SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
ELECTRONICS FOR IMAGING, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1) Title of each class of securities to which transactions applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
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ELECTRONICS FOR IMAGING, INC.
303 Velocity Way
Foster City, California 94404
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be held on September 13, 1999
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of
ELECTRONICS FOR IMAGING, INC., a Delaware corporation (the "Company"), will be
held on September 13, 1999 at 9:00 a.m., Pacific Daylight Time, at the Company's
Corporate headquarters, 303 Velocity Way, Foster City, California 94404 for the
following purposes:
1. To approve an amendment to the Company's 1999 Equity Incentive
Plan to increase the number of shares of Common Stock
authorized for issuance thereunder by 4,500,000 shares.
2. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on August 9, 1999
are entitled to notice of and to vote at the Special Meeting and at any
adjournment or postponement thereof.
All stockholders are cordially invited to attend the Special Meeting in
person. However, to assure your representation at the Special Meeting, you are
urged to mark, sign, date and return the enclosed proxy for that purpose. Any
stockholder attending the Special Meeting may vote in person even if he or she
has returned a proxy.
Sincerely,
/s/ Eric Saltzman
Eric Saltzman
Secretary
Foster City, California
August 20, 1999
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING,
YOU ARE REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY
AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE.
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ELECTRONICS FOR IMAGING, INC.
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
General
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of ELECTRONICS FOR IMAGING, INC., a
Delaware corporation (the "Company"), for use at the Special Meeting of
Stockholders to be held Monday, September 13, 1999 at 9:00 a.m., Pacific
Daylight Time ("the Special Meeting"), or at any adjournment or postponement
thereof. The Special Meeting will be held at the Company's corporate
headquarters, 303 Velocity Way, Foster City, California 94404. The Company
intends to mail this proxy statement and accompanying proxy card on or about
August 20, 1999.
At the Special Meeting, the stockholders of the Company will be asked:
(1) to approve an amendment to the 1999 Equity Incentive Plan to increase the
number of shares authorized for issuance thereunder by 4,500,000 shares and (2)
to transact such other business as may properly come before the meeting. All
proxies which are properly completed, signed and returned to the Company prior
to the Special Meeting will be voted.
Voting Rights and Outstanding Shares
Only stockholders of record at the close of business on August 9, 1999
(the "Record Date") are entitled to notice of and to vote at the Special
Meeting. As of the Record Date, the Company had outstanding and entitled to vote
54,877,447 shares of Common Stock. Each holder of record of Common Stock on such
date will be entitled to one vote per each share on all matters to be voted upon
by the stockholders. A majority of shares outstanding on the Record Date will
constitute a quorum for the transaction of business.
All votes will be tabulated by the inspector of election appointed for
the meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
In the event that sufficient votes in favor of the proposals are not
received by the date of the Special Meeting, the persons named as proxies may
propose one or more adjournments of the Special Meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of the holders of a majority of the outstanding shares present in person or by
proxy at the Special Meeting.
Solicitation
The cost of preparing, assembling, printing and mailing the Proxy
Statement, the Notice of Special Meeting and the enclosed proxy, as well as the
cost of soliciting proxies relating to the Special Meeting will be borne by the
Company. The Company will request banks, brokers, dealers and voting trustees or
other nominees to solicit their customers who are beneficial owners of shares
listed of record in names of nominees. The original solicitation of proxies by
mail may be supplemented by telephone, telegram and personal solicitation by
directors, officers and regular employees of the Company or, at the Company's
request Corporate Investor Communications, Inc. No additional compensation will
be paid to directors, officers or other regular employees of the Company for
such services, but Corporate Investor Communications, Inc. will be paid its
customary fee, estimated to be about $7,500, if it renders solicitation
services.
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Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Secretary of
the Company at the Company's principal executive office, 303 Velocity Way,
Foster City, California 94404, a written notice of revocation or a duly executed
proxy bearing a later date or it may be revoked by attending the Special Meeting
and voting in person. Attendance at the Special Meeting will not, by itself,
revoke a proxy.
Stockholder Proposals To Be Presented at Next Annual Meeting
The deadline for submitting a stockholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's annual meeting of
stockholders to be held in the year 2000, pursuant to Rule 14a-8 of the
Securities and Exchange Commission, is December 2, 1999. Unless a stockholder
who wishes to bring a matter before the stockholders at the Company's annual
meeting of stockholders notifies the Company of such matter prior to February
15, 2000, management will have discretionary authority to vote all shares for
which it has proxies in opposition to such matter.
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PROPOSAL ONE
AMENDMENT TO THE 1999 EQUITY INCENTIVE PLAN
Description of the Plans
The Company has previously adopted three stock plans, the 1989 Stock
Plan (the "1989 Plan"), the 1990 Stock Plan (the "1990 Plan") and the 1999
Equity Incentive Plan (the "1999 Plan" and, together with the 1989 Plan and the
1990 Plan, the "Stock Plans"). The Stock Plans are administered by the Board of
Directors or a committee appointed by the Board. The Stock Plans provide for
grants to employees, consultants and directors of the Company or any parent or
subsidiary (as defined in the Stock Plans) of the Company.
The 1989 Plan was terminated on May 6, 1999 upon approval by
stockholders of the 1999 Plan. No options or stock purchase rights have been
issued under the 1989 Plan since November 30, 1992. Any shares (plus any shares
that might in the future be returned to the 1989 Stock Plan as a result of
cancellations or expiration of awards) that remained available for future grants
under the 1989 Stock Plan have been returned to the total authorized but
unissued shares of Common Stock of the Company.
As of August 1, 1999, 13,241,088, 16,489,345 and zero (0) options to
purchase shares of Common Stock had been granted under the 1989 Plan, 1990 Plan
and 1999 Plan, respectively, and a total of 12,642,989 options had been
exercised under all Stock Plans. As of August 1, 1999, 476,091 and 600,000
options were available for grant under the 1990 Plan and 1999 Plan,
respectively. As of August 1, 1999, 7,345,788 options were outstanding under the
Plans at a weighted average per share exercise price of $26.30.
The 1999 Plan was intended to supplement and eventually replace the
Company's 1990 Stock Plan. The 1990 Stock Plan by its terms will expire in June
2000. Prior to this proposed increase, 600,000 shares of Common Stock had been
reserved for issuance under the 1999 Plan.
Proposed Amendment
On August 3, 1999 the Board of Directors approved an amendment to the
1999 Plan to increase the number of shares reserved for issuance thereunder by
an additional 4,500,000 shares. As a result of this amendment, the Board of
Directors has reserved an aggregate of 5,100,000 shares of Common Stock under
the 1999 Plan. This amendment is subject to stockholder approval.
The Stock Plans are long-term incentive plans for all employees. These
plans are intended to align stockholder and employee interests by creating a
direct link between long-term rewards and the value of the Company's shares. The
Board of Directors believes that long-term stock ownership by executive officers
and all employees is an important factor in achieving above-average growth in
share value and in retaining valued employees. Since the value of a stock option
bears a direct relationship to the Company's stock price, the Board further
believes that stock options motivate both executive officers and employees to
manage the Company in a manner which will benefit all stockholders.
Stockholders are requested in this Proposal One to approve the
amendment to the 1999 Plan to increase the number of shares of Common Stock
authorized for issuance thereunder by 4,500,000 shares. The affirmative vote of
the holders of a majority of the shares present in person or represented by
proxy and entitled to vote at the meeting will be required to approve the
amendment to the 1999 Plan. Abstentions will be counted toward the tabulation of
votes cast on proposals presented to the stockholders and will have the same
effect as negative votes. Broker non-votes are counted towards a quorum, but are
not counted for any purpose in determining whether this matter has been
approved.
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The Company's Board of Directors unanimously recommends a vote "FOR"
the amendment to the 1999 Plan.
The essential features of the 1999 Plan are outlined below.
General
The 1999 Plan provides for the grant of incentive stock options,
nonstatutory stock options, stock appreciation rights, stock bonuses and
restricted stock purchase awards (collectively "awards"). Incentive stock
options granted under the 1999 Plan are intended to qualify as "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"). Nonstatutory stock options granted under the 1999 Plan
are not intended to qualify as incentive stock options under the Code. Stock
appreciation rights granted under the 1999 Plan may be tandem rights, concurrent
rights or independent rights. See "Federal Income Tax Information" for a
discussion of the tax treatment of awards.
Purpose
The Board adopted the 1999 Plan, and amended the 1999 Plan to provide
for additional grants thereunder, to provide a means by which employees,
directors and consultants of the Company and its affiliates may be given an
opportunity to purchase stock in the Company, to assist in retaining the
services of such persons, to secure and retain the services of persons capable
of filling such positions and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its affiliates. All of the
approximately 650 employees, directors and consultants of the Company and its
affiliates are eligible to participate in the 1999 Plan.
Administration
The Board administers the 1999 Plan. Subject to the provisions of the
1999 Plan, the Board has the power to construe and interpret the 1999 Plan and
to determine the persons to whom and the dates on which awards will be granted,
the number of shares of Common Stock to be subject to each award, the time or
times during the term of each option within which all or a portion of such
option may be exercised, the exercise price of each option, the type of
consideration and other terms of the option or award.
The Board has the power to delegate administration of the 1999 Plan to
a committee composed of one or more members of the Board. In the discretion of
the Board, a committee may consist solely of two or more "non-employee
directors" within the meaning of Rule 16b-3 of the Securities Exchange Act of
1934, as amended (the "Exchange Act") or solely of two or more "outside
directors" within the meaning of Section 162(m) of the Code. For this purpose, a
"non-employee director" generally is a director who does not receive
remuneration from the Company other than compensation for service as a director
(except for amounts not in excess of specified limits applicable pursuant to
Rule 16b-3 under the Exchange Act). An "outside director" generally is a
director who is neither a current or former officer of the Company nor a current
employee of the Company, does not receive any remuneration from the Company
other than compensation for service as a director, and is not employed by or
have certain ownership interests in an entity that receives remuneration from
the Company (except within specified limits applicable under regulations issued
pursuant to Section 162(m) of the Code). If administration is delegated to a
committee, the committee has the power to delegate administrative powers to a
subcommittee. As used herein with respect to the 1999 Plan, the "Board" refers
to any committee the Board appoints or, if applicable, any such subcommittee, as
well as to the Board itself. In accordance with the foregoing provisions, the
Board has delegated administration of the 1999 Plan to the Compensation
Committee. Also in accordance with the foregoing provisions, on June 1, 1999,
the Board of Directors approved the delegation of administrative authority under
the 1990 Plan and the 1999 Plan to a committee to consist of one director (the
"Non-Officer Stock Option Committee"), with the power and authority to grant
stock awards to eligible persons under the respective plans who are not subject
to Section 16 of the Exchange Act of 1934. The Company's Chief Executive Officer
and Chairman of the Board of Directors, Dan Avida, was designated as the sole
member of the Non-Officer Stock Option Committee.
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Eligibility
Incentive stock options and stock appreciation rights appurtenant
thereto may be granted under the 1999 Plan only to employees (including
officers) of the Company and its affiliates. Employees (including officers),
directors, and consultants of both the Company and its affiliates are eligible
to receive all other types of awards under the 1999 Plan.
No incentive stock option may be granted under the 1999 Plan to any
person who, at the time of the grant, owns (or is deemed to own) stock
possessing more than 10% of the total combined voting power of the Company or
any affiliate of the Company, unless the exercise price is at least 110% of the
fair market value of the stock subject to the option on the date of grant and
the term of the option does not exceed five years from the date of grant. In
addition, the aggregate fair market value, determined at the time of grant, of
the shares of Common Stock with respect to which incentive stock options are
exercisable for the first time by a participant during any calendar year (under
the 1999 Plan and all other such plans of the Company and its affiliates) may
not exceed $100,000.
No employee may be granted options and/or stock appreciation rights
under the 1999 Plan exercisable for more than (i) 2,000,000 shares of Common
Stock during any fiscal year if such shares are granted in connection with an
employee's initial employment with the Company or (ii) 1,000,000 shares of
Common Stock during any fiscal year if such shares are granted for reasons other
than an employee's initial employment with the Company (collectively, the
"Section 162(m) Limitations").
Stock Subject to the 1999 Plan
Subject to this Proposal, an aggregate of 5,100,000 shares of Common
Stock is reserved for issuance under the 1999 Plan. The 1999 Plan provides that
the aggregate number of shares of Common Stock subject to awards granted in the
form of stock bonuses and restricted stock may not exceed 10% of the aggregate
shares reserved for issuance under the 1999 Plan. If awards granted under the
1999 Plan expire or otherwise terminate without being exercised, the shares of
Common Stock not acquired pursuant to such awards again becomes available for
issuance under the 1999 Plan. If the Company reacquires unvested stock issued
under the 1999 Plan, the reacquired stock will not again become available for
reissuance under the 1999 Plan.
Terms of Options
The following is a description of the permissible terms of options
under the 1999 Plan. Individual option grants may be more restrictive as to any
or all of the permissible terms described below.
Exercise Price; Payment. The exercise price of incentive stock options
may not be less than 100% of the fair market value of the stock subject to the
option on the date of the grant and, in some cases (see "Eligibility" above),
may not be less than 110% of such fair market value. The exercise price of
nonstatutory options may not be less than 100% of the fair market value of the
stock on the date of grant. As of August 9, 1999, the closing price of the
Company's Common Stock as reported on the Nasdaq National Market System was
$52.9375 per share.
The exercise price of options granted under the 1999 Plan must be paid
either in cash at the time the option is exercised or, at the discretion of the
Board, (i) by delivery of other Common Stock of the Company, (ii) pursuant to a
deferred payment arrangement, or (iii) in any other form of legal consideration
acceptable to the Board.
Option Exercise. Options granted under the 1999 Plan may become
exercisable in cumulative increments ("vest") as determined by the Board.
Vesting typically will occur during the optionholder's continued service with
the Company or an affiliate, whether such service is performed in the capacity
of employee, director or consultant (collectively, "service") and regardless of
any change in the capacity of such service. Shares covered by different options
granted under the 1999 Plan may be subject to different vesting terms. The Board
has the power to accelerate the time during which an option may vest or be
exercised. In addition, options granted under the 1999 Plan may permit exercise
prior to vesting,
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but in such event the participant may be required to enter into an early
exercise stock purchase agreement that allows the Company to repurchase unvested
shares, generally at their exercise price, should the participant's service
terminate before vesting. To the extent provided by the terms of an option, a
participant may satisfy any federal, state or local tax withholding obligation
relating to the exercise of such option by a cash payment upon exercise, by
authorizing the Company to withhold a portion of the stock otherwise issuable to
the participant, by delivering already-owned Common Stock of the Company, or by
a combination of these means.
Term. The maximum term of options under the 1999 Plan is 10 years,
except that in certain cases (see "Eligibility") the maximum term is five years.
Options under the 1999 Plan generally terminate three months after termination
of the participant's service unless (i) such termination is due to the
participant's disability, in which case the option may, but need not, provide
that it may be exercised (to the extent the option was exercisable at the time
of the termination of service) at any time within 12 months of such termination;
(ii) the participant dies before the participant's service has terminated, or
within three months after termination of such service, in which case the option
may, but need not, provide that it may be exercised (to the extent the option
was exercisable at the time of the participant's death) within 18 months of the
participant's death by the person or persons to whom the rights to such option
have passed; or (iii) the option by its terms specifically provides otherwise. A
participant may designate a beneficiary who may exercise the option following
the participant's death. Individual option grants by their terms may provide for
exercise within a longer period of time following termination of service.
The option term may be extended in the event that exercise of the
option within these periods is prohibited by law, particularly applicable
securities law.
Terms of Stock Bonuses and Purchases of Restricted Stock
Eligibility; Aggregate Share Limitation. The 1999 Plan provides that no
employee, director or consultant shall be eligible to receive a stock bonus
award under the 1999 Plan with respect to the achievement of periodic (e.g.,
annual) performance targets if such individual receives a cash bonus from the
Company for the achievement of performance targets with respect to the same
period. In addition, a stock bonus that is awarded to any participant under the
1999 Plan for the achievement of periodic performance targets shall be in lieu
of any cash bonus that such Participant would have been eligible to receive for
the performance period with respect to which the stock bonus was awarded. See
"Stock Subject to the 1999 Plan" regarding the limitation on the aggregate
number of shares eligible to be granted as restricted stock awards and bonuses.
Payment. The Board determines the purchase price under a restricted
stock purchase agreement but the purchase price may not be less than 50% of the
fair market value of the Company's Common Stock on the date of grant. The Board
may award stock bonuses in consideration of past services without a purchase
payment. The purchase price of stock acquired pursuant to a restricted stock
purchase agreement under the 1999 Plan must be paid either in cash at the time
the award is exercised or at the discretion of the Board, (i) by delivery of
other Common Stock of the Company, (ii) pursuant to a deferred payment
arrangement, or (iii) in any other form of legal consideration acceptable to the
Board.
Vesting. Shares of stock sold or awarded under the 1999 Plan may, but
need not be, subject to a repurchase option in favor of the Company in
accordance with a vesting schedule as determined by the Board. The Board has the
power to accelerate the vesting of stock acquired pursuant to a restricted stock
purchase agreement under the 1999 Plan.
Restrictions on Transfer and Trading. Rights under a stock bonus or
restricted stock purchase agreement may not be transferred except where such
assignment is required by law or expressly authorized by the terms of the
applicable stock bonus or restricted stock purchase agreement. In addition, the
1999 Plan provides that any common stock acquired pursuant to each restricted
stock purchase agreement shall be held by the Company or its agent for the
account of each participant for either (a) one year in the case of a restricted
stock purchase agreement subject to a vesting schedule that is based upon the
achievement of specified performance goals or (b) three years in the case of a
restricted stock purchase agreement absent any performance-based vesting. The
foregoing restrictions on trading common stock acquired pursuant
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to any restricted stock purchase agreement expire immediately upon the
occurrence of a change in control of the Company.
Stock Appreciation Rights
The 1999 Plan authorizes three types of stock appreciation rights.
Tandem Stock Appreciation Rights. Tandem stock appreciation rights are
tied to an underlying option and require the participant to elect whether to
exercise the underlying option or to surrender the option for an appreciation
distribution equal to the market price of the vested shares purchasable under
the surrendered option less the aggregate exercise price payable for such
shares. Appreciation distributions payable upon exercise of tandem stock
appreciation rights shall generally be made in cash.
Concurrent Stock Appreciation Rights. Concurrent stock appreciation
rights are tied to an underlying option and are exercised automatically at the
same time the underlying option is exercised. The participant receives an
appreciation distribution equal to the market price of the vested shares
purchased under the option less the aggregate exercise price payable for such
shares. Appreciation distributions payable upon exercise of concurrent stock
appreciation rights shall generally be made in cash.
Independent Stock Appreciation Rights. Independent stock appreciation
rights are not tied to any underlying option, but instead are denominated in
"share equivalents." A share equivalent for this purposes is equal to a share of
Common Stock. Independent stock appreciation rights entitle the participant to
receive, upon exercise, a distribution for each exercised share equivalent that
is equal to the current fair market value of a share of Common Stock, less the
value of the share on the original date of grant. Distributions payable upon
exercise of independent stock appreciation rights may, at the Board's
discretion, be made in cash, in shares of stock or a combination thereof.
Restrictions on Transfer
The participant may not transfer an incentive stock option otherwise
than by will or by the laws of descent and distribution. A participant may also
designate a beneficiary who may exercise the option following the participant's
death. During the lifetime of the participant, only the participant may exercise
an incentive stock option. The Board may grant nonstatutory stock options that
are transferable in certain limited instances. Shares subject to repurchase by
the Company under an early exercise stock purchase agreement may be subject to
restrictions on transfer that the Board deems appropriate.
Adjustment Provisions
Transactions not involving receipt of consideration by the Company,
such as a merger, consolidation, reorganization, stock dividend, or stock split,
may change the class and number of shares of Common Stock subject to the 1999
Plan and outstanding awards. In that event, the 1999 Plan will be appropriately
adjusted as to the class and the maximum number of shares of Common Stock
subject to the 1999 Plan and the Section 162(m) Limitation, and outstanding
awards will be adjusted as to the class, number of shares and price per share of
Common Stock subject to such awards.
Effect of Certain Corporate Events
The 1999 Plan provides that, in the event of sale of substantially all of the
assets of the Company, specified types of merger, or other corporate
reorganization ("change in control"), then any surviving corporation will be
required to either assume or continue awards outstanding under the 1999 Plan or
substitute similar awards for those outstanding under the 1999 Plan. If any
surviving corporation declines to assume or continue awards outstanding under
the 1999 Plan, or to substitute similar awards, then, with respect to
participants whose service has not terminated, the vesting and the time
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during which their options may be exercised will be accelerated and for all
awards any repurchase rights or acquisition rights shall lapse. In such event,
an outstanding option will terminate if the optionholder does not exercise it
before the deadline established by the Board at or following the occurrence of
the change in control. The acceleration of vesting or lapse of restrictions on
an award in the event of an acquisition or similar corporate event may be viewed
as an anti-takeover provision, which may have the effect of discouraging a
proposal to acquire or otherwise obtain control of the Company.
Duration, Amendment and Termination
The Board may suspend or terminate the 1999 Plan without stockholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the 1999 Plan will terminate on March 28, 2009.
The Board also may amend the 1999 Plan at any time or from time to
time. However, no amendment will be effective unless approved by the
stockholders of the Company if the amendment would (i) modify the requirements
as to eligibility for participation (to the extent such modification requires
stockholder approval in order for the 1999 Plan to satisfy Section 422 of the
Code, if applicable, or Rule 16b-3 of the Exchange Act); (ii) change the 1999
Plan in any other way if such change requires stockholder approval in order to
comply with Rule 16b-3 of the Exchange Act or to satisfy the requirements of
Section 422 of the Code or any Nasdaq National Market or other applicable
securities exchange listing requirements. In addition, to the extent that the
Board determines that any amendment to the Plan would materially and negatively
affect the rights of stockholders of the Company and/or materially and
negatively affect the value of shares of Common Stock held by stockholders, then
the Board shall submit such an amendment for approval by the stockholders of the
Company. The Board may submit any other amendment to the 1999 Plan for
stockholder approval, including, but not limited to, amendments intended to
satisfy the requirements of Section 162(m) of the Code regarding the exclusion
of performance-based compensation from the limitation on the deductibility of
compensation paid to certain employees.
Federal Income Tax Information
Long-term capital gains currently are generally subject to lower tax
rates than ordinary income or short-term capital gains. The maximum long-term
capital gains rate for federal income tax purposes is currently 20% while the
maximum ordinary income rate and short-term capital gains rate is effectively
39.6%. Slightly different rules may apply to participants who acquire stock
subject to certain repurchase options or who are subject to Section 16(b) of the
Exchange Act.
Incentive Stock Options. Incentive stock options under the 1999 Plan
are intended to be eligible for the favorable federal income tax treatment
accorded "incentive stock options" under the Code.
There generally are no federal income tax consequences to the
participant or the Company by reason of the grant or exercise of an incentive
stock option. However, the exercise of an incentive stock option may increase
the participant's alternative minimum tax liability, if any.
If a participant holds stock acquired through exercise of an incentive
stock option for at least two years from the date on which the option is granted
and more than one year from the date on which the shares are transferred to the
participant upon exercise of the option, any gain or loss on a disposition of
such stock will be a long-term capital gain or loss.
Generally, if the participant disposes of the stock before the
expiration of either of these holding periods (a "disqualifying disposition"),
then at the time of disposition the participant will realize taxable ordinary
income equal to the lesser of (i) the excess of the stock's fair market value on
the date of exercise over the exercise price, or (ii) the participant's actual
gain, if any, on the purchase and sale. The participant's additional gain or any
loss upon the disqualifying disposition will be a capital gain or loss, which
will be long-term or short-term depending on whether the stock was held for more
than one year.
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To the extent the participant recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation) to a corresponding business
expense deduction in the tax year in which the disqualifying disposition occurs.
Nonstatutory Stock Options, Restricted Stock Purchase Awards and Stock
Bonuses. Nonstatutory stock options, restricted stock purchase awards and stock
bonuses granted under the 1999 Plan generally have the following federal income
tax consequences:
There are no tax consequences to the participant or the Company by
reason of the grant. Upon acquisition of the stock, the participant normally
will recognize taxable ordinary income equal to the excess, if any, of the
stock's fair market value on the acquisition date over the purchase price.
However, to the extent the stock is subject to certain types of vesting
restrictions, the taxable event will be delayed until the vesting restrictions
lapse unless the participant elects to be taxed on receipt of the stock. With
respect to employees, the Company is generally required to withhold from regular
wages or supplemental wage payments an amount based on the ordinary income
recognized. Subject to the requirement of reasonableness, the provisions of
Section 162(m) of the Code and the satisfaction of a tax reporting obligation,
the Company will generally be entitled to a business expense deduction equal to
the taxable ordinary income realized by the participant.
Upon disposition of the stock, the participant will recognize a capital
gain or loss equal to the difference between the selling price and the sum of
the amount paid for such stock plus any amount recognized as ordinary income
upon acquisition (or vesting) of the stock. Such gain or loss will be long-term
or short-term depending on whether the stock was held for more than one year.
Slightly different rules may apply to participants who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Exchange
Act.
Stock Appreciation Rights. No taxable income is realized upon the
receipt of a stock appreciation right, but upon exercise of the stock
appreciation right the fair market value of the shares (or cash in lieu of
shares) received must be treated as compensation taxable as ordinary income to
the participant in the year of such exercise. Generally, with respect to
employees, the Company is required to withhold from the payment made on exercise
of the stock appreciation right or from regular wages or supplemental wage
payments an amount based on the ordinary income recognized. Subject to the
requirement of reasonableness, Section 162(m) of the Code and the satisfaction
of a reporting obligation, the Company will be entitled to a business expense
deduction equal to the taxable ordinary income recognized by the participant.
Potential Limitation on Company Deductions. Section 162(m) of the Code
denies a deduction to any publicly-held corporation for compensation paid to
certain "covered employees" in a taxable year to the extent that compensation to
such covered employee exceeds $1 million. It is possible that compensation
attributable to awards, when combined with all other types of compensation
received by a covered employee from the Company, may cause this limitation to be
exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m), compensation
attributable to stock options and stock appreciation rights will qualify as
performance-based compensation if the award is granted by a compensation
committee comprised solely of "outside directors" and either (i) the plan
contains a per-employee limitation on the number of shares for which such awards
may be granted during a specified period, the per-employee limitation is
approved by the stockholders, and the exercise price of the award is no less
than the fair market value of the stock on the date of grant, or (ii) the award
is granted (or exercisable) only upon the achievement (as certified in writing
by the compensation committee) of an objective performance goal established in
writing by the compensation committee while the outcome is substantially
uncertain, and the award is approved by stockholders.
Compensation attributable to restricted stock purchases will qualify as
performance-based compensation, provided that: (i) the award is granted by a
compensation committee comprised solely of "outside directors," (ii) the
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<PAGE>
number of shares subject to the award is within the per-employee limitation
described above, and (iii) the purchase price of the award is no less than the
fair market value of the stock on the date of grant. Stock bonuses and
restricted stock purchases with a purchase price below fair market value qualify
as performance-based compensation under the Treasury regulations only if (i) the
award is granted by a compensation committee comprised solely of "outside
directors," (ii) the award is granted (or exercisable) only upon the achievement
of an objective performance goal established in writing by the compensation
committee while the outcome is substantially uncertain, (iii) the compensation
committee certifies in writing prior to the granting (or exercisability) of the
award that the performance goal has been satisfied and (iv) prior to the
granting (or exercisability) of the award, stockholders have approved the
material terms of the award (including the class of employees eligible for such
award, the business criteria on which the performance goal is based, and the
maximum amount - or formula used to calculate the amount - payable upon
attainment of the performance goal).
SECURITY OWNERSHIP
Except as otherwise indicated below, the following table sets forth
certain information regarding beneficial ownership of Common Stock of the
Company as of August 9, 1999 by (i) each person known by the Company to be the
owner of more than 5% of the outstanding shares of Common Stock, (ii) each
director, (iii) each executive officer listed in the Summary Compensation Table,
and (iv) all executive officers and directors as a group.
Common Stock
------------------
No. of Percent
Name of Beneficial Owner (1) Shares Owned
- --------------------------------------------------------- ------ -----
FMR Corp. (2) ........................................... 7,565,150 13.8%
82 Devonshire Street
Boston, Massachusetts 02109
J. & W. Seligman & Co. Incorporated (3) ................. 5,386,100 9.8%
100 Park Avenue
New York, New York 10017
Dan Avida (4) ........................................... 796,800 1.5%
Thomas Unterberg (5) .................................... 207,750 *
Jean-Louis Gassee (6) ................................... 131,250 *
Fred Rosenzweig (7) ..................................... 70,250 *
Janice Smith (8) ........................................ 61,280 *
Guy Gecht (6) ........................................... 9,250 *
Eric Saltzman (6) ....................................... 8,500 *
Mark Lee (6) ............................................ 5,000 *
Gill Cogan (6) .......................................... 3,750 *
Dan Maydan .............................................. 1,560 *
All executive officers and directors as a group (10
persons) (9) ....................................... 1,295,390 2.4%
- ----------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the
Commission. Unless otherwise indicated in the footnotes to this table and
subject to community property laws where applicable, each of the
stockholders named in this table has sole voting and
11
<PAGE>
investment power with respect to the shares indicated as beneficially
owned. Applicable percentages are based on 54,877,447 shares outstanding
on August 9, 1999, adjusted as required by rules promulgated by the
Securities and Exchange Commission (the "SEC").
(2) Reflects shares owned as of December 31, 1998. Of such shares Fidelity
Management & Research Company ("Fidelity"), a wholly-owned subsidiary of
FMR Corp., is the beneficial owner of 7,303,450 shares as a result of
acting as an investment adviser to various investment companies. Edward
C. Johnson 3d, Chairman of FMR Corp., FMR Corp., through its control of
Fidelity, and the funds each has sole investment power over such
7,303,450 shares. Voting power over such 7,303,450 shares resides with
the funds' Boards of Trustees. Of such shares, Fidelity Management Trust
Company, a wholly-owned subsidiary of FMR Corp., is the beneficial owner
of 261,700 shares as a result of its serving as investment manager of the
institutional accounts. Edward C. Johnson 3d and FMR Corp., through its
control of Fidelity Management Trust Company, each has sole investment
power over 261,700 of such 261,700 shares and sole voting power over
205,900 of such 261,700 shares. Members of the Edward C. Johnson 3d
family, though their ownership of voting common stock of FMR Corp. and
their execution of a shareholders' voting agreement, may be deemed, under
the Investment Company Act of 1940, to form a controlling group with
respect to FMR Corp.
(3) Reflects shares owned as of June 30, 1999. Of such shares 4,825,000
shares are owned by Seligman Communications and Information Fund, Inc.
(the "Fund"). J. & W. Seligman & Co. Incorporated ("JWS"), as investment
adviser for the Fund, may be deemed to beneficially own the shares
reported herein by the Fund. William C. Morris, as the owner of a
majority of the outstanding voting securities of JWS, may be deemed to
beneficially own the shares reported herein by JWS. Accordingly, Mr.
Morris and JWS have shared voting and investment power over all such
shares, and the Fund has shared voting and investment power over the
shares held by it.
(4) Includes 727,236 shares of Common Stock issuable upon exercise of options
granted to Mr. Avida collectively under the 1989 Stock Plan and the 1990
Stock Plan which are exercisable within 60 days of August 9, 1999.
(5) Includes 3,750 shares of Common Stock issuable upon exercise of options
granted to Mr. Unterberg under the 1990 Stock Plan which are exercisable
within 60 days of August 9, 1999.
(6) Consists solely of Common Stock issuable upon the exercise of options
granted under the 1989 and/or 1990 Stock Plans which are exercisable
within 60 days of August 9, 1999.
(7) Includes 60,250 shares of Common Stock issuable upon exercise of options
granted to Mr. Rosenzweig under the 1990 Stock Plan which are exercisable
within 60 days of August 9, 1999.
(8) Includes 59,580 shares of Common Stock issuable upon exercise of options
granted to Ms. Smith under the 1990 Stock Plan which are exercisable
within 60 days of August 9, 1999.
(9) Includes an aggregate of 1,008,566 shares of Common Stock issuable upon
the exercise of options granted to executive officers and directors
collectively under the 1989 and 1990 Stock Plans which are exercisable
within 60 days of August 9, 1999.
12
<PAGE>
EXECUTIVE COMPENSATION
<TABLE>
Compensation of Executive Officers
The following table sets forth certain summary information regarding
compensation paid by the Company for services rendered during the fiscal years
ended December 31, 1998, 1997 and 1996 to all individuals serving as the
Company's Chief Executive Officer during the last complete fiscal year and its
four most highly compensated executive officers other than the Chief Executive
Officer.
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards All Other
Salary Bonus Number Of Compensation
Name and Principal Position Year ($) (1) ($) (1) Options ($)
- --------------------------- ---- --------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
Dan Avida 1998 400,000 451,713 (2) 100,000 6,000 (5)
Chairman of the Board of Directors and 1997 375,000 212,810 (3) 90,000 179,876 (6)
Chief Executive Officer 1996 350,000 188,149 (4) 150,000 6,000 (5)
Mark Lee 1998 164,500 140,341 (8) 25,000 4,800 (5)
Vice President, Worldwide Sales
Fred Rosenzweig 1998 242,500 202,167 (2) 37,000 4,800 (5)
Executive Vice President, Operations 1997 210,000 85,124 (3) 26,000 4,600 (5)
1996 157,000 (7) 56,448 (4) 44,000 4,800 (5)
Eric Saltzman 1998 212,500 143,750 (2) 30,000 4,800 (5)
Chief Financial Officer 1997 185,000 59,992 (3) 17,000 4,800 (5)
General Counsel and Corporate Secretary 1996 143,750 (7) 46,110 (4) 30,000 4,800 (5)
Jan Smith 1998 165,000 106,891 (2) 30,000 4,800 (5)
Vice President, Human Resources and
Corporate Communications
<FN>
- ----------------
(1) Amounts shown include cash and non-cash compensation earned and received
by executive officers as well as amounts earned but deferred at the
election of those officers.
(2) Represents bonuses accrued in 1998 under the Executive Bonus Plan and paid
in January 1999.
(3) Represents bonuses accrued in 1997 under the Executive Bonus Plan and paid
in March 1998.
(4) Represents bonuses accrued in 1996 under the Executive Bonus Plan and paid
in January 1997.
(5) Automobile allowance.
(6) Consists of a $173,876 payment to compensate for personal tax consequences
on conversion of previously granted incentive stock options to
non-statutory stock options at the Company's request and a $6,000
automobile allowance.
(7) Includes salary accrued in 1996 and paid in 1997.
(8) Consists of a $49,891 commission and a $90,450 bonus accrued in 1998 under
the Executive Bonus Plan and paid in January 1999.
</FN>
</TABLE>
Executive Incentive Plans
The Compensation Committee of the Company's Board of Directors has
adopted a bonus plan for its executive officers. Target bonuses under the Bonus
Plan have been established based on a factor of the individual's annual salary
for 1999 and are 75%, 55%, 45%, 50% and 45% for Messrs. Avida, Rosenzweig,
Saltzman, Lee and Ms. Smith, respectively. Under the bonus plan, the target
bonus established for all participants is based on the individual's and the
Company's performances. Payment of target bonuses related to the Company's
performance is contingent upon the
13
<PAGE>
achievement of certain minimum operating profit and revenue goals. If minimum
operating profit and revenue goals are not achieved, bonus awards based on
individual performance could still be made.
Compensation of Directors
Effective July 1, 1998, outside members of the Board of Directors
receive cash compensation in the amount of $15,000 per year plus $1,000 per
Board of Directors meeting or $500 per Board of Directors meeting attended by
phone and $1,000 per Audit Committee meeting, in addition to reimbursement of
reasonable expenses incurred in attending meetings. The cash compensation for
1998 had been prorated accordingly. All outside members of the Board of
Directors have been granted 15,000 options to purchase shares of the Company's
Common Stock. The options were granted on August 4, 1998 and are exercisable
starting nine months after the grant date, with 25% of the option becoming
exercisable on each of May 4, 1999, February 4, 2000, November 4, 2000, and
August 4, 2001. None of the outside members of the Board exercised options
during 1998.
<TABLE>
STOCK OPTION GRANTS AND EXERCISES
The following table sets forth information regarding stock option
grants made during the fiscal year ended December 31, 1998 to each of the
executive officers named in the Summary Compensation Table.
<CAPTION>
Option Grants in Fiscal Year Ended December 31, 1998
Individual Grants
-------------------------------------------------- Potential Realizable
Number % of Total Value at Assumed Annual Rates
Of Shares Options of Stock Price Appreciation for
Underlying Granted to Exercise Option Term (3)
Options Employees Price Expiration -----------------------------
Granted (1) in 1998 Per Share Date (2) 5% 10%
------------ ---------- ----------- ------------- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
Dan Avida 100,000(4) 5.5% $13.75 8/4/08 $864,730 $2,191,396
Mark Lee 10,000(5) 0.6% 15.64 1/22/08 98,363 249,271
15,000(4) 0.8% 13.75 8/4/08 129,710 328,709
--------- ---- ------- -------
25,000 1.4% 228,073 577,981
Fred Rosenzweig 37,000(4) 2.0% 13.75 8/4/08 319,950 810,816
Eric Saltzman 30,000(4) 1.6% 13.75 8/4/08 259,419 657,419
Jan Smith 30,000(4) 1.6% $13.75 8/4/08 $259,419 $657,419
<FN>
- ---------------
(1) Options granted on August 4, 1998 are exercisable starting 9 months after
the grant date, with 25% of the option shares becoming exercisable on each
of May 4, 1999, February 4, 2000, November 4, 2000, and August 4, 2001.
Options granted on January 22, 1998 are exercisable starting 6 months
after the grant date, with 25% of the option shares becoming exercisable
on each of July 22, 1998, January 22, 1999, January 22, 2000 and January
22, 2001. Each grant was made at an exercise price equal to the fair
market value on the date of grant.
(2) The options have a term of 10 years, subject to earlier termination in
certain events related to termination of employment.
(3) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the SEC and do not represent the Company's estimate or projection of its
future Common Stock price.
(4) Options were granted on August 4, 1998.
(5) Options were granted on January 22, 1998.
</FN>
</TABLE>
14
<PAGE>
<TABLE>
The following table sets forth information regarding exercises of stock
options during the fiscal year ended December 31, 1998 by each of the executive
officers named in the Summary Compensation Table.
<CAPTION>
Aggregated Option Exercises in Fiscal Year Ended
December 31, 1998 and Fiscal Year End Option Values
Number of Value of Unexercised
Unexercised Options In-the-Money Options
Shares at 12/31/98 at 12/31/98 (2)
Acquired on Value ------------------------------- -------------------------------
Name Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dan Avida 0 0 815,236 292,500 $24,963,003 $5,062,500
Mark Lee 8,000 112,742 4,500 36,500 28,750 701,914
Fred Rosenzweig 0 0 69,500 107,000 1,600,281 2,134,031
Eric Saltzman 0 0 47,750 71,250 1,271,719 1,370,156
Jan Smith 1,700 17,053 50,330 75,250 1,265,222 1,427,656
<FN>
- ---------------
(1) This amount represents the market value of the underlying securities on
the exercise date minus the exercise price of such options.
(2) This amount represents the market value of the underlying securities
relating to "in-the-money" options at December 31, 1998 minus the
exercise price of such options.
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with Messrs. Avida,
Rosenzweig in July 1995, with Mr. Saltzman in October 1995 and with Ms. Smith in
October 1995, whereby each executive's employment shall continue to be "at
will." The employment agreements state an annual base salary, subject to any
increases annually as the Company's Board shall authorize from time to time in
connection with an annual review and provides for such performance bonus amounts
as the Company's Board authorizes. In addition, the employment agreements
contain certain provisions that take effect upon a change in control of the
Company. If the executive's employment is involuntarily or constructively
terminated other than for cause within a period beginning 90 days before and
ending 18 months after a change of control, the executive will be entitled to a
lump sum severance payment in an amount equal to one-half of his then current
annual salary and bonus. Each employment agreement terminates upon the earlier
of (i) the date that all obligations of the parties thereunder have been
satisfied, (ii) October 1, 1999, or (iii) eighteen (18) months after a change of
control.
REPORT OF THE COMPENSATION COMMITTEE
The Report of the Compensation Committee shall not be deemed to be
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 (the
"Securities Act") or under the Exchange Act, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such acts.
General. The responsibilities of the Compensation Committee are to
administer the Company's various incentive stock option plans, and to set
compensation policies applicable to the Company's executive officers.
15
<PAGE>
Base Salary. Individual salaries are determined based on individual
experience, performance and breadth of responsibility within the Company. The
Compensation Committee reviews these factors for each executive officer each
year. In addition, the Compensation Committee considers executive officers'
salaries for relative competitiveness within the Company's sector of the
computer industry.
Commissions and Bonuses. The Company established a bonus plan for its
executive officers. See "Executive Compensation- Executive Incentive Plans."
Stock Options. The Company's Stock Plans are long-term incentive plans
for all employees. These plans are intended to align stockholder and employee
interests by creating a direct link between long-term rewards and the value of
the Company's shares. The Compensation Committee believes that long-term stock
ownership by executive officers and all employees is an important factor in
achieving above average growth in share value and in retaining valued employees.
Since the value of an option bears a direct relationship to the Company's stock
price, the Compensation Committee believes that options motivate executive
officers and employees to manage the Company in a manner which will benefit all
stockholders.
The Stock Plans authorize the Compensation Committee to award stock
options to employees at any time. Options are generally granted at the time of
initial employment with the Company, and at later dates at the discretion of the
Compensation Committee. The size of initial and subsequent grants are determined
by a number of factors including comparable grants to executive officers and
employees by other companies which compete in the Company's industry. The
exercise price per share of the stock options is equal to the prevailing market
value of a share of the Company's Common Stock on the date the options are
granted.
CEO Salary. The Compensation Committee has set Mr. Avida's base salary
for 1999 at $425,000. The Compensation Committee believes that the Company's
success is dependent in part upon the efforts of its chief executive officer,
and as a result, the Company entered into a four-year employment agreement with
Mr. Avida in July 1995 (see "Employment Agreements").
Submitted by:
Jean-Louis Gassee
Member of the Compensation Committee
Thomas I. Unterberg
Member of the Compensation Committee
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Jean-Louis Gassee has served on the Compensation Committee of the Board
of Directors from its formation in August 1992 through December 31, 1998. Thomas
I. Unterberg has served on the Compensation Committee of the Board of Directors
from his appointment in February 1995 through December 31, 1998.
16
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG ELECTRONICS FOR IMAGING, INC., H&Q TECHNOLOGY INDEX AND
NASDAQ COMPOSITE INDEX
The stock price performance graph below includes information required
by the SEC and shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act or under the Exchange Act, except to the extent the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed soliciting material or filed under such Acts.
The following graph demonstrates a comparison of cumulative total
returns based upon an initial investment of $100 in the Company's Common Stock
as compared with the Hambrecht & Quist Technology Index, the NASDAQ Composite
Index as well as the Nasdaq US Index and the Nasdaq Computers and Manufacturers
Index. Historically, the Company presented the comparison of the Company's
Common Stock to the Hambrecht & Quist Technology Index and the Nasdaq Composite
Index. The Company decided to present in the future the comparison of the
Company's Common Stock to the Nasdaq US Index and the Nasdaq Computers and
Manufacturers Index as the indexes are more readily available for the public.
The stock price performance shown on the graph below is not necessarily
indicative of future price performance and only reflects the Company's relative
stock price for the period commencing on December 31, 1993 and ending on
December 31, 1998.
[The following description data is supplied in accordance with Rule 304(d) of
Regulation S-T]
Nasdaq Computers
EFII H&Q Nasdaq Comp. Nasdaq US Manufactures Stock
31-Dec-93 $100 $100 $100 $100 $100
31-Dec-94 $157 $116 $ 97 $ 98 $110
31-Dec-95 $500 $173 $135 $138 $173
31-Dec-96 $940 $208 $166 $170 $232
31-Dec-97 $380 $276 $202 $209 $281
31-Dec-98 $914 $426 $282 $293 $610
<PAGE>
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting.
If any other matters properly come before the meeting, it is the intention of
the persons named in the enclosed form of proxy to vote the shares they
represent as the Board of Directors may recommend.
By Order of the Board of Directors
/s/ Eric Saltzman
Eric Saltzman
Secretary
Dated: August 20, 1999
18
<PAGE>
APPENDIX A
ELECTRONICS FOR IMAGING, INC.
1999 EQUITY INCENTIVE PLAN
Adopted March 29, 1999
Approved By Stockholders May 6, 1999
Amended August 3, 1999
Approved By Stockholders _______________, 1999
Termination Date: March 28, 2009
1. PURPOSES.
(a) Eligible Stock Award Recipients. The persons eligible to receive Stock
Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(b) Available Stock Awards. The purpose of the Plan is to provide a means
by which eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of the
following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock appreciation rights, (iv) stock bonuses and (v) rights to
acquire restricted stock.
(c) General Purpose. The Company, by means of the Plan, seeks to retain the
services of the group of persons eligible to receive Stock Awards, to secure and
retain the services of new members of this group and to provide incentives for
such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. DEFINITIONS.
(a) "Affiliate" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance with
subsection 3(c).
(e) "Common Stock" means the common stock of the Company.
(f) "Company" means Electronics for Imaging, Inc., a Delaware corporation.
(g) "Consultant" means any person, including an advisor, (1) engaged by the
Company or an Affiliate to render consulting or advisory services and who is
compensated for
1
<PAGE>
such services or (2) who is a member of the Board of Directors of an Affiliate.
However, the term "Consultant" shall not include either Directors of the Company
who are not compensated by the Company for their services as Directors or
Directors of the Company who are merely paid a director's fee by the Company for
their services as Directors.
(h) "Continuous Service" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director of the
Company will not constitute an interruption of Continuous Service. The Board or
the chief executive officer of the Company, in that party's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by that party, including sick leave, military
leave or any other personal leave.
(i) "Covered Employee" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(j) "Director" means a member of the Board of Directors of the Company.
(k) "Disability" means the inability of a person, in the opinion of a
qualified physician acceptable to the Company, to perform the major duties of
that person's position with the Company or an Affiliate of the Company because
of the sickness or injury of the person.
(l) "Employee" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(n) "Fair Market Value" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
traded on the NASDAQ National Market or the NASDAQ SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.
2
<PAGE>
(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(o) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "Non-Employee Director" means a Director of the Company who either (i)
is not a current Employee or Officer of the Company or its parent or a
subsidiary, does not receive compensation (directly or indirectly) from the
Company or its parent or a subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K promulgated
pursuant to the Securities Act ("Regulation S-K")), does not possess an interest
in any other transaction as to which disclosure would be required under Item
404(a) of Regulation S-K and is not engaged in a business relationship as to
which disclosure would be required under Item 404(b) of Regulation S-K; or (ii)
is otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(q) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(r) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "Option" means an Incentive Stock Option or a Nonstatutory Stock Option
granted pursuant to the Plan.
(t) "Option Agreement" means a written agreement between the Company and an
Optionholder evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(u) "Optionholder" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(v) "Outside Director" means a Director of the Company who either (i) is
not a current employee of the Company or an "affiliated corporation" (within the
meaning of Treasury Regulations promulgated under Section 162(m) of the Code),
is not a former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(w) "Participant" means a person to whom a Stock Award is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding Stock
Award.
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(x) "Plan" means this Electronics for Imaging, Inc. 1999 Equity Incentive
Plan.
(y) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or any
successor to Rule 16b-3, as in effect from time to time.
(z) "Securities Act" means the Securities Act of 1933, as amended.
(aa) "Stock Award" means any right granted under the Plan, including an
Option, a stock appreciation right, a stock bonus and a right to acquire
restricted stock.
(bb) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(cc) "Ten Percent Stockholder" means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any of its Affiliates.
3. ADMINISTRATION.
(a) Administration by Board. The Board will administer the Plan unless and
until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) Powers of Board. The Board shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible under
the Plan shall be granted Stock Awards; when and how each Stock Award shall be
granted; what type or combination of types of Stock Award shall be granted; the
provisions of each Stock Award granted (which need not be identical), including
the time or times when a person shall be permitted to receive stock pursuant to
a Stock Award; and the number of shares with respect to which a Stock Award
shall be granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan as provided in Section 12.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) Delegation to Committee.
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(i) General. The Board may delegate administration of the Plan to a
Committee or Committees of one or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
(ii) Committee Composition when Common Stock is Publicly Traded. At
such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (i) delegate to a committee of one or
more members of the Board who are not Outside Directors, the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or (ii)
delegate to a committee of one or more members of the Board who are not
Non-Employee Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.
(d) Effect of Administrator's Decision. All determinations, interpretations
and constructions made by the Board or Committee in good faith shall not be
subject to review by anyone and shall be final, binding and conclusive on all
Participants.
4. SHARES SUBJECT TO THE PLAN.
(a) Share Reserve. Subject to the provisions of Section 11 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate five million one hundred thousand
(5,100,000) shares of Common Stock.
(b) Share Limitation for Stock Bonuses and Restricted Stock Awards. Subject
to the provisions of Section 11 relating to adjustments upon changes in stock,
the stock that may be issued pursuant to stock bonuses and restricted stock
awards shall not exceed in the aggregate ten percent (10%) of the aggregate
shares reserved for issuance under subsection 4(a).
(c) Reversion of Shares to the Share Reserve. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full (or vested in the case of Restricted Stock), the stock
not acquired under such Stock Award shall revert to and again become available
for issuance under the Plan. Shares subject to stock appreciation rights
exercised in accordance with the Plan shall not be available for subsequent
issuance under the Plan. If any Common Stock acquired pursuant to the exercise
of an Option shall for any reason be repurchased by the Company under an
unvested share repurchase option
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provided under the Plan, the stock repurchased by the Company under such
repurchase option shall not revert to and again become available for issuance
under the Plan.
(d) Source of Shares. The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Eligibility for Specific Stock Awards. Incentive Stock Options may be
granted only to Employees. Stock Awards other than Incentive Stock Options may
be granted to Employees, Directors and Consultants.
(b) Ten Percent Stockholders. No Ten Percent Stockholder shall be eligible
for the grant of an Incentive Stock Option unless the exercise price of such
Option is at least one hundred ten percent (110%) of the Fair Market Value of
the Common Stock at the date of grant and the Option is not exercisable after
the expiration of five (5) years from the date of grant.
(c) Section 162(m) Limitation. Subject to the provisions of Section 11
relating to adjustments upon changes in stock, no Employee shall be eligible to
be granted Options and/or stock appreciation rights covering more than two
million (2,000,000) shares of the Common Stock during any fiscal year of the
Company with respect to options granted to any Employee in connection with his
or her initial employment with the Company or one million (1,000,000) shares of
the Common Stock during any fiscal year of the Company with respect to options
granted to Employees for all other purposes.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and a separate certificate or certificates will be issued for shares
purchased on exercise of each type of Option. The provisions of separate Options
need not be identical, but each Option shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the substance of each
of the following provisions:
(a) Term. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) Exercise Price of an Incentive Stock Option. Subject to the provisions
of subsection 5(b) regarding Ten Percent Stockholders, the exercise price of
each Incentive Stock Option shall be not less than one hundred percent (100%) of
the Fair Market Value of the stock subject to the Option on the date the Option
is granted. Notwithstanding the foregoing, an Incentive Stock Option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
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(c) Exercise Price of a Nonstatutory Stock Option. The exercise price of
each Nonstatutory Stock Option shall be not less than one hundred percent (100%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock Option
may be granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(d) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) by delivery to the
Company of other Common Stock, according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other Common Stock) with the Participant or in any other
form of legal consideration that may be acceptable to the Board; provided,
however, that at any time that the Company is incorporated in Delaware, payment
of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(e) Transferability of an Incentive Stock Option. An Incentive Stock Option
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing provisions of this
subsection 6(e), the Optionholder may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionholder, shall thereafter be entitled to
exercise the Option.
(f) Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock
Option shall be transferable to the extent provided in the Option Agreement. If
the Nonstatutory Stock Option does not provide for transferability, then the
Nonstatutory Stock Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of
the Optionholder only by the Optionholder. Notwithstanding the foregoing
provisions of this subsection 6(f), the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.
(g) Vesting Generally. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable in
periodic installments which may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may
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vary. The provisions of this subsection 6(g) are subject to any Option
provisions governing the minimum number of shares as to which an Option may be
exercised.
(h) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise it as of the date of termination) but
only within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionholder's Continuous Service (or
such longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If,
after termination, the Optionholder does not exercise his or her Option within
the time specified in the Option Agreement, the Option shall terminate.
(i) Extension of Termination Date. An Optionholder's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionholder's Continuous Service (other than upon the Optionholder's death or
Disability) would be prohibited at any time solely because the issuance of
shares would violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in subsection 6(a) or (ii) the expiration of a period of
three (3) months after the termination of the Optionholder's Continuous Service
during which the exercise of the Option would not be in violation of such
registration requirements.
(j) Disability of Optionholder. In the event an Optionholder's Continuous
Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination (or such longer or shorter period specified in the
Option Agreement) or (ii) the expiration of the term of the Option as set forth
in the Option Agreement. If, after termination, the Optionholder does not
exercise his or her Option within the time specified herein, the Option shall
terminate.
(k) Death of Optionholder. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise the Option as of the date of death) by the
Optionholder's estate, by a person who acquired the right to exercise the Option
by bequest or inheritance or by a person designated to exercise the option upon
the Optionholder's death pursuant to subsection 6(e) or 6(f), but only within
the period ending on the earlier of (1) the date eighteen (18) months following
the date of death (or such longer or shorter period specified in the Option
Agreement) or (2) the expiration of the term of such Option as set forth in the
Option Agreement. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate.
(l) Early Exercise. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to
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exercise the Option as to any part or all of the shares subject to the Option
prior to the full vesting of the Option. Any unvested shares so purchased may be
subject to an unvested share repurchase option in favor of the Company or to any
other restriction the Board determines to be appropriate.
(m) Re-Load Options. Without in any way limiting the authority of the Board
to make or not to make grants of Options hereunder, the Board shall have the
authority (but not an obligation) to include as part of any Option Agreement a
provision entitling the Optionholder to a further Option (a "Re-Load Option") in
the event the Optionholder exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Any such Re-Load Option shall (i) provide for a number of shares equal to the
number of shares surrendered as part or all of the exercise price of such
Option; (ii) have an expiration date which is the same as the expiration date of
the Option the exercise of which gave rise to such Re-Load Option; and (iii)
have an exercise price which is equal to one hundred percent (100%) of the Fair
Market Value of the Common Stock subject to the Re-Load Option on the date of
exercise of the original Option. Notwithstanding the foregoing, a Re-Load Option
shall be subject to the same exercise price and term provisions heretofore
described for Options under the Plan.
Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory
Stock Option, as the Board may designate at the time of the grant of the
original Option; provided, however, that the designation of any Re-Load Option
as an Incentive Stock Option shall be subject to the one hundred thousand
dollars ($100,000) annual limitation on exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares under subsection 4(a) and
the "Section 162(m) Limitation" on the grants of Options under subsection 5(c)
and shall be subject to such other terms and conditions as the Board may
determine which are not inconsistent with the express provisions of the Plan
regarding the terms of Options.
7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.
(a) Stock Bonus Awards. No Employee, Director or Consultant shall be
eligible to receive a stock bonus award under the Plan with respect to the
achievement of periodic (e.g., annual) performance targets if such Employee,
Director or Consultant receives a cash bonus from the Company for the
achievement of performance targets with respect to the same period. In addition,
a stock bonus that is awarded to any Participant under the Plan for the
achievement of periodic performance targets shall be in lieu of any cash bonus
that such Participant would have been eligible to receive for the performance
period with respect to which the stock bonus was awarded. Each stock bonus
agreement shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate. The terms and conditions of stock bonus
agreements may change from time to time, and the terms and conditions of
separate stock bonus agreements need not be identical, but each stock bonus
agreement shall include (through
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incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:
(i) Consideration. A stock bonus shall be awarded in consideration for
past services actually rendered to the Company for its benefit.
(ii) Vesting. Shares of Common Stock awarded under the stock bonus
agreement may, but need not, be subject to a share reacquisition option in favor
of the Company in accordance with a vesting schedule to be determined by the
Board.
(iii) Termination of Participant's Continuous Service. In the event a
Participant's Continuous Service terminates, the Company may reacquire any or
all of the shares of Common Stock held by the Participant which have not vested
as of the date of termination under the terms of the stock bonus agreement.
(iv) Transferability. Rights to acquire shares under the stock bonus
agreement shall be transferable by the Participant only upon such terms and
conditions as are set forth in the stock bonus agreement, as the Board shall
determine in its discretion, so long as stock awarded under the stock bonus
agreement remains subject to the terms of the stock bonus agreement.
(b) Restricted Stock Awards. Each restricted stock purchase agreement shall
be in such form and shall contain such terms and conditions as the Board shall
deem appropriate. The terms and conditions of the restricted stock purchase
agreements may change from time to time, and the terms and conditions of
separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
(i) Restriction on Transfer or Sale of Stock.
(1) Stock acquired pursuant to each restricted stock purchase
award shall be issued and registered in the name of the Participant to whom such
restricted stock award was granted; provided, however, that such stock shall be
held by the Company or its agent for the account of such Participant during the
applicable Restricted Period as set forth below (the "Restricted Stock"). As a
condition to the receipt of any certificates representing the grant of a
restricted stock award, each Participant shall deliver to the Company stock
powers duly endorsed in blank by the Participant. None of the Restricted Stock
may be sold, exchanged, transferred, assigned, pledged or otherwise encumbered
or disposed of by the Participant during the Restricted Period. None of the
Restricted Stock may vest during the Restricted Period. Except with respect to
any share repurchase option in favor of the Company in accordance with a vesting
schedule or any Restricted Stock serving as security for indebtedness of the
Participant to the Company under the terms of a pledge agreement (as may be
applicable), at the end of the applicable Restricted Period with respect to any
shares of Restricted Stock, or at such earlier time as otherwise provided for
herein, all restrictions with respect to such Restricted Stock shall
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terminate, and the appropriate number of shares of Common Stock shall be
transferred as soon as practicable to the Participant or the Participant's
beneficiary or estate, as the case may be.
(2) The term "Restricted Period" shall mean either (a) one (1)
year in the case of a restricted stock award subject to a vesting schedule that
is based upon the achievement of specified performance goals by the Participant
or (b) three (3) years in the case of a restricted stock award absent such
performance-based vesting. Notwithstanding any other provision of this Plan to
the contrary, the Restricted Period shall expire immediately upon the occurrence
of a Change in Control.
(ii) Purchase Price. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. The purchase price shall
not be less than fifty percent (50%) of the stock's Fair Market Value on the
date such award is made or at the time the purchase is consummated.
(iii) Consideration. The purchase price of stock acquired pursuant to
the restricted stock purchase agreement shall be paid either: (i) in cash at the
time of purchase; (ii) at the discretion of the Board, according to a deferred
payment or other arrangement with the Participant; or (iii) in any other form of
legal consideration that may be acceptable to the Board in its discretion;
provided, however, that at any time that the Company is incorporated in
Delaware, payment of the Common Stock's "par value," as defined in the Delaware
General Corporation Law, shall not be made by deferred payment.
(iv) Vesting. Shares of Common Stock acquired under the restricted
stock purchase agreement may, but need not, be subject to a share repurchase
option in favor of the Company in accordance with a vesting schedule to be
determined by the Board.
(v) Termination of Participant's Continuous Service. In the event a
Participant's Continuous Service terminates, the Company may repurchase or
otherwise reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement.
(vi) Transferability of Rights to Acquire Stock. Rights to acquire
shares under the restricted stock purchase agreement shall be transferable by
the Participant only upon such terms and conditions as are set forth in the
restricted stock purchase agreement, as the Board shall determine in its
discretion, so long as stock awarded under the restricted stock purchase
agreement remains subject to the terms of the restricted stock purchase
agreement.
(c) Stock Appreciation Rights.
(i) Authorized Rights. The following three types of stock appreciation
rights shall be authorized for issuance under the Plan:
(1) Tandem Rights. A "Tandem Right" means a stock appreciation
right granted appurtenant to an Option which is subject to the same terms and
conditions applicable to
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the particular Option grant to which it pertains with the following exceptions:
The Tandem Right shall require the holder to elect between the exercise of the
underlying Option for shares of Common Stock and the surrender, in whole or in
part, of such Option for an appreciation distribution. The appreciation
distribution payable on the exercised Tandem Right shall be in cash (or, if so
provided, in an equivalent number of shares of Common Stock based on Fair Market
Value on the date of the Option surrender) in an amount up to the excess of (A)
the Fair Market Value (on the date of the Option surrender) of the number of
shares of Common Stock covered by that portion of the surrendered Option in
which the Optionholder is vested over (B) the aggregate exercise price payable
for such vested shares.
(2) Concurrent Rights. A "Concurrent Right" means a stock
appreciation right granted appurtenant to an Option which applies to all or a
portion of the shares of Common Stock subject to the underlying Option and which
is subject to the same terms and conditions applicable to the particular Option
grant to which it pertains with the following exceptions: A Concurrent Right
shall be exercised automatically at the same time the underlying Option is
exercised with respect to the particular shares of Common Stock to which the
Concurrent Right pertains. The appreciation distribution payable on an exercised
Concurrent Right shall be in cash (or, if so provided, in an equivalent number
of shares of Common Stock based on Fair Market Value on the date of the exercise
of the Concurrent Right) in an amount equal to such portion as determined by the
Board at the time of the grant of the excess of (A) the aggregate Fair Market
Value (on the date of the exercise of the Concurrent Right) of the vested shares
of Common Stock purchased under the underlying Option which have Concurrent
Rights appurtenant to them over (B) the aggregate exercise price paid for such
shares.
(3) Independent Rights. An "Independent Right" means a stock
appreciation right granted independently of any Option but which is subject to
the same terms and conditions applicable to a Nonstatutory Stock Option with the
following exceptions: An Independent Right shall be denominated in share
equivalents. The appreciation distribution payable on the exercised Independent
Right shall be not greater than an amount equal to the excess of (a) the
aggregate Fair Market Value (on the date of the exercise of the Independent
Right) of a number of shares of Company stock equal to the number of share
equivalents in which the holder is vested under such Independent Right, and with
respect to which the holder is exercising the Independent Right on such date,
over (b) the aggregate Fair Market Value (on the date of the grant of the
Independent Right) of such number of shares of Company stock. The appreciation
distribution payable on the exercised Independent Right shall be in cash or, if
so provided, in an equivalent number of shares of Common Stock based on Fair
Market Value on the date of the exercise of the Independent Right.
(ii) Relationship to Options. Stock appreciation rights appurtenant to
Incentive Stock Options may be granted only to Employees. The "Section 162(m)
Limitation" provided in subsection 5(c) and any authority to reprice Options
shall apply as well to the grant of stock appreciation rights.
(iii) Exercise. To exercise any outstanding stock appreciation right,
the holder shall provide written notice of exercise to the Company in compliance
with the provisions of the
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Stock Award Agreement evidencing such right. Except as provided in subsection
5(c) regarding the "Section 162(m) Limitation," no limitation shall exist on the
aggregate amount of cash payments that the Company may make under the Plan in
connection with the exercise of a stock appreciation right.
8. COVENANTS OF THE COMPANY.
(a) Availability of Shares. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Stock Awards and to issue and sell shares of Common
Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any stock issued or issuable pursuant to any such
Stock Award. If, after reasonable efforts, the Company is unable to obtain from
any such regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell stock upon exercise of such Stock Awards unless and until such authority is
obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
10. MISCELLANEOUS.
(a) Acceleration of Exercisability and Vesting. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(b) Stockholder Rights. No Participant shall be deemed to be the holder of,
or to have any of the rights of a holder with respect to, any shares subject to
such Stock Award unless and until such Participant has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.
(c) No Employment or other Service Rights. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant or other holder of Stock Awards any right to continue to serve
the Company or an Affiliate in the capacity in effect at the time the Stock
Award was granted or shall affect the right of the Company or an Affiliate to
terminate (i) the employment of an Employee with or without notice and with or
without cause, (ii) the service of a Consultant pursuant to the terms of such
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Consultant's agreement with the Company or an Affiliate or (iii) the service of
a Director pursuant to the Bylaws of the Company or an Affiliate, and any
applicable provisions of the corporate law of the state in which the Company or
the Affiliate is incorporated, as the case may be.
(d) Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of stock with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) Investment Assurances. The Company may require a Participant, as a
condition of exercising or acquiring stock under any Stock Award, (i) to give
written assurances satisfactory to the Company as to the Participant's knowledge
and experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring the stock
subject to the Stock Award for the Participant's own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (iii) the issuance of the shares upon the exercise or acquisition
of stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (iv) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.
(f) Withholding Obligations. To the extent provided by the terms of a Stock
Award Agreement, the Participant may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of stock under a
Stock Award by any of the following means (in addition to the Company's right to
withhold from any compensation paid to the Participant by the Company) or by a
combination of such means: (i) tendering a cash payment; (ii) authorizing the
Company to withhold shares from the shares of the Common Stock otherwise
issuable to the participant as a result of the exercise or acquisition of stock
under the Stock Award; or (iii) delivering to the Company owned and unencumbered
shares of the Common Stock.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) Capitalization Adjustments. If any change is made in the stock subject
to the Plan, or subject to any Stock Award, without the receipt of consideration
by the Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend,
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dividend in property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate structure or
other transaction not involving the receipt of consideration by the Company),
the Plan will be appropriately adjusted in the class(es) and maximum number of
securities subject to the Plan pursuant to subsection 4(a) and the maximum
number of securities subject to award to any person pursuant to subsection 5(c),
and the outstanding Stock Awards will be appropriately adjusted in the class(es)
and number of securities and price per share of stock subject to such
outstanding Stock Awards. Such adjustments shall be made by the Board, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
transaction "without receipt of consideration" by the Company.)
(b) Dissolution or Liquidation. In the event of a dissolution or
liquidation of the Company, then such Stock Awards shall be terminated if not
exercised (if applicable) prior to such event.
(c) Change in Control--Asset Sale, Merger, Consolidation or Reverse Merger.
In the event of (1) a sale of substantially all of the assets of the Company,
(2) a merger or consolidation in which the Company is not the surviving
corporation or (3) a reverse merger in which the Company is the surviving
corporation but the shares of Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise, then any surviving corporation or
acquiring corporation shall assume or continue any Stock Awards outstanding
under the Plan or shall substitute similar stock awards (including an award to
acquire the same consideration paid to the stockholders in the transaction
described in this subsection 11(c)) for those outstanding under the Plan. In the
event any surviving corporation or acquiring corporation refuses to assume or
continue such Stock Awards or to substitute similar stock awards for those
outstanding under the Plan, then with respect to Stock Awards held by
Participants whose Continuous Service has not terminated, the vesting of such
Stock Awards (and, if applicable, the time during which such Stock Awards may be
exercised) shall be accelerated in full, and the Stock Awards shall terminate if
not exercised (if applicable) by a time established by the Board at or following
the occurrence of such event. With respect to any other Stock Awards outstanding
under the Plan, such Stock Awards shall terminate if not exercised (if
applicable) at or prior to such event.
12. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any NASDAQ or securities exchange listing requirements. In addition, to the
extent that the Board determines that any amendment to the Plan would materially
and negatively affect the rights of stockholders of the Company and/or
materially and negatively affect the value of shares of Common Stock held by
stockholders, then the Board shall submit such an amendment for approval by the
stockholders of the Company.
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(b) Stockholder Approval. The Board may, in its sole discretion, submit any
other amendment to the Plan for stockholder approval, including, but not limited
to, amendments to the Plan intended to satisfy the requirements of Section
162(m) of the Code and the regulations thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) Contemplated Amendments. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) No Impairment of Rights. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) No Impairment of Rights. Rights and obligations under any Stock Award
granted while the Plan is in effect shall not be impaired by suspension or
termination of the Plan, except with the written consent of the Participant.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Stock
Award shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.
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APPENDIX B
This Proxy is solicited on behalf of the Board of Directors of
ELECTRONICS FOR IMAGING, INC.
SPECIAL MEETING OF STOCKHOLDERS
September 13, 1999
The undersigned stockholder of ELECTRONICS FOR IMAGING, INC., a
Delaware corporation, hereby acknowledges receipt of the Notice of Special
Meeting of Stockholders and Proxy Statement, each dated August 20, 1999, and
hereby appoints Dan Avida and Eric Saltzman, or either of them, his or her
proxies and attorneys-in-fact, with full power to each of substitution, on
behalf and in the name of the undersigned, to represent the undersigned at the
1999 Special Meeting of Stockholders of ELECTRONICS FOR IMAGING, INC. to be held
on Monday, September 13, 1999 at 9:00 a.m., Pacific Daylight Time, at
Electronics for Imaging, Inc., 303 Velocity Way, Foster City, California 94404,
and at any adjournment or adjournments thereof, and to vote all shares of Common
Stock that the undersigned would be entitled to vote if then and there
personally present, on the matters set forth on the reverse.
Voting Items (to appear on reverse side of proxy card)
1. Proposal to approve an amendment to the 1999 Equity Incentive Plan.
2. In their discretion, upon such other matter or matters that may properly
come before the meeting or any adjournments thereof.
