SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 the party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[x ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11 (c) or Rule 14a-12
Videonics, Inc.
--------------
(Name of Registrant as Specified in Its Charter)
Videonics, Inc.
--------------
(Name of Person (s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[ x] $125 per Exchange Act Rule 0-11 (c) (1) (ii), 14a-6(i) (1) or 14a-
6j (2)
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6 (I) (3)
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i) (45) and 0-11
(1) Title of each class of securities to which transaction applies:
______________________________________________________________________________
(2) Aggregate number of securities to which tranactions applies:
______________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
______________________________________________________________________________
(4) Proposed maximum aggregrate value of transaction:
______________________________________________________________________________
<PAGE>
VIDEONICS, INC.
----------------
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of
Videonics, Inc., a California corporation (the "Company"), will be held at 1370
Dell Avenue, Campbell, California 95008 at 4:00 p.m. on Thursday, December 12,
1996, for the following purpose:
Proposal To approve the adoption of the Company's Amended 1996 Stock
Option Plan, pursuant to which 1,000,000 shares of common stock are reserved
for issuance;
and to transact such other business as may properly come before the meeting or
any adjournments thereof.
The close of business on November 7, 1996 has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the meeting.
PLEASE SIGN, DATE AND MAIL YOUR PROXY IN THE ENVELOPE PROVIDED FOR YOUR
CONVENIENCE. YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO THE MEETING, AND IF
YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors,
/s/ Mark C. Hahn
----------------
Mark C. Hahn
Secretary
Dated: November 12, 1996
<PAGE>
VIDEONICS, INC.
1370 Dell Ave.
Campbell, California 95008
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Videonics, Inc. (the "Company") for use at
a Special Meeting of Shareholders to be held on December 12, 1996, or at any
adjournments thereof (the "Special Meeting"), for the purposes set forth herein
and in the foregoing Notice. This Proxy Statement and the accompanying Proxy are
being mailed to the Company's shareholders on or about November 12, 1996.
At the close of business on November 7, 1996, the record date fixed by the
Board of Directors of the Company for determining those shareholders entitled to
vote at the Special Meeting (the "Record Date"), the outstanding shares of the
Company entitled to vote consisted of 5,664,505 shares of Common Stock. Each
shareholder of record at the close of business on the Record Date is entitled to
one vote for each share then held on each matter submitted to a vote of the
shareholders.
A form of proxy is enclosed for use at the Special Meeting. The proxy may
be revoked by a shareholder at any time prior to the exercise thereof, and any
shareholder present at the Special Meeting may revoke his proxy thereat and vote
in person if he or she so desires. When such proxy is properly executed and
returned, the shares it represents will be voted at the Special Meeting in
accordance with any instructions noted thereon. If no direction is indicated,
all shares represented by valid proxies received pursuant to this solicitation
(and not revoked prior to exercise) will be voted in favor of all proposals
stated in the Notice of Meeting and described in this Proxy Statement.
<PAGE>
PROPOSAL
APPROVE AMENDMENT OF THE COMPANY'S 1996 STOCK OPTION PLAN
In February 1996, in order to attract and retain personnel who possess a
high degree of competence, experience and motivation, the Company's Board of
Directors adopted the 1996 Stock Option Plan (the "1996 Option Plan"). A total
of 500,000 shares of Common Stock has been reserved for issuance under the 1996
Option Plan. The Compensation Committee and the Board authorized the 1996 Option
Plan because the Company's 1987 Stock Option Plan (the "1987 Option Plan") will
terminate, in accordance with its terms, on January 1, 1997 and all shares
currently reserved under the 1987 Option Plan will be granted in 1996. At the
Annual Meeting of shareholders held on May 29, 1996, the shareholders approved
the adoption of the 1996 Option Plan. On October 2, 1996, the Company's Board of
Directors amended the 1996 Option Plan to increase the number of shares reserved
for issuance under Section 4(a) from 500,000 to 1,000,000. This amendment is
reflected in the Amended 1996 Stock Option Plan (the "Amended 1996 Option
Plan"). No additional amendments or modifications to the 1996 Option Plan are
proposed for shareholder approval. The Company's Board of Directors recommends a
vote in favor of the increase in the number of authorized shares for two
reasons. First, since the 1996 Option Plan was proposed, the Company has
expanded its business through the acquisition of the assets and personnel of KUB
Systems. Second, the Company continues to strengthen its engineering management
team and development staff. In the presently strong competitive environment for
skilled engineering personnel, the Company needs equity incentives represented
by these additional options to attract such personnel. The affirmative vote of a
majority of the shares present, in person or by proxy, at the Special Meeting is
required to approve the Amended 1996 Option Plan.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL
Description of Amended 1996 Option Plan
Amended 1996 Option Plan. Under the Amended 1996 Option Plan, there are
1,000,000 shares of Common Stock reserved for issuance upon the exercise of
options granted to key employees and Directors of and consultants to the
Company. The Amended 1996 Option Plan provides for the grant of both incentive
stock options, intended to qualify as such under Section 422 of the Code, and
nonstatutory stock options. The Amended 1996 Option Plan will terminate on
February 11, 2006, unless sooner terminated by the Board of Directors.
The Amended 1996 Option Plan is administered by the Board of Directors,
unless the Board delegates administration to a committee of disinterested
directors. Subject to the limitations set forth in the Amended 1996 Option Plan,
the Board has the authority to select the persons to whom grants are to be made,
to designate the number of shares to be covered by each option, to establish
vesting schedules, to determine whether an option is to be an incentive stock
option or a nonstatutory stock option and to specify other terms of the options.
The maximum term of options granted under the Amended 1996 Option Plan is ten
years in the case of incentive stock options and ten years and two days in the
case of nonstatutory stock options. Options granted under the Amended 1996
Option Plan generally are nontransferable and expire three months after the
termination of an optionee's employment, directorship or consulting relationship
with the Company. In general, if an optionee is permanently disabled or dies
during his or her employment by or service to the Company, such person's vested
options may be exercised up to one year following such disability or death.
<PAGE>
The Amended 1996 Option Plan will continue to provide that each
non-employee director ("Outside Director"), who does not own more than 2 percent
of the Company's Common Stock (taking into account the conversion of all options
owned by such Outside Director), serving on the Company's Board of Directors on
August 31st of each year will be granted nonstatutory stock options to purchase
4,500 shares of the Company's Common Stock. In addition, Outside Directors newly
elected or appointed to the Company's Board of Directors, after February 11,
1996, will initially be granted options to purchase 6,000 shares of the
Company's Common Stock and thereafter will be granted options to purchase 4,500
shares of the Company's Common Stock on August 31st for each year for so long as
they serve as directors of the Company. The exercise price of all such options
must equal the fair market value of the Company's Common Stock on the grant date
and such grants shall become exercisable at a rate of 1/6 after the first full
six months, and 1/6 every six months thereafter such that all such options will
be vested three years after the grant date.
The exercise price of nonstatutory stock options granted under the Amended
1996 Option Plan must equal at least 85% and the exercise price of incentive
stock options must equal 100%, of the fair market value of the Common Stock on
the date of grant. The exercise price of options granted to any person who, at
the time of grant, owns stock possessing more than 10% of the total combined
voting power of all classes of stock must be at least 100% of the fair market
value of such stock on the date of grant in the case of a nonstatutory stock
option and 110% in the case of an incentive stock option. Additionally, in the
case of an incentive stock option grant to such person, the term of these
options cannot exceed five years. Shares covered by currently outstanding
options under the Amended 1996 Option Plan typically become exercisable at a
rate of 1/6 after the first full six months of employment, and 1/6 every six
months thereafter for a total three year vesting period following the date of
grant.
Incentive Stock Options: There are generally no federal income tax
consequences to the optionee or the Company by reason of the grant or exercise
of an incentive stock option. If an optionee holds stock acquired through the
exercise of an incentive stock option for more than two years from the date on
which the option is granted and more than one year from the date on which the
shares are transferred to the optionee upon exercise of an option, any gain or
loss on disposition of such stock will be long term capital gain or loss.
Generally, if the optionee disposes of the stock before the expiration of either
of these holding periods (a "disqualifying disposition"), at the time of
disposition, the optionee will realize taxable ordinary income equal to the
lesser of the excess of the stock's fair market value on the date of exercise
over the exercise price, or (ii) the optionee's actual gain, if any, on the
purchase and sale. The optionee's additional capital gain, or any loss upon the
disqualifying disposition, will be long or short term depending on whether the
stock was held for more than one year.
Nonstatutory Stock Options: There are no tax consequences to the optionee
or the Company by reason of the grant of a nonstatutory stock option. Upon
exercise of a nonstatutory stock option, the optionee normally will recognize
taxable ordinary income equal to the excess of the stock's fair market value on
the date of exercise over the option exercise price. Generally, with respect to
employees, the Company is required to withhold from regular wages or
supplemental wage payments an amount based on the ordinary income recognized.
Subject to certain requirements, the Company will be entitled to a business
expense deduction equal to the taxable ordinary income realized by the optionee.
Upon disposition of the stock, the optionee will recognize a capital gain or
loss equal to the difference between the selling price and the sum of the amount
paid for such stock plus any amount recognized as ordinary income upon exercise
of the option. Such gain or loss will be long or short term depending on whether
the stock was held for more than one year.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of October 7, 1996, certain information
with respect to each person known by the Company to be a beneficial owner, as
defined in Rule 13d-3 ("Rule 13d-3") promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended (the "1934
Act") of more than 5% of the outstanding Common Stock of the Company.
<TABLE>
Percentage of
Outstanding
Name and Address Number of Shares Common
of Beneficial Owner Beneficially Owned Stock
<S> <C> <C>
Carl E. Berg
10050 Drive
Cupertino, CA 95014 1,051,605 18%
Michael L. D'Addio
1370 Dell Avenue
Campbell, CA 95008<F1> 903,862 15%
Mark C. Hahn
1370 Dell Avenue
Campbell, CA 95008<F2> 578,031 10%
State of Wisconsin
Investment Board
P.O. Box 7842
Madison, WI 53707 535,000 9%
<FN>
<F1>
(1) Includes 6,000 shares subject to stock options exercisable as of
October 7, 1996 or within 60 days thereafter held by Mr. D'Addio's
spouse, a Company employee.
<F2>
(2) Includes 6,000 shares subject to stock options exercisable as of
October 7, 1996 or within 60 days thereafter held by Mr. Hahn's
spouse, a Company employee.
</FN>
</TABLE>
<PAGE>
SECURITY OWNERSHIP OF THE DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information, as of October 7, 1996
concerning each director and eac executive officer, including their beneficial
ownership as defined in Rule 13d-3, of shares of Common Stock and beneficial
ownership of Common Stock by all officers and directors as a group.
<TABLE>
Director/ Shares Percent
Officer Beneficially Beneficially
Name Age Since Positions Owned Owned
<S> <C> <C> <C> <C> <C>
Carl E. Berg 58 1988 Director 1,051,605 18
Michael L. D'Addio(1) 52 1986 Chairman, CEO, 903,862 15
President, &
Director
Mark C. Hahn(2) 47 1987 V.P., Chief 578,031 10
Technical Officer,
Secretary & Director
N. William Jasper, Jr.(3) 47 1993 Director 30,000 *
Jack M. Aiello(4) 46 1993 V.P. of Marketing 34,000 *
Jeffrey A. Burt(5) 43 1992 V.P. of Operations 43,000 *
James Francis(6) 31 1992 E.V.P. of Sales and 49,668 *
Marketing
Thomas Herrmann(7) 31 1995 V.P. of International 10,334 *
Sales
Wojciech Majewski(8) 32 1995 V.P. of Business 16,668 *
Development
James A. McNeill(9) 51 1993 V.P. of Finance, 75,000 1
CFO & Assistant
Secretary
David O'Kelly(10) 42 1996 V.P. of Domestic 4,167 *
Sales
Stephen L. Peters(11) 42 1996 V.P. of Research and 9,334 *
Development
All executive officers
and directors as a Group (12 persons)(12) 2,805,669 49
</TABLE>
* Represents less than 1%
<PAGE>
Jack M. Aiello has served as Vice President of Marketing of the Company
since February 1993. From March 1982 to January 1993 Mr. Aiello held various
marketing and sales operations positions with GRiD Systems, a division of Tandy
Corporation. Mr. Aiello holds B.A. degrees in Mathematics and Computer Science
from the University of California at Santa Cruz, and M.S. and E.E. degrees in
Electrical Engineering and Computer Science from the Massachusetts Institute of
Technology.
Jeffrey A. Burt has served as Vice President of Operations of the Company
since April 1992. From August 1991 to March 1992, Mr. Burt served the Company as
its Materials Manager. Prior to that time, from October 1990 until July 1991,
Mr. Burt acted as a consultant to the Company in the area of materials
management. From May 1989 to October 1990, Mr. Burt served as the Director of
Manufacturing of On Command Video. Mr. Burt holds a B.A. degree in Economics
from the University of Wisconsin at Whitewater.
James Francis has served as Executive Vice President of Sales and Marketing
since September 1995. From March 1992 to August 1995, Mr. Francis served the
Company as its Vice President of International Sales. From May 1990 to March
1992, Mr. Francis served the Company as its Manager of Far East Marketing. Prior
to joining the Company in 1990 Mr. Francis worked as a computer programmer with
IBM Corporation. Mr. Francis holds a B.S. degree in Electrical Engineering and
Japanese from Brigham Young University.
Thomas Herrmann has served as Vice President of International Sales since
September 1995. Previously, he served as an international sales engineer for the
European region. Prior to joining Videonics, Mr. Herrmann served as
international sales coordinator for Basic Measuring Instruments. He holds a B.S.
degree from California State Polytechnic University.
Wojciech Majewski has served as Vice President of Business Development
since September 1995. He joined Videonics in 1992 as an international sales
engineer, and most recently served as director of European sales. Previously,
Mr. Majewski served as a software programmer at a number of companies, including
Super Mac Technology and Digital F/X in Calif. He holds a B.S. degree in
computer sciences from the Technical University in Ilmenau, Germany. Mr.
Majewski is fluent in seven languages; English, Spanish, German, French,
Russian, Polish and Czech.
James A. McNeill has served the Company as its Vice President of Finance
and Chief Financial Officer since November 1993. Mr. McNeill has served as
Assistant Secretary since October 1994. From 1991 until joining the Company, Mr.
McNeill served as Vice President, Finance of JHK & Associates, Inc., a
professional services firm. From 1978 to 1991, he served successively as Vice
President of Finance and President of U.S. Controls Holding, Inc. and its
subsidiaries, Reactor Controls, Inc. and Project Integration, Inc. Mr. McNeill
holds a B.S. degree in Accounting from Pennsylvania State University and is a
C.P.A. under the laws of California.
David O'Kelly has served as Vice President of Domestic Sales of the Company
since May 1996. Previously he was President of Imageland Inc., a firm that
represented Videonics in the Canadian market from 1994 to 1996. Prior to that he
served as senior manager for Canon Canada, responsible for their consumer and
industrial video division.
Stephen L. Peters has served the Company as its Vice President of Research
and Development since February 1996. From 1994 to February 1996, Mr. Peters
acted as a consultant in the areas of international business planning and
product development. From 1976 to 1980 and from 1983 to 1994, he served as a
Division Manager, R&D Manager, R&D Section Manager, Project Manager, and
development engineer at Hewlett-Packard. From 1980 to 1983 he served as Project
Manager and senior engineer at Advanced Technology Labs. Mr. Peters holds B.S.
degrees from Oregon State University in Engineering Physics and Pre-medicine.
- -------------
(1) Includes 6,000 shares subject to stock options exercisable as of
October 7, 1996 or within 60 days thereafter held by Mr. D'Addio's
spouse, a Company employee.
(2) Includes 6,000 shares subject to stock options exercisable as of
October 7, 1996 or within 60 days thereafter held by Mr. Hahn's
spouse, a Company employee.
(3) Includes 30,000 shares subject to stock options exercisable as of
October 7, 1996 or within 60 days thereafter.
(4) Includes 34,000 shares subject to stock options exercisable as of
October 7, 1996 or within 60 days thereafter.
(5) Includes 43,000 shares subject to stock options exercisable as of
October 7, 1996 or within 60 days thereafter.
(6) Includes 49,668 shares subject to stock options exercisable as of
October 7, 1996 or within 60 days thereafter.
(7) Includes 10,334 shares subject to stock options exercisable as of
October 7, 1996 or within 60 days thereafter.
(8) Includes 16,668 shares subject to stock options exercisable as of
October 7, 1996 or within 60 days thereafter.
(9) Includes 7,500 shares of outstanding common stock acquired under a
stock purchase agreement that are subject to repurchase and 5,000
shares subject to stock options exercisable as of October 7, 1996 or
within 60 days thereafter.
(10) Includes 4,167 shares subject to stock options exercisable as of
October 7, 1996 or within 60 days thereafter.
(11) Includes 8,334 shares subject to stock options exercisable as of
October 7, 1996 or within 60 days thereafter.
(12) Includes an aggregate of 213,171 shares included pursuant to
notes (1) - (11).
<PAGE>
OTHER MATTERS
Expenses of Solicitation
The accompanying proxy is solicited by and on behalf of the Board of
Directors of the Company, and the entire cost of such solicitation will be borne
by the Company. In addition to the use of the mails, proxies may be solicited by
directors, officers and employees of the Company, by personal interview,
telephone and telegraph. Arrangements will be made with brokerage houses and
other custodians, nominees and fiduciaries for the forwarding of solicitation
material to the beneficial owners of stock held of record by such persons, and
the Company will reimburse them for reasonable out-of-pocket and clerical
expenses incurred by them in connection therewith.
Financial and Other Information
All financial information is incorporated by reference to the information
contained in the Financial Statements included in the Company's Annual Report to
security holders.
Shareholder Proposals
Proposals of shareholders that are intended to be presented at the
Company's 1997 Annual Meeting of shareholders must be received by the Company no
later than December 15, 1996, in order to be included in the proxy statement and
proxy relating to that Annual Meeting.
Discretionary Authority
The Special Meeting is called for the specific purposes set forth in the
Notice of Meeting as discussed above, and also for the purpose of transacting
such other business as may properly come before the Special Meeting. At the date
of this Proxy Statement the only matters which management intends to present, or
is informed or expects that others will present for action at the Special
Meeting, are those matters specifically referred to in such Notice. As to any
matters which may come before the Special Meeting other than those specified
above, the proxy holders will be entitled to exercise discretionary authority.
By Order of the Board of Directors,
/s/ Mark C. Hahn
----------------
Mark C. Hahn
Secretary
Dated: November 12, 1996
Campbell, California
<PAGE>
APPENDIX A
VIDEONICS, INC.
AMENDED 1996 STOCK OPTION PLAN
Adopted on February 12, 1996
Amended on October 2, 1996
1. PURPOSE.
(a) The purpose of this Amended Stock Option Plan (the "Plan") is to
provide a means whereby selected eligible employees of VIDEONICS, INC., a
California corporation (the "Company") may be given an opportunity to
purchase common stock of the Company (the "Common Stock"). The Internal
Revenue Code of 1986, is referred to herein as the "Code."
(b) The Company, by means of the Plan, seeks to retain the services of
its current key employees, and to secure and retain the services of new key
employees, corporate directors and consultants necessary for the continued
improvement of operations.
2. STOCK OPTIONS.
(a) Stock options granted pursuant to the Plan may, at the discretion
of the Board of Directors of the Company, be granted either as an Incentive
Stock Option ("ISO") or as a Nonstatutory Stock Option ("NSO"). An ISO
shall mean an option described in Section 422 of the Code. An NSO shall
mean any option not meeting the requirements of Section 422 of the Code. An
option designated as an NSO will not be treated as an ISO.
(b) Subject to the limitations of Section 3, below, each non-employee
director ("Outside Director") serving on the Board as of August 31st of
each year and who does not own more than two percent (2%) of the Company's
common stock (taking into account the conversion of all options owned by
such Outside Director) will be granted nonstatutory stock options to
purchase four thousand five hundred (4,500) shares of the Company's common
stock, for so long as they serve as directors of the Company. In addition,
each Outside Director newly elected or appointed to the Board after
February 11, 1996 will initially be granted options to purchase six
thousand (6,000) shares of the Company's common stock and thereafter will
be granted options to purchase four thousand five hundred (4,500) shares of
the Company's common stock on August 31st of each year for so long as they
serve as directors of the Company. The exercise price of all such options
must equal the fair market value of the Company's common stock on the grant
date and such grants shall become exercisable at a rate of 1/6 every six
(6) months such that all such options will be vested three (3) years after
the grant date.
3. ADMINISTRATION.
(a) The Board of Directors (the "Board"), whose authority shall be
plenary, shall administer the Plan, unless and until such time as the Board
delegates administration of the Plan pursuant to subsection 3(c).
(b) The Board, whose determinations shall be conclusive, shall have
the power, subject to and within the limits of the express provisions of
the Plan:
(i) To grant options pursuant to the Plan.
(ii) To determine from time to time which of the eligible
persons shallbe granted options under the Plan, the number of shares
for which each option shall be granted, the term of each granted
option and the time or times during the term of each option within
which all or portions of each option may be exercised (which at the
Board's discretion may be accelerated).
(iii) To construe and interpret the Plan and options
granted under it and to establish, amend, and revoke rules and
regulations for its administration. The Board, in the exercise
of this power, shall generally determine all questions of policy
and expediency that may arise and may correct any defect, omission
or inconsistency in the Plan or in any option agreement in a manner
and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iv) To grant options in exchange for cancellation of
options granted earlier at different exercise prices; provided,
however, that nothing contained herein shall empower the Board
to grant an ISO under conditions or pursuant to terms that
are inconsistent with the requirements of subsection 4(b), below,
or Section 422 of the Code.
(v) To prescribe the terms and provisions of each option
granted (which need not be identical) and the form of written
instrument that shall constitute the option agreement.
(vi) To amend the Plan as provided in Section 10, below.
(vii) Generally, to exercise such powers and to perform
such acts as are deemed necessary or expedient to promote the best
interests of the Company.
(viii) To take appropriate action to cause any option
granted hereunder to cease to be an ISO; provided, however, no such
action may be taken by the Board without the written consent of the
affected optionee.
(c) The Board may, by resolution, delegate administration of the Plan
(including, without limitation, the Board's powers under subsection 3(b)
above) to an existing committee acting under the authority of the Board,
consisting of not less than two (2) members of the Board, each of whom
shall not at any time within one (1) year prior to his or her service as an
administrator of the Plan have received a grant or award of equity
securities pursuant to the Plan or any other plan of the Company or any of
its affiliates. The Board shall have complete discretion to determine the
composition structure, form, term and operation of any committee
established to administer the Plan. The Board at any time may revest in the
Board the administration of the Plan.
4. SHARES SUBJECT TO PLAN AND TO OPTION.
(a) Subject to the provisions of Section 9, below (relating to
adjustments upon changes in stock), the stock which may be sold pursuant to
options granted under the Plan shall not exceed in the aggregate One
Million (1,000,000) shares of the Company's authorized Common Stock and may
be unissued shares, reacquired shares, or shares bought on the market for
the purpose of issuance under the Plan. If any options granted under the
Plan shall for any reason terminate or expire without having been exercised
in full, the stock not purchased under such options shall be available
again for the purpose of the Plan.
(b) If the aggregate fair market value of stock with respect to which
ISOs are exercisable for the first time by any individual during any
calendar year exceeds the amount provided in Section 422(d) of the Code,
such options representing stock in excess of the Section 422(d) annual
limitation shall be deemed to be a grant of an NSO to the extent of such
excess.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to full or part-time
employees of the Company. The price to be paid for each share of common
stock upon the exercise of an option shall be determined by the
Administrator at the time the option is granted, but shall in no event be
less than eighty-five percent (85%) in the case of a nonstatutory stock
option, and one hundred percent (100%) in the case of an incentive stock
option, of the fair market value of a share of Common Stock on the date the
option is granted.
(b) No option shall be granted to any individual who, at the time such
option would be granted, owns stock possessing more than ten percent (10%)
of the total combined voting power of all classes of outstanding capital
stock of the Company, unless the exercise price is, in the case of a
nonstatutory stock option, not less than one hundred percent (100%) and, in
the case of an incentive stock option, not less than one hundred ten
percent (110%) of the fair market value of the Common Stock on the date the
option is granted, and in the case of an incentive stock option the period
within which the option may be exercised does not exceed five (5) years
from the date the option is granted.
(c) Directors of the Company who are not also employees of the Company
shall not be eligible for ISO, but are eligible for NSO. Independent
contractors shall only be eligible for NSO. Any employee may hold more than
one (1) option at any time.
6. TERMS OF OPTIONS.
Options granted pursuant to the Plan need not be identical, but each option
shall be granted within ten (10) years from the date the Plan is adopted by the
Board or approved by the shareholders, whichever is earlier, shall specify the
number of shares to which it pertains and shall be subject to the following
terms and conditions:
(a) The purchase price under each option shall not be less than
eighty-five percent (85%), in the case of an NSO, or one hundred percent
(100%), in the case of an ISO, of the fair market value of the stock
subject thereto on the last trading day prior to the date the option is
granted (if the Stock is publicly traded, its closing sales price on
NASDAQ, the over-the-counter market or on an exchange), as such value is
determined in good faith by the Board of Directors, by taking into
consideration (with respect to stock which is not publicly traded) the
Company's net worth, prospective earning power and dividend-paying
capacity, and other relevant factors.
Some of the "other relevant factors" are the goodwill of the business;
the economic outlook in the particular industry; the Company's position in
the industry and its management; the degree of control of the business
represented by the block of stock to be valued; and the values of
securities of corporations engaged in the same or similar lines of business
which are listed on a stock exchange. In addition to the relevant factors
described above, consideration shall also be given to nonoperating assets
including proceeds of life insurance policies payable to or for the benefit
of the Company, to the extent such nonoperating assets have not been taken
into account in the determination of net worth prospective earning power
and dividend-earning capacity.
(b) Except as otherwise set forth in Section 5, above, the term of any
ISO shall not be greater than ten (10) years from the date it was granted,
and the term of any NSO shall not be greater than ten (10) years and two
(2) days from the date it was granted.
(c) An option by its terms, shall not be transferable otherwise than
by will or the laws of descent and distribution and may be exercisable,
during the lifetime of the option holder, only by the individual to whom
the option is granted.
(d) Each option shall become exercisable on an annual basis as to not
less than twenty percent (20%) of the total number of shares subject
thereto.
(e) Upon the termination of a participant's employment, his rights to
exercise an option then held by him shall be only as follows:
(i) If a participant's employment, directorship or
consulting relationship is terminated by death or disability, he or
his estate, as the case may be, shall have the right for a period of
not less than one (1) year following the date of death or disability,
or for such longer period as the Board may fix, to exercise the
option to the extent the participant was entitled to exercise
such option on the date of his death or disability, or to the extent
otherwise specified by the Board, which may so specify, at a time
that is subsequent to the date of his death or disability,
provided the actual date of exercise is in no event after the
expiration of the term of the option. A participant's estate shall
mean his legal representative or any person who acquires the right
to exercise an option by reason of the participant's death or
disability.
(ii) If a participant's employment, directorship or
consulting relationship is terminated for any reason other than
"death or disability," he may, for a period of at least three
(3) months following such termination (but in no event later than
that date upon which the option expires by reason of the lapse of
time), or within such longer period as the Board may fix, exercise
the option to the extent such option was exercisable by the
participant on the date of such termination, or to the extent
otherwise specified by the Board, which may so specify at a time that
is subsequent to the date of such termination, provided the date of
exercise is in no event after the expiration of the term of the
option.
(f) Options may also contain such other provisions, which shall not be
inconsistent with any of the foregoing terms, as the Board shall deem
appropriate. No option, however, nor anything contained in the Plan, shall
confer upon any participant any right to continue as an employee or
director of, or consultant to, the Company (or affiliate) nor limit in any
way the right of the Company (or affiliate) to terminate his employment or
other relationship with the Company at any time.
(g) Subject to any required action by the Company's shareholders, if
the Company shall be the surviving corporation in any merger or
consolidation, each outstanding option shall pertain and apply to the
securities to which a holder of the number of shares subject to the option
would have been entitled. A dissolution or liquidation of the Company or a
merger or consolidation in which the Company is not the surviving
corporation shall cause each outstanding option to terminate, unless the
surviving corporation in the case of a merger or consolidation assumes
outstanding options or replaces them with substitute options having
substantially similar terms and conditions.
7. PAYMENTS AND LOANS UPON EXERCISE.
(a) The purchase price of stock sold pursuant to an option shall be
paid in full either in cash or by certified check at the time the option is
exercised or pursuant to any deferred payment arrangement that the Board in
its discretion may approve; provided, however, that any interest to be paid
by an optionee in connection with any such deferred payment arrangement
shall be charged at the applicable federal rate as defined in Section
1274(d) of the Code.
(b) The Company may make loans or guarantee loans made by an
appropriate financial institution to individual optionees, including
officers, on such terms as may be approved by the Board for the purpose of
financing the exercise of options granted under the Plan and the payment of
any taxes that may be due by reason of such exercise.
(c) In addition, if and to the extent authorized by the Board,
optionees may make all or any portion of any payment due to the Company
upon exercise of an option by delivery of any property (including
securities of the Company) other than cash, so long as such property
constitutes valid consideration for the stock under applicable law.
(d) Where the Company has or will have a legal obligation to withhold
taxes relating to the exercise of any stock option, such option may not be
exercised, in whole or in part, unless such tax obligation is first
satisfied in a manner satisfactory to the Company.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the Plan
shall be used for general corporate purposes.
9. ADJUSTMENTS OF AND CHANGES IN THE STOCK.
Subject to the rights of the Company set forth in Section 6 above, in the
event that the shares of Common Stock of the Company, as presently constituted,
shall be changed into or exchanged for a different number or kind of shares of
stock or other securities of the Company or of another corporation (whether by
reason of merger, consolidation, recapitalization, reclassification, split-up,
combination of shares, or otherwise), or if the number of shares of Common Stock
of the Company shall be increased through the payment of a stock dividend, then
there shall be substituted for or added to each share of Common Stock of the
Company theretofore appropriated or thereafter subject or which may become
subject to an option under the Plan, the number and kind of shares of stock or
other securities into which each outstanding share of Common Stock of the
Company shall be so changed, or for which each such share shall be exchanged or
to which each such share shall be entitled, as the case may be. Outstanding
options shall also be amended as to price and other terms if necessary to
reflect the foregoing events. In the event there shall be any other change in
the number or kind of the outstanding shares of Common Stock of the Company, or
of any stock or other securities into which such Common Stock of the Company, or
of any stock or other securities into which such Common Stock shall have been
changed, or for which it shall have been exchanged, then if the Board of
Directors shall, in its sole discretion, determine that such change equitably
requires an adjustment in any option theretofore granted or which may be granted
under the Plan, such adjustment shall be made in accordance with such
determination. No right to purchase fractional shares shall result from any
adjustment in options pursuant to this Section 9. In case of any such
adjustment, the shares subject to the option shall be rounded down to the
nearest whole share. Notice of any adjustment shall be given by the Company to
each holder of an option which shall have been so adjusted and such adjustment
(whether or not such notice is given) shall be effective and binding for all
purposes of the Plan.
10. AMENDMENT OF THE PLAN.
The Board may not amend the Plan more than once every six months except to
comport with changes in the Code, the Employee Retirement Income Security Act,
or the rules thereunder. Except as provided in Section 9 (relating to
adjustments upon changes in stock), no amendment shall be effective, unless
approved, within twelve (12) months before or after the date of such amendment's
adoption, by the vote or written consent of a majority of the outstanding shares
of the Company entitled to vote, where such amendment will:
(a) Increase the number of shares reserved for options under
the Plan;
(b) Materially increase the benefits accruing to
participants under the Plan; or
(c) Materially modify the requirements of Section 5 as to
eligibility for participation in the Plan.
It is expressly contemplated that the Board may amend the Plan in any
respect necessary to provide the Company's employees with the maximum benefits
provided or to be provided under Section 422 of the Code and the regulations
promulgated thereunder relating to employee incentive stock options and/or to
bring the plan or options granted under it into compliance therewith.
Rights and obligations under any option granted before any amendment of the
Plan shall not be altered or impaired by amendment of the Plan, except with the
consent, which may be obtained in any manner deemed by the Board to be
appropriate, of the person to whom the option was granted.
11. TERMINATION OR SUSPENSION OF THE PLAN.
The Board at any time may suspend or terminate the Plan. The Plan, unless
sooner terminated, shall terminate at the end of ten (10) years from the date
the Plan is adopted by the Board or approved by the stockholders of the Company,
whichever is earlier. An option may not be granted under the Plan while the Plan
is suspended or after it is terminated.
Rights and obligations under any option granted while the Plan is in effect
shall not be altered or impaired by suspension or termination of the Plan,
except with the consent of the person to whom the option was granted, which may
be obtained in any manner that the Board deems appropriate.
12. LISTING, QUALIFICATION OR APPROVAL OF STOCK; APPROVAL OF OPTIONS.
All options granted under the Plan are subject to the requirement that if
at any time the Board shall determine in its discretion that the listing or
qualification of the shares of stock subject thereto on any securities exchange
or under any applicable law, or the consent or approval by any governmental
regulatory body or the shareholders of the Company, is necessary or desirable as
a condition of or in connection with the issuance of shares under the option,
the option may not be exercised in whole or in part, unless such listing,
qualification, consent or approval shall have been effected or obtained free of
any condition not acceptable to the Board.
13. BINDING EFFECT OF CONDITIONS.
The conditions and stipulations hereinabove contained or in any option
granted pursuant to the Plan shall be and constitute a covenant running with all
of the shares of the Company owned by the participant at any time, directly or
indirectly whether the same have been issued or not, and those shares of the
Company owned by the participant shall not be sold, assigned or transferred by
any person save and except in accordance with the terms and conditions herein
provided, and the participant shall agree to use his best efforts to cause the
officers of the Company to refuse to record on the books of the Company any
assignment or transfer made or attempted to be made, except as provided in the
Plan and to cause said officers to refuse to cancel old certificates or to issue
or deliver new certificates therefor where the purchaser or assignee has
acquired certificates for the stock represented thereby, except strictly in
accordance with the provisions of this Plan.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board but no options
granted under it shall be exercisable until the Plan has been approved by the
vote or written consent of the holders of a majority of the outstanding shares
of the Company entitled to vote.
15. MISCELLANEOUS.
The use of any masculine pronoun or similar term is intended to be without
legal significance as to gender.
16. FINANCIAL REPORTS.
The Company shall provide financial and other information regarding the
Company, on an annual or more frequent basis, to each individual holding an
outstanding option under the Plan, as required pursuant to Section 260.140.46 of
Title 10, California Code of Regulations.
