PRELIMINARY COPIES
PROXY
WANDERLUST INTERACTIVE, INC.
598 Broadway
New York, New York 10012
This Proxy is solicited on behalf of the Board of Directors.
The undersigned, revoking all proxies, hereby appoints
Catherine Winchester and Richard S. Kalin and each of them, proxies
with power of substitution to each, for and in the name of the
undersigned to vote all shares of Common Stock of Wanderlust
Interactive, Inc. (the "Company") which the undersigned would be
entitled to vote if present at the Annual Meeting of Shareholders
of the Company to be held on January 15, 1997, at 10:00 A.M. at the
offices of Wanderlust Interactive, Inc., 462 Broadway, 6th Floor,
New York, New York, and any adjournments thereof, upon the matters
set forth in the Notice of Annual Meeting.
The undersigned acknowledges receipt of the Notice of Annual
Meeting, Proxy Statement and the Company's 1996 Annual Report.
1. ELECTION OF DIRECTORS
FOR all nominees listed WITHHOLD Authority to
below (except as marked vote for all nominees
to the contrary below) listed below
(INSTRUCTION: To withhold authority to vote for an individual
nominee, strike a line through such nominee's name in the list
below.)
CATHERINE WINCHESTER, RICHARD S. KALIN and
RICHARD S. MELNICK
2. APPROVAL OF THE ADOPTION OF THE 1996 STOCK OPTION PLAN;
and
FOR AGAINST
3. IN THEIR DISCRETION, ON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING.
FOR AGAINST
PLEASE SIGN ON THE NEXT PAGE AND RETURN THIS PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
and when properly executed will be voted as directed herein. If no
direction is given, this Proxy will be voted FOR proposals 1, 2 and
3.
DATED: , 1996
(Signature)
(Signature, if held jointly)
Where stock is registered in the
names of two or more persons ALL
should sign. Signature(s) should
correspond exactly with the name(s)
as shown above. Please sign, date
and return promptly in the enclosed
envelope. No postage need be affixed
if mailed in the United States.
<PAGE>
PRELIMINARY COPIES
WANDERLUST INTERACTIVE, INC.
(a Delaware Corporation)
Notice of 1997 Annual Meeting
of Shareholders to be held
at 10:00 A.M. on January 15, 1997
To the Shareholders of
WANDERLUST INTERACTIVE, INC.
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of
Shareholders (the "Meeting") of WANDERLUST INTERACTIVE, INC. (the
"Company") will be held on January 15, 1997 at 10:00 A.M. at the
offices of Wanderlust Interactive, Inc., 462 Broadway, 6th Floor,
New York, New York, to consider and vote on the following matters
described under the corresponding numbers in the attached Proxy
Statement:
1. Election of three directors;
2. Approval of adoption of the 1996 Stock Option Plan; and
3. Such other matters as may properly come before the
Meeting.
The Board of Directors has fixed November 22, 1996, at the
close of business, as the record date for the determination of
shareholders entitled to vote at the Meeting, and only holders of
shares of Common Stock of the Company of record at the close of
business on that day will be entitled to vote. The stock transfer
books of the Company will not be closed.
A complete list of shareholders entitled to vote at the
Meeting shall be available for examination by any shareholder, for
any purpose germane to the Meeting, during ordinary business hours
from December 9, 1996 until the Meeting at the offices of the
Company. The list will also be available at the Meeting.
Whether or not you expect to be present at the Meeting, please
fill in, date, sign, and return the enclosed Proxy, which is
solicited by management. The Proxy is revocable and will not
affect your vote in person in the event you attend the Meeting.
By Order of the Board of Directors
Richard S. Kalin, Secretary
Date: December 2, 1996
Request for additional copies of proxy material and the Company's
Annual Report for its fiscal year ended June 30, 1996 should be
addressed to Shareholder Relations, Wanderlust Interactive, Inc.
598 Broadway, New York, New York 10012. This material will be
furnished without charge to any shareholder requesting it.
<PAGE>
PRELIMINARY COPIES
WANDERLUST INTERACTIVE, INC.
598 Broadway
New York, New York 10012
Proxy Statement
The enclosed proxy is solicited by the management of
Wanderlust Interactive, Inc. (the "Company") in connection with the
1997 Annual Meeting of Shareholders (the "Meeting") to be held on
January 15, 1997 at 10:00 A.M. at the offices of Wanderlust
Interactive, Inc., 462 Broadway, 6th Floor, New York, New York, and
any adjournment thereof. The Board of Directors has set November
22, 1996 as the record date for the determination of shareholders
entitled to vote at the Meeting. A shareholder executing and
returning a proxy has the power to revoke it at any time before it
is exercised by filing a later proxy with, or other communication
to, the Secretary of the Company or by attending the Meeting and
voting in person.
The proxy will be voted in accordance with your directions as
to:
(1) The election of the persons listed herein as directors of
the Company;
(2) Approval of adoption of the 1996 Stock Option Plan; and
(3) Such other matters as may properly come before the
Meeting.
In the absence of direction, the proxy will be voted in favor
of management's proposals.
The entire cost of soliciting proxies will be borne by the
Company. The costs of solicitation, which represent an amount
believed to be normally expended for a solicitation relating to an
uncontested election of directors, will include the costs of
supplying necessary additional copies of the solicitation materials
and the Company's Annual Report to Shareholders for its fiscal year
ended June 30, 1996 ("Fiscal 1996")(the "Annual Report") to
beneficial owners of shares held of record by brokers, dealers,
banks, trustees, and their nominees, including the reasonable
expenses of such recordholders for completing the mailing of such
materials and Annual Reports to such beneficial owners.
Only shareholders of record of the Company's 3,763,719 shares
of Common Stock (the "Common Stock") outstanding at the close of
business on November 22, 1996 will be entitled to vote. Each share
of Common Stock is entitled to one vote. Holders of a majority of
the outstanding shares of Common Stock must be represented in
person or by proxy in order to achieve a quorum. The proxy
statement, the attached notice of meeting, the enclosed form of
proxy and the Annual Report are being mailed to shareholders on or
about December 2, 1996.
<PAGE>
1. ELECTION OF DIRECTORS
Three directors are to be elected by a majority of the votes
cast at the Meeting, each to hold office until the next Annual
Meeting of Shareholders and until his respective successor is
elected and qualifies. The persons named in the accompanying proxy
have advised management that it is their intention to vote for the
election of the following nominees as directors unless authority is
withheld:
Catherine Winchester
Richard S. Kalin
Richard S. Melnick
Management has no reason to believe that any nominee will be
unable to serve. In the event that any nominee becomes
unavailable, the proxies may be voted for the election of such
person or persons who may be designated by the Board of Directors.
The following table sets forth certain information as to the
persons nominated for election as directors of the Company at the
Meeting, all of whom are presently directors of the Company:
Position
with the Director
Name Age Company Since
Catherine Winchester 33 Chief Executive August 1994
and Financial
Officer, Director
Richard S. Kalin 41 Director and July 1994
Secretary
Richard S. Melnick 38 Director May 1995
Catherine Winchester. Ms. Winchester, a co-founder of the
Company, has been President, Chief Executive Officer and a director
since August 1994. In 1989, Ms. Winchester formed InterOptica
Publishing Limited ("InterOptica"), a developer of interactive
multimedia software CD-ROM titles. Ms. Winchester served as chief
executive and worked at InterOptica until December 1993, overseeing
various aspects of InterOptica, including product development,
sales, marketing finance and administration. From December 1993
until May 1994, Ms. Winchester was the President of Take-2
Interactive Software Inc., the successor to InterOptica. Ms.
Winchester graduated from Barnard College, Columbia University, in
1984.
Richard S. Kalin. Mr. Kalin, a co-founder of the Company, has
been Secretary and a director of the Company since it commenced
activities in July 1994. He is a co-founder, Secretary and
Director of Pentech International, Inc., a manufacturer and
marketer of writing instruments and stationery products primarily
for children. He is also Chairman, Secretary and Director of
Micronetics Wireless, Inc., a manufacturer of components for
wireless communications. He is a founding partner of Kalin &
Banner, general counsel to the Company. Mr. Kalin has been engaged
in the private practice of law since November 1978. He graduated
from Georgetown University Law Center in 1978 and University of
Illinois in 1975.
Richard S. Melnick. Mr. Melnick, a director of the Company
since May 1995, has been a private investor, mainly in the health
care and high technology fields, for the past ten years. In 1991,
Mr. Melnick co-founded Saliva Diagnostic Systems, Inc., a company
engaged in developing saliva and blood-based immunodiagnostic
products and served as a director from 1992 to 1993. Mr. Melnick
also co-founded DermaRx Corporation, a developer of wound care
products in 1985 and has served as a director since 1988.
Ms. Winchester and Mr. Kalin may be deemed to be promoters of
the Company as such term is defined in the rules and regulations
promulgated under the Securities Act.
Directors serve until the next annual meeting of stockholders
and until their respective successors are elected and qualify.
Directors not employed by the Company receive $1,000 per month for
their services as directors of the Company.
During the fiscal year ended June 30, 1996 ("Fiscal 1996"),
the Board of Directors met on three occasions and acted seven times
by unanimous consent.
OTHER EXECUTIVE OFFICERS
Position Position
with the Held
Name Age Company Since
Jeffrey I. Gross 32 Vice President - May 1996
North American
Sales and Marketing
Jennifer Scanlin 42 Vice President - May 1996
Development
Jeffrey I. Gross. Mr. Gross has been Vice President-North
American Sales and Marketing since May 1996. Prior to his
employment with the Company, from September 1994 through March
1996, Mr. Gross was an executive producer of CD-ROMs at Byron
Preiss Multimedia Division in New York. From April 1991 through
September 1994, Mr. Gross was Senior Product Manager at Absolute
Entertainment, Inc., a videogame production company located in New
Jersey. From September 1988 until April 1991, he was a marketing
manager at Microvideo Learning Systems, Inc., a producer of
training products for corporations.
Jennifer Scanlin. Ms. Scanlin has been employed by the
Company as a consultant since October 1994 and as an employee since
May 1996. Prior to her appointment as Vice President-Development
in May 1996, Ms. Scanlin served as the Company's creative director.
From July 1994 through December 1994, Ms. Scanlin consulted as a
producer to HBO Studios, a television production company. From
1980 until 1994, Ms. Scanlin was Vice President for Romulus
Productions, Inc., a media production company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Ms. Jennifer Scanlin, upon her appointment as Vice-President-
Development, did not timely file Form 3 to list her ownership of
securities. Mr. Jeffrey Gross did not timely file Form 3 to report
the grant of an option to him. These forms were subsequently
filed.
EXECUTIVE COMPENSATION
The following table sets forth information relating to the
cash compensation received during the Company's last three fiscal
years by the Company's executive officers:
SUMMARY COMPENSATION TABLE
Name and Annual Com- Other Annual
Principal Fiscal pensation- Compensation
Position Year Salary ($) Bonus ($)
Catherine Winchester, 1996 92,639 25,000
Chief Executive
Officer 1995 49,452 31,359(1)
_______________
(1) Includes $6,359 as the value of 10,003 shares of Common Stock
distributed as a bonus during Fiscal 1995.
Employment and Consulting Agreements
Ms. Winchester entered into a three-year employment agreement
(the "Agreement") with the Company, effective on March 26, 1996.
The Agreement provides that she will serve as Chief Executive
Officer and President of the Company and receive for her services
a base salary of $150,000 per year, plus annual cost of living
increases. The Agreement provides that Ms. Winchester will devote
substantially all of her business time, attention and energy to the
Company and be subject to a one year covenant not to directly
compete with the Company after her relationship with the Company
ends. Pursuant to the Agreement, Ms. Winchester is also entitled
to the following bonuses if the Company meets the specified
performance goals: (i) $25,000 upon completion of the first alpha
version (the completed, untested version) of the first title
designed and developed by the Company; (ii) $25,000 upon completion
of the first title designed, developed and marketed by the Company
delivered for commercial sale; and (iii) $25,000 for each
$1,000,000 of revenues from any titles (collectively, such bonuses
are referred to herein as the "Bonus"). Notwithstanding the
foregoing, the Bonus for any fiscal year shall not be greater than
$50,000 unless the Company has pretax income of at least $500,000,
shall not be greater than $75,000 unless the Company has pretax
income of at least $1,000,000 and shall not be greater than
$100,000 unless the Company has pretax income of at least
$1,500,000. She is also entitled to participate in all group
health and insurance programs and other fringe benefit or
retirement plans available to executive and other employees of the
Company.
In July 1995, Mr. Simon Winchester, Ms. Winchester's husband
and an author of travel books and magazine articles, began serving
as a creative consultant to the Company. Mr. Winchester receives
$24,000 per year for his services.
In November 1995, Mr. Melnick entered into a one-year
consulting agreement with the Company which provides that he shall
furnish the Company with his business consulting services
commencing in March 1996. Mr. Melnick was paid $31,000 during
Fiscal 1996.
STOCK OPTION PLANS
In September 1994, the Company's Board of Directors and
stockholders adopted a stock option plan (the "Stock Option Plan").
The Stock Option Plan was amended in September 1995 to increase the
number of shares for which options could be granted to 360,000.
The Company's stockholders approved the Stock Option Plan, as
amended, in September 1995. No options may be issued under the
Stock Option Plan after April 1, 2004. The Stock Option Plan
provides that options may be granted to employees, consultants or
directors. Options granted under the Stock Option Plan may be
incentive or non-qualified options, or both, as such terms are
defined in the Internal Revenue Code of 1986, as amended. All
directors and advisors to the Company's Board of Directors who are
not employees of the Company shall automatically receive a grant of
10,000 non-qualified options upon election or appointment to the
Board, provided that the director is elected or appointed
subsequent to the date the Stock Option Plan was approved by the
Company's stockholders (September 13, 1995). From June 1995
through May 1996, an aggregate of 325,028 options were granted to
20 employees of the Company. These options expire six years from
the date of issuance and are exercisable at prices ranging from
$1.08 to $5.50 per share.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END (FYE) OPTION VALUES
Number of
Securities
Underlying Value of
Unexercised Unexercised
Options In-the-Money
Shares Ac- At FYE Options At FYE
quired On Value Exercisable/ ($) Exercisable/
Name Exercise Realized Unexercisable Unexercisable (1)
Jennifer - - 5,001/20,008 36,257/145,058
Scanlin
Jeffrey I. - - 0/25,000 0/181,250
Gross
COMPENSATION OF DIRECTORS
Directors are compensated for the time spent on Company
matters, including attendance at directors' and other meetings.
During Fiscal 1996, Mr. Melnick received $31,000 and Mr. Kalin
received $3,000. In addition, Kalin & Banner, a law firm in which
Mr. Kalin is a partner, received approximately $206,500 in fees and
reimbursement of expenses.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of October 15, 1996, the
number of shares of Common Stock held of record or beneficially (i)
by each person who held of record, or was known by the Company to
own beneficially, more than five percent of the outstanding shares
of the Common Stock, (ii) by each director and (iii) by all
officers and directors as a group:
Number of Percent of
Names and Address Shares Owned (1) Outstanding Shares
of Beneficial Owner Owned (1) of Common Stock
Catherine Winchester 537,878(2) 14.8%
258 Broadway, #6A
New York, New York 10007
Richard S. Kalin 431,464(3) 11.7%
P.O. Box 462
Bridgehampton, N.Y. 11932
Number of Percent of
Names and Address Shares Owned (1) Outstanding Shares
of Beneficial Owner Owned (1) of Common Stock
Richard S. Melnick 255,196(4) 9.2%
P.O. Box 3346
Boulder, CO 80304
All officers and
directors as a
group (three persons) 1,309,638(2)(3)(4) 35.7%
(1) All shares owned directly unless otherwise noted.
(2) Includes 166,732 shares of Common Stock owned by Mr. Simon
Winchester, Ms. Winchester's husband, as to which she
disclaims beneficial ownership.
(3) Includes 84,199 shares of Common Stock owned by Ms. Noelle
Makenzie, Mr. Kalin's wife, and 13,801 shares of Common Stock,
including 4,631 shares of Common Stock issuable upon
conversion of a $10,000 Convertible Debenture owned by Mr.
Kalin's minor child, as to all of which he disclaims
beneficial ownership.
(4) Includes 87,867 shares of Common Stock owned by Ms. Alice
Melnick, Mr. Melnick's wife, as to which he disclaims
beneficial ownership.
CERTAIN TRANSACTIONS
In April 1995 and December 1995, Ms. Winchester personally
guaranteed performance of the Company's obligations pursuant to its
leases for the two floors of the Company's offices located at 598
Broadway, New York, New York. The Company intends to vacate these
offices in December 1996.
2. APPROVAL OF THE COMPANY'S 1996 STOCK OPTION PLAN
The Board of Directors is recommending approval of the
Company's 1996 Stock Option Plan (the "1996 Plan"). The Board of
Directors adopted the 1996 Plan on July 25, 1996.
The 1996 Plan provides for the issuance of incentive and non-
statutory stock options to employees, consultants, advisors and/or
directors. The Company will reserve 360,000 shares of its Common
Stock for issuance of shares of Common Stock pursuant to the 1996
Plan. The 1996 Plan will be in effect for ten years from its
effective date. Options shall be exercisable at the fair market
value at the date of the grant except options issued to persons who
own in excess of ten percent of the Common Stock may be no less
than 110% of the fair market value.
Generally, for Federal income tax purposes neither the grant
nor exercise of an incentive option will result in any tax effect
on either the Company or the recipient. Upon the sale of Common
Stock issued upon exercise of such an option, the recipient is
obligated to pay federal tax on any amount received from the sales
price over the exercise price of the option, as a capital gain.
Generally, this is not a taxable event for the Company. With
respect to non-incentive options, the difference between the
exercise price of the option and the market price of a share of
Common Stock on the day of exercise will be treated as ordinary
income for the recipient and compensation expense for the Company.
A copy of the 1996 Plan is attached hereto as Exhibit "A".
Along with certain prerequisites already incorporated into the body
of the 1996 Plan, Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 requires the 1996 Plan's approval by a
majority of the votes cast at the Meeting.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE IN
FAVOR OF ADOPTION OF THE COMPANY'S 1996 STOCK OPTION PLAN.
3. OTHER MATTERS
The Board of Directors has no knowledge of any other matters
which may come before the Meeting and does not intend to present
any other matters. However, if any other matters shall properly
come before the Meeting or any adjournment thereof, the persons
named as proxies will have discretionary authority to vote the
shares of Common Stock represented by the accompanying proxy in
accordance with their best judgment.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has selected Drucker Math & Whitman,
independent certified public accountants, auditors of its Fiscal
1996 financial statements, as the auditors of the financial
statements of the Company for its current fiscal year ending June
30, 1997. A member of such firm is expected to be at the Meeting
and will be given the opportunity to make a statement and to answer
questions any shareholders may have.
SHAREHOLDERS' PROPOSALS
Any shareholder of the Company who wishes to present a
proposal to be considered at the next annual meeting of
shareholders of the Company and who wishes to have such proposal
presented in the Company's Proxy Statement for such meeting must
deliver such proposal in writing to the Company at 462 Broadway,
New York, New York 10013 on or before August 20, 1997.
By Order of the Board of Directors
Richard S. Kalin,
Secretary
Dated: December 2, 1996
<PAGE>
EXHIBIT A
WANDERLUST INTERACTIVE, INC.
1996 STOCK OPTION PLAN
1. General Plan Information. The purpose of this Stock
Option Plan (the "Plan") is to advance the interests of Wanderlust
Interactive, Inc. (the "Company") by enhancing the ability of the
Company to attract and retain selected employees, officers,
consultants, advisors to the Board of Directors and qualified
directors (collectively the "Participants") by creating for such
Participants incentives and rewards for their contributions to the
success of the Company, and by encouraging such Participants to
become owners of shares of the Company's common stock, par value
$0.01 per share, as the title or par value may be amended (the
"Shares").
Options granted pursuant to the Plan may be incentive stock
options ("Incentive Options") as defined in the Internal Revenue
Code of 1986, as amended (the "Code") or non-qualified options, or
both. The proceeds received from the sale of Shares pursuant to
the Plan shall be used for general corporate purposes.
2. Effective Date of Plan. The Plan will become effective
upon approval by the Board of Directors (the "Board"), and shall be
subject to the approval by the holders of at least a majority of
all Shares present in person and by proxy and entitled to vote
thereon at a meeting of stockholders of the Company prior thereto
or within 12 months thereafter.
3. Administration of the Plan. The Plan will be administered
by the Board of the Company. The Board will have authority, not
inconsistent with the express provisions of the Plan, to take all
action necessary or appropriate thereunder, to interpret its
provisions, and to decide all questions and resolve all disputes
which may arise in connection therewith. Such determinations of
the Board shall be conclusive and shall bind all parties.
The Board may, in its discretion, delegate its powers with
respect to the Plan to an employee benefit plan committee or any
other committee (the "Committee"), in which event all references to
the Board hereunder, including without limitation the references in
Section 10, shall be deemed to refer to the Committee. The
Committee shall consist of not fewer than three members. Each of
the members must be a "disinterested person" as that term is
defined in Rule 16b-3 adopted pursuant to the Securities Exchange
Act of 1934 (the "Exchange Act"). A majority of the members of the
Committee shall constitute a quorum, and all determinations of the
Committee shall be made by the majority of its members present at
a meeting. Any determination of the Committee under the Plan may
be made without notice or meeting of the Committee by a writing
signed by all of the Committee members.
The Board and the Committee, if any, shall have the authority
to determine eligibility, the number of options granted and the
exercise price of options.
4. Eligibility. The Participants in the Plan shall be all
employees, officers, consultants, advisors to the Board of
Directors and qualified directors of the Company or any of its
present or future subsidiaries (as defined in Section 9) whether or
not they are also officers of the Company. Members of the
Committee are eligible only if they do not exercise any discretion
in: (i) selecting Participants who receive grants of options; (ii)
determining the number of Shares to be granted to any Participant;
or (iii) determining the exercise price of any options, or as
counsel to the Company may otherwise advise the Committee that the
taking of any such action does not impair the status of such
eligible Committee members as "disinterested persons" within the
meaning of Exchange Act Rule 16b-3.
5. Grant of Options.
(a) The Board shall grant options to Participants that
it, in its sole discretion, selects. Options shall be granted on
such terms as the Board shall determine except that Incentive
Options shall be granted on terms that comply with the Code and
regulations thereunder.
(b) All directors and advisors to the Board of Directors
of the Company who are not employees of the Company or its
subsidiaries shall automatically receive grants of 10,000 fully-vested
non-qualified options upon election or appointment to the
Board, if not a member of the Board at the time this Plan is
adopted by the Board and the Company has a class of equity
securities registered under the Securities Act of 1933 (the "Act").
The exercise price shall be 100% of fair market value on the date
of grant as defined by Section 9.
(c) No options shall be granted after July 25, 2006 but
options previously granted may extend beyond that date.
6. Option Agreements.
(a) Each option under the Plan shall be evidenced by an
option agreement, which shall be signed by an officer of the
Company and by the optionee and which shall contain such provisions
as may be approved by the Board.
(b) The option agreements shall constitute binding
contracts between the Company and the optionee. Every optionee,
upon acceptance of such option agreement, shall be bound by the
terms and restrictions of this Plan and of the option agreement.
(c) The terms of the option agreement shall be in
accordance with this Plan, but may include additional provisions
and restrictions, provided that the same are not inconsistent with
the Plan.
7. Terms and Conditions of Options.
(a) Exercise Price. Except as provided in Section 5(b)
of this Plan, the purchase price per share for Shares issuable upon
exercise of options shall be a minimum of 100% of fair market value
on the date of grant and shall be determined by the Board. For
this purpose, "fair market value" will be determined as set forth
in Section 9. Notwithstanding the foregoing, if any person to whom
an option is to be granted owns in excess of ten percent of the
outstanding capital stock of the Company, then no option may be
granted to such person for less than 110% of the fair market value
on the date of grant as determined by the Board.
(b) Annual Limit on Grant and Exercise. Incentive
Options shall not be granted to any individual pursuant to this
Plan, the effect of which would be to permit such person to first
exercise options, in any calendar year, for the purchase of Shares
having a fair market value in excess of $100,000 (determined at the
time of the grant of the options). An optionee hereunder may
exercise options for the purchase of Shares valued in excess of
$100,000 (determined at the time of the grant of the options) in a
calendar year, but only if the right to exercise such options shall
have first become available in prior calendar years.
(c) Payment for Delivery of Shares. Shares which are
subject to options shall be issued only upon receipt by the Company
of full payment of the purchase price for the Shares as to which
the option is exercised. The purchase price shall be payable by
the Participant to the Company either (i) in cash, certified
check, bank draft or money order payable to the order of the
Company; or (ii) through the delivery of Shares owned by the
Participant for a period of not less than six months and for which
the Participant has good title (free and clear of any liens and
encumbrances) having a fair market value equal to the purchase
price; or (iii) by a combination of cash and Shares as provided in
(i) and (ii) above.
The Company shall not be obligated to deliver any Shares
unless and until, in the opinion of the Company's counsel, all
applicable federal and state laws and regulations have been
complied with, nor, if the outstanding common stock is at the time
not listed on any securities exchange, unless and until the Shares
to be delivered have been listed (or authorized to be added to the
list upon official notice of issuance) upon such exchange, nor
unless or until all other legal matters in connection with the
issuance and delivery of Shares have been approved by the Company's
counsel. Without limiting the generality of the foregoing, the
Company may require from the person exercising an option such
investment representation or such agreement, if any, as counsel for
the Company may consider necessary in order to comply with the
Securities Act of 1933, as amended and applicable state securities
laws.
A Participant shall have the rights of a shareholder only as
to Shares actually acquired by him under the Plan.
(d) Vesting. Except for options granted pursuant to
Section 5(b) of this Plan, the Board may impose such vesting
restrictions as it sees fit at the time of grant.
(e) Non-Transferability of Options. Options may not be
sold, assigned or otherwise transferred or disposed of in any
manner whatsoever except as provided in Section 7(g).
(f) Forfeiture of Options upon Termination of
Relationship. All options which have not vested shall terminate
and be forfeited automatically upon the termination for any reasons
whatsoever of a Participant's status as an employee, consultant or
advisor to the Board. Unexercised options shall terminate and be
forfeited upon (i) the Participants voluntary termination of his
employment or (ii) the expiration of three months after the
Participant's employment is terminated by the Company. Except as
provided in Section 7(g) below, unexercised options granted to
directors shall not terminate or be forfeited in the event such
person is no longer a director of the Company.
(g) Death. If a Participant dies at a time when he is
entitled to exercise an option, then at any time or times within
one year after his death (or such further period as the Board may
allow) such options may be exercised, as to all or any of the
Shares which the Participant was entitled to purchase immediately
prior to his death, by his personal representative or the person or
persons to whom the options are transferred by the will or the
applicable laws of descent and distribution, and except as so
exercised such options will expire at the end of such period.
(h) Loans to Exercise Options. If requested by any
Participant to whom a grant of non-qualified options has been made,
the Company or any subsidiary may loan such person the amount of
money necessary to pay the federal income taxes incurred as a
result of the exercise of any options (or guarantee a bank loan for
such purpose), assuming that the Participant is in the maximum
federal income tax bracket six months from the time of exercise and
assuming that the Participant has no deductions which would reduce
the amount of such tax owed. The loan shall be made on or after
April 15th of the year following the year in which the amount of
tax is determined as may be requested by the Participant and shall
be made on such terms as the Company or lending bank determines.
(i) Withholding Taxes. To the extent that the Company
is required to withhold taxes for federal income tax purposes in
connection with the exercise of any options, the Company shall have
the right to assist the Participant to satisfy such withholding
requirement by (i) the Participant paying the amount of the
required withholding tax to the Company, (ii) the Participant
delivering to the Company Shares of its common stock previously
owned by the Participant or (iii) the Participant having the
Company retain a portion of the Shares covered by the option
exercise. The number of Shares to be delivered to or withheld by
the Company times the fair market value as defined by Section 8 of
this Plan shall equal the cash required to be withheld. To the
extent that the Company elects to allow the Participant either to
deliver or have withheld Shares of the Company's common stock, the
Board or the Committee may require him to make such election only
during certain periods of time as may be necessary to comply with
appropriate exemptive procedures regarding the "short-swing" profit
provisions of Section 16(b) of the Exchange Act or to meet certain
Code requirements.
8. Shares Subject to Plan.
(a) Number of Shares and Stock to be Delivered. Shares
delivered pursuant to this Plan shall, in the discretion of the
Board, be authorized but unissued Shares of common stock or
previously issued Shares acquired by the Company. Subject to
adjustments as described below, the aggregate number of Shares
which may be delivered under this Plan shall not exceed 360,000
Shares of common stock of the Company.
(b) Changes in Stock. In the event of a stock dividend,
stock split or combination of Shares, recapitalization, merger in
which the Company is the surviving corporation or other change in
the Company's capital stock, the number and kind of Shares of stock
or securities of the Company to be subject to the Plan and to
options then outstanding or to be granted thereunder, the maximum
number of Shares or securities which may be delivered under the
Plan, the option price and other relevant provisions, shall be
appropriately adjusted by the Board whose determination shall be
binding on all persons. In the event of a consolidation or merger
in which the Company is not the surviving corporation or which
results in the acquisition of substantially all the Company's
outstanding stock by a single person or entity, or in the event of
the sale or transfer of substantially all the Company's assets, all
outstanding options shall thereupon terminate.
The Board may also adjust the number of Shares subject to
outstanding options, the exercise price of outstanding options and
the terms of outstanding options to take into consideration
material changes in accounting practices or principles,
consolidations or mergers (except those in which the Company is not
the surviving Corporation as described in the immediately preceding
paragraph), acquisitions or dispositions of stock or property or
any other event if it is determined by the Board that such
adjustment is appropriate to avoid distortion in the operation of
the Plan.
9. Definitions.
(a) For purposes of the Plan, a subsidiary is any
corporation (i) in which the Company owns, directly or indirectly,
stock possessing 50 percent or more of the total combined voting
power of all classes of stock or (ii) over which the Company has
effective operating control.
(b) The fair market value of the Shares of common stock
shall be deemed to be:
(i) the closing price of the Company's common stock
appearing on a national securities exchange if the Company's common
stock is listed on such an exchange, or if not listed, the average
closing bid price appearing on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ");
(ii) if the Shares of common stock are not listed
on NASDAQ, then the average bid price for the Company's stock as
listed in the National Quotation Bureau's pink sheets;
(iii) if there are no listed bid prices published
in the pink sheets, then the market value shall be based upon the
average closing bid price as determined following a polling of all
dealers making a market in the Company's Shares.
10. Indemnification of Board. In addition to and without
affecting such other rights of indemnification as they may have as
members of the Board or otherwise, each member of the Board shall
be indemnified by the Company to the extent legally possible
against reasonable expenses, including attorney's fees, actually
and reasonably incurred in connection with any appeal therein, to
which he may be a party by reason of any action taken or failure to
act under or in connection with the Plan, or any option granted
thereunder, and against all judgments, fines and amounts paid by
him in settlement thereof; provided that such payment of amounts so
indemnified is first approved by a majority of the members of the
Board who are not parties to such action, suit or proceeding, or by
independent legal counsel selected by the Company, in either case
on the basis of a determination that such member acted in good
faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company; and except that no
indemnification shall be made in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such
Board member is liable for a breach of the duty of loyalty, bad
faith or intentional misconduct in his duties; and provided
further, that the Board member shall, in writing, offer the Company
the opportunity, at its own expense, to handle and defend same.
11. Amendments. The Board may at any time discontinue
granting options under the Plan. The Board may at any time or
times amend the Plan or amend any outstanding option or options for
the purpose of satisfying the requirements of any changes in
applicable laws or regulations or for any other purpose which may
at the time be permitted by law, provided that (except to the
extent explicitly required or permitted herein above) no such
amendment will, without the approval of the stockholders of the
Company, (a) increase the maximum number of Shares available under
the Plan, (b) reduce the option price of outstanding options or
reduce the price at which options may be granted, (c) extend the
time within which options may be granted, (d) amend the provisions
of this Section 11 of the Plan, (e) adversely affect the rights of
any Participant (without his consent) under any options theretofore
granted or (f) be effective if stockholder approval is required by
applicable statute, rule or regulation.
Date Approved by Board of Directors: July 25, 1996
Date to be Approved by Shareholders:
cdkidz\Pxy.96
