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
[ ] Confidential for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
ZOMAX INCORPORATED
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing:
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
ZOMAX INCORPORATED
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held
April 19, 2000
-------------------
TO THE SHAREHOLDERS OF ZOMAX INCORPORATED:
The 2000 Annual Meeting of Shareholders of Zomax Incorporated will be
held at the Lutheran Brotherhood Building, 625 Fourth Avenue South, Minneapolis,
Minnesota at 3:30 p.m. on Wednesday, April 19, 2000, for the following purposes:
1. To set the number of members of the Board of Directors at six
(6).
2. To elect members of the Board of Directors.
3. To approve an amendment to the Company's Articles of
Incorporation to increase the authorized shares from
25,000,000 to 125,000,000.
4. To approve an amendment to the Company's 1996 Stock Option
Plan to increase the shares reserved under the Plan from
2,600,000 to 3,200,000.
5. To ratify the appointment of the Company's independent public
accountants for the year ending December 29, 2000.
6. To take action on any other business that may properly come
before the meeting or any adjournment thereof.
Accompanying this Notice of Annual Meeting is a Proxy Statement, form
of Proxy and the Company's 1999 Annual Report to Shareholders.
Only shareholders of record as shown on the books of the Company at the
close of business on March 8, 2000 will be entitled to vote at the 2000 Annual
Meeting or any adjournment thereof. Each shareholder is entitled to one vote per
share on all matters to be voted on at the meeting.
You are cordially invited to attend the 2000 Annual Meeting. Whether or
not you plan to attend the 2000 Annual Meeting, please sign, date and mail the
enclosed form of Proxy in the return envelope provided as soon as possible. The
Proxy is revocable and will not affect your right to vote in person in the event
you attend the meeting. The prompt return of proxies will help the Company avoid
the unnecessary expense of further requests for proxies.
BY ORDER OF THE BOARD OF DIRECTORS,
James T. Anderson, Chairman and
Chief Executive Officer
Dated: March 20, 2000
Plymouth, Minnesota
ZOMAX INCORPORATED
------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
to be held
April 19, 2000
------------------
The accompanying Proxy is solicited by the Board of Directors of Zomax
Incorporated (the "Company") for use at the 2000 Annual Meeting of Shareholders
of the Company to be held on Wednesday, April 19, 2000, at the location and for
the purposes set forth in the Notice of Annual Meeting, and at any adjournment
thereof.
The cost of soliciting proxies, including the preparation, assembly and
mailing of the proxies and soliciting material, as well as the cost of
forwarding such material to the beneficial owners of stock, will be borne by the
Company. Directors, officers and regular employees of the Company may, without
compensation other than their regular remuneration, solicit proxies personally
or by telephone.
Any shareholder giving a Proxy may revoke it any time prior to its use
at the 2000 Annual Meeting by giving written notice of such revocation to the
Secretary or any other officer of the Company or by filing a later dated written
Proxy with an officer of the Company. Personal attendance at the 2000 Annual
Meeting is not, by itself, sufficient to revoke a Proxy unless written notice of
the revocation or a later dated Proxy is delivered to an officer before the
revoked or superseded Proxy is used at the 2000 Annual Meeting. Proxies will be
voted as directed therein. Proxies which are signed by shareholders but which
lack specific instruction with respect to any proposal will be voted in favor of
such proposal as set forth in the Notice of Annual Meeting or, with respect to
the election of directors, in favor of the number and slate of directors
proposed by the Board of Directors and listed herein.
The presence at the Annual Meeting in person or by proxy of the holders
of a majority of the outstanding shares of the Company's Common Stock entitled
to vote shall constitute a quorum for the transaction of business. If a broker
returns a "non-vote" proxy, indicating a lack of voting instructions by the
beneficial holder of the shares and a lack of discretionary authority on the
part of the broker to vote on a particular matter, then the shares covered by
such non-vote shall be deemed present at the meeting for purposes of determining
a quorum but shall not be deemed to be represented at the meeting for purposes
of calculating the vote required for approval of such matter. If a shareholder
abstains from voting as to any matter, then the shares held by such shareholder
shall be deemed present at the meeting for purposes of determining a quorum and
for purposes of calculating the vote with respect to such matter, but shall not
be deemed to have been voted in favor of such matter. An abstention as to any
proposal will therefore have the same effect as a vote against the proposal.
The mailing address of the principal executive office of the Company is
5353 Nathan Lane, Plymouth, Minnesota 55442. The Company expects that this Proxy
Statement, the related Proxy and Notice of Annual Meeting will first be mailed
to shareholders on or about March 20, 2000.
STOCK SPLIT
All information contained herein regarding the Company's Common Stock,
including information regarding options to purchase the Company's Common Stock,
has been adjusted, as necessary, to reflect the 2-for-1 stock split of the
Company's Common Stock which was effected on August 11, 1999.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed March 8, 2000 as the
record date for determining shareholders entitled to vote at the 2000 Annual
Meeting. Persons who were not shareholders on such date will not be allowed to
vote at the 2000 Annual Meeting. At the close of business on March 8, 2000,
there were 15,895,961 shares of the Company's Common Stock issued and
outstanding. The Common Stock is the only outstanding class of capital stock of
the Company. Each share of Common Stock is entitled to one vote on each matter
to be voted upon at the 2000 Annual Meeting. Holders of Common Stock are not
entitled to cumulative voting rights.
PRINCIPAL SHAREHOLDERS AND MANAGEMENT SHAREHOLDINGS
The following table provides information as of the record date
concerning the beneficial ownership of the Company's Common Stock by (i) each
director of the Company, (ii) the named executive officers in the Summary
Compensation Table, (iii) the persons known by the Company to own more than 5%
of the Company's outstanding Common Stock, and (iv) all directors and executive
officers as a group. Except as otherwise indicated, the persons named in the
table have sole voting and investment power with respect to all shares of Common
Stock owned by them.
Name (and Address of 5% Number of Shares Percent
Owner) or Identity of Group Beneficially Owned(1) of Class (1)
- --------------------------- --------------------- ------------
James T. Anderson (2) 321,563 2.0%
Anthony Angelini (3) 76,690 *
James E. Flaherty (4) 28,125 *
Michelle S. Bedard (2) 321,563 2.0%
Phillip T. Levin (5) 1,328,612 8.4%
Janice Ozzello Wilcox (6) 20,000 *
Robert Ezrilov (7) 22,000 *
Howard P. Liszt (8) 30,000 *
Pilgrim Baxter & Associates, Ltd. (9) 2,045,300 12.9%
All Executive Officers 1,826,990 11.3%
and Directors as a Group
(8 Individuals) (10)
- ---------------------
* Less than 1% of the outstanding shares of Common Stock.
(1) Under the rules of the SEC, shares not actually outstanding are deemed
to be beneficially owned by an individual if such individual has the
right to acquire the shares within 60 days. Pursuant to such SEC Rules,
shares deemed beneficially owned by virtue of an individual's right to
acquire them are also treated as outstanding when calculating the
percent of the class owned by such individual and when determining the
percent owned by any group in which the individual is included.
(2) Represents 148,148 shares held by Mr. Anderson, 84,352 shares held by
Ms. Bedard, 78,125 shares which may be purchased by Mr. Anderson upon
exercise of currently exercisable options and 10,938 shares which may
be purchased by Ms. Bedard, his wife, upon exercise of currently
exercisable options. Mr. Anderson and Ms. Bedard are married.
(3) Includes 43,500 shares which may be purchased by Mr. Angelini upon
exercise of currently exercisable options.
(4) Includes 11,125 shares which may be purchased by Mr. Flaherty upon
exercise of currently exercisable options.
(5) Includes 320,000 shares held by Metacom, Inc., of which Mr. Levin is
the majority shareholder and Chief Executive Officer, 4,000 shares held
by Mr. Levin as custodian for his children and 12,000 shares which may
be purchased by Mr. Levin upon exercise of currently exercisable
options. Mr. Levin's address is 7303 Boone Ave. N., Brooklyn Park, MN
55428.
(6) Includes 12,000 shares which may be purchased by Ms. Wilcox upon
exercise of currently exercisable options.
(7) Includes 20,000 shares which may be purchased by Mr. Ezrilov upon
exercise of currently exercisable options.
(8) Includes 20,000 shares which may be purchased by Mr. Liszt upon
exercise of currently exercisable options.
(9) Represents shares held by Pilgrim & Baxter as a registered investment
adviser. Pilgrim has sole dispositive power over all of the shares and
has sole power to vote 1,650,400 shares and no power to vote the
remaining shares. The Company has relied on information contained in
the Schedule 13G filed with the Securities and Exchange Commission on
March 7, 2000.
(10) Includes 207,688 shares which may be purchased by current executive
officers and directors upon exercise of currently exercisable options;
see above footnotes for shares held indirectly or for the benefit of
family members.
ELECTION OF DIRECTORS
(Proposals #1 and #2)
The Bylaws of the Company provide that the number of directors shall be
the number set by the shareholders, which shall be not less than one. The Board
of Directors unanimously recommends that the number of directors be set at six
and that the nominees listed below be elected. Unless otherwise instructed, the
Proxies will be so voted.
Under applicable Minnesota law, approval of the proposal to set the
number of directors at six and the election of the nominees to the Board of
Directors require the affirmative vote of the holders of the greater of (i) a
majority of the voting power of the shares represented in person or by proxy at
the Annual Meeting with authority to vote on such matter, or (ii) a majority of
the voting power of the minimum number of shares that would constitute a quorum
for the transaction of business at the Annual Meeting.
In the absence of other instruction, the Proxies will be voted for each
of the individuals listed below. If elected, such individuals shall serve until
the next annual meeting of shareholders and until their successors shall be duly
elected and shall qualify. All of the nominees are members of the current Board
of Directors, with Anthony Angelini being elected to the Board in January 2000
as permitted by the Company's Bylaws. If, prior to the 2000 Annual Meeting of
Shareholders, it should become known that any one of the following individuals
will be unable to serve as a director after the 2000 Annual Meeting by reason of
death, incapacity or other unexpected occurrence, the Proxies will be voted for
such substitute nominee(s) as is selected by the Board of Directors.
Alternatively, the Proxies may, at the Board's discretion, be voted for such
fewer number of nominees as results from such death, incapacity or other
unexpected occurrence. The Board of Directors has no reason to believe that any
of the following nominees will be unable to serve.
Position with Director
Name Age the Company Since
- -------------- --- ------------------- --------
James T. Anderson 42 Chief Executive Officer and 1996
Chairman of the Board
Anthony Angelini 36 President, Chief Operating Officer 2000
and Director
Phillip T. Levin 56 Director 1996
Janice Ozzello Wilcox 46 Director 1996
Robert Ezrilov 55 Director 1996
Howard P. Liszt 53 Director 1996
Business Experience of the Director Nominees
James T. Anderson has served as Chief Executive Officer and as a
director of the Company since he co-founded it in February 1996 and as Chairman
since January 2000. He also served as President from February 1996 to January
2000. He was President of ZOMI Corp., the General Partner of Zomax Optical Media
Limited Partnership (the "Partnership"), the Company's predecessor, from 1993,
when he co-founded it and the Partnership, until May 1996. Mr. Anderson served
with Metacom from May 1982 to June 1993, including five years as Vice President
of Manufacturing where he was responsible for all manufacturing activities,
including purchasing, inventory control, production, warehousing and
distribution. Mr. Anderson is married to Michelle S. Bedard, Executive Vice
President - Sales and Marketing of the Company.
Anthony Angelini has served as President, Chief Operating Officer and
as a Director of the Company since January 2000. He served as Executive Vice
President - Global Operations from January 1999 to January 2000. Mr. Angelini
joined the Company as Vice President - Western U.S. and European Operations on
February 1998 when the Company acquired Primary Marketing Group ("PMG"), Primary
Marketing Group Ltd. ("PMG Ltd.") and Next Generation Services LLC ("NGS"). Mr.
Angelini co-founded PMG, PMG Ltd. and NGS in October 1989, September 1995 and
May 1996, respectively. Mr. Angelini served as Vice President of PMG, a Director
of PMG Ltd. and Manager of NGS, and he was a major equity owner of each.
Phillip T. Levin has served as a Director of the Company since he
co-founded it in February 1996, and he served as Chairman from February 1996
until January 2000. Mr. Levin was Chairman and Chief Executive Officer of ZOMI
Corp., from 1993, when he co-founded it and the Partnership, until May 1996. Mr.
Levin has served as a director and officer of Metacom, Inc., a leading
distributor of audio cassettes and a principal shareholder of the Company, since
he co-founded it in 1970. He has served as Metacom's Chief Executive Officer
since 1991.
Janice Ozzello Wilcox has served as Senior Vice President and Chief
Financial Officer of Marquette Bancshares, Inc., a bank holding company in
Minneapolis, Minnesota, since January 1993. From April 1991 to December 1992,
Ms. Wilcox served as Senior Vice President and Chief Financial Officer of
Marquette Bank Minneapolis, N.A. in Minneapolis, Minnesota.
Robert Ezrilov has served as President of Metacom, Inc. since July
1997. Mr. Ezrilov was self-employed as a business consultant from April 1995 to
July 1997. Prior to April 1995, he was a partner with Arthur Andersen LLP, which
accounting firm he joined in 1966. Mr. Ezrilov also serves on the Board of
Directors of C.H. Robinson Worldwide, Inc., a transportation service provider
located in Eden Prairie, Minnesota.
Howard P. Liszt currently serves as Chief Executive Officer of Campbell
Mithun Esty, an advertising agency in Minneapolis, Minnesota, and has been
employed by Campbell Mithun Esty since 1976.
BOARD AND COMMITTEE MEETINGS
During fiscal 1999, the Board of Directors held five meetings. Each
director attended more than 75% of the meetings of the Board and the committees
on which such director served during fiscal 1999 except for Bob Ezrilov who
attended 60% of the Board Meetings.
The Company's Board of Directors has two standing committees, the Audit
Committee and Compensation Committee. The Company does not have a nominating
committee.
The members of the Audit Committee are Robert Ezrilov, Howard Liszt and
Janice Ozzello Wilcox. This committee reviews the selection and work of the
Company's independent auditors and the adequacy of internal controls for
compliance with corporate policies and directives. The Audit Committee met twice
during fiscal 1999.
The members of the Compensation Committee are Robert Ezrilov, Howard
Liszt and Janice Ozzello Wilcox. This committee recommends to the Board of
Directors from time to time the salaries to be paid to executive officers of the
Company and any plan for additional compensation it deems appropriate. In
addition, this committee is vested with the same authority as the Board of
Directors with respect to the granting of options and the administration of the
Company's 1996 Stock Option Plan. The Compensation Committee met six times
during fiscal 1999, and it took written action by unanimous consent four times.
EXECUTIVE OFFICERS OF THE COMPANY
The names and ages of the Company's current executive officers and the
positions held by such officers are listed below.
Name Age Position
- ------------- --- ------------------
James T. Anderson 42 Chief Executive Officer and Chairman of the
Board
Anthony Angelini 36 President, Chief Operating Officer and Director
James E. Flaherty 46 Chief Financial Officer and Secretary
Michelle S. Bedard 41 Executive Vice President - Sales and Marketing
James T. Anderson has served as Chief Executive Officer and as a
director of the Company since he co-founded it in February 1996 and as Chairman
since January 2000. He also served as President from February 1996 to January
2000. He was President of ZOMI Corp., the General Partner of Zomax Optical Media
Limited Partnership (the "Partnership"), the Company's predecessor, from 1993,
when he co-founded it and the Partnership, until May 1996. Mr. Anderson served
with Metacom from May 1982 to June 1993, including five years as Vice President
of Manufacturing where he was responsible for all manufacturing activities,
including purchasing, inventory control, production, warehousing and
distribution. Mr. Anderson is married to Michelle S. Bedard, Executive Vice
President - Sales and Marketing of the Company.
Anthony Angelini has served as President, Chief Operating Officer and
as a Director of the Company since January 2000. He served as Executive Vice
President - Global Operations from January 1999 to January 2000. Mr. Angelini
joined the Company as Vice President - Western U.S. and European Operations on
February 1998 when the Company acquired Primary Marketing Group ("PMG"), Primary
Marketing Group Ltd. ("PMG Ltd.") and Next Generation Services LLC ("NGS"). Mr.
Angelini co-founded PMG, PMG Ltd. and NGS in October 1989, September 1995 and
May 1996, respectively. Mr. Angelini served as Vice President of PMG, a Director
of PMG Ltd. and Manager of NGS, and he was a major equity owner of each.
James E. Flaherty has served as Chief Financial Officer of the Company
since December 1996 and as Secretary since January 1997. From May 1989 until
December 1996, Mr. Flaherty was employed by Racotek Inc., a wireless data
software company in Minneapolis, Minnesota, serving in various capacities
including Chief Financial Officer, Controller and Secretary.
Michelle S. Bedard has served as Executive Vice President - Sales and
Marketing of the Company since its inception in February 1996, prior to which
she served as Vice President of Sales and National Sales Manager of the
Partnership since its inception in 1993. From June 1991 to August 1993, Ms.
Bedard was National Sales Manager of Metacom, where she was responsible for
sales revenue and staff, including eight inside sales representatives and
thirteen independent sales groups, the customer service department and various
support staff, for all four sales divisions. Ms. Bedard is married to James T.
Anderson, President and Chief Executive Officer of the Company.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information regarding
compensation paid or accrued during each of the Company's last three fiscal
years to the Chief Executive Officer and to each other executive officer whose
total annual salary and bonus paid or accrued during fiscal year 1999 exceeded
$100,000.
Long Term Compensation
Annual Compensation Awards Payouts
---------------------------------- -----------------------------------
Restricted LTIP All Other
Fiscal Stock Payouts Compensation
Year Salary ($) Bonus ($) Other ($) Awards ($) Options ($) ($)
------- ---------- --------- --------- ---------- ------------- ------- ------------
James T. Anderson, 1999 400,000 2,677,416 -- -- (1) -- --
Chairman and Chief 1998 248,144 341,067 -- -- 500,000 -- --
Executive Officer 1997 214,935 204,441 -- -- 250,000 -- --
Anthony Angelini, 1999 225,000 809,273 -- -- (1) -- --
President and Chief 1998 149,077 34,000 -- -- 200,000 -- --
Operating Officer
Michelle S. Bedard, 1999 300,000 (2) 719,354 -- -- (1) -- --
Executive Vice 1998 400,749 (2) 28,000 -- -- 100,000 -- --
President - Sales & 1997 356,437 (2) 20,000 -- -- 50,000 -- --
Marketing
James E. Flaherty, 1999 175,000 367,206 -- -- (1) -- --
Chief Financial 1998 121,404 25,000 -- -- 100,000 -- --
Officer 1997 98,398 15,000 -- -- 70,000 -- --
- -------------------------
(1) The named executive officers are entitled to stock options as part of
bonuses earned in 1999, which options will be granted upon shareholder
approval of the increase of shares under the Company's 1996 Stock
Option Plan (see Proposal #4). The options to be granted are 120,000
shares for Mr. Anderson, 64,000 shares for Mr. Angelini, 63,000 shares
for Ms. Bedard and 26,000 shares for Mr. Flaherty. Also, as part of
bonuses earned in 1999, the vesting of all outstanding options held by
the named executive officers was accelerated, pursuant to which 50% of
the shares became exercisable on January 1, 2000 and the remaining
shares will become exercisable in equal increments each quarter through
January 1, 2002.
(2) Includes commissions of $100,000, $262,758 and $256,233 for 1999, 1998
and 1997, respectively.
Option Grants During 1999 Fiscal Year
The Company did not grant any stock options to the named executive
officers in the Summary Compensation Table during fiscal year ended December 31,
1999; however, the Company's Compensation Committee approved awarding each of
such named executive officers a stock option. See "Summary Compensation Table."
The Company has not granted any stock appreciation rights.
Option Exercises During 1999 Fiscal Year and Fiscal Year-End Option Values
The following table provides information as to options exercised by the
named executive officer in the Summary Compensation Table during fiscal 1999 and
the number and value of options at December 31, 1999. The Company does not have
any outstanding stock appreciation rights.
Value of Unexercised
Shares Number of Unexercised Options In-the Money Options at
Acquired on Value Realized at December 31, 1999 December 31, 1999(2)
Name Exercise (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
------ ------------- -------------- ------------ ------------- ----------- -------------
James T. Anderson 500,000 $12,246,532 -- 500,000 $0 $20,629,375
Anthony Angelini 8,000 $229,504 -- 192,000 $0 $7,811,200
Michelle S. Bedard 175,000 $4,319,501 -- 125,000 $0 $5,147,000
James E. Flaherty 14,000 $375,598 28,000 128,000 $1,193,500 $5,278,000
(1) Value realized is calculated on the basis of the difference between the
option exercise price and the closing price for the Company's Common
Stock on the date of exercise as quoted by the Nasdaq National Market,
multiplied by the number of shares to which the exercise relates.
(2) Value of unexercised options is calculated on the basis of the
difference between the option exercise price and $45.25, the closing
sale price for the Company's Common Stock at December 31, 1999 as
quoted by the Nasdaq National Market, multiplied by the number of
shares of Common Stock underlying the option.
Compensation to Directors
The Company pays fees to the non-officer members of the Board of
Directors of $1,500 for each Board meeting and $500 for each Committee meeting
attended. The Company reimburses the directors for out-of-pocket expenses
incurred while attending Board or Committee meetings.
The 1996 Stock Option Plan provides for automatic option grants to each
director who is not an employee of the Company (a "Non-Employee Director"). Each
Non-Employee Director who was elected for the first time as a director on or
after the adoption of the Plan on March 1, 1996 was granted a nonqualified
option to purchase 20,000 shares of the Common Stock. Such option is exercisable
to the extent of 4,000 shares on each of the first five anniversaries of the
date of grant. Each Non-Employee Director who is re-elected as a director of the
Company or whose term of office continues after a meeting of shareholders at
which directors are elected shall, as of the date of such re-election or
shareholder meeting, automatically be granted a nonqualified option to purchase
4,000 shares of the Common Stock. A Non-Employee Director who receives a
20,000-share option upon initial election to the Board may not receive a
4,000-share option for at least twelve (12) months. All options granted pursuant
to these provisions are granted at a per share exercise price equal to 100% of
the fair market value of the Common Stock on the date of grant, and they expire
on the earlier of (i) three months after the optionee ceases to be a director
(except by death) and (ii) ten (10) years after the date of grant. In the event
of the death of a Non-Employee Director, any option granted to such Non-Employee
Director pursuant to this formula plan may be exercised at any time within
twelve (12) months of the death of such Non-Employee Director or until the date
on which the option, by its terms, expires, whichever is earlier.
Compensation Committee Report on Executive Compensation
Compensation Committee Interlocks and Insider Participation. The
Compensation Committee of the Board of Directors of the Company is composed of
directors Robert Ezrilov, Janice Ozzello Wilcox and Howard P. Liszt. Mr.
Ezrilov, is also the President and a director of Metacom, Inc., a shareholder of
the Company. Metacom and the Company are parties to a Manufacturing Agreement,
pursuant to which the Metacom has agreed to purchase certain compact discs and
cassettes from the Company at the same price as Metacom could obtain such
products and services from an unrelated third party. See the section of this
Proxy Statement entitled Executive Compensation - Certain Transactions.
Overview and Philosophy. The Compensation Committee's executive
compensation policies are designed to enhance the financial performance of the
Company, and thus shareholder value, by significantly aligning the financial
interests of the Company's key executives with those of the Company's
shareholders. Compensation of the Company's executive officers is comprised of
four parts: base salary, annual incentive bonuses, fringe benefits and long-term
incentive opportunity in the form of stock options.
The Compensation Committee believes that the base salaries of the
Company's executive officers (plus sales commissions for certain executive
officers) for fiscal 1999 are generally comparable to base salaries of executive
officers of comparable publicly-held companies. Although no formal survey was
conducted in connection with setting past compensation levels, an outside
compensation consulting firm was engaged to assist the Compensation Committee in
setting compensation for fiscal 1999. Executive officers also have the
opportunity to earn cash bonuses if certain Company financial performance goals
are met. Long-term incentives are based on stock performance through stock
options under the Company's 1996 Stock Option Plan ("1996 Plan"). The
Compensation Committee believes that stock ownership by the Company's executive
officers is beneficial in aligning management's and shareholders' interests in
the enhancement of shareholder value. Overall, the intent is to have a
significant emphasis on variable compensation components and less on fixed cost
components. The Compensation Committee believes this philosophy and structure
are in the best interests of the Company's shareholders.
Bonuses. The Company has followed a policy of setting bonus plans for
its executive officers, based on the individual performance of the executive
officers as well as the overall performance of the Company.
Stock Options and Other Incentives. The Company's stock option program
is the Company's long-term incentive plan for executive officers and key
employees. The objectives of the program are to align executive and shareholder
long-term interests by creating a strong and direct link between executive pay
and shareholder return, and to enable executives to develop and maintain a
significant, long-term ownership position in the Company's Common Stock.
The Company's 1996 Plan authorizes the Compensation Committee of the
Board of Directors to award stock options to executive officers and other
employees. Stock options are generally granted each year, at an option price
equal to the fair market value of the Company's Common Stock on the date of
grant, and vest over a period of three to five years. The amount of stock
options awarded is generally a function of the recipient's salary and position
in the Company. Awards are intended to be generally competitive with other
companies of comparable size and complexity, although the Compensation Committee
has not conducted any thorough comparative analysis.
Benefits. The Company provides medical and insurance benefits to its
executive officers which are generally available to all Company employees. The
Company has a 401(k) plan in which all qualified employees, including the
executive officers, may participate. The amounts of perquisites allowed to
executive officers, as determined in accordance with rules of the Securities and
Exchange Commission, did not exceed 10% of salary in fiscal 1999
Chief Executive Officer Compensation. James T. Anderson served as the
Company's Chief Executive Officer in fiscal 1999. His compensation was
determined in accordance with the policies described above as applicable to all
executive officers. His base salary was increased from $250,000 in fiscal 1998
to $400,000 in fiscal 1999 in light of the Company's increase in revenues and
earnings. Mr. Anderson was entitled to a cash bonus of $2,677,416 for fiscal
1999 and an option to purchase 120,000 shares, which option will be granted upon
shareholder approval of the increase of shares under the Company's 1996 Stock
Option Plan. Mr. Anderson received a bonus of $341,067 in fiscal 1998. In
addition, the vesting of the outstanding options held by Mr. Anderson as of
year-end was accelerated, pursuant to which 50% of the shares became exercisable
on January 1, 2000 and the remaining shares will become exercisable in equal
increments each quarter through January 1, 2001. The bonus amount is based on
the Company's earnings, in accordance with the terms of Mr. Anderson's
Employment Agreement, which agreement is described in the section of this Proxy
Statement entitled Executive Compensation - Employment Agreements and
Termination of Employment Arrangements.
Summary. Aggregate executive compensation increased in fiscal 1999, and
the Company awarded stock options to officers because the Company achieved
record revenues and earnings. The Compensation Committee intends to continue its
policy of paying relatively moderate base salaries, basing bonuses on
performance and granting options to provide long-term incentive.
Robert Ezrilov
Janice Ozzello Wilcox
Howard P. Liszt
Members of the
Compensation Committee
Stock Performance Chart
For the fiscal year ended December 25, 1998, the Company included a
graph comparing its stock performance with S&P 500 Composite Stock Index and the
S&P SmallCap Computer (Software and Services) Index. The Company believes that,
because of its size, it aligns more with the companies included in the Russell
2000 Index than it does with the S&P SmallCap Computer (Software and Services)
Index; therefore, the Company intends to delete the S&P SmallCap Computer
(Software and Services) Index from its graph in the future. The following graph
compares the yearly percentage change in the cumulative total stockholder return
on the Company's Common Stock during the four fiscal years ended December 31,
1999 with the cumulative total return on the S&P 500 Composite Stock Index, the
S&P SmallCap Computer (Software and Services) Index and the Russell 2000 Index.
The comparison assumes $100 was invested on May 7, 1996 (the date that the
Company's stock began to be publicly traded) in the Company's Common Stock and
in each of the foregoing indices and assumes reinvestment of dividends.
[SHAREHOLDER RETURNS GRAPH OMITTED]
05/07/96 12/27/96 12/26/97 12/25/98 12/31/99
Zomax Incorporated $100.00 $ 38.89 $ 67.82 $ 95.84 $670.37
S&P 500 Composite Stock Index $100.00 $119.94 $147.87 $194.38 $234.13
Russell 2000 Index $100.00 $103.91 $121.94 $117.33 $146.02
S&P SmallCap Computer (Software & $100.00 $ 88.11 $ 75.02 $105.41 $230.31
Services) Index
Employment Agreements and Termination of Employment Arrangements
The Company entered into an Employment Agreement with James T.
Anderson, Chief Executive Officer of the Company, effective January 1, 1999,
which agreement is automatically extended for additional one-year terms unless
the Company or Mr. Anderson gives notice at least three months prior to the end
of the current term. Pursuant to the terms of the agreement, the initial base
annual salary is $400,000, which salary is to be reviewed at least annually by
the Board, and has been determined by the Board to be $400,000 for 2000. In
addition, Mr. Anderson is entitled to a bonus, consisting of a combination of
cash and stock options, the terms of which are determined annually no later than
February 28. Upon Mr. Anderson's termination under certain conditions, he is
entitled to compensation and benefits. If Mr. Anderson terminates his employment
without good reason (as defined in the agreement), the Company will provide him
and his family health care benefits for up to five years. If Mr. Anderson's
employment is terminated by the Company without cause (as defined in the
agreement) or he resigns for good reason or for any reason within one year after
a change of control, or the Company fails to extend the agreement, Mr. Anderson
is entitled to an amount equal to twice his then current base salary, an amount
equal to twice his bonus payment earned for the preceding year or the current
year, whichever is higher, all stock options shall become immediately
exercisable and health care benefits for five years. In the event Mr. Anderson's
employment is terminated because of his disability, the Company shall provide
health care benefits for Mr. Anderson and his family. For one year following Mr.
Anderson's termination of employment with the Company, he has agreed that he
will not compete with the Company, solicit any of the Company's employees to
leave the Company or interfere with Company's relationship with its customers.
Change of Control Arrangements
The Company's 1996 Stock Option Plan (the "Plan") provides that, in the
event of an acquisition of the Company through the sale of substantially all of
the Company's assets and the consequent discontinuance of its business or
through a merger, consolidation, exchange, reorganization, reclassification,
extraordinary dividend, divestiture or liquidation of the Company ("change of
control"), all outstanding options under the Plan shall become exercisable in
full. The acceleration of the exercisability of outstanding options may be
limited, however, if (i) the acquiring party seeks to account for the change of
control transaction on a "pooling of interests" basis which would be precluded
if such options are accelerated, or (ii) if such acceleration would subject a
participant to an excise tax imposed upon "excess parachute payments." The Board
may also decide to take certain additional actions, such as termination of the
Plan, providing cash or stock valued at the amount equal to the excess of the
fair market value of the stock over the exercise price, or allow exercise of the
options for stock of the succeeding company.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
the Company believes that, during fiscal year 1999, all officers, directors and
greater than ten-percent beneficial owners complied with the applicable filing
requirements, except that Phillip Levin had four late reports on Form 4
reporting an aggregate of 35 transactions.
Certain Transactions
Metacom, Inc., a shareholder of the Company, is a party to a
Manufacturing Agreement with the Company. Phillip T. Levin, a director and a
significant shareholder of the Company, is the Chief Executive Officer and
majority shareholder of Metacom; and Robert Ezrilov, a director of the Company
who also serves on the Company's Compensation Committee, is President of
Metacom. Pursuant to the Manufacturing Agreement, Metacom has agreed to purchase
certain compact discs and cassettes from the Company at the same price as
Metacom could obtain such products and services from an unrelated third party.
The Manufacturing Agreement, as amended, terminates December 31, 2000. Metacom's
purchases of $461,000 from the Company in fiscal 1999 accounted for 0.2% of the
Company's revenues in fiscal 1999. As a result of Metacom not meeting its prior
obligations under the Manufacturing Agreement, Metacom agreed to pay the Company
$350,000 under a payment schedule through 1999, which amount was fully paid in
1999. Neither Mr. Levin nor Mr. Ezrilov participate in Board or management
discussions regarding Metacom or vote as a Company director on any matter
involving Metacom.
On January 1, 1995, the Company entered into an Office/Warehouse Lease
with Metacom, which lease was amended on October 28, 1997 and subsequently
assigned to Nathan Lane Partnership, LLP, a Minnesota limited liability
partnership of which Mr. Levin owns a one-third interest. Pursuant to the
Office/Warehouse Lease, as amended (the "Lease"), the Company leases
manufacturing (10,586 square feet), office (26,011 square feet) and warehouse
(45,229 square feet) space. The Lease expires on December 31, 2000. The Company
pays a base rent of $8.52 per net rentable square foot per annum for the office
space and the allocated portion of the common area; $5.38 per net rentable
square foot of production space per annum; and $3.76 per net rentable square
foot of warehouse space per annum. Additionally, the Company is obligated to pay
its proportionate share of taxes and operating expenses.
AMENDMENT TO ARTICLES TO INCREASE AUTHORIZED SHARES
(Proposal #3)
On January 19, 2000, the Board of Directors unanimously approved an
amendment to the Company's Articles of Incorporation to increase the authorized
shares from 25,000,000, consisting of 20,000,000 common and 5,000,000
undesignated shares, to 125,000,000, consisting of 100,000,000 common and
25,000,000 undesignated shares. As of March 8, 2000, there were 15,895,961
shares of Common Stock issued and outstanding. Of the unissued shares,
approximately 2,319,000 shares have been reserved for future issuances pursuant
to the Company's employee benefit plans, including the increased shares for the
Company's 1996 Stock Option Plan in Proposal #4 below, and 130,000 shares for
outstanding stock options and warrants outside of any plan.
The Board desires to increase the number of authorized shares to give
the Board flexibility to declare stock dividends or stock splits at such times
as the Board may deem appropriate; to give the Board flexibility to make
acquisitions using stock; to adopt additional employee benefit plans or increase
the shares available under existing plans; to raise equity capital or to use the
additional shares for other general corporate purposes. Aside from shares
currently reserved for issuance as described above, the Board has not authorized
the issuance of any additional shares, and there are no current agreements or
commitments for the issuance of any additional shares.
The Company's Articles of Incorporation permits the Board to establish
from the undesignated shares, by resolution adopted and filed with the Secretary
of State in the manner provided by law, one or more classes or series and to fix
the relative rights and preferences of each such class or series, including the
establishment of additional shares of Common Stock. These shares are available
for issuance by the Board at such times and for such purposes as the Board may
deem advisable without further action by the shareholders, except as may be
required by law or regulatory authorities.
In the event of a proposed merger, tender offer or other attempt to
gain control of the Company of which the Board does not approve, the Company's
Articles of Incorporation permit the Board to authorize the issuance of a series
of stock with rights and preferences which could impede the completion of such a
transaction. The Board will have the authority, for example, to adopt a
shareholder rights plan or "poison pill" without additional shareholder
approval. The Board has the authority to issue shares to purchasers who would
support the Board in opposing a hostile takeover bid. The Board does not intend
to issue any shares except on terms which the Board deems to be in the best
interests of the Company and its then existing shareholders.
Shareholders of the Company have no preemptive rights with respect the
Common Stock of the Company. If this proposed amendment is adopted, the
additional authorized shares of Common Stock will be available for issuance from
time to time at the discretion of the Board without further action by the
shareholders, except where shareholder approval is required by law, regulatory
authorities or to obtain favorable tax treatment for certain employee benefit
plans. Although an increase in the authorized shares could, under certain
circumstances, also be construed as having an anti-takeover effect (for example,
by diluting the stock ownership of a person seeking to effect a change in the
composition of the Board of Directors or contemplating a tender offer or other
transaction for the combination of the Company with another company), the
Company is not proposing the increase in authorized shares in response to any
effort to accumulate the Company's stock or to obtain control of the Company by
means of a merger, tender offer or solicitation in opposition to management.
Vote Required. The Board of Directors recommends that the shareholders
approve the increase of authorized shares of the Company. Under applicable
Minnesota law and the Company's current Articles of Incorporation, approval of
the amendment to increase the authorized shares requires the affirmative vote of
the holders of the greater of (i) a majority of the voting power of the shares
represented in person or by proxy at the Annual Meeting with authority to vote
on such matter, or (ii) a majority of the voting power of the minimum number of
shares that would constitute a quorum for the transaction of business at the
Annual Meeting.
APPROVAL OF AMENDMENT TO THE COMPANY'S 1996 STOCK OPTION PLAN
(Proposal #4)
Amendments
On January 19, 2000, the Board amended the Company's 1996 Stock Option
Plan (the "Plan") to increase the shares reserved under the Plan from 2,600,000
to 3,200,000 shares (the "Amendment"). As of March 8, 2000, the Company had
outstanding incentive and nonqualified options for the purchase of an aggregate
of 1,398,805 shares of the Company's common stock with an average exercise price
of $10.83 per share granted under the Company's 1996 Stock Option Plan adopted
on March 1, 1996 by the Board of Directors and the shareholders (the "1996
Plan"). Options to purchase 1,258,395 shares under the 1996 Plan have been
exercised as of March 8, 2000. The increase of shares is necessary to provide
sufficient shares for future options. The Board believes that granting
fairly-priced stock options to employees and directors is an effective means to
promote the future growth and development of the Company. Such options, among
other things, increase employees' and directors' proprietary interest in the
Company's success and enables the Company to attract and retain qualified
personnel. The Board therefore recommends that all shareholders vote in favor of
the Amendment.
Summary of 1996 Stock Option Plan
A general description of the basic features of the 1996 Plan is
presented below, but such description is qualified in its entirety by reference
to the full text of the 1996 Plan, a copy of which may be obtained without
charge upon written request to James E. Flaherty, the Company's Chief Financial
Officer.
Purpose. The purpose of the 1996 Plan is to promote the success of the
Company by facilitating the employment and retention of competent personnel and
by furnishing incentive to directors, officers and employees of the Company and
consultants and advisors to the Company, upon whose efforts the success of the
Company will depend to a large degree.
Term. Incentive stock options may be granted pursuant to the 1996 Plan
during a period of ten (10) years from the date the 1996 Plan was adopted by the
Board of Directors (until March 1, 2006), and nonqualified stock options may be
granted until the 1996 Plan is discontinued or terminated by the Board of
Directors.
Administration. With the exception of the stock options automatically
issued to Non-Employee Directors as described below, the 1996 Plan is
administered by the Compensation Committee of the Board of Directors, all of the
members of which are "non-employee directors" under Rule 16b-3 of the Act. The
1996 Plan gives broad powers to the Committee to administer and interpret the
1996 Plan, including the authority to select the individuals to be granted
options and to prescribe the particular form and conditions of each option
granted.
Eligibility. All employees of the Company or any subsidiary are
eligible to receive incentive stock options pursuant to the 1996 Plan. All
employees, officers and directors of and consultants and advisors to the Company
or any subsidiary are eligible to receive nonqualified stock options. As of
March 8, 2000, the Company had approximately 1,524 employees, of which four are
officers, and four directors who are not employees.
Options. When an option is granted under the 1996 Plan, the Committee,
at its discretion, specifies the option price and the number of shares of Common
Stock which may be purchased upon exercise of the option. The exercise price of
an incentive stock option may not be less than 100% of the fair market value of
the Company's Common Stock, as that term is defined in the 1996 Plan. Unless
otherwise determined by the Committee, the exercise price of a nonqualified
stock option will not be less than 100% of the fair market value on the date of
grant. The period during which an option may be exercised and whether the option
will be exercisable immediately, in stages, or otherwise is set by the
Committee. An incentive stock option may not be exercisable more than ten (10)
years from the date of grant. Optionees may pay for shares upon exercise of
options with cash, certified check or Common Stock of the Company valued at the
stock's then "fair market value" as defined in the 1996 Plan. Each option
granted under the 1996 Plan is nontransferable during the lifetime of the
optionee.
Generally, under the form of option agreement which the Committee is
currently using for options granted under the 1996 Plan, if the optionee's
affiliation with the Company terminates before expiration of the option for
reasons other than death, the optionee has a right to exercise the option for
three months after termination of such affiliation or until the option's
original expiration date, whichever is earlier. If the termination is because of
death, the option typically is exercisable until its original stated expiration
or until the 12-month anniversary of the optionee's death, whichever is earlier.
The Committee may impose additional or alternative conditions and restrictions
on the incentive or nonqualified stock options granted under the 1996 Plan;
however, each incentive option must contain such limitations and restrictions
upon its exercise as are necessary to ensure that the option will be an
incentive stock option as defined under the Internal Revenue Code.
Grants to Non-Employee Directors. The 1996 Stock Option Plan provides
for automatic option grants to each director who is not an employee of the
Company (a "Non-Employee Director"). Each Non-Employee Director who was elected
for the first time as a director on or after the adoption of the 1996 Plan on
March 1, 1996 was granted a nonqualified option to purchase 20,000 shares of the
Common Stock. Such option is exercisable to the extent of 4,000 shares on each
of the first five anniversaries of the date of grant. Each Non-Employee Director
who is re-elected as a director of the Company or whose term of office continues
after a meeting of shareholders at which directors are elected shall, as of the
date of such re-election or shareholder meeting, automatically be granted a
nonqualified option to purchase 4,000 shares of the Common Stock. A Non-Employee
Director who receives a 20,000-share option upon initial election to the Board
may not receive a 4,000-share option for at least twelve (12) months. All
options granted pursuant to these provisions are granted at a per share exercise
price equal to 100% of the fair market value of the Common Stock on the date of
grant, and they expire on the earlier of (i) three months after the optionee
ceases to be a director (except by death) and (ii) ten (10) years after the date
of grant. In the event of the death of a Non-Employee Director, any option
granted to such Non-Employee Director pursuant to this formula plan may be
exercised at any time within twelve (12) months of the death of such
Non-Employee Director or until the date on which the option, by its terms,
expires, whichever is earlier.
In addition to the automatic grants of nonqualified options, the
Non-Employee Directors are eligible to receive additional nonqualified stock
options pursuant to the 1996 Plan in the sole discretion of the Committee.
Change of Control. In the event of an acquisition of the Company
through the sale of substantially all of the Company's assets and the consequent
discontinuance of its business or through a merger, consolidation, exchange,
reorganization, reclassification, extraordinary dividend, divestiture or
liquidation of the Company ("change of control"), all outstanding options shall
become exercisable in full. The acceleration of the exercisability of
outstanding options may be limited, however, if (i) the acquiring party seeks to
account for the change of control transaction on a "pooling of interests" basis
which would be precluded if such options are accelerated, or (ii) if such
acceleration would subject a participant to an excise tax imposed upon "excess
parachute payments." The Board may also decide to take certain additional
actions, such as termination of the Plan, providing cash or stock valued at the
amount equal to the excess of the fair market value of the stock over the
exercise price, or allow exercise of the options for stock of the succeeding
company.
Amendment. The Board of Directors may from time to time suspend or
discontinue the 1996 Plan or revise or amend it in any respect; provided,
however, that no such revision or amendment may impair the terms and conditions
of any outstanding option to the material detriment of the optionee without the
consent of the optionee, except as authorized in the event of a sale, merger,
consolidation or liquidation of the Company. The 1996 Plan may not be amended in
any manner that will cause incentive stock options to fail to meet the
requirements of Code Section 422, and may not be amended in any manner that
will: (i) materially increase the number of shares subject to the 1996 Plan
except as provided in the case of stock splits, consolidations, stock dividends
or similar events; (ii) change the designation of the class of employees
eligible to receive options; (iii) decrease the price at which options will be
granted; or (iv) materially increase the benefits accruing to optionees under
the 1996 Plan, without the approval of the shareholders, if such approval is
required to comply with Code Section 422 or the requirements of Section 16(b) of
the Act.
The Board of Directors will equitably adjust the maximum number of
shares of Common Stock reserved for issuance under the 1996 Plan, the number of
shares covered by each outstanding option and the option price per share in the
event of stock splits or consolidations, stock dividends or other transactions
in which the Company receives no consideration. Generally, the Board of
Directors may also provide for the protection of optionees in the event of a
merger, liquidation or reorganization of the Company.
Federal Income Tax Consequences of the 1996 Plan. Under present law, an
optionee will not realize any taxable income on the date a nonqualified stock
option is granted to the optionee pursuant to the 1996 Plan. Upon exercise of
the nonqualified stock option, however, the optionee will realize, in the year
of exercise, ordinary income to the extent of the difference between the option
price and the fair market value of the Company's Common Stock on the date of
exercise. Upon the sale of the shares, any resulting gain or loss will be
treated as capital gain or loss. The Company will be entitled to a tax deduction
in its fiscal year in which nonqualified stock options are exercised, equal to
the amount of compensation required to be included as ordinary income by those
optionees exercising such options.
Incentive stock options granted pursuant to the 1996 Plan are intended
to qualify for favorable tax treatment to the optionee under Code Section 422.
Under Code Section 422, an employee realizes no taxable income when the
incentive stock option is granted. If the employee has been an employee of the
Company or any subsidiary at all times from the date of grant until three months
before the date of exercise, the employee will realize no taxable income when
the option is exercised. If the employee does not dispose of shares acquired
upon exercise for a period of two years from the granting of the incentive stock
option and one year after receipt of the shares, the employee may sell the
shares and report any gain as capital gain. The Company will not be entitled to
a tax deduction in connection with either the grant or exercise of an incentive
stock option. If the employee should dispose of the shares prior to the
expiration of the two-year or one-year periods described above, the employee
will be deemed to have received compensation taxable as ordinary income in the
year of the early sale in an amount equal to the lesser of (i) the difference
between the fair market value of the Company's Common Stock on the date of
exercise and the option price of the shares, or (ii) the difference between the
sale price of the shares and the option price of shares. In the event of such an
early sale, the Company will be entitled to a tax deduction equal to the amount
recognized by the employee as ordinary income. The foregoing discussion ignores
the impact of the alternative minimum tax, which may particularly be applicable
to the year in which an incentive stock option is exercised.
Plan Benefits. Because future grants of stock options are subject to
the discretion of the Committee, the future benefits under the 1996 Plan cannot
be determined at this time, except for the automatic grants to Non-Employee
Directors as set forth above. The table below shows the total number of shares
underlying stock options that have been granted under the 1996 Plan as of March
8, 2000 to the named executive officers and the groups set forth.
Shares of Common Stock
Name and Position/Group Underlying Options Received(1)
- -------------------------- ------------------------------
James T. Anderson 1,000,000
Chief Executive Officer and Chairman
Anthony Angelini 200,000
President and Chief Operating Officer
Michelle S. Bedard 300,000
Executive Vice President
James E. Flaherty 170,000
Chief Financial Officer
Current Executive Officers 1,670,000
as a Group (4 persons)
Current Directors who are not 96,000
Executive Officers as a Group (4 persons)
Current Employees who are not 771,200
Executive Officers or Directors
as a Group (1,520 persons)
- -------------------
(1) Includes options which have been exercised.
Vote Required. The Board of Directors recommends that the shareholders
approve the amendment to the 1996 Plan to increase the number of shares reserved
for issuance under the 1996 Plan from 2,600,000 to 3,200,000. Under applicable
Minnesota law, approval of the amendment to the 1996 Plan requires the
affirmative vote of the holders of the greater of (i) a majority of the voting
power of the shares represented in person or by proxy at the Annual Meeting with
authority to vote on such matter, or (ii) a majority of the voting power of the
minimum number of shares that would constitute a quorum for the transaction of
business at the Annual Meeting.
INDEPENDENT PUBLIC ACCOUNTANT
(Proposal #5)
Arthur Andersen LLP has served as the Company's independent public
accountants since its inception in February 1996 and served as the independent
public accountants of the Partnership, the Company's predecessor, from its
inception in 1993 to the reorganization of the Company and the Partnership in
May 1996. A representative of Arthur Andersen LLP is expected to be present at
the 2000 Annual Meeting and will be given an opportunity to make a statement
regarding financial and accounting matters of the Company, if he or she so
desires, and will be available to respond to appropriate questions from the
Company's shareholders.
The Board of Directors recommends that the shareholders ratify the
appointment of Arthur Andersen LLP as the Company's independent public
accountants for the Company for the year ending December 29, 2000. The
ratification of Arthur Andersen LLP as independent public accountants for the
Company requires the affirmative vote of a majority of the shares represented in
person or by proxy at the Annual Meeting.
OTHER BUSINESS
Management knows of no other matters to be presented at the 2000 Annual
Meeting. If any other matter properly comes before the 2000 Annual Meeting, the
appointees named in the proxies will vote the proxies in accordance with their
best judgment.
SHAREHOLDER PROPOSALS
Any appropriate proposal submitted by a shareholder of the Company and
intended to be presented at the 2001 Annual Meeting must be received by the
Company by November 21, 2000 to be included in the Company's proxy statement and
related proxy for the 2001 Annual Meeting. Shareholder proposals intended to be
presented at the 2001 Annual Meeting but not included in the Company's proxy
statement and proxy will be considered untimely if received by the Company after
February 4, 2001.
ANNUAL REPORT
A copy of the Company's Annual Report to Shareholders for the fiscal
year ended December 31, 1999, including financial statements, accompanies this
Notice of Annual Meeting and Proxy Statement. No portion of the Annual Report is
incorporated herein or is to be considered proxy soliciting material.
FORM 10-K
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS
BEING SOLICITED, UPON WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
1999, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE
FINANCIAL STATEMENTS AND A LIST OF EXHIBITS TO SUCH FORM 10-K. THE COMPANY WILL
FURNISH TO ANY SUCH PERSON ANY EXHIBIT DESCRIBED IN THE LIST ACCOMPANYING THE
FORM 10-K UPON THE ADVANCE PAYMENT OF REASONABLE FEES. REQUESTS FOR A COPY OF
THE FORM 10-K AND/OR ANY EXHIBIT(S) SHOULD BE DIRECTED TO THE CHIEF FINANCIAL
OFFICER OF ZOMAX INCORPORATED, 5353 NATHAN LANE, PLYMOUTH, MINNESOTA 55442. YOUR
REQUEST MUST CONTAIN A REPRESENTATION THAT, AS OF MARCH 8, 2000, YOU WERE A
BENEFICIAL OWNER OF SHARES ENTITLED TO VOTE AT THE 2000 ANNUAL MEETING OF
SHAREHOLDERS.
BY ORDER OF THE BOARD OF DIRECTORS
James T. Anderson, Chairman and Chief Executive Officer
Dated: March 20, 2000
Zomax Incorporated
ANNUAL MEETING OF SHAREHOLDERS
Wednesday, April 19, 2000
3:30 p.m.
Lutheran Brotherhood Building
625 Fourth Avenue South
Minneapolis, MN 55415
Zomax Incorporated
5353 Nathan Lane, Plymouth, Minnesota 55442 proxy
- --------------------------------------------------------------------------------
This proxy is solicited by the Board of Directors for use at the Annual Meeting
on April 19, 2000.
The shares of stock you hold in your account will be voted as you specify below.
If no choice is specified, the proxy will be voted "FOR" Items 1, 2, 3, 4 and 5.
By signing the proxy, you revoke all prior proxies and appoint James T. Anderson
and James E. Flaherty, and each of them, with full power of substitution, to
vote your shares on the matters shown on the reverse side and any other matters
which may come before the Annual Meeting and all adjournments.
See reverse for voting instructions
Please detach here
The Board of Directors Recommends a Vote FOR Items 1, 2, 3, 4 and 5.
1. Set the number of directos at six (6). [ ] For [ ] Against [ ] Abstain
2. Election of directors: 01 James T. Anderson 04 Janice Ozzello Wilcox [ ] Vote FOR [ ] Vote WITHHELD
02 Anthony Angelini 05 Robert Ezrilov all nominees from all nominees
03 Phillip T. Levin 06 Howard P. Liszt (except as withheld below)
(Instructions: To withhold authority to vote for any indicated nominee,
write the number(s) of the nominee(s) in the box provided to the right.)
-------------------------------------------
3. Approve amendment to the Company's Articles of Incorporation [ ] For [ ] Against [ ] Abstain
to increase the authorized shares from 25,000,000 to 125,000,000.
4. Approve amendment to the Company's 1996 Stock Option Plan to [ ] For [ ] Against [ ] Abstain
increase the shares reserved under the Plan from 2,600,000 to 3,200,000.
5. Ratify appointment of Arthur Andersen LLP as independent auditors [ ] For [ ] Against [ ] Abstain
of the Company for the fiscal year ending December 29, 2000.
6. In their discretion, the proxies are authorized to vote upon such business as
may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS GIVEN, THIS PROXY WILL BE VOTED FOR EACH PROPOSAL.
Address change? Mark box [ ] Dated:____________________________, 2000
Indicate changes below:
------------------------------------------
------------------------------------------
Signature(s) in Box Please sign exactly as
your name(s) appear on Proxy. If held in
joint tenancy, all persons must sign.
Trustees, administrators, etc., should
include title and authority. Corporations
should provide full name of corporation and
title of authorized officer signing the
proxy.
ZOMAX INCORPORATED
1996 STOCK OPTION PLAN
(As Amended Through January 19, 2000)
SECTION 1.
DEFINITIONS
As used herein, the following terms shall have the meanings indicated
below:
(a) The "Company" shall mean Zomax Incorporated, a Minnesota
corporation.
(b) A "Subsidiary" shall mean any corporation of which fifty percent
(50%) or more of the total voting power of outstanding stock is owned,
directly or indirectly in an unbroken chain, by the Company.
(c) "Option Stock" shall mean Common Stock of the Company (subject to
adjustment as described in Section 13) reserved for options pursuant to
this Plan.
(d) The "Plan" means the Zomax Incorporated 1996 Stock Option Plan, as
amended hereafter from time to time, including the form of Option
Agreements as they may be modified by the Board from time to time.
(e) Non-Employee Directors shall mean members of the Board who are not
employees of the Company or any Subsidiary.
(f) The "Optionee" for purposes of Section 9 is an employee of the
Company or any Subsidiary to whom an incentive stock option has been
granted under the Plan. For purposes of Section 10, the "Optionee" is a
consultant or advisor to or an employee, officer or director of the
Company or any Subsidiary to whom a nonqualified stock option has been
granted. For purposes of Section 11, the "Optionee" is a Non-Employee
Director to whom a nonqualified stock option has been granted.
(g) "Committee" shall mean a Committee of two or more directors who
shall be appointed by and serve at the pleasure of the Board. As long
as the Company's securities are registered pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended, then, to the extent
necessary for compliance with Rule 16b-3, or any successor provision,
each of the members of the Committee shall be a "Non-Employee
Director." For purposes of this Section 1(g) "Non-Employee Director"
shall have the same meaning as set forth in Rule 16b-3, or any
successor provision, as then in effect, of the General Rules and Regula
tions under the Securities Exchange Act of 1934, as amended.
(h) The "Internal Revenue Code" is the Internal Revenue Code of 1986,
as amended from time to time.
SECTION 2.
PURPOSE
The purpose of the Plan is to promote the success of the Company and
its subsidiaries by facilitating the employment and retention of competent
personnel and by furnishing incentive to directors, officers, employees,
consultants, and advisors upon whose efforts the success of the Company and its
subsidiaries will depend to a large degree.
It is the intention of the Company to carry out the Plan through the
granting of stock options which will qualify as "Incentive Stock Options" under
the provisions of Section 422 of the Internal Revenue Code, and through the
granting of "Nonqualified Stock Options" pursuant to Sections 10 and 11 of this
Plan. Adoption of this Plan shall be and is expressly subject to the condition
of approval by the shareholders of the Company within twelve (12) months before
or after the adoption of the Plan by the Board of Directors. In no event shall
any stock options be exercisable prior to the date this Plan is approved by the
shareholders of the Company. If shareholder approval of this Plan is not
obtained within twelve (12) months after the adoption of the Plan by the Board
of Directors, any stock options previously granted shall be revoked.
SECTION 3.
EFFECTIVE DATE OF PLAN
The Plan shall be effective as of the date it is adopted by the Board
of Directors of the Company, subject to approval by the shareholders of the
Company as required in Section 2.
SECTION 4.
ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(hereinafter referred to as the "Board") or by a Stock Option Committee
(hereinafter referred to as the "Committee" and as defined in Section 1(g) of
this Plan) which may be appointed by the Board from time to time. The Board or
the Committee, as the case may be, shall have all of the powers vested in it
under the provisions of the Plan, including but not limited to exclusive
authority (where applicable and within the limitations described herein) to
determine, in its sole discretion, whether an incentive stock option or
nonqualified stock option shall be granted, the individuals to whom, and the
time or times at which, options shall be granted, the number of shares subject
to each option and the option price and terms and conditions of each option. The
Board, or the Committee, shall have full power and authority to administer and
interpret the Plan, to make and amend rules, regulations and guidelines for
administering the Plan, to prescribe the form and conditions of the respective
stock option agreements (which may vary from Optionee to Optionee) evidencing
each option and to make all other determinations necessary or advisable for the
administration of the Plan. The Board's, or the Committee's, interpretation of
the Plan, and all actions taken and determinations made by the Board or the
Committee pursuant to the power vested in it hereunder, shall be conclusive and
binding on all parties concerned. No member of the Board or the Committee shall
be liable for any action taken or determination made in good faith in connection
with the administration of the Plan.
In the event the Board appoints a Committee as provided hereunder, any
action of the Committee with respect to the administration of the Plan shall be
taken pursuant to a majori ty vote of the Committee members or pursuant to the
written resolution of all Committee members.
SECTION 5.
PARTICIPANTS
The Board or the Committee, as the case may be, shall from time to
time, at its discretion and without approval of the shareholders, designate
those employees, directors, officers, consultants or advisors of the Company or
of any Subsidiary to whom nonqualified stock options shall be granted under this
Plan; provided, however, that consultants or advisors shall not be eligible to
receive stock options hereunder unless such consultant or advisor renders bona
fide services to the Company or Subsidiary and such services are not in
connection with the offer or sale of securities in a capital-raising
transaction. The Board or the Committee, as the case may be, shall, from time to
time, at its discretion and without approval of the shareholders, designate
those employees of the Company or any Subsidiary to whom incentive stock options
shall be granted under this Plan.
The Board or the Committee may grant additional incentive stock options
or nonqualified stock options under this Plan to some or all participants then
holding options or may grant options solely or partially to new participants. In
designating participants, the Board or the Committee shall also determine the
number of shares to be optioned to each such participant. The Board may from
time to time designate individuals as being ineligible to participate in the
Plan.
SECTION 6.
STOCK
The Stock to be optioned under this Plan shall consist of authorized
but unissued shares of Option Stock. Three million two hundred thousand
(3,200,000) shares of Option Stock shall be reserved and avail able for options
under the Plan; provided, however, that the total number of shares of Option
Stock reserved for options under this Plan shall be subject to adjustment as
provided in Section 13 of the Plan. In the event that any outstanding option
under the Plan for any reason expires or is terminated prior to the exercise
thereof, the shares of Option Stock allocable to the unexercised portion of such
option shall continue to be reserved for options under the Plan and may be
optioned hereunder.
SECTION 7.
DURATION OF PLAN
Incentive stock options may be granted pursuant to the Plan from time
to time during a period of ten (10) years from the earlier of the date the Plan
is approved by the Board or the date it is approved by the shareholders of the
Company. Nonqualified stock options may be granted pursuant to the Plan from
time to time after the Plan is adopted by the Board and until the Plan is
discontinued or terminated by the Board.
SECTION 8.
PAYMENT
Optionees may pay for shares upon exercise of options granted pursuant
to this Plan with cash, certified check, Common Stock of the Company valued at
such stock's then "fair market value" as defined in Section 9 below, or such
other form of payment as may be authorized by the Board or the Committee. The
Board or the Committee may, in its sole discretion, limit the forms of payment
available to the Optionee and may exercise such discretion any time prior to the
termination of the Option granted to the Optionee or upon any exercise of the
Option by the Optionee.
SECTION 9.
TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS
Each incentive stock option granted pursuant to the Plan shall be
evidenced by a written stock option agreement (the "Option Agreement"). The
Option Agreement shall be in such form as may be approved from time to time by
the Board or the Committee and may vary from Optionee to Optionee; provided,
however, that each Optionee and each Option Agreement shall comply with and be
subject to the following terms and conditions:
(a) Number of Shares and Option Price. The Option Agreement shall state
the total number of shares covered by the incentive stock option. The
option price per share shall not be less than one hundred percent
(100%) of the fair market value of the Common Stock per share on the
date the Board or the Committee, as the case may be, grants the option;
provided, however, that if an Optionee owns stock possessing more than
ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of its parent or any Subsidiary, the option
price per share of an incentive stock option granted to such Optionee
shall not be less than one hundred ten percent (110%) of the fair
market value of the Common Stock per share on the date of the grant of
the option. For purposes hereof, if such stock is then reported in the
national market system or is listed upon an established exchange or
exchanges, "fair market value" of the Common Stock per share shall be
the highest clos ing price of such stock in such national market system
or on such stock exchange or exchanges on the date the option is
granted or, if no sale of such stock shall have occurred on that date,
on the next preceding day on which there was a sale of stock. If such
stock is not so reported in the national market system or listed upon
an exchange, "fair market value" shall be the mean between the "bid"
and "asked" prices quoted by a recognized specialist in the Common
Stock of the Company on the date the option is granted, or if there are
no quoted "bid" and "asked" prices on such date, on the next preceding
date for which there are such quotes. If such stock is not publicly
traded as of the date the option is granted, the "fair market value" of
the Common Stock shall be determined by the Board, or the Committee, in
its sole discretion by applying principles of valuation with respect to
all such options. The Board or the Committee, as the case may be, shall
have full authority and discretion in establishing the option price and
shall be fully protected in so doing.
(b) Term and Exercisability of Incentive Stock Option. The term during
which any incentive stock option granted under the Plan may be
exercised shall be established in each case by the Board or the
Committee, as the case may be, but in no event shall any incentive
stock option be exercisable during a term of more than ten (10) years
after the date on which it is granted; provided, however, that if an
Optionee owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of its
parent or any Subsidiary, the incentive stock option shall be
exercisable during a term of not more than five (5) years after the
date on which it is granted. The Option Agreement shall state when the
incentive stock option becomes exercisable and shall also state the
maximum term during which the option may be exercised. In the event an
incentive stock option is exercisable immediately, the manner of
exercise of the option in the event it is not exercised in full
immediately shall be specified in the Option Agreement. The Board or
the Committee, as the case may be, may accelerate the exercise date of
any incentive stock option granted hereunder which is not immediately
exercisable as of the date of grant.
(c) Other Provisions. The Option Agreement authorized under this
Section 9 shall contain such other provisions as the Board or the
Committee, as the case may be, shall deem advisable. Any such Option
Agreement shall contain such limitations and restrictions upon the
exercise of the option as shall be necessary to ensure that such option
will be considered an "Incentive Stock Option" as defined in Section
422 of the Internal Revenue Code or to conform to any change therein.
(d) Holding Period. The disposition of any shares of Common Stock
acquired by an Optionee pursuant to the exercise of an option described
above shall not be eli gible for the favorable taxation treatment of
Section 421(a) of the Internal Revenue Code unless any shares so
acquired are held by the Optionee for at least two (2) years from the
date of the granting of the option under which the shares were acquired
and at least one year after the acquisition of such shares pursuant to
the exercise of such option, or such other periods as may be prescribed
by the Internal Revenue Code. In the event of an Optionee's death, such
holding period shall not be applicable pursuant to Section 421(c)(1) of
the Internal Revenue Code.
SECTION 10.
TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS
Each nonqualified stock option granted pursuant to the Plan shall be
evidenced by a written Option Agreement. The Option Agreement shall be in such
form as may be approved from time to time by the Board or the Committee and may
vary from Optionee to Optionee; provided, however, that each Optionee and each
Option Agreement shall comply with and be subject to the following terms and
conditions:
(a) Number of Shares and Option Price. The Option Agreement shall state
the total number of shares covered by the nonqualified stock option.
The option price per share shall be equal to one hundred percent (100%)
of the fair market value of the Common Stock per share on the date the
Board or the Committee grants the option unless otherwise determined by
the Board or the Committee, as the case may be; provided, however, that
the option price per share shall be equal to at least eighty-five
percent (85%) of the fair market value of the Common Stock per share on
the date of grant. For purposes hereof, the "fair market value" of a
share of Common Stock shall have the same meaning as set forth under
Section 9(a) herein.
(b) Term and Exercisability of Nonqualified Stock Option. The term
during which any nonqualified stock option granted under the Plan may
be exercised shall be established in each case by the Board or the
Committee, as the case may be, but in no event shall any option be
exercisable during a term of more than ten (10) years after the date on
which it was granted. The Option Agreement shall state when the
nonqualified stock option becomes exercisable and shall also state the
maximum term during which the option may be exercised. In the event a
nonqualified stock option is exercisable immediately, the manner of
exercise of the option in the event it is not exercised in full
immediately shall be specified in the Option Agreement. The Board or
the Committee, as the case may be, may accelerate the exercise date of
any nonqualified stock option granted hereunder which is not
immediately exercisable as of the date of grant.
(c) Withholding. In the event the Optionee is required under the Option
Agreement to pay the Company, or make arrangements satisfactory to the
Company respecting payment of, any federal, state, local or other taxes
required by law to be withheld with respect to the option's exercise,
the Board or the Committee, as the case may be, may, in its discretion
and pursuant to such rules as it may adopt, permit the Optionee to
satisfy such obligation, in whole or in part, by electing to have the
Company withhold shares of Common Stock otherwise issuable to the
Optionee as a result of the option's exercise equal to the amount
required to be withheld for tax purposes. Any stock elected to be
withheld shall be valued at its "fair market value," as provided under
Section 9(a) hereof, as of the date the amount of tax to be withheld is
determined under applicable tax law. The Optionee's election to have
shares withheld for this purpose shall be made on or before the date
the option is exercised or, if later, the date that the amount of tax
to be withheld is determined under applicable tax law. Such election
shall also comply with such rules as may be adopted by the Board or the
Committee to assure compliance with Rule 16b-3, as then in effect, of
the General Rules and Regulations under the Securities Exchange Act of
1934, if applicable.
(d) Other Provisions. The Option Agreement authorized under this
Section 10 shall contain such other provisions as the Board, or the
Committee, as the case may be, shall deem advisable.
SECTION 11.
GRANTING OF OPTIONS TO NON-EMPLOYEE DIRECTORS
(a) Upon Joining Board. Each Non-Employee Director whose
initial election or appointment to the Board of Directors occurs after
the date this Plan is adopted by the Board of Directors shall, as of
the date of such election or appointment to the Board, automatically be
granted an option to purchase 20,000 shares of the Common Stock at an
option price per share equal to one hundred percent (100%) of the fair
market value of the Common Stock on the date of such election or
appointment. Such option shall become exercisable to the extent of
4,000 shares on each of the first, second, third, fourth and fifth
anniversaries of the date of grant.
(b) Upon Re-election to Board. Each Non-Employee Director who,
after the date this Plan is adopted by the Board of Directors, is
re-elected as a Non-Employee Director of the Company or whose term of
office continues after a meeting of shareholders at which directors are
elected shall, as of the date of such re-election or shareholder
meeting, automatically be granted an option to purchase 4,000 shares of
Common Stock at an option price per share equal to one hundred percent
(100%) of the fair market value of the Common Stock on the date of such
re-election or shareholder meeting; provided that a Non-Employee
Director who receives an option pursuant to subsection (a) above shall
not be entitled to receive an option pursuant to this subsection (b)
until at least twelve (12) months after such Non-Employee Director's
initial election to the Board. Options granted pursuant to this
subsection (b) shall be immediately exercisable in full.
(c) General. Non-Employee Directors shall not receive more
than one option to purchase 4,000 shares pursuant to this Section 11 in
any one fiscal year. All options granted pursuant to this Section 11
shall be designated as nonqualified options and shall be subject to the
same terms and provisions as are then in effect with respect to
granting of nonqualified options to officers and employees of the
Company, except that the option shall expire on the earlier of (i)
three months after the optionee ceases to be a director (except by
death) and (ii) ten (10) years after the date of grant. Notwithstanding
the foregoing, in the event of the death of a Non-Employee Director,
any option granted to such Non-Employee Director may be exercised at
any time within twelve (12) months of the death of such Non-Employee
Director or on the date on which the option, by its terms expire,
whichever is earlier.
SECTION 12.
TRANSFER OF OPTION
No option shall be transferable, in whole or in part, by the Optionee
other than by will or by the laws of descent and distribution and, during the
Optionee's lifetime, the option may be exercised only by the Optionee. If the
Optionee shall attempt any transfer of any option granted under the Plan during
the Optionee's lifetime, such transfer shall be void and the option, to the
extent not fully exercised, shall terminate.
SECTION 13.
RECAPITALIZATION, SALE, MERGER, EXCHANGE OR LIQUIDATION
In the event of an increase or decrease in the number of shares of
Common Stock resulting from a subdivision or consolidation of shares or the
payment of a stock dividend or any other increase or decrease in the number of
shares of Common Stock effected without receipt of consideration by the Company,
the number of shares of Option Stock reserved under Section 6 hereof and the
number of shares of Option Stock covered by each outstanding option and the
price per share thereof shall be adjusted by the Board to reflect such change.
Additional shares which may be credited pursuant to such adjustment shall be
subject to the same restrictions as are applicable to the shares with respect to
which the adjustment relates.
Unless otherwise provided in the stock option agreement, in the event
of an acquisition of the Company through the sale of substantially all of the
Company's assets and the consequent discontinuance of its business or through a
merger, consolidation, exchange, reorganization, reclassification, extraordinary
dividend, divestiture or liquidation of the Company (collectively referred to as
a "transaction"), all outstanding options shall become immediately exercisable,
whether or not such options had become exercisable prior to the transaction;
provided, however, that if the acquiring party seeks to have the transaction
accounted for on a "pooling of interests" basis and, in the opinion of the
Company's independent certified public accountants, accelerating the
exercisability of such options would preclude a pooling of interests under
generally accepted accounting principles, the exercisability of such options
shall not accelerate. In addition to the foregoing, in the event of such a
transaction, the Board may provide for one or more of the following:
(a) the complete termination of this Plan and cancellation of
outstanding options not exercised prior to a date specified by the
Board (which date shall give Optionees a reasonable period of time in
which to exercise the options prior to the effectiveness of such
transaction);
(b) that Optionees holding outstanding incentive or
nonqualified options shall receive, with respect to each share of
Option Stock subject to such options, as of the effective date of any
such transaction, cash in an amount equal to the excess of the Fair
Market Value of such Option Stock on the date immediately preceding the
effective date of such transaction over the option price per share of
such options; provided that the Board may, in lieu of such cash
payment, distribute to such Optionees shares of stock of the Company or
shares of stock of any corporation succeeding the Company by reason of
such transaction, such shares having a value equal to the cash payment
herein; or
(c) the continuance of the Plan with respect to the exercise
of options which were outstanding as of the date of adoption by the
Board of such plan for such transaction and provide to Optionees
holding such options the right to exercise their respective options as
to an equivalent number of shares of stock of the corporation
succeeding the Company by reason of such transaction.
The Board may restrict the rights of or the applicability of this
Section 13 to the extent necessary to comply with Section 16(b) of the
Securities Exchange Act of 1934, the Internal Revenue Code or any other
applicable law or regulation. The grant of an option pursuant to the Plan shall
not limit in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, exchange or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.
SECTION 14.
INVESTMENT PURPOSE
No shares of Common Stock shall be issued pursuant to the Plan unless
and until there has been compliance, in the opinion of Company's counsel, with
all applicable legal requirements, including without limitation those relating
to securities laws and stock exchange listing requirements. As a condition to
the issuance of Option Stock to an Optionee, the Board or the Committee may
require the Optionee to (a) represent that the shares of Option Stock are being
acquired for investment and not resale and to make such other representations as
the Board, or the Committee, as the case may be, shall deem necessary or
appropriate to qualify the issuance of the shares as exempt from the Securities
Act of 1933 and any other applicable securi ties laws, and (b) represent that
Optionee shall not dispose of the shares of Option Stock in violation of the
Securities Act of 1933 or any other applicable securities laws. The Company
reserves the right to place a legend on any stock certificate issued upon
exercise of an option granted pursuant to the Plan to assure compliance with
this Section 14.
SECTION 15.
RIGHTS AS A SHAREHOLDER
An Optionee (or the Optionee's successor or successors) shall have no
rights as a shareholder with respect to any shares covered by an option until
the date of the issuance of a stock certificate evidencing such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property), distributions or other rights for which the
record date is prior to the date such stock certificate is actually issued
(except as otherwise provided in Section 13 of the Plan).
SECTION 16.
AMENDMENT OF THE PLAN
The Board may from time to time, insofar as permitted by law, suspend
or discontinue the Plan or revise or amend it in any respect; provided, however,
that no such revision or amend ment, except as is authorized in Section 13,
shall impair the terms and conditions of any option which is outstanding on the
date of such revision or amendment to the material detriment of the Optionee
without the consent of the Optionee. Notwithstanding the foregoing, no such
revision or amendment shall (i) materially increase the number of shares subject
to the Plan except as provided in Section 12 hereof, (ii) change the designation
of the class of employees eligible to receive options, (iii) decrease the price
at which options may be granted, or (iv) materially increase the benefits
accruing to Optionees under the Plan, unless such revision or amendment is
approved by the shareholders of the Company. Furthermore, the Plan may not,
without the approval of the shareholders, be amended in any manner that will
cause incentive stock options to fail to meet the requirements of Section 422 of
the Internal Revenue Code. In addition to and notwithstanding the foregoing, the
provisions of Section 11 shall not be amended more than once every six months,
other than to comport with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act, or the rules thereunder.
SECTION 17.
NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon the Optionee
to exercise such option. Further, the granting of an option hereunder shall not
impose upon the Company or any Subsidiary any obligation to retain the Optionee
in its employ for any period.