<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed be the Registrant [X]
Filed by a Party other than the Registrant []
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to section 240.14a-11(c) or
section 240.14a-12
<PAGE>
REAL GOODS TRADING CORPORATION
_________________________________________________________________
(Name of Registrant as Specified In Its Charter)
_________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than
the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), or
14a-6(i)(1), or 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which
transaction applies:
_________________________________________________________________
(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) Account Previously Paid:
_________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
_________________________________________________________________
(3) Filing Party:
_________________________________________________________________
(4) Date Filed:
_________________________________________________________________
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AUGUST 24, 1996
The Annual Meeting of Stockholders of Real Goods Trading
Corporation (the "Company") will be held on Saturday, August 24,
1996, at 10:00 a.m. at 13771 S. Hwy. 101, Hopland, California,
95449, for the following purposes:
1. Electing six directors to the Board of Directors of the
Company;
2. Approving the Amended and Restated Real Goods Trading
Corporation Non-Employee Directors' Stock Option Plan;
3. Considering and acting upon such other business as may
properly come before the meeting or at any adjournment
or postponement thereof.
A complete list of the stockholders entitled to vote at the
meeting, including the address and number of shares registered in
the name of each such stockholder, will be open for examination
by any such stockholder, for any purpose germane to the meeting,
at the Company's corporate office (555 Leslie Street, Ukiah,
California) during ordinary business hours for ten days before
the date of the meeting. The list will also be available for
inspection at the meeting.
The close of business on June 25, 1996, has been fixed as
the record date for the determination of stockholders entitled to
notice of and to vote at the meeting. The stock transfer books
will not be closed.
/S/DONNA MONTAG
Donna Montag, Secretary
June 28, 1996
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING.
PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE ENVELOPE
PROVIDED, WHICH REQUIRES NO POSTAGE. YOU MAY NEVERTHELESS VOTE
IN PERSON IF YOU ATTEND THE MEETING.
REAL GOODS TRADING CORPORATION PROXY STATEMENT FOR THE 1996
ANNUAL MEETING OF STOCKHOLDERS
INTRODUCTION
This Proxy Statement is furnished to the stockholders of
Real Goods Trading Corporation, a California corporation (the
"Company") by the Board of Directors (the "Board") of the Company
in connection with the solicitation of proxies for use at the
Annual Meeting of Stockholders (the "Meeting") to be held on
Saturday, August 24, 1996, at 10:00 a.m., local time, and at any
adjournment or postponement thereof, for the purposes set forth
herein and in the accompanying Notice of Annual Meeting of
Stockholders. The Meeting will be held at 13771 S. Hwy. 101,
Hopland, California 95449. The Company's principal executive
offices are located at 555 Leslie Street, Ukiah, California
95482. Its telephone number is (707) 468-9292. These proxy
solicitation materials were first mailed on or about July 1, 1996
to all stockholders entitled to vote at the Meeting.
ANNUAL REPORT
The Annual Report of the Company for the year ended March
31,1996, is furnished concurrently to all stockholders entitled
to vote at the Meeting. The Annual Report is not to be regarded
as proxy soliciting material or as a communication by means of
which any solicitation is to be made.
RECORD DATE, SHARES OUTSTANDING AND VOTING RIGHTS
Stockholders of record at the close of business on June 25,
1996, are entitled to notice of and to vote at the Meeting. On
such date, 3,434,666 shares of the Company's Common Stock
(without par value) were issued and outstanding. The proposals
set forth herein must be approved by the holders of a majority of
the shares entitled to vote at the Meeting in order to be
adopted. Each outstanding share of capital stock entitles its
holder to one vote with respect to the matters set forth herein.
However, in the election of directors, if prior to the voting any
stockholder gives notice at the Meeting of his or her intention
to cumulate his or her votes, every stockholder shall be entitled
to the number of votes equal to the number of shares owned by him
or her multiplied by the number of directors to be elected. In
the event that cumulative voting occurs, each stockholder may
cast all such votes for a single nominee or distribute them among
two or more nominees. No stockholder may cumulate votes for any
candidate whose name has not been placed into nomination prior to
the voting.
SOLICITATION
The solicitation of proxies is made by the Company, and all
related costs will be borne by the Company. In addition, the
Company may reimburse brokerage firms and other persons
representing beneficial owners of shares of the Company's stock
for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may also be solicited by certain of
the Company's directors, officers and regular employees, without
additional compensation, personally or by telephone or telegram.
VOTING OF PROXIES
The shares represented by the proxies solicited hereby will
be voted FOR the election of the Company's nominees for the
Board, FOR approval of the Amended and Restated Real Goods
Trading Corporation Non-Employee Directors' Stock Option Plan,
and at the discretion of the proxy holders on any other matters
that may properly come before the Meeting, if no contrary
instruction is indicated on a proxy.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked
by the person giving it at any time before its use (i) by
delivery to the Secretary of the Company of a written notice of
revocation or a duly executed proxy bearing a later date, or (ii)
by attending the Meeting and voting in person.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding
beneficial ownership of the Company's Common Stock as of May 23,
1996, by (i) each person (including any "group" as that term is
used in Section 13(d)(3) of the Securities Exchange Act of 1934
(the "Exchange Act")) who is known by the Company to own
beneficially 5% or more of the Common Stock, (ii) each director
of the Company, and (iii) all directors and executive officers as
a group. Unless otherwise indicated, all persons listed below
have sole voting power and investment power with respect to such
shares.
<TABLE>
Name and Address of Amount and Nature of Percentage
Beneficial Owner Beneficial Ownership of Class**
<C> <C> <C>
John and Nancy Schaeffer 2,471,646 shares1,2 71.96%
555 Leslie Street
Ukiah, CA 95482
Stephen Morris 31,300 shares3 **
555 Leslie Street
Ukiah, CA 95482
James T. Robello 2,115 shares **
555 Leslie Street
Ukiah, CA 95482
Linda Francis None N/A
555 Leslie Street
Ukiah, CA 95482
John Lenser None N/A
555 Leslie Street
Ukiah, CA 95482
Barry Reder None N/A
555 Leslie Street
Ukiah, CA 95482
All directors and officers 2,506,061 shares4 72.96%
as a group (7 Persons)
</TABLE>
* The amounts and percentages indicated as beneficially
owned were calculated pursuant to Rule 13d-3(d)(1) under
the Exchange Act which provides that beneficial ownership
of a security is acquired by a person if that person has
the right to acquire beneficial ownership of such security
within 60 days through the exercise of a right such as the
exercise of an option or the conversion of a convertible
security into common stock. Any securities not
outstanding which are subject to options or conversion
privileges are deemed outstanding for the purpose of
computing the percentage of outstanding securities of the
class owned by the person who owns the option or
conversion privilege but are not deemed outstanding for
the purpose of computing the percentage of the class owned
by any other person.
** Less than one percent of such class of stock.
1 Mr. Schaeffer, the President, Chairman of the Board
and Chief Executive Officer of the Company, and his wife,
Nancy, own their interest as community property. Includes
250 shares held in the name of Mr. Schaeffer's son as to
which Mr. Schaeffer disclaims beneficial ownership.
2 The amount reported excludes 3,000 shares transferred in
December 1994 by Mr. Schaeffer to an irrevocable trust
established for the benefit of Mr. Schaeffer's children.
Mr.Schaeffer does not have voting or investment powers
over these 3,000 shares and Mr. Schaeffer disclaims
beneficial ownership of all of the shares held in this
irrevocable trust.
3 Includes 31,300 shares subject to issuance within 60 days
after May 21, 1996, upon the exercise of stock options
granted pursuant to the Company's Fiscal 1993 Stock Incentive
Plan, as amended (the "1993 Plan").
4 Includes 1,000 shares subject to issuance within 60 days
after May 21, 1996 to an officer of the Company upon the
exercise of stock options granted pursuant to the 1993
Plan.
<PAGE>
BOARD OF DIRECTORS
BOARD MEETINGS
During the fiscal year ended March 31, 1996, the Board met
on two (2) occasions and took action by written consent on twelve
(12) occasions. Each person who was then a Board member attended
the two meetings held.
BOARD COMMITTEES
On March 29, 1995, the Board established a Compensation
Committee. As of May 21, 1996 the Committee is comprised of
three directors, John Schaeffer, Linda Francis and Barry Reder.
Mr. Schaeffer is also the Company's President, Chief Executive
Officer and Chairman of the Board. Neither Mr. Schaeffer, Ms.
Francis nor Mr. Reder was granted options pursuant to the 1993
Plan during the twelve months prior to appointment to the
Compensation Committee. The Compensation Committee is the
administrator of the 1993 Plan and is empowered to grant stock
and options thereunder. The Compensation Committee also
also establishes the compensation and evaluates the performance
of the officers of the Company. No Compensation Committee
meetings were held in fiscal 1996. Two actions were taken by
written consent.
On May 21, 1996, the Board established an Audit Committee
which is currently comprised of two directors, James Robello and
Barry Reder, who are not employees of the Company. The Audit
Committee has the responsibility of recommending the annual
appointment of the public accounting firm to serve as the
Company's independent auditors and reviewing any matters with the
auditors that might affect the financial statements, internal
controls, or other financial aspects of the operation of the
Company. The Audit Committee also reviews the Company's
accounting procedures and systems of control, and the Company's
quarterly and annual financial statements.
REPORTS REQUIRED BY SECTION 16(A)
Section 16(a) of the Exchange Act requires the Company's
directors and executive officers, and persons who own more than
ten percent (10%) of the Company's Common Stock, to file with the
Securities and Exchange Commission, and any exchange on which the
Company's stock is traded, reports of ownership and changes in
ownership of the Company's Common Stock.
Based solely on its review of the copies of Forms 3, 4 and 5
received by the Company, or written representations from certain
reporting persons that no Form 5 reports were required for such
persons, the Company believes that, during the fiscal year ended
March 31, 1996, all Section 16(a) filing requirements applicable
to its officers, directors and 10% shareholders were complied
with, except that (i) Stephen Morris was late in filing two
reports: a Form 4 report of his acquisition on March 29, 1995 of
a stock option to purchase shares of the Company's Common Stock
pursuant to the 1993 Plan and a Form 5 report of two transactions
relating to stock options granted to him by the Company, (ii)
James Robello was late in filing a Form 4 report of his
acquisition of a stock option he was granted under the Company's
Non-Employee Directors' Stock Option Plan in October 1995, and (iii)
John Schaeffer was late in filing a Form 4 report of his sale in
February 1996 of shares of the Company's Common Stock and (iv)
Donna Montag was late in filing a Form 3 report in December 1995
of her beneficial ownership of two stock options.
GENERAL INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS
Information about (i) each director nominee, and (ii) the
only executive officer of the Company who is not a director, is
set forth below:
<TABLE>
Name Age Office Director Term
Since Expires
<C> <C> <C> <C> <C>
John Schaeffer 46 President, 1990 1996
Chief
Executive
Officer
and Chairman
of the Board
Stephen Morris 48 Director 1993 1996
James T. Robello 50 Director October 1996
1995
Linda Francis 47 Director May 1996
1996
John Lenser 51 Director May 1996
1996
Barry Reder 51 Director May 1996
1996
Donna Montag 49 Controller N/A N/A
and Secretary
</TABLE>
</PAGE>
Professional Experience of Executive Officers and
Directors:
JOHN SCHAEFFER. Mr. Schaeffer founded the Company's
predecessor in 1986 and since 1990 has been the Company's
President, Chief Executive Officer and Chairman of the Board.
Mr. Schaeffer has been involved in retail businesses since 1978.
In 1994 Mr. Schaeffer was named California Small Businessperson
of the Year. Mr. Schaeffer received a B.A. degree in anthropology
from the University of California at Berkeley in 1971.
STEPHEN MORRIS. Mr. Morris joined the Company's Board of
Directors in October 1993. On July 1, 1994, Mr. Morris became
Executive Vice President and Chief Operating Officer of the
Company. He resigned from such position in June, 1995. Prior to
July 1, 1994 and subsequent to June, 1995, Mr. Morris has been
the principal of Stephen Morris Associates, a provider of sales
and marketing consulting services. From 1978 to 1990, Mr. Morris
was a Sales Manager, Director of Sales and Distribution, and Vice
President, Sales and Marketing for Vermont Castings, Inc. of
Randolph, Vermont, a manufacturer of wood stoves. He is
currently the publisher at Chelsea Green Publishing Co. in
Vermont. Mr. Morris received an A.B. degree in Psychology from
Yale University in 1970.
JAMES ROBELLO. Mr. Robello joined the Company's Board
of Directors in October 1995. Mr. Robello was hired by Real
Goods as its Controller in 1991, and in August 1992 was appointed
its Chief Financial Officer. He resigned from that position in
October 1995, to become General Administrator of Santa Rosa
Anesthesia Medical Group, Inc. At that time he was elected to the
Board of Directors at Real Goods. Mr. Robello served as
Secretary of the Company from August 1992 to May 21, 1996. From
1983 to 1991, Mr. Robello was employed at Cray Research, Inc., a
manufacturer and distributor of supercomputers, as a Business
Controls Manager, Western Region; a Business Manager I; and a
Business Manager II, Western/Asia Pacific Region. Mr. Robello
received a B.A. in finance and business environment from the
University of Oregon in 1967.
LINDA FRANCIS. Ms. Francis joined the Company's Board of
Directors in May 1996. Ms. Francis has been a self-employed
management consultant since 1989. Ms Francis founded and ran a
non-profit corporation serving developmentally disabled persons.
Since 1995, Ms. Francis has worked with Real Goods to fine tune
its organization and corporate structure, utilizing her
experience in "open book management" and employee motivational
programs. Ms. Francis received a B.A. degree in Sociology from
Sonoma State University in 1972, an M.A. degree in Education from
Sonoma State University in 1982 and a Special Education teaching
credential from Sonoma State University in 1973.
JOHN LENSER. Mr. Lenser joined the Company's Board of
Directors in May 1996. Mr. Lenser was Chairman of the Board of
The Music Box Company from 1978 to 1991, and was President of
Hearthsong & David Kay Catalog from 1992 to 1995. Mr. Lenser
has been an independent consultant from 1994 to the present.
Mr. Lenser received a B.A. degree in 1966 and a Masters Degree
in 1966 from the University of California at Berkeley.
BARRY REDER. Mr. Reder joined the Company's Board of
Directors in May 1996. Since October 1993, Mr. Reder has been a
partner at the San Francisco firm of Coblentz, Cahen, McCabe &
Breyer, LLP, a California law firm. From 1976 to October 1993,
Mr. Reder was a partner at Dinkelspiel, Donovan & Reder, a San
Francisco, California law firm that dissolved in October 1993.
Mr. Reder has served as counsel to the Company since 1990. He is
a general corporate and securities counsel for a broad range of
businesses throughout the United States. His expertise is in
mergers and acquisitions, venture capital contracts and real
estate. Mr. Reder received a B.A. degree from Wesleyan
University in 1966 and a J.D. degree from Cornell Law School in
1969.
DONNA MONTAG. Ms. Montag joined the Company as its
Assistant Controller in 1993. She was appointed as Controller of
the Company on November 8, 1995 and Secretary of the Company on
May 21, 1996. Ms. Montag was the Controller at Scharffenberger
Cellars from 1989 until 1993. Ms. Montag received a B.A. degree
from Marymount College in 1969 and C.M.A. certification in 1996.
There is no family relationship among directors, executive
officers or persons nominated or chosen by the Company to become
directors or executive officers.
REMUNERATION OF DIRECTORS
On August 12, 1995, the Company's shareholders approved a
Nonemployee Directors' Plan (the "Directors' Plan") which
provides that (i) on the date of election or appointment, as the
case may be, all non-employee directors of the Company who are
newly elected to the Board will receive an option to purchase
5,000 shares of Company Common Stock pursuant to such plan, and
(ii) on the date of the Meeting and each subsequent Annual
Meeting at which they are re-elected to the Board, all
non-employee directors who are re-elected will receive an option
to purchase 1,000 shares each of the Company Common Stock.
Accordingly, on August 12, 1995, Stephen Morris received an
option to purchase 1,000 shares of such stock, and on
October 23, 1995, James Robello received an option to purchase
5,000 shares of such stock.
On May 21, 1996, subject to shareholder approval, the Board of
Directors amended the Directors' Plan substantially. Pursuant to
the Company's proposed Amended and Restated Non-Employee Directors'
Plan (the "Amended Directors' Plan") and subject to the approval
of the Company's shareholders at the Meeting, (i) Ms. Francis and
Mr. Lenser received an option to purchase 10,000 shares of the
Company's Common Stock, (ii) Mr. Robello received an option
to purchase an additional 5,000 shares of the Company's Common
Stock, (iii) Mr. Morris received an option to purchase an
additional 4,000 shares of the Company's Common Stock, and
Mr. Reder has disclaimed participation in the Amended Directors'
Plan.
Prior to May 1, 1996, non-employee directors received no
remuneration. Effective May 1, 1996, the non-employee directors
of the Company each receive a cash retainer fee of $6,000
per year. Also as of May 21, 1996, each non-employee director
who chairs the Compensation Committee and Audit Committee of the
Board will receive an additional $3,000 per year for chairing
each such committee. The directors are not reimbursed for their
out-of-pocket expenses in connection with their service on the
Company's Board.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the cash, bonus and other
annual compensation received by Mr. Schaeffer, the Company's
President and Chief Executive Officer, for the three fiscal years
ending on March 31, 1994, 1995 and 1996, respectively. Mr.
Schaeffer received no bonuses, reportable perquisites, securities
or property, long term compensation awards in the form of
restricted stock awards, option or SAR awards, or payouts
pursuant to any long term incentive plan during fiscal 1996 or
the two preceding fiscal years. Mr. Schaeffer holds no options
to purchase any of the Company's securities, including Common
Stock. No officer received in excess of $100,000 of total annual
salary and bonus compensation during such period.
SUMMARY COMPENSATION TABLE
<TABLE>
Name and Principal Fiscal All Other
Position Year Salary (1) (2) Compensation(3)
<C> <C> <C> <C>
John Schaeffer,
President, 1996 $79,083 $5,767
Chairman of 1995 84,492 2,855
the Board, 1994 75,596
Chief Executive
Officer
</TABLE>
1 Includes amounts deferred at the election of Mr.
Schaeffer pursuant to the Company's 401(k) Plan
established pursuant to Section 401(k) of the Internal
Revenue Code of 1986, as amended. Also includes
amounts contributed by the Company pursuant to its
Profit Sharing Plan.
2 Includes certain amounts accrued during the year
indicated and paid the following year.
3 Consists entirely of the cash value benefit to
Mr. Schaeffer of split-dollar life insurance premiums
paid by the Company in fiscal 1995 and fiscal 1996 on
a $5,000,000 second-to-die life insurance policy owned
by the Schaeffer 1994 Irrevocable Trust. The figure
was established using the demand loan valuation method
and assuming a long-term interest rate of 7.5%.
Such split-dollar life insurance policy and the
arrangement between Mr. Schaeffer, the Schaeffer 1994
Irrevocable Trust and the Company regarding such
policy is discussed under "Employment Contracts,
Employment Termination and Change-in-Control
Arrangements" below. Prior to fiscal 1995, Mr.
Schaeffer did not receive such a benefit.
On March 29, 1995, the Board granted options to replace
previously granted options to certain executive officers of
the Company to purchase shares of Common Stock at $8.375 per
share. On October 3, 1995, the Compensation Committee of the
Board cancelled the March 29, 1995 grant of options and
authorized the grant of options to purchase the same number of
shares pursuant to the 1993 Plan at a price of $5.69 per share.
The basis for the repricing of these options by the Compensation
Committee of the Board in October 1995 was to adjust the price of
the options to reflect the then current market price of the
underlying shares of the Company's stock that are subject to such
options. The Compensation Committee believed that such repricing
would create positive incentives for the grantees and avoid
frustration of the motivational purpose of the options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Between October 27, 1993 and April 4, 1995 the Company had
no line of credit. On April 4, 1995 the Company obtained a
$1,000,000 line of credit with National Bank of the Redwoods and
the line of credit was renewed on April 5, 1996. Mr. Schaeffer
personally guaranteed that line of credit. No amounts are
currently outstanding under that line of credit.
Stephen Morris, a director of the Company, currently serves
as the publisher at, and owns 10% of the Common Stock of, Chelsea
Green Publishing Co. ("CGP") in Vermont, a company which has co-
published several books with the Company and is a distributor of
the Company's Real Goods Solar Living Sourcebook. All
transactions involving the Company and CGP resulted in total
gross payments of $192,892 made by the Company to CGP from April
1, 1995 through March 31, 1996.
EMPLOYMENT CONTRACTS, EMPLOYMENT TERMINATION AND
CHANGE-IN-CONTROL ARRANGEMENTS
John Schaeffer has had an employment agreement with the
Company since June 1990. The agreement is renewable on an annual
basis, commencing February 28th of each year, and is terminable
by Mr. Schaeffer upon thirty (30) days' notice, or by the Company
upon sixty (60) days' notice. Mr. Schaeffer's base salary is
subject to annual increase by the Board as determined by the
Board. Mr. Schaeffer is also eligible to participate in the
Company's benefit plans, including option, profit sharing,
insurance and similar plans. Upon Mr. Schaeffer's death during
his employment, his spouse will be entitled to a payment of
$20,000 under the Company's health insurance plan. If Mr.
Schaeffer becomes disabled during the term of his employment, his
disability benefits will be paid through the remaining term of
the agreement. The agreement requires Mr. Schaeffer's full-time
service to the Company.
Mr. Schaeffer is presently the owner and holder (with his
wife Nancy) of 2,471,646 shares of the Company's Common Stock.
Mr. Schaeffer and the Company have been advised that on the death
of the last to die of Mr. Schaeffer and his wife, the estate of
such last to die may be required to sell all or a substantial
portion of such shares to satisfy estate tax obligations. The
sale of such number of shares would likely destabilize the
market for the Company's stock. Accordingly, in May 1995, the
Company agreed to pay a portion of the premiums due on a life
insurance policy insuring the joint lives of Mr. Schaeffer and
his wife for $5,000,000 (the "Policy"). The Policy is owned by
the Schaeffer 1994 Irrevocable Trust (the "Trust") established
for the benefit of Mr. Schaeffer's children. Pursuant to a
Split-Dollar Agreement dated May 15, 1995, among the Company, Mr.
Schaeffer and the Trustee of the Trust, the Company will be
reimbursed for the amount of the premiums it pays on the policy
at such time as the Split-dollar Agreement is terminated, the
Trust surrenders or cancels the Policy, or when the Policy's
death benefit proceeds are paid. Such repayment has been secured
by the collateral assignment of the Policy by the Trust to the
Company.
On May 19, 1995 the Company and Stephen Morris entered into
a letter agreement (the "Letter Agreement") pursuant to which,
effective June 18, 1995, Mr. Morris resigned as an officer and
employee and became a consultant to the Company. The Letter
Agreement was terminated as of February 1, 1996. For
approximately two months after the effective date of his
resignation as an officer and employee of the Company, the
Company paid Mr. Morris $43.27 per hour for time he spent on Company
activities. From September 1, 1995 until January, 1996, Mr.
Morris has been paid $3,750 per month to work approximately 20
hours per week on Company matters. Since that time he has been a
part-time consultant to the Company on an hourly basis. In June
1995, the Company paid Mr. Morris a bonus of $5,000 and lent him
approximately $5,000 worth of office furniture.
Pursuant to the Letter Agreement, the Company extended the
exercise of stock options for 33,000 shares of Company Common
Stock granted to Mr. Morris on December 1, 1993 so that Mr.
Morris may exercise such options at any time until 30 days after
Mr. Morris' term as a part-time consultant has ended.
Additionally, the Company accelerated Mr. Morris' right to
exercise an option to purchase 3,300 shares of the Company's
Common Stock at $5.10 per share when he surrendered the right to
purchase 8,700 shares of the Company's Common Stock. A
25,000-share stock option granted to Mr. Morris on March 31, 1995
was terminated on April 29, 1996.
On October 20, 1995, James Robello resigned as Chief
Financial Officer and Controller of the Company and was elected a
director of the Company. On October 23, 1995, Mr. Robello was
granted an option to purchase 5,000 shares of the Company's
Common Stock pursuant to the terms of the Directors' Plan. On
January 8, 1996, the Company redeemed from Mr. Robello options to
purchase 12,000 shares of the Company's Common Stock at the
redemption price of $.90 per share. The redeemed options had
been granted to Mr. Robello under the 1993 Plan.
FUTURE TRANSACTIONS
Any future transactions (including loans) between the
Company and any officer, director, principal shareholder or
affiliate of the Company will be approved by a majority of the
directors disinterested in such transactions and by a majority of
the independent outside directors, each of whom shall have
determined that the transaction is fair to the Company and its
stockholders and that the terms of such transaction are no less
favorable to the Company than could be obtained from unaffiliated
parties.
MATTERS SUBMITTED TO THE VOTE OF STOCKHOLDERS
ELECTION OF DIRECTORS
Company's Bylaws were amended by the holders of a majority
of the Company's Common Stock on May 21, 1996 to authorize a
Board of four to seven members, the specific number of which is
currently fixed at six but can be fixed within that range by the
Board. Each director holds office for a term which expires at
the next annual meeting when his or her successor is elected and
qualified. Unless otherwise instructed, the proxyholders will
vote the proxies received by them for the Company's nominees,
Linda Francis, John Lenser, Stephen Morris, Barry Reder, James
Robello and John Schaeffer. In the event that any of these
individuals is unable or declines to serve as a director at the
time of the Meeting, the proxies will be voted for any nominee
who shall be designated by the Chairman of the Board to fill the
vacancy. It is not expected that any nominee will be unable or
will decline to serve as a director. The six nominees receiving
the highest number of votes at the Meeting will be elected
directors.
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR ALL MANAGEMENT
NOMINEES FOR THE ELECTION OF DIRECTORS.
APPROVAL OF THE AMENDED AND RESTATED NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN
Effective as of May 21, 1996, the Board, subject to
stockholder approval, approved the Company's Amended and Restated
Non-Employee Directors' Stock Option Plan. The amendments relate
primarily to changing the number of shares issuable to
participants, the vesting of options granted and the exercise
price. The Amended Directors' Plan would (i) grant each
non-employee director (a) as of May 21, 1996 (the "Grant Date")
an option to purchase at 100% of fair market value 10,000 shares
of the Company's Common Stock less the number of shares subject
to options previously granted to such director under the
Directors' Plan as previously constituted, (b) who becomes a
non-employee director after May 21, 1996 a similar option to
purchase 10,000 shares of the Company's Common Stock, and (c) if
such director continues to serve as a non-employee director for
more than six years after his or her election as a director of
the Company, an option to purchase 2,000 additional shares on
the sixth anniversary of the original Grant Date and on each
anniversary following such sixth anniversary, at the exercise price
of 100% of the fair market value of such additional shares on
such subsequent grant dates and (ii) establish the rate of
vesting of all options previously or subsequently granted under
the Amended Directors' Plan at 20% on each anniversary after the
Grant Date, except that options granted after such sixth anniversary
of service vest 100% on such grant date. Currently, the Directors'
Plan provides that options granted under the Directors' Plan to
purchase stock at 85% of fair market value vest at the rate of
10% on the first grant anniversary date, and 15%, 20%, 25% and 30%
on the second, third, fourth and fifth anniversary dates, respectively.
Management believes that level vesting is more appropriate. Prior to
amendment, the Directors' Plan provided for the issuance of an
option to purchase (a) 5,000 shares to new non-employee
directors, and (b) 1,000 shares on each anniversary date
of service as a director thereafter. The Directors' Plan
included 50,000 shares; the Amended Directors' Plan includes
100,000 shares. Management believes that the proposed increase in
the number of shares subject to the Amended Directors' Plan as
described above and the revision of the option vesting schedule
will assist the Company in attracting and retaining highly
qualified individuals as Board members.
The Directors' Plan was initially approved by the
stockholders at the 1995 Annual Meeting of Stockholders. As of
May 20, 1996, options to purchase 6,000 shares had been granted
under the Directors' Plan, none of which have been exercised.
Options to purchase 44,000 shares of the Company's Common Stock
were otherwise available for future grant. Under the Amended
Directors' Plan, subject to stockholders' approval thereof at the
meeting, as of May 21, 1996, options to purchase 35,000 shares
had been granted thereunder, (including 6,000 shares previously
granted) none of which have been exercised and options to
purchase 65,000 shares of the Company's Common Stock were
otherwise available for future grant.
GENERAL.
The purpose of the Amended Directors' Plan is to attract and retain
highly qualified individuals to serve as Board members and to
provide the additional incentives which would promote the success
of the Company's business.
NUMBER AND TYPE OF SHARES.
Prior to the amendments, the Directors' Plan provided that
the Company will automatically grant non-qualified stock options
to purchase Common Stock pursuant to a pre-determined formula as
follows: (i) on the date of first election or appointment, all
non-employee directors of the Company ("Directors") will receive
an option to purchase 5,000 shares of Company Common Stock, and
(ii) on the date of the Meeting and each subsequent Annual Meeting of
Stockholders at which they are re-elected to the Board, all
Directors who are re-elected will receive an option
to purchase 1,000 shares each of Company's Common Stock. Under the
original Directors' Plan, each director would receive an option
to purchase an additional 1,000 shares each year beginning at the
end of the first year of service as a director of the Company.
Under the Amended Directors' Plan, each Director who is not
an employee received on May 21, 1996, subject to shareholders'
approval, an option to purchase 10,000 shares of the Company's
common stock less the number of shares subject to options
previously granted to such Director under the Directors' Plan.
Under the Amended Directors' Plan, each Director receives an
option to purchase an additional 2,000 shares per year at the
end of the sixth year.
Under the Directors' Plan, 50,000 shares of Common Stock
were reserved for issuance upon exercise; under the Amended
Directors' Plan, the number of shares is increased to 100,000.
To the extent that options are unexercised and lapse, the
shares subject thereto shall again become available for issuance
and sale under the Amended Directors' Plan.
ADMINISTRATION AND PARTICIPATION.
The Amended Directors' Plan is administered by the Board
(for purposes of this summary, the "Committee"). The Committee
has the power to administer the Amended Directors' Plan pursuant
to the terms thereof. The Committee is also permitted to make
certain amendments to the Amended Directors' Plan without
stockholder approval. The participation, the number of shares
subject to option and the exercise price are all pre-determined
by the terms of the Amended Directors' Plan, and any action taken
by the Committee will be taken only if, in addition to any other
required vote, such action is approved by the majority of the
directors not then eligible to participate under the Directors'
Plan.
Options may only be granted to Directors of the Company who
are not employees.
TERMS OF OPTIONS
The maximum term for options granted pursuant to the Amended
Directors' Plan is 10 years.
EXERCISE PRICE.
The exercise price per share of an option granted under the
Amended Directors' Plan is 100% of the fair market value thereof
on the date of grant; under the Directors' Plan the exercise
price was 85% of fair market value on the date of grant.
Although the fair market value will be determined by the
Committee, because there is a public market for the Company's
Common Stock, the fair market value per share shall generally be
determined as the mean of the high and low sale prices of such
stock on the Pacific Stock Exchange as of the date of grant.
On May 21, 1996, the high and low sales price of such stock
on the Pacific Stock Exchange was $6.75, which is the exercise
price of each option granted on such date to four non-employee
directors of the Company to purchase an aggregate of 29,000
shares of the Company's Common Stock pursuant to the terms of the
Amended Directors' Plan. In 1995, two stock options to purchase
5,000 and 1,000 shares, respectively, were granted under the
Directors' Plan with exercise prices of $5.10 and $7.12,
respectively.
VESTING.
Generally, initial grants are effective on the date of
Committee approval, although the Committee may designate a later
effective date. Under the Directors' Plan, options vested
cumulatively as follows: 10% at the first anniversary, 25% at
the second anniversary, 45% at the third anniversary, 70% at the
fourth anniversary and 100% at the fifth anniversary of the date
of grant. Under the Amended Directors' Plan, the rate of vesting
of (a) all new options granted under the Amended Directors' Plan
is 20% on each anniversary date after the date of the initial
grant, and (b) all options previously granted to Directors who
currently serve on the Board will be amended to provide for
vesting at the rate of 20% on each anniversary date after the
initial grant. Options granted under the Amended Directors' and Plan
to a Director after his or her sixth year of service will vest 100%
on the grant date of such option. The options terminate, if
unexercised, ten years after the date of grant.
PAYMENT OF PURCHASE PRICE.
As determined by the Committee, the option exercise price
may be paid in cash, check, or shares of stock or other
securities of the Company, which will be valued at their fair
market value (without regard to any restrictions under the
Securities Act of 1933, as amended) determined as set forth
above. The Company may withhold or require payment as necessary
to comply with applicable income or employment tax law.
EXERCISE OF OPTIONS.
Options are exercisable at any time after they have vested.
Until the issuance of the stock certificate representing the
shares issuable upon exercise, no optionee has any rights as a
stockholder. The Company may require individual optionees to
report their subsequent sales or dispositions of stock acquired
under options and receipt of other benefits under the Amended
Directors' Plan in order for the Company to realize and benefit from any
available income tax deductions and for the purposes of complying
with securities law reporting obligations.
TERMINATION OF SERVICE AS DIRECTOR.
Under the Amended Directors' Plan, if a participant's board
service terminates for reasons of death, disability or retirement
after age 64, the options generally expire one year after such
event. If a participant's board service terminates for any other
reason, the options generally expire ten (10) days after such
event. Without the amendments, the Directors' Plan provides for
these same termination provisions, except that if a participant's
board service terminates for any reason other than death,
disability or retirement after age 64, the options generally
expire sixty (60) days after such event.
AMENDMENT AND TERMINATION.
The Board may from time to time amend or terminate the
Amended Directors' Plan, except that without the approval of the
holders of a majority of the outstanding shares, no such revision
or amendment may be adopted unilaterally by the Board which would
(i) increase the number of shares subject to the Amended
Directors' Plan except in accordance with the provisions of the
Amended Directors' Plan relating to adjustments due to changes in
capitalization, or (ii) amend the Amended Directors' Plan in a
manner which would materially alter any outstanding option terms.
No such termination or amendment shall alter or impair the rights
under any previously granted options. Unless sooner terminated,
the Amended Directors' Plan shall continue in effect until no
stock remains available for issuance or delivery thereunder and
the Company has no further rights or obligations with respect to
outstanding options thereunder.
MISCELLANEOUS.
An option granted under the Amended Directors' Plan may not
be sold, transferred or disposed of other than by will or the
laws of descent or distribution and may be exercised, during the
lifetime of the optionee, only by the optionee or his or her
legal representative.
Under the Amended Directors' Plan, any non-employee director
who is eligible to participate in the Plan may disclaim and
refuse the issuance of any options under the Amended Directors'
Plan either temporarily or permanently. In the event of changes
in the capitalization of the Company, such as stock splits and
stock dividends, outstanding options shall be equitably adjusted,
and the purchase price shall be equitably adjusted, to reflect
the change. The number of shares remaining in the Amended
Directors' Plan and those reserved for exercise of outstanding
options shall also be adjusted accordingly.
The shares issuable with respect to options shall be issued
only in compliance with applicable law, and the Company shall at
all times reserve a number of shares sufficient to satisfy the
requirements of the Amended Directors' Plan. If the Company is
unable to obtain the approval of the shareholders to implement
the proposed amendments to the Amended Directors' Plan, the
Directors' Plan shall remain in effect under its current terms.
All option grants pursuant to the Amended Directors' Plan shall
be evidenced by written agreements.
TAX EFFECTS OF PARTICIPATION.
The following describes certain federal income tax
consequences to Amended Directors' Plan participants and the
Company. Because each person's individual income tax
circumstances inevitably vary, participants under the Amended
Directors' Plan are advised to consult their personal tax
advisors concerning specific consequences of the particular
transaction and any appropriate action to be taken. Furthermore,
this summary does not discuss the provisions of the income tax
laws of any municipality, state or foreign country in which the
participant may reside.
(A) GENERAL.
A participant does not recognize any taxable income at the
time he or she is granted an option, as long as it does not have
a readily ascertainable fair market value on the date of grant.
An option granted pursuant to the Amended Directors' Plan
generally will not have a readily ascertainable fair market value
because the Company's options (as distinguished from the
Company's Common Stock) are not traded on an established
securities market. Generally, the participant will recognize
ordinary income for tax purposes at the time of exercise (and the
participant's long-term capital gain holding period will begin at
such time). The amount of ordinary income will be equal to the
difference between he value of the shares at that time and the
option exercise price. Upon a resale by the participant of shares
acquired upon exercise of an option, any difference between the
sales price and the fair market value of the shares on the date
of exercise of the option will generally be treated as capital
gain or loss.
(B) WITHHOLDING.
The Company may withhold or require payment from a
participant as necessary to comply with applicable income or
employment tax law.
(C) LIMITATIONS ON CORPORATE DEDUCTION.
Generally, the Company will be entitled to a corresponding
tax deduction at the time the participant recognizes ordinary
income (if any) with respect to shares acquired upon exercise of
an option.
THE BOARD OF DIRECTORS RECOMMENDS THE APPROVAL OF THE AMENDED AND
RESTATED NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN.
GENERAL VOTING INFORMATION
A stockholder may, with respect to the election of directors
(i) vote for the election of all director nominees named herein,
or (ii) withhold authority to vote for the director nominees or
(iii) vote for the election of one or more of such director
nominees and against the other director nominee or nominees by so
indicating on the proxy. Withholding authority to vote for a
director nominee will not prevent such director nominee from
being elected. A stockholder may, with respect to each other
matter specified in the notice of the meeting (i) vote "FOR" the
matter, (ii) vote "AGAINST" the matter, or (iii) "ABSTAIN" from
voting on the matter. Shares will be voted as instructed in the
accompanying proxy on each matter submitted to stockholders. If
there are no instructions from the stockholder on an executed
proxy, the proxy will be voted as recommended by the Board.
When a broker is not permitted to vote stock held in street
name on certain matters in the absence of instructions from the
beneficial owner of the stock and so indicates that it is not
voting certain stock on any or all matters on the proxy, the
shares which are not being voted with respect to a particular
matter (the "non-voted shares") will be considered shares not
present and entitled to vote on such matter, although such
shares may be considered present and entitled to vote for other
purposes and will count for purposes of determining the presence
of a quorum. Approval of each matter specified in the Meeting
notice requires the affirmative vote of a majority of the shares
of Common Stock present in person or by proxy at the meeting and
entitled to vote on such matter. Accordingly, non-voted shares
with respect to such matters will not affect the determination of
whether such matters are approved or the outcome of the election
of directors, while a vote to abstain will be counted and
therefore have the effect of a vote against the matter.
INDEPENDENT AUDITORS
The Board generally selects independent auditors to audit
the financial statements of the Company at the end of each fiscal
year. As of the date hereof, the Board has not selected such
auditors for the fiscal year ending March 31, 1997 but shall make
a selection after reviewing the cost, availability and expertise
of such accountants. Representatives of Deloitte & Touche, LLP, the
Company's independent auditors for the fiscal year ending March 31,
1996 are expected to be present at the meeting with the opportunity
to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals that stockholders of the Company would like to
present at next year's Annual Meeting must be received by the
Company no later than April 26, 1997 in order that they may be
included in the proxy statement and form of proxy related to that
meeting.
OTHER MATTERS
The Company knows of no other matters to be submitted at the
Meeting. If any other matters properly come before the Meeting,
it is the intention of the persons named in the enclosed form of
Proxy to vote the shares they represent as the Board may
recommend.
Form 10-KSB/A
A copy of the Company's Annual Report on Form 10-KSB/A, as filed
with the Securities and Exchange Commission on June 25, 1996 is
available without charge upon written request to Investor
Relations, Real Goods Trading Corporation, 555 Leslie Street,
Ukiah, California 95482.
By signing and returning the enclosed Proxy, stockholders
will be assured of representation at the Annual Meeting in
connection with approval of the matters discussed herein. Each
stockholder should review, complete, execute, date and return the
enclosed Proxy to the Company in the envelope provided as
promptly as possible, and in any event before August 18, 1996.
The Board appreciates the cooperation of the stockholders.
By Order of the Board of Directors
/S/DONNA MONTAG
Donna Montag
Secretary
Dated: June 28, 1996
<PAGE>
Appendix A to Proxy Statement
Form of Proxy
REAL GOODS TRADING CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE 1996
ANNUAL MEETING OF STOCKHOLDERS
August 24, 1996
The undersigned hereby appoints John Schaeffer and Donna
Montag, and each of them, proxies for the undersigned, with full
power of substitution, to vote all shares of common stock of Real
Goods Trading Corporation, a California corporation (the
"Company"), which the undersigned would be entitled to vote
at the Annual Meeting of Stockholders of the Company which will
be held at 13771 S. Highway 101, Hopland, California 95449 on
Saturday, August 24, 1996 at 10:00 a.m., local time, or at any
adjournment thereof, upon the matters set forth below and
described in the accompanying Proxy Statement, and upon such
other business as properly comes before the meeting or any
adjournment thereof.
1. Election of Directors
For all nominees For all nominees Withhold authority
listed below[] except as crossed out[] to vote for nominees[]
Instruction: To withhold authority for any nominee, cross out
that nominee's name below.
Linda Francis Stephen Morris James Robello
John Lenser Barry Reder John Schaeffer
2. Approval of the Amended & Restated Real Goods
Trading Corporation Non-Employee Directors' Stock
Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
[ ] COMMENTS/ADDRESS CHANGE
Please mark this box if you have written comments/address
change on the reverse side.
[ ] I PLAN TO ATTEND THE MEETING
(continued on reverse side)
<PAGE>
Please mark this proxy as indicated on the reverse side to
vote on any item. If you wish to vote in accordance with all of
the Board of Directors' recommendations, please sign below: no
boxes need be checked. If you sign this proxy and do not
indicate that you (i) withhold authority to vote FOR the election
of any director nominee, or (ii) vote against or abstain from
voting on the other proposal, this proxy shall be deemed to be a
vote FOR all such nominees and FOR the other proposal, as the
case may be.
Receipt is hereby acknowledged of the Real Goods Trading
Corporation Notice of Meeting and Proxy Statement.
____________________________
COMMENTS/ADDRESS CHANGE: |
Please mark Comment/Address | Please date and sign exactly as
Box on Reverse Side | your name(s) appear on your
| shares. If signing for estates,
| trusts, or corporations, title or
| office should be stated. If
| shares are held jointly, each
| holder should sign.
|
| --------------------------------
|
| ________________________________
| Signature of Stockholder(s)
|
| Dated:_______________, 1996
<PAGE>
Appendix B to Proxy Statement
AMENDED AND RESTATED
REAL GOODS TRADING CORPORATION
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
1. Name and Purposes.
(a) This Plan is the Amended and Restated Real
Goods Trading Corporation Non-Employee
Directors' Stock Option Plan (the "Plan").
(b) The purposes of the Plan are (i) to promote
ownership by non-employee Directors of a
greater proprietary interest in Real Goods
Trading Corporation (the "Company"), thereby
aligning such Directors' interests more closely
with the interests of the stockholders of the
Company and (ii) to assist the Company in
attracting and retaining qualified persons to
serve as non-employee Directors.
2. Definitions. In addition to terms defined elsewhere
in the Plan, the following are defined terms under the Plan:
(a) "Code" means the Internal Revenue Code of 1986,
as amended. References to any provision of
the Code include regulations thereunder and
successor provisions and regulations.
(b) "Exchange Act" means the Securities Exchange
Act of 1934, as amended. References to any
provision of the Exchange Act include rules
thereunder and successor provisions and rules.
(c) "Fair Market Value" means a value for each
share of Stock determined as follows: If the
Stock is listed on the Pacific, American or New
York Stock Exchange, the mean of the high and
low sale prices of the Stock on such Exchange
as of the effective date of the Fair Market
Value determination or, if there is no trading
on that date, on the last date on which there
was trading may be considered to be the
Fair Market Value of such Stock. During such
time as the Stock is not listed on any of the
aforesaid Exchanges and is publicly traded, its
Fair Market Value may be considered to be the
mean between dealer bid and asked quotations in
the over-the-counter market on the
determination date, as reported by the National
Association of Securities Dealers, Inc. Where,
however, (i) the Stock is not publicly traded
or listed or (ii) such market quotations are
unavailable or not reflective of actual
transactions, or (iii) they do not, in the
opinion of the Board of Directors, accurately
reflect the true value of the Stock, the Board
may use any method it deems reasonable to
ascertain the Fair Market Value of the Stock.
(d) "Option" means the right, granted to a
Participant under Section 6, to purchase Stock
at the specified exercise price for a specified
period of time under the Plan.
(e) "Participant" means a Director who is eligible
to receive and is granted Options under the
Plan.
(f) "Stock" means the Common Stock, without par
value, of the Company and such other securities
as may be substituted for Stock or such other
securities pursuant to Section 7.
3. Shares Available Under the Plan. The total number of
shares of Stock reserved and available for delivery under the
Plan is One Hundred Thousand (100,000), subject to adjustment
as provided in Section 7 below. Such shares may be authorized
but unissued shares. If any Option expires or terminates for
any reason without having been exercised in full,the shares
remaining subject to such Option will again be available for
delivery under the Plan.
4. Administration of the Plan. The Plan will be
administered by the Board of Directors of the Company or any
committee they may designate from time to time, provided that any
action by the Board of Directors relating to the Plan will be
taken only if, in addition to any other required vote, approved
by the affirmative vote of the majority of the Directors who are
not then eligible to participate under the Plan.
5. Eligibility. Each Director of the Company who on any
date on which an Option is to be granted hereunder, is not an
employee of either the Company or any parent or subsidiary of
the Company will be eligible to receive a grant of an Option at
such date. Any eligible director may permanently or temporarily
disclaim issuance of an option hereunder by submitting a written
notice to the Company stating such refusal; upon any withdrawal
of such disclaimer, the director shall automatically be granted
an option hereunder as if he had been first elected on the date
of withdrawal of the disclaimer. If an eligible Director who
receives an Option subsequently becomes an employee, the Option
shall remain in effect and shall continue to vest in accordance
with its terms, but no additional options shall be granted
hereunder to such person. No person other than those specified
in this Section 5 will participate in the Plan.
6. Stock Options. An option to purchase 10,000
shares of Stock shall be granted under the Plan to each person
who first becomes a non-employee Director of the Company on or
after May 21, 1996. An option to purchase 10,000 shares of Stock
less the number of shares previously subject to options hereby
shall be granted to each Director as of May 21, 1996 who
previously participated in this Plan. Additionally, an option to
purchase 2,000 shares of Stock shall be granted under the Plan on
the sixth and each succeeding anniversary of service on the Board
to each eligible non-employee Director who continues to serve as
a Director of the Company, which option shall, not withstanding
the provisions of subparagraph (c) below, be immediately 100%
vested and exercisable. Options granted under the Plan will be non-
qualified stock options which will be subject to the following
terms and conditions:
(a) Exercise Price. The exercise price per share
of Stock purchasable under an Option will be
equal to one hundred percent (100%) of the Fair
Market Value of Stock on the date of grant of
the Option.
(b) Option Term. Each Option will expire at the
earlier of (i) ten (10) years after the date of
grant, (ii) twelve months after the Participant
ceases to serve as a Director of the Company due
to death, permanent disability, or retirement at
or after age 65, or (iii) ten (10) days after
the Participant ceases to serve as a Director of
the Company for any reason other than death,
permanent disability, or retirement at or after
age 65.
(c) Exercisability. Options granted pursuant to this
Plan will vest and become exercisable as follows:
Cumulative
Percentage of Stock
Subject to Option Vesting Date
20% First Anniversary of Date of Grant
40% Second Anniversary of Date of Grant
60% Third Anniversary of Date of Grant
80% Fourth Anniversary of Date of Grant
100% Fifth Anniversary of Date of Grant
This Option shall be exercisable at any time during the Option
Period with respect to any shares which have vested in accordance
with the foregoing schedule. Any portion of the Option that is
not exercised shall accumulate and may be exercised at any time
during the Option Period. In no event shall the Company be
required to issue fractional shares. Not withstanding anything to
the contrary herein, an Option previously granted to a
Participant will be exercisable after the Participant ceases to
serve as a Director of the Company for any reason other than
death, disability, or retirement at or after age 65 only if
the Option was exercisable at the date of such cessation of
service.
(d) Method of Exercise. Each Option may be
exercised, in whole or in part, at such time
as it is exercisable and prior to its expiration
by giving written notice of exercise to the
Company specifying the Option to be exercised
and the number of shares to be purchased, and
accompanied by payment in full of the exercise
price in cash (including by check) or by
surrender of shares of Stock of the Company
acquired by the Participant at least six (6)
months prior to the exercise date and having a
Fair Market Value at the time of exercise equal
to the exercise price, or a combination of a
cash payment and surrender of such Stock.
7. Adjustment Provisions. In the event any
recapitalization, reorganization, merger, consolidation,
spin-off, combination, repurchase, exchange of shares or other
securities of the Company, stock split or reverse split,
extraordinary dividend having a value in excess of 150% of the
quarterly dividends paid during the preceding twelve-month
period, liquidation, dissolution, or other similar corporate
transaction or event affects Stock such that an adjustment is
determined by the Board of Directors to be appropriate in order
to prevent dilution or enlargement of Participants' rights under
the Plan, then the Board of Directors will, in an equitable
manner that is substantially proportionate to the change to
the Stock, adjust (i) any or all of the number or kind of shares
of Stock reserved for issuance and delivery under the Plan, (ii)
the number or kind of shares of Stock to be subject to each
automatic grant of Options under Section 6, and (iii) the number
and kind of shares of Stock issuable or deliverable upon exercise
of outstanding Options, and/or the exercise price per shares
thereof (provided that no fractional shares will be issued upon
exercise of any Option). The foregoing notwithstanding, no
adjustment may be made hereunder except as shall be necessary to
preserve, without exceeding, the value of outstanding
Options and potential grants of Options. If at any date
an insufficient number of shares are available for the
automatic grant of Options at that date, Options will be
automatically granted under Section 6 proportionately to
Participants to the extent shares are available.
8. Changes to the Plan. The Board of Directors may
amend, alter, suspend, discontinue, or terminate the Plan or
authority to grant Options under the Plan without the consent of
stockholders or Participants, except that any such action will be
subject to the approval of the Company's stockholders at the
next annual meeting of stockholders having a record date after
the date such action was taken if such stockholder approval is
required by any federal or state law or regulation or the rules
of any automated quotation system or stock exchange on which the
Stock may then be quoted or listed, or if the Board of Directors
determines in its discretion to seek such stockholder approval;
provided, however, that, without the consent of an affected
Participant, no such action may materially impair the rights of
such Participant with respect to any previously granted Option;
and provided further, that any Plan provision that specifies the
Directors who may receive grants of Options, the amount and
price of securities to be granted to such Directors, and the
timing of grants to such Directors, or is otherwise a "plan
provision" referred to Rule in 16b-3(c)(2)(ii)(B) under the
Exchange Act, shall not be amended more than once every six
months, other than to comport with changes in the Code or the
rules thereunder.
9. General Provisions
(a) Consideration of Grants; Agreements. Options
will be granted under the Plan in
consideration of the services of the
Participants and, except for the payment of
the Option exercise price upon exercise of
the options, no other consideration shall be
required therefor. Grants of Options will
be evidenced by agreements executed by
the Company and the Participant containing the
terms and conditions set forth in the Plan
together with such other terms and conditions
not inconsistent with the Plan as the Board of
Directors may from time to time approve.
(b) Compliance with Laws and Obligations. The
Company will not be obligated to issue or
deliver Stock in connection with any Option in
a transaction subject to the registration
requirements of the Securities Act of 1933, as
amended, or any state securities law, any
requirement under any listing agreement
between the Company and any automated
quotation system or national securities
exchange, or any other law, regulation or
contractual obligation, until the Company is
satisfied that such laws, regulations, and
other obligations of the Company have been
complied with in full. Certificates
representing shares of Stock delivered under
the Plan will be subject to such stop-transfer
orders and other restrictions as may be
applicable under such laws, regulations,
and other obligations of the Company,
including any requirement that a legend or
legends be placed thereon.
(c) Non-Transferability. Options and any other
right under the Plan that may constitute a
"derivative security" as generally defined in
Rule 16a-1(c) under the Exchange Act will not
be transferable by a Participant except by
will or the laws of descent and distribution
(or to a designated beneficiary in the event of
a Participant's death), and will be exercisable
during the lifetime of a Participant only by
such Participant or his or her guardian or
legal representative.
(d) Compliance with Rule 16b-3. It is the intent
of the Company that this Plan comply in all
respects with applicable provisions of Rule
16b-3 under the Exchange Act in connection with
any grant of Options to a Participant.
Accordingly, if any provision of this Plan
or any agreement hereunder does not comply with
the requirements of Rule 16b-3 as then
applicable to any such grant to a Participant,
or would cause any Participant no longer to be
deemed a "disinterested person" within the
meaning of Rule 16b-3, such provision will be
construed or deemed amended to the extent
necessary to conform to such requirements
with respect to such Participant. In addition,
the Board of Directors shall have no authority
to make any amendment, alteration, suspension,
discontinuation, or termination of the Plan or
any agreement hereunder, to make any adjustment
under Section 7, or take other action if and to
the extent such authority would cause a
Participant's transactions under the Plan not
to be exempt, or would cause any Participant
no longer to be deemed a "disinterested
person" within the meaning of Rule 16-b-3
under the Exchange Act.
(e) Continued Service as a Director. If a
Participant ceases serving as a Director and,
immediately thereafter, he or she is employed
by the Company or any subsidiary, then solely
for purposes of Sections 6(b) and (c) of the
Plan, such Participant will not be deemed
to have ceased service as a Director at that
time, and his or her continued employment by
the Company or any subsidiary will be deemed
to be continued service as a Director;
provided, however, that such former Director
will not be eligible for additional grants of
Options under the Plan.
(f) No Right to Continue as a Director. Nothing
contained in the Plan or any agreement
hereunder will confer upon any Participant any
rights to continue to serve as a Director of
the Company.
(g) No Stockholder Rights Conferred. Nothing
contained in the Plan or any agreement
hereunder will confer upon any Participant any
rights of a stockholder of the Company unless
and until an Option is duly exercised
hereunder.
(h) Governing Law. The place of administration of
the Plan shall be conclusively deemed to be
within the State of California; and the
validity, construction, interpretation and
effect of the Plan and all rights of any of
the persons having or claiming to have any
interest in the Plan shall be governed by the
laws of the State of California.
10. Effective Date and Duration of Plan. The Plan will
be effective at the time stockholders of the Company have
approved it by the affirmative votes of the holders of
a majority of the shares of Stock present in person,or represented
by proxy, and entitled to vote at a meeting of the Company's
stockholders duly held in accordance with the California
Corporations Code or any adjournment thereof. Unless earlier
terminated by action of the Board of Directors, the Plan will
remain in effect until such time as no Stock remains available
for issuance or delivery under the Plan and the Company has no
further rights or obligations with respect to outstanding
Options under the Plan.
