SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/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 14a-12
Alpharel, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Alpharel, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
----------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
3) Filing Party:
----------------------------------------------------------------------
4) Date Filed:
----------------------------------------------------------------------
ALPHAREL, INC.
9339 CARROLL PARK DRIVE
SAN DIEGO, CALIFORNIA 92121
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 9, 1996
The Annual Meeting of Shareholders of Alpharel, Inc., a California
corporation (the "Company"), will be held at ___________________________
__________________, San Diego, California at 2:00 p.m. on Thursday, May 9,
l996 for the following purposes:
1. To elect seven directors to hold office until the next succeeding
Annual Meeting and until their successors have been elected and
qualified.
2. To vote upon a proposal to amend the Company's Articles of
Incorporation to increase the total number of authorized shares of
capital stock from 21,000,000 to 45,000,000, including an increase in
the authorized common stock of the Company from 20,000,000 to
40,000,000 and an increase in the authorized preferred stock of the
Company from 1,000,000 to 5,000,000.
3. To consider and act upon a proposal to approve the Company's 1996
Stock Incentive Plan.
4. To transact such other business as may properly come before the
Annual Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 3, 1996
as the record date for the determination of shareholders entitled to receive
notice of, and to vote at, the Annual Meeting and any adjournments or
postponements thereof, and only holders of record of Common Stock at the
close of business on that date will be entitled to receive notice of, and to
vote at, the Annual Meeting.
WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING OR NOT, PLEASE SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THIS WILL ENSURE THAT YOUR SHARES ARE VOTED IN ACCORDANCE WITH YOUR WISHES
AND THAT A QUORUM WILL BE PRESENT. YOU ARE CORDIALLY INVITED TO ATTEND THE
MEETING, AND YOU MAY VOTE IN PERSON EVEN THOUGH YOU HAVE RETURNED YOUR PROXY.
By Order of the Board of Directors:
John W. Low
SECRETARY
April 3, 1996
ALPHAREL, INC.
9339 CARROLL PARK DRIVE
SAN DIEGO, CALIFORNIA 92121
_________________________________
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 9, 1996
_________________________________
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Alpharel, Inc. (the "Company") for use
at the Annual Meeting of Shareholders to be held at ___________________________,
San Diego, California, on Thursday, May 9, 1996 at 2:00 p.m., or at any
adjournments or postponements thereof, for the purposes set forth herein and
in the foregoing Notice. This Proxy Statement and the accompanying proxy
were first sent to shareholders on or about April 3, 1996.
PROXY INFORMATION
Shares represented by properly executed proxies, if received in time and
not revoked or suspended, will be voted in accordance with the instructions
indicated thereon or, if no instructions are given for any or all of the
proposals, will be voted in favor of the election of all persons named in, or
otherwise nominated as set forth in, this Proxy Statement to serve as
directors, in favor of the proposal to amend the Company's Articles of
Incorporation to increase the number of authorized shares and in favor of the
proposal to adopt the Company's 1996 Stock Incentive Plan.
A shareholder giving a proxy has the power to revoke it at any time
before it is exercised by attending and voting at the Annual Meeting or by
filing with the Secretary of the Company either a written notice of
revocation or a duly executed proxy bearing a later date.
RECORD DATE AND VOTING
Each shareholder of record of Common Stock at the close of business on
April 3, 1996 is entitled to vote on all matters submitted to a vote of the
shareholders at the Annual Meeting. At the close of business on March 11,
1996, there were 18,093,636 outstanding shares of the Common Stock of the
Company held of record by approximately 530 shareholders. Directors will be
elected by a plurality of the votes of the shares of Common Stock represented
and voting on the election of directors. In all matters other than the
election of directors, the affirmative vote of a majority of shares of Common
Stock represented and voting on a particular matter (assuming
such affirmative votes constitute a majority of the votes required for a
quorum of the shareholders) shall be the act of the shareholders. In general,
abstentions will have no effect on the outcome of the voting with respect to
any matter. As to certain matters other than the election of directors, New
York Stock Exchange and American Stock Exchange rules generally require when
shares are registered in street or nominee name that their member brokers
receive specific instructions from the beneficial owners in order to vote on
such a proposal. If a member broker indicates on the proxy that such broker
does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
Holders of Common Stock have one vote for each share on all matters
submitted to the shareholders at the Annual Meeting, except that shareholders
may cumulate votes in the election of directors if any shareholder gives
notice to the Secretary prior to the voting of his or her intention to
cumulate votes. Under cumulative voting, each shareholder may give any one
candidate whose name was placed in nomination prior to the commencement of
voting a number of votes equal to the number of directors to be elected,
multiplied by the number of votes to which the shareholder's shares are
normally entitled, or distribute such number of votes on the same principle
among as many candidates as the shareholder sees fit. The proxy holders will
have authority, in their discretion, to vote cumulatively for less than all
of the nominees.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to shares of Common Stock
of the Company owned as of March 11, 1996, by (i) each person who, to the
extent known to the Company, beneficially owned more than 5% of such
outstanding Common Stock; (ii) each director who served during 1995; (iii)
each nominee for election as a director; (iv) each Named Executive Officer
(as defined below) of the Company and (v) all directors and executive
officers as a group. Unless otherwise indicated in the footnotes following
the table, the persons as to whom the information is given have sole voting
and investment power over the shares shown as beneficially owned, subject to
community property laws where applicable.
Number Percent of
Name Shares (1) Class (1)
- ----- ---------- ----------
Michael J. McGovern 889,450(2) 4.9%
Robert T. Bruce 302,000 1.7%
Stephen P. Gardner 136,000 *
Jay V. Tanna 6,250 *
Dominic Chan 5,000 *
D. Ross Hamilton 359,000 2.0%
2
Larry D. Unruh 8,594 *
Roger H. Erickson 168,250 *
John W. Low 196,750 1.1%
Garrett W. Stowell 68,750 *
All Current Directors and
Executive Officers as a Group (12 persons) 2,189,994 11.7%
___________________________________
*Less than 1%
(1) Amounts and percentages include shares of Common Stock that may be acquired
within 60 days through the exercise of stock options. Such stock included
in the computation of beneficial ownership is 140,000 shares for Mr. Bruce,
122,500 shares for Mr. Gardner, 101,250 shares for Mr. Erickson, 153,750
shares for Mr. Low, 68,750 shares for Dr. Stowell, 10,000 shares for Mr.
Hamilton, 5,000 shares for Dr. Chan, 6,250 shares for Mr. Tanna and 657,500
for all current directors and executive officers as a group.
(2) Does not include 113,000 shares held in trust for the benefit of Mr.
McGovern's adult children, as to which Mr. McGovern disclaims beneficial
ownership.
ITEM 1
ELECTION OF DIRECTORS
Seven directors, constituting all of the authorized directors, are to be
elected at the Annual Meeting to hold office until the next Annual Meeting
and until their successors are elected and qualified. In the election of
directors, the proxy holders intend to vote for the election of the nominees
named below. Should any nominee decline or become unavailable to serve as a
director or should any vacancy occur before the election (which events are
not anticipated), the proxies will be voted, in the absence of instructions
to the contrary, for the election of the remaining nominees named in this
Proxy Statement.
The following table sets forth certain information concerning each
person nominated for election as a director:
Name Age Position
- ---------------------------- -------- -------------------------------------
Robert T. Bruce 61 Chairman of the Board
Stephen P. Gardner 42 President and Chief Executive Officer
Jay V. Tanna 56 Chief Operating Offer and Executive
Vice President
3
Dominic Chan, Ph.D. 46 Director
D. Ross Hamilton 58 Director
Michael J. McGovern 66 Director
Larry D. Unruh 45 Director
Mr. Bruce has served as Chairman of the Board of the Company since March
1990. He previously served as Chief Executive Officer of the Company from
September 1993 to March 1995 and also from April 1990 to October 1991. He has
been a Director of the Company since May 1988. Mr. Bruce was Chairman of the
Board and Chief Executive Officer of Quadrex Corporation, a publicly held
engineering consulting firm from September 1985 to January 1989. Before
joining Quadrex Corporation, Mr. Bruce was employed by General Electric
Company for 26 years, most recently as Vice President and General Manager of
the Domestic Apparatus & Engineering Services Operations. Mr. Bruce also
served as a director of the Company for a short time in 1986.
Mr. Gardner became President and Chief Executive Officer effective March
8, 1995. Until joining the Company, he had served as Corporate Vice
President of Data General since October 1993. Previously, Mr. Gardner was
Vice President of Marketing for AViiON, a Data General business units from
March 1993. Prior to his employment with Data General, Mr. Gardner was
President of Integris, an independent division of Groupe Bull, since October
1991. Before heading Integris, Mr. Gardner held positions of Vice President,
North American Marketing from 1991 to 1992 and Vice President, Small Systems
Product Line Management from 1988 to 1990 at Groupe Bull.
Mr. Tanna has served as a director of the Company since the acquisition
of Trimco Group plc ("Trimco") by the Company in December 1995. Mr. Tanna
also became the Executive Vice President of the Company at such time, and was
appointed Chief Operating Officer of the Company in February 1996. Prior to
the Trimco acquisition, Mr. Tanna served as Managing Director of Trimco,
beginning in 1988. Prior to his employment with Trimco, Mr. Tanna held the
positions of Managing Director of Sorco Engineering, Ltd., a construction
engineering company, and Director of Projects of Lummus Co., Ltd., also a
construction engineering company.
Dr. Chan has served as a Director of the Company since July 1995. In
September 1991, Dr. Chan founded Peritus Software Services, Inc. ("Peritus"),
a computer software company, where he presently serves as President and Chief
Executive Officer. Before founding Peritus, Dr. Chan was Executive Vice
President of Research and Development for Bull HN Information Systems
("Bull") from 1988 to 1991. Prior to his employment with Bull, Dr. Chan held
the position of Vice President of Software Engineering for Apollo Computer
Corp., a computer workstation manufacturer, from 1986 to 1989. Dr. Chan began
his career as a member of the technical staff at Bell Laboratories.
Mr. Hamilton has served as a Director of the Company since June 1994.
Since 1983 Mr. Hamilton has served as President of Hamilton Research, Inc.,
an investment banking firm. Mr. Hamilton currently serves as a director of
IncStar Corporation, a medical diagnostic company, Luther Medical Products,
Inc., a medical device manufacturer, and Belcor, Inc., a natural resource
company.
Mr. McGovern, the founder of the Company, has served as a Director since
the Company's inception in February 1981. He has served as Chairman and Chief
Executive Officer of Photo Management Technologies, Inc. ("PMT"), a
manufacturer of dry silver processing aperture
4
card records, since June 1989 and as a consultant to MCREL & Associates since
1987. As a result of the downturn in U.S. Government defense spending, PMT,
which was dependent on government contract funding, experienced financial
difficulties. On May 23, 1991, PMT filed for bankruptcy under Chapter 7 of
the United States Bankruptcy Code. Mr. McGovern also served as Chairman and
Chief Executive Officer of the Company from its inception until December
1987. From 1972 to 1980, he was Director, Electrical Engineering of Bunker
Ramo Corporation, a then wholly owned subsidiary of Allied Corporation.
Mr. Unruh has served as a Director of the Company since May 1988. He is
a partner of Hein & Associates, certified public accountants, and has been
its Managing Tax Partner since 1982. Mr. Unruh currently serves as a director
of Basin Exploration, Inc., an oil exploration and development company, and
also serves as a director of LK Business Services Inc., a specialty
automobile lubricant manufacturer.
All directors are elected annually and serve until the next annual
meeting of shareholders and until their successors have been elected and
qualified.
MANAGEMENT
EXECUTIVE OFFICERS
The following table and discussion set forth certain information with
regard to the Company's executive officers.
Name Age Position
- ---------------------------- -------- -------------------------------------
Stephen P. Gardner 42 President and Chief Executive Officer
Jay Tanna 56 Chief Operating Officer and Executive
Vice President
Roger H. Erickson 39 Vice President, Worldwide Channel Sales
Richard J. Kennedy 55 Vice President, Operations
John W. Low 39 Chief Financial Officer and
Secretary
Garrett W. Stowell, Ph.D. 47 Chief Technology Officer and
Vice President, Product Development
Terrence P. Theobald 40 Vice President, Engineering
Messrs. Gardner and Tanna are nominees to the Board of Directors. See
"Item 1 -- Election of Directors" for biographical information.
Mr. Erickson was appointed in April 1995 as Vice President, Worldwide
Channel Sales, with responsibility for alternate channel and international
sales. Prior to April 1995, Mr. Erickson
5
served as Executive Vice President, Marketing and Sales from September 1993.
He was also a Director of the Company from July 1990 to June 1995. From
October 1991 to August 1993, Mr. Erickson served as Chief Executive Officer
and President of the Company. From June 1990 to October 1991, Mr. Erickson
served as Vice President, Engineering. From March to May 1990, Mr. Erickson
was Director of Technical Marketing at West Coast Information Systems, Inc.
From 1984 until March 1990, Mr. Erickson served the Company in several
positions including Senior Systems Engineer and Director of Technical
Projects.
Mr. Kennedy became Vice President, Operations effective August 1995.
Prior to joining the Company, Mr. Kennedy was Vice President of Operations at
Integris, a business unit of Groupe Bull. From 1968-1991 Mr. Kennedy held
various positions at Bull HN Information Systems, most recently as Director
of Product Management.
Mr. Low has served as Chief Financial Officer and Secretary since June
1990. Previously, Mr. Low had served as Corporate Controller since joining
the Company in August 1987. From 1980 until joining the Company, Mr. Low was
with Price Waterhouse, most recently as a Manager working with middle-market
and growing companies.
Mr. Theobald has served as Vice President, Engineering since January
1996. Prior to being promoted, Mr. Theobald served as Director, Projects and
Services since September 1993, and Director of Engineering from December 1992
to September 1993. Mr. Theobald joined the Company in July 1992 as a Project
Manager. Before joining the Company, Mr. Theobald spent 14 years at Northrop
Corporation, most recently as Manager of Information Systems Development.
Dr. Stowell has served as Vice President, Product Development of the
Company since the acquisition of Optigraphics Corporation ("Optigraphics") by
the Company in September 1993. For Optigraphics, Dr. Stowell served as Vice
President of Engineering from September 1985 until September 1993. Prior to
joining Optigraphics, he was Vice President of Research and Development at
Synercom Corporation and held similar engineering management positions at
Megatek Corporation.
EXECUTIVE OFFICERS' COMPENSATION
The following table sets forth certain information concerning the annual
and long-term compensation for services in all capacities to the Company for
the three fiscal years ended December 31, 1995 of those persons who were, at
December 31, 1995 (i) the Chief Executive Officer and (ii) the other
executive officers of the Company having compensation of $100,000 or more
(the "Named Executive Officers").
6
SUMMARY COMPENSATION TABLE
Annual Compensation
---------------------------------------------- Long Term
Compensation
Other Annual Awards-Stock
Name and Principal Position Year Salary Bonus Compensation (1) Options (Shares)
- -------------------------------- ------ --------- ----- ---------------- ----------------
Stephen P. Gardner (2) 1995 $172,000 -- $48,266(3) 250,000
Chief Executive Officer
and President
Roger H. Erickson 1995 $138,252 -- -- --
Vice President, Worldwide 1994 $146,308 -- -- --
Channel Sales 1993 $150,000 -- 35,000
John W. Low 1995 $131,904 -- -- 20,000
Chief Financial Officer 1994 $126,769 -- $36,594(4) --
and Secretary 1993 $114,924 -- -- 45,000
Garrett W. Stowell, Ph.D. 1995 $121,000 -- -- 25,000
Chief Technology Officer 1994 $112,883 -- -- --
and Vice President 1993 $ 26,255 -- -- 75,000
Product Development (5)
Robert T. Bruce 1995 $173,077(6) $250,000(7) -- --
Chief Executive Officer 1994 $241,694 -- -- --
1993 $105,565 $250,000(8) -- 70,000
_________________________________
(1) Excludes compensation in the form of other personal benefits, which for
each of the executive officers (with the exception of Mr. Gardner in 1995
and Mr. Low in 1994) did not exceed the lesser of $50,000 or 10% of the
total annual salary and bonus reported for each year.
(2) Mr. Gardner became Chief Executive Officer and President of the Company in
March 1995.
(3) Includes $45,023 for reimbursement of relocation costs incurred in
connection with a move at the time of joining the Company.
(4) Includes $36,325 for reimbursement of relocation costs incurred in
connection with a move for the benefit of the Company.
7
(5) Dr. Stowell became a Vice President of the Company in September 1993.
(6) Mr. Bruce resigned as the Chief Executive Officer in March 1995 upon Mr.
Gardner joining the Company. The salary amounts paid to Mr. Bruce in 1995
include amounts paid to him after such resignation in return for various
services rendered to the Company.
(7) A bonus was awarded to Mr. Bruce in recognition of his considerable efforts
in connection with the acquisition of Trimco in December 1995. This bonus
is currently being paid to Mr. Bruce in equal monthly installments of
$10,000, although the Company may, in its sole discretion, accelerate such
payments.
(8) A bonus was awarded to Mr. Bruce in recognition of his considerable efforts
in connection with the acquisition of Optigraphics in September 1993.
8
OPTION GRANTS IN 1995
Shown below is information concerning grants of options issued by the
Company to the Named Executive Officers during 1995:
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM (2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- -------------------- --------------- ---------------- ----------- ------------ -------------- --------------
Stephen P. Gardner 250,000 44% $1.50 March 2000 $102,500 $230,000
Roger H. Erickson 0 0% -- -- -- --
John W. Low 20,000 4% $1.69 January 2000 $9,200 $20,600
Garrett W. Stowell 25,000 4% $1.69 January 2000 $11,500 $25,750
Robert T. Bruce 0 0% -- -- -- --
__________________
(1) All options were granted in January and March, 1995, with an exercise price
equal to the closing sale price of the Company Common Stock as reported on
The Nasdaq National Market on such date. Unless otherwise indicated, all
grants vest 25% on the date of the grant and in additional annual
installments of 25% commencing on the first anniversary of the date of
grant.
(2) The 5% and 10% assumed rates of appreciation are specified under the rules
of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of the future price of its Common Stock.
The actual value, if any, which a Named Executive Officer may realize upon
the exercise of stock options will be based upon the difference between the
market price of the Company's Common Stock on the date of exercise and the
exercise price.
AGGREGATED OPTION EXERCISES IN 1995 AND 1995 YEAR-END OPTION VALUES
The following table sets forth for the Chief Executive Officer and the
other Named Executive Officers, information with respect to unexercised
options and year-end option values, in each case with respect to options to
purchase shares of the Company's Common Stock:
Value of Unexercised
Number of Unexercised Options In-the-money Options
Shares Held as of December 31, 1995 At December 31, 1995 (1)
Acquired on Value ------------------------------- -------------------------------
Name Exercise Realized Exercisable Nonexercisable Exercisable Nonexercisable
- ---- ----------- -------- ------------- --------------- ------------- ---------------
Stephen P. Gardner 2,500 $8,125 60,000 187,500 $202,800 $633,750
Roger H. Erickson 60,000 $175,641 161,250 8,750 $478,350 $27,888
John W. Low 55,000 $145,750 148,750 26,250 $445,013 $83,063
Garrett W. Stowell -- -- 62,500 37,500 $199,375 $119,625
Robert T. Bruce 160,000 $190,080 140,000 -- $420,700 --
__________________
(1) Based on the closing sale price of the Company's Common Stock on The Nasdaq
National Market on December 29, 1995 of $4.88 per share.
9
COMMITTEES AND ATTENDANCE AT MEETINGS
The Board of Directors has an Audit Committee which makes recommendations
regarding the selection of independent public accountants and reviews with
them the scope and results of the audit engagement. The Audit Committee is
comprised of Robert T. Bruce, Michael J. McGovern and Larry D. Unruh. The Audit
Committee held one meeting during 1995.
The Board of Directors also has a Compensation Committee which reviews
compensation of officers. The Compensation Committee is currently comprised
of Dominic K. Chan, Michael McGovern, D. Ross Hamilton and Larry D. Unruh.
The Compensation Committee held three meetings during 1995.
In addition, the Board of Directors has a Stock Option Committee which
administers the Company's 1987 Stock Option Plan. The Stock Option Committee
will also administer the 1996 Stock Incentive Plan if it is approved by the
Shareholders. The Stock Option Committee is currently comprised of Larry D.
Unruh and Michael J. McGovern. The Stock Option Committee held six meetings
in 1995.
The Board of Directors does not have a standing Nominating Committee or
any other committee which performs a similar function.
During 1995, the Board of Directors held eight meetings. Each director
attended at least 75% of the aggregate of (i) the total number of meetings of
the Board held during the period for which he was a director, and (ii) the
total number of meetings held by all committees of the Board on which he
served during the period he served.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors and persons who own more than 10%
of the Company's common stock to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission
(the "SEC"). Executive officers, directors and 10% shareholders are required
by the SEC to furnish the Company with copies of all Forms 3, 4 and 5 that
they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file a Form 5 for specified fiscal years, the Company
believes that all of its executive officers, directors and greater than 10%
shareholders have complied with all of the filing requirements applicable to
them with respect to transactions during 1995.
INDEMNITY TRUST
In 1988, the Company adopted a form of indemnity agreement (the
"Indemnity Agreement"), which was approved at the 1988 Annual Meeting of
Shareholders. The Company subsequently entered into Indemnity Agreements
with certain of its officers and directors. Because the Company was unable to
obtain director and officer liability insurance at a reasonable cost and in
order to enable the Company to attract and retain qualified officers and
directors, on
10
October 12, 1989, the Company established an indemnity trust (the "Indemnity
Trust") with an initial principal amount of $250,000 to serve as a vehicle
for officers elected by the Board of Directors who have served on or after
May 31, 1989, as well as the Company's directors who have served on or after
such date. The trustee of the Indemnity Trust is Bank of America. The
Indemnity Trust is irrevocable but may terminate after the occurrence of
certain events, including the Company's obtaining of a director and officer
liability insurance policy comparable in scope to the coverage of the
Indemnity Trust, or the Company's achieving certain financial results. In
any event, the Indemnity Trust terminates on December 31, 1999.
COMPENSATION OF DIRECTORS
Each director, other than directors who are also employees of the
Company or are precluded from accepting a fee by their employers, receives a
$5,000 annual fee plus a $1,000 meeting fee for four paid meetings a year. In
addition, each director is reimbursed for all reasonable expenses incurred in
connection with attendance at such meetings. Directors who are employees of
the Company are not compensated for serving as directors.
During 1995, Mr. Hamilton, through Hamilton Research, Inc., provided
consulting services to the Company, primarily in connection with investment
banking and investor relations. The Company currently pays a monthly fee of
$3,000 plus reimbursement of out-of-pocket expenses for such services. The
Company paid Hamilton Research, Inc. an aggregate of $35,181 for Mr.
Hamilton's consulting services in 1995. This consulting arrangement is
terminable by the Company at any time.
ITEM 2
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
The Board of Directors has adopted a resolution amending Article III of
the Company's Articles of Incorporation to increase the authorized shares of
capital stock of the Company from the current amount of 21,000,000 shares,
which consists of 20,000,000 shares of Common Stock and 1,000,000 shares of
Preferred Stock, to 45,000,000 shares, which would consist of 40,000,000
shares of Common Stock and 5,000,000 shares of Preferred Stock (the "Capital
Stock Amendment"). Article III of the Company's Articles of Incorporation, as
amended by the Capital Stock Amendment, is attached hereto as Annex I. The
description which follows is qualified in its entirety by the exact language
of the Capital Stock Amendment.
Article III currently authorizes a total of 21,000,000 shares of capital
stock, in the form of 20,000,000 shares of Common Stock and 1,000,000 shares
of Preferred Stock. At the close of business on March 11, 1996, there were
18,093,636 shares of Common Stock outstanding, and an additional 1,224,051
shares of Common Stock were reserved for issuance upon exercise of
outstanding options issued pursuant to the Company's 1987 Stock Option Plan.
No shares of Preferred Stock were outstanding. The increase in the authorized
number of shares is proposed in order to allow the Company to grant
additional stock options or other stock-based compensation to its employees
and consultants and, where advantageous to the Company, to issue shares of
its capital stock in connection with future acquisitions or other business
combinations. In connection
11
with the acquisition of the outstanding shares of Trimco Group, plc
("Trimco") in December 1995, the Company issued an aggregate of 1,614,189
shares to the former Trimco shareholders as part of the consideration.
Although the Company does not currently have any agreements with respect to
additional proposed acquisitions, an increase in the authorized number of
shares pursuant to the Capital Stock Amendment would allow the Company
additional flexibility to issue its capital stock where appropriate. The
Company believes that the number of shares of Common Stock and Preferred
Stock that would be available for issuance following adoption of the Capital
Stock Amendment would be sufficient for any purposes foreseeable by the
Company. Other than increasing the number of authorized shares of capital
stock of the Company, the Capital Stock Amendment will not affect the rights,
preferences or privileges of the Company's shareholders.
The Board of Directors has directed that the Capital Stock Amendment be
submitted for shareholder approval. The affirmative vote of a majority of the
shares of Common Stock represented at the Annual Meeting will be required for
approval. In the absence of approval, the Capital Stock Amendment will be
without effect, and the authorized number of shares of capital stock of the
Company will remain as described above.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR APPROVAL OF THE CAPITAL STOCK AMENDMENT.
When a proxy in the form of the proxy enclosed with this Proxy Statement
is returned properly executed, unless marked to the contrary, such proxy will
be voted in favor of the Capital Stock Amendment.
ITEM 3
APPROVAL OF 1996 STOCK INCENTIVE PLAN
The Board of Directors of the Company has previously adopted, and has
recommended that the shareholders approve, the 1996 Stock Incentive Plan (the
"1996 Plan"), pursuant to which officers, directors, employees and
consultants of the Company would be eligible to receive options to purchase
Common Stock and other awards as described below. The 1996 Plan is intended
to replace the Company's existing 1987 Stock Option Plan, under which there
were a total of 103,725 options remaining available for grant as of March 11,
1996. The following is a description of the material features of the 1996
Plan, a complete copy of which is attached hereto as Annex II. The
description which follows is qualified in its entirety by reference to the
exact language of 1996 Plan.
GENERAL
The purpose of the 1996 Plan is to enable the Company and its
subsidiaries to attract, retain and motivate its directors, employees and
consultants by providing for or increasing the proprietary interests of such
persons in the Company. Every director, employee and consultant of the
Company and its subsidiaries is eligible to be considered for the grant of
awards
12
under the 1996 Plan. As of March 1, 1996, the Company and its subsidiaries
had a total of 193 employees.
The 1996 Plan is administered by the Stock Option Committee, each member
of which must be a "disinterested person" as defined in Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended. The
members of the Stock Option Committee will not be eligible for the grant of
awards under the 1996 Plan. The Stock Option Committee has full and final
authority to select the individuals to receive awards and to grant such
awards and has a wide degree of flexibility in determining the terms and
conditions of awards. Subject to limitations imposed by law, the Board of
Directors of the Company may amend or terminate the Plan at any time and in
any manner. However, no such amendment or termination may deprive the
recipient of an award previously granted under the Plan of any rights
thereunder without his or her consent.
Awards under the 1996 Plan are not restricted to any specified form or
structure and may include, without limitation, sales or bonuses of stock,
restricted stock, stock options, reload stock options, stock purchase
warrants, other rights to acquire stock, securities convertible into or
redeemable for stock, stock appreciation rights, phantom stock, dividend
equivalents, performance units or performance shares. An award to an employee
may consist of one such security or benefit or two or more of them in tandem
or in the alternative. The 1996 Plan does not specify a minimum exercise
price or other consideration that a recipient of an award must pay to obtain
the benefit of an award, and therefore the maximum compensation payable to
employees pursuant to the 1996 Plan, during the term of the 1996 Plan and
awards granted thereunder, is equal to the number of shares of Common Stock
with respect to which awards may be issued thereunder, multiplied by the
value of such shares on the date such compensation is measured. An award
granted under the 1996 Plan to an employee will generally include a provision
conditioning or accelerating the receipt of benefits upon the occurrence of
specified events, such as a change of control of the Company or a
dissolution, liquidation, sale of substantially all of the property and
assets of the Company or other significant corporate transaction.
The maximum number of shares of Common Stock that may be issued pursuant
to awards granted under the 1996 Plan is 1,250,000. The 1996 Plan generally
provides that no single employee may be granted options or other awards with
respect to more than 1,250,000 shares of Common Stock in any one calendar
year. The 1996 Plan also contains customary anti-dilution provisions;
provided, however, that no adjustment will be made pursuant to such
provisions to the extent such adjustment would cause incentive stock options
(as discussed below under "CERTAIN INCOME TAX CONSEQUENCES") issued or
issuable under the 1996 Plan to be treated as other than incentive stock
options, or to the extent that the Stock Option Committee determines that
such adjustment would result in the disallowance of a federal income tax
deduction for compensation attributable to such awards by causing such
compensation to be treated as other than "performance-based compensation"
within the meaning of the 1996 Plan.
Awards may not be granted under the 1996 Plan on or after the tenth
anniversary of the adoption of the 1996 Plan. Although any award that was
duly granted prior to such date may thereafter be exercised or settled in
accordance with its terms, no shares of Common Stock may be issued pursuant
to any award on or after the twentieth anniversary of the adoption of the
Plan.
13
SECTION 16(b) OF THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), directors, executive officers and 10%
shareholders of the Company are generally liable to the Company for repayment
of any profits realized from any non-exempt purchase and sale of Common Stock
occurring within a six-month period. Rule 16b-3 promulgated under the
Exchange Act provides an exemption from Section 16(b) liability for certain
transactions by an officer or director pursuant to an employee benefit plan
that complies with such Rule. The 1996 Plan is designed to comply with Rule
16b-3.
CERTAIN INCOME TAX CONSEQUENCES
The following is a brief description of the federal income tax treatment
that will generally apply to awards made under the 1996 Plan, based on
federal income tax laws in effect on the date hereof. The exact federal
income tax treatment of awards will depend on the specific nature of any such
award.
Pursuant to the 1996 Plan, participants that are employees may be
granted options that are intended to qualify as incentive stock options
("ISOs") under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"). Generally, the optionee is not taxed, and the Company is not
entitled to a deduction, on the grant or exercise of an ISO. However, if the
optionee sells the shares acquired upon the exercise of an ISO ("ISO Shares")
at any time within (i) one year after the transfer of ISO Shares to the
optionee pursuant to the exercise of the ISO or (ii) two years from the date
of grant of the ISO, then the optionee will recognize ordinary income in an
amount equal to the excess, if any, of the lesser of the sale price or the
fair market value of the ISO Shares on the date of exercise, over the
exercise price of the ISO. The Company will generally be entitled to a
deduction equal to the amount of ordinary income recognized by the optionee.
If the optionee sells the ISO Shares at any time after the optionee has held
the ISO Shares for at least (i) one year after the date of transfer of the
ISO Shares to the optionee pursuant to the exercise of the ISO and (ii) two
years from the date of grant of the ISO, then the optionee will recognize
capital gain or loss equal to the difference between the sales price and the
exercise price of such ISO, and the Company will not be entitled to any
deduction.
The amount by which the fair market value of the ISO Shares received
upon exercise of an ISO exceeds the exercise price will be included as a
positive adjustment in the calculation of an optionee's "alternative minimum
taxable income" ("AMTI") in the year of exercise. The "alternative
minimum tax" imposed on individual taxpayers is generally equal to the
amount by which 28% (26% of AMTI below certain amounts) of the individual's
AMTI (reduced by certain exemption amounts) exceeds his or her regular income
tax liability for the year.
The grant of an option or other similar right to acquire stock that does
not qualify for treatment as an ISO (a "non-qualified stock option") is
generally not a taxable event for the optionee. Upon exercise of the option,
the optionee will generally recognize ordinary income in an amount equal to
the excess of the fair market value of the stock acquired upon exercise
(determined as of the date of exercise) over the exercise price of such
option, and the Company
14
will be entitled to a deduction equal to such amount. Nonemployees may only
be awarded non-qualified stock options.
If an optionee is a director, officer or shareholder subject to Section
16 of the Exchange Act (an "Insider") and exercises an option within six
months of the date of grant, the timing of the recognition of any ordinary
income should be deferred until (and the amount of ordinary income should be
determined based on the fair market value (or sales price in the case of a
disposition) of the shares of Common Stock upon) the earlier of the following
two dates (the "16(b) Date"): (i) six months after the date of grant or
(ii) a disposition of the shares of Common Stock, unless the Insider makes an
election under Section 83(b) of the Code (an "83(b) Election") within 30
days after exercise to recognize ordinary income based on the value of the
Common Stock on the date of exercise. In addition, special rules apply to an
Insider who exercises an option having an exercise price greater than the
fair market value of the underlying shares on the date of exercise.
Awards under the 1996 Plan may also include stock sales, stock bonuses
or other grants of stock that include provisions for the delayed vesting of
the recipient's rights to the stock. Unless the recipient makes an 83(b)
Election as discussed above within 30 days after the receipt of the
restricted shares, the recipient generally will not be taxed on the receipt
of restricted shares until the restrictions on such shares expire or are
removed. When the restrictions expire or are removed, the recipient will
recognize ordinary income (and the Company will be entitled to a deduction)
in an amount equal to the excess of the fair market value of the shares at
that time over the purchase price. However, if the recipient makes an 83(b)
Election within 30 days of the receipt of restricted shares, he or she will
recognize ordinary income (and the Company will be entitled to a deduction)
equal to the excess of the fair market value of the shares on the date of
receipt (determined without regard to vesting restrictions) over the purchase
price. In the case of an Insider (as defined above), the timing of income
recognition (including the date used to compute the fair market value of
shares) with respect to restricted shares may be deferred until the 16(b)
Date, as described above, unless the Insider makes a valid 83(b) Election.
Awards may be granted under the 1996 Plan which do not fall clearly into
the categories described above. The federal income tax treatment of these
awards will depend upon the specific terms of such awards. Generally, the
Company will be required to make arrangements for withholding applicable
taxes with respect to any ordinary income recognized by a recipient in
connection with awards made under the 1996 Plan.
Special rules will apply in cases where a recipient of an award pays the
exercise or purchase price of the award or applicable withholding tax
obligations under the 1996 Plan by delivering previously owned shares of
Common Stock or by reducing the amount of shares otherwise issuable pursuant
to the award. The surrender or withholding of such shares will in certain
circumstances result in the recognition of income with respect to such shares
or a carryover basis in the shares acquired.
The terms of the agreements pursuant to which specific awards are made
under the 1996 Plan may provide for accelerated vesting or payment of an
award in connection with a change in ownership or control of the Company. In
that event and depending upon the individual
15
circumstances of the recipient, certain amounts with respect to such award
may constitute "excess parachute payments" under the "golden parachute"
provisions of the Code. Pursuant to these provisions, a recipient will be
subject to a 20% excise tax on any "excess parachute payments" and the
Company will be denied any deduction with respect to such payment.
In certain circumstances, the Company may be denied a deduction for
compensation (including compensation attributable to the ordinary income
recognized with respect to awards made under the 1996 Plan) to certain
officers of the Company to the extent that the compensation exceeds
$1,000,000 (per person) annually.
CONCLUSION
The Board of Directors has directed that the 1996 Plan be submitted for
shareholder approval. The affirmative vote of a majority of the shares of
Common Stock represented at the Annual Meeting will be required for approval.
In the absence of approval, the 1996 Plan will be without effect, and no
grants of awards thereunder will be made.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR APPROVAL OF THE 1996 PLAN.
When a proxy in the form of the proxy enclosed with this Proxy Statement
is returned properly executed, unless marked to the contrary, such proxy will
be voted in favor of the adoption of the 1996 Plan.
16
PERFORMANCE GRAPH
The stock performance graph shall not be deemed to be incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
The following graph shows the Company's total return to shareholders
compared to the NASDAQ Market Value Index(1) and a Peer Group Index(2) over
the period from January 1, 1991 to December 31, 1995.
[INSERT GRAPH]
"COMPARE 5-YEAR CUMULATIVE TOTAL RETURN AMONG ALPHAREL, INC.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX"
ALPHAREL, INC PEER GROUP INDEX NASDAQ MARKET INDEX
FY 1990 100 100 100
FY 1991 360.00 175.61 128.38
FY 1992 275.01 191.87 129.64
FY 1993 255.01 204.87 155.50
FY 1994 310.00 250.68 163.26
FY 1995 780.00 372.93 211.77
ASSUMES $100 INVESTED ON JAN. 1, 1991
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1995
__________________________
(1) Includes all issues trading over the NASDAQ National Market and Over the
Counter Markets during the period from January 1, 1991 through December 31,
1995, weighted annually by market capitalization (shares outstanding
multiplied by stock price).
(2) A Peer Group Index compiled and published by Media General Financial
Services, Inc. comprised of all computer software and data processing
companies that were publicly traded in the United States at December 31,
1995, weighted annually by market capitalization (shares outstanding
multiplied by stock price). Copies of this index can be obtained by ordering
MG Industry Group 03 from Media General Financial Services, Inc., P.O. Box
85333, Richmond, VA, 23293, telephone number (804) 649-6097, and paying
their standard fee.
17
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP has audited the Company's 1995 financial
statements. A representative of Price Waterhouse LLP is expected to be
present at the Annual Meeting to make a statement if such person so desires
and to be available to respond to appropriate questions that may be asked by
shareholders. The selection of independent accountants to audit the Company's
1996 financial statements will be made in the second half of 1996 after an
evaluation of the audit fee proposal.
ANNUAL REPORT
The Company's Annual Report on Form 10-K including financial statements
and related schedules for the year ended December 31, 1995 filed with the
Securities and Exchange Commission is being mailed to all shareholders. Any
shareholder who has not received a copy may obtain one by writing to the
Company at 9339 Carroll Park Drive, San Diego, California 92121, Attention:
Shareholder Relations.
SHAREHOLDER PROPOSALS
A proposal of a shareholder intended to be presented at the 1997 Annual
Meeting of Shareholders and to be included in the Proxy Statement for that
meeting must be received on or before December 4, 1996 at the Company's
principal offices, 9339 Carroll Park Drive, San Diego, California 92121.
OTHER MATTERS
The Company knows of no other matters to be brought before the Annual
Meeting. However, if any other matters are properly presented for action, the
persons named in the accompanying proxy intend to vote on such matters in
their discretion.
SOLICITATION OF PROXIES
The cost of this solicitation of proxies will be borne by the Company.
Solicitation will be made by mail, telephone or telegram and personally by
directors, officers and other employees of the Company, but such persons will
not receive compensation for such services over and above their regular
salaries. The Company will reimburse brokers, banks, custodians, nominees and
fiduciaries holding stock in their names or in the names of their nominees
for their reasonable charges and expenses in forwarding proxy material to the
beneficial owners of such stock.
18
ANNEX I
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
ALPHAREL, INC.
The undersigned, Stephen P. Gardner and John W. Low, certify that:
1. They are the President and Secretary, respectively, of Alpharel,
Inc., a California corporation (the "Corporation").
2. Article III of the Articles of Incorporation of this Corporation is
amended and restated to read in its entirety as follows:
(a) This corporation is authorized to issue two classes of
shares of stock, designated, respectively as "Common Stock" and "Preferred
Stock." The total number of shares of all classes of stock that this
corporation is authorized to issue is Forty-Five Million (45,000,000),
consisting of Forty Million (40,000,000) shares of Common Stock and Five
Million (5,000,000) shares of Preferred Stock.
(b) Shares of Preferred Stock may be issued from time to time in
one or more series. The Board of Directors is authorized to determine the
designation of any such series. The Board of Directors is also authorized
to determine or alter the rights, preferences, privileges and restrictions
granted to or imposed upon any wholly unissued series of Preferred Stock,
including, without limitation, the dividend rights (and whether dividends
are cumulative), conversion rights, if any, voting rights (including the
number of votes, if any, per share, as well as the number of members, if
any, the Board of Directors or the percentage of members, if any, of the
Board of Directors that each series of Preferred Stock may be entitled to
elect), rights and terms of redemption (including sinking fund provisions,
if any), redemption price and liquidation preferences, and, within the
limits and restrictions stated in any resolution or resolutions of the
Board of Directors originally fixing the number of shares constituting any
series, to increase or decrease (but not below the number of shares of such
series then outstanding) the number of shares of any such series subsequent
to the issuance of shares of that series. In case the number of shares of
any series shall be so decreased, the shares constituting such decrease
shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
3. The foregoing amendment of the Articles of Incorporation has been
duly approved by the Board of Directors.
4. The foregoing amendment of the Articles of Incorporation has been
duly approved by the required vote of shareholders in accordance with Section
902 of the California Corporations Code. The total number of outstanding
shares of the Corporation entitled to vote thereon is ___________, all of
which are shares of Common Stock. There are presently no shares of Preferred
Stock outstanding. The number of shares voting in favor of the amendment
equaled or exceeded the vote required. The percentage vote required was
greater than 50%.
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this Certificate are true and
correct of our own knowledge.
DATED: May ______, 1996
----------------------------------------
Stephen P. Gardner, President
----------------------------------------
John W. Low, Secretary
2
ANNEX II
ALPHAREL, INC.
1996 STOCK INCENTIVE PLAN
Section 1. PURPOSE OF PLAN
The purpose of this 1996 Stock Incentive Plan (the "Plan") of Alpharel,
Inc., a California corporation (the "Company"), is to enable the Company to
attract, retain and motivate its directors, officers, employees and
consultants by providing for or increasing the proprietary interests of such
persons in the Company.
Section 2. PERSONS ELIGIBLE UNDER PLAN
Each of the following persons (each, a "Participant") shall be eligible
to be considered for the grant of Awards (as hereinafter defined) hereunder:
(1) any employee of the Company or any of its subsidiaries, including any
officer or director who is also such an employee (an "Employee"), (2) any
director of the Company or any of its subsidiaries, including any director
who is not an Employee and (3) any consultant of the Company or any of its
subsidiaries. Notwithstanding the foregoing, the members of the Committee
(as hereinafter defined) shall not be eligible to be considered for the grant
of Awards hereunder.
Section 3. AWARDS
(a) The Committee (as hereinafter defined), on behalf of the Company,
is authorized under this Plan to enter into any type of arrangement with a
Participant that is not inconsistent with the provisions of this Plan and
that, by its terms, involves or might involve the issuance of (i) shares of
common stock, no par value, of the Company (the "Common Shares") or (ii) a
Derivative Security (as such term is defined in Rule 16a-1 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as such
rule may be amended from time to time) with an exercise or conversion
privilege at a price related to the Common Shares or with a value derived
from the value of the Common Shares. The entering into of any such
arrangement is referred to herein as the "grant" of an "Award."
(b) Awards are not restricted to any specified form or structure and
may include, without limitation, sales or bonuses of stock, restricted stock,
stock options, reload stock options, stock purchase warrants, other rights to
acquire stock, securities convertible into or redeemable for stock, stock
appreciation rights, phantom stock, dividend equivalents, performance units
or performance shares, and an Award may consist of one such security or
benefit, or two or more of them in tandem or in the alternative.
(c) Awards may be issued, and Common Shares may be issued pursuant to
an Award, for any lawful consideration as determined by the Committee,
including, without limitation, services rendered by the recipient of such
Award.
(d) Subject to the provisions of this Plan, the Committee, in its sole
and absolute discretion, shall determine all of the terms and conditions of
each Award granted under this Plan, which terms and conditions may include,
among other things:
(i) a provision permitting the recipient of such Award, including any
recipient who is a director or officer of the Company, to pay the purchase
price of the Common
Shares or other property issuable pursuant to such Award, or such
recipient's tax withholding obligation with respect to such issuance, in
whole or in part, by any one or more of the following:
(A) the delivery of cash;
(B) the delivery of other property deemed acceptable by the
Committee;
(C) the delivery of previously owned shares of capital stock of
the Company (including "pyramiding") or other property; or
(D) a reduction in the amount of Common Shares or other property
otherwise issuable pursuant to such Award.
(ii) a provision conditioning or accelerating the receipt of benefits
pursuant to such Award, either automatically or in the discretion of the
Committee, upon the occurrence of specified events, including, without
limitation, a change of control of the Company (as defined by the
Committee), an acquisition of a specified percentage of the voting power of
the Company, the dissolution or liquidation of the Company, a sale of
substantially all of the property and assets of the Company or an event of
the type described in Section 7 hereof; or
(iii) a provision required in order for such Award to qualify as an
incentive stock option (an "Incentive Stock Option") under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"); PROVIDED,
HOWEVER, that no Award issued to a consultant or any other person that is
not an Employee of the Company may qualify as an Incentive Stock Option.
Section 4. STOCK SUBJECT TO PLAN
(a) The aggregate number of Common Shares that may be issued pursuant
to all Incentive Stock Options granted under this Plan shall not exceed
1,250,000, subject to adjustment as provided in Section 7 hereof.
(b) At any time, the aggregate number of Common Shares issued and
issuable pursuant to all Awards (including all Incentive Stock Options)
granted under this Plan shall not exceed 1,250,000, subject to adjustment as
provided in Section 7 hereof.
(c) For purposes of Section 4(b) hereof, the aggregate number of Common
Shares issued and issuable pursuant to Awards granted under this Plan shall
at any time be deemed to be equal to the sum of the following:
(i) the number of Common Shares that were issued prior to such time
pursuant to Awards granted under this Plan, other than Common Shares that
were subsequently reacquired by the Company pursuant to the terms and
conditions of such Awards and with respect to which the holder thereof
received no benefits of ownership such as dividends; plus
(ii) the number of Common Shares that were otherwise issuable prior to
such time pursuant to Awards granted under this Plan, but that were
withheld by the Company as payment of the purchase price of the Common
Shares issued pursuant to such Awards
2
or as payment of the recipient's tax withholding obligation with respect to
such issuance; plus
(iii) the maximum number of Common Shares that are or may be issuable
at or after such time pursuant to Awards granted under this Plan prior to
such time.
(d) Subject to adjustment as provided in Section 7 hereof, the
aggregate number of Common Shares subject to Awards granted during any
calendar year to any one Participant (including the number of shares involved
in Awards having a value derived from the value of Common Shares) shall not
exceed 1,250,000 shares.
Section 5. DURATION OF PLAN
No Awards shall be made under this Plan on or after [tenth anniversary
of the earlier of plan adoption or shareholder approval], 2006. Although Common
Shares may be issued on or after [tenth anniversary of the earlier of plan
adoption or shareholder approval], 2006 pursuant to Awards made prior to such
date, no Common Shares shall be issued under this Plan after [twentieth
anniversary of the earlier of plan adoption or shareholder approval], 2016.
Section 6. ADMINISTRATION OF PLAN
(a) This Plan shall be administered by a committee (the "Committee") of
the Board of Directors of the Company (the "Board") consisting of two or more
directors, each of whom: (i) is a "disinterested person" (as such term is
defined in Rule 16b-3 promulgated under the Exchange Act, as such Rule may be
amended from time to time), and (ii) is an "outside director" within the
meaning of Section 162(m) of the Code.
(b) Subject to the provisions of this Plan, the Committee shall be
authorized and empowered to do all things necessary or desirable in
connection with the administration of this Plan, including, without
limitation, the following:
(i) adopt, amend and rescind rules and regulations relating to this
Plan;
(ii) determine which persons are Participants and to which of such
Participants, if any, Awards shall be granted hereunder;
(iii) grant Awards to Participants and determine the terms and
conditions thereof, including the number of Common Shares issuable pursuant
thereto;
(iv) determine whether, and the extent to which adjustments are
required pursuant to Section 7 hereof; and
(v) interpret and construe this Plan and the terms and conditions of
any Award granted hereunder.
Section 7. ADJUSTMENTS
If the outstanding securities of the class then subject to this Plan are
increased, decreased or exchanged for or converted into cash, property or a
different number or kind of securities, or if cash, property or securities
are distributed in respect of such outstanding securities, in either case as
a result of a reorganization, merger, consolidation, recapitalization,
restructuring, reclassification, dividend (other than a regular, quarterly
cash dividend) or other
3
distribution, stock split, reverse stock split or the like, or if
substantially all of the property and assets of the Company are sold, then,
unless the terms of such transaction shall provide otherwise, the Committee
shall make appropriate and proportionate adjustments in (a) the number and
type of shares or other securities or cash or other property that may be
acquired pursuant to Incentive Stock Options and other Awards theretofore
granted under this Plan, (b) the maximum number and type of shares or other
securities that may be issued pursuant to Incentive Stock Options and other
Awards thereafter granted under this Plan and (c) the maximum number of
Common Shares for which options may be granted during any one calendar year;
PROVIDED, HOWEVER, that no adjustment shall be made to the number of Common
Shares that may be acquired pursuant to outstanding Incentive Stock Options
or the maximum number of Common Shares with respect to which Incentive Stock
Options may be granted under this Plan to the extent such adjustment would
result in such options being treated as other than Incentive Stock Options;
PROVIDED, FURTHER, that no such adjustment shall be made to the extent the
Committee determines that such adjustment would result in the disallowance of
a federal income tax deduction for compensation attributable to Awards
hereunder by causing such compensation to be other than Performance-Based
Compensation (as defined for purposes of Section 162(m) of the Code).
Section 8. AMENDMENT AND TERMINATION OF PLAN
The Board may amend or terminate this Plan at any time and in any
manner, subject to the following limitations:
(a) No such amendment or termination shall deprive the recipient of any
Award theretofore granted under this Plan, without the consent of such
recipient, of any of his or her rights thereunder or with respect thereto; and
(b) If an amendment to this Plan would (i) increase the maximum number
of Common Shares that may be issued pursuant to (A) all Awards granted under
this Plan, (B) all Incentive Stock Options granted under this Plan, and (C)
Awards granted under this Plan during any calendar year to any one Employee,
(ii) change the class of persons eligible to receive Awards under this Plan,
(iii) otherwise materially increase the benefits hereunder accruing to
participants who are subject to Section 16 of the Exchange Act in a manner
not specifically contemplated herein, or (iv) affect this Plan's compliance
with Rule 16b-3 or applicable provisions of the Code, as amended from time to
time, the amendment shall be approved by the Company's shareholders to the
extent required to comply with Rule 16b-3, Sections 422 and 162(m) of the
Code, and other applicable provisions of or rules under the Code, as amended
from time to time.
Section 9. EFFECTIVE DATE OF PLAN
This Plan shall be effective as of ___________________, 1996, the date
upon which it was approved by the Board; PROVIDED, HOWEVER, that no Common
Shares may be issued under this Plan until it has been approved, directly or
indirectly, by the affirmative votes of the holders of a majority of the
securities of the Company present, or represented, and entitled to vote at a
meeting duly held in accordance with the laws of the State of California.
4
PROXY
ALPHAREL, INC.
9339 CARROLL PARK DRIVE
SAN DIEGO, CALIFORNIA 92121
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ALPHAREL, INC.
The undersigned hereby appoints Stephen P. Gardner and John W. Low, and
each of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and vote as designated below, all
the shares of Common Stock of Alpharel, Inc., a California corporation (the
"Company") held of record by the undersigned on April 3, 1996, at the Annual
Meeting of Shareholders to be held on May 9, 1996 and any postponements or
adjournments thereof.
PLEASE DATE, SIGN ON REVERSE SIDE AND RETURN IN THE ACCOMPANYING ENVELOPE.
Please mark
your votes as /X/
indicated in
this example
1. Election of Directors.
/ / FOR all nominees listed below (except as marked to the contrary below).
/ / WITHHOLD AUTHORITY to vote for all nominees listed below.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.
ROBERT T. BRUCE STEPHEN P. GARDNER
JAY V. TANNA DOMINIC CHAN
D. ROSS HAMILTON MICHAEL J. McGOVERN
LARRY D. UNRUH
2. To approve the adoption of the amendment to the Company's Articles of
Incorporation to increase the total number of authorized shares of capital
stock from 21,000,000 to 45,000,000, including an increase in the authorized
common stock of the Company from 20,000,000 to 40,000,000 and an increase in
the authorized preferred stock of the Company from 1,000,000 to 5,000,000.
/ / FOR / / AGAINST / / ABSTAIN
3. To approve the adoption of the Company's 1996 Stock Incentive Plan.
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before such meeting and any and all
postponements or adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS INDICATED; HOWEVER, IF NO INSTRUCTIONS ARE GIVEN, THE PROXIES
WILL VOTE THE SHARES FOR EACH OF THE NOMINEES FOR DIRECTOR, FOR ADOPTION OF
THE AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION, FOR ADOPTION OF THE
1996 STOCK INCENTIVE PLAN AND IN THEIR DISCRETION ON THE MATTERS DESCRIBED IN
ITEM 4.
Do you plan to attend the meeting? / / YES / / NO
PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS ON THE STOCK CERTIFICATE(S).
WHEN SHARES ARE HELD BY JOINT TENANTS,
BOTH SHOULD SIGN. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE YOUR
FULL TITLE AS SUCH. IF A CORPORATION,
PLEASE SIGN IN FULL CORPORATE NAME BY
THE PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE
SIGN THE PARTNERSHIP'S NAME BY AN
AUTHORIZED PERSON.
Signatures
---------------------------------------
Signatures if held jointly
---------------------------------------
DATED: , 1996
--------------
Please mark, sign, date and return the Proxy Card promptly using the enclosed
envelope.