<PAGE>
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 the Commission Only (as permitted by Rule
14a-6(e)(2))
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
RF MONOLITHICS, INC.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
SAM L. DENSMORE
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(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box)
[X]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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[_]Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
6. Amount Previously Paid:
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7. Form, Schedule or Registration Statement No.:
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8. Filing Party:
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9. Date Filed:
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<PAGE>
RF MONOLITHICS, INC.
4347 SIGMA ROAD
DALLAS, TEXAS 75244
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, JANUARY 27, 1999
TO THE STOCKHOLDERS OF RF MONOLITHICS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of RF
MONOLITHICS, INC., a Delaware corporation (the "Company"), will be held on
Wednesday, January 27, 1999 at 10:00 a.m., local time, at Bank One Centre,
1717 Main Street, 4th Floor Auditorium, Dallas, Texas 75201 for the following
purpose:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To approve the amendment of the Company's 1997 Equity Incentive Plan to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 200,000 shares.
3. To ratify the selection of Deloitte & Touche LLP as independent auditors
of the Company for its fiscal year ending August 31, 1999.
4. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on December 10, 1998,
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
/s/ James P. Farley
James P. Farley
Secretary
Dallas, Texas
December 18, 1998
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE
YOUR REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE
PREPAID IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN
IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE
MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A
BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST
OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE>
RF MONOLITHICS, INC.
4347 SIGMA ROAD
DALLAS, TEXAS 75244
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
JANUARY 27, 1999
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of RF
Monolithics, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held on Wednesday, January 27, 1999, at
10:00 a.m., local time (the "Annual Meeting"), or at any adjournment or
postponement thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting. The Annual Meeting will be held at Bank
One Centre, 1717 Main Street, 4th Floor Auditorium, Dallas, Texas 75201. The
Company intends to mail this proxy statement and accompanying proxy card on or
about Friday, December 18, 1998, to all stockholders entitled to vote at the
Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses,
fiduciaries and custodians holding in their names shares of Common Stock
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of Common Stock for their
costs of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or
other regular employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on December
10, 1998 will be entitled to notice of and to vote at the Annual Meeting. At
the close of business on December 10, 1998 the Company had outstanding and
entitled to vote 5,713,952 shares of Common Stock. Each holder of record of
Common Stock on such date will be entitled to one vote for each share held on
all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter
has been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 4347
Sigma Road, Dallas, Texas 75244, a written notice of revocation or a duly
executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
<PAGE>
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the Company's
2000 Annual Meeting of Stockholders must be received by the Company not later
than August 20, 1999 in order to be included in the proxy statement and proxy
relating to that Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
There are six nominees for the seven Board positions presently authorized in
the Company's By-laws. Each director to be elected will hold office until the
next annual meeting of stockholders and until his successor is elected and has
qualified, or until such director's earlier death, resignation or removal.
Each nominee listed below is currently a director of the Company, all
directors having been elected by the stockholders.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the six nominees named below. In the
event that any nominee should be unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute nominee as management may propose. Each person nominated for
election has agreed to serve if elected and management has no reason to
believe that any nominee will be unable to serve.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
NOMINEES
The names of the nominees and certain information about them are set forth
below:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION/
NAME AGE POSITION HELD WITH THE COMPANY
- ---- --- ------------------------------
<S> <C> <C>
Sam L. Densmore......... 57 President and Chief Executive Officer
Michael R. Bernique..... 54 Retired, formerly President, Satellite Data Networks
Group of Next Level Systems, Inc.
Cornelius C. Bond, Jr. . 65 Retired, formerly General Partner, New Enterprise
Associates
Dean C. Campbell........ 48 Managing General Partner, Campbell Venture Management
Matthew J. Desch........ 40 President, Nortel Wireless Networks
Francis J. Hughes, Jr. . 48 General Partner, American Research and Development
</TABLE>
SAM L. DENSMORE joined the Company as Executive Vice President, Chief
Operating Officer, Chief Financial Officer and Secretary in October 1993. Mr.
Densmore became a director of the Company in June 1994. In July 1996, Mr.
Densmore was elected to the positions of President and Chief Executive
Officer. In 1991, Mr. Densmore founded the IBC Group, a private consulting
company, and served as its President from January 1991 to September 1993. From
1984 to January 1990, Mr. Densmore was employed at Recognition International,
Inc., a document image processing company. During that period, Mr. Densmore
served as Senior Vice President, Treasurer and Chief Financial Officer from
October 1989 to December 1990 and Vice President of Corporate Development from
1984 to 1989. He is also a director of XeTel Corporation, a provider of
advance design, prototype and manufacturing services in the
telecommunications, networking and computer industries. Mr. Densmore is a
Certified Public Accountant.
2
<PAGE>
MICHAEL R. BERNIQUE has served on the Company's Board of Directors since
October 1997. In 1997, Mr. Bernique retired from Next Level Systems, Inc., a
telecommunications company, where he had served as President of Satellite Data
Networks Group since 1996. From 1993 to 1995, Mr. Bernique served as Sr. Vice
President, North American Sales and Service at DSC Communications ("DSC"), a
telecommunications company, and from 1992 to 1993 he served as Vice President
and General Manager, Transmission Products Division of DSC.
CORNELIUS C. BOND, JR. has served on the Company's Board of Directors since
November 1992. From 1982 to 1997, he was a general partner of various New
Enterprise Associates venture capital funds. Mr. Bond is a director of
Spectranetics, Inc., a medical device company. He also serves on the Board of
Advisors to the Princeton School of Engineering and to the University of
Pennsylvania School of Nursing.
DEAN C. CAMPBELL has served on the Company's Board of Directors since May
1989. Since 1982, Mr. Campbell has been the Managing General Partner of
Campbell Venture Management, a venture capital fund. Mr. Campbell serves as a
director of Texas Micro Inc., a manufacturer of ruggedized systems.
MATTHEW J. DESCH has served on the Company's Board of Directors since
October 1997. Since 1996, Mr. Desch has been Executive Vice President and
President of Nortel Wireless Networks, a global division of Nortel Networks, a
digital network solutions company. From 1991 to 1996, Mr. Desch served as
Group President and General Manager at Nortel Wireless Networks. Since joining
Nortel Networks in 1987, Mr. Desch has held a variety of general management
positions responsible for wireless and wireless telecommunication products.
Prior to 1987, Mr. Desch worked for AT&T.
FRANCIS J. HUGHES, JR. has served on the Company's Board of Directors since
1983. Mr. Hughes joined American Research & Development, a private venture
capital firm, in January 1982, became Chief Operating Officer in November 1990
and President in June 1992. He has been a general partner of three American
Research & Development venture capital funds, as well as a general partner of
Hospitality Technology Funds, L.P. He is also a general partner of Egan-
Managed Capital, a private venture capital firm. Mr. Hughes serves as a
director of Ceramic Process Systems Corporation, a manufacturer of advanced
metal-matrix composites and ceramic components, and as Chairman of the Board
of Texas Micro, Inc., a manufacturer of ruggedized computers.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended August 31, 1998 the Board of Directors held 7
meetings. The Board has an Audit Committee and a Compensation Committee.
The Audit Committee: (i) meets with the Company's independent auditors at
least annually to review the results of the annual audit and discuss the
financial statements; (ii) recommends to the Board the independent auditors to
be retained; and (iii) receives and considers the accountants comments as to
controls, adequacy of staff and management performance and procedures in
connection with audit and financial controls. The Audit Committee is composed
of two non-employee directors: Messrs. Campbell and Hughes. It met twice
during such fiscal year, although not as an individual committee, but rather
as part of a regular meeting of the Board of Directors.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants
under the Company's stock option plans and otherwise determines compensation
levels and performs such other functions regarding compensation as the Board
may delegate. The Compensation Committee is composed of three non-employee
directors: Messrs. Bond, Campbell and Hughes. It met six times during such
fiscal year, although not as an individual committee, but rather as part of a
regular meeting of the Board of Directors.
During the fiscal year ended August 31, 1998, each Board members attended
75% or more of the aggregate of the meetings of the Board and of the
committees on which he served, held during the period for which he was a
director or committee member, respectively.
3
<PAGE>
PROPOSAL 2
APPROVAL OF THE AMENDMENT TO THE 1997 EQUITY INCENTIVE PLAN
In 1982, the Board of Directors adopted, and the stockholders subsequently
approved, the Company's Amended and Restated 1982 Stock Option Plan (the "1982
Plan"). As a result of a series of amendments, there are 650,000 shares of the
Company's Common Stock authorized for issuance under the 1982 Plan.
In October 1997, the Board amended and restated the 1982 Plan as the 1997
Equity Incentive Plan (the "Incentive Plan"), and the stockholders
subsequently approved the Incentive Plan, to enhance the flexibility of the
Board and the Compensation Committee in granting stock awards to the Company's
employees, directors and consultants. The amendment also increased the number
of shares authorized for issuance under the 1982 Plan from a total of 650,000
shares to 975,000 shares (an increase of 325,000 shares).
In October 1998, the Board amended the Incentive Plan, subject to
stockholder approval, to increase the number of shares authorized for issuance
under the Incentive Plan from a total of 975,000 shares to 1,175,000 shares
(an increase of 200,000 shares). The Board adopted this amendment to ensure
that the Company can continue to grant stock options to employees at levels
determined appropriate by the Board and the Compensation Committee.
In November 1998, options (net of canceled or expired options) covering an
aggregate of 897,787 shares of the Company's Common Stock had been granted
under the Incentive Plan, and 77,213 shares (plus any shares that might in the
future be returned to the plans as a result of cancellations or expiration of
options) remained available for future grant under the Incentive Plan.
Stockholders are requested in this Proposal 2 to approve the amendment to
the Incentive Plan, as amended. The affirmative vote of the holders of a
majority of the shares present in person or represented by proxy and entitled
to vote at the meeting will be required to approve the Incentive Plan.
Abstentions will be counted toward the tabulation of votes cast on proposals
presented to the stockholders and will have the same effect as negative votes.
Broker non-votes are counted towards a quorum, but are not counted for any
purpose in determining whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
The essential features of the Incentive Plan are outlined below:
GENERAL
The Incentive Plan provides for the grant or issuance of incentive stock
options to employees and nonstatutory stock options, restricted stock purchase
awards, and stock bonuses to consultants, employees and directors. To date
only incentive stock options and nonstatutory stock options have been awarded
under the Incentive Plan. Incentive stock options granted under the Incentive
Plan are intended to qualify as "incentive stock options" within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
Nonstatutory stock options granted under the Incentive Plan are intended not
to qualify as incentive stock options under the Code. See "Federal Income Tax
Information" for a discussion of the tax treatment of the various awards
included in the Incentive Plan.
PURPOSE
The Incentive Plan provides a means by which selected employees and
directors of, and consultants to, the Company, and its affiliates, may be
given an opportunity to purchase Common Stock of the Company. The Company, by
means of the Incentive Plan, seeks to retain the services of persons who are
now employees of or consultants to the Company or its affiliates, to secure
and retain the services of new employees and consultants, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its affiliates.
4
<PAGE>
FORMS OF BENEFIT
The Incentive Plan provides for incentive stock options, nonstatutory stock
options, restricted stock purchase awards, stock bonuses (collectively "Stock
Awards").
ADMINISTRATION
The Incentive Plan is administered by the Board unless and until the Board
delegates administration to a committee composed of not fewer than two Board
members, all of the members of which committee must be non-employee directors
(unless the Board expressly declares that such requirement shall not apply)
and may also be, in the discretion of the Board, outside directors. If
administration has been delegated to a committee, the committee will have, in
connection with the administration of the Incentive Plan, the powers possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Incentive Plan, as may be adopted from time to time by the
Board. The Board or committee may delegate to a committee of one or more
members of the Board the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and/or who are either (i) not then employees
covered by Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code") and are not expected to be covered by Section 162(m) of the Code
at the time of recognition of income resulting from such Stock Award, or (ii)
not persons with respect to whom the Company wishes to avoid the application
of Section 162(m) of the Code. The Board may abolish such committee at any
time and revest in the Board the administration of the Incentive Plan. The
Board has delegated the administration of the Incentive Plan to the
Compensation Committee.
The Board has the power to determine from time to time which of the persons
eligible under the Incentive Plan shall be granted awards, the type of awards
to be granted, when and how each award shall be granted, to construe and
interpret the Incentive Plan and awards granted under it, and to establish,
amend and revoke rules and regulations for its administration. The Board may
correct any defect in the Incentive Plan or in any award agreement to make the
Incentive Plan fully effective.
SHARES SUBJECT TO THE PLAN
The Common Stock that may be sold pursuant to awards under the Incentive
Plan shall not exceed in the aggregate 1,175,000 shares of the Company's
Common Stock. If any award expires or terminates, in whole or in part, without
having been exercised in full, the stock not purchased under such award will
revert to and again become available for issuance under the Incentive Plan.
The Common Stock subject to the Incentive Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
ELIGIBILITY
Incentive stock options may be granted only to employees. Nonstatutory stock
options, restricted stock purchase awards, and stock bonuses may be granted
only to employees, directors or consultants.
No person is eligible for the grant of an incentive stock option if, at the
time of grant, such person owns stock possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company
unless the exercise price of such option is at least one hundred ten percent
(110%) of the fair market value of such Common Stock subject to the option at
the date of grant and the option is not exercisable after the expiration of
five (5) years from the date of grant, or in the case of a restricted stock
purchase award, the purchase price is at least one hundred percent (100%) of
the fair market value of Common Stock subject to the award at date of grant.
Once the Company becomes subject to Section 162(m) of the Code (which limits
the Company's deduction for compensation in excess of $1 million per year for
certain executives) following the transition period for newly public
companies, no person shall be eligible to be granted options covering more
than two hundred fifty thousand (250,000) shares of the Company's Common Stock
in any calendar year.
TERM AND TERMINATION
No option is exercisable after the expiration of ten (10) years from the
date it was granted.
5
<PAGE>
In the event an optionee's continuous status as an employee, director or
consultant is terminated, the optionee may exercise his or her option (to the
extent that the optionee was entitled to exercise it at the time of
termination) but generally only within the earlier of (i) the date three (3)
months after the termination of the optionee's continuous status as an
employee, director or consultant, or (ii) the expiration of the term of the
option as set forth in the option agreement.
An optionee's option agreement may also provide that if the exercise of the
option following the termination of the optionee's continuous status as an
employee, director, or consultant would result in liability under Section
16(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), then the
option shall terminate on the earlier of (i) the expiration of the term of the
option set forth in the option agreement, or (ii) the tenth (10th) day after
the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act. Finally, an optionee's option agreement may
also provide that if the exercise of the option following the termination of
the optionee's continuous status as an employee, director or consultant would
be prohibited at any time solely because the issuance of shares would violate
the registration requirements under the Securities Act of 1933, then the
option shall terminate on the earlier of (i) the expiration of the term of the
option as set forth in the immediately preceding paragraph, or (ii) the
expiration of a period of three (3) months after the termination of the
optionee's continuous status as an employee, director or consultant during
which the exercise of the option would not be in violation of such
registration requirements.
In the event an optionee's continuous status as an employee, director or
consultant terminates as a result of the optionee's death or disability, the
optionee (or such optionee's estate, heirs or beneficiaries) may exercise his
or her option, but only within the period ending on the earlier of (i) twelve
(12) months following such termination (or such longer or shorter period as
specified in the option agreement) or (ii) the expiration of the term of the
option as set forth in the option agreement.
In the event a stock bonus or restricted stock recipient's continuous status
as an employee, director or consultant terminates, the Company may repurchase
or otherwise reacquire any or all of the shares of stock held by that person
which have not vested as of the date of termination under the terms of the
stock bonus or restricted stock purchase agreement between the Company and
such person.
EXERCISE PRICE
The exercise price of each incentive stock option will not be less than one
hundred percent (100%) of the fair market value of the Company's Common Stock
on the date of grant. The exercise price of each nonstatutory stock option
will not be less than eighty-five percent (85%) of the fair market value on
the date of grant. The purchase price of restricted stock will not be less
than eighty-five percent (85%) of the fair market value of the Company's
Common Stock on the date such award is made. Stock bonuses may be awarded in
consideration for past services actually rendered to the Company or for its
benefit.
CONSIDERATION
The purchase price of stock acquired pursuant to a Stock Award is paid
either in cash at the time of exercise or purchase, or (if determined by the
Board at the time of grant for an option) by deferred payment or other
arrangement or in any other form of legal consideration that may be acceptable
to the Board. Additionally, in the case of an option and in the discretion of
the Board at the time of the grant of an option, by delivery to the Company of
other Common Stock of the Company. In the case of any deferred payment
arrangement, interest will be payable at least annually and will be charged at
the minimum rate of interest necessary to avoid the treatment as interest of
amounts that are not stated to be interest.
6
<PAGE>
TRANSFERABILITY
An incentive stock option will not be transferable except by will or by the
laws of descent and distribution, and shall be exercisable during the lifetime
of the person to whom the incentive stock option is granted only by such
person. A nonstatutory stock option, stock bonus, or restricted stock award
generally will be transferable only as provided in the stock award agreement.
An optionee may designate a beneficiary who may exercise his or her option
after death.
VESTING
The total number of shares of stock subject to an option may, but need not,
be allotted in periodic installments. The option agreement may provide that
from time to time during each of such installment periods, the option may
become exercisable ("vest") with respect to some or all of the shares allotted
to that period, and may be exercised with respect to some or all of the shares
allotted to such period and/or any prior period as to which the option became
vested but was not fully exercised. The option agreement may also provide that
an optionee may exercise an option prior to full vesting, provided that the
Company may have a repurchase right with respect to any unvested shares.
Restricted stock purchase awards and stock bonuses granted under the
Incentive Plan may be granted pursuant to a repurchase option in favor of the
Company in accordance with a vesting schedule determined by the Board.
ADJUSTMENTS UPON CHANGES IN STOCK
If any change is made in the Common Stock subject to the Incentive Plan, or
subject to any Stock Award, without receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the class(es) and maximum number of shares subject to
the Incentive Plan, the maximum annual award applicable under the Incentive
Plan and the class(es) and number of shares and price per share of stock
subject to outstanding Stock Awards will be appropriately adjusted.
In the event of (a) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of 35% or more of either (i) the then outstanding shares of
common stock of the Company, or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of the Board of Directors of the Company, (b) or in connection with
or in anticipation of, any acquisition, merger or reorganization in which
individuals who, as of the date hereof, constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a majority of the Board,
or (c) the sale or other disposition of all or substantially all of the assets
of the Company, then any surviving corporation shall assume any Stock Awards
outstanding under the Incentive Plan or shall substitute similar awards for
those outstanding under the Incentive Plan or such Stock Awards shall continue
in full force and effect. In the event a surviving corporation refuses to
assume such Stock Awards or substitute similar awards, then, with respect to
stock awards held by persons then performing services as employees, directors
or consultants, the time during which such Stock Awards may be exercised shall
be accelerated prior to completion of such transaction and such Stock Awards
terminated if not exercised prior to such transaction. If any surviving
corporation assumes Stock Awards outstanding under the Incentive Plan or
substitutes similar stock awards for those outstanding under the Incentive
Plan, then if the holder of a Stock Award (or substitute stock award) is
terminated for any reason other than (i) death, (ii) cause, (iii) disability
which prevents the holder of such award from performing his or her duties for
more than one hundred and eighty (180) days during any twelve (12) month
period, or (iv) voluntary resignation, then the vesting of such award shall be
accelerated in full and, if applicable, such award shall be exercisable in
full for the post-termination exercise period provided in such award's
agreement.
7
<PAGE>
AMENDMENT OF THE INCENTIVE PLAN
The Board at any time, and from time to time, may amend the Incentive Plan.
However, no amendment shall be effective unless approved by the stockholders
of the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will increase the number of shares reserved for
issuance under the Incentive Plan, modify the requirements as to eligibility
for participation or in any other way if such modification requires
stockholder approval in order for the Incentive Plan to satisfy the
requirements of Section 422 of the Code, Rule 16b-3, or any Nasdaq or
securities exchange requirements. The Board may in its sole discretion submit
any other amendment to the Incentive Plan for stockholder approval.
TERMINATION OR SUSPENSION OF THE INCENTIVE PLAN
The Board may suspend or terminate the Incentive Plan at any time. Unless
sooner terminated, the Incentive Plan shall terminate on October 16, 2007. No
Stock Awards may be granted under the Incentive Plan while the Incentive Plan
is suspended or after it is terminated.
FEDERAL INCOME TAX INFORMATION
INCENTIVE STOCK OPTIONS. Incentive stock options under the Incentive Plan
are intended to be eligible for the favorable federal income tax treatment
accorded "incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive stock
option for at least two years from the date on which the option is granted and
at least one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of
such stock will be capital gain or loss. Generally, if the optionee disposes
of the stock before the expiration of either of these holding periods (a
"disqualifying disposition"), at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (a) the excess of the
stock's fair market value on the date of exercise over the exercise price, or
(b) the optionee's actual gain, if any, on the purchase and sale. The
optionee's additional gain, or any loss, upon the disqualifying disposition
will be a capital gain or loss, which will be long-term, mid-term, or short-
term depending on how long the optionee holds the stock. Capital gains are
generally subject to lower tax rates than ordinary income. Slightly different
rules may apply to optionees who acquire stock subject to certain repurchase
options.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness and the satisfaction of a tax reporting
obligation) to a corresponding business expense deduction in the tax year in
which the disqualifying disposition occurs.
NONSTATUTORY STOCK OPTIONS. Nonstatutory stock options granted under the
Incentive Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonstatutory stock option. Upon exercise of a nonstatutory
stock option, the optionee normally will recognize taxable ordinary income
equal to the excess of the stock's fair market value on the date of exercise
over the option exercise price. Generally, with respect to employees, the
Company is required to withhold from regular wages or supplemental wage
payments an amount based on the ordinary income recognized. Subject to the
requirement of reasonableness and the satisfaction of a reporting obligation,
the Company will generally be entitled to a business expense deduction equal
to the taxable ordinary income realized by the optionee. Upon disposition of
the stock, the optionee will recognize a capital gain or loss equal to the
difference between the selling price and the sum of the amount paid for such
stock plus any amount recognized as ordinary income upon exercise of the
option.
8
<PAGE>
Such gain or loss will be long-term, mid-term, or short-term depending on
how long the optionee holds the stock. Slightly different rules may apply to
optionees who acquire stock subject to certain repurchase options or who are
subject to Section 16(b) of the Exchange Act.
POTENTIAL LIMITATION ON COMPANY DEDUCTIONS. In 1993, the U.S. Congress
amended the Code to add Section 162(m) which denies a deduction to any
publicly held corporation for compensation paid to certain employees in a
taxable year to the extent that compensation exceeds $1 million for a covered
employee. It is possible that compensation attributable to awards granted in
the future under the Incentive Plan, when combined with all other types of
compensation received by a covered employee from the Company, may cause this
limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m), compensation
attributable to stock options will qualify as performance-based compensation,
provided that the option is granted by a compensation committee comprised
solely of "outside directors" and either: (i) the option plan contains a per-
employee limitation on the number of shares for which options may be granted
during a specified period, the per-employee limitation is approved by the
stockholders, and the exercise price of the option is no less than the fair
market value of the stock on the date of grant; or (ii) the option is granted
(or exercisable) only upon the achievement (as certified in writing by the
compensation committee) of an objective performance goal established in
writing by the compensation committee while the outcome is substantially
uncertain, and the option is approved by stockholders.
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche LLP as the Companys
independent auditors for the fiscal year ending August 31, 1999 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Deloitte & Touche
LLP has audited the Companys financial statements since August 1986.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting, will have an opportunity to make a statement if they so desire
and will be available to respond to appropriate questions.
Stockholder ratification of the selection of Deloitte & Touche LLP as the
Companys independent auditors is not required by the Companys By-laws or
otherwise. However, the Board is submitting the selection of Deloitte & Touche
LLP to the stockholders for ratification as a matter of good corporate
practice. If the stockholders fail to ratify the selection, the Audit
Committee and the Board will reconsider whether or not to retain that firm.
Even if the selection is ratified, the Audit Committee and the Board in their
discretion may direct the appointment of different independent auditors at any
time during the year if they determine that such a change would be in the best
interests of the Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Deloitte & Touche LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3.
9
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of September 30, 1998 by: (i) each nominee
for director; (ii) each of the executive officers named in the Summary
Compensation Table; (iii) all executive officers and directors of the Company
as a group; and (iv) all those known by the Company to be beneficial owners of
more than five percent of its Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
------------------------------------
BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF TOTAL(2)
- ---------------- ---------------- -------------------
<S> <C> <C>
Kopp Investment Advisors, Inc.(3)........ 906,350 15.89%
6600 France Avenue South
Suite 672
Edina, MN 55435
Quaker Capital Management Corporation(4). 563,400 9.88%
401 Wood Street, Suite 1300
Pittsburgh, PA 15222
Verissimo Research & Management, Inc.(5). 341,500 5.99%
775 Baywood Drive, #314
Petaluma, CA 94954
Michael R. Bernique(6)................... 8,468 *
Cornelius C. Bond, Jr.(7)................ 54,394 *
Dean C. Campbell(8)...................... 67,339 1.18%
Matthew J. Desch(9)...................... 5,468 *
Francis J. Hughes, Jr.(10)............... 80,135 1.40%
Sam L. Densmore(11)...................... 168,780 2.89%
Darrell L. Ash(12)....................... 112,349 1.95%
Christopher G. Conlin.................... -- *
James P. Farley(13)...................... 30,724 *
Thomas J. Phillips, Jr.(14).............. 22,161 *
Robert J. Kansy(15)...................... 17,463 *
All executive officers and directors as a
group (13 persons)(16).................. 579,216 9.58%
</TABLE>
- --------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission (the "SEC"). Unless otherwise indicated in the
footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the stockholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned.
(2) Applicable percentages are based on 5,702,890 shares outstanding on
September 30, 1998, adjusted as required by rules promulgated by the SEC.
(3) Kopp Investment Advisors, Inc. holds sole voting power with respect to
62,000 shares, sole investment power with respect to 210,000 shares and
shares investment power with respect to 675,950 shares with its clients.
(4) Quaker Capital Management Corporations holds sole voting and investment
power with respect to 266,800 shares and shares voting and investment
power with respect to 296,600 shares with its clients.
10
<PAGE>
(5) Information based on Schedule 13G filed with the SEC on February 17, 1998.
Verissimo Research & Management, Inc. holds sole voting and dispositive
power with respect to all 341,500 shares.
(6) Includes 5,468 shares issuable upon exercise of options that are
exercisable within 60 days of September 30, 1998.
(7) Represents (i) 33,649 shares held through NEA Partners, (ii) 2,684 shares
held in The Bond Family Trust, (iii) 52 shares held in the Bond Survivor's
Trust, and (iv) 1,500 shares held by Mr. Bond's wife. Also includes 16,509
shares issuable upon exercise of options that are exercisable within 60
days of September 30, 1998.
(8) Includes (i) 1,000 shares held in the LBC 1992 Irrevocable Trust, (ii)
1,000 shares held in the JHC 1992 Irrevocable Trust, (iii) 1,000 shares
held in the Raymond W. Campbell Non-Marital Trust A, and (iv) 4,000 shares
held in the Raymond W. Campbell Non-Marital Trust B. Also includes 27,061
shares issuable upon exercise of options that are exercisable within 60
days of September 30, 1998.
(9) Represents 5,468 shares issuable upon exercise of options that are
exercisable within 60 days of September 30, 1998.
(10) Includes 5,000 shares held by American Research & Development. Also
includes 22,061 shares issuable upon exercise of options that are
exercisable within 60 days of September 30, 1998. Mr. Hughes disclaims
beneficial ownership of the shares held by American Research &
Development, except to the extent of his pecuniary interest therein.
(11) Includes 146,359 shares issuable upon exercise of options that are
exercisable within 60 days of September 30, 1998.
(12) Includes 52,081 shares issuable upon exercise of options that are
exercisable within 60 days of September 30, 1998.
(13) Includes 23,540 shares issuable upon exercise of options that are
exercisable within 60 days of September 30, 1998.
(14) Includes 19,095 shares issuable upon exercise of options that are
exercisable within 60 days of September 30, 1998.
(15) Includes 13,958 shares issuable upon exercise of options that are
exercisable within 60 days of September 30, 1998.
(16) Includes an aggregate of 343,535 shares issuable upon exercise of options
held by executive officers and directors that are exercisable within 60
days of September 30, 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity
securities, to file with the SEC initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended August 31, 1998, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with except that
three reports were filed late by Mr. Farley, one report was filed late by Mr.
Phillips, two reports were filed late by Mr. Bernique and one report was filed
late by Robert Kansy.
11
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives a quarterly retainer of
$3,000 and a per meeting fee of $1,000 per day for each board meeting attended
by a member in person. The members of the Board of Directors are also eligible
for reimbursement for their expenses incurred in connection with attendance at
Board meetings in accordance with Company policy.
Each non-employee director of the Company also receives stock option grants
under the 1994 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan"). Only non-employee directors of the Company or an affiliate of such
directors (as defined in the Code) are eligible to receive options under the
Directors' Plan. Options granted under the Directors' Plan are intended by the
Company not to qualify as incentive stock options under the Code.
Option grants under the Directors' Plan are non-discretionary. Pursuant to
the terms of the Directors' Plan, each person elected for the first time to be
a non-employee director of the Company will automatically be granted an option
to purchase 12,500 shares of Common Stock upon the date of his or her initial
election as a non-employee director by the Board or the stockholders of the
Company. On January 2nd of each year (or the next business day should such
date be a legal holiday), each member of the Company's Board of Directors who
is not an employee of the Company and has served as a non-employee director
for at least three months or, where specified by the non-employee director, an
affiliate of such director, is automatically granted under the Directors'
Plan, without further action by the Company, the Board of Directors or the
stockholders of the Company, an option to purchase 4,500 shares of Common
Stock of the Company. No other options may be granted at any time under the
Directors' Plan. The exercise price of options granted under the Directors'
Plan is 100% of the fair market value of the Common Stock on the date of the
option grant. Options are subject to vesting over a four-year period
commencing one year after the date of grant, and terminate ten years from the
date of grant unless terminated sooner pursuant to termination of the
optionee's status as a director or otherwise pursuant to the Directors' Plan.
In the event of a merger of the Company with or into another corporation or
consolidation, acquisition of assets or other change-in-control transaction
involving the Company, each option either becomes exercisable in full or is
assumed or an equivalent option is substituted by the successor corporation.
Unless terminated sooner, the Directors' Plan will terminate in 2004. The
Directors' Plan will be administered by the Board of Directors of the Company.
The Board has authority to amend or terminate the Directors' Plan, provided
that no such action may impair the rights of any optionee without the
optionee's consent.
On October 8, 1997, the date of their election to the Board, options to
purchase 12,500 shares of Common Stock were granted to each of Messrs.
Bernique and Desch at a price per share of $27.0625, the fair market value of
the stock on the date of grant. During the last fiscal year, each of Messrs.
Bond, Campbell and Hughes received an automatic grant of options to purchase
4,500 shares of Common Stock under the Directors' Plan at a price per share of
$11.375, the fair market value of the Stock as of January 2, 1998, the date of
the grant. As of September 30, 1998, no options had been exercised under the
Directors' Plan.
On January 14, 1998, options to purchase 10,000 shares of Common Stock were
granted to each of Messrs. Bernique and Desch under the Incentive Plan at a
price per share of $12.5625, the fair market value of the stock on the date of
grant.
12
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows for the fiscal year ended August 31, 1998,
compensation awarded or paid to, or earned by, the Company's Chief Executive
Officer and its other four most highly compensated executive officers at
August 31, 1998 whose total annual salary and bonus exceeded $100,000 during
the fiscal year ended August 31, 1998 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------------- ---------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND COMPENSATION AWARDS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) ($)(2) (#)(3) ($)(4)
- ------------------ ---- --------- -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sam L. Densmore 1998 182,302 46,584 -- -- 50,000 2,250
President and Chief 1997 179,232 126,754 -- -- 30,000 1,215
Executive Officer 1996 135,000 39,984 -- 67,500 30,000 342
Darrell L. Ash 1998 115,000 -- -- -- 7,000 1,037
Senior Vice President, 1997 115,864 15,000 -- -- -- 369
and Chief Technical
Officer 1996 115,000 16,721 -- 13,500 10,000 342
Christopher G. Conlin(5) 1998 116,749 -- -- -- 15,000 100,435(6)
Former Vice President, 1997 148,979 94,210 -- -- 10,000 204
Sales and Marketing 1996 63,447(7) 55,000 44,991(8) -- 60,000 143
James P. Farley 1998 97,550 19,877 -- -- 10,000 522
Vice President, 1997 94,502 21,480 -- -- -- 153
Controller and Secretary
Robert J. Kansy 1998 113,323 21,547 50,302(8) -- 12,000 1,037
Vice President,
Engineering
Thomas J. Phillips, Jr. 1998 112,073 21,547 -- -- 17,000 626
Vice President, 1997 86,013 24,551 -- -- 5,000 174
Manufacturing
</TABLE>
- --------
(1) In accordance with Securities and Exchange Commission ("Commission")
rules, Other Annual Compensation in the form of perquisites and other
personal benefits has been omitted where the aggregate amount of such
perquisites and other personal benefits constitute less than the lesser of
$50,000 or 10% of the total annual salary and bonus for the Named
Executive Officer for the fiscal year.
(2) Represents Restricted Stock Awards granted in December 1995 to Messrs.
Densmore and Ash for 10,000 and 2,000 shares of Common Stock of the
Company, respectively. As of August 31, 1998, the fair market value of the
Company's Common Stock was $7.875 per share and the value of the
Restricted Stock Awards was $78,750 and $15,750, respectively. The
Restricted Stock Awards vest at a rate of 25% annually, and therefore will
be fully vested in December 1999.
(3) The Company has not granted stock appreciation rights.
(4) Represents premiums paid by the Company on a life insurance policy. The
Company is not the beneficiary of the policy.
(5) Mr. Conlin resigned from the Company effective as of May 31,1998.
(6) Represents (i) $100,000 paid by the Company pursuant that certain
Separation and Consulting Agreement dated as of June 10, 1998 and
(ii) $435 paid by the Company on a life insurance policy. The Company is
not the beneficiary of the policy.
(7) Represents pro-rated salary paid from Mr. Conlin's appointment as Vice
President, Sales and Marketing in March 1996, based on an annual salary of
$145,000.
(8) Represents reimbursements of relocation expenses.
13
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
The Company has two stock option plans for the benefit of officers and other
employees: its 1997 Equity Incentive Plan, as previously described in detail
in Proposal 2, and its 1986 Supplemental Stock Option Plan (the "1986 Plan").
The 1986 Plan was adopted by the Board of Directors in July 1986 and has
been amended seven times, most recently in January 1994. Pursuant to the 1986
Plan, the Company may grant nonstatutory stock options to key employees,
directors of or consultants or advisors to the Company. A total of 712,500
shares of Common Stock have been reserved for issuance under the 1986 Plan.
The 1986 Plan is administered by the Compensation Committee. No vesting is
required under the 1986 Plan, although it may be imposed by the committee. The
maximum term of a stock option under the 1986 Plan is 10 years, but if the
optionee at the time of grant has voting power over more than 10% of the
Company's outstanding capital stock, the maximum term of an incentive stock
option in five years. The exercise price of nonstatutory stock options granted
under the 1986 Plan is determined by the Compensation Committee. Options
granted under the 1986 Plan are generally non-transferable. The exercise price
may be paid in cash or any other form of consideration that may be acceptable
to the Board of Directors.
Options generally terminate three months after termination of the optionee's
employment or relationship as a consultant or director unless such termination
is caused by the permanent disability or death of the optionee. The 1986 Plan
may be amended at any time by Board of Directors, although certain amendments
would require stockholder approval. The 1986 Plan will terminate in November
2002, unless earlier terminated by the Board of Directors.
The following tables show for the fiscal year ended August 31, 1998,
regarding options held at year-end by the Named Executive Officers. Option to
purchase 84,000 shares of the Company's Common Stock were granted to the Named
Executive Officers during the last fiscal year. Option to purchase 10,000
shares of the Company were exercised by the Named Executive Officers during
the last fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM(3)
OPTIONS IN FISCAL PRICE EXPIRATION ---------------------
NAME GRANTED (#) YEAR(1) ($/SH)(2) DATE 5% ($) 10% ($)
- ---- ----------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sam L. Densmore......... 50,000 11.17% $12.5625 01/13/08 395,719 998,719
Darrell L. Ash.......... 7,000 1.56% $12.5625 01/13/08 55,401 139,821
Christopher G.
Conlin(4).............. 15,000 3.35% $12.5625 01/13/08 118,716 299,616
James P. Farley......... 10,000 2.23% $12.5625 01/13/08 79,144 199,744
Robert J. Kansy......... 12,000 6.58% $12.5625 01/13/08 94,973 239,693
Thomas J. Phillips, Jr.. 12,000 2.68% $12.5625 01/13/08 94,973 239,693
5,000 1.12% $ 10.50 06/23/08 33,075 83,475
</TABLE>
- --------
(1) Based on aggregate of 447,500 options granted to employees of, consultants
to and directors of the Company during fiscal year ended August 31, 1998,
including the Named Executive Officers.
(2) The exercise price per share of each option is equal to the fair market
value of the Common Stock on the date of grant.
(3) The potential realizable value is calculated based on the term of the
option at its time of grant (ten years). It is calculated by assuming that
the stock price on the date of grant appreciates at the indicated annual
rate compounded annually for the entire term of the option and that the
option is exercised and sold on the last day of its term for the
appreciated stock price. No gain to the optionee is possible unless the
stock price increases over the option term, which will benefit the
stockholder.
(4) Mr. Conlin resigned from the Company effective as of May 31, 1998, and as
a result, his option expired 90 days thereafter.
14
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
08/31/98 (#) 08/31/98 ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
- ---- --------------- ------------ -------------- ----------------
<S> <C> <C> <C> <C>
Sam L. Densmore......... -- -- 137,089/72,911 611,255/0
Darrell L. Ash.......... -- -- 51,018/9,314 112,298/0
Christopher G.
Conlin(2).............. 29,375 $115,398 0/0 0/0
James P. Farley......... 10,000 72,750 22,290/11,876 94,057/0
Robert J. Kansy......... -- -- 11,645/25,355 0/0
Thomas J. Phillips, Jr.. -- -- 16,587/24,913 0/0
</TABLE>
- --------
(1) Based on the fair market value of the Common Stock as of August 31, 1998
of $7.875 per share, minus the exercise price, multiplied by the number of
shares underlying the option.
(2) Mr. Conlin resigned from the Company effective as of May 31, 1998, and as
a result, his options ceased to vest as of such date.
EMPLOYMENT AGREEMENT
In June 1998, the Company entered into a separation and consulting agreement
with Christopher G. Conlin, former Vice President, Sales and Marketing.
Pursuant to the agreement, Mr. Conlin received a one time payment of $100,000.
In addition, Mr. Conlin agreed to provide consulting services for a certain
period of time with payment by the Company of $1,000 per month.
15
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
GENERAL
Compensation of senior executives of the Company is determined by the
Compensation Committee of the Board of Directors (the "Committee"). The
Committee, comprised entirely of outside directors, meets to fix annual
salaries in advance and bonuses for the current year, to review annual goals
and to reward outstanding annual performance of executive officers and to
grant stock options pursuant to the Incentive Plan and the 1986 Plan.
COMPENSATION PHILOSOPHY
The primary goal of the Company is to align compensation with the Company's
business objectives and performance. The Company's aim is to attract, retain
and reward executive officers and other key employees who contribute to the
long-term success of the Company and to motivate those individuals to enhance
long-term stockholder value. To establish this relationship between executive
compensation and the creation of stockholder value, the Board of Directors has
adopted a total compensation package comprised of base salary, bonus and stock
option awards. Key elements of this compensation package are:
. The Company pays competitively with leading companies with which the
Company competes for talent.
. The Company maintains annual incentive opportunities sufficient to
provide motivation to achieve specific operating goals and to generate
rewards that bring total compensation to competitive levels.
. The Company provides significant equity-based incentives for executives
and other key employees to ensure that individuals are motivated over
the long term to respond to the Company's business challenges and
opportunities as owners and not just as employees.
BASE SALARY
Each executive officer's base salary is reviewed on an annual basis. Among
those factors taken into consideration are (1) individual and corporate
performance, (2) level of responsibility, (3) prior experience, (4) breadth of
knowledge of the industry, and (5) competitive pay practices.
BONUS
The Company believes that executive performance may be maximized via a
system of annual incentive awards. The actual incentive award earned depends
on the extent to which the Company and individual performance objectives are
achieved. Early in the fiscal year, the Compensation Committee will review and
approve the annual performance objectives for the Company and the individual
officers. The Company's objectives consist of operating, strategic and
financial goals that are considered to be critical to the Company's overall
goal: building stockholder value. For the fiscal year ended August 31, 1998,
the Board of Directors determined that the primary goal in building
stockholder value would be the increase in net income via both an expansion of
revenues and the control of costs. During the most recent fiscal year, product
sales increased by 16% over the results of the prior fiscal year and net
income increased by 25% during the same period. This represented achievement
of the targeted revenue bonus goal and a partial achievement of the targeted
bonus goal for net income. The cash and stock option bonuses were determined
in accordance with those results.
LONG-TERM INCENTIVES
The Company's primary long-term incentive program presently consists of the
Plans and the Employee Stock Purchase Plan (the "Purchase Plan"). The Plans
utilize vesting periods (generally four years) to encourage key employees to
continue in the employ of the Company. Through option grants and other stock
awards, executives receive significant equity incentives to build long-term
stockholder value. The exercise price of options granted under the Plans
generally is 100% of the fair market value of the underlying stock on the date
of grant. Employees receive value from these grants only if the Company's
Common Stock appreciates in the long term.
16
<PAGE>
The Company established the Purchase Plan both to encourage employees to
continue in the employ of the Company and to motivate employees through
ownership interest in the Company. Under the Purchase Plan, employees,
including officers, may have up to 15% of their earnings withheld for
purchases of Common Stock on certain dates specified by the Board. The price
of Common Stock purchased will be equal to 85% of the lower of the fair market
value of the Common Stock on the purchase date of the commencement date or
closing date of the relevant offering period. In Fiscal 1998, the Committee
granted stock options to purchase 84,000 shares of the Companys Common Stock
to the Companys Named Executive Officers.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Densmore's base salary, bonus and grants of stock options were
determined in accordance with the criteria described in the "Base Salary,"
"Bonus," and "Long Term Incentives" sections of this report. Mr. Densmore's
Base Salary of $182,302 and cash bonus of $46,584 reflect the Board and the
Committee's assessment of (1) his favorable performance, (2) his skills in
relation to other CEO's in the Company's industry, (3) the Board's confidence
in Mr. Densmore's ability to lead the Company's continued development, and (4)
his broad involvement in the operations of the Company. In October 1998, the
Board set Mr. Densmore's base salary for the fiscal year ending August 31,
1999 at $225,000.
CERTAIN TAX CONSIDERATIONS
Section 162(m) of the Internal Revenue Code (the "Code") limits the Company
to a deduction for federal income tax purposes of not more than $1 million of
compensation paid to certain executive officers in a taxable year.
Compensation above $1 million may be deducted if it is "performance-based
compensation" within the meaning of the Code.
The Board of Directors believes that at the present time it is unlikely that
the compensation paid to any executive officer in a taxable year will exceed
$1 million. Therefore, the Board of Directors has not established a policy for
determining which forms of incentive compensation awarded to executive
officers shall be designed to qualify as "performance-based compensation."
From the disinterested members of the Board of Directors and Compensation
Committee:
Michael R. Bernique
Cornelius C. Bond, Jr.
Dean C. Campbell
Matthew J. Desch
Francis J. Hughes, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Sam L. Densmore, the Company's President and Chief Executive Officer,
participated in the deliberations of the Board of Directors concerning
executive officer compensation, except where the decision directly involved
his compensation package.
17
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph shows the total stockholder return of an investment of
$100 in cash on August 31, 1998 for (I) the Company's Common Stock, (ii) the
NASDAQ Stock Market (U.S.) and (iii) the NASDAQ Electronic Components Index.
All values assume reinvestment of the full amount of all dividends and are
calculated as of August 31 of each year:
COMPARISON OF 49 MONTH CUMULATIVE TOTAL RETURN*
AMONG RF MONOLITHICS, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ ELECTRONIC COMPONENTS INDEX
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-----------------------------------------------
7/28/94 8/94 8/95 8/96 8/97 8/98
<S> <C> <C> <C> <C> <C> <C>
RF MONOLITHICS, INC. 100.00 112.96 124.07 100.00 294.44 116.67
NASDAQ STOCK MARKET (U.S.) 100.00 107.90 145.33 163.85 228.60 217.47
NASDAQ ELECTRONIC COMPONENTS 100.00 114.09 227.48 230.88 468.61 323.38
</TABLE>
. $100 INVESTED ON 7/28/94 IN STOCK
OR INDEX-INCLUDING REINVESTMENT
OF DIVIDENDS, FISCAL YEAR ENDING
AUGUST 31.
- --------
(/1/) This Section is not "soliciting material," is not deemed filed with the
SEC and is not to be incorporated by reference in any filing of the
Company under the 1933 Act or the 1934 Act whether made before or after
the date hereof and irrespective of any general incorporation language
in any such filing.
18
<PAGE>
CERTAIN TRANSACTIONS
INDEMNIFICATION
The Company has entered into indemnity agreements with certain officers and
directors which provide, among other things, that the Company will indemnify
such officer or director, under the circumstances and to the extent provided
for therein, for expenses, damages, judgments, fines and settlements he may be
required to pay in actions or proceedings which he is or may be made a party
by reason of his position as a director, officer or other agent of the
Company, and otherwise to the full extent permitted under Delaware law and the
Company's By-laws.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
/s/ James P. Farley
James P. Farley
Secretary
December 18, 1998
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED AUGUST 31, 1998 IS AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST TO: CORPORATE SECRETARY, RF MONOLITHICS,
INC., 4347 SIGMA ROAD, DALLAS, TEXAS 75244.
19
<PAGE>
APPENDIX A
RF MONOLITHICS, INC.
1997 EQUITY INCENTIVE PLAN
ADOPTED OCTOBER 8, 1997
APPROVED BY STOCKHOLDERS JANUARY 14, 1998
AMENDED ON OCTOBER 14, 1998
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) stock bonuses, and (iv) rights to purchase
restricted stock, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
be either (i) Options granted pursuant to Section 6 hereof, including
Incentive Stock Options and Nonstatutory Stock Options, or (ii) stock bonuses
or rights to purchase restricted stock granted pursuant to Section 7 hereof.
All Options shall be separately designated Incentive Stock Options or
Nonstatutory Stock Options at the time of grant, and in such form as issued
pursuant to Section 6, and a separate certificate or certificates will be
issued for shares purchased on exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections
424(e) and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CAUSE" shall mean (i) the willful breach of habitual neglect of
assigned duties related to the Company, including compliance with Company
policies; (ii) conviction (including any plea of nolo contendere) of Executive
of any felony or crime involving dishonesty; (iii) any act of personal
dishonesty knowingly taken by Executive in connection with his
responsibilities as an employee and intended to result in personal enrichment
of Executive or any other person; (iv) bad faith conduct that is materially
detrimental to the Company; (v) inability of Executive to perform Employee's
duties due to alcohol or illegal drug use; (vi) the Executive's failure to
<PAGE>
comply with any legal written directive of the Board of Directors of the
Company; or (vii) any act or omission of the Executive which is of substantial
detriment to the Company because of the Executive's intentional failure to
comply with any statute, rule or regulation, except any act or omission
believed by Executive in good faith to have been in or not opposed to the best
interest of the Company (without intent of Executive to gain, directly or
indirectly, a profit to which Executive was not legally entitled) and except
that Cause shall not mean bad judgment or negligence other than habitual
neglect of duty.
(d) "CHANGE OF CONTROL" shall mean:
i. Any acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act) of 35% or more of either (A) the
then outstanding shares of common stock of the Company (the
"Outstanding Common Stock") or (B) the combined voting power of the
then outstanding voting securities of the Company entitled to vote
generally in the election of the Board of Directors of the Company
(the "Outstanding Voting Securities"); or
ii. in connection with or in anticipation of, any
acquisition, merger or reorganization in which individuals who, as
of the date hereof, constitute the Board (the "incumbent Board")
cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A of the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
iii. the sale or other disposition of all or substantially
all of the assets of the Company; but
iv. "Change of Control" shall not mean (i) any acquisition,
merger, or reorganization by the Company in which the beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act)
of 65% or more of the stockholders of the Company immediately prior
to such acquisition, merger, or reorganization of either (A) the
Outstanding Common Stock or (B) the Outstanding Voting Securities
remains unchanged after such acquisition, merger or reorganization
or (ii) any acquisition, merger, or reorganization by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company.
(e) "CODE" means the Internal Revenue Code of 1986, as amended.
2
<PAGE>
(f) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(g) "COMPANY" means RF Monolithics, Inc., a Delaware corporation.
(h) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated
for such services, provided that the term "Consultant" shall not include
Directors who are paid only a director's fee by the Company or who are not
compensated by the Company for their services as Directors.
(i) "CONTINUOUS SERVICE AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means
that the service of an individual to the Company, whether as an Employee,
Director or Consultant, is not interrupted or terminated. The Board or the
chief executive officer of the Company may determine, in that party's sole
discretion, whether Continuous Service as an Employee, Director or Consultant
shall be considered interrupted in the case of: (i) any leave of absence
approved by the Board or the chief executive officer of the Company, including
sick leave, military leave, or any other personal leave; or (ii) transfers
between the Company, Affiliates or their successors.
(j) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange
Act, as determined for purposes of Section 162(m) of the Code.
(k) "DIRECTOR" means a member of the Board.
(l) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows:
(1) If the common stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap
Market, the Fair Market Value of a share of common stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the greatest
volume of trading in the Company's common stock) on the last market trading
day prior to the day of determination, as reported in The Wall Street Journal
or such other source as the Board deems reliable.
(2) In the absence of such markets for the common stock, the Fair
Market Value shall be determined in good faith by the Board.
(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
3
<PAGE>
(p) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange, or designated (or approved for designation) upon notice
of issuance as a national market security on an interdealer quotation system
if such securities exchange or interdealer quotation system has been certified
in accordance with the provisions of Section 25100(o) of the California
Corporate Securities Law of 1968.
(q) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does
not receive compensation (directly or indirectly) from the Company or its
parent or subsidiary for services rendered as a consultant or in any capacity
other than as a Director (except for an amount as to which disclosure would
not be required under Item 404(a) of Regulation S-K promulgated pursuant to
the Securities Act ("Regulation S-K")), does not possess an interest in any
other transaction as to which disclosure would be required under Item 404(a)
of Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(s) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(t) "OPTION" means a stock option granted pursuant to the Plan.
(u) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of
the Plan.
(v) "OPTIONEE" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(w) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not
a former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated
corporation" at any time, and is not currently receiving direct or indirect
remuneration from the Company or an "affiliated corporation" for services in
any capacity other than as a Director, or (ii) is otherwise considered an
"outside director" for purposes of Section 162(m) of the Code.
(x) "PLAN" means this 1997 Long-Term Equity Incentive Plan.
(y) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect with respect to the Company at the time discretion
is being exercised regarding the Plan.
(z) "SECURITIES ACT" means the Securities Act of 1933, as amended.
4
<PAGE>
(aa) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus, and any right to purchase restricted stock.
(bb) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of
an individual Stock Award grant. Each Stock Award Agreement shall be subject
to the terms and conditions of the Plan.
(cc) "VOLUNTARY RESIGNATION" shall mean any termination of Executive's
employment with the Company upon such Executive's own initiative, including
Executive's retirement, provided, however, that if such Executive's salary,
title, duties, or benefits are materially reduced subsequent to or in
anticipation of a Change of Control, such resignation by the Executive shall
not be deemed a "Voluntary Resignation."
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted
stock, or a combination of the foregoing; the provisions of each Stock Award
granted (which need not be identical), including the time or times when a
person shall be permitted to receive stock pursuant to a Stock Award and the
number of shares with respect to which a Stock Award shall be granted to each
such person.
(2) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section 13.
(4) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee of
the Board composed of not fewer than two (2) members (the "Committee"), all of
the members of which Committee may be, in the discretion of the Board, Non-
Employee Directors and/or Outside Directors. If administration is delegated to
a Committee, the Committee shall have, in connection with the administration
of the Plan, the powers theretofore possessed by the Board, including the
power to delegate to a subcommittee of two (2) or more Outside Directors any
of the administrative powers the Committee is authorized to exercise (and
references in this Plan to
5
<PAGE>
the Board shall thereafter be to the Committee or such a subcommittee),
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the administration
of the Plan. Notwithstanding anything in this Section 3 to the contrary, the
Board or the Committee may delegate to a committee of one or more members of
the Board the authority to grant Stock Awards to eligible persons who (1) are
not then subject to Section 16 of the Exchange Act and/or (2) are either (i)
not then Covered Employees and are not expected to be Covered Employees at the
time of recognition of income resulting from such Stock Award, or (ii) not
persons with respect to whom the Company wishes to comply with Section 162(m)
of the Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 12 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock Awards
shall not exceed in the aggregate one million one hundred seventy-five
thousand (1,175,000) shares of the Company's common stock. If any Stock Award
shall for any reason expire or otherwise terminate, in whole or in part,
without having been exercised in full, the stock not acquired under such Stock
Award shall revert to and again become available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees. Stock
Awards other than Incentive Stock Options may be granted only to Employees,
Directors or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates unless the exercise price of such
Incentive Stock Option is at least one hundred ten percent (110%) of the Fair
Market Value of such stock at the date of grant and the Incentive Stock Option
is not exercisable after the expiration of five (5) years from the date of
grant.
(c) Subject to the provisions of Section 12 relating to adjustments
upon changes in stock, no person shall be eligible to be granted Options
covering more than two hundred fifty thousand (250,000) shares of the
Company's common stock in any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise)
the substance of each of the following provisions:
6
<PAGE>
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted; the exercise price of
each Nonstatutory Stock Option shall be determined on the date the Option is
granted. Notwithstanding the foregoing, an Option (whether an Incentive Stock
Option or a Nonstatutory Stock Option) may be granted with an exercise price
lower than that set forth in the preceding sentence if such Option is granted
pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii)
at the discretion of the Board or the Committee, at the time of the grant of
the Option, (A) by delivery to the Company of other common stock of the
Company, (B) according to a deferred payment arrangement, except that payment
of the common stock's "par value" (as defined in the Delaware General
Corporation Law) shall not be made by deferred payment, or other arrangement
(which may include, without limiting the generality of the foregoing, the use
of other common stock of the Company) with the person to whom the Option is
granted or to whom the Option is transferred pursuant to subsection 6(d), or
(C) in any other form of legal consideration that may be acceptable to the
Board.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be
interest under the deferred payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option shall
only be transferable by the Optionee upon such terms and conditions as are set
forth in the Option Agreement for such Nonstatutory Stock Option, as the Board
or the Committee shall determine in its discretion. The person to whom the
Option is granted may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionee, shall thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem
7
<PAGE>
appropriate. The provisions of this subsection 6(e) are subject to any Option
provisions governing the minimum number of shares as to which an Option may be
exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Service as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that
the Optionee was entitled to exercise it as of the date of termination) but
only within such period of time ending on the earlier of (i) the date three
(3) months following the termination of the Optionee's Continuous Service as
an Employee, Director or Consultant (or such longer or shorter period
specified in the Option Agreement), or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, at the date of termination,
the Optionee is not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available for issuance under the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified in the
Option Agreement, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Status as an
Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the
term of the Option set forth in the Option Agreement, or (ii) the tenth (10th)
day after the last date on which such exercise would result in such liability
under Section 16(b) of the Exchange Act. Finally, an Optionee's Option
Agreement may also provide that if the exercise of the Option following the
termination of the Optionee's Continuous Service as an Employee, Director or
Consultant (other than upon the Optionee's death or disability) would be
prohibited at any time solely because the issuance of shares would violate the
registration requirements under the Securities Act, then the Option shall
terminate on the earlier of (i) the expiration of the term of the Option set
forth in the first paragraph of this subsection 6(f), or (ii) the expiration
of a period of three (3) months after the termination of the Optionee's
Continuous Service as an Employee, Director or Consultant during which the
exercise of the Option would not be in violation of such registration
requirements.
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Service as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it as of the date of
termination), but only within such period of time ending on the earlier of (i)
the date twelve (12) months following such termination (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration of
the term of the Option as set forth in the Option Agreement. If, at the date
of termination, the Optionee is not entitled to exercise his or her entire
Option, the shares covered by the unexercisable portion of the Option shall
revert to and again become available for issuance under the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
8
<PAGE>
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option Agreement after the termination of,
the Optionee's Continuous Service as an Employee, Director or Consultant, the
Option may be exercised (to the extent the Optionee was entitled to exercise
the Option as of the date of death) by the Optionee's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionee's death pursuant to
subsection 6(d), but only within the period ending on the earlier of (i) the
date eighteen (18) months following the date of death (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration of
the term of such Option as set forth in the Option Agreement. If, at the time
of death, the Optionee was not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
and again become available for issuance under the Plan. If, after death, the
Option is not exercised within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject
to the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to
any other restriction the Board determines to be appropriate.
(j) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the
Board or Committee shall have the authority (but not an obligation) to include
as part of any Option Agreement a provision entitling the Optionee to a
further Option (a "Re-Load Option") in the event the Optionee exercises the
Option evidenced by the Option agreement, in whole or in part, by surrendering
other shares of Common Stock in accordance with this Plan and the terms and
conditions of the Option Agreement. Any such Re-Load Option (i) shall be for a
number of shares equal to the number of shares surrendered as part or all of
the exercise price of such Option; (ii) shall have an expiration date which is
the same as the expiration date of the Option the exercise of which gave rise
to such Re-Load Option; and (iii) shall have an exercise price which is equal
to one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Re-Load Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Re-Load Option which is an Incentive Stock
Option and which is granted to a 10% stockholder (as described in subsection
5(b)), shall have an exercise price which is equal to one hundred ten percent
(110%) of the Fair Market Value of the stock subject to the Re-Load Option on
the date of exercise of the original Option and shall have a term which is no
longer than five (5) years.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee may designate at the time
of the grant of the original Option; provided, however, that the designation
of any Re-Load Option as an Incentive Stock Option shall be subject to the one
hundred thousand dollar ($100,000) annual limitation on exercisability of
Incentive Stock Options described in subsection 11(e) of the Plan and in
Section 422(d) of the Code. There shall be no Re-Load Options on a Re-Load
Option. Any such Re-Load Option shall be subject to the availability of
sufficient shares under subsection 4(a) and the limits on the grants of
Options under subsection 5(c) and shall be subject to such other terms and
conditions as
9
<PAGE>
the Board or Committee may determine which are not inconsistent with the
express provisions of the Plan regarding the terms of Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus
or restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such Stock Award Agreement. Notwithstanding the
foregoing, the Board or the Committee may determine that eligible participants
in the Plan may be awarded stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or for its
benefit.
(b) TRANSFERABILITY. Rights under a stock bonus or restricted stock
purchase agreement shall be transferable by the grantee only upon such terms
and conditions as are set forth in the applicable Stock Award Agreement, as
the Board or the Committee shall determine in its discretion, so long as stock
awarded under such Stock Award Agreement remains subject to the terms of the
agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment arrangement, except that payment of the common stock's "par
value" (as defined in the Delaware General Corporation Law) shall not be made
by deferred payment, or other arrangement with the person to whom the stock is
sold; or (iii) in any other form of legal consideration that may be acceptable
to the Board or the Committee in its discretion. Notwithstanding the
foregoing, the Board or the Committee to which administration of the Plan has
been delegated may award stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or for its
benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
(e) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Service as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.
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8. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or the Committee shall have the authority to effect, at
any time and from time to time, (i) the repricing of any outstanding Options
under the Plan and/or (ii) with the consent of the affected holders of
Options, the cancellation of any outstanding Options under the Plan and the
grant in substitution therefor of new Options under the Plan covering the same
or different numbers of shares of stock, but having an exercise price per
share not less than the ratio between the original exercise price and Fair
Market Value on the original date of grant (one hundred percent (100%) of the
Fair Market Value in the case of an Incentive Stock Option) or, in the case of
a 10% stockholder (as described in subsection 5(b)) receiving a new grant of
an Incentive Stock Option, not less than one hundred ten percent (110%) of the
Fair Market Value) per share of stock on the new grant date. Notwithstanding
the foregoing, the Board or the Committee may grant an Option with an exercise
price lower than that set forth above if such Option is granted as part of a
transaction to which section 424(a) of the Code applies.
(b) Shares subject to an Option canceled under this Section 8 shall
continue to be counted against the maximum award of Options permitted to be
granted pursuant to subsection 5(c) of the Plan. The repricing of an Option
under this Section 8, resulting in a reduction of the exercise price, shall be
deemed to be a cancellation of the original Option and the grant of a
substitute Option; in the event of such repricing, both the original and the
substituted Options shall be counted against the maximum awards of Options
permitted to be granted pursuant to subsection 5(c) of the Plan. The
provisions of this subsection 8(b) shall be applicable only to the extent
required by Section 162(m) of the Code.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act either the Plan, any Stock Award or any stock issued or
issuable pursuant to any such Stock Award. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful
issuance and sale of stock under the Plan, the Company shall be relieved from
any liability for failure to issue and sell stock upon exercise of such Stock
Awards unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
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11. MISCELLANEOUS.
The Board shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any
part thereof will vest pursuant to subsection 6(e), 7(d) or 8(b),
notwithstanding the provisions in the Stock Award stating the time at which it
may first be exercised or the time during which it will vest.
(a) Neither an Employee, Director or Consultant nor any person to whom
a Stock Award is transferred under subsection 6(d), 7(b), or 8(b) shall be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares subject to such Stock Award unless and until such
person has satisfied all requirements for exercise of the Stock Award pursuant
to its terms.
(b) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Director, Consultant
or other holder of Stock Awards any right to continue in the employ of the
Company or any Affiliate (or to continue acting as a Director or Consultant)
or shall affect the right of the Company or any Affiliate to terminate the
employment of any Employee with or without cause the right of the Company's
Board of Directors and/or the Company's stockholders to remove any Director as
provided in the Company's Bylaws and the provisions of the Delaware General
Corporation Law, or the right to terminate the relationship of any Consultant
subject to the terms of such Consultant's agreement with the Company or
Affiliate.
(c) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand
dollars ($100,000), the Options or portions thereof which exceed such limit
(according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options.
(d) The Company may require any person to whom a Stock Award is
granted, or any person to whom a Stock Award is transferred pursuant to
subsection 6(d), 7(b) or 8(b), as a condition of exercising or acquiring stock
under any Stock Award, (1) to give written assurances satisfactory to the
Company as to such person's knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably satisfactory to
the Company who is knowledgeable and experienced in financial and business
matters, and that he or she is capable of evaluating, alone or together with
the purchaser representative, the merits and risks of exercising the Stock
Award; and (2) to give written assurances satisfactory to the Company stating
that such person is acquiring the stock subject to the Stock Award for such
person's own account and not with any present intention of selling or
otherwise distributing the stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (i)
the issuance of the shares upon the exercise or acquisition of stock under the
Stock Award has been registered under a then currently effective registration
statement under the Securities Act, or (ii) as to any particular requirement,
a determination is made by counsel for the Company that such requirement need
not be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
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appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(e) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or
local tax withholding obligation relating to the exercise or acquisition of
stock under a Stock Award by any of the following means or by a combination of
such means: (1) tendering a cash payment; (2) authorizing the Company to
withhold shares from the shares of the common stock otherwise issuable to the
participant as a result of the exercise or acquisition of stock under the
Stock Award; or (3) delivering to the Company owned and unencumbered shares of
the common stock of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any Stock Award (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or other transaction not involving
the receipt of consideration by the Company), the Plan will be appropriately
adjusted in the type(s) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person during any calendar year pursuant to subsection 5(c), and
the outstanding Stock Awards will be appropriately adjusted in the type(s) and
number of securities and price per share of stock subject to such outstanding
Stock Awards. Such adjustments shall be made by the Board or the Committee,
the determination of which shall be final, binding and conclusive. (The
conversion of any convertible securities of the Company shall not be treated
as a "transaction not involving the receipt of consideration by the Company".)
(b) In the event of a Change of Control, then: (i) any surviving
corporation or acquiring corporation shall assume any Stock Awards outstanding
under the Plan or shall substitute similar stock awards (including an award to
acquire the same consideration paid to the stockholders in the transaction
described in this subsection 12(b)) for those outstanding under the Plan, or
(ii) in the event any surviving corporation or acquiring corporation refuses
to assume such Stock Awards or to substitute similar stock awards for those
outstanding under the Plan, (A) with respect to Stock Awards held by persons
then performing services as Employees, Directors or Consultants the vesting of
such Stock Awards (and, if applicable, the time during which such Stock Awards
may be exercised) shall be accelerated prior to such event and the Stock
Awards terminated if not exercised (if applicable) after such acceleration and
at or prior to such event, and (B) with respect to any other Stock Awards
outstanding under the Plan, such Stock Awards shall be terminated if not
exercised (if applicable) prior to such event. If any acquiring or surviving
corporation assumes Stock Awards outstanding under the Plan or substitutes
similar stock awards for those outstanding under the Plan, then if the
Continuous Service as an Employee, Director or Consultant of the holder of a
Stock Award (or substitute stock award) is terminated for any reason other
than (i) death, (ii) Cause, (iii) illness, accident, or other physical or
mental incapacity which prevents the holder of such award from performing his
or her duties for more than one hundred and eighty (180) days during any
twelve (12) month period, or (iv)
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Voluntary Resignation, then the vesting of such award shall be accelerated in
full and, if applicable, such award shall be exercisable in full for the post-
termination exercise period provided in such award's agreement.
13. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders
of the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for Stock
Awards under the Plan;
(ii) Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires
stockholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code); or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the
requirements of Section 422 of the Code or to comply with exchange listing
requirements.
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments
to the Plan intended to satisfy the requirements of Section 162(m) of the Code
and the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide eligible
Employees with the maximum benefits provided or to be provided under the
provisions of the Code and the regulations promulgated thereunder relating to
Incentive Stock Options and/or to bring the Plan and/or Incentive Stock
Options granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms
of any one or more Stock Award; provided, however, that the rights and
obligations under any Stock Award shall not be impaired by any such amendment
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.
14. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on the day prior to the tenth
anniversary of the earlier of the
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date the Plan is adopted by the Board or the date the Plan is approved by the
stockholders of the Company. No Stock Awards may be granted under the Plan
while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be impaired by suspension or termination of the Plan,
except with the written consent of the person to whom the Stock Award was
granted.
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Stock
Awards granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company, which approval shall be
within twelve (12) months before or after the date the Plan is adopted by the
Board.
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RF MONOLITHICS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 27, 1999
The undersigned hereby appoints SAM L. DENSMORE and JAMES P. FARLEY,
and each of them, as attorneys and proxies of the undersigned, with full power
of substitution, to vote all of the shares of stock of RF Monolithics, Inc.
which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders of RF Monolithics, Inc. to be held at Bank One Centre, 1717 Main
Street, 4th Floor Auditorium, Dallas, Texas 75201 on Wednesday, January 27,
1999, at 10:00 a.m., local time, and at any and all continuations and
adjournments thereof, with all powers that the undersigned would possess if
personally present, upon and in respect of the following matters and in
accordance with the following instructions, with discretionary authority as to
any and all other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3 AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED
BELOW.
PROPOSAL 1: To elect six directors to hold office until the next Annual
Meeting of Stockholders and until their successors are
elected.
[_]: FOR all nominees listed below [_]: WITHHOLD AUTHORITY to vote
(except as marked to the contrary for all nominees listed below.
below).
NOMINEES: Sam L. Densmore, Michael R. Bernique, Cornelius C. Bond, Jr., Dean
C. Campbell, Matthew J. Desch and Francis J. Hughes, Jr.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S) WRITE SUCH NOMINEE(S)'
NAME(S) BELOW:
________________________________________________________________________________
________________________________________________________________________________
PROPOSAL 2: To approve the amendment of the Company's 1997 Equity
Incentive Plan to increase the aggregate number of shares of
Common Stock authorized for issuance under such plan by
200,000 shares.
[_]: FOR [_]: AGAINST [_]: ABSTAIN
(Continued on other side)
<PAGE>
(Continued from other side)
PROPOSAL 3: To ratify selection of Deloitte & Touche LLP as independent
auditors of the Company for its fiscal year ending August
31, 1999.
[_]: FOR [_]: AGAINST [_]: ABSTAIN
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTORS LISTED ABOVE AND A
VOTE FOR PROPOSALS 2 AND 3.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE, THAT IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
Please sign exactly as your name appears hereon. If the stock is registered in
the names of two or more persons, each should sign. Executors, administrators,
trustees, guardians and attorneys-in-fact should add their titles. If signer
is a corporation, please give full corporate name and have a duly authorized
officer sign, stating title. If signer is a partnership, please sign in
partnership name by authorized person.
Dated ___________ _________________________________
_________________________________
SIGNATURE(S)
