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 sec. 240.14a-11(c) or sec. 240.14a-12
ADVANCED LOGIC RESEARCH, 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):
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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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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.
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<PAGE>
ADVANCED LOGIC RESEARCH, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
February 21, 1996
To the Stockholders of Advanced Logic Research, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Advanced Logic Research, Inc. (the "Company") will be
held at the Sheraton Newport Beach, 4545 MacArthur Boulevard, Newport Beach,
California 92660 on Wednesday, February 21, 1996, at 10:00 a.m. local time for
the purpose of considering and voting on the following matters:
1. ELECTION OF DIRECTORS. Election of five directors to serve until the
1997 Annual Meeting of Stockholders or until their respective successors are
elected and qualified. The Board of Directors intends to nominate as
directors the five persons identified in the accompanying Proxy Statement.
2. AMENDMENT OF DIRECTORS' NONQUALIFIED STOCK OPTION PLAN. Approval of
an amendment to the Company's Directors' Nonqualified Stock Option Plan (the
"Plan") to increase the number of shares of Common Stock reserved for issuance
over the term of the Plan from 60,000 shares to 120,000 shares.
3. RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS.
Ratification of the selection of KPMG Peat Marwick LLP as the independent
public accountants for Advanced Logic Research, Inc. for the fiscal year
ending September 30, 1996.
4. OTHER BUSINESS. Such other business as may properly come before the
Annual Meeting and any adjournment or adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. The Board of Directors has fixed the
close of business on December 31, 1995 as the record date for the
determination of stockholders who are entitled to notice of, and to vote at,
the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, to assure your representation at the Annual Meeting, you are
urged to complete, sign, and return the enclosed Revocable Proxy as promptly
as possible in the postage-prepaid envelope enclosed for that purpose. Any
stockholder attending the Annual Meeting may vote in person even if he or she
has returned the Proxy.
By Order of the Board of Directors
RONALD J. SIPKOVICH
Secretary
Irvine, California
January 12, 1996
<PAGE>
ADVANCED LOGIC RESEARCH, INC.
9401 Jeronimo Road
Irvine, California 92718
PROXY STATEMENT
General Information
This Proxy Statement and the enclosed proxy card are furnished to
stockholders of Advanced Logic Research, Inc., a Delaware corporation ("ALR"
or the "Company"), in connection with the solicitation of proxies by the Board
of Directors for use at the Annual Meeting of Stockholders to be held February
21, 1996 (the "Annual Meeting"), at 10:00 a.m., local time, and at any and all
adjournments or postponements thereof for the purposes set forth in the Notice
of Annual Meeting accompanying this Proxy Statement. The Annual Meeting will
be held at the Sheraton Newport Beach, 4545 MacArthur Boulevard, Newport
Beach, California 92660.
These proxy solicitation materials are first being mailed to all
stockholders entitled to vote at the Annual Meeting on or about January 12,
1996.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Company (sent
to the attention of Vic Sial) a written notice of revocation or a duly
executed proxy bearing a later date, or by attending the Annual Meeting and
voting in person.
Voting and Solicitation
The solicitation of proxies will be conducted by mail and the Company
will bear all attendant costs. These costs will include reimbursements paid
to brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the Annual Meeting to beneficial owners of the
Company's Common Stock. The Company may conduct further solicitation
personally or telephonically through its officers, directors and regular
employees, none of whom will receive additional compensation for assisting
with the solicitation.
Only stockholders of record at the close of business on December 31, 1995
are entitled to notice of and to vote at the Annual Meeting. As of December
31, 1995, 11,722,368 shares of the Company's Common Stock were issued and
outstanding. On each matter to be considered at the Annual Meeting,
stockholders will be entitled to cast one vote for each share held of record
on December 31, 1995. The Company's By-laws do not provide for cumulative
voting by stockholders.
A majority of shares of Common Stock entitled to vote will constitute a
quorum for the transaction of business at the meeting. Abstentions and broker
non-votes are counted as being present for purposes of determining a quorum
for the transaction of business. Abstentions are counted in tabulations of
the votes cast on proposals presented to stockholders, whereas broker non-
votes are not counted for purposes of determining whether a proposal has been
approved. Each matter to be submitted to a vote of the stockholders, other
than the election of directors, must receive an affirmative vote of the
majority of shares present, in person or represented by proxy, and entitled to
vote at the Annual Meeting. Directors shall be elected by a plurality of the
votes cast.
<PAGE>
PROPOSAL 1:
ELECTION OF DIRECTORS
Nominees
A Board of Directors consisting of five individuals is to be elected at
the Annual Meeting. Unless otherwise instructed, the proxy holders will vote
the proxies received by them for the Company's five nominees named below, all
of whom are presently directors of the Company. In the event that any nominee
of the Company is unable or declines to serve as a director at the time of the
Annual Meeting, the proxies will be voted for any nominee who shall be
designated by the present Board of Directors to fill the vacancy. The term of
office of each person elected as a director will continue until the next
annual meeting of stockholders or until his or her successor has been elected
and qualified.
The names of the nominees, and certain information about them, are set
forth below.
Name of Director
Nominee Age Principal Occupation Since
Gene Lu 41 Chairman of the Board, President, 1984
and Chief Executive Officer,
Advanced Logic Research, Inc.
Philip A. Harding 63 Chief Executive Officer, 1985
Multi-Fineline Electronix, Inc.
Therese E. Myers 51 Chief Executive Officer, 1990
Bouquet Multimedia
Kenneth W. Simonds 60 Chairman of the Board of MasPar Corporation 1990
and The Practice Tee Inc.
Chun Win Wong 59 Chairman of the Board, 1986
Wearnes Technology (Private) Limited
Except as set forth below, each of the nominees has been engaged in his
or her principal occupation stated above during the past five years. There is
no family relationship between any director or executive officer of the
Company.
Gene Lu, the founder of the Company, has been President, Chief Executive
Officer and a director of the Company since its inception in 1984. In August
1990, Mr. Lu was elected Chairman of the Board of Directors. Prior to
founding the Company, during 1983 and 1984, Mr. Lu was a design engineer at
National Advanced Systems. Earlier in 1983, Mr. Lu was chief engineer at Tava
Corporation, an early manufacturer of products compatible with the IBM
personal computer. Mr. Lu received a Bachelor of Science degree in Electrical
and Electronic Engineering from California State Polytechnic University at
Pomona.
Philip A. Harding has been a director of the Company since 1985.
Mr. Harding is presently the Chief Executive Officer and a director of Multi-
Fineline Electronix, Inc. in Santa Ana, California, a manufacturer of
electronics products that is majority owned by Wearnes Technology (Private)
Limited ("Wearnes Technology") and its affiliates. From 1984 to 1988, he was
Chief Executive Officer of Wearnes Technology's affiliate, Weltec Digital,
Inc., where he continues to serve as Chairman of the Board of Directors.
Mr. Harding received his Master of Science degree from Columbia University and
his Bachelor of Science degree from Cooper Union College.
<PAGE>
Therese E. Myers has been a director of the Company since August 1990.
Ms. Myers is presently the Chief Executive Officer of Bouquet Multimedia, a
provider of multimedia software to the PC industry. From 1982 to 1994,
Ms. Myers was President of Quarterdeck Office Systems in Santa Monica,
California, a supplier of software to the computer industry. Ms. Myers also
served on the Board of Directors of Quarterdeck from 1982 to 1994. Ms. Myers
received her Bachelor of Arts degree in Economics from Newton College of the
Sacred Heart. She holds a Master of Administration degree from the Graduate
School of Industrial Administration at Carnegie Mellon University.
Kenneth W. Simonds has been a director of the Company since August 1990.
Mr. Simonds currently serves as Chairman of the Board of MasPar Corporation
and The Practice Tee Inc. and is a director of File Tek, Inc. and Hampton
Products International. From 1987 to 1992, Mr. Simonds served as the Chairman
of the Board of Teradata Corporation, a manufacturer of fault-tolerant
database management computer systems based in Los Angeles. Mr. Simonds
received a Bachelor of Science degree from East Tennessee State University.
Chun Win Wong has been a director of the Company since 1986 with the
investment in the Company by Wearnes Technology. Wearnes Technology is a
Singapore based holding company for technology and computer products entities,
and is ALR's largest single stockholder. Mr. Wong currently serves as
Chairman of the Board of Wearnes Technology. From 1983 to 1994, Mr. Wong
served as Managing Director of Wearnes Technology. He also serves on the
Board of Directors of Wearnes Technology's parent corporation, WBL Corporation
Limited and a number of its affiliates. Mr. Wong received an Associate degree
in Electrical Engineering from the Royal Melbourne Institute of Technology.
<PAGE>
Stock Ownership of Management and Principal Stockholder
The following table sets forth information concerning the shares of the
Company's Common Stock beneficially owned by (i) each beneficial owner of more
than 5% of the outstanding shares of Common Stock; (ii) each director of the
Company; (iii) the Chief Executive Officer and the four other executive
officers of the Company; and (iv) by all directors and executive officers of
the Company as a group. This information is presented as of December 31,
1995. Except as otherwise noted, each beneficial owner listed has sole
investment and voting power with respect to the Common Stock indicated.
Amount
Name of Individual and Nature Percent
or Number of Position with of Beneficial of
Persons in Group the Company Ownership (1) Class
Wearnes Technology
(Private) Limited (2) 4,780,549 40.8%
Gene Lu (3) Chairman of the Board, President
and Chief Executive Officer 794,203 6.7%
Philip A. Harding (4) Director 40,704 *
Therese E. Myers Director 15,000 *
Kenneth W. Simonds Director 10,700 *
Chun Win Wong (4) Director 75,000 *
David L. Kelly Vice President, Hardware Engineering
and Assistant Secretary 55,417 *
David G. Kirkey Vice President, Sales and
Director of European Operations 86,526 *
Vic Sangveraphunsiri Vice President, Systems Engineering and
Director of Asia Pacific Operations 67,082 *
Ronald J. Sipkovich Vice President, Finance and Administration,
Chief Financial Officer and Secretary 84,776 *
All Directors and Officers
as a Group (9 persons) (4) 1,229,408 10.0%
* Less than 1%.
(1) The shares listed in the table include the following stock options
exercisable on or within 60 days after December 31, 1995: Mr. Lu -- 212,777
shares; Messrs. Harding, Wong and Ms. Myers --15,000 shares each; Mr. Simonds
- -- 7,500 shares; Mr. Kelly -- 55,417 shares; Mr. Kirkey -- 86,526 shares;
Mr. Sangveraphunsiri -- 67,082 shares; Mr. Sipkovich -- 84,776 shares; and
all directors and officers as a group -- 559,078 shares.
(2) See "Certain Transactions." The address of Wearnes Technology is 801,
Lorong 7 #07-00, Toa Payoh, Singapore 1231.
(3) Includes 6,426 shares of Common Stock held of record by Mr. Lu's wife.
Mr. Lu's address is c/o Advanced Logic Research, Inc., 9401 Jeronimo Road,
Irvine, California 92718.
(4) Excludes 4,780,549 shares of Common Stock owned by Wearnes Technology.
While Mr. Wong serves as a director of Wearnes Technology and certain of its
affiliates, and Mr. Harding is the Chief Executive Officer and a director of
an affiliate of Wearnes Technology, they disclaim beneficial ownership of
Wearnes Technology's shares.
<PAGE>
The Board of Directors and Its Committees
During the fiscal year ended September 30, 1995, ALR's Board of Directors
met four times. No incumbent director attended fewer than 50% of the
aggregate meetings of the Board of Directors and meetings of the committees of
the Board on which he or she served.
The Board of Directors has two committees: the Audit Committee and the
Compensation Committee. The Board of Directors does not have a Nominating
Committee.
The Audit Committee, which held one meeting during fiscal 1995, consists
of Philip A. Harding, Therese E. Myers and Kenneth W. Simonds. The Audit
Committee recommends engagement of the Company's independent accountants and
is primarily responsible for approving the services performed by the Company's
independent accountants and for reviewing and evaluating the Company's
accounting principles and its system of internal accounting controls.
The Compensation Committee consists of Therese E. Myers and Kenneth W.
Simonds. The Compensation Committee held three meetings during fiscal 1995.
The Compensation Committee is responsible for reviewing and administering the
Company's various incentive plans, including the cash compensation levels of
members of management, the Company's bonus plan and the Company's Flexible
Stock Incentive Plan.
Directors who are not officers of the Company receive an annual retainer
of $8,000, plus $2,000 per regular or special Board meeting attended and $500
for attending any committee meeting not held on the same day as a regular or
special Board meeting.
Directors also receive stock options pursuant to the Directors'
Nonqualified Stock Option Plan. Each person who is a director of the Company
following the Annual Meeting, with the exception of Mr. Lu, will receive
options for 2,500 shares of Common Stock under this plan with an exercise
price equal to the fair market value of such stock on February 21, 1996.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's officers and directors, and persons who own more than
10% 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"). Officers, directors and stockholders owning greater than
10% of the Common Stock of the Company are required by SEC regulation to
furnish the Company with copies of all reports filed pursuant to Section
16(a).
Based solely on a review of copies of such reports required by Section
16(a) or written representations that no such reports were required, the
Company believes that its officers, directors and stockholders owning greater
than 10% of the Common Stock of the Company complied with all applicable
Section 16(a) filing requirements during fiscal 1995.
<PAGE>
PROPOSAL 2:
APPROVAL OF AMENDMENT TO
DIRECTOR'S' NONQUALIFIED STOCK OPTION PLAN
Proposal to Amend the Plan
The Board of Directors adopted the Directors' Nonqualified Stock Option
Plan (the "Plan") in August 1990 and the stockholders approved the Plan in
February 1991. On May 12, 1992, the Board of Directors approved amendments to
the Plan to conform it to the new requirements applicable to the Plan under
amended Rule 16b-3 of the SEC. The new amendment to the Plan, increasing the
shares of Common Stock available for issuance under the Plan, for which
stockholder approval is hereby sought was adopted by the Board on November 8,
1995.
Prior to the new amendment, the number of shares of Common Stock reserved
for issuance over the term of the Plan were 60,000. Stockholder approval of
the new amendment will result in an immediate increase in the maximum number
of shares of Common Stock available for issuance under the Plan to 120,000
shares from 60,000 shares, a net increase of 60,000 shares. The purpose of
the increase in the number of shares is to assure that the Company will
continue to have a sufficient reserve of Common Stock available under the Plan
to provide incentives to eligible directors for increased efforts and
successful achievement on behalf of or in the interest of the Company while
serving on the Company's Board of Directors.
Summary of the Plan
The essential features of the Plan are discussed below, but such
description is subject to, and qualified in its entirety by, the full text of
the Plan. Any stockholder of the Company who wishes to obtain a copy of the
actual Plan document may do so upon written request to the Corporate Secretary
at the Company's principal executive offices in Irvine, California.
The purpose of the Plan is to provide incentives to non-employee
directors ("Participants") whose services contribute to the financial success
and growth of the Company and its affiliates. The Plan provides a means for
participants to purchase shares of the Company's Common Stock pursuant to
nonqualified options (options that do not qualify as incentive stock options
under Section 422 of the Internal Revenue Code of 1986, as amended from time
to time).
The shares to be issued under the Plan are made available at the
discretion of the Board, either from authorized but unissued shares of Common
Stock or from previously issued shares of Common Stock reacquired by the
Company, including shares purchased on the open market. The Plan currently
provides for the granting of nonqualified stock options for up to an aggregate
of 60,000 shares. If any option ceases to be exercisable in whole or in part,
the shares that were subject to such option, but as to which the option had
not been exercised, will continue to be available under the Plan. As of
December 31, 1995, no shares were available for issuance or grant of options
and options for 60,000 shares had been granted pursuant to the Plan. Options
for 52,500 shares were outstanding and exercisable as of December 31, 1995.
Accordingly, if the amendment is approved, 60,000 shares will become available
for future option grants under the Plan.
Awards under the Plan can only be granted to non-employee directors. An
option to purchase 5,000 shares of Common Stock of the Company is granted to
each director on the date such director is initially elected to serve on the
Board. Thereafter, immediately following each annual meeting of the Company's
stockholders, each non-employee director who continues in that capacity
<PAGE>
following such annual meeting and has served as a director for at least one
year shall be granted an option to purchase 2,500 shares of Common Stock of
the Company. Presently the Company has five directors of whom Messrs.
Harding, Simonds and Wong and Ms. Myers are eligible to participate in the
Plan. No other director, executive officer or employee is currently eligible
to receive any benefit under the Plan.
Administration. Each option is subject to the terms specified in the
Plan. Neither the Board nor any Committee of the Board performs any
discretionary functions under the Plan.
Exercise Price. The exercise price of each nonqualified option shall be
the per share fair market value of the Common Stock of the Company on the date
the option is granted.
Valuation. The fair market value per share of Common Stock on any
relevant date under the Plan will be the closing selling price per share on
that date on The Nasdaq Stock Market. On December 29, 1995, the closing
selling price per share was $6.00.
Terms and Conditions. Each option granted pursuant to the Plan must be
evidenced by a written stock option agreement executed by the Company and the
person to whom such option is granted. The term of any option granted under
the Plan will be ten years and one month from the date of grant. No option
granted under the Plan may be exercised prior to six months after the date of
grant. After such six-month period, the option may be exercised for any or
all of the option shares as fully-vested shares. Upon termination of a
director's service as a Board member, the director will have upto a one year
period to exercise each outstanding option to the extent the option was
exercisable on the date of termination of service.
Amendment, Suspension or Termination of the Plan. The Board may at any
time suspend or terminate the Plan, and may amend it from time to time in such
respects as the Board may deem advisable provided that such amendment,
suspension or termination complies with all applicable state and federal
requirements and requirements of any stock exchange on which the stock is then
listed, including any applicable requirement that the Plan or an amendment to
the Plan be approved by the stockholders. However, in no event may the Plan
be amended more frequently than once every six (6) months other than to comply
with certain Federal tax law requirements. Without the Participant's consent,
no amendment, suspension or termination of the Plan will alter or impair any
rights or obligations under an option granted under the Plan.
Payment Upon Exercise. Payment of the purchase price upon exercise of
any option granted under the Plan must be made in whole or in part with (i)
cash, or (ii) in shares of Common Stock with a fair market value on the
exercise date equal to the aggregate exercise price and which have been held
for at least six (6) months, or (iii) a broker-dealer sale and remittance
procedure pursuant to which the exercise price is paid to the Company from the
proceeds of a sale of the purchased shares through a designated broker.
Adjustments. If there are to be any changes in the stock subject to the
Plan, including stock subject to any option granted thereunder, through
merger, consolidation, reorganization, reincorporation, or other similar
change in the corporate structure of the Company, appropriate adjustments will
be made by the Board in order to preserve but not to increase the benefits to
Participants. Consistent with the foregoing, in the event that the
outstanding stock of the Company is changed into another class or series of
capital stock of the Company, outstanding options granted under the Plan will
become options to purchase such other class or series.
Assignment. No option or other right to purchase stock granted under the
Plan is transferable by the recipient other than by will, the laws of descent
and distribution or pursuant to a qualified domestic relations order.
<PAGE>
Stock Awards. The table below shows, as to each of the Company's
directors and by all directors as a group, the number of shares of Common
Stock subject to options granted under the Plan between October 1, 1994 and
December 31, 1995, together with the weighted average exercise price payable
per share.
OPTION TRANSACTIONS
Options Granted Weighted Average
Name of Director (Number of Shares) Exercise Price
Philip A. Harding 2,500 $4.437
Gene Lu --- ---
Therese E. Myers 2,500 $4.437
Kenneth W. Simonds 2,500 $4.437
Chun Win Wong 2,500 $4.437
All non-employee directors as a group (4 persons) 10,000 $4.437
New Plan Benefits. Provided the stockholders approve the share increase
under this Proposal 2, each of Messrs. Harding, Simonds and Wong and Ms. Myers
will, if reelected to the Board, receive an option grant to purchase 2,500
shares of Common Stock on the date of the Annual Meeting at a price equal to
the fair market value per share of Common Stock on such date.
Federal Income Tax Consequences. The federal tax consequences of
nonqualified options are complex and subject to change. The following summary
is intended only as a general guide as to United States Federal Income Tax
consequences under current law. A taxpayer's particular situation may be such
that some variation of the general rule is applicable. A participant
receiving a nonqualified option under the Plan does not recognize taxable
income on the date of the grant of the option. The optionee will in general
recognize ordinary income, in the year in which the option is exercised, equal
to the excess of the fair market value of the purchased shares on the exercise
date over the exercise price paid for the shares.
The Company will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised nonqualified stock option. The deduction will in general be allowed
for the Company in the taxable year in which such exercise occurs.
Accounting Treatment. Option grants at 100% of fair market value do not
result in any charge to the Company's earnings. However, the number of
outstanding options may be a factor in determining the Company's earnings per
share on a primary and fully-diluted basis.
Under the recently issued Statement of Financial Accounting Standards
No. 123 ("SFAS No. 123") "Accounting for Stock-Based Compensation", the
Company will be required, at a minimum to disclose in the footnotes to the
financial statements, proforma earnings and earnings per share to reflect the
difference between compensation cost, if any, included in net income and the
related cost measured by the fair value based method as defined in SFAS No.
123 for all stock option grants to be issued. The Company will have the
option to elect to fully adopt SFAS No. 123 which would require an adjustment
to earnings for the incremental compensation costs.
<PAGE>
Stockholder Approval
The affirmative vote of a majority of the outstanding voting shares of
the Company present or represented and entitled to vote at the 1996 Annual
Meeting is required for approval of the amendment to the Plan which will
increase the number of shares of Common Stock authorized for issuance over the
term of the Plan from 60,000 shares to 120,000 shares. Should such
stockholder approval not be obtained the Plan will, however, continue in
effect, and stock options may continue to be granted pursuant to the
provisions of the Plan until the Plan is terminated by the Board of Directors.
The Board of Directors recommends that the stockholders vote FOR the
amendment to the Plan.
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Compensation
The following table provides certain information summarizing the
compensation earned by the Company's Chief Executive Officer and each of the
Company's other four most highly compensated executive officers whose
compensation was in excess of $100,000 (determined as of the end of the last
fiscal year) for services rendered in all capacities to the Company and its
subsidiaries for each of the last three fiscal years ended September 30, 1995,
1994 and 1993. No executive officers who would have otherwise been includable
in such table on the basis of salary and bonus earned for the 1995 fiscal year
have resigned or terminated employment during that fiscal year.
<TABLE>
TABLE I
SUMMARY COMPENSATION
<CAPTION>
Long-Term
Compensation Awards
Securities
Annual Compensation (1) Underlying All Other
Name of Individual Salary Bonus Other Options Compensat-ion
and Principal Position Year ($) ($) ($)(2) (#) ($)(3)
<S> <C> <C> <C> <C> <C> <C>
Gene Lu 1995 383,840 60,639 26,641 100,000 5,370
Chief Executive Officer 1994 353,030 61,777 28,239 50,000 6,229
1993 263,636 --- 22,495 175,000 4,748
David L. Kelly 1995 161,827 30,319 19,566 50,000 4,275
Vice President, 1994 148,750 30,889 18,680 20,000 4,921
Hardware Engineering 1993 122,500 --- 14,066 20,000 3,423
David G. Kirkey 1995 193,949 30,319 20,942 50,000 5,857
Vice President, Sales 1994 157,500 30,889 24,488 20,000 4,271
1993 122,500 --- 25,480 20,000 2,340
Vic Sangveraphunsiri 1995 172,134 30,319 20,209 50,000 4,898
Vice President, 1994 148,750 30,889 18,186 20,000 5,299
Systems Engineering 1993 122,500 --- 14,422 20,000 3,180
Ronald J. Sipkovich 1995 161,827 30,319 19,128 50,000 5,400
Vice President, Finance 1994 148,750 30,889 19,009 20,000 4,921
and Administration 1993 122,500 --- 15,081 28,000 3,993
<FN>
(1) Amounts shown include cash and non-cash compensation earned and
received by executive officers as well as amounts earned but deferred at the
election of these officers.
(2) Amounts of Other Annual Compensation shown for officers include the
cost of (i) Company provided automobiles, (ii) health and dental insurance
premiums for providing coverage to spouses and dependents, (iii) insurance
which provides reimbursement for a portion of the health and dental costs in
excess of the amount payable under the Company's group health and dental
plans, and (iv) tax and financial planning advice by third parties.
(3) All Other Compensation consists of 401(k) matching contributions and
supplemental life insurance payments by the Company. As to the amounts listed
for fiscal 1995, $4,620, $3,525, $5,107, $4,148, and $4,650 represent matching
contributions by the Company under its 401(k) plan for Messrs. Lu, Kelly,
Kirkey, Sangveraphunsiri and Sipkovich, respectively.
</TABLE>
<PAGE>
Option Grants in Last Fiscal Year
The following table contains information concerning the stock option
grants made to each of the executive officers named in the Summary
Compensation Table for the fiscal year ended September 30, 1995. No stock
appreciation rights were granted to these individuals during such fiscal year.
<TABLE>
TABLE II
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Grants
Percent of Total Potential Realizable
Number of Securities Value at Assumed
Securities Underlying Exercise Annual Rates of
Underlying Options Granted or Base Stock Price Appreciation
Options to Employees Price (2) Expiration For Option Term(3)
Name Granted(1) in 1995 ($/Share) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Gene Lu 100,000 16.7 4.50 12/9/04 285,989 726,491
Dave Kelly 50,000 8.3 4.50 12/9/04 142,994 363,246
Dave Kirkey 50,000 8.3 4.50 12/9/04 142,994 363,246
Vic Sangveraphunsiri 50,000 8.3 4.50 12/9/04 142,994 363,246
Ron Sipkovich 50,000 8.3 4.50 12/9/04 142,994 363,246
<FN>
(1) All options were granted under the Company's Flexible Stock Incentive
Plan on November 9, 1994. Each of the options vest monthly over three years
from the grant date and are first exercisable one year from the grant date.
Each option has a maximum term of ten years and one month from the grant date,
subject to earlier termination in the event of the optionee's cessation of
employment with the Company.
(2) The exercise price per share of the options granted represented the
fair market value of the underlying shares of Common Stock on the date the
respective options were granted. The exercise price may be paid in cash or in
shares of Common Stock valued at fair market value on the exercise date. The
Company may also fund the option exercise by loaning the optionee sufficient
funds to pay the exercise price of the purchased shares.
(3) The potential realizable value is calculated from the closing price of
Common Stock on November 9, 1994, the date of grant to officers. These
amounts represent certain assumed annual rates of appreciation over the ten
year and one month option period. Actual gains, if any, on stock option
exercises and Common Stock holdings are dependent on the future performance of
the Common Stock and overall market conditions. There can be no assurance
that the amounts reflected in this table will be achieved.
</TABLE>
<PAGE>
Aggregated Option Exercises and Fiscal Year-End Values
The following table sets forth certain information with respect to the
Company's Chief Executive Officer and the other executive officers named in
the Summary Compensation Table concerning the exercise of options during the
1995 fiscal year and unexercised options held as of the end of such fiscal
year. No stock appreciation rights were exercised during the 1995 fiscal
year, nor were any stock appreciation rights outstanding at the end of such
fiscal year.
<TABLE>
TABLE III
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<CAPTION>
Value of Unexercised
Shares Number of Unexercised in-the-Money Options
Acquired on Value Securities Underlying Options at September 30, 1995
Exercise Realized at September 30, 1995 ($)(2)
Name (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Gene Lu 40,000 136,215 149,582 135,418 525,971 467,190
Dave Kelly --- --- 61,249 60,001 145,206 204,794
Dave Kirkey 35,200 227,590 61,249 60,001 145,206 204,794
Vic Sangveraphunsiri --- --- 61,249 60,001 145,206 204,794
Ron Sipkovich --- --- 58,832 60,668 167,873 207,127
<FN>
(1) Based on the fair market value of the shares on the exercise date less
the exercise price paid for those shares.
(2) Based on a fair market value of $7.75 per share of Common Stock at
September 30, 1995 (based on the closing selling price on The Nasdaq Stock
Market) less the exercise price.
</TABLE>
<PAGE>
Stock Performance Graph
The following graph compares the Company's cumulative total return to the
Standard & Poors ("S&P") 500 Composite Index and the S&P Computer Systems
Composite Index since September 30, 1990. The stockholder return assumes $100
invested at the beginning of the period in ALR Common Stock, the S&P 500
Composite Index and the S&P Computer Systems Composite Index. The total
return calculation assumes reinvestment of all dividends for the two indexes.
ALR has not paid any dividends since September 30, 1990. Past financial
performance should not be considered to be a reliable indicator of future
performance, and investors should not use historical trends to anticipate
results or trends in future periods.
TABLE IV
Comparison of Cumulative Total Return
The data points depicted on the graph are as follows:
Fiscal year ended September 30,
1990 1991 1992 1993 1994 1995
Advanced Logic Research, Inc. $100 $200 $71 $52 $67 $129
S&P 500 Composite Index 100 131 146 165 171 221
S&P Computer Systems Composite Index 100 110 91 61 89 128
<PAGE>
Certain Transactions
Shares held by Wearnes Technology represent 40.8% of the outstanding
Common Stock of ALR. During the fiscal year ended September 30, 1995, ALR
purchased components and finished goods from Wearnes Technology and its
affiliates totaling $7.4 million. The Company believes that these purchases
were made on terms no less favorable to the Company than could otherwise have
been obtained from unaffiliated third parties.
Executive Officers
The Company's Board of Directors elects executive officers annually at
its first meeting following the Annual Meeting of Stockholders. Certain
information concerning ALR's executive officers is set forth below, except
that information regarding Gene Lu is set forth above under "Election of
Directors - Nominees".
David L. Kelly, age 40, has been Vice President of Hardware Engineering
since joining the Company in 1984. Mr. Kelly also serves as Assistant
Secretary of the Company. Prior to joining ALR, Mr. Kelly was a design
engineer at LNW Research Corporation and Tava Corporation. Mr. Kelly studied
electrical and electronic engineering at California State Polytechnic
University at Pomona and California State University, Fullerton.
David G. Kirkey, age 43, joined ALR in 1986 and currently serves as Vice
President of Sales and Director of European Operations. From June 1994 to May
1995, Mr. Kirkey served as ALR's Vice President of Worldwide Sales and
Worldwide Marketing. From March 1990 to June 1994, he served as ALR's Vice
President of International Sales and Worldwide Marketing. Prior to March
1990, Mr. Kirkey served as ALR's Vice President of Sales and Marketing. From
1984 to 1986, Mr. Kirkey served as Regional Sales Manager at NMB Hi-Tek
Corporation, a manufacturer of dynamic random access memory chips and
keyboards. From 1982 to 1984, he served in sales and marketing positions with
Spectra Strip Corporation, R. D. Sales Corporation and Linear Instruments
Corporation. Mr. Kirkey studied electronic engineering at Golden West College
in Huntington Beach, California.
Vic Sangveraphunsiri, age 43, has been Vice President of Systems
Engineering since joining ALR in 1986. Since May 1995 Mr. Sangveraphunsiri
has also been serving as ALR's Director of Asia-Pacific Operations. From 1984
to 1986 he held systems engineering positions at Sigma Information Systems, a
manufacturer of DEC-compatible minicomputers. Mr. Sangveraphunsiri holds a
Master of Science degree in Electrical and Electronic Engineering from the
University of Cincinnati and a Bachelor of Science degree in Electrical
Engineering from the University of Louisville.
Ronald J. Sipkovich, age 53, has been Vice President of Finance and
Administration, Chief Financial Officer and Secretary since July 1992. Prior
to July 1992, Mr. Sipkovich served as ALR's Corporate Controller. Prior to
joining ALR in December 1989, Mr. Sipkovich was employed at MAI Systems, Inc.,
a manufacturer of minicomputer systems. Over a ten year period at MAI Systems,
Inc. he held a number of key financial management positions, including
Director of Corporate Financial Planning and Operations Controller. From 1970
to 1978, Mr. Sipkovich served in a number of financial staff and management
positions with Burroughs Corporation (now UNISYS) in the United States and
Europe. Mr. Sipkovich studied accounting and finance at Pepperdine University
in Los Angeles, California.
<PAGE>
COMPENSATION COMMITTEE REPORT
The Company's Compensation Committee ("Committee") of the Board of
Directors is composed of independent outside directors, Mr. Simonds and Ms.
Myers. The Committee reviews and administers the Company's various incentive
plans, including the cash compensation levels of members of management, the
Company's bonus plan and the Company's Flexible Stock Incentive Plan.
General Compensation Policy. The Committee's fundamental compensation
policy is to make a substantial portion of an executive's compensation
contingent upon the financial performance of the Company. Accordingly, in
addition to each executive's base salary, the Company offers semi-annual and
annual bonuses which are tied to the Company's achievement of financial
performance goals. The Company also offers stock option awards to its
executive officers, as the Committee believes that its stockholders are
benefited through the alignment of the long-term interests of stockholders and
employees by providing certain employees an equity interest in the Company.
Base Salary. The Committee annually reviews the compensation package
provided to executive officers including their base salaries, the bonus plan
and stock option awards under the Plan. During March 1995 the Committee
determined that the Company would stop the practice of providing Company owned
automobiles to executives and would instead increase the officers' base
salaries by an amount equal to the value of the fringe benefit.
Fiscal 1995 Cash Bonus Plan. The Company's Fiscal 1995 Cash Bonus Plan
is designed to provide officers with incentives for higher levels of
performance while establishing minimum acceptable performance thresholds. The
Company's Fiscal 1995 Cash Bonus Plan consists of semi-annual and annual
bonuses based on the Company achieving certain operating performance criteria.
The operating criteria consist of 30% revenue growth over the comparable year-
to-date period in the preceding fiscal year and a net income target of 5% of
revenue for the year-to-date period being measured with minimum thresholds
established at 5% revenue growth over the year-ago period with a minimum net
income threshold of 1% of revenue. The maximum aggregate amount of quarterly
and annual bonuses based on achieving the performance goals was $180,000 for
the CEO and $90,000 for each of the other executive officers. Actual bonuses
are calculated on a prorata basis between the minimum threshold and operating
goal points. During fiscal 1995, bonuses totaling $8,320 and $4,160 were paid
to the CEO and each executive officer, respectively, for achieving operating
performance goals for the first six months ended March 31, 1995.
Additionally, bonuses totaling $22,319 and $11,159 were accrued at year-end
for the CEO and each executive officer, respectively, for achieving operating
performance goals for fiscal 1995. The Company's Cash Bonus Plan also has an
annual maximum discretionary component of $50,000 for the CEO and $25,000 for
each of the other executive officers. The award of the discretionary
component is subject to the Company achieving certain operational milestones.
Bonuses totaling $30,000 for the CEO and $15,000 for each of the other
executive officers were accrued at year-end under the discretionary component
of the Company's Cash Bonus Plan.
Stock Option Awards. The Company's Flexible Stock Incentive Plan was
adopted in 1990 and provides for the granting of stock options, stock bonuses,
stock appreciation rights or rights to purchase stock for up to an aggregate
of not more than the greater of (i) 10% of the authorized shares of Common
Stock, or (ii) 15% of the shares of Common Stock outstanding as of the close
of business on the Company's immediately preceding fiscal year. The Committee
grants stock options at prices not less than the fair market value of the
Common Stock on the grant date. The options generally vest monthly over
thirty-six months and are first exercisable twelve months from the grant date.
Grants to executives and other key employees are based on their
responsibilities and relative positions in the Company as well as industry
peer group comparisons. As stock options are tied to the future value of the
Company's stock they benefit the recipient only when the price of ALR Common
Stock increases above the option grant price thus providing a direct linkage
with stockholder interest. Therefore, the stock option program serves as the
Company's only long-term incentive and retention tool for executives and other
key employees.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of
the Internal Revenue Code, enacted in 1993, generally disallows a tax
deduction to publicly held companies for compensation exceeding $1 million
paid to certain of the corporation's executive officers. It is not expected
that the compensation to be paid to the Company's executive officers for
fiscal 1996 will exceed the $1 million limit per officer.
COMPENSATION COMMITTEE
Therese E. Myers Kenneth W. Simonds
<PAGE>
PROPOSAL 3:
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed KPMG Peat Marwick LLP to continue as
the Company's independent certified public accountants for the fiscal year
ending September 30, 1996 and to audit the consolidated financial statements
of the Company for that year, subject to ratification of its selection by the
stockholders at the Annual Meeting. KPMG Peat Marwick LLP has served as the
independent accountants of the Company since 1986. A representative of KPMG
Peat Marwick LLP will be present at the Annual Meeting. The representative
will be able to respond to questions and will have an opportunity to make a
statement if desired.
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be
presented by stockholders at the Company's 1997 Annual Meeting must be
received by the Company no later than September 30, 1996 to be included in the
proxy statement and form of proxy relating to the 1997 Annual Meeting.
OTHER MATTERS
The Company knows of no other matters to be brought before the Annual
Meeting. If any other business should properly come before the Annual
Meeting, the persons named in the proxy intend to vote thereon in accordance
with their best judgment.
The Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995, including audited financial statements, is being sent with
this Proxy Statement to all stockholders of record as of December 31, 1995.
Additionally, copies of the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1995 as filed with the SEC will be provided to
stockholders without charge upon written request to Investor Relations,
Advanced Logic Research, Inc., 9401 Jeronimo Road, Irvine, California 92718.
By Order of the Board of Directors
RONALD J. SIPKOVICH
Secretary
Irvine, California
January 12, 1996
- ------------------------------------------------------------------------------
<PAGE>
PROXY
ADVANCED LOGIC RESEARCH, INC.
Annual Meeting of Stockholders, February 21, 1996
9401 Jeronimo Road
Irvine, California 92718
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Gene Lu, Philip A. Harding, Therese E.
Myers, Kenneth W. Simonds, and Chun Win Wong, or any of them, each with full
power of substitution, to represent the undersigned and to vote all shares of
stock of Advanced Logic Research, Inc. which the undersigned would be entitled
to vote if personally present at the 1996 Annual Meeting of Stockholders of
Advanced Logic Research, Inc. to be held at the Sheraton Newport Beach, 4545
MacArthur Boulevard, Newport Beach, California 92660 on February 21, 1996 at
10:00 a.m. local time, and at any and all adjournments or postponements
thereof, as follows on the reverse side.
The undersigned acknowledges receipt of the Notice of Annual Meeting and
Proxy Statement for the 1996 Annual Meeting.
Whether or not the undersigned plans to attend the 1996 Annual Meeting,
the undersigned is urged to execute and return this Proxy, which may be
revoked at any time prior to the voting hereof.
All other proxies heretofore given by the undersigned to vote shares of
stock of Advanced Logic Research, Inc. which the undersigned would be entitled
to vote if personally present at said Annual Meeting or any other adjournment
thereof are hereby expressly revoked.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
<PAGE>
/X/ Please mark votes as in this example.
The shares represented by this Proxy will be voted as directed, but when no
direction is given, they will be voted FOR the nominees named below and FOR
approval of the proposals named below. The nominations for members of the
Board of Directors, the proposal for the approval of an amendment to the
Directors' Nonqualified Stock Option Plan and the proposal for selection of
Accountants have been made by Advanced Logic Research, Inc. Your vote on each
matter is neither conditioned on nor related to your vote on the other matter.
1. ELECTION OF DIRECTORS
Nominees: Gene Lu, Philip A. Harding, Therese E. Myers, Kenneth W. Simonds,
Chun Win Wong
/ / FOR / / WITHHELD
/ /_______________________________________
For all nominees except as noted above
2. AMENDMENT OF DIRECTORS' NONQUALIFIED STOCK OPTION PLAN (the "Plan")
Approval of an amendment to the Plan to increase the number of shares of
Common Stock reserved for issuance over the term of the Plan from 60,000
shares to 120,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
3. SELECTION OF ACCOUNTANTS
Selection of KPMG Peat Marwick LLP as the independent public accountants for
the fiscal year ending September 30, 1996.
/ / FOR / / AGAINST / / ABSTAIN
MARK HERE FOR ADDRESS / / Please sign your name exactly as it
CHANGE AND NOTE BELOW appears herein, date, and return this
Proxy as promptly as possible in the
reply envelope provided. When signing as
attorney, executor, trustee, or guardian,
please give full title, as such. If a
corporation, please sign in full corporate
name by a duly authorized officer. If a
partnership, please sign in partnership
name by authorized person. Joint owners
must each sign personally.
PLEASE BE CERTAIN YOU HAVE Signature: Date:
DATED AND SIGNED THIS PROXY Signature: Date:
<PAGE>
ADVANCED LOGIC RESEARCH, INC.
DIRECTORS' NON-QUALIFIED STOCK OPTION PLAN
(As amended through November 8, 1995)
1. Establishment, Purpose, and Definitions.
(a) There is hereby adopted the Directors' Non-Qualified
Stock Option Plan (the "Plan") of Advanced Logic Research, Inc. (the
"Company"). The Plan is intended to provide a means whereby eligible
directors of the Company, as described in subparagraph 3(b) ("Participants"),
may be given an opportunity to purchase shares of Stock (as defined in
Paragraph 3 of the Plan) of the Company (the "Stock") pursuant to options
which are not intended to qualify as incentive stock options under Section 422
of the Internal Revenue Code as amended from time to time.
(b) The purpose of this Plan is to provide incentives to
Participants for increased efforts and successful achievements on behalf of or
in the interests of the Company while serving on the Company's Board of
Directors (the "Board") and to maximize the rewards due them for such
increased efforts and successful achievements.
(c) The term "affiliates" as used in the Plan means
parent or subsidiary corporations, as defined in Section 424(e) and (f) of
the Internal Revenue Code (but substituting "the Company" for "employer
corporation"), including parents or subsidiaries which become such after
adoption of the Plan.
2. Administration of the Plan. Administration of the Plan shall
be self-executing in accordance with the express terms of the Plan and neither
the Board nor any committee of the Board shall exercise any discretionary
function with respect to option grants made thereunder.
3. Stock Subject to the Plan.
(a) Stock shall mean Common Stock, $0.01 par value, of
the Company or such stock as the Common Stock may be changed into as
contemplated by subparagraph 3(c) below. The maximum number of shares of
Stock which may be issued over the term of the Plan shall not exceed
120,000 (includes the 60,000-share increase approved by the Board on November
8, 1995, subject to approval by the Company's stockholders at the 1996 Annual
Meeting.) shares.
(b) An option to purchase 5,000 shares of Stock shall be
granted ("Initial Grant") to each director who is not an officer of the
Company ("Non-Employee Director"), such Initial Grant to be made on the later
of (i) the date of adoption by the Board of the Plan or (ii) the date the
Non-Employee Director is initially elected to serve on the Board. Thereafter,
immediately following each annual meeting of the Company's stockholders, each
Non-Employee Director who continues as a Non-Employee Director following such
annual meeting shall be granted an option to purchase 2,500 shares of Stock
("Subsequent Grant"), provided that no Subsequent Grant shall be made to any
such Non-Employee Director who has not served as a director of the Company for
at least one (1) year from the date of his or her Initial Grant. Each such
Subsequent Grant shall be made on the date of the annual stockholders' meeting
in question. If any option ceases to be exercisable in whole or in part, the
shares which were subject to such option but as to which the option had not
been exercised shall continue to be available under the Plan.
<PAGE>
(c) If there shall be any change in the Stock subject to
the Plan, including Stock subject to any option granted hereunder, through
merger, consolidation, reorganization, reincorporation, or other similar
change in the corporate structure of the Company, appropriate adjustments may
be made by the Board in order to preserve but not to increase the benefits to
Participants, including adjustments in the number of shares and the price per
share subject to outstanding options granted hereunder. Consistent with the
foregoing, in the event that the outstanding Common Stock of the Company is
changed into another class or series of capital stock of the Company,
outstanding options granted under the Plan shall become options to purchase
such other class or series and the provisions of this subparagraph 3(c) shall
apply to such new class or series.
4. Eligibility. All Non-Employee Directors shall be eligible to
receive grants of Stock options as provided in subparagraph 3(b) hereof.
5. Exercise Price for Options Granted Under the Plan. The
exercise price of the Stock covered by each option shall be the per-share fair
market value of such Stock on the date the option is granted. The price of an
option granted under the Plan shall be subject to adjustment to the extent
provided in subparagraph 3(c), above.
6. Terms and Conditions of Options.
(a) Each option granted pursuant to the Plan shall be
evidenced by a written stock option agreement executed by the Company and the
person to whom such option is granted.
(b) Each option granted pursuant to the Plan shall have a
term of ten (10) years and one (1) month measured from the option grant date.
(c) No option granted under the Plan may be exercised
prior to six (6) months following the date of grant. After such six (6)-month
period, the option may be exercised for any or all of the shares of Stock
subject to such option as fully vested shares of Stock.
(d) Should a Participant cease to serve as a Non-Employee
Director for any reason during the six (6)-month period following the date of
grant of an option, then such option shall, immediately upon such cessation of
Board service, terminate and cease to be outstanding.
<PAGE>
(e) Should a Participant cease to serve as a Non-Employee
Director for any reason after the six (6)-month period following the date of
grant of an option, then such Participant shall have a one (l)-year period
following the date of such cessation of Board service in which to exercise
such option for any or all of the shares of Stock subject to such option as
fully vested shares of Common Stock. In no event, however, shall an option
remain exercisable after the expiration of the option term. Upon expiration
of the one (1 )-year post-service exercise period or (if earlier) upon the
expiration of the option term, the option shall terminate and cease to be
outstanding with respect to any shares of Stock for which the option has not
been exercised.
7. Use of Proceeds. Cash proceeds realized from the sale of
Stock pursuant to Stock issued under the Plan shall constitute general funds
of the Company.
8. Amendment of the Plan. The Board shall have complete and
exclusive power and authority to amend or modify the Plan in any or all
respects. However, (i) the Plan, together with the option grants outstanding
hereunder, may not be amended at intervals more frequently than once every six
(6) months, other than to the extent necessary to comply with applicable
Federal income tax laws and regulations and (ii) no such amendment or
modification shall adversely affect the rights and obligations with respect to
options at the time outstanding under the Plan unless the Participant consents
to such amendment or modification. In addition, the Board shall not, without
the approval of the Company's stockholders, (i) materially increase the
maximum number of shares issuable under the Plan or the number of shares for
which options may be granted to each Participant, except for permissible
adjustments in the event of certain changes in the Company's capitalization,
(ii) materially modify the eligibility requirements for Plan participation or
(iii) materially increase the benefits accruing to Participants.
9. Assignability of Options. Each option to purchase Stock
granted pursuant to this Plan shall, during the Participant's lifetime, be
exercisable only by the Participant, and the option shall not be transferable
by the Participant by operation of law or otherwise other than by will, the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Internal Revenue Code, or Title I of ERISA, or the
rules thereunder, or otherwise as permitted by Rule 16b-3 of the Securities
and Exchange Commission.
10. Payment Upon Exercise. Payment of the exercise price upon
exercise of any option to purchase Stock granted under this Plan shall be made
in whole or in part with (i) cash, (ii) shares of Stock held by the
Participant for the requisite period necessary to avoid a charge to the
Company's earnings for financial reporting purposes and valued at fair market
value on the date of the exercise of the option, or (iii) through a special
sale and remittance procedure pursuant to which the Participant shall
concurrently provide irrevocable written instructions to (A) a Company-
designated brokerage firm to effect the immediate sale of the purchased shares
and remit to the Company, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate option exercise price payable
for the purchased shares plus all applicable Federal and State income and
employment taxes required to be withheld by the Company in connection with
such exercise and (B) the Company to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete the sale
transaction.
<PAGE>
11. Withholding Taxes.
(a) Shares of Stock issued hereunder shall be delivered
to a Participant only upon payment by such person to the Company of the amount
of any withholding tax which may be imposed thereon under the provisions of
the Internal Revenue Code as then in effect or any law or any other taxing
jurisdiction requiring such withholding tax.
(b) The Board may, under such terms and conditions as it
deems appropriate, authorize a Participant to satisfy withholding tax
obligations under this paragraph 11 by delivering shares of Stock or by
electing to have the Company withhold from the Stock to be issued to the
Participant shares of Stock having a fair market value equal to the amount of
the withholding tax required to be withheld.
12. Effective Date of Plan. The Plan became effective when
adopted by the Board in August 1990 and was approved by the Company's
stockholders in February 1991. On May 12, 1992, the Board amended the Plan to
bring it into compliance with the requirements of Rule 16b-3 of the Securities
and Exchange Commission. On November 8, 1995, the Board further amended the
Plan to increase the maximum number of shares of Stock reserved for issuance
over the term thereof from 60,000 to 120,000 shares. Such 60,000-share
increase is subject to approval by the Company's stockholders at the 1996
Annual Meeting. No option granted on the basis of such increase shall be
exercisable unless and until the increase is approved by the Company's
stockholders. If such stockholder approval is not obtained at the 1996 Annual
Meeting, then any options previously granted on the basis of the 60,000-share
increase shall terminate, and no further options based on such increase shall
be granted. Those options granted under the Plan which are not based on such
increase shall remain outstanding in accordance with the terms and conditions
of the respective agreements evidencing such options, whether or not the
requisite stockholder approval of the share increase is obtained.
