<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Network Imaging Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] 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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(4) Date filed:
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<PAGE> 2
[NETWORK IMAGING CORPORATION LOGO]
NETWORK IMAGING CORPORATION
500 HUNTMAR PARK DRIVE
HERNDON, VIRGINIA 20170
April 23, 1997
Dear Stockholders:
It is my pleasure to invite you to the Annual Meeting of Stockholders of
Network Imaging Corporation to be held on Tuesday, June 3, 1997 at 9:00 a.m., at
the Hyatt Regency Hotel, 1800 Presidents Street, Reston, Virginia.
Whether or not you plan to attend, and regardless of the number of shares
you own, it is important that your shares be represented at the Annual Meeting.
You are accordingly urged to complete, sign, date and return your proxy promptly
in the enclosed envelope. Your return of a proxy in advance will not affect your
right to vote in person at the Annual Meeting.
I hope that you will attend the Annual Meeting. The officers and directors
of the Company look forward to seeing you at that time.
Very truly yours,
/s/ JAMES J. LETO
JAMES J. LETO
President and Chief Executive Officer
<PAGE> 3
[NETWORK IMAGING CORPORATION LOGO]
NETWORK IMAGING CORPORATION
500 HUNTMAR PARK DRIVE
HERNDON, VIRGINIA 20170
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, JUNE 3, 1997
------------------------
To our Stockholders:
The Annual Meeting of Stockholders (the "Meeting") of Network Imaging
Corporation (the "Company") will be held on Tuesday, June 3, 1997 at 9:00 a.m.
at the Hyatt Regency Hotel, 1800 Presidents Street, Reston, Virginia for the
following purposes:
1. To ratify the adoption of amendments to Sections 3.02, 3.04 and 3.05 of
the Bylaws of the Company to provide for a classified Board of
Directors;
2. To elect five directors;
3. To consider and vote upon a proposal to adopt the Employee Stock
Purchase Plan;
4. To ratify the selection of Ernst & Young LLP as independent accountants
for the year ending December 31, 1997; and
5. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
Stockholders of record at the close of business on April 7, 1997 are
entitled to receive notice of and to vote at the Meeting.
You are invited to attend the Meeting. Please carefully read the attached
Proxy Statement for information regarding the matters to be considered and acted
upon at the Meeting. We hope that you will attend the Meeting.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING IN PERSON, YOU ARE
URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
RETURN POSTAGE-PAID ENVELOPE. No postage need be affixed to the return envelope
if mailed in the United States. If you attend the Meeting, you may withdraw your
proxy and vote in person by ballot.
By Order of the Board of Directors
/s/ JULIA A. BOWEN
JULIA A. BOWEN
Vice President, General Counsel
and Assistant Secretary
Herndon, Virginia
April 23, 1997
<PAGE> 4
NETWORK IMAGING CORPORATION
500 HUNTMAR PARK DRIVE
HERNDON, VIRGINIA 20170
------------------------
PROXY STATEMENT
This Proxy Statement and the accompanying Notice of Annual Meeting of
Stockholders and Proxy Card are being furnished in connection with the
solicitation by the Board of Directors of Network Imaging Corporation (the
"Company") of proxies to be voted at the Annual Meeting of Stockholders
scheduled to be held on Tuesday, June 3, 1997 at 9:00 a.m. at the Hyatt Regency
Hotel, 1800 Presidents Street, Reston, Virginia, and any adjournment or
postponement thereof (the "Meeting"). This Proxy Statement and the enclosed
Proxy Card are being furnished on or about April 25, 1997, to all holders of
record of the Company's Common Stock (the "Common Stock") as of April 7, 1997. A
copy of the Company's Form 10-K for the year ended December 31, 1996, including
consolidated financial statements for that year, accompanies this Proxy
Statement.
At the Meeting, stockholders will vote on proposals to ratify the adoption
of certain amendments to the Company's Bylaws, to elect five directors, in Class
I and Class II, who shall then have terms that end for Class I in 1998 and Class
II in 1999, to approve the adoption of the Company's Employee Stock Purchase
Plan, and to ratify the selection of Ernst & Young as the Company's independent
auditors for 1997.
VOTING SECURITIES AND RECORD DATE
The Board of Directors has fixed the close of business on April 7, 1997 as
the record date (the "Record Date") for determination of stockholders entitled
to notice of and to vote at the Meeting. As of the Record Date, there were
24,835,263 shares of Common Stock issued and outstanding and there were no other
voting securities of the Company outstanding. Each outstanding share of Common
Stock entitles the record holder thereof to one vote. Under Delaware law, shares
represented at the Meeting (either by properly executed proxy or in person) that
reflect abstentions or "broker non-votes" (i.e., shares held by a broker or
nominee which are represented at the Meeting, but with respect to which such
broker or nominee is not empowered to vote on a particular proposal) will be
counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. Abstentions as to each Proposal will have
the same effect as votes against the respective proposals. Broker non-votes,
however, will be treated as unvoted for purposes of determining approval of such
proposals (and therefore will reduce the absolute number -- although not the
percentage -- of votes needed for approval) and will not be counted as votes for
or against the proposals. Under the New York Stock Exchange Rules, brokers will
not have discretionary voting authority for Proposal 1, and may not vote for
Proposal 1 without receiving instructions from the beneficial owners of shares;
however, brokers will have discretionary voting authority for Proposals 2, 3, 4
and 5.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Stockholders of record on the Record Date may vote at the Meeting in person
or by means of the enclosed Proxy Card. You may specify your voting choices by
marking the appropriate boxes on the Proxy Card. The proxy solicited hereby, if
properly signed and returned to the Company and not revoked prior to or at the
Meeting, will be voted in accordance with the instructions specified thereon. If
you properly sign and return your Proxy Card, but do not specify your choices,
your shares will be voted by the proxy holders as recommended by the Board of
Directors.
The Board of Directors encourages you to complete and return the Proxy Card
even if you expect to attend the Meeting. You may revoke your proxy at any time
before it is voted at the Meeting by giving written notice of revocation to the
Secretary of the Company, by submission of a proxy bearing a later date or by
attending the Meeting and casting a ballot.
1
<PAGE> 5
The proxy holders, James J. Leto and Robert P. Bernardi, will vote all
shares of Common Stock represented by Proxy Cards that are properly signed and
returned by stockholders. The Proxy Card also authorizes the proxy holders to
vote the shares represented with respect to any matters not known at the time
this Proxy Statement was printed that may properly be presented for
consideration at the Meeting. YOU MUST RETURN A SIGNED PROXY CARD IF YOU WANT
THE PROXY HOLDERS TO VOTE YOUR SHARES OF COMMON STOCK.
The cost of preparing, assembling and mailing this proxy soliciting
material and Notice of Annual Meeting of Stockholders will be paid by the
Company. Following the mailing of proxy solicitation materials, proxies may be
solicited by directors, officers and regular employees of the Company and its
subsidiaries personally, by mail, telephone, telecopier or by personal
solicitation, for which they will receive no additional compensation. In
addition, the Company will reimburse brokers, custodians, nominees and other
persons holding shares of Common Stock for others for their reasonable expenses
in sending proxy materials to the beneficial owners of such shares and in
obtaining their proxies. Additional solicitation by Brokerage houses and other
nominees, fiduciaries, and custodians nominally holding shares of the Company's
stock as of the record date will be requested to forward proxy soliciting
material to the beneficial owners of such shares, and will be reimbursed by the
Company for their reasonable expenses.
PROPOSAL 1 -- RATIFICATION OF THE ADOPTION OF AMENDMENTS
TO THE BYLAWS OF THE COMPANY
General. The Board of Directors of the Company has unanimously approved
and recommended the adoption of amendments ("Classified Board Amendments") to
the Bylaws of the Company (the "Bylaws"), the purpose of which is to classify
the Company's Board of Directors. The Classified Board Amendments would classify
the Corporation's Board of Directors into two classes, as nearly equal in
numbers as possible. Directors in Class I will serve for an initial term to
expire at the next annual meeting of stockholders succeeding their election, and
directors in Class II will serve for an initial term to expire at the second
annual meeting of stockholders succeeding their election. Each successor to a
Class I or Class II Director will serve until the second annual meeting of the
Stockholders next succeeding his or her election.
The Classified Board Amendments would modify Sections 3.02, 3.04 and 3.05
of the Bylaws in order to effect the classification of the Board. The following
description and discussion of the Classified Board Amendments is a summary only
and is not intended to be complete. Stockholders are urged to read carefully the
provisions of the proposed Sections 3.02, 3.04 and 3.05, the full text of which
is annexed as Appendix A to this Proxy Statement.
Reasons for and Effects of the Classified Board Amendments. The Board of
Directors has unanimously proposed the adoption of the Classified Board
Amendments because it believes that it is in the best interests of the Company
and its stockholders. The Board of Directors believes that a classified Board
structure will provide both continuity and stability to the Company and
accountability to the Company's stockholders.
Board accountability is enhanced by selection of responsible, experienced
and respected directors. The Company's annual elections at which approximately
one-half of the Board would be elected under the Classified Board Amendments
will provide stockholders with the regular opportunity to make significant
change in the composition of the Board, while also providing the Company with
experienced and knowledgeable directors.
The Company's Board plays an important role in strategic planning and
corporate policy-making. A director's ability to make meaningful contributions
in these areas depends in large part on his or her familiarity with the
Company's business and affairs. The classified board structure lends stability
and enables directors to make deliberate and insightful decisions regarding the
Company's business.
If the Classified Board Amendments are approved, a majority of the
Company's directors could only be replaced at the biannual meeting of
stockholders at which Class II Directors are elected (instead of each annual
meeting), unless directors were removed for cause by the requisite vote of
stockholders. The Board of Directors accordingly would be better able to
evaluate any takeover proposal for the Company, or any other
2
<PAGE> 6
self-interested proposal, and to assess alternatives, and thereby to ensure that
the interests of all stockholders are protected.
The Classified Board Amendments may discourage potential acquirers because
its provisions could operate to delay the purchaser's ability to obtain control
of the Board of Directors. The Classified Board Amendments could similarly delay
stockholders who do not approve of policies of the Board from replacing the
entire board of directors. Adoption of the Classified Board Amendments may also
deter certain mergers, tender offers or other takeover attempts which some or a
majority of holders of the Company's voting stock may deem to be in their best
interest. The Company is not aware of any existing or planned effort on the part
of any person to gain control of the Company or to organize a proxy contest for
control of the Board.
If the Classified Board Amendments are not approved, directors will be
elected annually.
The affirmative vote of a majority of the outstanding shares of Common
Stock entitled to vote in the election of directors at the Meeting is required
to approve the Classified Board Amendments.
THE BOARD OF DIRECTORS BELIEVES THAT A CLASSIFIED BOARD BEST SERVES THE
COMPANY, THE STOCKHOLDERS AND THOSE WITH WHOM THE COMPANY DOES BUSINESS, AND
ACCORDINGLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THIS PROPOSAL.
PROPOSAL 2 -- ELECTION OF DIRECTORS
The Bylaws, as proposed to be amended by the Classified Board Amendments,
will provide that the Company's Board of Directors be divided into Class I and
Class II, each class being as nearly equal in number as possible. The term of
office of each class of directors will expire alternate years in rotation so
that one class is elected at each subsequent annual meeting of stockholders for
a two year term. The terms of each of the five current directors will expire at
the Meeting. The election shall be for three Class I directors, John F. Burton,
James J. Leto and C. Alan Peyser, whose terms shall expire at the next annual
meeting of stockholders. The election of the two Class II directors, Robert P.
Bernardi and Robert Ripp, shall expire at the second annual meeting of
stockholders.
If the Classified Board Amendments are adopted at the Meeting, three
directors will be elected for terms expiring at the 1998 annual meeting of
stockholders, and two directors will be elected for terms expiring at the 1999
annual meeting of stockholders. If the Classified Board Amendments are not
adopted at the Meeting, five directors will be elected for terms expiring at the
next annual meeting.
Director candidates are nominated by the Board of Directors.
At the Meeting, the five directors are to be elected. Each nominee has
consented to being named as a nominee for director of the Company and has agreed
to serve if elected. Directors in Class I will serve for an initial term to
expire at the next annual meeting of stockholders succeeding their election, and
directors in Class II will serve for an initial term to expire at the second
annual meeting of stockholders succeeding their election. Each successor to a
Class I or Class II Director will serve until the second annual meeting of the
Stockholders next succeeding his or her election.
The directors will be elected to serve for their respective terms and until
their successors have been elected and have qualified. The Board of Directors
has no reason to believe that any of the nominees will be unavailable or that
any other vacancy on the Board will occur; however, should any nominee become
unavailable or unable to serve as a director, the persons named as proxies on
the proxy card will vote for the person(s) the Board of Directors recommends.
Set forth below is certain information regarding each nominee for Class I
director and each Class II director, each of whose term of office will continue
after the Meeting.
NOMINEES FOR CLASS I DIRECTORS
John F. Burton James. J. Leto C. Alan Peyser
3
<PAGE> 7
JOHN F. BURTON, 45, was appointed to the Board of Directors in September
1995. Mr. Burton became Managing Director of the Updata Group, a mergers and
acquisitions investment bank, in March 1997. From October 1996 to February 1997,
he served as the President of Burton Technology Partners, a strategic consulting
and investment company. Prior to that time, Mr. Burton was President and Chief
Executive Officer of Nat Systems, Inc., a provider of applications development
software from August 1995 to September 1996. From January 1995 to August 1995,
Mr. Burton was an independent consultant in the applications software field.
From March 1992 to January 1995, Mr. Burton served as Chief Executive Officer,
and from 1989 to January 1995 as President, Chief Operating Officer and a
Director, of Legent Corporation ("Legent"), an independent software vendor. Mr.
Burton is also a Director of Banyan Systems, Inc., MapInfo Corporation and
Netrix Corporation. Mr. Burton was a founding member of the Northern Virginia
Technology Council.
JAMES J. LETO, 53, became President and Chief Executive Officer and a
Director of the Company in May 1996. Mr. Leto served as the Chairman and Chief
Executive Officer of PRC Inc., an information technology company ("PRC"), from
January 1993 to February 1996, and prior thereto in various capacities as an
executive officer of that company. From January 1989 until February 1992, Mr.
Leto served as the Vice President and General Manger of AT&T Federal Systems
Computer Division, a division of AT&T charged with developing a major system
integration and computer presence in the federal marketplace. Mr. Leto first
joined AT&T in November 1977. Mr. Leto is a director of Government Technology
Systems, Inc.
C. ALAN PEYSER, 62, became a Director of the Company in May 1996. Mr.
Peyser was appointed President and Chief Executive Officer of Cable & Wireless,
Inc., in October 1996. From September 1995 to October 1996, Mr. Peyser served as
a consultant to Cable & Wireless, Inc. He is also currently President of Country
Long Distance Corporation and a member of the Board of Directors of Tridex
Corporation and TCI International, Inc. Mr. Peyser previously served as the
Chief Executive Officer and President of Cable & Wireless, Inc. from 1980
through September 1995.
The three nominees receiving the vote of a plurality of the outstanding
shares of Common Stock present, in person or represented by proxy at the Meeting
and entitled to vote on the elections of directors will be elected as the Class
I Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION
OF EACH OF THE NOMINATED CLASS I DIRECTORS.
NOMINEES FOR CLASS II DIRECTORS
Robert P. Bernardi Robert
Ripp
ROBERT P. BERNARDI, 44, was a co-founder of the Company and has been a
Director of the Company (and its predecessor) since its inception and Chairman
of the Board of Directors since September 1995. Mr. Bernardi served as President
of the Company from inception to February 1995 and as Chief Executive Officer
from inception to May 1996. From 1988 to 1990, Mr. Bernardi was an independent
consultant in the document imaging and telecommunications fields. From March
1984 to December 1987, Mr. Bernardi was Chairman and Chief Executive Officer of
Spectrum Digital Corporation, a publicly held telecommunications equipment
manufacturing company ("Spectrum Digital"), with overall management
responsibilities including marketing, sales, engineering and finance.
ROBERT RIPP, 55, has served as a Director since October 1994. Mr. Ripp is
Corporate Vice President and Chief Financial Officer of AMP, Inc., an
electronics manufacturer. Prior to joining AMP in 1994, Mr. Ripp was Vice
President and Treasurer of International Business Machines Corporation, where he
served in various capacities as a finance executive from 1964 to 1994. He is a
member of the board of directors of ACE, Limited.
The two nominees receiving the vote of a plurality of the outstanding
shares of Common Stock present, in person or represented by proxy at the Meeting
and entitled to vote on the election of directors will be elected as the Class
II Directors.
4
<PAGE> 8
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION
OF EACH OF THE NOMINATED CLASS II DIRECTORS.
COMPENSATION OF DIRECTORS
Each director of the Company who is not also currently employed by the
Company, currently Messrs. Burton, Peyser and Ripp, receives a fee of $1,000 for
each meeting of the Board or committee thereof which he attends in person and
$250 for each such meeting in which he participates by telephone. Mr. Ripp has
been granted options on 21,675 shares of Common Stock at $3.75 per share, 25,000
shares of Common Stock at $6.82 per share, and 25,000 shares of Common Stock at
$3.82 per share, each with a term of 10 years and each of which is exercisable
on a cumulative basis in four equal installments on each of the first four
anniversaries of the applicable date of grant. Mr. Burton has been granted an
option on 100,000 shares of Common Stock with an exercise price of $3.38 per
share and a term of 10 years. The option vests on May 2, 2002 or, earlier, upon
the Company's entering into a strategic partnership agreement with a major
software company as a result of the assistance of Mr. Burton. Mr. Peyser has
been granted an option on 50,000 shares of Common Stock at $3.69 per share with
a term of 10 years and which is exercisable on a cumulative basis in four equal
installments on each of the first four anniversaries of its date of grant. The
exercise prices of the options granted to directors were set at the fair market
value of the Common Stock at the time of grant.
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
The Board of Directors held five meetings during 1996. The Board of
Directors has established standing Audit and Compensation committees, each of
which is composed of non-employee members of the Board of Directors. The
membership of each of these standing committees is determined from time to time
by the Board. The Board of Directors has not established a nominating committee;
the entire Board of Directors votes on nominations of directors for the Company.
THE AUDIT COMMITTEE, which presently consists of John F. Burton and Robert
Ripp, held two meetings during 1996. The committee selects, subject to the
approval of the Board of Directors, a firm of independent certified public
accountants to audit the books and accounts of the Company and its subsidiaries
for the year for which they are appointed. In addition, the committee reviews
and approves the scope and cost of all services (including nonaudit services)
provided by the firm selected to conduct the audit. The committee also monitors
the effectiveness of the audit effort and the Company's financial and operating
controls.
THE COMPENSATION COMMITTEE, which presently consists of Robert P. Bernardi
and Robert Ripp, held one meeting during 1996. The committee is responsible for
the approval and administration of the compensation program for James J. Leto,
the Company's President and Chief Executive Officer. The committee also reviews
and approves compensation programs for the other officers of the Company as
recommended by Mr. Leto. The committee is also responsible for the grant of
options to the Company's employees under the Company's various stock option
plans and administers the plans.
5
<PAGE> 9
OWNERSHIP OF NETWORK IMAGING CORPORATION STOCK
The following table sets forth certain information, as of April 1, 1997,
with respect to the beneficial ownership of shares of Common Stock by (i) each
stockholder known by the Company to be the beneficial owner of more than five
percent (5%) of the outstanding shares of Common Stock; (ii) each director of
the Company; (iii) each executive officer named in the Summary Compensation
Table appearing below under "Executive Compensation"; and (iv) all executive
officers and directors as a group. Except as indicated in the footnotes to the
table, persons named in the table have sole voting and investment power with
respect to all shares of Common Stock which they respectively own beneficially.
The address of each person who is an executive officer or director of the
Company is 500 Huntmar Park Drive, Herndon, Virginia 20170.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS
--------------------------------------------------------- --------------------- --------
<S> <C> <C>
Fred E. Kassner(2)....................................... 2,085,597 8.4
Robert P. Bernardi(3).................................... 1,745,825 7.0
James J. Leto(4)......................................... 123,191 *
Robert M. Sterling, Jr.(5)............................... 1,926,825 7.8
Mark T. Wasilko(6)....................................... 43,750 *
John F. Burton........................................... 0 *
C. Alan Peyser(7)........................................ 21,500 *
Robert Ripp(8)........................................... 22,088 *
Russell D. Hale(9)....................................... 125,000 *
Brian H. Hajost(10)...................................... 13,581 *
Directors and executive officers as a group (10
persons)............................................... 2,142,853 8.6
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
(1) Under applicable rules of the Securities and Exchange Commission (the
"SEC"), a person is deemed to be the beneficial owner of share of Common
Stock if, among other things, he or she directly or indirectly has or
shares voting power or investment power with respect to such shares. A
person is also considered to beneficially own shares of Common Stock which
he or she does not actually own but has the right to acquire presently or
within the next sixty (60) days, by exercise of stock options or otherwise.
(2) The address of Mr. Kassner is 69 Spring Street, Ramsey, New Jersey 07446.
Of the total shares shown, Mr. Kassner has shared voting and dispositive
power with respect to 1,207,857 shares, including 80,000 shares underlying
a warrant, held by Liberty Travel, Inc. of which Mr. Kassner is an officer,
director, and stockholder. Of the shares reported as being held directly by
Mr. Kassner, 154,000 are issuable upon the exercise of a warrant.
(3) Includes 1,348,325 shares issuable upon exercise of options.
(4) Includes 110,000 shares issuable upon exercise of options.
(5) Includes 1,348,325 shares issuable upon exercise of options and 96,000
shares issuable upon exercise of Redeemable Common Stock Purchase Warrants.
(6) All shares are issuable upon exercise of options.
(7) Includes 12,500 shares issuable upon exercise of options.
(8) Includes 17,088 shares issuable upon exercise of options.
(9) All shares are issuable upon exercise of options.
(10) Includes 12,500 shares issuable upon exercise of options.
6
<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table below lists the Chief Executive Officer and
the four other most highly compensated executive officers of the Company (the
"Named Executives") as of the end of 1996 and their compensation for services in
1996, 1995 and 1994.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
---------------------------------------- SECURITIES ALL OTHER
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING COMPEN-
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) SATION($)
- -------------------------- ---- --------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert P. Bernardi(1)..... 1996 $79,306 $50,000 $ 102,083(2) 0 $ 5,250(3)
Chairman of the Board 1995 182,306 50,000 1,148,325(4)
and Chief Executive
Officer 1994 175,000 64,000 625,000(5)
James J. Leto............. 1996 118,974(6) 34,066 500,000
President & Chief
Executive Officer
Russell D. Hale(7)........ 1996 165,000 11,050 0
Senior Vice President, 1995 165,000 43,329 250,000
Federal Sales 1994 28,135(8) 0
Mark T. Wasilko........... 1996 150,000 13,125 50,000
Senior Vice President, 1995 48,942(9) 125,000
Marketing
Brian H. Hajost........... 1996 102,000(10) 26,978 100,000 42,697(11)
Senior Vice President,
Integrated Products
</TABLE>
- ---------------
(1) Mr. Bernardi resigned as the Company's Chief Executive Officer effective
May 29, 1996.
(2) Mr. Bernardi became a consultant of the Company upon his resignation as the
Company's Chief Executive Officer. The amount shown constitutes the
consulting fees paid to Mr. Bernardi in 1996.
(3) The amount shown constitutes the automobile allowance for Mr. Bernardi.
(4) The figures shown treat as newly issued in 1995 the replacement options
which were exchanged for the options surrendered by Mr. Bernardi pursuant
to the Company's 1995 Option Repricing Program. Mr. Bernardi received
replacement options on 938,325 (FIX NOS>) shares in exchange for
surrendering options on the 1,125,000 shares shown as having been granted
in 1993 and 1994. The Company's 1995 Option Repricing Program allowed
holders of out-of-the-money options to surrender them to the Company and
receive in exchange therefor replacement options exercisable for fewer
shares as determined by a formula intended to achieve approximate economic
equivalence between the surrendered options and the replacement options and
having an exercise price of $3.75, the same vesting schedule as the
surrendered options and a term of ten years commencing on the original
grant date of the surrendered option.
(5) Terminated pursuant to the Company's 1995 Option Repricing Program.
(6) Mr. Leto joined the Company as its Chief Executive Officer in May 1996.
(7) Mr. Hale resigned as an officer of the Company effective April 1, 1997.
(8) Mr. Hale joined the Company as an officer in October 1994.
(9) Mr. Wasilko joined the Company as an officer in September 1995.
(10) Mr. Hajost joined the Company as an officer in March 1996.
(11) The amount shown constitutes temporary housing benefits and moving expenses
paid for Mr. Hajost in 1996.
7
<PAGE> 11
STOCK OPTIONS
No stock options were granted to Messrs. Bernardi or Hale during 1996. The
following table sets forth certain information concerning the grant of options
to the other Named Executives in 1996. The Company has not granted any stock
appreciation rights ("SARs").
OPTION GRANTS IN LAST YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN OR BASE EXPIRATION -----------------------
NAME GRANTED(#) YEAR PRICE($/SH) DATE 5% 10%
- ----------------------------- ---------- ------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
James J. Leto................ 500,000(1) 34% $4.22 5/28/06 $1,327,000 $3,355,000
Mark T. Wasilko.............. 50,000(1) 3% $3.82 4/10/06 $ 120,000 $ 305,000
Brian H. Hajost.............. 50,000(1) 3% $3.82 4/15/06 $ 120,000 $ 305,000
50,000(1) 3% $3.13 9/22/06 $ 98,000 $ 248,500
</TABLE>
- ---------------
(1) Each of the indicated options was granted pursuant to the Company's Employee
Incentive Stock option Plan and vests four years from the date of grant, or,
for the options held by Mr. Leto, upon the acquisition of the Company.
The following table summarizes the value realized upon exercise of
outstanding stock options and the value of the outstanding options held by the
Chief Executive Officer and the other Named Executives.
AGGREGATED OPTION EXERCISES IN LAST YEAR AND
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES YEAR-END(#) AT FISCAL-YEAR END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert P. Bernardi.......... 0 0 680,582 667,743 $ 230,000 $ 0
James J. Leto............... 0 0 0 0 500,000 0
Russell M. Hale............. 0 0 125,000 125,000 0 0
Mark T. Wasilko............. 0 0 43,750 131,250 0 0
Brian H. Hajost............. 0 0 0 100,000 0 0
</TABLE>
- ---------------
(1) Computed by multiplying the number of options by the difference between (i)
the per share market value of the Common Stock on 12/31/96 and (ii) the
exercise price per share.
The information set forth in the following Report and Performance Graph
shall not be deemed incorporated by reference by anything incorporating by
reference this Proxy Statement, future filings or generally into any filings
under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, except to the extent that the Company specifically
incorporates such information by reference.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is directly
responsible for the approval and administration of the compensation program for
James J. Leto, the Company's President and Chief Executive Officer. The
Compensation Committee is also responsible for the grant of options to the
Company's employees under the Company's various stock option plans and
administers the plans. In 1996, the Compensation Committee consisted of two
directors of the Company, Robert P. Bernardi and Robert Ripp.
8
<PAGE> 12
Mr. Leto is responsible for the approval and administration of compensation
programs for the other executive officers of the Company, including those named
in the Summary Compensation Table, subject to review and approval by the
Compensation Committee and the Board of Directors.
Executive Compensation Philosophy
The Company's executive compensation program is designed to meet the
following objectives:
- To attract and retain highly qualified executives to lead and manage the
Company by providing competitive total compensation packages;
- To reward executives based on the business performance of the Company;
- To provide executives with incentives designed to maximize the long-term
performance of the Company; and
- To assure that objectives for corporate and individual performance are
established and measured.
For 1996, the components of the Company's executive compensation program
included annual base salary and short-term incentive bonus plans. In 1996, stock
options to purchase shares of the Company's Common Stock were awarded as a
long-term incentive to executive officers of the Company as follows: James J.
Leto, 500,000 shares upon his appointment as the Company's President and Chief
Executive Officer; Jorge R. Forgues, 125,000 shares, upon his appointment as the
Company's Chief Financial Officer; Mark T. Wasilko, 50,000 shares; John M.
Flowers, Jr., 100,000 shares upon his appointment as the Company's Senior Vice
President, Engineering; and Brian H. Hajost, 100,000 shares upon his appointment
as the Company's Senior Vice President, Integrated Products.
Base Salaries and Short Term Incentive Plans
Base salaries for executive officers (including the Chief Executive
Officer) are determined by evaluating the responsibilities associated with their
respective positions and the experience of the officers and by reference to
salaries paid in the competitive marketplace to executive officers with
comparable ability and experience within the same industry following review of
compensation information available in certain widely-known surveys and
databases. Bonuses and annual salary adjustments, if any, are determined by
evaluating performance taking into account such factors as achievement of the
Company's strategic goals, assumption of additional responsibilities and
attainment of specific individual objectives. The Board believes that stock
ownership by management is especially beneficial in aligning management's and
stockholders' interests in the Company.
Base salaries are set by Mr. Leto for the other executive officers. No
specific weight of relative importance is assigned to the various factors and
compensation information considered. Accordingly, the Company's executive
compensation policies and practices may be deemed informal and subjective,
although they are based on such factors and detailed investigation.
Long-Term Incentive Plans
The Company historically has provided long-term incentive compensation to
attract, motivate and retain executive officers and other employees through
grants of stock options under the Company's Employee Incentive Stock Option
Plan. The Compensation Committee believes that this form of compensation closely
aligns the interests of executive officers with those of the Company's
shareholders and provides a major incentive in building shareholder value. The
Compensation Committee designates the employees who shall be granted options and
the amount and terms of the options granted. The number of stock options granted
to each individual is based on his or her salary range, position, level of
responsibility, and performance during the relevant year. All grants are made
with an exercise price not less than the fair market value of the Common Stock
on the date of grant.
9
<PAGE> 13
Section 162(m) of the Code imposes a limitation on the deductibility of
nonperformance-based compensation in excess of $1 million paid to the Named
Executives. The cash compensation of each of the Company's executive officers is
substantially below the $1 million threshold. The options granted under the
Company's stock option plans to date may not meet the requirement of being
performance-based as that term is used in the section and consequently their
exercise could reduce the compensation tax deduction that would otherwise be
available to the Company if the spread between the exercise price and the then
fair market value of the common stock should cause a specified executive's
compensation to exceed $1 million. The Board of Directors currently believes
that it should be able to continue to manage the executive compensation paid to
the Named Executives so as to preserve the related federal income tax
deductions.
Compensation Committee
Robert P. Bernardi
Robert Ripp
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Bernardi, who was a member of the Company's Board of Directors and an
executive officer of the Company in 1996, participated in the Board's
deliberations concerning executive officer compensation for 1996.
The Company has entered into consulting agreements with BCG, Inc. ("BCG")
(of which Mr. Bernardi is the sole stockholder) and with Sterling Capital Group,
Inc. ("Sterling Capital") (of which Mr. Sterling is the sole stockholder) which
provide for BCG and Sterling Capital to make the services of Messrs. Bernardi
and Sterling available to the Company. Each of the consulting agreements is for
an initial term ending January 31, 1999 and continues from year to year
thereafter unless terminated by either the Company or either of Messrs. Bernardi
or Sterling. Each of the agreements with BCG and Sterling Capital Group provides
for an annual consulting fee of $225,000, subject to increases upon review by
the Board of Directors, and an annual performance bonus if agreed to and
approved by the Board of Directors. The Company has also agreed to employ Mr.
Sterling as Assistant Secretary of the Company at an annual salary of $5,000. In
determining the levels of bonuses and increases in salary or consulting fees,
the Board of Directors intends to consider such factors as the levels of
compensation of senior executives of comparable companies, the overall
performance of the Company and the respective contributions of Messrs. Bernardi
and Sterling to that performance. Apart from these considerations, no criteria
have been established that would limit the amounts of bonuses or the size of
increases in consulting fees. The agreements provide demand registration rights
to Messrs. Bernardi and Sterling with respect to securities of the Company owned
by them or which they may acquire upon exercise of options. The consulting
agreements provide that Messrs. Bernardi and Sterling will devote their
reasonable best efforts to the business of the Company and the furthering of its
interests and that each of them is expected to devote up to 100 hours per month
to the Company's affairs as requested by the Company. The Company expects that
Mr. Bernardi will, in addition to serving as Chairman, perform other duties
assigned to him by the Board of Directors and that Mr. Sterling will identify
and pursue on behalf of the Company business development projects, including
acquisitions and, as needed, financings, perform other duties as requested by
the Board and be available to consult with the executive officers on matters
affecting the Company. Each of the respective agreements prohibits Messrs.
Bernardi and Sterling during the term of the agreement from certain associations
with any business that competes with the Company.
The agreements also provide that if the consultant's services are
terminated by the Company for any reason other than cause, death or disability,
or if the consultant terminates the agreement for "good reason," the Company
will pay in a lump sum the full amount of the fees and benefits which the
consultant would have received, at the average rate in effect during the six
month period immediately prior to termination, and of any bonuses which would
have been received, at the rate of the bonus for the last full year prior to
termination, if the consultant's services had continued for the remaining term
of the agreement. The term "good reason" means a failure by the Company to
comply with any material provision of the agreement, a change of control of the
Company to which the consultant has not given prior written consent or a good
faith determination by
10
<PAGE> 14
the consultant that as a result of a change in control he is unable to discharge
effectively his duties under the agreement. A change in control is deemed to
occur if substantially all the assets of the Company are sold, if the Company is
merged or consolidated with, or becomes a subsidiary of another corporation, if
any person acquires 20% or more of the combined voting power of the Company's
securities and is then the largest holder of such securities or if during any
period of two consecutive years individuals who at the beginning of such period
constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority thereof, unless the election of each director who
was not a director at the beginning of such period has been approved in advance
by directors representing at least two-thirds of the directors then in office
who were directors at the beginning of the period.
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total stockholder return on the Company's Common Stock for the period beginning
with the Company's initial public offering on May 8, 1992 through December 31,
1996 with cumulative total return for the Nasdaq Stock Market (US) and for
Nasdaq Computer & Data Processing Stocks (SIC code 737). The comparison assumes
$100 was invested on May 8, 1992 in the Company's Common Stock at the $4.00
initial offering price and in each of the foregoing indices and assumes
reinvestment of dividends, if any.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) NIC-Common Stock NASDAQ COMPOSITE NASDAQ C&DPS
<S> <C> <C> <C>
5/8/92 100 100 100
12/31/92 115.63 116.38 110.58
12/31/93 262.50 133.59 117.02
12/31/94 115.63 130.59 142.07
12/31/95 93.75 184.68 216.36
12/31/96 76.55 227.14 267.07
</TABLE>
<TABLE>
<CAPTION>
INDEXED/CUMULATIVE RETURNS
BASE PERIOD --------------------------------------------------------
COMPANY/INDEX NAME 5/8/92 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
----------------------------- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NIC-Common Stock............. $ 100 $ 115.63 $ 262.50 $ 115.63 $ 93.75 $ 76.55
NASDAQ COMPOSITE............. 100 116.38 133.59 130.59 184.68 227.14
NASDAQ Computer &
Data Processing Services... 100 110.58 117.02 142.07 216.36 267.07
</TABLE>
CERTAIN BUSINESS RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into consulting agreements with BCG, Inc., a
corporation of which Mr. Bernardi is the sole stockholder and Sterling Capital
Group, Inc., a corporation of which Mr. Sterling is the sole stockholder. See
"Executive Compensation -- Compensation Committee Interlocks and Insider
Participation."
In December 1996, the Company entered into an agreement for a line of
credit for up to $5,000,000 with Fred E. Kassner at an interest rate of 2% above
a commercial lender's fluctuating prime rate. Mr. Kassner is the beneficial
owner of more than five percent of the outstanding stock of the Company. The
line of credit is secured by a lien against all of the accounts receivables of
the Company. In connection with the Kassner
11
<PAGE> 15
financing, the Company issued to Mr. Kassner warrants to acquire 100,000 shares
of Common Stock, exercisable at $3.06 per share, and the Company is further
obligated to issue to Mr. Kassner warrants to purchase 5,000 shares of Common
Stock, exercisable at the market rate upon the date of borrowing under the line
of credit, for each $500,000 the Company borrows under the line of credit.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") requires the Company's executive officers, directors and persons
who own more than ten percent of the Common Stock (collectively, "Reporting
Persons") to file initial reports of ownership and changes of ownership of the
Common Stock with the SEC and the Nasdaq Stock Market. Reporting Persons are
required to furnish the Company with copies of all forms that they file under
Section 16(a). Based solely upon a review of the copies of such forms received
by the Company or written representations from Reporting Persons, the Company
believes that, with respect to year 1996, all reports required of Reporting
Persons pursuant to Section 16(a) were timely filed except that: late filings on
Forms 4 were made for Messrs. Leto, Forgues and Hajost due to an inadvertent
error on the part of the Company concerning purchases of the Company's Common
Stock pursuant to a stock purchase arrangement, and Forms 4 were filed late for
Mr. Peyser and Mr. Flowers due to administrative errors on the part of the
Company.
PROPOSAL 3 -- ADOPTION OF THE EMPLOYEE STOCK PURCHASE PLAN
At the Meeting, the shareholders are being asked to approve the adoption of
the Company's Employee Stock Purchase Plan (the "ESPP"), as adopted by the Board
of Directors, and the reservation of 400,000 shares of Common Stock for issuance
thereunder. The ESPP shall become effective upon shareholder approval.
The description that follows is an overview of the material provisions of
the ESPP and is qualified in its entirety by references to the ESPP. A copy of
the complete ESPP (without exhibits) is attached hereto as Appendix B.
DESCRIPTION OF THE ESPP
Purpose. The purpose of the ESPP is to provide employees of the Company
and its subsidiaries with an opportunity to purchase Common Stock at a discount
from the market price, through payroll deductions, and to thereby provide an
incentive for continued employment.
Administration. The ESPP shall be administered by the Compensation
Committee. The interpretation and construction by the Compensation Committee is,
to the full extent permitted by law, final.
In the event that insufficient shares are available under the ESPP for a
full allocation of shares to all participants during a given Offering Period (as
defined below), the Compensation Committee shall make a pro rata allocation of
the shares remaining available for purchase in as uniform a matter among the
persons exercising options as shall be practicable and as it shall determine to
be equitable.
Eligibility. All employees of the Company or its subsidiaries are eligible
to participate in the ESPP except the following: (i) employees who are
customarily employed for less than 20 hours per week; (ii) employees who are
customarily employed for less than five months in a calendar year; and (iii)
employees who own or hold options to purchase or who, as a result of
participation in the ESPP, would own stock or hold options to purchase stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company as determined pursuant to Section 424(d)
of the Code. Currently, there are approximately 326 employees eligible to
participate in the ESPP.
Offering Periods and Enrollment. Each Offering Period of Common Stock
under the ESPP is for a period of six (6) months. Offering Periods commence on
the first day of January and July of each year. The
12
<PAGE> 16
Compensation Committee may change the duration of Offering Periods without
stockholder approval, subject to certain limitations set forth in the ESPP.
Eligible employees may participate in any Offering Period by submitting a
subscription agreement to the Company on or before the fifteenth day of the last
month before the Offering Period. Once enrolled, a participant automatically
will participate in each succeeding Offering Period unless the participant
withdraws from the Offering Period or the ESPP. Upon enrollment, a participant
authorizes payroll deductions of up to ten percent (10%) of the participant's
base salary or wages, bonuses, overtime, shift premiums, incentive compensation,
and sales commissions received during an Offering Period provided that such
deductions may not exceed twenty-five thousand dollars ($25,000) in any calendar
year. After a participant sets the rate of payroll deductions for an Offering
Period, the participant may increase or decrease the rate for any subsequent
Offering Period, but may only decrease the rate for the current Offering Period.
Only one change may be made during an Offering Period, unless otherwise approved
by the Compensation Committee. No interest accrues on payroll deductions.
Purchase of Stock. The number of whole shares that a participant may
purchase in any Offering Period is determined by dividing the total amount of
payroll deductions withheld from the participant during the Offering Period by
the price per share determined as described below. The purchase takes place
automatically on the Exercise Date. Any cash balance remaining in a
participant's account following the purchase will be returned to the
participant.
No participant may purchase more than ten percent (10%) of the
participant's compensation, as described herein, on the Exercise Date divided by
the applicable percentage of the purchase price of the Common Stock on the
Offering Commencement Date elected by the participant at the commencement of
each Offering Period. In no event may the participant purchase more than $25,000
worth of Common Stock in any calendar year.
Purchase Price. The purchase price of shares purchased in any Offering
Period will be 85% of the lesser of (a) the average of the high and low market
prices as reported on Nasdaq National Market System on the Offering Commencement
Date or (b) the average of the high and low market prices as reported on the
Nasdaq National Market System on the Offering Termination Date. Shares are
purchased at 85% of the fair market value of the Common Stock, at a price
determined as described above, and those shares shall be restricted for a
minimum period of six (6) months after receipt of those shares.
Withdrawal. A participant may withdraw from the ESPP or any Offering
Period by giving written notice to the Company. All of the participant's payroll
deductions credited to the participant's account will be paid to the participant
after receipt of notice of withdrawal. After such a withdrawal, payroll
deductions will not resume at the beginning of the succeeding Offering Period
unless the participant completes a new subscription agreement.
Termination of Employment. If a participant's employment terminates for
any reason (including death, disability or retirement) the participant will be
deemed to have elected to withdraw from the ESPP and the payroll deductions
credited to the participant's account during the Offering Period, but not yet
used to exercise the option, will be returned to such participant, or in the
case of the participant's death, to the persons entitled to receive such funds.
Recapitalization. Subject to any required action by the shareholders of
the Company, the number of shares of Common Stock covered by each outstanding
option, and the price per share thereof in each such option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a subdivision or consolidation of shares
or the payment of a stock dividend (but only on the Common Stock) or any other
increase or decrease in the number of such shares effected without receipt of
consideration by the Company.
In the event of a merger or consolidation and the Company is a surviving
corporation, each outstanding option shall pertain to and apply to the
securities to which a holder of the number of shares of Common Stock subject to
the option would have been entitled.
13
<PAGE> 17
In the event of a change in the Common Stock as presently constituted,
which is limited to a change of all of its authorized shares with par value into
the same number of shares with a different par value or without par value the
shares resulting from any such change shall be deemed to be the Common Stock.
Such adjustments to stock or securities of the Company shall be made by the
Compensation Committee, whose determination shall be final.
Resale of Shares. The ESPP imposes a six month holding period on the
shares of Common Stock purchased by participants at 85% of the purchase price.
The Company intends to file a Form S-8 Registration Statement with the SEC which
will satisfy most federal securities laws requirements with respect to the
resale of such shares. In addition, participants who are affiliates of the
Company may not resell under the Form S-8 Registration Statement any shares
purchased under the ESPP. Such resales must be effected in accordance with Rule
144 or another available exemption under the Securities Act of 1933, as amended.
Amendment of the ESPP. The Company, insofar as permitted by law, may at
any time amend, suspend or discontinue the ESPP except that no revision or
amendment may increase the number of shares of Common Stock under the ESPP,
materially increase the benefits accruing to participants under the ESPP or
otherwise materially modify the requirements for eligibility without the
approval of the shareholders of the Company.
Tax Consequences. The ESPP is intended to qualify as an "employee stock
purchase plan" within the meaning of Section 423 of the Code. Participants will
not recognize income for federal income tax purposes either upon enrollment in
the ESPP or upon purchase of shares thereunder. All tax consequences of
purchasing shares under the ESPP are deferred until the participant sells or
otherwise disposes of the shares or dies. The Company will be entitled to a
deduction for federal income tax purposes to the extent that a participant
recognizes ordinary income on a disqualifying disposition of the shares in the
year of the disqualification, but not if a participant meets the holding
requirements. The foregoing is intended to be a brief summary of the tax
consequences of transactions under the ESPP based on federal tax laws in effect
on April 1, 1997. As federal and state tax laws may change, the federal, state
and local tax consequences for any participant will depend upon his or her
individual circumstances.
The affirmative vote of a majority of the outstanding shares of Common
Stock present or represented and entitled to vote at the Meeting is required to
approve the adoption of the Employee Stock Purchase Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ADOPTION OF
THE EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL 4 -- RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed Ernst & Young LLP, independent accountants, as auditors of the Company
to examine and report to stockholders on the consolidated financial statements
of the Company and its subsidiaries for the year ending on December 31, 1997.
Ernst & Young LLP currently serves as the Company's independent accountants.
Representatives of Ernst & Young LLP will be present at the Meeting and will be
given an opportunity to make a statement. They also will be available to respond
to appropriate questions from stockholders.
Although ratification of the appointment of Ernst & Young LLP is not
required, the Board of Directors requests that the stockholders ratify the
appointment. If ratification is not obtained, the Board will reconsider the
matter of appointment of independent accountants for the Company.
The Company engaged Ernst & Young LLP effective June 25, 1996 as
independent accountants to examine the consolidated financial statements of the
Company for the year ending December 31, 1996. Ernst & Young LLP replaced Price
Waterhouse LLP. The Company's decision to retain Ernst & Young LLP and
discontinue the engagement of Price Waterhouse LLP as the Company's principal
independent accountants was approved by the Board of Directors of the Company.
There have been no disagreements with Price Waterhouse LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure which, if not resolved to the satisfaction of Price
Waterhouse LLP, would have
14
<PAGE> 18
caused it to make reference to the subject matter of the disagreement in
connection with its report for the years ended December 31, 1995 and December
31, 1994.
The affirmative vote of a majority of the outstanding shares of Common
Stock present or represented and entitled to vote at the Meeting is required to
ratify the appointment of Ernst & Young LLP.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR YEAR 1997.
SHAREHOLDER PROPOSALS
The Company anticipates that its 1998 annual meeting of stockholders will
be held in June, 1998. In order to be considered for that meeting, shareholder
proposals must be received by the Company no later than December 24, 1997.
Stockholders should send their proposals to the Company's corporate headquarters
address and must be submitted in accordance with Rule 14a-8 of the Exchange Act
on or before December 24, 1997.
OTHER BUSINESS
The Board of Directors does not intend to bring any other matter before the
Meeting and does not know of any other business which others will present for
consideration at the Meeting. Except as the Board of Directors may otherwise
permit, only the business set forth and discussed in the Notice of Annual
Meeting of Stockholders and this Proxy Statement may be acted on at the Meeting.
If any other business does properly come before the Meeting the proxy holders
will vote on such matters according to their discretion.
By Order of the Board of Directors
/s/ JULIA A. BOWEN
JULIA A. BOWEN
Vice President, General Counsel
and Assistant Secretary
ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN, DATE, AND RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. THANK YOU FOR
YOUR PROMPT ATTENTION TO THIS MATTER.
15
<PAGE> 19
APPENDIX A
CLASSIFIED BOARD AMENDMENTS
SECTION 3.02. NUMBER, QUALIFICATION AND TERM OF OFFICE. (a) The number of
Directors shall be one or such other number not greater than nine as shall be
fixed from time to time by the Board. Directors need not be Stockholders.
(b) The Board shall be divided into two classes, as nearly equal in number
as the then total number of Directors constituting the entire Board permits with
the term of office of one class expiring each year. At the Annual Meeting of
Stockholders in 1996, Directors of the first class shall be elected to hold
office for a term expiring at the next annual meeting, and until the election
and qualification of their successors, or until their prior death, resignation
or removal, and Directors of the second class shall be elected to hold office
for a term expiring at the second annual meeting of stockholders thereafter, and
until the election and qualification of their successors, or until their prior
death, resignation or removal. The following present Directors are hereby
designated initial members of the classes as indicated below:
<TABLE>
<CAPTION>
CLASS I CLASS II
- ---------------- -------------------
<S> <C>
John F. Burton Robert P. Bernardi
James J. Leto Robert Ripp
C. Alan Peyser
</TABLE>
(c) Each successor to a Class I or Class II Director shall hold office
until the second annual meeting of the stockholders next succeeding his or her
election, and until his or her successor is elected and qualified, or until his
or her prior death, resignation or removal; except however, if additional
directorships are established, the initial term for such directorships shall be
for one or more years not greater than two as determined by the Board in order
to ensure that approximately one-half ( 1/2) of all of the directors are elected
at each annual meeting of the stockholders.
SECTION 3.04. REMOVAL. Any or all of the Directors may be removed, but
only for cause, at any time by vote of the recordholders of a majority of the
Shares then entitled to vote at an election of Directors, or by written consent
of the recordholders of Shares pursuant to Section 2.09 hereof.
SECTION 3.05. VACANCIES. Vacancies occurring on the Board for any reason
including, without limitation, vacancies occurring as a result of the creation
of new directorships that increase the number of Directors, may be filled by
vote of the recordholders of a majority of the Shares then entitled to vote at
an election of Directors or by written consent of such recordholders pursuant to
Section 2.09 hereof or by vote of the Board or by written consent of the
Directors pursuant to Section 3.08 hereof. If the number of Directors then in
office is less than a quorum, such vacancies may be filled by vote of a majority
of the Directors then in office or by written consent of all such Directors
pursuant to Section 3.08 hereof. Unless earlier removed pursuant to Section 3.04
hereof, each Director chosen in accordance with this Section 3.05 shall have the
same term as that of his or her predecessor, or, if such vacancy is a result of
an increase in the number of directors, as that of the other directors of the
class of which he or she shall be a member.
A-1
<PAGE> 20
APPENDIX B
NETWORK IMAGING CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The Employee Stock Purchase Plan (the "Plan") is intended to
encourage stock ownership by employees of Network Imaging Corporation (the
"Corporation") or any of its present or future subsidiaries (the "Subsidiaries")
as defined in Section 424 of the Internal Revenue Code of 1986, as amended (the
"Code") so that such employees may increase their interest in the success of the
Corporation and its Subsidiaries and so that they may be encouraged to remain in
the employ of the Corporation or its Subsidiaries. It is the intention of the
Corporation to have the Plan qualify as an Employee Stock Purchase Plan under
Section 423 of the Code.
2. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee of the Board of Directors of the Corporation (the "Committee"). The
Board of Directors may from time to time remove members from, or add members to,
the Committee. Vacancies on the Committee, howsoever caused, shall be filled by
the Board of Directors. The Committee shall hold meetings at such times and
places as it may determine and may hold telephonic Committee meetings. If the
Committee consists of three or more members, the Committee shall select one of
its members as Chairman. Acts by a majority of the Committee at a meeting at
which a quorum is present shall be the valid acts of the Committee. Any decision
or determination reduced to writing and signed by a majority of the members of
the Committee shall be as fully effective as if it had been made by a majority
vote at a meeting duly called and held. The interpretation and construction by
the Committee of any provisions of the Plan shall be final. No member of the
Board of Directors or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan.
3. DEFINITIONS.
(a) "Compensation" shall mean regular straight-time gross earnings
plus payments for overtime, shift premium, incentive compensation, bonuses
and other special payments, such as, in the case of employees who are
salespersons, sales commissions.
(b) "Committee" shall mean the Committee referenced in Article 2, or
if no such Committee has been designated, it shall mean the Board of
Directors of the Corporation.
(c) "Employee" shall mean any person (including officers, whether or
not they are Directors) who is customarily employed on a full-time or
part-time basis by the Corporation or its Subsidiaries and is regularly
scheduled to work more than twenty (20) hours per week but excluding any
employee customarily employed for not more than five months in any calendar
year.
(d) "Enrollment Period" shall mean the applicable time periods during
which an employee will be allowed to become a participant under the Plan.
(e) "Exercise Date" or "Purchase Date" shall mean the applicable date
at the end of an Offering Period on which shares are purchased pursuant to
an option issued under the Plan, which date shall be each Offering
Termination Date.
(f) "Fair Market Value" or "FMV" shall mean the average of the high
and low market prices as reported on NASDAQ National Market System on a
given trading day.
(g) "Offering Commencement Date" shall mean the applicable date on
which an Offering under the Plan commences pursuant to Article 6.
(h) "Offering Termination Date" shall mean the applicable date on
which an Offering under the Plan terminates pursuant to Article 6.
(i) "Offering Period" shall mean the applicable time period during
which an Offering under the Plan shall take place pursuant to Article 6.
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(j) "Purchase Price" shall mean 85% of the lower of: (a) the average
of the high and low market prices as reported on NASDAQ National Market
System on the Offering Commencement Date ("Option Price") and (b) the
average of the high and low market prices as reported on NASDAQ on the
Offering Termination Date, pursuant to Article 22.
(k) "Trading Day" shall mean a day on which the National Association
of Securities Dealers Automated Quotation (NASDAQ) System is open for
trading.
4. ELIGIBILITY. The persons who shall be eligible to participate in the
Plan shall be all Employees of the Corporation or its Subsidiaries on a given
Enrollment Date. No Participant shall be granted an option under the Plan if (i)
immediately after the grant such Participant (or any other person whose stock
would be attributed to such Participant pursuant to Section 424(d) of the Code)
would own capital stock of the Corporation or any Subsidiary and/or hold
outstanding options of any kind to purchase such stock possessing five percent
(5%) or more of the capital stock of the Corporation or any Subsidiary or (ii)
his or her rights to purchase stock under the Plan or any other employee stock
purchase plan of the Corporation or any Subsidiary accrues at a rate which
exceeds twenty-five thousand dollars ($25,000) worth of stock (determined at the
fair market value of the shares at the time such option is granted) for each
calendar year in which such option is outstanding at any time.
5. STOCK. The stock subject to the options of the Plan shall be shares of
the Corporation's authorized, but unissued or reacquired common stock (the
"Common Stock").
(a) The aggregate number of shares which may be issued under the Plan
shall not exceed 400,000 shares of Common Stock. The limitation established
by the preceding sentence shall be subject to adjustment as provided in
Article 18 of the Plan. If, on a given Exercise Date, the number of shares
with respect to which options are to be exercised exceeds the number of
shares then available under the Plan, the Committee shall make a pro rata
allocation of the shares remaining available for purchase in as uniform a
manner among the persons exercising options as shall be practicable and as
it shall determine to be equitable.
(b) The Participant will have no voting right or other interests in
shares issuable upon exercise of any option held by such Participant until
such option has been exercised.
(c) Shares to be delivered to a Participant under the Plan will be
registered in the name of the Participant or in the name of the Participant
and the Participant's spouse.
6. OFFERING PERIODS. The Plan shall be implemented by consecutive Offering
Periods with a new Offering Period commencing on the first Trading Day on or
after January 1 and July 1 of each year, or on such other date as the Committee
shall determine, and continuing thereafter until terminated in accordance with
Article 21 hereof. The duration of each Offering Period shall be six (6) months.
The Committee shall have the power to change the duration of Offering Periods at
its discretion (including the commencement dates thereof) with respect to future
offerings without shareholder approval if such change is announced at least
fifteen (15) days prior to the scheduled beginning of the first Offering Period
to be effective thereafter.
7. PARTICIPATION.
(a) An eligible Employee may become a Participant in the Plan by
completing a Subscription Agreement authorizing payroll deductions on a
form established by the Company from time to time which will be similar to
Exhibit A to this Plan and filing it with the Corporation's Payroll
Administrator during the applicable Enrollment Period.
(b) Payroll deductions for a Participant shall commence on the first
payday following the Offering Commencement Date and shall end on the last
payday in the Offering Period to which such authorization is applicable,
unless sooner terminated by the Participant as provided in Article 12
hereof.
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<PAGE> 22
8. PAYROLL DEDUCTIONS.
(a) At the time a Participant files his or her Subscription Agreement,
he or she shall elect to have payroll deductions made on each payday during
the Offering Period in an amount not less than one percent (1%) of his or
her Compensation and not exceeding ten percent (10%) of his or her
Compensation for such payroll period on each payday during the Offering
Period.
(b) All payroll deductions made for a Participant shall be credited to
his or her account under the Plan. A Participant may not make any
additional payments into such account.
(c) A Participant may discontinue his or her participation in the Plan
as provided in Article 12 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Article 9 hereof, a Participant's
payroll deductions may be decreased to zero percent (0%) at such time
during any Offering Period, which is scheduled to end during the current
calendar year (the "Current Offering Period"), that the aggregate of all
payroll deductions which were previously used to purchase Common Stock
under the Plan in a prior Offering Period which ended during that calendar
year plus all payroll deductions accumulated with respect to the Current
Offering Period equal $25,000. Payroll deductions shall recommence as
provided in such Participant's Subscription Agreement at the beginning of
the first Offering Period which is scheduled to end in the following
calendar year, unless terminated by the Participant as provided in Article
12 hereof.
(e) At the time some or all of the Common Stock issued under the Plan
is disposed of, the Participant must make adequate provision for the
Corporation's federal, state, or other tax withholding obligations, if any,
which arise upon the exercise of the option or the disposition of the
Common Stock. At any time, the Company may, but will not be obligated to,
withhold from the Participant's compensation the amount necessary for the
Company to meet applicable withholding obligations, including any
withholding required to make available to the Company any tax deductions or
benefits attributable to sale or early disposition of Common Stock by the
Employee.
9. GRANT OF OPTION. On the Enrollment Date of each Offering Period, each
Participant shall be granted an option to purchase on the Exercise Date of such
Offering Period (at the applicable Purchase Price) up to a maximum number of
shares of Common Stock determined as follows: an amount equal to (a) that
percentage of such Participant's Compensation as of the Enrollment Date which he
has elected to have withheld (but not in any case in excess of ten percent
(10%)) multiplied by (b) the Participant's annual Compensation as of the
Enrollment Date (c) divided by the applicable percentage of the Purchase Price
of the Common Stock on the Offering Commencement Date elected by the Participant
at the commencement of each Offering Period pursuant to Article 22 hereof. No
Participant shall be granted an option to purchase in excess of the maximum
amount allowable pursuant to Section 423 of the IRS Code. Exercise of the option
shall occur as provided in Article 10 hereof, unless the Participant has
withdrawn pursuant to Article 12 hereof, and shall expire on the last day of the
Offering Period.
10. EXERCISE OF OPTION. Unless a Participant withdraws from the Plan as
provided in Article 12 hereof, his or her option for the purchase of shares will
be exercised automatically on the Exercise Date of each Offering Period, and the
maximum number of full shares subject to option shall be purchased for such
Participant at the applicable Purchase Price, as defined in Article 3, with the
accumulated payroll deductions in his or her account (but not in excess of the
number of shares for which options have been granted to the Participant pursuant
to Article 9 hereof). No fractional shares will be purchased and any payroll
deductions accumulated in a Participant's account which are not sufficient to
purchase a full share shall be retained in the Participant's account for the
subsequent Offering Period, subject to earlier withdrawal by the Participant as
provided in Article 12 hereof. Any other monies left over in a Participant's
account after the Exercise Date shall be returned to the Participant. During a
Participant's lifetime, a Participant's option to purchase shares hereunder is
exercisable only by him or her.
11. DELIVERY OF SHARES PURCHASED. All shares of Common Stock purchased
pursuant to this Plan shall be held in a separate shareholder account
("Shareholder Account") maintained by such brokerage house,
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<PAGE> 23
investment banking firm, commercial bank or other such similar institution as
may be selected by the Committee. Each Shareholder Account shall be in the name
of a Participant. Each Participant shall have all of the rights and privileges
of a shareholder of the Corporation with respect to those shares purchased under
the Plan and held in his or her Shareholder Account.
12. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A Participant may voluntarily withdraw all, but not less than all,
the payroll deductions credited to his or her account, and not yet used to
exercise his or her option under the Plan, at any time by giving written
notice to the Corporation on a form established by the Corporation from
time to time which will be similar to Exhibit B to this Plan. All of the
Participant's payroll deductions credited to his or her account will be
paid to such Participant promptly after receipt of notice of withdrawal and
such Participant's option for the Offering Period will be automatically
terminated and no further payroll deductions for the purchase of shares
will be made during the Offering Period. If a Participant voluntarily
withdraws from an Offering Period, payroll deductions will not resume at
the beginning of the succeeding Offering Period unless the Participant
completes and delivers to the Company a new Subscription Agreement.
(b) Upon a Participant's ceasing to be an Employee for any reason, he
or she will be deemed to have elected to withdraw from the Plan and the
payroll deductions credited to such Participant's account during the
Offering Period, but not yet used to exercise the option, will be returned
to such Participant or, in the case of his or her death, to the person or
persons entitled thereto under Article 14 hereof, and such Participant's
option will be automatically terminated.
(c) A Participant's withdrawal from an Offering Period (other than in
the case of death) will not have any effect upon his or her eligibility to
participate in any similar plan which may hereafter be adopted by the
Corporation or in succeeding Offering Periods which commence after the
termination of the Offering Period from which the Participant voluntarily
withdraws for so long as the Participant remains an Employee of the
Corporation or its Subsidiaries.
13. INTEREST. No interest shall be paid on the payroll deductions of a
Participant in the Plan.
14. DESIGNATION OF BENEFICIARY.
(a) A Participant may file with the Corporation's Payroll
Administrator a written designation of a beneficiary who is to receive any
shares and cash, if any, from the Participant's accounts under the Plan in
the event of such Participant's death subsequent to an Exercise Date on
which the option is exercised but prior to delivery to such Participant of
any shares and/or cash in Participant's accounts.
(b) Such designation of beneficiary may be changed by the Participant
at any time by written notice to the Corporation's Payroll Administrator.
In the event of the death of a Participant and in the absence of a
beneficiary validly designated under the Plan who is living at the time of
such Participant's death, the Corporation shall deliver such shares and/or
cash to the executor or administrator of the estate of the Participant, or
if no such executor or administrator has been appointed (to the knowledge
of the Corporation), the Corporation, in its discretion, may deliver such
shares and/or cash to the spouse or to any one or more dependents or
relatives of the Participant, or if no spouse, dependent or relative is
known to the Corporation, then to such other person as the Corporation may
designate.
15. TRANSFERABILITY. Neither payroll deductions credited to a
Participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Article 14 hereof) by the Participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Article 12 hereof.
16. APPLICATION OF FUNDS. The proceeds received by the Corporation from
the sale of Common Stock issued pursuant to options will be used for general
corporate purposes.
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<PAGE> 24
17. REPORTS. Individual accounts will be maintained by the Corporation for
each Participant in the Plan. Statements of account will be given to
Participants after the termination of each Offering Period. Such statements will
set forth the amounts of payroll deductions, the Purchase Price, the number of
shares of Common Stock purchased and any remaining cash balance.
18. RECAPITALIZATION. Subject to any required action by the shareholders
of the Corporation, the number of shares of Common Stock covered by each
outstanding option, and the price per share thereof in each such option, shall
be proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock of the Corporation resulting from a subdivision or
consolidation of shares or the payment of a stock dividend (but only on the
Common Stock) or any other increase or decrease in the number of such shares
effected without receipt of consideration by the Corporation, so that the
optionee's percentage of ownership of the total number of shares of Common Stock
outstanding is neither increased nor decreased.
Subject to any required action by the shareholders of the Corporation, if
the Corporation shall be the surviving corporation in any merger or
consolidation, each outstanding option shall pertain to and apply to the
securities to which a holder of the number of shares of Common Stock subject to
the option would have been entitled.
In the event of a change in the Common Stock of the Corporation as
presently constituted, which is limited to a change of all of its authorized
shares with par value into the same number of shares with a different par value
or without par value, the shares resulting from any such change shall be deemed
to be the Common Stock within the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or securities
of the Corporation, such adjustments shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive.
Except as hereinbefore expressly provided in this Article 18, the
Participant shall have no rights by reason of any subdivision or consolidation
of shares of stock of any class or the payment of any stock dividend or any
other increase or decrease in the number of shares of stock of any class or by
reason of any dissolution, liquidation, merger, consolidation or spin-off of
assets or stock of another corporation, and any issue by the Corporation of
shares of stock of any class, or securities convertible into or exchangeable or
exercisable for shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to the option.
The grant of an option pursuant to the Plan shall not affect in any way the
right or power of the Corporation to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell, or transfer all or any part of its
business or assets.
19. AMENDMENT OF THE PLAN. The Committee of the Corporation may, insofar
as permitted by law, from time to time, with respect to any shares at the time
not subject to outstanding options, suspend or discontinue the Plan or revise or
amend it in any respect whatsoever except that, without approval of the
Shareholders of the Corporation, no such revision or amendment shall increase
the number of shares of Common Stock which may be issued pursuant to the Plan,
materially increase the benefits accruing to Participants under the Plan, or
otherwise materially modify the requirements for eligibility or the class of
subsidiaries whose employees are eligible to participate.
20. NOTICES. All notices or other communications by a Participant to the
Corporation under or in connection with the Plan shall be deemed to have been
duly given when received in writing by the person designated by the Corporation
for the receipt thereof.
21. TERM OF PLAN. Options may be granted pursuant to the Plan from time to
time until such time as all shares of Common Stock available under the Plan as
set forth in Article 5 have been made subject to an option grant. If any
outstanding option under the Plan for any reason expires or is terminated, the
shares of Common Stock allocable to the option may again be subject to an option
under the Plan.
22. INVESTMENT PURPOSE. Each option under the Plan shall be granted on the
condition that the purchase of stock thereunder shall be for investment purposes
and not with a view for resale or distribution.
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<PAGE> 25
Participant agrees to receive shares carrying a six month holding period
restriction. Participants may sell shares purchased under the Plan subject to
compliance with any applicable governmental securities laws, provided, however,
that because of certain governmental tax requirements, each Participant agrees
by entering the Plan, to promptly give the Corporation notice of any such Common
Stock disposed of within two years after the date of grant of the applicable
option or one year from the date of exercise showing the number of such shares
disposed of. The Participant assumes the risk of any market fluctuations in the
price of the stock.
23. INDEMNIFICATION OF COMMITTEE. In addition to such other rights of
indemnification as they may have as directors or as members of the Committee and
the Board of Directors, the members of the Committee and the Board of Directors
shall be indemnified by the Corporation against the reasonable expenses,
including attorneys' fees actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, in which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Corporation) or paid by them in satisfaction of a judgment in any such
action, suit or proceeding except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such person is liable for gross
negligence or intentional misconduct in the performance of his or her duties,
provided that within sixty (60) days after institution of any such action, suit
or proceeding such person shall in writing offer the Corporation the
opportunity, at its own expense, to handle and defend the same.
24. NO EMPLOYMENT RIGHTS. The Plan does not, directly or indirectly,
create any right for the benefit of any employee or class of employees to
purchase any shares under the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by the
Corporation or its Subsidiaries, and it shall not be deemed to interfere in any
way with the Corporation's or its Subsidiaries' right to terminate, or otherwise
modify, an employee's employment at any time.
25. ADDITIONAL RESTRICTIONS OF RULE 16b-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
26. APPROVAL OF STOCKHOLDERS; EFFECTIVENESS OF PLAN. The Plan is subject
to the approval of the shareholders of the Corporation at their next annual
meeting or at any special meeting of the shareholders for which one of the
purposes of such a special meeting shall be to act upon the Plan.
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