SCHEDULE 14a
(RULE 14a-101)
INFORMATION REQUIRED IN A PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box: [ ] Confidential For
Use of the
[X] Preliminary Proxy Statement Commission Only (as
Permitted by Rule
[ ] Definitive Proxy Statement 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11 (c) or Rule 14a-12
COMPUTERIZED THERMAL IMAGING, INC.
(Name of Registrant as Specified in Its Charter)
__________________________________
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee: (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rule 14a-6(I)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of the filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
COMPUTERIZED THERMAL IMAGING, INC.
TWO CENTERPOINTE DRIVE, SUITE 450
LAKE OSWEGO, OREGON 97035
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 12, 2002
To the Shareholders of Computerized Thermal Imaging, Inc.:
The Company will hold its Annual Meeting of Shareholders (the "Annual
Meeting") in the in the Board Room of The American Stock Exchange, 86 Trinity
Place, New York, NY 10006, on December 12, 2002 at 1:00 P.M. local time for the
following purposes:
(1) To elect six (6) directors, each to serve until the next
Annual Meeting or until a successor has been elected;
(2) To enact amendments to our 1997 Stock Option and Restricted
Stock Plan;
(3) To ratify the appointment of the Company's independent
accountants for the fiscal year ending June 30, 2003; and
(4) To transact any other business as may properly come before the
meeting.
All holders of common stock of record at the close of business on
October 28, 2002, will be entitled to vote at the Annual Meeting or any
postponements or adjournments thereof.
You are cordially invited to attend the Annual Meeting. Whether or not
you plan to attend the Annual Meeting, please sign, date, and return your proxy
to us promptly. Your cooperation in signing and returning the proxy will help
avoid further solicitation expense.
IF YOU PLAN TO ATTEND:
Registration will begin at 12:00 P.M. and seating will begin at 12:30
P.M. Each shareholder may be asked to present valid picture identification, such
as a driver's license or passport. Shareholders holding stock in brokerage
accounts ("street name" holders) will need to bring a copy of a brokerage
statement reflecting stock ownership as of the record date. Cameras, recording
devices, and other electronic devices will not be permitted at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Richard V. Secord
-------------------------------------
Richard V. Secord
Chairman of the Board and CEO
October 25, 2002
Lake Oswego, Oregon
COMPUTERIZED THERMAL IMAGING, INC.
TWO CENTERPOINTE DRIVE, SUITE 450
LAKE OSWEGO, OREGON 97035
___________________
PROXY STATEMENT
___________________
SOLICITATION AND REVOCABILITY OF PROXY
This Proxy Statement is furnished to Shareholders in connection with
the solicitation of proxies by and on behalf of the Board of Directors of
Computerized Thermal Imaging, Inc., a Nevada corporation, for use at the Annual
Meeting of Shareholders to be held in the Board Room of The American Stock
Exchange, 86 Trinity Place, New York, NY 10006, on December 12, 2002 at 1:00
P.M. local time, and at any postponements and adjournments thereof, for the
purpose of considering and voting upon the matters set forth in the accompanying
Notice of Annual Meeting of Shareholders. This Proxy Statement and the
accompanying form of Proxy are first being mailed to Shareholders on or about
November 11, 2002. The cost of preparing, printing and mailing this Proxy
Statement and of the solicitation of proxies by the Company will be borne by the
Company.
The close of business on October 28, 2002, has been fixed as the record
date for the determination of Shareholders entitled to notice of, and to vote
at, the Annual Meeting and any postponements and adjournment thereof. As of the
record date, there are 83,630,515 shares of common stock, par value $0.001 per
share, issued and outstanding. Each share of common stock is entitled to one
vote with respect to each matter to be voted on at the Annual Meeting.
The presence, in person or by proxy, of a majority of the total
outstanding shares of common stock on the record date is necessary to constitute
a quorum at the Annual Meeting.
Assuming the existence of a quorum:
o The six nominees receiving the most votes, even if less than a
majority of the shares of common stock, cast in person or by
proxy will be elected. Shareholders may not cumulate their
votes for the election of Directors;
o The proposed amendments to the Company's 1997 Stock Option and
Restricted Stock Plan will become effective if approved by the
holders of a majority of the shares of common stock cast in
person or by proxy; and
o The decision of the Board of Directors to appoint Deloitte &
Touche will be ratified if approved by a majority of the votes
cast in person or by proxy.
All shares represented by properly executed proxies, unless such
proxies have been previously revoked, will be voted at the Annual Meeting in
accordance with the directions on the proxies. If no direction is indicated, the
shares will be voted (i) FOR THE ELECTION OF THE NOMINEES NAMED HEREIN, (ii) FOR
THE PROPOSAL TO AMEND THE 1997 STOCK OPTION AND RESTRICTED STOCK PLAN, AND (iii)
FOR THE RATIFICATION OF DELOITTE & TOUCHE, LLP AS INDEPENDENT ACCOUNTANTS FOR
THE FISCAL YEAR ENDING JUNE 30, 2003.
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The Board of Directors is not aware of any other matters to consider at
the Annual Meeting. However, if any other matter is properly presented at the
Annual Meeting, it is the intention of the persons named in the enclosed proxy
to vote in accordance with their best judgment on such matters.
A proxy may be revoked at any time prior to the Annual Meeting (a) by
execution and submission of a revised proxy prior to the time the vote is taken,
(b) by written notice received by our Secretary at our corporate headquarters,
Two Centerpointe Drive, Suite 450, Lake Oswego, OR 97035, prior to December 11,
2002, or (c) by attending the Annual Meeting and voting in person (although
attendance at the Annual Meeting will not in and of itself constitute a
revocation of a proxy).
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PROPOSAL NUMBER 1: TO ELECT SIX (6) DIRECTORS FOR THE ENSUING YEAR.
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NOMINEES FOR DIRECTORS
The persons named in the enclosed Proxy have been selected by the Board
of Directors to serve as Proxies and will vote the shares represented by valid
proxies at the Annual Meeting of Shareholders and adjournments thereof. They
have indicated that, unless otherwise specified in the Proxy, they intend to
elect as directors the nominees listed below. All of the nominees are presently
members of the Board of Directors. The directors are elected at the Annual
Meeting to serve until the next Annual Meeting and their successors are elected
and qualified.
Unless otherwise instructed or unless authority to vote is withheld,
the enclosed Proxy for the election of the Board representatives will be voted
for the nominees listed below. Although our Board of Directors does not
contemplate that any of the nominees will be unable to serve, if such a
situation arises prior to the Annual Meeting, the persons named in the enclosed
Proxy will vote for the election of such other person(s) as may be nominated by
the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS SHAREHOLDERS VOTE FOR THE ELECTION
OF ITS NOMINEES FOR DIRECTOR. The following briefly describes the Company's
nominees for directors:
RICHARD V. SECORD DIRECTOR SINCE FEBRUARY 1996
GENERAL SECORD, age 70, (Major General, United States Air Force, retired) has
served as our Chairman and Chief Executive Officer since September 22, 2000, and
is Chairman of our Executive Committee. General Secord served as our Vice
Chairman from July 1, 1997 through September 21, 2000, as our Secretary from
July 1, 1997 to June 27, 2000, as our President from February 1996 to April 1997
and as our Chief Operating Officer from June 1995 to December 1999. General
Secord served in numerous positions while performing military service from July
1951 until June 1984. General Secord received a Bachelor of Science degree from
the United States Military Academy. General Secord is also a graduate of the
United States Air Force Command and Staff College and the United States Naval
War College. General Secord holds a Masters degree in International Affairs from
George Washington University.
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JOHN M. BRENNA DIRECTOR SINCE MARCH 2001
MR. BRENNA, age 56, has been a director and our President and Chief Operating
Officer since March 2001, and is a member of our Executive Committee. From
October 2000 until March 2001, Mr. Brenna served as our Executive Vice
President. From 1986 until 1996, Mr. Brenna was employed by Phillips Medical
Systems marketing cardiovascular and general X-ray systems for Phillip's North
America operations. From 1996 until 1999, Mr. Brenna was Executive Vice
President of Marketing of Trex Medical, a Thermo-Electron company. During that
time period, Mr. Brenna also was President and Chief Operating Officer of the
LORAD division of Trex Medical, which specializes in advanced breast imaging and
stereotactic biopsy systems. Following Mr. Brenna's employment with Trex Medical
and up to the time that he joined us, Mr. Brenna was an independent consultant.
Mr. Brenna holds a Bachelor of Science degree from University of New Haven.
BRENT M. PRATLEY, M.D. DIRECTOR SINCE JUNE 1995
DR. PRATLEY, age 66, has been a director since June 1995 and is a member of our
Audit Committee. Dr. Pratley served as our Secretary from June 1994 to September
1997. Dr. Pratley is currently licensed to practice medicine in Utah and
California. Since 1978, Dr. Pratley has been in private practice in General
Orthopedics and Sports Medicine at Utah Valley Regional Medical Center located
in Provo, Utah, as well as in Los Angeles, California. Dr. Pratley holds a
Doctor of Medicine degree in Orthopedic Surgery from the College of Medicine at
University of California, Irvine and a Bachelors of Science degree from Brigham
Young University.
MILTON R. GEILMANN DIRECTOR SINCE JANUARY 1998
MR. GEILMANN, age 70, retired, has been a director since January 1998 and serves
as a member of our Audit Committee. From 1965 until his retirement in 1992, Mr.
Geilmann worked at E. R. Squibb & Sons where he held many positions, including
Nuclear Consultant for Diagnostic Medicine. Mr. Geilmann holds an Associates
degree in dental science from State University of New York.
HARRY C. ADERHOLT DIRECTOR SINCE JANUARY 1998
GENERAL ADERHOLT, age 82, (Brigadier General, United States Air Force, retired),
has been a director since January 1998 and serves as Chairman of our Audit
Committee. From 1942 until his retirement in 1976, General Aderholt served in
the U.S. Air Force. Since his retirement from military service, General Aderholt
has engaged in various private business ventures, including serving as Vice
President of Air Siam in Bangkok, Thailand. General Aderholt owns and operates
Far East Designs, a furniture importer and retailer in Florida, and is President
of the McCroskie Threshold Foundation, a humanitarian organization that donates
medical supplies, food and clothing to needy people in the U.S. and around the
world.
ROBERT L. SIMMONS, M.D. DIRECTOR SINCE JUNE 2001
DR. SIMMONS, F.A.C.S., F.A.C.C., F.C.C.P., age 70, has been a director since
June 2001. Since 1987, Dr. Simmons has practiced medicine at Providence Hospital
in Washington, D.C., where he also is Vice President of Medical Affairs. Dr.
Simmons has served in many positions including Chief of Cardiovascular/Thoracic
Surgery, Providence Hospital (1984 - 1987); Chief of Clinical Services,
Providence Hospital (1983 - 1987) and Professor of Surgery and Chief - Division
of Thoracic Surgery, Howard University (1977 - 1983). Dr. Simmons holds a
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Bachelor of Science degree in Chemistry (with a minor in Mathematics and
Biology) from Morehouse College and a Doctor of Medicine from Howard University.
Dr. Simmons also is a Candidate for Doctor of Philosophy in Surgery from
University of Minnesota Graduate School.
COMPENSATION OF DIRECTORS
Outside directors receive $5,000 each quarter, $20,000 annually. All
directors are reimbursed for expenses incurred in connection with attending
Board and committee meetings.
BOARD COMMITTEES AND MEETINGS
The Board of Directors held three meetings during the fiscal year ended
June 30, 2002. All Directors were present for at least 75 percent of the
aggregate number of meetings, consents, or committee meetings, if serving on a
Board committee.
COMMITTEES OF THE BOARD
The standing committees of the Board of Directors are the Executive
Committee and the Audit Committee. The full Board of Directors nominates
director candidates.
EXECUTIVE COMMITTEE. The Executive Committee consists of Richard V.
Secord, John M. Brenna and Bernard J. Brady, the Company's Chief Financial
Officer, Secretary and Treasurer. The Executive Committee oversees operations
and all strategic planning. The Executive Committee held three meetings during
our 2002 fiscal year.
AUDIT COMMITTEE. The Audit Committee consists of Brent M. Pratley,
M.D., Milton R. Geilmann and Harry C. Aderholt. The Audit Committee assists the
Board of Directors in fulfilling its oversight responsibilities relating to
corporate accounting, the Company's reporting practices and the quality and
integrity of the Company's financial reports; compliance with law and the
maintenance of ethical standards by the Company; and the Company's maintenance
of effective internal controls.
AUDIT COMMITTEE REPORT
THE AUDIT COMMITTEE REPORT DOES NOT CONSTITUTE SOLICITING MATERIAL AND
SHOULD NOT BE DEEMED FILED OR INCORPORATED BY REFERENCE INTO ANY OTHER COMPANY
FILING UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934,
EXCEPT TO THE EXTENT WE SPECIFICALLY INCORPORATE THIS REPORT BY REFERENCE
THEREIN.
The Audit Committee of the Board is responsible for providing
independent, objective oversight of the Company's accounting functions and
internal controls. The Audit Committee is composed of three or more independent
directors as defined by the SEC and the American Stock Exchange.
Management is responsible for the Company's internal controls and
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Company's financial statements in
accordance with generally accepted auditing standards and to issue a report
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thereon. The Audit Committee's responsibility is to monitor and oversee these
processes.
In connection with these responsibilities, the Audit Committee met with
management and Deloitte & Touche, LLP., the Company's independent accountants,
to review and discuss the June 30, 2002, financial statements. The Audit
Committee discussed with Deloitte & Touche, LLP. the matters required by
Statement on Auditing Standards No. 61, as amended (Communication with Audit
Committees). The Audit Committee also received written disclosures from Deloitte
& Touche, LLP. required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Audit Committee
discussed with Deloitte & Touche, LLP. that firm's independence.
Based upon the Audit Committee's discussions with management and the
independent accountants, and the Audit Committee's review of the representation
of management and the independent accountants, the Audit Committee recommended
that the Board of Directors include the audited financial statements in the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2002, to
be filed with the Securities and Exchange Commission.
The Audit Committee
HARRY C. ADERHOLT, CHAIRMAN
BRENT M. PRATLEY
MILTON R. GEILMANN
EXECUTIVE OFFICERS
Richard V. Secord and John M. Brenna are directors and officers. In
addition to Messrs. Secord and Brenna, Bernard J. Brady is our Chief Financial
Officer, Secretary and Treasurer. These individuals comprise our Executive
Committee.
BERNARD J. BRADY, age 45, was appointed Chief Financial Officer,
Secretary, and Treasurer in June 2001. From January 1995 to June 1999 and from
April 2000 to March 2001, Mr. Brady served as vice president, chief financial
officer, treasurer, and in various other positions for Laser Power Corporation
and its predecessor company Exotic Materials, Inc., a manufacturer of infrared
and laser optics for military and commercial applications. From July 1999 to
April 2000, Mr. Brady was the chief financial officer for DecisionPoint
Applications, Inc., a provider of packaged data warehousing applications. From
February 1997 until June 1998, Mr. Brady served as controller at Atlas Telecom,
where he was recruited to assist in an attempt to solve the company's acute
financial problems. Despite Mr. Brady's efforts, in June 1998, Atlas filed for
reorganization under the bankruptcy code. From 1989 through 1994, Mr. Brady
served as controller at MLX Corp., a nationwide wholesale distributor. Mr. Brady
holds Bachelors and MBA degrees from the University of Utah.
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EXECUTIVE COMPENSATION
THE FOLLOWING MATERIAL DOES NOT CONSTITUTE SOLICITING MATERIAL AND
SHOULD NOT BE DEEMED FILED OR INCORPORATED BY REFERENCE INTO ANY OTHER COMPANY
FILING UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934,
EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY INCORPORATE THIS REPORT BY
REFERENCE THEREIN.
The Board of Directors has furnished the following report on executive
compensation for fiscal 2002.
The Company's compensation program for executives consists of three key
elements:
o a base salary;
o a performance-based annual bonus; and
o periodic grants of stock options and/or restricted stock.
The Board believes that this three-part approach best serves the
interests of the Company and its shareholders. It enables the Company to meet
the requirements of the highly competitive environment in which it operates
while ensuring that executive officers are compensated in a way that advances
both the short- and long-term interest of shareholders. Under this approach,
compensation for our executive officers involves a high proportion of pay that
is "at risk", namely the annual bonus and stock options.
BASE SALARY. Base salaries for our executive officers, other than our
Chief Executive Officer, as well as changes in such salaries, are based upon
recommendations by our Chief Executive Officer, taking into account such factors
as competitive industry salaries, a subjective assessment of the nature of the
position, contribution, and experience of the officer and the length of the
officer's service with the Company. For fiscal 2002, the Board reviewed the
Chief Executive Officer's compensation and did not change General Secord's
salary during the fiscal year. Mr. Brenna's base salary was adjusted during June
2001 and was not subject to review or adjustment by the Board because through
October 2003, his base salary is set forth in his employment agreement. Mr.
Brady's salary was revised during June 2002 and increased pursuant to a
recommendation from the Chief Executive Officer based upon the factors described
above.
ANNUAL BONUS. Annual bonuses for fiscal 2002 paid to our executive
officers, other than our Chief Executive Officer who received no bonus
compensation during the fiscal year, were based upon recommendations by the
Chief Executive Officer, taking into account such factors as are considered in
determining base salary as well as the overall performance and contribution of
each officer. In addition, consideration was given to the need to keep the
Company competitive in overall compensation.
STOCK OPTIONS AND RESTRICTED STOCK. Decisions to grant stock options or
restricted stock are in the sole discretion of the Board, which uses a formula
that awards options based upon the employee's responsibility, annual
compensation and the notional value of an option computed using the
Black-Scholes model.
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CHIEF EXECUTIVE OFFICER COMPENSATION. On April 4, 2001, General
Secord executed a new employment agreement. The term of the agreement is three
years beginning September 18, 2000, which coincided with the expiration of a
previous agreement, and provides annual base compensation of $210,000. The
salary was based upon a review comparing compensation paid to chief executive
officers in our line of business, and was General Secord's first salary increase
since joining the company in 1995. In connection with the agreement, stock
options for 750,000 shares of common stock with an exercise price of $1.50 per
share were granted to General Secord. One-fourth (187,250) of the options vested
immediately and one-fourth of the options vest on each anniversary date of the
agreement. Notwithstanding the foregoing vesting schedule, the vesting of all
options is accelerated to that date on which the price of the Company's common
stock (after taking into consideration all adjustments required to be accounted
for as a result of stock splits, mergers and similar capital transactions)
achieves and sustains a price of $12 or greater for 20 consecutive trading days.
The options granted to General Secord are governed by our 1997 Stock Option and
Restricted Stock Plan. If the employment agreement is terminated for "cause" as
defined in the agreement, or General Secord voluntarily terminates the
agreement, all of the options granted thereunder, and which have not vested,
shall be forfeited. If General Secord is terminated without cause, he is
entitled to a severance package consisting of a minimum payout of the remaining
amounts payable under this Agreement including 18 months paid medical and dental
insurance, or two years salary, whichever is greater, at the time of
termination.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION. Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), limits to $1,000,000 per person
the amount that the Company may deduct for compensation paid to the Company's
Chief Executive Officer and the four highest compensated officers (other than
the Chief Executive Officer) in any year. However, the statute exempts
qualifying performance-based compensation from the deduction limit if certain
requirements are met. The Board currently intends to structure performance-based
compensation, including stock option grants and annual bonuses, to executive
officers who may be subject to Section 162(m) of the Code in a manner that
satisfies those requirements. However, because of ambiguities and uncertainties
as to the application and interpretation of Section 162(m) of the Code and the
regulations issued thereunder, no assurance can be given, notwithstanding our
efforts, that compensation intended to satisfy the requirements for
deductibility under Section 162(m) of the Code does in fact do so. The Board
reserves the authority to award non-deductible compensation in certain
circumstances as they deem appropriate.
BOARD INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Secord and Brenna are executive officers of the Company. None
of the other members of the Board are, or have been, an officer or employee of
the Company, except Dr. Pratley, who was Secretary of the Company from June 1994
to September 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management believes that all prior related-party transactions are on
terms no less favorable to us as could be obtained from unaffiliated third
parties. Management's reasonable belief of fair values is based upon proximate
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similar transactions with third parties or attempts to obtain the consideration
from third parties. All ongoing and future transactions with such persons, if
any, including any loans or compensation to such persons, will be approved by a
majority of disinterested, independent outside members of the Board of
Directors. During 2002, the Company paid a shareholder $79,000. Because of
inadequate documentation, the amount has been recorded as a preferential
dividend to a shareholder in the accompanying statement of stockholders' equity
for the year ended June 30, 2002. The Company also assumed a $100,000 promissory
note due to the same shareholder in connection with settling certain litigation.
EMPLOYMENT AGREEMENTS
RICHARD V. SECORD, our Chairman and Chief Executive Officer, signed an
employment agreement on April 27, 2001. The term of the agreement is three
years, beginning September 18, 2000, and calls for compensation of $210,000 per
year, plus stock options covering 750,000 shares of common stock at an exercise
price of $1.50 per share. One-fourth (187,250) of the options vested immediately
and one-fourth of the options vest on each anniversary date of the agreement. As
of the date of this Proxy Statement, 375,000 of these shares are vested and
fully exercisable. Notwithstanding the foregoing vesting schedule, all options
becomes fully vested and immediately exercisable on that date on which the
Company's common stock price (after taking into consideration all adjustments
required to be accounted for as a result from changes to the Company's stock,
i.e., splits, reverse splits, mergers, etc.) achieves and sustains a price of
$12 or greater for 20 consecutive trading days. The options granted to General
Secord are governed by our 1997 Stock Option and Restricted Stock Plan. If the
employment agreement is terminated for "cause" as defined in the agreement, or
General Secord voluntarily terminates the agreement, all of the options granted
to General Secord thereunder, and which have not vested, shall be forfeited. If
General Secord is terminated without cause, he is entitled to a severance
package consisting of a minimum payout of the remaining amounts payable under
this agreement including 18 months paid medical and dental insurance or two
years salary, whichever is greater, at the time of termination. The agreement:
a) subjects a non-compete restriction that extends for two years after he leaves
employment with the Company; b) provides the Company the right to take advantage
of any business opportunities developed during the term of the agreement; and,
c) creates the duty not to reveal any confidential information about the
business of the Company.
JOHN M. BRENNA, our President and Chief Operating Officer, signed an
employment agreement when he became our Executive Vice President during October
2000. The term of the agreement is three years, beginning October 12, 2000, and
calls for a signing bonus of $150,000, compensation of $200,000 per year, and
stock options covering 500,000 shares of common stock at an exercise price of
$3.60 per share. Upon Mr. Brenna's promotion to President and Chief Operating
Officer, his annual compensation was increased to $210,000 per year and the
exercise price of the options was decreased to $1.50 for options covering
250,000 shares and $2.50 for options covering 125,000 shares. Options covering
the remaining 125,000 shares remain unchanged. One-fourth (125,000) of the
options vested immediately and one-fourth of the options vest on his anniversary
date. As of the date of this Proxy 250,000 options are vested and fully
exercisable. If the employment agreement is terminated for "cause" as defined in
the agreement, or Mr. Brenna voluntarily terminates the agreement, all of the
options granted to Mr. Brenna thereunder, and which have not vested, are
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forfeited. If Mr. Brenna is terminated without cause, he is entitled to a
severance package consisting of a minimum payout of the remainder of the
contracted salary and bonus amount or two years salary, whichever is greater at
the time of termination plus 18 months of medical and dental insurance paid for
by the Company. The agreement: a) subjects a non-compete restriction that
extends for two years after he leaves employment with the Company; b) provides
the Company the right to take advantage of any business opportunities developed
during the term of the agreement; and, c) creates the duty not to reveal any
confidential information about our business.
BERNARD J. BRADY, our Chief Financial Officer, Secretary, and
Treasurer, signed a one-year employment agreement June 6, 2001, which expired by
its terms and was mutually extended by the parties for an additional year and
calls for compensation of $175,000 per year and options to purchase 50,000
shares of common stock at an exercise price of $0.91 per share, which vested
immediately. If the employment agreement is terminated for "cause" as defined in
the agreement, or Mr. Brady voluntarily terminates the agreement, all of the
options granted to Mr. Brady thereunder, and which have not vested, shall be
forfeited. If Mr. Brady is terminated without cause, he is entitled to the
greater of two months salary or the minimum amounts payable through expiration
of the agreement plus not less than six months of medical and dental insurance
paid for by the Company. The agreement: a) subjects a non-compete restriction
that extends for two years after he leaves employment with the Company; b)
provides the Company the rights to take advantage of any business opportunities
developed during the term of the agreement; and, c) creates the duty not to
reveal any confidential information about our business.
EXECUTIVE SEVERANCE AGREEMENTS
The Board of Directors has approved an Executive Severance Agreement
that provides certain "Severance Benefits" as defined in the Agreement for our
executive officers (each an "Executive") in the event the employment of the
Executive is terminated subsequent to a "Change in Control" of the Company under
the circumstances described in the Agreement. The Agreement, once executed,
continues from year-to-year until terminated at the end of any year by written
notice from the Company, unless a Change in Control of the Company has occurred
prior to that date, in which event it shall continue in effect during the 2-year
period immediately following such Change in Control.
Pursuant to the Agreement, a Change in Control of the Company is deemed
to have occurred if (a) any organization, group or person (as defined in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is,
or becomes, the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 35
percent or more of the combined voting power of the then outstanding securities
of the Company; or (b) during any two-year period, a majority of the members of
the Board serving at the effective date of the Agreement is replaced by
directors who are not nominated and approved by the Board; or (c) a majority of
the members of the Board is represented by, appointed by, or affiliated with any
person whom the Board has determined is seeking to effect a Change in Control of
the Company, or (d) the Company is combined with or acquired by another company
and the Board determines, either before such event or thereafter, by resolution,
that a Change in Control will or has occurred.
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If a Change in Control has occurred, the Executive is entitled to
Severance Benefits upon the subsequent involuntary termination, whether actual
or constructive, of the employment of the Executive within the two-year period
immediately following such Change in Control, for any reason other than
termination for cause, disability, death, normal retirement or early retirement.
Pursuant to the Agreement, "Constructive Involuntary Termination" means
voluntary termination of employment by Executive as a result of a significant
change in the duties, responsibilities, reporting relationship, job description,
compensation, perquisites, office or location of employment of Executive without
the written consent of the Executive.
If, following a Change of Control, the Executive's employment by the
Company is terminated other than for cause, disability, death, normal
retirement, or early retirement, the Executive shall, subject to the provisions
of the Agreement, be entitled to:
1) compensation at his or her full annual base salary at the rate in
effect immediately prior to the termination of the employment of the Executive,
and short-term and long-term bonuses at the target levels pursuant to the
Company's annual incentive plan, if any, for the period of two years following
actual involuntary termination or Constructive Involuntary Termination (the
"Salary Continuance Period");
2) all medical and dental benefits and all long-term disability
benefits in which the Executive was entitled to participate immediately prior to
the date of termination, to the same extent as if the Executive had continued to
be an employee of the Company during the Salary Continuance Period, provided
that such continued participation is feasible under the general terms and
provisions of such plans and programs;
3) an immediate vesting of all outstanding stock options, stock
appreciation rights, restricted stock, performance plan awards and performance
shares granted by the Company to the Executive;
4) continued credit for years of service under the benefit plan of the
Company from the date of termination through the Salary Continuance Period, and
any compensation paid to the Executive above shall be treated as salary
compensation for purposes of such plan; and
5) an amount necessary to reimburse the Executive for all legal fees
and expenses incurred by the Executive as a result of the Change in Control of
the Company and such termination of employment, including fees and expenses
incurred in successfully contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by the Agreement.
If the severance benefits provided for under the Agreement, either
alone or together with other payments which the Executive would have the right
to receive from the Company, would constitute a "parachute payment" as defined
in Section 280G(a) of the Internal Revenue Code in effect at the time of
payment, such payment shall, in good faith, be reduced to the largest amount as
will result in no portion being subject to the excise tax imposed by Section
4999 of the Code or the disallowance of a deduction by Company pursuant to
Section 280G of the Code.
As of the date hereof, Severance Agreements have been executed and are
effective for Messrs. Secord, Brenna, and Brady.
10
EXECUTIVE COMPENSATION SUMMARY TABLE
The following table sets forth information concerning total
compensation earned or paid to our Chief Executive Officer and each of our
executive officers who received $100,000 or more in compensation during the
fiscal year for services rendered to the Company during each of the past three
fiscal years and who served in such capacities as of June 30, 2002 (the "named
executive officers").
Summary Compensation Table
For The Fiscal Year Ended June 30, 2002
Long-Term Compensation
Annual Compensation Awards
----------------------------------------------------------------
(1) (2)
Other Restricted Securities All
Name and Principal Annual Stock Underlying Other
Position Year Salary ($) Bonus ($) Compensation($) Award($) Options Compensation ($)
------------------------------------------------------------------------------------------------------------------------
Richard V. Secord, 2002 $ 210,000 $ -- $ 8,400 $ -- $ -- $ --
Chairman & Chief 2001 $ 210,000 $ -- $ 8,400 $ -- $ 750,000 $ 975,894
Executive Officer 2000 $ 175,000 $ -- $ 6,000 $ -- $ -- $ --
John M. Brenna, 2002 $ 210,000 $ 168,000 $ 6,000 $ -- $ 15,000 $ --
President & Chief 2001 $ 143,014 $ 20,000 $ 4,500 $ -- $ 500,000 $ 150,000
Operating Officer 2000 $ -- $ -- $ -- $ -- $ -- $ --
Bernard J. Brady, 2002 $ 140,000 $ 84,000 $ -- $ -- $ 110,000 $ --
Chief Financial 2001 $ 13,417 $ -- $ -- $ -- $ 50,000 $ --
Officer, Secretary 2000 $ -- $ -- $ -- $ -- $ -- $ --
& Treasurer
___________________________________________________________________________
(1) The Company provides the named executive officers with certain
group life, health, medical and other non-cash benefits generally
available to all salaried employees. Such amounts are not included
in this column pursuant to SEC rules. Included in "Other Annual
Compensation" is automobile allowances received by the named
officers.
(2) General Secord's 2001 amount reflects $975,894 of compensation
attributable to the exercise of "in-the-money" employee stock
options. Mr. Brenna's 2001 amount reflects $150,000 signing bonus
paid in connection with his Employment Contract.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to option
grants to our named executive officers during fiscal 2002. The Potential
Realized Value of the options as of their respective dates of grant has been
calculated using the Black-Scholes option pricing model as permitted by SEC
rules based upon a set of assumptions set forth in the footnote to the table.
The Black-Scholes model is only one method of valuing options and our use of the
model should not be interpreted as an endorsement of its accuracy. The actual
value of the options may be significantly different and the value actually
realized, if any, on the exercise of such options will depend upon the excess of
the market value of the common stock over the option exercise price at the time
of exercise.
11
OPTION GRANTS TABLE
FOR THE FISCAL YEAR ENDED JUNE 30, 2002
-------------------------------------------------------------------------------------------------------------
Potential Realized
Value at Assumed Annual
Rates of Stock Price
Appreciation for Grant Date
Individual Grants Option Term Value
-------------------------------------------------------------------------------------
(1) # of % of Total
Securities Options (2) Grant
Underlying Granted to Exercise Date
Options Employees in Price Expiration Present
Name of Officer Granted Fiscal Year ($/Sh) Date 5% ($) 10% ($) Value ($)
-------------------------------------------------------------------------------------------------------------
Richard V. Secord 0 N/A $ N/A N/A $N/A $N/A $N/A
John M. Brenna 15,000 1.51% $1.52 1/14/03 $1,140 $2,280 $6,242
Bernard J. Brady 50,000 5.02% $1.55 1/1/12 $48,739 $123,515 $36,763
10,000 1.00% $1.52 1/14/03 $760 $1,520 $4,161
50,000 5.02% $0.91 6/6/12 $28,615 $72,515 $21,599
____________________________________________________________________________
(1) The Board of Directors, which administers our stock option and
restricted stock plan, has general authority to accelerate,
extend, or otherwise modify benefits under option grants in
certain circumstances within overall plan limits.
(2) The estimated present value at grant date of options granted
during the fiscal year 2002 has been calculated using the
Black-Scholes Option Pricing Model, based on the following
assumptions: a) estimated time to exercise of one to three years;
b) risk free interest rates representing the interest rates on
U.S. Government Treasuries as of the date of grant with maturities
corresponding to the estimated time until exercise; c) volatility
rate of 68%; and d) a dividend yield of 0%. The approach used in
developing the assumptions upon which the Black-Scholes valuations
were calculated is consistent with the requirements of Statement
of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation."
OPTIONS EXERCISED AND VALUES FOR FISCAL 2002
The following table below sets forth information with respect to option
exercises during fiscal 2002 for each of our named executive officers and the
status of their options at June 30, 2002, including:
o The number of shares of Computerized Thermal Imaging, Inc. common
stock acquired upon exercise of options during fiscal year 2002;
o The aggregate dollar value realized upon the exercise of those
options;
o The total number of exercisable and non-exercisable stock options
held at June 30, 2002;
o The aggregate dollar value of in-the-money exercisable options at
June 30, 2002.
12
AGGREGATE OPTION EXERCISES DURING FISCAL 2002
AND
OPTION VALUES ON JUNE 30, 2002
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired on Value Options Exercisable/ Exercisable/
Name of Officer Exercise Realized Unexercisable Unexercisable (1)
-------------------------------------------------------------------------------------------------------
Richard V. Secord, -- -- 3,325,714/375,000 $0/$0
Chairman & Chief
Executive Officer
John M. Brenna, -- -- 265,000/250,000 $0/$0
President & Chief
Operating Officer
Bernard J. Brady, -- -- 89,166/70,834 $0/$0
Chief Financial
Officer, Secretary &
Treasurer
___________________________________________________________________________
(1) In accordance with SEC rules, the values of the unexercised
in-the-money options at June 30, 2002, was determined by
calculating the difference between the exercise price per share of
common stock, as set forth in the respective stock option
agreements, and the closing price per share of common stock on
June 28, 2002, which was $0.63.
We have no long-term incentive plans or defined benefit plans for the
benefit of our executive officers or directors.
PERFORMANCE GRAPH
THE FOLLOWING PERFORMANCE GRAPH DOES NOT CONSTITUTE SOLICITING MATERIAL
AND SHOULD NOT BE DEEMED FILED OR INCORPORATED BY REFERENCE INTO ANY OTHER
COMPANY FILING UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT
OF 1934, EXCEPT TO THE EXTENT WE SPECIFICALLY INCORPORATE THIS PERFORMANCE GRAPH
BY REFERENCE THEREIN.
The following graph compares the cumulative performance of the
Company's common stock with the performance of the Nasdaq Composite Stock Market
Index and the Company's Peer Group for the five-year period extending through
June 30, 2002. In each case, the cumulative performance assumes an initial
investment of $100 and reinvestment of dividends into the same class of equity
securities at the frequency with which dividends are paid on such securities
during the applicable fiscal year. The Company's peer group consists of seven
companies including Fischer Imaging Corporation (NasdaqNM:FIMG), Hologic, Inc.
(NasdaqNM:HOLX), Elscint Limited (NYSE:ELT), Applied Biosystems Group
(NYSE:ABI), Bio-logic Systems Corp. (NasdaqNM:BLSC), Thermo Electron Corp.
(NYSE:TMO), and FLIR Systems, Inc. (NasdaqNM:FLIR). Each of the foregoing
companies comprising the peer group are participants in the medical/diagnostic
equipment line-of-business with the exception of FLIR Systems, Inc. FLIR
Systems, Inc. designs, manufactures, and markets thermal imaging products for a
wide variety of industrial applications. FLIR is included in the peer group to
reflect the Company's segment focused on the industrial application of thermal
imaging.
13
COMPUTERIZED THERMAL IMAGING, INC. COMMON STOCK (CIO)
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
BASED ON REINVESTMENT OF $100 BEGINNING JUNE 30, 1997
[COMPARISON GRAPH HERE]
Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02
------- ------- ------- ------- ------- -------
CIO $ 100 $ 160 $ 111 $1,110 $ 424 $ 122
Nasdaq $ 100 $ 131 $ 186 $ 275 $ 150 $ 101
Peer Group $ 100 $ 84 $ 100 $ 66 $ 56 $ 61
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents certain information regarding the
beneficial ownership of all shares of common stock at September 20, 2002, for
each of our named executive officers and directors, for each person known to us
who owns beneficially more than 5 percent of the outstanding common stock, and
our named executive officers and directors as a group. The percentage ownership
is based on 83,489,455 shares of common stock issued and outstanding at
September 20, 2002, and ownership by these persons of options or warrants
exercisable within 60 days of such date. Unless otherwise indicated, each person
has sole voting and investment power over the shares.
14
SCHEDULE OF BENEFICIAL OWNERSHIP OF DIRECTORS,
MANAGEMENT, AND MORE THAN 5% SHAREHOLDERS
Number of Shares
of Common Stock Percent
Name and Address of Beneficial Owners Owned of Class
--------------------------------------------------------------------------------
David B. Johnston 10,717,761 (1) 12.84%
141 N. State Street, PBM 161
Lake Oswego, OR 97034
Nabeel AL-Mula 4,918,115 5.90%
P0 Box 177 Safat 13007
Kuwait
Daron Dillia 4,578,803 (2) 5.36%
1147 Manhattan Avenue #134
Manhattan Beach, CA 90266
Richard V. Secord 2,790,286 (3) 3.30%
Two Ceterpointe Drive, Suite 450
Lake Oswego, OR 97035
John M. Brenna 265,000 (4) *
Two Ceterpointe Drive, Suite 450
Lake Oswego, OR 97035
Bernard J. Brady 89,166 (5) *
Two Ceterpointe Drive, Suite 450
Lake Oswego, OR 97035
Harry C. Aderholt 167,500 (6) *
Two Ceterpointe Drive, Suite 450
Lake Oswego, OR 97035
Robert L. Simmons, MD 13,600 (7) *
Two Ceterpointe Drive, Suite 450
Lake Oswego, OR 97035
Milton R. Geilmann 20,000 (8) *
Two Ceterpointe Drive, Suite 450
Lake Oswego, OR 97035
Brent M. Pratley, MD 26,125 (9) *
Two Ceterpointe Drive, Suite 450
Lake Oswego, OR 97035
Officers and directors as a group (seven persons) 3,371,677 (10) 3.95%
____________________________________________________________________________
* Less than 1%.
1) Includes 10,717,761 shares of common stock owned by Thermal
Imaging, Inc., an affiliate of Mr. Johnston. All common stock and
common stock underlying options held by Mr. Johnston and Thermal
Imaging, Inc. are subject to a 3-year voting agreement whereby the
shares are voted in the same proportion as those shares voted by
all shareholders other than (i) David B. Johnston, individually,
(ii) Daron C. Dillia, individually, and Daron C. Dillia, doing
business as Manhattan Financial Group, and (iii) Thermal Imaging,
Inc.
2) Includes 2,003,038 shares of common stock underlying options that
are exercisable within 60 days of the date of this Proxy
Statement, 16,000 shares of common stock held by Daron C. Dillia
and 2,564,340 shares of common stock held by Manhattan Financial
15
Group. All common stock and common stock underlying options and
warrants held by Daron Dillia and Manhattan Financial Group are
subject to a 3-year voting agreement whereby the shares are voted
in the same proportion as those shares voted by all shareholders
other than (i) David B. Johnston, individually, (ii) Daron C.
Dillia, individually, and Daron C. Dillia, doing business as
Manhattan Financial Group, and (iii) Thermal Imaging, Inc.
3) Includes 1,000 shares of common stock in the name of Jo Anne
Secord, 150,000 shares of common stock in the name of Richard V.
Secord Revocable Trust, 264,286 shares of common stock in the name
of Secord Holdings, LLC and 2,375,000 shares of common stock
underlying options that are exercisable within 60 days of the date
of this Proxy Statement.
4) Includes 265,000 shares of common stock underlying options that
are exercisable within 60 days of the date of this Proxy
Statement.
5) Includes 89,166 shares of common stock underlying options that are
exercisable within 60 days of the date of this Proxy Statement.
6) Includes 15,000 shares of common stock in the name of Pornpimon
Kirdpirote & Harry C. Aderholt JTWROS, 147,500 shares of common
stock in the name of Harry C. Aderholt and 5,000 shares of common
stock underlying options that are exercisable within 60 days of
the date of this Proxy Statement.
7) Includes 8,000 shares of common stock in the name of Dr. Robert L.
Simmons, Sylvia A Simmons, and Leslie M. Simmons JTWROS, 600
shares of common stock in the name of Robert L. Simmons and
Christopher C. Simmons JTWROS, and 5,000 shares of common stock
underlying options that are exercisable within 60 days of the date
of this Proxy Statement.
8) Includes 5,000 shares of common stock underlying options that are
exercisable within 60 days of the date of this Proxy Statement.
9) Includes 5,000 shares of common stock underlying options that are
exercisable within 60 days of the date of this Proxy Statement.
10) Includes 4,752,204 shares of common stock underlying options that
are exercisable within 60 days of the date of this Proxy
Statement.
We know of no arrangement or understanding that may, at a subsequent
date, result in a change of control.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers, directors and persons who own more
than 10 percent of the common stock to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC"). Specific due
dates for such reports have been established. SEC regulations require persons
subject to Section 16(a) reporting requirements to furnish the Company with
copies of all Section 16(a) reports they file. Based solely on a review of the
copies of such reports received by the Company and on written representations
that no other reports are required, the Company believes that during its fiscal
year ended June 30, 2002, all reports required under Section 16(a) were timely
filed, except for the following:
16
Mr. Johnston, a 10 percent shareholder, failed to timely file a report
on Form 4, Statement of Changes in Beneficial Ownership of Securities, for
September 2001, to timely report one transaction in which he transferred by gift
options to acquire 1,000,000 shares of common stock.
--------------------------------------------------------------------------------
PROPOSAL NUMBER 2: TO CONSIDER AND ACT UPON THE AMENDMENTS TO THE 1997 STOCK
OPTION AND RESTRICTED STOCK PLAN.
--------------------------------------------------------------------------------
The 1997 Stock Option and Restricted Stock Plan (the "Plan") was
originally adopted by the Board of Directors in November 1997, and adopted by
our shareholders in February 1998. In May 2000, our Board adopted a resolution
to amend the Plan to increase the number of shares in the Plan to 10,000,000
shares of our common stock. This amendment was adopted by our shareholders in
June 2000. Unless otherwise instructed, the enclosed proxy will be voted to
approve the following four (4) amendments to the 1997 Stock Option and
Restricted Stock Plan:
1) To extend participation in the plan to directors and specified
consultants;
2) To eliminate the vesting schedule prescribed by the plan in
preference to vesting as determined within the discretion of the
Board of Directors or Board;
3) To provide that the Plan be governed under Oregon law.
In all other material respects, the Plan will be unchanged. A complete
copy of the Amended Plan as approved by our Board of Directors is attached
hereto as Attachment "A".
AMENDMENT #1 - ELIGIBILITY TO PARTICIPATE. The Plan presently limits
participation in Plan awards to our employees and specifically prohibits
non-employee directors and consultants from eligibility to receive any Plan
awards. If approved by our Shareholders, the Plan will extend participation in
Plan awards to our independent directors and to consultants. To conserve cash,
the Company may grant to consultants and directors options to purchase the
Company common stock in lieu of cash payment. As the Plan is currently
constructed, the Company must register the shares underlying these options on a
separate securities registration statement. This process is time consuming and
expensive, and the Board believes that the interests of the shareholders would
be served by simplifying these transactions. The Board believes that the stock
option plans of most publicly-traded companies permit directors and consultants
to participate in the plan.
AMENDMENT #2 - VESTING OF OPTIONS. Currently, each option granted under
the Plan may only be exercised to the extent that the optionee is vested in such
option. Except as otherwise provided, all options issued under the Plan vest in
accordance with the following schedule:
Number of Years the Optionee Extent to
has remained in the employ Which the
of the Company or a Subsidiary Option is
following the grant of the Option Vested
--------------------------------- ------
17
Under one...........................................................0%
At least one but less than two................................... 20%
At least two but less than three.................................. 40%
At least three but less than four................................ 60%
At least four but less than five.................................. 80%
Five or more......................................................100%
Notwithstanding the foregoing, the administrator possesses the
discretionary power to establish the vesting periods for any option granted,
except that in no case may the administrator permit more than 25 percent of any
Option to vest before the first anniversary of the earlier of the date the
option is granted or the date on which the optionee began providing services to
the Company.
If approved by our shareholders, the Plan will provide that all options
issued under the Plan shall vest in accordance with the schedule established by
the administrator in its sole discretion as reflected in the stock option
agreement. The proposed change facilitates amending the Plan to include
directors and non-affiliate consultants, as options granted to these persons are
typically vested upon issuance.
AMENDMENT #3 - GOVERNING JURISDICTION. The Plan is presently governed
under Utah law.
If approved by our Shareholders, the Plan would be governed under
Oregon law, the state of our corporate headquarters.
NEW PLAN BENEFITS
The Board has not yet authorized any new plan benefits under the
Amended Plan.
THE BOARD OF DIRECTORS HAS APPROVED THE ADOPTION OF THE AMENDMENTS TO
THE PLAN AND UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENTS TO THE
PLAN. SUCH ADOPTION REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY
OF SHARES OF COMMON STOCK PRESENT OR REPRESENTED BY PROXY AND ENTITLED TO VOTE
AT THE ANNUAL MEETING.
--------------------------------------------------------------------------------
PROPOSAL NUMBER 3: TO RATIFY THE SELECTION OF DELOITTE & TOUCHE, LLP AS
INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING JUNE 30, 2003.
--------------------------------------------------------------------------------
The Board of Directors of the Company, upon recommendation of its Audit
Committee, has appointed Deloitte & Touche, LLP to serve as our independent
accountants for the fiscal year ended June 30, 2003. The Board of Directors
wishes to obtain from the shareholders a ratification of this decision.
In the event the appointment of Deloitte & Touche, LLP as independent
accountants is not ratified by the Shareholders, the adverse vote will be
considered by the Board of Directors in deciding whether to select other
independent accountants.
18
Representatives of Deloitte & Touche, LLP are expected to be present at
the Annual Meeting, will have the opportunity to make a statement, if they so
desire, and will be available to respond to appropriate questions.
AUDIT FEES. The aggregate fees billed by Deloitte & Touche, LLP for
professional services rendered for the audit of the Company's annual financial
statements for the fiscal year ended June 30, 2002, and for the reviews of the
financial statements included in the Company's Quarterly Reports on Form 10-Q
for that fiscal year were $60,000 and $25,300 respectively.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. The
aggregate fees billed by Deloitte & Touche, LLP for professional services
rendered for information technology services related to financial information
systems design and implementation for the fiscal year ended June 30, 2002, were
$0.
ALL OTHER FEES. The aggregate fees billed by Deloitte & Touche, LLP for
services other than those described above under "Audit Fees" and "Financial
Information Systems Design and Implementation", for the fiscal year ended June
30, 2002, were $34,100. These fees were for non-financial statement audit
related services such as SEC registration statement related work and accounting
consultations related to the adoption of new accounting standards.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RATIFICATION OF DELOITTE & TOUCHE, LLP AS INDEPENDENT ACCOUNTANTS FOR THE FISCAL
YEAR ENDED JUNE 30, 2003.
--------------------------------------------------------------------------------
OTHER MATTERS.
--------------------------------------------------------------------------------
The Board of Directors is not aware of any other matters to be
presented for action at the Annual Meeting. However, if any other matter is
properly presented at the Annual Meeting, it is the intention of the persons
named in the enclosed proxy to vote in accordance with their best judgment on
such matters.
FUTURE PROPOSALS OF SHAREHOLDERS
The deadline for Shareholders to submit proposals to be considered for
inclusion in the Proxy Statement for the year 2003 Annual Meeting of
Shareholders is July 31, 2003. All proposals must comply with Rule 14a-8 under
the Securities Exchange Act of 1934 and with our charter and bylaws. We will be
able to use proxies given to us for next year's meeting to vote, at our
discretion, for or against any shareholder proposal that is not included in the
proxy statement, unless the proposal is submitted to us on or before July 14,
2003.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Richard V. Secord
------------------------------------
Chairman of the Board and CEO
Lake Oswego, Oregon
19
PROXY
FOR VOTING BY HOLDERS OF COMMON STOCK
COMPUTERIZED THERMAL IMAGING, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD ON DECEMBER 12, 2002.
The undersigned hereby appoints John M. Brenna and Bernard J. Brady, or
their lawful substitutes, and each of them as the true and lawful attorneys,
agents and proxies of the undersigned, with full power of substitution, to
represent and to vote all shares of common stock of Computerized Thermal
Imaging, Inc. held of record by the undersigned on October 28, 2002, at the
Annual Meeting of Shareholders to be held will be held in the Board Room of The
American Stock Exchange, 86 Trinity Place, New York, NY 10006, on December 12,
2002 at 1:00 P.M. local time, and at any postponements and adjournments thereof.
Any and all proxies heretofore given are hereby revoked.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY THE
UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR THE NOMINEES
LISTED IN NUMBER 1 AND FOR APPROVAL OF THE AMENDMENTS IN NUMBER 2 AND THE
RATIFICATION IN NUMBER 3.
1. ELECTION OF OUR DIRECTORS. (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE
FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH, OR OTHERWISE STRIKE,
THAT NOMINEE'S NAME IN THE LIST BELOW.)
[ ] FOR all nominees listed [ ] WITHHOLD authority to
below except as marked vote for all nominees
to the contrary below
Richard V. Secord John M. Brenna Brent M. Pratley, MD
Harry C. Aderholt Milton R. Geilmann Robert L. Simmons, MD
2. PROPOSAL TO AMEND THE 1997 STOCK OPTION AND RESTRICTED STOCK PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO RATIFY THE SELECTION OF DELOITTE & TOUCHE, LLP AS
INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING JUNE 30, 2003.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
Please sign exactly as name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, as executor,
1
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Number of Shares of
Common Stock
Stock Owned _____________
_____________________________________
Signature
_____________________________________
(Typed or Printed Name)
_____________________________________
Signature if held jointly
_____________________________________
(Typed or Printed Name)
DATED: ______________________________
THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED AT THE MEETING. PLEASE
MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
2
ATTACHMENT "A"
COMPUTERIZED THERMAL IMAGING, INC.
AMENDED 1997 STOCK OPTION AND RESTRICTED STOCK PLAN
SECTION 1
PURPOSE
-------
This Plan is established (i) to offer selected Employees, members of
the Board of Directors ("Directors")and Consultants of the Company or its
Subsidiaries an equity ownership interest in the financial success of the
Company, (ii) to provide the Company with an opportunity to attract and retain
the best available personnel for positions of substantial responsibility, and
(iii) to encourage equity participation in the Company by eligible Participants.
This Plan provides for the grant by the Company of (i) Options to purchase
Shares, and (ii) shares of Restricted Stock. Options granted under this Plan may
include nonstatutory options as well as incentive stock options intended to
qualify under section 422 of the Code.
SECTION 2
DEFINITIONS
-----------
"ADMINISTRATOR" shall mean either the Board of Directors or the
Committee delegated responsibility for the administration of the Plan in
accordance with the terms and conditions of the Plan.
"AFFILIATE" shall mean any subsidiary, parent corporation, joint
venture or other business enterprise which controls or is controlled by, or is
under common control with, the Company.
"BOARD OF DIRECTORS" shall mean the board of directors of the Company,
as duly elected from time to time.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and as
interpreted by the regulations thereunder.
"COMMITTEE" shall mean the Compensation Committee of the Board of
Directors, or such other Committee of 2 or more independent directors as may be
appointed by the Board of Directors from time to time.
"COMPANY" shall mean Computerized Thermal Imaging, Inc., a Nevada
corporation.
"CONSULTANT" shall mean an individual professional or professional
service firm, retained by the Company under the terms of an engagement letter or
consulting agreement.
"DATE OF GRANT" shall mean the date on which the Administrator resolves
to grant, or ratify the grant of, an Option to an Optionee or grant Restricted
Stock to a Participant, as the case may be.
"EMPLOYEE" shall include every individual performing Services to the
Company or its Subsidiaries if the relationship between such individual and the
Company or its Subsidiaries is the legal relationship of employer and employee.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and as interpreted by the rules and regulations promulgated thereunder.
"EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Administrator in the
applicable Stock Option Agreement, but in no event less than the par value per
Share.
"FAIR MARKET VALUE" shall be the closing price of the Shares on the
date in question (on the principal market in which the Shares are traded), or if
the Shares were not traded on such date, the closing price of the Shares on the
next preceding trading day during which the Shares were traded.
"ISO" shall mean a stock option which is granted to an individual and
which meets the requirements of section 422(b) of the Code.
"INDEPENDENT DIRECTOR" shall mean any director who is not an Employee
of the Company or any Affiliate, and who does not receive compensation directly
or indirectly from the Company for services rendered, other than regular board
meeting fees, retainers and expense reimbursements.
"NONSTATUTORY OPTION" shall mean any Option granted by the
Administrator that does not meet the requirements of sections 421 through 424 of
the Code, as amended.
"OPTION" shall mean either an ISO or Nonstatutory Option, as the
context requires.
"OPTIONEE" shall mean a Participant who holds an Option.
"PARTICIPANTS" shall mean those individuals described in Section 1 of
this Plan selected by the Administrator who are eligible under Section 4 of this
Plan for grants of either Options or Restricted Stock under this Plan.
"PERMANENT AND TOTAL DISABILITY" shall mean that an individual is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than twelve (12) months. An individual shall not be considered to
suffer from Permanent and Total Disability unless such individual furnishes
proof of the existence thereof in such form and manner, and at such times, as
the Administrator may reasonably require. The scope of this definition shall
automatically be reduced or expanded to the extent that section 22(e)(3) of the
Code is amended to reduce or expand the scope of the definition of Permanent and
Total Disability thereunder.
"PLAN" shall mean this Amended 1997 Stock Option and Restricted Stock
Plan, as amended from time to time.
"PLAN AWARD" shall mean the grant of either an Option or Restricted
Stock, as the context requires.
"RESTRICTED STOCK" shall have that meaning set forth in Section 7(a) of
this Plan.
2
"RESTRICTED STOCK ACCOUNT" shall have that meaning set forth in Section
7(a)(ii) of this Plan.
"RESTRICTED STOCK CRITERIA" shall have that meaning set forth in
Section 7(a)(iv) of this Plan.
"RESTRICTION PERIOD" shall have that meaning set forth in Section
7(a)(iii) of this Plan.
"SERVICES" shall mean services rendered to the Company or any of its
Subsidiaries.
"SHARE" shall mean one share of Stock, as adjusted in accordance with
Section 9 of this Plan (if applicable).
"STOCK" shall mean the common stock of the Company, par value $.001 per
share.
"STOCK OPTION AGREEMENT" shall mean the agreement executed between the
Company and an Optionee that contains the terms, conditions, and restrictions
pertaining to the granting of an Option. Any inconsistencies between this Plan
and any Stock Option Agreement shall be controlled by this Plan.
"SUBSIDIARY" shall mean any corporation as to which more than fifty
(50%) percent of the outstanding voting stock or shares shall now or hereafter
be owned or controlled directly by a person, any Subsidiary of such person, or
any Subsidiary of such Subsidiary.
"TEN-PERCENT STOCKHOLDER" shall mean a person that owns more than ten
percent (10%) of the total combined voting power of all classes of outstanding
stock of the Company or any Subsidiary, taking into account the attribution
rules set forth in section 424 of the Code, as amended. For purposes of this
definition of "Ten Percent Stockholder" the term "outstanding stock" shall
include all stock actually issued and outstanding immediately after the grant of
an Option to an Optionee. "Outstanding stock" shall not include reacquired
shares or shares authorized for issuance under outstanding Options held by the
Optionee or by any other person.
"VEST DATE" shall have that meaning set forth in Section 7(a)(v) of
this Plan.
SECTION 3
ADMINISTRATION
--------------
(a) GENERAL ADMINISTRATION. This Plan shall be administered by the
Board of Directors, or by Committee of the Board composed solely of two (2) or
more Independent Directors. In the case a Committee is chosen to administer the
Plan, the members of the Committee shall be appointed by the Board of Directors
for such terms as the Board of Directors may determine. The Board of Directors
may from time to time remove members from, or add members to, the Committee.
Vacancies on the Committee, however caused, shall be filled by the Board of
Directors.
(b) COMMITTEE PROCEDURES. The Board of Directors shall designate one of
the members of the Committee as chairman. The Committee may hold meetings at
such times, places, and in such manner as it shall determine. The acts of a
majority of the Committee members present at meetings at which a quorum exists,
or acts reduced to or approved in writing by a majority of all Committee
members, shall be valid acts of the Committee. A majority of the Committee shall
constitute a quorum.
3
(c) AUTHORITY OF ADMINISTRATOR. This Plan shall be administered by, or
under the direction of, the Board of Directors or the Committee (either of which
may hereinafter be referred to as the "Administrator"). The Administrator shall
administer this Plan so as to comply at all times with the Exchange Act,
including Rule 16b-3 (or any successor rule), and, subject to the Code, shall
otherwise have absolute and final authority to interpret this Plan and to make
all determinations specified in or permitted by this Plan or deemed necessary or
desirable for its administration or for the conduct of the Administrator's
business including, without limitation, the authority to take the following
actions:
(i) To interpret this Plan and to apply its provisions;
(ii) To adopt, amend or rescind rules, procedures and forms
relating to this Plan;
(iii) To authorize any person to execute, on behalf of the Company,
any instrument required to carry out the purposes of this
Plan;
(iv) To determine when Plan Awards are to be granted under this
Plan;
(v) To select the Optionees and Participants;
(vi) To determine the number of Shares to be made subject to each
Plan Award;
(vii) To prescribe the terms, conditions and restrictions of each
Plan Award, including without limitation the Exercise Price,
vesting conditions, and the determination whether an Option is
to be classified as an ISO or a Nonstatutory Option;
(viii) To amend any outstanding Stock Option Agreement or the terms,
conditions and restrictions of a grant of Restricted Stock,
subject to applicable legal restrictions and the consent of
the Optionee or Participant, as the case may be, who entered
into such agreement;
(ix) To establish procedures so that an Optionee may obtain a loan
through a registered broker-dealer under the rules and
regulations of the Federal Reserve Board, for the purpose of
exercising an Option;
(x) To establish procedures for an Optionee(1) to have withheld
from the total number of Shares to be acquired upon the
exercise of an Option that number of Shares having a Fair
Market Value, which, together with such cash as shall be paid
inrespect of fractional shares, shall equal the Exercise
4
Price, and (2) to exercise a portion of an Option by
delivering that number of Shares already owned by an Optionee
having a Fair Market Value which shall equal the partial
Exercise Price and to deliver the Shares thus acquired by such
Optionee in payment of Shares to be received pursuant to the
exercise of additional portions of the Option, the effect of
which shall be that an Optionee can in sequence utilize such
newly acquired shares in payment of the Exercise Price of the
entire Option, together with such cash as shall be paid in
respect of fractional shares;
(xi) To establish procedures whereby a number of Shares may be
withheld from the total number of Shares to be issued upon
exercise of an Option, to meet the obligation of withholding
for federal and state income and other taxes, if any, incurred
by the Optionee upon such exercise; and
(xii) To take any other actions deemed necessary or advisable for
the administration of this Plan.
All interpretations and determinations of the Administrator made with
respect to the granting of Plan Awards shall be final, conclusive, and binding
on all interested parties. The Administrator may make grants of Plan Awards on
an individual or group basis. No member of the Administrator shall be liable for
any action that is taken or is omitted to be taken if such action or omission is
taken in good faith with respect to this Plan or grant of any Plan Award.
(D) HOLDING PERIOD. The Administrator may in its sole discretion
require as a condition to the granting of any Plan Award, that a Participant
agree not to sell or otherwise dispose of a Plan Award, any Shares acquired
pursuant to a Plan Award, or any other "derivative security" (as defined by Rule
16a-1(c) under the Exchange Act) for a period of time determined by the
Administrator including, without limitation, a period of six (6) months
following the (i) the date of the issuance of Shares pursuant to a Plan Award,
or (ii) the date when the Exercise Price of an Option is fixed if such Exercise
Price is not fixed on the Date of Grant.
(e) SECTION 16 COMPLIANCE. In the event the Company registers any of
its equity securities pursuant to Section 12(b) or 12(g) of the Exchange Act, it
is the intention of the Company that this Plan, and options granted under this
Plan, comply in all respects with Rule 16b-3 under the Exchange Act and, if any
Plan provision is later found not to be in compliance with such Rule, the
provision shall be deemed null and void, and in all events this Plan shall be
construed in favor of its meeting the requirements of Rule 16b-3.
Notwithstanding anything in this Plan to the contrary, the Board, in its
absolute discretion, may bifurcate this Plan so as to restrict, limit or
condition the use of any provision of this Plan to participants who are officers
and directors subject to Section 16(b) of the Exchange Act without so
restricting, limiting or conditioning other Plan participants.
SECTION 4
ELIGIBILITY
-----------
(a) GENERAL RULE. Subject to the limitations set forth in subsection
(b) below, Participants, as described in Section I, shall be eligible to
participate in this Plan.
(b) NON-EMPLOYEE INELIGIBLE FOR ISOS. In no event shall an ISO be
granted to any individual who is not an Employee on the Date of Grant.
5
SECTION 5
SHARES SUBJECT TO PLAN
----------------------
(a) BASIC LIMITATION. Shares offered under this Plan shall be comprised
of authorized but unissued Shares or Shares that have been reacquired by the
Company. The aggregate number of Shares that are available for issuance under
this Plan shall not exceed ten million (10,000,000) Shares. However, this
aggregate number shall be reduced as necessary to compensate for any shares of
Stock (i) subject to valid and outstanding stock options granted pursuant or in
reference to the Company's 1995 Stock Option Plan ("1995 Plan") or (ii) issued
pursuant to the 1995 Plan, so that the aggregate number of shares of Stock
subject to outstanding options, restricted grants or issued under both plans
shall not exceed ten million (10,000,000) shares of Stock. The aggregate number
of Shares available under the Plan is subject to adjustment pursuant to Section
9 of this Plan. The Administrator shall not issue more Shares than are available
for issuance under this Plan. The number of Shares that are subject to
unexercised Options at any time under this Plan shall not exceed the number of
Shares that remain available for issuance under this Plan. The Company, during
the term of this Plan, shall at all times reserve and keep available sufficient
Shares to satisfy the requirements of this Plan.
(b) ADDITIONAL SHARES. In the event any outstanding Option for any
reason expires, is canceled or otherwise terminates, the Shares allocable to the
unexercised portion of such Option shall again be available for issuance under
this Plan. In the event that Shares issued under this Plan revert to the Company
prior to the Vest Date under a grant of Restricted Stock, such Shares shall
again be available for issuance under this Plan.
SECTION 6
TERMS AND CONDITIONS OF OPTIONS
-------------------------------
(a) TERM OF OPTION. The term of each Option shall be ten (10) years
from the Date of Grant or such shorter term as may be determined by the
Administrator; provided, however, in the case of an ISO granted to a Ten-Percent
Stockholder, the term of such ISO shall be five (5) years from the Date of Grant
or such shorter time as may be determined by the Administrator.
(b) VESTING OF OPTIONS. Each Option granted hereunder may only be
exercised to the extent that the Optionee is vested in such Option. Options
issued under this Plan shall vest in accordance with the schedule established by
the Administrator in its sole discretion as reflected in the Stock Option
Agreement. Unless otherwise set forth in the stock option agreement, options
shall vest at the rate of 25% per annum over the course of four years from the
date of grant.
(c) EXERCISE PRICE AND METHOD OF PAYMENT.
(i) EXERCISE PRICE. The Exercise Price shall be such price as
is determined by the Administrator in its sole discretion and set forth in the
Stock Option Agreement; provided, however, the Exercise Price shall not be less
than 100% of the Fair Market Value of the Shares subject to such option on the
Date of Grant (or 110% in the case of an Option granted to a Participant who is
a Ten-Percent Stockholder on the Date of Grant).
6
(ii) PAYMENT OF SHARES. Payment for the Shares upon exercise
of an Option shall be made in cash, by certified check, or if authorized by the
Administrator, by delivery and transfer of other Shares having a Fair Market
Value on the date of delivery equal to the aggregate exercise price of the
Shares as to which said Option is being exercised, or by any combination of such
methods of payment or by any other method of payment as may be permitted under
applicable law and authorized by the Administrator.
(d) EXERCISE OF OPTION.
(i) PROCEDURE FOR EXERCISE; RIGHTS OF STOCKHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as shall be determined by the Administrator in accordance with the terms of this
Plan, including, without limitation, performance criteria with respect to the
Company and/or the Optionee.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company, in accordance with the terms of the
Stock Option Agreement, by the Optionee entitled to exercise the Option and full
payment for the Shares and any withholding and other applicable taxes with
respect to the exercised Option has been received by the Company. Full payment
may, as authorized by the Administrator, consist of any form of consideration
and method of payment allowable under Section 6(c)(ii) of this Plan. Upon the
receipt of notice of exercise and full payment for the Shares and taxes, the
Shares shall be deemed to have been issued and the Optionee shall be entitled to
receive such Shares and shall be a stockholder with respect to such Shares, and
the Shares shall be considered fully paid and nonassessable. No adjustment will
be made for a dividend or other right for which the record date is prior to the
date on which the stock certificate is issued, except as provided in Section 9
of this Plan.
Each exercise of an Option shall reduce, by an equal number, the total
number of Shares that may thereafter be purchased under such Option.
(ii) TERMINATION OF STATUS AS AN EMPLOYEE. Except as provided
in Subsections 6(d)(iii) and 6(d)(iv) below and unless provided otherwise in the
Stock Option Agreement, an Optionee holding an Option who ceases ("Terminates")
to be an Employee, Director or Consultant of the Company may, but only until the
earlier of the date (i) the Option held by the Optionee expires, or (ii) in the
case of an ISO, three (3) months, and in the case of a Nonstatutory Option, six
(6) months, after the date such Optionee Terminates (or such shorter period as
may be provided in the Stock Option Agreement), exercise the Option to the
extent that the Optionee was entitled to exercise it on the date Termination
takes effect, unless the Administrator extends such period in its sole
discretion. To the extent that the Optionee was not entitled to exercise an
Option on the Termination date, or if the Optionee does not exercise it within
the time specified herein, such Option shall terminate. The Administrator shall
have the authority (i) to determine the Termination date and (ii) to shorten the
exercise periods provided above in the event the Optionee resigns and/or ceases
for "cause" to be an Employee. For purposes of this paragraph (iii), "cause
shall be defined as (i) the failure of the Employee to perform his or her duties
in a satisfactory manner (other than any such failure resulting from the
Employee's incapacity due to physical or mental illness), (ii) conduct amounting
to fraud or embezzlement or any other act by Employee which is negligently or
willfully performed which has the effect of damaging the reputation of the
Company or its business, (iii) breach of fiduciary duty as an officer and/or
director of the Company, and (iv) the violation by the Employee of any material
provision of their employment agreement and/or any Company policy.
7
(iii) PERMANENT AND TOTAL DISABILITY. Notwithstanding the
provisions of Section 6(d)(ii) above, in the event an Optionee is unable to
continue to perform Services for the Company or any of its Subsidiaries as a
result of such Optionee's Permanent and Total Disability, (and, for ISOs, at the
time such Permanent and Total Disability begins, the Optionee was an Employee
and had been and Employee since the Date of Grant), such Optionee may exercise
an Option in whole or in part to the extent that the Optionee was entitled to
exercise it on such date, but only until the earlier of the date (i) the Option
held by the Optionee expires, or (ii) twelve (12) months from the date of
termination of Services due to such Permanent and Total Disability. To the
extent the Optionee is not entitled to exercise an Option on such date or if the
Optionee does not exercise it within the time specified herein, such Option
shall terminate, unless the Administrator further extends such period in its
sole discretion.
(iv) DEATH OF AN OPTIONEE. Upon the death of an Optionee, any
Option held by an Optionee shall terminate and be of no further effect;
provided, however, notwithstanding the provisions of Section 6(d)(ii) above, in
the event an Optionee's death occurs during the term of an Option held by such
Optionee and, at the time of death, the Optionee was an Employee or Director
(and, for ISOs, at the time of death, the Optionee was an Employee and had been
an Employee since the Date of Grant), the Option may be exercised in whole or in
part to the extent that the Optionee was entitled to exercise it on such date,
but only until the earlier of the date (i) the Option held by the Optionee
expires, or (ii) twelve (12) months from the date of the Optionee's death, by
the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance. To the extent the Option is not entitled to be
exercised on such date or if the Option is not exercised within the time
specified herein, such Option shall terminate, unless the Administrator further
extends such period in its sole discretion.
(e) NON-TRANSFERABILITY OF OPTIONS. No Option granted under this Plan
may be sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent and distribution and no
Option granted under this Plan is assignable by operation of law or subject to
execution, attachment or similar process. Any Option granted under this Plan can
only be exercised during the Optionee's lifetime by such Optionee unless
exercised pursuant to Section 6(d)(iv). Any attempted sale, pledge, assignment,
hypothecation or other transfer of the Option contrary to the provisions hereof
and the levy of any execution, attachment or similar process upon the Option
shall be null and void and without force or effect. No transfer of the Option by
will or by the laws of descent and distribution shall be effective to bind the
Company unless the Company shall have been furnished written notice thereof and
an authenticated copy of the will and/or such other evidence as the
Administrator may deem necessary to establish the validity of the transfer and
the acceptance by the transferee or transferees of the terms and conditions of
the Option. The terms of any Option transferred by will or by the laws of
descent and distribution shall be binding upon the executors, administrators,
heirs and successors of Optionee.
8
(f) TIME OF GRANTING OPTIONS. Any Option granted hereunder shall be
deemed to be granted on the Date of Grant. Written notice of the Administrator's
determination to grant an Option to an Employee, evidenced by a Stock Option
Agreement, dated effective as of the Date of Grant, shall be given to such
Employee within a reasonable time after the Date of Grant.
(g) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Within the
limitations of this Plan, the Administrator may modify, extend or renew
outstanding Options or may accept the cancellation of outstanding Options under
this Plan or the 1995 Plan (to the extent not previously exercised) for the
granting of new Options in substitution therefor. The foregoing notwithstanding,
no modification of an Option shall,without the consent of the Optionee, alter or
impair the Optionee's rights or obligations under such Option.
(h) RESTRICTIONS ON TRANSFER OF SHARES. Any Shares issued upon exercise
of an Option shall be subject to such rights of repurchase and other transfer
restrictions as the Administrator may determine in its sole discretion. Such
restrictions shall be set forth in the applicable Stock Option Agreement.
(i) SPECIAL LIMITATION ON ISOS. To the extent that the aggregate Fair
Market Value (determined on the Date of Grant) of the Shares with respect to
which ISOs are exercisable for the first time by an individual during any
calendar year under this Plan, and under all other plans maintained by the
Company, exceeds $100,000, such Options shall be treated as Nonstatutory
Options.
(j) LEAVES OF ABSENCE. Leaves of absence approved by the Administrator
which conform to the policies of the Company shall not be considered termination
of employment if the employer-employee relationship as defined under the Code or
the regulations promulgated thereunder otherwise exists.
SECTION 7
RESTRICTED STOCK
----------------
(a) AUTHORITY TO GRANT RESTRICTED STOCK. The Administrator shall have
the authority to grant Shares to Participants that are subject to certain terms,
conditions, and restrictions (the "Restricted Stock"). The Restricted Stock may
be granted by the Administrator either separately or in combination with
Options. The terms, conditions and restrictions of the Restricted Stock shall be
determined from time to time by the Administrator without limitation, except as
otherwise provided in this Plan; provided, however, that each grant of
Restricted Stock to an Employee shall require the Employee to remain an Employee
of the Company or any of its Subsidiaries for at least six (6) months from the
Date of Grant. The granting, vesting, and issuing of the Restricted Stock shall
also be subject to the following provisions:
(i) NATURE OF GRANT. Restricted Stock shall be granted to
Participants for Services rendered and at no additional cost to Participant;
provided, however, that the value of the Services performed must, in the opinion
of the Administrator, equal or exceed the par value of the Restricted Stock to
be granted to the Participant.
9
(ii) RESTRICTED STOCK ACCOUNT. The Company shall establish a
restricted stock account (the "Restricted Stock Account") for each Participant
to whom Restricted Stock is granted, and such Restricted Stock shall be credited
to such account. No certificates will be issued to the Participant with respect
to the Restricted Stock until the Vest Date as provided herein. Every credit of
Restricted Stock under this Plan to a Restricted Stock Account shall be
considered "contingent" and unfunded until the Vest Date. Such contingent
credits shall be considered bookkeeping entries only, notwithstanding the
"crediting" of "dividends" as provided herein. Such accounts shall be subject to
the general claims of the Company's creditors. The Participant's rights to the
Restricted Stock Account shall be no greater than that of a general creditor of
the Company. Nothing contained herein shall be construed as creating a trust or
fiduciary relationship between the Participants and the Company, the Board of
Directors or the Committee.
(iii) RESTRICTIONS. The terms, conditions, and restrictions of
the Restricted Stock shall be determined by the Administrator on the Date of
Grant. The Restricted Stock may not be sold, assigned, transferred, redeemed,
pledged or otherwise encumbered during the period in which the terms, conditions
and restrictions apply (the "Restriction Period"). More than one grant of
Restricted Stock may be outstanding at any one time, and the Restriction Periods
may be of different lengths. Receipt of the Restricted Stock is conditioned upon
satisfactory compliance with the terms, conditions and restrictions of this Plan
and those imposed by the Administrator.
(iv) RESTRICTED STOCK CRITERIA. At the time of each grant of
Restricted Stock, the Administrator in its sole discretion may establish certain
criteria to determine the times at which restrictions placed on Restricted Stock
shall lapse (i.e., the termination of the Restriction Period), which criteria
may include without limitation performance measures and targets and/or holding
period requirements (the "Restricted Stock Criteria"). The Administrator may
establish a corresponding relationship between the Restricted Stock Criteria and
(i) the number of Shares of Restricted Stock that may be earned, and (ii) the
extent to which the terms, conditions and restrictions on the Restricted Stock
shall lapse. Restricted Stock Criteria may vary among grants of Restricted
Stock; provided, however, that once the Restricted Stock Criteria are
established for a grant of Restricted Stock, the Restricted Stock Criteria shall
not be modified with respect to that grant.
(v) VESTING. On the date the Restriction Period terminates,
the Restricted Stock shall vest in the Participant (the "Vest Date"), who may
then require the Company to issue certificates evidencing the Restricted Stock
credited to the Restricted Stock Account of such Participant.
(vi) DIVIDENDS. The Administrator may provide from time to
time that amounts equivalent to dividends shall be payable with respect to the
Restricted Stock held in the Restricted Stock Account of a Participant. Such
amounts shall be credited to the Restricted Stock Account and shall be payable
to the Participant on the Vest Date.
(vii) TERMINATION OF SERVICES. If a Participant (x) with the
consent of the Administrator, ceases to be an Employee of, or otherwise ceases
to provide Services to, the Company or any of its Subsidiaries, or (y) dies or
suffers from Permanent and Total Disability, the vesting or forfeiture
(including without limitation the terms, conditions and restrictions) of any
grant under this Section 7 shall be determined by the Administrator in its sole
discretion, subject to any limitations or terms of this Plan. If the Participant
ceases to be an Employee of, or otherwise ceases to provide Services to, the
Company or any of its Subsidiaries for any other reason, all grants of
Restricted Stock under this Plan shall be forfeited (subject to the terms of
this Plan).
10
(b) DEFERRAL OF PAYMENTS. The Administrator may establish procedures by
which a Participant may elect to defer the transfer of Restricted Stock to the
Participant. The Administrator shall determine the terms and conditions of such
deferral in its sole discretion.
(c) PAYMENT OF TAXES. Notwithstanding the provisions of Section 7(a)(v)
above, the Company will not be required to issue any Restricted Stock unless and
until the Participant shall pay to the Company an amount equal to any
withholding and other applicable taxes related to the issuance of the Restricted
Stock. Such payment shall be made in cash, by certified check, or if authorized
by the Administrator, by delivery of other Shares having a Fair Market Value on
the date of delivery equal to such payment or by any combination of such methods
of payment or by any other method of payment as may be permitted under
applicable law and authorized by the Administrator.
SECTION 8
ISSUANCE OF SHARES
------------------
As a condition to the transfer of any Shares issued under this Plan,
the Company may require an opinion of counsel, satisfactory to the Company, to
the effect that such transfer will not be in violation of the Securities Act of
1933, as amended (the "Securities Act"), or any other applicable securities
laws, rules or regulations, or that such transfer has been registered under
federal and all applicable state securities laws. The Company may refrain from
delivering or transferring Shares issued under this Plan until the Administrator
has determined that the Participant has tendered to the Company any and all
applicable federal, state or local tax owed by the Participant as the result of
the receipt of a Plan Award, the exercise of an Option or the disposition of any
Shares issued under this Plan, in the event that the Company reasonably
determines that it might have a legal liability to satisfy such tax. The Company
shall not be liable to any person or entity for damages due to any delay in the
delivery or issuance of any stock certificate evidencing any Shares for any
reason whatsoever.
SECTION 9
CAPITALIZATION ADJUSTMENTS; MERGER
----------------------------------
(a) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Subject to any required
action by the stockholders of the Company, the number of Shares covered by each
outstanding Option, the aggregate number of Shares that have been authorized for
issuance under this Plan, and the number of Shares of Restricted Stock credited
to any Restricted Stock Account of a Participant (as well as the Exercise Price
covered by any outstanding Option), shall be proportionately adjusted for any
increase or decrease in the number of issued Shares resulting from a stock
split, payment of a stock dividend with respect to the Stock or any other
increase or decrease in the number of issued Shares effected without receipt of
consideration by the Company. Such adjustment shall be made by the Administrator
in its sole discretion, which adjustment shall be final, binding, and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of Shares subject to an
Option.
11
(b) DISSOLUTION, LIQUIDATION, SALE OF ASSETS OR MERGER. In the event of
the proposed dissolution or liquidation of the Company, or a proposed sale of
all or substantially all of the assets of the Company, or the proposed merger of
the Company with or into another corporation where the Company is not the
surviving entity, any Options and grants of Restricted Stock shall terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided in the Stock Option Agreement or by the Administrator. The
Administrator may, in the exercise of its sole discretion, in such instances
declare that any Option shall terminate as of a date fixed by the Administrator
and give each Optionee the right to exercise the Optionee's Option as to all or
any part of the Shares covered by such Option, including Shares as to which the
Option would not otherwise be exercisable. Notwithstanding the provisions of
Section 6(b) to the contrary, the Administrator may, in the exercise of its sole
discretion, provide in any Stock Option Agreement or under any grant of
Restricted Stock that the applicable Plan Award shall become immediately vested
in the event of a change in control of the Company or other extraordinary events
as defined by the Administrator.
SECTION 10
NO EMPLOYMENT RIGHTS
--------------------
No provision of this Plan, under any Stock Option Agreement or under
any grant of Restricted Stock shall be construed to give any Participant any
right to remain an Employee of, or provide Services to, the Company or any of
its Subsidiaries or to affect the right of the Company to terminate any
Participant's service at any time, with or without cause.
SECTION 11
STOCKHOLDER APPROVAL
--------------------
With respect to any amendment to this Plan adopted by the Administrator
that is required to be approved by the Company's stockholders pursuant to the
terms of Section 12 of this Plan, such approval shall be obtained within twelve
(12) months after the date such amendment is adopted by the Administrator;
provided, that such amendment shall not become effective until such approval has
been obtained.
SECTION 12
TERM OF PLAN; EFFECT OF AMENDMENT OR TERMINATION
------------------------------------------------
(a) TERM OF PLAN. This Plan shall become effective upon its adoption by
the Board of Directors subject to the condition subsequent that this Plan is
approved by the stockholders of the Company. The Administrator may grant Plan
Awards under the Plan prior to the time of stockholder approval, but if for any
reason the stockholders of the Company do not approve the Plan within twelve
(12) months after the date the Plan is adopted by the Board of Directors, all
Plan Awards granted under the Plan will be terminated and shall have no force or
effect, and no Plan Award may be exercised in whole or in part prior to such
stockholder approval. This Plan shall continue in effect for a term of ten (10)
years unless sooner terminated under this Section 12.
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(b) AMENDMENT AND TERMINATION. The Administrator in its sole discretion
may terminate this Plan at any time. The Administrator may amend this Plan at
any time in such respects as the Administrator may deem advisable; provided,
that the following amendments shall require approval of the holders of a
majority of the outstanding Shares entitled to vote:
(i) Any change in the aggregate number of Shares that may be
issued under this Plan, other than in connection with an adjustment under
Section 9 of this Plan;
(ii) Any change in the designation of the Participants
eligible to be granted Plan Awards; or
(iii) Any change in this Plan that would materially increase
the benefits accruing to Participants under this Plan.
(c) EFFECT OF TERMINATION. In the event this Plan is terminated, no
Shares shall be issued under this Plan nor shall any Shares of Restricted Stock
be credited to a Restricted Stock Account, except upon exercise of an Option
granted prior to such termination or issuance of Shares of Restricted Stock
previously credited to a Restricted Stock Account. The termination of this Plan,
or any amendment thereof, shall not affect any Shares previously issued to a
Participant, any Option previously granted under this Plan or any Restricted
Stock previously credited to a Restricted Stock Account.
SECTION 13
GOVERNING LAW
-------------
THIS PLAN AND ANY AND ALL STOCK OPTION AGREEMENTS AND AGREEMENTS
RELATING TO THE GRANT OF RESTRICTED STOCK EXECUTED IN CONNECTION WITH THIS PLAN
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
OREGON, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
Adopted by the Board of
Directors of the Company:
October 25, 2002 /s/ Bernard J. Brady
-----------------------------
Bernard J. Brady
Secretary
Adopted by the stockholders
of the Company:
November __, 2002
-----------------------------
Bernard J. Brady
Secretary
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