<PAGE>
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
MICROWARE SYSTEMS CORPORATION
(Name of Registrant as Specified In Its Charter)
------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/) No fee required.
/ / Fee computed on table below per Exchange Act
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 statement 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>
MICROWARE SYSTEMS CORPORATION
------------------
1500 NW 118TH STREET
DES MOINES, IOWA 50325
July 29, 1999
Notice of Annual Shareholders Meeting:
You are hereby notified that the Annual Meeting of Shareholders of
Microware Systems Corporation (the "Company") will be held at the Four Points
Hotel Sheraton, 11040 Hickman Road, Clive, Iowa 50325, at 10:00 a.m. local
time, on Tuesday, September 14, 1999, for the following purposes:
1. To elect three Class I Directors to hold office until the 2002 Annual
Meeting.
2. To consider a proposal to approve the Microware Systems Corporation
1999 Stock Purchase Plan.
3. To consider a proposal to ratify the selection of KPMG Peat Marwick
LLP as independent public accountants of the Company for the fiscal
year ending March 31, 2000.
4. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on July 13, 1999 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting.
You are invited to attend the Annual Meeting in person. Whether or not
you expect to be present in person at the Meeting, please date, sign and
return the enclosed proxy in the envelope provided.
By Order of the Board of Directors
GEORGE E. LEONARD
SECRETARY
<PAGE>
MICROWARE SYSTEMS CORPORATION
1500 NW 118TH STREET
DES MOINES, IOWA 50325
------------------
1999 ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 14, 1999
------------------
PROXY STATEMENT
GENERAL
This Proxy Statement and the accompanying proxy are furnished to
shareholders of Microware Systems Corporation (the "Company") in connection
with the solicitation of proxies by the Company's Board of Directors for use
at the 1999 Annual Meeting of Shareholders (the "Meeting") to be held at the
Four Points Hotel Sheraton, 11040 Hickman Road, Clive, Iowa, at 10:00 a.m.
local time, on Tuesday, September 14, 1999, for the purposes set forth in the
accompanying Notice of Meeting. This Proxy Statement, the form of proxy
included herewith and the Company's Annual Report to Shareholders for the
fiscal year ended March 31, 1999, are expected to be mailed to shareholders
on or about July 29, 1999.
Shareholders of record at the close of business on July 13, 1999 are
entitled to notice of and to vote at the Meeting. On such date there were
outstanding 14,944,942 shares of Common Stock, no par value (the "Common
Stock"). The presence, in person or by proxy, of the holders of a majority of
the shares of Common Stock outstanding and entitled to vote at the Meeting is
necessary to constitute a quorum. In deciding all questions, each holder of
Common Stock shall be entitled to one vote, in person or by proxy, for each
share held on the record date.
Votes cast by proxy or in person at the Meeting will be tabulated by the
election inspector appointed for the Meeting and will determine whether or
not a quorum is present. Neither the Company's Articles of Incorporation,
By-laws nor Iowa law determines the treatment and effect of abstentions and
broker non-votes. The election inspectors will treat abstentions as shares
that are present and entitled to vote but as not voted for purposes of
determining the approval of any matter submitted to the shareholders for a
vote. If a broker indicates on the proxy that it does not have discretionary
authority as to certain shares to vote on a particular matter, those shares
will not be considered as present and entitled to vote with respect to that
matter.
Properly executed proxies will be voted in the manner directed by the
shareholders. If no direction is made, such proxies will be voted FOR the
election of the three nominees named under the caption "Election of
Directors" as set forth therein as Directors of the Company, FOR the adoption
of the Microware Systems Corporation 1999 Stock Purchase Plan and FOR the
ratification of the selection of KPMG Peat Marwick LLP as the Company's
independent public accountants. Any proxy may be revoked by the shareholder
at any time prior to the voting thereof by notice in writing to the Secretary
of the Company, either prior to the Meeting (at the above address) or at the
Meeting if the shareholder attends in person. A later dated proxy will revoke
a prior dated proxy. As of the date of this Proxy Statement, the Board of
Directors knows of no other business which will be presented for
consideration at the Meeting. If other proper matters are presented to the
Meeting, however, it is the intention of the proxy holders named in the
enclosed form of proxy to take such actions as shall be in accordance with
their best judgment.
The information contained in this Proxy Statement relating to the
occupations and security holdings of Directors and officers of the Company
and their transactions with the Company is based upon information received
from each individual as of July 13, 1999.
<PAGE>
HOLDINGS OF SHAREHOLDERS, DIRECTORS
AND EXECUTIVE OFFICERS
The following table sets forth, as of July 13, 1999, the name, address
and holdings of each person (including any "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934) known by the Company to be
the beneficial owner of more than five percent of the Company's Common Stock,
and the amount of Common Stock beneficially owned by each of the Directors,
Named Executive Officers (defined herein) and executive officers of the
Company and by all Directors and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT
NATURE OF OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS
------------------------ ---------------------- -------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Kenneth B. Kaplan . . . . . . . . . . . . . . . 4,698,107(2) 31.4
M. Denis Connaghan . . . . . . . . . . . . . . 93,200(3) *
George E. Leonard . . . . . . . . . . . . . . . 25,000(3) *
Shigehiro Ishibashi . . . . . . . . . . . . . . -- --
Martin Allen . . . . . . . . . . . . . . . . . 12,000(3) *
Kent E. Thompson . . . . . . . . . . . . . . . 8,550(3) *
James H. Boswell . . . . . . . . . . . . . . . -- --
Derek South . . . . . . . . . . . . . . . . . . -- --
Arthur Don . . . . . . . . . . . . . . . . . . 40,100(3) *
James A. Gordon . . . . . . . . . . . . . . . . 748,639(4) 5.0
Daniel P. Howell . . . . . . . . . . . . . . . 748,639(5) 5.0
Dennis E. Young . . . . . . . . . . . . . . . . 16,000(3) *
Robert W. Bigony . . . . . . . . . . . . . . . 2,358,720(6)(7) 15.0
All executive officers and directors as a group
(12 persons)(2)(3)(4)(5)(6)(7)(8) . . . . . 8,748,955 54.8
---------------------- -------
OTHER FIVE PERCENT SHAREHOLDERS
Lawrence A. Crane . . . . . . . . . . . . . . . 899,892 6.0
1500 N.W. 118th Street
Des Moines, IA 50325
Motorola, Inc.(6)(7) . . . . . . . . . . . . . 2,358,720 15.0
1303 East Algonquin Road
Schaumburg, Illinois 60196
Edgewater Private Equity Fund, L.P.(4). . . . . 748,639 5.0
666 Locust Street
Des Moines, Iowa 50309
Mesirow Capital Partners VI(5). . . . . . . . . 748,639 5.0
350 North Clark Street
Chicago, Illinois 60610
</TABLE>
- -----------------
* Less than 1% of the outstanding Common Stock.
(1) Unless otherwise indicated in the footnotes to this table, the Company
believes the persons named in this table have sole voting and investment
power with respect to all shares of Common Stock reflected in this
table.
(2) Includes 7,600 shares held by Mr. Kaplan as custodian.
(3) Comprises options which are currently exercisable or which are deemed
currently exercisable, and, in the case of Messrs. Leonard, Thompson and
Don, includes 1,000, 550 and 100 shares, respectively, which are
directly owned.
(4) Mr. Gordon is President of Gordon Management, Inc., which is General
Partner of Edgewater Private Equity Fund, L.P., the direct beneficial
owner of such shares.
2
<PAGE>
(5) Mr. Howell is Senior Managing Director of Mesirow Private Equity
Investments, Inc., an affiliate of the corporate general partner of
Mesirow Capital Partners VI, which is the direct beneficial owner of
such shares.
(6) Mr. Bigony is Senior Vice President and President, North American Region,
of Motorola, Inc. ("Motorola"). Motorola is the direct beneficial owner
of such shares. Mr. Bigony disclaims beneficial ownership of such
shares.
(7) Includes 832,488 warrants deemed currently exercisable at an exercise
price of $10.81 per share. Of such warrants, 277,496 became exercisable
on August 1, 1997 and expire July 31, 1999. An additional 277,496 of
such warrants became exercisable on August 1, 1998. The remaining
277,496 warrants will become exercisable on August 1, 1999.
(8) Does not include Mr. South who resigned from the Company in February 1999.
ELECTION OF DIRECTORS
Three Directors are to be elected by a plurality of the shareholder
votes cast at the Meeting, to serve until the 2002 Annual Meeting of
Shareholders and until their successors shall be elected and shall qualify.
The Class I Directors, Kenneth B. Kaplan, Martin Allen and Daniel P. Howell,
are nominees at this Meeting. The Class II Directors, James A. Gordon and
Robert W. Bigony, are scheduled to serve as Directors until the 2000 Annual
Meeting. The Class III Directors, Arthur Don and Dennis E. Young, are
scheduled to serve until the 2001 Annual Meeting. The Articles of
Incorporation provide that three directors will serve in each of the three
classes. Effective December 31, 1998, Mr. Robert L. Growney resigned as a
director of the Company causing there to be only two directors in Class II.
In May 1999, the Board appointed Mr. Robert W. Bigony to replace Mr. Growney.
Also in May 1999, the Board filled the vacancy in Class I by appointing Mr.
Martin Allen as a Class I Director. M. Denis Connaghan resigned as a Class II
director effective July 21, 1999. There are now only two directors in Class
II and Class III. The Board is currently considering potential nominees for
these vacancies.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S)
DURING THE PAST FIVE YEARS DIRECTOR OF
NAME AGE AND OTHER PUBLIC DIRECTORSHIPS COMPANY SINCE
---- --- ------------------------------ -------------
<S> <C> <C> <C>
Kenneth B. Kaplan 46 Mr. Kaplan has been Chairman of the Board 1977
of Directors, President and Chief
Executive Officer of the Company since it
was founded in 1977. Mr. Kaplan was one
of the principal designers of the OS-9
real time operating system. Mr. Kaplan is
a trustee of Drake University and Buena
Vista University.
Martin Allen 46 Mr. Allen has served as Managing Director 1999
of European Operations since January 1996,
where he is responsible for overall
business activities for the Company's
United Kingdom, German and French
operations. From 1993 to 1995, he was
Managing Director of Microware U.K.
Daniel P. Howell 46 Mr. Howell is Senior Managing Director of 1994
Mesirow Private Equity Investments, Inc.,
an affiliate of the corporate general
partner of Mesirow Capital Partners VI, a
venture capital partnership. Mr. Howell
also is currently a director of IMNET
Systems, Inc.
</TABLE>
THE ENCLOSED PROXIES CANNOT BE VOTED FOR A GREATER NUMBER OF PERSONS
THAN THREE, THE NUMBER OF NOMINEES NAMED IN THIS PROXY STATEMENT.
3
<PAGE>
The Board of Directors knows of no reason why any of the foregoing
nominees will be unavailable to serve, but, in the event of any such
unavailability, the proxies received will be voted for such substitute
nominees as the Board of Directors may recommend. Information about the
Directors whose terms of office will continue after the Annual Meeting is set
forth in the following paragraphs:
DIRECTORS WHOSE TERMS EXPIRE IN 2000
JAMES A. GORDON, AGE 49 DIRECTOR SINCE 1994
Mr. Gordon currently is President of Gordon Management, Inc., an
investment management company based in Chicago, Illinois, which was founded
in 1992. Gordon Management, Inc. serves as the General Partner of Edgewater
Private Equity Fund, L.P., Edgewater Private Equity Fund II, L.P., and
Edgewater Private Equity Fund III, L.P., venture capital partnerships. From
1971 to 1992, Mr. Gordon was the President of Gordon Wholesalers, Inc., a
grocery and tobacco wholesaler.
ROBERT W. BIGONY, AGE 57 DIRECTOR SINCE 1999
Mr. Bigony was appointed a Director as the designee of Motorola pursuant
to the Stock and Warrant Purchase Agreement between the Company and Motorola
dated July 3, 1995. Mr. Bigony has been Senior Vice President and President,
North American Region, of Motorola, which he joined in 1966. Mr. Bigony also
serves on the Board of Directors of the American Electonics Association.
DIRECTORS WHOSE TERMS EXPIRE IN 2001
ARTHUR DON, AGE 45 DIRECTOR SINCE 1994
Mr. Don has been a member of the law firm of D'Ancona & Pflaum LLC,
Chicago, Illinois, counsel to the Company, since 1985.
DENNIS E. YOUNG, AGE 56 DIRECTOR SINCE 1994
Mr. Young is Executive Vice President and Chief Financial Officer and a
director of Norwest Financial Inc., a financial services firm headquartered
in Des Moines, Iowa, which he joined in 1984.
DIRECTOR COMMITTEES
The Board of Directors has established an Executive Committee, an Audit
Committee and a Compensation Committee.
The Executive Committee is empowered to act with all authority granted
to the Board of Directors between meetings, except with respect to those
matters required by Iowa law or by the Company's By-laws to be subject to the
power and authority of the full Board of Directors. Messrs. Kaplan (Chair)
and Gordon currently serve on the Executive Committee. During the 1999
fiscal year, the Executive Committee held one (1) meeting and acted by
unanimous consent on one (1) occasion.
The functions of the Audit Committee are to:
- recommend annually to the Board of Directors the appointment of the
independent public accountants of the Company
- to discuss and review the scope and the fees of the prospective
annual audit and to review the results thereof with the Company's
independent public accountants
4
<PAGE>
- review and approve non-audit services of the independent public
accountants
- review compliance with existing major accounting and financial
policies of the Company
- review the adequacy of the financial organization of the Company
- review management's procedures and policies relative to the adequacy
of the Company's internal accounting controls
Messrs. Young (Chair), Gordon and Howell currently serve on the Audit
Committee. During the 1999 fiscal year, the Audit Committee held one (1)
meeting.
The functions of the Compensation Committee are to:
- review and approve annual salaries and bonuses for all executive
officers
- review, approve and recommend to the Board of Directors the terms and
conditions of all employee benefit plans or changes thereto
- administer the Company's stock option plans
Messrs. Howell (Chair) and Gordon currently serve on the Compensation
Committee. During the 1999 fiscal year, the Compensation Committee held five
(5) meetings and acted by unanimous consent on three (3) occasions.
The Board of Directors held four (4) meetings during the fiscal year
ended March 31, 1999. Robert L. Growney attended two (2) out of the four (4)
Board meetings prior to his resignation in December, 1998. All of the other
Directors attended at least seventy-five percent of applicable Board and
Committee meetings.
The Company does not have a nominating committee. Nominations of
individuals for election to the Board of Directors of the Company must be
received by the Secretary of the Company no later than 60 days prior to a
regularly scheduled annual meeting of shareholders or within ten days after
receipt of notice of an annual meeting which is held at any other time.
DIRECTORS' COMPENSATION
Non-employee Directors are entitled to be paid $1,000 for attendance at
each committee or Board of Directors meeting attended in person, up to an
amount not to exceed $5,000 per Director per year. All Directors are
reimbursed for travel expenses incurred in attending meetings of the Board of
Directors. Certain Directors are also eligible to receive grants of stock
options.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth a summary of all compensation awarded,
earned or paid by the Company for its fiscal years ended March 31, 1997, 1998
and 1999 to the Company's Chief Executive Officer, the next three most highly
compensated executive officers and an individual for whom disclosure would
have been required but for the fact that he was not an executive officer at
March 31, 1999. These individuals are referred to as the "Named Executive
Officers."
----------------------
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION ($)
------------------ ALL OTHER
SALARY BONUS(1) COMPENSATION($)
------- -------- ---------------
<S> <C> <C> <C> <C>
KENNETH B. KAPLAN................................................ 1999 185,000 -- 4,411(2)
Chairman, President 1998 185,000 -- 6,593(2)
and Chief Executive Officer 1997 184,615 -- 7,809(2)
M. DENIS CONNAGHAN (3)........................................... 1999 200,000 -- 769(4)
Executive Vice President, Chief Operating Officer and Secretary 1998 174,000 9,000 90,600(5)
MARTIN ALLEN (6)................................................. 1999 132,272 128,142 --
Managing Director European Operations 1998 131,776 32,944 --
SHIGIHIRO ISHIBASHI (7).......................................... 1999 195,500 -- --
President and Representative Director, Microware Systems 1998 51,725 -- --
Kabushiki Kaisha
DEREK SOUTH (8).................................................. 1999 123,442 11,582 32,308(9)
Executive Vice President of Sales 1998 86,000 35,000 --
</TABLE>
- ---------------------
(1) Includes bonus and/or sales commissions earned in respective fiscal years.
(2) Other compensation includes 401(k) plan matching contributions, life
insurance premiums and personal tax preparation services paid by the
Company.
(3) Mr. Connaghan joined the Company on May 19, 1997 and resigned effective
July 21, 1999.
(4) Represents life insurance premiums paid by the Company.
(5) Represents relocation expenses and associated taxes paid by the Company.
(6) Mr. Allen became an executive officer for reporting purposes on
February 17, 1998.
(7) Mr. Ishibashi joined the Company in January 1998 and became an executive
officer for reporting purposes on February 17, 1998.
(8) Mr. South joined the Company on August 20, 1997 and resigned from the
Company on February 28, 1999.
(9) Consists of severance payments paid by the Company.
6
<PAGE>
STOCK OPTION PLANS
1995 PLAN. The Company's 1995 Stock Option Plan (the "1995 Plan") is
construed, interpreted and administered by the Compensation Committee. The
Compensation Committee has the discretion to determine the individuals to
whom options are granted, the number of shares subject to the options, the
exercise price of the options (which in the case of Non-Statutory Options (as
defined below) may be below fair market value of the Common Stock on the date
of grant), the period over which the options become exercisable, the term of
the options (including the period after termination of employment during
which an option may be exercised) and certain other provisions relating to
the options. Under the 1995 Plan, the Compensation Committee may grant
options to purchase up to 2,070,000 shares of Common Stock to management,
employees and directors of the Company. The 1995 Plan limits the grants to
any reporting executive officer to 200,000 option shares in any fiscal year.
Shares of Common Stock underlying options that expire unexercised will be
available for future option grants under the 1995 Plan. The number of shares
available for grant of options under the 1995 Plan and the number of shares
included in each outstanding option are subject to adjustment upon
recapitalizations, stock splits or other similar events that cause changes in
the Common Stock. The Company must retain sufficient authorized but unissued
shares of Common Stock to assure itself of its ability to perform its
obligations under the 1995 Plan.
The 1995 Plan provides for the grant of incentive stock options
("Incentive Options") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and non-statutory stock
options that do not qualify as incentive stock options under Section 422 of
the Code ("Non-Statutory Options"). The exercise price of each Incentive
Option must be at least equal to the fair market value of the Common Stock on
the date the Incentive Option is granted. The exercise price of Non-Statutory
Options may be less than the fair market value of the Common Stock on the
date the Non-Statutory Option is granted. If an Incentive Option is granted
to an employee who then owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any parent or
subsidiary corporation of the Company, the exercise price of the Incentive
Option must be at least equal to 110% of the fair market value of the Common
Stock on the date the Incentive Option is granted.
Generally, for federal income tax purposes, Non-Statutory Options will
not result in any taxable income to the optionee at the time of grant. The
optionee will generally realize ordinary income, however, at the time of
exercise of the option, in an amount measured by the excess of the fair
market value of the optioned shares at the time of exercise over the option
price, regardless of whether the option price is paid in cash or shares.
Where ordinary income is recognized in connection with the exercise of an
option, the Company will be entitled to a deduction in the amount of ordinary
income so recognized, provided, among other things, that the Company complied
with applicable tax withholding requirements. No income is recognized for
federal income tax purposes when an Incentive Option is exercised and no
deduction is available to the Company. Incentive Options will be taxed as
Non-Statutory Options if shares purchased upon exercise of the Incentive
Option are sold within one year after the exercise or within two years after
the date the Incentive Option is granted.
The maximum term of options granted under the 1995 Plan generally will
be 10 years, but with respect to an Incentive Option granted to an employee
who then owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company, the maximum term of the option
will be five years. Subject to that limitation, the Committee has discretion
to decide the period over which options may be vested and exercised. In
addition, the Committee may specify that an option will terminate prior to
the end of its stated term upon termination of employment (which includes for
this purpose termination of a consulting relationship in the case of a
consultant), disability or death. Options which contain vesting schedules
ordinarily will become fully exercisable in the event of disability or death.
Options are not transferable, except by will or pursuant to the laws of
descent and distribution, and are exercisable only by the option holder
during his lifetime or, in the event of disability or death, by the option
holder's guardian or legal representative. Option agreements issued under the
1995 Plan may (but need not) provide that the vesting of options will be
accelerated upon a "Change in Control" of the Company. A Change
7
<PAGE>
in Control is deemed to have occurred if (a) a person (as such term is used
in Section 13(d) of the Securities Exchange Act of 1934 (the "Exchange Act"))
becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, in one or more transactions, of shares of
Common Stock representing 50% or more of the total number of votes that may
be cast by all shareholders of the Company voting as a single class, without
the approval or consent of the Board of Directors, (b) there is a
consolidation or merger of the Company in which the Company is not the
surviving corporation or (c) a plan or proposal for the liquidation or
dissolution of the Company is adopted.
1989, 1991 AND 1992 STOCK OPTION PLANS. The Company has established
1989, 1991 and 1992 stock option plans pursuant to which it has granted
options to certain employees to purchase shares of Common Stock. As of July
13, 1999, all of the options granted under the 1989 plan had been exercised
or had expired. As of July 13, 1999, the 1991 and 1992 plans had outstanding
options for 122,000 and 159,100 shares of Common Stock, respectively, at
exercise prices of $0.9375 and $1.3125 per share, respectively. All options
granted under these plans are Non-Statutory Options and the Company's
authority to issue additional options under these plans has terminated.
Options granted under the 1991 and 1992 plans expire 10 years from their date
of grant and are exercisable in accordance with the terms of individual stock
option agreements.
OPTION GRANTS AND EXERCISES IN LAST FISCAL YEAR
The following tables provide certain specified information concerning
options granted to, exercised by and held at March 31, 1999 under the 1991,
1992 and 1995 stock option plans, by each Named Executive Officer of the
Company.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
POTENTIAL REALIZABLE
% OF TOTAL VALUE OF ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SHARES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OR OPTION TERM
OPTIONS FISCAL BASE PRICE EXPIRATION -----------
NAME GRANTED(#) YEAR ($ PER SHARE) DATE 5%($) 10%($)
- ---- ---------- ---- ------------- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Kenneth B. Kaplan . . 0 N/A N/A N/A N/A N/A
M. Denis Connaghan. . 66,000 5.65 5.25 4/15/08 217,912 552,232
Martin Allen. . . . . 25,000 2.14 1.94 12/21/08 30,420 77,167
Martin Allen. . . . . 20,000 1.71 2.56 12/21/08 11,936 49,333
Shigehiro Ishibashi . 25,000 2.14 1.94 12/21/08 30,420 77,167
Shigehiro Ishibashi . 35,000 3.00 2.56 12/21/08 20,888 86,334
Derek South . . . . . 10,000 0.86 5.25 02/28/99 N/A N/A
</TABLE>
8
<PAGE>
AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES MARCH 31, 1999 (#) MARCH 31, 1999 ($)(*)
ACQUIRED ON VALUE ------------------ ---------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth B. Kaplan............ 0 N/A 0 0 N/A N/A
M. Denis Connaghan........... 0 N/A 40,000 226,000 0 0
Martin Allen................. 0 N/A 0 45,000 N/A 0
Shigehiro Ishibashi.......... 0 N/A 0 60,000 N/A 0
Derek South.................. 0 N/A 0 0 N/A N/A
</TABLE>
- ---------------
(*) Calculated on the basis of the fair market value of the underlying
securities as of March 31, 1999 of $1.875 per share, minus the aggregate
exercise price.
No compensation intended to serve as an incentive for performance to
occur over a period longer than one fiscal year was paid or accrued pursuant
to a long-term incentive plan during the last fiscal year to any of the
persons named in the Summary Compensation Table. The Company does not have
employment contracts with any of the persons named in the Summary
Compensation Table or any defined benefit or actuarial plan under which
benefits are determined primarily by final compensation or average final
compensation and years of service.
In December 1998, the Company offered to grant options to purchase
20,000, 35,000 and 22,500 shares of common stock, respectively, to Messrs.
Allen, Ishibashi and Thompson with a new price and revised vesting schedule,
in exchange for Messrs. Allen, Ishibashi and Thompson agreeing to the
cancellation of their options to purchase 20,000, 35,000 and 22,500 shares of
common stock, respectively. The new exercise price is $2.56 per share for
all of the new options. The new grants have an expiration date of December
21, 2008.
The following table includes information concerning the cancellation and
reissuance of options held by the Company's executive officers since April
1996, the date of the Company's initial public offering of securities.
OPTIONS/SAR REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
SECURITIES ORIGINAL
UNDERLYING OPTION TERM
NUMBER OF MARKET PRICE OF EXERCISE PRICE REMAINING AT
OPTIONS/SARs STOCK AT TIME AT TIME OF NEW DATE OF
REPRICED OR OF REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE AMENDED (#) AMENDMENT ($) AMENDMENT ($) PRICE ($) AMENDMENT
- ---- ---- ----------- ------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Martin Allen ........... 12/21/98 5,000 1.94 7.00 2.56 9 yrs.
Martin Allen ........... 12/21/98 5,000 1.94 6.25 2.56 9 yrs.
Martin Allen ........... 12/21/98 10,000 1.94 5.25 2.56 10 yrs.
Shigehiro Ishibashi .... 12/21/98 25,000 1.94 6.25 2.56 10 yrs.
Shigehiro Ishibashi .... 12/21/98 10,000 1.94 5.25 2.56 10 yrs.
Kent Thompson .......... 12/21/98 12,500 1.94 6.25 2.56 9 yrs.
Kent Thompson .......... 12/21/98 10,000 1.94 7.00 2.56 9 yrs.
Kent R. Kelderman* ..... 4/16/98 20,000 5.25 15.50 10.00 8 yrs.
</TABLE>
- -------------------
*Kent Kelderman resigned from the Company in July 1998.
9
<PAGE>
PROFIT SHARING PLAN
Effective April 1, 1994, the Company established a 401(k) contributory
profit sharing plan for substantially all full-time employees. Under the
contributory plan, the Company provides matching cash contributions based on
qualified employee contributions, as well as certain other contributions.
Contributions to the contributory plan for the fiscal year ended March 31,
1999 were $114,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee was formed in May 1994, and the members
currently are Messrs. Howell (Chairman) and Gordon. Affiliates of Messrs.
Howell and Gordon each hold more than 5% of the Common Stock. See "Holdings
of Shareholders, Directors and Executive Officers." Neither of the members of
the Compensation Committee is eligible to receive options under the Company's
existing stock option plans.
No member of the Compensation Committee serves as a member of the board
of directors or compensation committee of any entity that has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's Directors and
executive officers, and persons who own more than 10% of the Company's Common
Stock, to file with the Securities and Exchange Commission (the "SEC")
initial reports of beneficial ownership and reports of changes in beneficial
ownership of Common Stock of the Company. Officers, Directors and greater
than 10% shareholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely upon a review of the copies of such reports furnished to
the Company and written representations from the executive officers and
Directors of the Company, the Company believes all Section 16(a) filing
requirements were complied with during fiscal 1999.
CERTAIN TRANSACTIONS
During the fiscal year ended March 31, 1999, Microware received total
revenues of $2,227,000 under various license and service agreements with
Motorola, which holds 1,526,232 shares of Common Stock of the Company and
warrants to purchase an additional 1,526,232 shares. The Company also
routinely purchases various hardware products from Motorola used in product
development.
The Company believes that all transactions discussed or disclosed above
have been, and the Company's Board of Directors has adopted a policy stating
that any future transactions with the Company's officers, Directors,
affiliates or controlling shareholders will be, on terms which are considered
to be no less favorable to the Company than those obtainable in arm's length
transactions with unaffiliated third parties.
10
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative
total shareholder return on the Company's Common Stock during the period from
the Company's initial public offering on April 2, 1996 through March 31,
1999, with the cumulative total return on the Nasdaq Composite Index and the
Nasdaq Computer & Data Processing Index over the same period.
The graph below assumes the investment of $100 in the Company's Common
Stock and in each of the other indexes on April 3, 1996, with reinvestment of
all dividends.
COMPARISON OF TOTAL RETURN AMONG MICROWARE SYSTEMS CORPORATION,
THE NASDAQ COMPOSITE INDEX AND NASDAQ COMPUTER & DATA PROCESSING INDEX
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
04/03/96 03/31/97 03/31/98 03/31/99
- --------------------------------------------------------------------------------------------
Microware Systems Corporation 100.00 63.75 48.75 18.75
- --------------------------------------------------------------------------------------------
Nasdaq Computer & Data Processing Index 100.00 108.02 188.99 306.91
- --------------------------------------------------------------------------------------------
Nasdaq Composite Index 100.00 109.62 166.49 223.87
- --------------------------------------------------------------------------------------------
</TABLE>
[GRAPH]
11
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This Report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates the information contained herein by reference, and
shall not otherwise be deemed filed under those Acts.
The Compensation Committee of the Board of Directors of the Company is
composed of two non-employee Directors, Daniel P. Howell (Chair) and James A.
Gordon. The Compensation Committee is responsible for setting and
administering the policies that govern the compensation of the Company's
executive officers. These policies are based on the premise that the
shareholders' interests are best served by recruiting and retaining the most
talented people in the industry. The Compensation Committee looks to provide
competitive compensation packages that enable the Company to attract key
executives, to integrate compensation with the Company's business objectives
and to tie an individual executive's compensation with overall Company
performance. The Compensation Committee also approves and recommends to the
Board of Directors the terms and conditions of all employee benefit plans or
changes thereto and administers the Company's stock option plans.
The Company's compensation package consists of three basic components:
base salary, cash bonuses and stock-based incentive compensation.
BASE SALARY
The base salary paid to the Company's executive officers is established
to be in line with other software companies deemed by the Compensation
Committee to be of similar size and prospects (the "peer group"), while
taking into account the experience and contribution of individual members of
management. The Compensation Committees also takes into consideration in
setting salaries for existing management the anticipated salary requirements
of prospective members of the Company's management team. Individual salary
increases during the 1999 fiscal year were based on the performance of the
Company and of each individual executive, as observed and recommended by the
Company's Chief Executive Officer, and on observed salary levels within the
peer group. Salary adjustments for the Company's Chief Executive Officer and
other executive officers are subject to the review and approval of the full
Board of Directors, based upon the recommendation of the Compensation
Committee.
CASH BONUSES
The Company believes it is important to provide additional cash
incentives to executives who make extraordinary contributions to the Company.
In determining the amount to be paid as bonuses to various executives during
the 1999 fiscal year, the Committee considered the performance of the Company
in reaching its revenue and profitability goals, the strategic
accomplishments of respective executives critical to the long-term success of
the Company, and the recommendations of the Chief Executive Officer.
LONG TERM INCENTIVES
The Compensation Committee makes option grants after consideration of
recommendations made by the Company's Chief Executive Officer.
Recommendations for option amounts are based upon relative positions and
responsibilities of various officers. The Compensation Committee believes
that the long-term nature of the options encourages officers to remain with
the Company in order to realize the options' underlying economic value. Also,
the Compensation Committee feels it is appropriate to grant options to newly
hired officers in order to help them embrace the Company's goal of increasing
shareholder value.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The annual salary and bonus of the Company's Chief Executive Officer are
determined in consultation with Mr. Kaplan. In fiscal 1999, Mr. Kaplan
received a salary of $185,000 and no cash bonus. These amounts reflect the
Committee's philosophy as described above.
12
<PAGE>
The Compensation Committee regularly evaluates its policies with respect
to executive compensation. The Compensation Committee believes that a
combination of salary, bonus, and stock options provides a mix of short-and
long-term rewards necessary to attract, motivate and retain an excellent
management team.
OPTION REPRICINGS
During the 1999 fiscal year, the Compensation Committee approved the
cancellation and reissuance of certain options granted to Messrs. Allen,
Ishibashi and Thompson. The decision to replace the options was made in
order to ensure that such options remained as an effective incentive to the
performance of the grantees. All replacement options were priced at not less
than the market price on the effective date of their grant.
COMPLIANCE WITH SECTION 162(m) OF THE INTERNAL REVENUE CODE OF 1986
The Company intends to comply with the requirements of Section 162(m) of
the Internal Revenue Code of 1986 for the 2000 fiscal year. The Company does
not expect cash compensation for the 1999 fiscal year to be in excess of
$1,000,000 or consequently affected by the requirements of Section 162(m).
The Compensation Committee
Daniel P. Howell, Chair
James A. Gordon
13
<PAGE>
PROPOSAL TO ADOPT THE 1999 STOCK PURCHASE PLAN
GENERAL. At the Annual Meeting, the shareholders will be asked to
approve the adoption of an Employee Stock Purchase Plan (the "Plan") pursuant
to which all employees would be eligible to purchase shares of Common Stock,
by payroll deduction, at a 15% discount. The following is a summary of the
principal provisions of the Plan, but it is not intended to be a complete
description of all the terms and provisions of the Plan, a copy of which is
attached hereto as Appendix A. On July 28, 1999, the Plan was adopted by the
Board of Directors. Although shareholder approval is being sought at this
time, the Company's Board of Directors reserves the right to defer
implementation of the Plan until a later date, or to decline to implement the
Plan. It is proposed that a total of 500,000 shares of Common Stock be
reserved for issuance thereunder.
ADMINISTRATION. The Plan will be administered by the Compensation
Committee. The Committee has the authority to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to it, and to
make all other determinations necessary or advisable in administering the
Plan.
PURPOSE. The purpose of the Plan is to provide eligible employees of
the Company, and of subsidiaries of the Company that have been designated by
the Committee as eligible to participate in the Plan (each a "Subsidiary"),
with an opportunity to purchase Common Stock through payroll deductions and
voluntary cash contributions. The Plan is neither subject to the provisions
of ERISA nor qualified under Section 401 of the Code. Payroll deductions and
other contributions are accumulated during, and stock is purchased as of the
last day of, "Offering Periods". Generally, an "Offering Period" is a
three-month period commencing on the first day of a calendar quarter and
ending on the last day thereof.
ELIGIBILITY. All employees of the Company and each Subsidiary are
eligible to participate in the Plan, except for employees (i) who are not
employed on the first day of the Offering Period or (ii) who, directly or by
attribution, own or hold options to purchase Common Stock equaling five
percent (5%) or more of the combined voting power or value of all classes of
stock of the Company or any subsidiary. Eligible Employees may participate
in the Plan beginning on the first day of the first Offering Period which
coincides with or which next follows their date of hire by the Company or any
Subsidiary and for as long as such person remains an Eligible Employee. An
Eligible Employee may not participate in the Plan to the extent that
participation would permit the Eligible Employee to purchase stock under all
employee stock purchase plans of the Company and its subsidiaries in any
calendar year in an amount which, in the aggregate, would exceed $25,000
based on the fair market value of such stock.
Participation in the Plan is voluntary and is dependent upon each
Eligible Employee's election to participate (each Eligible Employee electing
to participate in the Plan is referred to herein as a "Participant") and his
or her determination as to the level of payroll deductions or cash
contributions, subject to the Plan limits. Accordingly, future purchases
under the Plan are not determinable.
ENROLLMENT. Each Participant may direct the Company to deduct a
specified whole dollar amount of at least $25.00 per payroll period, subject
to maximums of $15,000 and 15% of the Participant's eligible compensation.
In addition, each Participant, subject to the aggregate dollar limitation
specified in the prior sentence, may elect to make a cash contribution by
delivery of good funds to the Company. The Participant may increase or
decrease his or her contribution election once per calendar quarter, or may
discontinue participation in the Plan at any time. Eligible compensation
includes: all compensation reported on IRS Form W-2; any amounts contributed
to, or elective deferrals made to , any qualified cash or deferred
arrangement under Section 401(k) of the Code maintained by the Company or any
subsidiary; and any employee contribution to a plan maintained by the Company
or any subsidiary that is intended to meet the requirements of Section 125 of
the Code. A Participant who has discontinued participation may participate
again in any subsequent calendar quarter. Participants continue to
participate in the Plan each quarter on the same basis unless a Participant
notifies the Company to the contrary.
PURCHASE OF COMMON STOCK. All payroll deductions and cash contributions
of a Participant during an Offering Period shall be used to purchase Common
Stock on the last day of such Offering Period. Each Participant shall be
deemed to have been granted a nontransferable option to purchase Common Stock
on the first day of the Offering Period and to have exercised on the last day
of the Offering Period such option and purchased the number
14
<PAGE>
of shares of Common Stock determined by dividing the amount of the
Participant's contributions for such Offering Period by the then-current
purchase price for such shares. The purchase price shall be eighty-five
percent (85%) of the lesser of the fair market value of a share of Common
Stock on the first day of the Offering Period or the fair market value of a
share of Common Stock or the last day of the Offering Period.
All Common Stock purchased under the Plan shall be held in an account
administered by a custodian. The account will be governed by the terms and
conditions of an agreement between the Company and the custodian. Each
Participant is the beneficial owner of the Common Stock held in the
Participant's account and may elect to withdraw whole shares and have a stock
certificate issued to him or her. All cash dividends paid on Common Stock
held in a Participant's account shall be invested in Common Stock as
additional voluntary cash contributions.
TERMINATION OF EMPLOYMENT; LEAVE OF ABSENCE. Upon termination of the
Participant's employment with the Company and its subsidiaries, all Common
Stock credited to such Participant's account and any uninvested cash credited
to the Participant pursuant to payroll deductions or cash contributions shall
be distributed to the Participant or, in the event of the Participant's
death, to his or her estate as soon as practicable. In general, a
Participant on a sick leave, military leave of absence or other approved
leave of absence will continue to be a Participant in the Plan provided that
the leave is not in excess of 90 days.
AMENDMENT AND TERMINATION OF THE PLAN. Subject to the provisions of
Section 423 of the Code, the Board of Directors has the power to amend or
terminate the Plan in its sole discretion at any time in any respect, except
that any amendment may not retroactively impair or otherwise adversely affect
the rights of any person to benefits that have already accrued under the
Plan. In addition, no amendment may be made without the approval of the
shareholders within 12 months of the adoption of the amendment if the
amendment would (i) increase the number of shares issued under the Plan, (ii)
change the class of employees eligible to participate in the Plan, or (iii)
constitute an amendment for which stockholder approval is requested in order
to comply with Rule 16b-3 (or any successor rule) of the Exchange Act.
CERTAIN FEDERAL INCOME TAX INFORMATION. Set forth below is a general
summary of certain of the principal federal income tax consequences to the
Company and Participants of participation in the Plan. The following
discussion is general in nature and is not intended to be a complete analysis
of all potential tax consequences to the Company or Participants of
participation in the Plan. This discussion is based on the Code as currently
in effect.
The Plan is intended to qualify under Sections 421 and 423 of the Code.
Under Section 423 of the Code, a Participant who purchases Common Stock
through the Plan will not recognize any income, and the Company will not be
entitled to a deduction for tax purposes, at the time of the purchase for the
difference between the fair market value of the Common Stock at the time of
purchase and the purchase price (i.e. the discount below fair market value).
Generally, if the Participant holds the Common Stock for at least two years
after the date of purchase, the Participant will include as compensation in
the Participant's taxable income at the time of sale or other taxable
disposition of the Common Stock the lesser of: (i) the amount by which the
fair market value of the Common Stock when purchased exceeds the purchase
price (i.e., the discount below fair market value); or (ii) the amount, if
any, by which the Common Stock's fair market value at the time of the sale or
other taxable disposition exceeds the purchase price. The Participant's tax
basis in the Common Stock will be increased by the amount recognized as
compensation and any further gain recognized on the sale or other taxable
disposition will be treated, under current tax rules, as long-term capital
gain. In general, no deduction will be allowed to the Company with respect
to any such disposition. However, if the Participant disposes of shares of
Common Stock acquired under the Plan within two years after the date of
purchase (a "disqualifying disposition"), the Participant will recognize
compensation income, and the Company (or one of its Subsidiaries) will be
entitled to a deduction for tax purposes, in the amount of the excess of the
fair market value of the shares on the date of purchase over the purchase
price (i.e., the discount below fair market value) regardless of the amount
received by the Participant in connection with the disqualifying disposition.
The Participant's tax basis in the shares disposed of will be increased by
the amount recognized as compensation and any further gain or loss realized
upon the disqualifying disposition will be short-term or long-term capital
gain or loss, depending upon the length of time between the purchase and the
disqualifying disposition of the shares.
If an affected Participant's total compensation from the Company
(including compensation related to purchase of Common Stock under the Plan)
exceeds $1,000,000, such compensation in excess of $1,000,000 may
15
<PAGE>
not be deductible by the Company under Section 162(m) on the Code. Affected
Participants are generally the Company's Chief Executive Officer and the four
most highly compensated executive officers of the Company (other than the
Chief Executive Officer) at the end of the Company's taxable year. Excluded
from the calculation of total compensation for this purpose is compensation
that is ""performance-based" within the meaning of Section 162(m) of the
Code. It is expected that compensation realized upon the purchase of Common
Stock under the Plan may not be "performance-based", and, therefore, that
such compensation will be deductible in accordance within the limits of
Section 162(m) of the Code.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE PROPOSAL TO
ADOPT THE 1999 STOCK PURCHASE PLAN.
--------------------
PROPOSAL TO RATIFY SELECTION OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The firm of KPMG Peat Marwick LLP has audited the books and records of
the Company since 1984 and the Board of Directors desires to continue the
services of this firm for the current fiscal year ending March 31, 2000.
Accordingly, the Board of Directors will recommend at the Meeting that the
shareholders ratify the appointment of the firm of KPMG Peat Marwick LLP to
audit the accounts of the Company for the current fiscal year.
Representatives of that firm are expected to be present at the Meeting with
the opportunity to make a statement if they desire to do so and are expected
to be available to respond to appropriate questions.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF RATIFICATION OF
THE SELECTION OF KPMG PEAT MARWICK LLP.
--------------------
MISCELLANEOUS
The Company's 1999 Annual Report to Shareholders is being mailed to
shareholders contemporaneously with this Proxy Statement.
COST OF SOLICITATION
All expenses incurred in the solicitation of proxies will be borne by
the Company. In addition to the use of the mails, proxies may be solicited on
behalf of the Company by directors, officers and employees of the Company or
by telephone or telecopy. The Company will reimburse brokers and others
holding Common Stock as nominees for their expenses in sending proxy material
to the beneficial owners of such Common Stock and obtaining their proxies.
PROPOSALS OF SECURITY HOLDERS
Proposals of shareholders intended to be presented at the 2000 Annual
Meeting of Shareholders under SEC Rule 14a-8 must be made in accordance with
the Company's By-laws, and must be received by the Secretary of the Company
at the Company's principal executive offices for inclusion in the Company's
Proxy Statement and form of proxy relating to that meeting no later than
March 31, 2000.
16
<PAGE>
Notice of shareholder matters intended to be submitted at the next
annual meeting outstide the processes of Rule 14a-8 will be considered
untimely if not received by the Company by June 14, 2000.
By order of the Board of Directors
GEORGE E. LEONARD
SECRETARY
Date: July 29, 1999
17
<PAGE>
APPENDIX A
MICROWARE SYSTEMS CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
1. ESTABLISHMENT OF PLAN. Microware Systems Corporation, an Iowa
corporation (the "Company"), proposes to grant options for purchase of the
Company's Common Stock to eligible employees of the Company and its
Subsidiaries (as hereinafter defined) pursuant to this Employee Stock
Purchase Plan (this "Plan"). For purposes of this Plan, "Parent Corporation"
and "Subsidiary" (collectively "Subsidiaries") shall have the same meanings
as "parent corporation" and "subsidiary corporation" in Sections 424(e) and
424(f) respectively of the Internal Revenue Code of 1986, as amended (the
"Code"). The Company intends this Plan to qualify as an "employee stock
purchase plan" under Section 423 of the Code (including any amendments to or
replacements of such Section) and this Plan shall be so construed. Any term
not expressly defined in this Plan but defined for purposes of Section 423 of
the Code shall have the same definition herein.
2. SHARES RESERVED FOR ISSUANCE. A total of 500,000 shares of the
Company's Common Stock are reserved for issuance under this Plan. Such
number shall be subject to adjustments effected in accordance with Section 15
of this Plan.
3. PURPOSE. The purpose of this Plan is to provide employees of the
Company and Subsidiaries designated by the Board of Directors of the Company
(the "Board") as eligible to participate in this Plan with a convenient means
of acquiring an equity interest in the Company through Cash Contributions (as
hereinafter defined) and payroll deductions to enhance such employees' sense
of participation in the affairs of the Company and Subsidiaries and to
provide an incentive for continued employment.
4. ADMINISTRATION. This Plan shall be administered by a committee
appointed by the Board (the "Committee") consisting of at least two (2)
members of the Board, each of whom is a Disinterested Person as defined in
Rule 16b-3(d) of the Securities Exchange Act of 1934 (the "Exchange Act") and
an "Outside Director" within the meaning of Section 162(m) of the Code. As
used in this Plan, references to the "Committee" shall mean either such
committee or the Board if no committee has been established. Committee
members who are not Disinterested Persons may not vote on any matters
affecting the administration of this Plan, but any such member may be counted
for determining the existence of a quorum at any meeting of the Committee.
Subject to the provisions of this Plan and the limitations of Section 423 of
Code or any successor provision in the Code, all questions of interpretation
or application of this Plan shall be determined by the Committee and its
decisions shall be final and binding upon all participants. Members of the
Board shall receive no compensation for their services in connection with the
administration of this Plan, other than standard fees as established from
time to time by the Board for services rendered by Board members serving on
Board Committees. All expenses incurred in connection with the
administration of this Plan shall be paid by the Company.
5. ELIGIBILITY. Any employee of the Company or the Subsidiaries is
eligible to participate in an Offering Period (as hereinafter defined) under
this Plan except the following:
a. Employees who are not employed by the Company or Subsidiaries as
of the beginning of such Offering Period;
b. Employees who, together with any other person whose stock would
be attributed to such employee pursuant to Section 424(d) of the Code, own
stock or hold options to purchase stock possessing five percent (5%) or
more of the total combined voting power or value of all classes of stock of
the Company or any of its Subsidiaries or who, as a result of being granted
an option under this Plan with respect to such Offering Period, would own
stock or hold options to purchase stock possessing five percent (5%) or
more of the total combined voting power or value of all classes of stock of
the Company or any of its Subsidiaries.
<PAGE>
6. OFFERING DATES. The offering periods of this Plan (each an
"Offering Period") shall be of three (3) months duration commencing on
January 1, April 1, July 1, and October 1 of each year and ending on March
31, June 30, September 30 and December 31 of each year. Each Offering Period
shall consist of one (1) three (3) month purchase period (individually, a
"Purchase Period") during which payroll deductions of participants are
accumulated under this Plan and aggregated with their respective Cash
Contributions (as hereinafter defined), if any. The first business day of
each Offering Period is referred to as the "Offering Date" The last business
day of each Purchase Period is referred to as the "Purchase Date". The Board
shall have the power to change the duration of Offering Periods or Purchase
Periods with respect to future offerings without stockholder approval if such
change is announced at least fifteen (15) days prior to the scheduled
beginning of the first Offering Period or Purchase Period to be affected.
7. PARTICIPATION IN THIS PLAN. Eligible employees may become
participants in an Offering Period under this Plan on the first Offering Date
after satisfying the eligibility requirements by delivering to the Company's
Human Resources Department (the "Human Resources Department") not later than
the close of business of the first day of the Offering Period, or such other
date specified by the Committee, a Subscription Agreement in a form
designated by the Company setting forth payroll deductions and Cash
Contributions authorized in Section 10 of this Plan.
An eligible employee who does not deliver a subscription agreement to
the Human Resources Department by such date after becoming eligible to
participate in such Offering Period shall not participate in that Offering
Period or any subsequent Offering Period, unless such employee enrolls in
this Plan by filing a subscription agreement with the Human Resources
Department not later than the commencement of a subsequent Offering Period or
such other date specified by the Committee. Once an employee becomes a
participant in an Offering Period, such employee will automatically
participate in the Offering Period commencing immediately following the last
day of the prior Offering Period unless the employee withdraws or is deemed
to withdraw from this Plan or terminates further participation in the
Offering Period as set forth in Section 12 below. Such participant is not
required to file any additional subscription agreement in order to continue
participation in this Plan. Notwithstanding any provision to the contrary,
Cash Contributions will be permitted in any Offering Period.
8. GRANT OF OPTION ON ENROLLMENT. Enrollment by an eligible employee
in this Plan with respect to an Offering Period will constitute the grant (as
of the Offering Date) by the Company to such employee of an option to
purchase on the Purchase Date up to that number of shares of Common Stock of
the Company determined by dividing (a) the amount accumulated in such
employee's payroll deduction account during such Purchase Period plus all
Cash Contributions by (b) the lower of (i) eighty-five percent (85%) of the
fair market value of a share of the Company's Common Stock on the Offering
Date (but in no event less than the par value of a share of the Company's
Common Stock), or (ii) eighty-five percent (85%) of the fair market value of
a share of the Company's Common Stock on the Purchase Date (but in no event
less than the par value of a share of the Company's Common Stock); PROVIDED,
HOWEVER, that the number of shares of the Company's Common Stock subject to
options granted pursuant to this Plan shall not exceed the lesser of (a) the
maximum number of shares set by the Board pursuant to Section 11(c) below
with respect to the applicable Offering Period, or (b) with respect to any
participant, the maximum number of shares which may be purchased pursuant to
Section 11(b) below with respect to the applicable Offering Period. The fair
market value of a share of the Company's Common Stock shall be determined as
provided in Section 9 hereof.
9. PURCHASE PRICE. The purchase price per share at which a share of
Common Stock will be sold in any Offering Period shall be eighty-five percent
(85%) of the lesser of:
a. The fair market value on the Offering Date; or
b. The fair market value on the Purchase Date;
PROVIDED, HOWEVER, that in no event may the purchase price per share of the
Company's Common Stock be below the par value per share of the Company's
Common Stock. For purposes of this Plan, the term "fair market value" on a
given date shall mean the fair market value of the Company's Common Stock as
<PAGE>
determined by the Board in its sole discretion, exercised in good faith,
PROVIDED, HOWEVER, that where there is a public market for the Common Stock,
the fair market value per share shall be the average of the last reported bid
and asked prices of the Common Stock on the last trading day prior to the
date of determination (or the average closing price over the number of
consecutive trading days preceding the date of determination as the Board
shall deem appropriate), or, in the event the Common Stock is listed on a
stock exchange or on any Nasdaq listing, the fair market value per share
shall be the closing price on such exchange or quotation system on the last
trading date prior to the date of determination (or the average closing price
over the number of consecutive trading days preceding the date of
determination as the Board shall deem appropriate).
10. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS, ISSUANCE
OF SHARES.
a. The purchase price of the shares for each respective
participant shall be the aggregate of (a) cash contributions of up to
$15,000 delivered to the Company during any Offering Period (the "Cash
Contributions"); and (b) regular payroll deductions made during each
Offering Period. The aggregated amount of the Cash Contributions and
accumulated payroll deductions shall not be permitted to exceed $15,000
during any Offering Period or fiscal year. The deductions are made in
specified whole dollar amounts with a pay period minimum no less than
twenty five dollars ($25.00) not to exceed fifteen percent (15%) of a
participant's compensation during any Offering Period or any lower limit
set by the Committee. Compensation shall mean all W-2 compensation,
including, but not limited to base salary, wages, and overtime;
PROVIDED, HOWEVER, that for purposes of determining a participant's
compensation, any election by such participant to reduce his or her
regular cash remuneration under Sections 125 or 401(k) of the Code shall
be treated as if the participant did not make such election. Payroll
deductions shall commence on the first payday following the Offering
Date and shall continue to the end of the Offering Period unless sooner
altered or terminated as provided in this Plan.
b. A participant may lower or increase the rate of payroll
deductions during an Offering Period by filing with the Human Resources
Department a new authorization for payroll deductions in which case the new
rates shall become effective for the next payroll period commencing more
than fifteen (15) days after the Human Resources Department's receipt of
the authorization and shall continue for the remainder of the Offering
Period unless changed as described below. Such changes in the rate of
payroll deductions may be made at any time during an Offering Period, but
not more than one (1) change may be made effective during any three month
period. A participant may increase or decrease the rate of payroll
deductions for any subsequent Offering Period by filing with the Human
Resources Department a new authorization for payroll deductions not later
than the beginning of such Offering Period.
c. Cash Contributions must be received by the Company in the form of
a cashiers check, certified check or wire transfer no later than two
business days prior to the end of an Offering Period and no increase will
be permitted although (i) one decrease will be permitted and (ii) Cash
Contributions, may be withdrawn through withdrawal from the Plan as set
forth in Section 12.
d. All payroll deductions and all Cash Contributions are credited to
the respective participant's account established under this Plan and are
deposited with the general funds of the Company. No interest accrues on
such amounts. All amounts received or held by the Company under this Plan
may be used by the Company for any corporate purposes, and the Company
shall not be obligated to segregate such amounts.
e. On each Purchase Date, so long as this Plan remains in effect and
provided that the participant has not submitted a signed and completed
withdrawal form before that date which notifies the Company that the
participant wishes to withdraw from the Offering Period under this Plan and
have all payroll deductions and Cash Contributions, if any, in the account
maintained on behalf of the participant as of that date returned to the
participant, the Company shall apply the funds then in the participant's
account to the purchase of whole and fractional shares of Common
<PAGE>
Stock reserved under the option granted to such participant with respect
to the Offering Period to the extent that such option is exercisable on
the Purchase Date. The Purchase Price per share shall be as specified in
Section 9 of this Plan. As provided in Sections 12 and 13 hereof, no
Common Stock shall be purchased on a Purchase Date on behalf of any
employee whose participation in this Plan has terminated prior to such
Purchase Date.
f. Shares purchased hereunder shall be initially maintained in
separate stock accounts for the participants at a brokerage firm, bank or
other administrator (the "Administrator") selected by, and pursuant to an
arrangement with the Company. The Administrator shall maintain accounts
for the benefit of the participants which shall reflect each participant's
interest in the shares of Company Stock held by the Administrator for the
benefit of each participant. Any participant may elect to have the Company
Stock purchased under the Plan on such participant's behalf withdrawn from
his or her account and certificates issued directly to the participant.
Any election under this paragraph shall be on the forms provided by the
Committee and shall be issued in accordance with this Section. In the
event that Company Stock under the Plan is issued directly to a
participant, the Company will deliver to each participant a stock
certificate or certificates issued in such participant's name, or the name
of the participant and another person designated by the participant as
joint tenants with rights of survivorship, for the number of whole shares
of Company Stock being withdrawn from the participant's account, as soon as
practicable after the participant notifies the Administrator of his or her
election to withdraw the shares. Only certificates representing full
shares of Company Stock will be issued to a participant under this
paragraph. In the event of the complete withdrawal of shares from a
participant's account, the participant shall receive that number of full
shares in his or her account and cash in lieu of fractional shares. If and
to the extent provided by the Committee, for so long as such shares are
maintained in accounts, all dividends paid with respect to such shares may
be credited to each participant's account and be automatically reinvested
in Company Stock as a Cash Contribution. The Committee may provide that
transaction fees incurred with respect to dividend reinvestment be paid by
either the Company or the participant.
g. During a participant's lifetime, such participant's option to
purchase shares hereunder is exercisable only by him or her. The
participant will have no interest or voting right in shares covered by his
or her option until such option has been exercised. Shares to be delivered
to a participant under this Plan will be registered in the name of the
participant or in the name of the participant and, if so designated, his or
her spouse.
11. LIMITATIONS ON SHARES TO BE PURCHASED.
a. No employee shall be entitled to purchase stock under this Plan
at a rate which, when aggregated with his or her rights to purchase stock
under all other employee stock purchase plans of the Company or any
Subsidiary exceeds $25,000 in fair market value, determined as of the
Offering Date (or such other limit as may be imposed by the Code) for each
calendar year in which the employee participates in this Plan.
b. No employee shall be entitled to purchase more than the Maximum
Share Amount (as defined below) on any single Purchase Date. Not less than
fifteen (15) days prior to the commencement of any Offering Period, the
Board may in its sole discretion, set a maximum number of shares which may
be purchased by an employee at any single Purchase Date (hereinafter the
"Maximum Share Amount"). Initially, there shall be no Maximum Share
Amount. If a Maximum Share Amount is set, then all participants must be
notified of such Maximum Share Amount not less than five (5) days prior to
the commencement of the next Offering Period. Once the Maximum Share
Amount is set, it shall continue to apply with respect to all succeeding
Purchase Dates and Offering Periods unless revised by the Board as set
forth above.
c. If the number of shares to be purchased on a Purchase Date by all
employees participating in this Plan exceeds the number of shares then
available for issuance under this Plan, then the Company will make a pro
rata allocation of the remaining shares in as uniform a manner
<PAGE>
as shall be reasonably practicable and as the Board shall determine to be
equitable. In such event, the Company shall give written notice of such
reduction of the number of shares to be purchased under a participant's
option to each participant affected thereby.
d. Any payroll deductions and Cash Contributions accumulated in a
participant's account which are not used to purchase stock due to the
limitations in this Section 11 shall be returned to the participant as soon
as practicable after the end of the applicable Purchase Period, without
interest.
12. WITHDRAWAL.
a. Each participant may withdraw from an Offering Period under this
Plan by signing and delivering to the Human Resources Department a written
notice to that effect on a form provided for such purpose. Such withdrawal
may be elected at any time at least fifteen (15) days prior to the end of
an Offering Period.
b. Upon withdrawal from this Plan, the accumulated payroll
deductions and the Cash Contributions, if any, shall be returned to the
withdrawn participant without interest, and his or her interest in this
Plan shall terminate. In the event a participant voluntarily elects to
withdraw from this Plan, he or she may not resume his or her participation
in this Plan during the same Offering Period, but he or she may participate
in any Offering Period under this Plan which commences on a date subsequent
to such withdrawal by filing a new Subscription Agreement in the same
manner as set forth above for initial participation in this Plan.
13. TERMINATION OF EMPLOYMENT. Termination of a participant's
employment for any reason, including retirement or death, immediately
terminates his or her participation in this Plan. In such event, the payroll
deductions and Cash Contributions, if any, credited to the participant's
account will be returned to him or her or, in the case of his or her death,
to his or her legal representatives without interest and the remaining shares
credited to the participant's account shall be distributed to the participant
in accordance with Section 10f. For purposes of this Section 13, an employee
will not be deemed to have terminated employment or failed to remain in the
continuous employ of the Company in the case of a transfer to or from the
Company and to or from any Subsidiary that the Board has designated as
eligible to participate in this Plan, sick leave, military leave, or any
other leave of absence approved by the Board; PROVIDED, that such leave is
for a period of not more than ninety (90) days or reemployment upon the
expiration of such leave is guaranteed by contract or statute.
14. RETURN OF PAYROLL DEDUCTIONS AND CASH CONTRIBUTIONS. In the event
a participant's interest in this Plan is terminated by withdrawal or
termination of employment or otherwise, or in the event this Plan is
terminated by the Board, the Company shall promptly deliver to the
participant all payroll deductions and Cash Contributions credited to such
participant's account. No interest shall accrue on the payroll deductions or
Cash Contributions of a participant in this Plan.
15. CAPITAL CHANGES. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each option under this Plan which has not yet been exercised and the number
shares of Common Stock which have been authorized for issuance under this
Plan but have not yet been placed under option (collectively, the
"Reserves"), as well as the price per share of Common Stock covered by each
option under this Plan which has not yet been exercised, shall be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding shares of Common Stock of the Company resulting from a stock
split or the payment of a stock dividend (but only in the Common Stock) or
any other increase or decrease in the number of issued and outstanding shares
of Common Stock effected without receipt of any consideration by the Company;
PROVIDED, HOWEVER, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration" and PROVIDED, FURTHER, that the price per share of Common Stock
shall not be reduced below its par value per share. Such adjustment shall be
made by the Board, whose determination shall be final, binding and
conclusive. Except as expressly provided herein, no issue by the Company of
shares of stock of any class, or securities convertible into shares of stock
of any class, shall
<PAGE>
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option.
In the event of the proposed dissolution or liquidation of the Company,
the Offering Period will terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Board. The Board may,
in the exercise of its sole discretion in such instances, declare that the
options under this Plan shall terminate as of a date fixed by the Board and
give each participant the right to exercise his or her option as to all of
the optioned stock, including shares which would not otherwise be
exercisable. In the event of a proposed sale of all or substantially all the
assets of the Company, or the merger or consolidation of the Company with or
into another corporation, each option under this Plan shall be assumed or an
equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Board
determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution that the participant shall have the right to
exercise the option as to all of the optioned stock. If the Board makes an
option exercisable in lieu of assumption or substitution in the event of a
merger, consolidation or sale of assets, the Board shall notify the
participant that the option shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the option will terminate
upon the expiration of such period.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the
price per share of Common Stock covered by each outstanding option, in the
event that the Company effects one or more reorganizations,
recapitalizations, rights offerings or other increases or reductions of
shares of its outstanding Common Stock, or in the event of the Company being
consolidated with or merged into any other corporation; PROVIDED that the
price per share of Common Stock shall not be reduced below its par value per
share.
16. NONASSIGNABILITY. Neither payroll deductions credited to a
participant's account nor Cash Contributions, if any, nor any rights with
regard to the exercise of an option or to receive shares under this Plan may
be assigned, transferred, pledged or otherwise disposed of in any way (other
than by will, the laws of descent and distribution or as provided in Section
23 hereof) by the participant. Any such attempt at assignment, transfer,
pledge or other disposition shall be void and without effect.
17. REPORTS. Individual accounts will be maintained for each
participant in this Plan. Each participant shall receive promptly after the
end of each Purchase Period and promptly following any other transaction or
activity on the account a report of his or her account setting forth (i) the
Cash Contributions, if any; (ii) the total payroll deductions accumulated;
(iii) the number of shares purchased; (iv) the per share price thereof and
(v) the remaining cash balance, if any, carried forward to the next Purchase
Period or Offering Period, as the case may be.
18. NOTICE OF DISPOSITION. Each participant shall notify the Company
if the participant disposes of any of the shares purchased in any Offering
Period pursuant to this Plan if such disposition occurs within two (2) years
from the Offering Date or within one (1) year from the Purchase Date on which
such shares were purchased (the "Notice Period"). Unless such participant is
disposing of any of such shares during the Notice Period, such participant
shall keep the certificates representing such shares in his or her name (and
not in the name of a nominee) during the Notice Period. The Company may, at
any time during the Notice Period, place a legend or legends on any
certificate representing shares acquired pursuant to this Plan requesting the
Company's transfer agent to notify the Company of any transfer of the shares.
The obligation of the participant to provide such notice shall continue
notwithstanding the placement of any such legend on the certificates.
19. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant
of any option hereunder shall confer any right on any employee to remain in
the employ of the Company or any Subsidiary, or restrict the right of the
Company or any Subsidiary to terminate such employee's employment.
20. EQUAL RIGHTS AND PRIVILEGES. All eligible employees shall have
equal rights and privileges with respect to this Plan so that this Plan
qualifies as an "employee stock purchase plan" within
<PAGE>
the meaning of Section 423 or any successor provision of the Code and the
related regulations. Any provision of this Plan which is inconsistent with
Section 423 or any successor provision of the Code shall, without further act
or amendment by the Company or the Board, be revised to comply with the
requirements of Section 423. This Section 20 shall take precedence over all
other provisions in this Plan.
21. NOTICES. All notices or other communications by a participant
under or in connection with the Plan shall be deemed to have been duly given
when received in the form specified by the Company at the location, or other
person, designated by the Company for the receipt thereof.
22. TERMS; STOCKHOLDER APPROVAL. After this Plan is adopted by the
Board, this Plan will become effective on the date that is the first
commencement of an Offering Period (as defined above). This Plan shall be
approved by the stockholders of the Company, in any manner permitted by
applicable corporate law, within twelve (12) months before or after the date
this Plan is adopted by the Board. No purchase of shares pursuant to this
Plan shall occur prior to such stockholder approval. Thereafter, no later
than twelve (12) months after the Company becomes subject to Section 16(b) of
the Exchange Act, the Company will comply with the requirements of Rule 16b-3
with respect to stockholder approval. This Plan shall continue until the
earlier to occur of (a) termination of this Plan by the Board (which
termination may be effected by the Board at any time), (b) issuance of all of
the shares of the Common Stock reserved for issuance under this Plan, or (c)
ten (10) years from the adoption of this Plan by the Board.
23. DESIGNATION OF BENEFICIARY.
a. A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account
under this Plan in the event of such participant's death subsequent to the
end of a Purchase Period but prior to delivery to him of such shares and
cash. In addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's account under
this Plan in the event of such participant's death prior to a Purchase
Date.
b. Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant
and in the absence of a beneficiary validly designated under this Plan who
is living at the time of such participant's death, the Company shall
deliver such shares or cash to the executor or administrator of the estate
of the participant or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such shares or cash to the spouse or to any one or
more dependents or relatives of the participant, or if no spouse, dependent
or relative is known to the Company, then to such other person as the
Company may designate.
24. CONDITIONS UPON ISSUANCE OF SHARES; SECURITIES LAW LIMITATIONS ON
SALE OF SHARES. Shares shall not be issued with respect to an option unless
the exercise of such option and the issuance and delivery of such shares
pursuant thereto shall comply with all applicable provisions of law, domestic
or foreign, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder,
state securities law and regulations and the requirements of any stock
exchange or automated quotation system upon which the shares may than be
listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
25. APPLICABLE LAW. Except to the extent governed by federal law, the
Plan shall be governed by the substantive laws (excluding the conflict of
laws rules) of the State of Iowa.
26. AMENDMENTS OR TERMINATION OF THIS PLAN. The Board may, at any
time, amend, terminate or extend the term of this Plan, except that any such
termination cannot affect options previously granted under this Plan, nor may
any amendments make any change in an option previously granted which would
adversely affect the right of any participant, nor may an amendment be made
without approval of the stockholders of the Company obtained in accordance
with Section 22 hereof within twelve (12) months of the adoption of such
amendment (or earlier if required by Section 22) if such amendment would:
<PAGE>
a. Increase the number of shares that may be issued under this Plan;
b. Change the designation of the employees (or class of employees)
eligible for participation in this Plan; or
c. Constitute an amendment for which stockholder approval is
required in order to comply with Rule 16b-3 (or any successor
rule) of the Exchange Act.
ADOPTED BY the Company on the _____ day of _____, 1999, to be effective as
of ______________, _____.
MICROWARE SYSTEMS CORPORATION
By: _________________________________
Its: __________________________________
<PAGE>
MICROWARE SYSTEMS CORPORATION
1500 NW 118TH STREET
DES MOINES, IOWA 50325
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Kenneth B. Kaplan and George E. Leonard,
and each of them, with full power of substitution, attorneys and proxies to
represent the undersigned at the 1999 Annual Meeting of Shareholders of
Microware Systems Corporation (the "Company") to be held at the Four Points
Hotel Sheraton, 11040 Hickman Road, Clive, Iowa, at 10:00 a.m. local time, on
Tuesday, September 14, 1999, or at any adjournment thereof, with all power which
the undersigned would possess if personally present, and to vote all shares of
stock of the Company which the undersigned may be entitled to vote at said
Meeting as follows:
<TABLE>
<C> <C> <C> <C>
1. ELECTION OF DIRECTORS
/ / FOR THE NOMINEES LISTED BELOW (UNLESS NAME OF NOMINEE / / WITHHOLD AUTHORITY
IS CROSSED OUT)
Kenneth B. Kaplan Martin Allen Daniel P. Howell
2. PROPOSAL TO ADOPT THE COMPANY'S 1999 STOCK PURCHASE PLAN / / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO RATIFY THE SELECTION OF KPMG PEAT MARWICK LLP AS / / FOR / / AGAINST / / ABSTAIN
INDEPENDENT PUBLIC ACCOUNTANTS
4. IN THEIR DISCRETION, ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING (which the Board of
Directors does not know of as of July 29, 1999).
Management recommends your vote FOR all proposals.
</TABLE>
THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE SIGN ON THE REVERSE
SIDE AND RETURN PROMPTLY.
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR, FOR THE ADOPTION OF THE
COMPANY'S 1999 STOCK PURCHASE PLAN AND FOR THE RATIFICATION OF THE SELECTION OF
KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS, AND WILL CONFER THE AUTHORITY IN
PARAGRAPH 4.
Receipt is hereby acknowledged of the Notice of the Meeting and Proxy
Statement dated July 29, 1999, as well as a copy of the 1999 Annual Report.
Dated: -------------------------------, 1999
-------------------------------------
-------------------------------------
(Signature(s) of stockholder(s))
When signing as attorney, executor,
administrator, trustee or guardian,
please give title. Each joint owner
is requested to sign. If a
corporation or partnership, please
sign by an authorized officer or
partner. Please sign in the same
manner as your certificate(s) is
(are) registered.
PLEASE COMPLETE, DATE, SIGN AND
RETURN THIS PROXY IN THE ENVELOPE
PROVIDED.
