SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
X- Filed by the registrant
Filed by a party other than the registrant
Check the appropriate box:
X- Preliminary proxy statement
Confidential, for Use of the Commission Only
(as permitted by Rule14a6 (e) (2))
Definitive proxy statement
Definitive additional materials
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a12
________NEW PARADIGM SOFTWARE CORP.________
(Name of Registrant as Specified in Its Charter)
_____________________________________________________________________________
(Name of Person(s)Filing Proxy Statement if other than the Registrant)
Payment of filing fee (Check the appropriate box):
X- $125 per Exchange Act Rules 011(c)(1)(ii), 14a6(i)(1),
or 14a-6(j)(2) or item 22(a)(2) of Schedule 14A.
$500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
Fee computed on table below per Exchange Act Rules 14a6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
____________________________________________________________________________
(2) Aggregate number of securities to which transactions applies:
____________________________________________________________________________
(3) Per unit price or other underlying value oftransaction computed pursuant
to Exchange Act Rule 0-11:1. Set forth the amount on which the filing fee is
calculated and state how it was determined.
____________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
____________________________________________________________________________
(5) Total Fee Paid:
____________________________________________________________________________
Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
___________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
(3) Filing party:
___________________________________________________________________________
(4) Date filed:
___________________________________________________________________________
June __, 1996 [Logo]
DEAR SHAREHOLDER:
On behalf of the Board of Directors and management, we cordially invite you
to the Annual Meeting of Shareholders to be heldTuesday, July 30, 1996, at
11:00 A.M., at the principal executive offices of the Corporation,
335 Madison Avenue, 11th Floor, New York City. In the pages that follow you
will find the Notice of Annual Meeting and the Proxy Statement describing the
formal business to be transacted at this meeting. Please read them carefully.
At the Annual Meeting, there will be a report to shareholders regarding the
operations of New Paradigm Software Corp. In addition, time will be made
available for shareholders to discuss the formal business items as well as
to ask other questions about New Paradigm Software Corp.'s operations.
It is important that your shares be voted at the meeting in accordance with
your preference whether or not you plan to attend in person. We urge you to
specify your choices on the matters presented by filling in the appropriate
boxes on the enclosed Proxy Card. Please sign, date and return the Proxy Card
in the prepaid envelope provided. Your cooperation in promptly returning
the Proxy Card will save your Corporation additional solicitation costs and
is appreciated. If you do attend the meeting and wish to vote in person,
you may withdraw your Proxy at that time.
Sincerely,
/s/ Daniel A. Gordon
Daniel A. Gordon
Chairman of the Board
June __, 1996 [Logo]
Re: NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JULY 30,
1996
To the Shareholders of New Paradigm Software Corp.:
The Annual Meeting of Shareholders of New Paradigm Software Corp.
(the "Corporation") will be held at the principal executive offices of the
Corporation, 335 Madison Avenue, 11th Floor, New York, New York 10017,
Tuesday, July 30, 1996, at 11 A.M., for the purpose of considering and
voting upon the following:
1. Election of six directors;
2. Proposal to adopt a By-Law amendment to eliminate the applicability of
New York Business Corporation Law Section 912 (an anti-takeover provision);
3. Proposal to adopt an Executive Stock Option Plan;
4. Proposal to Amend the Corporation's Stock Option Plan;
5. Ratification of the appointment of BDO Seidman, LLP as the independent
certified public accountants for the fiscal year ending March 31, 1997; and
6. Such other business as may properly come before the Annual Meeting or any
adjournment thereof.
Information relating to the above matters is set forth in the accompanying
Proxy Statement.
In accordance with the By-Laws and resolutions of the Board of Directors,
only shareholders of record at the close of business on June 14, 1996 shall
be entitled to notice of and to vote at the Annual Meeting.
By Order of the Board of Directors,
/s/ John Brann
John Brann
Vice President of Technology and Secretary
___________________________________________________________________________
Please sign and return the enclosed proxy card in the envelope provided.
No postage is necessary.
___________________________________________________________________________
335 Madison Avenue, 11th Floor
New York, New York 10017
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JULY 30, 1996
PROXY STATEMENT
To the Shareholders of New Paradigm Software Corp.:
This statement is furnished in connection with the solicitation of proxies
by the Board of Directors of New Paradigm Software Corp. (the "Corporation")
for use at the Annual Meeting of Shareholders to be held at 11 A.M. on
July 30, 1996, at the principal executive offices of the Corporation,
335 Madison Avenue, 11th Floor, New York, New York, and at any adjournment
thereof (the OAnnual MeetingO). A Notice of Annual Meeting is attached
hereto and a form of proxy is enclosed.
THE PROXY
The persons named as proxies were selected by the Board of Directors of the
Corporation and are directors or officers of the Corporation. When the
proxies in the enclosed form are properly executed and returned, the shares
they represent will be voted at the Annual Meeting in accordance with the
shareholders'directions. Any shareholder giving a proxy has the power to
revoke it at any time before it is voted at the Annual Meeting by filing
with the Secretary of the Corporation an instrument revoking it or by filing
a duly executed proxy bearing a later date.
The proxy cards should be sent to the Corporation sufficiently in advance of
the Annual Meeting so that they are received at the principal executive
offices of the Corporation prior to the commencement of the Annual Meeting.
The cost of soliciting proxies will be borne by the Corporation. The
Corporation will request banks and brokers to solicit their customers who have a
beneficial interest in the Corporation's shares registered in the names of
nominees and will reimburse such banks and brokers for their reasonable
out-of-pocket expenses of such solicitations. In addition, directors,
officers and full-time employees of the Corporation may solicit proxies by
telephone, telegraph or personal interview.
These proxy materials are being mailed to shareholders of the Corporation
commencing on June __, 1996. A copy of the Annual Report to Shareholders for
the year ended March 31, 1996 is being mailed to shareholders concurrently.
VOTING SECURITIES
The only securities of the Corporation entitled to vote at the Annual Meeting
are shares of Common Stock, par value $.01 per share (the "Common Stock"),
outstanding on June 14, 1996 (the Record Date). On that date, there were
2,441,729 shares of Common Stock outstanding. Each share of Common Stock is
entitled to one vote at the Annual Meeting.
VOTING PROCEDURES
Under the New York Business Corporation Law (the BCL) and the Corporation's
By-Laws, the presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote on a particular
matter is necessary to constitute a quorum of shareholders to take action at
the Annual Meeting with respect to such matter. For these purposes, shares
which are present, or represented by a proxy, at the Annual Meeting will be
counted for quorum purposes regardless of whether the holder of the shares
or proxy fails to vote on any particular matter or whether a broker with
discretionary authority fails to exercise its discretionary voting authority
with respect to any particular matter. Once a quorum of the shareholders is
established, under the BCL and the Corporation's By-Laws, the directors
standing for election must be elected by a plurality of the votes cast and
each other matter will be decided by a majority of the votes cast on the
matter, except as otherwise provided by law or the Corporation's Certificate
ofIncorporation. For voting purposes (as opposed to for purposes of
establishing a quorum) abstentions and broker non-votes will not be counted
in determining whether the directors standing for election have been elected
and whether each matter has been approved.
1. ELECTION OF SIX DIRECTORS
Under the Corporation's By-Laws, the number of directors constituting the
entire Board of Directors is currently seven (7). This numbermay be increased
or decreased (but not to a number less than three (3)) from time to time by
action of the Board of Directors taken by the affirmative vote of a majority
of the entire Board of Directors. No decrease in the number of directors
shall shorten the term of any incumbent director. Directors shall be
elected at the annual meeting of shareholders to hold office until the next
annual meeting of shareholders and until their respective successors are
elected and qualified.
Six directors are to be elected at the Meeting. The persons named as proxies
in the enclosed form of proxy cannot exercise the discretionary authority
granted to them by the proxy to vote for a greater number of persons than
the number of nominees named.
Five directors, including Daniel A. Gordon, Mark Blundell, John Brann and
Jeff Kahn were elected at the 1995 annual meeting of shareholders.
Barrington J. Fludgate, a director of the Corporation from November 1993 to
September 1995, resigned from the Board September 11, 1995. Mr. Fludgate
stated that his resignation from the Board of Directors was because he was
negotiating contracts with the Corporation and considered his position a
conflict ofinterest.
Beverly Brown was elected to the Board of Directors on September 20, 1995.
Michael Taylor was elected to the Board of Directors on April 26, 1996. Each
was elected to the Board of Directors by the Board of Directors pursuant to
provisions of the Corporation's By Laws for filling vacancies on the Board.
The Corporation has agreed that Mr. Robert S. Trump, an investor in a 1994
private placement of the Corporation's securities, may nominate for election
one person to serve on the Board of Directors. Mr. Trump has orally advised
the Corporation that he does not currently intend to nominate anyone to
serve on the Board of Directors.
THE BOARD OF DIRECTORS' RECOMMENDATION
Unless otherwise specified by the shareholder, the Board of Directors intends
the accompanying proxy to be voted FOR the election of the named six nominees
as directors.
The Board of Directors does not contemplate that any nominee will be unable
or unwilling to serve as a director. However, if that should occur, the
individuals named as the proxies reserve the right to substitute another
person as may be selected by the Board of Directors when voting at the Annual
Meeting.
Following is information about each of the six nominees for director who are
being proposed for election at the Annual Meeting.
NOMINEES FOR ELECTION AS DIRECTOR FOR TERM EXPIRING AT THE 1997 ANNUAL MEETING
DANIEL A. GORDON, age 57, an attorney, has been a director and the Chairman
of the Board of Directors of the Corporation since November 1993. He has been
a principal with Corporate Growth Services since 1992. Corporate Growth
Services provides consulting support services to businesses in the early
stages of development. From 1989 to 1992, Mr. Gordon served as President of
COIN Banking Systems, Inc., which had been the banking systems division of
COIN Financial Systems, Inc. Mr. Gordon had served as Chairman and Chief
Executive Officer of COIN Financial Systems, Inc., a financial software
development company, from 1984-1989.
BEVERLY BROWN, age 51, is the President of the Bruce Group, a consulting and
investment company, since September 1994. Ms. Brown was Executive Vice
President at Praxis International Inc., a software development company
specializing in database and data replication tools, where she had
operational responsibility for sales, marketing, business development,
professional services and education, from 1994 to 1996. Ms. Brown served as
Vice President Marketing at INGRES, a division of The ASK Group from 1992 to
1994. INGRES is a database software development company. Prior to her
employment at Ingres, Ms. Brown served IBM for 24 years in various executive
and management positions.
MARK BLUNDELL, age 38, is the Chief Executive Officer, President, Chief
Financial Officer and a current director of the Corporation and has served
in these capacities since the Corporation's inception in July 1993. From
October 1991 until December 1993, Mr. Blundell was initially the Chief
Executive Officer of Management Technologies, Inc.'s ("MTI") European
subsidiary and then the Chief Operating Officer and Chief Financial Officer of
MTI in New York. He was also a director of MTI from December 1993 to
March 1994. MTI is a publicly-held financial services software company. From
May 1988 to October 1991, Mr. Blundell was the Chief Executive Officer of the
London Fox, the futures and options exchange, where he introduced the first
international electronic trading system.
JOHN BRANN, age 35, is the Vice President of Technology, Secretary and a
current director of the Corporation and has served in these capacities since
the Corporation's inception in July 1993. From 1990 to December 1993,
Mr. Brann was the Vice President of Research and Development at MTI, where he
was responsible for the development of new systems. In 1990, Mr. Brann was an
outside consultant to The First Boston Corporation, consulting on building
real time information systems. From 1989 to 1990, Mr. Brann was employed by
Extel Financial, a major information vendor in London engaged in the
construction of electronic data feeds.
JEFF KAHN, age 38, has been a director of the Corporation since November
1993. In 1991, Mr. Kahn founded and began serving as president of Kahn
Communications Group Inc. ("KCG"), a marketing communications firm which
specializes in telecommunications, high technology, consumer, financial and
manufacturing industries. KCG is now a division of Ruder Finn, a marketing
communications firm. He presently serves as President of KCG. Prior to
forming KCG, Mr. Kahn was President of Schoenfeld Kahn from 1988-1991 and from
1987 to 1988 he was Executive Vice President of Schoenfeld Strauss, an
advertising agency, where he established that company's public relations
division.
MICHAEL TAYLOR, age 54, has been a director of the Corporation since
April 26, 1996. He is a Managing Director of Investment Banking at Laidlaw
Equities. He was Associate Director of Investment Banking for Josephthal
Lyon & Ross from June 1989 to March 1996. From December 1981 until joining
Josephthal, he was President of Mostel & Taylor Securities, Inc.,
a NASD-member investment banking and brokerage firm. He has been involved in
the securities industry since 1966, when he joined Lehman Brothers as an
analyst. He has been a director of NDE Environmental, Inc. since July 1992.
He is also Chairman of the Board of Jennifer Muller/The Works, a contemporary
dance company. He attended Amhurst College and Columbia University. In 1991,
the Securities and Exchange Commission entered an administrative order
finding that, in 1988 and 1989, Mr. Taylor aided Mostel & Taylor Securities,
Inc. in connection with certain violations of the net capital requirements
for securities broker-dealers imposed by the Securities Exchange Act of 1934,
and suspended him from associating with a broker, dealer, investment company,
investment adviser or municipal securities dealer in any capacity for 90 days
and in a proprietary or supervisory capacity indefinately. Mr Taylor was given
the right to apply for reinstatement in a propreietary and suporvisory
capacity after two years and has currently done so. Mr. Taylor consented to
the order without admitting or denying its findings.
INFORMATION AS TO COMMITTEES,ATTENDANCE
AND FEES OF THE BOARD OF DIRECTORS
The Corporation's Board of Directors has standing Audit, and Compensation
Committees.
The Audit Committee is comprised of Ms. Brown, Mr. Gordon and Mr. Taylor.
During the fiscal year ended March 31, 1996, the Audit Committee held one
meeting. The functions performed by the Audit Committee include:
(a) reviewing and approving the scope and coverage of the Corporation's
annual audit; (b) discussing any significant difficulties encountered or
significant findings made during the annual audit; (c) reviewing and
approving the annual audit, financial statements and management letters
following completion of the Corporation's annual audit; (d) reviewing with
the Corporation's independent certified public accountants and the
Corporation's management the accounting systems, financial controls and
procedures used by the Corporation; (e) reviewing and approving the annual
audit budget and actual fees paid to the Corporation's independent certified
public accountants; and (f) recommending to the Board of Directors each
year the firm of independent certified public accountants to be retained for
the following year.
The Compensation Committee is comprised of Ms. Brown, Mr. Gordon, Mr. Kahn
and Mr. Taylor. During the fiscal year ended March 31, 1996, the
Compensation Committee held two meetings. The functions performed by the
Compensation Committee include: (a) establishing and approving the
compensation to be paid to members of the Corporation's senior management;
(b) administering the Corporation's stock incentive plans; and
(c) authorizing and approving any special compensation arrangements for senior
management.
The Board of Directors of the Corporation held a total of 10 meetings during
the fiscal year ended March 31, 1996. During the periods in which they served
on the Board of Directors all directors attended at least 75% of (1) all
meetings of the Board of Directors and (2) all meetings of all board
committees on which they served, except that Jeff Kahn attended 50% of all
meetings of the Board of Directors. The overall attendance record for all
directors as a group during the fiscal year ended March 31, 1996 was 86%.
INDEMNIFICATION
The Corporation's Certificate of Incorporation and By-Laws contain provisions
exculpating the Corporation's directors from liability to the Corporation's
shareholders for certain actions taken or omitted by them and indemnifying
the Corporation's officers and directors against judgments, fines, amounts
paid in settlement and reasonable attorneys' fees incurred in the defense
of certain actions and proceedings to the extent permitted the BCL.
The Corporation purchased directors' and officers' liability insurance
coverage on April 10, 1996. The Corporation's current insurance coverage
was purchased for the one-year period commencing at 12:01 a.m. on
April 10, 1996 and extending through 12:01 a.m. of April 10, 1997, at an
annual aggregate premium of approximately $45,000. This coverage, subject to
a number of standard exceptions, indemnifies the directors and officers of
the Corporation, whether elected or appointed, for liabilities or losses
incurred in the performance of their duties up to an aggregate sum of
$1,000,000. The Corporation has purchased this insurance coverage from the
General Star Indemnity Company. No sums have been paid under this coverage
to the Corporation or any directors or officers nor have any claims for
reimbursement been made under this policy.
DIRECTORS' COMPENSATION
The directors of the Corporation currently receive a retainer of $1,000 per
quarter and a fee of $1,000 for each meeting of the Board of Directors that
they attend. They are also reimbursed by the Corporation for
their direct costs. On December 8, 1993, Messrs. Kahn, Gordon and two former
directors, were each granted, as remuneration for service on the Board of
Directors, an option (Directors' Options) to acquire, at a price of $5.00
per unit, 10,000 units, each unit consisting of one share of Common Stock and
one warrant to purchase one share of Common Stock at an exercise price of
$6.00 per share (1993 Warrant). These options will expire on November 1, 1998.
On April 26, 1995 Messrs. Blundell, Brann, Kahn, Gordon and one former
director were granted options under the Corporation's Stock Option Plan to
purchase 5,333 shares of Common Stock each at an exercise price of $4.50 per
share. These options became exercisable on April 26, 1996 and expire on
April 26, 2005. On November 30, 1995 Messrs. Kahn, Gordon and Ms. Brown were
each granted options under the Corporation's Stock Option Plan to purchase
10,000 shares of Common Stock at an exercise price of $5.125 per share.
Messrs. Blundell and Brann were granted options under the Corporation's
Stock Option Plan to purchase 20,000 shares of Common Stock at the same
exercise price. These options become exercisable on November 30, 1996 and
expire on November 30, 2000. On April 24 1996, Mr. Taylor was granted options
under the Corporation's Stock Option Plan to purchase 10,000 shares of Common
Stock at an exercise price of $5.125 per share. These options become
exercisable on April 24, 1997 and expire on April 24, 2001.
Pursuant to an Underwriting Agreement dated August 11, 1996 between the
Corporation and First Allied Securities, Inc., as representative (the
Representative) of the underwriters in the Corporation's initial public
offering, the Corporation has agreed that until September 11, 1996 it would
not issue any options to any director or officer of the Corporation without
the prior written consent of the Representative.
<TABLE>
BENEFICIAL OWNERSHIP OF THE CORPORATION'S COMMON STOCK (a)
The following table indicates the beneficial ownership of the
Corporation's Common Stock as of May 1, 1996, by (1) each of the directors and
nominees, (2) each of the executive officers of the Corporation, (3) all
directors, nominees and executive officers of the Corporation as a group and
(4) each person or entity which beneficially owned in excess of five percent of
the Common Stock, based upon information supplied by each of the directors,
nominees, executive officers and five percent beneficial owners:
<CAPTION>
Name of Beneficial Owner Right to Sole Right to Shared Total Number of Percent of
Voting and Voting and Shares Beneficially Common Stock
Investment Power Investment Power Owned Beneficially Owned
<S> <C> <C> <C> <C>
Beverly Brown 0(b) 0 0 0%
Mark Blundell 50,666(c) 199,999(d) 250,665 10%
John Brann 49,333(e) 199,999(d) 249,332 10%
Philip V. Caltabiano 37,733(f) 0 37,733 2%
Nicholas Field 17,733(g) 0 17,733 (h)
Daniel Gordon 25,333(i) 0 25,333 1%
Jeff Kahn 25,333(j) 0 25,333 1%
Lancer Holdings 199,999(k) 0 199,998 8%
Midland Associates 619,999(l) 0 619,999 24%
Michael Taylor 0(m) 0 0 0%
Robert Trump 200,000(n) 619,999(o) 819,999 29%
All Directors and Executive 267,631(p) 199,999(q) 467,630 16%
Officers of the Corporation
as a group (a total of
8 persons)
<FN>
<F1>
(a) The shares of Common Stock beneficially owned by each person or by all
directors and executive officers as a group, and the shares included in the
total number of shares of Common Stock outstanding used to determine the
percentage of shares of Common Stock beneficially owned by each person and
such group, have been adjusted in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934 to reflect the ownership of shares issuable
upon exercise of outstanding options, warrants or other common stock
equivalents which are exercisable within 60 days. As provided in such Rule,
such shares issuable to any holder are deemed outstanding for the purpose of
calculating such holder's beneficial ownership but not any other holder's
beneficial ownership.
<F2>
(b) Excludes 10,000 shares of Common Stock granted under the Corporation's
Stock Option Plan (the "SOP") which will not become exercisable until
November 1996.
<F3>
(c) Consists of (i) 26,667 shares of Common Stock, (ii) 5,333 shares of
Common Stock issuable upon exercise of warrants issued in a 1994 private
placement of the CorporationOs securities (the" 1994 Warrants"), and
(iii) 18,666 shares of Common Stock issuable upon exercise of options granted
under the SOP that are currently exercisable. Excludes 20,000 shares of
Common Stock granted under the SOP which will not become exercisable until
November 1996 and up to 149,999 shares of Common Stock underlying options in
the Executive Stock Option Plan as listed in proposal 3 hereunder. All of
these securities are subject to an agreement with the Corporation and the
representative of the underwriters for the Corporation's initial public
offering which commenced on August 11, 1995 (or an affiliate of the
representative of the underwriters), pursuant to which the holder of
such securities has agreed not to sell such securities prior to September 11,
1996, except with the prior written consent of the Corporation and the
representative of the underwriters ("Lock Up Agreement").
<F4>
(d) Represents the holdings of Lancer Holdings of which Mr. Blundell and
Mr. Brann are each 33% owners and directors and officers. Consists of 166,666
shares of Common Stock and 33,333 shares of Common Stock issuable upon
exercise of warrants held by Lancer Holdings. All of these securities are
subject to a Lock-Up Agreement until September 11, 1996.
<F5>
(e) Consists of (i) 26,667 shares of Common Stock, (ii) 4,000 shares of
Common Stock issuable upon exercise of 1994 Warrants, and (iii) 18,666 shares
of Common Stock issuable upon exercise of options granted under the SOP that
are currently exercisable. Excludes 20,000 shares of Common Stock granted
under the SOP which will not become exercisable until November 1996 and up to
149,999 shares of Common Stock underlying options in the Executive Stock
Option Plan As listed under proposal 3 hereunder. All of these securities
are subject to a Lock-Up Agreement until September 11, 1996.
<F6>
(f) Consists of (i) 20,400 shares of Common Stock, (ii) 4,000 shares of Common
Stock issuable upon exercise of 1994 Warrants, and (iii) 13,333 shares of
Common Stock issuable upon exercise of options granted under the SOP that are
currently exercisable. Excludes 20,000 shares of Common Stock granted under
the SOP which will not become exercisable until November 1996 and up to
100,000 shares of Common Stock underlying options in the Executive Stock
Option Plan as listed in proposal 3 hereunder. All of these
securities are subject to a Lock-Up Agreement until September 11, 1996.
<F7>
(g) Consists of 10,533 shares of Common Stock and 7,200 shares of Common
Stock issuable upon exercise of options granted under the SOP that are
currently exercisable. Excludes 15,000 shares of Common Stock granted under
the SOP which will not become exercisable until November 1996 and upto
66,000 shares of Common Stock underlying options in the Executive Stock
Option Plan as listed in proposal 3 hereunder. All of these
securities are subject to a Lock-Up Agreement until September 11, 1996.
<F8>
(h) Less than 1%.
<F9>
(i) Consists of (i) 10,000 shares of Common Stock and 10,000 shares of Common
Stock underlying 1993 Warrants issuable upon exercise of Directors' Options
granted in 1993 to non employee directors of the Corporation and (ii) 5,333
shares of Common Stock issuable upon exercise of options granted under the SOP
that are currently exercisable. Excludes 10,000 shares of Common Stock granted
under the SOP which will not become exercisable until November 1996. All of
these securities are subject to a Lock-Up Agreement until September 11, 1996.
<F10>
(j) Consists of (i) 10,000 shares of Common Stock and 10,000 shares of Common
Stock underlying 1993 Warrants issuable upon exercise of Director's Options
and (ii) 5,333 shares of Common Stock issuable upon exercise of options
granted under the SOP that are currently exercisable. Excludes 10,000 shares
of Common Stock granted under the SOP which will not become exercisable
until November 1996. All of these securities are subject to a Lock-Up
Agreement until September 11, 1996.
<F11>
(k) Consists of 166,666 shares of Common Stock and 33,333 shares of Common
Stock issuable upon exercise of warrants held by Lancer Holdings. All of these
securities are subject to a Lock-Up Agreement until September 11, 1996.
<F12>
(l) Consists of 439,999 shares of Common Stock and 180,000 shares of Common
Stock issuable upon exercise of warrants. These securities were previously
owned by Management Technologies, Inc. (MTI) and transferred to Midland
Associates in satisfaction of a loan to MTI by Midland Associates.
<F13>
(m) Excludes 10,000 shares of Common Stock granted under the SOP which will
not become exercisable until April 1997.
<F14>
(n) Consists of 200,000 shares of Common Stock issuable upon exercise of 1994
Warrants.
<F15>
(o) Represents the holdings of Midland Associates. Consists of the securities
listed in note l above.
<F16>
(p) Consists of all of the above securities in notes b-j & m and excludes all
of the securities issued under the SOP which do not become exercisable within
60 days.
</FN>
</TABLE>
INFORMATION AS TO EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of the
Corporation's chief executive officer and each of the other executive officers
(the "Named Officers") for services rendered in all capacities to the
Corporation. The Corporation has only four executive officers.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-Term Compensation
Name and Principal Position Fiscal Year Salary Bonus Other Securities Restricted All Other
Ended Annual underlying Stock Compen-
March 31, Compen- options Awards sation
sation
<S> <C> <C> <C> <C> <C> <C> <C>
Mark Blundell - Chief 1994(*)
Executive Officer, Chief 1995 $150,000 $0 $45,000(1) 0 $0 $1,456(2)
Financial Officer, President 1996 $150,000 $20,000 $45,000 38,666 $0 $1,100(2)
John Brann - Vice President
Technology 1994(*)
1995 $100,000 $0 $0 0 $0 $0
1996 $100,000 $0 $0 38,666 $0 $810(2)
Philip V. Caltabiano -Senior 1994(*)
Vice President Sales and 1995 $100,000 $0 $0 0 $50 $0
Marketing 1996 $100,000 $0 $0 33,333 $50 $0
Nicholas Field - Vice 1994(*)
President Implementation 1995 $70,000 $0 $0 0 $26.7 $0
1996 $80,000 $0 $0 22,500 $13.3 $0
<FN>
<F1>
(1) Reflects an accommodation allowance of $4,000 per month which terminated
in December 1994 and consisted of costs allocated with Mr. Blundell's
relocation to the United States from England, and a car allowance of $750 per
month paid to Mr. Blundell.
<F2>
(2) Reflects the insurance premium paid by the Corporation for term life
insurance for Mr. Blundell and Mr. Brann.
<F3>
(3) Upon first joining the Corporation in 1993, the Corporation awarded
Mr. Caltabiano a stock grant of 20,000 shares of Common Stock, 15,000 of
which have vested. 5,000 shares of Common Stock will vest on December 31,
1996, unless his employment is terminated earlier. The amount included in the
table reflects 5,000 shares of Common Stock that vested in each of the fiscal
years ended March 31, 1995 and March 31, 1996. These shares were awarded in
connection with the organization of the Corporation and have been valued at
par value ($.01 per share).
<F4>
(4) Upon first joining the Corporation in 1993, the Corporation awarded
Mr. Field a stock grant of 8,000 shares of Common Stock, all of which have
vested. The amount included in this table reflects 2,667 shares that vested
during the year ended March 31, 1995 and 1,333 shares that vested during the
year ended March 31, 1996. These shares were awarded in connection with the
organization of the Corporation and have been valued at par value
($.01 per share).
<F5>
* Pursuant to Item 402(b) of Regulation S-B, no information for the fiscal
year ended March 31, 1994 is required to be presented.
</FN>
</TABLE>
OPTION GRANTS IN FISCAL YEAR ENDED MARCH 31, 1996
The following table sets forth all grants of stock options made during the
fiscal year ended March 31, 1996 pursuant to the Corporation's Stock Option
Plan to the Named Officers:
<TABLE>
<CAPTION>
Individual Grants
Name Number of % of Total Average Expiration
Securities Options Exercise Date
Underlying Granted to or Base
Options Employees Price (b)
Granted in Fiscal Per Share
ended March
31, 1996 (a)
<S> <C> <C> <C> <C>
Mark Blundell 38,666 19% $4.82 (c)
John Brann 38,666 19% $4.82 (c)
Philip V. Caltibiano 33,333 16% $4.88 (c)
Nicholas Field 22,200 11% $4.92 (c)
All Shareholders N/A N/A N/A N/A
All Optionees 263,466 N/A $4.89 (c)
<FN>
<F1>
(a) Excludes 40,666 shares of Common Stock issuable upon exercise of options
granted to outside directors.
<F2>
(b) Two groups of options were granted in the fiscal year ended March 31, 1996.
Options exercisable for 99,466 shares of Common Stock were granted in April
1995 and options exercisable for 164,000 shares of Common Stock were granted
in November 1995.
<F3>
(c) The options which were granted in April 1995 expire in April 2000. The
options issued in November 1996 expire in November 2000.
</FN>
</TABLE>
AGGREGATE OPTION EXERCISES IN FISCAL YEAR ENDED MARCH 31, 1996 AND
YEAR-END OPTION VALUES
YEAR-END OPTION VALUES
The following table sets forth information with respect to options exercised
by each of the Named Officers during the fiscal year ended March 31, 1996 and
the number and value of unexercised options as of March 31, 1996:
<TABLE>
<CAPTION>
Number ofSecurities Value of Uexercised
Underlying Unexercised In-the-Money Options
Options at March 31, 1996 at March 31 1996(a)
Name Shares Value Exercisable Unexercisable Exercisable Unexercisable
Acquired on Realized
Exercise
<S> <C> <C> <C> <C> <C> <C>
Mark Blundell 0 0 18,666 20,000 $18,666 $7,500
John Brann 0 0 18,666 20,000 18,666 7,500
Philip V.Caltibiano 0 0 13,333 20,000 13,333 7,500
Nicholas Field 0 0 7,200 15,000 7,200 5,625
<FN>
<F1>
(a) Based on the closing price of New Paradigm Software Corp. Common Stock
on March 31, 1996 of $5.50 as reported on NASDAQ.
</FN>
</TABLE>
Employment Contracts
The Corporation has entered into employment contracts with Messrs. Blundell,
Brann and Caltabiano. The employment contracts of Messrs. Blundell, Brann and
Caltabiano contain the following principal features.
Mr. Blundell: Term: Five years with a remaining term of approximately three
years; Base Salary: $200,000 per annum (Mr. Blundell has waived $50,000 per
annum of this Base Salary (which is not being accrued) until such time as the
Corporation would otherwise be able to report a pre-tax annual profit in
excess of $75,000); Common Stock Award: Mr. Blundell received 26,667 shares
of Common Stock. If the Corporation achieves at least $2.5 million in sales
in any period of twelve consecutive months, Mr. Blundell will be paid a bonus
of $50,000. Mr. Blundell's employment contract provides that if such bonus
target is achieved and such bonus paid, he and the Corporation will negotiate
a new bonus arrangement. Mr. Blundell is entitled to receive a death benefit
of $1,000,000 payable to a beneficiary named by him. The Corporation has
obtained a life insurance policy to fund this benefit. Mr. Blundell's
employment agreement will renew automatically from year to year unless
Mr. Blundell or the Corporation gives notice of termination to the other on
or before May 1 of any year beginning in 1999.
Mr. Brann: Term: Three years with a remaining term of approximately one
year; Base Salary: $125,000 per annum (Mr. Brann has waived $25,000 per annum
of this Base Salary (which is not being accrued) until such time as the
Corporation would otherwise be able to report a pre-tax annual profit in
excess of $75,000); Common Stock Award: Mr. Brann received 26,667 shares of
Common Stock. Mr. Brann is entitled to a death benefit of $1,000,000 payable
to a beneficiary named by him. The Corporation has obtained a life insurance
policy to fund this benefit. Mr. Brann's employment agreement will renew
automatically from year to year unless Mr. Brann or the Corporation gives
notice of termination to the other on or before May 1 of any year beginning
in 1999.
Mr. Caltabiano: Term: Three years with a remaining term of approximately
three years; Base Salary: $100,000 per annum plus commissions on sales;
Common Stock Award: Mr. Caltabiano received 20,000 shares of Common Stock,
15,000 of which have vested. Rights to receive an additional 5,000 shares of
Common Stock will vest on December 31, 1996, unless his employment is
terminated before then.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION INTRODUCTION
The Compensation Committee of the Board of Directors (the "Committee") is
composed of the individuals listed below, who are independent outside
directors of the Corporation. The Committee has sole responsibility for all
compensation matters with respect to the Corporation's senior management.
PHILOSOPHY
The Corporation seeks to attract, motivate and retain senior management by
providing a fully competitive total compensation opportunity based on
performance. The compensation package of each member of senior management
consists of two key elements: (1) base salary which reflects competitive
marketplace data and evaluated individual performance; and (2) long-term
stockbased incentive opportunities consisting of annual stock option grants.
The long-term stock based incentive opportunities are intended to align the
interests of senior management with those of the Corporation's shareholders.
The Corporation's executive compensation program is structured so that at
higher management levels a larger portion of total compensation is composed
of longterm stockbased compensation.
The Committee strives to balance short- and longterm incentive objectives and
to employ prudent judgment in establishing financial performance criteria,
evaluating performance and determining actual incentive payments.
Following is a discussion of each of the elements of the Program and a
description of the specific decisions and actions taken by the Committee with
regard to compensation for the fiscal year ended March 31, 1996.
PROGRAM COMPETITIVENESS
Each element of the compensation arrangements for senior management is
intended to be fully competitive with comparable elements of competitor
companies in the computer software industry. Salary ranges are established
for each position using published survey information of computer software
industry compensation practices, which includes reports from the Gartner
Group, a technology consulting company, and accounting companies.
The long-term incentive option grant guidelines are reviewed by the Committee
based upon total options granted to employees of the Corporation, seniority
and position. These grant guidelines are intended to provide competitive
longterm compensation opportunities if the assumptions as to goal achievement
and stock price growth are realized.
ANNUAL SALARY AND BONUSES
Annual total cash compensation for senior management consists of base salary
and bonus. The base salaries for senior executives other than the CEO are
recommended by Mr. Blundell based on the competitive marketplace, evaluated
position responsibilities and individual performance, and are reviewed and
approved by the Committee. Bonuses are awarded as compensation for
extraordinary goals achieved by individual members. In the fiscal year ended
March 31, 1996 Mr. Blundell received a bonus of $20,000 for efforts in
connection with the Corporation's financing activities, in particular the
initial public offering. No other bonuses were awarded. Mr. Caltabiano also
receives a 2% commission on all sales of COPERNICUS software. Mr. Blundell's
employment contract provides that he will be paid a bonus of $50,000 if the
Corporation achieves at least $2.5 million in sales in any twelve consecutive
months.
LONG-TERM INCENTIVE COMPENSATION
The long-term incentive compensation program for seniorbmanagement consists
of stock options. All option awards were granted under the Corporation's Stock
Option Plan, which Plan was approved by shareholders on September 13, 1994.
Stock options provide the right to purchase shares of Common Stock at the fair
market value (the average of the high and low trading prices) on the date of
grant. These grants are awarded under the general principal that larger grants
will be made to employees at higher salary and management levels. Each stock
option becomes exercisable one year after grant, and has a ten year maximum
term.
The size of the awards of stock options are not reduced for any current stock
holdings or previous awards held by a participant.
FISCAL YEAR ENDED MARCH 31, 1996 CEO COMPENSATION
Mr. Blundell's base salary is fixed in his employment contract. The
appropriateness of his base salary is reviewed annually by the Committee. As
part of its review, the Committee considers competitive CEO base salary
information from computer software industry companies identified by the
Committee, Mr. Blundell's individual performance and contributions since his
last review, and the merit increase guidelines in effect for other salaried
employees during this period.
In early 1996, the Committee reviewed and approved the 1996 Executive Stock
Option Plan for the CorporationOs management employees, including
Mr. Blundell and the other Named Officers. The option grants to be given are
shown below under Proposal 3,"Adoption of the Executive Stock Option Plan".
The option awards granted under the Stock Option Plan which the Committee
approved for Mr. Blundell were made in accordance with the grant guidelines
established in 1995. Mr. Blundell's awards for the year ended March 31, 1996
consist of 38,666 stock option shares, and are disclosed in the Option Grants
Table along with the awards for the fiscal year ended March 31, 1996 to the
other Named Officers.
CLOSING STATEMENT
The Committee believes that the caliber and motivation of the Corporation's
key employees and the quality of their leadership makes a significant
difference in the long-term performance of the Corporation. The Committee
further believes that compensation should vary with the Corporation's
financial performance so that executives are well rewarded when performance
meets or exceeds standards established by the Committee.
In its view, the Committee believes that New Paradigm Software Corp.'s
executive compensation program is meeting and fulfilling the goals contained
in the program's philosophy.
The foregoing report has been furnished by
Ms. Brown
Mr. Gordon (Chairman)
Mr. Kahn
Mr. Taylor
The Compensation Committee Report on Executive Compensation shall not be
deemed to be "soliciting material" or to be "filed" with the Securities and
Exchange Commission or subject to Regulation 14A or 14C under the Securities
Exchange Act of 1934 or to the liabilities of Section 18 of such Act.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Ms. Brown, Mr. Gordon, Mr. Kahn
and Mr. Taylor. Mr. Gordon and Mr. Kahn served on the Compensation Committee
during the entire fiscal year ended March 31, 1996. Ms. Brown was appointed
to the Committee on September 20, 1995 and Mr. Taylor was appointed to the
Committee on April 26, 1995.
Mr. Gordon, a member of the Committee, has been the Chairman of the Board of
Directors of the Corporation since its inception. No member of the Committee
was an officer or employee of the Corporation or any of its subsidiaries
during the fiscal year ended March 31, 1996 or at any prior time. In addition,
there are no transactions, relationships or indebtedness for which disclosure
is required under the rules of the Securities and Exchange Commission with
respect to any member of the Committee.
CERTAIN TRANSACTIONS
General
The following is a discussion of certain transactions entered into by the
Corporation with officers, directors, security holders and affiliates thereof.
The Corporation believes that the terms of these transactions were no less
favorable to the Corporation than would have been obtained from a
non-affiliated third party for similar transactions at the time of entering
into such transactions.
The Corporation has adopted a policy whereby any future transactions, including
loans, between the Corporation and its directors, officers, principal
shareholders and other affiliates, will be on terms no less favorable to the
Corporation than could be obtained from unaffiliated third persons on an
arm's-length basis at the time that the transaction was entered into and will
be reviewed and approved by a majority of the Corporation's directors,
including a majority of the Corporation's independent disinterested directors.
Issuance of Securities to Directors, Executive Officers and Their Affiliates
In a private placement of the CorporationOs securities for which a closing was
held on October 20, 1994 (the "1994 Financing"),Mr. Blundell purchased a
fractional unit comprised of (i) a two year promissory note with an increasing
interest rate starting at 10% per annum (a "1994 Note") in the principal
amount of $15,000 and (ii) 1994 Warrants exercisable for 12,000 shares of
Common Stock; Mr. Brann purchased a fractional unit comprised of (i) a 1994
Note in the principal amount of $5,000 and (ii) 1994 Warrants exercisable for
4,000 shares of Common Stock; Mr. Caltabiano purchased a fractional unit
comprised of (i) a 1994 Note in the principal amount of $5,000 and (ii) 1994
Warrants exercisable for 4,000 shares of Common Stock. Mr. Blundell
subsequently transferred 1994 Warrants exercisable for 6,667 shares of Common
Stock. The shares of Common Stock issuable upon exercise of the 1994 Warrants
purchased in the 1994 Financing by the foregoing directors and executive
officers are registered for sale under the Securities Act of 1933 but are
subject to Lock-Up Agreements.
On March 22, 1995, 33,333 shares of Common Stock and warrants (the "MBA
Warrants"), which are exercisable for 33,333 shares of Common Stock at an
exercise price of $5.63 per share, subject to adjustment under certain
circumstances, were issued in connection with the Corporation's acquisition
of the New Paradigm Architecture. See "New Paradigm Architecture."
MBA Warrants will expire on March 21, 2000 and are not redeemable.
On June 30, 1995 Mr. Field exercised 2,000 1993 Warrants for an aggregate of
$980.
See "Directors Compensation" and "Options Grants in Fiscal Year Ended
March 31, 1996" with respect to options granted to directors and executive
officers of the Corporation during the fiscal year ended March 31, 1996. See
Proposal 3, "Adoption ofthe Executive Stock Option Plan," for information
about options that have been authorized for certain executive officers of the
Corporation, subject to shareholder approval of the Executive Stock Option
Plan.
New Paradigm Architecture
The Corporation acquired the rights to its proprietary approach to developing
computer programs (the "New Paradigm Architecture") used to develop COPERNICUS
and related intellectual property rights from Lancer Holdings as of March 22,
1995 for a consideration equal to 33,333 shares of Common Stock and the MBA
Warrants. Lancer Holdings no longer holds any right, title or interest in
COPERNICUS or the New Paradigm Architecture. Prior to the acquisition of the
New Paradigm Architecture, the Corporation held an exclusive, perpetual
license to use the New Paradigm Architecture from Lancer Holdings. The
Corporation acquired the license pursuant to a license agreement with Lancer
Holdings dated as of July 20, 1993. Pursuant to the July 20, 1993 license
agreement, the Corporation made a onetime payment of 133,333 shares of Common
Stock in 1993 and annual license fee payments of $10,000 in 1993 and 1994.
The Corporation's Chief Executive Officer and President, Mark Blundell, and its
Vice President of Technology, John Brann, collectively own 66% of the voting
stock of Lancer Holdings. Messrs. Blundell and Brann have no direct or
indirect interest in the remaining 34% of the voting stock of Lancer Holdings.
Messrs. Blundell and Brann are the only directors of Lancer Holdings and
are both directors of the Corporation.
Other Transactions
Mr. Jeff Kahn, a director, is the President of Kahn Communications Group Inc.
(KCG), a division of Ruder Finn. Kahn Communications Group provides public
relations services to the Corporation for which it receives a monthly fixed
fee from the Corporation of $5,000. KCG also provides special event related
marketing services to the Corporation for which it receives additional fees
on a per engagement basis. In the fiscal year ended March 31, 1995, KCG
received $36,000 in such fees and in the fiscal year ended March 31, 1996,
KCG received $72,182 in such fees.
On September 1, 1995 the Corporation entered into a consulting contract with
Corporate Growth Services, a corporation owned by Mr. Gordon, Chairman of the
Board of Directors. Corporate Growth Services provides small development
stage companies with management consulting. Under the terms of the contract
Corporate Growth Services receives a consulting fee of $2,000 per month
over and above any fees Mr. Gordon receives for attending meetings of the
Board of Directors. In the fiscal year ended March 31, 1995, Corporate Growth
Services received $11,400 in such fees and in the fiscal year ended March 31,
1996, Corporate Growth Services received $18,000 in such fees.
2. PROPOSAL TO ELIMINATE THE APPLICABILITY OF SECTION 912 OF THE BCL
The Board of Directors recommends that the shareholders approve an amendment
to the Corporation's By-Laws by the adoption of a new Section 6.5 which will
provide that Section 912 of the BCL shall not apply to the Corporation. The
text of the proposed new Section 6.5 of the CorporationOs By-Laws is set forth
below and the text of Section 912 of the BCL (referred to herein as "Section
912") is set forth in Appendix A. The description of Section 912 which follows
is qualified in its entirety by reference to the text of Section 912.
The Corporation, as a New York corporation, is subject to the BCL, including
Section 912, an anti-takeover provision. In general, Section 912 restricts the
ability of a public New York corporation to engage in a "business combination"
with an "interested shareholder" for a period of five years after the date of
the transaction in which the person became an interested shareholder. As a
result, potential acquirors of the Corporation may find it more difficult or
be discouraged from attempting to effect an acquisition transaction with the
Corporation, thereby possibly depriving holders of the securities issued by the
Corporation of certain opportunities to sell or otherwise dispose of such
securities at a premium pursuant to such transactions. Section 912 is described
in greater detail below.
The Corporation can elect not to be governed by these provisions by adopting
an amendment to its By-Laws. The new By-Law Section would not be effective
until 18 months after the Corporation's shareholders have approved it and
would not apply to a business combination with an interested shareholder who
became an interested shareholder on or prior to the effective date of such
amendment. In order to opt out of these provisions, the Board of Directors
has approved and recommended to the Corporation's shareholders the amendment
of the Corporation's By-Laws by adding to the ByLaws the following new
Section 6.5:
SECTION 6.5. Inapplicability of Section 912 of the New York Business
Corporation Law. Pursuant to subsection (d)(3)(iii) of Section 912 of the
New York Business Corporation Law, the Corporation hereby elects, to the
maximum extent authorized by such subsection, that Section 912 shall not
apply to the Corporation or to any business combination involving the
Corporation.
In addition, directors Mark Blundell, John Brann, Daniel A. Gordon and Jeff
Kahn have agreed that they would vote in favor of such amendment.
Section 912
Section 912 defines "business combination" broadly to include a wide range of
transactions involving the Corporation or the Corporation's assets or
securities. Section 912, subject to certain exceptions, prohibits the
Corporation from engaging in any business combination with any interested
shareholder for five years after the date the interested shareholder first
became an interested shareholder (the "stock acquisition date") unless the
business combination or the purchase of shares made by the interested
shareholder is approved by the Board of Directors before the interested
shareholder's stock acquisition date.
Further, Section 912 prohibits any business combination with an interested
shareholder, even one following the expiration of five years after his stock
acquisition date, unless either (i) the business combination or the purchase
of shares by the interested shareholder is approved by the Board of Directors
before the shareholder's stock acquisition date, or (ii) the business
combination is approved by the affirmative vote of the holders of stock
representing a majority of the outstanding voting stock not beneficially owned
by the interested shareholder at a meeting called for that purpose no earlier
than five years after the interested shareholder's stock acquisition date, or
(iii) the aggregate value of consideration to be received by the holders of
the Corporation's Common Stock and by the holders of any other class or series
of shares satisfies certain standards specified in Section 912, the
consideration to be received by the shareholders is distributed promptly and
is in cash or the same form as the interested shareholder used to acquire the
largest number of shares previously acquired by such shareholder, and except
as specified in the statute, the interested shareholder has not become the
beneficial owner of any additional voting shares of the Corporation after the
stock acquisition date and before the date of consummation of the business
combination.
"Interested shareholder" is defined under Section 912 as any person (other
than the Corporation or any of its subsidiaries) who beneficially owns,
directly or indirectly, 20% or more of the Corporation's outstanding voting
stock, or any affiliate or associate of the Corporation who, at any time
within five years immediately before the date in question, was the beneficial
owner of 20% or more of the Corporation's then outstanding voting stock.
Section 912 permits friendly, negotiated transactions which are approved in
advance by the Board of Directors. It restricts a hostile acquiror's
flexibility in acquiring the Corporation and may help prevent unfair, coercive,
abusive or self-dealing activities which accompany or follow some hostile
acquisitions, particularly those which are highly leveraged. Opting out of
Section 912 will make the Corporation more vulnerable to a hostile takeover
and reduce the role of the Board of Directors in opposing any such takeover.
However, the Board of Directors favors the proposed amendment because it
believes it unlikely that the Corporation will, in the foreseeable future,
be involved in a hostile takeover, opting out of Section 912 may enhance the
Corporation's ability to raise new capital and the Board of Directors will have
other available alternatives to thwart any takeover attempt which the Board of
Directors determines is not in the best interests of the Corporation and its
shareholders.
Background of Amendment
The Board of Directors approved the proposed amendment at a meeting held on
June 25, 1995 after considering concerns about Section 912 expressed by the
California Department of Corporations in response to the Corporation's
application to qualify its initial public offering in California. The
Department of Corporations expressed concern about provisions the effect of
which is to exclude shares from voting or to enable supermajority voting in
excess of 66 2/3% of outstanding shares entitled to vote. As noted above, under
some circumstances Section 912 excludes shares held by an interested shareholder
proposing a combination covered by Section 912 from voting to approve that
business combination. Unless the Corporation undertook to recommend to its
shareholders that they approve the proposed amendment, the Department of
Corporations would not have approved the Corporation's application. The Board
of Directors determined that such approval was critical to the success of the
Corporation's then pending initial public offering and therefore more
important to the Corporation's ongoing viability than the hypothetical
possibility that the Corporation might benefit from the protection against
hostile takeovers offered by Section 912, particularly in light of the
relatively concentrated ownership of the Corporation's Common Stock.
In addition, the Board of Directors believes it to be in the Corporation's
best interest to eliminate restrictions imposed by Section 912 which might
discourage or delay new investment in the Corporation by investors desiring
to acquire significant amounts of Corporation shares.
Robert S. Trump, Midland Associates, Lancer Holdings, Mark Blundell, John Brann
and MTI may currently be deemed to be "interested shareholders" within the
meaning of Section 912. Section 912 provides that the proposed amendment to
the Corporation's By-Laws would not be effective until 18 months after the
Corporation's shareholders approve it and the proposed amendment would not
apply to a business combination with an interested shareholder who became an
interested shareholder on or prior to the effective date of such amendment.
The Corporation is not a party to, and is unaware of, any arrangements,
agreements, negotiations, or understandings with respect to any transaction
covered by Section 912 or similar transaction, and no such transaction is
currently under consideration by the Corporation.
Required Vote
Adoption of the proposed amendment requires the affirmative vote of (i) the
holders (excluding interested shareholders and their affiliates and associates)
of a majority of the outstanding voting stock (excluding the voting stock of
interested shareholders and their affiliates and associates), and (ii) the
holders of a majority of the outstanding voting stock (including the voting
stock of interested shareholders and their affiliates and associates).
Accordingly, the proposed amendment must be approved by the affirmative vote
of (i) a majority of shares of Common Stock outstanding on the Record Date,
excluding shares held by Robert S. Trump, Midland Associates, Lancer Holdings,
Mark Blundell, John Brann and MTI, and (ii) a majority of all shares of
Common Stock outstanding on the Record Date. Under the BCL, shareholders will
have no appraisal or similar dissenters' rights with respect to action on the
proposed amendment.
THE BOARD OF DIRECTORS' RECOMMENDATION
Your Board recommends that you vote FOR this resolution. Unless otherwise
specified by the shareholder, the Board intends the accompany proxy to be
voted for this resolution.
3. ADOPTION OF THE EXECUTIVE STOCK OPTION PLAN
A proposal will be presented at the Annual Meeting to approve the
Corporation's Executive Stock Option Plan (the "EXSOP") which was
adopted by the Compensation Committee, subject to approval of the
shareholders of the Corporation. The complete text of the Plan
is set forth in Exhibit B to this Proxy Statement, and shareholders
are urged to review it together with the following information,
which is qualified in its entirety by reference to Exhibit B.
The purpose of the EXSOP is (a) to further the growth, development
and financial success of the Corporation by providing additional
incentives to certain management personnel who have been or will
be given responsibility for the management or administration of
the Corporation's business affairs and other persons performing
significant services for the Corporation and thus enabling such
management personnel to benefit directly from the Corporation's
growth, development and financial success; and (b) to enable the
Corporation to obtain and retain the services of management
personnel considered essential to the long range success of the
Corporation by providing them an opportunity to become owners of
capital stock of the Corporation pursuant to the exercise of options.
The EXSOP provides for the grant of nonqualified stock options to
purchase shares of Common Stock which do not qualify as incentive
stock options under Section 422 of the Internal Revenue Code of 1986,
as amended. No options may be granted under the EXSOP after
September 12, 2006.
The EXSOP is administered by the Compensation Committee
(the "Committee") of the Board of Directors of the Corporation.
The Committee must at all times consist of no fewer than two members
of the Board of Directors. Subject to the limitations set forth in
the EXSOP, the Committee has the authority to determine to whom
options will be granted, the term during which an option granted
under the EXSOP may be exercised, the exercise price of an option,
and the rate at which the options may be exercised and may vest.
Such stock options may be granted under the EXSOP only to management
personnel who are full-time employees of the Corporation.
The maximum term of each stock option granted under the EXSOP is
10 years and, in general, an option may not be exercised until
the optionee has remained in the employ of the Corporation or performed
services for the Corporation for at least one year. The exercise
price of shares of Common Stock subject to stock options must be
not less than the fair market value of the Common Stock on the
date of the grant.
The grant of a nonqualified stock option will not result in any
immediate tax consequence to the Corporation or the participant.
Upon exercise of a nonqualified stock option, the participant
will realize ordinary income in an amount equal to the fair market
value of the stock at the time of exercise over the option price,
and the Corporation will generally be entitled to a deduction in
the same amount.
The foregoing provides only a brief summary of the principal
federal income tax consequences of awards under the EXSOP. This
summary is not intended to be exhaustive and does not describe
state, local or foreign tax laws.
The Board of Directors may amend the EXSOP, provided, however,
the Board of Directors may not, without the approval of the
Corporation's shareholders, amend the EXSOP to increase the
maximum number of shares authorized for the EXSOP except that
the Board of Directors may make certain adjustments to prevent
dilution in the event of certain corporate events, change the
class of eligible individuals to whom options may be granted,
reduce the basis upon which the minimum option price is determined,
extend the period within which options under the EXSOP may be
granted, or provide for an option that is exercisable more than
ten years from the date it is granted except in the event of death.
The Board of Directors shall have no power to change the terms of
any option theretofore granted under the EXSOP so as to impair the
rights of an optionee without the consent of the optionee whose
rights would be affected by such change except to the extent, if
any, provided in the EXSOP or in the related option agreement.
The Board of Directors may suspend or terminate the EXSOP at any
time. No such suspension or termination shall affect options
then outstanding.
The EXSOP authorizes the grant of options for a total of 750,000
shares. As of June 14, 1996, the closing price of the Common
Stock as reported by NASDAQ SmallCap Market was $2.875 per share.
The following is a table which describes the benefits or amounts
that will be received by or allocated to each of the following
under the EXSOP:
Executive Group
Name & Position Number of Shares underlying
Options Granted
Mark Bundell Chief Executive Officer,
President and CFO 149,999*
John Brann Vice President of Technology,
Secretary and Treasurer 149,999*
Philip Caltabiano Senior Vice Presidentof Sales
and Marketing 100,000*
Nicholas Field Vice President of Production 66,000
Non Executive Officer Employee Group 66,000
* Exercise of a portion of these options is subject to the
achievement of certain performance standards.
Under the terms of individual option agreements, the following
management employees are entitled to receive an option to purchase
the Common Stock of the Corporation (at the fair market value of
such Common Stock on September 12, 1997), in the following amounts:
Name Date First Exercisable No. of Shares
1. Ali Faraji September 12, 1996 15,000
September 12, 1997 17,000
September 12, 1998 17,000
September 12, 1999 17,000
2. Nick Field September 12, 1996 15,000
September 12, 1997 17,000
September 12, 1998 17,000
September 12, 1999 17,000
3. Mark Blundell September 12, 1997 16,666
September 12, 1998 16,666
September 12, 1999 16,667
In addition to the foregoing, Mark Blundell may purchase
50,000 shares of Common Stock on or after July 1, 1997, if
the audited financial statements of the Corporation for the
fiscal year ended on March 31, 1997 demonstrate that the
Corporation's gross revenue for such year was at least $2,250,000
and the net loss for such year was no more than $1,350,000.
Mr. Blundell may also purchase 50,000 shares of Common Stock
on or after July 1, 1998, if certain financial performance
standards determined by the Board of Directors are met by
the Corporation.
4. John Brann September 12, 1997 16,666
September 12, 1998 16,666
September 12, 1999 16,667
In addition to the foregoing, John Brann may purchase 50,000
shares of Common Stock on or after July 1, 1997, if the audited
financial statements of the Corporation for the fiscal year
ended on March 31, 1997 demonstrate that the Corporation's
gross revenue for such year was at least $2,250,000 and the
net loss for such year was no more than $1,350,000. Mr. Brann
may also purchase 50,000 shares of Common Stock on or after
July 1, 1998, if certain financial performance standards
determined by the Board of Directors are met by the Corporation.
5. Philip Caltabiano September 12, 1997 10,000
September 12, 1998 10,000
September 12, 1999 10,000
In addition to the foregoing, Philip Caltabiano may purchase
5,000 shares of Common Stock on or after July 1, 1997, if the
audited financial statements of the Corporation for the fiscal
year ended on March 31, 1997 demonstrate that the Corporation's
gross revenue for such year was at least $2,250,000 and the net
loss for such year was no more than $1,350,000. Mr. Caltabiano
may also purchase 5,000 shares of Common Stock on or after
July 1, 1998, if certain financial performance standards
determined by the Board of Directors are met by the Corporation.
Mr. Caltabiano may also purchase 30,000 shares of Common Stock
on or after July 1, 1997 if the audited financial statements of
the Corporation for the fiscal year ended on March 31, 1997
demonstrate that the Corporation's gross revenue directly
related to U.S. sales of COPERNICUS products is no less than
$2,115,000 and the direct expenses for the sales staff are
no more than $864,621. In addition to the foregoing, Mr. Caltabiano
may also purchase 30,000 shares of Common Stock on or after
July 1, 1998 if the Corporation's gross revenue directly related
to the U.S. sales of COPERNICUS products meets certain performance
standards determined by the Board of Directors; provided, however,
Mr. Caltabiano shall have the right to accelerate the purchase of
these shares to a date which is on or after July 1, 1997 in the
event that the Corporation's gross revenue directly related to U.S.
sales of COPERNICUS products in the fiscal year of the Corporation
ended March 31, 1997 is not less than $4,000,000 and the direct
expenses for the sales staff are no more than $1,600,000.
Pursuant to an Underwriting Agreement dated August 11, 1996 between
the Corporation and First Allied Securities, Inc., as representative
of the underwriters in the Corporation's initial public offering,
the Corporation has agreed that until September 11, 1996 it would not
adopt, propose to adopt or otherwise permit to come into existence
any plan or arrangement permitting the number of shares of Common
Stock purchasable pursuant to options or warrants to exceed the number
purchasable under the Stock Option Plan at August 11, 1996 and under
other options and warrants outstanding on that date without the prior
written consent of the Representative. First Allied Securities, Inc.
has given the Corporation its written approval of the proposed adoption
of the EXSOP.
The approval by a majority of the votes present and entitled to be
cast at the Annual Meeting is required to approve the proposal to
adopt the EXSOP.
THE BOARD OF DIRECTORS' RECOMMENDATION
Your Board of Directors recommends that you vote FOR the proposal
to approve and adopt the New Paradigm Software Corp. Executive Stock
Option Plan as set forth above. Unless otherwise specified by the
shareholder, the Board intends the accompanying proxy to be voted
for this proposal.
4. PROPOSED INCREASE IN SHARES AUTHORIZED UNDER THE CORPORATION'S
STOCK OPTION PLAN
The Corporation maintains the New Paradigm Software Corp. Stock Option Plan
(the "Plan"), the purpose of which is (a) to further the growth, development
and financial success of the Corporation by providing additional incentives to
certain key personnel who have been or will be given responsibility for the
management or administration of the Corporation's business affairs and other
persons performing significant services for the Corporation and thus enabling
such key personnel to benefit directly from the Corporation's growth,
development and financial success; and (b) to enable the Corporation to
obtain and retain the services of key personnel considered essential to the
long range success of the Corporation by providing them an opportunity to
become owners of capital stock of the Corporation pursuant to the exercise of
options. The Plan provides for the grant of two types of options to purchase
shares of Common Stock, (a) incentive stock options intended to qualify under
Section 422 of the Internal Revenue Code of 1986, as amended, and
(b) nonqualified stock options which do not so qualify. No options may be
granted under the Plan after April 8,2004.
The Plan is administered by the Compensation Committee (the "Committee") of
the Board of Directors of the Corporation. The Committee must at all times
consist of no fewer than two members of the Board of Directors. Subject to
the limitations set forth in the Plan, the Committee has the authority to
determine to whom options will be granted, the term during which an option
granted under the Plan may be exercised, the exercise price of an option, and
the rate at which the options may be exercised and may vest. Incentive stock
options may be granted under the Plan only to persons who are full-time
employees of the Corporation.
Options may be granted to any person who is (a) a full-time employee of the
Corporation, including an officer or director, or (b) an outside director.
The maximum term of each stock option granted under the Plan is 10 years and,
in general, an option may not be exercised until the optionee has remained in
the employ of the Corporation or performed services for the Corporation for at
least one year. The exercise price of shares of Common Stock subject to
stock options must be not less than the fair market value of the Common Stock
on the date of the grant. The exercise price of incentive stock options
granted under the Plan to any participant who owns more than 10% of the total
combined voting power of all classes of outstanding stock of the Corporation or
any parent or subsidiary of the Corporation must be at least equal to 110% of
the fair market value on the date of grant. Any incentive stock options
granted to such participants must also expire within five years from the date
of grant.
The grant of an incentive stock option will not result in any immediate tax
consequence to the Corporation or to the participant. A participant will not
realize taxable income upon the exercise of an incentive stock option,
provided the participant was an employee of the Corporation or a parent or a
subsidiary of the Corporation at all times from the date the option was
granted to the date three months (in the case of a disabled employee, one year)
before the date of exercise, and the Corporation will not be entitled to any
deduction. If the participant does not dispose of the Common Stock acquired
within one year after its receipt (and two years after such option was
granted), gain or loss realized on the subsequent disposition of the stock
will be treated as long term capital gain or loss. The excess of the fair
market value of the stock at the time of exercise over the option price will
be includable in the participant's "alternative minimum taxable income" for
purposes of the "alternative minimum tax".
If the Common Stock is disposed of prior to those times, the participant will
realize ordinary income in an amount equal to the lesser of (a) the excess of
the fair market value of the stock on the date of exercise over the option
price, or (b) if the disposition is a taxable sale or exchange, the amount of
gain realized. Any gain recognized by the participant on the disposition in
excess of the amount taxable as ordinary income will be treated as capital
gain, long term or short term depending on whether the Common Stock has been
held for more than one year. Upon such a disposition, the Corporation
generally will be entitled to a deduction in the same amount and at the
same time as the participant realizes such ordinary income.
The grant of a nonqualified stock option will not result in any immediate tax
consequence to the Corporation or the participant. Upon exercise of a
nonqualified stock option, the participant will realize ordinary income in
an amount equal to the fair market value of the stock at the time of exercise
over the option price, and the Corporation will generally be entitled to a
deduction in the same amount.
The foregoing provides only a brief summary of the principal federal income
tax consequences of awards under the Plan. This summary is not intended to be
exhaustive and does not describe state, local or foreign tax laws.
The Plan was adopted by the Corporation's Board of Directors as of April 8,
1994, and approved by the Corporation's shareholders on September 13, 1994.
See "Option Grants in Fiscal Year Ended March 31, 1996" and "Aggregate
Option Exercises in Fiscal Year Ended March 31, 1996 and Year-End Option
Values" for information with respect to options granted during the fiscal year
ended March 31, 1996 and the value of options outstanding as of that date.
The Board of Directors may amend the Plan, including changing the amount of
the aggregate fair market value of the shares subject to incentive stock
options first exercisable in any calendar year to the extent provided in
Section 422 of the Code, or any successor provision. The Board of Directors
may not, without the approval of the Corporation's shareholders, amend the
Plan to increase the maximum number of shares authorized for the Plan except
that the Board of Directors may make certain adjustments to prevent dilution
in the event of certain corporate events, change the class of eligible
individuals to whom options may be granted, reduce the basis upon which the
minimum option price is determined, extend the period within which options
under the Plan may be granted, or provide for an option that is exercisable
more than ten years from the date it is granted except in the event of death.
The Committee shall have no power to change the terms of any option
theretofore granted under the Plan so as to impair the rights of an optionee
without the consent of the optionee whose rights would be affected by such
change except to the extent, if any, provided in the Plan or in the related
option agreement. The Board of Directors may suspend or terminate the Plan at
any time. No such suspension or termination shall affect options then
outstanding.
The Plan authorizes the grant of options for a total of 266,667 shares. As of
June 14, 1996, options for 263,466 shares had been granted under the Plan.
The number of shares available for future grants under the Plan will not be
sufficient to carry out the Plan's purposes in the future, and therefore the
Board of Directors has approved, and recommends that the shareholders of the
Corporation approve, a proposal to increase the number of shares of Common
Stock available for issuance under the Plan from 266,667 to 516,667 shares.
As of June 14, 1996, the closing price of the Common Stock as reported by
NASDAQ SmallCap Market was $2.875 per share.
The benefits or amounts that will be received by the Named Officers, the
Corporation's executive officers as a group, the Corporation's nonexecutive
officer directors as a group and the Corporation's non-executive employees
as a group if the proposed amendment to the Plan is adopted are not
determinable.
Pursuant to an Underwriting Agreement dated August 11, 1996 between the
Corporation the Representative relating to the Corporation's initial public
offering, the Corporation has agreed that until September 11, 1996 it would
not adopt any plan or arrangement permitting the number of shares of Common
Stock purchasable pursuant to options or warrants to exceed the number
purchasable under the Plan at that date and under other options and warrants
outstanding on that date without the prior written consent of the
Representative. First Allied Securities, Inc. has given the Corporation its
written approval of the proposed amendment to the Plan.
The approval by a majority of the votes cast at the Annual Meeting on the
proposal to increase the number of shares available for issuance pursuant to
the Plan is required to adopt the proposal.
THE BOARD OF DIRECTORS' RECOMMENDATION
Your Board of Directors recommends that you vote FOR the proposal to amend the
New Paradigm Software Corp. Stock Option Plan as set forth above. Unless
otherwise specified by the shareholder, the Board intends the accompanying
proxy to be voted for this proposal.
5. RATIFICATION OF APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
During the year ended March 31, 1996, BDO Seidman, LLP audited the
consolidated financial statements of the Corporation and its subsidiaries.
The Board of Directors, after receiving a favorable recommendation from the
Audit Committee, has again selected BDO Seidman, LLP to serve as the
Corporation's independent certified public accountants for the fiscal year
ending March 31, 1997. Although not required to do so, the Board is submitting
the selection of this firm for ratification by the Corporation's shareholders
to ascertain their views. BDO Seidman, LLP has advised the Corporation that it
has no direct, nor any material indirect, financial interest in the
Corporation or any of its subsidiaries. A representative of BDO Seidman, LLP
is expected to be present at the Annual Meeting with the opportunity to make a
statement if the representative desires to do so, and such representative
will be available to respond to appropriate questions.
The following resolution will be offered by the Board of Directors at the
Annual Meeting:
RESOLVED: That the selection by the Board of Directors of BDO Seidman,
LLP as independent certified public accountants for this Corporation and its
subsidiaries for the year ended March 31, 1997 be, and hereby is, ratified and
approved.
The approval by a majority of the votes cast at the Annual Meeting on the
proposal to ratify the appointment of BDO Seidman, LLP as the independant
certified public accountants of the Corporation is required to adopt the
proposal.
THE BOARD OF DIRECTORS' RECOMMENDATION
Your Board recommends that you vote FOR this resolution. Unless otherwise
specified by the shareholder, the Board intends the accompanying proxy to
be voted for this resolution.
6. OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
Annual Meeting. However, if other matters should properly come before the
Annual Meeting, it is the intention of those named in the solicited proxy to
vote such proxy in accordance with their best judgment.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 ("Section 16(a)")
requires the Corporation's directors, executive officers, and persons who
own more than 10% of a registered class of the Corporation's equity
securities, to file with the Securities and Exchange Commission reports on
Forms 3, 4 and 5 concerning their ownership of the Common Stock and other
equity securities of the Corporation.
Based solely on the Corporation's review of copies of such reports and
written representations that no other reports were required, the Corporation
believes that all its officers, directors and greater than ten percent
beneficial owners complied with all filing requirements applicable to them
with respect to transactions during the fiscal year ended March 31, 1996,
except that the Forms 3 of directors Kahn and Brown were filed late and Forms
4 of directors and executive officers Blundell and Brann, directors Brown,
Gordon and Kahn and executive officers Caltabiano and Field in respect of
options granted to them under the Corporation's Stock Option Plan were
filed late.
SHAREHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING OF SHAREHOLDERS
Shareholder proposals may be submitted for inclusion in the Corporation's
proxy statement and form of proxy for the 1997 Annual Meeting of
Shareholders. Shareholders wishing to have a proposal included in the
Corporation's proxy materials must comply with the applicable requirements of
the Securities Exchange Act and the rules and regulations thereunder and shall
have the rights provided by Rule 14a-8 under such Act. In order to be eligible
under Rule 14a-8 for inclusion in the Corporation's proxy statement and
accompanying proxy for the 1997 Annual Meeting of Shareholders, shareholder
proposals must be received by the Corporation on or before February 20, 1997.
Any such proposal should be submitted in writing by notice delivered or
mailed, postage prepaid, to the Secretary of the Corporation, 335 Madison
Avenue, 11th Floor, New York, New York 10017.
The Corporation's By-Laws contain procedures for shareholder nomination of
directors and for other shareholder proposals to be presented before annual
and other shareholder meetings. The By Laws provide that nominations of
persons for election to the Board of Directors of the Corporation may be made
at an annual meeting of shareholders or at a special meeting of shareholders
for which notice of an election of a director or directors has been duly given
by any shareholder of the Corporation entitled to vote for election of
directors at the meeting who complies with the notice procedures described
below. Such nominations may be made only pursuant to timely notice in proper
written form to the Secretary of the Corporation. To be timely, a
shareholder's request to nominate a person for director, together with the
written consent of such person to serve as director, must be received by the
Secretary of the Corporation before the close of business on the eighth day
following the day on which notice of such meeting is given to shareholders.
To be in proper written form, such shareholder's notice shall set forth in
writing (a) as to each person whom the shareholder proposes to nominate for
election or re-election as a director (1) the name, age, business address and
residence address for such person, (2)the principal occupation or employment
of such person, (3) the class and number of shares of stock of the
Corporation that are beneficially owned by such person, and (4) such other
information relating to such person as is required to be disclosed in
solicitations of proxies for election of directors, or as otherwise required,
in each case pursuant to Regulation 14A under the Exchange Act and any
successor to such Regulation; and (b) as to the shareholder giving the notice
(1) the name and address, as they appear on the Corporation's books, of such
shareholder, (2) the class and number of shares of stock of the Corporation
that are beneficially owned by such shareholder, and (3) a representation
that the shareholder is a holder of record of stock of the Corporation
entitled to vote at such meeting and intends to appear in person or by proxy
at the meeting to nominate the person or persons specified in the notice.
The Corporation may require any proposed nominee to furnish such other
information as may reasonably be required by the Corporation to determine the
eligibility of such proposed nominee to serve as a director of the Corporation
or the shareholder to nominate the proposed nominee.
With respect to shareholder proposals or other business to be considered at
an annual or other meeting of shareholders, the By Laws provide that in
addition to any other applicable requirements for business to be properly
brought before a meeting by a shareholder, the shareholder must have given
timely notice thereof in writing to the Secretary of the Corporation. To be
timely, a shareholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation, not less than 90 days
prior to the meeting. A shareholder's notice to the Secretary shall set forth
as to each matter the shareholder proposes to bring before the meeting (1) a
brief description of the business desired to be brought before the meeting and
the reasons for conducting such business at the meeting, (2) the name and
record address of the shareholder proposing such business, (3) the class and
number of shares of the Corporation that are beneficially owned by the
shareholder, and (4) any material interest of the shareholder in such
business. In addition, any such shareholder shall be required to provide such
further information as may be requested by the Corporation in advance to
comply with federal securities laws, rules and regulations. The Corporation
may require evidence by any person giving such notice that such person is a
bona fide beneficial owner of the Corporation's stock.
A copy of the By-Laws is available upon request to the Secretary of the
Corporation, 335 Madison Avenue, 11th Floor, New York, New York 10017.
The person presiding at the meeting is authorized to determine if a proposed
matter is properly before the meeting of if a nomination is properly made.
The procedures for shareholder nominations of directors and proposal of other
business described above may have the effect of precluding a nomination for
election of a director or directors or proposal of other business at a
particular meeting if the required procedure is not followed.
FORM 10-K ANNUAL REPORT
Any shareholder who desires a copy of the Corporation's Annual Report on Form
10-K for the fiscal year ended March 31, 1996 filed with the Securities and
Exchange Commission may obtain a copy (excluding exhibits) without charge by
addressing a request to the Secretary of the Corporation at 335 Madison Avenue,
11th Floor, New York, New York, 10017. Exhibits also may be requested, but a
charge equal to the reproduction cost thereof will be made.
By Order of the Board of Directors
John Brann
Vice President of Technology
and Secretary
New York, New York
June, 14 1996
APPENDIX A - 912. Requirements relating to certain business combinations
(a) For the purposes of this section:
(1) "Affiliate" means a person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under
common control with, a specified person.
(2) "Announcement date", when used in reference to any business
combination, means the date of the first public announcement of the
final, definitive proposal for such business combination.
(3) "Associate", when used to indicate a relationship with any person,
means (A) any corporation or organization of which such person is an
officer or partner or is, directly or indirectly, the beneficial owner
of ten percent or more of any class of voting stock, (B) any trust or
other estate in which such person has a substantial beneficial interest
or as to which such person serves as trustee or in a similar fiduciary
capacity, and (C) any relative or spouse of such person, or any relative
of such spouse, who has the same home as such person.
(4) "Beneficial owner", when used with respect to any stock, means a
person:
(A) that, individually or with or through any of its affiliates or
associates, beneficially owns such stock, directly or indirectly; or
(B) that, individually or with or through any of its affiliates or
associates, has (i) the right to acquire such stock (whether such
right is exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding (whether or not
in writing), or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise; provided, however, that a person
shall not be deemed the beneficial owner of stock tendered pursuant to
a tender or exchange offer made by such person or any of such person's
affiliates or associates until such tendered stock is accepted for
purchase or exchange; or (ii) the right to vote such stock pursuant to
any agreement, arrangement or understanding (whether or not in writing);
provided, however, that a person shall not be deemed the beneficial
owner of any stock under this item if the agreement, arrangement or
understanding to vote such stock (X) arises solely from a revocable
proxy or consent given in response to a proxy or consent solicitation
made in accordance with the applicable rules and regulations under the
Exchange Act and (Y) is not then reportable on a Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(C) that has any agreement, arrangement or understanding (whether or
not in writing), for the purpose of acquiring, holding, voting (except
voting pursuant to a revocable proxy or consent as described in item
(ii) of clause (B) of this subparagraph), or disposing of such stock
with any other person that beneficially owns, or whose affiliates or
associates beneficially own, directly or indirectly, such stock.
(5) "Business combination", when used in reference to any resident
domestic corporation and any interested shareholder of such resident
domestic corporation, means:
(A) any merger or consolidation of such resident domestic corporation
or any subsidiary of such resident domestic corporation with (i) such
interested shareholder or (ii) any other corporation (whether or not
itself an interested shareholder of such resident domestic corporation)
which is, or after such merger or consolidation would be, an affiliate
or associate of such interested shareholder;
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with
such interested shareholder or any affiliate or associate of such
interested shareholder of assets of such resident domestic corporation
or any subsidiary of such resident domestic corporation (i) having
an aggregate market value equal to ten percent or more of the
aggregate market value of all the assets, determined on a consolidated
basis, of such resident domestic corporation, (ii) having an aggregate
market value equal to ten percent or more of the aggregate market
value of all the outstanding stock of such resident domestic
corporation, or (iii) representing ten percent or more of the earning
power or net income, determined on a consolidated basis, of such
resident domestic corporation;
(C) the issuance or transfer by such resident domestic corporation or
any subsidiary of such resident domestic corporation (in one
transaction or a series of transactions) of any stock of such resident
domestic corporation or any subsidiary of such resident domestic
corporation which has an aggregate market value equal to five percent
or more of the aggregate market value of all the outstanding stock
of such resident domestic corporation to such interested shareholder
or any affiliate or associate of such interested shareholder except
pursuant to the exercise of warrants or rights to purchase stock
offered, or a dividend or distribution paid or made, pro rata to all
shareholders of such resident domestic corporation;
(D) the adoption of any plan or proposal for the liquidation or
dissolution of such resident domestic corporation proposed by, or
pursuant to any agreement, arrangement or understanding (whether
or not in writing) with, such interested shareholder or any affiliate
or associate of such interested shareholder;
(E) any reclassification of securities (including, without limitation,
any stock split, stock dividend, or other distribution of stock in
respect of stock, or any reverse stock split), or recapitalization of
such resident domestic corporation, or any merger or consolidation of
such resident domestic corporation with any subsidiary of such resident
domestic corporation, or any other transaction (whether or not with or
into or otherwise involving such interested shareholder), proposed by,
or pursuant to any agreement, arrangement or understanding (whether or
not in writing) with, such interested shareholder or any affiliate or
associate of such interested shareholder, which has the effect,
directly or indirectly, of increasing the proportionate share of the
outstanding shares ofany class or series of voting stock or securities
convertible into voting stock of such resident domestic corporation or
any subsidiary of such resident domestic corporation which is directly
or indirectly owned by such interested shareholder or any affiliate or
associate of such interested shareholder, except as a result of
immaterial changes due to fractional share adjustments; or
(F) any receipt by such interested shareholder or any affiliate or
associate of such interested shareholder of the benefit, directly or
indirectly (except proportionately as a shareholder of such resident
domestic corporation) of any loans, advances, guarantees, pledges or
other financial assistance or any tax credits or other tax advantages
provided by or through such resident domestic corporation.
(6) "Common stock" means any stock other than preferred stock.
(7) "Consummation date", with respect to any business combination, means
the date of consummation of such business combination, or, in the case
of a business combination as to which a shareholder vote is taken, the
later of the business day prior to the vote or twenty days prior to the
date of consummation of such business combination.
(8) "Control", including the terms "controlling", "controlled by" and
"under common control with", means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting stock, by contract, or otherwise. A person's beneficial ownership
of ten percent or more of a corporation's outstanding voting stock shall
create a presumption that such person has control of such corporation.
Notwithstanding the foregoing, a person shall not be deemed to have
control of a corporation if such person holds voting stock, in good faith
and not for the purpose of circumventing this section, as an agent, bank,
broker, nominee, custodian or trustee for one or more beneficial owners
who do not individually or as a group have control of such corporation.
(9) "Exchange Act" means the Act of Congress known as the Securities
Exchange Act of 1934, as the same has been or hereafter may be amended
from time to time.
(10) "Interested shareholder", when used in reference to any resident
domestic corporation, means any person (other than such resident
domestic corporation or any subsidiary of such resident domestic
corporation) that
(A)(i) is the beneficial owner, directly or indirectly, of twenty
percent or more of the outstanding voting stock of such resident
domestic corporation; or
(ii) is an affiliate or associate of such resident domestic corporation
and at any time within the fiveyear period immediately prior to the
date in question was the beneficial owner, directly or indirectly, of
twenty percent or more of the then outstanding voting stock of such
resident domestic corporation; provided that
(B) for the purpose of determining whether a person is an interested
shareholder, the number of shares of voting stock of such resident
domestic corporation deemed to be outstanding shall include shares
deemed to be beneficially owned by the person through application of
subparagraph four of this paragraph but shall not include any other
unissued shares of voting stock of such resident domestic corporation
which may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or
options, or otherwise.
(11) "Market value", when used in reference to stock or property of any
resident domestic corporation, means:
(A) in the case of stock, the highest closing sale price during the
thirty-day period immediately preceding the date in question of a
share of such stock on the composite tape for New York stock
exchange-listed stocks, or, if such stock is not quoted on such
composite tape or if such stock is not listed on such exchange, on the
principal United States securities exchange registered under the
Exchange Act on which such stock is listed, or, if such stock is not
listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the thirtyday period preceding
the date in question on the National Association of Securities Dealers,
Inc. Automated Quotations System or any system then in use, or if no
such quotations are available, the fair market value on the date in
question of a share of such stock as determined by the board of
directors of such resident domestic corporation in good faith; and
(B) in the case of property other than cash or stock, the fair market
value of such property on the date in question as determined by the
board of directors of such resident domestic corporation in good faith.
(12) "Preferred stock" means any class or series of stock of a resident
domestic corporation which under the by-laws or certificate of
incorporation of such resident domestic corporation is entitled to
receive payment of dividends prior to any payment of dividends on some
other class or series of stock, or is entitled in the event of any
voluntary liquidation, dissolution or winding up of the resident
domestic corporation to receive payment or distribution of a preferential
amount before any payments or distributions are received by some other
class or series of stock.
(13) "Resident domestic corporation" means an issuer of voting stock
which:
(A) is organized under the laws of this state; and
(B) either (i) has its principal executive offices and significant
business operations located in this state; or (ii) has, alone or in
combination with one or more of its subsidiaries of which it owns at
least eighty percent of the voting stock, at least two hundred fifty
employees or twentyfive percent of the total number of all employees
of itself and such subsidiaries employed primarily within the state;
and
(C) has at least ten percent of its voting stock owned beneficially
by residents of this state. For purposes of this section, the residence
of a partnership, unincorporated association, trust or similar
organization shall be the principal office of such organization.
No resident domestic corporation, which is organized under the laws
of this state, shall cease to be a resident domestic corporation by
reason of events occurring or actions taken while such resident domestic
corporation is subject to the provisions of this section.
(14) "Stock" means:
(A) any stock or similar security, any certificate of interest, any
participation in any profit sharing agreement, any voting trust
certificate, or any certificate of deposit for stock; and
(B) any security convertible, with or without consideration, into
stock, or any warrant, call or other option or privilege of buying stock
without being bound to do so, or any other security carrying any right
to acquire, subscribe to or purchase stock.
(15) "Stock acquisition date", with respect to any person and any
resident domestic corporation, means the date that such person first
becomes an interested shareholder of such resident domestic corporation.
(16) "Subsidiary" of any person means any other corporation of which a
majority of the voting stock is owned, directly or indirectly, by such
person.
(17) "Voting stock" means shares of capital stock of a corporation
entitled to vote generally in the election of directors.
(b) Notwithstanding anything to the contrary contained in this chapter (except
the provisions of paragraph (d) of this section), no resident domestic
corporation shall engage in any business combination with any interested
shareholder of such resident domestic corporation for a period of five years
following such interested shareholder's stock acquisition date unless such
business combination or the purchase of stock made by such interested
shareholder on such interested shareholder's stock acquisition date is
approved by the board of directors of such resident domestic corporation prior
to such interested shareholder's stock acquisition date. If a good faith
proposal is made in writing to the board of directors of such resident
domestic corporation regarding a business combination, the board of directors
shall respond, in writing, within thirty days or such shorter period, if any,
as may be required by the Exchange Act, setting forth its reasons for its
decision regarding such proposal. If a good faith proposal to purchase stock
is made in writing to the board of directors of such resident domestic
corporation, the board of directors, unless it responds affirmatively in
writing within thirty days or such shorter period, if any, as may be required
by the Exchange Act, shall be deemed to have disapproved such stock purchase.
(c) Notwithstanding anything to the contrary contained in this chapter
(except the provisions of paragraphs (b) and (d) of this section), no
resident domestic corporation shall engage at any time in any business
combination with any interested shareholder of such resident domestic
corporation other than a business combination specified in any one of
subparagraph (1), (2) or (3):
(1) A business combination approved by the board of directors of such
resident domestic corporation prior to such interested shareholder's stock
acquisition date, or where the purchase of stock made by such interested
shareholder on such interested shareholder's stock acquisition date had
been approved by the board of directors of such resident domestic
corporation prior to such interested shareholder's stock acquisition date.
(2) A business combination approved by the affirmative vote of the holders
of a majority of the outstanding voting stock not beneficially owned by
such interested shareholder or any affiliate or associate of such
interested shareholder at a meeting called for such purpose no earlier
than five years after such interested shareholder's stock acquisition date.
(3) A business combination that meets all of the following conditions:
(A) The aggregate amount of the cash and the market value as of the
consummation date of consideration other than cash to be received per
share by holders of outstanding shares of common stock of such resident
domestic corporation in such business combination is a [at] least
equal to the higher of the following:
(i) the highest per share price paid by such interested shareholder
at a time when he was the beneficial owner, directly or indirectly,
of five percent or more of the outstanding voting stock of such
resident domestic corporation, for any shares of common stock of the
same class or series acquired by it (X) within the five-year period
immediately prior to the announcement date with respect to such
business combination, or (Y) within the fiveyear period immediately
prior to, or in, the transaction in which such interested shareholder
became an interested shareholder, whichever is higher; plus, in
either case, interest compounded annually from the earliest date on
which such highest per share acquisition price was paid through the
consummation date at the rate for one-year United States treasury
obligations from time to time in effect; less the aggregate amount of
any cash dividends paid, and the market value of any dividends paid
other than in cash, per share of common stock since such earliest
date, up to the amount of such interest; and
(ii) the market value per share of common stock on the announcement
date with respect to such business combination or on such interested
shareholder's stock acquisition date, whichever is higher; plus
interest compounded annually from such date through the consummation
date at the rate for oneyear United States treasury obligations from
time to time in effect; less the aggregate amount of any cash
dividends paid, and the market value of any dividends paid other
than in cash, per share of common stock since such date, up to the
amount of such interest.
(B) The aggregate amount of the cash and the market value as of the
consummation date of consideration other than cash to be received per
share by holders of outstanding shares of any class or series of stock,
other than common stock, of such resident domestic corporation is at
least equal to the highest of the following (whether or not such
interested shareholder has previously acquired any shares of such
class or series of stock):
(i) the highest per share price paid by such interested shareholder
at a time when he was the beneficial owner, directly or indirectly,
of five percent or more of the outstanding voting stock of such
resident domestic corporation, for any shares of such class or series
of stock acquired by it (X) within the five-year period immediately
prior to the announcement date with respect to such business
combination, or (Y) within the five year period immediately prior to,
or in, the transaction in which such interested shareholder became
an interested shareholder, whichever is higher; plus, in either case,
interest compounded annually from the earliest date on which such
highest per share acquisition price was paid through the consummation
date at the rate for one-year United States treasury obligations
from time to time in effect; less the aggregate amount of any cash
dividends paid, and the market value of any dividends paid other than
in cash, per share of such class or series of stock since such
earliest date, up to the amount of such interest;
(ii) the highest preferential amount per share to which the holders
of shares of such class or series of stock are entitled in the event
of any voluntary liquidation, dissolution or winding up of such
resident domestic corporation, plus the aggregate amount of any
dividends declared or due as to which such holders are entitled
prior to payment of dividends on some other class or series of stock
(unless the aggregate amount of such dividends is included in such
preferential amount); and
(iii) the market value per share of such class or series of stock on
the announcement date with respect to such business combination or on
such interested shareholder's stock acquisition date, whichever is
higher; plus interest compounded annually from such date through the
consummation date at the rate for one-year United States treasury
obligations from time to time in effect; less the aggregate amount
of any cash dividends paid, and the market value of any dividends
paid other than in cash, per share of such class or series of stock
since such date, up to the amount of such interest.
(C) The consideration to be received by holders of a particular class or
series of outstanding stock (including common stock) of such resident
domestic corporation in such business combination is in cash or in the
same form as the interested shareholder has used to acquire the largest
number of shares of such class or series of stock previously acquired by
it, and such consideration shall be distributed promptly.
(D) The holders of all outstanding shares of stock of such resident
domestic corporation not beneficially owned by such interested
shareholder immediately prior to the consummation of such business
combination are entitled to receive in such business combination cash or
other consideration for such shares in compliance with clauses (A), (B)
and (C) of this subparagraph.
(E) After such interested shareholder's stock acquisition date and prior
to the consummation date with respect to such business combination, such
interested shareholder has not become the beneficial owner of any
additional shares of voting stock of such resident domestic corporation
except:
(i) as part of the transaction which resulted in such interested
shareholder becoming an interested shareholder;
(ii) by virtue of proportionate stock splits, stock dividends or other
distributions of stock in respect of stock not constituting a business
combination under clause (E) of subparagraph five of paragraph (a) of
this section;
(iii) through a business combination meeting all of the conditions of
paragraph (b) of this section and this paragraph; or
(iv) through purchase by such interested shareholder at any price which,
if such price had been paid in an otherwise permissible business
combination the announcement date and consummation date of which were
the date of such purchase, would have satisfied the requirements of
clauses (A), (B) and (C) of this subparagraph.
(d) The provisions of this section shall not apply:
(1) to any business combination of a resident domestic corporation that
does not have a class of voting stock registered with the Securities and
Exchange Commission pursuant to section twelve of the Exchange Act,
unless the certificate of incorporation provides otherwise; or
(2) to any business combination of a resident domestic corporation whose
certificate of incorporation has been amended to provide that such resident
domestic corporation shall be subject to the provisions of this section,
which did not have a class of voting stock registered with the Securities
and Exchange Commission pursuant to section twelve of the Exchange Act on
the effective date of such amendment, and which is a business combination
with an interested shareholder whose stock acquisition date is prior to
the effective date of such amendment; or
(3) to any business combination of a resident domestic corporation
(i) the original certificate of incorporation of which contains a
provision expressly electing not to be governed by this section, or
(ii) which adopts an amendment to such resident domestic corporation's
by-laws prior to March thirty-first, nineteen hundred eighty-six, expressly
electing not to be governed by this section, or (iii) which adopts an
amendment to such resident domestic corporation's by laws, approved by
the affirmative vote of the holders, other than interested shareholders
and their affiliates and associates, of a majority of the outstanding
voting stock of such resident domestic corporation, excluding the voting
stock of interested shareholders and their affiliates and associates,
expressly electing not to be governed by this section, provided that such
amendment to the by-laws shall not be effective until eighteen months
after such vote of such resident domestic corporation's shareholders and
shall not apply to any business combination of such resident domestic
corporation with an interested shareholder whose stock acquisition date
is on or prior to the effective date of such amendment; or
(4) to any business combination of a resident domestic corporation with
an interested shareholder of such resident domestic corporation which
became an interested shareholder inadvertently, if such interested
shareholder (i) as soon as practicable, divests itself of a sufficient
amount of the voting stock of such resident domestic corporation so that
it no longer is the beneficial owner, directly or indirectly, of twenty
percent or more of the outstanding voting stock of such resident
domestic corporation, and (ii) would not at any time within the five-year
period preceding the announcement date with respect to such business
combination have been an interested shareholder but for such inadvertent
acquisition.
(5) to any business combination with an interested shareholder who was
the beneficial owner, directly or indirectly, of five per cent or more of
the outstanding voting stock of such resident domestic corporation on
October thirtieth, nineteen hundred eighty-five, and remained so to such
interested shareholder's stock acquisition date.
APPENDIX B - NEW PARADIGM SOFTWARE CORP.
EXECUTIVE STOCK OPTION PLAN
ARTICLE I - PURPOSE
New Paradigm Software Corp. (the "Company"), a New York Corporation, hereby
adopts this New Paradigm Software Corp. Executive Stock Option Plan (the
"Plan"). The purpose of the Plan are as follows:
(1) To further the growth, development and financial success of the Company
by providing certain additional incentives to certain management personnel
who have been or will be given responsibility for the management or
administration of the Company's business affairs or other persons performing
significant services to the Company and thus enabling such management
personnel to benefit directly from the Company's growth, development and
financial success.
(2) To enable the Company to obtain and retain the services of management
personnel considered essential to the long range success of the Company by
providing them an opportunity to become owners of the capital stock of the
Company pursuant to the exercise of Options, as defined below.
ARTICLE II - DEFINITIONS
Whenever used in the Plan, the words and phrases set forth below shall have
the following meanings unless context clearly requires otherwise:
(a) "Board of Directors" shall mean the Board of Directors of the Company.
(b) A "Change in Control" shall be deemed to have occurred if (A) any person
(as that term is used in Section 13(d) and 14(d) of the Exchange Act) is or
becomes the beneficial owner (as that term is used in Section 13(d) of the
Exchange Act and the rules and the rules and regulations promulgated
thereunder) of stock of the Company entitled to cast more than 30% of the
votes at thetime entitled to be cast generally for the election of directors,
(B) more than 50% of the members of the Board of Directors shall not be
Continuing Directors (which term, as used herein, means the directors of the
Company (x) who are members of the Board of Directors on June 1, 1996 or (y)
who subsequently became directors of the Company and who were elected or
designated to be candidates for election as nominees of the Board of Directors,
or whose election or nomination for election by the Company's shareholders
was otherwise approved by a vote of a majority of the Continuing Directors
then on the Board of Directors), (C) the Company shall be merged or
consolidated with, or, in any transaction or series of transactions,
substantially all of the business or the assets of the Company shall be sold or
otherwise acquired by, another corporation or corporation or entity and, asa
result thereof either (1) the shareholders of the Company immediately prior
thereto shall not directly or indirectly have at least 50% or more of the
combined voting power of the surviving, resulting or transferee corporation or
entity immediately thereafter or (2) any person (as that term is used in
Sections 13(d) and 14(d) of the Exchange Act is or becomes the beneficial
owner (as that term is used in Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder) of more than 30% of the combined
voting power of the surviving, resulting or transferee corporation or entity,
or (D) any change in control of the Company shall have occurred of a nature
that would be reported in response to Item 1(a) of form 8-K promulgated under
the Exchange Act, regardless of whether the Company is at the time of such
change of control subject to the reporting requirements thereof.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
have occurred if an acquisition of stock that would otherwise constitute a
Change of Control pursuant to clause (A) or (D) of the preceding sentence is
made by the Company, by any corporation in a merger or consolidation that does
not constitute a Change in Control pursuant to clause (C) of the preceding
sentence or by any employee benefit plan (or related trust) sponsored or
maintained by the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Committee" shall mean the Compensation Committee of the Board of Directors
of the Company or such other committee as may be appointed by the Board of
Directors as provided in article III.
(e) "Common Stock" shall mean the common stock of the Company, $0.01 par value
per share.
(f) "Exchange Act", means the Securities and Exchange Act of 1934 as
heretofore or hereafter amended.
(g) "Fair Market Value", when used in connection with the value of shares of
the Common Stock subject to an Option granted under the Plan, shall mean (a)
the last sale price of shares of Common Stock on the last trading day
immediately preceding the date of grant or, if no such sale takes place on
such date, the average of the closing bid and ask prices thereof on such date,
in each case as officially reported on the principal national securities
exchange on which the same are then listed or admitted to trading, or
(b) if no shares of Common Stock are then listed or admitted to trading on any
national securities exchange, the average of the highest reported closing bid
and asked prices of the shares of Common Stock on such date in the
over-the-counter as shown by the National Association of Securities Dealers
automated quotation system. If the Common Stock ceases to be so quoted or
listed, the term Fair Market Value shall be the fair market value as of
the date of grant as determined in good faith by the Committee based
on considerations of factors it deems appropriate including, but not
limited to, the market value of the shares of common stock of comparable
companies in the industry and the trend of the Company's earnings.
(h) "Management Employee" shall mean any person, including an officer, who is
in the regular full time employment of the Company and who, in the opinion of
the Committee, is or is expected to be primarily responsible for the
management, growth or protection of some part or all of the business of the
Company.
(i) "Nonqualified Stock Option" shall mean an option to purchase shares of
Common Stock granted under the Plan which is not intended to qualify as an
incentive stock option as defined in Section 422(b) of the Code and which is
designated in the applicable Option Agreement as an Nonqualified Stock Option.
(j) "Option" shall mean a Nonqualified Stock Option.
(k) "Option Agreement" shall mean an agreement between the Company and the
Optionee that sets forth the terms, conditions and limitations applicable to
an Option.
(l) "Optionee" shall mean any person who has the right to purchase Common Stock
pursuant to an Option granted hereunder.
(m) "Option Shares" shall mean shares of Common Stock purchased by the
Optionee pursuant to an Option.
ARTICLE III - ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee appointed by the Board of
Directors and consisting of at least two members of the Board of Directors.
Members of the Committee shall serve at the pleasure of the Board.
The Committee may adopt its own rules of procedure, and the action of a
majority of the Committee, taken at a meeting or taken without a meeting by a
writing signed by all members of the Committee, shall constitute action by the
Committee. The Committee shall have the power and authority to administer,
construe and interpret the Plan, to make rules for carrying it out and to
make changes in such rules. The determination of the Committee shall be
conclusive on all persons affected thereby. The Committee shall conduct itself
in accordance with the By-Laws of the Company.
ARTICLE IV - GRANTING OF OPTIONS
The Committee may from time to time grant Options under the Plan to such
Management Employees and in such form and having such terms, conditions and
limitations, consistent with the terms of the Plan, as the Committee may
determine; provided, however, that the Committee may not grant Options to any
Management Employee who is not in the regular fulltime employment of the
Company. The terms, conditions and limitations of each Option granted under
the Plan shall be set forth in an Option Agreement, in a form approved by the
Committee, consistent, however, with the terms of the Plan.
ARTICLE V - TERMS OF OPTIONS
5.1 Terms, Conditions and Limitations. The terms, conditions and limitations
with respect to each grant of Options under the Plan shall be consistent with
the following:
(a) The Option price per share shall not be less than the Fair Market
Value of the Common Stock at the time the Option is granted.
(b) Exercise of an Option shall be conditioned upon the Optionee named
therein having remained in the employ of the Company or having performed
service for the Company for at least one year. An Option shall be
exercisable in whole or in part from time to time during the period
beginning at the completion of the required employment time or period of
service stated in the Option Agreement and ending at the expiration of
ten years from the date of grant of the Option, unless an earlier
expiration date shall be stated in the Option Agreement or the Option
shall cease to be exercisable pursuant to Section 5.1(c).
(c) Unless otherwise provided in the Option Agreement, if an Optionee's
employment with the Company or performance of services for the Company
terminates other than by reason of the Optionee's death or disability,
the Optionee's Option shall terminate and cease to be exercisable no later
than one hundred eighty (180) days after the date of such termination of
employment or services. If an Optionee's employment with or service for
the Company terminates by reason of death or disability, the Optionee's
option shall terminate and cease to be exercisable not later than one
year from the date of death or disability; provided that, if so permitted
in the Option Agreement, a Nonqualified Stock Option may be exercised
within one year from the date of death even if later than the expiration
date stated in such Option.
ARTICLE VI - EXERCISE OF OPTIONS
6.1 Manner of Exercise. Options shall become exercisable at such times and in
such installments (which may be cumulative) as the Committee shall provide in
the terms of each individual Option Agreement; provided, however, that the
Committee may, at the time of grant or by resolution adopted after an Option is
granted and on such terms and conditions as it may determine to be
appropriate, accelerate the time at which such Option or any portion thereof
may be exercised. If a Change in Control cocurs, all Options granted under
the Option Agreements will vest immediately and become immediately exercisable;
provided, however, that no such Option held by any Management Employee who
is subject to Section 16 of the Exchange Act shall become so vested or
exercisable until the day after the expiration of six months from the date
of grant (or until such Management Employee's death, if earlier) unless the
change in such Option resulting from such vesting or exercisability would, in
the opinion of counsel to the Company, be exempt from the provisions of
Section 16(b) of the Exchange Act.
An Optionee shall exercise his Option by giving the Committee written notice
of the exercise on a form approved by the Committee. The notice shall specify
the number of shares in respect of which the Option is to be exercised and
shall be signed by the Optionee; provided, however, that the Company may
not issue fractional shares and the Committee may, in the Option Agreement,
require any partial exercise to be with respect to a specified minimum number
of shares. In no event may an Option be exercised after the expiration of its
term, except as provided in the proviso of the last sentence of Section 5.1(c).
6.2 Payment for Stock and Withholding. At the time that an Optionee exercises
his right to purchase shares of Common Stock pursuant to an Option, the
Optionee must convey to the Company the full purchase price of the Option
Shares in respect of which the Option is exercised and full payment of any
federal income or other tax required to be withheld by the Company with respect
to the shares for which such Option or portion thereof is exercised. Payment
of the full purchase price plus any applicable withholding for taxes must be
made in cash or by check.
ARTICLE VII - LIMITATIONS AND CONDITIONS
7.1 Maximum amount of Options. The total number of shares of Common Stock that
may be made subject to Options under the Plan is 750,000 shares. Such total
number of shares may consist, in whole or in part, of unissued shares or
reacquired shares. The foregoing number of shares may be increased or decreased
by the events set forth in Article VIII. In the event that the Company makes
an acquisition or is a party to a merger or consolidation and the Company
assumes the options or other awards consistent with the purpose of this Plan
of the company acquired, merged or consolidated and such options or other
awards are administered pursuant to this Plan, shares of Common Stock subject
to the assumed options or other awards shall not count as part of the total
number of shares of Common Stock that may be made subject to Options under
this Plan.
7.2. Counting of Options. Any shares that have been made subject to an Option
that cease to be subject to the Option (other than by reason of exercise of
the Option) shall again be available for award and shall not be considered
as having been theretofore made subject to award.
7.3 Term of Plan. No options shall be granted under the Plan after
September 12, 2006, but the terms of Options granted on or before such date
may extend beyond such date.
7.4 Compliance With Applicable Law. Option Shares shall not be issued with
respect to an Option granted under the Plan unless, in the opinion of the
Company, the exercise of the Option and the issuance and delivery of the
Option Shares pursuant to the provisions of the Option and the Plan shall
comply with all relevant provisions of the law, including, without limitation,
the Securities Act of 1933, as amended and the Exchange Act, any rules and
regulations promulgated thereunder, and the requirements of any stock
exchange or inter-dealer quotation system upon which the Common Stock may then
be quoted or listed. The Committee may request the Optionee to provide any
representations and documents, and may take or request the Optionee to take
any additional actions, including, without limitation, placing legends on
share certificates and issuing stop-transfer orders, that the Committee
reasonably deems necessary or advisable to effect compliance with any
applicable laws. The exercise of any Option pursuant to Article VI of the
Plan shall be subject to approval of counsel for the Company with respect to
its compliance with all applicable federal and state laws.
7.5 Transfer Restrictions. No Option or interest or right therein shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means, whether such disposition be
voluntary or involuntary or by operation of law or by judgment, levy,
attachment, garnishment or any other legal or equitable preceding (including
bankruptcy), and any attempted disposition thereof shall be null and void and
of no effect; provided, however, that nothing in this Section 7.5 shall
prevent transfers by will or by the laws of descent and distribution. During
the lifetime of the Optionee, an Option shall be exercisable only by the
Optionee.
7.6 No Contract of Employment. Nothing in the Plan or in any Option granted
pursuant to the Plan shall (i) confer upon any Management Employee any right
to continue in the employ of the Company or to perform services for the
Company or (ii) interfere in any way with the right of the Company to terminate
the Management Employee's employment or services at any time.
7.7 Shareholder Rights. Until such time as the transfer of ownership to the
Optionee of Option Shares has been completed and stock certificates have been
issued, the Optionee shall not be, nor have any of the rights (including right
to receive dividends) or privileges of, a stockholder of the Company.
7.8 Notice to Optionee. Upon the exercise of any Option, the Company shall
provide the Management Employee with the notice required under Section
6039(a) of the Code.
ARTICLE VIII - STOCK ADJUSTMENTS
In the event of any merger, consolidation, stock or other noncash dividend,
extraordinary cash dividend, split-up, spinoff, combination or exchange of
shares, reorganization or recapitalization or change in capitalization, or any
other similar corporate event, the Committee shall make such adjustments in
(i) the aggregate number of shares subject to the Plan and the number of
shares that may be made subject to Options to any individual Management
Employee as set forth in Section 7.1, and (ii) the number and kind of shares
that are subject to any Option (including any Option outstanding after
termination of employment) and the Option price per share without any change
in the aggregate Option Price to be paid therefor upon exercise of the Option,
as the Committee shall deem appropriate in the circumstances. Notwithstanding
any other provision of this Plan or any Option Agreement, in connection with
any transaction referred to in the preceding sentence, the Board of Directors,
acting by affirmative vote of the entire Board of Directors at such time as
at least a majority of the Board of Directors is composed of Continuing
Directors and by the affirmative vote of a majority of such Continuing
Directors, may cause all outstanding Options to vest and to become immediately
exercisable and may cause all outstanding Options to be canceled in
consideration for cash, securities or other property of the type that holders of
Common Stock would be entitled to receive in such transaction and having a
value equal to the difference between the exercise price of such Options and
the value of the consideration to be received in such transaction by the
holders of Common Stock. The determination by the Committee as to the terms of
any of the foregoing adjustments shall be conclusive and binding.
Nothing contained in this Article VIII shall require the issuance of any
fractional shares.
ARTICLE IX MISCELLANEOUS
9.1 Amendment, Suspension and Termination. The Board of Directions shall have
the Power to amend the Plan, provided, however, the Board of Directors
shall not, without the approval of the Company's stockholders, amend the plan
to increase the maximum number of shares authorized for the Plan except as
provided in Article VIII, change the class of eligible individuals to other
than Management Employees, reduce the basis upon which the minimum Option
price is determined, extend the period within which Options under the Plan
may be granted, or provide for an Option that is exercisable more than ten
years from the date it is granted except in the event of death. The Committee
shall have no power to change the terms of any Option theretofore granted
under the Plan so as to impair the rights of an Optionee without the the
consent the Optionee whose rights would be affected by such change except
to the extent, if any, provided in the Plan or in the related Option Agreement.
The Board of Directors may suspend or terminate the Plan at any time. No such
uspension or termination shall affect Options then outstanding.
9.2 Governing Law. The Plan shall be governed by the laws of the State of New
York. It is the intention of the Company that the Plan shall comply with the
provisions of the Code and any other applicable federal and state laws, and
that the Plan shall be interpreted consistently with those ends.
9.3 Effective Date. The Plan shall be effective as of September 12, 1996,
subject to its approval by the shareholders of the Company. All Options which
have been or may be granted under the lan prior to such approval shall be
conditioned upon, and may not be exercisable until after, such approval is
obtained.
9.4 Titles Not Controlling. The titles to Articles and the headings of
Sections in the Plan are placed herein for convenience of reference only and
in the case of any conflict, the text of this instrument rather than such
titles or headings shall control.
NEW PARADIGM SOFTWARE CORP.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, JULY 30, 1996
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Mark Blundell, John Brann and Daniel A. Gordon
proxies, with power of substitution, to vote at the Annual Meeting of
Shareholders of New Paradigm Software Corp. to be held on July 30, 1996 at the
principal executive offices of the Corporation at 11:00 a.m., and at any
adjournment thereof, on the matters referred to and described in the
accompanying Proxy Statement, and on any other business before the meeting,
with all powers the undersigned would possess if personally present. A
majority (or, if only one, then that one) of the proxies or their substitutes
acting at the meeting may exercise all powers hereby conferred.
PLEASE MARK, SIGN AND DATE ON THE REVERSE SIDE AND RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
[ X ] PLEASE MARK YOUR VOTES LIKE THIS
THIS PROXY WILL BE VOTED AS DIRECTED BY THE SHAREHOLDER.
IF NOT OTHERWISE SPECIFIED, THE PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS AND FOR PROPOSALS 2 THROUGH 5.
The Board of Directors recommends a vote FOR all nominees in Item 1, and a
vote FOR Proposals 2-5:
1. Election of Beverly Brown, Mark Blundell, John Brann, Dan Gordon, Jeff Kahn
and Michael Taylor as directors for a one year term expiring at the 1997 Annual
Meeting:
FOR THE WITHHOLD AUTHORITY
NOMINEES to vote for the nominee(s)
[ ] [ ]
INSTRUCTION: To withhold authority to vote for any individual
nominee(s) write that nominee's name below.
____________________________________________________________________________
2. Proposal to Adopt a By-Law amendment to eliminate the applicability of New
York Business Corporation Law Section 912 (an anti-takeover provision):
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Proposal to adopt the Executive Stock Option Plan:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Proposal to amend the Employee Stock Option Plan:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. Ratification of the appointment of BDO Seidman, LLP as independent public
accountants for the fiscal year ending March 31, 1997:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
And, in their discretion, in the transaction of such other business as may
properly come before the Annual Meeting.
Signature(s) ---------------------------------------------------------
Date ---------------------------
NOTE: Please sign exactly as your name appears on this card, date this
card and return it in the enclosed envelope.
NEW PARADIGM SOFTWARE CORP.
STOCK OPTION PLAN
ARTICLE I
PURPOSE
New Paradigm Software Corp. (the "Company"), a New York corporation,
hereby adopts this New Paradigm Software Corp. Stock Option Plan (the
"Plan"). The purposes of the Plan are as follows:
(1) To further the growth, development and financial success of the
Company by providing additional incentives to certain key personnel
who have been or will be given responsibility for the management or
administration of the Company's business affairs and other persons
performing significant services for the Company and thus enabling
such key personnel to benefit directly from the Company's growth,
development and financial success.
(2) To enable the Company to obtain and retain the services of key
personnel considered essential to the long range success of the
Company by providing them an opportunity to become owners of capital
stock of the Company pursuant to the exercise of Options, as defined
below.
ARTICLE II
DEFINITIONS
Whenever used in the Plan, the words and phrases set forth below shall
have the following meanings unless the context clearly requires otherwise:
(a) "Board of Directors" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the Stock Option Committee appointed by the
Board of Directors as provided in Article III.
(d) "Common Stock" shall mean the common stock of the Company, $0.01 par
value per share.
(e) "Fair Market Value", when used in connection with the value of shares
of Common Stock subject to an Option granted under the Plan, shall mean (a)
the last sale price of shares of Common Stock on the last trading day
immediately preceding the date of grant or, if no such sale takes place on
such date, the average of the closing bid and asked prices thereof on such
date, in each case as officially reported on the principal national securities
exchange on which the same are then listed or admitted to trading, or (b)
if no shares of Common Stock are then listed or admitted to trading on any
national securities exchange, the average of the highest reported closing
bid and asked prices of the shares of Common Stock on such date in the
over-the-counter market as shown by the National Association of Securities
Dealers automated quotation system. If the Common Stock has never been or
ceases to be so quoted or listed, the term "Fair Market Value" shall be the
fair market value as of the date of grant as determined in good faith by the
Committee based on considerations of factors it deems appropriate including,
but not limited to, the market value of the shares of common stock of
comparable companies in the industry and the trend of the Company's earnings.
(f) "Incentive Stock Option" shall mean an option to purchase shares of
Common Stock granted under the Plan which is intended to qualify as an
incentive stock option as defined in Section 422(b) of the Code and which
is designated in the applicable Option Agreement as an Incentive Stock Option.
(g) "Key Employee" shall mean any person, including an officer or director,
who (i) is in the regular full-time employment of the Company or (ii) is an
outside director of the Company and who, in the opinion of the Committee, is
or is expected to be primarily responsible for the management, growth or
protection of some part or all of the business of the Company.
(h) "Nonqualified Stock Option" shall mean an option to purchase shares
of Common Stock granted under the Plan which is not intended to qualify
as an incentive stock option as defined in Section 422(b) of the Code
and which is designated in the applicable Option Agreement as a Nonqualified
Stock Option.
(i) "Option" shall mean an Incentive Stock Option or a Nonqualified Stock
Option.
(j) "Option Agreement" shall mean an agreement between the Company and the
Optionee that sets forth the terms, conditions and limitations applicable
to an Option.
(k) "Optionee" shall mean any person who has the right to purchase Common
Stock pursuant to an Option granted hereunder.
(l) "Option Shares" shall mean shares of Common Stock purchased by the
Optionee pursuant to an Option.
ARTICLE III
ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee appointed by the Board
of Directors and consisting of at least two members of the Board of
Directors. Members of the Committee shall serve at the pleasure of
the Board. The Committee may adopt its own rules of procedure, and
the action of a majority of the Committee, taken at a meeting or
taken without a meeting by a writing signed by all members of the
Committee, shall constitute action by the Committee. The Committee
shall have the power and authority to administer, construe and interpret
the Plan, to make rules for carrying it out and to make changes in
such rules. The determination of the Committee shall be conclusive
on all persons affected thereby. The Committee shall conduct itself
in accordance with the Bylaws of the Company.
ARTICLE IV
GRANTING OF OPTIONS
The Committee may from time to time grant Options under the Plan
to such Key Employees and in such form and having such terms,
conditions and limitations, consistent with the terms of the Plan,
as the Committee may determine; provided, however, that the
Committee may not grant Incentive Stock Options to any Key
Employee who is not in the regular full-time employment of the
Company. The terms, conditions and limitations of each Option
granted under the Plan shall be set forth in an Option Agreement,
in a form approved by the Committee, consistent, however, with
the terms of the Plan.
ARTICLE V
TERMS OF OPTIONS
5.1 Terms, Conditions and Limitations. The terms, conditions
and limitations with respect to each grant of Options under
the Plan shall be consistent with the following:
(a) The Option price per share shall not be less than the Fair
Market Value of the Common Stock at the time the Option is granted.
(b) Exercise of an Option shall be conditioned upon the Optionee
named therein having remained in the employ of the Company or
having performed service for the Company for at least one year
after the date of the grant of the Option; provided, however,
that this condition shall not be applicable in the event of the
death of the Optionee while an employee of the Company or
performing services for the Company. An Option shall be
exercisable in whole or in part from time to time during the
period beginning at the completion of the required employment
time or period of service stated in the Option Agreement and
ending at the expiration of ten years from the date of grant
of the Option, unless an earlier expiration date shall be
stated in the Option Agreement or the Option shall cease
to be exercisable pursuant to Section 5.1(c). To the extent
that the aggregate Fair Market Value of shares of Common
Stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any
calendar year exceeds $100,000, such Options shall be
treated as Nonqualified Stock Options. The foregoing shall
be applied by taking Options into account in the order in
which they were granted. For purposes of the foregoing, the
Fair Market Value of any share shall be determined at the time
of the grant of the related Option. In the event the foregoing
results in a portion of an Incentive Stock Option exceeding the
$100,000 limitation, only such excess shall be treated as a
Nonqualified Stock Option.
(c) Unless otherwise provided in the Option Agreement, if an
Optionee's employment with the Company or performance of
services for the Company terminates other than by reason of
the Optionee's death or disability, the Optionee's Option shall
terminate and cease to be exercisable no later than ninety (90)
days after the date of such termination of employment or services.
If an Optionee's employment with or service for the Company
terminates by reason of death or disability, the Optionee's
Option shall terminate and cease to be exercisable not later
than one year from the date of death or disability; provided
that if the Option is an Incentive Stock Option, such Option
shall terminate and cease to be exercisable no later than the
earlier of ten years from the date of grant and one year from
the date of death; and provided further that, if so permitted
in the Option Agreement, a Nonqualified Stock Option may be
exercised within one year from the date of death even if later
than the expiration date stated in such Option.
(d) Notwithstanding any other provisions of the Plan to the
contrary, if a Key Employee, at the time an Incentive Stock
Option is granted to such employee, owns more than ten
percent (10%) of the total combined voting power of all
classes of stock of the Company then (i) the price per
share for Common Stock which may be acquired pursuant to
any Incentive Stock Option granted under the Plan to such
employee shall equal not less than 110 percent of the Fair
Market Value of the Common Stock at the time the Incentive
Stock Option is granted and (ii) no such Incentive Stock
Option, by its terms, may be exercisable more than five
years after the date the Incentive Stock Option is granted.
ARTICLE VI
EXERCISE OF OPTIONS
6.1 Manner of Exercise. Options shall become exercisable
at such times and in such installments (which may be cumulative)
as the Committee shall provide in the terms of each individual
Option Agreement; provided, however, that the Committee may, at
the time of grant or by resolution adopted after an Option is
granted and on such terms and conditions as it may determine to
be appropriate, accelerate the time at which such Option or any
portion thereof may be exercised.
An Optionee shall exercise his Option by giving the Committee
written notice of the exercise on a form approved by the Committee.
The notice shall specify the number of shares in respect of
which the Option is to be exercised and shall be signed by
the Optionee; provided, however, that the Company may not
issue fractional shares and the Committee may, in the Option
Agreement, require any partial exercise to be with respect to
a specified minimum number of shares. In no event may an Option
be exercised after the expiration of its term.
6.2 Payment for Stock and Withholding. At the time that an
Optionee exercises his right to purchase shares of Common Stock
pursuant to an Option, the Optionee must convey to the Committee
the full purchase price of the Option Shares in respect of which
the Option is exercised and full payment of any federal income or
other tax required to be withheld by the Company with respect to
the shares for which such Option or portion thereof is exercised.
Payment of the full purchase price plus any applicable withholding
for taxes must be made in cash or by check.
ARTICLE VII
LIMITATIONS AND CONDITIONS
7.1 Maximum Amount of Options. The total number of shares of
Common Stock that may be made subject to Options under the Plan
is 1,000,000 shares. Such total number of shares may consist,
in whole or in part, of unissued shares or reacquired shares.
The foregoing numbers of shares may be increased or decreased
by the events set forth in Article VIII. In the event that the
Company makes an acquisition or is a party to a merger or
consolidation and the Company assumes the options or other
awards consistent with the purpose of this Plan of the company
acquired, merged or consolidated and such options or other awards
are administered pursuant to this Plan, shares of Common Stock
subject to the assumed options or other awards shall not count
as part of the total number of shares of Common Stock that may
be made subject to Options under this Plan.
7.2 Counting of Options. Any shares that have been made subject
to an Option that cease to be subject to the Option (other than
by reason of exercise of the Option) shall again be available
for award and shall not be considered as having been theretofore
made subject to award.
7.3 Term of Plan. No options shall be granted under the Plan
after April 8, 2004, but the terms of Options granted on or before
such date may extend beyond such date.
7.4 Compliance With Applicable Law. Option Shares shall not
be issued with respect to an Option granted under the Plan unless,
in the opinion of the Company, the exercise of the Option and the
issuance and delivery of the Option Shares pursuant to the provisions
of the Option and the Plan shall comply with all relevant provisions
of law, including, without limitation, the Securities Act of 1933,
as amended, the Securities Exchange Act of 1934, as amended, any
rules and regulations promulgated thereunder, and the requirements
of any stock exchange or inter-dealer quotation system upon which
the Common Stock may then be quoted or listed. The Committee may
request the Optionee to provide any representations and documents,
and may take or request the Optionee to take any additional actions,
including, without limitation, placing legends on share certificates
and issuing stop-transfer orders, that the Committee reasonably deems
necessary or advisable to effect compliance with any applicable laws.
The exercise of any Option pursuant to Article VI of the Plan shall
be subject to approval of counsel for the Company with respect to
its compliance with all applicable federal and state laws.
7.5 Transfer Restrictions. No Option or interest or right therein
shall be subject to disposition by transfer, alienation, anticipation,
pledge, encumbrance, assignment or any other means, whether such
disposition be voluntary or involuntary or by operation of law or
by judgment, levy, attachment, garnishment or any other legal or
equitable proceeding (including bankruptcy), and any attempted
disposition thereof shall be null and void and of no effect;
provided, however, that nothing in this Section 7.5 shall prevent
transfers by will or by the laws of descent and distribution.
During the lifetime of the Optionee, an Option shall be exercisable
only by the Optionee.
7.6 No Contract of Employment. Nothing in the Plan or in any
Option granted pursuant to the Plan shall (i) confer upon any
Key Employee any right to continue in the employ of the Company
or to perform services for the Company or (ii) interfere in any
way with the right of the Company to terminate the Key Employee's
employment or services at any time.
7.7 Notice of Disposition. As a condition to the exercise of
any Incentive Stock Option, the Optionee shall enter into an
agreement with the Company under which the Optionee shall be
obligated to notify the Company in writing, within thirty
days, of any disposition (whether by sale, exchange, gift
or otherwise) of shares of Common Stock acquired by the
Optionee pursuant to the exercise of an Incentive Stock
Option within two years from the date of the granting of
such Option or within one year of the transfer of such
shares to the Optionee.
7.8 Shareholder Rights. Until such time as the transfer
of ownership to the Optionee of Option Shares has been
completed and stock certificates have been issued, the
Optionee shall not be, nor have any of the rights (including
the right to receive dividends) or privileges of, a
stockholder of the Company.
7.9 Notice to Optionee. Upon the exercise of any Option,
the Company shall provide the Key Employee with the notice
required under Section 6039(a) of the Code.
ARTICLE VIII
STOCK ADJUSTMENTS
In the event of any merger, consolidation, stock or other
non-cash dividend, extraordinary cash dividend, split-up,
spin-off, combination or exchange of shares, reorganization
or recapitalization or change in capitalization, or any
other similar corporate event, the Committee may make
such adjustments in (i) the aggregate number of shares
subject to the Plan and the number of shares that may
be made subject to Options to any individual Key Employee
as set forth in Section 7.1, and (ii) the number and kind
of shares that are subject to any Option (including any
Option outstanding after termination of employment) and
the Option price per share without any change in the
aggregate Option price to be paid therefor upon exercise
of the Option, as the Committee shall deem appropriate
in the circumstances. The determination by the Committee
as to the terms of any of the foregoing adjustments shall
be conclusive and binding.
Nothing contained in this Article VIII shall require the
issuance of any fractional shares.
ARTICLE IX
MISCELLANEOUS
9.1 Amendment, Suspension and Termination. The Board of
Directors shall have the power to amend the Plan, including
the power to change the amount of the aggregate Fair Market
Value of the shares subject to Incentive Stock Options first
exercisable in any calendar year under Article V to the
extent provided in Section 422 of the Code, or any successor
provision. The Board of Directors shall not, without the
approval of the Company's stockholders, amend the Plan to
increase the maximum number of shares authorized for the
Plan except as provided in Article VIII, change the class
of eligible individuals to other than Key Employees, reduce
the basis upon which the minimum Option price is determined,
extend the period within which Options under the Plan may be
granted, or provide for an Option that is exercisable more
than ten years from the date it is granted except in the
event of death. The Committee shall have no power to change
the terms of any Option theretofore granted under the Plan
so as to impair the rights of an Optionee without the consent
of the Optionee whose rights would be affected by such change
except to the extent, if any, provided in the Plan or in the
related Option Agreement. The Board of Directors may suspend
or terminate the Plan at any time. No such suspension or
termination shall affect Options then outstanding.
9.2 Governing Law. The Plan shall be governed by the laws
of the State of New York. It is the intention of the Company
that the Plan shall comply with the provisions of Section 422
of the Code and any other applicable federal and state laws,
and that the Plan shall be interpreted consistently with those
ends.
9.3 Effective Date. The Plan shall be effective as of
April 8, 1994, subject to its approval by the stockholders
of the Company. All Options which have been or may be
granted under the Plan prior to such approval shall be
conditioned upon, and may not be exercisable until after,
such approval is obtained.
9.4 Titles Not Controlling. The titles to Articles and
the headings of Sections in the Plan are placed herein for
convenience of reference only and in the case of any conflict,
the text of this instrument rather than such titles or
headings shall control.
