1
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 Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
- -------------------------------------------------------------------------------
THE CERPLEX GROUP, INC.
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
Board of Directors of Registrant
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
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(2) Aggregate number of securities to which transaction applies: N/A
- -------------------------------------------------------------------------------
(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:
N/A
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction: N/A
- -------------------------------------------------------------------------------
(5) Total fee paid: N/A
- -------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- -------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filling.
(1) Amount previously paid: N/A
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(2) Form, Schedule or Registration Statement No.: N/A
- -------------------------------------------------------------------------------
(3) Filing Party: N/A
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(4) Date Filed: N/A
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TO THE STOCKHOLDERS OF THE CERPLEX GROUP, INC.
You are cordially invited to attend the Annual Meeting of Stockholders of
The Cerplex Group, Inc. ("Cerplex" or the "Company") on Thursday, August 22,
1996 at 9:00 a.m., Pacific Daylight Savings time. The Annual Meeting will be
held at the Hyatt Regency Irvine, 17900 Jamboree Road, Irvine, California.
At the meeting, you will be asked to consider and vote upon the following
proposals: (i) the approval of a proposal to authorize the issuance of Common
Stock equal to 20% or more of the outstanding Common Stock upon conversion of
the Company's Series B Convertible Preferred Stock; (ii) the approval of certain
amendments to the Company's Restated 1993 Stock Option Plan, as amended (the
"1993 Plan"), which will increase the number of shares of the Company's Common
Stock available for issuance from 1,000,000 to 2,000,000 shares, and increase
the total number of shares of Common Stock for which any one individual may be
granted stock options or separately exercisable stock appreciation rights in any
calendar year from 300,000 to 500,000; (iii) the election of seven (7)
individuals to serve as the Company's Board of Directors; and (iv) the
ratification of [__________] as the Company's independent auditors for the
current fiscal year.
Whether or not you plan to attend the Annual Meeting, please mark, sign,
date and return the enclosed proxy card promptly in the accompanying post-paid
reply envelope. By returning the proxy, you can help Cerplex avoid the expense
of duplicate proxy solicitations and possibly having to reschedule the Annual
Meeting if a quorum of the outstanding shares is not present or represented by
proxy. If you decide to attend the Annual Meeting and wish to change your proxy
vote, you may do so simply by voting in person at the Annual Meeting.
August 5, 1996 WILLIAM A. KLEIN
Chairman of the Board
3
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF
THE CERPLEX GROUP, INC.
-------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of The
Cerplex Group, Inc., a Delaware corporation ("Cerplex" or the "Company"), will
be held on Thursday, August 22, 1996 at 9:00 a.m. Pacific Daylight Savings time
at the Hyatt Regency Irvine, 17900 Jamboree Road, Irvine, California, for the
following purposes:
1. The approval of a proposal to authorize the issuance of Common Stock
equal to 20% or more of the outstanding Common Stock upon conversion of the
Company's Series B Convertible Preferred Stock;
2. To approve certain amendments to Cerplex's Restated 1993 Stock Option
Plan as amended (the "1993 Plan") to (i) increase the number of shares of the
Company's Common Stock available for issuance from 1,000,000 to 2,000,000 shares
and (ii) increase the total number of shares of Common Stock for which any one
individual may be granted stock options or separately exercisable stock
appreciation rights in any calendar year from 300,000 to 500,000;
3. To elect a seven (7) member Board of Directors for Cerplex from the
following nominees: Richard C. Davis, Robert Finzi, Jerome Jacobson, Patrick S.
Jones, William A. Klein, Myron Kunin and James T. Schraith;
4. To ratify the selection of [__________] as Cerplex's independent auditors
for the current fiscal year ending December 29, 1996; and
5. To transact such other business as may properly come before the meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on July 23, 1996 as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any continuation or adjournment thereof.
By Order of the Board of Directors
FREDERIC A. RANDALL, JR.
Secretary
Tustin, California
August 5, 1996
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU EXPECT TO
ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY
OR PROXIES AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT
THE MEETING. A POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE. EVEN IF
YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE
MEETING.
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PROXY STATEMENT
----------
THE CERPLEX GROUP, INC.
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INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of The Cerplex Group, Inc. ("Cerplex" or the "Company") for use at the
Annual Meeting of Stockholders to be held on Thursday, August 22, 1996 at 9:00
a.m. Pacific Daylight Savings time, at which time stockholders of record on July
23, 1996 will be entitled to vote. On July 23, 1996, Cerplex had outstanding
13,402,467 shares of Common Stock and 8,000 shares of Series B Convertible
Preferred Stock ("Series B Stock"). Stockholders of record on such date are
entitled to one vote for each share of Common Stock held on such date and each
share of Common Stock into which the Series B Stock held on such date is
convertible, on all matters to be voted upon at the meeting.
Cerplex intends to mail this proxy statement and the accompanying proxy card
on or about August 5, 1996 to all stockholders entitled to vote at the Annual
Meeting. Cerplex's principal executive offices are located at 1382 Bell Avenue,
Tustin, California 92680. The telephone number at that address is (714)
258-5600.
VOTING
On each matter to be considered at the meeting, each holder of Common Stock
will be entitled to cast one vote for each share of the Company's Common Stock
held of record by such stockholder on July 23, 1996 and each holder of Series B
Stock shall be entitled to vote with the holders of Common Stock on an
as-converted basis as a single class. Pursuant to Delaware law, directors are
elected by a plurality vote. The other matters submitted for stockholder
approval at this Annual Meeting will be decided by the affirmative vote of a
majority of shares present in person or represented by proxy at the 1996 Annual
Meeting and entitled to vote on each matter. With regard to the election of
directors, votes may be cast in favor of or withheld from each nominee. Votes
that are withheld will be excluded entirely from the vote and will have no
effect. Abstentions may be specified on all proposals except the election of
directors and will be counted as present for purposes of determining the
existence of a quorum regarding the item on which the abstention is noted. If
shares are not voted by the broker who is the record holder of the shares, or if
shares are not voted in other circumstances in which proxy authority is
defective or has been withheld with respect to any matter, these non-voted
shares are not deemed to be present or represented for purposes of determining
whether stockholder approval of that matter has been obtained.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by the holder of
record by filing with the Secretary of Cerplex at Cerplex's principal executive
office, a written notice of revocation or a new duly executed proxy bearing a
date later than the date indicated on the previous proxy, or it may be revoked
by the holder of record attending the meeting and voting in person. Attendance
at the meeting will not, by itself, revoke a proxy.
SOLICITATION
Cerplex will bear the entire cost of proxy solicitation, including costs of
preparing, assembling, printing and mailing this proxy statement, the proxy card
and any additional material furnished to stockholders. Copies of the
solicitation materials will be furnished to brokerage houses, fiduciaries and
custodians holding in their names
2.
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shares of Common Stock beneficially owned by others, to forward to such
beneficial owners. Cerplex may reimburse persons representing beneficial owners
of shares for their expenses in forwarding solicitation materials to such
beneficial owners. Original solicitation of proxies by mail may be supplemented
by telephone, telegram or personal solicitation by directors, officers or other
regular employees of Cerplex. No additional compensation will be paid to
directors, officers or other regular employees for such services.
GENERAL
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to Cerplex
regarding the ownership as of July 23, 1996 of Cerplex's Common Stock and Series
B Stock on an as-converted basis (assuming a Conversion Price - as such term is
defined under the caption "Proposal No. 1" - of $5.07) by (i) each Named
Executive Officer of Cerplex (as such term is defined under the caption
"Compensation of Directors and Executive Officers -- Summary of Cash and Certain
Other Compensation"), (ii) each director and nominee for director of Cerplex,
(iii) all current directors and executive officers of Cerplex as a group, and
(iv) each stockholder known to Cerplex to be a beneficial owner of more than
five percent (5%) of Cerplex's Common Stock.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP (#) CLASS
------------------------ ----------------- ----------
William A. Klein......................................... 4,990,383 (1) 37.2%
Myron Kunin.............................................. 972,642 (2) 7.2
Theodore J. Wisniewski................................... 753,603 5.6
Richard C. Davis......................................... 703,204 5.2
James T. Schraith........................................ 440,744 (3) 3.2
Alan L. Weaver........................................... 144,536 1.1
Bruce D. Nye............................................. 52,381 (4) *
Jerome Jacobson.......................................... 47,605 (5) *
Robert Finzi............................................. 33,500 (6) *
Patrick S. Jones......................................... 20,000 (7) *
All current directors and executive officers as a group 7,208,078 (8) 51.8
(10 persons)
DLJ Capital Corporation.................................. 1,510,255 (9) 10.8
140 Broadway
New York, NY 10005
Sprout Growth II, L.P.................................... 1,294,599(10) 9.3
140 Broadway
New York, NY 10005
The Northwestern Mutual Life Insurance Company........... 1,358,261(11) 9.2
720 East Wisconsin Avenue
Milwaukee, WI 53202
John Hancock Mutual Life Insurance Company............... 893,261(12) 6.2
John Hancock Place
200 Clarendon Street
Boston, MA 02117
- --------------------
* Less than 1%
3.
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(#) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission") and generally
includes voting or investment power with respect to securities. Shares of
Common Stock subject to options and warrants which are currently
exercisable or convertible or which will become exercisable or convertible
within sixty (60) days after July 23, 1996 are deemed outstanding for
computing the beneficial ownership of the person holding such option but
are not outstanding for computing the beneficial ownership of any other
person or entity. In addition, as the shares of Series B Stock are
convertible into shares of Common Stock within sixty (60) days after July
23, 1996, such shares are deemed outstanding for computing the beneficial
ownership of the entities holding shares of Series B Stock, but are not
outstanding for computing the beneficial ownership of any other person or
entity. Except as indicated by footnote, and subject to community property
laws where applicable, the persons named in the table above have sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them.
(1) Includes 50,000 shares of Common Stock held by the Klein 1994 Charitable
Remainder UniTrust (the "Trust") and 180,000 shares of Common Stock held
by The Klein Foundation. Mr. Klein disclaims beneficial ownership of these
shares except to the extent of his indirect interest in shares held by the
Trust.
(2) Includes 20,000 shares of Common Stock issuable upon the exercise of
immediately exercisable options.
(3) These 440,744 shares of Common Stock are issuable upon the exercise of
immediately exercisable options.
(4) Includes 9,921 shares of Common Stock issuable upon the exercise of
immediately exercisable options.
(5) Includes 10,000 shares of Common Stock issuable upon the exercise of
immediately exercisable options.
(6) Includes 30,000 shares issuable upon the exercise of immediately
exercisable options held by Mr. Finzi for the beneficial ownership of DLJ
Capital Corporation. Mr. Finzi disclaims beneficial ownership of these
shares. Mr. Finzi serves as a Vice President of the Sprout Group, a
division of DLJ Capital Corporation, and is a general partner of one of
the general partners of Sprout Growth II, L.P. As such, Mr. Finzi may be
deemed the beneficial owner of the shares of Common Stock held by Sprout
Growth II, L.P. Mr. Finzi disclaims such beneficial ownership except to
the extent of his indirect partnership interest in Sprout Growth II, L.P.
(7) These 20,000 shares of Common Stock are issuable upon the exercise of
immediately exercisable options.
(8) This number reflects the stock ownership of those individuals who are
executive officers and directors of the Company as of July 23, 1996 (such
individuals are named in "Executive Officers" and "Information With
Respect to Nominees" herein) and incorporates the shares and options
referenced in footnotes (1) through (7) above.
(9) Includes 1,294,599 shares beneficially owned by Sprout Growth II, L.P.
(see footnote 10 below). DLJ Capital Corporation, as the managing general
partner of Sprout Growth II, L.P., may be deemed to share voting and
dispositive power with respect to these shares. DLJ Capital Corporation
disclaims beneficial ownership of these shares except to the extent of its
direct and indirect partnership interests in Sprout Growth II, L.P. Also
includes 231 shares of Series B Stock on an as-converted basis assuming a
Conversion Price of $5.07, which equals 45,562 shares of Common Stock.
Also includes 53,826 shares issuable upon exercise of an immediately
exercisable warrant beneficially owned by DLJ Capital Corporation and
30,000 shares issuable upon the exercise of options held by Mr. Finzi for
the beneficial interest of DLJ Capital Corporation. See footnote (6)
above.
(10) Includes 2,269 shares of Series B Stock on an as-converted basis assuming
a Conversion Price of $5.07, which equals 447,534 shares of Common Stock.
(11) Includes 918,261 shares of Common Stock issuable upon the exercise of an
immediately exercisable warrant and 440,000 shares of Common Stock
issuable upon the exercise of an additional immediately exercisable
warrant.
4.
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(12) Includes 173,913, 304,348, 150,909, and 264,091 shares of Common Stock
issuable upon the exercise of immediately exercisable warrants.
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the executive
officers of the Company as of July 23, 1996:
NAME AGE POSITION
- ---- --- --------
William A. Klein 55 Chairman of the Board
James T. Schraith 38 President and Chief Executive Officer
Richard C. Davis 46 President of International Operations
James R. Eckstaedt 42 Senior Vice President and Chief Financial Officer
Philip E. Pietrowski 51 Senior Vice President, North American Operations
Robert N. McFarland 51 Senior Vice President, North American Sales
William A. Klein has been the Chairman of the Board of Directors of
Cerplex since its inception in May 1990. Mr. Klein also served as the Company's
Chief Executive Officer from August 1993 until October 1995. Mr. Klein was
Chairman of InCirT Technology Incorporated from 1990 until September 1993 at
which time such entities were consolidated with the Company. Mr. Klein was
previously President and Chief Executive Officer of Century Data, Inc. from 1986
until 1990. Mr. Klein was the founder and Chief Executive Officer of Cybernex
from October 1981 until its merger with Read-Rite in 1986. Prior to October
1981, Mr. Klein held various positions over a 19-year period with IBM in
engineering, manufacturing and management.
James T. Schraith has served as President and Chief Executive Officer
and a member of the Board of Directors of Cerplex since October 1995. Before
joining Cerplex, Mr. Schraith was employed from 1987 to September 1995 by AST
Research, Inc., where he served as a director and the President and Chief
Operating Officer of the company. From 1978 to 1987 Mr. Schraith held various
positions with Schlumberger Ltd. He currently serves on the Board of Directors
of Semtech Corporation.
Richard C. Davis has served as a member of the Board of Directors of
Cerplex since May 1990 and as the President of International Operations of
Cerplex since October 1995. Prior to October 1995, Mr. Davis served as the
President of Cerplex and in various executive positions since May 1990. Mr.
Davis was the Chief Financial Officer of each of EMServe, Inc., Diversified
Manufacturing Services, Inc. and InCirT Technology Incorporated from July 1991,
June 1991 and February 1990, respectively, until September 1993 at which time
such entities were consolidated with the Company. Mr. Davis was Vice President
and Chief Financial Officer of Century Data, Inc. from 1986 until 1990. Prior to
1986, Mr. Davis held various financial, accounting and managerial positions
within Xerox Corporation.
James R. Eckstaedt joined the Company as Senior Vice President and
Chief Financial Officer in July 1996. From 1987 to 1996, Mr. Eckstaedt held
various finance-related positions with Western Digital Corporation, including
Vice President and Treasurer in 1996; Vice President, Finance from 1994 to
1996; Vice President and Treasurer from 1993 to 1994; and Assistant Treasurer
from 1991 to 1993.
Philip E. Pietrowski has served as Senior Vice President, North
American Operations of Cerplex since January 1996. He joined the Company in
October 1995 as Vice President of Logistics. Prior to that time, Mr. Pietrowski
spent twenty-four years at Digital Equipment Corporation in Massachusetts,
holding various senior level positions. The last position he held with Digital
Equipment was Corporate Multivendor Services Business Manager, where Mr.
Pietrowski was responsible for worldwide service logistics, repair of
information systems and administration.
5.
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Robert N. McFarland has served as the Senior Vice President, North
American Sales for Cerplex since joining the Company in January 1996. From 1992
to 1996, he held a number of positions with AST Research, Inc., most recently as
Vice President and General Manager of Asian and Middle East Operations. Mr.
McFarland spent nine years in vice president and director level sales management
positions with The Mastercare Corporation, Computer Language Research, Inc. and
LEGENT Corporation and eleven years with Auto-Trol Technology Corporation,
finishing as Vice President of International Operations.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION COMMITTEE REPORT
It is the responsibility of the Compensation Committee (the "Committee"
or "Compensation Committee") of the Cerplex Board of Directors to make
recommendations to the Board with respect to the base salary and bonuses to be
paid to the Company's executive officers each fiscal year. The Committee also
administers the Company's Restated 1993 Stock Option Plan, as amended (the "1993
Plan"). The following is a summary of the policies of the Committee which
affected the compensation paid to executive officers for the last fiscal year,
as reflected in the tables and text set forth elsewhere in this Proxy Statement.
GENERAL COMPENSATION POLICY. Under the supervision of the Committee,
Cerplex has developed a compensation policy which is designed to attract and
retain qualified key executives critical to the Company's success and to provide
such executives with performance-based incentives tied to the financial
performance of Cerplex. One of the Committee's primary objectives is to have a
substantial portion of each officer's compensation contingent upon the Company's
performance as well as upon the individual's contribution to the success of
Cerplex as measured by his personal performance. Accordingly, each executive
officer's compensation package is fundamentally comprised of three elements: (i)
base salary which reflects individual experience, expertise and responsibility
and is designed to be competitive with salary levels in the industry; (ii)
annual incentive compensation which reflects individual and Company performance
for the year; and (iii) long-term stock-based incentive awards which strengthen
the mutuality of interests between the executive officers and the Cerplex
stockholders.
FACTORS. Several of the more important factors which were considered in
establishing the components of each executive officer's compensation package for
the 1995 fiscal year are summarized below. Additional factors were also taken
into account, and the Committee may in its discretion apply entirely different
factors, particularly different measures of financial performance, in setting
executive compensation for future fiscal years.
- BASE SALARY. The base salary for each officer is set on the basis of
experience, expertise, responsibility, the salary levels in effect for
comparable positions in the industry and internal comparability considerations.
As a general matter, year-to-year adjustments to each executive officer's base
salary are based upon personal performance for the year and changes in the
general level of base salaries of persons in positions comparable to that of the
executive officer within the industry.
- ANNUAL INCENTIVE COMPENSATION. The Board of Directors has
discretionary authority to award cash bonuses to executive officers and
employees in accordance with recommendations made by the Committee based upon
the extent to which certain financial and performance targets established
annually by the Committee are met and the contribution of each such officer and
employee to the attainment of such targets. For fiscal year 1995, the
performance targets for each of the Named Executive Officers included net sales
and pre-tax profit. The weight given to each factor varied from individual to
individual. No bonuses were awarded in fiscal year 1995 to the Named Executive
Officers due to the Company's failure to meet the performance targets
established by the Committee.
- LONG-TERM INCENTIVE COMPENSATION. Cerplex has also adopted the 1993
Plan and, subject to stockholder approval, certain amendments thereto. Each
grant under the 1993 Plan is designed to align the interests of the executive
officers with those of the stockholders and provide each individual with a
significant incentive to manage Cerplex from the perspective of an owner with an
equity stake in the business and to remain in the service of the Company. The
Company has established certain general guidelines in making option grants to
the executive officers in an attempt to target a fixed number of vested option
shares based upon the individual's position with the Company and his or her
existing holdings of vested options. The number of shares subject to each option
grant is based upon the officer's tenure, level of responsibility and relative
position in
6.
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Cerplex. However, the Company does not adhere strictly to these guidelines and
will vary the size of the option grant made to each executive officer as it
feels the circumstances warrant. Each grant allows the officer to acquire shares
of Cerplex Common Stock at a fixed price per share (the market price on the
grant date) over a specified period of time (up to 10 years). The option vests
over time subject to the executive officer's continued employment with the
Company. Accordingly, the option will provide a return to the executive officer
only if he or she remains in the Company's employ and the market price of the
Company's Common Stock appreciates over the option term.
- CEO COMPENSATION. The base salary established for the 1995 fiscal
year for Mr. William A. Klein, the Company's Chief Executive Officer until
October 1995 and for Mr. James T. Schraith, the Company's Chief Executive
Officer as of October 1995, reflected the Committee's policy to maintain a level
of stability and certainty with respect to the Chief Executive Officer's base
salary from year to year, and there was no intent to have this particular
component of compensation affected to any significant degree by the Company's
performance factors. In setting the Chief Executive Officer's base salary, the
Committee sought to provide a level of base salary competitive to that paid to
other chief executive officers in the industry and to maintain internal
comparability. No bonuses were paid to either Chief Executive Officer during
1995. Mr. Schraith was granted an option to purchase 500,000 shares in
connection with his commencement of employment with the Company in order to
strengthen the mutuality of interests between the Chief Executive Officer and
the Cerplex stockholders and encourage Mr. Schraith to remain in the employ of
the Company.
TAX LIMITATION. As a result of federal tax legislation enacted in 1993,
a publicly-held company such as Cerplex will not be allowed a federal income tax
deduction for compensation paid to certain executive officers, to the extent
that compensation exceeds $1 million per officer in any year. This limitation
was in effect for the 1995 fiscal year, but the compensation paid to the
Company's executive officers for the 1995 fiscal year did not exceed the $1
million limit per officer. This limitation will apply to all compensation paid
to the covered executive officers which is not considered to be performance
based. Compensation which does qualify as performance-based compensation will
not have to be taken into account for purposes of this limitation. At the Annual
Meeting, the stockholders are being asked to approve certain amendments to the
1993 Plan which are intended to assure that any compensation deemed paid in
connection with the exercise of stock options granted under that plan with an
exercise price equal to the market price of the option shares on the grant date
will qualify as performance-based compensation. Because it is very unlikely that
the cash compensation payable to any of the Company's executive officers in the
foreseeable future will approach the $1 million limit, the Committee has decided
at this time not to take any other action to limit or restructure the elements
of cash compensation payable to the Company's executive officers. The Committee
will reconsider this decision should the individual compensation of any
executive officer ever approach the $1 million level.
Dated: August 5, 1996 Compensation Committee
Robert Finzi
Myron Kunin
7.
10
STOCK PERFORMANCE GRAPH
The graph depicted below shows Cerplex's stock price as an index for
the period commencing April, 1994 to December 29, 1995 assuming $100 invested on
April 8, 1994 (the date of Cerplex's initial public offering) and reinvestment
of dividends, along with the composite prices of companies listed on the
University of Chicago's Center for Research on Security Prices ("CRSP") Total
Return Index for National Association of Securities Dealers Automated Quotation
("Nasdaq") Stock Market.
Cerplex CRSP NASDAQ
------------------ ------------------- -------------------
Apr-94 9.09 $11.00 $100 0.42 $236.47 $100 0.24 $411.93 $100
Dec-94 9.09 10.75 $ 98 0.42 $244.46 $103 0.24 $493.73 $120
Dec-95 9.09 7.75 $ 70 0.42 $345.69 $146 0.24 $751.97 $183
Chart Data
- ----------
Apr-94 Dec-94 Dec-95
------ ------ ------
Cerplex $100 $ 98 $ 70
CRSP $100 $103 $146
NASDAQ $100 $120 $183
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended or the
Securities Exchange Act of 1934, as amended, which might incorporate future
filings, including this Proxy Statement, the preceding Compensation Committee
Report on Executive Compensation and the Company's Stock Performance Graph will
not be incorporated by reference into any of those prior filings, nor will such
report or graph be incorporated by reference into any future filings made by the
Company under those statutes.
8.
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SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the compensation awarded to, earned by
or paid for services rendered to the Company in all capacities during the 1993,
1994 and 1995 fiscal years by (i) the Company's Chief Executive Officers during
fiscal 1995 and (ii) the Company's four other most highly compensated executive
officers who were serving as executive officers at the end of that year
(together, the "Named Executive Officers"). No executive officer who would have
otherwise been includable in such table on the basis of salary and bonus earned
for the 1995 fiscal year resigned or terminated employment during the fiscal
year.
SUMMARY COMPENSATION TABLE
Annual Compensation
Long-Term
Compensation
Securities
Underlying All Other
Name and Principal Position Year Salary($) Options (#) Compensation($)(1)
--------------------------- ---- --------- ------------ ------------------
William A. Klein(2) 1995 $415,422 -- $791
Chairman of the Board 1994 392,343 -- 660
1993 398,115 -- 900
James T. Schraith(3) 1995 84,612 500,000 195
President and Chief 1994 -- -- --
Executive Officer 1993 -- -- --
Richard C. Davis 1995 202,356 -- 791
President of International 1994 196,197 -- 660
Operations 1993 199,083 -- 900
Bruce D. Nye(4) 1995 150,020 -- 791
Vice President and 1994 131,552 -- 660
Chief Financial Officer 1993 44,769 52,381 57
Theodore J. Wisniewski(5) 1995 152,332 -- 791
Sr. Vice President 1994 156,735 -- 660
Corporate Quality & Engineering 1993 149,539 -- 900
Alan L. Weaver(6) 1995 152,332 -- 791
President of the 1994 156,735 -- 660
InCirT Technology Division 1993 149,059 -- 315
- ----------------------------------
(1) Reflects payments of term life insurance premiums for each Named
Executive Officer.
(2) Mr. Klein served as the Company's Chief Executive Officer until October
1995.
(3) Mr. Schraith joined the Company as its Chief Executive Officer in
October 1995. Had Mr. Schraith been employed by the Company for all of
1995, his base salary would have been $400,000 and the amount of life
insurance premiums paid by the Company would have been $791.
(4) Mr. Nye joined the Company in August 1993. Had Mr. Nye been employed by
the Company for all of 1993, his salary would have been $120,000 and
the amount of life insurance premiums paid by the Company would have
been $153. Mr. Nye served as an executive officer of the Company until
July 1996.
(5) Mr. Wisniewski served as an executive officer of the Company until
January 1996.
9.
12
(6) Mr. Weaver served as an executive officer of the Company until January
1996.
STOCK OPTIONS
The following table sets forth, for the year ended December 31, 1995,
information concerning the grant of options to purchase shares of Common Stock
under the Company's 1993 Plan to the Named Executive Officers. No stock
appreciation rights have been granted to any of the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
Percent of
Number of Total Options Potential Realizable Value
Securities Granted to at Assumed Annualized
Underlying Employees in Exercise of Rates of Stock Price
Options Fiscal Year Base Price Expiration Appreciation For Option
Name Granted (%) ($/Sh) Date Term(4)
---- ---------- ------------- ------------ ---------- -------------------------
5% 10%
-- ---
James T. Schraith 500,000(1) 75.2(2) 6.75(3) 10/02/05 $2,122,519 $5,378,881
(1) The option was granted on October 3, 1995 and has a maximum term of ten
years, subject to earlier termination in the event of the optionee's
cessation of service with the Company. 440,744 of such option shares
are immediately exercisable, but subject to repurchase by the Company
which repurchase right lapses with respect to twenty-five percent (25%)
of the option shares on October 3, 1996 and the balance of the option
shares in thirty-six (36) equal successive monthly installments
thereafter. Of the 59,256 remaining option shares, twenty-five percent
(25%) become exercisable on October 3, 1996 and the balance become
exercisable thereafter in a series of thirty-six (36) equal successive
monthly installments.
(2) Based on option grants for an aggregate of 715,000 shares granted to
employees in 1995, including the options granted to the Named Executive
Officers.
(3) The exercise price per share of the options granted represents the fair
market value of the underlying shares of Common Stock on the date the
options were granted, as determined by the Company's Compensation
Committee. The exercise price may be paid in cash, in shares of the
Company's 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 or employment tax
liability incurred by the optionee in connection with such exercise.
The optionee may be permitted, subject to the approval of the
Compensation Committee, to apply a portion of the shares purchased
under the option (or to deliver existing shares of Common Stock) in
satisfaction of such tax liability.
(4) Potential realizable value is based on the assumption that the price
per share of Common Stock appreciates at the assumed annual rate of
stock appreciation for the option term. There is no assurance that the
assumed 5% and 10% annual rates of appreciation (compounded annually)
will actually be realized over the term of the option. The assumed 5%
and 10% annual rates are set forth in accordance with the rules and
regulations adopted by the Securities and Exchange Commission and do
not represent the Company's estimate of stock price appreciation.
10.
13
OPTION EXERCISES AND HOLDINGS
The table below sets forth information concerning unexercised options
held as of the end of fiscal 1995 by the Named Executive Officers. No stock
options or stock appreciation rights were exercised during such year and no
stock appreciation rights were outstanding at the end of such fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised In-the-
Underlying Unexercised Money Options at FY-End
Name Options at FY-End (#) ($)(1)
---- --------------------------------- ---------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
William A. Klein -- -- -- --
James T. Schraith 440,744(2) 59,256(3) $440,744 $59,256
Richard C. Davis -- -- -- --
Bruce D. Nye 34,921(4) -- 245,495 --
Theodore J. Wisniewski -- -- -- --
Alan L. Weaver -- -- -- --
- ------------------------------
(1) Based upon the market price of $7.75 per share, which was the closing
selling price per share of Common Stock on the Nasdaq National Market
on December 29, 1995, the last business day of the 1995 fiscal year,
less the option exercise price payable per share.
(2) Such option shares are immediately exercisable, but subject to
repurchase by the Company which repurchase right lapses with respect to
twenty-five percent (25%) of the option shares on October 3, 1996 and
the balance of the option shares in thirty-six (36) equal successive
monthly installments thereafter.
(3) Such option shares are exercisable for twenty-five percent (25%) on
October 3, 1996 and for the balance in a series of thirty-six (36)
equal successive monthly installments thereafter.
(4) Such options are immediately exercisable and fully vested.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL AGREEMENTS
None of the Company's executive officers have employment agreements
with Cerplex, and their employment may be terminated at any time at the
discretion of the Board of Directors. The Compensation Committee has the
discretionary authority as administrator of the Company's 1993 Plan to provide
for the accelerated vesting of the shares of Common Stock subject to outstanding
options upon the happening of certain events, including, without limitation, a
change in control of the Company whether by successful tender offer for more
than 50% of the outstanding voting stock or by proxy contest for the election of
Board members.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Robert Finzi, Carmelo Santoro and Gregorio Reyes were members
of the Compensation Committee until May 1995, when Mr. Reyes declined to stand
for reelection to the Company's Board of Directors. From May 1995 to September
1995, the Compensation Committee consisted of Messrs. Finzi and Santoro. Mr.
Kunin was appointed to the Compensation Committee in September 1995 and Mr.
Santoro resigned from the Company's Board of Directors and its Compensation
Committee in October 1995. None of these individuals was at any time an officer
or employee of the Company. A loan was made to Mr. Santoro which is further
described herein under the heading "Certain Relationships and Related
Transactions."
During the 1995 fiscal year, William A. Klein, the Chief Executive
Officer of the Company for a portion of 1995 and the Chairman of the Board,
served as a director of Sunward Technologies, Inc. and Sunward Technologies,
Inc.'s Chief Executive Officer, Gregorio Reyes, served on the Company's
Compensation Committee.
11.
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PROPOSAL NO. 1
APPROVAL OF ISSUANCE OF COMMON STOCK UPON CONVERSION
OF SERIES B CONVERTIBLE PREFERRED STOCK
On June 11, 1996 the Company consummated a private placement (the
"Private Placement") of Series B Convertible Preferred Stock (the "Series B
Stock") to accredited investors. Eight thousand shares of Series B Stock were
offered and sold at the price of $1,000 per share for gross proceeds to the
Company of $8,000,000.
THE SERIES B STOCK
Holders of the Series B Stock are entitled to receive dividends as may
be declared from time to time by the Board. The Board may not pay dividends to
the holders of the Company's Common Stock unless and until the Board has paid an
equivalent dividend, based upon the number of shares of Common Stock into which
each share of series B Stock is convertible as of the record date for the
payment of the dividend, to the holders of Series B Stock. In addition, the
Company has agreed to file a registration statement on Form S-3 with the
Securities and Exchange Commission covering the resale of the Common Stock
issuable upon conversion of the Series B Stock, and shall cause such
registration to become effective by the 150th day following the closing of the
Private Placement. In the event the Company should fail to register under the
Securities Act of 1993, as amended, by such deadline the shares of Common Stock
into which the Series B Stock are convertible, the holders of Series B Stock
shall be entitled to receive a dividend at the rate of $0.83 1/3 per share per
day for each day after such deadline until the shares are so registered, up to
$500 per share.
In the event of any liquidation, dissolution or winding up of the
Company, the holders of Series B Stock are entitled to receive, prior and in
preference to any distribution of any assets of the Company to the holders of
Common Stock, the amount of $2,000 per share plus all accrued or declared but
unpaid dividends (the "Liquidation Preference").
At any time more than ninety (90) days after June 11, 1996, each share
of Series B Stock may be convertible, at the option of the holder thereof, into
the number of shares of Common Stock equal to $1,000 (the "Original Issue
Price") divided by the lower of (i) 80% of the average closing bid price of the
Common Stock for the 10 trading days ending three days prior to the date of the
notice of conversion or (ii) $5.07 (the "Conversion Price"). Each share of
Series B Stock shall automatically be converted into the number of shares of
Common Stock determined as provided above, either (i) five years following June
11, 1996, or (ii) five days after written notice to the holders of Series B
Stock by the Company that the price of the Common Stock for 30 consecutive
trading days has exceeded $19.13 per share, whichever occurs first. The
conversion provisions are also subject to adjustment in certain circumstances.
The Series B Stock is not redeemable, with one exception which is
described below. Except as otherwise provided by law, each holder of shares of
Series B Stock shall be entitled to vote with the holders of Common Stock on an
as-converted basis as a single class on all matters presented for stockholder
vote.
STOCKHOLDER APPROVAL REQUIRED FOR ISSUANCE OF COMMON STOCK UPON CONVERSION OF
SERIES B STOCK
Under applicable Delaware law and the Company's Certificate of
Incorporation, as amended, the Company's Board has the authority, without
further action by the stockholders, (i) to issue Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions granted
to or imposed upon any series of unissued Preferred Stock and (ii) to fix the
number of shares constituting any series and the designation of such series.
However, the rules of the Nasdaq National Market on which the Company's Common
Stock is traded require that the Company obtain stockholder approval prior to
the issuance of Common Stock (or securities convertible into or exercisable for
Common Stock) equal to 20% or more of the Common Stock (or voting power)
outstanding before the issuance for less than the greater of book or market
value of the stock.
The actual number of shares of Common Stock which the Company will
ultimately issue upon conversion of the Series B Stock presently cannot be
determined as the conversion price is based on the then current market price.
Assuming a Conversion Price of $5.07, the Company would be obligated to issue
197 shares of Common Stock for each share of Series B Stock, for a total of
1,576,000 shares of Common Stock or approximately 11.8% of the Common Stock
outstanding immediately prior to the issuance of the Series B Stock. The
application of
12.
15
the conversion formula set forth above will cause the number of shares of Common
Stock to be issued to vary inversely with the market price of the Common Stock.
Accordingly, the number of shares of Common Stock to be issued upon
conversion of the Series B Stock potentially could equal or exceed 20% of the
number of shares of the Company's Common Stock outstanding prior to such Private
Placement. Therefore, in order to assure continued compliance with the
above-referenced Nasdaq rules, the Company is requesting that the holders of
Common Stock authorize the Company to issue and deliver such number of shares of
Common Stock as would be necessary upon the conversion of the Series B Stock
presently outstanding, which number of shares of Common Stock could equal 20% or
more of the number of shares of Common Stock outstanding prior to the Private
Placement. No further authorization or vote of the holders of Common Stock will
be sought or required with respect to the issuance of Common Stock upon
conversion of the Series B Stock. The issuance of the Common Stock may be
dilutive of the interests of holders of the currently outstanding Common Stock.
Holders of the Company's Common Stock have no preemptive rights with respect to
the issuance and sale of any securities of the Company.
The Company is not obligated to issue, in the aggregate, more than
2,679,484 shares of Common Stock (less than 20% of the amount outstanding as of
the close of the private placement) upon conversion of the Series B Stock if
issuance of a larger amount would violate the above-referenced Nasdaq rules. In
the event that stockholder approval of this proposal is not obtained and
conversion of all such Series B Stock would otherwise violate such Nasdaq rules,
then those shares of Series B Stock which, upon conversion to Common Stock,
would bring the Company's aggregate issuance to or above that 20% threshold
shall not convert and the holders shall, instead, receive an amount of cash
equal to the Liquidation Preference ($2,000 per share) for such shares, subject
to certain qualifications. So, for example, assuming a Conversion Price of
$3.00, the 8,000 shares of Series B Stock outstanding would convert into
3,333,333 shares of Common Stock, which represents 25% of the total number of
shares outstanding as of the closing of the Private Placement. Accordingly, the
Company would be required to pay the holders of Series B Stock approximately
$3,135,966 in cash if all such shares were presented for conversion. In
addition, the conversion formula dictates that the number of shares of Common
Stock issuable upon conversion of the Series B Stock will increase if the market
price of the Common Stock decreases and, so, the amount of cash the Company
would be required to pay to the holders of the Series B Stock also increases.
There can be no assurance that the Company would have the amount of cash
required to satisfy such obligation if it were required to pay such amount, or
that such payment would not adversely affect the Company by reducing the amount
of cash otherwise available for its operations and general corporate purposes.
The minimum vote which will constitute stockholder approval of this
Proposal No. 1 is a majority of the total votes cast on the proposal in person
or by proxy. The holders of a majority of the shares of Common Stock and
Series B Stock (voting together with the holders of Common Stock on an
as-converted basis) have previously voted to approve this proposal.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSAL.
13.
16
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO THE RESTATED 1993 STOCK OPTION PLAN
PLAN BACKGROUND
The Company's stockholders are being asked to approve an amendment to
the Restated 1993 Stock Option Plan (the "1993 Plan") to (i) increase the number
of shares of Common Stock authorized for issuance under the 1993 Plan from
1,000,000 shares to 2,000,000 shares, and (ii) increase the total number of
shares of Common Stock for which any one individual may be granted stock options
or separately exercisable stock appreciation rights in any one calendar year
from 300,000 to 500,000. The 1993 Plan was originally adopted by the Board and
approved by the stockholders in 1993. A restatement of the 1993 Plan was
approved by the Board and stockholders on February 2, 1994 and February 4, 1994,
respectively.
The following is a summary of the principal features of the 1993 Plan
as most recently amended. The summary, however, does not purport to be a
complete description of all the provisions of the 1993 Plan. Any stockholder of
the Company who wishes to obtain a copy of the actual plan documents may do so
upon written request to the Corporate Secretary at the Company's principal
executive offices in Tustin, California.
STRUCTURE OF EQUITY PROGRAM
The 1993 Plan contains two separate equity incentive programs: (i) a
Discretionary Option Grant Program and (ii) an Automatic Option Grant Program.
The Discretionary Option Grant Program is administered by the Compensation
Committee of the Board. This Committee has complete discretion (subject to the
provisions of the 1993 Plan) to authorize discretionary option grants under the
1993 Plan. However, all grants under the Automatic Option Grant Program are made
in strict compliance with the provisions of that program, and no administrative
discretion will be exercised by the Committee with respect to the grants made
thereunder.
ELIGIBILITY
Officers and other employees of the Company and its parent or
subsidiaries (whether now existing or subsequently established), non-employee
members of the Board (other than those serving as members of the Compensation
Committee) and consultants and independent contractors of the Company and its
parent and subsidiaries will be eligible to participate in the Discretionary
Option Grant Program. Non-employee members of the Board (including members of
the Compensation Committee) will also be eligible to participate in the
Automatic Option Grant Program.
As of July 23, 1996, six executive officers, approximately 1,500 other
employees and three employee Board members were eligible to participate in the
Discretionary Option Grant, and four non-employee Board members were eligible
to participate in the Automatic Option Grant Program.
SHARE RESERVE
A total of 2,000,000 shares of Common Stock (including the 1,000,000
share increase subject to stockholder approval under this Proposal No. 2) have
been reserved for issuance over the ten year term of the 1993 Plan. In no event
may any one participant in the 1993 Plan be granted options or separately
exercisable stock appreciation rights for more than 500,000 shares (including
the 200,000 share increase subject to stockholder approval under this Proposal
No. 2) in the aggregate over the term of the 1993 Plan.
In the event any change is made to the outstanding shares of Common
Stock by reason of any recapitalization, stock dividend, stock split,
combination of shares, exchange of shares or other change in corporate structure
effected without the Company's receipt of consideration, appropriate adjustments
will be made to the securities issuable (in the aggregate and to each
participant) under the 1993 Plan and to each outstanding option.
As of July 23, 1996, 1,248,949 shares were subject to outstanding
options and 668,667 shares were available for grant under the 1993 Plan,
including the proposed 1,000,000 share increase in authorized shares.
14.
17
VALUATION
The fair market value per share of Common Stock on any relevant date
under the 1993 Plan will be the closing selling price per share on that date on
the Nasdaq National Market. On July 23, 1996, the closing selling price per
share was $6.38.
DISCRETIONARY OPTION GRANT PROGRAM. Options may be granted under the
Discretionary Option Grant Program at an exercise price per share not less than
eighty-five percent (85%) of the fair market value per share of Common Stock on
the option grant date. No granted option will have a term in excess of ten
years.
Upon cessation of service, the optionee will have a limited period of
time in which to exercise any outstanding option to the extent such option is
exercisable for vested shares. The Committee will have complete discretion to
extend the period following the optionee's cessation of service during which his
or her outstanding options may be exercised and/or to accelerate the
exercisability or vesting of such options in whole or in part. Such discretion
may be exercised at any time while the options remain outstanding, whether
before or after the optionee's actual cessation of service.
The Committee is authorized to issue two types of stock appreciation
rights in connection with option grants made under the Discretionary Option
Grant Program:
- - TANDEM STOCK APPRECIATION RIGHTS provide the holders with the right to
surrender their options for an appreciation distribution from the Company in an
amount equal to the excess of (a) the fair market value of the vested shares of
Common Stock subject to the surrendered option over (b) the aggregate exercise
price payable for such shares. Such appreciation distribution may, at the
discretion of the Compensation Committee, be made in cash or in shares of Common
Stock.
- - LIMITED STOCK APPRECIATION RIGHTS may be granted to officers of the Company as
part of their option grants. Any option with such a limited stock appreciation
right in effect for at least six (6) months will automatically be cancelled upon
the successful completion of a hostile take-over of the Company. In return for
the cancelled option, the officer will be entitled to a cash distribution from
the Company in an amount per cancelled option share equal to the excess of (a)
the take-over price per share over (b) the exercise price payable for such
share.
The Committee will have the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program which have
exercise prices in excess of the then current market price of Common Stock and
to issue replacement options with an exercise price based on the market price of
Common Stock at the time of the new grant.
AUTOMATIC OPTION GRANT PROGRAM. Under the Automatic Option Grant
Program, each individual who first becomes a non-employee Board member at or
after the 1995 Annual Stockholders Meeting will automatically be granted at that
time an option grant for 20,000 shares of Common Stock, provided such individual
has not previously been in the Company's employ. In addition, on the date of
each Annual Stockholders Meeting, beginning with the 1995 Annual Meeting, each
individual who is reelected as a non-employee Board member at such meeting will
automatically be granted an option to purchase 10,000 shares of Common Stock,
provided such individual has served as a non-employee Board member for at least
six months. There will be no limit on the number of such 10,000 share options
which any one non-employee Board member may receive over the period of Board
service, and non-employee Board members who have previously served in the
Company's employ will be eligible for one or more 10,000 share option grants.
Each option will have an exercise price per share equal to 100% of the
fair market value per share of Common Stock on the option grant date and a
maximum term of ten years measured from the option grant date.
Each option will be immediately exercisable for all the option shares,
but any purchased shares will be subject to repurchase by the Company, at the
exercise price paid per share, upon the optionee's cessation of Board service.
Each initial option grant will vest (and the Company's repurchase rights will
lapse) in forty-eight equal monthly installments over the optionee's period of
Board service measured from the option grant date.
15.
18
The shares subject to each automatic option grant will immediately vest
upon the happening of certain events, including the acquisition of the Company
by merger or asset sale or a hostile change in control of the Company. In
addition, upon the successful completion of a hostile take-over, each automatic
option grant which has been outstanding for at least six months may be
surrendered to the Company for a cash distribution per surrendered option share
in an amount equal to the excess of (a) the take-over price per share over (b)
the exercise price payable for such share.
ACCELERATION
In the event that the Company is acquired by merger or asset sale, each
outstanding option under the Discretionary Option Grant Program which is not to
be assumed by the successor corporation or replaced with a comparable option to
purchase shares of the capital stock of the successor corporation will
automatically accelerate in full. The Committee has the discretionary authority
to accelerate any options assumed or replaced in connection with such
acquisition or to condition such acceleration on the subsequent termination of
the optionee's service within a designated period following the acquisition. In
connection with a hostile change in control of the Company (whether by
successful tender offer for more than 50% of the outstanding voting stock or by
proxy contest for the election of Board members), the Committee will have the
discretionary authority to provide for automatic acceleration of outstanding
options under the Discretionary Grant Program either at the time of such change
in control or upon the subsequent termination of the optionee's service.
The acceleration of vesting in the event of a change in the ownership
or control of the Company may be seen as an anti-takeover provision and may have
the effect of discouraging a merger proposal, a takeover attempt or other
efforts to gain control of the Company.
FINANCIAL ASSISTANCE
The Committee may permit one or more optionees to pay the exercise
price of outstanding options under the Discretionary Option Grant Program by
delivering a promissory note. The Committee will determine the terms of any such
promissory note. However, the maximum amount of financing provided any optionee
may not exceed the cash consideration payable for the purchased shares plus all
applicable taxes incurred in connection with the acquisition of the shares.
SPECIAL TAX ELECTION
The Committee may provide one or more holders of options under the
Discretionary Option Grant Program with the right to have the Company withhold a
portion of the shares otherwise issuable to such individuals in satisfaction of
the tax liability incurred by such individuals in connection with the exercise
of those options or the vesting of those shares. Alternatively, the Committee
may allow such individuals to deliver previously acquired shares of Common Stock
in payment of such tax liability.
AMENDMENT AND TERMINATION
The Board may amend or modify the 1993 Plan in any or all respects
whatsoever subject to any required stockholder approval. The Board may terminate
the 1993 Plan at any time, and the 1993 Plan will in all events terminate on
December 16, 2003.
16.
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RECENT STOCK AWARDS UNDER THE 1993 PLAN
The table below shows, as to each of the Company's Named Executive
Officers, each nominee for director and the various indicated groups, the number
of shares of Common Stock subject to options granted between January 1, 1995 and
July 23, 1996 under the 1993 Plan with the weighted average exercise price
payable per share.
NUMBER OF
NAME AND POSITION OPTION SHARES EXERCISE PRICE
----------------- ------------- --------------
William A. Klein
Chairman of the Board...................................... 0 0
James T. Schraith
Chief Executive Officer, Director.......................... 500,000 $6.75
Richard C. Davis
President of International Operations, Director............ 0 0
Bruce D. Nye
Chief Financial Officer.................................... 0 0
Theodore J. Wisniewski
Senior Vice President Corporate Quality & 0 0
Engineering................................................
Alan L. Weaver
President of the InCirt Technology Division................ 0 0
All current executive officers, as a group
(6 persons)......................................................... 630,000(1) 6.72(2)
Robert Finzi
Director................................................... 10,000 7.50
Myron Kunin
Director................................................... 20,000 7.50
Jerome Jacobson
Director................................................... 10,000 7.50
Patrick S. Jones
Director................................................... 20,000 6.58
All current directors who are not executive officers, as a
group (4 persons)................................................... 60,000 7.19(2)
All employees, including current officers who are not
executive officers, as a group (22 persons)......................... 342,000 6.71(2)
- ----------------------------------------
(1) Includes grant of (i) 500,000 option shares to James Schraith (as set
forth above), (ii) 30,000 option shares to Robert McFarland, the
Company's Senior Vice President, North American Sales, on January 23,
1996 for an exercise price of $6.63 per share; (iii) 20,000 option
shares to Philip Pietrowski, the Company's Senior Vice President, North
American Operations, on October 3, 1995 for an exercise price of $6.75
per share, (iv) an additional 20,000 option shares to Mr. Pietrowski on
January 23, 1996 for $6.63 per share and (v) 60,000 option shares to
James Eckstaedt, the Company's Senior Vice President and Chief
Financial Officer, on July 16, 1996 for $6.58 per share.
(2) Exercise price per share is equal to the weighted average exercise
price per share.
17.
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FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS. Options granted under the 1993 Plan may be either
incentive stock options which satisfy the requirements of Section 422 of the
Internal Revenue Code or non-statutory options which are not intended to meet
such requirements. The federal income tax treatment for the two types of options
differs as follows:
- INCENTIVE STOCK OPTIONS. No taxable income is recognized by the
optionee at the time of the option grant, and no taxable income is generally
recognized at the time the option is exercised. The optionee will, however,
recognize taxable income in the year in which the purchased shares are sold or
otherwise disposed of. For federal tax purposes, dispositions are divided into
two categories: (i) qualifying and (ii) disqualifying. A qualifying disposition
occurs if the sale or other disposition is made after the optionee has held the
shares for more than two years after the option grant date and more than one
year after the exercise date. If either of these two holding periods is not
satisfied, then a disqualifying disposition will result.
If the optionee makes a disqualifying disposition of the purchased
shares, then the Company will be entitled to an income tax deduction, for the
taxable year in which such disposition occurs, equal to the excess of (i) the
fair market value of such shares on the option exercise date over (ii) the
exercise price paid for the shares. In no other instance will the Company be
allowed a deduction with respect to the optionee's disposition of the purchased
shares.
- NON-STATUTORY OPTIONS. No taxable income is recognized by an optionee
upon the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the Section
83(b) election is made, the optionee will not recognize any additional income as
and when the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised non-statutory option. The deduction will in general be allowed for the
taxable year of the Company in which such ordinary income is recognized by the
optionee.
STOCK APPRECIATION RIGHTS. An optionee who is granted a stock
appreciation right will recognize ordinary income in the year of exercise equal
to the amount of the appreciation distribution. The Company will be entitled to
an income tax deduction equal to the appreciation distribution for the taxable
year in which such ordinary income is recognized by the optionee.
ACCOUNTING TREATMENT
Option grants with exercise prices less than the fair market value of
the shares on the grant date will result in a compensation expense to the
Company's earnings equal to the difference between the exercise price and the
fair market value of the shares on the grant date. Such expense will be
accruable by the Company over the period that the option shares are to vest.
Option grants at 100% of fair market value will not result in any charge to the
Company's earnings, but the Company must disclose, in pro-forma statements to
its financial statements, the impact those options would have upon the Company's
reported earnings were the 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.
18.
21
Should one or more optionees be granted stock appreciation rights which
have no conditions upon exercisability other than a service or employment
requirement, then such rights will result in a compensation expense to the
Company's earnings.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the outstanding voting shares of
the Company present or represented and entitled to vote at the Annual Meeting is
required for approval of the amendments to the 1993 Plan. Should such
stockholder approval not be obtained, then the 1,000,000 share increase in the
number of shares available for issuance under the 1993 and the 200,000 share
increase in the number of options and stock appreciation rights which may be
granted to any one individual in any calendar year will not become effective,
and the grants made on the basis of such increases will terminate, and the 1993
Plan will terminate once the balance of the share reserve as last approved by
the stockholders has been issued.
NEW PLAN BENEFITS AND STOCK AWARDS
The table below shows, as to each of the Company's Named Executive
Officers, each nominee for director and the various indicated groups, the number
of shares of Common Stock underlying options received by or allocated to each of
the following subject to stockholder approval of the 1,000,000 share reserve
increase and the 200,000 share increase in the number of options and stock
appreciation rights which may be granted to any one individual, as well as the
options which will be granted under the Automatic Option Grant Program on the
date of the 1996 Annual Meeting to each individual who is to continue to serve
as a non-employee Board member.
NUMBER OF DOLLAR
NAME AND POSITION OPTION SHARES VALUE
----------------- ------------- ------
William A. Klein
Chairman of the Board.............................................. 0 0
James T. Schraith
Chief Executive Officer, President, Director....................... 200,000 $6.75
Richard C. Davis
President of International Operations, Director.................... 0 0
Bruce D. Nye
Chief Financial Officer............................................ 0 0
Alan L. Weaver
President of the InCirt Technology Division........................ 0 0
Theodore J. Wisniewski
Senior Vice President Corporate Quality and Engineering............ 0 0
All current executive officers as a group (6 persons)....................... 310,000(1) $6.70(2)
Robert Finzi
Director........................................................... 10,000 (3)
Myron Kunin
Director........................................................... 10,000 (3)
Jerome Jacobson
Director........................................................... 10,000 (3)
Patrick S. Jones
Director........................................................... 20,000 $6.58
All current non-employee directors as a group (4 persons)................... 50,000 (4)
All employees, including current officers who are not executive
officers, as a group (14 persons)........................................... 197,000 6.61(2)
- ----------------------------------------
19.
22
(1) This number reflects the Committee's grant of 30,000 option shares to
Robert N. McFarland on January 23, 1996, the grant of 20,000 option
shares to Philip E. Pietrowski on the same date and the grant of 60,000
option shares to James R. Eckstaedt on July 16, 1996.
(2) Exercise price per share is equal to the weighted average exercise
price per share.
(3) Exercise price per share for each such option will be equal to the
closing selling price per share of Common Stock on the Nasdaq National
Market on the date of the Annual Meeting.
(4) Exercise price per share for Messrs. Finzi, Kunin and Jacobson will be
equal to the closing selling price per share of Common Stock on the
Nasdaq National Market on the date of the Annual Meeting.
Exercise price per share for options held by Mr. Jones is $6.58.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
APPROVAL OF THE AMENDMENTS TO THE 1993 PLAN. THE BOARD BELIEVES THAT IT IS IN
THE BEST INTERESTS OF THE COMPANY TO CONTINUE TO HAVE A COMPREHENSIVE EQUITY
INCENTIVE PROGRAM FOR THE COMPANY WHICH WILL PROVIDE A MEANINGFUL OPPORTUNITY
FOR OFFICERS, EMPLOYEES AND BOARD MEMBERS TO ACQUIRE A SUBSTANTIAL PROPRIETARY
INTEREST IN THE ENTERPRISE AND THEREBY ENCOURAGE SUCH INDIVIDUALS TO REMAIN IN
THE COMPANY'S SERVICE AND MORE CLOSELY ALIGN THEIR INTERESTS WITH THOSE OF THE
STOCKHOLDERS.
PROPOSAL NO. 3
ELECTION OF DIRECTORS - NOMINEES
Seven (7) directors will be elected at the Annual Meeting by the
holders of Cerplex Common Stock and Series B Stock to serve until the next
Annual Meeting and until their successors are elected and qualified, or until
their earlier death, resignation or removal. Proxyholders will vote all proxies
received by them FOR the nominees listed below unless otherwise instructed in
writing on such proxy. The seven (7) candidates receiving the highest number of
affirmative votes of shares entitled to vote at the Annual Meeting will be
elected directors of Cerplex. Stockholders of Cerplex are not entitled to
cumulative voting rights. In the event any nominee is unable or declines to
serve as a director at the time of the Annual Meeting, the proxies will be voted
for an additional nominee who shall be designated by the current Board of
Directors to fill the vacancy. As of the date of this Proxy Statement, the Board
of Directors is not aware of any nominee who is unable or will decline to serve
as director.
INFORMATION WITH RESPECT TO NOMINEES
Set forth below, as of July 23, 1996, for each nominee for director of
Cerplex is information regarding his age, position(s) with Cerplex, the period
he has served as a director, any family relationship with any other director or
executive officer of Cerplex and the directorships currently held by him in
corporations whose shares are publicly traded.
NAME, AGE AND PRINCIPAL OCCUPATION AND
FIRST YEAR AS DIRECTOR BUSINESS EXPERIENCE
- ---------------------- ------------------------
Richard C. Davis, 46, 1990............... For a description of the background of Mr. Davis, see "Executive
Officers" herein.
20.
23
Robert Finzi, 42, 1993 (1)(2)............ Mr. Finzi has been a Vice President of the Sprout Group, a
division of DLJ Capital Corporation, which is the managing
general partner of Sprout Growth II, L.P. and an affiliate of
Donaldson, Lufkin & Jenrette Securities Corporation since May
1991. Mr. Finzi is also a general partner of the general partner of
a series of investment funds managed by the Sprout Group and a
limited partner of the general partner of ML Ventures II, L.P.
From 1984 to 1991, Mr. Finzi was a Vice President of Merrill
Lynch Venture Capital. Mr. Finzi also serves as a director of
Platinum Software Corporation and a number of private
companies.
Jerome Jacobson, 74, 1993 (1)............ Mr. Jacobson serves as a director of Datawatch Corporation. Mr.
Jacobson has served as an individual general partner of ML
Ventures II, L.P. since 1987. Mr. Jacobson is President of
Economic Studies, Inc. and an independent financial advisor and
economic consultant. Mr. Jacobson was Executive Vice President
of Bendix Corporation from 1974 to 1980 and was Vice Chairman
of Burroughs Corporation from 1981 to 1984.
Patrick S. Jones, 51, 1996 (2)........... Mr. Jones has served as Vice President - Corporate Controller for
Intel Corporation since 1992. As such, he is responsible for
worldwide accounting, international finance and administration at
Intel's overseas locations, accounting services, external reporting,
and all financial systems applications. Prior to 1992, Mr. Jones
served as Vice President and Chief Financial Officer of LSI Logic
Corporation.
William A. Klein, 55, 1990............... For a description of the background of Mr. Klein, see "Executive
Officers" herein.
Myron Kunin, 67, 1995 (1)(2)............. Mr. Kunin has served as Chairman of the Board of Regis
Corporation since 1983. Mr. Kunin also served as the Chief
Executive Officer until July 1995. From 1967 to 1987 he was
President of Regis Corporation, and from 1954 to 1965 he served
as its Vice President. Mr. Kunin has been a director of Regis
Corporation since 1954. Mr. Kunin has been a director and major
stockholder of Nortech Systems, Inc. since 1990.
James T. Schraith, 38, 1995.............. For a description of the background of Mr. Schraith, see
"Executive Officers" herein.
- --------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met seven times during the year ended December
1995. Each Director attended at least 75% of the aggregate of (i) the total
number of meetings of the Board of Directors and (ii) the total number of
meetings held by all Committees of the Board on which such Director served.
Cerplex has a standing Audit Committee composed of Messrs. Robert
Finzi, Jerome Jacobson, Patrick Jones and Myron Kunin. The Audit Committee is
primarily responsible for approving the services performed by the Company's
independent public accountants and for reviewing and evaluating the Company's
accounting principles and reporting practices and its system of internal
accounting controls. The Audit Committee had three formal meetings and several
additional informal meetings during the 1995 fiscal year.
Cerplex has a standing Compensation Committee which met twice during
the 1995 fiscal year. This Committee consisted of Messrs. Robert Finzi, Carmelo
Santoro and Gregorio Reyes from the beginning of the
21.
24
1995 fiscal year until May 1995, when Mr. Reyes declined to stand for reelection
to the Company's Board of Directors. From May 1995 to September 1995, the
Compensation Committee consisted of Messrs. Finzi and Santoro. Mr. Kunin was
appointed to the Compensation Committee in September 1995 and Mr. Santoro
resigned from the Company's Board of Directors and its Compensation Committee in
October 1995. The Compensation Committee reviews and acts on matters relating to
compensation levels and benefit plans for key executives of Cerplex.
COMPENSATION OF DIRECTORS
Each director has received $6,000 per quarter as a retainer fee, $1,000
per Board meeting attended and $1,000 per committee meeting attended since
January 1, 1994. In addition, each non-employee board member is eligible to
receive automatic option grants under the Company's 1993 Plan as follows: (i)
each individual who is first elected or appointed a non-employee Board member at
or after the 1995 Annual Stockholders Meeting will automatically be granted, on
the date of such initial election or appointment, an option to purchase 20,000
shares of Common Stock and (ii) on the date of each Annual Stockholders Meeting
beginning with the 1995 Meeting, each individual who is reelected to serve as a
non-employee Board member will automatically be granted an option to purchase
10,000 shares of Common Stock, provided such individual has served as a
non-employee Board member for at least six months prior to the date of the
Annual Meeting. The following individuals were granted an option to purchase
10,000 shares of Common Stock at the 1995 Annual Meeting at an exercise price of
$7.50 per share: Robert Finzi, Jerome Jacobson and Carmelo J. Santoro. Myron
Kunin was granted an option to purchase 20,000 shares of Common Stock at the
1995 Annual Meeting at an exercise price of $7.50 per share as he was first
elected to the Board at such meeting. See Proposal No. 2 for a detailed
description of the automatic option grant program under the 1993 Plan.
All directors hold office until the next Annual Meeting of Stockholders
and until their successors have been elected. Officers are appointed to serve,
at the discretion of the Board of Directors, until their successors are
appointed. There are no family relationships among executive officers or
directors of Cerplex. There are no arrangements or understandings involving any
director or any nominee regarding such person's status as a director or nominee.
Mr. Jacobson, a director of the Company since August, 1993, performed
consulting services for the Company during the 1995 fiscal year. Mr. Jacobson
was paid a consulting fee of $2,500 per month for such services and was
reimbursed by the Company for expenses incurred by him in connection with
performing such services.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The following summarizes all known filing delinquencies or failure to
file with respect to reports on Forms 3, 4 and 5, which were required to be
filed pursuant to the reporting requirements of Section 16(a) of the Securities
Exchange Act of 1934 by members of the Board of Directors, the executive
officers of Cerplex and beneficial owners of more than ten percent of the
outstanding shares of the Company's Common Stock: Richard Davis, a director and
executive officer of the Company, filed a required report on a Form 4 on July
10, 1996 disclosing the disposition of 25,000 shares of Common Stock on May 29,
1996, which disposition should have been reported on the Form 4 filed on
June 10, 1996 for Mr. Davis.
CERTAIN TRANSACTIONS
CERTAIN RELATIONSHIPS AND RESTATED TRANSACTIONS
The Company subleases certain real property for its operations in
Irvine, California and in Newburgh, New York from WC Cartwright Corporation, a
California corporation ("WC Cartwright"). Messrs. Klein and Davis and Ms.
Carolyn J. Klein (the spouse of Mr. Klein) are officers, directors and principal
shareholders of WC Cartwright. In 1995, the Company paid to WC Cartwright an
aggregate of $540,000 in rent for use of the real property located in Irvine,
California and $245,000 in rent for use of the real property located in
Newburgh, New York. Under its subleases with WC Cartwright, the Company is
obligated to remit monthly lease payments to WC Cartwright in the amount of
$44,982 through October 31, 1996 with respect to the Irvine, California
property, and from $16,713 and $22,204 per month (on a graduated rent basis)
through July 31, 1997 with respect to the Newburgh, New York real property.
22.
25
On January 5, 1994, the Company made loans, each in the amount of
$80,000 at a 6% interest rate compounded annually, to Jerome Jacobson and
Carmelo Santoro, directors of the Company in connection with the exercise of
stock options. The principal amount of such loans and accrued interest of
$179,062 remains outstanding and are due and payable on January 5, 1999. In
addition, on December 31, 1995, the Company made a loan in the amount of $55,000
at a 6.8% interest rate compounded annually to Bruce D. Nye, an officer
of the Company, in connection with the exercise of stock options. Such
loan and accrued interest remains outstanding and are due and payable on
December 31, 2000.
In connection with the Private Placement of Series B Stock in June
1996, the following entities, which are related to Robert Finzi, a director of
Cerplex (as more fully described in footnotes (6) and (9) to the table set forth
under the caption "Security Ownership of Certain Beneficial Owners and
Management"), made the following purchases of Series B Stock at a price of
$1,000 per share:
Number of Shares
Affiliated Entities of Series B Stock
------------------- -----------------
DLJ Capital Corporation............................................................ 231
Sprout Growth II, L.P.............................................................. 2,269
INDEMNITY AGREEMENTS
The Company has entered into an Indemnity Agreement with each of its
directors (the "Indemnity Agreements") which provides that, with certain
exceptions, the Company will hold harmless and indemnify its directors to the
fullest extent permitted under Delaware Law. Under the Indemnity Agreements, the
Company is obligated to indemnify each of its directors against all expenses
(including attorneys' fees), fines, judgments and settlement amounts that such
director may incur in connection with any action or proceeding (including
actions brought by or on behalf of the Company such as stockholder derivative
actions) to which the director is or may be made a party to by reason of such
director's position as a director, officer, employee or agent of the Company or
any other company or enterprise to which the person provides services at the
request of the Company. This additional indemnity goes beyond the rights
expressly provided under the Delaware Law primarily in the availability of
indemnification in connection with actions brought by or on behalf of the
Company, such as stockholder derivative actions, and in the provisions for
advancement of litigation expenses prior to settlement or judgment.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF ALL SEVEN NOMINEES
NAMED ABOVE.
PROPOSAL NO. 4
RATIFICATION OF SELECTION OF INDEPENDENT
AUDITORS
The firm of KPMG Peat Marwick LLP served as independent auditors for
Cerplex for the fiscal year ended December 31, 1995. However, on [___________],
1996 the Audit Committee of the Board of Directors, on the recommendation of
Cerplex's management, selected [______________________] to serve in this
capacity for the current fiscal year. Cerplex is asking the stockholders to
ratify the selection by the Board of Directors of [______________________] as
independent auditors to audit the consolidated financial statements of Cerplex
for the fiscal year ending December 29, 1996 and to perform other appropriate
services.
KPMG Peat Marwick LLP's report on the Company's financial statements
for each of the past two years neither contained an adverse opinion or
disclaimer of opinion, nor was modified as to uncertainty, audit scope or
accounting principles. In addition, there were not any disagreements with the
former accountant on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure.
A representative of each of [______________________] and KPMG Peat
Marwick LLP is expected to be present at the Annual Meeting to respond to
stockholders' questions, and each of the representatives will be given an
opportunity to make a brief presentation to the stockholders and will be
available to respond to appropriate questions. Cerplex has been advised by
[______________________] that neither that firm nor any of its associates has
any material relationship with Cerplex nor any affiliate of Cerplex.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION. IN THE EVENT
THAT A MAJORITY OF THE SHARES VOTED AT THE ANNUAL MEETING DO NOT VOTE FOR
23.
26
RATIFICATION OF THE SELECTION OF [______________________], THE BOARD OF
DIRECTORS WILL RECONSIDER SUCH SELECTION. UNDER ALL CIRCUMSTANCES, THE BOARD
RETAINS THE CORPORATE AUTHORITY TO CHANGE THE AUDITORS AT A LATER DATE.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Under the present rules of the Commission, the deadline for
stockholders to submit proposals to be considered for inclusion in Cerplex's
Proxy Statement for next year's Annual Meeting of Stockholders is January 15,
1997. Such proposals may be included in next year's Proxy Statement if they
comply with certain rules and regulations promulgated by the Commission.
OTHER BUSINESS
The Board of Directors is not aware of any other matter which may be
presented for action at the Annual Meeting. Should any other matter requiring a
vote of the stockholders arise, it is intended that the proxy holders will vote
on such matters in accordance with their best judgment.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are hereby
incorporated by reference in this Proxy Statement: (i) the Annual Report of the
Company on Form 10-K for the fiscal year ended December 31, 1995, (ii) the
Quarterly Report of the Company on Form 10-Q for the quarter ended March 31,
1996, and (iii) the Current Report of the Company on Form 8-K dated April 8,
1996.
All reports and other documents subsequently filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
of this Proxy Statement and prior to the Annual Meeting shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and documents. Any statement incorporated herein shall be deemed
to be modified or superseded for purposes of this Proxy Statement to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this Proxy
Statement.
The Company will provide without charge to each person to whom this
Proxy Statement is delivered, upon written or oral request of such person, a
copy of any or all of the foregoing documents incorporated herein by reference
(other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such document). Requests for such documents
should be submitted in writing to James T. Schraith, President and Chief
Executive Officer, at The Cerplex Group, Inc., 1382 Bell Avenue, Tustin, CA
92680 or by telephone at (714) 258-5600.
24.
27
THE CERPLEX GROUP, INC.
PROXY
FOR HOLDERS OF COMMON STOCK
ANNUAL MEETING OF STOCKHOLDERS, AUGUST 22, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned revokes all previous proxies, acknowledges receipt of
the Notice of Annual Meeting of Stockholders to be held on August 22, 1996 and
the proxy statement and appoints William A. Klein and James T. Schraith, or
either of them, the proxy of the undersigned, with full power of substitution,
to vote all shares of Common Stock of The Cerplex Group, Inc. which the
undersigned is entitled to vote, either on his or her own behalf or on behalf of
an entity or entities, at the Annual Meeting of Stockholders of Cerplex to be
held at the Hyatt Recency Irvine, 17900 Jamboree Road, Irvine, California, on
Thursday, August 22, 1996 at 9:00 a.m., and at any adjournment or postponement
thereof, and to vote in their discretion on such other business as may properly
come before the Annual Meeting and any postponement or adjournment thereof.
1. PROPOSAL TO AUTHORIZE THE ISSUANCE OF COMMON STOCK EQUAL TO 20% OR MORE
OF THE OUTSTANDING COMMON STOCK (OR VOTING POWER) UPON CONVERSION OF
THE COMPANY'S SERIES B CONVERTIBLE PREFERRED STOCK.
FOR AGAINST ABSTAIN
/ / / / / /
2. AMENDMENT TO CERPLEX'S 1993 PLAN TO INCREASE THE POOL OF SHARES
AVAILABLE UNDER THE 1993 PLAN FROM 1,000,000 TO 2,000,000 OF COMMON
STOCK AND TO INCREASE THE TOTAL NUMBER OF OPTION SHARES WHICH MAY BE
GRANTED TO ANY ONE INDIVIDUAL IN ANY CALENDAR YEAR FROM 300,000 TO
500,000.
FOR AGAINST ABSTAIN
/ / / / / /
3. ELECTION OF DIRECTORS
/ / FOR all nominees / / WITHHOLD AUTHORITY / / EXCEPTIONS
listed below to vote for all nominees
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE
MARK THE "EXCEPTIONS" BOX, AND STRIKE A LINE THROUGH THE NOMINEE'S NAME
IN THE LIST BELOW:
RICHARD C. DAVIS PATRICK S. JONES MYRON KUNIN
ROBERT FINZI WILLIAM A. KLEIN JAMES T. SCHRAITH
JEROME JACOBSON
4. RATIFICATION OF [______________________] AS INDEPENDENT AUDITORS FOR
FISCAL YEAR 1996.
FOR AGAINST ABSTAIN
/ / / / / /
The Board of Directors recommends a vote FOR each of the director
nominees listed above and for the other proposals set forth above. This Proxy,
when properly executed will be voted as specified above. This Proxy will be
voted FOR Proposals No. 1, 2 and 4 and FOR each of the nominees listed under
Proposal No. 3 if no specification is made. This proxy will also be voted at the
discretion of the proxy holders on such matters other than the three specific
items as may come before the meeting.
Please print the name(s) appearing
on each Common Stock certificate(s)
over which you have voting authority: Dated:
(Print name(s) as it (they) appear on certificate)
Please sign exactly as your name(s) is (are) shown on the share certificate to
which the Proxy applies. When shares are held by joint tenants, both should
sign. When signing as an attorney, executor, administrator, trustee or guardian,
please give full title, as such. If a corporation, please sign in full corporate
name by the President or another authorized officer.
If a partnership, please sign in the partnership name by an authorized person.
(Authorized Signature(s))
28
PLEASE RETURN YOUR EXECUTED PROXY TO CERPLEX'S TRANSFER AGENT IN THE ENCLOSED
ENVELOPE, OR, IF NECESSARY, DELIVER IT TO CERPLEX ATTENTION: CHIEF FINANCIAL
OFFICER.
2.
29
THE CERPLEX GROUP, INC.
PROXY
FOR HOLDERS OF SERIES B PREFERRED STOCK
ANNUAL MEETING OF STOCKHOLDERS, AUGUST 22, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned revokes all previous proxies, acknowledges receipt of
the Notice of Annual Meeting of Stockholders to be held on August 22, 1996 and
the proxy statement and appoints William A. Klein and James T. Schraith, or
either of them, the proxy of the undersigned, with full power of substitution,
to vote all shares of Common Stock of The Cerplex Group, Inc. which the
undersigned is entitled to vote, either on his or her own behalf or on behalf of
an entity or entities, at the Annual Meeting of Stockholders of Cerplex to be
held at the Hyatt Recency Irvine, 17900 Jamboree Road, Irvine, California, on
Thursday, August 22, 1996 at 9:00 a.m., and at any adjournment or postponement
thereof, and to vote in their discretion on such other business as may properly
come before the Annual Meeting and any postponement or adjournment thereof.
1. PROPOSAL TO AUTHORIZE THE ISSUANCE OF COMMON STOCK EQUAL TO 20% OR MORE
OF THE OUTSTANDING COMMON STOCK (OR VOTING POWER) UPON CONVERSION OF
THE COMPANY'S SERIES B CONVERTIBLE PREFERRED STOCK.
FOR AGAINST ABSTAIN
/ / / / / /
2. AMENDMENT TO CERPLEX'S 1993 PLAN TO INCREASE THE POOL OF SHARES
AVAILABLE UNDER THE 1993 PLAN FROM 1,000,000 TO 2,000,000 OF COMMON
STOCK AND TO INCREASE THE TOTAL NUMBER OF OPTION SHARES WHICH MAY BE
GRANTED TO ANY ONE INDIVIDUAL IN ANY CALENDAR YEAR FROM 300,000 TO
500,000.
FOR AGAINST ABSTAIN
/ / / / / /
3. ELECTION OF DIRECTORS
/ / FOR all nominees / / WITHHOLD AUTHORITY / / EXCEPTIONS
listed below to vote for all nominees
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE
MARK THE "EXCEPTIONS" BOX, AND STRIKE A LINE THROUGH THE NOMINEE'S NAME
IN THE LIST BELOW:
RICHARD C. DAVIS PATRICK S. JONES MYRON KUNIN
ROBERT FINZI WILLIAM A. KLEIN JAMES T. SCHRAITH
JEROME JACOBSON
4. RATIFICATION OF [______________________] AS INDEPENDENT AUDITORS FOR
FISCAL YEAR 1996.
FOR AGAINST ABSTAIN
/ / / / / /
The Board of Directors recommends a vote FOR each of the director nominees
listed above and for the other proposals set forth above. This Proxy, when
properly executed will be voted as specified above. This Proxy will be voted FOR
Proposals No. 1, 2 and 4 and FOR each of the nominees listed under Proposal
No. 3 if no specification is made. This proxy will also be voted at the
discretion of the proxy holders on such matters other than the three specific
items as may come before the meeting.
Please print the name(s) appearing
on each Series B Preferred Stock
certificate(s) over which you have
voting authority: Dated:
(Print name(s) as it (they) appear on certificate)
Please sign exactly as your name(s) is (are) shown on the share certificate to
which the Proxy applies. When shares are held by joint tenants, both should
sign. When signing as an attorney, executor, administrator, trustee or guardian,
please give full title, as such. If a corporation, please sign in full corporate
name by the President or another authorized officer. If a partnership, please
sign in the partnership name by an authorized person.
30
(Authorized Signature(s))
PLEASE RETURN YOUR EXECUTED PROXY TO CERPLEX'S TRANSFER AGENT IN THE ENCLOSED
ENVELOPE, OR, IF NECESSARY, DELIVER IT TO CERPLEX ATTENTION: CHIEF FINANCIAL
OFFICER.
2.
31
THE CERPLEX GROUP, INC.
RESTATED 1993 STOCK OPTION PLAN
(RESTATED AND AMENDED AS OF JULY 16, 1996)
ARTICLE ONE
GENERAL PROVISIONS
------------------
I. PURPOSES OF THE PLAN
A. The Restated 1993 Stock Option Plan (the "Plan") is
intended to promote the interests of The Cerplex Group, Inc., a Delaware
corporation (the "Corporation"), by providing eligible individuals 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 (or its parent or subsidiary corporations).
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two separate equity
programs:
a. 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, and
b. 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 Four shall apply
to both equity programs under the Plan and shall accordingly govern the
interests of all persons under the Plan.
III. DEFINITIONS
For purposes of the Plan, the following definitions shall be
in effect:
BOARD: the Corporation's Board of Directors.
CHANGE IN CONTROL: a change in ownership or control of the
Corporation effected through either of the following transactions:
a. 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)
directly or indirectly acquires
1.
32
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange
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
b. there is 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 (rounded up to the next whole
number) ceases, by reason of one or more contested 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
such election or nomination was approved by the Board.
CODE: the Internal Revenue Code of 1986, as amended.
COMMITTEE: the committee of two (2) or more non-employee
Board members appointed by the Board to administer the Plan.
COMMON STOCK: shares of the Corporation's common stock.
CORPORATE TRANSACTION: either of the following
stockholder-approved transactions to which the Corporation is a party:
a. 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 those who held those securities
immediately prior to such transaction, or
b. the sale, transfer or other disposition of
all or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
EFFECTIVE DATE: the first date on which the shares of the
Corporation's Common Stock were registered under Section 12(g) of the Exchange
Act.
ELIGIBLE DIRECTOR: a non-employee Board member eligible to
participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.
EMPLOYEE: 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.
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EXCHANGE ACT: the Securities Exchange Act of 1934, as amended
from time to time.
FAIR MARKET VALUE: the fair market value per share of Common
Stock determined in accordance with the following provisions:
a. If the Common Stock is not at the time listed or
admitted to trading on any national stock exchange but is traded on
the Nasdaq National Market, the Fair Market Value shall be the closing
selling price per share 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
reported closing selling price for the Common Stock on the date in
question, then the closing selling price on the last preceding date
for which such quotation exists shall be determinative of Fair Market
Value.
b. If the Common Stock is at the time listed or admitted
to trading on any national stock exchange, then the Fair Market Value
shall be the closing selling price per share on the date in question
on the exchange determined by the Committee 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
reported sale of Common Stock on such exchange on the date in
question, then the Fair Market Value shall be the closing selling
price on the exchange on the last preceding date for which such
quotation exists.
HOSTILE TAKE-OVER: a change in ownership of the Corporation
effected through the following transaction:
a. 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)
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the Exchange 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
b. more than fifty percent (50%) of the securities so
acquired in such tender or exchange offer are accepted from holders
other than the officers and directors of the Corporation subject to
the short-swing profit restrictions of Section 16 of the Exchange Act.
INCENTIVE OPTION: a stock option which satisfies the
requirements of Code Section 422.
3.
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NON-STATUTORY OPTION: a stock option not intended to meet the
requirements of Code Section 422.
OPTIONEE: any person to whom an option is granted under the
Plan.
PARENT: any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each such
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.
PERMANENT DISABILITY OR PERMANENTLY DISABLED: the inability
of the Optionee 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.
SERVICE: the provision of services to the Corporation (or any
Parent or Subsidiary) by an individual in the capacity of an Employee, a
non-employee member of the board of directors or an independent consultant or
advisor, except to the extent otherwise specifically provided in the applicable
stock option agreement.
SUBSIDIARY: each corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
such 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.
TAKE-OVER PRICE: the greater of (a) 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 (b) 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 stock option
under the Federal tax laws, the Take-Over Price shall not exceed the clause (a)
price per share.
10% STOCKHOLDER: the owner of stock (as determined under Code
Section 424(d)) possessing ten percent (10%) or more of the total combined
voting power of all classes of stock of the Corporation.
IV. ADMINISTRATION OF THE PLAN
A. The Discretionary Option Grant Program shall be
administered by the Committee. No Board member shall be eligible to serve on
the Committee if such individual has, within the twelve (12)-month period
immediately preceding the date of his or her appointment to the Committee,
received an option grant or stock issuance under this Plan or any
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other stock plan of the Corporation (or any parent or subsidiary corporation)
other than pursuant to the Automatic Grant Program under Article IV. Members
of the Committee shall serve for such period of time as the Board may determine
and shall be subject to removal by the Board at any time.
B. The Committee shall have full power and authority
(subject to the express provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for the proper administration of the
Plan and to make such determinations and interpretations concerning the
Discretionary Option Grant Program and any outstanding option as it may deem
necessary or advisable. The Committee shall have the authority to make option
grants under the Discretionary Option Grant Program to any and all eligible
individuals. The Committee shall have complete discretion to determine the
number of shares to be covered by each such option, the time or times at which
such option is to become exercisable and the maximum term for which the option
is to remain outstanding. Decisions of the Committee shall be final and
binding on all parties with an interest in any outstanding option under the
Discretionary Option Grant Program.
C. Administration of the Automatic Option Grant Program
shall be self-executing in accordance with the terms of that program, and the
Committee shall exercise no discretionary functions with respect to option
grants made thereunder.
V. ELIGIBILITY FOR OPTION GRANTS
A. The persons eligible to participate in the
Discretionary Option Grant Program shall be limited to the following:
(i) officers and other Employees of the
Corporation (or its parent or subsidiary corporations) who render
services which contribute to the management, growth and financial
success of the Corporation (or its parent or subsidiary corporations);
(ii) non-employee members of the Board,
other than those who are serving on the Committee; and
(iii) those consultants or independent
contractors who provide valuable services to the Corporation (or its
parent or subsidiary corporations).
B. 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 on or after the 1995 Annual
Stockholders Meeting, whether through appointment by the Board or election by
the Corporation's stockholders, and (ii) those individuals who are reelected to
serve as non-employee Board members after one or more Annual Stockholders
Meetings beginning with the 1995 Annual Meeting. A non-employee Board member
who has previously been in the employ of the Corporation (or any Parent or
Subsidiary) shall not be
5.
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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 reelection as a non-employee
Board member at one or more Annual Stockholders Meetings.
VI. STOCK SUBJECT TO THE PLAN
A. Shares of the Common Stock shall be available for
issuance under the Plan and shall be drawn from either the Corporation's
authorized but unissued shares of Common Stock or from reacquired shares of
Common Stock, including shares repurchased by the Corporation on the open
market. The aggregate number of shares available for issuance under the Plan
from and after the Effective Date shall not exceed 2,000,000 shares of Common
Stock, subject to adjustment from time to time in accordance with the
provisions of this Section VI. The maximum number of shares of Common Stock
for which any one participant on the Plan may be granted stock options or
separately exercisable stock appreciation rights in any calendar year shall not
exceed 500,000 shares.
B. Should one or more outstanding options under this
Plan expire or terminate for any reason prior to exercise in full (including
any option cancelled in accordance with the cancellation-regrant provisions of
Section IV of Article Two of the Plan), the shares subject to the portion of
the option not so exercised shall be available for subsequent option grant
under the Plan. Shares subject to any option or portion thereof surrendered or
cancelled in accordance with Section V of Article Two and all shares issued
under the Plan, whether or not repurchased by the Corporation pursuant to its
repurchase rights under the Plan, shall not be available for subsequent option
grant under the Plan. Should the exercise price of an outstanding option under
the 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 outstanding option under the Plan, then the number of shares available
for issuance under the Plan shall be reduced by the gross number of shares for
which the option is exercised, and not by the net number of shares of Common
Stock issued to the option holder.
C. In the event any change is made to the Common Stock
issuable under the Plan 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 receipt of
consideration, then appropriate adjustments shall be made to (i) the maximum
number and/or class of shares issuable under the Plan, (ii) the maximum number
and/or class of shares for which any one participant may be granted stock
options or separately exercisable stock appreciation rights, (iii) 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 (iv) the number and/or class of shares and price per share in
effect under each outstanding option under the Plan. Such adjustments to the
outstanding options shall preclude the enlargement or dilution of rights and
benefits under such options. The adjustments determined by the Committee shall
be final, binding and conclusive.
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ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
----------------------------------
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to this Article Two shall be
authorized by action of the Committee and may, at the Committee's discretion,
be either Incentive Options or Non-Statutory Options. Individuals who are not
Employees may only be granted Non-Statutory Options. Each option granted shall
be evidenced by one or more instruments in the form approved by the Committee.
Each such instrument shall, however, comply with the terms and conditions
specified below, and each instrument evidencing an Incentive Option shall, in
addition, be subject to the applicable provisions of Section II of this Article
Two.
A. Option Price.
1. The option price per share shall be fixed by
the Committee. In no event, however, shall the option price per share of an
Incentive Option be less than one hundred percent (100%) of the Fair Market
Value per share of Common Stock on the date of the option grant, and in no
event shall the option price per share of a Non-Statutory Option be less than
eighty-five percent (85%) of the Fair Market Value per share of Common Stock on
the date of the option grant.
2. The option price shall become immediately due
upon exercise of the option and, subject to the provisions of Section VI of
this Article Two and the instrument evidencing the grant, shall be payable in
one of the following alternative forms:
- cash or check made payable to the
Corporation's order;
- shares of Common Stock held by the optionee
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 (as such term is defined
below); or
- through a broker-dealer sale and remittance
procedure pursuant to which the optionee shall provide irrevocable
written instructions (I) to 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 option price payable for
the purchased shares plus all applicable Federal and State income and
employment taxes required to be withheld by the Corporation in
connection with such purchase and (II) to the Corporation to deliver
the certificates for the
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purchased shares directly to such brokerage firm in order to complete
the sale transaction.
For purposes of this Section I.A.2, the Exercise Date
shall be the date on which written notice of the option exercise is delivered
to the Corporation. Except to the extent the sale and remittance procedure is
used in connection with the exercise of the option, payment of the option price
for the purchased shares must accompany such notice.
B. Term and Exercise of Options.
Each option granted under this Article Two shall be
exercisable at such time or times, during such period, and for such number of
shares as shall be determined by the Committee and set forth in the instrument
evidencing the option grant. No such option, however, shall have a maximum
term in excess of ten (10) years from the grant date. During the lifetime of
the optionee, the option shall be exercisable only by the optionee and shall
not be assignable or transferable by the optionee otherwise than by will or by
the laws of descent and distribution following the optionee's death.
C. Termination of Service.
1. Except to the extent otherwise provided
pursuant to Section I.C.3 below, the following provisions shall govern the
exercise period applicable to any options held by the optionee at the time of
cessation of Service or death.
- Should the optionee cease to remain in
Service for any reason other than death or Permanent Disability, then
the period during which each outstanding option held by such optionee
is to remain exercisable shall be limited to the three (3)-month
period following the date of such cessation of Service.
- Should such Service terminate by reason of
Permanent Disability, then the period during which each outstanding
option held by the optionee is to remain exercisable shall be limited
to the twelve (12)-month period following the date of such cessation
of Service.
- Should the optionee die while holding one or
more outstanding options, then the period during which each such
option is to remain exercisable shall be limited to the twelve
(12)-month period following the date of the optionee's death. During
such limited period, the option may be 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.
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- Under no circumstances, however, shall any
such option be exercisable after the specified expiration date of the
option term.
- 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
exercisable for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the optionee's
cessation of Service, terminate and cease to be outstanding with
respect to any option shares for which the option is not at that time
exercisable or in which the optionee is not otherwise at that time
vested.
2. The Committee shall have discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to permit one or more options held by the optionee
under this Article Two to be exercised, during the limited period of
exercisability provided under Section I.C.1 above, not only with respect to the
number of shares for which each such option is exercisable at the time of the
optionee's cessation of Service but also with respect to one or more subsequent
installments of purchasable shares for which the option would otherwise have
become exercisable had such cessation of Service not occurred.
3. The Committee shall have discretion to extend
the period of time for which any option granted under this Article Two is to
remain exercisable following the optionee's cessation of Service or death from
the limited period in effect under Section I.C.1 of this Article Two to such
greater period of time as the Committee shall deem appropriate; provided,
however, that in no event shall such option be exercisable after the specified
expiration date of the option term.
D. Stockholder Rights.
An optionee shall have no stockholder rights with
respect to any shares covered by the option until such individual shall have
exercised the option and paid the option price for the purchased shares.
E. Repurchase Rights. The shares of Common Stock
acquired upon the exercise of any option granted under this Plan may be subject
to repurchase by the Corporation in accordance with the following provisions:
a. The Committee shall have the discretion to
authorize the issuance of unvested shares of Common Stock under this
Plan. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase any or all
of those unvested shares at the option price paid per share. The
terms and conditions upon which such repurchase right shall
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be exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be
established by the Committee and set forth in the instrument evidencing
such repurchase right.
b. All of the Corporation's outstanding
repurchase rights under this Plan shall automatically terminate, and
all shares subject to such terminated rights shall immediately vest in
full, upon the occurrence of a Corporate Transaction, except to the
extent: (i) any such repurchase right is expressly assigned to the
successor corporation (or parent thereof) in connection with the
Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed by the Committee at the time the repurchase
right is issued.
c. The Committee shall have discretion,
exercisable either before or after the Optionee's cessation of
Service, to cancel the Corporation's outstanding repurchase rights
with respect to one or more shares purchased or purchasable by the
Optionee under this Plan and thereby accelerate the vesting of such
shares in whole or in part at any time.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable
to all Incentive Options granted under this Article Two. Incentive Options may
only be granted to individuals who are Employees. Options which are
specifically designated as Non-Statutory Options when issued under the Plan
shall not be subject to such terms and conditions.
A. Dollar Limitation. The aggregate Fair Market Value
(determined as of the respective date or dates of grant) of the Common Stock
for which one or more options granted to any Employee under this Plan (or any
other option plan of the Corporation or its parent or subsidiary corporations)
may for the first time become exercisable as incentive stock options under the
Federal tax laws during any one calendar year shall not exceed the sum of One
Hundred Thousand Dollars ($100,000). To the extent the Employee holds two 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 stock options under the Federal tax laws shall be applied on the
basis of the order in which such options are granted.
B. 10% Stockholder. If any individual to whom an
Incentive Option is granted is a 10% Stockholder, then the option price per
share shall not be less than one hundred and ten percent (110%) of the fair
market value per share of Common Stock on the grant date, and the option term
shall not exceed five (5) years measured from the grant date.
Except as modified by the preceding provisions of this Section
II, the provisions of the Plan shall apply to all Incentive Options granted
hereunder.
III . CORPORATE TRANSACTION/CHANGE IN CONTROL
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A. In the event of a Corporate Transaction, the
exercisability of each option outstanding under this Article Two shall
automatically accelerate so that each such option shall, immediately prior to
the specified effective date for the Corporate Transaction, become fully
exercisable with respect to the total number of shares of Common Stock at the
time subject to such option and may be exercised for all or any portion of such
shares. However, an outstanding option under this Article Two 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 be replaced with a comparable option to purchase shares of
the capital stock of the successor corporation or parent thereof or (ii) the
acceleration of such option is subject to other limitations imposed by the
Committee at the time of grant. The determination of comparability under
clause (i) above shall be made by the Committee, and its determination shall be
final, binding and conclusive.
B. Immediately following the consummation of the
Corporate Transaction, all outstanding options under this Article Two shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation or its parent company.
C. The Committee shall have the discretionary authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one or
more outstanding options under this Article Two upon the occurrence of a
Corporate Transaction, whether or not those options are to be assumed or
replaced in the Corporate Transaction, or alternatively to provide for the
subsequent acceleration of any outstanding options under this Article Two which
do not otherwise accelerate at the time of the Corporate Transaction, should
the Optionee's Service terminate within a designated period following the
effective date of such Corporate Transaction. The Committee shall also have
the authority to provide for the immediate termination of any of the
Corporation's outstanding repurchase rights under this Article Two which do not
otherwise terminate at the time of the Corporate Transaction, upon the
subsequent termination of the Optionee's Service within a designated period
following the effective date of such Corporate Transaction.
D. Each outstanding option under this Article Two which
is assumed in connection with the Corporate Transaction or is otherwise to
continue in effect shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply and pertain to the number and class of
securities which would have been issuable, in consummation of such Corporate
Transaction, to an actual holder of the same number of shares of Common Stock
as are subject to such option immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the option price payable per
share, provided the aggregate option price payable for such securities shall
remain the same. In addition, the class and number of securities available for
issuance under the Plan following the consummation of the Corporate Transaction
shall be appropriately adjusted.
D. The Committee shall have the discretionary authority,
exercisable either in advance of any actually-anticipated Change in Control or
at the time of an actual Change in Control, to provide for the automatic
acceleration of one or more outstanding options under this
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Article Two (and the immediate termination of the Corporation's outstanding
repurchase rights under this Article Two) upon the occurrence of the Change in
Control. The Committee shall also have full power and authority to condition
any such option acceleration (and the termination of outstanding repurchase
rights) upon the subsequent termination of the optionee's Service within a
specified period following the Change in Control. Any options accelerated in
connection with the Change in Control shall remain fully exercisable until the
expiration or sooner termination of the option term.
E. Any options accelerated in connection with the Change
in Control shall remain fully exercisable until the expiration or sooner
termination of the option term.
F. The grant of options under this Article Two 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.
G. The exercisability as incentive stock options under
the Federal tax laws of any options accelerated under this Section III in
connection with a Corporate Transaction or Change in Control shall remain
subject to the dollar limitation of Section II.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Committee shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under this Article Two and to
grant in substitution new options under the Plan covering the same or different
numbers of shares of Common Stock but with an option price per share not less
than (i) Fair Market Value of the Common Stock on the new grant date in the
case of an Incentive Option (ii) eighty-five percent (85%) of such Fair Market
Value in the case of a Non-Statutory Option, or (iii) one hundred ten percent
(110%) of such Fair Market Value in the case of an Incentive Option granted to
a 10% Stockholder.
V . STOCK APPRECIATION RIGHTS
A. Provided and only if the Committee determines in its
discretion to implement the stock appreciation right provisions of this Section
V, one or more optionees may be granted the right, exercisable upon such terms
and conditions as the Committee may establish, to surrender all or part of an
unexercised option under this Article Two in exchange for a distribution from
the Corporation in an amount equal to the excess of (i) 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 (ii) the aggregate option price payable for such vested shares.
B. No surrender of an option shall be effective
hereunder unless it is approved by the Committee. If the surrender is so
approved, then the distribution to which the optionee
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shall accordingly become entitled under this Section V 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 Committee shall in its sole
discretion deem appropriate.
C. If the surrender of an option is rejected by the
Committee, 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
(i) five (5) business days after the receipt of the rejection notice or (ii)
the last day on which the option is otherwise exercisable in accordance with
the terms of the instrument evidencing such option, but in no event may such
rights be exercised more than ten (10) years after the date of the option
grant.
D. One or more officers of the Corporation subject to
the short-swing profit restrictions of the Federal securities laws may be
granted limited stock appreciation rights in tandem with their outstanding
options under this Article Two. Upon the occurrence of a Hostile Take-Over,
each outstanding option with such a limited stock appreciation right in effect
for at least six (6) months shall automatically be cancelled and 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 cancelled option (whether or not the option is
otherwise at the time exercisable for such shares) over (ii) the aggregate
option price payable for such shares. The cash distribution payable upon such
cancellation shall be made within five (5) days following the consummation of
the Hostile Take-Over. Neither the approval of the Committee nor the consent
of the Board shall be required in connection with such option cancellation and
cash distribution.
E. No stock appreciation right granted under this
Section V shall be assignable or transferable by the optionee and shall be
exercisable only by the optionee. The shares of Common Stock subject to any
option surrendered or cancelled for an appreciation distribution pursuant to
this Section V shall NOT be available for subsequent option grant under the
Plan.
VI. LOANS OR INSTALLMENT PAYMENTS
The Committee may assist any optionee (including any officer)
in the exercise of one or more outstanding options under this Article Two,
including the satisfaction of any Federal and State income and employment tax
obligations arising therefrom, by (a) authorizing the extension of a loan to
such optionee from the Corporation or (b) permitting the optionee to pay the
option price for the purchased Common Stock in installments over a period of
years. The terms of any loan or installment method of payment (including the
interest rate and terms of repayment) will be established by the Committee in
its sole discretion. Loans and installment payments may be granted with or
without security or collateral, but the maximum credit available to the
optionee shall not exceed the sum of (i) the aggregate option price (less par
value) of the purchased shares plus (ii) any federal and state income and
employment tax liability incurred by the optionee in connection with the
exercise of the option.
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ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
------------------------------
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 on or after the 1995 Annual
Stockholders Meeting shall automatically be granted, on the date of such
initial election or appointment, a Non-Statutory Option to purchase 20,000
shares of Common Stock.
2. On the date of each Annual Stockholders
Meeting, beginning with the 1995 Annual Meeting, each individual who is
reelected to serve as an Eligible Director after such meeting, shall
automatically be granted a Non-Statutory Option to purchase 10,000 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 10,000-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 accompany the written notice of exercise delivered to the Corporation.
C. OPTION TERM. Each option shall have a term of ten
(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 grant shall
vest, and the Corporation's repurchase right shall lapse, in a series of
forty-eight (48) equal and successive monthly 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) month of Board service
measured from the option grant date.
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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 vested 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 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
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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 FOUR
MISCELLANEOUS
I. AMENDMENT OF THE PLAN
The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects whatsoever.
However, (i) no such amendment or modification shall, without the consent of
the holders, adversely affect rights and obligations with respect to options at
the time outstanding under the Plan 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,
except for permissible adjustments under Section VI.C of Article One, (ii)
materially modify the eligibility requirements for the grant of options under
the Plan or (iii) otherwise materially increase the benefits accruing to
participants under the Plan.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares or
cash upon the exercise of stock options or stock appreciation rights granted
under the Discretionary Option Grant Program shall be subject to the
satisfaction of all applicable Federal, State and local income and employment
tax withholding requirements.
B. The Committee may, in its discretion and upon such
terms and conditions as it may deem appropriate (including the applicable
safe-harbor provisions of Rule 16b-3 of the Exchange Act) provide any or all
holders of outstanding option grants under Article Two with the election to
have the Corporation withhold, from the shares of Common Stock otherwise
issuable upon the exercise of such options, a portion of such shares with an
aggregate Fair Market Value equal to the designated percentage (any multiple of
5% specified by the optionee) of the Federal, State and local income and
employment taxes ("Taxes") incurred in connection with the acquisition of such
shares. In lieu of such direct withholding, one or more optionees may also be
granted the right to deliver shares of Common Stock to the Corporation in
satisfaction of such Taxes. The withheld or delivered shares shall be valued
at the Fair Market Value on the applicable determination date for such Taxes.
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III. EFFECTIVE DATE AND TERM OF PLAN
1. The Plan was adopted as an amendment and restatement
of the 1993 Stock Option Plan originally adopted as of December 17, 1993 and
became effective on the Effective Date.
A. On January 13, 1995, the Board adopted an amendment
to the Plan to increase the number of shares issuable thereunder by 500,000
shares to 1,000,000 shares and to implement the Automatic Option Grant Program,
subject to stockholder approval at the 1995 Annual Stockholders Meeting. The
Company's stockholders approved such amendment at the 1995 Annual Meeting of
Stockholders held on May 18, 1995.
B. On July 16, 1996, the Board adopted on amendment to
the Plan to increase the number of shares issuable thereunder by 1,000,000
shares to 2,000,000 shares and to increase the total number of shares of Common
Stock for which any one individual may be granted stock options or separately
exercisable stock appreciation rights in any calendar year from 300,000 to
500,000. No options granted on the basis of such 1,000,000-share increase or
the 200,000-share increase shall become exercisable in whole or in part unless
and until such stockholder approval is obtained. If such stockholder approval is
not obtained, then any unexercised options granted on the basis of such increase
shall terminate and cease to be outstanding.
C. The provisions of each restatement of, and amendment
to, the Plan shall apply only to options granted under the Plan from and after
the effective date of such restatement or amendment. All options issued and
outstanding under the Plan immediately prior to the adoption of each
restatement or amendment shall continue to be governed by the terms and
conditions of the Plan (and the instrument evidencing each such option) as in
effect on the date each such option was previously granted, and nothing in a
subsequent restatement or amendment shall be deemed to affect or otherwise
modify the rights or obligations of the holders of such options with respect to
the acquisition of shares of Common Stock thereunder.
D. The Plan shall terminate upon the earliest of (i) the
expiration of the ten (10) year period measured from the date the Plan was
originally adopted by the Board, (ii) the date on which all shares available
for issuance under the Plan have been issued pursuant to the exercise of
outstanding options and stock appreciation rights, or (iii) the termination of
all outstanding options in connection with a Corporate Transaction. If the
date of termination is determined under clause (i) above, then no options
outstanding on such date shall be affected by the termination of the Plan, and
such securities shall thereafter continue to have force and effect in
accordance with the provisions of the instruments evidencing such options.
E. Options may be granted under this Plan to purchase
shares of Common Stock in excess of the number of shares then available for
issuance under the Plan, provided each option granted is not to become
exercisable, in whole or in part, at any time prior to stockholder approval of
an amendment authorizing a sufficient increase in the number of shares issuable
under the Plan.
IV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares pursuant to options granted under the Plan shall be used for general
corporate purposes.
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V. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any
option hereunder, and the issuance of stock upon the exercise or surrender of
any such option shall be subject to the procurement by the Corporation of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it and the 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 a Form S- 8 registration
statement for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any securities exchange on which stock of
the same class is then listed.
VI. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the
Plan, nor any action taken by the Committee hereunder, nor any provision of the
Plan shall be construed so as to grant any individual the right to remain in
the employ or service of the Corporation (or any parent or subsidiary
corporation) for any period of specific duration, and the Corporation (or any
parent or subsidiary corporation retaining the services of such individual) may
terminate such individual's employment or service at any time and for any
reason, with or without cause.
VII. MISCELLANEOUS PROVISIONS
A. Except as otherwise expressly authorized under the
Plan, the right to acquire Common Stock or other assets under the Plan may not
be assigned, encumbered or otherwise transferred by any optionee.
B. The provisions of the Plan governing the vesting and
exercise of options and shares issued under the Plan shall be governed by the
laws of the State of California, as such laws are applied to contracts entered
into and performed in such State.
C. The provisions of the Plan shall inure to the benefit
of, and be binding upon, the Corporation and its successors or assigns, whether
by Corporate Transaction or otherwise, and the optionees, the legal
representatives of their respective estates, their respective heirs or legatees
and their permitted assignees.
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