SCHEDULE 14A
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
[ ]Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ]Definitive Proxy Statement
[ ]Definitive Additional Materials
[ ]Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
PC ETCETERA, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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:
Common Stock, par value $.01 per share
(2) Aggregate number of securities to which transaction applies:
21,584,120 Shares of common Stock on a fully diluted basis.
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] 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.:
. . . . . . . . . . . .
(3) Filing Party:
. . . . . . . . . . . .
(4) Date Filed:
. . . . . . . . . . . .
<PAGE>
Draft 6/20/97
PC ETCETERA, INC.
462 Seventh Avenue
New York, New York 10018
Telephone: (212) 736-5870
July 7, 1997
To Our Stockholders:
On behalf of the Board of Directors, I cordially invite you to attend the
1997 Annual Meeting of the Stockholders of PC Etcetera, Inc. (the "Company").
The Annual Meeting will be held at 10:00 a.m., local time, on Monday, August 4,
1997, at the Company's principal offices at 462 Seventh Avenue, 4th Floor, New
York, New York. We hope that you will be able to attend the meeting.
The matters expected to be acted upon at the meeting are described in the
attached Notice of Annual Meeting and Proxy Statement. During the meeting,
stockholders who are present at the meeting will have the opportunity to ask
questions.
It is important that your views be represented at the Annual Meeting
whether or not you are able to be present. Please complete, sign and date the
enclosed proxy card and promptly return it to us in the postpaid envelope also
enclosed.
Sincerely,
Roy Machnes
Chairman and Chief Executive Officer
<PAGE>
PC ETCETERA, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
August 4, 1997
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New York, New York
July 7, 1997
The Annual Meeting of Stockholders of PC Etcetera, Inc., a Delaware
corporation (the "Company"), will be held at the Company's principal offices at
462 Seventh Avenue Floor, New York, New York, on Monday, August 4, 1997 at 10:00
a.m., local time, for the following purposes:
1. The election of six persons to serve as directors of the Company until
the next annual meeting of stockholders and until their successors are
duly elected.
2. A proposal to amend the Company's Certificate of Incorporation to
change the name of the Company to Mentortech Inc.
3. A proposal to amend the Company's Certificate of Incorporation to
increase the number of authorized shares of capital stock of the
Company from 20,000,000 to 45,000,000 comprised of 40,000,000 shares
of common stock of the Company, par value $.01 per share (the "Common
Stock"), and 5,000,000 shares of preferred stock of the Company, par
value of $.001 per share ( the "Preferred Stock").
4. A proposal to authorize the conversion, at the option of the holder,
of each of the 658,412 outstanding shares of the Company's Series C
Preferred Stock into ten shares of Common Stock.
5. A proposal to ratify the Company's 1997 Stock Option Plan.
6. A proposal to ratify the appointment of Ernst & Young LLP as
independent auditors of the Company's 1997 financial statements.
7. Such other business as may properly come before the Annual Meeting and
any adjournments or postponements thereof.
Only those holders of record of Common Stock and Series C Preferred
Stock as of the close of business on July 2, 1997, will be entitled to notice
of, and to vote at, the Annual Meeting and any adjournments or postponements
thereof. A list of stockholders entitled to vote will be available for
inspection by interested stockholders at the offices of the Company, commencing
on Thursday, July 3, 1997, and will be available at the Annual Meeting.
By order of the Board of Directors,
Terry I. Steinberg
Secretary
<PAGE>
YOUR VOTE IS IMPORTANT WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL
MEETING. PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENVELOPE PROVIDED FOR THAT PURPOSE.
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<PAGE>
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
August 4, 1997
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This Proxy Statement is being furnished to the stockholders of PC Etcetera,
Inc., a Delaware corporation (the "Company"), in connection with the Annual
Meeting of Stockholders (the "Annual Meeting") to be held at 10:00 a.m., local
time, on Monday, August 4, 1997, at the Company's principal offices at 462
Seventh Avenue, 4th Floor, New York, New York, and at any adjournment thereof.
The Company's Board of Directors is soliciting proxies to be voted at the Annual
Meeting.
This Proxy Statement and attached Notice of Annual Meeting, the enclosed
proxy card and the Company's 1996 Annual Report to Stockholders are expected to
be sent to stockholders beginning on July 7, 1997.
Proxy Procedure
Only stockholders of record at the close of business on July 2, 1997 (the
"Record Date"), are entitled to notice of, and to vote in person or by proxy at,
the Annual Meeting.
When a proxy card is returned properly signed and dated, the shares
represented thereby will be voted in accordance with the instructions marked in
the boxes on the proxy card. Stockholders are urged to mark the boxes on the
enclosed proxy card to indicate how their shares are to be voted. If a
stockholder returns a signed and dated proxy card but does not mark the boxes,
the shares represented by that proxy card will be voted for the election as
directors of the nominees herein and for each of the other proposals herein. The
Board of Directors is currently unaware of any other matters to be presented for
action at the Annual Meeting, but the proxy card gives the individuals named as
proxies discretionary authority to vote the shares represented thereby on any
such other matter that is properly presented for action at the Annual Meeting. A
stockholder may revoke his or her proxy at any time before it is voted by: (i)
giving notice in writing to the Secretary of the Company; (ii) submitting a
proxy card bearing a later date; or (iii) appearing in person and voting at the
Annual Meeting. If a stockholder attends the Annual Meeting, he or she may vote
by ballot.
Cost of Solicitation
The cost of soliciting proxies in the enclosed form will be borne by the
Company. Proxies may be solicited by telephone or other means by directors,
officers or regular employees of the Company, who will not be specially
compensated therefor. The Company will reimburse brokerage houses and other
custodians, nominees and fiduciaries for their expenses in accordance with the
regulations of the Securities and Exchange Commission concerning the forwarding
of proxies and proxy material to the beneficial owners of stock.
Stockholder Proposals
Stockholders of the Company may submit proposals for possible inclusion in
the proxy material for the 1998 Annual Meetings of Stockholders. Such proposals
must meet the stockholder eligibility and other requirements of the Securities
and Exchange Commission. In order to be considered for inclusion in the
Company's 1998 proxy material, a stockholder's proposal must be received not
later than March 9, 1998 at the Company's headquarters, 462 Seventh Avenue, New
York, New York, 10018, Attention: Secretary.
Quorum and Voting
<PAGE>
The outstanding voting stock of the Company as of the Record Date consisted
of 15,000,000 shares of Common Stock, par value $.01 per share (the "Common
Stock"), and 658,412 shares of Series C Preferred Stock, par value $.001 per
share (the "Series C Preferred Stock"). In general, the Common Stock and the
Series C Preferred Stock vote together on all matters submitted to a vote of the
Company's stockholders. Except as noted below, each share of Common Stock is
entitled to one vote, and each share of Series C Preferred Stock is entitled to
ten votes, upon each matter to come before the Annual Meeting. Thus, a maximum
of 21,584,120 votes may be cast on most proposals at the Annual Meeting.
The presence at the Annual Meeting, in person or by proxy, of the holders
of Common Stock and Series C Preferred Stock entitled to cast a majority of the
maximum number of votes which may be cast at the Annual Meeting will constitute
a quorum for the transaction of any business.
Directors of the Company will be elected by a plurality of the combined
votes of the shares of Common Stock and Series C Preferred Stock present in
person or represented by proxy at the Annual Meeting, i.e., each share of Common
Stock entitles the holder to cast one vote for each of six persons, and each
share of Series C Preferred Stock entitles the holder to cast ten votes for each
of six persons, and the persons who receive the six highest totals of votes
(whether or not a majority) will be elected. Thus, stockholders who do not vote,
or who withhold their vote from one or more nominees named herein and who do not
vote for another person, will not affect the outcome of the election, provided
that a quorum is present at the Annual Meeting.
Proposals 2 and 3 herein require the affirmative vote of a majority of the
combined votes represented by all shares of Common Stock and Series C Preferred
Stock outstanding on the Record Date. In addition, Proposal 3 requires the
affirmative vote of a majority of the shares of Common Stock outstanding on the
Record Date, voting as a separate class. Thus, stockholders who do not vote or
who vote to abstain on Proposals 2 and 3 will in effect be voting against those
proposals.
Proposal 4 herein requires the affirmative vote of a majority of the shares
of Common Stock present in person or represented by proxy at the Annual Meeting,
and Proposal 5 and 6 herein require the affirmative vote of a majority of the
combined votes represented by all shares of Common Stock and Series C Preferred
Stock present in person or represented by proxy at the Annual Meeting. Thus,
stockholders who are not present, in person or by proxy, at the Annual Meeting
will not affect the outcome of the votes on those proposals, provided that a
quorum is present at the Annual Meeting; however, a stockholder who is present,
in person or by proxy, at the Annual Meeting, and who does not vote or votes to
abstain on Proposals 5 and 6 will in effect be voting against those proposals.
A broker who is the record owner of shares of Common Stock beneficially
owned by a customer will have discretionary authority to vote such shares in the
election for directors and on Proposals 1, 2, 3 and 6 herein if the broker has
not received voting instructions from the beneficial owner by the tenth day
before the Annual Meeting, provided that this Proxy Statement has been
transmitted to the beneficial owner at least 15 days before the Annual Meeting.
A broker who is the record owner of shares of Common Stock beneficially owned by
a customer will not have discretionary authority to vote such shares for or
against Proposals 4 and 5 in the absence of instructions from the beneficial
owner. Votes which are not cast for this reason ("broker non-votes") will not
affect the outcome of the votes on Proposals 5 and 6, provided that a quorum is
present at the Annual Meeting.
As previously reported, effective February 13, 1997, a change of control of
the Company occurred, pursuant to a Stock Purchase Agreement dated February 6,
1997 (the "Stock Purchase
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<PAGE>
Agreement"), between the Company and Mashov Computers Marketing Ltd., a
corporation incorporated under the laws of the State of Israel ("Mashov
Marketing"). Pursuant to the Stock Purchase Agreement, Mashov Marketing acquired
8,438,924 shares of Common Stock and 658,412 shares of Series C Preferred Stock
as consideration for the Company's acquisition from Mashov Marketing of Sivan
Computers Training Center (1994) ("Sivan") and Mashov Computer Based Training
(C.B.T.) Ltd. ("Mashov CBT"), both corporations incorporated under the laws of
the State of Israel. As a result of the foregoing and other transactions
provided for in the Stock Purchase Agreement, Mashov owns approximately 55.3% of
the outstanding Common Stock, all of the outstanding Series C Preferred Stock,
and approximately 69% of the Company's equity and stockholder voting power on a
fully diluted basis.
Management of the Company has been advised that Mashov Marketing presently
intends to vote its shares of Common Stock and Series C Preferred Stock in favor
of the election as directors of the six nominees herein and in favor of the
other proposals herein, thereby assuring the election of such nominees and the
passage of such proposals.
Stockholders of the Company are not entitled to any statutory dissenters'
or appraisal rights with respect to any of the proposals herein.
Security Ownership of Principal Beneficial Owners and Management
The following table sets forth certain information as of the Record Date
regarding each person known by the Company to beneficially own more than five
percent of any class of the Company's voting securities:
<TABLE>
<CAPTION>
Amount of shares
Title of Name and address and nature of beneficial Percent of
class of beneficial owner ownership(1) class (2)
----- ------------------- ------------ ---------
<S> <S> <C> <C>
Series C Mashov Computers Marketing Ltd.(4) 658,412 100.0%
Preferred 5 HaPlada Street
Stock (3) Or-Yehuda, Israel 60218
Common Mashov Computers Marketing Ltd.(4) 8,308,924(5) 55.3%
Stock
Elron Electronic Industries Ltd. 1,490,405(6) 9.9%
Advanced Technology Center
P.O. Box 1573
Haifa, Israel 31015
Rho Management Trust I 1,166,671(7) 7.8%
c/o Rho Management Co., Inc.
767 Fifth Avenue
New York, New York
Dr. Meir Barel 871,304(8) 5.8%
SVM STAR Ventures
Management Ltd.
Herzelia Pitauch, Israel 46733
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Amount of shares
Title of Name and address and nature of beneficial Percent of
class of beneficial owner ownership(1) class (2)
----- ------------------- ------------ ---------
<S> <S> <C> <C>
Gilbert H. Steinberg 1,448,123(9) 9.6%
Six Nevada Drive
Lake Success, New York
Terry I. Steinberg 1,448,123(9) 9.6%
462 Seventh Avenue
New York, New York
Joseph Sabrin 1,448,123(9) 9.6%
333 East 34th Street
New York, New York
</TABLE>
(1) Except as otherwise disclosed in the footnotes below, the shares listed in
this column for a person named in this table are directly held by such
person, with sole voting and dispositive power.
(2) Percentages of Common Stock in this column do not give effect to the
conversion of the Series C Preferred Stock into Common Stock. See Proposal
4 herein.
(3) Each share of Series C Preferred Stock is convertible into 10 shares of
Common Stock (see Proposal 4) and in general entitles the holders to ten
votes in all matters required to be or otherwise submitted to a vote of the
holders of the Common Stock.
(4) Mashov Marketing is a 79% owned subsidiary of Mashov Computers Ltd.
("Mashov Computers"), a publicly held company incorporated under the laws
of the State of Israel. David Assia and Jack Dunietz are directors of
Mashov Marketing and Mashov Computers and own approximately 20% and 10%,
respectively, of the shares of Mashov Computers. Mr. Assia is the Chairman
and Mr. Dunietz is the Chief Executive Officer of Mashov Computers.
(5) Does not include 6,584,120 shares of Common Stock issuable upon conversion
of the Series C Preferred Stock. See Proposal 4.
(6) Includes 130,000 shares of Common Stock transferred to Elron Electronic
Industries Ltd. by Mashov Marketing upon the execution of the Stock
Purchase Agreement.
(7) Rho Management Partners L.P. ("Rho Management Partners") may be deemed the
beneficial owner of these shares registered in the name of Rho Management
Trust I (formerly known as Gibraltar Trust), pursuant to an investment
advisory agreement that confers sole voting and dispositive power over such
shares to Rho Management Partners.
(8) These shares are held of record by the Star Group. Pursuant to information
available to the Company, the Star Group includes: SVE STAR Ventures
Enterprises No. II GbR (112,610 shares), SVE STAR Ventures Enterprises No.
III (297,422 shares), SVE STAR Ventures
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<PAGE>
Enterprises No. IIIA GbR (25,260 shares), Justy Ltd. (261,392 shares) and
Yozma Venture Capital Ltd. (174,260 shares). Dr. Meir Barel has sole voting
and dispositive power with respect to the shares beneficially owned by the
members of the Star Group.
(9) Includes shares beneficially owned by Terry I. Steinberg (305,458 shares,
including 20,000 issuable upon exercise of options), Joseph Sabrin (305,458
shares, including 20,000 issuable upon exercise of options) and Gilbert H.
Steinberg (807,207 shares) pursuant to a voting trust agreement expiring in
December 1997, wherein Terry I. Steinberg, Gilbert H. Steinberg and Mr.
Sabrin exercise joint voting power as co-trustees. Each of Terry I.
Steinberg, Gilbert H. Steinberg and Mr. Sabrin retain sole dispositive
control over their respective shares.
The following table sets forth certain information as of the Record Date
regarding the beneficial ownership of the Company's equity securities by each of
its executive officers and directors, and by the Company's executive officers
and directors as a group:
<TABLE>
<CAPTION>
Amount of shares
and nature of
beneficial Percent of
Title of class Name (1) ownership(1) class(2)
- -------------- -------- ------------ --------
<S> <S> <C> <C>
Series C Preferred All executive officers -- --
Stock and directors as a
group (6 persons)
Common Stock David Assia -- --
Jack Dunietz -- --
Martin F. Kahn 40,000(3) 0.3%
Roy Machnes 108,334(3) 0.7%
Elan Penn 66,667(3) 0.4%
Terry I. Steinberg 405,458(4) 2.6%
All executive officers 620,459(5) 4.1%
and directors as a
group (6 persons)
- -------------------
</TABLE>
(1) Messrs. Assia, Dunietz, Machnes and Penn are each directors of Mashov
Marketing and Mashov Computers. See footnote (4) in the preceding table
above.
(2) Percentages in this column do not give effect to the conversion of the
Series C Preferred Stock into Common Stock. See Proposal 4 herein.
(3) Comprised of shares issuable upon the exercise of stock options which are
currently exercisable or which, subject to the ratification of Proposal 5
herein, will first become exercisable within 60 days of the Record Date.
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<PAGE>
(4) Includes 100,000 shares issuable upon the exercise of stock options which
are currently exercisable or which, subject to the ratification of Proposal
5 herein, will first become exercisable within 60 days of the Record Date.
(5) Includes 315,001 shares issuable upon the exercise of stock options which
are currently exercisable or which, subject to the ratification of Proposal
5 herein, will first become exercisable within 60 days of the Record Date.
PROPOSAL 1
ELECTION OF DIRECTORS
Six directors are to be elected at the Annual Meeting to serve until the
next Annual Meeting and the due election and qualification of their successors.
The proxies will be voted, unless otherwise specified therein, in favor of the
election as directors of David Assia, Jack Dunietz, Martin F. Kahn, Roy Machnes,
Elan Penn and Terry I. Steinberg.
Each of them is currently a director, with a term expiring as of the date
of this Annual Meeting. Roy Machnes, Elan Penn, David Assia, and Jack Dunietz
were appointed Directors in February 1997 in connection with the execution of
the Stock Purchase Agreement. Terry I. Steinberg and Martin F. Kahn were
directors prior to the execution of the Stock Purchase Agreement. Should any of
these nominees not be available for election, all properly executed and returned
proxies will be voted for a substitute nominee designated by the Board of
Directors. It is not expected that any of the nominees will be unavailable.
Proxies cannot be voted for more than six persons.
The Board recommends a vote FOR the election of the six director nominees
herein.
David Assia. Mr. Assia has served as a director of the Company since
February 1997. He is a co-founder with Mr. Dunietz of Mashov Computers and has
been its Chairman since 1989. Mr. Assia has been Managing Director, since its
inception in 1983, of Magic Software Enterprises Ltd. ("Magic"), a developer and
provider of network software products and services for departmental,
client/server and Internet/Intranet applications, and has been Chief Executive
Officer and Chairman of Magic since 1986. He also serves as a director of Mashov
Marketing and Aladdin Knowledge Systems Ltd. Mr. Assia holds a B.A. and an
M.B.A. from the Tel-Aviv University.
Jack Dunietz. Mr. Dunietz has served as a director of the Company since
February 1997. He is a co-founder with Mr. Assia of Mashov Computers of which he
has been the Chief Executive Officer since 1987. Mr. Dunietz also serves as a
director of Mashov Marketing, Magic Software and Paradigm Geophysical Ltd. &
Data Automation Ltd. Mr. Dunietz holds a B.Sc. in Computer Science from the
Technion Israel Institute of Technology.
Martin F. Kahn. Mr. Kahn has served as a director of the Company since May
1994 and was Chairman of the Board of the Company from May 1995 until February
1997. He has served since 1989 as Chairman of Ovid Technologies, Inc. (formerly
CDP Technologies, Inc.), a leading producer of medical, scientific and technical
CD-ROM and network products; since [________] 1993 as Chairman of OneSource
Information Services (formerly Lotus One Source), which develops and markets a
comprehensive set of integrated business information and software products;
since 1991 as Chairman of Vista Information Solutions, Inc. (formerly DataMap,
Inc., a successor through merger to Vista Environmental Information, Inc.) which
supplies site-specific risk information about real estate for the insurance,
banking, and environmental engineering markets; since April 1995 as Chairman of
ShopperVision Express, Inc., which offers home grocery shopping through dial-up
and on-line services; and since 1990 as Managing Director of Cadence Information
Associates L.L.C. (and its predecessor), a consulting and management services
firm. Mr. Kahn holds a Bachelors Degree in Administrative Sciences from Yale
College and an M.B.A. from Harvard Business School.
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<PAGE>
Roy Machnes. Mr. Machnes has served as the Company's Chairman of the Board
and Chief Executive Officer and a director since February 1997. Since January
1994, he has been Chairman and Chief Executive Officer of Mashov Marketing, and
prior thereto, from January 1988, he served as Vice President Sales of Mashov
Computers. Mr. Machnes is also a director of Mashov Computers. He holds a B.A.
from the University of California at Berkeley.
Elan Penn. Mr. Penn has served as the Company's Chief Financial Officer and
a director since February 1997. He also serves as the Chief Financial Officer of
Mashov Computers and Mashov Marketing. Mr. Penn joined Mashov Computers and
Magic as their Vice President of Finance and Administration in June 1992. In
February 1997, he resigned his position at Magic to assume the position of Chief
Financial Officer of the Company. From January 1991 until May 1992, Mr. Penn was
employed by Solgood Representatives Ltd., an electronics equipment sales
representative firm, where he acted in an executive capacity. Prior to January
1991, he was Vice President of Finance of Mashov Computers. Mr. Penn holds a
B.A. in Economics from the Hebrew University of Jerusalem and a Ph.D. in
Management Science from the University of London.
Terry I. Steinberg. Mr. Steinberg has served as the Company's Executive
Vice President, responsible for North American Sales and Marketing, and a
director since February 1997. Prior to thereto, he was President and Chief
Executive Officer and a director of the Company since its inception in 1985 and
its Treasurer from August 1991. He currently serves as Secretary. For more than
five years prior to the Company's inception, he was the Director of Decision
Support for Paramount Pictures Corporation, with responsibility for all end-user
computing. Mr. Steinberg holds a Bachelor's Degree in Applied Mathematics and
Computer Science and an M.B.A., both from McGill University.
Board of Directors
The business and affairs of the Company are managed under the direction of
the Board of Directors, composed currently of three non-employee directors and
three employee directors. The Board of Directors establishes the overall
policies and standards for the Company and reviews the performance of
management.
In 1996, the Board of Directors held 4 meetings, all of which were held by
conference telephone. Each director was present for all of the meetings of the
Board.
The Board of Directors currently has no standing audit, nominating or
compensation committee.
Directors' Compensation
Directors, whether or not they are also employees of the Company, are not
paid any fees or other remuneration for service on the Board. The Company
reimburses all of its directors for their out-of-pocket expenses incurred in the
performance of their duties as directors of the Company.
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<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 and the rules
thereunder require the Company's directors and executive officers, and persons
who beneficially own more than 10% of the Common Stock, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of any equity securities of the Company. To the Company's
knowledge, based solely on review of the copies of such reports furnished to it
and representations that no other reports were required, all persons subject to
these reporting requirements filed the required reports on a timely basis during
1996.
Executive Compensation
The following table sets forth information concerning the compensation
during the last three fiscal years of the Company's chief executive officer and
its only other executive officer who served as such in 1996 and whose total
salary during any of the three prior fiscal years was $100,000 or more. The
Company did not pay any bonuses or make any restricted stock grants in 1994,
1995 or 1996 and the Company has a 401(k) plan for its executives which is
available to all Company employees. The current value of all perquisites and
other personal benefits furnished in each of such years to each of the executive
officers named below was less than 10% of such officer's salary for such year.
Summary Compensation Table
Annual Compensation -
Name and principal position Year Salary ($)
- --------------------------- ---- ----------
Terry I. Steinberg 1996 90,000
President and Chief 1995 99,360
Executive Officer (1) 1994 131,750
Joseph Sabrin 1996 --(2)
Executive Vice President (3) 1995 103,680
1994 110,400
- ------------
(1) Effective February 13, 1997, Mr. Steinberg was appointed Executive Vice
President.
(2) Less than $100,000.
(3) Effective May 1997, Mr. Sabrin resigned from the Company. Mr. Sabrin was
granted severance of $30,000, equal to three months' salary.
Employment Contracts
Pursuant to the Stock Purchase Agreement and effective February 13, 1997,
the Company entered into employment contracts with each of Roy Machnes, Terry I.
Steinberg and Elan Penn, providing for their employment as Chief Executive
Officer, Executive Vice President and Chief Financial Officer, respectively, of
the Company. Pursuant to such contracts, effective as of June
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<PAGE>
1997, and subject to the ratification of Proposal 5 herein, Messrs. Machnes,
Steinberg and Penn were granted incentive stock options to purchase 325,000,
240,000 and 200,000 shares of Common Stock, respectively, which options vest
over a three-year period commencing in August 1997. The exercise price of such
stock options is $0.584 per share. See Proposal 5 herein.
The base salaries of Messrs. Machnes and Steinberg are each $155,000. Mr.
Penn's salary is paid at a rate of $10,000 per month, adjusted monthly in a
percentage amount equal to the increase in the Consumer Price Index as published
by the Israeli Bureau of Labor Statistics.
Mr. Machnes's employment agreement provides that the Company will reimburse
certain of Mr. Machnes's relocation and living expenses. Specifically, the
Company must reimburse Mr. Machnes for the following expenses: (1) $20,000 for
expenses incurred during the relocation of Mr. Machnes, his family and their
possessions; (2) all expenses associated with the education of Mr. Machnes's
children including private school tuition and associated expenses (estimated at
$20,000 per annum); (3) rental payments for an apartment in Manhattan, New York,
including any associated real estate broker's fees, less the amount of any
rental payments received from the sublease of Mr. Machnes's home in Israel, net
of associated expenses; and (4) any expenses incurred by Mr. Machnes in
connection with a visit by his family to Israel once each year. All of the
foregoing expense reimbursements are to be grossed up to account for the payment
of any taxes due if such reimbursement constitutes taxable income to Mr. Machnes
and are to be adjusted upwards annually in a percentage amount equal to the
Consumer Price Index for all urban consumers in the New York, New Jersey and
Connecticut area as published by the Bureau of Labor Statistics. Should Mr.
Machnes' employment be terminated for any reason, Mr. Machnes is to be
reimbursed for relocation expenses of no more than $20,000 in connection with
Mr. Machnes's relocation to Israel.
Stock Options
The following table provides information concerning exercises of stock
options during 1996 by each of the executive officers named above in the Summary
Compensation Table, and the number and value of unexercised options held by each
of them at December 31, 1996. No options were granted to these persons in 1996.
Aggregated Option Exercises in Last
Fiscal Year and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of shares
underlying Value of unexercised
unexercised options at in-the-money options
Shares FY-end (#) at FY-end ($)(1)
acquired on exercisable/ exercisable/
Name exercise (#) unexercisable unexercisable
- ---- ------------ ------------- -------------
<S> <C> <C> <C>
Terry I. Steinberg -- 20,000/0 --/--
Joseph Sabrin -- 20,000/0 --/--
- ----------------
</TABLE>
(1) Difference between the aggregate market value of the underlying shares
(based on the average ($.47) of the bid and the asked prices of a share
of Common Stock on December 31, 1996) and the aggregate exercise price
of such shares.
-9-
<PAGE>
PROPOSAL 2
PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO CHANGE
THE COMPANY'S NAME
The Board of Directors has unanimously adopted, and recommends that the
stockholders approve, an amendment to the Company's Certificate of Incorporation
to provide for a change in the Company's name from PC Etcetera, Inc. to
Mentortech Inc. (the "Name Amendment"). The Board of Directors believes that the
proposed name is more descriptive of the Company's strategy of marketing
cutting-edge computer training services and products. The full text of the Name
Amendment is set forth in the proposed Certificate of Amendment to the
Certificate of Incorporation (the "Certificate of Amendment"), which is Exhibit
A attached to this Proxy Statement.
The Board of Directors has unanimously approved the Name Amendment and
recommends that the stockholders vote FOR it.
PROPOSAL 3
PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION
TO AUTHORIZE AN INCREASE IN THE AUTHORIZED SHARES OF COMMON STOCK
(THE "SHARE INCREASE AMENDMENT")
The Board of Directors has unanimously adopted, and believes that it would
be in the best interests of the Company and its stockholders if the stockholders
approve, the Share Increase Amendment, which would amend the Certificate of
Incorporation to increase the number of authorized shares of Common Stock of the
Company from 15,000,000 to 40,000,000. The full text of the Share Increase
Amendment is set forth in the Certificate of Amendment, which is Exhibit A
attached to this Proxy Statement.
Currently, the Company's authorized share capital consists of 15,000,000
shares of Common Stock (all of which is outstanding) and 5,000,000 shares of
Preferred Stock, of which 658,412 shares are designated and outstanding as
Series C Preferred Stock.
The increase in the number of authorized shares of Common Stock is being
proposed primarily because all of the currently authorized shares of Common
Stock are currently outstanding, and because there are no authorized shares of
Common Stock available for the conversion of the Series C Preferred Stock into
up to 6,584,120 shares of Common Stock. See Proposal 4 herein.
The additional authorized shares of Common Stock would be available for
issuance from time to time as required for general corporate purposes, including
stock dividends, stock splits, employee stock options and other employee benefit
plans, the raising of capital, the formation of new companies, the acquisition
of established businesses, and other programs to facilitate the Company's
expansion and growth. Apart from the issuance of 6,584,120 shares upon the
conversion of the Series C Preferred Stock (see Proposal 4), no specific plans
have been formulated, and there are no commitments, understandings or
negotiations at this time with respect to the issuance of additional shares of
Common Stock. The advance stockholder authorization being sought by the Share
Increase
-10-
<PAGE>
Amendment would, however, allow the Board of Directors to authorize the issuance
of additional shares of Common Stock without having to obtain further
stockholder approval, unless such approval were otherwise required by law or the
rules of any stock exchange on which the Common Stock is listed, or unless such
approval were deemed appropriate by the Board.
The authorization of additional shares of Common Stock would not, by
itself, have any effect on the rights of holders of outstanding shares.
Depending on the circumstances, the issuance of additional shares of Common
Stock could affect the existing holders of shares by diluting the voting power
of the outstanding shares. The Company's stockholders do not have pre-emptive
rights with respect to the future issuance of securities by the Company.
Pursuant to Section 242(c) of the Delaware General Corporation Law, the
Board of Directors have reserved the right, notwithstanding stockholder
authorization of the Share Increase Amendment, to abandon it without further
action by the stockholders if, at any time prior to the effectiveness of the
Certificate of Amendment, the Board of Directors, in its sole discretion,
determines that the Share Increase Amendment is no longer in the best interests
of the Company and its stockholders.
The Board of Directors of the Company has unanimously approved the Share
Increase Amendment as described herein, and recommends that stockholders vote
FOR it.
PROPOSAL 4
PROPOSAL TO AUTHORIZE
CONVERSION OF SERIES C PREFERRED STOCK
Subparagraph (iii)(A) of the Certificate of Designations of the Series C
Preferred Stock provides that "Subject to the authorization of shareholders
holding a sufficient number of the Corporation's Common Shares to permit such
conversion, each Series C Preferred Share shall be convertible, at the option of
the holder thereof, at the office of the Corporation, into ten (10) Common
Shares of the Corporation."
Accordingly, the following resolution will be offered by the Board of
Directors at the Annual Meeting:
RESOLVED: That the holders of the Company's outstanding Common Stock
hereby authorize the holder of the issued and outstanding shares of the
Company's Series C Preferred Stock to convert them into shares of Common
Stock in accordance with the terms set forth in the Certificate of
Designations of the Company's Series C Preferred Stock.
The Board of Directors believes that it would be in the best interest of
the Company if Mashov Marketing were to convert the issued and outstanding
shares of the Series C Preferred Stock into Common Stock. The Stock Purchase
Agreement provides that each share of Series C Preferred Stock will be converted
into ten shares of Common Stock when practicable. The Company has been advised
that Mashov Marketing will immediately convert all the 658,412 shares of Series
C
-11-
<PAGE>
Preferred Stock into 6,584,120 shares of Common Stock if this Proposal 4 and
Proposal 3 are authorized.
The Board of Directors recommends a vote FOR the authorization of the
conversion of the Series C Preferred Stock into Common Stock.
PROPOSAL 5
RATIFICATION OF THE 1997 STOCK OPTION PLAN
The stockholders will be asked at the Annual Meeting to vote on a proposal
to ratify the adoption of the 1997 Stock Option Plan (the "Plan"). A copy of the
Plan is attached hereto as Exhibit B. On June 25, 1997, the Plan was approved by
the Board of Directors, subject to shareholder ratification. The Plan provides
for the issuance of options to purchase a maximum aggregate of 5,000,000 shares
of the Company's Common Stock (subject to adjustment for stock splits and other
capital adjustments). Options under the Plan may be issued to employees
(including officers), non-employee directors, and consultants (for services
rendered). It is estimated that there are presently approximately 80 employees
and consultants (including three executive officers) whom the Board of Directors
may consider for the grant of options.
The Board of Directors believes that substantial benefits accrue to the
Company from the granting of stock options to employees. Such options encourage
employees to acquire a proprietary interest in the Company through stock
ownership and thereby afford them a greater incentive to enhance the value of
the Common Stock through their own efforts in improving the Company's business.
The Board adopted the Plan for these reasons and because the number of shares
remaining available for option grants under the Company's existing stock option
plan is deemed by the Board to be inadequate. There are no shares available for
future grants under the existing plan. Accordingly, the Board of Directors and
management believe that approval of the Plan is in the best interests of the
Company.
Options Granted
On June 25, 1997, the Board of Directors granted three options under the
1997 Plan to purchase an aggregate of 765,000 shares of Common Stock. All such
grants are conditional upon the ratification of the 1997 Plan by the Company's
stockholders at the Annual Meeting, which adoption will constitute ratification
by the stockholders of such conditional grants. The following table set forth
certain information with respect to such conditional grants. No other
conditional options have been granted under the 1997 Plan or are at present
specifically contemplated.
Number of
shares under
Optionee option
- -------- ------
Roy Machnes .......................................................325,000
Chairman of the Board and
Chief Executive Officer
Elan Penn .........................................................200,000
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<PAGE>
Chief Financial Officer
Terry I. Steinberg ................................................240,000
Executive Vice President
The foregoing options were granted to each executive pursuant to their
employment agreements with the Company. See "Proposal 1 -- Employment
Contracts." Each of the foregoing options is an incentive stock option meeting
the requirements of Section 422 of the Internal Revenue Code ("ISOs") and
expires on August 1, 2005, or three months after the date of termination of
employment, whichever is earlier. The option exercise price is $.584 per share
and was calculated as the average of the bid and asked prices of the Common
Stock as quoted on the NASDAQ Bulletin Board for the 10 business days subsequent
to February 13, 1997 (the date of the employment agreements). On June 12, 1997,
the average of the bid and the asked prices of the Common Stock as quoted on the
NASDAQ Bulletin Board was $.313.
The foregoing options will become exercisable in three equal cumulative
installments, of which the first shall become exercisable on August 1, 1997, and
the remaining two shall become exercisable on August 1 of each of the two
succeeding calender years.
Federal Income Tax Consequences
The Plan provides that options granted thereunder may, at the election of
the Board of Directors, be either (a) ISOs, or (b) options which do not qualify
as ISO's ("nonqualified stock options").
For federal income tax purposes, assuming that the shares acquired by the
holder of an ISO are not disposed of within two years from the date the option
was granted or one year from the date the option was exercised, (i) the Company
receives no deduction either upon the grant or the exercise of an ISO or upon a
subsequent sale of the shares by the optionee, and (ii) the optionee realizes no
income for tax purposes either at the time of the grant or exercise of the ISO.
Instead, the optionee will realize income or loss only upon his or her
subsequent sale of the option shares, and the optionee's income, in the amount
of any excess of the sale price over the option exercise price, will be taxed as
long-term capital gain. If, however, the shares are disposed of within either of
the two periods mentioned above, the tax consequences for the Company and the
optionee will be as described below for nonqualified stock options.
The recipient of a nonqualified stock option will not realize any taxable
income upon the grant of the option. Upon exercise of such option, the optionee
will realize ordinary income in an amount generally measured by the excess, if
any, of the fair market value of the shares on the date of exercise over the
option exercise price. The Company will be entitled to a deduction in the same
amount as the ordinary income realized by the optionee. Upon the sale of such
shares, the optionee will realize short-term or long-term capital gain or loss,
depending upon the length of time the shares are held. Such gain or loss will be
measured by the difference between the sale price of the shares and the market
price of the shares on the date of exercise.
The Board recommends a vote FOR the ratification of the 1997 Stock Option
Plan.
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<PAGE>
PROPOSAL 6
RATIFICATION OF AUDITORS
The following resolution will be offered by the Board of Directors at the
Annual Meeting:
RESOLVED: That the appointment of Ernst & Young LLP by the Board of
Directors of the Company to conduct the annual audit of the financial
statements of PC Etcetera, Inc. for the year ending December 31, 1997 is
hereby ratified, confirmed and approved.
The Board of Directors of the Company first appointed Ernst & Young LLP
("E&Y"), independent public accountants, as its auditors in February 1997. The
Israeli affiliate of E&Y has been and remains the auditors of Mashov Marketing,
Mashov Computers, Sivan and Mashov CBT. As a result of E&Y's knowledge of the
Company's operations, and reputation in the auditing field, the Board of
Directors is convinced that E&Y has the necessary personnel, professional
qualifications and independence to act as the Company's auditors.
In the event this resolution does not receive the necessary vote for
adoption, or if for any reason E&Y ceases to act as auditors for the Company,
the Board of Directors of the Company will appoint other independent public
accountants as auditors.
Representatives of E&Y will attend the Annual Meeting. They will have the
opportunity to make a statement and will be available to respond to appropriate
questions from stockholders at the meeting.
The Board of Directors recommends a vote FOR the ratification of the
appointment of E&Y.
OTHER MATTERS
The Board of Directors does not intend to bring any matters before the
Annual Meeting other than those specifically set forth in the Notice of the
Annual Meeting and knows of no matters to be brought before the Annual Meeting
by others. If any other matters properly come before the Annual Meeting, it is
the intention of the persons named in the accompanying proxy to vote such proxy
in accordance with the judgment of the Board of Directors.
Financial statements for the Company are included in its Annual Report to
Stockholders for the year 1996, which was mailed to the stockholders beginning
July 7, 1997.
A COPY OF THE COMPANY'S 1996 ANNUAL REPORT ON FORM 10-KSB FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS AVAILABLE WITHOUT CHARGE TO THOSE
STOCKHOLDERS WHO WOULD LIKE MORE DETAILED
-14-
<PAGE>
INFORMATION CONCERNING THE COMPANY. TO OBTAIN A COPY, PLEASE WRITE TO: TERRY I.
STEINBERG, SECRETARY, PC ETCETERA, INC. 462 SEVENTH AVENUE, NEW YORK, NEW YORK
10018.
By Order of the Board of Directors,
----------------------------
Terry Steinberg, Secretary
Dated: July 7, 1997
-15-
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PC ETCETERA, INC.
PC ETCETERA, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: Article I of the Certificate of Incorporation of the Corporation is
hereby amended and restated to read in its entirety as follows:
"ARTICLE I
The name of the corporation (hereinafter referred to as the "Corporation")
is Mentortech Inc."
SECOND: Paragraph (a) of Article IV of the Certificate of Incorporation of
the Corporation is hereby amended and restated to read in its entirety as
follows:
"ARTICLE IV
(a) The aggregate number of shares of stock which the corporation shall
have the authority to issue is 45,000,000, of which 40,000,000 are shares of
Common Stock, with a par value of $.01 per share, and 5,000,000 are shares of
Preferred Stock, with a par value of $.001 per share."
<PAGE>
THIRD: The aforesaid amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
Signed on____________, 1997
____________________________
-2-
<PAGE>
EXHIBIT B
PC ETCETERA, INC.
1997 STOCK OPTION PLAN
1. Purpose of the Plan. The PC Etcetera, Inc. 1997 Stock Option Plan (the
"Plan") is intended to advance the interests of PC Etcetera, Inc. (the
"Company") by inducing individuals or entities of outstanding ability and
potential to join and remain with, or provide consulting or advisory services
to, the Company, by encouraging and enabling employees, Directors, consultants
and advisors to acquire proprietary interests in the Company, and by providing
those employees, Directors, consultants and advisors with an additional
incentive to promote the success of the Company. This is accomplished by
providing for the granting of "Options," which term, as used herein, includes
both "Incentive Stock Options" and "Nonstatutory Stock Options," as later
defined, to employees and "Nonstatutory Stock Options" to non-employee
Directors, consultants and advisors.
2. Administration. The Plan shall be administered by the Board of Directors
of the Company (the "Board"). Except as herein specifically provided, the
interpretation and construction by the Board of any provision of the Plan or of
any Option granted under it, shall be final and conclusive. The receipt of
Options by Directors shall not preclude their vote on any matters in connection
with the administration or interpretation of the Plan.
<PAGE>
3. Shares Subject to the Plan. The stock subject to Options granted under
the Plan shall be shares of the Company's common stock, par value $.01 per share
(the "Common Stock"), whether authorized but unissued or held in the Company's
treasury, or shares purchased from stockholders expressly for use under the
Plan. The maximum number of shares of Common Stock which may be issued pursuant
to Options granted under the Plan shall not exceed Five Million (5,000,000)
shares, subject to adjustment in accordance with the provisions of Section 12
hereof. The Company shall at all times while the Plan is in force reserve such
number of shares of Common Stock as will be sufficient to satisfy the
requirements of all outstanding Options granted under the Plan. In the event any
Option granted under the Plan shall expire or terminate for any reason without
having been exercised in full or shall cease for any reason to be exercisable in
whole or in part, the unpurchased shares subject thereto shall again be
available for Options under the Plan.
4. Participation. The class of persons which shall be eligible to receive
Options under the Plan shall be (a) with respect to Incentive Stock Options
described in Section 6 hereof, all employees of either the Company or any
subsidiary corporation of the Company; and (b) with respect to Nonstatutory
Stock Options described in Section 7 hereof, all employees and non-employee
Directors of, or consultants and advisors to, either the Company or any
subsidiary corporation of the Company; provided, however, that Nonstatutory
Stock Options shall not be granted to any such consultants and advisors unless
(i) bona fide services have been or are to be rendered by such consultant or
advisor; and (ii) such services are not in connection with the offer or sale of
securities in a capital raising transaction. The Board, in its sole discretion,
but subject to the provisions of the
-2-
<PAGE>
Plan, shall determine the employees and non-employee Directors of, and the
consultants and advisors to, the Company and its subsidiary corporations to whom
Options shall be granted (the "Optionees"), the time or times when they shall be
granted, the type of option to be granted and the number of shares to be covered
by each Option, taking into account the nature of the employment or services
rendered by the individuals being considered, their annual compensation, their
present and potential contributions to the success of the Company and such other
factors as the Board may deem relevant.
5. Stock Option Agreement. Each Option granted under the Plan shall be
authorized by the Board and shall be evidenced by a Stock Option Agreement which
shall be executed by the Company and by the Optionee to whom such Option is
granted. The Stock Option Agreement shall specify the number of shares of Common
Stock as to which any Option is granted, the period during which the Option is
exercisable and the option price per share thereof. All options shall comply
with and be subject to the provisions of Section 6 or 7, whichever is applicable
as determined by the type of Option to be granted, as well as all other
provisions of this Plan and such other terms and conditions not inconsistent
with the Plan as the Board may deem desirable.
6. Incentive Stock Options. The Board may grant Options under the Plan
which are intended to meet the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") (referred to herein as an
"Incentive Stock Option"), and which are subject to the following terms and
conditions and any other terms and conditions as may at any time be required by
Code Section 422:
-3-
<PAGE>
a. An Incentive Stock Option may be granted to any individual eligible to
receive an Option under the Plan pursuant to Section 4(a) hereof.
b. Each Incentive Stock Option under the Plan must be granted prior to June
25, 2007.
c. The option price of the shares subject to any Incentive Stock Option
shall not be less than the fair market value of the Common Stock at the time
such Incentive Stock Option is granted; provided, however, if an Incentive Stock
Option is granted to an Optionee who owns, at the time the Incentive Stock
Option is granted, more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of a parent corporation or
subsidiary corporation of the Company, the option price of the shares subject to
the Incentive Stock Option shall be at least one hundred ten percent (110%) of
the fair market value of the Common Stock at the time the Incentive Stock Option
is granted.
d. No Incentive Stock Option granted under the Plan shall be exercisable
after the expiration of ten (10) years from the date of its grant. However, if
an Incentive Stock Option is granted to an Optionee who owns, at the time the
Incentive Stock Option is granted, more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of a parent
corporation or subsidiary corporation of the Company, such Incentive Stock
Option shall not be exercisable after the expiration of five (5) years from the
date of its grant. Every Incentive Stock Option granted under the Plan shall be
subject to earlier termination as expressly provided in Section 10 hereof.
-4-
<PAGE>
e. For purposes of determining stock ownership under this Section 6, the
attribution rules of Code Section 424(d) shall apply.
f. For purposes of the Plan, fair market value shall be determined by the
Board. If the Common Stock is listed on a national securities exchange or traded
on the Over-the-Counter market, fair market value shall be the closing selling
price or, if not available, the mean of the closing bid and asked prices of the
Common Stock, or, if not available, of the high bid and low asked prices of the
Common Stock quoted on such exchange, or on the Over-the-Counter market as
reported by the National Association of Securities Dealers Automated Quotation
(NASDAQ) system, or if the Common Stock is not listed on NASDAQ, then by the
National Quotation Bureau, Incorporated, as the case may be, on the day on which
the Option is granted, or, if there is no trading or bid or asked price on that
day, the closing selling price or the mean of the closing bid and asked prices
or of the high bid and low asked prices on the nearest trading date before that
day and for which such prices are available, and if the Common Stock is not
listed on such an exchange or traded in such a market, then the fair market
value shall be determined by taking into consideration all relevant factors,
including but not limited to the Company's net worth, prospective earning power
and dividend paying capacity.
7. Nonstatutory Stock Options. The Board may grant Options under the Plan
which are not intended to meet the requirements of Code Section 422, as well as
Options which are intended to meet the requirements of Code Section 422 but the
terms of which provide that they will not be
-5-
<PAGE>
treated as Incentive Stock Options (referred to herein as a "Nonstatutory Stock
Option"). Nonstatutory Stock Options shall be subject to the following terms and
conditions:
a. A Nonstatutory Stock Option may be granted to any individual or entity
eligible to receive an Option under the Plan pursuant to Section 4(b) hereof.
b. The option price of the shares subject to a Nonstatutory Stock Option
shall be determined by the Board, in its sole discretion, at the time of the
grant of the Nonstatutory Stock Option; provided, however, that the option price
of the shares subject to a Nonstatutory Stock Option granted to a person subject
to Section 16(b) of the Securities Exchange Act of 1934, as amended (an
"Insider"), shall not be less than the fair market value of the Common Stock at
the time such Nonstatutory Stock Option is granted.
c. A Nonstatutory Stock Option granted under the Plan may be of such
duration as shall be determined by the Board (subject to earlier termination as
expressly provided in Section 10 hereof); provided, however, that no
Nonstatutory Stock Option granted under the Plan to an Insider shall be
exercisable after the expiration of ten (10) years from the date of its grant.
8. Transferability. No Option granted under the Plan shall be transferable
by the Optionee otherwise than by Will or the laws of descent and distribution,
and, during the lifetime of the Optionee shall not be exercisable by any other
person.
9. Rights of Option Holders. An Option Holder shall have none of the rights
of a stockholder with respect to the Common Stock covered by his Option until
such Common Stock shall be transferred to him upon the exercise of his Option.
For purposes of this Plan, "Option
-6-
<PAGE>
Holder" shall mean (i) an Optionee; or (ii) with respect to any Option held by
an Optionee at the date of his death, the Optionee's Beneficiary, as determined
pursuant to Section 19.
10. Termination of Employment or Death.
a. If the employment of an employee by, or the services of a non-employee
Director for, or consultant or advisor to, the Company or a subsidiary
corporation of the Company shall be terminated for cause or, subject to the
terms of the Stock Option Agreement, voluntarily by the employee, non-employee
Director, consultant or advisor, then his or its Option shall expire forthwith.
Subject to the terms of the Stock Option Agreement, and except as provided in
subsections (b) and (c) of this Section 10, if such employment or services shall
terminate for any other reason, then such Option may be exercised at any time
within three (3) months after such termination, subject to the provisions of
subsection (d) of this Section 10. For purposes of the Plan, the retirement of
an individual either pursuant to a pension or retirement plan adopted by the
Company or at the normal retirement date prescribed from time to time by the
Company shall be deemed to be termination of such individual's employment other
than voluntarily or for cause. For purposes of this subsection (a), an employee,
non-employee Director, consultant or advisor who leaves the employ or services
of the Company to become an employee or a non-employee Director of, or a
consultant or advisor to, a subsidiary corporation of the Company or a
corporation (or subsidiary corporation or parent corporation of the corporation)
which has assumed the Options of the Company as a result of a corporate
reorganization, etc., shall not be considered to have terminated his employment
or services.
-7-
<PAGE>
b. Subject to the terms of the Stock Option Agreement, if an Optionee dies
(i) while employed by, or while serving as a non-employee Director for or
consultant or advisor to, the Company or a subsidiary corporation of the Company
or (ii) within three (3) months after the termination of his employment or
services other than voluntarily by the employee or non-employee Director, or for
cause, then such Option may, subject to the provisions of subsection (d) of this
Section 10, be exercised by the Optionee's Beneficiary at any time within one
(1) year after such death.
c. Subject to the terms of the Stock Option Agreement, if an Optionee
ceases employment or services because of permanent and total disability (within
the meaning of Code Section 22(e)(3)) while employed by, or while serving as a
non-employee Director for or consultant or advisor to, the Company or a
subsidiary corporation of the Company, then such Option may, subject to the
provisions of subsection (d) of this Section 10, be exercised at any time within
one (1) year after his termination of employment, termination of Directorship or
termination of consulting or advisory services, as the case may be, due to the
disability.
d. An Option may not be exercised pursuant to this Section 10 except to the
extent that the Option Holder was entitled to exercise the Option at the time of
termination of employment, termination of Directorship, termination of
consulting or advisory services, or death, and in any event may not be exercised
after the expiration of the Option.
e. For purposes of this Section 10, the employment relationship of an
employee of the Company or of a subsidiary corporation of the Company will be
treated as continuing intact while
-8-
<PAGE>
he is on military or sick leave or other bona fide leave of absence (such as
temporary employment by the Government) if such leave does not exceed ninety
(90) days, or, if longer, so long as his right to reemployment is guaranteed
either by statute or by contract.
11. Exercise of Options.
a. Unless otherwise provided in the Stock Option Agreement, any Option
granted under the Plan shall be exercisable in whole at any time, or in part
from time to time, prior to expiration. The Board, in its absolute discretion,
may provide in any Stock Option Agreement that the exercise of any Option
granted under the Plan shall be subject: (i) to such condition or conditions as
it may impose, including, but not limited to, a condition that the Optionee
remain in the employ or service of, or continue to provide consulting or
advisory services to, the Company or a subsidiary corporation of the Company for
such period or periods from the date of grant of the Option as the Board, in its
absolute discretion, shall determine; and (ii) to such limitations as it may
impose, including, but not limited to, a limitation that the aggregate fair
market value of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by any Optionee during any calendar year
(under all plans of the Company and its parent corporation and subsidiary
corporations) shall not exceed one hundred thousand dollars ($100,000). In
addition, in the event that under any Stock Option Agreement the aggregate fair
market value of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by any Optionee during any calendar year
(under all plans of the Company and its parent corporation and subsidiary
corporations) exceeds one hundred thousand dollars ($100,000), the Board may,
when shares are
-9-
<PAGE>
transferred upon exercise of such Options, designate those shares which shall be
treated as transferred upon exercise of an Incentive Stock Option and those
shares which shall be treated as transferred upon exercise of a Nonstatutory
Stock Option.
b. An Option granted under the Plan shall be exercised by the delivery by
the Option Holder to the Company at its principal office (attention of the
Secretary) of written notice of the number of shares with respect to which the
Option is being exercised. Such notice shall be accompanied by payment of the
full option price of such shares, and payment of such option price shall be made
by the Option Holder's delivery of his check payable to the order of the Company
in such amount.
12. Adjustment Upon Change in Capitalization.
a. In the event that the outstanding Common Stock is hereafter changed by
reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination of shares, reverse split, stock
dividend or the like, an appropriate adjustment shall be made by the Board in
the aggregate number of shares available under the Plan, in the number of shares
and option price per share subject to outstanding Options, and in any limitation
on exercisability referred to in Section 11(a) (ii) hereof which is set forth in
outstanding Incentive Stock Options. If the Company shall be reorganized,
consolidated or merged with another corporation, an Option Holder shall be
entitled to receive upon the exercise of his Option the same number and kind of
shares of stock or the same amount of property, cash or securities as he would
have been entitled to receive upon the happening of any such corporate event as
if he had been, immediately prior to such event, the holder
-10-
<PAGE>
of the number of shares covered by his Option; provided, however, that in such
event the Board shall have the discretionary power to take any action necessary
or appropriate to prevent any Incentive Stock Option granted hereunder from
being disqualified as such under the then existing provisions of the Code or any
law amendatory thereof or supplemental thereto.
b. Any adjustment in the number of shares shall apply proportionately to
only the unexercised portion of the Option granted hereunder. If fractions of a
share would result from any such adjustment, the adjustment shall be revised to
the next lower whole number of shares.
13. Further Conditions of Exercise.
a. Unless prior to the exercise of the Option the shares issuable upon such
exercise have been registered with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended, the notice of exercise shall
be accompanied by a representation or agreement of the Option Holder to the
Company to the effect that such shares are being acquired for investment and not
with a view to the resale or distribution thereof, or such other documentation
as may be required by the Company, unless in the opinion of counsel to the
Company such representation, agreement or documentation is not necessary to
comply with such Act.
b. The Company shall not be obligated to deliver any Common Stock until it
has been listed on each securities exchange on which the Common Stock may then
be listed or until there has been qualification under or compliance with such
federal or state laws, rules or regulations as the Company may deem applicable.
The Company shall use reasonable efforts to obtain such listing, qualification
and compliance.
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<PAGE>
14. Effectiveness of the Plan. The plan was adopted by the Board on June
25, 1997 and approved by the stockholders of the Company on [insert the date of
approval of the Plan by the Company's stockholders].
15. Termination, Modification and Amendment.
a. The Plan shall terminate on June 25, 2007, which is ten (10) years from
the date of the earlier of its adoption by the Board or its approval by the
Company's stockholders, or sooner as hereinafter provided, and no Option shall
be granted after termination of the Plan.
b. The Plan may from time to time be terminated, modified or amended by the
affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Company present in person or by proxy at a meeting of
stockholders of the Company convened for such purpose.
c. The Board may at any time, on or before the termination date referred to
in Section 15 (a) hereof, terminate the Plan, or from time to time make such
modifications or amendments to the Plan as it may deem advisable; provided,
however, that the Board shall not, without approval by the affirmative vote of
the holders of a majority of the outstanding shares of capital stock of the
Company present in person or by proxy at a meeting of stockholders of the
Company convened for such purpose, increase (except as provided by Section 12
hereof) the maximum number of shares as to which Options may be granted
hereunder, change the designation of the employees or class of employees to
receive Options, or make any other change which would prevent any Incentive
Stock Option granted hereunder which is intended to be an "incentive stock
option" from qualifying as such
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<PAGE>
under the then existing provisions of the Code or any law amendatory thereof or
supplemental thereto.
d. No termination, modification or amendment of the Plan may, without the
consent of the Option Holder, adversely affect the rights conferred by such
Option.
16. Not a Contract of Employment. Nothing contained in the Plan or in any
Stock Option Agreement executed pursuant hereto shall be deemed to confer upon
any Option Holder any right to remain in the employ or service of the Company or
a subsidiary corporation of the Company or any entitlement to any remuneration
or other benefit pursuant to any consulting or advisory arrangement.
17. Use of Proceeds. The proceeds from the sale of shares pursuant to
Options granted under the Plan shall constitute general funds of the Company.
18. Taxes. The Company may make such provisions and take such steps as it
may deem necessary or appropriate for the withholding of all federal, state and
local taxes required by law to be withheld with respect to Options granted under
the Plan and the exercise thereof including, but not limited to (i) deducting
the amount so required to be withheld from any other amount then or thereafter
payable to an Option Holder; or (ii) requiring an Option Holder to pay to the
Company the amount so required to be withheld as a condition of the issuance,
delivery, distribution or release of any Common Stock.
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19. Designation and Change of Beneficiary. Each Optionee shall file with
the Board a written designation of one or more persons (the "Beneficiary") as
the individual who shall be entitled to exercise any Options, or to receive any
amount payable, under the Plan upon his death. An Optionee may, from time to
time, revoke or change his Beneficiary designation without the consent of any
previously designated Beneficiary by filing a new designation with the Board.
The last such designation received by the Board shall be controlling; provided,
however, that no designation, or change or revocation thereof, shall be
effective unless received by the Board prior to the Optionee's death, and in no
event shall it be effective as of a date prior to such receipt. If at the date
of an Optionee's death, there is no designation of a Beneficiary in effect for
the Optionee pursuant to the provisions of this Section 19, or if no Beneficiary
designated by the optionee in accordance with the provisions hereof survives to
exercise any Options that become exercisable, or to receive any amount that
becomes payable, under the Plan by reason of the Optionee's death, the
Optionee's estate shall be treated as the Optionee's Beneficiary for all
purposes.
20. Payments to Persons Other Than Optionee. If the Board shall find that
any Option Holder to whom any amount, or any Common Stock, is payable under the
Plan is unable to care for his affairs because of illness, accident or legal
incapacity, then if the Board so directs, such amount, or such Common Stock, may
be paid to such Option Holder's spouse, child or other relative, an institution
maintaining or having custody of such person, or any other person deemed by the
Board to be a proper recipient on behalf of such Option Holder, unless a prior
claim therefor has been made
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by a duly appointed legal representative of the Option Holder. Any payment made
under this Section 20 shall be a complete discharge of the liability of the
Company with respect to such payment.
21. Indemnification of the Board. In addition to such other rights of
indemnification as they may have, the members of the Board shall be indemnified
by the Company to the extent permitted under applicable law against all costs
and expenses reasonably incurred by them in connection with any action, suit or
proceeding to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any rights
granted hereunder and against all amounts paid by them in settlement thereof or
paid by them in satisfaction of a judgment of any such action, suit or
proceeding, except a judgment based upon a finding of bad faith. Upon the
institution of any such action, suit or proceeding, the member or members of the
Board shall notify the Company in writing, giving the Company an opportunity at
its own cost to defend the same before such member or members undertake to
defend the same on their own behalf.
22. Definitions. For purposes of the Plan, the terms "parent corporation"
and "subsidiary corporation" shall have the meaning set forth in Code Sections
424(e) and 424(f), respectively, and the masculine shall include the feminine
and the neuter as the context requires.
23. Governing Law. The Plan shall be governed by, and all questions arising
hereunder shall be determined in accordance with, the laws of the State of
Delaware.
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EXHIBIT B
PC ETCETERA, INC.
1997 STOCK OPTION PLAN
1. Purpose of the Plan. The PC Etcetera, Inc. 1997 Stock Option Plan (the
"Plan") is intended to advance the interests of PC Etcetera, Inc. (the
"Company") by inducing individuals or entities of outstanding ability and
potential to join and remain with, or provide consulting or advisory services
to, the Company, by encouraging and enabling employees, Directors, consultants
and advisors to acquire proprietary interests in the Company, and by providing
those employees, Directors, consultants and advisors with an additional
incentive to promote the success of the Company. This is accomplished by
providing for the granting of "Options," which term, as used herein, includes
both "Incentive Stock Options" and "Nonstatutory Stock Options," as later
defined, to employees and "Nonstatutory Stock Options" to non-employee
Directors, consultants and advisors.
2. Administration. The Plan shall be administered by the Board of Directors
of the Company (the "Board"). Except as herein specifically provided, the
interpretation and construction by the Board of any provision of the Plan or of
any Option granted under it, shall be final and conclusive. The receipt of
Options by Directors shall not preclude their vote on any matters in connection
with the administration or interpretation of the Plan.
3. Shares Subject to the Plan. The stock subject to Options granted under
the Plan shall be shares of the Company's common stock, par value $.01 per share
(the "Common Stock"), whether
<PAGE>
authorized but unissued or held in the Company's treasury, or shares purchased
from stockholders expressly for use under the Plan. The maximum number of shares
of Common Stock which may be issued pursuant to Options granted under the Plan
shall not exceed Five Million (5,000,000) shares, subject to adjustment in
accordance with the provisions of Section 12 hereof. The Company shall at all
times while the Plan is in force reserve such number of shares of Common Stock
as will be sufficient to satisfy the requirements of all outstanding Options
granted under the Plan. In the event any Option granted under the Plan shall
expire or terminate for any reason without having been exercised in full or
shall cease for any reason to be exercisable in whole or in part, the
unpurchased shares subject thereto shall again be available for Options under
the Plan.
4. Participation. The class of persons which shall be eligible to receive
Options under the Plan shall be (a) with respect to Incentive Stock Options
described in Section 6 hereof, all employees of either the Company or any
subsidiary corporation of the Company; and (b) with respect to Nonstatutory
Stock Options described in Section 7 hereof, all employees and non-employee
Directors of, or consultants and advisors to, either the Company or any
subsidiary corporation of the Company; provided, however, that Nonstatutory
Stock Options shall not be granted to any such consultants and advisors unless
(i) bona fide services have been or are to be rendered by such consultant or
advisor; and (ii) such services are not in connection with the offer or sale of
securities in a capital raising transaction. The Board, in its sole discretion,
but subject to the provisions of the Plan, shall determine the employees and
non-employee Directors of, and the consultants and advisors to, the Company and
its subsidiary corporations to whom Options shall be granted (the "Optionees"),
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the time or times when they shall be granted, the type of option to be granted
and the number of shares to be covered by each Option, taking into account the
nature of the employment or services rendered by the individuals being
considered, their annual compensation, their present and potential contributions
to the success of the Company and such other factors as the Board may deem
relevant.
5. Stock Option Agreement. Each Option granted under the Plan shall be
authorized by the Board and shall be evidenced by a Stock Option Agreement which
shall be executed by the Company and by the Optionee to whom such Option is
granted. The Stock Option Agreement shall specify the number of shares of Common
Stock as to which any Option is granted, the period during which the Option is
exercisable and the option price per share thereof. All options shall comply
with and be subject to the provisions of Section 6 or 7, whichever is applicable
as determined by the type of Option to be granted, as well as all other
provisions of this Plan and such other terms and conditions not inconsistent
with the Plan as the Board may deem desirable.
6. Incentive Stock Options. The Board may grant Options under the Plan
which are intended to meet the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") (referred to herein as an
"Incentive Stock Option"), and which are subject to the following terms and
conditions and any other terms and conditions as may at any time be required by
Code Section 422:
a. An Incentive Stock Option may be granted to any individual eligible to
receive an Option under the Plan pursuant to Section 4(a) hereof.
b. Each Incentive Stock Option under the Plan must be granted prior to June
25, 2007.
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c. The option price of the shares subject to any Incentive Stock Option
shall not be less than the fair market value of the Common Stock at the time
such Incentive Stock Option is granted; provided, however, if an Incentive Stock
Option is granted to an Optionee who owns, at the time the Incentive Stock
Option is granted, more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of a parent corporation or
subsidiary corporation of the Company, the option price of the shares subject to
the Incentive Stock Option shall be at least one hundred ten percent (110%) of
the fair market value of the Common Stock at the time the Incentive Stock Option
is granted.
d. No Incentive Stock Option granted under the Plan shall be exercisable
after the expiration of ten (10) years from the date of its grant. However, if
an Incentive Stock Option is granted to an Optionee who owns, at the time the
Incentive Stock Option is granted, more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of a parent
corporation or subsidiary corporation of the Company, such Incentive Stock
Option shall not be exercisable after the expiration of five (5) years from the
date of its grant. Every Incentive Stock Option granted under the Plan shall be
subject to earlier termination as expressly provided in Section 10 hereof.
e. For purposes of determining stock ownership under this Section 6, the
attribution rules of Code Section 424(d) shall apply.
f. For purposes of the Plan, fair market value shall be determined by the
Board. If the Common Stock is listed on a national securities exchange or traded
on the Over-the-Counter market,
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<PAGE>
fair market value shall be the closing selling price or, if not available, the
mean of the closing bid and asked prices of the Common Stock, or, if not
available, of the high bid and low asked prices of the Common Stock quoted on
such exchange, or on the Over-the-Counter market as reported by the National
Association of Securities Dealers Automated Quotation (NASDAQ) system, or if the
Common Stock is not listed on NASDAQ, then by the National Quotation Bureau,
Incorporated, as the case may be, on the day on which the Option is granted, or,
if there is no trading or bid or asked price on that day, the closing selling
price or the mean of the closing bid and asked prices or of the high bid and low
asked prices on the nearest trading date before that day and for which such
prices are available, and if the Common Stock is not listed on such an exchange
or traded in such a market, then the fair market value shall be determined by
taking into consideration all relevant factors, including but not limited to the
Company's net worth, prospective earning power and dividend paying capacity.
7. Nonstatutory Stock Options. The Board may grant Options under the Plan
which are not intended to meet the requirements of Code Section 422, as well as
Options which are intended to meet the requirements of Code Section 422 but the
terms of which provide that they will not be treated as Incentive Stock Options
(referred to herein as a "Nonstatutory Stock Option"). Nonstatutory Stock
Options shall be subject to the following terms and conditions:
a. A Nonstatutory Stock Option may be granted to any individual or entity
eligible to receive an Option under the Plan pursuant to Section 4(b) hereof.
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<PAGE>
b. The option price of the shares subject to a Nonstatutory Stock Option
shall be determined by the Board, in its sole discretion, at the time of the
grant of the Nonstatutory Stock Option; provided, however, that the option price
of the shares subject to a Nonstatutory Stock Option granted to a person subject
to Section 16(b) of the Securities Exchange Act of 1934, as amended (an
"Insider"), shall not be less than the fair market value of the Common Stock at
the time such Nonstatutory Stock Option is granted.
c. A Nonstatutory Stock Option granted under the Plan may be of such
duration as shall be determined by the Board (subject to earlier termination as
expressly provided in Section 10 hereof); provided, however, that no
Nonstatutory Stock Option granted under the Plan to an Insider shall be
exercisable after the expiration of ten (10) years from the date of its grant.
8. Transferability. No Option granted under the Plan shall be transferable
by the Optionee otherwise than by Will or the laws of descent and distribution,
and, during the lifetime of the Optionee shall not be exercisable by any other
person.
9. Rights of Option Holders. An Option Holder shall have none of the rights
of a stockholder with respect to the Common Stock covered by his Option until
such Common Stock shall be transferred to him upon the exercise of his Option.
For purposes of this Plan, "Option Holder" shall mean (i) an Optionee; or (ii)
with respect to any Option held by an Optionee at the date of his death, the
Optionee's Beneficiary, as determined pursuant to Section 19.
10. Termination of Employment or Death.
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a. If the employment of an employee by, or the services of a non-employee
Director for, or consultant or advisor to, the Company or a subsidiary
corporation of the Company shall be terminated for cause or, subject to the
terms of the Stock Option Agreement, voluntarily by the employee, non-employee
Director, consultant or advisor, then his or its Option shall expire forthwith.
Subject to the terms of the Stock Option Agreement, and except as provided in
subsections (b) and (c) of this Section 10, if such employment or services shall
terminate for any other reason, then such Option may be exercised at any time
within three (3) months after such termination, subject to the provisions of
subsection (d) of this Section 10. For purposes of the Plan, the retirement of
an individual either pursuant to a pension or retirement plan adopted by the
Company or at the normal retirement date prescribed from time to time by the
Company shall be deemed to be termination of such individual's employment other
than voluntarily or for cause. For purposes of this subsection (a), an employee,
non-employee Director, consultant or advisor who leaves the employ or services
of the Company to become an employee or a non-employee Director of, or a
consultant or advisor to, a subsidiary corporation of the Company or a
corporation (or subsidiary corporation or parent corporation of the corporation)
which has assumed the Options of the Company as a result of a corporate
reorganization, etc., shall not be considered to have terminated his employment
or services.
b. Subject to the terms of the Stock Option Agreement, if an Optionee dies
(i) while employed by, or while serving as a non-employee Director for or
consultant or advisor to, the Company or a subsidiary corporation of the Company
or (ii) within three (3) months after the
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<PAGE>
termination of his employment or services other than voluntarily by the employee
or non-employee Director, or for cause, then such Option may, subject to the
provisions of subsection (d) of this Section 10, be exercised by the Optionee's
Beneficiary at any time within one (1) year after such death.
c. Subject to the terms of the Stock Option Agreement, if an Optionee
ceases employment or services because of permanent and total disability (within
the meaning of Code Section 22(e)(3)) while employed by, or while serving as a
non-employee Director for or consultant or advisor to, the Company or a
subsidiary corporation of the Company, then such Option may, subject to the
provisions of subsection (d) of this Section 10, be exercised at any time within
one (1) year after his termination of employment, termination of Directorship or
termination of consulting or advisory services, as the case may be, due to the
disability.
d. An Option may not be exercised pursuant to this Section 10 except to the
extent that the Option Holder was entitled to exercise the Option at the time of
termination of employment, termination of Directorship, termination of
consulting or advisory services, or death, and in any event may not be exercised
after the expiration of the Option.
e. For purposes of this Section 10, the employment relationship of an
employee of the Company or of a subsidiary corporation of the Company will be
treated as continuing intact while he is on military or sick leave or other bona
fide leave of absence (such as temporary employment by the Government) if such
leave does not exceed ninety (90) days, or, if longer, so long as his right to
reemployment is guaranteed either by statute or by contract.
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<PAGE>
11. Exercise of Options.
a. Unless otherwise provided in the Stock Option Agreement, any Option
granted under the Plan shall be exercisable in whole at any time, or in part
from time to time, prior to expiration. The Board, in its absolute discretion,
may provide in any Stock Option Agreement that the exercise of any Option
granted under the Plan shall be subject: (i) to such condition or conditions as
it may impose, including, but not limited to, a condition that the Optionee
remain in the employ or service of, or continue to provide consulting or
advisory services to, the Company or a subsidiary corporation of the Company for
such period or periods from the date of grant of the Option as the Board, in its
absolute discretion, shall determine; and (ii) to such limitations as it may
impose, including, but not limited to, a limitation that the aggregate fair
market value of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by any Optionee during any calendar year
(under all plans of the Company and its parent corporation and subsidiary
corporations) shall not exceed one hundred thousand dollars ($100,000). In
addition, in the event that under any Stock Option Agreement the aggregate fair
market value of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by any Optionee during any calendar year
(under all plans of the Company and its parent corporation and subsidiary
corporations) exceeds one hundred thousand dollars ($100,000), the Board may,
when shares are transferred upon exercise of such Options, designate those
shares which shall be treated as transferred upon exercise of an Incentive Stock
Option and those shares which shall be treated as transferred upon exercise of a
Nonstatutory Stock Option.
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<PAGE>
b. An Option granted under the Plan shall be exercised by the delivery by
the Option Holder to the Company at its principal office (attention of the
Secretary) of written notice of the number of shares with respect to which the
Option is being exercised. Such notice shall be accompanied by payment of the
full option price of such shares, and payment of such option price shall be made
by the Option Holder's delivery of his check payable to the order of the Company
in such amount.
12. Adjustment Upon Change in Capitalization.
a. In the event that the outstanding Common Stock is hereafter changed by
reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination of shares, reverse split, stock
dividend or the like, an appropriate adjustment shall be made by the Board in
the aggregate number of shares available under the Plan, in the number of shares
and option price per share subject to outstanding Options, and in any limitation
on exercisability referred to in Section 11(a) (ii) hereof which is set forth in
outstanding Incentive Stock Options. If the Company shall be reorganized,
consolidated or merged with another corporation, an Option Holder shall be
entitled to receive upon the exercise of his Option the same number and kind of
shares of stock or the same amount of property, cash or securities as he would
have been entitled to receive upon the happening of any such corporate event as
if he had been, immediately prior to such event, the holder of the number of
shares covered by his Option; provided, however, that in such event the Board
shall have the discretionary power to take any action necessary or appropriate
to prevent any Incentive
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Stock Option granted hereunder from being disqualified as such under the then
existing provisions of the Code or any law amendatory thereof or supplemental
thereto.
b. Any adjustment in the number of shares shall apply proportionately to
only the unexercised portion of the Option granted hereunder. If fractions of a
share would result from any such adjustment, the adjustment shall be revised to
the next lower whole number of shares.
13. Further Conditions of Exercise.
a. Unless prior to the exercise of the Option the shares issuable upon such
exercise have been registered with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended, the notice of exercise shall
be accompanied by a representation or agreement of the Option Holder to the
Company to the effect that such shares are being acquired for investment and not
with a view to the resale or distribution thereof, or such other documentation
as may be required by the Company, unless in the opinion of counsel to the
Company such representation, agreement or documentation is not necessary to
comply with such Act.
b. The Company shall not be obligated to deliver any Common Stock until it
has been listed on each securities exchange on which the Common Stock may then
be listed or until there has been qualification under or compliance with such
federal or state laws, rules or regulations as the Company may deem applicable.
The Company shall use reasonable efforts to obtain such listing, qualification
and compliance.
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14. Effectiveness of the Plan. The plan was adopted by the Board on June
25, 1997 and approved by the stockholders of the Company on [insert the date of
approval of the Plan by the Company's stockholders].
15. Termination, Modification and Amendment.
a. The Plan shall terminate on June 25, 2007, which is ten (10) years
from the date of the earlier of its adoption by the Board or its approval by the
Company's stockholders, or sooner as hereinafter provided, and no Option shall
be granted after termination of the Plan.
b. The Plan may from time to time be terminated, modified or amended by the
affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Company present in person or by proxy at a meeting of
stockholders of the Company convened for such purpose.
c. The Board may at any time, on or before the termination date referred to
in Section 15 (a) hereof, terminate the Plan, or from time to time make such
modifications or amendments to the Plan as it may deem advisable; provided,
however, that the Board shall not, without approval by the affirmative vote of
the holders of a majority of the outstanding shares of capital stock of the
Company present in person or by proxy at a meeting of stockholders of the
Company convened for such purpose, increase (except as provided by Section 12
hereof) the maximum number of shares as to which Options may be granted
hereunder, change the designation of the employees or class of employees to
receive Options, or make any other change which would prevent any Incentive
Stock Option granted hereunder which is intended to be an "incentive stock
option" from qualifying as such
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<PAGE>
under the then existing provisions of the Code or any law amendatory thereof or
supplemental thereto.
d. No termination, modification or amendment of the Plan may, without the
consent of the Option Holder, adversely affect the rights conferred by such
Option.
16. Not a Contract of Employment. Nothing contained in the Plan or in any
Stock Option Agreement executed pursuant hereto shall be deemed to confer upon
any Option Holder any right to remain in the employ or service of the Company or
a subsidiary corporation of the Company or any entitlement to any remuneration
or other benefit pursuant to any consulting or advisory arrangement.
17. Use of Proceeds. The proceeds from the sale of shares pursuant to
Options granted under the Plan shall constitute general funds of the Company.
18. Taxes. The Company may make such provisions and take such steps as it
may deem necessary or appropriate for the withholding of all federal, state and
local taxes required by law to be withheld with respect to Options granted under
the Plan and the exercise thereof including, but not limited to (i) deducting
the amount so required to be withheld from any other amount then or thereafter
payable to an Option Holder; or (ii) requiring an Option Holder to pay to the
Company the amount so required to be withheld as a condition of the issuance,
delivery, distribution or release of any Common Stock.
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19. Designation and Change of Beneficiary. Each Optionee shall file with
the Board a written designation of one or more persons (the "Beneficiary") as
the individual who shall be entitled to exercise any Options, or to receive any
amount payable, under the Plan upon his death. An Optionee may, from time to
time, revoke or change his Beneficiary designation without the consent of any
previously designated Beneficiary by filing a new designation with the Board.
The last such designation received by the Board shall be controlling; provided,
however, that no designation, or change or revocation thereof, shall be
effective unless received by the Board prior to the Optionee's death, and in no
event shall it be effective as of a date prior to such receipt. If at the date
of an Optionee's death, there is no designation of a Beneficiary in effect for
the Optionee pursuant to the provisions of this Section 19, or if no Beneficiary
designated by the optionee in accordance with the provisions hereof survives to
exercise any Options that become exercisable, or to receive any amount that
becomes payable, under the Plan by reason of the Optionee's death, the
Optionee's estate shall be treated as the Optionee's Beneficiary for all
purposes.
20. Payments to Persons Other Than Optionee. If the Board shall find that
any Option Holder to whom any amount, or any Common Stock, is payable under the
Plan is unable to care for his affairs because of illness, accident or legal
incapacity, then if the Board so directs, such amount, or such Common Stock, may
be paid to such Option Holder's spouse, child or other relative, an institution
maintaining or having custody of such person, or any other person deemed by the
Board to be a proper recipient on behalf of such Option Holder, unless a prior
claim therefor has been made
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by a duly appointed legal representative of the Option Holder. Any payment made
under this Section 20 shall be a complete discharge of the liability of the
Company with respect to such payment.
21. Indemnification of the Board. In addition to such other rights of
indemnification as they may have, the members of the Board shall be indemnified
by the Company to the extent permitted under applicable law against all costs
and expenses reasonably incurred by them in connection with any action, suit or
proceeding to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any rights
granted hereunder and against all amounts paid by them in settlement thereof or
paid by them in satisfaction of a judgment of any such action, suit or
proceeding, except a judgment based upon a finding of bad faith. Upon the
institution of any such action, suit or proceeding, the member or members of the
Board shall notify the Company in writing, giving the Company an opportunity at
its own cost to defend the same before such member or members undertake to
defend the same on their own behalf.
22. Definitions. For purposes of the Plan, the terms "parent corporation"
and "subsidiary corporation" shall have the meaning set forth in Code Sections
424(e) and 424(f), respectively, and the masculine shall include the feminine
and the neuter as the context requires. 23. Governing Law. The Plan shall be
governed by, and all questions arising hereunder shall be determined in
accordance with, the laws of the State of Delaware.
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APPENDIX A
PC ETCETERA, INC.
462 Seventh Avenue
New York, New York 10018
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Roy Machnes and Terry I. Steinberg, or
either of them, attorneys or attorney of the undersigned, for and in the name(s)
of the undersigned, with power of substitution and revocation in each to vote
any and all shares of Common Stock, par value, $.01 per share, of PC Etcetera,
Inc. (the "Company"), which the undersigned would be entitled to vote as fully
as the undersigned could if personally present at the Annual Meeting of
Shareholders of the Company to be held on August 4, 1997 at 10:00 A.M. at
Company's principal offices at 462 Seventh Avenue, 4th Floor, New York, New York
and at any adjournment or adjournments thereof, and hereby revoking any prior
proxies to vote said shares, upon the following items of business more fully
described in the notice of and proxy statement for such Annual Meeting (receipt
of which is hereby acknowledged):
(1) The election of six Directors.
|_| FOR all the nominees listed below (except as marked to contrary below)
|_| WITHHOLD AUTHORITY to vote for all the nominees below
DAVID ASSIA
JACK DUNIETZ
MARTIN F. KAHN
ROY MACHNES
ELAN PENN
TERRY I. STEINBERG
INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name above.
(2) To amend the Company's Certificate of Incorporation to change the name
of the Company to Mentortech Inc.
|_| FOR |_| AGAINST |_| ABSTAIN
(3) To amend the Company's Certificate of Incorporation to increase the
number of authorized shares of capital stock of the Company from
20,000,000 to 45,000,000 comprised of 40,000,000 shares of common
stock of the Company, par value $.01
<PAGE>
per share (the "Common Stock"), and 5,000,000 shares of preferred
stock of the Company, par value of $.001 per share (the "Preferred
Stock").
|_| FOR |_| AGAINST |_| ABSTAIN
(4) To authorize the conversion, at the option of the holder, of each of
the 658,412 outstanding shares of the Company's Series C Preferred
Stock into ten shares of Common Stock.
|_| FOR |_| AGAINST |_| ABSTAIN
(5) To ratify the Company's 1997 Stock Option Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
(6) To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company's 1997 financial statements.
|_| FOR |_| AGAINST |_| ABSTAIN
(7) To vote on all other matters which may be brought before the meeting.
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE. IN THE ABSENCE OF SUCH
SPECIFICATION, THE SHARES REPRESENTED BY THIS PROXY CARD WILL BE VOTED FOR THE
ELECTION AS DIRECTORS OF THE NOMINEES, AND FOR EACH OF THE OTHER PROPOSALS, SET
FORTH ABOVE.
Shares voting ___________ Common Dated________________________1997
___________ Preferred _________________________________
Signature(s)
_________________________________
Signatures, if held jointly
(Please sign exactly as name(s) appear(s)
hereon. When signing as attorney, executor,
administrator, trustee, guardian, or as an
officer signing for a corporation, please
give full title under signature.)
