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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-12
SYSCAN IMAGING, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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[ ] Fee paid previously with preliminary materials.
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SYSCAN IMAGING, INC.
1772 TECHNOLOGY DRIVE
SAN JOSE, CALIFORNIA
(408) 436-9888
May 2, 2006
Dear Fellow Stockholder:
The 2006 Annual Meeting of Stockholders (the "Annual Meeting") of Syscan
Imaging, Inc. (the "Company" or "Syscan") will be held at 10:00 a.m., Pacific
Standard Time, on June 9, 2006 at 1772 Technology Drive, San Jose, California
95110. Enclosed you will find a formal Notice of Annual Meeting, Proxy Card and
Proxy Statement, detailing the matters which will be acted upon. Directors and
Officers of the Company will be present to help host the meeting and to respond
to any questions from our stockholders. I hope you will be able to attend.
Please sign, date and return the enclosed Proxy without delay in the
enclosed envelope. If you attend the Annual Meeting, you may vote in person,
even if you have previously mailed a Proxy, by withdrawing your Proxy and voting
at the meeting. Any stockholder giving a Proxy may revoke the same at any time
prior to the voting of such Proxy by giving written notice of revocation to the
Company's Secretary, by submitting a later dated Proxy or by attending the
Annual Meeting and voting in person. The Company's Annual Report on Form 10-KSB
(including audited financial statements) for the fiscal year ended December 31,
2005 accompanies the Proxy Statement. All shares represented by Proxies will be
voted at the Annual Meeting in accordance with the specifications marked
thereon, or if no specifications are made, (a) as to Proposal 1, the Proxy
confers authority to vote "FOR" all of the four persons listed as candidates for
a position on the Board of Directors, (b) as to Proposal 2, the Proxy confers
authority to vote "FOR" the approval of the 2002 Stock Option Plan, as amended,
(c) as to Proposal 3, the Proxy confers authority to vote "FOR" the approval of
the 2006 Stock Option Plan, (d) as to Proposal 4, the Proxy confers authority to
vote "FOR" the approval of the appointment of Clancy and Co., P.L.L.C., as the
Company's independent auditor for the year ended December 31, 2006, and (e) as
to any other business which comes before the Annual Meeting, the Proxy confers
authority to vote in the Proxy holder's discretion.
The Company's Board of Directors believes that a favorable vote for each
candidate for a position on the Board of Directors and for all other matters
described in the attached Notice of Annual Meeting and Proxy Statement is in the
best interest of the Company and its stockholders and recommends a vote "FOR"
all candidates and all other matters. Accordingly, we urge you to review the
accompanying material carefully and to return the enclosed Proxy promptly.
Thank you for your investment and continued interest in Syscan Imaging,
Inc.
Sincerely,
/S/ DARWIN HU
Darwin Hu
Chairman and Chief Executive Officer
SYSCAN IMAGING, INC.
1772 TECHNOLOGY DRIVE
SAN JOSE, CALIFORNIA
(408) 436-9888
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FRIDAY JUNE 9, 2006
Notice is hereby given that the 2006 Annual Meeting of Stockholders (the
"Annual Meeting") of Syscan Imaging, Inc., a Delaware corporation (the "Company"
or "Syscan"), will be held at the Company's principal executive offices located
at 1772 Technology Drive, San Jose, California 95110, on Friday, June 9, 2006 at
10:00 a.m., Pacific Standard Time, for the following purposes:
1. To elect four Directors to the Board of Directors to serve until the
2006 Annual Meeting of Stockholders or until their successors have
been duly elected and qualified;
2. To approve the Company's 2002 Amended and Restated Stock Option
Plan;
3. To approve the Company's 2006 Stock Option Plan;
4. To ratify the appointment by the Company's Board of Directors of
Clancy and Co., P.L.L.C., to serve as the Company's independent
auditors for the year ended December 31, 2006; and
5. To consider and take action upon such other business as may properly
come before the Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on May 1, 2006, as
the record date for determining the stockholders entitled to notice of, and to
vote at, the Annual Meeting or any adjournments thereof.
For a period of 10 days prior to the Annual Meeting, a stockholders list
will be kept at the Company's office and shall be available for inspection by
stockholders during usual business hours. A stockholders list will also be
available for inspection at the Annual Meeting.
Your attention is directed to the accompanying Proxy Statement for further
information regarding each proposal to be made.
STOCKHOLDERS UNABLE TO ATTEND THE MEETING IN PERSON ARE URGED TO COMPLETE,
DATE AND SIGN THE ACCOMPANYING PROXY AND MAIL IT IN THE ENCLOSED STAMPED,
SELF-ADDRESSED ENVELOPE AS PROMPTLY AS POSSIBLE. IF YOU SIGN AND RETURN YOUR
PROXY WITHOUT SPECIFYING YOUR CHOICES IT WILL BE UNDERSTOOD THAT YOU WISH TO
HAVE YOUR SHARES VOTED IN ACCORDANCE WITH THE DIRECTORS' RECOMMENDATIONS. IF YOU
ATTEND THE ANNUAL MEETING, YOU MAY, IF YOU DESIRE, REVOKE YOUR PROXY AND VOTE IN
PERSON.
By Order of the Board of Directors
/S/ WILLIAM HAWKINS
William Hawkins, SECRETARY
May 2, 2006
SYSCAN IMAGING, INC.
1772 TECHNOLOGY DRIVE
SAN JOSE, CALIFORNIA
(408) 436-9888
PROXY STATEMENT
2006 ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation by
and on behalf of the Board of Directors (the "Board of Directors") of Syscan
Imaging, Inc. (the "Company" or "Syscan") of proxies to be voted at the 2006
Annual Meeting of Stockholders to be held at 10:00 a.m., Pacific Standard Time,
on Friday, June 9, 2006 at the principal executive offices of the Company at
1772 Technology Drive, San Jose, California 95110 and at any adjournments
thereof (the "Annual Meeting"). The Annual Meeting has been called to consider
and take action on the following proposals: (i) To elect four Directors to the
Board of Directors to serve until the 2007 Annual Meeting of Stockholders or
until their successors have been duly elected or appointed and qualified; (ii)
To approve the Company's 2002 Amended and Restated Stock Option Plan; (iii) To
approve the Company's 2006 Stock Option Plan; (iv) To appoint Clancy & Co.,
P.L.L.C., to serve as the Company's independent auditors for the year ended
December 31, 2006, and (v) To consider and take action upon such other business
as may properly come before the Annual Meeting or any adjournments thereof.
The Board of Directors knows of no other matters to be presented for
action at the Annual Meeting. However, if any other matters properly come before
the Annual Meeting, the persons named in the proxy will vote on such other
matters and/or for other nominees in accordance with their best judgment. The
Company's Board of Directors recommends that the stockholders vote in favor of
each of the proposals. Only holders of record of common stock, $.001 par value
(the "Common Stock"), of the Company at the close of business on May 1, 2006
(the "Record Date") will be entitled to vote at the Annual Meeting.
The principal executive offices of the Company are located at 1772
Technology Drive, San Jose, California 95110 and its telephone number is (408)
436-9888. The approximate date on which this Proxy Statement, the proxy card and
other accompanying materials are first being sent or given to stockholders is
approximately May 10, 2006. A copy of the Company's Annual Report for the fiscal
year ended December 31, 2005 is enclosed with these materials, but should not be
considered proxy solicitation material.
INFORMATION CONCERNING SOLICITATION AND VOTING
As of the Record Date, there were 24,601,096 outstanding shares of Common
Stock, each share entitled to one vote on each matter to be voted on at the
Annual Meeting. As of the Record Date, the Company had approximately 370 holders
of record of Common Stock. Only holders of shares of Common Stock on the Record
Date will be entitled to vote at the Annual Meeting. The holders of Common Stock
are entitled to one vote on all matters presented at the meeting for each share
held of record. The presence in person or by proxy of holders of record of a
majority of the shares outstanding and entitled to vote as of the Record Date
shall be required for a quorum to transact business at the Annual Meeting. If a
quorum should not be present, the Annual Meeting may be adjourned until a quorum
is obtained.
Each nominee to be elected as a director named in Proposal 1 must receive
the vote of a plurality of the votes of the shares of Common Stock present in
person or represented by proxy at the meeting. For the purposes of election of
directors, although abstentions will count toward the presence of a quorum, they
will not be counted as votes cast and will have no effect on the result of the
vote. BROKERS WHO HOLD SHARES IN STREET NAME MAY VOTE ON BEHALF OF BENEFICIAL
OWNERS WITH RESPECT TO PROPOSAL 1.
The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or represented by proxy at the meeting is required for
the approval of each of Proposal 2, Proposal 3 and Proposal 4. For purposes of
approval of each of Proposal 2, Proposal 3 and Proposal 4, abstentions will not
be counted as votes entitled to be cast on each of these matters and will have
no effect on the result of the vote. "Broker non-votes," which occur when
brokers are prohibited from exercising discretionary voting authority for
beneficial owners who have not provided voting instructions, will not be counted
for the purpose of determining the number of shares present in person or by
proxy on either Proposal 2, Proposal 3 or Proposal 4 and will have no effect on
the outcome of the vote.
The expense of preparing, printing and mailing this Proxy Statement,
exhibits and the proxies solicited hereby will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by officers and
directors and regular employees of the Company, without additional remuneration,
by personal interviews, telephone or facsimile transmission. The Company will
also request brokerage firms, nominees, custodians and fiduciaries to forward
proxy materials to the beneficial owners of shares of Common Stock held of
record and will provide reimbursements for the cost of forwarding the material
in accordance with customary charges.
Proxies given by stockholders of record for use at the Annual Meeting may
be revoked at any time prior to the exercise of the powers conferred. In
addition to revocation in any other manner permitted by law, stockholders of
record giving a proxy may revoke the proxy by an instrument in writing, executed
by the stockholder or his attorney authorized in writing or, if the stockholder
is a corporation, under its corporate seal, by an officer or attorney thereof
duly authorized, and deposited either at the corporate headquarters of the
Company at any time up to and including the last business day preceding the day
of the Annual Meeting, or any adjournments thereof, at which the proxy is to be
used, or with the chairman of such Annual Meeting on the day of the Annual
Meeting or adjournments thereof, and upon either of such deposits the proxy is
revoked. Stockholder attending the meeting may revote their proxies at the
meeting.
ALL PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES
SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF A PROPOSAL IF NO
CONTRARY SPECIFICATION IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE
DISCRETION OF THE PERSONS NAMED IN THE PROXY WITH RESPECT TO ANY OTHER BUSINESS
THAT MAY COME BEFORE THE ANNUAL MEETING.
Proposals 1, 2, 3 and 4 do not give rise to any statutory right of a
stockholder to dissent and obtain the appraisal of or payment for such
stockholder's shares.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, four individuals will be elected to serve as
directors until the next annual meeting or until their successors are duly
elected, appointed and qualified. The Company's Board of Directors currently
consists of four persons. All of the individuals who are nominated for election
to the Board of Directors are existing directors of the Company. Unless a
stockholder WITHHOLDS AUTHORITY, a properly signed and dated proxy will be voted
"FOR" the election of the persons named below, unless the proxy contains
contrary instructions. Management has no reason to believe that any of the
nominees will not be a candidate or will be unable to serve as a Director.
However, in the event any nominee is not a candidate or is unable or unwilling
to serve as a Director at the time of the election, unless the stockholder
withholds authority from voting, the proxies will be voted "FOR" any nominee who
shall be designated by the present Board of Directors to fill such vacancy.
The name and age of each of the four nominees, his position with the
Company, and the period during which such person has served as a Director are
set out below.
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YEAR FIRST ELECTED AS
NAME AN OFFICER OR DIRECTOR AGE POSITION(S) HELD
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Darwin Hu 2004 53 President, Chief Executive
Officer and Chairman
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David Clark 2004 38 Senior Vice President of Business
Development and Director
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Peter Mor 2004 56 Director
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Lawrence Liang 2004 70 Director
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There are no family relationships between any director, executive officer, or
person nominated or chosen to become a director or executive officer. DARWIN HU
became our Chairman, President and Chief Executive Officer on April 2, 2004, in
connection with our acquisition of Syscan, Inc. Prior thereto, Mr. Hu was the
President and Chief Executive Officer of Syscan, Inc., our wholly-owned
subsidiary. Mr. Hu has over 21 years of experience in the high-tech industry and
has held various management related positions within organizations related to
color graphic imaging input scanning, display output and imaging communication
product development, manufacturing and sales and marketing. Before joining
Syscan, Inc. in April 1998, Mr. Hu held senior management positions at Microtek,
Xerox, OKI, AVR, DEST, Olivetti and Grundig. Mr. Hu holds a bachelor's degree in
Engineering Science from National Cheng-Kung University, Taiwan, and a master's
degree in Computer Science and Engineering from California State University,
Chico, USA.
DAVID CLARK has been our Senior Vice President of Business Development and a
director since July 15, 2004,. In July 2005, Mr. Clark was appointed President
of Sysview Technology Inc., our wholly owned subsidiary. From October, 2003 to
July, 2004 Mr. Clark was President of Nautical Vision, Inc. a market specific
image display company where he created and implemented the company's business
plan which involved product sourcing, sales and marketing and general
management. From June, 2001 to October, 2003 Mr. Clark actively invested in and
consulted to a diverse group of companies in addition to being involved in
residential development. Mr. Clark was President and CEO of Homebytes.com from
November, 1998 to May of 2001, where he was primarily responsible for raising in
excess of twenty five million dollars in funding from investors including
America Online, FBR Technology Venture Partners, PNC Bank, and Bank of America,
as well as being instrumental in the acquisition of a key competitor of
Homebytes.com. Prior thereto Mr. Clark was the head of distribution and a
director of Take Two Interactive (NASDAQ:TTWO) which was a result of TTWO's
acquisition of Inventory Management Systems, Inc. (I.M.S.I.), of which Mr. Clark
was a co-founder and President. Prior to founding I.M.S.I., Mr. Clark held
various management positions with Acclaim Entertainment (NASDAQ:AKLM), and the
Imagesoft division of SONY Music (NYSE:SNE). Mr. Clark received a B.S. in
Business from the State University of New York at Binghamton in 1990.
PETER MOR has been a director since April 2, 2004. Mr. Mor has been the Senior
Vice President of Engineering & Operations of Focus Enhancements since February
1, 2005. Prior to joining Focus Enhancements, Mr. Mor served as a Vice President
of Engineering of SONY Corp. from July 23, 1999 to January 31, 2005 where he was
responsible for research and development of SONY's VAIO Notebook and Desktop
PCs, accessories and web based network services. Prior thereto, Mr. Mor has
extensive experience in engineering, operations and manufacturing, as well as
off-shore manufacturing, international outsourcing and procurement and ODM
management. Prior to joining SONY Corp., since 1980 Mr. Mor held various senior
positions with AMAX Engineering, AVR Technologies, Fujitsu Computer Products of
America, XEROX and QUME. Mr. Mor holds a master's degree in Computer Science
from the University of Oregon and a bachelor's degree in Electrical Engineering
from National Cheng-Kung University, Taiwan.
LAWRENCE LIANG has been a director since April 2, 2004. Since 1984 Mr. Liang has
been the President and Vice President of Genoa Systems Corporation, a graphics
company that developed the flicker free and true color technologies in the late
1980's, the President of Telecom Marketing, a marketing consultant for
telecommunications infrastructure, and the President of Cwaves Technology, a
wireless LAN/WAN company. Mr. Liang has also worked for IBM's Technology
Component Division to help develop semiconductor products and RISC CPU
Instruction sets. Mr. Liang also spent five years in IBM's Disk Drive division
in Silicon Valley where he held various management positions. Mr. Liang holds a
master's degree in Applied Mathematics from the City University of New York.
VOTE REQUIRED
Provided that a quorum of stockholders is present at the meeting in
person, or is represented by proxy, and is entitled to vote thereon, Directors
will be elected by a plurality of the votes cast at the meeting
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR Messrs. Hu, Clark, Mor and
Liang. Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted FOR the election of the above listed nominees and
AGAINST any other nominees.
COMPENSATION OF DIRECTORS
The Company intends to establish a formal plan for compensating its Board
of Directors. Currently, directors are reimbursed for actual expenses incurred
in connection with performing duties as directors and do not receive
compensation for attendance at meetings. Further, from time to time, directors
are granted options under the Company's stock option plan, as reflected in the
description of the stock option plans included herein.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 2005 ("fiscal 2005"), the Board
of Directors held one meeting, which was attended by all of the Company's
Directors during the period that such person was a member of the Board. During
fiscal 2005, the Board of Directors also acted by written consent four times.
Directors are expected to attend all meetings. Although the Company is not
currently required to have any board committees under applicable securities laws
and exchange listing guidelines, the Company intends to establish an audit
committee. The Company does not have a standing nominating or compensation
committee at this time. Currently the entire Board of Directors is active in the
nominating and compensation process. Nominations for election to the Board of
Directors may be made by the Board of Directors or by any stockholder entitled
to vote for the election of directors. The Board of Directors carefully
considers nominees regardless of whether they are nominated by stockholders or
existing board-members.
Special meetings may be held from time to time to consider matters for
which approval of the Board of Directors is desirable or required by law.
BOARD COMMITTEES
Our board of directors does not currently have any standing committees. We
intend to establish an audit committee which we expect will be comprised of a
majority of independent directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that our directors and executive officers and persons who beneficially own more
than 10% of our common stock (referred to herein as the "reporting persons")
file with the SEC various reports as to their ownership of and activities
relating to our common stock. Such reporting persons are required by the SEC
regulations to furnish us with copies of all Section 16(a) reports they file.
Based solely upon a review of copies of Section 16(a) reports and
representations received by us from reporting persons, and without conducting
any independent investigation of our own, in 2005, we believe all Forms 3, 4 and
5 were timely filed with the SEC by such reporting persons.
CODE OF ETHICS
Our board of directors has adopted a Code of Ethics which is applicable to
our chief executive officer, senior financial officers and members of our board
of directors, including our principal executive officer and principal financial
officer, principal accounting officer or controller, or other persons performing
similar functions.
Any amendment of our Code of Ethics or waiver thereof applicable to any of
our principal executive officer, principal financial officer and controller,
principal accounting officer, directors or persons performing similar functions
will be disclosed on our website within 5 days of the date of such amendment or
waiver. In the case of a waiver, the nature of the waiver, the name of the
person to whom the waiver was granted and the date of the waiver will also be
disclosed. A copy of our Code of Ethics has been previously filed as Exhibit 14
to our Form 10-KSB for the year ended December 31, 2004.
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years indicated, all
compensation awarded to, paid to or earned by the following type of executive
officers for the fiscal years ended December 31, 2003, 2004 and 2005: (i)
individuals who served as, or acted in the capacity of, our principal executive
officer for the fiscal year ended December 31, 2005; and (ii) our other most
highly compensated executive officers, who together with the principal executive
officer are our most highly compensated officers whose salary and bonus exceeded
$100,000 with respect to the fiscal years ended December 31, 2005, 2004 and 2003
and who were employed by us at the end of fiscal year 2005.
SUMMARY COMPENSATION TABLE*
LONG TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------- ------------------------- -----------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
--------------------------- ---- ------ ----- ------------ ---------- ------------ ------- ------------
($) ($) ($) ($) (#) ($) ($)
Darwin Hu, Chief Executive 2005 200,000 -- -- -- 1,500,000(1) -- --
Officer and Chairman 2004 200,000 -- -- -- -- -- --
2003 200,000 -- -- -- -- -- --
William Hawkins 2005 160,000 -- -- -- 1,000,000(2) -- --
Chief Operating Officer, 2004 160,000 -- -- -- -- -- --
Acting Chief Financial 2003 160,000 -- -- -- -- -- --
Officer and Secretary
David Clark 2005 150,000 -- -- -- 800,000(3) -- --
Senior Vice President of 2004 68,750
Business Development
-- -- -- -- -- --
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* Salary reflects total compensation paid to these executives (both before
and after the merger described in Item 1).
(1) As of the date hereof, 1,000,000 of such options have vested.
(2) As of the date hereof, 666,667 of such options have vested.
(3) As of the date hereof, 533,333 of such options have vested.
OPTION GRANTS IN FISCAL 2005
The following table sets forth certain information regarding stock options
held as of December 31, 2005 by the named executive officers.
Number of
Securities
Underlying % of Total Granted
Options to Employees in Exercise Expiration
Name and Principal Position Granted Fiscal Year Price ($/Sh) Date
--------------------------- ------- ----------- ------------ ----
Darwin Hu 1,500,000 35.4% $.01 April 26,
President and Chief Executive Officer 2012
William Hawkins 1,000,000 16.4% $.01 April 26,
Chief Operating Officer, Acting Chief 2012
Financial Officer and Secretary
David Clark 800,000 18.9% $.01 April 26,
Senior Vice President of Business Development 2012
AGGREGATE OPTIONS EXERCISEABLE IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at December 31, 2005 at December 31, 2005 (1)
----------------------------- -----------------------------
Name and Principal Position Exercisable Unexercisable Exercisable Unexercisable
--------------------------- ----------- ------------- ----------- -------------
Darwin Hu 500,000 1,560,000 $320,000 $640,000
President, Chief Executive Officer
and Chairman of the Board
William Hawkins 333,333 1,026,666 $213,333 $426,666
Chief operating Officer, Acting Chief
Financial Officer and Secretary
David Clark 266,666 933,334 $170,666 $341,333
Vice President of Business Development
(1) As of December 31, 2005, the market value of a share of common stock
was $0.65.
No shares were exercised by named executive officers in fiscal year ended
December 31, 2005.
As of December 31, 2005, options to purchase a total of 2,210,000 shares
of common stock were granted under our 2002 Amended and Restated Stock option
Plan, at exercise prices of $0.65 to $2.00 per share. One-fourth of the options
granted vest on the first anniversary, one-fourth of the options granted vest on
the second anniversary, one-fourth of the options granted vest on the third
anniversary and one-fourth of the options vest on the fourth anniversary. The
options expire on the ten year anniversary of their grant date. All options
described above have been issued pursuant to the 2002 Amended and Restated Stock
Option Plan described below.
EQUITY COMPENSATION PLAN INFORMATION
Number of securities
Number of remaining available
securities to be for future issuance
issued upon Weighted average under equity
exercise of exercise price of compensation plans
outstanding outstanding (excluding securities
options, warrants options, warrants reflected in column
and rights and rights (a))
(a) (b) (c)
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Equity compensation plans approved by security holders 200,000 $ 2.00 -0-
Equity compensation plans not approved by security holders 7,129,000 $ 0.857 990,000
Total 7,329,000 $ 0.888 990,000
2002 AMENDED AND RESTATED STOCK OPTION PLAN
On May 17, 2002, the Company's stockholders approved the adoption of the
2002 Amended and Restated Stock Option Plan (the "Plan"). Under the Plan, the
Company has reserved 200,000 shares of its common stock to issue to eligible
current and prospective employees, consultants and directors of the Company. In
April 2004, the Board of Directors unanimously approved an amendment to the Plan
raising the number of shares that may be issued under the Plan to 2,200,000. In
July 2004 employees were granted options under the Plan to purchase 2,200,000
shares of the Company's common stock at $2.00 per share, 220,000 of which were
cancelled in May 2005. The options have a term of ten years and beginning July
15, 2005, vest in equal annual installments of 25% per year over four years. In
July 2004, the Board of Directors unanimously approved an additional amendment
to the Plan raising the number of shares that may be issued under the Plan to
3,200,000. In December 2005 employees were granted options under the Plan to
purchase 230,000 shares of the Company's common stock at $0.65 per share. The
number of options granted to individual directors, officers (who are not also
directors) and others are as follows:
GRANT DATE
JULY 15, 2004
-------------
DIRECTORS
Darwin Hu 560,000
David Clark 400,000
Peter Mor 80,000
Lawrence Liang 80,000
OFFICERS
William Hawkins 360,000
OTHERS 730,000
CANCELLED MAY 2005 230,000
---------
Subtotal 1,980,000
---------
GRANT DATE
DECEMBER 8, 2005
----------------
OTHERS 230,000
---------
Total 2,210,000
---------
EMPLOYMENT AGREEMENTS
In April 2005, we entered into an employment agreement with Mr. Darwin Hu
pursuant to which he will serve as our President and Chief Executive Officer.
The agreement provides for an initial term of three years, an annual salary to
Mr. Hu of $200,000 and an annual bonus to be determined by our board of
directors. In connection with the agreement, Mr. Hu was issued non-qualified
options to purchase up to 1,500,000 shares of our common stock at an exercise
price of $0.01 per share. One-third of the options vested immediately upon the
execution of the employment agreement, one-third vested on April 3, 2006 and
one-third shall vest on April 2, 2007. The agreement also provides for the
executive's ability to participate in our health insurance program. In the event
that Mr. Hu's employment is terminated other than with good cause, he will
receive a payment of the lesser of his then remaining salary due pursuant to the
employment agreement or six months of base salary at his then current annual
salary.
In April 2005, we entered into an employment agreement with Mr. William
Hawkins pursuant to which he will serve as our Chief Operating Officer. The
agreement provides an initial term of three years, an annual salary to Mr.
Hawkins of $160,000 and an annual bonus to be determined by our board of
directors. In connection with the agreement, Mr. Hawkins was issued
non-qualified options to purchase up to 1,000,000 shares of our common stock at
an exercise price of $0.01 per share. One-third of the options vested
immediately upon the execution of the employment agreement, one-third vested on
April 3, 2006 and one-third shall vest on April 2, 2007. The agreement also
provides for the executive's ability to participate in our health insurance
program. In the event that Mr. Hawkins' employment is terminated other than with
good cause, he will receive a payment of the lesser of his then remaining salary
due pursuant to the employment agreement or six months of base salary at his
then current annual salary.
In April 2005, we entered into an employment agreement with Mr. David
Clark pursuant to which he will serve as our Senior Vice President of Business
Development. The agreement provides for an initial term of three years, an
annual salary to Mr. Clark of $150,000 and an annual bonus to be determined by
our board of directors. In connection with the agreement, Mr. Clark was issued
non-qualified options to purchase up to 800,000 shares of our common stock at an
exercise price of $0.01 per share. One-third of the options vested immediately
upon the execution of the employment agreement, one-third vested on April 3,
2006 and one-third shall vest on April 2, 2007. The agreement also provides for
the executive's ability to participate in our health insurance program. In the
event that Mr. Clark's employment is terminated other than with good cause, he
will receive a payment of the lesser of his then remaining salary due pursuant
to the employment agreement or six months of base salary at his then current
annual salary.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of May 1, 2006, information regarding the
beneficial ownership of our common stock based upon the most recent information
available to us for: (i) each person known by us to own beneficially more than
five (5%) percent of our outstanding common stock, (ii) each of our officers and
directors, and (iii) all of our officers and directors as a group. Unless
otherwise indicated, each of the persons listed below has sole voting and
investment power with respect to the shares beneficially owned by them. As of
May 1, 2006 there were 24,601,096 shares of our common stock outstanding.
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER OF COMMON SHARES PERCENTAGE OF COMMON SHARES
BENEFICIALLY OWNED(2) BENEFICIALLY OWNED
--------------------- ------------------
Darwin Hu (3) 1,000,000 3.9%
William Hawkins (4) 666,667 2.6%
David Clark (5) 583,333 2.3%
Peter Mor (6) -0- --
Lawrence Liang (6) -0- --
Syscan Imaging Limited(7) 18,773,514 76.3%
All Directors and Officers as a group
(5 persons) (3)-(6) 2,250,000 8.3%
* less than one percent
(1) Unless otherwise indicated, the address of each person listed below is c/o
Syscan Imaging, Inc., 1772 Technology Drive, San Jose, California 95110.
(2) Pursuant to the rules and regulations of the Securities and Exchange
Commission, shares of common stock that an individual or group has a right to
acquire within 60 days pursuant to the exercise of options or warrants are
deemed to be outstanding for the purposes of computing the percentage ownership
of such individual or group, but are not deemed to be outstanding for the
purposes of computing the percentage ownership of any other person shown in the
table.
(3) Includes 1,000,000 shares of common stock issuable upon the exercise of
options issued to Mr. Hu in connection with his employment agreement with us.
Does not include 560,000 shares issuable upon the exercise of options granted
pursuant to the Company's Amended and Restated 2002 Stock Option Plan, 420,000
of which are not exercisable within 60 days of the date hereof and all of which
are subject to stockholder approval of the Amended and Restated Stock Option
Plan under which such options were issued. Also does not include 500,000 shares
underlying options issued to Mr. Hu in connection with the execution of his
employment agreement with us, which are not exercisable within 60 days of the
date hereof. Mr. Hu also disclaims beneficial ownership of any shares of common
stock held by Syscan Imaging Limited, our majority-stockholder, of which Mr. Hu
is a director.
(4) Includes 666,667 shares of common stock issuable upon the exercise of
options issued to Mr. Hawkins in connection with his employment agreement with
us. Does not include 360,000 shares issuable upon the exercise of options
granted pursuant to the Company's Amended and Restated 2002 Stock Option Plan,
270,000 of which are not exercisable within 60 days of the date hereof and all
of which are subject to stockholder approval of the Amended and Restated Stock
Option Plan under which such options were issued. Also does not include 333,333
shares underlying options issued to Mr. Hawkins in connection with the execution
of his employment agreement with us, which are not exercisable within 60 days of
the date hereof.
(5) Includes 50,000 shares of common stock and 533,333 shares of common stock
issuable upon the exercise of options issued to Mr. Clark in connection with his
employment agreement with us. Does not include 400,000 shares issuable upon the
exercise of options granted pursuant to the Company's Amended and Restated 2002
Stock Option Plan, 300,000 of which are not exercisable within 60 days of the
date hereof and all of which are subject to stockholder approval of the Amended
and Restated Stock Option Plan under which such options were issued. Also does
not include 266,667 shares underlying options issued to Mr. Clark in connection
with the execution of his employment agreement with us, which are not
exercisable within 60 days of the date hereof.
(6) Does not include 80,000 shares issuable upon the exercise of options granted
pursuant to the Company's Amended and Restated 2002 Stock Option Plan, 60,000 of
which are not exercisable within 60 days of the date hereof and all of which are
subject to stockholders approval of the Amended and Restated Stock Option Plan
under which such options were issued.
(7) The sole shareholder of Syscan Imaging Limited is Syscan Technology Holdings
Limited, a publicly-held company whose shares are listed on The Growth
Enterprise Market of The Stock Exchange of Hong Kong Limited. The address for
Syscan Imaging Limited is Unit 808, 8th floor, K. Wah Centre, 191 Java Road,
North Point Hong Kong.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
To the best of management's knowledge, other than (i) compensation for
services as officers and directors, or (ii) as set forth below, there were no
material transactions, or series of similar transactions, or any currently
proposed transactions, or series of similar transactions, to which Syscan was or
is to be a party, in which the amount involved exceeds $60,000, and in which any
director or executive officer, or any security holder who is known by us to own
of record or beneficially more than 5% of any class of our common stock, or any
member of the immediate family of any of the foregoing persons, has an interest.
MANUFACTURING
All of our products are manufactured by Syscan Technology Holdings (STH),
the parent company of our majority stockholder. We and STH have established an
internal-pricing agreement that is updated on a semi-annual basis. STH currently
serves as the manufacturer of all current image capture products produced by us.
We believe, for quality control and pricing reasons, that this type of
relationship is more favorable then could be attained from unaffiliated
third-parties. We purchase and provide STH with critical parts and components
necessary to manufacture our products.
We purchase significantly all of our finished scanner imaging products
from the parent company of our majority stockholder, Syscan Technology Holdings
Limited ("STH"). Our Chairman and CEO, Darwin Hu, was formerly the CEO of STH,
and beneficially owns approximately 5.33% of the issued and outstanding capital
stock of STH. The following is a summary of significant related party
transactions, which were carried out in the normal course of the Company's
business, during the years ended December 31, 2005 and 2004:
THE FOLLOWING IS A SUMMARY OF SIGNIFICANT RELATED PARTY PURCHASE TRANSACTIONS,
WHICH WERE CARRIED OUT IN THE NORMAL COURSE OF THE COMPANY'S BUSINESS:
2005 2004
-------- --------
SYSCAN Intervision Limited, a wholly-owned
subsidiary of STH (purchases) $ 4.915M $ 3.825M
======== ========
SYSCAN Optoelectronics Technology
(Shenzhen) Company Limited, a wholly-owned
subsidiary of STH (purchases) -- $ 0.520M
======== ========
AMOUNTS DUE TO/FROM RELATED PARTIES ARE UNSECURED, INTEREST-FREE AND REPAYABLE
ON DEMAND AND CONSISTED OF THE FOLLOWING:
Due from STH $ 345,998
Due from Majority Stockholder 100,000
Due from various subsidiaries wholly-owned by STH 1,956,522
-----------
$ 2,402,520
===========
In April 2005 we entered into employment agreements with each of Darwin
Hu, our Chief Executive Officer, William Hawkins, our Chief Operating Officer
and Acting Chief Financial Officer, and David Clark, our Senior Vice President
of Business Development. In connection therewith we granted options to each of
Messrs. Hu, Hawkins and Clark to purchase 1,500,000, 1,000,000 and 800,000
shares of our common stock, respectively, at an exercise price of $0.01 per
share. Such options shall vest one-third on the execution date of the employment
agreement, one-third on April 3, 2006 and one-third on April 2, 2007. Pursuant
to such employment agreements, each of Messrs. Hu, Hawkins and Clark shall be
entitled to receive annual salaries of $200,000, $160,000 and $150,000,
respectively.
Other than those described above, we have no material transactions which
involved or are planned to involve a direct or indirect interest of a director,
executive officer, greater than 5% stockholder or any family member of such
parties.
We believe that all of the transactions set forth above were made on terms
no less favorable to us than could have been obtained from unaffiliated third
parties. All future transactions between us and our officers, directors and
principal shareholders and their affiliates will be on terms no less favorable
than could be obtained from unaffiliated third parties and will be approved by
the independent members of our board of directors.
PROPOSAL 2
APPROVAL OF THE 2002 AMENDED AND RESTATED
STOCK OPTION PLAN
On May 17, 2002, the Company's stockholders approved the 2002 Stock Option
Plan under which 200,000 shares of the Company's common stock were reserved for
issuance. On April 16, 2004, the Board of Directors (the "Board"), subject to
stockholder approval, increased the number of shares of the Company's common
stock reserved for issuance to 2,200,000 shares (8.95% of the outstanding shares
as of May 1, 2006) ("2002 Amended and Restated Stock Option Plan" or the
"Plan"). In July 2004, the Board of Directors, subject to stockholder approval,
increased the number of shares of the Company's common stock reserved for
issuance to 3,200,000 shares (13.0% of the outstanding shares as of May 1, 2006)
("2002 Amended and Restated Stock Option Plan" or the "Plan"). On July 15, 2004,
the Board of Directors granted, subject to shareholder approval of the Plan,
options to purchase 2,200,000 shares at $2.00 per share of the Company's common
stock (see "2002 Amended and Restated Stock Option Plan" on Page 14 for more
details including the number of options granted to Officers and Directors),
220,000 of which were subsequently cancelled in May 2005. On December 8, 2005,
the Board of Directors granted, subject to shareholder approval of the Plan,
options to purchase 230,000 shares at $0.65 per share of the Company's common
stock (see "2002 Amended and Restated Stock Option Plan" on Page 14 for more
details). The additional shares approved by the Board of Directors will not be
exercisable until the amendments to the Plan are approved by the Company's
stockholders. The Board is asking the Company's stockholders to approve the
Plan, as amended, so that the Company may issue stock options thereunder,
thereby providing additional incentives to those persons responsible for the
success of the Company and allowing the Company to continue its policy of
allowing those persons to share in the appreciation of the value of the
Company's stock. The stockholders should be aware that since the Directors have
been granted an aggregate of 1,120,000 of the 2,200,000 shares granted under the
Plan they will receive a personal benefit from the approval of this proposal by
the Stockholders.
DESCRIPTION OF THE 2002 AMENDED AND RESTATED STOCK OPTION PLAN
The following is a description of the purpose and certain of the
provisions of the 2002 Amended and Restated Stock Option Plan. The summary is
qualified in its entirety by reference to the complete text of the 2002 Amended
and Restated Stock Option Plan, which is attached hereto as Exhibit A.
DESCRIPTION OF THE PLAN
THE PURPOSE OF THE PLAN. The purpose of the Plan is to provide additional
incentive to the directors, officers, employees and consultants of the Company
who are primarily responsible for the management and growth of the Company. Each
option shall be designated at the time of grant as either an incentive stock
option (an "ISO") or as a non-qualified stock option (a "NQSO").
The Board of Directors believes that the ability to grant stock options to
employees which qualify for ISO treatment provides an additional material
incentive to certain key employees. The Internal Revenue Code requires that ISOs
be granted pursuant to an option plan that receives stockholder approval within
one year of its adoption. The Company adopted the Plan in order to comply with
this statutory requirement and preserve its ability to grant ISOs.
The benefits to be derived from the Plan, if any, are not quantifiable or
determinable.
ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Board of
Directors of the Company, or by any committee that the Company may in the future
form and to which the Board of Directors may delegate the authority to perform
such functions (in either case, the "Administrator"). The Board of Directors
shall appoint and remove members of the committee in its discretion in
accordance with applicable laws. In the event that the Company establishes such
a committee and is required to comply with Rule 16b-3 under the Exchange Act and
Section 162(m) of the Internal Revenue Code (the "Code"), the committee shall,
in the Board of Director's discretion, be comprised solely of "non-employee
directors" within the meaning of said Rule 16b-3 and "outside directors" within
the meaning of Section 162(m) of the Code. Notwithstanding the foregoing, the
Administrator may delegate non-discretionary administrative duties to such
employees of the Company as it deems proper and the Board of Directors, in its
absolute discretion, may at any time and from time to time exercise any and all
rights and duties of the Administrator under the Plan.
Subject to the other provisions of the Plan, the Administrator shall have
the authority, in its discretion: (i) to grant options; (ii) to determine the
fair market value of the Common Stock subject to options; (iii) to determine the
exercise price of options granted; (iv) to determine the persons to whom, and
the time or times at which, options shall be granted, and the number of shares
subject to each option; (v) to interpret the Plan; (vi) to prescribe, amend, and
rescind rules and regulations relating to the Plan; (vii) to determine the terms
and provisions of each option granted (which need not be identical), including
but not limited to, the time or times at which options shall be exercisable;
(viii) with the consent of the optionee, to modify or amend any option; (ix) to
defer (with the consent of the optionee) the exercise date of any option; (x) to
authorize any person to execute on behalf of the Company any instrument
evidencing the grant of an option; and (xi) to make all other determinations
deemed necessary or advisable for the administration of the Plan. The
Administrator may delegate non-discretionary administrative duties to such
employees of the Company as it deems proper.
SHARES OF STOCK SUBJECT TO THE PLAN. Subject to the conditions outlined
below, the total number of shares of stock which may be issued under options
granted pursuant to the Plan shall not exceed 3,200,000 shares of Common Stock,
$.001 par value per share.
The number of shares of Common Stock subject to options granted pursuant
to the Plan may be adjusted under certain conditions. If the stock of the
Company is changed by reason of a stock split, reverse stock split, stock
dividend, recapitalization, combination or reclassification, appropriate
adjustments shall be made by the Board of Directors in (i) the number and class
of shares of stock subject to the Plan, and (ii) the exercise price of each
outstanding option; provided, however, that the Company shall not be required to
issue fractional shares as a result of any such adjustments. Each such
adjustment shall be subject to approval by the Board of Directors in its sole
discretion.
In the event of the proposed dissolution or liquidation of the Company,
the Administrator shall notify each optionee at least thirty days prior to such
proposed action. To the extent not previously exercised, all options will
terminate immediately prior to the consummation of such proposed action;
provided, however, that the Administrator, in the exercise of its sole
discretion, may permit exercise of any options prior to their termination, even
if such options were not otherwise exercisable. In the event of a merger or
consolidation of the Company with or into another corporation or entity in which
the Company does not survive, or in the event of a sale of all or substantially
all of the assets of the Company in which the Stockholders of the Company
receive securities of the acquiring entity or an affiliate thereof, all options
shall be assumed or equivalent options shall be substituted by the successor
corporation (or other entity) or a parent or subsidiary of such successor
corporation (or other entity); provided, however, that if such successor does
not agree to assume the options or to substitute equivalent options therefor,
the Administrator, in the exercise of its sole discretion, may permit the
exercise of any of the options prior to consummation of such event, even if such
options were not otherwise exercisable.
PARTICIPATION. Every person who at the date of grant of an option is an
employee of the Company or of any Affiliate (as defined below) of the Company is
eligible to receive NQSOs or ISOs under the Plan. Every person who at the date
of grant is a consultant to, or non-employee director of, the Company or any
Affiliate (as defined below) of the Company is eligible to receive NQSOs under
the Plan. The term "Affiliate" as used in the Plan means a parent or subsidiary
corporation as defined in the applicable provisions (currently Sections 424(e)
and (f), respectively) of the Code. The term "employee" includes an officer or
director who is an employee of the Company. The term "consultant" includes
persons employed by, or otherwise affiliated with, a consultant.
OPTION PRICE. The exercise price of a NQSO shall be not less than 85% of
the fair market value of the stock subject to the option on the date of grant.
To the extent required by applicable laws, rules and regulations, the exercise
price of a NQSO granted to any person who owns, directly or by attribution under
the Code (currently Section 424(d)), stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of any Affiliate
(a "10% Stockholder") shall in no event be less than 110% of the fair market
value of the stock covered by the option at the time the option is granted. The
exercise price of an ISO shall be determined in accordance with the applicable
provisions of the Code and shall in no event be less than the fair market value
of the stock covered by the option at the time the option is granted. The
exercise price of an ISO granted to any 10% Stockholder shall in no event be
less than 110% of the fair market value of the stock covered by the Option at
the time the Option is granted.
TERM OF THE OPTIONS. The Administrator, in its sole discretion, shall fix
the term of each option, provided that the maximum term of an option shall be
ten years. ISOs granted to a 10% Stockholder shall expire not more than five
years after the date of grant. The Plan provides for the earlier expiration of
options in the event of certain terminations of employment of the holder.
RESTRICTIONS ON GRANT AND EXERCISE. Except with the express written
approval of the Administrator which approval the Administrator is authorized to
give only with respect to NQSOs, no option granted under the Plan shall be
assignable or otherwise transferable by the optionee except by will or by
operation of law. During the life of the optionee, an option shall be
exercisable only by the optionee.
TERMINATION OF THE PLAN. The Plan shall become effective upon adoption by
the Board or Directors; provided, however, that no option shall be exercisable
unless and until written consent of the Stockholders of the Company, or approval
of Stockholders of the Company voting at a validly called Stockholders' meeting,
is obtained within twelve months after adoption by the Board of Directors. If
such Stockholder approval is not obtained within such time, options granted
pursuant to the Plan shall be of the same force and effect as if such approval
was obtained except that all ISOs granted pursuant to the Plan shall be treated
as NQSOs. Options may be granted and exercised under the Plan only after there
has been compliance with all applicable federal and state securities laws. The
Plan shall terminate within ten years from the date of its adoption by the Board
of Directors.
TERMINATION OF EMPLOYMENT. If for any reason other than death or permanent
and total disability, an optionee ceases to be employed by the Company or any of
its Affiliates (such event being called a "Termination"), options held at the
date of Termination (to the extent then exercisable) may be exercised in whole
or in part at any time within three months of the date of such Termination, or
such other period of not less than thirty days after the date of such
Termination as is specified in the Option Agreement or by amendment thereof (but
in no event after the expiration date of the option (the "Expiration Date"));
provided, however, that if such exercise of the option would result in liability
for the optionee under Section 16(b) of the Exchange Act, then such three-month
period automatically shall be extended until the tenth day following the last
date upon which optionee has any liability under Section 16(b) (but in no event
after the Expiration Date). If an optionee dies or becomes permanently and
totally disabled (within the meaning of Section 22(e)(3) of the Code) while
employed by the Company or an Affiliate or within the period that the option
remains exercisable after Termination, options then held (to the extent then
exercisable) may be exercised, in whole or in part, by the optionee, by the
optionee's personal representative or by the person to whom the option is
transferred by devise or the laws of descent and distribution, at any time
within twelve months after the death or twelve months after the permanent and
total disability of the optionee or any longer period specified in the Option
Agreement or by amendment thereof (but in no event after the Expiration Date).
"Employment" includes service as a director or as a consultant. For purposes of
the Plan, an optionee's employment shall not be deemed to terminate by reason of
sick leave, military leave or other leave of absence approved by the
Administrator, if the period of any such leave does not exceed 90 days or, if
longer, if the optionee's right to reemployment by the Company or any Affiliate
is guaranteed either contractually or by statute.
AMENDMENTS TO THE PLAN. The Board of Directors may at any time amend,
alter, suspend or discontinue the Plan. Without the consent of an optionee, no
amendment, alteration, suspension or discontinuance may adversely affect
outstanding options except to conform the Plan and ISOs granted under the Plan
to the requirements of federal or other tax laws relating to ISOs. No amendment,
alteration, suspension or discontinuance shall require Stockholder approval
unless (i) stockholder approval is required to preserve incentive stock option
treatment for federal income tax purposes or (ii) the Board of Directors
otherwise concludes that stockholder approval is advisable.
TAX TREATMENT OF THE OPTIONS. Under the Code, neither the grant nor the
exercise of an ISO is a taxable event to the optionee (except to the extent an
optionee may be subject to alternative minimum tax); rather, the optionee is
subject to tax only upon the sale of the Common Stock acquired upon exercise of
the ISO. Upon such a sale, the entire difference between the amount realized
upon the sale and the exercise price of the option will be taxable to the
optionee. Subject to certain holding period requirements, such difference will
be taxed as a capital gain rather than as ordinary income. Optionees who receive
NQSOs will be subject to taxation upon exercise of such options on the spread
between the fair market value of the Common Stock on the date of exercise and
the exercise price of such options. This spread is treated as ordinary income to
the optionee, and the Company is permitted to deduct as an employee expense a
corresponding amount. NQSOs do not give rise to a tax preference item subject to
the alternative minimum tax.
REQUIRED VOTE AND RECOMMENDATION
Stockholder approval of the 2002 Amended and Restated Stock Option Plan is
required under the Internal Revenue Code of 1986, as amended, in order for
options granted under the 2002 Amended and Restated Stock Option Plan to be
considered "incentive stock options." The affirmative vote of a majority of all
the votes cast at a meeting at which a quorum is present is required to approve
the 2002 Amended and Restated Stock Option Plan as set forth in this Proposal 2.
For purposes of the vote on Proposal 2, abstentions and broker non-votes will
not be counted as votes cast and thus will have no effect on the result of the
vote although they will count towards the presence of a quorum for Proposal 2.
Properly executed, unrevoked proxies will be voted FOR Proposal 2 unless a vote
against Proposal 2 or abstention is specifically indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE COMPANY'S
2002 AMENDED AND RESTATED STOCK OPTION PLAN
PROPOSAL 3
APPROVAL OF THE 2006 STOCK OPTION PLAN
On May 1, 2006, the Company's Board of Directors adopted a resolution
approving the 2006 Stock Option Plan under which 1,500,000 shares of the
Company's common stock will be reserved for issuance (6.1% of the outstanding
shares as of May 1, 2006) ("2006 Stock Option Plan"). The Plan will not become
effective until it is approved by the Company's stockholders. The Board is
asking the Company's stockholders to approve the 2006 Stock Option Plan so that
the Company may issue stock options thereunder, thereby providing additional
incentives to those persons responsible for the success of the Company and
allowing the Company to continue its policy of allowing those persons to share
in the appreciation of the value of the Company's stock. No options have been
granted under the 2006 Stock Option Plan to date, and there is no plan by the
Company to issue any options at this time.
DESCRIPTION OF THE 2006 STOCK OPTION PLAN
The following is a description of the purpose and certain of the
provisions of the 2006 Stock Option Plan. The summary is qualified in its
entirety by reference to the complete text of the 2006 Stock Option Plan, which
is attached hereto as Exhibit B.
DESCRIPTION OF THE PLAN
THE PURPOSE OF THE PLAN. The purpose of the Plan is to provide additional
incentive to the directors, officers, employees and consultants of the Company
who are primarily responsible for the management and growth of the Company. Each
option shall be designated at the time of grant as either an incentive stock
option (an "ISO") or as a non-qualified stock option (a "NQSO").
The Board of Directors believes that the ability to grant stock options to
employees which qualify for ISO treatment provides an additional material
incentive to certain key employees. The Internal Revenue Code requires that ISOs
be granted pursuant to an option plan that receives stockholder approval within
one year of its adoption. The Company adopted the Plan in order to comply with
this statutory requirement and preserve its ability to grant ISOs.
The benefits to be derived from the Plan, if any, are not quantifiable or
determinable.
ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Board of
Directors of the Company, or by any committee that the Company may in the future
form and to which the Board of Directors may delegate the authority to perform
such functions (in either case, the "Administrator"). The Board of Directors
shall appoint and remove members of the committee in its discretion in
accordance with applicable laws. In the event that the Company establishes such
a committee and is required to comply with Rule 16b-3 under the Exchange Act and
Section 162(m) of the Internal Revenue Code (the "Code"), the committee shall,
in the Board of Director's discretion, be comprised solely of "non-employee
directors" within the meaning of said Rule 16b-3 and "outside directors" within
the meaning of Section 162(m) of the Code. Notwithstanding the foregoing, the
Administrator may delegate non-discretionary administrative duties to such
employees of the Company as it deems proper and the Board of Directors, in its
absolute discretion, may at any time and from time to time exercise any and all
rights and duties of the Administrator under the Plan.
Subject to the other provisions of the Plan, the Administrator shall have
the authority, in its discretion: (i) to grant options; (ii) to determine the
fair market value of the Common Stock subject to options; (iii) to determine the
exercise price of options granted; (iv) to determine the persons to whom, and
the time or times at which, options shall be granted, and the number of shares
subject to each option; (v) to interpret the Plan; (vi) to prescribe, amend, and
rescind rules and regulations relating to the Plan; (vii) to determine the terms
and provisions of each option granted (which need not be identical), including
but not limited to, the time or times at which options shall be exercisable;
(viii) with the consent of the optionee, to modify or amend any option; (ix) to
defer (with the consent of the optionee) the exercise date of any option; (x) to
authorize any person to execute on behalf of the Company any instrument
evidencing the grant of an option; and (xi) to make all other determinations
deemed necessary or advisable for the administration of the Plan. The
Administrator may delegate non-discretionary administrative duties to such
employees of the Company as it deems proper.
SHARES OF STOCK SUBJECT TO THE PLAN. Subject to the conditions outlined
below, the total number of shares of stock which may be issued under options
granted pursuant to the Plan shall not exceed 1,500,000 shares of Common Stock,
$.001 par value per share.
The number of shares of Common Stock subject to options granted pursuant
to the Plan may be adjusted under certain conditions. If the stock of the
Company is changed by reason of a stock split, reverse stock split, stock
dividend, recapitalization, combination or reclassification, appropriate
adjustments shall be made by the Board of Directors in (i) the number and class
of shares of stock subject to the Plan, and (ii) the exercise price of each
outstanding option; provided, however, that the Company shall not be required to
issue fractional shares as a result of any such adjustments. Each such
adjustment shall be subject to approval by the Board of Directors in its sole
discretion.
In the event of the proposed dissolution or liquidation of the Company,
the Administrator shall notify each optionee at least thirty days prior to such
proposed action. To the extent not previously exercised, all options will
terminate immediately prior to the consummation of such proposed action;
provided, however, that the Administrator, in the exercise of its sole
discretion, may permit exercise of any options prior to their termination, even
if such options were not otherwise exercisable. In the event of a merger or
consolidation of the Company with or into another corporation or entity in which
the Company does not survive, or in the event of a sale of all or substantially
all of the assets of the Company in which the Stockholders of the Company
receive securities of the acquiring entity or an affiliate thereof, all options
shall be assumed or equivalent options shall be substituted by the successor
corporation (or other entity) or a parent or subsidiary of such successor
corporation (or other entity); provided, however, that if such successor does
not agree to assume the options or to substitute equivalent options therefor,
the Administrator, in the exercise of its sole discretion, may permit the
exercise of any of the options prior to consummation of such event, even if such
options were not otherwise exercisable.
PARTICIPATION. Every person who at the date of grant of an option is an
employee of the Company or of any Affiliate (as defined below) of the Company is
eligible to receive NQSOs or ISOs under the Plan. Every person who at the date
of grant is a consultant to, or non-employee director of, the Company or any
Affiliate (as defined below) of the Company is eligible to receive NQSOs under
the Plan. The term "Affiliate" as used in the Plan means a parent or subsidiary
corporation as defined in the applicable provisions (currently Sections 424(e)
and (f), respectively) of the Code. The term "employee" includes an officer or
director who is an employee of the Company. The term "consultant" includes
persons employed by, or otherwise affiliated with, a consultant.
OPTION PRICE. The exercise price of a NQSO shall be not less than 85% of
the fair market value of the stock subject to the option on the date of grant.
To the extent required by applicable laws, rules and regulations, the exercise
price of a NQSO granted to any person who owns, directly or by attribution under
the Code (currently Section 424(d)), stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of any Affiliate
(a "10% Stockholder") shall in no event be less than 110% of the fair market
value of the stock covered by the option at the time the option is granted. The
exercise price of an ISO shall be determined in accordance with the applicable
provisions of the Code and shall in no event be less than the fair market value
of the stock covered by the option at the time the option is granted. The
exercise price of an ISO granted to any 10% Stockholder shall in no event be
less than 110% of the fair market value of the stock covered by the Option at
the time the Option is granted.
TERM OF THE OPTIONS. The Administrator, in its sole discretion, shall fix
the term of each option, provided that the maximum term of an option shall be
ten years. ISOs granted to a 10% Stockholder shall expire not more than five
years after the date of grant. The Plan provides for the earlier expiration of
options in the event of certain terminations of employment of the holder.
RESTRICTIONS ON GRANT AND EXERCISE. Except with the express written
approval of the Administrator which approval the Administrator is authorized to
give only with respect to NQSOs, no option granted under the Plan shall be
assignable or otherwise transferable by the optionee except by will or by
operation of law. During the life of the optionee, an option shall be
exercisable only by the optionee.
TERMINATION OF THE PLAN. The Plan shall become effective upon adoption by
the Board or Directors; provided, however, that no option shall be exercisable
unless and until written consent of the Stockholders of the Company, or approval
of Stockholders of the Company voting at a validly called Stockholders' meeting,
is obtained within twelve months after adoption by the Board of Directors. If
such Stockholder approval is not obtained within such time, options granted
pursuant to the Plan shall be of the same force and effect as if such approval
was obtained except that all ISOs granted pursuant to the Plan shall be treated
as NQSOs. Options may be granted and exercised under the Plan only after there
has been compliance with all applicable federal and state securities laws. The
Plan shall terminate within ten years from the date of its adoption by the Board
of Directors.
TERMINATION OF EMPLOYMENT. If for any reason other than death or permanent
and total disability, an optionee ceases to be employed by the Company or any of
its Affiliates (such event being called a "Termination"), options held at the
date of Termination (to the extent then exercisable) may be exercised in whole
or in part at any time within three months of the date of such Termination, or
such other period of not less than thirty days after the date of such
Termination as is specified in the Option Agreement or by amendment thereof (but
in no event after the expiration date of the option (the "Expiration Date"));
provided, however, that if such exercise of the option would result in liability
for the optionee under Section 16(b) of the Exchange Act, then such three-month
period automatically shall be extended until the tenth day following the last
date upon which optionee has any liability under Section 16(b) (but in no event
after the Expiration Date). If an optionee dies or becomes permanently and
totally disabled (within the meaning of Section 22(e)(3) of the Code) while
employed by the Company or an Affiliate or within the period that the option
remains exercisable after Termination, options then held (to the extent then
exercisable) may be exercised, in whole or in part, by the optionee, by the
optionee's personal representative or by the person to whom the option is
transferred by devise or the laws of descent and distribution, at any time
within twelve months after the death or twelve months after the permanent and
total disability of the optionee or any longer period specified in the Option
Agreement or by amendment thereof (but in no event after the Expiration Date).
"Employment" includes service as a director or as a consultant. For purposes of
the Plan, an optionee's employment shall not be deemed to terminate by reason of
sick leave, military leave or other leave of absence approved by the
Administrator, if the period of any such leave does not exceed 90 days or, if
longer, if the optionee's right to reemployment by the Company or any Affiliate
is guaranteed either contractually or by statute.
AMENDMENTS TO THE PLAN. The Board of Directors may at any time amend,
alter, suspend or discontinue the Plan. Without the consent of an optionee, no
amendment, alteration, suspension or discontinuance may adversely affect
outstanding options except to conform the Plan and ISOs granted under the Plan
to the requirements of federal or other tax laws relating to ISOs. No amendment,
alteration, suspension or discontinuance shall require Stockholder approval
unless (i) stockholder approval is required to preserve incentive stock option
treatment for federal income tax purposes or (ii) the Board of Directors
otherwise concludes that stockholder approval is advisable.
TAX TREATMENT OF THE OPTIONS. Under the Code, neither the grant nor the
exercise of an ISO is a taxable event to the optionee (except to the extent an
optionee may be subject to alternative minimum tax); rather, the optionee is
subject to tax only upon the sale of the Common Stock acquired upon exercise of
the ISO. Upon such a sale, the entire difference between the amount realized
upon the sale and the exercise price of the option will be taxable to the
optionee. Subject to certain holding period requirements, such difference will
be taxed as a capital gain rather than as ordinary income. Optionees who receive
NQSOs will be subject to taxation upon exercise of such options on the spread
between the fair market value of the Common Stock on the date of exercise and
the exercise price of such options. This spread is treated as ordinary income to
the optionee, and the Company is permitted to deduct as an employee expense a
corresponding amount. NQSOs do not give rise to a tax preference item subject to
the alternative minimum tax.
REQUIRED VOTE AND RECOMMENDATION
Stockholder approval of the 2006 Stock Option Plan is required under the
Internal Revenue Code of 1986, as amended, in order for options granted under
the 2006 Stock Option Plan to be considered "incentive stock options." The
affirmative vote of a majority of all the votes cast at a meeting at which a
quorum is present is required to approve the 2006 Stock Option Plan as set forth
in this Proposal 3. For purposes of the vote on Proposal 3, abstentions and
broker non-votes will not be counted as votes cast and thus will have no effect
on the result of the vote although they will count towards the presence of a
quorum for Proposal 3. Properly executed, unrevoked proxies will be voted FOR
Proposal 3 unless a vote against Proposal 3 or abstention is specifically
indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
COMPANY'S 2006 STOCK OPTION PLAN
PROPOSAL 4
RATIFICATION OF THE APPOINTMENT OF CLANCY AND CO., P.L.L.C. AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE YEAR ENDED DECEMBER 31, 2006
On April _, 2006 the Company's Board of Directors appointed the firm of
Clancy and Co., P.L.L.C. ("Clancy") to serve as the Company's independent
auditors for the Company's year ended December 31, 2006.
The independent accountant's report of Clancy on the Company's
consolidated financial statements for the year ended December 31, 2005 contained
no adverse opinion or disclaimer of opinion and was not qualified or modified as
to uncertainty, audit scope or accounting principles.
The following fees were incurred by the Company for the services of Clancy
in each of the years ended December 31, 2004 and 2003.
December 31, 2005 December 31, 2004
Audit Fees $49,100 $36,950
Audit Related Fees -0- -0-
Tax Fees 4,900 -0-
All Other Fees -0- -0-
AUDIT FEES. The aggregate fees billed by Clancy for professional services
rendered for the audit of the Company's annual financial statements for the
years ended December 31, 2005 and 2004, the review of the financial statements
included in the Company's Forms 10-QSB's totaled, respectively, $49,100 and
$36,950. Interim procedures are included as audit fees.
AUDIT-RELATED FEES. There were no audit-related fees incurred by the
Company during the years ended December 31, 2004 and 2003.
TAX FEES. The aggregate fees billed for tax fees by Clancy for the years
ended December 31, 2005 and 2004 were $4,900 and zero, respectively.
ALL OTHER FEES. The aggregate fees billed by Clancy for products and
services, other than the services described in the paragraph captioned "Audit
Fees" above for the years ended December 31, 2005 and 2004 totaled zero for both
years.
Until such time as the Company establishes an audit committee of the Board
of Directors, the entire Board of Directors shall be responsible for handling
such duties as would be handled by an audit committee. The Company's Board of
Directors has established its pre-approval policies and procedures, pursuant to
which the Board of Directors approved the foregoing audit services provided by
Clancy in 2004. Consistent with the Board of Directors responsibility for
engaging the Company's independent auditors, all audit and permitted non-audit
services require pre-approval by the Board of Directors. The Board of Directors
approves proposed services and fee estimates for these services. The Board of
Directors approves any services arising during the year that were not
pre-approved by the Board of Directors. Pursuant to these procedures, the Board
of Directors approved the foregoing audit services provided by Clancy.
A representative of Clancy is expected to attend the annual meeting, will
have the opportunity to make a statement if they desire to do so, and will be
available to respond to appropriate questions.
REQUIRED VOTE AND RECOMMENDATION
The affirmative vote of a majority of all the votes cast at a meeting at
which a quorum is present is required to approve the appointment of Clancy and
Co., P.L.L.C. as the Company's independent auditors for the year ended December
31, 2006 as set forth in this Proposal 4. For purposes of the vote on Proposal
4, abstentions and broker non-votes will not be counted as votes cast and thus
will have no effect on the result of the vote although they will count towards
the presence of a quorum for Proposal 4. Properly executed, unrevoked proxies
will be voted FOR Proposal 4 unless a vote against Proposal 4 or abstention is
specifically indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE APPOINTMENT OF
CLANCY AND CO., P.L.L.C. AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE YEAR
ENDED DECEMBER 31, 2006
GENERAL
The Management of the Company does not know of any matters, other than
those stated in this Proxy Statement, that are to be presented for action at the
Annual Meeting. If any other matters should properly come before the Annual
Meeting, proxies will be voted on those other matters in accordance with the
judgment of the persons voting the proxies. Discretionary authority to vote on
such matters is conferred by such proxies upon the persons voting them.
The Company will bear the cost of preparing, printing, assembling and
mailing all proxy materials that may be sent to stockholders in connection with
this solicitation. Arrangements will also be made with brokerage houses, other
custodians, nominees and fiduciaries, to forward soliciting material to the
beneficial owners of the Common Stock of the Company held by such persons. The
Company will reimburse such persons for reasonable out-of-pocket expenses
incurred by them. In addition to the solicitation of proxies by use of the
mails, officers and regular employees of the Company may solicit proxies without
additional compensation, by telephone or facsimile transmission. The Company
does not expect to pay any compensation for the solicitation of proxies.
A copy of the Company's Form 10-KSB for the fiscal year ended December 31,
2005 as filed with the Securities and Exchange Commission, accompanies this
Proxy Statement. Upon written request, the Company will provide each stockholder
being solicited by this Proxy Statement with a free copy of any exhibits and
schedules thereto. All such requests should be directed to Syscan Imaging, Inc.,
1772 Technology Drive, San Jose, California 95110 Attn: William Hawkins,
Secretary.
All properly executed proxies delivered pursuant to this solicitation and
not revoked will be voted at the Annual Meeting in accordance with the
directions given. In voting by proxy in regard to items to be voted upon,
stockholders may (i) vote in favor of, or FOR, the item, (ii) vote AGAINST the
item or, (iii) ABSTAIN from voting on one or more items. Stockholders should
specify their choices on the enclosed proxy. If no specific instructions are
given with respect to the matters to be acted upon, the shares represented by
the proxy will be voted FOR the election of all Directors, FOR the approval of
the Company's 2002 Amended and Restated Stock Option Plan, FOR the approval of
the Company's 2006 Stock Option Plan and FOR the approval of the appointment of
Clancy and Co., P.L.L.C. as the Company's independent auditors for the year
ended December 31, 2006.
STOCKHOLDER PROPOSALS FOR 2007 ANNUAL MEETING AND GENERAL COMMUNICATIONS
Any stockholder proposals intended to be presented at the Company's 2007
Annual Meeting of Stockholders must be received by the Company at its office in
San Jose, California on or before March 31, 2007 in order to be considered for
inclusion in the Company's proxy statement and proxy relating to such meeting.
The Company has received no stockholders nominations or proposals for the 2006
Annual Meeting.
Stockholders may communicate their comments or concerns about any other
matter to the Board of Directors by mailing a letter to the attention of the
Board of Directors c/o the Company at its office in San Jose, California.
VOTING OF PROXIES
Proxies may be revoked by stockholders at any time prior to the voting
thereof by giving notice of revocation in writing to the Secretary of the
Company or in person at the Annual Meeting. If the enclosed proxy is properly
signed, dated and returned, the Common Stock represented thereby will be voted
in accordance with the instructions thereon. If no instructions are indicated,
the Common Stock represented thereby will be voted FOR the election of all the
Directors, FOR the approval of the Company's 2002 Amended and Restated Stock
Option Plan, FOR the approval of the Company's 2006 Stock Option Plan, and FOR
the approval of the appointment of Clancy and Co., P.L.L.C. as the Company's
independent auditors for the year ended December 31, 2006.
REVOCABILITY OF PROXY
Shares represented by valid proxies will be voted in accordance with
instructions contained therein, or, in the absence of such instructions, in
accordance with the Board of Directors' recommendations. Any person signing and
mailing the enclosed proxy may, nevertheless, revoke the proxy at any time prior
to the actual voting thereof by attending the Annual Meeting and voting in
person, by providing written notice of revocation of the proxy or by submitting
a signed proxy bearing a later date. Any written notice of revocation should be
sent to the attention of the Secretary of the Company at the address above. Any
stockholder of the Company has the unconditional right to revoke his or her
proxy at any time prior to the voting thereof by any action inconsistent with
the proxy, including notifying the Secretary of the Company in writing,
executing a subsequent proxy, or personally appearing at the Annual Meeting and
casting a contrary vote. However, no such revocation will be effective unless
and until such notice of revocation has been received by the Company at or prior
to the Annual Meeting.
METHOD OF COUNTING VOTES
Unless a contrary choice is indicated, all duly executed proxies will be
voted in accordance with the instructions set forth on the proxy card. A broker
non-vote occurs when a broker holding shares registered in street name is
permitted to vote, in the broker's discretion, on routine matters without
receiving instructions from the client, but is not permitted to vote without
instructions on non-routine matters, and the broker returns a proxy card with no
vote (the "non-vote") on the non-routine matter. Under the rules and regulations
of the primary trading markets applicable to most brokers, the election of
directors is a routine matter on which a broker has the discretion to vote if
instructions are not received from the client in a timely manner. Abstentions
will be counted as present for purposes of determining a quorum but will not be
counted for or against the election of directors. As to Item 1, the Proxy
confers authority to vote for all of the four persons listed as candidates for a
position on the Board of Directors even though the block in Item 1 is not marked
unless the names of one or more candidates are lined out. The Proxy will be
voted "For" Item 2 unless "Against" or "Abstain" is indicated. The Proxy will be
voted "For" Item 3 unless "Against" or "Abstain" is indicated. The Proxy will be
voted "For" Item 4 unless "Against" or "Abstain" is indicated. If any other
business is presented at the meeting, the Proxy shall be voted in accordance
with the recommendations of the Board of Directors.
By order of the Board of Directors
/S/ DARWIN HU
---------------
Darwin Hu
Chairman and Chief Executive Officer
May 2, 2006
EXHIBIT A
2002 AMENDED AND RESTATED STOCK OPTION PLAN
OF
SYSCAN IMAGING, INC.
1. PURPOSES OF THE PLAN
The purposes of the 2002 Amended and Restated Stock Option Plan (the
"Plan") of Syscan Imaging, Inc., a Delaware corporation (the "Company"), are to:
(a) Encourage selected employees, directors and consultants to improve
operations and increase profits of the Company;
(b) Encourage selected employees, directors and consultants to accept or
continue employment or association with the Company or its Affiliates; and
(c) Increase the interest of selected employees, directors and consultants
in the Company's welfare through participation in the growth in value of the
common stock of the Company (the "Shares").
Options granted under this Plan ("Options") may be "incentive stock
options" ("ISOs") intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder (the
"Code"), or "non-qualified stock options" ("NQSOs").
2. ELIGIBLE PERSONS
Every person who at the date of grant of an Option is an employee of the
Company or of any Affiliate (as defined below) of the Company is eligible to
receive NQSOs or ISOs under this Plan. Every person who at the date of grant is
a consultant to, or non-employee director of, the Company or any Affiliate (as
defined below) of the Company is eligible to receive NQSOs under this Plan. The
term "Affiliate" as used in the Plan means a parent or subsidiary corporation as
defined in the applicable provisions (currently Sections 424(e) and (f),
respectively) of the Code. The term "employee" (within the meaning of Section
3401(c) of the Code) includes an officer or director who is an employee of the
Company. The term "consultant" includes persons employed by, or otherwise
affiliated with, a consultant.
3. STOCK SUBJECT TO THIS PLAN; MAXIMUM NUMBER OF GRANTS
Subject to the provisions of Section 6.1.1 of the Plan, the total number
of Shares which may be issued under Options granted pursuant to this Plan shall
not exceed three million two hundred thousand (3,200,000) Shares. The Shares
covered by the portion of any grant under the Plan which expires unexercised
shall become available again for grants under the Plan.
4. ADMINISTRATION
(a) The Plan shall be administered by either the Board of Directors of the
Company (the "Board") or by a committee (the "Committee") to which
administration of the Plan, or of part of the Plan, may be delegated by the
Board (in either case, the "Administrator"). The Board shall appoint and remove
members of such Committee, if any, in its discretion in accordance with
applicable laws. If necessary in order to comply with Rule 16b-3 under the
Exchange Act and Section 162(m) of the Code, the Committee shall, in the Board's
discretion, be comprised solely of "non-employee directors" within the meaning
of said Rule 16b-3 and "outside directors" within the meaning of Section 162(m)
of the Code. The foregoing notwithstanding, the Administrator may delegate
nondiscretionary administrative duties to such employees of the Company as it
deems proper and the Board, in its absolute discretion, may at any time and from
time to time exercise any and all rights and duties of the Administrator under
the Plan.
(b) Subject to the other provisions of this Plan, the Administrator shall
have the authority, in its discretion: (i) to grant Options; (ii) to determine
the fair market value of the Shares subject to Options; (iii) to determine the
exercise price of Options granted; (iv) to determine the persons to whom, and
the time or times at which, Options shall be granted, and the number of shares
subject to each Option; (v) to interpret this Plan; (vi) to prescribe, amend,
and rescind rules and regulations relating to this Plan; (vii) to determine the
terms and provisions of each Option granted (which need not be identical),
including but not limited to, the time or times at which Options shall be
exercisable; (viii) with the consent of the optionee, to modify or amend any
Option; (ix) to defer (with the consent of the optionee) the exercise date of
any Option; (x) to authorize any person to execute on behalf of the Company any
instrument evidencing the grant of an Option; and (xi) to make all other
determinations deemed necessary or advisable for the administration of this
Plan. The Administrator may delegate nondiscretionary administrative duties to
such employees of the Company as it deems proper.
(c) All questions of interpretation, implementation, and application of
this Plan shall be determined by the Administrator. Such determinations shall be
final and binding on all persons.
5. GRANTING OF OPTIONS; OPTION AGREEMENT
(a) No Options shall be granted under this Plan after 10 years from the
date of adoption of this Plan by the Board.
(b) Each Option shall be evidenced by a written stock option agreement, in
form satisfactory to the Administrator, executed by the Company and the person
to whom such Option is granted.
(c) The stock option agreement shall specify whether each Option it
evidences is an NQSO or an ISO.
(d) Subject to Section 6.3.3 with respect to ISOs, the Administrator may
approve the grant of Options under this Plan to persons who are expected to
become employees, directors or consultants of the Company, but are not
employees, directors or consultants at the date of approval, and the date of
approval shall be deemed to be the date of grant unless otherwise specified by
the Administrator.
6. TERMS AND CONDITIONS OF OPTIONS
Each Option granted under this Plan shall be subject to the terms and
conditions set forth in Section 6.1. NQSOs shall also be subject to the terms
and conditions set forth in Section 6.2, but not those set forth in Section 6.3.
ISOs shall also be subject to the terms and conditions set forth in Section 6.3,
but not those set forth in Section 6.2.
6.1 Terms and Conditions to Which All Options Are Subject. All Options
granted under this Plan shall be subject to the following terms and conditions:
6.1.1 Changes in Capital Structure. Subject to Section 6.1.2, if the
stock of the Company is changed by reason of a stock split, reverse stock split,
stock dividend, or recapitalization, combination or reclassification,
appropriate adjustments shall be made by the Board in (a) the number and class
of shares of stock subject to this Plan and each Option outstanding under this
Plan, and (b) the exercise price of each outstanding Option; provided, however,
that the Company shall not be required to issue fractional shares as a result of
any such adjustments. Each such adjustment shall be subject to approval by the
Board in its sole discretion.
6.1.2 Corporate Transactions. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
optionee at least 30 days prior to such proposed action. To the extent not
previously exercised, all Options will terminate immediately prior to the
consummation of such proposed action; provided, however, that the Administrator,
in the exercise of its sole discretion, may permit exercise of any Options prior
to their termination, even if such Options were not otherwise exercisable. In
the event of a merger or consolidation of the Company with or into another
corporation or entity in which the Company does not survive, or in the event of
a sale of all or substantially all of the assets of the Company in which the
shareholders of the Company receive securities of the acquiring entity or an
affiliate thereof, all Options shall be assumed or equivalent options shall be
substituted by the successor corporation (or other entity) or a parent or
subsidiary of such successor corporation (or other entity); provided, however,
that if such successor does not agree to assume the Options or to substitute
equivalent options therefor, the Administrator, in the exercise of its sole
discretion, may permit the exercise of any of the Options prior to consummation
of such event, even if such Options were not otherwise exercisable.
6.1.3 Time of Option Exercise. Subject to Section 5 and Section
6.3.4, Options granted under this Plan shall be exercisable (a) immediately as
of the effective date of the stock option agreement granting the Option, or (b)
in accordance with a schedule as may be set by the Administrator (each such date
on such schedule, the "Vesting Base Date") and specified in the written stock
option agreement relating to such Option. In any case, no Option shall be
exercisable until a written stock option agreement in form satisfactory to the
Company is executed by the Company and the optionee.
6.1.4 Option Grant Date. The date of grant of an Option under this
Plan shall be the date as of which the Administrator approves the grant.
6.1.5 Nontransferability of Option Rights. Except with the express
written approval of the Administrator which approval the Administrator is
authorized to give only with respect to NQSOs, no Option granted under this Plan
shall be assignable or otherwise transferable by the optionee except by will, by
the laws of descent and distribution or pursuant to a qualified domestic
relations order. During the life of the optionee, an Option shall be exercisable
only by the optionee.
6.1.6 Payment. Except as provided below, payment in full, in cash,
shall be made for all stock purchased at the time written notice of exercise of
an Option is given to the Company, and proceeds of any payment shall constitute
general funds of the Company. The Administrator, in the exercise of its absolute
discretion, may authorize any one or more of the following additional methods of
payment:
(a) Subject to the discretion of the Administrator and the
terms of the stock option agreement granting the Option, delivery by the
optionee of Shares already owned by the optionee for all or part of the Option
price, provided the fair market value (determined as set forth in Section
6.1.10) of such Shares being delivered is equal on the date of exercise to the
Option price, or such portion thereof as the optionee is authorized to pay by
delivery of such stock; and
(b) Subject to the discretion of the Administrator, through
the surrender of Shares then issuable upon exercise of the Option, provided the
fair market value (determined as set forth in Section 6.1.10) of such Shares is
equal on the date of exercise to the Option price, or such portion thereof as
the optionee is authorized to pay by surrender of such stock.
6.1.7 Termination of Employment. If for any reason other than death
or permanent and total disability, an optionee ceases to be employed by the
Company or any of its Affiliates (such event being called a "Termination"),
Options held at the date of Termination (to the extent then exercisable) may be
exercised in whole or in part at any time within three months of the date of
such Termination, or such other period of not less than 30 days after the date
of such Termination as is specified in the Option Agreement or by amendment
thereof (but in no event after the Expiration Date); provided, however, that if
such exercise of the Option would result in liability for the optionee under
Section 16(b) of the Exchange Act, then such three-month period automatically
shall be extended until the tenth day following the last date upon which
optionee has any liability under Section 16(b) (but in no event after the
Expiration Date). If an optionee dies or becomes permanently and totally
disabled (within the meaning of Section 22(e)(3) of the Code) while employed by
the Company or an Affiliate or within the period that the Option remains
exercisable after Termination, Options then held (to the extent then
exercisable) may be exercised, in whole or in part, by the optionee, by the
optionee's personal representative or by the person to whom the Option is
transferred by devise or the laws of descent and distribution, at any time
within twelve months after the death or twelve months after the permanent and
total disability of the optionee or any longer period specified in the Option
Agreement or by amendment thereof (but in no event after the Expiration Date).
For purposes of this Section 6.1.7, "employment" includes service as a director
or as a consultant. For purposes of this Section 6.1.7, an optionee's employment
shall not be deemed to terminate by reason of sick leave, military leave or
other leave of absence approved by the Administrator, if the period of any such
leave does not exceed 90 days or, if longer, if the optionee's right to
reemployment by the Company or any Affiliate is guaranteed either contractually
or by statute.
6.1.8 Withholding and Employment Taxes. At the time of exercise of
an Option and as a condition thereto, or at such other time as the amount of
such obligations becomes determinable (the "Tax Date"), the optionee shall remit
to the Company in cash all applicable federal and state withholding and
employment taxes. Such obligation to remit may be satisfied, if authorized by
the Administrator in its sole discretion, after considering any tax, accounting
and financial consequences, by the optionee's (i) delivery of a promissory note
in the required amount on such terms as the Administrator deems appropriate,
(ii) tendering to the Company previously owned Shares or other securities of the
Company with a fair market value equal to the required amount, or (iii) agreeing
to have Shares (with a fair market value equal to the required amount) which are
acquired upon exercise of the Option withheld by the Company.
6.1.9 Other Provisions. Each Option granted under this Plan may
contain such other terms, provisions, and conditions not inconsistent with this
Plan as may be determined by the Administrator, and each ISO granted under this
Plan shall include such provisions and conditions as are necessary to qualify
the Option as an "incentive stock option" within the meaning of Section 422 of
the Code.
6.1.10 Determination of Value. For purposes of the Plan, the fair
market value of Shares or other securities of the Company shall be determined as
follows:
(a) Fair market value shall be the closing price of such stock
on the date before the date the value is to be determined on the principal
recognized securities exchange or recognized securities market on which such
stock is reported, but if selling prices are not reported, its fair market value
shall be the mean between the high bid and low asked prices for such stock on
the date before the date the value is to be determined (or if there are no
quoted prices for such date, then for the last preceding business day on which
there were quoted prices).
(b) In the absence of an established market for the stock, the
fair market value thereof shall be determined in good faith by the
Administrator, with reference to the Company's net worth, prospective earning
power, dividend-paying capacity, and other relevant factors, including the
goodwill of the Company, the economic outlook in the Company's industry, the
Company's position in the industry, the Company's management, and the values of
stock of other corporations in the same or similar line of business.
6.1.11 Option Term. Subject to Section 6.3.4, no Option shall be
exercisable more than 10 years after the date of grant, or such lesser period of
time as is set forth in the stock option agreement (the end of the maximum
exercise period stated in the stock option agreement is referred to in this Plan
as the "Expiration Date").
6.2 Terms and Conditions to Which Only NQSOs Are Subject. Options granted
under this Plan which are designated as NQSOs shall be subject to the following
terms and conditions:
6.2.1 Exercise Price.
(a) Except as set forth in Section 6.2.1(b), the exercise
price of an NQSO shall be not less than 85% of the fair market value (determined
in accordance with Section 6.1.10) of the stock subject to the Option on the
date of grant.
(b) To the extent required by applicable laws, rules and
regulations, the exercise price of a NQSO granted to any person who owns,
directly or by attribution under the Code (currently Section 424(d)), stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Company or of any Affiliate (a "Ten Percent
Shareholder") shall in no event be less than 110% of the fair market value
(determined in accordance with Section 6.1.10) of the stock covered by the
Option at the time the Option is granted.
6.3 Terms and Conditions to Which Only ISOs Are Subject. Options granted
under this Plan which are designated as ISOs shall be subject to the following
terms and conditions:
6.3.1 Exercise Price.
(a) Except as set forth in Section 6.3.1(b), the exercise
price of an ISO shall be determined in accordance with the applicable provisions
of the Code and shall in no event be less than the fair market value (determined
in accordance with Section 6.1.10) of the stock covered by the Option at the
time the Option is granted.
(b) The exercise price of an ISO granted to any Ten Percent
Shareholder shall in no event be less than 110% of the fair market value
(determined in accordance with Section 6.1.10) of the stock covered by the
Option at the time the Option is granted.
6.3.2 Disqualifying Dispositions. If stock acquired by exercise of
an ISO granted pursuant to this Plan is disposed of in a "disqualifying
disposition" within the meaning of Section 422 of the Code (a disposition within
two years from the date of grant of the Option or within one year after the
transfer such stock on exercise of the Option), the holder of the stock
immediately before the disposition shall promptly notify the Company in writing
of the date and terms of the disposition and shall provide such other
information regarding the Option as the Company may reasonably require.
6.3.3 Grant Date. If an ISO is granted in anticipation of employment
as provided in Section 5(d), the Option shall be deemed granted, without further
approval, on the date the grantee assumes the employment relationship forming
the basis for such grant, and, in addition, satisfies all requirements of this
Plan for Options granted on that date.
6.3.4 Term. Notwithstanding Section 6.1.11, no ISO granted to any
Ten Percent Shareholder shall be exercisable more than five years after the date
of grant.
7. MANNER OF EXERCISE
(a) An optionee wishing to exercise an Option shall give written notice to
the Company at its principal executive office, to the attention of the officer
of the Company designated by the Administrator, accompanied by payment of the
exercise price and withholding taxes as provided in Sections 6.1.6 and 6.1.8.
The date the Company receives written notice of an exercise hereunder
accompanied by payment of the exercise price will be considered as the date such
Option was exercised.
(b) Promptly after receipt of written notice of exercise of an Option and
the payments called for by Section 7(a), the Company shall, without stock issue
or transfer taxes to the optionee or other person entitled to exercise the
Option, deliver to the optionee or such other person a certificate or
certificates for the requisite number of shares of stock. An optionee or
permitted transferee of the Option shall not have any privileges as a
shareholder with respect to any shares of stock covered by the Option until the
date of issuance (as evidenced by the appropriate entry on the books of the
Company or a duly authorized transfer agent) of such shares.
8. EMPLOYMENT OR CONSULTING RELATIONSHIP
Nothing in this Plan or any Option granted hereunder shall interfere with
or limit in any way the right of the Company or of any of its Affiliates to
terminate any optionee's employment or consulting at any time, nor confer upon
any optionee any right to continue in the employ of, or consult with, the
Company or any of its Affiliates.
9. CONDITIONS UPON ISSUANCE OF SHARES
Shares shall not be issued pursuant to the exercise of an Option unless
the exercise of such Option and the issuance and delivery of such shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended (the "Securities
Act").
10. NON-EXCLUSIVITY OF THE PLAN
The adoption of the Plan shall not be construed as creating any
limitations on the power of the Company to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options other than under the Plan.
11. AMENDMENTS TO PLAN
The Board may at any time amend, alter, suspend or discontinue this Plan.
Without the consent of an optionee, no amendment, alteration, suspension or
discontinuance may adversely affect outstanding Options except to conform this
Plan and ISOs granted under this Plan to the requirements of federal or other
tax laws relating to incentive stock options. No amendment, alteration,
suspension or discontinuance shall require shareholder approval unless (a)
shareholder approval is required to preserve incentive stock option treatment
for federal income tax purposes or (b) the Board otherwise concludes that
shareholder approval is advisable.
12. EFFECTIVE DATE OF PLAN; TERMINATION
This Plan shall become effective upon adoption by the Board; provided,
however, that no Option shall be exercisable unless and until written consent of
the shareholders of the Company, or approval of shareholders of the Company
voting at a validly called shareholders' meeting, is obtained within twelve
months after adoption by the Board. If such shareholder approval is not obtained
within such time, Options granted hereunder shall be of the same force and
effect as if such approval was obtained except that all ISOs granted hereunder
shall be treated as NQSOs. Options may be granted and exercised under this Plan
only after there has been compliance with all applicable federal and state
securities laws. This Plan shall terminate within ten years from the date of its
adoption by the Board.
EXHIBIT B
2006 STOCK OPTION PLAN
OF
SYSCAN IMAGING, INC.
1. PURPOSES OF THE PLAN
The purposes of the 2006 Stock Option Plan (the "Plan") of Syscan Imaging,
Inc., a Delaware corporation (the "Company"), are to:
(a) Encourage selected employees, directors and consultants to improve
operations and increase profits of the Company;
(b) Encourage selected employees, directors and consultants to accept or
continue employment or association with the Company or its Affiliates; and
(c) Increase the interest of selected employees, directors and consultants
in the Company's welfare through participation in the growth in value of the
common stock of the Company (the "Shares").
Options granted under this Plan ("Options") may be "incentive stock
options" ("ISOs") intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder (the
"Code"), or "non-qualified stock options" ("NQSOs").
2. ELIGIBLE PERSONS
Every person who at the date of grant of an Option is an employee of the
Company or of any Affiliate (as defined below) of the Company is eligible to
receive NQSOs or ISOs under this Plan. Every person who at the date of grant is
a consultant to, or non-employee director of, the Company or any Affiliate (as
defined below) of the Company is eligible to receive NQSOs under this Plan. The
term "Affiliate" as used in the Plan means a parent or subsidiary corporation as
defined in the applicable provisions (currently Sections 424(e) and (f),
respectively) of the Code. The term "employee" (within the meaning of Section
3401(c) of the Code) includes an officer or director who is an employee of the
Company. The term "consultant" includes persons employed by, or otherwise
affiliated with, a consultant.
3. STOCK SUBJECT TO THIS PLAN; MAXIMUM NUMBER OF GRANTS
Subject to the provisions of Section 6.1.1 of the Plan, the total number
of Shares which may be issued under Options granted pursuant to this Plan shall
not exceed one million five hundred thousand (1,500,000) Shares. The Shares
covered by the portion of any grant under the Plan which expires unexercised
shall become available again for grants under the Plan.
4. ADMINISTRATION
(a) The Plan shall be administered by either the Board of Directors of the
Company (the "Board") or by a committee (the "Committee") to which
administration of the Plan, or of part of the Plan, may be delegated by the
Board (in either case, the "Administrator"). The Board shall appoint and remove
members of such Committee, if any, in its discretion in accordance with
applicable laws. If necessary in order to comply with Rule 16b-3 under the
Exchange Act and Section 162(m) of the Code, the Committee shall, in the Board's
discretion, be comprised solely of "non-employee directors" within the meaning
of said Rule 16b-3 and "outside directors" within the meaning of Section 162(m)
of the Code. The foregoing notwithstanding, the Administrator may delegate
nondiscretionary administrative duties to such employees of the Company as it
deems proper and the Board, in its absolute discretion, may at any time and from
time to time exercise any and all rights and duties of the Administrator under
the Plan.
(b) Subject to the other provisions of this Plan, the Administrator shall
have the authority, in its discretion: (i) to grant Options; (ii) to determine
the fair market value of the Shares subject to Options; (iii) to determine the
exercise price of Options granted; (iv) to determine the persons to whom, and
the time or times at which, Options shall be granted, and the number of shares
subject to each Option; (v) to interpret this Plan; (vi) to prescribe, amend,
and rescind rules and regulations relating to this Plan; (vii) to determine the
terms and provisions of each Option granted (which need not be identical),
including but not limited to, the time or times at which Options shall be
exercisable; (viii) with the consent of the optionee, to modify or amend any
Option; (ix) to defer (with the consent of the optionee) the exercise date of
any Option; (x) to authorize any person to execute on behalf of the Company any
instrument evidencing the grant of an Option; and (xi) to make all other
determinations deemed necessary or advisable for the administration of this
Plan. The Administrator may delegate nondiscretionary administrative duties to
such employees of the Company as it deems proper.
(c) All questions of interpretation, implementation, and application of
this Plan shall be determined by the Administrator. Such determinations shall be
final and binding on all persons.
5. GRANTING OF OPTIONS; OPTION AGREEMENT
(a) No Options shall be granted under this Plan after 10 years from the
date of adoption of this Plan by the Board.
(b) Each Option shall be evidenced by a written stock option agreement, in
form satisfactory to the Administrator, executed by the Company and the person
to whom such Option is granted.
(c) The stock option agreement shall specify whether each Option it
evidences is an NQSO or an ISO.
(d) Subject to Section 6.3.3 with respect to ISOs, the Administrator may
approve the grant of Options under this Plan to persons who are expected to
become employees, directors or consultants of the Company, but are not
employees, directors or consultants at the date of approval, and the date of
approval shall be deemed to be the date of grant unless otherwise specified by
the Administrator.
6. TERMS AND CONDITIONS OF OPTIONS
Each Option granted under this Plan shall be subject to the terms and
conditions set forth in Section 6.1. NQSOs shall also be subject to the terms
and conditions set forth in Section 6.2, but not those set forth in Section 6.3.
ISOs shall also be subject to the terms and conditions set forth in Section 6.3,
but not those set forth in Section 6.2.
6.1 Terms and Conditions to Which All Options Are Subject. All Options
granted under this Plan shall be subject to the following terms and conditions:
6.1.1 Changes in Capital Structure. Subject to Section 6.1.2, if the
stock of the Company is changed by reason of a stock split, reverse stock split,
stock dividend, or recapitalization, combination or reclassification,
appropriate adjustments shall be made by the Board in (a) the number and class
of shares of stock subject to this Plan and each Option outstanding under this
Plan, and (b) the exercise price of each outstanding Option; provided, however,
that the Company shall not be required to issue fractional shares as a result of
any such adjustments. Each such adjustment shall be subject to approval by the
Board in its sole discretion.
6.1.2 Corporate Transactions. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
optionee at least 30 days prior to such proposed action. To the extent not
previously exercised, all Options will terminate immediately prior to the
consummation of such proposed action; provided, however, that the Administrator,
in the exercise of its sole discretion, may permit exercise of any Options prior
to their termination, even if such Options were not otherwise exercisable. In
the event of a merger or consolidation of the Company with or into another
corporation or entity in which the Company does not survive, or in the event of
a sale of all or substantially all of the assets of the Company in which the
shareholders of the Company receive securities of the acquiring entity or an
affiliate thereof, all Options shall be assumed or equivalent options shall be
substituted by the successor corporation (or other entity) or a parent or
subsidiary of such successor corporation (or other entity); provided, however,
that if such successor does not agree to assume the Options or to substitute
equivalent options therefor, the Administrator, in the exercise of its sole
discretion, may permit the exercise of any of the Options prior to consummation
of such event, even if such Options were not otherwise exercisable.
6.1.3 Time of Option Exercise. Subject to Section 5 and Section
6.3.4, Options granted under this Plan shall be exercisable (a) immediately as
of the effective date of the stock option agreement granting the Option, or (b)
in accordance with a schedule as may be set by the Administrator (each such date
on such schedule, the "Vesting Base Date") and specified in the written stock
option agreement relating to such Option. In any case, no Option shall be
exercisable until a written stock option agreement in form satisfactory to the
Company is executed by the Company and the optionee.
6.1.4 Option Grant Date. The date of grant of an Option under this
Plan shall be the date as of which the Administrator approves the grant.
6.1.5 Nontransferability of Option Rights. Except with the express
written approval of the Administrator which approval the Administrator is
authorized to give only with respect to NQSOs, no Option granted under this Plan
shall be assignable or otherwise transferable by the optionee except by will, by
the laws of descent and distribution or pursuant to a qualified domestic
relations order. During the life of the optionee, an Option shall be exercisable
only by the optionee.
6.1.6 Payment. Except as provided below, payment in full, in cash,
shall be made for all stock purchased at the time written notice of exercise of
an Option is given to the Company, and proceeds of any payment shall constitute
general funds of the Company. The Administrator, in the exercise of its absolute
discretion, may authorize any one or more of the following additional methods of
payment:
(a) Subject to the discretion of the Administrator and the
terms of the stock option agreement granting the Option, delivery by the
optionee of Shares already owned by the optionee for all or part of the Option
price, provided the fair market value (determined as set forth in Section
6.1.10) of such Shares being delivered is equal on the date of exercise to the
Option price, or such portion thereof as the optionee is authorized to pay by
delivery of such stock; and
(b) Subject to the discretion of the Administrator, through
the surrender of Shares then issuable upon exercise of the Option, provided the
fair market value (determined as set forth in Section 6.1.10) of such Shares is
equal on the date of exercise to the Option price, or such portion thereof as
the optionee is authorized to pay by surrender of such stock.
6.1.7 Termination of Employment. If for any reason other than death
or permanent and total disability, an optionee ceases to be employed by the
Company or any of its Affiliates (such event being called a "Termination"),
Options held at the date of Termination (to the extent then exercisable) may be
exercised in whole or in part at any time within three months of the date of
such Termination, or such other period of not less than 30 days after the date
of such Termination as is specified in the Option Agreement or by amendment
thereof (but in no event after the Expiration Date); provided, however, that if
such exercise of the Option would result in liability for the optionee under
Section 16(b) of the Exchange Act, then such three-month period automatically
shall be extended until the tenth day following the last date upon which
optionee has any liability under Section 16(b) (but in no event after the
Expiration Date). If an optionee dies or becomes permanently and totally
disabled (within the meaning of Section 22(e)(3) of the Code) while employed by
the Company or an Affiliate or within the period that the Option remains
exercisable after Termination, Options then held (to the extent then
exercisable) may be exercised, in whole or in part, by the optionee, by the
optionee's personal representative or by the person to whom the Option is
transferred by devise or the laws of descent and distribution, at any time
within twelve months after the death or twelve months after the permanent and
total disability of the optionee or any longer period specified in the Option
Agreement or by amendment thereof (but in no event after the Expiration Date).
For purposes of this Section 6.1.7, "employment" includes service as a director
or as a consultant. For purposes of this Section 6.1.7, an optionee's employment
shall not be deemed to terminate by reason of sick leave, military leave or
other leave of absence approved by the Administrator, if the period of any such
leave does not exceed 90 days or, if longer, if the optionee's right to
reemployment by the Company or any Affiliate is guaranteed either contractually
or by statute.
6.1.8 Withholding and Employment Taxes. At the time of exercise of
an Option and as a condition thereto, or at such other time as the amount of
such obligations becomes determinable (the "Tax Date"), the optionee shall remit
to the Company in cash all applicable federal and state withholding and
employment taxes. Such obligation to remit may be satisfied, if authorized by
the Administrator in its sole discretion, after considering any tax, accounting
and financial consequences, by the optionee's (i) delivery of a promissory note
in the required amount on such terms as the Administrator deems appropriate,
(ii) tendering to the Company previously owned Shares or other securities of the
Company with a fair market value equal to the required amount, or (iii) agreeing
to have Shares (with a fair market value equal to the required amount) which are
acquired upon exercise of the Option withheld by the Company.
6.1.9 Other Provisions. Each Option granted under this Plan may
contain such other terms, provisions, and conditions not inconsistent with this
Plan as may be determined by the Administrator, and each ISO granted under this
Plan shall include such provisions and conditions as are necessary to qualify
the Option as an "incentive stock option" within the meaning of Section 422 of
the Code.
6.1.10 Determination of Value. For purposes of the Plan, the fair
market value of Shares or other securities of the Company shall be determined as
follows:
(a) Fair market value shall be the closing price of such stock
on the date before the date the value is to be determined on the principal
recognized securities exchange or recognized securities market on which such
stock is reported, but if selling prices are not reported, its fair market value
shall be the mean between the high bid and low asked prices for such stock on
the date before the date the value is to be determined (or if there are no
quoted prices for such date, then for the last preceding business day on which
there were quoted prices).
(b) In the absence of an established market for the stock, the
fair market value thereof shall be determined in good faith by the
Administrator, with reference to the Company's net worth, prospective earning
power, dividend-paying capacity, and other relevant factors, including the
goodwill of the Company, the economic outlook in the Company's industry, the
Company's position in the industry, the Company's management, and the values of
stock of other corporations in the same or similar line of business.
6.1.11 Option Term. Subject to Section 6.3.4, no Option shall be
exercisable more than 10 years after the date of grant, or such lesser period of
time as is set forth in the stock option agreement (the end of the maximum
exercise period stated in the stock option agreement is referred to in this Plan
as the "Expiration Date").
6.2 Terms and Conditions to Which Only NQSOs Are Subject. Options granted
under this Plan which are designated as NQSOs shall be subject to the following
terms and conditions:
6.2.1 Exercise Price.
(a) Except as set forth in Section 6.2.1(b), the exercise
price of an NQSO shall be not less than 85% of the fair market value (determined
in accordance with Section 6.1.10) of the stock subject to the Option on the
date of grant.
(b) To the extent required by applicable laws, rules and
regulations, the exercise price of a NQSO granted to any person who owns,
directly or by attribution under the Code (currently Section 424(d)), stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Company or of any Affiliate (a "Ten Percent
Shareholder") shall in no event be less than 110% of the fair market value
(determined in accordance with Section 6.1.10) of the stock covered by the
Option at the time the Option is granted.
6.3 Terms and Conditions to Which Only ISOs Are Subject. Options granted
under this Plan which are designated as ISOs shall be subject to the following
terms and conditions:
6.3.1 Exercise Price.
(a) Except as set forth in Section 6.3.1(b), the exercise
price of an ISO shall be determined in accordance with the applicable provisions
of the Code and shall in no event be less than the fair market value (determined
in accordance with Section 6.1.10) of the stock covered by the Option at the
time the Option is granted.
(b) The exercise price of an ISO granted to any Ten Percent
Shareholder shall in no event be less than 110% of the fair market value
(determined in accordance with Section 6.1.10) of the stock covered by the
Option at the time the Option is granted.
6.3.2 Disqualifying Dispositions. If stock acquired by exercise of
an ISO granted pursuant to this Plan is disposed of in a "disqualifying
disposition" within the meaning of Section 422 of the Code (a disposition within
two years from the date of grant of the Option or within one year after the
transfer such stock on exercise of the Option), the holder of the stock
immediately before the disposition shall promptly notify the Company in writing
of the date and terms of the disposition and shall provide such other
information regarding the Option as the Company may reasonably require.
6.3.3 Grant Date. If an ISO is granted in anticipation of employment
as provided in Section 5(d), the Option shall be deemed granted, without further
approval, on the date the grantee assumes the employment relationship forming
the basis for such grant, and, in addition, satisfies all requirements of this
Plan for Options granted on that date.
6.3.4 Term. Notwithstanding Section 6.1.11, no ISO granted to any
Ten Percent Shareholder shall be exercisable more than five years after the date
of grant.
7. MANNER OF EXERCISE
(a) An optionee wishing to exercise an Option shall give written notice to
the Company at its principal executive office, to the attention of the officer
of the Company designated by the Administrator, accompanied by payment of the
exercise price and withholding taxes as provided in Sections 6.1.6 and 6.1.8.
The date the Company receives written notice of an exercise hereunder
accompanied by payment of the exercise price will be considered as the date such
Option was exercised.
(b) Promptly after receipt of written notice of exercise of an Option and
the payments called for by Section 7(a), the Company shall, without stock issue
or transfer taxes to the optionee or other person entitled to exercise the
Option, deliver to the optionee or such other person a certificate or
certificates for the requisite number of shares of stock. An optionee or
permitted transferee of the Option shall not have any privileges as a
shareholder with respect to any shares of stock covered by the Option until the
date of issuance (as evidenced by the appropriate entry on the books of the
Company or a duly authorized transfer agent) of such shares.
8. EMPLOYMENT OR CONSULTING RELATIONSHIP
Nothing in this Plan or any Option granted hereunder shall interfere with
or limit in any way the right of the Company or of any of its Affiliates to
terminate any optionee's employment or consulting at any time, nor confer upon
any optionee any right to continue in the employ of, or consult with, the
Company or any of its Affiliates.
9. CONDITIONS UPON ISSUANCE OF SHARES
Shares shall not be issued pursuant to the exercise of an Option unless
the exercise of such Option and the issuance and delivery of such shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended (the "Securities
Act").
10. NON-EXCLUSIVITY OF THE PLAN
The adoption of the Plan shall not be construed as creating any
limitations on the power of the Company to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options other than under the Plan.
11. AMENDMENTS TO PLAN
The Board may at any time amend, alter, suspend or discontinue this Plan.
Without the consent of an optionee, no amendment, alteration, suspension or
discontinuance may adversely affect outstanding Options except to conform this
Plan and ISOs granted under this Plan to the requirements of federal or other
tax laws relating to incentive stock options. No amendment, alteration,
suspension or discontinuance shall require shareholder approval unless (a)
shareholder approval is required to preserve incentive stock option treatment
for federal income tax purposes or (b) the Board otherwise concludes that
shareholder approval is advisable.
12. EFFECTIVE DATE OF PLAN; TERMINATION
This Plan shall become effective upon adoption by the Board; provided,
however, that no Option shall be exercisable unless and until written consent of
the shareholders of the Company, or approval of shareholders of the Company
voting at a validly called shareholders' meeting, is obtained within twelve
months after adoption by the Board. If such shareholder approval is not obtained
within such time, Options granted hereunder shall be of the same force and
effect as if such approval was obtained except that all ISOs granted hereunder
shall be treated as NQSOs. Options may be granted and exercised under this Plan
only after there has been compliance with all applicable federal and state
securities laws. This Plan shall terminate within ten years from the date of its
adoption by the Board.
SYSCAN IMAGING, INC.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of SYSCAN IMAGING, INC. (the "Company") hereby
appoints DARWIN HU as the attorney and proxy of the undersigned, with the powers
the undersigned would possess if personally present, and with full power of
substitution, to vote all shares of common stock of the Company at the annual
meeting of stockholders of the Company to be held on Friday, June 9, 2006 at
10:00 a.m. Pacific Standard Time at the Company's principal executive offices
located at 1772 Technology Drive, San Jose, California 95110, and any
adjournment or postponement thereof, upon all subjects that may properly come
before the meeting, including the matters described in the proxy statement
furnished herewith, subject to any directions indicated below.
1. ELECTION OF DIRECTORS
[ ] For all nominees listed below [ ] WITHHOLD AUTHORITY to vote for all
(except as indicated to the nominees listed below.
contrary).
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, LINE THROUGH
OR OTHERWISE STRIKE OUT HIS NAME BELOW)
Darwin Hu David P. Clark Peter Mor
Lawrence Liang
2. APPROVAL OF THE 2002 AMENDED AND RESTATED STOCK OPTION PLAN.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
3. APPROVAL OF THE ADOPTION OF 2006 STOCK OPTION PLAN.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
4. APPROVAL OF THE APPOINTMENT OF CLANCY AND CO., P.L.L.C. AS THE COMPANY'S
INDEPENDENT AUDITOR FOR THE YEAR ENDED DECEMBER 31, 2006.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS IN ITEM 1, "FOR" THE APPROVAL OF
THE COMPANY'S 2002 AMENDED AND RESTATED STOCK OPTION PLAN IN ITEM 2, "FOR" THE
ADOPTION OF THE 2006 STOCK OPTION PLAN IN ITEM 3, AND "FOR" THE APPOINTMENT OF
CLANCY AND CO., P.L.L.C. AS THE COMPANY'S INDEPENDENT AUDITOR IN ITEM 4. THIS
PROXY ALSO DELEGATES DISCRETIONARY AUTHORITY TO VOTE WITH RESPECT TO ANY OTHER
BUSINESS WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR
POSTPONEMENT THEREOF.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL
MEETING AND PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH, AND HEREBY
RATIFIES ALL THAT THE SAID ATTORNEYS AND PROXIES MAY DO BY VIRTUE HEREOF.
DATED:
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SIGNATURE
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SIGNATURE IF JOINTLY OWNED
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PRINT NAME
-----------------------------------
NO. OF SHARES
PLEASE SIGN EXACTLY AS THE NAME APPEARS ON YOUR STOCK CERTIFICATE. WHEN
SHARES OF CAPITAL STOCK ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN
SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN, OR CORPORATE
OFFICER, PLEASE INCLUDE FULL TITLE AS SUCH. IF THE SHARES OF CAPITAL STOCK ARE
OWNED BY A CORPORATION, SIGN IN THE FULL CORPORATE NAME BY AN AUTHORIZED
OFFICER. IF THE SHARES OF CAPITAL STOCK ARE OWNED BY A PARTNERSHIP, SIGN IN THE
NAME OF THE PARTNERSHIP BY AN AUTHORIZED OFFICER.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY
IN THE ENCLOSED ENVELOPE