<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
NEW IMAGE INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LETTERHEAD]
Dear Shareholder:
As you are by now aware, in fiscal 1995, New Image Industries undertook a
significant restructuring of its operations, management and product line in
order to position the Company for a return to profitability in the coming fiscal
year.
As a result of that restructuring, the Company reported a loss of
($7,673,000), or ($1.61) per share, on revenues of $31,623,000 for the fiscal
year ended June 30, 1995, compared with a net loss of ($347,000), or ($0.08) per
share, on revenues of $31,569,000 a year earlier.
The bulk of the restructuring occurred in the third and fourth quarter. In
the fourth quarter, we posted a loss of ($4,172,000), or ($0.87) per share, on
revenues of $8,064,000 resulting primarily from unusual charges of approximately
$4.35 million related to the Company's restructuring and relocation. The two
largest components of the unusual charge were non-cash charges of approximately
$1.3 million for the writedown of European marketing rights and a $1.25 million
writedown of inventory related to discontinued products. The remainder of the
unusual charge comprised contract restructuring, executive severance, relocation
commitments and miscellaneous legal expenses.
STRATEGY
The financial restructuring of the Company, however, was only part of our
comprehensive strategy to strengthen New Image Industries and enhance its
performance.
While it was important this year to improve our balance sheet, as well as to
implement other financial controls and efficiencies, we believe it was equally
important to strengthen the Company's infrastructure and redirect its sales and
marketing focus.
With respect to strengthening the Company's infrastructure, we have hired
several highly experienced senior executives, all of whom have had substantial
complementary business experience.
NEW SENIOR MANAGEMENT
In June, Dewey Edmunds, with more than 25 years of operating and financial
experience, was appointed President and Chief Executive Officer.
Our new Chief Financial Officer, Hal Orr, brings to New Image more than a
decade of experience in that position, as well as a strong background in
operations and MIS. Most recently, Mr. Orr was Chief Financial Officer and Vice
President of Operations at an international electronic components designer,
manufacturer and distributor. Mr. Orr holds a Doctor of Jurisprudence from
Pepperdine University School of Law and a Bachelor of Science Degree from the
University of California-Berkeley.
Michael P. Oliver is our new Vice President of Marketing and Sales. He has
two decades of experience in the healthcare industry. Most recently he was Vice
President of Sales and Marketing of a large manufacturer of electronic products
for the healthcare industry, where his efforts were instrumental in increasing
sales by nearly 50 percent. Mr. Oliver holds a Master of Science Degree in
Administration from George Washington University and a Bachelor of Science
Degree from the United State Naval Academy.
SIGNIFICANT EVENTS
Several important events have occurred throughout the year, as well as
shortly after the close of fiscal 1995. Prime among them was the summary
judgment granted in our favor in the High Tech Medical Instrumentation case.
While this issue has not been fully resolved, we continue to be optimistic about
the final outcome for the Company.
Another major event during the past year was our product development
contract with Loral Fairchild Imaging Sensors for a unique digital X-ray sensor
to be used in Dental Radiography. This new filmless X-ray system will
significantly reduce patient X-ray exposure compared with conventional dental
radiography.
<PAGE>
Additionally, your Company appointed three new members to the Board of
Directors: Richard Greenthal, Ralph Richart, M.D. and Kenneth Sawyer. We warmly
welcome these new directors and look forward to their continuing, substantive
contribution to the revitalization and growth of New Image Industries.
Finally, just after the close of the year, we announced that New Image will
be consolidating its headquarters and manufacturing units, now located in Canoga
Park, California and San Juan Capistrano, California respectively, to a new
32,000 square foot facility in Carlsbad, California.
OBJECTIVES FOR FISCAL YEAR 1996
With the turnaround of New Image Industries well underway, we have set four
primary objectives for the coming fiscal year.
1. Complete the stabilization of the Company and return it to
profitability.
2. Strengthen New Image Industries' position and capitalize on its
reputation as the nation's premiere producer of intraoral cameras.
3. Maximize New Image Industries' shareholder value.
4. Broaden the Company's product line, both within the intraoral camera
market and in other areas in the dental market.
With your continued support and the continued contributions of the entire
New Image team and its Board of Directors, we will achieve these objectives.
In closing, we want to take this opportunity to thank you, our stockholders,
and our employee team, our Board of Directors and our other constituencies for
your loyal support during the past year.
Sincerely,
[SIG]
Dewey Edmunds
President and Chief Executive Officer
[SIG]
Robert S. Colman
Chairman of the Board of Directors
<PAGE>
NEW IMAGE INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 10, 1996
TO THE STOCKHOLDERS:
Notice is hereby given that the 1995 Annual Meeting of Stockholders of New
Image Industries, Inc. (the "Company") will be held in the Baton Rouge Room of
the Olympic Resort Hotel & Spa located at 6111 El Camino Real in Carlsbad,
California, on January 10, 1996, at 10:00 a.m., local time, for the following
purposes:
1. To elect two Class II directors to each hold office for three years
and until their respective successors are elected;
2. To amend the Company's 1993 Stock Incentive Plan to increase the
number of shares available for grant thereunder;
3. To adopt the Company's 1995 Stock Incentive Plan; and
4. To transact such other business as may properly come before the
meeting and any adjournment(s) thereof.
Only holders of record of the Common Stock of the Company at the close of
business on December 8, 1995 are entitled to notice of and to vote at the Annual
Meeting and adjournment(s) thereof.
All stockholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to mark,
sign and return the enclosed Proxy as promptly as possible in the postage
prepaid envelope enclosed for that purpose. Any stockholder attending the
meeting may vote in person, even though he or she has returned a Proxy.
Dewey F. Edmunds
Chief Executive Officer
Carlsbad, CA 92009
December 12, 1995
IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, AND SIGN THE ACCOMPANYING PROXY AS PROMPTLY AS POSSIBLE AND
RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE>
NEW IMAGE INDUSTRIES, INC.
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 10, 1996
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of New Image Industries, Inc., a Delaware
corporation, (the "Company") for use at the 1995 Annual Meeting of Stockholders
to be held in the Baton Rouge Room at the Olympic Resort Hotel & Spa located at
6111 El Camino Real in Carlsbad, Ca., at 10:00 a.m., local time, on January 10,
1996 and any adjournment(s) or postponement(s) thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting of Stockholders.
Accompanying this Proxy Statement is the Board of Directors' Proxy for the
Annual Meeting, which you may use to indicate your vote as to the proposals
described in this Proxy Statement.
All Proxies which are properly completed, signed and returned to the Company
prior to the Annual Meeting, and which have not been revoked, will be voted as
indicated on the proposals described in this Proxy Statement unless otherwise
directed. A stockholder may revoke his or her Proxy at any time before it is
voted either by filing with the Secretary of the Company, at its principal
executive offices, a written notice of revocation or a duly executed Proxy
bearing a later date, or by attending the Annual Meeting and expressing a desire
to vote his or her shares in person.
The close of business on December 8, 1995 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting and any adjournments or postponements thereof. At the record
date, 4,794,438 shares of the Company's Common Stock, par value $.001 per share,
were outstanding. The Common Stock is the only outstanding class of securities
entitled to vote at the meeting. At the record date, the Company had
approximately 648 stockholders of record. The Company is informed and believes
that there are approximately 2800 beneficial holders of the Company's Common
Stock. A stockholder is entitled to cast one vote for each share of Common Stock
held on the record date (each a "Share") on all matters to be considered at the
Annual Meeting. Abstentions and shares held by brokers that are prohibited from
exercising discretionary authority will be counted as present for the purposes
of determining if a quorum is present but will not be counted as voting.
The Company's principal executive offices are located at 2283 Cosmos Court,
Carlsbad, California 92009, and its telephone number is (619) 930-9900. This
Proxy Statement and the accompanying Proxy were mailed to all stockholders
entitled to vote at the Annual Meeting on or about December 12, 1995.
ELECTION OF CLASS II DIRECTORS
In accordance with the Certificate of Incorporation and Bylaws of the
Company, the Board of Directors is divided into three classes. At each annual
meeting of the stockholders of the Company, directors constituting one class are
elected for three-year terms. The By-Laws of the Company provide that the Board
of Directors shall consist of not less than five and not more than nine members
as determined from time to time by the Board of Directors. At the time of the
annual meeting, the Board of Directors will consist of two Class I Directors,
with terms expiring in 1997, two Class II Directors, with terms expiring in
1995, and two Class III Directors, with terms expiring in 1996. At the 1995
Annual Meeting, two Class II Directors will be elected for terms expiring at the
1998 Annual Meeting. If the number of directors is changed, any increase or
decrease is to be apportioned among the classes so as to maintain the number of
directors in each class as nearly equal as possible. Directors may be removed
only with cause by the vote of a majority of the stockholders then entitled to
vote.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the nominees named below. If either nominee is unable or
unwilling to serve as a director at the time of the Annual
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<PAGE>
Meeting or any postponement or adjournment thereof, the proxies will be voted
for such nominee as shall be designated by the current Board of Directors to
fill the vacancy. The Company has no reason to believe that either nominee will
be unwilling or unable to serve if elected as a director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE NOMINEES LISTED BELOW
The Board of Directors proposes the election of the following nominees as
Class II Directors:
Dewey F. Edmunds
Kenneth B. Sawyer
If elected, each nominee is expected to serve until the 1998 Annual Meeting
of Stockholders. The affirmative vote of a majority of the Shares present in
person or represented by proxy at the Annual Meeting and voting on the election
of the Class II Directors, is required for the election of each of the above
named nominees.
INFORMATION WITH RESPECT TO NOMINEES, CONTINUING DIRECTORS AND EXECUTIVE
OFFICERS.
The following table sets forth certain information with respect to the
nominees, continuing directors and executive officers of the Company as of
October 31, 1995:
<TABLE>
<CAPTION>
YEAR TERM
NAME AGE PRINCIPAL OCCUPATION EXPIRES
- ---------------------------- --- --------------------------------------------- -----------
<S> <C> <C> <C>
NOMINEES:
- ----------------------------
Dewey F. Edmunds 52 Chief Executive Officer and President -- New 1995
Image Industries Inc.
Kenneth B. Sawyer 30 Principal, Colman, Furlong & Co. 1995
CONTINUING DIRECTORS:
- ----------------------------
Richard Greenthal 41 Vice President, Sentex Systems, Inc. 1996
Ralph M. Richart, M.D. 62 Professor, Columbia University 1996
Robert S. Colman 54 Chairman of the Board of the Company; 1997
Partner, Colman, Furlong & Co.
Harold J. Meyers 62 Chairman, H.J. Meyers & Co., Inc. 1997
OTHER EXECUTIVE OFFICERS:
- ----------------------------
David M. Cooper 61 Vice President, Product Development
Doug Golay 30 Vice President, Software Development
Michael Oliver 47 Vice President, Marketing and Sales
Hal Orr 47 Chief Financial Officer
</TABLE>
The executive officers of the Company are appointed by and serve at the
discretion of the Board of Directors. There is no family relationship between
any director and any executive officer of the Company.
MR. EDMUNDS joined the company in May of 1995 as the President and Chief
Executive Officer. He was appointed to the board at the same time as a Class II
Director. In 1987, Mr. Edmunds was one of three founding employees of
Secoamerica, Inc., a U.S. holding company for a $2 billion Japanese
conglomerate. During his employ from 1987 to 1995, Mr. Edmunds acted as Vice
President, Corporate Development and Chief Financial Officer of Secoamerica,
Inc. as well as President and Chief Operating Officer of Life Fleet, Inc., a
subsidiary. Mr. Edmunds received an MBA in International Finance from the
University of Southern California and a BA in History/Economics from the
University of California, Los Angeles.
MR. MEYERS has served as a Director of the Company since the Company's
initial public offering in August 1989. Mr. Meyers has been the Chairman of the
Board and President of H.J. Meyers & Co., Inc. and
2
<PAGE>
a principal shareholder of the parent corporation of H.J. Meyers & Co., Inc.
since 1982. Mr. Meyers served as President and Chief Executive Officer of
McDonald, Kreiger & Bowyer, an investment banking firm and the predecessor of
H.J. Meyers & Co., Inc. from 1978 to 1982. From 1974 to 1978, Mr. Meyers served
as West Coast Senior Partner of Loeb Rhoades. Mr. Meyers is also a member of the
Board of Directors of Dycam Corp.
MR. COLMAN has served as a Director of the Company since February 1994 and
as Chairman of the Board since March 1995. He is a partner of Colman Furlong &
Co., a private merchant banking firm, which he co-founded in 1991. In January
1989 he founded R.S. Colman Company, a merchant banking firm, where he remained
until he founded Colman Furlong. From 1978 until December 1988, Mr. Colman was a
founding partner of Robertson, Colman & Stephens, an investment banking firm.
Mr. Colman serves on the Board of Directors of Healthcare Compare Corp., a
health care cost management firm, Cleveland Cliffs, Inc., a producer and
processor of iron ore, and Access Healthnet, Inc., a company which supplies
information and telecommunication systems to the healthcare industry.
DR. RICHART has served as a Director of the Company since July 1995. He is
currently a Professor of Pathology at Columbia University College of Physicians
and Surgeons, where he has taught since 1969. Dr. Richart has also been an
Attending Pathologist at The Presbyterian Hospital since 1969. Dr. Richart is
the founder and owner of Kyto Diagnostics, L.P., a clinical pathology lab in New
York. Dr. Richart received an MD from the University of Rochester, School of
Medicine and Dentistry and a BA from Johns Hopkins University. Dr. Richart also
serves on the board of Neopath, Inc., a medical diagnostic instrument company,
and BEI Medical Systems, Inc.
MR. GREENTHAL has served as a Director of the Company since July 1995. Mr.
Greenthal is the co-owner and Vice President of Sentex Systems, Inc., a
manufacturer of access control systems. Mr. Greenthal co-founded the company in
1983. From 1977 to 1983 Mr. Greenthal was Senior Engagement Manager for McKinsey
& Co., Inc., a management consulting firm. Mr. Greenthal received an MBA from
Harvard Business School and a BA in Economics from Cornell University.
MR. SAWYER has served as a Director of the Company since July 1995. He is a
principal of Colman Furlong & Co., a private merchant banking firm. Mr. Sawyer
worked previously for Morgan Stanley & Co., an investment banking firm in the
Mergers and Acquisitions department in New York and Chicago. Mr. Sawyer
previously owned and managed an employment agency and publishing operations in
Illinois. Mr. Sawyer has a BS in engineering and a MBA from Stanford University.
MR. GOLAY joined the Company as an engineer in the Company's product
development in 1987. He was appointed the Vice President of Software Development
in October 1991.
MR. OLIVER joined the Company in September 1995 as its Vice President,
Marketing and Sales. Prior thereto Mr. Oliver was Vice President of Sales and
Marketing at Diatek, a medical device manufacturer. Prior to that he held a
number of sales, sales management, and marketing positions with international
biotechnology and medical distribution companies. Mr. Oliver received his BS
from the U.S. Naval Academy and an MSA from George Washington University.
MR. ORR joined the Company in October 1995 as its Chief Financial Officer.
Prior thereto,and since 1994, he was Chief Financial Officer and Vice President,
Operations of LH Research, Inc. a designer, manufacturer and distributer of
AC/DC power supplies. Prior thereto, and since 1992, Mr. Orr was Chief Financial
Officer of Receptors, Inc., a manufacturer of video ID and card access security
systems. Prior thereto, and since 1988, Mr. Orr was Chief Financial Officer and
Executive Vice President of Vanguard Electronics Co., Inc., an international
electronic components manufacturing and distribution company. He received his BS
from UC Berkeley and his JD from Pepperdine University.
MR. COOPER joined the Company in May of 1995 as Vice President, Advanced
Development. Mr. Cooper has an extensive background in broadcast and medical
camera design and marketing. As Executive Vice President and President of Fuji
Optical Systems, Inc., Mr. Cooper was responsible for the
3
<PAGE>
development of the highest resolution video endoscope and was the inventor of
the intra-oral video camera. Mr. Cooper received an HNC in electrical
engineering from Harlow College, England, and a MS in Engineering Science from
Pennsylvania State University.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of sixteen meetings during the fiscal
year ended June 30, 1995. The Board of Directors has an Audit Committee and a
Compensation Committee. During the fiscal year ended June 30, 1995, each
director attended at least 75% of the meetings of the Board of Directors held
while he or she was a director and of the Committees of the Board of Directors
on which he or she served.
The Audit Committee's functions include recommending to the Board of
Directors the engagement of the Company's independent auditors, reviewing and
approving the services performed by the independent auditors and reviewing and
evaluating the Company's accounting policies and internal accounting controls.
The Compensation Committee reviews and approves the compensation of officers and
key employees, including the granting of options under the Company's various
stock incentive plans. See "Report of Compensation Committee" attached hereto as
Annex "A." Currently, the members of the Audit Committee are Mr. Meyers and Mr.
Greenthal and the members of the Compensation Committee are Mr. Greenthal and
Dr. Richart. During fiscal year 1995, Mr. Guy deVrees, a former Director of the
Company who is not standing for reelection, and Mr. Harold J. Meyers served at
various times on the Compensation Committee and Mr. Colman served at various
times on the Audit Committee.
COMPENSATION OF DIRECTORS
Directors do not receive cash compensation for their services. The 1995 Plan
proposed for approval at the Annual Meeting provides that each director newly
appointed in 1995 who is not engaged by the Company as either an employee or as
a consultant shall receive options to purchase 7,000 shares of Common Stock of
the Company when he or she initially joins the Board and options to purchase
12,500 options on the date of each subsequent Annual Stockholders Meeting during
his or her term as Director.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year, executive compensation for the Company was
administered by the Compensation Committee of the Board. Mr. Harold J. Meyers
and Mr. Guy deVrees served as the Compensation Committee during the last fiscal
year. Mr. deVrees is not continuing as a director of the Company. Neither of the
members of the Compensation Committee is, nor has been, an officer or employee
of the Company.
REPORT OF COMPENSATION COMMITTEE
The Report of the Compensation Committee of the Board of Directors of the
Company, describing the compensation policies and rationale applicable to the
Company's executive officers with respect to compensation paid to such executive
officers for the year ended June 30, 1995, is attached to this Proxy Statement
as Annex "A."
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows, as to the Chief Executive Officer and as to each
of the other executive officers (all except one of whom are former executive
officers) whose salary plus bonus exceeded $100,000 during the last fiscal year,
information concerning all compensation paid for services to the Company in all
capacities during the last three fiscal years.
4
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------- --------------
NAME AND OTHER ANNUAL STOCK OPTION
PRINCIPAL POSITION YEAR SALARY COMPENSATION AWARDS (1)
- -------------------------------------- ---- --------- ------------ --------------
<S> <C> <C> <C> <C>
Dewey F. Edmunds (2) 1995 $ 16,615 $ -- 200,000 shares
Chief Executive Office and President 1994 -- -- --
1993 -- -- --
Doug Golay 1995 175,000 26,922(6) 50,000 shares(9)
Vice President 1994 156,000 -- --
Software Development 1993 100,000 -- --
Tom Compere (3) 1995 100,000 -- 20,000 shares(10)
Former Executive Officer 1994 100,000 -- 10,000 shares
1993 83,000 -- 10,000 shares
Phillip Griswa (4) 1995 245,000 6,877(7) 35,000 shares(11)
Former Officer 1994 245,000 -- 10,000 shares
1993 -- -- --
Roger Leddington (5) 1995 275,000 48,558(8) 200,000 shares(12)
Former Executive Officer 1994 275,000 -- 140,000 shares
1993 168,000 -- 100,000 shares
</TABLE>
- ------------------------
(1)All numbers reflect the number of shares of Common Stock subject to options
granted during the fiscal year.
(2)Mr. Edmunds joined the Company as Chief Executive Officer in May, 1995.
(3)Mr. Compere is the former Chief Financial Officer of the Company.
(4)Mr. Griswa is the former Chief Operating Officer of the Company.
(5)Mr. Leddington is the former Chief Executive Officer of the Company.
(6)Consists of $18,172 in accrued vacation pay and $8,750 in car allowance.
(7)Consists of accrued vacation pay.
(8)Consists of $33,269 in accrued vacation pay and $15,289 in car allowance.
(9) Consists of options, originally granted in December 1993, which were
repriced in December 1994. See "Ten-Year Option Repricings" table below.
(10) Consists of options, originally granted in April 1992 (10,000 options) and
December 1993 (10,000 options), which were repriced in December 1994. See
"Ten-Year Option Repricings" table below.
(11) Consists of 25,000 options granted in December 1994 and 10,000 options,
originally granted in December 1993, which were repriced in December 1994.
See "Ten-Year Option Repricings" table below.
(12) Consists of options, originally granted in November 1992 (35,000 options)
April 1993 (65,000 options), and December 1993 (100,000 options), which were
repriced in December 1994. See "Ten-Year Option Repricings" table below.
5
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding grants of stock
options made during the fiscal year ended June 30, 1995 to the executive
officers named in the Summary Compensation Table ("Named Executive Officers").
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE OF ASSUMED
OPTIONS ANNUAL RATE OF STOCK
GRANTED TO APPRECIATION FOR
EMPLOYEE OPTION
NUMBER OF IN EXERCISE OR TERM (1)
OPTIONS FISCAL BASE PRICE EXPIRATION --------------------
NAME GRANTED YEAR (2) PER SHARE (3) DATE @ 5% @ 10%
- ---------------- ----------- ---------- --------------- ---------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Dewey F. Edmunds 200,000(4) 17.3 $3.75 5/30/00 $ 207,211 $ 457,883
Doug Golay 50,000(5) 4.3 3.63 12/23/03 100,066 246,468
Tom Compere 20,000(6) 2.0 3.63 6/30/96 5,536 11,254
Phillip Griswa 10,000(7) 1.0 3.63 11/6/95 -- --
Phillip Griswa 25,000(7) 2.2 4.00 11/6/95 -- --
Roger Leddington 200,000(8) 17.3 3.63 3/24/96 45,829 92,565
</TABLE>
- ------------------------
(1) The potential realizable value is based on the assumption that the Common
Stock of the Company appreciates at the annual rate shown (compounded
annually) from the date of grant until the expiration of the option term.
These amounts are calculated pursuant to applicable requirements of the
Securities and Exchange Commission and do not represent a forecast of the
future appreciation of the Company's Common Stock.
(2) Options covering an aggregate of 1,154,350 shares (including options
relating to shares which were granted in connection with the cancellation
and concurrent repricing of certain previously issued options) were granted
to eligible optionees during the fiscal year ended June 30, 1995.
(3) The exercise price and tax withholding obligations related to exercise may
be paid by delivery of already owned shares, subject to certain conditions.
(4) The 200,000 options vest as follows: 30,000 options on May 30, 1995, the
date of grant, and 30,000 options, 60,000 options, and 80,000 options to
vest on the first, second and third anniversaries of the date of grant,
respectively; all options to vest immediately upon a "change in control."
(5) The 50,000 options vest as follows: 12,500 options on December 23, 1994, and
an additional 12,500 options to vest annually thereafter; all options to
vest immediately upon a "change in control."
(6) Pursuant to an agreement with the Company, all of Mr. Compere's options
became exercisable as of May 1995 and will expire on June 30, 1996.
(7) Pursuant to the terms upon which they were granted, all of Mr. Griswa's
options expired on November 6, 1995, 90 days after the termination of his
employment with the Company.
(8) Pursuant to an agreement with the Company, Mr. Leddington's options, all of
which are exercisable, will expire on March 24, 1996.
6
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTIONS
The following table sets forth, for each of the Named Executive Officers,
certain information regarding the exercise of stock options during the fiscal
year ended June 30, 1995, and the value of options held at fiscal year end.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF VALUE OF ALL UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END (1)
SHARES ACQUIRED ------------------------- -------------------------
NAME ON EXERCISE VALUE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ----------------------------------------- --------------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Tom Compere 10,000 $28,800 30,000/0 $11,900/0
All other Named Executive Officers (2) -- -- 273,500/207,500 88,325/31,479
</TABLE>
- ------------------------
(1) Based upon the last reported sale price of the Common Stock on NASDAQ
National Market System on June 30, 1995.
(2) No Named Executive Officer other than Mr. Compere exercised options in the
fiscal year ended June 30, 1995.
OPTION REPRICINGS
The following table sets forth information regarding the repricing of
options held by any executive officer during the Company's eight-year history.
See the report of the Compensation Committee of the Company's Board of
Directors, attached hereto as Exhibit A, for discussion of all option repricings
during the fiscal year ended June 30, 1995.
OPTION REPRICINGS SINCE 1987
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF MARKET ORIGINAL
SECURITIES PRICE OF EXERCISE OPTION TERM
UNDERLYING STOCK AT PRICE AT REMAINING AT
OPTIONS TIME OF TIME OF NEW DATE OF
DATE OF REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME REPRICING AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
- ----------------------------- --------- ----------- ------------- ------------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Tom Compere 12/12/94 10,000 $ 3.63 $ 7.25 $ 3.63 7 Years 312 Days
Tom Compere 12/12/94 10,000 3.63 11.88 3.63 9 Years 11 Days
Doug Golay 12/12/94 50,000 3.63 11.88 3.63 9 Years 11 Days
Phillip Griswa 12/12/94 10,000 3.63 11.88 3.63 9 Years 11 Days
Roger Leddington 12/12/94 35,000 3.63 12.00 3.63 7 Years 342 Days
Roger Leddington 12/12/94 65,000 3.63 12.75 3.63 8 Years 139 Days
Roger Leddington 12/12/94 100,000 3.63 11.88 3.63 9 Years 11 Days
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Securities and Exchange Commission ("SEC").
Executive officers, directors, and greater-than-ten percent stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its review of the copies of such forms
received by it and written representations from certain reporting persons that
they have complied with the relevant filing requirements, the Company believes
that, during the year ended June 30, 1995, all relevant Section 16(a) filing
requirements were complied with. The Company is aware of no failures to file
required forms.
7
<PAGE>
CERTAIN TRANSACTIONS WITH MANAGEMENT
In March 1995, the Company engaged Colman Furlong & Co. to provide general
investment banking advice to the Company. Mr. Robert S. Colman and Mr. Kenneth
B. Sawyer, Directors of the Corporation, are associated with of Colman Furlong &
Co. Pursuant to the engagement agreement with Colman Furlong & Co., the Company
pays Colman Furlong & Co. a fee in the amount of $12,000 per month. In
connection with the engagement, the Company granted Colman Furlong & Co.
warrants to purchase 275,000 shares of the Common Stock of the Company at an
exercise price of $3.875 per share. The warrants vest over a one-year period and
have a term of five years. The engagement of Colman Furlong & Co. may be
terminated by either party at any time.
PRIOR PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual percentage change in
the cumulative return to the stockholders of the Company's Common Stock with the
cumulative return of the NASDAQ Stock Market (US Companies) Index and the Index
for NASDAQ Surgical, Medical and Dental Instruments and Supplies Index for the
period commencing July 1, 1990 and ending on June 30, 1995. The information
contained in the performance graph shall not be deemed "soliciting material" or
to be "filed" with the Securities and Exchange Commission, nor shall such
information be incorporated by reference into any future filing under the
Securities Act or Exchange Act, except to the extent that the Company
specifically incorporates it by reference into such filing. The stock price
performance on the following graph is not necessarily indicative of future stock
price performance.
Comparison of Five Year-Cumulative Total Returns
PREPARED BY THE CENTER FOR RESEARCH IN SECURITY PRICES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SYMBOL CRSP TOTAL RETURNS INDEX FOR:
<S> <C> <C> <C> <C> <C> <C>
6/29/90 6/28/91 6/30/92 6/30/93 6/30/94 6/30/95
NEW IMAGE INDUSTRIES, INC. 100 27.9 80.9 235.3 117.6 45.6
Nasdaq Stock Market (US Companies) 100 105.9 127.2 160 161.6 215.4
NASDAQ Stocks (SIC 3840-3849 US Companies) 100 130.8 138.2 130.8 115.8 168.6
Surgical, Medical, and Dental Instruments and
Supplies
</TABLE>
8
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of October 31, 1995, certain information
relating to the ownership of the Company Common Stock by (i) each person known
by the Company to be the beneficial owner of more than 5% of the outstanding
shares of the Company Common Stock, (ii) each of the Company's directors, (iii)
each of the Company's Named Executive Officers, and (iv) all of the Company's
executive officers and directors as a group. Except as may be indicated in the
footnotes to the table and subject to applicable community property laws, each
of such persons has the sole voting and investment power with respect to the
shares owned. Beneficial ownership has been determined in accordance with Rule
13d-3 under the Exchange Act. Under this Rule, certain shares may be deemed to
be beneficially owned by more than one person (such as where persons share
voting power or investment power). In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire the shares
(for example, upon exercise of an option) within 60 days of the date as of which
the information is provided; in computing the percentage ownership of any
person, the amount of shares outstanding is deemed to include the amount of
shares beneficially owned by such person (and only such person) by reason of
these acquisition rights. As a result, the percentage of outstanding shares of
any person as shown in the following table does not necessarily reflect the
person's actual voting power at any particular date. Unless otherwise indicated,
the address of each person is c/o New Image Industries, Inc., 2283 Cosmos Court,
Carlsbad Ca., California, 92009.
<TABLE>
<CAPTION>
PERCENT OF
NAME NUMBER OF SHARES CLASS OWNED
------------------------------------ ---------------- -------------
<S> <C> <C>
Dewey F. Edmunds 37,500(1) 1.0
Hal Orr 3,000 *
Michael Oliver 0 0
Doug Golay 27,000(2) 1.0
Tom Compere 30,000(3) 1.0
Phillip Griswa 0 0
Roger Leddington 201,501(4) 4.2
Robert S. Colman 94,000(5) 2.0
Richard P. Greenthal 0 0
Harold J. Meyers 60,000(6) 1.3
Ralph P. Richart, M.D. 0 0
Kenneth B. Sawyer 4,600 *
All executive officers and directors 454,100 9.1
as a group (12 persons)
</TABLE>
- ------------------------
* Less than 1%.
(1) Includes 30,000 shares of Common Stock underlying options that are
exercisable within 60 days of the date hereof.
(2) Includes 25,000 shares of Common Stock underlying options that are
exercisable within 60 days of the date hereof.
(3) Includes 30,000 shares of Common Stock underlying options that are
exercisable within 60 days of the date hereof.
(4) Includes 200,000 shares of Common Stock underlying options that are
exercisable within 60 days of the date hereof. Information regarding the
remainder of Mr. Leddington's holdings of Common Stock was obtained from
publicly available information on file with the Securities and Exchange
Commission.
(5) Includes 25,000 shares of Common Stock underlying options exercisable within
60 days of the date hereof. Does not include a warrant to purchase 275,000
shares of the Company's Common Stock held by Colman Furlong & Co., of which
Mr. Colman is a Partner. The warrant is exercisable with repect to 262,500
of the Company's Common Stock within 60 days of the date hereof.
(6) Consists of 60,000 shares of Common Stock underlying options that are
exercisable within 60 days of the date hereof. Does not include 75,000
shares of Common Stock held by H.J. Meyers & Co., Inc. Mr. Meyers is a
principal shareholder of the parent corporation of H.J. Meyers & Co., Inc.
9
<PAGE>
PROPOSAL TO APPROVE FORM OF AMENDMENT TO THE
NEW IMAGE INDUSTRIES, INC. 1993 STOCK INCENTIVE PLAN TO
INCREASE THE NUMBER OF SHARES AVAILABLE FOR GRANT THEREUNDER
SUMMARY OF PLAN
The Company's 1993 Stock Incentive Plan (the "1993 Plan") was approved by
the stockholders in December 1993. The 1993 Plan provides for the grant of
options to selected directors, officers, employees and consultants of the
Company and its subsidiaries. The only options that non-employee directors are
entitled to receive under the 1993 Plan are options granted to a non-employee
director who is expressly made eligible to participate in the 1993 Plan by a
resolution of the Board of Directors.
Prior to July 1995, an aggregate of 300,000 shares of the Company's Common
Stock were reserved for issuance under the 1993 Plan. On July 26, 1995, the
Board of Directors amended the 1993 Plan to increase the number of shares
reserved for issuance under the 1993 Plan to 500,000. At October 31, 1995,
options to purchase 500,000 shares of the Company's Common Stock had been
granted pursuant to the 1993 Plan at a weighted average exercise price of $3.73
per share. At October 31, 1995, approximately 92 persons were eligible to
participate in the 1993 Plan.
The 1993 Plan is currently administered by the Compensation Committee of the
Board of Directors (the "Administrator"). The Administrator has sole discretion
and authority, consistent with the provisions of the 1993 Plan, to select the
eligible participants to whom options will be granted or shares sold, the number
of shares covered by the option to be sold, the exercise or purchase price, and
the form and terms of agreement to be used.
The exercise price of incentive stock options must be not less than the fair
market value of a share of Common Stock on the date the option is granted (110%
with respect to optionees who beneficially hold at least 10% of the outstanding
Common Stock) and nonstatutory options must have an exercise price equal to at
least 85% of the fair market value of a share of Common Stock on the date the
option is granted. The Administrator has the authority to determine the time or
times at which options granted under the 1993 Plan become exercisable, provided
that options expire no later than ten years from the date of grant (five years
with respect to optionees who beneficially hold at least 10% of the outstanding
Common stock). The Administrator also has the authority to automatically grant
an option (a "Reload Option") to a current optionee upon the delivery to the
Company by such optionee of shares of the Company in payment of another option
or in satisfaction of a tax withholding requirement, up to the number of Shares
delivered to the Company in payment of such other option or in satisfaction of
such obligation. A Reload Option shall have a per share exercise price of not
less than 100% of the per Share fair market value on the date of grant of such
Reload Option, a term not longer than the remaining term of the original stock
option at the time of exercise thereof, and such other terms and conditions as
the Administrator in its sole discretion shall determine. Options are
nontransferable, other than by will and the laws of descent and distribution,
and generally may be exercised only by an employee while employed by the Company
or within 90 days after termination of employment (one year from termination
resulting from death or disability).
THE AMENDMENT
The amendment to the 1993 Plan (the "Amendment") will increase the number of
shares reserved for issuance under the 1993 Plan by 200,000 shares, from 300,000
to 500,000 shares. There are no other proposed changes to the 1993 Plan. The
Administrator has sole discretion and authority, consistent with the provisions
of the 1993 Plan, to select the eligible participants to whom these additional
options will be granted, the number of shares covered by any such option, the
exercise or purchase price, and the form and terms of agreement to be used.
REQUIRED VOTE
The Board of Directors has unanimously approved the amendment of the 1993
Plan to increase the number of shares available for issuance thereunder. The
affirmative vote of a majority of the Shares present
10
<PAGE>
in person or represented by proxy at the Annual Meeting and voting on the
amendment to the 1993 Plan is required for the approval of the adoption of such
amendment to the 1993 Plan. Unless marked otherwise, proxies received will be
voted for the adoption of such amendment to the 1993 Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE
AMENDMENT TO THE NEW IMAGE INDUSTRIES, INC. 1993 STOCK INCENTIVE PLAN TO
INCREASE THE NUMBER OF SHARES AVAILABLE FOR GRANT THEREUNDER
PROPOSAL TO APPROVE THE ADOPTION OF THE
NEW IMAGE INDUSTRIES, INC. 1995 STOCK INCENTIVE PLAN
INTRODUCTION
The proposed New Image Industries, Inc. 1995 Stock Incentive Plan (the "1995
Plan") was adopted by the Company's Board of Directors on July 26, 1995, subject
to the approval of the 1995 Plan by the stockholders. The 1995 Plan provides for
the issuance of options to purchase shares of the Company's Common Stock
("Shares") to selected directors, officers, employees and consultants of the
Company and its subsidiaries. Subject to adjustment for stock splits, stock
dividends and other similar events, the total number of Shares reserved for
issuance under the 1995 Plan shall be 500,000 Shares. At November 20, 1995,
options to purchase 151,500 Shares had been granted to employees of the Company
pursuant to the terms of the 1995 Plan, subject to the approval of the 1995 Plan
by the stockholders, at exercise prices ranging from $1.75 to $3.75 per Share.
The following sections summarize the principal features of the 1995 Plan, a
copy of which is attached as Exhibit "B" to this Proxy Statement. Although this
Proxy Statement contains a summary of the principal features of the 1995 Plan,
this summary is not intended to be complete and reference should be made to
Exhibit "B" to this Proxy Statement for the complete text of the 1995 Plan.
PURPOSE
The purpose of the 1995 Plan is to advance the interests of the Company and
its stockholders by strengthening the Company's and its subsidiaries' ability to
obtain and retain the services of the types of employees, consultants, officers
and directors who will contribute to the Company's long term success and to
provide incentives which are linked directly to increases in stock value which
will inure to the benefit of all stockholders of the Company.
ADMINISTRATION
The 1995 Plan will be administered by a committee of the Company's Board of
Directors (the "Committee"), each member of which is a non-employee member of
the Board of Directors, a Disinterested Person (as defined in Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended), and an
Outside Director (as defined in Section 162m of the Internal Revenue Code of
1986, as amended (the "Code")).
ELIGIBILITY AND NONDISCRETIONARY GRANTS
The 1995 Plan provides that options may be granted to officers of the
Company who serve as directors, non-employee directors (subject to the
limitations described below), officers, employees and consultants of the Company
and its subsidiaries. The Committee will determine the persons to be selected as
optionees, the terms of vesting of options and the number of Shares to be
subject to each option. Non-employee directors shall be entitled to receive the
following: (i) the nondiscretionary grant of a non-statutory option to purchase
7,000 Shares upon the non-employee director's election or appointment to the
Board of Directors, and (ii) for so long as the non-employee director remains on
the Board of Directors, an annual nondiscretionary grant on the date of the
Company's annual meeting of stockholders of non-statutory options to purchase
12,500 Shares, unless such non-employee directors are designated "eligible
persons" by a majority of the Board of Directors and therefore become eligible
for additional grants. All options granted to the non-employee directors shall
have an exercise price equal to 100% of the fair market value of the Shares on
the date of grant and shall vest over a three year period.
11
<PAGE>
TERMS OF OPTIONS
The terms of options granted under the 1995 Plan are determined by the
Committee. In the sole and absolute discretion of the Committee, such options
may be either "incentive stock options" within the meaning of Section 422 of the
Code ("ISOs"), or non-statutory options. However, to the extent that the
aggregate market value of the Shares with respect to which ISOs are exercisable
for the first time by any individual under the 1995 Plan and all other incentive
plans of the Company and any Parent or subsidiary of the Company during any
calendar year exceeds $100,000, such options shall not be treated as ISOs. In
addition, no participant shall be granted options with respect to more than
200,000 Shares during any one year period. Each option will be evidenced by an
option agreement between the Company and the optionee to whom such option is
granted on such terms and conditions as shall be determined by the Committee
from time to time. The terms of the option agreements need not be identical.
Each option is, however, subject to the following terms and conditions:
EXERCISE OF THE OPTION. The Committee determines when options granted under
the 1995 Plan may be exercisable. An option is exercised by giving written
notice of exercise to the Company, specifying the number of full Shares to be
purchased, and tendering payment of the purchase price. Payment for Shares
issued upon exercise of an option may be made by cash, by cashier's check or
certified check, by surrender of previously owned Shares (if the Committee
authorizes payment in Shares and such shares have been held for at least six
months), by surrender of the numbers of Shares issuable upon exercise of the
stock option having a fair market value on the date of exercise equal to the
option exercise price (if the Committee authorizes such method of payment), or
by any combination thereof or any other form of legal consideration acceptable
to the Committee. The 1995 Plan provides that, upon the recommendation of the
Committee, the Company may loan optionees the funds necessary to exercise their
options.
OPTION PRICE. The ISO exercise price shall equal or exceed the fair market
value of the Shares on the date the option is granted. The exercise price for
ISOs granted to individuals beneficially holding at least 10% of the outstanding
securities of the Company shall equal or exceed 110% of the fair market value of
the Shares on the date the option is granted.
TERMINATION OF OPTIONS. All options granted under the 1995 Plan expire ten
years from the date of grant, or such shorter period as is determined by the
Committee. No option is exercisable by any person after such expiration. If an
option expires, terminates or is canceled in full, the Shares not purchased
thereunder may again be available for option.
NON-TRANSFERABILITY OF OPTIONS. An option is not transferable by the
optionee otherwise than by will or the laws of descent and distribution and is
exercisable during the optionee's lifetime only by the optionee, his or her
guardian or legal representative.
OTHER PROVISIONS. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the 1995 Plan as may be
determined by the Committee.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
The 1995 Plan and each option granted thereunder contain provisions for
appropriate adjustments in the exercise price per share (but not the total
price) and the number of Shares subject to the option in the event of any change
in the number of issued Shares which results from a split-up or consolidation of
Shares, payment of a Share dividend, a recapitalization or other like capital
adjustment.
CHANGE OF CONTROL
The Committee has the right, in its sole discretion, to accelerate the
vesting of options granted pursuant to the 1995 Plan in the event of a
dissolution, liquidation, merger or consolidation of the Company.
AMENDMENT AND TERMINATION OF THE 1995 PLAN
The Board of Directors may amend the 1995 Plan at any time, may suspend it
from time to time or may terminate it without approval of the stockholders;
provided, however, that stockholder approval is required for any amendment which
materially increases the number of Shares for which options may be granted,
materially modifies the requirements of eligibility or materially increases the
benefits which may accrue to
12
<PAGE>
optionees under the 1995 Plan. However, no such action by the Board of Directors
or stockholders may unilaterally alter or impair any option previously granted
under the 1995 Plan without the consent of the optionee. In any event, the 1995
Plan shall terminate ten years from the date of stockholder approval unless
sooner terminated by action of the Board.
FEDERAL INCOME TAX CONSEQUENCES
The following general discussion of the principal tax considerations is
based upon the tax laws and regulations of the United States existing as of the
date hereof, all of which are subject to modification at any time. The 1995 Plan
does not constitute a qualified retirement plan under Section 401(a) of the Code
(which generally covers trusts forming part of a stock bonus, pension or
profit-sharing plan funded by the employer and/or employee contributions which
are designed to provide retirement benefits to participants under certain
circumstances) and is not subject to the Employee Retirement Income Security Act
of 1974 (the pension reform law which regulates most types of privately funded
pension, profit-sharing and other employee benefit plans).
Pursuant to Section 162(m) of the Code ("Section 162(m)"),
non-performance-based compensation in excess of $1 million to certain senior
executives of public companies is not deductible by the Company.
Performance-based compensation is excluded from applicable employee remuneration
for Section 162(m) limitation purposes. The 1995 Plan is intended to qualify as
performance-based compensation which is not subject to the $1 million
limitation. In order for the 1995 Plan to qualify as performance-based
compensation under Section 162(m) and therefore be exempt from the $1 million
limitation, the 1995 Plan must be approved by the stockholders of the Company.
CONSEQUENCES TO EMPLOYEES: INCENTIVE STOCK OPTIONS. No income is recognized
for federal income tax purposes by an optionee at the time an ISO is granted,
and, except as discussed below, no income is recognized by an optionee upon his
or her exercise of an ISO. If the optionee makes no disposition of the Shares
received upon exercise within two years from the date such option is granted or
one year from the date such option is exercised, the optionee will recognize
long-term capital gain or loss when he or she disposes of his or her Shares.
Such gain or loss will be measured by the difference between the exercise price
of the option and the amount received for the Shares at the time of disposition.
If the optionee disposes of Shares acquired upon exercise of an ISO within
two years after being granted the option or within one year after acquiring the
Shares, any amount realized from such disqualifying disposition will be taxable
as ordinary income in the year of disposition to the extent that the lesser of
(A) the fair market value of the shares on the date the ISO was exercised or (B)
the fair market value at the time of such disposition, exceeds the ISO exercise
price. Any amount realized upon disposition in excess of the fair market value
of the shares on the date of exercise will be treated as long-term or short-term
capital gain, depending upon whether the shares have been held for more than one
year.
The use of stock acquired through exercise of an ISO to exercise an ISO will
constitute a disqualifying disposition if the applicable holding period
requirement has not been satisfied.
For alternative minimum tax purposes, the excess of the fair market value of
the stock as of the date of exercise over the exercise price of the ISO is
included in computing alternative minimum taxable income.
CONSEQUENCES TO EMPLOYEES: NON-STATUTORY OPTIONS. No income is recognized
by a holder of Non-statutory Options at the time Non-statutory Options are
granted under the Plan. In general, at the time Shares are issued to a holder
pursuant to exercise of Non-statutory Options, the holder will recognize
ordinary income equal to the excess of the sum of cash and the fair market value
of the shares on the date of exercise over the exercise price.
A holder will recognize gain or loss on the subsequent sale of Shares
acquired upon exercise of Non-statutory Options in an amount equal to the
difference between the selling price and the tax basis of the Shares, which will
include the price paid plus the amount included in the holder's income by reason
of the
13
<PAGE>
exercise of the Non-statutory Options. Provided the Shares are held as a capital
asset, any gain or loss resulting from a subsequent sale will be long-term or
short-term capital gain or loss depending upon whether the Shares have been held
for more than one year.
CONSEQUENCES TO THE COMPANY: INCENTIVE STOCK OPTIONS. The Company will not
be allowed a deduction for federal income tax purposes at the time of the grant
or exercise of an ISO. There are also no federal income tax consequences to the
Company as a result of the disposition of Shares acquired upon exercise of an
ISO if the disposition is not a disqualifying disposition. At the time of a
disqualifying disposition by an optionee, the Company will be entitled to a
deduction for the amount received by the optionee to the extent that such amount
is taxable to the optionee as ordinary income.
CONSEQUENCES TO THE COMPANY: NON-STATUTORY OPTIONS. The Company will be
entitled to a deduction for federal income tax purposes in the year and in the
same amount as the Optionee is considered to have realized ordinary income in
connection with the exercise of Non-statutory Options if provision is made for
withholding of federal income taxes, where applicable.
GRANTS UNDER 1995 PLAN
OPTION GRANTS UNDER THE 1995 PLAN
The following table sets forth information regarding grants of stock options
made pursuant to the 1995 Plan, subject to the approval of stockholders, as of
the date hereof.
<TABLE>
<CAPTION>
NAME POSITION DATE PRICE SHARES VALUE TERM
- ---------------------------- ----------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Dewey Edmunds CEO 5/30/95 $ 3.75 51,500 $ 193,125 5 Years
Hal Orr CFO 10/9/95 2.25 30,000 $ 67,500 5 Years
Michael Oliver VP Marketing & Sales 10/2/95 2.00 25,000 $ 50,000 5 Years
Doug Golay VP R&D 11/6/95 2.19 15,000 $ 32,850 5 Years
Randy Bailey Director of Sales 11/20/95 1.75 15,000 $ 26,250 5 Years
Patti Consilvio Director, Telesales 10/16/95 2.50 5,000 $ 12,500 5 Years
Janet Morris Director, Human Resources 10/9/95 2.00 5,000 $ 10,000 5 Years
Regina Abrams Manager, Trade Shows 11/6/95 2.19 5,000 $ 10,950 5 Years
--------- ---------
151,500 $ 403,175
--------- ---------
--------- ---------
</TABLE>
REQUIRED VOTE
The Board of Directors has unanimously approved the adoption of the 1995
Plan. The affirmative vote of a majority of the Shares present in person or
represented by proxy at the Annual Meeting and voting on the approval of the
adoption of the 1995 Plan is required for the approval of the adoption of the
1995 Plan. Unless marked otherwise, proxies received will be voted for the
adoption of such 1995 Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE
APPROVAL OF THE NEW IMAGE INDUSTRIES, INC. 1995 STOCK INCENTIVE PLAN
PROPOSALS OF STOCKHOLDERS
A proper proposal submitted by a stockholder for presentation at the
Company's 1996 Annual Meeting and received at the Company's executive offices no
later than August 4, 1996, will be included in the Company's proxy statement and
form of proxy relating to the 1996 Annual Meeting.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen, independent accountants, were selected by the Board of
Directors to serve as independent auditors of the Company for the fiscal year
ended June 30, 1995, and have been selected by the Board of Directors to serve
as independent auditors of the fiscal year ending June 30, 1996. Representatives
of Arthur Andersen are expected to be present at the Annual Meeting, will have
an opportunity to make a statement if they desire to do so and will respond to
appropriate questions from stockholders.
14
<PAGE>
OTHER MATTERS
The Board of Directors is not aware of any matter to be acted upon at the
Annual Meeting other than described in this Proxy Statement. Unless otherwise
directed, all shares represented by the persons named in the accompanying proxy
will be voted in favor of the proposals described in this Proxy Statement. If
any other matter properly comes before the meeting, however, the proxy holders
will vote thereon in accordance with their best judgment.
EXPENSES
The entire cost of soliciting proxies will be borne by the Company.
Solicitation may be made by mail, telephone, telegraph and personal contact by
officers and other employees of the Company, who will not receive additional
compensation for such services. The Company will request brokerage houses,
nominees, custodians, fiduciaries and other like parties to forward soliciting
material to the beneficial owners of the Company's Common Stock held of record
by them and will reimburse such persons for their reasonable charges and
expenses in connection therewith.
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1995 is being mailed to stockholders along with this Proxy Statement. The Annual
Report is not to be considered part of the soliciting material.
ON BEHALF OF THE BOARD OF DIRECTORS
Dewey F. Edmunds
Chief Executive Officer
DATED: December 12, 1995
15
<PAGE>
EXHIBIT A
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The following report of the Compensation Committee to the Board of Directors
shall not be deemed to be incorporated by reference into any previous filing by
the Company under either the Securities Act of 1933, as amended ("Securities
Act") or the Securities Exchange Act of 1934, as amended ("Exchange Act") that
incorporates future Securities Act or Exchange Act filings in whole or in part
by reference.
To the Board of Directors:
GENERAL
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for establishing and administering the policies that govern
executive compensation and benefit practices. The Committee evaluates the
performance of the executive officers and determines their cash compensation
levels, equity incentives, and related benefits, all subject to Board approval.
COMPENSATION PHILOSOPHY
The Company's executive compensation programs are designed to attract and
retain the talented executives believed to be necessary to maximize shareholder
value. In so doing, the Committee attempts to provide levels of compensation
that integrate cash compensation and incentive plans with the Company's
strategic goals. The Committee believes this effectively serves to align the
interests of executive management with the long-term interests of the
stockholders, thereby motivating Company executives to achieve the strategic
business goals of the Company.
With regard to the Company's performance, the measures used for determining
appropriate levels of compensation for executive officers include the Company's
overall performance, ability to meet strategic goals within the current economic
climate and industry environment, expansion by acquisition or otherwise, profit
retention and profitability, all of which the Compensation Committee believes
combine to enhance stockholder value.
The Committee believes that the components of executive compensation should
include base salary, stock option grants and other benefits, and should be
linked to individual and Company performance.
BASE SALARY
Total executive compensation from salary and incentives is currently within
a range believed to be competitive for similarly situated executives within
other middle-market companies of similar size and stage of development. While
the Committee considers cash bonuses to be an effective tool for compensating
management, the Company's performance during fiscal 1995 did not, in the
Committee's view, merit any cash bonuses.
The Committee considers Company management proposals concerning salary
adjustments for executive officers and then makes recommendations to the entire
Board of Directors for its approval. The annual base salary of $180,000 for Mr.
Edmunds, the Company's Chief Executive Officer, was established under the terms
of an employment agreement entered into in May 1995 with the approval of the
Board of Directors. Mr. Edmunds is an at will employee of the Company, and there
is no term to his employment agreement.
In determining base salaries for executives for 1995, the Committee
considered the Company's earnings, growth in revenues, individual performance
and achievement, areas of responsibilities, position, tenure and internal
comparability.
STOCK OPTION GRANTS
The Compensation Committee believes that stock options are an important
element in executive compensation. The Compensation Committee believes that the
total number of options outstanding does
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not result in undue dilution of shareholders' equity, as the level of equity
incentives provided has enabled the Company to attract and retain executives who
could earn comparably greater salaries at similarly situated companies.
In 1993, the Board of Directors and the stockholders adopted a stock option
plan pursuant to which the Company may grant stock options to directors,
officers and employees of the Company. The purpose of this plan is to attract,
retain and award executive officers and directors and to furnish incentives to
these persons to improve operations, increase profits and positively impact the
Company's long-term performance. The Board of Directors has proposed the
adoption of a 1995 Stock Incentive Plan with identical purposes. Consistent with
these objectives, the Committee has approved in fiscal 1995 the granting of
options to executive officers under the 1993 Stock Option Plan as follows: Mr.
Edmunds received options to purchase 200,000 shares (30,000 options to vest
immediately upon grant and 30,000 options, 60,000 options, and 80,000 options to
vest on the first, second and third anniversaries of the commencement of his
employment, respectively; all options to vest immediately upon the occurrence of
a "change in control").
During fiscal 1995, the Committee repriced certain stock options held by one
of the Company's current executive officers and by various former executive
officers while they were still employed by the Company. The repricing resulted
from the Committee's determination that the options no longer represented a
meaningful incentive to these persons as a result of the then-current market
price having fallen to a level substantially below the exercise price of the
repriced options.
Compensation Committee: Harold J. Meyers Guy de Vreese
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EXHIBIT B
NEW IMAGE INDUSTRIES, INC.
1995 STOCK INCENTIVE PLAN
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NEW IMAGE INDUSTRIES, INC.
1995 STOCK INCENTIVE PLAN
ARTICLE 1
GENERAL PURPOSE OF PLAN
The name of this plan is the New Image Industries, Inc. 1995 Stock Incentive
Plan (the "PLAN"). The purpose of the Plan is to enable New Image Industries,
Inc., a Delaware corporation (the "COMPANY"), and any Parent or any Subsidiary
to obtain and retain the services of the types of employees, consultants,
officers and Directors who will contribute to the Company's long range success
and to provide incentives which are linked directly to increases in share value
which will inure to the benefit of all shareholders of the Company.
ARTICLE 2
DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set forth
below:
"ADMINISTRATOR" shall have the meaning as set forth in Section 3.1 of the
Plan.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto.
"COMMITTEE" means a committee of the Board designated by the Board to
administer the Plan and composed of not less than the minimum number of persons
from time to time required both by the Rule and Section 162(m) of the Code, each
of whom is a Disinterested Person and an Outside Director.
"COMPANY" means New Image Industries Inc., a corporation organized under the
laws of the State of Delaware (or any successor corporation).
"DATE OF GRANT" means the date on which the Committee adopts a resolution
expressly granting Stock Options to a Participant, or if a different date is set
forth in such resolution as the Date of Grant, then such date as is set forth in
such resolution.
"DIRECTOR" means a member of the Board.
"DISABILITY" means permanent and total disability as defined by the
Committee.
"DISINTERESTED PERSON" shall have the meaning set forth in Rule
16b-3(c)(2)(i) under the Exchange Act, or any successor definition adopted by
the SEC.
"ELECTION" shall have the meaning set forth in Section 10.3(d)(i) of the
Plan.
"ELIGIBLE PERSON" means an employee, officer, consultant or, subject to the
limitations set forth in Article 5 of the Plan, Director of the Company, any
Parent or any Subsidiary.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXERCISE PRICE" shall have the meaning set forth in Section 6.2(c) of the
Plan.
"FAIR MARKET VALUE" per share at any date shall mean (i) if the Stock is
listed on an exchange or exchanges, or admitted for trading in a market system
which provides last sale data under Rule 11Aa3-1 of the General Rules and
Regulations of the SEC under the Exchange Act (a "MARKET SYSTEM"), the last
reported sales price per share on the last business day prior to such date on
the principal exchange on which it is traded, or in a Market System, as
applicable, or if no sale was made on such day on such principal exchange or in
such a Market System, as applicable, the last reported sales price per share on
the most recent day prior to such date on which a sale was reported on such
exchange or such Market System, as applicable;
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or (ii) if the Stock is not then traded on an exchange or in a Market System,
the average of the closing bid and asked prices per share for the Stock in the
over-the-counter market as quoted on NASDAQ on the day prior to such date; or
(iii) if the Stock is not listed on an exchange or quoted on NASDAQ, an amount
determined in good faith by the Committee.
"LIQUIDATING EVENT" shall have the meaning set forth in Section 8.1(b) of
the Plan.
"LIQUIDITY EVENT" means any Reorganization Event which the Committee
determines, in its sole and absolute discretion, to treat as such an event.
"INCENTIVE STOCK OPTION" means a Stock Option intended to qualify as an
"incentive stock option" as that term is defined in Section 422 of the Code.
"NON-STATUTORY STOCK OPTION" means a Stock Option intended to not qualify as
an Incentive Stock Option.
"OPTIONEE" means a Participant who is granted a Stock Option pursuant to the
Plan.
"OUTSIDE DIRECTOR" means a Director who is not (a) a current employee of the
Company (or any related entity), (b) a former employee of the Company (or any
related entity) who is receiving compensation for prior services (other than
benefits under a tax-qualified retirement plan), or (c) a consultant or person
otherwise receiving compensation or other remuneration, either directly or
indirectly, in any capacity other than as a Director.
"PARENT" means any present or future corporation which would be a "parent
corporation" as that term is defined in Section 424 of the Code.
"PARTICIPANT" means any Eligible Person selected by the Committee, pursuant
to the Committee's authority set forth in Article 3 of the Plan, to receive
grants of Stock Options.
"PLAN" means this New Image Industries, Inc. 1995 Stock Incentive Plan, as
the same may be amended or supplemented from time to time.
"REORGANIZATION EVENT" shall have the meaning set forth in Section 8.1(c) of
the Plan.
"RETIREMENT" means retirement from active employment with the Company or any
Parent or Subsidiary as defined by the Committee.
"RULE" means Rule 16b-3 and any future rules promulgated in substitution
therefor under the Exchange Act.
"SEC" means the Securities and Exchange Commission.
"SECTION 16(B) PERSON" means a person subject to Section 16(b) of the
Exchange Act.
"STOCK" means the Common Stock, par value $.001 per share, of the Company.
"STOCK OPTION" means an option to purchase shares of Stock granted pursuant
to Article 6 of the Plan.
"STOCK OPTION AGREEMENT" shall have the meaning set forth in Section 6.2 of
the Plan.
"SUBSIDIARY" means any present or future corporation which would be a
"subsidiary corporation" as that term is defined in Section 424 of the Code.
"SURVIVING CORPORATION" shall have the meaning set forth in Section 8.1(e)
of the Plan.
"TAX DATE" shall have the meaning set forth in Section 10.3(d)(iii) of the
Plan.
"TEN PERCENT SHAREHOLDER" means a person who on the Date of Grant owns,
either directly or through attribution as provided in Section 424(d) of the
Code, Stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of any Parent or Subsidiary.
"WITHHOLDING RIGHT" shall have the meaning set forth in Section 10.3(c) of
the Plan.
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ARTICLE 3
ADMINISTRATION
SECTION 3.1 COMMITTEE. The Plan shall be administered by the Committee.
SECTION 3.2 POWERS IN GENERAL. The Committee shall have the power and
authority to grant Stock Options to Eligible Persons, pursuant to the terms of
the Plan.
SECTION 3.3 SPECIFIC POWERS. In particular, the Committee shall have the
authority: (i) to construe and interpret the Plan and apply its provisions; (ii)
to promulgate, amend and rescind rules and regulations relating to the
administration of the Plan; (iii) to authorize any person to execute, on behalf
of the Company, any instrument required to carry out the purposes of the Plan;
(iv) to determine when Stock Options are to be granted under the Plan; (v) from
time to time to select, subject to the limitations set forth in this Plan, those
Eligible Persons to whom Stock Options shall be granted; (vi) to determine the
number of shares of Stock to be made subject to each Stock Option; (vii) to
prescribe the terms and conditions of each Stock Option, including, without
limitation, the Exercise Price and medium of payment and vesting provisions, to
determine whether the Stock Option is to be an Incentive Stock Option or a
Non-Statutory Stock Option and to specify the provisions of the Stock Option
Agreement relating to such Stock Option; (viii) to amend any outstanding Stock
Options for the purpose of modifying the time or manner of vesting, the Exercise
Price, thereunder or otherwise, subject to applicable legal restrictions and to
the consent of the other party to such agreement; (ix) to determine when a
consultant's relationship with the Company is sufficient to constitute the
equivalent of employment with the Company for purposes of the Plan; (x) to
determine the duration and purpose of leaves of absences which may be granted to
a Participant without constituting termination of his or her employment for
purposes of the Plan; and (xi) to make any and all other determinations which it
determines to be necessary or advisable for administration of the Plan.
SECTION 3.4 DECISIONS FINAL. All decisions made by the Committee pursuant
to the provisions of the Plan shall be final and binding on the Company and the
Participants.
SECTION 3.5 THE COMMITTEE. The Board may, in its sole and absolute
discretion, from time to time delegate any or all of its duties and authority
with respect to the Plan to the Committee whose members are to be appointed by
and to serve at the pleasure of the Board. Once appointed, the Committee shall
continue to serve until otherwise directed by the Board. From time to time, the
Board may increase or decrease (to not less than the minimum number of persons
from time to time required by both the Rule and Section 162(m) of the Code) the
size of the Committee, add additional members to, remove members (with or
without cause) from, appoint new members in substitution therefor, and fill
vacancies, however caused, in the Committee. The Committee shall act pursuant to
a vote of the majority of its members or, in the case of a committee comprised
of only two members, the unanimous consent of its members, whether present or
not, or by the written consent of the majority of its members or, in the case of
a committee comprised of only two members, the unanimous written consent of its
members, and minutes shall be kept of all of its meetings and copies thereof
shall be provided to the Board. Subject to the limitations prescribed by the
Plan and the Board, the Committee may establish and follow such rules and
regulations for the conduct of its business as it may determine to be advisable.
ARTICLE 4
STOCK SUBJECT TO PLAN
SECTION 4.1 STOCK SUBJECT TO THE PLAN. Subject to adjustment as provided
in Article 8, the total number of shares of Stock reserved and available for
issuance under the Plan shall be 700,000 shares.
SECTION 4.2 UNEXERCISED STOCK OPTIONS; REACQUIRED SHARES. To the extent
that any Stock Options expire or are otherwise terminated without being
exercised, the shares of Stock underlying such Stock Options (and shares related
thereto) shall again be available for issuances in connection with future Stock
Options under the Plan. If and to the extent that the Company receives shares of
Stock in payment of all or a portion of the purchase price for any Stock, or in
payment of any tax liabilities, the receipt of such shares will NOT increase the
number of shares available for issuance under the Plan.
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ARTICLE 5
ELIGIBILITY
Outside Directors who are designated as Eligible Persons by the Board of
Directors, Outside Directors who are not so designated as Eligible Persons (but
only to the extent provided by Article 7 hereof), officers, employees and
consultants of the Company, any Parent or any Subsidiary, shall be eligible to
be granted Stock Options hereunder, subject to limitations set forth in this
Plan; provided, however, that only officers and employees shall be eligible to
be granted Incentive Stock Options hereunder.
ARTICLE 6
STOCK OPTIONS
SECTION 6.1 GENERAL. Each Stock Option granted under the Plan shall be in
such form and under such terms and conditions as the Committee may from time to
time approve; provided, that such terms and conditions are not inconsistent with
the Plan. The provisions of Stock Option Agreements entered into under the Plan
need not be identical with respect to each Optionee. Stock Options granted under
the Plan may be either Incentive Stock Options or Non-Statutory Stock Options.
SECTION 6.2 TERMS AND CONDITIONS OF STOCK OPTIONS. Each Stock Option
granted pursuant to the Plan shall be evidenced by a written option agreement
between the Company and the Optionee (the "STOCK OPTION AGREEMENT"), which shall
comply with and be subject to the following terms and conditions.
(a) NUMBER OF SHARES. Each Stock Option Agreement shall state the
number of shares of Stock to which the Stock Option relates.
(b) TYPE OF OPTION. Each Stock Option Agreement shall identify the
portion (if any) of the Stock Option which constitutes an Incentive Stock
Option.
(c) EXERCISE PRICE. Each Stock Option Agreement shall state the price
at which shares subject to the Stock Option may be purchased (the "EXERCISE
PRICE"), which, with respect to Incentive Stock Options, shall not be less
than 100% of the Fair Market Value of the shares of Stock on the Date of
Grant; provided, however, that in the case of an Incentive Stock Option
granted to a Ten Percent Shareholder, the Exercise Price shall not be less
than 110% of such Fair Market Value.
(d) VALUE OF SHARES. The Fair Market Value of the shares of Stock
(determined as of the Date of Grant) with respect to which Incentive Stock
Options are first exercisable by an Optionee under this Plan and all other
incentive option plans of the Company and any Parent or Subsidiary in any
calendar year shall not, for such year, in the aggregate, exceed $100,000;
provided, however, that if the aggregate Fair Market Value of such shares
exceeds $100,000, then the incremental portion in excess of $100,000 shall
be treated as Non-Statutory Stock Options (and not as Incentive Stock
Options); provided, further, that this Section 6.2(d) shall not affect the
right of the Committee to accelerate or otherwise alter the time of vesting
of any Stock Options granted as Incentive Stock Options, even if, as a
result thereof, some of such Stock Options cease being Incentive Stock
Options.
(e) MEDIUM AND TIME OF PAYMENT. The Exercise Price shall be paid in
full, at the time of exercise, (i) in cash or cash equivalents, (ii) with
the approval of the Committee, in shares of Stock which have been held by
the Optionee for a period of at least six calendar months preceding the date
of surrender and which have a Fair Market Value equal to the Exercise Price,
(iii) in a combination of cash, cash equivalents and Stock, or (iv) in any
other form of legal consideration acceptable to the Committee, and may be
effected in whole or in part (x) with monies received from the Company at
the time of exercise as a compensatory cash payment or (y) with monies
borrowed from the Company in accordance with Section 10.5.
(f) TERM AND EXERCISE OF STOCK OPTIONS. Stock Options shall vest or
become exercisable over the exercise period at the times the Committee may
determine, as reflected in the related Stock Option Agreements; provided,
however, that the Optionees shall have the right to exercise the Stock
Options at the rate of at least 20% per year over five years from the Date
of Grant of such Stock Options. The
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exercise period of any Stock Option shall be determined by the Committee,
but shall not exceed ten years from the Date of Grant of the Stock Option.
In the case of an Incentive Stock Option granted to a Ten Percent
Shareholder, the exercise period shall be determined by the Committee, but
shall not exceed five years from the Date of Grant of the Stock Option. A
Stock Option may be exercised, as to any or all full shares of Stock as to
which the Stock Option has become exercisable, by giving written notice of
such exercise to the Company.
ARTICLE 7
MANDATORY GRANTS TO OUTSIDE DIRECTORS
SECTION 7.1 MANDATORY GRANTS TO OUTSIDE DIRECTORS. Notwithstanding any
other provision of this Plan, the grant of Stock Options to Outside Directors
shall be subject to the following limitations of this Article 7.
(a) Upon the initial election or appointment of an Outside Director, the
Committee shall grant to such member, at the first meeting of the Committee
following the date of such election or appointment, a ten year Non-Statutory
Stock Option to purchase 7,000 shares of Stock.
(b) The Committee shall grant to each Outside Director, effective as of
each annual meeting of the Company's stockholders at the conclusion of which
the Outside Director still serves as a Director of the Company, a ten year
Non-Statutory Stock Option to purchase 12,500 shares of Stock.
(c) All Stock Options granted to Outside Directors under this Article 7
shall be exercisable at an Exercise Price equal to 100% of the Fair Market
Value of a share of Stock on the Date of Grant.
(d) All Stock Options granted to Outside Directors under this Article 7
will vest or become exercisable as follows: 33% of the Stock Options
(rounded up to the nearest whole share) shall vest on the first anniversary
of the Date of Grant of the Stock Options, and 33% of the Stock Options
(rounded up to the nearest whole share) shall vest on the second anniversary
of the Date of Grant of the Stock Options, and the remaining Stock Options
shall vest on the third anniversary of the Date of Grant of the Stock
Options.
(e) Unless otherwise provided in the Plan, all provisions regarding the
terms of Non-Statutory Stock Options, other than those pertaining to the
Date of Grant, the number of shares covered by such grant, term and Exercise
Price shall be applicable to the Stock Options granted to Outside Directors
under this Article 7.
SECTION 7.2 PROHIBITION OF OTHER GRANTS TO OUTSIDE
DIRECTORS. Notwithstanding any other provisions in this Plan, the mandatory
grants described in this Article 7 shall constitute the only grants under the
Plan permitted to be made to Outside Directors unless such persons are
designated Eligible Persons by the Board of Directors.
SECTION 7.3 PROHIBITION AGAINST CERTAIN AMENDMENTS. Notwithstanding any
other provisions of this Plan, the provisions of this Article 7 shall not be
amended more than once every six months, other than to comport with changes in
the Code, the Employee Retirement Income Security Act, or the rules thereunder.
ARTICLE 8
ADJUSTMENTS
SECTION 8.1 EFFECT OF CERTAIN CHANGES.
(a) STOCK DIVIDENDS, SPLITS, ETC. If there is any change in the number
of outstanding shares of Stock through the declaration of Stock dividends or
through a recapitalization resulting in Stock splits, or combinations or
exchanges of the outstanding shares, (i) the number of shares of Stock
available for Stock Options, (ii) the number of shares covered by
outstanding Stock Options, (iii) the number of shares set forth under
Section 10.1(a) and (iv) the Exercise Price of any Stock Option, in effect
prior to such change, shall be proportionately adjusted by the Committee to
reflect any increase or decrease in the number of issued shares of Stock;
provided, however, that any fractional shares resulting from the adjustment
shall be eliminated.
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(b) LIQUIDATING EVENT. In the event of the proposed dissolution or
liquidation of the Company, or in the event of any corporate separation or
division, including, but not limited to, a split-up, split-off or spin-off
(each, a "LIQUIDATING EVENT"), the Committee may provide that the holder of
any Stock Options then exercisable shall have the right to exercise such
Stock Options (at the price provided in the agreement evidencing the Stock
Options) subsequent to the Liquidating Event, and for the balance of its
term, solely for the kind and amount of shares of Stock and other
securities, property, cash or any combination thereof receivable upon such
Liquidating Event by a holder of the number of shares of Stock for or with
respect to which such Stock Options might have been exercised immediately
prior to such Liquidating Event; or the Committee may provide, in the
alternative, that each Stock Option granted under the Plan shall terminate
as of a date to be fixed by the Board; provided, however, that not less than
30 days written notice of the date so fixed shall be given to each Stock
Option holder and if such notice is given, each Stock Option holder shall
have the right, during the period of 30 days preceding such termination, to
exercise his or her Stock Options as to all or any part of the shares of
Stock covered thereby, without regard to any installment or vesting
provisions in his or her Stock Options agreement, on the condition, however,
that the Liquidating Event actually occurs; and if the Liquidating Event
actually occurs, such exercise shall be deemed effective (and, if
applicable, the Stock Option holder shall be deemed a shareholder with
respect to the Stock Options exercised) immediately preceding the occurrence
of the Liquidating Event (or the date of record for shareholders entitled to
share in such Liquidating Event, if a record date is set).
(c) MERGER OR CONSOLIDATION. In the case of any capital
reorganization, any reclassification of the Stock (other than a change in
par value or recapitalization described in Section 8.1(a) of the Plan), or
the consolidation of the Company with, or a sale of substantially all of the
assets of the Company to (which sale is followed by a liquidation or
dissolution of the Company), or merger of the Company with another person (a
"REORGANIZATION EVENT"), the Committee may provide in the Stock Option
Agreement, or if not provided in the Stock Option Agreement, may determine,
in its sole and absolute discretion, to accelerate the vesting of
outstanding Stock Options (a "LIQUIDITY EVENT") in which case the Company
shall deliver to the Stock Option holders at least 15 days prior to such
Reorganization Event (or at least 15 days prior to the date of record for
shareholders entitled to share in the securities or property distributed in
the Reorganization Event, if a record date is set) a notice which shall (i)
indicate whether the Reorganization Event shall be considered a Liquidity
Event and (ii) advise the Stock Option holder of his or her rights pursuant
to the agreement evidencing such Stock Options. If the Reorganization Event
is determined to be a Liquidity Event, (i) the Surviving Corporation may,
but shall not be obligated to, tender stock options or stock appreciation
rights to the Stock Option holder with respect to the Surviving Corporation,
and such new options and rights shall contain terms and provisions that
substantially preserve the rights and benefits of the applicable Stock
Options then outstanding under the Plan, or (ii) in the event that no stock
options or stock appreciation rights have been tendered by the Surviving
Corporation pursuant to the terms of item (i) immediately above, the Stock
Option holder shall have the right, exercisable during a 10 day period
ending on the fifth day prior to the Reorganization Event (or ending on the
fifth day prior to the date of record for shareholders entitled to share in
the securities or property distributed in the Reorganization Event, if a
record date is set), to exercise his or her rights as to all or any part of
the shares of Stock covered thereby, without regard to any installment or
vesting provisions in his or her Stock Options agreement, on the condition,
however, that the Reorganization Event is actually effected; and if the
Reorganization Event is actually effected, such exercise shall be deemed
effective (and, if applicable, the Stock Option holder shall be deemed a
shareholder with respect to the Stock Options exercised) immediately
preceding the effective time of the Reorganization Event (or on the date of
record for shareholders entitled to share in the securities or property
distributed in the Reorganization Event, if a record date is set). If the
Reorganization Event is not determined to be a Liquidity Event, the Stock
Option holder shall thereafter be entitled upon exercise of the Stock
Options to purchase the kind and number of shares of stock or other
securities or property of the Surviving Corporation receivable upon such
event by a holder of the number of shares of the Stock which the Stock
Options would have entitled the Stock Option holder to purchase from the
Company if the Reorganization Event had not occurred, and in any such case,
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appropriate adjustment shall be made in the application of the provisions
set forth in this Plan with respect to the Stock Option holder's rights and
interests thereafter, to the end that the provisions set forth in the
agreement applicable to such Stock Options (including the specified changes
and other adjustments to the Exercise Price) shall thereafter be applicable
in relation to any shares or other property thereafter purchasable upon
exercise of the Stock Options.
(d) PAR VALUE CHANGES. In the event of a change in the Stock of the
Company as presently constituted which is limited to a change of all of its
authorized shares with par value, into the same number of shares without par
value, or any subsequent change in the par value, the shares resulting from
any such change shall be "STOCK" within the meaning of the Plan.
SECTION 8.2 DECISION OF COMMITTEE FINAL. To the extent that the foregoing
adjustments relate to stock or securities of the Company, such adjustments shall
be made by the Committee, whose determination in that respect shall be final,
binding and conclusive; provided, however, that each Incentive Stock Option
granted pursuant to the Plan shall not be adjusted without the prior consent of
the holder thereof in a manner that causes such Stock Option to fail to continue
to qualify as an Incentive Stock Option.
SECTION 8.3 NO OTHER RIGHTS. Except as expressly provided in this Article
8, no Stock Option holder shall have any rights by reason of any subdivision or
consolidation of shares of Stock or the payment of any dividend or any other
increase or decrease in the number of shares of Stock of any class or by reason
of any Liquidating Event, merger, or consolidation of assets or stock of another
corporation, or any other issue by the Company of shares of stock of any class,
or securities convertible into shares of stock of any class; and except as
provided in this Article 8, none of the foregoing events shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Stock subject to Stock Options. The grant of Stock Options pursuant
to the Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassification, reorganizations or changes of its capital or
business structures or to merge or to consolidate or to dissolve, liquidate or
sell, or transfer all or part of its business or assets.
SECTION 8.4 NO RIGHTS AS SHAREHOLDER. Except as specifically provided in
this Article 8, a Stock Option holder or a transferee of Stock Options shall
have no rights as a shareholder with respect to any shares covered by the Stock
Options until the date of the issuance of a Stock certificate to him or her for
such shares, and no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
of other rights for which the record date is prior to the date such Stock
certificate is issued, except as provided in Section 8.1.
ARTICLE 9
AMENDMENT AND TERMINATION
The Board may amend, alter or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights of a
Participant under any Stock Options theretofore granted without such
Participant's consent, or which without the approval of the shareholders would:
(a) except as provided in Article 8, materially increase the total
number of shares of Stock reserved for the purposes of the Plan;
(b) materially increase the benefits accruing to Participants or
Eligible Persons under the Plan; or
(c) materially modify the requirements for eligibility under the Plan.
The Committee may amend the terms of any award theretofore granted,
prospectively or retroactively, but, subject to Article 3, no such amendment
shall impair the rights of any holder without his or her consent.
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ARTICLE 10
GENERAL PROVISIONS
SECTION 10.1 GENERAL RESTRICTIONS.
(a) LIMITATION ON GRANTING OF STOCK OPTIONS. Subject to adjustment as
provided in Article 8, no Participant shall be granted Stock Options with
respect to more than 500,000 shares of Stock.
(b) NO VIEW TO DISTRIBUTE. The Committee may require each person
acquiring shares of Stock pursuant to the Plan to represent to and agree
with the Company in writing that such person is acquiring the shares without
a view towards distribution thereof. The certificates for such shares may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer.
(c) LEGENDS. All certificates for shares of Stock delivered under the
Plan shall be subject to such stop transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations and other
requirements of the SEC, any stock exchange upon which the Stock is then
listed and any applicable federal or state securities laws, and the
Committee may cause a legend or legends to be put on any such certificates
to make appropriate reference to such restrictions.
SECTION 10.2 OTHER COMPENSATION ARRANGEMENTS. Nothing contained in this
Plan shall prevent the Board from adopting other or additional compensation
arrangements, subject to shareholder approval if such approval is required; and
such arrangements may be either generally applicable or applicable only in
specific cases.
SECTION 10.3 DISQUALIFYING DISPOSITIONS: WITHHOLDING TAXES.
(a) DISQUALIFYING DISPOSITION. The Stock Option Agreements shall
require Optionees who make a "DISPOSITION" (as defined in the Code) of all
or any of the Stock acquired through the exercise of Stock Options within
two years from the date of grant of the Stock Option, or within one year
after the issuance of Stock relating thereto, to immediately advise the
Company in writing as to the occurrence of the sale and the price realized
upon the sale of such Stock; and each Optionee shall agree that he or she
shall maintain all such Stock in his or her name so long as he or she
maintains beneficial ownership of such Stock.
(b) WITHHOLDING REQUIRED. Each Participant shall, no later than the
date as of which the value derived from Stock Options first become
includable in the gross income of the Participant for income tax purposes,
pay to the Company, or make arrangements satisfactory to the Committee
regarding payment of, any federal, state or local taxes of any kind required
by law to be withheld with respect to the Stock Options or their exercise.
The obligations of the Company under the Plan shall be conditioned upon such
payment or arrangements and the Participant shall, to the extent permitted
by law, have the right to request that the Company deduct any such taxes
from any payment of any kind otherwise due to the Participant.
(c) WITHHOLDING RIGHT. The Committee may, in its discretion, grant to
a Stock Option holder the right (a "WITHHOLDING RIGHT") to elect to make
such payment by irrevocably requiring the Company to withhold from shares
issuable upon exercise of the Stock Options that number of full shares of
Stock having a Fair Market Value on the Tax Date (as defined below) equal to
the amount (or portion of the amount) required to be withheld. The
Withholding Right may be granted with respect to all or any portion of the
Stock Options.
(d) EXERCISE OF WITHHOLDING RIGHT. To exercise a Withholding Right,
the Stock Option holder must follow the election procedures set forth below,
together with such additional procedures and conditions as may be set forth
in the related Stock Option Agreement or otherwise adopted by the Committee.
(i) The Stock Option holder must deliver to the Company his or her
written notice of election (the "ELECTION") to have the Withholding Right
apply to all (or a designated portion) of his or her Stock Options prior
to the date of exercise of the Right to which it relates.
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(ii) Unless disapproved by the Committee as provided in Subsection
(iii) below, the Election once made will be irrevocable.
(iii) No Election is valid unless the Committee consents to the
Election; the Committee has the right and power, in its sole discretion,
with or without cause or reason therefor, to consent to the Election, to
refuse to consent to the Election, or to disapprove the Election; and if
the Committee has not consented to the Election on or prior to the date
that the amount of tax to be withheld is, under applicable federal income
tax laws, fixed and determined by the Company (the "TAX DATE"), the
Election will be deemed approved.
(iv) If the Stock Option holder on the date of delivery of the
Election to the Company is a Section 16(b) Person, the following
additional provisions will apply:
(A) the Election cannot be made during the six calendar month
period commencing with the date of the grant of the Withholding Right
(even if the Stock Options to which such Withholding Right relates
have been granted prior to such date); provided, that this Subsection
(A) is not applicable to any Stock Option holder at any time
subsequent to the death, Disability or Retirement of the Stock Option
holder;
(B) the Election (and the exercise of the related Stock Option)
can only be made during the Window Period; and
(C) notwithstanding any other provision of this Section 10.3, no
Section 16(b) Person shall have the right to make any Election unless
the Company has been subject to the reporting requirements of Section
13(a) of the Exchange Act for at least a year prior to the
transaction and has filed all reports and statements required to be
filed pursuant to that Section for that year.
(e) EFFECT. If the Committee consents to an Election of a Withholding
Right:
(i) upon the exercise of the Stock Options (or any portion thereof)
to which the Withholding Right relates, the Company will withhold from
the shares otherwise issuable that number of full shares of Stock having
an actual Fair Market Value equal to the amount (or portion of the
amount, as applicable) required to be withheld under applicable federal,
state and/or local income tax laws as a result of the exercise; and
(ii) if the Stock Option holder is then a Section 16(b) Person who
has made an Election, the related Stock Options may not be exercised, nor
may any shares of Stock issued pursuant thereto be sold, exchanged or
otherwise transferred, unless such exercise, or such transaction,
complies with an exemption from Section 16(b) provided under Rule 16b-3.
(f) CASH REIMBURSEMENTS. The Company may make cash bonus payments to
Non-Statutory Stock Option holders to reimburse such Non-Statutory Stock
Option holders for all or part of federal and state taxes payable with
respect to the exercise of Non-Statutory Stock Options.
SECTION 10.4 INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as Directors or Outside Directors, and to the
extent allowed by applicable law, the Committee shall be indemnified by the
Company against the reasonable expenses, including attorney's fees, actually
incurred in connection with any action, suit or proceeding or in connection with
any appeal therein, to which they or any one of them may be party by reason of
any action taken or failure to act under or in connection with the Plan or any
Stock Option granted under the Plan, and against all amounts paid by them in
settlement thereof (provided that the settlement has been approved by the
Company, which approval shall not be unreasonably withheld) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Committee did not act in good faith and in a manner which
such person reasonably believed to be in the best interests of
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the Company, and in the case of a criminal proceeding, had no reason to believe
that the conduct complained of was unlawful; provided, however, that within 60
days after institution of any such action, suit or proceeding, such Committee
shall, in writing, offer the Company the opportunity at its own expense to
handle and defend such action, suit or proceeding.
SECTION 10.5 LOANS. The Company may make loans to Optionees (other than
Directors who are not also employees or officers of the Company or any Parent or
any Subsidiary) as the Committee, in its discretion, may determine in connection
with the exercise of outstanding Stock Options granted under the Plan. Such
loans shall (i) be evidenced by promissory notes entered into by the holders in
favor of the Company; (ii) be subject to the terms and conditions set forth in
this Section 10.5 and such other terms and conditions, not inconsistent with the
Plan, as the Committee shall determine; and (iii) bear interest, if any, at such
rate as the Committee shall determine. In no event may the principal amount of
any such loan exceed the Exercise Price less the par value, if any, of the
shares of Stock covered by the Stock Option, or portion thereof, exercised by
the Optionee. The initial term of the loan, the schedule of payments of
principal and interest under the loan, the extent to which the loan is to be
with or without recourse against the holder with respect to principal and
applicable interest and the conditions upon which the loan will become payable
in the event of the holder's termination of employment shall be determined by
the Committee; provided, however, that the term of the loan, including
extensions, shall not exceed 10 years. Unless the Committee determines
otherwise, when a loan shall have been made, shares of Stock having a Fair
Market Value at least equal to the principal amount of the loan shall be pledged
by the holder to the Company as security for payment of the unpaid balance of
the loan and such pledge shall be evidenced by a security agreement, the terms
of which shall be determined by the Committee, in its discretion; provided,
however, that each loan shall comply with all applicable laws, regulations and
rules of the Board of Governors of the Federal Reserve System and any other
governmental agency having jurisdiction.
SECTION 10.6 NON-TRANSFERABILITY OF STOCK OPTIONS. Each Stock Option
Agreement shall provide that the Stock Options granted under the Plan shall not
be transferable otherwise than by will or by the laws of descent and
distribution, and the Stock Options may be exercised, during the lifetime of the
Stock Option holder, only by the Stock Option holder or by his or her guardian
or legal representative.
SECTION 10.7 REGULATORY MATTERS. Each Stock Option Agreement shall provide
that no shares shall be purchased or sold thereunder unless and until (i) any
then applicable requirements of state or federal laws and regulatory agencies
shall have been fully complied with to the satisfaction of the Company and its
counsel; and (ii) if required to do so by the Company, the Optionee shall have
executed and delivered to the Company a letter of investment intent in such form
and containing such provisions as the Committee may require.
SECTION 10.8 RECAPITALIZATIONS. Each Stock Option Agreement and Stock
Purchase Agreement shall contain provisions required to reflect the provisions
of Article 8.
SECTION 10.9 DELIVERY. Upon exercise of Stock Options granted under this
Plan, the Company shall issue Stock or pay any amounts due within a reasonable
period of time thereafter. Subject to any statutory obligations the Company may
otherwise have, for purposes of this Plan, 30 days shall be considered a
reasonable period of time.
SECTION 10.10 RULE 16B-3. With respect to persons subject to Section 16 of
the Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To
the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void to the extent permitted by law and
deemed advisable by the Committee.
SECTION 10.11 OTHER PROVISIONS. The Stock Option Agreements authorized
under the Plan may contain such other provisions not inconsistent with this
Plan, including, without limitation, restrictions upon the exercise of the Stock
Options, as the Committee may deem advisable.
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ARTICLE 11
EFFECTIVE DATE OF PLAN
The Plan shall become effective on July 24, 1995, subject to approval by the
Company's stockholders, which approval must be obtained within one year from the
date the Plan is adopted by the Board.
ARTICLE 12
TERM OF PLAN
No Stock Options shall be granted pursuant to the Plan on or after July 23,
2005 but Stock Options theretofore granted may extend beyond that date.
ARTICLE 13
INFORMATION TO STOCK OPTION HOLDERS
The Company will cause a report to be sent to each Stock Option holder not
later than 120 days after the end of each fiscal year. Such report shall consist
of the financial statements of the Company for such fiscal year and shall
include such other information as is provided by the Company to its
shareholders.
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NEW IMAGE INDUSTRIES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
The undersigned, a Stockholder of NEW IMAGE INDUSTRIES, INC., a Delaware
corporation, (the "Company") hereby appoints the Board of Directors of the
Company the proxy of the undersigned, with full power of substitution, to
attend, vote and act for the undersigned at the Annual Meeting of Stockholders
of the Company, to be held on January 10, 1996, and any postponements or
adjournments thereof, and in connection herewith, to vote and represent all of
the shares of the Company which the undersigned would be entitled to vote, as
follows:
THE BOARD OF DIRECTORS RECOMMENDS A WITH VOTE ON PROPOSAL 1, AND A FOR VOTE
ON PROPOSALS 2 AND 3.
1. ELECTION OF DIRECTORS, as provided in the Company's Proxy Statement:
/ / WITH / / WITHOUT Authority to vote for the nominee listed
below.
(Instructions: To withhold authority for the nominee, line through or
otherwise strike out name below)
Dewey F. Edmunds Kenneth B. Sawyer
2. / / FOR / / AGAINST / / ABSTAIN
The adoption of the Amendment to the New Image Industries, Inc. 1993 Stock
Incentive Plan (the "1993 Stock Incentive Plan") to increase the number of
shares outstanding thereunder.
3. / / FOR / / AGAINST / / ABSTAIN
The adoption of the New Image Industries, Inc. 1995 Stock Incentive Plan
(the "1995 Incentive Plan").
The undersigned hereby revokes any other proxy to vote at such Meeting, and
hereby ratifies and confirms all that said proxy, may lawfully do by virtue
hereof. With respect to matters not known at the time of the solicitation
hereof, said proxy is authorized to vote in accordance with its best judgment.
This Proxy will be voted in accordance with the instructions set forth
above. This Proxy will be treated as a GRANT OF AUTHORITY TO VOTE FOR the
Amendment to the 1993 Stock Incentive Plan, FOR the adoption of the 1995 Stock
Incentive Plan, and FOR the election of the Directors named, and as said proxy
shall deem advisable on such other business as may come before the Meeting,
unless otherwise directed.
<PAGE>
The undersigned acknowledges receipt of a copy of the Notice of Annual
Meeting and accompanying Proxy Statement, dated December 12, 1995, relating to
the Meeting.
Dated: _______________, ____
____________________________
____________________________
Signature(s) of
Shareholder(s)
(See Instructions Below)
The signature(s) hereon
should correspond exactly
with the name(s) of the
Stockholder(s) appearing on
the Stock Certificate. If
stock is jointly held, all
joint owners should sign.
When signing as attorney,
executor, administrator,
trustee or guardian, please
give full title as such. If
signer is a corporation,
please sign the full
corporation name, and give
title of signing officer.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF NEW IMAGE INDUSTRIES, INC.
