UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE \
SECURITIES EXCHANGE ACT OF 1934
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Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
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[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
WESTAFF, INC.
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(Name of Registrant as Specified In Its Charter)
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WESTAFF, INC.
301 LENNON LANE
WALNUT CREEK, CALIFORNIA 94598
SUPPLEMENT TO PROXY STATEMENT FOR 2001 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 23, 2001
The following supplements and amends the Proxy Statement of Westaff, Inc.
(the "Company") dated April 20, 2001 (the "Proxy Statement") that was mailed to
you on or about April 23, 2001, in connection with the Annual Meeting of
stockholders of the Company (the "Annual Meeting") to be held at 10:00 a.m.,
local time, at the Company's administrative office located at 220 N. Wiget Lane,
Walnut Creek, California on Wednesday, May 23, 2001. This supplement should be
read in conjunction with the Proxy Statement.
The Company announced on May 1, 2001, the appointment of Tom D. Seip as its
President and Chief Executive Officer and as a director. W. Robert Stover will
remain as the Chairman of the Board of Directors. In conjunction with
Mr. Seip's appointment, the Board of Directors adopted a proposal to amend and
restate the Company's 1996 Stock Option/Stock Issuance Plan (the "Plan").
Prior to joining the Company, Mr. Seip was employed by Charles
Schwab & Co. from January 1983 to June 1998 in various capacities, serving most
recently as Chief Executive Officer of Charles Schwab Investment
Management, Inc., the company's mutual fund subsidiary, and was a member of the
Charles Schwab Management Committee from July 1992 to June 1998. Since January
1998, Mr. Seip has been a private investor with a focus on early stage companies
in the financial services sector. Mr. Seip was a Vice President and Partner at
Korn/Ferry International from 1977 to 1982. He began his career as an Executive
Recruiter at Merrill Lynch & Co.
Under the Company's employment agreement with Mr. Seip, he shall serve as
the President and Chief Executive Officer. Effective as of the first day of his
employment, the Board of Directors awarded Mr. Seip stock options to purchase an
aggregate of 1,000,000 shares of the Company's Common Stock with an exercise
price equal to the fair market value on the date of the grant. 500,000 of these
shares were granted as an incentive stock option and the remaining 500,000 of
these shares were granted as a nonqualified stock option, which shall be
rescinded if the stockholders do not approve the proposal to amend and restate
the Plan, as discussed below. The option grants are subject to vesting on terms
described in the option agreements.
The Board of Directors has approved an amendment and restatement of the
Plan, subject to stockholder approval, to: (i) increase the number of shares
reserved for issuance under the Plan by 1,000,000 shares of Common Stock thereby
bringing the number of shares issuable under the Plan to a total of 2,550,718
shares; and (ii) increase the maximum number of shares with respect to which
stock options, stock appreciation rights and direct stock issuances may be
granted to any individual in any calendar year from 500,000 to 1,000,000 shares
of Common Stock. This proposal to amend and restate the Plan requires an
affirmative vote of a majority of shares present in person or represented by
proxy at the 2001 Annual Meeting and entitled to vote on such matters.
VOTING BY MAIL
Stockholders who are entitled to vote at the 2001 Annual Meeting can use the
enclosed Proxy. You can vote by proxy or in person at the meeting on May 23,
2001. If you return your signed Proxy before the meeting, the proxy holders will
vote your shares as you direct. If you return your Proxy and do not specify on
the proxy card how you want your shares voted, the proxy holders will vote them
FOR the election of the two nominees for directors of Westaff, FOR the
ratification of the appointment of Arthur Andersen LLP as the Company's
independent public accountants and FOR the amendment and restatement of the Plan
to (i) increase the number of shares reserved for issuance under the Plan by
1,000,000 shares for a new total of 2,550,718 shares and (ii) increase the
maximum number of shares with respect to which stock options, stock appreciation
rights and direct stock issuances may be granted
to any individual in any calendar year from 500,000 to 1,000,000 shares of
Common Stock. If the enclosed form of Proxy is not executed and returned, but
the original form of Proxy delivered with the Proxy Statement dated April 23,
2001 has been executed and returned, the persons appointed as Proxies under the
original form of Proxy will vote the shares represented by such form of Proxy as
indicated therein and FOR the amendment and restatement of the Plan.
VOTING ELECTRONICALLY OR BY TELEPHONE
Instead of submitting your vote by mail on the enclosed proxy card, you can
vote electronically by submitting your Proxy through the Internet or by
telephone. Please note that there are separate arrangements for using the
Internet and telephone depending on whether your shares are registered in the
Company's stock records in your name or in the name of a brokerage firm or bank.
The Internet and telephone voting procedures are designed to authenticate
your identity as a Westaff, Inc. stockholder, to allow you to vote your shares
and to confirm that your instructions have been properly recorded. Stockholders
voting by means of the Internet through American Stock Transfer & Trust Company,
the Company's transfer agent, should understand that there may be costs
associated with electronic access, such as usage charges from Internet access
providers and telephone companies, that may be borne by each individual
stockholder.
Stockholders with shares registered directly in their name in the Company's
stock records maintained by American Stock Transfer & Trust Company may vote
their shares as follows:
- By submitting their proxy through the Internet at the following address on
the World Wide Web: WWW.VOTEPROXY.COM. Please access the web page and
follow the on-screen instructions. Have your control number available when
you access the web page.
- By making a toll-free telephone call from the United States and Canada to
American Stock Transfer & Trust Company at 1-800-PROXIES and following the
instructions. Have your control number and the proxy card available when
you call.
- By mailing their signed proxy card. Specific instructions to be followed
by registered stockholders are set forth on the enclosed proxy card.
Proxies submitted through the Internet or by telephone through American
Stock Transfer & Trust Company as described above must be received by
one o'clock p.m. Eastern Standard Time (E.S.T.) on May 23, 2001.
A number of brokerage firms and banks are participating in a program
provided through ADP Investor Communication Services that offers telephone and
Internet voting options. That program is different from the program provided by
American Stock Transfer & Trust Company for shares registered in the name of the
stockholder. If your shares are held in an account at a brokerage firm or bank
participating in the ADP Program, you may vote those shares by calling the
telephone number which appears on your voting form or through the Internet in
accordance with the instructions set forth on the voting form. If you have any
questions regarding the proposals or how to execute your vote, please contact
American Stock Transfer & Trust Company at (718) 921-8210.
REVOCABILITY OF PROXIES
You may revoke or change your Proxy at any time before it is voted at the
Annual Meeting by filing with the Secretary of the Company at the Company's
principal executive offices a notice of revocation or another signed Proxy with
a later date. You also may revoke your Proxy by attending the Annual Meeting and
voting in person. Please note, however, that if your shares are held of record
by a broker, bank or other nominee and you wish to vote at the meeting, you must
bring to the meeting a letter from the broker, bank or other nominee confirming
your beneficial ownership of the shares. To revoke a Proxy previously submitted
electronically through the Internet or by telephone, you simply may vote again
at a later date, but before one o'clock p.m. E.S.T. on May 23, 2001, using the
same procedures, in which case your later submitted vote will be recorded and
your earlier vote revoked.
PROPOSAL THREE--AMENDMENT AND RESTATEMENT OF WESTAFF, INC.'S 1996 STOCK
OPTION/STOCK ISSUANCE PLAN
The Board of Directors announced on May 1, 2001, the appointment of Tom D.
Seip as the Company's President and Chief Executive Officer and as a director
and, in conjunction with Mr. Seip's appointment, the Board of Directors adopted
a proposal to amend and restate the Plan. Presently, the authorized number of
shares reserved for issuance under the Plan is 1,550,718. Additionally, the
maximum number of shares with respect to which stock options, stock appreciation
rights and direct stock issuances may be granted to any individual in any
calendar year is currently set at 500,000 shares of Common Stock.
The Board of Directors has approved an amendment and restatement of the Plan
to: (i) increase the number of shares reserved for issuance under the Plan by
1,000,000 shares of Common Stock thereby bringing the number of shares issuable
under the Plan to a total of 2,550,718 shares; and (ii) increase the maximum
number of shares with respect to which stock options, stock appreciation rights
and direct stock issuances may be granted to any individual in any calendar year
from 500,000 to 1,000,000 shares of Common Stock. This proposal to amend the
Plan requires stockholder approval pursuant to the terms of the Plan. The Board
recommends approval of the amendments because it believes they increase the
Company's ability to attract, retain and motivate officers and other key
employees and directors by providing them with an enhanced proprietary interest
in the Company or an additional feature enhancing the value of certain options
issued under the Plan, which results in an incentive to enhance the growth and
profitability of the Company.
1,033,812 shares of the Company's Common Stock were initially reserved for
issuance over the ten-year term of the Plan. Due to a three-for-two stock split
effected in the form of a stock dividend on May 29, 1998 to shareholders of
record on May 18, 1998, the total number of shares reserved for issuance under
the Plan increased to 1,550,718. Options granted under the Plan may be either
Incentive Options, as defined in Section 422 of the Internal Revenue Code, or
Non-Statutory Options. The total number of shares currently reserved for
issuance under the Plan shall be increased by 1,000,000 shares to a new total of
2,550,718 shares if this proposal is approved by the stockholders. As of
April 24, 2001, options to purchase approximately 230,213 shares were
outstanding, 127,411 options to purchase shares had been exercised, and
approximately 1,193,094 shares remained reserved for future grants.
In connection with his appointment as the new President and Chief Executive
Offer of the Company, as of May 1, 2001, Mr. Seip has been granted stock options
to purchase an aggregate of 1,000,000 shares of Common Stock, of which 500,000
shares shall be granted to him as a nonqualified stock option. Such nonqualified
stock option grant shall be rescinded if a majority of the stockholders of the
Company vote against the proposal to increase the maximum number of shares with
respect to which stock options, separately exercisable stock appreciation rights
and direct stock issuances may be granted in any calendar year from 500,000
shares to 1,000,000 shares of Common Stock.
This summary of the essential terms to be amended is not intended to be a
complete description of all of the terms of the Plan, and is qualified in its
entirety by the terms of the Plan, as proposed to be amended and restated, which
is attached to this Supplement to Proxy Statement as EXHIBIT A and is hereby
incorporated herein by reference.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR THE AMENDMENT AND
RESTATEMENT OF WESTAFF, INC.'S 1996 STOCK OPTION/STOCK ISSUANCE PLAN.
OTHER MATTERS
As of the date of this supplement, the Board of Directors does not know of
any other matters to be submitted at the 2001 Annual Meeting. As to any other
business that may come before the meeting, we intend that the persons voting
your Proxy will vote in accordance with their judgment.
Regardless of whether you plan to attend the meeting, it is important that
your shares by voted. Accordingly, we ask that you either vote by telephone or
by the Internet or sign and return your proxy card as soon as possible in the
envelope provided.
At any time prior to their being voted, proxies are revocable by written
notice to the Secretary of the Company or by appearance at the 2001 Annual
Meeting and voting in person. See "Revocability of Proxies" above for additional
instructions.
Dated: May 1, 2001 The Board of Directors
of Westaff, Inc.
WESTAFF, INC.
1996 STOCK OPTION/STOCK ISSUANCE PLAN
(amended and restated as of March 26, 1998)
(amended and restated as of May 17, 2000)
(amended and restated as of April 30, 2001)
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
A. This 1996 Stock Option/Stock Issuance Plan (the "Plan") is intended to
promote the interests of Westaff, 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).
B. The Plan became effective immediately upon the execution and final
pricing of the Underwriting Agreement for the initial public offering of the
Corporation's Common Stock on April 30, 1996 (referred to herein as the Plan
Effective Date).
II. DEFINITIONS
A. 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:
(i) the acquisition directly or indirectly by any person or related
group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities pursuant to
a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to
accept;
(ii) or a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of
the Board members ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who
either (A) have been Board members continuously since the beginning
of such period or (B) have been elected or nominated for election
as Board members during such period by at least a majority of the
Board members described in clause (A) who were still in office at
the time such election or nomination was approved by the Board.
CODE: the Internal Revenue Code of 1986, as amended.
COMMON STOCK: shares of the Corporation's Common Stock, par value of
$0.01 per share.
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CORPORATE TRANSACTION: either of the following stockholder-approved
transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or substantially all
of the Corporation's assets in complete liquidation or dissolution
of the Corporation.
COVERED EMPLOYEE: an Employee who is a "covered employee" under
Section 162(m)(3) of the Code.
EMPLOYEE: an individual who performs services while in the employ of
the Corporation or one or more Parent or Subsidiary corporations, subject to the
control and direction of the employer entity not only as to the work to be
performed but also as to the manner and method of performance.
EXERCISE DATE: the date on which the Corporation shall have received
written notice of the option exercise.
FAIR MARKET VALUE: the Fair Market Value per share of Common Stock
determined in accordance with the following provisions: 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, Inc. through the
Nasdaq National Market. 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. If the Common Stock is at the time listed or admitted to trading
on any national securities 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 Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of transactions
on such exchange. If there is no 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. For purposes of any option grants which are made at the time the
Underwriting Agreement for the initial public offering of the Common Stock is
executed and priced but prior to the time the Common Stock is first traded on
either a national securities exchange or the Nasdaq National Market, the Fair
Market Value per share of Common Stock shall be deemed to be equal to the price
per share at which the Common Stock is to be sold in the initial public offering
pursuant to the Underwriting Agreement.
HOSTILE TAKE-OVER: a change in ownership of the Corporation effected
through the following transaction:
(i) the direct or indirect acquisition by any person or related group of
persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control
with, the Corporation) of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than
fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept, and
(ii) the acceptance of more than fifty percent (50%) of the securities
so acquired in such tender or exchange offer from holders other
than the officers and directors of the Corporation subject to the
short-swing profit restrictions of Section 16 of the 1934 Act.
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INCENTIVE OPTION: a stock option which satisfies the requirements of
Code Section 422.
INVOLUNTARY TERMINATION: the termination of the Service of any
individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a change in
his or her position with the Corporation which materially reduces
his or her level of responsibility, (B) a reduction in his or her
level of compensation (including base salary, fringe benefits and
participation in corporate-performance based bonus or incentive
programs) by more than fifteen percent (15%) or (C) a relocation of
such individual's place of employment by more than fifty
(50) miles, provided and only if such change, reduction or
relocation is effected by the Corporation without the individual's
consent.
MISCONDUCT: the commission of any act of fraud, embezzlement or
dishonesty by the Optionee, Participant or other person in the Service of the
Corporation (or any Parent or Subsidiary), any unauthorized use or disclosure by
such person of confidential information or trade secrets of the Corporation (or
any Parent or Subsidiary), or any other intentional misconduct by such person
adversely affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
any Optionee, Participant or other person in the Service of the Corporation (or
any Parent or Subsidiary).
1934 ACT: the Securities and Exchange Act of 1934, as amended from time
to time.
NON-STATUTORY OPTION: a stock option not intended to meet the
requirements of Code Section 422.
OPTIONEE: a person to whom an option is granted under the Discretionary
Option Grant Program or Automatic Option Grant Program.
PARTICIPANT: a person who is issued Common Stock under the Stock
Issuance Program.
PERFORMANCE-BASED COMPENSATION: compensation qualifying as
"performance-based compensation" under Section 162(m) of the Code.
PERMANENT DISABILITY OR PERMANENTLY DISABLED: the inability of the
Optionee or the Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
However, solely for the purposes of the Automatic Option Grant Program,
Permanent Disability or Permanently Disabled shall mean the inability of the
non-employee Board member to perform his or her usual duties as a Board member
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.
PLAN ADMINISTRATOR: the particular entity, whether the Primary
Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
PRIMARY COMMITTEE: the committee of two (2) or more non-employee Board
members appointed by the Board to administer the Discretionary Option Grant, the
Automatic Option Grant and Stock Issuance Programs with respect to Section 16
Insiders.
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SECONDARY COMMITTEE: a committee of two (2) or more Board members
appointed by the Board to administer the Discretionary Option Grant and Stock
Issuance Programs with respect to eligible persons other than Section 16
Insiders.
SECTION 16 INSIDER: an officer or director of the Corporation subject
to the short-swing profit liabilities of Section 16 of the 1934 Act.
SECTION 12(g) REGISTRATION DATE: the date on which the initial
registration of the Common Stock under Section 12(g) of the 1934 Act becomes
effective.
SERVICE: the performance of services on a periodic basis for the
Corporation (or any parent or subsidiary corporation) 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 or stock issuance agreement.
TAKE-OVER PRICE: the greater of (i) the Fair Market Value per share of
Common Stock on the date the particular option to purchase such stock is
surrendered to the Corporation in connection with a Hostile Take-Over or
(ii) the highest reported price per share of Common Stock paid by the tender
offeror in effecting such Hostile Take-Over. However, if the surrendered option
is an Incentive Option, the Take-Over Price shall not exceed the clause (i)
price per share.
B. The following provisions shall be applicable in determining the parent
and subsidiary corporations of the Corporation:
Any corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation shall be considered to be a Parent
of 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.
Each corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation shall be considered to be a
Subsidiary of 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.
III. STRUCTURE OF THE PLAN
A. STOCK PROGRAMS. The Plan shall be divided into three separate
components: the Discretionary Option Grant Program specified in Article Two, the
Automatic Option Grant Program specified in Article Three and the Stock Issuance
Program specified in Article Four. Under the Discretionary Option Grant Program,
eligible individuals may, at the discretion of the Plan Administrator, be
granted options to purchase shares of Common Stock in accordance with the
provisions of Article Two. Under the Automatic Option Grant Program, each
individual serving as a non-employee Board member on the Plan Effective Date and
each individual who first joins the Board as a non-employee director at any time
after such Plan Effective Date shall at periodic intervals receive option grants
to purchase shares of Common Stock in accordance with the provisions of Article
Three, with the first such grants to be made on the Plan Effective Date. Under
the Stock Issuance Program, eligible individuals may be issued shares of Common
Stock directly, either through the immediate purchase of such shares at a price
per share not less than eighty-five percent (85%) of the fair market value per
share of Common Stock at the time of issuance or as a bonus for past services
rendered the Corporation or the Corporation's attainment of financial
objectives.
B. GENERAL PROVISIONS. Unless the context clearly indicates otherwise, the
provisions of Articles One and Five shall apply to the Discretionary Option
Grant Program, Automatic Option Grant
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Program and the Stock Issuance Program and shall accordingly govern the
interests of all individuals under the Plan.
IV. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant, the Automatic Option Grant and Stock
Issuance Programs with respect to Section 16 Insiders. The Primary Committee
shall be constituted in such a manner as to satisfy all applicable laws and to
permit such grants and related transactions under the Plan to be exempt from
Section 16(b) of the Exchange Act in accordance with Rule 16b-3.
B. Administration of the Discretionary Option Grant, the Automatic Option
Grant and Stock Issuance Programs with respect to all other persons eligible to
participate in those programs, if any, may, at the Board's discretion, be vested
in the Primary Committee or a Secondary Committee, or the Board may retain the
power to administer those programs with respect to all such persons.
C. Notwithstanding the foregoing, grants of stock options, separately
exercisable stock appreciation rights or direct stock issuances to any Covered
Employee intended to qualify as Performance-Based Compensation shall be made
only by a committee (or subcommittee of a committee) which is comprised solely
of two or more Board members eligible to serve on a committee making grants
qualifying as Performance-Based Compensation. In the case of such grants to
Covered Employees, references to the "Plan Administrator", the "Primary
Committee", or to a "Secondary Committee" shall be deemed to be references to
such committee or subcommittee.
D. Members of the Primary Committee or any Secondary Committee shall serve
for such period of time as the Board may determine and may be removed by the
Board at any time. The Board may also at any time terminate the functions of the
Primary Committee and any Secondary Committee and reassume all powers and
authority previously delegated to such committee.
E. Each Plan Administrator shall, within the scope of its administrative
functions under the Plan, have full power and authority to establish such rules
and regulations as it may deem appropriate for proper administration of the
Discretionary Option Grant, the Automatic Option Grant and Stock Issuance
Programs and to make such determinations under, and issue such interpretations
of, the provisions of such programs and any outstanding options or stock
issuances thereunder as it may deem necessary or advisable. Decisions of the
Plan Administrator within the scope of its administrative functions under the
Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant Program, the Automatic Option Grant Program or Stock
Issuance Program under its jurisdiction or any stock option or stock issuance
thereunder.
F. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
V. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option Grant
Program under Article Two and the Stock Issuance Program under Article Four
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);
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(ii) non-employee members of the Board; and
(iii) those consultants or other independent advisors who provide
valuable services to the Corporation (or its parent or subsidiary
corporations).
B. Each Plan Administrator shall, within the scope of its administrative
jurisdiction under the Plan, have full authority (subject to the provisions of
the Plan) to determine, (i) with respect to the option grants under the
Discretionary Option Grant Program, which eligible persons are to receive option
grants, the time or times when such option grants are to be made, the number of
shares to be covered by each such grant, the status of the granted option as
either an Incentive Option or a Non-Statutory Option, the time or times at which
each option is to become exercisable, the vesting schedule (if any) applicable
to the option shares and the maximum term for which the option is to remain
outstanding and (ii) with respect to stock issuances under the Stock Issuance
Program, which eligible persons are to receive stock issuances, the time or
times when such issuances are to be made, the number of shares to be issued to
each Participant, the vesting schedule (if any) applicable to the issued shares
and the consideration to be paid for such shares.
VI. STOCK SUBJECT TO THE PLAN
A. Shares of 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 maximum number of shares
of Common Stock which may be issued over the term of the Plan shall not exceed
2,550,718 shares, subject to adjustment from time to time in accordance with the
provisions of this Section VI.
B. No one person participating in the Plan may receive stock options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 1,000,000 shares of Common Stock in the aggregate per calendar year.
To the extent required by Section 162(m) of the Code or the regulations
thereunder, in applying the foregoing limitation with respect to a person
participating in the Plan, if any stock option, separately exercisable stock
appreciation right or direct stock issuance is canceled, the canceled stock
option, stock appreciation right or direct stock issuance shall continue to
count against the maximum number of shares with respect to which stock options,
stock appreciation rights and direct stock issuances may be granted to such
person. For this purpose, the repricing of an option (or in the case of a stock
appreciation right, the base amount on which the stock appreciation is
calculated is reduced to reflect a reduction in the Fair Market Value of the
Common Stock) shall be treated as the cancellation of the existing option or
stock appreciation right and the grant of a new option or stock appreciation
right.
C. Except to the extent required by Section 162(m) of the Code or the
regulations thereunder, as discussed immediately above, 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), then
the shares subject to the portion of each option not so exercised shall be
available for subsequent issuance under the Plan. Shares subject to any stock
appreciation rights exercised under the Plan and all share issuances under the
Plan, whether or not the shares are subsequently repurchased by the Corporation
pursuant to its repurchase rights under the Plan, shall reduce on a
share-for-share basis the number of shares of Common Stock available for
subsequent issuance under the Plan. In addition, should the exercise price of an
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 or the vesting of a direct
share issuance made under the Plan, then the number of shares of Common Stock
available for issuance under the Plan shall be reduced by the gross number of
shares for which
6
the option is exercised or which vest under the share issuance, and not by the
net number of shares of Common Stock actually issued to the holder of such
option or share issuance.
D. Should any change be 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 the Corporation's receipt of consideration, then
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the maximum number and/or class of
securities for which any one individual participating in the Plan may be granted
stock options, separately exercisable stock appreciation rights and direct stock
issuances in the aggregate per calendar year, (iii) the number and/or class of
securities for which automatic-option grants are to be subsequently made per
eligible non-employee Board member under the Automatic Option Grant Program,
(iv) the number and/or class of securities and price per share in effect under
each option outstanding under either the Discretionary Option Grant Program or
Automatic Option Grant Program, and (v) such other provisions of the Plan as the
Plan Administrator determines is appropriate. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
7
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Discretionary Option Grant Program shall be
authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or Non-Statutory
Options. Individuals who are not Employees of the Corporation or its Parent or
Subsidiary corporations may only be granted non-statutory options. Each granted
option shall be evidenced by one or more instruments in the form approved by the
Plan Administrator; PROVIDED, however, that each such instrument shall comply
with the terms and conditions specified below. 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 Plan Administrator
in accordance with the following provisions:
(i) The option price per share of Common Stock subject to an Incentive
Option shall in no event be less than one hundred percent (100%) of
the Fair Market Value of such Common Stock on the grant date.
(ii) The option price per share of Common Stock subject to a
Non-Statutory Option shall in no event be less than eighty-five
percent (85%) of the Fair Market Value of such Common Stock on the
grant date.
(iii) In the case of an option intended to qualify as Performance-Based
Compensation, the option price per share of Common Stock shall in
no event be less than one hundred percent (100%) of the Fair Market
Value of such Common Stock on the grant date.
2. The option price shall become immediately due upon exercise of the
option and, subject to the provisions of Section I of Article Five and the
instrument evidencing the grant, shall be payable in one of the following
alternative forms specified below:
(i) full payment in cash or check drawn to the Corporation's order;
(ii) full payment in shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value on
the Exercise Date (as such term is defined below);
(iii) full payment in a combination of shares of Common Stock held for
the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and valued
at Fair Market Value on the Exercise Date and cash or check drawn
to the Corporation's order; or
(iv) full payment through a broker-dealer sale and remittance procedure
pursuant to which the Optionee shall provide irrevocable written
instructions to (A) a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate option price payable
for the purchased shares plus all applicable Federal, state and
local income and employment taxes required to be withheld by the
Corporation in connection with such purchase and (B) the
Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale
transaction.
8
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 Discretionary Option Grant Program shall be
exercisable at such time or times and during such period as is determined by the
Plan Administrator and set forth in the instrument evidencing the grant. No such
option, however, shall have a maximum term in excess of ten (10) years from the
grant date.
C. TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise period applicable
to any outstanding option held by the Optionee at the time of cessation of
Service or death.
(i) Should an Optionee cease Service for any reason (including death or
Permanent Disability) while holding one or more outstanding options
under this Article Two, then none of those options shall (except to
the extent otherwise provided pursuant to subparagraph 2 below)
remain exercisable for more than a twelve (12)-month period (or such
shorter period determined by the Plan Administrator and set forth in
the instrument evidencing the grant) measured from the date of such
cessation of Service.
(ii) Any option held by the Optionee under this Article Two and
exercisable in whole or in part on the date of his or her death may
be subsequently exercised by the personal representative of the
Optionee's estate or by the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with
the laws of descent and distribution. However, the right to
exercise such option shall lapse upon the earlier of (A) the first
anniversary of the date of the Optionee's death (or such shorter
period determined by the Plan Administrator and set forth in the
instrument evidencing the grant) or (B) the specified expiration
date of the option term. Accordingly, upon the occurrence of the
earlier event, the option shall terminate and cease to remain
outstanding.
(iii) Under no circumstances shall any such option be exercisable after
the specified expiration date of the option term.
(iv) During the applicable post-Service exercise period, the option may
not be exercised in the aggregate for more than the number of
shares (if any), in which the Optionee is vested at the time of his
or her cessation of Service. Upon the expiration of the limited
post-Service exercise period or (if earlier) upon the specified
expiration date of the option term, each such option shall
terminate and cease to remain outstanding with respect to any
vested shares for which the option has not otherwise been
exercised. However, each outstanding option shall immediately
terminate and cease to remain outstanding, at the time of the
Optionee's cessation of Service, with respect to any shares for
which the option is not otherwise at that time exercisable or in
which the Optionee is not otherwise vested.
(v) Should the Optionee's Service be terminated for Misconduct, then all
outstanding options held by the Optionee under this Article Two
shall terminate immediately and cease to remain outstanding.
2. The Plan Administrator shall have the discretion, exercisable either
at the time an option is granted or at any time while the option remains
outstanding, to:
(i) extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service from the
period otherwise in effect for that option to such
9
greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option
term, and/or
(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number
of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but
also with respect to one or more additional installments in which
the Optionee would have vested under the option had the Optionee
continued in Service.
D. STOCKHOLDER RIGHTS.
An Optionee shall have no stockholder rights with respect to any shares
covered by the option until such individual shall have exercised the option,
paid the option price for the purchased shares and become the holder of record
of those shares.
E. TRANSFERABILITY
During the lifetime of the Optionee, any Incentive Option shall be
exercisable only by the Optionee and shall not be assignable or transferable
other than by will or by the laws of descent and distribution following the
Optionee's death. However, a Non-Statutory Option may be assigned in whole or in
part during the Optionee's lifetime in accordance with the terms of the
instrument evidencing the grant. The terms applicable to the assigned portion of
any Non-Statutory Option shall be the same as those in effect for the option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate.
F. REPURCHASE RIGHTS
The shares of Common Stock acquired upon the exercise of any Article Two
option grant may be subject to repurchase by the Corporation in accordance with
the following provisions:
(i) The Plan Administrator shall have the discretion to authorize the
issuance of unvested shares of Common Stock under this Article Two.
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 be
exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be
established by the Plan Administrator and set forth in the
instrument evidencing such repurchase right.
(ii) All of the Corporation's outstanding repurchase rights under this
Article Two 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:
(A) any such repurchase right is expressly assigned to the
successor corporation (or parent thereof) in connection with the
Corporate Transaction or (B) such termination is precluded by other
limitations imposed by the Plan Administrator at the time the
repurchase right is issued.
(iii) The Plan Administrator shall have the discretionary authority,
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 Article Two and thereby accelerate the vesting
of such shares in whole or in part at any time.
10
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 Options during any one calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted. Should the number of
shares of Common Stock for which any Incentive Option first becomes exercisable
in any calendar year exceed the applicable One Hundred Thousand Dollar
($100,000) limitation, then that option may nevertheless be exercised in that
calendar year for the excess number of shares as a Non-Statutory Option.
B. 10% STOCKHOLDER. If any individual to whom an Incentive Option is
granted is the owner of stock (as determined under Section 424(d) of the Code)
possessing ten percent (10%) or more of the total combined voting power of all
classes of stock of the Corporation or any one of its Parent or Subsidiary
corporations, then the option price per share shall not be less than one hundred
ten percent (110%) of the Fair Market Value per share of Common Stock on the
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 Articles One, Two and Five of the Plan shall apply to all
Incentive Options granted hereunder.
III. CORPORATE TRANSACTIONS/CHANGES IN CONTROL
A. In the event of any Corporate Transaction, each option which is at the
time 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 to be replaced with a comparable
option to purchase shares of the capital stock of the successor corporation or
parent thereof, (ii) such option is to be replaced with a cash incentive program
of the successor corporation which preserves the option spread existing at the
time of the Corporate Transaction and provides for subsequent payout in
accordance with the same vesting schedule applicable to such option, or
(iii) the acceleration of such option is subject to other limitations imposed by
the Plan Administrator at the time of the option grant. The determination of
option comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be final, binding and conclusive.
B. 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. 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
issued to the option holder, in consummation of such Corporate Transaction, had
11
such person exercised the 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 on both an aggregate and per
participant basis following the consummation of the Corporate Transaction shall
be appropriately adjusted.
D. The Plan Administrator shall have full power and authority to grant
options under the Discretionary Option Grant Program which provide for the
accelerated vesting of one or more outstanding options under the Discretionary
Option Grant Program upon the occurrence of a Corporate Transaction, Change in
Control or Hostile Take-Over whether or not those options are to be assumed or
otherwise continued in full force and effect pursuant to the terms of the
Corporate Transaction, Change in Control or Hostile Take-Over. In addition, the
Plan Administrator may structure one or more of the Corporation's repurchase
rights under the Discretionary Option Grant Program so that those rights shall
immediately terminate, in whole or in part, at the time of a Corporate
Transaction, Change in Control or Hostile Take-Over and shall not be assignable
to the successor corporation (or parent thereof), and the shares subject to
those terminated repurchase rights shall accordingly vest in full at the time of
such Corporate Transaction, Change in Control or Hostile Take-Over.
E. The Plan Administrator shall have full power and authority to grant
options under the Discretionary Option Grant Program which will automatically
accelerate in whole or in part in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed twelve (12) months) following the effective date of any Corporate
Transaction in which those options are assumed or replaced and do not otherwise
accelerate. Any options so accelerated shall remain exercisable for fully-vested
shares until the earlier of (i) the expiration of the option term or (ii) the
expiration of the twelve (12) month period measured from the effective date of
the Involuntary Termination. In addition, the Plan Administrator may provide
that one or more of the Corporation's outstanding repurchase rights with respect
to shares held by the Optionee at the time of such Involuntary Termination shall
immediately terminate in whole or in part, and the shares subject to those
terminated rights shall accordingly vest.
F. The Plan Administrator shall have full power and authority to grant
options under the Discretionary Option Grant Program which will automatically
accelerate in whole or in part in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed twelve (12) months) following the effective date of any Change in
Control. Each option so accelerated shall remain exercisable for fully-vested
shares until the earlier of (i) the expiration of the option term or (ii) the
expiration of the twelve (12)-month period measured from the effective date of
the Involuntary Termination. In addition, the Plan Administrator may provide
that one or more of the Corporation's outstanding repurchase rights with respect
to shares held by the Optionee at the time of such Involuntary Termination shall
immediately terminate in whole or in part, and the shares subject to those
terminated rights shall accordingly vest.
G. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Non-Qualified Option.
H. The outstanding options 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.
12
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time and
from time to time, with the consent of the affected 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) one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the new grant date in the case of a grant of an Incentive Option,
(ii) one hundred ten percent (110%) of such Fair Market Value in the case of a
grant of an Incentive Option to a 10% Stockholder or (iii) eighty-five percent
(85%) of such Fair Market Value in the case of all other grants.
V. STOCK APPRECIATION RIGHTS
A. Provided and only if the Plan Administrator 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 Plan Administrator 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 exercise price payable for such vested shares.
B. No surrender of an option shall be effective hereunder unless it is
approved by the Plan Administrator. If the surrender is so approved, then the
distribution to which the Optionee 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 Plan Administrator shall in its sole discretion deem appropriate.
C. If the surrender of an option is rejected by the Plan Administrator,
then the Optionee shall retain whatever rights the Optionee had under the
surrendered option (or surrendered portion thereof) on the option surrender date
and may exercise such rights at any time prior to the later of (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 1934 Act may, in the Plan Administrator's sole discretion,
be granted limited stock appreciation rights in tandem with their outstanding
options under this Article Two. Upon the occurrence of a Hostile Take-Over, the
officer shall have a thirty (30)-day period in which he or she may surrender any
outstanding options with such a limited stock appreciation right in effect for
at least six (6) months to the Corporation, to the extent such option is at the
time exercisable for fully vested shares of Common Stock. The officer 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 vested shares of Common
Stock at the time subject to each surrendered option (or surrendered portion of
such option) over (ii) the aggregate exercise price payable for such shares. The
cash distribution shall be made within five (5) days following the date the
option is surrendered to the Corporation, and neither the approval of the Plan
Administrator nor the consent of the Board shall be required in connection with
the option surrender and cash distribution. Any unsurrendered portion of the
option shall continue to remain outstanding and become exercisable in accordance
with the terms of the instrument evidencing such grant.
E. The shares of Common Stock subject to any option surrendered for an
appreciation distribution pursuant to this Section V shall not be available for
subsequent issuance under the Plan.
13
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
The individuals eligible to receive automatic option grants pursuant to the
provisions of this Article Three program shall be limited to those individuals
who are serving as non-employee Board members on the Plan Effective Date or who
are first elected or appointed as non-employee Board members on or after the
Plan Effective Date, whether through appointment by the Board or election by the
Corporation's stockholders. Each non-employee Board member eligible to
participate in the Automatic Option Grant Program pursuant to the foregoing
criteria shall be designated an Eligible Director for purposes of the Plan.
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. GRANT DATES. Option grants shall be made under this Article Three on
the dates specified below:
1. INITIAL GRANT. Each Eligible Director who is a non-employee Board
member on the Plan Effective Date and each Eligible Director who is first
elected or appointed as a non-employee Board member after such date shall
automatically be granted, on the Plan Effective Date or on the date of such
initial election or appointment (as the case may be), a Non-Statutory Option
to purchase 3,000 shares of Common Stock upon the terms and conditions of
this Article Three. In no event, however, shall a non-employee Board member
be eligible to receive such an initial option grant if such individual has
at any time been in the prior employ of the Corporation (or any Parent or
Subsidiary corporation).
2. ANNUAL GRANT. On the date of each Annual Stockholders Meeting,
beginning with the 1997 Annual Meeting, each individual who will continue to
serve as an Eligible Director shall automatically be granted, whether or not
such individual is standing for re-election as a Board member at that Annual
Meeting, a Non-Statutory Option to purchase an additional 3,000 shares of
Common Stock upon the terms and conditions of this Article Three, provided
he or she has served as a non-employee Board member for at least six
(6) months. There shall be no limit on the number of such annual option
grants any one Eligible Director may receive over his or her period of Board
service, and non-employee Board members who have previously been in the
employ of the Corporation (or any parent or subsidiary corporation) shall be
eligible to receive such annual option grants over their period of continued
Board service.
B. EXERCISE PRICE. The exercise price per share of Common Stock subject to
each automatic option grant made under this Article Three shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
automatic grant date.
C. PAYMENT. The exercise price shall be payable in one of the alternative
forms specified below:
(i) full payment in cash or check drawn to the Corporation's order;
(ii) full payment in shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value on
the Exercise Date (as such term is defined below);
(iii) full payment in a combination of shares of Common Stock held for
the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes
14
and valued at Fair Market Value on the Exercise Date and cash or
check drawn to the Corporation's order; or
(iv) full payment through a sale and remittance procedure pursuant to
which the Optionee shall provide irrevocable written instructions
to (A) a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price
payable for the purchased shares and (B) the Corporation to deliver
the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale transaction.
Except to the extent the sale and remittance procedure specified above is
used for the exercise of the option for vested shares, payment of the exercise
price for the purchased shares must accompany the exercise notice.
D. OPTION TERM. Each automatic grant under this Article Three shall have a
maximum term of ten (10) years measured from the automatic grant date.
E. EXERCISABILITY. Each automatic grant shall become fully exercisable for
the option shares upon the Optionee's completion of one year of Board service
measured from the automatic grant date. The exercisability of each automatic
grant outstanding under this Article Three shall be accelerated as provided in
Section II.G and Section III of this Article Three.
F. TRANSFERABILITY. Any automatic option grant may be assigned in whole or
in part during the Optionee's lifetime in accordance with the terms of the
instrument evidencing the grant. The terms applicable to the assigned portion of
the automatic option grant shall be the same as those in effect for the option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate.
G. EFFECT OF TERMINATION OF BOARD MEMBERSHIP.
1. Should the Optionee cease to serve as a Board member for any reason
(other than death or Permanent Disability) while holding one or more
automatic option grants under this Article Three, then such individual shall
have a twelve (12)-month period following the date of such cessation of
Board membership in which to exercise each such option for any or all of the
shares of Common Stock for which that option is exercisable at the time of
such cessation of Board service. Each such option shall immediately
terminate and cease to be outstanding, at the time of such cessation of
Board service, with respect to any shares for which the option is not
otherwise at that time exercisable,
2. Should the Optionee die within twelve (12) months after cessation of
Board service, then any automatic option grant held by the Optionee at the
time of death may subsequently be exercised, for any or all of the shares of
Common Stock for which such option is exercisable at the time of the
Optionee's cessation of Board membership (less any option shares
subsequently purchased by the Optionee prior to death), 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. Any such exercise must occur
within twelve (12) months after the date of the Optionee's cessation of
Board service.
3. Should the Optionee die or become Permanently Disabled while serving
as a Board member, then any automatic option grant held by such Optionee
under this Article Three shall accelerate in full, and the Optionee (or the
representative of the Optionee's estate or the person or persons to whom the
option is transferred upon the Optionee's death) shall have a twelve (12)-
month period following the date of the Optionee's cessation of Board
membership in which to
15
exercise such option for any or all of the shares of Common Stock subject to
the option at the time of such cessation of Board membership.
4. In no event shall any automatic grant under this Article Three
remain exercisable after the expiration date of the ten (10)-year option
term. Upon the expiration of the applicable post-service exercise period
under subparagraph 1, 2 or 3 above or (if earlier) upon the expiration of
the ten (10)-year option term, the automatic grant shall terminate and cease
to be outstanding for any unexercised shares for which the option was
otherwise exercisable at the time of the Optionee's cessation of Board
membership.
H. STOCKHOLDER RIGHTS. The holder of an automatic option grant under this
Article Three shall have none of the rights of a stockholder with respect to any
shares subject to such option until such individual shall have exercised the
option, paid the exercise price for the purchased shares and become the holder
of record of those shares.
III. CORPORATE TRANSACTION/CHANGES IN CONTROL
A. In the event of any Corporate Transaction, each automatic option grant at
the time outstanding under this Article Three 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. Immediately after the
consummation of the Corporate Transaction, all automatic option grants under
this Article Three shall terminate and cease to be outstanding, except to the
extent assumed by the successor entity or its parent company.
B. In connection with any Change in Control, each automatic option grant at
the time outstanding under this Article Three shall automatically accelerate so
that each such option shall, immediately prior to the specified effective date
for the Change in Control, 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. Any option accelerated in
connection with the Change in Control shall remain fully exercisable until the
expiration or sooner termination of the option term.
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 option held
by him or her under this Article Three 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 option is otherwise at the time exercisable for 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. Neither the approval of the Plan Administrator nor
the consent of the Board shall be required in connection with such option
surrender and cash distribution. The shares of Common Stock subject to each
option surrendered in connection with the Hostile Take-Over shall not be
available for subsequent issuance under the Plan.
D. The automatic option grants outstanding under this Article Three shall in
no way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
IV. 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 or as the Plan Administrator otherwise
determines.
16
ARTICLE FOUR
STOCK ISSUANCE PROGRAM
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate purchases without any intervening stock option
grants. The issued shares shall be evidenced by a Stock Issuance Agreement
("Issuance Agreement") that complies with the terms and conditions of this
Article Four.
A. CONSIDERATION.
1. Shares of Common Stock drawn from the Corporation's authorized but
unissued shares of Common Stock ("Newly Issued Shares") shall be issued
under the Stock Issuance Program for one or more of the following items of
consideration which the Plan Administrator may deem appropriate in each
individual instance:
a. full payment in cash or check made payable to the Corporation's
order;
b. a promissory note payable to the Corporation's order in one or
more installments, which may be subject to cancellation in whole or in
part upon terms and conditions established by the Plan Administrator; or
c. past services rendered to the Corporation or any parent or
subsidiary corporation.
2. Newly Issued Shares may, in the absolute discretion of the Plan
Administrator, be issued for consideration with a value less than one
hundred percent (100%) of the Fair Market Value of such shares at the time
of issuance, but in no event less than eighty-five percent (85%) of such
Fair Market Value.
3. Shares of Common Stock reacquired by the Corporation and held as
treasury shares ("Treasury Shares") may be issued under the Stock Issuance
Program for such consideration (including one or more of the items of
consideration specified in subparagraph 1. above) as the Plan Administrator
may deem appropriate, whether such consideration is in an amount less than,
equal to or greater than the Fair Market Value of the Treasury Shares at the
time of issuance. Treasury Shares may, in lieu of any cash consideration, be
issued subject to such vesting requirements tied to the Participant's period
of future Service or the Corporation's attainment of specified performance
objectives as the Plan Administrator may establish at the time of issuance.
4. In the case of shares of Common Stock issued under the Stock
Issuance Program that are intended to qualify as Performance-Based
Compensation, the price per share of such shares shall in no event be less
than one hundred percent (100%) of the Fair Market Value of such shares on
the grant date.
B. VESTING PROVISIONS.
1. Shares of Common Stock issued under the Stock Issuance Program may,
in the absolute discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments
over the Participant's period of Service. The elements of the vesting
schedule applicable to any unvested shares of Common Stock issued under the
Stock Issuance Program, namely:
a. the Service period to be completed by the Participant or the
performance objectives to be achieved by the Corporation,
b. the number of installments in which the shares are to vest,
17
c. the interval or intervals (if any) which are to lapse between
installments, and
d. the effect which death, Permanent Disability or other event
designated by the Plan Administrator is to have upon the vesting
schedule, shall be determined by the Plan Administrator and incorporated
into the Issuance Agreement executed by the Corporation and the
Participant at the time such unvested shares are issued.
2. The Participant shall have full stockholder rights with respect to
any shares of Common Stock issued to him or her under the Plan, whether or
not his or her interest in those shares is vested. Accordingly, the
Participant shall have the right to vote such shares and to receive any
regular cash dividends paid on such shares. Any new, additional or different
shares of stock or other property (including money paid other than as a
regular cash dividend) which the Participant may have the right to receive
with respect to his or her unvested shares by reason of any stock dividend,
stock split, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration or by reason of any Corporate
Transaction shall be issued, subject to (i) the same vesting requirements
applicable to his or her unvested shares and (ii) such escrow arrangements
as the Plan Administrator shall deem appropriate.
3. Should the Participant cease to remain in Service while holding one
or more unvested shares of Common Stock under the Stock Issuance Program,
then those shares shall be immediately surrendered to the Corporation for
cancellation, and the Participant shall have no further stockholder rights
with respect to those shares. To the extent the surrendered shares were
previously issued to the Participant for consideration paid in cash or cash
equivalent (including the Participant's purchase-money promissory note), the
Corporation shall repay to the Participant the cash consideration paid for
the surrendered shares and shall cancel the unpaid principal balance of any
outstanding purchase-money note of the Participant attributable to such
surrendered shares. The surrendered shares may, at the Plan Administrator's
discretion, be retained by the Corporation as Treasury Shares or may be
retired to authorized but unissued share status.
4. The Plan Administrator may in its discretion elect to waive the
surrender and cancellation of one or more unvested shares of Common Stock
(or other assets attributable thereto) which would otherwise occur upon the
non-completion of the vesting schedule applicable to such shares. Such
waiver shall result in the immediate vesting of the Participant's interest
in the shares of Common Stock as to which the waiver applies. Such waiver
may be effected at any time, whether before or after the Participant's
cessation of Service or the attainment or non-attainment of the applicable
performance objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. Upon the occurrence of any Corporate Transaction, all unvested shares of
Common Stock at the time outstanding under this Stock Issuance Program shall
immediately vest in full and the Corporation's repurchase/cancellation rights
shall terminate, except to the extent: (i) any such right is expressly assigned
to the successor corporation (or parent thereof) in connection with the
Corporate Transaction or (ii) such termination is precluded by other limitations
imposed in the Issuance Agreement.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant's Service
should subsequently terminate by reason of an Involuntary Termination within
twelve (12) months following the effective date of any Corporate
18
Transaction in which those repurchase/cancellation rights are assigned to the
successor corporation (or parent thereof).
C. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant's Service
should subsequently terminate by reason of an Involuntary Termination within
twelve (12) months following the effective date of any Change in Control.
III. TRANSFER RESTRICTIONS/SHARE ESCROW
A. Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing such unvested shares. To the extent an escrow
arrangement is utilized, the unvested shares and any securities or other assets
distributed with respect to such shares (other than regular cash dividends)
shall be delivered in escrow to the Corporation to be held until the
Participant's interest in such shares (or the distributed securities or assets)
vests. If the unvested shares are issued directly to the Participant, the
restrictive legend on the certificates for such shares shall read substantially
as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND ARE ACCORDINGLY
SUBJECT TO (I) CERTAIN TRANSFER RESTRICTIONS AND (II) CANCELLATION OR REPURCHASE
IN THE EVENT THE REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN INTEREST) CEASES
TO REMAIN IN THE CORPORATION'S SERVICE. SUCH TRANSFER RESTRICTIONS AND THE TERMS
AND CONDITIONS OF SUCH CANCELLATION OR REPURCHASE ARE SET FORTH IN A STOCK
ISSUANCE AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER (OR HIS/HER
PREDECESSOR IN INTEREST) DATED , , A COPY OF WHICH IS ON FILE
AT THE PRINCIPAL OFFICE OF THE CORPORATION."
B. The Participant shall have no right to transfer any unvested shares of
Common Stock issued to him or her under the Stock Issuance Program. For purposes
of this restriction, the term "transfer" shall include (without limitation) any
sale, pledge, assignment, encumbrance, gift or other disposition of such shares,
whether voluntary or involuntary. Upon any such attempted transfer, the unvested
shares shall immediately be cancelled in accordance with substantially the same
procedure in effect under Section I.B.3 of this Article Four, and neither the
Participant nor the proposed transferee shall have any rights with respect to
such cancelled shares. However, the Participant shall have the right to make a
gift of unvested shares acquired under the Stock Issuance Program to his or her
spouse or issue, including adopted children, or to a trust established for the
benefit of such spouse or issue, provided the donee of such shares delivers to
the Corporation a written agreement to be bound by all the provisions of the
Stock Issuance Program and the Issuance Agreement applicable to the gifted
shares.
19
ARTICLE FIVE
MISCELLANEOUS
I. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may, in its discretion, assist any Optionee or
Participant (including an Optionee or Participant who is an officer of the
Corporation) in the exercise of one or more options granted to such Optionee
under the Discretionary Option Grant Program or the purchase of one or more
shares issued to such Participant under the Stock Issuance Program, including
the satisfaction of any Federal and state income and employment tax obligations
arising therefrom, by (i) authorizing the extension of a loan from the
Corporation to such Optionee or Participant or (ii) permitting the Optionee or
Participant to pay the option price or purchase 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) shall be upon such terms as the Plan Administrator specifies in the
applicable option or issuance agreement or otherwise deems appropriate at the
time such option price or purchase price becomes due and payable. Loans or
installment payments may be authorized with or without security or collateral.
In all events, the maximum credit available to the Optionee or Participant may
not exceed the option or purchase price of the acquired shares (less the par
value of such shares) plus any Federal, state and local income and employment
tax liability incurred by the Optionee or Participant in connection with the
acquisition of such shares.
B. The Plan Administrator may, in its absolute discretion, determine that
one or more loans extended under this financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Plan Administrator may deem appropriate.
II. AMENDMENT OF THE PLAN AND AWARDS
The Board has complete and exclusive power and authority to amend or modify
the Plan (or any component thereof) in any or all respects whatsoever, However,
no such amendment or modification shall adversely affect rights and obligations
with respect to options at the time outstanding under the Plan, nor adversely
affect the rights of any Participant with respect to Common Stock issued under
the Stock Issuance Program prior to such action, unless the Optionee or
Participant consents to such amendment. In addition, the Board may not, without
the approval of the Corporation's stockholders, amend the Plan to (i) increase
the maximum number of shares issuable under the Plan or (ii) the maximum number
of shares for which any one individual participating in the Plan may be granted
stock options, separately exercisable stock appreciation rights and direct stock
issuances in the aggregate per calendar year, except for permissible adjustments
under Section VI subsection C of Article One.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon the
exercise of stock options for such shares or the vesting of such shares under
the Plan shall be subject to the satisfaction of all applicable Federal, foreign
state and local income tax and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion and in accordance with the
provisions of this Section III of Article Five and such supplemental rules as
the Plan Administrator may from time to time adopt, provide any or all holders
of Non-Statutory Options or unvested shares under the Plan with the right to use
shares of Common Stock in satisfaction of no more than the minimum amount of the
Federal, foreign state and local income and employment tax liabilities that the
Corporation is required to withhold from such holders in connection with the
exercise of their options or the vesting of their
20
shares (the "Taxes"). Such right may be provided to any such holder in either or
both of the following formats:
1. STOCK WITHHOLDING: The holder of the Non-Statutory Option or
unvested shares may be provided with the election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the
exercise of such non-statutory option or the vesting of such shares, a
portion of those shares with an aggregate Fair Market Value equal to the
percentage of the applicable Taxes (not to exceed one hundred percent
(100%)) designated by the holder.
2. STOCK DELIVERY: The Plan Administrator may, in its discretion,
provide the holder of the Non-Statutory Option or the unvested shares with
the election to deliver to the Corporation, at the time the Non-Statutory
Option is exercised or the shares vest, one or more shares of Common Stock
previously acquired by such individual (other than in connection with the
option exercise or share vesting triggering the Taxes) with an aggregate
Fair Market Value equal to the percentage of the Taxes incurred in
connection with such option exercise or share vesting (not to exceed one
hundred percent (100%)) designated by the holder.
IV. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan became effective on April 30, 1996 and was approved by
stockholders on April 26, 1996. In February 1998, the Board adopted and approved
amendments to the Plan to provide for an increase in the number of shares
subject to grants under the Automatic Option Grant Program from 1,000 to 2,000
shares and to reflect the amendments promulgated by the Securities and Exchange
Commission to Rule 16b-3 which allow for greater transferability of
Non-Statutory Options (collectively, the "February 1998 Amendments"). The
February 1998 Amendments became effective when approved by the Corporation's
stockholders on March 26, 1998. In March 2000, the Board adopted and approved
amendments to the Plan pertaining to: (i) the name of the Corporation; (ii) the
administration of the Plan; and (iii) the limit imposed by Section 162(m) of the
Code, on certain highly-compensated employees (collectively, the "March 2000
Amendments"). The March 2000 Amendments became effective when approved by the
Corporation's stockholders on June 20, 2000. In April 2001, the Board adopted
and approved amendments to the Plan to: (i) increase the number of shares
reserved for issuance under the Plan by 1,000,000 shares; (ii) increase the
maximum number of shares with respect to which stock options, stock appreciation
rights and direct stock issuances may be granted to any grantee in any calendar
year from 500,000 to 1,000,000 shares; and (iii) permit the Plan Administrator
to grant options under the Discretionary Option Grant Program which provide for
accelerated vesting upon the occurrence of a Corporate Transaction, Change in
Control or Hostile Take-Over whether or not those options are to be assumed or
otherwise continued in full force and effect pursuant to the terms of the
Corporate Transaction, Change in Control or Hostile Take-Over (collectively, the
"April 2001 Amendments"). The April 2001 Amendments shall be effective upon
Board approval but any option grants made in reliance on the April 2001
Amendments will be rescinded if the stockholders vote against the April 2001
Amendments.
B. The Plan shall terminate upon the earlier of (i) ten (10) years
following the Plan Effective Date or (ii) the date on which all shares available
for issuance under the Plan shall have been issued pursuant to the exercise of
the options granted under the Plan or the issuance of shares (whether vested or
unvested) under the Stock Issuance Program. If the date of termination is
determined under clause (i) above, then all option grants and unvested share
issuances outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the instruments evidencing such
grants or issuance.
21
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to option grants or share issuances under the Plan shall be used for
general corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option under the
Plan, the issuance of any shares under the Stock Issuance Program, and the
issuance of Common Stock upon the exercise or surrender of the option grants
made hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the Common Stock issued
pursuant to it.
B. No shares of Common Stock or other assets shall be issued or delivered
under this Plan unless and until there shall have been compliance with all
applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any securities exchange on which stock of the same class is then listed.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the Plan, nor any
action taken by the Plan Administrator 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.
VIII. MISCELLANEOUS PROVISIONS
A. Except as provided in 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 or Participant.
B. The provisions of the Plan relating to the exercise of options and the
vesting of shares 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 Participants and Optionees, the legal
representatives of their respective estates, their respective heirs or legatees
and their permitted assignees.
22
WESTAFF, INC.
PROXY
The undersigned, revoking previous proxies relating to these shares, hereby
acknowledges receipt of the Supplement to Proxy Statement dated May 1, 2001 in
connection with the 2001 Annual Meeting of stockholders to be held at 10:00 a.m.
on May 23, 2001 at the Company's administrative offices, 220 N. Wiget Lane,
Walnut Creek, California, and hereby appoints W. Robert Stover and Robin A.
Herman, and each of them, (with full power to act alone), the attorneys and
proxies of the undersigned, with power of substitution to each to vote all
shares of the Common Stock of WESTAFF, INC. registered in the name provided
herein which the undersigned is entitled to vote at the 2001 Annual Meeting of
stockholders, and at any adjournment or adjournments thereof, with all the
powers the undersigned would have if personally present. Without limiting the
general authorization hereby given, the proxies are, and each of them is,
instructed to vote or act as follows on the proposals set forth in the Proxy
Statement.
THIS PROXY WHEN EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO
DIRECTION IS MADE THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR
THE RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS, FOR THE AMENDMENT AND
RESTATEMENT OF THE COMPANY'S 1996 STOCK OPTION/STOCK ISSUANCE PLAN AND FOR
ANY OTHER MATTER OR MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
SEE REVERSE SIDE. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATION, SIMPLY SIGN ON THE REVERSE SIDE. YOU NEED NOT MARK
ANY BOXES.
Please mark your
votes as in this example
/X/ using dark ink only.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
FOR WITHHOLD
the nominees AUTHORITY
listed at right to vote for the
(except nominees listed at
as indicated) right NOMINEES:
1. ELECTION OF / / / / JOAN C. STOVER
DIRECTORS: DWIGHT S. PEDERSEN
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
AT RIGHT.)
2. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR FOR AGAINST ABSTAIN
ANDERSEN LLP AS THE INDEPENDENT PUBLIC / / / / / /
ACCOUNTANTS OF THE COMPANY FOR FISCAL 2001
3. PROPOSAL TO AMEND AND RESTATE THE COMPANY'S
1996 STOCK OPTION/STOCK ISSUANCE PLAN TO (I)
INCREASE THE NUMBER OF SHARES RESERVED FOR FOR AGAINST ABSTAIN
ISSUANCE UNDER THE PLAN BY 1,000,000 SHARES / / / / / /
FOR A NEW TOTAL OF 2,550,718 SHARES AND (II)
INCREASE THE MAXIMUM NUMBER OF SHARES WITH
RESPECT TO WHICH STOCK OPTIONS, STOCK
APPRECIATION RIGHTS AND DIRECT STOCK ISSUANCES
MAY BE GRANTED TO ANY INDIVIDUAL IN ANY
CALENDAR YEAR FROM 500,000 TO 1,000,000 SHARES
OF COMMON STOCK OF THE COMPANY
PLEASE SIGN, DATE AND MAIL THIS PROXY IMMEDIATELY.
- --------------------------------------------------------------------------------
Signature Signature Date
This Proxy should be marked, dated and signed by the stockholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.