<PAGE>
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or 240.14a-12
Ion Laser Technology, Inc.
................................................................................
(Name of Registrant as Specified in Charter)
................................................................................
(Name of Person(s) Filing Proxy Statement If Other Than The Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
.......................................................................
2) Aggregate number of securities to which transaction applies:
.......................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
.......................................................................
5) Total fee paid:
.......................................................................
[_] 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 For of Schedule and the date of its filing.
1) Amount Previously Paid:
................................................
2) Form, Schedule or Registration Statement No.
...........................
3) Filing Party:
..........................................................
4) Date Filed:
............................................................
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<PAGE>
ION LASER TECHNOLOGY, INC., dba BRITESMILE, INC.
200 Diplomat Drive
Airport Business Center
Lester, Pennsylvania 19113
(610) 362-1111
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 11, 1998
To the Shareholders:
Notice is hereby given that the Annual Meeting of the Shareholders of
Ion Laser Technology, Inc., dba BriteSmile, Inc. ("the Company") will be held
at the Warwick Hotel, 1701 Locust Street, Philadelphia, Pennsylvania 19103-6179,
on Tuesday, August 11, 1998, at 3:00 p.m., local time, and at any postponement
or adjournment thereof, for the following purposes, which are discussed in the
following pages and which are made part of this Notice:
1. To elect five directors, each to serve until the next annual
meeting of shareholders and until his successor is elected and
shall qualify;
2. To approve a proposal to amend Article 1 of the Articles of
Incorporation of the Company to change the name of the Company to
BriteSmile, Inc;
3. To approve the Company's Revised 1997 Stock Option and Incentive
Plan;
4. To approve the Board of Directors' selection of Ernst & Young LLP
as the Company's independent auditors; and
5. To consider and act upon any other matters that properly may come
before the meeting or any adjournment thereof.
The Company's Board of Directors has fixed the close of business on
June 22, 1998 as the record date for the determination of shareholders having
the right to notice of, and to vote at, the Annual Meeting of Shareholders and
any adjournment thereof. A list of such shareholders will be available for
examination by a shareholder for any purpose related to the meeting during
ordinary business hours at the offices of the Company at 200 Diplomat Drive,
Airport Business Center, Lester, Pennsylvania 19113 during the ten days prior
to the meeting.
You are requested to date, sign and return the enclosed Proxy which is
solicited by the Board of Directors of the Company and will be voted as
indicated in the accompanying Proxy Statement and Proxy. Your vote is
important. Please sign and date the enclosed Proxy and return it promptly in
the enclosed return envelope, whether or not you expect to attend the meeting.
The giving of your proxy as requested will not affect your right to vote in
person if you decide to attend the Annual Meeting. The return envelope requires
no postage if mailed in the United States. If mailed elsewhere, foreign postage
must be affixed. Your proxy is revocable at any time before the meeting.
By Order of the Board of Directors,
Brian G. Delaney, Acting Secretary
Lester, Pennsylvania
July 16, 1998
<PAGE>
ION LASER TECHNOLOGY, INC., dba BRITESMILE, INC.
200 Diplomat Drive
Airport Business Center
Lester, Pennsylvania 19113
(610) 362-1111
--------------------------------------
PROXY STATEMENT
--------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
The enclosed Proxy is solicited by the Board of Directors of Ion Laser
Technology, Inc., dba BriteSmile, Inc. (the "Company") for use in voting at the
Annual Meeting of Shareholders to be held at the Warwick Hotel, 1701 Locust
Street, Philadelphia, Pennsylvania 19103-6179 on August 11, 1998, at 3:00 p.m.,
local time, and at any postponement or adjournment thereof, for the purposes set
forth in the attached notice. When proxies are properly dated, executed and
returned, the shares they represent will be voted at the Annual Meeting in
accordance with the instructions of the shareholder completing the proxy. If no
specific instructions are given, the shares will be voted FOR the election of
the nominees for directors set forth herein, FOR approval of the Revised 1997
Stock Option and Incentive Plan, and FOR ratification of the appointment of
auditors. A shareholder giving a proxy has the power to revoke it at any time
prior to its exercise by voting in person at the Annual Meeting, by giving
written notice to the Company's Secretary prior to the Annual Meeting, or by
giving a later dated proxy.
The presence at the meeting, in person or by proxy, of shareholders
holding in the aggregate a majority of the outstanding shares of the Company's
common stock entitled to vote shall constitute a quorum for the transaction of
business. The Company does not have cumulative voting for directors; a
plurality of the votes properly cast for the election of directors by the
shareholders attending the meeting, in person or by proxy, will elect directors
to office. Action on a matter, other than the election of directors, is
approved if the votes properly cast favoring the action exceed the votes cast
opposing the action. Abstentions and broker non-votes will count for purposes
of establishing a quorum, but will not count as votes cast for the election of
directors or any other questions and accordingly will have no effect. Votes
cast by shareholders who attend and vote in person or by proxy at the Annual
Meeting will be counted by inspectors to be appointed by the Company (it is
anticipated that the inspectors will be employees, attorneys or agents of the
Company).
The close of business on June 22, 1998, has been fixed as the record
date for determining the shareholders entitled to notice of, and to vote at, the
Annual Meeting. Each share shall be entitled to one vote on all matters. As of
the record date there were 7,669,772 shares of the Company's common stock
outstanding and entitled to vote. For a description of the principal holders of
such stock, see "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT"
below.
This Proxy Statement and the enclosed Proxy are being furnished to
shareholders on or about July 16, 1998.
<PAGE>
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Company's Bylaws provide that the number of directors shall range
from three to seven, as determined from time to time by the shareholders or the
Board of Directors. Presently the Company's Board of Directors consists of six
members, five of whom are nominees for election at the Annual Meeting. Each
director elected at the Annual Meeting will hold office until a successor is
elected and qualified, or until the director resigns, is removed or becomes
disqualified. Unless marked otherwise, proxies received will be voted FOR the
election of each of the nominees named below. If any such person is unable or
unwilling to serve as a nominee for the office of director at the date of the
Annual Meeting or any postponement or adjournment thereof, the proxies may be
voted for a substitute nominee, designated by the proxy holders or by the
present Board of Directors to fill such vacancy, or for the balance of those
nominees named without nomination of a substitute, or the Board may be reduced
accordingly. The Board of Directors has no reason to believe that any of such
nominees will be unwilling or unable to serve if elected as a director.
The following information is furnished with respect to the nominees.
Stock ownership information is shown under the heading "Security Ownership of
Certain Beneficial Owners and Management" and is based upon information
furnished by the respective individuals.
Mr. Richard V. Trefz, age 56, became a member of the Board of
Directors in November 1997. He was appointed the President and CEO of the
Company on June 1, 1998. From January 1995 to May 1998, Mr. Trefz was the
Divisional CEO of Inductotherm Industries, Inc., the world's leading and largest
manufacturer of induction melting equipment. Prior to that position, Mr. Trefz
was President of DEN-TAL-EZ, Inc. Mr. Trefz held various management positions
with DEN-TAL-EZ, and ultimately served as President from 1989 to 1994. Under
his leadership as President, the Company achieved the number two market share in
dental handpieces, number one share in vacuum systems, and number four position
in operatory equipment in a field of 15 manufacturers.
Mr. Anthony M. Pilaro, age 62, has been a director of the Company
since August, 1997. Presently, he serves as Chairman of CAP Advisors Limited
and maintains offices in Dublin, Ireland. He is a director of LCO Investments
Limited, the owner of record of 32% of the Company's outstanding stock. He is
also Chairman of Excimer Vision Leasing L.P., a partnership engaged in the
business of leasing excimer laser systems. Mr. Pilaro has been involved in
private international investment banking. He was a Founding Director and former
Chief Executive Officer of Duty Free Shoppers Group Limited, a founder of the
predecessor of VISX, Inc., and a founder and principal owner of Excimer Vision
Leasing, LP. A graduate of the University of Virginia '57, and the University
of Virginia Law School '60, Mr. Pilaro practiced law in New York City through
1964.
Mr. Brian G. Delaney, age 29, was appointed Acting Chief Financial
Officer and Acting Secretary of the Company on May 5, 1998. He is currently
employed with CAP Advisors Limited, an affiliate of the Company, in their Dublin
branch. He holds the position of CAP Group Financial Director. Prior to
serving with CAP, Mr. Delaney qualified as a Chartered Accountant with Price
Waterhouse where he worked as a Senior Auditor for a wide variety of local and
international clients.
Mr. R. Eric Montgomery, age 43, has been a director of the Company
since May 5, 1998. Mr. Montgomery is an experienced consultant, researcher and
entrepreneur in the oral care and cosmetic products industries, and has been
granted over 65 US and foreign patents since 1981. Previously, from November
1997 until May 1998, he served as an independent consultant to the Company
through Applied Dental Sciences, Inc. (Monterey, MA), the oral care products
research and development firm of which he has been President since 1992. Mr.
Montgomery is also the Founding Manager and President of OraCeutical LLC (Lee,
MA), an organization dedicated to the development of next generation products
for use in the professional dental office. Mr. Montgomery's organizations have
developed products for companies including The Dial Corporation, Natural White,
AgriNutrition, ProHealth Laboratories, OPI Products, American Dental
-2-
<PAGE>
Hygienics, and Boots PLC. Mr. Montgomery is also President of IDEX Dental
Sciences, Inc. (Lee, MA), an intellectual property holding firm established by
Mr. Montgomery in March 1996.
Linda S. Oubre, age 39, commenced serving as a director of the Company
on May 21, 1998. Ms. Oubre is the President of Tri Com Ventures in Walnut
Creek, California. The firm specializes in new venture planning and
implementation consulting. Her clients have included McGraw Hill's Business
--------
Week Magazine, Prodigy Online Service, and the United Nations Business
- -------------
Development Project in the Republic of Belarus. Prior to starting Tri Com
Ventures in 1996, Ms. Oubre was General Manager, New Business Development, for
the Los Angeles Times, and also served as Director of Operations for Walt
-----------------
Disney's Consumer Products Division and Manager of Financial Planning for the
Times Mirror Company. She has also been a visiting instructor at the Wharton
Business School.
There is no family relationship between any executive officer or
director of the Company and any other executive officer or director.
DIRECTOR COMPENSATION
Since March 31, 1996, the Board has been compensated pursuant to a
program under which all directors receive options to purchase 5,000 shares of
common stock per year for each year during which they serve as a director. The
exercise price of such options is 100% of the fair market price on the date of
grant. Additionally, outside directors have received cash payment in the amount
of $500 per meeting physically attended; outside directors receive no cash
compensation for telephonic participation. Actual expenses incurred by outside
directors are compensated. The director compensation program is under review.
Certain new directors of the Company have been granted Units of
Company equity participation by LCO Investments Limited, a major shareholder of
the Company. As of May 11, 1998, LCO adopted an Incentive Compensation Plan
(the "LCO Plan"). Under the LCO Plan, certain key employees, consultants or
directors of the Company may be given the opportunity to benefit from the
appreciation in the value of the LCO's present equity holdings in the Company.
Such appreciation rights are granted by way of incentive compensation units
("Units"), whose value is determined by the increase in value of LCO's present
holdings of Company Common Stock above a prescribed base value of $4.75 per
share. Each Unit represents a percentage interest (determined by the total
number of Units granted under the LCO Plan) in such increase in value of LCO's
holdings. In May 1998, LCO granted Units to the following directors of the
Company as incentive compensation: Richard Trefz, Brian Delaney, and Linda
Oubre.
Pursuant to an Agreement in effect from November, 1997 through May
1998, Richard Trefz received compensation from a Company affiliate, CAP Advisers
Limited, related to Mr. Trefz' service as a director of the Company. During the
period the Agreement was in force, Mr. Trefz received a consulting fee, paid by
CAP Advisers Limited, of $25,000. Mr. Trefz also received options to purchase
50,000 shares of Common Stock of the Company owned by CAP Advisers, at an
exercise price of $4.00 per share. Such options have been cancelled. As of
June 1, 1998, this Agreement has been terminated and replaced with an Employment
Agreement relating to Mr. Trefz' appointment as President and CEO of the
Company.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Company's Board of Directors took action at four duly noticed
special meetings of the Board during the fiscal year ended March 31, 1998. Each
nominee for director then serving as a director attended all of the Company's
special meetings of the Board of Directors. The Company has established an
Audit Committee and a Compensation Committee. At present, the Audit Committee
consist of Messrs. Delaney
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<PAGE>
and Montgomery, and Ms. Oubre. The Compensation Committee consists of directors
Delaney, Montgomery, and Oubre.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH NOMINEE DIRECTOR.
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The following individuals serve as executive officers or significant
employees or consultants of the Company:
CURRENT
NAME AGE POSITION(S)/1/
- ---- --- --------------
Richard V. Trefz 56 President, Chief Executive Officer,
Director
David W. Bruhin 57 Vice President of Marketing, Business
Development, and Planning
Brian G. Delaney 29 Acting Chief Financial Officer,
Acting Company Secretary, Director
John W. Warner __ Research and Development Director
Michael B. Knight, DDS __ Clinical Dental Advisor
Salim A. Nathoo 42 Product Development Consultant
- --------------------------------------------------------------------------------
/1/ All directors serve for one year and until their successors are elected and
qualified. All officers serve at the pleasure of the Board of Directors. There
are no family relationships between any of the officers and directors.
- --------------------------------------------------------------------------------
David W. Bruhin was appointed Vice President of Marketing, Business
Development and Planning on June 1, 1998. Mr. Bruhin has more than 18 years of
senior management and consulting experience. He is currently in the process of
establishing a Marketing and Customer Service Center at the Company's newly
established headquarters in Lester, Pennsylvania, enabling the Company to more
efficiently respond to dentists' needs. From August 1995 to May 1998, Mr.
Bruhin was President of the Swarthmore Consulting Group, where he provided
business planning, marketing, consulting and acquisition advisory services to
clients in the dental industry. Prior to this position, he was Vice President
of DEN-TAL-EZ, Inc., where he undertook a wide range of responsibilities in
management, sales and marketing, and business and product development.
-4-
<PAGE>
Mr. John W. Warner accepted the position of Research and Development
Director for the Company on May 15, 1998. Mr. Warner is an experienced research
and technology consultant and entrepreneur who was one of the leading
contributors to the development of ophthalmic applications of laser technology.
Dr. Warner will lead the Company's assessment of existing products and LATW
development efforts at research and development facilities recently established
by the Company in Evanston, Illinois. Dr. Warner has served as a consultant to
Northwestern University in the areas of technology development and
commercialization. From March 1986 to December 1990 he was the founder and CEO
of Taunton Technologies, Inc., a predecessor of VISX, Inc., engaged in the
business of developing and manufacturing excimer laser systems to perform
ophthalmic surgery.
Michael B. Knight, DDS, a graduate of Baylor College of Dentistry
('87), currently serves as Dental Director to the Company. He began work with
the BriteSmile tooth whitening system in the Spring of 1996, and was asked to
help the Company with the training of dentists across the US late in 1996. He
assumed the duties as director of training for the Company in the Spring of
1997, and in the Fall of 1997, he left his successful private practice of 10
years to join the Company in a full-time capacity. His duties primarily include
the clinical testing and evaluation of all Company products, the development of
procedural protocol, and interfacing with the dental community seeking technical
assistance with the BriteSmile tooth whitening procedure and products. Dr.
Knight has successfully treated over 400 patients with the BriteSmile system.
Salim A. Nathoo, a principal of OraCeutical LLC in Lee,
Massachusetts, serves as a product development consultant to the Company. He was
formerly employed by Colgate-Palmolive Co. as a Senior Researcher from 1990 to
1998 and was a key player in the successful worldwide launch of the Colgate
Whitening program during his tenure there. Dr. Nathoo has lectured globally on
both the clinical and scientific aspects of tooth whitening, and he is
recognized as one of the leading authorities on the subject. Dr. Nathoo is
currently one of the founders of OraCeutical LLC and heads up its clinical
research arm, Oral Health Clinical Services, LLC (Piscataway, NJ). Dr. Nathoo
holds both a PhD and DDS from New York University, and has published over 40
papers in major scientific journals.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of June 22, 1998
regarding beneficial stock ownership of (i) all persons known to the Company to
be beneficial owners of more than 5% of the outstanding common stock; (ii) each
director or director nominee, and each person who served at any time during
fiscal year 1998 as the Company's CEO, and (iii) all officers and directors of
the Company as a group. Each of the persons in the table below has sole voting
power and sole dispositive power as to all of the shares shown as beneficially
owned by them except as otherwise indicated.
Number of Shares Percent of Outstanding
Name and Address Beneficially Owned Shares
- ---------------- ------------------ ----------------------
Executive Officers and Directors
Richard V. Trefz
Airport Business Center
200 Diplomat Drive, Bay 204
Lester, PA 19113 25,000/2/ *
Brian G. Delaney
36 Fitzwilliam Place
Dublin 2, IRELAND -0- *
-5-
<PAGE>
Anthony M. Pilaro
36 Fitzwilliam Place
Dublin 2, IRELAND 3,680,557/3/ 41.6%
R. Eric Montgomery
29 Fairview Road
P. O. Box 487
Monterey, MA 01245 175,000/4/ 2.2%
Linda S. Oubre
101 Ygnacio Valley Road,
Suite 212
Walnut Creek, CA 94596 -0- *
E. Wyatt Cannady
P. O. Box 3089
Dana Point, CA 92629 75,000/1/ *
All Officers and Directors
as a Group (7 persons) 4,005,557/6/ 43.8%
5% Beneficial Owners
LCO Investments Limited
Canada Court
Upland Road
St. Peter Port
Guernsey
Channel Islands 3,680,557/5/ 41.6%
- ------------------
* Constitutes less than 1%.
/1/ Represents shares Mr. Cannady may have the right to acquire through
the exercise of options to purchase shares of Common Stock at $9.00
per share. See, however, discussion regarding termination of Mr.
Cannady's Employment Agreement under "Employment Contracts and
Termination of Employment Arrangements."
/2/ Owned of record and beneficially.
/3/ Represents shares owned of record and beneficially by LCO Investments
Limited, including options to purchase 1,173,334 shares exercisable at
$4.50 per share. Mr. Pilaro is Chairman of CAP Advisors Limited. CAP
Advisors is the sole trustee of the ERSE Trust, of which LCO
Investments Limited is a wholly-owned subsidiary.
/4/ Represents shares which Mr. Montgomery has the right to acquire upon
the exercise of options exercisable at $3.20 per share.
/5/ Includes 1,173,334 shares subject to purchase within 60 days upon the
exercise of options. LCO Investments Limited is a wholly-owned
subsidiary of the ERSE Trust. The sole trustee of the ERSE Trust is
CAP Advisers Limited. Mr. Pilaro, a director of the Company, is
Chairman of CAP Advisors Limited.
/6/ Percentage based upon 9,143,106 shares outstanding, assuming exercise
by officers and directors of all stock options exercisable within 60
days beneficially owned by them.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
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<PAGE>
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who beneficially own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and greater than ten-percent shareholders are
required by regulation of the Securities and Exchange Commission to furnish the
Company with copies of all Section 16(a) forms which they file. The Company is
not aware of any transactions in its outstanding securities by or on behalf of
any director, executive officer or ten percent holder, which would require the
filing of any report pursuant to Section 16(a) during the fiscal year ended
March 31, 1998, that was not filed with the Commission.
EXECUTIVE COMPENSATION
The following Summary Compensation Table shows compensation paid by the
Company for services rendered during the past three fiscal years to E. Wyatt
Cannady, who served as the Company's Chief Executive Officer during the last
fiscal year. In April 1998, at the request of the directors of the Company, Mr.
Cannady resigned as the Company's President and Chief Executive Officer. The
Company has appointed Richard V. Trefz as its new President and CEO, effective
June 1, 1998.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation/1/ Awards Compensation
-----------------------------------------------
Name and Principal
Position Year Salary Bonus Options
- --------------------------------------------------------------------------------
E. Wyatt Cannady
President and CEO
since February 24, 1997 1998 $175,000 $ -0- -0-
1997 $ 19,080/2/ $25,000/3/ 225,000/4/
- -----------------
/1/ Compensation deferred at the election of the executive, pursuant to
the Ion Laser Technology Profit Sharing Plan, is included in the
year earned.
/2/ Base salary for the period February 24, 1997 (commencement of
employment) through March 31, 1997.
/3/ Signing bonus pursuant to Employment Agreement effective February
24, 1997.
/4/ Vest and become exercisable at the rate of 18,750 each April 1, July
1, October 1 and January 1 during the Employment Agreement term,
commencing April 1997. Mr. Cannady's entitlement to options granted
pursuant to his Employment Agreement with the Company is in dispute
as a result of the Company's termination of Mr. Cannady's
employment. See "Employment Contracts and Termination of Employment
Agreements," below.
-7-
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998
AND MARCH 31, 1998 OPTION VALUES
<TABLE>
<CAPTION>
Value of
Number of Securities Unexercised
Underlying Unexercised In-the-Money
Shares Value Options at Options at
Acquired on Realized March 31, 1998/1/ March 31, 1998/2/
Name Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------ ------------ --------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
E. Wyatt Cannady 0 0 75,000 150,000 $ 0 $ 0
</TABLE>
/1/ Mr. Cannady's entitlement to options granted pursuant to his
Employment Agreement with the Company is in dispute as a result of the
Company's termination of Mr. Cannady's employment. See "Employment
Contracts and Termination of Employment Agreements," below.
/2/ Potential unrealized value is calculated as the fair market value at
March 31, 1998 ($2.44 per share) less the option exercise price times
the number of shares.
Employment Contracts and Termination of Employment Arrangements
- ---------------------------------------------------------------
E. Wyatt Cannady served as President and CEO of the Company from February
24, 1997 to April 1998, pursuant to the terms of an Employment Agreement dated
April 25, 1997. The Employment Agreement provided for Mr. Cannady to serve
until March 31, 2000, at an annual base salary of $175,000 for the first year,
$195,000 for the second year, and $195,000 for the third year. Other benefits
included a one-time signing bonus of $25,000, annual bonuses contingent upon
achievement of goals established by the Board, participation in all incentive,
savings, retirement and welfare plans of the Company, reimbursement for
commuting from his residence to the Company's Salt Lake City office, and
reasonable secondary living expenses in Salt Lake City for one year. The
Agreement also provided for the grant of options to purchase 225,000 shares of
Common Stock of the Company at $9.00 per share, vesting 18,750 shares each
quarter.
With respect to compensation payable upon termination of employment, the
Agreement provides that if Mr. Cannady is terminated for cause, the Company is
released from most future financial obligations under the Agreement. However,
if he is not terminated for cause, he would be contractually entitled to
continue to receive his salary and benefits for one year, as well as stock
options, warrants and other similar rights. It is the position of the Company
that Mr. Cannady's employment was terminated for cause.
Compensation Committee
- ----------------------
The Compensation Committee of the Board of Directors is currently
comprised of directors Delaney, Montgomery, and Oubre. The committee meets
periodically to review the compensation of the Company's officers.
The current level of compensation for the Chief Executive Officer is a
base salary, which was established in June 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 5, 1998, the Company issued and sold 1,860,465 shares of its
Common Stock (the "Shares") to its major shareholder, LCO Investments Limited,
pursuant to a Stock Purchase Agreement dated as of May 4, 1998 (the "May 1998
Purchase Agreement"). See Item 1, "Recent Business Developments--May 1998
Equity Financing," above. LCO Investments Limited currently owns approximately
42% of the Company, assuming exercise of outstanding options held by LCO. LCO
is a wholly-owned subsidiary of the
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<PAGE>
ERSE Trust. The sole trustee of the ERSE Trust is CAP Advisers Limited. Mr.
Pilaro, a director of the Company, is Chairman of CAP Advisors Limited.
On May 12, 1997, the Company closed a private placement of 428,572 shares
of Common Stock of the Company (the "Shares"), and options to purchase 500,000
shares of Common Stock (the "Options"), pursuant to a Securities Purchase
Agreement dated as of May 8, 1997 (the "May 1997 Purchase Agreement"). The
total consideration received by the Company for the Shares and the Options in
this offering was $3,000,000. The Options are exercisable at any time until the
close of business on May 1, 2007. Pursuant to the May 1998 financing described
above, the exercise price of the options was amended to $4.50 per share. The
Shares and Options were sold to LCO Investments Limited and Richard S. Braddock,
the Chairman of the Board of the Company (the "Purchasers"). The Shares, and
the shares of Common Stock underlying the Options, are restricted and may not be
transferred or sold, except as permitted by the May 1997 Purchase Agreement, for
a period of one year after their acquisition by the Purchasers. The Shares,
including the shares issuable upon exercise of the Options, are subject to
certain piggyback and demand registration rights, as provided by a separate
Registration Rights Agreement dated as of May 8, 1997.
The Purchasers had invested in the Company previously by purchasing
280,000 shares of Common Stock and options to purchase 966,667 shares of Common
Stock under a Securities Purchase Agreement dated as of April 1, 1996, for a
total purchase price of $4,683,334.
The Company is negotiating, and anticipates entering into, an agreement
with OraCeutical LLC of Lee, Massachusetts, pursuant to which OraCeutical will
provide technology development services to the Company related to various light-
activated tooth whitening products and procedures, and a new, advanced
BriteSmile take-home tooth whitening product. Mr. Eric Montgomery, a director
of the Company, is the Founding Manager and President of OraCeutical, an
organization dedicated to the development of next generation products for use in
the professional dental office.
The Company has entered into a Consulting Agreement with its director,
Linda Oubre, pursuant to which Ms. Oubre will be retained for an initial term of
one-year at an hourly rate to conduct market research related to the
establishment of Company-owned tooth whitening centers throughout the United
States.
--------------------
PROPOSAL 2 -- NAME CHANGE
At the Annual Meeting, the shareholders will consider and vote upon a
proposal to amend Article 1 of the Articles of Incorporation of the Company to
change the name of the Company from Ion Laser Technology, Inc., to BriteSmile,
Inc. The Board of Directors believes that the proposed name change is
desirable because it more accurately reflects the Company's primary business of
providing tooth whitening and other therapeutic medical and dental procedures
through leading edge technology. The Company owns the rights to the registered
trademark "BriteSmile," which has been used in connection with sales of the
Company's primary products. The Company's new, light-activated tooth-whitening
device, currently under development, and the chemical agents used with the
device, will be marketed under the name "BriteSmile."
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
PROPOSAL TO CHANGE THE NAME OF THE COMPANY.
--------------------
PROPOSAL 3 -- ADOPTION OF COMPENSATION PLAN
-9-
<PAGE>
The Company's Board of Directors has approved and adopted the Company's
Revised 1997 Stock Option Investment and Incentive Plan (the "Plan"). At the
Annual Meeting, the Company's shareholders will be asked to approve the Plan,
and the Board of Directors is soliciting the enclosed proxy as to that decision.
A brief description of the material provisions of the Plan and a table
summarizing the benefits to be conferred under the Plan follows.
The Plan provides for the award of incentive stock options to key
employees, and the award of non-qualified stock options, stock appreciation
rights, cash and stock bonuses, and other incentive grants to key employees,
directors, officers, agents and consultants who have important relationships
with the Company or its subsidiaries. Presently there are approximately 22
employees who will be eligible to participate in the Plan. The Plan was
initially adopted by the Board of Directors effective as of January 31, 1997.
It was amended by the Board of Directors on May 12, 1998. The principal
provisions of the Plan are summarized below.
Administration
The Plan is administered by the Board of Directors of the Company, or a
Committee appointed by the Board consisting solely of two or more non-employee
directors (the "Plan Committee"). The Plan Committee will determine and
designate the individuals and classes of individuals to whom awards under the
Plan should be made and the amount, terms and conditions of the awards. The
Plan Committee may adopt and amend rules relating to the administration of the
Plan. Upon election of the director nominees identified in Proposal 1 herein,
the Plan Committee will be comprised of all directors of the Company. The Plan
is intended to comply with, and will be administered in accordance with, Rule
16b-3 adopted under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations thereto.
Eligibility
Awards under the Plan may be made to directors, officers, or key
employees of the Company and its subsidiaries, and to nonemployee agents,
consultants, advisors, and other persons whom the Plan Committee believes have
made or will make an important contribution to the Company or any subsidiary
thereof, subject to Section 422 of the Code, which limits the grant of
"Incentive Stock Options" to executive officers and other senior managerial and
professional employees.
Shares Available
Subject to adjustment as provided in the Plan, a maximum of 2,000,000
shares of the Company's common stock is reserved for issuance thereunder. If an
option or stock appreciation right granted under the Plan expires or is
terminated or canceled, the unissued shares subject to such option or stock
appreciation right are again available under the Plan. In addition, if shares
sold or awarded as a bonus under the Plan are forfeited to the Company or
repurchased by the Company, the number of shares forfeited or repurchased are
again available under the Plan. In the absence of an effective registration
statement under the Securities Act of 1933, as amended (the "Act"), all shares
granted under the Plan will be restricted as to subsequent resales or transfer,
pursuant to Rule 144 under the Act.
Term
Unless earlier terminated by the Plan Committee, the Plan will continue
in effect until the earlier of: (i) January 31, 1997, and (ii) the date on
which all shares available for issuance under the Plan have been issued and all
restrictions on such shares have lapsed. The Plan Committee may suspend or
terminate the Plan at any time except with respect to options, and shares
subject to restrictions then outstanding under the Plan.
Stock Option Grants
-10-
<PAGE>
The Plan Committee may grant Incentive Stock Options ("ISOs") and Non-
Statutory Stock Options ("NSOs") under the Plan. With respect to each option
grant, the Plan Committee will determine the number of shares subject to the
option, the option price, the period of the option, the time or times at which
the option may be exercised (including whether the option will be subject to any
vesting requirements and whether there will be any conditions precedent to
exercise of the option), and the other terms and conditions of the option. The
Plan specifies, however, that 6 months must elapse from the date of grant of the
options to the date of disposition by the option holder of the shares of common
stock underlying the option. Options granted under the plan expire six months
after the termination of the option holder's employment for reasons other than
permanent disability, retirement, death, or termination for cause. To date,
1,228,500 options to purchase Common Stock have been granted pursuant to the
Plan.
ISOs are subject to special terms and conditions. The aggregate fair
market value, on the date of the grant, of the common stock for which an ISO is
exercisable for the first time by the optionee during any calendar year may not
exceed $100,000. An ISO may not be granted to an employee who possesses more
than 10% of the total voting power of the Company's stock unless the option
price is at least 110% of the fair market value of the common stock subject to
the option on the date it is granted, and the option is not exercisable for 5
years after the date of grant. No ISO may be exercisable after 10 years from
the date of grant. The option price may not be less than 100% of the fair
market value of the common stock covered by the option at the date of grant.
In connection with the grant of NSOs or ISOs, the Plan Committee may
issue "Reload Options", which allow employees to receive options to purchase
that number of shares that shall equal (i) the number of shares of common stock
used to exercise underlying NSOs or ISOs, and (ii) the number of shares of
common stock used to satisfy any tax withholding requirement incident to the
exercise of the underlying NSOs or ISOs.
In general, no vested option may be exercised unless at the time of such
exercise the holder of such option is employed by or in the service of the
Company or any subsidiary thereof, within 3 years following termination of
employment by reason of death, retirement, or disability, and within 6 months
following termination for any other reason, except for cause, in which case all
unexercised options shall terminate forthwith. No shares may be issued pursuant
to the exercise of an option until full payment therefor has been made. Upon the
exercise of an option, the number of shares reserved for issuance under the Plan
will be reduced by the number of shares issued upon exercise of the option.
Stock Appreciation Rights
Two types of Stock appreciation rights ("SARs") may be granted under the
Plan: "Alternate SARs" and "Limited Rights." Alternate SARs are granted
concurrently with or subsequent to stock options, and permit the option holder
to be paid, in common stock, the excess of the fair market value of each share
of common stock underlying the stock option at the date of exercise of the
Alternate SARs over the fair market value of each share of common stock
underlying the option at the grant date. The exercise of Alternate SARs shall
be in lieu of the exercise of the stock option underlying the SARs, and upon
such exercise a corresponding number of stock options shall be canceled.
Alternate SARs are exercisable upon the same terms and conditions as are
applicable to the options underlying them. Upon the exercise of an Alternate
SAR, the number of shares reserved for issuance under the Plan will be reduced
by the number of shares issued.
Limited Rights may be issued concurrently with or subsequent to the award
of any stock option or Alternate SAR under the Plan. Limited Rights allow the
holder thereof to be paid appreciation on the stock option or the amount of
appreciation receivable upon exercise of an Alternate SAR in cash and in lieu of
exercising such options or rights. Limited Rights are exercisable only to the
same extent and subject to the same conditions and within the same time periods
as the stock options or Alternate SARs underlying such Limited Rights; provided,
however, that Limited Rights may not be exercised under any circumstances until
the expiration of 6 months following the date of grant. Limited Rights are
exercisable in full for a period of
-11-
<PAGE>
seven months following a change in control of the Company. Upon the exercise of
Limited Rights, the stock options or Alternate SARs underlying such Limited
Rights shall terminate. Cash payments upon the exercise of Limited Rights will
not reduce the number of shares of common stock reserved for issuance under the
Plan. No SARs have been granted under the Plan.
Stock Bonus Awards
The Plan Committee may award shares of common stock as a stock bonus
under the Plan. The Plan Committee may determine the recipients of the awards,
the number of shares to be awarded, and the time of the award. Stock received
as a stock bonus is subject to the terms, conditions, and restrictions
determined by the Plan Committee at the time the stock is awarded. No stock
bonus awards have been granted under the Plan.
Cash Bonus Rights
The Plan Committee may grant cash bonus rights under the Plan either
outright or in connection with (i) options granted or previously granted, (ii)
SARs granted or previously granted, (iii) stock bonuses awarded or previously
awarded, and (iv) shares issued under the Plan. Bonus rights granted in
connection with options entitle the optionee to a cash bonus if and when the
related option is exercised. The amount of the bonus is determined by
multiplying the excess of the total fair market value of the shares acquired
upon the exercise over the total option price for the shares by the applicable
bonus percentage. Bonus rights granted in connection with an SAR entitle the
holder to a cash bonus when the SAR is exercised, that is determined by
multiplying the amount received upon exercise of the SAR by the applicable bonus
percentage. Bonus rights granted in connection with stock bonuses entitle the
recipient to a cash bonus, in an amount determined by the Plan Committee, either
at the time the stock bonus is awarded or upon the lapse of any restrictions to
which the stock is subject. No bonus rights have been granted under the Plan.
Non-Assignability of Plan Awards
No award under the Plan shall be assignable or transferable by the
recipient thereof, except by will or the laws of descent or pursuant to a
qualified domestic relations order as defined in the Code.
Changes in Capital Structure
The Plan provides that if the outstanding common stock of the Company is
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation by
reason of any recapitalization, stock split or certain other transactions,
appropriate adjustment will be made by the Plan Committee in the number and kind
of shares available for grants under the Plan. In addition, the Plan Committee
will make appropriate adjustments in the number and kind of shares as to which
outstanding options will be exercisable. In the event of a merger,
consolidation or other fundamental corporate transformation, the Board may, in
its sole discretion, permit outstanding options to remain in effect in
accordance with their terms; to be converted into options to purchase stock in
the surviving or acquiring corporation in the transaction; or to be exercised,
to the extent then exercisable, during a period prior to the consummation of the
transaction established by the Plan Committee or as may otherwise be provided in
the Plan.
Tax Consequences
The following description addresses the federal income tax consequences
of the Plan. Although the Company believes the following statements are correct
based on existing provisions of the Code and legislative history and
administrative and judicial interpretations thereof, no assurance can be given
that changes will not occur which would modify such statements. Also, such
statements are intended only to
-12-
<PAGE>
provide basic information. Each Plan participant should consult his or her own
tax advisor concerning the tax consequences of participation in the Plan because
individual financial and federal tax situations may vary, and state and local
tax considerations may be significant.
Certain options authorized to be granted under the Plan are intended to
qualify as ISOs for federal income tax purposes. Under federal income tax law
currently in effect, the optionee will recognize no income upon grant or
exercise of the ISO. If an employee exercises an ISO and does not dispose of
any of the option shares within two years following the date of grant and within
one year following the date of exercise, then any gain realized upon subsequent
disposition of the shares will be treated as income from the sale or exchange of
a capital asset held for more than one year. If an employee disposes of shares
acquired upon exercise of an ISO before the expiration of either the one-year
holding period or the two-year waiting period, any amount realized will be
taxable as ordinary compensation income in the year of such disqualifying
disposition to the extent that the lesser of the fair market value of the shares
on the exercise date or the fair market value on the date of disposition exceeds
the exercise price. The Company will not be allowed any deduction for federal
income tax purposes at either the time of the grant or the exercise of an ISO.
Upon any disqualifying disposition by an employee, the Company will generally be
entitled to a deduction to the extent the employee realized ordinary income.
Certain options authorized to be granted under the Plan will be treated
as NSOs for federal income tax purposes. Under federal income tax law presently
in effect, no income is realized by the grantee of an NSO until the option is
exercised. When the NSO is exercised, the optionee will realize ordinary
compensation income, and the Company will generally be entitled to a deduction,
in the amount by which the market value of the shares subject to the option at
the time of exercise exceeds the exercise price. Upon the sale of shares
acquired upon exercise of an NSO, the excess of the amount realized from the
sale over the market value of the shares on the date of exercise will be
taxable.
An employee who receives stock in connection with the performance of
services will generally realize income at the time of receipt unless the shares
are not substantially vested for purposes of Section 83 of the Code and no
election under Section 83(b) of the Code is filed within 30 days after the
original transfer. The Company generally will be entitled to a tax deduction in
the amount includable as income by the employee at the same time or times as the
employee recognizes income with respect to the shares. The Company is required
to withhold employment taxes on the amount of the income the employee
recognizes. A participant who receives a cash bonus right under the Plan
generally will recognize income equal to the amount of any cash bonus paid at
the time of receipt of the bonus, and the Company generally will be entitled to
a deduction equal to the income recognized by the participant.
Section 162(m) of the Code limits to $1 million per person the amount the
Company may deduct for compensation paid to any of its most highly compensated
officers in any year after 1993. Under proposed regulations, compensation
received through the exercise of an option or SAR will not be subject to the $1
million limit if the option or SAR and the plan pursuant to which it is granted
meet certain requirements. The currently applicable requirements are that the
option or SAR be granted by a committee of at least two disinterested directors
and that the exercise price of the option or the SAR be not less than fair
market value of the Common Stock on the date of grant. Accordingly, the Company
believes compensation received on exercise of options and SARs granted under the
Plan in compliance with the above requirements will not be subject to the $1
million deduction limit.
Amendments to Plan
The Plan Committee may at any time and from time to time terminate or
modify or amend the Plan in any respect, including in response to changes in
securities, tax or other laws or rules, regulations or regulatory
interpretations thereof applicable to the Plan or to comply with stock exchange
rules or requirements.
-13-
<PAGE>
Subject to the Plan, the following options have been awarded:
NEW PLAN BENEFITS
Revised 1997 Stock Option
and Incentive Plan
---------------------------
<TABLE>
<CAPTION>
NO. OF OPTIONS TO
NAME AND POSITION DOLLAR VALUE ($)/4/ PURCHASE COMMON STOCK/5/
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Richard V. Trefz 0 225,000/1/
President and Chief Executive Officer, and
Director nominee
Current Executive Officers 0 575,000/2/
as a Group
Current Directors Who Are Not 0 175,000
Executive Officers, as a Group
All Current or Former Employees 0 478,500/3/
Who are Not Executive Officers, as a Group
</TABLE>
(1) Vest and become exercisable 45,000 each year over the next five years.
(2) Includes the 225,000 granted to Mr. Trefz. Of the total 575,000, 250,000
are currently vested, 50,000 vest after two years, subject to achievement
of certain Company financial goals, 50,000 vest after five years, subject
to achievement of financial goals, and Trefz' 225,000 vest over five
years.
(3) Includes 259,000 options granted to former employees, at exercises prices
in excess of $2.88 per share, which options expire by their terms, if
unexercised, within three months after termination of employment. Under
the Plan, any shares of Common Stock subject to an option, which for any
reason is canceled, terminated, unexercised or expires, shall again be
available for issuance under the Plan.
(4) As of July 2, 1998, the market value of the shares of Common Stock
underlying the options was $0.88, as quoted on the American Stock
Exchange.
(5) Exercise prices of options granted pursuant to the Plan range from $1.75
per share to $9.00 per share.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PLAN
-------------------
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<PAGE>
PROPOSAL 4 -- APPROVAL OF INDEPENDENT AUDITORS
The Board of Directors of the Company has selected Ernst & Young LLP as the
independent auditors for the Company for the fiscal year ending March 31, 1999.
Ernst & Young LLP served as the Company's independent auditors for the fiscal
year ended March 31, 1998.
At the Annual Meeting, shareholders will be asked to ratify the selection
by the Board of Directors of Ernst & Young LLP as the Company's independent
auditors.
Representatives of Ernst & Young LLP are expected to attend the 1998 Annual
Meeting and will have an opportunity to make a statement if they desire to do
so, and they will be available to answer appropriate questions from
shareholders.
THE BOARD RECOMMENDS SHAREHOLDER APPROVAL OF THE SELECTION OF AUDITORS.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of the
Company does not intend to present, and has not been informed that any other
person intends to present, a matter for action at the 1998 Annual Meeting other
than as set forth herein and in the Notice of Annual Meeting. If any other
matter properly comes before the meeting, it is intended that the holders of
proxies will act in accordance with their best judgment.
The accompanying proxy is being solicited on behalf of the Board of
Directors of the Company. In addition to the solicitation of proxies by mail,
certain of the officers and employees of the Company, without extra
compensation, may solicit proxies personally or by telephone, and, if deemed
necessary, third party solicitation agents may be engaged by the Company to
solicit proxies by means of telephone, facsimile or telegram, although no such
third party has been engaged by the Company as of the date hereof. The Company
will also request brokerage houses, nominees, custodians and fiduciaries to
forward soliciting materials to the beneficial owners of common stock held of
record and will reimburse such persons for forwarding such material. The cost
of this solicitation of proxies will be borne by the Company.
ANNUAL REPORT
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB (INCLUDING FINANCIAL
STATEMENTS AND FINANCIAL STATEMENT SCHEDULES) FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION MAY BE OBTAINED WITHOUT CHARGE BY WRITING TO THE COMPANY -
ATTENTION: SUSAN ADER, ASSISTANT SECRETARY, 200 Diplomat Drive, Airport
Business Center, Lester, Pennsylvania 19113. A request for a copy of the
Company's Annual Report on Form 10-KSB must set forth a good-faith
representation that the requesting party was either a holder of record or a
beneficial owner of Common Stock of the Company on June 22, 1998. Exhibits to
the Form 10-KSB, if any, will be mailed upon similar request and payment of
specified fees to cover the costs of copying and mailing such materials.
A copy of the Company's 1998 Annual Report to Shareholders is being mailed
with this Proxy Statement, but is not deemed a part of the proxy soliciting
material.
-15-
<PAGE>
SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be considered for inclusion in the
proxy statement for presentation in connection with the 1999 Annual Meeting of
Shareholders must be received by the Company by March 15, 1999. The proposal
must be in accordance with the provisions of Rule 14a-8 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934.
The Company suggests that any such request be submitted by certified mail,
return receipt requested. The Board of Directors will review any proposal which
is timely received, and determine whether it is a proper proposal to present to
the 1999 Annual Meeting.
The enclosed Proxy is furnished for you to specify your choices with
respect to the matters referred to in the accompanying notice and described in
this Proxy Statement. If you wish to vote in accordance with the Board's
recommendations, merely sign, date and return the Proxy in the enclosed envelope
which requires no postage if mailed in the United States. A prompt return of
your Proxy will be appreciated.
By Order of the Board of Directors
Brian G. Delaney, Acting Secretary
Lester, Pennsylvania
July 16, 1998
-16-
<PAGE>
APPENDICES
1. FORM OF PROXY
2. REVISED 1997 STOCK OPTION AND INCENTIVE PLAN
-17-
<PAGE>
PROXY
ION LASER TECHNOLOGY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard V. Trefz and Brian G. Delaney and each
of them as Proxies, with full power of substitution, and hereby authorizes them
to represent and vote, as designated below, all shares of Common Stock of the
Company held of record by the undersigned on July 22, 1998 at the Annual Meeting
of Shareholders to be held at the Warwick Hotel, 1701 Locust Street,
Philadelphia, Pennsylvania 19103-6179, on Tuesday, August 11, 1998, at 3:00
p.m., local time, or at any adjournment thereof.
1. Election of Directors.
FOR WITHHOLD AS TO ALL FOR ALL EXCEPT
/ / / / / /
(INSTRUCTIONS: IF YOU MARK THE "FOR ALL EXCEPT" CATEGORY ABOVE, INDICATE
THE NOMINEE(S) AS TO WHICH YOU DESIRE TO WITHHOLD AUTHORITY BY STRIKING A
LINE THROUGH SUCH NOMINEE(S) NAME IN THE LIST BELOW:)
Richard V. Trefz Anthony M. Pilaro Brian G. Delaney
R. Eric Montgomery Linda S. Oubre
2. To approve and ratify the change of the name of the Company to "BriteSmile,
Inc."
FOR AGAINST ABSTAIN
/ / / / / /
3. To approve and ratify the Company's adoption of the Revised 1997 Stock
Option and Incentive Plan.
FOR AGAINST ABSTAIN
/ / / / / /
4. To approve and ratify the selection of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ended March 31, 1999.
FOR AGAINST ABSTAIN
/ / / / / /
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2, 3, and 4.
DATE: __________________________________________
__________________________________________
Signature
__________________________________________
Signature of joint holder, if any
PLEASE SIGN EXACTLY AS THE SHARES ARE ISSUED. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, AS EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED
PERSON.
PLEASE DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
<PAGE>
ION LASER TECHNOLOGY, INC.
a Utah corporation
REVISED 1997 STOCK OPTION AND INCENTIVE PLAN
ARTICLE I GENERAL
1.01. PURPOSE.
The purposes of this Revised 1997 Stock Option and Incentive Plan (the
"Plan") are to: (1) closely associate the interests of the management of Ion
Laser Technology, Inc., a Utah corporation, and its Affiliates (collectively
referred to as the "Company") with the shareholders of the Company by
reinforcing the relationship between participants' rewards and shareholder
gains; (2) provide management with an equity ownership in the Company
commensurate with Company performance, as reflected in increased shareholder
value; (3) maintain competitive compensation levels; and (4) provide an
incentive to management to remain with the Company, whether as an employee or as
a non-employee director, and to put forth maximum efforts for the success of its
business.
1.02. ADMINISTRATION.
(a) Pursuant to the corporate laws of the State of Utah, the Board of
Directors of the Company, or a Committee appointed by the Board consisting
solely of two or more non-employee directors, (the "Committee"), shall
administer the Plan and shall approve any transaction under the Plan involving a
grant, award or other acquisition from the Company. Once appointed, the
Committee shall continue to serve until otherwise directed by the Board. From
time to time, the Board may increase or change the size of the Committee, and
appoint new members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, or remove
all members of the Committee.
(b) The Committee shall have the authority, without limitation, in its
sole discretion, subject to and not inconsistent with the express provisions of
the Plan, and from time to time, to:
(i) administer the Plan and to exercise all the powers and
authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan;
(ii) designate the directors, employees or classes of employees
eligible to participate in the Plan from among those described in
Section 1.03 below;
(iii) grant awards provided in the Plan in such form, amount and
under such terms as the Committee shall determine;
<PAGE>
(iv) determine the purchase price of shares of Common Stock covered
by each Option (the "Option Price");
(v) determine the Fair Market Value of Common Stock for purposes
of Options or of determining the appreciation of Common Stock with
respect to Stock Appreciation Rights;
(vi) determine the time or times at which Options and/or Stock
Appreciation Rights shall be granted;
(vii) determine the terms and provisions of the various Option or
Stock Appreciation Rights Agreements (none of which need be identical
or uniform) evidencing Options or Stock Appreciation Rights granted
under the Plan and to impose such limitations, restrictions and
conditions upon any such award as the Committee shall deem
appropriate; and
(viii) interpret the Plan, adopt, amend and rescind rules and
regulations relating to the Plan, and make all other determinations
and take all other action necessary or advisable for the
implementation and administration of the Plan.
The Committee may delegate to one or more of its members or to one or more
agents such administrative duties as it may deem advisable, and the Committee or
any delegate may employ one or more persons to render advice with respect to any
responsibility the Committee or such person may have under the Plan.
(c) All decisions, determinations and interpretations of the Committee on
all matters relating to the Plan shall be in its sole discretion and shall be
final, binding and conclusive on all Optionees and the Company.
(d) One member of the Committee shall be elected by the Board as
chairman. The Committee shall hold its meetings at such times and places as it
shall deem advisable. All determinations of the Committee shall be made by a
majority of its members either present in person or participating by conference
telephone at a meeting or by written consent. The Committee may appoint a
secretary and make such rules and regulations for the conduct of its business as
it shall deem advisable, and shall keep minutes of its meetings.
(e) No member of the Board or Committee shall be liable for any action
taken or decision or determination made in good faith with respect to any
Option, Stock Appreciation Right, the Plan, or any award thereunder.
(f) For purposes of this Section 1.02, a "non-employee director" shall
mean a director who: (i) is not currently an officer of the Company or a parent
or subsidiary of the Company, or otherwise currently employed by the Company or
a parent or subsidiary of the Company; (ii)
2
<PAGE>
does not receive compensation, either directly or indirectly, from the Company
or a parent or subsidiary of the Company, for services rendered as a consultant
or in any capacity other than as a director, except for an amount that does not
exceed the dollar amount for which disclosure would be required pursuant to Item
404(a) of Regulation S-K promulgated by the Securities and Exchange Commission;
(iii) does not possess an interest in any other transaction for which disclosure
would be required pursuant to Item 404(a) of Regulation S-K; and (iv) is not
engaged in a business relationship for which disclosure would be required
pursuant to Item 404(b) of Regulation S-K.
(g) Unless such holding period is waived by the Company, officers or
directors of the Company who are subject to the short-swing profits provisions
of Section 16 of the Securities Exchange Act of 1934 (the "34 Act") and who
acquire shares of Company stock pursuant to this Plan, must hold such shares for
a period of six months following the date of acquisition, provided that this
condition shall be satisfied with respect to stock options or other derivative
securities granted to such officers or directors if at least six months elapse
from the date of grant of the Option to the date of disposition by Optionee of
the Option (other than upon exercise), or the shares of Common Stock underlying
the Option.
1.03. ELIGIBILITY FOR PARTICIPATION
Participants in the Plan shall be selected by the Committee, and awards
under the Plan, as described in Section 1.04 below, may be granted by the
Committee, to directors, officers and key employees of the Company and to other
key individuals such as consultants and non-employee agents to the Company whom
the Committee believes have made or will make an essential contribution to the
Company; provided, however, that Incentive Stock Options may only be granted to
executive officers and other key employees of the Company who occupy responsible
managerial or professional positions, who have the capability of making a
substantial contribution to the success of the Company, and who agree, in
writing, to remain in the employ of, and to render services to, the Company for
a period of at least one (1) year from the date of the grant of the award. The
Committee has the authority to select particular employees within the eligible
group to receive awards under the Plan. In making this selection and in
determining the persons to whom awards under the Plan shall be granted and the
form and amount of awards under the Plan, the Committee shall consider any
factors deemed relevant in connection with accomplishing the purposes of the
Plan, including the duties of the respective persons and the value of their
present and potential services and contributions to the success, profitability
and sound growth of the Company. A person to whom an award has been granted is
sometimes referred to herein as an "Optionee." An Optionee shall be eligible to
receive more than one Option and/or Stock Appreciation Right during the term of
the Plan, but only on the terms and subject to the restrictions hereinafter set
forth.
1.04. TYPES OF AWARDS UNDER PLAN.
Awards under the Plan may be in the form of any one or more of the
following:
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(a) "Stock Options" which are nonqualified stock options, the tax
consequences of which are governed by the provisions of Section 83 of the
Internal Revenue Code (the "Code"), as described in Article II;
(b) "Incentive Stock Options" which are statutory stock options, the tax
consequences of which are governed by Section 422 of the Code, as described in
Article III;
(c) "Reload Options" which are also nonqualified stock options, the tax
consequences of which are governed by Section 83 of the Code, as described in
Article IV;
(d) "Alternate Rights" which are Stock Appreciation Rights, the tax
consequences of which are governed by Section 83 of the Code, as described in
Article V; and/or
(e) "Limited Rights" which are also Stock Appreciation Rights, the tax
consequences of which are governed by Section 83 of the Code, as described in
Article VI.
(f) "Stock Bonuses" which are compensation, the tax consequences of which
are governed by Section 83 of the Code, as described in Article VII.
(g) "Cash Bonuses" which are compensation, the tax consequences of which
are governed by Section 61 of the Code, as described in Article VIII.
1.05. AGGREGATE LIMITATION ON AWARDS.
(a) Except as may be adjusted pursuant to Section 9.12(i) below, shares
of stock which may be issued as Stock Bonuses or upon exercise of Options or
Alternate Rights under the Plan shall be authorized and unissued or treasury
shares of Common Stock of the Company ("Common Stock"). The number of shares of
Common Stock the Company shall reserve for issuance as Stock Bonuses or upon
exercise of Options or Alternate Rights to be granted from time to time under
the Plan, and the maximum number of shares of Common Stock which may be issued
under the Plan, shall not exceed in the aggregate 2,000,000 shares of Common
Stock. In the absence of an effective registration statement under the
Securities Act of 1933 (the "Act"), all Stock Bonuses, Options and Stock
Appreciation Rights granted and shares of Common Stock subject to their exercise
will be restricted as to subsequent resale or transfer, pursuant to the
provisions of Rule 144 promulgated under the Act.
(b) For purposes of calculating the maximum number of shares of Common
Stock which may be issued under the Plan:
(i) all the shares issued (including the shares, if any, withheld
for tax withholding requirements) shall be counted when cash is used
as full payment for shares issued upon exercise of an Option;
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(ii) only the shares issued (including the shares, if any, withheld
for tax withholding requirements) as a result of an exercise of
Alternate Rights shall be counted; and
(iii) only the net shares issued (including the shares, if any,
withheld for tax withholding requirements) shall be counted when
shares of Common Stock are used as full or partial payment for shares
issued upon exercise of an Option.
(iv) all shares issued (including the shares, if any, withheld for
tax withholding requirements) as Stock Bonuses shall be counted.
(c) In addition to shares of Common Stock actually issued pursuant to
Stock Bonuses or the exercise of Options or Alternate Rights, there shall be
deemed to have been issued a number of shares equal to the number of shares of
Common Stock in respect of which Limited Rights shall have been exercised.
(d) Shares tendered by a participant as payment for shares issued upon
exercise of an Option shall be available for issuance under the Plan. Any
shares of Common Stock subject to an Option or Stock Appreciation Right granted
without a related Option, which for any reason is canceled, terminated,
unexercised or expires in whole or in part shall again be available for issuance
under the Plan, but shares subject to an Option or Alternate Right which are not
issued as a result of the exercise of Limited Rights shall not again be
available for issuance under the Plan.
1.06. EFFECTIVE DATE AND TERM OF PLAN.
(a) The Plan shall become effective as of the 31st day of January,
1997, the date the Plan is adopted by the Board (the "Effective Date").
(b) No awards shall be granted under the Plan after or on the 31st day
of January, 2007, which date is ten (10) years after the Effective Date (the
"Plan Termination Date"). Provided, however, that the Plan and all awards made
under the Plan prior to such Plan Termination Date shall remain in effect until
such awards have been satisfied or terminated in accordance with the Plan and
the terms of such awards.
ARTICLE II STOCK OPTIONS
2.01. AWARD OF STOCK OPTIONS.
The Committee may from time to time, and subject to the provisions of the
Plan, and such other terms and conditions as the Committee may prescribe, grant
to any participant in the Plan one or more options to purchase for cash or for
Company shares the number of shares of Common Stock allotted by the Committee
("Stock Options"). The date a Stock Option is granted
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shall mean the date selected by the Committee as of which the Committee allots a
specific number of shares to a participant pursuant to the Plan.
2.02. STOCK OPTION AGREEMENTS.
The grant of a Stock Option shall be evidenced by a written Stock Option
Agreement, executed by the Company and the holder of a Stock Option (the
"Optionee"), stating the number of shares of Common Stock subject to the Stock
Option evidenced thereby, and in such form as the Committee may from time to
time determine.
2.03 STOCK OPTION PRICE.
The Option Price per share of Common Stock deliverable upon the exercise
of a Stock Option shall be 100% of the Fair Market Value of a share of Common
Stock on the date the Stock Option is granted, unless the Committee shall
determine, in its sole discretion, that there are circumstances which reasonably
justify the establishment of a lower or higher Option Price.
2.04. TERM AND EXERCISE.
Unless otherwise provided by the Committee or in the Stock Option
Agreement pertaining to the Stock Options, each Stock Option shall be fully
exercisable beginning after the date of its grant and ending not later than ten
years after the date of grant thereof (the "Option Term"). No Stock Option shall
be exercisable after the expiration of its Option Term.
2.05 MANNER OF PAYMENT.
Each Stock Option Agreement shall set forth the procedure governing the
exercise of the Stock Option granted thereunder, and shall provide that, upon
such exercise in respect of any shares of Common Stock subject thereto, the
Optionee shall pay to the Company, in full, the Option Price for such shares
with cash or with Common Stock previously owned by Optionee.
2.06 DEATH OF OPTIONEE.
(a) Upon the death of the Optionee, any rights to the extent exercisable
on the date of death may be exercised by the Optionee's estate, or by a person
who acquires the right to exercise such Stock Option by bequest or inheritance
or by reason of the death of the Optionee, provided that such exercise occurs
within both the remaining effective term of the Stock Option and three years
after the Optionee's death.
(b) The provisions of this Section shall apply notwithstanding the fact
that the Optionee's employment may have terminated prior to death, but only to
the extent of any rights exercisable on the date of death.
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2.07 RETIREMENT OR DISABILITY.
Upon termination of the Optionee's employment by reason of retirement or
permanent disability (as each is determined by the Committee), the Optionee may,
within three years from the date of termination, exercise any Stock Options to
the extent such options are exercisable during such three year period.
2.08 TERMINATION FOR OTHER REASONS.
Except as provided in Sections 2.06, 2.07, or 9.12(f), or except as
otherwise determined by the Committee, all Stock Options shall terminate six
months after the termination of the Optionee's employment.
2.9 EFFECT OF EXERCISE.
The exercise of any Stock Option shall cancel that number of related
Alternate Rights and/or Limited Rights, if any, which is equal to the number of
shares of Common Stock purchased pursuant to said Stock Option.
ARTICLE III INCENTIVE STOCK OPTIONS
3.01 AWARD OF INCENTIVE STOCK OPTIONS.
The Committee may, from time to time and subject to the provisions of the
Plan and such other terms and conditions as the Committee may prescribe, grant
to any participant in the Plan one or more "incentive stock options", which are
intended to qualify as such under the provisions of Section 422 of the Code, to
purchase for cash or for Company shares the number of shares of Common Stock
allotted by the Committee ("Incentive Stock Options"). The date an Incentive
Stock Option is granted shall mean the date selected by the Committee as of
which the Committee shall allot a specific number of shares to a participant
pursuant to the Plan.
3.02 INCENTIVE STOCK OPTION AGREEMENTS.
The grant of an Incentive Stock Option shall be evidenced by a written
Incentive Stock Option Agreement, executed by the Company and the holder of an
Incentive Stock Option (the "Optionee"), stating the number of shares of Common
Stock subject to the Incentive Stock Option evidenced thereby, and in such form
as the Committee may from time to time determine.
3.03 INCENTIVE STOCK OPTION PRICE.
Except as provided in Section 3.10 below, the Option Price per share of
Common Stock deliverable upon the exercise of an Incentive Stock Option shall be
100% of the Fair Market Value of a share of Common Stock on the date the
Incentive Stock Option is granted.
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3.04 TERM AND EXERCISE.
Except as provided elsewhere herein, or unless otherwise provided by the
Committee, or in the Stock Option Agreement pertaining to the Incentive Stock
Option, each Incentive Stock Option shall be fully exercisable beginning after
the date of its grant and ending not later than ten years after the date of
grant thereof (the "Option Term"). No Incentive Stock Option shall be
exercisable after the expiration of its Option Term.
3.05 MAXIMUM AMOUNT OF INCENTIVE STOCK OPTION GRANT.
The aggregate Fair Market Value (determined on the date the Incentive
Stock Option is granted) of Common Stock subject to an Incentive Stock Option
granted to any Optionee by the Committee in any calendar year shall not exceed
$100,000. Multiple Incentive Stock Options may be granted to an Optionee in any
calendar year, which Multiple Incentive Stock Options may in the aggregate
exceed such $100,000 Fair Market Value limitation, so long as each such
Incentive Stock Option within the Multiple Incentive Stock Option award does not
exceed such $100,000 Fair Market Value limitation and so long as no two such
Incentive Stock Options may be exercised by the Optionee in the same calendar
year.
3.06 DEATH OF OPTIONEE.
(a) Upon the death of the Optionee, any Incentive Stock Option
exercisable on the date of death may be exercised by the Optionee's estate or by
a person who acquires the right to exercise such Incentive Stock Option by
bequest or inheritance or by reason of the death of the Optionee, provided that
such exercise occurs within both the remaining Option Term of the Incentive
Stock Option and three years after the Optionee's death.
(b) The provisions of this Section shall apply notwithstanding the fact
that the Optionee's employment may have terminated prior to death, but only to
the extent of any Incentive Stock Options exercisable on the date of death.
3.07 RETIREMENT OR DISABILITY.
Upon the termination of the Optionee's employment by reason of permanent
disability or retirement (as each is determined by the Committee), the Optionee
may, within three years from the date of such termination of employment,
exercise any Incentive Stock Options to the extent such Incentive Stock Options
were exercisable at the date of such termination of employment. Notwithstanding
the foregoing, the tax treatment available pursuant to Section 422 of the Code,
upon the exercise of an Incentive Stock Option will not be available to an
Optionee who exercises any Incentive Stock Options more than (i) 12 months after
the date of termination of employment due to permanent disability or (ii) three
months after the date of termination of employment due to retirement.
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3.08 TERMINATION FOR OTHER REASONS.
Except as provided in Sections 3.06, 3.07 or 9.12(f), or except as
otherwise determined by the Committee, all Incentive Stock Options shall
terminate six months after the date of termination of the Optionee's employment.
3.09 APPLICABILITY OF STOCK OPTIONS SECTIONS AND OTHER RESTRICTIONS.
Sections 2.05, Manner of Payment; and 2.09, Effect of Exercise, applicable
to Stock Options, shall apply equally to Incentive Stock Options. Said Sections
are incorporated by reference in this Article III as though fully set forth
herein. In addition, the Optionee shall be prohibited from the sale, exchange,
transfer, pledge, hypothecation, gift or other disposition of the shares of
Common Stock underlying the Incentive Stock Options until the later of either
two (2) years after the date of granting the Incentive Stock Option or one (1)
year after the transfer to the Optionee of such underlying Common Stock after
the Optionee's exercise of such Incentive Stock Options.
3.10 EMPLOYEE/TEN PERCENT SHAREHOLDERS.
In the event the Committee determines to grant an Incentive Stock Option
to an employee who is also a Ten Percent Stockholder, as defined in 9.07(i)
below, (i) the Option Price shall not be less than 110% of the Fair Market Value
of the shares of Common Stock of the Company on the date of grant of such
Incentive Stock Option, and (ii) the exercise period shall not exceed 5 years
from the date of grant of such Incentive Stock Option. Fair Market Value shall
be as defined in 9.07(c) below.
ARTICLE IV RELOAD OPTIONS
4.01. AUTHORIZATION OF RELOAD OPTIONS.
Concurrently with the award of Stock Options and/or the award of
Incentive Stock Options to any participant in the Plan, the Committee may,
subject to the provisions of the Plan, particularly the provisions of Section
9.11 below, and such other terms and conditions as the Committee may prescribe,
authorize reload options to purchase for cash or for Company shares a number of
shares of Common Stock allotted by the Committee ("Reload Options"). The number
of Reload Options shall equal (i) the number of shares of Common Stock used to
exercise the underlying Stock Options or Incentive Stock Options and (ii) to the
extent authorized by the Committee, the number of shares of Common Stock used to
satisfy any tax withholding requirement incident to the exercise of the
underlying Stock Options or Incentive Stock Options. The grant of a Reload
Option will become effective upon the exercise of underlying Stock Options,
Incentive Stock Options or other Reload Options through the use of shares of
Common Stock held by the Optionee for at least 12 months. Notwithstanding the
fact that the underlying
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Option may be an Incentive Stock Option, a Reload Option is not intended to
qualify as an "incentive stock option" under Section 422 of the Code.
4.02. RELOAD OPTION AMENDMENT.
Each Stock Option Agreement and Incentive Stock Option Agreement shall
state whether the Committee has authorized Reload Options with respect to the
underlying Stock Options and/or Incentive Stock Options. Upon the exercise of
an underlying Stock Option, Incentive Stock Option or other Reload Option, the
Reload Option will be evidenced by an amendment to the underlying Stock Option
Agreement or Incentive Stock Option Agreement.
4.03. RELOAD OPTION PRICE.
The Option Price per share of Common Stock deliverable upon the exercise
of a Reload Option shall be the Fair Market Value of a share of Common Stock on
the date the grant of the Reload Option becomes effective, unless the Committee
shall determine, in its sole discretion, that there are circumstances which
reasonably justify the establishment of a lower Option Price.
4.04. TERM AND EXERCISE.
The term of each Reload Option shall be equal to the remaining Option
Term of the underlying Stock Option and/or Incentive Stock Option.
4.05. TERMINATION OF EMPLOYMENT.
No additional Reload Options shall be granted to Optionees when Stock
Options, Incentive Stock Options and/or Reload Options are exercised pursuant to
the terms of this Plan following termination of the Optionee's employment.
4.06. APPLICABILITY OF STOCK OPTIONS SECTIONS.
Sections 2.05, Manner of Payment; 2.06 Death of Optionee; 2.07,
Retirement or Disability; 2.08, Termination for Other Reasons; and 2.09, Effect
of Exercise, applicable to Stock Options, shall apply equally to Reload Options.
Said Sections are incorporated by reference in this Article IV as though fully
set forth herein.
ARTICLE V ALTERNATE STOCK APPRECIATION RIGHTS
5.01. AWARD OF ALTERNATE RIGHTS.
Concurrently with or subsequent to the award of any Option to purchase
one or more shares of Common Stock, the Committee may, subject to the provisions
of the Plan and such
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other terms and conditions as the Committee may prescribe, award to the Optionee
with respect to each share of Common Stock, a related alternate stock
appreciation right, permitting the Optionee to be paid the appreciation on the
Option in Common Stock in lieu of exercising the Option ("Alternate Right").
5.02. ALTERNATE RIGHTS AGREEMENT.
Alternate Rights shall be evidenced by written agreements in such form as
the Committee may from time to time determine.
5.03. TERM AND EXERCISE.
An Optionee who has been granted Alternate Rights may, from time to time,
in lieu of the exercise of an equal number of Options, elect to exercise one or
more Alternate Rights and thereby become entitled to receive from the Company
payment in Common Stock the number of shares determined pursuant to Sections
5.04 and 5.05. Alternate Rights shall be exercisable only to the same extent
and subject to the same conditions and within the same Option Terms as the
Options related thereto are exercisable, as provided in this Plan. The
Committee may, in its discretion, prescribe additional conditions to the
exercise of any Alternate Rights.
5.04. AMOUNT OF PAYMENT.
The amount of payment to which an Optionee shall be entitled upon the
exercise of each Alternate Right shall be equal to 100% of the amount, if any,
by which the Fair Market Value of a share of Common Stock on the exercise date
exceeds the Fair Market Value of a share of Common Stock on the date the Option
related to said Alternate Right was granted or became effective, as the case may
be.
5.05. FORM OF PAYMENT.
Upon exercise of Alternate Rights, the Company shall pay Optionee the
amount of payment determined pursuant to Section 5.04 in Common Stock. The
number of shares to be paid shall be determined by dividing the amount of
payment determined pursuant to Section 5.04 by the Fair Market Value of a share
of Common Stock on the exercise date of such Alternate Rights. As soon as
practicable after exercise, the Company shall deliver to the Optionee a
certificate or certificates for such shares of Common Stock.
5.06. EFFECT OF EXERCISE.
The exercise of any Alternate Rights shall cancel an equal number of
Stock Options, Incentive Stock Options, Reload Options and Limited Rights, if
any, related to said Alternate Rights.
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5.07. RETIREMENT OR DISABILITY.
Upon termination of the Optionee's employment (including employment as a
director of the Company after an Optionee terminates employment as an officer or
key employee of the Company) by reason of permanent disability or retirement (as
each is determined by the Committee), the Optionee may, within three years from
the date of such termination, exercise any Alternate Rights to the extent such
Alternate Rights are exercisable during such three year period.
5.08. DEATH OF OPTIONEE OR TERMINATION FOR OTHER REASONS.
Except as provided in Section 5.07 or 9.12(f), or except as otherwise
determined by the Committee, all Alternate Rights shall terminate six months
after the date of termination of the Optionee's employment or three years after
the death of the Optionee.
ARTICLE VI LIMITED RIGHTS
6.01. AWARD OF LIMITED RIGHTS.
Concurrently with or subsequent to the award of an Option or Alternate
Right, the Committee may, subject to the provisions of the Plan and such other
terms and conditions as the Committee may prescribe, award to the Optionee with
respect to each share of Common Stock underlying such Option or Alternate Right,
a related limited right permitting the Optionee, during a specified limited time
period, to be paid the appreciation on the Option in cash in lieu of exercising
the Option ("Limited Right").
6.02. LIMITED RIGHTS AGREEMENT.
Limited Rights granted under the Plan shall be evidenced by written
agreements in such form as the Committee may from time to time determine.
6.03. TERM AND EXERCISE.
An Optionee who has been granted Limited Rights may, from time to time,
in lieu of the exercise of an equal number of Options and Alternate Rights
related thereto, elect to exercise one or more Limited Rights and thereby become
entitled to receive from the Company payment in cash in the amount determined
pursuant to Sections 6.04 and 6.05. Limited Rights shall be exercisable only to
the same extent and subject to the same conditions and within the same Option
Terms as the Options or Alternate Rights related thereto are exercisable, as
provided in this Plan. The Committee may, in its discretion, prescribe
additional conditions to the exercise of any Limited Rights.
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Notwithstanding any other provision in this Section 6.03 to the contrary,
Limited Rights are exercisable in full for a period of seven months following
the date of a Change in Control of the Company (the "Exercise Period").
As used in the Plan, a "Change of Control" shall be deemed to have
occurred if (a) individuals who are currently directors of the Company
immediately prior to a Control Transaction shall cease, within one year of such
Control Transaction, to constitute a majority of the Board (or of the Board of
Directors of any successor to the Company, or to all or substantially all of its
assets), or any entity, person or Group other than the Company or a Subsidiary
Corporation of the Company acquires shares of the Company in a transaction or
series of transactions that result in such entity, person or Group directly or
indirectly owning beneficially fifty-one percent (51%) or more of the
outstanding shares of the Company.
As used herein, "Control Transaction" shall be (i) any tender offer for
or acquisition of capital stock of the Company, (ii) any merger, consolidation,
reorganization or sale of all or substantially all of the assets of the Company
which has been approved by the shareholders, (iii) any contested election of
directors of the Company, or (iv) any combination of the foregoing which results
in a change in voting power sufficient to elect a majority of the Board. As used
herein, "Group" shall mean persons who act in concert as described in Sections
13(d)(3) and/or 14(d)(2) of the Securities Exchange Act of 1934, as amended.
6.04. AMOUNT OF PAYMENT.
The amount of payment to which an Optionee shall be entitled upon the
exercise of each Limited Right shall be equal to 100% of the amount, if any,
which is equal to the difference between the Fair Market Value per share of
Common Stock covered by the related Option or Alternative Right on the date the
Option or Alternate Right was granted and the Fair Market Value per share of
such Common Stock on the exercise date.
6.05. FORM OF PAYMENT.
Payment of the amount to which an Optionee is entitled upon the exercise
of Limited Rights, as determined pursuant to Section 6.04, shall be paid by the
Company solely in cash.
6.06. EFFECT OF EXERCISE.
If Limited Rights are exercised, the Options and Alternate Rights, if
any, related to such Limited Rights cease to be exercisable to the extent of the
number of shares with respect to which the Limited Rights were exercised. Upon
the exercise or termination of the Options and Alternate Rights, if any, related
to such Limited Rights, the Limited Rights granted with respect thereto
terminate to the extent of the number of shares as to which the related Options
and Alternate Rights were exercised or terminated.
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6.07. RETIREMENT OR DISABILITY.
Upon termination of the Optionee's employment (including employment as a
director of this Company after an Optionee terminates employment as an officer
or key employee of this Company) by reason of permanent disability or retirement
(as each is determined by the Committee), the Optionee may, within three years
from the date of termination, exercise any Limited Right to the extent such
Limited Right is exercisable during such three year period.
6.08. DEATH OF OPTIONEE OR TERMINATION FOR OTHER REASONS.
Except as provided in Sections 6.07, 6.09 or 9.12(f), or except as
otherwise determined by the Committee, all Limited Rights granted under the Plan
shall terminate three months after the date of termination of the Optionee's
employment or three years after the death of the Optionee.
6.09. TERMINATION RELATED TO A CHANGE IN CONTROL.
The requirement that an Optionee be terminated by reason of retirement or
permanent disability or be employed by the Company at the time of exercise
pursuant to Sections 6.07 and 6.08 respectively, is waived during the Exercise
Period as to any Optionee who (i) was employed by the Company at the time of the
Change in Control and (ii) is subsequently terminated by the Company other than
for cause, or who voluntarily terminates if such termination was the result of a
good faith determination by the Optionee that as a result of the Change in
Control he is unable to effectively discharge his present duties or the duties
of the position which he occupied just prior to the Change in Control. As used
in this Plan, "for cause" shall mean willful misconduct or dishonesty or
conviction of or failure to contest prosecution for a felony, or excessive
absenteeism unrelated to illness.
ARTICLE VII STOCK BONUSES
7.01 TERMS, CONDITIONS AND RESTRICTIONS.
The Committee may from time to time, and subject to the provisions of the
Plan and such other terms and conditions as the Committee may prescribe, grant
to any participant in the Plan one or more Stock Bonuses as compensation the
number of shares of Common Stock allotted by the Committee ("Stock Bonuses").
Stock awarded as a Stock Bonus shall be subject to the terms, conditions and
restrictions determined by the Committee at the time of the award. The
Committee may require the recipient to sign an agreement as a condition of the
award. The agreement may contain such terms, conditions, representations, and
warranties as the Committee may require.
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ARTICLE VIII CASH BONUSES
8.01 GRANT.
The Committee may from time to time, and subject to the provisions of the
Plan and such other terms and conditions as the Committee may prescribe, grant
to any participant in the Plan one or more cash bonuses as compensation ("Cash
Bonuses"). The Committee may grant Cash Bonuses under the Plan outright or in
connection with (i) an Option or Stock Appreciation Right granted or previously
granted or (ii) a Stock Bonus awarded, or previously awarded. Bonuses will be
subject to rules, terms, and conditions as the Committee may prescribe.
8.02 CASH BONUSES IN CONNECTION WITH OPTIONS AND STOCK APPRECIATION RIGHTS.
Cash Bonuses granted in connection with Options will entitle an Optionee
to a Cash Bonus when the related Option is exercised (or surrendered in
connection with exercise of a Stock Appreciation Right related to the Option) in
whole or in part. Cash Bonuses granted in connection with Stock Appreciation
Rights will entitle the holder to a Cash Bonus when the Stock Appreciation Right
is exercised. Upon exercise of an Option, the amount of the Cash Bonus shall be
determined by multiplying the amount by which the total Fair Market Value of the
shares to be acquired upon the exercise exceeds the total Option Price for the
shares by the applicable bonus percentage. Upon exercise of a Stock Appreciation
Right, the cash bonus shall be determined by multiplying the total Fair Market
Value of the shares or cash received pursuant to the exercise of the Stock
Appreciation Right by the applicable bonus percentage. The bonus percentage
applicable to a Cash Bonus shall be determined from time to time by the
Committee but shall in no event exceed thirty percent.
8.03 CASH BONUSES IN CONNECTION WITH STOCK BONUSES.
Cash Bonuses granted in connection with Stock Bonuses will entitle the
person awarded such Stock Bonuses to a Cash Bonus either at the time the Stock
Bonus is awarded or at such time as restrictions, if any, to which the Stock
Bonus is subject lapse. If a Stock Bonus awarded is subject to restrictions and
is repurchased by the Company or forfeited by the holder, the Cash Bonus granted
in connection with such Stock Bonus shall terminate and may not be exercised.
Whether any Cash Bonus is to be awarded and, if so, the amount and timing of
such Cash Bonus shall be determined from time to time by the Committee.
ARTICLE IX MISCELLANEOUS
9.01. GENERAL RESTRICTION.
Each award under the Plan shall be subject to the requirement that, if at
any time the Committee shall determine that (i) the listing, registration or
qualification of the shares of Common Stock subject or related thereto upon any
securities exchange or under any state or
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Federal law, or (ii) the consent or approval of any government regulatory body,
or (iii) an agreement by the grantee of an award with respect to the disposition
of shares of Common Stock, is necessary or desirable as a condition of, or in
connection with, the granting of such award or the issue or purchase of shares
of Common Stock thereunder, such award may not be exercised or consummated in
whole or in part unless and until such listing, registration, qualification,
consent, approval or agreement shall have been effected or obtained free of any
conditions not acceptable to the Committee.
9.02. WITHHOLDING TAXES.
Whenever the Company proposes or is required to issue or transfer shares
of Common Stock under the Plan, the Company shall, to the extent permitted or
required by law, have the right to require the grantee, as a condition of
issuance of a Stock Bonus or exercise of its Options or Stock Appreciation
Rights, to remit to the Company no later than the date of issuance or exercise,
or make arrangements satisfactory to the Committee regarding payment of, any
amount sufficient to satisfy any Federal, state and/or local taxes of any kind,
including, but not limited to, withholding tax requirements prior to the
delivery of any certificate or certificates for such shares. If the participant
fails to pay the amount required by the Committee, the Company shall have the
right to withhold such amount from other amounts payable by the Company to the
participant, including but not limited to, salary, fees or benefits, subject to
applicable law. Alternatively, the Company may issue or transfer such shares of
Common Stock net of the number of shares sufficient to satisfy any such taxes,
including, but not limited to, the withholding tax requirements. For withholding
tax purposes, the shares of Common Stock shall be valued on the date the
withholding obligation is incurred.
9.03. RIGHT TO TERMINATE EMPLOYMENT.
Nothing in the Plan or in any agreement entered into pursuant to the Plan
shall confer upon any participant the right to continue in the employment of the
Company or affect any right which the Company may have to terminate the
employment of such participant.
9.04. NON-UNIFORM DETERMINATIONS.
The Committee's determinations under the Plan (including without
limitation determinations of the persons to receive awards, the form, amount and
timing of such awards, the terms and provisions of such awards and the
agreements evidencing same) need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, awards under
the Plan, whether or not such persons are similarly situated.
9.05. RIGHTS AS A SHAREHOLDER.
The recipient of any award under the Plan shall have no rights as a
shareholder with respect thereto unless and until certificates for shares of
Common Stock are issued to him or her.
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9.06 FRACTIONAL SHARES.
Fractional shares shall not be granted under any award under this Plan,
unless the provision of the Plan which authorizes such award also specifies the
terms under which fractional shares or interests may be granted.
9.07. DEFINITIONS.
As used in this Plan, the following words and phrases shall have the
meanings indicated in the following definitions:
(a) "AFFILIATE" means any person or entity which directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with the Company.
(b) "DISABILITY" shall mean an Optionee's inability to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or that has lasted or
can be expected to last for a continuous period of not less than one year.
(c) "FAIR MARKET VALUE" per share in respect of any share of Common Stock
as of any particular date shall mean (i) the closing sales price per share of
Common Stock reflected on a national securities exchange for the last preceding
date on which there was a sale of such Common Stock on such exchange; or (ii) if
the shares of Common Stock are then traded on an over-the-counter market, the
average of the closing bid and asked prices for the shares of Common Stock in
such over-the-counter market for the last preceding date on which there was a
sale of such Common Stock in such market; or (iii) in case no reported sale
takes place, the average of the closing bid and asked prices on the National
Association of Securities Dealers' Automated Quotations System ("NASDAQ") or any
comparable system, or if the shares of Common Stock are not listed on NASDAQ or
comparable system, the closing sale price or, in case no reported sale takes
place, the average of the closing bid and asked prices, as furnished by any
member of the National Association of Securities Dealers, Inc. selected from
time to time by the Company for that purpose; or (iv) if the shares of Common
Stock are not then listed on a national securities exchange or traded in an
over-the-counter market, such value as the Committee in its discretion may
determine in any such other manner as the Committee may deem appropriate. In no
event shall the Fair Market Value of any share of Common Stock be less than its
par value. In the case of Incentive Stock Options, the Fair Market Value shall
not be discounted for restrictions, lack of marketability and other such
limitations on the enjoyment of the Common Stock. In the case of other type of
Options, the Fair Market Value of the Common Stock shall be so discounted.
(d) "OPTION" means Stock Option, Incentive Stock Option or Reload Option.
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(e) "OPTION PRICE" means the purchase price per share of Common Stock
deliverable upon the exercise of an Option.
(f) "PARENT CORPORATION" shall mean any corporation (other than the
Company) in an unbroken chain of corporations ending with the Optionee's
employer corporation if, at the time of granting an Option, each of the
corporations other than the Optionee's employer corporation owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
(g) "STOCK APPRECIATION RIGHT" shall mean Alternate Right or Limited
Right.
(h) "SUBSIDIARY CORPORATION" shall mean any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Optionee's
employer corporation if, at the time of granting an Option, each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
(i) "TEN PERCENT STOCKHOLDER" shall mean an Optionee who, at the time an
Incentive Stock Option is granted, is an employee of the Company who owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of its Parent or Subsidiary Corporations.
9.08. LEAVES OF ABSENCE AND PERFORMANCE TARGETS.
The Committee shall be entitled to make such rules, regulations and
determinations as it deems appropriate under the Plan in respect of any leave of
absence taken by the recipient of any award. Without limiting the generality of
the foregoing, the Committee shall be entitled to determine (i) whether or not
any such leave of absence shall constitute a termination of employment within
the meaning of the Plan and (ii) the impact, if any, of such leave of absence on
awards under the Plan theretofore made to any recipient who takes such leave of
absence. The Committee shall also be entitled to make such determination of
performance targets, if any, as it deems appropriate and to impose them upon an
Optionee as a condition of continued employment.
9.09. NEWLY ELIGIBLE EMPLOYEES.
The Committee shall be entitled to make such rules, regulations,
determinations and awards as it deems appropriate in respect of any employee who
becomes eligible to participate in the Plan or any portion thereof, after the
commencement of an award or incentive period.
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9.10. ADJUSTMENTS.
In the event of any change in the outstanding Common Stock by reason of a
stock dividend or distribution, recapitalization, merger, consolidation, split-
up, combination, exchange of shares or the like, the Committee may appropriately
adjust the number of shares of Common Stock which may be issued under the Plan,
the number of shares of Common Stock subject to Options theretofore granted
under the Plan, the Option Price of Options theretofore granted under the Plan,
the performance targets referred to in Section 9.08 and any and all other
matters deemed appropriate by the Committee.
9.11. AMENDMENT OF THE PLAN.
The Committee may at any time and from time to time terminate or modify
or amend the Plan in any respect, including in response to changes in
securities, tax or other laws or rules, regulations or regulatory
interpretations thereof applicable to this Plan or to comply with stock exchange
rules or requirements. The termination or any modification or amendment of the
Plan shall not, without the consent of a participant, affect his other rights
under an award previously granted to him or her.
9.12. GENERAL TERMS AND CONDITIONS OF OPTIONS.
Each Option shall be evidenced by a written Option Agreement between the
Company and the Optionee, which agreement, unless otherwise stated in Articles
II, III or IV of the Plan, shall comply with and be subject to the following
terms and conditions:
(a) Number of Shares. Each Option Agreement shall state the number of
----------------
shares of Common Stock to which the Option relates.
(b) Type of Option. Each Option Agreement shall specifically identify the
--------------
portion, if any, of the Option which constitutes an Incentive Stock Option and
the portion, if any, which constitutes a Non-qualified Stock Option in the form
of either a Stock Option or a Reload Option.
(c) Option Price. Each Option Agreement shall state the Option Price
------------
which, in the case of Incentive Stock Options (except to the extent provided in
Article III above), shall be not less than 100% of the undiscounted Fair Market
Value of the shares of Common Stock of the Company on the date of grant of the
Option. The Option Price shall be subject to adjustment as provided in 9.13(i)
hereof. The date on which the Committee adopts a resolution expressly granting
an Option shall be considered the day on which such Option is granted. No
Options shall be granted under the Plan more than 10 years after the date of
adoption of the Plan by the Board, but the validity of Options previously
granted may extend and be validly exercised beyond that date. Except as
provided in Section 3.10 above, Options granted under the Plan shall be for a
period determined by the Committee as provided in Section 9.12(e), below.
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(d) Medium and Time of Payment. The Option Price shall be paid in full at
--------------------------
the time of exercise in cash or in shares of Common Stock having a Fair Market
Value equal to such Option Price or in a combination of cash and such shares,
and may be effected in whole or in part (i) with monies received from the
Company at the time of exercise as a compensatory cash payment, or (ii) with
monies borrowed from the Company pursuant to repayment terms and conditions as
shall be determined from time to time by the Committee, in its discretion,
separately with respect to each exercise of Options and each Optionee; provided,
however, that each such method and time for payment and each such borrowing and
terms and conditions of repayment shall be permitted by and be in compliance
with applicable law, and provided, further, if the Option Price is paid with
monies borrowed from the Company, such fact shall be noted conspicuously on the
certificate evidencing such shares in accordance with applicable law.
(e) Term and Exercise of Options. Options shall be exercisable over the
----------------------------
exercise period as and at the times and upon the conditions that the Committee
may determine, as reflected in the Option Agreement; provided, however, that the
Committee shall have the authority to accelerate the exercisability of any
outstanding Option at such time and under such circumstances, as it, in its sole
discretion, deems appropriate. The exercise period shall be determined by the
Committee for all Options; provided, however that such exercise period shall not
exceed 10 years from the date of grant of such Option. The exercise period
shall be subject to earlier termination as provided in Sections 9.12(f) and
9.12(g) hereof. An Option may be exercised, as to any or all full shares of
Common Stock as to which the Option has become exercisable, by giving written
notice of such exercise to the Committee; provided, however, that an Option may
not be exercised at any one time as to fewer than 100 shares (or such number of
shares as to which the Option is then exercisable if such number of shares is
less than 100).
(f) Termination. Except as provided in Section 9.12(e) and in this
-----------
Section 9.12(f) hereof, an Option may not be exercised unless the Optionee is
then in the employ of the Company or a Parent, division or Subsidiary
Corporation (or a corporation issuing or assuming the Option in a transaction to
which Code Section 424(a) applies), and unless the Optionee has remained
continuously so employed since the date of grant of the Option. If the
employment of an Optionee shall terminate (other than by reason of death,
disability or retirement), all Options of such Optionee that are exercisable at
the time of such termination may, unless earlier terminated in accordance with
their terms, be exercised within six months after such termination; provided,
however, that if the employment of an Optionee shall terminate for cause, all
Options theretofore granted to such Optionee shall, to the extent not
theretofore exercised, terminate forthwith. Nothing in the Plan or in any Option
shall limit the Company's rights under Section 9.03 above. No Option may be
exercised after the expiration of its term.
(g) Death, Disability or Retirement. If an Optionee shall die while
-------------------------------
employed by the Company, a Parent or a Subsidiary Corporation thereof, or die
within three months after the termination of such Optionee's employment other
than for cause, or if the Optionee's employment shall terminate by reason of
disability or retirement, all Options theretofore granted to such Optionee (to
the extent otherwise exercisable) may, unless earlier terminated in accordance
with
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their terms, be exercised by the Optionee or by the Optionee's estate or by a
person who acquired the right to exercise such Option by bequest or inheritance
or otherwise by reason of the death or disability of the Optionee, at any time
within three years after the date of death, disability or retirement of the
Optionee. If the Optionee's employment shall terminate by reason of removal for
cause, all Options theretofore granted to such Optionee shall terminate
immediately upon removal and may not be exercised.
(h) Non-transferability of Options. For the purpose of preserving to the
------------------------------
Company the right and ability to register the exercise of Options on Form S-8
under the Act, including exercises of Options by former employees and the
executors, administrators or beneficiaries of the estates of deceased employees,
Options granted under the Plan shall not be transferable otherwise than (i) by
will; (ii) by the laws of descent and distribution; or (iii) to a revocable
inter vivos trust for the primary benefit of the Optionee and his or her spouse.
Options may be exercised, during the lifetime of the Optionee, only by the
Optionee, his or her guardian, legal representative or the Trustee of an above
described trust. Except as permitted by the preceding sentences, or unless the
Committee determines that the ability to register the underlying shares on Form
S-8 need not be preserved, no Option granted under the Plan or any of the rights
and privileges thereby conferred shall be transferred, assigned, pledged, or
hypothecated in any way (whether by operation of law or otherwise), and no such
Option, right, or privilege shall be subject to execution, attachment, or
similar process. Upon any attempt so to transfer, assign, pledge, hypothecate,
or otherwise dispose of the Option, or of any right or privilege conferred
thereby, contrary to the provisions of this Plan, or upon the levy of any
attachment or similar process upon such Option, right, or privilege, the Option
and such rights and privileges shall immediately become null and void.
(i) Effect of Certain Changes.
-------------------------
(A) If there is any change in the number of shares of Common
Stock through the declaration of stock dividends, or through
recapitalization resulting in stock splits, or combinations or
exchanges of such shares, the number of shares of Common Stock
available for awards under the Plan pursuant to Section 1.05 above,
the number of such shares covered by the outstanding Options and the
price per share of such Options shall be proportionately adjusted by
the Committee to reflect any increase or decrease in the number of
issued shares of Common Stock; provided, however, that any
fractional shares resulting from such adjustment shall be
eliminated.
(B) In the event of the proposed dissolution or liquidation of
the Company, in the event of any corporate separation or division,
including, but not limited to split-up, split-off or spin-off, or in
the event of a merger, consolidation or other reorganization of the
Corporation with another corporation, the Committee may provide that
the holder of each Option then exercisable shall have the right to
exercise such Option (at its then Option Price) solely for the kind
and
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amount of shares of stock and other securities, property, cash or
any combination thereof receivable upon such dissolution,
liquidation, or corporate separation or division, or merger,
consolidation or other reorganization by a holder of the number of
shares of Common Stock for which such Option might have been
exercised immediately prior to such dissolution, liquidation, or
corporate separation or division, or merger, consolidation or other
reorganization; or the Committee may provide, in the alternative,
that each Option granted under the Plan shall terminate as of a date
to be fixed by the Committee; provided, however, that not less than
90-days' written notice of the date so fixed shall be given to each
Optionee, who shall have the right, during the period of 90 days
preceding such termination, to exercise the Options as to all or any
part of the shares of Common Stock covered thereby, including, if so
determined by the Committee, shares as to which such Options would
not otherwise be exercisable; provided, further, that failure to
provide such notice shall not invalidate or affect the action with
respect to which such notice was required.
(C) If while unexercised Options remain outstanding under the
Plan, the stockholders of the Corporation approve a definitive
agreement to merge, consolidate or otherwise reorganize the Company
with or into another corporation or to sell or otherwise dispose of
all or substantially all of its assets, or adopt a plan of
liquidation (each, a "Disposition Transaction"), then the Committee
may: (i) make an appropriate adjustment to the number and class of
shares available for awards under the Plan pursuant to Section 1.05
above, and to the amount and kind of shares or other securities or
property (including cash) receivable upon exercise of any
outstanding options after the effective date of such transaction,
and the price thereof, or, in lieu of such adjustment, provide for
the cancellation of all options outstanding at or prior to the
effective date of such transaction; (ii) provide that exercisability
of all Options shall be accelerated, whether or not otherwise
exercisable; or (iii) in its discretion, permit Optionees to
surrender outstanding options for cancellation; provided, however,
that if the stockholders approve such Disposition Transaction within
five years of the date of adoption of this Plan and before the
Company is taken public, the Committee shall provide for the
alternative in (ii) above. Upon any cancellation of an outstanding
Option pursuant to this 9.12(i)(C), the Optionee shall be entitled
to receive, in exchange therefor, a cash payment under any such
Option in an amount per share determined by the Committee in its
sole discretion, but not less than the difference between the per
share exercise price of such Option and the Fair Market Value of a
share of Company Common Stock on such date as the Committee shall
determine.
(D) Paragraphs (B) and (C) of this Section 9.12(i) shall not
apply to a merger, consolidation or other reorganization in which
the Company is the surviving corporation and shares of Common Stock
are not converted into or
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exchanged for stock, securities of any other corporation, cash or
any other thing of value. Notwithstanding the preceding sentence, in
case of any consolidation, merger or other reorganization of another
corporation into the Company in which the Company is the surviving
corporation and in which there is a reclassification or change
(including a change to the right to receive cash or other property)
of the shares of Common Stock (other than a change in par value, or
from par value to no par value, or as a result of a subdivision or
combination, but including any change in such shares into two or
more classes or series of shares), the Committee may provide that
the holder of each Option then exercisable shall have the right to
exercise such Option solely for the kind and amount of shares of
stock and other securities (including those of any new direct or
indirect parent of the Company), property, cash or any combination
thereof receivable upon such reclassification, change, consolidation
or merger by the holder of the number of shares of Common Stock for
which such Option might have been exercised.
(E) In the event of a change in the Common Stock of the Company
as presently constituted which is limited to a change of all of its
authorized shares with par value into the same number of shares with
a different par value or without par value, the shares resulting
from any such change shall be deemed to be the Common Stock within
the meaning of the Plan.
(F) To the extent that the foregoing adjustments relate to stock
or securities of the Company, such adjustments shall be made by the
Committee, whose determination in that respect shall be final,
binding and conclusive, provided that each Incentive Stock Option
granted pursuant to Article III of this Plan shall not be adjusted
in a manner that causes such option to fail to continue to qualify
as an Incentive Stock Option within the meaning of Section 422 of
the Code.
(G) Except as hereinbefore expressly provided in this Section
9.12(i), the Optionee shall have no rights by reason of any
subdivision or consolidation of shares of stock or any class or the
payment of any stock dividend or any other increase or decrease in
the number of shares of stock of any class or by reason of any
dissolution, liquidation, merger, consolidation or other
reorganization or spin-off of assets or stock of another
corporation; and any issue by the Company of shares of stock of any
class shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number of price of shares of Common Stock
subject to the Option. The grant of an Option pursuant to the Plan
shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of
its capital or business structures or to merge or to consolidate or
to dissolve, liquidate or sell, or transfer all or part of its
business or assets.
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(j) Rights as a Shareholder. An Optionee or a transferee of an Option
-----------------------
shall have no right as a shareholder with respect to any shares covered by the
Option until the date of the issuance of a certificate evidencing such shares.
No adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distribution of other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 9.12(i) hereof.
(k) Other Provisions. The Option Agreement authorized under the Plan
----------------
shall contain such other provisions, including, without limitation, (A) the
imposition of restrictions upon the exercise of an Option; (B) in the case of an
Incentive Stock Option, the inclusion of any condition not inconsistent with
such Option qualifying as an Incentive Stock Option; and (C) conditions relating
to compliance with applicable federal and state securities laws, as the
Committee shall deem advisable.
9.13. EFFECTS OF HEADINGS
The Section and Subsection headings contained herein are for convenience
only and shall not affect the construction hereof.
ADOPTED BY RESOLUTION OF THE BOARD OF DIRECTORS, EFFECTIVE THE 31ST DAY OF
JANUARY, 1997.
/s/ Dean E. Hutchings
----------------------------
Dean E. Hutchings, Secretary
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