March 24, 1997
TO THE SHAREHOLDERS OF ITEX CORPORATION:
You are cordially invited to attend the Annual Meeting of the
Shareholders of ITEX CORPORATION (the "Company"). The meeting will be held on
Thursday, April 24, 1997 at 1:00 p.m., Pacific Time in the Conference Room,
second floor, 2 Lincoln South, at 10220 S.W. Greenburg Road, Portland, OR 97223
for the following purposes:
1. To elect directors to serve for a term of one year or until their
successors are elected and qualified. The Board of Directors has
nominated Graham Norris, Mary Scherr, Dr. Evan Ames, Dr. Sherry Meinberg,
Robert Nelson, Dr. Charles Padbury and Joseph Morris to serve as
Directors.
2. To ratify the appointment of Andersen, Andersen & Strong, L.C. as
independent auditors of the Company for the 1996-1997 fiscal year.
3. To approve a new Incentive Stock Option Plan for employees, officers,
directors and consultants of the Company. The details of this Plan are
described in the accompanying Proxy Statement.
4. To transact any other business that properly comes before the Annual
Meeting or any adjournment of the Annual Meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this notice. Only shareholders of record at the close of
business on March 17, 1997 are entitled to notice of and the opportunity to vote
at the Annual Meeting.
In addition to the formal items of business, shareholders will hear a
presentation by Management on the Company's general state of affairs, including
its current financial and operating condition.
BY ORDER OF THE BOARD OF DIRECTORS:
- ---------------------------------------------------------------
Graham H. Norris, Sr., President, CEO and Chairman of the Board
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. HOWEVER,
TO INSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO VOTE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENVELOPE ENCLOSED
FOR THAT PURPOSE. THE GIVING OF THE PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE AT
THE ANNUAL MEETING IF THE PROXY IS REVOKED IN THE MANNER SET FORTH IN THE
ACCOMPANYING PROXY STATEMENT.
<PAGE>
ITEX CORPORATATION
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the management and Board of
Directors of ITEX CORPORATION (the "Company") for use at the Annual Meeting of
Shareholders to be held on Thursday, April 24, 1997 at 1:00 p.m., Pacific Time
in the Conference Room, second floor, 2 Lincoln South, at 10220 S.W. Greenburg
Road, Portland, OR 97223. The Company's principal executive office is located at
One Lincoln Center, 10300 S.W. Greenburg Road, Suite 370, Portland, OR 97223.
The Company will bear the cost of preparing and mailing the Proxy Form, this
Proxy Statement, a copy of the Company's Annual Report for the fiscal year ended
July 31, 1996 and any other material furnished to the shareholders by the
Company in connection with the Annual Meeting.
The Company expects to mail this Proxy Statement, the enclosed Proxy Form
and a copy of the Company's Annual Report for the fiscal year ended July 31,
1996 to shareholders of record as of the close of business on March 17, 1997 on
or about March 24, 1997. Only shareholders of record at the close of business on
March 17, 1997 are entitled to notice of and the opportunity to vote at the
Annual Meeting. The number of shares outstanding on March 17, 1997 was 6,875,246
shares, each of which is entitled to one vote for each proposal voted upon at
the Annual Meeting. Proxies will be solicited by use of the mails, and officers
and employees of the Company may also solicit proxies by telephone or personal
contact without receiving extra compensation for their services. Brokers,
dealers, banks or other nominees are requested to forward solicitation materials
to their principals to obtain authorization for the execution of the Proxy Form.
All valid proxies will be voted at the Annual Meeting of Shareholders in
accordance with each shareholder's instructions contained in the Proxy Form.
Abstentions and broker non-votes will not be counted either for against any
proposal. Pursuant to the Company's Articles of Incorporation, there are no
cumulative voting rights.
Any person giving a proxy in the form accompanying this Proxy Statement
has the power to revoke it at any time before it is voted. The proxy may be
revoked by filing with the Secretary of the Company at the Company's principal
executive office a written instrument of revocation or a duly executed proxy
bearing a later date, or by attending the meeting and voting in person. A
shareholder who attends the meeting need not revoke his or her proxy and vote in
person unless he or she wishes to do so.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
The Company's Board of Directors has nominated the candidates listed
below for election to the Company's Board of Directors for a one year term and
until their successors are elected and qualified:
Graham H. Norris, Sr.
Dr. Sherry L. Meinberg
Mary Scherr
Dr. Charles Padbury
Robert Nelson
Dr. Evan B. Ames
Joseph Morris
Thomas G. Baer, a director since 1995 has elected not to stand for
reelection to the Board of Directors.
GRAHAM H. NORRIS, SR., CTB, AGE 55, PRESIDENT, CEO AND CHAIRMAN OF THE BOARD OF
DIRECTORS, DIRECTOR SINCE 1986
Mr. Norris, who was elected President and Chief Executive Officer of the Company
on September 6, 1996, has over 30 years experience in management and finance.
Prior to his becoming President of the Company, he had been a consultant
providing a variety of management consulting services to small private and
public corporations. After a period of transition in management of the Company,
Mr. Norris was elected Chairman of the Board of Directors in addition to
President and Chief Executive Officer. Mr. Norris has been a pilot for United
Airlines since 1963. He has been a director of the Company since 1986. In 1993,
Mr. Norris became an ITEX Broker, operating an independent barter office in
Provo, Utah, in which capacity he earned the credential of Certified Trade
Broker.
DR. SHERRY L. MEINBERG, AGE 57, DIRECTOR SINCE 1986
Dr. Meinberg has served as Secretary/Director of The ITEX Corporation from 1982
to 1986, when the Company acquired the assets/liabilities of that company. Since
that time she has continued as corporate secretary until May 3, 1996 and a
director of
<PAGE>
the Company. Dr. Meinberg has received two masters degrees, and her Ph.D. in
Instructional Science. She is a published author and appears widely as a
professional speaker. Dr. Meinberg retired in January, 1995 after 34 years on
the faculty of Long Beach Unified School.
MARY SCHERR, CTB, AGE 60, VICE PRESIDENT OF BROKER DEVELOPMENT, DIRECTOR SINCE
1986
Ms. Scherr has over fourteen years of experience within the barter industry.
Upon joining ITEX in 1984 as an independent broker, Ms. Scherr was routinely
recognized for outstanding sales performance. In fact, she was honored with
Broker of the Year for distinguishing herself among her Company peers. In 1993,
Ms. Scherr was brought into the internal operations of ITEX as Vice President of
Broker Development. Ms. Scherr holds a Masters Degree from the University of
Iowa.
DR. CHARLES PADBURY, AGE 59, DIRECTOR SINCE 1992
Dr. Padbury is a Beaverton, Oregon dentist and has been a member of the ITEX
Retail Trade Exchange since 1985. Dr. Padbury has brought a wealth of experience
to the Board in terms of the interests, perceptions, and vantage point of the
ITEX client. During 1996 Dr. Padbury served briefly as Chairman of the Board of
Directors.
ROBERT NELSON, CPA, AGE 50, DIRECTOR SINCE 1995
Mr. Nelson is a Certified Public Accountant in private practice in Portland,
Oregon specializing in tax accounting. He has also been an active member of the
ITEX Retail Trade Exchange, and expects to bring the advantages of both of these
experiences to the Board. Mr. Nelson received an MBA from Brigham Young
University and is still active in the BYU Management Society. He is a member of
the American Institute of CPAs and the Oregon Society of CPAs.
DR. EVAN B. AMES, AGE 58, DIRECTOR SINCE 1995
Dr. Ames acquired his Ph.D. in 1971 from Princeton University, majoring in near
eastern and Soviet studies. He has served with the Central Intelligence Agency.
In 1985 Mr. Ames became affiliated with R.L. Ball & Associates as an investment
researcher, analyst, and investment strategist. He is currently a Registered
Investment Adviser registered with the Securities & Exchange Commission.
JOSEPH MORRIS, CPA, AGE 48, DIRECTOR, VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER, DIRECTOR SINCE 1995
Mr. Morris serves as both a Director and Chief Financial Officer of ITEX. With
over 15 years experience in and around the barter industry, Mr. Morris has
served as technical liaison between the Financial Accounting Standards Board
(FASB) and International Reciprocal Trading Association (IRTA). He served as
financial officer for Software-Intercomp, Inc. of Denver Colorado, a publicly
traded company on NASDAQ from 1984 through July 1995, except for the period 1988
to 1990. During that period, Mr. Morris was a technical project manager with
FASB. Mr. Morris is an accomplished CPA and author of seven books on accounting
practices. Mr. Morris was appointed Chief Financial Officer of the Company on
January 18, 1996.
The ITEX Board of Directors has a standing audit committee comprised of Mr.
Nelson, Mr. Morris and Dr. Ames and a standing compensation committee comprised
of Dr. Padbury, Mr. Nelson and Dr. Ames. In the last fiscal year (August 1, 1995
- - July 31, 1996) there were six meetings of the Board of Directors. There were
two meetings each of the audit and compensation committees. None of the
Directors attended any less than 75% of the aggregate of (1) the total number of
meetings of the Board of Directors and (2) the total number of meetings held by
committees of the Board on which each such Director served.
EXECUTIVE COMPENSATION
- ----------------------
Subject to Regulation S-K Item 402(1)(2)1 the only executive officer for which
disclosure is required is the President, Michael T. Baer. No other officers
received compensation in excess of $100,000 although Paul Shakeshaft, who works
with corporate trade but is not an executive officer, earned $114,833.19. Table
No. 1 lists the compensation paid for Fiscal Year 1995.
<TABLE>
<CAPTION>
Table No. 1
Summary Compensation Table
Long Term Compensation
-------------------------------
Awards Payouts
-------------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Name and Annual Compensation Restricted
Principal ---------------------------------- Stock Options/ LTIP All Other
Position Year Salary($) Bonus ($) Other($) Award ($) SARs(#) Payouts Compensation
-------- ---- ----------- --------- ---------- ---------- ------- ------- ------------
Michael Baer 1996 $126,859.62 $-0- $18,501.69 $ -0- -0- $ -0- $ -0-
CEO
Paul Shakeshaft 1996 $110,672.83 $-0- $4,160.36 $ -0- -0- $ -0- $ -0-
</TABLE>
2
<PAGE>
Table No. 2
Option/SAR Grants in Last Fiscal Year
Options Percent of Exercise Expiration
Name Granted (#) Total Options Price Date
----- ----------- ------------- -------- ----------
Michael Baer, CEO 225,200 17.3% $6.125 12/15/2005
As of the fiscal year end of the Company, the Company had no arrangement to
compensate its Directors for service in their capacity as Directors. As of
August 1, 1996, Outside Directors (i.e., Directors who are not employees of the
Company) will receive $500 per Board meeting attended in person or by telephone
and members of Board committees will receive $250 per committee meeting
attended. In addition, all Directors serving on January 1 of each year will be
issued 1,000 shares of the Company's restricted common stock and shall receive
the option to acquire a minimum of 2,500 additional shares pursuant to an
Employees Incentive Stock Option Plan with the exercise price being the closing
bid price of the stock on the trading day before the grant is made. No funds
were set aside or accrued by the Company during Fiscal 1996 ending July 31, 1996
to provide pension, retirement or similar benefits for Directors or Executive
Officers, other than those who are covered by the Company's 401(K) plan as
employees of the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------
Table No. 3 lists as of March 17, 1997 the shareholdings of all Directors and
Executive Officers and amount of Registrant's voting securities owned by all
officers and directors as a group.
Table No. 3
Shareholdings of Directors and Executive Officers
Title of Class Name of Amount and Nature % of
Beneficial Owner of Beneficial Ownership Class
- -------------- ----------------------- ----------------------------- -----
Common Graham H. Norris, Sr. 392,106 3.5%
(58,106 shares issued,
334,000 stock options)
- -------------- ----------------------- ----------------------------- -----
Common Dr. Sherry L. Meinberg 135,229 1.2%
(79,229 shares issued,
56,000 stock options)
- -------------- ----------------------- ----------------------------- -----
Common Mary Scherr 93,100 0.8%
(9,700 shares issued,
83,400 stock options)
- -------------- ----------------------- ----------------------------- -----
Common Dr. Charles Padbury 31,555 0.3%
(8,555 shares issued,
23,000 stock options)
- -------------- ----------------------- ----------------------------- -----
Common Robert Nelson, CPA 21,047 0.2%
(47 shares issued,
21,000 stock options)
- -------------- ----------------------- ----------------------------- -----
Common Dr. Evan B. Ames 21,000 0.2%
(-0- shares issued,
21,000 stock options)
- -------------- ----------------------- ----------------------------- -----
3
<PAGE>
- -------------- ----------------------- ----------------------------- -----
Common Thomas G. Baer 21,000 0.2%
(-0- shares issued,
21,000 stock options)
- -------------- ----------------------- ----------------------------- -----
Common Joseph Morris, CPA 71,000 0.6%
(-0- shares issued,
71,000 stock options)
- -------------- ----------------------- ----------------------------- -----
Common Donovan C. Snyder 37,800 0.3%
(-0- shares issued,
37,800 stock options)
- -------------- ----------------------- ----------------------------- -----
Total Directors and Executive Based upon 11,263,894 shares 7.3%
Officers (6,875,246 shares issued,
4,388,648 stock options)
As of March 17, 1996 and including the options described in Proposal 3
Table No. 4 lists persons or companies holding over 5% beneficial ownership of
Registrant's outstanding stock as of July 31, 1996:
Table No. 4
5% or Greater Shareholders
Title of Class Name and address Amount and Nature % of
of Beneficial Owner of Beneficial Ownership Class
- -------------- ----------------------- ----------------------------- -----
Common Terry Neal 775,035 6.9%
3295 NW 113th Place (316,535 shares owned,
Portland, OR 97229 8,500 shares beneficially
owned, 450,000 options)
- -------------- ----------------------- ----------------------------- -----
Common Bailey Mutual Fund 750,000 6.7%
C/O Holland Trust (250,000 shares owned,
Financial Services 500,000 warrants)
Haaksbergweg 55 1101 BR
Amsterdam ZO
The Netherlands
- -------------- ----------------------- ----------------------------- -----
Total 5% Based upon 11,263,894 shares Outstanding at 3/17/97 13.6%
(6,875,246 shares issued,
4,388,648 stock options)
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF EACH OF THE NOMINEES TO THE BOARD OF
DIRECTORS. A MAJORITY OF THE VOTES CAST BY A QUORUM OF SHARES IN ATTENDANCE IN
PERSON OR BY PROXY AT THE ANNUAL MEETING WILL BE REQUIRED FOR THE ELECTION OF
EACH DIRECTOR NOMINEE.
PROPOSAL NO. 2 -- RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected Andersen, Andersen & Strong, L.C. of
Salt Lake City, Utah as the Company's independent auditors for the 1996-97
fiscal year and is submitting the selection to the shareholders for
ratification. Andersen, Andersen & Strong have served as the Company's
independent auditors since 1994. A representative of Andersen, Andersen & Strong
is not expected to be in attendance at the Annual Meeting of Shareholders.
However, if such a representative is
4
<PAGE>
present, he or she will be permitted to address the Meeting, if so desired, and
will be available to answer shareholder questions.
MANAGEMENT AND THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL NO.
2. A MAJORITY OF THE VOTES CAST BY A QUORUM OF SHARES IN ATTENDANCE IN PERSON OR
BY PROXY AT THE ANNUAL MEETING WILL BE REQUIRED FOR THE APPROVAL OF THIS
PROPOSAL.
PROPOSAL NO. 3 -- APPROVAL OF AN INCENTIVE STOCK OPTION PLAN
Management believes that the Company's long-term growth is dependent
upon the performance and efforts of management and staff. It is considered
appropriate for the Company to provide incentives for superior performance in
the form of options to acquire the Company's stock. For that reason, the Board
of Directors adopted an incentive stock option plan as of December 27, 1996.
Under the Plan, the Company may grant to the Optionee during the period ending
on a date not more than five years from the date of the grant, the option to
purchase common stock of the Company at a price per share equal to the bid price
of the Company's traded common stock on the date of the grant of the option.
Such options vest when they are granted. The Company did not receive nor will it
receive any consideration for the granting of the options. The following options
were granted at an exercise price of $3.75 per share, the price at which the
Company's stock was trading on December 27, 1996:
a. Members of the Board of Directors each received an option to purchase
10,000 shares.
b. Vice Presidents and vice president level managers each received the
option to acquire 25,000 shares.
c. Graham H. Norris received an option to purchase 200,000 shares in
connection with his acceptance of the position of Chief Executive
Officer of the Company.
d. Mr. Norris was granted the authority to award up to a total of
100,000 options to employees or brokers of the Company.
e. Consultants to the Company Peter Grandich (Peter Grandich Company),
Mary Martin (Hamilton- Martin Group) and Jim Schilling (West Coast
Consultants) each received an option to acquire 50,000 shares for 1997.
NEW PLAN BENEFITS TABLE
Number of
Securities
Class of stock Name and Position Underlying
underlying of Optionee Granted
Options Granted
- -------------- --------------------------------------------- ----------
Common Graham H. Norris, President, CEO and 210,000
Director
- -------------- --------------------------------------------- ----------
Common Each Director serving on 12/27/96 (8 persons) 10,000
- -------------- --------------------------------------------- ----------
Common Vice Presidents and vice president level 25,000
managers (5 persons)
- -------------- --------------------------------------------- ----------
Executive Group (6 persons) 415,000
- -------------- --------------------------------------------- ----------
Non-Executive Director Group (5 persons) 50,000
- -------------- --------------------------------------------- ----------
FEDERAL INCOME TAX CONSEQUENCES
The Company intends that options granted under the plan will qualify as
"incentive stock options" ("ISO") under
5
<PAGE>
section 422 ("section 422") of the Internal Revenue Code. The following
discussion of the federal income tax consequences of participation in the Plan
therefore assumes that: the Plan satisfies the requirements of section 422; that
all options granted will, when granted, qualify under section 422 as ISOs and
will continue to so qualify at all times until exercise; and that optionees are,
at all times beginning with the Date of Grant and ending on the day three months
before the date of exercise, be "employees" within the meaning of section
422(a)(2). This discussion is only a summary, does not purport to be complete,
and does not cover, among other things, state and local tax consequences.
Differences in participants' financial situations may cause federal, state, and
local tax consequences of participation in the Plan to vary and no assurances
are or will be given to any participant regarding the tax consequences of
participating in the Plan. Accordingly, the Company urges each participant in
the Plan to consult his or her own accountant, legal counsel or other financial
advisor regarding the tax consequences of participation in the Plan. This
discussion is based on the provisions of the Code and applicable regulations
thereto, as presently in effect.
INCENTIVE STOCK OPTIONS
Under the current provisions of the Code, the optionees in an incentive
stock option plan will not recognize income at the time of the grant of the ISO.
In addition, the optionee will generally not recognize income upon exercise of
the ISO and receipt of the stock subject thereto (the "option stock"). However,
the Company will not be entitled to a deduction for compensation expense in
connection with granting the ISO. Also, unless the holder disposes of the option
stock in a disqualifying disposition, as described below, the Company will not
be entitled to a deduction in connection with issuing the option stock.
The tax consequences to the holder upon disposition of the option stock
will depend on whether the disposition occurred within the statutory holding
period. The holding period is the later of two years from the Date of Grant or
one year from the transfer of the option stock to the optionee on exercise. If
the employee-holder disposes of the option stock after the holding period
expires, then the disposition is considered a qualifying disposition and the
employee will be entitled to capital gain treatment on the difference between
the amount he or she receives from the disposition of the option stock and his
or her tax basis in the option stock. In a qualifying disposition, the holder's
basis is the amount paid on exercise of the option.
A disposition during the holding period is a disqualifying disposition.
When a disqualifying disposition occurs the employee must recognize compensation
income in the amount of the bargain purchase element of the option stock the
holder disposes of. The bargain purchase element is the difference between the
exercise price and the fair market value of the option stock on the date of
exercise. The gain attributable to the bargain purchase element is then added to
the holder's basis in the option stock to determine gain or loss on the
disposition. The gain (or loss) resulting from the disqualifying disposition
(i.e. the difference between the proceeds received on disposition and the tax
basis) is a capital gain (or loss). The shareholder must recognize the income
attributable to the bargain purchase element and the capital gain or loss in the
year when the disqualifying disposition occurs. From the Company's perspective,
the Company may deduct, as compensation expense, an amount equal to the
compensation income the employee recognizes on the bargain purchase element. The
Company would be entitled to such a deduction during the year in which the
disqualifying disposition occurs.
The foregoing discussion assumes the fair market value of option stock
exercisable by an optionee does not exceed the value limitation of section
422(d) of the Code. Section 422(d) limits the aggregate fair market value of ISO
stock exercisable in any calendar year to $100,000, based on the fair market
value of the option stock on the Date of Grant. The aggregate fair market value
of option stock first exercisable in any one year that exceeds $100,000 is not
ISO stock and is treated as stock subject to a non-qualified option. Generally,
on exercise of a non-qualified stock option the holder will recognize ordinary
income in an amount equal to the excess of the fair market value of the shares
acquired over the exercise price. The Company will be entitled to expense as
compensation the amount of ordinary income which the holder thus recognizes.
Upon the sale of the non-qualified option stock, the holder will recognize short
term or long term capital gain, or loss, as the case may be, in an amount equal
to the difference between the amount he or she receives from the sale of those
shares and his or her tax basis. The holder's tax basis will generally be the
exercise price paid plus the amount of ordinary income recognized.
6
<PAGE>
In order for this plan to qualify, shareholder approval is necessary. A
total of 1,000,000 shares of the Company's common stock will be set aside for
grants under the plan, both those made as of December 27, 1996 and those which
may be made in the future.
INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS IN THIS PROPOSAL. Those
Directors and Executive Officers listed above have a substantial interest in
this matter to be acted upon by the shareholders.
MANAGEMENT AND THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL NO.
3. A MAJORITY OF THE VOTES CAST BY A QUORUM OF SHARES IN ATTENDANCE IN PERSON OR
BY PROXY AT THE ANNUAL MEETING WILL BE REQUIRED FOR THE APPROVAL OF THIS
PROPOSAL.
OTHER BUSINESS
While the Notice of Annual Meeting of Shareholders provides for
transaction of such other business as may properly come before the meeting, the
Board of Directors has no knowledge of any other matters to be presented at the
meeting other than those referred to in this Proxy Statement. If any other
business requiring a vote of the shareholders should come before the meeting,
the persons designated as your proxies will vote or refrain from voting in
accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS:
- ---------------------------------------------------------------
Graham H. Norris, Sr., President, CEO and Chairman of the Board
7
<PAGE>
ITEX CORPORATION PROXY FORM
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned shareholder of ITEX
Corporation (the "Company"), do hereby appoint Graham H. Norris, Sr., President
and Chief Executive Officer of the Company, to be my proxy agent with full power
of substitution to vote as indicated below all of the shares of the Company
standing in my name on its books at the Annual Meeting of Shareholders to be
held on Thursday, April 24, 1997 at 1:00 p.m., Pacific Time in the Conference
Room, second floor, 2 Lincoln South, at 10220 S.W. Greenburg Road, Portand, OR
97223 (Please mark your vote on each item with an "X")
<TABLE>
<CAPTION>
1. Election of directors to hold office for a one year term and until their successors are elected and qualified.
<S> <C> <C> <C> <C> <C> <C> <C>
Dr. Sherry L. Meinberg FOR AGAINST ABSTAIN Mary Scherr FOR AGAINST ABSTAIN
----- ----- ----- ----- ----- -----
Graham H. Norris, Sr. FOR AGAINST ABSTAIN Robert Nelson FOR AGAINST ABSTAIN
----- ----- ----- ----- ----- -----
Dr. Charles Padbury FOR AGAINST ABSTAIN Joseph Morris FOR AGAINST ABSTAIN
----- ----- ----- ----- ----- -----
Dr. Evan B. Ames FOR AGAINST ABSTAIN
----- ----- -----
</TABLE>
2. To ratify and approve the selection of Andersen, Andersen & Strong, L.C. as
the Company's independent auditors for the 1996-97 fiscal year.
FOR AGAINST ABSTAIN
----- ----- -----
3. To approve a new Incentive Stock Option Plan for employees, officers,
directors and consultants of the Company as described in the accompanying Proxy
Statement.
FOR AGAINST ABSTAIN
----- ----- -----
I ratify and confirm all acts my proxy agent may do or cause to be done
by virtue of this Proxy. I revoke all proxies previously given by me for the
Annual Meeting of the shareholders of the Company. I recognize that this Proxy
shall be voted FOR the proposals presented to the shareholders at the Annual
Meeting unless contrary instructions are indicated above and will be voted at
the discretion of my proxy agent if other matters properly come before the
meeting. I acknowledge receipt of the Notice of Annual Meeting of Shareholders,
Proxy Statement and Annual Statement of ITEX Corporation.
Dated this day of , 1997.
-------- -----------------------------
Number of shares
-----------------------------
- ---------------------------------- ----------------------------------
(Print Name) (Print Name)
- ---------------------------------- ----------------------------------
(Please sign name exactly as it (Please sign name exactly as it
appears on this Proxy Material) appears on this Proxy Material)
IF STOCK IS HELD JOINTLY, EACH HOLDER SHOULD SIGN. IF EXECUTION IS IN
REPRESENTATIVE CAPACITY BY AN OFFICER, ATTORNEY, PERSONAL REPRESENTATIVE,
TRUSTEE, GUARDIAN OR OTHER LEGAL REPRESENTATIVE, GIVE FULL TITLE AS SUCH.
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED, PREADDRESSED ENVELOPE.
THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED AT THE ANNUAL MEETING.
<PAGE>
EXHIBIT
Stock Option Plan
ITEX CORPORATION
1996-97 KEY EMPLOYEES' INCENTIVE
STOCK OPTION PLAN
SECTION 1. PURPOSE
The continued growth and success of ITEX CORPORATION (the "Corporation")
depend in part on its ability to obtain and retain the services of key employees
of the highest competence, and to provide incentives for the effective service
of high-level performance. The purposes of this Key Employees' Incentive Stock
Option Plan (the "Plan") are to provide a means whereby the Corporation can
continue to attract, motivate, and retain key employees who can contribute
materially to the Corporation's growth and success, and to facilitate the
acquisition of shares of the Corporation's common stock, par value $0.01 per
share (the "Stock") by key employees pursuant to the options meeting the
requirements of IRC ss. 422, so that such key employees will more closely
identify their interests with those of the Corporation and its shareholders.
SECTION 2. STOCK
The Stock subject to options under the Plan shall be shares of the
Corporation's authorized but unissued or reacquired Stock. Subject to the
adjustments described in Section 6 of the Plan, the aggregate number of shares
that may be issued pursuant the to the Plan shall not exceed 1,000,000 shares.
In the event that any outstanding option granted under the Plan for any reason
expires or is terminated, the shares of Stock allocable to the unexercised
portion of such option may again be subjected to the grant of options under the
Plan.
SECTION 3. ELIGIBILITY
The individuals who may participate in this Plan are employees of the
Corporation and its subsidiaries, including officers and directors, non-employee
directors and other individuals who are not employees of the Corporation,
including consultants and advisors; provided however, consultants and advisors
may participate only if they render bona fide services to the Corporation that
are not in connection with the offer or sale of securities in a capital-raising
transaction. The stock option committee (the "Committee") of the Corporation's
board of directors (the "Board") or the non-employee directors of the Board (if
no such committee is in place) may determine from time to time which eligible
individuals will participate in the Plan. No otherwise eligible individual shall
have any right to participate in this Plan unless designated by the Committee or
the Board. Participants shall receive options to purchase Stock subject to the
provisions of this Plan and, to the extent not inconsistent with this Plan, the
terms of his or her stock option agreement.
SECTION 4. EMPLOYEE AND CONSULTANTS OPTIONS
Employees of the Corporation and its subsidiaries, including officers
and directors and other individuals who are not employees of the Corporation,
including consultants and advisors shall be granted such options as may be
determined by the Committee or the non-employee directors of the Board if no
such committee is in place. Consultants and advisors may participate only if
they render bona fide services to the Corporation that are not in connection
with the offer or sale of securities in a capital-raising transaction.
SECTION 5. NON-EMPLOYEE DIRECTORS OPTIONS
Awards of stock options to Non-Employee Directors shall be made only
under this Section 5. No person, including the members of the Board or the
Committee, shall have any discretion as to the selection of eligible recipients
or the determination of the amount or terms of such awards pursuant to this
Section 5.
5.1 INITIAL DIRECTOR OPTIONS. Upon the effective date of the Plan the
Non-Employee Directors shall each receive an Initial Option to acquire 10,000
Shares at an exercise price of $6.125 per share which is the Fair Market Value
of a share of the common stock of the Corporation on the Effective Date hereof.
Each person who becomes a Non-Employee Director after the Effective Date shall
be granted an Initial Option to purchase 10,000 Shares, with an exercise price
equal to the Fair Market Value of the Corporation's common stock on the date of
grant.
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5.2 Renewal Director Options. Each Non-Employee Director shall be
granted an option to purchase 1,000 Shares for each year of service as a
Non-Employee Director on the December 15 prior to the Annual Meeting of
Shareholders, with an exercise price equal to the Fair Market Value of the
Corporation's common stock on such date.
SECTION 6. ADMINISTRATION
The Board shall administer the Plan. Subject to compliance with
applicable provisions of the governing law, the Board may delegate
administration of the Plan, or specific administrative duties on such terms as
the Board deems proper, to the Committee. The Committee shall be composed of not
less than three members of the Board. The term the "Board" shall be deemed to
replace the term "Committee" until a Committee is duly appointed or, if there is
a vacancy on the Committee, until a replacement or successor director is
appointed and qualified. The Committee shall have full power and authority,
subject to the provisions of the Plan, to:
(1) To determine eligibility to participate in the Plan and designate
participants;
(2) Determine the number of options to be granted to each participant;
(3) Determine the terms of option agreements for each option;
(4) Supervise administration of the Plan;
(5) Interpret the provisions of the Plan and option agreements granted
under it; and
(6) Take all action in connection with the Plan as it deems necessary or
advisable.
Decisions of the Committee shall be final. More than one option may be
granted to the same individual. No member of the Committee or the Board shall be
liable for any action or determination made in good faith with respects to the
Plan or any option granted under it.
SECTION 7. TERMS AND CONDITIONS OF OPTIONS
Options under the Plan granted by the Committee shall be evidenced by
stock option agreements in such form as the Committee shall from time to time
approve, and shall comply with and be subject to the following terms and
conditions.
7.1 Number of Shares. Each option agreement shall state the number of
shares of Stock subject to the option.
7.2 Option Price. Each option agreement shall state the option price,
which shall be not less than 100% (110% for 10% Shareholders, as defined below)
of the fair market value, on the date the option is granted, of the shares of
Stock subject to the option. A "10% Shareholder" is any person who, at the time
an option is granted, owns stock of the Corporation possessing more than 10% of
the combined voting power of all classes of stock of the Corporation or any
affiliate.
7.3 Determination of Fair Market Value. The fair market value per share
of Stock shall be determined by the Committee in good faith at the time the
option is granted.
7.4 Option Period and Limitations on Exercise. Each option shall expire
and shall not be exercisable after the expiration of 10 years (five years for
10% Shareholders) from the date the option is granted, or such lesser period as
may be established by the Committee at the time the option is granted. Each
option shall be exercisable by the optionee either immediately or after such
period, and according to such schedule for exercise, or in such other manner as
the Committee shall provide in the option agreement at the time the option is
granted.
Notwithstanding any other provision of the Plan, and unless otherwise
resolved by the Committee, options granted to employees of the Corporation under
the Plan shall be exercisable only while the optionee remains an employee of the
Corporation, except that in the event of (1) an optionee's termination of
employment with the Corporation by reason of disability (within the meaning of
IRC ss.22(e)(3), or (2) an optionee's death while an employee of the
Corporation, the option agreement may allow the option to remain exercisable, to
the extent it was exercisable on the date of termination or the date of death,
by the optionee or the estate or devisee of the decedent, until the expiration
date of the term of the option or one year after the date of the optionee's
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termination of employment or death, whichever date is earlier.
7.5 Securities Restrictions. All option agreements evidencing options
granted under the Plan shall provide that:
(1) If the Committee at any time determines that registration or
qualification of the Stock or any option under state or federal law or the
consent or approval of any governmental regulatory body, is necessary or
desirable, then the option may be not be exercised, in whole or in part, until
that registration, qualification, consent, or approval shall have been effected
or obtained free of any conditions not acceptable to the Committee.
(2) Any person exercising an option to purchase shares of Stock may be
required by the Corporation to give a written representation that he or she is
acquiring the shares for his or her own account for investment and not with a
view to the distribution of the shares.
7.6 Payment of Purchase Price. The option price upon exercise of an
option under the plan shall be payable to the Corporation in cash or, in the
discretion of the Committee, in installments or terms and over periods as the
Committee shall determine.
7.7 Nontransferability . Options shall not be transferable except by
testamentary will or the laws of descent and distribution, and shall be
exercisable during an optionee's lifetime only be the optionee.
7.8 Other Provisions. Any option agreement may contain other or
additional terms and provisions as may be determined by the Committee to be
consistent with the Plan, or necessary or desirable to comply with the
provisions of applicable laws, rules, or regulations.
SECTION 8. ADJUSTMENT
In the event of any stock split or payment of a dividend on Stock
payable in shares of Stock after or at the same time the Plan is approved by the
Corporation's shareholders, the shares of Stock then subject to each option (and
the number of such shares which, pursuant to Section 2 of the Plan, may be
issued under the Plan) shall be increased proportionately without any change in
their aggregate purchase price. In the event all the outstanding shares of Stock
shall be changed into or exchanged for a different number or class of shares of
the corporation, or of another corporation, whether through reorganization,
recapitalization, stock split-up, combination of shares, merger, consolidation,
or otherwise, then there shall be substituted for each share of Stock then
subject to each option (and if the Corporation is the surviving corporation in
such transaction, for the number of shares which, pursuant to Section 2 of the
Plan, may be issued under the Plan), the number and class of shares into which
each outstanding share of Stock shall be so exchanged, all without any change in
the aggregate option price for the shares then subject to option. In connection
with any adjustment under this Section 8 resulting in a fractional share
interest, the interest may be rounded down to the nearest whole share if the
interest is less than 0.5 share; otherwise, the fractional share interest may be
rounded up to the nearest whole share.
SECTION 9. PROCEEDS
The proceeds received by the Corporation from the sale of Stock pursuant
to the Plan will be used for general corporate purposes.
SECTION 10. OBLIGATION TO EXERCISE; RIGHT TO CONTINUED EMPLOYMENT
The granting of an option shall impose no obligation on the optionee to
exercise the option. The granting of an option does not confer any right to be
continued in the employment of the Corporation.
SECTION 11. AMENDMENT AND DISCONTINUANCE
The Board may alter, amend, suspend, or terminate the Plan, provided
that the Board may not, without further approval by the holders of a majority of
the outstanding shares of stock of the Corporation entitled to vote:
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(1) Increase the aggregate number of shares of Stock for which options
may be granted under the Plan (except for adjustments pursuant to Section 6);
(2) Decrease the option price at which stock may be offered;
(3) Materially modify the requirements as to eligibility for
participation in the Plan; or
(4) Alter or impair, without the optionee's consent, the rights or
obligations under any option previously granted pursuant to the Plan.
SECTION 12. TERM OF PLAN AND EFFECTIVE DATE
The Plan shall become effective on the date the Plan is approved by the
Board.
Options may be granted pursuant to the Plan from time to time within 10
years after the plan becomes effective.
AS ADOPTED BY THE BOARD OF DIRECTORS OF ITEX CORPORATION EFFECTIVE THE 27th DAY
OF DECEMBER, 1996 PURSUANT TO SECTION 12 HEREOF, AND AS APPROVED BY THE
SHAREHOLDERS OF ITEX CORPORATION ON THE DAY OF APRIL, 1997.
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Graham H. Norris , President and CEO
