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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/X/ Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
STB Systems, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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[LOGO]
March 14, 1997
Dear Fellow Shareholder:
Enclosed you will find proxy materials for our Annual Meeting of
shareholders to be held on April 17, 1997, at which you will consider several
proposals, including a proposal to reincorporate our Company under the laws of
Delaware.
Your Board has unanimously recommended approval of the reincorporation of
STB to permit the Company to take advantage of the greater flexibility and
certainty offered by Delaware law. Your Board believes that by reincorporating
in Delaware the Company will be better positioned to take advantage of business
opportunities as they arise and to provide for changing business needs.
If approved, stock certificates representing outstanding stock of the
Company will automatically be converted into the same number of shares of stock
of the Delaware corporation and the Common Stock will continue to be traded on
the Nasdaq Stock Market. We urge you to read the enclosed proxy statement for a
detailed description of the proposals to be considered at the meeting, including
the reincorporation.
YOUR VOTE IS EXTREMELY IMPORTANT BECAUSE THE REINCORPORATION REQUIRES THE
APPROVAL OF TWO-THIRDS OF THE OUTSTANDING SHARES. IF YOU DO NOT VOTE, IT WILL
HAVE THE SAME EFFECT AS A VOTE AGAINST THE REINCORPORATION. PLEASE SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PAID ENVELOPE AS SOON AS
POSSIBLE. IF YOUR SHARES OF COMMON STOCK ARE HELD IN THE NAME OF A BANK OR
BROKERAGE FIRM, ONLY THAT FIRM CAN EXECUTE A PROXY CARD ON YOUR BEHALF. PLEASE
CONTACT THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND GIVE INSTRUCTIONS FOR A
PROXY CARD TO BE VOTED FOR THE REINCORPORATION.
If you have any questions about this important matter, please do not
hesitate to call our proxy solicitor, ChaseMellon Shareholder Services LLC, at
(212) 946-3265.
Thank you for your support and cooperation.
Yours truly,
WILLIAM E. OGLE
CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD OF DIRECTORS
<PAGE>
[LOGO]
1651 NORTH GLENVILLE DRIVE
RICHARDSON, TEXAS 75081
(972) 234-8750
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 17, 1997
------------------------
To the Shareholders of
STB SYSTEMS, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of STB
Systems, Inc. (the "Company"), a Texas corporation, will be held in the
Michelangelo Room, Omni Richardson Hotel, 701 East Campbell Road, Richardson,
Texas, on Wednesday, April 17, 1997, at 3:00 p.m., Dallas, Texas time, for the
following purposes:
1. To elect seven directors to serve until the next succeeding annual
meeting and until their respective successors are elected and qualified;
2. To approve amendments to the Company's 1995 Long Term Incentive
Plan;
3. To approve amendments to the Company's Stock Option Plan for
Non-Employee Directors;
4. To change the state of incorporation of the Company from Texas to
Delaware (the "Reincorporation");
5. To ratify the appointment by the Board of Directors of Price
Waterhouse LLP as independent certified public accountants of the Company
for the fiscal year ending October 31, 1997; and
6. To transact such other business as properly may come before the
meeting or any adjournment thereof.
The Reincorporation of the Company from Texas to Delaware would be effected
by merging the Company into a newly organized, wholly-owned Delaware subsidiary
that would be the surviving corporation ("STB-Delaware"). The Plan and Agreement
of Merger relating to the Reincorporation provides for the conversion of each
outstanding share of the Common Stock of the Company into one share of the
Common Stock of STB-Delaware, the conversion of all options and rights to
acquire shares of Common Stock of the Company under its various benefit plans
into a like number of options and rights to acquire shares of Common Stock of
STB-Delaware, the substitution of the charter and bylaws of STB-Delaware for
those of the Company (with certain differences conforming the charter and bylaws
to Delaware law) and an increase in the authorized Common Stock of the Company
from 20,000,000 shares to 25,000,000 shares (with the authorized Preferred Stock
of the Company remaining the same). The Reincorporation will not result in any
material change in the name, business, assets or financial position of the
Company or in the persons who constitute the Board of Directors or management.
Approval of the Reincorporation proposal will constitute approval of all such
matters.
The close of business on March 7, 1997 has been fixed by the Board of
Directors as the record date for the Annual Meeting. Only shareholders of record
on that date will be entitled to notice of and to vote at
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the Annual Meeting or any adjournment thereof, notwithstanding transfer of any
stock on the books of the Company after such record date. The stock transfer
books will not be closed.
A Proxy Statement, form of Proxy, and copy of the Annual Report on the
Company's operations during the fiscal year ended October 31, 1996, accompany
this notice.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING. IF
YOU DO NOT EXPECT TO ATTEND IN PERSON, PLEASE SIGN AND DATE THE FORM OF PROXY
AND RETURN IT IN THE ENCLOSED ENVELOPE. THE FORM OF PROXY IS ENCLOSED IN THE
MAILING ENVELOPE IN WHICH THIS PROXY STATEMENT IS CONTAINED. SHAREHOLDERS WHO
ATTEND THE ANNUAL MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON IF THEY
DESIRE.
By Order of the Board of Directors
BRYAN F. KEYES
SECRETARY
March 14, 1997
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[LOGO]
1651 NORTH GLENVILLE DRIVE
RICHARDSON, TEXAS 75081
(972) 234-8750
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 17, 1997
SOLICITATION OF PROXIES
This Proxy Statement is furnished to shareholders of STB Systems, Inc., a
Texas corporation (the "Company"), in connection with the solicitation of
proxies by the Board of Directors to be voted at the Annual Meeting of
Shareholders of the Company to be held in the Michelangelo Room, Omni Richardson
Hotel, 701 East Campbell Road, Richardson, Texas, on Wednesday, April 17, 1997,
at 3:00 p.m., Dallas, Texas time, or at any adjournment thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting of Shareholders.
References herein to the "Company" include its subsidiaries, unless the context
otherwise requires.
This Proxy Statement and form of Proxy are being mailed to shareholders on
or about March 14, 1997. If the enclosed form of Proxy is executed and returned,
it may nevertheless be revoked by the shareholder at any time by filing with the
Secretary of the Company a written revocation or a duly executed proxy bearing a
later date. A shareholder who attends the meeting in person may revoke his or
her proxy at that time and vote in person if so desired. All proxies duly
signed, dated, and returned will be voted as specified therein, but unless
otherwise specified, will be deemed to grant authority to vote:
(1) FOR the election of the seven nominees listed under "Election of
Directors" as nominees of the Company for election as directors;
(2) FOR the amendment of the Company's 1995 Long Term Incentive Plan;
(3) FOR the amendment of the Company's Stock Option Plan for
Non-Employee Directors;
(4) FOR the change of the state of incorporation of the Company from
Texas to Delaware by merging the Company into a newly organized wholly-owned
Delaware subsidiary corporation; and
(5) FOR the ratification of the appointment by the Board of Directors of
Price Waterhouse LLP as independent certified public accountants of the
Company for the fiscal year ending October 31, 1997.
The enclosed Proxy is solicited by and on behalf of the Board of Directors
of the Company. The Company is unaware of any additional matters not set forth
in the Notice of Annual Meeting of Shareholders that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the Annual Meeting and presented for a vote of the shareholders, the
persons named in the Proxy will vote in accordance with their best judgment upon
such matters, unless otherwise restricted by law.
The cost of solicitation of proxies will be borne by the Company. The
Company has engaged ChaseMellon Shareholder Services LLC to solicit proxies from
beneficial owners of shares standing in the name of brokers and other nominees.
The Company has agreed to pay ChaseMellon Shareholder Services LLC a fee of
$5,500 and the amount of its expenses for such service. In addition to the use
of the mails, proxies may also be solicited by personal interview, facsimile
transmission, and telephone by directors,
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officers, employees, and agents of the Company. The Company will also supply
brokers, nominees, or other custodians with the numbers of Proxy forms, Proxy
Statements, and Annual Reports they may require for forwarding to beneficial
owners, and the Company will reimburse such persons for their expense in so
doing.
OUTSTANDING CAPITAL STOCK AND STOCK OWNERSHIP OF
DIRECTORS, CERTAIN EXECUTIVE OFFICERS
AND PRINCIPAL SHAREHOLDERS
The record date for the determination of the shareholders entitled to notice
of and to vote at the Annual Meeting has been established by the Board of
Directors as the close of business on March 7, 1997. As of January 16, 1997, the
Company had issued and outstanding and entitled to vote at the Annual Meeting
4,516,610 shares of Common Stock, par value $.01 per share ("Common Stock").
(For a description of the voting rights of the Common Stock, see "Quorum and
Voting" herein.)
The following table sets forth information as of January 16, 1997, regarding
the beneficial ownership of the Company's Common Stock by each person or group
known by management of the Company to own more than five percent of the
outstanding shares of Common Stock of the Company, by each of the Company's
executive officers named in the Summary Compensation Table below, by each of the
Company's directors and nominees, and by all of its directors and executive
officers as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY
OWNED AND PERCENTAGE OF
OUTSTANDING
SHARES AS OF JANUARY 16,
1997
------------------------
NAME NUMBER(1) PERCENT
- ------------------------------------------------------------------------ ----------- -----------
<S> <C> <C>
William E. Ogle (2)(3)(4)(5)............................................ 770,269 17.0%
William D. Balthaser, Jr. (4)(5)........................................ 363,333 8.0%
Mark S. Sims (4)(5)..................................................... 365,001 8.1%
Mitchell Hutchins Asset Management, Inc. (6)............................ 254,800 5.6%
Randall D. Eisenbach (2)(3)............................................. 18,640 *
James L. Hopkins (2).................................................... 13,400 *
J. Shane Long (2)....................................................... 12,400 *
Bryan F. Keyes (2)...................................................... 4,300 *
James J. Byrne (2)...................................................... 5,000 *
Lawrence E. Wesneski (2)(7)............................................. 11,000 *
Dennis G. Sabo.......................................................... -- --
----------- ---
Directors and executive officers as a group (7 persons)(2).............. 835,009 18.2%
</TABLE>
- ------------------------
* Less than 1%
(1) Unless otherwise indicated, to the knowledge of the Company, all shares are
owned directly and the owner has sole voting and investment power.
(2) Includes options to purchase 21,600, 16,800, 12,400, 12,400, 3,800, 4,000,
6000 and 77,000 shares of Common Stock granted to Messrs. Ogle, Eisenbach,
Hopkins, Long, Keyes, Byrne, Wesneski and all directors and executive
officers as a group, respectively, that are exercisable within 60 days of
January 16, 1997. Does not include options to purchase 72,400, 65,200,
58,600, 58,600, 12,200, 6,000, 9,000 and 282,000 shares of Common Stock
granted to Messrs. Ogle, Eisenbach, Hopkins, Long, Keyes, Byrne, Wesneski
and all directors and executive officers as a group, respectively, that are
not exercisable within 60 days of January 16, 1997.
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(3) Includes for William E. Ogle 3,000 shares owned by his spouse, 1,500 shares
owned by a trust benefiting his children, 5,500 shares held by him pursuant
to an Individual Retirement Account and 2,335 shares held by him pursuant to
the Company's 401(k) Savings Plan. Includes for Randall D. Eisenbach 840
shares held by him pursuant to the Company's 401(k) Savings Plan.
(4) Messrs. Ogle, Balthaser and Sims are parties to a Right of First Refusal
Agreement pursuant to which either the Company or Mr. Ogle have the right to
purchase the shares of Messrs. Ogle, Balthaser or Sims under certain
circumstances. See "Certain Transactions--Right of First Refusal."
(5) The address of each of Messrs. Ogle, Balthaser and Sims is 1651 North
Glenville, Richardson, Texas 75081.
(6) The address of Mitchell Hutchins Asset Management, Inc. ("MHAM") is 1285
Avenue of the Americas, New York, NY 10019. MHAM disclaims direct beneficial
ownership of all Common Stock held by it. Information with respect to the
beneficial ownership of MHAM was obtained from that shareholder's Schedule
13G dated February 13, 1996.
(7) Includes 5,000 shares held by Twin Lakes Partners, L.P. ("Twin Lakes"). Mr.
Wesneski is the sole general partner of Twin Lakes.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of the
voting power of the outstanding shares of Common Stock of the Company entitled
to vote is necessary to constitute a quorum at the meeting. The affirmative vote
of a plurality of the voting power represented at the meeting and entitled to
vote is required for the election of directors. Approval of the amendment of the
1995 Long Term Incentive Plan and the Stock Option Plan for Non-Employee
Directors will be decided by the holders of a majority of the voting power
represented at the meeting and entitled to vote. Approval of the Company's
reincorporation in Delaware will be decided by the holders of two-thirds of the
voting power of the outstanding shares of Common Stock of the Company entitled
to vote. A holder of shares of Common Stock will be entitled to one vote per
share of Common Stock as to each matter properly brought before the meeting.
Cumulative voting is not permitted in the election of directors. Abstentions and
votes "withheld" are included in the determination of the number of shares
present at the meeting for purposes of determining a quorum. Broker non-votes
are counted for purposes of determining whether a quorum is present on any
particular matter only if authority to vote on the matter is granted by the
respective proxy. Abstentions and broker non-votes have no effect on
determinations of plurality, except to the extent that they affect the total
votes received by any particular candidate, and have the effect of negative
votes on matters requiring approval of a specified percentage of the outstanding
shares. For matters requiring approval of a specified percentage of the
outstanding shares represented at the meeting, abstentions will have the effect
of negative votes but broker non-votes will have no effect.
PROPOSAL ONE
ELECTION OF DIRECTORS
Seven directors will be elected at the Annual Meeting for terms expiring at
the next Annual Meeting. The directors will continue to serve until their
respective successors are duly elected and qualified. Each of the Board of
Directors' nominees currently serves as a director of the Company except Dennis
G. Sabo who has been nominated to fill a vacancy created by a recent increase in
the number of directors serving on the Board.
Shares represented by proxies returned duly executed will be voted, unless
otherwise specified, in favor of the seven nominees for the Board of Directors
named below. The proxies cannot be voted for more than seven nominees. The
nominees have indicated that they are able and willing to serve as directors. If
any (or all) such persons should be unable to serve, the persons named in the
enclosed proxy will vote the share covered thereby for such substitute nominee
(or nominees) as the Board of Directors
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may select. Shareholders may withhold authority to vote for any nominee by
striking a line through the name of such nominee in the space provided for such
purpose on the form of Proxy.
NOMINEES FOR DIRECTORS
WILLIAM E. OGLE, age 50, is a co-founder of the Company and has served as
Chief Executive Officer since 1981 and Chairman of the Board since 1985. Prior
to founding the Company, Mr. Ogle co-founded Sundance Sales, Inc., a
manufacturer's sales representative organization selling a broad variety of
electronic components, and served as President of that company from 1978 to
1983.
RANDALL D. EISENBACH, age 46, has served as a director since December 1994,
as Executive Vice President and Chief Operating Officer of the Company since
December 1993 and as Assistant Secretary since December 1994. From August 1990
to December 1993, Mr. Eisenbach served as Director of Operations of the Company.
From November 1985 to December 1993, Mr. Eisenbach served as Director of
Manufacturing for the Company.
JAMES L. HOPKINS, age 51, has served as a director and as Chief Financial
Officer and Vice President of Strategic Marketing of the Company since December
1994. Mr. Hopkins' present responsibilities include directing European sales and
marketing, managing specialized technology products, and planning financial
strategy. From 1987 through December 1994, Mr. Hopkins was active as general
partner of H&H Management Systems, a consulting firm owned by Mr. Hopkins and
his wife. H&H Management Systems, through Mr. Hopkins, provided a broad spectrum
of consulting services to the Company from March 1990 through December 1994. Mr.
Hopkins' responsibilities to the Company pursuant to STB's arrangement with H&H
Management Systems were substantially identical to Mr. Hopkins' current
responsibilities as an officer of the Company. Mr. Hopkins also served as an
advisory director for the Company from 1992 until his election as a director in
December 1994.
J. SHANE LONG, age 29, has served as Vice President of Sales and Marketing
of the Company since November 1994. Mr. Long served as National Sales Manager of
the Company from November 1992 to October 1994 and as Western Area Sales Manager
from July 1992 to October 1992. From January 1991 to July 1992, Mr. Long served
as a field sales employee for Quad State Sales, a manufacturer's representative
company specializing in the sale of high-technology products. Mr. Long was
elected a director of the Company following the completion of the Company's
initial public offering.
JAMES J. BYRNE, age 60, has been a director of the Company since February
1995. Mr. Byrne has served as Managing Partner of Byrne Technology Partners,
Ltd. since January 1996. The firm provides professional services for strategic
alliances and mergers within the computer industry and offers technology
consulting services for corporate re-engineering. From April 1990 to its sale in
March 1995, Mr. Byrne served as President of Harris Adacom Corporation, a
company formed from the merger of the data communications division of Harris
Corp. and Adacom Inc., which was engaged in network systems and services. From
December 1986 to April 1990, Mr. Byrne was the Vice President and General
Manager of the data communications division of Harris Corp. Mr. Byrne serves on
the board of directors of Lennox International, Inc., a manufacturer of heating,
ventilation and air conditioning systems and is also a member of the national
board of directors of the American Electronics Association (AEA). He is also a
member of the Advisory Council of the University of Texas School of Engineering
and Computer Science.
LAWRENCE E. WESNESKI, age 49, has been a director of the Company since
February, 1995. He has served as President and Chief Executive Officer of Hoak
Breedlove Wesneski & Co. ("HBW") (the successor to BW Securities, Inc. ("BWS"),
an investment banking firm, since August 1996. Prior to that time, Mr. Wesneski
was President of BWS, which provided certain financial advisory services to the
Company. See "Compensation and Other Committee Interlocks and Insider
Participation." From January 1987 to August 1996, Mr. Wesneski was President and
Managing Director of Breedlove Wesneski & Co., a private merchant banking firm.
From 1987 to 1995, Mr. Wesneski served as an advisory director for the Company.
Mr. Wesneski serves on the board of directors of TPG Holdings, Inc., a defense
products manufacturing company, and TelServe Communication, Inc., an independent
operator of private pay telephones.
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DENNIS G. SABO, age 48, has served as the President and Chief Executive
Officer of Arithmos, Inc., a privately held company engaged in the development
of integrated circuits and technology for LCD flat panel displays, since March,
1996. From 1990 through February, 1996, Mr. Sabo served as the Senior Vice
President of graphics accelerator products for S3, Incorporated, a designer and
manufacturer of integrated circuits, where he was involved in the early
development and introduction of "Windows Accelerators." Prior to being employed
by S3, Incorporated, Mr. Sabo held management positions in the field of
integrated circuit design technology for approximately 20 years.
MEETINGS AND COMMITTEES OF BOARD OF DIRECTORS
The Board of Directors held a total of six meetings in fiscal 1996. Each
director attended at least 75% of the meetings held by the Board of Directors
and by committees of the Board on which he served. The Board of Directors has an
Audit Committee, a Compensation Committee, and a Stock Option Committee, the
members of each of which are Lawrence E. Wesneski and James J. Byrne, the
Company's non-employee directors. The Board of Directors does not have a
nominating committee.
AUDIT COMMITTEE. The Audit Committee recommends annually to the Board of
Directors an accounting firm to serve as the Company's independent public
accountants, consults with the Company's independent auditors and with personnel
from the internal audit and financial staffs with respect to corporate
accounting, reporting, and internal control practices and reviews and approves
transactions with parties affiliated with the Company. The Audit Committee met
two times during fiscal 1996.
COMPENSATION COMMITTEE. The Compensation Committee approves annual salary,
bonus and sales commission levels for executive officers, oversees
administration of the Company's employment agreements, and administers the
Company's Profit Sharing Incentive Plan. The Compensation Committee met three
times during fiscal 1996.
STOCK OPTION COMMITTEE. The Stock Option Committee administers the
Company's 1995 Long Term Incentive Plan and 1995 Employee Stock Option Purchase
Plan. The Stock Option Committee met ten times in fiscal 1996.
PROPOSAL TWO
AMENDMENT OF THE STB SYSTEMS, INC.
1995 LONG TERM INCENTIVE PLAN
In 1995, the Company adopted the 1995 Long Term Incentive Plan (the
"Incentive Plan") under which incentive stock options, non-qualified stock
options, stock appreciation rights, restricted stock and performance units may
be granted to key executives and managerial employees of the Company and its
subsidiaries.
On December 11, 1996, the Board of Directors unanimously adopted and
recommended for shareholder approval amendments to the Incentive Plan that
increase the number of shares of Common Stock reserved for issuance under the
Incentive Plan and increase the Board of Directors' discretion in the
administration of the Incentive Plan in certain respects. These amendments are
described below. Each of the Company's current executive officers and employee
directors has been and is expected to continue to be a participant under the
Incentive Plan and therefore may be affected by the proposed amendments.
INCREASE OF AUTHORIZED SHARES UNDER THE PLAN
The Board of Directors proposes to amend the Incentive Plan to increase the
maximum aggregate number of shares of Common Stock with respect to which
options, restricted shares and rights granted without accompanying options may
be granted under the Incentive Plan from 850,000 to 1,000,000. At January 16,
1997, 794,500 shares of Common Stock had been allocated for options previously
issued under the Incentive Plan, leaving 55,500 shares of Common Stock available
for future grant. The Board of Directors believes that the use of long term
incentives based on the value of the Company's Common
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Stock is necessary to attract and retain qualified key executives and other key
employees, motivate such personnel to achieve long-range goals and provide
compensation opportunities that are competitive with those offered by other
corporations. The recommended increase in the number of shares reserved for
issuance under the Incentive Plan has been proposed in order to enable the
Company to continue to provide stock-based incentives to executive and
managerial personnel of the Company for the foreseeable future.
INCREASED DISCRETION IN THE ADMINISTRATION OF THE PLAN
The Board of Directors proposes to amend the Incentive Plan to grant the
Board increased discretion in the administration of the Incentive Plan in
certain respects. The Incentive Plan currently provides that the exercisability
of awards granted under the Plan vest and expire on a schedule established by
the Board at the time of grant and does not provide the ability to subsequently
alter this schedule. The Incentive Plan also currently provides that options
awarded under the Plan may not be exercised for a period of six months after the
date of award and that options and rights granted under the plan are
non-transferable. The amendments proposed by the Board of Directors would permit
the Board of Directors or a committee thereof, in its discretion, to (i)
accelerate the vesting schedule of, or extend the period of exercisability of,
outstanding awards; (ii) award options that are immediately exercisable; and
(iii) award non-qualified options and rights with limited transferability
features. These amendments are designed to enhance the administration of the
Incentive Plan and provide for flexibility consistent with the recent changes to
Rule 16b-3 of the Securities and Exchange Act of 1934, as amended. The Board of
Directors believes that the flexibility added by these amendments will enhance
the purpose of the Incentive Plan of attracting and retaining qualified key
executives and other key employees, motivating such personnel to achieve long-
range goals and providing competitive compensation opportunities to such
personnel.
The following description of the Incentive Plan is qualified in its entirety
by reference to the full text of the Incentive Plan, as amended by the proposed
amendments, a copy of which is attached as Appendix A hereto.
DESCRIPTION OF THE INCENTIVE PLAN
SCOPE. The Incentive Plan authorizes the granting of incentive stock
options and nonqualified stock options to purchase Common Stock, stock
appreciation rights, restricted stock and performance units, to key executives
and other key employees of the Company, including officers of the Company and
its subsidiaries. The purpose of the Incentive Plan is to attract and retain key
employees, to motivate key employees to achieve long-range goals and to further
identify the interests of key employees with those of the other shareholders of
the Company.
The Incentive Plan authorizes the award of 850,000 shares of Common Stock to
be used for stock options, stock appreciation rights or restricted stock. The
proposed amendments would increase the number of shares of Common Stock
available for award under the Incentive Plan to 1,000,000. If an award made
under the Incentive Plan expires, terminates or is forfeited, cancelled or
settled in cash, without issuance of shares of Common Stock covered by the
award, those shares will be available for future awards under the Incentive
Plan. The Incentive Plan will terminate on December 31, 2004.
ADMINISTRATION. The Incentive Plan may be administered by the Board of
Directors or, if directed by the Board of Directors, the Stock Option Committee
or any successor thereto of the Board of Directors of the Company (the Board of
Directors or, if applicable, the Stock Option Committee is referred to herein as
the "Stock Option Committee"). Subject to the provisions of the Incentive Plan,
the Stock Option Committee will have authority to select employees to receive
awards, to determine the time or times of receipt, to determine the types of
awards and the number of shares covered by the awards, to establish the terms,
conditions and provisions of such awards, to determine the value of performance
units, and to cancel or suspend awards. In making such award determinations, the
Stock Option Committee may take into account the nature of services rendered by
the employee, his or her present and potential contribution
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to the Company's growth and success and such other factors as the Stock Option
Committee deems relevant. The Stock Option Committee is authorized to interpret
the Incentive Plan, to establish, amend, and rescind any rules and regulations
relating to the Incentive Plan, to determine the terms and provisions of any
agreements made pursuant to the Incentive Plan, and to make all other
determinations that may be necessary or advisable for the administration of the
Incentive Plan. The proposed amendments would grant the Stock Option Committee
additional authority to accelerate or extend the period of exercisability of
awards after they have been granted.
ELIGIBILITY. Executives and other key full-time employees of the Company
and its subsidiaries may be selected by the Stock Option Committee to receive
awards under the Incentive Plan. The Company estimates that approximately 10
executives and approximately 90 other employees are currently eligible to
receive awards under the Incentive Plan. The Incentive Plan provides that no
more than 250,000 shares of Common Stock may be subject to awards granted per
year to any one employee participating in the Incentive Plan. In the discretion
of the Stock Option Committee, an eligible employee may receive an award in the
form of a stock option, stock appreciation right, restricted stock award or
performance unit or any combination thereof, and more than one award may be
granted to an eligible employee.
STOCK OPTIONS. The Incentive Plan authorizes the award of both incentive
stock options ("ISOs") and nonqualified stock options. Under the current
provisions of the Incentive Plan, an option may be exercised at any time during
the exercise period established by the Stock Option Committee, except that: (i)
no option may be exercised prior to the expiration of six months from the date
of grant; (ii) no option may be exercised more than 90 days after employment
with the Company and its subsidiaries terminates by reason other than death,
disability or authorized leave of absence for military or government service;
and (iii) no option may be exercised more than 12 months after employment with
the Company and its subsidiaries terminates by reason of death or disability.
The proposed amendments to the Incentive Plan would allow options to be awarded
that are exercisable prior to the expiration of six months from the date of
grant. The aggregate fair market value (determined at the time of the award) of
the Common Stock with respect to which ISOs are exercisable for the first time
by any employee during any calendar year may not exceed $100,000. The term of
each option is determined by the Stock Option Committee, but in no event may
such term exceed ten years from the date of grant. The proposed amendments would
permit the Stock Option Committee to extend the term of outstanding options
provided that the term may not exceed ten years from the date of grant. The
exercise price of options is determined by the Stock Option Committee, but the
exercise price of ISOs cannot be less than the fair market value of the Common
Stock on the date of the grant. The exercise price of options may be paid in
cash or, with the Stock Option Committee's approval, in shares of Common Stock.
Grants of options do not entitle any optionee to any rights as a shareholder,
and such rights will accrue only as to shares actually purchased through the
exercise of an option.
Under the current provisions of the Incentive Plan, options, stock
appreciation rights, restricted shares and performance units are not assignable
or transferable by the holder. The proposed amendment would permit a holder of
non-qualified stock options and rights to make gifts or other non-compensated
transfers of options and rights among a limited class of permitted transferees,
consisting of family members or trusts or partnerships for family members.
STOCK APPRECIATION RIGHTS. The Incentive Plan authorizes the grant of both
primary stock appreciation rights ("SARs") and additional SARs. Primary SARs may
be granted either separately or in tandem with options. Primary SARs entitle the
holder to receive an amount equal to the difference between the fair market
value of a share of Common Stock at the time of exercise of the SAR and the
option price (or deemed option price in the event of an SAR that is not granted
in tandem with an option), multiplied by the number of shares of Common Stock
subject to the option or deemed option as to which the SAR is being exercised
(subject to the terms and conditions of the option or deemed option). An SAR may
be exercised at any time when the option to which it relates may be exercised
and will terminate no later than the date on which the right to exercise the
tandem option (or deemed option) terminates (or is deemed to
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terminate). The participating employee has the discretion to determine whether
the exercise of an SAR will be settled in cash, in Common Stock (valued at its
fair market value at the time of exercise) or in a combination of the two,
subject to the approval of the Stock Option Committee in certain circumstances.
The exercise of an SAR requires the surrender of the tandem option, if any, and
the exercise of a stock option requires the surrender of the tandem SAR, if any.
Additional SARs may be granted only in tandem with stock options and entitle
the holder to receive an amount equal to the difference between the fair market
value of a share of Common Stock on the date of exercise of the related option
and the option price, multiplied by the number of shares of Common Stock subject
to the option as to which the SAR is being exercised (subject to the terms and
conditions of the option), multiplied by a percentage factor ranging from 10% to
100% (as determined either by the Stock Option Committee at the date of grant or
by the formula established by the Stock Option Committee at the date of grant).
If an SAR, or the corresponding option with which the SAR was awarded, is
not exercised prior the date that it ceases to be exercisable, then such SAR
generally shall be deemed exercised as of such date and shall be paid to the
employee in cash. No SAR may be exercised more than 90 days after employment
with the Company and its subsidiaries terminates by reason other than death,
disability or authorized leave of absence for military or government service. No
SAR may be exercised more than 12 months after the holder's employment with the
Company and its subsidiaries terminates by reason of death or disability.
RESTRICTED STOCK. Restricted stock awards are grants of Common Stock made
to employees subject to a required period of employment following the award (the
"Restricted Period") and any other conditions established by the Stock Option
Committee. An employee will become the holder of shares of restricted stock free
of all restrictions if he or she completes the Restricted Period and satisfies
any other conditions; otherwise, the shares will be forfeited. Under the
Incentive Plan, the Restricted Period may not be more than ten years. The
employee will have the right to vote the shares of restricted stock and, unless
the Stock Option Committee determines otherwise, will have the right to receive
dividends on the shares during the Restricted Period. The employee may not sell,
pledge or otherwise encumber or dispose of restricted stock until the conditions
imposed by the Stock Option Committee have been satisfied. The Stock Option
Committee may accelerate the termination of the Restricted Period or waive any
other conditions with respect to any restricted stock.
PERFORMANCE UNITS. Performance units are awards that entitle the holders to
receive a specified value for the units at the end of a performance period
established by the Stock Option Committee if performance measures established by
the Stock Option Committee at the beginning of the performance period are met.
Although the performance measures and performance period will be determined by
the Stock Option Committee at the time of the award of performance units, they
may be subject to such later revision as the Stock Option Committee deems
appropriate to reflect significant events or changes. If the employment of a
holder of a performance unit with the Company or a subsidiary terminates by
reason of death, disability or retirement, then the Company will pay the
employee or his or her beneficiary or estate the amount of the performance unit
earned as of the date of termination. If the employment of a holder of a
performance unit with the Company or a subsidiary terminates for any other
reason, then the performance units held by such holder will automatically be
forfeited.
ADJUSTMENTS. In the event of any change in the outstanding shares of Common
Stock by reason of any stock dividend, split, spinoff, recapitalization, merger,
consolidation, combination, exchange of shares or other similar change, the
aggregate number of shares with respect to which awards may be made under the
Incentive Plan, and the terms and the number of shares of any outstanding
option, SAR, performance unit or restricted stock, may be equitably adjusted by
the Stock Option Committee in its sole discretion.
BUSINESS COMBINATIONS. Unless provision is otherwise made in the terms of
the award granted by the Stock Option Committee, or by the terms of the
agreement with respect to the business combination, in the event of a change in
control of the Company (as defined), all outstanding stock options, stock
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appreciation rights, restricted stock and performance units shall terminate,
provided that the holders of any options or SARs may exercise such awards to the
extent then vested immediately prior to any such event and the holders of any
performance units shall be entitled to the then vested values of such units as
of such date.
TERMINATION AND AMENDMENT. The Incentive Plan may be suspended, terminated
or amended by the Board of Directors, provided that, in the absence of
shareholder approval, no amendment of the Incentive Plan or action of the Board
of Directors may materially increase the total number of shares of Common Stock
with respect to which awards may be made under the Incentive Plan (except as
discussed in "Adjustments" above), change the exercise price of a stock option
or the base price of an SAR, materially modify the requirements as to
eligibility for participation in the Incentive Plan or materially increase the
benefits accruing to participants under the Incentive Plan. No amendment,
suspension or termination of the Incentive Plan may alter or impair any option,
SAR, share of restricted stock or performance unit previously awarded under the
Incentive Plan without the consent of the holder thereof.
OPTION GRANTS. The terms of the Incentive Plan stock option grants to Mr.
Ogle and the other four executive officers named in the Summary Compensation
Table during fiscal 1996 are described below in the Option Grants in Last Fiscal
Year table. As a group, all executive officers of the Company (five persons)
received grants of 168,000 stock options in fiscal 1996 under the Incentive Plan
with an average per share exercise price of $21.79, and all current employees of
the Company as a group (60 persons) received grants of 409,500 stock options in
fiscal 1996 under the Incentive Plan with an average exercise price of $18.98.
These stock options have expiration dates ranging from November 1, 2005 to
October 29, 2006.
FEDERAL INCOME TAX CONSEQUENCES. The following summary of the federal
income tax consequences of the Incentive Plan is not comprehensive and is based
on current income tax laws, regulations and rulings.
INCENTIVE STOCK OPTIONS. An optionee does not recognize income on the grant
of an incentive stock option. Subject to the effect of the alternative minimum
tax, discussed below, if an optionee exercises an incentive stock option in
accordance with the terms of the option and does not dispose of the shares
acquired within two years from the date of the grant of the option nor within
one year from the date of exercise, the optionee will not realize any income by
reason of the exercise and the Company will be allowed no deduction by reason of
the grant or exercise. The optionee's basis in the shares acquired upon exercise
will be the amount paid upon exercise. Provided the optionee holds the shares as
a capital asset at the time of sale or other disposition of the shares, his gain
or loss, if any, recognized on the sale or other disposition will be capital
gain or loss. The amount of his gain or loss will be the difference between the
amount realized on the disposition of the shares and his basis in the shares.
If an optionee disposes of the shares within two years from the date of
grant of the option or within one year from the date of exercise (an "Early
Disposition"), the optionee will realize ordinary income at the time of such
Early Disposition which will equal the excess, if any, of the lesser of (1) the
amount realized on the Early Disposition, or (2) the fair market value of the
shares on the date of exercise, over the optionee's basis in the shares. The
Company will be entitled to a deduction in an amount equal to such income. The
excess, if any, of the amount realized on the Early Disposition of such shares
over the fair market value of the shares on the date of exercise will be
long-term or short-term capital gain, depending upon the holding period of the
shares, provided the optionee holds the shares as a capital asset at the time of
Early Disposition. If an optionee disposes of such shares for less than his
basis in the shares, the difference between the amount realized and his basis
will be a long-term or short-term capital loss, depending upon the holding
period of the shares, provided the optionee holds the shares as a capital asset
at the time of disposition.
The excess of the fair market value of the shares at the time the incentive
stock option is exercised over the exercise price for the shares is an amount
included in an optionee's alternative minimum taxable income (the "Stock Option
Preference").
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NONQUALIFIED STOCK OPTIONS. Nonqualified stock options do not qualify for
the special tax treatment accorded to incentive stock options under the Internal
Revenue Code. Although an optionee does not recognize income at the time of the
grant of the option, he recognizes ordinary income upon the exercise of a
nonqualified option in an amount equal to the difference between the fair market
value of the stock on the date of exercise of the option and the amount of the
exercise price.
As a result of the optionee's exercise of a nonqualified stock option, the
Company will be entitled to deduct as compensation an amount equal to the amount
included in the optionee's gross income. The Company's deduction will be taken
in the Company's taxable year in which the option is exercised.
The excess of the fair market value of the stock on the date of exercise of
a nonqualified stock option over the exercise price is not an item of tax
preference.
APPRECIATION RIGHTS. Recipients of SARs do not recognize income upon the
grant of such an award. When a participant elects to receive payment under an
SAR, he recognizes ordinary income in an amount equal to the cash and/or fair
market value of shares received, and the Company is entitled to a deduction
equal to such amount.
RESTRICTED STOCK; PERFORMANCE UNITS. Grantees of restricted stock and
performance units do not recognize income at the time of the grant of such stock
or units. However, when shares of restricted stock become free from any
restrictions or when performance units are paid, grantees recognize ordinary
income in an amount equal to the cash and the fair market value of the stock on
the date all restrictions are satisfied. Alteratively, the grantee of restricted
stock may elect to recognize income upon the grant of the stock and not at the
time the restrictions lapse.
TAXATION OF PREFERENCE ITEMS. Section 55 of the Internal Revenue Code
imposes an alternative minimum tax equal to the excess, if any, of (1) 26% of
the optionee's "alternative minimum taxable income" that does not exceed
$175,000, plus 28% of his "alternative minimum taxable income" in excess of
$175,000, over (2) his "regular" federal income tax. Alternative minimum taxable
income is determined by adding the optionee's Stock Option Preference and any
items of tax preference to the optionee's adjusted gross income and then
subtracting certain allowable deductions and an exemption amount. The exemption
amount is $33,750 for single taxpayers, $45,000 for married taxpayers filing
jointly, and $22,500 for married taxpayers filing separately. However, these
exemption amounts are phased out beginning at certain levels of alternative
minimum taxable income.
CHANGE OF CONTROL. If there is an acceleration of the vesting of benefits
and/or an acceleration of the exercisability of Stock Options upon a Change of
Control, all or a portion of the accelerated benefits may constitute "excess
parachute payments" under Section 280G of the Internal Revenue Code. The
employee receiving an excess parachute payment incurs an excise tax of 20% of
the amount of the payment in excess of the employee's average annual
compensation over the five calendar years preceding the year of the Change of
Control, and the Company is not entitled to a deduction for such payment.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the shares of Common Stock entitled to
vote on this proposal and represented in person or by proxy is required for
approval.
The Board of Directors recommends a vote FOR the approval of the amendment
to the Incentive Plan.
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PROPOSAL THREE
AMENDMENT OF THE STB SYSTEMS, INC.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
In 1995, the Company adopted the Stock Option Plan for Non-Employee
Directors (the "Non-Employee Director Plan") under which non-qualified stock
options are automatically awarded to each non-employee director annually. On
January 28, 1997 the Board of Directors of the Company unanimously adopted and
recommended for shareholder approval the amendments to the Non-Employee Director
Plan described below. Each of the current non-employee directors has been and is
expected to continue to be a participant under the Non-Employee Director Plan
and therefore may be affected by the proposed amendments.
The Non-Employee Director Plan currently provides for the automatic award of
options pursuant to a specified formula and that options awarded under the Plan
are not transferable. The Non-Employee Director Plan also currently provides
that in the event of a merger or other business combination of the Company,
outstanding options under the Non-Employee Director Plan would be accelerated
and must be exercised immediately prior to the consummation of the transaction
or be forfeited. The proposed amendments would authorize the Board of Directors
to use discretion in determining whether to award options to non-employee
directors, determining the timing of option awards and determining the number of
shares subject to, and the vesting schedule of, options awarded. The proposed
amendments also would permit limited transferability of options by holders
thereof and permit the Company, in the event of a merger or other business
combination, to provide for the substitution of securities of another
corporation for the securities of the Company underlying outstanding options
granted under the Non-Employee Director Plan.
The Board of Directors believes that these amendments are necessary to
provide needed flexibility in the administration of the Non-Employee Director
Plan, and to enhance the long-term incentives provided to non-employee directors
based on the value of the Company's Common Stock. The Board of Directors
believes that the Non-Employee Director Plan is necessary to attract and retain
qualified candidates to serve as members of the Company's Board of Directors.
The following description of the Non-Employee Director Plan is qualified in
its entirety by reference to the full text of the Non-Employee Director Plan, as
amended by the proposed amendments, a copy of which, is attached as Appendix B
hereto.
DESCRIPTION OF THE NON-EMPLOYEE DIRECTOR PLAN
The purpose of the Non-Employee Director Plan is to provide present and
prospective non-employee directors of the Company with the opportunity to obtain
equity ownership interests in the Company through the exercise of stock options
and thereby secure for the Company's shareholders the benefits associated with
stock ownership by those who will oversee the Company's future growth and
success.
ELIGIBILITY. Each member of the Board of Directors of the Company who is
not an employee of the Company or any subsidiary or affiliate of the Company
("Non-Employee Directors") will be eligible to receive a grant of stock options
under the Non-Employee Director Plan. The Company currently has two Non-Employee
Directors, both of whom are eligible to receive awards under the Non-Employee
Director Plan. The director nominees proposed by the Board of Directors include
three persons who, if elected, would be Non-Employee Directors and be eligible
to receive grants of stock options under the Non-Employee Director Plan. The
eligible status of a Non-Employee Director will terminate as to future stock
option grants at the time the individual ceases to be a director, or the
individual becomes an employee of the Company, or any subsidiary or affiliate of
the Company.
ADMINISTRATION. The Non-Employee Director Plan is administered by the Board
of Directors of the Company. The Board of Directors has full power to administer
and interpret the Non-Employee Director
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Plan to carry out its purpose. It is expected that the Board of Directors will
designate from time to time Company personnel to assist it in carrying out its
responsibilities under the Non-Employee Director Plan.
OPTIONS; EXERCISE PRICE; VESTING. Options to purchase 10,000 and 15,000
shares of Common Stock were granted to Messrs. Byrne and Wesneski, respectively,
upon their election as directors immediately following completion of the
Company's initial public offering. These options are exercisable at $12.00 per
share and will vest equally over the five year period from the date of grant.
Under the current provisions of the Non-Employee Director Plan, each
Non-Employee Director automatically receives options to purchase 2,000 shares of
Common Stock annually immediately following his or her election or re-election
to the Board at an annual meeting of shareholders, exercisable at the fair
market value of the Common Stock at the close of business on the date
immediately preceding the date of grant. However, Messrs. Byrne and Wesneski are
not eligible for such grants until their initial options have fully vested. Such
annual options vest at the conclusion of the Non-Employee Director's annual
term. In addition, all options become immediately exercisable in the event of a
"Business Combination" as described in the Non-Employee Director Plan. The
maximum number of shares available for grant and issuance under the Non-Employee
Director Plan is 100,000. The proposed amendment to the Non-Employee Director
Plan would eliminate the annual option formula awards described above. In lieu
thereof, the proposed amendment would permit the Board of Directors to award
options in its discretion, to determine the timing of such awards, the number of
shares of Common Stock covered by each option (subject to the maximum share
limitation described above) and the vesting provisions for each option. The
proposed amendment also would permit the Company to provide for the substitution
of the securities of another corporation for the securities of the Company
underlying outstanding options granted pursuant to the Non-Employee Director
Plan in the event of "Business Combinations" as described in the Plan.
In the case of events such as stock dividends, stock splits,
recapitalizations, or other changes in the Company's capitalization, an
automatic adjustment will be made to the number of unexercised options, the
purchase price of unexercised options, and the aggregate number of shares which
are available for option grants under the Non-Employee Director Plan. The
automatic adjustment is designed to ensure that the Non-Employee Directors
maintain the same proportionate position after the particular event as before
the event.
An option granted under the Non-Employee Director Plan may be evidenced by a
written instrument describing the terms and conditions of the grant. Under the
current provisions of the Non-Employee Director Plan, options are not assignable
or transferable by the Non-Employee Director, other than by will or the laws of
descent and distribution. During the Non-Employee Director's lifetime, an option
is exercisable only by the Non-Employee Director, or, in the case of incapacity,
by a person properly appointed to act on the Non-Employee Director's behalf. The
proposed amendment would permit a Non-Employee Director to make gifts or other
non-compensated transfers of options among a limited class of permitted
transferees, who are family members or trusts or partnerships for family
members. Options may be exercised by the delivery of cash or shares of Common
Stock or any combination of such forms of payment.
TERM OF PLAN AND OPTION. Unless terminated earlier by the Board of
Directors, the Non-Employee Director Plan will terminate on December 31, 2004.
Options granted prior to such termination date continue to be exercisable in
accordance with the terms of the Non-Employee Director Plan. Each option granted
under the Non-Employee Director Plan will automatically expire on the earlier of
ten years from the date the option is granted or six months after the
Non-Employee Director ceases to be a director of the Company.
AMENDMENT AND TERMINATION OF THE PLAN. The Board of Directors may amend,
terminate, or modify the Non-Employee Director Plan at any time without
shareholder approval, including amendments necessary to conform with Rule 16b-3
of the Securities Exchange Act of 1934 (the "Exchange Act"), unless the
particular amendment or modification requires shareholder approval under Section
16 of the
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Exchange Act, the Internal Revenue Code, under the rules and regulations of the
exchange or system on which the Common Stock is listed or reported, or pursuant
to other applicable laws, rules or regulations.
FEDERAL INCOME TAX CONSEQUENCES. A Non-Employee Director who is granted a
stock option under the Non-Employee Director Plan will not recognize taxable
income at the time of the grant, but will generally recognize income upon the
exercise of the stock option. The amount of income recognized upon the exercise
of the stock option will be measured by the excess, if any, of the fair market
value of the shares of Common Stock at the time of exercise over the exercise
price. The Company will generally be entitled to a corresponding deduction for
the amount of income recognized by the Non-Employee Director.
The foregoing does not purport to be a complete summary of the federal
income tax considerations that are relevant to stock options granted under the
Non-Employee Director Plan. Additionally, the tax consequences under applicable
state, local or foreign tax laws may not be the same as under the federal income
tax laws.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the shares of Common Stock entitled to
vote on this proposal and represented in person or by proxy is required for
approval.
The Board of Directors recommends a vote FOR the approval of the amendment
to the Non-Employee Director Plan.
PROPOSAL FOUR
REINCORPORATION OF THE COMPANY IN DELAWARE
SUMMARY DESCRIPTION OF THE PROPOSAL
GENERAL. The Board of Directors of the Company has approved a proposal to
change the state of incorporation of the Company from Texas to Delaware, subject
to approval by the shareholders (the "Reincorporation"). The proposal was
adopted by a unanimous vote of the six directors in attendance at the meeting at
which it was formally considered. The reincorporation will be effected by
merging the Company into a newly organized, wholly-owned Delaware subsidiary
that will be the surviving corporation (herein referred to as "STB-Delaware").
STB-Delaware currently has no operations.
The Reincorporation will not result in any material change in the name,
business, assets or financial position of the Company or in the persons who
constitute the Board of Directors or management. Upon the effective date of the
merger (the "Effective Date"), (i) the legal existence of the Company as a
separate corporation will cease, (ii) STB-Delaware, as the surviving
corporation, will succeed to the assets and assume the liabilities of the
Company, (iii) each of the Company's employee and non-employee director benefit
plans will be continued and assumed by STB-Delaware, and (iv) each outstanding
share of the Company's Common Stock will automatically be converted into one
share of Common Stock, $.01 par value, of STB-Delaware, except for those shares
with respect to which the holders thereof duly exercise their dissenters' rights
under Texas law. See "Rights of Dissenting Shareholders" below. Outstanding
options to purchase the Company's Common Stock will automatically be converted
into options to purchase STB-Delaware Common Stock. The terms of the
Reincorporation are more particularly described in the Plan and Agreement of
Merger (the "Plan of Merger") attached to this Proxy Statement as Appendix C and
all references to the Reincorporation are qualified by and subject to the more
complete information set forth therein.
Following the Effective Date, certificates representing shares of the
Company's Common Stock will be deemed to represent an equal number of shares of
STB-Delaware Common Stock. IT WILL NOT BE NECESSARY FOR THE HOLDERS OF THE
COMPANY'S COMMON STOCK TO SURRENDER
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THEIR CERTIFICATES FOR NEW CERTIFICATES REPRESENTING STB-DELAWARE COMMON STOCK.
The Common Stock of the Company will continue to be traded on the NASDAQ
National Market, and the NASDAQ National Market will consider the existing stock
certificates as constituting "good delivery" in transactions subsequent to the
Reincorporation.
The Reincorporation will become effective upon the filing of the requisite
merger documents in Delaware and Texas, which filings are expected to be made as
soon as practicable following shareholder approval. Pursuant to the terms of the
Plan of Merger, the merger may be abandoned by the Board of Directors of the
Company and STB-Delaware any time prior to the Effective Date (whether before or
after shareholder approval). In addition, the Board of Directors of the Company
may amend the Plan of Merger at any time prior to the Effective Date, provided
that any amendment made subsequent to shareholder approval may not alter or
change the amount or kind of shares to be received in exchange for or on
conversion of all or any of the shares of the Company, alter or change any term
of the Certificate of Incorporation of STB-Delaware or alter or change any of
the terms and conditions of the Plan of Merger if such alteration or change
would adversely affect the holders of the Company's Common Stock.
After the Effective Date, the Certificate of Incorporation of STB-Delaware,
the form of which is attached to this Proxy Statement as Appendix D (the
"Certificate of Incorporation"), and Bylaws of STB-Delaware will govern the
surviving corporation. Certain changes in the rights of the shareholders of the
Company will result under Delaware law and the new Certificate of Incorporation
and Bylaws. See "Certain Changes in the Rights of Shareholders."
INCREASED AUTHORIZED CAPITAL STOCK OF STB-DELAWARE. The authorized capital
stock of STB-Delaware will consist of 25,000,000 shares of Common Stock, $.01
par value per share, and 2,000,000 shares of Preferred Stock, $.01 par value per
share. The authorized capital stock of STB-Delaware will be the same as that of
the Company, except that 5,000,000 additional shares of Common Stock will be
authorized in the STB-Delaware Certificate of Incorporation. Therefore, approval
of the Reincorporation will have the effect of increasing the number of
authorized shares of Common Stock from 20,000,000 to 25,000,000.
The Board of Directors believes that an increase in the Company's authorized
Common Stock is advisable for several reasons. The Board of Directors is
considering the pursuit of a public offering of shares of Common Stock at a
future date. In addition, the Board of Directors may in the future find it
desirable to pursue a stock split of its outstanding shares of Common Stock,
which split would likely be effected in the form of a stock dividend. If these
contemplated activities were completed, it would result in a substantial portion
of the Company's currently authorized shares of Common Stock being outstanding
or reserved for issuance pursuant to one of the Company's benefit plans. The
Board of Directors, therefore, believes that it is prudent that the authorized
Common Stock of the Company be increased in order to provide for flexibility to
pursue other corporate activities in the near future, including further
financings, acquisitions, stock dividends and changes in employee stock options
and benefit plans. It should be noted that the newly authorized shares of Common
Stock, like other currently authorized but unissued shares of Common Stock,
would be issuable from time to time by action of the Board of Directors for any
proper corporate purpose, without shareholder approval. The additional shares
could be issued in a private placement transaction to a third party favored by
the Board of Directors in the event of takeover attempt directed at the Company,
which could give the favored party an advantage over a competing party in a
contest to acquire control of the Company. At the present time, the Company has
no immediate plans to issue the newly authorized shares and is aware of no
efforts to accumulate the Company's shares or to obtain control of the Company.
The Preferred Stock of STB-Delaware, like that of the Company, will be
issuable in series by action of the Board of Directors. The Board of Directors
will be authorized to fix the designations, powers, preferences and other rights
and the qualifications, limitations or restrictions thereof in substantially the
same manner as currently provided with respect to Preferred Stock of the
Company.
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SECURITIES ACT CONSEQUENCES. After the Reincorporation, STB-Delaware will
be a publicly held company, its Common Stock is expected to be quoted on the
NASDAQ National Market, and STB-Delaware will file with the Securities and
Exchange Commission and provide to its shareholders the same type of information
that the Company has previously filed and provided. The shares of STB-Delaware
to be issued in exchange for shares of the Company are not being registered
under the Securities Act of 1933, as amended (the "Securities Act"), in reliance
upon an exemption with respect to a merger which has as its sole purpose a
change in the domicile of the corporation. Shareholders whose stock in the
Company is freely tradable before the Reincorporation will own freely tradable
shares of STB-Delaware. Shareholders holding restricted securities of
STB-Delaware will be subject to the same restrictions on transfer as those to
which their present shares of stock in the Company are subject. For purposes of
computing compliance with the holding period of Rule 144 under the Securities
Act, the shareholders will be deemed to have acquired their shares in
STB-Delaware on the date they acquired their shares in the Company. In summary,
STB-Delaware and its stockholders will be in the same respective position under
the federal securities laws after the Reincorporation as were the Company and
its shareholders prior to the Reincorporation.
FEDERAL INCOME TAX CONSEQUENCES. Based on the advice of counsel, the
Company believes that for federal income tax purposes no gain or loss will be
recognized by the Company, STB-Delaware or the shareholders of the Company who
receive STB-Delaware Common Stock for their Company Common Stock in connection
with the Reincorporation. The adjusted tax basis of STB-Delaware Common Stock
received by a shareholder of the Company as a result of the Reincorporation will
be the same as the adjusted tax basis of the Company Common Stock converted into
such STB-Delaware Common Stock. A shareholder who holds Company Common Stock
will include in his holding period for the STB-Delaware Common Stock which he
receives as a result of the Reincorporation his holding period for the Company
Common Stock converted into such STB-Delaware Common Stock.
The receipt of cash, pursuant to the exercise of dissenters' rights, as the
fair value for shares of the Company's Common Stock will be a taxable
transaction for federal income tax purposes to shareholders receiving such cash.
A dissenting shareholder who owns no shares of STB-Delaware Common Stock after
the consummation of the Reincorporation (either directly or constructively
pursuant to certain rules of constructive ownership under the Internal Revenue
Code) will recognize gain or loss measured by the difference between the cash so
received and such shareholder's adjusted tax basis in the shares of the
Company's Common Stock exchanged therefor. Such gain or loss will be treated as
a capital gain or loss if the shares of the Company's Common Stock are capital
assets in the hands of such shareholder, and will be long-term capital gain or
loss if such shareholder has held such shares for more than one year.
State, local or foreign income tax consequences to shareholders may vary
from the federal income tax consequences described above, and shareholders are
urged to consult their own tax advisor as to the consequences to them of the
Reincorporation under all applicable tax laws.
VOTE REQUIRED FOR REINCORPORATION. Approval of the Reincorporation,
including the Plan of Merger, will require the affirmative vote of the holders
of at least two-thirds of the issued and outstanding shares of the Company's
Common Stock.
THE BOARD OF DIRECTORS BELIEVES THAT THE REINCORPORATION IS IN THE BEST
INTEREST OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS A VOTE FOR ITS
APPROVAL.
EFFECT ON CURRENT MARKET VALUE OF COMPANY'S COMMON STOCK
The Company does not know of any reason why implementation of the
Reincorporation and the conversion of shares of Common Stock of the Company into
shares of Common Stock of STB-Delaware would cause the market value of the
Common Stock of STB-Delaware following the Reincorporation to be different from
the present market value of the outstanding shares of the Common Stock of the
Company.
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PRINCIPAL REASONS FOR AND EFFECTS OF THE REINCORPORATION
The State of Delaware has long been the leader in adopting, construing and
implementing comprehensive, flexible corporation laws which are conducive to the
operational needs and independence of corporations domiciled in that state. The
corporation law of Delaware is widely regarded as the most extensive and
well-defined body of corporate law in the United States. Both the legislature
and the courts in Delaware have demonstrated an ability and a willingness to act
quickly and effectively to meet changing business needs. The Delaware judiciary
has acquired considerable expertise in dealing with complex corporate issues.
Moreover, the Delaware courts have repeatedly shown their willingness to
accelerate the resolution of such complex corporate issues within the very
limited time available to meet the needs of parties engaged in corporate
litigation. It is anticipated that the General Corporation Law of Delaware will
continue to be interpreted and construed in significant court decisions, thus
lending greater predictability and guidance in managing and structuring the
internal affairs of a corporation and its relationships and contacts with
others. For a discussion of certain differences in shareholder rights and the
powers of management under Delaware and Texas law, see "Certain Changes in the
Rights of Shareholders" below.
As a Delaware corporation, the Company would qualify for the provisions of
Section 203 of the Delaware General Corporation Law (the "Delaware Business
Combinations Statute"), which regulates certain business combinations between a
corporation and an "interested stockholder" thereof. While the Reincorporation
proposal is not being recommended in response to any specific effort of which
the Company is aware to accumulate the Company's shares or to obtain control of
the Company, the Board believes that the provisions of the Delaware Business
Combinations Statute will enhance the Board's ability to assure more equitable
treatment of the Company's stockholders in the event of a possible takeover
attempt. For a description of the Delaware Business Combinations Statute, see
"The Delaware Business Combinations Statute" below. Texas currently has no
statute that is comparable to the Delaware Business Combinations Statute.
THE DELAWARE BUSINESS COMBINATIONS STATUTE
The Delaware Business Combinations Statute prohibits certain transactions
between a Delaware corporation and an "interested stockholder," which is broadly
defined as a person (including the affiliates and associates of such person)
that is directly or indirectly a beneficial owner of 15% or more of the voting
power of the outstanding voting stock of a Delaware corporation. This provision
prohibits certain business combinations (defined broadly to include mergers,
consolidations, sales or other dispositions of assets having an aggregate market
value of 10% or more of either the consolidated assets of a company, and certain
transactions that would increase the interested stockholder's proportionate
share of ownership in a company or grant the interested stockholder
disproportionate financial benefits) between an interested stockholder and a
company for a period of three years after the date the interested stockholder
acquired its stock, unless (i) the business combination or the transaction in
which the stockholder became an interested stockholder is approved by such
company's board of directors prior to the date the interested stockholder
becomes an interested stockholder, (ii) the interested stockholder acquired at
least 85% of the voting stock of such company in the transaction in which it
became an interested stockholder, or (iii) the business combination is approved
by a majority of the board of directors and the affirmative vote of two-thirds
of the votes entitled to be cast by disinterested stockholders at an annual or
special meeting. The Board of Directors of STB-Delaware will prior to the
Reincorporation have taken action to exempt William E. Ogle, the Company's
Chairman, Chief Executive Officer and sole holder of 15% or more of the
Company's outstanding shares of Common Stock, from the inadvertent application
of the Delaware Business Combinations Statute to transactions between the
Company and Mr. Ogle, his affiliates or his associates.
If the Reincorporation is consummated, the Delaware Business Combinations
Statute will apply to STB-Delaware. The effect of the application of the
Delaware Business Combinations Statute would be to reduce the likelihood of
situations in which STB-Delaware may be forced to accept a proposal for the
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takeover of STB-Delaware without ample time to evaluate the proposal and
appropriate alternatives and to encourage anyone contemplating a transaction
with STB-Delaware to negotiate directly with STB-Delaware on a fair and
equitable basis. The application of the Delaware Business Combinations Statute
could make more difficult or discourage a tender offer for STB-Delaware's Common
Stock or the completion of a "second step" merger by a holder of a substantial
block of STB-Delaware's Common Stock, irrespective of whether such action might
be perceived by stockholders holding a majority of STB-Delaware's Common Stock
to be beneficial to STB-Delaware and its stockholders. In effect, stockholders
owning 15% of STB-Delaware's Common Stock (or in certain cases an even smaller
percentage) might be able to block certain transactions, which is a smaller
percentage than is currently the case.
The application of the Delaware Business Combinations Statute could
adversely affect the ability of stockholders to benefit from certain
transactions which are opposed by the Board of Directors or by stockholders
owning 15% of STB-Delaware's Common Stock, even if the price offered in such
transactions represents a premium over the then-current market price of
STB-Delaware's Common Stock. To the extent that the Board of Directors'
disapproval of a proposed transaction discourages establishment of a controlling
stock interest, the position of the Board of Directors and current management
may be strengthened, thereby assisting those persons in retaining their
positions.
However, the Board of Directors believes on balance that becoming subject to
the provisions of the Delaware Business Combinations Statute will be in the best
interests of the Company and its stockholders. In recent years there have been a
number of surprise takeovers of publicly-owned corporations. These transactions
have occurred through tender offers or other sudden purchases of a substantial
number of outstanding shares. Frequently, these tender offers and other share
purchases have been followed by a merger or other form of complete acquisition
of the target company by the purchaser without any negotiations with the board
of directors of the target company. Such a "second step" business combination
automatically eliminates minority interests in the target company, often for
less valuable considerations per share than was paid in the purchaser's original
tender offer or market purchases. In other instances, a purchaser has used its
controlling interest to effect other transactions having an adverse impact on
the target company and its stockholders. The protections afforded by the
Delaware Business Combinations Statute will increase the likelihood that anyone
contemplating a transaction with STB-Delaware would negotiate directly with
STB-Delaware in advance. The Board of Directors believes that it is in a better
position than the individual stockholders of the STB-Delaware to negotiate
effectively for an adequate price for all the stockholders, since the Board of
Directors is likely to be more knowledgeable than any individual stockholder in
assessing the business and prospects of STB-Delaware.
The Board of Directors has carefully considered the potential adverse
effects of being subject to the Delaware Business Combinations Statute described
above and has concluded that the adverse effects are substantially outweighed by
the increased protection which the statute will afford the Company and its
stockholders.
CERTAIN CHANGES IN THE RIGHTS OF SHAREHOLDERS
After the Reincorporation, the shareholders of the Company, a Texas
corporation, will become stockholders of STB-Delaware, a Delaware corporation.
Some of the differences between the Texas and Delaware corporation laws, as well
as differences between the charter and bylaws of the Company and of STB-Delaware
are set forth below. This description of differences is a summary only and does
not purport to be a complete description of all differences.
RIGHT OF SHAREHOLDERS TO VOTE ON CERTAIN MERGERS. Under Texas law,
shareholders have the right to vote on all mergers to which the corporation is a
party (except for the merger into the surviving corporation of subsidiaries
owned 90% or more by the surviving corporation, for which a shareholder vote
also is not required under Delaware law). In certain circumstances, different
classes of securities may be entitled to
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vote separately as classes with respect to such transactions. Unless the
articles of incorporation provide otherwise, approval of the holders of at least
two-thirds of all outstanding shares entitled to vote is required by Texas law
to approve a merger, while under Delaware law approval by the holders of a
majority of all outstanding shares is required to approve a merger, unless the
certificate of incorporation provides otherwise. Unless the articles of
incorporation provide otherwise, the approval of the shareholders of the
corporation in a merger is not required under Texas law if (1) the corporation
is the sole surviving corporation in the merger; (2) there is no amendment to
the corporation's articles of incorporation; (3) each shareholder holds the same
number of shares after the merger as before, with identical designations,
preferences, limitations and relative rights; (4) the voting power of the shares
outstanding after the merger plus the voting power of the shares issuable as a
result of the merger (taking into account convertible securities and warrants,
options or other rights to purchase securities issued pursuant to the merger)
does not exceed the voting power of the shares outstanding prior to the merger
by more than 20%; (5) the number of participating shares (that is, shares whose
holders are entitled to participate without limitation in dividends or other
distributions) outstanding after the merger plus the participating shares
issuable as a result of the merger (taking into account convertible securities
and warrants, options or other rights to purchase securities issued pursuant to
the merger) does not exceed the number of participating shares outstanding prior
to the merger by more than 20%; and (6) the board of directors of the
corporation adopts a resolution approving the plan of merger. Under Delaware
law, unless the certificate of incorporation provides otherwise, stockholders of
the surviving corporation in a merger have no right to vote, except under
limited circumstances, on the acquisition by merger directly into the surviving
corporation in cases where (1) the agreement of merger does not amend in any
respect the certificate of incorporation of such corporation, (2) each share of
stock of such corporation outstanding immediately prior to the effective date of
the merger is to be an identical outstanding or treasury share of the
corporation after the effective date of the merger, and (3) either no shares of
common stock of the surviving corporation, and no shares, securities or
obligations convertible into such stock are to be issued or delivered under the
plan of merger, or the authorized unissued shares or the treasury shares of
common stock of the surviving corporation to be issued or delivered under the
plan of merger plus those initially issuable upon conversion of any other
shares, securities or obligations to be issued or delivered under such plan do
not exceed 20% of the shares of common stock of such corporation outstanding
immediately prior to the effective date of the merger. The Company's current
Articles of Incorporation and the STB-Delaware Certificate of Incorporation do
not alter the statutory rules described above.
SALES, LEASES, EXCHANGES OR OTHER DISPOSITIONS. The sale, lease, exchange
or other disposition (not including any pledge, mortgage, deed of trust or trust
indenture, unless otherwise provided in the articles of incorporation) of all,
or substantially all, of the property and assets of a Texas corporation, if not
made in the usual and regular course of its business, requires the approval of
the holders of at least two-thirds of the outstanding shares of the corporation.
Under Texas law, the transfer of substantially all of a corporation's assets to
wholly-owned subsidiaries in such a manner that the corporation continues to
indirectly engage in its business is deemed to be in the usual and regular
course of its business. A Delaware corporation may sell, lease or exchange all
or substantially all of its property and assets when and as authorized by a
majority of the outstanding stock of the corporation entitled to vote thereon,
unless the certificate of incorporation provides to the contrary. STB-Delaware's
Certificate of Incorporation does not so provide.
APPRAISAL RIGHTS. Except for the limited classes of mergers,
consolidations, sales and asset dispositions for which no shareholder approval
is required under Texas law, and as set forth hereunder, shareholders of Texas
corporations have appraisal rights in the event of a merger, consolidation,
sale, lease, exchange or other disposition of all, or substantially all, the
property and assets of the corporation. Notwithstanding the foregoing, a
shareholder of a Texas corporation has no appraisal rights with respect to any
plan of merger in which there is a single surviving or new domestic or foreign
corporation, or with respect to any plan of exchange, if (1) the shares held by
the shareholder are part of a class of shares of which are listed, or authorized
for listing upon official notice of issuance, on a national securities exchange,
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or are held of record by not less than 2,000 holders, on the record date for the
plan of merger or the plan of exchange, and (2) the shareholder is not required
by the terms of the plan of merger or exchange to accept for his shares any
consideration other than (a) shares of a corporation that, immediately after the
merger or exchange, will be part of a class or series of shares which are (i)
listed, or authorized for listing upon official notice of issuance, on a
national securities exchange, or (ii) held of record by not less than 2,000
holders, and (b) cash in lieu of fractional shares otherwise entitled to be
received. The appraisal rights of a shareholder of a Texas corporation are
summarized herein under "Rights of Dissenting Shareholders" below. Shareholders
of a Delaware corporation have no appraisal rights in the event of a merger or
consolidation of the corporation if the stock of the Delaware corporation is
listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc., or such stock is held of record by more than 2,000
shareholders, or in the case of a merger in which a Delaware corporation is the
surviving corporation, if: (1) the agreement of merger does not amend the
certificate of incorporation of the surviving corporation, (2) each share of
stock of the surviving corporation outstanding immediately prior to the
effective date of the merger is to be an identical outstanding share of the
surviving corporation after the effective date of the merger, and (3) the
increase in the outstanding shares as a result of the merger does not exceed 20%
of the shares of the surviving corporation outstanding immediately prior to the
merger. Even if appraisal rights would not otherwise be available under Delaware
law in the cases described in the preceding sentence, stockholders would have
appraisal rights nevertheless if they are required by the terms of the agreement
of merger or consolidation to accept for their stock anything other than (1)
shares of stock (a) of the surviving corporation, (b) of any other corporation
whose shares will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc., or (c) held of
record by more than 2,000 stockholders, (2) cash in lieu of fractional shares,
or (3) a combination of such shares and cash. Otherwise, stockholders of a
Delaware corporation have appraisal rights in consolidations and mergers. Under
Delaware law, any corporation may provide in its certificate of incorporation
that appraisal rights will also be available as a result of an amendment to its
certificate of incorporation or the sale of all or substantially all of the
assets of the corporation. STB-Delaware currently has no such provisions in its
Certificate of Incorporation.
SHAREHOLDER CONSENT TO ACTION WITHOUT A MEETING. Under Texas law, any
action that may be taken at a meeting of the stockholders may be taken without a
meeting if written consent thereto is signed by all the holders of shares
entitled to vote thereon. The Articles of Incorporation of a Texas corporation
may provide that action by written consent in lieu of a meeting may be taken by
the holders of that number of shares which, under the corporation's Articles of
Incorporation, would be required to take the action which is the subject of the
consent at a meeting at which the holders of the shares entitled to vote thereon
were present and voted. The Company's Articles of Incorporation do not address
the use of written consents in lieu of a meeting with respect to any action
subject to stockholder approval. As a result, the taking of any such action
without a meeting requires the unanimous written consent of all of the Company's
stockholders entitled to vote thereon. Under Delaware law, unless otherwise
provided in the certificate of incorporation, any action that can be taken at
such meeting can be taken without a meeting if written consent thereto is signed
by the holders of outstanding stock having the minimum number of votes necessary
to authorize or take such action at a meeting of the stockholders.
STB-Delaware's Certificate of Incorporation achieves the same result under
Delaware law as the Company's Articles of Incorporation achieve under Texas law
by providing that stockholders cannot, by less than unanimous written consent,
take action without a meeting of stockholders.
PROCEDURES FOR FILLING VACANT DIRECTORSHIPS. Under Texas law, any vacancy
occurring in the board of directors may be filled by the shareholders or by the
affirmative vote of a majority of the remaining directors, although less than a
quorum. A directorship to be filled by reason of an increase in the number of
directors may be filled by the shareholders or by the board of directors for a
term of office continuing only until the next election of one or more directors
by the shareholders, provided that the board of
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directors may not fill more than two such directorships during the period
between any two successive annual meetings of shareholders. Under Delaware law,
unless the certificate of incorporation or bylaws provide otherwise, vacancies
and newly created directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors then in office,
although less than a quorum. The Certificate of Incorporation and bylaws of
STB-Delaware do not provide otherwise.
RIGHT TO CALL MEETINGS. Under Texas law, holders of not less than 10% of
all of the shares entitled to vote have the right to call a special
shareholders' meeting, unless the articles of incorporation provide for a number
of shares greater than or less than 10%, in which event, special meetings of the
shareholders may be called by the holders of at least the percentage of shares
so specified in the articles of incorporation, but in no event may the articles
of incorporation provide for a number of shares greater than 50% that would be
required to call a special meeting. The Company's Articles of Incorporation do
not alter the statutory rule described herein. Delaware law provides that
special meetings of the stockholders may be called by the board of directors or
such other persons as are authorized in the certificate of incorporation or
bylaws. The Certificate of Incorporation and by-laws of STB-Delaware do not
provide for the call for a special stockholders meeting by anyone other than the
Board of Directors.
CHARTER AMENDMENTS. Under Texas law, an amendment to the articles of
incorporation requires the approval of the holders of at least two-thirds of the
outstanding shares of the corporation, unless a different amount, not less than
a majority, is specified in the articles of incorporation. The Articles of
Incorporation of the Company do not provide for such different amount for
approval of an amendment to its Articles of Incorporation. Delaware law provides
that amendments to the certificate of incorporation must be approved by the
holders of a majority of the corporation's stock entitled to vote thereon,
unless the certificate of incorporation provides for a greater number. The
Certificate of Incorporation of STB-Delaware does not provide for any such
greater number.
BYLAW AMENDMENTS. Under Texas law, the Board of Directors may amend, repeal
or adopt a corporation's bylaws unless the articles of incorporation reserve
this power exclusively to the shareholders, or the shareholders in amending,
repealing or adopting a particular bylaw expressly provide that the Board of
Directors may not amend or repeal that bylaw. The Company's articles of
incorporation do not restrict the ability of the Board of Directors to amend,
repeal or adopt bylaws, and the Company's shareholders have not to date amended,
repealed or adopted a particular bylaw restricting the ability of the Board of
Directors to amend or repeal such bylaw. Similarly, under Delaware law, the
right to amend, repeal or adopt the bylaws is permitted to the stockholders of
the corporation and the corporation's Board of Directors, if the corporation's
Certificate of Incorporation so provides. STB-Delaware's Certificate of
Incorporation provides that its bylaws may be amended, repealed or adopted by
the Board of Directors. Under Delaware law, the power to amend, repeal or adopt
the bylaws so conferred upon the Board of Directors of STB-Delaware will not
divest its stockholders of the power, or limit their power, to amend, repeal or
adopt such bylaws.
CLASS VOTING. Under Texas law, class voting is required in connection with
certain amendments of a corporation's articles of incorporation, a merger or
consolidation requiring shareholder approval if the plan of merger or
consolidation contains any provision which, if contained in a proposed amendment
to a corporation's articles of incorporation, would require class voting or
certain sales of all or substantially all of the assets of a corporation. In
contrast, under Delaware law class voting is not required in connection with
such matters, except in the case of an amendment of a corporation's certificate
of incorporation which adversely affects a class of shares.
REMOVAL OF DIRECTORS. A Texas corporation may provide for the removal of a
director with or without cause in its Articles of Incorporation or bylaws. The
Company's bylaws currently provide that directors may be removed, with or
without cause, by the vote of a majority of the shares entitled to vote thereon.
Under Delaware law, a majority of stockholders may remove a director with or
without cause except (i) if the board of directors of a Delaware corporation is
classified (i.e. elected for staggered terms), in which
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case a director may only be removed for cause, unless the corporation's
Certificate of Incorporation provides otherwise and (ii) in the case of a
corporation which possesses cumulative voting, if less than the entire board is
to be removed, no director may be removed without cause if the votes cast
against his removal would be sufficient to elect him if then cumulatively voted
at an election of the entire board of directors, or, if there be classes of
directors, at an election of the class of directors of which he is a part. The
Certificate of Incorporation of STB-Delaware does not provide for a classified
Board of Directors and specifically prohibits cumulative voting. The bylaws of
STB-Delaware provide that at any meeting of stockholders called expressly for
the purpose of removing a director or directors, any director may be removed,
with or without cause; provided that whenever any Director shall have been
elected by the holders of any class of stock of the Corporation voting
separately as a class under the provisions of the Certificate of Incorporation,
such Director may be removed and the vacancy filled only by the holders of that
class of stock voting separately as a class. The Certificate of Incorporation of
STB-Delaware does not presently provide for the election of any directors by the
holders of any class of stock of the corporation voting separately as a class.
DISTRIBUTIONS AND DIVIDENDS. Under Texas law, a distribution is defined as
a transfer of money or other property (except a corporation's shares or rights
to acquire its shares), or an issuance of indebtedness, by a corporation to its
shareholders in the form of (i) a dividend on any class or series of the
corporation's outstanding shares; (ii) a purchase, redemption or other
acquisition by the corporation, directly or indirectly, of its shares; or (iii)
a payment in liquidation of all or a portion of its assets. Under Texas law, a
corporation may make a distribution, subject to restrictions in its charter, if
it does not render the corporation unable to pay its debts as they become due in
the course of its business, and if it does not exceed the corporation's surplus.
Surplus is defined under Texas law as the excess of net assets (essentially, the
amount by which total assets exceed total debts) over stated capital
(essentially, the aggregate par value of the issued shares having a par value
plus consideration paid for shares without par value that have been issued), as
such stated capital may be adjusted by the board. This limitation does not apply
to distributions involving a purchase or redemption of shares to eliminate
fractional shares, collect indebtedness, pay dissenting shareholders or redeem
shares if net assets equal or exceed the proposed distribution.
Under Delaware law, a corporation may, subject to any restrictions contained
in its Certificate of Incorporation, pay dividends out of surplus and, if there
is not surplus, out of net profits for the current and/or the preceding fiscal
year, unless the net assets of the corporation are less than the capital
represented by issued and outstanding stock having a preferences on asset
distributions. Surplus is defined under Delaware law as the excess of the net
assets (essentially, the amount by which total assets exceed total liabilities)
over capital (essentially, the aggregate par value of the shares of the
corporation having a par value that have been issued plus consideration paid for
shares without par value that have been issued), as such capital may be adjusted
by the board.
STOCK REDEMPTION AND REPURCHASE. As noted above, under Texas law, the
purchase or redemption by a corporation of its shares constitutes a
distribution. Accordingly, the discussion above relating to distributions is
applicable to stock redemptions and repurchases. Under Delaware law, a
corporation may purchase or redeem shares of any class except when its capital
is impaired or would be impaired by such purchase or redemption. A corporation
may, however, purchase or redeem out of capital shares that are entitled upon
any distribution of its assets to a preference over another class or series of
its stock, or, if no shares entitled to such a preference are outstanding, any
of its own shares, if such shares are to be retired and the capital reduced.
STB-DELAWARE CERTIFICATE OF INCORPORATION
Set forth below is a description of certain provision in the STB-Delaware
Certificate of Incorporation. Such description is intended as a summary only and
is qualified in its entirety by reference to the STB-Delaware Certificate of
Incorporation, which is attached to this Proxy Statement as Appendix D.
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STB-Delaware's authorized capital stock will consist of 25,000,000 shares of
Common Stock, $.01 par value per share, and 2,000,000 shares of Preferred Stock,
$.01 par value per share. The authorized capital stock of STB-Delaware will be
the same as that of the Company, except that 5,000,000 additional shares of
Common Stock will be authorized in the STB-Delaware Certificate of
Incorporation.
Holders of STB-Delaware's Common Stock will be entitled to one vote per
share on matters voted upon by the stockholders. The holders of STB-Delaware's
Common Stock will be entitled to receive dividends when and as declared by the
Board of Directors, in its discretion, from funds legally available therefor.
However, the terms of the Company's Revolving Credit Facility limit the payment
of dividends to 25% of the Company's annual net income during the term of the
Revolving Credit Facility; such limitation will also apply to dividends upon the
capital stock of STB-Delaware during the term of such Revolving Credit Facility.
Like the Company's Common Stock, the Common Stock of STB-Delaware will have
no preemptive rights and no subscription, redemption, or conversion privileges.
The Common Stock of STB-Delaware will also have no cumulative voting rights,
which means that holders of a majority of shares voting for the election of
directors can elect all members of the Board of Directors. A majority vote of
the shares present in person or represented by proxy is also generally
sufficient for actions that require the vote or concurrence of stockholders,
except as otherwise required by Delaware law for certain extraordinary
transactions. Upon consummation of the Reincorporation, all of the shares of
STB-Delaware Common Stock issued in exchange for the Company's Common Stock will
be fully paid and nonassessable. Such shares will not be redeemable or subject
to further calls or assessments.
The transfer agent and registrar for the Common Stock of STB-Delaware will
be ChaseMellon Shareholder Services L.L.C.
The Preferred Stock of STB-Delaware, like that of the Company, will be
issuable in series by action of the Board of Directors. The Board of Directors
will be authorized to fix the designations, powers, preferences and other rights
and the qualifications, limitations or restrictions thereof in substantially the
same manner as currently provided with respect to Preferred Stock of the
Company.
The Delaware Supreme Court has held that a director's duty of care to a
corporation and its stockholders requires the exercise of an informed business
judgment. Having become informed of all material information reasonably
available to them, directors must act with requisite care in the discharge of
their duties. Delaware General Corporation Law permits a corporation through its
Certificate of Incorporation to exonerate its directors from personal liability
to the corporation or its stockholders for monetary damages for breach of the
fiduciary duty of care as a director, with certain exceptions. The exceptions
include a breach of the director's duty of loyalty, acts or omissions not in
good faith or which involve intentional misconduct or knowing violations of law,
the improper declaration of dividends or redemption of the Corporation's stock
and transactions from which the directors derived an improper personal benefit.
STB-Delaware's Certificate of Incorporation exonerates its directors, acting in
such capacity, from monetary liability to the extent permitted by this statutory
provision. The limitation of liability provision does not eliminate a
stockholder's right to seek nonmonetary, equitable remedies such as injunction
or recision to redress an action taken by directors. However, as a practical
matter, equitable remedies may not be available in all situations and there may
be instances in which no effective remedy is available. The Company's current
articles of incorporation provide for a comparable limitation of liability,
which the Company believes is important to permit it to retain its existing
outside directors and to attract similarly qualified directors in the future.
Under Texas law, the directors of a corporation are specifically held liable for
corporate distributions that are not permitted by Texas law, unless the
directors acted in good faith and with ordinary care in determining that
adequate provision existed to permissibly make a distribution. Delaware law does
not contain an analog to this provision of Texas law.
Section 145 of the Delaware General Corporation Law permits a corporation to
indemnify directors, officers, employees, or agents against judgments, fines,
amounts paid in settlement, and reasonable costs,
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expenses and counsel fees paid or incurred in connection with any proceeding,
other than an action by or in the right of the corporation, to which such
director, officer or employee or his legal representative may be a party,
provided such a director, officer or employee shall have acted in good faith and
shall have reasonably believed (a) in the case of a civil proceeding, that his
conduct was in or not opposed to the best interests of the corporation, or (b)
in the case of a criminal proceeding, that he had no reasonable cause to believe
his conduct was unlawful. In connection with an action by or in the right of the
corporation against a director, officer, employee or agent, the corporation has
the power to indemnify such director, officer, employee or agent for reasonable
expenses incurred in connection with such suit (a) if such person acted in good
faith and in a manner not opposed to the best interests of the corporation, and
(b) if found liable to the corporation, only if ordered by a court of law.
Section 145 provides that such section is not exclusive of any other
indemnification rights which may be granted by a corporation to its directors,
officers, employees or agents.
The Certificate of Incorporation of STB-Delaware provides for mandatory
indemnification of directors and officers to the fullest extent permitted by
Section 145, unless the corporation determines that the person seeking
indemnification did not meet the standard set forth above. The Certificate of
Incorporation of STB-Delaware permits it to indemnify other persons to the
extent authorized from time to time by the Board of Directors. The right to
indemnification is a contract right and includes the right to be paid by the
corporation the expenses incurred in defending any such proceeding in advance of
its final disposition, provided that the indemnitee undertakes to repay all
amounts so advanced if it is ultimately determined that such indemnitee is not
entitled to be indemnified for such expenses. The Company's current bylaws
provide for substantially similar rights to indemnification. The Company is a
party to an indemnification agreement with each of its directors, and it is
expected that STB-Delaware will enter into similar agreements with each of its
directors and certain of its key employees.
RIGHTS OF DISSENTING SHAREHOLDERS
With certain exceptions which are not applicable to the Reincorporation,
Article 5.11 of the Texas Business Corporation Act gives each shareholder of the
Company the right to object to a merger and to demand payment of the fair value
of his shares calculated as of the day before the vote was taken authorizing the
merger, excluding any appreciation or depreciation in anticipation of the
merger. Inasmuch as the Reincorporation contemplates such a merger of the
Company, the rights under said Article 5.11 will apply to the Reincorporation.
However, because the Reincorporation is not intended to have any material effect
upon the Company's business or financial condition, the Company reserves its
right to abandon the Reincorporation for any reason at any time before the
merger becomes effective, and would expect to do so if the holders of a
substantial number of shares of the Company's Common Stock exercise such
dissenter's rights.
In order to perfect such rights, a shareholder of the Company must, prior to
the taking of the vote of shareholders on the merger, file with the Company a
written objection to the merger, notifying the Company that his right to dissent
will be exercised if the merger is effected and specifying the address to which
notice shall be delivered or mailed in such event. If the merger of the Company
into STB-Delaware is effected and the shareholder has not voted in favor
thereof, the Company must, within ten days after the merger is effected, deliver
or mail to such shareholder written notice thereof and such shareholder may,
within ten days from the delivery or mailing of such notice, make written demand
on the surviving corporation for payment of the fair value of his shares. Such
demand must state the number and class of shares owned by the dissenting
shareholder and his estimate of the fair value thereof. It is not necessary for
the shareholder to vote against the Reincorporation (although he may not vote in
favor of the Reincorporation, if he desires to preserve his dissenter's
appraisal rights); however, any shareholder failing to make demand within the
ten day period will be bound by such corporate action. A vote against or
abstaining with respect to the proposed Reincorporation will not satisfy the
requirement that the shareholder make demand for payment of his shares. Within
20 days after demanding payment for his or
23
<PAGE>
her shares in the manner described above, each holder of certificates
representing shares so demanding payment shall submit such certificates to the
corporation for notation thereon that such demand has been made.
Within 20 days after receipt by the Company of a demand by the dissenting
shareholder for payment of the fair value of his shares, the Company shall
deliver or mail to the dissenting shareholder a written notice to the effect
that it will either (i) pay the amount claimed within 90 days after the date the
merger is effected upon the surrender of the duly endorsed certificates, or (ii)
pay some other amount as the fair value within 90 days after the date the merger
was effected, upon receipt of notice within 60 days after the date the merger
was effected from the shareholder that he will accept such amount in exchange
for surrender of his duly endorsed certificates. If the Company and the
dissenting shareholder can agree upon the fair value, such value will be paid
and the dissenting shareholder shall cease to have any interest in such shares
or in the corporation. If agreement as to the fair value cannot be reached,
either the dissenting shareholder or the Company may, within the time limits
prescribed by Article 5.12, file a petition in a court of competent jurisdiction
in Dallas County, Texas, asking for a finding and determination of the fair
value of such shares. Court costs will be allocated between the parties in such
manner as the court shall determine to be fair and equitable.
The foregoing summary does not purport to be a complete statement of the
rights of dissenting shareholders, and such summary is qualified in its entirety
by references to Article 5.11, 5.12 and 5.13 of the Texas Business Corporation
Act, which are reproduced in full as Appendix E hereto.
PROPOSAL FIVE
RATIFICATION OF SELECTION OF AUDITOR
The Board of Directors has selected Price Waterhouse LLP as independent
certified public accountants to audit the consolidated financial statements of
the Company for the fiscal year ending October 31, 1997, and has determined that
it would be desirable to request that the shareholders ratify such selection.
The affirmative vote of a majority of the outstanding shares of Common Stock
present at the Annual Meeting in person or by proxy is necessary for the
ratification of the appointment by the Board of Directors of Price Waterhouse
LLP as independent certified public accountants. Price Waterhouse LLP served as
the Company's independent certified public accountants for the fiscal year ended
October 31, 1996 and has reported on the Company's consolidated financial
statements for such year. Representatives of Price Waterhouse LLP are expected
to be present at the Annual Meeting and will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions from shareholders.
While shareholder ratification is not required for the selection of Price
Waterhouse LLP since the Board of Directors has the responsibility for selecting
the Company's independent certified public accountants, the selection is being
submitted for ratification at the Annual Meeting with a view towards soliciting
the shareholders' opinions, which the Board of Directors will take into
consideration in future deliberations.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF PRICE
WATERHOUSE LLP AS INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS OF THE COMPANY FOR
THE FISCAL YEAR ENDING OCTOBER 31, 1997.
24
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers and key employees of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- --------------------------- --- -------------------------------------------------------------------------
<S> <C> <C>
William E. Ogle............ 50 Chief Executive Officer and Chairman of the Board of Directors
Randall D. Eisenbach....... 46 Executive Vice President, Chief Operating Officer, Assistant Secretary
and Director
James L. Hopkins........... 51 Chief Financial Officer, Vice President of Strategic Marketing and
Director
J. Shane Long.............. 29 Vice President of Sales and Marketing and Director
Bryan F. Keyes............. 48 Director of Legal and Finance, Secretary and Treasurer
William R. Milford......... 34 Chief Engineer
</TABLE>
Information concerning the business experience of Messrs Ogle, Eisenbach,
Hopkins and Long is provided under the caption "Election of Directors" above.
Set forth below is information concerning the business experience of the other
executive officers and key employees of the Company.
BRYAN F. KEYES has served as Director of Legal and Finance of the Company
since April 1993 and as Secretary and Treasurer since December 1994. Mr. Keyes
is responsible for all legal matters, vendor and customer financial relations
and inventory and cash flow management. From November 1992 to April 1993, Mr.
Keyes was self-employed as a financial consultant. From January 1988 to November
1992, Mr. Keyes served as Vice President of Finance and Administration for
Trammell Crow Distribution Corporation, a national warehousing and logistics
company. From 1972 to 1987, Mr. Keyes was employed by Coopers & Lybrand, where
he was a partner from 1980 to 1987. Mr. Keyes is a member of the American
Institute of Certified Public Accountants, the Texas Society of CPAs and the
State Bar of Texas.
WILLIAM R. MILFORD has served as Chief Engineer of the Company since July
1996. Mr. Milford served as Senior Hardware Engineer of the Company from
November 1992 to June 1996. Prior to joining the Company, Mr. Milford served as
an Electronic Systems Engineer at E-Systems, Garland Division, a major defense
contractor, from January 1986 to November 1992.
All executive officers are elected annually by the Board of Directors to
serve until the next annual meeting of the Board of Directors and until their
respective successors are chosen and qualified.
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following information summarizes annual and long-term compensation for
services in all capacities to the Company for the fiscal years ended October 31,
1996, 1995 and 1994, of the Chief Executive Officer and the other four most
highly compensated executive officers of the Company:
25
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
---------------------- UNDERLYING ALL OTHER
NAME AND BONUS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) ($)(1)(2) (#) ($)(3)
- --------------------------------------------------- --------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
William E. Ogle.................................... 1996 $ 200,000 $ 96,741 40,000 $ 1,974
Chairman and Chief Executive Officer 1995 $ 175,000 $ 79,814 54,000 $ 2,685
1994 $ 152,882 $ 196,650 -- $ 4,000
J. Shane Long (4).................................. 1996 $ 212,993 $ 55,626 40,000 $ 1,150
Vice President of Sales and Marketing 1995 $ 153,349 $ 20,393 31,000 $ 975
1994 $ 149,502 $ 32,189 -- --
Randall D. Eisenbach............................... 1996 $ 177,770 $ 83,197 40,000 $ 1,746
Executive Vice President and 1995 $ 150,000 $ 28,275 42,000 $ 8,148
Chief Operating Officer 1994 $ 115,000 $ 61,696 -- $ 4,000
James L. Hopkins (5)............................... 1996 $ 162,066 $ 60,463 40,000 $ 1,250
Chief Financial Officer and Vice President 1995 $ 108,199 $ 7,701 31,000 $ 1,917
of Strategic Marketing
Bryan F. Keyes..................................... 1996 $ 97,767 $ 27,540 8,000 $ 712
Director of Legal and Finance, 1995 $ 91,267 $ 18,678 8,000 $ 400
Secretary and Treasurer 1994 $ 80,208 $ 42,538 -- $ --
</TABLE>
- ------------------------
(1) All amounts reported as bonus for fiscal 1994 were paid pursuant to the
Company's former Profit Sharing Plan, which, except for the percentage of
pretax income allocated to the Plan and the relative amounts allocated among
participants, was substantially identical to the Company's current Profit
Sharing Plan. The Company's current Profit Sharing Plan became effective
upon the consummation of the Company's initial public offering, and amounts
reported as bonus for fiscal 1995 include certain payments that were made
pursuant to the former Profit Sharing Plan prior to such consummation.
(2) None of the named executive officers received any perquisites or other
personal benefits in fiscal 1994, fiscal 1995 or fiscal 1996 that in the
aggregate exceeded the lesser of $50,000 or 10% of such named executive
officer's salary and bonus for such year.
(3) Reflects for fiscal 1996 matching contributions made by the Company pursuant
to its 401(k) Savings Plan to Messrs. Ogle, Long, Eisenbach, Hopkins and
Keyes in the amounts of $1,974, $1,150, $1,746, $1,250 and $712,
respectively.
(4) Salary amount includes for fiscal 1994 $60,000 paid as base salary and
$89,502 paid as sales commissions, for fiscal 1995 $97,500 paid as base
salary and $55,849 paid as sales commissions, and for fiscal 1996 $115,000
paid as base salary and $97,993 paid as sales commissions.
(5) Salary amount includes for fiscal 1995 (beginning January 1, 1995, when Mr.
Hopkins was first compensated as an officer of the Company) $91,667 paid as
base salary and $16,532 paid as sales commissions, and for fiscal 1996
$125,000 paid as base salary and $37,065 paid as sales commissions.
26
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding options granted during
fiscal 1996 to the named executive officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED ANNUAL
SECURITIES % OF TOTAL RATES OF STOCK PRICE
UNDERLYING OPTIONS EXERCISE APPRECIATION FOR OPTION
OPTIONS GRANTED TO OR BASE TERM (3)
GRANTED EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME (#)(1) FISCAL YEAR ($/SH)(2) DATE 5% ($) 10% ($)
- ---------------------------------------- ----------- -------------- --------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
William E. Ogle......................... 40,000 9.8% $ 22.00 10/11/06 $ 553,427 $ 1,402,493
J. Shane Long........................... 40,000 9.8% $ 22.00 10/11/06 $ 553,427 $ 1,402,493
Randall D. Eisenbach.................... 40,000 9.8% $ 22.00 10/11/06 $ 553,427 $ 1,402,493
James L. Hopkins........................ 40,000 9.8% $ 22.00 10/11/06 $ 553,427 $ 1,402,493
Bryan F. Keyes.......................... 3,000 0.7% $ 10.38 2/22/06 $ 19,584 $ 49,629
5,000 1.2% $ 22.00 10/11/06 $ 69,178 $ 175,312
</TABLE>
- ------------------------
(1) All options awarded to Messrs. Ogle, Long, Eisenbach and Hopkins were
granted on October 11, 1996 and vest at the rate of 20% per year on each of
the first five anniversaries of the date of grant. Of the 8,000 options
awarded to Mr. Keyes, 3,000 were granted on February 22, 1996 and 5,000 were
granted on October 11, 1996, and all options vest at the rate of 20% per
year on each of the first five anniversaries of the dates of grant. The 1995
Long Term Incentive Plan allows for the payment of the exercise price of an
option with shares of Common Stock, upon the approval of the Company's Stock
Option Committee. In addition, the 1995 Long Term Incentive Plan permits an
optionee under certain circumstances to cause the Company to withhold shares
issued upon the exercise of an option granted under that plan in payment of
the taxes due upon the exercise of such option.
(2) The exercise price per share of all of the options granted to Messrs. Ogle,
Long, Eisenbach and Hopkins is $22.00. The exercise price per share of 3,000
of the options granted to Mr. Keyes is $10.38, and the exercise price per
share of 5,000 of the options granted to Mr. Keyes is $22.00.
(3) Calculated based on the market price per share of the Common Stock on the
date of grant, which in each case equaled the exercise price. The amounts
represent only certain assumed rates of appreciation. Actual gains, if any,
on stock option exercises and Company Common Stock holdings cannot be
predicted, and there can be no assurance that the gains set forth in the
table will be achieved.
27
<PAGE>
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table shows information concerning the number and estimated
value of unexercised options held by the named executive officers at fiscal 1996
year-end. No options were exercised by such persons during fiscal 1996:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
YEAR-END(#) AT FISCAL YEAR-END ($)(1)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
William E. Ogle........................................... 10,800 83,200 $ 88,605 $ 354,418
J. Shane Long............................................. 6,200 64,800 $ 56,606 $ 226,424
Randall D. Eisenbach...................................... 8,400 73,600 $ 76,692 $ 306,768
James L. Hopkins.......................................... 6,200 64,800 $ 56,606 $ 226,424
Bryan F. Keyes............................................ 1,600 14,400 $ 14,608 $ 90,682
</TABLE>
- ------------------------
(1) Based on the last sale price of $21.13 of the Company's Common Stock on the
Nasdaq National Market on October 31, 1996. The exercise prices of the
options in this table ranged from $12.00 to $22.00 per share.
EMPLOYMENT AGREEMENTS
The Company is a party to employment agreements with each of Messrs. Ogle,
Eisenbach, Hopkins and Long. Each agreement has a term extending through October
31, 1997, and automatically renews for an additional year on each subsequent
October 31, subject to the right of the Company or the employee to terminate the
agreement with a 30-day notice prior to the date of renewal. Under the
agreements, Messrs. Ogle, Eisenbach, Hopkins and Long will receive base annual
salaries in fiscal 1997 of $260,000, $212,000, $180,000 and $160,000,
respectively, and each is eligible to receive incentive compensation under the
Company's Profit Sharing Plan. The agreements with Messrs. Hopkins and Long also
provide for the payment of sales commissions, the amount of which is subject to
annual adjustment by the Compensation Committee. Each agreement provides for a
severance payment if the agreement is terminated under certain circumstances
(including termination of an agreement during the period immediately preceding a
renewal date). The amounts of the severance payments are as follows: Mr. Ogle
would receive two times the sum of his base annual salary and annualized
incentive compensation; Mr. Eisenbach would receive the sum of his base annual
salary and annualized incentive compensation; each of Mr. Hopkins and Mr. Long
would receive the sum of his base annual salary, annualized incentive
compensation and annualized sales commissions. If an agreement is terminated
under certain circumstances within 12 months after a change in control of the
Company, such agreement also provides for a parachute payment in an amount that
is two times the severance payment. For purposes of calculating severance and
parachute payments, the employee's base annual salary is equal to the employee's
then current base annual salary; the annualized incentive compensation is four
times the average of the amount earned in the eight full quarters preceding the
termination; and the annualized sales commissions is 12 times the average of the
amount earned in the 24 full months preceding the termination. Except in the
event of a termination that requires payment of a parachute payment, Messrs.
Ogle, Eisenbach, Hopkins and Long also agree not to participate, in any manner,
during the term of their respective agreements and for two years thereafter, in
the development, manufacture or sale of graphics adapters for desktop PCs or in
any other business in which the Company may be engaged at the time of
termination of employment.
28
<PAGE>
COMPENSATION OF DIRECTORS
Prior to its initial public offering, the Company paid each director a fee
of $1,000 per meeting and paid advisory director fees of $1,000 per meeting to
Messrs. Eisenbach, Hopkins and Wesneski. Beginning in the second quarter of
fiscal 1995, the Company stopped paying directors fees for their services as
directors, although the Company continues to reimburse directors for all
expenses incurred in connection with their activities as directors. Non-Employee
Directors of the Company are entitled to receive certain stock option awards
under the Company's Stock Option Plan for Non-Employee Directors.
COMPENSATION AND OTHER COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Before the Company's initial public offering, decisions concerning
compensation, including decisions concerning compensation for fiscal 1995, were
made by the Company's Board of Directors. At the time such decisions were made
concerning compensation for fiscal 1995, the Board of Directors consisted of Mr.
Ogle, Mr. Mark S. Sims and Mr. William D. Balthaser, Jr. Mr. Eisenbach also
participated in deliberations concerning such compensation. Each of Messrs.
Ogle, Eisenbach, Balthaser and Sims served as officers of the Company during
fiscal 1995. In March, 1995, the Company's Board of Directors appointed a
Compensation Committee comprised of Messrs. Byrne and Wesneski and a Stock
Option Committee comprised of Messrs. Byrne and Wesneski, the Company's
independent directors.
Lawrence E. Wesneski, a director of the Company, serves as President and
Chief Executive Officer of Hoak Breedlove Wesneski & Co. ("HBW"), the successor
pursuant to an acquisition of BW Securities, Inc. ("BWS"), and owns a portion of
the equity securities of HBW. Mr. Wesneski served as President of Breedlove
Wesneski & Company ("BWC") and its affiliate, BWS, and before the acquisition of
BWS, owned a portion of the equity of BWC and BWS. The Company paid BWC and its
affiliates $57,922 in fiscal 1996 for the performance of certain services
relating to the arrangement of credit facilities for the Company.
CERTAIN TRANSACTIONS
RIGHT OF FIRST REFUSAL. The Company and Messrs. Ogle, Sims and Balthaser
have entered into a Right of First Refusal Agreement providing that if Mr. Ogle,
Mr. Sims or Mr. Balthaser proposes to sell any shares of Common Stock registered
in his name as of the date of the closing of the Company's initial public
offering, then the Company will have a right of first refusal to purchase such
shares on terms similar to those proposed. If the Company does not exercise its
right to purchase all of the shares of Common Stock proposed to be sold by
either Mr. Sims or Mr. Balthaser, then Mr. Ogle will have a right of first
refusal to purchase those shares of Common Stock that the Company does not wish
to purchase. Mr. Ogle will not participate in any decision by the Company to
exercise its right of first refusal to purchase shares proposed to be sold by
Mr. Ogle, Mr. Sims or Mr. Balthaser. If the foregoing rights of first refusal
are not independently or collectively fully exercised, then the shares not
purchased may be sold in accordance with the proposed terms of sale.
Notwithstanding the foregoing, the Right of First Refusal Agreement does not
restrict the ability of Messrs. Ogle, Sims or Balthaser to sell shares of Common
Stock in the public market pursuant to Rule 144 promulgated under the Securities
Act.
CERTAIN PRODUCT SALES. Paul A. Ogle, the father of William E. Ogle, was a
Company employee and sales agent for certain products prior to his retirement
effective October 15, 1996. Paul Ogle paid to the Company $110,580 in fiscal
1996, in connection with the purchase of products from the Company that he
resold to certain customers. The Company sold the products to Mr. Ogle on terms
roughly comparable to those provided to other distributors. In addition, the
Company paid compensation to Paul Ogle in the amount of $14,410 in fiscal 1996.
TAX AGREEMENT. As of December 16, 1994, the Company, on the one hand, and
Messrs. Ogle, Balthaser and Sims (the "Founding Shareholders"), on the other,
(the "parties") entered into a Tax Allocation and Indemnification Agreement (the
"Tax Agreement") relating to their respective income tax
29
<PAGE>
liabilities. Since the Company became fully subject to corporate income taxation
as a C corporation after its status as an S corporation terminated prior to its
initial public offering, the reallocation of income and deductions between the
period during which the Company was treated as an S corporation and a period
during which the Company was or will be subject to corporate income taxation as
a C corporation may increase the taxable income of one party in one period while
decreasing that of another party in another period. The Tax Agreement generally
provides that the Founding Shareholders will be indemnified by the Company with
respect to income taxes (plus interest and penalties) arising due to taxable
income shifted from a C corporation taxable year to a taxable year in which the
Company was an S corporation, and that the Company will be indemnified by the
Founding Shareholders with respect to income taxes (plus interest and penalties)
arising due to taxable income shifted from an S corporation taxable year to a C
corporation taxable year; provided, however, that only in the case of the
Founding Shareholders' obligation to indemnify the Company, such obligation
shall be reduced by an amount equal to the federal or state tax benefit (if any)
derived by the Company due to the shift of taxable income from a taxable year in
which the Company was an S corporation to a C corporation taxable year and shall
not exceed the amount, if any, by which (i) the amount of the reduction in the
liability for taxes and interest thereon of a Founding Shareholder that results
from the shifting of S corporation taxable income to a C corporation taxable
year of the Company, exceeds (ii) all reasonable costs incurred by the Founding
Shareholder reasonably attributable to securing such reduction in liability for
taxes. The Company will also be indemnified by the Founding Shareholders for any
federal or state taxes that arise because the Company's status as an S
corporation was ineffective, revoked or terminated prior to the termination of
the Company's S corporation status. Any payment made by the Company to the
Founding Shareholders pursuant to the Tax Agreement may be considered by the
Internal Revenue Service or the state taxing authorities to be nondeductible by
the Company for income tax purposes.
S CORPORATION DISTRIBUTION. Prior to its initial public offering, the
Company declared a dividend (the "S Corporation Distribution") in an amount
equal to its undistributed S corporation earnings through the date immediately
prior to the completion of the initial public offering, or approximately $4.2
million (the "Undistributed S Corporation Earnings"), approximately one-half of
which was paid in cash to the Founding Shareholders out of the proceeds of the
Company's initial public offering. The remaining half of the S Corporation
Distribution was distributed to the Founding Shareholders in the form of
promissory notes providing for 12 equal monthly payments of both principal and
interest and bearing interest at 9%, the prime rate in effect on the date of
issuance (the "Founding Shareholder Notes"). The Company paid $700,422 in fiscal
1996 from cash generated from operations in connection with its obligations
under the Founding Shareholder Notes. The final payment on the remaining
outstanding balance under the Founding Shareholder Notes was made in February
1996.
FUTURE TRANSACTIONS. The Company has adopted a policy that all transactions
between the Company and related parties are subject to approval by a majority of
all disinterested directors and must be on terms no less favorable than those
that could be obtained from unrelated third parties.
REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's executive officers generally are
made by the two-member Compensation Committee of the Board. Each member of the
Compensation Committee is a Non-Employee Director. All decisions by the
Compensation Committee relating to compensation of the Company's executive
officers are reviewed by the Board. Decisions with respect to awards under
certain of the Company's stock-based compensation plans are made solely by the
Stock Option Committee, which is composed of the same members as the
Compensation Committee, in order for such awards to satisfy Securities Exchange
Act Rule 16b-3. Set forth below is a report prepared by Messrs. Byrne and
Wesneski in their capacity as the Compensation Committee addressing the
Company's compensation policies for fiscal year 1996 as they affected the
Company's executive officers, including the Company's Chief Executive Officer,
Mr. Ogle.
30
<PAGE>
The Compensation Committee's executive compensation policies are designed to
provide competitive levels of compensation that integrate pay with the Company's
annual and long-term performance goals, reward above average corporate
performance, recognize individual initiative and achievements, and assist the
Company in attracting and retaining qualified executives. Targeted levels of
total executive compensation are generally set at levels that the Compensation
Committee believes to be consistent with others in the Company's industry,
although actual compensation levels in any particular year may be above or below
those of the Company's competitors, depending upon the Company's performance.
Each year the Compensation Committee commissions a report prepared by an
independent consulting firm, which details the compensation of various executive
positions for companies comparable to the Company. The Compensation Committee
uses this report to assist it setting compensation for the Company's executives.
The Compensation Committee is mindful of grants or awards made to the
Company's executive officers under the Company's stock-based compensation plans
administered by the Stock Option Committee. The Compensation Committee endorses
the position that stock ownership by management and stock-based performance
compensation arrangements are beneficial in aligning management's and
shareholders' interests in the enhancement of shareholder value. Thus, the
Compensation Committee takes into account these stock-based elements in
designing the compensation packages of the Company's executive officers.
In 1993, Congress amended the Internal Revenue Code to add Section 162(m).
This section provides that publicly held companies may not deduct compensation
paid to certain executive officers in excess of $1 million annually, with
certain exemptions. The Company has examined its compensation policies in view
of Section 162(m) and the regulations adopted by the Internal Revenue Service to
implement this section and has determined that these provisions will not affect
the deductibility of executive compensation for fiscal 1996. It is currently not
expected that any part of the Company's deduction for executive compensation
will be disallowed for fiscal 1997.
The three principal components of the Company's non-stock-based compensation
program are base salary, sales commissions and profit sharing.
BASE SALARIES
Each executive officer's base salary is reviewed annually by the
Compensation Committee and is subject to adjustment on the basis of individual,
business unit and corporate performance. Base salaries are generally set at or
somewhat below competitive levels, with the result that the Company relies on
annual and longer term incentive compensation to attract and retain executive
officers of outstanding ability and to motivate them to perform to the full
extent of their abilities. The base salaries of the Company's executive officers
are kept within a fairly narrow range in an effort to keep the amount of total
base salaries under control and otherwise reflect the relatively comparable
contributions made by the Company's executive officers to the Company's overall
performance.
SALES COMMISSIONS
The Company pays sales commissions to its sales personnel on a monthly
basis. Each year the Company's Chief Executive Officer recommends to the
Compensation Committee a sales commission rate to be paid to sales personnel
that are executive officers, and this recommendation is subject to the
Compensation Committee's review and approval. While the Compensation Committee
strives to set sales commission rates that will provide an incentive to maximize
Company sales, the Committee also seeks to set rates at a level that will ensure
a proper balance between efforts directed toward overall benefit to the Company
and the executive's personal compensation.
PROFIT SHARING INCENTIVE PLAN
Under the Company's Profit Sharing Incentive Plan (the "Profit Sharing
Plan"), which is administered by the Compensation Committee, the Company
reserves each fiscal quarter an amount equal to 7% of its
31
<PAGE>
income before income taxes (as calculated prior to profit sharing expense) (the
"Reserve") for the payment of cash bonuses to the Company's employees. Of the
total amount of the Reserve, approximately 43% is allocated to the Management
Incentive Program and the remaining 57% is allocated to the Employees Incentive
Program. The Compensation Committee designates each year those eligible
employees who shall share in the Management Incentive Program. The Compensation
Committee seeks to designate those employees who make the greatest contribution
to the Company's overall effective management to share in the Management
Incentive Program. Once designated to share in the Management Incentive Program,
each participant receives an award based on the ratio that his base salary bears
to the total base salaries of all designated participants. Most of the Company's
executive officers currently share in the Management incentive program, with the
balance sharing in the other incentive programs.
FISCAL 1996 CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Ogle's compensation for fiscal year 1996 as Chairman and Chief Executive
Officer of the Company principally consisted of a base salary and share of the
Management Incentive Program under the Profit Sharing Plan. Mr. Ogle's
compensation for fiscal year 1996 was based on the executive compensation
policies described above. The Compensation Committee set Mr. Ogle's base salary
for fiscal 1996 in light of such policies, including consideration of a report
prepared by an independent consulting firm detailing the compensation of chief
executive officers of companies determined to be comparable to the Company. The
Compensation Committee designated Mr. Ogle to participate in the Management
Incentive Program based upon the substantial contribution made by Mr. Ogle to
the management of the Company. Mr. Ogle's participation in the Management
Incentive Program and the Company's strong performance in fiscal 1996 directly
determined the amount of bonus paid to Mr. Ogle. Mr. Ogle received other
compensation in fiscal 1996 in the amount of $1,974, comprised of the Company's
matching contributions under its 401(k) plan.
Submitted by the Compensation
Committee
of the Board of Directors
JAMES J. BYRNE
LAWRENCE E. WESNESKI
32
<PAGE>
PERFORMANCE GRAPH
The following graph compares the annual cumulative total shareholder return
on an investment of $100 on February 14, 1995 in the Company's Common Stock,
based on the market price of the Common Stock, with the cumulative total return
of a similar investment in companies on the Nasdaq Composite Stock Market Index
and in a group of peer companies selected by the Company on a line-of-business
basis and weighted for market capitalization. Peer companies included are
Diamond Multimedia Systems, Inc., Number Nine Visual Technology Corporation, ATI
Technologies, Inc., Boca Research, Inc. and Creative Technologies, Ltd. The
Company is also included in the calculations of peer group cumulative total
shareholder return on investment. The peer group index excludes Diamond
Multimedia Systems, Inc. and Number Nine Visual Technology Corporation, whose
common stock became publicly traded on April 14, 1995 and May 29, 1995,
respectively, for the portion of the period covered below that is prior to the
date that such companies' stock became publicly traded.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STBI NASDAQ PEER
<S> <C> <C> <C>
14-Feb-95 $100.00 $100.00 $100.00
31-Oct-95 83.02 131.04 120.83
31-Oct-96 159.43 154.50 82.86
</TABLE>
ANNUAL REPORT ON FORM 10-K
UPON WRITTEN REQUEST OF ANY BENEFICIAL SHAREHOLDER OR SHAREHOLDER OF RECORD,
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
OCTOBER 31, 1996 (INCLUDING THE EXHIBITS, FINANCIAL STATEMENTS, AND THE
SCHEDULES THERETO) REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 13A-1 UNDER THE SECURITIES EXCHANGE ACT OF 1934, MAY
BE OBTAINED, WITHOUT CHARGE, FROM BRYAN F. KEYES, SECRETARY, 1651 NORTH
GLENVILLE DRIVE, RICHARDSON, TEXAS 75081.
33
<PAGE>
SHAREHOLDER PROPOSALS
Shareholder proposals to be presented at the 1998 Annual Meeting of
Shareholders, for inclusion in the Company's Proxy Statement and form of Proxy
relating to that meeting, must be received by the Company at its offices in
Richardson, Texas, addressed to the Secretary of the Company, not later than
November 14, 1997. Such proposals must comply with the Bylaws of the Company and
the requirements of Regulation 14A of the Securities Exchange Act of 1934.
OTHER MATTERS
At the date of this Proxy Statement, management was not aware that any
matters not referred to in this Proxy Statement would be presented for action at
the meeting. If any other matters should come before the meeting, the persons
named in the accompanying form of Proxy will have discretionary authority to
vote all proxies in accordance with their best judgment, unless otherwise
restricted by law.
By Order of the Board of Directors
BRYAN F. KEYES
SECRETARY
Dated: March 14, 1997
34
<PAGE>
APPENDIX A
STB SYSTEMS, INC.
1995 LONG TERM INCENTIVE PLAN
(AS AMENDED AND RESTATED EFFECTIVE NOVEMBER 1, 1996)
1. PURPOSE
The STB SYSTEMS, INC. 1995 LONG TERM INCENTIVE PLAN (AS AMENDED AND RESTATED
EFFECTIVE NOVEMBER 1, 1996) (the "RESTATED PLAN") has been established by STB
SYSTEMS, INC. (the "CORPORATION") to:
(a) Attract and retain key executives and other key employees;
(b) Motivate participating employees, by means of appropriate
incentives, to achieve long-range goals;
(c) Provide incentive compensation opportunities that are competitive
with those of other corporations; and
(d) Further identify the interests of eligible employees with those of
the Corporation's other shareholders through compensation alternatives based
on the Corporation's Common Stock;
and thereby promote the long-term financial interest of the Corporation,
including the growth in value of the Corporation's equity and enhancement of
long-term shareholder return.
2. SCOPE
Awards under the Restated Plan may be granted in the form of (i) incentive
stock options ("INCENTIVE STOCK OPTIONS") as provided in Section 422 of the
Internal Revenue Code of 1986, as amended (the "CODE"), (ii) non-qualified stock
options ("NON-QUALIFIED OPTIONS") (unless otherwise indicated, references in the
Restated Plan to "options" include incentive stock options and non-qualified
options), (iii) shares of the Common Stock of the Corporation (the "COMMON
STOCK") that are restricted as provided in paragraph 12 hereof ("RESTRICTED
SHARES") or (iv) units valued based upon the long-term performance of the
Corporation as determined pursuant to paragraph 13 hereof ("PERFORMANCE UNITS").
Options may be accompanied by stock appreciation rights ("RIGHTS"). Rights may
also be granted without accompanying options. The maximum aggregate number of
performance units, shares of Common Stock with respect to which options and
restricted shares are granted, and rights granted without accompanying options,
which may be awarded from time to time under the Restated Plan shall be
1,000,000 (subject to adjustment as described in paragraph 16 hereof). The
maximum number of Shares of Common Stock with respect to which incentive stock
options, non-qualified options, restricted shares and performance units may be
granted in any one year to any employee shall not exceed 250,000. Shares of
Common Stock with respect to which awards are granted may be, in whole or in
part, authorized and unissued shares, authorized and issued shares held in the
treasury of the Corporation, or issued shares reacquired by the Corporation, as
the Board of Directors of the Corporation (the "BOARD OF DIRECTORS") shall from
time to time determine. If for any reason (other than surrender of options or
Deemed Options (as herein defined) upon exercise of rights as provided in
paragraph 9 hereof) any shares as to which an option has been granted cease to
be subject to purchase thereunder, or any restricted shares are forfeited to the
Corporation, or any right issued without accompanying options terminates or
expires without being exercised, then the shares in respect of which such option
or right was granted, or such restricted shares, shall become available for
subsequent awards under the Restated Plan to the extent permitted by the Code
and other applicable law.
3. EFFECTIVE DATE
The Plan originally became effective on January 1, 1995 and, unless sooner
terminated pursuant to the terms hereof, the Plan shall terminate on December
31, 2004. The Restated Plan was adopted effective on
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November 1, 1996. The Restated Plan (and each award granted under the Restated
Plan) will become null and void unless the Restated Plan is approved by the
affirmative vote of the holders of a majority of the shares of voting stock of
all classes of the Corporation present, or represented, and entitled to vote at
a meeting of shareholders of the Corporation at which a majority of the
outstanding shares of the Corporation's voting stock is voted on the proposal to
approve the Restated Plan. The agreement relating to each award granted under
the Restated Plan prior to approval of the Restated Plan by shareholders as
aforesaid shall expressly provide that such award will not be exercisable or
payable prior to such approval and that such award will become null and void
unless the Restated Plan is approved by the shareholders. Effective November 1,
1996, it is the intent of the Corporation for the Restated Plan to comply with
new Rule 16b-3, issued by the Securities and Exchange Commission on May 31,
1996, "New Rule 16b-3.".
4. ADMINISTRATION
(a) The Restated Plan shall be administered, construed and interpreted by
the Board of Directors of the Corporation; provided, that the Board of
Directors, in its discretion, may delegate any or all of its authority, powers
and discretion under the Restated Plan to the Stock Option Committee of the
Board of Directors. (All references herein to the "Committee" shall be deemed to
refer exclusively to the Stock Option Committee or any successor thereto of the
Board of Directors of the Corporation.) Notwithstanding anything in this
paragraph 4 to the contrary, the Committee shall consist of two or more "outside
directors," as such term is defined under the Treasury Regulations under Code
section 162(m), who are also "non-employee directors," as such term as defined
under New Rule 16b-3.
(b) With respect to persons subject to Section 16 of the Securities Exchange
Act of 1934 (the "1934 Act"), transactions under the Restated Plan are intended
to comply with all applicable conditions of Rule 16b-3 or its successors under
the 1934 Act. To the extent any provision of the Restated Plan or action by the
Board of Directors or the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Board of
Directors or the Committee, as applicable.
(c) The Board of Directors shall have plenary authority in its sole
discretion and subject to the express provisions of the Restated Plan, to grant
options, to determine the purchase price of the Common Stock covered by each
option (the "EXERCISE PRICE"), the term of each option and to change the same,
the class or classes of shares of Common Stock to be covered by each option, the
Employees (as defined in paragraph 5 hereof) to whom, and the time or times at
which, options shall be granted and the number of shares to be covered by each
option; to designate options as incentive stock options or non-qualified options
and to determine which options shall be accompanied by rights; to grant rights
without accompanying options; to determine the Employees to whom and the time or
times at which such rights shall be granted and the exercise price, term, and
number of shares of Common Stock covered by any Deemed Option (as defined in
paragraph 9 hereof) corresponding thereto; to grant restricted shares and
performance units and to determine the term of the restricted period and
appropriate long-term objectives and other conditions applicable to such
restricted shares or performance units, the Employees to whom and the time or
times at which restricted shares or performance units shall be granted and the
number of restricted shares or performance units to be covered by each grant; to
interpret the Restated Plan; to prescribe, amend and rescind rules and
regulations relating to the Restated Plan; to determine the terms and provisions
of the option agreements, and the right, restricted share and performance unit
agreements entered into in connection with awards under the Restated Plan; to
accelerate outstanding awards and extend the exercisability thereof in its
discretion; to prepare and distribute in such manner as the Board of Directors
determines to be appropriate information concerning the Restated Plan, and to
make all other determinations deemed necessary or advisable for the
administration of the Restated Plan. The Board of Directors may delegate to one
or more of its members or to one or more agents such administrative duties as it
may deem advisable, and the Board of Directors or any person to whom it has
delegated duties as aforesaid may employ one or more persons to render advice
with respect to any responsibility the Board of Directors or such person may
have under the Restated Plan; PROVIDED, HOWEVER, that except as authorized in
paragraph 4(a) above, the Board of Directors shall not delegate its authority to
construe and interpret the
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Restated Plan, to determine which Employees may participate in the Restated
Plan, or its authority to make grants of options, restricted shares, performance
units and rights.
(d) If appointed, the Committee shall function as follows. The Committee may
adopt such rules as it deems necessary, desirable or appropriate. The Committee
may act at a meeting or in writing without a meeting. The Committee shall elect
one of its members as chairman, appoint a secretary (who may or may not be a
Committee member, as the case may be) and advise the Board of Directors of such
actions. The secretary shall keep a record of all minutes and forward all
necessary communications to the Corporation. A majority of the Committee shall
constitute a quorum. All decisions of the Committee shall be made by a vote of
not less than a majority of the Committee members present at a meeting of the
Committee at which a quorum is present or by a written consent signed by all of
the members of the Committee. A dissenting Committee member who, within a
reasonable time after he has knowledge of any action or failure to act in
accordance with the preceding sentence, registers his dissent in writing
delivered to the other Committee members and to the Board of Directors, shall
not be responsible for any such action or failure to act.
(e) All usual and reasonable expenses of the Committee shall be paid by the
Corporation, and no member shall receive compensation with respect to his
services for the Committee except as may be authorized by the Board of
Directors. The Board of Directors and the Committee may employ attorneys,
consultants, accountants or other persons, and the Board of Directors, the
Committee, the Corporation and its officers and directors shall be entitled to
rely upon the advice, opinions or valuations of any such persons. All actions
taken and all interpretations and determinations made by the Board of Directors
or the Committee in good faith shall be final and binding upon all Employees who
have received awards, the Corporation and all other interested persons. No
member of Board of Directors or the Committee shall be personally liable for any
action, determination, or interpretation taken or made in good faith with
respect to the Restated Plan or awards made thereunder, and the Corporation
shall indemnify and hold harmless each member of the Board of Directors or the
Committee against all loss, cost, expenses or damages, occasioned by any act or
omission to act in connection with any such action, determination or
interpretation under or of the Restated Plan, consistent with the Corporation's
articles of incorporation and bylaws.
(f) Subject to such limitations or restrictions as may be imposed by the
Code or other applicable law, the Board of Directors may grant to an Employee
who has been granted an award under the Restated Plan or any other benefit plan
maintained by the Corporation or any of its subsidiaries, or any predecessor or
successor thereto, in exchange for the surrender and cancellation of such prior
award, a new award with such terms and conditions as the Board of Directors may
deem appropriate consistent with the provisions of the Restated Plan.
5. ELIGIBILITY; FACTORS TO BE CONSIDERED IN GRANTING AWARDS
(a) Awards shall be granted only to persons who are regular full-time
employees (meaning an employee who works thirty (30) hours or more per week for
the Corporation) of the Corporation or one or more of its subsidiaries (as
defined below) and either are officers of, or in the opinion of the Board of
Directors hold key positions in or for, the Corporation or any subsidiary
("Employees"). In determining the Employees to whom awards shall be granted, the
number of shares and class or classes of Common Stock with respect to which each
award shall be granted, the number of performance units granted by each award,
and the terms and conditions of each award, the Board of Directors shall take
into account the nature of the Employee's duties, his or her present and
potential contributions to the growth and success of the Corporation, and such
other factors as the Board of Directors shall deem relevant in connection with
accomplishing the purposes of the Restated Plan. The chief executive officer of
the Corporation shall assist the Board of Directors in this determination by
making recommendations. An Employee who has been granted an award or awards
under the Restated Plan may be granted an additional award or awards, subject to
such limitations as may be imposed by the Code on the grant of incentive stock
options or other applicable law.
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(b) For purposes of this Restated Plan, the term "SUBSIDIARY" means any
corporation (other than the Corporation) during any period of which fifty
percent (50%) or more of the total combined voting power of all classes of stock
is owned, directly or indirectly, by the Corporation. For purposes of this
Restated Plan, the term "AFFILIATE" shall have the same meaning as in Rule 12b-2
promulgated under the 1934 Act.
6. OPTION PRICE; FAIR MARKET VALUE
The per share exercise price of each option for shares of Common Stock shall
be determined by the Board of Directors, but shall be one hundred percent (100%)
of the Fair Market Value on the date the option is granted unless the Board of
Directors expressly determines otherwise, subject to the requirements for
incentive stock options set forth in paragraph 10 hereof. For purposes of this
Restated Plan, the term "FAIR MARKET VALUE PER SHARE" as of any date shall mean,
except as provided in paragraph 9(d) hereof, for shares of Common Stock with
respect to which restricted shares, options and rights shall be granted, the
closing price of such Common Stock on such date (or if there are no sales on
such date, on the next preceding date on which there were sales), as reported on
the New York Stock Exchange Composite Tape, or if such Common Stock is not
listed or admitted to trading on the New York Stock Exchange, as reported on the
principal consolidated transaction reporting system for the principal national
securities exchange on which the Common Stock is listed or admitted to trading,
or if such Common Stock is not listed or admitted to trading on any national
securities exchange, the closing price of such Common Stock as reported on the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ"), or if such Common Stock is not listed or
admitted to trading on the NASDAQ National Market System, the last quoted sales
price or, if not so quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported by the NASDAQ System or such other
system as may then be in use, or if such Common Stock is not reported on any
such system and is not listed or admitted to trading on any national securities
exchange, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in such Common Stock selected by the
Board of Directors, or if no such market maker is making a market in such Common
Stock, the fair value of such Common Stock as determined in good faith by the
Board of Directors by applying generally recognized principles of valuing
closely-held securities; PROVIDED, HOWEVER, that in any event the Fair Market
Value per Share shall be appropriately adjusted to reflect events described in
paragraph 16 hereof. The Board of Directors shall determine the date on which an
option is granted, provided that such date is consistent with the Code and any
applicable rules or regulations thereunder; in the absence of such
determination, the date on which the Board of Directors adopts a resolution
granting an option shall be considered the date on which such option is granted,
provided the Employee to whom the option is granted is promptly notified of the
grant and a written option agreement is duly executed as of the date of the
resolution. The exercise price so determined shall also be applicable in
connection with the exercise of any related right.
7. TERM OF OPTIONS
The term of each option granted under the Restated Plan shall be as the
Board of Directors shall determine, but in no event shall any option have a term
of more than ten (10) years from the date of grant, subject to earlier
termination as provided in paragraphs 14 and 15 hereof. If the holder of an
incentive stock option owns Common Stock possessing more than ten percent (10%)
of the combined voting power of all classes of stock of the Corporation or any
subsidiary, the term of such incentive stock option shall not exceed five (5)
years from the date of grant.
8. EXERCISE OF OPTIONS
(a) Subject to the provisions of this Restated Plan and unless otherwise
provided in the option agreement, an option granted under the Restated Plan
shall become one hundred percent (100%) vested at the earliest of the Employee's
retirement from active employment at or after Retirement Age (as defined in
paragraph 14 hereof) or the Employee's death or total and permanent disability
(as defined in paragraph 15 hereof). Prior to becoming one hundred percent
(100%) vested, each option shall become
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exercisable in such cumulative installments and upon such events as the Board of
Directors may determine in its sole discretion. Subject to the foregoing, the
unvested portion of any option or right granted under the Restated Plan shall be
forfeited on the date the Employee ceases to be a full-time Employee of the
Corporation. The Board of Directors may also, in its sole discretion, accelerate
the exercisability of any option or installment thereof at any time.
(b) An option may be exercised at any time or from time to time (subject, in
the case of an incentive stock option, to such restrictions as may be imposed by
the Code), as to any or all full shares of Common Stock as to which the option
has become exercisable; PROVIDED, HOWEVER, that an option shall not be exercised
at any time as to less than fifty (50) shares (or less than the number of shares
of Common Stock as to which the option is then exercisable, if that number is
less than fifty (50) shares).
(c) At the time of exercise of any option, the per share exercise price of
such option shall be paid in full for each share of Common Stock with respect to
which such option is exercised. Payment may be made in cash or, with the
approval of the Board of Directors, in shares of the Common Stock, valued at the
Fair Market Value per Share on the date of exercise. If the Corporation shall
have a class of its Common Stock registered pursuant to Section 12 of the 1934
Act, an option holder may also make payment at the time of exercise of an option
for such class of Common Stock by delivering to the Corporation a properly
executed exercise notice together with irrevocable instructions to a broker
approved by the Corporation that upon such broker's sale of shares with respect
to which such option is exercised, it is to deliver promptly to the Corporation
the amount of sale proceeds necessary to satisfy the option exercise price and
any required withholding taxes (subject to the provisions of paragraph 19
hereof).
(d) No option granted under this Plan prior to the effective date of the
Restated Plan and unless otherwise expressly provided in the option agreement,
no option granted after the effective date of the Restated Plan, may be
exercised prior to the expiration of six (6) months from the date of the award
thereof.
(e) Upon the exercise of an option or portion thereof in accordance with the
Restated Plan, the option agreement and such rules and regulations as may be
established by the Board of Directors, the holder thereof shall have the rights
of a shareholder with respect to the Common Stock issued as a result of such
exercise.
9. AWARD AND EXERCISE OF RIGHTS
(a) The Board of Directors may grant a right as a primary right or an
additional right (each as defined in this paragraph) in the manner set forth in
this paragraph 9. A right granted in connection with an option may be granted
either at the time the option is granted or, in the case of an option that is
not an incentive stock option, thereafter at any time prior to the exercise,
termination or expiration of such option. Each right shall be subject to the
same terms and conditions as the related option or Deemed Option (as defined in
paragraph 9(b)) and shall be exercisable only to the extent the option or Deemed
Option is exercisable.
(b) A primary right may be awarded by the Board of Directors either alone or
in connection with any option granted under the Restated Plan. Each primary
right granted without a corresponding option shall nevertheless be deemed for
certain purposes described in this paragraph 9 to have been accompanied by an
option (a "DEEMED OPTION"). A Deemed Option shall have no value, and no shares
of Common Stock (or other consideration) shall be delivered upon exercise
thereof, but such Deemed Option shall serve solely to establish the terms and
conditions of the corresponding primary right. At the time of grant of a primary
right not granted in connection with an option, the Board of Directors shall set
forth the terms and conditions of the corresponding Deemed Option. The terms and
conditions of such Deemed Option shall include all terms and conditions that at
the time of grant are required, and, in the discretion of the Board of
Directors, may include any additional terms and conditions that at such time are
permitted, to be included in options granted under this Restated Plan. A primary
right shall entitle the Employee to surrender unexercised the related option or
Deemed Option (or any portion or portions thereof that the Employee determines
to surrender) and to receive in exchange, subject to the provisions of the
Restated
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Plan and such rules and regulations as from time to time may be established by
the Board of Directors, a payment having an aggregate value equal to (i) the
excess of (A) the Fair Market Value per Share on the exercise date over (B) the
per share exercise price of the option or Deemed Option, multiplied by (ii) the
number of shares of Common Stock subject to the option, Deemed Option or portion
thereof that is surrendered. Surrender of an option or Deemed Option or portion
thereof in exchange for a payment as described in this paragraph is referred to
as the "EXERCISE OF A PRIMARY RIGHT." Upon exercise of a primary right, payment
shall be made in the form of cash, shares of Common Stock, or a combination
thereof, as elected by the Employee, provided that the Board of Directors shall
have sole discretion to approve or disapprove the election of an Insider to
receive all or part of a payment in cash (which approval or disapproval may be
given at any time after the election to which it relates). Shares of Common
Stock paid upon exercise of a primary right will be valued at the Fair Market
Value per Share on the exercise date. Cash will be paid in lieu of any
fractional share of Common Stock based upon the Fair Market Value per Share on
the exercise date. Subject to paragraph 19 hereof, no payment will be required
from the Employee upon exercise of a primary right.
(c) An additional right may be awarded by the Board of Directors in
connection with any option granted under the Restated Plan. An additional right
shall entitle the Employee to receive, upon the exercise of a related option, a
cash payment equal to (i) the product determined by multiplying (A) the excess
of (x) the Fair Market Value per Share on the date of exercise of the related
option over (y) the option price per share at which such option is exercisable
by (B) the number of shares of Common Stock with respect to which the related
option is being exercised, multiplied by (ii) a percentage factor (which may be
any percentage factor equal to or greater than ten percent (10%) and equal to or
less than one hundred percent (100%)) as determined by the Board of Directors at
the time of the grant of such additional right or as determined in accordance
with a formula for determination of such percentage factor established by the
Board of Directors at the time of the grant of such additional right. If no
percentage factor or formula is otherwise specified by the Board of Directors at
the time of grant of such additional right, the percentage factor shall be
deemed to be one hundred percent (100%). The Board of Directors at any time, or
from time to time, after the time of grant may in its discretion increase such
percentage factor (or amend such formula so as to increase such factor) to not
more than one hundred percent (100%).
(d) Upon exercise of a primary right, the number of shares of Common Stock
subject to exercise under the related option or Deemed Option shall
automatically be reduced by the number of shares of Common Stock represented by
the option, Deemed Option or portion thereof surrendered. Shares of Common Stock
subject to options, Deemed Options or portions thereof surrendered upon the
exercise of rights shall not be available for subsequent awards under the
Restated Plan.
(e) A right related to an incentive stock option may only be exercised if
the Fair Market Value per Share on the exercise date (as determined pursuant to
paragraph 6) exceeds the exercise price of the option per share of Common Stock.
(f) If neither the right nor, in the case of a right (whether primary or
additional) with a related option, the related option, is exercised before the
end of the day on which the right ceases to be exercisable, such right shall be
deemed exercised as of such date and, subject to paragraph 19 hereof, a payment
in the amount prescribed by paragraph 9(b) or paragraph 9(c), as the case may
be, shall be paid to the Employee in cash.
10. INCENTIVE STOCK OPTIONS
(a) The Board of Directors shall designate the Employees to whom incentive
stock options, as described in Section 422 of the Code or any successor section
thereto, are to be awarded under the Restated Plan and shall determine the class
or classes and the number of shares of Common Stock to be covered by each
incentive stock option. Incentive stock options shall be awarded only to regular
full-time Employees of the Corporation. In no event shall the aggregate Fair
Market Value of all Common Stock (determined at the time the option is awarded)
with respect to which incentive stock options are
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exercisable for the first time by an individual during any calendar year (under
all plans of the Corporation and its subsidiaries) exceed $100,000.
(b) The purchase price of a share of Common Stock under each incentive stock
option shall be determined by the Board of Directors; PROVIDED, HOWEVER, that in
no event shall such price be less than one hundred percent 100% of the Fair
Market Value Per Share as of the date of grant or one hundred ten percent (110%)
of such Fair Market Value Per Share if the holder of the incentive stock option
owns Common Stock possessing more than ten percent (10%) of the combined voting
power of all classes of stock of the Corporation or any subsidiary.
(c) Except as provided in paragraphs 14 and 15 hereof, no incentive stock
option shall be exercised at any time unless the holder thereof is then a
regular full-time Employee of the Corporation or one of its subsidiaries. For
this purpose, "SUBSIDIARY" shall include, as under Treasury Regulations Section
1.421-7(h)(3)-(4), example (3), any corporation that is a subsidiary of the
Corporation during the entire portion of the requisite period of employment
during which it is the employer of the holder.
(d) In the event of amendments to the Code or applicable rules or
regulations relating to incentive stock options subsequent to the date hereof,
the Corporation may amend the provisions of the Restated Plan, and the
Corporation and the Employees holding such incentive stock options may agree to
amend outstanding option agreements to conform to such amendments.
11. LIMITED TRANSFERABILITY OF OPTIONS AND RIGHTS
Incentive stock options granted under the Restated Plan shall not be
transferable otherwise than by will or the laws of descent and distribution, or
pursuant to a qualified domestic relations order as defined by the Code or Title
I of the Employee Retirement Income Security Act of 1974, as amended, or the
rules thereunder, and incentive stock options shall be exercisable during the
lifetime of the Employee only by the Employee or by the Employee's guardian or
legal representative (unless such exercise would disqualify an option as an
incentive stock option). Effective with respect to non-qualified options and
rights granted after the effective date of the Restated Plan, and unless the
agreement regarding the award of non-qualified options or rights expressly
provides otherwise, non-qualified options and rights may be transferred by the
holder to Permitted Transferees, provided that there cannot be any consideration
for the transfer. For purposes of this Restated Plan, "Permitted Transferees"
shall mean Immediate Family Members of the optionee, trusts for the benefit of
such Immediate Family Members, and partnerships in which such optionee and/or
such Immediate Family Members are the only partners. The term "Immediate Family
Member" shall mean an optionee's descendants (children, grandchildren and more
remote descendants), and shall include step-children and relationships arising
from legal adoption. Otherwise, neither options nor rights, nor any interest
therein may be sold, assigned, conveyed, gifted, pledged, hypothecated or
otherwise transferred in any manner other than by will or the laws of descent
and distribution. During the recipient's lifetime, a non-qualified option or
right may only be exercised by the optionee, the optionee's guardian or legal
representative, or a Permitted Transferee.
12. AWARD AND DELIVERY OF RESTRICTED SHARES
(a) At the time an award of restricted shares is made, the Board of
Directors shall establish a period or periods of time (each a "RESTRICTED
PERIOD") applicable to such award that shall not be more than ten (10) years.
Each award of restricted shares may have a different Restricted Period or
Restricted Periods. The Board of Directors may, in its sole discretion, at the
time an award is made, provide for the incremental lapse of Restricted Periods
with respect to a portion or portions of the restricted shares awarded, and for
the lapse or termination of restrictions upon all or any portion of the
restricted shares upon the satisfaction of other conditions in addition to or
other than the expiration of the applicable Restricted Period. The Board of
Directors may also, in its sole discretion, shorten or terminate a Restricted
Period or waive any conditions for the lapse or termination of restrictions with
respect to all or any portion of the restricted shares. Notwithstanding the
foregoing, all restrictions shall lapse or terminate with respect to all
restricted shares upon the Employee's death, total and permanent disability (as
defined in paragraph
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15 hereof), or retirement from active employment at or after the Retirement Age
(as defined in paragraph 14 hereof).
(b) At the time a grant of restricted shares is made to an Employee, a stock
certificate representing a number of shares of Common Stock equal to the number
of such restricted shares shall be registered in the Employee's name but shall
be held in custody by the Corporation for such Employee's account. The Employee
shall generally have the rights and privileges of a shareholder as to such
restricted shares, including, without limitation, the right to vote such
restricted shares, except that, subject to the earlier lapse or termination of
restrictions as herein provided, the following restrictions shall apply: (i) the
Employee shall not be entitled to delivery of the stock certificate evidencing
restricted shares until the expiration or termination of the Restricted Period
applicable to such shares and the satisfaction of any other conditions
prescribed by the Board of Directors; (ii) none of the shares then subject to a
Restricted Period shall be sold, transferred, assigned, pledged, or otherwise
encumbered or disposed of during the Restricted Period applicable to such shares
and until the satisfaction of any other conditions prescribed by the Board of
Directors; and (iii) all of the shares then subject to a Restricted Period shall
be forfeited and all rights of the Employee to such restricted shares shall
terminate without further obligation on the part of the Corporation if the
Employee ceases to be a regular full-time Employee of the Corporation or any of
its subsidiaries before the expiration or termination of such Restricted Period
and the satisfaction of any other conditions prescribed by the Board of
Directors applicable to such restricted shares. Dividends in respect of
restricted shares shall be currently paid; provided, however, that in lieu of
paying currently a dividend of shares of Common Stock in respect of restricted
shares, the Board of Directors may, in its sole discretion, register in the name
of an Employee a stock certificate representing such shares of Common Stock
issued as a dividend in respect of restricted shares, and may cause the
Corporation to hold such certificate in custody for the Employee's account
subject to the same terms and conditions as such restricted shares. Upon the
forfeiture of any restricted shares, such forfeited restricted shares shall be
transferred to the Corporation without further action by the Employee. The
Employee shall have the same rights and privileges, and be subject to the same
restrictions, with respect to any shares received pursuant to paragraph 16
hereof.
(c) Upon the expiration or termination of the Restricted Period applicable
to such shares and the satisfaction of any other conditions prescribed by the
Board of Directors or at such earlier time as provided for herein, the
restrictions applicable to the shares subject to such Restricted Period shall
lapse and a certificate for a number of shares of Common Stock equal to the
number of restricted shares with respect to which the restrictions have expired
or terminated shall be delivered, free of all such restrictions, except any that
may be imposed by law, to the Employee or the Employee's Beneficiary (as defined
in paragraph 14(b)). The Corporation shall not be required to deliver any
fractional share of Common Stock but shall pay to the Employee or the Employee's
Beneficiary, in lieu thereof, the product of (i) the Fair Market Value per Share
(determined as of the date the restrictions expire or terminate) and (ii) the
fraction of a share to which such Employee would otherwise be entitled. Subject
to paragraph 19 hereof, no payment will be required from the Employee upon the
issuance or delivery of any Common Stock upon the expiration or termination of a
Restricted Period with respect to restricted shares.
13. AWARD OF PERFORMANCE UNITS
(a) At the time an award of performance units is made, the Board of
Directors shall prescribe a range of long-term financial or other performance
objectives, including minimum, maximum and target objectives of the Corporation
("LONG-TERM OBJECTIVES") during the Incentive Period (as defined in paragraph
13(c) hereof) applicable to such performance units, and shall determine a range
of dollar values of each performance unit associated with such range of
long-term earnings objectives. If the minimum long-term objective prescribed by
the Board of Directors for any performance unit is not achieved or exceeded,
then such performance unit shall have no value and no amount shall be payable
with respect thereto. If such minimum long-term objective is achieved or
exceeded, then the dollar value of all performance units to be paid with respect
thereto shall be based upon the level of long-term objective achieved, subject
to any maximum performance unit value imposed by the Board of Directors. If
during the course of an Incentive
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Period there shall occur significant events that were not foreseen in
establishing the minimum long-term objective for such Incentive Period and which
the Board of Directors expects to have a substantial effect on such objective
during such Incentive Period, in its discretion, the Board of Directors may
revise such objective.
(b) Any Employee who is an Employee of the Corporation or a subsidiary as of
the Valuation Date (as defined in paragraph 13(c)) with respect to performance
units that have been previously awarded to him, shall, if the minimum long-term
objective specified in paragraph 13(a) is met, be eligible to receive a cash
award equal to the value of such performance units determined pursuant to such
paragraph 13(a) as of the Valuation Date applicable thereto. Payment of such
cash award shall be made as soon as practicable following the Valuation Date of
such performance units. Except as otherwise provided in paragraph 14 hereof, any
performance units awarded to an Employee during his employment period for which
the Incentive Period has not ended shall be forfeited upon the date such
employment terminates, and he shall not be entitled to any payment in respect
thereof.
(c) For purposes of the Restated Plan,
(i) the "INCENTIVE PERIOD" with respect to a performance unit shall be a
period beginning on the date such performance unit is granted and lasting
for such period, not shorter than two (2) years nor longer than ten years,
as the Board of Directors shall designate; and
(ii) the "Valuation Date" means the last day of the Incentive Period for
a performance unit.
14. TERMINATION OF EMPLOYMENT
(a) In the event that the employment of an Employee to whom an option or
right has been granted under the Restated Plan terminates for any reason (except
pursuant to an authorized leave of absence for military or government service as
determined by the Board of Directors or as set forth in paragraph 15 hereof),
such Employee shall have a period of ninety (90) days following termination of
employment in which to exercise any then vested options or rights under the
Restated Plan, and at the end of the 90-day period, all rights of such Employee
under any then outstanding option or right shall terminate and shall be
forfeited immediately as to any unexercised portion thereof.
(b) Unless otherwise determined by the Board of Directors, if an Employee to
whom performance units have been granted ceases to be an Employee of the
Corporation or of a subsidiary prior to the end of the Incentive Period with
respect to such performance units for any reason other than death, total and
permanent disability or retirement from active employment at or after the
Retirement Age, the Employee shall immediately forfeit all such performance
units. If an Employee to whom performance units have been granted terminates
employment by reason of retirement on or after the Retirement Age, total and
permanent disability or death, he shall, if the minimum long-term objectives
specified in paragraph 13(a) hereof are met, be eligible to receive a cash award
equal to the value of such performance units, determined pursuant to such
paragraph 13(a) and payable as soon as practicable following the Valuation Date
of such performance units. If the Employee terminates employment due to his
death or if an Employee who retires from active employment on or after his
Retirement Age or terminated employment due to total and permanent disability
dies prior to receipt of any such payment, then his designated Beneficiary (as
defined below) shall, if the minimum long-term objectives specified in paragraph
13(a) are met, be entitled to receive a cash award equal to the value of such
performance units, determined pursuant to such paragraph 13(a), and payable as
soon as practicable following the Valuation Date of such performance units. In
the event that the person designated by the Employee as his Beneficiary shall
not be living at the time, or if no designation has been made, then the payment
of such cash award shall be made to the estate of the Employee. An Employee's
Retirement Age ("RETIREMENT AGE") hereunder is sixty (60). An Employee's
"BENEFICIARY" is a person or persons (natural or otherwise) designated by such
Employee, pursuant to a written instrument executed by such Employee and filed
with the Board of Directors, to receive any benefits payable hereunder in the
event of such Employee's death.
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(c) Awards granted under the Restated Plan shall not be affected by any
change of duties or position so long as the holder continues to be a regular
full-time Employee of the Corporation or any subsidiary thereof. Any option or
right, restricted share or performance unit agreement, and any rules and
regulations relating to the Restated Plan, may contain such provisions as the
Board of Directors shall approve with reference to the determination of the date
employment terminates and the effect of leaves of absence. Any such rules and
regulations with reference to any option agreement shall be consistent with the
provisions of the Code and any applicable rules and regulations thereunder.
Nothing in the Restated Plan or in any award granted pursuant to the Restated
Plan shall confer upon any Employee any right to continue in the employ of the
Corporation or any subsidiary or interfere in any way with the right of the
Corporation or any subsidiary to terminate such employment at any time.
15. DEATH OR TOTAL AND PERMANENT DISABILITY OF EMPLOYEE
If an Employee to whom an option or right has been granted under the
Restated Plan shall die or suffer a total and permanent disability while
employed by the Corporation or a subsidiary, such option or right may be
exercised, to the extent that the Employee was entitled to do so at the
termination of employment (including by reason of death or total and permanent
disability), as set forth herein (subject to any restrictions set forth in
paragraph 9 with respect to Insiders) by the Employee, legal guardian of the
Employee (unless such exercise would disqualify an option as an incentive stock
option), a legatee or legatees of the Employee under the Employee's last will,
or by the Employee's personal representatives or distributees, whichever is
applicable, at any time within twelve (12) months after the date of the
Employee's death or total and permanent disability, but in no event later than
the date on which the option or right terminates. Notwithstanding the above, if
an Employee who terminates employment by reason of total and permanent
disability shall die, a legatee or legatees of such Employee under the
Employee's last will, or the executor of such Employee's estate, shall only have
the right to exercise such option or right, to the extent that the Employee was
entitled to do so at the termination of employment, during the period ending
twelve (12) months after the date of the Employee's termination of employment by
reason of total and permanent disability. For purposes hereof, "TOTAL AND
PERMANENT DISABILITY" shall have the meaning set forth in Code Section 22(e)(3)
or any successor provision thereto.
16. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.
Notwithstanding any other provision of the Restated Plan, the Board of
Directors shall make or provide for such adjustments to the Restated Plan, to
the number and classes of shares available thereunder, to the terms and number
of shares of Common Stock or other securities available, and/or to the purchase
price of a share of Common Stock or other securities available under, any
outstanding options, rights, restricted shares or performance units as it shall
deem appropriate to prevent dilution or enlargement, including adjustments in
the event of changes in the outstanding Common Stock by reason of stock
dividends, split-ups, recapitalizations, mergers, consolidations, combinations
or exchanges of shares, separations, reorganizations, liquidations and the like.
In the event of any offer to holders of Common Stock generally relating to the
acquisition of their shares, the Board of Directors shall make such adjustment
as it deems equitable in respect to outstanding options, rights, restricted
shares and performance units, including revision of outstanding options, rights,
restricted shares and performance units so that they may be exercisable or
redeemable for or payable in the consideration payable in the acquisition
transaction. Any such determination by the Board of Directors shall be
conclusive. Any fractional shares resulting from such adjustments to options,
rights, or restricted shares shall be eliminated.
17. BUSINESS COMBINATIONS.
The following provisions shall apply unless an Employee's written agreement
evidencing an award of options, rights, restricted shares or performance units
under the Restated Plan provides otherwise. In the event that, while any
options, rights, restricted shares or performance units are outstanding under
the Restated Plan, there shall occur (a) a merger or consolidation of the
Corporation with or into another corporation in which the Corporation shall not
be the surviving corporation (for purposes of this paragraph 17, the Corporation
shall not be deemed the surviving corporation in any such transaction if, as
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the result thereof, it becomes a wholly-owned subsidiary of another
corporation), (b) a dissolution of the Corporation, (c) a transfer of all or
substantially all of the assets or shares of stock of the Corporation in one
transaction or a series of related transactions to one or more other persons or
entities, (d) if any "person" or "group" as those terms are used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Act"), other than
Excluded Persons, becomes the "beneficial owner" (as defined in Rule 13d-3 of
the Act), directly or indirectly, of securities of the Corporation representing
50% or more of the combined voting power of the Corporation's then outstanding
securities, or (e) during any period of two consecutive years commencing on or
after April 1, 1995, individuals who at the beginning of the period constituted
the Board cease for any reason to constitute at least a majority, unless the
election of each director who was not a director at the beginning of the period
has been approved in advance by directors representing at least two-thirds (2/3)
of the directors then in office who were directors at the beginning of the
period, then, with respect to each option, right, restricted share and
performance unit outstanding immediately prior to the consummation of such
transaction, if provision is not otherwise made in writing in connection with
such transaction for the substitution of securities of another corporation, and
without the necessity of any action by the Board of Directors, each such option,
right, restricted shares or performance units shall terminate, but (A) each
holder of an outstanding option shall be entitled, immediately prior to the
effective date of such transaction, to purchase the number of shares that are
then vested and exercisable, (B) the holder of any right shall be entitled,
immediately prior to the effective date of such transaction, to exercise such
right to the extent the related option or Deemed Option is exercisable at such
time in accordance with its terms, (C) the holder of any additional rights shall
be entitled to receive, to the extent the related option is exercised
immediately prior to the effective date of such transaction, the full amount of
cash he would have been entitled to receive if the related option had been
exercised to such extent, to the extent that such additional rights are then
vested, and (D) the recipient of any performance unit shall be entitled,
immediately prior to the effective date of such transaction, to receive the then
vested values under such unit. The unexercised portion of any option, right,
Deemed Option or any additional right relating to the unexercised portion of a
related option shall be deemed cancelled and terminated as of the effective date
of such transaction. Notwithstanding the foregoing, the Board of Directors may
provide that upon the occurrence of such events as the Board of Directors shall
deem appropriate, all outstanding options, rights, restricted shares and
performance units shall become fully vested and exercisable. The term "Excluded
Persons" means each of William E. Ogle, William D. Balthaser, Jr. and Mark S.
Sims, and any person, entity or group under the control of any of them, or a
trustee or other fiduciary holding securities under an employee benefit plan of
the Corporation.
18. TERMINATION AND AMENDMENT
The Board of Directors of the Corporation shall have the right to amend,
suspend or terminate the Restated Plan at any time; PROVIDED, HOWEVER, that an
amendment shall be subject to shareholder approval if such approval is required
by Rule 16b-3 promulgated under the 1934 Act or under any successor rule, the
Code or the rules of any securities exchange or market system on which
securities of the Corporation are listed or admitted to trading at the time such
amendment is adopted. The Board of Directors may delegate to the Committee all
or any portion of its authority under this paragraph 18. If the Restated Plan is
terminated, the terms of the Restated Plan shall, notwithstanding such
termination, continue to apply to awards granted prior to such termination. In
addition, no suspension, termination, modification or amendment of the Restated
Plan may, without the consent of the Employee to whom an award shall theretofore
have been granted, adversely affect the rights of such Employee under such
award.
19. WITHHOLDING TAX
(a) The Corporation shall have the right to deduct from all amounts paid in
cash in consequence of the exercise of an option or right, or the settlement of
a performance unit, under the Restated Plan any taxes required by law to be
withheld with respect to such cash payments. Subject to paragraph 19(c) below,
where an Employee or other person is entitled to receive shares of Common Stock
pursuant to the exercise of an option or a right pursuant to the Restated Plan,
the Corporation shall have the right to require the Employee or such other
person to pay to the Corporation the amount of any taxes that the Corporation is
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required to withhold with respect to such shares, or, in lieu thereof, to
retain, or sell without notice, a sufficient number of such shares to cover the
amount required to be withheld. Upon the disposition (within the meaning of Code
Section 424(c)) of shares of Common Stock acquired pursuant to the exercise of
an incentive stock option prior to the expiration of the holding period
requirements of Code Section 422(a)(1), the Employee shall be required to give
notice to the Corporation of such disposition and the Corporation shall have the
right to require the Employee to pay to the Corporation the amount of any taxes
that are required by law to be withheld with respect to such disposition.
(b) Upon termination of the Restricted Period with respect to any restricted
shares (or such earlier time, if any, as an election is made by the Employee
under Code Section 83(b), or any successor provisions thereto, to include the
value of such shares in taxable income), the Corporation shall have the right to
require the Employee or other person receiving shares of Common Stock in respect
of such restricted shares to pay to the Corporation the amount of taxes that the
Corporation is required to withhold with respect to such shares of Common Stock
or, in lieu thereof, to retain or sell without notice a sufficient number of
shares of Common Stock held by it to cover the amount required to be withheld.
The Corporation shall have the right to deduct from all dividends paid with
respect to restricted shares the amount of taxes that the Corporation is
required to withhold with respect to such dividend payments.
(c) In the case of an Employee or other person who is subject to Section 16
of the 1934 Act, all tax withholding obligations shall be satisfied through the
withholding or surrender of shares of Common Stock as necessary to comply with
Section 16 of the 1934 Act and the rules and regulations thereunder or to obtain
any exemption therefrom.
20. WRITTEN AGREEMENTS; STOCK LEGENDS
Each award of options, rights, restricted shares or performance units shall
be evidenced by a written agreement, executed by the Employee and the
Corporation, which shall contain such restrictions, terms and conditions as the
Board of Directors may require, and certificates evidencing shares of Common
Stock issued under the Restated Plan shall have conspicuously noted thereon such
restrictions on transferability as the Corporation may require in order to
ensure compliance with applicable federal and state securities laws and
regulations.
21. EFFECT ON OTHER STOCK PLANS
The adoption of the Restated Plan shall have no effect on awards made or to
be made pursuant to other plans covering Employees of the Corporation or its
subsidiaries, or any predecessors or successors thereto.
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APPENDIX B
STB SYSTEMS, INC.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1997)
SECTION I. PURPOSE OF PLAN.
The purpose of this Stock Option Plan for Non-Employee Directors (the
"Plan") of STB Systems, Inc., a Texas corporation (the "Corporation"), is to
provide present and prospective directors of the Corporation who are not
employed by the Corporation with the opportunity to obtain equity ownership
interests in the Corporation through the exercise of stock options.
SECTION II. PERSONS ELIGIBLE UNDER PLAN.
Participation in this Plan is limited to non-employee directors. A
non-employee director (referred to herein as a "Director") is a director of the
Corporation who, at the time stock options are granted to him or her under the
Plan, is not an employee of the Corporation or of any subsidiary of the
Corporation.
SECTION III. ADMINISTRATION.
This Plan shall be administered by the Board of Directors (the "Board") of
the Corporation. The Board shall have discretion, as provided in Section 4, to
grant options (the "Options") to purchase shares of Common Stock, par value $.01
per share, of the Corporation (the "Common Shares") under this Plan. Subject to
the provisions of this Plan, the Board, in its sole and absolute discretion, is
authorized to do all things necessary or desirable in connection with the
administration of this Plan, including, without limitation, the following:
1. Subject to Section 8, adopt, amend and rescind rules and regulations
relating to this Plan;
2. Determine whether, and the extent to which, adjustments are required
pursuant to Section 7 hereof; and
3. Interpret and construe this Plan and the terms and conditions of any
Option granted hereunder.
SECTION IV. TERMS AND CONDITIONS OF OPTIONS.
A. AMOUNT AND EXERCISE PRICE OF OPTION GRANTS. The Board may authorize and
approve the award of Options to purchase Common Shares to a Director on the date
of the Director's election to the Board or at any other time or from time to
time, including awards of Options coincident to the Corporation's annual meeting
of stockholders (the "Annual Meeting")(the "Date of Grant"). The number of
Common Shares subject to each Option shall be determined by the Board in its
discretion, in each event subject to adjustment as provided in Section 7. The
exercise price for each Option granted pursuant to the Plan shall be the Fair
Market Value of the Common Shares at the close of business on the date preceding
the Date of Grant (the "Exercise Price"). "Fair Market Value" shall mean the
last sale price per Common Share on such day or, in case no such sale takes
place on such day, the average of the closing bid and asked prices in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange, or, if the Common Shares are not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Common Shares are listed or admitted to trading
or, if the Common Shares are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported by
the National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or such other system then in use or,
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if on any such date the Common Shares are not quoted by any such organization,
the average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Common Shares who is selected by the Board
of the Corporation.
(b) OPTIONEES. Except as otherwise expressly set forth in this Plan,
references in this Plan to "Optionees" shall refer to recipients of Options.
(c) VESTING OF OPTIONS. The Board may determine in its discretion the
terms of each Option granted under this Plan governing vesting and
exercisability.
(d) MANNER OF EXERCISE. Any vested and exercisable Option shall be
exercised by the holder thereof or a Permitted Transferee, as herein
defined, by giving written notice, signed by such holder or Permitted
Transferee, to the Corporation stating the number of Common Shares with
respect to which the Option is being exercised, accompanied by payment in
full of the applicable aggregate Exercise Price. Payment may be made in cash
or in Common Shares, valued at the Fair Market Value per share on the date
of exercise. If the Corporation shall have a class of its Common Shares
registered pursuant to Section 12 of the 1934 Act, an option holder or
Permitted Transferee may also make payment at the time of exercise of an
option for such class of Common Shares by delivering to the Corporation a
properly executed exercise notice together with irrevocable instructions to
a broker approved by the Corporation that upon such broker's sale of shares
with respect to which such option is exercised, it is to deliver promptly to
the Corporation the amount of sale proceeds necessary to satisfy the option
exercise price. No Option may be exercised with respect to any fractional
share and cash shall be paid in lieu of fractional shares. As promptly as
practicable following the receipt of a notice hereunder, the Corporation
shall issue a stock certificate registered in the name of the Optionee or
Permitted Transferee exercising such Option, representing the number of
Common Shares issued to such Optionee or Permitted Transferee upon exercise
of the Option.
(e) TERMINATION OR EXPIRATION. Each Option shall expire on the earlier
of the tenth anniversary of the Date of Grant or six months after the date
the Optionee ceases to be a director of the Corporation.
(f) LIMITED TRANSFERABILITY. Effective with respect to Options granted
after the effective date of the Restated Plan, and unless the agreement
regarding the award of Options expressly provides otherwise, Options may be
transferred by the holder to Permitted Transferees, provided that there
cannot be any consideration for the transfer. For purposes of this Restated
Plan, "Permitted Transferees" shall mean Immediate Family Members of the
optionee, trusts for the benefit of such Immediate Family Members, and
partnerships in which such optionee and/or such Immediate Family Members are
the only partners. The term "Immediate Family Member" shall mean an
optionee's descendants (children, grandchildren and more remote
descendants), and shall include step-children and relationships arising from
legal adoption. Otherwise, neither the Option nor any interest therein may
be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise
transferred in any manner other than by will or the laws of descent and
distribution. During the recipient's lifetime, an Option may only be
exercised by the Optionee, the Optionee's guardian or legal representative,
or a Permitted Transferee.
(g) PAYMENT OF WITHHOLDING TAXES. If the Corporation is obligated by
law to withhold an amount on account of any federal, state or local tax
imposed as a result of the exercise of the Option (such amount shall be
referred to herein as the "Withholding Liability"), the Optionee shall, on
the first date upon which the Corporation becomes obligated to pay the
Withholding Liability to the appropriate taxing authority, pay the
Withholding Liability to the Corporation in full in cash or by check.
(h) STOCK EXCHANGE REQUIREMENTS, APPLICABLE LAWS. Notwithstanding
anything to the contrary in this Plan, no Common Shares purchased upon
exercise of an Option, and no certificate representing all or any part of
such shares, shall be issued or delivered if (i) such shares have not been
admitted to listing upon official notice of issuance on each stock exchange
upon which shares of that class are then
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listed or (ii) in the opinion of counsel to the Corporation, such issuance
or delivery would cause the Corporation to be in violation of or to incur
liability under any federal, state or other securities law, or any
requirement of any stock exchange listing agreement to which the Corporation
is a party, or any other requirement of law or of any administrative or
regulatory body having jurisdiction over the Corporation. It is the
Corporation's intent that this Plan comply in all respects with Rule 16b-3
(together with any successor rule or statute, "Rule 16b-3") of the
Securities Exchange Act of 1934, as amended, and any successor rule or
statute (the "Act"), and any regulations promulgated thereunder. If any
provision of this Plan is later found not to be in compliance with Rule
16b-3, such provision shall be deemed null and void. All grants and
exercises of Options under this Plan shall be executed in accordance with
the requirements of Section 16 of the Act and any regulations promulgated
thereunder.
(i) STOCK OPTION AGREEMENT. Each grant of an Option under this Plan
shall be evidenced by an agreement duly executed on behalf of the
Corporation and the Optionee, dated as of the applicable Date of Grant. Each
such agreement shall set forth the number of Common Shares subject to the
Option, the Exercise Price and the date upon which the Option or portions
thereof become exercisable and shall incorporate by reference the terms and
conditions of this Plan.
SECTION V. STOCK SUBJECT TO PLAN.
A. The maximum number of Common Shares that may be issued pursuant to all
Options granted under this Plan is 100,000, subject to adjustment as provided in
Section 7 hereof (such maximum number, as so adjusted, shall be referred to
herein as the "Share Limitation").
B. Notwithstanding Section 4(a) of this Plan, no Option shall be granted
under this Plan unless, on the Date of Grant, the sum of (i) the maximum number
of Common Shares issuable at any time pursuant to such Option, plus (ii) the
number of Common Shares that have previously been issued pursuant to the
exercise of Options granted under this Plan, plus (iii) the maximum number of
Common Shares that may be issued at any time thereafter pursuant to the exercise
of Options granted under this Plan that are outstanding on such date, does not
exceed the Share Limitation.
SECTION VI. DURATION OF PLAN.
A. No Options shall be granted under this Plan after December 31, 2004.
Although Common Shares may be issued after December 31, 2004 pursuant to Options
granted prior to such date, no Common Shares shall be issued under this Plan
after December 31, 2014.
SECTION VII. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION.
If the outstanding securities of the class then subject to this Plan are
increased, decreased, changed into or exchanged for a different number or kind
of shares of the Corporation through reorganization, recapitalization,
reclassification stock dividend, stock split or reverse stock split, upon proper
authorization of the Board, an appropriate and proportionate adjustment shall be
made in (a) the number and type of shares or other securities or cash or other
property that may be acquired pursuant to Options theretofore granted under this
Plan, (b) the type of shares or other securities that may be issued pursuant to
Options thereafter granted under this Plan, and (c) the purchase price of the
shares or other securities that may be issued pursuant to Options theretofore
granted under this Plan.
SECTION VIII. AMENDMENT AND TERMINATION OF PLAN.
The Board may amend or terminate this Plan at any time and in any manner.
However, (a) no such amendment or termination shall deprive the recipient of any
Option theretofore granted under this Plan, without the consent of such
recipient, of any of his or her rights thereunder or with respect thereto, and
(b) no such amendment shall be effective without the approval of the
stockholders of the Corporation, if
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stockholder approval of the amendment is then required pursuant to Rule 16b-3
under the Act, or the applicable rules of any securities exchange.
SECTION IX. BUSINESS COMBINATIONS.
In the event that, while any Options are outstanding under this Plan, there
shall occur (a) a merger or consolidation of the Corporation with or into
another corporation in which the Corporation shall not be the surviving
corporation (for purposes of this Section 9, the Corporation shall not be deemed
the surviving corporation in any such transaction if, as the result thereof, it
becomes a wholly-owned subsidiary of another corporation), (b) a dissolution of
the Corporation, (c) a transfer of all or substantially all of the assets or
shares of stock of the Corporation in one transaction or a series of related
transactions to one or more other persons or entities, (d) if any "person" or
"group" as those terms are used in Sections 13(d) and 14(d) of the Act, other
than Excluded Persons, becomes the "beneficial owner" (as defined in Rule 13d-3
of the Act), directly or indirectly, of securities of the Corporation
representing 50% or more of the combined voting power of the Corporation's then
outstanding securities, or (e) during any period of two consecutive years
commencing on or after April 1, 1995, individuals who at the beginning of the
period constituted the Board cease for any reason to constitute at least a
majority, unless the election of each director who was not a director at the
beginning of the period has been approved in advance by directors representing
at least two-thirds (2/3) of the directors then in office who were directors at
the beginning of the period, then, with respect to each Option outstanding
immediately prior to the consummation of such transaction, if provision is not
otherwise made in writing in connection with such transaction for the
substitution of securities of another corporation, and without the necessity of
any action by the Board, each such Option shall terminate, but each holder of an
outstanding Option shall be entitled, immediately prior to the effective date of
such transaction, to purchase the number of shares that he would otherwise have
been entitled to purchase during the entire remaining term of the Option. The
unexercised portion of any Option shall be deemed cancelled and terminated as of
the effective date of such transaction. The term "Excluded Persons" means each
of William E. Ogle, William D. Balthaser, Jr. and Mark S. Sims, and any person,
entity or group under the control of any of them, or a trustee or other
fiduciary holding securities under an employee benefit plan of the Corporation.
SECTION X. EFFECTIVE DATE OF RESTATED PLAN.
This Plan was originally effective as of January 1, 1995. The provisions of
this Restated Plan shall be effective as of January 1, 1997; provided, however,
that no Common Shares shall be issued under the Restated Plan until it has been
approved, directly or indirectly, by the affirmative votes of the holders of a
majority of the securities of the Corporation present, or represented, and
entitled to vote at a meeting duly held in accordance with the laws of the State
of Texas.
SECTION XI. NO RIGHTS AS STOCKHOLDER AND RIGHTS OF DIRECTORS.
Neither the recipient of an Option under this Plan nor an Optionee's
successor or successors in interest nor Permitted Transferees shall have rights
as a stockholder of the Corporation with respect to any Common Shares subject to
an Option granted to such person until the date of issuance of a stock
certificate for such Common Shares. Neither this Plan, nor the granting of an
Option hereunder, nor any other action taken pursuant to this Plan shall
constitute or be evidence of any agreement or understanding, express or implied,
that a Director has a right to continue as a Director for any period of time or
at any particular rate of compensation.
SECTION XII. GOVERNING LAW.
This Plan and all rights and obligations under this Plan shall be construed
in accordance with and governed by the laws of the State of Texas.
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APPENDIX C
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (the "Agreement") dated as of ,
1997, is made and entered into by and between STB Systems, Inc., a Texas
corporation ("STB Texas"), and STB Systems, Inc., a Delaware corporation ("STB
Delaware").
W I T N E S S E T H:
WHEREAS, STB Texas is a corporation organized and existing under the laws of
the State of Texas, having been incorporated on December 8, 1981; and
WHEREAS, STB Delaware is a wholly-owned subsidiary corporation of STB Texas,
having been incorporated on , 1997; and
WHEREAS, the respective Boards of Directors of STB Texas and STB Delaware
have determined that it is desirable to merge STB Texas into STB Delaware
(hereinafter the "Merger");
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein contained and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree that STB
Texas shall be merged into STB Delaware upon the terms and conditions set forth.
ARTICLE I
MERGER
On the effective date of the Merger (the "Effective Date") as provided
herein, STB Texas shall be merged into STB Delaware, the separate existence of
STB Texas shall cease and STB Delaware (hereinafter sometimes referred to as the
"Surviving Corporation") shall continue to exist under the name of STB Systems,
Inc. by virtue of, and shall be governed by, the laws of the State of Delaware.
The address of the registered office of the Surviving Corporation in the State
of Delaware will be Corporation Trust Center, 1209 Orange Street, in the County
of New Castle, in the City of Wilmington, Delaware 19801.
ARTICLE II
CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION
The name of the Surviving Corporation shall be "STB Systems, Inc." The
Certificate of Incorporation of the Surviving Corporation as in effect on the
date hereof shall be the Certificate of Incorporation of STB Delaware (the
"Delaware Charter") without change unless and until amended in accordance with
Article VIII of this Agreement or otherwise amended in accordance with
applicable law, except that Article FOURTH of the Delaware Charter shall be
amended to read as follows:
"FOURTH: The total number of shares of Common Stock that the
Corporation shall have authority to issue is twenty-five million
(25,000,000) shares, and the par value of each such share is one
cent ($.01). Holders of shares of Common Stock shall have no
subscription or conversion rights for any other securities of the
Corporation. The total number of shares of Preferred Stock that
the Corporation shall have authority to issue is two million
(2,000,000) shares, and the par value of each such share is one
cent ($.01). Shares of Preferred Stock may be issued from time to
time in one or more series, each such series to have such
distinctive designation or title as may be fixed by the Board of
Directors prior to the issuance of any shares thereof. Each such
series shall have such designations, preferences, limitations, and
relative rights, including voting rights, as shall be stated in
the resolution or resolutions providing for the issuance of such
series of
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Preferred Stock, as may be adopted from time to time by the Board
of Directors prior to the issuance of any shares thereof, in
accordance with the laws of the State of Delaware. The Board of
Directors, in such resolution or resolutions, may increase or
decrease the number of shares within each such series; provided,
however, the Board of Directors may not decrease the number of
shares within a series to less than the number of shares within
such series that are then issued. Holders of shares of capital
stock of the Corporation shall have no preemptive rights."
ARTICLE III
BY-LAWS OF THE SURVIVING CORPORATION
The By-laws of the Surviving Corporation as in effect on the date hereof
shall be the By-laws of STB Delaware (the "Delaware By-laws") without change
unless and until amended in accordance with applicable law.
ARTICLE IV
EFFECT OF MERGER ON STOCK OF CONSTITUENT CORPORATIONS
4.1 On the Effective Date, each outstanding share of common stock of STB
Texas, par value $.01 per share (the "Common Stock"), other than the shares, if
any, for which appraisal rights shall be perfected under Articles 5.12 and 5.13
of the Texas Business Corporation Act ("TBCA"), shall be converted into one
share of STB Delaware common stock, par value $.01 per share (the "Delaware
Common Stock"), and each outstanding share of Delaware Common Stock held by STB
Texas shall be retired and cancelled. The shares of Delaware Common Stock shall
be identical to the shares of Common Stock in all other aspects.
4.2 All options and rights to acquire the Common Stock under STB Texas' 1995
Long Term Incentive Plan, as amended, 1995 Employee Stock Option Purchase Plan,
as amended, Stock Option Plan for Non-Employee Directors, as amended, and under
all other outstanding options, warrants or rights outstanding on the Effective
Date will automatically be converted into equivalent options and rights to
purchase the same number of shares of Delaware Common Stock.
4.3 After the Effective Date, certificates representing shares of the Common
Stock will represent shares of Delaware Common Stock and upon surrender of the
same to the transfer agent for STB Delaware, the holder thereof shall be
entitled to receive in exchange therefor a certificate or certificates
representing the number of shares of Delaware Common Stock into which such
shares of Common Stock shall have been converted pursuant to Article 4.1 of this
Agreement.
ARTICLE V
CORPORATE EXISTENCE, POWERS AND
LIABILITIES OF SURVIVING CORPORATION
5.1 On the Effective Date, the separate existence of STB Texas shall cease.
STB Texas shall be merged with and into STB Delaware, the Surviving Corporation,
in accordance with the provisions of this Agreement. Thereafter, STB Delaware
shall possess all the rights, privileges, powers and franchises of a public as
well as of a private nature, and shall be subject to all the restrictions,
disabilities and duties of each of the parties to this Agreement; all singular
rights, privileges, powers and franchises of STB Texas and STB Delaware, and all
property, real, personal and mixed and all debts due to each of them on whatever
account, shall be vested in STB Delaware; and all property, rights, privileges,
powers and franchises, and all and every other interest shall be thereafter as
effectually the property of STB Delaware, the Surviving Corporation, as they
were of the respective constituent entities, and the title to any real estate,
whether by deed or otherwise, vested in STB Texas and STB Delaware, or either of
them, shall not revert or be in any way impaired by reason of the Merger, but
all rights of creditors and all liens upon the
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property of the parties hereto, shall be preserved unimpaired, and all debts,
liabilities and duties of STB Texas, shall thenceforth attach to STB Delaware,
and may be enforced against it to the same extent as if said debts, liabilities
and duties had been incurred or contracted by it.
5.2 STB Texas agrees that it will execute and deliver, or cause to be
executed and delivered, all such deeds and other instruments and will take or
cause to be taken such further or other action as the Surviving Corporation may
deem necessary in order to vest in and confirm to the Surviving Corporation
title to and possession of all the property, rights, privileges, immunities,
powers, purposes and franchises, and all and every other interest of STB Texas
and otherwise to carry out the intent and purposes of this Agreement.
ARTICLE VI
OFFICERS AND DIRECTORS OF SURVIVING CORPORATION
6.1 Upon the Effective Date, the officers and directors of STB Texas shall
become the officers and directors of STB Delaware, and such persons shall hold
office in accordance with the Delaware By-laws until their respective successors
shall have been appointed or elected.
6.2 If upon the Effective Date, a vacancy shall exist in the Board of
Directors of the Surviving Corporation, such vacancy shall be filled in the
manner provided by the Delaware By-laws.
ARTICLE VII
DISSENTING SHARES
Holders of shares of Common Stock who have complied with all requirements
for perfecting their rights of appraisal set forth in Articles 5.12 and 5.13 of
the TBCA shall be entitled to their rights under Texas law.
ARTICLE VIII
APPROVAL BY SHAREHOLDERS, EFFECTIVE DATE,
CONDUCT OF BUSINESS PRIOR TO EFFECTIVE DATE
8.1 Soon after the approval of this Agreement by the requisite number of
shareholders of STB Texas, the respective Boards of Directors of STB Texas and
STB Delaware will cause their duly authorized officers to make and execute
Articles of Merger and a Certificate of Ownership and Merger or other applicable
certificates or documentation effecting this Agreement and shall cause the same
to be filed with the Secretaries of State of Texas and Delaware, respectively,
in accordance with the Texas Business Corporation Act (the "TCBA") and the
Delaware General Corporation Law (the "DGCL"), the Effective Date shall be the
date on which the Merger becomes effective under the TBCA or the date on which
the Merger becomes effective under the DGCL, whichever occurs later.
8.2 The Boards of Directors of STB Texas and STB Delaware may amend this
Agreement and the Delaware Charter at any time prior to the Effective Date,
provided that an amendment made subsequent to the approval of the Merger by the
shareholders of STB Texas may not (i) change the assessment or type of shares to
be received in exchange for or on conversion of the shares of the Common Stock
or the shares of the Preferred Stock, (ii) change any term of the terms and
conditions of this Agreement if such change would adversely affect the holders
of the Common Stock or the holders of the Preferred Stock.
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ARTICLE IX
TERMINATION OF MERGER
This Agreement may be terminated and the Merger abandoned at any time prior
to the Effective Date, whether before or after shareholder approval of this
Agreement, by the consent of the Board of Directors of STB Texas and STB
Delaware.
ARTICLE X
MISCELLANEOUS
In order to facilitate the filing and recording of the Agreement, this
Agreement may be executed in counterparts, each of which when so executed shall
be deemed to be an original, and all such counterparts shall together constitute
one and the same instrument. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Chief Executive Officers and Secretaries, all as of
the day and year first above written.
STB SYSTEMS, INC., a Texas corporation
By
------------------------------------
CHIEF EXECUTIVE OFFICER
ATTEST:
- ---------------------------------------------
SECRETARY
STB SYSTEMS, INC., a Delaware
corporation
By
------------------------------------
CHIEF EXECUTIVE OFFICER
ATTEST:
- ---------------------------------------------
SECRETARY
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APPENDIX D
CERTIFICATE OF INCORPORATION
OF
STB SYSTEMS, INC.
The undersigned incorporator, for the purpose of incorporating or organizing
a corporation under the General Corporation Law of the State of Delaware,
certifies:
FIRST: The name of the corporation is STB Systems, Inc. (the "Corporation").
SECOND: The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, County of New Castle,
City of Wilmington, Delaware 19801. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares of Common Stock that the Corporation
shall have authority to issue is one thousand (1,000) shares, $.01 par value per
share. Holders of shares of Common Stock shall have no preemptive rights or
other subscription or conversion rights for any other securities of the
Corporation.*
FIFTH: The right to cumulate voting is hereby expressly denied.
SIXTH: No action may be taken by the stockholders of the Corporation except
at a regular or special meeting of all stockholders entitled to vote thereon
unless a written consent or consents authorizing the taking of such action is
signed by the holders of all the outstanding stock of the corporation.
SEVENTH: The names and mailing addresses of the persons who are to serve as
directors of the Corporation until the first annual meeting of stockholders of
the Corporation or until their successors are elected and qualify are as
follows:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
- ------------------------- ------------------------------------------------------------------------------------
<S> <C>
William E. Ogle 1651 North Glenville Drive, Richardson, Texas 75081
Randall D. Eisenbach 1651 North Glenville Drive, Richardson, Texas 75081
James L. Hopkins 1651 North Glenville Drive, Richardson, Texas 75081
J. Shane Long 1651 North Glenville Drive, Richardson, Texas 75081
James L. Byrne 6524 Clubhouse Circle, Dallas, Texas 75240
Lawrence E. Wesneski One Galleria Tower, 13355 Noel Road, Suite 1650, Dallas, Texas 75240
</TABLE>
EIGHTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors of the Corporation shall have the power to
adopt, amend or repeal the bylaws of the Corporation.
NINTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner
prescribed by statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
- ------------------------
* The Plan and Agreement of Merger between STB Systems, Inc., a Texas
corporation, and the Corporation provides for the amendment of this Article to
provide for 25,000,000 shares of Common Stock, $.01 par value per share, and
2,000,000 shares of Preferred Stock, $.01 par value per share.
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TENTH: No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit.
If the Delaware General Corporation Law is amended after the filing of this
Certificate of Incorporation to authorize corporate action further limiting or
eliminating the personal liability of a director, then the liability of the
directors to the Corporation shall be limited or eliminated to the fullest
extent permitted by the Delaware General Corporation Law, as so amended. Any
repeal or modification of this Article by the stockholders of the Corporation
otherwise shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
ELEVENTH: The Corporation shall indemnify each director or officer of the
Corporation who may be indemnified, to the fullest extent permitted by Section
145 of the Delaware General Corporation Law ("Section 145"), as it may be
amended from time to time, in each and every situation where the Corporation is
obligated to make such indemnification pursuant to Section 145. In addition, the
Corporation shall indemnify each of the Corporation's directors and officers in
each and every situation where, under Section 145, the Corporation is not
obligated, but is permitted or empowered, to make such indemnification. The
Corporation may, in the sole discretion of the Board of Directors, indemnify any
other person who may be indemnified pursuant to Section 145 to the extent the
Board of Directors deems advisable, as permitted by such section. The
Corporation shall promptly make or cause to be made in accordance with its
Bylaws and with applicable law any determination which Section 145 requires.
TWELFTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
THIRTEENTH: The name and mailing address of the incorporator is John B.
McKnight at Locke Purnell Rain Harrell (A Professional Corporation), 2200 Ross
Avenue, Suite 2200, Dallas, Texas 75201.
IN WITNESS WHEREOF, I have signed this Certificate this day of
, 1997.
--------------------------------------
John B. McKnight, Incorporator
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APPENDIX E
TEXAS BUSINESS CORPORATION ACT
ARTICLE 5.11. RIGHTS OF DISSENTING SHAREHOLDERS IN THE EVENT OF CERTAIN
CORPORATE ACTIONS
A. Any shareholder of a domestic corporation shall have the right to dissent
from any of the following corporate actions:
(1) Any plan of merger to which the corporation is a party if
shareholder approval is required by Article 5.03 or 5.16 of this Act and the
shareholder holds shares of a class or series that was entitled to vote
thereon as a class or otherwise;
(2) Any sale, lease, exchange or other disposition (not including any
pledge, mortgage, deed of trust or trust indenture unless otherwise provided
in the articles of incorporation) of all, or substantially all, the property
and assets, with or without good will, of a corporation requiring the
special authorization of the shareholders as provided by this Act.
(3) Any plan of exchange pursuant to Article 5.02 of this Act in which
the shares of the corporation of the class or series held by the shareholder
are to be acquired.
B. Notwithstanding the provisions of Section A of this Article, a
shareholder shall not have the right to dissent from any plan of merger in which
there is a single surviving or new domestic or foreign corporation, or from any
plan of exchange, if (1) the shares held by the shareholder are part of a class
of shares which are listed on a national securities exchange, or are held of
record by not less than 2,000 holders, on the record date fixed to determine the
shareholders entitled to vote on the plan of merger or the plan of exchange, and
(2) the shareholder is not required by the terms of the plan of merger or the
plan of exchange to accept for his shares any consideration other than (a)
shares of a corporation that, immediately after the effective time of the merger
or exchange, will be part of a class or series of shares of which are (i)
listed, or authorized for listing upon official notice of issuance, on a
national securities exchange, or (ii) held of record by not less than 2,000
holders, and (b) cash in lieu of fractional shares otherwise entitled to be
received.
ARTICLE 5.12. PROCEDURE FOR DISSENT BY SHAREHOLDERS AS TO SAID CORPORATE
ACTIONS
A. Any shareholder of any domestic corporation who has the right to dissent
from any of the corporate actions referred to in Article 5.11 of this Act may
exercise that right to dissent only by complying with the following procedures:
(1) (a) With respect to proposed corporate action that is submitted to a
vote of shareholders at a meeting, the shareholder shall file with the
corporation, prior to the meeting, a written objection to the action,
setting out that the shareholder's right to dissent will be exercised if the
action is effective and giving the shareholder's address, to which notice
thereof shall be delivered or mailed in that event. If the action is
effected and the shareholder shall not have voted in favor of the action,
the corporation, in the case of action other than a merger, or the surviving
or new corporation (foreign or domestic) or other entity that is liable to
discharge the shareholder's right of dissent, in the case of a merger,
shall, within ten (10) days after the action is effected, deliver or mail to
the shareholder written notice that the action has been effected, and the
shareholder may, within ten (10) days from the delivery or mailing of the
notice, make written demand on the existing, surviving, or new corporation
(foreign or domestic) or other entity, as the case may be, for the payment
of the fair value of the shareholder's shares. The fair value of the shares
shall be the value thereof as of the day immediately preceding the meeting,
excluding any appreciation or depreciation in anticipation of the proposed
action. The demand shall state the number and class of the shares owned by
the shareholder and the fair value of the shares as estimated by the
shareholder. Any shareholder failing to make demand within the ten (10) day
period shall be bound by the action.
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(b) With respect to proposed corporate action that is approved
pursuant to Section A of Article 9.10 of this Act, the corporation, in
the case of action other than a merger, and the surviving or new
corporation (foreign or domestic) or other entity that is liable to
discharge the shareholder's right of dissent, in the case of a merger,
shall, within ten (10) days after the date the action is effected, mail
to each shareholder of record as of the effective date of the action
notice of the fact and date of the action and that the shareholder may
exercise the shareholder's right to dissent from the action. The notice
shall be accompanied by a copy of this Article and any articles or
documents filed by the corporation with the Secretary of State to effect
the action. If the shareholder shall not have consented to the taking of
the action, the shareholder may, within twenty (20) days after the
mailing of the notice, make written demand on the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may
be, for payment of the fair value of the shareholder's shares. The fair
value of the shares shall be the value thereof as of the date the written
consent authorizing the action was delivered to the corporation pursuant
to Section A of Article 9.10 of this Act, excluding any appreciation or
depreciation in anticipation of the action. The demand shall state the
number and class of shares owned by the dissenting shareholder and the
fair value of the shares as estimated by the shareholder. Any shareholder
failing to make demand within the twenty (20) day period shall be bound
by the action.
(2) Within twenty (20) days after receipt by the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be,
of a demand for payment made by a dissenting shareholder in accordance with
Subsection (1) of this Section, the corporation (foreign or domestic) or
other entity shall deliver or mail to the shareholder a written notice that
shall either set out that the corporation (foreign or domestic) or other
entity accepts the amount claimed in the demand and agrees to pay that
amount within ninety (90) days after the date on which the action was
effected, and, in the case of shares represented by certificates, upon the
surrender of the certificates duly endorsed, or shall contain an estimate by
the corporation (foreign or domestic) or other entity of the fair value of
the shares, together with an offer to pay the amount of that estimate within
ninety (90) days after the date on which the action was effected, upon
receipt of notice within sixty (60) days after that date from the
shareholder that the shareholder agrees to accept that amount and, in the
case of shares represented by certificates, upon the surrender of the
certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the corporate
action was effected, the value of the shares is agreed upon between the
shareholder and the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, payment for the shares shall
be made within ninety (90) days after the date on which the action was
effected and, in the case of shares represented by certificates, upon
surrender of the certificates duly endorsed. Upon payment of the agreed
value, the shareholder shall cease to have any interest in the shares or in
the corporation.
B. If, within the period of sixty (60) days after the date on which the
corporate action was effected, the shareholder and the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, do
not so agree, then the shareholder or the corporation (foreign or domestic) or
other entity may, within sixty (60) days after the expiration of the sixty (60)
day period, file a petition in any court of competent jurisdiction in the county
in which the principal office of the domestic corporation is located, asking for
a finding and determination of the fair value of the shareholder's shares. Upon
the filing of any such petition by the shareholder, service of a copy thereof
shall be made upon the corporation (foreign or domestic) or other entity, which
shall, within ten (10) days after service, file in the office of the clerk of
the court in which the petition was filed a list containing the names and
addresses of all shareholders of the domestic corporation who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the corporation (foreign or domestic) or other
entity. If the petition shall be filed by the corporation (foreign or domestic)
or other entity, the petition shall be accompanied by such a list. The clerk of
the court shall give notice of the time and place fixed for the hearing of the
petition by registered mail to the corporation (foreign or domestic) or other
entity and to
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the shareholders named on the list at the addresses therein stated. The forms of
the notices by mail shall be approved by the court. All shareholders thus
notified and the corporation (foreign or domestic) or other entity shall
thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court shall determine the
shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and shall
appoint one or more qualified appraisers to determine that value. The appraisers
shall have power to examine any of the books and records of the corporation the
shares of which they are charged with the duty of valuing, and they shall make a
determination of the fair value of the shares upon such investigation as to them
may seem proper. The appraisers shall also afford a reasonable opportunity to
the parties interested to submit to them pertinent evidence as to the value of
the shares. The appraisers shall also have such power and authority as may be
conferred on Masters in Chancery by the Rules of Civil Procedure or by the order
of their appointment.
D. The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their shares
and shall file their report of that value in the office of the clerk of the
court. Notice of the filing of the report shall be given by the clerk to the
parties in interest. The report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the shareholders entitled to
payment for their shares and shall direct the payment of that value by the
existing, surviving, or new corporation (foreign or domestic) or other entity,
together with interest thereon, beginning ninety-one (91) days after the date on
which the applicable corporate action from which the shareholder elected to
dissent was effected to the date of such judgment, to the shareholders entitled
to payment. The judgment shall be payable to the holders of uncertificated
shares immediately but to the holders of shares represented by certificates only
upon, and simultaneously with, the surrender to the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case may be, of duly
endorsed certificates for those shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in those shares or in
the corporation. The court shall allow the appraisers a reasonable fee as court
costs, and all court costs shall be allotted between the parties in the manner
that the court determines to be fair and equitable.
E. Shares acquired by the existing, surviving, or new corporation (foreign
or domestic) or other entity, as the case may be, pursuant to the payment of the
agreed value of the shares or pursuant to payment of the judgment entered for
the value of the shares, as in this Article provided, shall, in the case of a
merger, be treated as provided in the plan of merger and, in all other cases,
may be held and disposed of by the corporation as in the case of other treasury
shares.
F. The provisions of this Article shall not apply to a merger if, on the
date of the filling of the articles of merger, the surviving corporation is the
owner of all the outstanding shares of the other corporations, domestic or
foreign, that are parties to the merger.
G. In the absence of fraud in the transaction, the remedy provided by this
Article to a shareholder objecting to any corporate action referred to in
Article 5.11 of this Act is the exclusive remedy for the recovery of the value
of his shares or money damages to the shareholder with respect to the action. If
the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, complies with the requirements of this Article, any
shareholder who fails to comply with the requirements of this Article shall not
be entitled to bring suit for the recovery of the value of his shares or money
damages to the shareholder with respect to the action.
ARTICLE 5.13. PROVISIONS AFFECTING REMEDIES OF DISSENTING SHAREHOLDERS
A. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act shall not thereafter be entitled to
vote or exercise any other rights of a shareholder except the right to receive
payment for his shares pursuant to the provisions of those articles and the
right to maintain an appropriate action to obtain relief on the ground that the
corporate action would be or was
E-3
<PAGE>
fraudulent, and the respective shares for which payment has been demanded shall
not thereafter be considered outstanding for the purposes of any subsequent vote
of shareholders.
B. Upon receiving a demand for payment from any dissenting shareholder, the
corporation shall make an appropriate notation thereof in its shareholder
records. Within twenty (20) days after demanding payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act, each holder of
certificates representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such demand has been
made. The failure of holders of certificated shares to do so shall, at the
option of the corporation, terminate such shareholder's rights under Articles
5.12 and 5.16 of this Act unless a court of competent jurisdiction for good and
sufficient cause shown shall otherwise direct. If uncertificated shares for
which payment has been demanded or shares represented by a certificate on which
notation has been so made shall be transferred, any new certificate issued
therefor shall bear similar notation together with the name of the original
dissenting holder of such shares and a transferee of such shares shall acquire
by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making demand for payment of the fair
value thereof.
C. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act may withdraw such demand at any
time before payment for his shares of before any petition has been filed
pursuant to Article 5.12 or 5.16 of this Act asking for a finding and
determination of the fair value of such shares, but no such demand may be
withdrawn after such payment has been made or, unless the corporation shall
consent thereto, after any such petition has been filed. If, however, such
demand shall be withdrawn as hereinbefore provided, or if pursuant to Section B
of this Article the corporation shall terminate the shareholder's rights under
Article 5.12 or 5.16 of this Act, as the case may be, or if no petition asking
for a finding and determination of fair value of such shares by a court shall
have been filed within the times provided in Article 5.12 or 5.16 of this Act,
as the case may be, or if after the hearing of a petition filed pursuant to
Article 5.12 or 5.16, the court shall determine that such shareholder is not
entitled to the relief provided by those articles, then, in any such case, such
shareholder and all persons claiming under him shall be conclusively presumed to
have approved and ratified the corporate action from which he dissented and
shall be bound thereby, the right of such shareholder to be paid the fair value
of his shares shall cease, and his status as a shareholder shall be restored
without prejudice to any corporate proceedings which may have been taken during
the interim, and such shareholder shall be entitled to receive any dividends or
other distributions made to shareholders in the interim.
E-4
<PAGE>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
STB SYSTEMS, INC.
The undersigned hereby appoints William E. Ogle and Randall D. Eisenbach,
or either of them, as proxies, each with the power to appoint his substitute,
and hereby authorizes each of them to represent and to vote, as designated on
the reverse side, all of the shares of Common Stock of STB Systems, Inc. held
of record by the undersigned on March 7, 1997 at the Annual Meeting of
Shareholders to be held on April 17, 1997, or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE NOMINEES AND THE
PROPOSALS LISTED HEREON. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
IS GIVEN, THIS PROXY WILL BE VOTED FOR THE NOMINEES AND THE PROPOSALS.
(PLEASE SEE REVERSE SIDE)
- --------------------------------------------------------------------------------
^FOLD AND DETACH HERE^
<PAGE>
<TABLE>
<S> <C> <C>
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Please mark
your votes as /X/
indicated in
this example
1. To elect seven Directors: INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR 2. Proposal to approve amendment
ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH of the 1995 Long Term Incentive
FOR all nominees WITHHOLD THE NOMINEE'S NAME IN THE LIST BELOW: Plan.
listed to the right AUTHORITY
(except as marked to to vote for all William E. Ogle, Randall D. Eisenbach, James L. FOR AGAINST ABSTAIN
the contrary) nominees listed Hopkins, J. Shane Long, Lawrence E. Wesneski, / / / / / /
James J. Byrne, Dennis G. Sabo
/ / / /
3. Proposal to approve amendment of the 4. Proposal to change the 5. Proposal to ratify 6. In their discretion to
Stock Option Plan for Non-Employee state of incorporation the Board of Directors vote upon such other
Directors. of the company from selection of independent business as may properly
Texas to Delaware. auditors. come before the meeting.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
/ / / / / / / / / / / / / / / / / /
DATED: , 1997
--------------------------
--------------------------------------
(SIGNATURE OF SHAREHOLDER)
--------------------------------------
(SIGNATURE IF HELD JOINTLY)
PLEASE SIGN EXACTLY AS NAME APPEARS
HEREON. WHEN SHARES ARE HELD BY
JOINT TENANTS BOTH SHOULD SIGN. WHEN
SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH, IF A
CORPORATION, PLEASE SIGN FULL CORPORATE
NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN
IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
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^FOLD AND DETACH HERE^
</TABLE>
