<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
International Meta Systems, Inc.
------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
George W. Smith, President
------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
---------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
INTERNATIONAL META SYSTEMS, INC.
A DELAWARE CORPORATION
EXECUTIVE OFFICES
100 NORTH SEPULVEDA BOULEVARD
SUITE 601
EL SEGUNDO, CALIFORNIA 90245
310-524-9300
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 10, 1996,
AT THE RADISSON HOTEL, MANHATTAN BEACH, CALIFORNIA
TO THE STOCKHOLDERS OF INTERNATIONAL META SYSTEMS, INC.:
An Annual Meeting of Stockholders (the "Meeting") of International Meta
Systems, Inc., a Delaware corporation (the "Company"), will be held at the
Radisson Hotel, Manhattan Beach, California, on July 10, 1996, at 10:00 a.m.,
local time, to consider and vote on the following proposals:
PURPOSE OF MEETING
(1) To approve an amendment to the Company's Certificate of Incorporation
to increase the amount of authorized shares of Common Stock from
50,000,000 to 70,000,000 and to reduce from 8 to 6 the threshold at
which directors of the Company must be elected to staggered terms of
office.
(2) To ratify the appointment of Singer, Lewak, Greenbaum & Goldstein,
Certified Public Accountants, as auditors of the Company for the
fiscal year ending December 31, 1996.
(3) To elect to the Board of Directors five (5) directors, to serve until
the next Annual Meeting of Stockholders of the Company or until their
successors are elected and qualify, subject to their prior death,
resignation or removal.
(4) To approve the form of indemnity agreement between the Company and the
members of the Company's Board of Directors.
(5) To adopt the Company's 1996 Stock Option Plan and to reserve up to
4,500,000 shares of the Company's Common Stock for issuance under the
1996 Stock Option Plan.
(6) To transact such other business as may properly come before the
Meeting and any adjournments thereof.
ONLY STOCKHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON MAY 10, 1996 (THE
"RECORD DATE") ARE ENTITLED TO NOTICE OF AND TO VOTE AT THE MEETING.
PLEASE FILL IN, SIGN, DATE AND RETURN THE ENCLOSED PROXY TO INTERNATIONAL
META SYSTEMS, INC., 100 NORTH SEPULVEDA BOULEVARD, SUITE 601, EL SEGUNDO,
CALIFORNIA 90245, WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING. A RETURN
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Directors
INTERNATIONAL META SYSTEMS, INC.
By:/s/ George W. Smith
-------------------------------------
George W. Smith
President
El Segundo, California
DATED: , 1996
----
<PAGE>
INTERNATIONAL META SYSTEMS, INC.
A DELAWARE CORPORATION
EXECUTIVE OFFICES
100 NORTH SEPULVEDA BOULEVARD
SUITE 601
EL SEGUNDO, CALIFORNIA 90245
310-524-9300
________________________
PROXY STATEMENT
_________________________
This proxy statement is furnished to the stockholders of International Meta
Systems, Inc., a Delaware corporation (the "Company"), in connection with the
Annual Meeting of Stockholders (the "Meeting") to be held at the Radisson Hotel,
Manhattan Beach, California, on July 10, 1996 at 10:00 a.m., local time.
The Meeting will be held to consider and vote on the following proposals:
PURPOSE OF MEETING
(1) To approve an amendment to the Company's Certificate of Incorporation
to increase the amount of authorized shares of Common Stock from
50,000,000 to 70,000,000 and to reduce from 8 to 6 the threshold at
which directors of the Company must be elected to staggered terms of
office.
(2) To ratify the appointment of Singer, Lewak, Greenbaum & Goldstein,
Certified Public Accountants, as auditors of the Company for the
fiscal year ending December 31, 1996.
(3) To elect to the Board of Directors five (5) directors, to serve until
the next Annual Meeting of Stockholders of the Company or until their
successors are elected and qualify, subject to their prior death,
resignation or removal.
(4) To approve the form of indemnity agreement between the Company and the
members of the Company's Board of Directors.
(5) To adopt the Company's 1996 Stock Option Plan and to reserve up to
4,500,000 shares of the Company's Common Stock for issuance under the
1996 Stock Option Plan.
(6) To transact such other business as may properly come before the
Meeting and any adjournments thereof.
The list of all stockholders of record on May 10, 1996, will be available
at the Meeting and at the office of the Company at 100 North Sepulveda
Boulevard, Suite 601, El Segundo, California 90245, for the ten (10) days
preceding the Meeting.
Upon written request, the Company will provide, without charge: (i) a copy
of the exhibits to this Proxy Statement, and (ii) a copy of its Annual Report on
Form 10-KSB, for the year ended December 31, 1995, to any stockholder of record
or any stockholder who owned Common Stock listed in the name of a bank or
broker, as nominee, at the close of business on May 10, 1996.
Requests should be addressed to the Company, to the attention of George W.
Smith, President, International Meta Systems, Inc., 100 North Sepulveda
Boulevard, Suite 601, El Segundo, California 90245, 310-524-9300.
<PAGE>
INFORMATION CONCERNING SOLICITATION AND VOTING
The following information is provided to stockholders to explain the use of
this Proxy Statement for the Meeting:
RECORD DATE
Only stockholders of record at the close of business on May 10, 1996 are
entitled to vote at the Meeting. The Company's Common Stock is its only class
of voting securities. On May 10, 1996, the record date (the "Record Date")
fixed by the Board of Directors, the Company had issued and outstanding
37,009,827 shares of Common Stock.
REVOCABILITY OF PROXIES
A PROXY FOR USE AT THE MEETING IS ENCLOSED. ANY STOCKHOLDER WHO EXECUTES
AND DELIVERS A PROXY HAS THE RIGHT TO REVOKE IT AT ANY TIME BEFORE ITS EXERCISE
BY FILING WITH THE SECRETARY OF THE COMPANY AN INSTRUMENT REVOKING IT OR A DULY
EXECUTED PROXY BEARING A LATER DATE. IN ADDITION, A STOCKHOLDER MAY REVOKE A
PROXY PREVIOUSLY EXECUTED BY HIM BY ATTENDING THE MEETING AND ELECTING TO VOTE
IN PERSON.
VOTING AND SOLICITATION
Proxies are being solicited by the Board of Directors of the Company. The
cost of this solicitation will be borne by the Company. Solicitation will be
primarily by mail, but may also be made by telephone, fax transmission or
personal contact by certain officers and directors of the Company, who will not
receive any compensation therefor. Shares of Common Stock represented by
properly executed proxies will, unless such proxies have been previously
revoked, be voted in accordance with the instructions indicated thereon. IN THE
ABSENCE OF SPECIFIC INSTRUCTIONS TO THE CONTRARY, PROPERLY EXECUTED PROXIES WILL
BE VOTED FOR EACH OF THE PROPOSALS DESCRIBED ABOVE. No business other than that
set forth in the accompanying Notice of Annual Meeting of Stockholders is
expected to come before the Meeting. Should any other matter requiring a vote
of stockholders properly arise, the persons named in the enclosed form of proxy
will vote such proxy in accordance with the recommendation of the Board of
Directors.
Each share of Common Stock is entitled to one vote for each share held as
of record, and there are no preemptive rights. The Company's Restated
Certificate of Incorporation and Bylaws do not provide for cumulative voting for
the election of directors or any other purpose.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
Shares representing 50% of the combined voting power of the 37,009,827
shares of Common Stock outstanding on the Record Date must be represented at the
Meeting to constitute a quorum for conducting business. In the absence of a
quorum, the stockholders present in person or by proxy, by majority vote and
without further notice, may adjourn the meeting from time to time until a quorum
is attained. At any reconvened meeting following such adjournment at which a
quorum shall be present, any business may be transacted which might have been
transacted at the Meeting as originally notified.
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<PAGE>
The required quorum for the transaction of business at the Meeting is a
majority of the votes eligible to be cast by holders of shares of Common Stock
issued and outstanding on the Record Date. Shares that are voted "FOR" or
"AGAINST" a matter are treated as being present at the Meeting for purposes of
establishing a quorum and are also treated as shares entitled to vote at the
Meeting (the "Votes Cast") with respect to such matter.
The Company will count abstentions for purposes of determining both: (i)
the presence or absence of a quorum for the transaction of business, and (ii)
the total number of Votes Cast with respect to a proposal (other than the
election of directors). Accordingly, abstentions will have the same effect as a
vote against the proposal.
Further, the Company intends to count broker non-votes for the purpose of
determining the presence or absence of a quorum for the transaction of business,
although broker non-votes will not be counted for purposes of determining the
number of Votes Cast with respect to the particular proposal on which the broker
has expressly not voted. Thus, a broker non-vote will not affect the outcome of
the voting on a proposal.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the next annual meeting must be received by the Company
no later than December 31, 1996, in order to be considered for inclusion in the
proxy statement and form of proxy relating to the Meeting.
3
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth, as of May 2, 1996, information concerning
the beneficial ownership of Common Stock of the Company by (i) each person who
is known by the Company to own beneficially more than 5% of the Company's Common
Stock; (ii) each director of the Company; (iii) each executive officer named in
the summary compensation table; and (iv) all directors and executive officers of
the Company as a group.
<TABLE>
<CAPTION>
Name Number Percent*
---- ------ --------
<S> <C> <C>
Masahiro Tsuchiya, Director (1) 3,740,583 10.11
George W. Smith, Chairman of the Board, 2,287,077 5.98
Chief Executive Officer, President and
Acting Chief Financial Officer (2)
Richard A. Hahn, Chief Financial Officer, 549,800 1.47
Director (3)
Paragon Capital Management LLC 2,000,000 5.40
Den Norsk Krigsforsikring for Skib 2,000,000 5.40
Investeringsselskapet Amandus AS 2,000,000 5.40
Martin S. Albert, Director (4) 10,000,000 27.02
Frank LaChapelle, Director (5) 66,667 0.18
Sigmund Hartmann, Director (6) 30,000 .08
All directors and officers as a group (6 persons) 16,674,127 43.52
</TABLE>
-------------------------
* Pursuant to the rules of the Commission, shares of Common Stock which
an individual or group has a right to acquire within 60 days pursuant to the
exercise of options or warrants are deemed to be outstanding for the purpose of
computing the percentage ownership of such individual or group, but are not
deemed to be outstanding for the purpose of computing the percentage ownership
of any other person shown in the table.
1. Dr. Tsuchiya's address is 1585 Kaminaka Drive, Honolulu, Hawaii 96846.
Included in the shares owned by Dr. Tsuchiya are 886,583 shares owned by Sypex
International, of which Dr. Tsuchiya is part owner.
2. Mr. Smith's address is c/o International Meta Systems, Inc., 100 North
Sepulveda Boulevard, Suite 601, El Segundo, California 90245. Mr. Smith's
holdings consist of 1,079,000 shares of Common Stock currently owned, vested
options for 1,208,077 shares and unvested options for 250,000 shares.
3. Mr. Hahn, whose address is c/o International Meta Systems, Inc., 100
North Sepulveda Boulevard, Suite 601, El Segundo, California 90245, resigned as
an employee, officer and director of the Company as of April 30, 1996. Before
his resignation on April 30, 1996, Mr. Hahn's holdings consisted of 130,000
shares of Common Stock, vested options for 419,800 shares of Common Stock and
unvested options for 375,000 shares of Common Stock.
4
<PAGE>
4. Mr. Albert's address is c/o AmerScan, 3625 E. Thousand Oaks
Boulevard, Suite 50, Westlake Village, California 91362. Mr. Albert is the
beneficial owner of 133,000 shares, and he is a director of Paragon Capital
Management LLC ("Paragon"), which is the beneficial owner of 2,000,000 shares.
In addition, pursuant to a Shareholders Agreement dated March 26, 1996 and
remaining in effect until April 30, 1998, Paragon (2,000,000 shares), Den Norsk
Krigsforsikring for Skib (2,000,000 shares), Investeringsselskapet Amandus AS
(2,000,000 shares), A/S/ Selvaag Invest (1,500,000 shares), Andreas Ugland
(1,500,000 shares), Woodbridge Asset Management Limited (266,667 shares), Pollex
A/S (200,000 shares), J. Arthur Olafsen (250,000 shares), Filab A/S (100,000
shares), Martin S. Albert (133,333 shares) and Bent Aasnes (50,000 shares)
(collectively "Grantors") have agreed to vote (a) in favor of the election of
Martin S. Albert (or another person designated by Paragon) as a director of the
Company; (b) in favor of each action contemplated by the Shareholders Agreement,
the Subscription Agreements pursuant to which all grantors except Paragon
acquired their shares of the Company's Common Stock, the Stock Purchase
Agreement pursuant to which Paragon acquired its shares of the Company's Common
Stock, and the Placement Agency Agreement (collectively, the "Stock Agreements")
pursuant to which Paragon placed the shares of Common Stock with all the
grantors except Paragon itself; and (c) except as specifically requested by
Paragon, against (i) any action which would result in a breach of any covenant,
representation or warranty or other obligation of the Company under any of the
Stock Agreements, (ii) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the Company or any
subsidiary thereof, (iii) any sale, lease or transfer of a material amount of
assets of the Company or subsidiary thereof or any reorganization,
recapitalization, dissolution or liquidation of the Company or subsidiary
thereof, (iv) any change in the majority of the Board of Directors of the
Company, (v) any material change in the present capitalization of the Company
(other than as contemplated by the Stock Agreements), (vi) any amendment of the
Company's certificate of incorporation or bylaws, (vii) any other material
change in the Company's corporate structure or business, or (viii) any other
action which is intended, or could reasonably be expected to impede, interfere
with, delay, postpone, discourage or materially affect, the transactions
contemplated by the Stock Agreements or the economic benefit of any of the
foregoing. To effect such Shareholders Agreements, each Grantor grants Paragon
and three of its directors its irrevocable proxy to vote such Grantor's shares
as described in this paragraph.
5. Mr. LaChapelle's address is c/o Interscience Computer Corporation,
5171 Clareton Drive, Agoura Hills, California 91301. In addition, Mr.
LaChapelle holds unvested options for 33,333 Shares.
6. Mr. Hartmann's address is c/o International Meta Systems, Inc., 100
North Sepulveda Boulevard, Suite 601, El Segundo, California 90245. In
addition, Mr. Hartmann holds unvested options for 70,000 Shares.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
of certain of the Company's executive officers, including the Company's Chief
Executive Officer and all executive officers whose total annual salary and bonus
exceeded $100,000, for the years ended December 31, 1995, 1994 and 1993:
Summary Compensation Table
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Table Long Term Compensation
----------------------------------- --------------------------------
Awards Payouts
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Name and Restricted Securities
principal Other annual stock underlying LTIP All other
position Year Salary Bonus compensation award(s) Options/SARs payouts compensation
($) ($) (#) ($) ($)
----------------------------------------------------------------------------------------------------------------------------------
George W. 1995 $130,000 0 0 0 0 0 0
Smith, President 1994 $130,000 0 0 0 0 0 0
1993 $104,615 0 0 0 0 0 0
Richard A. 1995 $120,000 0 0 0 0 0 0
Hahn, Executive 1994 $117,692 0 0 0 0 0 0
Vice President (1)
</TABLE>
----------------------
1. Mr. Hahn resigned as an employee, officer and director of the Company as of
April 30, 1996.
COMPENSATION OF DIRECTORS
Currently, the Company does not compensate directors in cash for services
rendered as directors. Outside directors are issued stock options which vest
over a period of three years. The Company maintains errors and omissions
liability insurance for its Directors.
Under Delaware laws, an officer or director of the Company may be entitled
to indemnification from the Company against expenses (including attorneys,
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with a pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative. Under the Company's
Certificate of Incorporation, no director of the Company shall be liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director, except for liability: (i) for any breach of the director's duty of
loyalty to the Company or its stockholders; (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) under Section 174 of the Delaware General Corporation Law; or (iv)
for any transaction from which the director derives an improper personal
benefit.
COMPLIANCE WITH SECTION 16 OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and executive officers and the
holders of more than 10% of the Company's Common Stock to file with the
Securities and Exchange Commission (the "Commission") initial reports of
ownership and reports of changes in ownership of equity securities of the
Company. Based solely upon a review of such
6
<PAGE>
forms, or on written representations form certain reporting persons that no
other reports were required for such persons, the Company believes that all
reports required pursuant to Section 16(a) with respect to its executive
officers, directors and 10% stockholders for the 1995 fiscal year were timely
filed.
MATTERS FOR CONSIDERATION BY STOCKHOLDERS
PROPOSAL 1. AMENDMENT OF CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK TO 70,000,000 SHARES AND TO
REDUCE FROM EIGHT TO SIX THE THRESHOLD AT WHICH DIRECTORS OF THE
COMPANY MUST BE ELECTED TO STAGGERED TERMS OF OFFICE.
General
The Board of Directors has unanimously adopted a resolution to amend the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock, par value $0.0001 per share, from 50,000,000 to
70,000,000 and approved the submission of this proposal to the Company's
stockholders. This measure is permitted under Delaware law. Approval by the
Company's stockholders of this proposal will constitute authorization to the
Board to file the amendment to the Certificate of Incorporation with the State
of Delaware.
The Board of Directors has unanimously adopted a resolution to amend the
Company's Certificate of Incorporation to reduce from eight to six the threshold
at which directors of the Company must be elected to staggered terms of office.
Approval by the Company's stockholders of this proposal will constitute
authorization to the Board to file the amendment to the Certificate of
Incorporation with the State of Delaware.
Proposed Amendment
REASONS FOR THE MEASURES. In January, 1994, the stockholders of the Company
voted to amend the Company's Certificate of Incorporation and Bylaws by adopting
certain measures to reduce the Company's vulnerability to certain attempts to
obtain control of the Company. Such measures included a provision that the Board
of Directors would be divided into three classes whose terms of office would end
in difference years whenever the authorized number of directors is eight or
more. Since 1994, the Company has not had more than six directors at any one
time, and the Board believes it to be in the best interest of the Company to
cause the three-class system to take effect even when there are fewer than eight
directors.
During the last four years the Company has financed its development work
largely through the placement of its securities to investors, with the result
that the number of issued and outstanding shares of Common Stock, plus the total
of shares of Common Stock reserved for issuance upon exercise of outstanding
stock options and the shares reserved for issuance upon conversion of
outstanding shares of Preferred Stock, is approaching the Company's maximum
authorized capital. The Board believes it to be in the best interest of the
Company to increase such authorized capital to provide for an additional
20,000,000 shares of Common Stock. The amount of authorized shares of Preferred
Stock would be unchanged.
Pursuant to Proposal 1:
Article FOURTH of the Company's Certificate of Incorporation will be
amended and restated to read as follows:
7
<PAGE>
"The total number of shares of stock which the Corporation shall have
authority to issue is Seventy-One Million (71,000,000) shares, of which Seventy
Million (70,000,000) shall be in Common Stock, par value $0.0001 per Share, and
One Million (1,000,000) shall be in one or more classes of Preferred Stock, par
value $0.0001 per Share."
The first sentence of Article EIGHTH, Section 1 of the Company's
Certificate of Incorporation will be amended and restated to read as follows:
"At the first Annual Meeting of Stockholders of the Corporation (the
"Annual Meeting") after the authorized number of directors is Six (6) or more,
the Board of Directors shall be divided into three (3) classes: Class I, Class
II and Class III. The number of directors in each class shall be the whole
number contained in such quotient obtained by dividing the authorized number of
directors by three (3)."
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE TO AMEND AND RESTATE THE
CERTIFICATE OF INCORPORATION.
PROPOSAL 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANT
The Board of Directors of the Company has appointed the firm of Singer,
Lewak, Greenbaum & Goldstein as independent auditors of the Company for the
fiscal year ending December 31, 1996 subject to stockholder approval. The
Company has been advised by Singer, Lewak, Greenbaum & Goldstein that neither
that firm nor any of its partners has any material relationship with the Company
or any affiliate of the Company.
A representative of Singer, Lewak, Greenbaum & Goldstein is expected to be
present at the Annual Meeting and make a statement if he or she desires to do
so. He or she will be available to respond to appropriate questions. Should
the appointment of Singer, Lewak, Greenbaum & Goldstein be disapproved by the
stockholders, the Board of Directors will review its selection.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION OF
THE APPOINTMENT OF SINGER, LEWAK, GREENBAUM & GOLDSTEIN AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1996 AS DESCRIBED
ABOVE.
PROPOSAL 3. ELECTION OF THE BOARD OF DIRECTORS
General
Five (5) directors will be elected at the Annual Meeting, each to hold
office for one year or until a successor has been duly elected and qualified. In
the absence of instructions to the contrary, shares of Common Stock represented
by properly executed proxies will be voted for the five (5) nominees listed
hereinbelow, all of whom are recommended by management of the Company and who
have consented to be named and to serve if elected.
The Board of Directors met twice during the fiscal year ended December 31,
1995. The Board has no standing committee on nominations, nor a standing
committee on compensation. For the year ended December 31, 1995, with the
exception of Sigmund Hartmann, who was elected to the Board in August, 1995, all
directors standing for reelection except Frank LaChapelle attended 100% of the
meetings of the Board.
8
<PAGE>
The Board knows of no reason why any of the nominees will be unavailable or
unable to serve as a director. The information presented below is as of May 2,
1996 and is based in part on information furnished by the nominees and, in part,
from the records of the Company.
Directors are elected by the affirmative vote of a plurality of the votes
cast at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE ELECTION OF THE NOMINEES
LISTED BELOW.
NOMINEES FOR ELECTION AS DIRECTOR
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE:
<S> <C> <C>
George W. Smith 56 December, 1985
Chairman of the Board,
President, Chief Executive Officer
Masahiro Tsuchiya 47 August, 1992
Director
Frank LaChapelle 54 September, 1993
Director
Sigmund Hartmann 66 August, 1995
Director
Martin S. Albert 64 March, 1996
Director
</TABLE>
GEORGE W. SMITH, Chairman of the Board, President, Chief Executive Officer,
has served the Company in these offices since election by the shareholders in
connection with the Merger consummated as of December 31, 1988. Prior to that
date he founded the Company and served as its President and Chief Executive
Officer and Director from its inception in December 1985 until the Merger, and
served as Chairman of the Merged Company's board of directors from December 1985
to August 1987 and from May 1988 to the date of the Merger. Prior to serving
the Merged Company, from October, 1967 to August 1985 he was employed by the
Aerospace Corporation, where his positions included Principal Director for DOD
Space Shuttle Operations and Systems Director for Development and Operations of
several classified Air Force programs. While employed by the Aerospace
Corporation, he managed programs with budgets exceeding $300 million. He has an
extensive background in managing the design, development and manufacturing of
complex high-tech products. His awards include the Trustees' Distinguished
Achievement Award granted by the Aerospace Corporation in recognition of his
technical leadership and management and the Air Force Outstanding Service Award.
he received a Bachelor of Science degree in electrical engineering from the
University of Nevada and has done graduate work at U.C.L.A.
MASAHIRO TSUCHIYA, Director of the Company and acting marketing
representative of the Company in Japan. He received his Ph.D. degree in
computer sciences from the University of Texas at Austin. Currently he is
president of Sypex International Company, based in the U.S. and Japan. As
founder and president of Sypex, he has served as consultant to several startups
and major corporations in the U.S., Japan and Korea on high technology product
development and marketing plans. From 1980 to 1988, he worked on
9
<PAGE>
systems engineering of several major U.S. missile and space defense programs at
TRW Defense Systems Group, Redondo Beach, California. His academic career
includes a research associate at the University of California, Berkeley in 199
1, an adjunct professor of computer science at the University of Southern
California, Los Angeles, in 1986. From 1973 to 1979, he was an associate
professor at the University of Hawaii at Manoa, Honolulu, an assistant professor
at the University of California, Irvine, and at Northwestern University,
Evanston, Illinois. In 1975, he was a visiting computer scientist for research
in computer architecture at Arhus University, Arhus, Denmark, and in 1972, he
was a visiting lecturer at Konan University, Japan.
FRANK LACHAPELLE, Director is a founder of Interscience Computer
corporation and has served as the Chairman of the Board since its formation in
1983. Mr. LaChapelle served as President of Interscience Computer Corporation
from 1983 until January, 1991, and has served as Chief Executive Officer since
September, 1991.
SIGMUND HARTMANN, Director of the Company, previously held the positions of
Vice President and Assistant General Manager of TRW Incorporated, President,
Software Division of Commodore Business Machines, and President of Software of
Atari Corporation. At Commodore, Mr. Hartmann directed the company from a $300
million, low end computer business to a $1.2 billion systems company. At Atari,
he reversed the fortunes from losing $500 million a year to a profitable
operation.
MARTIN S. ALBERT, Mr. Albert is the President and Chief Executive Officer
of Dolphin Interconnect Solutions, Inc. and has been a director since
incorporation. He also a shareholder of Amerscan A.S., Dolphin's largest
shareholder and a shareholder and director of Amerscan Capital Management, the
general partner and investment advisor of Amerscan Partners II. Mr. Albert has
a bachelor's degree in Physics from the City College of New York and carried out
post graduate studies in Philosophy of Science and Business at the University of
California, Los Angeles and Columbia University. He has previously been
involved in corporate investment and consultancy work and has served as a
director of numerous companies during his career, particularly being involved
with a number of small-to medium sized technology companies seeking funding to
expand their strategic and operational capabilities. He has also been involved
in developing and managing disk-drive test and development systems companies and
other companies involved in computer disk and tape technologics. Mr. Albert has
led several high technology companies through their original public offerings
and oversaw their future acquisition by substantially larger firms.
PROPOSAL 4. APPROVAL OF FORM OF INDEMNIFICATION AGREEMENT
GENERAL
The stockholders are being asked at the Meeting to approve proposed
agreements (the "Indemnification Agreements") to be entered into between the
Company and its directors and officers, in substantially the form attached
hereto as Exhibit "A."
The Board of Directors believes that the Indemnification Agreements are a
response to: (i) the increasing hazard and related expense of unfounded
litigation directed against directors and executive officers; (ii) the general
unavailability of directors' and officers' liability insurance or significant
limitations in amounts and breadth of coverage; (iii) dramatic increases in
premiums for such coverage; and (iv) the potential inability of the Company to
continue to attract and retain qualified directors and executive officers in
light of these circumstances.
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The Board of Directors believes that the Indemnification Agreements will
serve the best interests of the Company and its stockholders by strengthening
the Company's ability to attract and retain the services of knowledgeable and
experienced persons as directors and officers who, through their efforts and
expertise, can make a significant contribution to the success of the Company.
The Indemnification Agreements are intended to complement the indemnity and
protection available under Delaware law, the Company's Certificate of
Incorporation and Bylaws and any policies of insurance which may hereafter be
maintained by the Company and to provide for indemnification of certain of its
agents to the fullest extend permitted by applicable law.
DIRECTOR AND OFFICERS LIABILITY INSURANCE
As of January, 1996, the Company obtained insurance for liability of its
officers and directors arising from acts carried out in connection with their
service to the Company. The overall coverage is $1,000,000 and is subject to a
number of limitations, including a reduced percentage for losses arising out of
securities claims, payments made to governmental officials, and political
contributions.
SUMMARY OF INDEMNIFICATION AGREEMENT
The following discussion summarizes certain aspects of the Indemnification
Agreement, but is qualified in its entirety by reference to the form of
Indemnification Agreement which is attached hereto as Exhibit "A."
PROTECTION UNDER DELAWARE LAW
In general, Delaware law empowers a corporation to indemnify any person who
was or is a party or who is threatened to be made a party to any threatened,
pending, or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, except in the case of an action by or in the
right of the corporation, by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or other enterprise. Depending on the character of the
proceeding, a corporation may indemnify against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding if the person
indemnified acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the corporation, and with respect
to any criminal action or proceedings, had no reasonable cause to believe his or
her conduct was unlawful.
A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or other
enterprise, against expenses, including amounts paid in settlement and
attorney's fees actually and reasonably incurred by him or her in connection
with the defense or settlement of the action or suit if he or she acted in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the corporation. Indemnification may not be
made for any claim, issue or matter as to which such a person has been adjudged
by a court of competent jurisdiction, after exhaustion of all appeals therefrom,
to be liable to the corporation or for amounts paid in settlement to the
corporation unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
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To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to above, or in defense of any claim, issue or matter
therein, he or she must be indemnified by the corporation against expenses,
including attorney's fees, actually and reasonably incurred by him in connection
with the defense. Any indemnification under this section, unless ordered by a
court or advanced pursuant to this section, must be made by the corporation only
as authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances. The
determination must be made: (a) by the stockholders; (b) by the board of
directors by majority vote of a quorum consisting of directors who were not
parties to the action, suit or proceeding; (c) if a majority vote of a quorum
consisting of directors who were not parties to the action, suit or proceeding
so orders, by independent legal counsel in a written opinion; or (d) if a quorum
consisting of directors who were not parties to the action, suit or proceeding
cannot be obtained, by independent legal counsel in a written opinion.
The certificate of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he or she is not entitled to be indemnified
by the corporation. The provisions of this section do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
The indemnification and advancement of expenses authorized in or ordered by
a court pursuant to this section: (a) does not exclude any other rights to which
a person seeking indemnification or advancement of expenses may be entitled
under the certificate of incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either an action in
his or her official capacity or an action in another capacity while holding his
or her office, except that indemnification, unless ordered by a court pursuant
to this section or for the advancement of any director or officer if a final
adjudication establishes that his or her acts or omissions involved intentional
misconduct, fraud or a knowing violation of the law and was material to the
cause of action; and (b) continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of the heirs, executors and
administrators of such a person.
Delaware law provides that a director shall not be held personally liable
for monetary damages for breach of fiduciary duty as a director, provided (as
specified in the Delaware law) that such limitation of liability shall not act
to limit liability for the following conduct: (a) breaches of the director's
duty of loyalty to the corporation or its stockholders; (b) acts or omissions
not in good faith or which involve intentional misconduct or knowing violation
of law; (c) the payment of unlawful dividends or unlawful stock repurchases or
redemptions; or (d) any transaction from which the director derived an improper
personal benefit.
INDEMNIFICATION AGREEMENTS
The Indemnification Agreements provide the Indemnitee with the maximum
indemnification allowed under applicable law. Since the Delaware statute is
non-exclusive, it is possible that certain claims beyond the scope of the
statute may be indemnifiable. The Indemnification Agreements provide a scheme
of indemnification which may be broader than that specifically provided by
Delaware law. It has not yet been determined, however, to what extent the
indemnification expressly permitted by Delaware law may be expanded, and
therefore the scope of indemnification provided by the Indemnification
Agreements may be subject to future judicial interpretation.
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The Indemnification Agreements provide that the Company shall indemnify an
Indemnitee who is or was a party or is threatened, pending or completed action
or proceeding whether civil, criminal, administrative or investigative by reason
of the fact that the Indemnitee is or was a director, officer, key employee or
agent of the Company or any subsidiary of the Company. The Company shall
advance all expenses, judgments, fines, penalties and amounts paid in settlement
(including taxes imposed on Indemnitee on account of receipt of such payouts)
incurred by the Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action or proceeding as described
above. The Indemnitee shall repay such amounts advanced only if it shall be
ultimately determined that he or she is not entitled to be indemnified by the
Company. The advances paid to the Indemnitee by the Company shall be delivered
within 20 days following a written request by the Indemnitee. Any award of
indemnification to an Indemnitee, if not covered by insurance, would come
directly from the assets of the Company, thereby affecting a stockholder's
investment.
The Indemnification Agreements set forth a number of procedural and
substantive matters which are not addressed or are addressed in less detail in
Delaware law, including the following:
First, in the event an action is instituted by the Indemnitee under the
Indemnification Agreements to enforce or interpret any of the terms therein,
Indemnitee shall be entitled to be paid all costs and expenses, including
reasonable attorneys' fees, incurred by the Indemnitee with respect to such
action, unless as a part of such action, a court of competent jurisdiction
determines that each of the material assertions made by the Indemnitee were not
made in good faith or were frivolous. In the event of an action instituted by
or in the name of the Company under the Indemnification Agreements or to enforce
or interpret any of the terms therein, the Indemnitee shall be entitled to be
paid all costs and expenses, including reasonable attorneys' fees, incurred by
the Indemnitee in the defense of such action, unless as a part of such action
the court determines that each of the Indemnitee's material defenses to such
action were made in bad faith or were frivolous. Delaware law does not set
forth any procedure for contesting a corporation's determination of a party's
right to indemnification.
Second, the Indemnification Agreements explicitly provide for partial
indemnification of costs and expenses in the event that an Indemnitee is not
entitled to full indemnification under the terms of the Indemnification
Agreement. Delaware law does not specifically address this issue. Delaware law
does, however, provide that to the extent that an Indemnitee has been successful
on the merits, he or she shall be entitled to such indemnification.
Third, in the event the Company shall be obligated to pay the expenses of
any proceeding against the Indemnitee, the Company shall be entitled to assume
the defense of such proceeding, with counsel approved by the indemnified party,
which approval shall not be unreasonably withheld, upon the delivery to the
Indemnitee of written notice of its election to do so. The Company shall have
the right to conduct such defense as it sees fit in its sole discretion,
including the right to settle any claim against Indemnitee without the consent
of the Indemnitee.
Fourth, indemnification provided by the Indemnification Agreements is not
exclusive of any rights to which the Indemnitee may be entitled under the
Company's Certificate of Incorporation, its Bylaws, any agreement, any vote of
stockholders or disinterested directors, Delaware law, or otherwise. The
indemnification provided under the Indemnification Agreements continues for any
action taken or not taken while serving in an indemnified capacity even though
the Indemnitee may have ceased to serve in such capacity at the time of the
action, suit or other covered proceeding.
Finally, the Indemnification Agreements provide for certain exceptions to
indemnification which include the following: (a) indemnification for liabilities
where the law prohibits indemnification; (b) indemnification
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or advancement of expenses with respect to proceedings or claims initiated or
brought voluntarily by an Indemnitee and not by way of defense, except with
respect to proceedings brought to establish or enforce a right to
indemnification under the Indemnification Agreements or any statute or law or
otherwise as required under Section 145 of the Delaware General Corporation Law;
and (c) indemnification for expenses in the payment of profits arising from the
purchase and sale by the Indemnitee of securities in violation of Section 16(b)
of the Exchange Act or any similar or successor statute.
The proposed Indemnification Agreements, together with the limitations on
the directors' liability provided by the Company's Certificate of Incorporation
and the Company's Bylaws, reduce significantly the number of instances in which
directors might be held liable to the Company for monetary damages for breach of
their fiduciary duties. Therefore, it should be noted that the current
directors of the Company have a direct personal interest in the approval of the
Indemnification Agreements.
At present, there is no pending litigation or proceeding involving an
Indemnitee where indemnification would be required or permitted under the
Indemnification Agreements.
INDEMNIFICATION OF LIABILITIES UNDER THE SECURITIES ACT OF 1933
The Commission has expressed its opinion that indemnification of directors,
officers and controlling persons of the Company against liabilities arising
under the 1933 Act, is against public policy as expressed in the 1933 Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by an Indemnitee of the Company in the successful defense of
any such act or proceeding) is asserted by such Indemnitee in connection with
securities which have been registered by the Company, the Company will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS
Section 144 of the Delaware General Corporation Law provides that no
contract or transaction between a corporation and one or more of its directors
or officers shall be void or voidable solely for this reason, or solely because
the director or officer is present or participates in the meeting of the board
or committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if: (a) the material
facts as to his relationship or interest and as to the contract or transaction
are disclosed or are known to the board of directors or the committee, and the
board or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum, (b) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders,
or (c) the contract or transaction is fair as to the corporation as of the time
it is authorized, approved or ratified, by the board, a committee thereof, or
the stockholders.
Since the Company intends to enter into these Indemnification Agreements
with each of its directors, the Indemnification Agreements must either be fair
to the Company or be approved by the requisite vote of stockholders. Although
the Company believes that the form of Indemnification Agreement is fair to the
Company, and that stockholder approval may not therefore be required to validate
the Indemnification Agreements, the Company believes that it is appropriate to
submit the Indemnification Agreements to the stockholders for their
consideration. If the Indemnification Agreements are not approved by the
stockholders,
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the invalidity of such agreements could hereafter be asserted by the
stockholders. In such an instance, the person asserting the validity of the
Indemnification Agreements will bear the burden of proving that they were fair
to the Company at the time they were authorized.
Approval of the Indemnification Agreements will require the affirmative
vote of a majority of the votes present or represented and entitled to vote on
this subject matter at the meeting and held by disinterested stockholders.
Since each director is an interested party with respect to this matter, shares
owned directly or indirectly by any director may not be voted on this proposal
although they will be counted for purposes of determining whether a quorum is
present. An abstention is not an affirmative vote and, therefor, will have the
same effect as a vote against the proposal. A broker non-vote will not be
treated as entitled to vote on this subject matter at the meeting. See
"Information Concerning Solicitation and Voting - Quorum; Abstentions; Broker
Non-Votes."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL
PROPOSAL 5 APPROVAL OF THE COMPANY'S 1996 STOCK OPTION PLAN
GENERAL
The 1996 Stock Option Plan (the "1996 Stock Option Plan") was adopted by
the Board of Directors on April 30, 1996. The Company has reserved for issuance
thereunder an aggregate of 4,500,000 shares of Common Stock. The general
purposes of the 1996 Stock Option Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to employees and consultants of the Company and to promote
the success of the Company's business. It is intended that these purposes will
be effected through the granting of stock options, which may be either incentive
stock options ("ISOs") as defined in Section 422 of the Code, or nonstatutory
stock options ("NSOs") and stock appreciation rights ("SARs"). No options have
been granted under the 1996 Stock Option Plan.
DESCRIPTION OF THE 1996 STOCK OPTION PLAN
A description of the 1996 Stock Option Plan is set forth below. The
description is intended to be a summary of the material provisions of the 1996
Stock Option Plan and does not purport to be complete. The following discussion
summarizes certain aspects of the 1996 Stock Option Plan, but is qualified in
its entirety by reference to the 1996 Stock Option Plan, which is attached
hereto as Exhibit "B."
In 1993 the Code was amended to add subsection 162(m), which denies a
deduction to corporations for compensation paid to certain of its highest paid
executives in excess of $1,000,000. If, during a single tax year of the Company,
the value of the Company's Common Stock were to have increased significantly and
if such executives were to exercise stock options in such year, the optionee
would recognize taxable income in the amount of the gain realized on such
exercise. To the extent that the amount of the gain exceeded $1,000,000, the
Company would lose its ability to deduct such excess as a compensation expense.
This deduction restriction would not apply, however, if such compensation were
based, among other things, on the performance of the corporation during the
period in respect of which such compensation is paid. In the case of stock
options, the Company could avoid this cost if the terms of its stock option plan
provide for the issuance of all stock options at an exercise price of no less
than fair market value on the date of grant and such plan is administered by a
committee consisting solely of outside directors of the Board. The 1996 Stock
Option Plan submitted for approval by the stockholders of the Company so
provides. No assurance can be given, however, that the Company will never pay
any amounts of compensation which are not deductible.
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The 1996 Stock Option Plan provides that options may be granted to the
employees (including officers and directors who are employees) and consultants
of the Company. Currently, all employees and consultants of the Company are
eligible to participate in the 1996 Stock Option Plan. Incentive stock options
may be granted only to employees.
ADMINISTRATION OF AND ELIGIBILITY UNDER 1996 STOCK OPTION PLAN.
Subject to the terms and conditions of the 1996 Stock Option Plan, the
Committee will have the sole authority to determine: (a)the persons
("optionees") to whom options to purchase shares of Common Stock and SARs will
be granted, (b) the number of options and SARs to be granted to each such
optionee, (c) the price to be paid for each share of Common Stock upon the
exercise of each option, (d) the period within which each option and SAR will be
exercised and any extensions thereof, and (e) the terms and conditions of each
such stock option agreement and SAR agreement which may be entered into between
the Company and any such optionee.
All officers, directors and employees of the Company and its subsidiaries
and certain consultants and other persons providing significant services to the
Company and its subsidiaries will be eligible to receive grants of options and
SARs under the 1996 Stock Option Plan. However, only employees of the Company
and its subsidiaries are eligible to be granted ISOs.
STOCK OPTION AGREEMENTS. All options granted under the 1996 Stock Option
Plan will be evidenced by an option agreement or SAR agreement between the
Company and the optionee receiving such option or SAR. Provisions of such
agreements entered into under the 1996 Stock Option Plan need not be identical
and may include any term or condition which is not inconsistent with the 1996
Stock Option Plan and which the Committee deems appropriate for inclusion.
INCENTIVE STOCK OPTIONS. Except for ISOs granted to stockholders
possessing more than ten percent (10%) of the total combined voting power of all
classes of the securities of the Company or its subsidiaries to whom such
ownership is attributed on the date of grant ("Ten Percent Stockholders"), the
exercise price of each ISO must be at least 100% of the fair market value of the
Company's Common Stock as determined on the date of grant. ISOs granted to Ten
Percent Stockholders must be at an exercise price of not less than 110% of such
fair market value.
Each ISO must be exercised, if at all, within ten (10) years from the date
of grant, but within five (5) years of the date of grant in the case of ISO's
granted to Ten Percent Stockholders.
An optionee of an ISO may not exercise an ISO granted under the 1996 Stock
Option Plan so long as such person holds a previously granted and unexercised
ISO.
The aggregate fair market value (determined as of time of the grant of the
ISO) of the Common Stock with respect to which the ISOs are exercisable for the
first time by the optionee during any calendar year shall not exceed $100,000.
NON-QUALIFIED STOCK OPTIONS. The exercise period for each NSO will be
determined by the Committee at the time such option is granted, but in no event
will such exercise period exceed ten (10) years from the date of grant.
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STOCK APPRECIATION RIGHTS. Each SAR granted under the 1996 Stock Option
Plan will entitle the holder thereof, upon the exercise of the SAR, to receive
from the Company, in exchange therefor, an amount equal in value to the excess
of the fair market value of the Common Stock on the date of exercise of one
share of Common Stock over its fair market value on the date of exercise of one
share of Common Stock over its fair market value on the date of grant (or in the
case of an SAR granted in connection with an option, the excess of the fair
market of one share of Common Stock at the time of exercise over the option
exercise price per share under the option to which the SAR relates), multiplied
by the number of shares of Common Stock covered by the SAR or the option, or
portion thereof, that is surrendered.
SARs will be exercisable only at the time or times established by the
Committee. If an SAR is granted in connection with an option, the SAR will be
exercisable only to the extent and on the same conditions that the related
option could be exercised. The Committee may withdraw any SAR granted under the
1996 Stock Option Plan at any time and may impose any conditions upon the
exercise of an SAR or adopt rules and regulations from time to time affecting
the rights of holders of SARs.
LIMIT TO OPTIONS GRANTED UNDER THE 1996 STOCK OPTION PLAN. Under Section
162(m) of the Code, which was enacted in 1993, the deductibility for federal
income tax purposes of compensation paid to the Company's President and the four
other most highly compensated executive officers who receive salary and bonus in
excess of $100,000 in a particular year is limited to $1,000,000 per year per
individual. For purposes of this legislation, compensation expense attributable
to stock options and SARs would be subject to this limitation unless, among
other things, the option plan under which the options and SARs is granted
includes a limit on the number of shares with respect to which awards may be
made to any one employee in a fiscal year. Such a potential compensation
expense deduction could arise, for example, upon the exercise by one of these
executive of a nonstatutory option, i.e., an option that is not an incentive
stock option qualifying for favorable tax treatment, or upon a disqualifying
disposition of stock received upon exercise of an incentive stock option. The
1996 Stock Option Plan provides that all nonqualified stock options be granted
only by the action of a committee of at least two members of the Board of
Directors who are Outside Directors of the Company, as defined in Treas. Reg.
Section 1.162-27(e) (3), that no such options may be granted for an exercise
price less than fair market value on the date of grant and that no single
employee optionee may be granted options for more than 500,000 shares during any
one fiscal year.
TERMINATION OF OPTION AND TRANSFERABILITY. In general, any unexpired
options and SARs granted under the 1996 Stock Option Plan will terminate: (a) in
the event of death or disability, pursuant to the terms of the option agreement
or SAR agreement, but not less than six (6) months or more than twelve (12)
months after the applicable date of such event, (b) in the event of retirement,
pursuant to the terms of the option agreement or SAR agreement, but no less that
thirty (30) days or more than three (3) months after such retirement date, or
(c) in the event of termination of such person other than for death, disability
or retirement, until thirty (30) days after the date of such termination.
However, the Committee may in its sole discretion accelerate the exercisability
of any or all options or SARs upon termination of employment or cessation of
services.
The options and SARs granted under the 1996 Stock Option Plan generally
will be non-transferable, except by will or the laws of descent and
distribution.
ADJUSTMENTS RESULTING FROM CHANGES IN CAPITALIZATION. The number of shares
of Common Stock reserved under the 1996 Stock Option Plan and the number and
price of shares of Common Stock covered by each outstanding option or SAR under
the 1996 Stock Option Plan will be proportionately adjusted by the Committee for
any increase or decrease in the number of issued and outstanding shares of
Common Stock resulting from any stock dividends, split-ups, consolidations,
recapitalizations, reorganizations or like event.
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AMENDMENT OR DISCONTINUANCE OF STOCK OPTION PLAN. The Board of Directors
has the right to amend, suspend or terminate the 1996 Stock Option Plan at any
time. Unless sooner terminated by the Board of Directors, the 1996 Stock Option
Plan will terminate on April 15, 2006, the tenth (10th) anniversary date of the
effectiveness of the 1996 Stock Option Plan.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS TO OPTIONEES
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after grant of the
option and one year after exercising the option, any gain or loss will be
treated as long-term capital gain or loss. If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of sale or
exchange equal to the difference between the exercise price and the lower of:
(i) the fair market value of the shares at the date of the option exercise, or
(ii) the sale price of the shares. A different rule for measuring ordinary
income upon such a premature disposition may apply if the optionee is also an
officer, director or a ten percent stockholder of the Company. Generally, the
Company will be entitled to a deduction in the same amount as the ordinary
income recognized by the optionee. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income will be characterized as long-term or short-term capital gain or loss,
depending on the holding period.
All other options that do not qualify as incentive options are referred to
as nonstatutory options. An optionee will not recognize any taxable income upon
the grant of a non-statutory option. However, upon its exercise, the optionee
will recognize taxable income generally measured as the excess of the then fair
market value of the shares purchased over the purchase price. Any taxable
income recognized in connection with an option exercise by an option who is also
an employee of the Company will be subject to tax withholding by the Company.
Upon the resale of such shares by the optionee, any difference between the sale
price and the optionee's purchase price, to the extent not recognized as taxable
income as described above, will be treated as long-term capital gain or loss,
depending on the holding period.
Generally, the Company will be entitled to a tax deduction in the same
amount as the ordinary income recognized by the optionee with respect to shares
acquired upon exercise of a nonstatutory option.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the 1996 Stock Option Plan, does not purport to be complete, and
does not discuss the tax consequences of the optionee's death or the income tax
laws of any municipality, state or foreign country in which an optionee may
reside.
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS
Approval of the 1996 Stock Option Plan requires the affirmative vote of a
majority of the combined votes cast.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL
OTHER MATTERS
The Company knows of no other matters to be submitted at the Meeting. If
any other matters properly come before the Meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors may recommend.
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INCORPORATION BY REFERENCE
International Meta Systems, Inc., a Delaware corporation (the "Company") is
currently subject to the reporting requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and, in accordance therewith, files
reports, proxy and information statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy and
information statements and other information may be inspected and copied at the
public reference facilities of the Commission at 450 Fifth Street, N.W. Room
1024, Washington D.C. 20549; at its New York Regional Office, 7 World Trade
Center, Suite 1300, El Segundo, California 10048; and at its Chicago Regional
Office, 500 West Madison Street, Suite 1400, Chicago Illinois 60661-2511, and
copies of such materials can be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington D.C. 20549 at prescribed
rates. The Company furnishes its stockholders with annual reports containing
audited financial statements and such other periodic reports as the Company may
determine to be appropriate or as may be required by law.
As part of this Proxy Statement, the Company incorporates by reference the
following the Company's Annual Report on Form 10-KSB in respect of the year
ended December 31, 1995 and the following documents filed herewith as exhibits
to this Proxy Statement:
1. Exhibit "A" Form of Indemnification Agreement
2. Exhibit "B" - 1996 Stock Option Plan
By Order of the Board of Directors of
INTERNATIONAL META SYSTEMS, INC.
By:/s/George W. Smith
-------------------------------------
George W. Smith
President
El Segundo, California
, 1996
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P R O X Y
INTERNATIONAL META SYSTEMS, INC.
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 10, 1996
The undersigned stockholder appoints George W. Smith as proxy with full
power of substitution, to vote the shares of voting securities of International
Meta Systems, Inc. (the "Company") which the undersigned is entitled to vote at
the Annual Meeting of Stockholders to be held at the Radisson Hotel, Manhattan
Beach, California, on July 10, 1996, at 10:00 a.m., local time, and at any
adjournments thereof, upon matters properly coming before the meeting, as set
forth in the Notice of Annual Meeting and Proxy Statement, both of which have
been received by the undersigned. Without otherwise limiting the general
authorization given hereby, such proxy is instructed to vote as follows:
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE PROPOSALS INDICATED ON THIS CARD AND
AS SUCH PROXIES DEEM ADVISABLE WITH DISCRETIONARY AUTHORITY ON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY
ADJOURNMENT OR ADJOURNMENTS THEREOF.
(1) To approve an amendment to the Company's Certificate of Incorporation
to increase the amount of authorized shares of Common Stock from
50,000,000 to 70,000,000 and to reduce from 8 to 6 the threshold at
which directors of the Company must be elected to staggered terms of
office.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(2) To ratify the appointment of Singer, Lewak, Greenbaum & Goldstein,
Certified Public Accountants, as auditors of the Company for the
fiscal year ending December 31, 1996.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) To elect to the Board of Directors five (5) directors, to save until
the next Annual Meeting of Stockholders of the Company or until their
successors are elected and qualify, subject to their prior death,
resignation or removal.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) To approve the form of indemnity agreements between the Company and
the members of the Company's Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(5) To adopt the Company's 1996 Stock Option Plan and to reserve up to
4,500,000 shares of the Company's Common Stock for issuance under the
1996 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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In his discretion, the proxy is authorized to vote upon such other business
as may properly come before the meeting.
DATED:
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Signature
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Signature (if held jointly)
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Print Names
(Please sign exactly as your name appears hereon. When
signing as attorney, executor, administrator, trustee or
guardian, please give your full title. If shares are
jointly held, each holder must sign. If a corporation,
please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in
partnership name by authorized person).
PLEASE CHECK THE BOXES ON THE REVERSE SIDE, SIGN, DATE AND RETURN THIS
PROXY TO INTERNATIONAL META SYSTEMS, INC., 100 NORTH SEPULVEDA BOULEVARD,
SUITE 601, EL SEGUNDO, CALIFORNIA 90245, IN THE SELF-ADDRESSED ENVELOPE
PROVIDED.
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EXHIBIT "A"
FORM OF
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of the ___ day
of __________, 199_____ by and between International Meta Systems, Inc., (the
"Company"), and __________________________ ("Indemnitee").
WHEREAS, the Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for directors, officers, employees, agents and
fiduciaries, the significant increases in the cost of such insurance and the
general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance have been severely
limited;
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and, in part, in
order to induce Indemnitee to continue to provide services to the Company,
wishes to provide for the indemnification and advancement of expenses to
Indemnitee to the maximum extent permitted by law; and
WHEREAS, in view of the considerations set forth above, the Company desires
that Indemnitee shall be indemnified by the Company as set forth herein.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
a. INDEMNIFICATION OF EXPENSES. The Company shall indemnify
Indemnitee to the fullest extent permitted by law if Indemnitee was or is or
becomes a party to or witness or other participant in, or is threatened to be
made a party to or witness or other participant in, any threatened, pending or
completed action, suit, proceeding or alternative dispute resolution mechanism,
or any hearing, inquiry or investigation that Indemnitee in good faith believes
might lead to the institution of any such action, suit, proceeding or
alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other (hereinafter a "Claim") by reason of (or
arising in part out of) any event or occurrence related to the fact that
Indemnitee is or was a director, officer, employee, agent or fiduciary of the
Company, or any subsidiary of the Company (regardless of whether it was a
subsidiary of the Company at the time of the event giving rise to Claim), or is
or was serving at the request of the Company as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action or inaction on the part of
Indemnitee while serving in such capacity (hereinafter an "Indemnifiable Event")
against any and all expenses (including attorneys' fees and all other costs,
expenses and obligations incurred in connection with investigating, defending,
being a witness in or participating
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in (including on appeal), or preparing to defend, be a witness in or participate
in, any such action, suit, proceeding, alternative dispute resolution mechanism,
hearing, inquiry or investigation), judgments, fines, penalties and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) of such Claim and any federal,
state, local or foreign taxes imposed on the Indemnitee as a result of the
actual or deemed receipt of any payments under this Agreement (collectively,
hereinafter "Expenses"), including all interest, assessments and other charges
paid or payable in connection with or in respect of such Expenses. Such payment
of Expenses shall be made by the Company as soon as practicable but in any event
no later than five (5) days after written demand by Indemnitee therefor is
presented to the Company.
b. REVIEWING PARTY. Notwithstanding the foregoing: (i) the
obligations of the Company under Section 1(a) shall be subject to the condition
that the Reviewing Party (as described in Section 10(e) hereof) shall not have
determined (in a written opinion, in any case in which the Independent Legal
Counsel referred to in Section 1(c) hereof is involved) that Indemnitee would
not be permitted to be indemnified under applicable law, and (ii) the obligation
of the Company to make an advance payment of Expenses to Indemnitee pursuant to
Section 2(a) (an "Expense Advance") shall be subject to the condition that, if,
when and to the extent that the Reviewing Party determines that Indemnitee would
not be permitted to be so indemnified under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the
Company) for all such amounts theretofore paid; PROVIDED, HOWEVER, that if
Indemnitee has commenced or thereafter commences legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee should be
indemnified under applicable law, any determination made by the Reviewing Party
that Indemnitee would not be permitted to be indemnified under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expense Advance until a final judicial determination is made
with respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed). Indemnitee's obligation to reimburse the Company for any
Expense Advance shall be unsecured and no interest shall be charged thereon. If
there has not been a Change in Control (as defined in Section 10(c) hereof), the
Reviewing Party shall be selected by the Board of Directors, and if there has
been such a Change in Control (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control), the Reviewing Party shall be the
Independent Legal Counsel referred to in Section 1(c) hereof. If there has been
no determination by the Reviewing Party or if the Reviewing Part determines
that Indemnitee substantively would not be permitted to be indemnified in whole
or in part under applicable law, Indemnitee shall have the right to commence
litigation seeking an initial determination by the court or challenging any such
determination by the Reviewing Party or any aspect thereof, including the legal
or factual bases therefor, and the Company hereby consents to service of process
and to appear in any such proceeding. Any determination by the Reviewing Party
otherwise shall be conclusive and binding on the Company and Indemnitee.
c. CHANGE IN CONTROL. The Company agrees that if there is a Change
in Control of the Company (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control) then with respect to all matters
thereafter arising concerning the rights of Indemnitee to payments of Expense
and Expense Advances under this Agreement or any other agreement or under the
Company's Certificate of Incorporation or Bylaws as now or hereafter in effect,
Independent Legal Counsel (as defined in Section 10(d) hereof) shall be selected
by Indemnitee and approved by the Company
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(which approval shall not be unreasonably withheld). Such counsel, among other
things, shall render its written opinion to the Company and Indemnitee as to
whether and to what extent Indemnitee would be permitted to be indemnified under
applicable law and the Company agrees to abide by such opinion. The Company
agrees to pay the reasonable fees of the Independent Legal Counsel referred to
above and to fully indemnify such counsel against any and all expenses
(including attorney's fees), claims, liabilities and damages arising out of or
relating to this Agreement or its engagement pursuant hereto.
d. MANDATORY PAYMENT OF EXPENSES. Notwithstanding any other
provision of this Agreement other than Section 9 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
action, suit, proceeding, inquiry or investigation referred to in Section(1)(a)
hereof or in the defense of any claim, issue or matter therein, Indemnitee shall
be indemnified against all Expenses incurred by Indemnitee in connection
therewith.
2. EXPENSES; INDEMNIFICATION PROCEDURE.
a. ADVANCEMENT OF EXPENSES. The Company shall advance all Expenses
incurred by Indemnitee. The advances to be made hereunder shall be paid by the
Company to Indemnitee as soon as practicable but in any event no later than five
(5) days after written demand by Indemnitee therefor to the Company.
b. NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of any
Claim made against Indemnitee for which indemnification will or could be sought
under this Agreement. Notice to the Company shall be directed to the Chief
Executive Officer of the Company at the address shown on the signature page of
this Agreement (or such other address as the Company shall designate in writing
to Indemnitee). In addition, Indemnitee shall give the Company such information
and cooperation as it may reasonably require and as shall be within Indemnitee's
power.
c. NO PRESUMPTIONS; BURDEN OF PROOF. For purposes of this
Agreement, the termination of any Claim by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of NOLO
CONTENDERE, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by applicable
law. In addition, neither the failure of the Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by the
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that Indemnitee should be indemnified under
applicable law, shall be a defense to Indemnitee's claim or create a presumption
that Indemnitee has not met any particular standard of conduct or did not have
any particular belief. In connection with any determination by the Reviewing
Party or otherwise as to whether the Indemnitee is entitled to be indemnified
hereunder, the burden of proof shall be on the Company to establish that
Indemnitee is not so entitled.
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d. NOTICE TO INSURERS. If, at the time of the receipt by the
Company of a notice of a Claim pursuant to Section 2(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such action,
suit, proceeding, inquiry or investigation in accordance with the terms of such
policies.
e. SELECTION OF COUNSEL. In the event the Company shall be
obligated hereunder to pay the Expenses of any Claim, the Company shall be
entitled to assume the defense of such Claim with counsel approved by
Indemnitee, which approval shall not be unreasonably withheld, upon the delivery
to Indemnitee of written notice of its election so to do. After delivery of
such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same Claim; PROVIDED, THAT: (i) Indemnitee shall have the right
to employ Indemnitee's counsel in any such Claim at Indemnitee's expense, and
(ii) if (A) the employment of counsel by Indemnitee has been previously
authorized by the Company, (B) Indemnitee shall have reasonably concluded that
there be a conflict of interest between the Company and Indemnitee in the
conduct of any such defense, or (C) the Company shall not continue to retain
such counsel to defend such Claim, then the fees and expenses of Indemnitee's
counsel shall be at the expense of the Company. The Company shall have the
right to conduct such defense as it sees fit in its sole discretion, including
the right to settle any claim against Indemnitee without the consent of the
Indemnitee.
3. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
a. SCOPE. The Company hereby agrees to indemnify the Indemnitee to
the fullest extent permitted by law, notwithstanding that such indemnification
is not specifically authorized by the other provisions of this Agreement, the
Company's Certificate of Incorporation, the Company's Bylaws or by statute. In
the event of any change after the date of this Agreement in any applicable law,
statute or rule which expands the right of a corporation of the Company's state
of incorporation to indemnify a member of its board of directors or an officer,
employee, agent or fiduciary, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits afforded by such
change. In the event of any change in any applicable law, statute or rule which
narrows the right of a corporation of the Company's state of incorporation to
indemnify a member of its board of directors or an officer, employee, agent or
fiduciary, such change, to the extent not otherwise required by such law,
statute or rule to be applied to this Agreement, shall have no effect on this
Agreement or the parties' rights and obligations hereunder except as set forth
in Section 8(a) hereof.
b. NONEXCLUSIVITY. The indemnification provided by this Agreement
shall be in addition to any rights to which Indemnitee may be entitled under the
Company's Certificate of Incorporation, its Bylaws, any agreement, any vote of
stockholders or disinterested directors, the laws of the Company's state of
incorporation, or otherwise. The indemnification provided under this Agreement
shall continue as to Indemnitee for any action Indemnitee took or did not take
while serving in an indemnified capacity even though Indemnitee may have ceased
to serve in such capacity.
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4. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, Certificate of Incorporation, Bylaw or otherwise)
of the amounts otherwise indemnifiable hereunder.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
6. MUTUAL ACKNOWLEDGEMENT. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's rights under public policy to indemnify Indemnitee.
7. LIABILITY INSURANCE. To the extent the Company maintains liability
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company's key
employees, agents or fiduciaries, if Indemnitee is not an officer or director
but is a key employee, agent or fiduciary.
8. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
a. EXCLUDED ACTION OR OMISSIONS. To indemnify Indemnitee for
Indemnitee's acts, omissions or transactions from which Indemnitee may not be
relieved of liability under applicable law.
b. CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance expenses
to Indemnitee with respect to Claims initiated or brought voluntarily by
Indemnitee and not by way of defense, except: (i) with respect to proceedings
brought to establish or enforce a right to indemnification under this Agreement
or any other agreement or insurance policy or under the Company's Certificate of
Incorporation or Bylaws now or hereafter in effect relating to Claims for
Indemnifiable Events, (ii) in specific cases if the Board of Directors has
approved the initiation or bringing of such suit, or (iii) as otherwise as
required under the laws of the Company's state of incorporation, regardless of
whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery, as the case may
be.
c. LACK OF GOOD FAITH. To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
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d. CLAIMS UNDER SECTION 16(B). To indemnify Indemnitee for expenses
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or any similar successor statute.
9. PERIOD OF LIMITATIONS. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two-year period; PROVIDED, HOWEVER, that if any shorter
period of limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.
10. CONSTRUCTION OF CERTAIN PHRASES.
a. For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees, agents or
fiduciaries, so that if Indemnitee is or was serving at the request of such
constituent corporation as a director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, employee benefit plan, trust or
other enterprise, Indemnitee shall stand in the same position under the
provisions of this Agreement with respect to the resulting or surviving
corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
b. For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
service as a director, officer, employee, agent or fiduciary of the Company
which imposes duties on, or involves services by, such director, officer,
employee, agent or fiduciary with respect to an employee benefit plan, its
participants or its beneficiaries; and if Indemnitee acted in good faith and in
a manner Indemnitee reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan, Indemnitee shall be
deemed to have acted in a manner "not opposed to the best interests of the
Company" as referred to in this Agreement.
c. For purposes of this Agreement, a "Change in Control" shall be
deemed to have occurred if: (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or a
corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
more than 20% of the total voting power represented by the Company's then
outstanding Voting Securities, (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by the Board of
Directors or nomination for election by the Company's stockholders was approved
by a vote of at least two- thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose election or
nomination for election was
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previously so approved, cease for any reason to constitute a majority thereof,
or (iii) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation other than a merger or consolidation
which would result in the Voting Securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of the surviving
entity) at least 80% of the total voting power represented by the Voting
Securities of the Company of the surviving entity) at least 80% of the total
voting power represented by the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
the stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of (in one
transaction or a series of transactions) all or substantially all of the
Company's assets.
d. For purposes of this Agreement, "Independent Legal Counsel" shall
mean an attorney or firm of attorneys, selected in accordance with the provision
of Section 1(c) hereof, who shall not have otherwise performed services for the
Company or Indemnitee within the last three years (other than with respect to
matters concerning the rights of Indemnitee under this Agreement, or of other
indemnitees under similar indemnity agreements).
e. For purposes of this Agreement, a "Reviewing Party" shall mean
any appropriate person or body consisting of a member or members of the
Company's Board of Directors or any other person or body appointed by the Board
of Directors who is not party to the particular Claim for which Indemnitee is
seeking indemnification, or Independent Legal Counsel.
f. For purposes of this Agreement, "Voting Securities" shall mean
any securities of the Company that vote generally in the election of directors.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. BINDING EFFECT; SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns, including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company, spouses, heirs,
and personal and legal representative. The Company shall require and cause any
successor (whether direct or indirect by purchase, merger, consolidation or
otherwise) to all, substantially all, or a substantial part, of the business
and/or assets of the Company, by written agreement in form and substance
satisfactory to Indemnitee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place. This Agreement shall
continue in effect with respect to Claims relating to Indemnifiable Events
regardless of whether Indemnitee continues to serve as a director, officer,
employee, agent or fiduciary of the Company or any other enterprise at the
Company's request.
13. ATTORNEY'S FEES. In the event that any action is instituted by
Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof or
thereof, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee with respect to such action, regardless of whether Indemnitee is
ultimately successful in such action, and shall be entitled to the advancement
of Expenses with respect to such
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action, unless as a part of such action, a court of competent jurisdiction over
such action determines that each of the materials assertions made by Indemnitee
as a basis for such action were not made in good faith or were frivolous. In
the event of an action instituted by or in the name of the Company under this
Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee
shall be entitled to be paid all Expenses incurred by Indemnitee in defense of
such action (including costs and expenses incurred with respect to Indemnitee's
counterclaims and cross-claims made in such action), and shall be entitled to
the advancement of Expenses with respect to such action, unless, as a part of
such action, the court having jurisdiction over such action determines that each
of Indemnitee's material defenses to such action were made in bad faith or were
frivolous.
14. NOTICE. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given and shall in any
event be deemed to be given: (a) five (5) after deposit with the U.S. Postal
Service or other applicable postal service, if delivered by first class mail,
postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day
after the business day of deposit with Federal Express or similar overnight
courier, freight prepaid, or (d) one day after the business day of delivery by
facsimile transmission, if delivered by facsimile transmission, with copy by
first class mail, postage prepaid, and shall be addressed if to Indemnitee, at
the Indemnitee's address as set forth beneath Indemnitee's signature to this
Agreement and if to the Company at the address of its principal corporate
offices or at such other address as such party may designate by ten days'
advance written notice to the other party hereto.
15. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
16. SEVERABILITY. The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable, and the remaining provisions shall remain
enforceable to the fullest extent permitted by law. Furthermore, to the fullest
extent possible, the provisions of this Agreement (including, without
limitations, each portion of this Agreement containing any provision held to be
invalid, void or otherwise unenforceable that is not itself invalid, void or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
17. CHOICE OF LAW. This Agreement shall be governed by and its provisions
construed and enforced in accordance with the laws of the State of Delaware, as
applied to contracts between Delaware residents, entered into and to be
performed entirely within the State of Delaware, without regard to the conflict
of laws principles thereof.
18. SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
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19. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless it is in writing signed
by both the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
20. INTEGRATION AND ENTIRE AGREEMENT. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
21. NO CONSTRUCTION AS EMPLOYMENT AGREEMENT. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries.
A-9
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written at El Segundo, California.
INTERNATIONAL META SYSTEMS, INC.
By:
----------------------------
AGREED TO AND ACCEPTED AS OF
THE DATE FIRST WRITTEN ABOVE:
------------------------------
[Name of Indemnitee]
Address:
----------------------
------------------------------
------------------------------
------------------------------
Telecopier No.
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A-10
<PAGE>
EXHIBIT "B"
International Meta Systems, Inc.
1996 STOCK OPTION PLAN
1. PURPOSE. The purpose of the International Meta Systems, Inc. 1996
Stock Option Plan (the "Plan"), is to provide an incentive to officers,
directors, employees, independent contractors, and consultants of International
Meta Systems, Inc., a Delaware corporation and any parent companies and
subsidiaries (collectively referred to as "IMS") to remain in the employ of IMS
or provide services to IMS and contribute to its success.
As used in the Plan, the term "Code" shall mean the Internal Revenue Code
of 1986, as amended, and any successor statute, and the terms "Parent" and
"Subsidiary" shall have the meanings set forth in Code Sections 424(e) and (f).
This Plan was adopted by the Board of Directors as of April 30, 1996 and by
the stockholders of IMS as of ___________, 1996.
2. ADMINISTRATION. The Plan shall be administered by a Plan Committee
which shall be established by the Board of Directors of IMS (the "Board"). The
Plan Committee shall be consist of at least two members who shall be Outside
Directors of IMS, as defined in Treasury Regulation Section 1.162-27(e)(3),
promulgated under Code Section 162(m). Members of the Plan Committee shall be
appointed, both initially and as vacancies occur, by the Board. The Board, at
any time it so desires, may increase or decrease, but not below two, the number
of members of the Plan Committee, may remove from membership on the Plan
Committee all or any portion of its members, and may appoint such person or
persons as it desires to fill any vacancy existing on the Plan Committee,
whether by removal, resignation or otherwise. The provisions of the Plan and
all option and stock appreciation right ("SAR") agreements executed pursuant
thereto, and its decisions shall be conclusive and binding upon all interested
persons. Subject to the provisions of the Plan, the Plan Committee shall have
the sole authority to determine:
(a) The persons (hereinafter, "optionees") to whom options to
purchase shares of Common Stock of IMS ("Stock") and SARs shall be granted;
(b) The number of options and SARs to be granted to each optionee;
(c) The price to be paid for each share of Stock upon the exercise of
each option;
(d) The period within which each option and SAR shall be exercised
and, with the consent of the optionee, any extensions of such period (provided,
however, that the original period and all extensions shall not exceed the
maximum period permissible under the Plan); and
(e) The terms and conditions of each stock option and/or SAR
agreement entered into between IMS and persons to whom IMS has granted an option
or SAR and of any amendments thereto (provided that the optionee consents to
each such amendment).
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The Plan Committee shall meet at such times and places as it determines,
including by means of a telephone conference call. A majority of the members
shall constitute a quorum, and a decision of a majority of those present at any
meeting at which a quorum is present shall constitute the decision of the Plan
Committee. A memorandum signed by all of the members of the Plan Committee
shall constitute the decision of the Plan Committee without the necessity, in
such event, for holding an actual meeting.
3. ELIGIBILITY. Officers, directors and employees of IMS independent
contractors, consultants and other persons providing significant services to IMS
shall be eligible to receive grants of options under the Plan.
4. STOCK SUBJECT TO PLAN. There shall be reserved for issue, upon the
exercise of options granted under the Plan, 4,500,000 shares of Stock or the
number of shares of Stock, which, in accordance with the provisions of Section 9
hereof, shall be substituted therefor. Such shares may be treasury shares. If
an option granted under the Plan shall expire or terminate for any reason
without having been exercised in full, unpurchased shares subject thereto shall
again be available for the purposes of the Plan.
5. TERMS OF OPTIONS AND SARS.
(a) INCENTIVE STOCK OPTIONS. It is intended that options granted
pursuant to this Section 5(a) qualify as incentive stock options as defined in
Section 422 of the Code. Incentive stock options shall be granted only to
employees of IMS. Each stock option agreement evidencing an incentive stock
option shall provide that the option is subject to the following terms and
conditions and to such other terms and conditions not inconsistent therewith as
the Plan Committee may deem appropriate in each case:
(1) OPTION PRICE. The price to be paid for each share of Stock
upon the exercise of each incentive stock option shall be determined by the Plan
Committee at the time the option is granted, but shall in no event be less than
100% of the Fair Market Value (as defined below) of the shares on the date the
option is granted, or not less than 110% of the Fair Market Value (as defined
below) of such shares on the date such option is granted in the case of an
individual then owning (within the meaning of Section 424(d) of the Code) 10% or
more of the total combined voting power of all classes of stock of IMS. As used
in this Plan, the term "date the option is granted" means the date on which the
Plan Committee authorizes the grant of an option hereunder or any later date
specified by the Plan Committee. For the purposes of the Plan, Fair Market
Value of the shares shall be (i) the closing sales price of shares of Stock sold
on the New York Stock Exchange, American Stock Exchange or the NASDAQ National
Market System on the date the option is granted (or if there was no sale on such
date, the highest asked price for the Stock on such date), (ii) if the Stock is
not listed on either of those exchanges or traded on the NASDAQ National Market
System on the date the option is granted, the mean between the "bid" and "asked"
price of the Stock in the National Over-The-Counter Market (or other similar
market quotation system) on the date the option is granted, or (iii) if the
Stock is not traded in any market, the price determined by the Plan Committee to
be the fair market value, based upon such evidence as it may deem necessary or
desirable.
(2) PERIOD OF OPTION AND EXERCISE. The period or periods within
which an option may be exercised shall be determined by the Plan Committee at
the time the option is granted, but in no event shall any option granted
hereunder be exercised more than ten years from the date the option was granted
nor more than five years from the date the option was granted in the case of an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of IMS.
B-2
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(3) PAYMENT FOR STOCK. The option exercise price for each share
of Stock purchased under an option shall be paid in full at the time of
purchase. The Plan Committee may provide that the option price be payable, at
the election of the holder of the option and with the consent of the Plan
Committee, in whole or in part either in cash or by delivery of Stock in
transferable form, such Stock to be valued for such purpose at its Fair Market
Value on the date on which the option is exercised. No share of Stock shall be
issued upon exercise until full payment therefor has been made, and no optionee
shall have any rights as an owner of Stock until the date of issuance to him of
the stock certificate evidencing such Stock.
(4) LIMITATION ON AMOUNT BECOMING EXERCISABLE IN ANY ONE
CALENDAR YEAR. Subject to the overall limitations of Section 4 hereof (relating
to the aggregate shares subject to the Plan), the aggregate Fair Market Value
(determined as of the time the option is granted) of Stock with respect to which
incentive stock options first become exercisable by the optionee during any
calendar year (under the Plan and all other incentive stock option plans of IMS)
shall not exceed $100,000.
(b) NONQUALIFIED STOCK OPTIONS. Nonqualified stock options may be granted
not only to employees but also to directors who are not employees of IMS and to
consultants, independent contractors and other persons who provide substantial
services to IMS. Each nonqualified stock option granted under the Plan shall be
evidenced by a stock option agreement between the person to whom such option is
granted and IMS. Such stock option agreement shall provide that the option is
subject to the following terms and conditions and to such other terms and
conditions not inconsistent therewith as the Plan Committee may deem appropriate
in each case:
(1) OPTION PRICE. The price to be paid for each share of Stock
upon the exercise of an option shall be determined by the Plan Committee at the
time the option is granted , but shall in no event be less than 100% of the Fair
Market Value of the shares on the date the option is granted. As used in this
Plan, the term "date the option is granted" means the date on which the Plan
Committee authorized the grant of an option hereunder or any later date
specified by the Plan Committee.
(2) PERIOD OF OPTION AND EXERCISE. The periods, installments or
intervals during which an option may be exercised shall be determined by the
Plan Committee at the time the option is granted, but in no event shall such
period exceed 10 years from the date the option is granted.
(3) PAYMENT FOR STOCK. The option exercise price for each share
of Stock purchased under an option shall be paid in full at the time of
purchase. The Plan Committee may provide that the option exercise price be
payable at the election of the holder of the option, with the consent of the
Plan Committee, in whole or in part either in cash or by delivery of Stock in
transferable form, such Stock to be valued for such purpose at its Fair Market
Value on the date on which the option is exercised. No share of Stock shall be
issued until full payment therefor has been made, and no optionee shall have any
rights as an owner of shares of Stock until the date of issuance to him of the
stock certificate evidencing such Stock.
(4) LIMITATION ON NUMBER OF SHARES. No one optionee who is an
employee of IMS may be granted more than 500,000 nonqualified stock options in
any one fiscal year.
(c) STOCK APPRECIATION RIGHTS. SARs may be granted in writing under the
Plan by the Plan Committee subject to the following terms and conditions and
such other terms and conditions as the Plan Committee may prescribe.
B-3
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(1) RIGHT OF OPTIONEE. Each SAR shall entitle the holder
thereof, upon the exercise of the SAR, to receive from IMS in exchange therefor
an amount equal in value to the excess of the Fair Market Value on the date of
exercise of one share of Stock over its Fair Market Value on the date of grant
(or, in the case of an SAR granted in connection with an option, the excess of
the Fair Market Value of one share of Stock at the time of exercise over the
option exercise price per share under the option to which the SAR relates),
multiplied by the number of shares covered by the SAR or the option, or portion
thereof, that is surrendered. No SAR shall be exercisable at a time that the
amount determined under this subparagraph is negative. Payment by IMS upon
exercise of an SAR shall be made in Stock valued at the Fair Market Value of the
Stock on the date of exercise.
(2) EXERCISE. An SAR shall be exercisable only at the time or
times established by the Plan Committee. If an SAR is granted in connection
with an option, the following rules shall apply: (i) the SAR shall be
exercisable only to the extent and on the same conditions that the related
option could be exercised; (ii) upon exercise of the SAR, the option or portion
thereof to which the SAR relates terminates; and (iii) upon exercise of the
option, the related SAR or portion thereof terminates.
(3) RULES. The Plan Committee may withdraw any SAR granted
under the Plan at any time and may impose any conditions upon the exercise of an
SAR or adopt rules and regulations from time to time affecting the rights of
holders of SARs granted prior to adoption or amendment of such rules and
regulations as well as SARs granted thereafter.
(4) FRACTIONAL SHARES. No fractional shares shall be issued
upon exercise of an SAR. In lieu thereof, cash may be paid in an amount equal
to the value of the fraction or, if the Plan Committee shall determine, the
number of shares may be rounded downward to the next whole share.
(5) SHARES SUBJECT TO PLAN. Upon the exercise of an SAR for
shares, the number of shares of Stock reserved for issuance under the Plan shall
be reduced by the number of shares issued.
6. NONTRANSFERABILITY. The options and SARs granted pursuant to the Plan
shall be nontransferable except by will or the laws of descent and distribution
of the state or country of the optionee's domicile at the time of death or for
options other than incentive stock options, pursuant to a qualified domestic
relations order as defined in the Code or Title I of the Employee Retirement
Income Security Act and shall be exercisable during the optionee's lifetime only
by him (or, in the case of a transfer pursuant to a qualified domestic relations
order, by the transferee under such qualified domestic relations order) and
after his death, by his personal representative or by the person entitled
thereto under his will or the laws of intestate succession.
7. TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP. Unless otherwise
specified in the applicable option and/or SAR agreement or SAR, upon termination
of the optionee's employment or other relationship with IMS, his rights to
exercise options and SARs then held by him shall be only as follows (in no case
do the time periods referred to below extend the term specified in any option):
(a) DEATH OR DISABILITY. Upon the death or disability (within the
meaning of Section 22(e)(3) of the Code) of an optionee, any option or SAR which
he holds may be exercised (to the extent exercisable at his death or
disability), unless it otherwise expires, within such period after the date of
his death (not less than six months nor more than twelve months) as the Plan
Committee shall prescribe in his option agreement or SAR, by the optionee or, in
the event of death, by the optionee's representative or by the person entitled
thereto under his will or the laws of intestate succession.
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(b) RETIREMENT. Upon the retirement (either pursuant to an IMS
retirement plan, if any, or pursuant to the approval of the Board) of an
officer, director or employee, an outstanding option or SAR may be exercised (to
the extent exercisable at the date of such retirement) by him within such period
after the date of his retirement (provided that such period is no less than 30
days and no more than three months) as the Plan Committee shall prescribe in his
option agreement or SAR.
(c) OTHER TERMINATION. In the event an officer, director or employee
ceases to serve as an officer or director or leaves the employ of IMS for any
reasons other than as set forth in (a) and (b), above, or a nonemployee ceases
to provide services to IMS, any option or SAR which he holds shall remain
exercisable (to the extent exercisable as of the date of such termination) until
30 days after the date of such termination.
(d) PLAN COMMITTEE DISCRETION. The Plan Committee may in its sole
discretion accelerate or extend the exercisability of any or all options or
SARs.
8. TRANSFER TO RELATED CORPORATION. In the event an employee leaves the
employ of IMS to become an employee of a Parent or a Subsidiary or any employee
leaves the employ of a Parent or a Subsidiary to become an employee of IMS or
another Parent or Subsidiary, such employee shall be deemed to continue as an
employee for purposes of this Plan.
9. ADJUSTMENT OF SHARES; TERMINATION OF OPTIONS AND SARS.
(a) ADJUSTMENT OF SHARES. In the event of changes in the outstanding
Stock by reason of stock dividends, split-ups, consolidations,
recapitalizations, reorganizations or like events (as determined by the Plan
Committee), an appropriate adjustment shall be made by the Plan Committee in the
number of shares reserved under the Plan, in the number of shares set forth in
Section 4 hereof, in the number of shares and the option price per share
specified in any stock option agreement, and in the number of SARs with respect
to any unexercised shares. The determination of the Plan Committee as to what
adjustments shall be made shall be conclusive. Adjustments for any options to
purchase fractional shares shall also be determined by the Plan Committee. The
Plan Committee shall give prompt notice to all optionees of any adjustment
pursuant to this Section.
(b) TERMINATION OF OPTIONS AND SARS ON MERGER, REORGANIZATION OR
LIQUIDATION OF IMS. Notwithstanding anything to the contrary in this Plan, in
the event of any merger, consolidation or other reorganization of IMS in which
IMS is not the surviving or continuing corporation (as determined by the Plan
Committee) or in the event of the liquidation or dissolution of IMS, all options
and SARs granted hereunder shall terminate on the effective date of the merger,
consolidation, reorganization, liquidation or dissolution unless there is an
agreement with respect thereto which expressly provides for the assumption of
such options and SARs by the continuing or surviving corporation.
10. SECURITIES LAW REQUIREMENTS. IMS's obligation to issue shares of its
Stock upon exercise of an option or SAR is expressly conditioned upon the
completion by IMS of any registration or other qualification of such shares
under any state and/or federal law or rulings and regulations of any government
regulatory body or the making of such investment representations or other
representations and undertakings by the optionee (or his legal representative,
heir or legatee, as the case may be) in order to comply with the requirements of
any exemption from any such registration or other qualification of such shares
which IMS in its sole discretion shall deem necessary or advisable. IMS may
refuse to permit the sale or other disposition of any shares acquired pursuant
to any such representation until it
B-5
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is satisfied that such sale or other disposition would not be in contravention
of applicable state or federal securities law.
11. TAX WITHHOLDING. As a condition to the exercise of an option or SAR
or otherwise, IMS may require an optionee to pay over to IMS all applicable
federal, state and local taxes which IMS is required to withhold with respect to
the exercise of an option or SAR granted hereunder. At the discretion of the
Plan Committee and upon the request of an optionee, the minimum statutory
withholding tax requirements may be satisfied by the withholding of shares of
Stock otherwise issuable to the optionee upon the exercise of an option or SAR.
12. AMENDMENT. The Board may amend the Plan at any time, except that
without shareholder approval:
(a) The number of shares of Stock which may be reserved for issuance
under the Plan shall not be increased except as provided in Section 9(a) hereof;
(b) The option price per share of Stock subject to incentive stock
options may not be fixed at less than 100% of the Fair Market Value of a share
of Stock on the date the option is granted;
(c) The maximum period of ten (10) years during which the options or
SARs may be exercised may not be extended;
(d) The class of persons eligible to receive options or SARs under
the Plan as set forth in Section 3 shall not be changed; and
(e) This Section 12 may not be amended in a manner that limits or
reduces the amendments which require shareholder approval.
13. EFFECTIVE DATE. The Plan shall be effective upon the date of its
adoption by both the Board, and subject to the approval of the stockholders of
IMS within the 12 month period following such adoption date.
14. TERMINATION. The Plan shall terminate automatically as of the close
of business on the day preceding the 10th anniversary date of its effectiveness
or earlier by resolution of the Board, or upon consummation of any merger,
consolidation or other reorganization in which the options granted hereunder
terminate, all as described in Section 9(b) hereof. Unless otherwise provided
herein, the termination of the Plan shall not affect the validity of any option
agreement outstanding at the date of such termination.
15. STOCK OPTION AND SAR AGREEMENT. Each option and SAR granted under the
Plan shall be evidenced by a written agreement executed by IMS and accepted by
the optionee, which (i) shall contain each of the provisions and agreements
herein specifically required to be contained therein, (ii) shall indicate
whether an option is to be an incentive stock option or a nonqualified stock
option, and if it is to be an incentive stock option, the stock option agreement
shall contain terms and conditions permitting such option to qualify for
treatment as an incentive stock option under Section 422 of the Code, (iii) may
contain the agreement of the optionee to remain in the employ of, and/or to
render services to, IMS or any Parent or Subsidiary for a period of time to be
determined by the Plan Committee, and (iv) may contain such other terms and
conditions as the Plan Committee deems desirable and which are not inconsistent
with the Plan.
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16. NO RIGHT TO EMPLOYMENT. Nothing in this Plan or in any option or SAR
granted hereunder shall confer upon any optionee any right to continue in the
employ of or to continue to perform services for IMS, or shall interfere with or
restrict in any way the rights of IMS to discharge or terminate any officer,
director, employee, independent contractor or consultant at any time for any
reason whatsoever, with or without good cause.
Executed and dated as of the date first written above at El Segundo,
California.
INTERNATIONAL META SYSTEMS, INC.
By:
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George W. Smith, President
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P R O X Y
INTERNATIONAL META SYSTEMS, INC.
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 10, 1996
The undersigned stockholder appoints George W. Smith as proxy with full
power of substitution, to vote the shares of voting securities of International
Meta Systems, Inc. (the "Company") which the undersigned is entitled to vote at
the Annual Meeting of Stockholders to be held at the Radisson Hotel, Manhattan
Beach, California, on July 10, 1996, at 10:00 a.m., local time, and at any
adjournments thereof, upon matters properly coming before the meeting, as set
forth in the Notice of Annual Meeting and Proxy Statement, both of which have
been received by the undersigned. Without otherwise limiting the general
authorization given hereby, such proxy is instructed to vote as follows:
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE PROPOSALS INDICATED ON THIS CARD AND AS
SUCH PROXIES DEEM ADVISABLE WITH DISCRETIONARY AUTHORITY ON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENT OR
ADJOURNMENTS THEREOF.
(1) To approve an amendment to the Company's Certificate of Incorporation
to increase the amount of authorized shares of Common Stock from
50,000,000 to 70,000,000 and to reduce from 8 to 6 the threshold at
which directors of the Company must be elected to staggered terms of
office.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(2) To ratify the appointment of Singer, Lewak, Greenbaum & Goldstein,
Certified Public Accountants, as auditors of the Company for the
fiscal year ending December 31, 1996.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) To elect to the Board of Directors five (5) directors, to save until
the next Annual Meeting of Stockholders of the Company or until their
successors are elected and qualify, subject to their prior death,
resignation or removal.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) To approve the form of indemnity agreements between the Company and
the members of the Company's Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(5) To adopt the Company's 1996 Stock Option Plan and to reserve up to
4,500,000 shares of the Company's Common Stock for issuance under the
1996 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
In his discretion, the proxy is authorized to vote upon such other business
as may properly come before the meeting.
DATED:
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Signature
-----------------------------------
Signature (if held jointly)
-----------------------------------
Print Names
(Please sign exactly as your name appears hereon. When
signing as attorney, executor, administrator, trustee or
guardian, please give your full title. If shares are
jointly held, each holder must sign. If a corporation,
please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in
partnership name by authorized person).
PLEASE CHECK THE BOXES ON THE REVERSE SIDE, SIGN, DATE AND RETURN THIS
PROXY TO INTERNATIONAL META SYSTEMS, INC., 100 NORTH SEPULVEDA BOULEVARD,
SUITE 601, EL SEGUNDO, CALIFORNIA 90245, IN THE SELF-ADDRESSED ENVELOPE
PROVIDED.
