SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
ADVANCED LOGIC RESEARCH, INC.
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(Name of Registrant as Specified in its Charter)
Not Applicable
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3). / / Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
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(2) Aggregate number of securities to which transaction applies:
Not Applicable
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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):
Not Applicable
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(4) Proposed maximum aggregate value of transaction:
Not Applicable
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(5) Total fee paid:
Not Applicable
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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.
(1) Amount Previously Paid:
Not Applicable
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(2) Form, Schedule or Registration Statement No.:
Not Applicable
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(3) Filing Party:
Not Applicable
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(4) Date Filed:
Not Applicable
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<PAGE>
ADVANCED LOGIC RESEARCH, INC.
9401 Jeronimo Road
Irvine, CA 92618
January 21, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of
Stockholders of Advanced Logic Research, Inc. The meeting will be held at 10:00
a.m. local time on Tuesday, February 18, 1997 at the Sheraton Newport Beach,
4545 MacArthur Boulevard, Newport Beach, California 92660.
At this year's stockholders meeting you are being asked to elect five
directors, approve the adoption of the Advanced Logic Research, Inc. 1996 Stock
Option/Stock Issuance Plan, ratify the appointment of KPMG Peat Marwick LLP as
independent auditors, and consider a stockholder proposal. The Board of
Directors unanimously recommends a vote FOR the directors, the 1996 Stock
Option/Stock Issuance Plan and the independent auditors, and AGAINST the
stockholder proposal. Accordingly, please give careful attention to these proxy
materials.
The stockholder proposal requires that the Company adopt a mandated
stock ownership program for its Board of Directors and all officers at the level
of Vice President and above. The proposal ignores the fact that the Company is a
high technology company in a high growth industry where mandated stock purchase
programs are rarely, if ever, adopted, and ignores the negative effect the
adoption of such a plan likely would have on the Company's ability to attract
and retain qualified officers and directors. The Company's management
compensation structure is designed to incentivize management to maximize Company
performance. As is standard in the industry in setting compensation levels, the
Company relies to a large extent on non-cash incentives which are tied to the
Company's long-term performance, such as stock option grants. The Company
similarly ties the cash bonus component of management compensation to Company
performance, and officers do not earn these bonuses if the Company does not meet
specific performance targets. The Company's officers and directors thus are
rewarded for results that maximize Company performance and stockholder value and
are penalized for results that do not.
It is important that your shares be represented and voted at the Annual
Meeting regardless of the size of your holdings. Whether or not you plan to
attend the Annual Meeting, please complete, sign, date and return the
accompanying proxy card in the enclosed envelope in order to make certain that
your shares will be represented at the Annual Meeting.
Thank you for your support and continued interest in Advanced Logic
Research, Inc.
Sincerely,
[GRAPHIC OMITTED]
EUGENE LU
Chairman of the Board,
Chief Executive Officer and President
<PAGE>
ADVANCED LOGIC RESEARCH, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
February 18, 1997
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 Tuesday, February 18, 1997, 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
1998 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. ADOPTION OF 1996 STOCK OPTION/STOCK ISSUANCE PLAN. Approve adoption of
the Advanced Logic Research, Inc. 1996 Stock Option/Stock Issuance Plan and to
reserve 1,500,000 shares for issuance thereunder.
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, 1997.
4. STOCKHOLDER PROPOSAL. To act on stockholder proposal recommending that
the Company require its Directors and Officers to own shares of ALR Common
Stock.
5. 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, 1996 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
[GRAPHIC OMITTED]
RONALD J. SIPKOVICH
Secretary
Irvine, California
January 21, 1997
<PAGE>
ADVANCED LOGIC RESEARCH, INC.
9401 Jeronimo Road
Irvine, California 92618
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 18,
1997 (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 21,
1997.
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 the Company's Treasurer, 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,
1996 are entitled to notice of and to vote at the Annual Meeting. As of December
31, 1996, 12,454,270 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,
1996. 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. The Company's inspector
of elections for the Annual Meeting will count abstentions and so-called "broker
non-votes" (i.e., shares held by a broker or other nominee having discretionary
power to vote on some matters but not others) for purposes of determining
whether a quorum exists for the transaction of business at the Annual Meeting.
Abstentions are also counted in tabulating the total number of votes cast on
matters voted on by the stockholders at the Annual Meeting. Broker non-votes are
not counted for purposes of determining either the number of votes cast on any
matter voted on by the stockholders or whether such matter 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
Eugene Lu 42 Chairman of the Board, President, 1984
and Chief Executive Officer,
Advanced Logic Research, Inc.
Philip A. Harding 64 Chief Executive Officer, 1985
Multi-Fineline Electronix, Inc.
Therese E. Myers 52 Chief Executive Officer, 1990
Bouquet Multimedia
Kenneth W. Simonds 61 Chairman of the Board, 1990
NeoVista Solutions, Inc.
Chun Win Wong 60 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.
Eugene 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. 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 privately held
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., a private company, where he currently serves 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.
Therese E. Myers has been a director of the Company since August 1990.
Ms. Myers founded Bouquet Multimedia, a provider of multimedia software to the
PC industry, in 1994 and has served as that company's Chief Executive Officer
since that time. From 1982 to 1994, Ms. Myers was President and a director of
Quarterdeck Office Systems, a supplier of software to the computer industry. 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 NeoVista
Solutions, Inc., a private company, and is a director of Printrak International,
Inc., a public company, and File Tek, Inc. and Hampton Products International,
both of which are privately held companies. 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, ALR's largest single
stockholder. Since 1994, Mr. Wong has served 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. WBL
Corporation Limited is a public company listed on the Singapore stock exchange.
Mr. Wong also serves on the Board of Integrated Silicon Solution, Inc., a public
company. 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, 1996. Except as
otherwise noted, each beneficial owner listed has sole investment and voting
power with respect to the Common Stock indicated, subject to community property
laws where applicable.
<TABLE>
<CAPTION>
Amount
Name of Individual and Nature Percent
or Number of Position with of Beneficial of
Persons in Group (1) the Company Ownership (2) Class
- ---------------------- ----------- ------------- -----
<S> <C> <C> <C>
Wearnes Technology
(Private) Limited (3) 4,780,549 38.4%
Eugene Lu (4) Chairman of the Board, President
and Chief Executive Officer 455,316 3.6%
Philip A. Harding (5) Director 43,204 *
Therese E. Myers Director 17,500 *
Kenneth W. Simonds Director 10,000 *
Chun Win Wong (5) Director 47,500 *
David L. Kelly Vice President, Hardware Engineering
and Assistant Secretary 47,640 *
David G. Kirkey Vice President, Sales and
Director of European Operations 48,749 *
Vic Sangveraphunsiri Vice President, Systems Engineering and
Director of Asia Pacific Operations 56,305 *
Ronald J. Sipkovich Vice President, Finance and Administration,
Chief Financial Officer and Secretary 66,999 *
All Directors and Officers
as a Group (9 persons) (5) 793,213 6.2%
<FN>
* Less than 1%.
(1) Unless otherwise indicated the address of each individual named in the
table is c/o Advanced Logic Research, Inc., 9401 Jeronimo Road, Irvine,
California 92618.
(2) The shares listed in the table include the following stock options
exercisable on or within 60 days after December 31, 1996: Mr. Lu --
38,890 shares; Messrs. Harding, Wong and Ms. Myers -- 17,500 shares
each; Mr. Simonds -- 10,000 shares; Mr. Kelly -- 47,640 shares; Mr.
Kirkey -- 48,749 shares; Mr. Sangveraphunsiri -- 56,305 shares; Mr.
Sipkovich -- 66,999 shares; and all directors and officers as a group
-- 321,083 shares.
(3) See "Certain Transactions." The address of Wearnes Technology is 801,
Lorong 7 #07-00, Toa Payoh, Singapore 1231.
(4) Includes 6,426 shares of Common Stock held of record by Mr. Lu's wife.
(5) 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.
</FN>
</TABLE>
<PAGE>
The Board of Directors and Its Committees
During the fiscal year ended September 30, 1996, ALR's Board of
Directors met four times. No incumbent director attended fewer than 75% 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 three committees: the Audit Committee, the
Compensation Committee and the Nominating Committee.
The Audit Committee, which held one meeting during fiscal 1996,
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 one meeting during fiscal 1996. 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 1996 Stock
Option/Stock Issuance Plan.
The Nominating Committee was formed during fiscal 1996 and consists
of Philip A. Harding and Kenneth W. Simonds. The Nominating Committee is
responsible for reviewing candidates for ALR's Board of Directors. The
Nominating Committee did not meet during fiscal 1996.
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 18, 1997.
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 1996 except as follows: Kenneth W. Simonds, a
director of the Company, sold 3,200 shares of the Company's Common Stock in
October 1995, which sale was disclosed in a Form 5 filed by the Company on
November 8, 1996, but which should have been reported on a Form 4 filed on
behalf of Mr. Simonds prior to November 8, 1996.
<PAGE>
PROPOSAL 2:
ADOPTION OF
1996 STOCK OPTION/STOCK ISSUANCE PLAN
Proposal to Adopt the Plan
The Company's stockholders are being asked to approve the adoption of
the Advanced Logic Research, Inc. 1996 Stock Option/Stock Issuance Plan (the
"1996 Plan") as the successor to the Company's existing Flexible Stock Incentive
Plan (the "Predecessor Plan"). A total of 1,746,580 shares of Common Stock will
be reserved for issuance under the 1996 Plan. The Board of Directors has
authorized the implementation of the 1996 Plan as a comprehensive equity
incentive program to attract and retain the services of those persons essential
to the Company's growth and financial success.
The 1996 Plan became effective upon its adoption by the Board on
November 8, 1996, subject to stockholder approval at the 1997 Annual Meeting.
All outstanding options under the Predecessor Plan will be transferred to the
1996 Plan upon such approval. The Predecessor Plan will terminate, and no
further option grants or share issuances will be made under the Predecessor
Plan. However, all outstanding options under the Predecessor Plan will continue
to be governed by the terms and conditions of the existing option agreements for
those grants.
The following is a summary of the principal features of the 1996 Plan.
The summary, however, does not purport to be a complete description of all the
provisions of the 1996 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.
Equity Incentive Programs
The 1996 Plan contains two separate equity incentive programs: (i) a
Discretionary Option Grant Program and (ii) a Stock Issuance Program. The
principal features of these programs are described below. The 1996 Plan will be
administered by the Compensation Committee of the Board. This committee (the
"Plan Administrator") will have complete discretion (subject to the provisions
of the 1996 Plan) to authorize option grants and direct stock issuances under
the 1996 Plan.
Share Reserve
1,746,580 shares of Common Stock have been reserved for issuance over
the ten year term of the 1996 Plan. This reserve is comprised of (i) 246,580
shares available for issuance under the Predecessor Plan as last approved by the
stockholders (including shares subject to outstanding options incorporated into
the 1996 Plan) and (ii) an increase of 1,500,000 shares approved by the Board,
subject to stockholder approval at the 1997 Annual Meeting. In no event may any
one participant in the 1996 Plan be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances for more than
250,000 shares per calendar year.
In the event any change is made to the outstanding shares of Common
Stock by reason of any recapitalization, stock dividend, stock split,
combination of shares, exchange of shares or other change in corporate structure
effected without the Company's receipt of consideration, appropriate adjustments
will be made to the securities issuable (in the aggregate and to each
participant) under the 1996 Plan and to the securities and exercise price under
each outstanding option.
Eligibility
Officers and other employees of the Company and its parent or
subsidiaries (whether now existing or subsequently established), non-employee
members of the Board and the board of directors of its parent or subsidiaries
and consultants and independent advisors of the Company and its parent and
subsidiaries will be eligible to participate in the Plan.
As of December 31, 1996, five executive officers, approximately 500
other employees and four non-employee Board members were eligible to participate
in the 1996 Plan.
Valuation
The fair market value per share of Common Stock on any relevant date
under the 1996 Plan will be the closing selling price per share on that date on
The Nasdaq Stock Market. On December 31, 1996, the closing selling price per
share was $12.375.
Discretionary Option Grant Program
Options may be granted under the Discretionary Option Grant Program at
an exercise price per share not less than eighty five percent (85%) of the fair
market value per share of Common Stock on the option grant date.
No granted option will have a term in excess of ten years.
Upon cessation of service, the optionee will have a limited period of
time in which to exercise any outstanding option to the extent such option is
exercisable for vested shares. The Plan Administrator will have complete
discretion to extend the period following the optionee's cessation of service
during which his or her outstanding options may be exercised and/or to
accelerate the exercisability or vesting of such options in whole or in part.
Such discretion may be exercised at any time while the options remain
outstanding, whether before or after the optionee's actual cessation of service.
The Plan Administrator is authorized to issue two types of stock
appreciation rights in connection with option grants made under the
Discretionary Option Grant Program:
Tandem stock appreciation rights provide the holders with the
right to surrender their options for an appreciation distribution from
the Company equal in amount to the excess of (i) the fair market value
of the vested shares of Common Stock subject to the surrendered option
over (ii) the aggregate exercise price payable for such shares. Such
appreciation distribution may, at the discretion of the Plan
Administrator, be made in cash or in shares of Common Stock.
Limited stock appreciation rights may be granted to officers
of the Company as part of their option grants. Any option with such a
limited stock appreciation right may be surrendered to the Company upon
the successful completion of a hostile take-over of the Company. In
return for the surrendered option, the officer will be entitled to a
cash distribution from the Company in an amount per surrendered option
share equal to the excess of (i) the take-over price per share over
(ii) the exercise price payable for such share.
The Plan Administrator will have the authority to effect the
cancellation of outstanding options under the Discretionary Option Grant Program
which have exercise prices in excess of the then current market price of Common
Stock and to issue replacement options with an exercise price based on the
market price of Common Stock at the time of the new grant.
Stock Issuance Program
Shares may be sold under the Stock Issuance Program at a price per
share not less than eighty five percent (85%) of fair market value per share of
Common Stock, payable in cash or through a promissory note payable to the
Company. Shares may also be issued solely as a bonus for past services.
The issued shares may either be immediately vested upon issuance or
subject to a vesting schedule tied to the performance of service or the
attainment of performance goals. The Plan Administrator will, however, have the
discretionary authority at any time to accelerate the vesting of any unvested
shares.
General Provisions
Acceleration
In the event that the Company is acquired by merger or asset sale, each
outstanding option under the Discretionary Option Grant Program which is not to
be assumed by the successor corporation or replaced with a comparable option to
purchase shares of the capital stock of the successor corporation will
automatically accelerate in full, and all unvested shares under the Stock
Issuance Program will immediately vest, except to the extent the Company's
repurchase rights with respect to those shares are to be assigned to the
successor corporation. The Plan Administrator will have the discretion,
exercisable either at the time of the option grant or any time while the option
remains outstanding (or at the time of issuance of unvested shares under the
Stock Issuance Program or at any time the Corporation's repurchase rights remain
outstanding) to provide that one or more options assumed or replaced in
connection with such acquisition will be subject to immediate acceleration (and
any unvested shares under the Stock Issuance Program which do not vest at the
time of such acquisition will be subject to full and immediate vesting) in the
event the individual's service is subsequently terminated within a designated
period (not to exceed 18 months) following the acquisition. In connection with a
hostile change in control of the Company (whether by successful tender offer for
more than 50% of the outstanding voting stock or by proxy contest for the
election of Board members), the Plan Administrator will have the discretionary
authority to provide for automatic acceleration of outstanding options under the
Discretionary Grant Program and the automatic vesting of outstanding shares
under the Stock Issuance Program either at the time of such change in control or
upon the subsequent termination of the individual's service within a designated
period (not to exceed 18 months) of such change in control.
The acceleration of vesting in the event of a change in the ownership
or control of the Company may be seen as an anti-takeover provision and may have
the effect of discouraging a merger proposal, a takeover attempt or other
efforts to gain control of the Company.
Financial Assistance
The Plan Administrator may permit one or more participants to pay the
exercise price of outstanding options or the purchase price of shares under the
1996 Plan by delivering a promissory note payable in installments. The Plan
Administrator will determine the terms of any such promissory note. However, the
maximum amount of financing provided any participant may not exceed the cash
consideration payable for the issued shares plus all applicable taxes incurred
in connection with the acquisition of the shares. Any such promissory note may
be subject to forgiveness in whole or in part, at the discretion of the Plan
Administrator, over the participant's period of service.
Special Tax Election
The Plan Administrator may provide one or more holders of options or
unvested shares with the right to have the Company withhold a portion of the
shares otherwise issuable to such individuals in satisfaction of the tax
liability incurred by such individuals in connection with the exercise of those
options or the vesting of those shares. Alternatively, the Plan Administrator
may allow such individuals to deliver previously acquired shares of Common Stock
in payment of such tax liability.
Amendment and Termination
The Board may amend or modify the 1996 Plan in any or all respects
whatsoever subject to any required stockholder approval. The Board may terminate
the 1996 Plan at any time, and the 1996 Plan will in all events terminate on
November 7, 2006.
Stock Awards
The table below shows, as to each of the Company's executive officers
named in the Summary Compensation Table and the various indicated individuals
and groups, the number of shares of Common Stock subject to options granted
between October 1, 1995 and December 31, 1996 under the predecessor Flexible
Stock Incentive Plan together with the weighted average exercise price payable
per share.
<TABLE>
OPTION TRANSACTIONS
<CAPTION>
Name of Individual Options Granted Weighted Average
and Principal Position (Number of Shares) Exercise Price
<S> <C> <C>
Eugene Lu, Chief Executive Officer 50,000 $7.00
David L. Kelly, Vice President Hardware Engineering 25,000 $7.00
David G. Kirkey, Vice President Worldwide Sales 25,000 $7.00
Vic Sangveraphunsiri, Vice President Systems Engineering 25,000 $7.00
Ronald J. Sipkovich, Vice President, Finance and Administration 25,000 $7.00
All executive officers as a group (5 persons) 150,000 $7.00
All non-employee directors as a group (4 persons) --- ---
All employees, including current officers who are
not executive officers as a group (92 persons) 450,000 $7.00
</TABLE>
Federal Income Tax Consequences
Option Grants
Options granted under the 1996 Plan may be either incentive stock
options which satisfy the requirements of Section 422 of the Internal Revenue
Code or non-statutory options which are not intended to meet such requirements.
The Federal income tax treatment for the two types of options differs as
follows:
Incentive Options. No taxable income is recognized by the optionee at
the time of the option grant, and no taxable income is generally recognized at
the time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise disposed
of. For Federal tax purposes, dispositions are divided into two categories: (i)
qualifying and (ii) disqualifying. A qualifying disposition occurs if the sale
or other disposition is made after the optionee has held the shares for more
than two years after the option grant date and more than one year after the
exercise date. If either of these two holding periods is not satisfied, then a
disqualifying disposition will result.
If the optionee makes a disqualifying disposition of the purchased
shares, then the Company will be entitled to an income tax deduction, for the
taxable year in which such disposition occurs, equal to the excess of (i) the
fair market value of such shares on the option exercise date over (ii) the
exercise price paid for the shares. In no other instance will the Company be
allowed a deduction with respect to the optionee's disposition of the purchased
shares.
Non-Statutory Options. No taxable income is recognized by an optionee
upon the grant of a non-statutory 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, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the Section
83(b) election is made, the optionee will not recognize any additional income as
and when the repurchase right lapses.
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 non-statutory option. The deduction will in general be allowed for the
taxable year of the Company in which such ordinary income is recognized by the
optionee.
Stock Appreciation Rights
An optionee who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to the amount of the appreciation
distribution. The Company will be entitled to an income tax deduction equal to
the appreciation distribution for the taxable year in which the ordinary income
is recognized by the optionee.
Direct Stock Issuance
The tax principles applicable to direct stock issuances under the 1996
Plan will be substantially the same as those summarized above for the exercise
of non-statutory option grants.
Accounting Treatment
Option grants or stock issuances with exercise or issue prices less
than the fair market value of the shares on the grant or issue date will result
in a compensation expense to the Company's earnings equal to the difference
between the exercise or issue price and the fair market value of the shares on
the grant or issue date. Such expense will be accruable by the Company over the
period that the option shares or issued shares are to vest. Option grants or
stock issuances at 100% of fair market value at the time of grant will not
result in any charge to the Company's earnings. Whether or not granted at a
discount, the number of outstanding options may be a factor in determining the
Company's earnings per share on a fully-diluted basis. Under Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (Statement No. 123), footnote disclosure will be required as to
the impact the outstanding options under the 1996 Plan would have upon the
Company's reported earnings and earnings per share had those options been valued
as compensation expense in accordance with Statement No. 123.
Should one or more optionees be granted stock appreciation rights which
have no conditions upon exercisability other than a service or employment
requirement, then such rights will result in a compensation expense to the
Company's earnings.
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 1997 Annual
Meeting is required for approval of the 1996 Plan. Should such stockholder
approval not be obtained, then the 1996 Plan will terminate and no option grants
or stock issuances will be made under the 1996 Plan. The Company's Flexible
Stock Incentive Plan will, however, continue to remain in effect, and option
grants and stock issuances may continue to be made pursuant to the provisions of
that plan until the available reserve of Common Stock under such plan is issued.
The Board of Directors recommends that the stockholders vote FOR the
approval of the 1996 Plan. The Board believes that it is in the best interests
of the Company to implement a comprehensive equity incentive program for the
Company which will provide a meaningful opportunity for officers, employees and
non-employee Board members to acquire a proprietary interest in the enterprise
and thereby encourage such individuals to remain in the Company's service and
more closely align their interests with those of the stockholders.
<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 $100,000 (determined as of the end of the last
fiscal year) for services rendered in all capacities to the Company and its
subsidiaries for each of the last three fiscal years ended September 30, 1996,
1995 and 1994. No executive officers who would have otherwise been includable in
such table on the basis of salary and bonus earned for the 1996 fiscal year have
resigned or terminated employment during that fiscal year.
<TABLE>
TABLE I
SUMMARY COMPENSATION
<CAPTION>
Long-Term
Compensation Awards
Securities
Annual Compensation (1) Underlying All Other
Name of Individual Salary Bonus Other Options Compensation
and Principal Position Year ($) ($) ($)(2) (#) ($)(3)
- ---------------------- ---- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Eugene Lu 1996 383,636 130,204 18,445 50,000 5,440
Chief Executive Officer 1995 383,840 60,639 26,641 100,000 5,370
1994 353,030 61,777 28,239 50,000 6,229
David L. Kelly 1996 170,000 65,102 10,316 25,000 4,761
Vice President, 1995 161,827 30,319 19,566 50,000 4,275
Hardware Engineering 1994 148,750 30,889 18,680 20,000 4,921
David G. Kirkey 1996 200,000 65,102 11,600 25,000 5,136
Vice President, Sales 1995 193,949 30,319 20,942 50,000 5,857
1994 157,500 30,889 24,488 20,000 4,271
Vic Sangveraphunsiri 1996 170,000 65,102 10,806 25,000 4,212
Vice President, 1995 172,134 30,319 20,209 50,000 4,898
Systems Engineering 1994 148,750 30,889 18,186 20,000 5,299
Ronald J. Sipkovich 1996 170,000 65,102 10,208 25,000 5,204
Vice President, Finance 1995 161,827 30,319 19,128 50,000 5,400
and Administration 1994 148,750 30,889 19,009 20,000 4,921
<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) health and dental insurance premiums for providing coverage
to spouses and dependents, (ii) 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 (iii)
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 1996, $4,750, $4,071, $4,446, $3,522, and $4,514
represent matching contributions by the Company under its 401(k) plan
for Messrs. Lu, Kelly, Kirkey, Sangveraphunsiri and Sipkovich,
respectively.
</FN>
</TABLE>
<PAGE>
Option Grants in Last Fiscal Year
The following table contains information concerning the stock option
grants made to each of the executive officers named in the Summary Compensation
Table for the fiscal year ended September 30, 1996. No stock appreciation rights
were granted to these individuals during such fiscal year.
<TABLE>
TABLE II
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Grants
---------------------------------------------------------
Percent of Total Potential Realizable
Number of Securities Value at Assumed
Securities Underlying Exercise Annual Rates of
Underlying Options Granted or Base Stock Price Appreciation
Options to Employees Price (2) Expiration For Option Term (3)
Name Granted (1) in 1996 ($/Share) Date 5%($) 10%($)
- ---- ----------- ------- ------------- ---- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Eugene Lu 50,000 8.3 7.00 9/19/06 222,436 565,049
Dave Kelly 25,000 4.2 7.00 9/19/06 111,218 282,524
Dave Kirkey 25,000 4.2 7.00 9/19/06 111,218 282,524
Vic Sangveraphunsiri 25,000 4.2 7.00 9/19/06 111,218 282,524
Ron Sipkovich 25,000 4.2 7.00 9/19/06 111,218 282,524
<FN>
(1) All options were granted under the Company's Flexible Stock Incentive
Plan on August 20, 1996. 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 August 20, 1996, 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.
</FN>
</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 1996
fiscal year and unexercised options held as of the end of such fiscal year. No
stock appreciation rights were exercised during the 1996 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, 1996
Exercise Realized at September 30, 1996 ($)(2)
----------------------------- ---------------------------
Name (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eugene Lu 221,109 783,324 20,834 93,057 84,381 228,649
Dave Kelly 31,109 108,638 69,029 46,112 188,827 112,294
Dave Kirkey 30,000 119,096 70,138 46,112 189,860 112,294
Vic Sangveraphunsiri 52,444 161,568 47,694 46,112 106,042 112,294
Ron Sipkovich 25,000 97,014 73,388 46,112 239,318 112,294
<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 $8.25 per share of Common Stock at September 30, 1996 (based on the
closing selling price on The Nasdaq Stock Market) less the exercise price.
</FN>
</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 Computers
(Hardware)-500 (formerly called Computer Systems Composite Index) since
September 30, 1991. 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 Computers (Hardware)-500 Systems. The total return calculation assumes
reinvestment of all dividends for the two indexes. ALR has not paid any
dividends since September 30, 1991. 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. The material in this section of the Proxy Statement is not "soliciting
material," is not deemed filed with the SEC and is not to be incorporated by
reference in any filing of the Company under the Securities Act of 1933, as
amended, or the Exchange Act.
TABLE IV
Comparison of Cumulative Total Return
[GRAPHIC OMITTED]
The data points depicted on the graph are as follows:
Fiscal year ended September 30,
1991 1992 1993 1994 1995 1996
Advanced Logic Research, Inc. $ 100 $ 35 $ 26 $ 33 $ 65 $ 69
S&P 500 Composite Index 100 111 125 130 169 203
S&P Computers (Hardware)-500 100 83 56 81 117 142
<PAGE>
Certain Transactions
Shares held by Wearnes Technology represent 38.4% of the outstanding
Common Stock of ALR. During the fiscal year ended September 30, 1996, ALR
purchased components and finished goods from Wearnes Technology and its
affiliates totaling approximately $3,000. 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 Eugene Lu is set forth above under "Election of Directors
- - Nominees".
David L. Kelly, age 41, has been Vice President of Hardware Engineering
since joining the Company in 1984. Mr. Kelly also serves as Assistant Secretary
of the Company. Mr. Kelly studied electrical and electronic engineering at
California State Polytechnic University at Pomona and California State
University, Fullerton.
David G. Kirkey, age 44, 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. Since joining ALR in
1986 and prior to March 1990, Mr. Kirkey served as ALR's Vice President of Sales
and Marketing. Mr. Kirkey studied electronic engineering at Golden West College
in Huntington Beach, California.
Vic Sangveraphunsiri, age 44, 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. 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 54, has been Vice President of Finance and
Administration, Chief Financial Officer and Secretary since July 1992. Since
joining ALR in December 1989 and prior to July 1992, Mr. Sipkovich served as
ALR's Corporate Controller and Director of Financial Planning. 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 1996 Stock Option/Stock Issuance 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.
Fiscal 1996 Cash Bonus Plan. The Company's Fiscal 1996 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 1996 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 1996,
bonuses totaling $60,049 and $30,025 were paid to the CEO and each
executive officer, respectively, for achieving operating performance
goals for the first six months ended March 31, 1996. Additionally,
bonuses totaling $50,155 and $25,077 were accrued at year-end for the
CEO and each executive officer, respectively, for achieving operating
performance goals for fiscal 1996. The Company's Fiscal 1996 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 $20,000 for the CEO
and $10,000 for each of the other executive officers were accrued at
year-end under the discretionary component of the Company's Fiscal 1996
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. Subject to approval of Proposal 2, the 1996 Stock
Option/Stock Issuance Plan will be the successor to the Flexible Stock
Incentive Plan.
CEO Compensation. In setting the base salary for Eugene Lu, the
Company's Chairman, President and Chief Executive Officer, for 1996,
the Committee sought to provide him with a level of salary competitive
with the salaries paid to chief executive officers of similarly-sized
companies in the industry. There was no intent on the Committee's part
to have this particular component of Mr. Lu's compensation affected to
any significant degree by the Company's performance factors. In
addition to his base salary, Mr. Lu received certain bonuses for fiscal
1996 as follows: as indicated above under the title Fiscal 1996 Cash
Bonus Plan, Mr. Lu received a cash bonus totaling $110,204 based on the
Company successfully achieving operating performance goals for fiscal
1996. Mr. Lu was also awarded a discretionary bonus totaling $20,000
for achieving certain operational milestones during fiscal 1996. In
recognition of his contribution to the Company's successful performance
in fiscal 1996, the Committee also awarded him a stock option for
50,000 shares.
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 (other than performance-based
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 1997 will exceed the $1 million limit
per officer. In addition, the 1996 Stock Option/Stock Issuance Plan contains
certain provisions intended to assure that any compensation deemed paid in
connection with the exercise of stock options granted under that plan with an
exercise price equal to the market price of the option shares on the grant date
will qualify as performance-based compensation.
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, 1997 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
available to respond to appropriate questions and will have an opportunity to
make a statement if desired.
PROPOSAL 4:
STOCKHOLDER PROPOSAL
Anne B. Finn, owner of 1,000 shares of the Company's Common Stock and
residing at 1113 Leaftree Court, Cincinnati, Ohio 45208, has submitted the
following Stockholder Proposal and supporting statement for the consideration
and vote of the stockholders at the Annual Meeting. The Board of Directors and
the Company accept no responsibility for the Stockholder Proposal or the
supporting statement. The Board of Directors recommends a vote against the
Stockholder Proposal for the reasons stated following the proposal and its
supporting statement.
Stockholder proposal
It is recommended that the Board of Directors take the necessary steps
to require all members of the Board of Directors and all officers of the
Company, at the level of Vice President and above, to own shares of Common Stock
of the Company.
With regard to members of the Board of Directors, each member should
own a minimum of 1,000 shares.
With regard to officers at the level of Vice President and above,
holdings should be at some multiple of annual compensation. In addition, so as
to preclude hardship, a time period should be granted to build to the required
number of shares.
At this time, a compensation consulting firm should be engaged to
review and advise on the specific ownership level and time framework to
accomplish same.
Supporting statement
Directors and officers should be at risk exactly as stockholders are.
Our Company is not being managed to maximize earnings nor, apparently, for the
benefit of stockholders.
Our Company earns less on investment than can be earned on riskless
U.S. Treasury bonds. That suggests that non-owner directors and officers are not
managing for the long-term benefit of stockholders.
With direct ownership of shares, directors and officers will more
likely review options and make decisions in managing our Company with more
thought and attention on bottom line and return on investment considerations.
Recommendation and statement of the board of directors
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE AGAINST
THE PROPOSAL FOR THE FOLLOWING REASONS:
The Stockholder Proposal is unclear regarding its implementation but
attempts to change the Company's basic compensation system so that "all members
of the Board of Directors and all officers of the Company, at the level of Vice
President and above" must divert a percentage of their savings or annual income
toward the purchase of shares of the Company's Common Stock until stated
minimums are reached and maintained. The proposal ignores the fact that the
Company is a high technology company in a high growth industry where mandated
stock purchase programs are rarely, if ever, adopted, and ignores the negative
effect the adoption of such a plan likely would have on the Company's ability to
attract and retain qualified officers and directors.
While the Company is aware that some large institutional companies in
slow growth industries have implemented mandated stock purchase programs, high
technology companies such as the Company historically have not done so (indeed,
the Company is not aware of any of its competitors having implemented such a
program). This is due, in large part, to the fact that large institutional
companies generally pay a higher percentage of compensation in cash than high
technology companies which generally compensate their officers and directors to
a substantial extent through non-cash forms of incentives, such as stock option
grants, thus tying officer and director compensation to company performance.
Because such programs are not normally implemented in the Company's industry,
the Company's adoption of such a program likely would place the Company at a
competitive disadvantage by hampering its ability to retain its current officers
and directors and attract prospective officers and directors.
The following illustrates why the Company's ability to compete for
qualified management could be hindered by implementing a mandated stock
ownership program as recommended by the Stockholder Proposal. With regard to
officers, the proposal advocates requiring officers to purchase a "multiple" of
their annual compensation. Assuming a minimum multiple of one times annual
compensation and four years in which to reach the minimum level of shares under
the program, an officer with annual pre-tax Company earnings of $150,000 (or
$97,500 after taxes, assuming a total net tax burden of 35%, including federal
and state income and other taxes) would be required to spend, during each year
of the four year period, an average of $37,500 (or approximately 38% of the
officer's after-tax annual Company earnings) for the purchase of Company Common
Stock. As can be seen, such a program could significantly affect an officer's
personal finances, and thus could have the effect of hampering the Company's
ability to retain its current officers and attract prospective officers. For
these reasons, the proposal should be rejected.
The Stockholder Proposal should also be rejected because, contrary to
what is suggested in the proposal, management motivation to maximize stockholder
value already is high. The Company's management compensation structure is
designed to incentivize management to maximize Company performance. As is
standard in the industry in setting compensation levels, the Company relies to a
large extent on non-cash incentives which are tied to the Company's long-term
performance, such as stock option grants. The Company similarly ties the cash
bonus component of management compensation to Company performance, and officers
do not earn these bonuses if the Company does not meet specific performance
targets. In addition, each Company officer is employed on an at-will basis and
may be discharged at any time for any reason, including a failure to maximize
Company performance. The Company's officers and directors thus are rewarded for
results that maximize Company performance and stockholder value and are
penalized for results that do not.
The Company's operating performance over the last three years has
steadily improved. For example, the Company's return on investment for fiscal
1996 was approximately 12%, notably higher than that referenced in the proposal,
and a significant improvement over the fiscal 1995 return on investment of
approximately 6%. The improvement in the Company's operating performance has
resulted in a substantial increase in the market price of the Company's Common
Stock over the last three years. The Board of Directors believes that these
improvements are due in great part to the commitment and dedication of Company
management, whose interests are aligned with those of the stockholders through
both their compensation and their ownership interest in the Company (see table
of Stock Ownership of Management and Principal Stockholder at page 4 hereof).
The Board of Directors therefore recommends that the stockholders vote against
the Stockholder Proposal.
Vote required
The affirmative vote of the holders of at least a majority of the
Common Shares entitled to vote at the Annual Meeting is required to approve the
Proposal. The Company's stockholders should be aware that, because the Proposal
is precatory rather than mandatory, requesting, rather than mandating action,
its approval is not binding on the Company. While not binding, the Board of
Directors will nevertheless consider the views of the stockholders if the
Proposal is approved.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE AGAINST THE STOCKHOLDER PROPOSAL.
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be
presented by stockholders at the Company's 1998 Annual Meeting must be received
by the Company no later than September 30, 1997 to be included in the proxy
statement and form of proxy relating to the 1998 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, 1996, including audited financial statements, is being sent with
this Proxy Statement to all stockholders of record as of December 31, 1996.
Additionally, copies of the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1996 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 92618.
By Order of the Board of Directors
[GRAPHIC OMITTED]
RONALD J. SIPKOVICH
Secretary
Irvine, California
January 21, 1997
<PAGE>
PROXY CARD
ADVANCED LOGIC RESEARCH, INC.
Annual Meeting of Stockholders, February 18, 1997
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 1997 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 18, 1997 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 1997 Annual Meeting.
Whether or not the undersigned plans to attend the 1997 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 following proposals made by Advanced Logic Research, Inc.: the
nominations for members of the Board of Directors, the proposal for the approval
of adoption of 1996 Stock Option/Stock Issuance Plan and the proposal for
ratification of selection of Accountants. Your vote on each matter is neither
conditioned on nor related to your vote on the other matters.
1. ELECTION OF DIRECTORS
Nominees: Gene Lu, Philip A. Harding, Therese E. Myers,
Kenneth W. Simonds, Chun Win Wong MARK HERE FOR
ADDRESS CHANGE / /
/ / FOR / / WITHHELD AND NOTE BELOW
/ /---------------------------------------
For all nominees except as noted above
2. ADOPTION OF 1996 STOCK OPTION/STOCK ISSUANCE PLAN To approve adoption of the
Advanced Logic Research, Inc. 1996 Stock Option/Stock Issuance Plan and to
reserve 1,500,000 shares for issuance thereunder.
/ / FOR / / AGAINST / / ABSTAIN
3. RATIFICATION OF SELECTION OF ACCOUNTANTS
To ratify the selection of KPMG Peat Marwick LLP as the independent public
accountants for the fiscal year ending September 30, 1997.
/ / FOR / / AGAINST / / ABSTAIN
4. STOCKHOLDER PROPOSAL
To act on stockholder proposal recommending that the Company require its
Directors and Officers to own shares of ALR Common Stock.
/ / FOR / / AGAINST / / ABSTAIN
PLEASE BE CERTAIN YOU HAVE DATED AND SIGNED THIS PROXY.
Please sign your name exactly as it 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 sign personally.
Signature:_______________ Date:_______ Signature:_______________ Date:______
<PAGE>
ADVANCED LOGIC RESEARCH, INC.
1996 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1996 Stock Option/Stock Issuance Plan is intended to
promote the interests of Advanced Logic Research, Inc., a Delaware corporation,
by providing eligible persons with the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Corporation
as an incentive for them to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two separate equity
programs:
(i) the Option Grant Program under which eligible persons
may, at the discretion of the Plan Administrator, be granted
options to purchase shares of Common Stock, and
(ii) the Stock Issuance Program under which eligible persons
may, at the discretion of the Plan Administrator, be issued
shares of Common Stock directly, either through the immediate
purchase of such shares or as a bonus for services rendered the
Corporation (or any Parent or Subsidiary).
B. The provisions of Articles One and Four shall apply to
both equity programs under the Plan and shall accordingly govern the interests
of all persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive
authority to administer the Plan with respect to Section 16 Insiders.
Administration of the Plan with respect to all other persons eligible to
participate may, at the Board's discretion, be vested in the Primary Committee
or a Secondary Committee, or the Board may retain the power to administer the
Plan with respect to all such persons.
B. Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and may be
removed by the Board at any time. The Board may also at any time terminate the
functions of any Secondary Committee and reassume all powers and authority
previously delegated to such committee.
C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Option Grant and Stock Issuance Programs and to make such
determinations under, and issue such interpretations of, the provisions of such
programs and any outstanding options or stock issuances thereunder as it may
deem necessary or advisable. Decisions of the Plan Administrator within the
scope of its administrative functions under the Plan shall be final and binding
on all parties who have an interest in the Option Grant or Stock Issuance
Program under its jurisdiction or any option or stock issuance thereunder.
D. Service on the Primary Committee or the Secondary Committee
shall constitute service as a Board member, and members of each such committee
shall accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
IV. ELIGIBILITY
A. The persons eligible to participate in the Option Grant
and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority (subject to the
provisions of the Plan) to determine, (i) with respect to the option grants
under the Option Grant Program, which eligible persons are to receive option
grants, the time or times when such option grants are to be made, the number of
shares to be covered by each such grant, the status of the granted option as
either an Incentive Option or a Non-Statutory Option, the time or times at which
each option is to become exercisable, the vesting schedule (if any) applicable
to the option shares and the maximum term for which the option is to remain
outstanding and (ii) with respect to stock issuances under the Stock Issuance
Program, which eligible persons are to receive stock issuances, the time or
times when such issuances are to be made, the number of shares to be issued to
each Participant, the vesting schedule (if any) applicable to the issued shares
and the consideration to be paid by the Participant for such shares.
C. The Plan Administrator shall have the absolute discretion
either to grant options in accordance with the Option Grant Program or to effect
stock issuances in accordance with the Stock Issuance Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Corporation on the open market. The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall initially not exceed
1,746,580 shares. Such authorized share reserve is comprised of (i) the number
of shares which remain available for issuance, as of the Plan Effective Date,
under the Predecessor Plan as last approved by the Corporation's stockholders,
including the shares subject to the outstanding options incorporated into the
Plan, plus (ii) an additional increase of 1,500,000 shares authorized by the
Board, subject to stockholder approval.
B. No one person participating in the Plan may receive
options, separately exercisable stock appreciation rights and direct stock
issuances for more than 250,000 shares of Common Stock per calendar year period.
C. Shares of Common Stock subject to outstanding options shall
be available for subsequent issuance under the Plan to the extent (i) the
options (including any options incorporated from the Predecessor Plan) expire or
terminate for any reason prior to exercise in full or (ii) the options are
cancelled in accordance with the cancellation-regrant provisions of Article Two.
Unvested shares issued under the Plan and subsequently repurchased by the
Corporation, at the original issue price paid per share, pursuant to the
Corporation's repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan. However, should the exercise
price of an option under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred in connection with
the exercise of an option or the vesting of a stock issuance under the Plan,
then the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is exercised
or which vest under the stock issuance, and not by the net number of shares of
Common Stock issued to the holder of such option or stock issuance.
D. Should any change be made to the Common Stock by reason of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of securities
issuable under the Plan, (ii) the number and/or class of securities for which
any one person may be granted options, separately exercisable stock appreciation
rights and direct stock issuances per calendar year and (iii) the number and/or
class of securities and the exercise price per share in effect under each
outstanding option (including any option incorporated from the Predecessor Plan)
in order to prevent the dilution or enlargement of benefits thereunder. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
<PAGE>
ARTICLE TWO
OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed by
the Plan Administrator but shall not be less than eighty-five percent (85%) of
the Fair Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due
upon exercise of the option and shall, subject to the provisions of Section I
of Article Four and the documents evidencing the option, be payable in one
or more of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on
the Exercise Date, or
(iii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant
to which the Optionee shall concurrently provide irrevocable
written instructions to (a) a Corporation-designated brokerage
firm to effect the immediate sale of the purchased shares and
remit to the Corporation, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such
exercise and (b) the Corporation to deliver the certificates for
the purchased shares directly to such brokerage firm in order to
complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
B. Exercise and Term of Options. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in excess
of ten (10) years measured from the option grant date.
C. Effect of Termination of Service.
1. The following provisions shall govern the
exercise of any options held by the Optionee at the time of cessation of Service
or death:
(i) Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain exercisable for
such period of time thereafter as shall be determined by the Plan
Administrator and set forth in the documents evidencing the
option, but no such option shall be exercisable after the
expiration of the option term.
(ii) Any option exercisable in whole or in part by the
Optionee at the time of death may be exercised subsequently by
the personal representative of the Optionee's estate or by the
person or persons to whom the option is transferred pursuant to
the Optionee's will or in accordance with the laws of descent and
distribution.
(iii) During the applicable post-Service exercise period,
the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable
on the date of the Optionee's cessation of Service. Upon the
expiration of the applicable exercise period or (if earlier) upon
the expiration of the option term, the option shall terminate and
cease to be outstanding for any vested shares for which the
option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate
and cease to be outstanding to the extent the option is not
otherwise at that time exercisable for vested shares.
(iv) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee
shall terminate immediately and cease to be outstanding.
(v) In the event of an Involuntary Termination following a
Corporate Transaction, the provisions of Section III of this
Article Two shall govern the period for which the outstanding
options are to remain exercisable following the Optionee's
cessation of Service and shall supersede any provisions to the
contrary in this section.
2. The Plan Administrator shall have
the discretion, exercisable either at the time an option is granted
or at any time while the option remains outstanding, to:
(i) extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service
from the period otherwise in effect for that option to such
greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option
term, and/or
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to
the number of vested shares of Common Stock for which such option
is exercisable at the time of the Optionee's cessation of Service
but also with respect to one or more additional installments in
which the Optionee would have vested under the option had the
Optionee continued in Service.
D. Stockholder Rights. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. Limited Transferability of Options. During the lifetime of
the Optionee, Incentive Options shall be exercisable only by the Optionee and
shall not be assignable or transferable other than by will or by the laws of
descent and distribution following the Optionee's death. However, a
Non-Statutory Option may, in connection with the Optionee's estate plan, be
assigned in whole or in part during the Optionee's lifetime to one or more
members of the Optionee's immediate family or to a trust established exclusively
for one or more such family members. The assigned portion may only be exercised
by the person or persons who acquire a proprietary interest in the option
pursuant to the assignment. The terms applicable to the assigned portion shall
be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Four shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall not be subject to the terms of this Section II.
A. Eligibility. Incentive Options may only be granted to
Employees.
B. Exercise Price. The exercise price per share shall not
be less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the option grant date.
C. Dollar Limitation. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one (1) calendar
year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% Stockholder. If any Employee to whom an Incentive
Option is granted is a 10% Stockholder, then the exercise price per share shall
not be less than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock on the option grant date, and the option term shall not
exceed five (5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall not so accelerate
if and to the extent: (i) such option is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation (or parent
thereof) or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation (or parent thereof), (ii) such option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing on the unvested option shares at the time of
the Corporate Transaction and provides for subsequent payout in accordance with
the same vesting schedule applicable to such option or (iii) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant. The determination of option comparability under
clause (i) above shall be made by the Plan Administrator, and its determination
shall be final, binding and conclusive.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction, (ii) the exercise price payable per share under each
outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same and (iii) the maximum number of securities
and/or class of securities for which any one person may be granted stock
options, separately exercisable stock appreciation rights and direct stock
issuances under the Plan.
E. Notwithstanding Section III.A. of this Article Two, the
Plan Administrator shall have the discretionary authority, exercisable either at
the time the option is granted or at any time while the option remains
outstanding, to provide for the automatic acceleration of one or more
outstanding options under the Option Grant Program upon the occurrence of a
Corporate Transaction, whether or not those options are to be assumed or
replaced in the Corporate Transaction. In addition, notwithstanding Section
III.B. of this Article Two, the Plan Administrator may provide that one or more
of the Corporation's outstanding repurchase rights with respect to shares held
by the Optionee at the time of such Corporate Transaction shall immediately
terminate, and the shares subject to those terminated repurchase rights shall
accordingly vest in full, even in the event the options are to be assumed.
F. The Plan Administrator shall have full power and authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one or
more outstanding options under the Option Grant Program in the event the
Optionee's Service subsequently terminates by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of any Corporate Transaction in which those options
are assumed or replaced and do not otherwise accelerate. Any options so
accelerated shall remain exercisable for fully-vested shares until the earlier
of (i) the expiration of the option term or (ii) the expiration of the one
(1)-year period measured from the effective date of the Involuntary Termination.
In addition, the Plan Administrator may provide that one or more of the
Corporation's outstanding repurchase rights with respect to shares held by the
Optionee at the time of such Involuntary Termination shall immediately
terminate, and the shares subject to those terminated repurchase rights shall
accordingly vest in full.
G. The Plan Administrator shall have full power and authority
exercisable, either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one or
more outstanding options under the Option Grant Program upon (i) a Change in
Control or (ii) the subsequent termination of the Optionee's Service by reason
of an Involuntary Termination within a designated period (not to exceed eighteen
(18) months) following the effective date of such Change in Control. Each option
so accelerated shall remain exercisable for fully-vested shares until the
earlier of (i) the expiration of the option term or (ii) the expiration of the
one (1)-year period measured from the effective date of the Optionee's cessation
of Service. In addition, the Plan Administrator may provide that one or more of
the Corporation's outstanding repurchase rights with respect to shares held by
the Optionee at the time of such Change in Control or Involuntary Termination
shall immediately terminate, and the shares subject to those terminated
repurchase rights shall accordingly vest in full.
H. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Option only to the extent the applicable One Hundred
Thousand Dollar ($100,000) limitation is not exceeded. To the extent such dollar
limitation is exceeded, the accelerated portion of such option shall be
exercisable as a Non-Statutory Option under the Federal tax laws.
I. The grant of options under the Option Grant Program shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected option holders,
the cancellation of any or all outstanding options under the Option Grant
Program (including outstanding options incorporated from the Predecessor Plan)
and to grant in substitution new options covering the same or different number
of shares of Common Stock but with an exercise price per share based on the Fair
Market Value per share of Common Stock on the new option grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority
to grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
B. The following terms shall govern the grant and exercise
of tandem stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may
establish, to elect between the exercise of the underlying option
for shares of Common Stock and the surrender of that option in
exchange for a distribution from the Corporation in an amount
equal to the excess of (a) the Fair Market Value (on the option
surrender date) of the number of shares in which the Optionee is
at the time vested under the surrendered option (or surrendered
portion thereof) over (b) the aggregate exercise price payable
for such shares.
(ii) No such option surrender shall be effective unless it
is approved by the Plan Administrator, either at the time of the
actual option surrender or at any earlier time. If the surrender
is so approved, then the distribution to which the Optionee shall
be entitled may be made in shares of Common Stock valued at Fair
Market Value on the option surrender date, in cash, or partly in
shares and partly in cash, as the Plan Administrator shall in its
sole discretion deem appropriate.
(iii) If the surrender of an option is not approved by the
Plan Administrator, then the Optionee shall retain whatever
rights the Optionee had under the surrendered option (or
surrendered portion thereof) on the option surrender date and may
exercise such rights at any time prior to the later of (a) five
(5) business days after the receipt of the rejection notice or
(b) the last day on which the option is otherwise exercisable in
accordance with the terms of the documents evidencing such
option, but in no event may such rights be exercised more than
ten (10) years after the option grant date.
C. The following terms shall govern the grant and exercise
of limited stock appreciation rights:
(i) One or more Section 16 Insiders may be granted limited
stock appreciation rights with respect to their outstanding
options.
(ii) Upon the occurrence of a Hostile Take-Over, each such
individual holding one or more options with such a limited stock
appreciation right shall have the unconditional right
(exercisable for a thirty (30)-day period following such Hostile
Take-Over) to surrender each such option to the Corporation, to
the extent the option is at the time exercisable for vested
shares of Common Stock. In return for the surrendered option, the
Optionee shall receive a cash distribution from the Corporation
in an amount equal to the excess of (a) the Take-Over Price of
the shares of Common Stock which are at the time vested under
each surrendered option (or surrendered portion thereof) over (b)
the aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the
option surrender date.
(iii) Neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with such
option surrender and cash distribution.
(iv) The balance of the option (if any) shall continue in
full force and effect in accordance with the documents evidencing
such option.
<PAGE>
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below.
A. Purchase Price
1. The purchase price per share shall be fixed by
the Plan Administrator, but shall not be less than eighty-five percent (85%)
of the Fair Market Value per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article
Four, shares of Common Stock may be issued under the Stock Issuance Program for
any of the following items of consideration which the Plan Administrator
may deem appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. Vesting Provisions
1. Shares of Common Stock issued under the Stock
Issuance Program may, in the discretion of the Plan Administrator, be fully
and immediately vested upon issuance or may vest in one or more installments
over the Participant's period of Service or upon attainment of specified
performance objectives.
2. Any new, substituted or additional securities
or other property (including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with respect to the
Participant's unvested shares of Common Stock by reason of any stock dividend,
stock split, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration shall be issued subject to (i) the same
vesting requirements applicable to the Participant's unvested shares of Common
Stock and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.
3. The Participant shall have full stockholder rights
with respect to any shares of Common Stock issued to the Participant under the
Stock Issuance Program, whether or not the Participant's interest in those
shares is vested. Accordingly, the Participant shall have the right to vote such
shares and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service
while holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion
waive the surrender and cancellation of one or more unvested shares of Common
Stock (or other assets attributable thereto) which would otherwise occur upon
the cessation of the Participant's Service or the non-attainment of the
performance objectives applicable to those shares. Such waiver shall result in
the immediate vesting of the Participant's interest in the shares of Common
Stock as to which the waiver applies. Such waiver may be effected at any time,
whether before or after the Participant's cessation of Service or the attainment
or non-attainment of the applicable performance objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All outstanding repurchase rights under the Stock Issuance
Program shall terminate automatically, and all the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the event
of any Corporate Transaction, except to the extent (i) those repurchase rights
are assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed in the Stock Issuance Agreement.
B. Notwithstanding Section II.A. of this Article Four, the
Plan Administrator shall have the discretionary authority, exercisable either at
the time the unvested shares are issued or any time while the Corporation's
repurchase rights remain outstanding under the Stock Issuance Program, to
provide that those rights shall automatically terminate in whole or in part, and
the shares of Common Stock subject to those terminated rights shall immediately
vest, in the event of a Corporate Transaction, whether or not those repurchase
rights are to be assigned to the successor corporation (or its parent) in
connection with such Corporate Transaction.
C. The Plan Administrator shall have the discretionary
authority, exercisable either at the time the unvested shares are issued or any
time while the Corporation's repurchase rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant's Service
should subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which those repurchase rights are assigned
to the successor corporation (or parent thereof).
D. The Plan Administrator shall have the discretionary
authority, exercisable either at the time the unvested shares are issued or any
time while the Corporation's repurchase rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest upon (i) a Change in Control or (ii)
the subsequent termination of the Participant's Service by reason of an
Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of such Change in Control or Involuntary
Termination.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion,
be held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing those unvested shares.
<PAGE>
ARTICLE FOUR
MISCELLANEOUS
I. FINANCING
A. The Plan Administrator may permit any Optionee or
Participant to pay the option exercise price under the Option Grant Program or
the purchase price for shares issued under the Stock Issuance Program by
delivering a promissory note payable in one or more installments. The terms of
any such promissory note (including the interest rate and the terms of
repayment) shall be established by the Plan Administrator in its sole
discretion. Promissory notes may be authorized with or without security or
collateral. In all events, the maximum credit available to the Optionee or
Participant may not exceed the sum of (i) the aggregate option exercise price or
purchase price payable for the purchased shares plus (ii) any Federal, state and
local income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise or share purchase.
B. The Plan Administrator may, in its discretion, determine
that one or more such promissory notes shall be subject to forgiveness by the
Corporation in whole or in part upon such terms as the Plan Administrator may
deem appropriate.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common
Stock upon the exercise of options or stock appreciation rights under the Plan
shall be subject to the satisfaction of all applicable Federal, state and local
income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any
or all holders of Non-Statutory Options or unvested shares of Common Stock under
the Plan with the right to use shares of Common Stock in satisfaction of all or
part of the Taxes incurred by such holders in connection with the exercise of
their options or the vesting of their shares. Such right may be provided to any
such holder in either or both of the following formats:
(i) Stock Withholding: The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon
the exercise of such Non-Statutory Option or the vesting of such
shares, a portion of those shares with an aggregate Fair Market
Value equal to the percentage of the Taxes (not to exceed one
hundred percent (100%)) designated by the holder.
(ii) Stock Delivery: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised or
the shares vest, one or more shares of Common Stock previously
acquired by such holder (other than in connection with the option
exercise or share vesting triggering the Taxes) with an aggregate
Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective on the Plan Effective Date,
and options may be granted under the Option Grant Program at any time on or
after the Plan Effective Date. However, no options granted under the Plan may be
exercised, and no shares shall be issued under the Plan, until the Plan is
approved by the Corporation's stockholders. If such stockholder approval is not
obtained within twelve (12) months after the Plan Effective Date, then all
options previously granted under this Plan shall terminate and cease to be
outstanding, and no further options shall be granted and no shares shall be
issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor
Plan, and no further option grants or direct stock issuances shall be made under
the Predecessor Plan after approval of the Plan by the Corporation's
stockholders. All options outstanding under the Predecessor Plan on the date of
such approval shall be incorporated into the Plan at that time and shall be
treated as outstanding options under the Plan. However, each outstanding option
so incorporated shall continue to be governed solely by the terms of the
documents evidencing such option, and no provision of the Plan shall be deemed
to affect or otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of Common
Stock.
C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plan which do not otherwise contain such provisions.
D. The Plan shall terminate upon the earliest of (i) November
8, 2006, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. Upon such Plan
termination, all outstanding options and unvested stock issuances shall continue
to have force and effect in accordance with the provisions of the documents
evidencing such options or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect the rights and obligations with
respect to stock options or unvested stock issuances at the time outstanding
under the Plan unless the Optionee or the Participant consents to such amendment
or modification. In addition, certain amendments may require stockholder
approval pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted
under the Option Grant Program and shares of Common Stock may be issued under
the Stock Issuance Program that are in excess of the number of shares then
available for issuance under the Plan, provided any excess shares actually
issued under those programs shall be held in escrow until there is obtained
stockholder approval of an amendment sufficiently increasing the number of
shares of Common Stock available for issuance under the Plan. If such
stockholder approval is not obtained within twelve (12) months after the date
the first such excess issuances are made, then (i) any unexercised options
granted on the basis of such excess shares shall terminate and cease to be
outstanding and (ii) the Corporation shall promptly refund to the Optionees and
the Participants the exercise or purchase price paid for any excess shares
issued under the Plan and held in escrow, together with interest (at the
applicable Short Term Federal Rate) for the period the shares were held in
escrow, and such shares shall thereupon be automatically cancelled and cease to
be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
or stock appreciation right under the Plan and the issuance of any shares of
Common Stock (i) upon the exercise of any option or stock appreciation right or
(ii) under the Stock Issuance Program shall be subject to the Corporation's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options and stock appreciation rights
granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued
or delivered under the Plan unless and until there shall have been compliance
with all applicable requirements of Federal and state securities laws, including
the filing and effectiveness of the Form S-8 registration statement for the
shares of Common Stock issuable under the Plan, and all applicable listing
requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. Board shall mean the Corporation's Board of Directors.
B. Change in Control shall mean a change in ownership or control
of the Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any person or
related group of persons (other than the Corporation or a person
that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation), of beneficial
ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the
Corporation's stockholders which the Board does not recommend
such stockholders to accept, or
(ii) a change in the composition of the Board over a period
of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously
since the beginning of such period or (B) have been elected or
nominated for election as Board members during such period by at
least a majority of the Board members described in clause (A) who
were still in office at the time such election or nomination was
approved by the Board.
C. Code shall mean the Internal Revenue Code of 1986, as amended.
D. Common Stock shall mean the Corporation's common stock.
E. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power
of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those
securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
F. Corporation shall mean Advanced Logic Research, Inc., a
Delaware corporation, and its successors.
G. Employee shall mean an individual who is in the employ of
the Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed and the
manner and method of performance.
H. Exercise Date shall mean the date on which the Corporation
shall have received written notice of the option exercise.
I. Fair Market Value per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on The Nasdaq
Stock Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question,
as such price is reported by the National Association of
Securities Dealers on the The Nasdaq Stock Market or any
successor system. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for
which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the
Stock Exchange determined by the Plan Administrator to be the
primary market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such exchange. If
there is no closing selling price for the Common Stock on the
date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
J. Hostile Take-Over shall mean the acquisition, directly or
indirectly, by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.
K. Incentive Option shall mean an option which satisfies the
requirements of Code Section 422.
L. Involuntary Termination shall mean the termination of the
Service of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by
the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which
materially reduces his or her level of responsibility, (B) a
reduction in his or her level of compensation (including base
salary, fringe benefits and participation in
corporate-performance based bonus or incentive programs) by more
than fifteen percent (15%) or (C) a relocation of such
individual's place of employment by more than fifty (50) miles,
provided and only if such change, reduction or relocation is
effected by the Corporation without the individual's consent.
M. Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
N. 1934 Act shall mean the Securities Exchange Act of 1934, as
amended.
O. Non-Statutory Option shall mean an option not intended to
satisfy the requirements of Code Section 422.
P. Option Grant Program shall mean the option grant program in
effect under the Plan.
Q. Optionee shall mean any person to whom an option is granted
under the Option Grant Program.
R. Parent shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided
each corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
S. Participant shall mean any person who is issued shares of
Common Stock under the Stock Issuance Program.
T. Permanent Disability or Permanently Disabled shall mean
the inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more.
U. Plan shall mean the Corporation's 1996 Stock Option/Stock
Issuance Plan, as set forth in this document.
V. Plan Administrator shall mean the particular entity,
whether the Primary Committee, the Board or the Secondary Committee, which is
authorized to administer the Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
W. Plan Effective Date shall mean November 8, 1996, the date on
which the Plan was adopted by the Board.
X. Predecessor Plan shall mean the Corporation's pre-existing
Flexible Incentive Plan in effect immediately prior to the Plan Effective Date
hereunder.
Y. Primary Committee shall mean the committee of two (2) or
more non-employee Board members appointed by the Board to administer the Plan
with respect to Section 16 Insiders.
Z. Secondary Committee shall mean a committee of one (1) or more
Board members appointed by the Board to administer the Plan with respect to
eligible persons other than Section 16 Insiders.
AA. Section 16 Insider shall mean an officer or director of
the Corporation subject to the short-swing profit liabilities of Section 16 of
the 1934 Act.
BB. Service shall mean the performance of services for the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant.
CC. Stock Exchange shall mean either the American Stock Exchange
or the New York Stock Exchange.
DD. Stock Issuance Agreement shall mean the agreement entered
into by the Corporation and the Participant at the time of issuance of shares
of Common Stock under the Stock Issuance Program.
EE. Stock Issuance Program shall mean the stock issuance program
in effect under the Plan.
FF. Subsidiary shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
GG. Take-Over Price shall mean the greater of (i) the Fair Market
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
HH. Taxes shall mean the Federal, state and local income and
employment tax liabilities incurred by the holder of Non-Statutory Options or
unvested shares of Common Stock in connection with the exercise of those options
or the vesting of those shares.
II. 10% Stockholder shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Corporation (or any
Parent or Subsidiary).
