<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. _____)
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] 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 Section 240.14a-11(c) or Section
240.14a-12
MACKIE DESIGNS INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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).
[ ] $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 apples:______
____________________
(2) Aggregate number of securities to which transactions 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:_______________________________________________________
<PAGE> 2
[MACKIE LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 30, 1997
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
MACKIE DESIGNS INC., a Washington corporation (the "Company"), will be held on
Wednesday, April 30, 1997, at 10:00 a.m., local time, at the Bellevue Club,
11200 S.E. Sixth Street, Bellevue, Washington, for the following purposes:
1. To elect two directors to serve three-year terms and until
their successors are elected.
2. To approve amendments to the Company's Amended and Restated
1995 Stock Option Plan.
3. To ratify the appointment of Ernst & Young LLP as independent
auditors for the Company for the fiscal year ending December
31, 1997.
4. To transact such other business as may properly come before
the meeting or any postponement or adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on March 14, 1997
are entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof.
All shareholders are cordially invited to attend the Annual Meeting.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder attending
the meeting may vote in person even if he or she returned a proxy.
By Order of the Board of Directors
Greg C. Mackie
President and Chief Executive Officer
Woodinville, Washington
March 28, 1997
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. IF A QUORUM IS NOT REACHED, THE COMPANY WILL HAVE THE ADDED EXPENSE OF
REISSUING THESE PROXY MATERIALS. IF YOU ATTEND THE MEETING, AND SO DESIRE, YOU
MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
<PAGE> 3
MACKIE DESIGNS INC.
16220 WOOD-RED ROAD, N.E.
WOODINVILLE, WASHINGTON 98072
(206) 487-4333
----------------------------------------
PROXY STATEMENT
----------------------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Mackie Designs Inc. (the "Company") for use at the Annual Meeting of
Shareholders to be held Wednesday, April 30, 1997, at 10:00 a.m., local time, or
at any postponement or adjournment thereof (the "Meeting"), for the purposes set
forth herein and in the accompanying Notice of Annual Meeting of Shareholders.
The Meeting will be held at the Bellevue Club, 11200 S.E. Sixth Street,
Bellevue, Washington (telephone number (206) 455-1616).
These proxy solicitation materials will be mailed on or about March 28,
1997 to all shareholders entitled to vote at the Meeting.
RECORD DATE
Shareholders of record of the Company's Common Stock at the close of
business on March 14, 1997 are entitled to notice of, and to vote at, the
Meeting. On March 14, 1997, 12,885,000 shares of the Company's Common Stock were
issued and outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Company a
written notice of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
VOTING
Holders of shares of Common Stock are entitled to one vote per share on
all matters. A majority of the shares issued and outstanding as of March 14,
1997 must be present in person or represented by proxy at the Meeting for the
transaction of business. Nominees for election of directors are elected by
plurality vote of all votes cast at the Meeting. Approval of certain amendments
to the Company's Amended and Restated 1995 Stock Option Plan and ratification of
Ernst & Young LLP as the independent public accountants require the affirmative
vote of a majority of the shares present at the Meeting in person or by proxy
and entitled to vote. Abstentions and broker non-votes are counted for purposes
of determining whether a quorum exists at the Meeting. Abstentions and broker
non-votes (i.e., shares held by brokers that are present but not voted because
the brokers were prohibited from exercising authority) are not counted and have
no effect in determining whether a plurality exists with respect to a given
nominee but do have the effect of a "no" vote in determining whether other
proposals, including approval of certain amendments to the Company's Amended and
Restated 1995 Stock Option Plan and ratification of appointment of Ernst & Young
LLP, are approved.
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<PAGE> 4
SOLICITATION
The Company bears the cost of soliciting proxies. In addition to use of
the mails, proxies may be solicited personally or by telephone by directors,
officers and employees of the Company, who will not be specially compensated for
such activities. Such solicitations may be made personally, or by mail,
facsimile, telephone, telegraph or messenger. The Company will also request
persons, firms and companies holding shares in their names or in the name of
their nominees, which are beneficially owned by others, to send proxy materials
to and obtain proxies from such beneficial owners. The Company will reimburse
such persons for their reasonable expenses incurred in that connection.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of shareholders that are intended to be presented by such
shareholders at the Company's 1998 Annual Meeting must be received by the
Company no later than November 28, 1997 in order that such proposals may be
included in the proxy statement and form of proxy relating to that meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Bylaws provide that the Company shall have not less than
three nor more than 10 directors, with the exact number set by the Board of
Directors. The size of the Board of Directors is currently set at five
directors.
The directors of the Company are divided into three classes. One class
of directors is elected each year and the members of such class will hold office
for a three-year term and until their successors are duly elected and qualified
or until their death, resignation or removal from office. Class 1 consists of
Walter Goodman and David M. Tully, whose terms will expire at the 1999 Annual
Meeting of Shareholders; Class 2 consists of Raymond B. Ferguson and C. Marcus
Sorenson, whose terms will expire at the 1997 Annual Meeting of Shareholders;
and Class 3 consists of Greg C. Mackie, whose term will expire at the 1998
Annual Meeting of Shareholders.
At the Meeting, two Class 2 directors will be elected, each to serve a
three-year term until the 2000 Annual Meeting and until their successors are
elected and qualified. The nominees for Class 2 directors are Messrs. Ferguson
and Sorenson (the "Nominees"), both of whom are currently members of the Board
of Directors of the Company. The Board of Directors recommends a vote FOR both
of the nominees. The persons named on the enclosed proxy (the proxy holders)
will vote for election of the Nominees unless you have withheld authority for
them to do so on your proxy card. If a Nominee is unable or declines for good
cause to serve as a director at the time of the Meeting, the proxies will be
voted for any nominee named by the current Board of Directors to fill the
vacancy. As of the date of this Proxy Statement, the Board of Directors is not
aware of any Nominee who is unable and/or will decline to serve as a director.
There is no cumulative voting for election of directors.
The Company's directors, including the two Nominees, executive officers
and key employees are as follows:
2
<PAGE> 5
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------- ---------- --------------------------------------------------------
<S> <C> <C>
NOMINEES:
Raymond B. Ferguson(1)(2)(3) 51 Director (Class 2)
C. Marcus Sorenson(3) 49 Director (Class 2)
CONTINUING DIRECTORS:
Walter Goodman(1)(3) 73 Director (Class 1)
Greg C. Mackie(1)(2) 47 President, Chief Executive Officer and Director (Class 3)
David M. Tully(2) 53 Secretary, Treasurer and Director (Class 1)
OTHER EXECUTIVE OFFICERS AND
KEY EMPLOYEES:
Roy D. Wemyss 46 Executive Vice President and Chief Operating Officer
Thomas M. Elliott 47 Vice President--Finance and Chief Financial Officer
Ron M. Koliha 46 Director of Marketing and Communications
Patric L. Wiesmann 35 Vice President--Marketing and Business Development
David E. Firestone 45 Vice President--Product Development
Janet L. Narduzzi 32 Vice President--Administration
Calvin C. Perkins 54 Vice President--Technologies
</TABLE>
- --------------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Option Committee
Nominees
Raymond B. "Buck" Ferguson has been a director of the Company since
March 1997. Since 1994, Mr. Ferguson has been a consultant regarding business
and real estate matters. From 1983 to 1994, he held various positions at
Microsoft Corporation, including Senior Director of Administration and Senior
Director of Investor Relations. Mr. Ferguson received his J.D. degree from Duke
University School of Law in 1970.
C. Marcus Sorenson has been a director of the Company since 1990. Since
1975, he has been President and owner, together with his wife, Judith B.
Sorenson, of C.M. Sorenson Company, Inc., dba Calwest Marketing South
("Calwest"), a manufacturers' representative and distributor of consumer and
professional electronics which acted as the Company's exclusive representative
for southern California and southern Nevada through January 1997. Mr. Sorenson
is also a partner in Blackhurst-Sorenson Audio Group which has acted since
January 1997 as the Company's exclusive representative for southern California
and southern Nevada.
Continuing Directors
Walter Goodman has been a director of the Company since 1995. Since
1993, Mr. Goodman has acted as consultant to companies in the audio industry.
From 1967 to 1993, he held various positions with Harman International
("Harman"), an audio company that owns several of the Company's major
competitors including Soundcraft Ltd., Allen & Heath Brenell Ltd., and DOD
Electronics Corporation. Mr. Goodman was Chairman and Chief Executive Officer of
Harman from 1977 to 1980 and was President of its International Division from
1972 to 1977 and from 1980 to 1993. Mr. Goodman served on the Board of Governors
of the Electronic Industries Association from 1963 to 1980, was President of the
Institute of High Fidelity from 1970 to 1972 and was inducted into the Audio
Hall of Fame in 1979.
Greg C. Mackie founded the Company in 1988 and since then has served as
its President and Chief Executive Officer and as a director. From 1978 to 1985,
he was President of Audio Control Corporation ("Audio Control"), a company he
co-founded, which specialized in equalizers and analyzers for the home consumer
electronics market. From 1970 to 1978, Mr. Mackie was President of Technical
Audio Products Company
3
<PAGE> 6
(TAPCO), also a company he co-founded, which is generally credited with
pioneering the professional multi-channel live music mixer as a discrete
product.
David M. Tully has been Secretary, Treasurer and a director of the
Company since its inception in 1988. From 1975 to 1994, Mr. Tully was the owner
and President of Priebe Electronics, a major supplier of components to the
Company and a division of Quadra Investment Ltd. He is currently President of
SMB Corporation, a holding company.
Other Executive Officers and Key Employees
Roy D. Wemyss was appointed Executive Vice President and Chief
Operating Officer of the Company in March 1997; he served as the Company's
interim Chief Operating Officer from November 1996 to March 1997. From 1993 to
1996, Mr. Wemyss was involved in several start-up operations, primarily engaged
in product development. From 1990 to 1993, Mr. Wemyss served as Senior Vice
President of James Hardie Building Boards Inc., a gypsum and fiber cement
company. From 1987 to 1990, he served as James Hardie Gypsum Inc.'s Vice
President--General Manager and, from 1985 to 1987, served as general manager of
Norwest Gypsum. From 1983 to 1984, Mr. Wemyss was Financial Controller, then
Production Manager, of Sauder Industries, Limited (Trufit Division). From 1972
to 1983, he was on the professional staff of Price Waterhouse at various
international locations.
Thomas M. Elliott served as Vice President--Strategic Planning and
Chief Financial Officer of the Company from 1995 until February 1996 at which
time he became Vice President--Finance and Chief Financial Officer. Mr. Elliott
served as Chief Financial Officer for Pacer Corporation, an electronics
manufacturing company that developed and sold point-of-sale equipment to the
movie theater and stadium and arena market, from 1983 to 1991, when Pacer
Corporation was acquired by Wembley PLC, an international company based in the
United Kingdom. He remained with Wembley PLC and served as its
Vice-President--Finance/Treasurer for U.S. operations from 1991 to 1994. Mr.
Elliott is a Certified Public Accountant and received an M.B.A. from the
University of Washington in 1978.
Ron M. Koliha has been employed by the Company since 1992; he currently
serves as Director of Marketing and Communications. From 1989 to 1992, he served
as a marketing and advertising consultant to the Company. From 1984 to 1989, he
was Communications Director of Rogersound Lab Inc., a consumer electronics
retail chain. From 1980 to 1984, Mr. Koliha was Director of Marketing at Audio
Control. Mr. Koliha has also been Assistant Creative Director and Senior
Copywriter at several New York and Seattle advertising agencies and is the
recipient of numerous advertising awards.
Patric L. Wiesmann was appointed Vice President--Marketing and Business
Development of the Company in January 1997. From 1992 to 1996, Mr. Wiesmann was
Vice President of Sales & Marketing of Lang Manufacturing Company, a
manufacturer of commercial and marine cooking equipment sold worldwide. From
1988 to 1992, Mr. Wiesmann was Regional Manager and Corporate Sales Manager of
Baxter Healthcare Corporation and, from 1984 to 1988, was a regional manager and
sales representative for American Hospital Supply Corporation.
David E. Firestone served as Vice President--Sales and Marketing of the
Company from 1992 until January 1997 at which time he was appointed Vice
President--Product Development. From 1987 to 1992, he held sales and product
development positions with JBL Professional, a subsidiary of Harman ("JBL"), and
was Sales Manager for Audio Control from 1982 to 1987.
Janet L. Narduzzi served as Vice President--Finance of the Company from
1994 until February 1996 at which time she became Vice
President--Administration. From 1990 until 1994, she was Accounting Manager for
the Company. From 1980 until 1990, Ms. Narduzzi was employed by Westermeyer
Spray Service, an insect and plant disease control company, where her last
position was Accounting/Operations Manager.
Calvin C. Perkins joined the Company in January 1996 and was appointed
Vice President--Technologies in January 1997. From 1989 to 1995, he held several
management and engineering positions with JBL. From 1980
4
<PAGE> 7
to 1989, Mr. Perkins designed professional sound equipment at Fender Musical
Instruments and, from 1978 to 1980, was an engineering manager at Biamp Systems.
Prior to 1980, Mr. Perkins held various positions at Northwest Sound, Marantz
Corporation and JBL. Mr. Perkins received a B.S. degree in Electrical
Engineering from California Polytechnic College.
BOARD MEETINGS, NOMINATIONS BY SHAREHOLDERS AND COMMITTEES
The Board of Directors of the Company held a total of six meetings
during the year ended December 31, 1996.
The Board of Directors acts as a nominating committee for selecting
nominees for election as directors. The Company's bylaws also permit
shareholders to make nominations for the election of directors, if such
nominations are made pursuant to timely notice in writing to the Company's
Secretary. To be timely, notice must be delivered to, or mailed to and received
at, the principal executive offices of the Company not less than 60 days nor
more than 90 days prior to the date of the meeting, provided that at least 60
days' notice or prior public disclosure of the date of the meeting is given or
made to shareholders. If less than 60 days' notice or prior public disclosure of
the date of the meeting is given or made to shareholders, notice by the
shareholder to be timely must be received by the Company not later than the
close of business on the tenth day following the date on which such notice of
the meeting was mailed or such public disclosure was made. Public disclosure of
the date of the Meeting was made in a press release on February 19, 1997. A
shareholder's notice of nomination must also set forth certain information
specified in Section 2.3.2 of the Company's bylaws concerning each person the
shareholder proposes to nominate for election and the nominating shareholder.
The Company's Board of Directors currently has an Audit Committee, a
Compensation Committee and an Option Committee. The Audit Committee recommends
engagement of the Company's independent certified public accountants, reviews
the scope of the audit, considers comments made by the independent certified
public accountants with respect to accounting procedures and internal controls
and the consideration given thereto by management, and reviews internal
accounting procedures and controls with the Company's financial and accounting
staff; the Audit Committee, which currently consists of Messrs. Ferguson,
Goodman and Mackie, held one meeting in 1996. The Compensation Committee reviews
executive compensation and establishes executive compensation levels; the
Compensation Committee, which currently consists of Messrs. Ferguson, Mackie and
Tully, met once in 1996. The Option Committee administers the Company's Amended
and Restated 1995 Stock Option Plan and currently consists of Messrs. Ferguson,
Goodman and Sorenson; during 1996, the Option Committee held five meetings.
During 1996, no director attended fewer than 75% of the aggregate of
(i) the total number of meetings of the Board of Directors and (ii) the total
number of meetings of all committees of the Board of Directors on which such
director served (during the period he served).
DIRECTOR COMPENSATION
For serving as directors of the Company, each director who is not an
employee of the Company ("Outside Director") is paid (i) an annual fee of
$7,500, payable in quarterly payments of $1,875; (ii) a $1,000 fee for each
Board meeting attended in person ($500 if attended by telephone); and (iii) a
$500 fee for each Board committee meeting attended in person ($250 if attended
by telephone). The Company also reimburses travel and lodging expenses incurred
in connection with attending meetings of the Board and its committees. In
addition, each newly appointed Outside Director is entitled to receive 10,000
non-qualified stock options pursuant to the terms of the Company's Amended and
Restated 1995 Stock Option Plan.
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<PAGE> 8
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation paid by the Company to its Chief Executive Officer and the four
other most highly compensated executive officers (collectively, the "Named
Executives") during the year ended December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------------- -----------------
AWARDS
-----------------
OTHER ANNUAL SHARES
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) UNDERLYING OPTIONS
- ----------------------------------------------------------------------------------- -----------------
<S> <C> <C> <C> <C> <C>
Greg C. Mackie 1995 $ 91,999 $254,805 -- --
President and Chief Executive 1996 175,000 200,732 -- --
Officer
Corey D. Rivers(2) 1995 75,000 175,562 $500 273,500
Executive Vice President and 1996 95,192 142,084 -- --
Chief Operating Officer
Thomas M. Elliott(3) 1995 85,902 15,520 -- 99,100
Vice President--Finance and 1996 90,000 77,794 500 --
Chief Financial Officer
David E. Firestone 1995 85,000 75,631 500 140,500
Vice President--New Product 1996 90,000 75,691 500 --
Development
Angela M. Rivers 1995 56,500 75,631 -- 211,800
Vice President--Manufacturing 1996 86,570 66,742 -- --
and Human Resources
Janet L. Narduzzi 1995 47,500 82,673 -- 211,800
Vice President--Administration 1996 70,000 71,983 -- --
</TABLE>
- --------------------
(1) Other Annual Compensation consists of matching contributions made by the
Company on behalf of each of the named individuals under its 401(k)
profit-sharing plan. Salary deferrals into the 401(k) plan are included
in the Salary column.
(2) Mr. Rivers resigned from the Company in 1996 and has since acted as a
consultant to the Company. Mr. Rivers's 1996 salary includes $1,442 in
consulting fees.
(3) Mr. Elliott joined the Company in February 1995.
During the year ended December 31, 1996, no stock options were granted
to the Named Executives to purchase shares of Common Stock of the Company.
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<PAGE> 9
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table provides information with respect to the Named
Executives concerning the exercise of options during the last fiscal year and
unexercised options held as of December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AT FY-END MONEY OPTIONS AT FY-END(1)
------------------------ ---------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------ --------------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Greg C. Mackie -- -- -- -- -- --
Corey D. Rivers -- -- 237,500 -- $ 225,625 --
Thomas M. Elliott -- -- 99,100 -- 94,145 --
David E. Firestone -- -- 140,500 -- 133,475 --
Angela M. Rivers -- -- 211,800 -- 201,210 --
Janet L. Narduzzi 10,000 $ 55,500 201,800 -- 191,700 --
</TABLE>
- ----------------
(1) Amounts reflected are based upon the market value of the Common Stock
as of December 31, 1996 ($6.50) minus the exercise price ($5.55),
multiplied by the number of shares underlying the options.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION*
EXECUTIVE COMPENSATION PHILOSOPHY
The Compensation Committee of the Board of Directors, composed of
Raymond B. Ferguson, Greg C. Mackie and David M. Tully, is responsible for
setting and administering the policies and programs that govern compensation for
the executive officers of the Company. The Board of Directors' Option Committee
("Option Committee"), composed of Raymond B. Ferguson and Walter Goodman,
administers the Company's Amended and Restated 1995 Stock Option Plan (the
"Option Plan"). The goal of the Company's executive compensation policy is to
ensure that an appropriate relationship exists between compensation and
corporate performance, while at the same time attracting, motivating and
retaining executive officers.
The key components of the Company's compensation program are base
salary and monthly and quarterly cash bonuses, as well as potential long-term
compensation through stock options. These components are administered with the
goal of providing total compensation that is competitive in the marketplace,
rewards successful financial performance and aligns executive officers'
interests with those of stockholders. The Compensation Committee reviews
executive compensation on an annual basis, or more often if necessary, and
determines, subject to the Board's approval, base salary and cash bonuses for
executive officers. The Option Committee makes all decisions with respect to
stock option grants.
MANAGEMENT INCENTIVE PLAN
The Compensation Committee believes that a significant proportion of
total cash compensation for executive officers should be a function of the
Company's performance. This approach creates a direct incentive for executive
officers to achieve desired performance goals and places a significant
percentage of each executive officer's compensation at risk. Consequently, the
Compensation Committee has established and administers the Company's Management
Incentive Plan (the "Management Incentive Plan"), a bonus program based on the
Company's
- --------
* The report of the Compensation Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under either the Securities Act of 1933, as amended,
or the Securities Exchange Act of 1934, as amended (together, the "Acts"),
except to the extent that the Company specifically incorporates such report by
reference; and further, such report shall not otherwise be deemed filed under
the Acts.
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<PAGE> 10
achievement of certain earnings criteria which is available to executive
officers and key employees the Committee designates from time to time. Each
participant is entitled to receive a percentage of both monthly and quarterly
bonus pools, with each individual percentage established by the Compensation
Committee. The Management Incentive Plan shall continue from year to year until
terminated by the Board of Directors.
For 1996, the Compensation Committee set the monthly bonus pool at 4%
of the Company's post-bonus operating income up to a maximum amount each month.
In addition, quarterly bonuses were paid if the Company achieved post-bonus
operating income of certain minimum amounts in each quarter of 1996. In 1996,
monthly and quarterly bonuses aggregating $774,045 were paid to nine executive
officers of the Company and one key employee; $234,999 of that amount was for
services rendered during 1995.
For 1997, the Compensation Committee has not yet set the monthly bonus
pool or the minimum amounts of quarterly operating income for determining
quarterly bonuses.
EQUITY PARTICIPATION
The Company uses stock options granted under its Option Plan both to
reward past performance and to motivate future performance, especially long-term
performance. The Compensation Committee believes that through the use of stock
options, executive interests are directly tied to enhancing shareholder value.
Stock options under the Option Plan have a term of 10 years and generally vest
25% per year, beginning on the first anniversary date of the grant. Under the
Option Plan as it is proposed to be amended at the 1997 Annual Meeting, a
maximum of 3,000,000 shares of the Company's Common Stock may be issued.
The stock options provide value to the recipients only when the market
price of the Company's Common Stock increases above the option grant price and
only as the shares vest and become exercisable. While option grants are made by
the Option Committee, the Compensation Committee considers these grants in
making its cash compensation decisions.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Chief Executive Officer's compensation is set using the
Compensation Committee's general philosophy as described above and consequently
is subject in large part to the Company's performance. In 1996, Mr. Mackie
received a base salary of $175,000 and bonuses totaling $200,732 pursuant to the
bonus programs described above. He received no stock option grants in 1996.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Compensation Committee has considered the impact of Section 162(m)
of the Internal Revenue Code adopted under the Omnibus Budget Reconciliation Act
of 1993, which section disallows a deduction for any publicly held corporation
for individual compensation exceeding $1 million in any taxable year for the CEO
and the four other most highly compensated executive officers, unless such
compensation meets certain exceptions to the general rule. Compensation paid by
the Company to each of its executive officers in 1996 was well below $1 million,
and therefore Section 162(m) did not affect the tax deductions available to the
Company. The Committee will continue to monitor the applicability of the section
to the Company's compensation programs and will determine at a later date what
actions, if any, the Company should take to qualify for available tax
deductions.
COMPENSATION COMMITTEE
Raymond B. Ferguson
Greg C. Mackie
David M. Tully
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<PAGE> 11
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Since its formation in October 1995, the Compensation Committee has
consisted of Greg C. Mackie, David M. Tully and a third outside director. Mr.
Mackie is President and Chief Executive Officer of the Company and Mr. Tully is
its Secretary/Treasurer. No member of the Compensation Committee or executive
officer of the Company has a relationship that would constitute an interlocking
relationship with executive officers or directors of another entity.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of January 31, 1997, by (i) each
person who is known by the Company to own beneficially more than 5% of the
Company's outstanding Common Stock, (ii) each of the Company's Named Executives,
(iii) each director and (iv) all current executive officers and directors as a
group.
<TABLE>
<CAPTION>
SHARES PERCENT OF OUTSTANDING
DIRECTORS, NAMED EXECUTIVES AND 5% SHAREHOLDERS BENEFICIALLY OWNED(1) SHARES BENEFICIALLY OWNED
- -------------------------------------------------- ------------------ -------------------------
<S> <C> <C>
Greg C. Mackie(2)(3) 5,310,000 41.2%
C. Marcus Sorenson and Judith B. Sorenson(2)(4) 2,550,000 19.8%
David M. Tully(2)(5) 2,431,500 18.9%
Corey D. Rivers(6) 449,300 3.4%
Angela M. Rivers(7) 449,300 3.4%
Janet L. Narduzzi(8) 201,800 1.5%
David E. Firestone(8) 140,500 1.1%
Thomas M. Elliott(9) 99,100 *
Walter Goodman(10) 37,500 *
Raymond B. Ferguson(11) 8,000 *
All directors and executive officers as a group 10,790,900 80.9%
(eleven persons)(12)
</TABLE>
- ---------------------
* Less than 1%.
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days of January 31, 1997, the date of
this table, upon the exercise of options. Each beneficial owner's
percentage ownership is determined by assuming that options that are held
by such person (but not those held by another person) and that are
exercisable within 60 days of January 31, 1997 have been exercised. Unless
otherwise noted, the Company believes that all persons named in the table
have sole voting and investment power with respect to all shares of Common
Stock beneficially owned by them.
(2) The address of the shareholder is care of Mackie Designs Inc., 16220
Wood-Red Road, N.E., Woodinville, Washington 98072.
(3) Includes 232,200 shares held by four trusts for the benefit of Mr.
Mackie's immediate family. Mr. Mackie serves as trustee of each of these
trusts.
(4) C. Marcus Sorenson and Judith B. Sorenson are husband and wife. Includes
480,000 shares held by six trusts for the benefit of the Sorensons'
children and grandchildren. The Sorensons serve as co-trustees of each of
these trusts. Mrs. Sorenson has granted Mr. Sorenson a proxy to vote the
2,020,000 shares they jointly own, which proxy expires in July 2000 or
upon earlier revocation by Mrs. Sorenson.
9
<PAGE> 12
(5) Includes 400,000 shares held by two trusts for the benefit of Mr. Tully's
children. Mr. Tully serves as trustee of both of these trusts.
(6) Consists of shares subject to options exercisable within 60 days of
January 31, 1997, including options held by Mr. Rivers's wife, Angela M.
Rivers. Mr. Rivers resigned from the Company in October 1996.
(7) Consists of shares subject to options exercisable within 60 days of
January 31, 1997, including options held by Ms. Rivers's husband, Corey D.
Rivers.
(8) Consists of shares subject to options exercisable within 60 days of
January 31, 1997.
(9) Consists of shares subject to options exercisable within 60 days of
January 31, 1997.
(10) Includes 2,500 shares subject to options exercisable within 60 days of
January 31, 1997.
(11) Consists of shares held jointly with Mr. Ferguson's wife.
(12) Includes 456,400 shares subject to options exercisable within 60 days of
January 31, 1997.
CERTAIN TRANSACTIONS
C.M. Sorenson Company, Inc. dba Calwest Marketing South ("Calwest"), a
company owned by C. Marcus Sorenson and his wife, Judith B. Sorenson, acted as
the Company's exclusive manufacturers' representative for southern California
and southern Nevada in 1996. Calwest received payments from the Company pursuant
to this arrangement of $368,689 in 1996.
In December 1994, the Company entered into a lease with Mackie
Holdings, L.L.C. ("Mackie Holdings"), a limited liability company beneficially
owned by Greg C. Mackie, C. Marcus Sorenson, Judith B. Sorenson and David M.
Tully, that expires December 31, 2004 for office and manufacturing facilities.
The monthly rent under this lease is $56,613, adjusted annually for changes in
the consumer price index. Taxes, insurance, utilities and maintenance are the
responsibility of the Company. During 1996, Mackie Holdings was paid a total of
$685,118 in rent pursuant to this lease. The Company believes that the lease is
on terms at least as favorable to the Company as might have been obtained from
unaffiliated parties.
10
<PAGE> 13
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return
for the Company's stock at December 31, 1996 since August 18, 1995 (the date on
which the Company's stock was first traded on the Nasdaq National Market System
after its initial public offering) to the cumulative return over such period of
(i) the Total Return Index of the Nasdaq Stock Market - US and (ii) the Total
Return Index of the Nasdaq Stock Market - Electronic Components. The graph
assumes that on August 18, 1995 $100 was invested in the Common Stock of the
Company and in each of the comparative indices. The stock price performance on
the following graph is not necessarily indicative of future stock price
performance.
[LINE GRAPH]
<TABLE>
<CAPTION>
8/18/95 9/30/95 12/31/95 3/31/96 6/30/96 9/30/96 12/31/96
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MACKIE DESIGNS INC.............. $100.00 $ 101.75 $ 78.95 $ 74.56 $ 78.95 $ 57.02 $ 45.61
NASDAQ - US..................... 100.00 101.20 102.43 107.22 115.97 120.10 126.00
NASDAQ - ELECTRONIC COMPONENTS.. 100.00 95.11 82.21 81.70 93.33 113.11 142.10
</TABLE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Under the securities laws of the United States, the Company's
directors, its officers and any persons holding more than 10% of the Company's
Common Stock must report their initial ownership to the Securities and Exchange
Commission ("SEC"). Specific filing deadlines of these reports have been
established, and the Company must disclose in this Proxy Statement any failure
to file by these dates during the fiscal year ended December 31, 1996. The
Company believes that all of these filing requirements have been satisfied
except Form 3s were not filed by Tami L. Pereira, Stephen J. Ripp and Richard M.
Rosenzweig, former officers of the Company. In making this statement the Company
has relied solely on written representations of its directors and officers and
any 10% holders and copies of the reports that they filed with the SEC.
11
<PAGE> 14
PROPOSAL NO. 2
APPROVAL OF AMENDMENTS TO THE COMPANY'S
AMENDED AND RESTATED 1995 STOCK OPTION PLAN
BACKGROUND
The Amended and Restated 1995 Stock Option Plan (the "Plan") was
originally adopted by the Board of Directors and approved by the shareholders of
the Company in April 1995 and later amended and restated by the Board of
Directors in September 1996. The Plan is not subject to the Employee Retirement
Income Security Act of 1974 and is not a qualified pension, profit sharing or
bonus plan under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code").
The Plan currently provides for the grant of options to purchase up to
2,500,000 shares of the Company's Common Stock to eligible participants. On
December 31, 1996, options to purchase 2,036,700 shares were outstanding under
the Plan, 1,759,700 of which were immediately exercisable, and options to
purchase 453,300 shares remained available for grant. The exercise prices of the
outstanding options ranged from $5.55 to $13.88 per share. On December 31, 1996,
approximately 25 employees were eligible to receive options granted under the
Plan. On March 17, 1997, the closing market price of the Company's Common Stock
was $7.50.
AMENDMENTS
Subject to shareholder approval, the Board of Directors approved the
following amendments to the Plan in September 1996 (the "Amendments"):
1. The group eligible to participate in the Plan, which had been
limited to directors (including directors who are not employees), officers and
other key employees of the Company, has been expanded to include selected
non-employee agents, consultants, advisors, persons involved in the sale or
distribution of the Company's products and independent contractors of the
Company.
2. The number of shares of Common Stock of the Company issuable under
the Plan has been increased from 2,500,000 to 3,000,000 shares.
The Board of Directors believes that the Amendments promote the
interests of the Company and its shareholders by assisting the Company in
attracting, retaining and motivating its key employees and motivating certain
non-employees. The Board of Directors recommends a vote FOR the Amendments.
WHO MAY PARTICIPATE IN THE PLAN
Directors (including directors who are not employees), officers and
other key employees of the Company are currently eligible to receive options
under the Plan. The Company has not developed any performance formulas or
measurements for determining to whom it should grant options.
An option granted under the Plan may be either an "incentive stock
option," as defined in Section 422 of the Code ("ISO"), or a non-statutory stock
option ("NSO"). ISOs may be granted only to employees of the Company and are
subject to the following limitations, in addition to restrictions applicable to
all stock options under the Plan:
(1) An ISO may not be granted to an employee who at the time of
grant owns in excess of 10% of the outstanding Common Stock of
the Company, unless the exercise price under the option is at
least 110% of the fair market value of the stock subject to
the option as of the date of grant of the option and the
option term is no more than five years.
12
<PAGE> 15
(2) The aggregate fair market value (determined as of the time the
option is granted) of stock with respect to which ISOs are
exercisable for the first time by an optionee during any
calendar year (under all option plans of the Company) will not
exceed $100,000.
Options that do not meet the above qualifications will be treated as NSOs. The
option price of ISOs will not be less than 100% of the fair market value of such
shares on the date the option is granted.
EXERCISE OF OPTIONS
No option shall be exercisable until it has vested. The Plan
Administrator has the power to set the vesting schedule for each option. Unless
the option agreement executed by the optionee expressly otherwise provides, the
option shall vest on a cumulative basis as to one-quarter of the total number of
shares covered thereby on each of the first, second, third and fourth
anniversary dates of the date of the grant of the option. No option shall be
exercisable after the expiration of 10 years from the date it is granted, except
in the case of an ISO granted to a 10% shareholder (in which event the option
must be exercised within five years). An ISO is not exercisable prior to the
expiration of 12 months from the date it is granted.
To the extent the right to purchase shares has accrued under the
option, the option may be exercised from time to time by written notice to the
Company, stating the number of shares being purchased and accompanied by the
payment in full of the option price of such number of shares, such payment to be
made in cash or, upon approval of the Plan Administrator, by (i) delivering
shares previously held by the option holders, (ii) executing a promissory note
in a form approved by the Plan Administrator, (iii) directing the Company to
withhold shares otherwise issuable upon exercise of the option, or (iv)
delivering an irrevocable election to a broker directing the broker to use the
proceeds of the sale of the shares to pay the purchase price.
If any option expires or terminates before being exercised in full or
in part, the shares not acquired upon exercise of that option may be made
subject to additional options granted under the Plan.
DURATION OF OPTIONS
Vested options shall terminate, to the extent not previously exercised,
upon the occurrence of the first of the following events: (i) the expiration of
the option, as designated by the Plan Administrator; (ii) the date of an
optionee's termination of employment with the Company or any related corporation
for cause (as determined in the sole discretion of the Plan Administrator);
(iii) the expiration of 90 days from the date of an optionee's termination of
employment with the Company or any related corporation for any reason whatsoever
other than cause, death or disability unless the exercise period is extended by
the Plan Administrator until a date not later than the expiration date of the
option; or (iv) the expiration of one year from the date of death of the
optionee or cessation of an optionee's employment by reason of disability unless
the exercise period is extended by the Plan Administrator until a date not later
than the expiration date of the option.
ASSIGNMENT
During the lifetime of the optionee, the option will be exercisable
only by the optionee and will not be assignable or transferable, except that the
Plan Administrator may, in its discretion, authorize the transfer of NSOs by
gift to members of the optionee's family or trusts or partnerships for the
exclusive benefit of the family members, or to charitable organizations.
DURATION OF THE PLAN AND AMENDMENT
Options may be granted under the Plan from time to time until April 3,
2005. The Board may at any time terminate or amend the Plan, provided that any
modification that materially increases the benefits accruing to participants or
the number of shares that may be issued under the Plan, or materially modifies
the requirements as to eligibility for participation in the Plan, will become
effective only upon approval of the holders of a majority of the securities of
the Company present, or represented, and entitled to vote at a meeting duly held
in accordance with the laws of the state of Washington.
13
<PAGE> 16
CHANGE IN CONTROL
The Plan provides that upon a merger, consolidation, acquisition of
property or stock, separation, reorganization or liquidation of the Company as a
result of which shareholders of the Company receive cash, stock or other
property, any option granted under the Plan shall terminate, but the optionee
shall have the right immediately prior to such event to exercise such option, in
whole or part, to the extent the vesting requirements set forth in his or her
option agreement have been satisfied, unless stated otherwise in his or her
option agreement. Upon such event, if the shareholders of the Company receive
capital stock of another corporation, all options granted under the Plan shall
be converted into options to purchase shares of such other corporation unless
the Company and the corporation issuing exchange shares determine in their sole
discretion that any or all such options shall not be converted but instead shall
terminate and the optionee shall have the right to exercise such option
immediately prior to consummation of the exchange. In the event of a "change in
control" of the Company, any options or portions of options outstanding as the
date of such event that are not yet fully vested shall become immediately
exercisable in full. "Change in control" is defined in the Plan as (i) an
extraordinary event, such as certain mergers or consolidations, a transfer of
substantially all of the Company's assets or adoption of a plan or proposal for
liquidation or dissolution of the Company, (ii) an acquisition by any person of
shares of common stock or securities convertible into common stock if after the
acquisition the person beneficially owned at least 20% of the combined voting
power of the Company's then outstanding securities, or (iii) a change in the
Board of Director in which the current members of the Board (the "Continuing
Directors") cease to constitute at least a majority of the Board provided that
any person becoming a director whose nomination for election was approved by a
majority of the Continuing Directors (other than a nomination of an individual
who assumed office in connection with an actual threatened election contest
relating to the election of the directors of the Company, as such terms are used
in Rule 14a-11 of Regulation 14A under the Exchange Act of 1934) shall be deemed
to be a Continuing Director.
ADMINISTRATION OF THE PLAN
The Plan is administered by the Plan Administrator which is a committee
of the Board of Directors consisting of two non-employee directors appointed by
the Board; non-employee directors are defined as members of the Board of
Directors who are not officers of the Company or its affiliates, do not receive
compensation for services other than as a director in an amount in excess of
$60,000 annually, and do not have an interest in certain transactions or are not
otherwise engaged in certain business relationships with the Company or its
affiliates.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary discusses certain of the federal income tax
consequences associated with (i) the grant of a stock option under the Plan,
(ii) the exercise of such option and (ii) the disposition of shares received
upon the exercise of an option. This description of tax consequences is based
upon present federal tax laws and regulations, but does not purport to be a
complete description of the federal income tax consequences applicable to an
optionee under the Plan.
Non-Statutory Stock Options
The grant of an NSO (including any option exceeding the limitations on
ISOs described above) to an optionee will not be a taxable event so long as the
option does not have a readily ascertainable fair market value. Options granted
pursuant to the Plan should not have a readily ascertainable fair market value
because they are not actively traded on an established securities market, are
not transferable, are not immediately exercisable in full upon grant and have
more than a nominal exercise price. Accordingly, the optionee will not be
subject to any income tax consequences with respect to such option unless and
until the option is exercised.
Upon the exercise of an NSO, the optionee generally must recognize
ordinary compensation income equal to the "spread" between the exercise price
and the fair market value of the Common Stock on the date of exercise. However,
if the Common Stock received by the optionee is not vested (that is, the
optionee's right to enjoy the full benefits of ownership of the Common Stock is
conditioned on rendering further services or is subject to other restrictions
that constitute a substantial risk of forfeiture), then the optionee would not
be required to include such
14
<PAGE> 17
"spread" in income upon exercise, unless the optionee elected to do so under the
special, but somewhat complicated, rules of Section 83(b) of the Code.
The amount and character of any gain or loss realized on a subsequent
disposition of Common Stock by the optionee generally would depend on, among
other things, whether such disposition occurred before or after such Common
Stock vested, whether an election under Code Section 83(b) with respect to such
shares had been made, and the length of time such shares were held by the
employee.
Incentive Stock Options
There are no federal income tax consequences associated with the grant
of an ISO to an employee. However, in contrast to the exercise of an NSO, the
exercise of an ISO will not cause an employee to recognize taxable income for
regular income tax purposes (although the employee could be subject to an
alternative minimum tax liability as described below). If the employee holds the
shares acquired upon exercise of the ISO for a minimum of two years from the
date of the grant of the ISO, and for at least one year after exercise, any gain
realized by the optionee on the subsequent sale or exchange of such shares
generally would be treated as long-term capital gain. If the shares are sold or
otherwise disposed of prior to the expiration of such periods (a "disqualifying
disposition"), then a portion of any gain recognized by the employee which would
otherwise be characterized as capital gain would instead be taxable as ordinary
compensation income. The amount of such gain which would be characterized as
ordinary income would not exceed an amount equal to the excess of (i) the fair
market value of such shares as of the date the option was exercised over (ii)
the amount paid for such shares. Any loss recognized upon a taxable disposition
of the shares generally would be characterized as a capital loss.
Upon exercise of an ISO by an employee, the alternative minimum taxable
income of such employee must be determined as if such ISO were an NSO.
Accordingly, such employee will be required to include as alternative minimum
taxable income the excess (if any) of the value of the shares received upon
exercise as of the date such shares are vested over the amount paid for such
shares. Such employee would then be required to pay the greater of such
employee's regular or alternative minimum tax liability computed with respect to
such year.
Compensation Deduction
To the extent compensation income is recognized by an optionee in
connection with the exercise of an NSO or a "disqualifying disposition" of stock
obtained upon exercise of an ISO, the Company generally would be entitled to a
matching compensation deduction (assuming the withholding requirements are
satisfied).
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP, independent
auditors, to audit the consolidated financial statements of the Company for the
fiscal year ending December 31, 1997, and recommends that shareholders vote FOR
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
Representatives of Ernst & Young LLP are expected to be present at the meeting
and will have an opportunity to make a statement and to respond to appropriate
questions.
15
<PAGE> 18
OTHER MATTERS
The Company knows of no other matters to be submitted at the Meeting.
If any other matters properly come before the meeting, it is the intention of
the persons named in the enclosed form of proxy to vote the shares they
represent as the Board of Directors may recommend.
ADDITIONAL INFORMATION
A copy of the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year ended December 31, 1996 is available
without charge upon written request to: Corporate Secretary, Mackie Designs
Inc., 16220 Wood-Red Road, N.E., Woodinville, Washington 98072.
By Order of the Board of Directors
Greg C. Mackie
President and Chief Executive Officer
Woodinville, Washington
March 28, 1997
16
<PAGE> 19
MACKIE DESIGNS INC. PROXY
16220 WOOD-RED ROAD, N.E.
WOODINVILLE, WASHINGTON 98072
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF THE SHAREHOLDERS, APRIL 30, 1997
The undersigned hereby appoints Greg C. Mackie and David M. Tully, or each
of them, as proxies, each with power of substitution, to vote for and on behalf
of the undersigned at the Annual Meeting of the Shareholders of the Company to
be held on April 30, 1997, and at any adjournment thereof, upon matters properly
coming before the Meeting, as set forth in the related Notice of Annual Meeting
and Proxy Statement, both of which have been received by the undersigned.
Without otherwise limiting the general authorization given hereby, said proxies
are instructed to vote as follows:
1. Election of the following nominees for Directors: Raymond B. Ferguson and
C. Marcus Sorenson.
(THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR")
[ ] FOR both nominees [ ] WITHHOLD AUTHORITY to vote
listed above for both nominees listed above
INSTRUCTION: To withhold authority to vote for any individual nominee listed
above, write that nominee's name in the space provided below.
-------------------------------------------------------------------
2. To approve amendments to the Company's Amended and Restated 1995 Stock
Option Plan.
(THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR")
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(Continued and to be dated and signed on reverse side)
[FRONT]
- --------------------------------------------------------------------------------
3. Ratification of the selection of Ernst & Young, LLP as the independent
auditors of the Company for the fiscal year ending December 31, 1997.
(THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR")
FOR [ ] AGAINST [ ] ABSTAIN [ ]
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned holder.
If no direction is made, this proxy will be voted for Proposals 1, 2 and
3.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by the president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
____________________________________________
Signature
____________________________________________
Signature if held jointly
Dated:_______________________________, 1997
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE
[BACK]
<PAGE> 20
MACKIE DESIGNS INC.
AMENDED AND RESTATED 1995 STOCK OPTION PLAN
1. PURPOSES. The purposes of this Mackie Designs Inc. Amended
and Restated 1995 Stock Option Plan ("Plan") are to:
1.1 Closely associate interests of the management of
Mackie Designs Inc. ("Company") with the shareholders by reinforcing
the relationship between participants' rewards and shareholder gains;
1.2 Provide management with an equity ownership in the
Company commensurate with the Company's performance as reflected in
increased value of its common shares;
1.3 Maintain competitive compensation levels;
1.4 Provide a means whereby the Company can continue to
attract, motivate, and retain key employees who can contribute
materially to the Company's growth and success; and
1.5 Provide a means whereby the Company can continue to
attract, motivate and retain the services of selected non-employee
agents, consultants, advisors, persons involved in the sale or
distribution of the Company's products and independent contractors of
the Company.
2. ADMINISTRATION. This Plan shall be administered by the Board
of Directors of the Company ("Board") or, in the event the Board shall appoint
and/or authorize a committee to administer this Plan, by a committee of the
Board consisting of at least two (2) non-employee directors ("Committee"). The
administrator of this Plan, whether the Board or Committee, shall hereinafter
be referred to as the "Plan Administrator." The Plan Administrator shall
administer the Plan in accordance with the following:
2.1 Incapacity of Plan Administrator. No member of the
Board or the Committee shall vote with respect to the granting of an
option created under this Plan ("Option(s)") to himself or herself.
Any Option granted to a director for his or her services as such shall
not be effective until approved by the full Board.
2.2 Registration Under The Securities Act. If the
Company registers any of its equity securities pursuant to Section
12(b) or 12(g) of the Securities Exchange Act of 1934, as amended
("Exchange Act") and any officers or directors are eligible to receive
Options, the following provisions shall apply to the administration of
this Plan with respect to grants made to directors, officers or other
Optionees (as hereinafter defined) affected by Section 16(b) of the
Exchange Act. The Plan Administrator shall be constituted at all
times so as to meet the requirements of Section 16(b) of the Exchange
Act, as amended from time to time. The members of any committee
serving as Plan Administrator shall be appointed by the Board for such
term as the Board may determine. The Board may from time to time
remove members from, or add members to, the committee. Vacancies on
the committee, however caused, may be
<PAGE> 21
filled by the Board. Currently, the Plan Administrator is a
Committee, of which all members are disinterested. If, at any time,
an insufficient number of disinterested non-employee directors is
available to serve on such committee, interested non-employee
directors may serve on the committee; however, during such time, no
Options shall be granted to any person if the granting of such Option
would not meet the requirements of Section 16(b) of the Exchange Act.
For purposes of this Section 2, a disinterested director shall be a
member of the Board who meets the definition of "disinterested person"
as set forth in the rules and regulations promulgated under Section
16(b) of the Exchange Act, as amended from time to time (the "16(b)
Rules"). Currently, a disinterested director for purposes of this
Section 2 is a member of the Board who for one (1) year prior to
service as an administrator of this Plan has not been (and during
service as a Plan Administrator, will not be) granted or awarded
equity securities, including options for equity securities pursuant to
this Plan or any other plan of the Company or its affiliates, except
for certain exclusions described in Rule 16b-3. For purposes of this
Section 2, a non-employee director shall be a member of the Board who
meets the definition of "non-employee director" as set forth in the
16(b) Rules. Currently, a non-employee director is a member of the
Board who (i) is not currently an officer of the Company or a parent
or subsidiary of the Company, or otherwise currently employed by the
Company or a parent or subsidiary of the Company; (ii) does not
receive compensation, either directly or indirectly, from the Company
or a parent or subsidiary of the Company, for services rendered as a
consultant or in any capacity other than as a director, except for an
amount that does not exceed the dollar amount for which disclosure
would be required pursuant to Item 404(a) of Regulation S-K
promulgated under the Exchange Act (("S-K"); (iii) does not possess an
interest in any other transaction for which disclosure would be
required pursuant to Item 404(b) of S-K; and (iv) is not engaged in a
business relationship for which disclosure would be required pursuant
to Item 404(b) of S-K.
2.3 Procedures. The Board may designate one of the
members of the Plan Administrator as chairman. The Plan Administrator
may hold meetings at such times and places as it shall determine. The
acts of a majority of the members of the Plan Administrator present at
meetings at which a quorum exists, or acts reduced to or approved in
writing by all Plan Administrator members, shall be valid acts of the
Plan Administrator.
2.4 Responsibilities. Except for the terms and
conditions explicitly set forth in this Plan, the Plan Administrator
shall have the authority, in its discretion, to determine all matters
relating to the Options, including selection of the individuals to be
granted Options, the number of shares to be subject to each Option,
the exercise price for such Option ("Exercise Price"), and all other
terms and conditions of the Options. The interpretation and
construction by the Plan Administrator of any terms or provisions of
this Plan or any Option, or of any rule or regulation promulgated in
connection with this Plan, shall be conclusive and binding on all
interested parties, so long as such interpretation and construction
with respect to incentive stock options correspond to the requirements
of Section 422 of the Internal Revenue Code of 1986, as amended
("Code"), and the regulations issued thereunder, and any amendment or
successor sections or regulations.
2.5 Section 16(b) Compliance and Bifurcation of Plan.
If the Company registers any of its equity securities pursuant to
Sections 12(b) and 12(g) of the Exchange Act, it is the intention of
the Company that this Plan then comply in all respects with Rule 16b-3
under the Exchange Act and, if any Plan provision is later found not
to be in compliance with such Section, the provision shall be deemed
null and void. In all events, the Plan shall be construed in favor of
its meeting the requirements of Rule 16b-3. Notwithstanding anything
in the Plan to the
<PAGE> 22
contrary, the Board, in its absolute discretion, may bifurcate the
Plan so as to restrict, limit or condition the use of any provision of
the Plan to participants who are officers and directors subject to
Section 16(b) of the Exchange Act without so restricting, limiting or
conditioning the Plan with respect to other participants.
3. STOCK SUBJECT TO THIS PLAN. The stock subject to this Plan
shall be the Company's common stock ("Common Stock"). The Company shall have
authorized and have in reserve for issuance at the time of exercise of any
Option a sufficient number of shares of Common Stock to meet the Company's
obligation. The maximum number of shares of Common Stock which may be issued
under the Plan shall be three million (3,000,000). If any Option expires or is
surrendered, exchanged for another Option, cancelled or terminated for any
reason without having been exercised in full, the unpurchased shares subject to
such Option shall again be available for purposes of this Plan, including for
replacement Options which may be granted in exchange for such expired,
exchanged, surrendered, cancelled or terminated Options.
4. ELIGIBILITY. An incentive stock option in accordance with
Section 422 of the Code ("Incentive Option") may be granted only to an
individual who, at the time the option is granted, is an employee of the
Company and who the Plan Administrator may from time to time select for
participation in this Plan. Members of the Board shall not be eligible for
grants of Incentive Options unless they are also employees of the Company. At
the discretion of the Plan Administrator, employees, officers, directors of the
Company (including non-employee directors), selected non-employee agents,
consultants, advisors, persons involved in the sale or distribution of the
Company's products and independent contractors of the Company also may receive
stock options which are not qualified under Section 422 of the Code
("Nonqualified Option") (Qualified and Nonqualified Options are included
collectively within the term "Options" as used in this Plan). Any party to
whom an Option is granted shall be referred to as an "Optionee."
5. TERMS AND CONDITIONS OF OPTIONS. Options granted under this
Plan shall be evidenced by written agreements which shall contain such terms,
conditions, limitations and restrictions as the Plan Administrator shall deem
advisable and which are not inconsistent with this Plan. Notwithstanding the
foregoing, Option agreements shall include or incorporate by reference the
following terms and conditions:
5.1 Number of Shares. Each Option agreement shall state
the number of shares of stock subject to the Option;
5.2 Option Price. The Option agreement shall state the
Exercise Price per share, and the Plan Administrator shall act in good
faith to establish the Exercise Price as follows:
5.2.1 Incentive Options. Subject to subsection
5.2.3, the Exercise Price of Incentive Options shall be not
less than the fair market value per share of the Common Stock
at the time the Incentive Option is granted;
5.2.2 Incentive Options to Greater than 10%
Shareholders. With respect to Incentive Options granted to
shareholders then holding greater than ten percent (10%) of
the then-issued and outstanding shares of voting stock of the
Company, the Exercise Price shall be as required by Section 6;
<PAGE> 23
5.2.3 Fair Market Value. With respect to
Incentive Options, the fair market value per share of the
Common Stock shall be determined by the Plan Administrator in
good faith at the time the Incentive Option is granted.
5.2.4 Nonqualified Options. The Exercise Price of
Nonqualified Options shall be as is determined by the Plan
Administrator in good faith at the time of their issuance.
5.3 Term, Maturity and Vesting. Subject to the
restrictions contained in Sections 5.8 and 6, the term of each
Incentive Option shall be ten (10) years from the date it is granted
unless a shorter period of time is established by the Plan
Administrator, but in no event shall the term of any Incentive Option
exceed ten (10) years. The term of each Nonqualified Option shall
also be ten (10) years from the date it is granted unless a shorter
period of time is established by the Plan Administrator. The Plan
Administrator shall specify which Options granted hereunder are
Incentive Options and which are Nonqualified Options.
No Option shall be exercisable until it has vested. The
vesting schedule for each Option shall be specified by the Plan
Administrator at the time of grant; provided, that if no vesting
schedule is specified at the time of grant, the Option shall vest
according to the following schedule:
<TABLE>
<CAPTION>
NUMBER OF YEARS PERCENTAGE OF
FOLLOWING DATE OF GRANT TOTAL OPTION VESTED
----------------------- -------------------
<S> <C>
One 25%
Two 50%
Three 75%
Four 100%
</TABLE>
The Plan Administrator may specify a vesting schedule for all
or any portion of an Option based on the achievement of performance
objectives established in advance of the commencement by the Optionee
of services related to the achievement of the performance objectives.
Performance objectives shall be expressed in terms of one or more of
the following: return on equity, return on assets, share price,
market share, sales, earnings per share, costs, net earnings, net
worth, inventories, cash and cash equivalents, gross margin or the
Company's performance relative to its internal business plan.
Performance objectives may be in respect of the performance of the
Company as a whole (whether on a consolidated or unconsolidated
basis), a related corporation, or a subdivision, operating unit,
product or product line of either of the foregoing. Performance
objectives may be absolute or relative and may be expressed in terms
of a progression or a range. An option which is exercisable (in whole
or in part) upon the achievement of one or more performance objectives
may be exercised only following written notice to the Optionee and
the Company by the Plan Administrator that the performance objective
has been achieved.
5.4 Exercise. Subject to the limitations on exercise
described in subsection 5.3 above and any additional holding period
required by applicable law, each Option may be exercised in whole or
in part; provided, however, that only whole shares will be issued
pursuant to the exercise of any Option. During an Optionee's
lifetime, any Options granted under this
<PAGE> 24
Plan are personal to him or her and are exercisable solely by such
Optionee. Options shall be exercised by delivery to the Company of a
written notice of the number of shares with respect to which the
Option is to be exercised, together with payment of the Exercise Price
in accordance with Section 5.5.
5.5 Payment of Exercise Price. Payment of the Exercise
Price shall be made in full at the time the written notice of exercise
of an Option is delivered to the Company, and shall be in cash, bank
certified or cashier's check or personal check (unless at the time of
exercise the Plan Administrator in a particular case determines not to
accept a personal check) for the Common Stock being purchased. The
Plan Administrator can determine in its discretion (i) at the time an
Incentive Option is granted, or (ii) at any time before exercise of
Nonqualified Options, that additional forms of payment will be
permitted, including installment payments on such terms and over such
period as the Plan Administrator may determine. To the extent
permitted by the Plan Administrator and applicable laws and
regulations (including, but not limited to, federal tax and securities
laws and regulations and state corporate law), an option may be
exercised by:
5.5.1 Delivery of Common Stock. Delivery of
shares of Common Stock held by an Optionee having a fair
market value equal to the Exercise Price, such fair market
value to be determined in good faith by the Plan
Administrator;
5.5.2 Delivery of Promissory Note. Delivery of a
full-recourse promissory note executed by the Optionee;
provided that (i) such note if delivered in connection with an
Incentive Option shall, and such note if delivered in
connection with a Nonqualified Option may, bear interest at a
rate specified by the Plan Administrator, but in no case less
than the rate required to avoid imputation of interest (taking
into account any exceptions to the imputed interest rules) for
federal income tax purposes; (ii) the Plan Administrator shall
specify the term and other provisions of such note at the time
an Incentive Option is granted or at any time prior to
exercise of a Nonqualified Option; (iii) the Plan
Administrator may require that the Optionee pledge the
Optionee's shares to the Company for the purpose of securing
the payment of such note, and may require that the certificate
representing such shares be held in escrow to perfect the
Company's security interest; (iv) the note provides that
ninety (90) days following the Optionee's termination of
employment with the Company or a related Corporation, the
entire outstanding balance under the note shall become due and
payable, if not previously due and payable; and (v) the Plan
Administrator in its sole discretion may at any time after
granting an Option restrict or rescind the right to pay using
a promissory note upon written notification to any Optionee;
5.5.3 Delivery of Sale Proceeds. Delivery of a
properly executed written exercise notice, together with
irrevocable instructions to a broker, all in accordance with
the regulations of the Federal Reserve Board, to promptly
deliver to the Company the amount of sale or loan proceeds to
pay the exercise price and any federal, state or local
withholding tax obligations that may arise in connection with
the exercise; provided, that the Plan Administrator may at any
time determine that this section 5.5.3, to the extent the
instructions to the broker call for an immediate sale of the
shares, shall not be available to any Optionee who is subject
to Section 16(b) of the Exchange Act if such transaction would
result in a violation of Section 16(b), or if such Optionee is
not an employee at the time of exercise;
<PAGE> 25
5.5.4 Delivery of Withholding Notice. Delivery of
a properly executed written exercise notice together with
instructions to the Company to withhold upon exercise, from
the shares that would otherwise be issued, that number of
shares having a fair market value equal to the Exercise Price.
5.6 Withholding Tax Requirement. The Company or any
related entity shall have the right to retain and withhold from any
payment of cash or Common Stock under this Plan the amount of taxes
required by any government to be withheld or otherwise deducted and
paid with respect to such payment. At its discretion, the Company may
require an Optionee receiving shares of Common Stock to reimburse the
Company for any such taxes required to be withheld by the Company, and
may withhold any distribution in whole or in part until the Company is
so reimbursed. In lieu of such withholding or reimbursement, the
Company shall have the right to withhold from any other cash amounts
due or to become due from the Company to the Optionee an amount equal
to such taxes or to retain and withhold a number of shares having a
market value not less than the amount of such taxes required to be
withheld by the Company to reimburse the Company for any such taxes
and cancel (in whole or in part) any such shares so withheld. If
required by Section 16(b) of the Exchange Act, the election to pay
withholding taxes by delivery of shares held by any person who at the
time of exercise is subject to Section 16(b) of the Exchange Act,
shall be made during the quarterly 10-day window period required under
Section 16(b) of the Exchange Act for exercises of stock appreciation
rights.
5.7 Non-assignability of Option. Options and the rights
and privileges conferred by this Plan shall not be transferred,
assigned or pledged in any manner (whether by operation of law or
otherwise) other than (i) by will or by the applicable laws of descent
and distribution, or (ii) by gift to members of the Optionee's family,
including grandparents, parents, spouses, siblings, children,
grandchildren and great-grandchildren, or trusts for the benefit of
such family members, or to charitable organizations, and shall not be
subject to execution, attachment or similar process. Any attempt to
transfer, assign, pledge or otherwise dispose of any Option or of any
right or privilege conferred by this Plan, contrary to the Code or to
the provisions of this Plan, or the sale or levy or any attachment or
similar process upon the rights and privileges conferred by this Plan
shall be null and void. Notwithstanding the foregoing, an Optionee
may, during the Optionee's lifetime, designate a person who may
exercise the Option after the Optionee's death by giving written
notice of such designation to the Plan Administrator. Such
designation may be changed from time to time by the Optionee giving
written notice to the Plan Administrator revoking any earlier
designation and making a new designation. In the event that no such
designation is made, the executor or personal representative of the
Optionee's estate shall have any rights then remaining to the Optionee
or his estate under this Plan.
5.8 Duration of Option. Vested Options shall terminate,
to the extent not previously exercised, upon the occurrence of the
first of the following events: (i) the expiration of the Option, as
designated by the Plan Administrator in accordance with Section 5.3
above; (ii) the date of an Optionee's termination of employment with
the Company or any related corporation for cause (as determined in the
sole discretion of the Plan Administrator); (iii) the expiration of
ninety (90) days from the date of an Optionee's termination of
employment with the Company or any related corporation for any reason
whatsoever other than cause, death or Disability (as defined below)
unless the exercise period is extended by the Plan Administrator until
a date not later than the expiration date of the Option; or (iv) the
expiration of one year from (A) the date of death of the Optionee or
(B) cessation of an Optionee's employment by reason of Disability (as
<PAGE> 26
defined below) unless, the exercise period is extended by the Plan
Administrator until a date not later than the expiration date of the
Option. If an Optionee's employment is terminated by death, any
Option held by the Optionee shall be exercisable only by the person or
persons to whom such Optionee's rights under such Option shall pass by
the Optionee's will or by the laws of descent and distribution of the
state or county of the Optionee's domicile at the time of death. For
purposes of the Plan, unless otherwise defined in the Agreement,
"Disability" shall mean any physical, mental or other health condition
which substantially impairs the Optionee's ability to perform his or
her assigned duties for one hundred twenty (120) days or more in any
two hundred forty (240) day period or that can be expected to result
in death. The Plan Administrator shall determine whether an Optionee
has incurred a Disability on the basis of medical evidence acceptable
to the Plan Administrator. Upon making a determination of Disability,
the Plan Administrator shall, for purposes of the Plan, determine the
date of an Optionee's termination of employment.
Unless accelerated in accordance with Section 7, unvested
Options shall terminate immediately upon termination of employment of
the Optionee by the Company for any reason whatsoever, including death
or Disability. For purposes of this Plan, transfer of employment
between or among the Company and/or any related corporation shall not
be deemed to constitute a termination of employment with the Company
or any related corporation. For purposes of this subsection with
respect to Incentive Stock Options, employment shall be deemed to
continue while the Optionee is on military leave, sick leave or other
bona fide leave of absence (as determined by the Plan Administrator).
The foregoing not withstanding, employment shall not be deemed to
continue beyond the first ninety (90) days of such leave, unless the
Optionee's re-employment rights are guaranteed by statute or by
contract.
5.9 Status of Shareholder. Neither the Optionee nor any
party to which the Optionee's rights and privileges under the Option
may pass shall be, or shall have any of the rights or privileges of, a
shareholder of the Company with respect to any of the shares issuable
upon the exercise of any Option unless and until such Option has been
exercised.
5.10 Right to Terminate Employment. Nothing in this Plan
or in any Option shall confer upon any Optionee any right to continue
in the employ of the Company or of a related entity, or to interfere
in any way with the right of the Company or of any related corporation
to terminate, at will, his or her employment or other relationship
with the Company at any time.
5.11 Modification and Amendment of Option. Subject to
the requirements of Code Section 422 with respect to Incentive Options
and to the terms, conditions and limitations of this Plan, the Plan
Administrator may modify or amend outstanding Options. The
modification or amendment of an outstanding Option shall not, without
the consent of the Optionee, impair or diminish any of his or her
rights or any of the obligations of the Company under such Option.
Except as otherwise provided in this Plan, no outstanding Option shall
be terminated without the consent of the Optionee. Unless the
Optionee agrees otherwise, any changes or adjustments made to
outstanding Incentive Options shall be made in such a manner so as not
to constitute a "modification" as defined in Code Section 424(h) and
so as not to cause any Incentive Option to fail to continue to qualify
as an "incentive stock option" as defined in Code Section 422(b).
5.12 Limitation on Value for Incentive Options. As to
all Incentive Options, to the extent that the aggregate fair market
value of the Common Stock with respect to which Incentive Options are
exercisable for the first time by the Optionee during any calendar
year (under this
<PAGE> 27
Plan and all other incentive stock option plans of the Company, a
related corporation or a predecessor corporation) exceeds $100,000,
those Options (or the portion of an Option) beyond the $100,000
threshold shall be treated as Nonqualified Options. If the Internal
Revenue Service publicly rules, issues a private ruling to the
Company, any Optionee, or any legatee, personal representative or
distributee of an Optionee or issues regulations changing or
eliminating such annual limit, the dollar limitation in the preceding
sentence shall be adjusted correspondingly.
6. GREATER THAN 10% SHAREHOLDERS. In the case of Incentive
Options granted to employees who own at the time of their grant ten percent
(10%) or more of the then-issued and outstanding voting stock of the Company,
the following rules shall apply:
6.1 Exercise Price and Term of Incentive Options. If
Incentive Options are granted to employees who own more than ten
percent (10%) of the total combined voting power of all classes of
stock of the Company or any related corporation, the term of such
individual's Incentive Options shall not exceed five (5) years and the
Exercise Price shall be not less than one hundred ten percent (110%)
of the fair market value of the Common Stock at the time the Incentive
Option is granted. This provision shall control notwithstanding any
contrary terms contained in an Option agreement or any other document.
6.2 Attribution Rule. For purposes of subsection 6.1,
in determining stock ownership, an employee shall be deemed to own
such shares as are owned by those persons or entities defined in Code
Section 424. For purposes of this Section 6, stock owned by an
employee shall include all stock actually issued and outstanding
immediately before the grant of the Incentive Option to the employee.
7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The aggregate
number and class of shares for which Options may be granted under this Plan,
the number and class of shares covered by each outstanding Option and the
Exercise Price per share thereof (but not the total price), and each such
Option, shall all be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock of the Company resulting from a
split-up or consolidation of shares or any like capital adjustment, or the
payment of any stock dividend.
7.1 Effect of Liquidation, Reorganization or Change in
Control.
7.1.1 Cash, Stock or Other Property for Stock.
Except as provided in subsection 7.1.2, upon a merger (other
than a merger of the Company in which the holders of Common
Stock immediately prior to the merger have the same
proportionate ownership of Common Stock in the surviving
corporation immediately after the merger), consolidation,
acquisition of property or stock, separation, reorganization
(other than a mere reincorporation or the creation of a
holding company) or liquidation of the Company, as a result of
which the shareholders of the Company receive cash, stock or
other property in exchange for or in connection with their
shares of Common Stock, any Option granted under this Plan
shall terminate, but the Optionee shall have the right
immediately prior to any such merger, consolidation,
acquisition of property or stock, separation, reorganization
or liquidation to exercise such Option in whole or in part, to
the extent the vesting requirements set forth in the Option
agreement have been satisfied, unless stated otherwise in the
Optionee's individual Option agreement.
<PAGE> 28
7.1.2 Conversion of Options on Stock for Stock
Exchange. If the shareholders of the Company receive capital
stock of another corporation ("Exchange Stock") in exchange
for their shares of Common Stock in any transaction involving
a merger (other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have
the same proportionate ownership of Common Stock in the
surviving corporation immediately after the merger),
consolidation, acquisition of property or stock, separation or
reorganization (other than a mere reincorporation or the
creation of a holding company), all Options granted under this
Plan shall be converted into options to purchase shares of
Exchange Stock unless the Company and the Corporation issuing
the Exchange Stock, in their sole discretion, determine that
any or all such Options shall not be converted into options to
purchase shares of Exchange Stock, but instead shall terminate
in accordance with the provisions of subsection 7.1.1. The
amount and price of converted options shall be determined by
adjusting the amount and price of the Options in the same
proportion as used for determining the number of shares of
Exchange Stock the holders of the Common Stock receive in such
merger, consolidation, acquisition of property or stock,
separation or reorganization. Unless accelerated by the
Board, the exercise limitations set forth in the Option
agreement and the Plan shall continue to apply for the
Exchange Stock.
7.1.3 Change in Control. In the event of a
"Change in Control", as defined below, of the Company, unless
otherwise determined by the Board prior to the occurrence of
such Change in Control, any Options or portions of such
Options outstanding as of the date such Change in Control is
determined to have occurred that are not yet fully vested on
such date shall become immediately exercisable in full.
7.1.4 Definition of "Change in Control". For
purposes of this Plan, a "Change in Control" shall mean (a)
the first approval by the Board or by the stockholders of the
Company of an Extraordinary Event, (b) a Purchase, or (c) a
Board Change. For purposes of the Plan such terms shall have
the following meanings:
7.1.4.1 an "Extraordinary Event" shall mean
any of the following actions: (i) any consolidation
or merger of the Company in which the Company is not
the continuing or surviving corporation or pursuant
to which shares of Common Stock would be converted
into cash, securities or other property, other than a
merger of the Company in which the holders of Common
Stock immediately prior to the merger have the same
proportionate ownership of common stock of the
surviving corporation immediately after the merger;
(ii) any sale, lease, exchange or other transfer (in
one transaction or a series of related transactions)
of all, or substantially all, the assets of the
Company; or, (iii) the adoption of any plan or
proposal for liquidation or dissolution of the
Company.
7.1.4.2 a "Purchase" shall mean the
acquisition by any person (as such term is defined in
Section 13(d) of the Exchange Act) of any shares of
Common Stock or securities convertible into Common
Stock without the prior approval of a majority of the
Continuing Directors (as defined below) of the
Company, if after making such acquisition such person
is the beneficial owner (as such term is defined in
Rule 13d-3 under the Exchange Act) directly or
indirectly of Securities of the Company representing
twenty percent (20%) or more of the
<PAGE> 29
combined voting power of the Company's then
outstanding securities (calculated as provided in
paragraph (d) of such Rule 13d-3).
7.1.4.3 a "Board Change" shall have occurred
if individuals who constitute the Board of the
Company at the time of adoption of this Plan (the
"Continuing Directors") cease for any reason to
constitute at least a majority of the Board, provided
that any person becoming a Director subsequent to the
date of adoption of this Plan whose nomination for
election was approved by a vote of at least a
majority of the Continuing Directors (other than a
nomination of an individual whose initial assumption
of office is in connection with an actual threatened
election contest relating to the election of the
Directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A under the Exchange Act)
shall be deemed to be a Continuing Director.
7.2 Fractional Shares. In the event of any adjustment
in the number of shares covered by any Option, any fractional shares
resulting from such adjustment shall be disregarded and each such
Option shall cover only the number of full shares resulting from such
adjustment.
7.3 Determination of Board to Be Final. All Section 7
adjustments shall be made by the Board, and its determination as to
what adjustments shall be made, and the extent of such adjustments,
shall be final, binding and conclusive. Unless an Optionee agrees
otherwise, any change or adjustment to an Incentive Option shall be
made in such a manner so as not to constitute a "modification" as
defined in Code Section 424(h) and so as not to cause his or her
Incentive Option to fail to continue to qualify as an incentive stock
option as defined in Code Section 422(b).
8. SECURITIES REGULATION. Shares shall not be issued with
respect to an Option unless the exercise of such Option and the issuance and
delivery of such shares pursuant to the exercise of such Option shall comply
with all relevant provisions of law, including, without limitation, any
applicable state securities laws, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance, including the availability of an exemption from
registration for the issuance and sale of any shares under this Plan.
Inability of the Company to obtain from any regulatory body having
jurisdiction, the authority deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any shares under this Plan or the
unavailability of an exemption from registration for the issuance and sale of
any shares under this Plan shall relieve the Company of any liability in
respect of the non-issuance or sale of such shares as to which such requisite
authority shall not have been obtained.
As a condition to the exercise of any Option, the Company may require
the Optionee to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present
intention to sell or distribute such shares if, in the opinion of counsel for
the Company, such a representation is required by any relevant provision of the
aforementioned laws. At the option of the Company, a stop-transfer order
against any shares of stock may be placed on the official stock books and
records of the Company, and a legend indicating that the stock may not be
pledged, sold or otherwise transferred unless an opinion of counsel is provided
(concurred in by counsel for the Company) stating that such transfer is not in
violation of any applicable law or regulation, may be stamped on stock
certificates in order to assure exemption from registration. The Plan
Administrator may also require such other action or agreement by the Optionees
as may from time to time be necessary
<PAGE> 30
to comply with the federal and state securities laws. THIS PROVISION SHALL NOT
OBLIGATE THE COMPANY TO UNDERTAKE REGISTRATION OF THE OPTIONS OR STOCK
HEREUNDER. Should any of the Company's capital stock of the same class as the
stock subject to Options be listed on a national securities exchange, all stock
issued under this Plan if not previously listed on such exchange shall be
authorized by that exchange for listing on such exchange prior to the issuance
of such stock.
9. AMENDMENT AND TERMINATION. This Plan may be amended from
time to time as follows:
9.1 Board Action. The Board may at any time suspend,
amend or terminate this Plan; provided, that except as set forth in
Section 7, the approval of the Company's shareholders is necessary
within twelve (12) months before or after the adoption by the Board of
any amendment which will:
9.1.1 increase the number of shares which are to be
reserved for the issuance of Options;
9.1.2 permit the granting of stock options to a
class of persons other than those presently permitted to
receive Options; or,
9.1.3 require shareholder approval under applicable
law, including Section 16(b) of the Exchange Act.
Any amendment made to this Plan which would constitute a
"modification" to Incentive Options outstanding on the date of such
amendment, shall not be applicable to such outstanding Incentive
Options, but shall have prospective effect only, unless the Optionee
agrees otherwise.
9.2 AUTOMATIC TERMINATION. Unless sooner terminated by
the Board, this Plan shall terminate ten (10) years from the earlier
of (i) the date on which this Plan is adopted by the Board or (ii) the
date on which this Plan is approved by the shareholders of the
Company. No Option may be granted after such termination or during
any suspension of this Plan. The amendment or termination of this
Plan shall not, without the consent of the option holder, alter or
impair any rights or obligations under any option previously granted
under this Plan.
10. EFFECTIVENESS OF THIS PLAN. This Plan shall become effective
upon adoption by the Board so long as it is approved by the Company's
shareholders any time within twelve (12) months before or after the adoption of
this Plan.
MACKIE DESIGNS INC.
AMENDED AND RESTATED 1995 STOCK OPTION PLAN
AMENDMENT ADOPTED BY THE BOARD OF DIRECTORS MARCH 11, 1997
Section 5.7 is replaced in its entirety by the following:
5.7 Non-assignability of Option. Options and the rights and
privileges conferred by this Plan shall not be transferred, assigned or pledged
in any manner (whether by operation of law or
<PAGE> 31
otherwise) other than by will or by the applicable laws of descent and
distribution, except that the Plan Administrator may also in its discretion
allow transferability of Nonqualified Options only by gift to members of the
Optionee's family, including grandparents, parents, spouses, siblings,
children, grandchildren and great-grandchildren, or trusts or partnerships for
the benefit of such family members, or to charitable organizations. Options
and the rights and privileges conferred by this Plan shall not be subject to
execution, attachment or similar process. Any attempt to transfer, assign,
pledge or otherwise dispose of any Option or of any right or privilege
conferred by this Plan, contrary to the Code or to the provisions of this Plan,
or the sale or levy or any attachment or similar process upon the rights and
privileges conferred by this Plan shall be null and void. Notwithstanding the
foregoing, an Optionee may, during the Optionee's lifetime, designate a person
who may exercise the Option after the Optionee's death by giving written notice
of such designation to the Plan Administrator. Such designation may be changed
from time to time by the Optionee giving written notice to the Plan
Administrator revoking any earlier designation and making a new designation.
In the event that no such designation is made, the executor or personal
representative of the Optionee's estate shall have any rights then remaining to
the Optionee or his estate under this Plan.
