-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WpoGx/XMqYpeHzaxB3Ezq0QkNnQjqMGGfzSa+PGta1JQ0v7WIMnvYwi/3skV40DP ZDLCUmrXSLIAyFWQhBbiMQ== 0000050842-96-000003.txt : 19960201 0000050842-96-000003.hdr.sgml : 19960201 ACCESSION NUMBER: 0000050842-96-000003 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960221 FILED AS OF DATE: 19960131 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERPOINT CORP /NEW/ CENTRAL INDEX KEY: 0000050842 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 910850556 STATE OF INCORPORATION: WA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-11069 FILM NUMBER: 96509118 BUSINESS ADDRESS: STREET 1: 10301 WILLOWS RD STREET 2: PO BOX 97005 CITY: REDMOND STATE: WA ZIP: 98073-9705 BUSINESS PHONE: 2068823100 MAIL ADDRESS: STREET 1: 10301 WILLOWS ROAD STREET 2: PO BOX 97005 CITY: REDMOND STATE: WA ZIP: 98073-9705 FORMER COMPANY: FORMER CONFORMED NAME: INTEGRATED CIRCUITS INC DATE OF NAME CHANGE: 19890321 DEF 14A 1 DEFINITIVE PROXY STATEMENT INTERPOINT CORPORATION 10301 Willows Road, PO Box 97005 Redmond, Washington 98073-9705 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To Be Held February 21, 1996 TO THE SHAREHOLDERS: The Annual Meeting of Shareholders of Interpoint Corporation, a Washington corporation (the Company), will be held on Wednesday, February 21, 1996, at 10:00 a.m., local time, at the Hyatt Regency Bellevue at Bellevue Place, 900 Bellevue Way N.E., Bellevue, Washington, for the following purposes. 1. To elect four directors, three to hold office for three- year terms and one to hold office for a two-year term; 2. To consider and vote upon a proposal to approve the adoption of the Interpoint Corporation 1995 Stock Option and Award Plan; 3. To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof. Only holders of record of shares of Interpoint Common Stock at the close of business on January 5, 1996, the record date for the Annual Meeting, are entitled to notice of and to vote at the Annual Meeting and adjournments or postponements thereof. Shareholders are cordially invited to attend the meeting in person. By Order of the Board of Directors /s/Leslie S. Rock Leslie S. Rock Secretary-Treasurer Redmond, Washington January 25, 1996 PLEASE COMPLETE, DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE RETURN ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. INTERPOINT CORPORATION 10301 Willows Road P.O. Box 97005 Redmond, Washington 98073-9705 PROXY STATEMENT This Proxy Statement, which was first mailed to shareholders of Interpoint Corporation (the Company) on January 25, 1996, is furnished to Shareholders of the Company (Shareholders) in connection with the solicitation of proxies by the Board of Directors of the Company for the Annual Meeting of Shareholders to be held February 21, 1996, and any adjournment or postponement thereof (the Annual Meeting). A proxy may be revoked in writing at any time before it is exercised by filing with the Secretary of the Company a written revocation or a duly executed proxy bearing a later date. A proxy may also be revoked by attending the Annual Meeting and voting in person. If the enclosed form of proxy is properly executed and returned, it will be voted in accordance with the instructions given, but may be revoked at any time to the extent it has not been exercised. There were 3,839,100 shares of the Company's Common Stock (Common Stock), the only security of the Company entitled to vote at the Annual Meeting, outstanding at January 5, 1996. Holders of a majority of those shares, present in person or represented by proxy, will constitute a quorum. Shareholders are entitled to one vote for each share of Common Stock held of record at the close of business on January 5, 1996, the record date for the Annual Meeting. The cost of soliciting proxies will be borne by the Company. Proxies will be solicited by certain of the Company's directors, officers and regular employees (team members), without additional compensation, personally or by telephone or telefax. In addition, the Company may reimburse brokerage firms and other persons representing beneficial owners of shares of Common Stock for their expenses in forwarding solicitation materials to such beneficial owners. Each shareholder will be entitled to one vote for each share of Common Stock held. Directors will be elected by a plurality of the shares of Common Stock present by proxy or in person at the Annual Meeting. Holders of Common Stock are not entitled to cumulate votes in the election of directors. Abstention from voting and broker nonvotes on the election of directors will have no impact on the outcome of this proposal. The affirmative vote of holders of a majority of the shares of Common Stock present and entitled to vote at the Annual Meeting is required for approval of the Interpoint Corporation 1995 Stock Option and Award Plan. Abstention from voting will have the practical effect of voting against this proposal since such shares are present at the meeting and entitled to vote but are not voting in favor of the proposal. Broker nonvotes will have no effect on the outcome of this proposal since they are not considered shares entitled to vote on the proposal. The Company is not aware, as of the date hereof, of any matters to be voted upon at the Annual Meeting other than as stated in the accompanying Notice of Annual Meeting of Shareholders. The enclosed Proxy gives discretionary authority to the persons named therein to vote the shares in their best judgment if any other matters are properly brought before the Annual Meeting. ELECTION OF DIRECTORS The Board of Directors is divided into three classes. At the Annual Meeting, three directors will be elected to serve for terms of three years, expiring on the date of the Annual Meeting of Shareholders in 1999, and one director will be elected to serve for a term of two years, expiring on the date of the Annual Meeting of Shareholders in 1998. Each director elected will continue in office until a successor has been elected or until resignation or removal in the manner provided by the Bylaws of the Company. The nominee, Walter F. Walker, was appointed effective November 20, 1995, to fill a vacancy on the Board of Directors and is being nominated for a shorter term in order to keep the director classes as equal in size as possible, as required by Washington law. The names of nominees to the Board of Directors, each of whom is presently a director of the Company, and the names of directors whose terms will continue after the Annual Meeting are listed below. Unless otherwise instructed, the persons named in the accompanying proxy intend to vote shares represented by properly executed proxies for the four nominees named below. If any nominee becomes unavailable for any reason or if a vacancy occurs before the election (which events are not anticipated), the proxies may be voted for a person to be selected by the Board of Directors. Nominees Name and Age Director Since Christopher T. Bayley, age 57 1987 Chairman, Dylan Bay Companies, since 1995; Chairman, New Pacific Partners (Seattle and Hong Kong-based investment bank), 1992 to 1995; President and Chief Executive Officer, Glacier Park Company (real estate development), and Senior Vice President, Corporate Affairs, Burlington Resources Inc. (oil and gas exploration and production company), 1985 to 1992 and 1989 to 1992, respectively; Director, The Commerce Bank; Board of Governors, The Nature Conservancy; Board of Governors, The Bush School. John W. Stanton, age 40 1988 Chairman and Chief Executive Officer, Western Wireless Corporation and predecessors, since 1992; Vice Chairman and Director, McCaw Cellular Communications, Inc. (mobile communications company), 1988 to 1991; Trustee, Whitman College. Peter H. van Oppen, age 43 1984 Chairman of the Board of Directors, Interpoint, since 1995; President and Chief Executive Officer, Interpoint, since 1989; President and Chief Operating Officer, Interpoint, 1987 to 1989; Executive Vice President for Finance and Operations, Interpoint, 1985 to 1987; Director, Seattle FilmWorks, Inc.; Member, Advisory Council on Small Business and Agriculture of the Federal Reserve Bank of San Francisco. Walter F. Walker, age 41 1995 President, Seattle SuperSonics National Basketball Association basketball team (a subsidiary of Ackerley Communications, Inc.) since 1994; President, Walker Capital (a money management firm), from March 1994 to September 1994; Vice President, Goldman Sachs & Co. (an investment banking firm), from 1987 to 1994. Director, Redhook Ale Brewery, Incorporated and Gargoyles Inc. (eyeware manufacturer). Continuing Directors Name and Age Term Expires Director Since Russell F. McNeill, age 84 1997 1977 Secretary Emeritus, Interpoint, since 1992; Secretary, Interpoint, 1977 to 1992; former President, Old National Bank of Washington; Trustee Emeritus, Whitman College. David A. Uvelli, Ph.D., age 48 1997 1991 Senior Vice President and General Manager, Power Products Division, Interpoint, since 1991; Vice President, Marketing and Major Programs, Power Products Division, Interpoint, 1990 to 1991; Director, Marketing, Interpoint, 1989 to 1990; Marketing Manager, Major Programs, Interpoint, 1988 to 1989; former Associate Professor, University of Washington. Walter P. Kistler, age 76 1998 1972 Chairman of the Board of Directors, Kistler Aerospace Corporation, since 1993; Chairman Emeritus of the Board of Directors, Interpoint, since 1987; Chairman, Interpoint, 1974 to 1987; Chairman, Kistler-Morse Corporation (electronic equipment manufacturer), since 1972. Calvin A.H. Waller, age 58 1998 1991 Lieutenant General, United States Army, Retired; Vice President, Site Operations and Integration, Kaiser Hill Company, L.L.C., since 1995; Senior Vice President, Environment and Energy Group, ICF Kaiser International, Inc. (engineering, construction and consulting company), 1994 to 1995; President and Chief Executive Officer, RKK, Ltd. (environmental technology company), 1991 to 1994; former Deputy Commander-in-Chief, Operations Desert Shield/Storm; former Commanding General, I Corps and Fort Lewis, Washington, 1989 to 1991; 32 years active service in the U.S. Army; Chairman, Nonprofit "Fund for the Next Generation"; Director, Bank One, Colorado Springs, Colorado; Trustee, Colorado College; Trustee, Florida International University Foundation. Board of Directors Meetings and Committees During the last fiscal year there were four meetings of the Board of Directors. All directors attended at least 75% of meetings held. The Board of Directors maintains an Audit Committee, a Nominating Committee and a Compensation and Stock Option Committee. The Audit Committee, composed of Messrs. Kistler and McNeill, reviewed with the Company's independent auditors the scope, results and costs of the audit engagement. During the past year there were two meetings of the Audit Committee. All committee members attended the meetings held. The Nominating Committee, composed of Messrs. Bayley, van Oppen and Waller, nominates and recommends candidates for the Board of Directors. During the past year there was one meeting of the Nominating Committee. All committee members attended the meeting held. The Nominating Committee will consider the names and qualifications for candidates for the Board submitted by Shareholders to the Secretary of the Company in writing on or before the date specified below under "Shareholder Proposals for 1997 Annual Meeting." The Compensation and Stock Option Committee, composed of Messrs. Bayley, Kistler and Stanton, determines the salaries and bonuses to be paid the President and Chief Executive Officer of Interpoint and reviews the salaries and bonuses for those reporting to the President and Chief Executive Officer. The Committee also administers Interpoint's stock option plans and meets either independently or in conjunction with the full Interpoint Board to grant options to eligible individuals in accordance with the terms of each plan. During the past year there were four meetings of the Compensation and Stock Option Committee. All Committee members attended at least 75% of the meetings held. In December 1995, the Board of Directors agreed to certain reassignments among Committee memberships. For the upcoming year, the Audit Committee will be comprised of Messrs. McNeill, Kistler and Walker; the Nominating Committee will be comprised of Messrs. Bayley, van Oppen and Waller; and the Compensation and Stock Option Committee will be comprised of Messrs. Bayley, Stanton and Walker. Directors' Compensation In 1995, nonemployee directors were paid a retainer of $500 per quarter and $500 for each meeting attended. Mr. Bayley, who served as Lead Director, received a retainer of $1,000 per quarter. Employee directors of the Company are not paid any fees for serving as members of the Interpoint Board. Audit Committee members are paid $50 per hour up to a maximum of ten hours per year for their services. In addition, each nonemployee director, upon his or her first election or appointment, receives a Nonqualified Stock Option for 5,500 shares of Interpoint Common Stock. The Interpoint Corporation 1995 Stock Option and Award Plan presented for approval at the Annual Meeting provides for an annual grant of options to purchase 500 shares of stock to each nonemployee director on the date of each annual meeting. Such options will vest on the date of the next annual meeting and expire after five years with the first grant effective February 22, 1995. EXECUTIVE OFFICERS OF INTERPOINT The following are executive officers of Interpoint who will serve in the capacities noted until their successors are appointed:
Name Age Positions and Offices with Interpoint ---- --- ------------------------------------- Peter H. van Oppen 43 Chairman, President, and Chief Executive Officer David A. Uvelli 48 Senior Vice President and General Manager, Power Products Division, Director Charles H. Stonecipher 34 Senior Vice President and Chief Operating Officer, Advanced Digital Information Corporation (ADIC) Sally M. Veillette 34 Vice President and General Manager, Custom Microelectronics Division Leslie S. Rock 38 Vice President, Chief Accounting Officer, Secretary-Treasurer
Each executive officer of the Company is appointed annually by the Board of Directors. For biographical summaries of Mr. van Oppen and Dr. Uvelli, see "ELECTION OF DIRECTORS." Mr. Stonecipher has served as Senior Vice President and Chief Operating Officer of Advanced Digital Information Corporation since 1995, and Vice President, Finance and Administration, and Chief Financial Officer, 1994 to 1995. Prior to that he worked as a Manager at Bain & Company from 1992 to 1994 and a Consultant at Bain & Company from 1989 to 1992. Ms. Veillette has served as Vice President and General Manager, Custom Microelectronics Division, since 1994; Director and General Manager, Medical Microelectronics Division, 1993 to 1994; and Regional Sales Manager, 1990 to 1993. Ms. Rock has served as Vice President, Treasurer and Secretary since 1994; Vice President, Finance from 1989 to 1994; Chief Financial Officer, 1987 to 1994; and Controller from 1986 to 1994. EXECUTIVE COMPENSATION Summary Compensation Table The following table shows the compensation for services rendered during the fiscal years ended October 31, 1995, 1994 and 1993 for the Chief Executive Officer and the Company's most highly compensated executive officers whose annual salary and bonus exceeded $100,000 in 1995.
Name and Principal Awards/ All Other Position Year Salary Bonus(2) Options(#) Compensation - --------------------- ---- --------- -------- ---------- ------------ Peter H. van Oppen 1995 $ 212,493 $ 20,636 -- $ 150 (3) Chairman, President, 1994 202,339 45,896 -- 150 (3) CEO and Director(1) 1993 194,322 5,642 10,000 150 (3) David A. Uvelli 1995 114,574 10,096 5,000 150 (3) Senior Vice President 1994 102,573 20,575 -- 150 (3) and General Manager, 1993 89,965 2,689 5,000 150 (3) Power Products Division and Director Charles H. Stonecipher 1995 110,216 7,650 10,000 150 (3) Senior Vice President, 1994 25,004 2,089 15,000 33,879 (4) Chief Operating Officer, ADIC(5) Sally M. Veillette 1995 93,162 10,357 7,500 150 (3) Vice President and 1994 66,955 13,633 -- 150 (3) General Manager, 1993 46,939 1,398 6,000 150 (3) Custom Microelectronics Division
(1) Salary excludes cash-out of unused sick days and vacation days in accordance with Interpoint's flexible time-off plan, which is applicable to all Interpoint Team Members. Such cash-out amounted to $4,023, $8,420 and $5,358 in fiscal 1995, 1994 and 1993, respectively. (2) Consists of profit bonus awards associated with performance for that year and Management Incentive Plan (MIP) awards for fiscal 1995 and 1994. (3) Consists of matching contributions to the 401(k) plan. (4) Includes a payment in the amount of $33,729 associated with relocation expenses. The remainder consists of matching contributions to the 401(k) plan. (5) Mr. Stonecipher joined the Company in August, 1994. Option Grants Table The following table sets forth certain information regarding options granted during the fiscal year ended October 31, 1995 to the Company's executive officers as to whom compensation is reported in this Proxy Statement.
------------------------------------------------ Potential Realizable Number of Percent of Value at Assumed Shares Total Options Annual Rates of Stock Underlying Granted to Price Appreciation Options Team Members Exercise for Option Terms(3) Granted in Price Expiration -------------------- Name (#) Fiscal Year ($/Share) Date 5% 10% ---- ---------- ------------- --------- ---------- ------- --------- Peter H. van Oppen -- -- -- -- -- -- David A. Uvelli 5,000 4.91% $8.875 2/22/00 (2) $12,260 $27,091 Charles H. Stonecipher 8,000 7.86% $8.875 2/22/00 (2) $19,616 $43,346 2,000 1.96% $11.00 8/16/05 (1) $13,836 $35,062 Sally M. Veillette 5,000 4.91% $8.875 2/22/00 (2) $12,260 $27,091 2,500 2.46% $11.00 8/16/05 (1) $17,295 $43,828
(1) The options vest upon the earlier of July 16, 2005 and the last day of the consecutive 40-day period during which the market price of Interpoint Common Stock has been at or above $15 per share. The per share exercise price represents the fair market value of the Interpoint Common Stock on the date of grant. The options expire ten years from the date of grant. (2) The options vest in four equal annual installments beginning one year after the date of grant. The per share exercise price represents the fair market value of the Interpoint Common Stock on the date of grant. The options expire five years from the date of grant. (3) Future value of current year grants assuming appreciation of 5% and 10% per year over the five-year or ten-year option period. The actual value realized may be greater than or less than the potential realizable values set forth in the table. Option Exercises and Year-End Value Table The following table sets forth certain information as of October 31, 1995, regarding options held by the Company's executive officers as to whom compensation is reported in this Proxy Statement. None of such executive officers exercised any options during the fiscal year ended October 31, 1995.
Total Number of Value of Unexercised Unexercised Options at in-the-Money Options Fiscal Year-End(#) at Fiscal Year-End($)(1) -------------------------- -------------------------- Name Exercisable Unexercisable Exercisable Unexercisable ---- ----------- ------------- ----------- ------------- > Peter H. van Oppen 102,500 10,000 $ 656,735 $ 40,000 David A. Uvelli 12,000 11,000 $ 72,375 $ 36,125 Charles H. Stonecipher 3,750 21,250 $ 10,313 $ 50,438 Sally M. Veillette 3,000 11,000 $ 13,938 $ 27,125
(1) Calculated on the basis of the fair market value of the underlying securities as of October 31, 1995, less the option exercise price times the number of shares. Report of the Compensation and Stock Option Committee on Annual Compensation The policy of the Compensation and Stock Option Committee (the Committee) with respect to executive officer compensation is that such compensation should (i) assist Interpoint in attracting and retaining key executives critical to the Company's long-term success, (ii) align the interests of the executives with the long-term interests of the shareholders, (iii) reflect Interpoint's performance and (iv) reward executives for their individual performance. Executive compensation includes base salary, bonuses based on Company performance and stock option grants. These programs are designed to provide incentives for both short and long-term performance. Base Salary. The base salary of the Chief Executive Officer (CEO) is set at an amount the Committee believes is competitive with salaries paid to executives of companies of comparable size and of companies located within the local area. In evaluating salaries, the Committee uses an American Electronics Association survey which provides data by industry and size of company. Additionally, a detailed review of the CEO's performance and a general review of the Company's financial and stock price performance are considered. The base salary for executive officers and all other salaried Team Members is reviewed once per year with adjustments effective August 1. The CEO's base salary was increased from $210,000 to $220,000 on August 1, 1995. This adjustment provided an increase of 4.7 percent which is approximately equal to the average adjustment granted to other executive officers and salaried Team Members. Some, but not all, of the companies included this survey are included in the Nasdaq Electronic Components Index shown on the Performance Graph. Additionally, it places the CEO's salary slightly below the average indicated in the survey referred to above. Bonuses. Bonuses are paid under Profit Sharing and Management Incentive Plans. The Profit Sharing Plan is a noncontributory plan that covers all U.S.-based Team Members. The plan, which has been in place in substantially the same form since 1973, provides for fifteen percent of pretax profits to be contributed to the Plan which is then allocated among the Team Members, including the CEO, based upon his or her monthly wage and length of service. The Management Incentive Plan (MIP) is also noncontributory and covers approximately 60 key Team Members. Interpoint's Board of Directors may set aside a portion of pretax profits for payment under the MIP based upon achievement of certain corporate performance goals which are established at the beginning of the year. These goals are primarily tied to operating profit and in 1995 provided for significant growth in sales and profitability. Upon achievement of these goals, MIP payment targets are set as a percentage of base compensation depending on the Team Member's level of responsibility. In 1995, based upon partial achievement of these goals, the Committee determined that $85,000 should be paid out in the form of MIP payments. This amount was distributed based upon level of responsibility, with the CEO receiving $6,500. Historically, the plan has distributed between zero and ten percent of pretax profits. Stock Option Grants. The Company provides its executive officers with long-term incentives through the Stock Option Plans, the objective of which is to provide incentives to maximize shareholder value. There were no option grants made to the CEO during 1995. COMPENSATION AND STOCK OPTION COMMITTEE John W. Stanton, Chairman Christopher T. Bayley Walter P. Kistler Performance Graph Comparison of Five-Year Cumulative Return(1) Among Interpoint Corporation, Nasdaq Electronic Components Index and S&P 500 Index
1990 1991 1992 1993 1994 1995 ------ ------ ------ ------ ------ ------ Interpoint Corporation 100.00 122.22 161.11 166.67 188.89 250.00 Nasdaq Electronic Components Index 100.00 144.27 202.40 345.85 382.36 779.19 Standard & Poor's 500 Index 100.00 129.10 137.72 153.89 155.38 191.28
(1) Assumes $100 invested at the close of trading on October 31, 1990 in Interpoint Common Stock, in the Nasdaq Electronic Components Index and in the S&P 500 Index. NOTE: Stock price performance shown above for Interpoint Common Stock is historical and not necessarily indicative of future price performance. Section 16 Reporting Section 16(a) of the Exchange Act requires Interpoint's officers and directors, and persons who own more than 10% of a registered class of Interpoint's equity securities, to file reports of ownership and changes in ownership with the Commission. Officers, directors and greater than 10% shareholders are required by Commission regulation to furnish Interpoint with copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons that no Form 5s were required for those persons, Interpoint believes that during fiscal 1995 all filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with. PRINCIPAL SHAREHOLDERS Principal Shareholders The following table sets forth information as of January 5, 1996, with respect to all shareholders known by Interpoint to be the beneficial owners of more than 5% of the outstanding shares of Interpoint Common Stock. Except as noted, Interpoint believes that the beneficial owners of the shares of Interpoint Common Stock listed below, based on information furnished by such owners, have sole voting and investment power with respect to such shares.
Shares Beneficially Owned ------------------------- Name and Address Number Percent ---------------- ----------- ----------- John W. Stanton 290,232 (1) 7.6% 10301 Willows Road Redmond, Washington 98073-9705 Ernest G. Brown 251,400 6.5 Redmond, Washington Walter P. Kistler 250,470 (1) 6.5 10301 Willows Road Redmond, Washington 98073-9705 Kennedy Capital Management 224,000 5.8 St. Louis, Missouri Peter H. van Oppen 204,176 (2) 5.3 10301 Willows Road Redmond, Washington 98073-9705
(1) Includes 5,500 shares subject to issuance upon exercise of Interpoint options that are exercisable within 60 days. Also includes 500 shares subject to issuance upon exercise of Interpoint options that are exercisable within 60 days, pending shareholder approval of the 1995 Stock Option and Award Plan at the Annual Meeting of Shareholders. (2) Does not include 5,150 shares that are held in trust for Mr. van Oppen's minor children or 3,000 shares that are held in a trust (as to which Mr. van Oppen serves as trustee) for the benefit of certain minor relatives of Mr. van Oppen, as to which he disclaims any beneficial ownership. Includes 91,241 shares subject to issuance upon exercise of Interpoint options that are exercisable within 60 days. Security Ownership of Management The following table sets forth information as of January 5, 1996, with respect to the beneficial ownership of shares of Interpoint Common Stock of each director of Interpoint, each of Interpoint's executive officers for whom compensation is reported in this Proxy Statement, and all directors and executive officers of Interpoint as a group. Except as noted, Interpoint believes that the beneficial owners listed below, based on information furnished by such owners, have sole voting and investment power with respect to such shares.
Shares Beneficially Owned _________________________ Name Number Percent ---- ------------ ----------- John W. Stanton(1) 290,232 7.6 % Walter P. Kistler(1) 250,470 6.5 Peter H. van Oppen(2) 204,176 5.3 Christopher T. Bayley(1) 30,000 * David A. Uvelli(3) 20,585 * Russell F. McNeill(4) 4,900 * Calvin A.H. Waller(1) 6,000 * Charles H. Stonecipher(5) 6,750 * Sally M. Veillette(6) 4,250 * Walter F. Walker 10,000 * All directors and executive officers as a group (11 persons)(7) 837,098 21.8
* Less than 1% (1) Includes 5,500 shares subject to issuance upon exercise of Interpoint options that are exercisable within 60 days. . Also includes 500 shares subject to issuance upon exercise of Interpoint options that are exercisable within 60 days, pending shareholder approval of the 1995 Stock Option and Award Plan at the Annual Meeting of Shareholders. (2) Does not include 5,150 shares that are held in trust for Mr. van Oppen's minor children or 3,000 shares that are held in a trust (as to which Mr. van Oppen serves as trustee) for the benefit of certain minor relatives of Mr. van Oppen, as to which he disclaims any beneficial ownership. Includes 91,241 shares subject to issuance upon exercise of Interpoint options that are exercisable within 60 days. (3) Includes 13,250 shares subject to issuance upon exercise of Interpoint options that are exercisable within 60 days. (4) Includes 4,400 shares subject to issuance upon exercise of Interpoint options that are exercisable within 60 days. Also includes 500 shares subject to issuance upon exercise of Interpoint options that are exercisable within 60 days, pending shareholder approval of the 1995 Stock Option and Award Plan at the Annual Meeting of Shareholders. (5) Includes 5,750 shares subject to issuance upon exercise of Interpoint options that are exercisable within 60 days. (6) Includes 4,250 shares subject to issuance upon exercise of Interpoint options that are exercisable within 60 days. (7) Includes 151,441 shares subject to issuance upon exercise of Interpoint options that are exercisable within 60 days. APPROVAL OF THE 1995 STOCK OPTION AND AWARD PLAN The 1995 Plan as adopted by the Board on February 22, 1995 and amended and restated by the Board on December 6, 1995, is submitted to the Company's shareholders for approval at the Annual Meeting. The 1995 Plan is the successor to the Company's Amended 1985 Stock Option Plan and the Amended Non-Qualified Stock Option Plan (the "1985 Plans"), both of which expired on December 17, 1995. A copy of the 1995 Plan is attached to this Proxy Statement as Exhibit A. The following description of the 1995 Plan is a summary and does not purport to be fully descriptive. Reference is made to Exhibit A for more detailed information. Introduction While similar to the 1985 Plans, in that the 1995 Plan includes provisions for the same kinds of option awards that could be made under the 1985 Plans, the 1995 Plan gives the Company greater flexibility in certain respects. The 1995 Plan also provides for automatic annual grants of options to purchase 500 shares to each nonemployee director, as well as one-time automatic grants of options to purchase 5,500 shares to each nonemployee director upon the director's initial election or appointment to the Board. The Amended 1985 Stock Option Plan provided only for one-time grants to new nonemployee directors. Summary of the 1995 Plan The 1995 Plan provides for grants of incentive stock options and nonqualified stock options. Stock Subject to the 1995 Plan. Subject to adjustment from time to time as provided in the 1995 Plan, the maximum of 100,000 shares of Common Stock will be available for issuance under the 1995 Plan. As of January 5, 1996, options to purchase 392,554 shares were outstanding under the 1985 Plans and, subject to shareholder approval of the 1995 Plan, options to purchase 2,500 shares were outstanding under the 1995 Plan. Shares issued pursuant to the 1995 Plan will be drawn from authorized and unissued shares or shares now held or subsequently acquired by the company. The closing price of the Common Stock as reported on the Nasdaq National Market on January 5, 1996 was $9.25 per share. Subject to adjustment from time to time as provided in the 1995 Plan, not more than 50,000 shares of Common Stock may be subject to grants of options under the 1995 Plan to any participant in any one fiscal year of the Company, to the extent required for compliance with certain exemptive provisions of Section 162(m) of the Code, which precludes the Company from taking a tax deduction for compensation payments to executives in excess of $1 million, unless such payments qualify for the "performance-based" exemption from the $1 million limitation. Any shares of Common Stock that have been made subject to an award that cease to be subject to the award (other than by reason of exercise), including, without limitation, in connection with the cancellation of an award and the grant of a replacement award, will be available for issuance in connection with future grants of awards under the 1995 Plan. Eligibility to Receive Awards. Discretionary awards may be granted under the 1995 Plan to those officers and key employees (including directors who are also employees) of the Company and its subsidiaries as the plan administrator from time to time selects. Awards may also be made to consultants, advisors and agents who provide services to the Company and its subsidiaries. Nonemployee directors are eligible to receive only the automatic awards specified in the 1995 plan. Terms and Conditions of Stock Option Grants. Options granted under the 1995 Plan may be "incentive stock options" (as defined in Section 422 of the Code) or "nonqualified stock options." The option price for each option granted under the 1995 Stock Option Plan will be determined by the plan administrator, but will be not less than 100% of the Common Stock's fair market value on the date of grant. For purposes of the 1995 Stock Option Plan, "fair market value" means the closing price of the Common Stock as reported by Nasdaq National Market for a single trading day. The exercise price for shares purchased under options must be paid in cash, already-owned Common Stock held by the optionee for at least six months and/or delivery of a properly executed exercise notice, together with irrevocable instructions to a broker. The optionee must pay to the Company applicable withholding taxes upon exercise of the option as a condition to receiving the stock certificates. The option term will be fixed by the plan administrator and if not so fixed will be five years. Each option will be exercisable pursuant to a vesting schedule determined by the plan administrator. If not so determined, each option will be exercisable in four equal installments beginning one year after the date of grant. The plan administrator will also determine the circumstances under which an option will be exercisable in the event the optionee ceases to provide services to the Company or one of its subsidiaries. If not so established, options generally will be exercisable for three months after termination of services. An option will not be exercisable if the optionee's services are terminated for cause, as defined in the 1995 Plan. Nonemployee Director Grants. Nonemployee directors of the Company are eligible to receive option awards under the 1995 Plan only in the form of automatic grants. Each nonemployee director automatically received an option to purchase 500 shares of Common Stock on February 22, 1995, subject to shareholder approval of the 1995 Plan, and automatically will receive an option to purchase 500 shares immediately after each subsequent Annual Meeting of Shareholders after that date. Such options vest upon the optionee's continued service as a director until the next Annual Meeting of Shareholders after the date of grant. Each newly elected or appointed nonemployee director automatically will receive an option to purchase 5,500 shares on the date of his or her initial election or appointment to the Board. Such options will vest in four equal annual installments of 1,375 shares each beginning one year after the date of grant. Options granted to nonemployee directors are nonqualified stock options and have a term of five years from the date of grant. The options are exercisable at a price equal to the fair market value of the Common Stock on the date of grant. Any options granted to nonemployee directors are subject to the availability of Common Stock under the 1995 Plan. Except as otherwise provided, options to nonemployee directors are subject to the terms and conditions of the 1995 Plan applicable to other optionees. Loans, Loan Guarantees and Installment Payments. To assist a holder (including a holder who is an officer or director of the Company, but not a nonemployee director) in acquiring shares of Common Stock pursuant to an award granted under the 1995 Plan, the plan administrator may authorize (a) the extension of a loan to the holder by the Company, (b) the payment by the holder of the purchase price, if any, of the Common Stock in installments, or (c) the guarantee by the Company of a loan obtained by the grantee from a third party. The terms of any loans, installment payments or guarantees, including the interest rate and terms of repayment, will be subject to the plan administrator's discretion, and may be granted with or without security. Transferability. No option will be assignable or otherwise transferable by the holder other than by will or the laws of descent and distribution and, during the holder's lifetime, may be exercised only by the holder, except to the extent permitted by the plan administrator, Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or Section 422 of the Code. Options held by nonemployee directors may be transferred only to certain family members and trusts, to the extent permitted by Rule 16b-3 under the Exchange Act. Adjustment of Shares. In the event of any changes in the outstanding stock of the Company by reason of stock dividends, stock splits, spin-offs, combinations or exchanges of shares, recapitalizations, mergers, consolidations, distributions to stock holders other than a normal cash dividend, or other changes in the Company's corporate or capital structure, the plan administrator shall make proportional adjustments in (a) the maximum number and class of securities subject to the 1995 Plan, (b) the number and class of securities that may be made subject to automatic awards to nonemployee directors, and (c) the number and class of securities subject to any outstanding award granted to a nonemployee director and the per share price of such securities, without any change in the aggregate price to be paid therefor, and the plan administrator, in its sole discretion, may make any equitable adjustments it deems appropriate for awards other than those granted to nonemployee directors, in (x) the maximum number and class of securities that may be made subject to awards to any participants, and (y) the number and class of securities that are subject to any outstanding award and the per share price of such securities, without any changes in the aggregate price to be paid therefor. Corporate Transaction. In the event of certain mergers or consolidations or a sale of substantially all the assets or a liquidation of the Company, each option that is at the time outstanding will automatically accelerate so that each such award will, immediately prior to such corporate transaction, become 100% vested, except that with respect to awards other than those granted to nonemployee directors, such award will not so accelerate if and to the extent: (a) such award is, in connection with the corporate transaction, either to be assumed by the successor corporation or parent thereof or to be replaced with a comparable award for the purchase of shares of the capital stock of the successor corporation or its parent corporation or (b) such award is to be replaced with a cash incentive program of the successor corporation that preserves the spread existing at the time of the corporate transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to such award. Any such awards that are assumed or replaced in the corporate transaction and do not otherwise accelerate at that time shall be accelerated in the event the holder's employment or services should subsequently terminate within two years following such corporate transaction, unless such employment or services are terminated by the successor corporation for cause or by the holder voluntarily without good reason. Further Adjustment of Awards. The plan administrator shall have the discretion, exercisable at any time before a sale, merger, consolidation, reorganization, liquidation or change in control of the Company, as defined by the plan administrator, to take such further action as it determines to be necessary or advisable, and fair and equitable to holders, with respect to awards other than those granted to nonemployee directors. Such authorized action may include (but is not limited to) establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on, awards so as to provide for earlier, later, extended or additional time for exercise, alternate forms and amounts of payments and other modifications, and the plan administrator may take such actions with respect to all holders, to certain categories of holders or only to individual holders. The plan administrator may take such actions before or after granting awards to which the action relates and before or after any public announcement with respect to such sale, merger, consolidation, reorganization, liquidation or change in control that is the reason for such action. Administration. The 1995 Plan will be administered by a committee or committees appointed by, and consisting of two or more members of, the Company's Board of Directors. The board may delegate the responsibility for administering the 1995 Plan with respect to designated classes of eligible participants to different committees, or with respect to grants made to newly hired individuals other than persons subject to Section 16(b) of the Exchange Act, to one or more of the Company's officers, subject to such limitations as the Board deems appropriate. Committee members will serve for such term as the Board may determine, subject to removal by the Board at any time. The administration of the 1995 Plan with respect to officers and directors of the Company who are subject to Section 16 of the Exchange Act with respect to securities of the Company will comply with the requirements of Rule 16b-3 promulgated under Section 16(b) of the Exchange Act, or any successor provision. Amendment and Termination. The 1995 Plan may be terminated, modified or amended by the shareholders of the Company. The Company's Board of Directors may also terminate the 1995 Plan, or modify or amend it, subject to shareholder approval in certain instances, as set forth in the 1995 Plan. No incentive stock options may be granted under the 1995 Stock Option Plan more than 10 years after the date the 1995 Plan is adopted by the Board. Federal Income Tax Consequences The federal income tax consequences to the Company and to any person granted an award of options under the 1995 Plan under the existing applicable provisions of the Code and the regulations thereunder are substantially as follows. Under present law and regulations, no income will be recognized by a participant upon the grant of stock options. On the exercise of a nonqualified stock option, the optionee will recognize taxable ordinary income in an amount equal to the excess of the fair market value of the shares acquired over the option price. Upon a later sale of those shares, the optionee will have a short-term or long-term capital gain or loss, as the case may be, in an amount equal to the difference between the amount realized on such sale and the tax basis of the shares sold. If payment of the option price is made entirely in cash, the tax basis of the shares will be equal to their fair market value on the exercise date (but not less than the option price), and the shares' holding period will begin on the day after the exercise date. If the optionee uses already-owned shares to exercise an option in whole or in part, the transaction will not be considered to be a taxable disposition of the already-owned shares. The optionee's tax basis and holding period of the already-owned shares will be carried over to the equivalent number of shares received upon exercise. The tax basis of the additional shares received upon exercise will be the fair market value of the shares on the exercise date (but not less than the amount of cash, if any, used in payment), and the holding period for such additional shares will begin on the day after the exercise date. The same rules apply to an incentive stock option that is exercised more than three months after the optionee's termination of employment (or more than 12 months thereafter in the case of permanent and total disability, as defined in the Code). Upon the exercise of an incentive stock option during employment or within three months after the optionee's termination of employment (12 months in the case of permanent and total disability, as defined in the Code), for regular tax purposes the optionee will recognize no income at the time of exercise (although the optionee will have income for alternative minimum income tax purposes at that time as if the option were a nonqualified stock option) and no deduction will be allowed to the Company for federal income tax purposes in connection with the grant or exercise of the option. If the acquired shares are sold or exchanged after the later of (a) one year from the date of exercise of the option and (b) two years from the date of grant of the option, the difference between the amount realized by the optionee on that sale or exchange and the option price will be taxed to the optionee as a long-term capital gain or loss. If the shares are disposed of before such holding period requirements are satisfied, then the optionee will recognize taxable ordinary income in the year of disposition in an amount equal to the excess, on the date of exercise of the option, of the fair market value of the shares received over the option price paid (or generally, if less, the excess of the amount realized on the sale of the shares over the option price), and the optionee will have capital gain or loss, long-term or short- term, as the case may be, in an amount equal to the difference between (i) the amount realized by the optionee upon that disposition of the shares and (ii) the option price paid by the optionee increased by the amount of ordinary income, if any, so recognized by the optionee. Special rules apply to a director or officer subject to liability under Section 16(b) of the Exchange Act. In all the foregoing cases the Company will be entitled to a deduction at the same time and in the same amount as the participant recognizes ordinary income, subject to the following limitations. Under Section 162(m) of the code, certain compensation payments in excess of $1 million are subject to a limitation on deductibility for the Company. The limitation on deductibility applies with respect to that portion of a compensation payment for a taxable year in excess of $1 million to either the Company's Chief Executive Officer or any one of the other four most highly compensated executive officers. Certain performance-based compensation is not subject to the limitation on deductibility. Options can qualify for this performance-based exception, but only if they are granted at fair market value, the total number of shares that can be granted to an executive for any period is stated, and stockholder and Board approval is obtained. The 1995 Plan has been drafted to allow compliance with those performance-based criteria. New Plan Benefits Since awards under the 1995 Plan are discretionary, except for the specified grants to nonemployee directors, the Company cannot currently determine the number of awards which will be issued pursuant to the 1995 Plan during the fiscal year ending October 31, 1996. During 1995, options to purchase an aggregate of 22,500 shares at an average exercise price of $9.30 per share were granted under the 1985 Plans to all executive officers of the Company as a group, options to purchase an aggregate of 79,300 shares at an average exercise price of $9.184 per share were granted to all other employees of the Company as a group (including officers who are not executive officers), and options to purchase an aggregate of 5,500 shares at an exercise price of $11.00 per share were granted to all nonemployee directors of the Company as a group. Also during 1995, options to purchase an aggregate of 2,500 shares at an exercise price of $8.875 per share were granted under the 1995 Plan to all nonemployee directors of the Company as a group, subject to shareholder approval of the 1995 Plan. Options granted during 1995 to the Company's Named Executive Officers under the 1985 Plans are set forth under "EXECUTIVE COMPENSATION--Option Grants Table." The Board of Directors recommends a vote FOR approval of the 1995 Plan. CERTAIN TRANSACTIONS The Company leases space from K-M Properties, a general partnership in which Walter P. Kistler is a partner, to house its data storage operations. Rent payments for fiscal 1995 were $96,069. INDEPENDENT AUDITORS Price Waterhouse was Interpoint's independent auditor in 1995. A representative of Price Waterhouse will be present at the Annual Meeting to respond to appropriate questions and will have the opportunity to make a statement, if desired. SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING Proposals for Shareholder action that eligible Shareholders wish to have included in the Company's Annual Meeting to be held in February 1997 must be received by the Company at its principal executive offices on or before September 27, 1996. OTHER MATTERS The Board of Directors of the Company knows of no other matters that may come before the Annual Meeting. If any other matters should properly come before the Annual Meeting or any adjournment, the persons named in the proxy intend to vote the proxy in accordance with their best judgment. By Order of the Board of Directors /s/Leslie S. Rock Leslie S. Rock Secretary-Treasurer Redmond, Washington January 25, 1996 EX-20 2 PROXY CARD PROXY INTERPOINT CORPORATION 10301 WILLOWS ROAD P.O. BOX 97005 REDMOND, WA 98073-9705 PROXY FOR ANNUAL MEETING OF SHAREHOLDERS FEBRUARY 21, 1996 This Proxy is Solicited on Behalf of the Board of Directors The undersigned appoints Peter H. van Oppen and Leslie S. Rock, and either of them, with full powers of substitution, attorneys and proxies to vote all shares of stock of the undersigned entitled to vote at the Annual meeting of Shareholders of Interpoint Corporation ("Interpoint") to be held at the Hyatt Regency Bellevue at Bellevue Place, 900 Bellevue Way N.E., Bellevue, Washington on February 21, 1996 at 10:00 am and any adjournment or postponements thereof with all powers the undersigned would possess if personally present. (Continued and to be signed on reverse side) The Board of Directors recommends a vote "FOR " ELECTION OF DIRECTORS 1. ELECTION OF DIRECTORS / / FOR all nominees listed Nominees: Christopher T. Bayley (except as indicated) John W. Stanton Peter H. van Oppen / / WITHHOLD AUTHORITY to vote Walter F. Walker for all nominees (INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name in the space below) _______________________________________________ 2. Approve the adoption of the Interpoint Corporation 1995 Stock Option and Award Plan. / / FOR / / AGAINST / / ABSTAIN 3. Such other matters as may properly come before the Meeting. The Board of Directors at present know of no other matters to be brought before the Meeting. The proxy will be voted in accordance with the instructions given. Unless revoked or otherwise instructed, the shares represented by this proxy will be voted for proposals 1 and 2 and will be voted in accordance with the discretion of the proxies upon all other matters which may come before the Meeting or any adjournment or postponement thereof. PLEASE DATE AND MAIL IN ENCLOSED POSTAGE-PAID ENVELOPE. Signature(s)____________________________________ Date____________________ Please sign as your name appears hereon. Trustees, Guardians, Personal and other Representatives, please indicate full titles. EX-99 3 EXHIBIT A TO PROXY STATEMENT EXHIBIT A INTERPOINT CORPORATION 1995 STOCK OPTION AND AWARD PLAN As Amended and Restated on December 6, 1995 SECTION 1. PURPOSE The purpose of the Interpoint Corporation 1995 Stock Option and Award Plan, as amended and restated (the "Plan"), is to enhance the long-term profitability and shareholder value of Interpoint Corporation, a Washington corporation (the "Company"), by offering incentives and rewards to those employees, directors, officers, consultants, agents, advisors and independent contractors of the Company and its Subsidiaries (as defined in Section 2 below) who are key to the Company's growth and success, and to encourage them to remain in the service of the Company and its Subsidiaries and to acquire and maintain stock ownership in the Company. SECTION 2. DEFINITIONS For purposes of the Plan, the following terms shall be defined as set forth below: 2.1 Award "Award" means an award or grant made to a Participant pursuant to the Plan. 2.2 Board "Board" means the Board of Directors of the Company. 2.3 Cause "Cause" means dishonesty, fraud, misconduct, unauthorized use or disclosure of confidential information or trade secrets, or conviction or confession of a crime punishable by law (except minor violations), in each case as determined by the Plan Administrator, and its determination shall be conclusive and binding. 2.4 Code "Code" means the Internal Revenue Code of 1986, as amended from time to time. 2.5 Common Stock "Common Stock" means the common stock, no par value, of the Company. 2.6 Corporate Transaction "Corporate Transaction" means any of the following events: (a) Approval by the holders of the Common Stock of any merger or consolidation of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Common Stock are converted into cash, securities or other property, other than a merger of the Company in which the holders of the Common Stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger; (b) Approval by the holders of the Common Stock of any sale, lease, exchange or other transfer in one transaction or a series of related transactions of all or substantially all of the Company's assets other than a transfer of the Company's assets to a majority-owned subsidiary corporation (as the term "subsidiary corporation" is defined in Section 8.3 of the Plan) of the Company; or (c) Approval by the holders of the Common Stock of any plan or proposal for the liquidation or dissolution of the Company. 2.7 Disability "Disability" means "disability" as that term is defined for purposes of Section 22(e)(3) of the Code. 2.8 Eligible Director "Eligible Director" means a member of the Board who is not also an employee of the Company or any "parent corporation" or "subsidiary corporation" (as those terms are defined in Section 8.3 of the Plan) of the Company. 2.9 Exchange Act "Exchange Act" means the Securities Exchange Act of 1934, as amended. 2.10 Fair Market Value "Fair Market Value" shall be as established in good faith by the Plan Administrator or (i) if the Common Stock is listed on the Nasdaq National Market, the closing price for the Common Stock as reported by the Nasdaq National Market for a single trading day or (ii) if the Common Stock is listed on the New York Stock Exchange, the mean of the high and low per share trading prices for the Common Stock as reported in The Wall Street Journal for the New York Stock Exchange--Composite Transactions (or similar successor consolidated transactions reports) for a single trading day. 2.11 Good Reason "Good Reason" means the occurrence of any of the following events or conditions: (a) a change in the Holder's status, title, position or responsibilities (including reporting responsibilities) that, in the Holder's reasonable judgment, represents a substantial reduction of the status, title, position or responsibilities as in effect immediately prior thereto; the assignment to the Holder of any duties or responsibilities that, in the Holder's reasonable judgment, are inconsistent with such status, title, position or responsibilities; or any removal of the Holder from or failure to reappoint or reelect the Holder to any of such positions, except in connection with the termination of the Holder's employment for Cause, for Disability or as a result of his or her death, or by the Holder other than for Good Reason; (b) a reduction in the Holder's annual base salary; (c) the Company's requiring the Holder (without the Holder's consent) to be based at any place outside a 35-mile radius of his or her place of employment prior to a Corporate Transaction, except for reasonably required travel on the Company's business that is not materially greater than such travel requirements prior to the Corporate Transaction; (d) the Company's failure to (i) continue in effect any material compensation or benefit plan (or the substantial equivalent thereof) in which the Holder was participating at the time of a Corporate Transaction, including, but not limited to, the Plan, or (ii) provide the Holder with compensation and benefits at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each employee benefit plan, program and practice as in effect immediately prior to the Corporate Transaction (or as in effect following the Corporate Transaction, if greater); (e) any material breach by the Company of any provision of the Plan; or (f) any purported termination of the Holder's employment or service for Cause by the Company that does not comply with the terms of the Plan. 2.12 Grant Date "Grant Date" means (i) the date designated in a resolution of the Plan Administrator as the date an Award is granted, (ii) if the Plan Administrator does not designate the Grant Date in the resolution, the date the Plan Administrator adopted the resolution, or (iii) the date an option is automatically granted pursuant to Section 9 of the Plan. 2.13 Holder "Holder" means the Participant to whom an Award is granted, or the personal representative of a Holder who has died. 2.14 Incentive Stock Option "Incentive Stock Option" means an option to purchase Common Stock granted under Section 7 of the Plan with the intention that it qualify as an "incentive stock option" as that term is defined in Section 422 of the Code. 2.15 Nonqualified Stock Option "Nonqualified Stock Option" means an option to purchase Common Stock granted under Section 7 of the Plan other than an Incentive Stock Option. 2.16 Option "Option" means the right to purchase Common Stock granted under Sections 7 or 9 of the Plan. 2.17 Participant "Participant" means an individual who is a Holder of an Award. 2.18 Plan Administrator "Plan Administrator" means the Board or any committee of the Board designated to administer the Plan under Section 3.1 of the Plan 2.19 Subsidiary "Subsidiary," except as expressly provided otherwise, means any entity that is directly or indirectly controlled by the Company or in which the Company has a significant ownership interest, as determined by the Plan Administrator, and any entity that may become a direct or indirect parent of the Company. SECTION 3. ADMINISTRATION 3.1 Plan Administrator The Plan shall be administered by the Board or a committee or committees (which term includes subcommittees) appointed by, and consisting of two or more members of, the Board; provided, however, that so long as the Company is subject to Rule 16b-3 promulgated under Section 16(b) of the Exchange Act as in effect prior to May 1, 1991, such committee shall consist of at least three members of the Board. The Board may delegate the responsibility for administering the Plan with respect to designated classes of eligible Participants to different committees or, with respect to grants made to newly hired individuals other than persons subject to Section 16(b) of the Exchange Act, to one or more officers of the Company, subject to such limitations as the Board deems appropriate. Committee members shall serve for such term as the Board may determine, subject to removal by the Board at any time. Notwithstanding the foregoing, the administration of the Plan with respect to officers and directors of the Company who are subject to Section 16 of the Exchange Act with respect to securities of the Company shall comply with the requirements of Rule 16b-3 under the Exchange Act as then applicable to the Company's employee benefit plans. 3.2 Administration and Interpretation by the Plan Administrator Except for the terms and conditions explicitly set forth in the Plan, the Plan Administrator shall have exclusive authority, in its discretion, to determine all matters relating to Awards under the Plan, including the selection of individuals to be granted Awards, the type of Awards, the number of shares of Common Stock subject to an Award, all terms, conditions, restrictions and limitations, if any, of an Award and the terms of any instrument that evidences the Award. The Plan Administrator shall also have exclusive authority to interpret the Plan and may from time to time adopt, and change, rules and regulations of general application for the Plan's administration. The Plan Administrator's interpretation of the Plan and its rules and regulations, and all actions taken and determinations made by the Plan Administrator pursuant to the Plan, shall be conclusive and binding on all parties involved or affected. The Plan Administrator may delegate administrative duties to such of the Company's officers as it so determines. SECTION 4. STOCK SUBJECT TO THE PLAN 4.1 Authorized Number of Shares Subject to adjustment from time to time as provided in Section 12.1 of the Plan, a maximum of 100,000 shares of Common Stock shall be available for issuance under the Plan. Shares issued under the Plan shall be drawn from authorized and unissued shares. 4.2 Limitations Subject to adjustment from time to time as provided in Section 12.1 of the Plan, not more than 50,000 shares of Common Stock may be made subject to Awards under the Plan to any individual Participant in the aggregate in any one fiscal year of the Company, such limitation to be applied in a manner consistent with the requirements of, and only to the extent required for compliance with, the exclusion from the limitation on deductibility of compensation under Section 162(m) of the Code. 4.3 Reuse of Shares Any shares of Common Stock that have been made subject to an Award that cease to be subject to the Award (other than by reason of exercise), including, without limitation, in connection with the cancellation of an Award and the grant of a replacement Award, shall again be available for issuance in connection with future grants of Awards under the Plan. SECTION 5. ELIGIBILITY Awards may be granted under the Plan to those officers, directors and key employees of the Company and its Subsidiaries as the Plan Administrator from time to time selects; provided, however, that Eligible Directors shall be eligible to receive Awards only under Section 9 of the Plan. Awards may also be made to consultants, agents, advisors and independent contractors who provide services to the Company and its Subsidiaries. SECTION 6. AWARDS 6.1 Form and Grant of Awards The Plan Administrator shall have the authority, in its sole discretion, to determine the type or types of Awards to be made under the Plan. Such Awards shall consist of Incentive Stock Options and Nonqualified Stock Options. 6.2 Acquired Company Awards Notwithstanding anything in the Plan to the contrary, the Plan Administrator may grant Awards under the Plan in substitution for awards issued under other plans, or assume under the Plan awards issued under other plans, if the other plans are or were plans of other entities ("Acquired Entities")(or the parent of the Acquired Entity) and the new Award is substituted, or the old award is assumed, by reason of a merger, consolidation, acquisition of property or of stock, reorganization or liquidation (the "Acquisition Transaction"). In the event that a written agreement pursuant to which the Acquisition Transaction is completed is approved by the Board and said agreement sets forth the terms and conditions of the substitution for or assumption of outstanding awards of the Acquired Entity, said terms and conditions shall be deemed to be the action of the Plan Administrator without any further action by the Plan Administrator, except as may be required for compliance with Rule 16b-3 under the Exchange Act, and the persons holding such Awards shall be deemed to be Participants and Holders. SECTION 7. AWARDS OF OPTIONS 7.1 Grant of Options The Plan Administrator is authorized under the Plan, in its sole discretion, to issue Options as Incentive Stock Options or as Nonqualified Stock Options, which shall be appropriately designated. 7.2 Option Exercise Price The exercise price for shares purchased under an Option shall be as determined by the Plan Administrator, but shall not be less than 100% of the Fair Market Value of the Common Stock on the Grant Date. 7.3 Term of Options The term of each Option shall be as established by the Plan Administrator or, if not so established, shall be five years from the Grant Date. 7.4 Exercise of Options The Plan Administrator shall establish and set forth in each instrument that evidences an Option the time at which or the installments in which the Option shall become exercisable, which provisions may be waived or modified by the Plan Administrator at any time. If not so established in the instrument evidencing the Option, the Option will become exercisable according to the following schedule, which may be waived or modified by the Plan Administrator at any time:
Period of Holder's Continuous Percent of Employment or Service with the Total Option Company or Its Subsidiaries That Is From the Option Grant Date Exercisable After 1 year 25% After 2 years 50% After 3 years 75% After 4 years 100%
To the extent that the right to purchase shares has accrued thereunder, an Option may be exercised from time to time by written notice to the Company, in accordance with procedures established by the Plan Administrator, setting forth the number of shares with respect to which the Option is being exercised and accompanied by payment in full as described in Section 7.5 of the Plan. 7.5 Payment of Exercise Price The exercise price for shares purchased under an Option shall be paid in full to the Company by delivery of consideration equal to the product of the Option exercise price and the number of shares purchased. Such consideration must be paid in cash or check and/or one or more of the following alternative forms: (i) Common Stock already owned by the Holder for at least six months (or any shorter period necessary to avoid a charge to the Company's earnings for financial reporting purposes) having a Fair Market Value on the day prior to the exercise date equal to the aggregate Option exercise price or (ii) if the Common Stock is publicly traded, delivery of a properly executed exercise notice, together with irrevocable instructions, to (a) a brokerage firm designated by the Company to deliver promptly to the Company the aggregate amount of sale or loan proceeds to pay the Option exercise price and any withholding tax obligations that may arise in connection with the exercise and (b) the Company to deliver the certificates for such purchased shares directly to such brokerage firm, all in accordance with the regulations of the Federal Reserve Board. 7.6 Post-Termination Exercises The Plan Administrator shall establish and set forth in each instrument that evidences an Option whether the Option will continue to be exercisable, and the terms and conditions of such exercise, if a Holder ceases to be employed by, or to provide services to, the Company or its Subsidiaries, which provisions may be waived or modified by the Plan Administrator at any time. If not so established in the instrument evidencing the Option, the Option will be exercisable according to the following terms and conditions, which may be waived or modified by the Plan Administrator at any time. In case of termination of the Holder's employment or services other than by reason of death or Cause, the Option shall be exercisable, to the extent of the number of shares purchasable by the Holder at the date of such termination, only within three months after the date of such termination for reasons other than Disability and only within one year after the date of such termination by reason of Disability, but in no event later than the remaining term of the Option. Any Option exercisable at the time of the Holder's death may be exercised, to the extent of the number of shares purchasable by the Holder at the date of the Holder's death, by the personal representative of the Holder's estate entitled thereto at any time or from time to time within one year after the date of death, but in no event later than the remaining term of the Option. In case of termination of the Holder's employment or services for Cause, the Option shall automatically terminate upon first notification to the Holder of such termination, unless the Plan Administrator determines otherwise. If a Holder's employment or services with the Company are suspended pending an investigation of whether the Holder shall be terminated for Cause, all the Holder's rights under any Option likewise shall be suspended during the period of investigation. A transfer of employment or services between or among the Company and its Subsidiaries shall not be considered a termination of employment or services. Unless the Plan Administrator determines otherwise, a leave of absence approved in accordance with Company procedures shall not be considered a termination of employment or services, except that with respect to Incentive Stock Options such leave of absence shall be subject to any requirements of Section 422 of the Code. SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS To the extent required by Section 422 of the Code, Incentive Stock Options shall be subject to the following additional terms and conditions: 8.1 Dollar Limitation To the extent the aggregate Fair Market Value (determined as of the Grant Date) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time during any calendar year (under the Plan and all other stock option plans of the Company) exceeds $100,000, such portion in excess of $100,000 shall be treated as a Nonqualified Stock Option, unless such annual limitation is modified or eliminated under Code Section 422. In the event the Participant holds two or more such Options that become exercisable for the first time in the same calendar year, such limitation shall be applied on the basis of the order in which such Options are granted. 8.2 10% Shareholders If a Participant owns 10% or more of the total voting power of all classes of the Company's stock, then the exercise price per share of an Incentive Stock Option shall not be less than 110% of the Fair Market Value of the Common Stock on the Grant Date and the Option term shall not exceed five years. 8.3 Eligible Employees Individuals who are not employees of the Company or one of its parent corporations or subsidiary corporations may not be granted Incentive Stock Options. For purposes of this Section 8.3 of the Plan, "parent corporation" and "subsidiary corporation" shall have the meanings attributed to those terms for purposes of Section 422 of the Code. 8.4 Term The term of an Incentive Stock Option shall not exceed 10 years. 8.5 Exercisability An Option designated as an Incentive Stock Option must be exercised within three months after termination of employment for reasons other than death to qualify for Incentive Stock Option tax treatment, except that in the case of termination of employment due to Disability, such Option must be exercised within one year after such termination. 8.6 Taxation of Incentive Stock Option In order to obtain certain tax benefits afforded to Incentive Stock Options under Section 422 of the Code, the Participant must hold the shares issued upon the exercise of an Incentive Stock Option for two years after the date of grant of the Incentive Stock Option and one year from the date of exercise. A Participant may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option. The Committee may require a Participant to give the Company prompt notice of any disposition of shares acquired by the exercise of an Incentive Stock Option prior to the expiration of such holding periods. SECTION 9. AWARDS OF OPTIONS TO NONEMPLOYEE DIRECTORS Notwithstanding any other provision of the Plan to the contrary, grants to Eligible Directors shall be made only pursuant to the terms and conditions set forth below. All grants made under this Section 9 prior to shareholder approval of the Plan shall be subject to such shareholder approval. 9.1 Original Grants Each Eligible Director who is in office on the date the Plan is adopted by the Board shall automatically receive a grant of an Option to purchase 500 shares of Common Stock immediately following the Board's adoption of the Plan ("Original Grants"). Original Grants shall vest and become exercisable upon the optionee's continued service as a director until the Company's first Annual Meeting of Shareholders after the Grant Date. 9.2 Annual Grants Commencing with the Company's 1996 Annual Meeting of Shareholders, each Eligible Director shall automatically receive a grant of an Option to purchase 500 shares of Common Stock immediately following each year's Annual Meeting of Shareholders ("Annual Grants"). Annual Grants shall vest and become exercisable upon the optionee's continued service as a director until the next Annual Meeting of Shareholders after the Grant Date. 9.3 Initial Grants Each Eligible Director shall automatically receive a grant of an Option to purchase 5,500 shares of Common Stock immediately following his or her initial election or appointment to the Board ("Initial Grants"). Initial Grants shall vest and become exercisable as follows: Options for 1,375 shares shall become exercisable on and after one year after the Grant Date, and Options for an additional 1,375 shares shall become exercisable on and after each of the three succeeding anniversaries of the Grant Date. 9.4 Nonqualified Stock Options; Term of Options Options granted to an Eligible Director under the Plan shall constitute Nonqualified Stock Options. The term of each Option granted under this Section 9 shall be five years from the Grant Date. 9.5 Option Exercise Price The exercise price for shares purchased under an Option granted under this Section 9 shall be the Fair Market Value of the Common Stock on the Grant Date. 9.6 Post-Termination Exercises In case of termination of the Holder's services other than by reason of death or Cause, the Option shall be exercisable, to the extent of the number of shares purchasable by the Holder at the date of such termination, only within three months after the date the Holder ceases to be director of the Company if such termination is for reasons other than Disability and only within one year if such termination is by reason of Disability, but in no event later than the remaining term of the Option. Any Option exercisable at the time of the Holder's death may be exercised, to the extent of the number of shares purchasable by the Holder at the date of the Holder's death, by the personal representative of the Holder's estate entitled thereto at any time or from time to time within one year after the date of death, but in no event later than the remaining term of the Option. In case of termination of the Holder's services for Cause, the Option shall automatically terminate upon first notification to the Holder of such termination. If a Holder's services with the Company are suspended pending an investigation of whether the Holder shall be terminated for Cause, all the Holder's rights under any Option likewise shall be suspended during the period of investigation. 9.7 Corporate Transaction In the event of any Corporate Transaction, each Option that is at the time outstanding shall automatically accelerate so that each such Option shall, immediately prior to the specified effective date for the Corporate Transaction, become 100% vested, except that such acceleration will not occur if, in the opinion of the Company's accountants, it would render unavailable "pooling of interests" accounting for a Corporate Transaction that would otherwise qualify for such accounting treatment. All such Options not exercised prior to that time shall terminate and cease to remain outstanding immediately following the consummation of the Corporate Transaction. 9.8 Availability of Shares The Options provided for in this Section 9 are subject to the availability of shares under the Plan. If at the date of any grant under this Section 9 there are insufficient shares of Common Stock available to satisfy the grants in whole, then the shares available shall be divided by the number of Eligible Directors then entitled to a grant and each such Eligible Director shall be granted an Option for that number of shares. 9.9 Other Terms Applicable Except as otherwise provided in this Section 9, Options granted to Eligible Directors shall be subject to the terms and conditions of the Plan applicable to other Participants. SECTION 10. LOANS, LOAN GUARANTEES AND INSTALLMENT PAYMENTS To assist a Holder (including a Holder who is an officer or director of the Company) in acquiring shares of Common Stock pursuant to an Award granted under the Plan other than an Option granted pursuant to Section 9 of the Plan, the Plan Administrator may authorize, either at the Grant Date or at any time before the acquisition of Common Stock pursuant to the Award, (i) the extension of a loan to the Holder by the Company, (ii) the payment by the Holder of the purchase price, if any, of the Common stock in installments, or (iii) the guarantee by the Company of a loan obtained by the grantee from a third party. The terms of any loans, installment payments or guarantees, including the interest rate and terms of repayment, will be subject to the Plan Administrator's discretion. Loans, installment payments and guarantees may be granted with or without security. The maximum credit available is the purchase price, if any, of the Common Stock acquired plus the maximum federal and state income and employment tax liability that may be incurred in connection with the acquisition. SECTION 11. ASSIGNABILITY No Option granted under the Plan may be assigned or transferred by the Holder other than by will or by the laws of descent and distribution, and during the Holder's lifetime, such Awards may be exercised only by the Holder. Notwithstanding the foregoing, with respect to Awards other than Options granted pursuant to Section 9 of the Plan, and to the extent permitted by Rule 16b-3 under the Exchange Act and Section 422 of the Code, the Plan Administrator, in its sole discretion, may permit such assignment, transfer and exercisability and may permit a Holder of such Awards to designate a beneficiary who may exercise the Award after the Holder's death. With respect to Options granted pursuant to Section 9 of the Plan, and to the extent permitted by Rule 16b-3 under the Exchange Act as then applicable to the Company's employee benefit plans, such Options may be transferred or assigned by gift or other transfer to either (i) any trust or estate in which the original award recipient or such person's spouse or other immediate family member has a substantial beneficial interest or (ii) a spouse or other immediate family member, provided that such a transfer would continue to require such awards to be disclosed pursuant to Item 403 of Regulation S- K under the Securities Act of 1933, as amended. SECTION 12. ADJUSTMENTS 12.1 Adjustment of Shares In the event that at any time or from time to time a stock dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to shareholders other than a normal cash dividend, or other change in the Company's corporate or capital structure results in (i) the outstanding shares, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of securities of the Company or of any other corporation or (ii) new, different or additional securities of the Company or of any other corporation being received by the holders of shares of Common Stock of the Company, then the Plan Administrator shall make proportional adjustments in (a) the maximum number and class of securities subject to the Plan as set forth in Section 4.1 of the Plan, (b) the number and class of securities that may be made subject to individual Awards as set forth in Section 9 of the Plan, and (c) the number and class of securities subject to any outstanding Award made pursuant to Section 9 of the Plan and the per share price of such securities, without any change in the aggregate price to be paid therefore, and the Plan Administrator, in its sole discretion, shall make such equitable adjustments as it shall deem appropriate in the circumstances in (y) the maximum number and class of securities that may be made subject to Awards to any individual Participant as set forth in Section 4.2 of the Plan and (z) the number and class of securities that are subject to any outstanding Award (other than Options granted pursuant to Section 9 of the Plan) and the per share price of such securities, without any change in the aggregate price to be paid therefor. The determination by the Plan Administrator as to the terms of any of the foregoing adjustments shall be conclusive and binding. 12.2 Corporate Transaction Except as otherwise provided in the instrument that evidences the Award, in the event of any Corporate Transaction, each Option that is at the time outstanding shall automatically accelerate so that each such Award shall, immediately prior to the specified effective date for the Corporate Transaction, become 100% vested, except that such acceleration will not occur if in the opinion of the Company's accountants it would render unavailable "pooling of interest" accounting for a Corporate Transaction that would otherwise qualify for such accounting treatment. Except for Options granted pursuant to Section 9 of the Plan, such Award shall not so accelerate if and to the extent: (i) such Award is, in connection with the Corporate Transaction, either to be assumed by the successor corporation or parent thereof or to be replaced with a comparable award for the purchase of shares of the capital stock of the successor corporation or its parent corporation, (ii) such Award is to be replaced with a cash incentive program of the successor corporation that preserves the spread existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to such Award, or (iii) the acceleration of such Award is subject to other limitations imposed by the instrument evidencing the Award. The determination of Award comparability under clause (i) above shall be made by the Plan Administrator, and its determination shall be conclusive and binding. All such Awards shall terminate and cease to remain outstanding immediately following the consummation of the Corporate Transaction, except to the extent such Awards (other than Options granted pursuant to Section 9 of the Plan) are assumed by the successor corporation or its parent corporation. Any such Awards that are assumed or replaced in the Corporate Transaction and do not otherwise accelerate at that time shall be accelerated in the event the Holder's employment or services should subsequently terminate within two years following such Corporate Transaction, unless such employment or services are terminated by the Company for Cause or by the Holder voluntarily without Good Reason. Notwithstanding the foregoing, no Incentive Stock Option shall become exercisable pursuant to this Section 12.2 without the Holder's consent, if the result would be to cause such Option not to be treated as an Incentive Stock Option (whether by reason of the annual limitation described in Section 8.1 of the Plan or otherwise). 12.3 Further Adjustment of Awards Subject to the preceding Section 12.2 of the Plan, the Plan Administrator shall have the discretion, exercisable at any time before a sale, merger, consolidation, reorganization, liquidation or change in control of the Company, as defined by the Plan Administrator, to take such further action as it determines necessary or advisable, and fair and equitable to Participants, with respect to Awards (other than Options granted pursuant to Section 9 of the Plan). Such authorized action may include (but shall not be limited to) establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on, Awards so as to provide for earlier, later, extended or additional time for exercise, alternate forms and amounts of payments and other modifications, and the Plan Administrator may take such actions with respect to all Participants, to certain categories of Participants or only to individual Participants. The Plan Administrator may take such actions before or after granting Awards to which the action relates and before or after any public announcement with respect to such sale, merger, consolidation, reorganization, liquidation or change in control that is the reason for such action. 12.4 Limitations The grant of Awards will in no way affect the Company's right 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. SECTION 13. WITHHOLDING OF TAXES The Company may require the Holder to pay to the Company the amount of any withholding taxes that the Company is required to withhold with respect to the grant or exercise of any Award SECTION 14. AMENDMENT AND TERMINATION OF PLAN 14.1 Amendment of Plan The Plan may be amended by the shareholders of the Company. The Board may also amend the Plan in such respects as it shall deem advisable; however, to the extent required for compliance with Rule 16b-3 under the Exchange Act, Section 422 of the Code or any applicable law or regulation, shareholder approval will be required for any amendment that will (i) increase the total number of shares as to which Awards may be granted under the Plan, (ii) materially modify the class of persons eligible to receive Awards, (iii) materially increase the benefits accruing to Participants under the Plan, or (iv) otherwise require shareholder approval under any applicable law or regulation. Notwithstanding the foregoing, to the extent required for compliance with Rule 16b-3 under the Exchange Act or any applicable law or regulation, no amendment with respect to Section 9 of the Plan shall be made more than once every six months that would change the amount, price, timing or vesting of the Options, other than to comport to the changes in the Code, or the rules and regulations promulgated thereunder. 14.2 Termination of the Plan The Company's shareholders or the Board may suspend or terminate the Plan at any time. The Plan will have no fixed expiration date; provided, however, that no Incentive Stock Options may be granted more than 10 years after the Plan's effective date. 14.3 Consent of Holder The amendment or termination of the Plan shall not, without the consent of the Holder of any Award under the Plan, alter or impair any rights or obligations under any Award theretofore granted under the Plan. SECTION 15. GENERAL 15.1 Notification The Plan Administrator shall promptly notify a Participant of an Award, and a written grant shall promptly be executed and delivered by or on behalf of the Company. 15.2 Continued Employment or Services; Rights in Awards Neither the Plan, participation in the Plan as a Participant nor any action of the Plan Administrator taken under the Plan shall be construed as giving any Participant, including any employee, officer or director of the Company any right to be retained in the employ of the Company or to continue service as an officer or director of the Company, or limit the Company's right to terminate the employment or services of the Participant. 15.3 Registration; Certificates for Shares The Company shall be under no obligation to any Participant to register for offering or resale under the Securities Act of 1933, as amended, or register or qualify under state securities laws, any shares of Common Stock issued under the Plan. The Company may issue certificates for shares with such legends and subject to such restrictions on transfer and stop-transfer instructions as counsel for the Company deems necessary or desirable for compliance by the Company with federal and state securities laws. 15.4 No Rights as a Shareholder No Award shall entitle the Holder to any dividend, voting or other right of a shareholder unless and until the date of issuance under the Plan of the shares that are the subject of such Awards, free of all applicable restrictions. 15.5 Compliance With Laws and Regulations It is the Company's intention that, so long as any of the Company's equity securities are registered pursuant to Section 12(b) or 12(g) of the Exchange Act, the Plan shall comply in all respects with Rule 16b-3 under the Exchange Act and, if any Plan provision is later found not to be in compliance with such Rule, the provision shall be deemed null and void, and in all events the Plan shall be construed in favor of its meeting the requirements of Rule 16b-3. Notwithstanding anything in the Plan to the contrary, the Board, in its sole discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan to Participants who are officers or directors subject to Section 16 of the Exchange Act without so restricting, limiting or conditioning the Plan with respect to other Participants. Additionally, in interpreting and applying the provisions of the Plan, any Option granted as an Incentive Stock Option pursuant to the Plan shall, to the extent permitted by law, be construed as an "incentive stock option" within the meaning of Section 422 of the Code. 15.6 Severability If any provision of the Plan or any Award is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Award under any law deemed applicable by the Plan Administrator, such provision shall be construed or deemed amended to conform to applicable laws, or, it if cannot be so construed or deemed amended without, in the Plan Administrator's determination, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect. SECTION 16. EFFECTIVE DATE The Plan's effective date is the date on which it is adopted by the Board, so long as it is approved by the Company's shareholders at any time within 12 months of such adoption or, if earlier, and to the extent required for compliance with Rule 16b- 3 under the Exchange Act, at the next annual meeting of the Company's shareholders after adoption of the Plan by the Board. -----END PRIVACY-ENHANCED MESSAGE-----