SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Partyparty other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c)Section 240.14a-11(c) or Section240.14a-12
TAITRON COMPONENTS INCORPORATEDSection
240.14a-12
Taitron Components Incorporated
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.0-11
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(3) Per unit price or other underlying value of transaction computed
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
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TAITRON COMPONENTS INCORPORATED
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 1998
------------------------JUNE 11, 1999
----------------------------
TO THE SHAREHOLDERS OF
TAITRON COMPONENTS INCORPORATED
You are cordially invited to attend the Annual Meeting of Shareholders
of Taitron Components Incorporated (the "Company"), which will be held at the
Hyatt Valencia, Country Club, 27330 Tourney Road,24500 Town Center Drive, Valencia, California 91355, on Friday,
May 15, 1998,June 11, 1999, at 10:2:00 a.m.p.m. Pacific time, to consider and act upon the following
matters:
1. The election of directors;
2. To approve an amendment to the 1995 Stock Incentive Plan of Taitron
Components Incorporated increasing the number of shares which may be
issued under the Plan from 440,000 shares to 740,000 shares; and
3. Such other business as may properly come before the Annual
Meeting and any adjournment(s) thereof.
The Board of Directors has fixed April 20, 1998May 7, 1999 as the record date for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting and any postponements or adjournments thereof, and only stockholders of
record at the close of business on that date are entitled to such notice and to
vote at the Annual Meeting. A list of shareholders entitled to vote at the
Annual Meeting will be available at the Annual Meeting and at the offices of the
Company for ten days prior to the Annual Meeting.
We hope that you will use this opportunity to take an active part in
the affairs of the Company by voting on the business to come before the Annual
Meeting, either by executing and returning the enclosed Proxy Card or by casting
your vote in person at the Annual Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING
REGARDLESS OF THE NUMBER OF SHARES YOU HOLD. YOU ARE INVITED TO ATTEND THE
ANNUAL MEETING IN PERSON, BUT WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE.
IF YOU DO ATTEND THE ANNUAL MEETING, YOU MAY, IF YOU PREFER, REVOKE YOUR PROXY
AND VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors
Stewart Wang
PRESIDENT
25202 Anza Dr.
Santa Clarita, California, 91355
(805) 257-6060
April 29, 1998May 11, 1999
TAITRON COMPONENTS INCORPORATED
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 15, 1998
------------------------JUNE 11, 1999
-----------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Taitron Components Incorporated, a
California corporation (the "Company"), for use at the Annual Meeting of
Shareholders to be held at the Hyatt Valencia, Country Club, 27330 Tourney Road,24500 Town Center Drive,
Valencia, California 91355, on Friday, May 15, 1998,June 11, 1999, at 10:2:00 a.m.p.m. Pacific time.
Accompanying this Proxy Statement is the Board of Directors' Proxy for the
Annual Meeting, which you may use to indicate your vote as to the proposals
described in this Proxy Statement.
The expense of this solicitation of proxies will be borne by the
Company,Company. Solicitations will be made only by use of the mail except that, if
deemed desirable, officers and regular employees of the Company may solicit
proxies by telephone, telegraph or personal calls. Brokerage houses, custodians,
nominees and fiduciaries will be requested to forward the proxy soliciting
material to the beneficial owners of the stock held of record by such persons
and the Company will reimburse them for their reasonable expenses incurred in
this connection.
The Company's Annual Report to Shareholders, including financial
statements for the fiscal year ended December 31, 1997,1998, accompanies but does not
constitute part of this Proxy Statement.
The purpose of the meeting and the matters to be acted upon are set
forth in the attached Notice of Annual Meeting. As of the date of this Proxy
Statement, the Board of Directors knows of no other business which will be
presented for consideration at the Annual Meeting. All Proxies which are
properly completed, signed and returned to the Company prior to the Annual
Meeting, and which have not been revoked, will be voted in favor of the
proposals described in this Proxy Statement unless otherwise directed. A
shareholder may revoke his or her Proxy at any time before it is voted either by
filing with the Secretary of the Company, at its principal executive offices, a
written notice of revocation or a duly executed Proxy bearing a later date, or
by attending the Annual Meeting and expressing a desire to vote his or her
shares in person. If any other business shall properly come before the meeting,
votes will be cast pursuant to said proxies in respect of any such other
business in accordance with the judgement of the persons acting under said
proxies.
The Company's principal executive offices is located at 25202 Anza
Drive, Santa Clarita, CA 91355. It is anticipated that the mailing to
shareholders of this Proxy Statement and the enclosed proxy will commence on or
about April 29, 1998.May 11, 1999.
OUTSTANDING SECURITIES AND VOTING RIGHTS
The close of business on April 20, 1998May 7, 1999 has been fixed as the record date
for the determination of Shareholders entitled to notice of and to vote at the
Annual Meeting or any adjournment(s) of the Annual Meeting. As of the record
date, the Company had outstanding 5,532,5625,376,096 shares of Class A Common Stock, par
value $.001 per share, (the "Class A Common Stock"), and 762,612 shares of Class
B Common Stock, par value $.001 per share (the Class"Class B Common Stock" and
collectively with the Class A Common Stock, the "Common StockStock"). The Class A
Common Stock and the Class B Common Stock are the only outstanding voting
securities of the company. As of the record date, the Company had approximately
110105 Shareholders
1
of record. The Company is informed and believes that there are
approximately 1,8001,815 beneficial holders of its Class A Common Stock.
1
A holder of Class A Common Stock is entitled to cast one vote for each
share held on the record date on all matters to be considered at the Annual
Meeting. A holder of Class B Common Stock is entitled to cast ten votes for each
share held on the record date on all matters to be considered at the Annual
Meeting. The five nominees for election as Directors who receive the highest
number of votes will be elected. All other matters that may properly come before
the meeting require for approval the favorable vote of a majority of shares
voted at the meeting or by proxy. If the Company has fewer than 800 beneficial
owners on April 20, 1998,May 7, 1999, and a shareholder requests cumulative voting before
commencement of the election (and if the candidates' names have been placed in
nomination prior to that time), then any shareholder may distribute among as
many candidates as desired a number of votes equal to the number of directors to
be elected multiplied by the number of shares held. The Company believes it will
have more than 800 beneficial shareholders as of the record date:date, however, if
cumulative voting is in effect, the persons named in the accompanying proxy will
vote the shares in their discretion among all or any of the candidates named
herein. Abstentions and broker non-votes will be included in the determination
of shares present at the Annual Meeting for purposes of determining a quorum.
Abstentions will be counted toward the tabulation of votes cast on proposals
submitted to shareholders and will have the same effect as negative votes, while
broker non-votes will not be counted as votes cast for or against such matters.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
In accordance with the Articles of Incorporation and Bylaws of the
Company, the Board of Directors consists of not less than three nor more than
seven members, the exact number to be determined by the Board of Directors. At
each annual meeting of the Shareholders of the Company, directors are elected
for a one-year term. The Board of Directors is currently set at five members,
and there currently exist no vacancies. At the 19981999 Annual Meeting, each
director will be elected for a term expiring at the 19992000 annual meeting. The
Board of Directors proposes the election of the nominees named below.
Unless marked otherwise, Proxies received will be voted FOR the
election of each of the nominees named below. If any such person is unable or
unwilling to serve as a nominee for the office of director at the date of the
Annual Meeting or any postponement or adjournment thereof, the Proxies may be
voted for a substitute nominee, designated by the present Board of Directors to
fill such vacancy. The Board of Directors has no reason to believe that any such
nominee will be unwilling or unable to serve if elected a director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE ELECTION OF THE DIRECTORS NOMINATED HEREIN.
The Board of Directors proposes the election of the following nominees
as members of the Board of Directors:
Tzu Sheng (Johnson) Ku
Stewart Wang
Richard Chiang
Winston Gu
Felix Sung
If elected, the nominees are expected to serve until the 19992000 Annual
Meeting of Shareholders.
2
INFORMATION WITH RESPECT TO EACH NOMINEE AND EXECUTIVE OFFICERS.
The following table sets forth certain information with respect to each
nominee and executive officer of the Company as of March 31, 1998.1999.
NAME AGE POSITION
- --------------------------------------------------------- --- -------------------------------------------------------------
Tzu Sheng (Johnson) Ku............................... 49Ku 50 Chairman of the Board and Director Nominee
Stewart Wang......................................... 48Wang 49 President, Chief Executive Officer, Director and Director Nominee
Richard Chiang....................................... 41Chiang 42 Director and Director Nominee
Winston Gu........................................... 47Gu 48 Director and Director Nominee
Felix M. Sung........................................ 48Sung 49 Director and Director Nominee
OTHER OFFICERS:
David M. Batt........................................ 50Michael Adams 44 Vice President of Sales
Steven H. Dong 32 Chief Financial Officer and Secretary
Michael Adams........................................ 43 Vice President--Group 3 Sales
Bill Lloyd........................................... 43Bob Graziano 62 Senior Vice President Eugene L. Baxter.....................................of Eastern Regional Sales
Bill Lloyd 44 Senior Vice President of Sales and Marketing
Sally Manley 58 Vice President--Group 2 Sales
Sally Manley......................................... 57President of Procurement
Alex Miao 49 Vice President--ProcurementPresident of Engineering and Quality Assurance
Eli Yu 47 Chief Information Officer
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All officers are appointed by and serve at the discretion of the Board
of Directors. There are no family relationships between any directors or
officers of the Company.
TZU SHENG ("JOHNSON") KU, a co-founder of the Company, has been the
Chairman of the Company since it was founded in 1989. Since 1988, Mr. Ku has beenis the PresidentChairman of
Weekendz Off, Inc., which sells high quality casual sportswear to stores such as
Nordstrom, Bloomingdales, Saks Fifth Avenue and principal ownerits own label "Weekendz Off".
Additionly, Mr. Ku is Chairman of Continental S.R.L.,Etron Corporation which is a privately held importerworld wide
distributor of electronics, tools, cosmetics, athletic shoes and toys located in Paraguay.consumer electronic products.
STEWART WANG, a co-founder of the Company, has served as the Chief
Executive Officer and President and a Director of the Company since its
organization in 1989. Prior to founding the Company, Mr. Wang attended
Pepperdine University, where he received his Masters of Business Administration
degree in 1989. From 1985 to 1986, Mr. Wang was employed by Diodes Incorporated,
a manufacturer and reseller of discrete rectifiers located in Southern
California, as Purchasing and MIS Manager and later as Chief Operating Officer
and President from 1986 to 1987. Prior thereto, from 1983 to 1985, Mr. Wang was
Sales Manager for Rectron Limited, a rectifier manufacturer in Taiwan.
RICHARD CHIANG has been a directorDirector of the Company since it was founded
in 1989. Mr. Chiang is currently the Chairman and former President of Princeton Technology
Corporation, a distributor of semiconductor components and computer peripheral
products such as hard disks, floppy disks and CD ROM drives, in Taipei, Taiwan
where he has been employed since 1986. Mr. Chiang currently also serves as Chairmana Director of
Orchard ElectronicAlliance Venture Capital Corporation, also located in Taipei, Taiwan, which distributes electronic components.is a
venture capitalist firm. In addition, since October 1990, Mr. Chiang has servedserves as Chairman of IDX
International, Inc. and Proware Technology Corportion, which are a voice/fax
service business and RAID subsystem business, respectively. Mr. Chiang also
serves as a director for Unichip, IncorporatedDirector of Advanced Communications Devices Corporation which is a
Milpetas, California
company that designs pentium computer chips for PCs.networking switch controller chip business.
3
WINSTON GU has been a director of the Company since it was founded in
1989. Mr. Gu has been the President of Frontier Electronics Corporation, located
in Simi Valley, California, which imports and markets electronic components in
the United States, since he founded it in August 1984. In addition, Mr. Gu is
currently Chief Executive Officer of Autec Power Systems, Incorporated, based in
Simi Valley, California, a manufacturer of switching mode power supplies, which
he founded in June 1989.
FELIX M. SUNG became a director of the Company in February 1995. For more
than the past six years, Mr.
Sung has beenis the Managing Director and former Vice President and a principal
shareholder of Tai North Company, a
company engaged in exporting electronics, plastic parts and finished products to
the United States and various European countries.
3
DAVID M. BATTMICHAEL ADAMS, a co-founder of the Company, has been Vice President of
Western Regional Sales since 1993 and is currently Vice President of Sales. From
1990 to 1993, Mr. Adams served as an Executive Sales Manager for the Company.
Prior thereto, Mr. Adams was employed by Diodes Incorporated, as a Regional
Sales Manager.
STEVEN H. DONG joined the Company in October 1996March 1999 as its Chief Financial
Officer. Prior thereto, from 19931995 to 1996,1999, Mr. Batt wasDong practiced as an independent
financial consultant specializing in assisting publicly-held companies with high
level accounting projects and serving as interim Chief Financial OfficerOfficer. From
1988 to 1995, Mr. Dong was an assurance manager with the international
accounting firm of PWS Investments,Coopers & Lybrand, LLP. Mr. Dong is a Certified Public
Accountant and a member in good standing with the American Institute of
Certified Public Accountants and California State Board of Accountancy.
BOB GRAZIANO, joined the Company in April 1999 as its Senior Vice
President of Eastern Regional Sales. From 1975 to 1999, Mr. Graziano served as
International Distribution Manager for General Semiconductor Corporation. From
1972 to 1975, Mr. Graziano served as General Manager of Newark Electronics, a
distributor of a broad line of electronic components. From 1966 to 1972, Mr.
Graziano served as Testing Service Manager for Texas Instruments, Inc., a privately held coin laundry equipment distributor.
From 1991 to 1993, Mr.
Batt was Administration Director of Fortifiber
Corporation, a privately held manufacturer of paper conversion products. From
1976 to 1991, Mr. Batt was Chief Financial Officer and Secretary of Frawley
Corporation, a publicly held health care, manufacturer and real estate business.Graziano has worked in the electronics industry for nearly 40 years.
BILL LLOYD is a co-founder and Senior Vice President of the Company. Mr.
Lloyd has also served as a DirectorSales and
the SecretaryMarketing of the Company. Mr. Lloyd served the Company as Vice President of
Sales from 1992 through 1994 and Vice President of Eastern Regional Sales from
1990 through 1991. Prior thereto, Mr. Lloyd was the Director of Marketing for
Diodes Incorporated a manufacturer and
reseller of discrete rectifiers located in Southern California, from 1986 to 1989. MICHAEL ADAMS,Mr. Lloyd had also previously served as a
co-founderDirector and Secretary of the Company has been Vice President Western
Regional Sales since 1993 and is currently Vice President--Group 3 Sales. From
1990from 1989 to 1993, Mr. Adams served as an Executive Sales Manager for the Company.
Prior thereto, Mr. Adams was employed by Diodes Incorporated as a Regional Sales
Manager.
EUGENE L. BAXTER has been Vice President of Southeastern Regional Sales
since 1994 and is currently Vice President Group 1 and Group 2 Sales. Mr. Baxter
joined the Company as a Regional Sales Manager in 1992. From 1982 until 1992 Mr.
Baxter was the Area Sales Manager--Western States for Technology Marketing
Incorporated where he supervised four regional sales offices that sold computer
controlled automatic test equipment for functional testing of semiconductor
memory boards.1995.
SALLY MANLEY, a co-founder of the Company, has been Vice President
Central Regional Sales since 1994 and is currently Vice President of
Procurement. From 1990 to 1994, Ms. Manley served as an Executive Sales Manager
of the Company. Prior thereto, Ms. Manley was employed by Diodes Incorporated as
a Regional Sales Manager.
ALEX MIAO, has been Vice President of Engineering and Quality Assurance
since 1997. Prior to 1997, Mr. Miao served as quality assurance manager in the
computer products division at Analog Devices, Inc. Prior thereto, Mr. Miao
served in management positions for quality systems and product/test engineering
with Microchip Technologies, Inc., National Semiconductor Corporation, Micro
Power Systems, the Chung-San Science and Technology institute and RCA Taiwan,
Ltd.
ELI YU, a co-founder of the Company, has been the Chief Information
Officer since 1996. Mr. Yu served the Company as the MIS Manager from 1993 to
1996 and as the Material Control and EDP Manager from 1990 to 1993. Prior
thereto, Mr. Yu was the EDP manager for Diodes Incorporated.
During 1997,1998, the Board of Directors met twice.three times. Each director
attended one hundred percent of the Board of Directors meetings and the meetings
of Board committees on which he served.
COMMITTEES OF THE BOARD
AUDIT COMMITTEE--TheCOMMITTEE - The Board of Directors has established an Audit
Committee that reviews the audit and control functions of the Company, the
Company's accounting principles, policies and practices and financial reporting,
the scope of the audit conducted by the Company's independent auditors, the fees
and all non-audit services of the independent auditors and the independent
auditor's opinion and management comment letter of commitment to management (if any) and management's
response thereto. The
Board of Directors does not have a Nominating Committee or
a committee performing similar functions. The4
Audit Committee met once during the year. Members of the Audit Committee are
Mr. Gu and Mr. Chiang.
COMPENSATION COMMITTEE--TheCOMMITTEE - The Board of Directors has established a
Compensation Committee. The function of the Compensation Committee is to review
and make recommendations with respect to compensation of executive officers and
key employees, including administration of the Company's Stock Incentive Plan.
The Compensation Committee met once during the year. Members of the Compensation
Committee are Mr. Gu, Mr. Chiang and Mr. Sung.
The Board of Directors does not have a Nominating Committee or a
committee performing similar functions.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT.
Section 16(a) of the Securities and Exchange Act of 1934 (the "Exchange
Act") 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 and changes in ownership with the Securities and
Exchange Commission (the "SEC"). Officers, directors and greater than ten
percent shareholders are 4
required by SEC 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 it, or written representations from certain
reporting persons that no Section 16(a) forms were required to be filed by such
persons, the Company believes that, during the year ended December 31, 1997,1998, all but one
filing requirements applicable to its officers, directors, and greater than ten
percent beneficial owners were complied with.
Due to technical problems with the SEC's
EDGAR format Mr. Wang filed Schedule 13G one day late.
MANAGEMENT
COMPENSATION OF EXECUTIVE OFFICERS
The following tables settable sets forth certain information as to the Company's
Chief Executive Officer and each(the "Named Executive Officer".) None of the Company's
four most highly compensated
executive officers whose total annual salary plus bonus for the year endingended December
31, 19971998 exceeded $100,000:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM
--------------------------------------------------------------- COMPENSATION STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTION AWARDS(1)AWARDS (1) COMPENSATION - ------------------------------------- ---------(2)
---------------------------- ----- ---------- --------- ------------------- --------------------- ------------------ ----------------
1997 $ 157,650 $ -- -- $ 7,857(2)
Tzu Sheng Ku ........................ 1996 $ 157,595 $ -- 5,000 $ 7,542
Chairman of the Board 1995 $ 108,101 $ -- 2,500 $ 8,542
1997 $ 193,211 -- -- $ 6,044(2)
Stewart Wang ........................1998 $188,941 $ - - $5,619
Chief Executive Officer 1997 $193,211 $ - - $6,044
1996 $ 172,706$172,706 $ 34,725 40,000 $ 5,774
Chief Executive Officer 1995 $ 160,574 $ 88,070 26,500 $ 10,900$5,774
- -----------------------------------------
(1) All numbers reflect number of shares of Class A Common Stock subject to
options granted during the year.
(2) The amount consists solely of an automobile allowance.
OPTION GRANTS IN LAST FISCAL YEAR
The Company did not grant any stock options to the Named Executive
Officer during the 1998 fiscal year.
OPTION EXERCISES AND FISCAL YEAR END VALUE
The Following table provides information with respect to the
Named Executive Officer concerning options held as of December 31, 1998. No
options were exercised during the 1998 fiscal year by the Named Executive
Officer. None of the options have an exercise price below the fair market value
of the Common Stock as of December 31, 1998.
NUMBER OF
OPTIONS AT YEAR END
-------------------------------------
NAME AND PRINCIPAL POSITION EXERCISABLE UNEXERCISABLE
- --------------------------- ----------- -------------
Stewart Wang, Chief Executive Officer 44,334 22,166
5
COMPENSATION OF DIRECTORS
Non-employee directors receive $1,500 of compensation for attending the Annual Board of
Directors meeting. The Company pays all out-of-pocket fees associated with the
Directors attendance. In addition, members of the Compensation Committee receive
an annual grant of 5,000 non-statutory stock options under the Company's 1995
Stock Incentive Plan (the "1995 Plan"), exercisable at the fair market value of
the Company's Class A Common Stock on the date of grant, and which vest 1/3 upon
on each anniversary thereafter.
EMPLOYMENT CONTRACT
Mr. Wang's employment agreement expired December 31, 1997. TheAs of the
date of this Report, the Company and Mr. Wang have not entered into a new
agreement and they do not anticipate to do so. Mr. Wang and the other executive
officers are appointed by and serve at the discretion of the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors are Mr.
Gu, Mr. Chiang and Mr. Sung. During the year ended December 31, 1997,1998, the Company had sales
of approximately $340,000 to companies controlled by Winston
Gu, a director of the Company. All of these sales were of discrete electronic
component products carried by the Company in inventory and the Company considers
these
5
sales to be in the normal course of business and on an arm's length basis. The
Company expects that such sales may continue in the future.
During the year ended December 31, 1997, the Company had sales of
approximately $413,000$50,000 to a company controlled by Tzu Sheng Ku,Winston Gu, a director of
the Company. All of these sales were of discrete electronic component products
carried by the Company in inventory and the Company considers these sales to be
in the normal course of business and on an arm's length basis. The Company
expects that such sales may continue in the future.
During the year ended December 31, 1997,1998, the Company purchased printing
and related services of approximately $158,000$4,000 from a company in which Mr. Ku, Mr.
Wang and Mr. Gu are affiliated. All of these purchases were for printing of
catalogs and other materials that the Company considers to be in the normal
course of business and on an arm's length basis.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee has the responsibility to determine and
administer the Company's executive compensation programs and make appropriate
recommendations concerning matters of executive compensation. Set forth below
are the principal factors underlying the Committee's philosophy used in setting
compensation for fiscal 1997.1998.
COMPENSATION PHILOSOPHY. At the direction of the Board of Directors,
the Committee endeavors to ensure that the compensation programs for executive
officers of the Company are competitive and consistent in order to attract and
retain key executives critical to the Company's long-term success. The Committee
believes that the Company's overall financial performance should be an important
factor in the total compensation of executive officers. At the executive officer
level, the Committee has a policy that a significant portion of potential
compensation should consist of variable, performance-based components, such as
stock options and bonuses, which can increase or decrease to reflect changes in
corporate and individual performance. These incentive compensation programs are
intended to reinforce management's commitment to the enhancement of
profitability and stockholder value.
The Committee takes into account various qualitative and quantitative
indicators of corporate and individual performance in determining the level and
composition of compensation for the Company's executive officers. In
implementing the Company's executive compensation objectives, the Committee has
designed an executive compensation program consisting of base salary, annual
incentive compensation, stock options and other employment benefits.
The Committee seeks to maintain levels of compensation that are
competitive with similar companies in the Company's industry. To that end, the
Committee reviews proxy data and other compensation data relating to companies
within the Company's industry. In addition, from time to time, the Committee
also receives assessments and advice regarding the Company's compensation
practices from independent compensation consultants.
BASE SALARY. The base salary of the executive officers represents the
fixed component of their compensation program. The Company's philosophy
regarding base salaries is to maintain salaries for the aggregate group of
executive officers at levels the Committee believes to be near the industry
average. Periodic increases in base salary relate to individual contributions to
the Company's performance.
6
ANNUAL INCENTIVE COMPENSATION. The Company's executive officers are
eligible for annual incentive compensation consisting primarily of cash bonuses
based on the attainment of corporate earnings. While performance against
financial objectives is the primary measurement for executive officers' annual
incentive compensation, non-financial performance also affects pay. The
Committee considers such corporate performance measures as net income, basic
earnings per common share, return on average common stockholders' equity, sales
growth and expense management in making compensation decisions.
6
The Committee
also appreciates the importance of achievements that may be difficult to
quantify, and accordingly recognizes qualitative factors, such as successful
supervision of major corporate projects and demonstrated leadership ability.
STOCK OPTIONS. The Committee strongly believes that the Company's
compensation program should provide employees with an opportunity to increase
their equity ownership and potentially gain financially from Class A Common
Stock price increases. By this approach, the best interests of shareholders,
executives and employees will be closely aligned. Therefore, executives and
other employees are eligible to receive stock options, giving them the right to
purchase shares of Class A Common Stock of the Company at a specified price in
the future. The Committee believes that the use of stock options as the basis
for long-term incentive compensation meets the Committees compensation strategy
and business needs of the Company by achieving increased value for shareholders
and retaining key employees.
The Company grantedrecommended to the Board of Directors the granting of
125,300 options to purchase a total of 85,000 shares of the Company'scompany's Class A Common Stock to its executive officersduring the 1998
fiscal year which the Board approved on March 4, 1999, thereby becoming grants
during the 1999 fiscal year. There were no grants approved by the Board of
Directors in 1997.fiscal 1998. In approving grants and awards under the Plan, the
quantitative and qualitative factors and industry comparisons outlined above are
considered. The number of options previously awarded to and held by executive
officers was an important factor in determining the size of current option
grants.
OTHER EMPLOYMENT BENEFITS. The Company provides a cafeteria plan to
cover health and welfare benefits to executives and employee'sall employees similar to
those provided by similar companies in the Company's industry. The Company
also provides a 401(k) plan in which all employees are eligible.
CHIEF EXECUTIVE OFFICER COMPENSATION. With respect to Mr. Wang, the
Company's Chief Executive Officer, the Compensation Committee established an
annual base salary of $188,941 for him. In determining the appropriate
compensation figure for Mr. Wang, the Compensation Committee considered a
variety of factors, including a comparison of Mr. Wang's compensation at his
level of experience with the executive compensation paid in similar industry
groups to executives with comparable levels of experience.
COMPENSATION COMMITTEE
Richard Chiang
Winston Gu
Felix Sung
The Report of the Compensation Committee on Executive Compensation
shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the
Securities Act of 1933 as amended, or under the Securities Exchange Act of 1934,
as amended, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
acts.
7
STOCK PERFORMANCE GRAPH
The following performance table compares the cumulative total return
for the period from April 19, 1995 through December 31, 1997,1998, from an investment
of $100 in (i) the Company's Class A Common Stock, (ii) the NASDAQ US Companies
index, (iii) the NASDAQ Electronics groupPeer Group of companies (the Company's peer group).companies. For each group an initial investment
of $100 is assumed on April 19, 1995 ( the(the date of the Company's initial public
offering). The total return calculation assumes reinvestment of all dividends
for the indices. The Company did not pay dividends on its Class A Common Stock
during the time frame set forth below:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
TAITRON COMPONENTS NASDAQ ELECTRONICS NASDAQ US COMPANIES
04/19/95 $100.00 $100.00 $100.00
12/31/95 $150.00 $124.91 $129.80
12/31/96 $45.24 $216.01 $159.65
12/31/97 $52.38 $226.49 $195.95
Investment Value
[Graph Omitted]
The data points depicted on the graph are as follows:
- -------------------------------------------------------------------------
DATE THE COMPANY NASDAQ US COMPANIES NASDAQ ELECTRONICSPEER GROUP (2)
- ------------------------ ------------------------ ------------------------ -------------------------------------------------------------------------------------------------
April 19, 1995*1995 (1) $100.00 $100.00 $100.00
December 31, 1995 $150.00 $129.80 $124.91$126.66
December 31, 1996 $ 45.24 $159.65 $216.01$126.91
December 31, 1997 $ 52.38 $195.95 $226.49$126.93
December 31, 1998 $ 29.14 $275.60 $ 90.14
- -------------------------------------------------------------------------
*(1) The 1995 data begins April 19, 1995, the date of the Company's initial
public offering.
8
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO THE 1995 STOCK INCENTIVE PLAN(2) The Board of Directors believes it is in the best interestsPeer Group consists of the Company
to make substantial use of stock-based incentives to attract, retainfollowing electronic and motivate qualified employees. Accordingly, in February, 1998, the Board of
Directors unanimously adopted, subject to shareholder approval, an amendment to
increase the total number of shares of Class A Common Stock that may be issued
under the Taitron Components Incorporated 1995 Stock Incentive Plan (the "Plan")
from 440,000 shares to 740,000 shares and is submitting such amendment to the
Plan to the shareholders for their approval at the Annual Meeting.
DESCRIPTION OF THE PLAN
The full text of the Plan, and the amendment thereto, is attached to this
Proxy Statement as Exhibit A and the following discussion of the Plan is
qualified in its entirety by reference thereto. The following is a description
of the Plan as presently in effect.
GENERAL. The Plan provides for the issuance of "incentive stock options"
under Section 422 of the Internal Revenue Code of 1986, as amended,
"nonstatutory options" (collectively with incentive stock options, "Options")
and stock appreciation rights ("Rights") to directors, officers and other
employees of the Company.
The Plan is currently administered by the Company's Compensation Committee,
but may be administered by the Board of Directors or any other committee to whom
such authority is delegated by the Board of Directors (the "Administrator"). The
Administrator has sole discretion and authority, consistent with the provisions
of the Plan, to select the directors, officers and other employees to whom
Options or Rights will be granted under the Plan, the number of shares which
will be covered by each Option or Right and the form and terms of agreements to
be used to represent the Options or Rights.industrial
distribution companies:
All key employees, officers and
directors (other than members of the Compensation Committee who are
automatically granted, and limited to, 5,000 nonstatutory options per year) of
the Company are eligible to participate in the Plan. As of the record date,
there were fifty four officers and employees and three non-employee directors
eligible to receive Options and/or Rights under the Plan.
AVAILABLE SHARES UNDER THE PLAN. Subject to adjustment for stock splits,
stock dividends and other similar events, an aggregate of 440,000 shares of
Class A Common Stock, par value $.001 per share, are reserved for issuance under
the Plan. As of the record date, Options and Rights covering 395,000 shares of
Class A Common Stock have been granted.
OPTIONS. The Administrator is empowered to determine the exercise price of
Options granted under the Plan, but the exercise price of incentive stock
options must not be less than the fair market value of a share of Class A Common
Stock on the date the incentive stock option is granted and nonstatutory options
must have an exercise price equal to at least 85% of the fair market value of a
share of Class A Common Stock on the date the nonstatutory option is granted
(the exercise price of any incentive stock option granted to an Option holder
who owns at least 10% of the outstanding Common Stock must not be less than 110%
of the fair market value of a share of Class A Common Stock on the date the
incentive stock option is granted). Incentive stock options may only be granted
to officers and employees of the Company. No incentive stock options may be
granted to any Option holder which first become exercisable during any calendar
year with respect to shares having an aggregate fair market value, measured at
the time of the grant of such options, in excess of $100,000. Options granted
under the Plan will generally become exercisable at a rate of from 20% to 33%
per year, commencing one year from the date of grant. All Options which have not
previously been exercised or terminated will expire on the tenth anniversary of
the date of grant.
9American Semiconductor, Inc. Jaco Electronics, Inc.
Arrow Electronics, Inc. Marshall Industries
Avnet, Inc. Reptron Electronics, Inc.
8
The Plan also provides for automatic grants of nonstatutory options to
purchase 5,000 shares of Class A Common Stock to all members of the committee
administering the Plan, upon their initial election to such committee and each
year thereafter. The exercise price of such nonstatutory options will be equal
to the fair market value of a share of Class A Common Stock on the date of
grant.
Options terminate on the ninetieth day following the termination of
employment or services of the Option holder with the Company. If the Option
holder dies or becomes disabled during the term of the Option, the Option may be
exercised by the Option holder or by the Option holder's estate for a period of
one year following such date. An Option will be exercisable following
termination of employment or services only to the extent it was exercisable on
the date of such termination, but no Option may be exercised after the
expiration of its term.
Options granted under the Plan are not transferable other than by will or by
the laws of descent and distribution, and Options may be exercised, during the
lifetime of the Option holder, only by the Option holder or by the Option
holder's guardian or legal representative.
Payment of the exercise price may be made in cash, by check, or if all
necessary regulatory requirements have been satisfied and the Option Agreement
so provides, in shares of Class A Common Stock of the Company already owned by
the Option holder valued at their fair market value on the date of exercise of
the Option. The Plan also provides that as a condition of delivery of shares
purchased under the Plan, the Company may require the Option holder to deposit
with the Company an amount sufficient to satisfy any withholding tax
requirements relating to the delivery of the shares. Under certain conditions,
including the consent of the Administrator, the Option holder may elect to
satisfy his or her withholding obligations with a portion of the shares
otherwise deliverable by the Company.
STOCK APPRECIATION RIGHTS. Under the Plan, Rights may be granted
independently of any Option or in connection with Options granted under the
Plan. The exercise price of a Right must be equal to at least 100% of the fair
market value of a share of Class A Common Stock on the date the Right is granted
(the exercise price of any Right granted to a person who owns at least 10% of
the outstanding Common Stock must not be less than 110% of the fair market value
of a share of Class A Common Stock on the date the Right is granted).
PLAN DURATION. The Plan expires on March 31, 2005, ten years from the date
of its adoption by the Board of Directors. No Options or Rights may be granted
under the Plan after March 31, 2005. However, any Option or Right that was duly
granted on or prior to such date may thereafter be exercised or settled in
accordance with its terms.
EFFECT OF SECTION 16(b) OF THE SECURITIES EXCHANGE ACT OF 1934. The
acquisition and disposition of Class A Common Stock by officers, directors and
more than 10% shareholders of the Company ("Insiders") pursuant to Options or
Rights granted to them under the Plan may be subject to Section 16(b) of the
Securities Exchange Act of 1934. Pursuant to Section 16(b), a purchase of Class
A Common Stock by an Insider within six months before or after a sale of Class A
Common Stock by the Insider could result in recovery by the Company of all or a
portion of any amount by which the sale proceeds exceed the purchase price.
Insiders are required to file reports of changes in beneficial ownership under
Section 16(a) of the Securities Exchange Act of 1934 upon acquisitions and
dispositions of shares. Rule 16b-3 provides an exemption from Section 16(b)
liability for certain transactions pursuant to certain employee benefit plans.
The Plan is designed to comply with Rule 16b-3.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a brief description of the federal income tax treatment
that generally will apply to Options and Rights granted under the Plan, based on
federal income tax laws in effect on the date hereof. The exact federal income
tax treatment of Options and Rights will depend on the specific nature of the
Options and Rights.
10
INCENTIVE STOCK OPTIONS. Pursuant to the Plan, employees may be granted
Options that are intended to qualify as "incentive stock options" under the
provisions of Section 422 of the Internal Revenue Code. Except as described in
the following two sentences, the optionee generally is not taxed and the Company
is not entitled to a deduction on the grant or exercise of an incentive stock
option, provided the incentive stock option is exercised while the optionee is
an employee of the Company or within three months following termination of
employment (one year if termination is due to permanent disability). The amount
by which the fair market value of the shares acquired upon exercise of the
incentive stock option exceeds the exercise price will be included as a positive
adjustment in the calculation of the optionee's "alternative minimum taxable
income" in the year of exercise. The "alternative minimum tax" imposed on
individual taxpayers generally is equal to the amount by which a specified
percentage of the individual's alternative minimum taxable income (reduced by
certain exemption amounts) exceeds his or her regular income tax liability for
the year.
If the optionee sells shares acquired upon exercise of an incentive stock
option at any time within one year after the date of exercise or two years after
the date of grant of the incentive stock option, then:
(1) the optionee will recognize ordinary income in an amount equal to the
excess, if any, of the lesser of the sales price or the fair market value
of the shares on the date of exercise over the exercise price;
(2) the optionee will recognize capital gain in an amount equal to the
excess, if any, of the sales price over the fair market value of the
shares on the date of exercise;
(3) the optionee will recognize capital loss equal to the excess, if any, of
the exercise price over the sales price; and
(4) the Company will generally be entitled to a deduction in an amount equal
to the amount of ordinary income recognized by the optionee.
If the optionee sells shares acquired upon exercise of an incentive stock
option at any time after the first anniversary of the date of exercise and the
second anniversary of the date of grant of the incentive stock option, then the
optionee will recognize capital gain or loss equal to the difference between the
sales price and the exercise price of the incentive stock option, and the
Company will not be entitled to any deduction.
NONSTATUTORY OPTIONS. The grant of an Option to acquire Class A Common
Stock that does not qualify for treatment as an incentive stock option generally
is not a taxable event for the optionee. Upon exercise of the nonstatutory
option, the optionee generally will recognize ordinary income in an amount equal
to the excess of the fair market value of the shares on the date of exercise
over the exercise price, and the Company will be entitled to a deduction equal
to such amount. A subsequent sale of the shares generally will give rise to
capital gain or loss equal to the difference between the sales price and the sum
of the exercise price paid with respect to such shares plus the ordinary income
recognized with respect to such shares.
SPECIAL RULES FOR OPTIONS GRANTED TO INSIDERS. If an Insider exercises an
Option within six months of the date of grant, the Insider generally will not
recognize ordinary income until the date of sale of the shares or, if earlier,
six months after the date of grant of the Option. If the Insider makes a Section
83(b) Election within 30 days after the date (the "Acquisition Date") of the
exercise of the Option, he or she will recognize ordinary income on the
Acquisition Date equal to the excess of the fair market value of the shares on
that date over the exercise or purchase price. In addition, special rules apply
to an Insider who exercises an Option having an exercise price greater than the
fair market value of the underlying shares on the date of exercise.
MISCELLANEOUS TAX ISSUES. Generally, the Company will be required to make
arrangements for withholding applicable taxes with respect to ordinary income
recognized by an employee in connection
11
with Options or Rights granted under the Plan. Special rules will apply in cases
where the recipient of an Option or Right pays the exercise price of the Option
or applicable withholding tax obligations by delivering previously owned shares
or by reducing the number of shares otherwise issuable pursuant to the Option.
Such delivery of shares will in certain circumstances result in the recognition
of income with respect to such shares.
The terms of the agreements pursuant to which specific Options or Rights are
granted to directors, officers and employees under the Plan may provide for
accelerated vesting in connection with a change in ownership or control of the
Company. In that event and depending upon the individual circumstances of the
recipient, certain amounts with respect to such Option or Right may constitute
"excess parachute payments" under the "golden parachute" provisions of the
Internal Revenue Code. Pursuant to these provisions, a recipient will be subject
to a 20% excise tax on any "excess parachute payment" and the Company will be
denied any deduction with respect to such payment. In certain instances, the
Company may be denied a deduction for compensation attributable to Options
granted to certain officers of the Company to the extent such compensation
exceeds $1,000,000 in a given year.
PREVIOUS GRANTS UNDER THE PLAN
As of the record date, the Compensation Committee has granted Options and
Rights covering 395,000 shares of Class A Common Stock to eligible directors,
officers and employees and Options covering 37,500 shares of Class A Common
Stock have been granted to Compensation Committee members. The following table
sets forth the number of shares of Class A Common Stock underlying Options and
Rights granted to (i) Mr. Stewart Wang, the Company's Chief Executive Officer
and President; (ii) all current executive officers as a group; (iii) all current
directors who are not executive officers as a group; (iv) each nominee for
election as director; (v) each associate of any such directors, executive
officers or nominees; (vi) each other person who received five percent of such
Options or Rights; and (vii) all employees, including all current officers who
are not executive officers, as a group.
NUMBER OF OPTIONS
NAME TITLE AND RIGHTS
- ---------------------------------------------- ---------------------------------------------- ------------------
Stewart Wang.................................. President, Chief Executive Officer/ Director 76,500
and Director Nominee
All executive Officers as a group............. 191,700
All Directors who are not executive officers
as a group.................................. 37,500
Johnson Ku.................................... Chairman of the Board/Director/and Director 10,000
Nominee
Winston Gu.................................... Director 12,500
Richard Chiang................................ Director 12,500
Felix Sung.................................... Director 12,500
David M. Batt................................. Chief Financial Officer 23,500
Michael Adams................................. Vice President--Group 3 Sales 22,000
Eugene L. Baxter.............................. Vice President--Group 2 Sales 21,500
Sally Manley.................................. Vice President--Procurement 21,000
All employees, including officers who are not
executive officers, as a group.............. 165,000
12
AMENDMENT TO THE PLAN
The amendment to the Plan would increase the aggregate number of shares of
Class A Common Stock which may be issued under the Plan from 440,000 shares to
740,000 shares. As set forth above, there are presently 45,000 shares available
for future grants under the Plan. The Board of Directors believes that stock
options and similar awards are an effective means of attracting and retaining
individuals as officers, employees, directors and consultants who can contribute
materially to the successful conduct of the business and affairs of the Company.
Accordingly, the Board of directors believes that an increase in the number of
shares which may be issued pursuant to the Plan is in the best interest of the
Company and its shareholders.
BOARD RECOMMENDATION AND VOTE
The affirmative vote of a majority of the outstanding shares of Common Stock
is required to approve the amendment to the Plan. All proxies will be voted to
approve the amendment to the Plan unless a contrary vote is indicated on the
enclosed proxy card. THE BOARD IS OF THE OPINION THAT THE AMENDMENT TO THE PLAN
IS IN THE BEST INTERESTS OF THE COMPANY AND RECOMMENDS A VOTE FOR THE APPROVAL
OF THE AMENDMENT TO THE PLAN.
PRINCIPAL SHAREHOLDERS
The following table sets forth as of March 31, 1997,1999, certain
information regarding the ownership of the Company's Common Stock by (i) each
person (including any group) known by the Company to be the beneficial owner of
more than 5% of the outstanding shares of Common Stock, (ii) each of the
Company's directors and (iii) all of the Company's executive officers and
directors as a group. Except as otherwise indicated below, each person named in
the table has sole voting and investment power with respect to all shares of
Common Stock owned by such person. Unless otherwise indicated, the address of
each person shown is c/o the Company, 25202 Anza Dr., Santa Clarita, California
91355.
CLASS A COMMON STOCK (1) CLASS B COMMON CLASS A COMMON STOCK(1) STOCK(1)
----------------------- ----------------------STOCK (1) % OF VOTE OF ALL
NUMBER OF NUMBER OF----------------------------- ------------------------------ CLASSES OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES % OF CLASS NUMBER OF SHARES % OF CLASS STOCK(1)
- -------------------------------------------------- ---------OF COMMON STOCK (1)
------------------------------------- ---------------- ---------- ------------------------- ---------- -------------------------------------
Stewart Wang...................................... 793,612(2) 14.3%Wang 806,946 (2) 15.01% 762,612 100% 58.1%58.99% (3)
Tzu Sheng Ku...................................... 1,216,739(4) 21.9 9.2Ku 1,218,407 (4) 22.66% 9.37%
FMR Corporation 577,400 (7) 10.74% 4.44%
82 Devonshire Street
Boston, MA 02109
Richard Chiang.................................... 279,692(5) 5.0 2.1Chiang 281,361 (5) 5.23% 2.16%
Winston Gu........................................ 94,088(5) 1.7Gu 95,757 (5) 1.78% *
Felix Sung........................................ 31,725(5)Sung 33,394 (5) * *
All directors and executive officers
as a group (10 persons)......................... 2,728,150(6) 49.1% 2,836,882 (6) 52.77% 762,612 100% 72.8%74.61% (3)
- ------------------------
* Less than 1.0%
(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission that deem shares to be beneficially
owned by any person who has or shares voting or investment power with
respect to such shares. Unless otherwise indicated, the persons named in
this table have sole voting and sole investment power with respect to all
shares shown as beneficially owned, subject to community property laws
where applicable.
(2) Includes 762,612 shares of Class A Common Stock issuable upon conversion of
the 762,612 shares of Class B Common Stock owned by Mr. Wang and 31,00044,334
shares of Class A Common Stock underlying options that are or will within
60 days of the date hereof, be exercisable.
13
(3) Excludes 762,612 shares of Class A Common Stock issuable upon conversion of
the 762,612 shares of Class B Common Stock owned by Mr. Wang.
(4) Includes 81,962 shares of Class A Common Stock owned by Mr. Ku's wife and
178,180 shares of Class A Common Stock owned by Mr. Ku's four minor
children as to which Mr. Ku exercises sole voting control and includes
3,3325,000 shares of underlying options that are, or will within 60 days of the
date hereof, be exercisable.
(5) Includes 4,9986,667 shares of underlying options that are, or will within 60
days of the date hereof, be exercisable.
(6) Includes the shares of Class A Common Stock referred to in footnotes (2),
(4) and (5) above.
(7) FMR Corporation filed a Form 13G/A on February 1, 1999, claiming beneficial
ownership of 577,400 shares of Class A Common Stock.
AUDITORS
The Company filed on Form 8-K, dated December 2, 1998, reporting a
change of the Company's accountants. KPMG, LLP (formerly known as KPMG Peat
Marwick LLP) ("KPMG") was previously the principal accountants for the Company.
On December 2, 1998, KPMG was dismissed by the Company as principal accountants
and Grant
9
Thornton LLP was engaged as principal accountants to audit the accounts of
the company for the year ending December 31, 1998. The decision to change
accountants was approved by the Company's Audit Committee and the Board of
Directors.
During the fiscal years ended December 31, 1997 and 1996 through the
date of this Report, there were no disagreements with KPMG on any matter of
accounting principles or practices, financial statement disclosure or audit
scope or procedure which disagreement, if not resolved to the satisfaction of
KPMG, would have caused them to make reference to the matter of such
disagreement in connection with the Form 8-K, dated December 2, 1998. The
accountant's report for the fiscal years ended December 31, 1997 and 1996 did
not contain an adverse opinion or a disclaimer of opinion, nor were such reports
qualified or modified as to uncertainty, audit scope, or accounting principles.
KPMG furnished the Company with a letter addressed to the Securities
and Exchange Commission stating that it agreed with the above statements. A copy
of that letter was filed as Exhibit 16 to the Form 8-K, dated December 2, 1998.
Grant Thornton LLP, independent certified public accountants, were
selected by the Board of Directors to serve as independent auditors of the
Company for the fiscal yearsyear ended December 31, 1997, 1996 and 1995.1998. Representatives of KPMG Peat MarwickGrant
Thornton LLP are expected to be present at the Annual Meeting. They will have an
opportunity to make a statement if they desire to do so and will respond to
appropriate questions from shareholders.
PROPOSALS OF SHAREHOLDERS
A proper proposal submitted by a shareholder for presentation at the
Company's 19992000 Annual Meeting and received at the Company's executive offices no
later than December 17, 1998,1999, will be included in the Company's proxy statement
and form of proxy relating to the 19992000 Annual Meeting.
OTHER MATTERS
The Board of Directors is not aware of any matter to be acted upon at
the Annual Meeting other than described in this Proxy Statement. Unless
otherwise directed, all shares represented by the persons named in the
accompanying proxy will be voted in favor of the proposals described in this
Proxy Statement. If any other matter properly comes before the meeting, however,
the proxy holders will vote thereon in accordance with their best judgment.
EXPENSES
The entire cost of soliciting proxies will be borne by the Company.
Solicitation may be made by mail. The Company will request brokerage houses,
nominees, custodians, fiduciaries and other like parties to forward soliciting
material to the beneficial owners of the Company's Common Stock held of record
by them and will reimburse such persons for their reasonable charges and
expenses in connection therewith.
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report for the year ended December 31, 19971998 is
being mailed to Shareholders along with this Proxy Statement. The Annual Report
is not to be considered part of the soliciting material.
REPORT ON FORM 10-K
THE COMPANY UNDERTAKES, UPON WRITTEN REQUEST, TO PROVIDE, WITHOUT
CHARGE, EACH PERSON FROM WHOM THE ACCOMPANYING PROXY IS SOLICITED WITH A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997,1998,
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL
STATEMENTS AND SCHEDULES THERETO, BUT EXCLUDING EXHIBITS THERETO. REQUESTS
SHOULD BE ADDRESSED TO TAITRON COMPONENTS INCORPORATED, 25202 ANZA DR., SANTA
CLARITA CALIFORNIA, 91355, ATTENTION: CHIEF FINANCIAL OFFICER.
14
EXHIBIT A
TAITRON COMPONENTS INCORPORATED
1995 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
PAGE
-----
1995 STOCK INCENTIVE PLAN..................................................................................
1
ARTICLE 1 General Purpose of Plan.........................................................................
1
ARTICLE 2 Definitions..................................................................................... 1
ARTICLE 3 Administration.................................................................................. 3
Section 3.1 Administrator........................................................................ 3
Section 3.2 Powers in General.................................................................... 3
Section 3.3 Specific Powers...................................................................... 4
Section 3.4 Decisions Final...................................................................... 4
Section 3.5 The Committee........................................................................ 4
ARTICLE 4 Stock Subject to Plan........................................................................... 4
Section 4.1 Stock Subject to the Plan............................................................ 4
Section 4.2 Unexercised Rights; Reacquired Shares................................................ 4
ARTICLE 5 Eligibility..................................................................................... 4
ARTICLE 6 Stock Options................................................................................... 4
Section 6.1 General.............................................................................. 4
Section 6.2 Terms and Conditions of Stock Options................................................ 5
(a) Number of Shares..................................................................... 5
(b) Type of Option....................................................................... 5
(c) Exercise Price....................................................................... 5
(d) Value of Shares...................................................................... 5
(e) Medium and Time of Payment........................................................... 5
(f) Term and Exercise of Stock Options................................................... 5
ARTICLE 7 Stock Appreciation Rights....................................................................... 6
Section 7.1 General.............................................................................. 6
Section 7.2 Terms and Conditions of SARs......................................................... 6
(a) Number of SARs....................................................................... 6
(b) Initial Valuations................................................................... 6
(c) Term and Exercise of SARs............................................................ 6
(d) Securities Laws...................................................................... 8
(e) Limitations on Amounts Payable....................................................... 8
ARTICLE 8 Mandatory Grants to Committee Members........................................................... 8
Section 8.1 Mandatory Grants to Committee Members................................................ 8
Section 8.2 Prohibition of Other Grants to Committee Members..................................... 8
Section 8.3 Prohibition Against Certain Amendments............................................... 8
ARTICLE 9 Adjustments..................................................................................... 9
Section 9.1 Effect of Certain Changes............................................................ 9
(a) Stock Dividends, Splits, Etc......................................................... 9
(b) Liquidating Event.................................................................... 9
(c) Merger or Consolidation.............................................................. 9
i
PAGE
-----
(d) Where Company Survives............................................................... 10
(e) Surviving Corporation Defined........................................................ 10
(f) Par Value Changes.................................................................... 10
Section 9.2 Decision of Administrator Final...................................................... 10
Section 9.3 No Other Rights...................................................................... 11
Section 9.4 No Rights as Shareholder............................................................. 11
ARTICLE 10 Amendment and Termination...................................................................... 11
ARTICLE 11 General Provisions............................................................................. 11
Section 11.1 General Restrictions................................................................. 11
(a) Limitations on Granting of Rights.................................................... 11
(b) No View to Distribute................................................................ 11
(c) Legends.............................................................................. 11
Section 11.2 Other Compensation Arrangements...................................................... 12
Section 11.3 Disqualifying Dispositions; Withholding Taxes........................................ 12
(a) Disqualifying Disposition............................................................ 12
(b) Withholding Required................................................................. 12
(c) Withholding Right.................................................................... 12
(d) Exercise of Withholding Right........................................................ 12
(e) Effect............................................................................... 13
Section 11.4 Indemnification...................................................................... 13
Section 11.5 Loans................................................................................ 13
Section 11.6 Special Terminating Events........................................................... 14
Section 11.7 Termination of Employment............................................................ 14
Section 11.8 Non-Transferability of Rights........................................................ 14
Section 11.9 Regulatory Matters................................................................... 14
Section 11.10 Recapitalizations.................................................................... 14
Section 11.11 Delivery............................................................................. 14
Section 11.12 Rule 16b-3........................................................................... 14
Section 11.13 Other Provisions..................................................................... 15
ARTICLE 12 Effective Date of Plan......................................................................... 15
ARTICLE 13 Term of Plan................................................................................... 15
ARTICLE 14 Information to Rights Holders.................................................................. 15
ii
TAITRON COMPONENTS INCORPORATED
1995 STOCK INCENTIVE PLAN
ARTICLE 1
GENERAL PURPOSE OF PLAN
The name of this plan is the Taitron Components Incorporated 1995 Stock
Incentive Plan (the "PLAN"). The purpose of the Plan is to enable Taitron
Components Incorporated, a California corporation (the "COMPANY"), and any
Parent or any Subsidiary to obtain and retain the services of the types of
employees, consultants, officers and Directors who will contribute to the
Company's long range success and to provide incentives which are linked directly
to increases in share value which will inure to the benefit of all shareholders
of the Company.
ARTICLE 2
DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set forth
below:
"ADMINISTRATOR" shall have the meaning as set forth in Section 3.1 of the
Plan.
"BOARD" means the Board of Directors of the Company.
"CASH ELECTION" shall have the meaning set forth in Section 7.2(c)(vii) of
the Plan.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto.
"COMMITTEE" means a committee of the Board designated by the Board to
administer the Plan and composed of not less than the minimum number of persons
from time to time required both by the Rule and Section 162(m) of the Code, each
of whom is a Disinterested Person and an Outside Director.
"COMPANY" means Taitron Components Incorporated, a corporation organized
under the laws of the State of California (or any successor corporation).
"DATE OF GRANT" means the date on which the Administrator adopts a
resolution expressly granting Rights to a Participant, or if a different date is
set forth in such resolution as the Date of Grant, then such date as is set
forth in such resolution.
"DIRECTOR" means a member of the Board.
"DISABILITY" means permanent and total disability as defined by the
Administrator.
"DISINTERESTED PERSON" shall have the meaning set forth in Rule
16b-3(c)(2)(i) under the Exchange Act, or any successor definition adopted by
the SEC.
"ELECTION" shall have the meaning set forth in Section 11.3(d)(i) of the
Plan.
"ELIGIBLE PERSON" means an employee, officer, consultant or, subject to the
limitations set forth in Article 5 of the Plan, Director of the Company, any
Parent or any Subsidiary.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXERCISE PRICE" shall have the meaning set forth in Section 6.2(c) of the
Plan.
"FAIR MARKET VALUE" per share at any date shall mean (i) if the Stock is
listed on an exchange or exchanges, or admitted for trading in a market system
which provides last sale data under Rule 11Aa3-1 of the General Rules and
Regulations of the SEC under the Exchange Act (a "MARKET SYSTEM"), the last
reported sales price per share on the last business day prior to such date on
the principal exchange on
1
which it is traded, or in a Market System, as applicable, or if no sale was made
on such day on such principal exchange or in such a Market System, as
applicable, the last reported sales price per share on the most recent day prior
to such date on which a sale was reported on such exchange or such Market
System, as applicable; or (ii) if the Stock is not then traded on an exchange or
in a Market System, the average of the closing bid and asked prices per share
for the Stock in the over-the-counter market as quoted on NASDAQ on the day
prior to such date; or (iii) if the Stock is not listed on an exchange or quoted
on NASDAQ, an amount determined in good faith by the Administrator.
"GRANTEE" means a Participant who is granted a SAR pursuant to the Plan.
"LIQUIDATING EVENT" shall have the meaning set forth in Section 9.1(b) of
the Plan.
"LIQUIDITY EVENT" means any Reorganization Event which the Administrator
determines, in its sole and absolute discretion, to treat as such an event.
"INCENTIVE STOCK OPTION" means a Stock Option intended to qualify as an
"incentive stock option" as that term is defined in Section 422 of the Code.
"INITIAL VALUATION" shall have the meaning set forth in Section 7.2(b) of
the Plan.
"NON-STATUTORY STOCK OPTION" means a Stock Option intended to not qualify as
an Incentive Stock Option.
"OPTIONEE" means a Participant who is granted a Stock Option pursuant to the
Plan.
"OUTSIDE DIRECTOR" means a Director who is not (a) a current employee of the
Company (or any related entity), (b) a former employee of the Company (or any
related entity) who is receiving compensation for prior services (other than
benefits under a tax-qualified retirement plan), (c) a former officer of the
Company (or any related entity), or (d) a consultant or person otherwise
receiving compensation or other remuneration, either directly or indirectly, in
any capacity other than as a Director.
"PARENT" means any present or future corporation which would be a "parent
corporation" as that term is defined in Section 424 of the Code.
"PARTICIPANT" means any Eligible Person selected by the Administrator,
pursuant to the Administrator's authority set forth in Article 3 of the Plan, to
receive grants of Rights.
"PLAN" means this Taitron Components Incorporated 1995 Stock Incentive Plan,
as the same may be amended or supplemented from time to time.
"RELATED SAR OPTION" shall have the meaning set forth in Section 7.1 of the
Plan.
"REORGANIZATION EVENT" shall have the meaning set forth in Section 9.1(c) of
the Plan.
"RETIREMENT" means retirement from active employment with the Company or any
Parent or Subsidiary as defined by the Administrator.
"RIGHTS" means Stock Options and/or SARs.
"RULE" means Rule 16b-3 and any future rules promulgated in substitution
therefore under the Exchange Act.
"SAR" means a stock appreciation right granted alone or in tandem with a
Stock Option pursuant to Article 7.
"SEC" means the Securities and Exchange Commission.
"SECTION 16(B) PERSON" means a person subject to Section 16(b) of the
Exchange Act.
"SPECIAL TERMINATING EVENT" with respect to a Participant means the death or
Disability of that Participant.
2
"SPREAD" shall have the meaning set forth in 7.2(c)(iv) of the Plan.
"STOCK" means the Class A Common Stock, par value $.001 per share, of the
Company.
"STOCK OPTION" means an option to purchase shares of Stock granted pursuant
to Article 6 of the Plan.
"STOCK OPTION AGREEMENT" shall have the meaning set forth in Section 6.2 of
the Plan.
"SAR AGREEMENT" shall have the meaning set forth in Section 7.2 of the Plan.
"SUBSIDIARY" means any present or future corporation which would be a
"subsidiary corporation" as that term is defined in Section 424 of the Code.
"SURVIVING CORPORATION" shall have the meaning set forth in Section 9.1(e)
of the Plan.
"TAX DATE" shall have the meaning set forth in Section 11.3(d)(iii) of the
Plan.
"TEN PERCENT SHAREHOLDER" means a person who on the Date of Grant owns,
either directly or through attribution as provided in Section 424(d) of the
Code, Stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of any Parent or Subsidiary.
"WINDOW PERIOD" shall have the meaning set forth in Section 7.2(c)(vi) of
the Plan.
"WITHHOLDING RIGHT" shall have the meaning set forth in Section 11.3(c) of
the Plan.
ARTICLE 3
ADMINISTRATION
SECTION 3.1 ADMINISTRATOR. The Plan shall be administered by the Committee
(referred to herein as the "ADMINISTRATOR").
SECTION 3.2 POWERS IN GENERAL. The Administrator shall have the power and
authority to grant to Eligible Persons, pursuant to the terms of the Plan: (i)
Stock Options; (ii) SARs or (iii) any combination of the foregoing.
SECTION 3.3 SPECIFIC POWERS. In particular, the Administrator shall have
the authority: (i) to construe and interpret the Plan and apply its provisions;
(ii) to promulgate, amend and rescind rules and regulations relating to the
administration of the Plan; (iii) to authorize any person to execute, on behalf
of the Company, any instrument required to carry out the purposes of the Plan;
(iv) to determine when Rights are to be granted under the Plan; (v) from time to
time to select, subject to the limitations set forth in this Plan, those
Eligible Persons to whom Rights shall be granted; (vi) to determine the number
of shares of Stock to be made subject to each Right; (vii) to prescribe the
terms and conditions of each Stock Option, including, without limitation, the
Exercise Price and medium of payment and vesting provisions, to determine
whether the Stock Option is to be an Incentive Stock Option or a Non-Statutory
Stock Option and to specify the provisions of the Stock Option Agreement
relating to such Stock Option; (viii) to prescribe the terms and conditions of
each SAR including, without limitation, to determine whether such SAR is to be
granted alone or in tandem with Stock Options during the term of the Related SAR
Option, and to specify the provisions of the SAR relating to such SAR including,
without limitation, the Initial Valuation and vesting provisions; (ix) to amend
any outstanding Rights for the purpose of modifying the time or manner of
vesting, the Initial Valuation or Exercise Price, as the case may be, thereunder
or otherwise, subject to applicable legal restrictions and to the consent of the
other party to such agreement; (x) to determine when a consultant's relationship
with the Company is sufficient to constitute the equivalent of employment with
the Company for purposes of the Plan; (xi) to determine the duration and purpose
of leaves of absences which may be granted to a Participant without constituting
termination of their employment for purposes of the Plan; and (xii) to make any
and all other determinations which it determines to be necessary or advisable
for administration of the Plan.
3
SECTION 3.4 DECISIONS FINAL. All decisions made by the Administrator
pursuant to the provisions of the Plan shall be final and binding on the Company
and the Participants.
SECTION 3.5 THE COMMITTEE. The Board may, in its sole and absolute
discretion, from time to time delegate any or all of its duties and authority
with respect to the Plan to the Committee whose members are to be appointed by
and to serve at the pleasure of the Board. Once appointed, the Committee shall
continue to serve until otherwise directed by the Board. From time to time, the
Board may increase or decrease (to not less than the minimum number of persons
from time to time required by both the Rule and Section 162(m) of the Code) the
size of the Committee, add additional members to, remove members (with or
without cause) from, appoint new members in substitution therefor, and fill
vacancies, however caused, in the Committee. The Committee shall act pursuant to
a vote of the majority of its members or, in the case of a committee comprised
of only two members, the unanimous consent of its members, whether present or
not, or by the written consent of the majority of its members or, in the case of
a committee comprised of only two members, the unanimous written consent of its
members, and minutes shall be kept of all of its meetings and copies thereof
shall be provided to the Board. Subject to the limitations prescribed by the
Plan and the Board, the Committee may establish and follow such rules and
regulations for the conduct of its business as it may determine to be advisable.
ARTICLE 4
STOCK SUBJECT TO PLAN
SECTION 4.1 STOCK SUBJECT TO THE PLAN. Subject to adjustment as provided
in Article 9, the total number of shares of Stock reserved and available for
issuance under the Plan shall be <#>440,000 740,000 shares. Solely for the
purposes of determining the number of shares of Stock reserved and available for
issuance under the Plan, each SAR granted without relation to a Stock Option
shall be treated as a Stock Option.
SECTION 4.2 UNEXERCISED RIGHTS; REACQUIRED SHARES. To the extent that any
Rights expire or are otherwise terminated without being exercised, the shares of
Stock underlying such Rights (and shares related thereto) shall again be
available for issuances in connection with future Rights under the Plan. If and
to the extent that the Company receives shares of Stock in payment of all or a
portion of the purchase price for any Stock, or in payment of any tax
liabilities, the receipt of such shares will not increase the number of shares
available for issuance under the Plan.
ARTICLE 5
ELIGIBILITY
Directors who are not members of the Committee, members of the Committee
(but only subject to the provisions of Article 8 hereof), officers, employees
and consultants of the Company, any Parent or any Subsidiary, who are
responsible for or contribute to the management, growth or profitability of the
business of the Company, any Parent or any Subsidiary, shall be eligible to be
granted Rights hereunder, subject to limitations set forth in this Plan;
provided, however, that only officers and employees shall be eligible to be
granted Incentive Stock Options hereunder.
ARTICLE 6
STOCK OPTIONS
SECTION 6.1 GENERAL. Stock Options may be granted alone or in addition to
other Rights granted under the Plan. Each Stock Option granted under the Plan
shall be in such form and under such terms and conditions as the Administrator
may from time to time approve; provided, that such terms and conditions are not
inconsistent with the Plan. The provisions of Stock Option Agreements entered
into under the Plan need not be identical with respect to each Optionee. Stock
Options granted under the Plan may be either Incentive Stock Options or
Non-Statutory Stock Options.
4
SECTION 6.2 TERMS AND CONDITIONS OF STOCK OPTIONS. Each Stock Option
granted pursuant to the Plan shall be evidenced by a written option agreement
between the Company and the Optionee (the "Stock Option Agreement"), which shall
comply with and be subject to the following terms and conditions.
(a) NUMBER OF SHARES. Each Stock Option Agreement shall state the number
of shares of Stock to which the Stock Option relates.
(b) TYPE OF OPTION. Each Stock Option Agreement shall identify the portion
(if any) of the Stock Option which constitutes an Incentive Stock Option.
(c) EXERCISE PRICE. Each Stock Option Agreement shall state the price at
which shares subject to the Stock Option may be purchased (the "EXERCISE
PRICE"), which, with respect to Incentive Stock Options, shall not be less than
100% of the Fair Market Value of the shares of Stock on the Date of Grant;
provided however, that in the case of an Incentive Stock Option granted to a Ten
Percent Shareholder, the Exercise Price shall not be less than 110% of such Fair
Market Value. With respect to Non-Statutory Stock Options, the Exercise Price
shall not be less than 85% of the Fair Market Value of the shares of Stock on
the Date of Grant of the Non-Statutory Stock Option.
(d) VALUE OF SHARES. The Fair Market Value of the shares of Stock
(determined as of the Date of Grant) with respect to which Incentive Stock
Options are first exercisable by an Optionee under this Plan and all other
incentive option plans of the Company and any Parent or Subsidiary in any
calendar year shall not, for such year, in the aggregate, exceed $100,000;
provided, however, that if the aggregate Fair Market Value of such shares
exceeds $100,000, then the incremental portion in excess of $100,000 shall be
treated as Non-Statutory Stock Options (and not as Incentive Stock Options);
provided, further, that this Section 6.2(d) shall not affect the right of the
Administrator to accelerate or otherwise alter the time of vesting of any Stock
Options granted as Incentive Stock Options, even, if as a result thereof, some
of such Stock Options cease being Incentive Stock Options.
(e) MEDIUM AND TIME OF PAYMENT. The Exercise Price shall be paid in full,
at the time of exercise, (i) in cash or cash equivalents, (ii) with the approval
of the Administrator, in shares of Stock which have been held by the Optionee
for a period of at least six calendar months preceding the date of surrender and
which have a Fair Market Value equal to the Exercise Price, (iii) in a
combination of cash, cash equivalents and Stock, or (iv) in any other form of
legal consideration acceptable to the Administrator, and may be effected in
whole or in part (x) with monies received from the Company at the time of
exercise as a compensatory cash payment; or (y) with monies borrowed from the
Company in accordance with Section 11.5.
(f) TERM AND EXERCISE OF STOCK OPTIONS. Stock Options shall vest or become
exercisable over the exercise period at the times the Administrator may
determine, as reflected in the related Stock Option Agreements; provided,
however, that the Optionees shall have the right to exercise the Stock Options
at the rate of at least 20% per year over five years from the Date of Grant of
such Stock Options. Unless a different vesting schedule is established by the
Administrator and reflected in the Stock Option Agreement, each Optionee shall
have the right to exercise the Stock Options evidenced thereby as follows: 33%
of the Stock Options (rounded up to the nearest whole share) shall vest on the
first anniversary of the Date of Grant of the Stock Options, 33% of the Stock
Options (rounded up to the nearest whole share) shall vest on the second
anniversary of the Date of Grant of the Stock Options, and the remaining Stock
Options shall vest on the third anniversary of the Date of Grant of the Stock
Options. The exercise period of any Stock Option shall be determined by the
Administrator, but shall not exceed ten years from the Date of Grant of the
Stock Option. In the case of an Incentive Stock Option granted to a Ten Percent
Shareholder, the exercise period shall be determined by the Administrator, but
shall not exceed five years from the Date of Grant of the Stock Option. The
exercise period shall be subject to earlier termination upon the occurrence of
either a Special Terminating Event, as provided in Section 11.6, or the
termination of employment, as provided in Section 11.7. A Stock Option may be
exercised, as to any or all full shares of
5
Stock as to which the Stock Option has become exercisable, by giving written
notice of such exercise to the Company.
ARTICLE 7
STOCK APPRECIATION RIGHTS
SECTION 7.1 GENERAL. The Administrator shall have the authority to grant
SARs in tandem with Stock Options granted under this Plan or under any other
stock option plan of the Company (the "RELATED SAR OPTION") with respect to all
or some of the shares of Stock covered by the Related SAR Option. SARs granted
in tandem with Related SAR Options may be granted either at the time of grant of
the Related SAR Option or at any time thereafter during the term of the Related
SAR Option. The Administrator shall also have the authority to grant SARs
without relation to any Stock Option granted under this Plan or under any other
stock option plan of the Company. Each SAR shall be granted on such terms and
conditions not inconsistent with the Plan as the Administrator may determine.
The provisions of the various SAR awards need not be the same with respect to
each Grantee.
SECTION 7.2 TERMS AND CONDITIONS OF SARS. Each SAR granted pursuant to the
Plan shall be evidenced by a written SAR agreement between the Company and the
Grantee (the "SAR AGREEMENT"), which shall comply with and be subject to the
following terms and conditions.
(a) NUMBER OF SARS. Each SAR Agreement shall state the number of shares of
Stock to which the SAR relates.
(b) INITIAL VALUATIONS. Each SAR Agreement shall provide that each SAR
granted in tandem with a Related Stock Option is valued at the Exercise Price of
the Related SAR Option and that each SAR granted without relation to a stock
Option is valued at the Fair Market Value of a share of Stock on the Date of
Grant (the "INITIAL VALUATION").
(c) TERM AND EXERCISE OF SARS.
(i) Each SAR granted otherwise than in tandem with a Stock Option shall be
exercisable as determined by the Administrator, but in no event after 10 years
from the Date of Grant. Each other SAR shall be exercisable only if, and to the
extent that, the Related SAR Option is exercisable and has not yet terminated or
expired, and in the case of a SAR granted in respect of an Incentive Stock
Option, only when the Fair Market Value per share of the Stock exceeds the
Exercise Price of the Related SAR Option; and upon the exercise of a SAR, the
related SAR Option shall cease to be exercisable to the extent of the shares of
Stock with respect to which such SAR is exercised, but shall be considered to
have been exercised to that extent for purposes of determining the number of
shares available for the grant of further Rights pursuant to the Plan. Upon the
exercise or termination of a Related SAR Option, the SAR granted in tandem with
such Related SAR Option shall terminate to the extent of the shares of Stock
with respect to which the Related SAR Option was exercised or terminated.
(ii) To exercise a SAR granted in tandem with a Related SAR Option, the
Grantee shall (A) give written notice thereof to the Company specifying the
number of shares of Stock with respect to which the SAR is being exercised and
the percentage of the total amount the Grantee is entitled to receive which the
Grantee elects to receive in cash or shares of Stock with respect to the
exercise of the SAR; and (B) if requested by the Administrator, deliver the
Related SAR Option agreement to the Secretary of the Company, who shall endorse
thereon a notation of such exercise and return the Related SAR Option agreement
to the Grantee. To exercise a SAR granted without relation to a Stock Option,
the Grantee shall give written notice thereof to the Company specifying the
number of shares of Stock with respect to which the SAR is being exercised and
the percentage or sum of the total amount the Grantee is entitled to receive
which the Grantee elects to receive in cash, and the percentage or sum the
Grantee elects to receive in shares of Stock, with respect to the exercise of
the SAR. The date of exercise of a SAR which is
6
validly exercised shall be deemed to be the date on which there shall have been
delivered to the Company the appropriate aforesaid instruments.
(iii) Upon the exercise of a SAR, the holder thereof, subject to Section
7.2(c)(vii), shall be entitled at the holder's election to receive either:
(A) a number of shares of Stock equal to the quotient computed by
dividing the Spread (as defined in Section 7.2.(c)(iv)) by the Fair Market
Value per share of Stock on the date of exercise of the SAR; provided,
however, that in lieu of fractional shares, the Company shall pay in cash or
cash equivalents an amount equal to the same fraction of the Fair Market
Value per share of Stock on the date of exercise of the SAR; or
(B) an amount payable in cash or cash equivalents equal to the Spread;
or
(C) a combination of an amount payable in cash or cash equivalents and a
number of shares calculated as provided in Section 7.2.(c)(iii)(A) (after
reducing the Spread by such cash amount); plus any amounts payable in lieu
of any fractional shares as provided above.
(iv) The term "SPREAD" as used in Section 7.2(c) shall mean an amount equal
to the product computed by multiplying (A) the excess of (x) the Fair Market
Value per share of Stock on the date the SAR is exercised, over either (y) in
the case of an SAR in tandem with a Related SAR Option, the Exercise Price per
share of the Related SAR Option, or (z) in the case of an SAR not granted in
tandem with a Stock Option, the Initial Valuation of the SAR; by (B) the number
of shares with respect to which such SAR is being exercised.
(v) Notwithstanding the provisions of this Section 7.2, and while the SAR
Agreement may provide for longer vesting periods, no SAR may be exercised during
the first six months following its Date of Grant, and, with respect to SARs
granted in tandem with a Related SAR Option, neither the SAR nor the Related SAR
Option may be exercised during the first six months following the Date of Grant
of the SAR, unless, in either case, prior to the expiration of such six-month
period, the holder of the SAR ceases to be an employee of the Company or any
Parent or Subsidiary by reason of such holder's Special Terminating Events.
(vi) Notwithstanding the provisions of this Section 7.2 or the related SAR
Agreement to the contrary, any Grantee who at the date of the exercise of the
SAR or any portion thereof is a Section 16(b) Person, may only make a Cash
Election (as defined below) and related exercise during the period beginning on
the third business day following the date of release for publication of the
quarterly or annual summary statements of sales and earnings of the Company and
ending on the twelfth business day following such date (the "WINDOW PERIOD").
Additionally, no Section 16(b) Person shall have the right to make any Cash
Election unless the Company has been subject to the reporting requirements of
Section 13(a) of the Exchange Act for at least a year prior to the transaction
and has filed all reports and statements required to be filed pursuant to that
Section for that year.
(vii) Notwithstanding the provisions of this Section 7.2, the Administrator
shall have sole discretion to approve or disapprove a Participant's election to
receive any amounts payable in cash or cash equivalents in whole or in part
("CASH ELECTION") upon the exercise of a SAR. Such approval or disapproval may
be given at any time after the election to which it relates and until approval
is given, no amounts will be due or payable to such Participant. If the
Administrator shall disapprove a Cash Election, the exercise of the SAR with
respect to which the Cash Election was made shall be of no effect, but without
prejudice to the right of the holder to exercise such SAR in the future in
accordance with its terms.
(viii) Notwithstanding the foregoing, in the case of a SAR granted in tandem
with an Incentive Stock Option, the holder may not receive an amount in excess
of such amount as will enable the Stock Option to qualify as an Incentive Stock
Option.
7
(d) SECURITIES LAWS. The Company intends that this Section 7.2 shall
comply with the requirements of the Rule during the term of the Plan. Should any
provision of Section 7.2 not be necessary to comply with the requirements of the
Rule or should any additional provisions be necessary for Section 7.2 to comply
with the requirements of the Rule, the Board may amend the Plan to add to or
modify the provisions of the Plan accordingly.
(e) LIMITATIONS ON AMOUNTS PAYABLE. Notwithstanding Section 7.2(c)(iii),
the Administrator may place a limitation on the amount payable in cash, Stock or
both upon exercise of a SAR. Any such limitation must be determined as of the
Date of Grant, and noted on the instrument evidencing the Participant's SAR
granted hereunder.
ARTICLE 8
MANDATORY GRANTS TO COMMITTEE MEMBERS
SECTION 8.1 MANDATORY GRANTS TO COMMITTEE MEMBERS. Notwithstanding any
other provision of this Plan, the grant of Stock Options to members of the
Committee shall be subject to the following limitations of this Article 8.
(a) Upon the initial election or appointment of a member of the Committee by
the Board, the Committee shall grant to such member, at the first meeting of the
Committee following the date of such election or appointment, a ten year
Non-Statutory Stock Option to purchase 5,000 shares of Stock.
(b) The Committee shall grant to each member, effective as of each
anniversary of the election or appointment of such member to the Committee, a
ten year Non-Statutory Stock Option to purchase 5,000 shares of Stock.
(c) All Stock Options granted to members of the Committee under this Article
8 shall be exercisable at an Exercise Price equal to 100% of the Fair Market
Value of a share of Stock on the Date of Grant.
(d) All Stock Options granted to members of the Committee under this Article
8 will vest or become exercisable as follows: 33% of the Stock Options (rounded
up to the nearest whole share) shall vest on the first anniversary of the Date
of Grant of the Stock Options, and 33% of the Stock Options (rounded up to the
nearest whole share) shall vest on the second anniversary of the Date of Grant
of the Stock Options, and the remaining Sock Options shall vest on the third
anniversary of the Date of Grant of the Stock Options.
(e) Unless otherwise provided in the Plan, all provisions regarding the
terms of Non-Statutory Stock Options, other than those pertaining to the Date of
Grant, the number of shares covered by such grant, term and Exercise Price shall
be applicable to the Stock Options granted to members of the Committee under
this Article 8.
SECTION 8.2 PROHIBITION OF OTHER GRANTS TO COMMITTEE
MEMBERS. Notwithstanding any other provisions in this Plan, the mandatory
grants described in this Article 8 shall constitute the only grants under the
Plan permitted to be made to members of the Committee.
SECTION 8.3 PROHIBITION AGAINST CERTAIN AMENDMENTS. Notwithstanding any
other provisions of this Plan, the provisions of this Article 8 shall not be
amended more than once every six months, other than to comport with changes in
the Code, the Employee Retirement Income Security Act, or the rules thereunder.
8
ARTICLE 9
ADJUSTMENTS
SECTION 9.1 EFFECT OF CERTAIN CHANGES.
(a) STOCK DIVIDENDS, SPLITS, ETC. If there is any change in the number of
outstanding shares of Stock through the declaration of Stock dividends or
through a recapitalization resulting in Stock splits, or combinations or
exchanges of the outstanding shares, however, not including a change resulting
from the conversion of the Company's Class B Common Stock, par value $.001 per
share, for shares of Stock, (i) the number of shares of Stock available for
Rights, (ii) the number of shares covered by outstanding Rights, (iii) the
number of shares set forth under Section 11.1(a) and (iv) the Exercise Price or
Initial Value of any Stock Option or SAR, in effect prior to such change, shall
be proportionately adjusted by the Administrator to reflect any increase or
decrease in the number of issued shares of Stock; provided, however, that any
fractional shares resulting from the adjustment shall be eliminated.
(b) LIQUIDATING EVENT. In the event of the proposed dissolution or
liquidation of the Company, or in the event of any corporate separation or
division, including, but not limited to, a split-up, split-off or spin-off
(each, a "Liquidating Event"), the Administrator may provide that the holder of
any Rights then exercisable shall have the right to exercise such Rights (at the
price provided in the agreement evidencing the Rights) subsequent to the
Liquidating Event, and for the balance of its term, solely for the kind and
amount of shares of Stock and other securities, property, cash or any
combination thereof receivable upon such Liquidating Event by a holder of the
number of shares of Stock for or with respect to which such Rights might have
been exercised immediately prior to such Liquidating Event; or the Administrator
may provide, in the alternative, that each Right granted under the Plan shall
terminate as of a date to be fixed by the Board; provided, however, that not
less than 30 days written notice of the date so fixed shall be given to each
Rights holder and if such notice is given, each Rights holder shall have the
right, during the period of 30 days preceding such termination, to exercise his
or her Rights as to all or any part of the shares of Stock covered thereby,
without regard to any installment or vesting provisions in his or her Rights
agreement, on the condition, however, that the Liquidating Event actually
occurs; and if the Liquidating Event actually occurs, such exercise shall be
deemed effective (and, if applicable, the Rights holder shall be deemed a
shareholder with respect to the Rights exercised) immediately preceding the
occurrence of the Liquidating Event (or the date of record for shareholders
entitled to share in such Liquidating Event, if a record date is set).
(c) MERGER OR CONSOLIDATION. In the case of any capital reorganization,
any reclassification of the Stock (other than a change in par value or
recapitalization described in Section 9.1(a) of the Plan), or the consolidation
of the Company with, or a sale of substantially all of the assets of the Company
to (which sale is followed by a liquidation or dissolution of the Company), or
merger of the Company with another person (a "REORGANIZATION EVENT"), the
Administrator shall be obligated to determine, in its sole and absolute
discretion, whether the Reorganization Event shall constitute a "LIQUIDITY
EVENT," and to deliver to the Rights holders at least 15 days prior to such
Reorganization Event (or at least 15 days prior to the date of record for
shareholders entitled to share in the securities or property distributed in the
Reorganization Event, if a record date is set) a notice which shall (i) indicate
whether the Reorganization Event shall be considered a Liquidity Event and (ii)
advise the Rights holder of his or her rights pursuant to the agreement
evidencing such Rights. If the Reorganization Event is determined to be a
Liquidity Event, (i) the Surviving Corporation may, but shall not be obligated
to, tender stock options or stock appreciation rights to the Rights holder with
respect to the Surviving Corporation, and such new options and rights shall
contain terms and provisions that substantially preserve the rights and benefits
of the applicable Rights then outstanding under the Plan, or (ii) in the event
that no stock options or stock appreciation rights have been tendered by the
Surviving Corporation pursuant to the terms of item (i) immediately above, the
Rights holder shall have the right, exercisable during a 10 day period ending on
the fifth day prior to the Reorganization Event (or ending on the fifth day
prior to the date of record for shareholders entitled to share in the securities
or property distributed in the Reorganization Event, if a record date is set),
to
9
exercise his or her rights as to all or any part of the shares of Stock covered
thereby, without regard to any installment or vesting provisions in his or her
Rights agreement, on the condition, however, that the Reorganization Event is
actually effected; and if the Reorganization Event is actually effected, such
exercise shall be deemed effective (and, if applicable, the Rights holder shall
be deemed a shareholder with respect to the Rights exercised) immediately
preceding the effective time of the Reorganization Event (or on the date of
record for shareholders entitled to share in the securities or property
distributed in the Reorganization Event, if a record date is set). If the
Reorganization Event is not determined to be a Liquidity Event, the Rights
holder shall thereafter be entitled upon exercise of the Rights to purchase the
kind and number of shares of stock or other securities or property of the
Surviving Corporation receivable upon such event by a holder of the number of
shares of the Stock which the Rights would have entitled the Rights holder to
purchase from the Company if the Reorganization Event had not occurred, and in
any such case, appropriate adjustment shall be made in the application of the
provisions set forth in this Plan with respect to the Rights holder's rights and
interests thereafter, to the end that the provisions set forth in the agreement
applicable to such Rights (including the specified changes and other adjustments
to the Exercise Price) shall thereafter be applicable in relation to any shares
or other property thereafter purchasable upon exercise of the Rights.
(d) WHERE COMPANY SURVIVES. Section 9.1(c) shall not apply to a merger or
consolidation in which the Company is the Surviving Corporation, unless shares
of Stock are converted into or exchanged for securities other than
publicly-traded common stock, cash (excluding cash in payment for actual shares)
or any other thing of value. Notwithstanding the preceding sentence, in case of
any consolidation or merger of another corporation into the Company in which the
Company is the Surviving Corporation and in which there is a reclassification or
change (including a change to the right to receive an amount of money payable by
cash or cash equivalents or other property) of the shares of Stock (other than a
change in par value, or from par value to no par value, or as a result of a
subdivision or combination, but including any change in such shares into two or
more classes or series of shares), the Administrator may provide that the holder
of each of the Rights then exercisable shall have the right to exercise such
Rights solely for the kind and amount of shares of Stock and other securities
(including those of any new direct or indirect Parent of the Company), property,
cash or any combination thereof receivable upon such reclassification, change,
consolidation or merger by the holder of the number of shares of Stock for which
such Rights might have been exercised.
(e) SURVIVING CORPORATION DEFINED. The determination as to which party to
a merger or consolidation is the "SURVIVING CORPORATION" shall be made on the
basis of the relative equity interests of the shareholders in the corporation
existing after the merger or consolidation, as follows: if immediately following
any merger or consolidation the holders of outstanding voting securities of the
Company immediately prior to the merger or consolidation own equity securities
possessing more than 50% of the voting power of the corporation existing
following the merger or consolidation, then for purposes of this Plan, the
Company shall be the Surviving Corporation. In all other cases, the Company
shall not be the Surviving Corporation. In making the determination of ownership
by the shareholders of a corporation immediately after the merger or
consolidation, of equity securities pursuant to this Section 9.1(e), equity
securities which the shareholders owned immediately before the merger or
consolidation as shareholders of another party to the transaction shall be
disregarded. Further, for purposes of this Section 9.1(e) only, outstanding
voting securities of a corporation shall be calculated by assuming the
conversion of all equity securities convertible (immediately or at some future
time) into shares entitled to vote.
(f) PAR VALUE CHANGES. In the event of a change in the Stock of the
Company as presently constituted which is limited to a change of all of its
authorized shares with par value, into the same number of shares without par
value, or any subsequent change in the par value, the shares resulting from any
such change shall be "Stock" within the meaning of the Plan.
SECTION 9.2 DECISION OF ADMINISTRATOR FINAL. To the extent that the
foregoing adjustments relate to stock or securities of the Company, such
adjustments shall be made by the Administrator, whose
10
determination in that respect shall be final, binding and conclusive; provided,
however, that each Incentive Stock Option granted pursuant to the Plan shall not
be adjusted without the prior consent of the holder thereof in a manner that
causes such Stock Option to fail to continue to qualify as an Incentive Stock
Option.
SECTION 9.3 NO OTHER RIGHTS. Except as expressly provided in this Article
9, no Rights holder shall have any rights by reason of any subdivision or
consolidation of shares of Stock or the payment of any dividend or any other
increase or decrease in the number of shares of Stock of any class or by reason
of any Liquidating Event, merger, or consolidation of assets or stock of another
corporation, or any other issue by the Company of shares of stock of any class,
or securities convertible into shares of stock of any class; and except as
provided in this Article 9, none of the foregoing events shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Stock subject to Rights. The grant of Rights pursuant to the Plan
shall not affect in any way the right or power of the Company to make
adjustments, reclassification, reorganizations or changes of its capital or
business structures or to merge or to consolidate or to dissolve, liquidate or
sell, or transfer all or part of its business or assets.
SECTION 9.4 NO RIGHTSPLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SHAREHOLDER. Except as specifically provided in
this Article 9, a Rights holder or a transferee of Rights shall have no rights
as a shareholder with respect to any shares covered by the Rights until the date
of the issuance of a Stock certificate to him or her for such shares, and no
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions of other rights for which
the record date is prior to the date such Stock certificate is issued, except as
provided in Section 9.1.
ARTICLE 10
AMENDMENT AND TERMINATION
The Board may amend, alter or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights of a
Participant under any Rights theretofore granted without such Participant's
consent, or which without the approval of the shareholders would:
(a) except as provided in Article 9, materially increase the total number of
shares of Stock reserved for the purposes of the Plan;
(b) materially increase the benefits accruing to Participants or Eligible
Persons under the Plan; or
(c) materially modify the requirements for eligibility under the Plan.
The Administrator may amend the terms of any award theretofore granted,
prospectively or retroactively, but, subject to Article 3, no such amendment
shall impair the rights of any holder without his or her consent.
ARTICLE 11
GENERAL PROVISIONS
SECTION 11.1 GENERAL RESTRICTIONS.
(a) LIMITATION ON GRANTING OF RIGHTS. Subject to adjustment as provided in
Article 9, no Participant shall be granted Rights with respect to more than
100,000 shares of Stock during any one year period.
(b) NO VIEW TO DISTRIBUTE. The Administrator may require each person
acquiring shares of Stock pursuant to the Plan to represent to and agree with
the Company in writing that such person is acquiring the shares without a view
towards distribution thereof. The certificates for such shares may include any
legend which the Administrator deems appropriate to reflect any restrictions on
transfer.
(c) LEGENDS. All certificates for shares of Stock delivered under the Plan
shall be subject to such stop transfer orders and other restrictions as the
Administrator may deem advisable under the rules,
11
regulations and other requirements of the SEC, any stock exchange upon which the
Stock is then listed and any applicable federal or state securities laws, and
the Administrator may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
SECTION 11.2 OTHER COMPENSATION ARRANGEMENTS. Nothing contained in this
Plan shall prevent the Board from adopting other or additional compensation
arrangements, subject to shareholder approval if such approval is required; and
such arrangements may be either generally applicable or applicable only in
specific cases.
SECTION 11.3 DISQUALIFYING DISPOSITIONS; WITHHOLDING TAXES.
(a) DISQUALIFYING DISPOSITION. The Stock Option Agreements shall require
Optionees who make a "DISPOSITION" (as defined in the Code) of all or any of the
Stock acquired through the exercise of Stock Options within two years from the
date of grant of the Stock Option, or within one year after the issuance of
Stock relating thereto, to immediately advise the Company in writing as to the
occurrence of the sale and the price realized upon the sale of such Stock; and
each Optionee shall agree that he or she shall maintain all such Stock in his or
her name so long as he or she maintains beneficial ownership of such Stock.
(b) WITHHOLDING REQUIRED. Each Participant shall, no later than the date
as of which the value derived from Rights first becomes includable in the gross
income of the Participant for income tax purposes, pay to the Company, or make
arrangements satisfactory to the Administrator regarding payment of, any
federal, state or local taxes of any kind required by law to be withheld with
respect to the Rights or their exercise. The obligations of the Company under
the Plan shall be conditioned upon such payment or arrangements and the
Participant shall, to the extent permitted by law, have the right to request
that the Company deduct any such taxes from any payment of any kind otherwise
due to the Participant.
(c) WITHHOLDING RIGHT. The Administrator may, in its discretion, grant to
a Rights holder the right (a "WITHHOLDING RIGHT") to elect to make such payment
by irrevocably requiring the Company to withhold from shares issuable upon
exercise of the Rights that number of full shares of Stock having a Fair Market
Value on the Tax Date (as defined below) equal to the amount (or portion of the
amount) required to be withheld. The Withholding Right may be granted with
respect to all or any portion of the Rights.
(d) EXERCISE OF WITHHOLDING RIGHT. To exercise a Withholding Right, the
Rights holder must follow the election procedures set forth below, together with
such additional procedures and conditions as may be set forth in the related
Rights agreement or otherwise adopted by the Administrator.
(i) The Rights holder must deliver to the Company his or her written
notice of election (the "ELECTION") to have the Withholding Right apply to
all (or a designated portion) of his or her Rights prior to the date of
exercise of the Right to which it relates.
(ii) Unless disapproved by the Administrator as provided in Subsection
(iii) below, the Election once made will be irrevocable.
(iii) No Election is valid unless the Administrator consents to the
Election; the Administrator has the right and power, in its sole discretion,
with or without cause or reason therefor, to consent to the Election, to
refuse to consent to the Election, or to disapprove the Election; and if the
Administrator has not consented to the Election on or prior to the date that
the amount of tax to be withheld is, under applicable federal income tax
laws, fixed and determined by the Company (the "TAX DATE"), the Election
will be deemed approved.
(iv) If the Rights holder on the date of delivery of the Election to the
Company is a Section 16(b) Person, the following additional provisions will
apply:
(A) the Election cannot be made during the six calendar month period
commencing with the date of the grant of the Withholding Right (even if
the Rights to which such Withholding
12
Right relates have been granted prior to such date); provided, that this
Subsection (A) is not applicable to any Rights holder at any time
subsequent to the death, Disability or Retirement of the Rights holder;
(B) the Election (and the exercise of the related Right) can only be
made during the Window Period; and
(C) notwithstanding any other provision of this Section 11.3, no
Section 16(b) Person shall have the right to make any Election unless the
Company has been subject to the reporting requirements of Section 13(a)
of the Exchange Act for at least a year prior to the transaction and has
filed all reports and statements required to be filed pursuant to that
Section for that year.
(e) EFFECT. If the Administrator consents to an Election of a Withholding
Right:
(i) upon the exercise of the Rights (or any portion thereof) to which
the Withholding Right relates, the Company will withhold from the shares
otherwise issuable that number of full shares of Stock having an actual Fair
Market Value equal to the amount (or portion of the amount, as applicable)
required to be withheld under applicable federal and/or state income tax
laws as a result of the exercise; and
(ii) if the Rights holder is then a Section 16(b) Person who has made an
Election, the related Rights may not be exercised, nor may any shares of
Stock issued pursuant thereto be sold, exchanged or otherwise transferred,
unless such exercise, or such transaction, complies with an exemption from
Section 16(b) provided under Rule 16b-3.
SECTION 11.4 INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as Directors or members of the Committee, and
to the extent allowed by applicable law, the Administrators shall be indemnified
by the Company against the reasonable expenses, including attorney's fees,
actually incurred in connection with any action, suit or proceeding or in
connection with any appeal therein, to which they or any one of them may be
party by reason of any action taken or failure to act under or in connection
with the Plan or any option granted under the Plan, and against all amounts paid
by them in settlement thereof (provided that the settlement has been approved by
the Company, which approval shall not be unreasonably withheld) or paid by them
in satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Administrator did not act in good faith and in a manner
which such person reasonably believed to be in the best interests of the
Company, and in the case of a criminal proceeding, had no reason to believe that
the conduct complained of was unlawful; provided, however, that within 60 days
after institution of any such action, suit or proceeding, such Administrator
shall, in writing, offer the Company the opportunity at its own expense to
handle and defend such action, suit or proceeding.
SECTION 11.5 LOANS. The Company may make loans to Optionees (other than
Directors who are not also employees or officers of the Company) as the
Administrator, in its discretion, may determine in connection with the exercise
of outstanding Stock Options granted under the Plan. Such loans shall (i) be
evidenced by promissory notes entered into by the holders in favor of the
Company; (ii) be subject to the terms and conditions set forth in this Section
11.5 and such other terms and conditions, not inconsistent with the Plan, as the
Administrator shall determine; and (iii) bear interest, if any, at such rate as
the Administrator shall determine. In no event may the principal amount of any
such loan exceed the Exercise Price less the par value, if any, of the shares of
Stock covered by the Stock Option, or portion thereof, exercised by the
Optionee. The initial term of the loan, the schedule of payments of principal
and interest under the loan, the extent to which the loan is to be with or
without recourse against the holder with respect to principal and applicable
interest and the conditions upon which the loan will become payable in the event
of the holder's termination of employment shall be determined by the
Administrator; provided, however, that the term of the loan, including
extensions, shall not exceed 10 years. Unless the Administrator determines
otherwise, when a loan shall have been made, shares of Stock having a Fair
Market Value at
13
least equal to the principal amount of the loan shall be pledged by the holder
to the Company as security for payment of the unpaid balance of the loan and
such pledge shall be evidenced by a security agreement, the terms of which shall
be determined by the Administrator, in its discretion; provided, however, that
each loan shall comply with all applicable laws, regulations and rules of the
Board of Governors of the Federal Reserve System and any other governmental
agency having jurisdiction.
SECTION 11.6 SPECIAL TERMINATING EVENTS. If a Special Terminating Event
occurs, all Rights theretofore granted to such Rights holder may, unless earlier
terminated in accordance with their terms, be exercised by the Rights holder or
by his or her estate or by a person who acquired the right to exercise such
Rights by bequest or inheritance or otherwise by reason of the death or
Disability of the Rights holder, at any time within one year after the date of
the Special Terminating Event.
SECTION 11.7 TERMINATION OF EMPLOYMENT. Except as provided in Section 11.6
or this Section 11.7, Rights may not be exercised unless the Rights holder is
then a Director, or in the employ of the Company or any Parent or Subsidiary, or
rendering services as a consultant to the Company or any Parent or Subsidiary,
and unless he or she has remained continuously so employed or engaged since the
Date of Grant. If the employment or services of a Rights holder shall terminate
(other than by reason of a Special Terminating Event), all Rights previously
granted to the Rights holder which are exercisable at the time of such
termination may be exercised for the period ending 90 days after such
termination, unless otherwise provided in the Stock Option Agreement or SAR
Agreement; provided, however, that if the employment or services of a Rights
holder is terminated "for cause," such Rights may be exercised for the period
ending 30 days after such termination; provided, further, that no Rights may be
exercised following the date of their expiration. Nothing in the Plan or in any
Rights granted pursuant to the Plan shall confer upon an employee any right to
continue in the employ of the Company or any Parent or Subsidiary or interfere
in any way with the right of the Company or any Parent or Subsidiary to
terminate such employment at any time.
SECTION 11.8 NON-TRANSFERABILITY OF RIGHTS. Each Stock Option Agreement
and SAR Agreement shall provide that the Rights granted under the Plan shall not
be transferable otherwise than by will or by the laws of descent and
distribution, and the Rights may be exercised, during the lifetime of the Rights
holder, only by the Rights holder or by his or her guardian or legal
representative.
SECTION 11.9 REGULATORY MATTERS. Each Stock Option Agreement and SAR
Agreement shall provide that no shares shall be purchased or sold thereunder
unless and until (i) any then applicable requirements of state or federal laws
and regulatory agencies shall have been fully complied with to the satisfaction
of the Company and its counsel; and (ii) if required to do so by the Company,
the Optionee or Grantee shall have executed and delivered to the Company a
letter of investment intent in such form and containing such provisions as the
Administrator may require.
SECTION 11.10 RECAPITALIZATIONS. Each Stock Option Agreement and Stock
Purchase Agreement shall contain provisions required to reflect the provisions
of Article 9.
SECTION 11.11 DELIVERY. Upon exercise of Rights granted under this Plan,
the Company shall issue Stock or pay any amounts due within a reasonable period
of time thereafter. Subject to any statutory obligations the Company may
otherwise have, for purposes of this Plan, 30 days shall be considered a
reasonable period of time.
SECTION 11.12 RULE 16B-3. With respect to persons subject to Section 16 of
the Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To
the extent any provision of the Plan or action by the Administrator fails to so
comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Administrator.
14
SECTION 11.13 OTHER PROVISIONS. The Stock Option Agreements and SAR
Agreements authorized under the Plan may contain such other provisions not
inconsistent with this Plan, including, without limitation, restrictions upon
the exercise of the Rights, as the Administrator may deem advisable.
ARTICLE 12
EFFECTIVE DATE OF PLAN
The Plan shall become effective on the date on which the Plan is adopted by
the Board, subject to approval by the Company's shareholders, which approval
must be obtained within one year from the date the Plan is adopted by the Board.
ARTICLE 13
TERM OF PLAN
No Rights shall be granted pursuant to the Plan on or after March 31, 2005,
but Rights theretofore granted may extend beyond that date.
ARTICLE 14
INFORMATION TO RIGHTS HOLDERS
The Company will cause a report to be sent to each Rights holder not later
than 120 days after the end of each fiscal year. Such report shall consist of
the financial statements of the Company for such fiscal year and shall include
such other information as is provided by the Company to its shareholders.
15
TAITRON COMPONENTS INCORPORATED
PROXY FORSOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
The undersigned, a Shareholder of TAITRON COMPONENTS INCORPORATED
a
California corporation (the "Company"), hereby appoints STEWART WANGJUNE 11, 1999
Please Detach and DAVID M. BATT, and each of them,Mail in the proxies of the undersigned, each with
full power of substitution, to attend, vote and act for the undersigned at
the Annual Meeting of Shareholders of the Company, to be held on May 15, 1998
and any postponements or adjournments thereof, andEnvelope Provided
Please mark your
A / X / votes as in connection herewith, to
vote and represent all of the shares of the Company which the undersigned
would be entitled to vote as follows:
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE USING
DARK INK ONLY.this
example.
WITHHOLD The Board of Directors
AUTHORITY TO VOTE FOR recommends a WITH vote on
THE NOMINEES Proposal 1 and for vote on Proposal 2.
WITHOUT Authority to vote for1.
LISTED AT RIGHT
WITH the nominee listed below.
1. ELECTION OF Nominees: Tzu Sheng (Johnson) Ku
DIRECTORS, as / / / / Stewart Wang
provided in the Richard Chiang
Company's Proxy Statement: Winston Gu
Felix M. Sung
(INSTRUCTIONS: TO WITHHOLD AUTHORITY FOR THE
NOMINEE,NOMINEES, LINE THROUGH OR OTHERWISE STRIKE OUT
NAME BELOW.SAME AT RIGHT.)
Tzu Sheng (Johnson) Ku Stewart Wang Richard Chiang Winston Gu Felix M. Sung
FOR AGAINST ABSTAIN
2. APPROVAL OF AMENDMENT TO THE / / / / / /
COMPANY'S STOCK INCENTIVE PLAN,
as provided in the Company's
Proxy Statement:
Authority to vote to increase the number of shares which may be issued under
the Plan from 440,000 to 740,000 shares.
Please indicate by checking this box if you anticipate / /
anticipate
attending the Annual Meeting.Meeting
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF TAITRON COMPONENTS INCORPORATED
The undersigned hereby revokes any other proxy to vote at such Meeting and
hereby ratifies and confirms all that said attorneys and proxies, and each of
them, may lawfully do by virtue hereof. With respect to matters not known at
the time of the solicitation hereof, said proxies are authorized to vote in
accordance with their best judgment.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH
ABOVE. THIS PROXY WILL BE TREATED AS AThis Proxy will be voted in accordance with the instructions set forth
above. This Proxy will be treated as a GRANT OF AUTHORITY TO VOTE FOR THE
ELECTION OF THE DIRECTORS NAMED AND TO VOTE FOR THE APPROVAL OF THE AMENDMENT
TO THE COMPANY'S 1995 STOCK INCENTIVE PLAN AND AS SAID PROXY SHALL DEEM
ADVISABLE ON SUCH OTHER BUSINESS AS MAY COME BEFORE THE MEETING, UNLESS
OTHERWISE DIRECTED.the
election of the Directors named and as said proxy shall deem advisable on
such other business as may come before the Meeting, unless otherwise directed.
The undersigned acknowledges receipt of a copy of the Notice of Annual
Meeting and accompanying Proxy Statement dated April 29, 1998May 11, 1999 relating to the
Meeting.
Dated: , 1998
- --------------------------- ---------------------------- ----------
Signature(s) of ShareholderShareholders(s): ______________________________________
Signature(s) of Shareholder
(See Instructions Below)Shareholder(s): _______________________ Dated _________, 1999
NOTE: The signature(s) hereon should correspond exactly with the name(s)names(s) of
the Shareholder(s) appearing on the Share Certificate. If stock is jointly
held, all joint owners should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If signer
is a corporation, please sign the full corporationcorporate name and give title of
signing officer.
TAITRON COMPONENTS INCORPORATED
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
The undersigned, a Shareholder of TAITRON COMPONENTS INCORPORATED, a
California corporation (the "Company"), hereby appoints STEWART WANG and
STEVEN H. DONG, and each of them, the proxies of the undersigned, each with
full power of substitution, to attend, vote and act for the undersigned at
the Annual Meeting of Shareholders of the Company, to be held on June 11,
1999 and any postponements or adjournments thereof, and in connection herewith
to vote and represent all of the shares of the Company which the undersigned
would be entitled to vote as follows:
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)