SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
[ ] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
ACCOM, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
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(2) Aggregate number of securities to which transactions applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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ACCOM, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 20, 1999
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The Annual Meeting of Stockholders (the "Annual Meeting") of Accom,
Inc. ("Accom" or the "Company") will be held at the Company's principal
executive offices at 1490 O'Brien Drive, Menlo Park, California 94025, on
Tuesday, July 20, 1999, at 10:00 a.m., for the following purposes:
1. To elect a board of six directors as follows: (a) two directors to
serve a three-year term, two directors to serve a two-year term, and
two directors to serve a one-year term; or (b) if Proposal No. 3 is not
approved, six directors to hold office until the expiration of their
respective terms of office and until their respective successors are
duly elected and qualified.
2. To consider and vote upon a proposal to amend the Company's Amended and
Restated Certificate of Incorporation to increase the number of
authorized shares of the Company's Common Stock from 20,233,497 to
40,000,000, and the total number of shares of authorized stock from
22,233,497 to 42,000,000.
3. To consider and vote upon a proposal to (a) adopt classified board
provisions in the Company's Amended and Restated Certificate of
Incorporation to (i) implement a classified board of directors divided
into three classes of directors, with the term of office of one of the
three classes of directors expiring each year and with each class being
elected for a three-year term, (ii) provide that only the Board of
Directors, and not the stockholders, may set by resolution the number
of directors within the specified range of five (5) to nine (9), (iii)
provide that only the Board of Directors may fill vacancies on the
Board (unless no Board members remain) and that any director appointed
to fill a vacancy on the Board of Directors will serve for the
remainder of the full term of the class in which the vacancy occurred,
and (iv) require a vote of 66 2/3% of the Company's stockholders to
amend or repeal the foregoing classified board provisions (the
"Classified Board Provisions"); and (b) to amend the Company's Bylaws
to conform with the Classified Board Provisions.
4. To consider and vote upon a proposal to amend the Company's Amended and
Restated Certificate of Incorporation to provide that the Company
elects to be governed by the business combination statute set forth in
Section 203 of the Delaware General Corporation Law.
5. To consider and vote upon a proposal to amend the Company' 1995 Stock
Incentive/Stock Issuance Plan to provide that (a) the stock options
previously granted and to be granted to non-employee directors of the
Company be immediately vested and not subject to repurchase by the
Company and (b) each non-employee director be granted each year
fully-vested options to purchase 5,000 shares of Common Stock of the
Company.
6. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the Company's 1999 calendar year; and
7. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. The record date for determining those
stockholders entitled to notice of, and to vote at, the Annual Meeting and any
adjournment thereof is June [10], 1999. A complete list of the stockholders
entitled to vote at the Annual Meeting will be available for inspection at the
offices of the Company for at least ten days prior to the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting.
However, to assure your representation at the meeting, please carefully read the
accompanying Proxy Statement which describes the matters to be voted upon at
<PAGE>
the Annual Meeting and sign, date and return the enclosed proxy card in the
reply envelope provided. Should you receive more than one proxy because your
shares are registered in different names and addresses, each proxy should be
returned to assure that all your shares will be voted. If you attend the Annual
Meeting and vote by ballot, your proxy vote will be revoked automatically and
only your vote at the Annual Meeting will be counted. The prompt return of your
proxy card will assist us in preparing for the Annual Meeting.
By Order of the Board of Directors,
Lionel M. Allan,
Secretary
Menlo Park, California
June ___, 1999
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ACCOM, INC.
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
July 20, 1999
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This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of Accom, Inc., a Delaware
corporation ("Accom" or the "Company"), with principal executive offices at 1490
O'Brien Drive, Menlo Park, California 94025, to be voted upon at the Annual
Meeting of Stockholders on Tuesday, July 20, 1999 (the "Annual Meeting") and at
any adjournment or adjournments thereof.
These proxy materials were first mailed to stockholders on or about
June ___, 1999.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Stockholders. Each proposal is described in more detail in this Proxy Statement.
REVOCABILITY OF PROXIES
Any stockholder giving a proxy pursuant to this solicitation may revoke
it at any time prior to exercise of such proxy by providing written notice of
such revocation to the Secretary of the Company at its offices at 1490 O'Brien
Drive, Menlo Park, California 94025; by providing a duly executed proxy bearing
a later date; or by attending the meeting and voting in person.
VOTING AND SOLICITATION
Stockholders of record at the close of business on June [10], 1999 are
entitled to notice of and to vote at the Annual Meeting. As of the close of
business on such date, the Company had [10,123,247] shares of Common Stock
outstanding and entitled to vote and approximately [1,XXX] stockholders of
record, including several holders who are nominees for an undetermined number of
beneficial owners. Each holder of Common Stock is entitled to one vote for each
share held as of the record date. The holders of a majority of the shares of
Common Stock outstanding on the record date and entitled to be voted at the
Annual Meeting, present in person or by proxy, will constitute a quorum for the
transaction of business at the Annual Meeting and any adjournments and
postponements thereof.
All votes will be tabulated by the inspector of election appointed for
the meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Shares abstained or subject to a broker
non-vote are counted as present for the purpose of determining the presence or
absence of a quorum for the transaction of business. For proposals other than
the election of directors, abstentions are counted in tabulations of the votes
cast on a proposal presented to stockholders and generally have the same effect
as a vote against the proposal, whereas broker non-votes are not counted for
purposes of determining whether a proposal has been approved. With regard to the
election of directors, votes may be cast in favor of the director or withheld.
Because directors are elected by plurality, abstentions from voting and broker
non-votes will be entirely excluded from the vote and will have no effect on its
outcome. If a quorum is present at the Annual Meeting, the nominees receiving
the greatest number of votes (up to six directors) will be elected.
Each proxy submitted by a stockholder will, unless otherwise directed
by the stockholder in the proxy, be voted FOR (a) election of the six director
nominees named herein (Proposal No. 1); (b) amendment of the Company's
<PAGE>
Amended and Restated Certificate of Incorporation (hereinafter, the "Certificate
of Incorporation") to increase the number of authorized shares of the Company's
Common Stock to 40,000,000 and the number of authorized shares of all capital
stock to 42,000,000 (Proposal No. 2); (c) amendment of the Company's Certificate
of Incorporation and Bylaws to add the Classified Board Provisions (Proposal No.
3); (d) amendment of the Company's Certificate of Incorporation to provide that
the Company elects to be governed by the business combination statute set forth
in Section 203 of the Delaware General Corporation Law (Proposal No. 4); (e)
amendment of the Company's 1995 Stock Incentive/Stock Issuance Plan, as amended
(the "Plan") to provide that the stock options previously granted and to be
granted to non-employee directors of the Company be immediately vested and not
subject to repurchase by the Company and that each non-employee director be
granted each year options to purchase 5,000 shares of Common Stock of the
Company (Proposal No. 5); and (f) ratification of Ernst & Young LLP as
independent auditors of the Company for 1999 (Proposal No. 6). The Company's
directors and executive officers (who currently hold Common Stock representing
approximately 53% of the Company's outstanding Common Stock) have indicated that
they intend to vote all shares of voting stock over which they exercise voting
power as of the record date for approval of each of the proposals described in
this Proxy Statement.
If a stockholder has submitted a proxy appropriately directing how the
shares represented thereby are to be voted, such shares will be voted according
to the stockholder's direction. Any stockholder has the power to revoke his or
her proxy at any time before it is voted at the Annual Meeting by submitting a
written notice of revocation to the Secretary of the Company or by filing a duly
executed proxy bearing a later date. A proxy will not be voted if the
stockholder who executed it is present at the Annual Meeting and elects to vote
the shares represented thereby in person.. If a stockholder has submitted a
proxy appropriately directing how the shares represented thereby are to be
voted, such shares will be voted according to the stockholder's direction. Any
stockholder has the power to revoke his or her proxy at any time before it is
voted at the Annual Meeting by submitting a written notice of revocation to the
Secretary of the Company or by filing a duly executed proxy bearing a later
date. A proxy will not be voted if the stockholder who executed it is present at
the Annual Meeting and elects to vote the shares represented thereby in person.
The Board of Directors reserves the right to withhold any proposal
described herein from a vote at the Annual Meeting if the Board of Directors
deems a vote on such proposal to be contrary to the best interests of the
Company and its stockholders. In such an event, the proposal withheld will be
neither adopted nor defeated.
The cost of soliciting these proxies consisting of the printing,
handling and mailing of the proxy card and related material and the actual
expense incurred by brokerage houses, custodians, nominees and fiduciaries in
forwarding proxy material to the beneficial owners of stock. These costs will be
paid by the Company. In order to assure a majority vote will be present in
person or by proxy at the Annual Meeting, it may be necessary for certain
officers, directors, regular employees and other representatives of the Company
to solicit proxies by telephone, facsimile, telegraph or electronic means or in
person. These persons will receive no extra compensation for their services. The
Company reserves the right to have an outside solicitor conduct the solicitation
of proxies and to pay such solicitor for its services.
Each of the following documents of the Company (collectively, the
"Company Reports") has been mailed to all stockholders entitled to notice of and
to vote at the Annual Meeting: (a) Transition Report on Form 10-K for the
transition period ended December 31, 1998, and (b) Quarterly Report on Form 10-Q
for the quarter ended March 31, 1999. The Company Reports are not incorporated
into this Proxy Statement and are not considered proxy soliciting material.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
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Under the current charter documents, the Company's directors are
elected at each annual meeting of stockholders. Currently, the number of
authorized directors of the Company is six. At the Annual Meeting, six directors
will be elected to serve until the next annual meeting of stockholders and until
their successors are elected and qualified, provided however that the effect of
Proposal No. 3, if approved, would be to classify the Board of Directors into
three classes having staggered terms of three years each and make an initial
classification of the nominees as listed below. Such an amendment would
therefore extend the terms of two of the directors for two years and the term of
two other directors for one year. Each director would then serve until the
annual meeting of stockholders at which directors of his or her class are to be
elected and/or until their respective successors are duly elected and qualified.
If a quorum is present at the Annual Meeting, the nominees receiving the
greatest number of votes (up to six directors) will be elected.
All of the nominees for election as directors at the Annual Meeting set
forth in the table below are incumbent directors. Each of the nominees has
consented to serve as a director if elected. Except to the extent that authority
to vote for any directors is withheld in a proxy, shares represented by proxies
will be voted FOR such nominees. In the event that any of the nominees for
director should before the Annual Meeting become unable to serve if elected,
shares represented by proxies will be voted for such substitute nominees as may
be recommended by the Company's existing Board of Directors, unless other
directions are given in the proxies. Proxies cannot be voted for a greater
number of persons than the number of nominees herein. To the Company's
knowledge, all the nominees will be available to serve.
Information with Respect to Nominees
<TABLE>
Set forth below is information regarding the directors, including
information furnished by them as to their principal occupation at present and
for the last five years, certain other directorships held by them, the year in
which each became a director of the Company and their ages as of April 20, 1999.
There are no family relationships among any of the directors or executive
officers of the Company.
<CAPTION>
Class/End of Term of
Director Director if Classified
Nominees Position with the Company Age Since Board Approved
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Junaid Sheikh Chairman of the Board, President, 45 1988 Class 3/2002
and Chief Executive Officer
Lionel M. Allan Director 55 1995 Class 1/2000
Thomas E. Fanella Director 52 1997 Class 2/2001
David A. Lahar Director 41 1998 Class 2/2001
Eugene M. Matalene, Jr. Director 51 1999 Class 1/2000
Michael Luckwell Director 57 1999 Class 3/2002
</TABLE>
Business Experience of Board Nominees
Junaid Sheikh has served as the Chairman of the Board of Directors
since June 1988 and as the Company's President and Chief Executive Officer since
November 1991. Mr. Sheikh was also the President and Chairman of the Board of
Directors of Axial Systems Corporation, a maker of on-line editing systems, from
May 1990 to October 1991.
Lionel M. Allan has served on the Board of Directors since April 1995.
Since March 1992, Mr. Allan has been President of Allan Advisors, Inc., a board
of directors and legal consulting firm. Mr. Allan also is a director and past
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Chairman of the Board of KTEH Public Television Channel 54 in San Jose,
California, a director of Catalyst Semiconductor, Inc., a semiconductor company,
and a former director (from June 1994 to December 1998) of Global Motorsport
Group, Inc., a motorcycle products company.
Thomas E. Fanella has served on the Board of Directors since March
1997. Since August 1988, Mr. Fanella has been President and Chief Executive
Officer of KTEH Public Television Channel 54 in San Jose, California. Mr.
Fanella is also a director of the Catholic Television Network, the Pacific
Mountain Network and the Silicon Valley Forum.
David A. Lahar has served on the Board of Directors since February
1998. Since September 1992, Mr. Lahar has been a Managing Director of EOS
Capital, Inc., an investment, venture capital and consulting firm. From 1992 to
June 1996, Mr. Lahar was the President of Aurora Electronics, Inc. ("Aurora"), a
company which he co-founded and which is a provider of spare parts distribution
services and electronics recycling and recovery services to computer
manufacturers and field service providers. From 1986 to 1992, Mr. Lahar was a
Managing Director in the Investment Banking Division of PaineWebber
Incorporated.
Eugene M. Matalene, Jr. has served on the Board of Directors since
March 1999. Since 1997, Mr. Matalene has served as President of Strata Capital
Management Corp., a merchant bank. He was a Managing Director of Furman Selz, an
investment bank, from 1996 to 1997 and a Managing Director of PaineWebber
Incorporated, an investment bank, from 1989 to 1996. Mr. Matalene has been a
director of American Bankers Insurance Group, Inc., a specialty insurance
products company, since 1990.
Michael Luckwell has served on the Board of Directors since May 1999.
Since 1986, Mr. Luckwell's principal occupation has been as an individual
investor and a manager of his personal investments. In addition, for six months
in 1995, Mr. Luckwell served as the Chief Executive of Riverside Plc, a company
based in England which operated health and fitness centers. Mr. Luckwell has
been a director of HIT Entertainment Plc, a publicly traded entertainment
company based in England, since May 1993. In 1970, Mr. Luckwell founded The
Moving Picture Company, a leading European video facility and film and
television production company. In 1983, The Moving Picture Company was merged
with Carlton Communications Plc, and Mr. Luckwell served as the Managing
Director of Carlton until 1986.
Arrangements in Connection with the Election of Two Directors
On March 12, 1999, the Company issued 6% Senior Subordinated
Convertible Notes due March 12, 2004 (the "Convertible Notes") in the aggregate
principal amount of $3,500,000 to a group of six investors led by American
Bankers Insurance Group, Inc. ("American Bankers"), including Mr. Matalene. So
long as American Bankers holds either shares or Convertible Notes representing
at least 50% of the Company's Common Stock (the "Common Stock") issuable upon
conversion of the Convertible Notes, American Bankers has the right to nominate
an individual as a member of the Company's management slate of directors
submitted for election to the Company's Board of Directors (the "Board of
Directors"). American Bankers nominated Mr. Matalene, a director of American
Bankers. After the Company expanded its Board of Directors from four to five
directors, Mr. Matalene was appointed as the Company's fifth director in
accordance with the Company's Bylaws.
On December 10, 1998, the Company entered into a Stock Purchase
Agreement with Michael Luckwell, pursuant to which Mr. Luckwell purchased
$1,500,000 of Common Stock of the Company. Pursuant to the Stock Purchase
Agreement, Mr. Luckwell has the right to be nominated as a member of the
Company's management slate of directors submitted for election to the Company's
Board of Directors. Mr. Luckwell requested to be appointed to the Board of
Directors and, after the Company expanded its Board of Directors from five to
six directors, Mr. Luckwell was appointed as the Company's sixth director in
accordance with the Company's Bylaws.
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Compensation of Directors
Of the Company's six directors, one director is a salaried employee of
the Company. Directors who are employees of the Company do not receive any
additional compensation or benefits for their service as directors.
The five remaining non-employee directors are compensated for their
services through the issuance of stock options. When first elected or appointed
as directors, non-employee directors are granted non-statutory stock options to
purchase 10,000 shares of Common Stock. Then, after each annual meeting, each
non-employee director currently receives options to purchase 2,500 shares of
Common Stock, provided the non-employee directors has served on the Board of
Directors for at least six months. All such options expire 10 years from the
date of grant, have an exercise price at the fair market value of the Common
Stock on the date of grant and are immediately exercisable. However, any shares
purchased under such options are subject to repurchase by the Company. The
Company's repurchase right with respect to the initial grant of options lapses
in a series of four equal annual installments over the director's period of
continued service, with the first such installment to lapse upon the director's
completion of one year of Board service measured from the date of grant. The
Company's repurchase right with annual grants lapses one year from the date of
grant.
In accordance with the Company's standard arrangements, the Company
made the following issuances in calendar year 1998. Mr. Lahar was issued 10,000
options upon his first becoming a director of the Company on February 17, 1998.
Messrs. Fanella and Mr. Allan were issued 2,500 options upon re-election as
directors of the Company on February 17, 1998. Mr. Matalene was issued 10,000
options upon his first becoming a director of the Company on March 12, 1999. Mr.
Luckwell was issued 10,000 options upon his first becoming a director of the
Company on May 4, 1999
If Proposal No. 5, described below, is approved by the stockholders,
then each non-employee director will be granted options to purchase 5,000 shares
of the Company's Common Stock each year (instead of 2,500 shares) and such
options will be immediately vested and exercisable and will not be subject to
repurchase by the Company. In addition, all outstanding options held by
non-employee directors will become immediately vested and exercisable and will
not be subject to repurchase by the Company.
See, also, "Certain Relationships and Related Transactions," below, for
a discussion of certain transactions between the Company and certain members of
the Board of Directors.
Board Meetings and Committees
The Board of Directors held a total of eight meetings in fiscal year
1998 (ending September 30, 1998) and one meeting during the transition period
from October 1, 1998 to December 31, 1998 (the "Transition Period"). Each
incumbent director attended at least 75% of the board meetings and meetings of
the committee on which they served during fiscal year 1998 and the Transition
Period. During fiscal year 1998, one meeting of the Audit Committee was held and
during the Transition Period no committee meetings were held. The Company's
Audit Committee is comprised of Messrs. Fanella and Lahar. The Company does not
have a compensation or nominating committee and did not during the last fiscal
year and the Transition Period.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
Report of the Board of Directors
The Board of Directors has general responsibility for establishing the
compensation payable to the Company's executive officers and other key
executives and has the sole and exclusive authority to administer the Company's
1995 Stock Option/Stock Issuance Plan (the "Stock Option Plan") under which
grants may be made to such individuals. Until September 15, 1996, such functions
were performed by the Compensation Committee of the Board and are now performed
by the full Board of Directors.
General Compensation Policy. Under the supervision of the Board of
Directors, the Company's compensation policy is designed to attract and retain
qualified key executives critical to the Company's growth and long-term success.
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It is the objective of the Board of Directors to have a portion of each
executive's compensation contingent upon the Company's performance as well as
upon the individual's personal performance. Accordingly, each executive
officer's compensation package is comprised of three elements: (i) base salary
which reflects individual performance and expertise, (ii) variable bonus awards
payable in cash and tied to the achievement of certain performance goals for the
Company or the executive and (iii) long-term, stock-based incentive awards that
are designed to strengthen the mutuality of interests between the executive
officers and the Company's stockholders. The summary below describes in more
detail the factors which the Board of Directors considers in establishing each
of the three primary components of the compensation package provided to the
executive officers.
Base Salary. The level of base salary is established primarily on the
basis of the individual's qualifications and relevant experience, the strategic
goals for which he has responsibility, the compensation levels at companies that
compete with the Company for business and executive talent, and the incentives
necessary to attract and retain qualified management. Base salary is reevaluated
each year to take into account the individual's performance and to maintain a
competitive salary structure. Company performance does not play a significant
role in the determination of base salary.
Cash-Based Incentive Compensation. Cash bonuses are awarded on a
discretionary basis to executive officers on the basis of their success in
achieving designated individual goals and the Company's success in achieving
specific company-wide goals, such as customer satisfaction, revenue growth and
earnings growth.
Long-Term Incentive Compensation. The Company has utilized the Stock
Option Plan to provide executives and other key employees with incentives to
maximize long-term stockholder values. Awards under this plan by the Board of
Directors take the form of stock options designed to give the recipient a
significant equity stake in the Company and thereby closely align his interests
with those of the Company's stockholders. Factors considered in making such
awards include the individual's position in the Company, his performance and
responsibilities, and internal comparability considerations. In addition, the
Board of Directors takes into account each individual's position with the
Company and his existing holdings of unvested options. Each option grant allows
the executive officer to acquire shares of Common Stock at a fixed price per
share (the fair market value on the date of grant) over a specified period of
time (up to 10 years). The options typically vest in periodic installments over
a four-year period, contingent upon the executive officer's continued employment
with the Company. Accordingly, the option will provide a return to the executive
officer only if he remains in the Company's service, and then only if the market
price of the Common Stock appreciates over the option term.
CEO Compensation. In setting the compensation payable during the 1998
calendar year to the Company's Chief Executive Officer, Junaid Sheikh, the Board
of Directors used the same factors as described above for the executive
officers. The Board established a combination compensation package for Mr.
Sheikh, including a base salary and stock option grants in line with those
received by other executives of comparably-sized companies in similar
industries. In December 1998, the Board granted Mr. Sheikh options to purchase
250,000 shares of common stock, a portion of which were general compensation
options commensurate with options granted to other officers and key employees of
the Company and a portion of which were in consideration of the extraordinary
efforts expended by Mr. Sheikh in the negotiation and consummation of the
Company's acquisition of Scitex Digital Video.
Report on Repriced Stock Options. In May 1998, the Board of Directors
determined that it was in the best interest of the Company to offer to reprice
the then-existing stock options of the Company with exercise prices in excess of
the then-current fair market value of the Company's Common Stock. The Company
also changed the vesting on all outstanding options from a five-year period to a
four-year period, with 25% of the shares vesting at the end of the first year
and the rest vesting equally over the following three years. Included in the
repricing actions were options held by the Company's executive officers and
certain directors, but not any of the options that had been automatically
granted to the non-employee directors pursuant to the Stock Option Plan. The
objectives of the Stock Option Plan are to promote the interests of the Company
by providing employees, certain directors, and certain consultants or
independent contractors an incentive to acquire a proprietary interest in the
Company and to continue to render services to the Company. It was the view of
the Board of Directors that stock options with exercise prices substantially
above the current market price of the Company's Common Stock were viewed
negatively by most optionees of the Company, and provided little, if any, equity
incentive to the optionees. The Board thus concluded that such option grants
seriously undermined the specific objectives of the Stock Option Plan and should
properly be repriced. In making this
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decision, the Board also considered the fairness of such a determination in
relation to other stockholders. In the opinion of the Board, the stockholders'
long-term best interests were clearly served by the retention and motivation of
optionees.
In this context, the Board decided that effective May 15, 1998 (the
"Grant Date") all optionees holding stock options with exercise prices in excess
of the fair market value of the Company's Common Stock should receive a
one-for-one repricing of their then-existing unexercised stock options with a
new exercise price set at $1.03125 per share, the fair market value of the
Company's Common Stock on the Grant Date. The Company completed this repricing
through a one-for-one stock option exchange of "underwater" stock options for
all optionees. The vesting schedule of the new options, as well as all other
options, was changed from a vesting schedule over a five-year period to a
vesting schedule over a four-year period (with 25% vesting after one year and
the balance vesting on a equal monthly basis thereafter). The exchange was
completed in May 1998. It is the opinion of the Board of Directors that this
program helped build optionee morale and provided new incentives for the
Company's employees and management.
The Board of Directors
Junaid Sheikh
Lionel M. Allan
Thomas E. Fanella
David A. Lahar
Michael Luckwell
Eugene M. Matalene, Jr.
Compensation Committee Interlocks and Insider Participation
No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of the Board of Directors. Mr. Sheikh,
Chairman of the Board of Directors, is also President and Chief Executive
Officer of the Company. Mr. Sheikh participated in deliberations of the Board of
Directors concerning executive officer compensation.
Stock Performance Graph
<TABLE>
The following graph shows a comparison of cumulative total stockholder
returns for the Company, the Nasdaq Total Return Index, and the Hambrecht &
Quist Technology Index for the period commencing September 26, 1995, the date of
the initial public offering of the Company's Common Stock, to the last day of
the Company's fiscal year on December 31, 1998.
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T.]
<CAPTION>
9/26/95 9/30/95 9/30/96 9/30/97 9/30/98 12/31/98
------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Accom, Inc. $100 $ 97.22 $ 22.22 $ 29.17 $ 4.17 $ 6.94
NASDAQ Total Return Index $100 $100.55 $119.31 $163.79 $164.19 $211.23
Hambrecht & Quist Technology Index $100 $101.14 $111.02 $165.53 $153.80 $217.10
</TABLE>
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, which might incorporate future
filings made by the Company under those statutes, the preceding Report of the
Board of Directors on Executive Compensation and Stock Performance Graph are not
to be incorporated by reference into any of those previous filings; nor is such
report or graph to be incorporated by reference into any future filings which
the Company may make under those statutes.
7
<PAGE>
Summary of Cash and Certain Other Compensation
<TABLE>
The following Summary Compensation Table sets forth the compensation
earned by the Company's Chief Executive Officer and the three other highest-paid
executive officers whose salary and bonus for the calendar year ended December
31, 1998 was in excess of $100,000 (collectively, the "Named Officers") for
services rendered in all capacities to the Company for that calendar year. As a
result of the change in the Company's fiscal year from September 30 to December
31 in December 1998, the table below reflects compensation information for the
calendar year 1998 and for fiscal years ended September 30, 1996, 1997 and 1998.
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Long-Term
Compensation Compensation
Fiscal ------------------------ ---------------- --------------
Year Securities All Other
Name and Present Ended Calendar Bonus Underlying Compensation
Principal Position Sept. 30 Year Salary ($) ($) (1) Options (#)* ($)
- ------------------------------------ -------- ---------- ----------- ---------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Junaid Sheikh....................... 1998 $176,973 $0 397,286 (2) $2,782 (5)
President, Chief Executive Officer 1998 $170,528 $0 147,286 (2) $2,722 (5)
and Chairman of the Board 1997 $149,220 $0 87,286 (3) $866 (5)
1996 $159,644 $0 137,286 (4) $2,266 (5)
Ian Craven.......................... 1998 $145,000 $2,000 98,125 (6) $1,458 (5)
Senior Vice President, Engineering 1998 $141,596 $2,000 88,125 (6) $1,449 (5)
1997 $130,000 $5,000 58,125 (7) $351 (5)
1996 $129,000 $0 33,125 (8) $1,203 (5)
Harris Rogers....................... 1998 $128,199 $0 65,499 (9) $554 (12)
Vice President, Marketing 1998 $118,199 $1,000 65,499 (9) $492 (12)
1997 $101,439 $4,716 54,166 (10) $351 (12)
1996 $ 84,251 $1,439 34,166 (11) $369 (12)
Donald Petersen..................... 1998 $128,115 $0 117,916 (13) $553 (12)
Vice President, Manufacturing 1998 $124,345 $0 107,916 (13) $549 (12)
1997 $111,416 $5,000 75,833 (14) $330 (12)
1996 $105,502 $0 50,833 (15) $347 (12)
<FN>
- ------------------
(*) Includes options repriced in the fiscal years ending September 30, 1996
and 1997.
(1) Represents bonus compensation earned in such calendar year.
(2) Includes options to purchase 87,286 shares of the Company's Common Stock
that were canceled on May 15, 1998 and repriced to $1.03125 per share. See
"Option Grants in Last Calendar Year" below.
(3) Represents options to purchase 87,286 shares of the Company's Common Stock
that were canceled on February 18, 1997 and repriced to $1.3125 per share.
(4) Includes options to purchase 54,166 shares of the Company's Common Stock
that were canceled on April 23, 1996 and repriced to $3.25 per share.
(5) Represents standard life insurance and key man insurance premiums paid by
the Company for the benefit of the named Officer.
(6) Includes options to purchase 58,125 shares of the Company's Common Stock
that were canceled on May 15, 1998 and repriced to $1.03125 per share. See
"Option Grants in Last Calendar Year" below.
(7) Includes options to purchase 18,125 shares of the Company's Common Stock
that were canceled on February 18, 1997 and repriced to $1.3125 per share.
(8) Includes options to purchase 18,125 shares of the Company's Common Stock
that were canceled on April 23, 1996 and repriced to $3.25 per share.
8
<PAGE>
(9) Includes options to purchase 45,499 shares of the Company's Common Stock
that were canceled on May 15, 1998 and repriced to $1.03125 per share. See
"Option Grants in Last Calendar Year" below.
(10) Represents options to purchase 34,166 shares of the Company's Common Stock
that were canceled on February 18, 1997 and repriced to $1.3125 per share.
(11) Includes options to purchase 14,166 of the Company's Common Stock that
were canceled on April 23, 1996 and repriced to $3.25 per share.
(12) Represents standard life insurance premiums paid by the Company for the
benefit of the Named Officer.
(13) Includes options to purchase 75,833 shares of the Company's Common Stock
that were canceled on May 15, 1998 and repriced to $1.03125 per share. See
"Option Grants in Last Calendar Year" below.
(14) Includes options to purchase 35,833 shares of the Company's Common Stock
that were canceled on February 18, 1997 and repriced to $1.3125 per share.
(15) Includes options to purchase 35,833 shares of the Company's Common Stock
that were canceled on April 23, 1996 and repriced to $3.25 per share.
</FN>
</TABLE>
Option Grants
<TABLE>
The following table provides information with respect to the stock
option grants made during the year ended December 31, 1998 under the Company's
1995 Stock Option/Stock Issuance Plan to the Named Officers. No stock
appreciation rights were granted to these individuals during such calendar year.
OPTION GRANTS IN LAST CALENDAR YEAR
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rate of Stock
Price Appreciation
Individual Grants for Option Term
------------------------------------------------------------ --------------------------
% of Total
Options
Granted to Exercise
Options Employees in Price (2) Expiration
Name Granted Calendar Year(1) ($/share) Date 5% ($)(3) 10% ($)(3)
- ---- ------------ ---------------- --------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Junaid Sheikh 250,000(4) 23.7% $0.6500 12/04/08 41,112 161,718
60,000(5) 5.7% $0.8750 2/05/08 33,017 83,671
4,166(6) N/A $1.0313 1/19/05 1,656 3,826
50,000(6) N/A $1.0313 1/15/06 23,407 55,557
33,120(6) N/A $1.0313 9/03/06 17,062 41,212
Ian Craven 10,000(4) 0.9% $0.6500 12/04/08 1,644 6,469
30,000(5) 2.8% $0.8750 2/05/08 16,508 41,836
40,000(6) N/A $1.0313 3/14/07 22,214 54,453
3,125(6) N/A $1.0313 1/15/05 1,240 2,864
15,000(6) N/A $1.0313 1/15/06 7,022 16,667
Harris Rogers 20,000(5) 1.9% $0.8750 2/05/08 11,005 27,890
20,000(6) N/A $1.0313 3/14/07 11,007 27,227
15,000(6) N/A $1.0313 7/10/06 7,557 18,178
2,499(6) N/A $1.0313 7/01/05 1,072 2,507
8,000(6) N/A $1.0313 1/15/06 3,745 8,889
Donald W. Petersen 10,000(4) 0.9% $0.6500 12/04/08 1,644 6,469
30,000(5) 2.8% $0.8750 2/05/08 16,508 41,836
40,000(6) N/A $1.0313 3/14/07 22,214 54,453
20,833(6) N/A $1.0313 10/10/04 7,882 18,076
15,000(6) N/A $1.0313 1/15/06 7,022 16,667
<FN>
- ------------------
9
<PAGE>
(1) The percentages shown are based upon the options granted in calendar
year 1998, excluding repriced options.
(2) The exercise price may be paid in cash, in shares of Common Stock
valued at fair market value on the exercise date or through a cashless
exercise procedure involving a same-day sale of the purchased shares.
The Company may also finance the option exercise by loaning the
optionee sufficient funds to pay the exercise price for the purchased
shares and the federal and state income tax liability incurred by the
optionee in connection with such exercise.
(3) Disclosure of the 5% and 10% assumed annual rates of compounded stock
price appreciation is mandated by the Securities and Exchange
Commission. There is no assurance provided to any executive officer or
any other holder of the Company's securities that the actual stock
price appreciation over the 10-year option term will be at the assumed
5% and 10% levels or at any other defined level. Unless the market
price of the Common Stock appreciates over the option term, no value
will be realized from the option grants made to the executive officers.
(4) 25% of these options vest on December 4, 1999, and thereafter one
1/36th of the remaining unvested options vest each month. The Board of
Directors also has the authority to provide for the automatic vesting
of shares subject to the outstanding option upon the occurrence of
certain hostile takeovers. Each option has a maximum term of 10 years,
subject to earlier termination in the event of the optionee's cessation
of employment with the Company.
(5) 25% of these options vest on February 5, 1999, and thereafter one
1/36th of the remaining unvested options vest each month. The Board of
Directors also has the authority to provide for the automatic vesting
of shares subject to the outstanding option upon the occurrence of
certain hostile takeovers. Each option has a maximum term of 10 years,
subject to earlier termination in the event of the optionee's cessation
of employment with the Company.
(6) Represents option granted on May 15, 1998 in connection with the
cancellation of an existing outstanding option with an exercise price
in excess of $1.0313 per share. Concomitant with the repricing on May
15, 1998, the vesting schedule for these options changed. Under the
previous method, options vested in five equal annual installments with
20% of the option shares vesting on a cliff basis after each year of
service. Under the new method, options will vest and be exercisable
with respect to 25% of the option shares after one year of service, and
1/36th per month for each month of service thereafter. See "Ten-Year
Option/SAR Repricings" below.
</FN>
</TABLE>
Option Exercises and Holdings
<TABLE>
The table below sets forth information concerning the exercise of
options during the calendar year ended December 31, 1998 and unexercised options
held as of the end of such year by the Named Officers. No stock appreciation
rights were exercised during such calendar year or outstanding as of the end of
that calendar year.
AGGREGATED OPTION EXERCISES IN LAST CALENDAR YEAR
AND CALENDAR YEAR-END OPTION VALUES
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Shares Aggregate Unexercised Options at In-the-Money Options at
Acquired On Value Realized Calendar Year End Calendar Year End (1)
Name Exercise ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- -------------- ----------------- -------------------------- ---------------------------
<S> <C> <C> <C> <C>
Junaid Sheikh 0 $0 73,657 / 323,629 $0 / $0
Ian Craven 0 $0 31,496 / 66,629 $0 / $0
Harris Rogers 0 $0 24,994 / 40,505 $0 / $0
Donald W. Petersen 0 $0 51,353 / 66,563 $302 / $0
<FN>
- ---------------
(1) Market price at calendar year end ($0.625) less exercise price. For
purposes of this calculation, the calendar year end market price of the
shares is deemed to be the closing sale price of the Company's Common
Stock as reported on the Over-the-Counter Bulletin Board on December
31, 1998.
</FN>
</TABLE>
10
<PAGE>
Ten-Year Option/SAR Repricings
<TABLE>
The following table sets forth certain information as of December 31,
1998 with respect to the repricing of certain stock options held by the
Company's executive officers.
<CAPTION>
Market Length Of
Number Of Price Of Exercise Original
Securities Stock At Price At Option Term
Underlying Time Of Time Of Remaining
Options Repricing Or Repricing Or New At Date Of
Repriced Or Amendment Amendment Exercise Repricing
Name Date Amended (#) ($) ($) Price ($) Or Amendment
- -------------------------------------- ---------- ------------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Junaid Sheikh (1)................ 5/15/98 4,166 $1.03125 $1.3125 $1.03125 6.7 years
5/15/98 50,000 $1.03125 $1.3125 $1.03125 7.7 years
President, Chief Executive 5/15/98 33,120 $1.03125 $1.3125 $1.03125 8.3 years
Officer and Chairman of the Board 2/18/97 4,166 $1.3125 $3.25 $1.3125 7.9 years
2/18/97 50,000 $1.3125 $3.25 $1.3125 8.9 years
2/18/97 33,120 $1.3125 $1.88 $1.3125 9.5 years
4/23/96 4,166 $3.25 $4.80 $3.25 8.7 years
4/23/96 50,000 $3.25 $5.75 $3.25 9.7 years
Ian Craven (1)................... 5/15/98 3,125 $1.03125 $1.3125 $1.03125 6.7 years
5/15/98 15,000 $1.03125 $1.3125 $1.03125 7.7 years
Senior Vice President, Engineering 5/15/98 40,000 $1.03125 $1.3125 $1.03125 8.8 years
2/18/97 3,125 $1.3125 $3.25 $1.3125 7.9 years
2/18/97 15,000 $1.3125 $3.25 $1.3125 8.9 years
4/23/96 3,125 $3.25 $4.80 $3.25 8.7 years
4/23/96 15,000 $3.25 $5.75 $3.25 9.7 years
Harris Rogers (1)................ 5/15/98 15,000 $1.03125 $1.3125 $1.03125 8.2 years
5/15/98 2,499 $1.03125 $1.3125 $1.03125 7.1 years
Vice President, Marketing 5/15/98 8,000 $1.03125 $1.3125 $1.03125 7.7 years
5/15/98 20,000 $1.03125 $1.25 $1.03125 8.8 years
2/18/97 15,000 $1.3125 $3.25 $1.3125 9.4 years
2/18/97 4,166 $1.3125 $3.25 $1.3125 8.4 years
2/18/97 10,000 $1.3125 $3.25 $1.3125 8.9 years
2/18/97 5,000 $1.3125 $3.25 $1.3125 9.4 years
4/23/96 4,166 $3.25 $6.00 $3.25 9.2 years
4/23/96 10,000 $3.25 $5.75 $3.25 9.7 years
Donald W. Petersen (1)........... 5/15/98 20,833 $1.03125 $1.31 $1.03125 6.4 years
5/15/98 15,000 $1.03125 $1.31 $1.03125 7.7 years
Vice President, Manufacturing 5/15/98 40,000 $1.03125 $1.31 $1.03125 8.8 years
2/18/97 20,833 $1.3125 $3.25 $1.3125 7.9 years
2/18/97 15,000 $1.3125 $3.25 $1.3125 8.9 years
4/23/96 20,833 $3.25 $4.80 $3.25 8.7 years
4/23/96 15,000 $3.25 $5.75 $3.25 9.7 years
<FN>
- ---------------
(1) The Company repriced certain options in April 1996, February 1997 and May
1998. In each instance, in order to reincentivize certain of its
employees, the Compensation Committee of the Board of Directors or the
Board of Directors itself approved an option exchange for all employees
holding options with an exercise price in excess of the then current fair
market value (which is the price set forth in the column entitled "Market
Price Of Stock At Time Of Repricing Or Amendment" above); such repricings
entitled each such employee to cancel their outstanding options in
exchange for new options with an exercise price equal to the then current
fair market value of the Company's Common Stock on the date of the
approval by the Board of Directors or Compensation Committee. In the
April 1996 and February 1997 repricings, the new options were subject to
the same vesting schedule as the canceled options, including the same
original vesting commencement date. In the May 1998 repricing, the new
options were amended to vest as follows: 25% of each grant vests on the
original vesting commencement date, and thereafter, one 1/36th of the
remaining unvested options of each grant vest each month for the next
three years.
</FN>
</TABLE>
11
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The members of the Board of Directors, the executive officers of the
Company and persons who hold more than ten percent (10%) of the Company's
outstanding Common Stock are subject to the reporting requirements of Section
16(a) of the Securities Exchange Act of 1934, which requires such individuals to
file reports with respect to their ownership of and transactions in the
Company's securities. Officers, directors and greater than ten percent (10%)
stockholders are required to furnish the Company with copies of all such reports
they file. Based solely on its review of the copies of such forms received by
it, or written representations from certain reporting persons that no Forms 5
were required for those persons, the Company believes that, during the fiscal
year ended September 30, 1998 and the Transition Period ended December 31, 1998
all filing requirements applicable to its officers, directors, and greater than
ten-percent beneficial owners were complied with except that (i) each of Messrs.
Junaid Sheikh, Ian Craven, Harris Rogers, Donald Petersen, Paul Hansil and
Lionel Allan failed to timely file a year-end report of Form 5 to reflect the
repricing of outstanding options in May 1998, but have subsequently reported
such repricing transactions on a Form 5 and (ii) a Form 3 for Mr. Donald
McCauley was filed late.
COMMON STOCK OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Company's Common Stock as of May
31, 1999 by (i) all persons who are beneficial owners of five percent or more of
the Company's Common Stock, (ii) each director, (iii) each executive officer of
the Company, and (iv) all current directors and executive officers as a group.
<CAPTION>
Name and Address,
if Required, of Shares Percent of Shares
Beneficial Owner Beneficially Owned (1)(2) Beneficially Owned (1)(2)
---------------- ------------------------- -------------------------
<S> <C> <C>
Michael Luckwell (3)............................... 3,428,750 33.8%
26 Catherine Place
London SW1E 6HF
American Bankers Insurance Group, Inc. (4)......... 2,307,692 18.6%
11222 Quail Roost Drive
Miami, FL 33157
El Dorado Ventures and affiliated entities (5)..... 988,782 9.8%
20300 Stevens Creek Boulevard
Suite 395
Cupertino, CA 95014
Scitex Digital Video, Inc. (6)..................... 1,000,000 9.0%
c/o Scitex Corporation Ltd.
P.O. Box 330
Herzilya B 46103 Israel
AWM Investment Company and affiliates (7).......... 534,400 5.3%
153 East 53 rd Street, 51st Floor
New York, NY 10022
Junaid Sheikh (8).................................. 1,014,960 9.9%
Phillip Bennett (9)................................ 750,000 7.4%
Ian Craven (10).................................... 125,864 1.2%
Donald W. Petersen (11)............................ 69,999 *
Harris Rogers (12)................................. 39,248 *
Donald K. McCauley (13)............................ 0 *
12
<PAGE>
Name and Address,
if Required, of Shares Percent of Shares
Beneficial Owner Beneficially Owned (1)(2) Beneficially Owned (1)(2)
---------------- ------------------------- -------------------------
William Ludwig (13)................................ 0 *
Lionel M. Allan (14)............................... 167,784 1.6%
Thomas E. Fanella (15)............................. 12,500 *
David A. Lahar (16)................................ 110,000 1.1%
Eugene M. Matalene, Jr.(17)........................ 86,923 *
All executive officers and directors as
a group (12 persons) (18)...................... 5,806,028 55.0%
<FN>
- -----------------
* Less than one percent (1%).
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the Company believes that persons
named in the table have sole voting and investment power with respect
to all shares of Common Stock held by such person.
(2) The number of shares of Common Stock beneficially owned includes the
shares issuable pursuant to stock options which may be exercised within
60 days after May 31, 1999. Shares issuable pursuant to such options
are deemed outstanding for computing the percentage of the person
holding such options but are not outstanding for computing the
percentage of any other person.
(3) Includes 10,000 shares issuable upon currently exercisable options held
by Mr. Luckwell, all of which shares are currently subject to a
repurchase right of the Company.
(4) Includes the shares issuable upon conversion of the 6% Senior
Subordinated Convertible Note due March 12, 2004 (the "Convertible
Notes") in the aggregate principal amount of $3,000,000 held by
American Bankers Insurance Group, Inc. The Convertible Notes convert
into that number of shares as calculated by dividing the outstanding
principal amount of such Convertible Notes by a conversion price of
$1.30, subject to adjustment. As of May 31, 1999, the $3,000,000
Convertible Note held by American Bankers Insurance Group, Inc.
converts into 2,307,692 shares.
(5) Reflects share ownership as of December 31, 1998, based on the
Company's records. Includes 10,334 shares of Common Stock owned by El
Dorado C&L Fund, L.P.; 5,765 shares of Common Stock owned by El Dorado
Technology IV, L.P.; 452,326 shares of Common Stock owned by El Dorado
Ventures; and 520,357 shares of Common Stock owned by El Dorado
Ventures III, L.P. Such information is based upon the Company's
knowledge after investigation, but without independent confirmation
from such entities.
(6) Includes a currently exercisable warrant to purchase 250,000 shares of
the Company's Common Stock at $1.00 per share and a currently
exercisable warrant to purchase 750,000 shares of the Company's Common
Stock at $3.00 per share. Both warrants terminate upon the earlier to
occur of (a) December 10, 2008 or (b) an acquisition or change in
control of the Company.
(7) Reflects share ownership as of December 31, 1998, based on the
Company's records. Such shares are beneficially owned by (i) Special
Situations Fund III, L.P., a Delaware limited partnership (the "Fund"),
(ii) MGP Advisers Limited Partnership, a Delaware Limited Partnership
("MGP"), (iii) AWM Investment Company, Inc., a Delaware corporation
("AWM") and (iv) Austin W. Marxe. MGP is a general partner of and
investment adviser to the Fund. MGP is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended. AWM, a
Delaware corporation primarily owned by Austin Marxe, serves as the
sole general partner of MGP. AWM is a registered investment adviser
under the Investment Advisers Act of 1940. Austin W. Marxe is also the
principal limited partner of MGP and is the President and Chief
Executive Officer of AWM. Mr. Marxe is principally responsible for the
selection, acquisition and disposition of the portfolio securities by
AWM on behalf of MGP and the Fund. Such information is based upon the
Company's knowledge after investigation, but without independent
confirmation from such entities.
(8) Includes 102,286 shares issuable upon currently exercisable options
held by Mr. Sheikh. Also includes 912,674 shares owned indirectly by
Mr. Sheikh and Mr. Sheikh's wife as Trustees of the Sheikh Revocable
Trust.
(9) Includes 650,000 shares subject to a repurchase right of the Company,
at the issuance price, which lapses in equal monthly increments over a
period of three years, beginning December 1998.
(10) Includes 50,208 shares issuable upon currently exercisable options held
by Mr. Craven. (11) Represents 69,999 shares issuable upon currently
exercisable options held by Mr. Petersen.
(12) Includes 39,248 shares issuable upon currently exercisable options held
by Mr. Rogers.
(13) Messrs. McCauley and Ludwig joined the Company in December, 1998.
13
<PAGE>
(14) Includes 54,912 shares issuable upon currently exercisable options held
by Mr. Allan. Also includes 12,456 shares owned indirectly by Mr. Allan
as the beneficiary of the Allan Advisors, Inc. Profit Sharing Plan FBO
Lionel M. Allan. Also includes 100,000 shares which are subject to a
repurchase right of the Company, at the issuance price, which lapses
with respect to one-third of the shares after one year and then with
respect to the remaining shares in equal monthly increments over the
two years thereafter, beginning in December 1998.
(15) Represents shares issuable upon currently exercisable options held by
Mr. Fanella, 5,000 of which shares are currently subject to a
repurchase right of the Company.
(16) Includes 10,000 shares issuable upon currently exercisable options held
by Mr. Lahar, 7,500 of which shares are currently subject to a
repurchase right of the Company. Also includes 100,000 shares which are
subject to a repurchase right of the Company, at the issuance price,
which lapses with respect to one-third of the shares after one year and
then with respect to the remaining shares in equal monthly increments
over the two years thereafter, beginning in December, 1998.
(17) Includes 10,000 shares issuable upon currently exercisable options held
by Mr. Matalene, all of which shares are currently subject to a
repurchase right of the Company. Also includes the shares issuable upon
conversion of the Convertible Notes in the aggregate principal amount
of $100,000 held by Mr. Matalene. The Convertible Notes convert into
that number of shares as calculated by dividing the outstanding
principal amount of such Convertible Notes by a conversion price of
$1.30, subject to adjustment. As of May 31, 1999, the $100,000
Convertible Note held by Mr. Matalene converts into 76,923 shares.
(18) Includes 359,153 shares issuable upon currently exercisable options.
See Footnotes above.
</FN>
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 4, 1998, the Company entered into an agreement with Phillip
Bennett, as an inducement to Mr. Bennett to join the Company as Executive Vice
President, Technology and Engineering, which provided for the sale by the
Company to Mr. Bennett of 750,000 shares of Common Stock. Of such shares,
100,000 shares were sold at $0.50 per share for cash, 300,000 shares were sold
at $0.50 per share in consideration of the delivery by Mr. Bennett of a
non-recourse promissory note, and 350,000 shares were sold at $1.00 per share in
consideration of the delivery by Mr. Bennett of a non-recourse promissory note.
The 650,000 shares issued in consideration of the delivery of the promissory
note are subject to a repurchase right of the Company, at the issuance price,
which lapses in equal monthly increments over a period of three years.
On December 7, 1998, the Company entered into agreements with each of
Messrs. Allan and Lahar, directors of the Company, pursuant to which the Company
issued 100,000 shares of Common Stock to each of them. The shares were issued at
a price of $0.65 per share. In consideration of his shares, Mr. Allan delivered
a non-recourse promissory note in the amount of $65,000. In exchange for his
shares, Mr. Lahar has delivered a recourse promissory note, as amended, due
September 1, 1999 in the amount of $65,000. The shares issued are subject to a
repurchase right of the Company, at the issuance price, which lapses with
respect to one-third of the shares after one year and then with respect to the
remaining shares in equal monthly increments over the two years thereafter. The
Company approved the sale of such shares to Messrs. Allan and Lahar primarily in
recognition of their significant efforts related to the acquisition by the
Company of substantially all of the assets of Scitex Digital Video, Inc.
("Scitex") which was consummated on December 10, 1998.
On December 10, 1998, the Company sold and issued 2,500,000 shares of
unregistered Common Stock, at a price of $0.60 per share, to Michael Luckwell, a
major stockholder of the Company, in a private placement. The purpose of the
sale of shares to Mr. Luckwell was to provide the Company with additional
capital in connection with the purchase by the Company of substantially all of
the assets of Scitex. The Company purchased the assets of Scitex concurrently
with the sale of the shares to Mr. Luckwell. In connection with such
transaction, the Company granted Mr. Luckwell the right to be nominated to the
Board of Directors of the Company so long as he holds more than 15% of the
outstanding shares of Common Stock of the Company, and the Company agreed to use
its best efforts to take all required steps to effect the nomination, including
any required amendment of the Company's charter documents. The Company also
granted to Mr. Luckwell certain demand and piggyback registration rights with
respect to all of the shares of Common Stock held by Mr. Luckwell. In addition,
Mr. Luckwell agreed that, for so long as Junaid Sheikh is the Chief Executive
Officer of the Company, he would not, directly or indirectly, acquire beneficial
ownership of any additional stock of the Company. Mr. Luckwell also agreed that
he would not initiate, commence or propose any proxy contest or other
solicitation to vote or seek to influence any other person with respect to the
voting of any stock of the Company with respect to the election or removal of
the Board of Directors, nor become a member of a "group" within
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the meaning of Section 13 of the Securities Exchange Act of 1934, as amended.
The Company and Mr. Luckwell additionally agreed upon certain restrictions on
transfers of the Company's stock held by Mr. Luckwell. Prior to the sale of
shares to Mr. Luckwell, the Company amended its Preferred Shares Rights
Agreement, dated as of September 13, 1996, to permit Mr. Luckwell to acquire up
to 3,425,000 shares of Common Stock (as adjusted for any stock splits, stock
dividends, recapitalizations or the like). Subsequently, on May 4, 1999, the
Company again amended its Preferred Shares Rights Agreement to permit Mr.
Luckwell to acquire up to 3,437,000 shares of Common Stock (as adjusted for any
stock splits, stock dividends, recapitalizations or the like), in order to allow
for Mr. Luckwell to be granted and to exercise options for non-employee
directors.
In connection with the acquisition of substantially all of the assets
of Scitex, the Company retained EOS Capital, Inc. to provide investment banking,
capital raising and financial consulting services, including seeking necessary
debt financing, obtaining a commitment from a lender and negotiating the
financial and other terms of the financing, as well as financial analysis
concerning the acquisition. Mr. Lahar, a director of the Company, is a managing
director and the sole equity owner of EOS Capital. Upon consummation of the
acquisition of the assets of Scitex, EOS Capital earned a $300,000 payment from
the Company for its services. Such amount was negotiated on an arm's length
basis and the Company believes that such amount and the terms of the agreement
with EOS Capital are at least as favorable as the Company could have obtained
from third parties.
In connection with the issuance of the Convertible Notes in the
aggregate principal amount of $3,500,000, the Company retained EOS Capital, Inc.
to provide further financial consulting services. Upon consummation of the
issuance of the Notes, EOS Capital earned a $87,500 consulting fee to be paid by
the Company for its services. Upon the consummation of the issuance, Mr.
Matalene also earned a $87,500 consulting fee to be paid by the Company for his
financial consulting services. Mr. Matalene, who became a director of the
Company upon the issuance of the Notes, is a director and stockholder of
American Bankers. Both such financial consulting fees were negotiated on an
arm's length basis, and the Company believes that such amount and the terms of
the agreement with EOS Capital and Mr. Matalene are at least as favorable as the
Company could have obtained from third parties.
Each of El Dorado Ventures, Michael Luckwell and American Bankers are
entitled to certain registration rights with respect to the Company's Common
Stock owned by such stockholder. See "Common Stock Ownership of Certain
Beneficial Owners and Management." The Company's Certificate of Incorporation
limits the liability of directors to the maximum extent permitted by the
Delaware General Corporation Law. The Company's Bylaws also provide that the
Company shall indemnify its directors, officers, employees and agents in such
circumstances. In addition, the Company has entered into indemnification
agreements with its officers and directors.
The Company has retained Lionel Allan, a director of the Company, as a
consultant for legal and other business related matters. These services are in
addition to his services as a director of the Company. The Company pays Mr.
Allan $4,000 per month for such consulting services. Such amount was negotiated
on an arm's length basis and the Company believes that such amount and the terms
of the agreement with Mr. Allan are at least as favorable as the Company could
have obtained from third parties.
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PROPOSAL NO. 2
PROPOSED AMENDMENT TO RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE AUTHORIZED CAPITAL
- --------------------------------------------------------------------------------
The Board of Directors has unanimously approved, and recommends to the
stockholders that they adopt, an amendment to Article IV of the Amended and
Restated Certificate of Incorporation that would increase the number of
authorized shares of Common Stock from 20,233,497 shares to 40,000,000 and the
number of total authorized shares of capital stock from 22,233,497 to
42,000,000.
Of the 20,233,497 currently authorized shares of Common Stock, an
aggregate of approximately 16,482,271 are issued and outstanding, held in
treasury or reserved for issuance. As of May 20, 1999, 10,123,247 shares were
issued and outstanding; 4,000 shares were held in treasury and 6,355,024 shares
were reserved for issuance under the Company's stock option, stock issuance and
stock purchase plans, upon the conversion of issued and outstanding convertible
securities or upon the exercise of issued and outstanding warrants.
The additional shares of Common Stock for which authorization is sought
would be a part of the existing class of Common Stock and, if and when issued,
would have the same rights and privileges as the shares of Common Stock
currently outstanding. No holder of Common Stock has any preemptive rights. The
Company has no plans for the issuance of any shares of Common Stock at the
present time.
The full text of the proposed amendment to the Certificate of
Incorporation to increase the number of authorized shares is set forth below,
and stockholders are urged to read it.
Purposes and Effects of the Proposed Increase in the
Number of Authorized Shares of Common Stock
The Board of Directors believes that the proposed increase in the
number of authorized shares of Common Stock would benefit the Company and its
stockholders by giving the Company needed flexibility in its corporate planning
and in responding to developments in the Company's business, including possible
acquisition transactions, stock splits, stock dividends and other general
corporate purposes. Having such authorized shares available for issuance in the
future would give the Company greater flexibility and allow shares of its Common
Stock to be issued without the expense of a special stockholders' meeting or
waiting until the next annual meeting.
In December 1998, the Company acquired the assets of another company as
part of its strategy to broaden and strengthen its product lines, geographic
markets and distribution channels. As part of the consideration for such
acquisition, the Company issued warrants to acquire 1,000,000 shares of Common
Stock. The Company also raised $1,500,000 in cash for the transaction through a
private placement of its Common Stock. Subsequently, in March 1999, the Company
raised approximately $3,500,000 through the issuance of convertible subordinated
notes that may be converted into Common Stock. Future acquisitions and
financings may involve the payment and issuance of Common Stock or securities
convertible or exchangeable into Common Stock. The Board of Directors believes
that the proposed increase in the number of authorized shares of Common Stock is
desirable to maintain the Company's flexibility in choosing how to pay
consideration in acquisitions, raise capital and create benefit plans.
Unless otherwise required by applicable law or regulation, the shares
of Common Stock proposed to be authorized will be issuable without further
stockholder action and on such terms and for such consideration as may be
determined by the Board of Directors.
The Board of Directors could use the additional shares of Common Stock
to discourage an attempt to change control of the Company, even though a change
in control might be perceived as desirable by some stockholders, by selling a
substantial number of shares of Common Stock to persons who have an arrangement
with the Company
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concerning the voting of such shares, or by distributing Common Stock or rights
to receive such stock to the stockholders. The Board of Directors, however, has
no present intention of issuing any shares of Common Stock or rights to acquire
Common Stock for such purposes, and there are no arrangements with any person
for the purchase of shares of Common Stock in the event of an attempted change
of control.
Text of Proposed Amendments to Certificate of Incorporation
"ARTICLE IV
This Corporation is authorized to issue two classes of stock to be
designated common stock ("Common Stock") and preferred stock
("Preferred Stock"). The total number of shares which the Corporation
is authorized to issue is Forty Two Million (42,000,000) shares. The
number of shares of Common Stock authorized to be issued is Forty
Million (40,000,000), par value $0.001 per share, and the number of
shares of Preferred Stock authorized to be issued is Two Million
(2,000,000), par value $0.001 per share.
The Preferred Stock may be issued from time to time in one or more
series, without further stockholder approval. The Board of Directors is
hereby authorized, the resolution or resolutions adopted by the Board
of Directors providing for the issuance of any wholly unissued series
of Preferred Stock, within the limitations and restrictions stated in
this Amended and Restated Certificate of Incorporation to fix or alter
the dividend rights, dividend rate, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences of any
wholly unissued series of Preferred Stock, and the number of shares
constituting any such series and the designation thereof, or any of
them, and to increase or decrease the number of shares of any series
subsequent to the issue of shares of that series, but not below the
number of shares of such series then constituting such decrease shall
resume the status that they had prior to the adoption of the resolution
originally fixing the number of shares of such series."
Vote Required and Board of Directors' Recommendation
The affirmative vote of the majority of the shares of Common Stock
outstanding and entitled to vote at the Annual Meeting will be required to adopt
the proposed amendment of Article IV of the Certificate of Incorporation. The
Board of Directors unanimously recommends a vote IN FAVOR OF the adoption of the
proposed amendment of Article IV of the Certificate of Incorporation. The Board
of Directors believes that the Company and its stockholders will benefit from
the increase in the number of authorized shares of Common Stock.
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ANTI-TAKEOVER PROPOSALS
Proposals No. 3 and 4 in this Proxy Statement are proposals to amend
the Company's Certificate of Incorporation and Bylaws, which amendments, as
discussed below, may have certain anti-takeover effects. The following section
discusses the general consequences of these proposals to stockholders of the
Company and the existing anti-takeover devices that have already been
implemented by the Board of Directors, and should be read in conjunction with
the individual discussions with respect to Proposals 3 and 4.
The Anti-Takeover Proposals
The Board of Directors has evaluated the potential vulnerability of the
Company and its stockholders to the threat of unfair or coercive takeover
tactics and has considered the range of possible responses to any such threat.
Although the Board of Directors is not currently aware of any such threat, it
has unanimously approved the amendments to the Certificate of Incorporation and
Bylaws described in Proposal No. 3 (Classified Board Provisions) and Proposal
No. 4 (election to be covered by business combination statute). Proposals No. 3
and 4 are intended to reduce the Company's vulnerability to unsolicited or
hostile attempts to obtain control of the Company and to increase the likelihood
that stockholders will receive a fair price for their shares in transactions
relating to such attempts. Proposals No. 3 and 4 are not being proposed in
response to any present attempt, known to the Board of Directors, to acquire
control of the Company, to obtain representation on the Company's Board of
Directors, or to take significant corporate action. The Company has no current
intentions to adopt or propose anti-takeover measures other than Proposals No. 3
and 4.
Third parties frequently accumulate stock positions in public
corporations in order to force a merger or other business combination or to
commence a tender or exchange offer or other hostile attempt to acquire control
of a company. The Board of Directors believes that unsolicited takeover attempts
may be unfair or disadvantageous to the Company and its stockholders because,
among other reasons: (a) a non-negotiated takeover bid may be timed to take
advantage of temporarily depressed stock prices; (b) a non-negotiated takeover
bid may be designed to foreclose or minimize the possibility of more favorable
competing bids or alternative transactions; (c) a non-negotiated takeover bid
may involve the acquisition of only a controlling interest in the company's
stock, without affording all stockholders the opportunity to receive the same
economic benefits; and (d) a non-negotiated takeover bid may often deprive the
stockholders of an adequate opportunity to evaluate the merits of the proposed
transaction.
By contrast, in a transaction in which a potential acquiror must
negotiate with an independent board of directors, the board can and should take
account of the underlying and long-term values of the Company's business,
technology and other assets, the possibilities for alternative transactions on
more favorable terms, anticipated favorable developments in the Company's
business not yet reflected in the stock price, and equality of treatment of all
stockholders.
Proposals No. 3 and 4 are designed to encourage any person who might
seek to acquire control of the Company to first consult with the Company's Board
of Directors and to negotiate the terms of any tender offer or proposed business
combination. The Board of Directors believes that, for the protection of the
Company's stockholders, any proposed acquisition of control of the Company, and
any proposed business combination in which the Company might be involved, should
be thoroughly studied by the Company's Board of Directors to ensure that such
transaction would be in the best interests of the Company and its stockholders
and that all of the Company's stockholders be treated fairly. In sum, the Board
of Directors believes that Proposals No. 3 and 4 are prudent and in the best
interests of the Company and its stockholders and should be adopted for their
protection.
Despite the belief of the Board of Directors as to the benefits to
stockholders of Proposals No. 3 and 4, the proposals, if adopted, may be
disadvantageous to the extent that they have the effect of discouraging a future
takeover attempt that is not approved by the Board of Directors, but which a
majority of the stockholders may deem to be in their best interests or in which
stockholders may receive a substantial premium for their shares over the then
current market value or over their cost basis in such shares. As a result of
such effects of Proposals No. 3 and 4, stockholders who might wish to
participate in an unsolicited tender offer may not have an opportunity to do so.
Proposals No. 3 and 4, if adopted, could also delay or frustrate the assumption
of control by a holder of a large block of the Company's shares or
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a change in the composition of the incumbent Board of Directors, even if many
stockholders considered such actions to be beneficial. Furthermore, the adoption
of Proposals No. 3 and 4 will not ensure or guarantee that stockholders will
receive a price for their shares in connection with an acquisition of control of
the Company that reflects the value of such shares, or that the price received
will be fair or equitable, although in the opinion of the Board of Directors the
likelihood that the price will reflect such value and be fair and equitable will
be increased by the adoption of Proposals No. 3 and 4.
Existing Anti-Takeover Devices
In addition to Proposals No. 3 and 4, the Certificate of Incorporation
and the Bylaws currently have provisions that could have the effect of making it
more difficult for a third party to acquire, or discouraging a third party from
attempting to acquire, control of the Company, even if such transaction or
occurrence may be favorable to the interests of some or all of the Company's
stockholders.
The Certificate of Incorporation currently authorizes the Board of
Directors to issue 2,000,000 shares of Preferred Stock having such rights,
preferences and privileges as designated from time to time by the Board of
Directors without stockholder approval. Under certain circumstances, the Company
could use the Preferred Stock or currently authorized but unissued shares of
Common Stock to create voting impediments or to frustrate persons seeking to
affect a takeover or otherwise gain control of the Company or to dilute the
public ownership of the Company, and thereby protect the continuity of the
Company's management. Currently, there are no shares of Preferred Stock issued
and outstanding. In September 1996, the Company designated 60,000 shares of
Preferred Stock as Series A Participating Preferred Stock relating to the
Preferred Shares Rights Agreement, dated as of September 13, 1996, by and
between the Company and U.S. Stock Transfer Corporation (the "Rights
Agreement").
The Rights Agreement involves distributions of one "Right" for each
share of Common Stock outstanding as of the close of business on September 24,
1996, and for each share of Common Stock issued thereafter. Under the Rights
Agreement, among other provisions, if a person or group (other than as discussed
below) acquires 15% or more of the Company's outstanding Common Stock or
commences a tender offer or exchange offer for 15% or more of the outstanding
Common Stock, each Right not owned by the acquiror or its affiliates will
entitle its holder to pay the Company $20 and receive newly issued shares of
Common Stock worth $40. This ability of stockholders other than the acquiror to
purchase additional shares at a 50% discount from market, among other provisions
in the Rights Agreement, would cause an unapproved takeover to be much more
expensive to an acquiror, resulting in a strong incentive to negotiate with the
Board of Directors to redeem the Rights or approve the transaction instead of
pursuing a hostile strategy. The Rights are not exercisable in the event of a
permitted offer that means certain defined criteria and may be redeemed by the
Company at $0.01 per Right within 10 days (or such later date as may be
determined by a majority of continuing directors) after the accumulation of 15%
or more of the Company's outstanding Common Stock by a single acquiror or group.
In connection with certain acquisitions of Common Stock by Michael Luckwell in
private placements, the Company has amended the Rights Agreement to exempt from
the provisions of the Rights Plan acquisitions by Mr. Luckwell and his
affiliates of up to 3,437,000 shares of Common Stock, and in connection with
certain acquisitions of convertible promissory notes by American Bankers
Insurance Group, Inc. in a private placement, the Company has amended the Rights
Agreement to exempt from the provisions of the Rights Plan acquisitions by
American Bankers Insurance Group, Inc. and its affiliates of up to 2,307,692
shares of Common Stock.
In addition, in May 1999, the Board of Directors unanimously voted to
adopt two anti-takeover provisions in the Company's Bylaws. Consequently, the
Company's Bylaws were amended to (a) eliminate the ability of stockholders to
call a special meeting of stockholders; and (b) require stockholders to give
written notice of any proposal or the nomination of a director to the Secretary
of the Company not less than 90 days nor more than 120 days prior to the prior
year's Annual Meeting of Stockholders; provided, however, that in the event that
the date of the Annual Meeting of Stockholders is more than 30 days before or
more than 60 days after such anniversary date, notice by the stockholder must be
received not less than 90 days nor more than 120 days prior to the Annual
Meeting of Stockholders (or not less than ten days after the first public
announcement of the date of the meeting, if later). These provisions may have
the effect of delaying or precluding a nomination for the election of directors
or of delaying or precluding any other business of a particular meeting if the
proper procedures are not met. The provisions may also discourage or deter a
third party from conducting a solicitation of proxies to elect its own slate of
directors or otherwise attempt to obtain control of the Company.
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In addition, the Company's Certificate of Incorporation and Bylaws both
prohibit the stockholders of the Company from taking action by written consent.
These provisions may also discourage or deter a third party from attempting to
obtain control of the Company because they would delay the third party from
taking any actions with respect to a stockholder vote until a duly called and
noticed meeting is held.
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PROPOSAL NO. 3
AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION AND AMENDED AND RESTATED BYLAWS -
CLASSIFIED BOARD PROVISIONS
- --------------------------------------------------------------------------------
The Board of Directors has voted unanimously (a) to authorize the
adoption of the Classified Board Provisions in the Company's Certificate of
Incorporation to (i) implement a classified board of directors divided into
three classes of directors, with the term of office of one of the three classes
of directors expiring each year and with each class being elected for a
three-year term, (ii) provide that only the Board of Directors, and not the
stockholders, may set by resolution the number of directors within the specified
range of five (5) to nine (9), (iii) provide that only the Board of Directors
may fill vacancies on the Board (unless no Board members remain) and that any
director appointed to fill a vacancy on the Board of Directors will serve for
the remainder of the full term of the class in which the vacancy occurred, and
(iv) require a vote of 66 2/3% of the Company's stockholders to amend or repeal
the foregoing Classified Board Provisions; (b) to amend the Company's Amended
and Restated Bylaws to conform with the Classified Board Provisions in the
Company's Certificate of Incorporation; and (c) to recommend such proposed
amendments to the stockholders for adoption. The text of these proposed
amendments is set forth below.
The Bylaws and the Certificate of Incorporation currently provide that
the Board of Directors or the stockholders may set the exact number of directors
from time to time by bylaw amendment or resolution. Currently, the Board of
Directors has set the number of directors at six (6), and all directors are
elected to the Company's Board of Directors for a term of one year and vacancies
on the Board may be filled by the Board or the stockholders.
The proposed amendment, which would replace the existing Article VI of
the Company's Certificate of Incorporation, would add a provision that divides
the Board of Directors into three classes: Class 1, Class 2 and Class 3.
Initially, members of all three classes will be elected at the Annual Meeting.
Directors then elected to Class 1 would serve until the Annual Meeting of
Stockholders to be held in 2000, and until their respective successors are
elected and qualified. Directors initially elected to Class 2 and Class 3 would
serve until the Annual Meeting of Stockholders to be held in 2001 and 2002,
respectively, and until their respective successors are elected and qualified.
Commencing with the election of directors to Class 1 in 2000, each class of
directors elected at an Annual Meeting of Stockholders would be elected to
three-year terms. Under Delaware law, where a company's certificate of
incorporation calls for a classified board of directors, the stockholders of the
company may only remove a director from the board for cause unless the company's
certificate of incorporation provides otherwise. The Company's Certificate of
Incorporation does not specifically provide for removal of a director without
cause, and thus, an effect of the proposed amendment would be to eliminate the
stockholders' ability to remove a director without cause.
The proposed amendment to the Certificate of Incorporation would also
eliminate the stockholders' ability to fix the number of directors from time to
time by resolution, leaving the Board of Directors with sole authority to fix
the number of directors from time to time within the specified range of five (5)
to nine (9).
The proposed amendment would also provide that vacancies due to
resignation, death, increases in the number of directors, or any other cause
would be filled only by the Board of Directors (unless there are no directors,
in which case vacancies would be filled by the stockholders), keeping each class
of directors as nearly equal in number as possible. In addition, any new
director appointed to fill a vacancy on the Board of Directors will serve for
the remainder of the full term of the class in which the vacancy occurred,
rather than until the next annual meeting. These provisions relating to the
removal of directors and the filling of vacancies will preclude a third party
from removing incumbent directors without cause, and simultaneously gaining
control of the Board of Directors by filling the vacancies created by removal
with its own nominees.
The Classified Board Provisions include an amendment to current Article
XII to the Certificate of Incorporation, to add a provision that requires the
vote of holders of 66 2/3% or more of the Company's Common Stock
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to amend, repeal or modify the foregoing amendments or the Corporate Power
Article of the Restated Certificate of Incorporation. Delaware law provides that
the certificate of incorporation of a Company may be amended by the vote of a
majority of the shares of common stock then outstanding and entitled to vote,
unless the relevant provision of the company's certificate of incorporation
requires the vote of a greater number or proportion than a majority, in which
case any such provision many not be amended, modified or repealed except by such
greater vote. The supermajority vote provision in Proposal No. 3 will make it
more difficult for the stockholders, following the Annual Meeting, to modify or
eliminate the new Article VI, including without limitation the provisions
therein that classify the Board, that govern the filling of vacancies on the
Board, and that specify that the number of directors of the Company may be
determined by the Board within the specified range of five (5) to nine (9). This
will enhance the Company's ability to maintain the stability of the Board of
Directors, but may have the effect of further discouraging potentially
unfriendly bids for the shares of the Company.
Proposal No. 3 also calls for stockholder approval of conforming
amendments to be made to the Company's Bylaws to eliminate the stockholders'
ability, currently set forth therein, to fix the number of directors by
resolution and to set forth the contents of new Article VI in the Bylaws.
The Board of Directors believes that the adoption of the Classified
Board Provisions is in the best interests of the Company and its stockholders.
The Classified Board Provisions will help lend continuity and stability to the
management of the Company and will assure continuity and stability in the
Board's leadership and policies. At any given time, approximately two-thirds of
the members of the Board of Directors will have had prior experience as
directors of the Company. The Board believes that this will facilitate
long-range planning, strategy and policy because it will enhance the likelihood
of continuity and stability in the composition of the Board of Directors and its
policies. The Board of Directors believes that this will permit the Board of
Directors to more effectively represent the interests of all stockholders. The
Company is not aware of any prior problems with respect to director continuity.
A classified Board of Directors will serve as an obstacle to any
attempts to obtain control of the Company through the acquisition of a
significant minority position and the election of a new slate of directors. At a
minimum, two successive annual meetings of stockholders, as opposed to one, will
normally be required in order to elect a majority of the Board, unless there is
cause and sufficient voting strength to remove a particular director or
directors. As a result, instituting a classified Board of Directors may deter
certain mergers, tender offers, proxy contests or other future attempts to
acquire control of the Company that some or a majority of stockholders may deem
to be in their best interests or the Company's best interests. As a result of
the classification's possible effect of discouraging some takeover bids or block
purchases of stock by potential acquirors, stockholders may be deprived of
opportunities to sell some or all of their shares in a tender offer which might
involve a purchase price higher than the then-current market price or a bidding
contest between competing bidders. Moreover, to the extent classification
discourages open market purchases of the Company's stock, stockholders may be
deprived of temporary increases in the market price of the Company's stock.
Classification will also make it more difficult for stockholders to change the
Company's Board of Directors at a time when the stockholders consider it
desirable to do so. Consequently, the proposed amendment will tend to perpetuate
current management. See "The Anti-Takeover Proposals."
The Board of Directors believes that the Classified Board Provisions
will provide the Board of Directors with the opportunity to negotiate with
potential acquirors to obtain a fair price for stockholders in any
change-of-control transaction, and more time to evaluate any takeover or control
proposal and thus enable it to better protect the interests of the Company and
the remaining stockholders in the event someone obtains voting control of a
majority of the Company's stock. Classification is recommended for this reason
and because the Board believes that it will enhance the quality and stability of
the Board of Directors. The Classified Board Provisions are not being proposed
in order to prevent an unsolicited takeover attempt, and the Board of Directors
is not aware of any present attempt by any person to acquire control of the
Company, obtain representation on the Board of Directors or take any significant
action that would affect the governance of the Company. The Classified Board
Provisions are permitted under Delaware law.
The Board of Directors has considered the advantages and possible
disadvantages of this proposal and has unanimously determined that the adoption
of this proposal is in the best interests of the Company and its stockholders.
The information concerning the current nominees for election as
directors at the Annual Meeting and the classes to which they would be elected
if this Proposal No. 3 is approved is set forth above under the caption
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"Proposal No. 1 - Election of Directors." If the proposal to adopt a classified
board is not approved and implemented, all directors elected at the Annual
Meeting will serve for a one-year term and until their successors are duly
elected and qualified.
Text of Proposed Amendments to Certificate of Incorporation
"ARTICLE VI
The total number of directors of the Corporation shall be not less than
five (5) nor more than nine (9), with the actual total number of
directors set from time to time exclusively by resolution of the Board
of Directors. The Board of Directors shall initially consist of six
members until changed by such a resolution. There shall be three
classes of directors (each, a "Class"), known as Class 1, Class 2 and
Class 3. The initial Class 1, Class 2 and Class 3 directors shall serve
in office as follows: Class 1 shall retire at the first annual meeting
of stockholders following the filing of the Corporation's Amended and
Restated Certificate of Incorporation (the "Effective Date"), Class 2
shall retire at the second annual meeting of stockholders following the
Effective Date, and Class 3 shall retire at the third annual meeting of
stockholders following the Effective Date. This annual sequence shall
be repeated thereafter. Each director in a Class shall be eligible for
re-election if nominated, and such director's seat shall be open for
election of a director, at the annual meeting of stockholders of the
Corporation at which such Class shall retire, to hold office for three
years or until his successor is elected or appointed.
Any additional directors elected or appointed shall be elected
or appointed to such Class as will ensure that the number of directors
in each Class remains as nearly equal as possible, and if all Classes
have an equal number of directors or if one Class has one director more
than the other two Classes, then any additional directors elected or
appointed shall be elected or appointed to the Class that does not have
more directors than any other Class and is subject to election at an
ensuing annual meeting before any other such Class.
Vacancies due to resignation, death, increases in the number of
directors, or any other cause shall be filled only by the Board of
Directors (unless there are no directors, in which case vacancies will
be filled by the stockholders) in accordance with the rule that each
Class of directors shall be as nearly equal in number of directors as
possible. Notwithstanding such rule, in the event of any change in the
authorized number of directors each director then continuing to serve
as such will nevertheless continue as a director of the Class of which
he or she is a member, until the expiration of his or her current term
or his earlier death, resignation or removal. If any newly created
directorship or vacancy on the Board of Directors, consistent with the
rule that the three Classes shall be as nearly equal in number of
directors as possible, may be allocated to one or two or more Classes,
then the Board of Directors shall allocate it to that of the available
Classes whose term of office is due to expire at the earliest date
following such allocation. When the Board of Directors fills a vacancy,
the director chosen to fill that vacancy shall be of the same Class as
the director he or she succeeds and shall hold office until such
director's successor shall have been elected and qualified or until
such director shall resign or shall have been removed. No reduction of
the authorized number of directors shall have the effect of removing
any director prior to the expiration of such director's term of
office."
"ARTICLE XII
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute,
and all rights conferred on stockholders herein are granted subject to
this reservation; provided, however, that any amendment of Article VI
or of this Article XII will require an affirmative vote of the holders
of sixty-six and two-thirds percent (66 2/3%) or more of the total
voting power of all outstanding shares of voting stock of the
Corporation."
23
<PAGE>
Text of Proposed Conforming Amendment to Amended and Restated Bylaws
"ARTICLE III
DIRECTORS
Section 1. Unless otherwise provided in the corporation's
certificate of incorporation, the total number of directors of the
corporation shall be not less than five (5) nor more than nine (9),
with the actual total number of directors set from time to time
exclusively by resolution of the board of directors. The board of
directors shall consist of six members until changed by such a
resolution. There shall be three classes of directors (each, a
"Class"), known as Class 1, Class 2 and Class 3. The initial Class 1,
Class 2 and Class 3 directors shall serve in office as follows: Class 1
shall retire at the first annual meeting of stockholders following the
filing of the Amendment to the corporation's Amended and Restated
Certificate of Incorporation (the "Effective Date"), Class 2 shall
retire at the second annual meeting of stockholders following the
Effective Date, and Class 3 shall retire at the third annual meeting of
stockholders following the Effective Date. This annual sequence shall
be repeated thereafter. Each director in a Class shall be eligible for
re-election if nominated, and such director's seat shall be open for
election of a director, at the annual meeting of stockholders of the
corporation at which such Class shall retire, to hold office for three
years or until his successor is elected or appointed.
Any additional directors elected or appointed shall be elected or
appointed to such Class as will ensure that the number of directors in
each Class remains as nearly equal as possible, and if all Classes have
an equal number of directors or if one Class has one director more than
the other two Classes, then any additional directors elected or
appointed shall be elected or appointed to the Class that does not have
more directors than any other Class and is subject to election at an
ensuing annual meeting before any other such Class.
Section 2. Vacancies due to resignation, death, increases in
the number of directors, or any other cause shall be filled only by the
board of directors (unless there are no directors, in which case
vacancies will be filled by the stockholders) in accordance with the
rule that each Class of directors shall be as nearly equal in number of
directors as possible. Notwithstanding such rule, in the event of any
change in the authorized number of directors each director then
continuing to serve as such will nevertheless continue as a director of
the Class of which he or she is a member, until the expiration of his
or her current term or his earlier death, resignation or removal. If
any newly created directorship or vacancy on the board of directors,
consistent with the rule that the three Classes shall be as nearly
equal in number of directors as possible, may be allocated to one or
two or more Classes, then the board of directors shall allocate it to
that of the available Classes whose term of office is due to expire at
the earliest date following such allocation. When the board of
directors fills a vacancy, the director chosen to fill that vacancy
shall be of the same Class as the director he or she succeeds and shall
hold office until such director's successor shall have been elected and
qualified or until such director shall resign or shall have been
removed. No reduction of the authorized number of directors shall have
the effect of removing any director prior to the expiration of such
director's term of office.
Section 3. The business of the corporation shall be managed by
or under the direction of its board of directors which may exercise all
such powers of the corporation and do all such lawful acts and things
as are not by statute or by the certificate of incorporation or by
these bylaws directed or required to be exercised or done by the
stockholders."
Vote Required and Board of Directors' Recommendation
The affirmative vote of a majority of the shares outstanding and
entitled to vote at the Annual Meeting, at which a quorum representing a
majority of all outstanding shares of Common Stock of the Company is present and
entitled to vote, is required to approve Proposal 3. The Board of Directors
unanimously recommends that stockholders vote FOR Proposal 3.
24
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 4
AMENDMENT OF THE COMPANY'S CERTIFICATE OF
INCORPORATION TO ELECT TO BE GOVERNED BY
THE DELAWARE BUSINESS COMBINATION STATUTE
- --------------------------------------------------------------------------------
The Board of Directors has voted unanimously to amend the Company's
Certificate of Incorporation to provide specifically that the Company elects to
be governed by the provisions of the Delaware business combination statute
provisions set forth in Section 203 of the Delaware General Corporation Law (the
"DGCL"). The text of Section 203 of the DGCL is set forth in Appendix A hereto.
The provisions of Section 203 of the DGCL are applicable generally to
public companies incorporated in Delaware which are listed on a national
securities exchange, authorized for quotation on The Nasdaq Stock Market or held
of record by more than 2,000 stockholders, unless a Company elects specifically
in its certificate of incorporation not to be subject to Section 203. However,
Section 203 is not automatically applicable to other companies, including public
companies traded on the Over-The-Counter market with less then 2,000
stockholders, like the Company. Any company that is not automatically covered by
the terms of Section 203 may elect, by including a provision in its certificate
of incorporation, to be governed by Section 203. Accordingly, the Company is
proposing the amendment to its Certificate of Incorporation described in this
proposal to add a new Article XIII specifically electing to be governed by
Section 203.
Summary of Section 203 of the Delaware General Corporation Law
Under Section 203 of the DGCL, a Delaware corporation is prohibited
from engaging in a "business combination" with an "interested shareholder" for
three years following the time that such person or entity becomes an interested
shareholder. With certain exceptions, an "interested shareholder" is a person or
entity who or which owns, individually or with other persons or entities,
fifteen percent (15%) or more of the corporation's outstanding Voting Stock
(including any rights to acquire stock pursuant to an option, warrant,
agreement, arrangement or understanding, or upon the exercise of conversion or
exchange rights, and stock with respect to which the person has voting rights
only) (for purposes hereof, "Voting Stock" means all outstanding shares of
capital stock of a corporation entitled to vote in the election of the board of
directors of the corporation, and each reference to a percentage or portion of
shares of Voting Stock shall refer to such percentage or portion of the votes
entitled to be cast by such shares). Section 203 defines "business combination"
to include: (i) any merger or consolidation involving the corporation and the
interested stockholder; (ii) any sale, transfer, pledge or other disposition
involving the interested stockholder or 10% or more of the assets of the
corporation; (iii) subject to certain exceptions, any transaction which results
in the issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of stock of any class
or series of the corporation beneficially owned by the interested stockholder;
or (v) the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or through
the corporation.
The three-year moratorium imposed on business combinations by Section
203 does not apply if (i) prior to the time on which such shareholder becomes an
interested shareholder the board of directors of the subject corporation
approves either the business combination or the transaction that resulted in the
person or entity becoming an interested shareholder; (ii) upon consummation of
the transaction that made him or her an interested shareholder, the interested
shareholder owns at least eighty-five percent (85%) of the corporation's Voting
Stock outstanding at the time the transaction commenced (excluding for purposes
of determining the number of shares outstanding, shares owned by directors who
are also officers of the subject corporation and shares held by employee stock
plans in which employee participants do not have the right to decide
confidentially whether to accept a tender or exchange offer); or (iii) on or
after the time such person or entity becomes an interested shareholder, the
board of directors approves the business combination and it is also approved at
a shareholder meeting by sixty-six and two-thirds percent (66 2/3%) of the
outstanding Voting Stock not owned by the interested shareholder.
25
<PAGE>
Advantages and Disadvantages of Proposal No. 4
The Board of Directors believes that the amendment of the Certificate
of Incorporation to elect to be governed by the provisions of Section 203 is in
the best interests of the Company and its stockholders. The proposal is designed
to encourage any person who might seek to acquire control of the Company to
first consult with the Company's Board of Directors and to negotiate the terms
of any tender offer or proposed business combination. The Board of Directors
believes that, for the protection of the Company's stockholders, any proposed
acquisition of control of the Company, and any proposed business combination in
which the Company might be involved, should be thoroughly studied by the
Company's Board of Directors to ensure that such transaction would be in the
best interests of the Company and its stockholders and that all of the Company's
stockholders be treated fairly. Section 203 also might have the effect of
limiting the ability of a potential acquiror to make a two-tiered bid for the
Company in which all shareholders would not be treated equally. In sum, the
Board of Directors believes that this Proposal No. 4 is prudent and in the best
interests of the Company and its stockholders and should be adopted for their
protection.
Despite the belief of the Board of Directors as to the benefits to
stockholders of this proposal, if adopted, if may be disadvantageous to the
extent that they have the effect of discouraging a future takeover attempt that
is not approved by the Board of Directors, but which a majority of the
stockholders may deem to be in their best interests or in which stockholders may
receive a substantial premium for their shares over the then current market
value or over their cost basis in such shares. As a result of such effects of
this Proposal No. 4, stockholders who might wish to participate in an
unsolicited tender offer may not have an opportunity to do so. Proposal No. 4,
if adopted, could also delay or frustrate the assumption of control by a holder
of a large block of the Company's shares, even if many stockholders considered
such action to be beneficial. Furthermore, the adoption of Proposal No. 4 will
not ensure or guarantee that stockholders will receive a price for their shares
in connection with an acquisition of control of the Company that reflects the
value of such shares, or that the price received will be fair or equitable.
Section 203 would also discourage certain potential acquirors unwilling to
comply with its provisions.
The Rights Agreement that the Company currently has in place contains
provisions that are similar to the provisions of Section 203. Therefore, most of
the various advantages and disadvantages of this proposal described above will
still be in place because of the Rights Plan whether or not this Proposal No. 4
is approved.
See, also, the section entitled "The Anti-Takeover Proposals," above
This Proposal No. 4 is not being proposed in order to prevent an
unsolicited takeover attempt, and the Board of Directors is not aware of any
present attempt by any person to acquire control of the Company, obtain
representation on the Board of Directors or take any significant action that
would affect the governance of the Company.
The Board of Directors has considered the advantages and possible
disadvantages of this proposal and has unanimously determined that the adoption
of this proposal is in the best interests of the Company and its stockholders.
Text of Proposed Amendments to Certificate of Incorporation
"ARTICLE XIII
This corporation elects to be governed by Section 203 of the Delaware
General Corporation Law."
Vote Required and Board of Directors' Recommendation
The affirmative vote of a majority of the shares outstanding and
entitled to vote at the Annual Meeting, at which a quorum representing a
majority of all outstanding shares of Common Stock of the Company is present and
entitled to vote, is required to approve Proposal 4. The Board of Directors
unanimously recommends that stockholders vote FOR Proposal 4.
26
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5
AMENDMENT TO THE 1995 STOCK OPTION/
STOCK ISSUANCE PLAN
- --------------------------------------------------------------------------------
The Board of Directors has unanimously approved and adopted certain
amendments to the Company's 1995 Stock Option/Stock Issuance Plan (the "1995
Plan"), subject to stockholder approval. The Board unanimously recommends to the
stockholders of the Company that they approve and adopt such amendments. The
amendments affect only the Automatic Option Grant Program under the 1995 Plan,
pursuant to which non-employee directors are granted options to acquire shares
of the Company's common stock. A copy of the proposed Amendment to the 1995 Plan
is attached to this Proxy Statement as Appendix B. The proposed amendments are
summarized as follows:
1. Each option granted under the Automatic Option Grant Program
on or after July 20, 1999 will be immediately vested and exercisable and not
subject to any repurchase right of the Company. Prior to the amendment, each
share issued pursuant to an option granted to non-employee directors when they
first become a director has been subject to a repurchase right of the Company,
at the exercise price, which repurchase right lapses with respect to 25% of the
shares issuable pursuant to such option each year beginning one year after the
date of grant of the option. The shares granted under options granted to the
non-employee directors on an annual basis pursuant to the Automatic Option Grant
Program were subject to a repurchase right which lapsed one year after the date
of grant.
2. The provisions of each outstanding option granted before July
20, 1999 will be automatically amended to accelerate such option effective July
20, 1999 so that such option becomes fully vested and exercisable and no longer
subject to any repurchase right of the Company.
3. The number of shares of Common Stock issuable upon exercise of
the options to be granted to non-employee directors on an annual basis will be
increased from 2,500 shares to 5,000 shares, beginning with the grants to be
made at the annual meeting of stockholders described in this Proxy Statement.
Reasons for the Amendment
There are two primary reasons that the Board of Directors adopted these
amendments and are recommending that the stockholders approve them. First, the
Board believes that by making the options granted to non-employee directors
fully vested and immediately exercisable, without any repurchase right of the
Company, and by increasing the number of shares covered by the options granted
to non-employee directors, it will enhance the ability of the Company to attract
and retain qualified directors. Second, the proposed amendments will reduce the
potential impact of the expense charge that the Company will be obligated to
incur as a result of expected changes in the accounting treatment for options
granted to outside directors. Under the expected changes, which are more fully
described under the heading "Accounting Treatment and Expected Accounting
Changes" below, the vesting schedule of such options would affect the amount of
any expense attributable to the grant of such options. The immediate vesting of
such options and the accelerated vesting of previously granted automatic options
is intended to address the potential impact of such grants on earnings in the
event that the expected accounting changes are put into effect. Although the
proposed accounting changes only would apply to options granted after December
15, 1998, by accelerating the vesting of all outstanding options held by
non-employee directors, the Company is treating each of such directors equally,
regardless of when the options were granted.
The proposed amendments affect only the Automatic Option Grant Program
under the 1995 Plan and do not apply to any other portion of the 1995 Plan.
Summary of 1995 Stock Option/Stock Issuance Plan, as Amended
The 1995 Plan is the successor equity incentive program to the
Company's Restated 1990 Stock Option Plan (the "1990 Plan"). The 1995 Plan was
adopted by the Board of Directors on July 25, 1995 and approved by the
stockholders on September 14, 1995. The Company initially authorized 2,000,000
shares of Common Stock for
27
<PAGE>
issuance under the 1995 Plan, plus an additional number of shares equal to one
percent (1%) of the number of shares of Common Stock and Common Stock
equivalents outstanding on the first day of 1996, 1997 and 1998. The initial
2,000,000 share reserve was comprised of (i) the shares which remained available
for issuance under the 1990 Plan, including the shares subject to outstanding
options thereunder, plus (ii) an additional increase of 1,258,036 shares. As of
May 20, 1999, there were 185,869 outstanding shares of Common Stock issued
pursuant to the 1995 Plan, outstanding options under the 1995 Plan options to
purchase 1,515,652 shares of Common Stock, and 494,946 shares available for
issuance under the 1995 Plan.
The objective of the 1995 Plan is to provide an incentive for key
employees, including officers and directors who are employees, and
non-employees, including non-employee directors, of the Company or its
subsidiaries to remain in the service of the Company by providing them with
opportunities to acquire an economic interest in the future success and
prosperity of the Company and its subsidiaries.
The 1995 Plan is divided into three separate components: (i) the
Discretionary Option Grant Program under which employees and consultants may, at
the discretion of the Plan Administrator, be granted options to purchase shares
of Common Stock at an exercise price not less than eighty-five percent (85%) of
their fair market value on the grant date, (ii) the Stock Issuance Program under
which such persons may, in the Plan Administrator's discretion, be issued shares
of Common Stock directly, through the purchase of such shares at a price not
less than eighty-five percent (85%) of their fair market value at the time of
issuance or as a bonus tied to the performance of services and (iii) the
Automatic Option Grant Program under which automatic grants will be made at
periodic intervals to eligible non-employee Board members to purchase shares of
Common Stock at an exercise price equal to one-hundred percent (100%) of their
fair market value on the grant date.
The Discretionary Option Grant Program and the Stock Issuance Program
are administered by the Board of Directors or the Compensation Committee (the
appropriate administering party is referred to herein as the "Plan
Administrator"). Under those programs, the Plan Administrator has complete
discretion to determine which eligible individuals are to receive option grants
or stock issuances, the time or times when such option grants or stock issuances
are to be made, the number of shares subject to each such grant or issuance, the
status of any granted option as either an incentive stock option or a
non-statutory stock option under the Federal tax laws, the vesting schedule to
be in effect for the option grant or stock issuance and the maximum term for
which any granted option is to remain outstanding.
Each of those programs provides that, in the event the Company is
acquired by merger, consolidation or asset sale, the shares of Common Stock
purchased subject to a right of repurchase under the 1995 Plan will immediately
vest in full, except to the extent the Company's repurchase rights with respect
to those shares are to be assigned to the acquiring entity, and options will
accelerate to the extent not assumed by the acquiring entity. They also allow
the Plan Administrator discretion to provide for the acceleration of one or more
outstanding options under the 1995 Plan (including options incorporated from the
1990 Plan) and the vesting of shares subject to outstanding options upon the
occurrence of certain hostile takeovers. Such accelerated vesting may be
conditioned upon the subsequent termination of the affected optionee's service.
Stock appreciation rights are authorized for issuance under the
Discretionary Option Grant Program which provide the holders with the election
to surrender their outstanding options for an appreciation distribution from the
Company equal to the excess of (i) the fair market value of the vested shares of
Common Stock subject to the surrendered option over (ii) the aggregate exercise
price payable for such shares. Such appreciation rights distribution may be made
in cash or in shares of Common Stock.
The Plan Administrator has the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program (including
options incorporated from the 1990 Plan) in return for the grant of new options
for the same or different number of option shares with an exercise price per
share based upon the fair market value of the Common Stock on the new grant
date.
Under the Automatic Option Grant Program, when an individual first
becomes a non-employee Board member, he or she receives a 10,000-share option
grant on the date such individual joins the Board provided such individual has
not been in the prior employ of the Company. In addition, at each Annual
Stockholders Meeting, each individual who is to continue to serve as a
non-employee Board member after the Meeting currently receives an
28
<PAGE>
additional option grant to purchase 2,500 shares of Common Stock, whether or not
such individual has been in the prior employ of the Company, so long as such
individual has served on the Board for more than six months. If Proposal No. 5
is approved, the annual option grant will be increased to an option to purchase
5,000 shares of Common Stock. Currently, each share issued pursuant to an option
granted to non-employee directors when they first become a director has been
subject to a repurchase right of the Company, at the exercise price, which
repurchase right lapses with respect to 25% of the shares issuable pursuant to
such option each year beginning one year after the date of grant of the option.
The shares granted under options granted to the non-employee directors on an
annual basis pursuant to the Automatic Option Grant Program currently are
subject to a repurchase right which lapses one year after the date of grant. If
Proposal No. 5 is approved, all currently outstanding options granted under the
Automatic Option Grant Program and all options to be granted in the future under
the Automatic Option Grant Program will be immediately vested and exercisable
and not subject to any repurchase right of the Company.
The Board may amend or modify the 1995 Plan at any time, provided that
the terms of the Automatic Option Grant Program may not be amended more than
once every six months, other than to the extent necessary to comply with
applicable federal tax rules and regulations. Notwithstanding the foregoing, the
Board cannot, without the approval of the stockholders, (i) materially increase
the maximum number of shares issuable under the 1995 Plan, the number of shares
for which options may be granted under the Automatic Option Grant Program or the
maximum number of shares for which any one person may be granted options,
separately exercisable stock appreciation rights and direct stock issuances per
calendar year, except for permissible adjustment in the event of certain changes
in the Company's capitalization, (ii) materially modify the eligibility
requirements for 1995 Plan participation or (iii) materially increase the
benefits accruing to 1995 Plan participants. The 1995 Plan will terminate on
July 24, 2005, unless sooner terminated by the Board.
<TABLE>
The following table summarizes options granted under the 1995 Plan to
the individuals specified below in calendar year 1998 and to date in 1999, and
options held by the individuals specified below as of May 20, 1999, in each case
with the options issued pursuant to the Automatic Option Grant Program listed
separately:
<CAPTION>
Options Granted Under the
Options Granted Under 1995 Plan Other than
Automatic Option Grant Automatic Option Grant Number of
Program Program Options
---------------------- -------------------------- Currently
Name and Position 1998 1999 1998 1999 Outstanding(1)
- ------------------------------------ ---------------------- -------------------------- --------------
<S> <C> <C> <C> <C> <C>
Junaid Sheikh, President, Chief 0 0 397,286(2) (3) 397,286
Executive Officer and Chairman
of the Board
Ian Craven, Senior Vice President, 0 0 98,125(4) (3) 98,125
Engineering
Harris Rogers, Vice President, 0 0 65,499(5) (3) 65,499
Marketing
Donald Petersen, Vice President, 0 0 115,833(6) (3) 117,916
Manufacturing
Lionel M. Allan, Director 2,500 5,000(7) 41,250(8) 0 55,850
Thomas E. Fanella, Director 10,000 5,000(7) 0 0 12,500
David A. Lahar, Director 10,000 5,000(7) 0 0 10,000
Eugene M. Matalene, Jr., Director 0 10,000(9) 0 0 10,000
Michael Luckwell, Director 0 10,000(9) 0 0 10,000
All Executive Officers as a Group 0 0 876,743(10) 0 878,826
All Non-Executive Directors as a 22,500 35,000(11) 41,250(8) 0 98,350
Group
All Non-Executive Officer 0 0 483,429(12) (3) 469,600
Employees as a Group
29
<PAGE>
<FN>
- ------------------
(1) Does not include options to be issued to non-employee directors pursuant to
the Automatic Option Grant Program of the 1995 Plan.
(2) Includes 87,286 shares subject to options that were repriced in May 1998.
See "Executive Compensation and Related Information -- Option Grants" and
"-- Ten Year Option/SAR Repricings," above.
(3) Not determined yet. No options granted to date in 1999.
(4) Includes 58,125 shares subject to options that were repriced in May 1998.
See "Executive Compensation and Related Information -- Option Grants" and
"-- Ten Year Option/SAR Repricings," above.
(5) Includes 25,499 shares subject to options that were repriced in May 1998.
See "Executive Compensation and Related Information -- Option Grants" and
"-- Ten Year Option/SAR Repricings," above.
(6) Includes 75,833 shares subject to options that were repriced in May 1998.
See "Executive Compensation and Related Information -- Option Grants" and
"-- Ten Year Option/SAR Repricings," above.
(7) Number of options to be granted if Proposal No. 5 is approved. Otherwise,
the number of options granted will be 2,500.
(8) Represents 41,250 shares subject to options that were repriced in May 1998.
See "Executive Compensation and Related Information -- Option Grants" and
"-- Ten Year Option/SAR Repricings," above.
(9) Options granted upon becoming a member of the Board of Directors.
(10) Includes 246,743 shares subject to options that were repriced in May 1998.
See "Executive Compensation and Related Information -- Option Grants" and
"-- Ten Year Option/SAR Repricings," above.
(11) Number of options to be granted if Proposal No. 5 is approved. Otherwise,
the number of options granted will be 27,500.
(12) Includes 222,929 shares subject to options that were repriced in May 1998.
See "Executive Compensation and Related Information -- Option Grants" and
"-- Ten Year Option/SAR Repricings," above.
</FN>
</TABLE>
On May 20, 1999, the closing sale price of the Company's Common Stock
as reported on the Over-the-Counter Bulletin Board was $1.03.
Tax Treatment
The options granted under the Automatic Option Grant Program are
nonstatutory stock options. Under current federal tax law, upon a grant of a
nonstatutory stock option under the 1995 Plan, no taxable income is realized by
a participant and the Company will not be entitled to any deduction. Upon
exercise of a nonstatutory stock option, a participant will realize ordinary
taxable income on the date of exercise. Such taxable income will equal the
difference between the option exercise price and the fair market value of the
Common Stock on the date of exercise. The Company will be entitled to a
corresponding deduction for income subject to federal income tax.
THE FOREGOING SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH
ABOVE IS FOR GENERAL INFORMATIONAL PURPOSES AND MAY NOT BE APPLICABLE TO ALL
INDIVIDUALS. PARTICIPANTS SHOULD CONSULT THEIR OWN TAX ADVISORS FOR A
DETERMINATION AS TO THE SPECIFIC TAX CONSEQUENCES APPLICABLE TO THEM.
Accounting Treatment and Expected Accounting Changes
The Company applies Accounting Principles Board Opinion No. 25 --
"Accounting for Stock Issued to Employees" ("APB Opinion 25") and related
interpretations in accounting for stock options. Statement of Financial
Accounting Standards No. 123 requires companies which use APB Opinion 25
accounting to disclose the impact, if any, that use of a fair value option
valuation model would have on net income. If an option is issued to an employee
for an exercise price that is less than fair market value of the Company's
Common Stock on the date of grant, charges to earnings will be made at the time
of the grant of any options to the extent, if any, that the aggregate fair
market value of the Common Stock on the date of grant exceeds the exercise
price.
Any expense will be accruable by the Company over the period that the
option shares or issued shares are to vest. Option grants or stock issuances to
employees with exercise or issue prices not less than the fair market value of
the shares on the grant or issue date will not result in any direct charge to
the Company's earnings. However, as discussed above, the fair value of those
options is required to be disclosed in the notes to the Company's financial
30
<PAGE>
statements, and the Company must also disclose, in pro-forma statements to the
Company's financial statements, the impact those options would have upon the
Company's reported earnings were the fair value of those options at the time of
grant treated as compensation expense. Whether or not granted at a discount, the
number of outstanding options may be a factor in determining the Company's
earnings per share on a fully-diluted basis.
The Financial Accounting Standards Board recently issued an Exposure
Draft of a proposed interpretation of APB Opinion 25. Under the proposed
interpretation, option grants made to non-employee Board members after December
15, 1998 may result in a direct charge to the Company's reported earnings based
upon the fair value of the option. The charge to earnings would be equal to the
difference between the exercise or issue price and the fair market value of the
shares on the grant or issue date.
Such charge is likely to include the appreciation in the fair value of
the option shares over the period between the grant date of the option (or, if
later, the effective date of the final amendment) and the vesting date of each
installment of the option shares. In addition, if the proposed interpretation is
adopted, any options which are repriced after December 15, 1998 may also trigger
a direct charge to the Company's reported earnings measured by the appreciation
in the value of the underlying shares over the period between the grant date of
the option (or, if later, the effective date of the final amendment) and the
date the option is exercised for those shares.
If Proposal No. 5 is approved, then all options granted to non-employee
directors under the Automatic Option Grant Program will be immediately vested,
thereby allowing for an immediate charge to earnings for the fair value of the
option shares on the date of grant. This should reduce the uncertainty for the
Company of having to take periodic charges to earnings for the appreciation in
the fair value of the option shares vesting over time.
Vote Required and Board of Directors' Recommendation
The affirmative vote of a majority of the shares outstanding and
entitled to vote at the Annual Meeting, at which a quorum representing a
majority of all outstanding shares of Common Stock of the Company is present and
entitled to vote, is required to approve Proposal No. 5. The Board of Directors
unanimously recommends that stockholders vote FOR Proposal No. 5.
31
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 6
RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The firm of Ernst & Young LLP served as independent auditors for the
Company for the Company's 1998 fiscal year ended September 30, 1998 and the
Transition Period ended December 31, 1998. The Board of Directors has selected
that firm to continue in this capacity for the Company's 1999 calendar year. The
Company is asking the stockholders to ratify the appointment by the Board of
Directors of Ernst & Young LLP, as independent auditors, to audit the
consolidated financial statements the Company for the year ending December 31,
1999, and to perform other appropriate services.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting to respond to stockholders' questions, and if he or she so
desires, will be given an opportunity to make a brief statement.
The Board of Directors unanimously recommends a vote IN FAVOR OF the
ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1999. In the event
that a majority of the shares voted at the Annual Meeting do not vote for the
ratification, the Audit Committee and the Board of Directors will reconsider
whether or not to retain that firm. Under all circumstances, the Audit Committee
and the Board of Directors retain the corporate authority to change the auditors
at a later date.
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OTHER BUSINESS
The Board of Directors is not aware of any other matter which may be
presented for action at the Annual Meeting other than the matter set forth in
this Proxy Statement. Should any other matter requiring a vote of the
stockholders arise, it is intended that the persons named as proxy holders on
the enclosed proxy card will vote the shares represented thereby in accordance
with their best judgment in the interest of the Company. Discretionary authority
with respect to such other matters is granted by the execution of the enclosed
proxy.
STOCKHOLDER PROPOSALS
Under the present rules of the Securities and Exchange Commission, the
deadline for stockholders to submit proposals to be considered for inclusion in
the Company's Proxy Statement for the next year's Annual Meeting of Stockholders
is expected to be December 20, 1999. Such proposals may be included in next
year's Proxy Statement if they comply with certain rules and regulations
promulgated by the Commission.
INCORPORATION BY REFERENCE
According to the provisions of Schedule 14A under the Securities
Exchange Act of 1934, the following document or portion thereof is incorporated
by reference:
"Executive Officers of the Company" from Part I of the Company's Annual
Report on Form 10-K for the transition period ended December 31, 1998.
ADDITIONAL INFORMATION AVAILABLE
THE COMPANY WILL PROVIDE WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY
OF THE COMPANY'S TRANSITION REPORT ON FORM 10-K FOR THE TRANSITION PERIOD ENDED
DECEMBER 31, 1998 AND QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH
31, 1999, IN EACH CASE INCLUDING FINANCIAL STATEMENTS, SCHEDULES AND A LIST OF
EXHIBITS. REQUEST SHOULD BE SENT TO THE ATTENTION OF THE CHIEF FINANCIAL OFFICER
AT ACCOM, INC., 1490 O'BRIEN DRIVE, MENLO PARK, CALIFORNIA 94025, OR TELEPHONED
TO (650) 328-3818.
By Order of the Board of Directors,
Lionel M. Allan
Secretary
Dated: [June ___, 1999]
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APPENDIX A
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
ss. 203. Business combinations with interested stockholders.
(a) Notwithstanding any other provisions of this chapter, a corporation
shall not engage in any business combination with any interested stockholder for
a period of 3 years following the time that such stockholder became an
interested stockholder, unless:
(1) Prior to such time the board of directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder;
(2) Upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (i) by persons who are directors and also
officers and (ii) employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or
(3) At or subsequent to such time the business combination is
approved by the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative vote of
at least 662/3% of the outstanding voting stock which is not owned by the
interested stockholder.
(b) The restrictions contained in this section shall not apply if:
(1) The corporation's original certificate of incorporation
contains a provision expressly electing not to be governed by this section;
(2) The corporation, by action of its board of directors, adopts
an amendment to its bylaws within 90 days of February 2, 1988, expressly
electing not to be governed by this section, which amendment shall not be
further amended by the board of directors;
(3) The corporation, by action of its stockholders, adopts an
amendment to its certificate of incorporation or bylaws expressly electing not
to be governed by this section; provided that, in addition to any other vote
required by law, such amendment to the certificate of incorporation or bylaws
must be approved by the affirmative vote of a majority of the shares entitled to
vote. An amendment adopted pursuant to this paragraph shall be effective
immediately in the case of a corporation that both (i) has never had a class of
voting stock that falls within any of the 3 categories set out in subsection
(b)(4) hereof, and (ii) has not elected by a provision in its original
certificate of incorporation or any amendment thereto to be governed by this
section. In all other cases, an amendment adopted pursuant to this paragraph
shall not be effective until 12 months after the adoption of such amendment and
shall not apply to any business combination between such corporation and any
person who became an interested stockholder of such corporation on or prior to
such adoption. A bylaw amendment adopted pursuant to this paragraph shall not be
further amended by the board of directors;
(4) The corporation does not have a class of voting stock that is:
(i) Listed on a national securities exchange; (ii) authorized for quotation on
The NASDAQ Stock Market; or (iii) held of record by more than 2,000
stockholders, unless any of the foregoing results from action taken, directly or
indirectly, by an interested stockholder or from a transaction in which a person
becomes an interested stockholder;
(5) A stockholder becomes an interested stockholder inadvertently
and (i) as soon as practicable divests itself of ownership of sufficient shares
so that the stockholder ceases to be an interested stockholder; and (ii) would
not, at any time within the 3-year period immediately prior to a business
combination between the corporation and such stockholder, have been an
interested stockholder but for the inadvertent acquisition of ownership;
(6) The business combination is proposed prior to the consummation
or abandonment of and subsequent to the earlier of the public announcement or
the notice required hereunder of a proposed transaction which (i) constitutes
one of the transactions described in the 2nd sentence of this paragraph; (ii) is
with or by a person who either was not an interested stockholder during the
previous 3 years or who became an interested stockholder with the approval of
the corporation's board of directors or during the period described in paragraph
(7) of this subsection (b); and (iii) is approved or not opposed by a majority
of the members of the board of directors then in office (but not less
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than 1) who were directors prior to any person becoming an interested
stockholder during the previous 3 years or were recommended for election or
elected to succeed such directors by a majority of such directors. The proposed
transactions referred to in the preceding sentence are limited to (x) a merger
or consolidation of the corporation (except for a merger in respect of which,
pursuant to ss. 251(f) of this title, no vote of the stockholders of the
corporation is required); (y) a sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in 1 transaction or a series of transactions),
whether as part of a dissolution or otherwise, of assets of the corporation or
of any direct or indirect majority-owned subsidiary of the corporation (other
than to any direct or indirect wholly-owned subsidiary or to the corporation)
having an aggregate market value equal to 50% or more of either that aggregate
market value of all of the assets of the corporation determined on a
consolidated basis or the aggregate market value of all the outstanding stock of
the corporation; or (z) a proposed tender or exchange offer for 50% or more of
the outstanding voting stock of the corporation. The corporation shall give not
less than 20 days' notice to all interested stockholders prior to the
consummation of any of the transactions described in clause (x) or (y) of the
2nd sentence of this paragraph; or
(7) The business combination is with an interested stockholder who
became an interested stockholder at a time when the restrictions contained in
this section did not apply by reason of any of paragraphs (1) through (4) of
this subsection (b), provided, however, that this paragraph (7) shall not apply
if, at the time such interested stockholder became an interested stockholder,
the corporation's certificate of incorporation contained a provision authorized
by the last sentence of this subsection (b).
Notwithstanding paragraphs (1), (2), (3) and (4) of this subsection, a
corporation may elect by a provision of its original certificate of
incorporation or any amendment thereto to be governed by this section; provided
that any such amendment to the certificate of incorporation shall not apply to
restrict a business combination between the corporation and an interested
stockholder of the corporation if the interested stockholder became such prior
to the effective date of the amendment.
(c) As used in this section only, the term:
(1) "Affiliate" means a person that directly, or indirectly
through 1 or more intermediaries, controls, or is controlled by, or is under
common control with, another person.
(2) "Associate," when used to indicate a relationship with any
person, means: (i) Any corporation, partnership, unincorporated association or
other entity of which such person is a director, officer or partner or is,
directly or indirectly, the owner of 20% or more of any class of voting stock;
(ii) any trust or other estate in which such person has at least a 20%
beneficial interest or as to which such person serves as trustee or in a similar
fiduciary capacity; and (iii) any relative or spouse of such person, or any
relative of such spouse, who has the same residence as such person.
(3) "Business combination," when used in reference to any
corporation and any interested stockholder of such corporation, means:
(i) Any merger or consolidation of the corporation or any
direct or indirect majority-owned subsidiary of the corporation with (A) the
interested stockholder, or (B) with any other corporation, partnership,
unincorporated association or other entity if the merger or consolidation is
caused by the interested stockholder and as a result of such merger or
consolidation subsection (a) of this section is not applicable to the surviving
entity;
(ii) Any sale, lease, exchange, mortgage, pledge, transfer
or other disposition (in 1 transaction or a series of transactions), except
proportionately as a stockholder of such corporation, to or with the interested
stockholder, whether as part of a dissolution or otherwise, of assets of the
corporation or of any direct or indirect majority-owned subsidiary of the
corporation which assets have an aggregate market value equal to 10% or more of
either the aggregate market value of all the assets of the corporation
determined on a consolidated basis or the aggregate market value of all the
outstanding stock of the corporation;
(iii) Any transaction which results in the issuance or
transfer by the corporation or by any direct or indirect majority-owned
subsidiary of the corporation of any stock of the corporation or of such
subsidiary to the interested stockholder, except: (A) Pursuant to the exercise,
exchange or conversion of securities exercisable for, exchangeable for or
convertible into stock of such corporation or any such subsidiary which
securities were outstanding prior to the time that the interested stockholder
became such; (B) pursuant to a merger under ss. 251(g) of this title; (C)
pursuant to a dividend or distribution paid or made, or the exercise, exchange
or conversion of securities exercisable for, exchangeable for or convertible
into stock of such corporation or any such subsidiary which security is
distributed, pro rata to all holders of a class or series of stock of such
corporation subsequent to the time the interested stockholder became such; (D)
pursuant to an exchange offer by the corporation to purchase stock made on the
same terms to all
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holders of said stock; or (E) any issuance or transfer of stock by the
corporation; provided however, that in no case under items (C)-(E) of this
subparagraph shall there be an increase in the interested stockholder's
proportionate share of the stock of any class or series of the corporation or of
the voting stock of the corporation;
(iv) Any transaction involving the corporation or any direct
or indirect majority-owned subsidiary of the corporation which has the effect,
directly or indirectly, of increasing the proportionate share of the stock of
any class or series, or securities convertible into the stock of any class or
series, of the corporation or of any such subsidiary which is owned by the
interested stockholder, except as a result of immaterial changes due to
fractional share adjustments or as a result of any purchase or redemption of any
shares of stock not caused, directly or indirectly, by the interested
stockholder; or
(v) Any receipt by the interested stockholder of the
benefit, directly or indirectly (except proportionately as a stockholder of such
corporation), of any loans, advances, guarantees, pledges or other financial
benefits (other than those expressly permitted in subparagraphs (i)-(iv) of this
paragraph) provided by or through the corporation or any direct or indirect
majority-owned subsidiary.
(4) "Control," including the terms "controlling," "controlled by"
and "under common control with," means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting stock, by contract or
otherwise. A person who is the owner of 20% or more of the outstanding voting
stock of any corporation, partnership, unincorporated association or other
entity shall be presumed to have control of such entity, in the absence of proof
by a preponderance of the evidence to the contrary; Notwithstanding the
foregoing, a presumption of control shall not apply where such person holds
voting stock, in good faith and not for the purpose of circumventing this
section, as an agent, bank, broker, nominee, custodian or trustee for 1 or more
owners who do not individually or as a group have control of such entity.
(5) "Interested stockholder" means any person (other than the
corporation and any direct or indirect majority-owned subsidiary of the
corporation) that (i) is the owner of 15% or more of the outstanding voting
stock of the corporation, or (ii) is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting stock of
the corporation at any time within the 3-year period immediately prior to the
date on which it is sought to be determined whether such person is an interested
stockholder; and the affiliates and associates of such person; provided,
however, that the term "interested stockholder" shall not include (x) any person
who (A) owned shares in excess of the 15% limitation set forth herein as of, or
acquired such shares pursuant to a tender offer commenced prior to, December 23,
1987, or pursuant to an exchange offer announced prior to the aforesaid date and
commenced within 90 days thereafter and either (I) continued to own shares in
excess of such 15% limitation or would have but for action by the corporation or
(II) is an affiliate or associate of the corporation and so continued (or so
would have continued but for action by the corporation) to be the owner of 15%
or more of the outstanding voting stock of the corporation at any time within
the 3-year period immediately prior to the date on which it is sought to be
determined whether such a person is an interested stockholder or (B) acquired
said shares from a person described in item (A) of this paragraph by gift,
inheritance or in a transaction in which no consideration was exchanged; or (y)
any person whose ownership of shares in excess of the 15% limitation set forth
herein is the result of action taken solely by the corporation; provided that
such person shall be an interested stockholder if thereafter such person
acquires additional shares of voting stock of the corporation, except as a
result of further corporate action not caused, directly or indirectly, by such
person. For the purpose of determining whether a person is an interested
stockholder, the voting stock of the corporation deemed to be outstanding shall
include stock deemed to be owned by the person through application of paragraph
(8) of this subsection but shall not include any other unissued stock of such
corporation which may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options, or
otherwise.
(6) "Person" means any individual, corporation, partnership,
unincorporated association or other entity.
(7) "Stock" means, with respect to any corporation, capital stock
and, with respect to any other entity, any equity interest.
(8) "Voting stock" means, with respect to any corporation, stock
of any class or series entitled to vote generally in the election of directors
and, with respect to any entity that is not a corporation, any equity interest
entitled to vote generally in the election of the governing body of such entity.
(9) "Owner," including the terms "own" and "owned," when used with
respect to any stock, means a person that individually or with or through any of
its affiliates or associates:
(i) Beneficially owns such stock, directly or indirectly; or
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(ii) Has (A) the right to acquire such stock (whether such
right is exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding, or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise; provided, however,
that a person shall not be deemed the owner of stock tendered pursuant to a
tender or exchange offer made by such person or any of such person's affiliates
or associates until such tendered stock is accepted for purchase or exchange; or
(B) the right to vote such stock pursuant to any agreement, arrangement or
understanding; provided, however, that a person shall not be deemed the owner of
any stock because of such person's right to vote such stock if the agreement,
arrangement or understanding to vote such stock arises solely from a revocable
proxy or consent given in response to a proxy or consent solicitation made to 10
or more persons; or
(iii) Has any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting (except voting pursuant to a revocable
proxy or consent as described in item (B) of subparagraph (ii) of this
paragraph), or disposing of such stock with any other person that beneficially
owns, or whose affiliates or associates beneficially own, directly or
indirectly, such stock.
(d) No provision of a certificate of incorporation or bylaw shall
require, for any vote of stockholders required by this section, a greater vote
of stockholders than that specified in this section.
(e) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all matters with respect to this section.
(66 Del. Laws, c. 204, ss. 1; 70 Del. Laws, c. 79, ss.ss. 8-10.)
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APPENDIX B
AMENDMENT TO
ACCOM, INC.
1995 STOCK OPTION/STOCK ISSUANCE PLAN
Article Four of the 1995 Stock Option/Stock Issuance Plan is hereby
amended and restated as of July 20, 1999 to read in full as follows:
"ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAMS
I. OPTION TERMS
A. Grant Dates. Option grants shall be made on the dates
specified below:
1. Each Eligible Director who is first elected or appointed as
a non-employee Board member after the Section 12(g) Registration Date shall
automatically be granted on the date of such initial election or appointment (as
the case may be) a Non-Statutory Option to purchase 10,000 shares of Common
Stock.
2. On the date of each Annual Stockholders Meeting, each
individual who is to continue to serve as an Eligible Director after such
meeting, shall automatically be granted, whether or not such individual is
standing for re-election as a Board member at that Annual Meeting, a
Non-Statutory Option to purchase an additional 5,000 shares of Common Stock,
provided such individual has served as a non-employee Board member for at least
six (6) months prior to the date of such Annual Meeting. There shall be no limit
on the number of such 5,000-shares option grants any one Eligible Director may
receive over his or her period of Board service.
B. Exercise Price.
1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
C. Exercise and Term of the Options.
1. Each option granted on or after July 20, 1999 shall be
immediately vested and exercisable and not subject to any repurchase right of
the Corporation. The term of each such option shall be ten (10) years from the
option grant date, subject to the provisions of Section I.D. below.
2. Each option granted before July 20, 1999 shall
automatically accelerate on July 20, 1999 so that at such time each such option
shall become fully vested and exercisable for all of the shares of Common Stock
then subject to such option and may be exercised for any or all of those shares
as fully-vested shares of Common Stock that are not subject to any repurchase
right of the Corporation.
D. Effect of Termination of Board Service. The following provisions
shall govern the exercise of any option held by the Optionee at the time the
Optionee ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's death, the
personal representative of the Optionee's estate or the person or
persons to whom the option is transferred pursuant to the Optionee's
will or
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<PAGE>
or in accordance with the laws of the descent and distribution) shall
have a twelve (12)-month period following the date of such cessation of
Board service in which to exercise each such option.
(ii) During the twelve (12)-month exercise period, the option
may not be exercised in the aggregate for more than the number vested
of shares of Common Stock for which the option is exercisable at the
time of the Optionee's cessation of Board service.
(iii) In no event shall the option remain exercisable after
the expiration of the option term. Upon the expiration of the twelve
(12)-month) exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be outstanding for
any vested shares for which the option has not been exercised. However,
the option shall, immediately upon the Optionee's cessation of Board
service, terminate and cease to be outstanding to the extent it is not
exercisable for vested shares on the date of such cessation of Board
service.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKEOVER
A. Corporate Transactions. Immediately following the consummation of
any Corporate Transaction, each outstanding automatic option grant shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof).
B. Changes in Control. In connection with any Change in Control, each
outstanding option shall remain exercisable until the expiration or sooner
termination of the option term or the surrender of the option in connection with
a Hostile Take-Over.
C. Hostile Take-Overs. Upon the occurrence of a Hostile Take-Over, the
Optionee shall have a thirty (30)-day period in which to surrender to the
Corporation each automatic option held by him or her for a period of at least
six (6) months. The Optionee shall in return be entitled to a cash distribution
from the Corporation in an amount equal to the excess of (i) the Take-Over Price
of the shares of Common Stock at the time subject to the surrendered option over
(ii) the aggregate exercise price payable for such shares. Such case
distribution shall be paid within five (5) days following the surrender of the
option to the Corporation. No approval or consent of the Board shall be required
in connection with such option surrender and cash distribution.
D. Corporation's Rights. The grant of options under the Automatic
Option Grant Program shall in no way affect the right of the Corporation to
adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
III. AMENDMENT OF THE AUTOMATIC OPTION GRANT PROGRAM
The provisions of this Automatic Option Grant Program, together with
the option grants outstanding thereunder, may not be amended at intervals more
frequently than once every six (6) months, other than to the extent necessary to
comply with applicable Federal income tax laws and regulations.
IV. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program."
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APP: C
PROXY
ACCOM, INC.
Annual Meeting Of Stockholders, July 20, 1999
This Proxy is solicited on behalf of the Board of Directors of Accom, Inc.
The undersigned revokes all previous proxies, acknowledges receipt of
the Notice of the Annual Meeting of Stockholders to be held on July 20, 1999 and
the Proxy Statement and appoints Junaid Sheikh and Donald K. McCauley, and each
of them, as the Proxy of the undersigned, with full power of substitution, to
vote all shares of Common Stock of Accom, Inc. (the "Company") which the
undersigned is entitled to vote, either on his or her own behalf or on behalf of
any entity or entities, at the Annual Meeting of Stockholders of the Company to
be held at the Company's facilities located at 1490 O'Brien Drive, Menlo Park,
California 94025, on Tuesday, July 20, 1999 at 10:00 a.m. (the "Annual
Meeting"), and at any adjournment or postponement thereof, with the same force
and effect as the undersigned might or could do if personally present thereat.
The shares represented by this Proxy shall be voted in the following matter:
1. To elect a board of six directors as follows: (a) two directors to
serve a three-year term, two directors to serve a two-year term, and
two directors to serve a one-year term; or (b) if Proposal No. 3 is not
approved, six directors to hold office until the expiration of their
respective terms of office and until their respective successors are
duly elected and qualified.
|_| FOR all the nominees listed below (except as indicated).
|_| WITHHOLD authority to vote for all nominees listed below.
If you wish to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list below:
JUNAID SHEIKH LIONEL M. ALLAN THOMAS E. FANELLA
DAVID A. LAHAR EUGENE M. MATALENE, JR. MICHAEL LUCKWELL
2. To approve a proposal to amend the Company's Amended and Restated
Certificate of Incorporation to increase the number of authorized
shares of the Company's common stock from 20,233,497 to 40,000,000, and
the total number of shares of authorized stock from 22,233,497 to
42,000,000.
|_| FOR |_| AGAINST |_| ABSTAIN
3. To approve a proposal to (a) adopt classified board provisions in the
Company's Certificate of Incorporation to (i) implement a classified
board of directors divided into three classes of directors, with the
term of office of one of the three classes of directors expiring each
year and with each class being elected for a three-year term, (ii)
provide that only the Board of Directors, and not the stockholders, may
set by resolution the number of directors within the specified range of
five (5) to nine (9), (iii) provide that only the Board of Directors
may fill vacancies on the Board (unless no Board members remain) and
that any director appointed to fill a vacancy on the Board of Directors
will serve for the remainder of the full term of the class in which the
vacancy occurred, and (iv) require a vote of 75% of the Company's
stockholders to amend or repeal the foregoing classified board
provisions (the "Classified Board Provisions"); and (b) to amend the
Company's Bylaws to conform with the Classified Board Provisions.
|_| FOR |_| AGAINST |_| ABSTAIN
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4. To approve a proposal to amend the Company's Certificate of
Incorporation to provide that the Company elects to be governed by the
business combination statute set forth in Section 203 of the Delaware
General Corporation Law.
|_| FOR |_| AGAINST |_| ABSTAIN
5. To approve a proposal to amend the Company' 1995 Stock Incentive/Stock
Issuance Plan to provide that (a) the stock options previously granted
and to be granted to non-employee directors of the Company be
immediately vested and not subject to repurchase by the Company and (b)
each non-employee director be granted each year fully-vested options to
purchase 5,000 shares of Common Stock of the Company.
|_| FOR |_| AGAINST |_| ABSTAIN
6. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the Company's 1999 calendar year; and
|_| FOR |_| AGAINST |_| ABSTAIN
7. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
|_| FOR |_| AGAINST |_| ABSTAIN
The Board of Directors recommends a vote FOR each of the directors listed above
and a vote FOR the other proposals. This Proxy, when properly executed, will be
voted as specified above. THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
DIRECTORS LISTED ABOVE AND FOR THE OTHER PROPOSALS IF NO SPECIFICATION IS MADE.
Please print the name(s) appearing
on each share certificate(s) over
which you have voting authority:
------------------------------------
(Print name(s) on certificate)
Please sign your name(s):
------------------------------------
------------------------------------
(Authorized Signature(s))
Date: ------------------------------
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[[COPY OF 1995 STOCK OPTION/STOCK ISSUANCE PLAN, FILED AS AN APPENDIX
PURSUANT TO THE INSTRUCTIONS TO ITEM 10 OF SCHEDULE 14A]]
ACCOM, INC.
1995 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1995 Stock Option/Stock Issuance Plan is intended to promote the
interests of Accom, Inc., a Delaware corporation, by providing eligible persons
with the opportunity to acquire a proprietary interest, or otherwise increase
their proprietary interest, in the Corporation as an incentive for them to
remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in the
attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate equity programs:
(i) the Discretionary Option Grant Program under
which eligible persons may, at the discretion of the Plan
Administrator, be granted options to purchase shares of Common
Stock,
(ii) the Stock Issuance Program under which eligible
persons may, at the discretion of the Plan Administrator, be
issued shares of Common Stock directly, either through the
immediate purchase of such shares or as a bonus for services
rendered the Corporation (or any Parent or Subsidiary), and
(iii) the Automatic Option Grant Program under which
Eligible Directors shall automatically receive option grants
at periodic intervals to purchase shares of Common Stock.
B. The provisions of Articles One and Five shall apply to all
equity programs under the Plan and shall accordingly govern
the interests of all persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders. No non-employee Board member shall be eligible
to serve on the Primary Committee if such individual has, during the twelve
(12)-month period immediately preceding the date of his or her appointment to
the Committee or (if shorter) the period commencing with the Section 12(g)
Registration Date and ending with the date of his or her appointment to the
Primary Committee, received an option grant or direct stock issuance under the
Plan or any stock option, stock appreciation, stock bonus or other stock plan of
the Corporation (or any Parent or Subsidiary), other than pursuant to the
Automatic Option Grant Program.
B. Administration of the Discretionary Option Grant and Stock Issuance
Programs with respect to all other persons eligible to participate in these
programs may, at the Board's discretion, be vested in the Primary
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Committee or a Secondary Committee, or the Board may retain the power to
administer these programs with respect to all such persons. The members of the
Secondary Committee may be individuals who are Employees eligible to receive
discretionary option grants or direct stock issuances under the Plan or any
stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary).
C. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant or Stock Issuance Program under its jurisdiction or
any option or stock issuance thereunder.
E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
F. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to option
grants made thereunder.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board (other than
those serving as members of the Primary Committee) or the
board of directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or
Subsidiary).
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times at which each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
to be paid for such shares.
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C. The Plan Administrator shall have the absolute discretion either to
grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.
D. The individuals eligible to participate in the Automatic Option
Grant Program shall be (i) those individuals who are first elected or appointed
as non-employee Board members after the Section 12(g) Registration Date, whether
through appointment by the Board or election by the Corporation's stockholders
and (ii) those individuals who continue to serve as non-employee Board members
after one or more Annual Stockholders Meetings held after the Section 12(g)
Registration Date. A non-employee Board member who has previously been in the
employ of the Corporation (or any Parent or Subsidiary) shall not be eligible to
receive an option grant under the Automatic Option Grant Program at the time he
or she first becomes a non-employee Board member, but such individual shall be
eligible to receive periodic option grants under the Automatic Option Grant
Program upon his or her continued service as a non-employee Board member
following one or more Annual Stockholders Meetings.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
which may be issued over the term of the Plan shall initially not exceed
2,000,000 shares. Such authorized share reserve is comprised of (i) the number
of shares which remained available for issuance, as of the Plan Effective Date,
under the Predecessor Plan as last approved by the Corporation's stockholders
prior to such date, including the shares subject to the outstanding options
incorporated into the Plan and any other shares which would have been available
for future option grants under the Predecessor Plan, plus (ii) an additional
increase of 1,258,036 shares authorized by the Board under the Plan, subject to
stockholder approval.
B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of the 1996, 1997
and 1998 calendar years by an amount equal to one percent (1%) of the shares of
Common Stock outstanding on December 31 of the immediately preceding calendar
year; but in no event shall any such annual increase exceed 500,000 shares. No
Incentive Options may be granted on the basis of the additional shares of Common
Stock resulting from such annual increases.
C. The maximum number of shares of Common Stock which may be issued
pursuant to Incentive Options granted under the Plan shall not exceed 2,000,000
shares.
D. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 300,000 shares of Common Stock per calendar year, beginning with the
1995 calendar year.
E. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
(including any options incorporated from the Predecessor Plan) expire or
terminate for any reason prior to exercise in full or (ii) the options are
cancelled in accordance with the cancellation-regrant provisions of Article Two.
All shares issued under the Plan (including shares issued upon exercise of
options incorporated from the Predecessor Plan), whether or not those shares are
subsequently repurchased by the Corporation pursuant to its repurchase rights
under the Plan, shall reduce on a share-for-share basis the number of shares of
Common Stock available for subsequent issuance under the Plan. In addition,
should the exercise price of an option under the Plan (including any option
incorporated from the Predecessor Plan) be paid with shares of Common Stock or
should shares of Common Stock otherwise issuable under the Plan be withheld by
the Corporation in satisfaction of the withholding taxes incurred in connection
with the exercise of an option or the vesting of a stock issuance under the
Plan, then the number of shares of Common Stock available for issuance under the
Plan shall be reduced by the gross number of shares for which the option is
exercised or which vest under the stock issuance, and not by the net number of
shares of Common Stock issued to the holder of such option or stock issuance.
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F. Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the maximum number and/or class of securities for which the share
reserve is to increase automatically each year, (iii) the number and/or class of
securities for which any one person may be granted options, separately
exercisable stock appreciation rights and direct stock issuances per calendar
year, (iv) the number and/or class of securities for which automatic option
grants are to be subsequently made per Eligible Director under the Automatic
Option Grant Program and (v) the number and/or class of securities and the
exercise price per share in effect under each outstanding option (including any
option incorporated from the Predecessor Plan) in order to prevent the dilution
or enlargement of benefits thereunder. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of
the Fair Market Value per share of Common Stock on the option grant
date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section
I of Article Five and the documents evidencing the option, be payable
in one or more of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date, or
(iii) to the extent the option is exercised for
vested shares, through a special sale and remittance procedure
pursuant to which the Optionee shall concurrently provide
irrevocable written instructions to (a) a
Corporation-designated brokerage firm to effect the immediate
sale of the purchased shares and remit to the Corporation, out
of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable
for the purchased shares plus all applicable Federal, state
and local income and employment taxes required to be withheld
by the Corporation by reason of such exercise and (b) the
Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete
the sale transaction.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. Exercise and Term of Options. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the
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documents evidencing the option. However, no option shall have a term in excess
of ten (10) years measured from the option grant date.
C. Effect of Termination of Service.
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or
death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain
exercisable for such period of time thereafter as shall be
determined by the Plan Administrator and set forth in the
documents evidencing the option, but no such option shall be
exercisable after the expiration of the option term.
(ii) Any option exercisable in whole or in part by
the Optionee at the time of death may be subsequently
exercised by the personal representative of the Optionee's
estate or by the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution.
(iii) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for
more than the number of vested shares for which the option is
exercisable on the date of the Optionee's cessation of
Service. Upon the expiration of the applicable exercise period
or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any
vested shares for which the option has not been exercised.
However, the option shall, immediately upon the Optionee 5
cessation of Service, terminate and cease to be outstanding to
the extent it is not exercisable for vested shares on the date
of such cessation of Service.
(iv) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee
shall terminate immediately and cease to be outstanding.
(v) In the event of an Involuntary Termination
following a Corporate Transaction, the provisions of Section
III of this Article Two shall govern the period for which the
outstanding options are to remain exercisable following the
Optionee 5 cessation of Service and shall supersede any
provisions to the contrary in this section.
2. The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time
while the option remains outstanding, to:
(i) extend the period of time for which the option is
to remain exercisable following the Optionee's cessation of
Service from the period otherwise in effect for that option to
such greater period of time as the Plan Administrator shall
deem appropriate, but in no event beyond the expiration of the
option term, and/or
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect
to the number of vested shares of Common Stock for which such
option is exercisable at the time of the Optionee's cessation
of Service but also with respect to one or more additional
installments in which the Optionee would have vested under the
option had the Optionee continued in Service.
D. Stockholder Rights. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
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E. Repurchase Rights. The Plan Administrator shall have the discretion
to grant options which are exercisable for unvested shares of Common Stock.
Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. Limited Transferability of Options. During the lifetime of the
Optionee, the option shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. However, a Non-Statutory Option may
be assigned in accordance with the terms of a Qualified Domestic Relations
Order. The assigned option may only be exercised by the person or persons who
acquire a proprietary interest in the option pursuant to such Qualified Domestic
Relations Order. The terms applicable to the assigned option (or portion
thereof) shall be the same as those in effect for the option immediately prior
to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Five shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options when issued under the
Plan shall not be subject to the terms of this Section II.
A. Eligibility. Incentive Options may only be granted to Employees.
B. Exercise Price. The exercise price per share shall not be less than
one hundred percent (100%) of the Fair Market Value per share of Common Stock on
the option grant date.
C. Dollar Limitation. The aggregate Fair Market Value of the shares of
Common Stock (determined as of the respective date or dates of grant) for which
one or more options granted to any Employee under the Plan (or any other option
plan of the Corporation or any Parent or Subsidiary) may for the first time
become exercisable as Incentive Options during any one (1) calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% Stockholder. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. [In the event of any Corporate Transaction, each outstanding option
shall automatically accelerate so that each such option shall, immediately prior
to the effective date of the Corporate Transaction, become fully exercisable for
all of the shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
However, an outstanding option shall not so accelerate if and to the extent] (i)
such option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation (or parent thereof) or to be replaced with
a comparable option to purchase shares of the capital stock of the successor
corporation (or parent thereof), (ii) such option is to be replaced with a cash
incentive program of the successor corporation which preserves the spread
existing on the unvested option shares at the time of the Corporate Transaction
and provides for subsequent payout in accordance with the same vesting schedule
applicable to such option or(iii) [the acceleration of such option is subject to
other limitations imposed by the Plan
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Administrator at the time of the option grant.] The determination of option
comparability under clause (i) above shall be made by the Plan Administrator,
and its determination shall be final, binding and conclusive.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate Transaction,
all outstanding options shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan on both an aggregate and per
Optionee basis following the consummation of such Corporate Transaction and (ii)
the exercise price payable per share under each outstanding option, provided the
aggregate exercise price payable for such securities shall remain the same.
E. Any options which are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time shall automatically
accelerate (and any of the Corporation's outstanding repurchase rights which do
not otherwise terminate at the time of the Corporate Transaction shall
automatically terminate and the shares of Common Stock subject to those
terminated rights shall immediately vest in full) in the event the Optionee's
Service should subsequently terminate by reason of an Involuntary Termination
within eighteen (18) months following the effective date of such Corporate
Transaction. Any options so accelerated shall remain exercisable for
fully-vested shares until the earlier of (i) the expiration of the option term
or (ii) the expiration of the one (1)-year period measured from the effective
date of the Involuntary Termination.
F. The Plan Administrator shall have the discretion, exercisable either
at the time the option is granted or at any time while the option remains
outstanding, to (i) provide for the automatic acceleration of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights with the immediate vesting of the shares of Common Stock
subject to those rights) upon the occurrence of a Change in Control or (ii)
condition any such option acceleration (and the termination of any outstanding
repurchase rights) upon the subsequent Involuntary Termination of the Optionee's
Service within a specified period following the effective date of such Change in
Control. Any options accelerated in connection with a Change in Control shall
remain fully exercisable until the expiration or sooner termination of the
option term.
G. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.
H. The grant of options under the Discretionary Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in
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substitution new options covering the same or different number of shares of
Common Stock but with an exercise price per share based on the Fair Market Value
per share of Common Stock on the new option grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to grant
to selected Optionees tandem stock appreciation rights and/or limited stock
appreciation rights.
B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may
establish, to elect between the exercise of the underlying
option for shares of Common Stock and the surrender of that
option in exchange for a distribution from the Corporation in
an amount equal to the excess of (a) the Fair Market Value (on
the option surrender date) of the number of shares in which
the Optionee is at the time vested under the surrendered
option (or surrendered portion thereof) over (b) the aggregate
exercise price payable for such shares.
(ii) No such option surrender shall be effective
unless it is approved by the Plan Administrator. If the
surrender is so approved, then the distribution to which the
Optionee shall be entitled may be made in shares of Common
Stock valued at Fair Market Value on the option surrender
date, in cash, or partly in shares and partly in cash, as the
Plan Administrator shall in its sole discretion deem
appropriate.
(iii) If the surrender of an option is rejected by
the Plan Administrator, then the Optionee shall retain
whatever rights the Optionee had under the surrendered option
(or surrendered portion thereof) on the option surrender date
and may exercise such rights at any time prior to the later of
(a) five (5) business days after the receipt of the rejection
notice or (b) the last day on which the option is otherwise
exercisable in accordance with the terms of the documents
evidencing such option, but in no event may such rights be
exercised more than ten (10) years after the option grant
date.
C. The following terms shall govern the grant and exercise of limited
stock appreciation rights:
(i) One or more Section 16 Insiders may be granted
limited stock appreciation rights with respect to their
outstanding options.
(ii) Upon the occurrence of a Hostile Take-Over, each
such individual holding one or more options with such a
limited stock appreciation right in effect for at least six
(6) months shall have the unconditional right. (exercisable
for a thirty (30)-day period following such Hostile Take-Over)
to surrender each such option to the Corporation, to the
extent the option is at the time exercisable for vested shares
of Common Stock. In return for the surrendered option, the
Optionee shall receive a cash distribution from the
Corporation in an amount equal to the excess of (A) the
Take-Over Price of the shares of Common Stock which are at the
time vested under each surrendered option (or surrendered
portion thereof) over (B) the aggregate exercise price payable
for such shares. Such cash distribution shall be paid within
five (5) days following the option surrender date.
(iii) Neither the approval of the Plan Administrator
nor the consent of the Board shall be required in connection
with such option surrender and cash distribution.
(iv) The balance of the option (if any) shall
continue in full force and effect in accordance with the
documents evidencing such option.
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ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.
A. Purchase Price.
1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than eighty-five percent (85%) of
the Fair Market Value per share of Common Stock on the stock issuance
date.
2. Subject to the provisions of Section I of Article Five,
shares of Common Stock may be issued under the Stock Issuance Program
for one or both of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or
any Parent or Subsidiary).
B. Vesting Provisions.
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be filly and
immediately vested upon issuance or may vest in one or more
installments over the Participant's period of Service or upon
attainment of specified performance objectives. The elements of the
vesting schedule applicable to any unvested shares of Common Stock
issued under the Stock Issuance Program, namely:
(i) the Service period to be completed by the
Participant or the performance objectives to be attained,
(ii) the number of installments in which the shares
are to vest,
(iii) the interval or intervals (if any) which are to
lapse between installments, and
(iv) the effect which death, Permanent Disability or
other event designated by the Plan Administrator is to have
upon the vesting schedule, shall be determined by the Plan
Administrator and incorporated into the Stock Issuance
Agreement.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with respect to the
Participant's unvested shares of Common Stock by reason of any stock
dividend, stock split, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation 5 receipt of consideration
shall be issued subject to (i) the same vesting requirements applicable
to the Participant's unvested shares of Common Stock and (ii) such
escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under
the Stock Issuance Program, whether or not the Participant's interest
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in those shares is vested. Accordingly, the Participant shall have the
right to vote such shares and to receive any regular cash dividends
paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the
Stock Issuance Program or should the performance objectives not be
attained with respect to one or more such unvested shares of Common
Stock, then those shares shall be immediately surrendered to the
Corporation for cancellation, and the Participant shall have no further
stockholder rights with respect to those shares. To the extent the
surrendered shares were previously issued to the Participant for
consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay
to the Participant the cash consideration paid for the surrendered
shares and shall cancel the unpaid principal balance of any outstanding
purchase-money note of the Participant attributable to such surrendered
shares.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common
Stock (or other assets attributable thereto) which would otherwise
occur upon the cessation of the Participant's Service or the
non-completion of the vesting schedule applicable to such shares. Such
waiver shall result in the immediate vesting of the Participant's
interest in the shares of Common Stock as to which the waiver applies.
Such waiver may be effected at any time, whether before or after the
Participant's cessation of Service or the attainment or non-attainment
of the applicable performance objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the outstanding repurchase rights under the Stock Issuance
Program shall terminate automatically, and all the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the event
of any Corporate Transaction, except to the extent (i) those repurchase rights
are assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed in the Stock Issuance Agreement.
B. Any repurchase rights that are assigned in the Corporate Transaction
shall automatically terminate, and all the shares of Common Stock subject to
those terminated rights shall immediately vest in full, in the event the
Participant's Service should subsequently terminate by reason of an Involuntary
Termination within eighteen (18) months following the effective date of such
Corporate Transaction.
C. The Plan Administrator shall have the discretion, exercisable either
at the time the unvested shares are issued or at any time while the
Corporation's repurchase right remains outstanding, to (i) provide for the
automatic termination of one or more outstanding repurchase rights and the
immediate vesting of the shares of Common Stock subject to those rights upon the
occurrence of a Change in Control or (ii) condition any such accelerated vesting
upon the subsequent Involuntary Termination of the Participant's Service within
a specified period following the effective date of such Change in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. Grant Dates. Option grants shall be made on the dates specified
below:
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1. Each Eligible Director who is first elected or appointed as
a non-employee Board member after the Section 12(g) Registration Date
shall automatically be granted on the date of such initial election or
appointment (as the case may be) a Non-Statutory Option to purchase
10,000 shares of Common Stock.
2. On the date of each Annual Stockholders Meeting, beginning
with the 1996 Annual Meeting, each individual who is to continue to
serve as an Eligible Director after such meeting, shall automatically
be granted, whether or not such individual is standing for reelection
as a Board member at that Annual Meeting, a Non-Statutory Option to
purchase an additional 2,500 shares of Common Stock, provided such
individual has served as a non-employee Board member for at least six
(6) months prior to the date of such Annual Meeting. There shall be no
limit on the number of such 2,500-share option grants any one Eligible
Director may receive over his or her period of Board service.
B. Exercise Price.
1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on
the option grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant
Program. Except to the extent the sale and remittance procedure
specified thereunder is utilized, payment of the exercise price for the
purchased shares must be made on the Exercise Date.
C. Option Term. Each option shall have a term often (10) years measured
from the option grant date.
D. Exercise and Vesting of Options. Each option shall be immediately
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares. Each initial grant shall vest, and the
Corporation's repurchase right shall lapse, in a series of four (4) equal and
successive annual installments over the Optionee's period of continued service
as a Board member, with the first such installment to vest upon the Optionee's
completion of one (1) year of Board service measured from the option grant date.
Each annual grant shall vest, and the Corporation's repurchase right shall
lapse, upon the Optionee's completion of one (1) year of Board service measured
from the option grant date.
E. Effect of Termination of Board Service. The following provisions
shall govern the exercise of any options held by the Optionee at the time the
Optionee ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's
death, the personal representative of the Optionee's estate or
the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws
of descent and distribution) shall have a twelve (12)-month
period following the date of such cessation of Board service
in which to exercise each such option.
(ii) During the twelve (12)-month exercise period,
the option may not be exercised in the aggregate for more than
the number of shares of Common Stock for which the option is
exercisable at the time of the Optionee's cessation of Board
service.
(iii) Should the Optionee cease to serve as a Board
member by reason of death or Permanent Disability, then all
shares at the time subject to the option shall immediately
vest so that such option may, during the twelve (12)-month
exercise period following such cessation of Board service, be
exercised for all or any portion of such shares as
fully-vested shares of Common Stock.
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(iv) In no event shall the option remain exercisable
after the expiration of the option term. Upon the expiration
of the twelve (12)-month exercise period or (if earlier) upon
the expiration of the option term, the option shall terminate
and cease to be outstanding for any vested shares for which
the option has not been exercised. However, the option shall,
immediately upon the Optionee 5 cessation of Board service,
terminate and cease to be outstanding to the extent it is not
exercisable for vested shares on the date of such cessation of
Board service.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Corporate Transaction, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of such shares as
fully-vested shares of Common Stock. Immediately following the consummation of
the Corporate Transaction, each automatic option grant shall terminate and cease
to be outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
B. In connection with any Change in Control, the shares of Common Stock
at the time subject to each outstanding option but not otherwise vested shall
automatically vest in full so that each such option shall, immediately prior to
the effective date of the Change in Control, become fully exercisable for all of
the shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of such shares as fully-vested shares of Common
Stock. Each such option shall remain exercisable for such fully-vested option
shares until the expiration or sooner termination of the option term or the
surrender of the option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have
a thirty (30)-day period in which to surrender to the Corporation each automatic
option held by him or her for a period of at least six (6) months. The Optionee
shall in return be entitled to a cash distribution from the Corporation in an
amount equal to the excess of (i) the Take-Over Price of the shares of Common
Stock at the time subject to the surrendered option (whether or not the Optionee
is otherwise at the time vested in those shares) over (ii) the aggregate
exercise price payable for such shares. Such cash distribution shall be paid
within five (5) days following the surrender of the option to the Corporation.
No approval or consent of the Board shall be required in connection with such
option surrender and cash distribution.
D. The grant of options under the Automatic Option Grant Program shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
III. AMENDMENT OF THE AUTOMATIC OPTION GRANT PROGRAM
The provisions of this Automatic Option Grant Program, together with
the option grants outstanding thereunder, may not be amended at intervals more
frequently than once every six (6) months, other than to the extent necessary to
comply with applicable Federal income tax laws and regulations.
IV. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.
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ARTICLE FIVE
MISCELLANEOUS
I. FINANCING
A. The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price for shares issued under the Stock Issuance Program by delivering
a promissory note payable in one or more installments. The terms of any such
promissory note (including the interest rate and the terms of repayment) shall
be established by the Plan Administrator in its sole discretion. Promissory
notes may be authorized with or without security or collateral. In all events,
the maximum credit available to the Optionee or Participant may not exceed the
sum of (i) the aggregate option exercise price or purchase price payable for the
purchased shares plus (ii) any Federal, state and local income and employment
tax liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.
B. The Plan Administrator may, in its discretion, determine that one or
more such promissory notes shall be subject to forgiveness by the Corporation in
whole or in part upon such terms as the Plan Administrator may deem appropriate.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon
the exercise of options or stock appreciation rights or upon the issuance or
vesting of such shares under the Plan shall be subject to the satisfaction of
all applicable Federal, state and local income and employment tax withholding
requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant Program) with the right to use shares of Common Stock in
satisfaction of all or part of the Taxes incurred by such holders in connection
with the exercise of their options or the vesting of their shares. Such right
may be provided to any such holder in either or both of the following formats:
(i) Stock Withholding: The election to have the
Corporation withhold, from the shares of Common Stock
otherwise issuable upon the exercise of such Non-Statutory
Option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent
(100%)) designated by the holder.
(ii) Stock Delivery: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised
or the shares vest, one or more shares of Common Stock
previously acquired by such holder (other than in connection
with the option exercise or share vesting triggering the
Taxes) with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent
(100%)) designated by the holder.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Discretionary Option Grant, Automatic Option Grant Program and
Stock Issuance Programs shall become effective on the Plan Effective Date and
options and issuances may be granted under the Plan from and after the Plan
Effective Date. However, no options granted under the Plan may be exercised, and
no shares shall be issued under the Plan, until the Plan is approved by the
Corporation's stockholders. If such stockholder approval is not obtained within
twelve (12) months after the Plan Effective Date, then all options previously
granted under this Plan shall terminate and cease to be outstanding, and no
further options shall be granted and no shares shall be issued under the Plan.
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B. The Plan shall serve as the successor to the Predecessor Plan, and
no further option grants shall be made under the Predecessor Plan after the Plan
Effective Date. All options outstanding under the Predecessor Plan as of such
date shall, immediately upon approval of the Plan by the Corporations'
stockholders, be incorporated into the Plan and treated as outstanding options
under the Plan. However, each outstanding option so incorporated shall continue
to be governed solely by the terms of the documents evidencing such option, and
no provision of the Plan shall be deemed to affect or otherwise modify the
rights or obligations of the holders of such incorporated options with respect
to their acquisition of shares of Common Stock.
C. One or more provisions of the Plan, including (without limitation)
the option/vesting acceleration provisions of Article Two relating to Corporate
Transactions and Changes in Control, may, in the Plan Administrator's
discretion, be extended to one or more options incorporated from the Predecessor
Plan which do not otherwise contain such provisions.
D. The Plan shall terminate upon the earliest of (i) July 24, 2005,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued pursuant to the exercise of the options or the issuance of
shares (whether vested or unvested) under the Plan or (iii) the termination of
all outstanding options in connection with a Corporate Transaction. Upon such
Plan termination, all options and unvested stock issuances outstanding on such
date shall thereafter continue to have force and effect in accordance with the
provisions of the documents evidencing such options or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, (i) no such amendment
or modification shall adversely affect the rights and obligations with respect
to options, stock appreciation rights or unvested stock issuances at the time
outstanding under the Plan unless the Optionee or the Participant consents to
such amendment or modification, and (ii) any amendment made to the Automatic
Option Grant Program (or any options outstanding thereunder) shall be in
compliance with the limitations of that program. In addition, the Board shall
not, without the approval of the Corporation's stockholders, (i) materially
increase the maximum number of shares issuable under the Plan, the number of
shares for which options may be granted under the Automatic Option Grant Program
or the maximum number of shares for which any one person may be granted options,
separately exercisable stock appreciation rights and direct stock issuances per
calendar year, except for permissible adjustments in the event of certain
changes in the Corporation's capitalization, (ii) materially modify the
eligibility requirements for Plan participation or (iii) materially increase the
benefits accruing to Plan participants.
B. Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant Program and shares of Common Stock may be issued
under the Stock Issuance Program that are in each instance in excess of the
number of shares then available for issuance under the Plan, provided any excess
shares actually issued under those programs are held in escrow until there is
obtained stockholder approval of an amendment sufficiently increasing the number
of shares of Common Stock available for issuance under the Plan. If such
stockholder approval is not obtained within twelve (12) months after the date
the first such excess issuances are made, then (i) any unexercised options
granted on the basis of such excess shares shall terminate and cease to be
outstanding and (ii) the Corporation shall promptly refund to the Optionees and
the Participants the exercise or purchase price paid for any excess shares
issued under the Plan and held in escrow, together with interest (at the
applicable Short Term Federal Rate) for the period the shares were held in
escrow, and such shares shall thereupon be automatically cancelled and cease to
be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
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VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option or stock
appreciation right under the Plan and the issuance of any shares of Common Stock
(i) upon the exercise of any option or stock appreciation right or (ii) under
the Stock Issuance Program shall be subject to the Corporation's procurement of
all approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options and stock appreciation rights granted under it and
the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. Automatic Option Grant Program shall mean the automatic option grant
program in effect under the Plan.
B. Board shall mean the Corporation's Board of Directors.
C. Change in Control shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any
person or related group of persons (other than the Corporation
or a person that directly or indirectly controls, is
controlled by, or is under common control with, the
Corporation), of beneficial ownership (within the meaning of
Rule 13d-3 of the 1934 Act) of securities possessing more than
fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders
which the Board does not recommend such stockholders to
accept, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that
a majority of the Board members ceases, by reason of one or
more contested elections for Board membership, to be comprised
of individuals who either (A) have been Board members
continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during
such period by at least a majority of the Board members
described in clause (A) who were still in office at the time
the Board approved such election or nomination.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
E. Common Stock shall mean the Corporation's common stock.
F. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities are
transferred to a person or persons different from the persons
holding those immediately prior to such transaction; or
(ii) the sale, transfer or other disposition of all
or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
G. Corporation shall mean Accom, Inc., a Delaware corporation.
H. Discretionary Option Grant Program shall mean the discretionary
option grant program in effect under the Plan.
I. Domestic Relations Order shall mean any judgment, decree or order
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
J. Eligible Director shall mean a non-employee Board member eligible to
participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.
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K. Employee shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
L. Exercise Date shall mean the date on which the Corporation shall
have received written notice of the option exercise.
M. Fair Market Value per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be
the closing selling price per share of Common Stock on the
date in question, as such price is reported by the National
Association of Securities Dealers on the Nasdaq National
Market or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan
Administrator to be the primary market for the Common Stock,
as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling
price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
(iii) For purposes of option grants made on the date
the Underwriting Agreement is executed and the initial public
offering price of the Common Stock is established, the Fair
Market Value shall be deemed to be equal to the established
initial offering price per share. For purposes of option
grants made prior to such date, the Fair Market Value shall be
determined by the Plan Administrator after taking into account
such factors as the Plan Administrator shall deem appropriate.
N. Hostile Take-Over shall mean a change in ownership of the
Corporation effected through the following transaction:
(i) the acquisition, directly or indirectly, by any
person or related group of persons (other than the Corporation
or a person that directly or indirectly controls, is
controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of
Rule 13 d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such
stockholders to accept, and
(ii) more than fifty percent (50%) of the securities
so acquired are accepted from persons other than Section 16
Insiders.
O. Incentive Option shall mean an option which satisfies the
requirements of Code Section 422.
P. Involuntary Termination shall mean the termination of the Service of
any individual which occurs by reason of:
(i) such individual's involuntary dismissal or
discharge by the Corporation for reasons other than
Misconduct, or
(ii) such individual's voluntary resignation
following (A) a change in his or her position with the
Corporation which materially reduces his or her level of
responsibility, (13)a reduction in his or her level of
compensation (including base salary, fringe benefits and any
non-discretionary and
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objective-standard incentive payment or bonus award) by more
than fifteen percent (15%) or (C) a relocation of such
individual's place of employment by more than fifty (50)
miles, provided and only if such change, reduction or
relocation is effected by the Corporation without the
individual's consent.
Q. Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
R. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
S. Non-Statutory Option shall mean an option not intended to satisfy
the requirements of Code Section 422.
T. Optionee shall mean any person to whom an option is granted under
the Discretionary Option Grant or Automatic Option Grant Program.
U. Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
V. Participant shall mean any person who is issued shares of Common
Stock under the Stock Issuance Program.
W. Permanent Disability or Permanently Disabled shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for the purposes of the Automatic Option
Grant Program, Permanent Disability or Permanently Disabled shall mean the
inability of the non-employee Board member to perform his or her usual duties as
a Board member by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more.
X. Plan shall mean the Corporation's 1995 Stock Option/Stock Issuance
Plan, as set forth in this document.
Y. Plan Administrator shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
Z. Plan Effective Date shall mean the date on which the Plan is adopted
by the Board.
AA. Predecessor Plan shall mean the Corporation's existing Restated
1990 Stock Option Plan.
BB. Primary Committee shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders.
CC. Qualified Domestic Relations Order shall mean a Domestic Relations
Order which substantially complies with the requirements of Code Section 414(p).
The Plan Administrator shall have the sole discretion to determine whether a
Domestic Relations Order is a Qualified Domestic Relations Order.
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DD. Secondary Committee shall mean a committee of two (2) or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
EE. Section 16 Insider shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
FF. Section l2(g) Registration Date shall mean the first date on which
the Common Stock is registered under Section 12(g) of the 1934 Act.
GG. Service shall mean the provision of services to the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.
HH. Stock Exchange shall mean either the American Stock Exchange or the
New York Stock Exchange.
II. Stock Issuance Agreement shall mean the agreement entered into by
the Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
JJ. Stock Issuance Program shall mean the stock issuance program in
effect under the Plan.
KK. Subsidiary shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
LL. Take-Over Price shall mean the greater of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
MM. Taxes shall mean the Federal, state and local income and employment
tax liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of such holder's options
or the vesting of his or her shares.
NN. 10% Stockholder shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
OO. Underwriting Agreement shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
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