<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [_]
Check the appropriate box:
[_] Preliminary proxy statement
[_] Confidential, for use of the Commission only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive proxy statement
[_] Definitive additional materials
[_] Soliciting material pursuant to Section 240.14a-11(c) or Section 240.14a-12
Linkon Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Linkon Corporation
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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:
- -------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- -------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined.):
- -------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------------
[_] 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>
LINKON CORPORATION
140 SHERMAN STREET
FAIRFIELD, CONNECTICUT 06430
(203) 319-3100
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------
June 12, 1998
To the Stockholders of
Linkon Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Linkon Corporation (the "Company") will be held at the Landmark
Club, located at One Landmark Square, 22nd floor, Stamford, Connecticut, on
Wednesday, July 15, 1998, at 10:00 a.m., local time, for the following
purposes:
1. To elect four directors, each to hold office until the next Annual
Meeting of Stockholders or until his respective successor is elected and
qualified.
2. To consider and vote upon the amendment to the 1996 Stock Option and
Performance Incentive Plan (the "Plan") of the Company to (a) increase the
number of shares authorized for issuance pursuant to the Plan from
1,000,000 to 2,500,000 and (b) provide for the issuance to Non-Employee
Directors who remain as such on the last day of any given fiscal quarter of
such number of shares of the Company's Common Stock as have a fair market
value equal to $3,750 as of the last day of each such fiscal quarter.
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on Monday, June 8,
1998 as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Annual Meeting. A list of stockholders entitled
to vote at the Annual Meeting will be available for examination by any
stockholder, for any purpose relevant to the Annual Meeting, on and after June
15, 1998 during ordinary business hours at the Company's principal executive
offices located at the address first set forth above.
STOCKHOLDERS ARE URGED TO DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY
IN THE ENCLOSED ENVELOPE, TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE
UNITED STATES.
By Order of the Board of Directors,
Thomas V. Cerabona
Secretary
<PAGE>
LINKON CORPORATION
140 SHERMAN STREET
FAIRFIELD, CONNECTICUT 06430
(203) 319-3100
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY, JULY 15TH, 1998
----------------
INTRODUCTION
----------------
This proxy statement ("Proxy Statement") is being furnished to holders of
shares of common stock, par value $0.001 per share ("Common Stock"), of Linkon
Corporation, a Nevada corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at
the Annual Meeting of Stockholders (the "Annual Meeting"), to be held at the
Landmark Club, located at One Landmark Square, 22nd floor, Stamford,
Connecticut, on Wednesday, July 15th, 1998 at 10:00 a.m., local time, and at
any adjournments thereof. This Proxy Statement, the accompanying Notice of
Annual Meeting of Stockholders and the Annual Report referred to below and the
enclosed form of proxy are first being mailed to stockholders on or about June
12, 1998.
The Company's Annual Report on Form 10-KSB (the "Annual Report") for the
fiscal year ended January 31, 1998, as filed with the Securities and Exchange
Commission, also accompanies this Proxy Statement. The Annual Report includes
audited financial statements, a discussion by management of the Company's
financial condition and results of operations and other information.
At the Annual Meeting, stockholders will be asked to elect four directors,
each to hold office until the next Annual Meeting of Stockholders to be held
in 1999 or until each of their respective successors is elected and qualified.
At the Annual Meeting, stockholders will also be asked to consider and vote
upon an amendment to the Company's 1996 Stock Option and Performance Incentive
Plan (the "Plan") to (a) increase the authorized number of shares of Common
Stock allowed to be issued under the Plan from 1,000,000 to 2,500,000 and
(b) provide for the issuance to Non-Employee Directors who remain as such on
the last day of any given fiscal quarter of such number of shares of the
Company's Common Stock as have a fair market value equal to $3,750 as of the
last day of each such fiscal quarter (the "Plan Amendment").
VOTING RIGHTS AND PROXY INFORMATION
Proxies in the accompanying form are solicited on behalf of, and at the
direction of the Board of Directors, which has fixed the close of business on
Monday, June 8, 1998, as the record date (the "Record Date") for the
determination of holders of outstanding shares of Common Stock entitled to
notice of, and to vote at the Annual Meeting or any adjournment(s) thereof. As
of May 29, 1998, there were 13,321,252 shares of Common Stock issued and
outstanding, which were held of record on such date by approximately 650
holders. Each stockholder is entitled to one vote, exercisable in person or by
proxy, with respect to each share of Common Stock held of record by such
stockholder on the Record Date with respect to each matter. The election of
directors will be decided by a plurality of the votes of the shares of Common
Stock cast by stockholders present in person or represented by proxy at the
Annual Meeting and entitled to vote. In other words, the four individuals
receiving the largest number of votes will be elected. The affirmative vote of
the holders of a majority of the shares of the
<PAGE>
Company's Common Stock present in person or by proxy is required for the
adoption of the resolution authorizing and approving the amendment to the
Plan. Therefore, a stockholder who attends the Annual Meeting, either in
person or by proxy, and who abstains from voting on such resolution, would in
effect be voting against the amendment to the Plan. Broker non-votes would
likewise have the same effect. Proxies marked as abstaining (including proxies
containing broker non-votes) on any matter to be acted upon by stockholders
will be treated as present at the meeting for purposes of determining a
quorum, but will not be counted as votes cast on such matters.
When a proxy in the form of the accompanying proxy is returned properly
dated and signed, the shares represented thereby will be voted by the persons
named as proxies therein in accordance with each stockholder's directions,
unless previously revoked. To the extent that no direction is indicated, the
shares of the Company's Common Stock represented by proxy will be voted FOR
the election of all of the Company's nominees as directors and FOR the
adoption of a resolution amending the Plan. If any other matters are properly
presented at the Annual Meeting for action, including a question of adjourning
the meeting from time to time, the persons named in the proxies and acting
thereunder will have discretion to vote on such matters in accordance with
their best judgment.
Any stockholder who has executed and returned a proxy has the power to
revoke it at any time before it is voted. A stockholder who wishes to revoke a
proxy can do so by attending the Annual Meeting and voting in person, or by
executing a later-dated proxy relating to the same shares or a writing
revoking the proxy and, in the latter two cases, delivering such later-dated
proxy or writing to the Secretary of the Company prior to the vote at the
Annual Meeting. Any writing intended to revoke a proxy should be sent to the
Company at its principal executive offices, located at 140 Sherman Avenue,
Fairfield, Connecticut 06430, Attention: Corporate Secretary.
In addition to the use of the mail, proxies may be solicited via personal
interview and telephone or telegraph by the directors, officers and regular
employees of the Company. Such persons will receive no additional compensation
for such services. Arrangements will also be made with certain brokerage firms
and certain other custodians, nominees and fiduciaries for the forwarding of
solicitation materials to the beneficial owners of the Common Stock held of
record by such persons, and such brokers, custodians, nominees and fiduciaries
will be reimbursed by the Company for reasonable out-of-pocket expenses
incurred by them in connection therewith.
2
<PAGE>
ITEM 1--ELECTION OF DIRECTORS
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES
NOMINEES FOR ELECTION AS DIRECTORS
The Company's Board of Directors currently consists of five members. Unless
a director has been elected by the Board of Directors to fill a vacancy on the
Board, all of the directors are elected annually and hold office until the
next succeeding Annual Meeting of Stockholders or until their respective
successors are duly elected and qualified. The Board of Directors has adopted
resolutions in accordance with the Bylaws of the Company effecting a reduction
in the number of directors from five to four effective upon the election of
directors at the Annual Meeting. The Board may increase the size of the Board
in the future in accordance with the Company's Bylaws.
It is intended that the persons named as proxies in the enclosed form of
proxy will vote FOR the election of the following nominees as directors, to
serve until the 1999 Annual Meeting of Stockholders, or until their respective
successors are duly elected and qualified:
Joao M. Carvalho
Charles Castelli
Lee W. Hill
Daniel Zwiren
Each of the foregoing persons currently serves as a director of the Company.
The Board of Directors of the Company does not contemplate that any of these
nominees will become unable to serve. If, however, any of them should become
unable to serve before the Annual Meeting, proxies solicited by the Board of
Directors will be voted by the persons named as proxies therein in accordance
with the best judgment of such proxies.
INFORMATION REGARDING NOMINEES FOR ELECTION AS DIRECTORS AND REGARDING
CONTINUING DIRECTORS
The following table sets forth the name, age, business experience for the
past five years and other directorships of each of the Company's directors:
<TABLE>
<CAPTION>
CURRENT POSITIONS, PERIOD SERVED AND PRIOR BUSINESS
NAME AND AGE EXPERIENCE
------------ ---------------------------------------------------
<C> <S>
Joao M. Carvalho Mr. Carvalho has served as a director of the Company
(57) since June, 1990. Mr. Carvalho has been the President of
Union Commercial Services, Ltd., an offshore investment
company with holdings in the United States, Africa and
Europe since April, 1990. He is also the President of
Unicar Industrial e Commercial, Lda. (also known as Uniao
Commercial de Automoveis, Ltd.), a distributor and
service provider for American and European automotive,
motorcycle, agricultural and industrial machine
manufacturers and finance companies. Mr. Carvalho has
held this position since April, 1990. He is also the
President of Joao Carvalho, Lda., a real estate
investment and development company and operations
management company since 1978. For the past three years,
Mr. Carvalho has also served as President of Unicom
International of Florida, Inc.
Charles Castelli Mr. Castelli founded Linkon Delaware, Inc. ("Linkon
(54) Delaware"), which was engaged in consulting and research
and development of computer hardware and software
products for the telecommunications industry and which
merged with the Company in June, 1990. He is presently
the Company's Chief Technology Officer ("CTO") and
Chairman of the Board of Directors. He has served as
Chairman and as a Director since June, 1990. He served as
the Company's President from June, 1990 until March,
1993, when be became CTO.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CURRENT POSITIONS, PERIOD SERVED AND PRIOR BUSINESS
NAME AND AGE EXPERIENCE
------------ ---------------------------------------------------
<C> <S>
Lee W. Hill (54) Mr. Hill currently serves as the Company's President and
Chief Executive Officer, and has served as such since
March, 1993. Mr. Hill also serves as a Director of the
Company, a position he has held since September, 1996.
From December, 1990 until joining the Company, Mr. Hill
was the founder and sole principal of Affluence, Inc., a
management consulting firm located in Greenwich,
Connecticut.
Patrick J. Kane Mr. Kane currently serves as a Director of the Company.
(48) From August, 1996 to April 1997, he served as a Vice
President of Newnet Corporation ("Newnet"), located in
Shelton, Connecticut. Mr. Kane also served as the
Company's Secretary and Treasurer from 1990 through July,
1996. Upon accepting employment with Newnet, Mr. Kane
resigned his position with the Company as Chief Operating
Officer and, in March 1997, he resigned his position with
the Company as Secretary and Treasurer. Newnet
manufacturers intelligent network telecommunication
products, including software, for global computer
intelligent networks.
Daniel Zwiren (42) Mr. Zwiren has served as a director of the Company since
June, 1996. From January 1997 to May 1998 Mr. Zwiren
served as a derivative products consultant to
Eurobrokers, Inc., a brokerage firm located in New York
City. From May 1998 to present and during the period from
and prior to April 1993 until December 1996, Mr. Zwiren
served as Chief Executive Officer--Money Market Products
of Lasser Marshall Inc., an investment banking firm
located in New York City, New York.
</TABLE>
There is no family relationship among any of the nominees for election as
directors or any executive officers of the Company.
COMPENSATION OF DIRECTORS
Effective upon stockholder approval of the Plan Amendment at the Annual
Meeting, Non-Employee Directors will be granted each quarter shares of Common
Stock of the Company having an aggregate fair market value equal to $3,750 as
of the last day of each such fiscal quarter. Board members are reimbursed for
all reasonable out-of-pocket expenses, including travel expenses, incurred in
connection with their services as directors of the Company.
BOARD AND COMMITTEE MEETINGS
The Board of Directors has established one committee. The Management
Compensation and Option Committee is comprised of Messrs. Carvalho and Zwiren,
and is responsible for the review and approval of executive officers' salary
levels and adjustments, options and other incentive compensation awards and
other financial arrangements, including bonus awards and fringe benefits. The
Management Compensation and Option Committee did not meet during fiscal 1998;
however, it acted by unanimous written consent on one occasion.
Linkon does not have a standing nominating committee. Instead, the Board of
Directors selects nominees for directors.
The Board of Directors held 1 regularly scheduled meeting during fiscal
1998. Each director attended the meeting.
4
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth the name, age and business experience for the
past five years of each of the Company's executive officers who are not
members of the Board of Directors of the Company, together with all positions
and offices such executive officers have held with the Company during such
period:
<TABLE>
<CAPTION>
CURRENT POSITIONS, PERIOD SERVED AND PRIOR BUSINESS
NAME AND AGE EXPERIENCE
------------ ---------------------------------------------------
<C> <S>
Thomas V. Cerabona (46) Mr. Cerabona has served as the Company's Vice
President, Operations since March, 1996. From 1994
through 1995, Mr. Cerabona served as the
Vice President of Operations of Paragon Networks, a
data communications equipment company located in
Southbury, Connecticut. From 1986 through 1994 Mr.
Cerabona held various management positions, including
Vice President and General Manager, with Cobotyx
Corporation, a voice processing equipment company
located in Danbury, Connecticut. Mr. Cerabona was
responsible for the financial operations of such
corporation and in such capacity was responsible for
commencing a reorganization of Cobotyx Corporation
pursuant to Chapter 11 of the Bankruptcy Code of 1986,
as amended. This bankruptcy proceeding was commenced
on May 5, 1993 and culminated in a successful
reorganization and a subsequent sale of Cobotyx's
operating assets.
James E. Linley (45) Mr. Linley currently serves as the Company's Vice
President of Engineering, a position he has held since
March, 1991. In such capacity, he manages the research
and development, software development and technical
support areas for the Company.
Mark O'Brien (50) Mr. O'Brien currently serves as the Company's Vice
President of International Operations, a position he
has held since September, 1993. From June, 1992 until
he joined the Company, Mr. O'Brien was the President
of Universal/Univis, an optical products supplier.
From September, 1991 until June, 1992, Mr. O'Brien was
Executive Vice President and General Manager of Hydro
Systems Incorporated.
</TABLE>
5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Management. The following table sets forth, as of May
29, 1998, the number of outstanding shares of the Common Stock beneficially
owned by each of the nominees for director, each current director who is not a
nominee for director, and each executive officer individually, and by all
current directors and executive officers as a group. Except as otherwise
indicated, each of the following persons has sole voting and investment power
with respect to the shares beneficially owned by him.
COMMON STOCK $0.001 PAR VALUE
<TABLE>
<CAPTION>
NAME AND
ADDRESS APPROXIMATE
OF BENEFICIAL BENEFICIAL PERCENTAGE
OWNER OWNERSHIP OF CLASS
------------- ---------- -----------
<S> <C> <C>
Joao M. Carvalho................................. 120,000(1) .90%
R. Sapateiros 219-E-degrees E,
1100 Lisbon, Portugal
Charles Castelli................................. 2,069,000(2) 15.22%
141 E. Central Boulevard
Palisades Park, New Jersey
Thomas V. Cerabona............................... 180,000(3) 1.33%
3061 Dahlia Court
Yorktown Heights, New York
Lee W. Hill...................................... 600,000(4) 4.31%
62 Arch Street
Riverside, Connecticut
Patrick J. Kane.................................. 810,000(5) 6.06%
66 Pearl Street, Apt. 309
New York, New York
James E. Linley.................................. 741,600(6) 5.51%
210 Banks Road
Easton, Connecticut
Mark O'Brien..................................... 195,000(7) 1.44%
485 Camp Fuller Road
Wakefield, Rhode Island
Daniel Zwiren.................................... 191,666(8) 1.42%
100 Warren Street, Apt. 1908
Jersey City, New Jersey
Executive Officers and Directors as a Group
(8 persons)..................................... 4,907,266(9) 36.19%
</TABLE>
- --------
(1) Comprised of (i) 70,000 shares of Common Stock held by Mr. Carvalho and
(ii) 50,000 shares currently acquirable upon the exercise of options to
purchase Common Stock at an exercise price equal to $.75 per share.
(2) Comprised of (i) 1,800,000 shares of Common Stock held by Mr. Castelli,
(ii) 162,000 shares currently acquirable upon the exercise of options to
purchase Common Stock at an exercise price equal to $0.83 per share, (iii)
7,000 shares currently acquirable upon the exercise of options to purchase
Common Stock at an exercise price equal to $0.62 per share and (iv)
100,000 shares currently acquirable upon the exercise of options to
purchase Common Stock at an exercise price equal to $1.65 per share.
6
<PAGE>
(3) Comprised of (i) 75,000 shares currently acquirable upon the exercise of
options to purchase Common Stock at an exercise price equal to $0.75 per
share, (ii) 30,000 shares currently acquirable upon the exercise of
options to purchase Common Stock at an exercise price equal to $0.56 per
share and (iii) 75,000 shares currently acquirable upon the exercise of
options to purchase Common Stock at an exercise price equal to $1.50 per
share.
(4) Comprised of (i) 400,000 shares currently acquirable upon the exercise of
options to purchase Common Stock at an exercise price equal to $0.75 per
share, (ii) 50,000 shares currently acquirable upon the exercise of
options to purchase Common Stock at an exercise price equal to $0.56 per
share and (iii) 150,000 shares currently acquirable upon the exercise of
options to purchase Common Stock at an exercise price equal to $1.50 per
share.
(5) Comprised of (i) 760,000 shares of Common Stock held by Mr. Kane and (ii)
50,000 shares currently acquirable upon the exercise of options to
purchase Common Stock at an exercise price equal to $0.75 per share.
(6) Comprised of (i) 600,000 shares of Common Stock held by Mr. Linley, (ii)
9,600 shares currently acquirable upon the exercise of options to purchase
Common Stock at an exercise price equal to $0.75 per share (3,100 of which
options are held by Anna Linley, Mr. Linley's wife, who is also an
employee of the Company), (iii) 24,000 shares currently acquirable upon
the exercise of options to purchase Common Stock at an exercise price
equal to $0.56 per share (4,000 of which options are held by Anna Linley)
and (iv) 108,000 shares currently acquirable upon the exercise of options
to purchase Common Stock at an exercise price equal to $1.50 per share
(10,000 of which options are held by Anna Linley).
(7) Comprised of (i) 100,000 shares currently acquirable upon the exercise of
options to purchase Common Stock at an exercise price equal to $0.75 per
share, (ii) 30,000 shares currently acquirable upon the exercise of
options to purchase Common Stock at an exercise price equal to $0.56 per
share and (iii) 65,000 shares currently acquirable upon the exercise of
options to purchase Common Stock at an exercise price equal to $1.50 per
share.
(8) Comprised of (i) 33,333 shares of Common Stock held by Mr. Zwiren, (ii)
33,333 shares currently acquirable upon the exercise of 33,333 Warrants to
purchase Common Stock at an exercise price equal to $1.50 per share, (iii)
75,000 shares currently acquirable upon the exercise of options to
purchase Common Stock at an exercise price equal to $0.75 per share and
(iv) 50,000 shares of Common Stock, currently acquirable upon conversion
of a Subordinated Convertible Debenture, having a conversion rate of $2.00
per share.
(9) Comprised of (i) 3,263,333 shares currently held by executive officers and
directors as a group, (ii) 1,593,933 shares currently acquirable upon the
exercise of warrants or options to purchase Common Stock at exercise
prices ranging from $0.56 to $1.50 per share, and (iii) 50,000 shares
currently acquirable upon the conversion of a Subordinated Convertible
Debenture at a conversion rate equal to $2.00 per share.
7
<PAGE>
Security Ownership of Certain Beneficial Owners. To the knowledge of the
Company, the following table lists those parties (other than Messrs. Castelli,
Kane, and Linley each of whose beneficial ownership is disclosed in the
immediately preceding table) who beneficially owned more than 5% of the Common
Stock outstanding as of May 29, 1998:
COMMON STOCK $0.001 PAR VALUE
<TABLE>
<CAPTION>
AMOUNT OF APPROXIMATE
NAME AND ADDRESS BENEFICIAL PERCENTAGE
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------- ---------- -----------
<S> <C> <C>
James Scibelli................................. 2,680,000(1) 18.71%
RG Capital Fund, LLC
Roberts & Green, Inc.
One Hollow Lane, Suite 208
Lake Success, New York 11040
Mr. Piers M. MacDonald......................... 913,000(2) 6.85%
c/o Gulfstream Partners, L.P.
Two Greenwich Plaza, Suite 100
Greenwich, Connecticut 06830
</TABLE>
- --------
(1) Comprised of (i) 1,680,000 shares of Common Stock held by RG Capital Fund,
LLC and (ii) 1,000,000 shares of Common Stock issuable upon the exercise of
Warrants held by Roberts & Green, Inc. Mr. Scibelli, by virtue of the fact
that he is the sole shareholders, sole director and sole officer of Roberts
& Green, Inc. has sole power to vote and dispose of shares of Common Stock
held by Roberts & Green, Inc. Mr. Scibelli, by virtue of the fact that he
is the sole shareholder, sole director and sole officer of SG Capital
Corp., the Managing Director of RG Capital Fund, LLC, has the shared power
to vote and sole power to dispose of the shares of Common Stock held by RG
Capital Fund, LLC. As such, Mr. Scibelli beneficially owns 2,680,000 shares
of the Company's Common Stock. Excludes 720,000 shares of Common Stock held
by certain investors designated by RG Capital Fund LLC pursuant to a
Subscription and Stock Purchase Agreement between the Company and RG
Capital Fund, LLC. See "Certain Transactions" for a more detailed
description of such transactions.
(2) Comprised of (i) 538,000 shares of Common Stock owned by Gulfstream
Partners, L.P. ("Gulfstream"), a limited partnership of which Mr. MacDonald
is managing general partner, (ii) 120,000 shares of Common Stock held by
Mr. MacDonald, and (iii) 255,000 shares of Common Stock held by Bonner
MacDonald, Mr. MacDonald's wife.
----------------
8
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation for the years ended January
31, 1998, 1997 and 1996 paid to the Company's Chief Executive Officer and the
other named executive officers whose compensation is required to be disclosed
pursuant to Item 402(a)(2) of Regulation S-B promulgated under the Securities
Exchange Act of 1934, as amended:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION(1) AWARDS
----------------------------------- ------------
SHARES
NAME AND SALARY OTHER ANNUAL UNDERLYING
PRINCIPAL POSITION FISCAL YEAR ($) BONUS ($) COMPENSATION ($) OPTIONS
------------------ ----------- -------- --------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Lee W. Hill............. 1998 $150,000 $45,000 $8,040(2) 50,000
President and 1997 $150,000 $25,000 $7,349(2) 150,000
Chief Executive Officer 1996 $150,000 $25,000 $6,360(2) --
Charles Castelli........
Chairman, 1998 $ 96,000 $19,000 $8,640(3) 7,000
Chief Technology 1997 $ 96,000 -- $8,400(3) 162,000
Officer 1996 $ 96,000 -- $8,400(3) --
Mark O'Brien............ 1998 $128,392 $11,000 $6,000(4) 30,000
Vice President of 1997 $128,478 -- $6,000(4) 80,000
International 1996 $106,174 -- $6,000(4) --
Thomas V. Cerabona......
Vice President of 1998 $102,000 $34,500 $6,000(5) 30,000
Operations 1997 $ 89,250 $11,500 $6,000(5) 75,000
</TABLE>
- --------
(1) Columns entitled "Restricted Stock Award(s)", "LTIP Payouts", and "All
Other Compensation" have been excluded because they are not applicable to
any fiscal year covered by this table.
(2) Mr. Hill has received an automobile allowance from the Company of $670,
$612 and $530 per year for fiscal years 1998, 1997 and 1996, respectively.
(3) Mr. Castelli has received an automobile allowance from the Company of
$720, $700 and $700 per month for fiscal years 1998, 1997 and 1996,
respectively.
(4) Mr. O'Brien has received an automobile allowance from the Company for the
last three fiscal years of $500 per month.
(5) No information is provided for Mr. Cerabona for fiscal year 1996 since he
commenced employment with the Company in fiscal 1997. Mr. Cerabona has
received an automobile allowance from the Company for the last two fiscal
years of $500 per month.
9
<PAGE>
OPTION GRANTS IN FISCAL YEAR 1998
The following table sets forth certain information concerning grants of
stock options to each of the Company's named executive officers during the
fiscal year ended January 31, 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
------------------------------
PERCENT OF
NUMBER OF TOTAL OPTIONS
SHARES GRANTED TO
UNDERLYING EMPLOYEES IN EXERCISE OR EXPIRATION
NAME OPTIONS GRANTED FISCAL 1998(2) BASE PRICE DATE
---- --------------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
Lee W. Hill........... 50,000 26.2% $.56 12/19/07
Charles Castelli...... 7,000 3.7% $.56 12/19/02
Mark O'Brien.......... 30,000 15.7% $.56 12/19/07
Thomas V. Cerabona.... 30,000 15.7% $.56 12/19/07
</TABLE>
- --------
(1) Each of these options was granted pursuant to the Plan and is subject to
the terms of such plan. These options were granted at an exercise price
equal to the fair market value of the Company's Common Stock on the date
of grant.
(2) An aggregate 191,000 options were granted to employees, officers and/or
directors and consultants of the Company during fiscal year 1998.
----------------
AGGREGATE OPTION EXERCISES IN FISCAL YEAR ENDED JANUARY 31, 1998
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS (#) OPTIONS AT FISCAL YEAR
AT FISCAL YEAR END END
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------------------- -------------------------
<S> <C> <C>
Lee W. Hill................. 450,000/0 $0
Charles Castelli............ 169,000/0 $0
Mark O'Brien................ 130,000/0 $0
Thomas V. Cerabona.......... 105,000/0 $0
</TABLE>
EMPLOYMENT AGREEMENTS
On May 19, 1998, the Company and Mr. Lee W. Hill, the Company's President
and Chief Executive Officer, entered into a three year employment agreement.
The agreement provides that Mr. Hill will receive a base salary of $150,000
which will be reviewed annually and a performance bonus of $25,000 which is to
be paid annually based upon the achievement of certain defined corporate
goals. In addition, Mr. Hill will, subject to approval of the Plan Amendment,
receive 150,000 immediately vested options to purchase Common Stock as a
signing bonus, which options will have an exercise price equal to $1.50 (the
fair market value of a share of Common Stock on the date of grant). Mr. Hill
is also entitled to participate in Company benefit plans and will receive a
one month paid vacation per year and an automobile allowance of $700 per month
over the term of the agreement.
On May 19, 1998, the Company and Mr. Charles Castelli, the Company's
Chairman and CTO, entered into a three year employment agreement. The
agreement provides that Mr. Castelli will receive a monthly base salary of
$150,000, which will be reviewed annually and a performance bonus of $25,000
which is to be paid annually based upon the achievement of certain defined
corporate goals. In addition, Mr. Castelli, subject to approval of the Plan
Amendment, will receive 100,000 fully vested options to purchase Common Stock
as a signing bonus, which options will have an exercise price equal to $1.65
(110% of the fair market value of a share of Common Stock on the date of
grant). Mr. Castelli is also entitled to participate in Company benefit plans
and will receive a one month paid vacation per year and an automobile
allowance of $700 per month over the term of the agreement.
10
<PAGE>
On May 19, 1998, the Company and Mr. Mark R. O'Brien, the Company's Vice
President, Business Development, entered into a two year employment agreement.
The agreement provides that Mr. O'Brien will receive a base salary of
$102,000, which will be reviewed annually and a performance bonus of $15,000
which is to be paid annually based upon the achievement of certain defined
corporate goals. Mr. O'Brien is also entitled to a 2% sales commission for
sales of the Company's products by him or for which he is responsible. In
addition, Mr. O'Brien will, subject to approval of the Plan Amendment, receive
25,000 fully vested options to purchase Common Stock as a signing bonus, which
options will have an exercise price equal to $1.50 (the fair market value of a
share of Common Stock on the date of grant). Mr. O'Brien is also entitled to
participate in Company benefit plans and will receive a $650 per month stipend
for health and life insurance. Mr. O'Brien is entitled to one month paid
vacation per year and an automobile allowance of $500 per month over the term
of the agreement.
On May 19, 1998, the Company and Mr. Thomas V. Cerabona, the Company's
Senior Vice President--Operations and Corporate Secretary, entered into a two
year employment agreement. The agreement provides that Mr. Cerabona will
receive a base salary of $125,000, which will be reviewed annually and a
performance bonus of $25,000 which is to be paid annually based upon the
achievement of certain defined corporate goals. In addition, Mr. Cerabona
will, subject to approval of the Plan Amendment, receive 75,000 fully vested
options to purchase Common Stock as a signing bonus, which options will have
an exercise price equal to $1.50 (the fair market value of a share of Common
Stock on the date of grant). Mr. Cerabona is also entitled to participate in
Company benefit plans and will receive one month paid vacation per year and an
automobile allowance of $500 per month over the term of the agreement.
REPORT ON REPRICING OF OPTIONS
In 1993, the Company granted an aggregate of 340,000 options to purchase
Common Stock having an exercise price of $2.00 to various employees, directors
and/or consultants to the Company, including 250,000 and 20,000 options to
Messrs. Lee W. Hill and Mark R. O'Brien, respectively. None of such 340,000
options were granted to named executive officers other than Messrs. Hill and
O'Brien. On May 1, 1996, the Company cancelled such 340,000 options and
granted an identical number of new options (the "New Options") having all the
same terms as such previous options except that the exercise price was reduced
to $.75 (the price per share of Common Stock on May 1, 1996) to bring such
exercise price in line with the then current market price of the Company's
Common Stock. The Company's board of directors determined that such action was
necessary to keep the optionees incentivized. Thereafter, in December 1997,
the Compensation Committee adopted a resolution directing the Company to offer
options under the Plan (the "Offered Options") to the holders of the New
Options (the New Options being non-plan options), except that Mr. Hill was
only given such offer with respect to 197,000 of the 250,000 New Options held
by him so that the number of Offered Options would not exceed the then maximum
amount of options permitted to be issued under the Plan. Mr. Hill's remaining
53,000 New Options will remain outside of the Plan. The Offered Options will
be issued as incentive stock options under the Plan at the same exercise price
and on the same terms as the New Options against receipt from each such
optionee accepting the offer of a written agreement terminating the New
Options and waiving all of each such optionees' rights thereunder.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN TRANSACTIONS
On December 19, 1997, the Company awarded 191,000 options to 20 employees,
officers and/or directors of the Company under the Plan.
On April 6, 1998, the Company consummated an equity and debt financing
transaction with RG Capital Fund LLC (the "RG Fund"). The equity financing
part of the transaction involved the sale to the RG Fund and certain investors
designated by it, pursuant to the terms of a Subscription and Stock Purchase
Agreement (the "RG Subscription Agreement") between the Company and the RG
Fund, of an aggregate of 2,400,000 shares of the Company's Common Stock for an
aggregate consideration of $1,800,000.
11
<PAGE>
The debt portion of the RG Fund financing consisted of a loan to the Company
by the RG Fund in the principal amount of $1,000,000. The loan is evidenced by
a promissory note issued by the Company to the RG Fund in like principal
amount bearing interest at an annual rate of 8%. The RG Fund promissory note
is unsecured and payable in one lump sum on April 5, 2000.
On April 6, 1998, the Company also issued to Roberts & Green, Inc. ("R&G")
warrants to purchase 1,000,000 shares of the Company's Common Stock at a price
of $1.50 per share in connection with its entry into an investment banking
financial advisory services agreement with R&G.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the directors and executive officers of the Company and holders of more than
10% of the Company's Common Stock to file reports regarding beneficial
ownership and changes in beneficial ownership with the Securities and Exchange
Commission and the New York Stock Exchange. The Company believes that during
the fiscal year ended January 31, 1998, its directors, executive officers and
beneficial owners of ten percent of any class of equity securities of the
registrant complied with all applicable Section 16(a) filing requirements,
except as set forth below:
Messrs. Hill, Castelli, Cerabona and O'Brien failed to timely file a form 5
upon the grant as of December 19, 1997 pursuant to the Plan of 50,000; 7,000;
30,000; and 30,000 options to purchase Common Stock of the Company,
respectively, at an exercise price of $.56.
Mr. Kane failed to timely file a form 4 to reflect the sale of an aggregate
40,000 shares of the Company's Common Stock on various dates over the period
from June through October, 1997.
ITEM NO. 2--AMENDMENT TO PLAN
GENERAL
On May 18, 1998, the Board of Directors unanimously approved the Plan
Amendment, subject to Stockholder approval, to (a) increase the number of
shares reserved for issuance upon exercise of options by an additional
1,500,000 shares and (b) provide for the issuance to Non-Employee Directors
who remain as such on the last day of any given fiscal quarter of such number
of shares of the Company's Common Stock as have a fair market value equal to
$3,750 as of the last day of such fiscal quarter. The Plan is intended to
further the growth and success of Linkon and its subsidiaries by enabling
directors, executive officers and other key employees and consultants of the
Company to acquire shares of Common Stock of the Company, thereby increasing
their personal interest in such growth and success, and to provide a means of
rewarding outstanding performance by such persons to Linkon and/or its
subsidiaries. The Board of Directors believes that the granting of options
under the Plan has been a significant factor in attracting and retaining
competent and experienced management and experienced personnel. The Board of
Directors believes that additional shares of Common Stock should be made
available for the grant of future options to allow the Company to continue to
provide an incentive program for its employees. Furthermore, the Company
believes that the ability to grant stock awards under the Plan to Non-Employee
directors will help the Company retain and attract qualified persons to serve
as outside directors to the Company.
The following brief description of the material features of the Plan, is
qualified in its entirety by reference to the complete text of the Plan, as
amended by the Plan Amendment, attached to this Proxy Statement as Exhibit A.
PURPOSE OF PLAN
The purpose of the Plan is to attract and retain the best available
employees for the Company and its subsidiaries and to encourage the highest
level of performance by such directors, executive officers, other key
employees and consultants of the Company and its subsidiaries (for purposes of
this Item 2, such persons are
12
<PAGE>
hereinafter sometimes collectively referred to as "employees"), thereby
enhancing the value of the Company for the benefit of its stockholders. The
Plan is also intended to motivate employees to contribute to the Company's
future growth and profitability and to reward their performance in a manner
that provides them with a means to increase their holding of the Common Stock
of the Company and aligns their interests with the interests of the
stockholders of the Company.
NUMBER OF AUTHORIZED SHARES
The Plan, as amended by the Plan Amendment, provides for awards of up to
2,500,000 shares of Common Stock to employees of the Company and its
subsidiaries during the term of the Plan. These shares were reserved by the
Company's Board of Directors from the Company's authorized but unissued shares
of Common Stock. Corresponding Tax Offset Payments (as hereinafter defined)
also may be awarded at the discretion of the Committee. Awards are subject to
adjustment in certain circumstances as hereinafter described.
ADMINISTRATION OF THE PLAN
The Board of Directors of the Company has designated a committee of two of
its members to administer the Plan (the "Committee"). The Committee is
presently comprised of Messrs. Carvalho and Zwiren. The Committee must be
composed of non-employee directors. The Committee has the full power in its
discretion to grant awards under the Plan, to determine the terms thereof, to
interpret the provisions of the Plan and to take such action as it deems
necessary or advisable for the administration of the Plan.
ELIGIBILITY AND PARTICIPATION
Directors, executive officers, other key employees and consultants the
Company and its subsidiaries (if any), may participate in the Plan.
Approximately 20 employees of the Company and its subsidiaries are eligible to
participate in the Plan. Unless otherwise indicated, references herein to
employees include all of the foregoing eligible participants. Participation in
the Plan is at the discretion of the Committee and shall be based upon the
employee's present and potential contributions to the success of the Company
and its subsidiaries and such other factors as the Committee deems relevant.
TYPE OF AWARDS UNDER THE PLAN
The Plan provides that the Committee may grant awards to eligible employees
in any of the following forms, subject to such terms, conditions and
provisions as the Committee may determine to be necessary or desirable: (i)
incentive stock options ("ISOs"), (ii) nonstatutory stock options ("NSOs");
(iii) stock appreciation rights ("SARs"); (iv) shares of Common Stock of the
Company subject to certain restrictions ("Restricted Shares"); (v) units
representing shares of Common Stock ("Performance Shares"); (vi) units which
do not represent shares of Common Stock but which may be paid in Common Stock
("Performance Units"); (vii) quarterly grants of a specified number of shares
of Common Stock to Non-Employee Directors; (viii) shares of unrestricted
Common Stock ("Unrestricted Shares"); and (ix) tax offset payments ("Tax
Offset Payments"), which may consist of cash and/or Unrestricted Shares.
GRANT OF OPTIONS AND SARS
The Committee may award ISOs and/or NSOs to eligible employees
(collectively, "Options"). SARs may be awarded either in tandem with Options
("Tandem SARs") or on a stand-alone basis ("Nontandem SARs").
EXERCISE PRICE
The exercise price of each NSO is determined by the Committee at the time of
grant, while the exercise price of each ISO shall be not less than the fair
market value of the Common Stock on the date of grant. The exercise price
determined with respect to an Option shall also be applicable in connection
with the exercise of any Tandem SAR granted with respect to such Option. At
the time of grant of a Nontandem SAR, the Committee
13
<PAGE>
will specify the base price of the shares of Common Stock to be used for
determining the amount of cash or number of shares of Common Stock to be
distributed upon the exercise of such Nontandem SAR. The base price of
Nontandem SARs will not be less than 100% of the fair market value of the
Common Stock on the date of such grant.
VESTING
The Committee will determine at the time of grant the terms under which
Options and SARs shall vest and become exercisable.
SPECIAL LIMITATIONS ON ISOS
No ISO may be granted to an employee who owns, at the time of the grant,
stock representing more than 10% of the total voting power of all classes of
stock of the Company or its subsidiaries (a "10% Stockholder") unless the
exercise price for the shares subject to such ISO is at least 110% of the fair
market value on the date of grant and such ISO award is not exercisable more
than five (5) years after its date of grant. In addition, the total fair
market value of shares subject to ISOs which are exercisable for the first
time by an eligible employee in a given calendar year shall not exceed
$100,000, valued as of the date of the ISO's grant.
EXERCISE OF OPTIONS AND SARS
An option may be exercised by written notice to the Committee stating the
number of shares of Common Stock with respect to which the Option is being
exercised and tendering payment therefor. The Committee may, at its
discretion, accept shares of Common Stock as payment (valued at the fair
market value on the date of exercise).
Tandem SARs are exercisable only to the extent that the related Option is
exercisable and only for the period determined by the Committee. Upon exercise
of all or a portion of Tandem SARs, the related Option shall be cancelled with
respect to an equal number of shares of Common Stock. Similarly, upon exercise
of all or a portion of an Option, the related Tandem SARs shall be cancelled
with respect to an equal number of shares of Common Stock. Nontandem SARs
shall be exercisable for the period determined by the Committee.
SURRENDER OF EXCHANGE OF SARS
Upon surrender of a Tandem SAR and the related unexercised Option, the
employee will be entitled to receive shares of Common Stock having an
aggregate fair market value equal to (i) the fair market value of the shares
subject to the unexercised Option at the time of exercise, less (i) the
aggregate exercise price specified in the Option. Upon surrender of a
Nontandem SAR, the employee will be entitled to receive shares of Common Stock
having an aggregate fair market value equal to (i) the fair market value of
the shares covered by the Nontandem SAR at the time of exercise, less (ii) the
aggregate base price of such shares specified by the Committee. The Committee,
at its discretion, shall cause all or any portion of the payment to be made in
cash in lieu of Common Stock. Any fractional share resulting from the exercise
of an SAR will be paid in cash.
NONTRANSFERABILITY OF OPTIONS AND SARS
Options and SARs are not transferable except by will or applicable laws of
descent and distribution.
EXPIRATION OF OPTIONS
Options will expire at such time as the Committee determines; provided,
however, that an ISO may not be exercised more than ten (10) years from the
date of grant, unless held by a 10% Stockholder, in which case such ISO may
not be exercised more than five (5) years from the date of its grant.
EFFECT OF TERMINATION OF EMPLOYMENT AND SIMILAR EVENTS ON OPTIONS AND SARS
Options and SARs generally may be exercised during the three month period
following a recipient's termination of employment to the extent exercisable on
the date of termination. However, the period during
14
<PAGE>
which Options and SARs may be exercised may be extended, and the extent to
which they are exercisable may be increased, if such termination is due to the
death or disability of the recipient or to certain other circumstances.
Conversely, the Committee may cause any Options or SARs to be immediately
forfeited in the event that the recipient is terminated for a breach of
fiduciary duty to the Company, a serious violation of Company policy or
certain other cases.
RESTRICTED SHARES
Restricted Shares granted under the Plan may not be sold, transferred,
pledged or otherwise encumbered or disposed of during the restricted period
established by the Committee. The Committee may also impose additional
restrictions on the employee's right to dispose of or encumber Restricted
Shares.
Holders of Restricted Shares may not exercise the rights of a stockholder,
such as the right to vote the shares or receive dividends and other
distributions, unless and until the restrictions on such shares lapse.
Upon termination of the employee's employment, Restricted Shares granted to
such employee shall be forfeited; provided, however, that in the event of such
employee's death or total disability, the Committee shall have the discretion
to determine otherwise.
PERFORMANCE SHARES AND PERFORMANCE UNITS
The Committee may award Performance Shares equivalent to one share of Common
Stock and Performance Units which will have a specified value or formula-based
value at the end of a performance period. The Committee shall determine
performance periods and performance objectives in connection with each grant
of Performance Shares or Performance Units.
Vesting of awards of Performance Shares and Performance Units will occur
upon achievement of the applicable objectives within the applicable
performance period. The Committee may, at its discretion, permit vesting in
the event performance objectives are partially met or grant additional vested
Performance Shares or Performance Units in the event performance objectives
are surpassed. Payment for vested Performance Shares and Performance Units may
be in cash, Common Stock or any combination thereof, as determined by the
Committee.
No voting or dividend rights attach to the Performance Shares prior to
vesting; however, the Committee may credit an employee's Performance Share
account with additional shares equivalent to the fair market value of any
dividends on an equivalent number of shares of Common Stock.
GRANTS TO NON-EMPLOYEE DIRECTORS
The Plan provides that all Non-Employee Directors who remain as such on the
last day of any given fiscal quarter will be issued quarterly, in arrears,
such number of shares of Common Stock as have a fair market value equal to
$3,750, with such fee being pro rated for any director who serves less than
such full fiscal quarter.
UNRESTRICTED SHARES
Unrestricted Shares may also be granted at the discretion of the Committee.
No payment shall be required for Unrestricted Shares. The recipient of a grant
of Unrestricted Shares will have and may exercise all of the rights of an
owner of Common Stock with respect to such shares.
TAX OFFSET PAYMENTS
If and to the extent that Tax Offset Payments are made in Unrestricted
Shares, rather than in cash, no payment shall be required by the recipient of
such grant and such recipient will have and may exercise all of the rights of
an owner of Common Stock with respect to such shares.
LAPSED AWARDS AND ADJUSTMENTS
Shares of Common Stock attributable to (i) unexercised Options which expire
or are terminated, surrendered or cancelled (other than in connection with the
exercise of an SAR), (ii) Restricted Shares which are forfeited to
15
<PAGE>
the Company, (iii) Performance Shares and Performance Units which are not
earned and paid and (iv) awards settled in cash in lieu of shares of Common
Stock may become available for subsequent award under the Plan at the
Committee's discretion.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
The number and class of shares available under the Plan may be adjusted by
the Committee to prevent dilution or enlargement of rights in the event of
various changes in the capitalization of the Company.
AMENDMENT AND TERMINATION
The Board of Directors may suspend, amend, modify or terminate the Plan;
provided, however, that the Company's stockholders shall be required to
approve any amendment that would (i) materially increase the aggregate number
of shares issuable under the Plan, (ii) materially increase the benefits
accruing to employees under the Plan, or (iii) materially modify the
requirements for eligibility to participate in the Plan.
Awards granted prior to a termination of the Plan shall continue in
accordance with their terms following such termination. No amendment,
suspension or termination of the Plan shall adversely affect the rights of an
employee in awards previously granted without such employee's consent.
GRANTS BY THE COMMITTEE
On December 19, 1997, the Committee granted a total of 191,000 options to
purchase Common Stock to a total of 20 employees, officers and/or directors
and consultants of the Company under the Plan. Each of such options is
exercisable at an exercise price equal to $.56 and terminates on December 19,
2007, except for options granted to Mr. Castelli, a 10% Stockholder, whose
options terminate on December 19, 2002.
The following table sets forth the number of options granted under the Plan
to (i) the "Named Executive Officers" individually, (ii) all current executive
officers, as a group, (iii) all directors who are not executive officers, as a
group, and (iv) employees who are not executive officers, as a group.
NEW PLAN BENEFITS
LINKON CORPORATION 1996 STOCK OPTION AND PERFORMANCE INCENTIVE PLAN
<TABLE>
<CAPTION>
DOLLAR NUMBER OF
NAME AND POSITION VALUE SHARES
----------------- --------- ---------
<S> <C> <C>
Lee W. Hill......................................... $ 51,000(3) 150,000
President, CEO
Charles Castelli.................................... $ 19,000(3) 100,000
Chairman, CTO
Mark O'Brien........................................ $ 8,500(3) 25,000
Vice President, International, Operations
Thomas V. Cerabona.................................. $ 25,500(3) 75,000
Vice President of Operations
All current executive officers as a group........... $ 104,000(3) 350,000
Non-executive Officer directors as a group.......... $ 30,000(2) (1)
Non-executive Officer employees as a group.......... (1) (1)
</TABLE>
- --------
(1) Not yet determinable.
(2) Assumes that two Non-Employee Directors will sit on the Board of Directors
of the Company during Fiscal Year 1999.
(3) Reflects the spread between the exercise price of options granted to the
named executive officers on May 19, 1998, which was $1.50 for all such
officers except Mr. Castelli, whose options have an exercise price of
$1.65, and the market price of the Company's Common Stock on May 29, 1998,
which was $1.84.
16
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
STOCK OPTIONS
There will be no Federal income tax consequences to the employee or the
Company upon the grant of either an ISO or an NSO under the Plan. Upon
exercise of an NSO, an employee will generally recognize ordinary income in an
amount equal to (i) the fair market value, on the date of exercise, of the
acquired shares of Common Stock, less (ii) the exercise price of the NSO. The
Company will be entitled to a tax deduction in the same amount.
Upon the exercise of an ISO, an employee recognizes no immediate taxable
income. Income recognition is deferred until the employee sells the shares of
Common Stock. If the Option is exercised no later than three (3) months after
the termination of the employee's employment, and the employee does not
dispose of the shares acquired pursuant to the exercise of the Option within
two (2) years from the date the Option was granted and within one (1) year
after the exercise of the Option, the gain on the sale will be treated as long
term capital gain. Certain of these holding periods and employment
requirements are liberalized in the event of an employee's death or disability
while employed by the Company. Upon exercise of the ISO, the excess of the
fair market value of the Common Stock at exercise over the exercise price will
be considered as part of alternative minimum taxable income. Such excess will
be added to basis for purposes of determining alternative minimum taxable
income in the year the Common Stock is sold. The Company is not entitled to
any tax deduction, except that if the Common Stock is not held for the full
term of the holding period outlined above, a portion of the gain on the sale
of such Common Stock being the lesser of (i) the fair market value of the
Common Stock on the date of exercise minus the exercise price, or (ii) the
amount realized on disposition minus the exercise price, will be taxed to the
employee as ordinary income and the Company will be entitled to a deduction in
the same amount. The excess, if any, of the amount realized on disposition
over the fair market value of the Common Stock on the date of exercise will be
taxed to the employee as capital gain.
STOCK APPRECIATION RIGHTS
There will be no Federal income tax consequences to either the employee or
the Company upon the grant of an SAR. However, the employee generally will
recognize ordinary income upon the exercise of an SAR in an amount equal to
the aggregate amount of cash and the fair market value of the shares of Common
Stock received upon exercise. The Company will be entitled to a deduction
equal to the amount includable in the employee's income.
RESTRICTED SHARES
Unless the election referred to below is made, there will be no Federal
income tax consequences to either the employee or the Company upon the grant
of Restricted Shares until expiration of the restricted period and the
satisfaction of any other conditions applicable to the Restricted Shares. At
that time, the employee will recognize taxable income equal to the then fair
market value of the Common Stock and the Company will be entitled to a
corresponding deduction. However, the employee may elect, within thirty (30)
days after the date of the grant, to recognize ordinary income equal to the
fair market value of the Restricted Shares as of the date of grant and the
Company will be entitled to a corresponding deduction at that time.
PERFORMANCE SHARES AND UNITS
There will be no Federal income tax consequences to the employee or the
Company upon the grant of Performance Shares or Performance Units. Employees
will recognize taxable income at the time when payment for the Performance
Shares and Performance Units is received in an amount equal to the aggregate
amount of cash and the fair market value of shares of Common Stock acquired.
The Company will be entitled to a deduction equal to the amount includable in
the employee's income.
17
<PAGE>
GRANTS TO NON-EMPLOYEE DIRECTORS
Non-Employee Directors will recognize taxable income at the time shares
granted to Non-Employee Directors are received. The Company will be entitled to
a deduction equal to the amount includable in the Non-Employee Director's
income.
UNRESTRICTED SHARES
Employees will recognize taxable income at the time Unrestricted Shares are
received. The Company will be entitled to a deduction equal to the amount
includable in the employee's income.
TAX WITHHOLDING AND TAX OFFSET PAYMENTS
The Committee may require payment, or withhold payments made by the Plan, in
order to satisfy applicable withholding tax requirements. The Committee may
make Tax Offset Payments to assist employees in paying income taxes incurred as
a result of their participation in the Plan. The number of shares with respect
to which Tax Offset Payments may be awarded will not exceed the number of
shares available for issuance under the Plan. The amount of the Tax Offset
Payments shall be determined by multiplying a percentage (established by the
Committee) by all or a portion of the taxable income recognized by an employee
upon (i) the exercise of an NSO or SAR, (ii) the disposition of shares received
upon exercise of an ISO, (iii) the lapse of restrictions on Restricted Shares,
(iv) the award of Unrestricted Shares or (v) payments for Performance Shares or
Performance Units. Employees will recognize taxable income at the time that Tax
Offset Payments are received, whether such Tax Offset Payments are made in
cash, Unrestricted Shares or a combination thereof. The Company will be
entitled to a deduction equal to the amount includable in the employee's
income.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the Company's 1999 Annual
Meeting of Stockholders must be received at the Company's principal executive
offices located at 140 Sherman Avenue, Fairfield, Connecticut 06430 on or
before February 15, 1999, for meeting in June of 1999 for consideration for
inclusion in the Company's Proxy Statement and form of proxy relating to that
meeting.
OTHER MATTERS
As of the date of this Proxy Statement, the Company's management does not
know of any business, other than that mentioned above, which will be presented
for consideration at the Annual Meeting. However, if any other matters should
properly come before the Annual Meeting, it is the intention of the persons
named in the accompanying form of proxy to vote the proxies in accordance with
their best judgment on such matters.
INDEPENDENT ACCOUNTANTS
The Company's audited consolidated balance sheet as at January 31, 1998 and
1997, and Consolidated Statements of Operations, Statements of Cash Flows and
Statements of Stockholders' Equity for the periods ended January 31, 1998, 1997
and 1996 are included as part of the Annual Report which accompanies this Proxy
Statement. These audited financial statements were prepared by Radin Glass &
Co., LLP independent public accounts, which firm was selected by the Company's
Board of Directors. This firm has served as the Company's independent auditors
since 1993. A representative of Radin, Glass & Co., LLP will be present at the
Annual Meeting to respond to appropriate questions of stockholders and to make
a statement if he or she so desires.
By Order of the Board of Directors,
Thomas V. Cerabona
Secretary
18
<PAGE>
EXHIBIT A TO
PROXY STATEMENT
---------------
AMENDED AND RESTATED
LINKON CORPORATION
1996 STOCK OPTION AND PERFORMANCE INCENTIVE PLAN
<PAGE>
AMENDED AND RESTATED
LINKON CORPORATION
1996 STOCK OPTION AND PERFORMANCE INCENTIVE PLAN
TABLE OF CONTENTS
-----------------
ARTICLE 1.............................................................. - 1 -
ESTABLISHMENT AND PURPOSE.............................................. - 1 -
1.1 Establishment and Effective Date............................ - 1 -
--------------------------------
1.2 Purpose..................................................... - 1 -
-------
ARTICLE 2.............................................................. - 1 -
AWARDS................................................................. - 1 -
2.1 Form of Awards.............................................. - 1 -
--------------
2.2 Maximum Shares Available.................................... - 2 -
------------------------
2.3 Return of Prior Awards...................................... - 2 -
----------------------
ARTICLE 3.............................................................. - 2 -
ADMINISTRATION......................................................... - 2 -
3.1 Committee................................................... - 2 -
---------
3.2 Powers of Committee......................................... - 3 -
-------------------
3.3 Delegation.................................................. - 3 -
----------
3.4 Interpretations............................................. - 3 -
---------------
3.5 Liability; Indemnification.................................. - 3 -
--------------------------
ARTICLE 4.............................................................. - 4 -
ELIGIBILITY............................................................ - 4 -
ARTICLE 5.............................................................. - 4 -
STOCK OPTIONS.......................................................... - 4 -
5.1 Grant of Options............................................ - 4 -
----------------
5.2 Designation as Non-qualified Stock Option or Incentive Stock
------------------------------------------------------------
Option...................................................... - 4 -
------
5.3 Option Price................................................ - 4 -
------------
5.4 Limitation on Amount of Incentive Stock Options............. - 5 -
-----------------------------------------------
5.5 Limitation on Time of Grant................................. - 5 -
---------------------------
5.6 Exercise and Payment........................................ - 5 -
--------------------
-i-
<PAGE>
5.7 Term........................................................ - 6 -
----
5.8 Rights as a Stockholder..................................... - 6 -
-----------------------------------------------
5.9 General Restrictions........................................ - 6 -
-----------------------------------------------
5.10 Cancellation of Stock Appreciation Rights................... - 6 -
-----------------------------------------------
ARTICLE 6.............................................................. - 7 -
STOCK APPRECIATION RIGHTS.............................................. - 7 -
6.1 Grants of Stock Appreciation Rights......................... - 7 -
-----------------------------------
6.2 Limitations on Exercise..................................... - 7 -
-----------------------
6.3 Surrender or Exchange of Tandem Stock Appreciation.Rights... - 7 -
---------------------------------------------------------
6.4 Exercise of Nontandem Stock Appreciation Rights............. - 7 -
-----------------------------------------------
6.5 Settlement of Stock Appreciation Rights..................... - 8 -
---------------------------------------
6.6 Cash Settlement............................................. - 8 -
---------------
ARTICLE 7.............................................................. - 8 -
NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS............ - 8 -
ARTICLE 8.............................................................. - 9 -
EFFECT OF TERMINATION OF EMPLOYMENT, RELOCATION EVENT, DISABILITY,
RETIREMENT, DEATH OR SPECIAL EVENT............................. - 9 -
ARTICLE 9.............................................................. - 12 -
RESTRICTED SHARES...................................................... - 12 -
9.1 Grant of Restricted Shares.................................. - 12 -
--------------------------
9.2 Restrictions................................................ - 12 -
------------
9.3 Restricted Stock Certificates............................... - 12 -
-----------------------------
9.4 Rights of Holders of Restricted Shares...................... - 12 -
--------------------------------------
9.5 Forfeiture.................................................. - 12 -
----------
9.6 Delivery of Restricted Shares............................... - 13 -
-----------------------------
ARTICLE 10............................................................. - 13 -
PERFORMANCE SHARES..................................................... - 13 -
10.1 Award of Performance Shares................................. - 13 -
---------------------------
10.2 Performance Period.......................................... - 13 -
------------------
10.3 Right to Payment of Performance Shares...................... - 13 -
--------------------------------------
10.4 Payment for Performance Shares.............................. - 13 -
------------------------------
10.5 Voting and Dividend Rights.................................. - 14 -
--------------------------
-ii-
<PAGE>
ARTICLE 11............................................................. - 14 -
PERFORMANCE UNITS...................................................... - 14 -
11.1 Award of Performance Units.................................. - 14 -
--------------------------
11.2 Right to Payment of Performance Units....................... - 14 -
-------------------------------------
11.3 Payment for Performance Units............................... - 15 -
-----------------------------
ARTICLE 12............................................................. - 15 -
UNRESTRICTED SHARES.................................................... - 15 -
12.1 Award of Unrestricted Shares................................ - 15 -
----------------------------
12.2 Delivery of Unrestricted Shares............................. - 15 -
-------------------------------
ARTICLE 13............................................................. - 16 -
GRANTS TO NON-EMPLOYEE DIRECTORS....................................... - 16 -
ARTICLE 14............................................................. - 16 -
TAX OFFSET PAYMENTS.................................................... - 16 -
ARTICLE 15............................................................. - 16 -
ADJUSTMENT UPON CHANGES IN CAPITALIZATION.............................. - 16 -
ARTICLE 16............................................................. - 17 -
AMENDMENT AND TERMINATION.............................................. - 17 -
ARTICLE 17............................................................. - 17 -
WRITTEN AGREEMENT...................................................... - 17 -
ARTICLE 18............................................................. - 17 -
MISCELLANEOUS PROVISIONS............................................... - 17 -
18.1 Tax Withholding............................................. - 17 -
---------------
18.2 Compliance With Section 16(b)............................... - 18 -
-----------------------------
18.3 Successors.................................................. - 18 -
----------
18.4 General Creditor Status..................................... - 18 -
-----------------------
18.5 No Right to Employment...................................... - 18 -
----------------------
18.6 Notices..................................................... - 19 -
-------
18.7 Severability................................................ - 19 -
------------
18.8 Governing Law............................................... - 19 -
-------------
-iii-
<PAGE>
AMENDED AND RESTATED
LINKON CORPORATION
1996 STOCK OPTION AND PERFORMANCE INCENTIVE PLAN
ARTICLE 1.
ESTABLISHMENT AND PURPOSE
1.1 Establishment and Effective Date. Linkon Corporation, a Nevada
--------------------------------
corporation (the "Corporation"), hereby establishes a stock incentive plan to be
known as the "Linkon Corporation 1996 Stock Option and Performance Incentive
Plan" (the "Plan"). The Plan shall become effective as of December 1, 1996,
subject to the approval of the Corporation's stockholders at the 1996 Annual
Meeting of Stockholders. In the event that such stockholder approval is not
obtained, any awards made hereunder shall be cancelled and all rights with
respect to such awards shall thereupon cease. Upon approval by the Board of
Directors of the Corporation (the "Board") and the Board's Management
Compensation and Stock Option Committee (the "Committee"), awards may be made as
provided herein.
1.2 Purpose. The purpose of the Plan is to encourage and enable
-------
selected employees, officers, directors and independent contractors (subject to
such requirements as may be prescribed by the Committee) of the Corporation and
its subsidiaries to acquire a proprietary interest in the Corporation through
the ownership of the Corporation's common stock, par value $0.001 per share
("Common Stock"), and other rights with respect to the Common Stock. Such
ownership will provide such persons with a more direct stake in the future
welfare of the Corporation and encourage them to exert their best efforts for
the Corporation and its subsidiaries. It is also expected that the Plan will
encourage qualified persons to seek and accept employment with or provide
services to the Corporation and its subsidiaries.
ARTICLE 2.
AWARDS
2.1 Form of Awards. Awards under the Plan may be granted in any one
--------------
or all of the following forms: (i) incentive stock options ("Incentive Stock
Options") meeting the requirements of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"); (ii) non-qualified stock options ("Non-
qualified Stock Options") (unless otherwise indicated, references in the Plan to
"Options" shall include both Incentive Stock Options and Non-qualified Stock
Options); (iii) stock appreciation rights ("Stock Appreciation Rights"), as
described in Article 6 hereof, which may be awarded either in tandem with
Options ("Tandem Stock Appreciation Rights") or on a stand-alone basis
("Nontandem Stock Appreciation Rights"); (iv) shares of Common Stock which are
restricted as provided in Article 9 hereof ("Restricted
<PAGE>
Shares"); (v) units representing shares of Common Stock, as described in Article
10 hereof ("Performance Shares"); (vi) units which do not represent shares of
Common Stock but which may be paid in the form of Common Stock, as described in
Article 11 hereof ("Performance Units"); (vii) shares of Common Stock that are
not subject to any conditions to vesting ("Unrestricted Shares"); and (viii) tax
offset payments ("Tax Offset Payments"), as described in Article 13 hereof.
2.2 Maximum Shares Available. The maximum aggregate number of shares
------------------------
of Common Stock available for award under the Plan is 2,500,000 subject to
adjustment pursuant to Article 15 hereof. In addition, Tax Offset Payments
which may be awarded under the Plan will not exceed the number of shares
available for issuance under the Plan. Shares of Common Stock issued pursuant
to the Plan may be either authorized but unissued shares or issued shares
reacquired by the Corporation. In the event that prior to the end of the period
during which Options may be granted under the Plan, any Option or any Nontandem
Stock Appreciation Rights under the Plan expires unexercised or is terminated,
surrendered or cancelled (other than in connection with the exercise of Stock
Appreciation Rights) without being exercised in whole or in part for any reason,
or any Restricted Shares, Performance Shares or Performance Units are forfeited,
or if such awards are settled in cash in lieu of shares of Common Stock, then
such shares or units shall be available for subsequent awards under the Plan,
upon such terms as the Committee may determine.
2.3 Return of Prior Awards. As a condition to any subsequent award,
----------------------
the Committee shall have the right, at its discretion, to require recipients of
awards previously granted under the Plan to return to the Corporation any such
awards. Subject to the provisions of the Plan, such new award shall be upon
such terms and conditions as are specified by the Committee at the time the new
award is granted.
ARTICLE 3.
ADMINISTRATION
3.1 Committee. Awards shall be determined, and the Plan shall be
---------
administered, by the Committee as appointed from time to time by the Board,
which Committee shall consist of not less than two (2) members of the Board.
Except as permitted by Rule 16b-3 of the Securities Exchange Act of 1934, as
amended (the "Act"), and by Section 162(m) of the Code (or Regulations
promulgated thereunder), no member of the Board may serve on the Committee if
such member: (i) is or has been granted or awarded stock, stock options, stock
appreciation rights or any other equity security or derivative security of the
Corporation or any of its affiliates pursuant to the Plan or any other plan of
the Corporation or its affiliates either while serving on the Committee or
during the one year period prior to being appointed to the Committee; (ii) is an
employee or former employee of the Corporation; or (iii) receives remuneration
from the Corporation, either directly or indirectly, in any capacity other than
as a director.
-2-
<PAGE>
3.2 Powers of Committee. Subject to the express provisions of the
-------------------
Plan, the Committee shall have the power and authority (i) to grant Options and
to determine the purchase price of the Common Stock covered by each Option, the
term of each Option, the number of shares of Common Stock to be covered by each
Option and any performance objectives or vesting standards applicable to each
Option; (ii) to designate Options as Incentive Stock Options or Non-qualified
Stock Options and to determine which Options, if any, shall be accompanied by
Tandem Stock Appreciation Rights, (iii) to grant Tandem Stock Appreciation
Rights and Nontandem Stock Appreciation Rights and to determine the terms and
conditions of such rights; (iv) to grant Restricted Shares and to determine the
term of the restricted period and other conditions and restrictions applicable
to such shares; (v) to grant Performance Shares and Performance Units and to
determine the performance objectives, performance periods and other conditions
applicable to such shares or units; (vi) to grant Unrestricted Shares; (vii) to
determine the amount of, and to make, Tax Offset Payments; and (viii) to
determine the persons to whom, and the time or times at which, Options, Stock
Appreciation Rights, Restricted Shares, Performance Shares, Performance Units
and Unrestricted Shares shall be granted.
3.3 Delegation. The Committee may delegate to one or more of its
----------
members or to any other person or persons such ministerial duties as it may deem
advisable; provided, however, that the Committee may not delegate any of its
responsibilities hereunder if such delegation would cause the Plan to fail to
comply with the "disinterested administration" rules under Section 16 of the
Act. The Committee may also employ attorneys, consultants, accountants or other
professional advisors and shall be entitled to rely upon the advice, opinions or
valuations of any such advisors.
3.4 Interpretations. The Committee shall have sole discretionary
---------------
authority to interpret the terms of the Plan, to adopt and revise rules,
regulations and policies to administer the Plan and to make any other factual
determinations which it believes to be necessary or advisable for the
administration of the Plan. All actions taken and interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Corporation, all employees who have received awards under the Plan and
all other interested persons.
3.5 Liability; Indemnification. No member of the Committee, nor any
--------------------------
person to whom ministerial duties have been delegated, shall be personally
liable for any action, interpretation or determination made with respect to the
Plan or awards made thereunder, and each member of the Committee shall be fully
indemnified and protected by the Corporation with respect to any liability he or
she may incur with respect to any such action, interpretation or determination,
to the extent permitted by applicable law and to the extent provided in the
Corporation's Certificate of Incorporation and Bylaws, as amended from time to
time, or under any agreement between any such member and the Corporation.
ARTICLE 4.
-3-
<PAGE>
ELIGIBILITY
Awards may be made to all employees, officers, directors and
independent contractors of the Corporation or any of its subsidiaries (subject
to such requirements as may be prescribed by the Committee); provided, however,
-------- -------
that no person may receive awards of or relating to more than 100,000 shares of
Common Stock in the aggregate in any fiscal year of the Corporation. Awards may
be made to an officer, director or independent contractor of the Corporation,
whether or not such person is also an employee of the Corporation, provided that
no award may be granted to a director who is a member of the Committee. In
determining the persons to whom awards shall be granted and the number of shares
to be covered by each award, the Committee shall take into account the nature of
the services rendered by such persons, their present and potential contributions
to the success of the Corporation and its subsidiaries and such other factors as
the Committee in its sole discretion shall deem relevant.
As used herein, the term "subsidiary" shall mean any present or future
corporation, partnership or joint venture in which the Corporation owns,
directly or indirectly, 40% or more of the economic interests. Notwithstanding
the foregoing, only employees of the Corporation and any present or future
corporation which is or may be a "subsidiary corporation" of the Corporation (as
such term is defined in Section 424 (f) of the Code) shall be eligible to
receive Incentive Stock Options.
ARTICLE 5.
STOCK OPTIONS
5.1 Grant of Options. Options may be granted under the Plan for the
----------------
purchase of shares of Common Stock. Options shall be granted in such form and
upon such terms and conditions, including the satisfaction of corporate or
individual performance objectives and other vesting standards, as the Committee
shall from time to time determine.
5.2 Designation as Non-qualified Stock Option or Incentive Stock
------------------------------------------------------------
Option. In connection with any grant of Options, the Committee shall designate
- ------
in the written agreement required pursuant to Article 16 hereof whether the
Options granted shall be Incentive Stock Options or Non-qualified Stock Options,
or in the case both are granted, the number of shares of each.
5.3 Option Price. The purchase price per share under each Incentive
------------
Stock Option shall be the Market Price (as hereinafter defined) of the Common
Stock on the date the Incentive Stock Option is granted. The purchase price per
share under each Non-qualified Stock Option shall be specified by the Committee.
In no case, however, shall the purchase price per share of either an Incentive
Stock Option or Non-qualified Stock Option be less than the par
value of the Common Stock ($.001). Notwithstanding the foregoing, to the extent
required by the Code, the purchase price per share under each Non-qualified
Stock Option granted to an employee who
-4-
<PAGE>
is treated as a "covered employee" (as defined in Section 162(m)(3) of the Code)
on the date such Non-Qualified Option is exercised shall not be less than 100%
of the Market Price of the Common Stock on the date of grant. In the case of an
Incentive Stock Option granted to an employee owning (actually or constructively
under Section 424(d) of the Code), more than 10% of the total combined voting
power of all classes of stock of the Corporation or of a subsidiary (a "10%
Stockholder"), the option price shall not be less than 110% of the Market Price
of the Common Stock on the date of grant.
The "Market Price" of the Common Stock on any day shall be determined
as follows: (i) if the Common Stock is listed on a national securities exchange
or quoted through the NASDAQ National Market System, the Market Price on any day
shall be the average of the high and low reported Consolidated Trading sales
prices, or if no such sale is made on such day, the average of the closing bid
and asked prices reported on the Consolidated Trading listing for such day; (ii)
if the Common Stock is quoted on the NASDAQ inter-dealer quotation system, the
Market Price on any day shall be the average of the representative bid and asked
prices at the close of business for such day; or (iii) if the Common Stock is
not listed on a national stock exchange or quoted on NASDAQ, the Market Price on
any day shall be the average of the high bid and low asked prices reported by
the National Quotation Bureau, Inc. for such day. In no event shall the Market
Price of a share of Common Stock subject to an Incentive Stock Option be less
than the fair market value as determined for purposes of Section 422(b)(4) of
the Code.
The Option price so determined shall also be applicable in connection
with the exercise of any Tandem Stock Appreciation Rights granted with respect
to such Option.
5.4 Limitation on Amount of Incentive Stock Options. In the case of
-----------------------------------------------
Incentive Stock Options, the aggregate Market Price (determined at the time the
Incentive Stock Option is granted) 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 Corporation and any subsidiary)
shall not exceed $100,000.
5.5 Limitation on Time of Grant. No grant of an Incentive Stock
---------------------------
Option shall be made under the Plan more than ten (10) years after the date the
Plan is approved by stockholders of the Corporation.
5.6 Exercise and Payment. Options may be exercised in whole or in
--------------------
part. Common Stock purchased upon the exercise of Options shall be paid for in
full at the time of purchase. Such payment shall be made in cash or, in the
discretion of the Committee, through delivery of shares of Common Stock or
surrender of Options (or a portion of an Option) held by the optionee (provided
that the then-Market Price of Common Stock exceeds the exercise price of such
Options) or a combination of the foregoing, to the extent permitted in
accordance with procedures to be established by the Committee. Any shares of
Common Stock so delivered shall be valued at their Market Price on the date of
exercise. Any Option (or portion of an Option) so surrendered shall be valued at
the product of (a) the difference between (i) the Market Price of one (1) share
of Common Stock on the date of exercise and (ii) the exercise price under such
Option,
-5-
<PAGE>
multiplied by (b) the number of shares of Common Stock covered by such Option
(or the portion of such Option which is surrendered). Upon receipt of notice of
exercise and payment in accordance with procedures to be established by the
Committee, the Corporation or its agent shall deliver to the person exercising
the Option (or his or her designee) a certificate for such shares.
5.7 Term. The term of each Option granted hereunder shall be
----
determined by the Committee; provided, however, that, notwithstanding any other
-------- -------
provision of the Plan, in no event shall an Incentive Stock Option be
exercisable after ten (10) years from the date it is granted, or in the case of
an Incentive Stock Option granted to a 10% Stockholder, five (5) years from the
date it is granted.
5.8 Rights as a Stockholder. A recipient of Options shall have no
-----------------------
rights as a stockholder with respect to any shares issuable or transferable upon
exercise thereof until the date on which a recipient shall have exercised his or
her Option in accordance herewith. Except as otherwise expressly provided in
the Plan, no adjustment shall be made for cash dividends or other rights for
which the record date is prior to the date such stock certificate is issued.
5.9 General Restrictions. Each Option granted under the Plan shall
--------------------
be subject to the requirement that, if at any time the Board shall determine, in
its discretion, that the listing, registration or qualification of the shares
issuable or transferable upon exercise thereof upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such Option or the issue, transfer, or purchase of shares
thereunder, such Option may not be exercised in whole or in part unless such
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Board.
The Board or the Committee may, in connection with the granting of any
Option, require the person to whom the Option is to be granted to enter into an
agreement with the Corporation stating that as a condition precedent to each
exercise of the Option, in whole or in part, such person shall if then required
by the Corporation represent to the Corporation in writing that such exercise is
for investment only and not with a view to distribution, and also setting forth
such other terms and conditions as the Board or the Committee may prescribe.
5.10 Cancellation of Stock Appreciation Rights. Upon exercise of all
-----------------------------------------
or a portion of an Option, the related Tandem Stock Appreciation Rights shall be
cancelled with respect to an equal number of shares of Common Stock as are
issuable upon exercise of such Option.
-6-
<PAGE>
ARTICLE 6.
STOCK APPRECIATION RIGHTS
6.1 Grants of Stock Appreciation Rights. Tandem Stock Appreciation
-----------------------------------
Rights may be awarded by the Committee in connection with any Option granted
under the Plan, either at the time the Option is granted or thereafter at any
time prior to the exercise, termination or expiration of the Option. Nontandem
Stock Appreciation Rights may also be granted by the Committee at any time. At
the time of grant of Nontandem Stock Appreciation Rights, the Committee shall
specify the number of shares of Common Stock covered by such right and the base
price of shares of Common Stock to be used in connection with the calculation
described in Section 6.4 below. The base price of any Nontandem Stock
Appreciation Rights shall be not less than 100% of the Market Price of a share
of Common Stock on the date of grant. Stock Appreciation Rights shall be
subject to such terms and conditions not inconsistent with the other provisions
of the Plan as the Committee shall determine.
6.2 Limitations on Exercise. Tandem Stock Appreciation Rights shall
-----------------------
be exercisable only to the extent that the related Option is exercisable and
shall be exercisable only for such period as the Committee may determine (which
period may expire prior to the expiration date of the related Option). Upon the
exercise of all or a portion of Tandem Stock Appreciation Rights, the related
Option shall be cancelled with respect to an equal number of shares of Common
Stock. Shares of Common Stock subject to Options, or portions thereof,
surrendered upon exercise of Tandem Stock Appreciation Rights shall not be
available for subsequent awards under the Plan. Nontandem Stock Appreciation
Rights shall be exercisable during such period as the Committee shall determine.
6.3 Surrender or Exchange of Tandem Stock Appreciation Rights.
---------------------------------------------------------
Tandem Stock Appreciation Rights shall entitle the recipient to surrender to the
Corporation unexercised the related Option, or any portion thereof, and to
receive from the Corporation in exchange therefor that number of shares of
Common Stock having an aggregate Market Price equal to (A) the excess of (i) the
Market Price of one (1) share of Common Stock as of the date the Tandem Stock
Appreciation Rights are exercised over (ii) the option price per share specified
in such Option, multiplied by (B) the number of shares of Common Stock subject
to the Option, or portion thereof, which is surrendered. Cash shall be
delivered in lieu of any fractional shares.
6.4 Exercise of Nontandem Stock Appreciation Rights. The exercise of
-----------------------------------------------
Nontandem Stock Appreciation Rights shall entitle the recipient to receive from
the Corporation that number of shares of Common Stock having an aggregate Market
Price equal to (A) the excess of (i) the Market Price of one (1) share of Common
Stock as of the date on which the Nontandem Stock Appreciation Rights are
exercised over (ii) the base price of the shares covered by the Nontandem Stock
Appreciation Rights, multiplied by (B) the number of shares of Common Stock
covered by the Nontandem Stock Appreciation Rights, or the portion thereof being
exercised. Cash shall be delivered in lieu of any fractional shares.
-7-
<PAGE>
6.5 Settlement of Stock Appreciation Rights. As soon as is
---------------------------------------
reasonably practicable after the exercise of any Stock Appreciation Rights, the
Corporation shall (i) issue, in the name of the recipient, stock certificates
representing the total number of full shares of Common Stock to which the
recipient is entitled pursuant to Section 6.3 or 6.4 hereof and cash in an
amount equal to the Market Price, as of the date of exercise, of any resulting
fractional shares, and (ii) if the Committee causes the Corporation to elect to
settle all or part of its obligations arising out of the exercise of the Stock
Appreciation Rights in cash pursuant to Section 6.6 hereof, deliver to the
recipient an amount in cash equal to the Market Price, as of the date of
exercise, of the shares of Common Stock it would otherwise be obligated to
deliver.
6.6 Cash Settlement. The Committee, in its discretion, may cause the
---------------
Corporation to settle all or any part of its obligation arising out of the
exercise of Stock Appreciation Rights by the payment of cash in lieu of all or
part of the shares of Common Stock it would otherwise be obligated to deliver in
an amount equal to the Market Price of such shares on the date of exercise.
ARTICLE 7.
NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
No Option or Stock Appreciation Rights may be transferred, assigned,
pledged or hypothecated (whether by operation of law or otherwise), except as
provided by will or the applicable laws of descent and distribution, and no
Option or Stock Appreciation Rights shall be subject to execution, attachment or
similar process. Any attempted assignment, transfer, pledge, hypothecation or
other disposition of an Option or Stock Appreciation Rights not specifically
permitted herein shall be null and void and without effect. An Option or Stock
Appreciation Rights granted to an individual may be exercised by the recipient
only during his or her lifetime, or following his or her death pursuant to
Section 8.4 hereof.
Notwithstanding anything to the contrary in the preceding paragraph,
the Committee may, in its sole discretion, cause the written agreement relating
to any Non-qualified Stock Options or Stock Appreciation Rights granted
hereunder to provide that the recipient of such Non-qualified Stock Options or
Stock Appreciation Rights may transfer any of such Non-qualified Stock Options
or Stock Appreciation Rights other than by will or the laws of descent and
distribution in any manner authorized under applicable law; provided, however,
-------- -------
that in no event may the Committee permit any transfers which would cause this
Plan to fail to satisfy the applicable requirements of Rule 16b-3 under the Act,
or would cause any recipient of awards hereunder to fail to be entitled to the
benefits Rule 16b-3 or other exemptive rules under Section 16 of the Act or be
subject to liability thereunder.
-8-
<PAGE>
ARTICLE 8.
EFFECT OF TERMINATION OF EMPLOYMENT, RELOCATION EVENT, DISABILITY,
RETIREMENT, DEATH OR SPECIAL EVENT
8.1 General Rule. Except as expressly determined by the Committee in
------------
its sole discretion, no Option or Stock Appreciation Rights shall be exercisable
after three months following the recipient's termination of employment with or,
in the case of a nonemployee recipient, cessation of providing services to the
Corporation or a subsidiary, unless such termination or cessation occurs by
reason of (i) a Relocation Event (as defined in Section 8.2), (ii) Retirement
(as defined in Section 8.3), (iii) death, or (iv) a Special Event (as defined in
Section 8.5), provided that, in the case of a Special Event, the Committee shall
have modified such Option or Stock Appreciation Rights to remain exercisable as
provided in Section 8.5.
Options and Stock Appreciation Rights shall not be affected by any
change of duties so long as the recipient continues to be employed by or provide
services to either the Corporation or a subsidiary. The Committee may, in its
sole discretion, cause any Option or Stock Appreciation Rights to be forfeited
upon an award recipient's termination of employment or other arrangement for the
provision of services if the recipient was terminated for one (or more) of the
following reasons: (i) the conviction of, or plea of guilty or nolo contendere
---- ----------
to, the commission of a felony, (ii) the commission of any fraud,
misappropriation or misconduct which causes demonstrable injury to the
Corporation or a subsidiary, (iii) an act of dishonesty by the recipient
resulting or intended to result, directly or indirectly, in gain or personal
enrichment at the expense of the Corporation or a subsidiary, (iv) any breach of
the recipient's fiduciary duties to the Corporation, or (v) a serious violation
by the recipient of a Corporation policy. It shall be within the sole
discretion of the Committee to determine whether the recipient's termination was
for one of the foregoing reasons, and the decision of the Committee shall be
final and conclusive.
8.2 Relocation Event. Options and Stock Appreciation Rights granted
----------------
to a recipient shall remain outstanding after termination of such recipient's
employment with or, in the case of a nonemployee recipient, cessation of
providing services to the Corporation or a subsidiary, if such termination or
cessation solely occurs by reason of a "Relocation Event," which shall be deemed
to occur if (i) a husband and wife are both current employees, officers,
directors or independent contractors of or to the Corporation, (ii) the
Corporation transfers one spouse to a new location, (iii) the Corporation is
unable to offer the other spouse a position that is substantially comparable to
his or her current position, and (iv) as a result, the other spouse's employment
with or other arrangement for the provision of services to the Corporation is
terminated and the other spouse, as recipient, holds outstanding Options or
Stock Appreciation Rights.
In case of a Relocation Event, the Options or Stock Appreciation
Rights held by a terminated recipient shall be exercisable for a period equal to
the lesser of (i) the period such Options or Stock Appreciation Rights would be
exercisable absent such termination, and (ii) the period such Options or Stock
Appreciation Rights would be exercisable if granted to the spouse
-9-
<PAGE>
continuing as an employee, officer, director or independent contractor of the
Corporation on the date originally granted to the terminated spouse.
8.3 Disability or Retirement. Except as expressly provided otherwise
------------------------
in the written agreement relating to any Option or Stock Appreciation Rights
granted under the Plan, in the event of the Disability or Retirement of an
employee, officer or director who is the recipient of Options or Stock
Appreciation Rights, the Options or Stock Appreciation Rights which are held by
such recipient on the date of such Disability or Retirement, whether or not
otherwise exercisable on such date, shall be exercisable at any time until the
expiration date of the Options or Stock Appreciation Rights; provided, however,
-------- -------
that any Incentive Stock Option of such recipient shall no longer be treated as
an Incentive Stock Option unless exercised within three (3) months of the date
of such Disability or Retirement (or within one (1) year in the case of an
employee who is "disabled" within the meaning of Section 22(e)(3) of the Code).
"Disability" shall mean any termination of employment with or, in the
case of a nonemployee officer or director, status as an officer or director of
the Corporation or a subsidiary because of a long-term or total disability, as
determined by the Committee in its sole discretion. "Retirement" shall mean a
termination of employment with or, in the case of a nonemployee officer or
director, status as an officer or director of the Corporation or a subsidiary
either (i) on a voluntary basis by a recipient who is at least 60 years of age
and has at least 15 years of service with the Corporation or a subsidiary or
(ii) otherwise with the written consent of the Committee in its sole discretion.
The decision of the Committee shall be final and conclusive.
8.4 Death. Except as expressly provided otherwise in the written
-----
agreement relating to any Option or Stock Appreciation Rights granted under the
Plan, in the event of the death of a recipient of Options or Stock Appreciation
Rights while an employee, officer or director of the Corporation or any
subsidiary, Options or Stock Appreciation Rights which are held by such
recipient at the date of death, whether or not otherwise exercisable on the date
of death, shall be exercisable by the beneficiary designated by such recipient
for such purpose (the "Designated Beneficiary") or if no Designated Beneficiary
shall be appointed or if the Designated Beneficiary shall predecease such
recipient, by such recipient's personal representatives, heirs or legatees at
any time within three (3) years from the date of death (subject to the
limitation in Section 5.7 hereof), at which time such Options or Stock
Appreciation Rights shall terminate; provided, however, that any Incentive Stock
-------- -------
Option of such recipient shall no longer be treated as an Incentive Stock Option
unless exercised within three (3) months of the date of the recipient's death.
In the event of the death of a recipient of Options or Stock
Appreciation Rights following a termination of employment or, in the case of an
a nonemployee officer or director, status as an officer or director due to
Retirement, Disability or a Special Event (as defined in Section 8.5 hereof), if
such death occurs before the Options or Stock Appreciation Rights are exercised,
the Options or Stock Appreciation Rights which are held by such recipient on the
date of termination shall be exercisable by such recipient's Designated
Beneficiary, or if no Designated Beneficiary shall be appointed or if the
Designated Beneficiary shall predecease such recipient,
-10-
<PAGE>
by such recipient's personal representatives, heirs or legatees to the same
extent such Options or Stock Appreciation Rights were exercisable by the
recipient following such termination of employment.
8.5 Special Event. In the case of a Special Event, the Committee in
-------------
its sole discretion may elect to modify all or any lesser number of any Options
or Stock Appreciation Rights held by a recipient terminated as a result of a
Special Event which are or are not exercisable on the date of termination, to
provide that any of such Options or Stock Appreciation Rights may continue to be
exercisable for the term and in the manner specified therein or for such other
term and subject to such other provisions and conditions (including, without
limitation, acceleration of the time or times at which any such Options or Stock
Appreciation Rights may be exercised) as the Committee shall specify. The
Committee shall have the sole discretion to determine the recipients to whom and
in the manner in which any such modification shall be made. If the Committee
does not elect to modify an Option or Stock Appreciation Rights, then only
Options and Stock Appreciation Rights currently exercisable at the date of
termination shall be exercisable as provided in the first sentence of Section
8.1 hereof.
A "Special Event" shall mean (i) the sale or other disposition of a
subsidiary or division of the Corporation; (ii) the closing or discontinuation
of a specific operation of the Corporation or any subsidiary; (iii) the
elimination of job categories; or (iv) a limited program of terminations in
connection with a personnel reorganization or restructuring of the Corporation
or any subsidiary of the Corporation scheduled to be completed on a date
certain, provided, however, that only those recipients who meet the terms and
conditions as established by the Board or the Committee in its discretion shall
be eligible to receive accelerated vesting of Options and Stock Appreciation
Rights.
8.6 Leave of Absence. In the case of an employee, officer or
----------------
director on an approved leave of absence, the Options and Stock Appreciation
Rights of such person shall not be affected unless such leave is longer than 13
weeks. The date of exercisability of any Options or Stock Appreciation Rights
of an employee, officer or director which are unexercisable at the beginning of
an approved leave of absence lasting longer than 13 weeks shall be postponed for
a period equal to the length of such leave of absence. Notwithstanding the
foregoing, the Committee may, in its sole discretion, waive in writing any such
postponement of the date of exercisability of any Options or Stock Appreciation
Rights due to a leave of absence.
ARTICLE 9.
RESTRICTED SHARES
9.1 Grant of Restricted Shares. The Committee may from time to time
--------------------------
cause the Corporation to grant Restricted Shares under the Plan to employees,
officers, directors or independent contractors of the Corporation, subject to
such restrictions, conditions and other terms as the Committee may determine.
-11-
<PAGE>
9.2 Restrictions. At the time a grant of Restricted Shares is made,
------------
the Committee shall establish a period of time (the "Restricted Period")
applicable to such Restricted Shares. Each grant of Restricted Shares may be
subject to a different Restricted Period. The Committee may, in its sole
discretion, at the time a grant is made, prescribe restrictions in addition to
or other than the expiration of the Restricted Period, including the
satisfaction of corporate or individual performance objectives, which shall be
applicable to all or any portion of the Restricted Shares. The Committee may
also, in its sole discretion, shorten or terminate the Restricted Period or
waive any other restrictions applicable to all or a portion of such Restricted
Shares. None of the Restricted Shares may be sold, transferred, assigned,
pledged or otherwise encumbered or disposed of during the Restricted Period or
prior to the satisfaction of any other restrictions prescribed by the Committee
with respect to such Restricted Shares.
9.3 Restricted Stock Certificates. The Corporation shall issue, in
-----------------------------
the name of each person to whom Restricted Shares have been granted, stock
certificates representing the total number of Restricted Shares granted to the
recipient, as soon as reasonably practicable after the grant. The Corporation,
at the direction of the Committee, shall hold such certificates, properly
endorsed for transfer, for the recipient's benefit until such time as the
Restricted Shares are forfeited to the Corporation, or the restrictions lapse.
9.4 Rights of Holders of Restricted Shares. Holders of Restricted
--------------------------------------
Shares shall not have the right to vote such shares or the right to receive any
cash dividends with respect to such shares. All distributions, if any, received
by a recipient with respect to Restricted Shares as a result of any stock split,
stock distribution, a combination of shares, or other similar transaction shall
be subject to the restrictions of this Article 9.
9.5 Forfeiture. Any Restricted Shares granted pursuant to the Plan
----------
shall be forfeited if the recipient terminates employment with or, in the case
of a nonemployee recipient, the cessation of providing services to the
Corporation or its subsidiaries prior to the expiration or termination of the
Restricted Period and the satisfaction of any other conditions applicable to
such Restricted Shares. Upon such forfeiture, the Restricted Shares that are
forfeited shall be retained in the treasury of the Corporation and available for
subsequent awards under the Plan, unless the Committee directs that such
Restricted Shares be cancelled upon forfeiture. If the recipient's employment
or other arrangement for the provision of services terminates as a result of
Disability, Retirement or death, or a Relocation Event or Special Event, all
Restricted Shares of such recipient shall be forfeited, unless the Committee, in
its sole discretion, shall determine otherwise.
9.6 Delivery of Restricted Shares. Upon the expiration or
-----------------------------
termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Committee, the restrictions applicable to the
Restricted Shares shall lapse and a stock certificate for the number of
Restricted Shares with respect to which the restrictions have lapsed shall be
delivered, free of all such restrictions, to the recipient or the recipient's
beneficiary or estate, as the case may be.
ARTICLE 10.
-12-
<PAGE>
PERFORMANCE SHARES
10.1 Award of Performance Shares. For each Performance Period (as
---------------------------
defined in Section 10.2), Performance Shares may be granted under the Plan to
such employees, officers, directors and independent contractors of the
Corporation and its subsidiaries as the Committee shall determine in its sole
discretion. Each Performance Share shall be deemed to be equivalent to one (1)
share of Common Stock. Performance Shares granted to such a recipient shall be
credited to an account (a "Performance Share Account") established and
maintained for such recipient.
10.2 Performance Period. "Performance Period" shall mean such period
------------------
of time as shall be determined by the Committee in its sole discretion.
Different Performance Periods may be established for different recipients
receiving Performance Shares. Performance Periods may run consecutively or
concurrently.
10.3 Right to Payment of Performance Shares. With respect to each
--------------------------------------
award of Performance Shares under the Plan, the Committee shall specify
performance objectives (the "Performance Objectives") which must be satisfied in
order for the recipient to vest in the Performance Shares which have been
awarded to such recipient for the Performance Period. If the Performance
Objectives established for a recipient for the Performance Period are partially
but not fully met, the Committee may, nonetheless, in its sole discretion,
determine that all or a portion of the Performance Shares have vested. If the
Performance Objectives for a Performance Period are exceeded, the Committee may,
in its sole discretion, grant additional, fully vested Performance Shares to the
recipient. The Committee may also determine, in its sole discretion, that
Performance Shares awarded to a recipient shall become partially or fully vested
upon the recipient's Disability, Retirement or death, or upon a Relocation Event
or Special Event, or upon the termination of the recipient's employment or other
arrangement for the provision of services to the Corporation prior to the end of
the Performance Period.
10.4 Payment for Performance Shares. As soon as practicable
------------------------------
following the end of a Performance Period, the Committee shall determine whether
the Performance Objectives for the Performance Period have been achieved (or
partially achieved to the extent necessary to permit partial vesting at the
discretion of the Committee pursuant to Section 10.3). If the Performance
Objectives for the Performance Period have been exceeded, the Committee shall
determine whether additional Performance Shares shall be granted to the
recipient pursuant to Section 10.3. As soon as reasonably practicable after such
determinations, or at such later date as the Committee shall determine at the
time of grant, the Corporation shall pay to the recipient an amount with respect
to each vested Performance Share equal to the Market Price of a share of Common
Stock on such payment date or, if the Committee shall so specify at the time of
grant, an amount equal to (i) the Market Price of a share of Common Stock on the
payment date less (ii) the Market Price of a share of Common Stock on the date
of grant of the Performance Share. Payment shall be made entirely in cash,
entirely in Common Stock (including Restricted Shares) or in such combination of
cash and Common Stock as the Committee shall determine in its sole discretion.
-13-
<PAGE>
10.5 Voting and Dividend Rights. Except as provided in Article 15
--------------------------
hereof, no recipient of Performance Shares shall be entitled to any voting
rights, to receive any cash dividends, or to have such recipient's Performance
Share Account credited or increased as a result of any cash dividends or other
distribution with respect to Common Stock. Notwithstanding the foregoing,
within sixty (60) days from the date of payment of a cash dividend by the
Corporation on its shares of Common Stock, the Committee, in its sole
discretion, may credit a recipient's Performance Share Account with additional
Performance Shares having an aggregate Market Price equal to the cash dividend
per share paid on the Common Stock multiplied by the number of Performance
Shares credited to such recipient's account at the time the cash dividend was
declared.
ARTICLE 11.
PERFORMANCE UNITS
11.1 Award of Performance Units. For each Performance Period (as
--------------------------
defined in Section 10.2), Performance Units may be granted under the Plan to
such employees, officers, directors and independent contractors of the
Corporation and its subsidiaries as the Committee shall determine in its sole
discretion. The award agreement covering such Performance Units shall specify a
value for each Performance Unit or shall set forth a formula for determining the
value of each Performance Unit at the time of payment (the "Ending Value"). If
necessary to make the calculation of the amount to be paid to the recipient
pursuant to Section 11.3, the Committee shall also state in the award agreement
the initial value of each Performance Unit (the "Initial Value"). Performance
Units granted to a recipient shall be credited to an account (a "Performance
Unit Account") established and maintained for such recipient.
11.2 Right to Payment of Performance Units. With respect to each
-------------------------------------
award of Performance Units under the Plan, the Committee shall specify
Performance Objectives which must be satisfied in order for the recipient to
vest in the Performance Units which have been awarded to such recipient for the
Performance Period. If the Performance Objectives established for a recipient
for the Performance Period are partially but not fully met, the Committee may,
nonetheless, in its sole discretion, determine that all or a portion of the
Performance Units have vested. If the Performance Objectives for a Performance
Period are exceeded, the Committee may, in its sole discretion, grant
additional, fully vested Performance Units to the recipient. The Committee may,
in its sole discretion, adjust the Performance Objectives or the Initial Value
or Ending Value of any Performance Units to reflect extraordinary events, such
as stock splits, recapitalizations, mergers, combinations, divestitures, spin-
offs and the like. The Committee may also determine, in its sole discretion,
that Performance Units awarded to a recipient shall become partially or fully
vested upon the recipient's termination of employment or other arrangement for
the provision of services to the Corporation due to Disability, Retirement,
death or otherwise, or upon a Relocation Event or Special Event.
-14-
<PAGE>
11.3 Payment for Performance Units. As soon as practicable following
-----------------------------
the end of a Performance Period, the Committee shall determine whether the
Performance Objectives for the Performance Period have been achieved (or
partially achieved to the extent necessary to permit partial vesting at the
discretion of the Committee pursuant to Section 11.2). If the Performance
Objectives for the Performance Period have been exceeded, the Committee shall
determine whether additional Performance Units shall be granted to the recipient
pursuant to Section 11.2. As soon as reasonably practicable after such
determinations, or at such later date as the Committee shall determine at the
time of grant, the Corporation shall pay to the recipient an amount with respect
to each vested Performance Unit equal to the Ending Value of the Performance
Unit or, if the Committee shall so specify at the time of grant, an amount equal
to (i) the Ending Value of the Performance Unit less (ii) the Initial Value of
the Performance Unit. Payment shall be made entirely in cash, entirely in
Common Stock (including Restricted Shares) or in such combination of cash and
Common Stock as the Committee shall determine in its sole discretion.
ARTICLE 12.
UNRESTRICTED SHARES
12.1 Award of Unrestricted Shares. The Committee may cause the
----------------------------
Corporation to grant Unrestricted Shares to employees, officers, directors or
independent contractors of the Corporation at such time or times, in such
amounts and for such reasons as the Committee, in its sole discretion, shall
determine. No payment shall be required for Unrestricted Shares.
12.2 Delivery of Unrestricted Shares. The Corporation shall issue,
-------------------------------
in the name of each person to whom Unrestricted Shares have been granted, stock
certificates representing the total number of Unrestricted Shares granted to the
recipient, and shall deliver such certificates to the recipient as soon as
reasonably practicable after the date of grant or on such later date as the
Committee shall determine at the time of grant.
-15-
<PAGE>
ARTICLE 13.
GRANTS TO NON-EMPLOYEE DIRECTORS
Non-Employee Directors (as defined in Rule 16b-3 of the Act) who
remain as such on the last day of any given fiscal quarter shall be issued
quarterly, in arrears, such number of shares of Common Stock as have a Market
Price on the last day of such fiscal quarter equal to $3,750, with such amount
being pro rated for any Non-Employee Director who serves less than such full
fiscal quarter. If there shall be a merger, reorganization, consolidation,
recapitalization, stock dividend or other change in corporate structure such
that the shares of Common Stock are changed into or become exchangeable for a
different security, thereafter the shares to be granted to Non-Employee
Directors hereunder shall be similarly adjusted.
ARTICLE 14.
TAX OFFSET PAYMENTS
The Committee shall have the authority at the time of any award under
the Plan or anytime thereafter to make Tax Offset Payments, in cash or
Unrestricted Shares, to assist recipients in paying income taxes incurred as a
result of their participation in the Plan. The Tax Offset Payments shall be
determined by multiplying a percentage established by the Committee by all or a
portion (as the Committee shall determine) of the taxable income recognized by a
recipient upon (i) the exercise of Non-qualified Stock Options or Stock
Appreciation Rights, (ii) the disposition of shares received upon exercise of
Incentive Stock Options, (iii) the lapse of restrictions on Restricted Shares,
(iv) the award of Unrestricted Shares, or (v) payments for Performance Shares or
Performance Units. The percentage shall be established, from time to time, by
the Committee at that rate which the Committee, in its sole discretion,
determines to be appropriate and in the best interests of the Corporation to
assist recipients in paying income taxes incurred as a result of the events
described in the preceding sentence.
ARTICLE 15.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
Notwithstanding any other provision of the Plan, the Committee may:
(i) at any time, make or provide for such adjustments to the Plan or to the
number and class of shares available thereunder or (ii) at the time of grant of
any Options, Stock Appreciation Rights, Restricted Shares or Performance Shares,
provide for such adjustments to such Options, Stock Appreciation Rights,
Restricted Shares or Performance Shares, in each case, as the Committee shall
deem appropriate to prevent dilution or enlargement of rights, including,
without limitation, adjustments in the event of stock dividends, stock splits,
recapitalizations, mergers, consolidations,
-16-
<PAGE>
combinations or exchanges of shares, separations, spin-offs, reorganizations,
liquidations and the like.
ARTICLE 16.
AMENDMENT AND TERMINATION
The Board may suspend, terminate, modify or amend the Plan, provided
that any amendment that would (i) materially increase the aggregate number of
shares which may be issued under the Plan, (ii) materially increase the benefits
accruing to persons eligible to receive awards under the Plan, or (iii)
materially modify the requirements as to eligibility for participation in the
Plan, shall be subject to the approval of the Corporation's stockholders, except
that any such increase or modification that may result from adjustments
authorized by Article 15 hereof shall not require such stockholder approval. If
the Plan is terminated, the terms of the Plan shall, notwithstanding such
termination, continue to apply to awards granted prior to such termination. No
suspension, termination, modification or amendment of the Plan may, without the
consent of the recipient to whom an award shall theretofore have been granted,
adversely affect the rights of such recipient under such award.
ARTICLE 17.
WRITTEN AGREEMENT
Each award of Options, Stock Appreciation Rights, Restricted Shares,
Performance Shares, Performance Units, Unrestricted Shares and Tax Offset
Payments shall be evidenced by a written agreement containing such restrictions,
terms and conditions, if any, as the Committee may require. In the event of any
conflict between a written agreement and the Plan, the terms of the Plan shall
govern.
ARTICLE 18.
MISCELLANEOUS PROVISIONS
18.1 Tax Withholding. The Corporation shall have the right to
---------------
require recipients or their beneficiaries or legal representatives to remit to
the Corporation an amount sufficient to satisfy Federal, state and local
withholding tax requirements, or to deduct from all payments under the Plan,
including Tax Offset Payments, amounts sufficient to satisfy all withholding tax
requirements. Whenever payments under the Plan are to be made to a recipient in
cash, such payments shall be net of any amounts sufficient to satisfy all
Federal, state and local withholding tax requirements. The Committee may, in
its sole discretion, permit a recipient to satisfy his or her tax withholding
obligation either by (i) surrendering shares of Common Stock owned by
the
-17-
<PAGE>
recipient or (ii) having the Corporation withhold from shares of Common
Stock otherwise deliverable to the employee. Shares surrendered or withheld
shall be valued at their Market Price as of the date on which income is required
to be recognized for income tax purposes.
18.2 Compliance With Section 16(b). In the case of recipients of
-----------------------------
awards under the Plan who are or may be subject to Section 16 of the Act, it is
the intent of the Corporation that the Plan and any award granted hereunder
satisfy and be interpreted in a manner that satisfies the applicable
requirements of Rule 16b-3, so that such persons will be entitled to the
benefits of Rule 16b-3 or other exemptive rules under Section 16 of the Act and
will not be subjected to liability thereunder. If any provision of the Plan or
any award would otherwise conflict with the intent expressed herein, that
provision, to the extent possible, shall be interpreted and deemed amended so as
to avoid such conflict. To the extent of any remaining irreconcilable conflict
with such intent, such provision shall be deemed void as applicable to
recipients who are or may be subject to Section 16 of the Act.
18.3 Successors. The obligations of the Corporation under the Plan
----------
shall be binding upon any successor corporation or organization resulting from
the merger, consolidation or other reorganization of the Corporation, or upon
any successor corporation or organization succeeding to all or substantially all
of the assets and business of the Corporation. In the event of any of the
foregoing, the Committee may, at its discretion prior to the consummation of the
transaction and subject to Article 16 hereof, cancel, offer to purchase,
exchange, adjust or modify any outstanding awards, at such time and in such
manner as the Committee deems appropriate and in accordance with applicable law.
18.4 General Creditor Status. Recipients of awards under the Plan
-----------------------
shall have no right, title, or interest whatsoever in or to any investments
which the Corporation may make to aid it in meeting its obligations under the
Plan. Nothing contained in the Plan, and no action taken pursuant to its
provisions, shall create or be construed to create a trust of any kind, or a
fiduciary relationship between the Corporation and any recipient of an award
under the Plan or any beneficiary or legal representative of such a recipient.
To the extent that any person acquires a right to receive payments from the
Corporation under the Plan, such right shall be no greater than the right of an
unsecured general creditor of the Corporation. All payments to be made
hereunder shall be paid from the general funds of the Corporation and no special
or separate fund shall be established and no segregation of assets shall be made
to assure payment of such amounts except as expressly set forth in the Plan.
18.5 No Right to Employment. Nothing in the Plan or in any written
----------------------
agreement entered into pursuant to Article 17 hereof, nor the grant of any
award, shall confer upon any person any right to continue in the employ of or be
retained in any capacity by the Corporation or a subsidiary or to be entitled to
any remuneration or benefits not set forth in the Plan or such written agreement
or interfere with or limit the right of the Corporation or a subsidiary to
modify the terms of or terminate at any time such person's employment or other
arrangement for the provision of services to the Corporation.
-18-
<PAGE>
18.6 Notices. Notices required or permitted to be made under the
-------
Plan shall be sufficiently made if personally delivered to a recipient of an
award under the Plan or sent by regular mail addressed (a) to the recipient at
the recipient's address as set forth in the books and records of the Corporation
or its subsidiaries, or (b) to the Corporation or the Committee at the principal
office of the Corporation clearly marked "Attention: Stock Option Committee."
18.7 Severability. In the event that any provision of the Plan shall
------------
be held illegal or invalid for any reason, such illegality or invalidity shall
not affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
18.8 Governing Law. To the extent not preempted by Federal law, the
-------------
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Nevada.
-19-
<PAGE>
LINKON CORPORATION
PROXY FOR ANNUAL MEETING
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all previous proxies, hereby appoints Lee W. Hill and
Thomas V. Cerabona, or either of them (the "Proxies"), as attorneys and proxies,
each with full power of substitution and all of the powers which the undersigned
would possess, if present in person, to represent and vote, as designated on the
reverse side of this proxy, all of the shares of Common Stock of Linkon
Corporation (the "Company") registered in the name of the undersigned at the
Annual Meeting of Stockholders of the Company to be held on July 15, 1998, and
at any adjournment thereof.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS DIRECTED BY THIS PROXY. IF NO
DIRECTION IS MADE, THE PROXIES WILL VOTE SUCH SHARES FOR THE ELECTION OF ALL
NOMINEES FOR DIRECTOR LISTED UNDER PROPOSAL 1 AND FOR THE AMENDMENTS TO THE 1996
LINKON CORPORATION STOCK OPTION AND PERFORMANCE INCENTIVE PLAN DESCRIBED IN
PROPOSAL 2, AND SUCH PROXIES WILL VOTE IN ACCORDANCE WITH THEIR DISCRETION ON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
(IMPORTANT - TO BE MARKED, SIGNED AND DATED ON REVERSE SIDE)
<PAGE>
<TABLE>
<CAPTION>
Please mark your votes as in this example
FOR WITHHELD
all nominees from all nominees
1. Election Nominees: Joao M. Carvalho, Charles Castelli,
of Directors [ ] [ ] Lee W. Hill and Daniel Zwiren
For, except vote withheld from the following nominee(s): [ ]
<S> <C> <C> <C>
2. Proposal to amend the 1996 Linkon Corporation Stock Option and Performance FOR AGAINST ABSTAIN
Incentive Plan.
[ ] [ ] [ ]
3. In their discretion, the Proxies are authorized
to vote upon such other business as may
properly come before the meeting.
PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
- -----------------------------------Date: -------------, 1998--------------------------------------------------Date:-------, 1998
SIGNATURE OF STOCKHOLDER SIGNATURE IF HELD JOINTLY
Note: Please sign exactly as name appears hereon. When shares are held by joint tenants, both should sign. Executors,
administrators, trustees and other fiduciaries should so indicate when signing. If a corporation, please sign in full corporate name
by president, or other authorized officer. If a partnership, please sign in partnership name by authorized person. This proxy may be
mailed, postage-free, in the enclosed envelope.
</TABLE>
