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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of Commission Only
(as permitted by Rule 14a-6(e)(2))
[ X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
KOALA CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than 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)(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) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
KOALA CORPORATION LETTERHEAD
April 23, 1998
TO THE SHAREHOLDERS OF KOALA CORPORATION
You are cordially invited to attend the Annual Meeting of Shareholders
of Koala Corporation to be held on Tuesday, May 19, 1998, at 3:00 p.m. (local
time) at the Inverness Hotel, 200 Inverness Drive West, Englewood, Colorado. I
encourage you to attend. Whether or not you plan to attend the meeting, I urge
you to complete and sign the accompanying Proxy and return it in the enclosed
envelope. Also attached for your review are the formal Notice of Meeting and
Proxy Statement.
On behalf of your Board of Directors and employees, thank you for your
continued support of Koala Corporation.
Very truly yours,
Mark A. Betker,
Chairman and Chief Executive Officer
<PAGE>
KOALA CORPORATION
5031 So. Ulster Street, Suite 300
Denver, Colorado 80237
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 19, 1998
TO: The Shareholders of Koala Corporation:
The Annual Meeting of Shareholders of Koala Corporation (the "Company")
will be held on Tuesday, May 19, 1998 at 3:00 p.m. at the Inverness Hotel, 200
Inverness Drive West, Englewood, Colorado.
The items of business are:
1. To elect five directors to hold office until the next Annual
Meeting of Shareholders or until their successors are elected;
2. To amend and restate the Koala Corporation 1995 Stock Option
Plan (the "Plan") to ( i ) approve the grant of an additional
250,000 options authorized to be granted under the Plan, which
increases the maximum number of shares that may be issued
under the Plan to 650,000 and ( ii ) allow the transfer of
Non-Qualified Stock Options to (a) immediate family members of
the optionee or to trusts or partnerships for such family
members, without consent of the Company's Board of Directors
or (b) to other persons or entities upon written consent of
the Company's Board of Directors;
3. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending December
31, 1998; and
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Only shareholders of record as shown on the books of the Company at the
close of business of April 13, 1998 will be entitled to vote at the meeting and
any adjournment thereof.
This notice, the Proxy Statement and the enclosed Proxy are sent to you
by order of the Board of Directors.
Robert D. Scott,
Secretary
April 23, 1998
Denver, Colorado
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN YOUR
PROXY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON.
SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON
IF THEY DESIRE.
<PAGE>
KOALA CORPORATION
5031 So. Ulster Street, Suite 300
Denver, Colorado 80237
-------------------------
PROXY STATEMENT
-------------------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 19, 1998
PROXY SOLICITED BY THE BOARD OF DIRECTORS
This Proxy Statement is furnished to the record holders of shares of
Common Stock of Koala Corporation, a Colorado corporation (the "Company"), as of
April 13, 1998, by order of the Board of Directors. This Proxy Statement is
furnished in connection with the Board of Directors' solicitation of the
enclosed Proxy for the Annual Meeting of Shareholders to be held on Tuesday, May
19, 1998, at 3:00 p.m. at the Inverness Hotel, 200 Inverness Drive West,
Englewood, Colorado. A shareholder giving a Proxy may revoke it at any time
prior to the actual voting at the Annual Meeting of Shareholders by filing
written notice of revocation with the Secretary of the Company, by attending the
Annual Meeting of Shareholders and voting in person, or by filing a new Proxy
with the Secretary of the Company. The revocation of a Proxy will not affect any
vote taken prior to such revocation. This Proxy Statement is expected to be
first mailed to shareholders on or about April 23, 1998.
The Annual Meeting of Shareholders has been called for the purpose of
(i) electing five directors for a one-year term, ( ii ) approving the amendment
and restatement of the Company's 1995 Stock Option Plan and ( iii) ratifying the
appointment of Ernst & Young LLP as independent auditors of the Company for the
fiscal year ending December 31, 1998. All properly executed proxies received at
or prior to the meeting will be voted at the meeting. If a shareholder directs
how a Proxy is to be voted with respect to the business coming before the
meeting, the Proxy will be voted in accordance with the shareholder's
directions. If a shareholder does not direct how a Proxy is to be voted, it will
be voted FOR electing management's nominees as members of the Company's Board of
Directors, FOR the amendment and restatement of the Company's 1995 Stock Option
Plan and FOR ratifying the appointment by the Board of Directors of Ernst &
Young LLP as the Company's independent auditors for the fiscal year ending
December 31, 1998.
OUTSTANDING SHARES AND VOTING RIGHTS
At the close of business on April 13, 1998, the record date for the Annual
Meeting of Shareholders, there were 2,527,362 shares of Common Stock
outstanding. Each share of Common Stock is entitled to one vote on each matter
properly coming before the meeting. Cumulative voting for directors is not
permitted. A majority of the shares of common Stock issued and outstanding must
be represented at the Annual Meeting, in person or by proxy, in order to
constitute a quorum. An abstention or withholding authority to vote will be
counted as present for determining whether the quorum requirement is satisfied.
With respect to the vote on any particular proposal, abstentions will be treated
as shares present and entitled to vote, and for purposes of determining the
outcome of the vote on any such proposal, shall have the same effect as a vote
against the proposal. A broker "non-vote" occurs when a nominee holding shares
for a beneficial holder does not have discretionary voting power and does not
receive voting instructions from the beneficial owner. Broker "non-votes" on a
particular proposal will not be treated as shares present and entitled to vote
on the proposal.
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors recommends that Mark A. Betker, Michael C.
Franson, Thomas W. Gamel, John T. Pfannenstein and Ellen S. Robinson be elected
to serve as directors of the Company. Directors are elected to serve a one-year
term. Directors being elected at this Annual Meeting of Shareholders will serve
until the next Annual Meeting of Shareholders, or until their successors have
been duly elected and qualified. All nominees have consented to serve if
elected, but if any nominee becomes unable to serve, the persons named as
proxies may exercise their discretion to vote for a substitute nominee. Assuming
a quorum is present, the five nominees receiving the highest number of votes
cast will be elected as directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTING THE NOMINEES SET
FORTH ABOVE FOR DIRECTOR.
Directors and Executive Officers
The following table lists the names, ages and positions of the
directors and executive officers of the Company as of April 20, 1998. The
members of the Board of Directors are elected to serve until the next Annual
Meeting of Shareholders. All executive officers have been appointed to serve
until their successors are elected and qualified. Additional information
regarding the business experience, length of time served in each capacity and
other matters relevant to each individual is set forth below the table.
Name Age Company Position Director/Officer Since
Mark A. Betker 47 Chairman, Chief Executive 1995
Officer, and Director
Michael C. Franson 43 Director 1994
Thomas W. Gamel 58 Director 1993
John T. Pfannenstein 41 Director 1993
Ellen S. Robinson 35 Director 1997
Jeffrey L. Vigil 44 Treasurer and Vice President
of Finance and Administration 1996
James A. Zazenski 33 Executive Vice President and
General Manager 1997
Mark A. Betker has served as Chief Executive Officer, President and a
Director since joining the Company in November 1995, and as Chairman since
December 1996. From 1986 to 1995, Mr. Betker was executive vice president of
Windsor Industries Inc., a world-wide manufacturer of building maintenance
equipment. Mr. Betker received a MBA degree from Regis University and a
bachelors degree from the University of Wisconsin.
Michael C. Franson is a Director of the Company. He is currently an
Executive Vice President and principal of The Wallach Company, Inc., an
investment banking firm located in Denver, Colorado where he has worked since
1988. Mr. Franson received a MBA degree in Finance from the Graduate School of
Business at the University of Oregon and an undergraduate degree in Marketing
from California State University at Chico.
Thomas W. Gamel is a Director of the Company. Since 1992, Mr. Gamel has
served as Chairman of Rockmont Value Investors, Ltd. ("Rockmont"), a
privately-held investment company based in Denver, Colorado. He has been an
owner and director of Timpte Industries, Inc., a diversified private holding
company since 1970, and is an owner and director of several other private
companies. Mr. Gamel received a bachelors degree from the University of Notre
Dame.
<PAGE>
John T. Pfannenstein is a Director of the Company. From 1993 to 1995, he
served as the Company's Chairman of the Board, and from 1993 to May 1996 he
served as the Company's Treasurer. Mr. Pfannenstein also serves as President of
Rockmont. From 1988 to 1992, he was president of Pfannenstein & Associates,
Inc., a Denver-based investment banking firm. Mr. Pfannenstein received a
bachelor's degree from St. John's University (Minnesota).
Ellen S. Robinson is a Director of the Company. Ms. Robinson has been the
President of Ascent Sports, Inc. since June 1996, where she oversees the
business operations of the Colorado Avalanche professional hockey team and the
Denver Nuggets professional basketball team. From 1988 to 1996, Ms. Robinson was
the vice president of customer development, general manager and area marketing
manager for the Pepsi Cola Bottling Company in Denver. Ms. Robinson also serves
as a director of a number of private non-profit businesses. Ms. Robinson
received a bachelors degree from the Wharton School of Business at the
University of Pennsylvania and a certificate in international business from the
University of Colorado.
Jeffrey L. Vigil has served as the Company's Treasurer and Vice President
of Finance and Administration since May 1996. From 1980 to 1989 and from 1993 to
1996, Mr. Vigil held various positions at Energy Fuels Corporation, a privately
owned Colorado natural resources company, including Accounting Manager, Contract
Administrator, Controller and Vice President of Finance. From 1990 to 1993 Mr.
Vigil was a self-employed financial consultant. Mr. Vigil is a certified public
accountant and received a bachelor's degree in Accounting from the University of
Wyoming.
James A. Zazenski has served as the Company's Executive Vice President and
General Manager since June 1997. From 1984 to 1997, Mr. Zazenski held various
positions at Windsor Industries, Inc., the last of which was Vice President of
Marketing. Mr. Zazenski received a MBA-Finance degree from University of
Colorado at Denver and a bachelor's degree in Mechanical Engineering from the
University of Denver at Denver.
There are no family relationships among directors or executive officers
except that John T. Pfannenstein and Jeffrey L. Vigil are brothers-in-law.
During the fiscal year ended December 31, 1997, the Board of Directors held
four regular meetings and one special meeting. All Directors attended at least
75% of such meetings.
Board Committees
The Board of Directors has an Audit Committee, which consists of Mr.
Franson, Mr. Pfannenstein and Ms. Robinson. The purpose of the Audit Committee
is to recommend the appointment of the independent auditors for the Company,
review the scope of the audit, examine the auditors' reports, make appropriate
recommendations to the Board of Directors as a result of such review and
examination, and make inquiries into the effectiveness of the financial and
accounting functions and controls of the Company. The Audit Committee held two
meetings during 1997. The Company has no nominating or compensation committees.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, certain officers and persons holding 10% of the Company's
Common Stock to file reports with the Securities and Exchange Commission
regarding their ownership and regarding their acquisitions and dispositions of
the Company's Common Stock.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons, the Company believes
that, during the fiscal year ended December 31, 1996, all filing requirements
applicable to its executive officers, directors and greater than ten percent
beneficial owners were complied with except that Mr. Zazenski and Ms. Robinson
each failed to timely file an Initial Report on Form 3.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation for the fiscal years
ended December 31, 1995, 1996 and 1997 for the Chief Executive Officer of the
Company and the other executive officer who received compensation of $100,000 or
more during the year ended December 31, 1997.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation Compensation
------------------------------------------------- ------------
Number of
Securities
Name and Other Annual Underlying
Principal Position Year Salary Bonus Compensation Options
------------------ ---- ------ ----- ------------ -------
($) ($) (#) ($)
<S> <C> <C> <C> <C> <C>
Mark A. Betker 1997 159,230 27,659 -- --
Chief Executive 1996 175,000 27,850 --(2) --
Officer 1995 22,884(1) -- --(2) 250,000
Jeffrey L. Vigil 1997 103,595 3,000 -- 10,000
Vice President 1996 53,846 -- -- --
Finance & Administration 1995 -- -- -- --
- ----------------------
<FN>
(1) Does not include consulting fees paid to Mr. Betker prior to his
employment by the Company in the amount of $18,000.
(2) Does not include housing costs, temporary living expenses, nor certain
out-of-pocket travel expenses incurred by Mr. Betker related to travel
to and relocation in Denver.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Option Grants During Fiscal Year 1997
Individual Grants
Number of Securities % of Total
Underlying Options Granted to
Options Granted (#) Employees in Exercise or Base
Name Fiscal Year Price ($/Sh) Expiration Date
<S> <C> <C> <C> <C>
Mark A. Betker - 0 - n/a n/a n/a
Jeffrey L. Vigil 10,000 (1) 32.2% $13.00 January 29, 2007
- ------------------
<FN>
(1) Options vest at a rate of 2,000 shares per year, on the anniversary
date of the grant, over the next five year period. The anniversary date
of the grant is January 29, 1997.
</FN>
</TABLE>
<PAGE>
Aggregate Option Exercise in Fiscal 1997
and Fiscal Year-End Option Values
The following table summarizes the value of the unexercised options
held by the executive officers named in the summary compensation table as of
December 31, 1997. There were no options exercised by any officers or directors
of the Company during 1997.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying The Unexercised "In-the-Money"
Name Options at 12/31/97 Options at 12/31/97(1)
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
($) ($) ($) ($)
<S> <C> <C> <C> <C>
Mark A. Betker 100,000 150,000 600,000 900,000
Jeffrey L. Vigil -0- 10,000 -0- 42,500
- ------------------
<FN>
(1) "Value of Unexercised `In-the-Money' Options" is equal to the
difference between the closing bid price per share of the Company's
Common Stock as reported by Nasdaq on December 31, 1997, the last day
of trading in 1997 ($17.25 per share), and the option exercise price,
multiplied by the number of shares subject to such options.
</FN>
</TABLE>
Compensation of Directors
The Company does not pay employees or affiliates additional
compensation for services as a director. The Company pays each non-employee,
unaffiliated director an annual retainer of $5,000 and a fee of $1,000 per
meeting attended. The Board of Directors has also authorized payment of
reasonable travel and out-of-pocket expenses incurred by directors in attending
board meetings.
The Company's directors who are not employees of the Company are
eligible to be granted non-qualified stock options. The Company's directors who
are also employees of the Company are eligible to be granted incentive stock
options. During the fiscal year ended December 31, 1997, the Company granted
1,000 options to Mr. Franson and 1,000 options to Ms. Robinson.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of April 10, 1998, the number of
shares of Common Stock beneficially owned by each person known by the Company to
be the beneficial owner of more than 5% of the outstanding share of Common
Stock, by each director of the Company, by each executive officer, and by all
executive officers and directors of the Company as a group. Where the persons
listed have the right to acquire additional shares of Common Stock through the
exercise of options or warrants within sixty (60) days of April 23, 1998, such
additional shares are deemed to be outstanding for the purpose of computing the
percentage of outstanding shares owned by such person, but are not deemed to be
outstanding for the purpose of computing the percentage ownership interest of
any other person. Unless otherwise indicated, each of the following persons has
sole voting and investment power with respect to the shares of Common Stock set
forth opposite their respective names.
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Beneficially Owned
Name and Address -------------------------------------------
of Beneficial Owner Shares Percent
-------------------------------------------
<S> <C> <C>
Rockmont Capital Limited 1,073,000(1) 42.2
Liability Company
700 Broadway, Suite 800
Denver, Colorado 80203
John T. Pfannenstein 1,073,000(1) 42.2
700 Broadway, Suite 800
Denver, Colorado 80203
Thomas W. Gamel 783,300(1) 30.9
700 Broadway, Suite 800
Denver, Colorado 80203
Mark A. Betker 105,000(2) 4.2
5031 So. Ulster St., Suite 300
Denver, Colorado 80237
Jeffrey L. Vigil 2,000(3) *
5031 So. Ulster St., Suite 300
Denver, Colorado 80237
Michael C. Franson 1,400(4) *
1401 17th Street, Suite 750
Denver, Colorado 80202
Ellen S. Robinson 1,000(4) *
1635 Clay Street
Denver, CO 80204
James A. Zazenski -0- *
11600 E. 53rd Ave., Suite D
Denver, CO 80239
All directors and officers as a
group (7 persons) 1,182,400 46.8
- ----------------------
*Less than one percent.
<FN>
(1) Rockmont is the owner of 1,073,000 shares of the Company's Common
Stock. John T. Pfannenstein, who was the Chairman of the Board and
Treasurer of the Company and is a Director of the Company, owns a 17.5
percent membership interest in and is the Manager of Rockmont and,
accordingly, is deemed beneficial owner of all of the shares owned by
Rockmont. Each of the following persons is an owner of a portion of the
membership interests of Rockmont as indicated and is thereby deemed the
beneficial owner of a portion of the shares held by Rockmont as
follows:
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Person's
Membership Number of Shares Percent of
Name Interest Beneficially Owned Outstanding Shares
---- -------- ------------------ ------------------
<S> <C> <C> <C>
David B. Gamel 20.9% 223,800 8.85%
Leslie D. Gamel 20.9% 223,800 8.85%
Lara M. Gamel 20.9% 223,800 8.85%
Lisa Gamel Scott 10.4% 111,900 4.42%
Robert D. Scott 9.4% 101,660 4.02%
<FN>
(1) David, Leslie and Lara Gamel, and Lisa Gamel Scott (who is the wife of
Robert D. Scott), who are all brother and sisters, have agreed that
their father, Thomas W. Gamel, a Director of the Company, has the
exclusive right to vote their membership interests in Rockmont until
October 12, 1998 and each has agreed not to dispose of any membership
interest in Rockmont without the consent of the Manager of Rockmont,
currently John T. Pfannenstein, until October 12, 1998. Accordingly,
Mr. Pfannenstein is deemed to be the beneficial owner of all shares of
Common Stock owned by Rockmont, and Mr. Gamel is deemed to be the
beneficial owner of 783,300 shares of Common Stock owned by Rockmont.
(2) Includes options to acquire an aggregate of 100,000 shares of Common
Stock at exercise prices ranging from $9.25 to $13.25 per share.
(3) Consists of an option to acquire 2,000 shares of Common Stock at an
exercise price of $13.00 per share.
(4) Includes an option to acquire 1,000 shares of Common Stock at an
exercise price of $13.00 per share.
</FN>
</TABLE>
PROPOSAL TO AMEND AND RESTATE THE COMPANY'S STOCK OPTION PLAN
As of April 14, 1998, the Company's Board unanimously approved a
resolution to place before the Shareholders a proposal to amend and restate the
Company's 1995 Stock Option Plan (the "Plan") to (i) fix the maximum number of
shares for which options may be granted under the Plan at 650,000 and (ii) to
allow non-qualified options to be transferable under certain conditions. The
discussion herein sets forth all material terms of the amended and restated
Plan. A copy of the amended and restated Plan may be examined at the Company's
office at 5031 South Ulster Street, Suite 300, Denver, Colorado 80237 during
normal business hours or may be obtained upon written request to the Secretary
of the Company, at 5031 South Ulster Street, Suite 300, Denver, Colorado 80237.
At April 14, 1998, the closing price of the Company's Common Stock as reported
on Nasdaq National Market was $18.25 per share.
The Plan was adopted by the Company in November 1995 and originally was
scheduled to expire in 2005. If the proposed amendment is approved, the Plan
will expire in 2008 as to any shares not currently issued under options. The
purpose of the Plan is to advance the interests of the Company and its
shareholders by affording employees, directors and consultants ("Eligible
Persons") upon whose judgment, initiative and efforts the Company may rely for
the successful conduct of its business, an opportunity for investment in the
Company and the incentive advantages inherent in stock ownership in the Company.
The Plan authorizes the Board to grant options to purchase shares of Common
Stock to Eligible Persons selected by the Board while considering criteria such
as employment position or other relationship with the Company, duties and
responsibilities, ability, productivity, length of service or association,
morale, interest in the Company, recommendations by supervisors and other
matters. There are currently approximately 95 individuals who may be deemed
Eligible Persons to receive options under the Plan.
The Plan is administered by the Board, which selects the optionees and
determines: (i) the number of shares of Common Stock to be subject to each
option; (ii) the type of each option to be granted (non-qualified or incentive
stock option); (iii) the time at which each option is to be granted; (iv) the
purchase price for the option shares; (v) the option period; and (vi) the period
over which the option vests. The Plan is also subject to applicable rules of the
Nasdaq National Market.
<PAGE>
The Plan permits the Board to designate certain options granted under
the Plan as incentive stock options (an "Incentive Stock Option"). An option
designated by the Board as an Incentive Stock Option is intended to qualify as
an "incentive stock option" within the meaning of Section 422 of the U.S.
Internal Revenue Code. The purchase price of the Incentive Stock Option may
generally not be less than 100% of the fair market value of the stock at the
time the option is granted (110% if the optionee owns more than ten percent of
the total voting shares of the Company). In addition, the aggregate fair market
value, determined at the time of grant, of the shares under any Incentive Stock
Option which are exercisable for the first time by any one individual in any
calendar year may not exceed $100,000. An Incentive Stock Option may only be
granted to an Eligible Person who is an employee of the Company.
With respect to options that are not Incentive Stock Options
("Non-Qualified Stock Options"), the exercise price may be less than the fair
market value of the applicable shares on the date of grant. The period within
which any option must be exercised may not be later than 10 years from the date
on which the option was granted. An employee generally must exercise an option
within three months after the termination of his employment with the Company.
Currently, an option is not transferable otherwise than by will or by the laws
of descent and distribution. At the time of exercise the optionee must pay to
the Company the full purchase price of the shares in cash, shares of the
Company's Common Stock having a fair market value equal to the purchase price,
or a combination of cash and shares.
Federal Income Tax Consequences
An optionee will not be deemed to receive any income at the time an
Incentive Stock Option is granted or exercised. The exercise may give rise to
alternative minimum tax liability for the optionee. If an optionee does not
dispose of shares acquired on exercise of an Incentive Stock Option within the
two-year period beginning the day after the day of grant of the option or within
the one-year period beginning on the day after the day of the transfer of the
shares to the optionee, the gain (if any) on a subsequent sale (i.e., the excess
of the proceeds received over the option price) will be long-term capital gain,
and any loss the optionee may sustain on such sale will be long-term capital
loss. If the optionee disposes of the shares within the two-year or one-year
periods referred to above, the disposition is a "disqualifying disposition," and
the optionee will generally recognize ordinary income taxable as compensation in
the year of the disqualifying disposition to the extent of the excess of the
fair market value of the shares on the date of exercise over the option price.
The balance, if any, will be a long-term or short-term capital gain depending,
generally, on whether the shares were held more than one year after the
Incentive Stock Option was exercised. To the extent the optionee recognizes
ordinary income with respect to a disqualifying disposition, the Company will be
entitled to a corresponding deduction, subject to general rules relating to the
reasonableness of compensation.
With respect to options that are not Incentive Stock Options (each a
"Non-Qualified Stock Option"), there is no taxable income to the optionee as a
result of the grant of such an option. However, an optionee generally recognizes
taxable income upon the exercise of a Non-Qualified Stock Option equal to the
excess of the fair market value of the stock on the date of exercise over the
option price. The Company is not entitled to a tax deduction upon the grant of a
Non-Qualified Stock Option but is entitled to a tax deduction upon exercise
corresponding to the optionee's taxable income. Allowing the transferability of
Non-Qualified Stock Options will not affect the federal income tax consequences
of the grant and exercise of such options referred to above. The transfer of
such options may, however, generate gift tax consequences for the optionee.
Maximum Number of Shares Subject to Plan
The Plan currently provides that the Board is authorized to grant
options under the Plan up to a total number of 400,000 shares of Common Stock.
The proposed amendment would fix the number of shares which may be issued under
the Plan at 650,000. As of April 23, 1998, no shares have been issued under the
Plan pursuant to option exercises, and options to purchase 373,000 shares have
been granted and are outstanding. Therefore, 27,000 shares of Common Stock would
be available for future grants under the Plan if the proposed amendment is not
approved, and 277,000 shares of Common Stock would be available for future
grants under the Plan if the proposed amendment is approved.
<PAGE>
Transferability of Non-Qualified Options
The Plan currently prohibits the transfer of both Incentive Stock
Options and Non-Qualified Stock Options other than by will or by the laws of
descent and distribution. The proposed amendment would allow optionees to
transfer Non-Qualified Stock Options to ( i ) immediate family members of the
optionee or to trusts or partnerships for such family members, without consent
of the Company's Board of Directors or ( ii) to other persons or entities upon
written consent of the Company's Board of Directors. The Company may grant or
deny such consent in its sole and absolute discretion. The purpose of this
amendment is to provide optionees with additional flexibility to transfer
Non-Qualified Stock Options.
The following table summarizes the presently outstanding options issued
under the Plan to the indicated persons as of April 23, 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES SUBJECT TO OPTIONS
---------------------------------------------
NAME OR GROUP INCENTIVE OPTIONS NON-QUALIFIED OPTIONS
------------- ----------------- ---------------------
<S> <C> <C>
Mark A. Betker, Chief Executive Officer 50,000 200,000
Jeffrey L. Vigil, Treasurer and Vice President of 32,000 28,000
Finance and Administration
James A. Zazenski, Executive Vice President and 32,000 28,000
General Manager
All current executive officers as a group 114,000 256,000
All current directors who are not executive 0 2,000
officers, as a group
All employees, excluding executive officers 0 1,000
Persons owning more than 5% of outstanding options
Mark A. Betker 50,000 200,000
Jeffrey L. Vigil 32,000 28,000
James A. Zazenski 32,000 28,000
Each of the five nominees for director
Mark A. Betker 50,000 200,000
Michael C. Franson 0 1,000
Thomas W. Gamel 0 0
John T. Pfannestein 0 0
Ellen S. Robinson 0 1,000
</TABLE>
The Board recommends that Shareholders vote "FOR" the proposed
amendment and restatement of the Plan. The affirmative vote of a majority of the
shares of Common Stock represented at the Meeting in person or by proxy and
entitled to vote on the subject matter is necessary for the approval of the
proposed amendment to the Plan.
<PAGE>
THE SHARES OF COMMON STOCK REPRESENTED BY PROXIES IN THE ACCOMPANYING
FORM WILL BE VOTED "FOR" THE APPROVAL OF THE AMENDMENT TO THE COMPANY'S PLAN
UNLESS A CONTRARY DIRECTION IS INDICATED.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998 and to perform
other accounting services. Representatives of Ernst & Young LLP are expected to
be present at the Annual Meeting of Shareholders, with the opportunity to make a
statement if they so desire and to respond to appropriate shareholder questions.
The firm of Blanski Peter Kronlage & Zoch, P.C. acted as the Company's
independent auditors for the fiscal year ended December 31, 1996. In April 1997,
the Company's Board of Directors retained Ernst & Young LLP as the Company's
independent public accountants and replaced the Company's former auditors,
Blanski Peter Kronlage & Zoch, P.C. There were no disagreements with the former
auditors on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure with respect to the
Company's financial statements for the fiscal year ended December 31, 1996 or up
through the time of replacement which, if not resolved to the former auditors'
satisfaction, would have caused them to make reference to the subject matter of
the disagreement in connection with their report. Prior to retaining Ernst &
Young LLP, the Company had not consulted with Ernst & Young LLP regarding
accounting principles.
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock present in person or by proxy at the annual meeting and
entitled to vote is required to ratify the appointment of Ernst & Young LLP as
the Company's independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFYING THE APPOINTMENT
OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
SUBMISSION OF SHAREHOLDER PROPOSALS
Proposals by Shareholders of the Company to be presented at the next
Annual Meeting of Shareholders must be received by the Company on or before
December 20, 1998 to be included in the Company's Proxy Statement and proxy for
that meeting. The proponent must be a record or beneficial owner entitled to
vote on his or her proposal at the next Annual Meeting and must continue to own
such security entitling him or her to vote through that date on which the
Meeting is held. The proponent must own 1% or more of the outstanding shares, or
$1,000 in market value, of the Company's Common Stock and must have owned such
shares for one year in order to present a shareholder proposal to the Company.
ANNUAL REPORT
The Annual Report concerning the operations of the Company during the
fiscal year ended December 31, 1997, including certified financial statements
for the year then ended, is being mailed to each Shareholder of the Company with
this Notice of Annual Meeting. Additional copies of the Annual Report may be
obtained upon written request to the Company, at 5031 So. Ulster Street, Suite
300, Denver, Colorado 80237.
OTHER PROPOSALS
The Board of Directors of the Company does not intend to present any
business at the meeting other than the matters specifically set forth in this
Proxy Statement and knows of no other business to come before the meeting.
<PAGE>
COSTS AND METHOD OF SOLICITATION
Solicitation of proxies will be made by preparing and mailing the
Notice of Annual Meeting, Proxy and Proxy Statement to shareholders of record as
of the close of business on April 13, 1998. The cost of making the solicitation
includes the cost of preparing and mailing the Notice of Annual Meeting, Proxy
and Proxy Statement, and the payment of charges incurred by brokerage houses and
other custodians, nominees and fiduciaries for forwarding documents to
shareholders. The Company will bear all expenses incurred in connection with the
solicitation of proxies for the Annual Meeting.
It is important that your shares are represented and voted at the
meeting, whether or not you plan to attend. Accordingly, we respectfully request
that you sign, date and mail your Proxy in the enclosed envelope as promptly as
possible.
BY ORDER OF THE BOARD OF DIRECTORS
Robert D. Scott,
Secretary
April 23, 1998
<PAGE>
APPENDIX 1
KOALA CORPORATION
PROXY SOLICITED BY MANAGEMENT OF THE COMPANY
The undersigned shareholder of Koala Corporation, a Colorado corporation (the
"Company"), hereby appoints Mark A. Betker or Jeffrey L. Vigil as nominee of the
undersigned to attend, vote and act for and in the name of the undersigned at
the Annual Meeting of the Shareholders of the Company (the "Meeting") to be held
at the Inverness Hotel, 200 Inverness Drive West, Englewood, Colorado, on
Tuesday, May 19, 1998, at 3:00 p.m. (local time), and at every adjournment
thereof, and the undersigned hereby revokes any former proxy given to attend and
vote at the Meeting.
THE NOMINEE IS HEREBY INSTRUCTED TO VOTE AS FOLLOWS WITH RESPECT TO THE
FOLLOWING MATTERS:
1. FOR [ ]
All Nominees as Directors - Mark A. Betker, Michael C.
Franson,Thomas W. Gamel, John T. Pfannenstein, and Ellen S. Robinson.
WITHHELD [ ] From All Nominees.
FOR [ ] All Nominees Except the Following: __________________.
2. FOR [ ] AGAINST [ ] ABSTAIN [ ]
To approve amendment and restatement of 1995 Stock Option Plan.
3. FOR [ ] AGAINST [ ] ABSTAIN [ ]
To appoint Ernst & Young LLP as independent auditors of the Company.
THIS PROXY WILL BE VOTED FOR OR AGAINST OR WITHHELD OR ABSTAINED IN RESPECT OF
THE MATTERS LISTED IN ACCORDANCE WITH THE CHOICE, IF ANY, INDICATED IN THE SPACE
PROVIDED. IF NO CHOICE IS INDICATED, THE PROXY WILL BE VOTED FOR SUCH MATTER. IF
ANY AMENDMENTS OR VARIATIONS ARE TO BE VOTED ON, OR ANY FURTHER MATTERS COME
BEFORE THE MEETING, THIS PROXY WILL BE VOTED ACCORDING TO THE BEST JUDGMENT OF
THE PERSON VOTING THE PROXY AT THE MEETING. THIS FORM SHOULD BE READ IN
CONJUNCTION WITH THE ACCOMPANYING NOTICE OF MEETING AND PROXY STATEMENT.
1. Please date and sign (exactly as the shares represented by this Proxy are
registered) and return promptly. Where the instrument of Shareholder is signed
by a corporation, its corporate seal must be affixed and execution must be made
by an officer or attorney thereof duly authorized. If no date is stated by the
Shareholder, the Proxy is deemed to bear the date upon which it was mailed by
management to the Shareholder.
2. To be valid, this Proxy form, duly signed and dated, must arrive at the
office of the Company's transfer agent, American Securities Transfer & Trust,
Inc., P.O. Box 1596, Denver, Colorado 80201-1596 not less than forty-eight (48)
hours (excluding Saturdays, Sundays and holidays) before the day of the Meeting
or any adjournment thereof.
DATED this _________ day of ___________, 1998
____________________________________________
Signature
____________________________________________
(Please print name of Shareholder)
<PAGE>
APPENDIX 2
KOALA CORPORATION
1995 STOCK OPTION PLAN
1.) Purposes. The principal purposes of the Koala Corporation (the
"Corporation") 1995 Stock Option Plan (the "Plan") are (a) to improve individual
performance by providing long-term incentives and rewards to employees,
directors and consultants of the Corporation, (b) to assist the Corporation in
attracting, retaining and motivating employees and consultants with experience
and ability, and (c) to associate the interests of such persons with those of
the Corporation's shareholders.
Options granted under this Plan may either be Incentive Stock Options
qualified under Section 422 of the Code or Non-Qualified Options.
This Plan is separate from the Corporation's 1993 Stock Option Plan.
2.) Definitions. For purposes of this Plan, the following terms shall
have the meanings indicated below:
(01) "Capital Stock" - any of the Corporation's authorized but unissued
shares of voting common stock, par value of Ten Cents ($.10) per share.
(02) "Code" - the Internal Revenue Code of 1986, as amended from time
to time.
(03) "Corporation" - Koala Corporation, a Colorado corporation and any
of its Subsidiaries or its Parent.
(04 "Exchange Act" - the Securities Exchange Act of 1934, as amended.
(05) "Fair Market Value" - the price per share determined as follows:
(a) if the security is listed for trading on one or more national
securities exchanges (including the Nasdaq National Market System), the
reported last sales price on such principal exchange on the date in
question, or if such security shall not have been traded on such
principal exchange on such date, the reported last sales price on such
principal exchange on the first day prior thereto on which such
security was so traded; or (b) if the security is not listed for
trading on a national securities exchange (including the Nasdaq
National Market System) but is traded in the over-the-counter market,
the mean of the highest and lowest bid prices for such security on the
date in question, or if there are no such bid prices for such security
on such date, the mean of the highest and lowest bid prices on the
first day prior thereto on which such prices existed; or (c) if neither
(a) nor (b) is applicable, by any means deemed fair and reasonable by
the Committee (as defined below), which determination shall be final
and binding on all parties.
(06) "Incentive Stock Option" - an option defined in Section 422 of the
Code to purchase shares of the Capital Stock of the Corporation.
(07) "Non-Qualified Stock Option" - an option, not intended to qualify
as an Incentive Stock Option as defined in Section 422 of the Code, to
purchase Capital Stock of the Corporation.
(08) "Option" - the term shall refer to either an Incentive Stock
Option or a Non-Qualified Stock Option.
(09) "Option Agreement" - a written agreement pursuant to which the
Corporation grants an option to an Optionee and sets the terms and
conditions of the option.
(10) "Option Date" - the date upon which an Option Agreement for an
option granted pursuant to this Plan is duly executed by or on behalf
of the Corporation.
(11) "Option Stock" - the voting common stock of the Corporation, par
value of Ten Cents ($.10) per share (subject to adjustment as described
in Section 8) reserved for options pursuant to this Plan, or any other
class of stock of the Corporation which may be substituted therefor by
exchange, stock split or otherwise.
<PAGE>
(12) "Optionee" - an officer, director, management level employee,
other employee, and consultant of the Corporation or one of its
Subsidiaries to whom an option has been granted under the Plan.
(13) "Plan" - this 1995 Stock Option Plan, as amended hereafter from
time to time.
(14) A "Subsidiary" - any corporation in an unbroken chain of
corporations beginning with the Corporation, if, at the time of
granting the option, each of the corporations other than the last
corporation in the chain owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one
of the other corporations in such chain. The term shall include any
subsidiaries which become such after adoption of this Plan.
(15) A "Parent" - a corporation that directly, or indirectly through
related corporations, owns more than 50 percent of the voting power of
the shares entitled to vote for directors of Koala Corporation. The
term shall include a corporation which becomes such after adoption of
this Plan.
3.) Options Available Under Plan. The Corporation's authorized Capital
Stock in an amount equal to 400,000 shares is hereby made available, and shall
be reserved for issuance under this Plan. The aggregate number of shares
available under this Plan shall be subject to adjustment on the occurrence of
any of the events and in the manner set forth in Section 8. Except as provided
in Section 8, in no event shall the number of shares reserved be reduced below
the number of shares issuable upon exercise of outstanding Options. If an Option
shall expire or terminate for any reason without having been exercised in full,
the unpurchased shares, shall (unless the Plan shall have been terminated)
become available for other Options under the Plan.
4.) Administration. The Plan shall be administered by the Board of
Directors provided that the Board may appoint, from time to time, a committee
consisting solely of not less than two members of the Board of Directors of the
Corporation (the "Committee") who are "disinterested" within the meaning of and
to the extent required by the General Rules and Regulations promulgated pursuant
to Section 16 of the Exchange Act (the "Section 16 Regulations"). Any such
committee shall exercise those functions delegated to it by the Board of
Directors. To the extent permitted by the Section 16 Regulations, the Board of
Directors may serve as the Committee.
The Corporation shall grant Options pursuant to the Plan upon
determinations of the Committee as to which of the eligible persons shall be
granted Options, the number of shares to be Optioned and the term during which
any such Options may be exercised. The Committee may from time to time adopt
rules and regulations for carrying out the Plan and interpretations and
constructions of any provision of the Plan, which shall be final and conclusive.
5.) Eligibility for Incentive Stock Options. Incentive Stock Options
may only be granted to an officer, management level employee or other employee
of the Corporation or any of its Subsidiaries. A director of the Corporation who
is not also an employee shall not be eligible to receive an Incentive Stock
Option.
In selecting the employees to whom Incentive Stock Options shall be
granted, as well as determining the number of shares subject to each Option, the
Committee shall take into consideration such factors as it deems relevant in
connection with accomplishing the purposes of the Plan. For any calendar year,
the aggregate Fair Market Value (determined at the Option Date) of the stock
with respect to which any Incentive Stock Options are exercisable for the first
time by any individual employee (under all Incentive Stock Option plans of the
Corporation, the Parent, and all Subsidiary corporations) shall not exceed
$100,000. Subject to the provisions of Section 3, an employee who has been
granted an Option may, if he or she is otherwise eligible, be granted an
additional Option or Options if the Committee shall so determine.
No Incentive Stock Option may be granted under this Plan later than the
expiration of ten (10) years from the effective date.
6.) Eligibility for Non-Qualified Options. Non-Qualified Options may be
granted only to an officer, director, management level employee, other employee
or consultant of the Corporation or a subsidiary. No further restrictions are
placed on the Committee in determining eligibility for granting Non-Qualified
Options.
<PAGE>
7.) Terms and Conditions of Options. Whenever the Committee shall
designate an Optionee, it shall communicate to the Secretary of the Corporation
the name of the Optionee, the number of shares to be Optioned and such other
terms and conditions as it shall determine, not inconsistent with the provisions
of this Plan. The President or other officer of the Corporation shall then enter
into an Option Agreement with the Optionee, complying with and subject to the
following terms and conditions and setting forth such other terms and conditions
of the Option as determined by the Committee:
(01) Number of Shares and Option Price. The Option Agreement shall
state the total number of shares to which it pertains. The price of
Option Stock for an Incentive Stock Option, shall be not less than one
hundred percent (100%) of the Fair Market Value of the Option Stock at
the Option Date. The price of the Option Stock for a Non-Qualified
Stock Option shall be determined by the Committee and may be less than
the Fair Market Value at the Option Date. In the event an Incentive
Stock Option is granted to an employee, who, at the Option Date, owns
more than ten percent (10%) of the voting power of all classes of the
Corporation's stock then outstanding, the price of the shares of common
stock which will be covered by such Option shall be not less than one
hundred ten percent (110%) of the Fair Market Value of the common stock
at the Option Date. The Option price shall be subject to adjustment as
provided in Section 8 hereof.
(02) Time and Manner of Exercise of Option. The vesting and time of
exercise of each Option shall be determined from time to time by the
Committee and shall be set forth in the Option Agreement with each
Optionee.
(a) No Option may be exercised after ten (10) years from
the date on which the Option was granted; provided
that no Incentive Stock Option granted to an owner of
more than ten percent (10%) of the voting power of
all classes of the Corporation's stock then
outstanding may be exercised after five (5) years
from the date on which it was granted.
(03) Termination of Employment, Except Death or Disability. In the
event that an Optionee shall cease to be employed by the Corporation
for any reason other than his or her death, disability or "for cause,"
such Optionee shall have the right to exercise any vested outstanding
Options which were exercisable at the time of termination of employment
at any time within three (3) months after the termination of the
employee or until the earlier date of termination thereof under this
Plan or the Option Agreement. Any vested Options not exercised within
the three (3) month period shall terminate at the expiration of such
period. In the event that the Optionee shall be terminated "for cause"
including but not limited to: (i) willful breach of any agreement
entered into with the Corporation; (ii) misappropriation of the
Corporation's property, fraud, embezzlement, other acts of dishonesty
against the Corporation; or (iii) conviction of any felony or crime
involving moral turpitude, the Option shall terminate as of the date of
the Optionee's termination of employment.
(04) Death or Disability of Optionee. If the Optionee shall die or
become disabled within the definition of Section 105(d)(4) of the Code,
(i) while in the employ of the Corporation or any Subsidiary, or (ii)
within a period of three (3) months after the termination of his or her
employment with the Corporation or any Subsidiary as provided in
paragraph (03) of this section, and in either case shall not have fully
exercised his or her vested Options, any vested Options granted
pursuant to the Plan which were exercisable at the date of termination
of employment shall be exercisable only within six (6) months following
his or her death or date of disability or until the earlier originally
stated expiration thereof. In the case of death, such Option shall be
exercised pursuant to subparagraph (07) of this Section by the person
or persons to whom the Optionee's rights under the Option shall pass by
the Optionee's will or by the laws of descent and distribution, and
only to the extent that such Options were exercisable at the time of
death.
(05) Transfer of Option. Each Option granted hereunder shall, by its
terms, be not transferable by the Optionee other than by will or by the
laws of descent and distribution, and shall be, during the Optionee's
lifetime, exercisable only by the Optionee or Optionee's guardian or
legal representative. Except as permitted by the preceding sentence,
each Option granted under the Plan and the rights and privileges
thereby conferred shall not be transferred, assigned or pledged in any
way (whether by operation of law or otherwise), and shall not be
<PAGE>
subject to execution, attachment or similar process. Upon any attempt
to so transfer, assign, pledge, or otherwise dispose of the Option, or
of any right or privilege conferred thereby, contrary to the provisions
of the Option or the Plan, or upon levy of any attachment or similar
process upon such rights and privileges, the Option, and such rights
and privileges, shall immediately become null and void.
(06) Manner of Exercise of Options. An Option may be exercised, in
whole or in part, at such time or times and with such rights with
respect to such shares which have accrued and are in effect. Such
Option shall be exercisable only by: (i) written notice to the
Corporation of intent to exercise the Option with respect to a
specified number of shares of stock; (ii) tendering the original Option
Agreement to the Corporation; and (iii) payment to the Corporation of
the amount of the Option purchase price for the number of shares of
stock with respect to which the Option is then exercised. Payment of
the Option purchase price may be made in cash (including certified
check, bank draft or postal or express money order), by delivery of
shares of common stock of the Corporation with a Fair Market Value
equal to the Option purchase price, by a combination of cash and such
shares, whose value together with such cash shall equal the Option
purchase price or by any other method of payment which the Committee
shall approve and, in the case of an Incentive Stock Option, which
shall not be inconsistent with the provisions of Section 422 of the
Code; provided, however, that there shall be no such exercise at any
one time as to fewer than one hundred (100) shares or all of the
remaining shares then purchasable by the Optionee or person exercising
the Option. When shares of stock are issued to the Optionee pursuant to
the exercise of an Option, the fact of such issuance shall be noted on
the Option Agreement by the Corporation before the Option Agreement is
returned to the Optionee. When all shares of Optioned stock covered by
the Option Agreement have been issued to the Optionee, or the Option
shall expire, the Option Agreement shall be cancelled and retained by
the Corporation.
(07) Option Certificate. The Board of Directors shall have discretion
to issue a certificate representing an Option granted pursuant to this
Plan. Such certificate shall be surrendered to the Corporation upon
exercise of the Option.
(08) Delivery of Certificate. Except where shares are held for unpaid
withholding taxes, between fifteen (15) and thirty (30) days after
receipt of the written notice and payment specified above, the
Corporation shall deliver to the Optionee certificates for the number
of shares with respect to which the Option has been exercised, issued
in the Optionee's name; provided, however, that such delivery shall be
deemed effected for all purposes when the Corporation, or the stock
transfer agent for the Corporation, shall have deposited such
certificates in the United States mail, postage prepaid, addressed to
the Optionee and the address specified in the written notice of
exercise.
(9) Other Provisions. The Option Agreements under this Section shall
contain such other provisions as the Committee shall deem advisable.
8.) Adjustments. In the event that the outstanding shares of the common
stock of the Corporation are changed into or exchanged for a different number or
kind of shares or other securities of the Corporation or of another corporation
by reason of any reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination of shares or dividends payable in
capital stock, appropriate adjustment shall be made in the number and kind of
shares as to which Options may be granted under the Plan and as to which
outstanding Options or portions thereof then unexercised shall be exercisable,
to the end that the proportionate interest of the participant shall be
maintained as before the occurrence of such event; such adjustment in
outstanding Options shall be made without change in the total price applicable
to the unexercised portion of such Options and with a corresponding adjustment
in the Option Price per share. No such adjustment shall be made which shall,
within the meaning of any applicable sections of the Code, constitute a
modification, extension or renewal of an Option or a grant of additional
benefits to a participant.
If the Corporation does not exercise its right under paragraph 13
hereof to accelerate the date of any Options and is a party to a merger,
consolidation, reorganization or similar corporate transaction and if, as a
result of that transaction, its shares of common stock are exchanged for: (i)
other securities of the Corporation or (ii) securities of another corporation
which has assumed the outstanding options under the Plan or has substituted for
such Options its own Options, then each Optionee shall be entitled (subject to
the conditions stated herein or in such substituted Options, if any), in respect
of that Optionee's Options, to purchase that amount of such other securities of
the Corporation or of such other corporation as is sufficient to ensure that the
value of the Optionee's Options immediately before the corporate transaction is
equivalent to the value of such Options immediately after the transaction,
<PAGE>
taking into account the Option Price of the Option before such transaction, the
fair market value per share of the common stock immediately before such
transaction and the fair market value immediately after the transaction, of the
securities then subject to that Option (or to the option substituted for that
Option, if any). Upon the happening of any such corporate transaction, the class
and aggregate number of shares subject to the Plan which have been heretofore or
may be hereafter granted under the Plan shall be appropriately adjusted to
reflect the events specified in this clause.
9.) Rights as Stockholder. An Optionee shall not, by reason of any
Option granted hereunder, have any right of a stockholder of the Corporation
with respect to the shares covered by his Option until such shares shall have
been issued to the Optionee.
10.) No Obligation to Exercise Option. The granting of an Option shall
impose no obligation upon the Optionee to exercise such Option. Neither shall
the Plan confer upon the Optionee any rights respecting continued employment nor
limit the Optionee's rights or the Corporation's rights to terminate such
employment.
11.) Withholding Taxes. Whenever under the Plan shares of Option Stock
are to be issued upon exercise of the Options granted hereunder and prior to the
delivery of any certificate or certificates for said shares by the Corporation,
the Corporation shall have the right to require the Optionee to remit to the
Corporation an amount sufficient to satisfy any federal and state withholding or
other employment taxes resulting from such exercise. In the event that
withholding taxes are not paid within five days after the date of exercise, to
the extent permitted by law the Corporation shall have the right, but not the
obligation, to cause such withholding taxes to be satisfied by reducing the
number of shares of stock deliverable or by offsetting such withholding taxes
against amounts otherwise due from the Corporation to the Optionee. If
withholding taxes are paid by reduction of the number of shares deliverable to
Optionee, such shares shall be valued at the Fair Market Value as of the fifth
business day following the date of exercise.
12.) Purchase for Investment; Rights of Holder on Subsequent
Registration. Unless the shares to be issued upon exercise of an Option granted
under the Plan have been effectively registered under the Securities Act of 1933
as now in force or hereafter amended (the "1933 Act"), the Corporation shall be
under no obligation to issue any shares covered by any Option unless the person
who exercises such Option, whether such exercise is in whole or in part, shall
give a written representation and undertaking to the Corporation which is
satisfactory in form and scope to counsel for the Corporation and upon which, in
the opinion of such counsel, the Corporation may reasonably rely, that he or she
is acquiring the shares issued to him or her pursuant to such exercise of the
Option for his or her own account as an investment and not with a view to, or
for sale in connection with, the distribution of any such shares, and that he or
she will make no transfer of the same except in compliance with any rules and
regulations in force at the time of such transfer under the 1933 Act, or any
other applicable law, and that if shares are issued without such registration a
legend to this effect may be endorsed on the securities so issued. In the event
that the Corporation shall, nevertheless, deem it necessary or desirable to
register under the 1933 Act or other applicable statutes any shares with respect
to which an Option shall have been exercised, or to qualify any such shares for
exemption from the 1933 Act or other applicable statutes, then the Corporation
shall take such action at its own expense and may require from each participant
such information in writing for use in any registration statement, prospectus,
preliminary prospectus or offering circular as is reasonably necessary for such
purpose and may require reasonable indemnity to the Corporation and its officers
and directors from such holder against all losses, claims, damages and
liabilities arising from such use of the information so furnished and caused by
any untrue statement of any material fact required to be stated therein or
necessary to make the statement therein not misleading in light of the
circumstances under which they were made.
13.) Modification of Outstanding Options. The Committee, without the
consent of the Optionee, may accelerate the exercisability of an outstanding
Option upon the merger, consolidation, reorganization or similar transaction
with another entity and shorten the time period within which an Optionee must
exercise his or her Options. In addition, the Committee, at any time, may
authorize modification of any outstanding Option with the consent of the
participant when and subject to such conditions as are deemed to be in the best
interests of the Corporation and in accordance with the purposes of the Plan.
<PAGE>
14.) Foreign Employees. Without amending the Plan, the Committee may
grant Options to eligible employees who are foreign nationals on such terms and
conditions different from those specified in this Plan as may in the judgement
of the Committee be necessary or desirable to foster and promote achievement of
the purposes of the Plan, and, in furtherance of such purposes the Committee may
make such modification, amendments, procedures, subplans and the like as may be
necessary or advisable to comply with provisions of laws in other countries in
which the Corporation operates or has employees.
15.) Approval of Shareholders. This Plan is expressly subject to
approval of holders of the majority of the outstanding shares of Common Stock of
the Corporation, and if it is not so approved on or before twelve (12) months
after the date of adoption of this Plan by the Board of Directors, the Plan
shall not come into effect and any Options granted pursuant to this Plan shall
be deemed cancelled.
16.) Liquidation. Upon the complete liquidation of the Corporation, any
unexercised Options theretofore granted under this Plan shall be deemed
cancelled, except as otherwise provided in Section 8 in connection with a
merger, consolidation or reorganization of the Corporation.
17.) Restrictions on Issuance of Shares. Notwithstanding the provisions
of Section 7, the Corporation may delay the issuance of shares covered by the
exercise of any Option and the delivery of a certificate for such shares until
one of the following conditions shall be satisfied:
(01) The shares with respect to which the Option has been exercised
are at the time of the issue of such shares effectively
registered under applicable Federal and state securities acts
as now in force or hereafter amended; or
(02) A no-action letter in respect of the issuance of such shares
shall have been obtained by the Corporation from the
Securities and Exchange Commission and any applicable state
securities commissioner; or
(03) Counsel for the Corporation shall have given an opinion, which
opinion shall not be unreasonably conditioned or withheld,
that such shares are exempt from registration under applicable
federal and state securities acts as now in force or hereafter
amended.
It is intended that all exercises of Options shall be effective, and
the Corporation shall use its best efforts to bring about compliance with the
above conditions within a reasonable time, except that the Corporation shall be
under no obligation to cause a registration statement or a post-effective
amendment to any registration statement to be prepared at its expense solely for
the purpose of covering the issue of shares in respect of which any option may
be exercised.
18.) Termination and Amendment of the Plan. This Plan shall terminate
ten (10) years after November 3, 1995, the effective date of the Plan, or at
such earlier time as the Board of Directors shall determine. Any termination
shall not affect any Options then outstanding under the Plan:
The Board may make such modifications of the Plan as it shall deem
advisable, but may not, without further approval of the stockholders of the
Corporation, except as provided in Section 8 hereof, (a) increase the number of
shares reserved for Options under this Plan, (b) change the manner of
determining the Option price for Incentive Stock Options, (c) increase the
maximum term of the Options provide for herein, or (d) change the class of
persons eligible to receive Options under the Plan.
