-----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, UXmy3o9vlRU/FRZc5xL/ZRBOUOUIhtKwlGnNhdyHqc3ZMPlkkXfGGi1O3uOSJhYJ W18QxXWsU8UVIDt8/rCAEw== 0000898430-95-001939.txt : 19951003 0000898430-95-001939.hdr.sgml : 19951003 ACCESSION NUMBER: 0000898430-95-001939 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950929 FILED AS OF DATE: 19950929 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROPOLIS CORP CENTRAL INDEX KEY: 0000718865 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER STORAGE DEVICES [3572] IRS NUMBER: 953093858 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-12046 FILM NUMBER: 95577909 BUSINESS ADDRESS: STREET 1: 21211 NORDHOFF ST CITY: CHATSWORTH STATE: CA ZIP: 91311 BUSINESS PHONE: 8187093300 MAIL ADDRESS: STREET 1: 21211 NORDHOFF STREET CITY: CHATSWORTH STATE: CA ZIP: 91311 DEF 14A 1 DEFINITVE PROXY MATERIALS SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. 1) Filed by the Registrant [X] Filed by a Party other than the Registrant [_] Check the appropriate box: [_] Preliminary Proxy Statement [_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [_] Definitive Additional Materials [_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 MICROPOLIS CORPORATION - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. [_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). [_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: ------------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: ------------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): ------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: ------------------------------------------------------------------------- (5) Total fee paid: ------------------------------------------------------------------------- [X] Fee paid previously with preliminary materials. [_] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ------------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: ------------------------------------------------------------------------- (3) Filing Party: ------------------------------------------------------------------------- (4) Date Filed: ------------------------------------------------------------------------- Notes: MICROPOLIS CORPORATION 21211 NORDHOFF STREET CHATSWORTH, CALIFORNIA 91311 NOTICE AND PROXY STATEMENT FOR ACTION TO BE TAKEN BY WRITTEN CONSENT IN LIEU OF A MEETING OF STOCKHOLDERS To Our Stockholders: Attached hereto is a Proxy Statement which solicits the written consent of the Stockholders of Micropolis Corporation, a Delaware corporation (the "Company"), for the following actions: 1. To authorize and approve an amendment to the Stock Option Plan for Executive and Key Employees (the "Employee Plan") of Micropolis Corporation to increase the number of shares of Common Stock authorized for issuance thereunder from 2,400,000 to 3,150,000; and 2. To authorize and approve an amendment to the Stock Option Plan for Independent Directors of Micropolis Corporation (the "Directors Plan") to add a provision for the automatic granting of options to purchase 20,000 shares of Common Stock when a Director who is not an employee or affiliate of the Company initially is appointed to the position of Vice- Chairman of the Board. These proposed amendments are described in detail in the attached Proxy Statement. The Board of Directors has approved these amendments and is asking for Stockholder approval by written consent in lieu of a meeting at this time because the newly reorganized Compensation Committee of the Board wishes to increase the emphasis on stock options in the compensation of the executive and key employees and directors of the Company. Attached to the Proxy Statement as Appendix A is the Board of Directors' Consent Resolution which provides for approval of the amendment to the Employee Plan. Attached to the Proxy Statement as Appendix B is the Board of Directors Consent Resolution which provides for approval of the amendment to the Directors Plan. The next Annual Meeting of Stockholders of Micropolis Corporation is expected to be held in April 1996 and the Committee wishes to be able to award additional option grants earlier. By Order of the Board of Directors Ericson M. Dunstan Secretary Chatsworth, California September 29, 1995 In order to ensure your representation in the action to be taken by written consent you are requested to sign and date the enclosed proxy as promptly as possible and return it in the enclosed envelope (to which no postage need be affixed if mailed in the United States). MICROPOLIS CORPORATION 21211 NORDHOFF STREET CHATSWORTH, CALIFORNIA 91311 PROXY STATEMENT FOR STOCKHOLDER ACTION BY WRITTEN CONSENT This Proxy Statement is furnished to the Stockholders by the Board of Directors of Micropolis Corporation, a Delaware corporation (the "Company"), for solicitation of the written consent of Stockholders to authorize and approve amendments to the Stock Option Plan for Executive and Key Employees of Micropolis Corporation (the "Employee Plan") and to the Amended and Restated Stock Option Plan for Independent Directors of Micropolis Corporation (the "Directors Plan"). The amendment to the Employee Plan (the "Employee Plan Amendment") is to increase the number of shares of Common Stock authorized for issuance thereunder from 2,400,000 to 3,150,000. On September 20, 1995, the Board of Directors adopted, subject to approval by the stockholders by written consent in lieu of a meeting of stockholders, the proposed amendment. Attached to the Proxy Statement as Appendix A is Consent Resolution I, which provides for approval of the Employee Plan Amendment. The amendment to the Directors Plan (the "Directors Plan Amendment") is to add an additional provision for the automatic grant under this Plan of options to purchase 20,000 shares of the Company's Common Stock to a Director who is not an employee of the Company or any affiliate of the Company at the time such Director initially becomes Vice-Chairman of the Board. On September 20, 1995, the Board of Directors adopted, subject to approval by the stockholders by written consent in lieu of a meeting of stockholders, the proposed amendment. Attached to the Proxy Statement as Appendix B is Consent Resolution II, which provides for approval of the Directors Plan Amendment. It is anticipated that the mailing to stockholders of this Proxy Statement and the enclosed consent card will commence on or about October 2, 1995. The procedure for indicating approval of this Consent Resolution is described in detail in this Proxy Statement. GENERAL INFORMATION BACKGROUND At the Company's last Annual Meeting of Stockholders on April 26, 1995, the Company substantially changed the composition of its Board of Directors, and during 1995 there also has been significant changes in the Company's executive officers. In comparison to March 1995, three of the four directors are new to such service with the Company. This new Board also elected Mr. J. Larry Smart as President and Chief Executive Officer on July 10, 1995. Mr. Mabon, the Company's founder and President for 18 years, subsequently resigned as Chairman of the Board on August 18, 1995. The Compensation Committee of the Board of Directors believes that the incentive-based proportion of the total compensation plan for key employees should be greater than it has been in the past, and that such incentives should be much more closely aligned with the delivery of increased shareholder value. The Compensation Committee of the Board of Directors has thus reviewed all the Company's compensation plans, has made substantial option grants to the Company's key employees, including Mr. Smart, and has determined that additional option shares are required to help fill key vacancies for which the Company is presently recruiting, and/or which may occur in the normal course of business. 1 The Board of Directors has also reviewed its own structure, and has determined that a position of Vice-Chairman of the Board to be filled by an independent director is appropriate at this time. The Vice-Chairman will assist in setting Board agendas, executing Board action items and acting as Chairman in the Chairman's absence. It is expected that the position of Vice- Chairman will require additional time and effort beyond that required of an independent director who does not serve in that capacity. In recognition of the additional responsibilities of the Vice-Chairman, the Board believes a Director who becomes Vice-Chairman should be compensated with an additional option grant. VOTING SHARES AND VOTING RIGHTS Stockholders of record at the close of business on September 26, 1995 (the "Record Date"), are entitled to execute the Consent Resolutions. There were 15,546,879 shares of Common Stock of the Company outstanding on that date. Each share of the Common Stock is entitled to one vote. The approval of each Amendment requires execution of the corresponding Consent Resolution by the holders of a majority of the outstanding shares of the Common Stock of the Company. The beneficial ownership of the Company's Common Stock by certain beneficial owners and by each of the Company's directors, each of its five most highly- compensated officers and all executive officers and directors as a group is set forth below under "Security Ownership of Certain Beneficial Owners" and "Security Ownership of Management." SOLICITATION OF WRITTEN CONSENTS Under the Company's By-Laws and Delaware law, any action which may be taken at any annual or special meeting of the Stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. The matters being considered by the Stockholders are being submitted for action by written consent, rather than by votes cast at a meeting. Attached to this Proxy Statement as Appendix A and Appendix B are the texts of the Consent Resolutions being submitted for Stockholder adoption by written consent. The Consent Resolutions provide for the approval of the Amendments which are more fully described under the captions "PROPOSED AMENDMENT TO THE STOCK OPTION PLAN FOR EXECUTIVE AND KEY EMPLOYEES OF MICROPOLIS CORPORATION" and "PROPOSED AMENDMENT TO THE AMENDED AND RESTATED STOCK OPTION PLAN FOR INDEPENDENT DIRECTORS OF MICROPOLIS CORPORATION" below. The Consent Resolutions will be effective on November 3, 1995, if sufficient written consents thereto are received by that date (the "Effective Date"). Written consents must be received by the Company on or before November 3, 1995. Stockholders are being requested to indicate approval of and consent to the adoption of the Consent Resolutions by executing the enclosed Consent Card and by checking the boxes which correspond to the action the Stockholder wishes to take. FAILURE TO CHECK ANY OF THE BOXES WILL, IF THE CONSENT CARD HAS BEEN SIGNED, CONSTITUTE APPROVAL AND CONSENT TO THE ADOPTION OF THE CONSENT RESOLUTIONS. The text of the Consent Resolutions have not been set out on the Consent Card itself because of space limitations. Nevertheless, signing and indicating approval on the Consent Card will be deemed to be written consent to the adoption of the Consent Resolutions. Execution of each of the Consent Resolutions by execution of the Consent Card will constitute your approval, as a Stockholder of the Company, of the corresponding Amendments. The discussion and description of these items in this Proxy Statement is qualified in its entirety by reference to the full text of each Consent Resolution. Stockholders who do not approve, and consent to the adoption, of either or both of the Consent Resolutions by execution of the Consent Card will nonetheless be bound by either or both of the Consent Resolutions if sufficient written consents are received by the Company on or before the Effective Date to approve such Consent Resolution or Consent Resolutions. 2 The Board of Directors requests that each Stockholder execute, date and mail or deliver the Consent Card to D.F. King & Co., Inc., the Solicitor of the Company, or First Interstate Bank, at the following address, as appropriate: BENEFICIAL OWNERS DIRECT SHAREHOLDERS OF RECORD D.F. King & Co., Inc. First Interstate Bank 77 Water Street P.O. Box 4800 New York, NY 10005-4495 Woodland Hills, CA 91365-9794 An addressed envelope is provided for your convenience in returning the Consent Card. Each Stockholder should indicate on the Consent Card the number of shares of Common Stock which the Stockholder is voting. The Consent Card should be returned as soon as possible for receipt no later than November 3, 1995. The Company will pay the entire cost of the preparation and mailing of this Proxy Statement and all other costs of this solicitation. Following the initial mailing of this Proxy Statement, the Company and its agents may also solicit proxies by mail, telephone, facsimile or in person; employees of the Company who assist in such activities will not receive additional compensation in connection therewith. D.F. King & Co., Inc. will receive approximately $8,000 for their solicitation services. REVOCATION OF WRITTEN CONSENTS Any Consent Card executed and delivered by a Stockholder may be revoked by delivering written notice of such revocation prior to the Effective Date to the Company at the address set forth below, as appropriate. Consent Cards may not be revoked after the Effective Date. BENEFICIAL OWNERS DIRECT SHAREHOLDERS OF RECORD D.F. King & Co., Inc. First Interstate Bank 77 Water Street P.O. Box 4800 New York, NY 10005-4495 Woodland Hills, CA 91365-9794 3 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The following table sets forth certain information, as of June 30, 1995, with respect to those known by the Company to be beneficial owners of more than five percent (5%) of the outstanding shares of the Company's Common Stock.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS ------------------- -------------------- -------- Ryback Management Corporation(1) 1,980,500 13.7% 7711 Carondelet Avenue Box 16900 St. Louis, Missouri 63105 State of Wisconsin Investment Board 1,466,000 9.6% P.O. Box 7842 Madison, Wisconsin 53707 First Pacific Advisors 1,035,000 7.5% 11400 West Olympic Boulevard Suite 1200 Los Angeles, California 90064 Richard C. Perry 1,150,000 5.9% 2635 Century Parkway, N.E. Suite 1000 Atlanta, Georgia 30345
- -------- (1) Shares held in a fiduciary capacity by Ryback Management Corporation and/or Lindner Fund, Inc. as of June 30, 1995. Amount beneficially owned: 1,427,300 shares held by Linder Fund, Inc., and 553,200 shares managed by Ryback Management Corporation. SECURITY OWNERSHIP OF MANAGEMENT The following table sets forth information regarding ownership of the Company's Common Stock as of July 31, 1995 by Directors, by each of the named Executive Officers and by all Executive Officers and Directors as a group:
STOCK TOTAL OPTIONS TOTAL UNEXERCISED EXERCISEABLE COMMON AMOUNT OF STOCK WITHIN 60 STOCK BENEFICIAL PERCENT NAME OPTIONS DAYS(3) OWNED(1) OWNERSHIP(3)(4)(5) OF CLASS ---- ----------- ------------ -------- ------------------ -------- DIRECTORS J. Larry Smart......... 380,000 -- -- -- -- Ericson M. Dunstan..... 70,000 10,000 59,250 65,250 * Chriss W. Street....... 30,000 -- 26,700 26,700 * S. Kenneth Kannappan... 30,000 -- -- -- -- Stuart P. Mabon(1)..... 83,334 83,334 246,000 329,334 2.1% EXECUTIVE OFFICERS(2) Taroon C. Kamdar....... 125,000 59,000 -- 59,000 * All Executive Officers and Directors as a Group (11 persons, including those named)................ 936,334 191,334 349,741 541,075 3.4%
- -------- *Less than 1%. (1) Mr. Mabon resigned from the Board of Directors on August 18, 1995. 4 (2) Pursuant to applicable regulations of the Securities and Exchange Commission, information is presented with respect to certain individuals who were executive officers as of the end of the Company's last fiscal year. Information regarding the security ownership of the following named executive officers at the end of the previous fiscal year is not presented, because such individuals are no longer executive officers of the Company, and the Company does not have access to their share beneficial ownership records: Joel A. Appelbaum, Nigel C. McLeod, Dale J. Bartos. (3) Information with respect to beneficial ownership is based on information furnished to the Company by each person included in this table. Except as indicated in the notes to the table, each stockholder included in the table has sole voting and dispositive power with respect to the shares shown to be beneficially owned by the stockholder. (4) All of the stockholders included in this table reside in California. California has community property laws under which the spouse of a stockholder in whose name securities are registered may be entitled to share in the management of their community property which may include the right to vote or dispose of the shares. (5) Includes installments of options to purchase shares of Common Stock that were exercisable on, or within 60 days after, July 31, 1995. COMPENSATION OF DIRECTORS Each director who is not an officer of the Company is paid a retainer fee of $3,000 per quarter, an attendance fee of $2,000 per Board meeting attended, and a daily attendance fee of $1,000 for all committee meetings attended. In October 1987, the Board of Directors adopted the Directors Plan which was approved by the Stockholders of the Company in April 1988. As of July 31, 1995, there were options outstanding to purchase an aggregate of 173,334 shares of Common Stock. At the close of business on the date of each annual meeting of the Stockholders of the Company, each Director of the Company, who is not an employee of the Company or of any affiliate of the Company and who is reelected or continuing as a Director, is automatically granted an option to purchase 10,000 shares of the Company's Common Stock. In addition, when a person is initially elected to the Board, at an annual meeting of stockholders or at any other time, each such new Director who is not an employee of the Company or of any affiliate of the Company is automatically granted an option to purchase 30,000 shares of the Company's Common Stock. Also, when a person is initially appointed to the position of Vice-Chairman of the Board, at a meeting of the Board of Directors held in conjunction with the annual meeting of Stockholders or at any other time, such new Vice-Chairman, who is not an employee of the Company or of any affiliate of the Company, would be automatically granted an option to purchase 20,000 shares of the Company's Common Stock (subject to Stockholder approval of Consent Resolution II). See "Proposed Amendment to the Amended and Restated Stock Option Plan for Independent Directors of Micropolis Corporation" on page 11. Further Stockholder action will not be required with respect to such automatic option grants in the future. Options under the Directors Plan have an exercise price equal to the fair market value of the shares covered by the option on the date of grant, have a term of five years and become exercisable in three equal annual installments commencing one year after the date of grant. EXECUTIVE COMPENSATION CHIEF EXECUTIVE OFFICER 1995 COMPENSATION The Company has an Employment Agreement with Mr. Smart effective July 10, 1995 which provides for annual salary of $350,000, a cash bonus program requiring the achievement of certain key objectives, and the grant of an option to purchase 350,000 shares of the Company's Common Stock, pursuant to the Stock Option Plan for Executive and Key Employees of Micropolis Corporation. CASH AND OTHER COMPENSATION The following table and accompanying notes show, for the Chief Executive Officer and the other four most highly-compensated executive officers of the Company for 1994, the compensation paid by the Company and its subsidiaries to such persons for services in all capacities during 1994 and the preceding two fiscal years. 5 SUMMARY COMPENSATION TABLE
LONG TERM ANNUAL COMPENSATION COMPENSATION --------------------------------------- ------------ OTHER OPTIONS NAME AND ANNUAL GRANTED ALL OTHER PRINCIPAL POSITION YEAR SALARY(5) BONUS COMPENSATION(6) (SHARES) COMPENSATION(7) ------------------ ---- --------- -------- --------------- ------------ --------------- Stuart P. Mabon, President and 1994 $292,136 $ -- $ -- 20,000 $11,798 Chairman of the Board(1) 1993 296,871 22,860 -- 50,000 3,933 1992 273,321 127,940 -- -- 13,711 Taroon C. Kamdar, President, 1994 200,044 25,000 2,060 25,000 48,075 Asia Pacific Division 1993 203,410 91,170 2,612 -- -- 1992 175,032 219,406 6,318 10,000 4,364 Nigel C. Macleod, 1994 162,925 89,333 -- 5,000 -- Vice President-- Engineering(2) 1993 157,993 32,000 -- -- -- 1992 53,658 -- -- 30,000 -- Joel A. Appelbaum, Executive 1994 165,421 50,000 -- 60,000 -- Vice President--Sales and Marketing(3) Dale J. Bartos, Senior Vice President-- 1994 185,484 15,000 -- 15,000 -- Finance and Chief Financial Officer(4) 1993 189,051 9,525 -- -- -- 1992 179,072 71,644 -- 7,000 4,364
- -------- (1) Mr. Smart was elected by the Board of Directors to the position of President and Chief Executive Officer on July 10, 1995; Mr. Mabon later resigned as the Company's Chairman. (2) Bonus amounts for Mr. Macleod in 1993 and 1994 are in accordance with his employment contract with the Company dated August 10, 1992. Mr. MacLeod resigned from the Company on July 28, 1995. (3) Mr. Appelbaum resigned from the Company on March 2, 1995. (4) Mr. Bartos resigned from the Company on March 17, 1995. (5) Includes amounts contributed by each person named through salary reduction under the Micropolis Corporation Employee Savings and Retirement Plan (the "Section 401(k) Plan"). The 1993 salary year included 53 weeks. (6) Amounts represent reimbursement during the fiscal year for the payment of taxes. (7) Amounts for Mr. Mabon include payoff of accrued vacation of $11,798, $3,933 and $9,347 in 1994, 1993 and 1992, respectively. Amounts for Mr. Kamdar include cash payment of $48,075 relating to his overseas assignment. Amounts in 1992 include the Company's contributions of $4,364 to the Section 401(k) Plan on behalf of Mr. Mabon, Mr. Kamdar and Mr. Bartos. The Company has a severance pay agreement with Mr. Kamdar and had a severance pay agreement with Mr. Appelbaum which provide for payments to such persons in the event their employment is terminated by the Company for reasons other than cause. At December 30, 1994, the aggregate commitments pursuant to the agreements were approximately $100,000 and $200,000 for Mr. Kamdar and Mr. Appelbaum, respectively. The commitment to Mr. Kamdar is for six months base salary and performance bonus. The commitment for Mr. Appelbaum during his first year of employment was for one year base salary. After his first year of employment, the commitment to Mr. Appelbaum was for six months base salary. STOCK OPTIONS In October 1987, the Board of Directors adopted the Employee Plan. The Employee Plan was approved by stockholders in April 1988. The Employee Plan is administered by the Compensation Committee of the Board of Directors of the Company. Under the Employee Plan, full-time employees of the Company and of any subsidiary 6 of the Company are eligible to receive grants of non-qualified stock options and incentive stock options (as defined in Section 422 of the Internal Revenue Code (the "Code")). Further information about the Employee Plan is contained in the section entitled "Proposed Amendment to the Stock Option Plan for Executive and Key Employees of Micropolis Corporation." The following table sets forth information regarding stock options granted in 1994 to each of the named executive officers. OPTION GRANTS IN LAST FISCAL YEAR
GRANT DATE PRESENT INDIVIDUAL GRANTS VALUE(4) - ---------------------------------------------------------------- --------------- % OF TOTAL OPTIONS OPTIONS GRANTED GRANTED TO EXERCISE EXPIRATION NAME (SHARES)(3) EMPLOYEES PRICE DATE 5% 10% ---- --------------- ---------- -------- ---------- ------- ------- Stuart P. Mabon. 20,000 4.2% $5.625 10/9/95 $ -- $ -- Taroon C. Kamdar......... 25,000 5.2% $5.625 2/16/99 $38,852 $85,853 Nigel C. Macleod(1)..... 5,000 1.0% $5.625 Expired $ -- $ -- Joel A. Appelbaum(2)... 60,000 12.6% $5.625 Expired $ -- $ -- Dale J. Bartos(2)...... 15,000 3.1% $5.625 Expired $ -- $ --
- -------- (1) Mr. Macleod acquired 1,000 shares of Common Stock on exercise on July 31, 1995. His remaining options expired unexercised. (2) Options expired unexercised. (3) The per share exercise price of all options granted is the fair market value of the Company's Common Stock on the date of grant. Options have a term of five years and become exercisable in three to five equal installments, each of which accrues at the end of each year after the grant date except for the fifth installment, which accrues 60 days before the expiration date. (4) The potential realizable value is calculated from the exercise price per share, assuming the market price of the Company's Common Stock appreciates in value at the stated percentage rate from the date of grant to the expiration date. Actual gains, if any, are dependent on the future market price of the Common Stock. The following table sets forth information regarding stock option exercises and year-end stock option values for each of the named executive officers for 1994. OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUES AT DECEMBER 30, 1994
VALUE OF UNEXERCISED NUMBER OF UNEXERCISED "IN-THE-MONEY' STOCK OPTIONS STOCK OPTIONS(1) ------------------------- ------------------------- SHARES ACQUIRED VALUE NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ----------- ----------- ----------- ------------- ----------- ------------- Stuart P. Mabon......... -- -- 66,667 53,333 $79,201 $143,359 Taroon C. Kamdar........ -- -- 41,500 43,500 $41,615 $ 98,741 Nigel C. Macleod........ -- -- 12,000 23,000 $ 5,256 $ 24,449 Joel A. Appelbaum....... -- -- -- 60,000 -- $198,780 Dale J. Bartos.......... 18,000 $95,634 17,800 24,200 $14,171 $ 56,100
- -------- (1) Market value of underlying Common Stock on date of exercise or fiscal year- end, minus the option exercise price. The share price as of December 30, 1994 was $8.938. On February 25, 1993, as an inducement to his employment, the Company loaned Mr. Macleod the $180,000 to facilitate his relocation to Southern California. As of December 30, 1994, $120,000 was outstanding on the loan. The loan was free of interest during Mr. Macleod's employment by the Company and after such time interest accrues at 9% per annum. The loan is secured by Mr. Macleod's home in Southern California. 7 PROPOSED AMENDMENT TO THE STOCK OPTION PLAN FOR EXECUTIVE AND KEY EMPLOYEES OF MICROPOLIS CORPORATION The Stockholders of the Company are being asked to approve an amendment to the Employee Plan. The Employee Plan was adopted by the Board of Directors in October 1987 and approved by the stockholders in April 1988. The proposed amendment will increase from 2,400,000 to 3,150,000 the number of shares authorized for issuance on exercise of options under the Employee Plan. The terms of the proposed amendment were approved by the Board of Directors at a meeting of the Board on September 20, 1995. The principal features of the Employee Plan are summarized below, but the summary is qualified in its entirety by reference to the Employee Plan itself. Copies of the Employee Plan can be obtained by making written request of the Company's Secretary. GENERAL The Employee Plan authorizes the granting of "incentive stock options," as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and non-qualified stock options. The Employee Plan is not subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA") and is not a qualified plan under Section 401(a) of the Code. Proceeds received by the Company from the sale of the Company's Common Stock pursuant to the exercise of options will be used for general corporate purposes. The purposes of the Employee Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to certain key employees of the Company or any parent or subsidiary of the Company which now exists or hereafter is organized or acquired by or acquires the Company, and to promote the success of the Company. Options granted under the Employee Plan are evidenced by written Stock Option Agreements between the optionee and the Company. Each person receiving an option under the Employee Plan is required by the terms of the Employee Plan (as consideration for the option and as an inducement to the Company to grant the option) to agree in writing that he will remain in the employ of the Company or one of its subsidiaries for a period of at least one year following the date the option is granted, without, however, obligating the Company or its subsidiaries to continue the employment relationship with the optionee during such period. Stock Option Agreements evidencing options granted under the Employee Plan must be consistent with the Employee Plan but need not contain identical provisions. SHARES SUBJECT TO THE EMPLOYEE PLAN A maximum of 3,150,000 shares of the Company's Common Stock may be issued upon exercise of options granted under the Employee Plan, subject to the approval of the amendment to the Employee Plan by the Stockholders. Subject to such overall limitation, there is no restriction as to the maximum number of options that may be granted to any optionee or as to the maximum number of shares which may be issued to any optionee, except that the aggregate fair market value of the stock (determined as of the date of grant) with respect to which incentive stock options are exercisable for the first time by any optionee during any calendar year (under the Employee Plan and all other incentive stock option plans of the Company and its subsidiaries) shall not exceed $100,000. The Employee Plan provides for appropriate adjustments in the number and kind of shares subject to the Employee Plan and to outstanding options in the event of a stock split, stock dividend or certain other similar changes in the Company's Common Stock and in the event of a merger, consolidation or certain other types of recapitalizations. As a condition to the grant of an option, an optionee may be required to surrender for cancellation some or all of the unexercised options previously granted to him under the Employee Plan. Options conditioned upon such surrender may have a lower or higher option price than the option price of the surrendered option, may cover the same (or a lesser or greater) number of shares as the surrendered option and may contain such other terms as may be determined without regard to the terms of the surrendered option. 8 In the event options granted under the Employee Plan expire or terminate, the unpurchased shares of Common Stock covered thereby will become available for the grant of additional options. PARTICIPATION IN THE EMPLOYEE PLAN The Compensation Committee has determined that additional shares authorized for issuance on exercise of options under the Employee Plan are required to help fill key vacancies for which the Company is presently recruiting and the Compensation Committee intends to make such option grants a meaningful portion of the compensation of these new employees. Any executive or other key employee of the Company and of any subsidiary of the Company (a total of approximately 378 employees out of a total of 1,965 as of July 31, 1995) is eligible for participation in the Employee Plan, including any employee who is a director of the Company. No option may be granted to any employee who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or its subsidiaries. ADMINISTRATION OF THE OPTION PLAN The Employee Plan is administered by the Compensation Committee of the Board of Directors of the Company. The Committee is authorized to determine which individuals are executive or key employees, to select from among such individuals the persons to whom options should be granted, to determine the number of shares to be subject to such options, to designate whether options should be incentive or non-qualified stock options and to establish the terms and conditions of such options consistent with the Employee Plan. The Committee is also authorized to adopt, amend and rescind rules relating to the administration of the Employee Plan and to interpret the terms of options. The costs of administering the Employee Plan are paid by the Company. EXERCISE OF OPTIONS Options under the Employee Plan are exercisable in installments in such amounts (which may be cumulative) as the Committee shall provide in the terms of each Stock Option Agreement. Subject to the following, the expiration date, maximum number of shares purchasable, the conditions to exercise and the other provisions of individual Stock Option Agreements are established by the Committee at the time of grant. Option terms may not exceed ten years. No option may be exercised in whole or in part during the first six months after such option is granted. No portion of an option which is unexercisable upon the termination of employment of the optionee for any reason shall thereafter become exercisable. Generally, and subject to the terms of the optionee's individual Stock Option Agreement, options which are exercisable upon a termination of an optionee's employment with the Company or its subsidiaries expire 90 days following such termination. However, options may be exercised within one year after an optionee becomes permanently and totally disabled and, in the event the optionee's employment is terminated by reason of his death or in the event the optionee dies within 30 days following his termination, the option may be exercised within one year after death by the executors or administrators of the optionee's estate or his successors by will or the laws of descent and distribution. The exercise prices of options are fixed by the Committee, but may not be less than 100% of the fair market value of the Company's Common Stock on the date of grant. To exercise an option, the optionee must deliver to the Company a written notice of exercise and full payment in cash of the exercise price for the shares as to which the option is being exercised (with the consent of the Committee, shares of the Company's Common Stock owned by the optionee or issuable upon exercise of the option, valued at fair market value, may also be used to make all or part of such payment). ASSIGNMENT No option granted under the Employee Plan may be assigned or transferred by the optionee except upon death. During the lifetime of the optionee, the option may only be exercised by him. 9 MERGER OR CONSOLIDATION In its absolute discretion, and on such terms and conditions as it deems appropriate, the Committee may provide by the terms of any Stock Option Agreement that such option cannot be exercised after the merger or consolidation of the Company with or into another corporation, the acquisition by another person or entity of all or substantially all of the Company's assets or 80% or more of its outstanding voting stock, or the dissolution or liquidation of the Company. The Committee may also provide (subject to certain limitations relating to incentive stock options under the Code as discussed above) either by the terms of a Stock Option Agreement or by resolution adopted prior to the occurrence of such merger, consolidation, acquisition, liquidation or dissolution, that, for some period prior to such event, such option shall be exercisable as to all shares covered thereby. TERM OF EMPLOYEE PLAN AND AMENDMENTS The Employee Plan expires on October 28, 1997 unless sooner terminated by the Board of Directors. The Board may at any time amend or otherwise modify, suspend or terminate the Employee Plan, except that any amendment which would (i) increase the number of shares for which options may be granted (except pursuant to adjustments provided for in the Employee Plan); (ii) change the standards for eligibility for participants; (iii) reduce the minimum price for which options may be granted; or (iv) extend the period during which the Employee Plan is in effect, must be approved by the stockholders. OPTIONS OUTSTANDING UNDER THE EMPLOYEE PLAN As of July 31, 1995 (subject to the approval of the amendment to the Employee Plan by the stockholders), there were options outstanding to purchase an aggregate of 1,619,460 shares of Common Stock and there were 753,931 shares available for future grant under the Employee Plan. The market value of the shares of Common Stock represented by options outstanding under the Employee Plan was $10,728,923 as of July 31, 1995. No options may be granted under the Employee Plan to purchase in excess of 2,400,000 shares of Common Stock unless the stockholders of the Company approve the amendment to the Employee Plan. FEDERAL INCOME TAX CONSEQUENCES The Federal income tax discussion set forth below is intended for general information only. State and local income tax consequences are not discussed, and may vary from locality to locality. Non-Qualified Stock Options. For Federal income tax purposes, the recipient of non-qualified stock options granted under the Employee Plan will not realize taxable income upon the grant of the option, nor will the Company then be entitled to any deduction. Generally, upon exercise of non-qualified stock options the optionee will realize ordinary income and, subject to Section 162(m) of the Code, the Company will be entitled to a deduction in an amount equal to the difference between the option exercise price and the fair market value of the stock at the date of exercise. The Company will be required to withhold taxes on the ordinary income realized by an optionee upon exercise of non-qualified stock options in order to be entitled to the tax deduction. An optionee's basis for the stock for purposes of determining his gain or loss on his subsequent disposition of the shares generally will be the fair market value of the stock on the date of exercise of the non-qualified stock option. Incentive Stock Options. There is no taxable income to an employee when an incentive stock option is granted to him or when that option is exercised; however, generally the amount by which the fair market value of the shares at the time of exercise exceeds the option price will be included in the optionee's alternative minimum taxable income upon exercise unless the stock acquired is not transferable or is subject to a substantial risk of forfeiture, in which case no amount is included in alternative minimum taxable income until the stock is transferable or there is no longer a substantial risk of forfeiture. If stock received on exercise of an incentive stock option is disposed of in the same year the option was exercised, and the amount realized is less than the stock's fair market value at the time of exercise, the amount includible in alternative minimum taxable income 10 does not exceed the amount realized on the sale or exchange of the stock, less the taxpayer's basis in such stock. Gain realized by an optionee upon sale of stock issued on exercise of an incentive stock option is taxable as long-term capital gain, and no tax deduction is available to the Company, unless the optionee disposes of the shares within two years after the date of grant of the option or within one year of the date the shares were transferred to the optionee. In such event the difference between the option exercise price and the fair market value of the shares on the date of the option's exercise will be taxed at ordinary income rates, and, subject to Section 162(m) of the Code, the Company will be entitled to a deduction to the extent the employee must recognize ordinary income. RECOMMENDATION OF THE BOARD OF DIRECTORS The affirmative vote of a majority of the shares outstanding on the Record Date is required to approve the adoption of this amendment. The Board of Directors has adopted the amendment and recommends a vote FOR approval of the amendment to the Employee Plan which increases the number of shares authorized for issuance upon exercise of options granted under the Employee Plan from 2,400,000 to 3,150,000. PROPOSED AMENDMENT TO THE AMENDED AND RESTATED STOCK OPTION PLAN FOR INDEPENDENT DIRECTORS OF MICROPOLIS CORPORATION The Stockholders of the Company will be asked to approve an amendment to the Directors Plan. The Directors Plan was adopted by the Board of Directors in October 1987, approved by the stockholders in April 1988 and amended in April 1995. The proposed amendment will add a provision for automatic granting of options under the Directors Plan when a Director who is not an employee of the Company or any affiliate of the Company becomes Vice-Chairman of the Board, as described below. The Board of Directors approved the terms of the proposed amendment on September 20, 1995. The principal features of the Directors Plan are summarized below. Copies of the Directors Plan can be obtained by making written request of the Company's Secretary. PARTICIPATION IN THE DIRECTORS PLAN It is proposed that the Directors Plan be amended so that when a Director of the Company, who is not an employee of the Company or of any affiliate of the Company, is initially appointed to the position of Vice-Chairman of the Board, at a meeting of the Board of Directors in conjunction with an annual meeting of stockholders or at any other time, such Director automatically shall be granted an option to purchase 20,000 shares of the Company's Common Stock at the close of business on the date of his or her appointment to the position of Vice-Chairman of the Board. If this amendment is approved by the stockholders, further stockholder action would not be required with respect to such automatic option grants in the future. It is the present intention of the Board of Directors to appoint Chriss N. Street to the position of Vice- Chairman of the Board, with the result that Mr. Street would thereby receive such an option grant, subject to stockholder approval of this amendment. Pursuant to the Directors Plan as presently in effect, each Director of the Company, who is not an employee of the Company or of any affiliate of the Company and who is reelected or continuing as a Director, automatically is granted an option to purchase 10,000 shares of the Company's Common Stock at the close of business on the date of each annual meeting of the stockholders of the Company. In addition, when a person is initially elected to the Board, at an annual meeting of stockholders or at any other time, each such new Director who is not an employee of the Company or of any affiliate of the Company automatically is granted an option to purchase 30,000 shares of the Company's Common Stock at the close of business on the date of his or her election to the Board. Further stockholder action is not required with respect to such automatic option grants. 11 Generally, options which are exercisable upon a termination of a director's directorship with the Company expire three months following such termination. Options may, however, be exercised within one year by the executors or administrators of the director's estate or his successors by will or the laws of descent and distribution in the event the director's directorship is terminated by reason of his death or if the director dies within the three- month period following termination of his directorship. The exercise prices of options automatically granted would be equal to 100% of the fair market value of the Company's Common Stock on the date of grant. To exercise an option, the directors must deliver to the Company a written notice of exercise and full payment in cash of the exercise price for the shares as to which the option is being exercised. OPTIONS OUTSTANDING UNDER THE DIRECTORS PLAN At July 31, 1995, there were options outstanding to purchase an aggregate of 173,334 shares of Common Stock and there were 81,666 shares available for future issuance under the Directors Plan. The market value of the shares of Common Stock represented by options outstanding under the Directors Plan was $1,148,338 as of July 31, 1995. FEDERAL INCOME TAX CONSEQUENCES The Federal income tax discussion set forth below is intended for general information only. State and local income tax consequences are not discussed, and may vary from locality to locality. For Federal income tax purposes, the recipient of non-qualified stock options granted under the Directors Plan will not realize income upon the grant of the option, nor will the Company then be entitled to any deduction. Generally, upon exercise of non-qualified stock options the optionee will realize ordinary income, and, subject to Section 162(m) of the Code, the Company will be entitled to a deduction, in an amount equal to the difference between the option exercise price and the fair market value of the stock at the date of exercise of non-qualified stock options in order to be entitled to the tax deduction. An optionee's basis for the stock for purposes of determining his gain or loss on his subsequent disposition of the shares generally will be the fair market value of the stock on the date of exercise of the non-qualified stock option. RECOMMENDATION OF THE BOARD OF DIRECTORS The affirmative vote of a majority of the shares outstanding on the Record Date is required to approve the adoption of this amendment. The Board of Directors has adopted the amendment and recommends a vote FOR approval of the amendment to the Directors Plan which adds the provision for the automatic grant of future options under the Directors Plan when a Director who is not an employee of the Company or of any affiliate of the Company, upon the terms and conditions set forth in the Directors Plan as summarized above. ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOM- PANYING CONSENT CARD IN THE ENCLOSED ENVELOPE. ERICSON M. DUNSTAN Secretary DATED: September 29, 1995 12 APPENDIX A CONSENT RESOLUTION I WHEREAS an amendment to the Stock Option Plan for Executive and Key Employees of Micropolis Corporation to increase the aggregate number of shares of the Company's authorized but unissued Common Stock that may be issued upon exercise of options granted thereunder from 2,400,000 to 3,150,000 was approved by the Board of Directors of Micropolis Corporation on September 20, 1995, and the Board of Directors has directed that such amendment be submitted to the Stockholders of the Company for their approval or disapproval with the recommendation of the Board of Directors to the Stockholders that they approve such amendments. NOW, THEREFORE, BE IT HEREBY RESOLVED, that such amendment to the Stock Option Plan for Executive and Key Employees of Micropolis Corporation is approved by the stockholders of the Company as of November 3, 1995. A-1 APPENDIX B CONSENT RESOLUTION II WHEREAS an amendment to the Amended and Restated Stock Option Plan for Directors of Micropolis Corporation to provide for the automatic grant of an option to purchase 20,000 shares of the Company's Common Stock to a Director of the Company, who is not an employee of the Company or of any affiliate of the Company, when he or she is initially appointed to the position of Vice- Chairman of the Board, at an annual meeting of Stockholders or at any other time, was approved by the Board of Directors of Micropolis Corporation on September 20, 1995, and the Board of Directors has directed that such amendment be submitted to the Stockholders of the Company for their approval or disapproval with the recommendation of the Board of Directors to the Stockholders that they approve such amendment. NOW, THEREFORE, BE IT HEREBY RESOLVED, that such amendment to the Amended and Restated Stock Option Plan for Directors of Micropolis Corporation is approved by the stockholders of the Company as of November 3, 1995. B-1 THIS CONSENT IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MICROPOLIS CORPORATION CONSENT CARD FOR ACTION BY WRITTEN CONSENT OF STOCKHOLDERS TO BE EFFECTIVE NOVEMBER 3, 1995 1. Proposed Consent Resolution I approving amendment to the Stock Option Plan for Executive and Key Employees of Micropolis Corporation. FOR [_] AGAINST [_] ABSTAIN [_] 2. Proposed Consent Resolution II approving amendment to the Amended and Restated Stock Option Plan for Directors of Micropolis Corporation. FOR [_] AGAINST [_] ABSTAIN [_] (continued and to be signed on other side) THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE ABOVE PROPOSALS. FAILURE TO CHECK ANY OF THE BOXES WITH RESPECT TO A PROPOSAL WILL, IF THIS CONSENT CARD HAS BEEN SIGNED AND DATED, CONSTITUTE APPROVAL OF AND CORRESPONDING CONSENT TO THE ADOPTION OF THE CONSENT RESOLUTION. -------------- ------------- Consent Card Number of Number Shares Dated: ......................, 1995 ----------------------------------- ----------------------------------- (Signature(s) of Stockholder(s)) (NOTE--Please sign exactly as your name or names appear on the label. If more than one name appears, all persons so designated should sign. When signing in a representative capacity, please give your full title.) Please return promptly in the enclosed envelope, which requires no postage if mailed in the U.S.A. DO NOT FOLD, STAPLE OR MUTILATE EX-10.45 2 STOCK OPTION PLAN FOR INDEPENDENT DIRECTORS EXHIBIT 10.45 AMENDED AND RESTATED STOCK OPTION PLAN FOR INDEPENDENT DIRECTORS OF MICROPOLIS CORPORATION Micropolis Corporation, a corporation organized under the laws of the State of Delaware, in order to amend its existing Amended and Restated Stock Option Plan for Directors, hereby adopts this revised Amended and Restated Stock Option Plan for Independent Directors of Micropolis Corporation. The purposes of this Plan are as follows: (1) To further the growth, development and financial success of the Company by providing additional incentives to its independent Directors who have a major share of the responsibility for the management of the Company's business by assisting them to become owners of common stock of the Company and thus to benefit directly from its growth, development and financial success. (2) To enable the Company to obtain and retain the services of the type of independent directors considered essential to the long-range success of the Company by providing and offering them an opportunity to become owners of common stock of the Company. RECITALS -------- A. In October 1987 the Board of Directors of the Company adopted and approved a Stock Option Plan for Directors of the Company, which Plan was approved by the stockholders of the Company in April 1988. As amended, with the approval of the stockholders of the Company, the Plan now covers 300,000 shares of common stock of the Company; options for 173,334 shares are presently outstanding, approved by stockholders and covered by presently available shares under the Plan; and 45,000 shares have been issued upon exercise of options under the Plan. B. The Board of Directors deems it desirable and in the best interests of the Company and its stockholders to provide for the automatic granting of, in addition to options automatically granted or currently provided for under the Plan, an option to purchase 20,000 shares of the Company's Common Stock to a Director of the Company, who is not an employee of the Company or of any affiliate of the Company, when he or she is initially appointed to the position of Vice-Chairman of the Board, at a meeting of the Board of Directors held in conjunction with the annual meeting of Stockholders or at any other time, upon the terms and conditions set forth herein and subject to the approval of such amendment by the stockholders of the Company by written consent in lieu of a meeting. ARTICLE I DEFINITIONS ----------- Whenever the following terms are used in this Plan, they shall have the meaning specified below unless the context clearly indicates to the contrary. The masculine pronoun shall include the feminine and neuter and the singular shall include the plural, where the context so indicates. Section 1.1 - Board - ----------- ----- "Board" shall mean the Board of Directors of the Company. Section 1.2 - Company - ----------- ------- "Company" shall mean Micropolis Corporation. In addition, "Company" shall mean any corporation assuming, or issuing new stock options in substitution for, Options outstanding under the Plan. Section 1.3 - Director - ----------- -------- "Director" shall mean a member of the Board who is not an employee of the Company or of any "affiliate" of the Company as that term is defined by Regulation 405 under the Securities Act. Section 1.4 - Exchange Act - ----------- ------------ "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. Section 1.5 - Option - ----------- ------ "Option" shall mean an option to purchase common stock of the Company, granted under the Plan. Section 1.6 - Optionee - ----------- -------- "Optionee" shall mean a Director to whom an Option is granted under the Plan. Section 1.7 - Parent Corporation - ----------- ------------------ "Parent Corporation" shall mean any corporation in an unbroken chain of corporations ending with the Company if each of the corporations other than the Company then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Section 1.8 - Plan - ----------- ---- "Plan" shall mean the Amended and Restated Stock Option Plan for Independent Directors of Micropolis Corporation as in effect on November 3, 1995. Section 1.9 - Rule 16b-3 - ----------- ---------- "Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act as such Rule may be amended in the future. Section 1.10 - Secretary - ------------ --------- "Secretary" shall mean the Secretary of the Company. Section 1.11 - Securities Act - ------------ -------------- "Securities Act" shall mean the Securities Act of 1933, as amended. Section 1.12 - Termination of Directorship - ------------ --------------------------- "Termination of Directorship" shall mean the time when Optionee ceases to be a director of the Company or any Parent Corporation for any reason, including, but not by way of limitation, a termination by resignation, failure to be elected, death or retirement. The Board, in its absolute discretion, shall determine the effect of all other matters and questions relating to Termination of Directorship. ARTICLE II SHARES SUBJECT TO PLAN ---------------------- Section 2.1 - Shares Subject to Plan - ----------- ---------------------- The shares of stock subject to Options shall be shares of the Company's $1.00 par value Common Stock (the "Common Stock"). The aggregate number of such shares which may be issued upon exercise of Options shall not exceed 300,000. Section 2.2 - Unexercised Options - ----------- ------------------- If any Option expires or is cancelled without having been fully exercised, the number of shares subject to such Option but as to which such Option was not exercised prior to its expiration or cancellation may again be optioned hereunder, subject to the limitations of Section 2.1. Section 2.3 - Changes in Company's Shares - ----------- --------------------------- In the event that the outstanding shares of Common Stock of the Company are hereafter changed into or exchanged for a different number or kind of shares or other securities of the Company, or of another corporation, by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, stock dividend or combination of shares, appropriate adjustments shall be made by the Board in the number and kind of shares for the purchase of which Options may be granted, including adjustments of the limitations in Section 2.1 on the maximum number and kind of shares which may be issued on exercise of Options. ARTICLE III GRANTING OF OPTIONS ------------------- Section 3.1 - Eligibility - ----------- ----------- Each Director of the Company or of any corporation which is then a Parent Corporation shall be eligible to receive Options at the times and in the manner set forth in Section 3.3. Section 3.2 - Tax Status of Stock Options - ----------- --------------------------- Options granted under the Plan do not qualify as "incentive stock options" under Section 422 of the Internal Revenue Code of 1986. Section 3.3 - Granting of Options - ----------- ------------------- Each person who then is reelected or continuing as a Director automatically shall be granted an Option to purchase 10,000 shares of Common Stock (subject to adjustment as provided in Section 2.3) at the close of business on the date of each annual meeting of the stockholders of the Company. Also, when a person is initially elected to the Board, at an annual meeting of stockholders or at any other time, each such new Director automatically shall be granted an Option to purchase 30,000 shares of Common Stock (subject to adjustment as provided in Section 2.3) at the close of business on the date of his or her election to the Board. In addition, subject to stockholder approval of the material amendment to the Plan (as set forth in Recital B), when a Director is initially appointed to the position of Vice-Chairman of the Board, at a meeting of the Board of Directors held in conjunction with the annual meeting of Stockholders or at any other time, such new Vice-Chairman, who is not an employee of the Company or of any affiliate of the Company, shall be automatically granted an Option to purchase 20,000 shares of the Company's Common Stock at the close of business on the date of his or her appointment to the position of Vice-Chairman. ARTICLE IV TERMS OF OPTIONS ---------------- Section 4.1 - Option Agreement - ----------- ---------------- Each Option shall be evidenced by a written Stock Option Agreement, which shall be executed by the Optionee and an authorized officer of the Company and which shall contain such terms and conditions as the Board shall determine, consistent with the Plan. Section 4.2 - Option Price - ----------- ------------ (a) The price of the shares of Common Stock subject to each Option shall be equal to 100% of the fair market value of such shares on the date such Option is granted. (b) For purposes of the Plan, the fair market value of a share of the Common Stock as of a given grant date shall be: (i) the closing price of a share of the Common Stock on the principal exchange on which shares of the Common Stock are then trading, if any, on the day immediately preceding such grant date, or, if shares were not traded on the day immediately preceding such grant date, then on the next preceding trading day during which a sale occurred; or (ii) if the Common Stock is not traded on an exchange but is quoted on NASDAQ or a successor quotation system, (1) the last sales price (if the Common Stock is then listed as a National Market Issue under the NASD National Market System) or (2) the mean between the closing representative bid and asked prices (in all other cases) for the Common Stock on the day immediately preceding such grant date as reported by NASDAQ or such successor quotation system; or (iii) if the Common Stock is not publicly traded on an exchange and not quoted on NASDAQ or a successor quotation system, the mean between the closing bid and asked prices for the Common Stock, on the day immediately preceding such grant date, as determined in good faith by the Board; or (iv) if the Common Stock is not publicly traded, the fair market value established by the Board acting in good faith. Section 4.3 - Commencement of Exercisability - ----------- ------------------------------ (a) No Option may be exercised in whole or in part during the first year after such Option is granted. (b) Options shall become exercisable in cumulative annual installments of 33 1/3% of the number of shares covered by the Option on each of the first, second and third anniversaries of the date of Option grant. The term of each Option shall be five years. (c) No portion of an Option which is unexercisable at Termination of Directorship shall thereafter become exercisable. Section 4.4 - Expiration of Options - ----------- --------------------- No Option may be exercised to any extent by anyone after the first to occur of the following events: (i) The expiration of five years from the date the Option was granted; or (ii) The expiration of three months from the date of the Optionee's Termination of Directorship for any reason other than such Optionee's death unless the Optionee dies within said three-month period; or (iii) The expiration of one year from the date of the Optionee's death. Section 4.5 - Consideration - ----------- ------------- In consideration of the granting of the Option, the Optionee shall agree, in the written Stock Option Agreement, to serve as a Director of the Company until the next annual meeting of the stockholders of the Company or a Parent Corporation. Nothing in this Plan or in any Stock Option Agreement hereunder shall confer upon any Optionee any right to continue as a Director of the Company or any Parent Corporation. Section 4.6 - Adjustments in Outstanding Options - ----------- ---------------------------------- In the event that the outstanding shares of the stock subject to Options are changed into or exchanged for a different number or kind of shares of the Company or other securities of the Company by reason of merger, consolidation, recapitalization, reclassification, stock split-up, stock dividend or combination of shares, the Board shall make an appropriate and equitable adjustment in the number and kind of shares as to which all outstanding Options, or portions thereof then unexercised, shall be exercisable, to the end that after such event the Optionee's proportionate interest shall be maintained as before the occurrence of such event. Such adjustment in an outstanding Option shall be made without change in the total price applicable to the Option or the unexercised portion of the Option (except for any change in the aggregate price resulting from rounding-off of share quantities or prices) and with any necessary corresponding adjustment in Option price per share. Any such adjustment made by the Board shall be final and binding upon all Optionees, the Company and all other interested persons. Section 4.7 - Merger, Consolidation, Acquisition, Liquidation or Dissolution - ----------- -------------------------------------------------------------- In its absolute discretion, and on such terms and conditions as it deems appropriate, the Board may provide by the terms of any Option that such Option cannot be exercised after the merger or consolidation of the Company with or into another corporation, the acquisition by another corporation or person of all or substantially all of the Company's assets or 80% or more of the Company's then outstanding voting stock or the liquidation or dissolution of the Company; and if the Board so provides, it may, in its absolute discretion and on such terms and conditions as it deems appropriate, also provide, either by the terms of such Option or by a resolution adopted prior to the occurrence of such merger, consolidation, acquisition, liquidation or dissolution, that, for some period of time prior to such event, such Option shall be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in Section 4.3(a) or Section 4.3(b). ARTICLE V EXERCISE OF OPTIONS ------------------- Section 5.1 - Person Eligible to Exercise - ----------- --------------------------- During the lifetime of the Optionee, only he may exercise an Option granted to him, or any portion thereof. After the death of the Optionee, any exercisable portion of an Option may, prior to the time when such portion becomes unexercisable under Section 4.4 or Section 4.7, be exercised by his personal representative or by any person empowered to do so under the deceased Optionee's will or under the then applicable laws of descent and distribution. Section 5.2 - Partial Exercise - ----------- ---------------- At any time and from time to time prior to the time when an exercisable Option or exercisable portion thereof become unexercisable under Section 4.4 or Section 4.7, such Option or portion thereof may be exercised in whole or in part; provided, however, that the Company shall not be required to issue fractional shares. Section 5.3 - Manner of Exercise - ----------- ------------------ An exercisable Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary or his office of all of the following prior to the time when such Option or such portion becomes unexercisable under Section 4.4 or Section 4.7: (a) Notice in writing signed by the Optionee or other person then entitled to exercise such Option or portion, stating that such Option or portion is exercised, such notice complying with any applicable rules established by the Board; and (b) Full payment (in cash or by check) for the shares with respect to which such Option or portion is thereby exercised; and (c) Such representations and documents as the Board, in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act and any other federal or state securities laws or regulations. The Board may, in its absolute discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer orders to transfer agents and registrars; and (d) In the event that the Option or portion thereof shall be exercised pursuant to Section 5.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option or portion thereof. Section 5.4 - Conditions to Issuance of Stock Certificates - ----------- -------------------------------------------- The shares of stock issuable and deliverable upon the exercise of an Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions: (a) The admission of such shares to listing on all stock exchanges on which such class of stock is then listed; and (b) The completion of any registration or other qualification of such shares under any state or federal law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body, which the Board shall, in its absolute discretion, deem necessary or advisable; and (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Board shall, in its absolute discretion, determine to be necessary or advisable; and (d) The payment to the Company of all amounts which it is required to withhold, if any, under federal, state or local law in connection with the exercise of the Option; and (e) The lapse of such reasonable period of time following the exercise of the Option as the Board may establish from time to time for reasons of administrative convenience. Section 5.5 - Rights as Stockholders - ----------- ---------------------- The holders of Options shall not be, nor have any of the rights or privileges of, stockholders of the Company in respect of any shares purchasable upon the exercise of any part of an Option unless and until certificates representing such shares have been issued by the Company to such holders. ARTICLE VI ADMINISTRATION -------------- Section 6.1 - Duties and Powers of the Board - ----------- ------------------------------ It shall be the duty of the Board to conduct the general administration of the Plan in accordance with its provisions. The Board shall have the power to interpret the Plan and the Options and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. Section 6.2 - Majority Rule - ----------- ------------- The Board shall act by a majority of its members in office. The Board may act either by vote at a meeting or by a memorandum or other written instrument signed by a majority of the Board. Section 6.3 - Compensation; Professional Assistance; Good Faith Actions - ----------- --------------------------------------------------------- Members of the Board shall receive no additional compensation for their services under the Plan. All expenses and liabilities incurred by members of the Board in connection with the administration of the Plan shall be borne by the Company. The Board may employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Board and the Company shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Board in good faith shall be final and binding upon all Optionees, the Company and all other interested persons. No member of the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Options, and all members of the Board shall be fully protected by the Company in respect to any such action, determination or interpretation. ARTICLE VII OTHER PROVISIONS ---------------- Section 7.1 - Options Not Transferable - ----------- ------------------------ No Option or interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Optionee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that nothing in this Section 7.1 shall prevent transfers by will or by the applicable laws of descent and distribution. Section 7.2 - Amendment, Suspension or Termination of the Plan - ---------- ------------------------------------------------ (a) The Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board. However, without approval of the Company's stockholders given within 12 months before or after the action by the Board, no action of the Board may, except as provided in Section 2.3, increase the limit imposed in Section 2.1 on the maximum number of shares which may be issued on exercise of Options, modify the eligibility requirements of Section 3.1, reduce the Option price requirements of Section 4.2(a), change the exercisability provisions of Section 4.3 or extend the limit imposed in Section 7.2(d) on the period during which Options may be granted. Neither the amendment, suspension nor termination of the Plan shall, without the consent of the holder of the Option, alter or impair any rights or obligations under any Option theretofore granted. Notwithstanding the foregoing, the Plan shall not be amended more than once every six months other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act or the rules thereunder. (b) The Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including without limitation Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be administered, and Options shall be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and Options granted hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. (c) All adjustments in the number and kind of shares covered by the Plan and outstanding Options thereunder, and in the exercise price of outstanding Options, shall be made if, and in the same manner as, such adjustments are made to the Company's Stock Option Plan for Executive and Key Employees, or any successor to said plan, and to non-qualified stock options outstanding under said plan or successor plan. (d) No Option may be granted during any period of suspension nor after termination of the Plan, and in no event may any Option be granted under the Plan after October 28, 1997. Section 7.3 - Approval of Plan Amendments by Stockholders - ----------- ------------------------------------------- The material amendment to the Plan (as set forth in Recital B) will be submitted for the approval of the Company's stockholders by written consent in lieu of meeting of stockholders. If such approval is not obtained, such amendments to the Plan shall have no force or effect. Options may be granted prior to such stockholder approval, subject to such stockholder approval. Any Options so granted shall provide that if such approval is not obtained, the Options shall be void and of no further force or effect. Section 7.4 - Effect of Plan Upon Other Option and Compensation Plans - ----------- ------------------------------------------------------- The adoption of this Plan shall not affect any other compensation or incentive plans in effect for Directors of the Company. Nothing in this Plan shall be construed to limit the right of the Company to grant or assume options otherwise than under this Plan in connection with any proper corporate purpose, including, but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, firm or association. Neither the adoption of this Plan by the Board on October 6, 1993 nor its subsequent approval by the Company's stockholders shall have any effect upon previously granted Options or the terms of the written grant of such Options. Section 7.5 - Titles - ----------- ------ Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan. EX-10.46 3 STOCK OPTION PLAN FOR EXECUTIVE AND KEY EMPLOYEE EXHIBIT 10.46 STOCK OPTION PLAN FOR EXECUTIVE AND KEY EMPLOYEES OF MICROPOLIS CORPORATION Micropolis Corporation, a corporation organized under the laws of the State of Delaware, has previously adopted this Stock Option Plan for Executive and Key Employees of Micropolis Corporation, and wishes to amend the Plan to provide for the granting of options hereunder to directors of the Company who are also employees and to make certain other minor changes to the Plan which are deemed desirable. The purposes of this Plan are as follows: (1) To further the growth, development and financial success of the Company by providing additional incentives to certain of its executive and other key Employees who have been or will be given responsibility for the management or administration of the Company's business affairs, by assisting them to become owners of the Company's Common Stock and thus to benefit directly from its growth, development and financial success. (2) To enable the Company to obtain and retain the services of the type of professional, technical and managerial employees considered essential to the long-range success of the Company by providing and offering them an opportunity to become owners of the Company's Common Stock under options, including options that are intended to qualify as "incentive stock options" under Section 422 of the Code. ARTICLE I DEFINITIONS ----------- Whenever the following terms are used in this Plan, they shall have the meaning specified below unless the context clearly indicates to the contrary. The masculine pronoun shall include the feminine and neuter and the singular shall include the plural, where the context so indicates. Section 1.1 - Board - ----------- ----- "Board" shall mean the Board of Directors of the Company. Section 1.2 - Code - ----------- ---- "Code" shall mean the Internal Revenue Code of 1986, as amended. Section 1.3 - Committee - ----------- --------- "Committee" shall mean the Compensation Committee of the Board, appointed as provided in Section 6.1. Section 1.4 - Company - ----------- ------- "Company" shall mean Micropolis Corporation. In addition, "Company" shall mean any corporation assuming, or issuing new employee stock options in substitution for, Incentive Stock Options, outstanding under the Plan, in a transaction to which Section 424(a) of the Code applies. Section 1.5 - Director - ----------- -------- "Director" shall mean a member of the Board. Section 1.6 - Employee - ----------- -------- "Employee" shall mean any employee (as defined in accordance with the regulations and revenue rulings then applicable under Section 3401(c) of the Code) of the Company, or of any corporation which is then a Parent Corporation or a Subsidiary, whether such employee is so employed at the time this Plan is adopted or becomes so employed subsequent to the adoption of this Plan. Section 1.7 - Exchange Act - ----------- ------------ "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. Section 1.8 - Incentive Stock Option - ----------- ---------------------- "Incentive Stock Option" shall mean an Option which qualifies under Section 422 of the Code and which is designated as an Incentive Stock Option by the Committee. Section 1.9 - Non-Qualified Option - ----------- -------------------- "Non-Qualified Option" shall mean an Option which is not an Incentive Stock Option and which is designated as a Non-Qualified Option by the Committee. Section 1.10 - Officer - ------------ ------- "Officer" shall mean an officer of the Company, as defined in Rule 16a-1(f) under the Exchange Act, as such Rule may be amended in the future. Section 1.11 - Option - ------------ ------ "Option" shall mean an option to purchase Common Stock of the Company, granted under the Plan. "Options" includes both Incentive Stock Options and Non-Qualified Options. Section 1.12 - Optionee - ------------ -------- "Optionee" shall mean an Employee to whom an Option is granted under the Plan. Section 1.13 - Parent Corporation - ------------ ------------------ "Parent Corporation" shall mean any corporation in an unbroken chain of corporations ending with the Company if each of the corporations other than the Company then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Section 1.14 - Plan - ------------ ---- "Plan" shall mean this Stock Option Plan for Executive and Key Employees of Micropolis Corporation. Section 1.15 - Rule 16b-3 - ------------ ---------- "Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such Rule may be amended in the future. Section 1.16 - Secretary - ------------ --------- "Secretary" shall mean the Secretary of the Company. Section 1.17 - Securities Act - ------------ -------------- "Securities Act" shall mean the Securities Act of 1933, as amended. Section 1.18 - Subsidiary - ------------ ---------- "Subsidiary" shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Section 1.19 - Termination of Employment - ------------ ------------------------- "Termination of Employment" shall mean the time when the employee-employer relationship between the Optionee and the Company, a Parent Corporation or a Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death or retirement, but excluding terminations where there is a simultaneous reemployment by the Company, a Parent Corporation or a Subsidiary. The Committee, in its absolute discretion, shall determine the effect of all other matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a Termination of Employment resulted from a discharge for good cause, and all questions of whether particular leaves of absence constitute Terminations of Employment; provided, however, that, with respect to Incentive Stock Options, a leave of absence shall constitute a Termination of Employment if, and to the extent that, such leave of absence interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section. ARTICLE II SHARES SUBJECT TO PLAN ---------------------- Section 2.1 - Shares Subject to Plan - ----------- ---------------------- The shares of stock subject to Options shall be shares of the Company's $1.00 par value Common Stock. The aggregate number of such shares which may be issued upon exercise of Options shall not exceed 3,150,000. Section 2.2 - Unexercised Options - ----------- ------------------- If any Option expires or is cancelled without having been fully exercised, the number of shares subject to such Option but as to which such Option was not exercised prior to its expiration or cancellation may again be optioned hereunder, subject to the limitations of Section 2.1. Section 2.3 - Changes in Company's Shares - ----------- --------------------------- In the event that the outstanding shares of Common Stock of the Company are hereafter changed into or exchanged for a different number or kind of shares or other securities of the Company, or of another corporation, by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, stock dividend or combination of shares, appropriate adjustments shall be made by the Committee in the number and kind of shares for the purchase of which Options may be granted, including adjustments of the limitations in Section 2.1 on the maximum number and kind of shares which may be issued on exercise of Options. ARTICLE III GRANTING OF OPTIONS ------------------- Section 3.1 - Eligibility - ----------- ----------- Any executive or other key Employee of the Company or of any corporation which is then a Parent Corporation or a Subsidiary shall be eligible to be granted Options, except as provided in Section 3.2. Section 3.2 - Qualification of Incentive Stock Options - ----------- ---------------------------------------- No Incentive Stock Option shall be granted unless such Option, when granted, qualifies as an "incentive stock option" under Section 422 of the Code. Section 3.3 - Granting of Options - ----------- ------------------- (a) The Committee shall from time to time, in its absolute discretion: (i) Determine which Employees are executive or other key Employees and select from among the executive or other key Employees (including those to whom Options have been previously granted under the Plan) such of them as in its opinion should be granted Options; and (ii) Determine the number of shares to be subject to such Options granted to such selected executive or other key Employees, and determine whether such Options are to be Incentive Stock Options or Non-Qualified Options; and (iii) Determine the terms and conditions of such Options, consistent with the Plan. (b) Upon the selection of an executive or other key Employee to be granted an Option, the Committee shall instruct the Secretary to issue such Option and may impose such conditions on the grant of such Option as it deems appropriate. Without limiting the generality of the preceding sentence, the Committee may, in its discretion and on such terms as it deems appropriate, require as a condition on the grant of an Option to an Employee that the Employee surrender for cancellation some or all of the unexercised Options which have been previously granted to him. An Option the grant of which is conditioned upon such surrender may have an option price lower (or higher) than the option price of the surrendered Option, may cover the same (or a lesser or greater) number of shares as the surrendered Option, may contain such other terms as the Committee deems appropriate and shall be exercisable in accordance with its terms, without regard to the number of shares, price, option period or any other term or condition of the surrendered Option. ARTICLE IV TERMS OF OPTIONS ---------------- Section 4.1 - Option Agreement - ----------- ---------------- Each Option shall be evidenced by a written Stock Option Agreement, which shall be executed by the Optionee and an authorized Officer of the Company and which shall contain such terms and conditions as the Committee shall determine, consistent with the Plan. Stock Option Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to qualify such Options as "incentive stock options" under Section 422 of the Code. Section 4.2 - Option Price - ----------- ------------ (a) The price of the shares subject to each Option shall be set by the Committee; provided, however, that the price per share shall be not less than 100% of the fair market value of such shares on the date such Option is granted; provided, further, that, in the case of an Incentive Stock Option, the price per share shall not be less than 110% of the fair market value of such shares on the date such Option is granted in the case of an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company, any Subsidiary or any Parent Corporation. (b) For purposes of the Plan, the fair market value of a share of the Company's Common Stock as of a given date shall be: (i) the closing price of a share of the Company's Common Stock on the principal exchange on which shares of the Company's Common Stock are then trading, if any, on the day previous to such date, or, if shares were not traded on the day previous to such date, then on the next preceding trading day during which a sale occurred; or (ii) if such Common Stock is not traded on an exchange but is quoted on NASDAQ or a successor quotation system, (1) the last sales price (if the Company's Common Stock is then listed as a National Market Issue under the NASD National Market System) or (2) the mean between the closing representative bid and asked prices (in all other cases) for the Company's Common Stock on the day previous to such date as reported by NASDAQ or such successor quotation system; or (iii) if such Common Stock is not publicly traded on an exchange and not quoted on NASDAQ or a successor quotation system, the mean between the closing bid and asked prices for the Company's Common Stock, on the day previous to such date, as determined in good faith by the Committee; or (iv) if the Company's Common Stock is not publicly traded, the fair market value established by the Committee acting in good faith. Section 4.3 - Commencement of Exercisability - ----------- ------------------------------ (a) No Option may be exercised in whole or in part during the first six months after such Option is granted or such longer period as may be provided in the terms of any individual Option. (b) Subject to the provisions of Sections 4.3(a), 4.3(c), 4.3(d) and 7.3, Options shall become exercisable at such times and in such installments (which may be cumulative) as the Committee shall provide in the terms of each individual Option; provided, however, that by a resolution adopted after an Option is granted the Committee may, on such terms and conditions as it may determine to be appropriate, and subject to Section 4.3(c) and Section 7.3, accelerate the time at which such Option or any portion thereof may be exercised. (c) No portion of an Option which is unexercisable at Termination of Employment shall thereafter become exercisable. (d) Notwithstanding any other provision of this Plan, in the case of an Incentive Stock Option, the aggregate fair market value (determined at the time the Incentive Stock Option is granted) of the shares of the Company's stock with respect to which "incentive stock options" (within the meaning of Section 422 of the Code) are exercisable for the first time by the Optionee during any calendar year (under the Plan and all other incentive stock option plans of the Company, any Subsidiary and any Parent Corporation) shall not exceed $100,000. Section 4.4 - Expiration of Options - ----------- --------------------- (a) No Option may be exercised to any extent by anyone after the first to occur of the following events: (i) The expiration of ten years from the date the Option was granted; or (ii) With respect to an Incentive Stock Option in the case of an Optionee owning (within the meaning of Section 424(d) of the Code), at the time the Incentive Stock Option was granted, more than 10% of the total combined voting power of all classes of stock of the Company, any Subsidiary or any Parent Corporation, the expiration of five years from the date the Incentive Stock Option was granted; or (iii) Except in the case of any Optionee who is disabled (within the meaning of Section 22(e)(3) of the Code), the expiration of three months from the date of the Optionee's Termination of Employment for any reason other than such Optionee's death unless the Optionee dies within said three-month period; or (iv) In the case of an Optionee who is disabled (within the meaning of Section 22(e)(3) of the Code), the expiration of one year from the date of the Optionee's Termination of Employment for any reason other than such Optionee's death unless the Optionee dies within said one-year period; or (v) The expiration of one year from the date of the Optionee's death. (b) Subject to the provisions of Section 4.4(a), the Committee shall provide, in the terms of each individual Option, when such Option expires and becomes unexercisable; and (without limiting the generality of the foregoing) the Committee may provide in the terms of individual Options that said Options expire 30 days following a Termination of Employment for any reason. Section 4.5 - Consideration - ----------- ------------- In consideration of the granting of an Option, the Optionee shall agree, in the written Stock Option Agreement, to remain in the employ of the Company, a Parent Corporation or a Subsidiary for a period of at least one year after the Option is granted. Nothing in this Plan or in any Stock Option Agreement hereunder shall confer upon any Optionee any right to continue in the employ of the Company, any Parent Corporation or any Subsidiary or shall interfere with or restrict in any way the rights of the Company, its Parent Corporations and its Subsidiaries, which are hereby expressly reserved, to discharge any Optionee at any time for any reason whatsoever, with or without cause. Section 4.6 - Adjustments in Outstanding Options - ----------- ---------------------------------- In the event that the outstanding shares of the stock subject to Options are changed into or exchanged for a different number or kind of shares of the Company or other securities of the Company by reason of merger, consolidation, recapitalization, reclassification, stock split-up, stock dividend or combination of shares, the Committee shall make an appropriate and equitable adjustment in the number and kind of shares as to which all outstanding Options, or portions thereof then unexercised, shall be exercisable, to the end that after such event the Optionee's proportionate interest shall be maintained as before the occurrence of such event. Such adjustment in an outstanding Option shall be made without change in the total price applicable to the Option or the unexercised portion of the Option (except for any change in the aggregate price resulting from rounding-off of share quantities or prices) and with any necessary corresponding adjustment in Option price per share; provided, however, that, in the case of Incentive Stock Options, each such adjustment shall be made in such manner as not to constitute a "modification" within the meaning of Section 424(h)(3) of the Code. Any such adjustment made by the Committee shall be final and binding upon all Optionees, the Company and all other interested persons. Section 4.7 - Merger, Consolidation, Acquisition, Liquidation or Dissolution - ----------- -------------------------------------------------------------- In its absolute discretion, and on such terms and conditions as it deems appropriate, the Committee may provide by the terms of any Option that such Option cannot be exercised after the merger or consolidation of the Company with or into another corporation, the acquisition by another corporation or person of all or substantially all of the Company's assets or 80% or more of the Company's then outstanding voting stock or the liquidation or dissolution of the Company; and if the Committee so provides, it may, in its absolute discretion and on such terms and conditions as it deems appropriate, also provide, either by the terms of such Option or by a resolution adopted prior to the occurrence of such merger, consolidation, acquisition, liquidation or dissolution, that, for some period of time prior to such event, such Option shall be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in Section 4.3(a), Section 4.3(b), Section 4.3(d) and/or any installment provisions of such Option, but subject to Section 7.3. ARTICLE V EXERCISE OF OPTIONS ------------------- Section 5.1 - Person Eligible to Exercise - ----------- --------------------------- During the lifetime of the Optionee, only he may exercise an Option (or any portion thereof) granted to him. After the death of the Optionee, any exercisable portion of an Option may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Stock Option Agreement, be exercised by his personal representative or by any person empowered to do so under the deceased Optionee's will or under the then applicable laws of descent and distribution. Section 5.2 - Partial Exercise - ----------- ---------------- At any time and from time to time prior to the time when any exercisable Option or exercisable portion thereof becomes unexercisable under the Plan or the applicable Stock Option Agreement, such Option or portion thereof may be exercised in whole or in part; provided, however, that the Company shall not be required to issue fractional shares and the Committee may, by the terms of the Option, require any partial exercise to be with respect to a specified minimum number of shares. Section 5.3 - Manner of Exercise - ----------- ------------------ An exercisable Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary or his office of all of the following prior to the time when such Option or such portion becomes unexercisable under the Plan or the applicable Stock Option Agreement: (a) Notice in writing signed by the Optionee or other person then entitled to exercise such Option or portion, stating that such Option or portion is exercised, such notice complying with all applicable rules established by the Committee; and (b) Full payment (in cash or by check) for the shares with respect to which such Option or portion is thereby exercised; and (c) The payment (in cash or by check) to the Company (or other employer corporation) of all amounts which it is required to withhold under federal, state or local law in connection with the exercise of the Option; with the consent of the Committee, (i) shares of the Company's Common Stock owned by the Optionee duly endorsed for transfer or (ii) subject to the timing requirements of Section 5.4, shares of the Company's Common Stock issuable to the Optionee upon exercise of the Option, valued in accordance with Section 4.2(b) at the date of Option exercise, may be used to make all or part of such payment; and (d) Such representations and documents as the Committee, in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act and any other federal or state securities laws or regulations. The Committee may, in its absolute discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer orders to transfer agents and registrars; and (e) In the event that the Option or portion thereof shall be exercised pursuant to Section 5.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option or portion thereof. Section 5.4 - Certain Timing Requirements - ----------- --------------------------- Shares of the Company's Common Stock issuable to the Optionee upon exercise of the Option may be used to satisfy the tax withholding consequences of such exercise only (i) during the period beginning on the third business day following the date of release of the quarterly or annual summary statement of sales and earnings of the Company and ending on the twelfth business day following such date or (ii) pursuant to an irrevocable written election by the Optionee to use shares of the Company's Common Stock issuable to the Optionee upon exercise of the Option to pay the withholding taxes (subject to the approval of the Committee) made at least six months prior to the payment of such withholding taxes. Section 5.5 - Conditions to Issuance of Stock Certificates - ----------- -------------------------------------------- The shares of stock issuable and deliverable upon the exercise of an Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions: (a) The admission of such shares to listing on all stock exchanges on which such class of stock is then listed; and (b) The completion of any registration or other qualification of such shares under any state or federal law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body, which the Committee shall, in its absolute discretion, deem necessary or advisable; and (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable; and (d) The payment to the Company (or other employer corporation) of all amounts which it is required to withhold under federal, state or local law in connection with the exercise of the Option; and (e) The lapse of such reasonable period of time following the exercise of the Option as the Committee may establish from time to time for reasons of administrative convenience. Section 5.6 - Rights as Shareholders - ----------- ---------------------- The holders of Options shall not be, nor have any of the rights or privileges of, shareholders of the Company in respect of any shares purchasable upon the exercise of any part of an Option unless and until certificates representing such shares have been issued by the Company to such holders. Section 5.7 - Transfer Restrictions - ----------- --------------------- Unless otherwise approved in writing by the Committee, no shares acquired upon exercise of any Option by any Officer may be sold, assigned, pledged, encumbered or otherwise transferred until at least six months have elapsed from (but excluding) the date that such Option was granted. The Committee, in its absolute discretion, may impose such other restrictions on the transferability of the shares purchasable upon the exercise of an Option as it deems appropriate. Any such other restriction shall be set forth in the respective Stock Option Agreement and may be referred to on the certificates evidencing such shares. The Committee may require the Employee to give the Company prompt notice of any disposition of shares of stock, acquired by exercise of an Incentive Stock Option, within two years from the date of granting such Option or one year after the transfer of such shares to such Employee. The Committee may direct that the certificates evidencing shares acquired by exercise of an Incentive Stock Option refer to such requirement to give prompt notice of disposition. ARTICLE VI ADMINISTRATION -------------- Section 6.1 - Compensation Committee - ----------- ---------------------- The Compensation Committee shall consist of two or more Directors, appointed by and holding office at the pleasure of the Board, each of whom is a "disinterested person" as defined by Rule 16b-3. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee shall be filled by the Board. Section 6.2 - Duties and Powers of Committee - ----------- ------------------------------ It shall be the duty of the Committee to conduct the general administration of the Plan in accordance with its provisions. The Committee shall have the power to interpret the Plan and the Options and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. Any such interpretations and rules in regard to Incentive Stock Options shall be consistent with the basic purpose of the Plan to grant "incentive stock options" within the meaning of Section 422 of the Code. The Board shall have no right to exercise any of the rights or duties of the Committee under the Plan. Section 6.3 - Majority Rule - ----------- ------------- The Committee shall act by a majority of its members in office. The Committee may act either by vote at a meeting or by a memorandum or other written instrument signed by a majority of the Committee. Section 6.4 - Compensation; Professional Assistance; Good Faith Actions - ----------- --------------------------------------------------------- Members of the Committee shall receive such compensation for their services as members as may be determined by the Board. All expenses and liabilities incurred by members of the Committee in connection with the administration of the Plan shall be borne by the Company. The Committee may employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Committee, the Company and its Officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all Optionees, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Options, and all members of the Committee shall be fully protected by the Company in respect to any such action, determination or interpretation. ARTICLE VII OTHER PROVISIONS ---------------- Section 7.1 - Options Not Transferable - ----------- ------------------------ No Option or interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Optionee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that nothing in this Section 7.1 shall prevent transfers by will or by the applicable laws of descent and distribution. Section 7.2 - Amendment, Suspension or Termination of the Plan - ----------- ------------------------------------------------ The Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Committee. However, without approval of the Company's shareholders given within 12 months before or after the action by the Committee, no action of the Committee may, except as provided in Section 2.3, increase any limit imposed in Section 2.1 on the maximum number of shares which may be issued on exercise of Options, materially modify the eligibility requirements of Section 3.1, reduce the minimum Option price requirements of Section 4.2(a) or extend the limit imposed in this Section 7.2 on the period during which Options may be granted or amend or modify the Plan in a manner requiring shareholder approval under Rule 16b-3. Neither the amendment, suspension nor termination of the Plan shall, without the consent of the holder of the Option, impair any rights or obligations under any Option theretofore granted. No Option may be granted during any period of suspension nor after termination of the Plan, and in no event may any Option be granted under this Plan after October 28, 1997. Section 7.3 - Approval of Plan Amendment by Shareholders - ----------- ------------------------------------------ This Plan was initially approved by the Company's stockholders on April 26, 1988. Amendments to this Plan increasing the number of shares authorized hereunder were duly approved by the Company's stockholders on May 18, 1989, May 15, 1991 and April 28, 1993. The only amendment provided herein which requires stockholder approval is the amendment to Section 3.1, which permits Directors who are Employees to receive Options under the Plan. Such amendment shall be submitted to stockholders for approval at the 1994 Annual Meeting of Stockholders. Options may be granted to Employee-Directors prior to such stockholder approval; provided, however, that such Options shall not be exercisable prior to the time when said amendment is approved by the stockholders; provided, further, that if such approval is not obtained at said meeting, all Options previously granted under the Plan to Employee-Directors shall thereupon be cancelled and become null and void. The Company shall take such actions with respect to the Plan as may be necessary to satisfy the requirements of Rule 16b-3(b). Section 7.4 - Effect of Plan Upon Other Option and Compensation Plans - ----------- ------------------------------------------------------- This Plan, including the amendment to Section 3.1, shall not affect any other compensation or incentive plans in effect for the Company, any Parent Corporation or any Subsidiary. Nothing in this Plan shall be construed to limit the right of the Company, any Parent Corporation or any Subsidiary (a) to establish any other forms of incentives or compensation for employees of the Company, any Parent Corporation or any Subsidiary or (b) to grant or assume options otherwise than under this Plan in connection with any proper corporate purpose, including, but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, firm or association. Section 7.5 - Titles - ----------- ------ Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan. Section 7.6 - Conformity to Securities Laws - ----------- ----------------------------- The Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including without limitation Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be administered, and Options shall be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and Options granted hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. * * * * -----END PRIVACY-ENHANCED MESSAGE-----