<PAGE> 1
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
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
eFax.com, Inc.
--------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_]Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the 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:
<PAGE> 2
eFax.com, Inc.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 13, 1999
TO THE STOCKHOLDERS OF eFax.com, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
eFax.com, Inc. (the "Company"), a Delaware corporation, will be held at 2:00
p.m., local time, on May 13, 1999, at the Stanford Park Hotel, 100 El Camino
Real, Menlo Park, California 94025, for the following purposes:
1. To elect seven directors to serve for the ensuing year and until their
successors are elected.
2. To approve an amendment to the Company's Certificate of Incorporation
to change the name of the Company to "eFax.com."
3. To approve an increase in the aggregate number of shares of Common
Stock authorized for issuance under the Company's 1995 Stock Plan, as
amended, by 1,000,000 shares.
4. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the year ending December 31, 1999.
5. To transact such other business as may properly come before the
meeting or any postponements or adjournments 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 March 31, 1999
are entitled to notice of and to vote at the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person; however, to ensure your representation at the meeting you are urged
to mark, sign, date and return the enclosed proxy card as promptly as
possible in the postage prepaid envelope enclosed for that purpose. YOU MAY
REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT
AT ANY TIME BEFORE IT HAS BEEN VOTED AT THE ANNUAL MEETING. ANY STOCKHOLDER
ATTENDING THE ANNUAL MEETING MAY VOTE IN PERSON EVEN IF HE OR SHE HAS
RETURNED A PROXY.
By Order of the Board of Directors,
Allen K. Jones
Secretary
Menlo Park, California
April 16, 1999
<PAGE> 3
eFax.com, Inc.
PROXY STATEMENT FOR THE
1999 ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of eFax.com, Inc. (the
"Company") for use at the Annual Meeting of Stockholders to be held on May
13, 1999 at 2:00 p.m., local time, or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Stockholders. The Annual Meeting will be held at the
Stanford Park Hotel, 100 El Camino Real, Menlo Park, California 94025. The
telephone number at that location is (650) 322-1234. When proxies are
properly dated, executed, and returned, the shares they represent will be
voted at the meeting in accordance with the instructions of the stockholder.
If no specific instructions are given, the shares will be voted for the
election of the nominees for directors set forth herein, for the ratification
of the appointment of Deloitte & Touche LLP as independent auditors as set
forth herein, for Proposals 2 and 3, and at the discretion of the proxy
holders upon such other business as may properly come before the meeting or
any adjournment or postponement thereof.
These proxy solicitation materials and the Annual Report to Stockholders
for the year ended December 31, 1998, including financial statements, were
first mailed on or about April 16, 1999, to all stockholders entitled to vote
at the meeting.
Record Date and Voting Securities
Stockholders of record at the close of business on March 31, 1999 are
entitled to notice of and to vote at the meeting. At the record date,
12,346,796 shares of the Company's Common Stock, $0.01 par value, were
issued and outstanding. No shares of the Company's Preferred Stock were
outstanding.
Revocability of Proxies
Any proxy given pursuant to the solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by
(i) filing with the Secretary of the Company at or before the taking of the
vote at the Annual Meeting a written notice of revocation bearing a later
date than the proxy, (ii) duly executing a later dated proxy relating to the
same shares and delivering it to the Secretary of the Company at or before
the taking of the vote at the Annual Meeting or (iii) attending the Annual
Meeting and voting in person (although attendance at the Annual Meeting will
not in and of itself constitute a revocation of a proxy). Any written notice
of revocation or subsequent proxy should be delivered to eFax.com, Inc. at
1378 Willow Road, Menlo Park, California 94025, Attention: Secretary, or
hand-delivered to the Secretary of the Company at or before the taking of the
vote at the Annual Meeting.
Voting and Solicitation
On all matters, each share has one vote. The cost of soliciting proxies
will be borne by the Company and is estimated to be $10,000. The Company has
retained Kissel-Blake, Inc. to assist in its solicitation of proxies from
brokers, nominees, institutions and individuals. Arrangements will also be
made with custodians, nominees and fiduciaries for forwarding of proxy
solicitation materials to beneficial owners of shares held of record by such
custodians, nominees and fiduciaries. The Company will reimburse such
custodians, nominees and fiduciaries for reasonable expenses incurred in
connection therewith. In addition, proxies may be solicited by directors,
officers and employees of the Company in person or by telephone, telegram or
other means of communication. No additional compensation will be paid for
such services. Kissel-Blake, Inc. will be paid a base fee and allowance for
expenses for providing solicitation services.
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Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the Annual
Meeting is a majority of the votes eligible to be cast by holders of shares
of Common Stock issued and outstanding on the Record Date. Shares that are
voted "FOR," "AGAINST," or "WITHHELD FROM" on a matter are treated as being
present at the meeting for purposes of establishing a quorum and are also
treated as shares entitled to vote at the Annual Meeting (the "Votes Cast")
with respect to such matter.
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. Except for Proposal 2, broker non-
votes are counted towards a quorum, but are not counted for any purpose in
determining whether a matter has been approved. With respect to Proposal 2,
abstentions and broker non-votes will be treated as negative votes.
Stockholder Proposals for Next Annual Meeting
The Company currently intends to hold its 2000 Annual Meeting of Stockholders
in mid-May 2000 and to mail Proxy Statements relating to such meeting in
early-April 2000. The date by which stockholder proposals must be received
by the Company for inclusion in the Proxy Statement and form of proxy for its
1999 Annual Meeting of Stockholders, is December 18, 1999. Such stockholder
proposals should be submitted to eFax.com, Inc. at 1378 Willow Road, Menlo
Park, California 94025, Attention: Secretary.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees
The Company currently has eight directors. Mr. Chiu is not standing for
re-election, and the Board of Directors will be reduced to seven (7) members
as of the annual meeting. There are thus seven nominees for the board of
seven directors to be elected at the Annual Meeting. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for
management's seven nominees named below, all of whom are presently directors
of the Company. In the event that any management nominee is unable or
declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for a nominee who shall be designated by the present
Board of Directors to fill the vacancy. In the event that additional persons
are nominated for election as directors, the proxy holders intend to vote all
proxies received by them in such a manner as will assure the election of as
many of the nominees listed below as possible, and, in such event, the
specific nominees to be voted for will be determined by the proxy holders.
The Company is not aware of any nominee who will be unable or will decline to
serve as a director. The term of office for each person elected as a
director will continue until the next annual meeting of the stockholders or
until such director's successor has been duly elected and qualified.
Vote Required
The seven nominees receiving the highest number of affirmative votes of
the shares entitled to be voted shall be elected to the Board of Directors.
An abstention will have the same effect as a vote withheld for the election
of directors, and pursuant to Delaware law, a broker non-vote will not be
treated as voting in person or by proxy on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
NOMINEES LISTED BELOW.
The names of the nominees and certain information about them are set
forth below:
<TABLE>
<CAPTION>
Director
Name of Nominee Age Position(s) with the Company Since
- ----------------------------- --- ---------------------------- --------
<S> <C> <C> <C>
Rudy Prince 41 Chief Executive Officer and 1988
Chairman of the Board
Thomas B. Akin (1)(2) 46 Director 1996
Douglas Y. Bech (1)(2) 53 Director 1988
Steven J. Carnevale (2) 43 Director 1996
Edward R. Prince, Jr (1). 69 Director 1988
Lon B. Radin 48 Vice President of Engineering 1988
and Director
Albert E. Sisto 49 Director 1998
</TABLE>
[FN]
1 Member of the Compensation Committee
2 Member of the Audit Committee
</FN>
Rudy Prince co-founded the Company and has served as its President and
-----------
Chief Executive Officer and a member of the Board of Directors since August
1988. Mr. Prince was appointed as the Chairman of the Board of Directors in
October 1996. From June 1985 to February 1988, Mr. Prince was the Vice
President of Sales and Marketing at Entropic Speech, Inc., a manufacturer of
telecommunications products. Prior to that, Mr. Prince served as Sales
Manager with Digicon, Inc., a geophysical contractor ("Digicon"), from March
1980 to June 1985. From August 1978 to March 1980, Mr. Prince served as a
marketing representative with the Data Processing Division of International
Business Machines Corporation. Mr. Prince holds a B.S. in Mechanical
Engineering from the University of Texas at Austin. Mr. Prince is the son of
Edward R. Prince, Jr., a director of the Company.
Thomas B. Akin has served as a director of the Company since July 1996.
--------------
Since October 1995, Mr. Akin has served as a Managing General Partner of
Talkot Capital, LLC, an investment firm. From November 1981 to
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February 1994, Mr. Akin served in various capacities, most recently as the
Managing Director of Western Regional Sales for Merrill Lynch & Co. Mr. Akin
was on a leave of absence from Merrill Lynch & Co. from February 1994 until
his retirement in April 1997. Mr. Akin holds a B.A. in Biology from the
University of California at Santa Cruz and an M.B.A. from the University of
California at Los Angeles. Mr. Akin is a director of Acacia Research, Inc. and
one private
company.
Douglas Y. Bech has served as a director of the Company since August
---------------
1988. Since August 1997, Mr. Bech has served as Chairman and Chief Executive
Officer of Raintree Resorts International, Inc., a company that owns and
operates luxury vacation ownership resorts. Mr. Bech was a founding partner
of and, since August 1994, has served as a Managing Director of Raintree
Capital Company, LLC, a merchant banking firm. In addition, from October 1994
to October 1997, Mr. Bech was a partner of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., a law firm. From May 1993 through July 1994, Mr. Bech was a partner
of Gardere & Wynne, L.L.P., a law firm. From September 1970 to May 1993. Mr.
Bech was associated with and a senior partner of the law firm Andrews & Kurth
L.L.P. Mr. Bech holds a B.A. in Political Science from Baylor University and
a J.D. from The University of Texas Law School. Mr. Bech is a director of
Frontier Oil Corporation, Pride Companies, L.P. and several private
companies.
Steven J. Carnevale has served as a director of the Company since July
-------------------
1996. In July 1996, Mr. Carnevale became a General Partner in Talkot Capital,
LLC, an investment firm. From August 1992 to July 1996, Mr. Carnevale was a
General Partner of Endeavor Capital Management, an investment firm. From
November 1990 to August 1992, Mr. Carnevale was the owner and Chief Executive
Officer of Orca Industries, a specialty computer manufacturer. Mr. Carnevale
holds a B.S. in Engineering from the University of Michigan.
Edward R. Prince, Jr. has served as a director of the Company since
---------------------
August 1988. Since August 1994, Mr. Prince has served as the Vice Chairman of
Zydeco Exploration, Inc. and Zydeco Energy, Inc., oil and gas exploration
companies. Prior to that from November 1970 to May 1994, Mr. Prince served in
various capacities, most recently as the Chairman and Chief Executive Officer
of Digicon. Mr. Prince holds a B.S. from the United States Military Academy
at West Point and an M.S. in Applied Mathematics from North Carolina State
College. Mr. Prince is the father of Rudy Prince, the Company's Chairman of
the Board and Chief Executive Officer. Mr. Prince is a director of
Geoscience Corporation and Zydeco Energy, Inc.
Lon B. Radin co-founded the Company and serves as the Vice President of
------------
Engineering and a member of the Board of Directors of the Company. Dr. Radin
also served as the Chairman of the Board of Directors from August 1988 to
October 1996. From 1986 to 1988, Dr. Radin was the sole proprietor of L-Tel
Laboratories, a developer of digital fax telephone devices. From 1981 to
1986, Dr. Radin served in various positions, most recently as the Director of
Software and Manager of Research with Time & Space Processing, Inc., a
software developer of telecommunications products for the defense industry.
Prior to that Dr. Radin served as a software services consultant for The
Systems Group, an engineering consulting firm from 1976 to 1981. Dr. Radin
holds a B.S. in Physics and Mathematics from the University of Michigan and a
Ph.D. and an M.A. in Mathematics from the University of California at
Berkeley.
Albert E. Sisto has served as a director of the Company since February
---------------
1998. Since November 1997, Mr. Sisto has served as the Chief Operating
Officer of RSA Data Security, a wholly owned subsidiary of Security Dynamics
Technologies, Inc., a supplier of software components that secure electronic
data. From October 1994 to November 1997, Mr. Sisto was Chairman of the Board
and President of DocuMagix, Inc., a supplier of electronic file cabinet
software which was acquired by the Company in December 1997. Prior to that
Mr. Sisto was President and Chief Executive Officer of Pixel Craft (formerly
BarneyScan) from 1989 to September 1994. Mr. Sisto holds a B.E. in Materials
from the Stevens Institute of Technology. Mr. Sisto is a director of
Insignia Solutions PLC, Tekgraf, Inc. and hi/fn, Inc.
Board Meetings and Committees
The Board of Directors of the Company held a total of six meetings
during 1998. No directors attended fewer than 75% of the total meetings of
the Board of Directors or committees of the Board of Directors held in
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1998 except for Mr. Chiu who attended three of the six Board meetings, Lon
Radin who attended four of the six Board meetings, and Al Sisto who attended
three of the five Board meetings during the time he was a member of the Board
of Directors. The Board of Directors has an Audit Committee and a Compensation
Committee.
In 1998, the Audit Committee consisted of Messrs. Akin, Bech, and
Carnevale and met twice. This committee is primarily responsible for
approving the services performed by the Company's independent auditors and
for reviewing and evaluating the Company's accounting principles and its
systems of internal accounting controls. Messrs. Akin, Bech and Carnevale
will continue serving as the Audit Committee for 1999.
In 1998, the Compensation Committee consisted of Messrs. Akin, Bech, and
Edward R. Prince, Jr. and met three times. The committee reviews and
approves the Company's executive compensation policy and plan. Messrs.
Akin, Bech, and Edward R. Prince, Jr. will continue serving as the
Compensation Committee for 1999.
Board Compensation
Directors did not receive any cash compensation for their services in
1998 as members of the Board of Directors, although they are reimbursed for
their expenses in attending out-of-town meetings. Officers are appointed by
and serve at the discretion of the Board of Directors. There are no family
relationships between directors and executive officers of the Company except
that Mr. Edward R. Prince, Jr., is the father of Rudy Prince the Company's
Chairman of the Board and Chief Executive Officer. Each nonemployee director
is automatically granted an initial option on the date on which such person
first becomes a director to purchase 20,000 shares of the Company's Common
Stock (an "Initial Grant") and thereafter an annual grant to purchase 5,000
shares of the Company's Common Stock on the date of the annual meeting of the
stockholders each year thereafter (an "Annual Grant") pursuant to the terms
of the Company's 1997 Directors' Stock Option Plan (the "Directors' Plan").
Pursuant to the Directors' Plan, Mr. Sisto was granted a option to purchase
20,000 shares on February 11, 1998 at an exercise price of $4.625 and all
other directors were granted an option to purchase 5,000 shares on May 13,
1998 at an exercise price of $6.00. One-fourth of each Initial Grant will
vest on each year over a four-year period and the Annual Grants will vest in
full on the four year anniversary of the date of grant. Each option will expire
ten years from the date of grant unless terminated sooner pursuant to the
provisions of the Directors' Plan.
PROPOSAL NO. 2
APPROVAL OF AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
CHANGE THE NAME OF THE COMPANY
Background
On February 8, 1999 the Company filed a Certificate of Ownership and
Merger Merging eFax.com, Inc. into JetFax, Inc. whereby Article One
of the Certificate of Incorporation of the Company was amended to change the
Company's name to eFax.com, Inc.
The Company used the mechanism of a merger with its wholly owned
subsidiary (which was created solely for the purpose of the name change) to
expedite the name change, because that process did not require a stockholder
vote. However, the Company was at that time unable to obtain the desired name
of "eFax.com." Section 102 of the Delaware General Corporation Law (the
"DGCL")requires the use of words indicating status as a corporation in a
corporation's name (for example: Company, Corporation, Co., Inc., etc.). Upon
the approval of the Company's stockholders of the name change, the Company
intends to amend its Certificate of Incorporation and file with the Secretary
of State of the State of Delaware a certificate stating that the Company's
assets as defined in subsection 503(i) of the DGCL are not less than
$10,000,000 and that the Company otherwise qualifies for a waiver from the
Division of Corporations in the Department of State from the requirement of a
name with such indicia of corporate status.
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Recommendation
The Board of Directors believes it is desirable to complete the process
it began with the merger, and to file the aforementioned certificate
requesting a waiver and to also amend Article One of the Certificate of
Incorporation of the Company to further change the name of the Company to
"eFax.com" in keeping with the Company's position as a high-technology
Internet company.
Therefore, the Board of Directors recommends to the Stockholders the
adoption of an amendment to Article One which would read as follows:
RESOLVED, that this Article One of the Corporation's Certificate
of Incorporation be amended to read as follows:
"The name of this corporation is: eFax.com."
Required Vote
The affirmative vote of the holders of a majority of the shares of Common
Stock outstanding and entitled to vote is necessary to approve the amendment
to the Certificate of Incorporation to effect the name change.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL 2.
PROPOSAL NO. 3
APPROVAL OF AN INCREASE IN THE SHARES AUTHORIZED FOR
ISSUANCE UNDER THE 1995 STOCK PLAN, AS AMENDED
Background
In February 1996, the Board of Directors adopted, and the stockholders of
the Company subsequently approved, the 1995 Stock Option Plan. Under the
1995 Stock Option Plan, as amended (the "1995 Plan"), there are 3,400,000
shares of the Company's Common Stock authorized for issuance upon exercise of
options granted thereunder to employees (including officers), directors and
consultants of the Company. As of March 29, 1999, 3,126,863 option shares
have been issued to employees, leaving a balance of approximately 273,137
shares available for grant.
The Board of Directors believes it is desirable to continue to have the
Company maintain sufficient option shares available for grant in order to
attract critical new employees and to retain existing employees. Therefore,
the Board of Directors of the Corporation, at a meeting held on March 29,
1999 adopted resolutions proposing and declaring advisable the reservation of
an additional 1,000,000 shares of Common Stock of the Company for issuance
pursuant to the Plan, and recommending the adoption of an amended Plan by the
Stockholders.
Adjustment to 1995 Plan Share Reserve
Stockholders are requested in this Proposal 3 to approve the increase in
the number of shares authorized for issuance under the 1995 Plan as described
above. If this Proposal 3 is not approved and such increase in the shares
authorized is not so approved, the Board will reconsider the Company's
alternatives with respect to the 1995 Plan, which may include the adoption of
another stock option plan of the Company or other adjustments.
Required Vote
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 1995 Plan, as amended. For purposes
of this vote, abstentions will be counted toward the tabulation of votes
counted and will have the same effect as negative votes, while broker non-
votes are counted toward a quorum but are not counted for any purpose in
determining whether this matter has been ratified and approved.
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THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL 3.
The essential features of the 1995 Plan are outlined below:
General
The 1995 Plan provides for the grant of both incentive and nonstatutory
stock options. Incentive stock options granted under the 1995 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 1995 Plan are intended not to
qualify as incentive stock options under the Code. See "Federal Income Tax
Information" for a discussion of the tax treatment of incentive and
nonstatutory stock options.
Purpose
The 1995 Plan was adopted to provide a means by which selected employees
and directors (including officers) of and consultants to the Company and its
affiliates could be given an opportunity to purchase stock in the Company, to
assist in retaining the services of employees holding key positions, 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. All of the Company's approximately 100 employees and
consultants are eligible to participate in the 1995 Plan.
Administration
The 1995 Plan is administered by the Board of Directors of the Company
or any of its committees appointed pursuant to Section 4 of the Plan (the
"Administrator"). Section 4 of the Plan provides that the committee must be
constituted in such a manner as to comply with Rule 16b-3 promulgated under
the Exchange Act with respect to Directors and Officers, and with applicable
California laws with respect to consultants and other employees. The Board
has delegated administration of the 1995 Plan to the Compensation Committee
of the Board. As used herein with respect to the 1995 Plan, the
"Administrator" refers to the Compensation Committee as well as to the Board
of Directors itself.
The Administrator has the power to construe and interpret the 1995 Plan
and, subject to the provisions of the 1995 Plan, to determine the persons to
whom and the dates on which options will be granted, the number of shares to
be subject to each option, 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, the type of consideration and other terms of the option and the terms
and restrictions applicable to the right to purchase restricted stock
granted pursuant to Section 11 of the Plan ("Stock Purchase Rights") and the
restricted stock purchased by exercising such Stock Purchase Rights.
The 1995 Plan provides that, subject to the Board's discretion,
directors serving on the Compensation Committee are to be "outside directors"
within the meaning of Section 162(m). The current members of the Compensation
Committee are all "outside directors." This limitation excludes from the
Compensation Committee (a) current employees of the Company, (b) former
employees of the Company receiving compensation for past services (other than
benefits under a tax-qualified pension plan) during the taxable year, (c)
current and former officers of the Company or its current affiliated
corporations, and (d) directors currently receiving direct or indirect
remuneration from the Company in any capacity (other than as a director).
Eligibility
Incentive stock options may be granted under the 1995 Plan only to
employees (including officers) of the Company and its affiliates. Employees
(including officers), directors and consultants are eligible to receive
nonstatutory stock options under the 1995 Plan. Stock purchase rights may
also be granted under the plan to employees (including officers), directors
and consultants.
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No incentive stock option may be granted under the 1995 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 option 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. The aggregate fair market value, determined at the time of grant,
of the shares of Common Stock with respect to which such options granted
under the 1995 Plan are exercisable for the first time by an optionee during
any calendar year (under all such plans of the Company and its affiliates)
may not exceed $100,000.
Stock Subject To The 1995 Plan
If options granted under the 1995 Plan expire or otherwise terminate
without being exercised, the Common Stock not purchased pursuant to such
options again becomes available for issuance under the 1995 Plan.
Terms of Options
The following is a description of the permissible terms of options under
the 1995 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
------------------------
under the 1995 Plan may not be less than the fair market value of the Common
Stock subject to the option on the date of the option 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 under the 1995 Plan
may not be less than 85% of the fair market value of the Common Stock subject
to the option on the date of the option grant. At March 24, 1999, the closing
price of the Company's Common Stock as reported on the Nasdaq National Market
System was $19.125 per share.
In the event of a decline in the value of the Company's Common Stock,
the Board has the authority to offer employees the opportunity to replace
outstanding higher priced options, whether incentive or nonstatutory, with
new lower-priced options.
The exercise price of options granted under the 1995 Plan must be paid
either: (a) in cash at the time the option is exercised; (b) by delivery of
other Common Stock of the Company, provided that (i) any such shares acquired
upon exercise of a prior Option shall either have been owned by Optionee for
more than six months or were not acquired, directly or indirectly, from the
Company and (ii) have a Fair Market Value on the date of surrender equal to
the aggregate exercise price; (c) by withholding of Exercise Shares with a
Fair Market Value equal to the exercise price, (d) a broker's arrangement to
withhold the exercise price, (e) pursuant to a deferred payment arrangement
lasting no longer than twelve months; or (f) in any other form of legal
consideration acceptable to the Board.
Tax Withholding. To the extent provided by the terms of an option, an
----------------
optionee may satisfy any federal, state or local tax withholding obligation
relating to the exercise of such option by authorizing the Company to
withhold a portion of the stock otherwise issuable to the optionee, subject
to the consent or disapproval of the Administrator.
Term. The maximum term of options under the 1995 Plan is ten years,
-----
except that in certain cases (see "Eligibility") the maximum term is five
years. Generally, incentive stock options under the 1995 Plan terminate 90
days after termination of the optionee's employment or relationship as a
consultant or director of the Company or any affiliate of the Company, unless
such termination is due to such person's permanent and total disability (as
defined in the Code), in which case the option may, but need not, provide
that it may be exercised at any time within six months of such termination,
(or twelve months in the event of the death of the optionee) but only to the
extent the option was exercisable at the time of such termination.
Nonstatutory options by their terms may provide for exercise within a longer
period of time following termination of employment or the relationship as a
consultant or director.
8
<PAGE> 11
Terms of Stock Purchase Rights
The 1995 Plan provides that the Administrator may grant Stock Purchase
Rights, which rights must be accepted within 120 days of grant. Stock
purchased shall be Restricted Stock that will be received subject to a
Restricted Stock agreement. The price to be paid for the Restricted Stock
shall be no less than 85% of the fair market value of the Common Stock
subject to the right on the date of grant (or for 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, the price shall be no less than 100% of the fair market value ).
Such Restricted Stock will be subject to a repurchase option exercisable by
the company upon the voluntary or involuntary termination of the purchaser's
employment. The committee will determine the rate at which such repurchase
option lapses, but it will lapse at least as to 20% of the total shares
annually. A purchaser shall have full stockholder rights at the time his
purchase is entered in the transfer agent records.
Adjustment Provisions
If there is any change in the stock subject to the 1995 Plan or subject
to any option granted under the 1995 Plan (through stock dividend, stock
split, reverse stock split, combination or reclassification of shares, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company (excluding
conversion of any convertible securities of the Company)), the 1995 Plan and
options outstanding thereunder will be appropriately adjusted.
Effect Of Certain Corporate Events
The 1995 Plan provides that, in the event of a dissolution or
liquidation of the Company, or a merger in which the successor corporation
does not agree to assume the Option or Stock Purchase Right or substitute an
equivalent, the Board shall provide 15 days notice prior to the action.
Duration, Amendment And Termination
The Board may suspend or terminate the 1995 Plan without stockholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the 1995 Plan will terminate on December 19, 2005.
The Board may also amend the 1995 Plan at any time or from time to time.
However, no amendment will be effective unless approved by the stockholders
of the Company within twelve months before or after its adoption by the Board
if the amendment would: (a) modify the requirements as to eligibility for
participation (to the extent such modification requires stockholder approval
in order for the 1995 Plan to satisfy Section 422 of the Code, if applicable,
or Rule 16b-3 promulgated by the Commission under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")); (b) increase the number of shares
reserved for issuance upon exercise of options (unless due to an adjustment
resulting from a change in the stock subject to the 1995 Plan); or (c) change
any other provision of the 1995 Plan in any other way if such modification
requires stockholder approval in order to comply with Rule 16b-3 or satisfy
the requirements of Section 422 of the Code (or any other applicable law or
regulation, including the requirements of the NASD or an established stock
exchange). The Board may submit any other amendment to the 1995 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.
Restrictions On Transfer
Options and Stock Purchase Rights granted under the 1995 Plan may not be
transferred except by will or by the laws of descent and distribution, and
may be exercised during the lifetime of the optionee only by the optionee.
9
<PAGE> 12
Federal Income Tax Information
Incentive Stock Options. Incentive stock options under the 1995 Plan
------------------------
are intended to be eligible for the favorable federal income tax treatment
accorded to "incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee
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
optionee's alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive
stock option for more than 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 optionee upon exercise of the option, any gain or loss on
a disposition of such stock will be long-term capital gain or loss.
Generally, if the optionee disposes of the stock before the expiration of
either of these holding periods (a "disqualifying disposition"), at the time
of disposition, the optionee will realize taxable ordinary income equal to
the lesser of (a) the excess of the stock's fair market value on the date of
exercise over the exercise price, or (b) the optionee's actual gain, if any,
on the purchase and sale. The optionee'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. Long-term capital gains currently are subject to lower tax rates
than ordinary income. Currently, noncorporate taxpayers are subject to a
maximum federal capital gains rate of 20% and a maximum federal rate of 39.6%
for ordinary income and short-term capital gains.
To the extent the optionee 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. Nonstatutory stock options granted under the
---------------------------
1995 Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason
of the grant of a nonstatutory stock option. Upon exercise of a nonstatutory
stock option, the optionee normally will recognize taxable ordinary income
equal to the excess of the stock's fair market value on the date of exercise
over the option exercise price. Generally, with respect to employees, the
Company is 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 optionee. Upon disposition of the stock, the
optionee 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 exercise of the option. Such
gain or loss will be long or short-term depending on whether the stock was
held for more than one year. Slightly different rules may apply to optionees
who acquire stock subject to certain repurchase options or who are subject to
Section 16(b) of the Exchange Act.
Stock Purchase Rights. For a period of time determined by the
----------------------
Administrator, an employee who purchases Restricted Stock under the 1995 Plan
may be required, at the option of the Company, to sell his shares back to the
Company for his original purchase price (rather than fair market value) if
his employment is terminated. Thus, his shares will be deemed to be subject
to a substantial risk of forfeiture at the time of issuance. The federal
income tax consequences to the employee will depend upon whether he makes an
election under Section 83(b) of the Code.
If the employee does not make a Code Sec. 83(b) election within 30 days
--------------------------------------------------------
of issuance of stock under the 1995 Plan, the employee will recognize
compensation income upon the date on which the shares become "substantially
vested"-i.e., the earlier of (1) the date on which the shares are not subject
to a substantial risk of forfeiture or (2) the date on which the employee may
transfer the shares free of any substantial risk of
10
<PAGE> 13
forfeiture. The amount of compensation income will be equal to the fair market
value of the shares at the time they become substantially vested reduced by the
employee's purchase price for the shares. An employee's shares generally will
become substantially vested (and thus will become taxable) at such time that,
if the employee's employment with the Company were to be terminated, the
Company's option to purchase such shares at the employee's original purchase
price would have lapsed. Thus, for example, if the Company's repurchase option
with respect to 20% of an employee's shares were to lapse upon the first
anniversary date of the employee's stock purchase, the employee would be
required to recognize compensation income with respect to 20% of the shares
in the calendar year in which the first anniversary date occurred. The
employee's compensation income would be subject to normal income and
employment tax withholdings.
The employee's holding period with respect to the shares commences on
the date on which the shares become substantially vested. The basis of the
employee's shares will equal the sum of the employee's purchase price for the
shares plus the amount included as compensation in the employee's gross
income at the time the shares become substantially vested under Code Sec. 83(a).
If the employee subsequently sells his shares, he will recognize gain or
loss, which will be capital in nature. If the employee holds shares for more
than one year after they become substantially vested, any gain on the sale of
such shares will be treated as a long-term capital gain.
If the employee makes an election under Code Sec. 83(b), he includes in
-------------------------------------------------------
compensation income the excess, if any, of the fair market value of the
shares at the time of issuance over his purchase price for the shares. His
holding period for the shares will begin on the date that the stock was
purchased. His basis in the shares will equal the sum of his purchase price
plus the amount of compensation includable in income under Code Sec. 83(b).
If the employee sells his shares after they vest at a gain or loss, such
gain or loss will be capital in nature. Any such gain or loss will be
treated as long-term capital gain or loss provided his holding period is for
more than one year. If an employee's shares that are substantially nonvested
are repurchased by the Company at his original cost, his loss, if any, will
not be deductible.
The Company generally will be entitled to a deduction equal to the
amount of compensation that the employee has included in income under Code Sec.
83(a) or Code Sec. 83(b) in the same taxable year in which the employee
included the income.
Potential Limitation on Company Deductions. Section 162(m) of the Code
-------------------------------------------
denies a deduction to any publicly held corporation for compensation paid to
certain employees in a taxable year to the extent that compensation exceeds
$1,000,000 for a covered employee. It is possible that compensation
attributable to stock options or Stock Purchase Rights, 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 will qualify as performance-based
compensation, provided that the option is granted by a compensation committee
comprised solely of "outside directors" and either: (a) the option plan
contains a per-employee limitation on the number of shares for which options
may be granted during a specified period, the per-employee limitation is
approved by the stockholders, and the exercise price of the option is no less
than the fair market value of the stock on the date of grant; or (b) the
option 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 option is approved by stockholders.
Compensation attributable to Stock Purchase Rights will be treated as
performance-based compensation if (i) it is paid solely because the employee
has attained one or more performance goals set by a compensation committee
consisting solely of two or more outside directors; (ii) before payment,
shareholders approve the terms under which the compensation is to be paid,
including the performance goals; and (iii) before payment, the compensation
committee certifies that the performance goals and any other materials terms
were satisfied. The
11
<PAGE> 14
compensation will not be treated as paid solely on account of attaining
performance goals unless it is paid under a pre-established objective
performance formula or under a standard that precludes discretion.
Other Tax Consequences. The foregoing discussion is intended to be a
-----------------------
general summary only of the federal income tax aspects of options granted
under the 1995 Plan. Tax consequences may vary depending on the particular
circumstances at hand. In addition, administrative and judicial
interpretations of the application of the federal income tax laws are subject
to change. Furthermore, no information is given with respect to state or
local taxes that may be applicable. Participants in the 1995 Plan who are
residents of or are employed in a country other than the United States may be
subject to taxation in accordance with the tax laws of that particular
country in addition to or in lieu of United States federal income taxes.
During the fiscal year ended December 31, 1998, the Company did not
grant any options under the 1995 Plan to any of its Named Executive Officers
(defined below)options to purchase 45,000 shares of Common were granted to
directors of the Company. During that same period, options to purchase an
aggregate of 802,800 shares were granted to all employees of the Company
other than the Named Executive Officers as a group (exclusive of expired
options).
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche LLP, independent
auditors, to audit the consolidated financial statements of the Company for
the fiscal year ending December 31, 1999, and recommends that stockholders
vote for ratification of such appointment. In the event of a negative vote
on such ratification, the Board of Directors will reconsider its selection.
Deloitte & Touche LLP has audited the Company's financial statements
since 1988. Its representatives are expected to be present at the Annual
Meeting with the opportunity to make a statement if they desire to do so and
are expected to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT AUDITORS.
12
<PAGE> 15
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation earned in each of the
three years in the period ended December 31, 1998 by the Chief Executive
Officer and each of the other four most highly compensated executive officers
of the Company (collectively the "Named Executive Officers"), during the year
ended December 31, 1998:
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Securities
Underlying All Other
Name and Principal Position Year Salary($) Bonus($) Options(#) Compensation($)
- --------------------------- --- -------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Rudy Prince................ 1998 $180,000 - - 272(2)
Chief Executive Officer 1997 140,000 - 175,000 -
and Chairman of the Board 1996 102,995(1) - 100,000 -
and Former President
Michael M. Crandell........ 1998 140,000 - - 188(2)
Vice President of Software 1997 110,000 - - -
1996 45,525(1) - 187,500 -
Allen K. Jones............. 1998 150,000 - - 592(2)
Vice President of Finance, 1997 120,000 - 100,000 -
Chief Financial Officer 1996 70,298(1) - 60,000 -
And Secretary
Gary P. Kapner............. 1998 125,000 15,000 - 100(2)
Vice President of U.S. 1997 89,840 20,000 100,000 -
Sales 1996 61,918(1) 10,000 60,000 -
Lon B. Radin............... 1998 145,000 - - 341(2)
Vice President of 1997 125,000 - 75,000 -
Engineering 1996 92,604(1) - 100,000 -
</TABLE>
[FN]
(1) The salaries and bonus set forth in the table for 1996 are given for the
fiscal year ended December 31, 1996, which is a nine-month period. For
the twelve-month period ended December 31, 1996, the salaries earned by
each Named Executive Officer were as follows: Rudy Prince, $129,245;
Michael Crandell, $45,525 (Mr. Crandell joined the Company as an executive
officer in July 1996); Allen K. Jones, $70,298 (Mr. Jones joined the
Company as an executive officer in May 1996); Gary P. Kapner, $89,418; and
Lon B. Radin, $118,854.
(2) Consists of life insurance premiums paid.
</FN>
13
<PAGE> 16
Option Grants in Last Fiscal Year
No options were granted to the Named Executive Officers during the year
ended December 31, 1998.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values.
(1) The following table provides certain information concerning the number
of options held and their fiscal year-end value. None of the Named
Executive Officers exercised any options during the year ended December
31, 1998.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at FY-End(#) Options at FY-End($)(1)
------------------------- -------------------------
<S> <C> <C> <C> <C>
Name Exercisable Unexercisable Exercisable Unexercisable
Rudy Prince........... 114,061 160,939 $149,999 $75,002
Michael Crandell...... 187,281 74,219 350,088 181,837
Allen K. Jones........ 44,582 94,168 42,875 52,063
Gary P. Kapner........ 38,331 46,669 52,167 17,183
Lon B. Radin.......... 86,977 88,023 149,999 75,002
</TABLE>
[FN]
(1) Calculated by determining the difference between the closing price of the
Company's Common Stock on the Nasdaq National Market at year-end ($2.75)
and the exercise price of the in-the-money options. Such numbers do not
reflect amounts actually realized upon sale of the shares by such officers.
</FN>
14
<PAGE> 17
REPORT OF THE COMPENSATION COMMITTEE
The following is the Report of the Compensation Committee of the
Company, describing the compensation policies and rationale applicable to the
Company's executive officers with respect to the compensation paid to such
executive officers for the year ended December 31, 1998. The information
contained in the report shall not be deemed to be "soliciting material" or to
be "filed" with the Securities and Exchange Commission nor shall such
information be incorporated by reference into any future filing under the
Securities Act of 1933, as amended (the "Securities Act") or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), except to the extent
that the Company specifically incorporates it by reference into such filing.
TO: Board of Directors
The Compensation Committee of the Board of Directors of eFax.com,
Inc. is charged with the responsibility of administering all aspects of
the Company's executive compensation programs. The members of the
Committee for the year ended December 31, 1998 were Messrs. Akin, Bech,
Harrison and Edward R. Prince, Jr., who were all nonemployee Directors
of the Company. Mr. Harrison resigned from the Board and the Compensation
Committee in February 1998, and prior to February 1998 there were no 1998
committee meetings.
Compensation Objectives
The objectives of the compensation program are: (1) to provide a
means for the Company to attract and retain high-quality executives; (2)
to tie executive compensation directly to the Company's business and
performance objectives; and (3) to reward outstanding individual
performance that contributes to the long-term success of the Company.
Compensation Vehicles
The Company uses a simple total compensation program that consists
of cash and equity compensation. Having a compensation program that
allows the Company to successfully attract and retain key employees
permits it to provide useful products and services to customers, enhance
stockholder value, stimulate technological innovation, foster Company
values and adequately reward employees. The vehicles are:
Cash Compensation
Salary
------
The Committee considers specifically the following factors in
determining base compensation: (1) a comparison of the Company's growth
and financial performance relative to the performance of competitors; (2)
salary levels for comparable positions in companies in the software
industry; and (3) each executive's responsibility level and financial and
strategic objectives for the subsequent year.
Bonus
-----
No bonus plan has been utilized for executive compensation in 1996,
1997, or 1998 other than bonuses related to meeting sales objectives in
Sales and Marketing.
Equity Participation
The Company has adopted the 1995 Option Plan to provide employees
with additional incentives to work to maximize stockholder value. The
stock option plan utilizes vesting periods to encourage key employees to
continue in the employ of the Company. Stock options have been awarded
to all of the Company's employees. The Company believes that options
align the interests of executive officers closely with the interests of
other stockholders because of the direct benefits executive officers
receive through improved stock performance.
15
<PAGE> 18
Chief Executive Officer's Compensation
Compensation for the Chief Executive Officer is determined by a
process similar to that discussed above for executive officers. Mr.
Prince's base compensation for fiscal 1998 was established by the
Compensation Committee in November 1997.
The foregoing report has been furnished by the Compensation Committee
of the Board of Directors of eFax.com, Inc.
Compensation Committee
Thomas B. Akin
Douglas Y. Bech
Edward R. Prince, Jr.
Compensation Committee Interlocks and Insider Participation
Please see "Certain Transactions With Management" below for information
regarding reportable transactions between the Company and members of the
Compensation Committee. During the year ended December 31, 1998, Messrs.
Akin, Bech, and Edward R. Prince, Jr. served as the Compensation Committee of
the Company's Board of Directors. During the year ended December 31, 1998,
no interlocking relationship existed between any member of the Company's
Compensation Committee and any other member of the Company's Board of
Directors. Mr. Edward R. Prince, Jr. is the father of Rudy Prince, the
Company's Chairman of the Board and Chief Executive Officer.
16
<PAGE> 19
COMPANY PERFORMANCE
The following line graph compares the cumulative total return to
stockholders on the Company's Common Stock since June 10, 1997 the date the
Company first became subject to the reporting requirements of the Exchange
Act). The graph compares stockholder return on the Company's Common Stock
with the same cumulative total return on the Hambrecht & Quist Technology
Index and the Nasdaq Stock Market - U.S. Index. The information contained in
the Performance Graph shall not be deemed to be "soliciting material" or to
be "filed" with the Securities and Exchange Commission, nor shall such
information be incorporated by reference into any future filing under the
Securities Act or the Exchange Act, except to the extent that the Company
specifically incorporates it by reference into such filing.
The graph assumes that $100 was invested on June 10, 1997 in the
Company's Common Stock at the initial public offering price of $8.00 per
share and in the index, and that all dividends were reinvested. No dividends
have been declared or paid on the Company's Common Stock. Stockholder
returns over the period indicated should not be considered indicative of
future stockholder returns.
eFax.com, Inc.
Hambrecht & Quist Technology Index
Nasdaq Stock Market - U.S. Index
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG eFAX.com,Inc. (Formerly JETFAX, INC.), H&Q TECHNOLOGY AND NASDAQ STOCK
MARKET--U.S.
[PERFORMANCE GRAPH FOR THE PERIOD JUNE 10,
1997 THROUGH DECEMBER 31, 1998 APPEARS HERE]
The following table sets forth the data points used in preparing the
Performance Graph:
<TABLE>
<CAPTION>
Measurement Period H&Q NASDAQ
(Period Covered) eFAX.COM, INC. TECHNOLOGY STOCK MARKET--U.S.
-------------- ---------- ------------------
<S> <C> <C> <C>
Measurement Pt-06/10/97 $ 100.00 $ 100.00 $ 100.00
06/97 $ 96.88 $ 104.13 $ 102.85
07/97 $ 123.50 $ 120.88 $ 113.70
08/97 $ 123.50 $ 121.23 $ 113.53
09/97 $ 106.23 $ 126.20 $ 120.24
10/97 $ 101.63 $ 112.72 $ 114.01
11/97 $ 87.50 $ 111.54 $ 114.58
12/97 $ 67.25 $ 106.41 $ 112.75
01/98 $ 45.38 $ 113.23 $ 116.30
02/98 $ 50.75 $ 126.70 $ 127.22
03/98 $ 64.13 $ 128.84 $ 131.92
04/98 $ 77.38 $ 133.86 $ 134.16
05/98 $ 75.00 $ 124.09 $ 126.80
06/98 $ 59.38 $ 131.91 $ 135.74
07/98 $ 46.13 $ 130.24 $ 134.31
08/98 $ 36.00 $ 102.43 $ 107.97
09/98 $ 31.25 $ 117.26 $ 122.89
10/98 $ 31.25 $ 127.14 $ 127.91
11/98 $ 22.63 $ 142.26 $ 140.51
12/98 $ 34.38 $ 165.52 $ 158.49
</TABLE>
17
<PAGE> 20
CERTAIN TRANSACTIONS WITH MANAGEMENT
In connection with the Crandell Acquisition in July 1996, the Company
acquired substantially all of the assets of the Crandell Group in exchange
for a cash payment of $250,000, a non-interest bearing secured promissory
note of the Company in the amount of $250,000 which was repaid in July 1997
and an agreement to make certain ongoing royalty payments to the Crandell
Group. In addition, the Company entered into employment agreements with
Michael Crandell and Larry Crandell, the principals of the Crandell Group.
The Company also issued options to purchase an aggregate of 280,000 shares of
the Company's Common Stock to certain former employees of the Crandell Group
who were hired by the Company, including 187,500 shares to Michael Crandell
and 62,500 shares to Larry Crandell, at an exercise price of $0.30 per share
(the estimated fair market value of the Company's Common Stock at the grant
date), subject to vesting over 4 year periods (except for a 2 year vesting
period as to Larry Crandell). Pursuant to an amendment agreement dated
December 1996, (the "Amendment Agreement") the Company's obligation to make
certain ongoing royalty payments terminated upon the Company's initial public
offering, in exchange for a single lump sum payment. Pursuant to the
Amendment Agreement, the Company also issued warrants, exercisable at $1.75
per share (the estimated fair market value of the Company's Common Stock at
the grant date), to Michael Crandell and to Larry Crandell to purchase 75,000
shares and 25,000 shares of the Company's Common Stock, respectively. Such
warrants were exercisable upon the effectiveness of the Company's initial
public offering. Michael Crandell is the Company's Vice President of
Software.
In December 1994, pursuant to an Inkjet License and Supply Agreement
(the "Inkjet Agreement"), the Company granted certain licenses and
sublicenses to Ailicec (B.V.1.) Limited, an affiliate of Ailicec
International Enterprises Limited ("Ailicec International"), with respect to
certain technology developed by the Company and by Xerox Corporation in
connection with an inkjet product and agreed to supply Ailicec (B.V.I.)
Limited with such products and related components and consumables. Ailicec
(B.V.I.) Limited purchased products, components and consumables from the
Company under the Inkjet Agreement in an aggregate amount of approximately
$12,000 during the two twelve month periods ended December 31, 1997 and
December 31, 1998. Ailicec International was a principal stockholder of the
Company. Chung Chiu, a director of the Company, is the Managing Director of
Ailicec International. Mr. Chiu is not standing for re-election at the 1999
Annual Meeting.
The Company has entered into indemnification agreements with each of its
directors and executive officers. Such agreements require the Company to
indemnify such individuals to the fullest extent permitted by Delaware law.
The Company acquired DocuMagix, Inc. through a merger which was
accounted for as a pooling of interests in December 1997. As part of the
transaction, the principal DocuMagix stockholders requested representation on
the eFax.com, Inc. Board of Directors until the 900,000 shares of eFax.com,
Inc. Common Stock issued to the DocuMagix stockholders in the merger were
registered with the Securities and Exchange Commission, which occurred in the
third quarter of 1998. Albert E. Sisto, previously the Chairman and Chief
Executive Officer of DocuMagix, Inc., was appointed to the Company's Board of
Directors in February 1998, pursuant to this Agreement. This arrangement no
longer applies subsequent to the 1998 registration, however Mr. Sisto has
been nominated for the Board for the forthcoming election at the May 13, 1999
Annual Meeting of Stockholders.
18
<PAGE> 21
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of February 28, 1999 (except as noted
in the footnotes) certain information with respect to the beneficial
ownership of the Company's Common Stock by (i) each person known by the
Company to own beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each director and nominee of the Company, (iii) each of the Named
Executive Officers and (iv) all directors and executive officers as a group.
Except as indicated in the footnotes to this table the persons and entities
named in the table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them, subject to
community property laws where applicable.
<TABLE>
<CAPTION>
Shares of Common Stock
Beneficially Owned(1)
----------------------
Percentage
Name of Beneficial Owner Number Ownership
----------------------------------- ---------- ----------
<S> <C> <C>
Timothy Draper (2)................................... 727,906 6.1%
c/o Draper Fisher Associates
400 Seaport Ct.
Redwood City, CA 94965
Thomas B. Akin (3)................................... 700,999 5.8%
c/o Talkot Capital, LLC
2400 Bridgeway, Suite 200
Sausalito, CA 94965
Rudy Prince (4) ..................................... 479,478 3.9%
Steven J. Carnevale (5).............................. 338,831 2.8%
Lon B. Radin (6)..................................... 286,561 2.4%
Michael Crandell(7).................................. 219,000 1.8%
Allen K. Jones (8)................................... 102,075 *
Edward R. Prince, Jr. (9)............................ 96,333 *
Douglas Y. Bech (10)................................. 95,492 *
Gary P. Kapner (11) ................................. 66,540 *
Chung Chiu (12)...................................... 15,000 *
Albert E. Sisto (13)................................. 5,000 *
All directors and executive officers as a group,
(13 persons) (14).................................. 2,414,308 18.6%
* Less than 1%.
</TABLE>
[FN]
(1) Except as otherwise indicated in the footnotes to this table and
pursuant to applicable community property laws, the persons named
in the table have sole voting and investment power with respect to
all shares of Common Stock.
(2) Information is as provided in a Form 13G filed with the SEC on
December 10, 1998. Mr. Draper holds sole voting and dispositive
power as to all shares, and shared voting and dispositive power as
to 340,186 shares. Draper Associates, L.P. and Draper Associates,
Inc., an entity owned by Timothy Draper and the General Partner of
Draper Associates, L.P., holds shared voting and dispositive power
as to 340,186 shares.
(3) Includes 23,649 shares jointly with his wife, Karen Akin; and
83,720 shares of Common Stock held by his minor children. Includes
options and warrants to purchase an aggregate of 48,472 shares of
Common Stock exercisable within sixty days of February 28, 1998.
(4) Includes options to purchase 166,978 shares of Common Stock
exercisable within sixty days of February 28, 1999.
(5) Includes options to purchase 275,265 shares of Common Stock
exercisable within sixty days of February 28, 1999; and includes
30,233 shares of Common Stock held by Mr. Carnevale's wife.
(6) Includes options to purchase 121,561 shares of Common Stock
exercisable within sixty days of February 28, 1999.
(7) Includes options and warrants to purchase an aggregate of 219,000
shares of Common Stock exercisable within sixty days of February 28,
1999.
19
<PAGE> 22
(8) Includes options to purchase 69,916 shares of Common Stock
exercisable within sixty days of February 28, 1999.
(9) Includes options to purchase 15,000 shares of Common Stock
exercisable within sixty days of February 28, 1999.
(10) Includes options to purchase 15,000 shares of Common Stock
exercisable within sixty days of February 28, 1999.
(11) Includes options to purchase 56,540 shares of Common Stock
exercisable within sixty days of February 28, 1999.
(12) Includes options to purchase 15,000 shares of Common Stock
exercisable within sixty days of February 28, 1999.
(13) Includes options to purchase 5,000 shares of Common Stock
exercisable within sixty days of February 28, 1999.
(14) Includes options and warrants in the aggregate of 1,007,732
shares of Common Stock exercisable within sixty days of February
28, 1999.
</FN>
20
<PAGE> 23
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act and regulations of the Securities and
Exchange Commission (the "SEC") thereunder require the Company's executive
officers and directors, and persons who own more than 10% of a registered
class of the Company's equity securities, to file reports of initial
ownership and changes in ownership with the SEC. Based solely on its review
of copies of such forms received by the Company, and on written
representations from certain reporting persons that no other reports were
required for such persons, the Company believes that, during or with respect
to the fiscal year ended December 31, 1998, all of the Section 16(a) filing
requirements applicable to its executive officers, directors and 10%
stockholders were complied with except that Ron Brown filed his Form 3 on
becoming a Company officer 77 days late.
OTHER MATTERS
The Company knows of no other matters to be brought before the meeting.
If any other matters properly come before the meeting, it is the intention of
the persons named in the accompanying proxy to vote the shares represented as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
/s/ ALLEN K. JONES
---------------------
Allen K. Jones
Secretary
Dated: April 16, 1999
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<PAGE> 24
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
EFAX.COM, INC.
1999 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of eFax.com, Inc., a Delaware corporation (the
"Company"), hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated April 16, 1999, and hereby
appoints Rudy Prince and Allen K. Jones, or either of them, 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 1998 Annual
Meeting of Stockholders of eFax.com, Inc. to be held on May 13, 1999, at 2:00
p.m. local time, at Stanford Park Hotel, 100 El Camino Real, Menlo Park,
California, and at any adjournment(s) or postponement(s) thereof, and to vote
all shares of Common Stock which the undersigned would be entitled to vote if
then and there personally present, on the matters set forth below.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE RATIFICATION
OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS, FOR
PROPOSALS 2 AND 3, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING.
(Continued and to be signed on reverse side)
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. To elect seven (7) directors of the Company for the ensuing year and
until their successors are elected: Nominees: Rudy Prince, Thomas B. Akin,
Douglas Y. Bech, Steven J. Carnevale, Edward R. Prince, Jr., Lon B. Radin,
Albert E. Sisto
authority to vote for any nominee may be withheld by drawing a line through
such nominee's name
[_] FOR [_] WITHHELD
all nominees authority to vote for all nominees
listed above listed above
2. To approve an amendment to the Company's Certificate of Incorporation
to change the name of the Company to "eFax.com."
[_] FOR [_] WITHHELD [_] ABSTAIN
3. To approve an increase in the aggregate number of shares of Common
Stock authorized for issuance under the Company's 1995 Stock Plan, as
amended, by 1,000,000 shares.
[_] FOR [_] WITHHELD [_]ABSTAIN
4. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the year ending December 31, 1999.
[_] FOR [_] WITHHELD [_] ABSTAIN
5. To transact such other business as may properly come before the meeting
or any postponements or adjournments thereof.
[_] Mark here for address change
and note at left.
Signature(s):______________________________________Date:_________ NOTE:
(This proxy should be marked, dated, and signed by the stockholder(s) exactly
as his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons in a fiduciary capacity should so indicate, if shares are
held by joint tenants or as community property, both should sign.)
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<PAGE> 25
EXHIBIT A
eFax.com, Inc. (Formerly JetFax, Inc.)
1995 STOCK PLAN
(As amended September 19, 1996 and February 19, 1997)
1. Purposes of the Plan. The purposes of this Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants
of the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject
to the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder. Stock purchase rights may also be granted
under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means eFax.com, Inc., a Delaware corporation.
(g) "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render consultative or
advisory services and is compensated for such services, and any director of the
Company whether compensated for such services or not provided that if and in
the event the Company registers any class of any equity security pursuant to
the Exchange Act, the term Consultant shall thereafter not include directors
who are not compensated for their services or are paid only a director's fee
by the Company.
(h) "Continuous Status as an Employee" means the absence of any
interruption or termination of the employment relationship by the Company or
any Subsidiary. Continuous Status as an Employee shall not be considered
interrupted in the case of: (i) sick leave, military leave or any other leave
of absence approved by the Board, provided that such leave is for a period of
not more than ninety (90) days, unless
1
<PAGE> 26
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (ii) in the case of transfers between locations of the Company
or between the Company, its Subsidiaries or its successor.
(i) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute employment'' by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system including without limitation the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported, as quoted on such system or exchange for the last market trading day
prior to the time of determination) as reported in the Wall Street Journal or
such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System
(but not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high and low asked prices for the
Common Stock; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith
by the Board.
(l) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(m) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(n) "Option" means a stock option granted pursuant to the Plan.
(o) "Optioned Stock" means the Common Stock subject to an
Option.
(p) "Optionee" means an Employee or Consultant who receives an
Option.
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<PAGE> 27
(q) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(r) "Plan" means this 1995 Stock Plan, as amended from time to
time.
(s) "Purchaser" means an Employee or Consultant who exercises a
Stock Purchase Right.
(t) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(u) "Stock Purchase Right" means the right to purchase
Restricted Stock granted pursuant to Section 11 of the Plan.
(v) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section
13 of the Plan, the maximum aggregate number of shares which may be optioned
and sold under the Plan is 3,400,000 Shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right should expire or become unexercisable
for any reason without having been exercised in full, the unpurchased Shares
which were subject thereto shall, unless the Plan shall have been terminated,
become available for future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Administration With Respect to Directors and
Officers. With respect to grants of Options or Stock Purchase Rights to
Employees who are also officers or directors of the Company, the Plan shall be
administered by (A) the Board if the Board may administer the Plan in
compliance with Rule 16b-3 promulgated under the Exchange Act or any successor
thereto ("Rule 16b-3") with respect to a plan intended to qualify thereunder as
a discretionary plan, or (B) a Committee designated by the Board to administer
the Plan, which Committee shall be constituted in such a manner as to permit
the Plan to comply with Rule 16b-3 with respect to a plan intended to qualify
thereunder as a discretionary plan. Once appointed; such Committee shall
continue to serve in its designated capacity until
3
<PAGE> 28
otherwise directed by the Board. From time to time the Board may increase
the size of the Committee and appoint additional members thereof, remove
members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify
thereunder as a discretionary plan.
(ii) Multiple Administrative Bodies. If permitted by
Rule 16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers.
(iii) Administration With Respect to Consultants and
Other Employees. With respect to grants of Options or Stock Purchase Rights
to Employees or Consultants who are neither directors nor officers of the
Company, the Plan shall be administered by (A) the Board or (B) a Committee
designated by the Board, which Committee shall be constituted in such a
manner as to satisfy the legal requirements relating to the administration
of incentive stock option plans, if any, of California corporate and
securities laws and of the Code (the "Applicable Laws"). Once appointed,
such Committee shall continue to serve in its designated capacity until
otherwise directed by the Board. From time to time the Board may increase
the size of the Committee and appoint additional members thereof, remove
members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions
of the Plan and in the case of a Committee, the specific duties delegated by
the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(j) of the Plan;
(ii) to select the officers, Consultants and Employees
to whom Options and Stock Purchase Rights may from time to time be granted
hereunder;
(iii) to determine whether and to what extent Options
and Stock Purchase Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock
to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder
(including, but not limited to the share price and any restriction or
limitation, based in each case on such factors as the Administrator shall
determine, in its sole discretion);
(vii) to determine the terms and restrictions applicable
to Stock Purchase Rights and the Restricted Stock purchased by exercising
such Stock Purchase Rights;
4
<PAGE> 29
and
(viii) to make any other such determinations with
respect to awards under the Plan as it shall deem appropriate.
(c) Effect of Committee's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and Purchasers and any other holders of any Options
or Rights.
5. Eligibility for Options.
(a) Nonstatutory Stock Options may be granted to Employees
and Consultants. Incentive Stock Options may be granted only to Employees.
An Employee or Consultant who has been granted an Option may, if he is
otherwise eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of the Shares with respect to which Options
designated as Incentive Stock Options are exercisable for the first time by
any Optionee during any calendar year (under all plans of the Company or any
Parent or Subsidiary) exceeds $100,000, such excess Options shall be treated
as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options
shall be taken into account in the order in which they were granted, and the
Fair Market Value of the Shares shall be determined as of the time the
Option with respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right
with respect to continuation of employment or consulting relationship with
the Company, nor shall it interfere in any way with his right or the
Company's right to terminate his employment or consulting relationship at
any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated
under Section 15 of the Plan.
7. Term of Option. The term of each Option shall be the term stated
in the Option Agreement; provided, however, that in the case of any Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time
the Option is granted, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the Option
Agreement.
8. Option Exercise Price and Consideration.
5
<PAGE> 30
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by
the Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of
the grant of such Incentive Stock Option, owns stock representing more than
ten percent (10%) of the voting power of all classes of stock of the Company
or any Parent or Subsidiary, the per Share exercise price shall be no less
than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share
on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the
grant of such Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of the grant.
(B) granted to any person, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on the
date of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall
be determined at the time of grant) and may consist entirely of (i) cash,
(ii) check, (iii) other Shares which (x) in the case of Shares acquired upon
exercise of an Option either have been owned by the Optionee for more than
six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date
of surrender equal to the aggregate exercise price of the Shares as to which
said Option shall be exercised, (iv) authorization for the Company to retain
from the total number of Shares as to which the Option is exercised that
number of Shares having a Fair Market Value on the date of exercise equal to
the exercise price for the total number of Shares as to which the Option is
exercised, (v) delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price, (vi) by
delivering an irrevocable subscription agreement for the Shares which
irrevocably obligates the option holder to take and pay for the Shares not
more than twelve months after the date of delivery of the subscription
agreement, (vii) any combination of the foregoing methods of payment, (viii)
or such other consideration and method of payment for the issuance of Shares
to the extent permitted under Applicable Laws. In making its determination
as to the type of consideration to accept, the Board shall consider if
acceptance of such consideration may be reasonably expected to benefit the
Company (Section 409 of the California General Corporation Law).
9. Exercise of Option.
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<PAGE> 31
(a) Procedure for Exercise: Rights as a Stockholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment
for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Board,
consist of any consideration and method of payment allowable under Section
8(b) of the Plan. Until the issuance (as evidenced by the appropriate entry
on the books of the Company or of a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock certificate
promptly upon exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes
of the Plan and for sale under the Option, by the number of Shares as to
which the Option is exercised.
(b) Termination of Employment. In the event of termination
of an Optionee's consulting relationship or Continuous Status as an Employee
with the Company (as the case may be), such Optionee may, but only within
ninety (90) days after the date of such termination (or, in the case of a
Nonstatutory Stock Option such other period as is set out by the
Administrator in the Option Agreement, but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent that Optionee was entitled to
exercise it at the date of such termination. To the extent that Optionee was
not entitled to exercise the Option at the date of such termination, or if
Optionee does not exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions
of Section 9(b) above, in the event of termination of an Optionee's
Consulting relationship or Continuous Status as an Employee as a result of
his disability (as determined by the Board in accordance with the policies
of the Company), Optionee may, but only within six (6) months from the date
of such termination (or in the case of a Nonstatutory Stock Option, such
other longer period as is set out by the Administrator in the Option
Agreement, but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise the Option to
the extent otherwise entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(d) Death of Optionee. In the event of the death of an
Optionee, the
7
<PAGE> 32
Option may be exercised, at any time within twelve (12) months following the
date of death (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), by the Optionee's estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to exercise
the Option at the date of death. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.
(e) Rule 16b-3. Options granted to persons subject to
Section 16(b) of the Exchange Act must comply with Rule 16b-3 and shall
contain such additional conditions or restrictions as may be required
thereunder to qualify for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
10. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee.
11. Stock Purchase Rights.
(a) Rights to Purchase Restricted Stock. Stock Purchase
Rights may be issued either alone, in addition to, or in tandem with other
awards granted under the Plan and/or cash awards made outside of the Plan.
After the Administrator determines that it will offer Stock Purchase Rights
under the Plan, it shall advise the offeree in writing of the terms,
conditions and restrictions related to the offer, including the number of
Shares that such person shall be entitled to purchase, the price to be paid,
and the time within which such person must accept such offer, which shall in
no event exceed one-hundred twenty (120) days from the date of grant of the
Stock Purchase Right. For these purposes, the price to be paid shall be no
less than 85% of fair market value on the date of grant of the Stock
Purchase Right or, in the case of a greater than 10% stockholder, no less
than 100% of the fair market value on the date of grant. The offer shall be
accepted by execution of a Restricted Stock agreement in the form determined
by the Administrator. Shares purchased pursuant to the grant of a Stock
Purchase Right shall be referred to herein as "Restricted Stock."
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination
of the Purchaser's employment with the Company for any reason (including
death or Disability). The purchase price for Shares repurchased pursuant to
the Restricted Stock agreement shall be the original price paid by the
Purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option with respect to the
Restricted Stock shall lapse at such rate as the Committee may determine,
but in no event as to less than 20% of the total shares granted annually.
(c) Other Provisions. The Restricted Stock agreement shall
contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.
In addition, the provisions of Restricted Stock agreements need not be the
same with respect to each purchaser.
8
<PAGE> 33
(d) Rights as a Stockholder. Once the Stock Purchase Right
is exercised, the Purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered
upon the records of the duly authorized transfer agent of the Company. No
adjustment will be made for a dividend or other right for which the record
date is prior to the date the Stock Purchase Right is exercised, except as
provided in Section 13 of the Plan.
12. Stock Withholding to Satisfy Withholding Tax Obligations. At
the discretion of the Administrator, Optionees or Purchasers may satisfy
withholding obligations as provided in this paragraph. When an Optionee or
Purchaser incurs tax liability in connection with an Option or Stock
Purchase Right, which tax liability is subject to tax withholding under
applicable tax laws, and the Optionee or Purchaser is obligated to pay the
Company an amount required to be withheld under applicable tax laws, the
Optionee or Purchaser may satisfy the withholding tax obligation by electing
to have the Company withhold from the Shares to be issued upon exercise of
the Option, or the Shares to be issued in connection with the Stock Purchase
Right, if any, that number of Shares having a Fair Market Value equal to the
amount required to be withheld. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be
withheld is to be determined (the "Tax Date").
All elections by an Optionee or Purchaser to have Shares
withheld for this purpose shall be made in writing in a form acceptable to
the Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable
Tax Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option or Right as to which the election is made;
(c) all elections shall be subject to the consent or
disapproval of the Administrator;
(d) if the Optionee is subject to Rule 16b-3, the election
must comply with the applicable provisions of Rule 16b-3 and shall be
subject to such additional conditions or restrictions as may be required
thereunder to qualify for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee or Purchaser and the Tax Date is deferred under Section 83 of the
Code because no election is filed under Section 83(b) of the Code, the
Optionee or Purchaser shall receive the full number of Shares with respect
to which the Option or Stock Purchase Right is exercised but such Optionee
or Purchaser shall be unconditionally obligated to tender back to the
Company the proper number of Shares on the Tax Date.
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<PAGE> 34
13. Adjustments Upon Changes in Capitalization or Merger. Subject
to any required action by the stockholders of the Company, the number of
shares of Common Stock covered by each outstanding Option or Stock Purchase
Right, and the number of shares of Common Stock which have been authorized
for issuance under the Plan but as to which no Options or Stock Purchase
Rights have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option or Stock Purchase Right, as well as
the price per share of Common Stock covered by each such outstanding Option
or Stock Purchase Right, shall be proportionately adjusted for any increase
or decrease in the number of issued shares of Common Stock resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made
by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of
Common Stock subject to an Option or Stock Purchase Right.
In the event of the proposed dissolution or liquidation of the
Company, or of a merger in which the successor corporation does not agree to
assume the Option or Stock Purchase Right or substitute an equivalent Option
or Stock Purchase Right, the Board shall notify Optionees and Purchasers at
least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option or Stock Purchase Right will
terminate immediately prior to the consummation of such proposed action.
14. Time of Granting Options. The date of grant of an Option shall,
for all purposes, be the date on which the Administrator makes the
determination granting such Option, or such other date as is determined by
the Board. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after
the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of
any Optionee or Purchaser under any grant theretofore made, without his or
her consent. In addition, to the extent necessary and desirable to comply
with Rule 16b-3 under the Exchange Act or with Section 422 of the Code (or
any other applicable law or regulation, including the requirements of the
NASD or an established stock exchange), the Company shall obtain stockholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) Effect of Amendment or Termination. Any such amendment
or termination of the Plan shall not affect Options and Stock Purchase
Rights already granted and such Options and Stock Purchase Rights shall
remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Optionee or
Purchaser and the Board, which agreement must be in writing and signed by
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the Optionee or Purchaser and the Company.
16. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and
delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares
may then be listed, and shall be further subject to the approval of counsel
for the Company with respect to such compliance.
As a condition to the exercise of an Option or Stock Purchase
Right, the Company may require the person exercising such Option or Stock
Purchase Right to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
17. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the
Company's counsel to be necessary to the lawful issuance and sale of any
Shares hereunder, shall relieve the Company of any liability in respect of
the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
18. Agreements. Options and Stock Purchase Rights shall be
evidenced by written agreements in such form as the Board shall approve from
time to time.
19. Stockholder Approval. Continuance of the Plan shall be subject
to approval by the stockholders of the Company within twelve (12) months
before or after the date the Plan is adopted. Such stockholder approval
shall be obtained in the degree and manner required under applicable state
and federal law.
20. Compliance with Section 162(m) of the Code. The following
limitations shall apply to grants of Options to Employees:
(a) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 200,000 shares.
(b) The foregoing limitation shall be adjusted
proportionately in connection with any change in the Company's
capitalization as described in Section 13 above.
(c) If an Option is canceled (other than in connection with
a transaction described in Section 13), the canceled Option will be counted
against the limit set forth in Section 20(a). For this purpose, if the
exercise price of an Option is reduced, the
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transaction will be treated as a cancellation of the Option and the grant of
a new Option.
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