SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant <checked-box>
Filed by a party other than the Registrant <square>
Check the appropriate box:
<square> Preliminary Proxy Statement
<square> Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
<checked-box> Definitive Proxy Statement
<square> Definitive Additional Materials
<square> Soliciting Material Pursuant to <square> <section>240.14a-11(c)
or <square> <section>240.14a-12
ALTERNATIVE TECHNOLOGY RESOURCES, INC.
(FORMERLY KNOWN AS 3NET SYSTEMS, INC.)
(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):
<checked-box> No fee required
<square> 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:_______________________________________________
2) Aggregate number of securities to which transaction
applies:_______________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was
determined):__________________________
4) Proposed maximum aggregate value of transaction:_______
5) Total fee paid:________________________________________
<square> Fee paid previously with preliminary materials.
<square> Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:________________________________
2) Form, Schedule or Registration Statement No.:__________
3) Filing Party:__________________________________________
4) Date Filed:____________________________________________
<PAGE>
ALTERNATIVE TECHNOLOGY RESOURCES, INC.
629 J STREET
SACRAMENTO, CA 95814
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF
ALTERNATIVE TECHNOLOGY RESOURCES, INC.
TO BE HELD NOVEMBER 18, 1997
To Our Stockholders:
The Annual Meeting of Stockholders of Alternative Technology Resources, Inc.
(formerly known as 3Net Systems, Inc.), a Delaware corporation (the "Company"),
will be held on Tuesday, November 18, 1997, at 10:00 a.m., local time, at 629 J
Street, Sacramento, California 95814, for the following purposes:
1. To elect three directors;
2. To consider and act upon a proposal to approve the Alternative
Technology Resources, Inc. 1997 Stock Option Plan;
3. To consider and act upon such other matters as may properly come
before the meeting.
All of the above matters are more fully described in the accompanying Proxy
Statement. Stockholders of record as of the close of business on October 17,
1997 are entitled to notice of and to vote at the meeting or any postponement
or adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
W. ROBERT KEEN
Chief Executive Officer
Sacramento, California
October 24, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE
PREPAID ENVELOPE. ANY PERSON GIVING A PROXY HAS THE POWER TO REVOKE THAT PROXY
AT ANY TIME PRIOR TO VOTING, AND SHAREHOLDERS WHO ARE PRESENT AT THE MEETING
MAY WITHDRAW THEIR PROXIES AND VOTE IN PERSON IF THEY WISH.
<PAGE>1
ALTERNATIVE TECHNOLOGY RESOURCES, INC.
629 J STREET
SACRAMENTO, CA 95814
PROXY STATEMENT
SOLICITATION OF PROXIES
Your proxy in the form enclosed is solicited by the Board of Directors of
Alternative Technology Resources, Inc. (formerly known as 3Net Systems, Inc.)
[the "Company"] for use in voting at the Annual Meeting of Stockholders to be
held on Tuesday, November 18, 1997, at 10:00 a.m. local time, at the Company's
principal executive office located at 629 J Street, Sacramento, California
95814. This Proxy Statement and the accompanying form of proxy are being
mailed to stockholders on or about October 24, 1997.
The expense of soliciting proxies will be borne by the Company. The principal
solicitation of proxies is being made by mail and personal delivery. However,
additional solicitations may be made by telephone, telegram or other means by
directors, officers, employees or agents of the Company. No additional
compensation will be paid to these individuals for any such services.
In the case of employee stockholders located in the Company's principal office
in Sacramento, California, and in the case of certain other stockholders (see
"Certain Relationships and Related Transactions"), this Proxy Statement and
related materials may be hand delivered.
VOTING SECURITIES
Only stockholders of record on the books of the Company at the close of
business on October 17, 1997 will be entitled to vote at the Annual Meeting.
At the close of business on that date, there were outstanding 25,812,787 shares
of Common Stock of the Company and 204,167 shares of Preferred Stock, Series D,
of the Company. Each share of Common Stock is entitled to one vote for each of
the matters to be presented at the Annual Meeting. Each share of Preferred
Stock, Series D, is entitled to six votes for each of the matters to be
presented at the Annual Meeting. The holders of Common Stock and Preferred
Stock, Series D, shall vote on each proposal together as a class.
REQUIRED VOTE
The representation in person or by proxy of at least a majority of the
outstanding shares entitled to vote is necessary to provide a quorum at the
Annual Meeting. Abstentions and broker non-votes are counted as present in
determining whether the quorum requirement is satisfied. The plurality of the
votes of the Common Stock and Preferred Stock, Series D, voting together as a
class, present in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of directors shall elect the nominees for the
Board of Directors. The affirmative vote of a majority of the Common Stock and
Preferred Stock, Series D, voting together as a class, present in person or
represented by proxy at the Annual Meeting and entitled to vote on Proposal No.
2 (which shares voting affirmatively also constitute at least a majority of the
required quorum) is necessary to approve Proposal No. 2. With regard to the
election of directors, votes may be cast "For" or "Withheld" for each nominee;
votes that are withheld will be excluded entirely from the vote and will have
no effect. Since Proposal No. 2 requires the approval of a majority of the
outstanding shares of Common Stock and Preferred Stock, Series D, voting
together as a class, abstentions will have the effect of a negative vote.
<PAGE>2
Brokers who hold shares in street name have the authority to vote in their
discretion on "routine" items when they have not received instructions from
beneficial owners. With respect to "non-routine" items, no broker may vote
shares held for customers without specific instructions from such customers.
Under Delaware law, a broker non-vote will have the same effect as a vote
against Proposal No. 2 and will have no effect on the outcome of the election
of directors.
REVOCABILITY OF PROXIES
Shares represented by a duly executed proxy in the accompanying form received
by the Board of Directors prior to the meeting will be voted at the meeting.
Any such proxy may be revoked at any time prior to exercise by written request
delivered to the Secretary of the Company stating that the proxy is revoked, by
the execution and submission of a later dated proxy, or by voting in person at
the Annual Meeting. If a stockholder specifies a choice with respect to any
matter to be voted upon by means of the ballot provided in the accompanying
form of proxy, the shares will be voted in accordance with the specification so
made. If the endorsed proxy does not specify how the shares represented
thereby are to be voted, the proxy will be voted as recommended by the Board of
Directors.
PROPOSAL NO. 1
NOMINATION AND ELECTION OF DIRECTORS
Three directors are to be elected at the Annual Meeting, each to serve until
the next Annual Meeting of Stockholders and until his successor shall be
elected and qualified or until his earlier death, resignation or removal.
Currently there are four members of the Board of Directors comprised of W.
Robert Keen, Edward L. Lammerding, Gerald W. Faust, and Thomas W. O'Neil. The
Board of Directors has decided to reduce the number of directors to three and
has nominated Messrs. Keen, Lammerding, and O'Neil for reelection in 1997. The
three nominees receiving the highest number of affirmative votes of the shares
entitled to vote at the Annual Meeting will be elected directors of the
Company. If any nominee is not available for election (which the Company does
not foresee), the Board of Directors will recommend the election of a
substitute nominee and proxies in the accompanying form will be voted for the
election of the substitute nominee unless authority to vote such proxies in the
election of directors has been withheld.
The following table indicates certain information concerning the nominees.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AT PRESENT AND FOR THE PAST FIVE
YEARS
<S> <C> <C>
W. Robert Keen 55 Chief Executive Officer and Director of the Company since
1996; owner of Jonathan Companies, a management and
consulting company, since 1993; President of Occupational-
Urgent Care Health Systems, Inc. from 1988 to 1992. Mr.
Keen is a member of the Advisory Board of the U.C. Davis
Graduate School of Management and a Commissioner on the
Sacramento County Civil Service Commission.
<PAGE>3
Edward L. Lammerding 68 Director since November 1993, Chairman of the Board since
1995; President of Sierra Resources Corporation from 1982
to 1996; Chairman of the Board of Digital Power
Corporation since 1989; former member California Lottery
Commission; member of the St. Mary's College Board of
Trustees; Director and Secretary of Occupational-Urgent
Care Health Systems, Inc. from September 1983 to February
1992.
Thomas W. O'Neil, Jr. 68 Director since November 1995; Certified Public Accountant;
Partner, Schultze, Wallace and O'Neil, CPA's since April
1991; Director of Digital Power Corporation since 1991;
Retired Partner, KPMG Peat Marwick, 1955 to 1991;
Director, California Exposition and State Fair; Director,
Regional Credit Association; member of the St. Mary's
College Board of Regents.
</TABLE>
COMMITTEES OF THE BOARD; MEETINGS AND ATTENDANCE
The Company has a Compensation Committee, Audit Committee and Management
Committee. The Company does not have a nominating committee.
The Compensation Committee consisted of Messrs. Lammerding and O'Neil during
the fiscal year ended June 30, 1997. The Compensation Committee held one
meeting in fiscal 1997. Its function is to establish compensation for all
executive officers of the Company and administer the Company's Special Stock
Option Plan, 1993 Stock Option/Stock Issuance Plan and Employee Savings Plan.
The Audit Committee consisted of Messrs. Faust and O'Neil in fiscal 1997 and
held one meeting during fiscal 1997. The Audit Committee provides advice and
assistance regarding accounting, auditing and financial reporting practices of
the Company. It reviews, with the Company's independent accountants, the scope
and results of their audit, fees for services and independence in servicing the
Company. The Management Committee consisted of Messrs. Faust and Lammerding in
fiscal 1997 and held no meetings during fiscal 1997. The Management Committee
may exercise all the authority of the Board of Directors in management of the
Company, except for matters expressly reserved by law for action by the Board
of Directors.
During fiscal 1997, the Board of Directors met eleven times. All Board and
Committee members attended more than seventy-five percent of the meetings of
the Board of Directors and all committees of the Board on which they served,
except Mr. O'Neil, who attended 73% of the Board meetings.
COMPENSATION OF DIRECTORS
Directors do not receive compensation for serving as such but each Director who
is not an employee of the Company was, upon their initial election or
appointment to the Board of Directors, automatically granted a stock option,
subject to 3 years vesting, to purchase 5,000 shares of Common Stock at an
exercise price equal to the fair market value on the date of the appointment or
election under the Company's 1993 Stock Option/Stock Issuance Plan.
Furthermore, beginning in the third year as a director, each director who was
re-elected to the Board of Directors received an automatic grant of a stock
option to purchase 1,000 shares of Common Stock, at an exercise price equal to
the fair market value on the date of reelection.
<PAGE>4
PROPOSAL NO. 2
APPROVAL OF THE ALTERNATIVE TECHNOLOGY RESOURCES, INC. STOCK OPTION PLAN
On September 22, 1997, the Board of Directors adopted the Alternative
Technology Resources, Inc. 1997 Stock Option Plan (the "1997 Plan"), subject to
approval by the Company's stockholders. The Board of Directors believes the
existence of a stock option plan will be valuable to the Company as a means for
promoting employee loyalty and strengthening the identity of interests of
employees and stockholders. Therefore, the Board of Directors is recommending
that stockholders approve the 1997 Plan appended as Appendix A, the principal
features of which are summarized in the paragraphs below. Subject to
stockholder approval of the 1997 Plan, Mr. Keen has been granted the following
options to purchase the Company's common stock under the 1997 Plan: April 1,
1997, 40,000 shares, July 1, 1997, 80,000 shares, and October 1, 1997, 80,000
shares at $0.096, $1.03, and $1.06, per share respectively. These exercise
prices represented the closing market price of the Company's common stock on
the dates of grant.
PURPOSE. The Company adopted its 1997 Plan to attract, retain, and motivate
the officers and employees of the Company, as well as the consultants to and
directors of the Company, by giving them all the opportunity to acquire
ownership in the Company, thereby instilling in them the same goals as the
Company's other equity owners.
SHARES SUBJECT TO THE 1997 PLAN. A total of 3,000,000 shares of the Company's
common stock may be issued pursuant to the 1997 Plan, subject to adjustments
for changes in the Company's capitalization or for reorganization. As
discussed below, the 1997 Plan is a "dual plan" which provides for the grant of
both non-qualified options and incentive stock options, as defined by the
Internal Revenue Code.
ELIGIBILITY. The Committee shall determine to whom options may be granted. The
Company's officers and employees who are not subject to a collective bargaining
agreement, as well as consultants to and directors of the Company, are eligible
for option grants. Directors and consultants who are not full-time officers or
employees of the Company may only receive non-statutory stock options, not
incentive stock options.
OPERATION OF THE 1997 PLAN. Subject to the oversight and review of the Board
of Directors, the 1997 Plan shall generally be administered by the Company's
Compensation Committee consisting of at least two non-employee directors
(within the meaning of Rule 16b-3(b)(3)(i) of the Securities Exchange Act of
1934) as appointed by the Board of Directors. The Committee's determination
with respect to whom options shall be granted shall be based upon the
contribution by the particular officer, director, consultant, or employee to
the successful conduct of the Company's operations through his or her judgment,
interest, ability, and special efforts. The Committee shall also determine
whether to grant to the full-timed salaried officer or employee incentive stock
options or non-statutory stock options. However, any options designated as
incentive stock options that are subsequently determined to not qualify shall
then be deemed to be non-statutory options. Non-employees may only be granted
non-statutory stock options.
The grant date, the number of shares covered by an option and the terms and
conditions for exercise of options, shall be determined by the Committee,
subject to the 1997 Plan requirements. The Board of Directors shall determine
the grant date, the number of shares covered by an option and the terms and
conditions for exercise of options to be granted to members of the Committee.
<PAGE>5
A stock option agreement setting forth any other terms, conditions, and
restrictions, as determined at the discretion of the Committee, which agreement
shall be consistent with the terms of the 1997 Plan, shall be issued upon each
grant of a stock option.
NONTRANSFERABILITY. Each option granted shall be transferable only by will or
by the laws of descent and distribution, and shall be exercisable only by the
optionee during the optionee's lifetime. The optionee shall have no rights as
a shareholder with respect to any shares until the date of issuance of a stock
certificate for such shares.
AMENDMENT AND TERMINATION. No amendments may be made to the 1997 Plan to
increase the limit on the maximum number of shares to be granted (except for
adjustments resulting from stock splits and similar events), to modify the
eligibility requirements, or to increase materially the benefits accruing to
participants under the 1997 Plan, without stockholder approval. In
substantially all other aspects, the 1997 Plan can be amended by the Board of
Directors. With certain exceptions, the Board of Directors shall have complete
authority to terminate or amend the 1997 Plan. If not terminated earlier by
the Board of Directors, the 1997 Plan will terminate automatically in or around
November, 2002. The termination of the 1997 Plan shall not alter the vesting
provisions or any other term or condition of any option granted prior to the
termination of the 1997 Plan.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES. The 1997 Plan is a "dual plan" in
that it provides for the grant of both non-qualified options and incentive
stock options.
NON-QUALIFIED OPTIONS. In general, the grant of an option under the 1997 Plan
that is designated as a non-qualified option will not result in taxable income
to the optionee at the time of grant.
In general, an optionee will recognize ordinary income in an amount equal to
the excess of the fair market value of the shares at the time of exercise over
the option price.
The Company will be entitled to tax deductions in the same amounts and at the
same times as the participant takes amounts into income. The Optionee's cost
basis in the acquired shares will be the same as the fair market value of the
shares on the date they are valued to determine taxable income.
INCENTIVE STOCK OPTIONS. The grant of an option under the 1997 Plan that is
designated as an incentive stock option will not result in taxable income to
the optionee at the time of the grant nor at the time of exercise if the
requirements of Section 422 of the Internal Revenue Code are met. The optionee
will, however, recognize taxable income in the year in which the shares
purchased under the Incentive stock option are sold or otherwise made the
subject of disposition.
For federal income tax purposes, dispositions are divided into two categories:
qualifying and disqualifying. If the participant makes a disqualifying
disposition of the purchased shares, then the Company will be entitled to an
income tax deduction for the taxable year in which such disposition occurs
equal to the amount by which the fair market value of such shares on the date
the option was exercised exceeded the option price. The Company will not be
allowed a deduction with respect to the optionee's qualifying disposition of
the purchased shares.
RECOMMENDATION
The Board of Directors unanimously recommends a vote FOR this Proposal No. 2.
<PAGE>6
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PREFERRED STOCK, SERIES E
On December 1, 1995, James W. Cameron, Jr. ("Cameron") and Dr. Max Negri
("Negri"), two existing stockholders and holders of all the outstanding shares
of the Company's Preferred Stock, Series E, tendered those shares for
conversion into 22,335,932 shares of the Company's Common Stock pursuant to the
terms of the Series E Preferred Stock Purchase Agreement.
FINANCING ARRANGEMENTS
The Company received short-term financing in the form of notes payable of $1.0
million during fiscal 1997 and $0.7 million during fiscal 1996 from two
stockholders, Messrs. Cameron and Negri, to fund its operations. These notes
mature December 31, 1997 and bear interest at 10.25%. The Company must obtain
additional funds during fiscal 1998 in order to meet its obligations while
attempting to grow revenues to a level necessary to generate cash from
operations. Although the Company has not entered into any written agreement
with Messrs. Cameron or Negri, management believes, based on discussions with
these two individuals, that these two stockholders will continue to finance the
Company's operations during fiscal 1998. In December 1996, Messrs. Cameron and
Negri extended the maturity date on all notes payable currently maturing from
December 31, 1996, to the earlier of December 31, 1997, or such time as the
Company obtains equity financing. Although the Company has not entered into
any written agreement with Cameron or Negri, management believes, based on
discussions with these two individuals, that Messrs. Cameron and Negri will
continue to fund operations and extend the maturity dates of the various notes
payable until at least June 30, 1998, or until such time as the Company can
repay the notes. However, there can be no assurance that events may arise
which may affect these stockholders' ability to finance the Company or that the
Company may experience significant and unanticipated cash flow problems which
may cause these two stockholders to reconsider their investment. Further, if
the Company experiences significant cash flow problems, the Company may be
required to reduce the level of its operating activities or be forced into
seeking protection under federal bankruptcy laws.
In February 1994, the Company entered into a revolving line of credit with Bank
of America, NT&SA, (the "Bank") in the amount of $2,000,000, which was later
reduced to $1,000,000. On April 21, 1997, Cameron became the named borrower
under the line of credit, and the Company issued a note payable (the "Straight
Note") to Cameron for the $1,000,000 in accordance with the Reimbursement
Agreement the Company signed on February 28, 1994. Terms of the note provide
for an interest rate of 9.5% and monthly interest payments. No maturity date
is stated in the note; however, under the terms of the Reimbursement Agreement,
upon written demand by Cameron, the Straight Note will be replaced by a
convertible note (the "Convertible Note") in a principal amount equal to the
Straight Note and bearing interest at the same rate. The conversion ratio of
the Convertible Note is equal to the "Applicable Percentage," as defined in the
Reimbursement Agreement, multiplied by the average trading price of the
Company's Common Stock over the period of ten trading days ending on the
trading day next preceding the date of issuance of such Convertible Note. The
Applicable Percentage, which was originally 50%, has been reduced to 20% per
the terms of the Reimbursement Agreement due to the Bank extending the maturity
date of the line of credit. The Applicable Percentage may not be reduced below
20%.
Pursuant to the Reimbursement Agreement, a designee of Mr. Cameron received a
warrant to purchase 10,000 shares of the Company's Common Stock at an exercise
price of $15.00 per share. The warrant is immediately exercisable and expires
on February 29, 1999.
<PAGE>7
OTHER
In November 1995, the Company entered into a lease agreement for its current
facility under a one year lease with Mr. Cameron. The lease has been extended
to December 31, 1997, and is expected to be renewed. At June 30, 1997,
$223,107 of rent owed for fiscal years 1997 and 1996 is included in the balance
of accounts payable to stockholders.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Based solely upon a review of copies of such forms received by it, the Company
believes that during fiscal 1997 all filing requirements applicable to
officers, directors and greater than ten percent stockholders were satisfied,
except that Messrs. Keen and Lammerding inadvertently failed to timely file a
Form 5 for fiscal 1997.
EXECUTIVE COMPENSATION
The following table contains information regarding compensation paid with
respect to the three preceding fiscal years to the Company's Chief Executive
Officer and each other executive officer whose salary and bonus exceeded
$100,000 (the "Named Executives"):
Columns regarding "Bonus," "All Other Compensation," and "Long-Term Incentive
Plan (LTIP) Payouts" are excluded because no reportable payments were made to
such executive officers for the relevant years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
<S> <C> <C> <C> <C> <C>
Name and
Principal Restricted Other Annual Options/
Position Fiscal Year Salary ($) Stock Awards Compensation SARs#
W. Robert Keen, 1997 None 225,000{(2)} None 160,000{(3)}
Chief Executive
Officer {(1)}
George R. Van Derven, 1997 150,000 None None
President{(4)} 1996 131,667 None 37,500{(6)}
1995 130,000 2,580{(5)} None
James D. Alexander, 1997 108,000 None
Vice President of 1996 108,000 None 27,000{(8)}
Operations {(7)} 1995 108,000 1,065{(5)} 5,000{(8)}
</TABLE>
(1) Mr. Keen was elected Chief Executive Officer December 31, 1996, prior to
that date he was a Director.
(2) Mr. Keen was granted 225,000 shares of the Company's Common Stock with a
fair market value on the date of issuance of $168,750 as compensation.
<PAGE>8
(3) On December 31, 1996, the Company granted to Mr. Keen the right to
receive options to acquire 80,000 shares of Common Stock on a quarterly
basis, up to 320,000 shares.
(4) Mr. Van Derven was President and Chief Executive Officer from September
1, 1995 to December 31, 1996, prior to September 1, 1995, he was Chief
Operating Officer.
(5) The Company paid expenses related to corporate housing for Messrs. Van
Derven and Alexander.
(6) The Company granted to Mr. Van Derven an option to purchase 37,500
shares of Common Stock at $0.78125 per share and adjusted the exercise
price of previously issued options to purchase 70,000 shares to $0.78125
in April 1996.
(7) Mr. Alexander resigned his position as Vice President of Operations
effective September 5, 1997.
(8) Mr. Alexander received an option to purchase 27,000 shares of Common
Stock at $0.78125 per share in April 1996. An option to purchase 5,000
shares at $10.00 per share was granted in October 1994, and in April
1996 the exercise price of this option along with 20,000 other options
previously granted was adjusted to $0.78125 per share.
On December 31, 1996, the Board of Directors named Mr. W. Robert Keen as Chief
Executive Officer of the Company. In exchange for his services, Mr. Keen
received 225,000 shares of Common Stock with a fair market value on the date of
issuance of $168,750. The shares are subject to forfeiture in the event Mr.
Keen voluntarily leaves the Company prior to January 1, 1998. In addition, Mr.
Keen is entitled to receive on a quarterly basis options to purchase 80,000
shares of Common Stock at an exercise price equal to the fair market value as
of the date of grant up to an aggregate of 320,000 shares pursuant to the
Company's stock option plans. During fiscal 1997, Mr. Keen was granted options
to purchase 120,000 shares under the Company's 1993 Plan and was granted
options to purchase an additional 40,000 shares under the Company's 1997 Plan
subject to stockholder approval of the 1997 Plan (see Proposal No. 2).
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NAME Options/SARs Percent of Total Exercise Price Expiration
GRANTED (#) Options/SARs Granted to ($/SH) DATE
EMPLOYEES IN FISCAL YEAR
<S> <C> <C> <C> <C>
W. Robert Keen 5,000 3.0% $0.781 11/21/2006
80,000 48.5% $0.750 1/2/2007
80,000 48.5% $0.906 4/1/2007
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table sets forth the value of exercised and unexercised
options and SARs held by the named executives at fiscal year end:
<TABLE>
<CAPTION>
NAME Shares Value Options/SARs Value of
Acquired REALIZED ($) at Fiscal Unexercised in-the-
ON EXERCISE # Year-End(#) Money Options/SARs
Exercisable(E)/ at Fiscal Year-
Subject to End(1)
REPURCHASE(U) Exercisable(E)/
Subject to
REPURCHASE(U)
<S> <C> <C> <C> <C>
W. Robert Keen None None 165,000(U) $85,615(U)
George R. Van Derven 20,000 $16,375 (2) 87,500(E) $19,141(E)
James D. Alexander None None 52,000(E) $11,375(E)
</TABLE>
________________
(1) Based on the $1.00 per share closing/average trading price of the
Common Stock at June 30, 1997.
(2) Based on the $1.60 per share closing/average trading price of the
Common Stock on the exercise date of October 11, 1996.
<PAGE>9
SPECIAL STOCK OPTION PLAN
In June 1993 the Board of Directors adopted the Company's Special Stock
Option Plan which authorized 18,800 shares of Common Stock for the grant
of options. In June 1993 the Board of Directors granted options with respect to
18,715 shares of Common Stock to approximately 43 employees. Options to
purchase 13,887 shares of Common Stock under the Special Stock Option Plan
were canceled through April 10, 1996, at which time the remaining 4,913
options were canceled and reissued under the 1993 Stock Option/Stock
Issuance Plan. Subject to approval by the stockholders of the 1997 Plan,
the Board of Directors will terminate the Special Stock Option Plan.
1993 STOCK OPTION/STOCK ISSUANCE PLAN
The 1993 Stock Option/Stock Issuance Plan (the "1993 Plan"), pursuant to
which key employees (including officers) and consultants of the Company
and the non-employee members of the Board of Directors may acquire an equity
interest in the Company, was adopted by the Board of Directors and
Shareholders during 1993.
An aggregate of 400,000 shares of Common Stock are reserved for issuance
over the ten year term of the 1993 Plan. However, no officer of
the Company may be issued more than 200,000 shares of Common Stock under the
1993 Plan. The 1993 Plan contains three separate components: (i) a
Discretionary Option Grant Program under which key employees and consultants
may be granted options to purchase Common Stock; (ii) an Automatic Option
Grant Program under which option grants will be made at periodic intervals to
non-employee Board members; and (iii) a Stock Issuance Program under which
eligible individuals may be issued shares of Common Stock, either through
immediate purchase or as a bonus based on performance criteria. The 1993 Plan
is administered by the Compensation Committee. The shares issuable under the
1993 Plan will either be shares of the Company's authorized but previously
unissued Common Stock or shares of Common Stock reacquired by the Company,
including shares purchased on the open market and held as treasury shares.
As of June 30, 1997, approximately 1,173 shares are available under the 1993
Plan for grant.
During fiscal 1997, the Company granted options to purchase 120,000 shares of
Common Stock to Mr. Keen under the 1993 Plan (see table of "Option/SAR Grants
in Last Fiscal Year"). In addition, during fiscal 1997, Mr. Keen received
options to acquire 5,000 shares of Common Stock and Mr. Lammerding received
options to acquire 1,000 shares of Common Stock at $0.781 pursuant to the
Automatic Option Grant Program of the 1993 Plan. Subject to stockholder
approval of the 1997 Plan, the Board of Directors will terminate the 1993
Plan, which termination shall not alter the vesting provisions or any other
term or condition of any option granted prior to the termination of the 1993
Plan.
<PAGE>10
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as to (i) the persons or
entities known to the Company to be beneficial owners of more than 5% of the
Company's Common Stock and Preferred Stock, Series D, as of September 15, 1997,
(ii) all directors of the Company, (iii) all executive officers of the Company
and (iv) all directors and officers of the Company as a group.
COMMON STOCK
NAME AND ADDRESS OF
BENEFICIAL OWNER NUMBER OF SHARES PERCENT
James W. Cameron, Jr. 19,948,245 (1) 77.10%
629 J Street
Sacramento, CA 95814
Max Negri, M.D. 2,771,143 (2) 10.71%
31244 Palos Verdes Drive West
Suite 234
Rancho Palos Verdes, CA 90274
W. Robert Keen 470,000 (3) 1.80%
George Van Derven 98,500 (4) *
George R. Van Derven 98,500 (4) *
James D. Alexander 52,000 (5) *
Edward L. Lammerding 27,620 (6) *
Gerald W. Faust, Ph.D. 5,000 (7) *
Thomas W. O'Neil, Jr. 6,050 (8) *
All directors and executive officers 659,170 (9) 2.51%
as a group (6 persons)
___________________
* Less than 1.0%.
(1) Includes 59,410 shares issuable upon conversion of 76,167 shares of
Preferred Stock, Series D, and 1,500 shares issuable upon exercise of
warrants, all of which are currently convertible or exercisable.
Also includes 175,000 shares held by Mr. Cameron in an IRA and
213,250 shares held by the Cameron Foundation. Mr. Cameron disclaims
beneficial ownership in the shares held by the Cameron Foundation.
(2) Includes 64,740 shares issuable upon conversion of 83,000 shares of
Preferred Stock, Series D, currently convertible.
(3) Includes 245,000 shares issuable upon exercise of options, all of
which are subject to repurchase.
(4) Includes 87,500 shares issuable upon exercise of options, none of
which are subject to repurchase.
(5) Includes 52,000 shares issuable upon exercise of options, none of
which are subject repurchase.
(6) Includes 26,000 shares issuable upon exercise of options of which
11,667 are not subject to repurchase, and 1,500 shares issuable upon
exercise of warrants held by Sierra Resources Corporation all of
which are currently exercisable.
(7) Includes 5,000 shares issuable upon exercise of options, none of
which are subject to repurchase.
(8) Includes 5,000 shares issuable upon exercise of options of which
1,667 are not subject to repurchase.
(9) Includes 420,500 shares issuable upon exercise of options and 1,500
issuable upon exercise of warrants, 157,834 of which are not subject to
repurchase.
<PAGE>11
PREFERRED STOCK, SERIES D
NAME AND ADDRESS OF
BENEFICIAL OWNER NUMBER OF SHARES PERCENT
James W. Cameron, Jr. 76,167 37.3
629 J Street
Sacramento, CA 95814
W. Robert Ramsdell 45,000 22.0
474 Paseo Miramar
Pacific Palisades, CA 90272
Max Negri, M.D. 83,000 40.7
31244 Palos Verdes Drive West
Suite 234
Rancho Palos Verdes, CA 90274
APPOINTMENT OF INDEPENDENT AUDITORS
Ernst & Young LLP, has been selected as the Company's independent auditors
for the year ended June 30, 1998. Representatives of Ernst & Young LLP are
expected to be present at the Annual Meeting with the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
OTHER MATTERS
As of the date of this proxy statement, there are no other matters which the
Board of Directors intends to present or has reason to believe others will
present at the Annual Meeting of Stockholders. If other matters properly
come before the Annual Meeting, those persons named in the accompanying proxy
will vote in accordance with their judgment.
1998 ANNUAL MEETING OF STOCKHOLDERS
Stockholders are entitled to present proposals for action at stockholders'
meetings if they comply with the requirements of the proxy rules. In
connection with this year's Annual Meeting, no stockholder proposals were
presented. Any proposals intended to be presented at the 1998 Annual Meeting
must be received at the Company's offices on or before June 15, 1998 in order
to be considered for inclusion in the Company's proxy statement and form of
proxy relating to such meeting.
BY ORDER OF THE BOARD OF DIRECTORS
W. ROBERT KEEN
Chief Executive Officer
Sacramento, California
October 24, 1997
<PAGE>
APPENDIX A
ALTERNATIVE TECHNOLOGY RESOURCES, INC.
1997 STOCK OPTION PLAN
1. PURPOSE; DEFINITIONS.
1.1 PURPOSE. The purpose of the Plan is to attract, retain, and motivate the
officers and employees of the Company who are not subject to a collective
bargaining agreement, as well as the consultants to and directors of the
Company, by giving all of them the opportunity to acquire Stock ownership in
the Company and thereby instilling in them the same goals as the Company's
other equity owners.
1.2 DEFINITIONS. For purposes of the Plan, the following terms shall
have the following meanings:
1.2.1 "ADMINISTRATOR" shall mean the Compensation Committee referred to in
Section 4 in its capacity as administrator of the Plan in accordance with
Section 4.
1.2.2 "BOARD" shall mean the Board of Directors of the Company.
1.2.3 "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
1.2.4 "COMPANY" shall mean Alternative Technology Resources, Inc., a
Delaware corporation.
1.2.5 "DIRECTOR" shall mean a member of the Board.
1.2.6 "EFFECTIVE DATE" shall have the meaning set forth in Section 2.
1.2.7 "ELIGIBLE PERSON" shall mean, in the case of the grant of an Incentive
Stock Option, all employees of the Company who are not subject to a
collective bargaining agreement, and in the case of a Non-qualified Stock
Option, any director (including a director who is also a member of the
Compensation Committee), officer, consultant, or employee of the Company who
is not subject to a collective bargaining agreement.
1.2.8 "FAIR MARKET VALUE" shall mean the value established by the
Administrator for purposes of granting Options under the Plan.
1.2.9 "GRANT DATE" shall mean the date of grant of any Option.
1.2.10 "INCENTIVE STOCK OPTION" shall mean an option which is an option
within the meaning of Section 422 of the Code, the award of which contains
such provisions as are necessary to comply with that Section.
1.2.11 "NON-QUALIFIED STOCK OPTION" shall mean an option which is designated
a Non-qualified Stock Option.
1.2.12 "OPTION" shall mean an option to purchase common stock under this
Plan. An Option shall be designated by the Committee as either an Incentive
Stock Option or a Non-qualified Stock Option.
1.2.13 "OPTION AGREEMENT" shall mean the written option agreement with
respect to an Option.
1.2.14 "OPTIONEE" shall mean the holder of an Option.
<PAGE>A-2
1.2.15 "PLAN" shall mean this Alternative Technology Resources, Inc., 1997
Stock Option Plan, as amended from time to time.
1.2.16 "STOCK" shall mean the common stock of the Company, par value $0.01,
and any successor entity to the Company.
1.2.17 "TAX DATE" shall mean the date defined in Section 7.
1.2.18 "VESTING DATE" shall mean the date on which an Option becomes wholly
or partially exercisable, as determined by the Administrator in its sole
discretion.
2. EFFECTIVE DATE; TERM OF PLAN.
The Effective Date of this Plan shall be upon shareholder approval of this
Plan pursuant to Delaware Corporation Laws Section 216 which shall occur
within twelve (12) months of the date of Board approval. This Plan, but not
Options already granted, shall terminate automatically five (5) years after
its adoption by the Board, unless terminated earlier by the Board under
Section 13. No Options shall be granted after termination of this Plan but
all Options granted prior to termination shall remain in effect in accordance
with their terms.
3. NUMBER AND SOURCE OF SHARES OF STOCK SUBJECT TO THE PLAN.
Subject to the provisions of Section 8, the total number of shares of Stock
with respect to which Options may be granted under this Plan is three million
(3,000,000) shares of Stock. The shares of Stock covered by any canceled,
expired, or terminated Option or the unexercised portion thereof shall become
available again for grant under this Plan. The shares of Stock to be issued
hereunder upon exercise of an Option may consist of authorized and unissued
shares or treasury shares.
4. ADMINISTRATION OF THE PLAN.
This Plan shall be administered by a committee of at least two (2) non-
employee members of the Board to which administration of this Plan is
delegated by the Board (the "Compensation Committee"). The "Administrator"
shall mean the "Compensation Committee" referred to in this Section 4 in its
capacity as administrator of the Plan in accordance with this Section 4.
The Administrator may delegate nondiscretionary administrative duties to such
employees of the Company as it deems proper.
Subject to the express provisions of this Plan, the Administrator shall have
the authority to construe and interpret this Plan and any agreements defining
the rights and obligations of the Company and Optionees under this Plan; to
further define the terms used in this Plan; to prescribe, amend, and rescind
rules and regulations relating to the administration of this Plan; to determine
the duration and purposes of leaves of absence which may be granted to
Optionees without constituting a termination of their employment for purposes
of this Plan; and to make all other determinations necessary or advisable for
the administration of this Plan.
Any decision or action of the Administrator in connection with this Plan or
Options granted or shares of Stock purchased under this Plan shall be final
and binding. The Administrator shall not be liable for any decision, action,
or omission respecting this Plan, or any Options granted or shares of Stock
sold under this Plan. The Board at any time may abolish the Compensation
Committee and revest in the Board the administration of the Plan. To the
<PAGE>A-3
extent permitted by applicable law in effect from time to time, no member of
the Compensation Committee or the Board of Directors shall be liable for any
action or omission of any other member of the Compensation Committee or the
Board of Directors, nor for any act or omission on the member's own part,
excepting only the member's own willful misconduct or gross negligence,
arising out of or related to the Plan. The Company shall pay expenses
incurred by, and satisfy a judgment or fine rendered or levied against, a
present or former director or member of the Compensation Committee or Board in
any action against such person (whether or not the Company is joined as a
party defendant) to impose liability or a penalty on such person for an act
alleged to have been committed by such person while a director or member of
the Compensation Committee or Board arising with respect to the Plan or
administration thereof, or out of membership on the Compensation Committee or
Board, or by the Company, or all or any combination of the preceding;
provided, the director or Compensation Committee member was acting in good
faith, within what such director or Compensation Committee member reasonably
believed to have been within the scope of his or her employment or authority,
and for a purpose which he or she reasonably believed to be in the best
interests of the Company or its shareholders. Payments authorized hereunder
include amounts paid and expenses incurred in settling any such action or
threatened action. The provisions of this section shall apply to the estate,
executor, administrator, heirs, legatees, or devisees of a director or
Compensation Committee member, and the term "person" as used in this section
shall include the estate, executor, administrator, heirs, legatees, or
devisees of such person.
5. GRANT OF OPTIONS; TERMS AND CONDITIONS OF GRANT.
5.1 GRANT OF OPTIONS. One or more Options may be granted to any Eligible
Person. Subject to the express provisions of the Plan, the Administrator
shall determine from the Eligible Persons those individuals to whom Options
under the Plan may be granted. Each Option so granted shall be designated by
the Administrator as either a Non-qualified Stock Option or an Incentive
Stock Option. However, any Options designated as Incentive Stock Options that
are subsequently determined to not qualify, shall then be deemed to be Non-
qualified Stock Options.
Subject to the express provisions of this Plan, the Administrator shall
specify the Grant Date, the number of shares of Stock covered by the Option,
the exercise price, and the terms and conditions for exercise of the Options.
If the Administrator fails to specify the Grant Date, the Grant Date shall be
the date of the action taken by the Administrator to grant the Option. As
soon as practicable after the Grant Date, the Company shall provide the
Optionee with a written Option Agreement in the form approved by the
Administrator, which sets out the Grant Date, the number of shares of Stock
covered by the Option, the exercise price, and the terms and conditions for
exercise of the Option.
The Administrator may, in its absolute discretion, grant Options under this
Plan to an Eligible Person at any time and from time to time before the
expiration of five (5) years from the Effective Date.
5.2 GENERAL TERMS AND CONDITIONS. Except as otherwise provided herein, the
Options shall be subject to the following terms and conditions and such other
terms and conditions not inconsistent with this Plan as the Administrator may
impose.
5.3 EXERCISE OF OPTION. In order to exercise all or any portion of any
Option granted under this Plan, an Optionee must remain as an officer or
employee who is not subject to a collective bargaining agreement, or as a
consultant to or director of the Company, until the Vesting Date. The Option
shall be exercisable on or after each Vesting Date in accordance with the
terms set forth in the Option Agreement.
<PAGE>A-4
5.4 OPTION TERM. Each Option and all rights or obligations thereunder shall
expire on such date as shall be determined by the Administrator, but not
later than ten (10) years after the grant of the Option (five (5) years in
the case of an Incentive Stock Option when the Optionee owns more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company), and shall be subject to earlier termination as hereinafter
provided.
5.5 EXERCISE PRICE. Unless otherwise specified by the Administrator, the
exercise price of any option shall be one hundred percent (100%) of the fair
market value of the Company's common stock on the date of option grant.
However, in the case of Incentive Stock Options to an Optionee who owns more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company, the exercise price shall be one hundred ten percent
(110%) of the fair market value and shall be subject to earlier termination as
hereinafter provided.
5.6 METHOD OF EXERCISE. To the extent the right to purchase shares of Stock
has accrued, Options may be exercised, in whole or in part, from time to time
in accordance with their terms by written notice from the Optionee to the
Company stating the number of shares of Stock with respect to which the
Option is being exercised and accompanied by payment in full of the exercise
price.
5.7 PAYMENT FOR OPTION SHARES.
5.7.1 GENERAL RULE. The entire Exercise Price of Stock issued upon exercise
of Options shall be payable in cash, wire transfer, certified check, or, at
the absolute discretion of the Administrator, by non-certified check, at the
time when such Stock is purchased, except as follows:
(a) In the case of an Incentive Stock Option granted under the Plan,
payment shall be made only pursuant to the express provisions of the
applicable Option Agreement. The Option Agreement may, in the Compensation
Committee's sole discretion, specify that payment may be made in any form(s)
described herein.
(b) In the case of a Non-Qualified Stock Option, the Compensation Committee,
in its sole discretion, may specify payment in any form(s) described herein.
5.7.2 SURRENDER OF STOCK. To the extent that this Section 5.7.2 is
applicable, payment for all or any part of the exercise price, but not the
payment of withholding taxes, may be made with Stock which has already been
owned by the Optionee for more than six (6) months. Such Stock shall be
valued at its fair market value on the date of exercise of the new Stock
being purchased under the Plan.
5.7.3 EXERCISE/SALE. To the extent that this Section 5.7.3 is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of
an irrevocable direction to a securities broker approved by the Company to
sell Stock and to deliver all or part of the sales proceeds to the Company in
payment of all or part of the exercise price and/or any withholding taxes.
5.7.4 EXERCISE/PLEDGE. To the extent that this Section 5.7.4 is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of
an irrevocable direction to pledge Stock to a securities broker or lender
approved by the Company, as security for a loan, and to deliver all or part
of the loan proceeds to the Company in payment of all or part of the exercise
price and/or any withholding taxes.
<PAGE>A-5
5.8 RESTRICTIONS ON STOCK; OPTION AGREEMENT. At the time it grants Options
under this Plan, the Company may retain, for itself or others, rights to
repurchase the shares of Stock acquired under the Option or impose other
restrictions on such shares. The terms and conditions of any such rights or
other restrictions shall be set forth in the Option Agreement evidencing the
Option. No Option shall be exercisable until after execution of the Option
Agreement by the Company and the Optionee.
5.9 NON-ASSIGNABILITY OF OPTION RIGHTS. No Option shall be transferable
other than by will or by the laws of descent and distribution. During the
lifetime of an Optionee, only the Optionee may exercise an Option.
5.10 EXERCISE AFTER CERTAIN EVENTS.
5.10.1 TERMINATION AS AN EMPLOYEE, DIRECTOR, OR CONSULTANT, OR BECOMING
SUBJECT TO A COLLECTIVE BARGAINING AGREEMENT. If for any reason other than
permanent and total disability or death (as defined below) an Optionee ceases
to be employed by or to be a consultant to or director of the Company, or if an
Optionee becomes subject to a collective bargaining agreement, Options held
on the date of such termination or on the date the employee becomes subject
to a collective bargaining agreement (to the extent then exercisable) may be
exercised, in whole or in part, at any time within three (3) months after
such date, or such lesser period specified in the Option Agreement (but in no
event after the earlier of (i) the expiration date of the Option as set forth
in the Option Agreement, and (ii) ten (10) years from the Grant Date).
If an Optionee granted an Incentive Stock Option terminates employment but
continues as a consultant, advisor, or in a similar capacity to the Company,
the Optionee need not exercise the Option within three (3) months of
termination of employment but shall be entitled to exercise within three (3)
months of termination of services to the Company (one (1) year in the event
of permanent disability or death). However, if the Optionee does not
exercise within three (3) months of termination of employment, the Option
will not qualify as an Incentive Stock Option.
5.10.2 PERMANENT DISABILITY AND DEATH. If an Optionee becomes permanently
and totally disabled (within the meaning of Section 22(e)(3) of the Code), or
dies while employed by the Company, or while acting as an officer, consultant,
or director of the Company (or if the Optionee dies within the period that
the Option remains exercisable after termination of employment or
affiliation), Options then held (to the extent then exercisable) may be
exercised by the Optionee, by the Optionee's personal representative, or by
the person to whom the Option is transferred by will or the laws of descent
and distribution, in whole or in part, at any time within one (1) year after
the disability or death or any lesser period specified in the Option
Agreement (but in no event after the earlier of (i) the expiration date of
the Option as set forth in the Option Agreement, and (ii) ten (10) years from
the Grant Date).
5.11 COMPLIANCE WITH SECURITIES LAWS. The Company shall not be obligated
to issue any shares of Stock upon exercise of an Option unless such shares
are at that time effectively registered or exempt from registration under the
federal securities laws and the offer and sale of the shares of Stock are
otherwise in compliance with all applicable securities laws. Upon exercising
all or any portion of an Option, an Optionee may be required to furnish
representations or undertakings deemed appropriate by the Company to enable the
offer and sale of the shares of Stock or subsequent transfers of any interest
in such shares to comply with applicable securities laws. Evidences of
ownership of shares of Stock acquired upon exercise of Options shall bear any
legend required by, or useful for purposes of compliance with, applicable
securities laws, this Plan, or the Option Agreement evidencing the Option.
<PAGE>A-6
6. LIMITATIONS ON GRANT OF INCENTIVE STOCK OPTIONS.
6.1 The aggregate Fair Market Value (determined as of the Grant Date) of
the Stock for which Incentive Stock Options may first become exercisable by
any Optionee during any calendar year under this Plan, together with that of
Stock subject to Incentive Stock Options first exercisable (other than as a
result of acceleration pursuant to Section 9(a) by such Optionee under any
other plan of the Company or any Subsidiary), shall not exceed $100,000.
6.2 There shall be imposed in the Option Agreement relating to Incentive
Stock Options such terms and conditions as are required in order that the
Option be an "incentive stock option" as that term is defined in Section 422
of the Code.
6.3 No Incentive Stock Option may be granted to any person who, at the time
the Incentive Stock Option is granted, owns shares of outstanding Stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company, unless the exercise price of such Option
is at least one hundred ten percent (110%) of the Fair Market Value of the Stock
(determined as of the Grant Date) subject to the Option and such Option by
its terms is not exercisable after the expiration of five (5) years from the
Grant Date.
6.4 No Incentive Stock Option may be granted to any person who is not an
employee of the Company.
7. PAYMENT OF TAXES.
Upon the disposition by an Optionee or other person of shares of an Option
prior to satisfaction of the holding period requirements of Section 422 of
the Code, or upon the exercise of a Non-qualified Stock Option, the Company
shall have the right to require such Optionee or such other person to pay by
cash, or by check payable to the Company, the amount of any taxes which the
Company may be required to withhold with respect to such transactions. Any
such payment must be made promptly when the amount of such obligation becomes
determinable (the "Tax Date") and may be a condition prior to the delivery of
any certificate for shares or registration of the transfer of such shares.
8. ADJUSTMENT FOR CHANGES IN CAPITALIZATION.
The existence of outstanding Options shall not affect the Company's right to
effect adjustments, recapitalizations, reorganizations, or other changes in
its or any other corporation's capital structure or business, any merger or
consolidation, any issuance of bonds, debentures, preferred or prior
preference stock ahead of or affecting the Stock, the dissolution or
liquidation of the Company's or any other corporation's assets or business,
or any other corporate act, whether similar to the events described above or
otherwise. Subject to Section 9, if the outstanding shares of the Stock are
increased or decreased in number or changed into or exchanged for a different
number or kind of securities of the Company or any other corporation by
reason of a recapitalization, reclassification, stock split, combination of
shares, stock dividend, or other event, an appropriate adjustment of the
number and kind of securities with respect to which Options may be granted
under this Plan, the number and kind of securities as to which outstanding
Options may be exercised, and the exercise price at which outstanding Options
may be exercised, will be made.
<PAGE>A-7
9. DISSOLUTION, LIQUIDATION, OR MERGER.
9.1 COMPANY NOT THE SURVIVOR. In the event of a dissolution or liquidation
of the Company, a merger, consolidation, combination, or reorganization in
which the Company is not the surviving corporation, or a sale of
substantially all of the assets of the Company, any outstanding Options shall
become fully vested immediately upon the Company's public announcement of any
one of the foregoing. The Board of Directors shall determine, in its sole
and absolute discretion, when the Company shall be deemed to survive for
purposes of this paragraph. If the Optionee does not exercise the entire
Option within ninety (90) days, the Administrator, in its sole and absolute
discretion, may, with respect to the unexercised portion of the Option:
9.1.1 cancel the Option upon payment to the Optionee of an amount equal to
the difference between the closing price of the stock underlying the Option
quoted the date before such liquidation, dissolution, merger, consolidation,
combination, or reorganization, and the exercise price of the Option; or
9.2.1 assign the Option and all rights and obligations under it to the
successor entity, with all such rights and obligations being assumed by the
successor entity.
9.2 COMPANY IS THE SURVIVOR. In the event of a merger, consolidation,
combination, or reorganization in which the Company is the surviving
corporation, the Board of Directors shall determine the appropriate
adjustment of the number and kind of securities with respect to which
outstanding Options may be exercised, and the exercise price at which
outstanding Options may be exercised. The Board of Directors shall
determine, in its sole and absolute discretion, when the Company shall be
deemed to survive for purposes of this Plan.
10. CHANGE OF CONTROL.
If there is a "change of control" in the Company, all outstanding Options
shall fully vest immediately upon the Company's public announcement of such a
change. A "change of control" shall mean an event involving one transaction
or a related series of transactions in which any one of the following occurs:
(i) the Company issues securities equal to twenty-five percent (25%) or more
of the Company's issued and outstanding voting securities, determined as a
single class, to any individual, firm, partnership, limited liability
company, or other entity, including a "group" within the meaning of SEC
Exchange Act Rule 13d-3, (ii) the Company issues voting securities equal to
twenty-five percent (25%) or more of the issued and outstanding voting stock
of the Company in connection with a merger, consolidation, or other business
combination, (iii) the Company is acquired in a merger or other business
combination transaction in which the Company is not the surviving company, or
(iv) all or substantially all of the Company's assets are sold or transferred.
SEE Section 9 with respect to Options vesting upon the occurrence of either of
the events described in (iii) or (iv) of this Section 10 and the result upon
the non-exercise of the Options.
11. SUSPENSION AND TERMINATION.
In the event the Board or the Administrator reasonably believes an Optionee
has committed an act of misconduct specified below, the Administrator may
suspend the Optionee's right to exercise any Option granted hereunder pending
final determination by the Board or the Administrator. If the Administrator
determines that an Optionee has committed an act of embezzlement, fraud,
breach of fiduciary duty, or deliberate disregard of the Company rules
resulting in loss, damage or injury to the Company, or if an Optionee makes
an unauthorized disclosure of any Company trade secret or confidential
information, engages in any conduct constituting unfair competition, is
involved in the spreading of rumors or misinformation about the Company,
induces or attempts to induce an employee to leave the employment of the
<PAGE>A-8
Company, induces any Company customer to breach a contract with the Company
or induces any principal for whom the Company acts as agent to terminate such
agency relationship, neither the Optionee nor his estate shall be entitled to
exercise any Option hereunder. In making such determination, the Board or the
Administrator shall act fairly and in good faith and shall give the Optionee
an opportunity to appear and present evidence on the Optionee's behalf. The
determination of the Board or the Administrator shall be final and conclusive.
12. NO RIGHTS AS SHAREHOLDER OR TO CONTINUED EMPLOYMENT.
An Optionee shall have no rights as a shareholder with respect to any shares
of Stock covered by an Option. An Optionee shall have no right to vote any
shares of Stock, or to receive distributions of dividends or any assets or
proceeds from the sale of Company assets upon liquidation until such Optionee
has effectively exercised the Option and fully paid for such shares of Stock.
Subject to Sections 8 and 9, no adjustment shall be made for dividends or
other rights for which the record date is prior to the date title to the
shares of Stock has been acquired by the Optionee. The grant of an Option
shall in no way be construed so as to confer on any Optionee the rights to
continued employment by the Company.
13. TERMINATION; AMENDMENT.
The Board may amend, suspend or terminate this Plan at any time and for any
reason, but no amendment, suspension, or termination shall be made which
would impair the right of any person under any outstanding Options without
such person's consent not unreasonably withheld. Further, any amendment
which materially increases the benefits accruing to participants under this
Plan shall be subject to the approval of the Company's shareholders. Further,
the Board may amend this Plan to comply with Federal and State securities laws.
14. GOVERNING LAW.
This Plan and the rights of all persons under this Plan shall be construed in
accordance with and under applicable provisions of the laws of the State of
California.
<PAGE>
ALTERNATIVE TECHNOLOGY RESOURCES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
Annual Meeting of Stockholders -- November 18, 1997
The undersigned stockholder of ALTERNATIVE TECHNOLOGY RESOURCES, INC.
(formerly known as 3Net Systems, Inc.) [the "Company"], revoking all previous
proxies, hereby appoints GEORGE R. VAN DERVEN and NORBERT WAGNER, or any of
them, as proxies of the undersigned, and authorizes either or both of them to
vote all shares of the Company's Common Stock and Preferred Stock held of
record by the undersigned as of the close of business on October 17, 1997 at
the Annual Meeting of Stockholders of the Company to be held on Tuesday,
November 18, 1997, at 10:00 a.m., local time, at 629 J Street, Sacramento,
California 95814, and at any adjournment(s) or postponement(s) thereof (the
"Annual Meeting"), according to the votes the undersigned would be entitled to
cast if then personally present.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED "FOR" ALL OF THE NOMINEES AND "FOR" PROPOSAL 2 BELOW:
1. Election of Directors:
<square> FOR ALL NOMINEES LISTED BELOW (EXCEPT AS SPECIFIED)
<square> WITHHOLD AUTHORITY FOR ALL NOMINEES
W. Robert Keen Edward L. Lammerding Thomas W. O'Neil, Jr.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, DRAW A
LINE THROUGH THAT NOMINEE'S NAME.
2. A proposal to approve the Alternative Technology Resources, Inc. 1997 Stock
Option Plan
<square> <square> <square>
FOR AGAINST ABSTAIN
3. The authority of the proxy, in his discretion, to vote on such other
business as may properly come before the Annual Meeting, or any adjournment(s)
or postponement(s) thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF NOTICE OF THE ANNUAL
MEETING AND THE PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH. The
undersigned also hereby ratifies all that the said proxy may do by virtue
hereof and hereby confirms that this proxy shall be valid and may be voted
regardless of whether the stockholder's name is signed as set forth below or a
seal affixed or the descriptions, authority or capacity of the person signing
is given or any other defect of signature exists.
PLEASE COMPLETE, SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE REGARDLESS OF WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING.
DATED: _______________, 1997
____________________________
Signature
____________________________
Signature if held jointly
Please sign this Proxy exactly as the name appears in the address above. If
shares are registered in more than one name, all owners should sign. If signing
in a fiduciary or representative capacity, such as attorney-in-fact, executor,
administrator, trustee or guardian, please give full title and attach evidence
of authority. If signer is a corporation, please sign the full corporate name
and an authorized officer should sign his name and title and affix the
corporate seal.
