CAMELOT CORPORATION
PROXY
FOR THE HOLDERS OF COMMON SHARES
THIS PROXY IS SOLICITED ON BEHALF OF CAMELOT
CORPORATION
ANNUAL MEETING TO BE HELD ON JANUARY 3, 1997 AT
10:00 A.M.
The undersigned shareholder of Camelot Corporation (the
"Company") hereby appoints Daniel Wettreich, or failing him,
Jeanette P. Fitzgerald as Attorneys and Proxies to vote all the
shares of the undersigned at said Annual Meeting of Stockholders
and at all adjournments thereof, hereby ratifying and confirming
all that said Attorney and Proxies may do or cause to be done by
virtue thereof. The above-named Attorneys and Proxies
are instructed to vote all the
undersigned's shares as follows:
1. THE ELECTION OF DIRECTORS:
o For the Election of All Nominees Listed Below
(Except as Marked to the Contrary Below*)
o Withhold Authority to Vote for All Nominees Listed Below
Daniel Wettreich, Jeanette Fitzgerald , Henry Gelender and Allan
Wolfe
*(Instruction: To withhold authority to vote for an individual
nominee, strike a line through that nominee's name above.)
2. RATIFY THE SELECTION OF AUDITORS FOR APRIL 30, 1997:
To ratify the appointment of Lane, Gorman & Trubitt, as
auditors for the fiscal year ended April 30, 1997.
AGAINST o FOR o ABSTAIN o
3. APPROVAL OF THE CREATION OF THE 1996 STOCK OPTION PLAN:
To approve the creation of the 1996 Stock Option Plan to
create a plan which incorporates the amended governing rules.
AGAINST o FOR o ABSTAIN o
4. APPROVAL OF THE AMENDMENT OF THE 1991 STOCK OPTION PLAN:
To approve the amendment of the 1991 Stock Option Plan
for all nonemployee directors of the company.
AGAINST o FOR o ABSTAIN o
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED
HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2,
and 3.
Dated this _______ day of ______________, 1996
______________________________________________
Signature of Shareholder
______________________________________________
Signature of Shareholder
______________________________________________
Please Print Name
______________________________________________
Please Print Name
Please date and sign exactly as your name or names appear on
your stock certificate. Joint owners should each sign personally.
If signing in any
fiduciary or representative capacity, give full title as such
and provide authorization. For shares held by a
corporation, please affix its corporate
seal.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
CAMELOT CORPORATION
Camelot Place
17770 Preston Road
Dallas, Texas 75252
NOTICE OF MEETING OF SHAREHOLDERS
To be Held On January 3, 1997
Notice is hereby given that the Annual Meeting of
Shareholders of Camelot Corporation (the "Company") will be held at
____________________ on the 3rd of January 1997 at 10:00 a.m.,
local time, for the following purposes:
(1) To elect four directors;
(2) To ratify the appointment of auditors for the fiscal year
ended April 30, 1997.
(3) To approve the creation of the 1996 Stock Option Plan.
(4) To approve the amendment of the 1991 Stock Option Plan.
(5) To transact such other business as may properly come
before the meeting or any adjournment(s) thereof.
The accompanying Proxy Statement contains information
regarding, and a more complete description of, the items of business
to be considered at the meeting.
Only shareholders of record at the close of business on
November 15, 1996 are entitled to notice of, and to vote at, the
Meeting of Shareholders and any adjournment(s) thereof.
You are cordially invited to attend the meeting, but if you
are unable to do so, PLEASE SIGN AND DATE THE ACCOMPANYING PROXY
AND RETURN IT PROMPTLY IN THE ENCLOSED SELF ADDRESSED ENVELOPE. If
you attend the meeting, you may vote in person if you wish,
whether or not you have returned the proxy. In any event, a proxy
may be revoked at any time before it is exercised.
By Order of the Board of Directors
Jeanette Fitzgerald
Corporate Secretary
Dallas, Texas
November 14, 1996
CAMELOT CORPORATION
CAMELOT PLACE
17770 Preston Road
Dallas, Texas 75252
PROXY STATEMENT
FOR
ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD
JANUARY 3, 1997
This Proxy Statement is sent to shareholders of Camelot
Corporation (the "Company"), in connection with the solicitation
of proxies by the Board of Directors of the Company for use at
the Annual Meeting of Shareholders of the Company to be held on
January 3, 1997 at 10:00 a.m., local time at _____________ and any
adjournment(s) thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders.
Solicitation of proxies may be made in person or by mail, telephone
or telegraph by directors, officers, and regular employees of the
Company. The Company will also request banking institutions,
brokerage firms, custodians, nominees, and fiduciaries to forward
solicitation materials to the beneficial owners of common stock of
the Company held of record by such persons, and the Company will
reimburse the forwarding expenses. The cost of solicitation
of proxies will be paid by the Company. This Proxy
Statement and the enclosed proxy are first being sent to
shareholders of Camelot Corporation on or about November 16, 1996.
Pursuant to the Private Securities Litigation Reform Act of 1995 the
Company, in addition to historical information, certain
information within this proxy statement contains forward looking
statements. These statements are subject to certain risks and
uncertainties that could cause actual results to differ
materially from those set forth including but not limited to
competition among employers for appropriate personnel, Camelot's
dependence on outside suppliers and the need to go to outside
consulting sources, the continued ability to create and /or
acquire products that customers will accept; the impact of
competition and changing competitors; the changing nature of
regulations and the manner in which they are interpreted; and
pricing pressures in addition to normal economic and world
factors beyond the control of the Company.
REVOCATION OF PROXIES
Any Shareholders returning the accompanying proxy may revoke such
proxy at any time prior to its exercise (a) by giving written
notice to the Corporate Secretary of the Company of such
revocation prior to its use, (b) by voting in person at the
meeting, or (c) by executing and filing with the Corporate
Secretary of the Company a later dated proxy.
OUTSTANDING STOCK AND CERTAIN SHAREHOLDERS
The voting securities of the Company are shares of its common
stock, $0.01 par value ("Common Stock"), each share of which
entitles the holder to one vote at the Annual Meeting of
Shareholders and any adjournment(s) thereof. At October 15, 1996
there were outstanding and entitled to vote 25,016,059 shares of
Common Stock. Only shareholders of record at the close of
business on November 4, 1996, are entitled to notice of, and
to vote at, the Annual Meeting of Shareholders and any
adjournment(s) thereof.
The following table sets forth as of October 15, 1996 information
known to the management of the Company concerning the beneficial
ownership of Common Stock by (a) each person who is known by the
Company to be the beneficial owner of more than five percent of
the shares of Common Stock outstanding, (b) each director of the
Company owning Common Stock, and (c) all directors and officers of
the Company as a group (8 persons).
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership
of Class
Daniel Wettreich 14,514,665 <F1><F2><F3> 42.21%
17770 Preston Road
Dallas, Texas 75252
Jeanette P. Fitzgerald 200,000 <F4> *
17770 Preston Road
Dallas, Texas 75252
Allan Wolfe 65,000 <F5> *
390 South River Road
Suite 5
Bedford
New Hampshire 03110
Henry Gelender 240,500 <F6> *
7150 Greenville Avenue
Suite 600
Dallas, Texas 75231
Tom Watts 30,000 <F7> *
17770 Preston Road
Dallas, Texas 75252
David McCurley 50,000 <F8> *
17770 Preston Road
Dallas, Texas 75252
Katie Phillips 5,000 <F9> *
17770 Preston Road
Dallas, Texas 75252
Robert Gregory 10,000 <F10> *
17770 Preston Road
Dallas, Texas 75252
All Officers and Directors 15,047,165 <F1><F2><F3><F4> 45.6%
as a group (8 persons) <F5><F6><F7><F8>
<F9><F10>
* Under 0.1%
Zara Wettreich, 1,494,166 5.6%
Separate Property
17770 Preston Road
Dallas, Texas 75252
Forme Capital, Inc. 2,650,000 <F3> 9.9%
17770 Preston Road
Dallas, Texas 75252
[FN]
(1) 920,499 of these shares are in the name of Zara Wettreich and
Hermina, Inc. trustees of The Wettreich Heritage Trust ("Trust"),
a Texas trust whose beneficiaries are the children of Daniel
Wettreich. 1,494,166 of these shares are owned by Zara Wettreich
the wife of Mr. Wettreich, as her separate property.
1,000,000 of these shares are owned by Wettreich Financial
Consultants, Inc. ("WFC"), a Texas company owned by the wife
and children of Mr. Wettreich. 650,000 of these shares are
owned by Forme Capital, Inc., ("Forme"), a Delaware company of
which Mr. Wettreich is a director and officer. Mr. Wettreich
has disclaimed any beneficial interest in the shares owned by his
wife, Trust, WFC, and Forme.
(2) Includes options to purchase 8,000,000 shares
granted to Daniel Wettreich, which options are not
exercised.
(3) Includes an option granted to Forme Capital, Inc., a
company affiliated with Mr. Wettreich, to purchase 2,000,000
shares, which option is not exercised.
(4) Includes options to purchase 140,000 shares granted to
Jeanette Fitzgerald, which options are not exercised.
(5) Includes an option to purchase 55,000 shares granted to
Allan Wolfe, which option is not exercised.
(6) Includes an option to purchase 40,000 shares granted to
Henry Gelender, which option is not exercised. 500 of these
shares are as custodian for Rachel Gelender UGMA.
(7) Includes an option to purchase 30,000 shares granted
to Tom Watts, which option is not exercised.
(8) Includes an option to purchase 50,000 shares granted to
David McCurley, which option is not exercised.
(9) Includes options to purchase 5,000 shares granted to
Katie Phillips, which options are not exercised.
(10) Includes options to purchase 10,000 shares granted to
Robert Gregory, which options are not exercised.
[/FN]
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Company paid management fees of $44,000 in 1996 and $286,000
in 1995 to Wettreich Financial Consultants, Inc. ("WFC"), a
company affiliated with the President of the Company. These
management services consisted of the provision of the services of
the President and Corporate Secretary of Company. The amount
was determined by the time, effort, and skill required to provide
these services. The President and the Corporate Secretary of
Company were employees of WFC and during the fiscal year ended
April 1995, received no compensation from Company.
Company, through its previously wholly-owned subsidiary,
Stock Transfer Company of America, Inc., provided services during
the year ended April 1994, as a securities transfer agent to
companies affiliated with the President of
Company. For the ten months ended February 28, 1994, Company
recognized sales of approximately $1,243 to these affiliated
companies. Services as a security transfer agent to companies
affiliated with Allan Wolfe, director of Company were also
provided. For the ten months ended February 28, 1994, Company
recognized sales of approximately $1,807 to these affiliated
companies. During the years ended April 1995 and 1996, Stock
Transfer Company of America continued to provide stock transfer
services to Company and a total of $3,843 and $16,598 were paid by
Company for these services. In the opinion of the Board of
Directors, the terms of these transactions was as fair to the
company as could have been made with an unaffiliated party.
The Company leased 10,000 square feet of offices from Forme
Capital, Inc., a company affiliated with the President of the
Company. The lease is for a term of 5 years commencing September
1993 at $8 per square foot. Total rent paid during fiscal 1996 and
1995 was $80,000, respectively. The lease agreement and transactions
related thereto were approved by a vote of Company's shareholders.
The Company received loans from Forme totaling $406,000 and
$470,000 in fiscal years 1995 and 1994, respectively. Payments
of $236,000 and $190,000 were made in fiscal years 1996 and
1995, respectively. Forme converted the remaining balance of
$450,000 to common stock during fiscal 1996. Total interest
paid during fiscal 1996 was $11,615 and 1995 was $35,961.
During fiscal 1996 and 1995, Company received dividend
payments from Forme Capital, Inc., Preferred Shares Series C in the
amount of $46,657 for 1996 and $46,657 for 1995.
On March 9, 1995, Company issued 15,000 common shares valued
at $22,500 to a company for a mailing list. The president of that
company was the wife of the president of Camelot Distributing, Inc.,
one of Company's subsidiaries.
On January 17, 1996, the Company's disinterested directors
approved a secured loan to the Corporate Secretary in the amount
of $75,156. This loan bears interest at a rate 6% per annum.
On August 1, 1996, the Company's disinterested directors
approved a secured loan to the Corporate Secretary in the amount
of $14,000. This loan bears interest at a rate of 6% per annum
and has been substantially repaid as of October 21, 1996.
On September 25, 1996 the Company's disinterested directors
approved a secured loan to the President of the Company in the
amount of $1,000,000. This loan bears interest at a rate of 6% per
annum.
ELECTION OF DIRECTORS
The Company's Bylaws provide for a Board of Directors consisting of
at least three directors. The persons named in the enclosed form of Proxy
will vote the shares represented by such Proxy for the election
of the four nominees for directors named below. If at the time
of the meeting, any of these nominees shall have become
unavailable for any reason, which event is not expected to occur,
the persons entitled to vote the Proxy will vote for such
substitute nominee or nominees, if any, as they determine in their
discretion. If elected, the nominees for director will hold
office until the next annual meeting of shareholders, or until
their successors are elected and qualified. The
executive officers of the Company are elected annually at the first
meeting of the Company's Board of Directors held after each annual
meeting of shareholders. Each executive officer will hold office
until their successor is elected and qualified or until their
death or resignation or until they shall have been removed in
the manner provided by the Company's Bylaws. The nominees for
directors and officers, each of whom has consented to serve if
elected, are as follows:
Name Age Position Period Served Term
Expires
Daniel Wettreich 44 Chairman and September 16, 1988 Next
Chief Executive Annual
Officer,President, Meeting
Director
Jeanette P.
Fitzgerald 35 Vice President, September 16, 1988 Next
General Counsel, Annual
Secretary, Meeting
Director
Allan S.
Wolfe 63 Director May 24, 1993 Next
Annual
Meeting
Henry Gelender 49 Director December 1, 1995 Next
Annual
Meeting
[/TABLE]
Daniel Wettreich
Daniel Wettreich is Chairman and Chief Executive Officer,
President and Director of the Company since September 1988. He is
also a Director and Officer of all its subsidiaries(1). Since
1981, he has been the President and Director of Wettreich Financial
Consultants, Inc., a financial consulting company. Since August
1996, he has been Director and Chief Executive Officer of Meteor
Technology plc, a UK public company, and since May 1996 its
subsidiary, DigiPhone Europe, Ltd., a United Kingdom based
distributor of software in Europe. Additionally, he currently
holds directors positions in the following public companies:
Forme Capital, Inc., a real estate company and Danzar
Investment Group, Inc., Malex, Inc., Adina, Inc., and Tussik,
Inc.(2) which are dormant companies seeking merger opportunities.
In July 1993, he was appointed Director of Goldstar Video
Corporation(3) following an investment by the Company. From
January 1985 to February 1988 he was a founding director of
Phoenix Network, Inc., a telecommunications company listed on
the American Stock Exchange. Mr. Wettreich was an executive
with two London, England merchant banks in the mid 1970's.
Subsequently he was owner/manager of a private distribution
company, and thereafter Chief Financial Officer of a $60 million
retailer listed on the London Stock Exchange. Mr. Wettreich has
been an officer and director of Hermina, Inc., the corporate
trustee of The Wettreich Heritage Trust since June 1981. Mr.
Wettreich has a Bachelor of Arts in Business Administration
from the University of Westminster, London, England.
Jeanette P. Fitzgerald
Jeanette Fitzgerald is Vice President and General
Counsel, Corporate Secretary and a Director of the Company since
September 1988. She is a director and secretary of the
Company's subsidiaries(1). She is a member of the State
Bar of Texas and the Business Law section. Since August 1996, she
has been a Director of Meteor Technology plc, a UK public company and since
May 1996 its subsidiary DigiPhone Europe, Ltd., a United
Kingdom based distributor of software in Europe. She is also
the Corporate Secretary and Director of Wettreich Financial
Consultants, Inc., and of Malex, Inc., Adina, Inc., Tussik, Inc.
(2) and Danzar Investment Group, Inc., which are public companies.
In July 1993, she was appointed Director of Goldstar Video
Corporation(3) following an investment by the Company. Previous to
these positions, from 1987 to 1988 she worked as a staff attorney
and in the compliance department at H.D. Vest, Inc., a holding company with
subsidiaries including a securities brokerage firm. She
graduated from Texas Tech University School of Law receiving both a
Doctorate of Jurisprudence and a Masters of Business Administration
in May 1986, and from the University of Michigan with a Bachelors
of Business Administration in December 1982.
Allan S. Wolfe
Allan S. Wolfe has been a Director of the Company since May,
1993. He is Chairman and President of Database Technologies,
Inc., a public company providing database software to the
insurance industry from May 1986 to the present. He is also,
since 1984, a director and Chief Executive Officer of Pathfinder
Data Group ("PDG"), a database company. A subsidiary of PDG,
Pathfinder Data, Inc., filed for protection from creditors under
Chapter 11 and has since been converted to Chapter 7.
Henry Gelender
Dr. Henry Gelender has been a Director of the Company since
December, 1995. He is President of Cornea Associates of Texas, PA,
one of the leading cornea transplant surgery centers in the
country. He is Vice Chairman of the Department of
Ophthalmology at Presbyterian Hospital in Dallas, Texas since
1994, and is Clinical Associate Professor of Ophthalmology at the
University of Texas, Southwestern Medical School in Dallas since
1983. He received his medical degree from the University of
Health Sciences at the Chicago Medical School in Chicago, Illinois
in 1973, and has a BA in Zoology from the University of California.
DIRECTORS MEETING
During the fiscal year ending April 30, 1996, the Company had
fifteen (15) directors meetings, thirteen (13) of which consisted
of consent of directors minutes signed by all directors. The
consent minutes reflect decisions reached by all of the directors
following discussions among the directors. The audit committee
consisted of Daniel Wettreich, Alan Wolfe and Henry Gelender.
Company has no standing nominating or compensation committee.
MANAGEMENT REMUNERATION
The following table lists all cash compensation exceeding
$100,000 paid to Company's executive officers for services rendered
in all capacities during the fiscal year ended April 30, 1996. No
bonuses were granted to any officer, nor was any compensation
deferred.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term
Compensation
Award Payouts
s
Restricted
Name and Other Stock Options/ LTIP All Other
Principal Year Salary Bonus Annual Awards SARs Payouts Compen-
Position Compen- sation
sation
Daniel 1994 - - - - -- - $ (1)
Wettreich 1995 - - - - 1,000,000 - $ (1)
Chairman(1) 1996 $208,333 - - - 1,000,000 - $ (1)
Jeanette P. 1994 - - - - - - $ (1)
Fitzgerald 1995 - - - - 175,000 - $ (1)
Vice 1996 N/A - - - N/A - $ (1)
President,
General
Counsel and
Secretary (1)
<FN>
(1) Daniel Wettreich and Jeanette Fitzgerald, Directors and
Officers of Company, were employees of a company affiliated with Mr.
Wettreich, which company provided the Company with management
services until July 1995 and was paid $44,000, $286,000 and
$290,500 for the years ended April 30, 1996, 1995 and 1994
respectively. In July 1995, Mr. Wettreich and Ms. Fitzgerald
became employees of Company and Mr. Wettreich entered into an employment
contract with Company.
</FN>
Directors of the Company receive no salary for their services
as such, but are reimbursed for reasonable expenses incurred in
attending meetings of the Board of Directors.
Company has no compensatory plans or arrangements whereby
any executive officer would receive payments from the Company or
a third party upon his resignation, retirement or termination
of employment, or from a change in control of Company or a
change in the officer's responsibilities following a change in
control other than Mr. Wettreich. Under the newly proposed 1996
Stock Option Plan or under the Company's 1991 Outside Directors
Stock Option Plan options granted under these plans contain
provisions pursuant to which the unvested portions of outstanding
options become
immediately exercisable and fully vested upon a merger of the
Company in which the Company's stockholders do not retain,
directly or indirectly, at least a majority of the beneficial
interest in the voting stock of the Company or its successor, if
the successor corporation fails to assume the outstanding options
or substitute options for the successor corporation's stock to
replace the outstanding options. The outstanding options will
terminate to the extent they are not exercised as of consummation
of the merger, or assumed or substituted for by the successor
corporation.
On July 1, 1995, Company entered into an employment
contract with Mr. Wettreich whereby he was employed as
Chairman, Chief Executive Officer and President of the Company
for a period of ten years at an annual salary of
$250,000 and a cash bonus equal to 5% of the Company's annual
profits before taxation. In the event of Mr. Wettreich's death during
the term of the agreement, Company will pay annual death benefits of
$250,000 for a period of four years. Mr. Wettreich may terminate his
employment after the date of a change in control of the Company. A change
in control is defined as any person other than Mr. Wettreich or
his family interests becomes beneficial owner, directly or
indirectly of common stock of the Company representing 30% or more
of the Company's issued and outstanding common stock or if the
Incumbent Board as defined, ceases to constitute a majority of the
board of directors. If Mr. Wettreich terminates his employment
after a change of control in the company, he shall be paid (i)
the base salary and any bonuses payable to him under the
agreement or (ii) an amount equal to the product of the annual base
salary and bonus paid to Mr. Wettreich during the year
preceding the termination date multiplied by five whichever of
(i) or (ii) is more. In the circumstances whereby Mr. Wettreich
terminates his employment for good reason, as defined, he will
receive payments in accordance with the payments received if
termination occurs after a change of control of the Company.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES AND EXCHANGE ACT OF
1934
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's executive officers, directors, and persons who
beneficially own more than 10% of the Company's Common Stock to
file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission ("SEC").
Such persons are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms filed by such person.
Based solely on the Company's review of such forms furnished to the
Company and written representations from certain reporting persons,
the Company believe that all filing requirements applicable to
the Company's executive officers, director, and more than 10%
stockholders were complied with.
SHAREHOLDER PROPOSALS
According to Rule 14a-8 promulgated under the Securities
Exchange Act of 1934, a shareholder may require that certain
proposals suggested by the shareholders be voted upon at a
shareholders meeting. Information concerning such proposal may
be submitted to the Company for inclusion in the Company's Proxy
Statement. Such proposals must be submitted to the Company before
July 19, 1997 for consideration at the 1997 shareholders meeting.
MANAGEMENT PROPOSAL I
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDED APRIL 30, 1997
The following resolution will be offered by Management pursuant
to the Board of Directors resolutions at the meeting:
RESOLVED, that the appointment by the Board of Directors of
Lane, Gorman & Trubitt, as independent auditors of the Company for
the year ending April 30, 1997 is hereby approved.
It is not intended that a representative of Land Gorman &
Trubitt will be present at the meeting or be available for
questions. Lane Gorman and Trubitt have conducted the audit on the
Company since the 1994 fiscal year.
During the previous two years, there were no disagreements between
the Company
and the auditors regarding a policy or disclosure.
Neither this accountant nor any accountant for the past two years
has rendered an audit opinion containing an adverse opinion or a
disclaimer of opinion or were any of the opinions qualified or
modified as to uncertainty, audit scope or accounting principles.
MANAGEMENT PROPOSAL II
APPROVAL OF THE CREATION OF THE 1996 STOCK OPTION PLAN
The following resolution will be offered by Management pursuant to
the Board of Directors resolutions at the meeting:
"RESOLVED, that the creation of the 1996 Stock Option Plan by
the Board of Directors of the Company is hereby approved."
The board desires to establish options with vesting periods and
create an administrator consisting of non-employee directors.
The Board of Directors approved the adoption of the 1996 Stock
Option Plan (the "Option Plan") in October of 1996. As of October
15, 1996, the maximum number of shares granted pursuant to the
Option Plan is 7,397,000, of which options to purchase no shares
were outstanding. The Board of Directors determined to issue option
in the same amounts as the outstanding options and employees
have tendered all options granted under the 1991 Stock Option Plan
and the Company has canceled them. The options granted in lieu
of those tendered by employees immediately vested. The new plan,
subject to shareholder approval has 8,000,000 shares of common
stock that may be issued under the Option Plan, subject to
adjustments for stock splits or other changes in the Company capital
structu4e.
The Board of Directors believes that approval of the establishment
of the 1996 Option Plan is in the best interests of the Company and
its stockholders because it is important to be able to reward
employees and provide them an incentive to make the Company
succeed. Further, the ability to grant stock options is an
important factor in attracting, motivating and retaining
qualified personnel essential to the success of the Company.
Consequently, the Company grants options to each employee and
each employee is eligible for an additional annual grant, based on
his or her performance. The Company estimates that it will have
sufficient shares reserved for issuance to make anticipated
stock option issuances for the next year.
The following summary of the Option Plan is qualified in its
entirety by the specific language of the Option Plan, a copy of
which is available to any stockholder upon request.
General The Option Plan provides for the grant to employees of
incentive
stock options within the meaning of
section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and the grant to employees and consultants of nonstatutory
stock options. A maximum of 8,000,000 authorized but unissued
shares or treasury shares of the Common Stock of the Company may
be issued upon the exercise of options granted pursuant to the
Option Plan. In the event of any stock dividend, stock
split, recapitalization, combination, reclassification , or like
change in the capital structure of the Company, appropriate
adjustments will be made to the shares subject to the Option Plan,
to the Option Limit and to outstanding options. To
the extent any outstanding option under the Option Plan expires or
terminates prior to exercise in full or if shares issued upon
exercise of an option are repurchased by the Company, the shares
of Common Stock for which such option is not exercised or repurchased are
returned to the Option Plan and become available for future grant. The
Company intends that the compensation related to options granted under
the Option Plan qualifies for the "performance-based compensation" exemption
under Section 162(m) of the Code. Section 162(m) generally limits
the deductibility by the company for federal income tax
purposes of compensation paid to certain executive officers.
Administration. The Option Plan is administered by the Board
or a duly appointed committee of non-employee members of the
Board. With respect to the participation of individuals who are
subject to Section 16 of the Securities Exchange Act of 1934 (the
"Exchange Act"), the Option Plan must be administered in compliance
with the requirements of Rule 16b-3 under the Exchange Act.
Subject to the provisions of the Option Plan, the Board or the
committee, consisting of non-employee directors, determines the
persons to whom options are to be granted, the number of shares to
be covered by each option, whether an option is to be an
incentive stock option or a non-statutory stock option, the terms
of vesting and exercisability of each option, the type of
consideration to be paid to the Company upon exercise of an option,
the term of each option, and all other terms and conditions fo
the options. The Board or committee will interpret the Option
Plan and options granted under the Option Plan, and all
determinations of the Board or committee will be final and
binding on all persons having an interest in the Option Plan or
any option.
Eligibility. All employees (including officers and directors
who are also employees), consultants, advisors or other
independent contractors of the company or of any present or
future parent or subsidiary corporations of the Company are
eligible to participate in the Option Plan. As of October 15,
1996, the Company had approximately 70 employees, including
eight executive officers, and no consultants, advisors and other
independent contractors. Only employees may be granted incentive
stock options. Consultants, advisors, and other independent
contractors may only be granted nonstatutory stock options.
Terms and Conditions of Options. Each option granted under the
Option Plan is evidenced by a written agreement between the company
and the optionee specifying the number of shares subject to the
option and the other terms and conditions of the option, consistent
with the requirements of the Option Plan. The per share exercise
price of an option must equal at least the fair market value of a
share of the Company's Common Stock on the date of grant. The
per share exercise price of any option granted to a person who
at the time of grant owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company
or any parent or subsidiary corporation of the Company must be at
least 110% of the fair market value of a share of the Company's
Common Stock on the date of grant, and the term of any such option
cannot exceed five years.
Generally, options may be exercised by payment of the exercise price
in cash, by check, or in cash equivalent, by tender of shares of the
Company's Common Stock owned by the optionee having a fair
market value not less than the exercise price, by the assignment
of the proceeds of a sale of some or all of the shares of Common
Stock being acquired upon the exercise of the option, or by any
combination of these. However, the Board or committee may restrict
the forms of payment permitted in connection with any option
grant or may grant options permitting payment of the exercise
price with a promissory note.
Options granted under the Option Plan will become exercisable and
vested at such times as specified by the Board of committee.
Generally, options granted under the Option Plan are exercisable on
and after the date of grant, subject to the right of the Company to
reacquire at the optionees's exercise price any unvested shares
held by the optionee upon termination of employment or service with
the Company or if the optionee attempts to transfer any unvested
shares. Shares subject to options generally vest in installments
subject to the optionee's continued employment or service. The
maximum term of options granted under the Option Plan is ten
years. Options are nontransferable by the optionee other than by
will or by the laws of descent and distribution, and are
exercisable during the optionee's lifetime only by the optionee.
Transfer of Control. A "Transfer of Control" will be deemed to occur upon any
of the following events in which the stockholders of the Company do
not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Company or its
successor: (i) the direct or indirect sale or exchange by the
stockholders of the Company of all or substantially all of the
stock of the Company, (ii) a merger in which the Company is a
party, or (iii) the sale, exchange or transfer of all or
substantially all of the assets of the Company. If a Transfer of
Control occurs, the surviving,
continuing successor, or purchasing corporation or parent
corporation thereof (the "Acquiring Corporation") will either
assume outstanding options or
substitute options for the Acquiring Corporation's stock for the
outstanding options.
However, if the Acquiring Corporation elects not to assume
or
substitute for outstanding options in connection with a merger
described in clause (ii) above, the Company's Board will
provide that any unexercisable and/or unvested portion of the
outstanding options will be immediately exercisable and vested.
Any options which are neither assumed or substituted for by the
Acquiring Corporation nor exercised as of the date of the Transfer
of Control will terminate effective as of such date.
Termination or Amendment. Unless sooner terminated, no options may
be granted under the Option Plan after October 15, 2006. The
Board or committee may terminate or amend the Option Plan at
any time, but without stockholder approval, the Board may not
amend the Option Plan to increase the total number of shares of
Common Stock reserved for issuance thereunder, change the class of
persons eligible to receive incentive stock options, or expand
the class of persons eligible to receive nonstatutory stock
options. No amendment may
adversely affect an outstanding option without the consent of
the optionee, unless the amendment is intended to preserve the
option's status as an incentive stock option.
All outstanding options issued pursuant to the 1991 Stock
Option Plan to employees eligible under the new Stock Option Plan
have been returned to the Company and been replaced by equivalent
options under the new Stock Option plan.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF THE OPTION PLAN
The following summary is intended only as a general guide as to
the United States federal income tax consequences under current
law with respect to participation in the Option Plan and does not
attempt to describe all possible federal or other tax
consequences of such participation. Furthermore, the tax
consequences of options are complex and subject to change, and a
taxpayer's particular situation may be such that some variation of
the described rules is applicable. Optionees should consult
their own tax advisors prior to the exercise of any option
and prior to the disposition of any shares of Common Stock
acquired upon the exercise of an option.
Incentive Stock Options Options designated as incentive stock
options are intended to fall within the provisions of section 422
of the Code. An optionee recognizes no taxable income for regular
income tax purposes as the result of the grant or exercise of such
an option.
For optionees who do not dispose of their shares for two years
following the date the option was granted nor within one year
following the exercise of the option, the gain on sale of the
shares (which is the difference between the sale price and the
purchase price of the shares) will be taxed as long-term capital
gain. If an optionee satisfies such holding periods upon a sale of
the shares, the Company will not be entitled to any deduction
for federal income tax purposes. If an optionee disposes of
shares within two years after the date of grant or within one
year from the date of exercise (a "disqualifying
disposition"), the difference between the fair market value of the
shares on the determination date (see discussion under "Nonstatutory
Stock Option" below) and the option exercise price (not to exceed
the gain realized on the sale if the disposition is a transaction
with respect to which a loss, if sustained, would be recognized)
will be taxed as ordinary income at the time of disposition. Any
gain in excess of that amount will be a capital gain. If a loss is
recognized, there will be no ordinary income, and such loss will
be a capital loss. A capital gain or loss will be long-term if
the optionee's holding period i more than 12 months. Any
ordinary income recognized by the optionee upon the disposition
of the shares should be deductible by the Company for federal income
tax purposes, except to the extent such deduction is limited by
Section 162(m) of the Code.
The difference between the option exercise price and the fair
market value of the shares on the determination date of an
incentive stock option (see discussion under "Nonstatutory
Stock Options" below) is an adjustment in computing the
optionee's alternative minimum taxable income and may be subject to
an alternative minimum tax which is paid if such tax exceeds the
regular tax for the year. Special rules may apply with respect to
certain subsequent sales of the shares in a disqualifying
disposition, certain basis adjustments for purposes of computing
the alternative minimum taxable income on a subsequent sale of
the shares and certain tax credits which may arise with respect
to optionees subject to the alternative minimum tax.
Nonstatutory Stock Options. Options not designated as incentive
stock options will be nonstatutory stock options. Nonstatutory
stock options have no special tax status. An optionee generally
recognizes no taxable income as the result of the garnt of such an
option.
Upon exercise of a nonstatutory stock option, the optionee normally
recognizes ordinary income in the amount of the difference
between the option exercise price and the fair market value of
the shares on the determination date (as defined below). If the
optionee is an employee, ordinary income generally is subject to
withholding of income and employment taxes. The "determination
date" is the date on which the option is exercised unless the
shares are not vested and/or the sale of the shares at a profit
would subject the optionee to suit under Section 16(b) of the
Exchange Act, in which case the determination date is the later of
(i) the date on which the shares vest, or (ii) the date the sale of
the shares at a profit would no longer subject the optionee to
suit under Section 16(b) of the Exchange Act. Section 16(b) of
the Exchange Act generally is applicable only to officers, directors
and beneficial owners of more than 10% of the Common Stock of the
Company. If the determination date by filing an election with
the Internal Revenue Service not later than 30 days after the date
the option is exercise. Upon the sale of stock acquired by the
exercise of a nonstatutory stock option, any gain or loss, based
on the difference between the sale price and the fair market value
on the date of recognition of income, will be taxed as capital gain
or loss. A capital gain or loss will be long-term if the
optionee's holding period is more than 12 month. No tax
deduction is available to the company with respect to the grant of
a nonstatutory option or the sale of the stock acquired pursuant
to such grant. The company should be entitled to a deduction equal
to the amount of ordinary income recognized by the optionee as a
result of the exercise of a nonstatutory option, except to the
extent such deduction is limited by Section 162(m) of the Code,
as described above.
The Board recommends approval of the creation of the 1996 Stock
Option Plan.
MANAGEMENT PROPOSAL III
The following resolution will be offered by Management pursuant to
the Board of Directors resolutions at the meeting:
"RESOLVED, that the amendment of the 1991 Employee Stock Option Plan
is hereby approved."
The Board has determined to use the 1991 Employee Stock Option
Plan for nonemployee directors and has therefore amended the plan
to specifically cover said directors with a disinterested
committee of only employee directors to administer the plan.
Other than a name change to the 1991 Outside Director Stock Option
Plan and as set out above, the plan will otherwise stay the same.
The Board recommends approval of the Plan revisions.
SHAREHOLDER APPROVAL
Shareholders, representing a majority of those common shares
outstanding, and eligible to vote must return proxies to
constitute a quorum, including abstentions. A majority of
those shares constituting the quorum eligible to vote is
required for approval of Management Proposal I, II, and III, and
the election of directors.
OTHER BUSINESS
The Board of Directors of the Company does not know of any other
business to be presented at the Annual Meeting. If any other
matters are properly brought before the meeting, however, it is
intended that the persons named in the accompanying form of
proxy will vote such proxy in accordance with their best judgment.
By order of the Board of Directors
Jeanette P. Fitzgerald
Corporate
Secretary
Dallas,
Texas
November 15, 1996