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 ss.240.14a-11(c) or ss.240.14a-12
MARKETLINK, 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):
[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:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing:
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
MarketLink, Inc.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
to be held
December 16, 1996
A Special Meeting of Shareholders of MarketLink, Inc. will be held at
the Company's headquarters located at 10340 Viking Drive, Suite 150,
Minneapolis, Minnesota, on December 16, 1996, at 10:00 a.m. (Central Standard
Time), for the following purposes:
1. To amend the Articles of Incorporation to change the corporate
name to "OneLink Communications, Inc."
2. To amend the Articles of Incorporation to increase the
authorized number of shares to 50,000,000.
3. To approve the reservation of One Million Five Hundred
Thousand (1,500,000) additional shares for issuance to
employees, officers, directors, consultants and others under
the Company's 1994 Stock Option Plan.
4. To approve certain grants of options to the Chairman of the
Board and the President and Chief Executive Officer of the
Company under the Company's 1994 Stock Option Plan.
5. To approve certain current and future grants of options to
directors of the Company under the Company's 1994 Stock Option
Plan.
6. To take action upon any other business that may properly come
before the meeting or any adjournment of it.
Only shareholders of record shown on the books of the Company at the
close of business on November 27, 1996, will be entitled to vote at the meeting
or any adjournment of the meeting. Each shareholder is entitled to one vote per
share on all matters to be voted on at the Special Meeting.
You are cordially invited to attend the meeting. Whether or not you
plan to attend the meeting, please sign, date and return your Proxy in the
return envelope provided as soon as possible. Your cooperation in promptly
signing and returning the Proxy will help avoid further solicitation expense to
the Company.
Gregory H. Mohn
Secretary
Dated: December 5, 1996
Minneapolis, Minnesota
<PAGE>
MarketLink, Inc.
PROXY STATEMENT
for
Special Meeting of Shareholders
to be held December 16, 1996
INTRODUCTION
This Proxy Statement is being furnished to the shareholders of
MarketLink, Inc. ("MarketLink" or the "Company") in connection with the
solicitation by the Company's Board of Directors of proxies to be voted at the
Special Meeting of Shareholders (the "Special Meeting") to be held on December
16, 1996, and at any adjournment of the Special Meeting, for the purposes set
forth in the attached Notice of Special Meeting.
The cost of soliciting Proxies, including preparing, assembling and
mailing the Proxies and soliciting material, will be borne by the Company.
Directors, officers and regular employees of the Company may, without
compensation other than their regular compensation, solicit Proxies personally
or by telephone.
Any shareholder giving a Proxy may revoke it at any time prior to its
use at the Special Meeting by giving written notice of such revocation to the
Secretary or other officer of the Company or by filing a new written Proxy with
an officer of the Company. Personal attendance at the Special Meeting is not, by
itself, sufficient to revoke a Proxy unless written notice of the revocation or
a subsequent Proxy is delivered to an officer before the revoked or superseded
Proxy is used at the Special Meeting.
The presence at the Special Meeting in person or by proxy of the
holders of a majority of the outstanding shares of MarketLink's Common Stock
entitled to vote shall constitute a quorum for the transaction of business.
Proxies not revoked will be voted in accordance with the instructions specified
by shareholders by means of the ballot provided on the Proxy for that purpose.
Proxies which are signed but which lack any such specific instructions with
respect to any proposal will, subject to the following, be voted in favor of the
proposals set forth in the Notice of Meeting and listed herein. If a shareholder
abstains from voting as to any proposal, then the shares held by such
shareholder shall be deemed present at the Special Meeting for purposes of
determining a quorum and for purposes of calculating the vote with respect to
such proposal, but shall not be deemed to have been voted in favor of such
proposal. Abstentions as to any proposal, therefore, will have the same effect
as votes against such proposal. If a broker returns a "non-vote" proxy,
indicating a lack of voting instruction by the beneficial holder of the shares
and a lack of discretionary authority on the part of the broker to vote on a
particular proposal, then the shares covered by such non-vote proxy shall be
deemed present at the Special Meeting for purposes of determining a quorum, but
shall not be deemed to be represented at the Special Meeting for purposes of
calculating the vote required for approval of such proposal.
<PAGE>
The mailing address of the Company's principal executive office is
10340 Viking Drive, Suite 150, Minneapolis, Minnesota 55344. This Proxy
Statement and the related Proxy and Notice of Special Meeting are first being
mailed to MarketLink shareholders on or about December 5, 1996.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed November 27, 1996, as
the record date (the "Record Date") for determining shareholders entitled to
vote at the Special Meeting. Persons who were not shareholders on the Record
Date will not be allowed to vote at the Special Meeting. At the close of
business on the Record Date, 2,931,415 shares of MarketLink's Common Stock were
issued and outstanding. The Common Stock is the only outstanding class of
capital stock of the Company. Each share of Common Stock is entitled to one vote
on each matter to be voted upon at the Special Meeting.
PRINCIPAL SHAREHOLDERS AND
MANAGEMENT SHAREHOLDINGS
The following table sets forth the number of shares of the Company's
Common Stock beneficially owned as of November 27, 1996, by each person known to
the Company to be the beneficial owner of 5% or more of the Company's Common
Stock, by each executive officer of the Company named in the Summary
Compensation Table, by each director and nominee for director and by all
directors and executive officers (including the named individuals) as a group.
Unless otherwise indicated by footnote, the address of each beneficial owner is
10340 Viking Drive, Suite 150, Minneapolis, Minnesota 55344.
Name of Shareholder or Number of Shares Percent
Identity of Group Beneficially Owned(1) of Class(2)
Gregory H. Mohn 256,136(3) 8.7%
Nicholas C. Bluhm 110,000(4) 3.3%
Ronald E. Eibensteiner 50,000(5) 1.7%
Vin Weber 30,869(6) 1.0%
Michael P. Corcoran 0 --
George E. Smith 0 --
All executive officers and 447,005 15.2%
directors as a group (6 persons)(7)
Perkins Capital Management, Inc. 843,850(8) 28.2%
First Bank System, Inc. 649,800(9) 22.2%
Donald L. & Page Anne Johnson 186,099(10) 6.3%
- ---------------------
-2-
<PAGE>
(1) Unless otherwise indicated, the person listed as the beneficial owner
of the shares has sole voting and sole investment power over the
shares.
(2) Shares not outstanding but deemed beneficially owned by virtue of the
right of a person to acquire them as of November 27, 1996, or within 60
days of such date are treated as outstanding only when determining the
percent owned by such individual and when determining the percent owned
by the group.
(3) Includes 14,430 shares which may be purchased upon exercise of
currently exercisable options.
(4) Such shares are not outstanding but may be purchased upon exercise of
currently exercisable warrants and options, subject to approval of the
grant of such options by shareholders (see Proposal #4 below).
(5) Such shares are not outstanding but may be purchased upon exercise of
currently exercisable warrants and options, subject to approval of the
grant of such options by shareholders (see Proposal #4 below).
(6) Includes 28,000 shares which may be purchased upon exercise of
currently exercisable options.
(7) Includes 36,171 shares which may be purchased upon exercise of warrants
and 192,430 shares which may be purchased upon exercise of currently
exercisable options.
(8) Perkins Capital Management, Inc. has sole power to vote or direct the
vote of 151,500 shares and sole power to dispose or direct the
disposition of all shares listed in the table as beneficially owned by
it. Includes 60,000 shares of Common Stock issuable on exercise of
warrants. The address of the holder is 730 East Lake Street, Wayzata,
Minnesota 55391.
(9) First Bank System, Inc. has sole power to vote or direct the vote for
all shares and sole power to dispose or direct the disposition of
643,800 shares. The address of the holder is 601 2nd Avenue S.,
Minneapolis, Minnesota 55402.
(10) The address of the holder is 7547 128th Street, Apple Valley, Minnesota
55124.
Immediately prior to the Company's Annual Meeting of Shareholders on
May 13, 1996, Ian D. Packer, former President, Chief Executive Officer and Chief
Financial Officer and Allan K. Pray, former Vice President of Finance and
Administration of the Company voluntarily resigned and all incumbent directors,
except Mr. Weber, declined to stand for election. At the Annual Meeting, three
(3) new directors, Ronald E. Eibensteiner, Nicholas C. Bluhm and Michael P
Corcoran, and the sole incumbent director standing for election, Vin Weber, were
elected to the Board by the shareholders. Immediately following the Annual
Meeting, at a meeting, at a meeting of the directors, the size of the Board of
Directors was expanded to five (5) persons and Gregory H. Mohn, a founder of the
Company, was elected as director. The directors elected Richard E. Eibensteiner,
Chairman of the Company and Nicholas C. Bluhm, President of the Company.
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<PAGE>
On July 30, 1996, at a meeting of the directors, the size of the Board
was again expanded, this time to six (6) persons, and George E. Smith was
elected as director.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the total compensation paid by the
Company during the Company's last three fiscal years to the person who served as
President and Chief Executive Officer of the Company during the fiscal year
which ended December 31, 1995. No other executive officer of the Company earned
a total annual salary and bonus in excess of $100,000 during fiscal 1995.
<TABLE>
<CAPTION>
Annual Compensation Long-Term
Compensation
Awards
Securities
Other Annual Underlying
Name and Principal Position Year Salary ($) Bonus ($) Compensation Options (#)
- --------------------------- ---- ---------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Ian D. Packer, Former 1995 81,250 9,750 None 29,138(2)
President, Chief Executive Officer 1994 37,188 None None 125,000(2)
and Chief Financial Officer 1993(1) 0 None None 32,500(3)
</TABLE>
- -----------------
(1) Employment commenced in 1993.
(2) Such options terminated in connection with Mr. Packer's resignation.
(3) Represents warrants to purchase shares at an exercise price of $2.18 per
share expiring December 31, 1998.
Option/SAR Grants During 1995 Fiscal Year
The following table sets forth the options that were granted to the
executive officer named in the Summary Compensation Table during the Company's
last fiscal year which ended December 31, 1995.
<TABLE>
<CAPTION>
Number of Percent of
Securities Total Options/
Underlying SARs Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Share) Date
<S> <C> <C> <C> <C>
Ian D. Packer 29,138 14.2% $3.50 02/20/00(1)
</TABLE>
(1) See footnote (2) to preceding table.
-4-
<PAGE>
Option/SAR Exercises During Fiscal 1995
and Fiscal Year-End Option/SAR Values
The following table provides certain information regarding the exercise
of stock options to purchase shares of the Company's Common Stock during the
year ended December 31, 1995, by the executive officer named in the Summary
Compensation Table and the fiscal year-end value of unexercised stock options
held by such officer.
<TABLE>
<CAPTION>
Number of Number of Unexercised Value of Unexercised In-
Shares Acquired Value Options at Fiscal Year the-Money Options at
on Realized End Fiscal Year End ($)
Name Exercise ($) (exercisable/unexercisable) (exercisable/unexercisable)(1)
- ---- ---------- ----- --------------------------- ------------------------------
<S> <C> <C> <C> <C>
Ian D. Packer None 0 154,138 / 0 (2) $207,177 / 0 (2)
</TABLE>
(1) The value of the options equals the difference between $3.75, the
closing bid price of the Company's Common Stock on December 31, 1995 as
reported by the Nasdaq SmallCap Market, and the option exercise price
per share, multiplied times the number of shares subject to such
options.
(2) Such options terminated in connection with Mr. Packer's resignation.
Compensation of Current Officers
At a meeting held on July 30, 1996, the Board of Directors of the
Company created a Compensation Committee composed solely of the Board's outside
members, Michael Corcoran, George E. Smith and Vin Weber. The Board delegated to
the Committee authority to develop a compensation plan for Messrs. Eibensteiner
and Bluhm. Although Messrs. Eibensteiner and Bluhm had been elected Chairman of
the Board and President, respectively, on May 13, 1996, no agreement had been
reached by the Company and either Messrs. Eibensteiner and Bluhm concerning the
terms of their service to the Company. Although Mr. Bluhm was a full-time
employee of the Company from May 13, 1996 through July 30, 1996, he received no
cash compensation for his services during that period.
In discussions after May 13, 1996, Messrs. Eibensteiner and Bluhm
presented to the Compensation Committee a proposal setting forth the
compensation sought by them. Their proposals emphasized compensation from grants
of options to purchase the Company's Common Stock more than cash compensation.
Messrs. Eibensteiner and Bluhm told the Committee they bring to the Company
substantial knowledge and experience both directly in the industries in which
the Company sells its products and services as well as corporate finance, which
would benefit the Company.
After substantial discussions, the Compensation Committee concluded the
Company's shareholders should vote upon Messrs. Eibensteiner's and Bluhm's
compensation. Since options to purchase the Company's Common Stock are a
significant proportion of the compensation sought by Messrs. Eibensteiner and
Bluhm, the Compensation Committee decided its role should be to negotiate the
minimum compensation agreeable to them and take appropriate action to bring the
stock option portion of the resulting compensation plan to the Company's
shareholders for their consideration and, if appropriate, approval.
-5-
<PAGE>
For the purpose of presenting the stock option compensation sought by
Messrs. Eibensteiner and Bluhm to the shareholders, on September 4, 1996, the
Compensation Committee approved, expressly subject to shareholder approval, the
following compensation plan:
Ronald Eibensteiner: For his services as Chairman of the Board or a director of
the Company:
1. Stock Options. Subject to the limitations set out below, Mr.
Eibensteiner would receive options under the Company's 1994 Stock Option Plan to
purchase 400,000 shares of the Company's Common Stock at an exercise price equal
to $1.625, which was the fair market value of the Company's Common Stock on
August 27, 1996. Mr. Eibensteiner may exercise such options (i.e. the options
will vest) in the following manner:
50,000 shares Effective August 27, 1996.
50,000 shares May 13, 1997, (the first anniversary of Mr. Eibensteiner's
election as Chairman of the Board of the Company),
50,000 shares May 13, 1998,
50,000 shares May 13, 1999, and
200,000 shares Effective at such time as: (1) the closing price of the
Company's Common Stock exceeds $3.50 per share for 20
consecutive trading days, if such Common Stock is then
reported in the Nasdaq National Market or is listed upon
an established exchange or exchanges, or (2) the average
between the bid and asked prices quoted by a recognized
market maker in the Company's Common Stock exceeds
$3.50 per share for 20 consecutive trading days, if the
stock is not reported in the Nasdaq National Market or
listed upon an exchange.
If Mr. Eibensteiner ceases to be both Chairman of the Board and a
director of the Company for any reason, then options which are not vested will
automatically expire. Options which have vested but have not been exercised will
also automatically expire (1) ninety (90) days after the termination of his
positions, if Mr. Eibensteiner voluntarily terminates his positions both as
Chairman and director or (2) one (1) year after the termination of his
positions, if the Company terminates Mr. Eibensteiner's positions both as
Chairman and director.
2. No Separate Cash Compensation. It is not contemplated that Mr.
Eibensteiner will be an employee of the Company and he will not be entitled to
receive any cash compensation for his services unless the Compensation Committee
otherwise determines that cash compensation is appropriate.
As a non-employee, Mr. Eibensteiner will not be entitled to employee
benefits as are generally available to other officers of the Company.
-6-
<PAGE>
3. No Separate Director Compensation. If the Company's Board of
Directors decides to compensate directors for their attendance at Board and
committee meetings, as an employee of the Company, unless the Board decides
otherwise, Mr. Eibensteiner will not be entitled to receive such director's
compensation.
Nicholas Bluhm. For his services as President of the Company:
1. Stock Options. Subject to the limitations set out below, Mr. Bluhm
would receive options under the Company's 1994 Stock Option Plan to purchase
600,000 shares of the Company's Common Stock at an exercise price of $1.625,
which was the fair market value of the Company's Common Stock on August 27,
1996. Mr. Bluhm may exercise such options (i.e. the options will vest) in the
following manner:
100,000 shares Effective August 27, 1996,
100,000 shares May 13, 1997, (the first anniversary of Mr. Bluhm's
employment by the Company),
100,000 shares May 13, 1998,
100,000 shares May 13, 1999, and
200,000 shares Effective at such time as: (1) the closing price of the
Company's Common Stock exceeds $3.50 per share for 20
consecutive trading days, if stock is then reported in the
Nasdaq National Market or is listed upon an established
exchange or exchanges, or (2) the average between the bid
and asked prices quoted by a recognized market maker in
the Company's Common Stock exceeds $3.50 per share for
20 consecutive trading days, if the stock is not reported
in the Nasdaq National Market or listed upon an exchange.
If Mr. Bluhm ceases to be an employee of the Company for any reason,
then options which are not vested will automatically expire. Options which have
vested but have not been exercised will also automatically expire, unless Mr.
Bluhm exercises such options within (1) ninety (90) days after his employment
terminates, if Mr. Bluhm voluntarily terminates his employment or (2) one (1)
year after his employment terminates, if the Company terminates Mr.
Bluhm's employment.
2. Cash Compensation. Mr. Bluhm will receive such cash compensation as
the Compensation Committee may decide from time to time in agreement with Mr.
Bluhm. Mr. Bluhm will receive cash compensation at the rate of $90,000 per year
for the period commencing May 13, 1996, and ending on June 30, 1997. Mr. Bluhm's
cash compensation for periods beginning after June 30, 1997, will be as
established by agreement of the Compensation Committee and Mr. Bluhm.
Mr. Bluhm will also be entitled to such other employee benefits as are
generally available to other employee-officers of the Company.
-7-
<PAGE>
3. No Separate Director Compensation. If the Company's Board of
Directors decides to compensate directors for their attendance at Board and
committee meetings, as an employee of the Company, unless the Board otherwise
decides, Mr. Bluhm will not be entitled to receive such director's compensation.
Terms Applicable To Both Eibensteiner and Bluhm. Under the 1994 Stock Option
Plan, if there is an increase or decrease in the number of shares of Company's
Common Stock resulting from a subdivision or consolidation of shares or the
payment of a stock dividend or any other increase or decrease in the number of
shares effected without receipt of consideration by the Company, the number of
shares covered by each outstanding option granted to Messrs. Eibensteiner and
Bluhm and the option price per share for them will be equitably adjusted by the
Board of Directors to reflect such change. Additional shares which may be
credited pursuant to such adjustment will be subject to the same restrictions as
are applicable to the shares with respect to which the adjustment relates.
Under the 1994 Stock Option Plan, if there is a sale by the Company of
all or substantially all of its assets and the consequent discontinuance of its
business, or in the event of a merger, exchange, consolidation or liquidation of
the Company, the Board of Directors may, in connection with the Board's adoption
of the plan for sale, merger, exchange, consolidation or liquidation, provide
for one or more of the following: (i) accelerate the exercisability of any or
all of Messrs. Eibensteiner's and Bluhm's outstanding options; or (ii) continue
Messrs. Eibensteiner's and Bluhm's rights to exercise options which were
outstanding (both vested and unvested) as of the date of adoption by the Board
of such plan for sale, merger, exchange, consolidation or liquidation and
provide to Messrs. Eibensteiner and Bluhm the right to exercise their options as
to an equivalent number of shares of stock of the corporation which succeeds the
Company by reason of such sale, merger, exchange, consolidation or liquidation.
As provided in the 1994 Stock Option Plan, Messrs. Eibensteiner's and
Bluhm's option rights will not limit in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure or to merge, exchange or consolidate or to
dissolve, liquidate, sell or transfer all or any part of its business or assets.
Shareholder Approval. The compensation plan set out by the Compensation
Committee as a result of the discussions with Messrs. Eibensteiner and Bluhm
expressly provides the options granted under the Plan will not be effective
until their grant is approved by the holders of a majority of the disinterested
shares of the Company's Common Stock at the Special Meeting which has been
called for the purpose of approving such option compensation. The grant of the
options will be of no force or effect if such approval is not obtained.
Messrs. Eibensteiner's and Bluhm's compensation otherwise will remain
subject to change by the Compensation Committee and/or the Board by agreement
with Messrs. Eibensteiner and Bluhm. The Company may, at a subsequent time,
increase or decrease Mr. Bluhm's cash compensation or, in Mr. Eibensteiner's
case, begin paying cash compensation.
Mr. Bluhm's cash compensation is not being presented for approval by
the shareholders, nor are the details of the compensation plan generally. The
general terms of the stock options granted to Messrs. Eibensteiner and Bluhm are
subject to the 1994 Stock Option Plan and approval by Proposal #4 of such terms
is not being sought. The Board of Directors is seeking shareholder approval only
of the number of shares covered by the option grants to Messrs. Eibensteiner and
Bluhm and the terms governing the vesting and exercise of such options as
summarized in the paragraphs entitled "1. Stock Options." under Messrs.
Eibensteiner's and Bluhm's names, above.
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<PAGE>
Compensation of Directors
General Policy. Directors presently do not receive any compensation
from the Company for attending Board or Committee meetings, although the Company
does reimburse directors for expenses incurred in attending such meetings.
Stock Options. Prior to the public offering of the Company's stock,
outside directors of the Company received options under the Company's 1994 Stock
Option Plan to purchase Common Stock at exercise prices equal to the fair market
value of the Company's Common Stock on the date of grant. Mr. Weber is the only
remaining outside director to have received options which are exercisable. The
options granted to other outside directors have expired. Mr. Weber was granted
options in 1994 and 1995 to purchase Twenty-Five Thousand (25,000) and Three
Thousand (3,000) shares, respectively, at an exercise price of $2.18 and $3.50
per share, respectively. Subject to approval by the shareholders, each
nonemployee director of the Company will receive a nonqualified option for Five
Thousand (5,000) shares upon election to the Board and will automatically be
granted a nonqualified option for Fifteen Thousand (15,000) shares of Common
Stock for each year of service on the Board up to a maximum of Fifty Thousand
(50,000) shares. See Proposal #5 below for a more complete description of the
proposed automatic director grant amendment of the 1994 Stock Option Plan.
AMENDMENT OF ARTICLES TO CHANGE CORPORATE NAME
(Proposal #1)
At the Special Meeting, shareholders will be asked to approve an
amendment to the Company's Articles of Incorporation to change the name of the
Company to "OneLink Communications, Inc." On ---------, 1996, the Board of
Directors of the Company unanimously approved the amendment of the Company's
Articles of Incorporation (attached hereto as Exhibit B and referred herein as
"Amendment B") which amends Article I of the Company's Articles of Incorporation
to change the Company's name from "MarketLink, Inc." to "OneLink Communications,
Inc." to better identify the Company and its business.
Vote Required
Adoption of the amendment to the Company's Articles of Incorporation to
change the Company's name requires the affirmative vote of the holders of the
greater of (1) a majority of the voting power of the shares represented in
person or by proxy at the Special Meeting with authority to vote on such matter
or (2) a majority of the voting power of the minimum number of shares that would
constitute a quorum for the transaction of business at the Special Meeting.
-9-
<PAGE>
AMENDMENT OF ARTICLES TO INCREASE AUTHORIZED SHARES
(Proposal #2)
The Board of Directors has also adopted, and recommends shareholder
approval of an amendment to the Company's Articles of Incorporation to authorize
additional shares of stock. The full text of the amendment is set forth in
Exhibit A to this Proxy Statement. The amendment would increase the number of
shares authorized for issuance from 5,000,000 to 50,000,000, of which Forty
Million (40,000,000) will be designated as Common Stock and Ten Million
(10,000,000) will be classified as "undesignated."
The Company's existing Articles of Incorporation authorize Five Million
(5,000,000) shares and empower the Board to establish different classes or
series and fix the rights and preferences of the shares in any such class or
series. If the proposed amendment is approved, the Board of Directors will
similarly have the power to establish from the "undesignated" shares, without
further action by the shareholders, one or more additional classes of stock
(which may, in the Board's sole discretion, include designation as additional
Common or as Preferred Stock), to establish the relative preferences, rights and
limitations of any such additional class or series (including rights and
preferences which may be superior to those of Common Stock), and to issue any
such additional shares as it deems advisable. Current holders of the Company's
Common Stock will have no preemptive rights to purchase any shares of additional
stock when and if designated and issued.
The proposed authorization of Forty-Five Million (45,000,000)
additional shares of stock will insure that shares will be readily available, if
more shares are needed, for issuance in connection with corporate purposes such
as stock splits, stock dividends, financings, acquisitions and other future
developments where issuance would be desirable. The Board of Directors believes
having the additional shares available for such purposes without delay or the
necessity for a special shareholders' meeting would be beneficial to the
Company. The Company has no immediate plans for the designation or issuance of
any of such additional shares.
In the event of a proposed merger, tender offer or other attempt to
gain control of the Company of which the Board does not approve, the proposed
amendment will continue to allow the Board to authorize the issuance of a class
of stock with rights and preferences which could impede the completion of such a
transaction. The Board will also have the authority to issue shares to
purchasers who would support the Board in opposing a hostile takeover attempt.
The Board does not intend to issue any shares except on terms which the Board
deems to be in the best interests of the Company and its then existing
shareholders. Neither the Board of Directors nor management of the Company is
aware of any specific effort to accumulate the Company's securities or to obtain
control of the Company by means of a merger, tender offer or solicitation of
proxies in opposition to management.
Vote Required
Adoption of the amendment to the Company's Articles of Incorporation to
increase the authorized shares requires the affirmative vote of the holders of
the greater of (1) a majority of the voting power of the shares represented in
person or by proxy at the Special Meeting with authority to vote on such matter
or (2) a majority of the voting power of the minimum number of shares that would
constitute a quorum for the transaction of business at the Special Meeting.
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<PAGE>
APPROVAL OF INCREASE IN RESERVED SHARES UNDER
1994 STOCK OPTION PLAN
(Proposal #3)
General. The Board of Directors has adopted, subject to shareholder
approval, an increase to Two Million Two Hundred Fifty Thousand (2,250,000) in
the number of shares reserved for issuance under the Company's 1994 Stock Option
Plan (the "Plan"). There were initially Seven Hundred Fifty Thousand (750,000)
(adjusted to reflect a 2:1 reverse stock split) shares reserved for issuance
under the Plan, of which no shares have been issued and One Million Seven
Hundred Sixty-six Thousand Two Hundred Fifty Three (1,766,253) shares are
subject to currently outstanding options (including the options granted to
Messrs. Bluhm and Eibensteiner discussed in Proposal #4 below). Options
currently outstanding in excess of Seven Hundred Fifty Thousand (750,000) shares
have been granted expressly subject to shareholder approval of the increase in
the number of shares reserved under the Plan and the grants of the options
themselves in the cases of Messrs. Eibensteiner and Bluhm and the outside
directors. In order to provide sufficient shares to cover the proposed options
as well as for future grants to employees, consultants, directors and others,
the shareholders are being asked to approve the reservation of One Million Five
Hundred Thousand (1,500,000) additional shares under the Plan.
If the shareholders do not approve Proposal #3 to increase the number
of shares reserved under the Plan, there will not be enough shares available
under the Plan to provide the stock option compensation sought by Messrs.
Eibensteiner and Bluhm. Accordingly, if the shareholders do not approve such
increase, even though the shareholders may separately vote in favor of the stock
option compensation for Messrs. Eibensteiner and Bluhm, the failure to approve
such reservation of additional shares under the Plan will result in inability
and failure of the Company to provide to Messrs. Eibensteiner and Bluhm the
stock option compensation.
A general description of the basic features of the Plan is set forth
below, but such description is qualified in its entirety by reference to the
full text of the Plan, a copy of which may be obtained without charge upon
written request to the Company's Controller.
Description of Plan
Purpose. The purpose of the Plan is to promote the success of the
Company by facilitating the employment and retention of competent personnel and
by providing incentives to directors, officers, other employees and consultants
and advisors, upon whose efforts the success of the Company depends to a large
degree.
Term. The term of the Plan expires May 8, 2004, which is ten (10) years
from the date the Plan was adopted by the Board of Directors, unless it is
terminated earlier by the Board.
Administration. The Plan is administered by the Compensation Committee
of the Board of Directors (the "Committee") for the purpose of complying with
Rule 16b-3 of the Securities Exchange Act of 1934, as amended. The Plan gives
broad powers to the Committee to administer and interpret the Plan, including
the authority to select the individuals to be granted options and to prescribe
the particular form of agreement to govern each option grant and the conditions
to which each option is subject. The form of agreement may be different for each
optionee, depending upon the terms of the grant.
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<PAGE>
Eligibility. The Plan provides that all employees of the Company or of
any subsidiary are eligible to receive incentive stock options pursuant to the
Plan, including officers and directors who are employees of the Company. The
Plan provides also that nonqualified stock options may be granted to consultants
and advisors to the Company or of any subsidiary. Persons, such as Mr.
Eibensteiner, who qualifies as a "consultant", who are officers but not
employees may be granted nonqualified options under the Plan. Members of the
Board of Directors of the Company who are not employees and who do not qualify
as "consultants" may not be granted either incentive stock options or
nonqualified options under the Plan. As of November 27, 1996, the Company had
approximately 28 employees (including employee officers) and consultants
(including Mr. Eibensteiner). As of November 27, 1996, three (3) members of the
Board of Directors of the Company were not eligible to receive options under the
Plan because they are not employees or consultants of the Company.
Options. When an option is granted under the Plan, the Committee, at
its discretion, specifies the option price, the type of option (either
"incentive" or nonqualified) to be granted, and the number of shares of Common
Stock which may be purchased upon exercise of the option. The exercise price of
an incentive stock option may not be less than 100% of the fair market value of
the Company's Common Stock, as that term is defined in the Plan, and, unless
otherwise determined by the Committee, the exercise price of a nonqualified
stock option may not be less than 100% of the fair market value on the date of
grant. The market price of the Company's Common Stock was $_____ on November 27,
1996. The period during which an option may be exercised and whether the option
will be exercisable immediately, in stages or otherwise is set by the Committee
or the Board, but in no event may an option be exercisable more than ten (10)
years from the date of grant. Optionees may pay for shares upon exercise of
options with cash, check, promissory note or Common Stock of the Company valued
at the stock's then "fair market value" as defined in the Plan. Each option
granted under the Plan is nontransferable during the lifetime of the optionee
and will terminate earlier than its stated expiration date in the event of the
optionee's termination of employment or directorship. The Committee or the Board
may impose additional or alternative conditions and restrictions on the options
granted under the Plan. See Proposal #5 below for discussion of the automatic
director option grant provisions of the Plan which shareholders are asked to
approve at the Meeting.
Amendment. The Board of Directors may from time to time suspend or
discontinue the Plan or revise or amend it in any respect; provided, however,
that no such revision or amendment may impair the terms and conditions of any
outstanding option to the material detriment of the optionee without the consent
of the optionee, except as authorized in the event of a sale, merger,
consolidation or liquidation of the Company.
Federal Income Tax Consequences of the Plan. Incentive stock options
granted pursuant to the Plan are intended to qualify for favorable tax treatment
to the optionee under Section 422 of the Internal Revenue Code. Under Section
422, an optionee realizes no taxable income when the option is granted. Further,
the optionee generally will not recognize any taxable income when the option is
exercised if he or she has at all times from the date of the option's grant
until three months before the date of exercise been an employee of the Company.
The Company ordinarily is not entitled to any income tax deduction upon the
grant or exercise of an incentive stock option. Certain other favorable tax
consequences may be available to the optionee if he or she does not dispose of
the shares acquired upon exercise of an incentive stock option for a period of
two years from the granting of the option and one year after receipt of the
shares.
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<PAGE>
Under present law, an optionee will not realize any taxable income on
the date a nonqualified stock option is granted to the optionee pursuant to the
Plan. Upon exercise of the option, however, the optionee must recognize, in the
year of exercise, ordinary income equal to the difference between the option
price and the fair market value of the Company's Common Stock on the date of
exercise. Upon the sale of the shares, any resulting gain or loss will be
treated as capital gain or loss. The Company will receive an income tax
deduction in its fiscal year in which nonqualified options are exercised, equal
to the amount of ordinary income recognized by those optionees exercising
options, provided that the Company withholds income and other employment-related
taxes on such ordinary income.
Plan Benefits
The table below shows the total number of stock options that have been
received by the following individuals and groups under the Plan:
Total Number of
Name and Position/Group Options Received (1)
Ian D. Packer, Former President and
Chief Executive Officer 264,138(2)
Current Executive Officer Group (3 persons) 1,014,430(3)
Current Non-executive Officer Director Group
(3 persons) 68,000(4)
Current Non-executive Officer Employee Group
(25 persons) -------
(1) This table reflects the total stock options granted without
taking into account exercises or cancellations. Because future
grants of stock options are subject to the discretion of the
Compensation Committee, the future benefits that may be
received by these individuals or groups under the Plan cannot
be determined at this time, except for the automatic option
grants to nonemployee directors as described above.
(2) All of Mr. Packer's options have expired in connection with
his resignation.
(3) Includes options for 600,000 shares and 400,000 shares granted
to Messrs. Bluhm and Eibensteiner, respectively, subject to
approval by the shareholders. (See Proposal #4 below.)
(4) Includes options to purchase 10,000 shares in aggregate which
will be granted to Messrs. Corcoran and Smith and 30,000
shares which will be granted to Mr. Weber as of the date of
the Special Meeting if the director automatic option grant
amendment to the Plan is approved by the shareholders. (See
Proposal #5 below.)
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<PAGE>
Vote Required
The Board of Directors recommends the shareholders approve the increase
in the number of shares reserved under the 1994 Stock Option Plan. Approval of
such increase requires the affirmative vote of the greater of (i) a majority of
the shares represented at the meeting with authority to vote on such matter or
(ii) a majority of the voting power of the minimum number of shares that would
constitute a quorum for the transaction of business at the meeting.
APPROVAL OF GRANT OF OPTIONS TO OFFICERS
(Proposal #4)
Rationale for Compensation Approach. The success of the Company is
largely dependent upon the efforts of its management team, lead by Messrs.
Eibensteiner and Bluhm. The selection, organization and direction of the
management team depends for the most part on the skills and efforts of Messrs.
Eibensteiner and Bluhm. The compensation plan for Messrs. Eibensteiner and Bluhm
provides financial benefit to a large extent from an increase in the price of
the Company's common stock. This linkage ties and fully aligns the rewards to
Messrs. Eibensteiner's and Bluhm's for their performance with and to the
achievement of value for the Company's shareholders. If they are successful in
completing the development of the Company's business, it is hoped the value of
the Company's common stock will reflect that success. If so, Messrs.
Eibensteiner and Bluhm will, with the Company's shareholders, benefit directly
from that success. Conversely, if Messrs. Eibensteiner and Bluhm are unable to
succeed, the lack of success, too, will be reflected in the value of the
Company's common stock. Their financial benefit from the stock options may be
little or nothing if there is little or no appreciation in the value of the
Company's common stock after August 27, 1996.
The Company's capital resources are limited. The Company has not yet
developed a volume of profitable sales sufficient to fund the Company's
continued operations. The Company must develop successful sales efforts and
properly position its products and services rapidly while it has sufficient
resources to do so. Messrs. Eibensteiner and Bluhm believe this will be
accomplished best by an entrepreneurial management team whose compensation is
tied closely to the long-term success of the Company and which is best measured
by the market's valuation of the Company stock. Accordingly, the compensation
sought by Messrs. Eibensteiner and Bluhm provides for cash compensation totaling
$90,000. The remainder of the compensation consists entirely of stock options
which will have substantial value to Messrs. Eibensteiner and Bluhm only if the
Company succeeds in materially improving its sales efforts while controlling
costs.
Potential Compensation Expense. For financial accounting purposes, the
Company could incur an expense equal to the number of shares underlying the
options multiplied by the difference between the per share exercise price of the
options and the market price per share of Marketlink's Common Stock on the date
of shareholder approval. As a result, if the Company's Common Stock increases in
value significantly from $1.625, the exercise price of the options, the Company
could incur a compensation expense which may have a material adverse effect on
the Company.
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<PAGE>
Vote Required
Approval of the grants to Messrs. Eibensteiner and Bluhm requires the
affirmative vote of the greater of (i) a majority of the shares represented at
the meeting with authority to vote on such matter or (ii) a majority of the
voting power of the minimum number of shares that would constitute a quorum for
the transaction of business at the meeting.
APPROVAL OF AUTOMATIC OPTION GRANTS TO DIRECTORS
(Proposal #5)
The Board of Directors as adopted, subject to shareholder approval, an
amendment to the 1994 Stock Option Plan which provides for certain automatic
grants of stock options upon the initial election and continued service of
outside directors of the Company. Under the amendment, each nonemployee director
would receive an option to purchase 5,000 shares upon such director's initial
election to the Board and an option to purchase 15,000 shares for each year of
such director's service on the Board up to a maximum of 50,000 shares. Each
option will be exercisable for a period of 10 years, unless earlier terminated
in accordance with the Plan, at an exercise price per share equal to 100% of the
fair market value of the Company's Common Stock on the date of grant. Each
option would become exercisable only after the fair market value of the
Company's Common Stock (determined as described in the Plan) is, for 20
consecutive trading days, at least 25% above the fair market value of the
Company's Common Stock on the date of grant.
At the time the 1994 Stock Option Plan was adopted, Rule 16b-3 required
the Plan to be administered by a committee of disinterested directors. The law
further provided that to be "disinterested", a committee member could not be
entitled to receive options under the Plan. Rule 16b-3 did permit grants of
options to such directors under provisions where the directors would have no
discretion as to the number of shares and terms of the stock options granted to
them. The proposed amendment to the 1994 Stock Option Plan is a permissible
means under Rule 16b-3 for automatically granting options to outside directors
without causing them to lose their "disinterested" status.
Rule 16b-3 has changed and, after November 1, 1996, outside directors
administering stock option plans like the Plan will not lose their
"disinterested" status even if they have the power to award themselves options
under the Plan. The Company has determined that it is in the interests of the
shareholders only to permit outside, disinterested directors to participate
under the Plan using automatic grant provisions which were permissible under
prior law. Thus, even though under the revised Rule 16b-3, which will be in
force at the time of the Special Meeting, the members of the Committee
administering the Plan could be permitted to determine the terms of options
granted to themselves, the Company has eliminated all discretion of the
Committee to set such terms by providing for the automatic grant of options
described above.
In the event of the election of a new director by the Board between
shareholder meetings, the 15,000 shares per year of service would be pro-rated
for the number of months between the new director's election and the next
shareholders' meeting. This provision will apply to Mr. Smith. Directors do not
currently receive compensation for attending Board or committee meetings and,
with the exception of Mr. Weber who received director options in 1994 and 1995
-15-
<PAGE>
to purchase 25,000 and 3,000 shares, respectively, outside directors have not
received options to purchase Company stock. In Mr. Weber's case, his options to
purchase 28,000 shares of the Company's Common Stock will reduce the number of
shares as to which he may be granted options under the Plan. Mr. Weber's 28,000
option shares are not subject to the requirement of the proposed amendment that
the fair market value of the Company's Common Stock increase at least 25% prior
to the time the options become exercisable.
The Board of Directors asks the shareholders of the Company to approve
the automatic grant amendment to the Plan as a long-term approach for attracting
and retaining qualified outside directors who have an incentive to improve
shareholder value.
Vote Required
The Board of Directors recommends that the shareholders approve the
amendment to the 1994 Stock Option Plan providing for automatic grant of
options. Approval of such amendment requires the affirmative vote of the greater
of (i) a majority of the shares represented at the meeting with authority to
vote on such matter or (ii) a majority of the voting power of the minimum number
of shares that would constitute a quorum for the transaction of business at the
meeting.
SHAREHOLDER PROPOSALS
Any appropriate proposal submitted by a shareholder of the Company and
intended to be presented at the 1997 Annual Meeting must be received by the
Company at its offices by December 9, 1996, to be considered for inclusion in
the Company's proxy statement and related proxy for the 1997 Annual Meeting.
OTHER BUSINESS
The Board of Directors knows of no other matters to be presented at the
meeting. If any other matter does properly come before the meeting, the
appointees named in the Proxies will vote the Proxies in accordance with their
best judgment.
Dated: December 5, 1996
Minneapolis, Minnesota
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<PAGE>
EXHIBIT A
ARTICLE III.
3.1) Authorized Shares. The aggregate number of shares the corporation
has authority to issue shall be 50,000,000 shares, which shall have a par value
of $.01 per share, and which shall consist of 40,000,000 shares of Common Stock
and 10,000,000 undesignated shares.
The Board of Directors of the corporation is authorized to
establish from the undesignated shares, by resolution adopted and filed
in the manner provided by law, one or more classes or series of shares,
to designate each such class or series (which may include but is not
limited to designation as additional shares of Common Stock), and to
fix the relative rights and preferences of each such class or series.
The Board of Directors shall have the authority to issue
shares of a class or series, shares of which may then be outstanding,
to holders of shares of another class or series to effectuate share
dividends, splits or conversion of its outstanding shares.
<PAGE>
MarketLink, Inc.
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints NICHOLAS C. BLUHM and RONALD E. EIBENSTEINER, or
either of them acting alone, with full power of substitution, as proxies to
represent and vote, as designated below, all shares of Common Stock of
MarketLink, Inc. registered in the name of the undersigned, at the Special
Meeting of the Shareholders to be held on December 16, 1996, at 10:00 a.m.,
Central Standard Time, at the Company's headquarters located at 10340 Viking
Drive, Suite 150, Minneapolis, Minnesota, and at all adjournments of such
meeting. The undersigned hereby revokes all proxies previously granted with
respect to such meeting.
The Board of Directors recommends the shareholders vote to approve each
of the following proposals.
(1) AMEND ARTICLES OF INCORPORATION TO CHANGE CORPORATE NAME:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(2) AMEND ARTICLES TO INCREASE AUTHORIZED SHARES TO 50,000,000:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) APPROVE 1,500,000 SHARE INCREASE IN SHARES RESERVED FOR 1994 STOCK
OPTION PLAN:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) APPROVE GRANTS OF OPTIONS TO CHAIRMAN OF THE BOARD AND
PRESIDENT:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(5) APPROVE AUTOMATIC DIRECTOR OPTION GRANTS UNDER 1994 STOCK OPTION
PLAN:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(6) OTHER MATTERS. In their discretion, the appointed proxies are
authorized to vote upon such others business as may properly come
before the Meeting or any adjournment.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN FOR A PARTICULAR PROPOSAL, WILL BE VOTED FOR SUCH PROPOSAL.
Date , 1996.
-------------------------------------------
-------------------------------------------
PLEASE DATE AND SIGN ABOVE exactly as name
appears at the left, indicating, where
appropriate, official position or
representative capacity. If stock is held in
joint tenancy, each joint owner should sign.
575427
<PAGE>
MARKETLINK, INC.
1994 STOCK OPTION PLAN, AS AMMENDED
1. Purposes of the Plan. The purposes of this 1994 Stock Option Plan
are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to Employees and
Consultants of the Company and its Subsidiaries and to promote the success of
the Company's business. Options granted under the Plan may be incentive stock
options (as defined under Section 422 of the Code) or non-statutory stock
options, as determined by the Administrator at the time of grant of option and
subject to the applicable provisions of Section 422 of the Code, as amended, and
the regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" means the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means MarketLink, Inc., a Minnesota corporation.
(g) "Consultant" means any person, including an advisor, who
is engaged by the Company or any Parent or Subsidiary to render
services and is compensated for such services, and any director of the
Company whether compensated for such services or not, provided that if
and in the event the Company registers any class of any equity security
pursuant to the Exchange Act, the term Consultant shall thereafter not
include directors who are not compensated for their services or are
paid only a director's fee by the Company.
(h) "Continuous Status as an Employee" means the absence of
any interruption or termination of the employment relationship by the
Company or any Subsidiary. Continuous Status as an Employee shall not
be considered interrupted in the case of: (i) sick leave; (ii) military
leave; (iii) any other leave of absence approved by the Company,
provided that such leave is for a period of not more than ninety (90)
days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise
pursuant to Company policy adopted from time to time; or (iv) in the
case of transfers between locations of the Company or between the
Company, its Subsidiaries or its successor.
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<PAGE>
(i) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be
sufficient to constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(k) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system including without
limitation the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") System, its Fair Market Value shall be the closing
sales price for such stock (or the closing bid, if no sales
were reported, as quoted on such system or exchange, or the
exchange with the greatest volume of trading in Common Stock,
for the last market trading day prior to the time of
determination) as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the National Market System thereof) or
regularly quoted by a recognized securities dealer but selling
prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for the Common
Stock or;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be
determined in good faith by the Administrator.
(l) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422
of the Code.
(m) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.
(n) "Option" means a stock option granted pursuant to the
Plan.
(o) "Optioned Stock" means the Common Stock subject to an
Option.
(p) "Optionee" means an Employee or Consultant who receives an
Option.
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<PAGE>
(q) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(r) "Plan" means this 1994 Stock Option Plan.
(s) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(t) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12
of the Plan, the maximum aggregate number of shares which may be optioned and
sold under the Plan is 2,250,000 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Administration With Respect to Directors and
Officers. With respect to grants of Options to Employees who
are also officers or directors of the Company, the Plan shall
be administered by (A) the Board if the Board may administer
the Plan in compliance with Rule 16b-3 promulgated under the
Exchange Act or any successor thereto ("Rule 16b-3") with
respect to a plan intended to qualify thereunder as a
discretionary plan, or (B) a committee designated by the Board
to administer the Plan, which committee shall be constituted
in such a manner as to permit the Plan to comply with Rule
16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to
qualify thereunder as a discretionary plan.
(ii) Multiple Administrative Bodies. If permitted by
Rule 16b-3, the Plan may be administered by different bodies
with respect to directors, non-director officers and Employees
who are neither directors nor officers.
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<PAGE>
(iii) Administration With Respect to Consultants and
Other Employees. With respect to grants of Options to
Employees or Consultants who are neither directors nor
officers of the Company, the Plan shall be administered by (A)
the Board or (B) a committee designated by the Board, which
committee shall be constituted in such a manner as to satisfy
the legal requirements relating to the administration of
incentive stock option plans, if any, of state corporate and
securities laws and of the Code (the "Applicable Laws"). Once
appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board.
From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove
members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and
remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the
Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of
the Plan and in the case of a Committee, the specific duties delegated
by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to whom
Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options
are granted hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted
hereunder (including, but not limited to, the share price and
any restriction or limitation, or any vesting acceleration or
waiver of forfeiture restriction regarding any Option or other
award and/or the shares of Common Stock relating thereto,
based in each case on such factors as the Administrator shall
determine, in its sole discretion);
(vii) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted
hereunder;
(viii) to determine whether and under what
circumstances an Option may be settled in cash under
subsection 9(f) instead of Common Stock; and
- 4 -
<PAGE>
(ix) to reduce the exercise price of any Option to
the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option shall have declined
since the date the Option was granted.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final
and binding on all Optionees and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees.
An Employee or Consultant who has been granted an Option may, if he is
otherwise eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designations, to the extent that
the aggregate Fair Market Value of the Shares with respect to which
Options designated as Incentive Stock Options are exercisable for the
first time by any Optionee during any calendar year (under all plans of
the Company or my Parent or Subsidiary) exceeds $100,000, such excess
Options shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options
shall be taken into account in the order in which they were granted,
and the Fair Market Value of the Shares shall be determined as of the
time the Option with respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with
the Company, nor shall it interfere in any way with his right or the
Company's right to terminate his employment or consulting relationship
at my time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement. However, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement.
- 5 -
<PAGE>
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined
by the Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time
of the grant of Such Incentive Stock Option, owns
stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company
or any Parent or Subsidiary, the per Share exercise
price shall be no less than 110% of the Fair Market
Value per Share on the date of grant.
(B) granted to any Employee, the per Share
exercise price shall be no less than 100% of the Fair
Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the
per Share exercise price shall be determined by the
Administrator.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be
determined by the Administrator (and, in the case of an Incentive Stock
Option, shall be determined at the time of grant) and may consist
entirely of (1) cash, (2) check, (3) promissory note, (4) other Shares
which (x) in the case of Shares acquired upon exercise of an Option
have been owned by the Optionee for more than six months on the date of
surrender, and (y) have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) authorization from the Company to retain
from the total number of Shares as to which the Option is exercised
that number of Shares having a Fair Market Value on the date of
exercise equal to the exercise price for the total number of Shares as
to which the Option is exercised, (6) delivery of a properly executed
exercise notice together with such other documentation as the
Administrator and the broker, if applicable, shall require to effect an
exercise of the Option and delivery to the Company of the sale or loan
proceeds required to pay the exercise price, (7) any combination of the
foregoing methods of payment, or (8) such other consideration and
method of payment for the issuance of Shares to the extent permitted
under Applicable Laws. In making its determination as to the type of
consideration to accept, the Board shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company.
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<PAGE>
9. Exercise of Option.
(a) Procedure for Exercise: Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times and under
such conditions as determined by the Board, including performance
criteria with respect to the Company and/or the Optionee, and as shall
be permissible under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and
full payment for the Shares with respect to which the Option is
exercised has been received by the Company. Full payment may, as
authorized by the Board, consist of any consideration and method of
payment allowable under Section 8(b) of the Plan.
Until the stock certificate evidencing such Shares is issued
(as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist
with respect to the optioned Stock, notwithstanding the exercise of the
Option. The Company shall issue (or cause to be issued) such stock
certificate promptly after the Option is exercised. No adjustment will
be made for a dividend or other right for which the record date is
prior to the date the stock certificate is issued, except as provided
in Section 12 of the Plan.
Exercise of a Option in any manner shall result in a decease
in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of
Shares as to which the Option is exercised.
(b) Termination of Employment. In the event of termination of
an Optionee's consulting relationship or Continuous Status as an
Employee with the Company, such Optionee may, but only with in a period
of thirty (30) days (or such other period of time as is determined by
the Board, which, in the case of an Incentive Stock Option shall not
exceed three (3) months) after the date of such termination (but in no
event later than the expiration date of the term of such Option as set
forth in the Option Agreement), exercise his Option to the extent that
Optionee was entitled to exercise it at the date of such termination.
To the extent that Optionee was not entitled to exercise the Option at
the date of such termination, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of
Section 9(b) above, in the event of termination of an Optionee's
consulting relationship or Continuous Status as an Employee as a result
of his total and permanent disability (as defined in Section 22(e)(3)
of the Code), Optionee may, but only within twelve (12) months from the
date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement),
exercise the Option to the extent otherwise entitled to exercise it at
the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if
Optionee does not exercise such Option to the extent so entitled within
the time specified herein, the Option shall terminate.
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<PAGE>
(d) Death of Optionee. In the event of the death of an
Optionee, the Option may be exercised, at any time within twelve (12)
months following the date of death (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the
extent the Optionee was entitled to exercise the Option at the date of
death. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein,
the Option shall terminate.
(e) Rule 16-3. Options granted to persons subject to Section
16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain
such additional conditions or restrictions as may be required
thereunder to qualify for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously
granted, based on such terms and conditions as the Administrator shall
establish and communicate to the Optionee at the time that such offer
is made.
10. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
11. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by one or some combination of the
following methods: (i) by cash payment, or (ii) out of Optionee's current
compensation, or (iii) if permitted by the Administrator, in its discretion, by
surrendering to the Company Shares which (a) in the case of Shares previously
acquired from the Company, have been owned by the Optionee for more than six
months on the date of surrender, and (b) have a fair market value on the date of
surrender equal to or less than Optionee's marginal tax rate times the ordinary
income recognized, (iv) by electing to have the Company withhold from the Shares
to be issued upon exercise of the Option that number of Shares having a fair
market value equal to the amount required to be withheld. For this purpose, the
fair market value of the Shares to be withheld shall be determined on the date
that the amount of tax to be withheld is to be determined (the "Tax Date").
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<PAGE>
If the Optionee is subject to Section 16 of the Exchange Act (an
"Insider"), any surrender of previously owned Shares to satisfy tax withholding
obligations arising upon exercise of this Option must comply with the applicable
provisions of Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3") and
shall be subject to such additional conditions or restrictions as may be
required thereunder to qualify for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable
Tax Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or
disapproval of the Administrator;
(d) if the Optionee is an Insider, the election must comply
with the applicable provisions of Rule 16b-3 and shall be subject to
such additional conditions or restrictions as may be required
thereunder to qualify for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
12. Adjustments Upon Changes in Capitalization or Merger.
(a) Changes in Capitalization. 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 number of shares of
Common Stock which have been authorized for issuance under the Plan but
as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as
well as the price per share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for any increase
or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease
in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have
been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be
final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number
or price of shares of Common Stock subject to an Option.
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<PAGE>
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the
Optionee at least fifteen (15) days prior to such proposed action. To
the extent it has not been previously exercised, the Option will
terminate immediately prior to the consummation of such proposed
action.
(c) Merger or Asset Sale. In the event of a proposed sale of
all or a majority of all of the assets of the Company, or the merger of
the Company with or into another corporation if the shareholders of the
Company immediately prior to such merger own less than fifty percent
(50%) of the equity of the combined entity immediately after such
merger becomes effective the Optionee shall have the right to exercise
the Option as to all of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable and the Board shall
notify the Optionee at least twenty-five (25) days prior to such
transaction that the Option shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option will
terminate upon the expiration of such period. In the event of any other
form of merger with or into another corporation, each outstanding
Option shall be assumed or a equivalent option or right shall be
substituted by the successor corporation or a Parent or Subsidiary of
the successor corporation. In the event that the successor corporation
does not agree to assume the Option or to Substitute a equivalent
option or right, the Administrator may, in lieu of such assumption or
substitution, provide for the Optionee to have the right to exercise
the Option as to all of the Optioned Stock, including Shares as to
which it would not otherwise be exercisable. If the Administrator makes
an Option fully exercisable in lieu of assumption or substitution in
the event of a merger, the Administrator shall notify the Optionee that
the Option shall be fully exercisable for a period of fifteen (15) days
from the date of such notice, and the Option will terminate upon the
expiration of such period. For the purposes of this paragraph, the
Option shall be considered assumed if, following the merger or sale of
assets, the option or right confers the right to purchase, for each
Share of Optioned Stock subject to the Option immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or
other securities or property) received in the merger or sale of assets
by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the
outstanding Shares); provided, however, that if such consideration
received in the merger or sale of assets was not solely common stock of
the successor corporation or its Parent, the Administrator may, with
consent of the successor corporation and the participant, provide for
the consideration to be received upon the exercise of the Option, for
each Share of Optioned Stock subject to the Option, to be solely common
stock of the successor corporation or its Parent equal in Fair Market
Value to the per share consideration received by holders of Common
Stock in the merger or sale of assets.
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<PAGE>
(d) Public Offering. Immediately upon the closing of the
Company's sale of Common Stock pursuant to a registration statement on
Form 5-1, 5.18 (or the equivalent) under the Securities Act of 1933, as
amended, pursuant to a public offering the Optionee shall have the
right to exercise the Option as to all of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable so
long as such Optionee agrees not to sell any shares acquired upon
exercise during a period beginning on the effective date of such
registration statement and ending 180 days afterwards or such shorter
period as may be requested by the underwriter and the Board shall
notify the Optionee at least twenty-five (25) days prior to such
transaction.
13. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment,
alteration, suspension or discontinuation shall be made which would
impair the rights of any Optionee under any grant theretofore made,
without his or her consent. In addition, to the extent necessary and
desirable to comply with Rule 16B-3 under the Exchange Act or with
Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or a established stock
exchange), the Company shall obtain shareholder approval of any Plan
amendment in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and
such Options shall remain in full force and effect as if this Plan had
not been amended or terminated, unless mutually agreed otherwise
between the Optionee and the Board, which agreement must be in writing
and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of a Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
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<PAGE>
16. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
17. Agreements. Options shall be evidenced by written agreements in
such form as the Board shall approve from time to time.
18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law.
19. Granting of Options to Non-Employee Directors.
(a) Upon Joining Board. Each Non-Employee Director whose
initial election or appointment to the Board of Directors occurs after
the date this Plan is adopted by the Board of Directors shall, as of
the date of such election or appointment to the Board, automatically be
granted an option to purchase 5,000 shares of the Common Stock at an
option price per share equal to one hundred percent (100%) of the fair
market value of the Common Stock on the date of such election or
appointment. The option would become exercisable only after the fair
market value of the Company's Common Stock (determined as described in
the Plan) is, for 20 consecutive trading days, at least 25% above the
fair market value of the Company's Common Stock on the date of grant.
(b) Upon Re-election to Board. Each Non-Employee Director who,
after the date this Plan is adopted by the Board of Directors, is
re-elected as a Non-Employee Director of the Company or whose term of
office continues after a meeting of shareholders at which directors are
elected shall, as of the date of such re-election or shareholder
meeting, automatically be granted an option to purchase 15,000 shares
of Common Stock at an option price per share equal to one hundred
percent (100%) of the fair market value of the Common Stock on the date
of such re-election or shareholder meeting; provided that a
Non-Employee Director who receives an option pursuant to subsection (a)
above shall not be entitled to receive an option pursuant to this
subsection (b) until at least twelve (12) months after such
Non-Employee Director's initial election to the Board. The option would
become exercisable only after the fair market value of the Company's
Common Stock (determined as described in the Plan) is, for 20
consecutive trading days, at least 25% above the fair market value of
the Company's Common Stock on the date of grant.
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<PAGE>
(c) General. Non-Employee Directors shall not receive more
than one option to purchase 15,000 shares pursuant to this Section 11
in any one fiscal year and not more than 50,000 Shares for all years
served on the Board of Directors. All options granted pursuant to this
Section 11 shall be designated as nonqualified options and shall be
subject to the same terms and provisions as are then in effect with
respect to granting of nonqualified options to officers and employees
of the Company, except that the option shall expire on the earlier of
(i) three months after the optionee ceases to be a director (except by
death) and (ii) ten (10) years after the date of grant. Notwithstanding
the foregoing, in the event of the death of a Non-Employee Director,
any option granted to such Non-Employee Director may be exercised at
any time within twelve (12) months of the death of such Non-Employee
Director or on the date on which the option, by its terms expire,
whichever is earlier.
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