SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
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14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
PERSONAL COMPUTER PRODUCTS, 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):
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Item 22(a)(2) of Schedule 14A.
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14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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[LOGO]
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11031 Via Frontera -- San Diego, CA 92127
Phone: 619-485-8411 -- FAX: 619-487-5809
August 20, 1996
Dear Stockholder:
It is a pleasure to send to you the attached notice and proxy material with
regard to the annual meeting of stockholders of Personal Computer Products,
Inc.
The matters to be considered at this meeting include election of directors,
ratification of the selection of accountants, amendment of the Company's
Certificate of Incorporation to increase the common stock authorized and the
adoption and ratification of the 1997 Stock Option Plan.
I hope you will be able to attend the annual meeting. Whether or not you plan
to attend the annual meeting, however, we request that you sign, date and
return the enclosed proxy card as soon as possible.
We are grateful for the confidence you have shown in us.
Sincerely yours,
/s/ Edward W. Savarese
Edward W. Savarese
President and Chief Executive Office
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 20, 1996
To the Stockholders of
Personal Computer Products, Inc.:
The Annual Meeting of Stockholders of Personal Computer Products, Inc., a
Delaware corporation ("PCPI"), will be held at 11031 Via Frontera, San Diego,
California on Friday, September 20, 1996 at 11:00 a.m. for the following
purposes:
1. To elect a Board of Directors;
2. To act upon a proposal to ratify the selection of Boros & Farrington
APC as PCPI's independent accountants for fiscal year 1997;
3. To amend the Company's Certificate of Incorporation to increase the
common stock authorized from 50,000,000 shares to 100,000,000 shares;
4. To adopt and ratify the 1997 Stock Option Plan;
5. To adopt and ratify the 1997 Employee Stock Purchase Plan;
and to transact such other business as may properly come before the Meeting,
or any postponements or adjournments thereof.
The Board of Directors has fixed the close of business on August 2, 1996
as the record date for determination of stockholders entitled to notice of
and to vote at the Meeting.
All stockholders are cordially invited to attend the Meeting. In order to
allow us to provide adequate accommodations, please indicate on the enclosed
proxy card if you plan to attend in person.
BY ORDER OF THE BOARD OF DIRECTORS
Ralph R. Barry,
Secretary
San Diego, California
August 20, 1996
YOUR VOTE IS IMPORTANT!
Please immediately date, sign and return your proxy in the enclosed envelope.
If you attend the meeting, you may withdraw your proxy and vote in person.
THANK YOU FOR ACTING PROMPTLY.
PERSONAL COMPUTER PRODUCTS, INC.
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11031 Via Frontera -- San Diego, California 92127
PROXY STATEMENT
INTRODUCTION
GENERAL INFORMATION FOR STOCKHOLDERS
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Personal Computer Products, Inc., a
Delaware corporation ("PCPI" or the "Company"), for use at the Annual Meeting
of Stockholders of PCPI to be held on September 20, 1996 or at any
postponements or adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. This proxy statement,
the accompanying form of proxy and PCPI's annual report for fiscal year 1996
are first being sent to stockholders on or about August 20, 1996. If a proxy
in the accompanying form is duly executed and returned, the shares
represented thereby will be voted, and where a specification is made by the
stockholder as provided therein, will be voted in accordance with such
specification. A stockholder giving a proxy may, nevertheless, revoke it
before its exercise by filing with the Secretary of PCPI either an instrument
revoking the proxy or a duly executed proxy bearing a later date. A proxy
will be revoked automatically if the stockholder who executed it is present
at the Meeting and votes in person.
The cost of the solicitation of proxies will be borne by PCPI. In
addition to solicitation by mail, certain directors, officers and regular
employees of PCPI, without receiving any additional compensation, may solicit
proxies personally or by telephone or telegram. PCPI will reimburse brokers
and others holding stock in their names, or in the names of nominees, for
forwarding proxy material to their principals.
VOTING SECURITIES
On August 2, 1996 (the "record date" for determination of stockholders
entitled to notice of and to vote at the Meeting), PCPI had outstanding
33,839,955 shares of Common Stock, which is the only class of stock entitled
to vote at the Meeting. Each share entitles the holder thereof to one vote on
all matters to be presented at the meeting.
BENEFICIAL OWNERSHIP OF VOTING SECURITIES
The following table sets forth the number of shares of equity securities
of PCPI owned beneficially (as determined in accordance with the rules
adopted by the Securities and Exchange Commission ("SEC") under the
Securities Exchange Act of 1934) for all persons (including any "group")
known to PCPI to be the beneficial owner of more than five percent of any
class of voting securities of PCPI as of August 2, 1996, except as disclosed
in the Security Ownership of Management section below.
TITLE OF CLASS NAME SHARES BENEFICIALLY OWNED PERCENT OF CLASS
- -------------- ---- ------------------------- ----------------
PCPI Common MCM Partners LP 3,658,833 10.8
MCM Partners LP is a private investment group located at 1 Embarcadero
Center, Suite 2830, San Francisco, California 94111.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of equity securities
of PCPI owned beneficially (as determined in accordance with the rules
adopted by the SEC under the Securities Exchange Act of 1934) as of August 2,
1996 by each director and nominee for election as a director of PCPI, by each
executive officer of PCPI who earned more than $100,000 during fiscal year
1996, and by all directors and executive officers as a group. In each case,
such beneficial ownership includes both sole voting and sole investment
power. Dr. Saal, Dr. Savarese, Mr. Roth and MCM Partners LP were, to the
knowledge of PCPI, the only persons owning beneficially (as determined in
accordance with such rules) more than 5% of any class of voting securities of
PCPI as of such date. The business addresses of Dr. Saal, Dr. Savarese and
Mr. Bonar are the same as that of the Company. Mr. Roth's business address is
322 West 57th Street, Apartment 45T, New York, New York 10019.
TITLE OF CLASS NAME SHARES BENEFICIALLY OWNED PERCENT OF CLASS
- -------------- ---- ------------------------- ----------------
PCPI Common Harry J. Saal 10,925,000(a) 26.6
PCPI Common Edward W. Savarese 2,095,890(b) 5.9
PCPI Common Irwin Roth 1,754,400(c) 5.0
PCPI Common Brian Bonar 510,030(d) 1.5
PCPI Common All directors and executive
officers as a group
(5 persons) 15,492,320(e) 34.8
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TITLE OF CLASS NAME SHARES BENEFICIALLY OWNED PERCENT OF CLASS
- -------------- ---- ------------------------- ----------------
LPAC Common Edward W. Savarese 127,500(b) 4.1
LPAC Common Irwin Roth 126,500(c) 4.0
LPAC Common Harry J. Saal 76,500(a) 2.5
LPAC Common All directors and executive
officers as a group
(5 persons) 330,500(e) 9.9
(a) Includes options and/or warrants, now exercisable or exercisable within 60
days, to purchase 7,270,367 shares of PCPI Common Stock and 76,500 shares
of LPAC Common Stock.
(b) Includes options and/or warrants, now exercisable or exercisable within 60
days, to purchase 1,675,000 shares of PCPI Common Stock and 127,500 shares
of LPAC Common Stock. Also includes 30,000 shares of PCPI Common Stock
owned by Dr. Savarese's children; Dr. Savarese disclaims beneficial
ownership of those shares.
(c) Includes options and/or warrants, now exercisable or exercisable within 60
days, to purchase 1,158,335 shares of PCPI Common Stock and 126,500 shares
of LPAC Common Stock.
(d) Includes options and/or warrants, now exercisable or exercisable within 60
days, to purchase 470,000 shares of PCPI Common Stock.
(e) Includes options and/or warrants, now exercisable or exercisable within 60
days, to purchase 10,750,702 shares of PCPI Common Stock and 330,500 shares
of LPAC Common Stock. Also includes 30,000 shares of PCPI Common Stock
owned by Dr. Savarese's children; Dr. Savarese disclaims beneficial
ownership of those shares.
All percentages in this section were calculated on the basis of outstanding
securities plus securities deemed outstanding pursuant to Instruction 3 to
Item 403 of Regulation S-B, under the Securities Exchange Act of 1934.
MATTERS TO BE CONSIDERED AT ANNUAL MEETING
ITEM NO. 1 -- ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS; EXECUTIVE OFFICERS
Four (4) directors are to be elected at the Meeting, each to serve until
the next annual meeting or until a successor is elected. All of the nominees
are now serving as directors of PCPI and all four have consented to be named
and have indicated their intent to serve if elected, and the proxyholders
named in the accompanying form of proxy will vote the shares represented by
the proxy for all of the nominees unless withholding of authority to vote has
been specified on the proxy with respect to one or more directors. If for any
reason any nominee named is not a candidate (which is not expected) when the
election occurs, the proxyholders will vote the shares for the other nominees
named and for such other person as may be designated by the Board of
Directors.
The following table sets forth certain information regarding the
nominees for election to the Board of Directors of PCPI.
NAME AGE SINCE DIRECTOR TITLE
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Harry J. Saal 52 1983 Director, Chairman of the Board
Edward W. Savarese 49 1983 Director, Vice Chairman of the Board,
President and Chief Executive Officer
Brian Bonar 49 1995 Director and Executive Vice President
Sales, Marketing and Engineering
Irwin Roth 65 1983 Director
Dr. Saal has been a Director of PCPI since 1983 and became the Company's
Chairman in December 1995. He was President and Chief Executive Officer of
Smart Valley, Inc., a company which is working to create an electronic
community in the San Francisco Bay Area of California, from September 1, 1993
until November 1995. In addition, from 1986 until 1993 Dr. Saal was the
President and a Director of Network General Corp., which is engaged in the
design, manufacture and sale of diagnostic systems for local area networks
(and related products). Dr. Saal continues to serve as a Director of Network
General Corp. Dr. Saal also serves as a Director of Borland International and
GlobalNet Systems, Ltd.
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Dr. Savarese is a founder of PCPI and has been Chairman and Chief
Executive Officer of PCPI and its predecessor from 1982 until 1995, when he
became the Company's Vice Chairman. In addition, Dr. Savarese has been the
President of PCPI since 1989. Dr. Savarese also serves as a Director of
GlobalNet Systems, Ltd.
Mr. Bonar has been with PCPI since August 1992 as Director of Technology
Sales, and in April 1994 was appointed Vice President, Sales and Marketing.
In September 1994, Mr. Bonar became Executive Vice President Sales, Marketing
and Engineering and in August 1995 a Director. From 1991 to 1992, Mr. Bonar
was Vice President of Worldwide Sales and Marketing for Bezier Systems, Inc.,
a San Jose, California-based manufacturer and marketer of laser printers.
From 1990 to 1991, he was Worldwide Sales Manager for Adaptec, Inc., a San
Jose-based laser printer controller developer. From 1988 to 1990, he was Vice
President of Sales and Marketing for Rastek Corporation, a laser printer
controller developer located in Huntsville, Alabama.
Mr. Roth is an attorney, and has been practicing law in New York City for
more than the past five years. He has served on the Company's Board of
Directors since 1982. He was a co-founder of Panafax, Inc., the first
marketer of facsimile machines in the United States. He holds Bachelor's and
law degrees from the University of Michigan. Mr. Roth also serves as the
Chairman of GlobalNet Systems, Ltd.
In addition to Dr. Savarese and Mr. Bonar, Ralph R. Barry, age 38, is an
executive officer of PCPI and serves as its Chief Financial Officer,
Secretary and Treasurer. Mr. Barry, a CPA, joined PCPI as Controller and
Chief Accounting Officer, and Assistant Secretary in October 1993 and became
Chief Financial Officer and Secretary in August 1995. Prior thereto, Mr.
Barry served with Price Waterhouse LLP since August 1989.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held 12 meetings in fiscal year 1996. In addition
to action taken at meetings, the Board on occasion acts by unanimous written
consent.
The Board of Directors currently has no committees. Each of PCPI's current
directors attended at least 75% of the fiscal year 1996 meetings of the Board.
ITEM NO. 2 -- SELECTION OF INDEPENDENT ACCOUNTANTS
The Board has selected the firm of Boros & Farrington APC as independent
accountants for PCPI for the fiscal year ending June 30, 1997, it being
intended that such selection would be proposed for ratification by the
stockholders. The proxyholders named in the accompanying form of proxy will
vote the shares represented by the proxy for ratification of the selection of
Boros & Farrington APC unless a contrary choice has been specified on the
proxy. If the stockholders do not ratify the selection of Boros & Farrington
APC, the selection of independent accountants will be reconsidered by the
Board of Directors. The Board retains the power to select another firm as
independent accountants for PCPI to replace a firm whose selection was
ratified by the stockholders in the event the Board determines that a change
would be in the best interest of PCPI.
Representatives of Boros & Farrington APC are expected to be present at
the Meeting to respond to appropriate questions and to make a statement if
they desire to do so.
ITEM NO. 3 -- AMENDMENT OF CERTIFICATE OF INCORPORATION
On July 18, 1996, the Board of Directors unanimously adopted a resolution
proposing that Article FOURTH of PCPI's Certificate of Incorporation be
amended to increase the authorized common stock of the Company from
50,000,000 to 100,000,000 shares.
The Board of Director recommends a vote FOR approval of the proposed
amendment of the Certificate of Incorporation to allow for the future
financing of the Company's growth and expansion, as necessary.
The proposed amendment cannot become effective unless it is approved by a
majority of the stockholders entitled to vote thereon. The full text of the
amendment is included as Exhibit A to this proxy statement.
ITEM NO. 4 -- ADOPTION AND RATIFICATION OF 1997 STOCK OPTION PLAN
GENERAL NATURE AND PURPOSE
The 1997 Stock Option Plan of PCPI (the "Plan") was unanimously adopted
by the Board of Directors on August 7, 1996. The Plan provides for the
granting of incentive stock options or non-statutory stock options to key
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employees of the Company or any subsidiary and for the granting of
non-statutory stock options to non-employee directors.
SECURITIES SUBJECT TO THE 1997 PLAN
The maximum number of shares of the Company's Common Stock which may be
issued upon exercise of options granted under the Plan is 5,000,000 shares,
$0.005 par value per share (subject to adjustments as a result of further
stock splits, stock dividends, recapitalizations, reclassifications,
combinations, consolidations and mergers). If an option granted under the
Plan becomes unexercisable by expiration, surrender, termination or for any
other reason, the number of shares which were subject to the option but as to
which the option was not exercised will continue to be available under the
Plan, and new options may be granted in respect of such shares.
ELIGIBILITY TO RECEIVE OPTIONS UNDER THE 1997 PLAN
Any key employee or non-employee director of the Company or any of its
subsidiaries is eligible to be granted options under the Plan.
An individual may hold more than one option, provided that the aggregate
fair market value (determined as of the time the option is granted) of
incentive stock options exercisable during any one calendar year may not, for
any employee, exceed $100,000 (plus unused carryovers).
ADMINISTRATION AND DURATION OF THE 1997 PLAN
The Plan is administered by PCPI's Board of Directors and, to the extent
provided by the Board of Directors, a committee (the "Committee") appointed
by the Board of Directors. The Board of Directors (or the Committee, if
responsibility for any such matters is delegated by the Board of Directors to
the committee) (hereafter the "Administrator") is authorized to determine
which employees are key employees, to select those key employees and
non-employee directors to whom options are to be granted, to determine the
number of shares to be subject to such option grants and which options are to
be incentive stock options and which are to be non-statutory stock options,
to determine the terms and conditions of options (consistent with the Plan),
to establish such rules relating to the administration of the Plan as It may
deem appropriate and to issue such interpretations of the Plan and any
outstanding options thereunder as it may deem necessary or advisable.
The Board of Directors has the power to amend the Plan at any time;
provided, however, that (except for adjustments resulting from stock splits,
recapitalizations, etc.) the Board may not, without the approval of the
Company's stockholders, amend the Plan to increase the number of shares
available for options under the Plan, increase the maximum number of options
which may be granted to a member or all members of the Board of Directors,
materially increase the benefits accruing to individuals who participate in
the Plan, modify the eligibility requirements for the grant of options under
the Plan, or modify the restriction that no options granted to non-employee
directors may be exercised prior to the first anniversary of the date it is
granted. Further, no amendment of the Plan can, without the consent of the
option holder, adversely affect any rights or obligations under any option
previously granted.
No option may be granted under the Plan after August 7, 2006.
TERMS OF OPTIONS
The Plan requires that the option price for options granted thereunder be
at least 100% of the fair market value of the stock subject to the option on
the date the option is granted, provided that the option price must be at
least 110% of the fair market value in the case of incentive stock options
granted to persons then owning, directly or indirectly, more than 10% of the
total combined voting power of all classes of stock of PCPI, any subsidiaries
and any parent corporations. On August 7, 1996, the closing bid and asked
prices of PCPI common stock on the over-the counter market as reported by
NASD electronic bulletin board were $1.75 and $1.81, respectively.
No option may have a term in excess of ten years from its date of grant
and, except in the event of a merger, consolidation or reorganization of the
Company, no option granted to a non-employee director may be exercised in
whole or in part during the first year after it is granted. Incentive stock
options granted to persons then owning, directly or indirectly, more than 10%
of the total combined voting power of all classes of stock of the Company,
any subsidiaries and any parent corporations, may not be exercised after five
years from the date of grant. Subject to the foregoing, options become
exercisable at such times and in such installments (which may be cumulative)
as the Administrator provides in the terms of each individual option. The
Administrator provides in the terms of each individual option when such
option expires and becomes unexercisable.
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Any options granted under the Plan may, but need not, provide that the
option exercise period is subject to early termination if the option holder
ceases to be a director, officer or employee of the Company. The Plan also
grants to the Administrator the authority to make the Common Stock issuable
upon exercise of an option subject to a repurchase right in favor of the
Company (or its assigns), exercisable upon the option holder's cessation of
director or employee status, at the original option price paid by the option
holder upon his or her exercise of the option. These repurchase rights shall
be exercisable by the Company (or its assigns) upon such terms and conditions
(including provisions for such rights to expire in one or more instruments)
as the Administrator may specify in the agreement setting forth such rights.
The Plan also grants the Administrator the discretion to assist any employee
in financing the exercise of any options by authorizing a loan from the
Company to the option holder, permitting the option holder to pay the option
price in installments, or authorizing the Company to guarantee a third-party
loan to the option holder.
The Plan provides that upon the dissolution or liquidation of the Company
or the merger or consolidation of the Company into another corporation, or
upon certain other reorganizations, the Administrator may (a) accelerate in
whole or in part the exercisability of outstanding options, (b) terminate in
whole or in part outstanding options upon at least ten days' notice to the
option holders, (c) arrange to have the surviving corporation grant
appropriately adjusted replacement options, or (d) cancel in whole or in part
outstanding options upon payment to an option holder of cash equal to the
difference between (i) the fair market value of what the option holder would
have received upon the merger, consolidation, dissolution or liquidation, as
the case may be, had the option holder exercised the option immediately prior
to the effective date of said event; and (ii) the exercise price of the
option.
Subject to the Administrator's right to grant assistance in financing the
exercise of options and/or to limit the following alternatives in the terms
of particular stock option agreements, the Plan calls for option holders to
pay the option price in full at the time of exercise in cash or by check, by
the transfer to the Company of previously acquired shares of PCPI common
stock having a fair market value (determined on the date of delivery to the
Company) equal to the option price, or by a combination of cash and
previously acquired shares of PCPI common stock. This provision could permit
"pyramiding" of stock options, by which the delivery of even a small number
of PCPI shares could enable a holder to enjoy the economic benefit of a full
exercise without the need of paying any cash to the Company.
The option holder must make such representations and execute such
documents as the Company may require to effect compliance with applicable
federal and state securities laws. Other than the stock option agreements
executed in connection with each option grant, option holders are not
provided with any periodic reports concerning the status of their individual
options.
In the event any change is made to the Company's Common Stock by reason
of a stock split, stock dividend, recapitalization, reclassification,
combination of shares, consolidation or merger, unless such change results in
the termination of all outstanding options, the Administrator has the
discretion to make appropriate adjustments in the number and class of shares
as to which all options then outstanding under the Plan will be exerisable,
and in the option price per share. In such event, the Administrator may also
adjust the maximum number of shares to which options may be granted to any
one or to all directors. All such adjustments made by the Administrator will
be final and binding upon the option holders, the Company and other
interested persons.
FEDERAL TAX CONSEQUENCES
The following is a general description of the federal income tax
consequences of options granted under the Plan. Incentive stock options
granted under the Plan are intended to satisfy the requirements of Section
422A of the Internal Revenue Code. Non-statutory options granted under the
Plan do not satisfy such requirements. The federal income tax treatment for
the two types of options differs as follows:
(i) INCENTIVE STOCK OPTIONS. Incentive stock options under the Plan are
intended to be eligible for the favorable federal income tax treatment
accorded to "incentive stock options" under the Code.
There generally are no federal income tax consequences to the option
holder or the Company by reason of the grant or exercise of an incentive
stock option. However, the exercise of an incentive stock option may increase
the option holder's alternative minimum tax liability, if any.
If an option holder holds stock acquired through exercise of an incentive
stock option for at least two years from the date on which the option is
granted and at least one year from the date on which the shares are
transferred to the option holder upon exercise of the option, any gain or
loss on a disposition of such stock will be long-term capital gain or loss.
Generally, if the option holder disposes of the stock before the expiration
of either of these holding periods (a "disqualifying disposition"), at the
time of disposition, the option holder will realize taxable ordinary income
equal to the lesser of (a) the excess of the stock's fair market value on the
date of exercise over the exercise price, or (b) the option holder's actual
gain, if any, on the purchase and sale. The option holder's
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additional gain, or any loss, upon the disqualifying disposition will be a
capital gain or loss, which will be long-term or short-term depending on
whether the stock was held for more than one year. Long-term capital gains
currently are generally subject to lower tax rates than ordinary income.
Slightly different rules may apply to option holders who acquire stock
subject to certain repurchase options or who are subject to Section 16(b) of
the Exchange Act.
To the extent the option holder recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the
Code and the satisfaction of a tax reporting obligation) to a corresponding
business expense deduction in the tax year in which the disqualifying
disposition occurs.
(ii) NON-STATUTORY OPTIONS. Non-statutory stock options granted under the
Plan generally have the following federal income tax consequences:
There are no tax consequences to the option holder or the Company by
reason of the grant of a non-statutory stock option. Upon exercise of a
non-statutory stock option, the option holder normally will recognize taxable
ordinary income equal to the excess of the stock's fair market value on the
date of exercise over the option exercise price. Generally, with respect to
employees, the Company is required to withhold from regular wages or
supplemental wage payments an amount based on the ordinary income recognized.
Subject to the requirement of reasonableness, the provisions of Section
162(m) of the Code and the satisfaction of a tax reporting obligation, the
Company will generally be entitled to a business expense deduction equal to
the taxable ordinary income realized by the option holder. Upon disposition
of the stock, the option holder will recognize a capital gain or loss equal
to the difference between the selling price and the sum of the amount paid
for such stock plus any amount recognized as ordinary income upon exercise of
the option. Such gain or loss will be long or short-term depending on whether
the stock was held for more than one year. Slightly different rules may apply
to option holder who acquire stock subject to certain repurchase options or
who are subject to Section 16(b) of the Exchange Act.
POTENTIAL LIMITATION ON COMPANY DEDUCTIONS. As part of the Omnibus Budget
Reconciliation Act of 1993, the U.S. Congress amended the Code to add Section
162(m), which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1,000,000 for a covered employee. It is possible that
compensation attributable to stock options, when combined with all other
types of compensation received by a covered employee from the Company, may
cause this limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with proposed Treasury regulations issued under Section 162(m),
compensation attributable to stock options will qualify as performance-based
compensation, provided that the option is granted by a compensation committee
comprised solely of "outside directors" and either: (i) the option plan
contains a per-employee limitation on the number of shares for which options
may be granted during a specified period, the option plan, including the
per-employee limitation, is approved by the shareholders, and the exercise
price of the option is no less than the fair market value of the stock on the
date of grant; or (ii) the option is granted (or exercisable) only upon the
achievement (as certified in writing by the compensation committee) of an
objective performance goal established in writing by the compensation
committee while the outcome is substantially uncertain, and the option is
approved by shareholders.
OTHER TAX CONSEQUENCES. The foregoing discussion is intended to be a
general summary only of the federal income tax aspects of options granted
under the Plan; tax consequences may vary depending on the particular
circumstances at hand. In addition, administrative and judicial
interpretations of the application of the federal income tax laws are subject
to change, Furthermore, no information is given with respect to state or
local taxes that may be applicable. Participants in the Plan who are
residents of or are employed in a country other than the United States may be
subject to taxation in accordance with the tax laws of that particular
country in addition to or in lieu of United States federal income taxes.
OPTIONS NOT TRANSFERABLE
Options granted under the Plan are nontransferable, except by will or by
the applicable laws of descent and distribution.
VOTE REQUIRED
The approval of the holders of at least a majority of the shares of
Common Stock outstanding and entitled to vote is required for approval of the
adoption of the Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR the adoption and ratification
of the Plan.
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ITEM NO. 5 -- ADOPTION AND RATIFICATION OF 1997 STOCK PURCHASE PLAN
GENERAL NATURE AND PURPOSE
The 1997 Employee Stock Purchase Plan ("Purchase Plan") was unanimously
adopted by the Board of Directors on August 7, 1996. The Purchase Plan
permits employees to purchase the Company's common stock at a discounted
price. The Purchase Plan is designed to encourage and assist a broad spectrum
of employees of the Company to acquire an equity interest in the Company
through the purchase of its common stock. It is also intended to provide
participating employees the tax benefits under Section 421 of the Code. The
Purchase Plan covers an aggregate of 2,500,000 shares of the Company's common
stock. Management currently believes these shares to be sufficient for all
stock purchases under the Purchase Plan for approximately two years.
ELIGIBILITY
All employees, including executive officers and directors who are
employees, customarily employed more than 20 hours per week and more than
five months per year by the Company are eligible to participate in the
Purchase Plan on the first enrollment date following employment. However,
employees who hold, directly or through options, five percent or more of the
stock of the Company are not eligible to participate.
TERMS AND ADMINISTRATION
Participants may elect to participate in the Purchase Plan by
contributing up to a maximum of 15 percent of their compensation, or such
lesser percentage as the Board may establish from time to time. Enrollment
dates are the first trading day of January, April, July and October or such
other dates as may be established by the Board from time to time. The first
enrollment date will be October 1996. On the last trading day of each
December, March, June and September, beginning in September 1996, or such
other dates as may be established by the Board from time to time, the Company
will apply the funds then in each participant's account to the purchase of
shares. The cost of each share purchased is 85 percent of the lower of the
fair market value of common stock on (i) the enrollment date or (ii) the
purchase date. The length of the enrollment period may not exceed a maximum
of 24 months. No participant's right to acquire shares may accrue at a rate
exceeding $25,000 of fair market value of common stock (determined as of the
first trading day in an enrollment period) in any calendar year.
The Board may administer the Purchase Plan or the Board may delegate its
authority to a committee composed of not fewer than two outside directors and
may delegate routine matters to management. The Board may amend or terminate
the Purchase Plan at any time and may provide for an adjustment in the
purchase price and the number and kind of securities available under the
Purchase Plan in the event of a reorganization, recapitalization, stock
split, or other similar event. However, amendments that would increase the
number of shares reserved for purchase, or would otherwise require
shareholder approval in order to comply with Federal securities regulations,
require shareholder approval. Shares available under the Purchase Plan may be
either outstanding shares repurchased by the Company or newly issued shares.
As of August 7, 1996 approximately 53 employees of the Company were
eligible to participate in the Purchase. Since the number of shares purchased
under the Plan by any employee and the purchase price thereof are determined
by the level of voluntary contribution by such employee and the market price
of the shares in effect from time to time, the Company currently cannot
determine the number of shares that may be purchased in the future by any
eligible individual or group of individuals or the purchase price thereof.
FEDERAL TAX CONSEQUENCES
In general, participants will not have taxable income or loss under the
Purchase Plan until they sell or otherwise dispose of shares acquired under
the Purchase Plan (or die holding such shares). If the shares are held, as of
the date of sale or disposition, for longer than both: (i) two years after
the beginning of the enrollment period during which the shares were purchased
and (ii) one year following purchase, a participant will have taxable
ordinary income equal to 15% of the fair market value of the shares on the
first day of the enrollment period (but not in excess of the gain on the
sale). Any additional gain from the sale will be long-term capital gain. The
Company is not entitled to an income tax deduction if the holding periods are
satisfied.
If the shares are disposed of before the expiration of both of the
foregoing holding periods (a "disqualifying disposition"), a participant will
have taxable ordinary income equal to the excess of the fair market value of
the shares on the purchase date over the purchase price. Such ordinary income
is subject to information reporting requirements and may become subject to
income and employment tax withholding. In addition, the participant will have
taxable capital gain (or loss) measured by the difference between the sale
price and the participant's purchase price plus the amount of ordinary income
recognized, which gain (or loss) will be long-term if the shares
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have been held as of the date of sale for more than one year. The Company is
entitled to an income tax deduction equal to the amount of ordinary income
recognized by a participant in a disqualifying disposition.
SPECIAL FEDERAL INCOME TAX CONSIDERATION DUE TO SHORT SWING PROFIT RULE:
The potential liability of a person subject to Section 16 of the Exchange Act
to repay short-swing profits from the resale of shares acquired under a
Company plan constitutes a "substantial risk of forfeiture" within the
meaning of the above-described rules, which is generally treated as lapsing
at such time as the potential liability under Section 16 lapses. Persons
subject to Section 16 who would be required by Section 16 to repay profits
from the immediate resale of stock acquired under a Company plan should
consider whether to file a Section 83 (b) Election at the time they acquire
stock under a Company plan in order to avoid deferral of the date that they
are deemed to acquire shares for federal income tax purposes.
VOTE REQUIRED
The approval of the holders of at least a majority of the shares of
Common Stock outstanding and entitled to vote is required for approval of the
adoption of the Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR the adoption and
ratification of the Plan.
EXECUTIVE COMPENSATION
The following table shows as to each of the executive officers who earned
more than $100,000 during the fiscal year ended June 30, 1996, information
concerning compensation for services rendered in all capacities to PCPI and
its subsidiaries during the previous three fiscal years.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
------------------------------------- ------------
FISCAL OTHER ANNUAL OPTIONS/
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION SARs(#)
- --------------------------- ------ ------ ----- ------------ ------------
Edward W. Savarese................. 1996 $246,792 $ -- $72,850(1) 1,675,000
Director, Vice Chairman of the 1995 229,290 -- 74,000(3) --
Board, President and Chief 1994 200,000 30,000 -- 175,000
Executive Officer
Brian Bonar........................ 1996 155,648 -- 12,009(2) 750,000
Director, Executive Vice President, 1995 129,039 -- -- 350,000
Sales, Marketing and 1994 135,469 -- -- 150,000
Engineering(4)
All executive officers as a group 1996 472,820 -- 94,159 2,578,300
(3 persons for 1996 and 1995, and 1995 419,637 -- 74,000 350,000
5 persons for 1994). 1994 625,909 54,000 -- 618,500
(1) This amount includes $42,500 of accrued but unpaid vacation benefits
and $30,350 of accrued but unpaid compensation due to Dr. Savarese
which was converted into unregistered shares of the Company's common
stock.
(2) This amount includes $12,009 of accrued but unpaid vacation due to Mr.
Bonar which was converted into unregistered shares of the Company's
common stock.
(3) As of June 30, 1995, $2,811 remained unpaid for Dr. Savarese. The amount
for 1995 includes $74,000 of accrued but unpaid vacation benefits used
by Dr. Savarese to exercise warrants to purchase stock.
(4) Mr. Bonar was hired August 1, 1992 and was appointed Vice President,
Sales and Marketing on April 28, 1994. The table includes all of Mr.
Bonar's fiscal 1994 compensation even though he was not an executive
officer for all of fiscal 1994.
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OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on options/SARs granted in
fiscal year 1996 to the named executive officers.
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARs EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/SARs EMPLOYEES IN PRICE
NAME GRANTED(#) FISCAL YEAR ($/SHARE) EXPIRATION DATE
- ---- ------------ ---------------- --------- ---------------
Edward W. Savarese 925,000(1) 16.05% $.20 October 14, 2005
Edward W. Savarese 750,000(1) 13.02% $.20 October 14, 2005
Brian Bonar 350,000(2) 6.07% $.20 October 14, 2005
Brian Bonar 150,000(3) 2.60% $.20 December 31, 1999
Brian Bonar 250,000(4) 4.34% $.20 April 25, 2005
All executive officers
as a group 2,578,300 44.74%
(3 persons)
(1) Warrants aggregating 925,000 shares were repriced on October 12, 1995 to
the then current market price and in addition, a new warrant for 750,000
shares were issued. Of the combined warrants issued, 1,3000,000 were
exercisable immediately and 375,000 became exercisable on April 12, 1996.
(2) Warrants and options were repriced on October 12, 1995 to the then
current market with 165,000 exercisable immediately, 125,000 exercisable
on April 12, 1996 and 20,000 each on September 22, 1996, 1997 and 1998.
(3) Warrants and options were repriced on October 12, 1995 to the then
current market with 100,000 exercisable immediately and 50,000
exercisable on October 12, 1996.
(4) Options were granted on October 12, 1995 to purchase shares of PCPI's
common stock with 100,000 exercisable on April 25, 1996 and 75,000
exercisable on April 25, 1997 and 1998.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table provides information on option/SAR exercises in
fiscal year 1996 by the named executive officers and the value of such
officers' unexercised options/SARs at June 30, 1996. Warrants to purchase
PCPI common stock are included as options.
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTONS/SARs
NAME EXERCISE(#) REALIZED($) OPTIONS/SARs AT FY-END(#) AT FISCAL YEAR END($)(1)
- ---- ----------- ----------- ----------------------------- -----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Edward W. Savarese -- -- 1,675,000 -- $3,433,750 --
Brian Bonar 40,000 82,000 470,000 280,000 963,500 $574,000
All executive officers
as a group (3 persons) 40,000 82,000 2,322,000 280,000 4,746,354 574,000
(1) Includes stock options and warrants to purchase common stock of PCPI. At
fiscal year end June 30, 1996 the average of the bid and asked price of
the Company's common stock on that date as quoted by the NASD electronic
bulletin board was $2.25.
DIRECTOR COMPENSATION
As fees for service on PCPI's Board of Directors, the non-employee
directors of PCPI received in fiscal 1996 and will receive in fiscal 1997
$1,500 per month plus travel expenses. Employee directors receive no
additional compensation for service on the PCPI Board of Directors. In fiscal
1996, the Company paid $3,000 and $4,500 to Dr. Saal and Mr. Roth,
respectively, for director fees and each had $13,500 of accrued but unpaid
directors fees converted into unregistered shares of PCPI's common stock. At
June 30, 1996, $1,500 of accrued directors fees were unpaid to Dr. Saal. In
addition, the Company calls upon Mr. Roth from time to time to provide
special
9
consulting services on various corporate matters, for cash compensation. On
April 1, 1994, PCPI and Mr. Roth entered into a five-year consulting
agreement for Mr. Roth to continue to provide these services payable in
monthly installments of $9,000. The Company paid Mr. Roth $27,000 in such
consulting fees during fiscal 1996. In addition, Mr. Roth converted into
unregistered shares of the Company's common stock $81,000 due to Mr. Roth
under his consulting agreement.
EMPLOYMENT AGREEMENTS
PCPI entered into an employment agreement with Dr. Savarese, effective as
of July 1, 1990, calling for employment for five years. On February 25, 1994,
the agreement was amended to extend the term for an additional four years
through June 30, 1999. Minimum salaries under the amended agreement
commencing July 1, 1996 are $255,000, $270,000 and $285,000.
PCPI also entered into an employment agreement with Mr. Bonar, effective
September 1, 1994, calling for employment through June 30, 1999, at an annual
base salary of $120,000 with a 3.5% cost of living increase each year
commencing July 1, 1995. In addition to the annual base salary, Mr. Bonar
will be subject to commission under a plan and quotas to be established at
the start of each fiscal year.
These employment agreements provide that, in the event of termination
without cause, whether or not occurring in the aftermath of a change in
corporate control, the Company shall pay the executive, within 72 hours after
his termination, his entire salary for the remainder of the entire term, and
shall also continue his fringe benefits for the remainder of the entire term.
In the event of the executive's death or permanent disability, his salary
shall continue during the entire term, and his stock options shall be
exercisable until two years after his death or permanent disability.
The executive shall be entitled to severance pay equal to one-half of his
fiscal 1999 annual salary if his employment terminates upon the scheduled
expiration of the employment agreement, or if he is terminated without cause
within six months before the scheduled expiration of the employment agreement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1995, Dr. Savarese agreed to loan the Company a gross aggregate
amount of up to $100,000 with interest at the rate of 7% per year. As of June
30, 1996, borrowings under this Note aggregated $100,000.
In January 1996, the Company sold to its Chairman for $500,000 five-year
warrants to purchase 10,000,000 unregistered shares of its common stock at
the rate of $1.00 per share. The warrant contained certain anti-dilution
provisions should the Company issue equity instruments at less than 50% of
the exercise price. In connection with a private placement with various
private investors of approximately $2.5 million, the exercise price of this
warrant was subsequently reduced to $0.60 per share in accordance with this
provision. In June 1996, warrants to purchase 3,333,333 shares were exercised.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
During fiscal 1996, Dr. Saal filed late with the SEC a single Form 4
report with respect to two transactions; Dr. Savarese filed late with the SEC
a single Form 4 report with respect to two transactions; Mr. Roth filed late
with the SEC a single Form 4 report with respect to two transactions; Mr.
Bonar filed late with the SEC two Form 4 report with respect to three
transactions; and Mr. Barry filed late with the SEC a single Form 4 report
with respect to two transactions.
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RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR the nominees listed herein
and FOR ratification of the selection of independent certified public
accountants.
OTHER MATTERS
OTHER BUSINESS
So far as the management of PCPI is aware, no business other than that
described in this proxy statement will come before the Meeting. If any other
business properly comes before the Meeting, or any postponements or
adjournments thereof, the proxyholders named in the accompanying proxy will
vote thereon the shares represented by the proxy in accordance with their
best judgment.
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Stockholder proposals intended to be presented at the 1997 Annual Meeting
(i.e., the meeting to be held following the end of fiscal year 1997) must be
received on or before June 30, 1997 by the Company at its office address set
forth on the first page of this proxy statement, and all the other conditions
of Rule 14a-8 under the Securities Exchange Act of 1934 must be satisfied,
for such proposals to be included in PCPI's proxy statement and form of proxy
relating to that meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Ralph R. Barry,
Secretary
San Diego, California
August 20, 1996
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Exhibit A
PROPOSED AMENDMENT OF
CERTIFICATE OF INCORPRATION
PERSONAL COMPUTER PRODUCTS, INC.
Resolved, the Certificate of Incorporation of this Corporation be amended
such that the second sentence of the paragraph numbered Article FOURTH: (1)
so that as amended said sentence shall be and read "The number of shares of
Preferred Stock authorized to be issued is 10,000 and the number of shares of
Common Stock authorized is to be 100,000,000."
[LOGO]
PERSONAL COMPUTER PRODUCTS, INC.
- -------------------------------------------------------------------------------
11031 Via Frontera -- San Diego, CA 92127
Phone: 619-485-8411 --Fax: 619-487-5809
PERSONAL COMPUTER PRODUCTS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Edward E. Savarese, Brian Bonar, Irwin
Roth, Harry J. Saal or any of them with full power of substitution, proxies
to vote at the annual Meeting of Stockholders of Personal Computers Products,
Inc. (the "Company") to be held on September 20, 1996 at 11:00 a.m., local
time, and at any adjournments thereof, hereby revoking any proxies heretofore
given, to vote all shares of common stock of the Company held or owned by the
undersigned as directed on the reverse side, and in their discretion upon
such other matters as may come before the meeting.
(TO BE SIGNED ON REVERSE SIDE)
--------------------
| SEE REVERSE SIDE |
--------------------
Please mark your
A / X / votes as in this
example.
FOR WITHHELD
1. Election of / / / / Nominees: Edward E. Savarese
Directors: Brian Bonar
Irwin Roth
For, except vote withheld from the Harry J. Seal
following nominee(s):
___________________________________
FOR AGAINST ABSTAIN
2. Approval of Boros & Farrington, APC as / / / / / /
Independent Accountants for 1997.
3. To amend the Company's Certificate of / / / / / /
Incorporation to increase the common
stock authorized from 50,000,000 shares
to 100,000,000 shares:
4. To adopt and ratify the 1997 Stock Option / / / / / /
Plan:
5. To adopt and ratify the 1997 Employee / / / / / /
Stock Purchase Plan.
PLEASE DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
SELF-ADDRESSED, POSTAGE PAID ENVELOPE.
SIGNATURE(S)________________ _________________________ Date: ________________
SIGNATURE IF HELD JOINTLY
Note: Please sign exactly as your name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.