<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:
<TABLE>
<S> <C>
/ / 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
DIGITAL TRANSMISSION SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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> 2
DIGITAL TRANSMISSION SYSTEMS, INC.
3000 NORTHWOODS PARKWAY, BUILDING 330
NORCROSS, GEORGIA 30071
(770) 798-1300
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 7, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Digital
Transmission Systems, Inc. (the "Company") will be held at: 3000 Northwoods
Parkway, Building 330, Norcross, Georgia, at 9:00 a.m., eastern standard time,
on Thursday, November 7, 1996 (the "Meeting"), to consider and act upon:
1. Election of six persons to serve as members of the Company's Board of
Directors;
2. Approval of an amendment to the Company's 1996 Stock Incentive Plan
to increase the number of shares of Common Stock reserved for
issuance by 240,000 shares;
3. Approval of the Digital Transmission Systems, Inc. 1996 Employee
Stock Purchase Plan;
4. Ratification of the selection of KPMG Peat Marwick as independent
public accountants for the Company's current fiscal year; and
5. Such other business as may properly come before the Annual Meeting or
any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on September 16,
1996 as the record date for the determination of shareholders entitled to notice
of, and to vote at, the meeting.
By Order of the Board of Directors:
/s/ Roger Maloch
--------------------------------------
ROGER MALOCH
Secretary
October 10, 1996
Norcross, Georgia
IMPORTANT
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE MARK, DATE
AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE WHICH HAS BEEN
PROVIDED. NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES. IN THE EVENT
YOU ARE ABLE TO ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR
SHARES IN PERSON.
<PAGE> 3
DIGITAL TRANSMISSION SYSTEMS, INC.
3000 NORTHWOODS PARKWAY, BUILDING 330
NORCROSS, GEORGIA 30071
-------------------------------
PROXY STATEMENT
-------------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
SHAREHOLDERS' MEETING
This Proxy Statement and the enclosed proxy are furnished on behalf of the
Board of Directors of DIGITAL TRANSMISSION SYSTEMS, INC., a Delaware corporation
(the "Company"), for use at the Annual Meeting of Shareholders to be held on
November 7, 1996 at 9:00 o'clock a.m. eastern standard time (the "Annual
Meeting"), or at any adjournment or postponement thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting. The Annual
Meeting will be held at 3000 Northwoods Parkway, Building 330, Norcross,
Georgia. This Proxy Statement and the accompanying Proxy card were first mailed
on or about October 14, 1996 to all shareholders entitled to vote at the Annual
Meeting.
SHAREHOLDERS ENTITLED TO VOTE
Only holders of record of Common Stock (including holders of record of the
Company's units, which each include one share of common stock and one warrant to
purchase one share of common stock) at the close of business on September 16,
1996 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on September 16, 1996, the Company had outstanding and
entitled to vote 3,920,700 shares of Common Stock. Each holder of record of
Common Stock on such date will be entitled to one vote for each share held on
all matters to be voted upon at the Annual Meeting. Any shareholder who signs
and returns a Proxy has the power to revoke it at any time before it is
exercised by providing written notice of revocation to the Secretary of the
Company or by filing with the Secretary of the Company a Proxy bearing a later
date. The holders of a majority of the total shares of Common Stock outstanding
on the record date, whether present at the Annual Meeting in person or
represented by Proxy, will constitute a quorum for the transaction of business
at the Annual Meeting. The shares held by each shareholder who signs and returns
the enclosed form of Proxy will be counted for the purposes of determining the
presence of a quorum at the meeting, whether or not the shareholder abstains on
all or any matter to be acted on at the meeting. Abstentions and broker
non-votes both will be counted toward fulfillment of quorum requirements. A
broker non-vote occurs when a nominee holding shares for a beneficial owner does
not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that proposal and has not received
instructions from the beneficial owner.
COUNTING OF VOTES
The purpose of the Annual Meeting is to consider and act upon the matters
which are listed in the accompanying Notice of Annual Meeting and set forth in
this Proxy Statement. The enclosed form of Proxy provides a means for a
shareholder to vote for all of the matters listed in the accompanying Notice of
Annual Meeting and described in the Proxy Statement. The enclosed form of Proxy
also provides a means for a shareholder to vote for all of the nominees for
Director listed thereon or to withhold authority to vote for one or more of such
nominees. The six nominees receiving the highest number of votes will be elected
to the Board of Directors. Broker non-votes are not counted in the election of
directors.
The accompanying form of Proxy also provides a means for a shareholder to
vote for, against or abstain from voting on each of the other matters to be
acted upon at the Annual Meeting. Each Proxy will be voted in accordance with
the shareholder's directions. The affirmative vote of a majority of the shares
of Common Stock present in person or represented by a Proxy and entitled to vote
on proposals two through four set forth in the accompanying Notice of Annual
Meeting is required for the approval of such proposal. Approval of any
<PAGE> 4
other matters as may properly come before the meeting also will require the
affirmative vote of a majority of the shares of Common Stock present in person
or represented by a Proxy and entitled to vote at the meeting. Abstentions with
respect to proposals two through four will have the same effect as a vote
against these proposals. With respect to broker non-votes, the shares will not
be considered present at the meeting for the proposal to which authority was
withheld. Consequently, broker non-votes will not be counted with regard to the
proposal, but they will have the effect of reducing the number of affirmative
votes required to approve the proposal, because they reduce the number of shares
present or represented from which a majority is calculated.
PROXIES
The Proxy accompanying this Proxy Statement is solicited by the Board of
Directors of the Company. Proxies may be solicited by officers, directors and
regular supervisory and executive employees of the Company, none of whom will
receive any additional compensation for their services. Also, Morrow & Co. may
solicit proxies at an approximate cost of $3,500 plus reasonable expenses. Such
solicitations may be made personally, or by mail, facsimile, telephone,
telegraph, or messenger. The Company will pay persons holding units in their
names or in the names of nominees, as well as brokerage houses, banks and other
fiduciaries, for the expense of forwarding solicitation materials to their
principals. All of the costs of solicitation will be paid by the Company.
When the enclosed Proxy is properly signed and returned, the shares which
it represents will be voted at the Annual Meeting in accordance with the
instructions noted thereon. In the absence of such instructions, the shares
represented by a signed Proxy will be voted in favor of the nominees for
election to the Board of Directors, and in favor of the approval of proposals
two through four.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding beneficial ownership of the Company's voting securities as of
September 16, 1996 by (i) each person who is known by the Company to
beneficially own more than five percent of the Company's Common Stock, (ii) each
of the Company's directors and each of the executive officers named in the table
under Executive Compensation, and (iii) all directors and executive officers of
the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF APPROXIMATE
SHARES PERCENTAGE
BENEFICIALLY OF SHARES
NAME OWNED (1)(2) OWNED(3)
- ---------------------------------------------------------------------- ------------- ------------
<S> <C> <C>
Peregrine Ventures II, L.P.(5)........................................ 1,753,084 44.7
Andres C. Salazar(6).................................................. 63,433 1.6
Bobby Boykin(6)....................................................... 29,851 *
Marlin H. Nelson(6)................................................... 7,463 *
Thomas C. Mock(6)..................................................... 125,054 3.2
Roger E. Maloch(6).................................................... 0 *
Woodrow B. Cannon(6).................................................. 0 *
Frank LaHaye(7)....................................................... 1,754,278 44.7
Gene Miller(7)........................................................ 1,754,278 44.7
Robert D. Francis(8).................................................. 0 *
Edwin D. Kantor(9).................................................... 0 *
All executive officers and directors as a group (10 persons)(10)...... 1,980,079 50.5
</TABLE>
- ---------------
* Less than 1%
(1) Unless otherwise indicated below, the persons and entities named in the
table have sole voting and investment power with respect to the shares
owned.
2
<PAGE> 5
(2) Includes shares of Common Stock issuable upon exercise of stock options
exercisable within 60 days as follows: Mr. Salazar -- 42,074, Mr.
Boykin -- 29,851, Mr. Nelson -- 7,463, Mr. Mock -- 4,695, Mr.
LaHaye -- 1,194 and Mr. Miller -- 1,194.
(3) Does not reflect approximately 593,067 shares issuable upon exercise of
options granted under the Company's 1992 Stock Incentive Plan, of which
options to purchase approximately 309,821 shares have vested as of the
effective date of this Proxy and 200,000 shares issuable upon exercise of
options granted under the Company's 1996 Stock Incentive Plan, none of
which have vested as of the effective date of this Proxy.
(5) The address of Peregrine Ventures II, L.P. is 20833 Stevens Creek, Suite
102, Cupertino, California 95014-2154.
(6) The address of each of Mr. Salazar, Mr. Boykin, Mr. Nelson, Mr. Mock, Mr.
Maloch and Mr. Cannon is c/o Digital Transmission Systems, Inc., 3000
Northwoods Parkway. Suite 330, Norcross, Georgia 30071.
(7) The address of each of Mr. LaHaye and Mr. Miller is c/o Peregrine Ventures
II, L.P., 20833 Stevens Creek, Suite 102, Cupertino, California 95014-2154.
Includes 1,753,084 shares beneficially owned by Peregrine Ventures II,
L.P., with respect to which Messrs. LaHaye and Miller share investment and
voting control.
(8) The address of Mr. Francis is c/o Milford Communications Partners, 21
Bianca Drive, Milford, Connecticut 06460.
(9) The address of Mr. Kantor is c/o Barington Capital Group, L.P., 888 Seventh
Avenue, 17th Floor, New York, NY 10019.
(10) Includes 1,753,084 shares owned by Peregrine Ventures II, L.P. with respect
to which Messrs. LaHaye and Miller share investment and voting control.
3
<PAGE> 6
PROPOSAL 1
ELECTION OF DIRECTORS
INTRODUCTION
At the Annual Meeting, six directors are to be elected for the terms
described below. The Board of Directors of the Company is divided into three
classes serving staggered three-year terms. The terms of office of Mr. Mock and
Mr. Salazar will expire in 1997, the terms of Mr. Francis and Mr. LaHaye will
expire in 1998 and the terms of Mr. Miller and Mr. Kantor will expire in 1999.
Officers of the Company serve at the discretion of the Board of Directors.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the six nominees named below. In the event
that any nominee should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as the Board of Directors may select. Each person nominated for election
has agreed to serve if elected, and management has no reason to believe that any
nominee will be unable to serve.
The Board of Directors recommends a vote FOR each named nominee.
The name and age, principal occupation or employment, and other data
regarding each nominee, based on information received from the respective
nominees, are set forth below:
For a term of three years:
Gene Miller, 55, has been a director of the Company since 1990. Mr.
Miller is general partner of the general partnerships which control
Peregrine Ventures, L.P. and Peregrine Ventures II, L.P. (a significant
stockholder of the Company). Mr. Miller has co-managed these investment
companies with Mr. LaHaye for the last five years. Mr. Miller also sits on
the Board of Directors of Somatogen, Inc. and Raytel, Inc.
Edwin Kantor, 64, was elected as a director of the Company in August,
1996. Mr. Kantor is vice chairman of Barington Capital Group, L.P., a New
York city investment banking and brokerage firm and underwriters of the
Company's initial public offering which was completed in March, 1996. Prior
to joining Barington Capital, Mr. Kantor had 37 years of experience in the
securities industry with Drexel Burnham Lambert Inc. and its predecessor
firms.
For a term of two years:
Frank LaHaye, 67, has been a director of the Company since 1993. Mr.
LaHaye, along with Gene Miller, is a general partner of the general
partnerships which control Peregrine Ventures, L.P. and Peregrine Ventures
II, L.P. (a significant stockholder of the Company). Mr. LaHaye has
co-managed these investment companies with Mr. Miller for the last five
years. Mr. LaHaye also sits on the Board of Directors of Quarterdeck
Corporation and Fischer Imaging Corporation. Mr. LaHaye is also a director
or trustee for many of the trusts and funds of the Franklin/Templeton
Group.
Robert D. Francis, 60, has been a director of the Company since 1995.
From 1993 to the present, Mr. Francis has been a Managing Partner of
Milford Communications Partners, Ltd., an international sales consulting
firm, and a partner of Jefferson Partners, a Washington, D.C. Merchant
Bank. From 1990 to 1993 Mr. Francis was President of GDC International,
Inc.
For a term of one year:
Andres C. Salazar, 53, has been President and Chief Executive Officer
and a member of the Board of Directors of the Company since 1994. From 1991
to 1994, Mr. Salazar was a Vice President and General Manager at AT&T
Paradyne. From 1989 to 1991, he was Vice President of Operations for Avanti
Communications.
4
<PAGE> 7
Thomas C. Mock, 37, is Assistant Vice President of Operations. Mr.
Mock has been a Director of the Company since 1995. Mr. Mock has held
various other positions with the Company since 1990, including Chief
Technical Officer and Principal Engineer.
DIRECTOR COMPENSATION
Meetings of the Board of Directors are scheduled quarterly, but can be held
on an as-needed basis. All expenses, including travel and lodging, are
reimbursed by the Company for meeting attendance. Non-employee Board members are
also compensated with an option grant of 1,000 shares of Common Stock for every
Board meeting attended in person.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS
The Board of Directors of the Company held a total of 11 meetings during
fiscal 1996. No director attended fewer than 80% of the meetings of the Board of
Directors and committees thereof, if any, upon which such director served.
The Board of Directors has two standing committees: the Audit Committee and
the Compensation Committee.
Audit Committee. The Board of Directors has established an Audit Committee
composed of two (2) directors for the purpose of approving the Company's
independent auditors, reviewing the scope of their engagement, consulting with
such auditors, reviewing the results of any audit examination, reviewing the
disposition of recommendations made by the independent auditors during the past
year, acting as liaison between the Board of Directors and the independent
auditors and reviewing various Company policies, including those related to
accounting and internal control matters. The current members of the Audit
Committee are Mr. Miller and Mr. Kantor. Mr. Kantor was elected to the Audit
Committee on October 4, 1996 to replace Mr. Francis who continues to serve on
the Compensation Committee.
Compensation Committee. The Board of Directors has established a
Compensation Committee consisting of two (2) directors to review and approve
executive compensation policies, practices, salary levels and bonus programs.
The current members of the Compensation Committee are Mr. Francis and Mr.
LaHaye.
CERTAIN TRANSACTIONS
Edwin Kantor, a director of the Company since August, 1996, is a vice
chairman of Barington Capital Group, L.P. Barington was the underwriter of the
Company's initial public offering and received fees of approximately $850,000 in
connection with said offering. In connection with such offering, Barington will
also receive a fee equal to 5% of the aggregate exercise price of each warrant
exercised after the first anniversary of the initial public offering. Barington
has also been retained by the Company to provide certain investment banking
services in the future.
Robert Francis, a director of the Company, is a principal of Jefferson
Partners, L.L.C. As part of the Company's initial public offering, Jefferson
Partners received approximately $70,000 from Barington and in March, 1997, will
receive up to 25% of the value of the underwriter's options received by
Barington in connection with the offering. These amounts were compensation for
Jefferson Partners' introduction of the Company to Barington and the performance
by Jefferson Partners of certain diligence.
5
<PAGE> 8
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information regarding the executive
officers and directors of the Company:
<TABLE>
<S> <C> <C>
Andres C. Salazar...................... 53 President and Chief Executive Officer;
Director
Roger E. Maloch........................ 40 Chief Financial Officer; Vice President
of Finance and Administration
Woodrow B. Cannon*..................... 50 Vice President of Marketing and
Engineering
Bobby G. Boykin........................ 54 Vice President of U.S. Sales
Marlin H. Nelson....................... 48 Vice President of International Sales
Thomas C. Mock......................... 37 Assistant Vice President of Operations;
Director
Frank LaHaye(2)........................ 67 Director
Gene Miller(1)......................... 55 Director
Robert D. Francis(2)................... 60 Director
Ed Kantor(1)........................... 64 Director
</TABLE>
- ---------------
(1) Member of the Audit Committee of the Board of Directors
(2) Member of the Compensation Committee of the Board of Directors
* Joined the Company on August 5, 1996.
Andres C. Salazar has been President and Chief Executive Officer and a
member of the Board of Directors of the Company since 1994. From 1991 to 1994,
Mr. Salazar was a Vice President and General Manager at AT&T Paradyne. From 1989
to 1991, he was Vice President of Operations for Avanti Communications.
Roger E. Maloch was named Chief Financial Officer of the Company on July 8,
1996. Prior to that time he was CFO at UniComp, Inc., a publicly traded software
company in Atlanta. From 1981 to 1989, Mr. Maloch held various marketing and
general management positions with Dun & Bradstreet Software in Atlanta.
Woodrow B. Cannon was named Vice President of Marketing and Engineering for
the Company in August 1996. He was previously Vice President of Marketing for
BellSouth Communication Systems and served in several senior marketing positions
for the Motorola Information Systems Group from 1988 through 1995. Prior to
Motorola, he had over five years of management experience in several AT&T sales
and marketing positions and over thirteen years with IBM.
Bobby G. Boykin has been Vice President of U.S. Sales since 1994. From 1990
to 1993 he was Senior Account Executive for Telematics International, Inc.
Marlin H. Nelson has been Vice President of International Sales since 1995.
From 1993 to 1995 he was Vice President, European Region for Hayes Microcomputer
Products. During 1992, Mr. Nelson was Vice President, European Sales for N.E.T.
From 1990 to 1991, he was Vice President of Europe, Africa and the Middle East
for GDC, Inc.
Thomas C. Mock is Assistant Vice President of Operations. Mr. Mock has been
a Director of the Company since 1995 and has held various other positions with
the Company since 1990, including Chief Technical Officer and Principal
Engineer.
6
<PAGE> 9
PROPOSAL 2
APPROVAL OF MODIFICATIONS TO THE COMPANY'S AMENDED AND RESTATED
1996 STOCK OPTION PLAN
Effective January 1996, the Board of Directors adopted the 1996 Stock
Incentive Plan (the "1996 Plan") which provides for the grant of stock options
for up to 200,000 shares of common stock. The 1996 Plan also permits the Board
of Directors to grant stock appreciation rights, stock bonuses, and restricted
stock awards in accordance with the provisions of the Plan. The Plan remains in
effect until January 2006 unless sooner terminated by the Board of Directors.
Options granted under the 1996 Plan may be incentive stock options or
non-qualified stock options, as determined by the Board of Directors at the time
of grant. Incentive stock options are granted at a price not less than the fair
market value of the stock on the grant date, and non-qualified options are
granted at a price to be determined by the Board of Directors provided that such
exercise price is not less than 85% of the fair market value of the stock on the
grant date. Option vesting terms are established by the Board of Directors at
the time of grant, and presently range from three to five years. The expiration
date of options granted under the 1996 Plan is determined at the time of grant
and may not exceed ten years from the date of the grant. At September 16, 1996,
there were options outstanding to purchase 200,000 shares of the Company's
common stock, of which no shares were exercisable. There were 0 options
available for grant at June 30, 1996 under the 1996 Plan.
The Board of Directors believes that in order to attract and retain
qualified employees for the Company, it is necessary to continue to grant
employees options under the 1996 Plan. The Board of Directors further believes
that the remaining shares in the 1996 Plan are insufficient for such purpose.
The Board of Directors recommends a vote FOR the approval of modifications to
the 1996 Stock Incentive Plan to increase the number of shares available for
issuance from 200,000 to 440,000.
PROPOSAL 3
ADOPTION OF THE AMENDED AND RESTATED DIGITAL TRANSMISSION SYSTEMS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
Subject to shareholder approval, the Company's Board of Directors on August
1, 1996 approved the establishment of an Employee Stock Purchase Plan.
DESCRIPTION OF THE EMPLOYEE STOCK PURCHASE PLAN
The following description of the Employee Stock Purchase Plan (the "Plan")
is qualified in its entirety by reference to the text thereof set forth in
Exhibit A. The Board of Directors recommends that the shareholders vote FOR the
ratification of the Plan.
PURPOSE OF THE PLAN
The Plan is intended to provide an opportunity for employees of the Company
and its present and future subsidiaries to share in the growth and prosperity of
the Company through acquisition of an equity interest in the Company.
THE PLAN
Up to 150,000 shares of the Company's common Stock may be offered under the
Plan. The Plan provides for the issuance of options to purchase stock in the
Company. The Common Stock issued upon exercise of options granted under the Plan
may be either treasury stock or Common Stock originally reserved for purposes of
the Plan. If an option terminates for any reason without being exercised in
full, the unpurchased shares of stock subject to such option shall again be
available for purposes of the Plan.
7
<PAGE> 10
The Compensation Committee of the Board of Directors (the "Committee") may
at any time amend the Plan in any respect, except that approval of the
stockholders of the Company will be required for any amendment for which
stockholder approval is required under Section 423 of the Internal Revenue Code
(the "Code") or any other applicable law. The Committee may at any time
terminate the Plan effective as of the last day of any fiscal year or may
terminate the right of employees to make contributions or further contributions
under the Plan during any fiscal year.
ADMINISTRATION OF THE PLAN
The Plan provides that it shall be administered by the Company or an
individual delegated such authority by the Company and that the Company or such
individual shall keep records of individual employee benefits. The Committee
shall interpret the terms and intent of the Plan and shall determine all
questions arising in the administration, interpretation and application of the
Plan, and all such determinations by the Committee shall be conclusive and
binding on all persons.
ELIGIBILITY FOR PARTICIPATION
Options may be granted only to employees who have completed ninety days of
service with the Company or its present and future subsidiaries as the Committee
may select from time to time (other than highly compensated employees of the
Company, as defined in Section 414(q) of the Code) whose customary employment is
a least twenty hours a week and is or will be more than five months in a
calendar year.
PARTICIPATION IN THE PLAN
Each employee of the Company who becomes eligible to participate in the
Plan shall be furnished a copy of the Plan and a request for participation. An
employee may only participate in the Plan at the beginning of the Plan Period.
"Plan Period" means the twelve month period beginning on July 1 of a calendar
year and ending on the next succeeding June 30, except that the first Plan
Period shall be from November 15, 1996 through June 30, 1997. The completed
request for participation shall indicate the Member's Contribution Rate (as
defined below), authorized by the employee for such Plan Period.
In order to participate in the Plan and be granted an option under the
Plan, an employee must authorize the Company to deduct through payroll deduction
an exact number of dollars per month, but not less than $10.00 per month
("Member's Contribution Rate"). The maximum deduction shall be 10% of his normal
monthly pay from the Company as of the first day of the upcoming Plan Period.
At any time during the year, an employee may notify the Company that he
wishes to discontinue his contributions. This notice shall be in writing on such
forms as provided by the Company and shall become effective as of a date
specified by the employee but not more than thirty (30) days following its
receipt by the employee. Members may elect to withdraw their contributions at
any time during the Plan Period. However, if contributions are withdrawn during
the Plan Period, no further contributions will be permitted during that Plan
Period. The fact that an employee elects to participate for a Plan Period, or
fails so to elect, shall not affect his right to participate, or not to
participate, for any other Plan Period. The issue price of the Company's Common
Stock under the Plan (the "Issue Price") will be the lesser of (a) 85% of the
closing market price on the last trading date of the Plan Period (being the
"Exercise Date" for the year) or (b) 85% of the closing market price on the
first trading date of the Plan Period (being the "Grant Date" for the year).
However, as long as the Common Stock is traded as part of a unit, the price of
such Common Stock will be determined by subtracting the price of the warrants
(as determined through the use of a Black-Scholes option pricing model) from the
market price of the unit, on either the Exercise Date or Grant Date as required.
If the total number of shares to be purchased under options by all employees for
any one year period exceeds the number of shares remaining authorized under the
Plan, a pro rata allocation of the available shares will be made among all
employees authorizing such payroll deductions based on the amount of the
respective aggregate payroll deductions up to the Exercise Date.
On the Exercise Date, an employee's Contribution Account shall be used to
purchase the maximum number of whole shares of the Company's Common Stock
determined by dividing the Issue Price into the
8
<PAGE> 11
Member's Contribution Account, unless the employee has notified the Company in
writing at least ten (10) business days prior to the Exercise Date that the
employee does not want to exercise any options. Notwithstanding the foregoing,
no employee may purchase more than 2,000 shares of stock under the Plan during
any one year. Any money remaining in the Member's Contribution Account that is
not used to purchase the stock shall be returned to the employee. Options
granted under the Plan shall be subject to such amendment or modification as the
company shall deem necessary to comply with any applicable law or regulation,
and shall contain such other provisions as the Company shall from time to time
approve and deem necessary.
In no event may an employee (i) receive an option which permits his rights
to purchase stock under all 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 such stock (determined at the time such option is granted)
for each calendar year in which such option is outstanding at any time or (ii)
receive an option if he owns (within the meaning of Section 423(b)(3) of the
Code), immediately after the option is granted, stock possessing five percent
(5%) or more of the total combined voting power or value of all classes of stock
of the Company or its parent or subsidiary corporations, or (iii) transfer or
otherwise alienate any option granted to him under the Plan, other than by will
or the laws of descent and distribution.
TERMINATION OF EMPLOYMENT
Under the Plan, if a participant's employment with the Company is
terminated for any reason other than death or retirement, all of his options
shall be null and void, and the balance of his Contribution Account shall be
paid promptly to him or his legal representative. If a participant's employment
with the Company is terminated due to death or retirement, no further
contributions on behalf of the deceased or retired participant can be made. At
any time the participant may elect to withdraw the balance of his Contribution
Account and thereby choose not to exercise the option, or he may exercise the
option in accordance with the Plan. A participant's personal representative or
legatee under his will may exercise any option granted before such participant's
death.
Nothing in the Plan or any option granted thereunder confers upon a holder
the right to continue as an employee of the Company or affect the right of the
Company to terminate a holder's employment at any time.
NO TRANSFER OF OPTIONS
A participant may not transfer or assign an option granted to him under the
Plan except by will or by the laws of decent and distribution. Options may be
exercised during a participant's lifetime only by him.
DIVIDENDS, VOTING AND OTHER RIGHTS AS A SHAREHOLDER
A participant in the Plan becomes a shareholder of record of the Company on
the date an option is exercised and payment is received for the shares of stock
issued pursuant thereto. At that time, a participant will have all the benefits
that arise from ownership of the Common Stock. Prior to issuance of such shares
of Common Stock, a participant will have no rights as a shareholder arising from
participation in the Plan.
ERISA
The Plan is not subject to any provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA") and is not a qualified pension, profit-sharing or
stock bonus plan under Section 401 of the Code.
CHANGE IN CAPITALIZATION OR MERGER OF THE COMPANY
The aggregate number of shares of stock reserved for purchase under the
Plan, the calculation of the Issue Price, and the determination of the maximum
number of shares which each participant may purchase pursuant to the Plan shall
be appropriately adjusted to reflect any increases or decreases in the number of
issued shares of stock resulting from a subdivision or consolidation of shares
or other capital adjustment, or payment of a stock dividend, stock split, or
other such increase or decrease in such shares of the stock. In the
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<PAGE> 12
event of a dissolution or liquidation of the Company or a merger or
consolidation in which the Company is not the surviving corporation or survives
only as a subsidiary of another corporation, each outstanding option granted
under this Plan shall terminate except to the extent that another corporation
assumes such option or substitutes another option therefor.
SALE OF SHARES
The shares of stock issued pursuant to the Plan will have been registered
pursuant to the Securities Act of 1933, as amended, and except for certain
restrictions relating to affiliates of the Company, will be freely resalable.
Once a stock certificate representing the shares is delivered to the
participant, the Company has no responsibility regarding such subsequent sale.
If an employee or former employee disposes of a share of Company Stock obtained
under the Plan (i) prior to two years after the Grant Date of such share, or
(ii) prior to one year after the Exercise Date, then that employee or former
employee must notify the Company immediately of such disposition in writing.
TAX CONSEQUENCES OF PARTICIPATION IN THE PLAN
The Plan is intended to qualify as an "employee stock purchase plan" within
the meaning of Section 423 of the Code. No taxable gain will be recognized by
employees upon the grant or exercise of an option to purchase shares of the
Common Stock under the Plan, and the Company will not be entitled to a deduction
at the time any such option is granted or exercised. Provided an employee holds
the shares of the Common Stock acquired under the Plan for a period of at least
two years from the first day of the Plan Period during which he acquired the
shares, then an amount equal to the lesser of (i) the excess of the fair market
value of the shares of the Common Stock at the time of such disposition over the
amount paid for the shares, or (ii) the excess of the fair market value of the
shares of the Common Stock on the first day of the Plan Period during which the
employee purchased the shares, over the amount paid for the shares, must be
treated as compensation in the year of such disposition and will be taxed at
ordinary income rates. The balance of the gain realized upon such sale, if any,
will be taxed as a long-term capital gain. If an employee sells shares of the
Common Stock acquired under the Plan before the end of the two-year holding
period described above, all or a portion of the gain realized will be treated as
ordinary income, and the Company will be entitled to a tax deduction in an
amount equal to the ordinary income recognized.
Management estimates that approximately 60 employees of the Company and its
subsidiaries are eligible to participate in the Plan. The benefits to be
received from the Plan will depend on the extent to which employees elect to
participate and, therefore, are not determinable.
The Board of Directors recommends that the shareholders vote FOR approval
of the 1996 Employee Stock Purchase Plan.
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
In July 1996, the Board of Directors selected the accounting firm of KPMG
Peat Marwick LLP to serve as its independent auditor and recommends that
shareholders vote for ratification of such appointment. Representatives of KPMG
Peat Marwick LLP are expected to be present at the meeting. They will have an
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions from shareholders.
Price Waterhouse LLP was removed as the Company's principal auditor as of
July 11, 1996. During the fiscal year ended June 30, 1995, and during the
interim period until their dismissal, there were no disagreements between the
Company and Price Waterhouse LLP on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure which,
if not resolved to the satisfaction of Price Waterhouse LLP, would have required
Price Waterhouse LLP to make reference to the subject matter of the disagreement
in connection with its report and no "reportable event" occurred within the
meaning of Item 304(A)(1)(v) of SEC Regulation S-K. Price Waterhouse LLP has
confirmed that it concurs with the statements made by the Company herein. The
decision to change accountants was recommended by the audit committee and
approved by the Board of Directors.
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<PAGE> 13
The Board of Directors engaged KPMG Peat Marwick LLP, effective July 11,
1996. Prior thereto, the Company did not consult KPMG Peat Marwick LLP on any
matter that was the subject of a disagreement with the Company's former
accountants or a reportable event (as such terms are defined by Item
302(A)(1)(v) of Regulation S-K).
The Board of Directors recommends that the shareholders vote FOR
ratification of the selection of KPMG Peat Marwick as independent auditors.
EXECUTIVE COMPENSATION
Compensation Summary. The following table presents certain summary
information concerning compensation earned for services rendered to the Company
by Andres C. Salazar, the Company's President and Chief Executive Officer and
each of the other executive officers of the Company who received compensation of
at least $100,000 during 1996 (collectively the "Named Executive Officers"), for
the fiscal years ended June 30, 1996, 1995, and 1994.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
---------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION FY SALARY($) BONUS($) OPTIONS/SARS(#) COMPENSATION(1)($)
- ------------------------------------- ---- --------- -------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
Andres C. Salazar.................... 1996 140,167 0 75,867 12,750
President and CEO 1995 132,625 38,427 126,866 37,809
1994 48,750 0 0 0
Bobby G. Boykin...................... 1996 105,633 13,246 19,499 0
V.P. US Sales 1995 100,494 28,550 44,776 0
1994 90,000 0 0 0
Marlin H. Nelson..................... 1996 112,380 15,000 26,745 0
V.P. International Sales 1995 7,900 3,591 29,851 0
1994 0 0 0 0
</TABLE>
- ---------------
(1) Amounts set forth in this column represent certain relocation expenses.
No other executive officer had total compensation greater than $100,000 in
the fiscal year ended June 30, 1996.
Grants of Stock Options. The following table contains information
concerning options granted to the Named Executive Officers during the fiscal
year ended June 30, 1996:
OPTION GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED TO EXERCISE
UNDERLYING OPTIONS EMPLOYEES OR BASE PRICE EXPIRATION
NAME GRANTED(#) IN FISCAL YEAR ($/SH) DATE
------------------------------ ------------------ ------------------ ------------- ----------
<S> <C> <C> <C> <C>
Andres C. Salazar............. 75,867 25% 4.730 2/23/2006
Bobby G. Boykin............... 19,499 6% 4.730 2/23/2006
Marlin H. Nelson.............. 26,745 9% 4.730 2/23/2006
</TABLE>
11
<PAGE> 14
Aggregated Stock Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values. The following table sets forth certain information with respect
to options exercised during fiscal year 1996 and presents the value of
unexercised stock options held by the named executive officers as of June 30,
1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
VALUE OPTIONS/SARS AT IN-THE-MONEY OPTIONS AT
SHARES ACQUIRED REALIZED YEAR END FISCAL YEAR END($)(1)
NAME ON EXERCISE(#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ----------------------------- --------------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Andres C. Salazar............ 21,359 204,683 42,074/139,300 $403,195/$1,031,975
Bobby G. Boykin.............. 0 0 29,851/34,424 $302,812/$258,776
Marlin H. Nelson............. 0 0 7,463/49,133 $70,518/$361,049
</TABLE>
- ---------------
(1) Dollar values were calculated by determining the difference between the June
30, 1996 fair market value of the Company's Common Stock and the exercise
price of such options before income taxes.
SECTION 16(A) REPORTING
Section 16(a) of the Securities and Exchange Act of 1934 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 SEC initial reports of ownership
and reports of changes in ownership of the Common Stock and all other equity
securities of the Company beneficially owned by them. Directors, executive
officers and greater than 10% shareholders are required by regulation to furnish
the Company the copies of all Section 16(a) reports they file. To the Company's
knowledge, based solely on review of copies of such reports furnished to the
Company and written representations that no other reports were required, during
the fiscal year ended June 30, 1996, all Section 16(a) filing requirements
applicable to the directors, executive officers and greater than 10% beneficial
owners were complied with by such persons except that Form 3's for Gene Miller,
Edwin Kantor and Woody Cannon were inadvertently filed after the filing
deadline.
SHAREHOLDER PROPOSALS
Rules of the Securities and Exchange Commission require that any proposal
by a shareholder of the Company for consideration at the 1997 Annual Meeting of
Shareholders must be received by the Company no later than June 12, 1997, if any
such proposal is to be eligible for inclusion in the Company's proxy materials
for its 1997 Annual Meeting. Under such rules, the Company is not required to
include shareholder proposals in its proxy materials unless certain other
conditions specified in such rules are met.
OTHER MATTERS
Management of the Company is not aware of any other matter to be presented
for action at the Annual Meeting other than those mentioned in the Notice of
Annual Meeting of Shareholders and referred to in this Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Andres C. Salazar
--------------------------------------
ANDRES C. SALAZAR
President and Chief Executive Officer
12
<PAGE> 15
EXHIBIT A
TO DIGITAL TRANSMISSION SYSTEMS, INC. PROXY STATEMENT
FOR 1996 ANNUAL MEETING OF SHAREHOLDERS
DIGITAL TRANSMISSION SYSTEMS, INC. EMPLOYEE STOCK PURCHASE PLAN
Digital Transmission Systems, Inc., a Delaware corporation (hereinafter
referred to as the "Sponsoring Employer" or as an "Employer"), has adopted the
following Employee Stock Purchase Plan for the benefit of its eligible
employees.
The number of shares of the Sponsoring Employer's $.01 par value common
stock (the "Common Stock") presently reserved for issuance under the plan is
150,000 shares.
The purpose of this plan is to provide an opportunity for eligible
employees of an Employer to share in the growth and prosperity of the Sponsoring
Employer through acquisition of shares of the Common Stock.
The Company intends that options issued under this plan (hereinafter
"Options") constitute options issued pursuant to an "employee stock purchase
plan" within the meaning of Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code").
ARTICLE I
TITLE
SECTION 1.01 This plan shall be known as the Digital Transmission Systems,
Inc. 1996 Employee Stock Purchase Plan (hereinafter referred to as the "Plan").
ARTICLE II
DEFINITIONS
As used herein, the following words and phrases shall have the meanings
specified below, unless a different meaning is plainly required by the context,
viz.:
SECTION 2.01 The term "Board of Directors" or "Board" shall mean the Board
of Directors of the Sponsoring Employer.
SECTION 2.02 The term "Closing Market Price" shall mean the price paid in
the last sale in the Nasdaq Stock Market's SmallCap Market (hereinafter referred
to as "NASDAQ") as reported by NASDAQ as of the applicable date; provided that,
if there shall be any material alteration in the present system of reporting
prices of such stock, or if such stock shall no longer be reported by NASDAQ,
the fair market value of the stock as of a particular date shall be determined
by such method as shall be specified by the Compensation Committee of the Board
and, provided further, that for so long as the common stock is only traded as
part of a unit, the price of the common stock shall be determined by using the
price paid for a unit as described above and attributing a price to the warrant
as determined through the use of a Black-Scholes option pricing model.
SECTION 2.03 The term "Continuous Service" shall mean an Employee's number
of completed days or months of continuous employment with an Employer from his
last hiring date to his date of severance of employment for any reason.
Continuous Service shall not be broken by reason of and shall be credited for
absence due to vacation, temporary sickness or injury.
SECTION 2.04 The term "Contribution Account" shall mean the account
established on behalf of a Member to which shall be credited the amount of the
Member's contribution, pursuant to Article IV.
SECTION 2.05 The term "Employee" shall mean each current or future
employee of an Employer, except highly compensated employees of the Employer
(within the meaning of Section 414(q) of the Code),
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<PAGE> 16
whose customary employment is at least twenty (20) hours a week and is or will
be more than five (5) months in a calendar year.
SECTION 2.06 The term "Employer" shall mean any corporation designated by
the Board of Directors of the Sponsoring Employer as an Employer under this Plan
and which is either the Sponsoring Employer or a Subsidiary of the Sponsoring
Employer.
SECTION 2.07 The term "Exercise Date" shall mean the last NASDAQ trading
date of the Plan Period.
SECTION 2.08 The term "Grant Date" shall mean the first NASDAQ trading
date of the Plan Period.
SECTION 2.09 The "Issue Price" shall mean the price of the stock to be
charged to participating Members at the Exercise Date as provided in Article IV.
SECTION 2.10 The term "Member" shall mean any Employee of an Employer who
has met the conditions and provisions for becoming a Member as provided in
Article III.
SECTION 2.11 The term "Member's Contribution Rate" shall be that exact
number of dollars a Member elects to contribute by regular payroll deductions to
his Contribution Account as provided by Section 4.02.
SECTION 2.12 For hourly Employees the term "Normal Monthly Pay" shall be
computed by annualizing the Employee's hourly base pay and his regular scheduled
hours of work as of the first day of the Plan Period in question and dividing by
twelve. For salaried Employees the "Normal Monthly Pay" shall be the Employee's
regular monthly base pay as of the first day of the Plan Period in question.
SECTION 2.13 The term "Plan Period" shall mean the twelve (12) month
Period beginning on July 1 of a calendar year and ending on the next succeeding
June 30.
SECTION 2.14 The term "Sponsoring Employer" shall mean Digital
Transmission Systems, Inc., a Delaware corporation, the plan sponsor for all
purposes.
SECTION 2.15 The term "Sponsoring Employer Stock" shall mean those shares
of the Common Stock which pursuant to section 4.01 are reserved for issuance
upon the exercise of the options granted under this Plan.
SECTION 2.16 The term "Subsidiary" shall mean any corporation having a
relationship to the Sponsoring Employer described in Section 424(f) of the Code,
as amended.
SECTION 2.17 Any words herein used in the masculine shall be read and
construed in the feminine where they would so apply. Words in the singular shall
be read and construed as though in the plural in all cases where they would so
apply.
ARTICLE III
MEMBERSHIP IN PLAN
SECTION 3.01 Each employee will be eligible to become a Member in the Plan
for any Plan Period if he has completed ninety (90) days of Continuous Service
with an Employer on or before the first day of the Plan Period.
SECTION 3.02 Upon becoming a Member, said Member shall be bound by the
terms of this Plan, including any amendments hereto.
SECTION 3.03 Each Employee who becomes eligible to become a Member shall
be furnished a summary of the Plan and a request for participation. If such
Employee elects to participate hereunder for a Plan Period, he shall complete
such form and file it with his Employer prior to the first day of the Plan
Period (provided, however, that for the first Plan period under this Plan,
elections to participate may be filed by a date determined by the Board of
Directors). An Employee may only become a Member in the Plan at the
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<PAGE> 17
beginning of a Plan Period. The complete request for participation shall
indicate the Member's Contribution Rate authorized by the Member for such Plan
Period.
ARTICLE IV
ISSUANCE OF STOCK OPTIONS
SECTION 4.01 The Sponsoring Employer shall reserve 150,000 shares of
Sponsoring Employer Stock for issuance upon the exercise of the options granted
hereunder. These shares may be either authorized and unissued shares, issued
shares held in or acquired for the treasury of the Sponsoring Employer, or
shares of stock reacquired by the Sponsoring Employer upon purchase in the open
market or otherwise.
SECTION 4.02 Subject to the provisions of this Plan, including the
limitations contained in Section 4.06, on the Grant Date for each Plan Period
each Employee is hereby granted an Option for each Plan Period to purchase the
number of shares of Common Stock which may be purchased, at the Issue Price
determined under Section 4.04, with the aggregate amount of the Member's
contributions during the Plan Period. In order to participate in the Plan for a
Plan Period and be granted an option hereunder, an Employee must authorize his
Employer to deduct through payroll deduction an exact number of dollars per
month, but not less than $10.00 per month ("Member's Contribution Rate"). The
maximum deduction shall be 10% of his Normal Monthly Pay from his Employer as of
the first day of the Plan Period. Such authorization shall be in writing and on
such forms as shall be provided by the Sponsoring Employer. Such deductions
shall begin as of the first pay period beginning on or after the first day of
the Plan Period. For all purposes of this Plan, such contributions shall be
deemed a part of the Member's Contribution Account. Member contributions will
not be permitted to begin at any time other than the beginning of the Plan
Period. No interest shall accrue on any amounts withheld under this Plan.
At any time during the Plan Period, a Member may notify the Sponsoring
Employer that he wishes to discontinue his contributions. This notice shall be
in writing on such forms as provided by the Sponsoring Employer and shall become
effective as of a date specified by the Member but not more than (30) days
following its receipt by the Sponsoring Employer.
Members may elect to withdraw their contributions at any time during the
Plan Period. However, if contributions are withdrawn during the Plan Period, no
further contributions will be permitted during the Plan Period.
The fact that an Employee elects to participate for a Plan Period, or fails
so to elect, shall not affect his right to participate, or not to participate,
for any other Plan Period.
SECTION 4.03 If the total number of shares to be purchased under options
by all Members for any Plan Period exceeds the number of shares remaining
authorized under this Plan, a pro rata allocation of the available shares will
be made among all Members authorizing such payroll deductions based on the
amount of the respective aggregate payroll deductions up to the Exercise Date.
SECTION 4.04 The Issue Price of the Sponsoring Employer Stock under this
Plan will be the lesser of (a) 85% of the Closing Market Price on the last
trading date of the Plan Period (being the Exercise Date for the Plan Period) or
(b) 85% of the Closing Market Price on the first trading date of the Plan Period
(being the Grant Date for the Plan Period).
SECTION 4.05 On the Exercise Date a Member's Contribution Account shall be
used to purchase the maximum number of whole shares of Sponsoring Employer Stock
determined by dividing the Issue Price, defined in Section 4.04, into the
Member's Contribution Account, unless the Member has notified the Sponsoring
Employer in writing ten (10) business days prior to the Exercise Date that the
Member does not want to exercise any options. Notwithstanding the foregoing, no
Member may purchase more than 2,000 shares of Sponsoring Employer Stock under
the Plan during any Plan Period. Any money remaining in a Member's Contribution
Account that is not used to purchase Sponsoring Employer Stock shall be returned
to the Member. Options granted under this Plan shall be subject to such
amendment or modification as the
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<PAGE> 18
Sponsoring Employer shall deem necessary to comply with any applicable law or
regulation, and shall contain such other provisions as the Sponsoring Employer
shall from time to time approve and deem necessary.
SECTION 4.06 In no event may a Member (i) receive an option which permits
his rights to purchase stock under all employee stock purchase plans of the
Employer and its parent and subsidiary corporations to accrue at a rate which
exceeds $25,000 of fair market value of such stock (determined at the time such
option is granted) for each calendar year in which such option is outstanding at
any time, or (ii) receive an option if he owns (within the meaning of Section
423(b)(3) of the Code), immediately after the option is granted, stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Sponsoring Employer or its parent or subsidiary
corporations, or (iii) transfer or otherwise alienate any option granted to him
under this plan, other than by will or the laws of descent and distribution.
SECTION 4.08 The Sponsoring Employer stock certificates purchased through
the exercise of the option granted hereunder shall be issued to the Member as
soon as practicable after the date of such exercise. All shares of Sponsoring
Employer Stock purchased in accordance with Section 4.05 hereof shall be issued
in the name of the Member or former Member and shall be kept in such name by the
Member or former Member until the earlier of the date the shares are disposed of
or the expiration of both of the periods described in Section 4.11 hereof.
SECTION 4.09 Any Employee whose employment with the Employer is terminated
for any reason, except death or retirement, during a Plan Period shall cease
being a Member immediately. The balance of the Member's Contribution Account
shall be paid to such Member, or his legal representative, as soon as
practicable after his termination. Any options granted to such Member shall be
deemed null and void.
SECTION 4.09 If a Member shall die during the Plan Period, no further
contributions on behalf of the deceased Member shall be made. The Executor or
administrator of the deceased Member may elect to withdraw the balance in said
Member's Contribution Account by notifying the Employer in writing prior to the
last day of the Plan Period. In the event no election to withdraw has been made,
the balance accumulated in the Member's Contribution Account shall be used to
purchase shares of Sponsoring Employer's Stock in accordance with Section 4.05
hereof.
SECTION 4.10 If a Member shall retire during a Plan Period, no further
contributions on behalf of the retired Member shall be made. The Member may
elect to withdraw the balance in his Contribution Account by notifying the
Employer in writing prior to the last day of the Plan Period. In the event no
election to withdraw has been made, the balance accumulated in the retired
Member's Contribution Account shall be used to purchase shares of the Sponsoring
Employer's Stock in accordance with Section 4.05 hereof.
SECTION 4.11 If a Member or former Member disposes of a share of
Sponsoring Employer Stock obtained under this Plan (i) prior to two (2) years
after the Grant Date of such share, or (ii) prior to one (1) year after the
Exercise Date, then that Member or former Member must notify the Sponsoring
Employer immediately of such disposition in writing.
ARTICLE V
MISCELLANEOUS
SECTION 5.01 The Sponsoring Employer or an individual delegated such
authority by the Sponsoring Employer shall administer the Plan and keep records
of individual Member benefits. The Compensation Committee of the Board shall
interpret the terms and intent of the Plan and shall determine all questions
arising in the administration, interpretation and application of the Plan, and
all such determinations by the Compensation Committee shall be conclusive and
binding on all persons.
SECTION 5.02 Each Member, former Member, or any other person who shall
claim any right or benefit under this Plan, shall be entitled only to look to
the Employer for such benefit.
SECTION 5.03 The Compensation Committee of the Board may, at any time or
from time to time, amend the Plan in any respect, except that approval of the
stockholders of the Sponsoring Employer will be
A-4
<PAGE> 19
required for any amendment for which stockholder approval is required under
Section 423 of the Code or any other applicable law. The Compensation Committee
may at any time terminate the Plan effective as of the last day of any Plan
Period or may terminate the right of Members to make contributions or further
contributions under the Plan during any Plan Period.
SECTION 5.04 The Employer will pay all expenses of administering this Plan
that may arise in connection with this Plan.
SECTION 5.05 Any rules, regulations or procedures that may be necessary
for the proper administration or functioning of this plan that are not covered
in this Plan shall be promulgated and adopted by the Compensation Committee of
the Board.
SECTION 5.06 Any headings or subheadings in this Plan are inserted for
convenience of reference only and are to be ignored in the construction of any
Provisions hereof.
SECTION 5.07 This Plan shall be construed in accordance with the laws of
the State of Georgia.
SECTION 5.08 A misstatement of fact as to an Employee's length of
Continuous Service, date of employment or any such other matter shall be
corrected when it becomes known that any such misstatement of fact has occurred.
SECTION 5.09 The options granted hereunder are not transferrable by the
Member otherwise than by will or the laws of descent and distribution and are
exercisable during the Member's lifetime only by him. If a Member attempts such
assignment, transfer or alienation, his Employer shall disregard that action.
SECTION 5.10 This Plan is intended to be an "employee stock purchase plan"
qualified under Section 423 of the Code, and it shall be interpreted and
administered by the Sponsoring Employer in such a manner as to insure that the
Members receive the benefits provided by such a plan.
SECTION 5.11 This Plan shall not be deemed to constitute a contract
between an Employer and any Member or to be a consideration or an inducement for
the employment of any Member or Employee. Nothing contained in this Plan shall
be deemed to give any Member or Employee the right to be retained in the service
of an Employer or to interfere with the right of an Employer to discharge any
Member or Employee at any time regardless of the effect which such discharge
shall have upon him as a Member of the Plan.
SECTION 5.12 No liability whatever shall attach to or be incurred by any
past, present or future shareholders, officers or directors, as such, of the
Employer, under or by reason of any of the terms, conditions or agreements
contained in this Plan or implied therefrom, and any and all liabilities of, and
any and all rights and claims against, the Employer, or any shareholder, officer
or director as such, whether arising at common law or in equity or created by
statute or constitution or otherwise, pertaining to this Plan, are hereby
expressly waived and released by every Member, as a part of the consideration
for any benefits by the Employer under this Plan.
SECTION 5.13 Notwithstanding any other provisions of this Plan, in order
for this plan to continue as effective, it must be approved by the shareholders
of the Sponsoring Employer during the period commencing twelve (12) months prior
to and ending twelve (12) months after it is adopted by the Board.
SECTION 5.14 The aggregate number of shares of Sponsoring Employer Stock
reserved for purchase under the Plan as provided in Section 4.01 hereof, and the
calculation of the Issue Price per share as provided in Section 4.04 hereof and
the maximum number of shares which may be purchased by each Member pursuant to
Section 4.05 hereof shall be appropriately adjusted to reflect any increases or
decreases in the number of issued shares of Sponsoring Employer Stock resulting
from a subdivision or consolidation of shares or other capital adjustment, or
payment of a stock dividend, stock split, or other such increase or decrease in
such shares of Sponsoring Employer Stock. In the event of a dissolution or
liquidation of the Sponsoring Employer or a merger or consolidation in which the
Sponsoring Employer is not the surviving corporation or survives only as a
subsidiary of another corporation, each outstanding option granted under this
Plan shall terminate except to the extent that another corporation assumes such
option or substitutes another option therefor.
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<PAGE> 20
SECTION 5.15 The Sponsoring Employer's obligation to sell and deliver
stock under the Plan is at all times subject to all approvals of any
governmental authorities required in connection with the authorization,
issuance, sale or delivery of such stock.
SECTION 5.16 Any notice which the Sponsoring Employer or Member may be
required or permitted to give to each other shall be in writing, and may be
delivered personally or by mail, postage prepaid, addressed as follows: if to
the Sponsoring Employer to the Chief Financial Officer, Digital Transmission
Systems, Inc., 3000 Northwoods Parkway, Building 330, Norcross, Georgia 30071,
or at such other address as the Sponsoring Employer, by notice to the Members,
may designate in writing from time to time; if to any other Employer, to the
address designated by such Employer in a written notice to the Members; and if
to the Member, at the address shown on the records of the Sponsoring Employer,
or at such other address as the Member, by notice to the Sponsoring Employer,
may designate in writing from time to time.
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<PAGE> 21
APPENDIX A
DIGITAL TRANSMISSION SYSTEMS, INC.
3000 NORTHWOODS PARKWAY, BUILDING 330
NORCROSS, GEORGIA 30071
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Andres C. Salazar, Thomas C. Mock and Roger
E. Maloch, and each of them, with full power of substitution, as Proxy, to
represent and vote all the shares of Common Stock of DIGITAL TRANSMISSION
SYSTEMS, INC. held of record by the undersigned on September 16, 1996, at the
annual meeting of shareholders to be held on November 7, 1996 or any adjournment
thereof, as designated on the reverse side hereof and in their discretion as to
other matters.
Please sign exactly as name appears on the reverse side. When shares are
held by joint tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
The shares represented by this proxy will be voted as directed by the
stockholder. If no direction is given when the duly executed proxy is returned,
such shares will be voted "FOR" all nominees in Proposal 1 and "FOR" Proposals
2, 3 and 4.
/ / I PLAN TO ATTEND MEETING
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES IN PROPOSAL 1
AND "FOR" PROPOSALS 2, 3 AND 4.
1. Election of the following Nominees as Directors for terms expiring as stated
below:
<TABLE>
<S> <C>
For a term of three years: Gene Miller and Edwin Kantor
For a term of two years: Frank LaHaye and Robert D. Francis
For a term of one year: Andres C. Salazar and Thomas C. Mock
/ / FOR all Nominees / / WITHHELD for all Nominees
</TABLE>
INSTRUCTIONS: Withhold for the following only (Write the name of the nominee(s)
in the space below)
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(continued on other side)
2. Approval of an amendment to the Company's 1996 Stock Incentive Plan to
increase the number of shares of Common Stock reserved for issuance by
240,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
3. Approval of the Digital Transmission Systems, Inc. 1996 Employee Stock
Purchase Plan.
/ / FOR / / AGAINST / / ABSTAIN
4. Ratification of the selection of KPMG Peat Marwick as independent public
accountants for the Company's current fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
PLEASE MARK YOUR CHOICE LIKE
THIS /X/ IN BLUE OR BLACK INK,
Date
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Signature
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Signature if held jointly
PLEASE MARK, DATE AND SIGN AS YOUR NAME APPEARS ABOVE AND RETURN IN THE ENCLOSED
ENVELOPE.
