SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
COMMUNICATIONS GROUP INC
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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COMMUNICATIONS GROUP INC.
901 S. TROOPER ROAD
VALLEY FORGE, PA 19482
NOTICE OF 1995 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 16, 1995
NOTICE IS HEREBY GIVEN that the 1995 Annual Meeting of Stockholders of
Communications Group Inc., a Delaware corporation (the "Company"), will be held
at the offices of the Company, 901 S. Trooper Road, Valley Forge, Pennsylvania,
on Thursday, the 16th day of November, 1995 at 10:00 a.m. for the following
purposes:
(1) To elect five members of the Board of Directors of the Company to
serve until the next Annual Meeting of Stockholders and until their
respective successors shall be elected and shall qualify;
(2) Approval and adoption of a proposed amendment to the Company's
Certificate of Incorporation to change the Company's name to "CTI Group
(Holdings) Inc." and the contribution by the Company of all its tangible
assets and liabilities to CTI Data Solutions (USA) Inc., a Delaware
corporation and a wholly-owned subsidiary of the Company;
(3) Approval and adoption of the Communications Group Inc. Stock
Option and Restricted Stock Plan (the "Plan").
(4) To ratify the selection of Zelenkofske, Axelrod & Co., Ltd. as
the Company's independent certified public accountants for the fiscal year
ending March 31, 1996;
(5) To transact such other and further business as may properly come
before the Meeting or any adjournments thereof.
Holders of record of the Common Stock of the Company at the close of
business on October 6, 1995, which has been fixed by the Board of Directors as
the record date, will be entitled to notice of, and entitled to vote at, the
1995 Annual Meeting and any adjournments thereof.
By Order of the Board of Directors
Mary Ann Davis, Secretary
Dated: Valley Forge, Pennsylvania
October 16, 1995
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IMPORTANT
PLEASE VOTE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE WHICH DOES NOT REQUIRE ANY POSTAGE IF MAILED IN THE UNITED
STATES, SO THAT IF YOU ARE UNABLE TO ATTEND THE MEETING, YOUR SHARES MAY STILL
BE VOTED.
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COMMUNICATIONS GROUP INC.
901 S. TROOPER ROAD
VALLEY FORGE, PA
PROXY STATEMENT
1995 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 16, 1995
This Proxy Statement, which is to be mailed to stockholders on or about
October 16, 1995 is furnished in connection with the solicitation of proxies on
behalf of the Board of Directors of Communications Group Inc. (the "Company"),
for use at the Annual Meeting of Stockholders to be held on Thursday, November
16, 1995, at 10:00 a.m. at 901 S. Trooper Road, Valley Forge, Pennsylvania and
at any adjournments thereof (the "Annual Meeting").
Proxies may be solicited by members of the Board of Directors and senior
management. Proxies may be solicited in person, or by mail, telephone,
telegram, mailgram or other manner. Brokers, nominees, fiduciaries, and other
custodians have been requested to forward such soliciting material to the
beneficial owners of shares held of record by such custodians. Such custodians
may be reimbursed for their expenses. The cost for the solicitation of Proxies
is being paid for by the Company. Such costs are anticipated to represent
amounts normally expended in soliciting proxies for routine purposes, and costs
represented by salaries of such persons, if any, engaged in such solicitation.
No fees are to be paid to such persons specifically for soliciting proxies.
A form of proxy is enclosed. Any person giving a proxy has the power to
revoke it at any time before it is voted, by notice in writing to the Secretary
of the Company, at 901 S. Trooper Road, P.O. Box 80360, Valley Forge,
Pennsylvania 19484, or by attendance at the 1995 Annual Meeting and voting in
person. Shares presented by properly executed proxies will be voted at the
Annual Meeting in accordance with the choice specified thereon, and except as
otherwise provided herein, if no choice is specified, shall be voted for the
nominees for Directors indicated below, ratification of the Board's selection of
independent public accounts and the other Proposals set forth herein.
VOTING SECURITIES
Holders of the Company's Common Stock, par value $.01 per share, of record
at the close of business on October 6, 1995, which has been fixed by the Board
of Directors as the record date, are entitled to notice of, and to vote at the
1995 Annual Meeting. On that date, there were 5,131,756 shares of the Company's
Common Stock issued and outstanding, each share having one vote.
VOTE REQUIRED
The presence, in person or by proxy, of holders of record of the Company's
Common Stock entitled to cast at least a majority of the votes which all
stockholders of the Company are entitled to cast is necessary to constitute a
quorum at the Annual Meeting for the purpose of considering
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and voting upon the proposals (the "Proposals") set forth in the Notice of 1995
Annual Meeting delivered herewith and submitted to the stockholders. As more
particularly described below, favorable votes cast in person or by proxy at the
Annual Meeting, by the holders of a majority of the outstanding shares of the
Company's Common Stock present in person or by proxy at the Annual Meeting, is
required for the election of Directors, ratification of the Board's selection of
independent public accountants and the other Proposals set forth herein.
PROPOSALS FOR THE 1995 ANNUAL MEETING
PROPOSAL 1
ELECTION OF DIRECTORS
If no direction to the contrary is indicated, except as set forth below,
proxies received will be voted to elect as Directors of the Company the
following Directors listed in the table below who will hold office until the
next annual meeting of stockholders of the Company and until their successors
shall be elected and shall qualify. If any nominee is unable to serve, the
holders of the Proxy have discretionary authority to vote for a substitute.
Management has no reason to believe that any nominee will be unavailable.
Information concerning the nominees for election as Directors is set forth
below. Reference is made to the Section in this Proxy Statement entitled
"PRINCIPAL STOCKHOLDERS" for information relative to the number of shares of
the Company's Common Stock beneficially owned by said nominees.
Names and Principal Served as a
Occupation or Employment Director Since Age
------------------------ -------------- ---
Anthony P. Johns, President and Chief
Executive Officer (1) 1990 46
John D. Mazzuto, Chairman of the
Board of Directors (2) 1990 46
Francis O. Hunnewell
Director (3) 1993 56
Mark H. Daugherty (4)
Chief Financial Officer 1992 37
Rupert D. Armitage
Director Nominee (5) 1995 48
(1) Anthony P. Johns President and Chief Executive Officer and Director
of the Company since March, 1990. Chief Operating
Officer of the Company from December, 1989 to
March, 1990. Founding member, Company Chairman
and Managing Director of Britannic Group Holdings
Ltd., Britannic Telecom Company Ltd., and
Britannic Telecare Ltd. from August, 1985 to
November, 1989. Chairman of the Board of
Directors of Britannic Group Holdings Ltd.,
Britannic Telecom Company Ltd. and Britannic
Telecare Ltd. from December, 1989 to May, 1995.
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(2) John D. Mazzuto Chairman of the Board of Directors September, 1995
to present. Director and former Chairman of the
Board of Directors from October, 1990 until
November, 1993. Mr. Mazzuto also serves on the
Board of Directors of Chester Holdings, CPT
Holdings, Texfi Industries, Inc. and Weldotron,
all public companies engaged in a variety of
businesses. Since February, 1991 he has been
Chairman and Chief Executive Officer of Greystone
Partners, Inc., a private investment bank
specializing in assisting companies complete
successful turnarounds and providing them capital
as appropriate. Prior to February, 1991, Mr.
Mazzuto was Chief Executive Officer of the North
American operations of Asian Oceanic Holdings,
Ltd., a Hong Kong based international merchant
bank.
(3) Francis O. Hunnewell Director, Chairman of the Board of Directors,
November, 1993 to August, 1995. From 1975 until
July, 1993, Mr. Hunnewell was Co-Founder and
Director of Binladen Telecommunications Ltd. From
1984 to 1992 he was a General Partner of Bliss &
Co., Investment Bankers in New York. From 1986
until June 1992, he was Group Managing Director
and subsequently Vice Chairman of Asian Oceanic
Group. He was a Director of Lend Lease Trucks
from 1990 to 1992. At present Mr. Hunnewell is
Chairman of Panavision Canada located in Montreal,
Toronto and Vancouver, Canada as well as President
of Hunnewell & Co., Investment Bankers of Boston,
Massachusetts.
(4) Mark H. Daugherty Director September, 1992 to present. Controller
of the Company from August, 1985 until May, 1991.
He was Acting Chief Financial Officer from April,
1990 to October, 1990. Mr. Daugherty was made
Chief Financial Officer of the Company in May,
1991.
(5) Rupert D. Armitage Founding member, Chairman and Managing Director
of three software related companies in the United
Kingdom: Ambit Research Ltd. formed in 1987;
Information from Data Ltd. formed in 1993; and
Personal and Corporate Training Systems Ltd.
formed in 1995.
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Messrs. Anthony P. Johns, John D. Mazzuto, Francis O. Hunnewell, and Mark
H. Daugherty presently serve as the Board of Directors of the Company. All
Directors elected at the 1995 Annual Meeting of Shareholders will hold office
until the next Annual Meeting of Shareholders and until their successors shall
be elected and qualify. All officers of the Company serve at the discretion of
the Board. During the fiscal year ended March 31, 1995 the Board of Directors
held four meetings. All Directors were present at each Board meeting and Board
committee of which they were members.
The Board has three standing committees: the Executive Committee,
consisting of Anthony P. Johns, Francis O. Hunnewell and Mark H. Daugherty; the
Nominating Committee, consisting of John D. Mazzuto and Mark H. Daugherty; and
the Compensation Committee, consisting of Anthony P. Johns, Francis O. Hunnewell
and John D. Mazzuto. The Executive Committee is authorized to exercise all of
the authority of the Board of Directors in the management of the Company between
Board Meetings unless otherwise provided by the Corporation Bylaws. The
Executive Committee met one time during the fiscal year ended March 31, 1995.
The Compensation Committee reviews and approves the remuneration of officers and
benefit plans. The Compensation Committee met one time in the fiscal year ended
March 31, 1995. The Nominating Committee reviews candidates and recommends to
the Board of Directors nominees for membership on the Board of Directors. The
Nominating Committee met one time in the fiscal year ended March 31, 1995.
QUORUM AND VOTING REQUIREMENTS
A quorum for the purpose of acting on this Proposal requires the presence,
in person or by proxy, of the holders of at least a majority of the outstanding
shares of Common Stock entitled to vote at the Annual Meeting. The approval of
this Proposal requires the affirmative vote of the holders of a majority of the
shares of Common Stock present, in person or by proxy, at the Annual Meeting.
Abstentions will have the same effect as a vote against this Proposal. Broker
non-votes (i.e., proxies as to which a broker grants no authority with respect
to this Proposal) shall be counted as voting neither for nor against this
Proposal, but the shares represented by such abstention or broker non-vote shall
be considered present at the Annual Meeting for purposes of determining whether
a quorum is present.
PROPOSAL 2
APPROVAL AND ADOPTION OF A PROPOSED AMENDMENT
TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO CHANGE
THE COMPANY'S NAME TO "CTI GROUP (HOLDINGS) INC." AND THE
CONTRIBUTION BY THE COMPANY OF ALL ITS TANGIBLE ASSETS
AND LIABILITIES TO CTI DATA SOLUTIONS (USA) INC.
GENERAL
The Board of Directors of the Company has approved and proposed for
submission for stockholder approval an amendment to the Company's Certificate of
Incorporation to change the Company's name to "CTI Group (Holdings) Inc." and
the contribution by the Company of all of its tangible assets and liabilities to
CTI Data Solutions (USA) Inc. a Delaware corporation and a wholly-owned
subsidiary of the Company. the
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Company's Board of Directors believes that the initials CTI, which is an acronym
for "Computer Telephony Integration" in combination with the phrase "Data
Solutions" is more descriptive of the Company's business than the name
Communications Group Inc. The term Computer Telephony Integrations is generally
understood to mean the integration of computer software applications into
telephony hardware products. Upon the contribution of such assets to CTI Data
Solutions, the Company would become a holding company with all of its operations
being performed through subsidiaries. Therefore, the Company's Board of
Directors believes that the name "CTI Group (Holdings) Inc." would be both more
descriptive of the Company's business and would clearly reflect the Company's
status as a holding company.
QUORUM AND VOTING REQUIREMENTS
A quorum for the purpose of acting on this Proposal requires the presence,
in person or by proxy, of the holders of at least a majority of the outstanding
shares of Common Stock entitled to vote at the Special Meeting. The approval of
this Proposal requires the affirmative vote of the holders of a majority of the
shares of Common Stock present, in person or by proxy, at the Annual Meeting.
Abstentions will have the same effect as a vote against this Proposal. Broker
non-votes (i.e., proxies as to which a broker grants no authority with respect
to this Proposal) shall be counted as voting neither for nor against this
Proposal, but the shares represented by such abstention or broker non-vote shall
be considered present at the Annual Meeting for purposes of determining whether
a quorum is present.
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THIS PROPOSAL. On the Record Date, there were 5,131,756 shares of Common Stock
issued and outstanding, each of which is entitled to one vote per share. As of
the Record Date, the directors and executive officers of the Company and their
respective affiliates beneficially owned approximately 43% of the issued and
outstanding shares of Common Stock. It is expected that such parties will vote
in favor of this Proposal.
PROPOSAL 3
PROPOSAL TO APPROVE THE
COMMUNICATIONS GROUP INC.
STOCK OPTION AND RESTRICTED STOCK PLAN
GENERAL
The Board of Directors of the Company has approved, and proposed for
submission for stockholder approval the Communications Group Inc. Stock Option
and Restricted Stock Plan (the "Plan"). The Plan is intended to provide an
incentive to employees (including employee directors), non-employee directors,
consultants and others through (i) the issuance of options to purchase shares of
Common Stock and (ii) the grant of restricted shares of Common Stock. The
approval of this Proposal 3 is a condition precedent to the effectiveness of
certain grants made by the Company to directors, officers and employees of the
Company under the Plan.
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The Board of Directors believes that the Company's ability to grant awards
under the Plan is a valuable and necessary compensation tool that aligns the
long-term financial interests of employees and directors with the financial
interests of the Company's stockholders. The Board of Directors also believes
that the Plan will contribute to the success of the Company by improving its
ability to attract, motivate and retain key employees and directors.
DESCRIPTION OF THE PLAN
The Plan as proposed is set forth as Exhibit A to this Proxy Statement, and
the description of the Plan contained herein is qualified in its entirety by
reference to Exhibit A.
GENERAL. The Plan, as proposed, provides for the issuance of 600,000
shares of Common Stock. Employees eligible for participation in the Plan
include key employees (including employees who also serve as directors), non-
employee directors, independent contractors and consultants who perform services
for the Company (collectively, "Eligible Participants"). As of September 30,
1995, all of the Company's full-time employees and non-employee directors, or a
total of approximately 35 people, would have been eligible to participate in
the Plan. The Plan provides for the granting of options intended to qualify as
"incentive stock options" ("ISOs") as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), nonqualified stock options
("NQSOs") (ISOs and NQSOs are sometimes collectively referred to as "Stock
Options") and restricted stock ("Restricted Stock").
ADMINISTRATION. Except with respect to those provisions of the Plan
relating to the grant of NQSOs to non-employee directors which are intended to
operate automatically, the Plan would be administered and interpreted by a
committee of the Board (the "Committee") consisting of not less than two
persons, all of whom shall be "outside directors" within the meaning of Section
162(m) of the Code and each of whom shall be a "disinterested person" as defined
under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Except as set forth above, the Committee has the
full power to administer and interpret the Plan. Messrs. Hunnewell and Mazzuto
have been appointed to serve as the members of the Committee.
STOCK OPTIONS. Only officers and employees of the Company would be
eligible to receive ISOs. All Eligible Participants may receive NQSOs. The
exercise price of all ISOs granted would be the higher of the fair market value,
as defined in the Plan, or the book value of the Common Stock at the time the
ISO is granted. Stock Options may be granted for a term of up to ten years from
the date of grant, subject to earlier termination on the optionee's death,
disability or termination of employment or relationship with the Company. In
the event of a "change of control", as defined in the Plan, all options granted
are immediately exercisable and all restrictions under any grant of Restricted
Stock shall immediately lapse. Stock Options would not be assignable or
otherwise transferable except by will or the laws of descent and distribution,
and, in the case of NQSOs, if permitted under Rule 16b-3 of the Exchange Act and
by the Committee, pursuant to a qualified domestic relations order as defined
under the Code or Title I of the Employee Retirement Income Security Act of 1974
("ERISA"). The exercise price of an option would be payable in cash, or, with
the consent of the Committee, by delivering shares of Common Stock already owned
by the optionee, or by a combination
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of cash and shares. Shares subject to Stock Options granted under the Plan
which have lapsed or terminated may be regranted under the Plan. The Committee
may offer to exchange new options for existing options, with the shares of
Common Stock subject to the existing options being again available for grant
under the Plan.
Subject to stockholder approval of the Plan at the Annual Meeting, Stock
Options with respect to 60,000 shares of Common Stock have been granted under
the Plan to non-employee directors of the Company. See "New Plan Benefits."
In addition, all non-employee directors who serve on the Committee would each
receive an automatic grant of NQSOs with respect to 30,000 shares of Common
Stock at the commencement of and in consideration for their service to the
Company as a director (an "Initial Director's Grant"). One-half (50 %) of such
Initial Director's Grant would vest on the first anniversary of each such
director's election to the board, and one-quarter (25%) on each of the second
and third anniversaries of each such director's election to the board, provided
such non-employee director is then serving as a director. After the complete
vesting of the Initial Director's Grant, and assuming that a non-employee
director who serves on the committee is continuously reelected, such non-
employee director would receive a grant of NQSOs with respect to 30,000 shares
of Common Stock, subject to the same vesting schedule, at the end of each
successive three year period. Each of Mr. Hunnewell and Mr. Mazzuto were
granted 50,000 NQSOs in January 1995 subject to approval of the Plan by the
Company's Shareholders. However, due to a subsequent revision of the Plan prior
to the Annual Meeting, in the event that the Plan is approved by the Company's
shareholders, Messrs. Hunnewell and Mazzuto's grants would be revised to provide
for the grant of NQSOs with respect to 30,000 shares of Common Stock which would
vest over a three year period beginning on the date the Plan was initially
approved by the board. In the event approval of the Plan is not obtained such
options will be forfeited.
RESTRICTED STOCK. The Committee would be authorized to award Restricted
Stock to Eligible Participants, subject to terms set by the Committee. The
recipient (including non-employee directors) of Restricted Stock would be unable
to sell, transfer, pledge or otherwise dispose of the restricted stock until the
restrictions established by the Committee lapse. In the case of a Change Of
Control of the Company, all restrictions would automatically lapse. If the
recipient's relationship with the Company is terminated before the restrictions
lapse, the restricted stock grant would terminate unless the Committee
determined otherwise.
AMENDMENTS. The Committee has the full authority to amend the Plan, except
that (i) stockholder approval would be required (a) to increase the number of
shares available for the Plan, (b) to materially increase the benefits accruing
to optionee, (c) to materially modify the eligibility requirements for options
granted under the Plan, or (d) to modify the provisions for determining fair
market value under the Plan and (ii) those provisions of the Plan relating to
grants to non-employee directors who serve on the Committee may not be amended
more than once every six months, except for amendments necessary to conform the
plan to changes in the provisions of the Code or ERISA, or the rules promulgated
thereunder.
FEDERAL INCOME TAX CONSEQUENCES. The federal income tax consequences of an
employee's participation in the Plan are complex and subject to change. The
following discussion is only a summary of the general rules and participants in
the Plan should consult their own tax advisors regarding their particular
situation.
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There are no federal income tax consequences to the optionee or the Company
upon the grant of ISOs or NQSOs. Upon the exercise of NQSOs, the optionee will
realize ordinary income in the amount by which the fair market value of the
shares exceeds the exercise price of the option. The Company is allowed a
deduction for federal income tax purposes equal to the amount of ordinary income
recognized by the optionee at the time of exercise of NQSOs. The optionee's
holding period for purposes of determining whether any subsequently realized
gain or loss will be long-term or short-term will begin at the time the optionee
recognizes ordinary income. If, at the time of issuance of the shares, the
optionee is subject to the restrictions of Section 16(b) of the Exchange Act,
then the optionee generally will recognize ordinary income as of the later of
(i) the date of exercise, or (ii) the expiration of six months from the date of
option grant, based upon the difference between the fair market value of the
option shares at such time and exercise price.
Except as provided below with respect to "disqualifying dispositions",
there generally is no regular federal income tax consequences upon the exercise
of an ISO. However, for purposes of computing any alternative minimum tax
liability, the amount by which the fair market value of the shares at the time
of exercise exceeds the option price (or other tax basis in the shares) is an
item of tax preference subject to the alternative minimum tax applicable to the
person exercising the option. The Company is not entitled to a deduction upon
the exercise of an ISO. A sale of shares acquired by exercise of an ISO that
does not occur within one year after the exercise, or within two years after the
grant of the option, generally will result in the recognition of long-term
capital gain or loss in an amount equal to the difference between the amount
realized from the sale and the participant's tax basis in the shares assuming
that the shares were held as capital assets. The Company is not entitled to any
tax deduction in such event. However, if the sale occurs within one year from
the date of exercise or within two years from the date of grant (a
"disqualifying disposition"), the optionee will recognize ordinary income equal
to the lesser of (i) the excess of the fair market value of the shares on the
date of exercise of the options over the option price (or the optionee's other
tax basis in the shares), or (ii) the excess of the amount realized on the sale
of the shares over the option price (or the optionee's other tax basis in the
shares). Any amount realized on a disqualifying disposition in excess of the
amount treated as ordinary income (or any loss realized) will be a long-term or
short-term capital gain (or loss), depending upon the length of time the shares
were held and assuming that the shares were held as capital assets. If, at the
time of issuance of the option shares, the optionee is subject to the
restrictions of Section 16(b) of the Exchange Act, then the fair market value of
shares acquired upon exercise of an ISO generally will be determined as of the
later of (i) the time of exercise, or (ii) the expiration of six months from the
date of option grant. The Company generally will be entitled to a tax deduction
on a disqualifying disposition in the amount and at the time the ordinary income
is recognized by the optionee assuming that such amount constitutes an ordinary
and necessary business expense to the employer corporation.
In the case of Restricted Stock, the grantee will realize ordinary income
in an amount equal to the fair market value of such stock, at the time when the
grantee's rights with respect to such stock are no longer subject to a
substantial risk of forfeiture, less any amount paid for such stock, unless the
grantee made a written election (pursuant to Section 83(b) of the Code), filed
with Internal Revenue Service within thirty (30)
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days after the date of transfer of the Restricted Stock, to include in ordinary
income, as of the transfer date, the excess (on such date) of the fair market
value of such Restricted Stock (determined without regard to any restriction)
over any amount paid for such stock. Dividends paid to the holder of Restricted
Stock during a period of restriction will be taxable as ordinary income unless
the election under Section 83(b) of the Code has been made. The Company will be
entitled to a deduction under the Code at the time and equal to the amount of
ordinary income that is realized by the employee assuming that such amount
constituted an ordinary and necessary business expense to the Company.
SECTION 162(m). Under Section 162(m) of the Code, the Company may be
precluded from claiming a federal income tax deduction for total remuneration in
excess of $1,000,000 paid to the chief executive officer or to any of the other
four most highly compensated officers in any one taxable year. Total
remuneration would include amounts received upon the exercise of Stock Options.
An exception exists, however, for "performance-based" remuneration, including
amounts received upon the exercise of stock options pursuant to a plan approved
by stockholders that meets certain requirements. The Plan, when approved by
stockholders, is intended to make option grants thereunder meet the requirements
of "performance-based" remuneration.
The table below summarizes the number of shares of Restricted Stock and the
number of shares of Common Stock issuable upon exercise of Stock Options that
would be awarded under the Plan if it is approved by the stockholders at the
Annual Meeting. The table sets forth such information with respect to the the
Company's Chief Executive Officer, all current executive officers as a group,
all current directors who are not executive officers as a group and all
employees or consultants other than executive officers as a group.
NEW PLAN BENEFITS
Option
Name and Position Number of Shares (1) Exercise Price
- - ----------------- -------------------- --------------
Anthony P. Johns
President & CEO (2) 0 0
All current executive
officers as a group 0 0
All directors who are
not current executive 60,000 $.18
officers as a group
All employees who are not
executive officers as a group 0 0
________________________
(1) Future benefits under the Plan are not determinable since grants of Stock
Options and Restricted Stock are at the discretion of the
Committee except in the case of non-employee directors. In the case
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of non-employee directors who are members of the Committee, grants of NQSOs
representing 30,000 shares of Common Stock are made every three years
provided a non-employee director has continuously served as a director
during such three year period and is reelected to the board at such time.
(2) Other than Mr. Johns, no executive officer of the Company earned in excess
of $100,000 (including salary and bonus) during the year ended March 31,
1995.
QUORUM AND VOTING REQUIREMENTS
A quorum for the purpose of acting on this Proposal requires the presence,
in person or by proxy, of the holders of at least a majority of the outstanding
shares of Common Stock entitled to vote at the stockholders' meeting. The
approval requires the affirmative vote of the holders of a majority of the
shares of Common Stock, in person or by proxy, at the stockholders' meeting.
Abstentions will have the same effect as a vote against this Proposal. Broker
non-votes (i.e., proxies as to which a broker grants no authority with respect
to this Proposal) shall be counted as voting neither for nor against this
Proposal, but the shares represented by such abstention or broker non-vote shall
be considered present at the Special Meeting for purposes of determining whether
a quorum is present.
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THIS PROPOSAL. On the Record Date, there were 5,131,756 shares of Common Stock
issued and outstanding, each of which is beneficially entitled to one vote per
share. As of the Record Date, the directors and executive officers of the
Company and their respective affiliates owned approximately 43% of the issued
and outstanding shares of Common Stock. It is expected that such parties will
vote in favor of this Proposal.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to all
nominees for Director, corporate officers, and other persons individually and as
a group holding of record or known by the Company to own beneficially 5% or more
of the Company's Common Stock as of October 6, 1995, as determined in accordance
with Rule 13d-3 under the Securities Exchange Act of 1934, as amended.
Percent
Shares of Common Stock of Voting
Name and Business Address Beneficially Owned (1) Securities
- - ------------------------- ---------------------- ----------
Anthony P. Johns 1,718,302 (2) 33.5%
Communications Group Inc.
901 S. Trooper Road
Valley Forge, PA 19482
John D. Mazzuto 91,667 1.8%
Mentmore Holdings
1430 Broadway, 13th Fl.
New York, NY 10018
- 11 -
Francis O. Hunnewell 76,667 1.5%
Hunnewell & Company
10 Tremont Street
Boston, MA 02108
Mark H. Daugherty 15,600 .3%
Communications Group Inc.
901 S. Trooper Road
Valley Forge, PA 19482
Rupert D. Armitage 270,000 5.3%
Ambit Research Ltd.
London House
100 New Kings Road
London
Mary Ann Davis 37,225 .7%
Communications Group Inc.
901 S. Trooper Road
Valley Forge, PA 19482
All officers and directors as a 2,209,461 (2) 43.1%
group (5 persons)
______________________
(1) All shares are beneficially owned and the sole investment and voting power
is held by the person named, except as set forth below.
(2) Includes 150,000 shares of the Company's common stock owned by Asian
Oceanic Capital Corporation for which Mr. Johns holds voting power.
SUMMARY COMPENSATION
TABLE
The following table sets forth the compensation paid or accrued for the
five highest paid officers of the Company and its subsidiaries. The Company had
only one officer for the years ended March 31, 1995, 1994 and 1993 who received
in excess of $100,000.
Name and Principal Other
Position Year Salary Bonus Compensation
------------------ ----- ------ ----- ------------
Anthony P. Johns, President 1995 $150,000 - $19,810 (1) and
Chief Executive Officer
1994 $150,000 $ 5,660 $18,349 (1)
1993 $150,000 $49,476 $18,160 (1)
(1) Includes $11,000 annual automobile allowance and approximately $4,333 for
the non-exclusive use by Mr. Johns of an apartment for which the Company
makes annual lease payments of approximately $13,000.
- 12 -
On February 1, 1995, the Company entered into an employment agreement with
Anthony P. Johns. Pursuant to this agreement, Mr. Johns is employed as
President and Chief Executive Officer of the Company for a three-year term at an
annual base salary of $175,000. Should the Company regain its listing on
NASDAQ, Mr. Johns' salary will be increased to $200,000 for the remaining term
of the Employment Agreement. In addition to such annual base salary, Mr. Johns
is entitled to receive as additional compensation in the form of an annual
bonus, an amount equal to five percent (5%) of the Company's pretax profit. the
Company has also agreed to (i) provide Mr. Johns with a monthly automobile
allowance, (ii) provide Mr. Johns with the non-exclusive use of and access to a
Company leased apartment and (iii) pay the premiums on life insurance and health
insurance policies for the benefit of Mr. Johns. Mr. Johns will also be
reimbursed by the Company for all expenses reasonably incurred by him in the
performance of his duties.
The members of the Board of Directors, who are not employees of the
Company, are paid fees of $1,000 per quarter and $500 per Board of Director
meeting attended plus reasonable travel expenses. During the fiscal year ended
March 31, 1995, Messrs. Hunnewell, and Mazzuto each earned fees for their
services on the Board of Directors of $8,000 and $7,000 respectively, plus
expenses. During the fiscal year ended March 31, 1995 both Messrs. Hunnewell
and Mazzuto were granted 75,000 shares of the Company's common stock as
compensation for serving on the Mergers and Acquisition Committee of the Board
of Directors.
The Company's Certificate of Incorporation and Bylaws require the Company
to provide its Directors and Officers with indemnification to the fullest extent
permitted by the Delaware General Corporation Law, as amended from time to time
(the "Delaware General Corporation Law"). The Delaware General Corporation Law
and the Company's Bylaws provide for the indemnification of an Officer or
Director who was or is a party to or who has threatened to be made a party to
any threatened, pending, or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in the right of the Company) by reason of the fact that he is or was a Director
or an Officer of the Company, or is or was serving at the request of the
Company as a Director or an Officer of another Company. Such Officers and
Directors shall be indemnified against all expenses (including attorneys'
fees), judgments, fines, amounts paid in settlement actually and reasonably
incurred by them in connection with such action, suit or proceeding provided
that such Director or Officer acted in good faith and in a manner which they
reasonably believed to be in or not opposed to the best interest of the Company.
In addition, such Officers and Directors may have indemnification expenses
advanced to them in any such action or proceeding but may be required to give
the Company an undertaking to repay such indemnification in the event that it
is later determined they are not entitled to indemnification.
INDEPENDENT ACCOUNTANTS
Although the appointment is not required to be submitted to a vote by the
stockholders, the Board of Directors believes it appropriate, as a matter of
policy, to request that the stockholders ratify the appointment of Zelenkofske,
Axelrod & Co. Ltd. for the fiscal year ending March 31, 1996. If the
stockholders do not ratify this appointment, the Company's Board of Directors
will reconsider its action.
- 13 -
Representatives of Zelenkofske, Axelrod & Company, Ltd. are expected to be
present at the Annual Meeting, will have the opportunity to make a statement if
they desire to do so, and will be able to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Any stockholder who intends to present a proposal at the Company's 1996
Annual Meeting is advised that, in order for such proposal to be included in the
Board of Directors' proxy material for such meeting, the proposal must be sent
to the Secretary at the offices of the Company, Communications Group Inc., 901
S. Trooper Road, P.O. Box 80360, Valley Forge, PA 19484 and must be received by
the Company no later than July 16, 1996.
MISCELLANEOUS
Management does not know of any matters to be brought before the Annual
Meeting other than as set forth in the notice thereof. However, if any other
matters properly come before the meeting, it is the intention of the persons
named in the proxy solicited on behalf of the management of the Company to vote
such proxy in accordance with their judgment on such matters.
For the Board of Directors
Mary Ann Davis
Corporate Secretary
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EXHIBIT A
COMMUNICATIONS GROUP INC.
STOCK OPTION AND RESTRICTED STOCK PLAN
The purpose of the Stock Option and Restricted Stock Plan (the "Plan") of
Communications Group Inc. (the "Company") is to promote the interests of the
Company by providing incentives to (i) designated officers and other employees
of the Company or a Subsidiary Corporation (as defined herein), (ii) members of
the Company's Board of Directors (the "Board") and (iii) independent contractors
and consultants (who may be individuals or entities) who perform services for
the Company to enable the Company to attract and retain them and to encourage
them to acquire a proprietary interest, or to increase their proprietary
interest, in the Company. The Company believes that the Plan will cause
participants to contribute materially to the growth of the Company, thereby
benefitting the Company's shareholders. For purposes of the Plan, the terms
"Parent Corporation" and "Subsidiary Corporation" shall have the meanings set
forth in subsections (e) and (f) of Section 424 of the Internal Revenue Code of
1986, as amended (the "Code").
1. ADMINISTRATION
(a) Except with respect to a Director's Grant (as hereinafter
defined) granted pursuant to Section 2(b) hereof, the Plan shall be administered
and interpreted by a committee of the Board (the "Committee") consisting of not
less than two persons, all of whom shall be "outside directors" within the
meaning of Section 162(m) of the Code and each of whom shall be a "disinterested
person" as defined under Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended. With respect to Eligible Participants (as hereinafter
defined), the Committee shall have the sole authority to determine (i) who is
eligible to receive Grants (as defined in Section 2 below) under the Plan, (ii)
the type, size and terms of each Grant under the Plan (subject to Section 4
below), (iii) the time when each Grant will be made and the duration of any
exercise or restriction period; (iv) any restrictions on resale applicable to
the shares to be issued or transferred pursuant to the Grant; and (v) any other
matters arising under the Plan. The Committee may, if it so desires, base any
of the foregoing determinations upon the recommendations of management of the
Company. The Committee shall have full power and authority to administer and
interpret the Plan with respect to Eligible Participants and to adopt or amend
such rules, regulations, agreements and instruments as it may deem appropriate
for the proper administration of the Plan. The Committee's interpretations of
the Plan and all determinations made by the Committee pursuant to the powers
vested in it hereunder shall be conclusive and binding on all Eligible
Participants having any interests in the Plan or in any Grants under the Plan.
No person acting under this subsection shall be held liable for any action or
determination made in good faith with respect to the Plan or any Grant under the
Plan.
(b) Each member of the Committee shall be indemnified and held
harmless by the Company against any cost or expense (including counsel fees)
reasonably incurred by him or her, or liability (including any sum paid in
settlement of a claim with the approval of the Company) arising out of any act
or omission to act in connection with the Plan, unless arising out of such
member's own fraud or bad faith, to the extent permitted by applicable law.
Such indemnification shall be in addition to any rights of indemnification the
members may have as directors or otherwise under the Articles of Incorporation
or By-Laws of the Company, any agreement of shareholders or disinterested
directors or otherwise.
2. GRANTS
(a) GRANTS TO ELIGIBLE PARTICIPANTS. With respect to Eligible
Participants, Incentives under the Plan shall consist of Incentive Stock Options
(as defined in Section 5(b) below), Nonqualified Stock Options (as defined in
Section 5(b) below) and Restricted Stock Grants (as defined in Section 6 below),
(hereinafter sometimes collectively referred to as "Grants"). All Grants,
except with respect to Director's Grants (as hereinafter defined) as
specifically provided in Section 2(b) hereof, shall be subject to the terms and
conditions set forth herein and to such other terms and conditions of any nature
as long as they are not inconsistent with the Plan as the Committee deems
appropriate and specifies in writing to the participant (the "Grant Letter").
The Committee shall approve the form and provisions of each Grant Letter.
Grants under any section of the Plan need not be uniform as among the
participants receiving the same type of Grant, and Grants under two or more
sections of the Plan may be combined in one Grant Letter.
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(b) DIRECTOR'S GRANTS. A member of the Board of the Company who is
not an employee of the Company or a Subsidiary Corporation and who serves as a
member of the Committee (a "Committee Member") shall be entitled to receive a
Director's Grant in accordance with this Section 2(b).
i) Committee Members shall receive a Nonqualified Stock
Option to purchase Thirty Thousand (30,000) shares of Common Stock (as
hereinafter defined) of the Company at an exercise price equal to the higher of
the fair market value (as defined herein) or the book value of a share of
Common Stock on the date of grant, subject to adjustment as provided in
Section 3(b) of this Plan, at the commencement of and in consideration for
their service to the Company as a director (a "Director's Grant"). One-half
of such Director's Grant shall vest on the first anniversary of the date of
grant and one-quarter shall vest on each of the second and third anniversaries
of the date of grant, provided such Committee Member is then serving as a
director (the "Initial Vesting Period"). If a Committee Member is not serving
as a director on the first, second or third anniversary of the date of such
grant, then any such Director's Grant shall terminate as to all shares covered
by the Director's Grant which have not vested. Director's Grants shall be
exercisable for a period of ten years from the date of grant.
ii) Upon the expiration of the Initial Vesting Period,
and at the commencement of each succeeding three year period, Committee Members
shall be eligible to receive an additional Director's Grant, which grants shall
vest in accordance with the schedule set forth in Section 2(b)(i) hereof.
iii) Upon the occurrence of (a) a Change In Control (as
defined in Section 7 hereof or (b) a sale or exchange of assets of the Company
or (c) dissolution, liquidation, merger or consolidation of the Company (in
which the Company is not the surviving corporation), all restrictions imposed
under any Director's Grant shall immediately lapse.
iv) Each Committee Member who receives a Director's
Grant pursuant to this Section 2(b) shall receive a written agreement setting
forth the terms and conditions of such grant including, but not limited to, the
restrictions set forth in this Section 2(b) (the "Director's Grant Letter").
v) Except as otherwise provided in this Section 2(b),
Director Grants shall be subject to the provisions of this Plan applicable to
Non-Qualified Stock Options granted to other persons.
vi) Notwithstanding any other provision of the Plan,
this Section 2(b) may not be amended more than once every six months, except for
amendments necessary to conform the plan to changes in the provisions of the
Code or the Employee Retirement Income Security Act of 1974 ("ERISA"), or the
rules promulgated thereunder.
vii) The provisions of this Section 2(b) are intended to
operate automatically and not require administration. To the extent that any
administrative determinations may be required, such determination shall be made
by a member or members of the Board of Directors who is/are not eligible to be
granted Options under this Section 2(b), but in no event shall such
determinations affect the eligibility of Committee Members, the timing of the
grants or the number of shares of Common Stock subject to Restricted Stock
Grants hereunder.
3. SHARES SUBJECT TO THE PLAN
(a) The aggregate number of shares of the Common Stock, par value
$.01 ("Common Stock"), of the Company that may be issued or transferred under
the Plan is 600,000, subject to adjustment pursuant to Section 3(b) below. Such
shares may be authorized but unissued shares or reacquired shares. If and to
the extent that options granted under the Plan terminate, expire or are canceled
without having been exercised (including shares cancelled as part of an exchange
of Grants), or if any shares of restricted stock are forfeited, the shares
subject to such Grant or of such restricted stock shall again be available for
subsequent Grants under the Plan.
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(b) If any change is made to the Common Stock (whether by reason of
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, combination of shares, or exchange of shares or any other change in
capital structure made without receipt of consideration), then unless such event
or change results in the termination of all outstanding Grants and Director's
Grants under the Plan, the Committee shall preserve the value of the outstanding
Grants and Director's Grants by adjusting the maximum number and class of shares
issuable under the Plan to reflect the effect of such event or change in the
Company's capital structure, and by making appropriate adjustments to the number
and class of shares, the exercise price of each outstanding option and
otherwise, except that any fractional shares resulting from such adjustments
shall be eliminated by rounding any portion of a share equal to .500 or greater
up, and any portion of a share equal to less than .500 down, in each case to the
nearest whole number.
4. ELIGIBILITY FOR PARTICIPATION
Committee Members, Officers and other employees of the Company or a
Subsidiary Corporation and independent contractors and consultants who perform
services for the Company (hereinafter referred to individually as an "Eligible
Participant" and collectively as "Eligible Participants") shall be eligible to
participate in the Plan. Only Eligible Participants who are officers or other
employees of the Company or a Subsidiary Corporation shall be eligible to
receive Incentive Stock Options. All Eligible Participants shall be eligible to
receive Nonqualified Stock Options and Restricted Stock Grants. The Committee
shall select from among the Eligible Participants those who will receive Grants
(such Eligible Participants and Committee Members who receive Director's Grants
pursuant to Section 2(b) hereof are hereinafter sometimes collectively referred
to as the "Grantees") and, except in the case of a Director's Grant made
pursuant to Section 2(b) hereof, the Committee shall determine the number of
shares of Common Stock subject to each Grant; provided, however, that the
maximum number of shares of Common Stock which may be subject to Grants awarded
to any Grantee shall not exceed 600,000. The Committee may, if it so desires,
base any such selections or determinations upon the recommendations of
management of the Company. Nothing contained in the Plan shall be construed to
limit in any manner whatsoever the right of the Company to grant rights or
options to acquire Common Stock or awards of Common Stock otherwise than
pursuant to the Plan.
5. STOCK OPTIONS TO ELIGIBLE PARTICIPANTS
(a) NUMBER OF SHARES. The Committee, in its sole discretion, shall
determine the number of shares of Common Stock that will be subject to each
option.
(b) TYPE OF OPTION AND OPTION PRICE.
(1) The Committee may grant options qualifying as incentive
stock options within the meaning of Section 422 of the Code ("Incentive
Stock Options") and other stock options ("Nonqualified Stock Options"), in
accordance with the terms and conditions set forth herein, or may grant any
combination of Incentive Stock Options and Nonqualified Stock Options
(hereinafter referred to collectively as "Stock Options"). The option
price per share of an Incentive Stock Option shall be higher of the
Fair Market Value or the book value of a share of Common Stock on
the date of grant. If the Grantee of an Incentive Stock Option
owns Common Stock (as determined under section 424(d) of the Code)
possessing more than 10% of the total combined voting power of all classes
of stock of the Company or a Parent Corporation or Subsidiary Corporation,
the option price per share in the case of an Incentive Stock Option shall
not be less than 110% of the fair market value of a share of Common Stock
on the date of grant and such option by its terms is not exercisable after
the expiration of five (5) years from the date of grant.
(2) For all valuation purposes under the Plan, the fair market
value of a share of Common Stock shall be determined in accordance with the
following provisions:
(A) If the Common Stock is not at the time listed or
admitted to trading on any stock exchange but is traded in the
over-the-counter market (but not on the Nasdaq
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National Market segment of The Nasdaq Stock Market), the fair market
value shall be the mean between the last reported bid and asked prices
of one share of Common Stock on the date in question in the
over-the-counter market, as such prices are reported by the National
Association of Securities Dealers through its Nasdaq system or any
successor system. If there are no reported bid and asked prices on
the date in question, then the mean between the last reported bid and
asked prices on the next preceding date for which such quotations
exist shall be determinative of fair market value. If the Common
Stock is traded over-the-counter on the Nasdaq National Market segment
of The Nasdaq Stock Market, the fair market value shall be the closing
selling price of one share of Common Stock on the date in question as
such price is reported by the National Association of Securities
Dealers, Inc. through such system or any successor system. If there
is no reported closing selling price for the Common Stock on the
date in question, then the closing selling price on the next preceding
date for which such quotation exists shall be determinative of fair
market value.
(B) If the Common Stock is at the time listed or admitted
to trading on any stock exchange, then the fair market value shall be
the closing selling price of one share of Common Stock on the date in
question on the stock exchange determined by the Committee to be the
primary market for the Common Stock, as such prices are officially
quoted on such exchange. If there is no reported closing selling price
of Common Stock on such exchange on the date in question, then the
fair market value shall be the closing selling price on the next
preceding date for which such quotation exists.
(C) If the Common Stock is at the time neither listed nor
admitted to trading on any stock exchange nor traded in the
over-the-counter market (or, the Committee determines that the value
as determined pursuant to Section 5(b)(2)(A) or (B) above does not
reflect fair market value), then the Committee shall determine fair
market value after taking into account such factors as it deems
appropriate.
(c) EXERCISE PERIOD. The Committee shall determine the option
exercise period of each Stock Option. The exercise period shall not exceed ten
years from the date of grant. Notwithstanding any determinations by the
Committee regarding the exercise period of any Stock Option, all outstanding
Stock Options shall be immediately exercisable upon a Change of Control of the
Company (as defined in Section 7 below).
(d) VESTING OF OPTIONS AND RESTRICTIONS ON SHARES. The vesting
period for Stock Options shall commence on the date of grant and shall end on
the date or dates, determined by the Committee, that shall be specified in the
Grant Letter. The Committee may impose upon the shares of Common Stock issuable
upon the exercise of a Stock Option such restrictions as it deems appropriate
and specifies in the Grant Letter. During any period in which such restrictions
apply a Grantee may not sell, assign, transfer, pledge or otherwise dispose of
the shares of Common Stock issued upon exercise of such stock options except to
a successor Grantee pursuant to Section 7 hereof and the Committee, in such
circumstances as it deems equitable, may determine that all such restrictions
shall lapse. Notwithstanding any other provision of the Plan, all outstanding
Stock Options shall become immediately exercisable upon a Change of Control of
the Company (as defined in Section 7 below).
(e) MANNER OF EXERCISE. A Grantee may exercise a Stock Option by
delivering a duly completed notice of exercise to the Committee, together with
payment of the option price. Such notice may include instructions authorizing
the Company to deliver the certificates representing the shares of Common Stock
issuable upon the exercise of such Stock Option to any designated registered
broker or dealer ("Designated Broker"). Such instructions shall designate the
account into which the shares are to be deposited. The Grantee may tender such
notice of exercise, which has been properly executed by the Grantee, and the
aforementioned delivery instructions to any Designated Broker.
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(f) TERMINATION OF EMPLOYMENT, DISABILITY OR DEATH.
(1) If a Grantee who is an employee ceases to be an employee
(in the case of an Incentive Stock Option) or ceases to be an Eligible
Participant (in the case of a Nonqualified Stock Option) for any reason
(other than, in the case of an individual, the death of such individual)
any Stock Option which is otherwise exercisable by the Grantee shall
terminate unless exercised within three months after the date on which the
Grantee ceases to be an employee or an Eligible Participant, as the case
may be (or in the case of Non-Qualified Stock Options within such other
period of time, which may be longer or shorter than three months, as may be
specified in the Grant Letter), but in any event no later than the date of
expiration of the option exercise period, except that in the case of an
individual Grantee who is disabled within the meaning of Section 22(e)(3)
of the Code, such period shall be one year rather than three months (or in
the case of Non-Qualified Stock Options within such other period of time,
which may be longer or shorter than three months, as may be specified in
the Grant Letter).
(2) In the event of the death of an individual Grantee while
he or she is an Eligible Participant or within not more than three months
after the date on which the Grantee ceases to be an Eligible Participant
(or within such other period of time, which may be longer or shorter than
three months, as may be specified in the Grant Letter), any Stock Option
which was otherwise exercisable by the Grantee at the date of death may be
exercised by the Grantee's personal representative at any time prior to the
expiration of one year from the date of death, but in any event no later
than the date of expiration of the option exercise period.
(g) SATISFACTION OF OPTION PRICE. The Grantee shall pay the option
price in full at the time of exercise in cash, or, with the consent of the
Committee in its sole discretion, by delivering shares of Common Stock already
owned by the Grantee and having a fair market value on the date of exercise
equal to the option price or a combination of cash and shares of Common Stock.
The Grantee shall also pay the amount of withholding tax due, if any, at the
time of exercise. Shares of Common Stock shall not be issued or transferred
upon any purported exercise of a Stock Option until the option price and the
withholding obligation are fully paid.
(h) Limits on Incentive Stock Options. Each Option Grant of an
Incentive Stock Option shall provide that:
(1) the Stock Option is not transferable by the Grantee,
except, in the case of an individual Grantee, by will or the laws of
descent and distribution;
(2) the Stock Option is exercisable only by the Grantee,
except as otherwise provided herein or in the Grant Letter in the event of
the death of an individual Grantee;
(3) the aggregate fair market value of the Common Stock
determined as of the date of the Grant with respect to which Incentive
Stock Options are exercisable for the first time by a Grantee during any
calendar year under the Plan and under any other stock option plan of the
Company shall not exceed $100,000; and
(4) unless the Grantee could otherwise transfer Common Stock
issued pursuant to the Stock Option without incurring liability under
Section 16(b) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), at least six months must elapse from the date of
acquisition of the Stock Option until the date of disposition of the Common
Stock issued upon exercise thereof.
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6. RESTRICTED STOCK GRANTS
The Committee may issue shares of Common Stock to an Eligible Participant
pursuant to an incentive or long range compensation plan, program or contract
approved by the Committee (a "Restricted Stock Grant"). The following
provisions are applicable to Restricted Stock Grants:
(a) GENERAL REQUIREMENTS. Shares of Common Stock issued pursuant to
Restricted Stock Grants will be issued in consideration for cash or services
rendered having a value, as determined by the Board, at least equal to the par
value thereof. All conditions and restrictions imposed under each Restricted
Stock Grant, and the period of years during which the Restricted Stock Grant
will remain subject to such restrictions, shall be set forth in the Grant Letter
and designated therein as the "Restriction Period." All restrictions imposed
under any Restricted Stock Grant shall lapse on such date or dates as the
Committee may approve until the restrictions have lapsed as to 100% of the
shares, except that upon a Change of Control of the Company, all restrictions on
the transfer of the shares which have not been forfeited prior to such date
shall lapse. In addition, the Committee, in circumstances that it deems
equitable, may determine as to any or all Restricted Stock Grants, that all the
restrictions shall lapse, notwithstanding any Restriction Period.
(b) NUMBER OF SHARES. The Committee, in its sole discretion, shall
determine the number of shares of Common Stock that will be granted in each
Restricted Stock Grant.
(c) REQUIREMENT OF RELATIONSHIP WITH COMPANY. If the Grantee's
relationship with the Company (as an employee, independent contractor or
consultant, as the case may be) terminates during the period designated in the
Grant Letter as the Restriction Period, the Restricted Stock Grant shall
terminate as to all shares covered by the Grant as to which restrictions on
transfer have not lapsed, and such shares shall be immediately returned to the
Company. The Committee may, in its sole discretion, provide for complete or
partial exceptions to the provisions of this Section 6(c).
(d) RESTRICTIONS ON TRANSFER AND LEGEND ON STOCK CERTIFICATE. During
the Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of Common Stock to which such Restriction Period
applies except to a Successor Grantee pursuant to Section 7 below. Each
certificate representing a share of Common Stock issued or transferred under a
Restricted Stock Grant shall contain a legend giving appropriate notice of the
restrictions in the Grant. The Grantee shall be entitled to have the legend
removed from the stock certificate or certificates representing any such shares
as to which all restrictions have lapsed.
7. TRANSFERABILITY OF OPTIONS AND GRANTS
Only a Grantee or Committee Member (or, in the case of an individual
Grantee and a Committee Member, his or her authorized legal representative on
behalf of Grantee or Committee Member) may exercise rights under a Grant or a
Director's Grant. No individual Grantee or Committee Member may transfer those
rights except by will or by the laws of descent and distribution or, in the case
of a Grant other than an Incentive Stock Option and to the extent permitted
under Rule 16b-3 of the Exchange Act and by the Committee in its sole
discretion, (a) pursuant to a qualified domestic relations order as defined
under the Code or Title I of ERISA or the rules thereunder and (b) to a trust
for the benefit of a member of the Grantee's immediate family. Upon the death
of an individual Grantee or Committee Member, the personal representative or
other person entitled to succeed to the rights of the Grantee or Committee
Member ("Successor Grantee") may exercise such rights. A Successor Grantee
shall furnish proof satisfactory to the Company of such person's right to
receive the Grant or the Director's Grant under the Grantee's will or under the
applicable laws of descent and distribution.
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8. CHANGE OF CONTROL OF THE COMPANY
As used herein, a "Change of Control" shall be deemed to have occurred
when (a) any "person" (as such term is used in Section 13(d) and 14(d) of the
Exchange Act) becomes the "beneficial owner", directly or indirectly, of
securities of the Company representing thirty (30%) percent or more of the
combined voting power of the Company's then outstanding securities or (b) the
Company becomes a subsidiary of another corporation or is merged or consolidated
into another corporation or if substantially all of its assets shall have been
sold to an unaffiliated party or parties unless thereafter (1) directors of the
Company immediately prior thereto continue to constitute at least fifty (50%)
percent of the directors of the surviving entity or purchaser or (2) the
Company's securities continue to represent, or are converted into securities
which represent, more than seventy (70%) percent of the combined voting power of
the surviving entity or purchaser, or (c) fifty (50%) percent or more of the
Board is comprised of persons who were not nominated by the Board for election
as directors, or (d) the Board adopts a plan of complete liquidation of the
Company.
9. CERTAIN CORPORATE CHANGES
(a) SALE OR EXCHANGE OF ASSETS, DISSOLUTION OR LIQUIDATION OR MERGER
OR CONSOLIDATION WHERE THE COMPANY DOES NOT SURVIVE. If all or substantially
all of the assets of the Company are to be sold or exchanged, the Company is to
be dissolved or liquidated, or the Company is a party to a merger or
consolidation with another corporation in which the Company will not be the
surviving corporation, then, at least ten days prior to the effective date of
such event, the Company shall give each Grantee with any outstanding Grants
(including Director's Grants) written notice of such event. Each such Grantee
shall thereupon have the right to exercise in full any installments of such
Grants (including Director's Grants) not previously exercised (whether or not
the right to exercise such installments has accrued pursuant to such Grants
(including Director's Grants), within ten days after such written notice is sent
by the Company. Any installments of such Grants (including Director's Grants)
not so exercised shall thereafter lapse and be of no further force or effect.
(b) MERGER OR CONSOLIDATION WHERE THE COMPANY SURVIVES. If the
Company is a party to a merger or consolidation in which the Company will be the
surviving corporation, then the Committee may, in its sole discretion, elect to
give each Grantee with any outstanding Grants (including Director's Grants)
written notice of such event. If such notice is given, each such Grantee shall
thereupon have the right to exercise in full any installments of such Grants
(including Director's Grants) not previously exercised (whether or not the right
to exercise such installments has accrued pursuant to such Grants (including
Director's Grants), within ten days after such written notice is sent by the
Company. Any installments of such Grants (including Director's Grants) not so
exercised shall thereafter lapse and be of no further force or effect.
10. SHAREHOLDER APPROVAL
This Plan is subject to and no Options shall be exercisable hereunder until
after approval by holders of a majority of the shares of the stock of the
Company present or represented by a proxy in a separate vote at a duly held
meeting of the shareholders of the Company within twelve months after the date
of the adoption of the Plan by the Board. If the Plan is not so approved by
shareholders, the Plan and all Stock Options and Restricted Stock Grants,
including Director's Grants, hereunder shall terminate and be of no force or
effect.
11. AMENDMENT AND TERMINATION OF THE PLAN
(a) AMENDMENT. Subject to the provisions of Section 2(b)(ii) hereof,
the Board may amend or terminate the Plan at any time; provided that the
approval of the shareholders of the Company shall be required in respect of any
amendment that (A) materially increases the benefits accruing to Eligible
Participants under the Plan, (B) increases the aggregate number of shares of
Common Stock that may be issued or transferred under the Plan (other than by
operation of Section 3(b) above), (C) materially modifies the requirements as to
eligibility for participation in the Plan; or (D) modifies the provisions for
determining the fair market value of a share of Common Stock.
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(b) TERMINATION OF PLAN. The Plan shall terminate on January 11,
2005 (as set forth in Section 19 below) unless earlier terminated by the Board
or unless extended by the Board with the approval of the shareholders.
(c) TERMINATION AND AMENDMENT OF OUTSTANDING GRANTS. A termination
or amendment of the Plan that occurs after a Grant (including Director's Grant)
is made shall not result in the termination or amendment of such Grant
(including Director's Grant) unless the Grantee or the Committee Member, as the
case may be, consents or unless the Committee acts under Section 17(b) below.
The termination of the Plan shall not impair the power and authority of the
Committee with respect to an outstanding Grant. Whether or not the Plan
has terminated, an outstanding Grant may be terminated or amended under Section
17(b) below or may be amended by agreement of the Company and the Grantee which
is consistent with the Plan.
(d) EMPLOYEES IN FOREIGN COUNTRIES. The Board shall have the
authority to adopt such modifications, procedures and subplans as may be
necessary or desirable to comply with provisions of the laws of foreign
countries in which the Company or its Subsidiaries may operate to assure the
viability of benefits from Grants made to participants employed in such
countries and to meet the objectives of the Plan.
12. RIGHTS OF ELIGIBLE PARTICIPANTS
Nothing in the Plan shall entitle any Eligible Participant or other person
to any claim or right to any Grant under the Plan. Neither the Plan nor any
action taken hereunder shall be construed as giving any Eligible Participant,
Committee Member or Grantee any rights to be retained by the Company in any
capacity, whether as an employee, member of the Board, independent contractor,
consultant or otherwise.
13. WITHHOLDING OF TAXES
The Company shall have the right to require a Grantee or Committee Member
to pay to the Company the amount of any taxes which the Company is required to
withhold in respect of an Option Grant or Restricted Stock Grant or to take
whatever action it deems necessary to protect the interests of the Company in
respect of such tax liabilities, including, without limitation, withholding a
portion of the shares of Common Stock otherwise deliverable pursuant to the
Plan. The Company's obligation to issue or transfer shares of Common Stock upon
the exercise of a Stock Option or the acceptance of a Restricted Stock Grant
shall be conditioned upon the Grantee's or Committee Member's compliance with
the requirements of this section to the satisfaction of the Committee.
14. AGREEMENTS WITH GRANTEES AND COMMITTEE MEMBERS
Each Option Grant made under the Plan shall be evidenced by a Grant Letter
containing such terms and conditions as the Committee shall approve. Each
Restricted Stock Grant shall be evidenced by a Grant Letter containing the
restrictions imposed upon such grant, including but not limited to, restrictions
imposed by federal and state securities laws.
15. REQUIREMENTS FOR ISSUANCE OF SHARES
No Common Stock shall be issued or transferred under the Plan unless and
until all applicable legal requirements have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Stock Option or Restricted Stock Grant on the Grantee's undertaking in
writing to comply with such restrictions on any subsequent disposition of the
shares of Common Stock issued or transferred thereunder as the Committee shall
deem necessary or advisable as a result of any applicable law, regulation or
official interpretation thereof, and certificates representing such shares may
be legended to reflect any such restrictions.
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16. HEADINGS
The section headings of the Plan are for reference only. In the event of a
conflict between a section heading and the content of a section of the Plan, the
content of the section shall control.
17. EFFECTIVE DATE OF THE PLAN
The Plan shall be effective as of January 11, 1995, subject to the approval
of the Company's shareholders within 12 months after such effective date.
18. MISCELLANEOUS
(a) SUBSTITUTE GRANTS. The Committee may make a Grant to an
employee, or an independent contractor or consultant of another corporation, if
such person shall become an Eligible Participant by reason of a corporate
merger, consolidation, acquisition of stock or property, reorganization or
liquidation involving the Company or a Subsidiary Corporation and such other
corporation. Any such Grant shall be made in substitution for a stock option or
restricted stock grant granted by the other corporation ("Substituted Stock
Incentives"), but the terms and conditions of the substitute Grant may vary from
the terms and conditions required by the Plan and from those of the Substituted
Stock Incentives. The Committee shall prescribe the provisions of the
substitute Grants.
(b) COMPLIANCE WITH LAW. The Plan, the exercise of Grants and the
obligations of the Company to issue or transfer shares of Common Stock under
Grants shall be subject to all applicable laws and required approvals by any
governmental or regulatory agencies. The Committee (or in the case of
Director's Grants, the Board of Directors) may revoke any Grant if it is
contrary to law or modify any Grant to bring it into compliance with any valid
and mandatory government regulations. The Committee may also adopt rules
regarding the withholding of taxes on payments to Grantees. The Committee may,
in its sole discretion, agree to limit its authority under this section.
(c) OWNERSHIP OF STOCK. A Grantee or Successor Grantee shall have no
rights as a shareholder with respect to any shares of Common Stock covered by a
Grant or Director's Grant until the shares are issued or transferred to the
Grantee or Successor Grantee on the stock transfer records of the Company.
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