[DESCRIPTION]MVSI, INC. PROXY STATEMENT
<PAGE> 1
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:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement
/ / Confidential, for
Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
MVSI, 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):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
/X/ No fee required
<PAGE> 2
MVSI, INC.
8133 Leesburg Pike, Suite 750
Vienna, Virginia 22182
_____________
Proxy Statement
Annual Meeting of Stockholders
April 14, 1997
____________
Solicitation of Proxies
This Proxy Statement is furnished by the Board of Directors (the "Board")
of MVSI, Inc., a Delaware corporation (the "Company"), in connection with its
solicitation of proxies for use at the Annual Meeting of Stockholders of the
Company (the "Annual Meeting"), to be held on Monday, April 14, 1997, at 11:00
a.m., local time, at the Holiday Inn Tysons Corner, 1960 Chain Bridge Road,
McLean, Virginia 22102, and at any and all adjournments or postponements
thereof. Mailing of the Proxy Statement and form of proxy will commence on or
about March 7, 1997. Holders of record of Common Stock, $.01 par value (the
"Common Stock"), at the close of business on March 4, 1997 will be entitled to
one vote for each share held on all matters to come before the Annual Meeting.
As of March 4, 1997, there were outstanding 10,666,500 shares of Common Stock.
A proxy on the enclosed form may be revoked at any time before it has been
exercised by written notice to the Secretary of the Company, by a duly executed
proxy bearing a later date, or by voting in person at the Annual Meeting. The
revocation of a proxy will not affect any vote taken prior to such revocation.
Unless the proxy is revoked or there is a direction to abstain on one or more
proposals, it will be voted on each proposal and, if a choice is made with
respect to any matter to be acted upon, in accordance with such choice. If no
choice is specified, the proxy will be voted as recommended by the Board.
It is expected that the solicitation of proxies will be primarily by mail.
Proxies may also be solicited by officers and employees of the Company at no
additional cost to the Company, in person or by telephone, telegram or other
means of communication. The expense of preparing, printing and mailing this
Proxy Statement and accompanying materials will be paid by the Company. The
Company will reimburse banks, brokers and other custodians, nominees and
fiduciaries for their reasonable costs in forwarding the proxy materials to the
beneficial owners of Common Stock.
Voting at the Meeting
A majority of the votes entitled to be cast on matters to be considered at
the Annual Meeting constitutes a quorum. If a share is represented for any
purpose at the Annual Meeting, it is deemed to be present for all other
matters. Abstentions and shares held of record by a broker or its nominee
("Broker Shares") that are voted on any matter are included in determining the
number of votes present. In all cases, however, shares with respect to which
authority is withheld, abstentions and Broker Shares that are not voted will
not be included in determining the number of votes cast.
The election of each nominee for Director, the approval of the Company's
1997 Stock Option Plan and 1997 Employee Stock Purchase Plan, and the
ratification of the Company's independent auditors each requires a majority of
the votes cast in person or by proxy at the Annual Meeting.
A list of those Stockholders entitled to vote at the Annual Meeting will
be available for a period of ten days prior to the Annual Meeting for
examination by any Stockholder, for any purpose germane to the Annual Meeting,
at the Company's principal executive offices, 8133 Leesburg Pike, Suite 750,
Vienna, Virginia 22182 during regular business hours, and at the Annual Meeting.
ELECTION OF DIRECTORS
General Information
Seven Directors will be elected at the Annual Meeting by the Stockholders
to serve until the next Annual Meeting or until their successors are elected
and qualified. The accompanying form of proxy will be voted for the election
as Directors of the seven persons named below, unless the proxy contains
contrary instructions. Proxies cannot be voted for a greater number of persons
than the number of nominees named in the Proxy Statement. Each of the nominees
currently serves as a Director, except for Messrs. Abbas Fathi, Jeffrey M.
Rubin and James M. Ewan, who were nominated for election at a special meeting of
the Board on February 15, 1997. Although management does not anticipate that
any of the persons named below will be unable or unwilling to stand for
election, a proxy, in the event of such an occurrence, may be voted for a
substitute designated by the Board. In lieu of designating a substitute,
however, the Board may reduce the number of Directors. As of March 4, 1997,
the maximum number of Directors that can serve on or be elected to the Board
is seven.
Information Regarding Nominees
The name, age, principal business experience and offices held by each nominee
are as follows:
EDWARD RATKOVICH, Major General, United States Air Force (ret.), age 72, has
been Chairman of the Board and Chief Executive Officer of the Company since
April, 1994. He was appointed President of the Company on August 1, 1996. He
also served as the Chief Financial Officer until June, 1996. General Ratkovich
is a highly decorated air combat command pilot veteran of World War II
(European Theater). He also served during the Korean War, the Cuban missile
crisis and the Vietnam War. General Ratkovich has substantial senior
management, operations and consulting experience. He retired from the U.S.
Air Force in 1975 after 33 years of active duty service. From 1975 to 1994,
he served as a management consultant to numerous systems engineering and
technology firms in the United States. Since November, 1994, General Ratkovich
has been devoted on a full-time basis to the management and operations of the
Company.
JAMES M. EWAN, Commander, Royal Canadian Navy (ret.), age 50, is being
nominated for the first time as a Director of the Company. Mr. Ewan has
over 25 years of senior executive experience. Since 1996, Mr. Ewan has been
Vice President, Operations, at MVS Modular Visions Systems, Inc. ("MVS"), a
wholly-owned subsidiary of the Company. From 1994 to 1996, he was Vice
President, Business Development, of MDS Aero Support Corporation in Montreal,
Canada. From 1990 to 1994, he was a senior executive with two energy
technology companies in Florida.
Prior to becoming a business executive, Mr. Ewan served as a Naval Officer in
the Royal Canadian Navy for 22 years, which service included 3 major submarine
commands and 1 major destroyer command and extended foreign exchange postings
with the United States Navy and the British Royal Navy. Mr. Ewan has a BSc in
Applied Science from the Royal Military College of Canada and a PSC from the
Royal Naval Staff College, Greenwich, England. Mr. Ewan also holds a United
States patent for a electrochemical load management system for transportation
applications.
ABBAS FATHI, age 41, is being nominated for the first time as a Director of
the Company. In 1989, Mr. Fathi founded Socrates, Inc. ("Socrates"), a
Maryland Corporation and, since July 1, 1996, a wholly-owned subsidiary of the
Company. Since 1989, Mr. Fathi has served as the Chief Executive Officer and
President of Socrates. Mr. Fathi holds a B.A. degree from Texas Tech
University and a Masters in Urban Planning from Rutgers University.
BARRY J. HATFIELD, age 45, has been a Director and the Acting President of MVS
since August 1, 1996, and the Vice President of Corporate Development of the
Company since March, 1995. From 1987 through 1995, he was an executive with two
privately-held computer technology companies. Mr. Hatfield has over 20 years
of experience in sales, marketing, business development and management of
advanced technology companies in information services, telecommunications and
network systems. Mr. Hatfield is also a director of the National
Association of Environmental Risk Auditors.
EDWARD PAUL ROBERTS, Lieutenant Colonel, United States Air Force (ret.), age
80, has served as a Director of the Company since 1994 and has substantial
senior management, operations and technical advisory experience. Colonel
Roberts retired from the U.S. Air Force in 1964, after 22 years of active duty
service. Since 1975, Colonel Roberts has served as a technical and operations
consultant to numerous major systems engineering and technology firms in the
United States. Colonel Roberts holds B.S. and M.S. degrees from Jackson
College and attended post-graduate school at The College of William and Mary.
JEFFREY M. RUBIN, age 42, is being nominated for the first time as a Director
of the Company. In 1990, Mr. Rubin founded JMR Distributors, Inc. ("JMR"), a
Virginia corporation and, since October 1, 1995, a wholly-owned subsidiary of
the Company. Since 1990, he has served as the Chief Executive Officer and
President of JMR. Mr. Rubin holds B.S. and A.S. degrees from Embry-Riddle
Aeronautical University.
CLIVE G. WHITTENBURY, age 63, has been a Director of the Company since 1994.
Dr. Whittenbury has substantial senior management, operations and technical
advisory experience. From 1972 to 1979, Dr. Whittenbury was a Senior Vice
President and from 1976 to 1986 a director of Science Applications
International Corporation, a San Diego, California-based international systems
engineering firm. Since 1979, Dr. Whittenbury has been Executive Vice
President and then a director of the Erickson Group, Inc., an international
diversified products and aircraft services firm. Dr. Whittenbury is a member
of the International Advisory Board for the British Columbia Advanced Systems
Institute, which manages commercialization programs in technology at the three
major Vancouver/Victoria universities, and a member of the Advisory Board of
Compass Technology Partners, an investment fund. He is Chairman of the Laser
Directorate Advisory Board for the Lawrence Livermore National Laboratory. Dr.
Whittenbury served as an advisor to three U.S. Congressional Committees and
with the Grace Commission. Dr. Whittenbury holds a B.S. honors degree in
physics (Manchester, England) and a Ph.D. degree (Aeronautical Engineering)
from the University of Illinois.
Compensation of Directors.
A Director who is not an employee of the Company is paid $1,500 per
calendar month, or $18,000 per year, for services rendered as a Director. The
Company does not currently pay any additional fees or compensation to any
Director, whether or not an employee, who serves on any committee of the
Board. A Director who is also an employee of the Company or its subsidiaries
does not receive any compensation for services as a Director.
Committees and Meetings.
The Board of Directors has three standing committees: the Audit Committee,
the Compensation Committee and the Executive Committee.
The Audit Committee consults with the Company's management regarding
selection of the independent public accountant; concurs in the appointment or
dismissal of the internal auditor; holds periodic meetings with the Company's
internal and independent auditors and financial officers as appropriate to
monitor control of the Company's financial resources and audit functions;
reviews the arrangements and related fees for and the scope of the independent
auditor's examination; considers the audit findings and management response;
reviews the independent public accountant's non-audit fees; reviews significant
accounting issues, regulatory changes and accounting or reporting developments
and the impact of such on the Company's financial statements; reviews the
status of special investigations; reviews the financial statements; oversees
the quarterly reporting process; discusses with the Company's management, the
internal auditor and in-house legal counsel significant issues relating to
litigation or compliance with governmental regulations; reviews the Company's
procedures and controls; and reviews the Company's internal conduct and
conflict of interest policies and receives reports of disclosures of any
deviations from these policies. During fiscal year 1996 the Audit Committee
held one meeting. The current members of the Audit Committee are Edward Paul
Roberts and Clive G. Whittenbury.
The Compensation Committee periodically reviews compensation paid by the
Company to its Directors, officers, employees and agents, and makes
recommendations to the Board of Directors about appropriate levels or ranges
of compensation, both cash and non-cash compensation, for the Directors,
officers, employees and agents of the Company. The Compensation Committee will
also administer any stock benefit plans adopted and approved by the Company and
its Stockholders. During fiscal year 1996, the Compensation Committee held
one meeting. The current members of the Compensation Committee are Edward Paul
Roberts and Clive G. Whittenbury.
The Executive Committee has been delegated the authority to act on behalf of
the Board with respect to any matter within the ordinary course of the
business of the Company. The Executive Committee typically acts on proposed
capital expenditures and financial transactions during intervals between
regularly scheduled Board meetings. All significant actions taken by the
Executive Committee are reported at the next meeting of the Board for
ratification by the Board. During fiscal year 1996, the Executive Committee
took action on five matters either in a meeting of the Committee or by written
consent in lieu of a meeting. The current members of the Executive Committee
are Edward Ratkovich and Edward Paul Roberts.
Each of the Directors attended 75% or more of the Board meetings duly
called and held by the Company's Board of Directors in fiscal year 1996. During
fiscal year 1996, the Board of Directors met six times.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended requires
the Company's Directors, officers and beneficial owners of more than ten
percent of a class of the Company's equity securities, to file certain reports
of ownership and changes in ownership with the Securities and Exchange
Commission ("Commission"). Based solely on the review of the copies of such
forms furnished to the Company, or written representations that no Form 5 was
required, the Company believes that, during the period from October 1, 1995
through September 30, 1996, the Company's Directors, officers and greater than
10% beneficial owners complied with all Section 16(a) filing requirements,
except for their initial reports on Forms 3 and 5 which were filed in February,
1997.
EXECUTIVE OFFICERS
The Board of Directors elects the executive officers of the Company
annually at its first meeting following the Annual Meeting. Certain
information concerning the Company's executive officers, except information
about Edward Ratkovich, Chairman of the Board, Chief Executive Officer and
President, and Barry Hatfield, Vice President of Corporate Development,
previously included above, is set forth below:
MARK J. MCKNIGHT, age 31, has been the Chief Financial Officer and Controller
since June, 1996 and the Assistant Secretary since August, 1996. Prior to
joining the Company, Mr. McKnight held a similar position for three years
with a privately-held corporate services company. Mr. McKnight also has seven
years of public accounting experience with Ernst & Young L.L.P. and most
recently Grant Thornton L.L.P. Mr. McKnight holds a B.S.M. degree (accounting)
from Tulane University and is a certified public accountant.
PAUL W. RICHTER, age 41, has served as General Counsel since December 27, 1996
and he served as a part-time legal counsel to the Company from December 5, 1996
to December 27, 1996. He was appointed Secretary of the Company on January 13,
1997. From 1990 to 1996, Mr. Richter was a practicing business lawyer in
Northern Virginia and served as a general counsel and secretary to local
corporations. From 1988 to 1991, he was the president of a privately-held legal
research company. From 1984 to 1988, Mr. Richter was an operations executive
with a subsidiary of Commerce Clearing House, Inc. and then with a subsidiary
of Prentice Hall, Inc. Mr. Richter holds an L.LM. in Securities Law from
Georgetown University Law Center and a J.D. from George Mason University Law
School. He has written, edited or contributed to four nationally published
corporate law books.
Employment Agreements
Mr. Ratkovich entered into an employment agreement, dated February 1,
1995, with the Company, which employment agreement expires on January 31, 2000.
Under his employment agreement, he is entitled to receive a base annual salary
of $195,000 (as adjusted by any increases granted by the Compensation
Committee) plus an annual bonus equal to 50% of his then current base annual
salary. Under Mr. Ratkovich's current employment agreement, if the employment
agreement is terminated without cause by the Company or with good reason by Mr.
Ratkovich, then the Company would be obligated to pay Mr. Ratkovich's base
annual salary through the remaining term of the employment agreement plus the
sum of the annual bonus plus the maximum amount that could have been paid under
any performance bonus plan multiplied by the number of years remaining in the
term of the employment agreement.
Mr. Lukanovich entered into an employment agreement with the Company on
February 1, 1995, which employment agreement expired on January 31, 1997.
Under Mr. Lukanovich's employment agreement, his annual base salary was
$125,000 (as adjusted by any increases granted by the Compensation Committee)
plus an annual bonus of 50% of his then current base annual salary.
Mr. Lukanovich retired as the President and a Director of the Company and MVS,
effective August 1, 1996. He currently serves as a part-time management
consultant to MVS.
Mr. Vodanovic entered into an employment agreement with the Company on
February 1, 1995, which employment agreement was to expire on January 31,
2000. The Company restructured Mr. Vodanovic's relationship with the Company
and MVS. Under Mr. Vodanovic's employment agreement, the base annual salary was
$125,000 (as adjusted by any increases granted by the Compensation Committee)
plus an annual bonus of 50% of his then current base annual salary.
Mr. Vodanovic resigned as Executive Vice President and Secretary of the
Company, effective January 13, 1997, and resigned as a Director, effective
February 18, 1997. The Company believes that it no longer has any obligations
to Mr. Vodanovic under the employment agreement.
None of Messrs. Hatfield, McKnight or Richter have an employment agreement with
the Company.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information, as of March 4, 1997, as to the
beneficial ownership of Common Stock, including shares of Common Stock as to
which a right to acquire ownership within sixty days exists, of each Director,
each nominee for Director, each executive officer named in the Summary
Compensation Table, each person who is known to the Company to own, of record
or beneficially, more than five percent of the Common Stock and of the
Directors and executive officers of the Company as a group. Unless otherwise
indicated, each of the below-listed persons has sole voting and investment
power with respect to the shares beneficially owned.
Name and
Address of Shares Beneficially Owned
Beneficial Owners (1) ____________________________
Number Percent
______________________ ___________ __________
Edward Ratkovich (2) 1,907,467 17.88
Abbas Fathi 350,000 3.28
Jeffrey Rubin 100,000 *
Edward Paul Roberts (3) 85,000 *
Clive G. Whittenbury 50,000 *
Barry Hatfield -0- -
James M. Ewan -0- -
Mark J. McKnight 600 *
Paul W. Richter -0- -
All Directors, nominees
and executive officers
as a group 2,493,067 23.37
(9)
____________________________________________________________________
* Less than 1%.
(1) Unless otherwise indicated, the address of each person named is 8133
Leesburg Pike, Suite 750, Vienna, Virginia 22182.
(2) Includes 100,000 shares jointly owned by Mr. Ratkovich and spouse, which
were purchased in open market transactions on February 18, 1997 and February
21, 1997. These open market purchases have been reported to the Securities
and Exchange Commission on Form 3 and Form 4 under Section 16 of Securities
Exchange Act of 1934, as amended.
(3) Edward Paul Roberts disclaims ownership in 50,000 shares owned by
O'Connell Technologies, Inc. Mr. Roberts is a substantial shareholder of
O'Connell Technologies, Inc. Mr. Roberts purchased 35,000 shares for his own
account in open market transactions on February 28, 1997 and March 3, 1997.
These open market purchases have been reported to the Securities and Exchange
Commission on Form 3 and Form 4 under Section 16 of Securities Exchange Act of
1934, as amended.
The above summary of stock ownership does not include the ownership of
Common Stock by two former members of management: (1) Mr. Vodanovic, who owns
434,153 shares of Common Stock, which is 4% of the outstanding shares of Common
Stock, and (2) Mr. Lukanovich, who owns 67,812 shares of Common Stock. which is
less than 1% of the outstanding shares of Common Stock. Mr. Vodanovic
disclaims beneficial ownership as to an aggregate of 64,033 shares of Common
Stock held by spouse and two children. Mr. Lukanovich disclaims ownership of
an aggregate of 30,488 shares held by his wife and daughter.
Executive Compensation
The following table sets forth information concerning all compensation
awarded to, earned by or paid for all services rendered to the Company, a small
business issuer, during the fiscal years ended September 30, 1996, 1995 and
1994, for the Company's Chief Executive Officer and all other executive
officers whose total compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION
NAME AND PRINCIPAL
POSITION YEAR SALARY BONUS
Edward Ratkovich 1996 $195,000 $ 97,500
Chief Executive 1995 $130,000 $ 65,000
Officer 1994 - -
Barry Hatfield 1996 $100,833 $ 5,000
Vice President, MVSI, 1995 $ 43,000
Modular Vision 1994 - -
Systems, Inc.
Louis K. Lukanovich (1) 1996 $125,000 $ 62,500
President of MVSI, Inc., 1995 $ 83,333 $ 41,667
and MVS Modular Vision 1994 $ 34,000 -
Systems, Inc.
Bojko D. Vodanovic (2) 1996 $125,000 $ 62,500
Executive Vice President, 1995 $ 83,333 $ 41,667
MVSI, Inc., and MVS 1994 $ 70,800 -
Modular Vision Systems, Inc.
________________________
(1) Mr. Lukanovich retired as President and a director of the Company
and MVS Modular Vision Systems, Inc. Mr. Lukanovich's retirement was effective
August 1, 1996.
(2) Mr. Bojko Vodanovic resigned as Executive Vice President and Secretary of
the Company and MVS Modular Vision Systems, Inc., effective January 13, 1997,
and resigned as a Director of the Company effective February 18, 1997.
Options Grants and Exercises
The Company did not grant any options to any of the named executive
officers during its last fiscal year. In addition, there were no options
exercised by any of the named executive officers in the last fiscal year.
On February 15, 1997, the Compensation Committee of the Board granted
stock options under the Company's 1997 Incentive Stock Options to the
following officers, Director, and nominee for election as a Director:
INDIVIDUAL GRANTS
Number of Securities Percentage of Total Exercise
Name Underlying Granted Options Granted Price
Options to Employees
in Fiscal 1997
_______________ _____________________ _____________ _______
Barry J. Hatfield 25,000 12.5% $3.125
James M. Ewan 10,000 5.0% $3.125
Paul W. Richter 5,000 2.5% $3.125
Mark J. McKnight 5,000 2.5% $3.125
______________
On February 15, 1997, the Compensation Committee of the Company granted
stock options to purchase 155,000 shares of Common Stock to employees of the
Company's wholly-owned subsidiaries. None of these employees are Directors,
officers or nominees for election as Directors of the Company.
Long-Term Incentive Plan Awards
The Company did not make any awards under any long-term incentive plan to
any of the named executive officers during its last fiscal year, but the
Company may do so in 1997.
APPROVAL OF GRANT THORNTON, L.L.P. AS INDEPENDENT AUDITORS
OF THE COMPANY
The Board of Directors, upon the recommendation of the Audit Committee,
has appointed Grant Thornton, L.L.P. to continue as the Company's auditors and
to audit the books and accounts and other records of the Company for the fiscal
year ending September 30, 1997. The Board of Directors recommends that the
Stockholders vote FOR the appointment of Grant Thornton, L.L.P. as independent
auditors.
Grant Thornton, L.L.P. has served as the Company's independent auditors
since the Company's initial public offering in 1995. They have no financial
interests, either direct or indirect, in the Company. Representatives of Grant
Thornton, L.L.P. are expected to be present at the Annual Meeting to respond to
questions from Stockholders and to make a statement if they desire to do so.
APPROVAL OF THE COMPANY'S 1997 STOCK OPTION PLAN AND
THE 1997 EMPLOYEE STOCK PURCHASE PLAN
The Board, subject to the approval of the Stockholders, adopted and
approved the MVSI, Inc. 1997 Stock Option Plan (the "Option Plan"), which
authorizes the grant of options to purchase up to a total of 1,000,000 shares
of Common Stock, and the MVSI, Inc. 1997 Employee Stock Purchase Plan (the
"Employee Purchase Plan", and, together with the Option Plan, the "Plans"),
which authorizes the purchase by certain eligible employees of the Company of
up to a total of 250,000 shares of Common Stock.
The Board has deemed it in the best interests of the Company and its
Stockholders to establish the Plans so as to provide employees and other
persons involved in the continuing development and successes of the Company and
its subsidiaries an opportunity to acquire a proprietary interest in the
Company by means of grants of options to purchase Common Stock or by payroll
deductions to purchase Common Stock at a discount to the fair market value of
the Common Stock. It is the Board's view that by providing the Company's
employees and other individuals contributing to the Company and its
subsidiaries the opportunity to acquire an equity investment in the Company,
the Plans will maintain and strengthen their desire to remain with the Company,
stimulate their efforts on the Company's behalf, and also attract other
qualified personnel to the Company's employ. The affirmative vote of a
majority of the Common Stock represented at the Annual Meeting in person or
by proxy is required for approval of the Plans. The Plans will not be voted
upon separately by the Stockholders.
The following summarizes certain provisions of the Plans. All statements
are qualified in their entirety by reference to the text of the Plans, copies
of which are included as exhibits to this Proxy Statement.
1997 Stock Option Plan
Under the Option Plan, the Compensation Committee is authorized to issue
either (1) stock options that are not incentive stock options as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(2) incentive stock options that are qualified under Section 422 of the Code.
The options which do not qualify under Section 422 are known as "non-statutory"
or "non-qualified" stock options and the qualified Section 422 options are
known as "incentive stock options" or "ISO's". All such options granted under
the Option Plan will be in such form as the Compensation Committee may from
time to time approve. All options granted under the Option Plan will be null
and void unless the Option Plan is approved by the Stockholders by February 15,
1998.
Stock options granted under the Option Plan are either non-qualified stock
options or incentive stock options, and give the holder of the option (the
"Option Holder") the right to purchase shares of Common Stock at a price (the
"exercise price") fixed in the Stock Option Agreement executed by the Option
Holder and the Company at the time of grant, regardless of the actual value of
the Common Stock on the date of exercise.
Purpose. The purpose of the Option Plan is to provide officers and other
key employees of the Company and its subsidiaries and certain Directors of the
Company who are not employees of the Company or its subsidiaries with an
increased incentive to make significant and extraordinary contributions to the
long-term performance and growth of the Company and its subsidiaries; to join
the interests of the officers and other key employees and Directors, through
the opportunity for stock ownership, with the interests of the Stockholders;
and to attract skilled executives, workers and directors in the future and to
encourage officers and other key employees and Directors to remain with the
Company or its subsidiaries.
Eligibility. (1) Non-Qualified Options. The Compensation Committee of
the Board selects from among the executives and other key employees and
Directors of the Company and its subsidiaries those persons who will receive
grants of stock options under the Option Plan and the size and other terms of
such grants. No member of the Compensation Committee is eligible to participate
in the Option Plan.
(2) Incentive Stock Options. Incentive stock options may only be granted to
officers and employees of the Company and its subsidiaries.
Exercise. (1) Non-Qualified Stock Options. The exercise price for a
Non-Qualified Stock Option granted under the Option Plan will be specified in
the Stock Option Agreement to be entered into between the Option Holder and the
Company, but will not be less than eighty-five percent (85%) of the fair market
value of the Common Stock on the date the option is granted. Fair market value
will equal the closing price quoted on the date of grant.
(2) Incentive Stock Options. The exercise price for Incentive Stock Options
must equal the fair market value of the Common Stock on the date of the
grant of the Incentive Stock Option. For beneficial owners of ten percent
(10%) or more of the shares of Common Stock, the exercise price must equal one
hundred and ten percent (110%) of the fair market value of the Common Stock
on the date of grant.
Timing of Exercise. (1) Non-Qualified Stock Options. The period for
exercising a Non-Qualified Stock Options begins when the options vest and ends
ten (10) years from the date the options are granted, unless the options expire
earlier. The aggregate number of shares of Common Stock which may be purchased
by the exercise of any Non-Qualified Stock Option are subject to the following
vesting schedule: 50% of the shares of Common Stock may be purchased by the
Option Holder on or after the first anniversary of the date of the grant of the
Non-Qualified Stock Option and the remaining 50% of the shares of Common Stock
may be purchased on or after the second anniversary of the date of the grant of
the Non-Qualified Stock Option. The Compensation Committee may place other
restrictions in all or in any particular Non-Qualified Stock Option Agreement
as to the ability of the Option Holder to exercise an option prior to the
time the Non-Qualified Stock Options become fully vested. If the Option
Holder's employment with the Company is terminated for misconduct (as
determined by the Compensation Committee), all exercise rights under any
option, whether or not vested, will terminate on the date of such termination.
(2) Incentive Stock Options. An Incentive Stock Option must be exercised
within ten (10) years of the date of its grant. The shares of Common
Stock issued upon exercise of an Incentive Stock Option must be held by the
Option Holder for two years from the date on which the Incentive Stock Option
was granted and for one (1) year after its exercise and the receipt of the
underlying shares of Common Stock. Further, the number of shares of Common
Stock available for purchase under any Incentive Stock Option will be subject
to the following vesting schedule: 50% of the shares of Common Stock which
may be purchased upon the exercise of the Incentive Stock Option may be
purchased by the Option Holder on or after the first anniversary of the date on
which the Incentive Stock Option was granted and the remaining 50% of the
shares of Common Stock which may be purchased upon the exercise of the
Incentive Stock Option may be purchased by the Option Holder on or after
the second anniversary of the date the Stock Option was granted.
Disposing of shares of Common Stock received pursuant to the exercise of
an Incentive Stock Option before the expiration of the aforesaid holding
periods will usually result in the Option Holder realizing taxable income
in the year of the disposition.
Payment. During the period an option is exercisable, the Option Holder
may pay the purchase price for the shares subject to the option in cash, except
that the Compensation Committee may, in its discretion, permit such payment to
be by surrender of unrestricted shares of Common Stock or by a combination of
cash and unrestricted shares of Common Stock.
Shares Available under the Plan. A maximum of 1,000,000 shares of Common
Stock are available for issuance under the Option Plan. The Compensation
Committee shall determine the number of those shares of Common Stock which
shall be issued for Non-Qualified Stock Options and for Incentive Stock Options.
With respect to shares of Common Stock underlying Non-Qualified Stock
Options, any changes in the Common Stock by reason of stock dividends, split-
ups, recapitalization, mergers, consolidations, combinations, or other
exchanges of the Common Stock and the like, appropriate adjustments will be
by the Board to the number of shares of subject to outstanding options and/or
the exercise price per share of outstanding options, as necessary substantially
to preserve Option Holders' economic interest in their options.
Stockholders must approve an amendment to the Option Plan in order to
increase the number of shares of Common Stock available for issuance upon the
exercise of Incentive Stock Options.
Administration of Plan. The Option Plan is administered by the
Compensation Committee of the Board. The members of the Compensation Committee
are not eligible to participate in the Plan. The Compensation Committee shall
select the officers, key personnel and Directors who are eligible to
participate in the Plan and the number and terms of the Non-Qualified Stock
Options granted to any such person. Incentive Stock Options may only be issued
or granted to officers and employees.
Special Rules Applicable to Section 16 Reporting Persons. In addition to
the restrictions on exercise of the options contained in the Option Plan and
in the Stock Option Agreements, the Compensation Committee will administer
the Option Plan in a way that will prevent certain transactions under the
Option Plan from constituting purchases or sales in violation of Section 16(b)
of the Securities Exchange Act of 1934, as amended.
Tax Aspects. (1) Non-Qualified Stock Options. All taxes, if any,
required to be withheld and payable with respect to the exercise or surrender
of an option may be deducted from the Option Holder's salary. If at any time
such amounts are not adequate to cover taxes required to be withheld, the
Option Holder shall make adequate arrangement with the Company for payment of
the excess as a condition to the exercise or surrender of the Non-Qualified
Stock Options.
An Option Holder will recognize no income at the time a Non-Qualified
Stock Option is granted under the Option Plan. Upon exercise of the option
for cash, except as set forth below, the Option Holder will recognize
compensation taxable as ordinary income in an amount equal to the difference
between the exercise price and the fair market value of the shares on the date
of exercise, and the Company will be entitled to a deduction from income in the
same amount (if the Company withholds the appropriate tax from the Option
Holder).
When an Option Holder disposes of shares acquired by the exercise of a
Non-Qualified Stock Option, any amount received in excess of the fair market
value of the shares on the date of exercise of the Non-Qualified Stock Option
will be treated as long-term or short-term capital gain, depending upon the
holding period of the shares. If the amount received is less than the fair
market value of the shares on the date of exercise, the loss will be treated as
long-term or short-term loss, depending on the holding period of the shares.
The exercise of a Non-Qualified Stock Option by the exchange of
unrestricted shares of Common Stock already owned by the Option Holder will not
result in taxable gain or loss on the unrealized appreciation of or
depreciation of the shares so used. The Internal Revenue Service has ruled
that, if the option exercised is a non-statutory stock option (like those
granted under the Option Plan), a number of shares of the stock received equal
to the number of shares surrendered will have the same basis as the shares
surrendered and the remaining shares received shall have a basis equal to their
fair market value on the date of exercise.
(2) Incentive Stock Options. Neither the Option Holder nor the Company
will experience any tax consequences from the issuance of Incentive Stock
Options. The Company is not entitled to any deduction for issuing Incentive
Stock Options. Upon exercise, the Option Holder's tax liability is usually the
difference between the price at which the stock underlying the Incentive Stock
Option was sold and the Option Holder's tax basis in the stock (typically, the
exercise price). Any gain from the sale of the stock is usually taxed at
capital gains rates.
1997 Employee Stock Purchase Plan
The Employee Purchase Plan authorizes the purchase by certain employees of
the Company of up to 250,000 shares of Common Stock. All subscriptions for, and
purchases of Common Stock under the Employee Purchase Plan will be null and
void unless the Employee Purchase Plan is approved by the Stockholders by
February 15, 1998. The following summary of the principal provisions of the
Employee Purchase Plan is not intended to be exhaustive and is qualified in its
entirety by the terms of the Employee Purchase Plan.
Purpose. The Employee Purchase Plan is intended to advance the interests
of the Company and its Stockholders by allowing employees of the Company
and its wholly-owned subsidiaries the opportunity to purchase shares of the
Common Stock at a small discount to the fair market value of the Common Stock.
The Employee Purchase Plan is intended to constitute an "employee stock
purchase plan" within the meaning of Section 423 of the Code. See "Federal
Income Tax Consequences."
Administration. The Employee Purchase Plan is administered by the
Compensation Committee of the Board of Directors. The Compensation Committee
has the authority to (i) interpret and construe the Employee Purchase Plan and
any subscriptions thereunder, (ii) establish policies, procedures and rules
related to the operation and administration of the Employee Purchase Plan,
(iii) designate from time to time the subsidiaries of the Company whose
employees will be eligible to participate in the Employee Purchase Plan,
(iv) make adjustments in the price and the number and kind of shares which may
be purchased under the Employee Purchase Plan under the circumstances described
below under "Adjustments," and (v) subject to certain limitations, amend the
provisions of the Employee Purchase Plan. The interpretation and construction
by the Compensation Committee of any provision of the Employee Purchase Plan or
of any subscription thereunder will be final.
Rules. The Compensation Committee may adopt rules applicable to the
administration of the Employee Purchase Plan. Such rules may address minimum
payroll deductions and other matters, including the delivery of reports to
participants, related to the operation of the Employee Purchase Plan.
Aggregate Number of Shares Available for Purchase. Subject to adjustment
as described below, up to 250,000 shares of Common Stock may be purchased under
the Employee Purchase Plan. If the number of shares which may be purchased on
any date of purchase exceeds the number of shares available to be purchased
under the Employee Purchase Plan, the shares available to be purchased will be
made available for purchase on a pro rata basis among subscriptions. Shares of
Common Stock sold pursuant to the Employee Purchase Plan shall be authorized
but unissued or re-acquired shares.
Eligibility. Each employee of the Company or a subsidiary designated by
the Compensation Committee who works customarily 20 or more hours per week,
and has been employed by the Company or a subsidiary designated by the
Compensation Committee for at least ninety consecutive days, may participate in
the Employee Purchase Plan by subscribing to purchase shares of Common Stock.
Notwithstanding the foregoing, no employee may subscribe to purchase shares if,
immediately after such subscription, such employee would own Common Stock
possessing 5% or more of the total combined voting power or value of all
classes of stock of the Company or of any subsidiary of the Company. For
purposes of making this determination, an employee is considered as owning the
Common Stock owned, directly or indirectly, by or for the employee's brothers
and sisters, spouse, ancestors, and lineal descendants. Also, Common Stock
owned, directly or indirectly, by or for a corporation, partnership, estate, or
that is considered as being owned proportionately by or for its shareholders,
partners, or beneficiaries is considered as owned by the employee. In addition,
an employee is considered as owning stock which the employee may purchase under
outstanding options. A "subsidiary" is defined under the Employee Purchase Plan
as any corporation in which the Company directly or indirectly owns or controls
more than 50% of the total combined voting power of all classes of stock issued
by the corporation. As of March 4, 1997, approximately 80 employees were
eligible to participate in the Employee Purchase Plan.
Shares of Common Stock may be purchased only by subscribing employees who
have legal capacity as determined under applicable state law or, in the event
of the employee's legal incapacity, by his or her guardian or legal
representative acting in a fiduciary capacity on behalf of the employee under
state law or court supervision.
Terms of Subscriptions. Beginning May 1, 1997, each eligible employee may
subscribe to purchase shares of Common Stock by completing a written agreement
(a "Subscription") provided by the Compensation Committee and submitting it as
directed by the Compensation Committee. Pursuant to a Subscription, an eligible
employee designates any whole dollar amount to be withheld from such employee's
compensation in each pay period and used to purchase shares of Common Stock on
the next purchase date, provided that (i) the whole dollar amount (on an
annualized basis) cannot exceed 10% of his or her gross regular earnings (on an
annualized basis), (ii) the maximum number of shares of Common Stock which can
be purchased by any one employee on any purchase date cannot exceed 1,000
shares of Common Stock, and (iii) the Compensation Committee may establish
minimum payroll deductions. Notwithstanding the foregoing, no Subscription will
permit the rights of an employee to purchase (under all of the Company's
employee stock purchase plans) shares of the Common Stock to accrue at a rate
which exceeds $25,000 of fair market value (determined on the Subscription
Date, which is generally defined as the first business day of each fiscal
quarter or, if later, the date a participant first becomes an employee) in any
calendar year. Once an employee submits a Subscription, the employee will
remain participant in the Employee Purchase Plan on the same terms provided in
such Subscription until such employee provides a new Subscription or withdraws
from the Employee Purchase Plan in accordance with the provisions described
below. The form of Subscription may contain other terms which do not conflict
with the terms of the Employee Purchase Plan.
Purchase of Stock. The purchase of shares of Common Stock will take place
automatically on the last business day of each fiscal quarter during which the
Employee Purchase Plan is in effect (the "Purchase Date"). Unless a participant
has withdrawn from the Employee Purchase Plan, shares of Common Stock shall be
purchased to the extent of amounts withheld from the participant's
compensation. The purchase price of shares purchased under the Employee
Purchase Plan will be an amount equal to eighty five percent (85%) of the fair
market value of such shares on the applicable Purchase Date. During such time as
the Common Stock is traded on the Nasdaq Small Cap Market tier of The Nasdaq
Stock Market, the fair market value per share shall be the closing price of the
Common Stock on such Purchase Date or on the next regular business day on which
the Common Stock is traded if no shares of Common Stock are traded on the
Purchase Date. Fractional shares may be purchased under the Employee Purchase
Plan and credited to participant accounts; however, the Company shall have the
right to pay cash in lieu of any fractional shares of Common Stock to be
distributed from an employee's account.
The Purchase Price will be payable in full in U.S. dollars derived by
withholdings from participants' compensation. A participant can terminate
withholdings related to the Employee Purchase Plan at any time. In addition, a
participant may, once each quarter, change the amount withheld from his or her
compensation by submitting a written request to the Company at least 10
business days before any Purchase Date.
Cancellation. A participant may cancel any Subscription in whole or in
part and obtain a refund of amounts withheld from his or her compensation by
submitting a written request to the Company at least 10 business days before a
Purchase Date. All unused payments credited to his or her account will be
refunded within a reasonable time after the Company's receipt of such notice.
Any cancellation of a subscription in whole will constitute a withdrawal under
the Employee Purchase Plan.
Termination of Employment. If a participant retires or becomes disabled,
accumulated payments in his or her account upon such retirement or disability
will be used to purchase shares of Common Stock on the next Purchase Date,
unless the Company is otherwise notified in writing. In addition, he or she may
elect to continue making payments equal to the rate of payroll deductions made
before such retirement or disability until the first Purchase Date following
such retirement or disability. If a participant dies, the participant's
designated beneficiary or legal representative may exercise the same elections
available to a participant who retires or becomes disabled. If a participant
ceases to be employed by the Company or a participating subsidiary for any
other reason, the participant may elect in writing to have all accumulated
payments in his or her account at the time of termination applied to purchase
shares of Common Stock on the next Purchase Date following such termination.
In the absence of such written election, all unused payments credited to his or
her account will be refunded within a reasonable period of time.
No Interest. No interest will accrue on any amounts withheld from an
employee's compensation.
Transferability. Neither payments credited to an employee's account nor
any rights to subscribe to purchase shares of Common Stock under the Employee
Purchase Plan may be transferred by a participant except by the laws of descent
and distribution. Any such attempted transfer will be ineffective; however, the
Company may choose to treat an attempted transfer as an election to withdraw
from participation in the Employee Purchase Plan.
Adjustments. The Compensation Committee may make or provide for such
adjustments in the Purchase Price and in the number and kind of shares of
Common Stock or other securities covered by outstanding subscriptions or the
maximum shares specified above in "Terms of Subscriptions" as the Compensation
Committee in its sole discretion exercised in good faith, may determine is
equitably required to prevent dilution or enlargement of the rights of
employees which would otherwise result from any stock dividend, stock split,
combination of shares, recapitalization, or other change in the capital
structure of the Company, any merger, consolidation, spin-off, split-off,
spin-out, split-up, separation, reorganization, partial or complete
liquidation, or other distribution of assets, issuance of rights or warrants to
purchase stock or any other corporate transaction or event having an effect
similar to any of the foregoing. In the event of any such transaction or event
having an effect similar to the foregoing, the Compensation Committee, in its
discretion, may also provide in substitution for any or all outstanding
Subscriptions under the Employee Purchase Plan such alternative consideration
as it, in good faith, may determine to be equitable in the circumstances.
Rights as Stockholders. An employee shall have no rights as a Stockholder
with respect to any Common Stock covered by his or her Subscription until the
Purchase Date following payment in full. Except as described in "Adjustments"
above, no adjustment will be made to the Employee Purchase Plan or to
outstanding Subscriptions for dividends (ordinary or extraordinary, whether in
cash, securities or other property), or distributions or other rights for which
the record date occurs prior to such purchase.
Amendment. The Compensation Committee may from time to time amend the
Employee Purchase Plan. Except for the adjustments described above, without the
approval of the Stockholders, no such amendment can (i) increase the total
number of shares available for issuance under the Employee Purchase Plan, or
(ii) materially modify the requirements as to eligibility for participation in
the Employee Purchase Plan.
Duration. Employees may subscribe for shares under the Employee Purchase
Plan until May 1, 2007. Notwithstanding the foregoing, the Compensation
Committee may terminate or suspend the Employee Purchase Plan if at any time
less than five percent (5%) of the eligible employees are participating in the
Employee Purchase Plan.
Federal Income Tax Consequences. The following is a brief summary of the
federal income tax consequences that may occur based on the federal income tax
laws in effect on March 4, 1997. This summary is not intended to be exhaustive
and does not describe state or local tax consequences.
The Employee Purchase Plan is intended to qualify as an "employee stock
purchase plan" within the meaning of Section 423 of the Code. Assuming the
Employee Purchase Plan qualifies under Section 423 of the Code, participants
will not recognize income for federal income tax purposes either upon,
subscriptions under the Employee Purchase Plan or upon purchases of shares
thereunder. All tax consequences of purchasing shares under the Employee
Purchase Plan are deferred until the participant sells or otherwise disposes
of the shares or dies.
If the shares are held more than two years from the applicable Subscription
Date and more than one year from the applicable Purchase Date, the participant
will be taxed on the sale of such shares at long-term capital gains rates,
except to the extent that the participant realizes ordinary income under
Section 423 of the Code in an amount equal to the lesser of (i) fifteen percent
(15%) of the fair market value of the shares on the Subscription Date or (ii)
the amount by which the fair market value of the shares at the time of the sale
exceeds the Purchase Price.
If a participant should die owning shares acquired under the Employee
Purchase Plan, he or she will be deemed to have disposed of his or her shares
on the date of death and will realize ordinary income to the extent of the
ordinary income component described in the preceding section, but no capital
gain will result until the time of a subsequent sale, when the amount of gain
will typically be equal to the excess of the selling price over the fair market
value of the shares on the date of death or the alternative valuation date for
federal estate tax purposes.
If shares of the Common Stock acquired under the Employee Purchase Plan
are sold, exchanged or otherwise disposed of before the end of the required
holding periods described above, the participant will, in the usual case,
realize ordinary income at the time of disposition equal to the excess of the
fair market value of the shares on the applicable Purchase Date over the
Purchase Price of the shares. Any additional gain on the sale or disposition
should be taxable as capital gains, long-term or short-term, depending on the
holding period.
To the extent that an employee of the Company or any subsidiary realizes
ordinary income because he or she did not hold the stock more than two years
from the applicable Subscription Date and more than one year from the
applicable Purchase Date, the Company or its subsidiary generally will be
entitled to a corresponding deduction in the year in which the disposition
occurs. Otherwise, no deduction is allowable to the Company with respect to
shares acquired under the Employee Purchase Plan.
Plan Benefits. The number of shares of Common Stock which may be
purchased in the future by employees is dependent on each employee's decision
as to the extent, if any, to participate in the Employee Purchase Plan and,
therefore, cannot be determined.
STOCKHOLDER PROPOSALS
Any shareholder, whether of record or a beneficial owner, desiring to
submit a proposal for consideration to appear in the Company's 1998 Proxy
Statement shall submit such proposal, typewritten or printed, addressed to the
Secretary of the Company. Such proposal must identify the name and address of
the Stockholder, the number of the Company's shares held of record or
beneficially, the dates upon which the Stockholder acquired such shares and
documentary support for a claim of beneficial ownership. The proposal should be
sent Certified Mail - Return Receipt Requested to the attention of the
Secretary of the Company, and must be received not later than November 1,
1997. In addition to the foregoing procedure for inclusion of a shareholder
proposal in the Proxy Statement, the Company will consider other items of
business and nominations for election as Director of the Company that are
properly brought before the Annual Meeting by a Stockholder. To be properly
brought before the Annual Meeting, items of business must be appropriate
subjects for shareholder consideration, timely notice thereof must be given
in writing to the Secretary of the Company, and other applicable requirements
must be met.
GENERAL AND OTHER MATTERS
The Company knows of no matter that will be brought before the Annual
Meeting other than the matters expressly mentioned in the Notice of Annual
Meeting of Stockholders. However, if any further matters properly come before
the Annual Meeting or any of its adjournments, the person or persons voting the
proxies will vote them in accordance with their best judgment on such matters.
The Company will bear the expense of preparing, printing, and mailing this
proxy material, as well as the cost of any required solicitation. ADP Investor
Communication Services, Inc. has been retained by the Company to mail this
proxy statement to certain Stockholders who hold their shares of Common Stock
in "street name" and object to receiving proxy material directly from the
Company.
You are urged to mark, sign and return your proxy promptly to make certain
your shares will be voted at the meeting. For your convenience, a stamped self-
addressed envelope is enclosed.
A COPY OF THE COMPANY'S MOST RECENT FORM 10-KSB IS BEING MAILED WITH THIS
PROXY STATEMENT. UPON THE WRITTEN REQUEST OF ANY PERSON WHOSE PROXY IS
SOLICITED HEREUNDER, THE COMPANY WILL FURNISH WITHOUT CHARGE TO SUCH PERSON
A COPY OF ITS ANNUAL REPORT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON FORM 10-KSB, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO, FOR
THE FISCAL YEAR 1996. Such written requests should be directed to: Paul W.
Richter, Secretary and General Counsel, MVSI, Inc., 8133 Leesburg Pike,
Suite 750, Vienna, Virginia 22182. The Company's telephone numbers are:
(703) 356.5353 and facsimile (703) 356.5354.
Dated: March 4, 1997
EXHIBIT A:
STOCK OPTION PLAN
OF MVSI, INC.
Section 1. Purpose. This Stock Option Plan (the "Plan") is intended to
provide incentives: (a) to the officers and other employees of the Company and
its "Related Corporations" (as defined below) by providing them with
opportunities to purchase stock in the Company pursuant to options granted
hereunder, which options qualify as "incentive stock options" ("ISO" or
"ISO's") under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), and (b) to directors, officers, employees and consultants of
the Company and "Related Corporations" (as defined below) by providing them
with opportunities to purchase stock in the Company pursuant to options
granted hereunder which do not qualify as ISOs ("Non-Qualified Option" or
"Non-Qualified Options"). Both ISO's and Non-Qualified Options are referred to
hereafter individually as an "Option" and collectively as "Options".
For purposes of the Plan, the term "Related Corporations" shall mean a
corporation which is a subsidiary corporation with respect to the Company
within the meaning of Section 425(f) of the Code.
Section 2. Administration of the Plan. (a) The Plan shall be
administered by the Compensation Committee (the "Committee") of the Board of
Directors of the Company (the "Board"). The Committee shall consist of at
least two (2) directors to administer this Plan. Subject to ratification of
the grant or authorization of each Option by the Board (but only if so required
by applicable state law), and subject to the terms of the Plan, the Committee
shall have the authority to (i) determine the employees of the Company and
Related Corporations (from among the class of employees eligible under
Section 3 to receive ISOs) to whom ISOs may be granted, and to determine
(from among the class of individuals and entities eligible under Section 3 to
receive Non-Qualified Options) to whom Non-Qualified Options may be granted;
and (ii) determine the time or times at which Options may be granted;
(iii) determine the option price of shares subject to each Option, which price
for an ISO shall not be less than the minimum price specified in Section 6;
(iv) determine whether each option granted shall be an ISO or a Non-Qualified
Option; (v) determine (subject to Section 7) the time or times when each Option
shall become exercisable and the duration of the exercise period;
(vi) determine whether restrictions such as repurchase options are to be
imposed on shares subject to Options and the nature of such restrictions, if
any, and (vii) interpret the Plan and prescribe and rescind rules and
regulations relating to it. If the Committee determines to issue a
Non-Qualified Option, it shall take whatever actions it deems necessary, under
Section 422 of the Code and the regulations promulgated thereunder, to ensure
that such Option is not treated as an ISO. The interpretation and construction
by the Committee of any provisions of the Plan or of any Option granted under
it shall be final, binding and conclusive unless otherwise determined by the
Board.
The Committee may from time to time adopt such rules and regulations for
carrying out the Plan as it may deem best. No members of the Board or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option granted under it. No member of the
Committee or the Board shall be liable for any act or omission of any other
member of the Committee or the Board or for any act or omission on his own
part, including but not limited to the exercise of any power and discretion
given to him under the Plan, except those resulting from his own gross
negligence or willful misconduct.
(b) The Committee may select one of its members as its chairman, and shall
hold meetings at such time and places as it may determine. Acts by a majority
of the Committee, or acts reduced to or approved in writing by a majority of
the members of the Committee, shall be the valid acts of the Committee. All
references in this Plan to the Committee shall mean the Board if no Committee
has been appointed. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan. Each member of the Committee must qualify as an "outside
director" and "disinterested person" under applicable federal securities
regulations and federal tax laws and regulations.
(c) Options may be granted to members of the Board, but no Options shall
be granted to any person who is, at the time of the proposed grant, a member
of the Board, unless such grant has been approved by a majority vote of the
other members of the Board. All grants of Options to members of the Board
shall in all other respects be made in accordance with the provisions of this
Plan applicable to other eligible persons. Members of the Board who are either
(i) eligible for Options pursuant to the Plan or (ii) have been granted Options
may vote on any matters affecting the administration of the Plan or the grant
of any Options pursuant to the Plan, except that no such member shall act upon
the granting to himself of Options, but any such member may be counted in
determining the existence of a quorum at any meeting of the Board during
which action is taken with respect to the granting to him of Options.
(d) In addition to such other rights of indemnification as he may have as a
member of the Board or the Committee, and with respect to administration of the
Plan and the granting of Options under it, each member of the Board and of the
Committee shall be entitled without further act on his part to indemnity from
the Company for all expenses (including the amount of judgment and the
amount of approved settlements made with a view to the curtailment of costs of
litigation, other than amounts paid to the Company itself) reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding with respect to the administration of the Plan or the granting of
Options under it in which he may be involved by reason of his being or having
been a member of the Board or the Committee, whether or not he continues to be
such a member of the Board or the Committee at the time of the incurring of
such expenses; provided, however, that such indemnity shall not include any
expenses incurred by such member of the Board or the Committee (i) in respect
of matters as to which he shall be finally adjudged in such action, suit or
proceeding to have been guilty of gross negligence or willful misconduct in the
performance of his duties as a member of the Board or the Committee; or (ii) in
respect of any matter in which any settlement is effected to an amount in
excess of the amount approved by the Company on the advice of its legal
counsel; and provided further that no right of indemnification under the
provisions set forth herein shall be available to or accessible by any such
member of the Board or the Committee unless within thirty (30) days after
institution of any such action, suit or proceeding he shall have offered the
Company in writing the opportunity to handle and defend such action, suit or
proceeding at its own expense. The foregoing right of indemnification shall
inure to the benefit of the heirs, executors or administrators of each such
member of the Board or the Committee and shall be in addition to all other
rights to which such member of the Board or the Committee would be entitled
to as a matter of law, contract or otherwise.
Section 3. Eligible Employees and Others. When and if approved by the
Committee, ISOs may be granted to any employee of the Company or any Related
Corporation. Those officers and directors of the Company who are not
employees may not be granted ISOs under the Plan. Non-Qualified Options may
be granted to any director (whether or not an employee), officer, employee or
agent of the Company or any Related Corporation. The Committee may take into
consideration a recipient's individual circumstances in determining whether to
grant an ISO or a Non-Qualified Option. Granting of any Option to any
individual or entity shall neither entitle that individual or entity to, nor
disqualify him from, participation in any other grant of Options.
Section 4. Stock. The stock subject to Options shall be authorized but
unissued shares of Common Stock, $.01 par value, (the "Common Stock"), or
shares of Common Stock re-acquired by the Company in any manner. The aggregate
number of shares of Common Stock which may be issued pursuant to the Plan
(including shares issued pursuant to the Initial Plan) is 1,000,000, subject
to adjustment as provided in Section 13. Any such shares may be issued as
ISOs or Non-Qualified Options so long as the number of shares so issued does
exceed such number, as adjusted. If any Option granted under the Plan shall
expire or terminate for any reason without having been exercised in full or
shall cease for any reason to be exercisable in whole or in part, or if the
Company shall re-acquire any unvested shares issued pursuant to Options, the
unpurchased shares subject to such Options and any unvested shares so
re-acquired by the Company shall again be available for grants of Options under
the Plan.
Section 5. Granting of Options. Options may be granted under the Plan at
any time on and after February 15, 1997. The date of grant of an Option under
the Plan will be the date specified by the Committee at the time it grants the
Option; provided, however, that such date shall not be prior to the date on
which the Committee acts to approve the grant. The Committee shall have the
right, with the consent of the optionee, to convert an ISO granted under the
Plan to a Non-Qualified Option pursuant to Section 16.
Section 6. Minimum Option Price and Other Limitations. (a) The price per
share specified in the agreement relating to each ISO granted under the Plan
shall not be less than the fair market value per share of Common Stock on the
date of such grant. In the case of an ISO to be granted to an employee owning
stock possessing more than ten percent of the total combined voting power of
all classes of stock of the Company or any Related Corporation, the price per
share specified in the agreement relating to such ISO shall not be less than
one hundred ten percent (110%) of the fair market value per share of Common
Stock on the date of grant.
(b) In no event shall the aggregate fair market value (determined at the
time an ISO is granted) of Common Stock for which ISOs granted to any employee
are exercisable for the first time by such employee during any calendar year
(under all stock option plans of the Company and any Related Corporation)
exceed $100,000, or such lower amount required under applicable federal laws
or regulations.
(c) If, at the time an Option is granted under the Plan, the Company's
Common Stock is publicly traded, "fair market value" shall be determined as of
the last business day for which the prices or quotes discussed in this sentence
are available prior to the date such Option is granted and shall mean (i) the
average (on that date) of the high and low prices of the Common Stock on the
principal national securities exchange on which the Common Stock is traded, if
the Common Stock is then traded on a national securities exchange; or (ii) the
last reported sale price (on that date) of the Common Stock on The Nasdaq
National Market System or the Nasdaq Small Cap Market tier of The Nasdaq Stock
Market, if the Common Stock is not then traded on a national securities
exchange; or (iii) the closing price last quoted (on that date) by an
established quotation service for over-the-counter securities, if the Common
Stock is not reported on the NASDAQ National Market List. However, if the
Common Stock is not publicly traded at the time an Option is granted under the
Plan, "fair market value" shall be deemed to be the fair value of the Common
Stock as determined by the Committee after taking into consideration all
factors which it deems appropriate, including, without limitation, recent sale
and offer prices of the Common Stock in private transactions negotiated at
arm's length.
(d) The exercise price or option price for non-qualified stock options
shall not be less than eighty five percent (85%) of the fair market value of
the shares of Common Stock on the date of grant.
(e) The number of shares of Common Stock which may be purchased upon the
exercise of any option granted herein shall be subject to the following
vesting schedule: 50% of the shares of Common Stock shall be available for
purchase by the optionee (the "optionee" or "Option Holder") on or after the
first anniversary of the grant of the Option and the remaining 50% of the
remaining of the shares of Common Stock shall be available for purchase by the
Option Holder on or after the second anniversary of the grant of the Option.
Section 7. Option Duration. Subject to earlier termination as provided
in sections 9 and 10, each Option shall expire on the date specified by the
Committee, but not more than (i) ten years and one day from the date of grant
in the case of Non-Qualified Options, (ii) ten years from the date of grant in
the case of ISOs generally, and (iii) five years from the date of grant in the
case of ISOs granted to an employee owning stock possessing more than ten
percent of the total combined voting power of all classes of stock of the
Company or any Related Corporation. Subject to earlier termination as provided
in sections 9 and 10, the term of each ISO shall be the term set forth in the
original instrument granting such ISO, except with respect to any part of such
ISO that is converted into a Non-Qualified Option pursuant to Section 16.
Section 8. Exercise of Option. Subject to the provisions of Sections 9
through 12, each Option granted under the Plan shall be exercisable as follows:
(a) The Option shall either be fully exercisable on the date of grant
or shall become exercisable thereafter in such installments as the Committee
may specify.
(b) Once the installment becomes exercisable it shall remain
exercisable until expiration or termination of the Option, unless otherwise
specified by the Committee.
(c) Each Option or installment may be exercised at any time or from time
to time, in whole or in part, for up to the total number of shares with respect
to which it is then exercisable.
(d) The Committee shall have the right to accelerate the date of
exercise of any installment of any Option; provided that the Committee shall
not accelerate the exercise date of any installment of any Option granted to
any employee as an ISO (and not previously converted into a Non-Qualified
Option pursuant to Section 16) if such acceleration would violate the annual
vesting limitation contained in Section 422 (b)(7) of the Code.
Section 9. Termination of Employment. Subject to any greater
restrictions or limitations as may be imposed by the Committee upon the
granting of any ISO: If an ISO Option Holder ceases to be employed by the
Company and all Related Corporations other than by reason of death or
disability as defined in Section 10, no further installments of his ISOs shall
become exercisable, and his ISOs shall terminate after the passage of 60 days
from the date of termination of his employment, but in no event later than on
their specified expiration dates, except to the extent that such ISOs (or
unexercised installments thereof) have been converted into Non-Qualified
Options pursuant to Section 16. Employment shall be considered as continuing
uninterrupted during any bona fide leave of absence (such as those attributable
to illness, military obligations or governmental service) provided that the
period of such leave does not exceed 90 days or, if longer, any period during
which such optionee's right to re-employment is guaranteed by applicable laws.
A bona fide leave of absence with the written approval of the Committee shall
not be considered an interruption of employment under the Plan, provided that
such written approval contractually obligates the Company or any Related
Corporation to continue the employment of the Option Holder after the approved
period of absence. ISOs granted under the Plan shall not be affected by any
change of employment within or among the Company and Related Corporations, so
long as the Option Holder continues to be an employee of the Company or any
Related Corporation.
Section 10. Death; Disability. Subject to any greater restrictions or
limitations as may be imposed by the Committee upon the granting of any ISO:
(a) If an ISO Option Holder ceases to be employed by the Company and all
Related Corporations by reason of his death, any ISO of his may be exercised,
to the extent of the number of shares with respect to which he could have
exercised it on the date of his death, by his estate, personal representative
or beneficiary who has acquired the ISO by will or by the laws of descent and
distribution, at any time prior to the earlier of the ISO's specified
expiration date or 180 days from the date of the optionee's death.
(b) If an ISO Option Holder ceases to be employed by the Company and all
Related Corporations by reason of his disability, he shall have the right to
exercise any ISO held by him on the date of termination of employment, to the
extent of the number of shares with respect to which he could have exercised it
on the earlier of the ISO's specified expiration date or 180 days from the date
of the termination of the optionee's employment. For the purposes of the Plan,
the term "disability" shall mean "permanent and total disability" as defined in
Section 22(e)(3) of the Code or successor statute.
Section 11. Assignability. No Option shall be assignable or transferable
by the grantee, except by will or by the laws of descent and distribution, or
if the transfer is made to an immediate family member of the optionee or to a
trust, partnership or limited liability company established for the benefit of
an immediate family member of the optionee (collectively, a "Permitted
Assignee"). For purposes of this Plan, the phrase "immediate family member"
shall mean the spouse, any children, the parents, any sister or any brother of
the optionee. The Option may only be exercised by the optionee or, if the
Option is transferred to a Permitted Transferee by the optionee, the Permitted
Assignee. Any derivative security issued under the Option Plan to an officer
or director shall not be transferable other than by will or the laws of descent
and distribution or pursuant to a "qualified domestic relations order" (as
defined by the Code). The designation of a beneficiary by an officer or
director does not constitute a transfer under the foregoing restriction.
Section 12. Terms and Conditions of Options. Options shall be evidenced
by instruments (which need not be identical) in such forms as the Committee
may from time to time approve. Such instruments shall conform to the terms
and conditions set forth in Sections 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. In granting any Non-Qualified Option, the
Committee may specify that such Non-Qualified Option shall be subject to the
restrictions set forth herein with respect to ISOs, or to such other termination
and cancellation provisions as the Committee may determine. The Committee may
from time to time confer authority and responsibility on one or more of its own
members and/or one or more officers of the Company to execute and deliver such
instruments. The proper officers of the Company are authorized and directed to
take any and all action necessary or advisable from time to time to carry out
the terms of such instruments.
Section 13. Adjustments. Upon the occurrence of any of the following
events, an optionee's rights with respect to Options granted to him hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the Option Holder and the Company
relating to such Option:
(a) If the shares of Common Stock shall be subdivided or combined into a
greater or smaller number of shares or if the Company shall issue any shares of
Common Stock as a stock dividend on its outstanding Common Stock, the number of
shares of Common Stock deliverable upon the exercise of Options shall be
appropriately increased or decreased proportionately, and appropriate
adjustments shall be made in the purchase price per share to reflect such
subdivision, combination or stock dividend.
(b) If the Company is to be consolidated with or acquired by another
entity in a merger, sale of all or substantially all of the Company's assets or
otherwise (an "Acquisition"), the Committee or the board of directors of any
entity assuming the obligations of the Company hereunder (the "Successor
Board"), shall, as to outstanding Options, either (i) make appropriate
provision for the continuation of such Options by substituting on an equitable
basis for the shares then subject to such Options the consideration payable
with respect to the outstanding shares of Common Stock in connection with the
Acquisition; or (ii) upon written notice to the optionees, provide that all
Options must be exercised, to the extent then exercisable, within a specified
number of days of the date of such notice, at the end of which period the
Options shall terminate; or (iii) terminate all Options in exchange for a cash
payment equal to the excess of the fair market value of the shares subject to
such Options (to the extent then exercisable) over the exercise price thereof.
(c) In the event of a recapitalization or reorganization of the Company
(other than a transaction described in subsection "(b)" above) pursuant to
which securities of the Company or of another corporation are issued with
respect to the outstanding shares of Common Stock, an Option Holder upon
exercising an Option shall be entitled to receive for the purchase price paid
upon such exercise the securities he would have received if he had exercised
his Option prior to such recapitalization or reorganization.
(d) Notwithstanding the foregoing, any adjustments made pursuant to
subsections "(a)", "(b)" or "(c)" above with respect to ISOs shall be made
only after the Committee, after consulting with legal counsel for the Company,
determines whether such adjustments would constitute a "modification" of such
ISOs (as that term is defined in section 425 of the Code) or would cause any
adverse tax consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs, it may refrain from making such adjustments.
(e) In the event of the proposed dissolution or liquidation of the
Company, each Option will terminate immediately prior to the consummation of
such proposed action or at such other time and subject to such other conditions
as shall be determined by the Committee.
(f) Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares subject to Options.
No adjustments shall be made for dividends paid in cash or in property other
than securities of the Company.
(g) No fractional share shall be issued under the Plan and the Option
Holder shall receive from the Company cash in lieu of such fractional
securities.
(h) Upon the happening of any of the foregoing events described in
subsections "(a)", "(b)" or "(c)" above, the aggregate number of shares set
forth in Section 4 hereof that are subject to Options which previously have
been or subsequently may be granted under the Plan shall also be appropriately
adjusted to reflect the events described in such subsections. The Committee
or the Successor Board shall determine the specific adjustments to be made
under this Section 13 and, subject to Section 2, its determination shall be
conclusive.
If any person or entity owning restricted Common Stock obtained by
exercise of an Option made hereunder receives shares or securities or cash in
connection with a corporate transaction described in subsections "(a)", "(b)"
or "(c)" above as a result of owning such restricted Common Stock, such shares
or securities or cash shall be subject to all of the conditions and
restrictions applicable to the restricted Common Stock with respect to which
such shares or securities or cash were issued, unless otherwise determined by
the Committee or the Successor Board.
Section 14. Means of Exercising Options.
(a) An Option (or any part or installment thereof) shall be exercised by
giving written notice to the Secretary of the Company at its principal
executive headquarters. Such notice shall identify the Option being exercised
and specify the number of shares as to which such Option is being exercised,
accompanied by full payment of the purchase price therefor either (i) in United
States dollars in cash or by check, or (ii) at the discretion of the Committee,
through delivery of shares of Common Stock having a fair market value equal
as of the date of the exercise to the cash exercise price of the Option, or
(iii) at the discretion of the Committee, by delivery of the grantee's personal
recourse note bearing interest payable not less than annually at no less than
100% of the lowest applicable Federal rate, as defined in Section 1274(d) of
the Code, or (iv) at the discretion of the Committee, by any combination of
(i), (ii) and (iii) above. If the Committee exercises its discretion to permit
payment of the exercise price of an ISO by means of the methods set forth in
clauses (ii), (iii), or (iv) of the preceding sentence, such discretion shall
be exercised in writing at the time of the grant of the ISO in question.
The holder of an Option shall not have the rights of a shareholder with respect
to the shares covered by his Option until the date of issuance of a stock
certificate to him for such shares. Except as expressly provided above in
Section 13 with respect to changes in the capitalization and stock dividends,
no adjustment shall be made for dividends or similar rights for which the
record date is before the date such stock certificate is issued.
(b) Each notice of exercise shall, unless the shares issuable pursuant to
an Option (the "Option Shares") are covered by a then current registration
statement or a Notification under Regulation A under the Securities Act of
1933, as amended from time to time (the "Act"), contain the Optionee's
acknowledgment in form and substance satisfactory to the Company that (i) such
Option Shares are being purchased for investment and not for distribution or
resale (other than a distribution or resale which, in the opinion of counsel
satisfactory to the Company, may be made without violating the registration
provisions of the Act), (ii) the Optionee has been advised and understands that
(A) the Option Shares have not been registered under the Act and are
"restricted securities" within the meaning of Rule 144 under the Act and are
subject to restrictions on transfer and (B) the Company is under no obligation
to register the Option Shares under the Act or to take any action which would
make available to the Optionee any exemption from such registration, and
(c) such Option Shares may not be transferred without compliance with all
applicable federal and states securities laws. Notwithstanding the above,
should the Company be advised by counsel that issuance of shares should be
delayed pending (A) registration under federal or state securities laws or
(B) the receipt of an opinion that an appropriate exemption therefrom is
available, the Company may defer exercise of any Option granted hereunder until
either such event in "(A)" or "(B)" has occurred.
Section 15. Term of Plan. This Plan was adopted by the Board on February
15, 1997 subject (with respect to the validation of ISOs granted under the
Plan) to approval of the Plan by the stockholders of the Company at the next
meeting of stockholders to be held on April 14, 1997. If the approval of
stockholders is not obtained by May 1, 1997, any grants of ISOs under the Plan
made prior to that date will be rescinded. The Plan shall expire on
February 15, 2007 (except as to Options outstanding on that date). Subject to
the provisions of Section 5 above, Options may be granted under the Plan prior
to the date of stockholder approval of the Plan. The Board may terminate or
amend the Plan in any respect at any time, except that, without the approval of
the stockholders obtained within 12 months before or after the Board adopts a
resolution authorizing any of the following actions: (i) the total number of
shares that may be issued under the Plan may not be increased (except by
adjustment pursuant to Section 13); (ii) the provisions of Section 3 regarding
eligibility for grants of ISOs may not be modified; (iii) the provisions of
Section 6(a) regarding the exercise price at which shares may be offered
pursuant to ISOs may not be modified (except by adjustment pursuant to Section
13); and (iv) the expiration date of the Plan may not be extended.
Except as provided in the fourth sentence of this Section 15, in no event may
any action of the Board or stockholders alter or impair the rights of a grantee
or optionee, without his consent, under any Option previously granted to him.
Section 16. Conversion of ISOs into Non-Qualified Options; Termination of
ISOs. The Committee, at the written request of any optionee, may in its
discretion take such actions as may be necessary to convert such optionee's
ISOs (or any installments or portions of installments thereof) that have not
been exercised on the date of conversion into Non-Qualified Options at any
time prior to the expiration of such ISOs, regardless of whether the Option
Holder is an employee of the Company or a Related Corporation at the time of
such conversion.
Such actions may include, but not be limited to, extending the exercise
period or reducing the exercise price of the appropriate installments of such
Options. At the time of such conversion, the Committee (with the consent of
the optionee) may impose such conditions on the exercise of the resulting
Non-Qualified Options as the Committee in its discretion may determine,
provided that such conditions shall not be inconsistent with this Plan.
Nothing in the Plan shall be deemed to give any Option Holder the right to have
such optionee's ISOs converted into Non-Qualified Options, and no such
conversion shall occur until and unless the Committee takes appropriate
action. The Committee, with the consent of the optionee, may also terminate
any portion of any ISO that has not been exercised at the time of such
termination.
Section 17. Application of Funds. The proceeds received by the Company
from the sale of shares pursuant to Options granted under the Plan shall be
used for general corporate purposes.
Section 18. Governmental Regulations. The Company's obligation to sell
and deliver shares of the Common Stock under this Plan is subject to the
approval of any governmental authority required in connection with the
authorization, issuance or sale of such securities.
Section 19. Withholding of Additional Income Taxes. Upon the exercise of
a Non-Qualified Option for less than its fair market value, the making of a
"Disqualifying Disposition" (as defined in Section 20 below) or the vesting of
restricted Common Stock acquired on the exercise of an Option hereunder, the
Company, in accordance with Section 3402(a) of the Code, may require the Option
Holder to pay additional withholding taxes in respect of the amount that is
considered compensation included in such person's gross income. The Committee
in its discretion may condition (i) the exercise of an Option or (ii) the
vesting of restricted Common Stock acquired by exercising an Option on the
grantee's payment of such additional withholding taxes.
Section 20. Notice to Company of Disqualifying Disposition. Each
employee who receives an ISO must agree to notify the Company in writing
immediately after the employee makes a "Disqualifying Disposition" of any
Common Stock acquired pursuant to the exercise of an ISO. A "Disqualifying
Disposition" is any disposition (including any sale) of such Common Stock
before the later of (a) two years after the date of employee was granted the
ISO or (b) one year after the date the employee acquired Common Stock by
exercising the ISO. If the employee has died before such stock is sold, these
holding period requirements do not apply and no Disqualifying Disposition can
occur thereafter.
Section 21. Continued Employment. The grant of an Option pursuant to the
Plan shall not be construed to imply or to constitute evidence of any
agreement, express or implied, on the part of the Company or any affiliated
person or entity to retain the Optionee in the employ of the Company or such an
affiliate, as a member the Company's Board of Directors or in any other
capacity, whichever the case may be.
Section 22. Governing Law; Construction. The validity and construction
of the Plan and the instruments evidencing Options shall be governed by the
laws of the State of Delaware. In construing this Plan, the singular shall
include the plural and the masculine gender shall include the feminine and
neuter, unless the context otherwise requires.
Section 23. Approval of Shareholders. The Plan shall take effect upon
adoption by the Board of Directors; provided, however, that any options granted
and purchases of stock under the Plan shall be null and void unless the Plan
is approved by a vote of the holders of a majority of the total number of
outstanding shares of voting stock of the Company represented in person or by
proxy at a meeting at which a quorum is present in person or by proxy, which
approval must occur within the period of 12 months after the date the Plan is
adopted by the Board of Directors.
EXHIBIT B: EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. PURPOSE. This Employee Stock Purchase Plan (the "Plan") is
intended to advance the interests of MVSI, Inc. (the "Company") and its
stockholders by allowing employees of the Company and those subsidiaries of the
Company that participate in the Plan the opportunity to purchase shares of the
Company's Common Stock ("Common Stock"). It is intended that the Plan will
constitute an "employee stock purchase plan" within the meaning of Section 423
of the Internal Revenue Code of 1986, as amended from time to time (the "Code").
SECTION 2. ADMINISTRATION. The Plan shall be administered by the
Compensation Committee (the "Committee") of the Board of Directors. The
members of the Committee shall be non-employee directors of the Board of
Directors. The majority of the Committee shall constitute a quorum, and the
action of (a) a majority of the members of the Committee present at any meeting
at which a quorum is present or (b) all members acting unanimously by written
consent, shall be the acts of the Committee. The interpretation and
construction by the Committee of any provision of the Plan or of any
subscription to purchase shares under it shall be final. The Committee may
establish any policies or procedures which in the discretion of the Committee
are relevant to the operation and administration of the Plan and may adopt
rules for the administration of the Plan. The Committee will, from time to
time, designate the subsidiaries (as defined below) of the Company whose
employees will be eligible to participate in the Plan. No member of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any subscription to purchase shares under it.
For purposes of this Plan, the term "subsidiary" means any corporation in which
the Company directly or indirectly owns or controls more than fifty percent
(50%) of the total combined voting power of all classes of stock issued by the
corporation.
SECTION 3. ELIGIBILITY. Each employee of the Company or of a
participating subsidiary of the Company whose customary employment is a minimum
of 20 hours per week, and who has worked for the Company or a participating
subsidiary for at least ninety consecutive days, may subscribe to purchase
shares of Common Stock under the terms of the Plan, except that no employee may
subscribe to purchase shares on the immediately following Purchase Date (as
defined below) if, immediately after the immediately preceding Subscription
Date (as defined below), such employee would own stock possessing five percent
(5%) or more of the total combined voting power or value of all classes of
stock of the Company or of any subsidiary of the Company. For purposes of this
section, stock ownership of an individual shall be determined under the rules
of Section 424(d) of the Code.
For purposes of the Plan: (a) The term "Subscription Date" means the
first business day of each fiscal quarter of the Company during which the Plan
is effective or, in the case of a participant who is not an employee of the
Company or a participating subsidiary of the Company as of a particular
Subscription Date, the date thereafter on which such participant became an
employee of the Company or a participating subsidiary of the Company. The
first Subscription Date under the Plan will be May 1, 1997.
(b) The term "Purchase Date" means the last business day of the fiscal
quarter in which the related Subscription Date occurs.
SECTION 4. PARTICIPATION. (a) An eligible employee shall evidence his
or her agreement to subscribe for shares by completing a written agreement (the
"Subscription and Authorization Form") provided by the Committee and filing it
as directed by the Committee. A Subscription and Authorization Form will take
effect within a reasonable time after it has been filed with the Company and
accepted by the Committee. Once an employee provides the Committee with the
Subscription and Authorization Form, he or she continues as a participant in
the Plan on the terms provided in such form until he or she provides a new form
or withdraws from the Plan.
(b) In the Subscription and Authorization Form, an eligible employee
shall designate any whole dollar amount to be withheld from such employee's
compensation in each pay period and used to purchase shares of Common Stock on
the next Purchase Date, subject to the following limitations: (i) the whole
dollar amount (on an annualized basis) shall not exceed 10 percent of his or
her compensation (as defined below) on an annualized basis; (ii) the maximum
number of shares of Common Stock which can be purchased by any one employee on
any Purchase Date shall not exceed 1,000 shares of the Common Stock; and (iii)
the Committee may establish from time to time minimum payroll deductions. For
purposes of this Plan, the term "compensation" means gross regular earnings.
SECTION 5. STOCK. The stock purchased under the Plan shall be shares of
authorized but unissued or re-acquired Common Stock. Subject to the provisions
of Section 6(h), the aggregate number of shares which may be purchased under
the Plan shall not exceed 250,000 shares of Common Stock. In the event that
the dollar amount of shares subscribed for in any quarter exceeds the number
of shares available to be purchased under the Plan, the shares available to
be purchased shall be allocated on a pro rata basis among the subscriptions.
SECTION 6. TERMS AND CONDITIONS OF SUBSCRIPTIONS. Subscriptions shall be
evidenced by a Subscription and Authorization Form in such form as the
Committee shall from time to time approve, provided that all employees
subscribing to purchase shares shall have the same rights and privileges
(except as otherwise provided in Section 4(b) and subsection (d) below),
and provided further that such subscriptions shall comply with and be subject
to the following terms and conditions:
(a) Purchase Price. The purchase price shall be an amount equal to
eighty five percent (85%) of the fair market value of such stock on the
Purchase Date. During such time as the Common Stock is traded on the Nasdaq
Small Cap Market tier of The Nasdaq Stock Market or The Nasdaq National Market
System, the fair market value per share shall be the closing price of the
Common Stock on such Purchase Date (or on the next regular business date on
which shares of the Common Stock of the Company shall be traded in the event
that no shares of the Common Stock shall have been traded on the Purchase
Date). If the Common Stock is traded on a national securities exchange, the
average (on that date) of the high and low prices of the Common Stock on the
principal national securities exchange on which the Common Stock is traded
shall be the fair market value for purposes of this section. Subject to the
foregoing, the Committee shall have full authority and discretion in fixing the
purchase price.
(b) Medium and Time of Payment. The purchase price shall be payable in
full in United States dollars, pursuant to uniform policies and procedures
established by the Committee. The funds required for such payment will be
derived by withholding from an employee's compensation. An employee shall have
the right at any time to terminate the withholding from his or her compensation
of amounts to be paid toward the purchase price. An employee shall have the
right, one time in each quarter, to change the amount so withheld, by
submitting a written request to the Company at least 10 business days before
any Purchase Date. An employee shall have the right to cancel his or her
subscription in whole or in part and to obtain a refund of amounts withheld
from his or her compensation by submitting a written request to the Company at
least 10 business days before any Purchase Date. Any cancellation of a
subscription in whole will constitute a withdrawal under Section 4(a) of the
Plan. Such amounts shall thereafter be paid to the employee within a
reasonable period of time.
(c) No Interest on Employee Funds. No interest shall accrue on any
amounts withheld from an employee's compensation.
(d) Accrual Limitation. No subscription shall permit the rights of an
employee to purchase stock under all "employee stock purchase plans" (as
defined in the Code) of the Company to accrue, under the rules set forth in
Section 423(b)(8) of the Code, at a rate which exceeds $25,000 of fair market
value of such stock (determined at the time of subscription) for each calendar
year.
(e) Termination of Employment. If an employee who has subscribed for
shares ceases to be employed by the Company or a participating subsidiary
before any applicable Purchase Date:
i. Because of retirement or disability, he or she may elect to continue
making payments equal to the rate of payroll deductions made before retirement
or disability until the first Purchase Date following retirement or disability;
or otherwise the accumulated payment in his or her account at the time of
retirement or disability will be applied to purchase shares at the applicable
purchase price on the first Purchase Date following such retirement or
disability, unless the Company is otherwise notified in writing.
ii. For any other reason, he or she may elect to have the accumulated
payment in his or her account at the time of termination applied to purchase
shares at the applicable purchase price on the first Purchase Date following
such termination; or otherwise the total unused payments credited to his or her
account on the date of termination will be refunded within a reasonable time
without interest, unless the Company is otherwise notified in writing.
(f) Transferability. Neither payments credited to an employee's account
nor any rights to subscribe to purchase shares of Common Stock under the Plan
may be transferred by an employee except by the laws of descent and
distribution. Any such attempted transfer will be without effect, except that
the Company may treat such act as an election by the employee to withdraw in
accordance with Section 6(b). Shares of Common Stock may be purchased under
the Plan only by subscribing employees who have legal capacity as determined
under applicable state law or, in the event of the employee's legal incapacity,
by his or her guardian or legal representative acting in a fiduciary capacity
on behalf of the employee under state law or court supervision.
(g) Death and Designation of Beneficiary. An employee may file with the
Company a written designation of beneficiary and may change such designation of
beneficiary at any time by written notice to the Company. On the death of an
employee, the elections provided on termination of employment for retirement or
disability may be exercised by the employee's beneficiary, executor,
administrator, or other legal representative.
(h) Adjustments. The Committee may make or provide for such adjustments
in the purchase price and in the number or kind of shares of the Common Stock
or other securities covered by outstanding subscriptions, or specified in the
second sentence of Section 5 of the Plan, as the Committee in its sole
discretion, exercised in good faith, may determine is equitably required to
prevent dilution or enlargement of the rights of employees that would otherwise
result from (i) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company; (ii)
any merger, consolidation, spin-off, split-off, spin-out, split-up, separation,
reorganization, partial or complete liquidation, or other distribution of
assets, issuance of rights or warrants to purchase stock; or (iii) any other
corporate transaction or event having an effect similar to any of the
foregoing. Moreover, in the event of any such transaction or event, the
Committee, in its discretion, may provide in substitution for any or all
outstanding subscriptions under this Plan such alternative consideration as it,
in good faith, may determine to be equitable in the circumstances.
(i) Rights as a Stockholder. An employee shall have no rights as a
stockholder with respect to any Common Stock covered by his or her subscription
until the Purchase Date following payment in full. No adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior
to the date of such purchase, except as provided in Section 6(h) of the Plan.
(j) Fractional Shares. Fractional shares may be purchased under the
Plan and credited to an account for the employee. The Company, however, shall
have the right to pay cash in lieu of any fractional shares of Common Stock to
be distributed from an employee's account under the Plan.
(k) Other Provisions. The Subscription and Authorization Form
authorized under the Plan shall contain such other provisions as the Committee
may deem advisable, provided that no such provisions may in any way be in
conflict with the terms of the Plan.
SECTION 7. TERM OF PLAN. Eligible employees may subscribe for shares
under the Plan within a period of ten years from the date the Plan is adopted
by the Board of Directors; provided, however, that the Committee may terminate
or suspend the Plan if at any time there are less than five percent (5%) of
the eligible employees participating in the Plan.
SECTION 8. AMENDMENT OF THE PLAN. The Plan may be amended from time to
time by the Committee, but without further approval of the stockholders, no
such amendment shall (a) increase the aggregate number of shares of Common
Stock that may be issued and sold under the Plan (except that adjustments
authorized by Section 6(h) of the Plan shall not be limited by this provision)
or (b) materially modify the requirements as to eligibility for participation
in the Plan.
SECTION 9. APPROVAL OF STOCKHOLDERS. The Plan shall take effect upon
adoption by the Board of Directors; provided, however, that any subscriptions
and purchases under the Plan shall be null and void unless the Plan is
approved by a vote of the holders of a majority of the total number of
outstanding shares of voting stock of the Company represented in person or by
proxy at a meeting at which a quorum is present in person or by proxy, which
approval must occur within the period of 12 months after the date the Plan is
adopted by the Board of Directors.
I hereby certify that the foregoing Plan was duly adopted by the Board of
Directors of MVSI, Inc. on February 15, 1997.
Executed on this 15th day of February, 1997.
/s/
____________________________________________
Paul W. Richter, Secretary
Directions to Annual Meeting:
FROM VIRGINIA BY WAY OF I-95: I-95 North to 495 North (Rockville Exit).
Take Exit 11B for Route 123 (Chain Bridge Road). Make a right turn at 2nd
Traffic Light on to International Drive. Get into Left Lane and at next
Traffic Light turn Left on to Greensboro Drive. Make 2nd Left into driveway
of the Holiday Inn Tysons Corner.
FROM NATIONAL AIRPORT BY WAY OF GEORGE WASHINGTON PARKWAY: At the
Airport, get on to the George Washington Parkway heading North (signs say "to
D.C."). Follow the George Washington Parkway along the Potomac River until it
ends at the Capitol Beltway (495), where you bear left on to 495 South (to
Virginia). Take Exit 11B for Route 123 (Chain Bridge Road). Make a Right Turn
at 2nd Traffic Light on to International Drive. Get into Left Lane and at next
Traffic Light turn Left on to Greensboro Drive. Make 2nd Left into driveway of
the Holiday Inn Tysons Corner.
FROM DULLES AIRPORT BY WAY OF THE TOLL ROAD: At the Airport, get on to
the toll road, or Route 267E. Take exit for Leesburg Pike, Route 7 East. Go
to 3rd Traffic Light and Turn Left on to Westpark Drive. Go to 1st Traffic
Light and turn right on to Greensboro Drive. At the end of the block turn
Right into the driveway of the Holiday Inn Tysons Corner.
ALTHOUGH THE STREET ADDRESS FOR THE HOLIDAY INN TYSONS CORNER IS CHAIN
BRIDGE ROAD, THERE IS NO DIRECT ACCESS TO THE HOTEL FROM CHAIN BRIDGE ROAD.
ADMISSION SLIP
The Stockholder bearing this slip is entitled to attend the 1997 Annual
Meeting of Stockholders of MVSI, Inc.
DATE: Monday, April 14, 1997
TIME: 11:00 A.M.
LOCATION: Holiday Inn Tysons Corner, 1960 Chain
Bridge Road, McLean, Virginia 22102,
(703) 893-2100.
