SCHEDULE 14A
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:
|_| Preliminary proxy statement |_| Confidential, for use of
|X| Definitive proxy statement the Commission only (as
permitted by Rule
14a-6 (C)(2))
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Presstek, Inc.
(Name of Registrant as Specified in Its Charter)
Board of Directors of Presstek, Inc.
(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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
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|_| 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:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
PRESSTEK, INC.
8-9 Commercial Street
Hudson, New Hampshire 03051
April 23, 1998
Dear Fellow Stockholders:
You are cordially invited to attend our Annual Meeting of Stockholders
which will be held on Thursday, May 28, 1998 at 4:00 P.M. in Ballrooms III and
IV at the Crowne Plaza Manhattan, 1605 Broadway, New York, New York 10019.
The Notice of Annual Meeting and Proxy Statement which follow describe the
business to be conducted at the meeting.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted. After reading the enclosed Notice of
Annual Meeting and Proxy Statement, I urge you to complete, sign, date and
return your proxy card in the envelope provided. If the address on the
accompanying material is incorrect, please inform our Transfer Agent,
Continental Stock Transfer & Trust Company, in writing, at 2 Broadway, New York,
New York 10004.
Your vote is very important, and we will appreciate a prompt return of your
signed proxy card. We hope to see you at the meeting.
Cordially,
Robert Howard
Chairman of the Board
<PAGE>
PRESSTEK, INC.
8-9 Commercial Street
Hudson, New Hampshire 03051
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1998
----------
To the Stockholders of PRESSTEK, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Presstek,
Inc. (the "Company") will be held on Thursday, May 28, 1998, at 4:00 P.M. in
Ballrooms III and IV at the Crowne Plaza Manhattan, 1605 Broadway, New York, New
York 10019, for the following purposes:
1. To elect eight (8) directors to hold office until the next Annual
Meeting of Stockholders and until their respective successors have been
duly elected and qualified;
2. To approve the Company's 1998 Stock Incentive Plan; and
3. To transact such other business as may properly come before the
Annual Meeting of Stockholders or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on April 9, 1998 are
entitled to notice of and to vote at the Annual Meeting of Stockholders or any
adjournments thereof.
By Order of the Board of Directors,
Robert Howard
Chairman of the Board
April 23, 1998
- --------------------------------------------------------------------------------
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING:
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE
PROVIDED FOR THAT PURPOSE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE
PRESENT AT THE MEETING YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND
EXERCISE THE RIGHT TO VOTE YOUR SHARES PERSONALLY.
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<PAGE>
PROXY STATEMENT
PRESSTEK, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1998
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of PRESSTEK, INC. (the "Company") for use at
the Annual Meeting of Stockholders to be held on May 28, 1998 (the "Annual
Meeting"), including any adjournment or adjournments thereof, for the purposes
set forth in the accompanying Notice of Meeting.
Management intends to mail this proxy statement and the accompanying form
of proxy to stockholders on or about April 24, 1998.
Proxies in the accompanying form, duly executed and returned to the
management of the Company and not revoked, will be voted at the Annual Meeting.
Any proxy given pursuant to such solicitation may be revoked by the stockholder
at any time prior to the voting of the proxy by a subsequently dated proxy, by
written notification to the Secretary of the Company, or by personally
withdrawing the proxy at the Annual Meeting and voting in person.
The address and telephone number of the principal executive offices of the
Company are:
8-9 Commercial Street
Hudson, New Hampshire 03051
Telephone No.: (603) 595-7000
OUTSTANDING STOCK AND VOTING RIGHTS
Only stockholders of record at the close of business on April 9, 1998 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the Record Date, there were issued and outstanding 31,990,714 shares of the
Company's common stock, $.01 par value per share (the "Common Stock"), the
Company's only class of voting securities. Each share entitles the holder to one
vote on each matter submitted to a vote at the Annual Meeting.
<PAGE>
Voting Procedures
The directors will be elected by the affirmative vote of the holders of a
plurality of the shares of Common Stock present in person or represented by
proxy at the Annual Meeting, provided a quorum is present. A quorum is present
if, as of the Record Date, the holders of at least a majority of the outstanding
shares of Common Stock are present in person or represented by proxy at the
Annual Meeting. All other matters at the meeting will be decided by the
affirmative vote of the holders of a majority of the shares of Common Stock cast
with respect thereto, provided a quorum is present. Votes will be counted and
certified by one or more Inspector(s) of Election who are expected to be
employees of Continental Stock Transfer & Trust Company, the Company's transfer
agent. In accordance with Delaware law, abstentions and "broker non-votes" (i.e.
proxies from brokers or nominees indicating that such persons have not received
instructions from the beneficial owner or other persons entitled to vote shares
as to a matter with respect to which the brokers or nominees do not have
discretionary power to vote) will be treated as present for purposes of
determining the presence of a quorum. For purposes of determining approval of a
matter presented at the Annual Meeting, abstentions will be deemed present and
entitled to vote and will, therefore, have the same legal effect as a vote
"against" a matter presented at the meeting. Broker non-votes will be deemed not
entitled to vote on the subject matter as to which the non-vote is indicated and
will, therefore, have no legal effect on the vote on that particular matter.
The enclosed proxies will be voted in accordance with the instructions
thereon. Unless otherwise stated, all shares represented by such proxy will be
voted as instructed. Proxies which are executed but which do not contain
specific instructions will be voted in favor of the proposals contained herein.
Proxies may be revoked as noted above.
ELECTION OF DIRECTORS
At this year's Annual Meeting of Stockholders, eight (8) directors will be
elected to hold office for a term expiring at the Annual Meeting of Stockholders
to be held in 1999. Each director will be elected to serve until a successor is
elected and qualified or until the director's earlier resignation or removal.
At this year's Annual Meeting of Stockholders, the proxies granted by
stockholders will be voted individually for the election, as directors of the
Company, of the persons listed below, unless a proxy specifies that it is not to
be voted in favor of a nominee for director. In the event any of the nominees
listed below shall be unable to serve, it is intended
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<PAGE>
that the proxy will be voted for such other nominees as are designated by the
Board of Directors. Each of the persons named below has indicated to the Board
of Directors of the Company that he will be available to serve.
Name Age Position
---- --- --------
Robert Howard 74 Chairman of the Board and Director
Richard A. Williams 63 Chief Executive Officer,
Secretary, Vice Chairman of the
Board and Director
Robert E. Verrando 64 President, Chief Operating
Officer and Director
Dr. Lawrence Howard 45 Director
Bert DePamphilis 65 Director
John W. Dreyer 60 Director
John B. Evans 60 Director
Harold N. Sparks 76 Director
Robert Howard, a founder of the Company, has been Chairman of the Board of
Directors since June 1988 and a director of the Company since September 1987. He
served as President and Treasurer of the Company from October 1987 to June 1988.
Mr. Howard, the founder of Howtek, Inc. ("Howtek"), a publicly-held company
engaged in the manufacture of electronic prepress equipment, has served as
Chairman of the Board of Howtek since August 1984. Mr. Howard served as the
President of Howtek from August 1984 through November 1987 and as its Chief
Executive Officer from August 1984 to December 1993. Mr. Howard, the inventor of
the first impact dot matrix printer, was the founder of Centronics Data Computer
Corporation ("Centronics"), a manufacturer of printers. Mr. Howard served as
President and Chairman of the Board of Directors of Centronics from 1969 to
April 1980, resigning from the Board of Directors of Centronics in 1983. From
April 1980 until 1983, Mr. Howard was principally engaged in the management of
his investments. In February 1994, Mr. Howard entered into a settlement
agreement in the form of a consent decree with the Securities and Exchange
Commission (the "Commission") in connection with the Commission's investigation
covering trading in the common stock of Howtek by an acquaintance of Mr. Howard
and a business associate of such acquaintance. Mr. Howard, without admitting or
denying the Commission's allegations of securities laws violations, agreed to
pay a civil penalty and to the entry of a permanent injunction against future
violations of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of
1934 ("Exchange Act"). In addition, in December 1997, in
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<PAGE>
connection with the Commission's investigation covering trading in the
securities of the Company (the "SEC Investigation"), Mr. Howard, without
admitting or denying the Commission's allegations of securities laws violations,
agreed to pay a civil penalty of $2,700,000 and to the entry of a final judgment
enjoining him from future violations of Sections 10(b) and 13(a) and Rules
10b-5, 12b-20, 13a-1 and 13a-20 of the Exchange Act.
Richard A. Williams, has been Chief Executive Officer and Vice Chairman of
the Board of the Company since February 1996. He has been Secretary of the
Company since June 1988 and a director of the Company since November 1987. From
June 1988 to February 1996 Mr. Williams served as an Executive Vice President
and Chief Operating Officer of the Company. From November 1987 to June 1988 Mr.
Williams served as Vice President of the Company, and served as its Director of
Operations from September 1987 through October 1987. From June 1985 to February
1987, Mr. Williams served as Vice President of Engineering for Centronics, where
he was responsible for line matrix and laser printer development and
introduction.
Robert E. Verrando has been President and Chief Operating Officer of the
Company since February 1996 and a director of the Company since November 1994.
From October 1994 to February 1996 he served as an Executive Vice President of
the Company. From July 1993 to October 1994, Mr. Verrando was employed as a
consultant to the graphic arts industry. From October 1986 through July 1993, he
was employed in a variety of executive positions with Compugraphic Corporation
and Agfa Compugraphic/Agfa Division, Miles, Inc., most recently as Vice
President and General Manager, Business Imaging Systems Group. From April 1981
to September 1986 he was employed as Vice President - Business Development of
A.B. Dick Company. In December 1997, in connection with the SEC Investigation,
Mr. Verrando, without admitting or denying the Commission's allegations of
securities laws violations, agreed to pay a civil penalty of $200,000 and to the
entry of a final judgment enjoining him from future violations of Sections 10(b)
and 13(a) and Rules 10b- 5, 12b-20, 13a-1 and 13a-20 of the Exchange Act.
Dr. Lawrence Howard, a founder of the Company, has been a director of the
Company since November 1987 and served as Vice Chairman of the Board from
November 1992 to February 1996. He served as Chief Executive Officer and
Treasurer of the Company from June 1988 to June 1993; served as President from
June 1988 to November 1992; and was Vice President from October 1987 to June
1988. From March 1997 to the present, Dr. Howard has been a general partner of
Hudson Partners, L.P., a limited partnership that is qualified as a small
business investment company. From July 1995 to March 1997, Dr. Howard was
President of Howard Capital Partners, Inc., an investment banking firm. From
July 1994 to July 1995 Dr. Howard was Senior Managing Director of Whale
Securities Co. L.P., an NASD registered broker-dealer.
- 4 -
<PAGE>
From October 1992 through June 1994 Dr. Howard was President and Chief Executive
Officer of LH Resources, Inc., a management and financial consulting firm. Dr.
Howard is a director of Resurgence Properties, Inc., a public company engaged in
investments in and management of real estate. Dr. Howard is the son of Robert
Howard.
Bert DePamphilis has been a director of the Company since June 1990. Mr.
DePamphilis has been an independent consultant in the graphic arts industry
since May 1995. From September 1994 through April 1995 he was a consultant to
Applied Graphics Technology ("AGT"), the world's largest prepress service. Mr.
DePamphilis was the founder of, and from 1976 through August 1994, served as a
principal of PDR Royal, Inc., a color prepress service for advertising agencies
and Fortune 100 companies that ceased independent operations when it became a
division of AGT in September 1994.
John W. Dreyer has been a director of the Company since February 1996. Mr.
Dreyer has been employed by Pitman Company ("Pitman"), the largest graphic arts
and image supplier in the United States, since 1965. He has served as Pitman's
President since 1977 and has also served as its Chief Executive Officer since
1978.
John B. Evans has been a director of the Company since December 1997. From
August 1995 to the present, Mr. Evans has been President and Chief Executive
Officer of R.E.M. Productions, Inc., a media consulting firm. From March 1992 to
August 1995, Mr. Evans served as President and Chief Executive Officer of News
Electronic Data, Inc., a subsidiary of News Corporation.
Harold N. Sparks has been a director of the Company since February 1989.
From 1971 to September 1995, Mr. Sparks was the President and Chief Executive
Officer of Fashion Neckwear Co., Inc., a manufacturer of men's neckties. Mr.
Sparks has acted as a consultant to Fashion Neckwear Co., Inc. since September
1995.
Directors are elected annually by the stockholders. During the fiscal year
ended January 3, 1998, the Board of Directors held four meetings which were
attended by all of the directors eligible to attend except for Mr. Sparks who
was unable to attend one meeting. In addition, the Board took other action by
unanimous written consents in lieu of a meeting. During the fiscal year ended
January 3, 1998, the Company did not have standing nominating or compensation
committees of the Board of Directors or committees performing similar functions.
The Company has recently appointed a compensation committee of the Board. The
Company has an audit committee which supervises the audit and financial
procedures of the Company. The audit committee is currently comprised of Messrs.
DePamphilis and Verrando and Dr. Howard. The audit committee of the Board of
Directors held one meeting during the fiscal year ended January 3, 1998.
- 5 -
<PAGE>
EXECUTIVE OFFICERS
In addition to Richard A. Williams and Robert E. Verrando, the Company's
executive officers are Glenn J. DiBenedetto and Richard Loring. Officers are
elected annually by the Board of Directors and serve at the discretion of the
Board.
Glenn J. DiBenedetto, 48, has served as Chief Financial Officer of the
Company since November 1990. Mr. DiBenedetto has been a principal with the firm
of DiBenedetto & Company, P.A., certified public accountants, since July 1989.
From 1984 to July 1989, Mr. DiBenedetto was a principal with the firm of Newton
& DiBenedetto, P.A., certified public accountants. Under his arrangement with
the Company, Mr. DiBenedetto engages in other activities and is not required to
devote his full business time to the affairs of the Company.
Richard Loring, 59, was elected as an Executive Vice President of the
Company in April 1997. From February 1996 until his appointment as an Executive
Vice President, he served as a consultant to the Company. For more than fifteen
years prior thereto, Mr. Loring served as Corporate Senior Manager of Polaroid
Corp.
Compliance with Section 16(a) of the Exchange Act.
Based solely upon the Forms 3, 4 and 5 provided to it, the Company believes
that all of its officers, directors and other reporting persons timely filed all
reports required to be filed except that Mr. John Evans, who timely filed a Form
3 upon being appointed to the Company's Board of Directors in October 1997,
filed an amended Form 3 to reflect his ownership of certain shares that were
inadvertently not reported on his initial Form 3.
Legal Proceedings
As previously disclosed, during 1996 and 1997, seven federal class action
lawsuits were filed against the Company and others, all of which have been
consolidated before the United States District Court, District of New Hampshire,
under the common caption Bill Berke, et al. v. Presstek, Inc., et al. The
plaintiffs have jointly filed and served a Second Consolidated Amended Class
Action Complaint naming the Company, certain of its present or former officers
and directors (the "Berke Officer and Director Defendants"), and other parties
as defendants. The plaintiffs allege, among other things, that the Company
and/or the Berke Officer and Director Defendants violated Section 10(b) ("Sect.
10(b)") of the Exchange Act and Rule 10b-5 ("Rule 10b-5") promulgated
thereunder, and violated New Hampshire Law; and that the Berke Officer and
Director Defendants violated Section 20(a) ("Sect. 20(a)") of the Exchange Act.
The Complaint alleges, among other things, that the Company and/or the Berke
Officer and
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<PAGE>
Director Defendants issued false and misleading reports, failed to disclose
material facts including a misstatement of earnings in the Company's financial
statements for the first quarter ending March 30, 1996, misstated or failed to
fully disclose the Company's supply contracts with, payments received from,
sales made by, backlog or orders received from, and delays in production by the
Company's principal customer, and alleged circulation of, and failed to correct
certain analyst research reports concerning the Company that contained alleged
misrepresentations including allegedly inflated financial projections.
Certain of the Berke Officer and Director Defendants are alleged to have sold
the Company's Common Stock at artificially inflated prices while in possession
of material non-public information concerning the Company. The plaintiffs seek
unspecified compensatory and punitive damages, attorney and expert fees and
other costs and expenses incurred by the plaintiffs in connection with the
action.
As previously disclosed, on July 16, 1996, Richard Strauss commenced a
derivative suit on behalf of the Company in the Court of Chancery of the State
of Delaware, New Castle County, against certain officers and directors of the
Company (the "Strauss Officer and Director Defendants"). The plaintiff alleges
that the Strauss Officer and Director Defendants breached their fiduciary duties
to the Company and its public stockholders and wasted corporate assets, by
making allegedly false and misleading statements of fact or concealing material
facts concerning the viability of the Company's "key" patent and its proprietary
interest in its PEARL(R) technology, causing the Company to fail to properly
disclose the scope of the SEC Investigation, and causing the Company to misstate
its financial results for the first quarter of 1996. The plaintiff also alleges
that certain of the Strauss Officer and Director Defendants sold securities of
the Company at inflated prices while they were in possession of material
non-public information concerning the Company. The plaintiff alleges that the
actions of the Strauss Officer and Director Defendants resulted in breaches of
Sect. 10(b) and Rule 10b-5 which resulted in other lawsuits being commenced
against the Company which will require the Company to expend resources to
defend. The plaintiff seeks to recover, on behalf of the Company, unspecified
damages allegedly sustained by the Company as a result of the defendants'
alleged breaches of fiduciary duty, disgorgement of any profits derived from
their sale of the Company's Common Stock, as well as other relief. This action
had been stayed pending the outcome of the Berke action.
As previously disclosed, on March 14, 1997, James P. Cassidy commenced a
derivative suit on behalf of the Company in the United States District Court for
the District of New Hampshire against certain of the Company's officers and
directors (the "Cassidy Officer and Director Defendants"), and the Company's
independent auditor. The plaintiff alleges that the Cassidy Officer and Director
Defendants breached their fiduciary duty to
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<PAGE>
the Company and its public stockholders and wasted corporate assets by making
false and misleading statements of fact or concealing material facts concerning
the scope and viability of the Company's "key" patents and its proprietary
interest in its PEARL(R) technology, and causing the Company to issue false and
misleading reports or failure to disclose material facts including a
misstatement of earnings in the Company's financial statements for the year
ending December 30, 1995, and for the first quarter ending March 30, 1996. The
plaintiff also alleges that certain of the Cassidy Officer and Director
Defendants sold securities of the Company at inflated prices while they were in
possession of material non-public information concerning the Company. The
plaintiff also alleges that the actions of the Cassidy Officer and Director
Defendants resulted in breaches of Sect. 10(b) and Rule 10b-5 which resulted in
other lawsuits being commenced against the Company which will require the
Company to expend resources to defend, and also constituted gross negligence and
breaches of their contractual obligations to the Company. The plaintiff seeks to
recover on behalf of the Company unspecified damages allegedly sustained by the
Company as a result of the defendants' actions as alleged, disgorgement of any
profits from the sale of the Company's Common Stock, as well as other relief
against the defendants. By agreement of the parties, this action has been stayed
pending the outcome of certain motions made by the parties in the Berke action.
As previously disclosed, on June 16, 1997, Seena Stevens Silverman
commenced a purported class action in the United States District Court for the
District of New Hampshire against the Company and certain of its present and/or
former officers and directors (the "Stevens Officer and Director Defendants"),
and other parties. The plaintiff purports to bring this action on behalf of a
class of persons who sold put options in the Common Stock of the Company between
November 7, 1995 and June 20, 1996. The complaint alleges, among other things,
that the Company and/or the Stevens Officer and Director Defendants violated
Sect. 10(b) and Rule 10b-5, and violated New Hampshire Law; and that the Stevens
Officer and Director Defendants violated Sect. 20(a). The plaintiff alleges that
the defendants defrauded the putative class members by manipulating the price
and supply of the Company's Common Stock, issuing false and misleading
statements regarding the nature of the Company's proprietary PEARL(R)
technology, failing to disclose the true depth and target of the SEC
Investigation, and making misleading statements regarding the Company's claims
to its PEARL(R) technology and its contract with the Company's principal
customer. The plaintiff also alleges that certain of the Stevens Officer and
Director Defendants sold securities of the Company at inflated prices while they
were in possession of material non-public information concerning the Company.
The plaintiff seeks to recover unspecified compensatory and punitive damages on
behalf of the putative class, as well other relief.
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<PAGE>
The Company intends to vigorously defend the foregoing actions. However,
the outcome of any litigation is subject to uncertainty and a successful claim
against the Company in any of such actions could have a material adverse effect
on the Company.
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<PAGE>
EXECUTIVE COMPENSATION
The following table discloses the compensation for the person who served as
the Company's principal executive officer during the fiscal year ended January
3, 1998 and for the only other executive officers of the Company whose salaries
exceeded $100,000 for the Company's fiscal year ended January 3, 1998 (the
"Named Executives"). The number of securities underlying options has been
adjusted to give retroactive effect to the five-for-four split of the Company's
Common Stock effected in the form of a 25% stock dividend in September 1994 and
two-for-one Common Stock splits effected in the form of 100% stock dividends in
May 1995 and July 1997, respectively.
Summary Compensation Table
Long-Term
Annual Compensation
Compensation Awards
------------ ------------
Securities
Name and Principal Fiscal Salary Underlying
Position Year ($) Options (#)
- ------------------ ---- ----- -----------
Richard A. Williams 1997* 182,000 --
Chief Executive Officer 1996 153,000 40,000
1995 134,000 --
Robert E. Verrando 1997* 200,000 --
President and Chief 1996 179,000 40,000
Operating Officer 1995 179,000 --
Richard Loring(1) 1997* 172,907 100,000
Executive Vice President 1996 152,400 --
1995 61,650 --
Frank Pensavecchia(2) 1997* 132,746 --
Senior Vice President - 1996 114,000 40,000
Engineering 1995 105,000 --
- ----------
* Represents the fiscal year ended January 3, 1998.
(1) Mr. Loring was appointed as an executive officer of the Company in April
1997. In addition, from February 1996 until his appointment as an executive
officer in April 1997, Mr. Loring served as a consultant to the Company.
The salary for Mr. Loring includes $152,400 and $61,650 paid to him during
the fiscal years ended December 28, 1996 and January 3, 1998, respectively,
in his capacity as a consultant to the Company.
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<PAGE>
(2) Mr. Pensavecchia resigned from his position as an officer of the Company in
September 1997 but has remained as an employee of the Company. The
compensation for the fiscal year ended January 3, 1998 reflects total
compensation paid to Mr. Pensavecchia for all positions with the Company
held by him during such fiscal year.
The following table provides information with respect to individual stock
options granted during the fiscal year ended January 3, 1998 to Richard Loring
who was the only Named Executive who was granted options during such fiscal
year.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
-----------------
Potential Realizable
% of Value at Assumed
Total Annual Rates of
Options Stock Price
Shares Granted to Appreciation for
Underlying Employees Exercise Option Term (1)
Options in Fiscal Price Expiration -------------------------
Name Granted (#) Year (2) ($/sh) Date 5%($) 10%($)
---- ----------- -------- ------ ---- ------ ------
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard Loring 100,000 (3) 18.0 $27.2813 4/21/03 $927,825 $2,104,919
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------
(1) The potential realizable value columns of the table illustrate values that
might be realized upon exercise of the options immediately prior to their
expiration, assuming the Company's Common Stock appreciates at the
compounded rates specified over the term of the options. These numbers do
not take into account provisions of certain options providing for
termination of the option following termination of employment or
nontransferability of the options and do not make any provision for taxes
associated with exercise. Because actual gains will depend upon, among
other things, future performance of the Company's Common Stock, there can
be no assurance that the amounts reflected in this table will be achieved.
(2) The percentage has been calculated based upon total options granted to
employees in the fiscal year ending January 3, 1998 under all of the
Company's stock option plans.
(3) Non-qualified stock options; all options were granted under the 1994 Stock
Option Plan. One-quarter (25,000) of the options became exercisable on
April 21, 1998. An additional 25,000 options become exercisable on each of
April 21, 1999, 2000 and 2001, respectively.
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<PAGE>
The following table sets forth information concerning the value of
unexercised stock options held by the Named Executives as of January 3, 1998,
and the options exercised by the Named Executives during the fiscal year ended
January 3, 1998. The number of shares acquired on exercise and the number of
securities underlying options has been adjusted to give retroactive effect to
the five-for-four split of the Company's Common Stock effected in the form of a
25% stock dividend in September 1994 and two-for-one Common Stock splits
effected in the form of 100% stock dividends in May 1995 and July 1997,
respectively.
<TABLE>
<CAPTION>
Aggregated Option Exercises for Fiscal Year-Ended January 3, 1998
and Fiscal Year-End Option Values
- ------------------------------------------------------------------------------------------------------------------------------------
Number of Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at January 3, 1998 at January 3, 1998*
------------------ -------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Shares
Acquired Value
Name on Exercise Realized+ Exercisable Unexercisable Exercisable Unexercisable
---- ----------- --------- ----------- ------------- ----------- -------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Williams 75,000 $2,415,938 182,500 12,500 $3,167,063 $ 215,313
Robert E. Verrando -- $ -- 160,000 60,000 $2,250,000 $ 915,000
Richard Loring -- $ -- -- 100,000 $ 0 $ 0
Frank Pensavecchia 52,500 $1,281,000 145,000 12,500 $2,027,925 $ 215,313
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------
+ Value realized represents the positive spread between the exercise price
of such options and the market value of the Company's Common Stock on date of
exercise.
* Year-end values for unexercised in-the-money options represent the
positive spread between the exercise price of such options and the year-end
market value of the Common Stock which was $25.00.
Compensation of Directors
Directors received no cash compensation for serving on the Board during the
year ended January 3, 1998. However, during such year, the Company paid Mr.
Robert Howard, the Chairman of the Board, $145,000 for consulting services
rendered to the Company.
Effective December 1993, the Company adopted its Non-Employee Director
Stock Option Plan (the "Director Plan"). Only non-employee directors of the
Company (other than Robert Howard or Dr. Lawrence Howard) are eligible to
receive grants under the Director Plan. The Director Plan provides that eligible
directors automatically receive a grant of options to purchase 5,000 shares of
Common Stock at fair market value upon first becoming a director and,
thereafter, an annual grant, on the first business day of January of each year,
of 2,500 options at fair market value.
- 12 -
<PAGE>
Under each of the Company's 1988 Stock Option Plan ("1988 Plan"), 1991
Stock Option Plan ("1991 Plan"), 1994 Stock Option Plan ("1994 Plan") and 1997
Interim Stock Option Plan ("Interim Plan"), directors who are not employees of
the Company (other than directors who are members of the Stock Option Committee
of the particular plan) are eligible to be granted nonqualified options under
such plan. The Board of Directors or the Stock Option Committee (the
"Committee") of each plan, as the case may be, has discretion to determine the
number of shares subject to each nonqualified option (subject to the number of
shares available for grant under the particular plan), the exercise price
thereof (provided such price is not less than the par value of the underlying
shares of Common Stock), the term thereof (but not in excess of 10 years from
the date of grant, subject to earlier termination in certain circumstances), and
the manner in which the option becomes exercisable (amounts, intervals and other
conditions). Directors who are employees of the Company (but not members of the
Committee of the particular plan) are eligible to be granted incentive stock
options or nonqualified options under such plans to the extent permitted by such
plan. The Board or Committee of each plan, as the case may be, also has
discretion to determine the number of shares subject to each incentive stock
option ("ISO"), the exercise price and other terms and conditions thereof, but
their discretion as to the exercise price, the term of each ISO and the number
of ISOs that may vest may be in any year is limited by the Internal Revenue Code
of 1986, as amended. Directors are also eligible to receive options or
stock-based awards under the Company's 1998 Stock Incentive Plan. See "Proposal
I."
Employment Arrangements
The Company has an employment agreement with Mr. Richard A. Williams, which
provides for an annual salary which is subject to periodic review by the
Company's Board of Directors. The employment agreement expires on March 31,
1999, and contains certain non-disclosure provisions. Mr. Williams' annual
salary is currently $190,000.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
During the fiscal year ended January 3, 1998, the Company did not have a
Compensation Committee of its Board of Directors. Decisions as to compensation
for the fiscal year ended January 3, 1998 were made by the Company's Board of
Directors. Mr. Richard A. Williams, and Mr. Robert E. Verrando, in their
capacity as a director, each participated in the Board's deliberations
concerning compensation of executive officers for the Company's fiscal year
ended January 3, 1998. During the fiscal year ended January 3, 1998, none of the
executive officers of the Company has served on the Board of Directors or the
compensation committee of any other entity, any of whose officers has served on
the Board of Directors of the Company. The Company has recently established a
Compensation Committee of the Board of Directors consisting of Messrs. Dreyer
and Evans.
- 13 -
<PAGE>
Report on Executive Compensation
As noted above, during the fiscal year ended January 3, 1998, there was no
Compensation Committee of the Board of Directors or other committee of the Board
performing equivalent functions. Compensation of the Company's executive
officers for the fiscal year ended January 3, 1998 was determined by the Board
of Directors pursuant to recommendations made by Robert Howard, Chairman of the
Board. There is no formal compensation policy for the Company's executive
officers.
The Board of Directors has appointed a Stock Option Committee, currently
comprised of Messrs. Sparks and DePamphilis, for each of the 1991 and 1994
Plans, which has made grants under, and has administered, the 1991 and 1994
Plans.
Total compensation for executive officers consists of a combination of
salaries and stock option awards. The base salary of Richard A. Williams, the
Company's Chief Executive Officer, is fixed annually by the Board of Directors
pursuant to the terms of his employment agreement with the Company. Base salary
of other executive officers is based on the Company's financial performance and
the executive's individual performance and level of responsibility. Bonus
compensation, if any, to executive officers is based generally upon the
Company's financial performance and the availability of resources as well as the
executive officer's individual performance and level of responsibility. Stock
option awards under the Company's 1988, 1991, 1994, Interim and 1998 Stock
Option Plans are intended to attract, motivate and retain senior management
personnel by affording them an opportunity to receive additional compensation
based upon the performance of the Company's Common Stock. No stock options were
granted to the executive officers of the Company during the fiscal year ended
January 3, 1998 except for six year options to purchase 100,000 shares of Common
Stock at $27.28 which were granted to Richard Loring upon his becoming an
officer of the Company in April 1997.
During the fiscal year ended January 3, 1998, the Company earned
approximately $14,372,000 on revenues of approximately $91,560,000, compared to
earnings of approximately $7,121,000 on revenues of approximately $48,628,000
during the fiscal year ended December 28, 1996.
Robert Howard
Richard A. Williams
Robert E. Verrando
Dr. Lawrence Howard
Bert DePamphilis
John W. Dreyer
John B. Evans
Harold N. Sparks
- 14 -
<PAGE>
Stock Performance Graph
The following line graph compares, from January 1, 1993, through January 3,
1998, the cumulative total return among the Company, companies comprising the
NASDAQ Market Index and a Peer Group, based on an investment of $100 on January
1, 1993, in the Company's Common Stock and the NASDAQ Market Index, and the
stock of the Current Peer Group and the prior year's Peer Group assuming
reinvestment of all dividends, if any, paid on such securities. The Company has
not paid any cash dividends and, therefore, the cumulative total return
calculation for the Company is based solely upon stock price appreciation and
not upon reinvestment of cash dividends. The Current Peer Group consists of
Indigo N.V., Scitex Corporation Ltd. and Xeikon N.V. which the Company believes
is currently a more representative group of comparable companies in the
Company's industry than the prior years's Peer Group which was based upon
companies classified under the Printing Trades Machinery & Equipment Standard
Industrial Classification number. Historic stock price is not necessarily
indicative of future stock price performance.
<TABLE>
<CAPTION>
======================================================================================================================
1/1/93 12/31/93 12/31/94 12/31/95 12/28/96 1/03/98
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Presstek $ 100.00 $ 124.44 $ 280.56 $ 1,050.00 $ 816.67 $ 555.56
Inc.
- ----------------------------------------------------------------------------------------------------------------------
Current
Peer Group $ 100.00 $ 58.85 $ 40.58 $ 29.64 $ 17.74 $ 21.07
- ----------------------------------------------------------------------------------------------------------------------
Prior Peer $ 100.00 $ 66.23 $ 63.55 $ 48.66 $ 32.05 $ 28.94
Group (SIC
Code
Index(1)
- ----------------------------------------------------------------------------------------------------------------------
NASDAQ $ 100.00 $ 119.85 $ 125.94 $ 163.35 $ 202.99 $ 248.30
Market
Index
======================================================================================================================
</TABLE>
(1) The current composition of the Prior Peer Group (SIC Code Index) consists
of Autologic Info International, Baldwin Technology, Inc., Champion
Industries Inc., Check Technology Corp., Indigo, N.V., Multigraphics Inc.,
Nur Macroprinters Ltd., Presstek Inc., Scitex Corporation Ltd., Stevens
International Class A, Stevens International Class B, Virtualfunds.com Inc.
and Xeikon N.V. ADR.
- 15 -
<PAGE>
VOTING SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the Record Date,
based on information obtained from the persons named below, with respect to the
beneficial ownership of shares of Common Stock by (i) each person known by the
Company to be the beneficial owner of more than five percent of the outstanding
shares of Common Stock, (ii) each of the Named Executives, (iii) each of the
Company's directors and (iv) all current executive officers and directors as a
group:
Amount and Nature Percentage
Name of of Beneficial of Outstanding
Beneficial Owner Ownership (2) Shares Owned
- ---------------- ----------------- --------------
Robert Howard 2,629,748(1)(3) 8.2
Dr. Lawrence Howard 2,624,772(1)(4) 8.2
Richard A. Williams 669,300(5) 2.0
Robert E. Verrando 160,000(6) (7)
Richard Loring 25,000(8) (7)
Harold N. Sparks 100,800(9) (7)
Bert DePamphilis 37,100(10) (7)
John W. Dreyer 50,000(11) (7)
John B. Evans 4,000 (7)
Frank Pensavecchia 170,000(12) (7)
Thomas E. Oxley 1,613,400(13)(14) 5.0
Charles C. Killin 1,626,400(13)(16) 5.1
All executive officers
and directors as a
group (ten persons) 6,314,720(17) 19.2
- ----------
(1) The address of Dr. Lawrence Howard is 120 East End Avenue, New York, New
York 10028. The address of Robert Howard is 303 East 57th Street, New York,
New York 10022.
(2) The Company believes that except as set forth herein, all persons referred
to in the table have sole voting and investment power with respect to all
shares of Common Stock reflected as beneficially owned by them.
(3) Includes options to purchase 245,000 shares of Common Stock held by Mr.
Howard which are currently exercisable. Also includes 24,300 shares owned
by Mr. Howard's wife.
(4) Includes options to purchase 100,000 shares of Common Stock held by Dr.
Howard which are currently exercisable. Also includes 35,000 shares owned
by Dr. Howard's wife, 57,834 shares owned by Dr. Howard's wife as custodian
for Dr.
- 16 -
<PAGE>
Howard's children and 45,000 shares owned by Dr. Howard as custodian for
his children.
(5) Includes options to purchase 182,500 shares of Common Stock held by Mr.
Williams which are currently exercisable. Also includes 33,500 shares held
of record by Mr. Williams' wife. Does not include shares owned by Mr.
Williams' children with respect to which Mr. Williams disclaims any
beneficial interest.
(6) Represents shares issuable upon exercise of options held by Mr. Verrando
which are currently exercisable.
(7) Less than 1%.
(8) Represents shares issuable upon exercise of options held by Mr. Loring
which are currently exercisable.
(9) Includes options to purchase 32,500 shares of Common Stock held by Mr.
Sparks which are currently exercisable.
(10) Includes options to purchase 32,500 shares of Common Stock held by Mr.
DePamphilis which are currently exercisable.
(11) Represents shares issuable upon exercise of options held by Mr. Dreyer
which are currently exercisable.
(12) Includes 145,000 shares issuable upon exercise of options. Mr. Pensavecchia
resigned as an officer of the Company in September 1997.
(13) The information with respect to the securities ownership of Messrs.Thomas
E. Oxley and Charles C. Killin has been derived from their respective
Schedules 13-D as filed with the Securities and Exchange Commission.
(14) Represents 1,501,400 shares of Common Stock held by the estate of John T.
Oxley, of which Mr. Oxley is a co-executor; and 112,000 shares of Common
Stock held of record by Boca Polo, Inc. Mr. Oxley is a director and owner
of 50% of the outstanding shares of Boca Polo, Inc. The address of Mr.
Thomas E. Oxley is One West 3rd Street, Williams Center Tower I, Suite
1305, Tulsa, OK 74103.
(15) Represents 1,501,400 shares of Common Stock held by Mr. Killin as a
co-executor of the estate of John T. Oxley; 87,000 shares of Common Stock
held by Mr. Killin as the trustee of the Mary Jane Tritsch Trust dated
September 3, 1952; and 38,000 shares of Common Stock held by Mr. Killin as
the trustee of the Thomas E. Oxley Trust dated September 3, 1952. The
address for Mr. Killin is 15 East 5th Street, Suite 2400, Tulsa, OK 74103.
- 17 -
<PAGE>
(16) Includes options to purchase 245,000, 100,000, 182,500, 160,000, 25,000,
32,500, 32,500, 50,000, 7,500 and 14,000 shares held by Robert Howard, Dr.
Lawrence Howard, Richard A. Williams, Robert E. Verrando, Richard Loring,
Harold Sparks, Bert DePamphilis, John W. Dreyer, John B. Evans and Glenn J.
DiBenedetto, respectively, which are currently exercisable. Does not
include options to purchase 12,500, 60,000, 75,000, 2,500, 2,500, 2,500 and
7,500 shares of Common Stock held by Richard A. Williams, Robert E.
Verrando, Richard Loring, Harold Sparks, Bert DePamphilis, John W. Dreyer,
and John B. Evans, respectively, none of which are exercisable within 60
days from the Record Date.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company paid Mr. Robert Howard, its Chairman of the Board, $145,000 for
consulting services provided to the Company during the fiscal year ended January
3, 1998. In addition, the Company paid Mr. Howard $36,000 as a tenant-at-will
sublessee of certain offices from Mr. Howard.
During the fiscal year ended January 3, 1998, the Company recorded sales of
equipment and consumables to Pitman of $7,579,000, and had accounts receivable
from Pitman of $1,460,000 at January 3, 1998. John W. Dreyer, who has been a
director of the Company since February 1996, is Pitman's President and Chief
Executive Officer.
During the fiscal year ended January 3, 1998, the Company agreed to make a
loan to Robert E. Verrando, the President and Chief Operating Officer of the
Company, in the amount of $200,000. The loan, which was made subsequent to the
end of such fiscal year, bears interest at 8% per annum.
During the fiscal year ended January 3, 1998, the Company paid DiBenedetto
& Company, P.A. $111,693 for services it rendered to the Company during such
fiscal year. Mr Glenn DeBenedetto, the Company's Chief Financial Officer, is a
principal of DeBenedetto & Company, P.A.
PROPOSAL I
APPROVAL OF 1998 STOCK INCENTIVE PLAN
At the Annual Meeting, the Company's stockholders will be asked to approve
the adoption of the Company's 1998 Stock Incentive Plan (the "1998 Plan").
On April 6, 1998, the Board of Directors adopted, subject to stockholder
approval, the 1998 Plan. The Board believes that, to enable the Company to
continue to attract and retain personnel of the highest caliber, provide
incentive for officers, directors, employees and other key persons and to
promote the well-being of the Company, it is in the best interest of the Company
and its stockholders to provide to officers, directors, employees, consultants
and other independent
- 18 -
<PAGE>
contractors who perform services for the Company, through the granting of stock
options, restricted stock, deferred stock or other stock awards, the opportunity
to participate in the value and/or appreciation in value of the Company's Common
Stock. The Board has found that the grant of options under the existing stock
option plans and the grant of stock-based awards under its 1988 Stock Plan, has
proven to be a valuable tool in attracting and retaining key employees.
Accordingly, the Board believes that the 1998 Plan, which provides the Board
greater flexibility in the type of awards that may be granted, (a) will provide
the Company with significant means to attract and retain talented personnel, (b)
will result in saving cash, which otherwise would be required to maintain
current employees and adequately attract and reward personnel and others who
perform services for the Company, and (c) consequently, will prove beneficial to
the Company's ability to be competitive. There are only a nominal amount of
options available for future grant under the Company's existing stock option
plans. the last sale price of the Common Stock on April 22, 1998 was $16.3125.
To date, no options or stock awards have been granted under the 1998 Plan.
If the 1998 Plan is approved by the stockholders, options or stock awards may be
granted under the 1998 Plan, the timing, amounts and specific terms of which
cannot be determined at this time.
The following summary of the 1998 Plan does not purport to be complete, and
is subject to and qualified in its entirety by reference to the full text of the
1998 Plan, set forth as Exhibit "A" hereto.
Summary of the 1998 Plan
The 1998 Plan provides for the grant of any or all of the following types
of awards (collectively, "Awards"): (1) stock options, (ii) restricted stock,
(iii) deferred stock and (iv) other stock-based awards. Awards may be granted
singly, in combination, or in tandem, as determined by the administrators of the
1998 Plan. A total of 3,000,000 shares of Common Stock, subject to anti-dilution
adjustment as provided in the 1998 Plan, have been reserved for distribution
pursuant to the 1998 Plan. The maximum number of shares of Common Stock that may
be issued upon the grant of an Award to each of the Company's Chief Executive
Officer and the four other highest compensated executive officers who are
employed by the Company on the last day of any taxable year cannot exceed
500,000 shares during the term of the 1998 Plan.
The 1998 Plan can be administered by the Board of Directors (the "Board")
or a Compensation Committee (the "Committee") consisting of two or more
non-employee members of the Board of Directors appointed by the Board. The Board
or the Committee will determine, among other things, the persons to whom Awards
will be granted, the type of Awards to be granted, the
- 19 -
<PAGE>
number of shares subject to each Award and the share price. The Board or the
Committee will also determine the term of each Award, the restrictions or
limitations thereon, and the manner in which each such Award may be exercised
or, if applicable, the extent and circumstances under which common stock [and
other amounts payable with respect to an Award will be deferred. Unless sooner
terminated, the 1998 Plan will expire at the close of business on April 5, 2008.
Stock Options. The 1998 Plan provides for the grant of "incentive stock options"
("Incentive Stock Options"), as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and for options not qualifying as
Incentive Stock Options ("Non-Qualified Stock Options"). The Board or the
Committee, as the case may be, shall determine those persons to whom stock
options may be granted.
Incentive Stock Options granted pursuant to the 1998 Plan are
nontransferable by the optionee during his lifetime. Options granted pursuant to
the 1998 Plan will expire if not exercised within 10 years of the grant (five
years in the case of Incentive Stock Options granted to an eligible employee
owning stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or a parent or subsidiary of the Company
immediately before the grant ("10% Stockholder")), and under certain
circumstances set forth in the 1998 Plan, may be exercised within thirty (30)
days following termination of employment (one year in the event of death,
retirement or disability of the optionee). Options may be granted to optionees
in such amounts and at such prices as may be determined, from time to time, by
the Board or the Committee. The exercise price of an Incentive or Non-Qualified
Stock Option will not be less than the fair market value of the shares
underlying the option on the date the option is granted, provided, however, that
the exercise price of an Incentive Stock Option granted to a 10% Stockholder may
not be less than 110% of such fair market value.
Under the 1998 Plan, the Company may not, in the aggregate, grant Incentive
Stock Options that are first exercisable by any optionee during any calendar
year (under all such plans of the optionee's employer corporation and its
"parent" and "subsidiary" corporations, as those terms are defined in Section
424 of the Code) to the extent that the aggregate fair market value of the
underlying stock (determined at the time the option is granted) exceeds
$100,000.
The 1998 Plan contains anti-dilution provisions authorizing appropriate
adjustments in certain circumstances. Shares of Common Stock subject to Awards
which expire without
- 20 -
<PAGE>
being exercised or which are cancelled as a result of the cessation of
employment are available for further grants. No shares of Common Stock of the
Company may be issued upon the exercise of any option granted under the 1998
Plan until the full option price has been paid by the optionee. The Board of
Directors or the Committee may grant individual options under the 1998 Plan with
more stringent provisions than those specified in the 1998 Plan.
Options become exercisable in such amounts, at such intervals and upon such
terms and conditions as the Board of Directors or the Committee provide. Stock
options granted under the 1998 Plan are exercisable until the earlier of (i) a
date set by the Board of Directors or Committee at the time of grant or (ii) the
close of business on the day before the tenth anniversary of the stock option's
date of grant (the day before the fifth anniversary in the case of an Incentive
Stock Option granted to a 10% Stockholder). The 1998 Plan will remain in effect
until all stock options are exercised or terminated. Notwithstanding the
foregoing, no options may be granted after April 5, 2008.
Restricted and Deferred Stock Awards. Under the 1998 Plan the Board or the
Committee may grant shares of restricted Common Stock either alone or in tandem
with other Awards. Restricted and Deferred Stock awards give the recipient the
right to receive a specified number of shares of Common Stock, subject to such
terms, conditions and restrictions as the Board or the Committee deem
appropriate. Restrictions may include limitations on the right to transfer the
stock until the expiration of a specified period of time and forfeiture of the
stock upon the occurrence of certain events such as the termination of
employment prior to expiration of a specified period of time. In addition, a
participant in the 1998 Plan who has received a Deferred Stock Award may
request, under certain conditions, the Board or the Committee to defer the
receipt of an award (or an installment of an award) for an additional specified
period or until the occurrence of a specified event.
Other Stock Based Awards. Other Stock-Based Awards, which may include
performance shares and shares valued by reference to the performance of the
Company or any parent or subsidiary of the Company, may be granted either alone
or in tandem with other Awards.
Certain Federal Income Tax Consequences of the 1998 Plan
The following is a brief summary of the Federal income tax aspects of
Awards made under the 1998 Plan based upon statutes, regulations and
interpretations in effect on the date hereof. This summary is not intended to be
exhaustive, and does not describe state or local tax consequences.
- 21 -
<PAGE>
1. Incentive Stock Options. The optionee will recognize no taxable income
upon the grant or exercise of an Incentive Stock Option. Upon a disposition of
the shares after the later of two years from the date of grant and one year
after the transfer of the shares to the optionee, (i) the optionee will
recognize the difference, if any, between the amount realized and the exercise
price as long-term capital gain or long-term capital loss (as the case may be)
if the shares are capital assets in his or her hands; and (ii) the Company will
not qualify for any deduction in connection with the grant or exercise of the
options. The excess, if any, of the fair market value of the shares on the date
of exercise of an Incentive Stock Option over the exercise price will be treated
as an item of adjustment for his or her taxable year in which the exercise
occurs and may result in an alternative minimum tax liability for the optionee.
In the case of a disposition of shares in the same taxable year as the exercise
where the amount realized on the disposition is less than the fair market value
of the shares on the date of exercise, there will be no adjustment since the
amount treated as an item of adjustment, for alternative minimum tax purposes,
is limited to the excess of the amount realized on such disposition over the
exercise price which is the same amount included in regular taxable income.
If Common Stock acquired upon the exercise of an Incentive Stock Option is
disposed of prior to the expiration of the holding periods described above, (i)
the optionee will recognize ordinary compensation income in the taxable year of
disposition in an amount equal to the excess, if any, of the lesser of the fair
market value of the shares on the date of exercise or the amount realized on the
disposition of the shares, over the exercise price paid for such shares; and
(ii) the Company will qualify for a deduction equal to any such amount
recognized, subject to the requirements that the compensation be reasonable and
not limited under Section 162(m) of the Code. The optionee will recognize the
excess, if any, of the amount realized over the fair market value of the shares
on the date of exercise, if the shares are capital assets in his or her hands,
as short-term or long-term capital gain, depending on the length of time that
the optionee held the shares, and the Company will not qualify for a deduction
with respect to such excess.
Subject to certain exceptions for disability or death, if an Incentive
Stock Option is exercised more than three months following the termination of
the optionee's employment, the option will generally be taxed as a Non-Qualified
Stock Option. See "Non-Qualified Stock Options."
2. Non-Qualified Stock Options. With respect to Non--Qualified Stock
Options, (i) upon grant of the option, the optionee will recognize no income;
(ii) upon exercise of the option (if the shares are not subject to a substantial
risk of forfeiture), the optionee will recognize ordinary compensation
- 22 -
<PAGE>
income in an amount equal to the excess, if any, of the fair market value of the
shares on the date of exercise over the exercise price, and the Company will
qualify for a deduction in the same amount, subject to the requirements that the
compensation be reasonable and not limited under Section 162(m) of the Code;
(iii) the Company will be required to comply with applicable Federal income tax
withholding requirements with respect to the amount of ordinary compensation
income recognized by the optionee; and (iv) on a sale of the shares, the
optionee will recognize gain or loss equal to the difference, if any, between
the amount realized and the sum of the exercise price and the ordinary
compensation income recognized. Such gain or loss will be treated as short-term
or long-term capital gain or loss if the shares are capital assets in the
optionee's hands depending upon the length of time that the optionee held the
shares.
3. Stock Awards. Unless a participant otherwise elects to be taxed upon
receipt of shares of restricted or deferred stock under the 1998 Plan, the
participant must include in his or her taxable income the difference between the
fair market value of the shares and the amount paid, if any, for the shares, as
of the first date the participant's interest in the shares is no longer subject
to a substantial risk of forfeiture or such shares become transferrable. A
participant's rights in stock awarded under the 1998 Plan are subject to a
substantial risk of forfeiture if the rights to full enjoyment of the shares are
conditioned, directly or indirectly, upon the future performance of substantial
services by the participant. Where shares of stock received under the 1998 Plan
are subject to a substantial risk of forfeiture, the participant can elect to
report the difference between the fair market value of the shares on the date of
receipt and the amount paid, if any, for the stock as ordinary income in the
year of receipt. To be effective, the election must be filed with the Internal
Revenue Service within 30 days after the date the shares are transferred to the
participant. The Company is entitled to a Federal income tax deduction equal in
amount to the amount includable as compensation in the gross income of the
participant, subject to the requirements that the compensation be reasonable and
not limited under Section 162(m) of the Code. The amount of taxable gain arising
from a participant's sale of shares of restricted stock acquired pursuant to the
1998 Plan is equal to the excess of the amount realized on such sale over the
sum of the amount paid, if any, for the stock and the compensation element
included by the participant in taxable income.
4. Other Tax Matters. If unmatured installments of Awards are accelerated
as a result of a Change of Control (as defined in the 1998 Plan), any amounts
received from the exercise by a participant of a stock option, the lapse of
restrictions on restricted stock or the deemed satisfaction of conditions of
- 23 -
<PAGE>
performance-based awards may be included in determining whether or not a
participant has received an "excess parachute payment" under Section 280G of the
Code, which could result in (i) the imposition of a 20% Federal excise tax (in
addition to Federal income tax) payable by the participant on certain payments
of Common Stock or cash resulting from such exercise or deemed satisfaction of
conditions of performance awards from such exercise or deemed satisfaction of
conditions of performance awards or, in the case of restricted stock, on all or
a portion of the fair market value of the shares on the date the restrictions
lapse and (ii) the loss by the Company of a compensation deduction.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
BDO Seidman, LLP has audited and reported upon the financial statements of
the Company for the fiscal year ended January 3, 1998. As has been the practice
in previous years, the auditors who will examine and report upon the financial
statements of the Company for the fiscal year ending January 2, 1999 will be
appointed prior to commencement of the audit. A representative of BDO Seidman,
LLP is expected to be present at the Annual Meeting with the opportunity to make
a statement if he or she desires to do so and is expected to be available to
respond to appropriate questions.
STOCKHOLDER PROPOSALS FOR ANNUAL MEETING TO BE HELD IN 1999
Stockholders who wish to present proposals appropriate for consideration at
the Company's Annual Meeting of Stockholders to be held in 1999 must submit the
proposal in proper form to the Company at its address set forth on the first
page of this Proxy Statement not later than December 23, 1998 in order for the
proposition to be considered for inclusion in the Company's proxy statement and
form of proxy relating to such annual meeting. Any such proposals, as well as
any questions related thereto, should be directed to the Secretary of the
Company.
OTHER INFORMATION
Proxies for the Annual Meeting will be solicited by mail and through
brokerage institutions and all expenses involved, including printing and
postage, will be paid by the Company.
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE YEAR ENDED JANUARY 3, 1998 IS
BEING FURNISHED HEREWITH TO EACH STOCKHOLDER OF RECORD AS OF THE CLOSE OF
BUSINESS ON THE RECORD DATE. COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
WILL BE PROVIDED FOR A NOMINAL CHARGE UPON WRITTEN REQUEST TO:
- 24 -
<PAGE>
PRESSTEK, INC.
8-9 COMMERCIAL STREET
HUDSON, NEW HAMPSHIRE 03051
ATTENTION: JANE MILLER
The Board of Directors is aware of no other matters, except for those
incident to the conduct of the Annual Meeting, that are to be presented to
stockholders for formal action at the Annual Meeting. If, however, any other
matters properly come before the Annual Meeting or any adjournments thereof, it
is the intention of the persons named in the proxy to vote the proxy in
accordance with their judgment.
By order of the Board
of Directors,
Robert Howard
Chairman of the Board
April 23, 1998
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PRESSTEK, INC.
8-9 Commercial Street
Hudson, New Hampshire 03051
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 28, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints RICHARD A. WILLIAMS and ROBERT E. VERRANDO,
and each of them, Proxies, with full power of substitution in each of them, in
the name, place and stead of the undersigned, to vote at the Annual Meeting of
Stockholders of Presstek, Inc. on Thursday, May 28, 1998, at Ballrooms III and
IV, at Crowne Plaza Manhattan, 1605 Broadway, New York, New York 10019 or at any
adjournment or adjournments thereof, according to the number of votes that the
undersigned would be entitled to vote if personally present, upon the following
matters:
1. ELECTION OF DIRECTORS:
|_| FOR all nominees listed below
(except as marked to the contrary below).
|_| WITHHOLD AUTHORITY
to vote for all nominees listed below.
Robert Howard, Richard A. Williams, Robert E. Verrando, Dr.
Lawrence Howard, Bert DePamphilis, John W. Dreyer, John B. Evans
and Harold N. Sparks
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space below.)
2. Approval of 1998 Stock Incentive Plan
|_| FOR |_| AGAINST |_| ABSTAIN
(continued and to be signed on reverse side)
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3. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE.
IF NO INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THOSE NOMINEES
AND THE PROPOSALS LISTED ABOVE.
DATED: ________________________________, 1998
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
-----------------------------
Signature
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Signature if held jointly
Please mark, sign, date and return this proxy card promptly using the enclosed
envelope.
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EXHIBIT A
PRESSTEK, INC.
1998 Stock Incentive Plan
Section 1. Purpose; Definitions.
The purpose of the Presstek, Inc. 1998 Stock Incentive Plan is to enable
Presstek, Inc. to offer to those of its employees and to the employees of its
subsidiaries and other persons who are expected to contribute to the success of
the Company, long term performance-based stock and/or other equity interests in
the Company, thereby enhancing the Company's ability to attract, retain and
reward such key employees or other persons, and to increase the mutuality of
interests between those employees or other persons and the stockholders of
Presstek, Inc.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Board" means the Board of Directors of Presstek, Inc.
(b) "Cause" shall have the meaning ascribed thereto in Section 5(b)(ix)
below.
(c) "Change of Control" shall have the meaning ascribed thereto in Section
9 below.
(d) "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
(e) "Committee" means the Stock Incentive Committee of the Board or any
other committee of the Board which the Board may designate.
(f) "Company" means Presstek, Inc., a corporation organized under the laws
of the State of Delaware.
(g) "Deferred Stock" means Stock to be received, under an award made
pursuant to Section 7 below, at the end of a specified deferral period.
(h) "Disability" means disability as determined under procedures
established by the Committee for purposes of the Plan.
(i) "Early Retirement" means retirement, with the approval of the Committee
for purposes of one or more award(s) hereunder,
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from active employment with the Company or any Parent or Subsidiary prior to age
65.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as amended,
as in effect from time to time.
(k) "Fair Market Value", unless otherwise required by any applicable
provision of the Code or any regulations issued thereunder, means, as of any
given date: (i) if the principal market for the Stock is a national securities
exchange or the National Association of Securities Dealers Automated Quotations
System ("NASDAQ), the closing sales price of the Stock on such day as reported
by such exchange or market system, or on a consolidated tape reflecting
transactions on such exchange or market system, or (b) if the principal market
for the Stock is not a national securities exchange and the Stock is not quoted
on NASDAQ, the mean between the highest bid and lowest asked prices for the
Stock on such day as reported by NASDAQ or the National Quotation Bureau, Inc.;
provided that if clauses (a) and (b) of this paragraph are both inapplicable, or
if no trades have been made or no quotes are available for such day, the Fair
Market Value of the Stock shall be determined by the Board of Directors or the
Committee, as the case may be, which determination shall be conclusive as to the
Fair Market Value of the Stock.
(l) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
(m) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(n) "Normal Retirement" means retirement from active employment with the
Company or any Parent or Subsidiary on or after age 65.
(o) "Other Stock-Based Award" means an award under Section 8 below that is
valued in whole or in part by reference to, or is otherwise based upon, Stock.
(p) "Parent" means any present or future parent of the Company, as such
term is defined in Section 424(e) of the Code, or any successor thereto.
(q) "Plan" means this Presstek, Inc. 1998 Stock Incentive Plan, as
hereinafter amended from time to time.
(r) "Restricted Stock" means Stock, received under an award made pursuant
to Section 6 below, that is subject to restrictions under said Section 6.
(s) "Retirement" means Normal Retirement or Early Retirement.
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(t) "Rule 16b-3" means Rule 16b-3 of the General Rules and Regulations
under the Exchange Act, as in effect from time to time.
(u) "Securities Act" means the Securities Act of 1933, as amended, as in
effect from time to time.
(v) "Stock" means the Common Stock of the Company, par value $.01 per
share.
(w) "Stock Option" or "Option" means any option to purchase shares of Stock
which is granted pursuant to the Plan.
(x) "Subsidiary" means any present or future subsidiary corporation of the
Company, as such term is defined in Section 424(f) of the Code, or any successor
thereto.
Section 2. Administration.
The Plan shall be administered by the Board, or at its discretion, the
Committee, the membership of which shall consist solely of two or more members
of the Board, each of whom shall serve at the pleasure of the Board and shall be
a "Non-Employee Director", as defined in Rule 16b-3, and an "outside director",
as defined in Section 162(m) of the Code, and shall be at all times constituted
so as not to adversely affect the compliance of the Plan with the requirements
of Rule 16b-3 or with the requirements of any other applicable law, rule or
regulation.
The Board or the Committee, as the case may be, shall have the authority to
grant, pursuant to the terms of the Plan, to officers and other key employees or
other persons eligible under Section 4 below: (i) Stock Options, (ii) Restricted
Stock, (iii) Deferred Stock, and/or (iv) Other Stock-Based Awards.
For purposes of illustration and not of limitation, the Board or the Committee,
as the case may be, shall have the authority (subject to the express provisions
of this Plan):
(i) to select the officers, other employees of the Company or any
Parent or Subsidiary and other persons to whom Stock Options, Restricted
Stock, Deferred Stock and/or Other Stock-Based Awards may be from time to
time granted hereunder:
(ii) to determine the Incentive Stock Options, NonQualified Stock
Options, Restricted Stock, Deferred Stock and/or Other Stock-Based Awards,
or any combination thereof, if any, to be granted hereunder to one or more
eligible employees of the Company or any Parent or Subsidiary;
(iii) to determine the number of shares of Stock to be covered by each
award granted hereunder;
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(iv) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder (including, but not
limited to, share price, any restrictions or limitations, and any vesting,
acceleration or forfeiture provisions);
(v) to determine the terms and conditions under which awards granted
hereunder are to operate on a tandem basis and/or in conjunction with or
apart from other awards made by the Company or any Parent or Subsidiary
outside of this Plan;
(vi) to determine the extent and circumstances under which Stock and
other amounts payable with respect to an award hereunder shall be deferred;
and
(vii) to substitute (A) new Stock Options for previously granted Stock
Options, including previously granted Stock Options having higher option
exercise prices and/or containing other less favorable terms, and (B) new
awards of any other type for previously granted awards of the same type,
including previously granted awards which contain less favorable terms.
Subject to Section 10 hereof, the Board or the Committee, as the case may be,
shall have the authority to adopt, alter and repeal such administrative rules,
guidelines and practices governing the Plan as it shall, from time to time, deem
advisable, to interpret the terms and provisions of the Plan and any award
issued under the Plan (and to determine the form and substance of all agreements
relating thereto), and to otherwise supervise the administration of the Plan.
Subject to the express provisions of the Plan, all decisions made by the Board
or the Committee, as the case may be, pursuant to the provisions of the Plan
shall be made in the Board or the Committee's sole and absolute discretion and
shall be final and binding upon all persons, including the Company, its Parent
and Subsidiaries and the Plan participants.
Section 3. Stock Subject to Plan.
The total number of shares of Stock reserved and available for distribution
under the Plan shall be 3,000,000 shares. Such shares may consist, in whole or
in part, of authorized and unissued shares or treasury shares.
If any shares of Stock that have been optioned cease to be subject to a Stock
Option for any reason, or if any shares of Stock that are subject to any
Restricted Stock award, Deferred Stock award or Other Stock-Based award are
forfeited or any such award otherwise terminates without the issuance of such
shares, such shares shall again be available for distribution under the Plan.
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In the event of any merger, reorganization, consolidation, recapitalization,
stock dividend, stock split, extraordinary distribution with respect to the
Stock or other change in corporate structure affecting the Stock, such
substitution or adjustments shall be made in the aggregate number of shares of
Stock reserved for issuance under the Plan, in the number and exercise price of
shares of Stock subject to outstanding Options granted under the Plan, and in
the number of shares of Stock subject to other outstanding awards granted under
the Plan, as may be determined to be appropriate by the Board or the Committee,
as the case may be, in order to prevent dilution or enlargement of rights;
provided, however, that the number of shares of Stock subject to any award shall
always be a whole number. Such adjusted exercise price shall also be used to
determine the amount which is payable to the optionee upon the exercise by the
Board or the Committee of the alternative settlement right which is set forth in
Section 5(b)(xi) below.
Subject to the provisions of the immediately preceding paragraph, the maximum
numbers of shares subject to Options, Restricted Stock awards, Deferred Stock
awards, and other Stock-Based awards to each of the Company's chief executive
officer and the four other highest compensated executive officers, who are
employed by the Company on the last day of any taxable year of the Company,
shall be 500,000 shares during the term of the Plan.
Section 4. Eligibility.
Officers and other employees of the Company or any Parent or Subsidiary (but
excluding any person whose eligibility would adversely affect the compliance of
the Plan with the requirements of Rule 16b-3) who are at the time of the grant
of an award under the Plan employed by the Company or any Parent or Subsidiary
and who are responsible for or contribute to the management, growth and/or
profitability of the business of the Company or any Parent or Subsidiary, are
eligible to be granted Options and awards under the Plan. In addition,
Non-Qualified Stock Options and other awards may be granted under the Plan to
any person, including, but not limited to, independent agents, consultants and
attorneys who the Board or the Committee, as the case may be, believes has
contributed or will contribute to the success of the Company. Eligibility under
the Plan shall be determined by the Board or the Committee, as the case may be.
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Section 5. Stock Options.
(a) Grant and Exercise. Stock Options granted under the Plan may be of two
types: (i) Incentive Stock Options and (ii) Non-Qualified Stock Options. Any
Stock Option granted under the Plan shall contain such terms as the Board or the
Committee, as the case may be, may from time to time approve. The Board or the
Committee shall have the authority to grant to any optionee Incentive Stock
Options, Non-Qualified Stock Options, or both types of Stock Options, and they
may be granted alone or in addition to other awards granted under the Plan. To
the extent that any Stock Option is not designated as an Incentive Stock Option
or does not qualify as an Incentive Stock Option, it shall constitute a
Non-Qualified Stock option. The grant of an Option shall be deemed to have
occurred on the date on which the Board or the Committee, as the case may be, by
resolution, designates an individual as a grantee thereof, and determines the
number of shares of Stock subject to, and the terms and conditions of, said
Option.
Anything in the Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options or any agreement providing for Incentive
Stock Options shall be interpreted, amended or altered, nor shall any discretion
or authority granted under the Plan be exercised, so as to disqualify the Plan
under Section 422 of the Code, or, without the consent of the optionee(s)
affected, to disqualify any Incentive Stock Option under said Section 422.
(b) Terms and Conditions. Stock Options granted under the Plan shall be
subject to the following terms and conditions:
(i) Option Price. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Board or the Committee, as
the case may be, at the time of grant but shall be not less than 100%
(110%, in the case of an Incentive Stock Option granted to an optionee
("10% Stockholder") who, at the time of grant, owns Stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or its Parent or its Subsidiaries) of the Fair Market Value of the
Stock at the time of grant.
(ii) Option Term. The term of each Stock Option shall be fixed by the
Board or the Committee, as the case may be, but no Incentive Stock Option
shall be exercisable more than ten years (five years, in the case of an
Incentive Stock Option granted to a 10% Stockholder) after the date on
which the Option is granted.
(iii) Exercisability. Stock Options shall be exercisable at such time
or times and subject to such terms and conditions as shall be determined by
the Board or the
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Committee, as the case may be, at the time of grant; provided, however,
that except as otherwise provided in this Section 5 and Section 9 below,
unless waived by the Board or the Committee at or after the time of grant,
no Stock Options shall be exercisable prior to the first anniversary date
of the grant of the Option. If the Board or the Committee provides, in its
discretion, that any Stock Option is exercisable only in installments, the
Board or the Committee may waive such installment exercise provisions at
any time at or after the time of grant in whole or in part, based upon such
factors as the Board or the Committee shall determine.
(iv) Method of Exercise. Subject to whatever installment, exercise and
waiting period provisions are applicable in a particular case, Stock
Options may be exercised in whole or in part at any time during the option
period by giving written notice of exercise to the Company specifying the
number of shares of Stock to be purchased. Such notice shall be accompanied
by payment in full of the purchase price, which shall be in cash or, unless
otherwise provided in the Stock Option agreement referred to in Section
5(b)(xii) below, in whole shares of Stock which are already owned by the
holder of the Option or, unless otherwise provided in the Stock Option
agreement referred to in Section 5(b)(xii) below, partly in cash and partly
in such Stock. Cash payments shall be made by wire transfer, certified or
bank check or personal check, in each case payable to the order of the
Company; provided, however, that the Company shall not be required to
deliver certificates for shares of Stock with respect to which an Option is
exercised until the Company has confirmed the receipt of good and available
funds in payment of the purchase price thereof. Payments in the form of
Stock (which shall be valued at the Fair Market Value of a share of Stock
on the date of exercise) shall be made by delivery of stock certificates in
negotiable form which are effective to transfer good and valid title
thereto to the Company, free of any liens or encumbrances. Except as
otherwise expressly provided in the Plan or the Stock Option Agreement
referred to in Section 5(b)(xii) below, no Option granted to an employee
may be exercised at any time unless the holder thereof is then an employee
of the Company or of a Parent or Subsidiary. The holder of an Option shall
have none of the rights of a stockholder with respect to the shares subject
to the Option until the optionee has given written notice of exercise, has
paid in full for those shares of Stock and, if requested by the Board or
the Committee, has given the representation described in Section 12(a)
below.
(v) Transferability; Exercisability. No Stock Option shall be
transferable by the optionee other than by will or by the laws of descent
and distribution, and all Stock
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Options shall be exercisable, during the optionee's lifetime, only by the
optionee or his or her guardian or legal representative.
(vi) Termination by Reason of Death. Subject to Section 5(b)(x) below,
if an optionee's employment by the Company or any Parent or Subsidiary
terminates by reason of death, any Stock Option held by such optionee may
thereafter be exercised, to the extent then exercisable or on such
accelerated basis as the Board or the Committee, as the case may be, may
determine at or after the time of grant, for a period of one year (or such
other period as the Board or the Committee may specify at or after the time
of grant) from the date of death or until the expiration of the stated term
of such Stock Option, whichever period is the shorter.
(vii) Termination by Reason of Disability. Subject to Section 5(b)(x)
below, if an optionee's employment by the Company or any Parent or
Subsidiary terminates by reason of Disability, any Stock Option held by
such optionee may thereafter be exercised by the optionee, to the extent it
was exercisable at the time of termination or on such accelerated basis as
the Board or the Committee, as the case may be, may determine at or after
the time of grant, for a period of one year (or such other period as the
Board or the Committee may specify at or after the time of grant) from the
date of such termination of employment or until the expiration of the
stated term of such Stock Option, whichever period is the shorter;
provided, however, that if the optionee dies within such one-year period
(or such other period as the Board or the Committee shall specify at or
after the time of grant), any unexercised Stock Option held by such
optionee shall thereafter be exercisable to the extent to which it was
exercisable at the time of death for a period of one year from the date of
death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
(viii) Termination by Reason of Retirement. Subject to Section 5(b)(x)
below, if an optionee's employment by the Company or any Parent or
Subsidiary terminates by reason of Normal Retirement, any Stock Option held
by such optionee may thereafter be exercised by the optionee, to the extent
it was exercisable at the time of termination or on such accelerated basis
as the Board or the Committee, as the case may be, may determine at or
after the time of grant, for a period of one year (or such other period as
the Board or the Committee may specify at or after the time of grant) from
the date of such termination of employment or the expiration of the stated
term of such Stock Option, whichever period is the shorter; provided,
however, that if the optionee dies within such one-year period (or such
other period as the Board or the Committee shall specify at
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or after the date of grant), any unexercised Stock Option held by such
optionee shall thereafter be exercisable to the extent to which it was
exercisable at the time of death for a period of one year from the date of
death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter. If an optionee's employment with the
Company or any Subsidiary terminates by reason of Early Retirement, the
Stock Option shall thereupon terminate; provided, however, that if the
Board or the Committee so approves at the time of Early Retirement, any
Stock Option held by the optionee may thereafter be exercised by the
optionee as provided above in connection with termination of employment by
reason of Normal Retirement.
(ix) Other Termination. Subject to the provisions of Section 12(g)
below and unless otherwise determined by the Committee at or after the time
of grant, if an optionee's employment by the Company or any Subsidiary
terminates for any reason other than death, Disability or Retirement, the
Stock Option shall thereupon automatically terminate, except that if the
optionee is involuntarily terminated by the Company or a Subsidiary without
Cause (as hereinafter defined), such Stock Option may be exercised for a
period of thirty (30) days from the date of such termination or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter. For purposes of the Plan, "Cause" shall mean (A) the conviction of
the optionee of a felony under Federal law or the law of the state in which
such action occurred, (B) dishonesty by the optionee in the course of
fulfilling his or her employment duties, or (C) the willful and deliberate
failure on the part of the optionee to perform his or her employment duties
in any material respect.
(x) Additional Incentive Stock Option Limitation. In the case of an
Incentive Stock Option, the aggregate Fair Market Value of Stock
(determined at the time of grant of the Option) with respect to which
Incentive Stock Options are exercisable for the first time by an optionee
during any calendar year (under all such plans of optionee's employer
corporation and its Parent and Subsidiaries shall not exceed $100,000.
(xi) Alternative Settlement of Option. Upon the receipt of written
notice of exercise, the Board or the Committee, as the case may be, may
elect to settle all or part of any Stock Option by paying to the optionee
an amount, in cash or Stock (valued at Fair Market Value on the date of
exercise), equal to the product of the excess of the Fair Market Value of
one share of Stock on the date of exercise over the Option exercise price,
multiplied by the number of shares of Stock with respect to which the
optionee
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proposes to exercise the Option. Any such settlements which relate to
Options which are held by optionees who are subject to Section 16(b) of the
Exchange Act shall comply with any existing "window period" provisions of
Rule 16b-3, to the extent applicable.
(xii) Stock Option Agreement. Each grant of a Stock Option shall be
confirmed by, and shall be subject to the terms of, an agreement executed
by the Company and the participant.
Section 6. Restricted Stock.
(a) Grant and Exercise. Shares of Restricted Stock may be issued either
alone or in addition to or in tandem with other awards granted under the Plan.
The Board or the Committee, as the case may be, shall determine the eligible
persons to whom, and the time or times at which, grants of Restricted Stock will
be made, the number of shares to be awarded, the price (if any) to be paid by
the recipient, the time or times within which such awards may be subject to
forfeiture (the "Restriction Period"), the vesting schedule and rights to
acceleration thereof, and all other terms and conditions of the awards.
(b) Terms and Conditions. Each Restricted Stock award shall be subject to
the following terms and conditions:
(i) Restricted Stock, when issued, will be represented by a stock
certificate or certificates registered in the name of the holder to whom
such Restricted Stock shall have been awarded. During the Restriction
Period, certificates representing the Restricted Stock and any securities
constituting Retained Distributions (as defined below) shall bear a
restrictive legend to the effect that ownership of the Restricted Stock
(and such Retained Distributions), and the enjoyment of all rights related
thereto, are subject to the restrictions, terms and conditions provided in
the Plan and the Restricted Stock agreement referred to in Section 6(b)(iv)
below. Such certificates shall be deposited by the holder with the Company,
together with stock powers or other instruments of assignment, endorsed in
blank, which will permit transfer to the Company of all or any portion of
the Restricted Stock and any securities constituting Retained Distributions
that shall be forfeited or that shall not become vested in accordance with
the Plan and the applicable Restricted Stock agreement.
(ii) Restricted Stock shall constitute issued and outstanding shares
of Common Stock for all corporate purposes, and the issuance thereof shall
be made for at least the minimum consideration (if any) necessary to permit
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the shares of Restricted Stock to be deemed to be fully paid and
nonassessable. The holder will have the right to vote such Restricted
Stock, to receive and retain all regular cash dividends and other cash
equivalent distributions as the Board may in its sole discretion designate,
pay or distribute on such Restricted Stock and to exercise all other
rights, powers and privileges of a holder of Stock with respect to such
Restricted Stock, with the exceptions that (A) the holder will not be
entitled to delivery of the stock certificate or certificates representing
such Restricted Stock until the Restriction Period shall have expired and
unless all other vesting requirements with respect thereto shall have been
fulfilled; (B) the Company will retain custody of the stock certificate or
certificates representing the Restricted Stock during the Restriction
Period; (C) other than regular cash dividends and other cash equivalent
distributions as the Board may in its sole discretion designate, pay or
distribute, the Company will retain custody of all distributions ("Retained
Distributions") made or declared with respect to the Restricted Stock (and
such Retained Distributions will be subject to the same restrictions, terms
and conditions as are applicable to the Restricted Stock) until such time,
if ever, as the Restricted Stock with respect to which such Retained
Distributions shall have been made, paid or declared shall have become
vested and with respect to which the Restriction Period shall have expired;
(D) the holder may not sell, assign, transfer, pledge, exchange, encumber
or dispose of the Restricted Stock or any Retained Distributions during the
Restriction Period; and (E) a breach of any of the restrictions, terms or
conditions contained in the Plan or the Restricted Stock agreement referred
to in Section 6(b)(iv) below, or otherwise established by the Board or the
Committee, as the case may be, with respect to any Restricted Stock or
Retained Distributions will cause a forfeiture of such Restricted Stock and
any Retained Distributions with respect thereto.
(iii) Upon the expiration of the Restriction Period with respect to
each award of Restricted Stock and the satisfaction of any other applicable
restrictions, terms and conditions (A) all or part of such Restricted Stock
shall become vested in accordance with the terms of the Restricted Stock
agreement referred to in Section 6(b)(iv) below, and (B) any Retained
Distributions with respect to such Restricted Stock shall become vested to
the extent that the Restricted Stock related thereto shall have become
vested. Any such Restricted Stock and Retained Distributions that do not
vest shall be forfeited to the Company and the holder shall not thereafter
have any rights with respect to such Restricted Stock and Retained
Distributions that shall have been so forfeited.
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(iv) Each Restricted Stock award shall be confirmed by, and shall be
subject to the terms of, an agreement executed by the Company and the
participant.
Section 7. Deferred Stock.
(a) Grant and Exercise. Deferred Stock may be awarded either alone or in
addition to or in tandem with other awards granted under the Plan. The Board or
the Committee, as the case may be, shall determine the eligible persons to whom
and the time or times at which Deferred Stock shall be awarded, the number of
shares of Deferred Stock to be awarded to any person, the duration of the period
(the "Deferral Period") during which, and the conditions under which, receipt of
the Deferred Stock will be deferred, and all the other terms and conditions of
the awards.
(b) Terms and Conditions. Each Deferred Stock award shall be subject to the
following terms and conditions:
(i) Subject to the provisions of this Plan and the Deferred Stock
agreement referred to in Section 7(b)(vii) below, Deferred Stock awards may
not be sold, assigned, transferred, pledged or otherwise encumbered during
the Deferral Period. At the expiration of the Deferral Period (or the
Additional Deferral Period referred to in Section 7(b)(vi) below, where
applicable), share certificates shall be delivered to the participant, or
his legal representative, in a number equal to the shares of Stock covered
by the Deferred Stock award.
(ii) As determined by the Board or the Committee, as the case may be,
at the time of award, amounts equal to any dividends declared during the
Deferral Period (or the Additional Deferral Period referred to in Section
7(b)(vi) below, where applicable) with respect to the number of shares
covered by a Deferred Stock award may be paid to the participant currently
or deferred and deemed to be reinvested in additional Deferred Stock.
(iii) Subject to the provisions of the Deferred Stock agreement
referred to in Section 7(b)(vii) below and this Section 7 and Section 12(g)
below, upon termination of a participant's employment with the Company or
any Parent or Subsidiary for any reason during the Deferral Period (or the
Additional Deferral Period referred to in Section 7(b)(vi) below, where
applicable) for a given award, the Deferred Stock in question will vest or
be forfeited in accordance with the terms and conditions established by the
Board or the Committee, as the case may be, at the time of grant.
(iv) The Board or the Committee, as the case may be, may, after grant,
accelerate the vesting of all or any part
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of any Deferred Stock award and/or waive the deferral limitations for all
or any part of a Deferred Stock award.
(v) In the event of hardship or other special circumstances of a
participant whose employment with the Company or any Parent or Subsidiary
is involuntarily terminated (other than for Cause), the Board or the
Committee, as the case may be, may waive in whole or in part any or all of
the remaining deferral limitations imposed hereunder or pursuant to the
Deferred Stock agreement referred to in Section 7(b)(vii) below with
respect to any or all of the participant's Deferred Stock.
(vi) A participant may request to, and the Board or the Committee, as
the case may be, may at any time, defer the receipt of an award (or an
installment of an award) for an additional specified period or until a
specified event (the "Additional Deferral Period"). Subject to any
exceptions adopted by the Committee, such request must be made at least one
year prior to expiration of the Deferral Period for such Deferred Stock
award (or such installment).
(vii) Each Deferred Stock award shall be confirmed by, and shall be
subject to the terms of, an agreement executed by the Company and the
participant.
Section 8. Other Stock-Based Awards.
(a) Grant and Exercise. Other Stock-Based Awards, which may include
performance shares and shares valued by reference to the performance of the
Company or any Parent or Subsidiary, may be granted either alone or in addition
to or in tandem with Stock Options, Restricted Stock or Deferred Stock.
The Board or the Committee, as the case may be, shall determine the eligible
persons to whom, and the time or times at which, such awards shall be made, the
number of shares of Stock to be awarded pursuant to such awards, and all other
terms and conditions of the awards. The Board or the Committee may also provide
for the grant of Stock under such awards upon the completion of a specified
performance period.
(b) Terms and Conditions. Each Other Stock-Based Award shall be subject to
the following terms and conditions:
(i) Shares of Stock subject to an Other Stock-Based Award may not be
sold, assigned, transferred, pledged or otherwise encumbered prior to the
date on which the shares are issued, or, if later, the date on which any
applicable restriction or period of deferral lapses.
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(ii) The recipient of an Other Stock-Based Award shall be entitled to
receive, currently or on a deferred basis, dividends or dividend
equivalents with respect to the number of shares covered by the award, as
determined by the Committee at the time of the award. The Board or the
Committee, as the case may be, may provide that such amounts (if any) shall
be deemed to have been reinvested in additional Stock.
(iii) Any Other Stock-Based Award and any Stock covered by any Other
Stock-Based Award shall vest or be forfeited to the extent so provided in
the award agreement referred to in Section 8(b)(v) below, as determined by
the Board or the Committee, as the case may be.
(iv) In the event of the participant's Retirement, Disability or
death, or in cases of special circumstances, the Board or the Committee, as
the case may be, may waive in whole or in part any or all of the
limitations imposed hereunder (if any) with respect to any or all of an
Other Stock-Based award.
(v) Each Other Stock-Based Award shall be confirmed by, and shall be
subject to the terms of, an agreement executed by the Company and by the
participant.
Section 9. Change of Control Provisions.
(a) A "Change of Control" shall be deemed to have occurred on the tenth day
after:
(i) any individual, firm, corporation or other entity, or any group
(as defined in Section 13(d)(3) of the Exchange Act) becomes, directly or
indirectly, the beneficial owner (as defined in the General Rules and
Regulations of the Securities and Exchange Commission with respect to
Sections 13(d) and 13(g) of the Exchange Act) of more than 25% of the then
outstanding shares of the Company's capital stock entitled to vote
generally in the election of directors of the Company; or
(ii) the commencement of, or the first public announcement of the
intention of any individual, firm, corporation or other entity or of any
group (as defined in Section 13(d)(3) of the Exchange Act) to commence, a
tender or exchange offer subject to Section 14(d)(1) of the Exchange Act
for any class of the Company's capital stock; or
(iii) the stockholders of the Company approve (A) a definitive
agreement for the merger or other business combination of the Company with
or into another corporation
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pursuant to which the stockholders of the Company do not own, immediately
after the transaction, more than 50% of the voting power of the corporation
that survives, or (B) a definitive agreement for the sale, exchange or
other disposition of all or substantially all of the assets of the Company,
or (C) any plan or proposal for the liquidation or dissolution of the
Company; provided, however, that a "Change of Control" shall not be deemed
to have taken place if beneficial ownership is acquired by, or a tender or
exchange offer is commenced or announced by, the Company, any
profit-sharing, employee ownership or other employee benefit plan of the
Company, any trustee of or fiduciary with respect to any such plan when
acting in such capacity, or by a person who is an officer or director of
the Company on the effective date of the Plan, or by any group comprised
solely of such persons and/or entities.
(b) In the event of a "Change of Control" as defined in Section 9(a) above,
awards granted under the Plan will be subject to the following provisions,
unless the provisions of this Section 9 are suspended or terminated by an
affirmative vote of a majority of the Board prior to the occurrence of such a
"Change of Control":
(i) all outstanding Stock Options which have been outstanding for at
least six months shall become exercisable in full, whether or not otherwise
exercisable at such time, and any such Stock Option shall remain
exercisable in full thereafter until it expires pursuant to its terms; and
(ii) all restrictions and deferral limitations contained in Restricted
Stock awards, Deferred Stock awards and Other Stock Based Awards granted
under the Plan shall lapse.
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Section 10. Amendments and Termination.
The Board may at any time, and from time to time, amend any of the provisions of
the Plan, and may at any time suspend or terminate the Plan; provided, however,
that no such amendment shall be effective unless and until it has been duly
approved by the holders of the outstanding shares of Stock if the failure to
obtain such approval would adversely affect the compliance of the Plan with the
requirements of Rule 16b-3 of the Exchange Act, as in effect from time to time,
or with the requirements of any other applicable law, rule or regulation. The
Board or the Committee, as the case may be, may amend the terms of any Stock
Option or other award theretofore granted under the Plan; provided, however,
that subject to Section 3 above, no such amendment may be made by the Board or
the Committee which in any material respect impairs the rights of the optionee
or participant without the optionee's or participant's consent, except for such
amendments which are made to cause the Plan to qualify for the exemption
provided by Rule 16b-3.
Section 11. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a participant or
optionee by the Company, nothing contained herein shall give any such
participant or optionee any rights that are greater than those of a general
creditor of the Company.
Section 12. General Provisions.
(a) The Board or the Committee, as the case may be, may require each person
acquiring shares of Stock pursuant to a Stock Option or other award under the
Plan to represent to and agree with the Company in writing that the optionee or
participant is acquiring the shares for investment without a view to
distribution thereof.
All certificates for shares of Stock delivered under the Plan shall be subject
to such stop transfer orders and other restrictions as the Board or the
Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange or
association upon which the Stock is then listed or traded, any applicable
Federal or state securities law, and any applicable corporate law, and the Board
or the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(b) Nothing contained in the Plan shall prevent the Board from adopting
such other or additional incentive arrangements as
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it may deem desirable, including, but not limited to, the granting of stock
options and the awarding of stock and cash otherwise than under the Plan; and
such arrangements may be either generally applicable or applicable only in
specific cases.
(c) Nothing contained in the Plan or in any award hereunder shall be deemed
to confer upon any employee of the Company or any Parent or Subsidiary any right
to continued employment with the Company or any Parent or Subsidiary, nor shall
it interfere in any way with the right of the Company or any Subsidiary to
terminate the employment of any of its employees at any time.
(d) Not later than the date as of which an amount first becomes includable
in the gross income of the participant for Federal income tax purposes with
respect to any Option or other award under the Plan, the participant shall pay
to the Company, or make arrangements satisfactory to the Board or the Committee,
as the case may be, regarding the payment of, any Federal, state and local taxes
of any kind required by law to be withheld or paid with respect to such amount.
If permitted by the Board or the Committee, tax withholding or payment
obligations may be settled with Stock, including Stock that is part of the award
that gives rise to the withholding requirement. The obligations of the Company
under the Plan shall be conditional upon such payment or arrangements and the
Company or the participant's employer (if not the Company) shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to the participant from the Company or any Subsidiary.
(e) The Plan and all awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware
(without regard to choice of law provisions).
(f) Any Stock Option granted or other award made under the Plan shall not
be deemed compensation for purposes of computing benefits under any retirement
plan of the Company or any Parent or Subsidiary and shall not affect any
benefits under any other benefit plan now or subsequently in effect under which
the availability or amount of benefits is related to the level of compensation
(unless required by specific reference in any such other plan to awards under
this Plan).
(g) A leave of absence, unless otherwise determined by the Board or the
Committee, as the case may be, prior to the commencement thereof, shall not be
considered a termination of employment. Any Stock Option granted or awards made
under the Plan shall not be affected by any change of employment, so long as the
holder continues to be an employee of the Company or any Parent or Subsidiary.
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(h) Except as otherwise expressly provided in the Plan or in any Stock
Option agreement, Restricted Stock agreement, Deferred Stock agreement or any
Other Stock-Based Award agreement, no right or benefit under the Plan may be
alienated, sold, assigned, hypothecated, pledged, exchanged, transferred,
encumbranced or charged, and any attempt to alienate, sell, assign, hypothecate,
pledge, exchange, transfer, encumber or charge the same shall be void. No right
or benefit hereunder shall in any manner be subject to the debts, contracts or
liabilities of the person entitled to such benefit.
(i) The obligations of the Company with respect to all Stock Options and
awards under the Plan shall be subject to (A) all applicable laws, rules and
regulations, and such approvals by any governmental agencies as may be required,
including, without limitation, the effectiveness of a registration statement
under the Securities Act, and (B) the rules and regulations of any securities
exchange or association on which the Stock may be listed or traded.
(j) If any of the terms or provisions of the Plan conflict with the
requirements of Rule 16b-3 as in effect from time to time, or with the
requirements of any other applicable law, rule or regulation, and with respect
to Incentive Stock Options, Section 422 of the Code, then such terms or
provisions shall be deemed inoperative to the extent they so conflict with the
requirements of said Rule 16b-3, and with respect to Incentive Stock Options,
Section 422 of the Code. With respect to Incentive Stock Options, if this Plan
does not contain any provision required to be included herein under Section 422
of the Code, such provision shall be deemed to be incorporated herein with the
same force and effect as if such provision had been set out at length herein.
(k) The Board or the Committee, as the case may be, may terminate any Stock
Option or other award made under the Plan if a written agreement relating
thereto is not executed and returned to the Company within 30 days after such
agreement has been delivered to the optionee or participant for his or her
execution.
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Section 13. Effective Date of Plan.
The Plan shall be effective as of April 6, 1998, subject to the approval of the
Plan by the holders of the Stock at a meeting of stockholders held within one
year after the effective date. Any grants of Stock Options or other awards under
the Plan prior to such approval shall be effective when made (unless otherwise
specified by the Committee at the time of grant), but shall be conditioned upon,
and subject to, such approval of the Plan by the Company's stockholders (and no
Stock Options may be exercised, and no awards of Restricted Stock, Deferred
Stock or Other Stock-Based Awards shall vest or otherwise become free of
restrictions, prior to such approval).
Section 14. Term of Plan.
No Stock Option, Restricted Stock award, Deferred Stock award or Other
Stock-Based Award shall be granted pursuant to the Plan on or after the tenth
anniversary of the effective date of the Plan, but awards granted prior to such
tenth anniversary may extend beyond that date.
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