SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as Permitted by
[_] Definitive Proxy Statement Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
ODETICS, INC.
(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.:
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(4) Date Filed:
ODETICS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held September 14, 2001
---------------
To the Stockholders of Odetics, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Odetics,
Inc., a Delaware corporation, will be held on Friday, September 14, 2001 at
10:00 a.m., Pacific Time, at the principal executive offices of Odetics located
at 1515 South Manchester Avenue, Anaheim, California 92802 for the following
purposes, as more fully described in the proxy statement accompanying this
Notice:
1. To elect eight directors to serve on the Board of Directors of
Odetics--two directors by the holders of the Class A common stock and six
directors by the holders of the Class A common stock and the holders of the
Class B common stock, voting together as a single class.
2. To approve the amendment of the Certificate of Incorporation of
Odetics to increase the aggregate number of authorized shares of Class A
common stock from 10,000,000 shares to 50,000,000 shares.
3. To approve the amendment and restatement of the Odetics' 1997 Stock
Incentive Plan to increase the number of shares of Class A common stock
authorized for issuance by an additional 475,000 shares to 1,805,000
shares.
4. To approve and ratify the sale and issuance, as required by the rules
of the Nasdaq National Market, of an aggregate of 70,126 shares of Class A
common stock to the Chief Executive Officer and Chairman of the Board of
Odetics at a purchase price of $14.26 per share.
5. To ratify the appointment of Ernst & Young LLP as the independent
auditors of Odetics for the fiscal year ending March 31, 2002.
6. To transact any other business which may properly come before the
meeting or any adjournment(s) or postponement(s) thereof.
The Board of Directors has fixed the close of business on July 27, 2001 as
the record date for the determination of stockholders entitled to notice of,
and to vote at, the meeting and at any continuation or adjournment thereof. A
list of stockholders entitled to vote at the meeting will be available for
inspection at the principal executive offices of Odetics.
You are cordially invited to attend the meeting in person. Whether or not
you plan to attend the meeting, please mark, sign, date and return the enclosed
proxy card as soon as possible in the envelope enclosed for your convenience.
Should you receive more than one proxy because your shares are registered in
different names and addresses, each proxy should be signed and returned to
assure that all of your shares will be voted. You may revoke your proxy at any
time prior to the meeting. If you attend the meeting and vote by ballot, your
proxy will be revoked automatically and only your ballot vote at the meeting
will be counted.
Sincerely,
/s/ JERRY F. MUENCH
JERRY F. MUENCH
Secretary
Anaheim, California
August 20, 2001
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
PLEASE READ THE ATTACHED PROXY STATEMENT CAREFULLY, COMPLETE, SIGN AND DATE
THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE
ENCLOSED ENVELOPE.
ODETICS, INC.
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 14, 2001
General
These proxy materials and the enclosed proxy card are being furnished in
connection with the solicitation of proxies by the Board of Directors of
Odetics, Inc., a Delaware corporation, to be voted at the Annual Meeting of
Stockholders to be held on September 14, 2001 (the "Annual Meeting") and any
adjournment or postponement of the meeting. The Annual Meeting will be held at
10:00 a.m., Pacific Time, at the principal executive offices of Odetics located
at 1515 South Manchester Avenue, Anaheim, California 92802. These proxy
materials and the form of proxy were first mailed to the stockholders of
Odetics on or about August 20, 2001.
The mailing address of the principal executive offices of Odetics is 1515
South Manchester Avenue, Anaheim, California 92802.
Purpose of Meeting
The specific proposals to be considered and acted upon at the Annual Meeting
are summarized in the accompanying Notice of Annual Meeting of Stockholders.
Each proposal is described in more detail in this proxy statement.
Voting Rights
The record date for determining those stockholders who are entitled to
notice of, and to vote at, the Annual Meeting has been fixed as July 27, 2001.
At the close of business on the record date, 9,542,889 shares of the Class A
common stock of Odetics, par value $0.10 per share, and 1,035,841 shares of the
Class B common stock of Odetics, par value $0.10 per share, were outstanding.
The Class A common stock and Class B common stock of Odetics are collectively
referred to as the "common stock."
Holders of the Class A common stock are entitled to elect 25% of the Board
rounded up to the nearest whole number, or two directors. The holders of the
Class A common stock and the holders of the Class B common stock, voting
together as a single class, will be entitled to elect the balance of the Board,
or six directors. Directors will be elected by a plurality of the voting power
of the class or classes, as the case may be, of common stock entitled to vote
and present in person or represented by proxy at the Annual Meeting, unless
cumulative voting is in effect. With respect to the election of directors, when
voting together as a single class, the holders of Class A common stock are
entitled to one-tenth of one vote per share held and the holders of Class B
common stock are entitled to one vote per share held.
Pursuant to the bylaws of Odetics, no stockholder is entitled to cumulate
his or her votes (as described above) for candidates other than those whose
names have been placed in nomination prior to the commencement of voting and
unless at least one stockholder has given notice prior to commencement of the
voting of his or her intention to cumulate votes. If any stockholder has given
such notice, then each stockholder may cumulate votes by multiplying the number
of votes of each class of common stock the stockholder is entitled to vote by
the number of directors to be elected by such class. The number of cumulative
votes thus determined may be voted all for one candidate or distributed among
several candidates, at the discretion of the stockholder. The candidates
receiving the highest number of votes, up to the number of directors to be
elected by each class of common stock, will be elected. If cumulative voting is
in effect, the
1
persons named in the accompanying proxy will vote the shares of each class of
the common stock covered by proxies received by them (unless authority to vote
for directors is withheld) among the named candidates as they determine.
Proposal 2 requires the approval of the affirmative votes of (i) a majority
of the outstanding shares of the Class A common stock entitled to vote, voting
as a separate class, (ii) a majority of the outstanding shares of the Class B
common stock entitled to vote, voting as a separate class, and (iii) a majority
of the outstanding voting power of the Class A common stock and Class B common
stock entitled to vote, voting together as a single class. Except for the
election of directors and the amendment of the Certificate of Incorporation,
holders of each class of common stock will vote at the Annual Meeting as a
single class on all matters, with each holder of shares of Class A common stock
entitled to one-tenth of one vote per share held and each holder of shares of
Class B common stock entitled to one vote per share held. Proposals 3, 4 and 5
require the approval of the affirmative vote of a majority of the voting power
of the common stock present in person or represented by proxy at the Annual
Meeting and entitled to vote on the matter.
The presence in person or by proxy of the holders of a majority of the
outstanding shares of common stock entitled to vote will constitute a quorum
for the transaction of business at the Annual Meeting. All votes will be
tabulated by the inspectors of election appointed for the meeting, who will
separately tabulate affirmative and negative votes, abstentions and broker non-
votes. Broker non-votes occur when brokers who hold stock in "street name"
return proxy cards stating that they do not have authority to vote the stock
which they hold on behalf of beneficial owners. Abstentions and broker non-
votes are counted as present for purposes of determining the presence or
absence of a quorum for the transaction of business. Abstentions will be
counted towards the tabulations of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
will not be counted for purposes of determining whether a proposal has been
approved.
Proxies
Properly executed proxies will be voted in the manner directed by the
stockholders. If the proxy does not specify how the shares represented thereby
are to be voted, the proxy will be voted FOR the election of the directors
proposed by the Board unless the authority to vote for the election of any
director is withheld and, if no contrary instructions are given, the proxy will
be voted FOR the approval of Proposals 2, 3, 4 and 5 as described in this proxy
statement and the accompanying notice.
You may revoke or change your proxy at any time before the Annual Meeting by
filing with the Secretary of Odetics, at the principal executive offices of
Odetics at 1515 South Manchester Avenue, Anaheim, California 92802, a written
notice of revocation or a new duly executed proxy bearing a date later than the
date indicated on the previous proxy. You may also revoke your proxy by
attending the Annual Meeting and voting in person. Attendance at the Annual
Meeting will not, by itself, revoke a proxy.
Solicitation
The enclosed proxy is being solicited by the Board of Directors of Odetics.
Odetics will bear the entire cost of proxy solicitation, including costs of
preparing, assembling, printing and mailing this proxy statement, the proxy
card and any additional material furnished to the stockholders. Copies of the
solicitation materials will be furnished to brokerage houses, fiduciaries and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, Odetics may reimburse such persons for their costs in forwarding
the solicitation materials to the beneficial owners. The original solicitation
of proxies by mail may be supplemented by a solicitation by telephone,
facsimile, telegram or any other means by directors, officers or employees of
Odetics. No additional compensation will be paid to these individuals for any
such services.
In the discretion of management, Odetics reserves the right to retain a
professional firm of proxy solicitors to assist in solicitation of proxies.
Although Odetics does not currently expect to retain such a firm, it estimates
that the fees of such firm would range from $5,000 to $15,000 plus out-of-
pocket expenses, all of which would be paid by Odetics.
2
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees
The Board of Directors of Odetics is currently comprised of eight members.
Eight directors are to be elected at the Annual Meeting and hold office until
their successors are duly elected and qualified at the next Annual Meeting.
Holders of Class A common stock are entitled to elect two of the eight
directors to be elected at the Annual Meeting, and the holders of Class A
common stock and the holders of Class B common stock, voting together as a
single class, are entitled to elect the other six directors. The two candidates
receiving the highest number of affirmative votes of shares of Class A common
stock, present in person or represented by proxies and entitled to vote at the
Annual Meeting, will be elected directors of Odetics, and the six candidates
receiving the highest number of affirmative votes of shares of Class A common
stock and shares of Class B common stock, voting together as a single class,
present in person or represented by proxies and entitled to vote at the Annual
Meeting will be elected directors of Odetics. When voting together as a single
class, the holders of Class A common stock are entitled to one-tenth of one
vote per share held and the holders of Class B common stock are entitled to one
vote per share held. If cumulative voting is in effect, however, the proxy
holders of each class of common stock will have the right to cumulate and
allocate votes among those nominees standing for election with respect to such
class of common stock as such proxy holders in their discretion elect.
Messrs. Gudmundson and Muench will stand for election by the holders of
Class A common stock, and Messrs. Daly, Miner, Seazholtz, Slutzky, Thomas and
Wright will stand for election by the holders of Class A common stock and Class
B common stock, voting together as a single class.
3
Information with Respect to Nominees
The following table sets forth certain information concerning the nominees
for director of Odetics as of July 27, 2001.
NOMINEES FOR ELECTION
Director
Name Age Position Since
---- --- -------- --------
Joel Slutzky(3)............. 62 Chairman of the Board and Chief 1969
Executive Officer of Odetics and
of Broadcast, Inc.
Chairman of the Board and Vice
President of Gyyr Incorporated
Chairman of the Board of Iteris,
Inc. and Zyfer, Inc.
Director and Vice President of
Mariner Networks, Inc.
Director of Meyer, Mohaddes
Associates, Inc.
Kevin C. Daly, Ph.D.(2)(3).. 57 Director of Odetics 1993
Crandall Gudmundson......... 70 Director of Odetics 1979
Gregory A. Miner(3)......... 46 Vice President, Chief Financial 1998
Officer, Chief Operating Officer
and Director of Odetics
Chief Financial Officer and
Assistant Secretary of Broadcast
Director, Chief Financial Officer
and Secretary of Gyyr
Director of Iteris
Chief Financial Officer of Mariner
Networks
Director, Chief Financial Officer
and Secretary of Meyer, Mohaddes
Associates and Zyfer
Jerry F. Muench............. 66 Director and Secretary of Odetics 1969
John W. Seazholtz(1)(2)..... 64 Director of Odetics 1998
Director of Mariner Networks
Thomas L. Thomas(1)(2)...... 52 Director of Odetics 1999
Chairman of the Board of Mariner
Networks
Paul E. Wright(1)(3)........ 70 Director of Odetics 1993
Director of Iteris
- --------
(1) Member of the Audit Committee.
(2) Member of the Compensation and Stock Option Committee.
(3) Member of the Finance Committee.
Joel Slutzky has served as the Chairman of the Board of Directors of Odetics
since he co-founded Odetics in 1969 and has served as the Chief Executive
Officer since 1975. From August 1993 until January 1994, Mr. Slutzky assumed
the additional responsibilities of Chief Financial Officer on an interim basis
following the retirement of Odetics' former Chief Financial Officer. Mr.
Slutzky also served as the President of Odetics from 1969 to 1975 and served as
a director of ATL Products, Inc., a former subsidiary of Odetics, from its
formation in 1993 until Quantum Corporation purchased ATL in October 1998. Mr.
Slutzky currently serves in various capacities for the other subsidiaries of
Odetics. Prior to founding Odetics, Mr. Slutzky was an engineering manager at
Leach Corporation, which is now part of the Lockheed Electronics division of
Lockheed Corporation.
Kevin C. Daly, Ph.D. has served as a director of Odetics since 1993 and has
served as the President and Chief Executive Officer of ATL since its formation
in 1993. Dr. Daly also served as Vice President and Chief Technical Officer of
Odetics from 1987 until 1997 when Odetics consummated the spin-off of its
interest
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in ATL. Prior to that, from 1985 until 1987, Dr. Daly served as the Director of
Space Systems of Odetics. From March 1974 until June 1985, Dr. Daly served as
the Director of the Control and Dynamics division of the Charles Stark Draper
Laboratory. During that period, Dr. Daly participated in the design and
development of guidance, navigation and control systems for several major space
programs, including the United States Space Shuttle program.
Crandall Gudmundson is a co-founder of Odetics and served as its President
from 1975 until his retirement in 1998. Mr. Gudmundson has served as a director
of Odetics since 1979 and served as a director of ATL from 1993 to 1998. Prior
to co-founding Odetics, Mr. Gudmundson was the lead project engineer for Leach
Corporation.
Gregory A. Miner has served as a director and as Chief Operating Officer of
Odetics since 1998 and as a Vice President and Chief Financial Officer since
January 1994 when he joined Odetics. Mr. Miner served as the Vice President and
Chief Financial Officer of ATL, a former subsidiary of Odetics, from 1994 to
1998 and currently serves in various capacities for the other subsidiaries of
Odetics. From December 1984 until joining Odetics, Mr. Miner served as the Vice
President and Chief Financial Officer and a member of the Board of Directors of
Laser Precision Corporation, a manufacturer of telecommunications test
equipment.
Jerry F. Muench is a co-founder of Odetics and has served as a director and
Secretary since 1969. Mr. Muench served as the Vice President, Marketing of
Odetics from 1975 until his retirement in December 1997. Prior to co-founding
Odetics, Mr. Muench was the manager of applications engineering at
Leach Corporation.
John W. Seazholtz has served as a director of Odetics since May 1998. He
also serves as a director of Mariner Networks, Inc., a subsidiary of Odetics.
From May 1998 to April 2000, Mr. Seazholtz served as the President and Chief
Executive Officer of Telesoft America, Inc. He retired in April 1998 as the
Chief Technology Officer of Bell Atlantic after 36 years of service with that
company and its predecessor. Mr. Seazholtz was a senior officer of Bell
Atlantic since 1986, serving in various positions, including the positions of
Vice President, Operations and Engineering, Vice President, Marketing, Vice
President of New Services, and Vice President, Technology and Information
Systems. Mr. Seazholtz currently serves as the Chairman of the Board of Westell
Technologies, Inc. and is a member of the Board of Directors of Advanced
Switching Communications, Inc.
Thomas L. Thomas has served as a director of Odetics since May 1999. He also
serves as the Chairman of the Board of Mariner Networks, Inc., a subsidiary of
Odetics. Mr. Thomas is the President and Chief Executive Officer of HAHT
Commerce, a provider of software applications that enable companies to use the
Internet to conduct business. A veteran Silicon Valley executive, Mr. Thomas
was previously the President, Chief Executive Officer and Chairman of the Board
of Ajuba Solutions, a provider of B2B integration solution software, which was
sold to Interwoven in October 2000. From April 1999 until January 2000, he
served as the President, Chief Executive Officer and Chairman of the Board of
Vantive Corporation, a leading customer relationship management software vendor
which was acquired by Peoplesoft in January 2000. Prior to that, from September
1995 to April 1999, Mr. Thomas served as the Senior Vice President of e-
Business and Information Services and Chief Information Officer at 3Com
Corporation. From 1993 to 1995, Mr. Thomas served as a Vice President and the
Chief Information Officer of Dell Computer Corporation. From 1987 to 1993, he
served as the Vice President of Management Information Systems at Kraft General
Foods, and at Sara Lee Corporation from 1981 to 1987. Mr. Thomas also serves on
the Board of Directors of iManage, Inc.
Paul E. Wright has served as a director of Odetics since June 1993. Mr.
Wright is the President of Wright Associates--Engineering and Business
Consultants, a company he formed in 1997. From 1988 until his retirement in
1997, Mr. Wright served as the Chairman of the Board of Chrysler Technologies
Corp., the aerospace and defense electronics subsidiary of Chrysler
Corporation. From 1986 to 1988, Mr. Wright served as the President and Chief
Operating Officer of Fairchild Industries, Inc. Prior to joining Fairchild, he
was employed for 28 years by RCA Corporation, where he last served as the
Senior Vice President, responsible for planning RCA's merger into General
Electric Corporation.
5
All directors are elected annually and hold office until the next annual
meeting of stockholders and until their successors are duly elected and
qualified. All of the nominees are currently directors of Odetics and have
indicated that they are willing to continue to serve as directors. In the event
any nominee is unable or declines to serve as a director at the time of the
Annual Meeting, the proxies will be voted for an additional nominee who shall
be designated by the current Board of Directors. As of the date of this proxy
statement, the Board of Directors is not aware of any nominee who is unable or
will decline to serve as director.
Board Meetings and Committees
The Board of Directors met a total of four times during the fiscal year
ended March 31, 2001. Each of the directors nominated for reelection attended
at least 75% of the aggregate of (i) the total number of meetings of the Board
of Directors and (ii) the total number of meetings held by all committees of
the Board on which such director served.
Odetics has three standing committees--the Audit Committee, the Compensation
and Stock Option Committee, and the Finance Committee. Odetics has no standing
nominating committee, and the Board as a whole acts upon matters which would
otherwise be the responsibility of a nominating committee.
Audit Committee. The Audit Committee supervises and reviews the audit and
audit review programs and procedures of the independent auditors of Odetics,
its internal accounting staff and the results of internal auditing procedures.
The Audit Committee also reviews the independence, professional services, fees,
plans and results of the independent auditors' engagement and recommends their
retention or discharge to the Board. The members of the Audit Committee of
Odetics are Messrs. Seazholtz, Thomas and Wright. The Audit Committee held one
meeting during the fiscal year ended March 31, 2001.
The Board of Directors adopted and approved a written charter for the Audit
Committee in June 2000, a copy of which is attached hereto as Appendix A. The
Board has determined that all members of the Audit Committee are "independent"
as that term is defined in Rule 4200 of the listing standards of the National
Association of Securities Dealers.
Compensation and Stock Option Committee. The Compensation and Stock Option
Committee makes recommendations to the Board concerning the compensation of all
officers of Odetics and administers the stock option plans of Odetics. The
members of the Compensation and Stock Option Committee are Messrs. Daly,
Seaholtz and Thomas. The Compensation and Stock Option Committee held one
meeting during the fiscal year ended March 31, 2001.
Finance Committee. The Finance Committee reviews Odetics' financial planning
and strategies and provides guidance to the Board and the Audit Committee
regarding issues and opportunities related thereto. The Finance Committee also
provides interface and advice between the Board, the capital markets and other
financing sources. The Finance Committee held no meetings during the fiscal
year ended March 31, 2001. The members of the Finance Committee are Messrs.
Daly, Miner, Slutzky and Wright.
Compensation of Directors
Directors who are not employees of Odetics or one of its subsidiaries
receive an annual fee of $12,000 per year, paid quarterly, in addition to
$1,500 for each Board meeting attended in person and $250 for each telephone
conference Board meeting. All directors are reimbursed for their out-of-pocket
expenses incurred in attending meetings of the Board of Directors and its
committees.
Non-employee directors are also eligible to receive periodic option grants
pursuant to the Automatic Option Grant Program under Odetics' 1997 Stock
Incentive Plan. Under this plan, each non-employee director receives an option
to purchase 20,000 shares of Class A common stock upon his initial appointment
to the
6
Board of Directors and an additional option to purchase 5,000 shares of Class A
common stock on the date of each annual meeting after his appointment. Each
option granted to non-employee directors under the Automatic Option Grant
Program will have an exercise price equal to the fair market value of the Class
A common stock on the grant date and will have a maximum term of ten years,
subject to earlier termination following the optionee's cessation of service as
a Board member.
In addition to the annual grants, in August 2000, Messrs. Seazholtz, Thomas
and Wright were each granted an option to purchase 15,000 shares of the Class A
common stock under the 1997 Stock Incentive Plan at an exercise price of
$14.125 per share. Each option is fully vested and has a maximum term of ten
years, subject to earlier termination in certain circumstances.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED ABOVE.
PROXIES RETURNED TO ODETICS WILL BE VOTED "FOR" EACH NOMINEE UNLESS OTHERWISE
INSTRUCTED IN WRITING ON SUCH PROXY.
7
PROPOSAL NO. 2
APPROVAL OF AN AMENDMENT TO
THE CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED SHARES OF CLASS A COMMON STOCK
Under Odetics' present capital structure, Odetics is authorized to issue
10,000,000 shares of Class A common stock, par value $0.10 per share, 2,600,000
shares of Class B common stock, par value $0.10 per share, and 2,000,000 shares
of preferred stock, par value $1.00 per share. The Board believes this capital
structure is inadequate for the present and future needs of Odetics. Therefore,
the Board has approved the amendment of Paragraph 1 of Article FOURTH of the
Certificate of Incorporation of Odetics to increase the number of shares of
Class A common stock authorized for issuance by 40,000,000 shares to an
aggregate of 50,000,000 shares. The Board believes this capital structure more
appropriately reflects the present and future needs of Odetics and recommends
that the stockholders approve such amendment. The preferred stock may be issued
from time to time in one or more series with such rights, preferences and
privileges, including dividend rates, conversion and redemption prices, and
voting rights, as may be determined by the Board. On July 27, 2001, 9,542,889
shares of the Class A common stock, 1,035,841 shares of the Class B common
stock and no shares of preferred stock were outstanding.
Purpose of Authorizing Additional Common Stock
The authorization of an additional 40,000,000 shares of Class A common stock
would give the Board the express authority to issue such shares of common stock
from time to time as the Board deems necessary. The Board believes it is
necessary to have the ability to issue such additional shares of common stock
for any proper corporate purpose, for future acquisitions, option grants, and
convertible debt and equity financings and to facilitate stock splits, if any.
Odetics has no present specific plans, understandings or agreements for the
issuance of the proposed additional shares of common stock, other than pursuant
to the exercise of stock options. The Board of Directors, however, believes
that if an increase in the authorized number of shares of Class A common stock
were to be postponed until a specific need arose, the delay and expense
incident to obtaining the approval of Odetics' stockholders at that time could
significantly impair Odetics' ability to meet financing requirements or other
objectives. The additional shares of Class A common stock would be available
for issuance by the Board without any future action by the stockholders, unless
such action were specifically required by applicable law or the rules of any
stock exchange or quotation system on which Odetics' securities may then be
listed.
Possible Effects of Increase in Authorized Shares
The proposed increase in the authorized number of shares of Class A common
stock could have a number of effects on Odetics' stockholders depending upon
the exact nature and circumstances of any actual issuances of authorized but
unissued shares. The increase could have an anti-takeover effect, in that
additional shares could be issued (within the limits imposed by applicable law)
in one or more transactions that could make a change in control or takeover of
Odetics more difficult. For example, additional shares could be issued by
Odetics to dilute the stock ownership or voting rights of persons seeking to
obtain control of Odetics. Similarly, the issuance of additional shares to
certain persons allied with Odetics' management could have the effect of making
it more difficult to remove the current management of Odetics by diluting the
stock ownership or voting rights of persons seeking to cause such removal. In
addition, an issuance of additional shares by Odetics could have an effect on
the potential realizable value of a stockholder's investment. In the absence of
a proportionate increase in Odetics' earnings and book value, an increase in
the aggregate number of outstanding shares of the common stock caused by the
issuance of additional shares would dilute the earnings per share and book
value per share of all outstanding shares of Odetics' capital stock. If such
factors were reflected in the price per share of common stock, the potential
realizable value of a stockholder's investment could be adversely affected.
8
Stockholder Approval
The affirmative votes of (i) a majority of all shares of the Class A common
stock entitled to vote, voting as a separate class, (ii) a majority of the
outstanding shares of the Class B common stock entitled to vote, voting as a
separate class, and (iii) a majority of the outstanding voting power of the
Class A common stock and Class B common stock entitled to vote, voting together
as a single class, are required for approval of the amendment of Odetics'
Certificate of Incorporation to increase the number of authorized shares of
Class A common stock issuable thereunder by 40,000,000 shares to an aggregate
of 50,000,000 shares.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS DEEMS THIS PROPOSAL TO BE IN THE BEST INTERESTS OF
ODETICS AND ITS STOCKHOLDERS AND RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE PROPOSAL. UNLESS AUTHORITY TO DO SO IS WITHHELD, THE PERSON(S) NAMED IN
EACH PROXY WILL VOTE THE SHARES REPRESENTED THEREBY "FOR" THE APPROVAL OF THE
AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF ODETICS TO INCREASE THE
AUTHORIZED NUMBER OF SHARES OF CLASS A COMMON STOCK TO 50,000,000 SHARES.
9
PROPOSAL NO. 3
APPROVAL OF AN AMENDMENT TO THE 1997 STOCK INCENTIVE PLAN
Odetics stockholders are being asked to approve an amendment to the 1997
Stock Incentive Plan (the "Plan") that will increase the number of shares of
the Class A common stock reserved for issuance under the Plan by an additional
475,000 shares to 1,805,000 shares.
The purpose of the Plan is to enhance Odetics' ability to provide eligible
individuals with awards and incentives both commensurate with their
contributions and competitive with those offered by other employers and to
increase stockholder value by further aligning the interests of these eligible
individuals with the interests of Odetics stockholders by providing an
opportunity to benefit from stock price appreciation that generally accompanies
improved financial performance. The amendment was adopted by the Board of
Directors on July 12, 2001, subject to stockholder approval at the Annual
Meeting.
The Board of Directors believes the amendment is necessary to assure that a
sufficient reserve of the Class A common stock remains available for issuance
under the Plan to allow Odetics to continue to utilize equity incentives to
attract and retain the services of key individuals essential to Odetics' long-
term growth and financial success. Equity incentives play a significant role in
Odetics' efforts to remain competitive in the market for talented individuals,
and Odetics relies on such incentives as a means to attract and retain highly
qualified individuals in the positions vital to Odetics' success.
The following is a summary of the principal features of the Plan, as most
recently amended. Any stockholder who wishes to obtain a copy of the actual
plan document may do so upon written request to Odetics at 1515 South
Manchester Avenue, Anaheim, California 92802.
Equity Incentive Programs
The Plan consists of three (3) separate equity incentive programs: (i) the
Discretionary Option Grant Program, (ii) the Stock Issuance Program and (iii)
the Automatic Option Grant Program for non-employee Board members. The
principal features of each program are described below. The Compensation and
Stock Option Committee of the Board has the authority to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to option
grants and stock issuances made to Odetics' executive officers and non-employee
Board members and also has the authority to make option grants and stock
issuances under those programs to all other eligible individuals. However, the
Board may at any time appoint a secondary committee of one or more Board
members to have separate but concurrent authority with the Compensation and
Stock Option Committee to make option grants and stock issuances under those
two programs to individuals other than Odetics' executive officers and non-
employee Board members. Neither the Compensation and Stock Option Committee nor
any secondary committee exercises any administrative discretion under the
Automatic Option Grant Program. All grants under that program are made in
strict compliance with the express provisions of such program.
The term Plan Administrator, as used in this summary, will mean the
Compensation and Stock Option Committee and any secondary committee, to the
extent each such entity is acting within the scope of its administrative
jurisdiction under the Plan.
Share Reserve
An aggregate of 1,805,000 shares of the Class A common stock has been
reserved for issuance over the term of the Plan, including the 475,000 share
increase for which stockholder approval is sought under this proposal.
As of July 27, 2001, 691,147 shares of Class A common stock were subject to
outstanding options under the Plan, 154,150 shares of Class A common stock had
been issued under the Plan, and 959,703 shares of Class A common stock remained
available for future issuance, assuming stockholder approval of this proposal
is obtained.
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No participant in the Plan may receive option grants, separately exercisable
stock appreciation rights and/or direct stock issuances for more than 80,000
shares of Class A common stock in the aggregate per calendar year. Stockholder
approval of this proposal will also constitute a reapproval of the 80,000-share
limitation for purposes of Internal Revenue Code Section 162(m).
The shares of Class A common stock issuable under the Plan may be drawn from
shares of Odetics' authorized but unissued shares of such Class A common stock
or from shares of such Class A common stock reacquired by Odetics, including
shares repurchased on the open market.
In the event any change is made to the outstanding shares of Class A common
stock by reason of any recapitalization, stock dividend, stock split,
combination of shares, exchange of shares or other change in corporate
structure effected without Odetics' receipt of consideration, appropriate
adjustments will be made to the class and number of securities issuable (in the
aggregate and per participant) under the Plan and the securities and the
exercise price per share in effect under each outstanding option.
Eligibility
Officers, employees, non-employee Board members and independent consultants
in the service of Odetics or its parent and subsidiaries are eligible to
participate in the Discretionary Option Grant and Stock Issuance Programs.
Participation in the Automatic Option Grant Program is limited to non-employee
members of the Board.
As of July 27, 2001, nine executive officers, six non-employee Board members
and approximately 433 other employees and consultants were eligible to
participate in the Discretionary Option Grant and Stock Issuance Programs. The
six non-employee Board members were also eligible to participate in the
Automatic Option Grant Program.
Valuation
The fair market value per share of Class A common stock on any relevant date
under the Plan will be deemed to be equal to the closing selling price per
share of the Class A common stock on that date on the Nasdaq National Market.
If there is no reported closing selling price for such date, then the closing
selling price for the last previous date for which such quotation exists will
be used as its fair market value. On July 27, 2001, the fair market value per
share determined on such basis was $2.35.
Discretionary Option Grant Program
The Plan Administrator has complete discretion under the Discretionary
Option Grant Program to determine which eligible individuals are to receive
option grants, the time or times when those grants are to be made, the number
of shares subject to each such grant, the status of any granted option as
either an incentive stock option or a non-statutory option under the federal
tax laws, the vesting schedule (if any) to be in effect for the option grant
and the maximum term for which any granted option is to remain outstanding.
Each granted option will have an exercise price per share determined by the
Plan Administrator, but the exercise price will not be less than the fair
market value per share of Class A common stock on the option grant date. No
granted option will have a term in excess of ten (10) years, and the option
will generally become exercisable in one or more installments over a specified
period of service measured from the grant date. However, one or more options
may be structured so that they will be immediately exercisable for any or all
of the option shares; the shares acquired under those options will be subject
to repurchase by Odetics, at the exercise price paid per share, if the optionee
ceases service with Odetics prior to vesting in those shares.
Upon cessation of service, the optionee will have a limited period of time
in which to exercise any outstanding option for the number of shares which were
vested at the time service terminated. The Plan Administrator will have
complete discretion to extend the period following the optionee's cessation of
service
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during which his or her outstanding options may be exercised and/or to
accelerate the exercisability or vesting of such options in whole or in part.
Such discretion may be exercised at any time while the options remain
outstanding, whether before or after the optionee's cessation of service.
The Plan Administrator is authorized to issue tandem stock appreciation
rights under the Discretionary Option Grant Program, which provide the holders
with the right to surrender their options for an appreciation distribution from
Odetics equal to the excess of (i) the fair market value of the vested shares
of Class A common stock subject to the surrendered option over (ii) the
aggregate exercise price payable for such shares. Such appreciation
distribution may, at the discretion of the Plan Administrator, be made in cash
or in shares of Class A common stock.
The Plan Administrator may also grant limited stock appreciation rights to
certain officers, directors and other insiders at Odetics. The limited stock
appreciation rights entitle the holder, upon the occurrence of a hostile
takeover, the right (exercisable for 30 days following such a takeover) to
surrender the vested shares subject to the option for an appreciation
distribution. In such case, the optionee will receive a cash distribution in an
amount equal to the excess of the takeover price of the vested shares over the
aggregate exercise price payable for those shares.
The Plan Administrator also has the authority to effect the cancellation of
any or all options outstanding under the Discretionary Option Grant Program and
to grant, in substitution, new options covering the same or a different number
of shares of Class A common stock but with an exercise price per share based
upon the fair market value of the option shares on the new grant date.
Stock Issuance Program
Shares of Class A common stock may be issued under the Stock Issuance
Program at a price per share determined by the Plan Administrator, but the
price per share will not be less than the fair market value of the Class A
common stock on the issuance date. Shares will be issued for such valid
consideration as the Plan Administrator deems appropriate, including cash and
promissory notes. The shares may also be issued as a bonus for past services
without any cash outlay required of the recipient. The shares issued may be
fully vested upon issuance or may vest upon the completion of a designated
service period or the attainment of pre-established performance goals. The Plan
Administrator will, however, have the discretionary authority at any time to
accelerate the vesting of any and all unvested shares outstanding under the
Stock Issuance Program.
Automatic Option Grant Program
Under the Automatic Option Grant Program, eligible non-employee Board
members receive a series of option grants over their period of Board service.
Under this program, each non-employee Board member receives, at the time of his
or her initial election or appointment to the Board, an option grant for 20,000
shares of Class A common stock provided such individual has not been in the
previous employ of Odetics. In addition, on the date of each Annual
Stockholders Meeting, each individual who is to continue to serve as a non-
employee Board member will automatically be granted an option to purchase 5,000
shares of Class A common stock, provided he or she has served as a non-employee
Board member for at least six (6) months. There will be no limit on the number
of such 5,000-share option grants any one eligible non-employee Board member
may receive over his or her period of continued Board service.
Each automatic grant will have an exercise price per share equal to the fair
market value per share of Class A common stock on the grant date and will have
a maximum term of 10 years, subject to earlier termination following the
optionee's cessation of Board service. Each automatic option will be
immediately exercisable for any or all of the option shares; the shares
acquired under those options will be subject to repurchase by Odetics, at the
exercise price paid per share, if the optionee ceases service with Odetics
prior to vesting in those shares. The initial 20,000-share automatic option
will be fully vested on the grant date. Each annual 5,000-share automatic
option will vest in four (4) successive equal annual installments upon the
optionee's completion of each year of Board service measured from the grant
date. However, each outstanding automatic option grant will automatically
accelerate and become immediately exercisable for any or all of the
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option shares as fully-vested shares upon certain changes in control or
ownership of Odetics or upon the optionee's death or permanent disability while
a Board member. Following the optionee's cessation of Board service for any
reason, each option will remain exercisable for a 12-month period and may be
exercised during that time for any or all shares in which the optionee is
vested at the time of such cessation of Board service.
Each option granted under the Automatic Option Grant Program will include a
limited stock appreciation right so that upon the successful completion of a
hostile tender offer for more than fifty percent (50%) of Odetics' outstanding
voting securities or a change in a majority of the Board as a result of one or
more contested elections for Board membership, the option may be surrendered to
Odetics in return for a cash distribution from Odetics. The amount of the
distribution per surrendered option share will be equal to the excess of (i)
the fair market value per share at the time the option is surrendered or, if
greater, the tender offer price paid per share in the hostile take-over over
(ii) the exercise price payable per share under such option. In addition, the
Plan Administrator may grant such rights to officers of Odetics as part of
their option grants under the Discretionary Option Grant Program.
General Provisions
Acceleration
In the event that Odetics is acquired by merger, in which the stockholders
of Odetics immediately prior to the merger own less than 50% of the resulting
entity after the merger, or by a sale of all or almost all of Odetics' assets,
each outstanding option under the Discretionary Option Grant Program that is
not to be assumed or replaced by the successor corporation or otherwise
continued in effect will automatically accelerate in full, and all unvested
shares outstanding under the Discretionary Option Grant and Stock Issuance
Programs will immediately vest, except to the extent Odetics' repurchase rights
with respect to those shares are to be assigned to the successor corporation or
replaced by a cash incentive program.
The Plan Administrator will have the authority under the Discretionary
Option Grant Program to provide that those options will automatically vest in
full upon the occurrence of specified events. The vesting of outstanding shares
under the Stock Issuance Program may be accelerated upon similar terms and
conditions. The options granted under the Automatic Option Grant Program will
automatically accelerate and become exercisable in full upon any acquisition or
change in control transaction.
The acceleration of vesting in the event of a change in the ownership or
control of Odetics may be seen as an anti-takeover provision and may have the
effect of discouraging a merger proposal, a takeover attempt or other efforts
to gain control of Odetics.
Financial Assistance
The Plan Administrator may institute a loan program to assist one or more
participants in financing the exercise of outstanding options under the
Discretionary Option Grant Program or the purchase of shares under the Stock
Issuance Program through full-recourse interest-bearing promissory notes.
However, the maximum amount of financing provided any participant may not
exceed the cash consideration payable for the issued shares plus all applicable
taxes incurred in connection with the acquisition of those shares.
Special Tax Election
The Plan Administrator may provide one or more holders of non-statutory
options or unvested share issuances under the Plan with the right to have
Odetics withhold a portion of the shares otherwise issuable to such individuals
in satisfaction of the withholding taxes to which such individuals become
subject in connection with the exercise of those options or the vesting of
those shares. Alternatively, the Plan Administrator may allow such individuals
to deliver previously acquired shares of Class A common stock in payment of
such withholding tax liability.
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Amendment and Termination
The Board may amend or modify the Plan at any time, subject to any required
stockholder approval pursuant to applicable laws and regulations. Unless sooner
terminated by the Board, the Plan will terminate on the earliest of (i)
September 4, 2007, (ii) the date on which all shares available for issuance
under the Plan have been issued as fully-vested shares or (iii) the termination
of all outstanding options in connection with certain changes in control or
ownership of Odetics.
Stock Awards
The table below shows, as to each of the Named Executive Officers in the
Summary Compensation Table which appears elsewhere herein and the other
individuals and groups indicated, the number of shares of Class A common stock
subject to option grants made under the Plan from April 1, 2000 through July
27, 2001, together with the weighted average exercise price payable per share.
Odetics has not made any direct stock issuances to date under the Plan.
OPTION TRANSACTIONS
Number Of Shares Weighted Average
Underlying Exercise Price
Name And Position Options Granted (#) Per Share ($)
----------------- ------------------- ----------------
Joel Slutzky................................................ -- $ --
Chairman of the Board and Chief Executive Officer
of Odetics
Hugo Fruehauf............................................... -- --
Vice President of Odetics, President and Chief
Executive Officer of Zyfer
Jack Johnson................................................ -- --
Vice President of Odetics, President and Chief
Executive Officer of Iteris
Steven L'Heureux............................................ -- --
Vice President of Odetics, President of Broadcast
Gregory A. Miner............................................ 35,000 10.000
Director, Vice President, Chief Financial Officer
and Chief Operating Officer of Odetics
Kevin C. Daly, Ph.D......................................... 5,000 15.625
Director
Crandall Gudmundson......................................... 5,000 15.625
Director
Jerry F. Muench............................................. 5,000 15.625
Director
John W. Seazholtz........................................... 20,000 14.500
Director
Thomas L. Thomas............................................ 20,000 14.500
Director
Paul E. Wright.............................................. 20,000 14.500
Director
All current executive officers as a group (9 persons)....... 35,000 10.000
All current non-employee directors as a group (6 persons)... 75,000 14.725
All employees, including current officers who are not
executive officers, as a group............................. -- --
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Federal Income Tax Consequences
Option Grants
Options granted under the Plan may be either incentive stock options which
satisfy the requirements of Section 422 of the Internal Revenue Code or non-
statutory options which are not intended to meet such requirements. The Federal
income tax treatment for the two types of options differs as follows:
Incentive Options. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise disposed
of in a taxable transaction. For Federal tax purposes, dispositions are divided
into two categories: (i) qualifying and (ii) disqualifying. A qualifying
disposition occurs if the sale or other disposition is made after the optionee
has held the shares for more than two (2) years after the option grant date and
more than one (1) year after the exercise date. If either of these two holding
periods is not satisfied, then a disqualifying disposition will result.
Upon a qualifying disposition, the optionee will recognize long-term capital
gain in an amount equal to the difference between (a) the amount realized upon
the sale or other disposition of the purchased shares and (b) the exercise
price paid for the shares. If there is a disqualifying disposition of the
shares, then an amount equal to the difference between (i) the fair market
value of those shares on the exercise date or sale (whichever is less) and (ii)
the exercise price paid for the shares will be taxable as ordinary income to
the optionee. Any additional gain or loss recognized upon the disposition will
be recognized as a capital gain or loss by the optionee.
If the optionee makes a disqualifying disposition of the purchased shares,
Odetics will be entitled to an income tax deduction, for the taxable year in
which such disposition occurs, equal to the ordinary income the optionee
recognized. If the optionee makes a qualifying disposition, Odetics will not be
entitled to any income tax deduction.
Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. In general, the optionee will recognize
ordinary income, in the year in which the option is exercised in an amount
equal to the difference between (a) the fair market value of the purchased
shares on the exercise date and (b) the exercise price paid for the shares, and
the optionee will be required to satisfy the tax withholding requirements
applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by Odetics in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to
report as ordinary income, as and when Odetics' repurchase right lapses, an
amount equal to the excess of (i) the fair market value of the shares on the
date the repurchase right lapses over (ii) the exercise price paid for the
shares. The optionee may, however, elect under Section 83(b) of the Internal
Revenue Code to include as ordinary income in the year of exercise of the
option an amount equal to the excess of (i) the fair market value of the
purchased shares on the exercise date over (ii) the exercise price paid for
such shares. If the Section 83(b) election is made, the optionee will not
recognize any additional income as and when the repurchase right lapses.
Odetics will be entitled to an income tax deduction equal to the amount of
ordinary income recognized by the optionee with respect to the exercised non-
statutory option. The deduction will in general be allowed for the taxable year
of Odetics in which such ordinary income is recognized by the optionee.
Stock Appreciation Rights
No taxable income is recognized upon receipt of a stock appreciation right.
The holder will recognize ordinary income, in the year in which the stock
appreciation right is exercised, in an amount equal to the appreciation
distribution. Odetics will be entitled to an income tax deduction equal to the
appreciation distribution in its taxable year in which such ordinary income is
recognized by the optionee.
Direct Stock Issuances
The tax principles applicable to direct stock issuances under the Plan will
be substantially the same as those summarized above for the exercise of non-
statutory option grants.
15
Deductibility of Executive Compensation
Odetics anticipates that any compensation deemed paid by it in connection
with the disqualifying dispositions of incentive stock option shares or the
exercise of non-statutory options granted under the Plan will qualify as
performance-based compensation for purposes of Code Section 162(m) and will not
have to be taken into account for purposes of the $1 million limitation per
covered individual on the deductibility of the compensation paid to certain
executive officers of Odetics. Accordingly, all compensation deemed paid with
respect to those options will be deductible by Odetics without limitation under
Code Section 162(m).
Accounting Treatment
Under the current accounting principles in effect for equity incentive
programs such as the Plan, the option grants under the Discretionary Option
Grant and Automatic Option Grant Programs will not result in any direct charge
to Odetics' reported earnings. However, the fair value of those options is
required to be disclosed in the notes to Odetics' financial statements, and
Odetics must also disclose, in footnotes to Odetics' financial statements, the
pro-forma impact those options would have upon Odetics' reported earnings were
the fair value of those options at the time of grant treated as a compensation
expense. In addition, the number of outstanding options may be a factor in
determining Odetics' earnings per share on a fully-diluted basis.
Option grants made to consultants and independent advisors (but not non-
employee Board members) after December 15, 1998 will result in a direct charge
to Odetics' reported earnings on the vesting date of each installment of the
underlying option shares. No charge will, however, be required for periods
before July 1, 2000.
Should one or more individuals be granted tandem stock appreciation rights
under the Plan, then such rights would result in a compensation expense to be
charged against Odetics' reported earnings. Accordingly, at the end of each
fiscal quarter, the amount (if any) by which the fair market value of the
shares of Class A common stock subject to such outstanding stock appreciation
rights has increased from the prior quarter-end would be accrued as
compensation expense, to the extent such fair market value is in excess of the
aggregate exercise price in effect for those rights.
New Plan Benefits
As of July 27, 2001, no stock options had been granted, and no shares of
Class A common stock had been issued, on the basis of the share increase that
is the subject of this proposal.
Stockholder Approval
The affirmative vote of a majority of the voting power of the outstanding
shares of Class A common stock and Class B common stock of Odetics, voting
together as a class, present or represented by proxies and entitled to vote at
the Annual Meeting is required for approval of the proposed amendment to the
Plan. In the event stockholder approval is not obtained, then the share reserve
will not be increased. The Plan will, however, continue to remain in effect,
and option grants and stock issuances may continue to be made pursuant to the
provisions of the Plan prior to its amendment until the available reserve of
Class A common stock under the Plan is issued.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS DEEMS THIS PROPOSAL TO BE IN THE BEST INTERESTS OF
ODETICS AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL OF SUCH
PROPOSAL. UNLESS AUTHORITY TO DO SO IS WITHHELD, THE PERSON(S) NAMED IN EACH
PROXY WILL VOTE THE SHARES REPRESENTED THEREBY "FOR" THE APPROVAL OF THE
AMENDMENT TO THE 1997 STOCK INCENTIVE PLAN.
16
PROPOSAL NO. 4
APPROVAL OF SALE AND ISSUANCE OF COMMON STOCK
On September 6, 2000, Odetics entered into a Securities Purchase Agreement
(the "Purchase Agreement") with 24 accredited investors (the "Purchasers"),
including Mr. Joel Slutzky, the Chairman of the Board and Chief Executive
Officer of Odetics. The Purchase Agreement provided for the private placement
and sale of an aggregate of 1,199,851 shares of the Class A common stock to the
Purchasers at a purchase price of $14.26 per share, the average of the per
share closing price of the Class A common stock for the twenty trading days
ending on the third trading day before the closing date. The closing price of
the Class A common stock on the Nasdaq National Market was $16.625 per share on
September 6, 2000 and was $2.35 per share on July 27, 2001, the record date for
the Annual Meeting.
Odetics completed the sale of 1,199,851 shares of Class A common stock to
the Purchasers on September 6, 2000 and received gross proceeds of
approximately $17.1 million from the sale of the shares. B. Riley & Co. acted
as finder with respect to a portion of the private placement and, in connection
therewith, Odetics paid to B. Riley & Co. an aggregate fee of $317,500, which
represented 5% of the gross proceeds on the sales of Class A common stock to
the clients of B. Riley & Co. and 2.5% of the gross proceeds on the sales of
Class A common stock to Riley Hedge Fund Money. Odetics has used, and plans to
continue to use, the net proceeds of the private placement (i) for repayment of
indebtedness under its credit facility and (ii) for working capital and general
corporate purposes. Odetics filed a Registration Statement on Form S-3 with the
Securities and Exchange Commission to register for resale the 1,199,851 shares
of Class A common stock sold in the private placement.
Of the shares sold in the private placement, Mr. Slutzky purchased 70,126
shares for an aggregate purchase price of approximately $1.0 million. As of
July 27, 2001, Mr. Slutzky beneficially owned 8.3% of the shares of Class A
common stock outstanding and 25.3% of the shares of Class B common stock
outstanding, representing 17.1% of the voting power of the outstanding common
stock. In accordance with Rule 4350 of the Nasdaq Stock Market, Odetics is
requesting that its stockholders approve and ratify the sale and issuance of
the 70,126 shares of Class A common stock to Mr. Slutzky.
Nasdaq's Stockholder Approval Requirement
Rule 4350 requires stockholder approval for any arrangement pursuant to
which stock may be acquired by officers or directors unless the amount of
securities which may be issued does not exceed the lesser of: (i) 1% of the
number of shares of common stock outstanding, (ii) 1% of the voting power
outstanding, or (iii) 25,000 shares. In order to comply with such rule, the
sale of shares to Mr. Slutzky was conditioned upon the receipt of stockholder
approval of such sale. Mr. Slutzky has tendered the full purchase price for his
shares.
Stockholder Approval
The affirmative vote of a majority of the voting power of the outstanding
shares of Class A common stock and Class B common stock of Odetics, voting
together as a single class, present or represented by proxies and entitled to
vote at the Annual Meeting is required for approval and ratification of the
sale and issuance to Mr. Slutzky of 70,126 shares of Class A common stock. In
the event stockholder approval is not obtained, then only 25,000 shares of
Class A common stock shall be deemed to have been sold to Mr. Slutzky pursuant
to the exemption under Rule 4350, and Odetics will immediately refund all
amounts paid by Mr. Slutzky in excess of the amounts payable for such 25,000
shares. The failure to obtain stockholder approval will not affect the sale of
any shares in the private placement to any Purchaser other than Mr. Slutzky.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS DEEMS THIS PROPOSAL TO BE IN THE BEST INTERESTS OF
ODETICS AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL OF SUCH
PROPOSAL. UNLESS AUTHORITY TO DO SO IS WITHHELD, THE PERSON(S) NAMED IN EACH
PROXY WILL VOTE THE SHARES REPRESENTED THEREBY "FOR" THE APPROVAL AND
RATIFICATION OF THE SALE AND ISSUANCE TO MR. SLUTZKY OF 70,126 SHARES OF CLASS
A COMMON STOCK.
17
PROPOSAL NO. 5
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The accounting firm of Ernst & Young LLP served as the independent auditors
of Odetics for the fiscal year ended March 31, 2001. The Board of Directors has
selected that firm to continue in this capacity for the fiscal year ending
March 31, 2002. Odetics is asking the stockholders to ratify the selection by
the Board of Directors of Ernst & Young LLP as the independent auditors of
Odetics to audit the consolidated financial statements of Odetics for the
fiscal year ending March 31, 2002 and to perform other appropriate services.
Stockholder ratification of the selection of Ernst & Young LLP as Odetics'
independent auditors is not required by the bylaws of Odetics or otherwise. In
the event that the stockholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the selection is ratified, the
Board of Directors, in its discretion, may direct the appointment of a
different independent accounting firm at any time during the year if the Board
of Directors feels that such a change would be in the best interest of Odetics
and its stockholders.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting to respond to stockholders' questions, and that representative
will be given an opportunity to make a brief presentation to the stockholders
if he or she so desires.
Stockholder Approval
The affirmative vote of a majority of the voting power of the Class A common
stock and Class B common stock of Odetics, voting together as a single class,
present or represented and entitled to vote at the Annual Meeting will be
required for ratification of the selection of Ernst & Young LLP as the
independent auditors of Odetics for the fiscal year ending March 31, 2002.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION AND APPROVAL OF THE SELECTION OF ERNST & YOUNG LLP AS THE
INDEPENDENT AUDITORS OF ODETICS FOR THE FISCAL YEAR ENDING MARCH 31, 2002.
18
PRINCIPAL STOCKHOLDERS AND COMMON STOCK OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of July 27, 2001, the number and
percentage ownership of the Class A common stock and Class B common stock of
Odetics by (i) all persons known to Odetics to beneficially own more than 5% of
either class of outstanding common stock (based upon reports filed by such
persons with the SEC), (ii) each of the Named Executive Officers in the Summary
Compensation Table which appears elsewhere herein, (iii) each director of
Odetics and director nominee named under "Election of Directors," and (iv) all
executive officers and directors of Odetics as a group. To the knowledge of
Odetics, except as otherwise indicated, each of the persons named in this table
has sole voting and investment power with respect to the common stock shown as
beneficially owned, subject to community property and similar laws, where
applicable.
Class A Common Stock Class B Common Stock
---------------------------- ----------------------------
Amount and Nature Amount and Nature
Name and Address of of Beneficial Percent of of Beneficial Percent of
Beneficial Owner (1) Ownership(2)(3) Class(2) Ownership(2)(3) Class(2)
-------------------- ----------------- ---------- ----------------- ----------
Joel Slutzky............ 797,190(4) 8.3% 261,647(5) 25.3%
Gerald A. Weber......... 372,201(6) 3.9 194,478 18.8
New York Life Trust
Company................ 767,515(7) 8.0 -- --
Kevin C. Daly, Ph.D..... 28,744(8) * -- --
Crandall Gudmundson..... 117,777(9) 1.2 69,743 6.7
Gregory A. Miner........ 115,933(10) 1.2 -- --
Jerry F. Muench......... 113,308(11) 1.2 61,537(12) 5.9
John W. Seazholtz....... 32,797(13) * -- --
Thomas L. Thomas........ 21,250(14) * -- --
Paul E. Wright.......... 60,244(15) * 5,000 *
Hugo Fruehauf........... 42,668(16) * -- --
Jack Johnson............ 59,440(17) * -- --
Steven L'Heureux........ 4,490(18) * -- --
All executive officers
and directors as a
group (15 persons)..... 1,602,615(19) 16.2% 406,045 39.2%
- --------
* Represents less than 1%.
(1) The address for Gerald A. Weber is 222 North LaSalle, Suite 899, Chicago,
Illinois 60601. The address for New York Life Trust Company is 51 Madison
Avenue, Room 117A, New York, New York 10010. The address of all other
persons named in the table is 1515 South Manchester Avenue, Anaheim,
California 92802.
(2) Based on 9,542,889 shares of the Class A common stock and 1,035,841 shares
of Class B common stock outstanding as of July 27, 2001. Shares of each
class of common stock subject to options which are exercisable within 60
days of July 27, 2001 are deemed to be beneficially owned by the person
holding such options for the purpose of computing the percentage of
ownership of such person but are not treated as outstanding for the purpose
of computing the percentage of any other person. Other than as described in
the preceding sentence, shares issuable upon exercise of outstanding
options are not deemed to be outstanding for purposes of this calculation.
(3) In addition to the shares held in the individual's name, this column also
includes shares held for the benefit of the named person under Odetics'
401(k) and Stock Ownership Plan.
(4) Includes 105,000 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after July
27, 2001. Excludes 335,822 shares held in trust for the benefit of the
children and relatives of Mr. Slutzky as to which Mr. Slutzky has no
investment or voting power and disclaims any beneficial ownership. See note
6.
19
(5) Excludes 140,090 shares held in trust for the benefit of the children and
relatives of Mr. Slutzky as to which Mr. Slutzky has no investment or
voting power and disclaims any beneficial ownership. See note 6.
(6) All of such shares are owned beneficially of record by various trusts with
respect to which Mr. Weber serves as trustee or co-trustee. Mr. Weber
shares investment and voting power as to 29,379 shares of Class A common
stock and 56,088 shares of Class B common stock. Mr. Weber exercises sole
investment and voting power over the remaining 342,822 shares of Class A
common stock and 138,390 shares of Class B common stock. The shares shown
include an aggregate of 335,822 shares of Class A common stock and 140,090
shares of Class B common stock held in trust for the benefit of the
children and relatives of Mr. Slutzky, as to which shares Mr. Slutzky has
no investment or voting power and disclaims any beneficial ownership.
(7) Pursuant to a Schedule 13G filed on February 12, 2001 with the SEC, New
York Life Trust Company reported that it had sole voting power and sole
dispositive power over all 767,515 shares, in its capacity as trustee of
the Odetics 401(K) and Stock Ownership Plan on behalf of numerous plan
participants.
(8) Includes 100 shares held by Dr. Daly's spouse. Also includes 6,250 shares
issuable upon exercise of options that are currently exercisable or will
become exercisable within 60 days after July 27, 2001.
(9) Includes 4,500 shares held by Mr. Gudmundson's IRA and 6,250 shares
issuable upon exercise of options that are currently exercisable or will
become exercisable within 60 days after July 27, 2001.
(10) Includes 61,667 shares issuable upon exercise of options held by Mr. Miner
that are currently exercisable or will become exercisable within 60 days
after July 27, 2001.
(11) Includes 31,114 shares held by Mr. Muench's spouse and 6,250 shares
issuable upon exercise of options that are currently exercisable or will
become exercisable within 60 days after July 27, 2001.
(12) Includes 23,235 shares held by Mr. Muench's spouse.
(13) Includes 23,250 shares issuable upon exercise of options held by Mr.
Seazholtz that are currently exercisable or will become exercisable within
60 days after July 27, 2001.
(14) Consists of shares issuable upon exercise of options held by Mr. Thomas
that are currently exercisable or will become exercisable within 60 days
after July 27, 2001.
(15) Includes 21,250 shares issuable upon exercise of options held by Mr.
Wright that are currently exercisable or will become exercisable within 60
days after July 27, 2001.
(16) Includes 12,000 shares issuable upon exercise of options held by Mr.
Fruehauf that are currently exercisable or will become exercisable within
60 days after July 27, 2001.
(17) Includes 12,000 shares issuable upon exercise of options held by Mr.
Johnson that are currently exercisable or will become exercisable within
60 days after July 27, 2001.
(18) Includes 3,333 shares issuable upon exercise of options held by Mr.
L'Heureux that are currently exercisable or will become exercisable within
60 days after July 27, 2001.
(19) Includes 359,501 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after July
27, 2001.
20
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Executive Officers
The following table sets forth certain information regarding all executive
officers of Odetics as of July 27, 2001.
Name Age Capacities in Which Served
---- --- --------------------------
Joel Slutzky......... 62 Chairman of the Board and Chief Executive Officer of
Odetics and Broadcast
Chairman of the Board and Vice President of Gyyr
Chairman of the Board of Iteris and Zyfer
Director and Vice President of Mariner Networks
Director of Meyer, Mohaddes Associates
Thomas G. Bartholet.. 53 Vice President, Corporate Development of Odetics
Director and Secretary of Broadcast
Hugo Fruehauf........ 62 Vice President of Odetics
Director, President and Chief Executive Officer of
Zyfer
Jack Johnson......... 54 Vice President of Odetics
Director, President and Chief Executive Officer of
Iteris
Director of Meyer, Mohaddes Associates
Steven L'Heureux..... 45 Vice President of Odetics
Director and President of Broadcast
Gregory A. Miner..... 46 Vice President, Chief Financial Officer, Chief
Operating Officer and Director of Odetics
Chief Financial Officer and Assistant Secretary of
Broadcast
Director, Chief Financial Officer and Secretary of
Gyyr
Director of Iteris
Chief Financial Officer of Mariner Networks
Director, Chief Financial Officer and Secretary of
Meyer, Mohaddes Associates and Zyfer
David Scheel......... 49 Vice President of Odetics
Director, President and Chief Executive Officer of
Mariner Networks
Gary Smith........... 44 Vice President, Controller and Assistant Secretary
of Odetics
Assistant Secretary of Broadcast, Iteris, Gyyr,
Mariner Networks, Meyer, Mohaddes Associates and
Zyfer
Peter Strom.......... 37 Vice President of Odetics
Director, President and Chief Executive Officer of
Gyyr
The following is a brief description of the capacities in which each of the
executive officers has served during the past five years. The biographies of
Messrs. Miner and Slutzky appear earlier in this proxy statement. See "Election
of Directors."
Thomas G. Bartholet has served as the Vice President, Corporate Development
of Odetics since 1993 and as the Director, Corporate Development of Odetics
from 1990 to 1993. Prior to that, Mr. Bartholet served as the General Manager
of the Advanced Intelligent Machines division of Odetics from 1986 to 1990 and
as the Director of Strategic Planning of Odetics from 1983 to 1986.
Hugo Fruehauf has served as a Vice President of Odetics since February 1999.
Mr. Fruehauf joined Odetics in October 1997 as the Chief Technology Officer of
the Communications division and became the President of the Communications
division in December 1997. Prior to joining Odetics, Mr. Fruehauf was the
21
Group Vice President of Defense Systems at Alliant Techsystems, a developer of
smart tactical weapons systems. From 1978 to 1995, Mr. Fruehauf served as
President of Efratom Time and Frequency Products, a company specializing in
telecommunications. From 1965 to 1978, Mr. Fruehauf was employed by Rockwell
International in various management functions, including Chief Engineer.
Jack Johnson has served as a Vice President of Odetics since 1986 and has
served as the President of Odetics' subsidiary, Iteris, Inc., since its
formation in 1998. Prior to that, he served as the General Manager of the
Odetics ITS (Iteris) division from 1996 to 1998, prior to its incorporation.
From 1990 to 1996, Mr. Johnson served as the General Manager of the Gyyr
Customer Service division. Mr. Johnson served in various other capacities with
Odetics since joining Odetics in 1974, including the Vice President and General
Manager of the Omutec division from 1986 to 1990, the Director of Contracts for
the Space division from 1980 to 1986, the Controller of Infodetics, a former
subsidiary of Odetics, from 1975 to 1980 and the Controller of Odetics from
1974 to 1975. Prior to joining Odetics, Mr. Johnson served as a certified
public accountant with Peat Marwick.
Steve L'Heureux has served as a Vice President of Odetics since June 2000
and as the President and Chief Executive Officer of Odetics' subsidiary,
Broadcast, Inc., since June 2000. From March 1999 to June 2000, he served as
Vice President of Sales and Marketing of Broadcast. Prior to joining Odetics,
from August 1996 to February 1999, Mr. L'Heureux served as Vice President of
Sales and Marketing at Vibrint Technologies, Inc., a developer of digital video
server solutions for broadcast, cable and video applications. From October 1994
to August 1996, Mr. L'Heureux was Vice President of Sales and Business
Development for Minerva Systems, Inc., a provider of MPEG video compression
systems for video and DVD applications. He has also held various North American
and international sales management positions with the Eastman Kodak Company.
David Scheel has served as a Vice President of Odetics since September 1997
and as the President and Chief Executive Officer of Odetics' subsidiary,
Mariner Networks, since its formation in August 1998. Prior to that, Mr. Scheel
served as the General Manager of Odetics' Telecom division from January 1997 to
March 1998. Mr. Scheel has also served in various other management positions
with Odetics since joining Odetics in 1982.
Gary Smith has served as the Controller of Odetics since 1992 and became a
Vice President in August 1994. Prior to that, Mr. Smith served as the Assistant
Controller of Odetics from 1990 until 1992, and as Senior Financial Analyst
from 1986 until 1990.
Peter Strom has served as the President and Chief Executive Officer of Gyyr
Incorporated since August 1999. Prior to that, from February 1999 to August
1999, he served as the Vice President of Sales for Gyyr. Before joining
Odetics, from January 1997 to February 1999, Mr. Strom served as the Vice
President of International Sales for Mosler, a provider of CCTV systems. From
May 1995 until January 1997, Mr. Strom managed Sensormatic Electronics' global
account programs and formulated new sales channel programs specifically in the
Asia-Pacific and European regions.
Officers serve at the discretion of the Board of Directors.
22
Summary of Cash and Certain Other Compensation
The following table provides certain summary information concerning the
compensation earned by the Chief Executive Officer and each of the four other
most highly compensated executive officers of Odetics whose total cash salary
and bonus during the fiscal year ended March 31, 2001 exceeded $100,000
(collectively, the "Named Executive Officers") for each of the three fiscal
years ended March 31, 1999, 2000 and 2001. No other executive officers who
would have otherwise been includable in such table on the basis of salary
earned for the fiscal year ended March 31, 2001 has been excluded by reason of
his or her termination of employment or change in executive status during that
year. No bonuses have been paid to the Named Executive Officers during the
fiscal years ended March 31, 1999, 2000 and 2001.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual -------------------------
Compensation Awards
------------- -------------------------
Securities All Other
Fiscal Salary Bonus Restricted Underlying Compensation
Name and Principal Positions Year ($)(1) ($) Stock Options (#)(2) ($)(3)
---------------------------- ------ ------- ----- ---------- -------------- ------------
Joel Slutzky ........................ 2001 326,890 -- -- -- 3,211
Chairman of the Board and 2000 326,910 -- -- 55,000 4,800
Chief Executive Officer of Odetics 1999 326,111 -- -- 55,000 5,157
Gregory A. Miner .................... 2001 214,662 -- -- 30,000 3,891
Vice President, Chief Operating 2000 182,066 -- -- 30,000 5,122
Officer and Chief Financial Officer 1999 156,751 -- -- 25,000 4,613
of Odetics
Jack Johnson......................... 2001 185,958 -- -- -- 2,831
Vice President of Odetics 2000 159,034 -- -- -- 3,869
Chief Executive Officer of Iteris 1999 152,115 -- -- -- 3,920
Hugo Fruehauf(4)..................... 2001 174,969 -- -- -- 3,875
Vice President of Odetics 2000 172,907 -- -- -- 4,868
Chief Executive Officer of Zyfer 1999 180,000 -- -- -- 5,000
Steven L'Heureux(5).................. 2001 183,462 -- -- -- 3,975
Vice President of Odetics 2000 172,715 -- -- -- 3,701
President of Broadcast 1999 -- -- -- -- --
- --------
(1) Represents all amounts earned from Odetics and its subsidiaries during the
fiscal years shown, including amounts deferred under the Executive Deferral
Plan and the Odetics 401(k) and Stock Ownership Plan.
(2) Consists of options granted pursuant to Odetics' 1994 Long-Term Equity
Incentive Plan and 1997 Stock Incentive Plan entitling the holder to
purchase shares of Class A common stock of Odetics.
(3) Consists solely of the matching contribution of Odetics to the respective
accounts of the Named Executive Officers under the Odetics 401(k) and Stock
Ownership Plan.
(4) Mr. Fruehauf joined Odetics in October 1997 and was first appointed an
executive officer in May 1999. In fiscal 2001, Mr. Fruehauf was granted an
option to purchase 250,000 shares of common stock of Zyfer.
(5) Mr. L'Heureux joined Broadcast, Inc., a subsidiary of Odetics, in March
1999 and was first appointed an executive officer of Odetics in June 2000.
23
Stock Options
The following table sets forth information with respect to grants of options
to purchase Class A common stock during the fiscal year ended March 31, 2001 to
each of the Named Executive Officers. No stock appreciation rights were granted
to any of the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Individual Grants Value at Assumed
------------------------------------------------- Annual Rates of
Number of Percent of Stock Price
Securities Total Options Appreciation for
Underlying Granted to Option Term(3)
Options Employees in Exercise or Expiration ---------------------
Name Granted(1) Fiscal 2001 Base Price(2) Date 5% 10%
---- ---------- ------------- ------------- ---------- ---------- ----------
Joel Slutzky............ -- -- -- -- -- --
Gregory A. Miner........ 30,000 100.0% $10.000 04/14/10 $220,113 $ 557,810
Jack Johnson............ -- -- -- -- -- --
Hugo Fruehauf(4)........ -- -- -- -- -- --
Steven L'Heureux........ -- -- -- -- -- --
- --------
(1) The option was granted pursuant to Odetics' 1997 Stock Incentive Plan and
entitles the holder to purchase shares of Class A common stock of Odetics.
The option has a maximum term of ten years, subject to earlier termination
in the event of the optionee's termination of employment with Odetics or
its subsidiaries. The option vests in three equal annual installments with
the first installment vesting on the first year anniversary of the grant
date, subject to acceleration of vesting in the event of the merger,
consolidation or reorganization of Odetics if such option is not assumed or
otherwise continued in effect in such transaction. In addition, the
Compensation and Stock Option Committee has the authority to provide for
the accelerated vesting of the option whether or not the option is assumed
or otherwise continued in effect or upon the termination of the optionee's
employment following such transaction.
(2) Odetics may also finance the option exercise by loaning the optionee
sufficient funds to pay the exercise price for the purchased shares and the
applicable federal and state withholding taxes to which the optionee
becomes subject in connection with such exercise.
(3) The 5% and 10% assumed rates of appreciation are prescribed by the rules
and regulations of the SEC and do not represent management's estimate or
projection of future trading prices of the Class A common stock. Unless the
market price of the common stock does in fact appreciate over the option
term, no value will be realized from the option grants. Actual gains, if
any, are dependent upon numerous factors, including, without limitation,
the future performance of Odetics and its business units, overall business
and market conditions, and the option holder's continued employment with
Odetics throughout the entire vesting period and option term, which factors
are not reflected in this table.
(4) In connection with his services to Zyfer, Inc., a subsidiary of Odetics,
Mr. Fruehauf was granted an option to purchase 250,000 shares of the common
stock of Zyfer under the Zyfer, Inc. Special Executive Stock Option Plan at
an exercise price of $0.50 per share. The option has a maximum term of ten
years, subject to earlier termination in the event of the optionee's
termination of employment with Zyfer and its affiliates. The option is
immediately exercisable but is subject to Zyfer's right to repurchase any
unvested shares. The option vests, and the right of repurchase lapses,
after five years, subject to acceleration of vesting in the event of the
consummation of an initial public offering of the securities of Zyfer. In
addition, the Board of Directors of Zyfer has the authority to provide for
the accelerated vesting of the option.
24
Aggregated Option Exercises and Fiscal Year End Values
The table below sets forth certain information with respect to the Named
Executive Officers concerning the unexercised options held by them as of the
end of the fiscal year ended March 31, 2001. No options were exercised by any
of the Named Executive Officers during that fiscal year, and none of the Named
Executive Officers held or exercised any stock appreciation rights during the
fiscal year ended March 31, 2001.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR END OPTION VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
March 31, 2001 (#) March 31, 2001 ($)
------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Joel Slutzky................ 105,000 55,000 -- --
Hugo Fruehauf............... 12,000 -- -- --
Jack Johnson................ 12,000 -- -- --
Steven L'Heureux............ 3,333 6,667 -- --
Gregory A. Miner............ 61,667 48,333 -- --
Benefit Plans
Odetics maintains a 401(k) and Stock Ownership Plan (the "Stock Ownership
Plan") which qualifies for favorable tax treatment under Section 401(a) of the
Internal Revenue Code. The Stock Ownership Plan is the result of the merger of
the Odetics, Inc. Profit Sharing and 401(k) Plan and the Odetics Associates
Stock Ownership Plan.
Employees become eligible to make pre-tax contributions to the Stock
Ownership Plan pursuant to Internal Revenue Code Section 401(k) as of the
January 1, April 1, July 1 or October 1 coincident with or next following the
date on which they are hired. Participants may contribute an amount not in
excess of $10,500 for calendar year 2001. Employees become eligible to receive
an allocation of employer contributions to the Stock Ownership Plan as of the
January 1, April 1, July 1 or October 1 coincident with or next following the
date on which they have completed six months of service with Odetics. These
contributions may be made in the form of cash or Odetics stock. No
contributions were made by Odetics to the Stock Ownership Plan for the fiscal
years ended March 31, 1999, 2000 and 2001.
Contributions that are made to the Stock Ownership Plan are allocated to the
separate accounts of participants and are held in a trust. Participant accounts
are credited with investment gains and charged with investment losses.
Participant contributions are always fully vested at all times, and the Odetics
contributions on behalf of participants vest at the rate of 33 1/3 percent per
year of service. Following termination of employment, the vested portion of the
participant's account balance is distributed in a lump sum payment.
Odetics also maintains an Executive Deferral Plan which allows designated
executives to defer the receipt of some of their current compensation until a
future year. These executives may elect to defer the receipt of up to 75% of
their annual compensation, but in no event may they elect to defer less than
$5,000. Benefits are generally fully vested at all times, and are payable
following termination of employment in the manner elected by the executive. The
Executive Deferral Plan does not qualify for favorable income tax treatment.
Employment Contracts, Termination of Employment Agreements and Change of
Control Arrangements
Odetics does not currently have any employment contracts in effect with any
of its Named Executive Officers. Odetics provides incentives such as salary,
benefits and option grants to attract and retain executive
25
officers and other key associates. The Compensation and Stock Option Committee,
as Plan Administrator of the 1997 Stock Incentive Plan, has the authority to
provide for the accelerated vesting of outstanding options held by an
individual, in connection with the termination of such individual's employment
following an acquisition in which these options are assumed or the repurchase
rights with respect to the unvested shares are assigned or upon certain hostile
changes in control of Odetics. Other than such accelerated vesting and the
agreements described below, there is no agreement or policy which would entitle
any executive officer to severance payments or any other compensation as a
result of such officer's termination.
In January 2001, Odetics entered into an Executive Ownership/Severance Plan
with Steven L'Heureux, a Vice President of Odetics and the President and a
director of Broadcast, Inc., a subsidiary of Odetics. Under the plan, in the
event Mr. L'Heureux's employment is terminated without cause by Odetics during
the term of the plan, Mr. L'Heureux is entitled to receive twelve months of
salary and benefits, at the same level as those provided to him at the time of
execution of the plan. In addition, if Broadcast is sold before December 31,
2001, the date of termination of the plan, and the buyer does not offer
employment to Mr. L'Heureux on terms at least substantially equal to the terms
of his employment with Broadcast, Mr. L'Heureux is entitled to two years of
salary and benefits, at the same level as those provided to him at the time of
execution of the ownership/severance plan. Even if the buyer offers employment
and Mr. L'Heureux accepts, if such employment is terminated without cause or if
certain other events occur, Mr. L'Heureux is entitled to salary and benefits
for the remainder of the two year term, measured from the date of his initial
employment with the buyer.
In May 2001, Odetics entered into a Severance Benefit Plan with Peter Strom,
a Vice President of Odetics and the President, Chief Executive Officer and a
director of Gyyr Incorporated, a subsidiary of Odetics. Under the plan, in the
event Mr. Strom's employment is terminated without cause by Gyyr during the
term of the plan, Mr. Strom is entitled to receive two years of salary and
benefits, at the same level as those provided to him at the time of execution
of the plan. In addition, if Gyyr is sold before October 4, 2001, the date of
termination of the plan, and the buyer does not offer employment to Mr. Strom
on terms at least substantially equal to the terms of his employment with Gyyr,
Mr. Strom is entitled to two years of salary and benefits, at the same level as
those provided to him at the time of execution of the severance plan. Even if
the buyer offers employment and Mr. Strom accepts, if such employment is
terminated without cause or if certain other events occur, Mr. Strom is
entitled to salary and benefits for the remainder of the two year term,
measured from the date of his initial employment with the buyer.
Indemnification of Directors and Officers
Under Section 145 of the Delaware General Corporation Law, Odetics can
indemnify its directors and officers against liabilities they may incur in such
capacities, including liabilities under the Securities Act of 1933 (the
"Securities Act"). The certificate of incorporation and the bylaws of Odetics
provide that Odetics will indemnify its directors and officers to the fullest
extent permitted by law, and the bylaws require Odetics to advance litigation
expenses upon receipt by Odetics of an undertaking by the director or officer
to repay such advances if it is ultimately determined that the director or
officer is not entitled to indemnification. The bylaws further provide that
rights conferred under such bylaws do not exclude any other right such persons
may have or acquire under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
Odetics' certificate of incorporation provides that, pursuant to Delaware
law, its directors shall not be liable for monetary damages for breach of the
directors' fiduciary duty of care to Odetics and its stockholders. This
provision in the certificate of incorporation does not eliminate the duty of
care, and in appropriate circumstances equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to Odetics or its stockholders, for acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law, for actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.
26
Odetics has entered into agreements to indemnify its directors and certain
of its officers in addition to the indemnification provided for in the
certificate of incorporation and bylaws. These agreements, among other things,
indemnify Odetics' directors and certain of its officers for certain expenses
(including attorneys' fees), judgments, fines and settlement amounts incurred
by such person in any action or proceeding, including any action by or in the
right of Odetics, on account of services as a director or officer of Odetics,
or as a director or officer of any other company or enterprise to which the
person provides services at the request of Odetics.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation and Stock Option Committee of Odetics' Board
of Directors during the fiscal year ended March 31, 2001 were Messrs. Daly,
Seazholtz and Thomas. None of these individuals was an officer or employee of
Odetics or its subsidiaries at any time during the fiscal year ended March 31,
2001.
No executive officer of Odetics has served on the Board of Directors or on
the compensation committee of any other entity that has, or has had, one or
more executive officers serving as a member of the Board of Directors or on the
Compensation and Stock Option Committee of Odetics.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report covers Odetics' fiscal year ended March 31, 2001. The
Compensation and Stock Option Committee (the "Compensation Committee") for the
fiscal year ended March 31, 2001 was comprised of three outside directors,
Messrs. Daly, Seazholtz and Thomas. The Compensation Committee recommends the
general compensation levels for executives. The Compensation Committee meets
periodically to review and recommend for approval by the Board of Directors,
the salaries, bonuses and benefit plans for officers and key associates. During
the fiscal year ended March 31, 2001, the Compensation Committee held one
meeting.
General Compensation Policy
The guiding principle of the Compensation Committee is to establish a
compensation program that aligns executive compensation with Odetics'
objectives and business strategies as well as with financial and operational
performance. In keeping with this principle the Compensation Committee seeks
to:
(1) Attract and retain qualified senior executives who can play a
significant role in the achievement of Odetics' goals;
(2) Reward executives for strategic management and the long-term
enhancement of stockholder value; and
(3) Create a performance-oriented environment that rewards performance with
respect to the financial and operational goals of Odetics.
In the fiscal year ended March 31, 2001, the annual compensation for the
executive officers included base salaries and stock options.
Odetics establishes salaries for the officers by considering the salaries of
officers at comparably sized companies according to data obtained by the
Compensation Committee from executive compensation consultants and from other
independent outside sources, including the American Electronics Association
annual survey of executive compensation.
A substantial portion of the compensation of executive officers is based
upon the award of stock options which rely on increases in the value of
Odetics' securities. The award of options is intended to encourage executives
to establish a meaningful, long-term ownership interest in Odetics consistent
with the interests of Odetics' stockholders. Under Odetics' stock option plans,
options are granted from time to time to certain officers and key associates of
Odetics and its subsidiaries at the fair market value of the shares of Class A
common stock at the time of grant. Because the compensation element of options
is dependent on increases
27
over time in the market value of such shares, stock options represent
compensation that is tied to Odetics' long-term performance. The award of stock
options to the executive officers of Odetics is determined based upon
individual performance, level of base salary and position with Odetics.
The Compensation Committee has reviewed the base salaries for the fiscal
year ended March 31, 2001 of each of the executive officers and is of the
opinion that such salaries are not unreasonable in view of those paid by
Odetics' competitors and by other companies of similar size. The Compensation
Committee also reviewed the stock options awarded to the executive officers for
their services in the fiscal year ended March 31, 2001 and is of the opinion
that the option awards are reasonable in view of the officers' individual
performance and positions with Odetics.
CEO Compensation
In setting the total compensation payable to Joel Slutzky, Odetics' Chief
Executive Officer and Chairman of the Board, for the fiscal year ended March
31, 2001, the Compensation Committee sought to make such compensation
competitive with that provided by other companies with which Odetics competes
for executive talent. With respect to Mr. Slutzky's base salary, it was the
Compensation Committee's intent to provide him with a level of stability and
certainty each year and not have this particular component of compensation
affected to any significant degree by corporate performance factors. The
Compensation Committee believes Mr. Slutzky's base salary for the fiscal year
ended March 31, 2001 is at a competitive level with the base salaries in effect
for similarly situated chief executive officers. The remaining components of
Mr. Slutzky's fiscal year ended March 31, 2001 compensation, however, were
primarily dependent upon corporate performance. Based upon such performance,
among other factors, no bonus was paid to Mr. Slutzky for the fiscal year ended
March 31, 2001 and no options were granted to him for the fiscal year ended
March 31, 2001.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to publicly held corporations for compensation exceeding $1.0 million
paid to certain of the corporation's executive officers. The limitation applies
only to compensation which is not considered to be performance-based. The
nonperformance based compensation to be paid to Odetics' executive officers for
the fiscal year ended March 31, 2001 did not exceed the $1.0 million limit per
officer, nor is it expected that the nonperformance based compensation to be
paid to Odetics' executive officers for the next fiscal year will exceed that
limit. Odetics' 1997 Stock Incentive Plan is structured so that any
compensation deemed paid to an executive officer in connection with the
exercise of option grants made under that plan will qualify as performance-
based compensation which will not be subject to the $1.0 million limitation.
Because it is very unlikely that the cash compensation payable to any of
Odetics' executive officers in the foreseeable future will approach the
$1.0 million limit, the Compensation Committee has decided at this time not to
take any other action to limit or restructure the elements of cash compensation
payable to Odetics' executive officers. The Compensation Committee will
reconsider this decision should the individual compensation of any executive
officer ever approach the $1.0 million level.
Submitted by the Compensation
Committee of the Board of Directors:
Kevin C. Daly, Ph.D.
John W. Seazholtz
Thomas L. Thomas
28
AUDIT COMMITTEE REPORT
The following is the report of the audit committee with respect to the
audited consolidated financial statements of Odetics for the fiscal year ended
March 31, 2001 included in Odetics' Annual Report on Form 10-K/A for that year.
Review with Management
The audit committee has reviewed and discussed these audited consolidated
financial statements with management of Odetics.
Review and Discussions with Independent Auditors
The audit committee has discussed with Odetics' independent auditors, Ernst
& Young LLP, the matters required to be discussed by SAS 61 (Codification of
Statements on Auditing Standards, AU Section 380), as amended, which includes,
among other items, matters related to the conduct of the audit of the
consolidated financial statements of Odetics.
The audit committee has received the written disclosures and the letter from
Ernst & Young LLP required by Independence Standards Board Standard No. 1
("Independence Discussions with Audit Committees"), as amended, and has
discussed with Ernst & Young LLP the independence of Ernst & Young LLP from
Odetics.
Conclusion
Based on the review and discussions referred to above in this report, the
audit committee recommended to the Board of Directors of Odetics that the
audited consolidated financial statements be included in Odetics' Annual Report
on Form 10-K/A for the year ended March 31, 2001 for filing with the Securities
and Exchange Commission.
Submitted by the Audit Committee
of the Board of Directors:
John W. Seaholtz
Thomas L. Thomas
Paul E. Wright
AUDIT AND OTHER FEES
Fees Billed to Odetics by Ernst & Young LLP During the Fiscal Year Ended March
31, 2001
Audit Fees. Audit fees billed to Odetics by Ernst & Young LLP during the
fiscal year ended March 31, 2001 for audit of Odetics' annual consolidated
financial statements and review of those consolidated financial statements
included in Odetics' quarterly reports on Forms 10-Q totaled approximately
$162,000.
Financial Information Systems Design and Implementation Fees. Odetics did
not engage Ernst & Young LLP to provide advice or services to Odetics regarding
financial information systems design and implementation during the fiscal year
ended March 31, 2001.
All Other Fees. Other audit-related fees for the fiscal year ended March 31,
2001 were an additional $152,500 and included, among other things, fees for
registration statements, fees related to a private placement, and audits of
certain subsidiaries of Odetics. Fees billed to Odetics for non-audit-related
services rendered by Ernst & Young LLP for the fiscal year ended March 31,
2001, including fees for tax compliance and tax consulting services, were
approximately $71,500. In the aggregate, all such other fees, including audit-
related fees, totaled approximately $224,000.
Determination of Independence
The Audit Committee of the Board of Directors has determined that the
provision by Ernst & Young LLP of the services covered under the headings
"Financial Information Systems Design and Implementation Fees" and "All Other
Fees" above are compatible with maintaining Ernst & Young LLP's independence.
29
PERFORMANCE GRAPH FOR ODETICS, INC.
INDEXED COMPARISON OF CUMULATIVE TOTAL RETURN
The performance graph shows the cumulative total return on investment
assuming an investment of $100 on April 1, 1996 in each of the Class A common
stock and Class B common stock of Odetics, the Nasdaq National Market Index and
Media General's Industry Group 836 for Diversified Electronics. The total
stockholder return assumes reinvestment of dividends on a daily basis, although
cash dividends have not been declared on either class of Odetics' common stock.
The stockholder returns shown in the following graph are not necessarily
indicative of future performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG ODETICS, INC. CLASS A AND CLASS B COMMON STOCK,
NASDAQ NATIONAL MARKET INDEX AND MG GROUP INDEX
[PERFORMANCE GRAPH APPEARS HERE]
ASSUMES $100 INVESTED ON APRIL 1, 1996
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDED MARCH 31, 2001
Measurement Period
---------------------------------------
1997 1998 1999 2000 2001
------- ------- ------- ------- -------
Odetics, Inc. Class A common stock..... $181.03 $358.12 $399.05 $562.76 $138.13
Odetics, Inc. Class B common stock..... 203.57 286.14 413.31 582.87 127.17
Media General Industry Group 836....... 98.26 118.87 114.52 359.02 132.67
Nasdaq National Market Index........... 111.87 169.07 220.94 406.86 167.46
Notwithstanding anything to the contrary set forth in any of Odetics'
previous or future filings under the Securities Act or the Exchange Act, as
amended, that might incorporate this Proxy Statement or future filings made by
Odetics under those statutes, the Compensation Committee Report, the Audit
Committee Report, the Audit Committee Charter, reference to the independence of
the Audit Committee members and the Performance Graph are not deemed filed with
the Securities and Exchange Commission and shall not be deemed incorporated by
reference into any of those prior filings or into any future filings made by
Odetics under those statutes.
30
Certain Transactions
In July 1999, Odetics sold an option to Manchester Capital LLC for an
aggregate purchase price of $5.0 million to purchase certain real property of
Odetics consisting of approximately fourteen acres located at 1515 South
Manchester Avenue, Anaheim, California. Odetics used the proceeds of the option
sale for general working capital purposes. In August 2000, Odetics repurchased
this option from Manchester Capital LLC for an aggregate purchase price of $5.6
million.
The following officers and directors of Odetics are members of Manchester
Capital and have made capital contributions to Manchester Capital in the
amounts set forth opposite their names below:
Membership
Amount Percentage
Name Invested Interest
---- ---------- ----------
Joel Slutzky(1)...................................... $2,500,000 50%
Chairman of the Board and
Chief Executive Officer of Odetics
Crandall Gudmunson................................... 500,000 10%
Director of Odetics
Paul E. Wright....................................... 500,000 10%
Director of Odetics
- --------
(1) Includes a $2.0 million investment by a trust established by Mr. Slutzky.
Does not include a $500,000 investment made by Mr. Slutzky's adult son.
In May 2000, certain of the directors and an officer of Odetics, including
Messrs. David Scheel and Thomas L. Thomas, executed promissory notes in favor
of Mariner Networks, Inc., a subsidiary of Odetics, in connection with their
exercise of options to purchase the common stock of Mariner granted to them
under Mariner's 1999 Special Executive Stock Option Plan for their services
rendered to that subsidiary. Mr. Scheel is a Vice President of Odetics and the
President, Chief Executive Officer, and a director of Mariner. Mr. Thomas is a
director of Odetics and the Chairman of the Board of Mariner. The promissory
notes in the original principal amounts of $180,000 and $90,000 executed by
Messrs. Scheel and Thomas, respectively, bear interest at a rate of 6.3% per
annum, compounded semi-annually. The promissory notes are due and payable in
May 2005.
In September 2000, Odetics entered into a Securities Purchase Agreement (the
"Purchase Agreement") with 24 accredited investors (the "Purchasers"),
including Mr. Joel Slutzky, the Chairman of the Board and Chief Executive
Officer of Odetics. The Purchase Agreement provided for the private placement
and sale of an aggregate of 1,199,851 shares of the Class A common stock to the
Purchasers at a purchase price of $14.26 per share, the average of the per
share closing price of the Class A common stock for the twenty trading days
ending on the third trading day before the closing date. The closing price of
the Class A common stock on the Nasdaq National Market on the closing date,
September 6, 2000, was $16.625 per share. Mr. Slutzky purchased 70,126 shares
of the Class A common stock for an aggregate purchase price of approximately
$1.0 million.
In January 2001, Odetics entered into an Executive Ownership/Severance Plan
with Steven L'Heureux, a Vice President of Odetics and the President and a
director of Broadcast, Inc., a subsidiary of Odetics. Under the plan, in the
event that Broadcast is sold prior to the date of termination of the plan, Mr.
L'Heureux is entitled to 2.5% of the aggregate sale price. The plan terminates
on December 31, 2001.
In May 2001, Odetics entered into two Phantom Ownership Plans with Peter
Strom, a Vice President of Odetics and the President, Chief Executive Officer
and a director of Gyyr Incorporated, a subsidiary of Odetics. Under the plans,
in the event that Gyyr Incorporated sells its CCTV product line or its Access
Control product line prior to the date of termination of the plans, Mr. Strom
is entitled to 1.75% of the aggregate sale price of the CCTV product line and
0.78% of the aggregate sale price of the Access Control product line. The plans
terminate on October 4, 2001.
31
Section 16(a) Beneficial Ownership Reporting Compliance
Under the federal securities laws, Odetics' directors and officers and any
persons holding more than 10% of Odetics' common stock are required to report
their ownership of Odetics' common stock and any changes in that ownership to
the SEC. Specific due dates for these reports have been established, and
Odetics is required to report in this proxy statement any failure to file by
these dates. Based solely on its review of copies of the reports on Forms 3, 4
and 5 received by Odetics with respect to the fiscal year ended March 31, 2001,
and the written representations received from the reporting persons that no
other reports were required, Odetics believes that all directors, executive
officers and persons who own more than 10% of Odetics' common stock have
complied with the reporting requirements of Section 16(a) and have filed all
reports required by such section.
Annual Report
A copy of Odetics' annual report on Form 10-K/A for the fiscal year ended
March 31, 2001 and a copy of Odetics' quarterly report on Form 10-Q for the
quarter ended June 30, 2001, accompanies the proxy materials being mailed to
all stockholders. The annual report and the quarterly report are not
incorporated into this proxy statement and are not considered proxy
solicitation materials.
Deadline for Receipt of Stockholder Proposals
If Odetics has not received notice on or prior to June 22, 2001 of any
matter a stockholder intends to propose for a vote at the 2001 annual meeting
of stockholders, then a proxy solicited by the Board of Directors may be voted
on such matter in the discretion of the proxy holder, without discussion of the
matter in the proxy statement soliciting such proxy and without such matter as
a separate item on the proxy card.
The deadline for stockholders to submit proposals to be considered for
inclusion in Odetics' proxy statement for next year's annual meeting of
stockholders is anticipated to be April 22, 2002. In addition, the proxy to be
solicited by the Board of Directors for next year's annual meeting will confer
discretionary authority to vote on any stockholder proposal presented at that
meeting, unless Odetics receives notice of such proposal no later than July 6,
2002. Stockholder proposals must be mailed to the attention of the Secretary of
Odetics at the principal executive offices of Odetics located at 1515 South
Manchester, Anaheim, California 92802.
Other Business
The Board of Directors is not aware of any other matter which will be
presented for action at the Annual Meeting other than the matters set forth in
this proxy statement. If any other matter requiring a vote of the stockholders
arise, it is intended that the proxy holders will vote the shares they
represent as the Board of Directors may recommend. Discretionary authority with
respect to such other matters is granted by the execution of the enclosed proxy
card.
THE BOARD OF DIRECTORS OF
ODETICS, INC.
Anaheim, California
August 20, 2001
32
APPENDIX A
ODETICS, INC.
AUDIT COMMITTEE CHARTER
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors of Odetics, Inc., a Delaware corporation (the "Corporation"), in
fulfilling its oversight responsibilities by reviewing the financial
information which will be provided to the shareholders and others, the systems
of internal controls which management and the Board of Directors have
established, and the Corporation's audit and financial reporting process.
The independent accountants' ultimate responsibility is to the Board of
Directors and the Audit Committee, as representatives of the shareholders.
These representatives have the ultimate authority to select, evaluate, and,
where appropriate, replace the independent accountants.
The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of three or more independent
directors. All members of the Committee shall have a working familiarity with
basic finance and accounting practices, and at least one member of the
Committee shall have accounting or related financial management expertise.
III. MEETINGS
The Committee shall meet on a regular basis and shall hold special meetings
as circumstances require.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
A. Review this Charter at least annually and recommend any changes to the
Board.
B. Review the organization's annual financial statements and any other
relevant reports or other financial information.
C. Review the regular internal financial reports prepared by management and
any internal auditing department.
D. Recommend to the Board of Directors the selection of the independent
accountants and approve the fees and other compensation to be paid to
the independent accountants. On an annual basis, the Committee shall
obtain a formal written statement from the independent accountants
delineating all relationships between the accountants and the
Corporation consistent with Independence Standards Board Standard 1, and
shall review and discuss with the accountants all significant
relationships the accountants have with the Corporation to determine the
accountants' independence.
E. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances
warrant.
F. Following completion of the annual audit, review separately with the
independent accountants, the internal auditing department, if any, and
management any significant difficulties encountered during the course of
the audit.
G. Perform any other activities consistent with this Charter, the
Corporation's By-laws and governing law, as the Committee or the Board
deems necessary or appropriate.
A-1
APPENDIX B
ODETICS, INC.
1997 STOCK INCENTIVE PLAN
(Amended and Restated as of July 12, 2001)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1997 Stock Incentive Plan is intended to promote the interests of
Odetics, Inc., a Delaware corporation, by providing eligible persons with the
opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation as an incentive for them to remain in
the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in the
attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate equity programs:
. The Discretionary Option Grant Program under which eligible person may,
at the discretion of the Plan Administrator, be granted options to
shares of Class A Common Stock,
. the Stock Issuance Program under which eligible persons may, at the
discretion of the Plan Administrator, be issued shares of Class A Common
Stock directly, either through the immediate purchase of such shares or
as a bonus for services rendered the Corporation (or any Parent or
Subsidiary), and
. the Automatic Option Grant Program under which eligible non-employee
Board members shall automatically receive option grants at periodic
intervals to purchase shares of Class A Common Stock.
B. The provisions of Articles One and Five shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders. Administration of the Discretionary Option
Grant and Stock Issuance Programs with respect to all other persons eligible to
participate in those programs may, at the Board's discretion, be vested in the
Primary Committee or a Secondary Committee, or the Board may retain the power
to administer those programs with respect to all such persons.
B. Members of the Primary Committee or any Secondary Committee shall serve
for such period of time as the Board may determine and may be removed by the
Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
C. Each Plan Administrator shall, within the scope of its administrative
functions under the Plan, have full power and authority (subject to the
provisions of the Plan) to establish such rules and regulations as it may deem
appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions
under the Plan shall be final and binding on all parties who have an interest
in the Discretionary Option Grant and Stock Issuance Programs under its
jurisdiction or any option or stock issuance thereunder.
B-1
D. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary
Committee or the Secondary Committee shall be liable for any act or omission
made in good faith with respect to the Plan or any option grants or stock
issuances under the Plan.
E. Administration of the Automatic Option Grant Program shall be self
executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to any
option grants or stock issuances made under such program.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option Grant
and Stock Issuance Programs are as follows:
(i) employees,
(ii) non-employee members of the Board or the board of directors of any
Parent or Subsidiary, and
(iii) consultants and other independent advisors who provide services to
the Corporation (or any Parent or Subsidiary).
B. Each Plan Administrator shall, within the scope of its administrative
jurisdiction under the Plan, have full authority to determine, (i) with
respect to the option grants under the Discretionary Option Grant Program,
which eligible persons are to receive option grants, the time or times when
such option grants are to be made, the number of shares to be covered by each
such grant, the status of the granted option as either an Incentive Option or
a Nonstatutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the
consideration to be paid for such shares.
C. The Plan Administrator shall have the absolute discretion either to
grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.
D. The individuals who shall be eligible to participate in the Automatic
Option Grant Program shall be limited to (i) those individuals serving as non-
employee Board members on the Plan Effective Date, (ii) those individuals who
first become non-employee Board members on or after the Plan Effective Date,
whether through appointment by the Board or election by the Corporation's
stockholders, and (ii) those individuals who continue to serve as non-employee
Board members at one or more Annual Stockholders Meetings held after the Plan
Effective Date.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Class A Common Stock, including shares repurchased by
the Corporation on the open market. The maximum number of shares of Class A
Common Stock reserved for issuance over the term of the Plan shall not exceed
1,805,000 shares,/1/ including an increase of 475,000 shares of Class A Common
Stock which was authorized by the Board in July 2001, which is subject to
stockholder approval at the 2001 Annual Meeting.
- --------
1 On September 30, 1999, the stockholders approved an increase in the number
of shares from 530,000 to 930,000. On September 8, 2000, the stockholders
approved an additional increase of 400,000 shares to 1,330,000 shares.
B-2
B. No one person participating in the Plan may receive options, separately
exercisable stock appreciation rights and direct stock issuances for more than
80,000 shares of Class A Common Stock in the aggregate per calendar year,
beginning with the 1997 calendar year.
C. Shares of Class A Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) those
options expire or terminate for any reason prior to exercise in full or (ii)
those options are cancelled in accordance with the option cancellation/regrant
provisions of Section IV of Article Two. Unvested shares issued under the Plan
and subsequently cancelled or repurchased by the Corporation, at the original
exercise or direct issue price paid per share, pursuant to the Corporation's
repurchase rights under the Plan shall be added back to the number of shares of
Class A Common Stock reserved for issuance under the Plan and shall accordingly
be available for reissuance through one or more subsequent option grants or
direct stock issuances under the Plan. However, shares subject to any options
surrendered in connection with the stock appreciation right provisions of the
Plan shall not be available for reissuance. Should the exercise price of an
option under the Plan be paid with shares of Class A Common Stock or should
shares of Class A Common Stock otherwise issuable under the Plan be withheld by
the Corporation in satisfaction of the withholding taxes incurred in connection
with the exercise of an option or the vesting of a stock issuance under the
Plan, then the number of shares of Class A Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised or which vest under the stock issuance, and not by the net
number of shares of Class A Common Stock issued to the holder of such option or
stock issuance.
D. If any change is made to the Class A Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Class A Common Stock as a
class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of securities
issuable under the Plan, (ii) the number and/or class of securities for which
any one person may be granted stock options, separately exercisable stock
appreciation rights and direct stock issuances under the Plan per calendar
year, (iii) the number and/or class of securities for which grants are
subsequently to be made under the Automatic Option Grant Program to new and
continuing non-employee Board members, and (iv) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option under the Plan. Such adjustments to the outstanding options are to be
effected in a manner which shall preclude the enlargement or dilution of rights
and benefits under such options. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.
E. Should the Corporation effect a divestiture of one or more Subsidiaries
through a distribution or spin-off to the Corporation's stockholders of the
securities of the Subsidiary held by the Corporation ("Divestiture"), then the
Plan Administrator may, in its sole discretion, make appropriate adjustments to
the number and/or class of securities subject to each outstanding option and
the exercise price payable per share in order to reflect the effect of the
Divestiture on the Corporation's capital structure and the relative Fair Market
Values of the Class A Common Stock and the distributed securities of the
Subsidiary following the Divestiture. Such adjustment may include the division
of the option into two separate options, one for the shares of Class A Common
Stock at the time subject to the option and a second option for the securities
of the Subsidiary distributable with respect to those shares. The Plan
Administrator may also, in its sole discretion, accelerate the vesting and
exercisability of the option (or any separated option) with respect to one or
more shares of the Class A Common Stock or distributed securities at the time
subject to such option (or the separated option), if and to the extent the
Optionee is to remain in the Corporation's Service following such Divestiture
or is otherwise to provide services to the divested Subsidiary.
B-3
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form approved
by the Plan Administrator; provided, however, that each such document shall
comply with the terms specified below. Each document evidencing an Incentive
Option shall, in addition, be subject to the provisions of the Plan applicable
to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed by the Plan Administrator but
shall not be less than one hundred percent (100%) of the Fair Market Value per
share of Class A Common Stock on the option grant date.
2. The exercise price shall become immediately due upon exercise of the
option and shall, subject to the provisions of Section I of Article Five and
the documents evidencing the option, be payable in one or more of the forms
specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Class A Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date, or
(iii) to the extent the option is exercised for vested shares, through a
special sale and remittance procedure pursuant to which the Optionee shall
concurrently provide irrevocable instructions to (a) a Corporation
designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate exercise price
payable for the purchased shares plus all applicable Federal, state and
local income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (b) the Corporation to deliver
the certificates for the purchased shares directly to such brokerage firm
in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized, payment
of the exercise price for the purchased shares must be made on the Exercise
Date.
B. Exercise and Term of Options. Each option shall be exercisable at such
time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.
C. Effect of Termination of Service.
1. The following provisions shall govern the exercise of any options held by
the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the Optionee's cessation of
Service for any reason shall remain exercisable for such period of time
thereafter as shall be determined by the Plan Administrator and set forth
in the documents evidencing the option, but no such option shall be
exercisable after the expiration of the option term.
(ii) Any option exercisable in whole or in part by the Optionee at the
time of death may be subsequently exercised by the personal representative
of the Optionee's estate or by the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with the laws
of descent and distribution.
B-4
(iii) During the applicable exercise period following termination of
Service, the option may not be exercised in the aggregate for more than the
number of vested shares for which the option is exercisable on the date of
the Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares
for which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and cease
to be outstanding to the extent the option is not otherwise at that time
exercisable for vested shares.
(iv) Should the Optionee's Service be terminated for Misconduct, then
all outstanding options held by the Optionee shall terminate immediately
and cease to be outstanding.
2. The Plan Administrator shall have complete discretion, exercisable either
at the time an option is granted or at any time while the option remains
outstanding, to:
(i) extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service from the limited
exercise period otherwise in effect for that option to such greater period
of time as the Plan Administrator shall deem appropriate, but in no event
beyond the expiration of the option term, and/or
(ii) permit the option to be exercised, during the applicable Service
exercise period following termination of service, not only with respect to
the number of vested shares of Class A Common Stock for which such option
is exercisable at the time of the Optionee's cessation of Service but also
with respect to one or more additional installments in which the Optionee
would have vested had the Optionee continued in Service.
D. Stockholder Rights. The holder of an option shall have no stockholder
rights with respect to the shares subject to the option until such person shall
have exercised the option, paid the exercise price and become a holder of
record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the discretion to
grant options which are exercisable for unvested shares of Class A Common
Stock. Should the Optionee cease Service while holding such unvested shares,
the Corporation shall have the right to repurchase, at the exercise price paid
per share, any or all of those unvested shares. The terms upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall
be established by the Plan Administrator and set forth in the document
evidencing such repurchase right.
F. Limited Transferability of Options. During the lifetime of the Optionee,
Incentive Options shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. However, a Nonstatutory Option
may, in connection with the Optionee's estate plan, be assigned in whole or in
part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Five shall be applicable to Incentive Options. Options
which are specifically designated as Nonstatutory Options when issued under the
Plan shall not be subject to the terms of this Section II.
A. Eligibility. Incentive Options may only be granted to Employees.
B-5
B. Dollar Limitation. The aggregate Fair Market Value of the shares of Class
A Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent
the Employee holds two (2) or more such options which become exercisable for
the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
C. 10% Stockholder. If any Employee to whom an Incentive Option is granted
is a 10% Stockholder, then the exercise price per share shall not be less than
one hundred ten percent (110%) of the Fair Market Value per share of Class A
Common Stock on the option grant date, and the option term shall not exceed
five (5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding option shall
automatically accelerate so that each such option shall, immediately prior to
the effective date of the Corporate Transaction, become fully exercisable with
respect to the total number of shares of Class A Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully vested shares of Class A Common Stock. However, an outstanding option
shall not become exercisable on such an accelerated basis if and to the extent:
(i) such option is, in connection with the Corporate Transaction, to be assumed
by the successor corporation (or parent thereof) or (ii) such option is to be
replaced with a cash incentive program of the successor corporation which
preserves the spread existing at the time of the Corporate Transaction on any
shares for which the option is not otherwise at that time exercisable and
provides for subsequent payout in accordance with the same exercise/vesting
schedule applicable to those option shares or (iii) the acceleration of such
option is subject to other limitations imposed by the Plan Administrator at the
time of the option grant.
B. All outstanding repurchase rights shall automatically terminate, and the
shares of Class A Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction, except to
the extent: (i) those repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction
or (ii) such accelerated vesting is precluded by other limitations imposed by
the Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate Transaction, all
outstanding options shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent thereof).
D. Each option which is assumed in connection with a Corporate Transaction
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply to the number and class of securities which would have been issuable
to the Optionee in consummation of such Corporate Transaction had the option
been exercised immediately prior to such Corporate Transaction. Appropriate
adjustments to reflect such Corporate Transaction shall also be made to (i) the
exercise price payable per share under each outstanding option, provided the
aggregate exercise price payable for such securities shall remain the same,
(ii) the maximum number and/or class of securities available for issuance over
the remaining term of the Plan and (iii) the maximum number and/or class of
securities for which any one person may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances under the Plan
per calendar year.
E. The Plan Administrator shall have the discretionary authority to provide
for the automatic acceleration of one or more outstanding options under the
Discretionary Option Grant Program upon the occurrence of a Corporate
Transaction, whether or not those options are to be assumed in the Corporate
Transaction, so that each such option shall, immediately prior to the effect
date of such Corporate Transaction, become fully exercisable with respect to
the total number of shares of Class A Common Stock at the time subject to that
option and may be exercised for any or all of those shares as fully vested
shares of Class A Common Stock. In
B-6
addition, the Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the
Discretionary Option Grant Program so that those rights shall not be assignable
in connection with such Corporate Transaction and shall accordingly terminate
upon the consummation of such Corporate Transaction, and the shares subject to
those terminated rights shall thereupon vest in full.
F. The Plan Administrator shall have full power and authority, exercisable
either at the time the option is granted or at any time while the option
remains outstanding, to provide for the automatic acceleration of one or more
outstanding options under the Discretionary Option Grant Program in the event
the Optionee's Service is subsequently terminated by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of any Corporate Transaction in which those
options are assumed and do not otherwise accelerate. Any options so accelerated
shall remain exercisable for fully vested shares until the earlier of (i) the
expiration of the option term or (ii) the expiration of the one (1) year period
measured from the effective date of the Involuntary Termination. In addition,
the Plan Administrator may provide that one or more of the Corporation's
outstanding repurchase rights with respect to shares held by the Optionee at
the time of such Involuntary Termination shall immediately terminate, and the
shares subject to those terminated repurchase rights shall accordingly vest in
full.
G. The Plan Administrator shall have the discretionary authority to provide
for the automatic acceleration of one or more outstanding options under the
Discretionary Option Grant Program upon the occurrence of a Change in Control
so that each such option shall, immediately prior to the effect date of such
Change in Control, become fully exercisable with respect to the total number of
shares of Class A Common Stock at the time subject to that option and may be
exercised for any or all of those shares as fully vested shares of Class A
Common Stock. Each such accelerated option shall remain exercisable until the
expiration or sooner termination of the option term. In addition, the Plan
Administrator shall have the discretionary authority to structure one or more
of the Corporation's repurchase rights under the Discretionary Option Grant
Program so that those rights shall terminate automatically upon the
consummation of such Change in Control, and the shares subject to those
terminated rights shall thereupon vest in full. Alternatively, the Plan
Administrator may condition the automatic acceleration of one or more
outstanding options under the Discretionary Option Grant Program and the
termination of one or more of the Corporation's outstanding repurchase rights
under such program upon the subsequent termination of the Optionee's Service by
reason of an Involuntary Termination within a designated period (not to exceed
eighteen (18) months) following the effective date of such Change in Control.
Each option so accelerated shall remain exercisable for fully vested shares
until the earlier of (i) the expiration of the option term or (ii) the
expiration of the one (1) year period measured from the effective date of such
Involuntary Termination.
H. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Nonstatutory Option under the Federal tax laws.
I. The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital
or business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time and
from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program and to grant in substitution new options covering the same or
different number of shares of Class A Common Stock but with an exercise price
per share equal to the Fair Market Value per share of Class A Common Stock on
the new grant date.
B-7
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have the authority to grant to selected
Optionees tandem stock appreciation rights and/or limited stock appreciation
rights.
B. The following terms shall govern the grant and exercise of tandem stock
appreciation rights:
(i) One or more Optionees may be granted the right, exercisable upon
such terms as the Plan Administrator may establish, to elect between the
exercise of the underlying option for shares Class A Common Stock and the
surrender of that option in exchange for a distribution from the
Corporation in an amount equal to the excess of (a) the Fair Market Value
(on the option surrender date) of the number of shares in which the
Optionee is at the time vested under the surrendered option (or surrendered
portion) over (b) the aggregate exercise price payable for those shares.
(ii) No such option surrender shall be effective unless it is approved
by the Plan Administrator, either at the time of the actual option
surrender or at any earlier time. If the surrender is so approved, then the
distribution to which the Optionee shall be entitled may be made in shares
of Class A Common Stock valued at Fair Market Value on the option surrender
date, in cash, or partly in shares and partly in cash, as the Plan
Administrator shall in its sole discretion deem appropriate.
(iii) If the surrender of an option is not approved by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee
had under the surrendered option (or surrendered portion) on the option
surrender date and may exercise such rights at any time prior to the later
of (a) five (5) business days after the receipt of the rejection notice or
(b) the last day on which the option is otherwise exercisable in accordance
with the terms of the documents evidencing such option, but in no event may
such rights be exercised more than ten (10) years after the option grant
date.
2. The following terms shall govern the grant and exercise of limited stock
appreciation rights:
(i) One or more Section 16 Insiders may be granted limited stock
appreciation rights with respect to their outstanding options.
(ii) Upon the occurrence of a Hostile Takeover, each individual holding
one or more options with such a limited stock appreciation right shall have
the unconditional right (exercisable for a thirty (30) day period following
such Hostile Takeover) to surrender each such option to the Corporation, to
the extent the option is at the time exercisable for vested shares of Class
A Common Stock. In return for the surrendered option, the Optionee shall
receive a cash distribution from the Corporation in an amount equal to the
excess of (A) the Takeover Price of the shares of Class A Common Stock
which are at the time vested under each surrendered option (or surrendered
portion) over (B) the aggregate exercise price payable for those shares.
Such cash distribution shall be paid within five (5) days following the
option surrender date.
(iii) The Plan Administrator shall pre-approve, at the time the limited
right is granted, the subsequent exercise of that right in accordance with
the terms of the grant and the provisions of this Section V. No additional
approval of the Plan Administrator or the Board shall be required at the
time of the actual option surrender and cash distribution.
(iv) The balance of the option (if any) shall remain outstanding and
exercisable in accordance with the documents evidencing such option.
B-8
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Class A Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below.
A. Purchase Price.
1. The purchase price per share shall be fixed by the Plan Administrator,
but shall not be less than one hundred percent (100%) of the Fair Market Value
per share of Class A Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article Five, shares of Class
A Common Stock may be issued under the Stock Issuance Program for any
combination of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any Parent or
Subsidiary).
B. Vesting Provisions.
1. Shares of Class A Common Stock issued under the Stock Issuance Program
may, in the discretion of the Plan Administrator, be fully and immediately
vested upon issuance or may vest in one or more installments over the
Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Class A Common Stock issued under the Stock Issuance Program shall be
determined by the Plan Administrator and incorporated into the Stock Issuance
Agreement.
2. Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Class A Common Stock by reason of any stock dividend, stock
split, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Class A Common Stock as a class without the
Corporation's receipt of consideration shall be issued subject to (i) the same
vesting requirements applicable to the Participant's unvested shares of Class A
Common Stock and (ii) such escrow arrangements as the Plan Administrator shall
deem appropriate.
3. The Participant shall have full stockholder rights with respect to any
shares of Class A Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while holding one or
more unvested shares of Class A Common Stock issued under the Stock Issuance
Program or should the performance objectives not be attained with respect to
one or more such unvested shares of Class A Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase money note of
the Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive the surrender and
cancellation of one or more unvested shares of Class A Common Stock which would
otherwise occur upon the cessation of the Participant's
B-9
Service or the non attainment of the performance objectives applicable to those
shares. Such waiver shall result in the immediate vesting of the Participant's
interest in the shares as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non attainment of the applicable performance
objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase rights under the Stock
Issuance Program shall terminate automatically, and all the shares of Class A
Common Stock subject to those terminated rights shall immediately vest in full,
in the event of any Corporate Transaction, except to the extent (i) those
repurchase rights are to be assigned to the successor corporation (or parent
thereof) in connection with such Corporate Transaction or (ii) such accelerated
vesting is precluded by other limitations imposed in the Stock Issuance
Agreement.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued under the Stock
Issuance Program or any time while the Corporation's repurchase rights with
respect to those shares remain outstanding, to structure one or more of those
repurchase rights so that such rights shall not be assignable in connection
with a Corporate Transaction and shall accordingly terminate upon the
consummation of such Corporate Transaction, and the shares subject to those
terminated repurchase rights shall thereupon vest in full.
C. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights remain outstanding under the Stock Issuance
Program, to provide that those rights shall automatically terminate in whole or
in part, and the shares of Class A Common Stock subject to those terminated
rights shall immediately vest, in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which those repurchase rights are assigned
to the successor corporation (or parent thereof).
D. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights with respect to those shares remain
outstanding under the Stock Issuance Program, to structure one or more of those
repurchase rights so that such rights shall automatically terminate in whole or
in part, and the shares of Class A Common Stock subject to those terminated
rights shall immediately vest, upon (i) a Change in Control or (ii) the
subsequent termination of the Participant's Service by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of such Change in Control or Involuntary
Termination.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.
B-10
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. Grant Dates. Option grants shall be made on the dates specified below:
1. Each individual serving as a non-employee Board member on the Plan
Effective Date shall automatically be granted at that time a Nonstatutory
Option to purchase 5,000 shares of Class A Common Stock, provided that
individual has not previously been in the employ of the Corporation or any
Parent or Subsidiary.
2. Each individual who is first elected or appointed as a non-employee
Board member on or after the Plan Effective Date shall automatically be
granted, on the date of such initial election or appointment, a Nonstatutory
Option to purchase 20,000/2/ shares of Class A Common Stock, provided that
individual has not previously been in the employ of the Corporation or any
Parent or Subsidiary.
3. In the date of each Annual Stockholders Meeting, beginning with the 1998
Annual Stockholders Meeting, each individual who is to continue to serve as a
non-employee Board member, whether or not that individual is standing for
reelection to the Board at that particular Annual Meeting, shall automatically
be granted a Nonstatutory Option to purchase 5,000/3/ On September 8, 2000,
the stockholders approved increase from 4,000 shares to 5,000 shares. shares
of Class A Common Stock, provided such individual has served as a non-employee
Board member for at least six (6) months. There shall be no limit on the
number of such 5,000 share option grants any one non-employee Board member may
receive over his or her period of Board service, and non-employee Board
members who have previously been in the employ of the Corporation (or any
Parent or Subsidiary) shall be eligible to receive one or more such annual
option grants over their period of continued Board service.
B. Exercise Price.
1. The exercise price per share shall be equal to one hundred percent
(100%) of the Fair Market Value per share of Class A Common Stock on the
option grant date.
2. The exercise price shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
C. Option Term. Each option shall have a term of ten (10) years measured
from the option grant date.
D. Exercise and Vesting of Options. Each initial 20,000 share option grant
shall be immediately exercisable for any or all of the option shares as fully
vested shares of Class A Common Stock and shall remain so exercisable until
the expiration or sooner termination of the option term. Each annual 5,000
share grant shall also be immediately exercisable for any or all of the option
shares. However, the shares of Class A Common Stock purchased under each
annual 5,000 share grant shall be subject to repurchase by the Corporation, at
the exercise price paid per share, upon the Optionee's cessation of Board
service prior to vesting in those shares. Each annual 5,000 share grant shall
vest, and the Corporation's repurchase right shall lapse, in a series of four
(4) successive equal annual installments upon the Optionee's completion of
each year of Board service over the four (4) year period measured from the
automatic grant date.
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(2) On September 8, 2000, the stockholders approved increase from 5,000 shares
to 20,000 shares.
(3) On September 8, 2000, the stockholders approved increase from 4,000 shares
to 5,000 shares.
B-11
E. Termination of Board Service. The following provisions shall govern the
exercise of any options held by the Optionee at the time the Optionee ceases to
serve as a Board member:
(i) The Optionee (or, in the event of Optionee's death, the personal
representative of the Optionee's estate or the person or persons to whom
the option is transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution) shall have a twelve (12) month
period following the date of such cessation of Board service in which to
exercise each such option.
(ii) During the twelve (12) month exercise period, the option may not be
exercised in the aggregate for more than the number of vested shares of
Class A Common Stock for which the option is exercisable at the time of the
Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board member by reason of
death or Permanent Disability, then all shares at the time subject to the
option shall immediately vest so that such option may, during the twelve
(12) month exercise period following such cessation of Board service, be
exercised for all or any portion of those shares as fully vested shares of
Class A Common Stock.
(iv) In no event shall the option remain exercisable after the
expiration of the option term. Upon the expiration of the twelve (12) month
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares
for which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Board service for any reason
other than death or Permanent Disability, terminate and cease to be
outstanding to the extent the option is not otherwise at that time
exercisable for vested shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKEOVER
A. The shares of Class A Common Stock subject to each option outstanding
under this Article Four at the time of a Corporate Transaction but not
otherwise vested shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable for all of the shares of Class A Common Stock at the
time subject to such option and may be exercised for all or any portion of
those shares as fully vested shares of Class A Common Stock. Immediately
following the consummation of the Corporate Transaction, each automatic option
grant shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof).
B. The shares of Class A Common Stock subject to each option outstanding
under this Article Four at the time of a Change in Control but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Change in Control, become fully
exercisable for all of the shares of Class A Common Stock at the time subject
to such option and may be exercised for all or any portion of those shares as
fully vested shares of Class A Common Stock. Each such option shall remain
exercisable for such fully vested option shares until the expiration or sooner
termination of the option term or the surrender of the option in connection
with a Hostile Takeover.
C. All outstanding repurchase rights under the Automatic Option Grant
Program shall automatically terminate, and the unvested shares of Class A
Common Stock subject to those terminated rights shall immediately vest in full,
in the event of any Corporate Transaction or Change in Control.
D. Upon the occurrence of a Hostile Takeover, the Optionee shall have a
thirty (30) day period in which to surrender to the Corporation each of his or
her outstanding automatic option grants. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Takeover Price of the shares of Class A Common Stock at the
time subject to each surrendered option (whether or not the Optionee is
otherwise at the time vested in those shares) over (ii) the aggregate exercise
price payable for such shares. Such cash distribution shall be paid within five
(5) days following the surrender of the option to the Corporation. Stockholder
approval of the Plan on the Plan Effective Date shall constitute pre-approval
of the grant of each such option surrender right under this Automatic Option
Grant Program and the subsequent exercise of that right in accordance with the
terms and provisions of this Section II.
B-12
E. No additional approval or consent of the Plan Administrator or the Board
shall be required at the time of the actual option surrender and cash
distribution.
F. Each option which is assumed in connection with a Corporate Transaction
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply to the number and class of securities which would have been issuable
to the Optionee in consummation of such Corporate Transaction had the option
been exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same.
G. The grant of options under the Automatic Option Grant Program shall in no
way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option Grant
Program shall be the same as the terms in effect for option grants made under
the Discretionary Option Grant Program.
B-13
ARTICLE FIVE
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay the
option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering
a full recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares (less the par value of
those shares) plus (ii) any Federal, state and local income and employment tax
liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Class A Common Stock
upon the exercise of options or the issuance or vesting of such shares under
the Plan shall be subject to the satisfaction of all applicable Federal, state
and local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all holders
of Nonstatutory Options or unvested shares of Class A Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant Program) with the right to use shares of Class A Common Stock in
satisfaction of all or part of the Taxes incurred by such holders in connection
with the exercise of their options or the vesting of their shares. Such right
may be provided to any such holder in either or both of the following formats:
Stock Withholding: The election to have the Corporation withhold, from the
shares of Class A Common Stock otherwise issuable upon the exercise of such
Nonstatutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Taxes (not
to exceed one hundred percent (100%)) designated by the holder.
Stock Delivery: The election to deliver to the Corporation, at the time the
Nonstatutory Option is exercised or the shares vest, one or more shares of
Class A Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on July 25, 1997 and shall become
effective upon approval by the Corporation's stockholders at the 1997 Annual
Meeting held on the Plan Effective Date.
B. The Plan shall terminate upon the earliest to occur of (i) September 4,
2007, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as fully vested shares or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. Upon such plan
termination, all outstanding option grants and unvested stock issuances shall
thereafter continue to have force and effect in accordance with the provisions
of the documents evidencing those grants or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to amend
or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and
B-14
obligations with respect to stock options or unvested stock issuances at the
time outstanding under the Plan unless the Optionee or the Participant consents
to such amendment or modification. In addition, certain amendments may require
stockholder approval pursuant to applicable laws or regulations.
B. Options to purchase shares of Class A Common Stock may be granted under
the Discretionary Option Grant Program and shares of Class A Common Stock may
be issued under the Stock Issuance Program that are in each instance in excess
of the number of shares then available for issuance under the Plan, provided
any excess shares actually issued under those programs shall be held in escrow
until there is obtained stockholder approval of an amendment sufficiently
increasing the number of shares of Class A Common Stock available for issuance
under the Plan. If such stockholder approval is not obtained within twelve (12)
months after the date the first such excess issuances are made, then (i) any
unexercised options granted on the basis of such excess shares shall terminate
and cease to be outstanding and (ii) the Corporation shall promptly refund to
the Optionees and the Participants the exercise or purchase price paid for any
excess shares issued under the Plan and held in escrow, together with interest
(at the applicable Short Term Federal Rate) for the period the shares were held
in escrow, and such shares shall thereupon be automatically cancelled and cease
to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares of
Class A Common Stock under the Plan shall be used for general corporate
purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option under
the Plan and the issuance of any shares of Class A Common Stock (i) upon the
exercise of any granted option or (ii) under the Stock Issuance Program shall
be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the stock
options granted under it and the shares of Class A Common Stock issued pursuant
to it.
B. No shares of Class A Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Class A Common Stock issuable under the Plan, and all applicable listing
requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which Class A Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant any
right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining such person) or of the Optionee or
the Participant, which rights are hereby expressly reserved by each, to
terminate such person's Service at any time for any reason, with or without
cause.
B-15
APPENDIX
The following definitions shall be in effect under the Plan:
A. Automatic Option Grant Program shall mean the automatic option grant
program in effect under the Plan.
B. Board shall mean the Corporation's Board of Directors.
C. Change in Control shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders, or
(ii) a change in the composition of the Board over a period of thirty-
six (36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been
elected or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (A) who were
still in office at the time the Board approved such election or nomination.
D. Class A Common Stock shall mean the Corporation's Class A Common Stock,
which shall be registered under Section 12(g) of the 1934 Act and shall be
entitled to one-tenth of one vote per share on all matters subject to
stockholder approval.
E. Code shall mean the Internal Revenue Code of 1986, as amended.
F. Corporate Transaction shall mean either of the following stockholder
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different
from the persons holding those securities immediately prior to such
transaction, or
(ii) the sale, transfer or other disposition of all or substantially all
of the Corporation's assets in complete liquidation or dissolution of the
Corporation.
G. Corporation shall mean Odetics, Inc., a Delaware corporation, and its
successors.
H. Discretionary Option Grant Program shall mean the discretionary option
grant program in effect under the Plan.
I. Eligible Director shall mean a non-employee Board member eligible to
participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.
J. Employee shall mean an individual who is in the employ of the Corporation
(or any Parent or Subsidiary), subject to the control and direction of the
employer entity as to both the work to be performed and the manner and method
of performance.
K. Exercise Date shall mean the date on which the Corporation shall have
received written notice of the option exercise.
B-16
L. Fair Market Value per share of Class A Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Class A Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be deemed equal to the
closing selling price per share of Class A Common Stock on the date in
question, as such price is reported on the Nasdaq National Market or any
successor system. If there is no closing selling price for the Class A
Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Class A Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to the closing
selling price per share of Class A Common Stock on the date in question on
the Stock Exchange determined by the Plan Administrator to be the primary
market for the Class A Common Stock, as such price is officially quoted in
the composite tape of transactions on such exchange. If there is no closing
selling price for the Class A Common Stock on the date in question, then
the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
M. Hostile Takeover shall mean the acquisition, directly or indirectly, by
any person or related group of persons (other than the Corporation or a person
that directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the meaning of
Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer made directly to the
Corporation's stockholders which the Board does not recommend such stockholders
to accept.
N. Incentive Option shall mean an option which satisfies the requirements of
Code Section 422.
O. Involuntary Termination shall mean the termination of the Service of any
individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a change in
his or her position with the Corporation which materially reduces his or
her duties and responsibilities or the level of management to which he or
she reports, (B) a reduction in his or her level of compensation (including
base salary, fringe benefits and target bonus under any corporate
performance based bonus or incentive programs) by more than fifteen percent
(15%) or (C) a relocation of such individual's place of employment by more
than fifty (50) miles, provided and only if such change, reduction or
relocation is effected by the Corporation without the individual's consent.
P. Misconduct shall mean the commission of any act of fraud, embezzlement or
dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation
(or any Parent or Subsidiary) may consider as grounds for the dismissal or
discharge of any Optionee, Participant or other person in the Service of the
Corporation (or any Parent or Subsidiary).
Q. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
R. Nonstatutory Option shall mean an option not intended to satisfy the
requirements of Code Section 422.
S. Optionee shall mean any person to whom an option is granted under the
Discretionary Option Grant or Automatic Option Grant Program.
B-17
T. Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
U. Participant shall mean any person who is issued shares of Class A Common
Stock under the Stock Issuance Program.
V. Permanent Disability or Permanently Disabled shall mean the inability of
the Optionee or the Participant to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more. However, solely for purposes of the Automatic Option Grant Program,
Permanent Disability or Permanently Disabled shall mean the inability of the
non-employee Board member to perform his or her usual duties as a Board member
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.
W. Plan shall mean the Corporation's 1997 Stock Incentive Plan, as set forth
in this document.
X. Plan Administrator shall mean the particular entity, whether the Primary
Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity
is carrying out its administrative functions under those programs with respect
to the persons under its jurisdiction.
Y. Plan Effective Date shall mean September 5, 1997, the date of the 1997
Annual Stockholders Meeting at which the Plan is approved by the Corporation's
stockholders.
Z. Primary Committee shall mean the committee of two (2) or more non-
employee Board members appointed by the Board to administer the Discretionary
Option Grant and Stock Issuance Programs with respect to Section 16 Insiders.
AA. Secondary Committee shall mean a committee of one (1) or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
BB. Section 16 Insider shall mean an officer or director of the Corporation
subject to the short swing profit liabilities of Section 16 of the 1934 Act.
CC. Service shall mean the performance of services for the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a non-
employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.
DD. Stock Exchange shall mean either the American Stock Exchange or the New
York Stock Exchange.
EE. Stock Issuance Agreement shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Class A
Common Stock under the Stock Issuance Program.
FF. Stock Issuance Program shall mean the stock issuance program in effect
under the Plan.
GG. Subsidiary shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at
the time of the determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
B-18
HH. Takeover Price shall mean the greater of (i) the Fair Market Value per
share of Class A Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Takeover or (ii) the highest reported
price per share of Class A Common Stock paid by the tender offeror in effecting
such Hostile Takeover. However, if the surrendered option is an Incentive
Option, the Takeover Price shall not exceed the clause (i) price per share.
II. Taxes shall mean the Federal, state and local income and employment tax
liabilities incurred by the holder of Nonstatutory Options or unvested shares
of Class A Common Stock in connection with the exercise of those options or the
vesting of those shares.
JJ. 10% Stockholder shall mean the owner of stock (as determined under Code
Section 424(d)) possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation (or any Parent or
Subsidiary).
B-19
PROXY
ODETICS, INC.
CLASS A COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Class A common stock of ODETICS, INC. hereby
appoints THOMAS G. BARTHOLET and GARY SMITH, and each of them, proxies of the
undersigned, each with full power to act without the other and with power of
substitution, to represent the undersigned at the Annual Meeting of Stockholders
of Odetics to be held at 1515 South Manchester Avenue, Anaheim, California on
September 14, 2001 at 10:00 a.m. (Pacific Time), and at any adjournments
thereof, and to vote all shares of Class A common stock of Odetics held of
record by the undersigned on July 27, 2001, with all the powers the undersigned
would possess if personally present, in accordance with the instructions on the
reverse hereof.
The undersigned hereby revokes any other proxy to vote at such Annual
Meeting of Stockholders and hereby ratifies and confirms all that said proxies,
and each of them, may lawfully do by virtue hereof. The undersigned also
acknowledges receipt of the Notice of Annual Meeting of Stockholders, the proxy
statement, the annual report to stockholders on Form 10-K/A for the year ended
March 31, 2001, and the quarterly report on Form 10-Q for the quarter ended June
30, 2001, which were furnished with this proxy.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS BELOW, OR IF NO INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3, 4 AND 5, AND IN ACCORDANCE WITH THE DISCRETION OF
THE PROXY HOLDERS WITH REGARD TO ANY OTHER MATTERS PROPERLY BROUGHT TO A VOTE AT
THE ANNUAL MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
[X] Please mark votes as in this example.
1. Election of Directors
Nominees standing for election by holders of Class A common stock:
Crandall Gudmundson and Jerry F. Muench.
[_] FOR [_] WITHHOLD AUTHORITY to vote for all nominees listed below
Nominees standing for election by holders of Class A common stock and
Class B common stock voting together as a single class: Kevin C.
Daly, Gregory A. Miner, John W. Seazholtz, Joel Slutzky, Thomas L.
Thomas and Paul E. Wright.
[_] FOR [_] WITHHOLD AUTHORITY to vote for all nominees listed below
(Instruction: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below.)
----------------------------------------------------------------------------
2. Approval of the amendment of the Certificate of Incorporation of Odetics to
increase the aggregate number of authorized shares of Class A common stock
from 10,000,000 shares to 50,000,000 shares.
[_] FOR [_] AGAINST [_] ABSTAIN
3. Approval of the amendment to Odetics' 1997 Stock Incentive Plan to increase
the number of shares of Class A common stock authorized for issuance by an
additional 475,000 shares to 1,805,000 shares.
[_] FOR [_] AGAINST [_] ABSTAIN
4. Approval and ratification of the sale and issuance of an aggregate of
70,126 shares of Class A common stock to the Chief Executive Officer and
Chairman of the Board of Odetics at a purchase price of $14.26 per share,
as required by the rules of the Nasdaq National Market.
[_] FOR [_] AGAINST [_] ABSTAIN
5. Ratification of Ernst & Young LLP as the independent auditors of Odetics
for the fiscal year ending March 31, 2002.
[_] FOR [_] AGAINST [_] ABSTAIN
MARK HERE FOR ADDRESS CHANGE AND INDICATE NEW ADDRESS [_]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [_]
Signature:_____________________________________ Date__________________________
Signature:_____________________________________ Date__________________________
(This Proxy must be signed exactly as your name appears hereon. Executors,
administrators, trustees, etc., should give full title as such. If the
stockholder is a corporation, a duly authorized officer should sign on behalf of
the corporation and should indicate his or her title.)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
PROXY
ODETICS, INC.
CLASS B COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Class B common stock of ODETICS, INC. hereby
appoints THOMAS G. BARTHOLET and GARY SMITH, and each of them, proxies of the
undersigned, each with full power to act without the other and with power of
substitution, to represent the undersigned at the Annual Meeting of Stockholders
of Odetics to be held at 1515 South Manchester Avenue, Anaheim, California on
September 14, 2001 at 10:00 a.m. (Pacific Time), and at any adjournments
thereof, and to vote all shares of Class B common stock of Odetics held of
record by the undersigned on July 27, 2001, with all the powers the undersigned
would possess if personally present, in accordance with the instructions on the
reverse hereof.
The undersigned hereby revokes any other proxy to vote at such Annual
Meeting of Stockholders and hereby ratifies and confirms all that said proxies,
and each of them, may lawfully do by virtue hereof. The undersigned also
acknowledges receipt of the Notice of Annual Meeting of Stockholders, the proxy
statement, the annual report to stockholders on Form 10-K/A for the year ended
March 31, 2001, and the quarterly report on Form 10-Q for the quarter ended June
30, 2001, which were furnished with this proxy.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS BELOW, OR IF NO INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3, 4 AND 5, AND IN ACCORDANCE WITH THE DISCRETION OF
THE PROXY HOLDER WITH REGARD TO ANY OTHER MATTERS PROPERLY BROUGHT TO A VOTE AT
THE ANNUAL MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
[X] Please mark votes as in this example.
1. Election of Directors
Nominees standing for election by holders of Class A common stock and
Class B common stock voting together as a single class: Kevin C. Daly,
Gregory A. Miner, John W. Seazholtz, Joel Slutzky, Thomas L. Thomas and
Paul E. Wright.
[_] FOR [_] WITHHOLD AUTHORITY to vote for all nominees listed below
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
2. Approval of the amendment of the Certificate of Incorporation of Odetics
to increase the aggregate number of authorized shares of Class A common
stock from 10,000,000 shares to 50,000,000 shares.
[_] FOR [_] AGAINST [_] ABSTAIN
3. Approval of the amendment to Odetics' 1997 Stock Incentive Plan to
increase the number of shares of Class A common stock authorized for
issuance by an additional 475,000 shares to 1,805,000 shares.
[_] FOR [_] AGAINST [_] ABSTAIN
4. Approval and ratification of the sale and issuance of an aggregate of
70,126 shares of Class A common stock to the Chief Executive Officer and
Chairman of the Board of Odetics at a purchase price of $14.26 per share,
as required by the rules of the Nasdaq National Market.
[_] FOR [_] AGAINST [_] ABSTAIN
5. Ratification of Ernst & Young LLP as the independent auditors of Odetics
for the fiscal year ending March 31, 2002.
[_] FOR [_] AGAINST [_] ABSTAIN
MARK HERE FOR ADDRESS CHANGE AND INDICATE NEW ADDRESS [_]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [_]
Signature:_______________________________________ Date:_______________________
Signature:_______________________________________ Date:_______________________
(This Proxy must be signed exactly as your name appears hereon. Executors,
administrators, trustees, etc., should give full title as such. If the
stockholder is a corporation, a duly authorized officer should sign on behalf of
the corporation and should indicate his or her title.)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE