-----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, A9EEdm1M9xACawhoBUVS1yEuHVgjFIvNAZvnW8BU4tUpk1fjusty0dHBkB7Ljkrr JRyw6Qo479ierKU3FktZEQ== 0000912057-97-025338.txt : 19970730 0000912057-97-025338.hdr.sgml : 19970730 ACCESSION NUMBER: 0000912057-97-025338 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970729 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLYTH HOLDINGS INC CENTRAL INDEX KEY: 0000820738 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 943046892 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 000-16449 FILM NUMBER: 97647351 BUSINESS ADDRESS: STREET 1: 989 E HILLSDALE BLVD #400 CITY: FOSTER CITY STATE: CA ZIP: 94404 BUSINESS PHONE: 4152867174 MAIL ADDRESS: STREET 1: 989 E HILLSDALE BLVD. #400 CITY: FOSTER CITY STATE: CA ZIP: 94404 10-K405/A 1 FORM 10 K/A-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A-1 (Mark One) [X] Annual report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 For the fiscal year ended MARCH 31, 1997 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 [No Fee Required] For the transition period From _________ to ________ Commission File No. 0-16449 BLYTH HOLDINGS INC. (Exact name of registrant as specified in its charter) Delaware 851 Traeger Avenue 94-3046892 (STATE OF INCORPORATION) San Bruno, California 94066 (I.R.S. EMPLOYER (ADDRESS OF PRINCIPAL EXECUTIVE IDENTIFICATION NO.) OFFICES INCLUDING ZIP CODE) (415) 829-6000 REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE ------------------------------------------------------------------ Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value ------------------------------------------------------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the registrant's voting stock held by non-affiliates of the registrant as of June 17, 1997 was approximately $20,437,097 based upon the closing price for such stock on such date on the NASDAQ National Market. For purposes of this disclosure, shares of Common Stock held by persons who hold more than 5% of the outstanding shares of Common Stock and shares held by officers and directors of the Registrant have been excluded because such persons may be deemed affiliates. This determination is not necessarily conclusive. As of June 17, 1997, the registrant had 21,096,358 shares of its Common Stock outstanding. ------------------------------------------------------------------ DOCUMENTS INCORPORATED BY REFERENCE Parts of the Proxy statement for the 1997 Annual Meeting of Stockholders are incorporated by reference into Items 10, 11, 12 and 13 hereof. THIS ANNUAL REPORT ON FORM 10-K INCLUDES A NUMBER OF FORWARD-LOOKING STATEMENTS THAT REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES, INCLUDING THOSE DISCUSSED IN "MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL PERFORMANCE AND RESULTS OF OPERATIONS," BELOW THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR ANTICIPATED RESULTS. EXECUTIVE OFFICERS OF THE REGISTRANT The following sets forth certain information regarding the executive officers of the Company as of July 31, 1997: Name Age Position - ---- --- -------- Timothy P. Negris 42 Chairman, President and Chief Executive Officer David R. Seaman 44 Vice President and Chief Technical Officer and Founder Patrick R. McEntee 44 Vice President, Marketing Peter C. Mork 53 Vice President, Worldwide Sales David C. Colby 43 Director and Acting Chief Financial Officer Mr. Negris joined the Company in November 1996 as the Executive Vice President of Marketing and Development. In February 1997, Mr. Negris was promoted to the position of President and Chief Executive Officer and was appointed a member of the Board of Directors. In July 1997 he was appointed Chairman of the Board. Prior to joining the Company, Mr. Negris was employed by IBM Software Solutions Division, serving as Vice President of Sales and Marketing from April 1995 to October 1996, and as Vice President of Applications Development Tools Marketing and Vice President of Industry Solutions Marketing from June 1994 to April 1995. Prior to joining IBM, Mr. Negris was employed by Oracle Corporation as Vice President of Server Product Marketing from March 1993 to January 1994 and Senior Director of Corporate Strategy from December 1991 to March 1993. Mr. Seaman is Chief Technical Officer, and is a Founder of the Company. He has served as a Vice President of the Company since June 1990 and has served as Research and Development Director since June 1982. He served as Managing Director of Blyth Software, Ltd from September of 1990 until June of 1993. Mr. McEntee has served as Vice President of Marketing since he joined the Company in December 1996. From January 1996 to November 1996, Mr. McEntee served as Vice President of Marketing, Sales and Product Development of Ikonic, Inc., an Internet software company. Mr. McEntee served as Director of Marketing from March 1995 to January 1996 at Interactive Digital Solutions, a software company. In addition, Mr. McEntee was Senior Director of Communications Products and Director of Product Management Network Products Division, from September 1992 to March 1995 at Oracle Corporation. Previously, Mr. McEntee held marketing and sales positions with IBM. Mr. Mork has served as Vice President of Worldwide Sales since he joined the company in April 1997. Prior to joining the Company, Mr. Mork served as Vice President of Worldwide Sales from 1995 to 1996 at Persistence Software, Inc., a start-up company with object-oriented middleware facilitating the access of relational databases. Mr. Mork was President and Chief Executive Officer from 1992 to 1994 at Aurum Software, Inc., a sales applications company, and Vice President of North American Sales from 1986 to 1990 at Sybase, Inc., a database software company. 2 Mr. Colby, a Director of the Company since February 1997, was appointed Acting Chief Financial Officer in May 1997. Mr. Colby is currently the Chief Operating Officer of American Medical Responses Health Services Group. From April 1996 to April 1997, Mr. Colby served as Executive Vice President and Chief Financial Officer of American Medical Response, one of the largest operators of health care transportation services in the United States. From July 1988 to April 1996 Mr. Colby was the Senior Vice President and Treasurer at Columbia/HCA Healthcare Corporation, one of the nation's largest hospital operators. 3 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding directors of the Company is set forth below. Current Executive Officers of the Registrant found under the caption "Executive Officers of the Registrant" in Part I hereof is also incorporated by reference into this Item 10. The Bylaws of the Company provide that the Board of Directors shall be composed of seven directors divided into three classes composed of two members in each of Classes I and II and three members in Class III. The directors are elected to serve staggered three-year terms, with the term of one class of directors expiring each year. Following the meeting there will be one vacancy in each Class I and Class III. The following persons have been nominated as Class III Directors:
Director Name of Nominee Age Principal Occupation Since - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- Richard J. Hanschen (1) . . . . . . . . . . . 74 Chairman and Chief Executive Officer of 1990 New Business Resources II, Inc., an investment firm Timothy P. Negris . . . . . . . . . . . . . . 42 Chairman, President and Chief Executive 1997 Officer of the Company - ------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------
The term of the following Class I Director will expire at the 1999 Annual Meeting of Stockholders:
Director Name Age * Principal Occupation Since - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- Christopher J. Steffen . .. . . . . . . . . 55 Private Investor 1996 - ------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------
The term of the following Class II Directors will expire at the 1998 Annual Meeting of Stockholders:
Director Name Age * Principal Occupation Since - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- William E. Konrad (1) . . . . . . . . . . . . 66 Private Investor 1995 David C. Colby. . . . . . . . . . . . . . . . 43 Chief Financial Officer of 1997 American Medical Response - ------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------
* As of July 31, 1997. (1) Member of the Compensation and Options Committee and the Audit Committee Except as follows, each director has been engaged in his principal occupation set forth above during the past five years. There is no family relationship between any director or executive officer of the Company. Mr. Negris joined the Company in November 1996 as the Executive Vice President of Marketing and Development. In February 1997 Mr. Negris was promoted to the position of President and Chief Executive Officer and was appointed a member of the Board of Directors. In July 1997 he was appointed Chairman of the Board. Prior to joining the Company, Mr. Negris was employed by IBM Software Solutions Division, serving as Vice President of Sales and Marketing from April 1995 to October 1996, and as Vice President of Applications Development Tools Marketing and Vice President of Industry Solutions Marketing from June 1994 to April 1995. Prior to joining IBM, Mr. Negris was employed by Oracle Corporation as Vice President of Server Product Marketing from March 1993 to January 1994 and Senior Director of Corporate Strategy from December 1991 to March 1993. Mr. Steffen served as Vice Chairman of Citicorp/Citibank from May 1993 to December 1996. Mr. Steffen served as Chief Financial Officer and Executive Vice President for Honeywell from April 1989 to February 1993 and acted as Senior Vice President and Chief Financial Officer for Kodak from February 1993 to May 1993. Mr. Colby, a Director of the Company since February 1997, was appointed Acting Chief Financial Officer in May 1997. Mr. Colby is currently the Chief Operating Officer of American Medical Responses Health Services Group. From April 1996 to April 1997, Mr. Colby served as Executive Vice President and Chief Financial Officer of American Medical Response, one of the largest operators of health care transportation services in the United States. From July 1988 to April 1996 Mr. Colby was the Senior Vice President and Treasurer at Columbia/HCA Healthcare Corporation, one of the nation's largest hospital operators. Compliance with Section 16(a) of the Exchange Act Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities to file reports of ownership on Form 3 and changes in ownership on Form 4 or 5 with the Securities and Exchange Commission (the "SEC") and the National Association of Securities Dealers, Inc. Such officers, directors and ten-percent stockholders are also required by SEC rules to furnish the Company with copies of all forms that they file pursuant to Section 16(a). Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons that no other reports were required for such persons, the Company believes that all Section 16(a) filing requirements applicable to its officers, directors and ten-percent stockholders were complied with in a timely fashion, except that the Forms 3 for Christopher Steffen and Patrick McEntee were filed late. ITEM 11. EXECUTIVE COMPENSATION 4 SUMMARY COMPENSATION The following table shows, as to the Chief Executive Officer and each of the other current executive officers and former executive officers whose salary plus bonus exceeded $100,000, information concerning compensation awarded to, earned by or paid for services to the Company in all capacities during the last three fiscal years:
Summary Compensation Table Long-Term Compensation ------------ Annual Compensation Awards ---------------------------------------------------------- ------ Year Other Annual All Other Ended Salary Bonus Compensation Options Compensation Name and Principal Position March 31, ($) ($) ($) (#) ($) - --------------------------- --------- ------ ----- ------------ ------- ------------ TIMOTHY P. NEGRIS (1) 1997 $71,590 -- -- 750,000 $60,000 President and Chief Executive 1996 -- -- -- -- -- Officer 1995 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- DAVID R. SEAMAN (2) 1997 $126,580 -- $56,009 -- -- Vice President and Research and 1996 $124,332 -- $48,400 10,000 -- Development Director of Blyth 1995 $124,714 -- $54,412 -- -- Software Limited - -------------------------------------------------------------------------------------------------------------------------------- PATRICK R. MCENTEE (3) 1997 $43,750 -- -- 100,000 -- Vice President, Marketing 1996 -- -- -- -- -- 1995 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- MICHAEL J. MINOR (4) 1997 $166,974 -- -- 100,000 $139,515 Former Chief Executive Officer 1996 $185,000 -- -- -- $924 1995 $185,000 -- -- 250,000 $1,017 - -------------------------------------------------------------------------------------------------------------------------------- STEPHEN R. LORENTZEN (5) 1997 $145,833 -- -- -- $29,167 Former President and Chief 1996 $153,125 -- -- 190,000 $44,765 Operating Officer 1995 -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------
(1) Mr. Negris joined the Company in November 1996 as its Vice President of Marketing and Development. Mr. Negris was elected as President and Chief Executive Officer in February 1997. His annual base salary is $180,000. "Other Annual Compensation" represents relocation expenses. (2) Mr. Seaman is paid in pounds sterling, which have been converted into U.S. dollars at the exchange rate in effect on March 31 of the applicable fiscal year. "Other Annual Compensation" represents the value of the use of an automobile and amounts paid or reimbursed for automobile use ($15,712 in 1995, $11,400 in 1996 and $16,805 in 1997) and amounts contributed to the Blyth Holdings Limited Retirement Benefits Scheme and the Blyth Software Limited Retirement Scheme on Mr. Seaman's behalf (an aggregate of $38,421 in 1995, $37,000 in 1996 and $39,204 in 1997). (3) Mr. McEntee joined the Company in January 1997 and his annual base salary is $144,200. (4) Mr. Minor served as President of the Company from June 1991 to May 1995 and as Chief Executive Officer from June 1991 through February 1997. Mr. Minor received a warrant to purchase 100,000 shares of Common Stock in February 1997 as part of his separation from the Company. This warrant has an exercise price of $1.094 and a term of five years. "All Other Compensation" listed for Mr. Minor for 1997 includes $138,750 as a severance payment and $765 contributed by the Company under its 401(k) Plan. See "--Other Employee Benefit Plans and Termination of Employment Arrangement." "All Other Compensation" listed for Mr. Minor for 1996 and 1995 represents amounts contributed by the Company under its 401(k) Plan. (5) Mr. Lorentzen served as President and Chief Operating Officer of the Company from May 1995 through January 1997. "All Other Compensation" listed for Mr. Lorentzen in 1997 includes $29,167 paid as severance. The Company also paid Mr. Lorentzen an additional $58,333 as severance following March 31, 1997. "All Other Compensation" listed for Mr. Lorentzen in 1996 includes $525 contributed by the Company under its 401(k) plan and moving expenses of $44,240 paid to Mr. Lorentzen in connection with his relocation to the San Francisco Bay Area from the East Coast. 5 STOCK OPTION GRANTS AND EXERCISES The following table shows, as to the individuals named in the Summary Compensation Table above, (the "Named Executive Officers") information concerning stock options granted during the fiscal year ended March 31, 1997. This table also sets forth hypothetical gains or "option spreads" for the options at the end of their respective terms, as calculated in accordance with the Rules of the Securities and Exchange Commission. Each gain is based on an arbitrarily assumed annualized rate of compound appreciation of the market price at the date of the grant of 5% and 10% from the date the option was granted to the end of the option term. The 5% and 10% rates of appreciation are specified by the rules of the Securities and Exchange Commission and do not represent the Company's estimate or projection of future Common Stock prices. The Company does not necessarily agree that this method properly values an option. Actual gains, if any, on option exercises are dependent on the future performance of the Company's Common Stock and overall market conditions.
Option Grants In Last Fiscal Year Individual Grants (1) ----------------------------------------------------------- Potential Realizable Number of Value at Assumed Securities % of Total Annual Rates of Stock Underlying Options Price Appreciation Options Granted to Exercise for Option Term (3) Granted Employees in Price Expiration -------------------- Name (#)(1) Fiscal Year (2) ($/Sh) Date 5%($) 10%($) ---------------------------------- -------- --------------- -------- ---------- -------- ----- Timothy P. Negris . . . . . . . 250,000 19% $1.0000 11/11/06 $157,224 $398,436 500,000 38% .7188 03/20/07 226,025 572,791 David R. Seaman . . . . . . . . . 10,000 1% 3.3130 05/20/06 20,835 52,801 Patrick R. McEntee . . . . . . . 100,000 6% 1.2188 01/21/07 76,650 194,245 Michael J. Minor (4) . . . . . . 100,000 6% 1.094 02/05/02 30,225 66,790 Stephen R. Lorentzen (5) . . . . -- -- -- -- -- -- - -----------------------------------
(1) Options granted under the Company's 1987 Stock Option Plan and 1996 Stock Plan are granted with an exercise price not less than at 100% of fair market value of the Company's Common Stock at the date of grant and generally vest over a four-year period. (2) During the fiscal year ended March 31, 1997, the Company granted a total of 1,316,000 options and warrants to employees. (3) This column sets forth hypothetical gains or "option spreads" for the options at the end of their respective ten-year terms, as calculated in accordance with the rules of the Securities and Exchange Commission. Each gain is based on an arbitrarily assumed annualized rate of compound appreciation of the market price at the date of grant of 5% and 10% from the date the option was granted to the end of the option term. The 5% and 10% rates of appreciation are specified by the rules of the Securities and Exchange Commission and do not represent the Company's estimate or projection of future performance of the Company's Common Stock and overall market conditions. (4) Mr. Minor received a warrant to purchase 100,000 shares of Common Stock as part of his resignation from the Company in February 1997. See "--Other Employee Benefit Plans and Termination of Employment Arrangement." (5) Mr. Lorentzen resigned his positions with the Company in January 1997. 6 No options were exercised by the Named Executive Officers during the last fiscal year. The following table shows, as to the Named Executive Officers, the number of securities underlying outstanding options held by them at March 31, 1997. None of such options were in the money at March 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES Number of Securities Underlying Unexercised Options at March 31, 1997 (#)(1) ------------------------------------- Name Exercisable Unexercisable - ---------------------------- ------------- --------------- Timothy P. Negris . . . . . -- 750,000 David R. Seaman . . . . . . 100,000 10,000 Patrick R. McEntee . . . . -- 100,000 Michael J. Minor (3) . . . 100,000 -- Stephen R. Lorentzen (3) . -- -- - ----------------------------
(1) The Company has not granted any stock appreciation rights and its stock plans do not provide for the granting of such rights. (2) Calculated by determining the difference between the fair market value of the securities underlying the options at March 31, 1997 (the closing price of the Common Stock of the Company was listed on the Nasdaq National Market at $0.65625 per share on March 31, 1997) and the exercise price of the option. None of the options above are currently in-the-money. (3) Mr. Minor resigned his position with the Company in February 1997 and Mr. Lorentzen resigned his position with the Company in January 1997. All of their options, other than the warrant to purchase 100,000 shares granted to Mr. Minor upon his resignation, terminated without being exercised. See "--Other Employee Benefit Plans and Termination of Employment Arrangement." OTHER EMPLOYEE BENEFIT PLANS EMPLOYMENT CONTRACTS - The Service Agreement effective April 1, 1990 between the Company and Mr. Seaman retains Mr. Seaman as the Company's chief technical officer for an initial term of four (4) years, which is automatically renewed for subsequent two year terms unless the agreement is terminated by either party by delivery of six months prior notice. The Service Agreement was automatically renewed for two year terms in April 1994 and April 1996. It provides for an annual base salary of 48,000 pounds sterling, with annual increases based on a United Kingdom consumer index throughout the term of the agreement. In addition, Mr. Seaman is entitled to an annual incentive bonus of 25% of his base salary if certain annual profitability goals are achieved (no bonuses have been paid to date), to an automobile and payments or reimbursements for automobile expenses, and to Company contributions to a retirement plan on his behalf. See "Blyth Holdings Limited Retirement Benefits Scheme" and "Blyth Software Limited Retirement Benefits Scheme." BLYTH HOLDINGS LIMITED RETIREMENT BENEFITS SCHEME The Company, through its United Kingdom subsidiary, Blyth Holdings Limited (formerly Blyth Holdings Limited), sponsors a retirement plan, the Blyth Retirement Benefits Scheme ("BHL Retirement Plan"). The only participant in the BHL Retirement Plan is David R. Seaman. Participation in the BHL Retirement Plan is frozen; no additional employees may participate. The BHL Retirement Plan provides retirement benefits upon attainment of normal retirement age and incidental benefits in case of death or termination of employment prior to retirement. A participant's normal retirement benefit is 66.66% of his final remuneration, reduced if the participant has less than ten years of service with Blyth Holdings Limited. Blyth Holdings Limited makes annual contributions under the BHL Retirement Plan to fund promised retirement benefits. The BHL Retirement Plan is partially insured through the Sun Life Assurance Society. The assets held under the BHL Retirement Plan which 7 are not used to pay insurance premiums are held in trust for investment purposes for the benefit of the BHL Retirement Plan. Blyth Holdings Limited retains the right to terminate the BHL Retirement Plan at any time upon thirty days prior written notice. BLYTH SOFTWARE LIMITED RETIREMENT BENEFITS SCHEME The Company also sponsors a retirement plan called the Blyth Software Ltd. Retirement Benefits Scheme ("Blyth Software Retirement Plan") for substantially all employees of Omnis Software Limited (formerly Blyth Software Limited). The Blyth Software Retirement Plan provides retirement benefits upon attainment of normal retirement age and incidental benefits in case of death or termination of employment prior to retirement. Blyth Software Limited makes annual contributions under the Blyth Software Retirement Plan to fund promised retirement benefits. In addition, participants are entitled to make voluntary contributions under the Blyth Software Retirement Plan to increase their benefits. Currently, Blyth Software Limited contributes an amount equal to 5/8% of each participants' compensation under the Blyth Software Retirement Plan. Blyth Software Limited retains the right to terminate the Blyth Software Retirement Plan at any time upon thirty days prior written notice. 401(K) EMPLOYEE SAVINGS PLAN The Company established a 401(k) Employee Savings and Retirement Plan (the "401(k) Plan") in November 1992. The 401(k) Plan is a qualified profit sharing plan and salary deferral program under the Federal tax laws and is administered by the Company. All employees of the Company (except for certain specifically excluded classifications as defined in the 401(k) Plan) are eligible to participate in the 401(k) Plan on the first day of each quarter upon attainment of age 21. Participants may defer from 1% to 15% of their total salary (including bonuses and commissions) each pay period through contributions to the 401(k) Plan. The Company makes a matching contribution of 10% of the amount contributed by the participant up to a maximum of 6% of the salary deferral. During fiscal 1997 the Company made $765.00 in contributions on behalf of Mike Minor. All salary deferral and Company matching contributions are credited to separate accounts maintained in trust for each participant and are invested, at the participant's direction, in one or more of the investment funds available under the 401(k) Plan. All account balances are adjusted at least annually to reflect the investment earnings and losses of the trust fund. Each participant is fully vested in the portion of his or her account under the 401(k) Plan which such participant contributed. The portion contributed by the Company vests over five years. Distribution may be made from a participant's account upon termination of employment, retirement, disability, death or in the event of financial hardship or attainment of age 59 1/2. The federal tax laws limit the amount which may be added to a participant's account for any one year under a qualified plan such as the 401(k) Plan to the lesser of (i) $30,000 or (ii) 25% of the participant's compensation (net of salary deferral contributions) for the year. In addition, not more than $9,500 of compensation may be deferred by a participant through salary deferral contributions in any one calendar year. SEVERANCE ARRANGEMENT In connection with his resignation from the Company in February 1997, Mr. Minor and the Company entered into a Settlement Agreement and General Release pursuant to which Mr. Minor received a severance payment of $138,750, representing nine months of salary, together with a warrant to purchase 100,000 shares of Common Stock at an exercise price of $1.094 per share. This warrant has a term of 5 years. Mr. Minor also agreed, among other things, to serve as a consultant to the Company for a period of six months following his resignation. DIRECTOR COMPENSATION The Company reimburses directors for travel and other out-of-pocket expenses incurred in attending Board meetings but no cash compensation is otherwise paid to directors. 8 The 1993 Directors' Warrant Plan (the "Director Plan") was adopted by the Board of Directors in September 1993 and was approved by the stockholders in August 1994. The Director Plan provides for automatic non-discretionary grants of warrants to non-employee directors ("Outside Directors"). Each Outside Director elected on or after the date of adoption of the Director plan is automatically granted a warrant to purchase 60,000 shares of Common Stock upon the date he or she becomes a director of the Company. Mr. Konrad, Mr. Steffen and Mr. Colby each received such a grant when they were appointed to the Board of Directors. An Outside Director who is elected Chairman of the Board on or after the date of adoption of the Director Plan is automatically granted a warrant to purchase 90,000 shares of Common Stock on the date he or she is first elected Chairman. Thereafter, each Outside Director (other than the Chairman of the Board) is automatically granted a warrant to purchase 5,000 shares of Common Stock on September 1 of each year, provided that he or she has served for at least six (6) months as of such date and is then serving as an Outside Director ("Subsequent Warrant"). Mr. Hanschen received such a grant in September 1995 and 1996 and Mr. Colby, Mr. Hanschen, Mr. Konrad and Mr. Steffen each will receive such a grant in September 1997. An Outside Director who is serving as Chairman of the Board on September 1 of each year shall automatically be granted a warrant to purchase 7,500 shares of Common Stock, provided that he or she has served for at least six (6) months as of such date and is then serving as Chairman of the Board ("Subsequent Chairman Warrant"). The Director Plan provides that the exercise price of the warrants shall be equal to 100% of the fair market value of the Company's Common Stock on the date of grant of the warrants and that warrants will vest monthly over a three (3) year period. As of the Record Date, warrants to purchase 650,833 shares of the Company's Common Stock under the Director Plan were outstanding at a weighted average exercise price of $3.88 per share. COMPENSATION COMMITTEE' INTERLOCKS AND INSIDER PARTICIPATION The Compensation and Options Committee was composed of Messrs. Hanschen and Konrad during fiscal 1997, both non-employee directors. 9 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth as of July 29, 1997 (the "Record Date"), certain information with respect to the beneficial ownership of the Company's Common Stock by (i) any person (including any "group" as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) known by the Company to be the beneficial owner of more than 5% of any class of the Company's voting securities, (ii) each director and each nominee for director, (iii) each of the named executive officers identified in the Summary Compensation Table appearing herein, and (iv) all directors and executive officers of the Company as a group. Number of Percent Name and Address (1) Shares of Total - -------------------------------------------------- ------- -------- Richard J. Hanschen (2) . . . . . . . . . . . . . 497,500 2.33% 12102 Vendome Place Dallas, TX 75230 Astoria Capital Partner, L.P. (3). . . . . . . . 1,296,800 6.14% 735 Second Avenue San Francisco, CA 94118 Timothy P. Negris . . . . . . . . . . . . . . . 50,000 * David C. Colby . . . . . . . . . . . . . . . . . 92,000 * Christopher J. Steffen (4) . . . . . . . . . . . 20,000 * William E. Konrad (5) . . . . . . . . . . . . . . 295,500 1.39% David R. Seaman (6) . . . . . . . . . . . . . . . 210,439 1.00% Patrick R. McEntee . . . . . . . . . . . . . . . -- -- Michael J. Minor (7). . . . . . . . . . . . . . . 274,000 1.29% Stephen R. Lorentzen (8) . . . . . . . . . . . . 56,667 * All directors and executive officers as a group (10 persons)(9). . . . . . . . . . . . . . . . . 1,506,106 6.96% - -------------------- * Less than 1% (1) Except as otherwise indicated below, the persons whose names appear in the table above have sole voting and investment power with respect to all shares of stock shown as beneficially owned by them, subject to community property laws, where applicable. (2) Includes (i) 200,000 shares which are held by VSH II Limited Partnership, of which Mr. Hanschen is a general partner; (ii) 100,000 shares which are held by VSH III Limited Partnership, of which Mr. Hanschen is a general partner; and (iii) warrants to purchase 167,500 shares of Common Stock which are currently exercisable or will become exercisable on September 1, 1997, 30,000 of which are held in the name of Vier Sohne Progeny Trust. (3) Based solely on Schedule 13G filed with the SEC. (4) Includes warrants to purchase 20,000 shares of Common Stock exercisable within sixty (60) days of the Record Date held by Mr. Steffen. (5) Includes warrants to purchase 45,000 shares of Common Stock exercisable within sixty (60) days of the Record Date held by Mr. Konrad. (6) Includes options to purchase 102,625 shares of Common Stock exercisable within sixty (60) days of the Record Date held by Mr. Seaman. (7) Includes a warrant to purchase 100,000 shares of Common Stock exercisable within 60 days of the Record Date by Mr. Minor. (8) Represents warrants exercisable within sixty (60) days of the Record Date held by Mr. Lorentzen. (9) Includes the shares, options and warrants described in footnote 2 and footnoes 4 through 8. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is incorporated by reference from "Executive Compensation--Other Employee Benefit Plans" contained in Item 11 of Part III of this Report. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as a part of this Annual Report on Form 10-K: 3. Exhibits: Exhibit Number Description - -------------- ----------- 3.1 Certificate of Incorporation of the Company, as amended.(1) 3.2 By-Laws of the Company, as amended.(1) 10 10.1 Definitive Trust Deed dated October 26, 1983 among Blyth Holdings Limited, Blyth Software Limited and Geoffrey Paul Smith, Paul Nelson Wright and Suntrust Limited (relating to pension scheme).(2) 10.2 Service Agreement dated July 30, 1990 between Blyth Holdings Inc. and David Seaman.(3) 10.3 Deed of Guarantee dated June 1, 1993 between Blyth Holdings Inc. and A. Levy & Son Limited.(4) 10.4 Form of Subscription Agreement for purchase of Units of the Company's securities.(4) 10.5 Form of Stock Purchase Warrant sold to purchaser of Units of the Company's securities.(4) 10.6 Form of Stock Purchase Warrant sold to Director Walter V. Smiley, Richard J. Hanschen, and Albert Yu on September 1, 1992.(4) 10.7 Director's Warrant Plan and Amendment to Warrant issued to Albert Yu on September 1, 1992.(6) 10.8 Advisor's Warrant Plan and warrant issued to Garth Saloner on November 1, 1992.(6) 10.9 Common Stock Purchase Agreement dated March 31, 1993 between Blyth Holdings Inc. and General Reinsurance Corp.(6) 11 10.10 Form of Indemnification Agreement entered into between the Company and all of its directors and certain of its officers.(6) 10.11 The Blyth Holdings Inc. Amended and Restated 1987 Stock Option Plan, as amended.(6) 10.12 The Blyth Holdings Inc. 1993 Directors' Warrant Plan and form of Director's Warrant.(6) 10.13 Common Stock Purchase Agreement dated July 19, 1993 between Blyth Holdings Inc. and The Wisconsin Investment Board.(5) 10.14 The Blyth Holdings Inc. 1994 Employee Stock Purchase Plan.(6) 10.15 Registration Rights Agreement effective as of January 3, 1994, between the Company and Migration Software Systems Limited.(6) 10.16 Warrant to Purchase shares of Common Stock dated January 3, 1994 granted to Migration Software Systems Limited.(6) 10.17 Warrant to Purchase Common Stock issued to Swartz Investments, Inc.(7) 10.18 Form of Registration Rights Agreement among the Company, Purchasers of 8% Convertible Debentures due March 31, 1997 and Swartz Investments, Inc.(7) 10.19 Form of Warrant to Purchase Common Stock issued to certain persons affiliated with Swartz Investments, LLC.(8) 10.20 Form of Registration Rights Agreement among the Company and Swartz Investments, LLC and its designees.(8) 10.21 1996 Stock Plan and Form of Agreement 10.22 Warrant to Purchase Common Stock dated February 5, 1997 granted to Michael J. Minor 11.1 Statement re: computation of earnings per share 21.1 Subsidiaries of the Company.(3) 12 23.1 Independent Auditors' Consent (Deloitte & Touche) 27.1 Financial data schedule -------------- (1) Incorporated by reference to the Registration Statement on Form S-8 (Registration Statement No. 33-46166) filed by the Company with the Securities and Exchange Commission (the "Commission") on March 2, 1992. (2) Incorporated by reference to the Annual Report on Form 10-K filed by the Company with the Commission on July 13, 1990. (3) Incorporated by reference to the Annual Report on Form 10-K filed by the Company with the Commission on June 28, 1991. (4) Incorporated by reference to the Annual Report on Form 10-K filed by the Company with the Commission on June 26, 1992. (5) Incorporated by reference to the Quarterly Report on Form 10-Q filed by the Company with the Commission on August 16, 1993. (6) Incorporated by reference to the Annual Report filed by the Company with the Commission on June 28, 1994. (7) Incorporated by reference to the Current Report on Form 8-K filed by the Company with the Commission on April 7, 1995. (8) Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996. 13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: July 29, 1997 BLYTH HOLDINGS INC. By: /s/ TIMOTHY P. NEGRIS --------------------- Timothy P. Negris President, Chief Executive Officer and Chairman Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signatures Title Date - ---------- ----- ---- /s/TIMOTHY P. NEGRIS - -------------------- Timothy P. Negris President, Chief Executive July 29, 1997 Officer and Chairman (Principal Executive Officer) /s/WILLIAM M. GLYNN - ------------------- William M. Glynn Vice President of Finance, July 29, 1997 (Principal Accounting Officer) /s/RICHARD J. HANSCHEN - ---------------------- Richard J. Hanschen Director July 29, 1997 /s/WILLIAM E. KONRAD - -------------------- William E. Konrad Director July 29, 1997 /s/CHRIS STEFFEN - ---------------------- Christopher J. Steffen Director July 29, 1997 /s/DAVID COLBY - -------------- David C. Colby Director and Acting Chief July 29, 1997 Financial Officer 14 EX-10.21 2 EXHIBIT 10.21 EXHIBIT 10.21 BLYTH HOLDINGS INC. 1996 STOCK PLAN 1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are: - to attract and retain the best available personnel for positions of substantial responsibility, - to provide additional incentive to Employees and Consultants, and - to promote the success of the Company's business. Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant. Stock Purchase Rights may also be granted under the Plan. 2. DEFINITIONS. As used herein, the following definitions shall apply: (a) "ADMINISTRATOR" means the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the Plan. (b) "APPLICABLE LAWS" means the legal requirements relating to the administration of stock option plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code and the applicable laws of any foreign country or jurisdiction where Options or Stock Purchase Rights are, or will be, granted under the Plan. (c) "BOARD" means the Board of Directors of the Company. (d) "CODE" means the Internal Revenue Code of 1986, as amended. (e) "COMMITTEE" means a Committee appointed by the Board in accordance with Section 4 of the Plan. (f) "COMMON STOCK" means the Common Stock of the Company. (g) "COMPANY" means Blyth Holdings Inc., a Delaware corporation. (h) "CONSULTANT" means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services and who is compensated for such services, the term also includes any member of the Board of Directors of the Company. (i) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means that the employment or consulting relationship with the Company, any Parent, or Subsidiary, is not interrupted or terminated. Continuous Status as an Employee or Consultant shall not be considered interrupted in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. A leave of absence approved by the Company shall include sick leave, military leave, or any other personal leave approved by an authorized representative of the Company. For purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 181st day of such leave any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. (j) "DIRECTOR" means a member of the Board. (k) "DISABILITY" means total and permanent disability as defined in Section 22(e)(3) of the Code. (l) "EMPLOYEE" means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a director's fee by the Company shall be sufficient to constitute "employment" by the Company. (m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. (n) "FAIR MARKET VALUE" means, as of any date, the value of Common Stock determined as follows: (i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in THE WALL STREET JOURNAL or such other source as the Administrator deems reliable; (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination, as reported in THE WALL STREET JOURNAL or such other source as the Administrator deems reliable; (iii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator. (o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder. (p) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as an Incentive Stock Option. (q) "NOTICE OF GRANT" means a written notice evidencing certain terms and conditions of an individual Option or Stock Purchase Right grant. The Notice of Grant is part of the Option Agreement. (r) "OFFICER" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. (s) "OPTION" means a stock option granted pursuant to the Plan. (t) "OPTION AGREEMENT" means a written agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan. (u) "OPTION EXCHANGE PROGRAM" means a program whereby outstanding options are surrendered in exchange for options with a lower exercise price. (v) "OPTIONED STOCK" means the Common Stock subject to an Option or Stock Purchase Right. (w) "OPTIONEE" means an Employee or Consultant who holds an outstanding Option or Stock Purchase Right. (x) "PARENT" means a "PARENT CORPORATION," whether now or hereafter existing, as defined in Section 424(e) of the Code. (y) "PLAN" means this 1996 Stock Plan. (z) "RESTRICTED STOCK" means shares of Common Stock acquired pursuant to a grant of Stock Purchase Rights under Section 11 below. 2 (aa) "RESTRICTED STOCK PURCHASE AGREEMENT" means a written agreement between the Company and the Optionee evidencing the terms and restrictions applying to stock purchased under a Stock Purchase Right. The Restricted Stock Purchase Agreement is subject to the terms and conditions of the Plan and the Notice of Grant. (bb) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan. (cc) "SECTION 16(B)" means Section 16(b) of the Securities Exchange Act of 1934, as amended. (dd) "SHARE" means a share of the Common Stock, as adjusted in accordance with Section 13 of the Plan. (ee) "STOCK PURCHASE RIGHT" means the right to purchase Common Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant. (ff) "SUBSIDIARY" means a "subsidiary corporation", whether now or hereafter existing, as defined in Section 424(f) of the Code. 3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 13 of the Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is 450,000 Shares. The Shares may be authorized, but unissued, or reacquired Common Stock. If an Option or Stock Purchase Right expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). 4. ADMINISTRATION OF THE PLAN. (a) PROCEDURE. (i) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule 16b-3, the Plan may be administered by different bodies with respect to Directors, Officers who are not Directors, and Employees who are neither Directors nor Officers. (ii) ADMINISTRATION WITH RESPECT TO DIRECTORS AND OFFICERS SUBJECT TO SECTION 16(B). With respect to Option or Stock Purchase Right grants made to Employees who are also Officers or Directors subject to Section 16(b) of the Exchange Act, the Plan shall be administered by (A) the Board, if the Board may administer the Plan in a manner complying with the rules under Rule 16b-3 relating to the disinterested administration of employee benefit plans under which Section 16(b) exempt discretionary grants and awards of equity securities are to be made, or (B) a committee designated by the Board to administer the Plan, which committee shall be constituted to comply with the rules under Rule 16b-3 relating to the disinterested administration of employee benefit plans under which Section 16(b) exempt discretionary grants and awards of equity securities are to be made. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and appoint additional members, remove members (with or without cause) and substitute new members, fill vacancies (however caused), and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by the rules under Rule 16b-3 relating to the disinterested administration of employee benefit plans under which Section 16(b) exempt discretionary grants and awards of equity securities are to be made. (iii) ADMINISTRATION WITH RESPECT TO OTHER PERSONS. With respect to Option or Stock Purchase Right grants made to Employees or Consultants who are neither Directors nor Officers of the Company, the Plan shall be administered by (A) the Board or (B) a committee designated by the Board, which committee shall be constituted to satisfy Applicable Laws. 3 Once appointed, such Committee shall serve in its designated capacity until otherwise directed by the Board. The Board may increase the size of the Committee and appoint additional members, remove members (with or without cause) and substitute new members, fill vacancies (however caused), and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by Applicable Laws. (b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion: (i) to determine the Fair Market Value of the Common Stock, in accordance with Section 2(n) of the Plan; (ii) to select the Consultants and Employees to whom Options and Stock Purchase Rights may be granted hereunder; (iii) to determine whether and to what extent Options and Stock Purchase Rights or any combination thereof, are granted hereunder; (iv) to determine the number of shares of Common Stock to be covered by each Option and Stock Purchase Right granted hereunder; (v) to approve forms of agreement for use under the Plan; (vi) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options or Stock Purchase Rights may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or Stock Purchase Right or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine; (vii) to reduce the exercise price of any Option or Stock Purchase Right to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option or Stock Purchase Right shall have declined since the date the Option or Stock Purchase Right was granted; (viii) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan; (ix) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws; (x) to modify or amend each Option or Stock Purchase Right (subject to Section 15(c) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Options longer than is otherwise provided for in the Plan; (xi) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Option or Stock Purchase Right previously granted by the Administrator; (xii) to institute an Option Exchange Program; (xiii) to make all other determinations deemed necessary or advisable for administering the Plan. (c) EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's decisions, determinations and interpretations shall be final and binding on all Optionees and any other holders of Options or Stock Purchase Rights. 4 5. ELIGIBILITY. Nonstatutory Stock Options and Stock Purchase Rights may be granted to Employees and Consultants. Incentive Stock Options may be granted only to Employees. If otherwise eligible, an Employee or Consultant who has been granted an Option or Stock Purchase Right may be granted additional Options or Stock Purchase Rights. 6. LIMITATIONS. (a) Each Option shall be designated in the written option agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted. If an Option is granted hereunder that is part Incentive Stock Option and part Nonstatutory Stock Option due to becoming first exercisable in any calendar year in excess of $100,000, the Incentive Stock Option portion of such Option shall become exercisable first in such calendar year, and the Nonstatutory Stock Option portion shall commence becoming exercisable once the $100,000 limit has been reached. (b) Neither the Plan nor any Option or Stock Purchase Right shall confer upon an Optionee any right with respect to continuing the Optionee's employment or consulting relationship with the Company, nor shall they interfere in any way with the Optionee's right or the Company's right to terminate such employment or consulting relationship at any time, with or without cause. (c) The following limitations shall apply to grants of Options to Employees: (i) No Employee shall be granted, in any fiscal year of the Company, Options to purchase more than 500,000 Shares. (ii) In connection with his or her initial employment, an Employee may be granted Options to purchase up to an additional 500,000 Shares which shall not count against the limit set forth in subsection (i) above. (iii) The foregoing limitations shall be adjusted proportionately in connection with any change in the Company's capitalization as described in Section 13. (iv) If an Option is canceled in the same fiscal year of the Company in which it was granted (other than in connection with a transaction described in Section 13), the canceled Option will be counted against the limits set forth in subsections (i) and (ii) above. For this purpose, if the exercise price of an Option is reduced, the transaction will be treated as a cancellation of the Option and the grant of a new Option. 7. TERM OF PLAN. Subject to Section 19 of the Plan, the Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the shareholders of the Company as described in Section 19 of the Plan. It shall continue in effect for a term of ten (10) years unless terminated earlier under Section 15 of the Plan. 8. TERM OF OPTION. The term of each Option shall be stated in the Notice of Grant; provided, however, that in the case of an Incentive Stock Option, the term shall be ten (10) years from the date of grant or such shorter term as may be provided in the Notice of Grant. Moreover, in the case of an Incentive Stock Option granted to an Optionee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Notice of Grant. 5 9. OPTION EXERCISE PRICE AND CONSIDERATION. (a) EXERCISE PRICE. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator, subject to the following: (i) In the case of an Incentive Stock Option (A) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant. (B) granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. (ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall not be less than 85% of the Fair Market Value per share on the date of grant. (b) WAITING PERIOD AND EXERCISE DATES. At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions which must be satisfied before the Option may be exercised. In so doing, the Administrator may specify that an Option may not be exercised until the completion of a service period. (c) FORM OF CONSIDERATION. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of: (i) cash; (ii) check; (iii) promissory note; (iv) other Shares which (A) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised; (v) delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the exercise price; (vi) a reduction in the amount of any Company liability to the Optionee, including any liability attributable to the Optionee's participation in any Company-sponsored deferred compensation program or arrangement; (vii) any combination of the foregoing methods of payment; or (viii) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws. 10. EXERCISE OF OPTION. (a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. An Option may not be exercised for a fraction of a Share. An Option shall be deemed exercised when the Company receives: (i) written notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full 6 payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 13 of the Plan. Exercising an Option in any manner shall decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. (b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. Upon termination of an Optionee's Continuous Status as an Employee or Consultant, other than upon the Optionee's death or Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Notice of Grant to the extent that he or she is entitled to exercise it on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Notice of Grant). In the absence of a specified time in the Notice of Grant, the Option shall remain exercisable for three (3) months following the Optionee's termination. In the case of an Incentive Stock Option, such period of time for exercise shall not exceed three (3) months from the date of termination. If, on the date of termination, the Optionee is not entitled to exercise his or her entire Option, the Shares covered by the unexercisable portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. In the event of an Optionee's change in status from Consultant to Employee or Employee to Consultant, the Optionee's Continuous Status as an Employee or Consultant shall not automatically terminate solely as a result of such change in status. In such event, an Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option three months and one day following such change of status. Notwithstanding the above, if an Optionee is terminated for "Cause" (defined below), any portion of an Option not exercised prior to the date of such termination shall be canceled and shall be unexerciseable. For the purposes of the Plan, "Cause" shall mean conviction of a felony, misappropriation of the assets of the Company or its Parent of any Subsidiary, continued or repeated insobriety or abuse on misuse of prescription or nonprescription drugs, continued or repeated absence from employment during the normal working hours of the Optionee's position for reasons other than disability, sickness or bona fide leave of absence, or refusal to carry out the reasonable directions of the Board. (c) DISABILITY OF OPTIONEE. Upon termination of an Optionee's Continuous Status as an Employee or Consultant as a result of the Optionee's Disability, the Optionee may exercise his or her Option at any time within twelve (12) months from the date of termination, but only to the extent that the Optionee is entitled to exercise it on the date of termination (and in no event later than the expiration of the term of the Option as set forth in the Notice of Grant). If, on the date of termination, the Optionee is not entitled to exercise his or her entire Option, the Shares covered by the unexercisable portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (d) DEATH OF OPTIONEE. Upon the death of an Optionee, the Option may be exercised at any time within twelve (12) months following the date of death (but in no event later than the expiration of the 7 term of such Option as set forth in the Notice of Grant), by the Optionee's estate or by a person who acquires the right to exercise the Option by bequest or inheritance, but only to the extent that the Optionee would have been entitled to exercise the Option on the date of death. If, at the time of death, the Optionee is not entitled to exercise his or her entire Option, the Shares covered by the unexercisable portion of the Option shall immediately revert to the Plan. If the Optionee's estate or the person who acquires the right to exercise the Option by bequest or inheritance does not exercise the Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (e) BUYOUT PROVISIONS. The Administrator may at any time offer to buy out for a payment in cash or Shares, an Option previously granted based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made. (f) RULE 16B-3. Options granted to individuals subject to Section 16 of the Exchange Act ("Insiders") must comply with the applicable provisions of Rule 16b-3 and shall contain such additional conditions or restrictions as may be required thereunder to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions. 11. STOCK PURCHASE RIGHTS. (a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing, by means of a Notice of Grant, of the terms, conditions and restrictions related to the offer, including the number of Shares that the offeree shall be entitled to purchase, the price to be paid, and the time within which the offeree must accept such offer, which shall in no event exceed six (6) months from the date upon which the Administrator made the determination to grant the Stock Purchase Right. The offer shall be accepted by execution of a Restricted Stock Purchase Agreement in the form determined by the Administrator. (b) REPURCHASE OPTION. Unless the Administrator determines otherwise, the Restricted Stock Purchase Agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser's employment with the Company for any reason (including death or Disability). The purchase price for Shares repurchased pursuant to the Restricted Stock purchase agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at a rate determined by the Administrator. (c) RULE 16B-3. Stock Purchase Rights granted to Insiders, and Shares purchased by Insiders in connection with Stock Purchase Rights, shall be subject to any restrictions applicable thereto in compliance with Rule 16b-3. An Insider may only purchase Shares pursuant to the grant of a Stock Purchase Right, and may only sell Shares purchased pursuant to the grant of a Stock Purchase Right, during such time or times as are permitted by Rule 16b-3. (d) OTHER PROVISIONS. The Restricted Stock Purchase Agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion. In addition, the provisions of Restricted Stock Purchase Agreements need not be the same with respect to each purchaser. (e) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase Right is exercised, the purchaser shall have the rights equivalent to those of a shareholder, and shall be a shareholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 13 of the Plan. 8 12. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. An Option or Stock Purchase Right may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. 13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR ASSET SALE. (a) CHANGES IN CAPITALIZATION. Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option and Stock Purchase Right, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options or Stock Purchase Rights have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option or Stock Purchase Right, as well as the price per share of Common Stock covered by each such outstanding Option or Stock Purchase Right, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option or Stock Purchase Right. (b) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Option until ten (10) days prior to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which the Option would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Option will terminate immediately prior to the consummation of such proposed action. (c) MERGER OR ASSET SALE. In the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company, each outstanding Option and Stock Purchase Right shall be assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option or Stock Purchase Right, the Optionee shall fully vest in and have the right to exercise the Option or Stock Purchase Right as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option or Stock Purchase Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee that the Option or Stock Purchase Right shall be fully exercisable for a period of fifteen (15) days from the date of such notice, and the Option or Stock Purchase Right shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option or Stock Purchase Right shall be considered assumed if, following the merger or sale of assets, the option or right confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option or Stock Purchase Right immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or sale of assets is not solely common stock of the 9 successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock subject to the Option or Stock Purchase Right, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or sale of assets. 14. DATE OF GRANT. The date of grant of an Option or Stock Purchase Right shall be, for all purposes, the date on which the Administrator makes the determination granting such Option or Stock Purchase Right, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Optionee within a reasonable time after the date of such grant. 15. AMENDMENT AND TERMINATION OF THE PLAN. (a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter, suspend or terminate the Plan. (b) SHAREHOLDER APPROVAL. The Company shall obtain shareholder approval of any Plan amendment to the extent necessary and desirable to comply with Rule 16b-3 or with Section 422 of the Code (or any successor rule or statute or other applicable law, rule or regulation, including the requirements of any exchange or quotation system on which the Common Stock is listed or quoted). Such shareholder approval, if required, shall be obtained in such a manner and to such a degree as is required by the applicable law, rule or regulation. (c) EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. 16. CONDITIONS UPON ISSUANCE OF SHARES. (a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to the exercise of an Option or Stock Purchase Right unless the exercise of such Option or Stock Purchase Right and the issuance and delivery of such Shares shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, Applicable Laws, and the requirements of any stock exchange or quotation system upon which the Shares may then be listed or quoted, and shall be further subject to the approval of counsel for the Company with respect to such compliance. (b) INVESTMENT REPRESENTATIONS. As a condition to the exercise of an Option or Stock Purchase Right, the Company may require the person exercising such Option or Stock Purchase Right to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required. 17. LIABILITY OF COMPANY. (a) INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. (b) GRANTS EXCEEDING ALLOTTED SHARES. If the Optioned Stock covered by an Option or Stock Purchase Right exceeds, as of the date of grant, the number of Shares which may be issued under the Plan without additional shareholder approval, such Option or Stock Purchase Right shall be void with respect to such excess Optioned Stock, unless shareholder approval of an amendment sufficiently increasing the number of Shares subject to the Plan is timely obtained in accordance with Section 15(b) of the Plan. 10 18. RESERVATION OF SHARES. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. 19. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to approval by the shareholders of the Company within twelve (12) months before or after the date the Plan is adopted. Such shareholder approval shall be obtained in the manner and to the degree required under Applicable Laws and the rules of any stock exchange upon which the Common Stock is listed. 11 BLYTH HOLDINGS INC. STOCK OPTION AGREEMENT Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option Agreement. I. NOTICE OF STOCK OPTION GRANT [Optionee's Name and Address] You have been granted an option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows: Grant Number ------------------------------------------ Date of Grant ------------------------------------------ Vesting Commencement Date ------------------------------------------ Exercise Price per Share $ ---------------------------------------- Total Number of Shares Granted Total Exercise Price $ ---------------------------------------- Type of Option: ------- Incentive Stock Option ------- Nonstatutory Stock Option Term/Expiration Date: ------------------------------------------
VESTING SCHEDULE: This Option may be exercised, in whole or in part, in accordance with the following schedule: [25% of the Shares subject to the Option shall vest twelve months after the Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall vest each month thereafter]; Provided, however, that in the event you take a leave of absence from the Company, whether such leave is authorized or unauthorized, the vesting schedule set forth above shall be delayed by the extent of such leave. If your Continued Status as an Employee or Consultant is deemed to have terminated during such leave, vesting shall not resume upon your return to the Company. TERMINATION PERIOD: This Option may be exercised for three months after termination of the Optionee's Continuous Status as an Employee or Consultant. Upon the death or Disability of the Optionee, this Option may be exercised for such longer period as provided in the Plan. In the event of the Optionee's change in status from Employee to Consultant or Consultant to Employee, this Option Agreement shall remain in effect. In the event of a termination for Cause, the exercisability of this Option shall be subject to Section 10(b) of the Plan. In no event shall this Option be exercised later than the Term/Expiration Date as provided above. II. AGREEMENT 1. GRANT OF OPTION. The Plan Administrator of the Company hereby grants to the Optionee named in the Notice of Grant attached as Part I of this Agreement (the "Optionee") an option (the "Option") to purchase the number of Shares, as set forth in the Notice of Grant, at the exercise price per share set forth in the Notice of Grant (the "Exercise Price"), subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 15(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Option Agreement, the terms and conditions of the Plan shall prevail. If designated in the Notice of Grant as an Incentive Stock Option ("ISO"), this Option is intended to qualify as an Incentive Stock Option under Section 422 of the Code. However, if this Option is intended to be an Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code Section 422(d) it shall be treated as a Nonstatutory Stock Option ("NSO"). 2. EXERCISE OF OPTION. (a) RIGHT TO EXERCISE. This Option is exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and the applicable provisions of the Plan and this Option Agreement. In the event of Optionee's death, Disability or other termination of Optionee's employment or consulting relationship, the exercisability of the Option is governed by the applicable provisions of the Plan and this Option Agreement. (b) METHOD OF EXERCISE. This Option is exercisable by delivery of an exercise notice, in the form attached as Exhibit A (the "Exercise Notice"), which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the "Exercised Shares"), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice shall be signed by the Optionee and shall be delivered in person or by certified mail to the Secretary of the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by such aggregate Exercise Price. No Shares shall be issued pursuant to the exercise of this Option unless such issuance and exercise complies with all relevant provisions of law and the requirements of any stock exchange or quotation service upon which the Shares are then listed. Assuming such compliance, for income tax purposes the Exercised Shares shall be considered transferred to the Optionee on the date the Option is exercised with respect to such Exercised Shares. 3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee: (a) cash; (b) check; (c) delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the exercise price; (d) surrender of other Shares which (i) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six (6) months on the date of surrender, AND (ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the Exercised Shares; or (e) with the consent of the Administrator, delivery of Optionee's promissory note (the "Note") in the form attached hereto as Exhibit C, in the amount of the aggregate Exercise Price of the Exercised Shares together with the execution and delivery by the Optionee of the Security Agreement attached hereto as Exhibit B. The Note shall bear interest at a rate no less than the "applicable federal rate" prescribed under the Code and its regulations at time of purchase, and shall be secured by a pledge of the Shares purchased by the Note pursuant to the Security Agreement. 4. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by the Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 2 5. TERM OF OPTION. This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option Agreement. 6. TAX CONSEQUENCES. Some of the federal and state tax consequences relating to this Option, as of the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES. (a) EXERCISING THE OPTION. (i) NONSTATUTORY STOCK OPTION. The Optionee may incur regular federal income tax and [state] income tax liability upon exercise of a NSO. The Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over their aggregate Exercise Price. If the Optionee is an Employee or a former Employee, the Company will be required to withhold from his or her compensation or collect from Optionee and pay to the applicable taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise. (ii) INCENTIVE STOCK OPTION. If this Option qualifies as an ISO, the Optionee will have no regular federal income tax or state income tax liability upon its exercise, although the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over their aggregate Exercise Price will be treated as an adjustment to alternative minimum taxable income for federal tax purposes and may subject the Optionee to alternative minimum tax in the year of exercise. In the event that the Optionee undergoes a change of status from Employee to Consultant, any Incentive Stock Option of the Optionee that remains unexercised shall cease to qualify as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option on the ninety-first (91st) day following such change of status. (b) DISPOSITION OF SHARES. (i) NSO. If the Optionee holds NSO Shares for at least one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes. (ii) ISO. If the Optionee holds ISO Shares for at least one year after exercise and two years after the grant date, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes. If the Optionee disposes of ISO Shares within one year after exercise or two years after the grant date, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the excess, if any, of the lesser of (A) the difference between the Fair Market Value of the Shares acquired on the date of exercise and the aggregate Exercise Price, or (B) the difference between the sale price of such Shares and the aggregate Exercise Price. Any additional gain will be taxed as capital gain, short-term or long-term depending on the period that the ISO Shares were held. (c) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Optionee sells or otherwise disposes of any of the Shares acquired pursuant to an ISO on or before the later of (i) two years after the grant date, or (ii) one year after the exercise date, the Optionee shall immediately notify the Company in writing of such disposition. The Optionee agrees that he or she may be subject to income tax withholding by the Company on the compensation income recognized from such early disposition of ISO Shares by payment in cash or out of the current earnings paid to the Optionee. 3 7. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee's interest except by means of a writing signed by the Company and Optionee. This agreement is governed by California law except for that body of law pertaining to conflict of laws. 8. NO GUARANTEE OF EMPLOYMENT. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTING RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE. By your signature and the signature of the Company's representative below, you and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Option Agreement. Optionee has reviewed the Plan and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully understands all provisions of the Plan and Option Agreement. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Option Agreement. Optionee further agrees to notify the Company upon any change in the residence address indicated below. OPTIONEE: BLYTH HOLDINGS INC. By: --------------------------------------- - ------------------------------------------- Signature Title: ------------------------------------- - ------------------------------------------- Print Name - ------------------------------------------- Residence Address - -------------------------------------------
4 CONSENT OF SPOUSE The undersigned spouse of Optionee has read and hereby approves the terms and conditions of the Plan and this Option Agreement. In consideration of the Company's granting his or her spouse the right to purchase Shares as set forth in the Plan and this Option Agreement, the undersigned hereby agrees to be irrevocably bound by the terms and conditions of the Plan and this Option Agreement and further agrees that any community property interest shall be similarly bound. The undersigned hereby appoints the undersigned's spouse as attorney-in-fact for the undersigned with respect to any amendment or exercise of rights under the Plan or this Option Agreement. ______________________________________ Spouse of Optionee 5 EXHIBIT A 1996 STOCK PLAN EXERCISE NOTICE Blyth Holdings Inc. 989 East Hillsdale Boulevard, Suite 400 Foster City, CA 94404 Attention: Secretary 1. EXERCISE OF OPTION. Effective as of today, , 199 , the undersigned ("Purchaser") hereby elects to purchase shares (the "Shares") of the Common Stock of [Company Name] (the "Company") under and pursuant to the [Name of Plan] (the "Plan") and the Stock Option Agreement dated , 19 (the "Option Agreement"). The purchase price for the Shares shall be $ , as required by the Option Agreement. 2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the Company the full purchase price for the Shares. 3. REPRESENTATIONS OF PURCHASER. Purchaser acknowledges that Purchaser has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions. 4. RIGHTS AS SHAREHOLDER. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. A share certificate for the number of Shares so acquired shall be issued to the Optionee as soon as practicable after exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in [Section 13] of the Plan. 5. TAX CONSULTATION. Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser's purchase or disposition of the Shares. Purchaser represents that Purchaser has consulted with any tax consultants Purchaser deems advisable in connection with the purchase or disposition of the Shares and that Purchaser is not relying on the Company for any tax advice. 6. ENTIRE AGREEMENT; GOVERNING LAW. The Plan and Option Agreement are incorporated herein by reference. This Agreement, the Plan and the Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Purchaser with respect to the subject matter hereof, and may not be modified adversely to the Purchaser's interest except by means of a writing signed by the Company and Purchaser. This agreement is governed by California law except for that body of law pertaining to conflict of laws. Submitted by: Accepted by: PURCHASER: BLYTH HOLDINGS INC. - ------------------------------------------- By: ---------------------------------------- Signature - ------------------------------------------- Its: ---------------------------------------- Print Name ADDRESS: ADDRESS: - ------------------------------------------- 989 East Hillsdale Boulevard, Suite 400 Foster City, CA 94404 - -------------------------------------------
2 EX-10.22 3 EXHIBIT 10.22 EXHIBIT 10.22 THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. BLYTH HOLDINGS, INC. WARRANT TO PURCHASE COMMON STOCK February 5, 1997 This Warrant (the "Warrant") entitles Michael Minor, or his transferees and assigns (collectively, the "Holder"), for value received, to purchase from BLYTH HOLDINGS, INC., a Delaware corporation, during the period commencing as of the date hereof and ending on the Expiration Date (as defined herein) not more than one hundred thousand (100,000) shares of Common Stock of the Company (subject to adjustment as set forth herein) at a price of $1.094 per share (as adjusted, the "Exercise Price"). The holder of this Warrant agrees with the Company that this Warrant is issued and all rights hereunder shall be held subject to all of the conditions, limitations and provisions set forth herein. 1. EXERCISE OF WARRANT. Provided that the Settlement Agreement and General Release dated February 5, 1997 between the Company and the Holder shall become effective, the Holder may exercise this Warrant at any time or from time to time on any business day prior to or on the Expiration Date, for the full or any lesser number of shares of Common Stock purchasable hereunder, by surrendering this Warrant to the Company at its principal office, together with a duly executed Notice of Exercise (in substantially the form attached hereto as Exhibit A), and payment in cash or by check of the aggregate Exercise Price then in effect for the number of shares for which this Warrant is being exercised. Promptly after such exercise, the Company shall issue and deliver to the Holder a certificate or certificates representing the number of shares of Common Stock issuable upon such exercise. Upon issuances by the Company in accordance with the terms of this Warrant, all such shares of Common Stock shall be validly issued, fully paid and non-assessable, and free from all taxes, liens and encumbrances with respect to the issuance thereof (except as set forth in the Company's Certificate of Incorporation (the "Certificate") or bylaws and any restrictions on sale set forth therein or pursuant to federal or state securities laws. To the extent permitted by law, this Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided herein, even if the Company's stock transfer books are at that time closed, and the Holder shall be treated for all purposes as the holder of record of the Common Stock to be issued upon such exercise as of the close of business on such date. Upon any exercise of this Warrant for fewer than all shares of Common Stock represented by this Warrant, the Company shall cancel this Warrant and execute and deliver a new Warrant or Warrants in substantially identical form for the remaining shares of Common Stock. 1.1 NET ISSUE EXERCISE. Notwithstanding any provisions herein to the contrary, if the Quoted Price (as defined in Section 2.6 hereof) of one share of the Company's Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant by payment with cash, certified or cashier's check, the Holder may elect to make a cash-free exercise of this Warrant and thereby to receive Shares equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Notice of Exercise and notice of such election, in which event the Company shall issue to the Holder a number of Shares of Common Stock computed using the following formula: X = Y (A-B) ------- A Where X = the number of Shares of Common Stock to be issued to the Holder Y = the gross number of Shares of Common Stock purchasable under this Warrant or, if only a portion of this Warrant is being exercised, the gross number of Shares purchased under this Warrant being canceled (at the date of such calculation) A = the Quoted Price (as defined under Section 2.6 hereof) of one share of the Company's Common Stock (at the date of such calculation) B = Exercise Price (as adjusted to the date of such calculation) 2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and the number of shares of Common Stock subject to this Warrant shall be subject to adjustment from time to time as follows: 2.1 SUBDIVISION OR COMBINATION OF STOCK. (a) If at any time or from time to time after the date of this Warrant (the "Issue Date") the Company shall subdivide its outstanding shares of Common Stock, the Exercise Price in effect immediately prior to such subdivision shall be reduced proportionately, and conversely, in the event the outstanding shares of Common Stock shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be increased proportionately. (b) Upon each adjustment of the Exercise Price as provided in Section 2.1(a), the Holder thereafter shall be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of shares of Common Stock (calculated to the nearest whole share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares purchasable pursuant hereto immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. -2- 2.2 ADJUSTMENT FOR STOCK DIVIDENDS. If at any time the Company shall declare a dividend or make any other distribution upon any class or series of stock of the Company payable in shares of Common Stock or securities convertible into shares of Common Stock, the Exercise Price and the number of shares to be obtained upon exercise of this Warrant shall be adjusted proportionately to reflect the issuance of any shares of Common Stock or convertible securities, as the case may be, issuable in payment of such dividend or distribution. 2.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. In the event of any reorganization of the capital stock of the Company, a consolidation or merger of the Company with another corporation (other than a merger in which the Company is the surviving corporation), the sale of all or substantially all of the Company's assets or any transaction involving the transfer of a majority of the voting power over the capital stock of the Company effected in a manner such that holders of Common Stock shall be entitled to receive stock, securities, or other assets or property, then, as a condition of such reorganization, reclassification, consolidation, merger, sale or transaction, lawful and adequate provision shall be made whereby the holder hereof shall have the right to purchase and receive (in lieu of the shares of Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such shares of stock, securities or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby. In any such reorganization, consolidation, merger, sale or transaction, including successive events of such nature, appropriate provision shall be made with respect to the rights and interests of the Holder such that the provisions hereof (including, without limitation, provisions for adjustments of the Exercise Price and of the number of shares purchasable and receivable upon the exercise of this Warrant) thereafter shall be applicable, as nearly practicable, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof. 2.4 MINIMAL ADJUSTMENTS. No adjustment in the Exercise Price and/or the number of shares of Common Stock subject to this Warrant shall be made if such adjustment would result in a change in (i) the Exercise Price of less than one cent ($0.01) per share or (ii) the number of shares represented by this Warrant of less than one share (the "Adjustment Threshold Amount"). Any adjustment not made because the Adjustment Threshold Amount is not satisfied shall be carried forward and made, together with any subsequent adjustments, at such time as (a) the aggregate amount of all such adjustments is equal to at least the Adjustment Threshold Amount or (b) the Warrant is exercised. 2.5 CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each adjustment or readjustment of the Exercise Price pursuant to this Section 2, the Company promptly shall compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based. 2.6 QUOTED PRICE. The "Quoted Price" of the Common Stock is the last reported sales price of the Common Stock as reported by the Nasdaq National Market ("NMS"), or the primary national securities exchange on which the Common Stock is then quoted; PROVIDED, HOWEVER, that if the Common -3- Stock is neither traded on the NMS nor on a national securities exchange, the price referred to above shall be the price reflected on Nasdaq, or if the Common Stock is not then traded on Nasdaq, the price reflected in the over-the-counter market as reported by the National Quotation Bureau, Inc. or any organization performing a similar function; and PROVIDED, FURTHER, that if the Common Stock is not publicly traded, the Quoted Price of the Common Stock shall be the fair market value as determined in good faith by the Board of Directors of the Company. 3. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in this Warrant. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to consent or to receive notice as a shareholder of the Company on any matters or with respect to any rights whatsoever as a shareholder of the Company. No dividends or interest shall be payable or accrued in respect of this Warrant or the interest represented hereby or the shares of Common Stock purchasable hereunder until, and only to the extent that, this Warrant shall have been exercised in accordance with its terms. 4. NO IMPAIRMENT. The Company will not, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but shall at all times in good faith assist in effecting the terms of this Warrant and in taking all actions necessary or appropriate in order to protect the rights of the Holder against dilution or other impairment of its rights hereunder. 5. NO FRACTIONAL SHARES. No fractional share shall be issued upon exercise of this Warrant. In lieu of issuing any fractional share, the Company shall pay the Holder entitled to such fraction a sum in cash equal to the fair market value of such fraction on the date of exercise. 6. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT. The Company covenants and agrees that during the period of time during which this Warrant is exercisable, it will at all times have authorized and reserved solely for issuance and delivery upon the exercise of this Warrant, all such shares of Common Stock and other stock, securities and property as from time to time are receivable upon the exercise of this Warrant. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the exercise of this Warrant, the Company will use its best efforts to take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. The Company further covenants that all shares issuable upon exercise of the Warrant and payment of the Exercise Price, all as set forth herein, will be free from all taxes, liens and charges in respect of the issue of such shares (other than taxes in respect of any transfer occurring contemporaneously with such exercise and payment or otherwise specified herein). The Company agrees that its issuance of the Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock upon the exercise of the Warrant and covenants that all such shares, when issued, sold and delivered in accordance with the terms of the Warrant for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer set forth in this Warrant, and applicable state and federal securities laws. -4- 7. NOTICES OF RECORD DATE. Upon (a) any establishment by the Company of a record date of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or right or option to acquire securities of the Company, or any other right, (b) any capital reorganization, reclassification, recapitalization, merger or consolidation of the Company with or into any other corporation, any transfer of all or substantially all the assets of the Company, or (c) any voluntary or involuntary dissolution, liquidation or winding up of the Company, then, and in each such case, the Company shall mail to the Holder a notice specifying, as the case may be, (i) the date established as the record date for the purpose of such dividend, distribution, option or right and a description of such dividend, distribution, option or right, or (ii) the date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation or winding up is expected to become effective and the date, if any is to be fixed, as to when the holders of record of Common Stock (of other securities at that time receivable upon exercise of the Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation or winding up. Such notice shall be mailed at least 10 days prior to the date therein specified, or such longer period as may be required by law. 8. EXCHANGES OF WARRANT. Upon surrender for exchange of this Warrant (in negotiable form, if not surrendered by the Holder named on the face hereof) to the Company at its principal office, the Company will issue and deliver a new Warrant or Warrants in substantially identical form representing in the aggregate, the same number of shares of Common Stock, in the denomination or denominations requested, to or on the order of such Holder upon payment by such Holder of any applicable transfer taxes; provided that any transfer of the Warrant shall be subject to the conditions on transfer set forth herein; and provided further that all reasonable expenses incurred in connection with such re-issuance and delivery shall be borne by the Holder. 9. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement in such reasonable amount as the Company may determine, or (in the case of mutilation) upon surrender and cancellation hereof, the Company, at its expense, shall issue a new Warrant in substantially identical form in replacement hereof. 10. NOTICES. Except as provided in Section 9 above, all notices and other communications from the Company to the Holder shall be mailed by overnight courier or by first-class, registered or certified mail, postage prepaid, to the address furnished to the Company in writing by the last Holder who has furnished an address to the Company in writing. Notice shall be deemed given one day after deposit with an overnight courier service, three days after deposit in the mails in accordance with this Section 10 or upon delivery if personally delivered. 11. MODIFICATION AND WAIVER. Neither this Warrant nor any term hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. -5- 12. HEADINGS. The descriptive headings in this Warrant are included for convenience only, and do not constitute a part hereof. 13. GOVERNING LAW. This Warrant shall be construed in accordance with and governed by the laws of the State of California. 14. EXPIRATION DATE. This Warrant will be wholly void and of no effect after 5:00 p.m. (San Francisco time) February 5, 2002 (the "Expiration Date"); provided that, if the last day on which this Warrant may be exercised, or on which it may be exercised at a particular Exercise Price, is a Sunday or a legal holiday or a day on which banking institutions doing business in the City of San Francisco are authorized by law to close, this Warrant may be exercised prior to 5:00 p.m. (San Francisco time) on the next succeeding full business day with the same force and effect and at the same Exercise Price as if exercised on such last day specified herein. 15. ISSUE TAX. The issuance of certificate for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the Holder of the Warrant for any issue tax (other than applicable income taxes) in respect thereof; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the then Holder of the Warrant being exercised. 16. TRANSFER RESTRICTIONS. The Company is relying upon an exemption from registration, with respect to this Warrant and the shares of Common Stock issuable upon exercise hereof, under the Act and applicable state securities laws. The Holder, by acceptance hereof, represents that the Holder understands that neither this Warrant nor the Common Stock issuable upon exercise hereof has been registered with the Securities and Exchange Commission nor under any state securities law, and that neither this Warrant nor the Common Stock issuable upon exercise hereof may be sold or transferred unless registered under the Act and any applicable state securities laws, or unless an exemption from such registration is available. By acceptance hereof, the Holder represents, warrants and acknowledges that (a) it is acquiring the Warrant (and the shares of Common Stock or other securities issuable upon exercise hereof) for its own account for investment purposes and not with a view to distribution, (b) it has received all such information as the Holder deems necessary and appropriate to enable the Holder to evaluate the financial risk inherent in making an investment in the Company, and satisfactory and complete information concerning the business and financial condition of the Company in response to all inquiries in respect thereof, (c) the Holder's acquisition of shares upon exercise hereof will be a highly speculative investment, (d) the Holder is able, without impairing its financial condition, to hold such shares for an indefinite period of time and to suffer a complete loss of the Holder's investment, and (e) the Holder has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of acquisition of this Warrant and the shares issuable upon exercise hereof and of making an informed investment decision with respect thereto. Each certificate representing shares of Common Stock or other securities issued upon exercise of this Warrant shall have conspicuously endorsed on its face, at the time of its issuance, such legends as counsel to the Company deems necessary or appropriate, including without limitation the legend set forth on the top of the first page of this Warrant. The Company agrees to remove such legends upon (i) receipt of an unqualified written opinion of legal counsel who shall be reasonably satisfactory to the Company, addressed to the Company and -6- reasonably satisfactory in form and substance to the Company's counsel, to the effect that the proposed transfer of this Warrant, or the securities issuable upon exercise hereof, may be effected without registration under the Securities Act of 1933, as amended, or any applicable state securities laws or (ii) such other showing as shall be reasonably satisfactory to the Company's counsel. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and delivered on the date first set forth above. BLYTH HOLDINGS, INC. By: /s/ Timothy P. Negris --------------------------------------- Timothy Negris, President and Chief Executive Officer [Warrant signature page] -7- EXHIBIT A NOTICE OF EXERCISE (To be signed only upon exercise of Warrant) To: BLYTH HOLDINGS, INC. 989 Hillsdale Boulevard Suite 400 Foster City, CA 94404 The undersigned, Holder of the attached Warrant, hereby irrevocably elects to exercise the purchase right represented by this Warrant as follows: [ ] The undersigned elects to purchase for cash or check _________ full shares of Common Stock of Blyth Holdings, Inc. and herewith makes payment of $__________ for those shares; [ ] The undersigned elects to effect a net exercise of this Warrant, exercising this Warrant [ ] in full or [ ] as to the following GROSS number of shares: ____________. The undersigned understands that the actual number of shares issuable will be determined in accordance with Sections 1.1 and 2 of this Warrant. The undersigned requests that the certificates for the shares be issued in the name of, and delivered to, _________________________________*, whose address is____________________________________________. Dated:____________, ____ (Signature must conform in all respects to name of Holder as specified on the face of the attached Warrant.) ________________________________________ Signature ________________________________________ Address ________________________________________ ________________________ * If the stock is to be issued to anyone other than the registered Holder of this Warrant, this Notice of Exercise must be accompanied by an opinion of counsel to the effect that such transfer may be effected without compliance with the registration and prospectus delivery requirements of the Securities Act of 1933, as amended. EX-23.1 4 EXHIBIT 23.1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements No. 33-65538, 33-81008, 33-46166 and 33-32677 of Blyth Holding Inc. on Form S-8 of our report dated May 9, 1997 (June 10, 1997 as to the last paragraph of Note 5) appearing in this Annual Report on Form 10-K of Blyth Holdings Inc. for the year ended March 31, 1997. DELOITTE & TOUCHE LLP San Jose, California July 28, 1997 EX-27 5 EXHIBIT 27 (FDS)
5 YEAR MAR-31-1997 APR-01-1996 MAR-31-1997 236,000 5,914,000 2,419,000 676,000 18,000 8,597,000 4,033,000 2,583,000 10,047,000 3,069,000 1,646,000 0 0 174,000 5,158,000 10,047,000 4,731,000 10,400,000 4,880,000 17,036,000 1,329,000 676,000 1,757,000 (7,965,000) 30,000 (7,995,000) 0 0 0 (7,995,000) (0.67) (0.67)
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