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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 Section240.14a-11(c) or
Section240.14a-12
LORONIX INFORMATION SYSTEMS, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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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.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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LORONIX INFORMATION SYSTEMS, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 1997
------------------------
TO THE STOCKHOLDERS OF LORONIX INFORMATION SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of LORONIX INFORMATION SYSTEMS, INC., a Nevada corporation (the
"Company"), will be held at 9:00 a.m., local time, on May 19, 1997, at the
Strater Hotel, 699 Main Avenue, Durango, Colorado 81301, for the following
purposes:
1. To elect six (6) directors to serve for the ensuing year and until their
successors are elected.
2. To ratify and approve a 250,000 share increase in the Common Stock
issuable under the 1992 Stock Plan.
3. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company for the year ending December 31, 1997.
4. To transact such other business as may properly come before the Annual
Meeting or any postponements or adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on April 14, 1997 are
entitled to notice of and to vote at the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person; however, to ensure your representation at the Annual Meeting you are
urged to mark, sign, date and return the enclosed proxy card as promptly as
possible in the postage prepaid envelope enclosed for that purpose. YOU MAY
REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT AT
ANY TIME BEFORE IT HAS BEEN VOTED AT THE ANNUAL MEETING. ANY STOCKHOLDER
ATTENDING THE ANNUAL MEETING MAY VOTE IN PERSON EVEN IF HE OR SHE HAS RETURNED A
PROXY.
By Order of the Board of Directors
JONATHAN C. LUPIA, SECRETARY
Durango, Colorado
April 21, 1997
<PAGE>
LORONIX INFORMATION SYSTEMS, INC.
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PROXY STATEMENT
FOR THE 1997 ANNUAL MEETING OF STOCKHOLDERS
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of LORONIX INFORMATION SYSTEMS,
INC. (the "Company") for use at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held on Monday, May 19, 1997, at 9:00 a.m., local time, or at
any adjournment or postponement thereof, for the purposes set forth herein and
in the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting
will be held at the Strater Hotel at 699 Main Avenue, Durango, Colorado 81301.
The telephone number at that location is (970) 247-4431. When proxies are
properly dated, executed and returned, the shares they represent will be voted
at the Annual Meeting in accordance with the instructions of the stockholder. If
no specific instructions are given, the shares will be voted for the election of
the nominees for directors set forth herein, for the ratification and approval
of a 250,000 share increase in the Common Stock issuable under the 1992 Stock
Plan, for the ratification of the appointment of KPMG Peat Marwick LLP as
independent auditors as set forth herein and at the discretion of the proxy
holders upon such other business as may properly come before the Annual Meeting
or any adjournment or postponement thereof.
These proxy solicitation materials and the Annual Report to Stockholders for
the year ended December 31, 1996, including financial statements, were first
mailed on or about April 21, 1997, to all stockholders entitled to vote at the
Annual Meeting.
RECORD DATE AND SHARES OUTSTANDING
Stockholders of record at the close of business on April 14, 1997 are
entitled to notice of and to vote at the Annual Meeting. At the record date,
4,661,936 shares of the Company's Common Stock, $0.001 par value, were issued
and outstanding. No shares of the Company's Preferred Stock were outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to the solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of the Company at or before the taking of the vote at the
Annual Meeting a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a later dated proxy relating to the same shares and
delivering it to the Secretary of the Company at or before the taking of the
vote at the Annual Meeting or (iii) attending the Annual Meeting and voting in
person (although attendance at the Annual Meeting will not in and of itself
constitute a revocation of a proxy). Any written notice of revocation or
subsequent proxy should be delivered to Loronix Information Systems, Inc. at 820
Airport Road, Durango, Colorado 81301, Attention: Secretary, or hand-delivered
to the Secretary of the Company at or before the taking of the vote at the
Annual Meeting.
VOTING AND SOLICITATION
Each stockholder is entitled to one vote for each share of Common Stock on
all matters presented at the Annual Meeting. Stockholders do not have the right
to cumulate their votes in the election of directors.
<PAGE>
The cost of soliciting proxies will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
material to such beneficial owners. In addition, proxies may be solicited by
directors, officers and employees of the Company in person or by telephone,
telegram or other means of communication. No additional compensation will be
paid for such services.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the shares of Common Stock issued and outstanding on the Record
Date. Shares that are voted "FOR", "AGAINST" or "ABSTAIN" on a matter are
treated as being present at the Annual Meeting for purposes of establishing a
quorum and are also treated as shares "represented and voting" at the Annual
Meeting (the "Votes Cast") with respect to such matter.
While there is no definitive statutory authority in Nevada as to the proper
treatment of abstentions and broker non-votes, the Company believes that
abstentions should be counted for purposes of determining both (i) the presence
or absence of a quorum for the transaction of business and (ii) the total number
of Votes Cast with respect to a proposal (other than the election of directors).
In the absence of controlling precedent to the contrary, the Company intends to
treat abstentions in this manner. Accordingly, abstentions will have the same
effect as a vote against the proposal.
Broker non-votes will be counted for purposes of determining the presence or
absence of a quorum for the transaction of business, but will not be counted for
purposes of determining the number of Votes Cast with respect to the proposal on
which the broker has expressly not voted. Thus, a broker non-vote will not
affect the outcome of the voting on a proposal.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
The Company currently intends to hold its 1998 Annual Meeting of
Stockholders in May 1998 and to mail Proxy Statements relating to such meeting
in April 1998. The date by which stockholder proposals must be received by the
Company for inclusion in the Proxy Statement and form of proxy for its 1998
Annual Meeting of Stockholders is December 22, 1997. Such stockholder proposals
should be submitted to Loronix Information Systems, Inc. at 820 Airport Road,
Durango, Colorado 81301, Attention: Secretary.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 14, 1997 (except as noted)
certain information with respect to the beneficial ownership of the Company's
Common Stock by (i) each person known by the Company to own beneficially more
than 5% of the outstanding shares of Common Stock, (ii) each director of the
Company, (iii) each of the executive officers named in the Summary Compensation
Table below, and (iv) all directors and executive officers as a group. Except as
indicated in the footnotes to this table, the persons and entities named in the
table have sole voting and investment power with respect to all shares of
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Common Stock shown as beneficially owned by them, subject to community property
laws where applicable.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)
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PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OWNERSHIP
- ------------------------------------------------------------------ -------------- -------------
<S> <C> <C>
Wellington Management Company(2).................................. 297,500(3) 6.38%
75 State Street
Boston, Massachusetts 02109
Edward Jankowski.................................................. 800,133(4) 17.16%
c/o Loronix Information Systems, Inc.
820 Airport Road
Durango, Colorado 81301
Peter A. Jankowski................................................ 341,366(4) 7.32%
c/o Loronix Information Systems, Inc.
820 Airport Road
Durango, Colorado 81301
M. Dean Gilliam................................................... 200,674(4) 4.3%
C. Rodney Wilger.................................................. 108,818(4) 2.33%
George M. Duffy................................................... 103,750(4) 2.23%
Jonathan C. Lupia................................................. 59,000(4) 1.27%
Donald W. Stevens................................................. 17,750(4) *
All directors and executive officers as a group (9 persons)....... 1,742,655(4) 37.38%
</TABLE>
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* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options or warrants currently exercisable or exercisable within 60 days
are deemed to be beneficially owned by the person holding such option or
warrant for computing the percentage ownership of such person, but are not
treated as outstanding for computing the percentage of any other person.
(2) Information is as of December 31, 1996 and is based on a Schedule 13G filed
with the Securities and Exchange Commission by the entity.
(3) All 297,500 shares are held by Wellington Trust Company, N.A. ("WTC"), a
wholly owned subsidiary of Wellington Management Company, LLP ("WMC"). WTC
and WMC, in their capacities as investment advisors, may be deemed
beneficial owners of all 297,500 shares which are owned by numerous of their
investment counseling clients. WTC and WMC share voting and dispositive
power as to 297,500 of the shares.
(4) Includes the following numbers of shares which are exercisable within 60
days of April 14, 1997: for Edward Jankowski, 107,999; for Peter Jankowski,
85,000; for M. Dean Gilliam, 152,274; for George M. Duffy, 23,750; for
Jonathan C. Lupia, 38,500; for Donald Stevens, 11,750; and for all directors
and executive officers, 511,023. Also includes for C. Rodney Wilger (i)
23,750 shares issuable upon exercise of options that are currently
exercisable or exercisable within 60 days of April 14, 1997 and (ii) 36,476
shares of Common Stock owned of record by Serendipity, Inc., a company under
the control of Mr. Wilger.
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PROPOSAL NO. 1 - ELECTION OF DIRECTORS
NOMINEES
A board of six (6) directors is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the six (6) nominees named below, five of whom are presently directors of
the Company. In the event that any nominee is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be voted for a
nominee who shall be designated by the present Board of Directors to fill the
vacancy. In the event that additional persons are nominated for election as
directors, the proxy holders intend to vote all proxies received by them in such
a manner as will assure the election of as many of the nominees listed below as
possible, and, in such event, the specific nominees to be voted for will be
determined by the proxy holders. The Company is not aware of any nominee who
will be unable or will decline to serve as a director. The term of office for
each person elected as a director will continue until the next annual meeting of
the stockholders or until such director's successor has been duly elected and
qualified.
VOTE REQUIRED
The six nominees receiving the highest number of affirmative votes of the
shares entitled to be voted shall be elected to the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE NOMINEES
LISTED BELOW.
The names of the nominees and certain information about them as of April 14,
1997 are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE POSITION(S) WITH THE COMPANY SINCE
- ------------------------------------------------ --- ------------------------------------------------ -----------
<S> <C> <C> <C>
Louis E. Colonna................................ 63 Director --
George M. Duffy(1)(2)(3)........................ 57 Director 1991
M. Dean Gilliam................................. 44 President, Chief Executive Officer and Director 1992
Edward Jankowski(2)(4).......................... 59 Chairman of the Board of Directors 1987
Don W. Stevens(1)(2)(3)(4)...................... 64 Director 1994
C. Rodney Wilger(1)(3)(4)....................... 64 Director 1992
</TABLE>
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(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Acquisition Committee.
(4) Member of the Nominating Committee.
Louis E. Colonna has been nominated for election to the Company's Board of
Directors. Since January 1979, Mr. Colonna has served as Chief Executive Officer
and Director of Tess-Com, Inc., a privately owned company founded by Mr. Colonna
which designs and manufactures process and control instrumentation and sampling
systems for various process related industries. Prior to founding Tess-Com,
Inc., Mr. Colonna worked for 19 years in various management positions with
Beckman Instruments, Inc.
George M. Duffy has served as a Director of the Company since December 1991.
Mr. Duffy is the Manager of Purchasing for GE Nuclear Energy, a company which
provides nuclear energy services, where he has been employed since January 1980.
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M. Dean Gilliam joined the Company's predecessor corporation in September
1992 as Director, Chief Operating Officer, Chief Financial Officer and
Secretary. Mr. Gilliam assumed the additional positions of President, Chief
Executive Officer and Treasurer in June 1993 and relinquished the positions of
Chief Financial Officer and Secretary when Jonathan C. Lupia assumed these
positions in April 1994. Prior to joining the Company, from September 1982 to
September 1992, Mr. Gilliam served as Chief Financial Officer and Secretary of
DH Technology, Inc., a publicly-owned company headquartered in San Diego,
California, which is engaged in the design, manufacture and distribution of
transaction printers and mechanisms, impact printheads, bar code printers and
related services and supplies.
Edward Jankowski has served as Chairman of the Board of Directors of the
Company and the Company's predecessor corporations since August 1987, as
President from August 1987 to June 1993 and as Chief Executive Officer from
February 1992 to June 1993. Mr. Jankowski is currently working in various senior
level capacities including monitoring the Company's strategic direction and
maintaining high-level communications with several of the Company's largest
customers.
Don W. Stevens has served as a Director of the Company since April 1994.
From September 1987 until his retirement in January 1991, Mr. Stevens served as
a division manager of the Process Division of Milton Roy Corporation, a company
which provides industrial instrumentation systems to various industries.
C. Rodney Wilger has served as a Director of the Company since October 1992.
Mr. Wilger is the Chairman and Chief Executive Officer of the Wilger Company,
which owns various businesses involved in photo processing, manufacturing and
distribution of men's and women's sportswear and accessories, menswear
retailing, and real estate investment and development.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of six (6) meetings
during 1996. No director attended fewer than 75% of the total number of meetings
of the Board of Directors or committees of the Board of Directors held in 1996
during the period in which such directors were members of the Board of
Directors. The Board of Directors has an Audit Committee, a Compensation
Committee, a Nominating Committee and an Acquisition Committee.
The Audit Committee currently consists of Messrs. Duffy, Stevens and Wilger
and met once during 1996. This committee is primarily responsible for approving
the services performed by the Company's independent auditors and for reviewing
and evaluating the Company's accounting principles and its system of internal
accounting controls.
The Compensation Committee currently consists of Messrs. Duffy, Jankowski
and Stevens and met once during 1996. This committee reviews the Company's
executive compensation policy and 1992 Stock Plan and makes recommendations to
the full Board of Directors for approval.
The Acquisition Committee currently consists of Messrs. Duffy, Stevens and
Wilger and did not meet in 1996. This committee is primarily responsible for
reviewing potential acquisitions.
The Nominating Committee currently consists of Messrs. Jankowski, Wilger and
Stevens and met once during 1996. This committee recommends new members for the
Company's Board of Directors.
BOARD OF DIRECTORS COMPENSATION
Directors do not receive any cash compensation for their services as members
of the Board of Directors, although they are reimbursed for their expenses in
attending out-of-town meetings. The Company's Director Option Plan (the
"Director Plan") was approved by the Board of Directors in March 1995 and by the
stockholders in May 1995. A total of 100,000 shares have been reserved for
issuance thereunder. Under the Director Option Plan as currently in effect, a
non-employee Chairman of the Board automatically receives options for 10,000
shares of the Company's Common Stock upon such
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individual's reelection to the Board of Directors, and each non-employee
director automatically receives options for 5,000 shares of the Company's Common
Stock upon each such individual's reelection to the Board of Directors. On May
20, 1996, Messrs. Duffy, Stevens and Wilger each received options for 5,000
shares of the Company's Common Stock, all such options having an exercise price
of $4.12 per share. If Mr. Jankowski is reelected as Chairman of the Board of
Directors at the Annual Meeting, he will not receive any options under the
Director Plan because he has resumed the status of an employee of the Company.
Officers are appointed by and serve at the discretion of the Board of Directors.
Peter A. Jankowski, the Company's Chief Technical Officer, is the son of Mr.
Edward Jankowski, Chairman of the Board of Directors. There are no other family
relationships between directors and executive officers of the Company.
PROPOSAL NO. 2 - APPROVAL OF A 250,000 SHARE INCREASE
IN THE SHARES ISSUABLE UNDER THE 1992 STOCK PLAN
The Company is seeking stockholder approval for an amendment to the 1992
Stock Plan. The amendment consists of a 250,000 share increase in the number of
shares issuable under the 1992 Stock Plan.
The Board of Directors believes this increase is in the best interests of
the Company for two principal reasons. First, the Board of Directors believes
that the increase is necessary to enable the Company to continue to compete
successfully with other companies to attract and retain valuable employees.
Second, the Board of Directors believes that it is appropriate to have a
substantial pool of options available for grant in connection with acquisitions
that the Company may make from time to time. The ability to make such grants
enhances the Company's ability to structure attractive offers to potential
acquisition targets and their key personnel.
SUMMARY OF THE 1992 STOCK PLAN
GENERAL. The Company's 1992 Stock Plan was adopted by the Board of
Directors and approved by the stockholders in October 1992. A total of 800,000
shares of Common Stock were initially reserved for issuance under the 1992 Stock
Plan. In February 1995, the Board of Directors approved an increase of 250,000
shares issuable under the 1992 Stock Plan, and in May 1996, the stockholders
approved such increase. In February 1997, the Board of Directors approved a
250,000 share increase in the number of shares issuable under the 1992 Stock
Plan. As of April 14, 1997, options to purchase approximately 1,001,923 shares
were outstanding under the 1992 Stock Plan and approximately 48,077 remained
available for issuance thereunder. All share numbers in this summary have been
adjusted to reflect a 1 for 2.5 reverse stock split that occurred in June 1994.
PURPOSE. The purpose of the 1992 Stock Plan is to attract and retain the
best available personnel for positions of substantial responsibility, to provide
additional incentive to employees and consultants of the Company and to promote
the success of the Company's business.
ADMINISTRATION. The 1992 Stock Plan is to be administered by the Board of
Directors or by a committee or committees designated by the Board of Directors
to administer the plan (the "Administrator"). The Board of Directors may
establish different committees to handle different administrative duties under
the plan. With respect to directors and Section 16 officers, the Administrator
must be constituted in such a manner as to permit the 1992 Stock Plan and
transactions thereunder to comply with Rule 16b-3 as it applies to a plan
intended to qualify thereunder as a discretionary grant or award plan. The 1992
Stock Plan is currently being administered by the Compensation Committee and the
Board of Directors (acting on the recommendation of the Compensation Committee).
ELIGIBILITY. The 1992 Stock Plan provides that incentive stock options may
only be granted thereunder to employees (including officers, employee directors
and non-employee directors) of the Company. The
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1992 Stock Plan provides that nonstatutory options may be granted to employees
(including officers or employee directors) and consultants of the Company. The
Administrator selects the employees and consultants and determines the number of
shares to be subject to each option.
TERMS AND CONDITIONS OF OPTIONS. The terms and conditions of options
granted under the 1992 Stock Plan are determined by the Administrator. Each
option is evidenced by a stock option agreement between the Company and the
employee granted such option, and is subject to the following additional terms
and conditions:
(a) EXERCISE OF THE OPTION. Any option granted under the 1992 Stock Plan
shall be exercisable according to the terms of the 1992 Stock Plan and at such
times and under such conditions as determined by the Administrator and set forth
in the option agreement. An option is exercised by (i) giving written notice of
exercise to the Company from the person entitled to exercise the option and (ii)
tendering full payment to the Company of the purchase price. The exercise price
of the shares purchased upon exercise of any option may be paid in cash, check,
promissory note, exchange of shares of Common Stock or such form of
consideration as the Administrator determines, to the extent permissible by
applicable law. With respect to any incentive stock option, the form of
consideration to be paid upon exercise of such option must be determined at the
time of grant.
(b) EXERCISE PRICE. The exercise price of an option is determined by the
Administrator. The exercise price of an incentive stock option may not be less
than 100% of the fair market value of the Common Stock and the exercise price of
a nonstatutory stock option may not be less than 85% of the fair market value of
the Common Stock. Notwithstanding the foregoing, in the case of any stock option
granted to a holder of 10% or more of the Company's outstanding securities, the
exercise price must not be less than 110% of the fair market value at the time
of grant. For the purposes of the 1992 Stock Plan, fair market value is defined
as the reported closing sales price of a share of Common Stock on The Nasdaq
Stock Market on the last market trading day prior to the date of determination.
(c) TERMINATION OF EMPLOYMENT. If the optionee's employment with the
Company terminates for any reason other than upon death or disability, options
under the 1992 Stock Plan may be exercised but only within such period of time
as determined by the Administrator and may be exercised only to the extent the
option was exercisable on the termination date. In the case of an incentive
stock option, the Administrator shall determine such period of time (in no event
to exceed ninety (90) days from the date of termination) when the option is
granted.
(d) DEATH OR DISABILITY OF OPTIONEE. If an optionee's employment with the
Company should terminate as a result of the optionee's death or disability,
options may be exercised at any time within twelve (12) months after such
termination, but only to the extent that the optionee was entitled to exercise
the option at the date of death or disability.
(e) TERMINATION OF OPTIONS. Incentive Stock options granted under the 1992
Stock Plan expire ten years from the date of grant, unless a shorter term is
provided in the notice of grant. However, any incentive stock option granted to
a holder of 10% or more of the Company's outstanding securities will expire no
more than five years from the date of grant. No option may be exercised after
its expiration.
(f) NON-TRANSFERABILITY OF OPTIONS. An option is non-transferable by the
optionee other than by will or the laws of descent or distribution. During the
optionee's lifetime, an option is exercisable only by such optionee.
(g) OTHER PROVISIONS. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the 1992 Stock Plan as may be
determined by the Administrator.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split or stock dividend, combination or reclassification of
Common Stock or any other increase or decrease in the number of
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<PAGE>
issued shares of Common Stock effected without receipt of consideration, the
number of shares of Common Stock covered by each outstanding option, and the
number of shares of Common Stock which have been authorized for issuance under
the 1992 Stock Plan but as to which no options have yet been granted or which
have been returned to the 1992 Stock Plan upon cancellation or expiration of an
option, as well as the price per share of Common Stock covered by each such
outstanding option, shall be proportionately adjusted.
DISSOLUTION, LIQUIDATION OR MERGER OF THE COMPANY. In the event of the
proposed dissolution or liquidation of the Company, each option outstanding
under the 1992 Stock Plan will terminate immediately prior to the consummation
of such proposed action. In the event of a merger of the Company with or into
another corporation or the sale of substantially all of the assets of the
Company, each outstanding option will be assumed or an equivalent option or
right will be substituted by the successor corporation or by a parent or
subsidiary of such successor corporation. In the event that the successor
corporation does not agree to assume the option or to substitute an equivalent
option or right, the Administrator shall, in lieu of such assumption or
substitution, provide for the optionee to have the right to exercise the option
as to all of or a portion of the optioned stock, including shares as to which
the option would not otherwise be exercisable. If the Administrator makes an
option fully exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Administrator shall notify the optionee that (i)
the option will be fully exercisable for a period of 15 days from the date of
such notice, and (ii) the option will terminate upon the expiration of such
period.
INTERPRETATION, AMENDMENT AND TERMINATION OF THE PLAN. The Administrator
has the authority to interpret and construe the provisions of the 1992 Stock
Plan and to conclusively resolve any issues arising thereunder. The Board of
Directors at any time may amend alter, suspend or terminate the 1992 Stock Plan;
provided, however, that no such amendment, alteration, suspension or termination
shall impair the rights of any optionee unless mutually agreed otherwise between
the optionee and the Administrator. In addition, to the extent stockholder
approval is required and desirable to comply with Rule 16b-3 or Section 422 of
the Code (or any successor rule or statute or other applicable law, rule or
regulation, including requirements of any exchange or quotation system on which
the Company's Common Stock is listed or quoted), such stockholder approval, if
required, will be obtained in such a manner and to such a degree as is required
by the applicable law, rule or regulation.
TAX INFORMATION. Incentive stock options under the 1992 Stock Plan are
afforded favorable federal income tax treatment under the Code. If an option is
treated as an incentive stock option, the optionee will recognize no income upon
grant or exercise of the option unless the alternative minimum tax rules apply.
Upon an optionee's sale of the shares (assuming that the sale occurs no sooner
than two years after grant of the option and one year after exercise of the
option), any gain or loss will be taxed to the optionee as long-term capital
gain or loss. If the optionee disposes of the shares prior to the expiration of
the above holding periods, the optionee will recognize ordinary income in an
amount measured as the difference between the exercise price and the lower of
the fair market value of the shares at the exercise date or the sale price of
the shares. Any gain or loss recognized on such a premature sale or exchange of
the shares in excess of the amount treated as ordinary income will be
characterized as capital gain or loss. Under the Code, the fair market value of
the total number of shares of Common Stock (determined on the date of grant of
such option) covered by incentive stock options held by an optionee first
becoming exercisable in any one calendar year may not exceed $100,000. To the
extent this limit is exceeded, such options shall not qualify as incentive stock
options and will be taxed as nonstatutory stock options as described below.
All other options granted under the 1992 Stock Plan are nonstatutory options
and will not qualify for any special tax benefits to the optionee. Accordingly,
an optionee will not recognize any taxable income at the time he or she is
granted a nonstatutory option. However, upon exercise of the option, the
optionee will recognize ordinary income for federal income tax purposes in an
amount measured as the excess of the then fair market value of the shares over
the exercise price. Upon an optionee's resale of such shares, any
8
<PAGE>
difference between the sale price and the fair market value of such shares on
the date of exercise will be treated as capital gain or loss and will qualify
for long-term capital gain or loss treatment if the shares have been held for
more than one year.
The Company will be entitled to a tax deduction in the amount and at the
time that an optionee recognizes ordinary income with respect to the option.
The following table sets forth certain information with respect to the grant
of stock options under the 1992 Stock Plan to the Named Executive Officers (as
defined in "Executive Compensation" below), all current executive officers, all
non-employee directors as a group and all other employees as a group during the
fiscal year ended December 31, 1996:
AMENDED PLAN BENEFITS
1992 STOCK PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES
SUBJECT TO
DOLLAR OPTIONS
NAME AND POSITION VALUE($)(1) GRANTED(#)
- -------------------------------------------------------------- ----------- -----------------
<S> <C> <C>
M. Dean Gilliam............................................... $ 15,750 17,500
President, Chief Executive Officer and Director
Edward Jankowski.............................................. $ 7,750 60,000
Chairman of the Board of Directors
Peter A. Jankowski............................................ $ 16,200 18,000
Chief Technical Officer
Jonathan C. Lupia............................................. $ 16,200 18,000
Chief Financial Officer and Secretary
All current executive officers as a group (5 persons)......... $ 92,800 154,500
All non-employee directors (3 persons)(2)..................... -- --
All current non-executive-officer employees as a group........ $ 38,900 69,000
</TABLE>
- ------------------------
(1) Indicates the difference between the exercise price of the options granted
and $3.56, the closing price of the Company's Common Stock on December 31,
1996 for all in-the-money options. All stock options granted under the 1992
Stock Plan during 1996 were issued at exercise prices ranging from $2.13 to
$4.63 per share (which exercise prices represented the closing prices of the
Company's Common Stock on The Nasdaq Stock Market on the dates of grant).
(2) Non-employee directors receive automatic grants of options to purchase the
Company's Common Stock pursuant to the Director Stock Plan and not the 1992
Stock Plan.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment to the 1992 Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE AMENDMENT
TO THE 1992 STOCK PLAN.
PROPOSAL NO. 3 - RATIFICATION OF
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP, independent
auditors, to audit the consolidated financial statements of the Company for the
fiscal year ending December 31, 1997 and
9
<PAGE>
recommends that stockholders vote for ratification of such appointment. In the
event of a negative vote on such ratification, the Board of Directors will
reconsider its selection.
KPMG Peat Marwick LLP has audited the Company's financial statements since
1990. Its representatives are expected to be present at the Annual Meeting with
the opportunity to make a statement if they desire to do so and are expected to
be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION OF
THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned in each of the last
three years by the Chief Executive Officer, two other executive officers and one
other individual who earned over $100,000 in salary and bonus for services
rendered in all capacities to the Company during 1996 (the "Named Executive
Officers"):
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------
ANNUAL COMPENSATION SECURITIES
----------------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(1)
- --------------------------------------------------- --------- ------------- --------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
M. Dean Gilliam.................................... 1996 $ 96,350 $ 47,201 17,500 $ 9,289
President, Chief Executive Officer 1995 $ 94,000 $ 4,700 35,000 $ 4,127
and Director 1994 $ 87,500 $ 21,800 -- $ 2,846
Edward Jankowski................................... 1996 $ 120,000 -- 60,000 $ 24,114
Chairman of the Board of Directors 1995 $ 120,000(2) -- 10,000 $ 20,627
1994 $ 120,000 -- -- $ 19,142
Peter A. Jankowski................................. 1996 $ 84,800 $ 32,082 18,000 $ 5,465
Chief Technical Officer 1995 $ 80,000 $ 4,000 25,000 $ 1,638
1994 $ 73,726 $ 27,980 -- $ 1,393
Jonathan C. Lupia.................................. 1996 $ 78,000 $ 23,003 18,000 $ 6,495
Chief Financial Officer 1995 $ 75,000 $ 3,750 20,000 $ 13,639(3)
1994 $ 58,603 $ 16,750 32,000 $ 34,936(3)
</TABLE>
- ------------------------
(1) Includes health insurance premiums of $2,147, $3,245 and $4,310 for Mr.
Gilliam, $2,147, $3,394 and $4,310 for Mr. E. Jankowski, $941, $1,174 and
$3,872 for Mr. P. Jankowski and $1,790, $3,244 and $4,310 for Mr. Lupia in
1994, 1995 and 1996, respectively, as well as life insurance premiums of
$699, $882 and $945 for Mr. Gilliam, $16,995, $17,233 and $17,233 for Mr. E.
Jankowski, $452, $464 and $504 for Mr. P. Jankowski and $542, $997 and
$1,029 for Mr. Lupia in 1994, 1995 and 1996, respectively, and medical
reimbursements of $4,034, $2,571, $1,089 and $1,156 for Messrs. Gilliam, E.
Jankowski, P. Jankowski, and Lupia respectively, in 1996.
(2) Mr. Jankowski was paid at the rate of $10,000 per month from August 1994
through August 1995 pursuant to a one-year consulting agreement which
terminated pursuant to its terms in August 1995. Mr. Jankowski resumed
employment with the Company in September 1995 at an annual salary of
$120,000.
(3) Includes $9,398 and $32,604 in relocation expenses in 1995 and 1994,
respectively.
10
<PAGE>
OPTION GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE
UNDERLYING OPTIONS TO EMPLOYEES PRICE EXPIRATION
NAME GRANTED(#) IN 1996 ($/SH) DATE
- ---------------------------------------------------- ------------------- ------------------- ----------- ----------
<S> <C> <C> <C> <C>
M. Dean Gilliam..................................... 17,500 8.0% $ 2.66 04/01/06
Edward Jankowski.................................... 25,000 11.0% $ 3.25 04/22/06
35,000 16.0% $ 4.125 05/20/06
Peter A. Jankowski.................................. 18,000 8.0% $ 2.66 04/01/06
Jonathan C. Lupia................................... 18,000 8.0% $ 2.66 04/01/06
</TABLE>
FISCAL YEAR-END OPTION VALUES
There were no option exercises during the fiscal year ended December 31,
1996 by any of the Named Executive Officers. The following table sets forth, for
each of the Named Executive Officers, the year-end value of unexercised options
as of December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FY-END(#): FY-END($)(1):
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
M. Dean Gilliam........................................... 130,149 52,750 $ 28,025 $ 23,363
Edward Jankowski.......................................... 80,499 77,500 $ 14,210 $ 11,500
Peter A. Jankowski........................................ 66,250 44,750 $ 11,533 $ 21,638
Jonathan C. Lupia......................................... 21,000 41,000 $ 1,450 $ 20,550
</TABLE>
- ------------------------
(1) The Nasdaq National Market closing price for the Company's Common Stock of
$3.56 per share on December 31, 1996 minus the exercise price of the
options. All of the options listed above were issued at exercise prices
ranging from $2.66 to $4.88.
CERTAIN TRANSACTIONS
During 1996, the Company loaned an aggregate of $216,312 to its officers and
one senior employee for use in the purchase of an automobile by each such
employee. The recipients of these loans were: Edward Jankowski (Director),
$63,812; M. Dean Gilliam (President, Chief Executive Officer and Director),
$40,000; Peter Jankowski (Chief Technical Officer), $22,500; Jonathan C. Lupia
(Chief Financial Officer and Secretary), $22,500; Jim Price (Vice President,
Operations), $22,500; Tim Whitehead (Vice President, Special Projects), $22,500;
and George Schildge (Director of Sales and Marketing), $22,500. Each of these
individuals executed a non-interest-bearing unsecured promissory note for the
respective amounts of indebtedness listed above. The Company has agreed that the
amounts due under such notes will be forgiven (and a compensation expense
thereby incurred) by the Company on an amortized basis over 48 months beginning
on January 15, 1997. In addition, after June 1, 1997, the Company will forgive
(and take a compensation expense with respect to) the entire amount due from an
individual immediately in the event that such individual's employment with the
Company terminates for any reason. If such individual's employment terminates
prior to June 1, 1997, such individual will be required immediately to repay the
balance of indebtedness due under the note or surrender the car to the Company.
The Company has from time to time made non-interest bearing loans to certain
of its officers and directors. As of December 31, 1996, the outstanding amounts
of such loans were: Edward Jankowski (Director), $79,529; M. Dean Gilliam
(President, Chief Executive Officer and Director), $19,531; Peter Jankowski
(Chief Technical Officer), $23,176; Jonathan C. Lupia (Chief Financial Officer
and Secretary), $7,000; and Jim Price (Vice President, Operations), $5,803.
These loans have no stated maturity date.
11
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act of 1934, as amended, and regulations of
the Securities and Exchange Commission (the "SEC") thereunder require the
Company's executive officers and directors, and persons who own more than 10% of
a registered class of the Company's equity securities, to file reports of
initial ownership and changes in ownership with the SEC. Based solely on its
review of copies of such forms received by the Company, or on written
representations from certain reporting persons that no other reports were
required for such persons, the Company believes that, during or with respect to
the period from January 1, 1996 to December 31, 1996, all of the Section 16(a)
filing requirements applicable to its executive officers, directors and 10%
stockholders were complied with.
OTHER MATTERS
The Company knows of no other matters to be brought before the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is the
intention of the persons named in the accompanying proxy to vote the shares
represented as the Board of Directors may recommend.
THE BOARD OF DIRECTORS
JONATHAN C. LUPIA, SECRETARY
Dated: April 21, 1997
12
<PAGE>
<TABLE>
<S> <C>
LORONIX INFORMATION Proxy THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
SYSTEMS, INC.
The undersigned hereby appoints M. Dean Gilliam and Jonathan C. Lupia as Proxies, each
with the power to appoint his substitute, and hereby authorizes them to represent and
to vote, as designated below, all the shares of Common Stock of Loronix Information
Systems, Inc. held of record by the undersigned on April 14, 1997, at the Annual
820 AIRPORT ROAD, DURANGO, COLORADO 81301 Meeting of Stockholders to be held on May 19, 1997 or any adjournment thereof.
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. ELECTION OF DIRECTORS: FOR all nominees listed below WITHHOLD AUTHORITY
(EXCEPT AS INDICATED BELOW) / / to vote for all nominees listed below / /
M. Dean Gilliam Edward Jankowski George M. Duffy
C. Rodney Wilger Don W. Stevens Louis E. Colonna
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW:
__________________________________________________________________________________________________
2. APPROVAL OF A 250,000 SHARE INCREASE IN THE SHARES OF COMMON STOCK ISSUABLE UNDER THE 1992 STOCK PLAN
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO APPROVE THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE INDEPENDENT PUBLIC ACCOUNTANTS OF THE CORPORATION
/ / FOR / / AGAINST / / ABSTAIN
4. IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
<PAGE>
This proxy when properly executed will be voted in the manner directed herein by the undersigned stockholder. If no direction is
made, this proxy will be voted FOR Proposals 1, 2 and 3.
Please sign below exactly as name appears on stock certificate(s). When shares are held by joint tenants, both should sign. When
signing as attorney, as executor, administrator, trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a partnership please sign in partnership name by
authorized person.
Dated: ___________________ , 1997 ------------------------------------------------------------------------------------
Signature
_______________________________________
PLEASE MARK, SIGN, DATE AND RETURN ------------------------------------------------------------------------------------
THE PROXY CARD PROMPTLY USING THE Signature if held jointly
ENCLOSED ENVELOPE
_______________________________________
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</TABLE>
<PAGE>
APPENDIX I
LORONIX INFORMATION SYSTEMS, INC.
1992 STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants
of the Company and its Subsidiaries and to promote the success of the
Company's business. Options granted under the Plan may be incentive stock
options (as defined under Section 422 of the Code) or non-statutory stock
options, as determined by the Administrator at the time of grant of an option
and subject to the applicable provisions of Section 422 of the Code, as
amended, and the regulations promulgated thereunder. Stock purchase rights
may also be granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
(e) "COMMON STOCK" means the Common Stock of the Company.
(f) "COMPANY" means Loronix Information Systems, Inc., a Nevada
corporation.
(g) "CONSULTANT" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any non-employee director of the Company.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE" means the absence of any
interruption or termination of the employment relationship by the Company or
any Subsidiary. Continuous Status as an Employee shall not be considered
interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any
other leave of absence approved by the Board, provided that such leave is for
a period of not more than ninety (90) days, unless reemployment upon the
expiration of such leave is guaranteed by contract or statute, or unless
provided otherwise pursuant to Company policy adopted from time to time; or
(iv) in the case of transfers between locations of the Company or between the
Company, its Subsidiaries or its successor.
<PAGE>
(i) "EMPLOYEE" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be
sufficient to constitute "employment" by the Company.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(k) "FAIR MARKET VALUE" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the
National Market System of the National Association of Securities Dealers,
Inc. Automated Quotation ("Nasdaq") System, its Fair Market Value shall be
the closing sales price for such stock (or the closing bid, if no sales were
reported, as quoted on such system or exchange, or the exchange with the
greatest volume of trading in Common Stock, for the last market trading day
prior to the time of determination) as reported in the Wall Street Journal or
such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but
not on the National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high and low asked prices for the Common Stock
or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(l) "INCENTIVE STOCK OPTION" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(m) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(n) "OPTION" means a stock option granted pursuant to the Plan.
(o) "OPTIONED STOCK" means the Common Stock subject to an Option.
(p) "OPTIONEE" means an Employee or Consultant who receives an
Option.
(q) "PARENT" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(r) "PLAN" means this 1992 Stock Plan.
-2-
<PAGE>
(s) "RESTRICTED STOCK" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 below.
(t) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(u) "SUBSIDIARY" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 13
of the Plan, the maximum aggregate number of shares which may be optioned and
sold under the Plan is 1,050,000 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) ADMINISTRATION WITH RESPECT TO DIRECTORS AND OFFICERS.
With respect to grants of Options or Stock Purchase Rights to Employees who
are also officers or directors of the Company, the Plan shall be administered
by (A) the Board if the Board may administer the Plan in compliance with Rule
16b-3 promulgated under the Exchange Act or any successor thereto ("Rule
16b-3") with respect to a plan intended to qualify thereunder as a
discretionary plan, or (B) a Committee designated by the Board to administer
the Plan, which Committee shall be constituted in such a manner as to permit
the Plan to comply with Rule 16b-3 with respect to a plan intended to qualify
thereunder as a discretionary plan. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee
and appoint additional members thereof, remove members (with or without
cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter
directly administer the Plan, all to the extent permitted by Rule 16b-3 with
respect to a plan intended to qualify thereunder as a discretionary plan.
(ii) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule
16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers.
(iii) ADMINISTRATION WITH RESPECT TO CONSULTANTS AND OTHER
EMPLOYEES. With respect to grants of Options or Stock Purchase Rights to
Employees or Consultants who are neither directors nor officers of the
Company, the Plan shall be administered by (A) the Board or
-3-
<PAGE>
(B) a Committee designated by the Board, which Committee shall be constituted
in such a manner as to satisfy the legal requirements relating to the
administration of incentive stock option plans, if any, of Colorado corporate
and securities laws and of the Code (the "Applicable Laws"). Once appointed,
such Committee shall continue to serve in its designated capacity until
otherwise directed by the Board. From time to time the Board may increase
the size of the Committee and appoint additional members thereof, remove
members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of
the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(k) of the Plan;
(ii) to select the officers, Consultants and Employees to
whom Options and Stock Purchase Rights may from time to time be granted
hereunder;
(iii) to determine whether and to what extent Options and
Stock Purchase Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including, but
not limited to, the share price and any restriction or limitation, or any
vesting acceleration or waiver of forfeiture restrictions regarding any
Option or other award and/or the shares of Common Stock relating thereto,
based in each case on such factors as the Administrator shall determine, in
its sole discretion);
(vii) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(f) instead of Common Stock;
(viii) to determine whether, to what extent and under what
circumstances Common Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the election of
the participant (including providing for and determining the amount, if any,
of any deemed earnings on any deferred amount during any deferral period);
-4-
<PAGE>
(ix) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted; and
(x) to determine the terms and restrictions applicable to
Stock Purchase Rights and the Restricted Stock purchased by exercising such
Stock Purchase Rights.
(c) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. ELIGIBILITY.
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he is otherwise
eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair
Market Value of the Shares shall be determined as of the time the Option with
respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his right or the Company's
right to terminate his employment or consulting relationship at any time,
with or without cause.
(e) Upon the Company or a successor corporation issuing any class
of common equity securities required to be registered under Section 12 of the
Exchange Act or upon the Plan being assumed by a corporation having a class
of common equity securities required to be registered under Section 12 of the
Exchange Act, the following limitations shall apply to grants of Options and
Stock Purchase Rights to Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options and Stock Purchase Rights to purchase more than 100,000
Shares.
-5-
<PAGE>
(ii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization
as described in Section 12.
(iii) If an Option or Stock Purchase Right is canceled in the
same fiscal year of the Company in which it was granted (other than in
connection with a transaction described in Section 12), the canceled Option
or Stock Purchase Right will be counted against the limit set forth in
Section 5(e)(i). For this purpose, if the exercise price of an Option or
Stock Purchase Right is reduced, the transaction will be treated as a
cancellation of the Option or Stock Purchase Right and the grant of a new
Option or Stock Purchase Right.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated
under Section 15 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated
in the Option Agreement; provided, however, that in the case of an Incentive
Stock Option, the term shall be no more than ten (10) years from the date of
grant thereof or such shorter term as may be provided in the Option
Agreement. However, in the case of an Incentive Stock Option granted to an
Optionee who, at the time the Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Incentive Stock Option
shall be five (5) years from the date of grant thereof or such shorter term
as may be provided in the Option Agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant
of such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110%
of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the
date of grant.
(ii) In the case of a Nonstatutory Stock Option the per Share
exercise price shall be determined by the Administrator.
-6-
<PAGE>
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised, (5) authorization from the Company
to retain from the total number of Shares as to which the Option is exercised
that number of Shares having a Fair Market Value on the date of exercise
equal to the exercise price for the total number of Shares as to which the
Option is exercised, (6) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker,
if applicable, shall require to effect an exercise of the Option and delivery
to the Company of the sale or loan pro-ceeds required to pay the exercise
price, (7) by delivering an irrevocable subscription agreement for the Shares
which irrevocably obligates the option holder to take and pay for the Shares
not more than twelve months after the date of delivery of the subscription
agreement, (8) any combination of the foregoing methods of payment, (9) or
such other consideration and method of payment for the issuance of Shares to
the extent permitted under Applicable Laws. In making its determination as
to the type of consideration to accept, the Board shall consider if
acceptance of such consideration may be reasonably expected to benefit the
Company.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible under
the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms
of the Option by the person entitled to exercise the Option and full payment
for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Board,
consist of any consideration and method of payment allowable under Section
8(b) of the Plan. Until the issuance (as evidenced by the appropriate entry
on the books of the Company or of a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no right to vote or
receive dividends or any other rights as a stockholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock certificate
promptly upon exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 11 of the Plan.
-7-
<PAGE>
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes
of the Plan and for sale under the Option, by the number of Shares as to
which the Option is exercised.
(b) TERMINATION OF EMPLOYMENT. In the event of termination of an
Optionee's consulting relationship or Continuous Status as an Employee with
the Company (as the case may be), such Optionee may, but only within three
months (or such other period of time as is determined by the Board, with such
determination in the case of an Incentive Stock Option being made at the time
of grant of the Option and not exceeding three months) after the date of such
termination (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise his Option to the
extent that Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the
Option at the date of such termination, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate.
(c) DISABILITY OF OPTIONEE. Notwithstanding the provisions of
Section 9(b) above, in the event of termination of an Optionee's Consulting
relationship or Continuous Status as an Employee as a result of his total and
permanent disability (as defined in Section 22(e)(3) of the Code), Optionee
may, but only within twelve (12) months from the date of such termination
(but in no event later than the expiration date of the term of such Option as
set forth in the Option Agreement), exercise the Option to the extent
otherwise entitled to exercise it at the date of such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee,
the Option may be exercised, at any time within twelve (12) months following
the date of death (but in no event later than the expiration date of the term
of such Option as set forth in the Option Agreement), by the Optionee's
estate or by a person who acquired the right to exercise the Option by
bequest or inheritance, but only to the extent the Optionee was entitled to
exercise the Option at the date of death. To the extent that Optionee was
not entitled to exercise the Option at the date of termination, or if
Optionee does not exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate.
(e) RULE 16b-3. Options granted to persons subject to Section
16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
(f) BUYOUT PROVISIONS. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted,
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
-8-
<PAGE>
10. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee.
11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under
the Plan and/or cash awards made outside of the Plan. After the
Administrator determines that it will offer Stock Purchase Rights under the
Plan, it shall advise the offeree in writing of the terms, conditions and
restrictions related to the offer, including the number of Shares that such
person shall be entitled to purchase, the price to be paid (which price shall
not be less than 50% of the Fair Market Value of the Shares as of the date of
the offer), and the time within which such person must accept such offer,
which shall in no event exceed thirty (30) days from the date upon which the
Administrator made the determination to grant the Stock Purchase Right. The
offer shall be accepted by execution of a Restricted Stock purchase agreement
in the form determined by the Administrator. Shares purchased pursuant to
the grant of a Stock Purchase Right shall be referred to herein as
"Restricted Stock."
(b) REPURCHASE OPTION. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination
of the purchaser's employment with the Company for any reason (including
death or Disability). The purchase price for Shares repurchased pursuant to
the Restricted Stock purchase agreement shall be the original price paid by
the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at such rate as
the Committee may determine.
(c) OTHER PROVISIONS. The Restricted Stock purchase agreement
shall contain such other terms, provisions and conditions not inconsistent
with the Plan as may be determined by the Administrator in its sole
discretion. In addition, the provisions of Restricted Stock purchase
agreements need not be the same with respect to each purchaser.
(d) RIGHTS AS A STOCKHOLDER. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered
upon the records of the duly authorized transfer agent of the Company. No
adjustment will be made for a dividend or other right for which the record
date is prior to the date the Stock Purchase Right is exercised, except as
provided in Section 13 of the Plan.
12. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. At the
discretion of the Administrator, Optionees may satisfy withholding
obligations as provided in this paragraph. When an Optionee incurs tax
liability in connection with an Option or Stock Purchase Right, which tax
liability is subject to tax withholding under applicable tax laws, and the
Optionee is obligated to pay the Company an amount required to be withheld
under applicable tax laws, the Optionee may satisfy the withholding tax
obligation by electing to have the Company withhold from the Shares to be
issued
-9-
<PAGE>
upon exercise of the Option, or the Shares to be issued in connection with
the Stock Purchase Right, if any, that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market Value of
the Shares to be withheld shall be determined on the date that the amount of
tax to be withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall
be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option or Right as to which the election is made;
(c) all elections shall be subject to the consent or disapproval
of the Administrator;
(d) if the Optionee is subject to Rule 16b-3, the election must
comply with the applicable provisions of Rule 16b-3 and shall be subject to
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election
is filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option or Stock Purchase Right is
exercised but such Optionee shall be unconditionally obligated to tender back
to the Company the proper number of Shares on the Tax Date.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to
any required action by the stockholders of the Company, the number of shares
of Common Stock covered by each outstanding Option, and the number of shares
of Common Stock which have been authorized for issuance under the Plan but as
to which no Options have yet been granted or which have been returned to the
Plan upon cancellation or expiration of an Option, as well as the price per
share of Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be
deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to an Option.
-10-
<PAGE>
In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Optionee at least fifteen (15) days prior
to such proposed action. To the extent it has not been previously exercised,
the Option will terminate immediately prior to the consummation of such
proposed action. In the event of a merger of the Company with or into
another corporation, the Option shall be assumed or an equivalent option
shall be substituted by such successor corporation or a parent or subsidiary
of such successor corporation. In the event that such successor corporation
does not agree to assume the Option or to substitute an equivalent option,
the Board shall, in lieu of such assumption or substitution, provide for the
Optionee to have the right to exercise the Option as to all of the Optioned
Stock, including Shares as to which the Option would not otherwise be
exercisable. If the Board makes an Option fully exercisable in lieu of
assumption or substitution in the event of a merger, the Board shall notify
the Optionee that the Option shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option will terminate
upon the expiration of such period.
14. TIME OF GRANTING OPTIONS. The date of grant of an Option shall,
for all purposes, be the date on which the Administrator makes the
determination granting such Option, or such other date as is determined by
the Board. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent.
In addition, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act or with Section 422 of the Code (or any other
applicable law or regulation, including the requirements of the NASD or an
established stock exchange), the Company shall obtain stockholder approval of
any Plan amendment in such a manner and to such a degree as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee
and the Board, which agreement must be in writing and signed by the Optionee
and the Company.
16. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and
the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
-11-
<PAGE>
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation
is required by any of the aforementioned relevant provisions of law.
17. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall
be sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the
Company's counsel to be necessary to the lawful issuance and sale of any
Shares hereunder, shall relieve the Company of any liability in respect of
the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
18. AGREEMENTS. Options and Stock Purchase Rights shall be evidenced
by written agreements in such form as the Board shall approve from time to
time.
19. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before
or after the date the Plan is adopted. Such stockholder approval shall be
obtained in the degree and manner required under applicable state and federal
law.
-12-
<PAGE>
LORONIX INFORMATION SYSTEMS, INC.
1992 STOCK PLAN
NOTICE OF STOCK OPTION GRANT
Optionee's Name: 1
Optionee's Address:
-----------------------------------------
-----------------------------------------
You have been granted an option to purchase Common Stock of Loronix
Information Systems, Inc. (the "Company") as follows:
Date of Grant --
Option Price Per Share $--
Total Number of Shares Granted --
Total Price of Shares Granted $--
Type of Option: -- Incentive Stock Option
-- Nonstatutory Stock
Option
Term/Expiration Date --
VESTING SCHEDULE:
-----------------
Date of Number of
Vesting Shares
------- ---------
-- --
-- --
TERMINATION PERIOD:
Option may be exercised for three months after termination of
employment or consulting relationship except as set out in
Sections 7 and 8 of the Stock Option Agreement (but in no event
later than the Expiration Date).
<PAGE>
By your signature and the signature of the Company's representative
below, you and the Company agree that this option is granted under and
governed by the terms and conditions of the 1992 Stock Plan and the Stock
Option Agreement, all of which are attached and made a part of this document.
OPTIONEE: LORONIX INFORMATION SYSTEMS, INC.
- ------------------------------------ By: ----------------------------------
- ------------------------------------ Title: -------------------------------
Print Name
-2-
<PAGE>
LORONIX INFORMATION SYSTEMS, INC.
1992 STOCK PLAN
STOCK OPTION AGREEMENT
1. GRANT OF OPTION. Loronix Information Systems, Inc., a
Nevada corporation (the "Company"), hereby grants to the Optionee
named in the Notice of Grant (the "Optionee"), an option (the
"Option") to purchase a total number of shares of Common Stock (the
"Shares") set forth in the Notice of Grant, at the exercise price
per share set forth in the Notice of Grant (the "Exercise Price")
subject to the terms, definitions and provisions of the Loronix
Information Systems, Inc. 1992 Stock Plan (the "Plan") adopted by
the Company, which is incorporated herein by reference. Unless
otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option.
If designated an Incentive Stock Option, this Option is
intended to qualify as an Incentive Stock Option as defined in
Section 422 of the Code.
2. EXERCISE OF OPTION. This Option shall be exercisable
during its term in accordance with the Exercise Schedule set out in
the Notice of Grant and with the provisions of Section 9 of the
Plan as follows:
(i) RIGHT TO EXERCISE.
(a) This Option may not be exercised for a fraction
of a share.
(b) In the event of Optionee's death, disability or
other termination of employment, the exercisability of the Option
is governed by Sections 6, 7 and 8 below, subject to the limitation
contained in subsection 2(i)(c).
(c) In no event may this Option be exercised after
the date of expiration of the term of this Option as set forth in
the Notice of Grant.
(ii) METHOD OF EXERCISE. This Option shall be exercis-
able by written notice (in the form attached as Exhibit A) which
shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised, and such
other representations and agreements as to the holder's investment
intent with respect to such shares of Common Stock as may be
required by the Company pursuant to the provisions of the Plan.
Such written notice shall be signed by the Optionee and shall be
<PAGE>
delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the
Exercise Price. This Option shall be deemed to be exercised upon
receipt by the Company of such written notice accompanied by the
Exercise Price.
No Shares will be issued pursuant to the exercise of an
Option unless such issuance and such exercise shall comply with all
relevant provisions of law and the requirements of any stock
exchange upon which the Shares may then be listed. Assuming such
compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. OPTIONEE'S REPRESENTATIONS. In the event the Shares
purchasable pursuant to the exercise of this Option have not been
registered under the Securities Act of 1933, as amended, at the
time this Option is exercised, Optionee shall, if required by the
Company, concurrently with the exercise of all or any portion of
this Option, deliver to the Company his Investment Representation
Statement in the form attached hereto as Exhibit B.
4. METHOD OF PAYMENT.
(i) cash;
(ii) check;
(iii) surrender of other shares of Common Stock of the
Company which (A) either have been owned by the Optionee for more
than six (6) months on the date of surrender or were not acquired,
directly or indirectly, from the Company and (B) have a fair market
value on the date of surrender equal to the Exercise Price of the
Shares as to which the Option is being exercised; or
(iv) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the
broker, if applicable, shall require to effect an exercise of the
option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price.
5. RESTRICTIONS ON EXERCISE. This Option may not be exer-
cised until such time as the Plan has been approved by the share-
holders of the Company, or if the issuance of such Shares upon such
exercise or the method of payment of consideration for such shares
would constitute a violation of any applicable federal or state
securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regula-
-2-
<PAGE>
tion G") as promulgated by the Federal Reserve Board. As a condi-
tion to the exercise of this Option, the Company may require
Optionee to make any representation and warranty to the Company as
may be required by any applicable law or regulation.
6. TERMINATION OF RELATIONSHIP. In the event of termination
of Optionee's consulting relationship or Continuous Status as an
Employee, Optionee may, to the extent otherwise so entitled at the
date of such termination (the "Termination Date"), exercise this
Option during the Termination Period set out in the Notice of
Grant. To the extent that Optionee was not entitled to exercise
this Option at the date of such termination, or if Optionee does
not exercise this Option within the time specified herein, the
Option shall terminate.
7. DISABILITY OF OPTIONEE. Notwithstanding the provisions
of Section 6 above, in the event of termination of Optionee's Con-
tinuous Status as an Employee as a result of total and permanent
disability (as defined in Section 22(e)(3) of the Code), Optionee
may, but only within twelve (12) months from the date of termina-
tion of employment (but in no event later than the date of expi-
ration of the term of this Option as set forth in Section 10
below), exercise the Option to the extent otherwise so entitled at
the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if
Optionee does not exercise such Option (to the extent otherwise so
entitled) within the time specified herein, the Option shall
terminate.
8. DEATH OF OPTIONEE. In the event of the death of
Optionee, the Option may be exercised at any time within twelve
(12) months following the date of death (but in no event later than
the date of expiration of the term of this Option as set forth in
Section 10 below), by Optionee's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but
only to the extent the Optionee could exercise the Option at the
date of death.
9. NON-TRANSFERABILITY OF OPTION. This Option may not be
transferred in any manner otherwise than by will or by the laws of
descent or distribution and may be exercised during the lifetime of
Optionee only by him. The terms of this Option shall be binding
upon the executors, administrators, heirs, successors and assigns
of the Optionee.
10. TERM OF OPTION. This Option may be exercised only within
the term set out in the Notice of Grant, and may be exercised
during such term only in accordance with the Plan and the terms of
-3-
<PAGE>
this Option. The limitations set out in Section 7 of the Plan
regarding Options designated as Incentive Stock Options shall apply
to this Option.
11. TAX CONSEQUENCES. Set forth below is a brief summary as
of the date of this Option of some of the federal tax consequences
of exercise of this Option and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS
ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(i) EXERCISE OF ISO. If this Option qualifies as an
ISO, there will be no regular federal income tax liability upon the
exercise of the Option, although the excess, if any, of the fair
market value of the Shares on the date of exercise over the Exer-
cise Price will be treated as an adjustment to the alternative
minimum tax for federal tax purposes and may subject the Optionee
to the alternative minimum tax in the year of exercise.
(ii) EXERCISE OF NONQUALIFIED STOCK OPTION. If this
Option does not qualify as an ISO, there may be regular federal
income tax liability upon the exercise of the Option. The Optionee
will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the fair
market value of the Shares on the date of exercise over the Exer-
cise Price. If Optionee is an employee, the Company will be
required to withhold from Optionee's compensation income at the
time of exercise.
(iii) DISPOSITION OF SHARES. In the case of an NSO, if
Shares are held for at least one year, any gain realized on dis-
position of the Shares will be treated as long-term capital gain
for federal income tax purposes. In the case of an ISO, if Shares
transferred pursuant to the Option are held for at least one year
after exercise and are disposed of at least two years after the
Date of Grant, any gain realized on disposition of the Shares will
also be treated as long-term capital gain for federal income tax
purposes. If Shares purchased under an ISO are disposed of within
such one-year period or within two years after the date of Grant,
any gain realized on such disposition will be treated as compensa-
tion income (taxable at ordinary income rates) to the extent of the
excess, if any, of the fair market value of the Shares on the date
of exercise over the Exercise Price.
(iv) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES.
If the Option granted to Optionee herein is an ISO, and if Optionee
sells or otherwise disposes of any of the Shares acquired pursuant
to the ISO on or before the later of (1) the date two years after
-4-
<PAGE>
the Date of Grant, or (2) the date one year after transfer of such
Shares to the Optionee upon exercise of the ISO, the Optionee shall
immediately notify the company in writing of such disposition.
Optionee agrees that Optionee may be subject to income tax with-
holding by the Company on the compensation income recognized by the
Optionee from the early disposition by payment in cash or out of
the current earnings paid to the Optionee.
12. ENTIRE AGREEMENT; GOVERNING LAW. The Plan and this
Option Agreement constitute the entire agreement of the parties
with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and
Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee's interest except by means of a
writing signed by the Company and Optionee. This agreement is
governed by Nevada law except for that body of law pertaining to
conflict of laws.
LORONIX INFORMATION SYSTEMS, INC.,
a Nevada corporation
By:
---------------------------------
President
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CON-
SULTANCY OR EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE
ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING
IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY
RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY
THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH HIS RIGHT OR
THE COMPANY'S RIGHT TO TERMINATE HIS EMPLOYMENT OR CONSULTANCY AT
ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and
certain information related thereto and represents that he is
familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof.
Optionee has reviewed the Plan and this Option in their entirety,
has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the
Option. Optionee hereby agrees to accept as binding, conclusive
-5-
<PAGE>
and final all decisions or interpretations of the Board upon any
questions arising under the Plan.
Date:
----------------------- ------------------------------
Optionee
-6-
<PAGE>
EXHIBIT A
EXERCISE NOTICE
LORONIX INFORMATION SYSTEMS, INC.
Loronix Information Systems, Inc.
750 S. Camino Del Rio
Durango, Colorado 81301
Attention: Secretary
1. EXERCISE OF OPTION. Effective as of today, __________ 19__, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to
purchase _________ shares of the Common Stock (the "Shares") of Loronix
Information Systems, Inc. (the "Company") under and pursuant to the Company's
1992 Stock Plan, as amended (the "Plan") and the [ ] Incentive [ ]
Nonqualified Stock Option Agreement dated _______ (the "OPTION AGREEMENT").
2. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee
has received, read and understood the Plan and the Option Agreement and
agrees to abide by and be bound by their terms and conditions.
3. RIGHTS AS SHAREHOLDER. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such
Shares, no right to vote or receive dividends or any other right as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. A share certificate for the number of Shares so
acquired shall be issued to the Optionee as soon as practicable after
exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in [Section 13] of the Plan.
4. TAX CONSULTATION. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by
and construed in accordance with the laws of the State of Nevada excluding
that body of law pertaining to conflicts of law. Should any provision of
this Agreement be determined by a
<PAGE>
court of law to be illegal or unenforceable, the other provisions shall
nevertheless remain effective and shall remain enforceable.
6. NOTICES. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery or
upon deposit in the United States mail by certified mail, with postage and
fees prepaid, addressed to the other party at its address as shown below
beneath its signature, or to such other address as such party may designate
in writing from time to time to the other party.
7. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
8. DELIVERY OF PAYMENT. Optionee herewith delivers to the Company the
full Exercise Price for the Shares.
9. ENTIRE AGREEMENT. The Plan and Notice of Grant/Option Agreement
are incorporated herein by reference. This Agreement, the Plan and the
Notice of Grant/Option Agreement constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements
of the Company and Optionee with respect to the subject matter hereof and may
not be modified adversely to the Purchaser's interest except by means of a
writing signed by the Company and Purchaser.
Submitted by: Accepted by:
OPTIONEE: LORONIX INFORMATION SYSTEMS, INC.
By:
- ----------------------------- ------------------------------
(Signature)
Its:
-----------------------------
ADDRESS: ADDRESS:
- ------- --------
- ----------------------------- 820 Airport Road
- ----------------------------- Durango, CO 81301
-2-
