Schedule 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule
14a-b(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
SYQUEST TECHNOLOGY, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant))
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2), or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6()i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price of other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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4) Proposed maximum aggregate value of transaction:
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5) Total Fee Paid:
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[ ] Fee Paid Previously with Preliminary Materials
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PRELIMINARY COPY
SYQUEST TECHNOLOGY, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
SEPTEMBER [24], 1996
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of
SYQUEST TECHNOLOGY, INC. (the "Company"), a Delaware corporation, will be held
on September [24], 1996 at 10:00 a.m., local time, at the Company's principal
executive offices at 47071 Bayside Parkway, Fremont, California 94538, for the
following purposes:
1. To approve an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of the Company's
Common Stock from 20,000,000 to 60,000,000.
2. To approve the issuance of more than 2,291,891 shares of Common
Stock to the holders of the Company's 7% Cumulative Convertible Preferred Stock,
Series 1.
3. To approve an amendment to the Company's 1991 Stock Option Plan to
increase the number of shares issuable under the Plan to 6,000,000 shares.
4. To approve an amendment to the Company's 1992 Non-Employee Director
Stock Option Plan to increase the number of shares issuable under the Plan to
500,000 shares.
5. To approve an amendment to the Company's 1992 Non-Employee Director
Stock Option Plan to increase the number of shares subject to options to be
granted annually to each outside director and to approve a one-time grant of
options to purchase 30,000 shares to each new outside director at the time he or
she becomes a member of the Board (with such 30,000 share option also to be
granted to each present outside director).
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on August 5, 1996
are entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she has returned a Proxy.
Sincerely,
----------------------------------------------
Edwin L. Harper
President and Chief Executive Officer
Fremont, California
August 23, 1996
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YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE
REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE
AND RETURN IT IN THE ENCLOSED ENVELOPE.
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PRELIMINARY COPY
SYQUEST TECHNOLOGY, INC.
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed Proxy is solicited on behalf of the Board of Directors of
SYQUEST TECHNOLOGY, INC. (the "Company") for use at the Special Meeting of
Stockholders to be held Thursday, September [24], 1996 at 10:00 a.m., local
time, or at any continuation or adjournment thereof, for the purposes set forth
herein and in the accompanying Notice of Special Meeting of Stockholders. The
Special Meeting will be held at the Company's principal executive offices, 47071
Bayside Parkway, Fremont, California 94538. The Company's telephone number at
that location is (510) 226-4000.
These proxy solicitation materials were first mailed on or about August
23, 1996 to all stockholders entitled to vote at the meeting.
Shares represented at such meeting by Proxy in the form enclosed, which
are properly executed, duly returned to the Company and not revoked, will be
voted or not voted in accordance with the instructions contained therein. If no
instructions are given on an executed and returned form of Proxy with respect to
a matter set forth in the Notice of Special Meeting accompanying this Proxy
Statement, shares so represented will be voted in favor thereof.
Record Date and Principal Share Ownership
Stockholders of record at the close of business on August 5, 1996 are
entitled to notice of and to vote at the meeting. At the record date, _____
shares of the Company's Common Stock, $.001 par value (the "Common Stock"), and
20,000 shares of the Company's 7% Cumulative Convertible Preferred Stock, Series
1, $.001 par value (the "Preferred Stock"), were issued and outstanding. The
Company's Preferred Stock will not be entitled to vote at the meeting. For
information concerning beneficial owners of more than five percent (5%) of the
Company's Common Stock, see "Security Ownership of Management and Certain
Beneficial Owners."
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Company a
written notice of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
Voting and Solicitation
On all matters, each share of Common Stock has one vote.
Votes cast by proxy or in person at the Special Meeting will be
tabulated by the inspector of election appointed for the meeting and will
determine whether or not a quorum is present. The inspector of election will
treat abstentions as shares that are present and entitled to vote for purposes
of determining the presence of a quorum but as unvoted for purposes of
determining the approval of any matter submitted to the stockholders for a vote.
In the event that a broker indicates on a proxy that it
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does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered present and entitled to
vote with respect to that matter.
The cost of soliciting proxies will be borne by the Company. In
addition, the Company will reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation material to such beneficial owners. Proxies may also be solicited
by certain of the Company's directors, officers and regular employees, without
additional compensation, personally or by telephone, telegram or letter. The
Company has engaged the services of Corporate Investor Communications, Inc. to
assist in the solicitation of proxies from the Company's stockholders for a fee
of approximately $4,500, plus reimbursement of out-of-pocket expenses incurred
in connection therewith.
Stockholder Proposals To Be Presented at Next Annual Meeting
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the Company's 1997 Annual Meeting of
Stockholders must be received by the Company no later than September 30, 1996 in
order that they may be considered for inclusion in the proxy statement and form
of proxy relating to that meeting.
Security Ownership of Management and Certain Beneficial Owners
The following table sets forth beneficial ownership of Common Stock of
the Company as of July 1, 1996 by each present director, by each present
executive officer, by each of the former executive officers of the Company named
in the Summary Compensation Table set forth below, by all present directors and
executive officers as a group, and by all persons known to the Company to be the
beneficial owners of more than five percent (5%) of the Company's Common Stock,
the only class of voting securities of the Company outstanding. The table does
not include the holders of the Company's Preferred Stock even though the
Preferred Stock in the aggregate is convertible into 2,291,891 shares of the
outstanding Common Stock of the Company (which constitutes over 19% of the
shares outstanding on July 1, 1996), because the provisions of the Preferred
Stock do not permit a holder thereof to convert the shares of Preferred Stock at
any time into more than 4.9% of the outstanding Common Stock of the Company
combined with any other shares of Common Stock then beneficially owned by the
holder (other than upon conversion of the Preferred Stock).
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Shares of Common Stock
Beneficially Owned(1)
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Number of Percent of
Name Shares Shares
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Syed H. Iftikar(2) 1,369,551 11.6%
C. Richard Kramlich(3) 83,844 *
Edward L. Marinaro(4) 128,334 1.1%
Edwin L. Harper 0 --
John W. Luhtala 0 --
Chester Brown 0 --
Michael J. Field 0 --
Dale Pilgeram 0 --
Richard Schulman 0 --
David I. Caplan(5) 59,365 *
Kenneth Hardesty 0 --
Robert E. Lyon(6) 7,500 *
David Everett 0 --
Michael J. Perez 0 --
Eugene Berti 0 --
J. Brent Nilson 0 --
All directors and executive officers as of
July 1, 1996 as a group (11 persons)(7) 1,648,594 14.32%
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* Represents less than 1% of outstanding shares of Common Stock.
(1) Except as otherwise noted, the persons 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.
(2) Includes options to purchase 272,873 shares which are exercisable within 60
days after July 1, 1996, 46,300 shares held of record by Shawn Iftikar, Jon
Iftikar and Kristina Iftikar, members of Mr. Iftikar's family, and 795,000
shares held of record by Jessi Investments, a family partnership which is a
6.9% stockholder.
(3) Includes options to purchase 15,000 shares which are exercisable within 60
days after July 1, 1996.
(4) Consists of options to purchase 128,334 shares which are exercisable within
60 days after July 1, 1996.
(5) Includes options to purchase 30,000 shares which are exercisable within 60
days after July 1, 1996.
(6) Consists of options to purchase 7,500 shares which are exercisable within
60 days after July 1, 1996.
(7) Includes options to purchase 453,707 shares which are exercisable within 60
days after July 1, 1996.
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PROPOSAL NO. 1: AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION
The Board of Directors of the Company has adopted a resolution to amend
paragraph (A) of Article IV of the Restated Certificate of Incorporation of the
company to read in its entirety as follows:
(A) Classes of Stock. This corporation is authorized to issue the
following classes of stock: Common Stock ("Common Stock" or
"Common") and Preferred Stock ("Preferred Stock") or "Preferred").
The total number of shares which the corporation is authorized to
issue is Sixty Four Million (64,000,000). Sixty Million
(60,000,000) shares shall be Common Stock and Four Million
(4,000,000) shares shall be Preferred Stock. Each share of Common
and Preferred Stock shall have a par value of $0.001.
The purpose of such amendment is to increase the number of authorized
shares of the Company Common Stock from 20,000,000 to 60,000,000 shares. As of
July 1, 1996, the Company had outstanding 11,508,892 shares of Common Stock and
5,549,726 shares of Common Stock reserved for issuance as follows:
o Common Stock outstanding: 11,508,892
o Common shares reserved:
For conversion of Preferred Stock: 2,291,891(1)
Shares reserved for issuance under 1991 Stock Option Plan(2): 2,766,863
Shares reserved for issuance under the 1992 Non-Employee
Director Stock Option Plan(3): 250,000
Shares reserved for issuance under the 1992 Employee
Stock Purchase Plan: 240,972
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(1) If Proposal No. 2 is adopted the number of shares issuable upon conversion
of the Preferred Stock will increase. As of June 27, 1996 the number of
shares into which the Preferred Stock was convertible (but for the limit of
2,291,891 shares in the Certificate of Designation) was 3,087,549.
(2) If Proposal No. 3 is adopted the number of shares reserved for issuance
under the 1991 Stock Option Plan will increase by 1,571,476 shares.
(3) If Proposal No. 4 is adopted the number of shares reserved for issuance
under the 1992 Non-Employee Director Stock Option Plan will increase by
250,000 shares.
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The Board of Directors of the Company believes that it is desirable for
the Company to have additional authorized but unissued shares of Common Stock to
provide flexibility to act promptly with respect to public and private
financing, acquisitions, stock dividends and for other appropriate purposes.
Approval of the increase now will eliminate delays and the expense which
otherwise would be incurred if stockholder approval were required to increase
the authorized number of shares of Common Stock for possible future transactions
involving the issuance of additional shares. However, the rules of the National
Association of Securities Dealers, Inc. ("NASD") governing corporations with
securities listed on the Nasdaq National Market would still require stockholder
approval by a majority of the total votes cast in person or by proxy prior to
the issuance of designated securities (i) where the issuance would result in a
change of control of the Company, (ii) in connection with the acquisition of the
stock or assets of another company if an affiliate of the Company has certain
interlocking interests with the company to be acquired or where the Company
issues twenty percent (20%) or more of its currently outstanding shares or (iii)
in connection with a transaction other than a public offering involving the sale
or issuance of twenty percent (20%) or more of the Common Stock or voting power
outstanding before the issuance at less than the book value or market value of
the Company's shares at that time, subject to certain exceptions or application
to Nasdaq in the event delay in the issuance would impair the financial
viability of the Company. The violation of these rules could result in the
Company's Common Stock being removed from listing on the Nasdaq National Market.
The additional shares of Common Stock may be issued, subject to certain
exceptions, by the Company's Board of Directors at such times, in such amounts
and upon such terms as the Board may determine without further approval of the
stockholders. Any such issuance could reduce the current stockholders'
proportionate interests in the Company or dilute the stock ownership of persons
seeking to obtain control of the Company, depending on the number of shares
issued and the purpose, terms and conditions of the issuance. Stockholders have
no preemptive rights to subscribe to additional shares when issued.
As reported by the Company in its filings with the Securities and
Exchange Commission, the Company has had significant losses in the current
fiscal year ($84,906 during the six months ended March 31, 1996) and will need
additional cash in the next fiscal year, and possibly sooner, in order to meet
its commitments. Presently the Company has an insufficient number of authorized
shares of Common Stock to permit it to issue any significant number of shares of
Common Stock or additional shares of preferred stock convertible into Common
Stock to raise additional capital. There can be no assurance, however, following
approval of the proposed amendment the Company will be successful in raising
additional capital.
This amendment will, in the opinion of the Board of Directors, increase
the Company's financial flexibility. The Board believes that the complexity of
business financing and acquisition transactions require greater flexibility in
the Company's capital structure than now exists. Preferred Stock is available
for issuance but this amendment will permit the Company to offer additional
shares of Preferred Stock, convertible into Common Stock, from time to time as
determined by the Board for any proper corporate purpose. Such purposes could
include, without limitation, issuance in public or private sales for cash as a
means of obtaining capital for use in the Company's business and operations or
in cancellation of existing indebtedness, as part or all of the consideration
required to be paid by the Company for acquisitions of other businesses or
properties, and issuance under employee benefit plans.
Increasing the number of shares of Common Stock authorized for issuance
could discourage an attempt by a person to acquire control of the Company by a
tender offer or other means if significant additional shares of Common Stock are
issued or reserved for issuance. It could therefore deprive stockholders of
benefits that could result from such an attempt, such as realization of a
premium over the market price of their shares in a tender offer or the temporary
increase in market price that such an
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attempt could cause. Moreover, the issuance of stock to persons friendly to the
Board of Directors could make it more difficult to remove incumbent management
and directors from office even if such change would be favorable to the
stockholders generally.
The Board of Directors believes that the financial flexibility offered
by the amendment increasing the number of shares of authorized Common Stock
(particularly in light of the desire of the Company to raise additional capital)
far outweighs any of its potential disadvantages.
Vote Required
The approval of the amendment of the Company's Restated Certificate of
Incorporation requires the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock entitled to vote. Consequently, abstentions
and broker non-votes will have the effect of a vote against the proposed
amendment.
The Board of Directors recommends a vote "FOR" approval of the
amendment to the Company's Restated Certificate of Incorporation.
PROPOSAL NO. 2: APPROVAL TO INCREASE NUMBER OF SHARES ISSUABLE UPON CONVERSION
OF PREFERRED STOCK
On June 14, 1996 the Company issued 20,000 shares of its Preferred
Stock at a price of $1,000 per share. The rights, preferences and privileges of
the Preferred Stock are set forth in a Certificate of Designations, Preferences
and Rights (the "Certificate"), as filed with the Delaware Secretary of State.
Conversion Rights
The Preferred Stock is convertible into shares of Common Stock
commencing August 28, 1996 or the date the registration statement registering
the shares for resale which was filed with the Securities and Exchange
Commission on July 2, 1996 is declared effective (whichever is earlier) at a
conversion price per share which is the lesser of $11 or 77% of the average
market price of the Common Stock on the five trading days prior to the
conversion, as such amount may be adjusted. Shares of the Preferred Stock cannot
be converted if the converting holder and its respective affiliates would
beneficially own more than 4.9% of the Common Stock at the time of conversion
(excluding from the calculation shares of Common Stock issuable upon conversion
of the Preferred Stock). If the registration statement registering the resale of
the Common Stock is not effective by September 3, 1996, the $11.00 per share
amount decreases by three percent and the 23% discount increases (and therefore
the 77% factor decreases) at the rate of three percentage points, per each month
of delay.
If the Common Stock is trading below $5 per share when the Preferred
Stock converts, the Company can redeem that Preferred Stock at 130% of the
original purchase price, except that the redemption price is reduced to 110% of
the original purchase price to the extent that the original purchase price of
the amount of Preferred Stock being redeemed (plus one half the amount
previously converted by the holders) exceeds $10 million.
The Company can force conversion after one year after the registration
statement becomes effective, so long as the Common Stock is still a Nasdaq
National Market security or is listed on the Nasdaq Small Cap Market or is
listed on the Nasdaq Electronic Bulletin Board, and subject to the limit
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on any Preferred Stock holder beneficially owning more than 4.9% of the
outstanding shares of Common Stock.
Under no circumstances may more than 2,291,891 shares of Common Stock
be issued on conversion of the Preferred Stock or for dividends, unless the
Company's stockholders vote to increase that number and that vote does not
violate the Nasdaq National Market rule concerning below market value
financings. If the Preferred holders attempt a conversion which would exceed the
limit, the Company must redeem all of the Preferred Stock remaining outstanding
at 130% of the original purchase price, except the redemption price is reduced
to 110% of the original purchase price to the extent more than half of all of
the Preferred Stock is redeemed under that provision.
As of June 27, 1996 the Preferred Stock conversion price was $6.477625
per share. But for the limitation set forth in the Certificate on the number of
shares of Common Stock issuable upon conversion of the Preferred Stock, the
shares of Preferred Stock would have been convertible into 3,087,549 shares of
Common Stock.
Nasdaq Rule
Rule 4460 of the Nasdaq Stock Market, which is applicable to the
Company because the Company's shares of Common Stock are presently Nasdaq
National Market Securities, sets forth the corporate governance standards for
Nasdaq National Market Securities. Section (i) of Rule 4460 (formerly referred
to as Section 6(i) of Part III of Schedule D of the National Association of
Securities Dealers, Inc. By-Laws) provides:
(1) Each NNM [Nasdaq National Market] issuer shall require
shareholder approval of a plan or arrangement under
subparagraph (A) below or, prior to the issuance of designated
securities under subparagraph (B), (C), or (D) below:
(A) when a stock option or purchase plan is to be
established or other arrangement made pursuant to which stock
may be acquired by officers or directors, except for warrants
or rights issued generally to security holders of the company
or broadly based plans or arrangements including other
employees (e.g. ESOPs). In a case where the shares are issued
to a person not previously employed by the company, as an
inducement essential to the individual's entering into an
employment contract with the company, shareholder approval
will generally not be required. The establishment of a plan or
arrangement under which the amount of securities which may be
issued does not exceed the lesser of 1% of the number of
shares of common stock, 1% of the voting power outstanding, or
25,000 shares will not generally require shareholder approval;
(B) when the issuance will result in a change of
control of the issuer;
(C) in connection with the acquisition of the stock
or assets of another company if:
(i) any director, officer or substantial
shareholder of the issuer has a 5% or greater
interest (or such persons collectively have a 10% or
greater interest), directly or indirectly, in the
company or assets to be acquired or in the
consideration to be paid in the transaction or series
of related transactions and the present or potential
issuance of common stock, or securities convertible
into or exercisable for common stock,
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could result in an increase in outstanding common
shares or voting power of 5% or more; or
(ii) where the present or potential issuance
of common stock, or securities convertible into or
exercisable for common stock, other than a public
offering for cash, if the common stock has or will
have upon issuance voting power equal to or in excess
of 20% of the voting power outstanding before the
issuance of stock or securities convertible into or
exercisable for common stock, or the number of shares
of common stock to be issued is or will be equal to
or in excess of 20% of the number of shares or common
stock outstanding before the issuance of the stock or
securities; or
(D) in connection with a transaction other than a
public offering involving:
(i) the sale or issuance by the issuer of
common stock (or securities convertible into or
exercisable for common stock) at a price less than
the greater of book or market value which together
with sales by officers, directors or substantial
shareholders of the company equals 20% or more of
common stock or 20% or more of the voting power
outstanding before the issuance; or
(ii) the sale or issuance by the company of
common stock (or securities convertible into or
exercisable common stock) equal to 20% or more of the
common stock or 20% or more of the voting power
outstanding before the issuance for less than the
greater of book or market value of the stock.
(2) Exceptions may be made upon application to the
Association when:
(A) the delay in securing stockholder
approval would seriously jeopardize the financial
viability of the enterprise; and
(B) reliance by the company on this
exception is expressly approved by the Audit
Committee of the Board or a comparable body.
A company relying on this exception must mail to all
shareholders not later than ten days before issuance of the
securities a letter alerting them to its omission to seek the
shareholder approval that would otherwise be required and
indicating that the Audit Committee of the Board or a
comparable body has expressly approved the exception.
The issuance of the Preferred Stock constitutes an issuance of stock by
the Company at a price less than the market value of the Common Stock on the
date of issuance due to the adjusting conversion price which may be lower than
the market value of the Company's Common Stock on June 14, 1996. As a result of
this, and because the urgent need for the financing did not permit delay of the
financing in order to obtain stockholder approval prior to the issuance of the
shares of Preferred Stock, the Company and the holders of the Preferred Stock
agreed to limit the number of shares of Common Stock issuable upon conversion of
the Preferred Stock to 2,291,891 shares (which is less than 20% of the
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number of shares of Common Stock of the Company outstanding on June 14, 1996),
in order to comply with the Nasdaq Rule described above.
Section (6) of the Certificate provides that the limit of 2,291,891
shares will no longer be applicable if the Company obtains the approval of its
stockholders for the issuance of shares of Common Stock in excess of 2,291,891
shares upon conversion of the Preferred Stock and such approval is permitted
under the Nasdaq Rule described above. In the event stockholder approval is not
obtained the Company must redeem the excess shares of Preferred Stock as
described above.
Stockholder Approval
The Board of Directors of the Company desires to eliminate the limit
set forth in the Certificate. The Board believes it would be in the best
interests of the Company if the Company could issue the additional shares of
Common Stock to the Preferred holders rather than being required to redeem the
Preferred Stock at the required redemption price. The Board believes this
provision could result in a forced redemption at a time when the Company did not
have, and could not raise, the cash necessary to redeem the shares of Preferred
Stock. The Board desires to have the ability to retain the cash for the use of
the Company for other purposes.
Under the Nasdaq Rule and the terms of the Certificate, stockholder
approval is required for the issuance of shares of Common Stock in excess of the
2,291,891 share limit. The Board hereby solicits such approval on behalf of the
Company to issue such additional shares of Common Stock as is required to permit
the Preferred holders to convert the Preferred stock fully at the then relevant
conversion price. The actual number of shares of Common Stock which will be
issuable upon conversion will not be determinable until the conversion(s) take
place. As of June 27, 1996 the conversion price was $6.477625 per share making
the Preferred Stock convertible into 3,087,549 shares of Common Stock (but for
the limit). If stockholder approval of this proposal is not obtained, a maximum
of 2,291,891 shares will be issued upon the conversion of the Preferred Stock
and the Company will be required to redeem the remaining shares of Preferred
Stock outstanding.
Vote Required
The affirmative vote of the holders of a majority of the Company's
Common Stock present or represented and entitled to vote at the meeting is
required to approve the proposal to eliminate the restriction on the number of
shares of Common Stock issuable upon conversion of the Preferred Stock. An
abstention from voting by a stockholder present in person or represented by
proxy at the meeting has the same effect as a vote against the matter.
The Board of Directors recommends that the stockholders vote "FOR" the approval
of this proposal.
PROPOSAL NO. 3 APPROVAL OF AMENDMENT TO 1991 STOCK OPTION PLAN TO INCREASE
NUMBER OF SHARES
On October 31, 1991 the Company's Board of Directors approved the
adoption of the Company's 1991 Stock Option Plan (the "1991 Plan"), providing
for the grant of options to acquire an aggregate of 3,403,524 shares of Common
Stock. The number of shares issuable under the Plan was increased to 4,428,524
at the 1995 Annual Meeting of Stockholders. At the Special Meeting, the
stockholders are
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being asked to consider and approve an amendment to the 1991 Plan to increase
the number of shares available for issuance under the 1991 Plan to 6,000,000
shares.
Incentive stock options within the meaning of Section 422 of the
Internal Revenue Code (the "Code") and non-qualified stock options may be
granted under the 1991 Plan.
A description of the principal features of the 1991 Plan is set forth
below. The only change to the existing 1991 Plan effected by the proposed
amendment is an increase in the number of shares available for issuance under
the 1991 Plan from 4,428,424 to 6,000,000 shares.
Purpose
The purpose of the 1991 Plan is to attract, retain and provide equity
incentives to selected persons to promote the financial success of the Company.
Administration
The 1991 Plan is administered by the Board of Directors or by a
committee ("Committee") appointed by the Board, consisting of not less than two
directors of the Company. Until August 15, 1996, no director may serve on the
Committee who is not a disinterested person for purposes of Rule 16b-3 as
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Effective August 15, 1996
Rule 16b-3 is amended and as of such date the Committee, if any, will consist of
non-employee directors as defined in Rule 16b-3. The Board or the Committee is
authorized to interpret and carry out the 1991 Plan, subject to the general
purpose, terms and conditions of the 1991 Plan. Commencing August 15, 1996
either the Board or the Committee shall select the individuals to whom options
will be granted and determine the type of option and the number of shares to be
optioned. Option grants after August 15, 1996 under the 1991 Plan will be
determined in the discretion of the Board or a Committee if one is appointed.
The Stock Option Committee of the Board has historically administered the 1991
Plan.
Eligibility
The 1991 Plan provides that options may be granted to employees,
officers, directors, consultants, independent contractors and advisors to or of
the Company or any parent, subsidiary or affiliate of the Company (provided that
the consultants, independent contractors and advisors must render bona fide
services not in connection with the offer and sale of securities in a
capital-raising transaction). Incentive stock options may only be granted to
employees of the Company or a parent or subsidiary of the Company.
Stock Options
Under the 1991 Plan, incentive or non-qualified stock options may be
granted for terms ranging up to ten years. The exercise price per share under
the 1991 Plan shall be no less than 100% of the fair market value of the
Company's Common Stock on the date prior to the date of the grant for incentive
stock options and no less than 85% of the fair market value of the Company's
Common Stock on the date prior to the date of grant for non-qualified stock
options.
The stock option agreement between the Company and each option holder
will specify the number of shares to which it pertains and whether it is an
incentive stock option or a non-qualified stock option. At the time an option is
granted, the Committee will determine the terms and conditions to be satisfied
before shares may be purchased including the type of option and the dates on
which shares
-10-
<PAGE>
subject to the option may first be purchased. At the time an option is granted,
the Committee will fix the period within which it may be exercised which will
not be more than ten years from the date of grant.
In addition, the aggregate fair market value (determined at the time
the stock option is granted) of stock with respect to which incentive stock
options are exercisable for the first time by an employee during any one
calendar year (under all stock option plans of the Company and any parent or
subsidiary) may not exceed $100,000. Presently the 1991 Plan also provides that
no optionee may receive in any one fiscal year options to purchase more than
160,000 shares provided that a newly hired optionee may receive an additional
one-time grant of an option to purchase up to an additional 250,000 shares. This
provision may be eliminated by the Board if appropriate to do so.
Common Stock purchased pursuant to a stock option agreement must be
paid for in full at the time of purchase (i) in cash or (ii) in the discretion
of the Committee, (a) through the delivery of shares of Common Stock of the
Company with a value equal to the total option exercise price, (b) through a
guaranty by the Company of a loan to the option holder of all or part of the
option price, (c) by cancellation of indebtedness of the Company to the option
holder, (d) by waiver of compensation owed to the option holder by the Company,
(e) through a "same day sale" or (f) through a broker margin commitment, or
(iii) by a combination of the methods described in (i) and (ii) above. Provision
for payment by other than cash must be set forth in the original stock option
agreement at the time of the option grant.
Termination of Employment or Death
Except as provided below, no stock option granted under the 1991 Plan
to the extent such option rights are then exercisable, will be exercisable more
than three months after termination of employment of the option holder, except
that (i) if termination is due to the death of the option holder, then such
option will be exercisable no more than twelve months after his or her death,
but only to the extent it was exercisable at the date of death, and (ii) if
termination is due to the permanent and total disability of the employee (as
defined in the Code), then such option will be exercisable no more than twelve
months after said date of termination, but only to the extent it was exercisable
at the date of termination. In no event may a stock option be exercised after
the expiration of the term established in the stock option agreement.
Adjustments in Options
The 1991 Plan provides for appropriate adjustment in the number of
shares subject to outstanding options and in the number of shares available for
future grants, in the event that dividends are paid in Common Stock or in the
event there are splits, subdivisions or combinations of shares of Common Stock
of the Company.
The 1991 Plan provides for the automatic acceleration of the vesting of
all options outstanding under the 1991 Plan in the event of a merger or
consolidation of the Company in which the Company is not the surviving
corporation or in the event of a sale of all or substantially all of the assets
of the Company, if the successor entity does not assume the outstanding options
or provide options in substitution for the outstanding options.
Modification, Suspension and Termination
The 1991 Plan may be modified, amended, suspended or discontinued by
the Board of Directors at any time and from time to time, except that an option
holder's rights under a previously granted option may not be impaired without
his or her consent.
-11-
<PAGE>
The Board of Directors may not amend the 1991 Plan without the consent
of the stockholders in a manner which would: (i) increase the total number of
shares of stock reserved for purposes of the 1991 Plan (except for adjustment as
described above), (ii) extend the duration of the 1991 Plan, (iii) extend the
period during and over which options may be exercised under the 1991 Plan; or
(iv) change the class of persons eligible to participate in the 1991 Plan.
No options may be granted under the 1991 Plan after September 3, 2001.
Nontransferability of Options
No options granted under the 1991 Plan shall be assignable or
transferable by the recipient except by will or the laws of descent and
distribution. During the life of the recipient, the options shall be exercisable
only by the recipient.
Options Outstanding Under the 1991 Plan
As of July 1, 1996, incentive stock options were outstanding covering
1,500,995 shares of Common Stock, nonqualified stock options were outstanding
covering 961,566 shares of Common Stock and 2,205,261 shares had been issued
upon the exercise of options granted under the 1991 Plan. Options were held by
approximately 713 persons.
As of July 1, 1996, the aggregate exercise price of all options
outstanding under the 1991 Plan and the aggregate market value of the Common
Stock of the Company reserved for such outstanding stock options were
$19,217,309.52 and $20,163,449.47 respectively.
As of May 31, 1996, the Committee had authorized the grant of an option
to purchase an aggregate of 256,666 shares of Common Stock which options were
subject to receipt of stockholder approval of the increase in the size of the
1991 Plan. Edward Marinaro, the Chairman of the Board of the Company, was
granted the option to purchase the 256,666 shares which are subject to receipt
of stockholder approval.
Federal Tax Consequences
Non-Qualified Stock Options. An option holder will not be deemed to
have received any compensation for Federal income tax purposes upon the grant of
a non-qualified stock option. Upon exercise of the option, the option holder
will realize taxable ordinary income in the amount of the excess, if any, of the
fair market value of the Common Stock on the date of exercise over the exercise
price. The tax basis of such shares will be equal to the fair market value of
the shares as of the exercise date. The ordinary income recognized by any
employee at the time of exercise of the option will be treated as wages and will
be subject to income tax withholding by the Company.
If the option holder holds such shares for more than one year following
exercise of the option, any gain realized upon disposition will be treated as
long-term capital gain. If the shares are sold within one year after the
exercise date, any gain realized upon disposition will be treated as short-term
capital gain. The gain realized upon disposition will be the excess, if any, of
the sales price over the tax basis of the shares.
The Company will be entitled to a deduction for Federal income tax
purposes in an amount equal to the ordinary income, if any, recognized upon
exercise of the option.
-12-
<PAGE>
Incentive Stock Options. An employee will not be deemed to have
received any compensation for Federal income tax purposes either at the time of
grant or at the time of exercise of an incentive stock option. However, the
excess of the fair market value of the stock acquired upon the exercise of an
incentive stock option on the exercise date over the exercise price will be an
item of tax preference for purposes of computing an employee's alternative
minimum tax liability, if any.
If the employee disposes of the shares within two years from the date
of the granting of the incentive stock option or within one year from the date
of exercise, any gain the employee realizes will be taxed as ordinary income in
an amount equal to the difference between the exercise price and the lesser of
the fair market value of the shares of Common Stock on the date of exercise or
the sales price. The excess, if any, of the sales price over the fair market
value of the shares on the date of exercise will be treated as capital gain. The
Company will be entitled to a deduction for Federal income tax purposes in an
amount equal to the ordinary income, if any, recognized by the employee upon the
premature disposition of shares.
If the employee exercises an incentive stock option and does not
dispose of the shares acquired upon exercise of the incentive stock option
within two years from the date of the granting of such option or within one year
from the date of exercise, any gain the employee realizes will be treated as
long-term capital gain. The Company will not be entitled to a deduction for
Federal income tax purposes in connection with the grant or exercise of the
incentive stock option or the subsequent disposal of the stock by the employee
unless there is a premature disposition of the shares.
The above is not a complete description of the Federal income tax
aspects of options granted under the 1991 Plan. Furthermore, no information is
given herein with respect to any state and local taxes or any non-U.S.
taxes which may be applicable.
Vote Required
The affirmative vote of the holders of a majority of the Company's
Common Stock present or represented, and entitled to vote at the meeting is
required to approve the adoption of the amendment to the 1991 Plan. The total
number of shares cast "for" this proposal and the total number of shares
represented by proxy for which no instructions are given will be counted for
purposes of determining whether sufficient affirmative votes have been cast. An
abstention from voting by a stockholder present in person or represented by
proxy at the meeting has the same effect as a vote "against" the matter.
The Board of Directors recommends that the stockholders vote "FOR" the
approval of the amendment to the 1991 Stock Option Plan.
PROPOSAL NO. 4 APPROVAL OF AMENDMENT TO 1992 NON-EMPLOYEE DIRECTOR STOCK OPTION
PLAN TO INCREASE NUMBER OF SHARES
In 1992, the Board of Directors and the stockholders of the Company
approved the adoption of the 1992 Non-Employee Director Stock Option Plan (the
"Director Plan") and the reservation of 150,000 shares of the Company's Common
Stock for issuance thereunder. At the 1995 Annual Meeting of Stockholders, the
stockholders approved an increase in the Director Plan to 250,000 shares. As of
July 1, 1996, options to purchase 90,000 shares remained outstanding under the
Director Plan and options to purchase 160,000 shares remained available for
grant. The Board believes that in order to continue to enable the Company to
attract and retain the best available personnel who are not employees of the
Company to serve as directors ("Outside Directors") of the Company, the Director
Plan should be amended to
-13-
<PAGE>
increase the number of shares of the Company's Common Stock reserved for
issuance under the Director Plan to 500,000 shares.
Summary of the Director Plan and Amendment
The material features of the Director Plan are outlined below. The only
change to the existing Director Plan effected by the proposed amendment is an
increase in the number of shares available for issuance under the Director Plan
from 250,000 to 500,000.
<TABLE>
The benefits that are received by the Outside Directors under the
Director Plan are as follows:
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Number of Shares Underlying
Options Granted in Each
Name and Position Dollar Value Fiscal Year(1)(2)
- ---------------------------------------------------------------------------------------------------------------------
Number of Shares Underlying
Options Granted in Each
Name and Position Dollar Value Fiscal Year(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outside Directors as a Group (3) 15,000
- ---------------------------------------------------------------------------------------------------------------------
<FN>
- ----------------------------------------------------------
(1) Assuming three Outside Directors
(2) If Proposal Number 5 is adopted the number of shares underlying options
granted in each fiscal year will increase to 30,000 shares, and a one-time
grant of options to purchase an additional 90,000 shares would be made to
existing Outside Directors. In addition, any new Outside Director would
receive a one-time grant of options to purchase 30,000 shares.
(3) Not determinable because the market value on the date of exercise is not
presently ascertainable.
</FN>
</TABLE>
No directors other than Outside Directors and no officers or employees of
the Company are eligible to participate in the Director Plan.
Purposes
The purposes of the Director Plan are to attract and retain the best
available personnel to serve as Outside Directors of the Company and to
encourage ownership in the Company by such Outside Directors. Options granted
under the Director Plan are nonstatutory stock options not entitled to special
tax treatment under Section 422 of the Code, or its applicable regulations.
Administration
The Director Plan is administered by the Board of Directors of the
Company. The interpretation and construction of any provision of the Director
Plan by the Board is final and binding. Members of the Board receive no separate
compensation for their services in connection with the administration of the
Director Plan.
-14-
<PAGE>
Eligibility
The Director Plan provides that options may be granted only to Outside
Directors. Outside Directors are directors who are not employees of the Company
or its subsidiaries. The Company currently has a total of five directors, three
of whom are Outside Directors.
Grant of Options
All grants of options under the Director Plan are automatic and
nondiscretionary. Accordingly, no person shall have any discretion to select
which Outside Directors shall be granted options, to determine when such options
shall be granted or to determine the number of shares to be covered by options
granted to Outside Directors. All grants of options are made in strict
accordance with the following provisions (which provisions would be modified as
described in Proposal No. 5 if Proposal No. 5 is adopted):
(a) Immediately after each annual meeting of stockholders of the
Company at which directors are elected, reelected or continuing as
directors, each Outside Director is automatically granted an option or
options to purchase such number of shares of Common Stock as necessary
so that during each of the then four immediately following twelve-month
periods of July 1 through June 30 such Outside Director will have stock
options (including stock options granted under plans other than the
Director Plan) which become exercisable with respect to a minimum of
5,000 shares during each such period. By way of example, if immediately
following such a meeting of stockholders an Outside Director had an
option to purchase 5,000 shares that becomes exercisable during the
first twelve-month period, an option to purchase 3,000 shares that
becomes exercisable during the second twelve-month period, an option to
purchase 2,500 shares that becomes exercisable during the third
twelve-month period and no options that become exercisable during the
fourth twelve-month period, the Outside Director would be awarded the
following options that would become exercisable as follows: (i) zero
options for the first twelve-month period, (ii) an option to purchase
2,000 shares which becomes exercisable on the last day of the second
twelve-month period, (iii) an option to purchase 2,500 shares which
becomes exercisable on the last day of the third twelve-month period,
and (iv) an option to purchase 5,000 shares which becomes exercisable
on the last day of the fourth twelve-month period.
(b) During the term of the Director Plan, if a person first becomes an
Outside Director by appointment by the Board to fill a vacancy or a
newly created directorship, such Outside Director shall be
automatically granted an option or options to purchase such number of
shares of Common Stock necessary so that during each of the then four
immediately following twelve-month periods of July 1 through June 30
such Outside Director will have stock options (including stock options
granted under plans other than the Director Plan) which become
exercisable with respect to a minimum of 5,000 shares.
(c) All options granted shall become exercisable on the last day of the
applicable twelve-month periods, provided the Outside Director is then
a member of the Board of Directors.
(d) No consideration will be received by the Company for the granting
of the options under the Director Plan.
-15-
<PAGE>
Term of Options
The date of grant of each option shall be the date of the applicable
annual meeting of stockholders or the date on which a person is appointed by the
Board of Directors to fill a vacancy or a newly created directorship. Options
granted under the Director Plan have a term of seven years. Each option shall be
evidenced by an agreement between the Company and the Outside Director to whom
such option is granted. Options granted must comply with applicable provisions
of Rule 16b-3 under the Exchange Act, so that they qualify for the exemption
from Section 16 of the Exchange Act set forth in Rule 16b-3.
Option Price
The option price under the Director Plan is 100% of the fair market
value of the Company's Common Stock on the date of grant. Fair market value
shall be determined by reference to the closing sales price on the Nasdaq
National Market system, or in the event that the Common Stock is listed on a
stock exchange, the fair market value shall be the closing price on such
exchange on the grant date. The closing sales price per share of the Company's
Common Stock on July 1, 1996 was $8.188.
The consideration to be paid for shares issued upon exercise of options
granted under the Director Plan, including the method of payment, shall be
determined by the Board and may consist of cash, check, other shares of Common
Stock and certain other consideration and methods permitted by applicable law.
Termination of Status as a Director Through Death, Disability or Otherwise
Under the Director Plan, in the event an optionee ceases to serve as a
director of the Company for any reason other than death or total and permanent
disability, an option may thereafter be exercised, to the extent it was
exercisable at the date of such termination, for three months. If an optionee's
service as a director is terminated as a result of the optionee's permanent and
total disability, the option will be exercisable for twelve months following
such termination, but only to the extent it was exercisable at the date of
termination. If an optionee's service as a director of the Company is terminated
by reason of the optionee's death, the option will be exercisable by the
optionee's estate or successor in interest for twelve months following death,
but only to the extent it was exercisable at the date of death. However, in no
event may an option be exercised once its term has expired.
Nonassignability of Options
Options granted pursuant to the Director Plan are nonassignable and
nontransferable by the optionee, other than by will or by the laws of descent
and distribution and may be exercised, during the lifetime of the optionee, only
by the optionee.
Adjustment Upon Changes in Capitalization and Corporate Transactions
In the event any changes, such as stock splits or dividends, are made
in the capitalization of the Company, which changes result in an increase or
decrease in the number of outstanding shares of Common Stock without receipt of
consideration by the Company, appropriate adjustments shall be made in the
number of shares which have been reserved for issuance under the Director Plan
and the price per share covered by each outstanding option.
In the event of a merger, consolidation or similar occurrence where the
Company is not the surviving corporation, each outstanding option shall be
assumed or substituted by such successor
-16-
<PAGE>
corporation or a parent or subsidiary of such successor corporation. In the
event such successor corporation does not agree to assume or substitute such
option, the Company shall notify the optionee that the option shall be fully
exercisable for a period of twenty (20) days from the date of such notice and
the option will terminate upon the expiration of such period.
Amendment and Termination
The Board of Directors may amend the Director Plan at any time or from
time to time or may terminate the Director Plan without approval of the
stockholders. However, no action by the Board or the stockholders may
unilaterally alter or impair any rights previously granted under the Director
Plan without the consent of the optionee, except as necessary for compliance
with Rule 16b-3. In any event, the Director Plan will terminate in the year
2002.
Stockholder approval is required for amendments of the Director Plan
only as required by Rule 16b-3 as promulgated under the Exchange Act.
Federal Tax Consequences
Options granted under the Director Plan are nonstatutory stock options
not entitled to special tax treatment under the Code. Generally, an optionee
will not recognize any taxable income for the purposes of federal income tax
liability at the time the optionee is granted a nonstatutory option. However,
upon the exercise of the option, the optionee will recognize ordinary income for
income tax purposes equal to the excess of the then market value of the shares
over the option exercise price. The Company will be entitled to a deduction in
the same amount as the ordinary income recognized by the optionee.
The foregoing is not a complete description of the Federal income tax
aspects of options granted under the Director Plan. Furthermore, no information
is given herein with respect to any state and local taxes or any non-U.S. taxes
which may be applicable.
Vote Required
The affirmative vote of the holders of a majority of the Company's
Common Stock present, or represented and entitled to vote at the meeting is
required to approve the adoption of the amendment to the Director Plan. The
total number of shares cast "for" this proposal and the total number of shares
represented by proxy for which no instructions are given will be counted for
purposes of determining whether sufficient affirmative votes have been cast. An
abstention from voting by a stockholder present in person or represented by
proxy at the meeting has the same effect as a vote "against" the matter.
The Board of Directors recommends that the stockholders vote "FOR" the
approval of the amendment to the 1992 Non-Employee Director Stock Option Plan.
PROPOSAL NO. 5 APPROVAL OF AMENDMENT TO GRANTS UNDER 1992 NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN
At the Special Meeting, the stockholders are being asked to approve
amendments to the 1992 Non-Employee Director Stock Option Plan which (i)
increase the minimum number of shares of the Company's Common Stock subject to
options to be granted annually to Outside Directors under the Director Plan from
5,000 to 10,000 shares and (ii) provide for a one-time grant of options to
purchase
-17-
<PAGE>
30,000 shares to each new Outside Director at the time he or she becomes a
member of the Board (with such 30,000 share option also to be granted to each
present Outside Director).
Summary of Director Plan and Amendment
The material features of the Director Plan are outlined above under
"Proposal No. 4 -- Approval Of Amendment To 1992 Non-Employee Director Stock
Option Plan To Increase Number Of Shares." The only change to the existing
Director Plan effected by the proposed amendment is the change to "Grant of
Options" discussed below.
<TABLE>
The benefits that will be received by the Outside Directors under the
Director Plan if the proposed amendment to the Director Plan are adopted are as
follows:
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Number of Shares Number of Shares Underlying
Name and Dollar Underlying Options Options Granted in
Position Value Granted in First Year(1)(3)(4) Subsequent Years(1)(3)(4)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outside Directors as a (2) 120,000 30,000
Group
- ---------------------------------------------------------------------------------------------------------------------
<FN>
- ----------------------------------------------------------
(1) Assuming three Outside Directors.
(2) Not determinable because the market value on the date of exercise is not
presently ascertainable.
(3) The number of shares underlying options granted to Outside Directors in any
year would increase by 30,000 for each Outside Director who became a
director in such year.
(4) The benefits that would be received by the Outside Directors under the
Director Plan if the amendment were not adopted are options to purchase
15,000 shares.
</FN>
</TABLE>
Grant of Options
All grants of options under the Director Plan are automatic and
nondiscretionary. Accordingly, no person shall have any discretion to select
which Outside Directors shall be granted options, to determine when such options
shall be granted or to determine the number of shares to be covered by options
granted to Outside Directors. All grants of options are made in strict
accordance with the following provisions:
(a) Immediately after each annual meeting of stockholders of the
Company at which directors are elected, reelected or continuing as
directors, each Outside Director is automatically granted an option or
options to purchase such number of shares of Common Stock as necessary
so that during each of the then four immediately following twelve-month
periods of July 1 through June 30 such Outside Director will have stock
options (including stock options granted under plans other than the
Director Plan but not including the one-time grant of options to
purchase 30,000 shares which such Outside Director was granted (i) upon
becoming an Outside Director or (ii) for present Outside Directors,
immediately following the stockholder meeting at which the amendment
was approved) which become exercisable with respect to a minimum of
10,000 shares during each such period. By way of example, if
immediately following such a meeting of stockholders an Outside
Director had (in addition to and separate from such Outside Director's
one-time 30,000 share option) an option to purchase 10,000 shares that
becomes exercisable
-18-
<PAGE>
during the first twelve-month period, an option to purchase 6,000
shares that becomes exercisable during the second twelve-month period,
an option to purchase 3,000 shares that becomes exercisable during the
third twelve-month period and no options that become exercisable during
the fourth twelve-month period, the Outside Director would be awarded
the following options that would become exercisable as follows: (i)
zero options for the first twelve-month period, (ii) an option to
purchase 4,000 shares which becomes exercisable on the last day of the
second twelve-month period, (iii) an option to purchase 7,000 shares
which becomes exercisable on the last day of the third twelve-month
period, and (iv) an option to purchase 10,000 shares which becomes
exercisable on the last day of the fourth twelve-month period.
(b) During the term of the Director Plan, if a person first becomes an
Outside Director by appointment by the Board to fill a vacancy or a
newly created directorship, such Outside Director shall be
automatically granted an option or options to purchase such number of
shares of Common Stock necessary so that during each of the then four
immediately following twelve-month periods of July 1 through June 30
such Outside Director will have stock options (including stock options
granted under plans other than the Director Plan but not including the
one-time grant of options to purchase 30,000 shares) which become
exercisable with respect to a minimum of 10,000 shares.
(c) All annual options granted pursuant to (a) and (b) above shall
become exercisable on the last day of the applicable twelve-month
periods, provided the Outside Director is then a member of the Board of
Directors.
(d) During the term of the Director Plan, when a person first becomes
an Outside Director, whether by election at the annual meeting of
stockholders, or by appointment by the Board, such Outside Director
shall be automatically granted a one-time stock option as set forth
below, in addition to any stock options to be granted to such Outside
Director pursuant to (a) or (b) above. Immediately following the
election or appointment of an Outside Director to the Board, such
Outside Director shall be automatically granted a one-time option to
purchase 30,000 Shares, all of which options shall be immediately
exercisable. Notwithstanding the foregoing, immediately after the
meeting of stockholders at which the amendment to the Director Plan is
approved, all Outside Directors of the Company as of such date shall be
granted a one-time option to purchase 30,000 Shares, all of which
options shall be immediately exercisable. Such one-time option to
purchase 30,000 shares shall not be considered in determining the
number of stock options which an Outside Director has for purposes of
the calculation in (a) and (b) above.
(e) No consideration will be received by the Company for the granting
of the options under the Director Plan.
If the proposed amendment to the Director Plan were not adopted, (i)
options would continue to be granted to Outside Directors in accordance with the
foregoing provisions except that each Outside Director would receive options
such that he or she would have stock options (including stock options granted
under plans other than the Director Plan) which would become exercisable with
respect to an annual minimum of 5,000 shares and (ii) Outside Directors would
not receive a one-time grant of options to purchase 30,000 shares. The proposed
amendment will only (i) increase the number of shares subject to stock options
from 5,000 to 10,000 shares for each applicable twelve-month period, beginning
with the four twelve-month periods immediately following the adoption of the
proposed amendment and (ii) provide for a one-time grant of options to purchase
30,000 shares for each new Outside Director at the time he or she becomes a
member of the Board and for each existing Outside Director of the Company on the
date on which stockholder approval of the proposed amendment is received.
-19-
<PAGE>
Vote Required
The affirmative vote of the holders of a majority of the Company's
Common Stock present, or represented and entitled to vote at the meeting is
required to approve the adoption of the amendment to the Director Plan. The
total number of shares cast "for" this proposal and the total number of shares
represented by proxy for which no instructions are given will be counted for
purposes of determining whether sufficient affirmative votes have been cast. An
abstention from voting by a stockholder present in person or represented by
proxy at the meeting has the same effect as a vote "against" the matter.
The Board of Directors recommends that the stockholders vote "FOR" the
approval of the amendment to the 1992 Non-Employee Director Stock Option Plan.
<TABLE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
There is shown below information concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal years
ended September 30, 1995, 1994 and 1993 of the chief executive officer of the
Company as of September 30, 1995 and the other six most highly compensated
executive officers of the Company for the year ended September 30, 1995
(collectively the "Named Executive Officers"). Compensation information is only
included for those years during which the named individual served as an
executive officer of the Company.
<CAPTION>
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------------
Long Term All Other
Annual Compensation Compensation Compensation
Awards ($)(2)
- ------------------------------------------------------------------------------------------------------------------------------
Number of
Securities
Fiscal Underlying
Name and Principal Positions Year Salary($) Bonus($)(1) Options Granted
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Syed H. Iftikar(3) 1995 320,811 0 0 1,000
Chairman of the Board, 1994 319,992 0 45,000 500
President and Chief 1993 268,746 85,000 40,000 250
Executive Officer
David Everett(4) 1995 255,458 0 0 1,000
Executive Vice President, 1994 229,992 0 10,000 500
Sales and Marketing 1993 98,942 27,009 50,000 0
Ken Hardesty(4) 1995 245,620 0 0 1,000
Vice President, Business 1994 231,000 0 10,000 500
Development 1993 135,577 37,639 65,000 0
Eugene Berti(4) 1995 226,699 0 0 1,000
Senior Vice President, 1994 225,000 0 10,000 500
-20-
<PAGE>
Research & Development 1993 93,976 31,459 50,000 250
Michael J. Perez(4) 1995 215,543 0 0 0
Senior Vice President, 1994 203,342 0 16,000 0
Finance Chief Financial 1993 183,163 54,963 16,000 0
Officer
J. Brent Nilson(4) 1995 131,757 0 0 1,000
Senior Vice President, 1994 169,992 0 6,000 500
Quality Assurance 1993 157,471 36,605 36,000 250
Robert E. Lyon(5) 1995 127,778 0 30,000 0
Vice President,
Human Resources
<FN>
- ----------------------------------
(1) Bonus for services rendered during the fiscal year and paid in the following
fiscal year.
(2) Consists of the Company's maximum matching contribution to the officer's
individual 401(k) plan account.
(3) No longer an officer or employee of the Company.
(4) No longer with the Company.
(5) Mr. Lyon commenced employment at the Company in January 1995.
</FN>
</TABLE>
<TABLE>
The following table sets forth information with respect to each grant
of options to purchase the Company's Common Stock made during the last fiscal
year to each of the Named Executive Officers.
OPTION GRANTS IN FISCAL YEAR 1995
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term(4)
% of Total
No. of Options
Securities Granted to Exercise or
Underlying Employees Base
Options in Fiscal Price(2)(3) Expiration
Name Granted (1) Year ($/Share) Date 0% 5% 10%
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert E. Lyon 30,000 3.69 16.75 12/21/99 -- $138,831 $306,781
<FN>
- -------------
(1) The options were granted under the Company's 1991 Stock Option Plan.
-21-
<PAGE>
(2) Options were granted at an exercise price equal to the fair market value of
the Company's Common Stock, as determined by reference to the closing price
reported on the Nasdaq National Market System on the last trading day prior
to the date of grant.
(3) Exercise price and tax withholding obligations may be paid in cash or by an
alternative method of payment if authorized by the Board of Directors such
as by delivery of already owned shares subject to certain conditions, or
pursuant to a cashless exercise procedure.
(4) Potential realizable value is based on an assumption that the market price
of the stock appreciates at the stated rate, compounded annually, from the
date of grant to the expiration date. These values are calculated on
requirements promulgated by the Securities and Exchange Commission and do
not reflect the Company's estimate of future stock price appreciation.
Actual gains, if any, are dependent on the future market price of the
Company's Common Stock. Gains are reported net of the option exercise price
but before taxes associated with exercise.
</FN>
</TABLE>
<TABLE>
The following table sets forth information with respect to option
exercises and year end stock option values for each of the Named Executive
Officers.
AGGREGATE OPTION EXERCISES LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<CAPTION>
Number of Securities/ Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at FY-End at FY-End
Acquired on Value -------------------------- -----------------------------
Name Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- ---------- ------------ ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Syed H. Iftikar(2) -- -- 475,730 58,750 $5,283,756 $207,344
David A. Everett(3) -- -- 25,000 35,000 $ 6,250 $ 47,500
Kenneth Hardesty(3) 20,000 $ 170,500 12,500 42,500 $ 53,125 $179,375
Eugene Berti(3) 25,000 $ 131,875 -- -- $ -- $ --
Michael Perez(3) 38,318 $ 610,918 38,000 24,000 $ 362,750 $ 85,000
J. Brent Nilson(3) 87,244 $ 1,240,654 -- -- $ -- $ --
Robert E. Lyon -- -- -- 30,000 $ -- $ --
<FN>
- -----------------------------
(1) Calculated as the difference between the market value of the Company's
Common Stock at exercise date or fiscal year end, as the case may be, and
the exercise price.
(2) No longer an officer or employee of the Company.
(3) No longer with the Company.
</FN>
</TABLE>
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<PAGE>
Change of Control Provisions
The 1991 Stock Option Plan of the Company provides for the automatic
acceleration of the vesting of all options outstanding under the Plan in the
event of a merger or consolidation of the Company in which the Company is not
the surviving corporation or in the event of a sale of all or substantially all
of the assets of the Company, if the successor entity does not assume the
outstanding options or provide options in substitution for the outstanding
options.
Compensation of Directors
Non-employee members of the Board receive an annual retainer of $10,000
for serving as a director during the fiscal year. Non-employee directors were
also paid a fee of $1,500 for each Board meeting and $500 for each committee
meeting attended.
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting.
If any other matters properly come before the meeting, it is the intention of
the persons named in the enclosed form of Proxy to vote the shares they
represent as the Board of Directors may recommend.
Dated: August 23, 1996
-23-
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
P THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SYQUEST TECHNOLOGY, INC.
R SPECIAL MEETING OF STOCKHOLDERS
O The undersigned stockholder of SYQUEST TECHNOLOGY, INC., a Delaware
corporation ("Company"), hereby acknowledges receipt of the Notice of
X Special Meeting of Stockholders and Proxy Statement, each dated
August 23, 1996, and hereby appoints Edwin L. Harper and John W.
Y Luhtala, or either of them, proxies and attorneys-in-fact, with full
power to each of substitution, on behalf of and in the name of the
undersigned, to represent the undersigned at the Special Meeting of
Stockholders of SyQuest Technology, Inc. to be held on September
[24], 1996 at 10:00 a.m. local time, at the principal executive
offices of SyQuest Technology, Inc., 47071 Bayside Parkway, Fremont,
California 94538, and at any adjournment or adjournments 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 on the reverse side.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR PROPOSALS NOS. 1, 2, 3, 4, 5 AND 6, 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
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
MARK HERE FOR ADDRESS [ ]
1. To approve amendment to Certificate of Incorporation CHANGE AND NOTE AT LEFT
to increase number of authorized shares
(This proxy should be marked, dated and signed by the
[ ] For [ ] Against [ ] Abstain stockholder(s) exactly as his or her name appears
hereon, and returned promptly in the enclosed
2. To approve increase in number of shares issuable upon envelope. Persons signing in a fiduciary capacity
conversion of Preferred Stock should so indicate. If shares are held jointly or as
community property, both stockholders should sign.)
[ ] For [ ] Against [ ] Abstain
Signature: Date:
3. To approve increase in number of shares issuable ---------------------- ----------
under the 1991 Stock Option Plan Signature: Date:
-------------------- ----------
[ ] For [ ] Against [ ] Abstain
4. To approve increase in number of shares issuable
under the 1992 Non-Employee Director Stock Option Plan
[ ] For [ ] Against [ ] Abstain
5. To approve increase in number of shares granted
annually to Outside Directors, and one-time
grants of options to purchase 30,000 shares under
the 1992 Non-Employee Director Stock Option Plan
[ ] For [ ] Against [ ] Abstain
6. To transact such other business as may come before
the meeting or any adjournment thereof.
[ ] For [ ] Against [ ] Abstain
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
