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 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
K-TEL INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
K-tel International, Inc.
2605 Fernbrook Lane North
Minneapolis, Minnesota 55447
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
February 4, 1998
To our shareholders:
The Annual Meeting of shareholders of K-tel International, Inc. will be
held on February 4, 1998, 10:00 a.m., central time in the Company's executive
offices located at 2605 Fernbrook Lane North in Minneapolis, Minnesota for the
following purposes:
(1) To elect directors.
(2) To approve the K-tel International, Inc. 1997 Stock Option
Plan.
(3) To act upon any other business that may properly come before
the meeting.
Only shareholders of record at the close of business on December 10,
1997 will be entitled to vote at the meeting or any adjournment thereof.
You are cordially invited to attend the meeting. Whether or not you
plan to attend the meeting please read the attached Proxy Statement and
complete, sign, date and return your Proxy in the reply envelope provided as
soon as possible.
By Order of the Board of Directors
David Weiner
Secretary
Approximate Date of Mailing Proxy Material:
December 22, 1997
K-tel International, Inc.
-------------------------
Proxy Statement
Annual Meeting of Shareholders
to be held on
February 4, 1998
-------------------------
The Board of Directors of K-tel International, Inc. (the "Company")
solicits the enclosed Proxy for the Annual Meeting of Shareholders to be held at
the Company's executive offices located at 2605 Fernbrook Lane North in
Minneapolis, Minnesota on February 4, 1998 at 10:00 a.m., Central Time, and any
adjournment thereof. Shares represented by proxies in the form solicited will be
voted. Proxies may be revoked at any time before being exercised by filing with
the Company's Secretary a proxy dated at a later time or a written revocation
dated after the date of the proxy.
OUTSTANDING SHARES AND VOTING RIGHTS
Only shareholders of record at the close of business on December 10,
1997 will be entitled to vote at the meeting or any adjournment thereof. As of
September 30, 1997, the Company had outstanding 3,808,109 shares of Common
Stock. Each share of common stock has one vote.
SECURITY OWNERSHIP
The following table sets forth, as of September 30, 1997, all persons
known by the Company to be the owner, of record or beneficially, of as much as
approximately five percent of the outstanding common stock of the Company, and
such ownership by all officers and directors as a group.
Number of Common Shares Percent of
Name and Address Owned Beneficially Class
- ---------------- ------------------ -----
Philip Kives 3,014,365 (1) 71.9%
220 Saulteaux Crescent
Winnipeg, Manitoba R3J 3W3
Canada
All officers and directors 3,254,766 (2) 77.7%
as a group (6 persons)
- ----------------------
(Footnotes on following page.)
(1) Includes 200,000 shares subject to stock options exercisable by Mr.
Kives at $4.00 per share.
(2) Includes 382,500 shares with respect to which the officers and
directors have rights to acquire beneficial ownership through the
exercise of stock options.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and any person who owns more than 10% of
the Company's common stock to file reports of ownership and changes in ownership
with the Securities and Exchange Commission ("SEC"). Specific due dates have
been established by the SEC for the filing of these reports and the Company is
required to disclose in this Proxy Statement any failure to file the reports by
these dates. Based upon the copies of the Section 16(a) reports that the Company
received from such persons for their 1997 fiscal year transactions, the Company
believes that there has been compliance with all Section 16(a) filing
requirements applicable to such directors, executive officers and beneficial
owners of 10% or more of the Company's outstanding common stock.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the executive
officers of the Company during fiscal 1997.
Name of Officer Age Positions and Offices Held
- --------------- --- --------------------------
Philip Kives 68 Chairman of the Board,
Chief Executive Officer
David Weiner 40 President and Secretary
Jeffrey Koblick 50 Senior Vice President,
Purchasing and Operations
Mark Dixon 38 Vice President - Finance,
Chief Financial Officer/Treasurer
In October 1997 Jeffrey Koblick was appointed as Executive Vice President of
K-Tel International, Inc.
In October 1997 Corey Fischer was elected to succeed Mark Dixon as Vice
President - Finance, Chief Financial Officer/Treasurer of K-tel International,
Inc., and at that time, Mark Dixon was appointed Chief Operating Officer of the
Company's music business. Mark Dixon joined the Company in 1983 and became a
corporate officer of the Company in 1989. Prior to joining K-tel, Mr. Dixon was
with KPMG Peat Marwick, St. Paul, MN, earning his CPA in 1981.
Biographies for the other executive officers are under the heading encaptioned
"Election of Directors".
PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
Six (6) directors are to be elected at the meeting, each for a term of
one year or until his successor is elected and qualified. All the persons listed
below are now serving as directors of the Company except for Mr. Fischer. The
Board of Directors proposes for election all of the nominees listed below:
Common Shares
Beneficially
Principal Occupation Owned as of
Name and Age during the past five Director September 30, 1997 Percent
of Nominee years Since 1997 of Class
- ------------------ ----------------------------------- -------- ------------------ --------
Philip Kives Founder of the Company; 1968 3,014,365 (1) 71.9%
(68) Chairman of the Board
of the Company,
Chief Executive Officer
David Weiner President and Secretary 1996 151,600 (1) 3.6%
(40)
Jeffrey Koblick Sr. Vice President - Purchasing 1996 65,800 (1) 1.6%
(50) and Operations
Corey Fischer Vice President - Finance, --- --- ---
(40) Chief Financial Officer
Garry Kieves CEO - Anagram International, Inc. 1996 --- ---
(49)
Louis Scheimer CEO - Lou Scheimer Productions, Inc. 1996 6,000 (2)
(69)
(1) Includes shares pursuant to options of which Mr. Kives has 200,000, Mr.
Weiner has 133,000, and Mr. Koblick has 32,500 which are exercisable on
September 30, 1997 or within sixty (60) days thereafter.
(2) Represents less than 1%.
Garry Kieves is the nephew of Philip Kives.
Philip Kives founded the Company in 1968 and has served as its Chairman
of the Board since the Company's inception. In addition, Mr. Kives was
reappointed the Chief Executive Officer on October 16, 1996.
David Weiner is President and Secretary of the Company. Mr. Wiener
joined the Company in 1993 and became a corporate officer in 1994 and served in
that capacity until July 1996. Mr. Weiner was rehired as President in September
1996. Prior to joining the Company, Mr. Weiner held various positions within the
firm of Deloitte & Touche Management Consulting since 1989.
Jeffrey Koblick is Ex. Vice President - Purchasing and Operations of
the Company. Mr. Koblick joined the Company in 1970 and became a corporate
officer in 1978. Mr. Koblick has served K-tel International, Inc. in various
capacities and was appointed Ex. Vice President - Purchasing and Operations in
October 1997.
Corey Fischer joined K-tel on July 15, 1997 and became Chief Financial
Officer in October, 1997. Prior to joining K-tel, Mr. Fischer was the Director
of Finance at Las Vegas Entertainment Network Inc. from 1995-1997, and at
Hemdale Communications Inc. from 1994-1995, both NASDAQ traded companies. Prior
to that, Mr. Fischer was a Senior Manager in the corporate entertainment group
of Deloitte & Touche's CPA's.
Garry Kieves is the founder and Chief Executive Officer of Anagram
International, Inc., a closely held manufacturer and distributor of metallic
(mylar) balloons. Mr. Kieves founded Anagram in Belgium in 1976 and moved
manufacturing to the United States in 1980. Anagram has become the world's
largest manufacturer of metallic (mylar) balloons with its corporate
headquarters and manufacturing plant located in Eden Prairie, Minnesota. From
its Minnesota facility, the Company markets its products in over 80 countries
around the world. To support its worldwide marketing effort, sales offices and
distribution facilities are located in London, Frankfurt, Madrid, Paris, Tokyo,
Mexico City, Sydney, and Toronto.
Louis Scheimer is President and founder of Lou Scheimer Productions,
Inc., an animated film production company formed in 1984. Lou Scheimer
Productions is currently involved in program acquisition through international
sources for U.S. release. In 1961, Mr. Scheimer founded Filmation Associates,
Inc. a film production company responsible for such animated films and shows as
Superman, Batman, Aquaman and Fat Albert with Bill Cosby, the longest running
(1972-1984) animated series of all time. Mr. Scheimer was CEO and President of
Filmation Associates from 1961 until 1984, at which time the Company was sold.
Mr. Scheimer has received numerous industry awards (an Emmy, a Scott Neuman and
a Christopher) and is a member of the Motion Picture and Television Academies.
During fiscal 1997 the Company's Board of Directors took action by way
of Unanimous Actions in writing and held two meetings. All directors attended
both meetings.
The Audit Committee consists of Messrs., Kieves and Scheimer. The
principal functions of the Audit Committee are to (i) recommend to the Board of
Directors the independent public accountants to act as the Company's independent
auditors; (ii) discuss with representatives of management and the independent
auditors the scope and procedures used in auditing the records of the Company;
and (iii) review the financial statements of the Company. The Audit Committee
held no meeting in fiscal 1997.
The Compensation Committee was appointed in February 1997 and consists
of Messrs. Kives, Kieves and Scheimer. The principal functions of the
Compensation Committee are to review and recommend compensation for executive
personnel and to administer the Company's stock option and other compensation
plans. The Compensation Committee held no meeting in fiscal 1997.
The Stock Option Committee was appointed in February 1997 and consists
of Messrs. Kieves and Scheimer and administers the Company's 1997 Stock Option
Plan, including making grants and determining vesting of options.
Board members who are employees of the Company receive no compensation
for their service on the Company's Board of Directors. The two outside
directors, Garry Kieves and Louis Scheimer, served without compensation during
fiscal 1997. Compensation for outside directors of the Company, in the future,
may be made in the form of cash or stock option grants.
All shares represented by proxies will be voted for the election of the
foregoing nominees who have indicated a willingness to serve, if elected unless
otherwise provided on the proxy. If any such nominee should withdraw or
otherwise become unavailable for reasons not presently known, the Board of
Directors may designate substitute nominees, in which event the shares
represented by proxy cards returned to the Company will be voted for such
substitute nominees unless an instruction to the contrary is indicated on the
proxy card.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee establishes the general compensation
policies of the Company and specific compensation for each executive officer of
the Company. The Compensation Committee attempts to make the compensation
packages of the executive officers of the Company sufficient to attract and
retain persons of exceptional quality while at the same time including effective
incentives to motivate Company executives to perform as necessary to continue
the success and growth of the Company. The Stock Option Committee administers
grants of stock options under the Company's 1997 Stock Option Plan (the "1997
Option Plan") which was adopted by the Board of Directors in February, 1997 and
is being submitted for approval by the stockholders at this annual meeting.
Management Incentive Plan
The Company has a management incentive plan under which management,
including executive officers, and other key employees may be awarded annual
bonuses based upon the achievement of financial goals and objectives and an
assessment of personal performance during the year. Approximately 25 employees
currently participate in the plan. Payments made to the executive officers under
the management incentive plan are included in the Cash Compensation Table.
Pursuant to the plan, bonuses totaling $134,670 were earned by Messrs., Weiner,
Dixon and Koblick for fiscal 1997. Pursuant to the plan, no bonuses were earned
by Messrs., Weiner, Dixon and Koblick for fiscal 1995 or fiscal 1996.
Retirement Plan
Retirement benefits for full-time U.S. based employees of the Company
are provided under a retirement savings plan qualified under Section 401(k) of
the Internal Revenue Code. Participants may elect to contribute, through salary
reductions, up to 20% of their salary to the retirement plan up to a maximum of
$9,500 per year, and the Company may make matching contributions up to 50% of
the first 6% of the participants contributions. Employee contributions vest
immediately; employer contributions vest 50% after one year of service and 100%
after two years. Distributions upon death or termination of employment are
subject to certain restrictions in order that federal income tax regulations be
complied with and the amounts vested remain on a tax deferred basis until
retirement. Amounts contributed by the Company as matching contributions for the
executive officers under the 401(k) plan are included in the Cash Compensation
Table. The Company made matching contributions of $10,002 in fiscal 1997 for the
executive officers named in the Compensation Table.
Stock Options
On July 15, 1987 the Board of Directors adopted the K-tel
International, Inc. 1987 Stock Incentive Plan (the "1987 Option Plan") for
officers and other key employees of the Company. The shareholders approved the
plan on December 8, 1987. The stock incentives may take the form of incentive
stock options, nonqualified stock appreciation rights and/or restricted stock. A
total of 350,000 shares of the Company's common stock were reserved for issuance
upon exercise of the options. The Board of Directors has sole authority to
determine the employees to whom options and awards are granted, the duration of
the exercise period and any other matters arising under the plan. The Stock
Option Committee administers the 1997 Option Plan, including determination of
option grants. The Board of Directors has, from time to time, granted options
outside of these option plans.
As of September 30, 1997 there were 117,738 outstanding incentive stock
options granted under the option plans with 90,288 options exercisable and
442,500 nonqualified stock options granted with 353,000 options exercisable. As
of September 30, 1997 there were 30,850 options available to be granted under
the plan.
In November 1996, the Board of Directors granted Mr. Kives a
non-qualified stock option on 200,000 shares at an exercise price of $4.00 per
share for his years of service as Chairman of the Board of Directors and Chief
Executive Officer. The options vested 100% on the date of the grant.
Chief Executive Officer Compensation
Mr. Kives was reappointed as Chief Executive Officer October 16, 1995.
For fiscal 1997, Mr. Kives did not receive any cash compensation for his
services to the Company, but received an option on 200,000 shares of stock. The
option was granted to Mr. Kives by action of the Board of Directors in
recognition of his prior services and because he served as Chief Executive
Officer without cash compensation during fiscal 1997.
Philip Kives Garry Kieves Louis Scheimer
Compensation Committee Compensation Committee Compensation Committee
Stock Option Committee Stock Option Committee
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the cash and
noncash compensation for each of the last three fiscal years awarded to or
earned by the Chief Executive Officer and each of the other highest paid
executive officers of the Company for services in all capacities to the Company
and its subsidiaries during the year ended June 30, 1997.
Long Term
Annual Compensation Compensation
------------------------------------- ------------
Name and Awards All Other
Principal Position(s) Year Salary Bonus Options Compensation (1)
- ------------------------------------------------------------------------------------------------------
Philip Kives 1997 $ ---- $ ---- 200,000 $ ----
Chief Executive Officer 1996 $ ---- $ ---- ---- $ ----
1995 $ ---- $ ---- ---- $ ----
David Weiner 1997 $173,979 $ 85,920 200,000 $ 2,495
Vice President - Corporate 1996 $146,250 $ ---- ---- $ 495
Development 1995 $117,500 $ ---- ---- $ 1,366
Jeffrey Koblick 1997 $199,312 $ 30,000 ---- $ 3,894
Senior Vice President - 1996 $195,000 $ ---- ---- $ 1,210
Purchasing and Operations 1995 $177,482 $ ---- ---- $ 2,022
Mark Dixon 1997 $123,320 $ 18,750 ---- $ 3,613
Chief Financial Officer, 1996 $115,000 $ ---- ---- $ 1,260
Vice President - Finance 1995 $ 97,500 $ ---- ---- $ 1,221
and Treasurer
- -----------------------
(1) Other compensation for the 1995, 1996 and 1997 fiscal years consists of the
Company contributions under the 401(k) plan.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth, as to each executive officer named in
the Summary Compensation Table, certain information with respect to stock
options granted during the fiscal year ended June 30, 1997.
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term
- -------------------------------------------------------------------------------------- -----------------------------
Percent of
Total Options
Granted to
Options Employees in Exercise Expiration
Name Granted Fiscal Year Price ($/sh) Date 5% 10%
- -------------------------------------------------------------------------------------- ----------------------------
Philip Kives 200,000 42.4% $ 4.00 Nov./2006 $503,116 $1,274,994
David Weiner 200,000 42.4% $ 4.00 Sept./2006 $503,116 $1,274,994
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth, as to each executive officer named in
the Summary Compensation Table, certain information with respect to stock
options exercised during the last fiscal year and unexercised options held as of
June 30, 1997.
Number of Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options at
Year-End (#) Fiscal Year-End (1)
----------------------------- ----------------------------
Shares Acquired Value
Name on Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------
Philip Kives 0 0 200,000 0 $ 726,000 $ ---
David Weiner 0 0 100,000 100,000 $ 363,000 $ 363,000
Jeffrey Koblick 0 0 52,500 0 $ 285,575 $ ---
Mark Dixon 0 0 17,000 0 $ 57,335 $ ---
(1) Market value of underlying securities at year-end minus the exercise price.
Certain Transactions
During fiscal 1997, the Company purchased $381,000 of consumer
convenience product from K-tel International, Ltd., another company controlled
by the Chairman of the Board. The purchase prices for these products were at
prices comparable to transactions with a third party. There was an outstanding
balance owed by the Company to this affiliate at June 30, 1997 of $255,000. The
Company reimbursed such other company $1,000 during fiscal 1997 for warehousing
and shipping services provided in Canada and travel, telephone and legal fees
incurred on behalf of the Company.
The Company sold approximately $229,000 of consumer convenience product
in fiscal 1997 to K-tel International, Ltd. and K-tel International (Canada),
Inc., both affiliates controlled by the Company's Chairman of the Board. The
prices for these products were comparable to prices in transactions with third
parties. There was an outstanding balance of $83,000 owed by these affiliates to
the Company at June 30, 1997.
COMPANY STOCK PRICE PERFORMANCE
The following Stock Price Performance Graph compares the cumulative total
return* of the Company, the S&P 500 Stock Index and peer group Companies
(Quality Dino Entertainment and Live Entertainment) for a six year period:
[PLOT POINTS GRAPH]
1992 1993 1994 1995 1996 1997
-------- -------- --------- -------- -------- --------
K-TEL INTERNATIONAL $100.00 $394.74 $1,447.37 $833.34 $635.97 $712.64
S & P 500 100.00 113.41 128.87 130.68 164.75 207.59
PEER GROUP 100.00 11.82 8.74 11.29 9.95 12.90
* Cumulative total return assumes quarterly reinvestment of dividends.
PROPOSAL NUMBER TWO
APPROVAL OF K-TEL INTERNATIONAL, INC.
1997 STOCK OPTION PLAN
In February, 1997, the Board of Directors adopted the K-tel
International, Inc. 1997 Stock Option Plan (the "Plan"). The Board of Directors
adopted the Plan because no new grants could be made under the Company's
existing option plan, which was adopted in 1987 (the "1987 Option Plan"), after
1997 and there were only approximately 31,000 shares remaining available for
grant under the 1987 Option Plan. An aggregate of 300,000 shares of Common Stock
are reserved for issuance under the Plan. A copy of the Plan is attached to this
Proxy Statement as Appendix A.
The Plan is being submitted for approval by the Company's shareholders
because shareholder approval is required under the Internal Revenue Code of
1986, as amended (the "Code") for incentive stock options to be granted and to
qualify the Plan as a "performance based" plan which is not subject to the $1.0
million deductibility limit on compensation to each of the executive officers
named in the Summary Compensation Table.
GENERAL
The purpose of the Plan is to provide incentives to key employees of
the Company who are expected to contribute materially to the success of the
Company, to provide a means of rewarding performance and to enhance the interest
of such key employees in the Company's continued success and progress by
providing them a proprietary interest in the Company. As of October 31, 1997, 32
employees held options granted under the Plan for an aggregate of 23,500 shares
of Common Stock at an exercise price of $6.125 per share. No options may be
granted under the Plan after February 19, 2007. In addition, as of October 31,
1997, 83 employees held 110,088 options granted under the 1987 Option Plan or
granted outside of any plan at exercise prices ranging from $1.50 to $8.50.
ADMINISTRATION
The Stock Option Committee of the Board of Directors (the "Committee")
is responsible for the administration of the Option Plan. The Committee must be
comprised of at least two directors who are "Non-Employee Directors" within the
meaning of Rule 16b-3 of the Securities and Exchange commission. The Committee
has general authority and discretion to determine the employees to whom and the
time or times at which options may be granted, and the number of shares to be
subject to each option; provided that the Committee may not grant options under
the Plan on more than 50,000 shares of Common Stock to any employee during any
calendar year. In addition, the Committee may prescribe the terms applicable to
each grant of an option. The Committee is currently comprised of the following
two directors: Garry Kieves and Lou Scheimer.
TERMS AND CONDITIONS OF OPTIONS
Either incentive stock options ("ISOs") within the meaning of Section
422A of the Code or non-statutory options may be granted under the Plan. The
purchase price of shares of Common Stock subject to options granted under the
Plan is determined by the Committee, but is not to be less than 100% of the fair
market value of the Company's Common Stock on the date the option is granted for
ISOs and not less than 85% of the fair market value on the date the option is
granted for non-statutory options. An option granted under the Plan will vest at
such rate and upon such conditions as the Committee determines at the time the
option is granted and the Committee has the authority to waive any of such
conditions after the grant of the options. Options granted under the Plan are
not transferable by the optionee during his or her lifetime except with the
consent of the Company by action of the Committee. An option may be exercised
only while the optionee is an employee for the Company or any of its
subsidiaries or, in the event of a termination of employment other than by death
or disability, within thirty (30) days after termination of employment (but not
later than the expiration of the term of the option). Upon the death or
disability of an optionee, the optionee or optionee's legal or personal
representative or beneficiaries may exercise an option to the extent exercisable
by the optionee within one hundred twenty (20) days after the optionee's death
or disability (but not later than the expiration of the term of the option). In
the event any option expires or is canceled,
surrendered or terminated without being exercised, the shares subject to such
option (or the unexercised portion thereof) will again be available for options
under the Option Plan.
PAYMENT
Payment for shares of Common Stock purchased upon the exercise of an
option under the Option Plan must be made in full at the time the option is
exercised by (I) payment in cash, (ii) delivery of shares of the company's
Common Stock which have been owned for at least six months valued at their then
fair market value, or (iii) payment by the optionee's broker from the sale or
loan proceeds for such shares or any other securities the optionee may have in
his account with the broker.
TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. Under the present federal tax regulations,
there will be no federal income tax consequences to either the company or the
optionee upon the grant of an ISO, nor will an optionee's exercise of an ISO
result in federal income tax consequences to the Company. Although an optionee
will not realize ordinary income upon exercise of an ISO, the excess of the fair
market value of the shares of Common stock acquired at the time of exercise over
the exercise price will constitute an "item of tax preference" within the
meaning of Section 57 of the Code and, thus, may result in the imposition of the
"alternative minimum tax" pursuant to Section 55 of the code on the optionee. If
an optionee disposes of shares of Common Stock acquired through the exercise of
an ISO within two (2) years from the date of grant and within one (1) year of
the date of exercise of the ISO, an amount equal to the lesser of (I) the excess
of the fair market value of such shares on the date of the exercise over the
exercise price, or (ii) the actual gain realized upon such disposition will
constitute ordinary income to the optionee in the year of disposition. Any
additional gain upon such disposition will be taxed as short-term capital gain.
The Company will receive a deduction in an amount equal to the amount
constituting ordinary income to the optionee.
NON-STATUTORY OPTIONS. Under the present federal income tax
regulations, there will be no federal income tax consequences to either the
Company of the optionee upon the grant of a non-statutory option. However, the
optionee will realize ordinary income upon the exercise of a non-statutory
option in an amount equal to the excess of the fair market value of the shares
of Common Stock acquired upon exercise of such option over the exercise price,
and the Company will receive a corresponding tax deduction. The gain, if any
realized upon a subsequent disposition of such shares will constitute short-term
or long-term capital gain, depending upon the optionee's holding period.
OUTSTANDING OPTIONS
As of October 31, 1997, options were outstanding under the Plan for the
executive officers named in the compensation Table included in this Proxy
Statement as follows: David Weiner-3,000 shares, Jeffrey Koblick-17,000 shares,
and Mark Dixon-15,000 shares, all shares are exercisable at $6.125 per share. In
addition, Corey Fischer, who was elected Chief Financial Officer in October 1997
held options under the Plan on 15,000 shares at $6.125 per share. The five
current executive officers together as a group have options under the Plan for
50,000 shares at an exercise price of $6.125 per share. Options are outstanding
under the Plan for 32 employees who are not executive officers for 23,500 shares
at an exercise price of $6.125 per share. All options were granted at fair
market value on the date of grant.
RECOMMENDATION BY BOARD OF DIRECTORS
The Board of Directors unanimously recommends a vote FOR the proposal
to approve the Plan. The affirmative vote of a majority of the shares voting at
the meeting is required for approval of the Plan by the shareholders.
ADDITIONAL INFORMATION
General
As of the date of this Proxy Statement, management knows of no matters
that will be presented for determination at the meeting other than those
referred herein. If any other matters properly come before the meeting calling
for a vote of shareholders, it is intended that proxies in the enclosed form
will be voted in accordance with the judgment of the individual voting the
proxies.
Expenses in connection with the solicitation of proxies will be paid by
the Company. Proxies are being solicited principally by mail. In addition,
directors, officers and regular employees of the Company may solicit proxies
personally by telephone or by special letter. The Company may reimburse
brokerage firms and others for their expenses in forwarding proxy materials to
the beneficial owners of stock of the Company.
The Company's Annual Report for the year ended June 30, 1997
accompanies this proxy statement.
Shareholder Proposal
Any shareholders proposals for the Company's 1999 annual meeting must
be received by the Company's Secretary by September 15, 1998 in order to be
included in the proxy statement. The proposals must comply with all applicable
statutes and regulations.
Independent Public Accountants
Arthur Andersen LLP were the Company's independent public accountants
for fiscal 1997. A representative of Arthur Andersen LLP is expected to be
present at the Annual meeting and will have an opportunity to make a statement,
if such representative desires to do so, and will be available to respond to
appropriate questions.
The Board of Directors has not yet selected the Company's independent
public accountants for fiscal 1998.
By Order of the Board of Directors
David Weiner
Secretary
Minneapolis, Minnesota
December 22, 1997
K-TEL INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Philip Kives and David Weiner, or either of
them, as proxies, each with full power of substitution, to represent and to
vote, as designated below, all of the undersigned's shares of common stock of
K-tel International, Inc. which the undersigned would be entitled to vote at the
Annual Meeting of Stockholders to be held on February 4, 1997 at 10:00 a.m. and
at any adjournment thereof.
1. Election of Directors: For all nominees listed below
(except as marked on the contrary below) [ ]
WITHHOLD AUTHORITY to vote for
all nominees listed below [ ]
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW.)
Nominees: Philip Kives, David Weiner, Jeffrey Koblick, Corey Fischer,
Garry Kieves, Lou Scheimer
2. To approve the K-tel International, Inc. 1997 Stock Option Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
- --------------------------------------------------------------------------------
(Continued and to be signed on reverse side)
3. In their discretion on any other matter that may properly come before the
meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED "FOR"
PROPOSALS 1 AND 2.
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS.
Please sign exactly as your name or names appear below. If a partnership, sign
in Partnership name by authorized person. When shares are held by joint tenants,
both should sign. When signing as attorney, executor, administrator, trustee or
guardian give your full title as such. If a corporation, sign the full corporate
name by a duly authorized officer.
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
Date ____________________________________
Signature(s):
_________________________________________
_________________________________________
APPENDIX A
K-TEL INTERNATIONAL, INC.
1997 STOCK OPTION PLAN
------------------------------
PART I
PURPOSES; DEFINITIONS; SHAREHOLDER APPROVAL;
RESERVATION OF SHARES; AND PARTICIPATION IN PLAN
ARTICLE I
Purposes
1.1 Purposes of Plan. The purpose of this K-tel International, Inc.
1997 Stock Option Plan (the "Plan") is to provide incentives to employees of the
Company and/or any Subsidiary who contribute, and are expected to contribute, to
the success of the Company and any Subsidiary, to provide a means of rewarding
outstanding performance, and to enhance the interest of such employees in the
Company's continued success and progress by providing them a proprietary
interest in the Company. Further, this Plan is designed to enhance the Company's
ability to maintain a competitive position in attracting and retaining qualified
personnel necessary for the continued success and progress of the Company.
ARTICLE II
Definitions
2.1 Certain terms used herein shall have the meaning below stated,
subject to the provisions of Section 7.1.
"Board" or "Board of Directors" means the Board of Directors of the
Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee appointed by the Board to administer
this Plan pursuant to Article VII or, if no Committee is appointed by the Board,
means the Board.
"Common Stock" means, subject to the provisions of Section 9.3, the
Common Stock of the Company, par value $.01 per share.
"Company" means K-tel International, Inc., a Minnesota corporation.
"Disability" means (subject to Section 6.2) a physical or mental
impairment of sufficient severity such that an Employee is permanently unable to
continue his employment with the Company as determined by the Committee.
"Employee" means an employee (including an officer) of the Company or
of any Subsidiary of the Company.
"Fair Market Value" means the fair market value of the Company's Common
Stock as determined by the Committee on the basis of available prices for such
Common Stock or in such manner as may be authorized by applicable regulations
under the Code.
"Incentive Stock Option" means an option to purchase Common Stock,
granted by the Company to an Employee pursuant to Section 5.1, which is intended
to meet the requirements of Section 422A of the Code and which is designated at
the time of the award of an Incentive Stock Option.
"Non-Statutory Option" means an option to purchase Common Stock,
granted by the Company to an Optionee pursuant to Section 5.1, which is not an
Incentive Stock Option.
"Option" means an Incentive Stock Option or a Non-Statutory Option.
"Optionee" means the holder of an Option granted under the Plan.
"Plan" means the Damark International, Inc. 1991 Stock Option Plan, as
set forth herein and as from time to time amended.
"Subsidiary" means a subsidiary or parent corporation, as defined in
Section 425(e) and (f) of the Code, with respect to the Company.
"1933 Act" means the Securities Act of 1933, as amended.
ARTICLE III
Shareholder Approval; Reservations of Shares
3.1 Shareholder Approval. This Plan was approved by the Board of
Directors on February 18, 1997 and shall be subject to approval by the
affirmative vote of the holders of a majority of the Company's Common Stock at a
meeting of shareholders, which approval must be obtained no later than February
17, 1998.
3.2 Shares Reserved Under Plan. Subject to adjustment under the
provisions of Section 9.3 hereof, the maximum number of shares of Common Stock
which may be issued and sold under this Plan is 300,000 shares. Such shares may
be either authorized and unissued shares or shares issued and thereafter
acquired by the Company. Shares issued pursuant to this Plan
shall be subject to all applicable provisions of the Articles of Incorporation
and Bylaws of the Company in existence at the time of issuance of such shares
and at all times thereafter. If Options granted under this Plan shall terminate
or cease to be exercisable by reason of expiration, surrender for cancellation
or otherwise without having been wholly exercised, new Options may be granted
under this Plan covering the number of shares to which such termination or
cessation relates. At no time may the sum of the maximum number of shares
issuable under outstanding Options granted under this Plan and the number of
shares previously issued under Options granted under this Plan exceed the
maximum number of shares that may be issued and sold under this Plan, as above
stated.
ARTICLE IV
Participation in Plan
4.1 Eligibility to Receive Options. Options under this Plan may be
granted only to Employees who are employed by the Company or a Subsidiary on the
date the Option is granted and who the Committee believes are in a position to
make an important contribution to the success of the Company, all as determined
by the Committee, provided that no Employee shall be eligible for Options under
this Plan if such person has been a member of the Board of Directors of the
Company or a Subsidiary within one year of the grant.
4.2 Participation Not Guarantee of Employment. Nothing in this Plan or
in the instrument evidencing the grant of an Option shall in any manner be
construed to limit in any way the right of the Company or a Subsidiary to
terminate an Employee's employment at any time without regard to the effect of
such termination on any rights such Employee would otherwise have under this
Plan, or give any right to such an Employee to remain employed by the Company or
a Subsidiary in any particular position or at any particular rate of
compensation.
PART II
OPTIONS;
TERMINATION OF EMPLOYMENT AND DEATH
ARTICLE V
Options
5.1 Grants of Options.
(a) Grant. The Committee may grant Incentive Stock Options
and/or Non-Statutory Options to Employees, subject to the limitations provided
in Section 5.1(f) and Section 7.1. All Options under this Plan shall be granted
within ten years of March 20, 1991, the date on which this Plan was adopted by
the Board of Directors subject to approval of the Plan by shareholders.
(b) Option Price. The purchase price per share of Common Stock
under each Incentive Stock Option and Non-Statutory Option shall be determined
by the Committee but shall be not less than 100% of the Fair Market Value per
share of such Common Stock on the date the Option is granted for Incentive Stock
Options and no less than 85% of the Fair Market Value per share of such Common
Stock on the date the Option is granted for Non-Statutory Options. The purchase
price per share may be subject to adjustment in accordance with the provisions
of Section 9.3 hereof.
(c) Options Agreements. Options shall be evidenced by option
agreements in such form and containing such terms and conditions as the
Committee shall approve, which terms and conditions need not be the same for all
Options.
(d) Options Nontransferable. Except with the prior written
consent of the Committee, an Option granted under this Plan shall by its terms
be nontransferable by the Optionee other than by will or the laws of descent and
distribution, and, during the lifetime of the Optionee, shall be exercisable
only by such Optionee. No transfer of an Option by an Optionee by will or by the
laws of descent and distribution shall be effective to bind the Company unless
the Company shall have been furnished with written notice thereof and a copy of
the will and/or such other evidence as the Committee may determine necessary to
establish the validity of the transfer.
(e) Substitution and Cancellation. The Committee may, in its
sole discretion, grant to an Optionee who has been granted an Option under this
Plan, in exchange for the surrender and cancellation of such Option, a new
Option having a purchase price lower (or higher) than the purchase price
provided in the Option so surrendered and cancelled and containing such other
terms as the Committee may deem appropriate, subject to Section 5.1(b) and such
other limitations or restrictions with respect to an Incentive Stock Option as
may be imposed by the Code.
(f) Annual Per-Employee Limitation. The number of shares of
Common Stock subject to all Options granted to any Employee during any calendar
year shall not exceed 50,000 shares.
5.2 Exercise.
(a) Term of Options; Vesting; and Exercise. The term of each
Option granted under this Plan shall not exceed ten (10) years from the date of
grant. An Option granted under this Plan shall become vested and exercisable at
such rate and on such conditions as the Committee shall determine at the time
such Option is granted.
(b) Exercise; Payment on Exercise. Options shall be exercised
by delivering to the Company an exercise notice in the form prescribed by the
Committee. No shares of Common Stock shall be issued on the exercise of an
Option unless paid for in full at the time of purchase as provided in the next
sentence and until the provisions of 9.4 shall have been satisfied. Payment for
shares of Common Stock purchased upon the exercise of an Option shall be made
(i) in cash, or (ii) the following alternative forms of payment: (A) in whole or
in part in shares
of Common Stock held by the Optionee for at least six months and valued at the
then Fair Market Value thereof, or (B) by delivery to the Company of irrevocable
instructions to the Optionee's broker, which instructions and broker shall be
satisfactory to the Company, to promptly deliver to the Company the total
purchase price for the shares of the Option being exercised from the sale
proceeds for such shares or the loan proceeds for such shares or any other
securities which the Optionee may have in his account with such broker, and the
Company will deliver such shares directly to such broker in accordance with such
procedures as the Committee may establish, which alternative forms of payment
may be permitted by the Committee at the time the Option is granted or at any
time thereafter during the term of the Option. Stock certificates for the shares
of Common Stock so paid for will be issued and delivered to the person entitled
thereto only at the Company's office in Minneapolis, Minnesota. No Optionee
shall have any rights as a shareholder with respect to any share of Common Stock
covered by an Option unless and until such Optionee shall have become the holder
of record of such share and, except as otherwise permitted in Section 9.3
hereof, no adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property or distributions or other rights)
in respect of such share for which the record date is prior to the date on which
such Optionee shall have become the holder of record thereof.
(c) Dissolution, Liquidation, Etc. If at any time after an
Option has become exercisable and prior to its exercise and expiration, a
voluntary dissolution, liquidation (other than a liquidation into another
corporation which agrees to continue this Plan) or winding up of the affairs of
the Company shall be proposed, the Company shall cause notice in writing to be
mailed to each person holding an Option under this Plan, which notice shall be
mailed not less than twenty days prior to the closing of the transfer books of
the Company or the record date for determination of the holders of Common Stock
of the Company entitled to participate in such dissolution, liquidation or
winding up, as the case may be, to the end that during such notice period the
holder of any Option, to the extent that the same is then exercisable by such
holder, subject to the terms of Article V hereof, may purchase Common Stock in
accordance with the terms of the Option and be entitled, in respect of the
number of shares so purchased, to all the rights of the other holders of Common
Stock of the Company with respect to such proposed dissolution, liquidation or
winding up of the affairs of the Company. Each Option at the time outstanding
and all rights thereunder shall terminate at the close of business on the
twentieth day after mailing of such notice to the holder of such Option or on
the record date for determination of holders of Common Stock entitled to
participate in such dissolution, liquidation or winding up, whichever date is
later.
(d) Exercise of Options. In the event that an Optionee
exercises an Option, such Optionee shall comply with all requirements set forth
in the option agreement for such Options in connection with the purchase of
shares of Common Stock under this Plan.
5.3 Incentive Stock Options.
(a) Annual Limitation. In no event shall any Optionee be
granted an Incentive Stock Option under this Plan or any other plan of the
Company or any Subsidiary if such option would, during the calendar year in
which the option first becomes exercisable when combined with other Incentive
Stock Options which first become exercisable in such calendar year, entitle
such Optionee, to purchase shares of Common Stock or shares of any Subsidiary
having an aggregate fair market value (determined as of the time such option or
options were granted) in excess of $100,000. In the event an option granted
hereunder is designated an Incentive Stock Option and exceeds the limitations
set forth in this Section 5.4(a), whether at the time of grant or thereafter,
such option shall be an Incentive Stock Option only to the extent permitted
hereby and the balance thereof shall be a Non-Statutory Option for the purposes
of this Plan.
(b) Incentive Stock Options Granted to Ten Percent
Shareholders. No Incentive Stock Option shall be granted to any Employee who
owns, directly or indirectly pursuant to Section 425(d) of the Code, stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any Subsidiary, unless at the time such
Incentive Stock Option is granted, the price of the Incentive Stock Option is at
least 110% of the Fair Market Value of the Common Stock subject to the Incentive
Stock Option and such Incentive Stock Option, by its terms, is not exercisable
after the expiration of five (5) years from the date such Incentive Stock Option
is granted.
(c) Notice. Each Optionee shall give prompt notice to the
Company of any disposition of shares acquired upon exercise of an Incentive
Stock Option if such disposition occurs within either two years after the date
of grant or one year after the date of transfer of such shares to the Optionee
upon the exercise of such Incentive Stock Option.
(d) Consent. To the extent appropriate to avoid a
"modification" or other event described in Section 425(h) of the Code, a
Optionee's rights under an Incentive Stock Option (including the rights to pay
the exercise price in Common Stock) shall be set forth in the option agreement
for such Option entered into at the date of grant, so as to preclude any
requirement that further Committee consent be given after the date of grant.
ARTICLE VI
Termination of Employment
6.1 Termination of Employment. Unless earlier terminated in accordance
with its terms, an Option shall terminate thirty (30) days after any termination
of the Optionee's employment with the Company or any Subsidiary for any reason
other than as a result of the death or disability of the Optionee or, in the
case of death or disability of any Optionee, 120 days after the death or the
termination of the Optionee's employment due to disability.
6.2 Employment. For all purposes of this Plan, and any Option granted
hereunder, "employment" shall be defined in accordance with the provisions of
Section 1.421-7(h) of the Income Tax Regulations (or any successor regulations).
PART III
ADMINISTRATION, AMENDMENT AND TERMINATION
OF PLAN; MISCELLANEOUS
ARTICLE VII
Administration of Plan
7.1 The Committee. This Plan shall be administered by the Board or a
Committee of the Board consisting of two or more directors, each of whom shall
be a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3)(i) of the
Securities and Exchange Commission and shall be appointed by, and serve at the
pleasure of, the Board. A majority of the Committee shall constitute a quorum
thereof and the actions of a majority of the Committee at a meeting at which a
quorum is present, or actions unanimously approved in writing by all members of
the Committee, shall be the actions of the Committee. Vacancies occurring on the
Committee shall be filled by the Board. The Committee shall have full and final
authority to interpret this Plan and the agreements evidencing Options granted
hereunder (which agreements need not be identical), to prescribe, amend and
rescind rules and regulations, if any, relating to this Plan and to make all
determinations necessary or advisable for the administration of this Plan. The
Committee's determination in all matters referred to herein shall be conclusive
and binding for all purposes and upon all persons including, but without
limitation, the Company, the shareholders of the Company, the Committee and each
of the members thereof, and the Employees and the Optionees, and their
respective personal representatives, heirs and assigns.
7.2 Liability of Committee. No member of the Committee shall be liable
for anything done or omitted to be done by such member or by any other member of
the Committee in connection with this Plan, except for the willful misconduct or
gross negligence of such member. The Committee shall have power to engage
outside consultants, auditors or other professional help to assist in the
fulfillment of the Committee's duties under this Plan at the Company's expense.
7.3 Determinations of the Committee. In making its determinations
concerning the Employees, who shall receive Options as well as the number of
shares to be covered thereby and time or times at which they shall be granted,
the Committee shall take into account the nature of the services rendered by the
respective Employees and their past, present, and potential contribution to the
Company's success and such other factors as the Committee may deem relevant. The
Committee shall also determine the form of option agreements to be issued under
this Plan and the terms and conditions to be included therein, provided such
terms and conditions are not inconsistent with the terms of this Plan. In its
discretion or in accordance with a direction from the Board, the Committee may
waive any provisions of any option agreement, provided such waiver is not
inconsistent with the terms of this Plan as then in effect.
ARTICLE VIII
Amendment and Termination of Plan
8.1 Amendment of Plan.
(a) Generally. The Plan may be amended at any time and from
time to time by the Board of Directors of the Company but no amendment which (i)
increases the aggregate number of shares of Common Stock which may be issued and
sold under this Plan other than adjustments pursuant to Section 9.3, (ii)
decreases the minimum option price provided in this Plan, (iii) extends the
period during which Options may be granted under this Plan, or (vi) changes the
class of Employees eligible to receive Options, shall be effective unless and
until the same is approved by the affirmative vote, in person or by proxy, of
the holders of a majority of the shares of Common Stock of the Company present
and entitled to vote at a meeting held to take such action at which a quorum is
present. No termination or amendment of this Plan, without the consent of the
holder of any Option then existing, may terminate such holder's Option or
materially and adversely affect such holder's rights thereunder.
(b) Amendments Relating to Incentive Stock Options. To the
extent applicable, this Plan is intended to permit the issuance of Incentive
Stock Options in accordance with the provisions of Section 422A of the Code. The
Plan may be modified or amended at any time, both prospectively and
retroactively, and in such manner as to affect Incentive Stock Options
previously granted (after taking into account Section 425(h) of the Code,
relating to "modifications," etc.), if such amendment or modification is
necessary for this Plan and the Incentive Stock Options granted hereunder to
qualify under said provisions of the Code.
8.2 Termination. The Board of Directors of the Company may at any time
terminate this Plan as of any date specified in a resolution adopted by the
Board. If not earlier terminated, this Plan shall terminate on the tenth
anniversary of the effective date of the Plan. No Options may be granted after
this Plan has terminated. After this Plan shall terminate, the function of the
Committee will be limited to supervising the administration of Options
previously granted.
ARTICLE IX
Miscellaneous Provisions
9.1 Restrictions Upon Grant of Options. The registration or
qualification under any Federal or state law of any shares of Common Stock
issuable upon the exercise of Options granted pursuant to this Plan (whether to
permit the grant of Options or the resale or other disposition of any such
shares of Common Stock by or on behalf of the Optionees receiving such shares)
may be necessary or desirable and, in any such event, delivery of the
certificates for such shares of Common Stock shall, if the Board of Directors,
in its sole discretion, shall determine, not be made until such listing,
registration or qualification shall have been completed.
9.2 Restrictions upon Resale of Unregistered Stock. If the shares of
Common Stock that have been transferred to a Optionee pursuant to the terms of
this Plan are not registered
under the 1933 Act, pursuant to an effective registration statement, such
Optionee, if the Committee shall deem it advisable, may be required to represent
and agree in writing (i) that any shares of Common Stock acquired by such
Optionee pursuant to this Plan will not be sold except pursuant to an effective
registration statement under the 1933 Act, or pursuant to an exemption from
registration under the 1933 Act and (ii) that such Optionee is acquiring such
shares of Common Stock for such Optionee's own account and not with a view to
the distribution thereof.
9.3 Adjustments. In the event of any change whether through
recapitalization, merger, consolidation, stock dividend, split-up, or amount of
the Company's capital stock (or any other transaction described in Section
425(a) of the Code) after any Option is granted hereunder and prior to the
exercise thereof, the Option, to the extent that it has not been exercised,
shall entitle the holder to such number and kind of securities as such holder
would have been entitled to had such holder actually owned the stock subject to
the Option at the time of the occurrence of such change. If any such event
should occur, the number of shares subject to Options which are authorized to be
issued hereunder, but which have not been issued, shall be similarly adjusted.
If any other event shall occur, prior to the exercise of an Option granted to an
Optionee hereunder, which shall increase or decrease the amount of capital stock
outstanding and which the Committee, in its sole discretion, shall determine
equitably requires an adjustment in the number of shares which the holder should
be permitted to acquire, such adjustment as the Committee shall determine may be
made, and when so made shall be effective and binding for all purposes of this
Plan.
9.4 Withholding of Taxes. Each Optionee who exercises an Option to
purchase Common Stock shall, prior to the issuance of any shares, pay to the
Company, or make arrangements (including withholding of shares of Common Stock
purchased upon exercise of the Option at the Fair Market Value thereof)
satisfactory to the Committee regarding payment of, any taxes of any kind
required by law to be withheld with respect to the transfer to such Optionee of
such shares of Common Stock and/or amounts upon exercise of such Option.
9.5 Use of Proceeds. The proceeds from the sale of Common Stock
pursuant to Options granted under this Plan shall constitute general funds of
the Company and may be used for such corporate purposes as the Company may
determine.
9.6 Other Grants. Options may be granted under this Plan from time to
time in substitution for stock options held by employees of other corporations
who are or are about to become employees of the Company or a Subsidiary as the
result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary, or the acquisition by the Company or a Subsidiary of
the assets of the employing corporation, or the acquisition by the Company or a
Subsidiary of stock of the employing corporation as the result of which it
becomes a Subsidiary of the Company. The terms and conditions of the substituted
Options so granted may vary from the terms and conditions set forth in Part II
to such extent as the Committee may deem appropriate to conform, in whole or in
part, to the provisions of the substituted stock incentives.
9.7 Other Benefits. Nothing contained herein shall prevent the Company
from establishing other incentive plans in which Employees under the Plan may
also participate. No award under this Plan shall be considered as compensation
in calculating any insurance, pension
or other benefit for which the recipient is eligible unless any such insurance,
pension or other benefit is granted under a plan which expressly provides that
compensation under this Plan (and specifying the type of such compensation)
shall be considered as compensation under such plan.