Your prompt return of the enclosed proxy card will save the postage expense of
additional mailings. Your immediate attention to these materials would be
greatly appreciated.
ITRON
Johnny M. Humphreys
President and
Chief Executive Officer
April 4, 1997
Dear Shareholder:
On behalf of the Board of Directors, it is my pleasure to extend to you an
invitation to attend the 1997 Annual Meeting of Shareholders of Itron, Inc. We
hope you can join us. The Annual Meeting will be held:
At: Red Lion Hotel - Spokane City Center
Spokane Falls Ballroom - Suite A
322 North Spokane Falls Court
Spokane, Washington 99201
On: Tuesday, April 29, 1997
At: 9:00 a.m.
For our shareholders' convenience, a continental breakfast will be
available beginning at 8:30 a.m., at which time shareholders will have an
opportunity to meet personally with the Company's directors and officers and
discuss any questions they may have. The Annual Meeting will begin promptly at
9:00 a.m. The Notice of the Annual Meeting and the Proxy Statement accompany
this letter.
We know that many of our shareholders will be unable to attend the Annual
Meeting. Proxies are solicited so that each shareholder has an opportunity to
vote on all matters that are scheduled to come before the meeting. Whether or
not you plan to attend, please take the time now to read the Proxy Statement and
vote your shares by signing, dating and returning your proxy card promptly in
the enclosed postage-paid envelope. You may revoke your proxy at any time before
it is exercised. Regardless of the number of Company shares you own, your
presence by proxy is important for quorum purposes and your vote is important
for proper corporate action.
Thank you for your continuing interest in Itron. We look forward to seeing
as many of you as possible at our Annual Meeting.
Sincerely,
Johnny M. Humphreys
President and Chief Executive Officer
Itron, Inc., P.O. Box 15288, Spokane, Washington 99215-5288; (509)924-9900 or
(800)392-3185
ITRON, INC.
2818 North Sullivan Road
Spokane, Washington 99216
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 29, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Itron,
Inc., will be held at Red Lion Hotel - Spokane City Center, Spokane Falls
Ballroom - Suite A, 322 North Spokane Falls Court, Spokane, Washington, at 9:00
a.m., local time, on Tuesday, April 29, 1997 (the "Annual Meeting") for the
following purposes:
(1) To elect four directors of the Company;
(2) To approve the amendment of the Company's 1989 Restated Stock
Option Plan;
(3) To ratify the appointment of the auditors of the Company; and
(4) To transact such other business as may come before the meeting
and any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on February 28,
1997, as the record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting.
All shareholders are cordially invited to attend the Annual Meeting in
person.
To ensure representation at the Annual Meeting, shareholders are urged to
mark, sign, date and return the enclosed Proxy as promptly as possible, even if
they plan to attend the Annual Meeting. A return envelope, which requires no
postage if mailed in the United States, is enclosed for this purpose. Any
shareholder attending the Annual Meeting may vote in person even if such
shareholder has returned a Proxy.
By order of the Board of Directors
MariLyn R. Blair
Corporate Secretary
Spokane, Washington
April 4, 1997
ITRON
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Itron, Inc. (the "Company"), of proxies for use at the
Annual Meeting of Shareholders (the "Annual Meeting") to be held at the Red Lion
Hotel - Spokane Falls Ballroom, Suite A, 322 North Spokane Falls Court, Spokane,
Washington, at 9:00 a.m., local time, on Tuesday, April 29, 1997, for the
purposes set forth in the accompanying Notice of Annual Meeting of Shareholders.
The principal executive offices of the Company are located at 2818 North
Sullivan Road, Spokane, Washington 99216. It is expected that this Proxy
Statement and accompanying Proxy will be mailed to shareholders on or about
April 4, 1997.
Record Date and Outstanding Shares
Holders of the Company's common stock (the "Common Stock") of record at the
close of business on February 28, 1997, are entitled to notice of and to vote at
the Annual Meeting. On that date, there were 13,420,879 shares of Common Stock
outstanding.
Revocability of Proxies
Shares represented at the Annual Meeting by properly executed Proxies in
the accompanying form will be voted at the Annual Meeting and, where the
shareholder giving the Proxy specifies a choice, the Proxy will be voted in
accordance with the specification so made. A Proxy given for use at the Annual
Meeting may be revoked by the shareholder giving the Proxy at any time prior to
the exercise of the powers conferred thereby. A Proxy may be revoked either by
(i) filing with the Secretary of the Company prior to the Annual Meeting, at the
Company's principal executive offices, either a written revocation or a duly
executed Proxy bearing a later date or (ii) attending the Annual Meeting and
voting in person, regardless of whether a Proxy has previously been given.
Presence at the Annual Meeting will not revoke the shareholder's Proxy unless
such shareholder votes in person.
Quorum and Voting
Holders of Common Stock will be entitled to one vote per share of Common
Stock held. Holders of Common Stock are not entitled to cumulative voting rights
in the election of directors. Under Washington law, action may be taken on a
matter submitted to shareholders only if a quorum exists with respect to such
matter. A majority of the votes entitled to be cast on a matter by holders of
outstanding shares of Common Stock constitutes a quorum for action on such
matter.
Directors are elected by a plurality of the shares of Common Stock present,
in person or by proxy, at the Annual Meeting. Abstention from voting and broker
non-votes on the election of directors will have no impact on the outcome of
this proposal since they have not been cast in favor of any nominee. The
affirmative vote of holders of a majority of the shares of Common Stock present,
in person or by proxy, and entitled to vote at the Annual Meeting is required
for the approval of the amendment of the 1989 Restated Stock Option Plan and the
ratification of independent auditors. Abstention from voting on these matters
will have the practical effect of voting against these proposals because such
shares are present at the meeting and entitled to vote and are therefore counted
in the number of shares a majority of which are required for approval of a
proposal, but are not voting in favor of it. Broker non-votes with respect to
the amendment of 1989 Restated Stock Option Plan will have no effect on the
outcome of this proposal since they are not considered shares entitled to vote
on this proposal, whereas broker non-votes with respect to the ratification of
the Company's auditors will have the practical effect of voting against this
proposal since they are considered shares present at the meeting and entitled to
vote but are not voting in favor of the proposal.
Solicitation of Proxies
The Company has retained Corporate Investor Communications, Inc., 111
Commerce Road, Carlstadt, New Jersey, to aid in the solicitation of Proxies. It
is estimated that the cost of these services will be approximately $4,000 plus
expenses. The cost of soliciting Proxies will be borne by the Company. Proxies
will be solicited by personal interview, mail and telephone. In addition, the
Company may reimburse brokerage firms and other persons representing beneficial
owners of shares of Common Stock for their expenses in forwarding solicitation
materials to such beneficial owners. Proxies may also be solicited by certain of
the Company's directors, officers and regular employees, without additional
compensation, personally or by telephone.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, with each director of
the Company generally holding office for a three-year term or until his or her
successor has been elected and qualified. At the Annual Meeting, four directors
are to be elected, one to hold office for a term of two years until 1999, and
three to hold office for a term of three years until 2000 or, in each case,
until his/her respective successor shall be elected and shall qualify. One
nominee, Stuart Edward White, was appointed a director in April 1996, and is
being nominated for a shorter term in order to keep all classes of directors as
equal in size as possible, as required by Washington state law. Unless authority
to do so is withheld, the persons named as proxies in the accompanying Proxy
will vote for the election of the nominees listed below. The Board of Directors
has no reason to believe that any such nominee will be unable to serve as a
director. If, however any such nominee shall become unavailable, the persons
named as proxies will have discretionary authority to vote for a substitute
nominee.
Nominee to Serve Until 1999
Stuart Edward White (age 46) has been a director of the Company since 1996.
Mr. White is President, Utility Translation Systems, Inc. ("UTS"). Itron
acquired UTS in March 1996. Mr. White has been President of UTS since its
inception in 1980. Prior to founding UTS, Mr. White held numerous engineering
and marketing management positions with Westinghouse Electric Corporation, Meter
Division, for 13 years.
Nominees to Serve Until 2000
Michael B. Bracy (age 55) has been a director of the Company since 1992.
Mr. Bracy is Executive Vice President, Chief Financial Officer and a director of
NorAm Energy Corp. ("NorAm"), previously known as Arkla, Inc., an integrated
natural gas company. Since joining NorAm in 1984, he has held various executive
positions, most recently Chief Executive Officer of the Arkla Pipeline Group.
Prior to his joining NorAm, Mr. Bracy served as Executive Vice President and
Chief Financial Officer of El Paso Natural Gas Company, which he joined in 1977.
Graham M. Wilson (age 52) has been a director of the Company since 1990.
Mr. Wilson has been employed by Westcoast Energy Inc., a major Canadian natural
resource company, since 1988, where he is currently Executive Vice President and
Chief Financial Officer. From 1983 to 1988, he was Vice President, Finance and
Administration of Petro-Canada Inc. Mr. Wilson also serves as a director of
Union Gas Limited, Pacific Northern Gas Ltd. and Centra Gas, Inc., all of which
are affiliates of Westcoast Energy, Inc.
Mary Ann Peters (age 52) has been a director of the Company since 1994. Ms.
Peters is Managing Director of McGillicuddy and Peters, a marketing and
consulting firm, which she founded in 1984. Ms. Peters began her marketing
career with International Business Machines Corporation in 1972 and subsequently
held marketing positions with General Electric Company, Wells Fargo and Company,
Inc., Atari Corp. and Apple Computer, Inc.
Continuing Directors
Paul A. Redmond (age 60) has served as Chairman of the Board of Directors
of the Company since 1984. Mr. Redmond's term as a director expires in 1998. He
is Chairman of the Board and Chief Executive Officer of The Washington Water
Power Company ("WWP"). Mr. Redmond joined WWP in 1965, where he has held
numerous management and executive positions prior to his being elected to his
current position in 1985. Mr. Redmond also serves as a director Washington
RoundTable, U.S. Bancorp and Pentzer Corporation, as well as various
subsidiaries and affiliates of WWP.
Johnny M. Humphreys (age 59) has been President, Chief Executive Officer
and a director of Itron since 1987. Mr. Humphrey's term as a director expires in
1998. From 1975 to 1986, Mr. Humphreys was employed by Datachecker Systems, Inc.
("Datachecker"), a subsidiary of National Semiconductor Corporation ("NSC"), in
various executive positions, including President from 1980 to 1986. In 1986, Mr.
Humphreys was appointed Senior Vice President of NSC's Information Systems Group
and was responsible for strategic planning for three operating divisions,
National Advanced Systems, Microcomputer Products Group and Datachecker.
Ted C. DeMerritt (age 64) has been a director of the Company since 1994.
Mr. DeMerritt's term as a director expires in 1999. Mr. DeMerritt has been
employed by Olivetti North America, which develops and implements system
solutions for the financial services and retail industries, and its predecessor,
ISC Systems Corporation, since 1980, where he currently serves as its Chairman
and Chief Executive Officer. From 1963 to 1980, he was with Sacramento Savings
and Loan Association, where he served as Controller/Senior Vice President in
charge of the Savings and Operations Division. Mr. DeMerritt is a Trustee of the
Washington State University Foundation.
Jon E. Eliassen (age 49) has been a director of the Company since 1987. Mr.
Eliassen's term as a director expires in 1999. Mr. Eliassen is Senior Vice
President and Chief Financial Officer of WWP. He joined WWP in 1970 and held
numerous positions within the finance department prior to assuming his current
responsibilities in 1986. He also serves as a director of Spokane Capital
Management Corporation and Pentzer Corporation as well as various affiliates of
WWP.
Compensation of Directors
Nonemployee directors receive an annual $8,000 retainer which is payable
quarterly. In addition, nonemployee directors receive $800 for each Board
meeting attended ($900 for the Chairman of the Board) and $800 for each
Committee meeting attended ($900 for each of those Committee meetings at which
they serve as chairperson). Under the Company's 1992 Stock Option Plan for
Nonemployee Directors, nonemployee directors receive stock option grants to
purchase 10,000 shares of the Company's Common Stock upon their initial
appointment or election as a director and option grants to purchase 2,000 shares
of the Company's Common Stock annually thereafter. The exercise price of such
options is the fair market value of the Common Stock on the date of grant. Such
options are fully vested and immediately exercisable on the date of grant.
Information on Committees of the Board of Directors and Meetings
The Company's Board of Directors has established an Audit/Finance Committee
and a Compensation Committee.
The Audit/Finance Committee reviews the Company's accounting practices,
internal accounting controls and financial results and oversees the engagement
of the Company's independent auditors. The Audit/Finance Committee consists of
Jon E. Eliassen, Graham M. Wilson and Ted C. DeMerritt and held nine meetings
during 1996.
The Compensation Committee is responsible for setting compensation levels
for the Company's executive officers, overseeing the administration of various
incentive compensation and benefit plans and performing such other functions
regarding compensation as the Board may delegate. The Compensation Committee
consists of Paul A. Redmond, Michael B. Bracy and Mary Ann Peters. The
Compensation Committee held seven meetings in 1996.
During 1996 there were six Board meetings. All Board members, except Mr.
Wilson, attended at least 75% of the meetings of the Board and each committee of
which they were a member. Mr. Wilson attended four of the six Board meetings and
seven of the nine Audit/Finance Committee meetings.
PROPOSAL TO AMEND RESTATED 1989 STOCK OPTION PLAN
The Company's Restated 1989 Stock Option Plan (the "1989 Option Plan")
provides a means whereby selected employees, directors, officers, agents,
consultants, advisors and independent contractors of the Company may be granted
incentive stock options ("ISOs") or nonqualified stock options ("NSOs") to
purchase shares of Common Stock. Approximately 1,200 persons are eligible for
participation in the 1989 Option Plan. Currently, subject to adjustment required
in the event of any recapitalization of the Company, the aggregate amount of
Common Stock that may be issued upon exercise of all options granted under the
1989 Option Plan may not exceed 2,250,000 shares. On February 3, 1997, the
Company's Board of Directors unanimously adopted an amendment to the 1989 Option
Plan that, subject to shareholder approval, would authorize an additional
1,800,000 shares to be available for the granting of options under the 1989
Option Plan. As of the date of this Proxy Statement, approximately 115,000
shares remained available for future grant under the 1989 Option Plan, and
options to purchase approximately 1,312,000 shares of Common Stock were
outstanding. On March 26, 1997, the average of the high and low sale prices of
the Company's Common Stock was $19.81 per share, as reported by the Nasdaq
National Market. In addition, the Board extended the term of the 1989 Option
Plan by ten years from the date of amendment by the Board, which is until
February 3, 2007.
The Board believes that the additional options would, among other things,
promote the interests of the Company and its shareholders by assisting the
Company in attracting, retaining and stimulating the performance of officers and
key employees. The Board believes that the existing options have contributed
substantially to the successful achievement of the above objectives and the
granting of stock options for these purposes is comparable with other high-tech
companies. The complete text of the 1989 Option Plan, as proposed to be amended,
is attached to this Proxy Statement as Appendix A.
The Compensation Committee of the Board of Directors is currently the
administrator of the 1989 Option Plan (the "Plan Administrator"). Subject to the
terms of the 1989 Option Plan, the Plan Administrator determines the terms and
conditions of options granted under the 1989 Option Plan, including the exercise
price. The 1989 Option Plan provides that the Plan Administrator must establish
an exercise price for ISOs that is not less than the fair market value per share
at the date of grant. Each ISO must expire within ten years of the date of
grant. However, if ISOs are granted to persons owning more than 10% of the
voting stock of the Company, the 1989 Option Plan and the tax laws for ISOs
provides that the exercise price may not be less than 110% of the fair market
value per share at the date of grant and that the term of the ISOs may not
exceed five years. NSOs expire ten years from the date of grant. Unless
otherwise provided by the Plan Administrator, options granted under the 1989
Option Plan vest at a rate of 25% per year over a four year period. For ISO
purposes, the amendment of the 1989 Option Plan by the Board is considered the
adoption of a new option plan.
No option may be transferred by the optionee other than by will or the
laws of descent or distribution, except for certain transfers which may be
permitted by the Plan Administrator. An optionee whose relationship with the
Company or any related corporation ceases for any reason (other than termination
for cause, death or total disability, as such terms are defined in the 1989
Option Plan), may exercise options in the three-month period following such
cessation (unless such options terminate or expire sooner by their terms), or in
such longer period determined by the Plan Administrator. In the event the
optionee is terminated for cause, the options terminate upon the Company's
discovery of such cause. In the event the optionee dies or becomes totally
disabled, options vested as of the date of death or total disability may be
exercised prior to the earlier of the option's specified expiration date or one
year from the date of the optionee's death or disability.
Unexercised options granted under the 1989 Option Plan terminate upon
the occurrence of certain events, including certain mergers. Immediately prior
to such a transaction, optionees may exercise such options without regard to
whether the vesting requirements have been satisfied. In a stock merger, the
options would convert into options to purchase shares of the other corporation
involved in the merger, unless the Company and such other corporation, in their
sole discretion, determine that such options shall terminate. The converted
options would be fully vested without regard to whether the vesting requirements
in the option agreements have been satisfied.
Shares subject to options granted under the 1989 Option Plan which have
lapsed or terminated may again be subject to options granted under the 1989
Option Plan. Furthermore, the Plan Administrator may offer to exchange new
options for existing options, with the shares subject to the existing options
being again available for grant under the 1989 Option Plan. Assuming the
approval of this proposal by the Company's shareholders, the 1989 Option Plan
will terminate on February 3, 2007, unless sooner terminated by the Board of
Directors.
Federal Income Tax Consequences
The federal income tax consequences to the Company and to any person
granted an option under the 1989 Option Plan under the existing applicable
provisions of the Code and the regulations thereunder are substantially as
follows. Under present law and regulations, no income will be recognized by a
participant upon the grant of stock options.
Upon the exercise of an NSO, the optionee will recognize taxable
ordinary income in an amount equal to the excess of the fair market value of the
shares acquired over the option price. Upon a later sale of those shares, the
optionee will have short-term or long-term capital gain or loss, as the case may
be, in an amount equal to the difference between the amount realized on such
sale and the tax basis of the shares sold. If payment of the option price is
made entirely in cash, the tax basis of the shares will be equal to their fair
market value on the exercise date (but not less than the option price), and the
shares' holding period will begin on the day after the exercise date.
If the optionee uses already-owned shares to exercise an option in whole
or in part, the transaction will not be considered to be a taxable disposition
of the already-owned shares. The optionee's tax basis and holding period of the
already-owned shares will be carried over to the equivalent number of shares
received upon exercise. The tax basis of the additional shares received upon
exercise will be the fair market value of the shares on the exercise date (but
not less than the amount of cash, if any, used in payment), and the holding
period for such additional shares will begin on the day after the exercise date.
The rules for the tax treatment of an NSO also apply to an ISO that is
exercised more than three months after the optionee's termination of employment
(or more than 12 months thereafter in the case of permanent and total
disability, as defined in the Code).
Upon the exercise of an ISO during employment or within three months
after the optionee's termination of employment (12 months in the case of
permanent and total disability, as defined in the Code), for regular tax
purposes the optionee will recognize no income at the time of exercise (although
the optionee will have income for alternative minimum income tax purposes at
that time equal to the excess of the fair market value of the shares over the
exercise price. If the acquired shares are sold or exchanged after the later of
(a) one year from the date of exercise of the option and (b) two years from the
date of grant of the option, the difference between the amount realized by the
optionee on that sale or exchange and the option price will be taxed to the
optionee as a long-term capital gain or loss. If the shares are disposed of
before such holding period requirements are satisfied, then the optionee will
recognize taxable ordinary income in the year of disposition in an amount equal
to the excess of the fair market value on the exercise date of the shares
received over the option price paid (or generally, if less, the excess of the
amount realized on the sale of the shares over the option price), and the
optionee will have capital gain or loss, long-term or short-term, as the case
may be, in an amount equal to the difference between (i) the amount realized by
the optionee upon that disposition of the shares and (ii) the option price paid
by the optionee increased by the amount of ordinary income, if any, so
recognized by the optionee.
In all the foregoing cases the Company will be entitled to a deduction
at the same time and in the same amount as the participant recognizes ordinary
income, subject to the following limitations. Under Section 162(m) of the Code,
certain compensation payments in excess of $1 million are subject to a
limitation on deductibility for the Company. The limitation on deductibility
applies with respect to that portion of a compensation payment for a taxable
year in excess of $1 million to either the Company's Chief Executive Officer or
any one of the other four most highly compensated executive officers. Certain
performance-based compensation is not subject to the limitation on
deductibility. Options can qualify for this performance-based exception, but
only if they are granted at fair market value, the total number of shares that
can be granted to an executive for a specified period is stated, and shareholder
and Board approval is obtained. The 1989 Option Plan has been drafted to allow
compliance with those performance-based criteria.
The Board of Directors recommends that shareholders vote FOR approval of the
amendment of the Company's Restated 1989 Stock Option Plan.
EXECUTIVE COMPENSATION
Compensation Summary
The following table sets forth certain information as to Itron's Chief
Executive Officer and each of the four other most highly compensated executive
officers who were executive officers at December 31, 1996, for services rendered
in all capacities for the Company during the fiscal years ended December 31,
1996, 1995 and 1994.
Summary Compensation Table
Long-Term
Annual Compensation Compensation
---------------------------------------------------- ----------------
Securities
Name and Principal Other Annual Underlying All Other
Position Year Salary Bonus Compensation(1) Options#(2) Compensation(3)
-------- ------- --------- ---------- ----------------- -------------- --------------
Johnny M. Humphreys 1996 $363,142 $ 0 $ 0 - $ 14,958
President and Chief 1995 306,633 140,190 - - 12,556
Executive Officer 1994 250,570 141,261 54,877 - 11,292
Carl Robert Aron 1996 299,986 - - 70,000 56,778
Executive Vice President 1995 27,500 163,379 - 60,000 -
and Chief Operating
Officer(4)
Richard G. Geiger 1996 200,000 - - 22,000 21,181
Senior Vice President and 1995 188,468 72,128 - 12,000 6,803
Chief Technical Officer 1994 179,442 83,062 - 5,000 6,256
Michael J. O'Callaghan 1996 206,494 - - 17,500 9,206
Senior Vice President, 1995 176,597 66,730 - 10,000 6,307
Services 1994 160,269 75,942 - 10,000 5,483
David G. Remington 1996 208,654 - - 45,000 8,708
Vice President and
Chief Financial Officer(5)
- -----------
(1) Represents compensation paid under an employment agreement. See "Certain
Relationships and Related Transactions."
(2) The number of securities underlying options for 1996 does not include
options to purchase 30,000 shares, 10,000 shares, 7,500 shares and 45,000
shares that were granted to Messrs. Aron, Geiger, O'Callaghan and
Remington, respectively, in 1996, but were canceled in connection with the
repricing in November 1996. The number of securities underlying options for
1995 does include options to purchase 40,000 shares, 12,000 shares and
10,000 shares that were granted to Messrs. Aron, Geiger and O'Callaghan
respectively, in 1995, but were canceled in connection with the repricing
in November 1996. See "Ten Year Option Repricing."
(3) For the year ended December 31, 1996, consists of matching contributions to
a 401(k) savings plan ($4,750 for Messrs. Humphreys, Geiger and O'Callaghan
and $1,417 for Mr. Aron) and matching contributions to a deferred
compensation plan ($10,208, $9,883, $4,721, and $4,456 for each of Messrs.
Humphreys, Aron, Geiger and O'Callaghan, respectively). Also includes
$45,478 of reimbursed relocation and other expenses for Mr. Aron, $11,710
for reimbursed medical and other expenses for Mr. Geiger and $8,708 of
reimbursed relocation expenses for Mr. Remington.
(4) Mr. Aron joined the Company in November 1995.
(5) Mr. Remington joined the Company in February 1996.
Option Grants
The following table sets forth certain information regarding options
granted during the year ended December 31, 1996 to the Company's executive
officers for whom compensation is reported in this Proxy Statement.
Option Grants in 1996
Individual Grants
------------------------------------------------------------- -------------------------
Percent of Potential Realizable
Number of Total Options Exercise Expiration Value at Assumed Annual
Options Granted to Price Date Rates of Stock Price
Name Granted Employees in ($/Share) Appreciation
Fiscal Year for Option Term
- ------------------------ -------------- ---------------- -------------- ------------- ---------------------------
------------- -------------
5% 10%
------------- -------------
Carl Robert Aron 70,000 11.37% $17.75 11/25/06 $781,402 $1,980,225
Richard G. Geiger 22,000 3.57% 17.75 11/25/06 245,583 622,356
Michael J. O'Callaghan 17,500 2.84% 17.75 11/25/06 195,350 495,056
David G. Remington 45,000 7.31% 17.75 11/25/06 502,330 1,273,002
(1) The options vest on a four-year schedule, with the options becoming fully
exercisable on November 25, 2000, provided the holder remains employed by
the Company. The exercise price of the options is the fair market value of
the Company's stock on the date of grant. These options were granted in
exchange for the cancellation of options that had been previously granted
in 1995 and 1996. See "Ten Year Option Repricing."
(2) The number of options granted does not include options to purchase 30,000
shares, 10,000 shares, 7,500 shares and 45,000 shares that were granted to
Messrs. Aron, Geiger, O'Callaghan and Remington, respectively, in 1996, but
were canceled in connection with the repricing. Similarly, options granted
in 1996 but canceled in connection with the repricing were not included in
the total number of options granted to employees for purposes of
determining the percentage of options granted to the named executive
officers during 1996. See "Ten Year Option Repricing."
(3) Future value of current year grants assuming appreciation of 5% and 10% per
year over the ten-year option period. The actual value realized may be
greater than or less than the potential realizable values set forth on the
table.
Option Exercises and Year-End Values
The following table sets forth certain information regarding options held
as of December 31, 1996 by each of the Company's executive officers for whom
compensation is reported in this Proxy Statement. None of such executive
officers exercised any stock options during 1996.
Aggregated 1996 Fiscal Year-End Option Values
Value of Unexercised
Total Number of Unexercised in-the-Money Options
Options at Fiscal Year-End at Fiscal Year-End(1)
-------------------------------- ----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---------------- ---------------- --------------- ----------------- ----------------
Carl Robert Aron 15,000 115,000 $ 0 $ 0
Richard G. Geiger 63,750 22,000 445,663 -
Michael J. O'Callaghan 40,000 17,500 170,750 -
David G. Remington - 45,000 - -
(1) Calculated based on a price of $17.75 per share (the closing price of the
Company's Common Stock on December 31, 1996 as reported by the Nasdaq
National Market), less the exercise price.
Option Repricing
The following table sets forth information concerning any repricing of
stock options held by any executive officer of the Company during the period
commencing November 1993 (when the Company became a reporting company pursuant
to the Securities Exchange Act of 1934, as amended (the "Exchange Act")) and
ending on December 31, 1996.
Ten-Year Option Repricing
--------- ----------- ------------- ------------- ----------- --------------------------
Market Price
Number of of Stock at Exercise New Length of Original Option
Options Time of Price at Time Exercise Term Remaining at Date
Name Date Repriced Repricing of Pricing Price of Repricing
--------- ----------- ------------- ------------- ----------- --------------------------
Carl Robert Aron 11/25/96 40,000 $17.75 $28.06 $17.75 9 yrs.
11/25/96 30,000 $17.75 51.19 $17.75 9 yrs. 5 months
Richard G. Geiger 11/25/96 12,000 $17.75 24.25 $17.75 8 yrs. 5 months
11/25/96 10,000 $17.75 51.19 $17.75 9 yrs. 5 months
Klaus O. Huschke 11/25/96 8,000 $17.75 24.25 $17.75 8 yrs. 5 months
11/25/96 7,000 $17.75 51.19 $17.75 9 yrs. 5 months
Robert D. Neilson 11/25/96 20,000 $17.75 24.25 $17.75 8 yrs. 5 months
11/25/96 13,000 $17.75 51.19 $17.75 9 yrs. 5 months
Leroy D. Nosbaum 11/25/96 20,000 $17.75 50.25 $17.75 9 yrs. 4 months
Michael J. O'Callaghan 11/25/96 10,000 $17.75 24.25 $17.75 8 yrs. 5 months
11/25/96 7,500 $17.75 51.19 $17.75 9 yrs. 5 months
Larry A. Panattoni 11/25/96 15,000 $17.75 24.25 $17.75 8 yrs. 5 months
11/25/96 12,000 $17.75 51.19 $17.75 9 yrs. 5 months
David G. Remington 11/25/96 45,000 $17.75 43.50 $17.75 9 yrs. 3 months
Russel E. Vanos 11/25/96 10,000 $17.75 51.19 $17.75 9 yrs. 5 months
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Company's Board of Directors (the
"Committee") annually reviews and recommends to the full Board compensation
levels for executive officers of the Company. The Committee is comprised of
Board members who are not employees of the Company.
The Committee's primary objective in establishing compensation
opportunities for the Company's executive officers is to support the Company's
goal of maximizing the value of shareholders' interests in the Company. To
achieve this objective, the Committee believes it is critical to:
o Pay competitively to attract, retain and motivate a highly competent
executive team;
o Provide incentive opportunities that link corporate performance and
executive pay and pay executives competitive levels of incentive
compensation when corporate financial performance expectations are
achieved; and
o Align executives' financial interests with the creation of shareholder
value by providing long-term incentives in the form of options to
acquire Common Stock.
The Committee makes recommendations to the Board of Directors pertaining to
the Company's executive compensation plans which promote the objectives detailed
above. The Committee periodically engages outside consultants to determine
approximate compensation levels among executives in comparable jobs in
comparable high-tech companies. The Committee believes that the Company's
current compensation plans support the Company's business mission and contribute
to the Company's financial success. It is the Company's policy to meet the
requirements for deductibility of compensation for tax purposes under Section
162(m) of the Internal Revenue Code. The Company intends to meet these
requirements by paying performance-based compensation when appropriate. In the
event it is not possible to meet the requirements of Section 162(m), the Company
intends to minimize any compensation in excess of the limit.
Base Salary
The Committee annually reviews each executive officer's base salary. The
factors that the Committee considers in making recommendations regarding base
salary include: levels of pay among executives in similar jobs within similar
high-tech companies, level of responsibility, prior experience, breadth of
knowledge and job performance. Base salaries are targeted at the median of the
market. The market is defined as similar high-tech companies, nationwide, the
annual revenues of which are approximately $175 million and which have similar
executive level jobs. These companies are not necessarily the same as the
companies included in the Nasdaq Computer Manufacturers Stock Index used in the
performance graph. In general, in 1996, base salaries for the executive officers
are near the median of the market.
With respect to the Chief Executive Officer's compensation in 1996, the
Committee determined that a $360,000 base salary for Mr. Humphreys was
appropriate and consistent with the Company's overall salary plan. The Committee
believes that it is important that Mr. Humphreys' base salary be competitive
with those of other chief executive officers with similar responsibilities and
broad leadership experience in the market defined above because the Committee
recognizes and highly values Mr. Humphreys' visionary leadership, breadth of
knowledge, and business and utility experience, all of which have contributed
significantly to the success of the Company.
Executive Incentive Compensation Plan ("EIC Plan")
The EIC plan provides the opportunity for executive officers to earn both
annual and long-term incentives in addition to their base salaries. The
Committee believes that having as much as 50% of an executive officer's total
compensation at risk fosters achievement of the Company's short-term and
long-term financial performance goals.
Annual Incentives: The Compensation Committee each year establishes annual
financial goals which relate to one or more indicators of corporate financial
performance and targets amounts as a specified percentage of the executive
officer's salary. For 1996, such percentages ranged from 42% to 50% of base
salary. Incentive awards are paid to participating executives under the EIC Plan
only when the established financial goals are achieved. Depending on the extent
to which corporate goals are achieved, an executive officer may be entitled to
receive from zero up to 150% of such targeted award. For 1996, the annual
incentive award opportunity was contingent upon attaining an established level
of revenues and net profit after tax. These goals were not met in 1996 and
consequently no payments were made.
Long-Term Incentives: Long-term incentives consist of stock options. The
number of stock options granted is determined by the recipient's position and
amount of options currently held, and is intended to recognize different levels
of responsibility. All options are granted with an option exercise price equal
to the fair market value of the Company's Common Stock on the date of grant.
This closely links a significant portion of executive compensation to benefits
produced for all shareholders. As in prior years, the Company's Chief Executive
Officer was not granted any options in 1996 because the provisions of a Stock
Purchase Agreement entered into by the Company and Mr. Humphreys provided Mr.
Humphreys with long-term equity incentives. This Stock Purchase Agreement
terminated in 1996, and in future years the Compensation Committee expects to
grant options to Mr. Humphreys.
Compensation Committee Report on 1996 Cancellation and Regrant of Options
During October 1996, the Compensation Committee determined that factors
affecting the Company's stock had made it necessary for the Company to implement
a program to cancel and regrant certain options to purchase Common Stock held by
the company's executive officers and certain other employees. A
cancellation/regrant program was implemented whereby certain outstanding options
were canceled and new options for the same number of shares were granted with a
lower exercise price per share equal to the fair market price of the Company's
Common Stock on the regrant date.
The Compensation Committee determined that this program was necessary
because equity incentives are a significant component of the total compensation
of each employee and play a substantial role in the Company's ability to retain
the services of individuals essential to the Company's long-term financial
success. The market price of the Company's Common Stock had risen substantially
during the previous 12 months and then declined significantly prior to the
implementation of the program. This significant fluctuation in market price left
several key executives of the Company with few, if any, stock options that
provided meaningful incentives. Furthermore, the Compensation Committee did not
believe that such market price reflected the progress made by the Company in
operations, product development, market development or financing. The
Compensation Committee felt that the Company's ability to retain key employees
would be significantly impaired unless the value of such employees' options was
restored by regranting options for the Company's Common Stock at the then
current market price. Further, a review of other companies in the technology
industry indicated that some of these companies had been confronted with this
problem and have made similar adjustments in options prices to motivate and
retain their employees. This is the first time that the Compensation Committee
has approved the cancellation and regrant of options and the Committee considers
this an unusual event for the Company.
Accordingly, on October 29, 1996, the Compensation Committee approved the
cancellation and regrant of all outstanding options with an exercise price in
excess of $19.25 per share held by current employees. Each person holding such
an option had the opportunity to either retain the old option or accept a new
option with an exercise price of $17.75, the fair market value of the Common
Stock on November 25, 1996 (the exchange date), and cancel the older
higher-priced option. Each regranted option was for the same number of shares
and vesting length as the canceled option. However, vesting time earned on the
original option was forfeited and vesting of the regranted option began on
November 25, 1996.
The Compensation Committee believes the regranted options and new vesting
schedule strikes an appropriate balance between the interests of the option
holders and the shareholders. The lower exercise prices of the regranted options
made the options once again valuable to the executive officers and key employees
who are critical to the Company's financial performance. However, those
individuals will enjoy the benefits of the regranted options only if they remain
employed by the Company and contribute to the Company's and investors' financial
success.
Members of the Compensation Committee
Paul A. Redmond Michael B. Bracy Mary Ann Peters
Performance Graph
The following graph compares the cumulative total return to shareholders on
the Company's Common Stock with the cumulative total return of the Nasdaq US
Stock Market and the Nasdaq Computer Manufacturers Stocks for the period
beginning on November 5, 1993, the first day of trading as a public company and
ending on December 31, 1996, the end of the Company's latest fiscal year.
Comparison of Cumulative Total Return Among Itron, Inc.,
Nasdaq Computer Manufacturers Stocks and Nasdaq US Stock Market
(For the period November 5, 1993 to December 31, 1996)
5-Nov-93 31-Dec-93 30-Dec-94 29-Dec-95 31-Dec-96
Itron, Inc. $100 $133 $150 $250 $130
Nasdaq Computer Manufacturers Stock $100 $108 $119 $187 $251
Nasdaq U.S. Stock Market $100 $105 $102 $144 $178
The above presentation assumes $100 invested on November 5, 1993, in Itron
Common Stock, Nasdaq Computer Manufacturers Stock and Nasdaq U.S. Market Stock,
with all dividends reinvested. Stock prices shown above for the Common Stock are
historical and not necessarily indicative of future price performance.
Section 16 (a) Beneficial Ownership Compliance Reporting
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "Commission").
Officers, directors and greater than 10% shareholders are required by Commission
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by the
Company, or written representations from certain reporting persons, the Company
believes that during the 1996 fiscal year all filing requirements applicable to
its officers, directors and beneficial owners of greater than 10% were complied
with by such persons.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of February 28, 1997 certain information
with respect to the beneficial ownership of the Company's Common Stock by (i)
each director of the Company, (ii) each of the Company's executive officers for
whom compensation is reported in this Proxy Statement, (iii) all directors and
executive officers of the Company as a group, and (iv) each person known by the
Company to own beneficially more than 5% of the Common Stock. Except as
otherwise noted, the Company believes that the beneficial owners of the Common
Stock listed below, based on information furnished by such owners, have sole
voting and investment power with respect to such shares.
Shares Beneficially Owned
Name Number Percent
- ----------------------------------------------------------- ----------------------- ----------------------
Directors and Executive Officers:
Johnny M. Humphreys (1) 230,324 1.72%
Richard G. Geiger (2) 65,020 *
Michael J. O'Callaghan (3) 40,877 *
Carl Robert Aron (4) 29,049 *
David G. Remington 4,000 *
Paul A. Redmond (5) 20,000 *
Jon E. Eliassen (6) 14,000 *
Michael B. Bracy (7) 15,000 *
Graham M. Wilson (8) 15,000 *
Ted C. DeMerritt (9) 14,300 *
Mary Ann Peters (10) 12,000 *
All directors and executive officers as a group
(17 persons) (5) (6) (7) (8) (9) (10) (11) 1,268,683 9.45%
Greater than 5% Shareholders:
Kopp Investment Advisors, Inc. (12)
6600 France Ave. South, Suite 672
Edina, MN 55435 1,915,742 14.27%
Arkla Finance Corporation
P.O. Box 2628
Houston, TX. 77252 1,502,547 11.20%
Pentzer Corporation
(a subsidiary of WWP)
W. 818 Riverside, Suite 350
Spokane, WA 99201 792,767 5.91%
- ------------------
* Less than 1%.
1. Includes 2,595 shares of Common Stock held for Mr. Humphreys' individual
account under the Company's 401(k) employee savings plan. Also includes 300
shares held by Mr. Humphreys as custodian under UGMA for his granddaughter
and 300 shares held by Mr. Humphreys as custodian under UGMA for his
grandson.
2. Includes 63,750 shares issuable upon exercise of outstanding options that
are exercisable by Mr. Geiger within 60 days at a weighted average exercise
price of $10.77 per share. Also includes 1,270 shares of Common Stock held
for Mr. Geiger's individual account under the Company's 401(k) employee
savings plan.
3. Includes 40,000 shares issuable upon exercise of outstanding options that
are exercisable by Mr. O'Callaghan within 60 days at a weighted average
exercise price of $13.51 per share. Also includes 877 shares of Common
Stock held for Mr. O'Callaghan's individual account under the Company's
401(k) employee savings plan.
4. Includes 15,000 shares issuable upon exercise of outstanding options that
are exercisable by Mr. Aron within 60 days at a weighted average exercise
price of $28.06 per share. Also includes 49 shares of Common Stock held for
Mr. Aron's individual account under the Company's 401(k) employee savings
plan.
5. Includes 17,500 shares issuable to Mr. Redmond upon exercise of outstanding
options at a weighted average exercise price of $23.93 per share. Excludes
792,767 shares held by Pentzer Corporation, a subsidiary of WWP, as to
which Mr. Redmond disclaims beneficial ownership. Mr. Redmond is a director
of WWP.
6. Includes 14,000 shares issuable to Mr. Eliassen upon exercise of
outstanding options at a weighted average exercise price of $28.43 per
share. Excludes 792,767 shares held by Pentzer Corporation, a subsidiary of
WWP, as to which Mr. Eliassen disclaims beneficial ownership.
7. Includes 15,000 shares issuable to Mr. Bracy upon exercise of outstanding
options at a weighted average exercise price of $27.43 per share. Excludes
1,502,547 shares held by Arkla Finance Corporation, as to which Mr. Bracy
disclaims beneficial ownership. Mr. Bracy is a director of Arkla Finance
Corporation.
8. Includes 15,000 shares issuable to Mr. Wilson upon exercise of outstanding
options at a weighted average exercise price of $27.43 per share. Excludes
608,340 shares held by Centra, as to which Mr. Wilson disclaims beneficial
ownership. Mr. Wilson is a director of Centra Gas Inc.
9. Includes 14,000 shares issuable to Mr. DeMerritt upon exercise of
outstanding options at a weighted average exercise price of $28.32 per
share.
10. Includes 12,000 shares issuable to Ms. Peters upon exercise of outstanding
options at a weighted average exercise price of $30.21 per share.
11. Includes 286,791 shares issuable upon exercise of outstanding options that
are held by executive officers and are exercisable within 60 days. Also
includes 11,992 shares of Common Stock held for such officers' individual
accounts under the Company's 401(k) employee savings plan and 61 shares
held for such officers' individual accounts under the Company's employee
stock ownership plan.
12. Information is based on a Schedule 13G dated January 29, 1997 which was
filed by Kopp Investment Advisors, Inc., with the Securities and Exchange
Commission. Such filing indicates that the investor exercises investment
discretion over these shares but is record owner of only 5,000 of the
shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Change of Control Agreements
The Company has entered into Change of Control Agreements with some of its
executive officers to provide compensation and benefits in the event of a change
of control of the Company. Pursuant to such agreements, executive officers agree
to remain employed by the Company on an annual basis and are compensated by an
annual salary and bonus as determined by the Compensation Committee of the Board
of Directors. In the event the employment relationship is terminated by the
Company for other than cause or by the executive officer for good reason within
the one year period following a change of control, the executive officer will
receive any salary or bonus due to such executive officer, group insurance
benefits for one year after termination and severance pay equal to the annual
base salary for the fiscal year in which the termination occurs. The executive
officers will also receive such payments if their employment continues for the
full one year period following a change of control.
Employment Agreements
Johnny M. Humphreys, President and Chief Executive Officer of the Company,
is party to an Employment Agreement and a related Stock Purchase Agreement with
the Company. The Employment Agreement, dated February 9, 1987, provides for an
initial base salary of $165,000, which has been increased annually. The
agreement also provides for annual incentive and employment bonus payments.
There were no bonus amounts for 1995 and 1996, and there are no further bonus
amounts due Mr. Humphreys in the future. The Employment Agreement may be
terminated by either party at any time. If termination is by the Company, it is
obligated to pay Mr. Humphreys' base salary and benefits for a six-month period.
In conjunction with his Employment Agreement, Mr. Humphreys executed a Stock
Purchase Agreement, pursuant to which he was granted rights to acquire shares of
Common Stock. Mr. Humphreys has purchased an aggregate of 392,129 shares of
Common Stock pursuant to the Stock Purchase Agreement. The Company made loans to
Mr. Humphreys for the purchase of such shares of Common Stock, all of which have
been repaid.
Carl Robert Aron, who joined the Company as Executive Vice President and
Chief Operating Officer in November 1995, is party to an Employment Agreement
with the Company. The Agreement provides for an initial base salary of $275,000,
which was increased to $300,000 in 1996 and may be increased in future years by
the Chief Executive Officer, subject to the approval of the Compensation
Committee. In addition, a signing bonus of $150,000 was paid to Mr. Aron in
January 1996. The Agreement also provides for annual incentive bonus payments
which range from 50% to 75% of base salary depending on the Company's
performance. The Agreement may be terminated by either party. If termination is
by the Company for reasons other than cause by Mr. Aron for good reason or under
certain other conditions, the Company is required to pay to Mr. Aron the greater
of (a) $500,000 or 150% of Mr. Aron's then current base salary and (b) an amount
(depending on the market value of options granted) that will not exceed the
greater of $250,000 or 75% of Mr. Aron's then current base salary. The Agreement
also provided for an option grant of 100,000 shares of the Company's Common
Stock at the fair market value of the Company's Common Stock on the date of
grant. These options become vested ratably over a four year period. The
Agreement contains certain vesting acceleration clauses for termination, death,
disability and changes in control.
David G. Remington, who joined the Company as Vice President and Chief
Financial Officer in February 1996, is party to an Employment Agreement with the
Company. The Agreement provides for an initial base salary of $250,000 which may
be increased annually by the Chief Executive Officer, subject to the approval of
the Compensation Committee. The Agreement also provides for annual incentive
bonus payments. The Agreement may be terminated by either party under certain
conditions. If termination is by the Company for other than cause the Company is
required to pay Mr. Remington an amount equal to his then current annual base
salary. The Agreement also provided for an option grant of 45,000 shares of the
Company's Common Stock at the fair market value of the Company's Common Stock on
the date of the grant. These options become vested ratably over a three year
period. The Agreement contains certain vesting acceleration clauses for
termination, death or disability.
Other Related Party Agreements
In July 1995 and May 1996, the Company purchased its principal office and
manufacturing facilities and additional manufacturing space in Spokane,
Washington, from Pentzer Development Corporation. Pentzer Development
Corporation is a subsidiary of Pentzer Corporation, a significant shareholder of
the Company and a subsidiary of WWP. Cash paid at closing was $3.2 million. The
Company has two long-term notes payable to Pentzer for $6.4 million related to
the purchases. The principal balances of the notes bear interest at rates of
7.5% through July 1998 and May 1999 and 9% and 8.5% thereafter. Monthly payments
of interest only are due through August 1998 with payments of principal and
interest due from September 1998 to maturity in August 2015 and June 2019.
RATIFICATION OF AUDITORS
Shareholders are asked to ratify the selection of Deloitte & Touche LLP as
independent auditors for the Company for the fiscal year ending December 31,
1997. Unless instructed otherwise, it is the intention of the persons named in
the accompanying Proxy to vote shares represented by properly executed Proxies
for ratification of the selection of Deloitte & Touche LLP as independent
auditors.
Deloitte & Touche LLP audited the books and records of the Company for the
fiscal years ended December 31, 1994, 1995 and 1996. It is anticipated that
representatives of Deloitte & Touche LLP will be present at the Annual Meeting.
Such representatives will have the opportunity to make a statement, if they so
desire, and are expected to be available to respond to appropriate questions
from shareholders.
The Board of Directors recommends a vote FOR the ratification of Deloitte &
Touche LLP as independent auditors.
OTHER BUSINESS
The Board of Directors does not intend to present any business at the
Annual Meeting other than as set forth in the accompanying Notice of Annual
Meeting of Shareholders and has no present knowledge that any others intend to
present business at the meeting. If, however, other matters requiring the vote
of the shareholders properly come before the Annual Meeting or any adjournment
or postponement thereof, the persons named in the accompanying form of proxy
will have discretionary authority to vote the proxies held by them in accordance
with their judgment as to such matters.
SHAREHOLDER PROPOSALS
Shareholder proposals intended for inclusion in the proxy materials for the
Company's 1997 Annual Meeting of Shareholders must be received by the Company no
later than December 1, 1997.
Such proposals should be directed to the Corporate Secretary, Itron, Inc.,
2818 North Sullivan Road, P.O. Box 15288, Spokane, Washington 99216.
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of the Company's Annual Report to Shareholders for the year 1996,
including financial statements, accompanies this Proxy Statement.
---------------------------
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, as filed with the Commission, will be furnished without
charge to beneficial shareholders or shareholders of record on February 28,
1997, upon request to investor relations at the Company's principal executive
offices.
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APPENDIX A
ITRON
1989 RESTATED STOCK OPTION PLAN
As amended and restated on February 3, 1997
Section 1. Purpose
The purpose of the 1989 Restated Stock Option Plan (this "Plan") is to
provide a means whereby selected employees, directors, officers, agents,
consultants, advisors and independent contractors of Itron, Inc. (the
"Company"), or of any parent or subsidiary (as defined in subsection 5.8 and
referred to hereinafter as "related corporations") thereof, may be granted
incentive stock options and/or nonqualified stock options to purchase the Common
Stock (as defined in Section 3) of the Company, in order to attract and retain
the services or advice of such employees, directors, officers, agents,
consultants, advisors and independent contractors and to provide added incentive
to such persons by encouraging stock ownership in the Company.
Section 2. Administration
This Plan shall be administered by the Board of Directors of the Company
(the "Board") or a committee or committees (which term includes subcommittees)
appointed by and consisting of two or more members of the Board. The
administrator of this Plan shall hereinafter be referred to as the "Plan
Administrator." So long as the Common Stock is registered under Section 12(b) or
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
the Board shall consider, in selecting the Plan Administrator and the membership
of any committee acting as Plan Administrator of this Plan with respect to any
persons subject or likely to become subject to Section 16 under the Exchange
Act, the provisions regarding (a) "outside directors," as contemplated by
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
and (b) "nonemployee directors," as contemplated by Rule 16b-3 under the
Exchange Act. The Board may delegate the responsibility for administering this
Plan with respect to designated classes of eligible participants to different
committees, subject to such limitations as the Board deems appropriate.
Committee members shall serve for such term as the Board may determine, subject
to removal by the Board at any time.
The members of any committee serving as Plan Administrator shall be
appointed by the Board for such term as the Board may determine. The Board may
from time to time remove members from, or add members to the committee.
Vacancies on the committee, however caused, may be filled by the Board.
2.1 Procedures
The Board shall designate one of the members of the Plan Administrator as
chairman. The Plan Administrator may hold meetings at such times and places as
it shall determine. The acts of a majority of the members of the Plan
Administrator present at meetings at which a quorum exists, or acts reduced to
or approved in writing by all Plan Administrator members, shall be valid acts of
the Plan Administrator.
2.2 Responsibilities
Except for the terms and conditions explicitly set forth in this Plan, the
Plan Administrator shall have the authority, in its discretion, to determine all
matters relating to the options to be granted under this Plan, including
selection of the individuals to be granted options, the number of shares to be
subject to each option, the exercise price, and all other terms and conditions
of the options. Grants under this Plan need not be identical in any respect,
even when made simultaneously. The interpretation and construction by the Plan
Administrator of any terms or provisions of this Plan or any option issued
hereunder, or of any rule or regulation promulgated in connection herewith,
shall be conclusive and binding on all interested parties, so long as such
interpretation and construction with respect to incentive stock options
correspond to the requirements of Section 422 of the Code and the regulations
thereunder and any amendments thereto.
2.3 Rule 16b-3 Compliance and Bifurcation of Plan
Notwithstanding anything in this Plan to the contrary, the Board, in its
absolute discretion, may bifurcate this Plan so as to restrict, limit or
condition the use of any provision of this Plan to participants who are officers
and directors subject to Section 16 of the Exchange Act without so restricting,
limiting or conditioning this Plan with respect to other participants.
Section 3. Stock Subject to This Plan
3.1 Authorized Number of Shares
The stock subject to this Plan shall be the Company's Common Stock (the
"Common Stock"), presently authorized but unissued or subsequently acquired by
the Company. Subject to adjustment as provided in Section 7, the aggregate
amount of Common Stock to be delivered upon the exercise of all options granted
under this Plan shall not exceed 4,050,000 shares.
3.2 Limitations
Subject to adjustment as provided in Section 7, not more than an aggregate
of 100,000 shares of Common Stock may be made subject to options granted under
the Plan to any individual in any fiscal year of the Company, such limitation to
be applied in a manner consistent with the requirements of, and only to the
extent required for compliance with, the exclusion from the limitation on
deductibility of compensation under Section 162(m) of the Code.
3.3 Reuse of Shares
If any option granted under this Plan shall expire or be surrendered,
exchanged for another option, canceled or terminated for any reason without
having been exercised in full, the unpurchased shares subject thereto shall
thereupon again be available for purposes of this Plan, including for
replacement options which may be granted in exchange for such expired,
surrendered, exchanged, canceled or terminated options.
Section 4. Eligibility
An incentive stock option may be granted only to any individual who, at the
time the option is granted, is an employee of the Company or any related
corporation. A nonqualified stock option may be granted to any employee,
director, officer, agent, consultant, advisor or independent contractor of the
Company or any related corporation, whether an individual or an entity. Any
party to whom an option is granted under this Plan shall be referred to
hereinafter as an "Optionee."
Section 5. Terms and Conditions of Options
Options granted under this Plan shall be evidenced by written agreements
which shall contain such terms, conditions, limitations and restrictions as the
Plan Administrator shall deem advisable and which are not inconsistent with this
Plan. Notwithstanding the foregoing, options shall include or incorporate by
reference the following terms and conditions:
5.1 Number of Shares and Price
The maximum number of shares that may be purchased pursuant to the exercise
of each option and the price per share at which such option is exercisable (the
"exercise price") shall be as established by the Plan Administrator, provided
that the Plan Administrator shall act in good faith to establish the exercise
price which shall be not less than the fair market value per share of the Common
Stock at the time the option is granted with respect to incentive stock options
and also provided that, with respect to incentive stock options granted to
greater than 10% shareholders, the exercise price shall be as required by
subsection 6.1.
5.2 Term and Maturity
Subject to the restrictions contained in Section 6 with respect to granting
incentive stock options to greater than 10% shareholders, the term of each
incentive stock option shall be as established by the Plan Administrator and, if
not so established, shall be 10 years from the date it is granted but in no
event shall it exceed 10 years. The term of each nonqualified stock option shall
be as established by the Plan Administrator and, if not so established, shall be
10 years. To ensure that the Company or related corporation will achieve the
purpose and receive the benefits contemplated in this Plan, any option granted
to any Optionee hereunder shall, unless the condition of this sentence is waived
or modified in the agreement evidencing the option or by resolution adopted at
any time by the Plan Administrator, be exercisable according to the following
schedule:
Period of Optionee's Continuous
Relationship with the Company or
Related Corporation from the Date the Portion of Total Option
Option is Granted Which is Exercisable
- -------------------------------------------------------------------------------
after one year 25%
after two years 50%
after three years 75%
after four years 100%
5.3 Exercise
Subject to the vesting schedule described in subsection 5.2, each option
may be exercised in whole or in part at any time and from time to time;
provided, however, that no fewer than 100 shares (or the remaining shares then
purchasable under the option, if less than 100 shares) may be purchased upon any
exercise of option rights hereunder and that only whole shares will be issued
pursuant to the exercise of any option. Options shall be exercised by delivery
to the Company of notice of the number of shares with respect to which the
option is exercised, together with payment of the exercise price.
5.4 Payment of Exercise Price
Payment of the option exercise price shall be made in full at the time the
notice of exercise of the option is delivered to the Company and shall be in
cash, bank certified or cashier's check or personal check (unless at the time of
exercise the Plan Administrator in a particular case determines not to accept a
personal check) for the Common Stock being purchased.
The Plan Administrator can determine at any time before exercise that
additional forms of payment will be permitted. Unless the Plan Administrator in
its sole discretion determines otherwise, either at the time the option is
granted or at any time before it is exercised, and to the extent permitted by
applicable laws and regulations (including, but not limited to, federal tax and
securities laws and regulations and state corporate law), an option may be
exercised by a combination of cash and/or check and one or more of the following
alternative forms:
(a) tendering (either actually or by attestation) shares of stock
of the Company held by an Optionee having a fair market value equal to the
exercise price, such fair market value to be determined in good faith by the
Plan Administrator; provided, however, that payment in stock held by an Optionee
shall not be made unless the stock shall have been owned by the Optionee for a
period of at least six months (or any shorter period necessary to avoid a charge
to the Company's earnings for financial accounting purposes);
(b) delivery of a full-recourse promissory note executed by the
Optionee; provided that (i) such note delivered in connection with an incentive
stock option shall, and such note delivered in connection with a nonqualified
stock option may, in the sole discretion of the Plan Administrator, bear
interest at a rate specified by the Plan Administrator but in no case less than
the rate required to avoid imputation of interest (taking into account any
exceptions to the imputed interest rules) for federal income tax purposes, and
(ii) the Plan Administrator in its sole discretion shall specify the term and
other provisions of such note at the time an incentive stock option is granted
or at any time prior to exercise of a nonqualified stock option, and (iii) the
Plan Administrator may require that the Optionee pledge the Optionee's shares to
the Company for the purpose of securing the payment of such note and may require
that the certificate representing such shares be held in escrow in order to
perfect the Company's security interest, and (iv) the Plan Administrator in its
sole discretion may at any time restrict or rescind this right upon notification
to the Optionee; or
(c) delivery of a properly executed exercise notice, together with
irrevocable instructions to a broker, all in accordance with the regulations of
the Federal Reserve Board, to promptly deliver to the Company the amount of sale
or loan proceeds to pay the exercise price and any federal, state or local
withholding tax obligations that may arise in connection with the exercise.
5.5 Withholding Tax Requirement
The Company may require the Optionee to pay to the Company the amount of
any withholding taxes that the Company is required to withhold with respect to
the grant or exercise of any option. Subject to the Plan and applicable law, the
Plan Administrator, in its sole discretion, may permit an Optionee to satisfy
withholding obligations, in whole or in part, by paying cash, by electing to
have the Company withhold shares of Common Stock or by transferring shares of
Common Stock to the Company, in such amounts as are equivalent to the fair
market value of the withholding obligation. The Company shall have the right to
withhold from any shares of Common Stock issuable pursuant to an option or from
any cash amounts otherwise due or to become due from the Company to the
Optionee, an amount equal to such taxes.
5.6 Holding Periods
5.6.1 Securities and Exchange Act Section 16
If a director or officer subject to Section 16 of the Exchange Act sells
shares of Common Stock obtained upon the exercise of a stock option within six
months after the date the option was granted, such sale may result in
short-swing profit liability under Section 16(b) of the Exchange Act.
5.6.2 Taxation of Stock Options
In order to obtain certain tax benefits afforded to incentive stock options
under Section 422 of the Code, an Optionee must hold the shares issued upon the
exercise of an incentive stock option for two years after the date of grant of
the option and one year from the date of exercise. An Optionee may be subject to
the alternative minimum tax at the time of exercise of an incentive stock
option. The Plan Administrator may require an Optionee to give the Company
prompt notice of any disposition of shares of Common Stock acquired by the
exercise of an incentive stock option prior to the expiration of such holding
periods.
Tax advice should be obtained when exercising any option and prior to the
disposition of the shares issued upon the exercise of any option.
5.7 Nontransferability of Options
Options granted under this Plan and the rights and privileges conferred
thereby may not be transferred, assigned, pledged or hypothecated in any manner
(whether by operation of law or otherwise) other than by will or by the
applicable laws of descent and distribution, and shall not be subject to
execution, attachment or similar process. During an Optionee's lifetime, any
options granted under this Plan are personal to him or her and are exercisable
solely by such Optionee or a permitted assignee or transferee of such Optionee
(as provided below). Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of any option under this Plan or of any right or privilege
conferred hereby, contrary to the Code or to the provisions of this Plan, or the
sale or levy or any attachment or similar process upon the rights and privileges
conferred hereby, shall be null and void. Notwithstanding the foregoing, to the
extent permitted by Section 422 of the Code, the Plan Administrator may permit
an Optionee to (a) during the Optionee's lifetime, designate a person who may
exercise the option after the Optionee's death by giving written notice of such
designation to the Plan Administrator (such designation may be changed from time
to time by the Optionee by giving written notice to the Plan Administrator
revoking any earlier designation and making a new designation), or (b) transfer
the option and the rights and privileges conferred hereby; provided, however,
that any option so assigned or transferred shall be subject to all the same
terms and conditions contained in the instrument evidencing the award.
5.8 Termination of Relationship
If the Optionee's relationship with the Company or any related corporation
ceases for any reason, then the portion of the Optionee's option that is not
exercisable at the time of such cessation shall terminate immediately upon such
cessation, unless the Plan Administrator determines otherwise. If the Optionee's
relationship with the Company or any related corporation ceases for any reason
other than termination for cause, death or total disability, and unless by its
terms the option sooner terminates or expires, then the Optionee may exercise,
for a three-month period, that portion of the Optionee's option which is
exercisable at the time of such cessation, but the Optionee's option shall
terminate at the end of such period following such cessation as to all shares
for which it has not theretofore been exercised, unless such provision is waived
in the agreement evidencing the option or at any time prior to the expiration of
the option by the Plan Administrator in its sole discretion. If, however, in the
case of an incentive stock option, the Optionee does not exercise the Optionee's
option within three months after cessation of employment, the option will no
longer qualify as an incentive stock option under the Code.
If an Optionee is terminated for cause, any option granted hereunder shall
automatically terminate as of the first discovery by the Company of any reason
for termination for cause, and such Optionee shall thereupon have no right to
purchase any shares pursuant to such option. "Termination for cause" shall mean
dismissal for dishonesty, conviction or confession of a crime punishable by law
(except minor violations), fraud, misconduct or disclosure of confidential
information. If an Optionee's relationship with the Company or any related
corporation is suspended pending an investigation of whether or not the Optionee
shall be terminated for cause, all the Optionee's rights under any option
granted hereunder likewise shall be suspended during the period of
investigation.
If an Optionee's relationship with the Company or any related corporation
ceases because of a total disability, the portion of the Optionee's option that
is exercisable at the time of such cessation may be exercised for a period of
one year following such cessation (unless by its terms it sooner terminates and
expires). As used in this Plan, the term "total disability" refers to a mental
or physical impairment of the Optionee which is expected to result in death or
which has lasted or is expected to last for a continuous period of 12 months or
more and which causes the Optionee to be unable, in the opinion of the Company
and two independent physicians, to perform his or her duties for the Company and
to be engaged in any substantial gainful activity. Total disability shall be
deemed to have occurred on the first day after the Company and the two
independent physicians have fumished their opinion of total disability to the
Plan Administrator.
Any change of relationship with the Company shall not constitute a
termination of the Optionee's relationship with the Company for purposes of this
Section 5.8 so long as the Optionee continues to be an employee, director,
officer, agent, consultant, advisor or independent contractor of the Company or
of a related corporation. The Plan Administrator, in its absolute discretion,
may determine all questions of whether particular leaves of absence constitute a
termination of services; provided, however, that with respect to incentive stock
options, such determination shall be subject to any requirements contained in
the Code. The foregoing notwithstanding, with respect to incentive stock
options, employment shall not be deemed to continue beyond the first 90 days of
such leave, unless the Optionee's reemployment rights are guaranteed by statute
or by contract.
As used herein, the term "related corporation," when referring to a
subsidiary corporation, shall mean any corporation (other than the Company) in,
at the time of the granting of the option, an unbroken chain of corporations
ending with the Company, if stock possessing 50% or more of the total combined
voting power of all classes of stock of each of the corporations other than the
Company is owned by one of the other corporations in such chain. When referring
to a parent corporation, the term "related corporation" shall mean any
corporation in an unbroken chain of corporations ending with the Company if, at
the time of the granting of the option, each of the corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain. For
purposes of nonqualified stock options, "subsidiary" shall also include any
partnership in which the Company has an ownership interest.
5.9 Death of Optionee
If an Optionee dies while he or she has a relationship with the Company or
any related corporation or within the three-month period (or 12-month period in
the case of totally disabled Optionees) following cessation of such
relationship, any option held by such Optionee to the extent that the Optionee
would have been entitled to exercise such option, may be exercised within one
year after his or her death by the personal representative of his or her estate
or by the person or persons to whom the Optionee's rights under the option shall
pass by will or by the applicable laws of descent and distribution.
5.10 No Status as Shareholder
Neither the Optionee nor any party to which the Optionee's rights and
privileges under the option may pass shall be, or have any of the rights or
privileges of, a shareholder of the Company with respect to any of the shares
issuable upon the exercise of any option granted under this Plan unless and
until such option has been exercised.
5.11Continuation of Relationship
Nothing in this Plan or in any option granted pursuant to this Plan shall
confer upon any Optionee any right to continue in the employ or other
relationship of the Company or of a related corporation, or to interfere in any
way with the right of the Company or of any such related corporation to
terminate his or her employment or other relationship with the Company at any
time.
5.12 Modification and Amendment of Option
Subject to the requirements of Code Section 422 with respect to incentive
stock options and to the terms and conditions and within the limitations of this
Plan, the Plan Administrator may modify or amend outstanding options granted
under this Plan. The modification or amendment of an outstanding option shall
not, without the consent of the Optionee, impair or diminish any of his or her
rights or any of the obligations of the Company under such option. Except as
otherwise provided in this Plan, no outstanding option shall be terminated
without the consent of the Optionee.
5.13 Limitation on Value for Incentive Stock Options
As to all incentive stock options granted under the terms of this Plan, to
the extent that the aggregate fair market value of the stock (determined at the
time the incentive stock option is granted) with respect to which incentive
stock options are exercisable for the first time by the Optionee during any
calendar year (under this Plan and all other incentive stock option plans of the
Company, a related corporation or a predecessor corporation) exceeds $100,000,
such options shall be treated as nonqualified stock options. The previous
sentence shall not apply if the Internal Revenue Service issues a public rule,
issues a private ruling to the Company, any Optionee or any legatee, personal
representative or distribute of an Optionee or issues regulations changing or
eliminating such annual limit. Section 6. Greater Than 10% Shareholders
6.1 Exercise Price and Term of Incentive Stock Options
If incentive stock options are granted under this Plan to employees who own
more than 10% of the total combined voting power of all classes of stock of the
Company or any related corporation, the term of such incentive stock options
shall not exceed five years and the exercise price shall be not less than 110%
of the fair market value of the Common Stock at the time the incentive stock
option is granted. This provision shall control notwithstanding any contrary
terms contained in an option agreement or any other document.
6.2 Attribution Rule
For purposes of subsection 6. 1, in determining stock ownership, an
employee shall be deemed to own the stock owned, directly or indirectly, by or
for his or her brothers, sisters, spouse, ancestors and lineal descendants.
Stock owned, directly or indirectly, by or for a corporation, partnership,
estate or trust shall be deemed to be owned proportionately by or for its
shareholders, partners or beneficiaries. If an employee or a person related to
the employee owns an unexercised option or warrant to purchase stock of the
Company, the stock subject to that portion of the option or warrant which is
unexercised shall not be counted in determining stock ownership. For purposes of
this Section 6, stock owned by an employee shall include all stock actually
issued and outstanding immediately before the grant of the incentive stock
option to the employee.
Section 7. Adjustments Upon Changes in Capitalization
The aggregate number and class of shares for which options may be granted
under this Plan, the maximum annual grant to an Optionee set forth in Section
3.2, the maximum number and class of shares for which options may be granted to
an individual under this Plan, the number and class of shares covered by each
outstanding option and the exercise price per share thereof (but not the total
price), and each such option, shall all be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock of the
Company resulting from a split-up or consolidation of shares or any like capital
adjustment, or the payment of any stock dividend.
7.1 Effect of Liquidation or Reorganization
7.1.1 Cash, Stock or Other Property for Stock
Except as provided in subsection 7.1.2, upon a merger (other than a merger
of the Company in which the holders of Common Stock immediately prior to the
merger have the same proportionate ownership of Common Stock in the surviving
corporation immediately after the merger), consolidation, acquisition of
property or stock, separation, reorganization (other than a mere reincorporating
or the creation of a holding company) or liquidation of the Company, as a result
of which the shareholders of the Company receive cash, stock or other property
in exchange for or in connection with their shares of Common Stock, any option
granted hereunder shall terminate, but the Optionee shall have the right
immediately prior to any such merger, consolidation, acquisition of property or
stock, separation, reorganization or liquidation to exercise such Optionee's
option in whole or in part whether or not the vesting requirements set forth in
the option agreement have been satisfied.
7.1.2 Conversion of Options on Stock for Stock Exchange
If the shareholders of the Company receive capital stock of another
corporation ("Exchange Stock") in exchange for their shares of Common Stock in
any transaction involving a merger, consolidation, acquisition of property or
stock, separation or reorganization, all options granted hereunder shall be
converted into options to purchase shares of Exchange Stock unless the Company
and the corporation issuing the Exchange Stock, in their sole discretion,
determine that any or all such options granted hereunder shall not be converted
into options to purchase shares of Exchange Stock but instead shall terminate in
accordance with the provisions of subsection 7.1.1. The amount and price of
converted options shall be determined by adjusting the amount and price of the
options granted hereunder in the same proportion as used for determining the
number of shares of Exchange Stock the holders of the Common Stock receive in
such merger, consolidation, acquisition of property or stock, separation or
reorganization. In any such transaction, other than a merger of the Company in
which the holders of Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock in the surviving corporation immediately
after the merger or a mere reincorporating or the creation of a holding company,
the converted options shall be fully vested whether or not the vesting
requirements set forth in the option agreement have been satisfied.
7.2 Fractional Shares
In the event of any adjustment in the number of shares covered by any
option, any fractional shares resulting from such adjustment shall be
disregarded and each such option shall cover only the number of full shares
resulting from such adjustment.
7.3 Determination of Board to Be Final
All Section 7 adjustments shall be made by the Board, and its determination
as to what adjustments shall be made, and the extent thereof, shall be final,
binding and conclusive. Unless an Optionee agrees otherwise, any change or
adjustment to an incentive stock option shall be made in such a manner so as not
to constitute a "modification" as defined in Code Section 425(h) and so as not
to cause his or her incentive stock option issued hereunder to fail to continue
to qualify as an incentive stock option as defined in Code Section 422(b).
Section 8. Securities Regulation
Shares shall not be issued with respect to an option granted under this
Plan unless the exercise of such option and the issuance and delivery of such
shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, any applicable state securities laws, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance, including the
availability of an exemption from registration for the issuance and sale of any
shares hereunder. Inability of the Company to obtain from any regulatory body
having jurisdiction, the authority deemed by the Company's counsel to be
necessary for the lawful issuance and sale of any shares hereunder or the
unavailability of an exemption from registration for the issuance and sale of
any shares hereunder shall relieve the Company of any liability in respect of
the nonissuance or sale of such shares as to which such requisite authority
shall not have been obtained.
As a condition to the exercise of an option, the Company may require the
Optionee 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 by any relevant provision of the
aforementioned laws. At the option of the Company, a stop-transfer order against
any shares of stock may be placed on the official stock books and records of the
Company, and a legend indicating that the stock may not be pledged, sold or
otherwise transferred unless an opinion of counsel is provided (concurred in by
counsel for the Company) stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on stock certificates in order to
assure exemption from registration. The Plan Administrator may also require such
other action or agreement by the Optionees as may from time to time be necessary
to comply with the federal and state securities laws. THIS PROVISION SHALL NOT
OBLIGATE THE COMPANY TO UNDERTAKE REGISTRATION OF THE OPTIONS OR STOCK
HEREUNDER.
Should any of the Company's capital stock of the same class as the stock
subject to options granted hereunder be listed on a national securities
exchange, all stock issued hereunder if not previously listed on such exchange
shall be authorized by that exchange for listing thereon prior to the issuance
thereof.
Section 9. Amendment and Termination
9.1 Board Action
The Board may, at any time, suspend, amend or terminate this Plan, provided
that to the extent required by Section 422 of the Code or any applicable law or
regulation, the Company's shareholders must approve any amendment which will:
(a) increase the total number of shares that may be issued under this Plan;
(b) modify the class of participants eligible for participation in this
Plan, or
(c) otherwise require shareholder approval under any applicable law or
regulation.
Such shareholder approval must be obtained within 12 months of the adoption
by the Board of such amendment.
Any amendment made to this Plan since its original adoption which would
constitute a "modification" to incentive stock options outstanding on the date
of such amendment shall not be applicable to such outstanding incentive stock
options, but shall have prospective effect only, unless the Optionee agrees
otherwise.
9.2 Automatic Termination
Unless sooner terminated by the Board, this Plan shall terminate on
February 3, 2007. No option may be granted after such termination or during any
suspension of this Plan. The amendment or termination of this Plan shall not,
without the consent of the option holder, alter or impair any rights or
obligations under any option theretofore granted under this Plan.
Section 10. Effectiveness of This Plan
This Plan shall become effective upon adoption by the Board so long as it
is approved by the Company's shareholders at any time within 12 months of the
adoption of this Plan or, if earlier and to the extent required for compliance
with Rule 16b-3 under the Exchange Act, at the next annual meeting of
shareholders after adoption by the Board.
Original Plan adopted by the Company's Board of Directors on February 14,
1989 and approved by the Company's shareholders on May 23, 1989. Plan amended
and restated by the Company's Board of Directors on May 1, 1992 and approved by
the Company's shareholders on May 22, 1992. Plan further amended and restated by
the Company's Board of Directors on January 30, 1995 and approved by the
Company's shareholders on April 25, 1995. Plan further amended and restated by
the Company's Board of Directors on February 3, 1997 with approval pending by
the Company's shareholders.
