21
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
Value of
Unexercised
Number of In-the-Money
Options/SARs Options/SARs
At Fiscal At Fiscal
Year End (#) Year End (#)
Shares
Name and Acquired on Value Exercisable Exercisable
Principal Position Exercise (#) Realized ($) Unexecisable Unexecisable
------------------ ------------ ------------ ------------ ------------
Marvin Maslow -0- N/A 1,375,000 Exercisable 0/0
Chief Executive Officer,
Chairman of the Board
Of Directors
Martin Holleran, -0- N/A 1,250,000 Exercisable 0/0
President and Chief
Operating Officer
Martin Fife, -0- N/A 150,000 Exercisable 0/0
Vice Chairman of the
Board of Directors
Jules Zimmerman, -0- N/A 120,000 Exercisable 0/0
Chief Financial Officer
And Director
Sherman Langer -0- N/A 152,000 Exercisable 0/0
Senior Vice President
Of Marketing and
Sales and Director
Craig Fields, -0- N/A 150,000 Exercisable 0/0
Director
Richard Hickok, -0- N/A 100,000 Exercisable 0/0
Director
Arthur Lipper III -0- N/A 100,000 Exercisable 0/0
Director
22
Executive Employment Agreements
The Company entered into an employment agreement in July 1990 with Marvin
Maslow to serve as Chief Executive Officer of the Company. Mr. Maslow's
employment agreement, which was to initially expire in July, 1995, was
automatically extended in January 1995 by its terms for an additional 30 months.
That employment agreement was terminated and replaced with a new executive
employment agreement effective March 1, 1997 The term of Mr. Maslow's new
employment agreement is six (6) years with a two-year extension, and it contains
change in control provisions.
The Company entered into a three (3) year employment agreement with Mr.
Martin Holleran in November 1993 to serve as the Company's President and Chief
Operating Officer at a salary of $180,000 per year. Upon the expiration of this
agreement (which was orally extended by the parties subsequent to its term), the
Company entered into a new executive employment agreement with Mr. Holleran
effective March 1, 1997. The term of Mr. Holleran's new executive employment
agreement is six (6) years with a two-year extension, and it contains change in
control provisions.
Effective January 1, 1997, the Company entered into an executive
employment agreement with Mr. Sherman Langer. The term of Mr. Langer's
employment agreement is three (3) years and provides for a salary of $165,000
per year and also contains certain change in control provisions.
Each of Messrs. Maslow, Holleran and Langer have agreed not to compete
with the Company during the term of his respective employment agreement or for a
period of two years after the termination thereof. All of the executive
employment agreements contain termination for cause provisions.
Subsequent to the closing of the Company's initial public offering in
1990, the Company retained Jules Zimmerman as Chief Financial Officer of the
Company. In connection therewith, the Company entered into a consulting
agreement with Mr. Zimmerman and Hickok Associates whereby the Company is billed
on an hourly basis for the work performed by Mr. Zimmerman. Hickok Associates
discontinued operations as of December 31, 1996. Since that time Mr. Zimmerman
has continued to provide his services to the Company as Chief Financial Officer
on an hourly basis.
Indemnification Agreements
The Company has entered into an Indemnification Agreement with each of its
Directors and any officer, employee, agent or fiduciary designated by the Board
of Directors which provides that the Company indemnify the Director or other
party thereto to the fullest extent permitted by applicable law. The agreement
includes indemnification, to the extent permitted by applicable law, against
expenses, including reasonable attorneys' fees, judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with any civil or criminal action or administrative proceeding arising out of
the indemnitee's performance of his duties as a Director or officer of the
Company. Such indemnification is available if the indemnitee acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Company, and, with respect to any criminal action, had no
reasonable cause to believe his conduct was unlawful.
Under the Indemnification Agreement, the entitlement of a Director or
officer to indemnification will be determined by a majority vote of a quorum of
disinterested Directors, or if such quorum either is not obtainable or so
directs, by independent counsel or by the stockholders of the Company, as
determined by such disinterested Directors. If a change of control of the
Company has occurred, the entitlement of such Director or officer to
indemnification shall be determined by independent counsel selected by such
Director or officer, unless such Director or officer requests that either the
Board or the stockholders make such determination.
23
Each Indemnification Agreement will require the Company to advance
litigation expenses at the request of the Director or officer who is a party
thereto whether prior to or after final resolution of a proceeding, provided
that he undertakes to repay such advances if it is ultimately determined that he
is not entitled to indemnification for his expense. The advance of litigation
expenses will thereby be mandatory upon satisfaction of certain conditions by
such Director or officer.
The Company has entered into an Indemnification Agreement with all of its
Directors and officers. In addition, upon Dr. Fields' forming the Company's
Board of Directors, the Company also agreed to indemnify Dr. Fields with respect
to the aforementioned litigation relating to Tamarack during the period prior to
Dr. Fields' joining the Company's Board of Directors. The Company has obtained
officers' and directors' liability insurance which provides a maximum of
$4,000,000 of coverage, subject to a $100,000 deductible payable by the Company
except under certain circumstances for securities related matters in which case
the deductible is $200,000. Any payments made by the Company under an
Indemnification Agreement which are not covered by the insurance policy may have
an adverse impact on the Company's earnings.
Stock Option Plans and Agreements
Incentive Option Plan - In February 1990, the Directors of the Company
adopted and the stockholders of the Company approved the adoption of the
Company's 1990 Incentive Stock Option and Appreciation Plan which was amended in
June and July 1990. The purpose of the Incentive Option Plan is to enable the
Company to encourage key employees and Directors to contribute to the success of
the Company by granting such employees and Directors incentive stock options
("ISOs"), as well as non-qualified options and options and stock appreciation
rights ("SARs"). In November of 1993, a majority of the stockholders of the
issued and outstanding shares of common stock voted in favor of increasing the
number of shares with respect to which options and SARs may be granted under the
Incentive Option Plan from 400,000 to 1,000,000.
The Incentive Option Plan will be administered by the Board of Directors
which will determine, in its discretion, among other things, the recipients of
grants, whether a grant will consist of ISOs, non-qualified options or SARs (in
tandem with an option or freestanding) or a combination thereof, and the number
of shares to be subject to such options and SARs.
The Incentive Option Plan provides for the granting of ISOs to purchase
Common Stock at an exercise price not less than the fair market value of the
Common Stock on the date the option is granted. Non-qualified options and
freestanding SARs may be granted with any exercise price. SARs granted in tandem
with an option have the same exercise price as the related option.
The total number of shares with respect to which options and SARs may be
granted under the Incentive Option Plan is 1,000,000. ISOs may not be granted to
an individual to the extent that in the calendar year in which such ISOs first
become exercisable the shares subject to such ISOs have a fair market value on
the date of grant in excess of $100,000. No option or SAR may be granted under
the incentive Option Plan after February 20, 2000 and no option or SAR may be
outstanding for more than ten years after its grant.
Upon the exercise of an option, the holder must make payment of the full
exercise price. Such payment may be made in cash or in shares of Common Stock
(based on the fair market value of the Common Stock on the date prior to
exercise), or in a combination of both. The Company may lend to the holder of an
option funds sufficient to pay the exercise price, subject to certain
limitations. SARs may be settled, in the Board of Directors' discretion, in
cash, Common Stock, or in a combination of cash and Stock. The exercise of SARs
cancels the corresponding number of shares subject to the related option, if
any, and the exercise of an option cancels any associated SARs. Subject to
certain exceptions, options and SARs may be exercised any time up to three
months after termination of the holder's employment.
The Incentive Option Plan may be terminated or amended at any time by the
Board of Directors, except that, without stockholder approval, the Incentive
Option Plan may not be amended to increase the number of shares subject to the
Incentive Option Plan, change the class of persons eligible to receive options
or SARs under the Incentive Option Plan or materially increase the benefits of
participants.
To date no options or SARs have been granted under the Incentive Option
Plan. No determinations have been made regarding the persons to whom options or
SARs will be granted in the future, the number of shares which will be subject
to such options or SARs or the exercise prices to be fixed with respect to any
option or SAR.
24
Non-Qualified Option Plan - In February 1990, the Directors and
stockholders of the Company adopted the 1990 Non-Qualified Stock Option Plan
which was amended in June and July 1990. The purpose of the Non-Qualified Option
Plan is to enable the Company to encourage key employees, Directors and
consultants to contribute to the success of the Company by granting such
employees, Directors and consultants non-qualified options. The Non-Qualified
Option Plan will be administered by the Board of Directors in the same manner as
the Incentive Option Plan.
The Non-Qualified Option Plan provides for the granting of non-qualified
options at such exercise price as may be determined by the Board of Directors,
in its discretion. In November of 1993, a majority of the stockholders of the
issued and outstanding shares of common stock voted in favor of increasing the
number of shares with respect to which options and SARs may be granted under the
Incentive Option Plan from 400,000 to 1,000,000 and with respect to which
options may be granted under the Non-Qualified Plan from 1,500,000 to 5,000,000.
Upon the exercise of an option, the holder must make payment of the full
exercise price. Such payment may be made in cash or in shares of Common Stock
(based on the fair market value of the Common Stock on the date prior to
exercise), or in a combination of both. The Company may lend to the holder of an
option funds sufficient to pay the exercise price, subject to certain
limitations. Subject to certain exceptions, options may be exercised any time up
to three months after termination of the holder's employment.
The Non-Qualified Option Plan may be terminated or amended at any time by
the Board of Directors, except that, without stockholder approval, the
Non-Qualified Option Plan may not be amended to increase the number of shares
subject to the Non-Qualified Option Plan, change the class of persons eligible
to receive options under the Non-Qualified Option Plan or materially increase
the benefits of participants.
As of December 31, 1997, an aggregate of 4,302,833 options have been
granted under the Non-Qualified Option Plan. Through December 31, 1997, 230,000
non-qualified options have been exercised.
Performance Graph
[The following table was depicted as a line graph in the printed material.]
--------------------------------------------------------------------------------
12/31/92 12/31/93 12/30/94 12/29/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
100.0 208.0 81.5 89.8 48.5 18.3
100.0 114.8 112.2 158.7 195.2 239.6
100.0 163.0 184.9 286.9 318.1 340.4
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading,
the previous trading day is used.
D. The index level for all series was set to $100.00 on 12/31/92.
--------------------------------------------------------------------------------
25
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of March 24, 1997,
known to the Company regarding beneficial ownership of the Company's Common
Stock by: (i) any holder of more than five percent of the outstanding shares;
(ii) the Company's directors; and (iii) the directors and officers of the
Company as a group:
Shares Percentage Shares Percentage
of (%) of of (%) of
Common Total Preferred Total
Stock Common Stock Preferred
Name Owned(1)(2) Stock(3) Owned Stock
---- ----------- -------- --------- ---------
Martin D. Fife (4) 211,668 1.0% -0- -0-
405 Lexington Avenue
New York, NY 10174
Richard S. Hickok (5) 105,000 .5% -0- -0-
11 Deep Pond Circle
South Orlenas, MA 02662
Marvin Maslow (6) 1,403,073 6.6% 25,000 7.1%
Projectavision, Inc.
Two Penn Plaza
Suite 640
New York, NY 10121
Jules Zimmerman (7) 120,000 .6% -0- -0-
20 West 64th Street
New York, NY 10023
Martin Holleran (8) 1,300,000 6.1% -0- -0-
Projectavision, Inc. %
Two Penn Plaza
Suite 640
New York, NY 10121
Dr. Craig I. Fields (9) 150,000 .7% -0- -0-
1101 30th Street, N.W
Suite 500
Washington, D.C. 20007
Sherman Langer (10) 152,000 .7% -0- -0-
Projectavision, Inc.
Two Penn Plaza
Suite 640
New York, NY 10121
Arthur Lipper, III -0- -0- -0- -0-
14911 Carninito Ledera
Del Mar, CA 92014
All Directors, Nominees and Officers Group
(consisting of 7 persons) (4)(5)(6)(7)
(8)(9)(10) 3,441,741 16.2% 25,000 7.1%
(1) Except as otherwise indicated, all shares of Common Stock are beneficially
owned, and sole investment and voting power is held, by the persons named.
(2) Gives effect to the reverse stock split of one-for-11.3467611 shares of
Common Stock in February, 1990, two-for-three shares of Common Stock in
July, 1990, and two-for-one stock split in March, 1992.
(3) In accordance with Rule 13d-3(d), includes in addition to 21,279,935
shares of the Company's Common Stock outstanding, all of the shares of
Common Stock issuable upon the issuance of options held by officers and
directors within sixty (60) days.
26
(4) Includes 150,000 non-qualified options granted to and beneficially owned
by Mr. Fife to acquire 150,000 shares of Common Stock. Does not include
100 shares of non-voting Series A Preferred Stock issued to Mr. Fife.
(5) Includes 100,000 non-qualified options granted to and beneficially owned
by Mr. Hickok to acquire an aggregate of 100,000 shares of Common Stock of
the Company.
(6) Includes (i) 1,375,000 shares of Common Stock subject to 1,375,000
non-qualified stock options. Does not include 4,038 shares of Common Stock
owned by Mr. Maslow's adult child. Mr. Maslow disclaims beneficial
ownership of the shares of Common Stock owned by his adult child. Mr.
Maslow received 25,000 shares of Series B Preferred Stock on May 15, 1992
for services rendered in the second quarter of 1992.
(7) Includes 120,000 non-qualified options granted to and beneficially owned
by Mr. Zimmerman to acquire 120,000 shares of the Company's Common Stock.
(8) Includes 1,250,000 non-qualified options granted to and beneficially owned
by Mr. Holleran to acquire 1,250,000 shares of the Company's Common Stock.
(9) Includes 150,000 non-qualified options granted to and beneficially owned
by Dr. Fields to acquire 150,000 shares of the Company's Common Stock.
(10) Includes 152,000 non-qualified options granted to and beneficially owned
by Mr. Langer to acquire 152,000 shares of the Company's Common Stock.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Through July 31, 1995 the Company made advances of approximately $300,000
to another entity, whose president is the brother of Martin Holleran, the
Company's President and Chief Operating Officer, in contemplation of making an
investment in such other entity. The Company ultimately did not make such an
investment and the advance was fully reserved for on the Company's financial
statements as of December 31, 1995. In November, 1996, $109,166 of the advance
was repaid to the Company as a final settlement of amounts advanced.
27
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