<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a 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 Section 240.14a-11(c) or Section 240.14a-12
RMI.NET, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the approximate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration number or the
Form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
RMI.NET, INC.
999 EIGHTEENTH STREET, SUITE 2201
DENVER, COLORADO 80202
(303) 672-0700
MAY 15, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of
Stockholders of RMI.NET, Inc. (the "Company"), which will be held on Thursday,
June 15, 2000 at 10:00 a.m. (local time), at the Hotel Monaco, 1717 Champa
Street, Denver, Colorado.
At this meeting, you will be asked to vote, in person or by proxy, on
the following matters:
1. election of five directors to serve on the Board of Directors for
a one-year term;
2. the change of the name of the Company from RMI.NET, Inc. to
"Internet Communications Company, Inc.," subject to completion of
the proposed merger between the Company and Internet
Communications Corp.;
3. adoption of the RMI.NET, Inc. 2000 Employees' Stock Option Plan;
4. adoption of the RMI.NET, Inc. Employees' Stock Purchase Plan;
5. ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors; and
6. any other business as may properly come before the meeting or any
adjournments thereof.
The official Notice of Meeting, Proxy Statement, and form of proxy are included
with this letter. The matters listed in the Notice of Meeting are described in
detail in the accompanying Proxy Statement.
Regardless of your plans for attending in person, it is important that
your shares be represented and voted at the 2000 Annual Meeting. Accordingly,
you are urged to complete, sign, and mail the enclosed proxy card as soon as
possible.
Sincerely,
/s/ DOUGLAS H. HANSON
-----------------------------------
Douglas H. Hanson
Chairman, Chief Executive Officer,
and President
<PAGE> 3
RMI.NET, INC.
999 EIGHTEENTH STREET, SUITE 2201
DENVER, COLORADO 80202
(303) 672-0700
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 15, 2000
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders (the "Annual
Meeting") of RMI.NET, Inc. (the "Company") will be held on Thursday, June 15,
2000 at 10:00 a.m. (local time), at the Hotel Monaco, 1717 Champa Street,
Denver, Colorado and any postponements and adjournments thereof, to consider and
act upon the following proposals:
1. To elect five directors to serve on the Board of Directors for a
one-year term and until their successors are appointed or elected
and duly qualified;
2. To change the name of the Company from RMI.NET, Inc. to "Internet
Communications Company, Inc.," subject to completion of the
proposed merger between the Company and Internet Communications
Corp.;
3. To adopt the RMI.NET, Inc. 2000 Employees' Stock Option Plan;
4. To adopt the RMI.NET, Inc. Employees' Stock Purchase Plan;
5. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 2000;
and
6. To transact 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 April 28, 2000 as the
record date for the determination of stockholders entitled to notice of and to
vote at the Annual Meeting. Only holders of common stock of record at the close
of business on that date will be entitled to notice of and to vote at the Annual
Meeting or any adjournments thereof. A list of the Company's stockholders
entitled to vote at the Annual Meeting will be open to the examination of any
stockholder for any purpose germane to the meeting during ordinary business
hours for a period of ten days before the Annual Meeting at the Company's
offices. All stockholders are cordially invited to attend the Annual Meeting.
By Order of the Board of Directors
/s/ CHRISTOPHER J. MELCHER
------------------------------------
Christopher J. Melcher
Corporate Secretary
Denver, Colorado
May 15, 2000
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE, SIGN, AND RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES. YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT ANY TIME
PRIOR TO THE TIME IT IS VOTED.
<PAGE> 4
RMI.NET, INC.
999 EIGHTEENTH STREET, SUITE 2201
DENVER, COLORADO 80202
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 15, 2000
This proxy statement contains information related to the Annual Meeting
of Stockholders of RMI.NET, Inc. to be held on Thursday, June 15, 2000,
beginning at 10:00 a.m. (local time) at Hotel Monaco, 1717 Champa Street,
Denver, Colorado 80202 and at any postponements or adjournments thereof.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At our annual meeting, stockholders will act upon the matters outlined
in the accompanying notice of meeting. In addition, the Company's management
will report on the performance of the Company during fiscal 1999 and respond to
questions from stockholders.
WHO IS ENTITLED TO VOTE?
Only stockholders of record at the close of business on the record
date, April 28, 2000, are entitled to receive notice of the Annual Meeting and
to vote the shares of common stock that they held on that date at the meeting,
or any postponement or adjournment of the meeting. Each outstanding share
entitles its holder to cast one vote on each matter to be voted upon.
WHO CAN ATTEND THE MEETING?
All stockholders as of the record date (April 28, 2000), or their duly
appointed proxies, may attend the meeting, and each may be accompanied by one
guest. Seating, however, is limited. Admission to the meeting will be on a
first-come, first-served basis. Registration and seating will begin at 9:00 a.m.
(local time) and the meeting will begin at 10:00 a.m. (local time). Each
stockholder may be asked to present valid picture identification, such as a
driver's license or passport. Cameras, recording devices, and other electronic
devices will not be permitted at the meeting.
Many of you hold your shares in "street name," that is, through a
broker or other nominee. If you hold your shares in street name, you will need
to bring a copy of a brokerage statement reflecting your stock ownership as of
the record date and check in at the registration desk at the meeting.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting the meeting to conduct its business. As of the
record date, 20,876,074 shares of common stock of the Company were outstanding
and entitled to vote at the meeting. Proxies received but marked as abstentions
and broker non-votes will be included in the calculation of the number of shares
considered to be present at the meeting.
<PAGE> 5
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and
return it to the Company, it will be voted as you direct. If you are a
registered stockholder and attend the meeting, you may deliver your completed
proxy card in person. "Street name" stockholders who wish to vote at the meeting
will need to obtain a proxy form from the institution that holds their shares.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote
at any time before the proxy is exercised by filing with the Secretary of the
Company either a notice of revocation or a duly executed proxy bearing a later
date. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, although attendance at the meeting will not by
itself revoke a previously granted proxy.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF THE NOMINATED
SLATE OF DIRECTORS AND FOR EACH OF THE PROPOSALS IN THIS PROXY STATEMENT.
The Board's recommendation is also set forth together with the
description of each item in this proxy statement. Unless you give other
instructions on your proxy card, the persons named as proxy holders on the proxy
card will vote in accordance with the recommendations of the Board of Directors.
With respect to any other matter that properly comes before the
meeting, the proxy holders will vote as recommended by the Board of Directors
or, if no recommendation is given, in their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
For each item, the affirmative vote of the holders of a majority of the
shares represented in person or by proxy and entitled to vote on the matter is
required for approval, except that approval of Proposal 2 requires the vote of a
majority of the outstanding shares of the Company's common stock. A properly
executed proxy marked:
o "WITHHOLD AUTHORITY" with respect to the election of one or more
directors; or
o "ABSTAIN" with respect to any other matters
will not be voted, although it will be counted for purposes of determining
whether there is a quorum. Accordingly, such a proxy will have the effect of a
negative vote. A properly executed, but unmarked proxy will be voted for the
election of the nominated slate of four directors and for each of the proposals.
WHAT ARE "BROKER NON-VOTES" AND HOW WILL THEY BE COUNTED?
"Broker non-votes" occur when you hold your shares in "street name"
through a broker of other nominee, and you do not give your broker or nominee
specific instructions on your proxy card. If you fail to complete your proxy
card:
o your broker or nominee may not be permitted to exercise voting
discretion with respect to some of the matters to be acted upon;
and
o your shares may not be voted on those matters and will not be
counted in determining the number of shares necessary for
approval.
Broker non-votes will have the effect of a negative vote. Shares represented by
such "broker non-votes" will, however, be counted in determining whether there
is a quorum.
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<PAGE> 6
WHO WILL BEAR THE COST OF SOLICITING PROXIES?
The Company will bear the cost of soliciting proxies, including
expenses in connection with preparing and mailing this Proxy Statement. In
addition, the Company will reimburse brokerage firms and other persons
representing you for their expenses in forwarding proxy material to you. The
Company's directors, officers, and employees may also solicit you by telephone
and other means, but they will not receive any additional compensation for the
solicitation.
STOCK OWNERSHIP
HOW MUCH STOCK DO THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS OWN AND HOW DO
THEY INTEND TO VOTE?
The following table shows the amount of common stock of the Company
beneficially owned (unless otherwise indicated) by the directors and executive
officers of the Company named in the Summary Compensation Table below and the
directors and executive officers of the Company as a group. The officers and
directors have indicated that they intend to vote for election of the nominated
slate of directors and for each of the proposals in this proxy statement. Except
as otherwise indicated, all information is as of March 31, 2000.
<TABLE>
<CAPTION>
AGGREGATE NUMBER OF PERCENT OF
SHARES BENEFICIALLY SHARES
NAME OWNED (1) OUTSTANDING
- -------------------------------- ------------------- -----------
<S> <C> <C>
Douglas H. Hanson 6,022,500 (2) 28.2%
Robert W. Grabowski 11,300 (3) *
D. D. Hock 6,500 (4) *
Lewis H. Silverberg 21,500 (5) *
Michael T. Victor 2,000 (6) *
Michael R. Mara 98,400 (7) *
William H. Heuston 13,900 (8) *
Mary Beth Vitale 141,500 (9) *
James H. Comstock 6,667 (10) *
All Directors and Executive
Officers as a Group (12 persons) 6,479,456 (11) 29.9%
</TABLE>
- ------------------
* Less than one percent.
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a
person is deemed to be the beneficial owner, for purposes of this table, of
any shares of common stock if such person has or shares voting power or
investment power with respect to such security, or has the right to acquire
beneficial ownership at any time within 60 days from March 31, 2000. For
purposes of this table, "voting power" is the power to vote or direct the
voting of shares and "investment power" is the power to dispose or direct
the disposition of shares.
(2) Includes 5,756,115 shares of common stock directly owned by Mr. Hanson,
100,000 shares owned by Mr. Hanson's spouse, and 166,385 shares of common
stock that Mr. Hanson has the right to acquire within 60 days of March 31,
2000 pursuant to incentive stock options.
(3) Includes 4,800 shares of common stock directly owned by Mr. Grabowski and
6,500 shares of common stock that Mr. Grabowski has the right to acquire
within 60 days of March 31, 2000 pursuant to options.
(4) Includes 6,500 shares of common stock that Mr. Hock has the right to
acquire within 60 days of March 31, 2000 pursuant to options.
3
<PAGE> 7
(5) Includes 15,000 shares of common stock directly owned by Mr. Silverberg and
6,500 shares of common stock that Mr. Silverberg has the right to acquire
within 60 days of March 31, 2000 pursuant to options.
(6) Includes 2,000 shares of common stock directly owned by Mr. Victor.
(7) Includes 25,900 shares of common stock directly owned by Mr. Mara and
72,500 shares of common stock that Mr. Mara has the right to acquire within
60 days of March 31, 2000 pursuant to options.
(8) Includes 7,234 shares of common stock directly owned by Mr. Heuston and
6,666 shares of common stock that Mr. Heuston has the right to acquire
within 60 days of March 31, 2000.
(9) Includes 141,500 shares of common stock that Ms. Vitale has the right to
acquire within 60 days of March 31, 2000 pursuant to options. Ms. Vitale
resigned as President and Chief Operating Officer in the first quarter of
2000, and will not stand for reelection as a director at the 2000 Annual
Meeting of Stockholders.
(10) Includes 6,667 shares of common stock that Mr. Comstock has the right to
acquire within 60 days of March 31, 2000 pursuant to options. Mr. Comstock
resigned in the first quarter of 2000.
(11) Includes 5,972,906 shares of common stock directly owned by the eleven
officers and directors as a group and 504,550 shares of common stock that
ten officers and directors as a group have the right to acquire within 60
days of March 31, 2000 pursuant to options.
WHO ARE THE LARGEST OWNERS OF THE COMPANY'S STOCK?
As of March 31, 2000, the Company is not aware of any persons or
entities that beneficially own more than five percent of the Company's common
stock other than Douglas H. Hanson.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors will be made up of five directors. Each director
is elected for a one-year term that expires at the 2001 Annual Meeting. The
Board of Directors proposes that the nominees described below be elected for a
term of one year and until their successors are appointed or elected and duly
qualified.
Each of the nominees has consented to serve a one-year term. If any of
them should become unavailable to serve as a director, the Board may designate a
substitute nominee. In that case, the persons named as proxies will vote for the
substitute nominee designated by the Board.
DIRECTORS STANDING FOR ELECTION
The directors standing for election are:
DOUGLAS H. HANSON Director since 1997
Mr. Hanson, 56, has served as Chief Executive Officer and Chairman of the
Board of Directors of the Company since October 1997 and the President of
the Company since January 2000. Mr. Hanson also served as the Company's
President from October 1997 until January 1999. From 1987 to 1997, Mr.
Hanson was the President, Chief Executive Officer and a director of Qwest
Communications, Inc., a Colorado-based telecommunications company, as well
as founder of Qwest's predecessor, SP Telecom. Before founding SP Telecom,
Mr. Hanson was Vice President of FiberTrak, a telecommunications joint
venture among Santa Fe, Norfolk and SP railroads. He also held various
positions at Southern Pacific Transportation Co. Mr. Hanson currently
serves on the Board of Directors of the Competitive Telecommunications
Association, The Metropolitan State College Foundation Board, and the Board
of Trustees of the Salvation Army, Intermountain Division, and is engaged
in other civic activities.
ROBERT W. GRABOWSKI Director since 1998
Mr. Grabowski, 59, has been a director of the Company since January 1998.
He has been the Vice President of Finance and Administration to Sunny Side,
Inc./Temp Side, a private employment service, since 1988. He has been a
certified public accountant since 1968 and holds a Bachelor of Science
degree from De Paul University.
4
<PAGE> 8
D.D. HOCK Director since 1997
Mr. Hock, 65, has been a director of the Company since October 1997. Prior
to becoming a director, Mr. Hock was an executive with Public Service
Company of Colorado, including the President, Chief Executive Officer, and
Chairman of the Board of Directors from February 1989 to July 1994,
Chairman and Chief Executive Officer from July 1994 to January 1996, and
Chairman from January 1996 to February 1997, when he retired.
LEWIS H. SILVERBERG Director since 1998
Mr. Silverberg, 65, has been a director of the Company since January 1988.
Mr. Silverberg has been a private investor and a business consultant since
1994, advising businesses on matters of formation, finance, mergers, and
sales. He practiced law in San Diego, CA from 1959 to 1989. From 1989 to
1994 he was employed in an executive capacity to a subsidiary of a public
company.
MICHAEL T. VICTOR New Nominee
Mr. Victor, 38, has been Chairman and CEO, since 1993 and 1991
respectively, of Pyramid Industries, Inc., a leading manufacturer of fiber
optic conduit systems, located in Erie, Pennsylvania. Since 1991, Mr.
Victor has been Adjunct Professor Business Law at Gannon University. Prior
to his current position with Pyramid Industries, Mr. Victor served as
President from 1988 to 1993. From 1986 to 1988, he was an Attorney in the
Corporate Law Department of MacDonald, Illig, Jones & Britton. Mr. Victor
currently serves on the Board of Directors of the Erie Conference on
Community Development, is a Member of the President's Advisory Board at
Gannon University, and serves as a Member of the Board of Corporators to
Hamot Medical Center and St. Vincent Health Center. Mr. Vincent is also a
Member of the Board of Visitors of Mercyhurst College's D'Angelo School of
the Arts and serves on the Council of Fellows, at Pennsylvania State
University's Behrend College. Mr. Victor is engaged in many other civic
activities.
Unless otherwise instructed on the proxy, properly executed proxies will be
voted for the election of the four director nominees. The affirmative vote of a
majority of the outstanding shares of common stock is required to elect the
directors.
---------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE ELECTION OF THE NOMINATED SLATE OF DIRECTORS.
---------------------------
CORPORATE GOVERNANCE AND OTHER MATTERS
The Board of Directors conducts its business through meetings and
through its committees. The Board of Directors acts as a nominating committee
for selecting candidates to stand for election as directors.
HOW OFTEN DID THE BOARD MEET IN 1999?
During the year ended December 31, 1999, the Board of Directors held
five meetings. During the fiscal year ended December 31, 1999, no director
attended fewer than 75% of the total number of all meetings of the Board of
Directors and any committee on which the director served.
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
The Board of Directors currently has three committees: the Audit
Committee, the Compensation Committee, and the 16b Committee.
AUDIT COMMITTEE. The Audit Committee, among other things, recommends
the firm to be appointed as independent accountants to audit the Company's
financial statements, discusses the scope and results of the audit with the
independent accountants, reviews with management and the independent accountants
the Company's interim and year-end operating results, considers the adequacy of
the internal accounting controls and audit procedures of the Company, and
reviews the non-audit services to be performed by the independent accountants.
The Audit Committee is comprised of three directors, a majority of whom are
non-employee directors. The current members of the Audit Committee are Messrs.
Grabowski, Hock, and Hanson. The Audit Review Committee met two times in 1999.
COMPENSATION COMMITTEE. The Compensation Committee reviews the
salaries, benefits, and other compensation of our officers and key employees.
The Compensation Committee's responsibilities include employment contracts,
pensions, performance and incentive-based compensation, and stock option plans,
except with respect to matters entrusted the Section 16b Committee as described
below. The Compensation Committee then makes recommendations to the Board of
Directors based on its review. The current members of the Compensation Committee
are Messrs. Hock, Grabowski, and Hanson. Mr. Hanson does not vote on any matters
affecting his personal compensation. Mr. Hanson and the other members of the
Compensation Committee review and establish
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<PAGE> 9
the salaries, benefits, and other compensation of all other employees. The
Compensation Committee met two times in 1999.
16b COMMITTEE. The 16b Committee reviews management's recommendations
regarding various compensation issues, including issuance of stock options to
officers and directors who are subject to stock ownership reporting obligations
under Section 16 of the Securities Exchange Act of 1934, as amended. The 16b
Committee is comprised of two non-employee directors: D.D. Hock and Robert W.
Grabowski. The 16b Committee met two times in 1999.
HOW ARE DIRECTORS COMPENSATED?
BASE COMPENSATION. Each non-employee director receives an annual
retainer based on a prorated rate of $12,000 per year.
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN. Under the 1996
Non-Employee Directors' Stock Option Plan, each non-employee director receives
an option to purchase 1,500 shares of common stock upon appointment or election
to the Board of Directors. Thereafter, on the first, second, and third
anniversary of appointment or election, each non-employee director is eligible
to receive a grant of options to purchase an additional 1,500 shares of common
stock, up to a maximum of 6,000 shares. During 1999, the Company did not grant
any options under this plan. Each option grant, vesting six months after the
date of grant and having a five-year term, permits the holder to purchase shares
at their fair market value on the date of grant. To date, options to purchase
the following amounts of common stock have been issued:
<TABLE>
<CAPTION>
NUMBER OF SHARES
ISSUABLE UPON
NON-EMPLOYEE DIRECTOR EXERCISE
- --------------------------- -------------------
<S> <C>
Robert Grabowski 1,500
D.D. Hock 1,500
Lewis H. Silverberg 1,500
Mary Beth Vitale * 1,500
-------------------
Total 6,000
===================
</TABLE>
- --------------
* Not standing for reelection at the 2000 Annual Meeting of Stockholders.
1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN. Under the 1998
Non-Employee Directors' Stock Option Plan, each non-employee director receives
an option to purchase 8,500 shares of common stock upon appointment or election
to the Board of Directors. During 1999, the Company did not grant any options
under this plan. Under the 1998 Directors' Plan, the options expire five years
from the date of grant, unless the Compensation Committee or the Board of
Directors (in the absence of the Compensation Committee) terminates the options
earlier. The options vest based on the non-employee director's continued service
at the following rate: (1) 1,500 on December 31, 1998; (2) 3,500 on December 31,
1999; and (3) 3,500 on December 31, 2000. Notwithstanding the foregoing, in the
event of a change in control (as defined in the 1998 Directors' Plan), each
outstanding option vests immediately. Each option grant permits the holder to
purchase shares at their fair market value on the date of grant.
In the event of a change in control, as defined in the 1998
Non-Employee Directors' Stock Option Plan, the Compensation Committee (or the
Board of Directors in the absence of such a committee) may:
o grant a cash bonus award to any optionee in an amount equal to the
exercise price of all or any portion of the options then held by
the optionee;
6
<PAGE> 10
o pay cash to any or all optionees in exchange for the cancellation
of their outstanding options in an amount equal to the difference
between the exercise price and the greater of the tender offer
price for the common stock underlying such options (in the event
of a tender offer for the securities of the Company) or the fair
market value of the stock on the date of cancellation; and
o make any other adjustments or amendments to the outstanding
options.
A total of 68,000 shares of common stock have been reserved for issuance over
the three-year term of the 1998 Non-Employee Directors' Stock Option Plan. To
date, the following options have been granted under this plan:
<TABLE>
<CAPTION>
NUMBER OF SHARES
ISSUABLE UPON
NON-EMPLOYEE DIRECTOR EXERCISE
------------------------------ -------------------
<S> <C>
Robert Grabowski 8,500
D.D. Hock 8,500
Lewis H. Silverberg 8,500
Mary Beth Vitale * 8,500
-------------------
Total 34,000
===================
</TABLE>
- ----------------
* Not standing for reelection at the 2000 Annual Meeting of Stockholders.
EXECUTIVE OFFICERS AND KEY EMPLOYEES
Other than Douglas H. Hanson, whose biography appears above under the
caption "Directors Standing for Election," the following individuals are
executive officers of RMI.NET, Inc.
MICHAEL D. DINGMAN, JR., 46, joined the Company in March 1999 as
Treasurer. Since July 1999, Mr. Dingman has served as Vice President of Finance
and acting Chief Financial Officer. From March 1994 until joining the Company,
Mr. Dingman worked as a financial consultant and registered investment advisor.
From February 1989 to March 1994, he operated his own financial consulting firm
specializing in debt restructuring and private placements of capital. Prior to
entering his consulting practice, from August 1985 to February 1989, Mr. Dingman
worked as an Associate in Mergers & Acquisitions for Lazard Freres & Company in
New York City. Mr. Dingman received his Bachelor of Science degree from Indiana
University in 1981 and a Masters in Business Administration from the Amos Tuck
School of Business Administration in 1983.
WILLIAM H. HEUSTON, 34, has served as Regional Vice President of the
Company's Rocky Mountain Region since July 1999. Mr. Heuston joined the Company
in July 1996 as Business Account Executive. In July 1997, Mr. Heuston became
Manager of Network Sales and in 1998, Mr. Heuston was promoted to Director of
Network Sales. Prior to joining the Company, Mr. Heuston worked as a National
Account Manager for Sprint Communications and Metropolitan Fiber Systems. Mr.
Heuston received his undergraduate degree in Communications from the University
of Colorado, Boulder.
DAVID M. LALANDE, 35, joined the Company in February 1999 and served as
Vice President, Mid-Western Division until January 2000 when Mr. Lalande began
serving as Regional Vice President of the Great Lakes Region. From 1994 to 1999,
Mr. Lalande was President of Champaign and Bloomington, Illinois based Internet
Service Provider "Dave's World" until its acquisition by the Company.
MICHAEL R. MARA, 39, joined the Company in November 1995 as Director of
Sales. Mr. Mara served in this capacity until October 1997 when he was appointed
Vice President and General Manager of Internet services. In January 2000, Mr.
Mara was named Senior Vice President of Operations. Prior to joining the
Company, Mr. Mara was employed as regional Vice President by ITC, a privately
held international audio and video conferencing service provider, from June 1992
until October 1995.
CHRISTOPHER J. MELCHER, 41, joined the Company in January 1999 as
General Counsel, Corporate Secretary, and Vice President for Legal and
Legislative Affairs. Mr. Melcher served as Assistant General Counsel for KN
Energy, Inc. from September 1997 to December 1998, providing legal services on
regulated and unregulated market activities and directing corporate strategy in
federal and state proceedings across the company's 15 state
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<PAGE> 11
territory. Prior to KN Energy, he was a senior corporate counsel with Southern
California Edison, a subsidiary of Edison International, Inc., from July 1996 to
August 1997. Mr. Melcher represented corporate clients with the firm of
Brownstein Hyatt & Farber, P.C. from January 1995 to July 1996. From March 1990
to December 1994, he served as Associate Independent Counsel with the Office of
Independent Counsel (Adams) in Washington, D.C. Mr. Melcher practiced law with
the firm of Wilmer Cutler & Pickering from September 1987 to March 1990. Mr.
Melcher received his Bachelor of Arts degree from Carleton College and his Juris
Doctor degree from Yale Law School.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the
compensation paid during the periods indicated to the Chief Executive Officer
and President of the Company and to each of the four other most
highly-compensated executive officers of the Company during the fiscal year
ended December 31, 1999 (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------------------------- ------------------
SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING
POSITIONS YEAR SALARY BONUS COMPENSATION OPTIONS
- ----------------------------- --------- ----------------- ------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Douglas H. Hanson 1) 1999 $ 180,654 $ 600,000 $ 1,945 -
Chairman, President, 1998 $ 120,000 $ - $ 537,946 -
and CEO 1997 $ 30,000 $ - $ - 600,000
Michael R. Mara(2) 1999 $ 120,750 $ - $ 3,529 30,000
Senior Vice President of 1998 $ 124,468 $ - $ - 15,000
Operations 1997 $ 90,437 $ 9,450 $ - 18,500
Mary Beth Vitale(3) 1999 $ 149,776 $ - $ - 25,000
1998 $ - $ - $ - 120,000
1997 $ - $ - $ - -
William H. Heuston(4) 1999 $ 124,879 $ 10,000 $ 3,137 30,000
1998 $ 116,037 $ 2,500 $ 2,787 15,000
1997 $ 86,671 $ 2,775 $ - 9,000
James H. Comstock(5) 1999 $ 104,369 $ 20,000 $ - 6,667
1998 $ 39,750 $ 10,000 $ - -
1997 $ - $ - $ - -
</TABLE>
- -------------------
(1) Mr. Hanson's bonus of $600,000 was paid in full during fiscal year 1999 for
services performed in 1999. In 1998, Mr. Hanson's "Other Annual
Compensation" is comprised of $1,946 of 401(k) Plan matching funds and the
$536,000 dollar value difference between the price paid by Mr. Hanson for
securities of the Company and the fair market value of such securities on
the date of purchase. Mr. Hanson was granted options to purchase 600,000
shares of the Company's common stock in October 1997 as part of the
consideration paid at the time he made his initial investment in the
Company.
(2) A portion of the bonuses paid to Mr. Mara may be paid or awarded in the
first quarter of the fiscal year following the year in which the bonus was
earned. Mr. Mara was granted options to purchase 30,000 shares of the
Company's common stock in 1999 for services performed in 1999, options to
purchase 15,000 shares of common stock in 1998 for services performed in
1998, and options to purchase 18,500 shares of the Company's common stock
in 1997 for services performed in 1997.
(3) Ms. Vitale was granted options to purchase 25,000 shares of the Company's
common stock in 1999 for services performed in 1999, options to purchase
110,000 shares of the Company's common stock in 1998 pursuant to her
Employment Letter Agreement, and options to purchase 10,000 shares of the
Company's common stock in 1998 for services performed as a Director of the
Company. Ms. Vitale resigned as President and Chief Operating Officer in
the first quarter of 2000 and will resign as a director in June 2000.
(4) Mr. Heuston was granted options to purchase 30,000 shares of the Company's
common stock in 1999 for services performed in 1999, options to purchase
15,000 shares of the Company's common stock in 1998 for services performed
in 1998, and options to purchase 9,000 shares of the Company's common stock
in 1997 for services performed in 1997.
8
<PAGE> 12
(5) Mr. Comstock was granted options to purchase 6,667 shares of the Company's
common stock in 1999 for services performed in 1999 and options to purchase
30,000 shares of the Company's common stock in 1998 for services performed
in 1998. Mr. Comstock resigned in the first quarter of 2000.
STOCK OPTION GRANTS IN FISCAL YEAR 1999. The following table sets forth
information with respect to grants of stock options to each of the Named
Executive Officers during the year ended December 31, 1999. All such grants were
made under the Company's 1998 Employees' Stock Option Plan or pursuant to
employment letter agreements.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS IN 1999
----------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATE OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR THE
UNDERLYING GRANTED TO OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE GRANT EXPIRATION ------------------------------
NAME GRANTED(1) FISCAL YEAR PRICE DATE DATE (1) 5% 10%
- ------------------------ ----------- ------------ -------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Douglas H. Hanson - - - - - - -
Mary Beth Vitale 25,000 1.56% $ 6.68 9/30/99 9/29/09 $272,025 $433,155
Michael R. Mara 30,000 1.87% $ 6.68 9/30/99 9/29/09 $326,430 $519,786
William H. Heuston 30,000 1.87% $ 6.68 9/30/99 9/29/09 $326,430 $519,786
James H. Comstock 6,667 0.42% $ 6.68 9/30/99 9/29/09 $72,544 $115,514
</TABLE>
- ----------------
(1) All options represent shares of common stock. These options have a ten-year
term and become exercisable in three equal annual installments beginning
one year after the date of grant, with the exception of the options granted
to Ms. Vitale and Mr. Comstock. Ms. Vitale's and Mr. Comstock's options
vested fully at the time of their respective resignations.
OPTION EXERCISES AND FISCAL YEAR-END VALUES. The following table sets
forth information with respect to the Named Executive Officers concerning the
exercise of options during the fiscal year ended December 31, 1999, the number
of securities underlying unexercised options at 1999 year-end and the year-end
value of all unexercised in-the-money options held by such individuals.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT DECEMBER 31, 1999 AT DECEMBER 31, 1999(2)(3)
ACQUIRED ON VALUE ---------------------------- --------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ------------ ------------ ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Douglas H. Hanson 25,000 $ 309,688 166,385 - $ 948,395 $ -
Mary Beth Vitale - $ - 141,500 3,500 $ 78,794 $ 21,009
Michael R. Mara - $ - 72,500 35,000 $ 496,657 $ 76,788
William H. Heuston 12,334 $ 132,674 6,666 35,000 $ 37,080 $ 76,563
James H. Comstock - $ - 6,667 - $ 10,834 $ -
</TABLE>
- --------------
(1) Represents the excess, if any, of the closing price of the common stock on
the Nasdaq National Market on the date of exercise over the option exercise
price.
(2) Represents the excess, if any, of the closing price of the common stock on
the Nasdaq National Market at December 31, 1999 over the option exercise
price.
(3) Based on a closing price per share of $8.3125 on December 31, 1999.
9
<PAGE> 13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee for the year ended December
31, 1999 were Robert W. Grabowski, D.D. Hock, and Douglas H. Hanson. Mr. Hanson
does not vote on any matters affecting his personal compensation.
In 1999, Douglas H. Hanson invested approximately $7.5 million by
exercising warrants to purchase 3,950,000 shares of the Company's common stock.
The warrants were issued in October 1997, when Mr. Hanson made his initial
investment in the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has prepared the
following report on the Company's policies with respect to the compensation of
executive officers for 1999. Decisions on compensation of the Company's
executive officers generally are made by the Compensation Committee. The
Compensation Committee also administers the Company's 1998 Employees' Stock
Option Plan and will administer the Company's 2000 Employees' Stock Option Plan,
if approved by the Company's stockholders at the 2000 Annual Meeting.
WHAT IS THE COMPANY'S PHILOSOPHY OF EXECUTIVE OFFICER COMPENSATION?
The Company's executive compensation policies are designed to:
o attract, motivate, and retain experienced and qualified
executives;
o increase the overall performance of the Company;
o increase stockholder value; and
o enhance the performance of individual executives.
The Company seeks to pay competitive salaries and annual cash bonuses based upon
individual performance combined with the Company's overall performance relative
to corporate objectives, taking into account individual contributions and
performance levels. The Compensation Committee believes that the level of base
salaries plus bonuses should generally fall in the mid-range of executive
compensation paid by comparable telecommunications and Internet service
companies. In addition, it is the Company's policy to grant stock options to
executives upon commencement of their employment with the Company and
periodically thereafter as appropriate in order to strengthen the alliance of
interest between such executives and the Company's stockholders.
The following describes in more specific terms the elements of
compensation that implement the Company's executive compensation policies, with
specific reference to compensation reported for 1999:
BASE SALARIES. Base salaries for executive officers are initially
determined by evaluating the responsibilities of the position, the experience
and knowledge of the individual, and the competitive marketplace for executive
talent, including a comparison to base salaries paid for similar positions at
other companies which are deemed appropriate comparisons for compensation
purposes. Base salaries for executive officers are to be reviewed annually by
the Compensation Committee and the Board of Directors.
Annual salary adjustments are recommended by the Chief Executive
Officer after evaluating the previous year's performance and considering the new
responsibilities of each executive officer. The non-employee members of the
Compensation Committee (Messrs. Hock and Grabowski) perform the same review of
the Chief Executive Officer's performance. Individual performance evaluations
take into account such factors as achievement of specific goals that are driven
by the Company's strategic plan and attainment of specific individual
objectives. The weight given to the various factors affecting an executive
officer's base salary level is determined by the Compensation Committee on a
case-by-case basis.
ANNUAL CASH BONUSES. The Company's annual cash bonuses to its executive
officers are based on both corporate and individual performance. Corporate
performance is measured by reference to factors that reflect objective
performance criteria over which management generally has the ability to exert
some degree of control. These corporate performance factors consist of revenue
and earnings targets established in the Company's strategic plan.
STOCK OPTION GRANTS. Pursuant to the Company's 1998 Employees' Stock
Option Plan, executive officers and other employees are eligible to receive
compensation in the form of options to purchase shares of the Company's common
stock.
The Compensation Committee grants stock options to the Company's
executive officers in order to align their interests with the interests of the
stockholders. Stock options are considered by the Compensation Committee
10
<PAGE> 14
to be an effective long-term incentive because the executives' gains are linked
to increases in the stock value, which in turn provide stockholder gains. The
Compensation Committee generally grants options to new executive officers and
other key employees upon commencement of their employment with the Company and
periodically thereafter upon the attainment of certain performance goals
established by the Compensation Committee. The options generally are granted at
an exercise price equal to the market price of the common stock on the date of
grant (or 110% of the market price in the case of an optionee beneficially
owning more than 10% of the outstanding common stock). Options granted to
executive officers generally vest over a period of three years following the
date of grant. The option term is five years. The greater the appreciation of
the stock price in future periods, the greater the benefit to the holder of the
options, thus providing an additional incentive to executive officers to create
additional value for the Company's stockholders. Management of the Company
believes that stock options have been helpful in attracting and retaining
skilled executive personnel.
In determining grants of options for executive officers, the
Compensation Committee has reviewed competitive data of long-term incentive
practices at other companies that are deemed appropriate comparisons for
compensation purposes.
OTHER COMPENSATION. The Company has adopted a contributory retirement
plan (the "401(k) Plan") for all of its employees (including executive officers)
with at least three months of service to the Company. The 401(k) Plan provides
that each participant may contribute up to 15% of the participant's salary (not
to exceed the annual statutory limit). The Company matches 50% of the first six
percent contributed by a 401(k) Plan participant.
CHIEF EXECUTIVE OFFICER COMPENSATION. The executive compensation policy
described above is followed in setting Mr. Hanson's compensation. Mr. Hanson
generally participates in the same executive compensation plans and arrangements
available to the other senior executives. Accordingly, his compensation consists
of an annual base salary, an annual cash bonus and long-term equity-linked
compensation in the form of stock options. The Compensation Committee's general
approach in establishing Mr. Hanson's compensation is to be competitive with
peer companies, but to have a large percentage of his target compensation based
upon objective performance criteria and targets established in the Company's
strategic plan.
Mr. Hanson's compensation for the year ended December 31, 1999
consisted of a base salary of $180,654. Mr. Hanson received a cash bonus of
$600,000 for the year ended December 31, 1999 for services performed in 1999.
Mr. Hanson's salary for 1999 was based on, among other factors, the Company's
performance and the compensation of chief executive officers of comparable
companies, although his compensation was not targeted to any particular group of
these companies.
COMPENSATION DEDUCTIBILITY POLICY. Under Section 162(m) of the Internal
Revenue Code of 1986, as amended, and applicable Treasury regulations, no tax
deduction is allowed for annual compensation in excess of $1 million paid to any
of the Company's five most highly compensated executive officers. However,
performance-based compensation that has been approved by stockholders is
excluded from the $1 million limit if, among other requirements, the
compensation is payable only upon attainment of pre-established, objective
performance goals and the board committee that establishes such goals consists
only of "outside directors" as defined for purposes of Section 162(m). Thus, the
two members of the Compensation Committee who qualify as "outside directors"
(Messrs. Hock and Grabowski) are responsible for setting the objective
performance goals used as the basis for Mr. Hanson's performance-based
compensation. The Compensation Committee intends to maximize the extent of tax
deductibility of executive compensation under the provisions of Section 162(m)
so long as doing so is compatible with its determinations as to the most
appropriate methods and approaches for the design and delivery of compensation
to the Company's executive officers.
Respectfully submitted,
Compensation Committee
Douglas H. Hanson
D.D. Hock
Robert W. Grabowski
11
<PAGE> 15
STOCK PERFORMANCE GRAPH
The following indexed line graph indicates the Company's total return
to stockholders from September 6, 1996, the date on which the Company's common
stock began trading on Nasdaq, to December 31, 1999, as compared to the total
return for the Nasdaq Stock Market--US Index, an index of 291 Internet companies
(including Amazon.com, America Online, Earthlink, and Yahoo), and an index of
398 telecommunications companies (including AT&T, MCI WorldCom, and Sprint). The
telecommunications and Internet indices were compiled by Media General Financial
Services, Inc. The Company's common stock traded on the Nasdaq SmallCap Market
from September 6, 1996 through March 4, 1999 and has traded on the Nasdaq
National Market since March 5, 1999. The calculations in the graph assume that
$100 was invested on September 5, 1996, in each of the Company's common stock
and each index and also assume dividend reinvestment.
Comparison of 27 Month Cumulative Total Return Among (a) RMI.NET, Inc.,
(b) The Nasdaq Stock Market (U.S.) Index, (c) an 85 company Internet Index
and (d) a 375 company telecommunications index
(EDGAR Representation of Data Points Used in Printed Graphic)
<TABLE>
<CAPTION>
NASDAQ STOCK MARKET INTERNET TELECOMMUNICATIONS
RMI.NET, INC. (U.S.) INDEX INDEX
------------------------ ---------------------- --------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
09/05/96 $100 09/05/96 $100 09/05/96 $100 09/05/96 $100
12/31/96 $45 12/31/96 $112 12/31/96 $113 12/31/96 $110
12/31/97 $98 12/31/97 $137 12/31/97 $157 12/31/97 $142
12/31/98 $412 12/31/98 $193 12/31/98 $645 12/31/98 $208
12/31/99 $271 12/31/99 $341 12/31/99 $1,698 12/31/99 $361
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For a summary of certain transactions and relationships among the
Company and its associated entities, and among the directors, executive
officers, and stockholders of the Company and its associated entities, see
"Compensation Committee Interlocks and Insider Participation."
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, officers, and persons who
beneficially own more than ten percent of a registered class of the Company's
equity securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Directors, officers, and greater than ten
percent beneficial owners are required by the SEC's regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based upon a review of filings with the Securities and Exchange
Commission and written representations that no other reports were required, the
Company believes that all of the Company's directors and executive officers
complied during fiscal 1999 with the reporting requirements of Section 16(a) of
the Securities Exchange Act of 1934, with the exception of Messrs. Hanson,
Lalande, and Mara, and Ms. Vitale.
12
<PAGE> 16
PROPOSAL 2
APPROVAL OF AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY FROM RMI.NET, INC. TO
"INTERNET COMMUNICATIONS COMPANY, INC."
The Board of Directors has approved and recommends that the
stockholders approve an amendment to the Company's Certificate of Incorporation
to change the name of the company from RMI.NET, Inc. to Internet Communications
Company, Inc., subject to the completion of the proposed merger between the
Company and Internet Communications Corp. If the proposal is approved, the
Company intends to file an amendment to the Certificate of Incorporation shortly
after the completion of the proposed merger. The amendment to the Certificate of
Incorporation will be effective immediately upon acceptance of the filing by the
Secretary of the State of Delaware. Since May 1999, the Company has acquired an
additional 16 companies, each in different major geographical areas of the
United States. Because the Company is expanding nationally, the Board of
Directors believes that Internet Communications Company, Inc. better reflects
the purpose and nationwide scope of its business. Furthermore, the Company
expects to look for further growth opportunities and to expand into new markets.
The Board of Directors believes that Internet Communications Company, Inc. will
allow the Company to:
o further enhance its corporate identity and name recognition as a
nationwide company;
o be recognized as a leading e-commerce and web solutions company;
and
o further develop its reputation as a reliable, single-source
network of Internet and telecommunications solutions.
------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2
------------------------
PROPOSAL 3
ADOPTION OF THE RMI.NET, INC. 2000 EMPLOYEES' STOCK OPTION PLAN
The Board of Directors has approved and recommends that the
stockholders adopt the RMI.NET, Inc. 2000 Employees' Stock Option Plan. The
Board of Directors further directed that the 2000 Employees' Stock Option Plan
be submitted to the stockholders for approval in order for awards under the plan
to qualify under the exception to Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"), as "qualified performance-based compensation" if
the requirements of the exception are otherwise satisfied. At the Annual
Meeting, the stockholders of the Company will be asked to consider and vote to
approve the 2000 Employees' Stock Option Plan. Unless otherwise instructed on
the proxy, a properly executed proxy will be voted in favor of the 2000
Employees' Stock Option Plan.
The purpose of the 2000 Employees' Stock Option Plan is to advance the
interests of the Company by providing eligible individuals an opportunity to
acquire or increase a proprietary interest in the Company, which thereby will
create a stronger incentive to expend maximum effort for the growth and success
of the Company and will encourage such eligible individuals to remain in the
employ of the Company. The Board of Directors believes that stock options are
important to attract and to encourage continued employment and service of
officers and other key employees by facilitating their purchase of a stock
interest in the Company. Furthermore, approval of the 2000 Employees' Stock
Option Plan will afford the Company additional flexibility in making awards
deemed necessary in the future by increasing the aggregate number of stock
options available for issuance. The Board of Directors has reserved 1,500,000
shares of common stock for issuance under the 2000 Employees' Stock Option Plan.
Section 162(m) of the Code generally provides that no federal income
tax business expense deduction is allowed for annual compensation in excess of
$1 million paid by a publicly-traded corporation to its chief executive officer
and the four other most highly compensated officers. However, there is no
limitation under the Code on the deductibility of "qualified performance-based
compensation." To satisfy this definition, (1) the compensation must be paid
solely on account of the attainment of one or more pre-established, objective
performance goals; (2) the performance goal under which compensation is paid
must be established by a compensation committee comprised solely of two or more
directors who qualify as "outside directors" for purposes of the exception; (3)
the material terms under which the compensation is to be paid must be disclosed
to and subsequently approved by stockholders of the corporation before payment
is made; and (4) the compensation committee must certify in writing before
payment of the compensation that the performance goals and any other material
terms were in fact satisfied.
In the case of compensation attributable to stock options, the
performance goal requirement is deemed satisfied, and the certification
requirement is inapplicable, if (1) the grant or award is made by the
compensation
13
<PAGE> 17
committee; (2) the plan under which the option is granted states the maximum
number of shares with respect to which options may be granted to an employee
during a specified period; and (3) under the terms of the option, the amount of
compensation is based solely on an increase in the value of the stock after the
date of grant. Under the Code, a director is an "outside director" if he or she
is not a current employee of the corporation; is not a former employee who
receives compensation for prior services (other than under a qualified
retirement plan); has not been an officer of the corporation; and does not
receive, directly or indirectly (including amounts paid to an entity that
employs the director or in which the director has at least a 5% ownership
interest), remuneration from the corporation in any capacity other than as a
director. The regulations provide that the material terms of a performance goal
will be approved by stockholders for purposes of the foregoing rules if, in a
separate vote, affirmative votes are cast by a majority of the voting shares.
The following is a summary description of the material provisions of
the 2000 Employees' Stock Option Plan. This summary is qualified in its entirety
by the complete text of the 2000 Employees' Stock Option Plan, which is included
as an attachment to this Proxy Statement.
DESCRIPTION OF THE RMI.NET, INC. 2000 EMPLOYEES' STOCK OPTION PLAN
The following general description of certain features of the 2000
Employees' Stock Option Plan is qualified in its entirety by reference to the
2000 Employees' Stock Option Plan, which is attached as Appendix A. Under the
RMI.NET, Inc. 2000 Employees' Stock Option Plan, 1,500,000 shares of common
stock are reserved and authorized for issuance upon the exercise of options
issued pursuant to the plan. All employees of the Company are eligible to
receive options under the 2000 Employees' Stock Option Plan, which will be
administered by the Compensation Committee of the Board of Directors. Options
granted under the 2000 Employees' Stock Option Plan are intended to qualify as
incentive stock options under Section 422 of the Code, unless they exceed
certain limitations or are specifically designated otherwise.
The option exercise price for incentive stock options granted under the
2000 Employees' Stock Option Plan may not be less than 100% of the fair market
value of the common stock on the date of grant of the option (or 110% in the
case of an incentive stock option granted to an optionee beneficially owning
more than 10% of the outstanding common stock). In the case of an option not
intended to constitute an incentive stock option, the option price shall be not
less than the par value of the stock covered by the option. The maximum option
term is 10 years (or five years in the case of an incentive stock option granted
to an optionee beneficially owning more than 10% of the outstanding common
stock).
The aggregate fair market value (as defined in the 2000 Employees'
Stock Option Plan) of any incentive stock option plus any incentive options
granted under any other Company plan that are first exercisable by any
participant during any calendar year may not exceed $100,000. The Compensation
Committee may, in its discretion, impose a vesting schedule or vesting provision
for any options granted under the 2000 Employees' Stock Option Plan. Options
generally become exercisable as follows: (i) one-third of the options become
exercisable one year after the date of grant, or in certain cases, the
commencement date of the holder's employment; (ii) an additional one-third of
the options become exercisable two years after the date of grant, or in certain
cases, the commencement date of the holder's employment; and (iii) the remaining
one-third of the options become exercisable three years after the date of grant,
or in certain cases, the commencement date of the holder's employment.
Notwithstanding the foregoing, in the event of a change of control of the
Company (as defined in the 2000 Employees' Stock Option Plan), unless the
applicable agreement with respect to any option provides otherwise, each
outstanding option under the 2000 Employees' Stock Option Plan vests
immediately, regardless of any vesting schedule in the particular agreement.
Payment for shares purchased under the 2000 Employees' Stock Option
Plan may be made either in cash or, if permitted by the particular option
agreement, by exchanging shares of common stock of the Company with a fair
market value equal to the total option exercise price plus cash for any
difference. Options may, if permitted by the particular option agreement, be
exercised by directing that certificates for the shares purchased be delivered
to a licensed broker as agent for the optionee, provided that the broker tenders
to the Company cash or cash equivalents equal to the option exercise price.
The Board of Directors may terminate or suspend the 2000 Employees'
Stock Option Plan at any time. Unless previously terminated, the 2000 Employees'
Stock Option Plan will terminate automatically on June 14, 2010, ten years after
the date of adoption of the 2000 Employees' Stock Option Plan by the Board of
Directors.
14
<PAGE> 18
FEDERAL INCOME TAX CONSEQUENCES
The grant of an option is not a taxable event for the optionee or the
Company.
INCENTIVE STOCK OPTIONS. An optionee will not recognize taxable income
upon exercise of an incentive stock option (except that the alternative minimum
tax may apply), and any gain realized upon a disposition of shares of common
stock received pursuant to the exercise of an incentive stock option will be
taxed as long-term capital gain if the optionee holds the shares of common stock
for at least two years after the date of grant and for one year after the date
of exercise (the "holding period requirement"). The Company will not be entitled
to any business expense deduction with respect to the exercise of an incentive
stock option, except as discussed below.
For the exercise of an incentive stock option to qualify for the
foregoing tax treatment, the optionee generally must be an employee of the
Company from the date the option is granted through a date within three months
before the date of exercise of the option. In the case of an optionee who is
disabled, the three-month period is extended to one year. In the case of an
employee who dies, the three-month period and the holding period requirement for
shares of common stock received pursuant to the exercise of the option are
waived.
If all of the requirements for incentive option treatment are met
except for the holding period requirement, the optionee will recognize ordinary
income upon the disposition of shares of common stock received pursuant to the
exercise of an incentive stock option in an amount equal to the excess of the
fair market value of the shares of common stock at the time the option was
exercised over the exercise price. The balance of the realized gain, if any,
will be taxed at applicable capital gain tax rates. The Company will be allowed
a business expense deduction to the extent the optionee recognizes ordinary
income, subject to Section 162(m) of the Code as summarized below.
If an optionee exercises an incentive stock option by tendering shares
of common stock with a fair market value equal to part or all of the option
exercise price, the exchange of shares will be treated as a nontaxable exchange
(except that this treatment would not apply if the optionee had acquired the
shares being transferred pursuant to the exercise of an incentive stock option
and had not satisfied the holding period requirement summarized above). If the
exercise is treated as a tax-free exchange, the optionee would have no taxable
income from the exchange and exercise (other than alternative minimum taxable
income as noted above) and the tax basis of the shares of common stock exchanged
would be treated as the substituted basis for the shares of common stock
received. If the optionee used shares received pursuant to the exercise of an
incentive stock option (or another statutory option) as to which the optionee
had not satisfied the holding period requirement, the exchange would be treated
as a taxable disqualifying disposition of the exchanged shares, and the excess
of the fair market value of the shares tendered over the optionee's basis in the
shares would be taxable.
NON-QUALIFIED OPTIONS. Upon exercising an option that is not an
incentive stock option, an optionee will recognize ordinary income in an amount
equal to the difference between the exercise price and the fair market value of
the shares of common stock on the date of exercise. Upon a subsequent sale or
exchange of shares of common stock acquired pursuant to the exercise of a
non-qualified stock option, the optionee will have taxable gain or loss,
measured by the difference between the amount realized on the disposition and
the tax basis of the shares of common stock (generally, the amount paid for the
shares of common stock plus the amount treated as ordinary income at the time
the option was exercised).
If the Company complies with applicable reporting requirements and with
the restrictions of Section 162(m) of the Code, it will be entitled to a
business expense deduction in the same amount and generally at the same time as
the optionee recognizes ordinary income. Under Section 162(m) of the Code, if
the optionee is one of certain specified executive officers, then, unless
certain exceptions apply, the Company is not entitled to deduct compensation
with respect to the optionee, including compensation related to the exercise of
stock options, to the extent such compensation in the aggregate exceeds
$1,000,000 for the taxable year. The options are intended to comply with the
exception to Section 162(m) for "qualified performance-based compensation."
If the optionee surrenders shares of common stock in payment of part or
all of the exercise price for non-qualified stock options, no gain or loss will
be recognized with respect to the shares of common stock surrendered (regardless
of whether the shares were acquired pursuant to the exercise of an incentive
stock option) and the optionee will be treated as receiving an equivalent number
of shares of common stock pursuant to the exercise of the option in a nontaxable
exchange. The basis of the shares of common stock surrendered will be treated as
the substituted tax basis for an equivalent number of option shares received and
the new shares will be treated as having been held for the same holding period
as had expired with respect to the transferred shares. The difference between
the aggregate option exercise price and the aggregate fair market value of the
shares of common stock received pursuant to the exercise of the option will be
taxed as ordinary income. The optionee's basis in the additional shares of
common stock will be equal to the amount included in the optionee's income.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 3
------------------------
PROPOSAL 4
APPROVAL OF THE RMI.NET, INC. EMPLOYEES' STOCK PURCHASE PLAN
GENERAL
The Board of Directors intends to adopt the RMI.NET, Inc. Employee
Stock Purchase Plan (the "Purchase Plan"), subject to approval by the
stockholders of the Company. The purpose of the Purchase Plan is to provide an
incentive to employees of the Company and certain of its subsidiaries to acquire
or increase an ownership interest in the Company through the purchase of shares
of common stock. In order to receive favorable income tax treatment under
section 423 of the Internal Revenue Code of 1986, as amended (the "Code"),
stockholder approval of the Purchase Plan is required. Unless otherwise
instructed on the proxy, a properly executed proxy will be voted in favor of the
Purchase Plan.
SUMMARY OF PURCHASE PLAN
The following general description of certain features of the Purchase
Plan is qualified in its entirety by reference to the Purchase Plan, which is
attached as Appendix B.
Shares Available Under the Purchase Plan; Adjustments. Subject to
adjustment as provided in the Purchase Plan, the number of shares of common
stock that may be purchased by participating employees under the Purchase Plan
will not in the aggregate exceed 1,000,000 shares, which may be originally
issued or reacquired shares, including shares bought in the market or otherwise
for purposes of the Purchase Plan. Such number of shares is subject to
adjustment in the event of a change in the common stock by reason of a stock
dividend or by reason of a subdivision, stock split, reverse stock split,
recapitalization, reorganization, combination, reclassification of shares, or
other similar change. Upon any such event, the maximum number of shares that
may be subject to any option, and the number and purchase price of shares
subject to options outstanding under the Purchase Plan, will also be adjusted
accordingly.
Eligibility. Options under the Purchase Plan will be granted on July 1,
2000, and, thereafter through June 30, 2010, on the first day of each successive
January and July (each such date being referred to herein as a "Date of Grant").
Each employee of the Company or any present or future parent or subsidiary
corporation of the Company that has been designated as a "Participating Company"
from time to time by the Plan administrative committee as of a Date of Grant is
eligible to participate in the Purchase Plan as of such Date of Grant if such
employee is regularly scheduled to work more than 20 hours per week and more
than five calendar months in any calendar year.
However, an eligible employee may not participate if such employee
would own (directly or indirectly) five percent or more of the total combined
voting power of all classes of stock of the Company or a subsidiary, taking into
account options to purchase stock and stock that may be purchased under the
Purchase Plan. At the present time, only one employee of the Company would be
prevented from participating by reason of this limitation. In addition,
nonemployee directors, leased employees, and independent contractors are not
eligible to participate in the Purchase Plan. To the extent permitted by Section
423 of the Code and the regulations thereunder, an individual who is
reclassified as a common law employee as a result of a final court decree or the
settlement of an administrative or judicial proceeding will become eligible to
participate after two years of employment (including any service recharacterized
as common law employment). Approximately 452 employees would have been eligible
to participate in the Purchase Plan as of March 6, 2000.
Participation. An eligible employee may elect to participate in the
Purchase Plan for any six month period beginning on July 1, 2000 during the ten
year period from July 1, 2000 to June 30, 2010, by designating a specified whole
dollar amount or a whole percentage of such employee's eligible compensation to
be deducted for each pay period and paid into the Purchase Plan for such
employee's account. The designated percentage or whole dollar amount may not be
less than one percent nor more than 15%. An eligible employee may participate in
the Purchase Plan only
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<PAGE> 20
by means of payroll deduction. No employee will be granted an option under the
Purchase Plan that permits such employee's rights to purchase common stock to
accrue at a rate that exceeds $25,000 of fair market value of such stock
(determined at the time such option is granted) for the calendar year in which
such option is outstanding. Unless an employee's payroll deductions are
withdrawn (as described below), the aggregate payroll deductions credited to the
employee's account will be used to purchase shares of common stock at the end of
the six month period beginning on a Date of Grant (the "Option Period");
provided, however, that the maximum number of shares of Common Stock that may be
purchased by a participant under any particular Option Period may not exceed
20,000 (subject to adjustment in the event of a change in the Common Stock). The
per share purchase price of the common stock will be 85% of the lesser of the
fair market value of the common stock on the Date of Grant or on the last day of
the Option Period (the "Date of Exercise"). For all purposes under the Purchase
Plan, the fair market value of a share of common stock on a particular date
shall be equal to the last sale price on the applicable date for shares of
common stock made and reported through the Nasdaq National Market System of the
National Association of Securities Dealers, Inc., or such national stock
exchange on which the common stock may then be listed and which constitutes the
principal market for the common stock, or, if no sales of the common stock shall
have been reported with respect to that date, on the next preceding date with
respect to which sales have been reported. Payroll deductions will be included
in the general funds of the Company, free of any trust or other arrangement and
may be used for any corporate purpose. No interest will be paid or credited to
any participant.
Changes In And Withdrawal of Payroll Deductions. A participant may not
change the rate of his or her payroll deductions during an Option Period.
However, a participant may withdraw in whole from the Purchase Plan, but not in
part, at any time prior to the Date of Exercise relating to a particular Option
Period by timely delivering to the Company a notice of withdrawal in the manner
specified by the Company. The Company promptly will refund to the participant
the amount of the participant's payroll deductions under the Purchase Plan that
have not been otherwise returned or used upon exercise of options, and
thereafter the participant's payroll deduction authorization and interest in
unexercised options under the Purchase Plan will terminate.
Delivery Of Shares; Restrictions On Transfer. As soon as practicable
after each Date of Exercise, the Company will deliver to a custodian one or more
certificates representing (or shall otherwise cause to be credited to the
account of such custodian) the total number of whole shares of common stock with
respect to options exercised on such Date of Exercise in the aggregate (for both
whole and fractional shares) of all of the participating employees under the
Purchase Plan. Any remaining amount representing a fractional share will not be
certificated (or otherwise so credited) and such remaining amount will be paid
in cash to the custodian. Such custodian will keep accurate records of the
beneficial interests of each participant in such shares by means of participant
accounts under the Purchase Plan, and will provide each participant with
periodic statements with respect thereto as the administrative committee under
the Purchase Plan may specify. A participant may not generally transfer or
otherwise dispose of the shares for a period of six months from the Date of
Exercise (or for such other period as may be specified from time to time by the
administrative committee under the Purchase Plan). During this period, the
custodian will retain custody of the shares.
Termination Of Employment; Leaves Of Absence. Except as described
below, if the employment of a participant terminates for any reason, then the
participant's participation in the Purchase Plan ceases and the Company will
refund the amount of such participant's payroll deductions under the Purchase
Plan that have not yet been otherwise returned or used upon exercise of options.
If the employment of a participant terminates after such participant has
attained age 65 or due to death or disability, the participant, or the
participant's personal representative, as applicable, may elect either to (i)
withdraw all of the accumulated unused payroll deductions credited to the
participant's account or (ii) exercise the participant's option for the purchase
of common stock at the end of the Option Period. If no such election is timely
received by the Company, the participant or personal representative will
automatically be deemed to have elected the second alternative. During a paid
leave of absence approved by the Company and meeting Internal Revenue Service
regulations, a participant's elected payroll deductions will continue. A
participant may not contribute to the Purchase Plan during an unpaid leave of
absence. If a participant takes an unpaid leave of absence that is approved by
the Company and meets Internal Revenue Service regulations, then such
participant's payroll deductions for such Option Period that were made prior to
such leave may remain in the Purchase Plan and be used to purchase Common Stock
on the Date of Exercise relating to such Option Period. If a participant takes a
leave of absence not described above, then the participant will be considered to
have withdrawn from the Purchase Plan.
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Restriction Upon Assignment Of Option. An option granted under the
Purchase Plan may not be transferred other than by will or the laws of descent
and distribution. Subject to certain limited exceptions, each option is
exercisable, during the employee's lifetime, only by the employee to whom
granted.
Administration, Amendments And Termination. The Purchase Plan is to be
administered by a committee appointed from time to time by the Board. If the
Board does not appoint a committee, the Board will serve as the committee. In
connection with its administration of the Purchase Plan, the committee is
authorized to interpret the Purchase Plan.
The Purchase Plan may be amended from time to time by the Board;
provided, however, that no change in any option theretofore granted may be made
that would impair the rights of a participant without the consent of such
participant. The Board may in its discretion terminate the Purchase Plan at any
time with respect to any common stock for which options have not theretofore
been granted.
The benefits and amounts to be received by any participant under the
Purchase Plan are not currently determinable.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN OF THE U.S. FEDERAL INCOME
TAX CONSEQUENCES OF CERTAIN TRANSACTIONS UNDER THE PURCHASE PLAN BASED ON
FEDERAL INCOME TAX LAWS CURRENTLY IN EFFECT. THIS SUMMARY APPLIES TO THE
PURCHASE PLAN AS NORMALLY OPERATED AND IS NOT INTENDED TO PROVIDE OR SUPPLEMENT
TAX ADVICE TO ELIGIBLE EMPLOYEES. THE SUMMARY CONTAINS GENERAL STATEMENTS BASED
ON CURRENT U.S. FEDERAL INCOME TAX STATUTES, REGULATIONS AND CURRENTLY AVAILABLE
INTERPRETATIONS THEREOF. THIS SUMMARY IS NOT INTENDED TO BE EXHAUSTIVE AND DOES
NOT DESCRIBE STATE, LOCAL, OR FOREIGN TAX CONSEQUENCES OR THE EFFECT, IF ANY, OF
GIFT, ESTATE, AND INHERITANCE TAXES. THE PURCHASE PLAN IS NOT QUALIFIED UNDER
SECTION 401(a) OF THE CODE.
Tax Consequences To Participants. A participant's payroll deductions to
purchase Common Stock are made on an after-tax basis. There is no tax liability
to the participant when shares of common stock are purchased pursuant to the
Purchase Plan. However, the participant may incur tax liability upon disposition
(including by way of gift) of the shares acquired under the Purchase Plan. The
participant's U.S. federal income tax liability will depend on whether the
disposition is a qualifying disposition or a disqualifying disposition as
described below.
If a qualifying disposition of the shares is made by the participant
(i.e., a disposition that occurs more than two years after the first day of the
Option Period in which the shares were purchased), or in the event of death
(whenever occurring) while owning the shares, the participant will recognize in
the year of disposition (or, if earlier, the year of the participant's death)
ordinary income in an amount equal to the lesser of (i) the excess of the fair
market value of the shares at the time of disposition (or death) over the amount
paid for the shares under the option or (ii) 15% of the fair market value of the
shares at the Date of Grant (the beginning of the Option Period). Upon the sale
of the shares, any amount realized in excess of the ordinary income recognized
by the participant will be taxed to the participant as a long-term capital gain.
If the shares are sold at less than the purchase price under the option, then
there will be no ordinary income. Instead, the participant will have a capital
loss equal to the difference between the sale price and the purchase price paid
under the option.
If a disqualifying disposition of the shares is made (i.e., a
disposition (other than by reason of death) within two years after the first day
of the Option Period in which the shares were purchased), the participant
generally will recognize ordinary income in the year of disposition in an amount
equal to any excess of the fair market value of the shares at the Date of
Exercise over the purchase price paid for the shares under the option (even if
no gain is realized on the sale or if a gratuitous transfer is made). Any
further gain (or loss) realized by the participant generally will be taxed as
short-term or long-term capital gain (or loss) depending on the holding period.
Tax Consequences To the Company Or Participating Company. The Company,
or the Participating Company for which a participant performs services, will be
entitled to a deduction only if the participant makes a disqualifying
disposition of any shares purchased under the Purchase Plan. In such case, the
Company or such Participating Company can deduct as a compensation expense the
amount that is ordinary income to the participant provided that, among other
things, (i) the amount meets the test of reasonableness, is an ordinary and
necessary business expense and is not an "excess parachute payment" within the
meaning of Section 280G of the Code, (ii) any applicable reporting obligations
are satisfied and (iii) the one million dollar limitation of Section 162(m) of
the Code is not exceeded.
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------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 4
------------------------
PROPOSAL 5
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP ("Ernst &
Young") as the Company's independent auditors for the fiscal year ending
December 31, 2000, subject to ratification by stockholders at the Annual
Meeting. Representatives of Ernst & Young will be present at the Annual Meeting
and will have the opportunity to make a statement if they so desire and be
available to respond to appropriate questions. Unless otherwise instructed on
the proxy, properly executed proxies will be voted in favor of ratifying the
appointment of Ernst & Young to audit the books and accounts of the Company for
the fiscal year ending December 31, 2000.
------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 5
------------------------
OTHER BUSINESS TO BE TRANSACTED
As of the date of this Proxy Statement, the Board of Directors knows of
no other business that may come before the Annual Meeting. If any other business
is properly brought before the Annual Meeting, it is the intention of the proxy
holders to vote or act in accordance with their best judgment with respect to
such matters.
STOCKHOLDER PROPOSALS FOR THE YEAR 2001 ANNUAL MEETING
Any proposal or proposals intended to be presented by any stockholder
at the 2001 Annual Meeting of Stockholders must be received by the Company by
December 1, 2000 to be considered for inclusion in the Company's Proxy Statement
and form of proxy relating to that meeting.
ANNUAL REPORT
The Company's 1999 Annual Report on Form 10-K (which is not part of the
Company's proxy solicitation material) is being mailed to the Company's
stockholders with this proxy statement.
By Order of the Board of Directors
/s/ CHRISTOPHER J. MELCHER
-----------------------------------
Christopher J. Melcher
Corporate Secretary
Denver, Colorado
May 15, 2000
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS) FOR THE
YEAR ENDED DECEMBER 31, 1999 ACCOMPANIES THIS PROXY STATEMENT. STOCKHOLDERS MAY
OBTAIN, UPON PAYMENT OF A REASONABLE FEE, COPIES OF THE EXHIBITS TO THE FORM
10-K, BY WRITING TO RMI.NET, INC., ATTENTION: CHRISTOPHER J. MELCHER, 999
EIGHTEENTH STREET, SUITE 2201, DENVER, COLORADO 80202.
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APPENDIX A
RMI.NET, Inc.
2000 Employees' Stock Option Plan
Section 1
Introduction
1.1 Establishment. RMI.NET, Inc., a Delaware corporation, hereby establishes the
RMI.NET, Inc. 2000 Employees' Stock Option Plan (the "Plan") for certain key
employees, consultants and advisors of RMI.NET, Inc. (together with its
affiliated corporations as defined in Section 2.1(a) below, the "Company").
1.2 Purposes. The purposes of the Plan are to provide Eligible Persons (as
defined in Section 2.1(f) below) selected for participation in the Plan with
added incentives to continue in the long-term service of the Company and to
create in such persons a more direct interest in the future success of the
operations of the Company by relating incentive compensation to increases in
stockholder value, so that the income of the Eligible Persons is more closely
aligned with the income of the Company's stockholders. The Plan also is designed
to attract key employees, consultants, and advisors and to retain and motivate
Eligible Persons by providing an opportunity for investment in the Company.
Section 2
Definitions
2.1 Definitions. The following terms shall have the meanings set forth below:
(a) "AFFILIATED CORPORATION" means any corporation or other entity
(including, but not limited to, a partnership) which is affiliated with RMI.NET,
Inc. through stock ownership or otherwise and is treated as a common employer
under the provisions of Code Sections 414(b) and (c).
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as it may be
amended from time to time.
(d) "DISABILITY" means a physical or mental condition which, in the
judgment of the Company, based on medical reports or other evidence satisfactory
to the Company, permanently prevents an employee from satisfactorily performing
his or her usual duties for the Company or the duties of such other position or
job which the Company makes available to him or her and for which such employee
is qualified by reason of his or her training, education or experience.
(e) "EFFECTIVE DATE" means the effective date of the Plan, which will
be June 15, 2000 subject to the approval of the Plan by the Company's
stockholders.
(f) "ELIGIBLE PERSONS" means full-time key employees of the Company or
any Affiliated Corporation or any division thereof, whose judgment, initiative
and efforts are, or will be, important to the successful conduct of its
business; provided that no person who is a director of the Company may be an
Eligible Person. An employee will be considered a "full-time" employee if such
employee is employed by the Company on a minimum basis of thirty hours of
service a week. Eligible Persons also include independent contractors,
consultants and advisors of the Company or any Affiliated Corporation or any
division thereof; provided that such independent contractors, consultants and
advisors may not be granted Incentive Stock Options under this Plan.
(g) "FAIR MARKET VALUE" means the officially quoted closing price of
the Stock on the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotation ("NASDAQ") System on a particular
date, or if no such prices are reported on NASDAQ, then Fair Market Value shall
mean the average of the high and low sale prices for the Stock (or if no sales
prices are reported, the average of the high and low bid prices) as reported by
the principal regional stock exchange, or if not so reported, as reported by a
quotation system of general circulation to brokers and dealers. If there are no
Stock transactions on such date, the Fair Market Value shall be determined as of
the immediately preceding date on which there were Stock transactions. If the
Stock is not
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publicly traded, the Fair Market Value of the Stock on any date shall be
determined in good faith by the Administrative Committee after such consultation
with outside legal, accounting and other experts as the Administrative Committee
may deem advisable.
(h) "ADMINISTRATIVE COMMITTEE" means a committee or committees, each
consisting of a member or members of the Board and/or such other person or
persons as may be appointed from time to time by the Board, or the entire Board
if no such Committee has been appointed. With respect to the administration of a
grant or grants under the Plan to Eligible Persons subject to Rule 16b-3, such
Administrative Committee shall be constituted so as to comply with Rule 16b-3
and shall consist of (1) two non-employee directors or (ii) the entire Board
("16b-3 Committee"); PROVIDED THAT if a 16b-3 Committee is not required for such
grant or grants to meet the exemption requirements under Rule 16b-3, then this
sentence shall not be applicable.
(i) "INCENTIVE STOCK OPTION" means any Option designated as such and
granted in accordance with the requirements of Code Section 422.
(j) "1934 ACT" means the Securities Exchange Act of 1934, as amended.
(k) "NON-STATUTORY OPTION" means any Option other than an Incentive
Stock Option.
(l) "OPTION" means a right to purchase Stock at a stated price for a
specified period of time.
(m) "OPTION PRICE" means the price at which Shares of Stock subject, to
an Option may be purchased, determined in accordance with Section 5.2(b).
(n) "OPTION HOLDER" means an Eligible Person of the Company designated
by the Administrative Committee from time to time during the term of the Plan to
receive one or more Options under the Plan.
(o) "OPTIONED SHARES" means the Shares subject to an Option.
(p) "PLAN YEAR" means each 12-month period beginning January 1 and
ending the following December 31, except that for the first year of the Plan,
the Plan Year shall begin on the Effective Date and extend to the first December
31 following the Effective Date.
(q) "RULE 16b-3" means Rule 16b-3 promulgated under the 1934 Act or any
successor rule.
(r) "SHARE" or "SHARES" means a share or shares of Stock.
(s) "STOCK" means the common stock of the Company.
2.2 Gender and Number. Except where otherwise indicated by the content, the
masculine gender also shall include the feminine gender, and the definition of
any term herein in the singular also shall include the plural.
Section 3
Plan Administration
3.1 Administrative Committee; Powers. The Plan shall be administered by the
Administrative Committee. In accordance with the provisions of the Plan, the
Administrative Committee shall have full power and authority, in its sole
discretion, to administer the Plan, including authority to interpret and
construe any provision of the Plan and any Option granted hereunder, to select
the Eligible Persons to whom Options will be granted, the amount of each Option,
and any other terms and conditions of each Option as the Administrative
Committee may deem necessary or desirable and consistent with the terms of the
Plan. The Administrative Committee shall have full power and authority to
determine the form or forms of the agreements with Option Holders, which shall
evidence the particular provisions, terms, conditions, rights and duties of the
Company and the Option Holders with respect to Options granted pursuant to the
Plan, which provisions need not be identical except as may be provided herein.
The Administrative Committee in granting an Option may provide for the granting
or issuance of additional, replacement or alternative Options upon the
occurrence of specified events, including the exercise of the original Option.
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<PAGE> 25
3.2 Actions of Administrative Committee. The Administrative Committee may from
time to time adopt such rules and regulations for administering the Plan as it
may deem necessary in order to comply with the requirements of the Code or in
order to conform to any regulation or to any change in law or regulation
applicable thereto, or as it may otherwise deem proper and in the best interests
of the Company. The Administrative Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or in any agreement entered
into hereunder in the manner and to the extent it shall deem expedient and it
shall be the sole and final judge of such expediency. No member of the
Administrative Committee shall be liable for any action, interpretation or
determination made in good faith (including determinations of Fair Market
Value), and all members of the Administrative Committee shall, in addition to
their rights as directors, be fully protected by the Company with respect to any
action, interpretation or determination. All actions taken and all
interpretations and determinations made by the Administrative Committee pursuant
to the provisions of the Plan shall be final, binding and conclusive for all
purposes and on Option Holders, the Company and all other persons. Any
determination reduced in writing and signed by all of the members shall be fully
effective as if it had been made by a majority vote at a meeting duly called and
held.
Section 4
Stock Reserved for the Plan
4.1 Number of Shares. Subject to the provisions of Section 4.3 below, 1,500,000
Shares are authorized for issuance under the Plan, in accordance with the
provisions of the Plan. Shares which may be issued upon the exercise of Options
shall be applied to reduce the maximum number of Shares remaining available
under the Plan. The 1,500,000 Shares reserved for issuance under the Plan may be
either authorized and unissued or held in the treasury of the Company.
4.2 Unused and Forfeited Stock. Any Shares that are subject to an Option under
this Plan which are not used because the terms and conditions of the Option are
not met, including any Shares that are subject to an Option which expires or is
terminated for any reason, any Shares which are used for full or partial payment
of the purchase price of Shares with respect to which an Option is exercised and
any Shares retained by the Company pursuant to Section 5 or Section 11
automatically shall become available for use under the Plan.
4.3 Adjustments for Stock Split, Stock Dividend, Etc. If the Company shall at
any time increase or decrease the number of its outstanding Shares of Stock, or
change in any way the rights and privileges of such Shares by means of the
payment of a stock dividend or any other distribution upon such Shares payable
in Stock, or through a stock split, subdivision, consolidation, combination,
reclassification or recapitalization involving the Stock, except in connection
with an initial public offering, then in relation to the Stock that is affected
by one or more of the above events, such that an adjustment is required in order
to preserve the benefits or potential benefits intended to be made available
under this Plan, then the Administrative Committee shall, in its sole discretion
and in such manner as the Administrative Committee may deem equitable and
appropriate, make such adjustments to any or all of (i) the number and kind of
Shares which thereafter may be made subject to the benefits contemplated by the
Plan, (ii) the number and kind of Shares subject to outstanding Options, and
(iii) the purchase or exercise price with respect to any of the foregoing;
provided, however, that the number of Shares subject to any Option shall always
be a whole number. The Administrative Committee may, if deemed appropriate,
provide for a cash payment to any Option Holder of an Option in connection with
any adjustment made pursuant to this Section.
4.4 General Adjustment Rules. If any adjustment or substitution provided for in
this Section 4 shall result in the creation of a fractional Share under any
Option, the Company shall, in lieu of issuing such fractional Share, pay to the
Option Holder a cash sum in any amount equal to the product of such fraction
multiplied by the Fair Market Value of a Share on the date the fractional Share
otherwise would have been issued.
Section 5
Stock Options
5.1 Grant of Options. An Eligible Person may be granted one or more Options. The
Administrative Committee, in its sole discretion, shall designate whether an
Option is to be considered an Incentive Stock Option or a Non-Statutory Option.
The Administrative Committee may grant both an Incentive Stock Option, and a
Non-Statutory Option to the same Eligible Person at the same time or at
different times Incentive Stock Options and Non-Statutory Options, whether
granted at the same or different times, shall be deemed to have been awarded in
separate
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grants, shall be clearly identified, and in no event shall the exercise of one
Option affect the right to exercise any other Option or affect the number of
Shares for which any other Option may be exercised.
5.2 Option Agreements. Each Option granted under the Plan shall be evidenced by
a written stock option agreement which shall be entered into by the Company and
the Option Holder, and which shall contain the following terms and conditions,
as well as such other terms and conditions not inconsistent therewith, as the
Administrative Committee may consider appropriate in each case. In the event of
any inconsistency between the provisions of the Plan and any such agreement
entered into hereunder, the provisions of the Plan shall govern. Any such
agreement may be supplemented or amended from time to time as approved by the
Administrative Committee as contemplated herein.
(a) Number of Shares. Each stock option agreement shall state that it
covers a specified number of Shares, as determined by the Administrative
Committee. Notwithstanding any other provision of the Plan, the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by an Option Holder in any calendar year, under
the Plan and all other plans of the Company and its parent and subsidiary
companies, shall not exceed $100,000. For this purpose, the Fair Market Value of
the Shares shall be determined as of the time an Option is granted.
(b) Price. The price at which each Optioned Share may be purchased
shall be determined by the Administrative Committee and set forth in the stock
option agreement. In no event shall the Option Price for each Share covered by
an Incentive Stock Option be less than the Fair Market Value of the Stock on the
date the Option is granted; provided, however, that the Option Price for each
Share covered by an Incentive Stock Option granted to an Eligible Person who
then owns stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company must be at least 110% of the Fair Market
Value of the Stock subject to the Incentive Stock Option on the date the Option
is granted. The Option Price for each Share covered by a Non-Statutory Option
may be granted at any price equal to or less than Fair Market Value, in the sole
discretion of the Administrative Committee.
(c) Vesting. The Administrative Committee in its discretion may impose
a vesting schedule or vesting provision with respect to any Options granted
hereunder which shall be specified in the stock option agreement evidencing such
Option.
(d) Duration of Options. Each stock option agreement shall state the
period of time, determined by the Administrative Committee, within which the
Option may be exercised by the Option Holder (the "Option Period"). The Option
Period must expire, in all cases, not more than ten years from the date an
Option is granted; provided, however, that the Option Period of an Incentive
Stock Option granted to an Eligible Person who then owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company must expire not more than five years from the date such Option is
granted. Notwithstanding any other provision of the Plan, any Option Holder who
is subject to Section 16 of the 1934 Act may not exercise any portion of an
Option during the first six months following the grant of such Option, except
that this limitation shall not apply (i) if such Option was granted by a 16b-3
Committee as defined in Section 2.1(b) above or (ii) in the event of the Option
Holder's death or Disability during such six-month period.
(e) Termination of Employment, Death, Disability, Etc. Except as
otherwise determined by the Administrative Committee, each stock option
agreement shall provide as follows with respect to the exercise of the Option
upon termination of the employment or the death of the Option Holder.
(i) If the employment of the Option Holder is terminated (or, in
the case of a consultant or advisor, if the services of the Option Holder are
terminated) within the Option Period for cause, as determined by the Company,
the Option thereafter shall be void for all purposes. As used in this section,
"cause" shall mean an act of fraud or dishonesty, moral turpitude or a gross
violation, as determined by the Company, of the Company's established policies
and procedures. The effect of this section shall be limited to determining the
consequences of a termination, and nothing in this section shall restrict or
otherwise interfere with the Company's discretion with respect to the
termination of any employee, consultant or advisor.
(ii) If the Option Holder dies, or if the Option Holder becomes
Disabled during the Option Period while still employed (or, in the case of a
consultant or advisor, while the Option Holder is performing
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services), or within the three-month period referred to in (iii) below, the
Option may be exercised by those entitled to do so under the Option Holder's
will or by the laws of descent and distribution within twelve months following
the Option Holder's death or Disability, but not thereafter. In any such case,
the Option may be exercised only as to the Shares as to which the Option had
become exercisable on or before the date of the Option Holder's death or
Disability.
(iii) If the employment of the Option Holder by the Company is
terminated (which for this purpose means that the Option Holder is no longer
employed by the Company or by an Affiliated Corporation and which, in the case
of a consultant or advisor, means that the Option Holder is no longer performing
services for the Company or an Affiliated Corporation) within the Option Period
for any reason other than cause, Disability, or the Option Holder's death, the
Option may be exercised by the Option Holder within three months following the
date of such termination (provided that such exercise must occur within the
Option Period), but not thereafter. In any such case, the Option may be
exercised only as to the Shares as to which the Option had become exercisable on
or before the date of termination of employment or termination of services.
(f) Transferability. Each stock option agreement shall provide that the
Option granted therein is not transferable by the Option Holder except by will
or pursuant to the laws of descent and distribution, and that such Option is
exercisable during the Option Holder's lifetime only by him or her, or in the
event of Disability or incapacity, by his or her guardian or legal
representative.
(g) Exercise, Payments, Etc.
(i) Each stock option agreement shall provide that the method for
exercising the Option granted therein shall be by delivery to the Company of
written notice specifying the particular Option (or portion thereof) which is
being exercised, the number of Shares with respect to which such Option is
exercised and including payment of the Option Price. Such notice shall be in a
form satisfactory to the Administrative Committee. An Option for the purchase of
Shares granted hereunder may be exercised either in whole at any time, or from
time to time in part in lots of no less than 100 Shares or, in the event any
balance as to which the Option remains unexercised shall be less than 100
Shares, in a lot equal to such balance. The exercise of the Option shall be
deemed effective upon receipt of such notice by the Company and payment to the
Company of the Option Price. The purchase of such Stock shall take place at the
principal offices of the Company upon delivery of such notice, at which time the
purchase price of the Stock shall be paid in full by any of the methods or any
combination of the methods set forth in (ii) below. A properly executed
certificate or certificates representing the Stock shall be issued by the
Company and delivered to the Option Holder.
(ii) The method or methods of payment of the Option Price for the
Shares to be purchased upon exercise of an Option shall be determined by the
Administrative Committee and may consist of any of the following methods or any
combination of the following methods:
(A) in cash;
(B) by cashier's check payable to the order of the Company;
(C) authorization from the Company to retain from the total
number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised;
(D) delivery of a properly executed exercise notice together
with irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price;
(E) by delivery to the Company of certificates representing
the number of Shares then owned by the Option Holder, the Fair Market Value of
which equals the purchase price of the Stock purchased pursuant to the Option,
properly endorsed for transfer to the Company; provided, however, that Shares
used for this purpose must have been held by the Option Holder for such minimum
period of time as may be established from time to time by the Administrative
Committee. The Fair Market Value of any Shares delivered in payment of the
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purchase price upon exercise of the Option shall be the Fair Market Value as of
the exercise date and the exercise date shall be the day of the delivery of the
Certificates for the Stock used as payment of the Option Price.
(h) Date of Grant. An Option shall be considered as having been granted
on the date specified in the grant resolution of the Administrative Committee.
5.3 Stockholder Privileges. Prior to the exercise of the Option and the transfer
of Shares to the Option Holder, an Option Holder shall have no rights as a
stockholder with respect to any Shares subject to any Option granted to such
person under this Plan, and until the Option Holder becomes the holder of record
of such Stock, no adjustments shall be made for dividends or other distributions
or other rights as to which there is a record date preceding the date such
Option Holder becomes the holder of record of such Stock, except as provided in
Section 4.
Section 6
Change in Control
6.1 Change in Control. In the event of a change in control of the Company, as
defined in Section 6.2, notwithstanding any contrary vesting schedules unless
the applicable stock option agreement provides otherwise, each outstanding
Option shall become exercisable in full in respect of the aggregate number of
Shares covered thereby, upon the occurrence of the events described in clause
(a) and (b) of Section 6.2 or immediately prior to the consummation of the
events described in clause (c) of Section 6.2, and the Administrative Committee,
in its sole discretion, without obtaining stockholder approval, to the extent
permitted in Section 10, may take any or all of the following actions: (a) grant
a cash bonus award to any Option Holder in an amount necessary to pay the Option
Price of all or any portion of the Options then held by such Option Holder; (b)
pay cash to any or all Option Holders in exchange for the cancellation of their
outstanding Options in an amount equal to the difference between the Option
Price of such Options and the greater of the tender offer price for the
underlying Stock or the Fair Market Value of the Stock on the date of the
cancellation of the Options, and (c) make any other adjustments or amendments to
the outstanding Options. Notwithstanding the foregoing, unless otherwise
provided in the applicable stock option agreement, the Administrative Committee
may, in its discretion, determine that any or all outstanding Options granted
pursuant to the Plan will not vest or become exercisable or, an accelerated
basis in connection with an event described in clause (c) of Section 6.2 and/or
will not terminate if not exercised prior to consummation of such event, if the
Board of the surviving or acquiring corporation, as the case may be, shall have
taken or made effective provision for the taking of, such action as in the
opinion of the Administrative Committee is equitable and appropriate to
substitute a new Option for such Option or to assume such Option and in order to
make such new or assumed Option, as nearly as may be practicable, equivalent to
the old Option (before giving effect to any acceleration of the vesting or
exercisability thereof), taking into account, to the extent applicable, the kind
and amount of securities, cash or other assets into or for which the Stock may
be changed, converted or exchanged in connection with such event.
6.2 Definition. A "change in control" shall be deemed to have occurred if (a)
any "person" or "group" (within the meaning of Section 13(d) and 14(d)(2) of the
1934 Act), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of more than
50% of the then outstanding voting stock of the Company; or (b) the stockholders
of the Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 50% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
approve a plan or complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the Company's
assets; or (c) a tender offer or exchange offer to acquire securities of the
Company (other than such an offer made by the Company or any subsidiary),
whether or not such offer is approved or opposed by the Board is made to acquire
securities of the Company entitling the holders thereof to 50% or more of the
voting power in the election of directors of the Company.
6.3 Golden Parachute Payments. If the provisions of this Section would result in
the receipt by any Option Holder of a payment within the meaning of Code Section
280G and the regulations thereunder and if the receipt of such payment would
result in the imposition of any excise tax under Code Sections 280G and 4999,
then the amount of such payment will be reduced to the extent required, in the
opinion of independent tax counsel, to prevent the
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imposition of such excise tax; provided, however, that the Administrative
Committee, in its sole discretion, may authorize the payment of all or any
portion of the amount of such reduction to the Option Holder. In such event, the
Company will have no obligation or liability with respect to the Option Holder
for the amount of any excise tax imposed on the Option Holder under Code
Sections 280G and 4999.
Section 7
Rights of Employees and Option Holders
7.1 Employment. Nothing contained in the Plan or in any Option shall confer upon
any Eligible Person any right with respect to the continuation of his or her
employment by the Company (or, in the case of an advisor or consultant, to the
continuation of the performance of services for the Company), or interfere in
any way with the right of the Company, subject to the terms of any separate
employment agreement to the contrary, at any time to terminate such employment
or services or to increase or decrease the compensation of such Eligible Person
from the rate in existence at the time of the grant of an Option. Whether an
authorized leave of absence, or absence in military or government service, shall
constitute a termination of employment or a termination of services shall be
determined by the Administrative Committee at the time.
7.2 Nontransferability. No right or interest of any Option Holder in an Option
granted pursuant to the Plan shall be assignable or transferable during the
lifetime of the Option Holder, either voluntarily or involuntarily, or be
subjected to any lien, directly or indirectly, by operation of law, or
otherwise, including execution, levy, garnishment, attachment, pledge or
bankruptcy. In the event of an Option Holder's death, an Option Holder's rights
and interests in Options shall, to the extent provided in Section 5, be
transferable by testamentary will or the laws of decent and distribution. In the
opinion of the Administrative Committee, if an Option Holder is disabled from
caring for his affairs because of mental condition, physical condition or age,
such Option Holder's Options shall be exercised by such person's guardian,
conservator or other legal personal representative upon furnishing the
Administrative Committee with evidence satisfactory to the Administrative
Committee of such status.
Section 8
General Restrictions
8.1 Investment Representations. The Company may require any Option Holder, as a
condition of exercising such Option or receiving Stock under the Option, to give
written assurances, in the substance and form satisfactory to the Company and
its counsel, to the effect that such person is acquiring the Stock subject to
the Option for his own account for investment and not with any present intention
of selling or otherwise distributing the same, and to such other effects as the
Company deems necessary or appropriate in order to comply with federal and
applicable state securities laws. Legends evidencing such restrictions may be
placed on the certificates evidencing the Stock.
8.2 Compliance with Securities Laws. Each Option shall be subject to the
requirement that, if at any time counsel to the Company shall determine that the
listing registration or qualification of the Shares subject to such Option upon
any securities exchange or under any state or federal law, or the consent or
approval of any governmental or regulatory body, is necessary as a condition of,
or in connection with, the issuance or purchase of Shares thereunder, such
Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained on conditions acceptable to the Administrative Committee. Nothing
herein shall be deemed to require the Company to apply for or to obtain such
listing, registration or qualification.
8.3 Stock Restriction Agreement. The Administrative Committee may provide that
Shares of Stock issuable upon the exercise of an Option shall, under certain
conditions, be subject to restrictions whereby the Company has a right of first
refusal with respect to such Shares or a right or obligation to repurchase all
or a portion of such Shares, which restrictions may survive an Option Holder's
term of employment or term of service with the Company.
8.4 Restriction on Disposition. To preserve tax treatment under Section 422 of
the Code upon the disposition of any Optioned Shares acquired pursuant to any
Incentive Stock Option granted under this Plan, an Option Holder may not dispose
of any such Optioned Shares within two years from the date of the grant of such
Option nor within one year of the exercise of such Option.
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Section 9
Other Employee Benefits
The amount of any compensation deemed to be received by an Option
Holder as a result of the exercise of an Option shall not constitute "earnings"
with respect to which any other employee benefits of such Option Holder are
determined, including without limitation benefits under any pension, profit
sharing, life insurance or salary continuation plan.
Section 10
Plan Amendment, Modification and Termination
The Board may at any time terminate, and from time to time may amend or
modify, the Plan; provided, however, that no amendment or modification may
become effective without approval of the amendment or modification by the
stockholders if stockholder approval is required to enable the Plan to satisfy
any applicable statutory or regulatory requirements, or if the Company, on the
advice of counsel, determines that stockholder approval otherwise is necessary
or desirable.
No amendment, modification or termination of the Plan shall in any
manner adversely affect any Options theretofore granted under the Plan without
the consent of the Option Holder holding such Options.
Section 11
Withholding
11.1 Withholding Requirement. The Company's obligation to deliver Shares upon
the exercise of an Option shall be subject to the satisfaction of all applicable
federal, state and local income and other tax withholding requirements.
11.2 Withholding with Stock. At the time an Option is exercised by the Option
Holder, the Administrative Committee, in its sole discretion, may permit the
Option Holder to pay all such amounts of tax withholding, or any part thereof,
by transferring to the Company, or directing the Company to withhold from Shares
otherwise issuable to such Option Holder, Shares having a value equal to the
amount required to be withheld or such lesser amount as may be determined by the
Administrative Committee at such time. The value of Shares to be withheld shall
be based on the Fair Market Value of the Stock on the date that the amount of
tax to be withheld is to be determined.
Section 12
Nonexclusivity of the Plan
Neither the adoption of the Plan by the Board nor the submission of the
Plan to stockholders of the Company for approval shall be construed as creating
any limitations on the power or authority of the Board to adopt such other or
additional incentive or other compensation arrangements of whatever nature as
the Board may deem necessary or desirable or preclude or limit the continuation
of any other plan, practice or arrangement for the payment of compensation or
fringe benefits to employees generally, or to any class or group of employees,
which the Company or any Affiliated Corporation now has lawfully put into
effect, including, without limitation, any retirement, pension, savings and
stock purchase plan, insurance, death and disability benefits and executive
short-term incentive plans.
Section 13
Requirements of Law
13.1 Requirements of Law. The issuance of Stock and the payment of cash pursuant
to the Plan shall be subject to all applicable laws, rules and regulations.
13.2 Federal Securities Law Requirements. With respect to Eligible Persons
subject to Section 16 of the 1934 Act, transactions under this Plan are intended
to comply with all applicable conditions of Rule 16b-3 or its successors under
the 1934 Act. To the extent any provision of the Plan or action by the
Administrative Committee fails to so comply, it shall be deemed null and void
with respect to such Eligible Persons, to the extent permitted by law and deemed
advisable by the Administrative Committee.
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13.3 Governing Law. The Plan and all agreements hereunder shall be construed in
accordance with and governed by the laws of the State of Colorado.
Section 14.
Duration of the Plan
The Plan shall terminate at such time as may be determined by the
Board, and no Option shall be granted after such termination. If not sooner
terminated under the preceding sentence, the Plan shall fully cease and expire
at midnight on the date that is ten years from the Effective Date of the Plan.
Options outstanding at the time of the Plan termination may continue to be
exercised in accordance with their terms.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by
its duly authorized officers and its seal to be affixed hereto, effective,
except as specified to the contrary herein, as of June 15, 2000.
ATTEST/WITNESS: RMI.NET, INC.
By: By:
--------------------------------- ----------------------------------
Name: Name:
------------------------------- --------------------------------
Secretary President
[SEAL]
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APPENDIX B
RMI.NET, INC.
EMPLOYEES' STOCK PURCHASE PLAN
Effective June 15, 2000
1. PURPOSE. The RMI.NET, INC. EMPLOYEES' STOCK PURCHASE PLAN (the "Plan") is
intended to provide an incentive for employees of RMI.NET, Inc. (the "Company")
and certain of its subsidiaries to acquire or increase a proprietary interest in
the Company through the purchase of shares of the Company's common stock. The
Plan is intended to qualify as an "employee stock purchase plan" under Section
423 of the Internal Revenue Code of 1986, as amended (the "Code"). The
provisions of the Plan shall be construed in a manner consistent with the
requirements of that section of the Code.
2. DEFINITIONS. Where the following words and phrases are used in the Plan, they
shall have the respective meanings set forth below, unless the context clearly
indicates to the contrary:
(a) "Board" means the Board of Directors of the Company or a duly
authorized committee thereof.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the committee appointed by the Board to
administer the Plan, or if the Board does not appoint a committee, the full
Board shall act as the Committee.
(d) "Company" means RMI.NET, Inc., a Delaware corporation.
(e) "Date of Exercise" means the last day of each Option Period.
(f) "Date of Grant" means July 1, 2000, and, thereafter, the first day
of each successive January and July.
(g) "Eligible Compensation" means regular straight-time earnings or
base salary, determined before giving effect to any salary reduction agreement
pursuant to (i) a qualified cash or deferred arrangement (within the meaning of
Section 401(k) of the Code) or (ii) a cafeteria plan (within the meaning of
Section 125 of the Code). Eligible Compensation shall not include overtime,
bonuses, commissions, severance pay, incentive pay, shift premium differentials,
pay in lieu of vacation, reimbursements, or any other special or incentive
payments excluded by the Committee in its discretion (applied in a uniform
basis). If an Employee's sole compensation from the Company is commissions, then
the Employee's commissions will be the Employee's Eligible Compensation for
purposes of the Plan.
(h) "Eligible Employee" means, with respect to each Date of Grant, each
Employee of the Company or a Participating Company. Notwithstanding the
foregoing and to the extent permitted by Section 423 of the Code and any rules
or regulations promulgated thereunder, an Employee whose customary employment
with the Company or a Participating Company is for twenty (20) hours or less per
week or for not more than five (5) months in any calendar year shall not be
eligible to participate in the Plan.
(i) "Employee" means an individual who performs services for the
Company or a Participating Company whose remuneration for services rendered to
the Company or a Participating Company is subject to the withholding of federal
income tax under Section 3401 of the Code. In addition, the term "Employee" as
used herein shall (i) have the meaning applicable under Treasury Regulation
Section 1.421- 7(h), (ii) shall not include a member of the Board of Directors
of the Company or of a Participating Company who is not also an employee of the
Company or of a Participating Company, (iii) shall not include leased employees
within the meaning of Section 414(n) of the Code; and (iv) shall not include any
individual (A) who provides services to the Company, any Participating Company
or any division thereof under an agreement, contract, or any other arrangement
pursuant to which the individual is initially classified as an independent
contractor or (B) whose remuneration for services has not been treated initially
as subject to the withholding of federal income tax pursuant to Section 3401 of
the Code,
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unless the individual is subsequently reclassified as a common law employee as a
result of a final decree of a court of competent jurisdiction or the settlement
of an administrative or judicial proceeding. To the extent permitted by Section
423 of the Code and any rules or regulations promulgated thereunder, an
individual who is reclassified as a common law employee as a result of a final
decree of a court of competent jurisdiction or the settlement of an
administrative or judicial proceeding shall become eligible to participate, if
otherwise eligible under this Section 2 hereof, after two years of employment
(including any period of service recharacterized as common law employment).
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Option Period" means the six month period beginning on each Date
of Grant.
(l) "Option Price" shall have the meaning assigned to such term in
paragraph 8(b).
(m) "Participant" shall mean an Eligible Employee who has elected to
participate in the Plan.
(n) "Participating Company" means any present or future parent or
subsidiary corporation of the Company that participates in the Plan pursuant to
paragraph 4.
(o) "Plan" means this RMI.NET, Inc. Employees' Stock Purchase Plan, as
amended from time to time.
(p) "Restriction Period" means the period of time during which shares
of Stock acquired by a participant in the Plan may not be sold, assigned,
pledged, exchanged, hypothecated or otherwise transferred, encumbered or
disposed of by such participant as provided in paragraph 8(d).
(q) "Stock" means the shares of the Company's no par value common
stock.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Committee.
Subject to the provisions of the Plan, the Committee shall interpret the Plan
and all options granted under the Plan, make such rules as it deems necessary
for the proper administration of the Plan, and make all other determinations
necessary or advisable for the administration of the Plan. In addition, the
Committee shall correct any defect or supply any omission or reconcile any
inconsistency in the Plan, or in any option granted under the Plan, in the
manner and to the extent that the Committee deems desirable to carry the Plan or
any option into effect. The Committee shall, in its sole discretion, make such
decisions or determinations and take such actions, and all such decisions,
determinations and actions taken or made by the Committee pursuant to this and
the other paragraphs of the Plan shall be conclusive on all parties. The
Committee shall not be liable for any decision, determination or action taken in
good faith in connection with the administration of the Plan. The Committee
shall have the authority to delegate routine day-to-day administration of the
Plan to such officers and employees of the Company as the Committee deems
appropriate.
4. PARTICIPATING COMPANIES. The Committee may designate any present or future
parent or subsidiary corporation of the Company that is eligible by law to
participate in the Plan as a Participating Company by written instrument
delivered to the designated Participating Company. Such written instrument shall
specify the effective date of such designation and shall become, as to such
designated Participating Company and persons in its employment, a part of the
Plan. The terms of the Plan may be modified as applied to the Participating
Company only to the extent permitted under Section 423 of the Code. Transfer of
employment among the Company and Participating Companies (and among any other
parent or subsidiary corporation of the Company) shall not be considered a
termination of employment hereunder. Any Participating Company may, by
appropriate action of its Board of Directors, terminate its participation in the
Plan. Moreover, the Committee may, in its discretion, terminate a Participating
Company's Plan participation at any time.
5. ELIGIBILITY. Subject to the provisions hereof, all Eligible Employees as of a
Date of Grant shall be eligible to participate in the Plan with respect to
options granted under the Plan as of such date.
6. STOCK SUBJECT TO THE PLAN. Subject to the provisions of paragraph 13, the
aggregate number of shares which may be sold pursuant to options granted under
the Plan shall not exceed 1,000,000 shares of the authorized Stock, which shares
may be unissued shares or reacquired shares, including shares bought in the
market
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or otherwise for purposes of the Plan. Should any option granted under the Plan
expire or terminate prior to its exercise in full, the shares theretofore
subject to such option may again be subject to an option granted under the Plan.
Any shares that are not subject to outstanding options upon the termination of
the Plan shall cease to be subject to the Plan.
7. GRANT OF OPTIONS.
(a) In General. Commencing on July 1, 2000, and continuing while the
Plan remains in force, the Company shall, on each Date of Grant, grant an option
under the Plan to purchase shares of Stock to each Eligible Employee as of such
Date of Grant who elects to participate in the Plan; provided, however, that no
option shall be granted to an Eligible Employee if such individual, immediately
after the option is granted, owns stock possessing five percent or more of the
total combined voting power or value of all classes of stock of the Company or
of its parent or subsidiary corporations (within the meaning of Sections
423(b)(3) and 424(d) of the Code). Except as provided in paragraph 13, the term
of each option shall be for six months, which shall begin on a Date of Grant and
end on the last day of such six-month period. Subject to subparagraph 7(d), the
number of shares of Stock subject to an option for a Participant shall be equal
to the quotient of (i) the aggregate payroll deductions withheld on behalf of
such Participant during the Option Period in accordance with subparagraph 7(b),
divided by (ii) the Option Price of the Stock applicable to the Option Period,
including fractions; provided, however, that the maximum number of shares of
Stock that may be subject to any option for a Participant may not exceed 20,000
(subject to adjustment as provided in paragraph 13).
(b) Election To Participate; Payroll Deduction Authorization. An
Eligible Employee may participate in the Plan only by means of payroll
deduction. Except as provided in subparagraph 7(f), each Eligible Employee who
elects to participate in the Plan shall deliver to the Company, within the time
period prescribed by the Committee, a written payroll deduction authorization in
a form prepared by the Company whereby he gives notice of his election to
participate in the Plan as of the next following Date of Grant, and whereby he
designates a specified whole dollar amount or a whole percentage of his Eligible
Compensation to be deducted from his compensation for each pay period and paid
into the Plan for his account. The designated percentage may not be less than 1%
nor exceed 15%.
(c) Changes In Payroll Authorization. The payroll deduction
authorization referred to in subparagraph 7(b) may not be changed during the
Option Period. However, a Participant may withdraw from the Plan as provided in
paragraph 9.
(d) $25,000 Limitation. No Eligible Employee shall be granted an option
under the Plan which permits his rights to purchase Stock under the Plan and
under all other employee stock purchase plans of the Company and its parent and
subsidiary corporations to accrue at a rate which exceeds $25,000 of fair market
value of Stock (determined at the time such option is granted) for each calendar
year in which such option is outstanding at any time (within the meaning of
Section 423(b)(8) of the Code). Any payroll deductions in excess of the amount
specified in the foregoing sentence shall be returned to the Participant as soon
as administratively feasible after the next following Date of Exercise.
(e) Leaves Of Absence. During a paid leave of absence approved by the
Company and meeting the requirements of Treasury Regulation Section
1.421-7(h)(2), a Participant' selected payroll deductions shall continue. A
Participant may not contribute to the Plan during an unpaid leave of absence. If
a Participant takes an unpaid leave of absence that is approved by the Company
and meets the requirements of Treasury Regulation Section 1.421-7(h)(2), then
such Participant's payroll deductions for such Option Period that were made
prior to such leave may remain in the Plan and be used to purchase Stock under
the Plan on the Date of Exercise relating to such Option Period. If a
Participant takes a leave of absence that is not described in the first or third
sentence of this subparagraph 7(e), then he shall be considered to have
terminated his employment and withdrawn from the Plan pursuant to the provisions
of paragraph 9 hereof. Further, notwithstanding the preceding provisions of this
subparagraph 7(e), if a Participant takes a leave of absence that is described
in the first or third sentence of this subparagraph 7(e) and such leave of
absence exceeds 90 days, then he shall be considered to have withdrawn from the
Plan pursuant to the provisions of paragraph 9 hereof and terminated his
employment for purposes of the Plan on the 91st day of such leave of absence.
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(f) Continuing Election. Subject to the limitation set forth in
subparagraph 7(d), a Participant (i) who has elected to participate in the Plan
pursuant to subparagraph 7(b) as of a Date of Grant and (ii) who takes no action
to change or revoke such election as of the next following Date of Grant and/or
as of any subsequent Date of Grant prior to any such respective Date of Grant
shall be deemed to have made the same election, including the same attendant
payroll deduction authorization, for such next following and/or subsequent
Date(s) of Grant as was in effect immediately prior to such respective Date of
Grant. Payroll deductions that are limited by subparagraph 7(d) shall recommence
at the rate provided in such Participant's payroll deduction authorization at
the beginning of the first Option Period that is scheduled to end in the
following calendar year, unless the Participant changes the amount of his
payroll deduction authorization pursuant to paragraph 7, withdraws from the Plan
as provided in paragraph 9, or is terminated from participation in the Plan as
provided in paragraph 10.
8. EXERCISE OF OPTIONS.
(a) General Statement. Subject to the limitation set forth in
subparagraph 7(d), each Participant in the Plan automatically and without any
act on his part shall be deemed to have exercised his option on each Date of
Exercise to the extent of his unused payroll deductions under the Plan and to
the extent the issuance of Stock to such Participant upon such exercise is
lawful.
(b) "Option Price" Defined. The term "Option Price" shall mean the per
share price of Stock to be paid by each Participant on each exercise of his
option, which price shall be equal to 85% of the fair market value of the Stock
on the Date of Exercise or on the Date of Grant, whichever amount is less. For
all purposes under the Plan, the fair market value of a share of Stock on a
particular date shall be equal to the last sale price on the applicable date for
shares of Stock made and reported through the Nasdaq National Market System of
the National Association of Securities Dealers, Inc., or such national stock
exchange on which the Stock may then be listed and which constitutes the
principal market for the Stock, or, if no sales of the Stock shall have been
reported with respect to that date, on the next preceding date with respect to
which sales are reported.
(c) Delivery Of Share Certificates. As soon as reasonable, in good
faith, after the Date of Exercise, the Company shall deliver to a custodian
selected by the Committee one or more certificates representing (or shall
otherwise cause to be credited to the account of such custodian) the total
number of whole shares of Stock representing options exercised on such Date of
Exercise in the aggregate (for both whole and fractional shares) of all of the
Participants hereunder. Any remaining amount representing a fractional share
shall not be certificated (or otherwise so credited) and such remaining amount
shall be paid in cash to the custodian. Such custodian shall keep accurate
records of the beneficial interests of each Participant in such shares by means
of participant accounts under the Plan, and shall provide each participating
employee with periodic statements with respect thereto as may be directed by the
Committee. If the Company is required to obtain from any U.S. commission or
agency authority to issue any such shares, the Company shall seek to obtain such
authority. Inability of the Company to obtain from any commission or agency
(whether U.S. or foreign) authority which counsel for the Company deems
necessary for the lawful issuance of any such shares shall relieve the Company
from liability to any Participant in the Plan except to return to him the amount
of his payroll deductions under the Plan which would have otherwise been used
upon exercise of the relevant option.
(d) Restrictions On Transfer. The Committee may from time to time
specify with respect to a particular grant of options the Restriction Period
that shall apply to the shares of Stock acquired pursuant to such options.
Unless otherwise specified by the Committee, the Restriction Period applicable
to shares of Stock acquired under the Plan shall be a period of six months after
the Date of Exercise of the options pursuant to which such shares were acquired.
Except as hereinafter provided, during the Restriction Period applicable to
shares of Stock acquired under the Plan, such shares may not be sold, assigned,
pledged, exchanged, hypothecated or otherwise transferred, encumbered or
disposed of by the Participant who has purchased such shares; provided, however,
that such restriction shall not apply to the transfer, exchange or conversion of
such shares of Stock pursuant to a merger, consolidation or other plan of
reorganization of the Company, but the stock, securities or other property
(other than cash) received upon any such transfer, exchange or conversion shall
also become subject to the same transfer restrictions applicable to the original
shares of Stock, and shall be held by the custodian, pursuant to the provisions
hereof. Upon the expiration of such Restriction Period, the transfer
restrictions set forth in this subparagraph 8(d) shall cease to apply and the
optionee may, pursuant to procedures established by the Committee and the
custodian, direct the sale or distribution of some or all of the whole shares of
Stock in his Company stock account that are not then subject to transfer
restrictions and, in the event of a sale, request payment of the net proceeds
from such sale. At the time of distribution of such shares, any fractional share
in such Company stock account shall be converted to
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<PAGE> 36
cash based on the fair market value of the Stock on the date of distribution and
such cash shall be paid to the Participant. The Committee may cause the Stock
issued in connection with the exercise of options under the Plan to bear such
legends or other appropriate restrictions, and the Committee may take such other
actions, as it deems appropriate in order to reflect the transfer restrictions
set forth in this subparagraph 8(d) and to assure compliance with applicable
laws.
9. WITHDRAWAL FROM THE PLAN.
(a) General Statement. Any Participant may withdraw in whole from the
Plan at any time prior to the Date of Exercise relating to a particular Option
Period. Partial withdrawals shall not be permitted. A Participant who wishes to
withdraw from the Plan must timely deliver to the Company a notice of withdrawal
in a form prepared by the Company. The Company, promptly following the time when
the notice of withdrawal is delivered, shall refund to the Participant the
amount of his payroll deductions under the Plan which have not yet been
otherwise returned to him or used upon exercise of options; and thereupon,
automatically and without any further act on his part, his payroll deduction
authorization and his interest in unexercised options under the Plan shall
terminate.
(b) Eligibility Following Withdrawal. A participant who withdraws from
the Plan shall be eligible to participate again in the Plan upon expiration of
the Option Period during which he withdrew (provided that he is otherwise
eligible to participate in the Plan at such time).
10. TERMINATION OF EMPLOYMENT.
(a) General Statement. Except as provided in subparagraph 10(b), if the
employment of a participant terminates for any reason whatsoever, then his
participation in the Plan automatically and without any act on his part shall
terminate as of the date of the termination of his employment. The Company shall
promptly refund to him the amount of his payroll deductions under the Plan which
have not yet been otherwise returned to him or used upon exercise of options,
and thereupon his interest in unexercised options under the Plan shall
terminate.
(b) Termination By Retirement, Death Or Disability. If the employment
of a Participant terminates after such Participant has attained age 65 or due to
such Participant's death or permanent and total disability (within the meaning
of Section 22(e)(3) of the Code), then such Participant, or such Participant's
personal representative, as applicable, shall have the right to elect either to:
(1) withdraw all of such Participant's accumulated unused payroll
deductions under the Plan; or
(2) exercise such Participant's option for the purchase of Stock
on the last day of the Option Period during which termination of employment
occurs for the purchase of the number of shares of Stock, including fractions,
which the accumulated payroll deductions at the date of such Participant's
termination of employment will purchase at the applicable Option Price (subject
to subparagraph 7(d)).
The Participant or, if applicable, such personal representative, must make such
election by giving written notice to the Committee at such time and in such
manner as the Committee prescribes. In the event that no such written notice of
election is timely received by the Committee, the Participant or personal
representative will automatically be deemed to have elected as set forth in
clause (2) above.
11. RESTRICTION UPON ASSIGNMENT OF OPTION. An option granted under the Plan
shall not be transferable otherwise than by will or the laws of descent and
distribution. Each option shall be exercisable, during his lifetime, only by the
employee to whom granted. The Company shall not recognize and shall be under no
duty to recognize any assignment or purported assignment by an employee of his
option or of any rights under his option or under the Plan.
12. NO RIGHTS OF SHAREHOLDER UNTIL EXERCISE OF OPTION. With respect to shares of
Stock subject to an option, an optionee shall not be deemed to be a shareholder,
and he shall not have any of the rights or privileges of a shareholder, until
such option has been exercised. With respect to an individual's Stock held by
the custodian pursuant to subparagraph 8(d), the custodian shall, as soon as
practicable, pay the individual any cash
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<PAGE> 37
dividends attributable thereto or credit such dividends to such individual's
account (as directed by the Committee in its discretion applied in a uniform
manner) and shall, in accordance with procedures adopted by the custodian,
facilitate the individual's voting rights attributable thereto.
13. CHANGES IN STOCK; ADJUSTMENTS. Whenever any change is made in the Stock, by
reason of a stock dividend or by reason of subdivision, stock split, reverse
stock split, recapitalization, reorganization, combination, reclassification of
shares or other similar change, appropriate action will be taken by the
Committee to adjust accordingly the number of shares subject to the Plan, the
maximum number of shares that may be subject to any option, and the number and
Option Price of shares subject to options outstanding under the Plan. If the
Company shall not be the surviving corporation in any merger or consolidation
(or survives only as a subsidiary of another entity), or if the Company is to be
dissolved or liquidated, then, unless a surviving corporation assumes or
substitutes new options (within the meaning of Section 424(a) of the Code) for
all options then outstanding, (i) the Date of Exercise for all options then
outstanding shall be accelerated to a date fixed by the Committee prior to the
effective date of such merger or consolidation or such dissolution or
liquidation and (ii) upon such effective date any unexercised options shall
expire and the Company promptly shall refund to each Participant the amount of
such Participant's payroll deductions under the Plan which have not yet been
otherwise returned to him or used upon exercise of options.
14. USE OF FUNDS; NO INTEREST PAID. All funds received or held by the Company
under the Plan shall be included in the general funds of the Company free of any
trust or other restriction, and may be used for any corporate purpose. No
interest shall be paid to any participant.
15. TERM OF THE PLAN. The Plan shall be effective upon the date of its adoption
by the Board, provided the Plan is approved by the shareholders of the Company
within 12 months. Notwithstanding any provision in the Plan, no option granted
under the Plan shall be exercisable prior to such shareholder approval, and, if
the shareholders of the Company do not approve the Plan by the Date of Exercise
of the first option granted hereunder, then the Plan shall automatically
terminate, no options may be exercised hereunder, and the Company promptly shall
refund to each Participant the amount of such Participant's payroll deductions
under the Plan; and thereupon, automatically and without any further act on his
part, his payroll deduction authorization and his interest in unexercised
options under the Plan shall terminate. Except with respect to options then
outstanding, if not sooner terminated under the provisions of paragraph 16, the
Plan shall terminate upon and no further payroll deductions shall be made and no
further options shall be granted after June 30, 2010.
16. AMENDMENT OR TERMINATION OF THE PLAN. The Board in its discretion may
terminate the Plan at any time with respect to any Stock for which options have
not theretofore been granted. The Board shall have the right to alter or amend
the Plan or any part thereof from time to time; provided, however, that no
change in any option theretofore granted may be made that would impair the
rights of the optionee without the consent of such optionee.
17. SECURITIES LAWS. The Company shall not be obligated to issue any Stock
pursuant to any option granted under the Plan at any time when the offer,
issuance or sale of shares covered by such option has not been registered under
the Securities Act of 1933, as amended, or does not comply with such other
state, federal or foreign laws, rules or regulations, or the requirements of any
stock exchange upon which the Stock may then be listed, as the Company or the
Committee deems applicable and, in the opinion of legal counsel for the Company,
there is no exemption from the requirements of such laws, rules, regulations or
requirements available for the offer, issuance and sale of such shares. Further,
all Stock acquired pursuant to the Plan shall be subject to the Company's
policies concerning compliance with securities laws and regulations, as such
policies may be amended from time to time. The terms and conditions of options
granted hereunder to, and the purchase of shares by, persons subject to Section
16 of the Exchange Act shall comply with any applicable provisions of Rule
16b-3. As to such persons, the Plan shall be deemed to contain, and such options
shall contain, and the shares issued upon exercise thereof shall be subject to,
such additional conditions and restrictions as may be required from time to time
by Rule 16b-3 to qualify for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
18. NO RESTRICTION ON CORPORATE ACTION. Nothing contained in the Plan shall be
construed to prevent the Company or any subsidiary from taking any corporate
action that is deemed by the Company or such subsidiary to be appropriate or in
its best interest, whether or not such action would have an adverse effect on
the Plan or any option granted under the Plan. No employee, beneficiary or other
person shall have any claim against the Company or any subsidiary as a result of
any such action.
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<PAGE> 38
19. MISCELLANEOUS PROVISIONS.
(a) Parent And Subsidiary Corporations. For all purposes of the Plan, a
corporation shall be considered to be a parent or subsidiary corporation of the
Company only if such corporation is a parent or subsidiary corporation of the
Company within the meaning of Sections 424(e) and (f) of the Code.
(b) Number And Gender. Wherever appropriate herein, words used in the
singular shall be considered to include the plural and words used in the plural
shall be considered to include the singular. The masculine gender, where
appearing in the Plan, shall be deemed to include the feminine gender.
(c) Headings. The headings and subheadings in the Plan are included
solely for convenience, and if there is any conflict between such headings or
subheadings and the text of the Plan, the text shall control.
(d) Not A Contract Of Employment. The adoption and maintenance of the
Plan shall not be deemed to be a contract between the Company or any
Participating Company and any person or to be consideration for the employment
of any person. Participation in the Plan at any given time shall not be deemed
to create the right to participate in the Plan, or any other arrangement
permitting an employee of the Company or any Participating Company to purchase
Stock at a discount, in the future. The rights and obligations under any
participant's terms of employment with the Company or any Participating Company
shall not be affected by participation in the Plan. Nothing herein contained
shall be deemed to give any person the right to be retained in the employ of the
Company or any Participating Company or to restrict the right of the Company or
any Participating Company to discharge any person at any time, nor shall the
Plan be deemed to give the Company or any Participating Company the right to
require any person to remain in the employ of the Company or such Participating
Company or to restrict any person's right to terminate his employment at any
time. The Plan shall not afford any participant any additional right to
compensation as a result of the termination of such participant's employment for
any reason whatsoever.
(e) Compliance With Applicable Laws. The Company's obligation to offer,
issue, sell or deliver Stock under the Plan is at all times subject to all
approvals of and compliance with any governmental authorities (whether domestic
or foreign) required in connection with the authorization, offer, issuance, sale
or delivery of Stock as well as all federal, state, local and foreign laws.
Without limiting the scope of the preceding sentence, and notwithstanding any
other provision in the Plan, the Company shall not be obligated to grant options
or to offer, issue, sell or deliver Stock under the Plan to any employee who is
a citizen or resident of a jurisdiction the laws of which, for reasons of its
public policy, prohibit the Company from taking any such action with respect to
such employee.
(f) Severability. If any provision of the Plan shall be held illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions hereof; instead, each provision shall be fully severable
and the Plan shall be construed and enforced as if said illegal or invalid
provision had never been included herein.
(g) Governing Law. All provisions of the Plan shall be construed in
accordance with the laws of Delaware except to the extent preempted by federal
law.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by
its duly authorized officers and its seal to be affixed hereto, effective,
except as specified to the contrary herein, as of June 15, 2000.
ATTEST/WITNESS: RMI.NET, INC.
By: By:
--------------------------------- ----------------------------------
Name: Name:
------------------------------- --------------------------------
Secretary Chairman and CEO
[SEAL]
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<PAGE> 39
RMI.NET, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
June 15, 2000
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of RMI.NET, Inc. (the "Company") hereby
appoints Douglas H. Hanson and Christopher J. Melcher, or any of them, with full
power of substitution, as proxy holders to cast all votes, as designated below,
which the undersigned stockholder is entitled to cast at the 2000 Annual Meeting
of Stockholders (the "Annual Meeting") to be held on Thursday, June 15, 2000 at
10:00 a.m. (local time) at the Hotel Monaco, 1717 Champa Street, Denver,
Colorado 80202, upon the following matters and any other matters and any other
matter as may properly come before the Annual Meeting or any adjournments
thereof.
1. Election of the five nominees to serve on the Board of Directors (or if any
nominee is not available for election, such substitute as the Board of
Directors may designate), namely: Douglas H. Hanson, D.D. Hock, Robert W.
Grabowski, Lewis H. Silverberg, and Michael T. Victor.
[ ] FOR all nominees listed above (except as marked to the contrary below).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above.
INSTRUCTION: To withhold authority to vote for any individual nominee, mark
"FOR" above and write the name of the nominee or nominees as to which you
wish to withhold authority in the space below.
2. Proposal to approve the amendment to Article 1 of the Company's Amended and
Restated Certificate of Incorporation, as amended, to change the name of
the Company from RMI.NET, Inc. to Internet Communications Company, Inc.,
subject to completion of the proposed merger between the Company and
Internet Communications Corp.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to adopt the RMI.NET, Inc. 2000 Employees' Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to adopt the RMI.NET, Inc. Employees' Stock Purchase Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Proposal to ratify the appointment of Ernst & Young LLP as the independent
auditors of the Company for the fiscal year ending December 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be dated and signed on reverse side.)
<PAGE> 40
(continued from other side)
This proxy, when properly executed, will be voted as directed by the
undersigned stockholder and in accordance with the best judgment of the proxies
as to other matters. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR"
THE NOMINEES LISTED IN PROPOSAL 1, "FOR" PROPOSALS 2, 3, 4, and 5, AND IN
ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXY HOLDERS AS TO OTHER MATTERS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED IN PROPOSAL
1 AND "FOR" PROPOSALS 2, 3, 4, AND 5.
The undersigned hereby acknowledges prior receipt of the Notice of
Annual Meeting of Stockholders and Proxy Statement dated May 15, 2000 and the
2000 Annual Report to Stockholders, and hereby revokes any proxy or proxies
heretofore given. This Proxy may be revoked at any time before it is voted by
delivering to the Secretary of the Company either a written revocation of proxy
or a duly executed proxy bearing a later date, or by appearing at the Annual
Meeting and voting in person.
If you receive more than one proxy card, please sign and return all
cards in the accompanying envelope.
Date: , 2000
------------------------------
------------------------------------------------------
Signature of Stockholder or Authorized Representative
------------------------------------------------------
Signature of Stockholder or Authorized Representative
(if held jointly)
Please date and sign exactly as name appears hereon.
Each executor, administrator, trustee, guardian,
attorney-in-fact, and other fiduciary should sign and
indicate his or her full title. In the case of stock
ownership in the name of two or more persons, all
persons should sign.
[ ] I PLAN TO ATTEND THE JUNE 15, 2000 ANNUAL STOCKHOLDERS MEETING
PLEASE COMPLETE, DATE AND SIGN THIS PROXY, AND RETURN IT PROMPTLY TO ENSURE A
QUORUM AT THE MEETING. IT IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES. DELAY
IN RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO ADDITIONAL EXPENSE.
