<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
RADIANT SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
RADIANT SYSTEMS, INC.
1000 ALDERMAN DRIVE
ALPHARETTA, GEORGIA 30202
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 11, 1997
The annual meeting of shareholders of Radiant Systems, Inc. (the
"Company") will be held on Thursday, September 11, 1997 at 4:00 p.m., at the
Buckhead Club, 3343 Peachtree Road, N.E., 18th Floor, Atlanta, Georgia 30326,
for the following purposes:
(1) To elect four (4) directors to the Board of Directors, to
serve for their respective terms and until their successors are elected and
qualified;
(2) To approve an amendment to the 1995 Stock Option Plan of the
Company to increase the number of shares available for grant thereunder from
4,000,000 shares to 5,000,000 shares;
(3) To approve and adopt the Company's Non-Management Directors'
Stock Option Plan; and
(4) To transact such other business as may properly come before
the meeting or any adjournments or postponements thereof.
Only shareholders of record at the close of business on August 5, 1997
will be entitled to notice of and to vote at the meeting or any adjournments or
postponements thereof.
A Proxy Statement and a proxy solicited by the Board of Directors are
enclosed herewith. Please sign, date and return the proxy promptly. If you
attend the meeting, you may, if you wish, withdraw your proxy and vote in
person.
By Order of the Board of Directors,
/s/ Erez Goren
EREZ GOREN
Co-Chairman of the Board and
Chief Executive Officer
Alpharetta, Georgia
August 18, 1997
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY PROMPTLY SO THAT YOUR
VOTE MAY BE RECORDED AT THE MEETING IF YOU DO NOT ATTEND PERSONALLY.
<PAGE> 3
RADIANT SYSTEMS, INC.
1000 ALDERMAN DRIVE
ALPHARETTA, GEORGIA 30202
ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 11, 1997
-----------------------
PROXY STATEMENT
-----------------------
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Radiant Systems, Inc. (the "Company")
for the Annual Meeting of Shareholders to be held on Thursday, September 11,
1997, and any adjournments or postponements thereof, at the time and place and
for the purposes set forth in the accompanying notice of the meeting. The
expense of this solicitation, including the cost of preparing and mailing this
Proxy Statement, will be paid by the Company. In addition to solicitations by
mail, officers and regular employees of the Company, at no additional
compensation, may assist in soliciting proxies by telephone. This Proxy
Statement and the accompanying proxy are first being mailed to shareholders on
or about August 18, 1997. The address of the principal executive offices of
the Company is 1000 Alderman Drive, Alpharetta, Georgia 30202.
Any proxy given pursuant to this solicitation may be revoked by any
shareholder who attends the meeting and gives oral notice of his election to
vote in person, without compliance with any other formalities. In addition,
any proxy given pursuant to this solicitation may be revoked prior to the
meeting by delivering to the Secretary of the Company an instrument revoking it
or a duly executed proxy for the same shares bearing a later date. Proxies
which are returned properly executed and not revoked will be voted in
accordance with the shareholder's directions specified thereon. Where no
direction is specified, proxies will be voted for the election of the director
nominees named below, for adoption of the amendment to the 1995 Stock Option
Plan and for approval of the Non-Management Directors' Stock Option Plan.
Abstentions and broker non-votes will not be counted as votes either in favor
of or against the proposal to amend the 1995 Stock Option Plan or the proposal
to approve the Non-Management Directors' Stock Option Plan.
The record of shareholders entitled to vote at the annual meeting was
taken on August 5, 1997. On that date the Company had outstanding and entitled
to vote 15,175,660 shares of common stock, no par value per share (the "Common
Stock"), with each share of Common Stock entitled to one vote.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of July 30, 1997 by (i)
each person known by the Company to be the beneficial owner of more than five
percent (5%) of the outstanding Common Stock; (ii) each director of the
Company; (iii) the Named Executive Officers (as defined herein); and (iv) all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES
NAME OF BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED (1) OF CLASS
---------------- ------------ --------
<S> <C> <C>
Erez Goren (2) . . . . . . . . . . . . . . . . . 3,100,000 20.4%
Alon Goren (2) . . . . . . . . . . . . . . . . . 3,100,000 20.4
Eric B. Hinkle . . . . . . . . . . . . . . . . . 81,800(3) *
John H. Heyman . . . . . . . . . . . . . . . . . 305,454(4) 2.0
James S. Balloun . . . . . . . . . . . . . . . . 10,000 *
Evan O. Grossman . . . . . . . . . . . . . . . . 1,200 *
Carlyle M. Taylor . . . . . . . . . . . . . . . . - -
H. Martin Rice . . . . . . . . . . . . . . . . . 127,500 *
All directors and executive officers
as a group (11 persons) . . . . . . . . . . . . 7,229,580(5) 46.8
- -----------------------
</TABLE>
* Less than 1% of outstanding shares.
(1) "Beneficial Ownership" includes shares for which an individual,
directly or indirectly, has or shares voting or investment power or
both and also includes options which are exercisable within sixty days
of the date of this Proxy Statement. All of the listed persons have
sole voting and investment power over the shares listed opposite their
names. Beneficial ownership as reported in the above table has been
determined in accordance with Rule 13d-3 of the Securities Exchange
Act of 1934. Pursuant to the Rules of the Commission, certain shares
of the Company's Common Stock that a beneficial owner has the right to
acquire within 60 days pursuant to the exercise of stock options or
warrants are deemed to be outstanding for the purpose of computing the
percentage ownership of such owner but are not deemed outstanding for
the purpose of computing the percentage ownership of any other person.
(2) The address of Erez Goren and Alon Goren is 1000 Alderman Drive,
Alpharetta, Georgia 30202.
(3) Represents 81,800 shares of Common Stock subject to stock options
exercisable within the next 60 days.
(4) Includes 165,000 shares of Common Stock subject to stock options
exercisable within the next 60 days.
(5) Includes 263,230 shares of Common Stock subject to stock options
exercisable within the next 60 days.
-2-
<PAGE> 5
AGENDA ITEM ONE
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of six (6) directors,
divided into three classes, with members of each class of directors serving for
staggered three-year terms. The Board consists of two Class I directors, Erez
Goren and Alon Goren, two Class II directors, John H. Heyman and James S.
Balloun, and two Class III directors, Eric B. Hinkle and Evan O. Grossman.
The terms of the Class I directors will expire at the 1997 Annual Meeting of
Shareholders. In addition, because James S. Balloun and Evan O. Grossman were
appointed as directors earlier this year, they are required to stand for
reelection at the 1997 Annual Meeting and, if elected, will serve out the term
of their respective classes. James S. Balloun, as a Class II director, would
serve for a one-year term expiring at the 1998 Annual Meeting of Shareholders.
Evan O. Grossman, as a Class III director, would serve for a two-year term
expiring at the 1999 Annual Meeting of Shareholders. The Board of Directors
has nominated Erez Goren, Alon Goren, James S. Balloun and Evan O. Grossman
for election as directors of the Company. The Board of Directors recommends
that you vote "for" the election of these nominees.
Each of the nominees has consented to being named in this Proxy
Statement and to serve as a director of the Company if elected. In the event
that any nominee withdraws or for any reason is not able to serve as a
director, the proxy will be voted for such other person as may be designated by
the Board of Directors, but in no event will the proxy be voted for more than
four nominees. The affirmative vote of a plurality of all votes cast at the
meeting by the holders of the Common Stock is required for the election of the
four nominees standing for election. Management of the Company has no reason
to believe that any nominee will not serve if elected.
The following persons have been nominated by management for election
to the Board of Directors as Class I directors to succeed themselves for a term
of three years, expiring at the 2000 Annual Meeting of Shareholders, and until
their successors are elected and qualified:
EREZ GOREN, age 33, has served as Co-Chairman of the Board and Chief
Executive Officer of the Company since its inception in 1985 and as its
President from 1985 to October 1996. Mr. Goren attended State University of New
York at Stony Brook prior to devoting his full time and energy to the Company.
He is the brother of Alon Goren.
ALON GOREN, age 31, has served as Co-Chairman of the Board and Chief
Technology Officer of the Company since its inception in 1985. Mr. Goren has a
B.S. in Computer Systems Engineering from Rensselaer Polytechnic Institute. He
is the brother of Erez Goren.
The following person has been nominated by management for election to
the Board of Directors as a Class II director to succeed himself for a term of
one year, expiring at the 1998 Annual Meeting of Shareholders, and until his
successor is elected and qualified:
JAMES S. BALLOUN, age 59, has served as Chairman of the Board and
Chief Executive Officer of National Service Industries, Inc., a diversified
service and manufacturing company, since February 1996, and as its President
since October 1996. He was previously affiliated with the management
consulting firm of McKinsey & Company, Inc., which he served as a Director from
June 1976 until January 1996. Mr. Balloun has been a director of the Company
since April 1997.
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<PAGE> 6
The following person has been nominated by management for election to
the Board of Directors as a Class III director to succeed himself for a period
of two years expiring at the 1999 Annual Meeting of Shareholders and until his
successor is elected and qualified:
EVAN O. GROSSMAN, age 32, has served as President and Chief Operating
Officer of Share Group, Inc., a teleservices Company, since August 1993. Mr.
Grossman was previously affiliated with the management consulting firm of
McKinsey & Company, Inc. from October 1990 to July 1993. Mr. Grossman has been
a director of the Company since May 1997.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and persons who own more than 10% of
the outstanding Common Stock of the Company, to file with the Securities and
Exchange Commission reports of changes in ownership of the Common Stock of the
Company held by such persons. Officers, directors and greater than 10%
shareholders are also required to furnish the Company with copies of all forms
they file under this regulation. The Company was not subject to such reporting
requirements during fiscal 1996.
Although it is not the Company's obligation to make filings pursuant
to Section 16 of the Securities Exchange Act of 1934, the Company has adopted a
policy requiring all Section 16 reporting persons to report monthly to the
Controller of the Company as to whether any transactions in the Company's
Common Stock occurred during the previous month.
MEETINGS OF THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD
The Board of Directors held thirteen (13) meetings during the year
ended December 31, 1996. Each director attended at least 75% or more of the
aggregate number of meetings held by the Board of Directors and the committees
on which he served. The Company's Board of Directors has three (3) standing
committees -- the Audit Committee, the Compensation Committee and the Stock
Option Committee, each of which was established in May 1997.
The Audit Committee presently consists of James S. Balloun and Evan O.
Grossman. The Audit Committee has been assigned the principal function of
reviewing the internal and external financial reporting of the Company,
reviewing the scope of the independent audit and considering comments by the
auditors regarding internal controls and accounting procedures and management's
response to these comments.
The Compensation Committee presently consists of Erez Goren, James S.
Balloun and Evan O. Grossman. The Compensation Committee has been assigned the
functions of approving and monitoring the remuneration arrangements for senior
management.
The Stock Option Committee presently consists of James S. Balloun and
Evan O. Grossman. The Stock Option Committee has been assigned the functions
of administering the Company's stock option plans and granting options
thereunder.
The Board of Directors does not have a standing nominating committee,
such function being reserved to the full Board of Directors. Any shareholder
entitled to vote for the election of directors may nominate a person or persons
for election as a director only if written notice of such shareholder's
intention to make any such nomination is given either by personal delivery or
mailed by the United States Mail, postage prepaid, certified and return receipt
requested, to the Secretary of the Company not later than the later of (i) the
close of business on the seventh (7th) calendar day following the date on which
notice of the meeting of shareholders for the election of directors is first
given to shareholders (any such notice of meeting of
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<PAGE> 7
shareholders shall not be given earlier than the record date for the meeting of
shareholders) and (ii) a date ninety (90) days prior to the date of the meeting
of shareholders. Each such notice shall set forth: (a) the name and address
of the shareholder who intends to make the nomination and of the person or
persons to be nominated; (b) a representation that the shareholder is a holder
of record of stock of the Company entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (c) a description of all arrangements or
understandings between the shareholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder; (d) such other information
regarding each nominee proposed by such shareholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the
Commission had each nominee been nominated, or intended to be nominated, by the
Board; and (e) the consent of each nominee to serve as a director of the
Company if so elected.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
---- --- -------------
<S> <C> <C>
Erez Goren 33 Co-Chairman of the Board and Chief Executive Officer
Alon Goren 31 Co-Chairman of the Board and Chief Technology Officer
Eric B. Hinkle 37 President and Chief Operating Officer
John H. Heyman 36 Executive Vice President and Chief Financial Officer
Andrew S. Heyman 33 Vice President-Convenience Store Division and Managing
Director of Radiant Solutions Group
Carlyle M. Taylor 43 Vice President - Integration and Support
H. Martin Rice 45 Vice President; President of Radiant Entertainment
Division
David H. Douglas 41 Vice President; President of Radiant Hospitality
Systems Division
Christopher Lybeer 35 Vice President - Convenience Store Division
</TABLE>
Executive officers are appointed by the Board of Directors of the
Company and hold office at the pleasure of the Board. Executive officers
devote their full time to the affairs of the Company. See "Election of
Directors" for information with respect to Erez Goren and Alon Goren.
ERIC B. HINKLE has served as President, Chief Operating Officer and a
director of the Company since October 1996. Mr. Hinkle served in various
capacities with the Avionics Divisions of AlliedSignal Corporation from January
1994 to October 1996, including most recently as Vice President of
Communications and Navigation Products. From 1989 to January 1994, Mr. Hinkle
was employed by
-5-
<PAGE> 8
McKinsey & Co., a consulting firm, including most recently as Senior Engagement
Manager. Mr. Hinkle has an M.B.A. from Harvard Business School, a M.S. degree
in Electrical Engineering from Stanford University, and a B.S. degree in
Computer Engineering from Brown University.
JOHN H. HEYMAN has served as Executive Vice President and Chief
Financial Officer of the Company since September 1995 and as a director of the
Company since June 1996. Mr. Heyman served as Vice President and Chief
Financial Officer of Phoenix Communications, Inc., a commercial printer, from
March 1991 to August 1995. From 1989 to 1991, Mr. Heyman served as Vice
President, Acquisitions of Forsch Corporation, a diversified manufacturing
company. From 1983 to 1987, Mr. Heyman serviced in a variety of capacities
with Arthur Andersen LLP, where he worked primarily with middle market
companies and technology firms. Mr. Heyman has an M.B.A. from Harvard Business
School and a B.B.A. degree in Accounting from the University of Georgia. He is
the brother of Andrew S. Heyman.
ANDREW S. HEYMAN has served as Vice President-Convenience Store
Division and Managing Director of the Radiant Solutions Group of the Company
since January 1996. Mr. Heyman served as a senior manager with Andersen
Consulting from 1987 to December 1995. He holds a M.S. degree in Computer
Information Systems from Georgia State University and a B.B.A. in Finance from
the University of Georgia. He is the brother of John H. Heyman.
CARYLE M. TAYLOR has served as Vice President--Integration and Support
of the Company since September 1995. Mr. Taylor served in various capacities
with NCR Corporation (formerly AT&T Global Information Solutions) in the retail
information systems area from 1978 to September 1995, including most recently
as Assistant Vice President of the scanner business unit. Mr. Taylor received a
B.S. degree in Mathematics from North Carolina Wesleyan College.
H. MARTIN RICE has served as Vice President of the Company and the
President of its Radiant Entertainment division (formerly PrysmTech) since
December 1996. From September 1994 until its acquisition by the Company in
December 1996. Mr. Rice served as President and Chief Executive Officer of
PrysmTech, LLC. From 1989 to September 1994, Mr. Rice served as President of
The R.L. Sterling Company, a consulting company. Prior to 1989, Mr. Rice served
as Chief Financial Officer of Maryland Realty Trust, a publicly traded REIT,
and as a staff accountant for Price Waterhouse LLP.
DAVID H. DOUGLAS has served as Vice President of the Company and
President of its Radiant Hospitality Systems division since May 1997. Mr.
Douglas served as President of Restaurant Management and Control Systems, Inc.
("ReMACS") from 1983 until its acquisition by the Company in May 1997.
CHRISTOPHER LYBEER has served as Vice President--Convenience Store
Division of the Company since January 1996. From 1993 to 1995, Mr. Lybeer
served as Assistant Vice President--Software Solutions of NCR Corporation
(formerly AT&T Global Information Solutions), a telecommunications company.
From 1991 to 1993, Mr. Lybeer served as a Director of Product Development of
NCR Corporation, in the retail information systems area. Mr. Lybeer received a
B.S.E. in Computer Engineering from the University of Michigan.
-6-
<PAGE> 9
EXECUTIVE COMPENSATION
The following table presents certain information concerning
compensation earned for services rendered in all capacities by the Company's
Chief Executive Officer and the two other executive officers of the Company
whose total annual salary and bonus exceeded $100,000 during fiscal 1996 (the
"Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
NAME AND ------------------------ ---------------------------------------
PRINCIPAL POSITION SALARY($) BONUS($) SECURITIES UNDERLYING OPTIONS
- ------------------ --------- --------- ---------------------------------------
<S> <C> <C> <C>
Erez Goren . . . . . . . . . . . . . . . . . $ 80,769 $ 11,197 --
Co-Chairman and Chief
Executive Officer
Carlyle M. Taylor . . . . . . . . . . . . . 80,000 28,000 --
Vice President
H. Martin Rice . . . . . . . . . . . . . . . 100,000 98,504 137,500
Vice President
</TABLE>
DIRECTORS' FEES
The Company's present policy is not to pay any cash compensation to its
directors. Subject to approval of the Non-Management Directors' Stock Option
Plan at the Annual Meeting, each non-employee director of the Company will
receive an automatic grant of options to purchase 5,000 shares of Common Stock
on the last business day of each fiscal year of the Company. Each non-employee
director of the Company is also reimbursed for travel and other expenses
incurred in connection with the performance of their duties.
In addition, all new non-employee directors of the Company receive a
one-time grant of an option to purchase 15,000 shares of Common Stock at an
exercise price equal to the fair market value of such stock on the date of
grant, which options vest over a period of three years. All such options
expire, unless previously exercised or terminated, ten years from the date of
grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is currently
comprised of Erez Goren, James S. Balloun and Evan O. Grossman. With the
exception of Erez Goren, who serves as Co-Chairman of the Board and Chief
Executive Officer of the Company, none of the members of the Compensation
Committee served as an officer or employee of the Company or any of its
subsidiaries during fiscal 1996. There were no material transactions between
the Company and any of the members of the Compensation Committee during fiscal
1996.
EMPLOYMENT AGREEMENT
On December 31, 1996, in connection with the acquisition of PrysmTech,
the Company entered into an Employment Agreement with H. Martin Rice to serve
as Managing Director of the PrysmTech Division of the Company (the
"Agreement"). The term of the Agreement is four years subject to a one-year
automatic extension under certain circumstances. Under the Agreement, Mr. Rice
will be entitled to a base salary of $100,000 per year or a higher amount equal
to that of certain of the Company's highest paid executive officers plus a
bonus based upon the PrysmTech division's net income (as defined in the
Agreement), provided that the base compensation and bonus payable to Mr. Rice
under the Agreement is limited to the greater of $200,000 and the maximum
non-contingent and potential contingent compensation available to any other
executive officer of the Company. The Agreement also provides (i) that Mr. Rice
receive a loan from the
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<PAGE> 10
Company in the amount of $165,000, which is payable, together with interest at
the rate of 7.0% per annum, on December 31, 2001 or earlier out of the proceeds
of the sale of shares of the Company's Common Stock received by Mr. Rice in the
PrysmTech acquisition and (ii) certain insurance, automobile allowance and
other benefits. Under the Agreement, Mr. Rice has been granted options to
purchase 137,500 shares of the Company's Common Stock (the "Stock Options").
See "--Stock Option Plans."
Upon termination of the Agreement (other than voluntarily by Mr. Rice, or
by the Company for cause or upon the death of Mr. Rice), Mr. Rice will be
entitled to a termination payment equal to $16,666 for each partial and full
calendar month then remaining in the term of the Agreement, less any amount
payable to Mr. Rice under any long-term disability insurance maintained by the
Company.
The Agreement provides that if Mr. Rice's employment is terminated during
the term of the Agreement (other than voluntarily by Mr. Rice, or by the
Company for cause or upon the death of Mr. Rice) the Stock Options shall fully
vest on the date of such termination. Also upon such termination Mr. Rice may
require the Company to pay an income tax related bonus and to lend him the
amount payable upon the exercise of his remaining Stock Options.
The Agreement also contains provisions restricting Mr. Rice's ability to
compete with the Company and solicit its customers and employees and obligating
him to protect the confidentiality of the Company's information following
termination of his employment.
AGREEMENTS WITH EMPLOYEES
All employees of the Company, including executive officers, are required
to sign a confidentiality and noncompete agreement with the Company restricting
the ability of the employee to compete with the Company during his or her
employment and for a period ranging from six months to two years thereafter,
restricting solicitation of customers and employees following employment with
the Company, and providing for ownership and assignment of intellectual
property rights to the Company. The agreements have an indefinite term, but the
employee may terminate employment with the Company at any time.
401(K) PROFIT SHARING PLAN
The Company maintains a 401(k) Profit Sharing Plan (the "401(k) Plan")
which is intended to be a tax-qualified defined contribution plan under Section
401(k) of the Internal Revenue Code of 1986, as amended (the "Code"). In
general, all employees of the Company who have completed six months of service
and have attained age 21 are eligible to participate. The 401(k) Plan includes
a salary deferral arrangement pursuant to which participants may contribute,
subject to certain Code limitations, a minimum of 3.0% and a maximum of 15.0%
of their salary on a pre-tax basis (up to $9,500 per year). Subject to certain
Code limitations, the Company may make both matching and additional
contributions at the discretion of the Board of Directors of the Company each
year. To date, no contributions have been made by the Company to the 401(k)
Plan. A separate account is maintained for each participant in the 401(k) Plan.
The portion of a participant's account attributable to his or her own
contributions is 100.0% vested. Distributions from the 401(k) Plan may be made
in the form of a lump-sum cash payment or in installment payments.
STOCK OPTION PLANS
1996 Stock Option Plan. On December 20, 1995, the Company's directors
and shareholders adopted the 1995 Stock Option Plan (the "Plan") for employees
who are contributing significantly to the business of the Company or its
subsidiaries as determined by the Company's Board of Directors or the committee
administering the Plan. The Plan currently provides for the grant of incentive
and non-qualified stock options to purchase up to 4,000,000 shares of Common
Stock at the discretion of the Board of Directors of the Company or a committee
designated by the Board of Directors to administer the Plan. In June 1997, the
Plan
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<PAGE> 11
was amended by the Board of Directors, subject to shareholder approval at the
Annual Meeting, to increase the number of shares of Common Stock reserved for
issuance under the 1995 Stock Option Plan to 5,000,000 shares. The option
exercise price of incentive stock options must be at least 100.0% (110.0% in
the case of a holder of 10.0% or more of the Common Stock) of the fair market
value of the stock on the date the option is granted and the options are
exercisable by the holder thereof in full at any time prior to their expiration
in accordance with the terms of the Plan. Incentive stock options granted
pursuant to the Plan will expire on or before (1) the date which is the tenth
anniversary of the date the option is granted, or (2) the date which is the
fifth anniversary of the date the option is granted in the event that the
option is granted to a key employee who owns more than 10.0% of the total
combined voting power of all classes of stock of the Company or any subsidiary
of the Company. Options granted under the Plan typically vest over a period of
four to five years. As of July 30, 1997, options to purchase 3.9 million shares
of Common Stock were outstanding pursuant to the Plan. In addition,
non-qualified options to purchase 264,000 shares of Common Stock have been
granted by the Company outside of the Plan.
Directors Plan. On April 12, 1997, the Board of Directors adopted,
subject to the approval of the Company's stockholders, the Non-Management
Directors' Stock Option Plan (the "Directors Plan"). The purpose of the
Directors Plan is to secure for the Company the benefits of the additional
incentive inherent in the ownership of Common Stock by non-employee directors
of the Company and to help the Company secure and retain the services of such
non-employee directors. The Directors Plan is intended to be a self-governing
formula plan. To this end, the Directors Plan requires minimal discretionary
action by any administrative body with regard to any transaction under the
Directors Plan. Eligible persons under the Directors Plan are directors of the
Company who are not employees of the Company or any affiliate of the Company
("Outside Directors"). A maximum of 100,000 shares of Common Stock has been
reserved by the Company for issuance pursuant to options under the Directors
Plan, which number is subject to adjustment in certain circumstances in order
to prevent dilution or enlargement. Each Outside Director is granted an option
to purchase 15,000 shares of Common Stock upon joining the Board of Directors
of the Company. Thereafter, each person who is an Outside Director as of the
last business day of each fiscal year during the term of the Directors Plan
shall receive an option to purchase 5,000 shares of Common Stock as of such
date. See "Agenda Item Three -- Proposal to Approve Non-Management Directors'
Stock Option Plan."
The following table provides certain information concerning individual
grants of stock options made during fiscal 1996 to each of the Named Executive
Officers.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS EXERCISE ANNUAL RATES
UNDERLYING GRANTED TO OR STOCK PRICE
OPTIONS EMPLOYEES BASE EXPIRATION APPRECIATION FOR
NAME GRANTED IN FISCAL YEAR PRICE DATE OPTION TERM (2)
- ---- ------- -------------- -------- --------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
5% 10%
---------- ---------
Erez Goren . . . . . . . . . . . . . . -- -- -- -- -- --
Carlyle M. Taylor . . . . . . . . . . . -- -- -- -- -- --
H. Martin Rice(1) . . . . . . . . . . . 137,500 8.5% $7.00 2006 $605,311 $1,533,977
</TABLE>
______________
(1) Of the total, 57,140 are incentive stock options and 80,360 are
non-qualified stock options. Subject to acceleration upon the occurrence
of certain events, the incentive stock options vest in increments of
14,285 on each of the first, second, third and fourth anniversaries of the
date of grant, December 31, 1996. The non-qualified stock options vest on
December 31, 2004, subject to acceleration upon the attainment of certain
performance targets. See "--Employment Agreement."
(2) The dollar amounts under these columns represent the potential realizable
value of each grant of option assuming that the market price of the
Company's Common Stock appreciates in value from the date of
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<PAGE> 12
grant at the 5.0% and 10.0% annual rates prescribed by the SEC and
therefore are not intended to forecast possible future appreciation, if
any, of the price of the Company's Common Stock.
The following table provides certain information concerning the value of
unexercised options held by the Named Executive Officers under the Company's
1995 Stock Option Plan as of December 31, 1996. No stock options were exercised
during fiscal 1996 by the Named Executive Officers.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-
NUMBER OF UNEXERCISED THE-MONEY OPTIONS AT
NAME OPTIONS AT FISCAL YEAR END FISCAL YEAR END (1)
- ---- -------------------------- ---------------------------
EXERCISABLE UNEXERCISABL EXERCISABLE UNEXERCISABLE
----------- ------------ ----------- ---------------
<S> <C> <C> <C> <C>
Erez Goren . . . . . . . . . . . . . . . . . . . . . . -- -- -- --
Carlyle M. Taylor . . . . . . . . . . . . . . . . . . . -- 200,000 -- $ 1,700,000
H. Martin Rice . . . . . . . . . . . . . . . . . . . . -- 137,500 -- $ 343,750
</TABLE>
_______________________
(1) Dollar values were calculated by determining the difference between the
public offering price of $9.50 per share and the exercise price of the
options.
CERTAIN TRANSACTIONS
On May 29, 1995, the Company repurchased 2,628,523 shares of Common Stock
(representing 24.7% of the Company's then outstanding shares of Common Stock)
from Thomas J. Barrella in exchange for certain assets and technology. In
connection therewith, Mr. Barrella resigned his positions as an executive
officer and director of the Company. The transferred assets and technology had
a value of approximately $616,000. As part of the transaction, Mr. Barrella
issued to the Company a note in the amount of $61,000 due in May 1997 and
bearing interest at a rate of 8.0%. As of June 1, 1997, $2,900 remained
outstanding under this note.
On June 7, 1996, Mr. Barrella granted to Erez Goren, the Chief Executive
Officer of the Company, an option to purchase all 600,033 remaining shares of
Common Stock held by Mr. Barrella. This option, exercisable for a period of one
year thereafter at an exercise price of $1.875 per share, was assigned to the
Company by Mr. Goren for nominal consideration prior to the completion of the
Company's initial public offering. The Company utilized a portion of the
proceeds of its initial public offering to repurchase all of such shares from
Mr. Barrella in February 1997.
On October 31, 1994, the Company repurchased 3,085,700 shares of Common
Stock (representing 22.5% of the Company's then outstanding shares of Common
Stock) from Lawrence D. Parker in exchange for a note in the amount of $473,000
due December 31, 1997, and bearing interest at a rate of 8.0%. As of December
31, 1996, $170,000 remained outstanding under this note. The Company utilized a
portion of the proceeds of its initial public offering to repay this note in
March 1997. In connection with this transaction, Mr. Parker resigned his
positions as an executive officer and director of the Company and entered into
a five-year consulting agreement with the Company. In October 1995, the monthly
consulting fees payable to Mr. Parker were reduced to $2,500 from $14,000.
Consulting fees totaling $150,000, $131,000 and $28,000 were paid by the
Company to Mr. Parker in 1994, 1995 and 1996, respectively.
On May 27, 1994, the Company entered into a Software License, Support and
Equipment Purchase Agreement (the "Emro License Agreement") with Emro Marketing
Company (Speedway/Starvin' Marvin) ("Emro") pursuant to which Emro agreed to
purchase licenses for Compu-Touch systems. The Emro License Agreement includes
price discounts on certain of the Company's products, rebates and extended
warranty coverage on products purchased thereunder, and credits (based on the
number of systems purchased by Emro) for technical support services. Although
the rebates, the extended warranty terms and the credits for technical support
services are not currently available to other customers of the Company, the
price discounts are based
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<PAGE> 13
on the number of potential sites to be installed by Emro and are no more
favorable than those given to the only other customer of the Company who has a
comparable number of potential sites.
Under the terms of the Emro License Agreement, Emro is to receive a cash
rebate upon purchasing a defined number of software licenses. In the event the
Company is unable to pay the rebates when due, Emro has the option of applying
the rebate to the purchase of additional licenses or requiring the Company to
deliver a promissory note therefor. Accordingly, on March 27, 1996, the
Company issued to Emro a promissory note for accrued rebates in the amount of
$873,000 due March 2001, and bearing interest at a rate of 6.0%. As of December
31, 1996, $918,000, including accrued interest, remained outstanding under this
note. The Company utilized a portion of the proceeds of its initial public
offering to repay this note in February 1997.
Emro will continue to receive the preferential terms described above with
respect to purchases of Compu-Touch systems in the future for as long as Emro
purchases such products from the Company under the Emro License Agreement.
Revenues of $3.4 million, $6.9 million and $5.4 million were recorded by the
Company for systems sales and customer support, maintenance and other services
pursuant to the Emro License Agreement in 1994, 1995 and 1996, respectively.
In connection with the Emro License Agreement, the Company granted to Emro
a stock purchase warrant (the "Emro Warrant") to purchase 10.0% of the
outstanding shares of Common Stock of the Company at an exercise price of
$80,000 per percentage unit exercised. The Emro Warrant was subsequently
amended to increase the number of shares of Common Stock issuable thereunder to
12.0% of the outstanding shares of Common Stock of the Company and to provide
the Company with the right to repurchase 2.0% upon the exercise of the Emro
Warrant at a price equal to the average of the exercise price of the Emro
Warrant and the fair market value of the Common Stock. The Emro Warrant was
exercised in full prior to the completion of the Company's initial public
offering in February 1997, whereupon 318,996 shares of Common Stock were sold
by Emro in the initial public offering, 193,060 shares of Common Stock were
repurchased by the Company for $1.0 million from the proceeds of the initial
public offering and 646,304 shares of Common Stock were retained by Emro. Emro
sold an additional 200,000 shares of Common Stock in a subsequent public
offering in July 1997.
On December 31, 1996, the Company, which previously owned a 50.0% interest
in PrysmTech, acquired the remaining 50.0% interest of PrysmTech from its
owners, including H. Martin Rice, a Vice President of the Company and the
Managing Director of the Company's PrysmTech division. In connection therewith,
Mr. Rice received 150,000 shares of Common Stock of the Company and the Company
issued to Mr. Rice and his affiliates promissory notes totaling $1.5 million.
The Company utilized a portion of the proceeds of its initial public offering
to repay these notes in February 1997. The Company has also entered into an
employment agreement with Mr. Rice. See "-- Employment Agreement."
On May 23, 1997, the Company acquired ReMACS, which was 72.9% owned by
David H. Douglas, currently a Vice President of the Company and the President
of the Company's Radiant Hospitality Systems division. In connection
therewith, Mr. Douglas received 457,196 shares of Common Stock of the Company
and $2.4 million in cash. The Company repaid this note in July 1997. In
connection with the Acquisition of ReMACS, the Company also entered into a five
year employment agreement with Mr. Douglas which provides for an annual base
salary of $100,000 plus a performance bonus determined in accordance with the
terms of the employment agreement.
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<PAGE> 14
REPORT OF BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
During the year ended December 31, 1996, the Board of Directors was
responsible for: (i) setting the Company's compensation philosophy and
policies; (ii) review and approval of pay recommendations for the executive
officers of the Company; and (iii) initiation of all compensation actions for
the Chief Executive Officer of the Company.
The Company's compensation policies have been designed to align the
financial interests of the Company's management with those of its shareholders,
and reflect the nature of the Company by taking into account the Company's
operating environment and the expectations for continued growth and enhanced
profitability. Compensation for each of the Company's executive officers
consists of a base salary, an annual discretionary bonus and, in some cases,
stock options. The Company does not currently provide executive officers with
other long term incentive compensation other than the ability to contribute
their earnings to the Company's 401(k) Plan.
The Board's philosophy is that the predominant portion of an executive's
compensation should be based directly upon the value of long-term incentive
compensation in the form of stock ownership or stock option awards. The Board
believes that providing executives with the opportunities to acquire
significant stakes in the growth and prosperity of the Company (through grants
of stock options), while maintaining other elements of the Company's
compensation program at conservative levels, will enable the Company to attract
and retain executives with the outstanding management abilities and
entrepreneurial spirit which are essential to the Company's ongoing success.
Furthermore, the Board believes that this approach to compensation motivates
executives to perform to their full potential.
At least annually, the Board will review salary recommendations for the
Company's executives and then approve such recommendations, with any
modifications it deems appropriate. The annual salary recommendations are made
under the ultimate direction of the Chief Executive Officer, based on peer
group and national industry surveys of total compensation packages, as well as
evaluations of the individual executive's past and expected future performance.
Similarly, the Board fixes the base salary of the Chief Executive Officer based
on a review of competitive compensation data, the Chief Executive Officer's
overall compensation package, and the Board's assessment of his past
performance and its expectation as to his future performance in leading the
Company.
The Board also determines, based upon the recommendation of the Chief
Executive Officer, the annual bonus, if any, to be paid to executive officers
(other than the Chief Executive Officer). The amount of each individual bonus
is determined based upon an evaluation of such factors as individual
performance, increases in the Company's revenue, net income, net income per
share and market penetration, as well as the executive's contribution to the
Company's performance. The Board applies similar criteria in setting the
amount of annual bonus, if any, earned by the Chief Executive Officer.
Stock options represent a substantial portion of compensation for the
Company's executive officers other than Erez Goren and Alon Goren. Stock
options are granted at the prevailing market price on the date of grant, and
will only have value if the Company's stock price increases. Generally, grants
vest in equal amounts over a period of five years (although certain special
types of grants may vest either immediately or over a shorter period) and
executives must be employed by the Company at the time of vesting in order to
exercise the options. Grants of stock options generally are based upon the
level of the executive's position with the Company and an evaluation of the
executive's past and expected future performance. The Board believes that
dependence on stock options for a significant portion of executives'
compensation more closely aligns such executives' interests with those of the
Company's shareholders, since the ultimate value of such compensation is linked
directly to stock price.
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<PAGE> 15
The Board will continually evaluate the Company's compensation policies
and procedures with respect to executives. Although the Board believes that
current compensation policies have been successful in aligning the financial
interests of executive officers with those of the Company's shareholders and
with Company performance, it continues to examine what modifications, if any,
should be implemented to further link executive compensation with both
individual and Company performance.
Erez Goren
Alon Goren
Eric B. Hinkle
John H. Heyman
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the foregoing
Report of the Board of Directors on Executive Compensation shall not be
incorporated by reference into any such filings.
-13-
<PAGE> 16
AGENDA ITEM TWO
PROPOSAL TO AMEND 1995 STOCK OPTION PLAN
GENERAL
On December 20, 1995, the Board of Directors of the Company adopted a 1995
Stock Option Plan (the "1995 Plan") for employees who are contributing
significantly to the business of the Company. The 1995 Plan currently provides
for the grant of both incentive and non-qualified stock options to purchase up
to 4,000,000 shares of Common Stock at the discretion of the Board of Directors
of the Company or the committee administering the Plan. The purpose of the
1995 Plan is to encourage and enable eligible directors, officers and key
employees of the Company and its subsidiaries to acquire proprietary interests
in the Company and its subsidiaries through the ownership of common stock of
the Company and to provide motivation for participating directors, officers and
key employees to remain in the employ and give greater effort on behalf of the
Company.
As of July 30, 1997, options to purchase 3.9 million shares of Common
Stock were outstanding pursuant to the 1995 Plan. In addition, non-qualified
options to purchase 264,000 shares of Common Stock have been granted by the
Company outside the 1995 Plan.
As of July 30, 1997, the Company had granted options to purchase shares of
Common Stock pursuant to the 1995 Plan as follows: (i) each Named Executive
Officer (Erez Goren: no shares; Caryle M. Taylor: 200,000 shares; and H. Martin
Rice: 137,500 shares); (ii) all current executive officers as a group: 934,930
shares; (iii) all current directors who are not executive officers as a group:
no shares; (iv) each nominee for election as a director: no shares; and (v) all
employees, including all current officers who are not executive officers, as a
group: 3.3 million shares.
DESCRIPTION OF PROPOSED AMENDMENT
On June 26, 1997, the 1995 Plan was amended by the Board of Directors,
subject to shareholder approval, to increase the number of shares of Common
Stock reserved for issuance under the 1995 Plan to 5,000,000 shares. The
proposed increase in the number of authorized shares would ensure the
uninterrupted continuation of the 1995 Plan. As of July 30, 1997, less than
100,000 shares of Common Stock remained available for grant under the 1995
Plan. The Board of Directors recommends that shareholders vote "for" the
proposed amendment. The affirmative vote of a majority of the shares of the
Common Stock of the Company represented in person or by proxy at the Annual
Meeting is necessary for the approval of the amendment to the 1995 Plan.
DESCRIPTION OF 1995 PLAN
Effective Date. The effective date of the 1995 Plan is December 20, 1995.
The 1995 Plan shall remain in effect until all shares subject to or which may
become subject to the 1995 Plan shall have been purchased pursuant to options
granted under the 1995 Plan, provided that options under the 1995 Plan must be
granted within ten (10) years from the effective date.
Shares Subject to the 1995 Plan. The shares of the Company's Common Stock
available for issuance under the 1995 Plan may, at the election of the Board of
Directors, be either treasury shares or shares originally issued for such
purpose. The maximum number of shares which shall be reserved and made
available for sale under the 1995 Plan shall be 4,000,000 shares of Common
Stock (5,000,000 shares if the amendment to the 1995 Plan is approved by the
shareholders of the Company at the Annual Meeting). Any shares subject to an
option which for any reason expires or is terminated may again be subject to an
option under the 1995 Plan.
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<PAGE> 17
In the event of a subdivision or combination of the Company's shares, the
number of shares available under the 1995 Plan shall be increased or decreased
proportionately, as the case may be, and the number of shares deliverable upon
the exercise thereafter of any option theretofore granted shall be increased or
decreased proportionately, as the case may be, without change in the aggregate
price.
Persons Eligible to Participate in the 1995 Plan. Under the 1995 Plan,
options may be granted to any person or persons regularly employed by, or
serving as a director, officer or consultant to, the Company or a subsidiary of
the Company.
Administration of the 1995 Plan. The 1995 Plan is administered by the
Board of Directors or the Stock Option Committee comprised of no fewer than two
(2) members appointed by the Board of Directors of the Company from among its
members (the "Committee"). Members of the Committee shall be "disinterested
persons" which term is defined in the 1995 Plan as a director who is not,
during the one year prior to service as an administrator of the 1995 Plan or
during such service, granted or awarded equity securities pursuant to the 1995
Plan or any other plan of the Company or its affiliates.
Subject to the provisions of the 1995 Plan, the Board of Directors of the
Company or the Committee has the authority to administer the 1995 Plan, to
select those persons to whom options will be granted, to determine the terms
and provisions of the respective stock option agreements with optionees,
including the number of shares to be optioned to each such person, and to
interpret, construe and implement the provisions of the 1995 Plan.
Exercise Price, Terms of Exercise and Payment for Shares. (a)
All Options. Each option granted under the 1995 Plan will be represented by an
Option Agreement which shall set forth the terms particular to that option,
including the number of shares covered by the option, the exercise price, the
term of the option and any vesting requirements. Stock purchased pursuant to an
Option Agreement shall be paid for in accordance with the terms and conditions
set forth in the Option Agreement. The terms and conditions of payment may
vary with respect to each optionee. Upon receipt of payment, the Company
shall, without transfer or issue tax, deliver to the optionee (or other person
entitled to exercise the option) a certificate or certificates for such shares.
It is intended that funds received by the Company from the exercise of
options will be added to the general working capital of the Company and used
for general corporate purposes. Shares of Common Stock of the Company received
in payment for the exercise price of options may be, at the discretion of the
Board of Directors, either held as treasury shares or retired and returned to
authorized but unissued status.
(b) Incentive Stock Options. The exercise price of incentive
stock options granted under the 1995 Plan will be determined by the Board or
the Committee, but in no event shall such price be less than 100% of the fair
market value of the stock on the date of the grant of the option. In no event
may incentive stock options be exercised later than ten (10) years from the
date of grant of the option.
Notwithstanding the foregoing, an optionee who owns, directly or
indirectly, more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company ("10% Owner") may not be granted an
incentive stock option at less than 110% of the fair market value of the Common
Stock on the date the option is granted. Any incentive stock option granted to
a 10% Owner must by its terms be exercisable within five (5) years from the
date it is granted.
The aggregate fair market value (determined at the time the option was
granted) of the shares with respect to which incentive stock options are
exercisable for the first time by an optionee during any calendar year (under
all incentive stock option plans of the Company) shall not exceed $100,000.
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<PAGE> 18
Termination of Employment, Assignment and Other Limitations. In the event
that an optionee during his or her lifetime ceases to be an employee of the
Company or of any subsidiary of the Company for any reason (including
retirement) other than death or permanent and total disability, any incentive
stock option or unexercised portion thereof which was otherwise exercisable on
the date of termination of employment shall expire unless exercised within a
period of three (3) months from the date on which the optionee ceased to be an
employee, but in no event after the term provided in the optionee's agreement.
In the event that an optionee ceases to be an employee of the Company or of any
subsidiary of the Company for any reason (including retirement) prior to the
time that an incentive stock option is exercisable, his or her option shall
terminate and be null and void.
In the event that an optionee during his or her lifetime ceases to be an
employee of the Company or any subsidiary of the Company by reason of death or
permanent and total disability, any incentive stock option or unexercised
portion thereof which was otherwise exercisable on the date such optionee
ceased employment shall expire unless exercised within a period of one (1) year
from the date on which the optionee ceased to be an employee, but in no event
after the term provided in the optionee's agreement. Permanent and total
disability as used herein is as defined in Section 22(e)(3) of the Code.
In the event of the death of an optionee, the option shall be exercisable
by his or her personal representatives, heirs or legatees, as provided herein.
No option shall be assignable or transferable by the optionee except by
will or by the laws of descent and distribution. During the lifetime of the
optionee, the option shall be exercisable only by him or her.
An optionee shall have no rights as a shareholder with respect to any
shares covered by an option until the date of issuance of the stock certificate
to the optionee for such shares. Except as otherwise specifically provided in
the 1995 Plan, no adjustments shall be made for dividends or other rights for
which the record date is prior to the date such stock certificate is issued.
Adjustment of Shares. In the event that dividends are payable in Common
Stock of the Company or in the event there are splits, subdivisions or
combinations of shares of Common Stock of the Company, the 1995 Plan provides
that a proportionate adjustment will be made in the number of shares available
for option under the 1995 Plan, and, as to options then outstanding, a
proportionate adjustment to the number of shares subject to the option and to
the purchase price per share.
In case the Company is merged or consolidated with another corporation and
the Company is not the surviving corporation, or in case the property or stock
of the Company is acquired by another corporation, or in case of a separation,
reorganization, recapitalization or liquidation of the Company, the Board of
Directors of the Company, or the Board of Directors of any corporation assuming
the obligations of the Company hereunder, shall either (i) make appropriate
provision for the protection of any outstanding options by the substitution on
an equitable basis of appropriate stock of the Company, or of the merged,
consolidated or otherwise reorganized corporation which will be issuable in
respect to the shares of common stock of the Company, provided only that the
excess of the aggregate fair market value of the shares subject to option
immediately after such substitution over the purchase price thereof is not more
than the excess of the aggregate fair market value of the shares subject to
option immediately before such substitution over the purchase price thereof, or
upon written notice to the optionee, provide that the option (including the
shares not then exercisable) must be exercised within sixty (60) days of the
date of such notice or it will be terminated.
Amendment and Termination of the 1995 Plan. The Board of Directors may at
any time and from time to time terminate, modify or amend the 1995 Plan in any
respect, except that without shareholder approval the Board of Directors may
not (i) increase the maximum number of shares for which options may be granted
under the 1995 Plan, either in the aggregate or to any employee, (ii) reduce
the option price or waiting period, (iii) extend the period during which
options may be granted or exercised, (iv) change the class of employees
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<PAGE> 19
eligible for incentive stock options, (v) materially modify the requirements as
to eligibility for participation in the 1995 Plan, or (vi) materially increase
the benefits accruing to participants under the 1995 Plan.
The termination or any modification or amendment of the 1995 Plan shall
not, without the written consent of an optionee, affect his or her rights under
an option or right previously granted to him or her. With the written consent
of the optionee affected, the Board of Directors or the Committee may amend
outstanding option agreements in a manner not inconsistent with the 1995 Plan.
Without employee consent, the Board of Directors may at any time and from time
to time modify or amend outstanding option agreements in such respects as it
shall deem necessary in order that options granted thereunder shall comply with
the appropriate provisions of the Code and regulations thereunder which are in
effect from time to time respecting "Qualified Incentive Options."
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. All incentive options granted or to be granted
under the 1995 Plan which are designated as incentive stock options are
intended to be incentive stock options as defined in Section 422 of the Code.
Under the provisions of Section 422 of the Code, neither the holder of an
incentive stock option nor the Company will recognize income, gain, deduction
or loss upon the grant or exercise of an incentive stock option. An optionee
will be taxed only when the stock acquired upon exercise of his incentive stock
option is sold or otherwise disposed of in a taxable transaction. If at the
time of such sale or disposition the optionee has held the shares for the
required holding period (two years from the date the option was granted and one
year from the date of the transfer of the shares to the optionee), the optionee
will recognize long-term capital gain or loss, as the case may be, based upon
the difference between his exercise price and the net proceeds of the sale.
However, if the optionee disposes of the shares before the end of such holding
period, the optionee will recognize ordinary income on such disposition in an
amount equal to the lesser of:
(a) gain on the sale or other disposition; or
(b) the amount by which the fair market value of the shares on the
date of exercise exceeded the option exercise price, with any excess gain being
capital gain, long-term or short-term, depending on whether or not the shares
had previously been held for more than one year on the date of sale or other
taxable disposition.
The foregoing discussion and the reference to capital gain or loss
treatment therein assume that the option shares are a capital asset in the
hands of the optionee. A sale or other disposition which results in the
recognition of ordinary income to the optionee will also result in a
corresponding income tax deduction for the Company.
The 1995 Plan permits an optionee to pay all or part of the purchase price
for shares acquired pursuant to exercise of an incentive stock option by
transferring to the Company other shares of the Company's Common Stock owned by
the optionee. Section 422 of the Code provides that an option will continue to
be treated as an incentive stock option even if an optionee exercises such
incentive stock option with previously acquired stock of the corporation
granting the option. Accordingly, except as noted below with respect to
certain "statutory option stock," an optionee who exercises an incentive stock
option in whole or in part by transferring to the Company shares of the
Company's Common Stock will recognize no gain or loss upon such exercise. With
respect to the number of acquired shares equal to the number of shares of
Company Common Stock surrendered, the optionee's basis in the shares so
acquired will be equal to the optionee's cost basis in the shares surrendered,
and with respect to any acquired shares in excess of the number of shares of
Company Common Stock surrendered, the optionee's basis will be equal to zero
(plus, in the case of payment of the purchase price in a combination of cash
and surrendered shares, the amount of any cash paid).
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<PAGE> 20
Section 424(c)(3) of the Code provides that if "statutory option stock" is
transferred in connection with the exercise of an incentive stock option, and
if the holding period requirements under the applicable section of the Code are
not met with respect to such statutory option stock before such transfer, then
ordinary income will be recognized as a result of the transfer of statutory
option stock. However, the incentive stock option stock acquired through the
exchange of statutory option stock will still qualify for favorable tax
treatment under Section 422 of the Code.
Incentive stock options offer two principal tax benefits: (1) the
possibility of converting ordinary income into capital gain to the extent of
the excess of fair market value over option price at the time of exercise, and
(2) the deferral of recognition of gain until disposition of the stock acquired
upon the exercise of the option.
At present, the maximum tax rate on capital gains is 20% for assets held
for more than 18 months and 28% for assets held for more than 12 months but not
more than 18 months, while the maximum tax rate on ordinary income is 39.6%.
Thus, the conversion of ordinary income into capital gain produces some tax
benefit for certain taxpayers. However, the benefit of income deferral
generally provided by incentive stock options is reduced for some taxpayers
since the excess of the fair market value of shares acquired through the
exercise of an incentive stock option over the exercise price is taken into
account in computing an individual taxpayer's alternative minimum taxable
income. Thus, the exercise of an incentive stock option could result in the
imposition of an alternative minimum tax liability.
In general, an option granted under the 1995 Plan which is designated as
an incentive stock option will be taxed as described above. However, in some
circumstances an option which is designated as an incentive stock option will
be treated as a non-qualified stock option and the holder taxed accordingly.
For example, a change in the terms of an option which gives the employee
additional benefits may be treated as the grant of a new option. Unless all
the criteria for treatment as an incentive stock option are met on the date the
"new option" is considered granted (such as the requirement that the exercise
price of the option be not less than the fair market value of the stock as of
the date of the grant), the option will be treated and taxed as a non-qualified
stock option.
Non-Qualified Stock Options. All options granted or to be granted under
the 1995 Plan which do not qualify as incentive stock options are non-statutory
options not entitled to special tax treatment under Section 422 of the Code.
A participant in the 1995 Plan will recognize taxable income upon the
grant of a non-qualified stock option only if such option has a readily
ascertainable fair market value as of the date of the grant. In such a case,
the recipient will recognize taxable ordinary income in an amount equal to the
excess of the fair market value of the option as of such date over the price,
if any, paid for such option. No income would then be recognized on the
exercise of the option, and when the shares obtained through the exercise of
the option are disposed of in a taxable transaction, the resulting gain or loss
would be capital gain or loss (assuming the shares are a capital asset in the
hands of the optionee). However, under the applicable Treasury Regulations,
the non-qualified stock options issued under the 1995 Plan will not have a
readily ascertainable fair market value unless at the time such options are
granted similar options of the Company are actively traded on an established
market. The Company presently has no such actively traded options.
Upon the exercise of a non-statutory option not having a readily
ascertainable fair market value, the optionee recognizes ordinary income in an
amount equal to the excess of the fair market value of the shares on the date
of exercise over the option exercise price for those shares. The Company is
not entitled to an income tax deduction with respect to the grant of a
non-statutory stock option or the sale of stock acquired pursuant thereto. The
Company generally is permitted a deduction equal to the amount of ordinary
income the optionee is required to recognize as a result of the exercise of a
non-statutory stock option.
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<PAGE> 21
The 1995 Plan permits the Board of Directors or a Committee to allow an
optionee to pay all or part of the purchase price for shares acquired pursuant
to an exercise of a non-statutory option by transferring to the Company other
shares of the Company's Common Stock owned by the optionee. If an optionee
exchanges previously acquired Common Stock pursuant to the exercise of a
non-qualified stock option, the Internal Revenue Service has ruled that the
optionee will not be taxed on the unrealized appreciation of the shares
surrendered in the exchange. In other words, the optionee is not taxed on the
difference between his or her cost basis for the old shares and their fair
market value on the date of the exchange, even though the previously acquired
shares are valued at the current market price for purposes of paying all or
part of the option price.
General. The 1995 Plan is not qualified under Section 401(a) of the Code
and is not subject to the provisions of the Employee Retirement Income Security
Act of 1974.
The preceding discussion is based upon federal tax laws and regulations in
effect on the date of this Proxy Statement, which are subject to change, and
upon an interpretation of the statutory provisions of Section 422 of the Code,
its legislative history and related income tax regulations. Furthermore, the
foregoing is only a general discussion of the federal income tax consequences
of the 1995 Plan and does not purport to be a complete description of all
federal income tax aspects of the 1995 Plan. Option holders may also be
subject to state and local taxes in connection with the grant or exercise of
options granted under the 1995 Plan and the sale or other disposition of shares
acquired upon exercise of the options. Each employee receiving a grant of
options should consult with his or her personal tax advisor regarding federal,
state and local tax consequences of participating in the 1995 Plan.
The approval of the holders of a majority of the shares of Common Stock
present and voting at the Annual Meeting is necessary to approve the proposed
amendment to the 1995 Plan. THE BOARD OF DIRECTORS RECOMMENDS THAT
SHAREHOLDERS APPROVE THE PROPOSED AMENDMENT TO THE 1995 PLAN.
AGENDA ITEM THREE
PROPOSAL TO APPROVE NON-MANAGEMENT DIRECTORS'
STOCK OPTION PLAN
GENERAL
On April 12, 1997, the Company's Board of Directors unanimously approved
the Company's Non-Management Directors' Stock Option Plan (the "Directors
Plan") and recommends that shareholders vote "for" approval of the proposed
plan. The affirmative vote of a majority of all votes present at the meeting
and entitled to be cast is necessary for approval of the Directors Plan. A
copy of the Directors Plan is attached to this Proxy Statement as Exhibit A and
is incorporated by reference herein.
The Directors Plan provides for the granting of options to non-employee
directors of the Company to purchase up to an aggregate of 100,000 shares of
the Company's Common Stock. There are presently two persons (James S. Balloun
and Evan O. Grossman) eligible to participate in the Directors Plan. The Board
of Directors believes that directors who participate in stock option plans have
a closer identification with the Company by virtue of their ability as
stockholders to participate in the Company's growth and earnings. The purpose
of the Directors Plan is to promote the long-term success of the Company by
providing financial incentives to non-employee directors who are in positions
to make significant contributions toward such success. The Directors Plan is
designed to attract and retain individuals of outstanding ability to serve as
directors of the Company and to encourage such directors to acquire a
proprietary interest in the Company, to continue service as directors of the
Company and to render superior performance during such service.
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<PAGE> 22
PARTICIPANTS
The persons eligible to receive options under the Directors Plan are
directors of the Company who are not employees of the Company or any affiliate
of the Company. Subject to shareholder approval of the Directors Plan at the
Annual Meeting, options to purchase 15,000 shares of Common Stock were granted
pursuant to the Directors Plan to Mr. Balloun on April 8, 1997 and to Mr.
Grossman on May 12, 1997 at an exercise price of $7.375 per share and $12.75
per share, respectively. None of the Named Executive Officers is eligible to
receive stock option grants under the Directors Plan.
ADMINISTRATION AND OPTION GRANTS
The Directors Plan will be administered by the Board of Directors of the
Company or a committee consisting of at least two members of the Board (the
"Directors Plan Committee").
The Directors Plan is intended to be a self-governing formula plan. To
this end, the Directors Plan requires minimal discretionary action by any
administrative body with regard to any transaction under the Directors Plan.
Without the necessity of action by the Board of Directors or the Directors Plan
Committee, the Directors Plan provides for automatic stock option grants
annually on the last day of the Company's fiscal year during the term of the
Directors Plan to each non-employee director of the Company to purchase 5,000
shares of common stock at an exercise price equivalent to the fair market value
of the shares on such date. In addition, the Directors Plan provides for a
one-time grant of options to purchase 15,000 shares to all existing
non-employee directors and to any person who becomes a non- employee director
in the future.
EXERCISE PRICE
The exercise price of options granted under the Directors Plan is the mean
between the high "bid" and low "ask" prices of the Common Stock as of the close
of business for the Company's shares of Common Stock in the over-the-counter
market as reported by Nasdaq on the date the option is granted. If the
Company's Common Stock is not regularly traded in the over-the-counter market
but is listed on the Nasdaq Stock Market or is registered on a national
securities exchange, the exercise price shall be the closing price of the
Company's Common Stock on such market or exchange on the date the option is
granted.
DURATION OF OPTIONS
The shares subject to the option may be purchased in whole or in part by
the optionee from time to time after shareholder approval of the Directors
Plan, but in no event later than 10 years from the date the option is granted.
ADJUSTMENT OF SHARES
The Directors Plan Committee shall adjust the total number of shares of
Stock reserved for issuance under the Directors Plan and any outstanding
options, both as to the number of shares of Stock and the option price, for any
increase or decrease in the number of outstanding shares of Stock resulting
from a stock split or a payment of a stock dividend on the Stock, a subdivision
or combination of the Stock, a reclassification of the Stock, a merger or
consolidation of the Stock or any other like changes in the Stock or in their
value; provided that any such adjustment shall be made in a manner consistent
with the reason for the adjustment and shall be effected uniformly among
optionees. Outstanding options shall not be adjusted for cash dividends or the
issuance of rights to subscribe for additional stock or securities of the
Company.
The foregoing adjustments and the manner of application of the foregoing
provisions shall be determined by the Directors Plan Committee in its sole
discretion. Any adjustment may provide for the elimination of any fractional
share of Stock which might otherwise become subject to an option.
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<PAGE> 23
The grant of an option shall not affect in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations, or changes
in its capital or business structure, or to merge, consolidate, dissolve,
liquidate, sell or transfer all or any part of its business or assets.
NONTRANSFERABILITY
Options granted under the Directors Plan may only be transferred by will
or by the laws of descent and distribution. During the optionee's lifetime,
such options are exercisable only by the optionee.
TERM OF THE DIRECTORS PLAN
Options may be granted pursuant to the Directors Plan from time to time,
but no later than 10 years from the date the plan was adopted by the Board of
Directors.
AMENDMENT OR TERMINATION OF THE DIRECTORS PLAN
The Board of Directors at any time may amend or terminate the Plan without
shareholder approval; provided, however, that the Board of Directors may
condition any amendment on the approval of the shareholders of the Company if
such approval is necessary or advisable with respect to tax, securities (which
require such approval for a material increase of the number of shares of Stock
subject to options, and for material modifications to the eligibility
requirements of the Directors Plan, among others) or other applicable laws to
which the Company, the Directors Plan or optionees are subject.
Notwithstanding the foregoing, in no event shall the Board of Directors amend
the Directors Plan more than once every six (6) months, other than to comport
with changes in the Code, the Employee Retirement Income Security Act of 1974,
or the rules thereunder. No amendment or termination of the Plan shall
adversely affect the rights of an optionee with regard to his options without
his consent.
FEDERAL INCOME TAX CONSEQUENCES
All options to be granted under the Directors Plan are non-statutory
options which are not entitled to special treatment under Section 422 of the
Code. The grant of a stock option under the Directors Plan does not result in
taxable income to the optionee. Upon the exercise of a non-statutory option,
the optionee recognizes ordinary income in an amount equal to the difference
between the option price and the fair market value of the shares on the date of
exercise. The Company is not entitled to an income tax deduction with respect
to the grant of a stock option or the sale of stock acquired pursuant thereto.
The Company is permitted a deduction equal to the amount of ordinary income the
optionee is required to recognize as a result of the exercise of a
non-statutory stock option.
The Directors Plan permits an optionee to pay all or a part of the
purchase price for shares acquired pursuant to the exercise of a non-statutory
option by transferring to the Company other shares of the Company's common
stock owned by the optionee. If an optionee exchanges previously acquired
common stock pursuant to the exercise of a non-qualified stock option, the
Internal Revenue Service has ruled that the optionee will not be taxed on the
unrealized appreciation of the shares surrendered in the exchange. In other
words, the optionee is not taxed on the difference between his cost basis for
the old shares and their fair market value on the date of the exchange, even
though the previously acquired shares are valued at the current market price
for purposes of paying all or part of the option price.
The Directors Plan is not qualified under Section 401(a) of the Code and
is not subject to the provisions of the Employee Retirement Income Security Act
of 1974.
The preceding discussion is based upon federal tax laws and regulations in
effect on the date of this Proxy Statement which are subject to change.
Furthermore, the foregoing is only a general discussion of the federal income
tax consequences of the Directors Plan and does not purport to be a complete
description of all federal income tax aspects of the Directors Plan. Option
holders may also be subject to state and local
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<PAGE> 24
taxes in connection with the grant or exercise of options granted under the
Directors Plan and the sale or other disposition of shares acquired upon
exercise of the options.
The approval of the holders of a majority of the shares of the Company
Common Stock present and voting at the Annual Meeting is necessary to approve
the Directors Plan. THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
APPROVE THE DIRECTORS PLAN.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has served as independent auditors of the Company for
the fiscal year ended December 31, 1996 and have been selected by the Board of
Directors to serve as independent auditors of the Company for the fiscal year
ending December 31, 1997. Representatives of Arthur Andersen, LLP are expected
to be present at the shareholders' meeting and will have the opportunity to
make a statement if they desire to do so and to respond to appropriate
questions.
ANNUAL REPORT ON FORM 10-K
The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, as filed with the Securities and Exchange Commission, is
available to shareholders who make written request therefor to the Company's
Public Relations Department, 1000 Alderman Drive, Alpharetta, Georgia 30302.
Copies of exhibits and basic documents filed with that report or referenced
therein will be furnished to shareholders of record upon request.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the Company's 1998
annual meeting must be received at the Company's principal executive offices by
April 15, 1998 in order to be eligible for inclusion in the Company's proxy
statement and form of proxy for that meeting.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
annual meeting. However, if other matters should come before the annual
meeting it is the intention of the persons named in the enclosed form of Proxy
to vote the Proxy in accordance with their judgment of what is in the best
interest of the Company.
By Order of the Board of Directors,
/s/ Erez Goren
EREZ GOREN
Co-Chairman of the Board
and Chief Executive Officer
Alpharetta, Georgia
August 18, 1997
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<PAGE> 25
EXHIBIT A
RADIANT SYSTEMS, INC.
NON-MANAGEMENT DIRECTORS' STOCK OPTION PLAN
1. PURPOSE.
Radiant Systems, Inc., a Georgia corporation (the "Company"), adopts the
Radiant Systems, Inc. Non-Management Directors' Stock Option Plan (the "Plan")
to secure and retain the services of those directors of the Company who are not
employed by the Company or any of its affiliates (the "Eligible Optionees") by
giving them an opportunity to invest in the future success of the Company.
2. ADMINISTRATION.
The Plan shall be administered by the Board of Directors of the Company
(the "Board of Directors") or a committee consisting of at least two of its
members (the "Committee").
Each member of the Committee shall serve at the pleasure of the Board of
Directors, which may fill any vacancy, however caused, in the Committee. The
Committee shall select one of its members as a chairman and shall hold meetings
at the times and in the places as it may deem advisable. All actions the
Committee takes shall be made by majority decision. Any action evidenced by a
written instrument signed by all of the members of the Committee shall be as
fully effective as if the Committee had taken the action by majority vote at a
meeting duly called and held.
The Board of Directors or the Committee shall have complete and conclusive
authority to (1) interpret the Plan, (2) prescribe, amend and rescind rules and
regulations relating to it, and (3) make all other determinations necessary or
advisable for the administration of the Plan. The Board of Directors' or the
Committee's determinations on these matters shall be conclusive.
In addition to any other rights of indemnification that they may have as
directors of the Company or as members of the Committee, the directors of the
Company and members of the Committee shall be indemnified by the Company
against the reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of action taken or failure to act under or in
connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in settlement thereof (provided the settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in the action, suit or
proceeding that the director or Committee member is liable for negligence or
misconduct in the performance of his duties.
3. GRANT OF OPTIONS.
a. Initial Grants. Each Eligible Optionee serving as a
member of the Board of Directors on the Effective Date (as defined in Section 6
below) shall be granted an option as of the Effective Date to purchase 15,000
shares of common stock, no par value per share, of the Company (the "Stock").
b. Initial Grants Upon Appointment to the Board of
Directors. Each Eligible Optionee who is first elected or appointed to serve
as a member of the Board of Directors following the Effective Date shall be
granted an option as of the first business day following the Eligible
Optionee's first day of service as a member of the Board of Directors to
purchase 15,000 shares of Stock.
c. Subsequent Grants During Tenure as a Director. Each
Eligible Optionee shall be granted as of the last business day of each fiscal
year of the Company following the Effective Date an option to purchase
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<PAGE> 26
5,000 shares of Stock; provided the Eligible Optionee continues to serve as a
member of the Board of Directors as of the last business day of that fiscal
year.
d. Conditions to Grants. No options under the Plan
shall be granted to an Eligible Optionee who is otherwise precluded from
receiving a grant of the Company's equity securities. In the event the
remaining number of shares of Stock reserved for issuance under the Plan are
insufficient to grant options for the appropriate number of shares of Stock to
all Eligible Optionees as of any grant date, then no options shall be granted
as of that grant date.
4. STOCK SUBJECT TO PLAN.
The Company has authorized and reserved for issuance upon the exercise of
options pursuant to the Plan an aggregate of one hundred thousand (100,000)
shares of Stock. If any option is canceled, expires or terminates without the
respective optionee exercising it in full, options with respect to those
unpurchased shares of Stock may be granted to that same optionee or to another
eligible individual or individuals under the terms of this Plan.
The Committee shall adjust the total number of shares of Stock reserved
for issuance under the Plan and any outstanding options, both as to the number
of shares of Stock and the option price, for any increase or decrease in the
number of outstanding shares of Stock resulting from a stock split or a payment
of a stock dividend on the Stock, a subdivision or combination of the Stock, a
reclassification of the Stock, a merger or consolidation of the Stock or any
other like changes in the Stock or in their value; provided that any such
adjustment shall be made in a manner consistent with the reason for the
adjustment and shall be effected uniformly among optionees. Outstanding
options shall not be adjusted for cash dividends or the issuance of rights to
subscribe for additional stock or securities of the Company.
The foregoing adjustments and the manner of application of the foregoing
provisions shall be determined by the Committee in its sole discretion. Any
adjustment may provide for the elimination of any fractional share of Stock
which might otherwise become subject to an option.
The grant of an option shall not affect in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations, or changes
in its capital or business structure, or to merge, consolidate, dissolve,
liquidate, sell or transfer all or any part of its business or assets.
5. TERMS AND CONDITIONS OF ALL OPTIONS.
Each option granted pursuant to the Plan shall be evidenced by a stock
option agreement or other appropriate documentation (the "Agreement") in the
form and containing the terms and conditions as the Committee from time to time
may determine, provided that each Agreement will:
a. state an exercise price per share which will be the
Average Market Price of a share of stock on the date of the grant. "Average
Market Price" shall mean the mean between the high "bid" and low "ask" prices
as of the close of business for the Company's shares of Common Stock in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System (or other national quotation service).
If the Company's Common Stock is not regularly traded in the over-the-counter
market but is listed on The Nasdaq Stock Market or is registered on a national
securities exchange, "Average Market Price" shall mean the closing price of the
Company's Common Stock on such stock market or national securities exchange.
In the event there shall be no public market for the shares of Common Stock on
such date, the fair market value of the shares of Common Stock shall be
determined in good faith by the Board of Directors;
b. state the terms and conditions for payment, except as
otherwise provided by Plan Section 7;
c. state that the option shall expire on the earlier of
the tenth anniversary of the date of grant or the first anniversary of the date
that the optionee ceases to serve as a member of the Board of Directors;
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<PAGE> 27
d. provide that an option granted pursuant to Section
3(a) or (b) above shall become exercisable as to the shares subject thereto in
equal one-third increments as of the first, second and third anniversaries
following the date of grant; provided, however, any such option shall become
exercisable immediately in full upon the later of: (1) six (6) months following
the date of grant; or (2) the earlier of (i) the death of the optionee, or (ii)
the disability (as defined in Section 72(m)(7) of the Internal Revenue Code of
1986, as amended (the "Code")) of the optionee;
e. provide that an option granted pursuant to Section
3(c) above shall become exercisable in full six (6) months following the date
of grant;
f. provide that the option is not transferrable by the
optionee other than as provided by (1) the will of the optionee, or (2) the
applicable laws of descent and distribution, and is exercisable during the
optionee's lifetime only by the optionee except as provided in Subsection (g)
below; and
g. provide that if an optionee dies or becomes disabled
(as defined in Code Section 72(m)(7)) during the term of the option, the option
may be exercised by the optionee or (to the extent the optionee would have been
entitled to do so) by a legatee or legatees of the optionee under his last
will, or by his guardian.
6. TERM OF PLAN.
The effective date of the Plan (the "Effective Date") shall be the date
the Plan is adopted by the Board of Directors or the date the Plan is approved
by the shareholders of the Company, whichever is earlier. The Plan must be
approved by the affirmative vote of not less than a majority of the votes
entitled to be cast thereon, which shareholder vote must be taken within twelve
(12) months after the date the Plan is adopted by the Board of Directors. Such
shareholder vote shall not alter the Effective Date of the Plan. In the event
shareholder approval of the adoption of the Plan is not obtained within the
aforesaid twelve (12) month period, then any options granted in the intervening
period shall be void.
The Plan shall remain in effect until all shares subject to or which may
become subject to the Plan shall have been purchased pursuant to Options
granted under the Plan; provided that Options under the Plan must be granted
within ten (10) years from the Effective Date.
7. EXERCISE OF OPTION.
The optionee may purchase shares of Stock subject to an option (the
"Shares") only upon receipt by the Company of a notice in writing from the
optionee of his intent to purchase a specific number of Shares and which notice
contains such representations regarding compliance with the federal and state
securities laws as the Committee may reasonably request. The purchase price
shall be paid in full upon the exercise of an option and no Shares shall be
issued or delivered until full payment therefor has been made. Payment of the
purchase price for all Shares purchased pursuant to the exercise of an option
shall be made, at the discretion of the optionee, as follows:
a. by payment of cash or certified check;
b. by delivery to the Company of a number of shares of
common stock of the Company which have been owned by the optionee for at least
six months prior to the date of the option's exercise, having a fair market
value on the date of exercise, as determined by the Committee in its sole
discretion, either equal to the purchase price or in combination with cash to
equal the purchase price; or
c. by receipt of the purchase price in cash from a
broker, dealer or other "creditor" as defined by Regulation T issued by the
Board of Governors of the Federal Reserve System following delivery by the
optionee to the Committee of instructions in a form acceptable to the Committee
regarding delivery of such broker, dealer or other creditor of that number of
shares of common stock with respect to which the option is exercised.
A-3
<PAGE> 28
Until stock certificates reflecting the Shares accruing to the optionee
upon the exercise of the option are issued to the optionee, the optionee shall
have no rights as a shareholder with respect to the Shares. The Company shall
make no adjustment to the Shares for any dividends or distributions or other
rights for which the record date is prior to the issuance of that stock
certificate, except as the Plan otherwise provides.
8. ASSIGNABILITY.
Except as Plan Section 5 permits, no option or any of the rights and
privileges thereof accruing to an optionee shall be transferred, assigned,
pledged or hypothecated in any way whether by operation of law or otherwise,
and no option, right or privilege shall be subject to execution, attachment or
similar process.
9. NO RIGHT TO CONTINUED SERVICE.
No provision in the Plan or any option shall confer upon any optionee any
right to continue performing services for or to interfere in any way with the
right of the shareholders of the Company to remove such optionee as a director
of the Board of Directors at any time for any reason.
10. AMENDMENT AND TERMINATION.
The Board of Directors at any time may amend or terminate the Plan without
shareholder approval; provided, however, that the Board of Directors may
condition any amendment on the approval of the shareholders of the Company if
such approval is necessary or advisable with respect to tax, securities (which
require such approval for a material increase of the number of shares of Stock
subject to options, and for material modifications to the eligibility
requirements of the Plan, among others) or other applicable laws to which the
Company, the Plan, optionees or Eligible Optionees are subject.
Notwithstanding the foregoing, in no event shall the Board of Directors amend
the Plan more than once every six (6) months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act of 1974, or
the rules thereunder. No amendment or termination of the Plan shall adversely
affect the rights of an optionee with regard to his options without his
consent.
11. GENERAL RESTRICTION.
Each option is subject to the condition that if at any time the Company,
in its discretion, shall determine that the listing, registration or
qualification of the shares of Stock covered by such option upon any securities
exchange or under any state or federal law is necessary or desirable as a
condition of or in connection with the granting of such option or the purchase
or delivery of shares of Stock thereunder, the delivery of any or all shares of
Stock pursuant to such option may be withheld unless and until such listing,
registration or qualification shall have been effected. If a registration
statement is not in effect under the Securities Act of 1933 or any applicable
state securities laws with respect to the shares of Stock purchasable or
otherwise deliverable under the option then outstanding, the Company may
require, as a condition of exercise of any option or as a condition to any
other delivery of shares of Stock pursuant thereto, that the optionee or the
optionee's representative represent, in writing, that the shares of Stock
received pursuant to the option are being acquired for investment and not with
a view to distribution and agree that the shares of Stock will not be disposed
of except pursuant to an effective registration statement, unless the Company
shall have received an opinion of counsel that such disposition is exempt from
such requirement under the Securities Act of 1933 and any applicable state
securities laws. The Company may endorse on certificates representing shares
of Stock delivered pursuant to an option such legends referring to the
foregoing representations or restrictions or any other applicable restrictions
on resale as the Company, in its discretion, shall deem appropriate.
Options granted to persons subject to Section 16(b) of the Securities
Exchange Act of 1934 (the "Exchange Act") must comply with Rule 16b-3 and shall
contain such additional conditions or restrictions as may be required
thereunder to qualify for the maximum exemption from Section 16 of the Exchange
Act with respect to Plan transactions.
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<PAGE> 29
12. REORGANIZATION.
In case the Company is merged or consolidated with another corporation and
the Company is not the surviving corporation, or in case the property or stock
of the Company is acquired by another corporation, or in case of a separation,
reorganization, recapitalization or liquidation of the Company, the Board of
Directors of the Company, or the Board of Directors of any corporation assuming
the obligations of the Company hereunder, shall either (i) make appropriate
provision for the protection of any outstanding Options by the substitution on
an equitable basis of appropriate stock of the Company, or of the merged,
consolidated or otherwise reorganized corporation which will be issuable in
respect to the shares of Common Stock of the Company, provided only that the
excess of the aggregate fair market value of the shares subject to option
immediately after such substitution over the purchase price thereof is not more
than the excess of the aggregate fair market value of the shares subject to
option immediately before such substitution over the purchase price thereof, or
(ii) upon written notice to the Optionee provide that the Option (including the
shares not then exercisable) must be exercised within sixty (60) days of the
date of such notice or it will be terminated.
13. CHOICE OF LAW.
The laws of the State of Georgia shall govern the Plan.
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<PAGE> 30
APPENDIX
RADIANT SYSTEMS, INC.
1000 ALDERMAN DRIVE
ALPHARETTA, GEORGIA 30202
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 1997 ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Erez Goren and John H. Heyman or either of
them, with power of substitution to each, the proxies of the undersigned to vote
the Common Stock of the undersigned at the Annual Meeting of Shareholders of
RADIANT SYSTEMS, INC. to be held on September 11, 1997, at 4:00 p.m. at the
Buckhead Club, 3343 Peachtree Road, 18th Floor, Atlanta, Georgia 30326, and any
adjournments or postponements thereof:
<TABLE>
<S> <C> <C> <C> <C>
1. To elect four (4) directors to serve for their respective terms and
until their successors are elected and qualified.
[ ] FOR ALL NOMINEES LISTED BELOW (except as marked to the [ ] WITHHOLD AUTHORITY to vote for all nominees
contrary below). listed below
EREZ GOREN and ALON GOREN to serve as Class I Directors for a term
of three years;
JAMES S. BALLOUN to serve as a Class II Director for a term of one
year; and
EVAN O. GROSSMAN to serve as a Class III Director for a term of two
years.
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee write the
nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. To approve an amendment to the 1995 Stock Option Plan of the Company to
increase the number of shares available for grant thereunder from 4,000,000
shares to 5,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve and adopt the Company's Non-Management Directors' Stock Option
Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued and to be signed on reverse side)
(continued from other side)
4. To transact such other business incidental to the conduct of the Annual
Meeting as may properly become before the Annual Meeting or any adjournments or
postponements thereof.
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" THE ABOVE PROPOSALS AND UNLESS
INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED, THIS PROXY
WILL BE SO VOTED.
Please date and sign this Proxy
exactly as name(s) appears on
the mailing label
--------------------------------
--------------------------------
Print Name(s):
------------------
--------------------------------
NOTE: When signing as an
attorney, trustee, executor,
administrator or guardian,
please give your title as such.
If a corporation or partnership,
give full name by authorized
officer. In the case of joint
tenants, each joint owner must
sign.
Dated: , 1997
-------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
