<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
AMENDMENT NO. 1
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
ENSTAR INC.
(Name of Registrant as Specified in its Charter)
------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
ENStar Inc.
6479 City West Parkway
Eden Prairie, Minnesota 55344-3246
---------------------
May 15, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of Shareholders
of ENStar Inc. to be held at 4:00 p.m. on June 18, 1998 at the offices of
Transition Networks, Inc., 6475 City West Parkway, Eden Prairie, Minnesota
55344.
The Notice of Annual Meeting and the Proxy Statement that follow
describe the formal business to be transacted at the meeting. During the
meeting we also will review the activities of the past year and items of
general interest about ENStar Inc. (the "Company"). Also, shareholders will
be given the opportunity to ask questions.
The items being considered at the meeting are:
1. election of a Board of Directors for the ensuing year and until their
successors are elected and qualified;
2. a proposal to amend the Company's 1996 Stock Incentive Plan to
increase the number of shares of the Company's Common Stock available
for issuance thereunder and expand the eligible participants to
include non-employee directors; and
3. such other business as may properly come before the meeting or any
adjournment thereof.
We recommend that you vote FOR the slate of directors that is set forth in
the accompanying Proxy Statement and FOR the proposal to amend the 1996 Stock
Incentive Plan.
WHETHER OR NOT YOU CAN ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND MAIL THE ENCLOSED PROXY CARD PROMPTLY. THIS ACTION WILL NOT LIMIT YOUR
RIGHT TO REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE ACCOMPANYING PROXY
STATEMENT OR TO VOTE IN PERSON IF YOU WISH TO ATTEND THE ANNUAL MEETING AND VOTE
PERSONALLY.
Sincerely
/s/ JEFFREY J. MICHAEL
Jeffrey J. Michael
President and Chief Executive Officer
<PAGE>
ENStar Inc.
6479 City West Parkway
Eden Prairie, Minnesota 55344-3246
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 18, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of ENStar
Inc., a Minnesota corporation, will be held at 4:00 p.m. on June 18, 1998 at the
offices of Transition Networks, Inc., 6475 City West Parkway, Eden Prairie,
Minnesota 55344.
This meeting is being held for the following purposes:
1. To elect four persons to serve as directors until the next annual
election of directors and until their successors are duly elected and
qualified;
2. To consider and act upon a proposal to amend the ENStar 1996 Stock
Incentive Plan to increase the number of shares of ENStar Inc.
Common Stock available for issuance thereunder and expand the
eligible participants to include non-employee directors; and
3. To transact such other business as may properly come before the
meeting.
ONLY SHAREHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON MAY 12, 1998, WILL
BE ENTITLED TO NOTICE OF AND TO VOTE AT THE MEETING. WHETHER OR NOT YOU PLAN TO
BE PRESENT AT THE MEETING, PLEASE SIGN AND RETURN THE ACCOMPANYING FORM OF PROXY
IN THE ENCLOSED POSTAGE PREPAID ENVELOPE AT YOUR EARLIEST CONVENIENCE.
By order of the Board of Directors
/s/ THOMAS S. WARGOLET
Thomas S. Wargolet,
Chief Financial Officer
and Secretary
Minneapolis, Minnesota
May 15, 1998
<PAGE>
ENStar Inc.
6479 City West Parkway
Eden Prairie, Minnesota 55344-3246
---------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
JUNE 18, 1998
This Proxy Statement is furnished to shareholders of ENStar Inc. ("ENStar"
or the "Company"), 6479 City West Parkway, Eden Prairie, Minnesota 55344-3246,
in connection with the solicitation of proxies on behalf of the Board of
Directors for use at the Annual Meeting of Shareholders to be held at 4:00 p.m.
on June 18, 1998 at the offices of Transition Networks, Inc., 6475 City West
Parkway, Eden Prairie, Minnesota 55344 (the "Annual Meeting"), for the purposes
set forth in the accompanying Notice of Annual Meeting. This Proxy Statement
and the accompanying form of proxy are being mailed to shareholders on or about
May 15, 1998.
Shares represented by a proxy will be voted in the manner directed by the
shareholder. If no direction is made, the proxy will be voted (i) for the
election of the nominees for directors named in this Proxy Statement, (ii) for
the proposal to amend the Company's 1996 Stock Incentive Plan and (iii) in
accordance with the judgment of the persons named in the proxy as to such other
matters as may properly come before the meeting. Shares voted as abstentions on
any matter (or a "withhold vote for" as to directors) will be counted as shares
that are present and entitled to vote for purposes of determining the presence
of a quorum at the meeting and as unvoted, although present and entitled to
vote, for purposes of determining the approval of each matter as to which the
shareholder has abstained. If a broker submits a proxy which indicates that the
broker does not have discretionary authority as to certain shares to vote on one
or more matters, those shares will be counted as shares that are present and
entitled to vote for purposes of determining the presence of a quorum at the
meeting, but will not be considered as present and entitled to vote with respect
to such matters.
All expenses of the Company in connection with this solicitation will be
borne by the Company. In addition to solicitation by mail, proxies may be
solicited by directors, officers and other employees of the Company by
telephone, Internet, telegraph, telefax or telex, in person or otherwise,
without additional compensation. The Company will also request brokerage firms,
nominees, custodians and fiduciaries to forward proxy materials to the
beneficial owners of shares held of record by such persons and will reimburse
such persons and the Company's transfer agent for their reasonable out-of-pocket
expenses in forwarding such material. Additionally, the Company has elected to
retain the services of Norwest Bank Minnesota, National Association for the
purposes of broker nominee search, distribution of proxy materials to banks,
brokers, nominees and intermediaries and
<PAGE>
solicitation in order to obtain voted proxies for the Annual Meeting at an
estimated cost of $2,000, plus out-of-pocket expenses.
A shareholder giving a proxy may revoke it any time prior to the voting of
the proxy by filing with the Secretary of the Company a written notice of
revocation or another proxy bearing a later date. Any written notice of
revocation or subsequently dated proxy should be mailed or delivered to Thomas
S. Wargolet, Chief Financial Officer and Secretary, ENStar Inc., 6479 City West
Parkway, Eden Prairie, Minnesota 55344-3246.
The close of business on May 12, 1998 was fixed by the Board of Directors
as the record date for determination of shareholders entitled to notice of and
to vote at the Annual Meeting. At such date the Company had outstanding
3,235,356 shares of common stock, $.01 par value per share (the "Common Stock").
Each share of Common Stock entitles the holder to one vote on all matters to
come before the meeting. There is no cumulative voting.
This Proxy Statement includes certain information regarding Americable,
Inc. ("Americable"), Transition Networks, Inc. ("Transition") and Enstar
Networking Corporation ("Enstar Networking"), which are operating subsidiaries
of the Company.
The Company is including with this Proxy Statement its Annual Report to
Shareholders for the year ended December 31, 1997, which includes a copy of the
Company's 1997 Form 10-K Report as filed with the Securities and Exchange
Commission. SHAREHOLDERS MAY RECEIVE, WITHOUT CHARGE, ADDITIONAL COPIES OF THE
COMPANY'S 1997 FORM 10-K REPORT BY WRITING TO ENSTAR INC., 6479 CITY WEST
PARKWAY, EDEN PRAIRIE, MINNESOTA, 55344-3246, ATTENTION: CHIEF FINANCIAL
OFFICER.
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<PAGE>
I. ELECTION OF DIRECTORS
The Board of Directors has recommended that the number of directors to be
elected for the coming year be set at four. The Board of Directors has
nominated and recommended that the shareholders elect the nominees named below
as directors of the Company for the ensuing year and until their respective
successors are duly elected and qualified.
Unless otherwise indicated thereon, the persons named in the enclosed form
of proxy intend to vote FOR the election of the four nominees listed below. The
affirmative vote of a majority of the shares of the Company's Common Stock
present (or represented by proxy) and entitled to vote at the 1998 Annual
Meeting is required to elect each of the nominees as directors for the ensuing
year or until their successors are elected and have qualified. All of the
nominees are members of the present Board of Directors. If for any reason any
nominee shall be unavailable for election to the Board of Directors, votes will
be cast pursuant to authority granted by the enclosed proxy for such other
candidate or candidates as may be nominated by the Board of Directors. The
Board of Directors has no reason to believe that any of the nominees listed
below will be unable to serve if elected to office.
CERTAIN INFORMATION CONCERNING THE NOMINEES FOR DIRECTOR FOLLOWS:
NAME BIOGRAPHICAL INFORMATION
- ---- ------------------------
James H. Michael (age 77). . . . Mr. James H. Michael has served as Chairman
of the Board of ENStar since March 1996.
Mr. Michael served on the Board of
Directors of North Star Universal, Inc.
("NSU"), of which ENStar was a wholly owned
subsidiary prior to February 1997, and was
the Chairman of the Board of NSU prior to
July 1991. Also prior to March 1996, Mr.
Michael was Chairman of the Board of
Michael Foods, Inc. ("Michael"), into which
NSU was merged in February 1997.
Mr. Michael is the father of Jeffrey J.
Michael, ENStar's President and Chief
Executive Officer.
Miles E. Efron (age 71). . . . . Mr. Miles E. Efron has served on the Board
of Directors of ENStar since March 1996.
From July 1991 until February 1997,
Mr. Efron served as Chairman of the Board
of Directors of NSU.
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<PAGE>
Mr. Efron also is a director of Michael
and Medtox Scientific, Inc.
Richard J. Braun (age 53). . . . Mr. Richard J. Braun has served as a
director of ENStar since March 1996. Mr.
Braun served on the Board of Directors of
NSU from 1994 to 1996. Since July 1996 he
also has served as Chief Executive Officer
and a Director of Medtox Scientific, Inc, a
company that provides laboratory and
diagnostic testing services. From 1994 to
1996, Mr. Braun acted as a private investor
and provided management consulting services
to the health care and technology
industries. From 1992 to 1994, Mr. Braun
served as Chief Operating Officer and a
Director of Employee Benefit Plans, Inc.
(NYSE: EBP).
Jeffrey J. Michael (age 41). . . Mr. Jeffrey J. Michael has served as the
President and Chief Executive Officer of
the Company since March 1996. Mr. Michael
was an initial director and officer
(serving as President and Secretary) of
ENStar at the time it was organized by NSU
in December 1995. Mr. Michael served as
President and Chief Executive Officer of
NSU from December 1990 until February 1997.
Mr. Michael is the son of James H. Michael.
Mr. Michael also is a director of Michael
and CorVel Corporation ("CorVel").
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<PAGE>
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board of Directors met five times in 1997. The Board of Directors has
established an Audit Committee and a Compensation Committee. The Board of
Directors has not established a nominating committee.
The Audit Committee, consisting of Mr. Efron and Mr. Braun, did not meet
in 1997. The Audit Committee will review and make recommendations and reports
to the Board with respect to (i) the independent auditors, (ii) the quality and
effectiveness of internal controls, (iii) engagement or discharge of the
independent auditors, (iv) professional services provided by the independent
auditors, and (v) the review and approval of major changes in the Company's
accounting principals and practices.
The Compensation Committee, consisting of Mr. Efron and Mr. Braun, met
two times in 1997. The Compensation Committee considers and recommends to the
Board salaries, bonuses and other remuneration for the Company's executive
officers. This committee also administers the ENStar 1996 Stock Incentive Plan
(the "Stock Incentive Plan").
During 1997, all of the directors attended all of the meetings of the
Board of Directors and Messrs. Efron and Braun both attended the meetings of the
Compensation Committee.
COMPENSATION OF DIRECTORS
In 1997, the Company's non-employee directors received an annual retainer
of $8,000 for serving as members of the Company's Board of Directors. Directors
incurring travel expenses to attend meetings are reimbursed in full. Members of
committees receive an additional $300 for each committee meeting they attend.
Under the Stock Incentive Plan, each non-employee director of ENStar, upon
his or her initial election as a director, is granted an option to purchase
4,000 shares of Common Stock. Starting with the 1997 Annual Meeting, each
non-employee director of ENStar is also granted an option to purchase 1,000
shares of Common Stock on the date of the annual meeting of shareholders each
year if the director will remain in office immediately following such meeting.
The exercise price of each option is equal to 100 percent of the fair market
value per share on the date of grant. Such options are non-qualified stock
options, become exercisable six months after the date of grant and terminate on
the fifth anniversary of the date of grant or earlier, under certain
circumstances.
In 1997, each of Messrs. James H. Michael, Efron and Braun were granted an
option to purchase 10,000 shares of Common Stock. The exercise price of such
options is $7.375 per share. The grants are contingent upon shareholder
approval of the proposal to amend the Company's 1996 Stock Incentive Plan.
See "II. Proposal to Amend the Company's 1996 Stock Incentive Plan."
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<PAGE>
II. PROPOSAL TO AMEND THE COMPANY'S 1996 STOCK INCENTIVE PLAN
The Company's Board of Directors has adopted an amendment to the
Company's 1996 Stock Incentive Plan (the "Stock Incentive Plan") to provide
for the issuance of an additional 200,000 shares of Common Stock pursuant to
the Stock Incentive Plan, subject to shareholder approval. The amendment
further provides for participation in the Stock Incentive Plan for directors
who are not also employees of the Company ("Non-Employee Directors"). The
purpose of the Stock Incentive Plan is to aid in attracting and retaining key
management personnel capable of assuring the future success of, and
Non-Employee Directors capable of providing strategic direction to, the
Company, to offer such personnel and directors incentives to put forth
maximum efforts for the success of the Company's business and to afford such
personnel and directors an opportunity to acquire a proprietary interest in
the Company and to align further the interests of such personnel and
directors with the Company's shareholders.
INCREASE IN AVAILABLE SHARES
As originally adopted, the Stock Incentive Plan provides that a total of
300,000 shares of the Company's Common Stock are available for the granting
of awards. As of April 1, 1998, no shares remained available for grant under
the Stock Incentive Plan. The 200,000 share increase in the number of shares
available for the granting of awards will allow the Company to continue to
provide incentives to management personnel and Non-Employee Directors. The
Company believes that stock based awards make a significant contribution to
the success of the Company in attracting, motivating and retaining skilled
management personnel and directors.
PARTICIPATION BY NON-EMPLOYEE DIRECTORS
As originally adopted, Non-Employee Directors were not eligible to
receive grants of awards, other than automatic grants of stock options as
described below, under the Stock Incentive Plan. The amendment provides that
Non-Employee Directors may receive awards under the Stock Incentive Plan of
the types described below. The Board of Directors believes that the ability
to grant awards to Non-Employee Directors increases the flexibility of the
Company with respect to director compensation, while providing a means to
further align the interests of Non-Employee Directors with those of the
shareholders.
NEW PLAN BENEFITS
On December 29, 1997, options to purchase 270,000 shares of Common Stock
were granted under the Stock Incentive Plan. The Compensation
Committee made a portion of the December 29, 1997 grant conditional on
shareholder approval of the proposal to amend the Stock Incentive Plan. The
following chart reflects grants of Nonqualified Stock Options (as defined below)
made on December 29, 1997 subject to shareholder approval of the amendment:
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<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION UNITS (1) (2)
----------------- -------------
<S> <C>
Jeffrey J. Michael, President and Chief Executive Officer. . . 17,100
All Current Executive Officers as a Group (5). . . . . . . . . 17,100
Non-employee Directors as a Group (3). . . . . . . . . . . . . 30,000
All Other Employees as a Group . . . . . . . . . . . . . . . . 0
</TABLE>
- ---------------
(1) Units are options to purchase shares of Company Common Stock at $7.375 per
share, which is equal to 100% of fair market value on the date of grant.
The options were granted, subject to shareholder approval, on December 29,
1997. The options become exercisable with respect to 25% of the shares
each year over a period of four years and have a term of ten years.
(2) The conditional option grants listed constitute a portion of the grants
made on December 29, 1997. For more information regarding stock option
grants, see "Stock Options."
Other awards under the Stock Incentive Plan as proposed to be amended are
not yet determinable.
SUMMARY OF THE STOCK INCENTIVE PLAN
The following summary description of the Stock Incentive Plan is
qualified in its entirety by reference to the full text of the Stock
Incentive Plan, a copy of which may be obtained by the shareholders of the
Company upon request directed to the Company's Secretary at ENStar Inc., 6479
City West Parkway, Eden Prairie, Minnesota 55344-3246.
ELIGIBILITY. Any employee, officer, consultant or independent contractor
of the Company and its affiliates is eligible to receive awards under the Stock
Incentive Plan. The Stock Incentive Plan also provides for the automatic grant
of options to Non-Employee Directors as described below. Approximately five
employees will be eligible to participate in the Stock Incentive Plan in 1998.
The Stock Incentive Plan was approved by the Company's sole shareholder in
March 1996. The Stock Incentive Plan terminates on March 5, 2006, and no awards
may be made after that date. However, unless otherwise expressly provided in
the Stock Incentive Plan or an applicable award agreement, any award granted
may extend beyond the end of such 10-year period.
TYPES OF AWARDS; PLAN ADMINISTRATION. The Stock Incentive Plan permits the
granting of (a) stock options, including "incentive stock options" ("Incentive
Stock
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<PAGE>
Options") meeting the requirements of Section 422 of the Code and stock options
that do not meet such requirements ("Nonqualified Stock Options"), (b) stock
appreciation rights ("SARs"), (c) restricted stock and restricted stock units,
(d) performance awards, (e) dividend equivalents and (f) other awards valued in
whole or in part by reference to or otherwise based upon the Company's stock
("other stock-based awards"). The Stock Incentive Plan is administered by a
committee of the Company's Board, each of whom shall be an "outside director"
within the meaning of Section 162(m) of the Code (the "Committee"). The
Committee has the authority to establish rules for the administration of the
Stock Incentive Plan, to select the individuals to whom awards are granted, to
determine the types of awards to be granted and the number of shares of the
Company's Common Stock covered by such awards, and to set the terms and
conditions of such awards. The Committee may also determine whether the payment
of any amounts received under any award shall or may be deferred.
Determinations and interpretations with respect to the Stock Incentive Plan are
at the sole discretion of the Committee, whose determinations and
interpretations are binding on all interested parties. The Committee may
delegate to one or more officers the right to grant awards with respect to
individuals who are not subject to Section 16(b) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
If any shares of the Company's Common Stock subject to any award or to
which an award relates are not purchased or are forfeited, or if any such award
terminates without the delivery of shares or other consideration, the shares
previously used for such awards will be available for future awards under the
Stock Incentive Plan. Notwithstanding the foregoing, the total number of shares
of the Company's Common Stock that may be purchased upon exercise of Incentive
Stock Options (as defined below) granted under the Stock Incentive Plan may not
exceed 300,000 shares (subject to adjustment as described below). No person may
be granted any award or awards the value of which awards are based solely on an
increase in the value of the Company's Common Stock after the date of grant for
more than 170,000 shares of the Company's Common Stock, in the aggregate, in any
calendar year.
Awards may be granted for no cash consideration or for such minimal cash
consideration as may be required by applicable law. Awards may provide that
upon the grant or exercise thereof the holder will receive shares of the
Company's Common Stock, cash or any combination thereof, as the Committee shall
determine. The exercise price per share under any stock option, the grant price
of any SAR, and the purchase price of any security which may be purchased under
any other stock-based award shall not be less than 100% of the fair market value
of the Company's Common Stock on the date of the grant of such option, SAR or
award. Options may be exercised by payment in full of the exercise price,
either in cash or, at the discretion of the Committee, in whole or in part by
tendering shares of the Company's Common Stock or other consideration having a
fair market value on the date the option is exercised equal to the exercise
price. Determinations of fair
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<PAGE>
market value under the Stock Incentive Plan are made in accordance with methods
and procedures established by the Committee. For purposes of the Stock
Incentive Plan, the fair market value of shares of the Company's Common Stock on
a given date shall be the last sale price of the shares as reported on the
Nasdaq National Market on such date, unless otherwise determined by the
Committee.
The Stock Incentive Plan provides that the Committee may grant reload
options, separately or together with another option, and may establish the terms
and conditions of such reload options. Pursuant to a reload option, the
optionee would be granted a new option to purchase the number of shares not
exceeding the sum of (i) the number of shares of Common Stock tendered as
payment upon the exercise of the option to which such reload option relates, and
(ii) the number of shares of Common Stock tendered as payment of the amount to
be withheld under tax laws in connection with the exercise of the option to
which such reload option relates. Reload options may be granted with respect to
options granted under any stock option plan of the Company.
The holder of an SAR will be entitled to receive the excess of the fair
market value (calculated as of the exercise date or, if the Committee shall so
determine, as of any time during a specified period before or after the exercise
date) of a specified number of shares over the grant price of the SAR.
The holder of restricted stock may have all of the rights of a shareholder
of the Company, including the right to vote the shares subject to the restricted
stock award and to receive any dividends with respect thereto, or such rights
may be restricted. Restricted stock may not be transferred by the holder until
the restrictions established by the Committee have lapsed. Holders of
restricted stock units shall have the right, subject to any restrictions imposed
by the Committee, to receive shares of Common Stock (or a cash payment equal to
the fair market value of such shares) at some future date. Upon termination of
the holder's employment during the restricted period, restricted stock and
restricted stock units are forfeited, unless the Committee determines otherwise.
Performance awards provide the holder thereof the right to receive
payments, in whole or in part, upon the achievement of such goals during such
performance periods as the Committee shall establish. A performance award
granted under the Stock Incentive Plan may be denominated or payable in cash,
shares of Common Stock, restricted stock or other property. Dividend
equivalents entitle the holder thereof to receive payments (in cash, shares or
other property as determined by the Committee) equivalent to the amount of cash
dividends with respect to a specified number of shares.
The Committee is also authorized to establish the terms and conditions of
other stock-based awards.
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<PAGE>
NON-EMPLOYEE DIRECTOR PARTICIPATION. Under the Stock Incentive Plan,
Non-Employee Directors receive Nonqualified Stock Options to purchase 4,000
shares of the Company's Common Stock upon first being elected or appointed to
the Company's Board. During the term of the Stock Incentive Plan, Non-Employee
Directors are granted, as of the date of each annual meeting of shareholders, if
such Director's term of office continues after such date, an option to purchase
1,000 shares of Common Stock. Such options are exercisable in full six months
after the date of grant, expire on the fifth anniversary of the date of grant
and have an exercise price equal to the fair market value of Common Stock as of
the date of grant.
MISCELLANEOUS. No award and no right under any award granted under the
Stock Incentive Plan shall be transferable by the individual to whom it was
granted otherwise than by will or by the laws of descent and distribution;
PROVIDED, HOWEVER, that, if so determined by the Committee, a participant may,
in the manner established by the Committee, designate a beneficiary or
beneficiaries to exercise the rights of the participant and receive any property
distributable with respect to any award upon the death of the participant. Each
award or right under any award shall be exercisable during a participant's
lifetime only by the participant or, if permissible under applicable law, by the
participant's guardian or legal representative. Except as otherwise provided in
any applicable award agreement, no award or right under any such award may be
pledged, alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or encumbrance thereof shall be void and unenforceable
against the Company or any affiliate.
If any dividend or other distribution, recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of shares of Common Stock or other
securities of the Company, issuance of warrants or other rights to purchase
shares of Common Stock or other securities of the Company, or other similar
corporate transaction or event affects the shares of Common Stock so that an
adjustment is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Stock
Incentive Plan, the Committee shall, in such manner as it deems equitable,
adjust (a) the number and type of shares (or other securities or property) which
thereafter may be made the subject of awards, (b) the number and type of shares
(or other securities or property) subject to outstanding awards, and (c) the
exercise price with respect to any award. The Committee may correct any defect,
supply any omission, or reconcile any inconsistency in the Stock Incentive Plan
or any award agreement in the manner and to the extent it shall deem desirable
to carry the Stock Incentive Plan into effect.
The Board of Directors may amend, alter or discontinue the Stock
Incentive Plan at any time, provided that shareholder approval must be
obtained for any change that (i) absent such shareholder approval would cause
Rule 16b-3 as promulgated by the Securities and Exchange Commission under the
Exchange Act ("Rule 16b-3") to become unavailable with respect to the
Stock
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Incentive Plan, (ii) requires the approval of the Company's shareholders under
any rules or regulations of the National Association of Securities Dealers,
Inc., the Nasdaq Stock Market, or any other securities exchange applicable to
the Company; or (iii) requires the approval of the Company's shareholders under
the Internal Revenue Code of 1986, as amended (the "Code"), in order to permit
Incentive Stock Options to be granted under the Stock Incentive Plan.
The closing price per share of the Company's Common Stock on April 22,
1998, as reported by the Nasdaq Stock Market, was $7.25.
TAX CONSEQUENCES. The following is a summary of the principal federal
income tax consequences generally applicable to awards under the Stock Incentive
Plan. The grant of an option or SAR is not expected to result in any taxable
income for the recipient. The holder of an Incentive Stock Option generally
will have no taxable income upon exercising the Incentive Stock Option (except
that a liability may arise pursuant to the alternative minimum tax), and the
Company will not be entitled to a tax deduction when an Incentive Stock Option
is exercised. Upon exercising a Nonqualified Stock Option, the optionee must
recognize ordinary income equal to the excess of the fair market value of the
shares of Common Stock acquired on the date of exercise over the exercise price,
and the Company will be entitled at that time to a tax deduction for the same
amount. Upon exercising a SAR, the amount of any cash received and the fair
market value on the exercise date of any shares of Common Stock received are
taxable to the recipient as ordinary income and deductible by the Company. The
tax consequence to an optionee upon a disposition of shares acquired through the
exercise of an option will depend on how long the shares have been held and upon
whether such shares were acquired by exercising an Incentive Stock Option or by
exercising a Nonqualified Stock Option or SAR. Generally, there will be no tax
consequence to the Company in connection with the disposition of shares acquired
under an option, except that the Company may be entitled to a tax deduction in
the case of a disposition of shares acquired under an Incentive Stock Option
before the applicable Incentive Stock Option holding periods set forth in the
Code have been satisfied.
With respect to other awards granted under the Stock Incentive Plan that
are payable in cash or shares of the Company's Common Stock that are either
transferable or not subject to substantial risk of forfeiture, the holder of
such an award must recognize ordinary income equal to the excess of (a) the cash
or the fair market value of the shares of Common Stock received (determined as
of the date of such receipt) over (b) the amount (if any) paid for such shares
of Common Stock by the holder of the award, and the Company will be entitled at
that time to a deduction for the same amount. With respect to an award that is
payable in shares of Common Stock that are restricted as to transferability and
subject to substantial risk of forfeiture, unless a special election is made
pursuant to the Code, the holder of the award must recognize ordinary income
equal to the excess of (i) the fair market value of the shares of Common Stock
received (determined as of the first
-11-
<PAGE>
time the shares became transferable or not subject to substantial risk of
forfeiture, whichever occurs earlier) over (ii) the amount (if any) paid for
such shares of Common Stock by the holder, and the Company will be entitled at
that time to a tax deduction for the same amount.
Special rules may apply in the case of individuals subject to Section 16(b)
of the Exchange Act. In particular, unless a special election is made pursuant
to the Code, shares received pursuant to the exercise of a stock option or SAR
may be treated as restricted as to transferability and subject to a substantial
risk of forfeiture for a period of up to six months after the date of exercise.
Accordingly, the amount of any ordinary income recognized, and the amount of the
Company's tax deduction, are determined as of the end of such period.
Under the Stock Incentive Plan, the Committee may permit participants
receiving or exercising awards, subject to the discretion of the Committee and
upon such terms and conditions as it may impose, to surrender shares of the
Company's Common Stock (either shares received upon the receipt or exercise of
the award or shares previously owned by the optionee) to the Company to satisfy
federal and state withholding tax obligations.
RECOMMENDATION BY THE ENSTAR BOARD; VOTE REQUIRED. The affirmative vote of
the holders of a majority of the shares of ENStar Common Stock represented at
the meeting and entitled to vote is necessary for approval of the amendment to
the Stock Incentive Plan. Proxies will be voted in favor of such proposal
unless otherwise specified. THE ENSTAR BOARD RECOMMENDS THAT ENSTAR
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AMENDMENT TO THE STOCK INCENTIVE PLAN.
-12-
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee of the Board of Directors (the "Committee")
establishes the specific compensation for the Company's executive officers who
do not have direct operating responsibilities at one of the Company's operating
subsidiaries. After consideration of Committee recommendations, the full Board
of Directors reviews and approves the salaries and bonuses of such executive
officers. The Committee also is responsible for administering the Company's
Stock Incentive Plan. Compensation for officers of the Company's operating
subsidiaries, Americable, Transition and Enstar Networking, generally is
determined by the Company's Chief Executive Officer, consistent with the salary
structure and bonus programs at such operating subsidiaries.
EXECUTIVE COMPENSATION PHILOSOPHY AND GOALS
The Company has only one executive officer who does not have direct
operating responsibilities at any of its operating subsidiaries, Jeffrey J.
Michael, President and Chief Executive Officer. The compensation arrangements
for Mr. Michael are designed to motivate and reward the executive for attaining
financial and strategic objectives essential to the Company's overall success
and continued growth, while at the same time allowing the Company to retain high
caliber executives. The key components of the Company's compensation programs
are base salary, cash bonuses and, to a lesser extent, stock options.
The Company's other named executive officers include Peter E. Flynn,
Executive Vice President of the Company who is also President of Americable,
Thomas S. Wargolet, Chief Financial Officer and Secretary of the Company, who
is also Vice President--Finance and Operations of Enstar Networking, C.S.
Mondelli, who is President and Chief Executive Officer of Transition, and
Ronald D. Newman, President of Enstar Networking. The compensation
arrangements for Messrs. Flynn, Wargolet, Mondelli and Newman are designed to
motivate and reward these executives primarily for the financial performance
of the operating subsidiaries for which they perform services, although,
certain of Messrs. Flynn's and Wargolet's compensation is based on their
additional responsibilities as executive officers of the Company.
BASE SALARIES
The Committee generally believes executive officers' base salaries should
be moderate, yet competitive in relation to salaries commanded by persons in
similar positions; however, the Committee also believes that a substantial
portion of each executive officer's compensation should be contingent and based
on the Company's
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<PAGE>
and such officer's performance. In February 1996, an independent executive
compensation consultant was engaged to advise the Committee concerning the
establishment of compensation programs for the Company's executive officers
consistent with these general policies. The compensation consultant also
reviewed the compensation programs at the Company's operating subsidiaries.
Neither the Committee nor such consultant, however, conducted formal salary
comparisons or surveys in determining the compensation levels for the Company's
executive officers. In addition to the input of the compensation consultant, in
setting an officer's base salary the Company considers the personal performance
of the officer, the relative importance of the functions the officer performs,
the scope of the officer's ongoing responsibilities and estimated salary levels
in effect at comparable companies for comparable positions. The weight given to
each of these factors varies between individuals and is a subjective
determination by the Committee or, in the case of the named executive officers
at the Company's operating subsidiaries, the Company's Chief Executive Officer
after consultation with the members of the Committee.
CASH BONUSES
Annual bonuses for executives with direct operating responsibility at the
Company's operating subsidiaries are designed to reward such executives for
personal contributions to the success of such operating subsidiary and generally
are earned under a structured formula. Individual performance targets are
established based on an annual operating budget, which is submitted for review
and approved by the Chief Executive Officer of the Company after consultation
with the members of the Committee. At the end of the calendar year, the Chief
Executive Officer evaluates actual financial performance against individual
performance targets. The potential cash bonuses range from 10% to 40% of the
executive's annual base salary, beginning when operating profits exceed minimum
levels of performance (80% of budget) and increasing incrementally up to the
maximum when the profits equal or exceed a superior performance target (120% of
budget).
The Committee has determined that annual cash bonuses for Messrs. Michael
and Flynn will be largely discretionary based on each such officer's
contribution to the achievement of certain strategic goals of the Company.
STOCK OPTIONS
In December 1997, the Company approved the grant of non-qualified stock
options to Messrs. Michael and Flynn pursuant to the Stock Incentive Plan.
Certain of the grants are contingent upon receiving shareholder approval in the
increase in shares available under the Stock Incentive Plan. The number of
shares subject to such options was determined by the Committee considering
factors such as the officer's performance and overall levels of compensation.
It is anticipated that additional stock options periodically will be granted to
the Company's executive
-14-
<PAGE>
officers. Due to its limited corporate staff, however, the Committee does not
intend to establish formal policies or formulas for determining the timing,
amount or particular vesting schedules for stock option awards. At the parent
company level, the Committee believes that the limited use of stock options for
the Company's corporate staff will motivate executives to achieve positive
long-term financial results increasing shareholder value.
The Company's operating subsidiaries have established separate stock
option programs. During 1997, Mr. Wargolet and Mr. Newman participated in
the stock option program at Americable and, effective January 1, 1998,
participated in the Enstar Networking stock option program. Mr. Mondelli
participates in the Transition stock option program. The amount of the stock
option awards made pursuant to such programs in 1997 was determined by the
Company's Chief Executive Officer after consultation with the Board of
Directors of the Company. The Committee believes that the use of separate
stock option programs at the operating subsidiary level will cause those
persons with operating responsibilities at an operating subsidiary to focus
more directly on the performance of such subsidiary.
1997 CEO COMPENSATION
During 1997, Mr. Jeffrey J. Michael, as President and Chief Executive
Officer of ENStar, had overall responsibility for the strategic direction of
ENStar and the performance of ENStar's operating subsidiaries. Mr. Michael
first was elected President of NSU in December 1990, and was elected President
of ENStar at the time of its initial organization. Mr. Michael is not a party
to an employment agreement.
Mr. Michael's compensation at ENStar in 1997 consisted solely of his
base salary of $187,654. Further, Mr. Michael received a non-qualified stock
option to purchase 125,000 shares of Common Stock in 1997 under the Stock
Incentive Plan, 17,100 of which are subject to shareholder approval of the
proposal to amend the Stock Incentive Plan, and will be eligible for further
stock option grants under the plan. Mr. Michael's base compensation was
determined based on consideration of the factors discussed under the heading
"Base Salaries" appearing above.
This report of the Committee shall not be deemed incorporated by
reference by any general statement incorporating by referencing this proxy
statement into any filing under the Securities Act of 1933, as amended, or
under the Exchange Act except to the extent that the Company
specifically
-15-
<PAGE>
incorporates this information by reference, and shall not otherwise be deemed
filed under such acts.
Miles E. Efron
Richard J. Braun
Members of the Committee
-16-
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the President and
Chief Executive Officer and the four other most highly compensated executive
officers (the "Named Executive Officers") as of the year ended December 31,
1997. Information is also provided for the year ended December 31, 1996, the
first year in which the Company operated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION* LONG-TERM
-------------------------------- COMPENSATION
SALARY BONUS STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) OPTIONS (#)(1) COMPENSATION
--------------------------- --------- ---------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
Jeffrey J. Michael . . . . . . . . . . . . 1997 $ 187,654 $ 0 125,000(2) $ 7,146(3)
President and Chief Executive Officer 1996(4) -- -- 28,500 --
Peter E. Flynn . . . . . . . . . . . . . . 1997 157,939 0 90,000 6,889(5)
Executive Vice President 1996(6) -- -- 23,500 --
C.S. Mondelli. . . . . . . . . . . . . . . 1997 138,058 16,250 0 4,087(7)
President and Chief Executive Officer 1996 120,000 24,000 70,000(8) 2,769
of Transition
Ronald D. Newman . . . . . . . . . . . . . 1997 124,500 13,347 20,000(9) 1,718(7)
President of Enstar Networking 1996 85,000 10,150 25,000(9) 476
Thomas S. Wargolet . . . . . . . . . . . . 1997 90,000 0 0 4,404(7)
Chief Financial Officer and Secretary 1996 87,231 26,100 49,250(10) 2,890
</TABLE>
- ---------------------
* No years prior to fiscal 1996 are reported as the Company was a wholly
owned subsidiary of NSU, a corporation subject to the reporting
requirements of the Securities Exchange Act of 1934.
(1) None of the Named Executive Officers held or received any awards of
restricted shares.
(2) 17,100 of such options are contingent grants. See "II. Proposal to
Amend the Company's 1996 Stock Incentive Plan."
(3) Consists of $4,750 contributed to the Company's 401(k) plan for the
benefit of Mr. Michael and $2,396 of which represents life and disability
insurance premiums paid by ENStar for the benefit of Mr. Michael.
(4) During 1996, Mr. Michael did not receive any cash compensation from the
Company. Mr. Michael did receive an annual salary of $235,000 from NSU,
and $7,196 in other compensation, $4,750 of which represents amounts
contributed by NSU for the benefit of Mr. Michael pursuant to NSU's
401(k) plan, and $2,446 of which represents life and disability insurance
premiums paid by NSU for the benefit of Mr. Michael.
(5) Consists of $4,750 contributed to the Company's 401(k) plan for the
benefit of Mr. Flynn and $2,139 of which represents life and disability
insurance premiums paid by ENStar for the benefit of Mr. Flynn.
(6) During 1996, Mr. Flynn did not receive any cash compensation from the
Company. Mr. Flynn did receive an annual salary of $161,330 and a bonus
of $100,000 from NSU, and $6,889 in other compensation, $4,750 of which
represents amounts contributed by NSU for the benefit of Mr. Flynn
pursuant to NSU's 401(k) plan, and $2,139 of which represents life and
disability insurance premiums paid by NSU for the benefit of Mr. Flynn.
(7) Amount contributed to the Company's 401(k) plan for the benefit of
employee.
(8) Represents options to purchase shares of Transition common stock.
(9) Represents options to purchase shares of Americable common stock, which
in 1998 were replaced by options to purchase shares of Enstar Networking
common stock.
(10) Includes options to purchase 35,000 shares of Americable common stock,
which in 1998 were replaced by options to purchase shares of Enstar
Networking common stock.
-17-
<PAGE>
STOCK OPTIONS
OPTION GRANTS DURING 1997
The following table sets forth individual grants of stock options made to
the Named Executive Officers during the year ended December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF POTENTIAL REALIZABLE
SECURITIES TOTAL OPTIONS EXERCISE VALUE AT ASSUMED
UNDERLYING GRANTED TO PRICE OR ANNUAL RATES OR STOCK
OPTIONS EMPLOYEES BASE PRICE APPRECIATION
GRANTED IN FISCAL PRICE/SH. EXPIRATION FOR OPTION TERM(2)
NAME (#)(1) YEAR(%) ($) DATE 5%($) 10%($)
- ---- ----------------- ------------ ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey J. Michael . . . 125,000(3) 46.3%(4) $ 7.375 12/29/2007 $ 579,762 $ 1,469,231
Peter E. Flynn . . . . . 90,000 33.3(4) 7.375 12/29/2007 417,429 1,057,847
C.S. Mondelli. . . . . . -- -- -- -- -- --
Ronald D. Newman . . . . 20,000(5) 44.4(6) 1.150 4/1/2006 14,465 36,656
Thomas S. Wargolet . . . -- -- -- -- -- --
</TABLE>
- ------------------------
(1) Each option represents the right to purchase one share of common stock.
The options shown in this table are all non-qualified stock options.
The options to purchase shares of Common Stock of ENStar granted to
Messrs. Michael and Flynn become exercisable with respect to 25% of
such shares each year over a period of four years from the date of
grant and have a term of ten years. To the extent not already
exercisable, the options generally become exercisable in the event of a
merger in which ENStar or Americable, as the case may be, is not the
surviving corporation, a transfer of all the stock of ENStar or
Americable, as applicable, a sale of substantially all the assets, or a
dissolution or liquidation, of ENStar or Americable, as applicable.
(2) The compounding assumes a ten year exercise period for all option grants.
The 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by rules of the Securities and Exchange
Commission and do not represent ENStar's estimate or projection of future
common stock prices. These amounts represent certain assumed rates of
appreciation only. Actual gains, if any, on stock option exercises are
dependent on the future performance of the common stock of ENStar,
Americable and Transition, as applicable, and overall stock market
conditions. The amounts represented in the table may not necessarily be
achieved.
(3) 17,100 of such options are contingent grants. See "II. Proposal to
Amend the Company's 1996 Stock Incentive Plan."
(4) Percentage of options to purchase ENStar Common Stock granted in 1997.
(5) Represents the right to purchase shares of common stock of Americable.
The options granted to Mr. Newman are options to purchase shares of
Americable and are exercisable with respect to 20% of such shares on
the date of grant and on each anniversary of the date of grant during
the four year period thereafter, and have a term of ten years. In
January 1998, Mr. Newman's options to purchase Americable common stock
were canceled and replaced with options to purchase Enstar Networking
common stock.
(6) Percentage of options to purchase Americable common stock granted in
1997.
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<PAGE>
AGGREGATED OPTION EXERCISES IN 1997 AND YEAR END OPTION VALUES
The following table provides information concerning stock option exercises
and the value of unexercised options at December 31, 1997 for the Named
Executive Officers:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED VALUE OPTIONS AT YEAR END(#) AT YEAR END($)
ON EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey J. Michael . . . . . . 0 $ 0 7,125 146,375 $ 0 $ 46,875
Peter E. Flynn . . . . . . . . 0 0 5,875 107,625 0 33,750
C.S. Mondelli. . . . . . . . . 0 0 28,000(1) 42,000(1) 0 0
Ronald D. Newman . . . . . . . 0 0 14,000(2) 31,000(2) 0 0
Thomas S. Wargolet . . . . . . 0 0 3,562 10,688 0 0
0 0 14,000(2) 21,000(2) 0 0
</TABLE>
- ----------------
(1) Represents the right to purchase shares of common stock of Transition.
(2) Represents the right to purchase shares of common stock of Americable.
In January 1998, such options were canceled and replaced with options to
purchase common stock of Enstar Networking.
Americable, Transition and Enstar Networking maintain separate stock
option plans. The exercise price of the options granted pursuant to the plans
of the operating subsidiaries are determined by the Board of Directors of the
respective operating subsidiaries, based on the then current fair value of the
common stock. Pursuant to the terms of the applicable option agreements under
the plans, the shares of common stock that may be purchased pursuant to the
options are subject to restrictions on transfer and certain repurchase rights by
each of the respective issuers and by ENStar, based on a valuation formula. The
option agreements also include certain covenants with respect to nondisclosure
of confidential information and non-competition.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Mr. Wargolet is a party to an employment contract with Enstar
Networking which provides that Mr. Wargolet is entitled to receive his base
salary for six months subsequent to the termination of his employment by
Enstar Networking without cause.
RELATED PARTY TRANSACTION
On April 2, 1996, Mr. Efron, a director of the Company, and NSU entered
into a promissory note for $169,200, plus interest at the "reference rate" of
interest announced from time to time by First Bank National Association,
Minneapolis,
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<PAGE>
Minnesota, to be repaid in four equal annual installments. Mr. Efron used
such funds to exercise stock options to purchase shares of common stock of
NSU, as permitted under the terms of the applicable NSU stock option plan.
Mr. Efron's note to NSU was assigned to the Company in connection with the
spin-off of ENStar by NSU. The largest amount outstanding under the note was
$183,915.76 on April 22, 1997, the date Mr. Efron repaid the promissory note
in full.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information concerning beneficial
ownership of the Common Stock of the Company as of April 17, 1998 with respect
to (i) all persons known by the Company to be the beneficial owners of more than
5% of the outstanding Common Stock of the Company, (ii) each director of the
Company, (iii) each Named Executive Officer, and (iv) all directors and
executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) CLASS
- ------------------------------------ ------------ -------
<S> <C> <C>
James H. Michael . . . . . . . . . . . . . . . . . . . 1,030,965 (2) 31.5%
Jeffrey J. Michael . . . . . . . . . . . . . . . . . . 885,698 (3) 27.0%
Miles E. Efron . . . . . . . . . . . . . . . . . . . . 148,000 (4) 4.5%
Peter E. Flynn . . . . . . . . . . . . . . . . . . . . 11,750 (5) *
Thomas S. Wargolet . . . . . . . . . . . . . . . . . . 7,925 (6) *
Richard J. Braun . . . . . . . . . . . . . . . . . . . 4,000 (7) *
C.S. Mondelli. . . . . . . . . . . . . . . . . . . . . 0 *
Ronald D. Newman . . . . . . . . . . . . . . . . . . . 0 *
Heartland Advisors, Inc. . . . . . . . . . . . . . . . 206,833 (8) 6.3%
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
All officers and directors as a group (7 persons). . . 2,088,338 (9) 63.1%
</TABLE>
- ------------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("SEC"), and includes generally
voting power and/or investment power with respect to securities.
Shares of Common Stock subject to options or warrants currently
exercisable within 60 days of the date hereof ("Currently Exercisable
Options") are deemed outstanding for computing the percentage
beneficially owned by the person holding such
-20-
<PAGE>
options, but are not deemed outstanding for computing the percentage
beneficially owned by any other person.
(2) Includes 962,164 shares of Common Stock held by 4J2R1C Limited
Partnership, as to which Mr. James H. Michael, as managing general
partner, exercises sole voting and dispositive power. Mr. James H.
Michael has disclaimed any beneficial ownership of the shares
beneficially owned by Mr. Jeffrey J. Michael. Also includes 4,000 shares
of Common Stock issuable pursuant to Currently Exercisable Options.
(3) Includes 865,666 shares of Common Stock held by 3J2R Limited Partnership,
as to which Mr. Jeffrey J. Michael, as general partner, exercises sole
voting and dispositive power. Mr. Jeffrey J. Michael has disclaimed any
beneficial ownership of the shares beneficially owned by Mr. James H.
Michael. Includes 14,250 shares of Common Stock issuable pursuant to
Currently Exercisable Options.
(4) Includes 4,000 shares of Common Stock issuable pursuant to Currently
Exercisable Options.
(5) Consists of 11,750 shares of Common Stock issuable pursuant to Currently
Exercisable Options.
(6) Includes 7,125 shares of Common Stock issuable pursuant to Currently
Exercisable Options.
(7) Consists of 4,000 shares of Common Stock issuable pursuant to Currently
Exercisable Options.
(8) Based on information in a Schedule 13G Report showing information as of
January 27, 1998, and indicating that Heartland Advisors, Inc. has sole
voting and sole dispositive power over all such shares.
(9) Shares shown as beneficially owned include 45,125 shares not outstanding,
but which may be acquired pursuant to Currently Exercisable Options.
-21-
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The following graph and table compare the monthly percentage change in
the cumulative total shareholder return on ENStar's Common Stock during the
period beginning March 3, 1997 and ending December 31, 1997, with the
cumulative total return on each of the S&P 500 Index, the S&P Healthcare
Sector Index and the S&P Computers (Networking) Index. The component S&P
indices represent indicies relating to ENStar's operating subsidiaries (S&P
Computers (Networking) Index) and ENStar's investment in CorVel Corporation
(S&P Healthcare Sector Index). The comparison assumes $100 was invested on
March 3, 1997 in ENStar's Common Stock and in each of the foregoing indices
and assumes reinvestment of dividends.
[CHART]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
3/3/97 3/97 4/97 5/97 6/97 7/97 8/97 9/97 10/97 11/97 12/97
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ENStar Inc 100 76 65 60 74 74 82 88 103 91 91
- ---------------------------------------------------------------------------------------------
S&P 500 100 96 102 108 113 122 115 121 117 122 125
- ---------------------------------------------------------------------------------------------
Healthcare Sector 100 93 101 107 117 119 110 116 117 122 128
- ---------------------------------------------------------------------------------------------
Computers (Networking) 100 90 94 127 120 143 136 136 137 137 129
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers, certain employees and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission initial reports of ownership and
changes in ownership of Common Shares and other equity securities of the
Company. Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with all Section 16(a)
forms they file.
To the Company's knowledge, all Section 16(a) filing requirements
applicable to officers, directors and greater than ten percent shareholders were
satisfied during fiscal 1997, except that 3J2R Limited Partnership and 4J2R1C
Limited Partnership each filed a late Form 3 and Mr. Wargolet filed a late Form
4.
AUDITORS
The Board of Directors of the Company has appointed Grant Thornton as
independent auditors for the Company for the year ending December 31, 1998.
Grant Thornton audited the financial statements of the Company for the year
ended December 31, 1997. Representatives of Grant Thornton will be present at
the Annual Meeting and will be given an opportunity to make a statement, if they
desire to do so, and to respond to appropriate questions raised at the meeting.
OTHER MATTERS
The Board of Directors does not intend to present to the meeting any matter
not referred to above and does not presently know of any matters that may be
presented to the meeting by others. If other matters come before the meeting,
however, it is the intention of the persons named in the enclosed form of proxy
to vote the proxy in accordance with their best judgment.
-22-
<PAGE>
PROPOSALS OF SHAREHOLDERS
The proxy rules of the Securities and Exchange Commission permit
shareholders, after timely notice to issuers, to present proposals for
shareholder action in issuer proxy statements where such proposals are
consistent with applicable law, pertain to matters appropriate for shareholder
action and are not properly omitted by company action in accordance with proxy
rules. The Company's annual meeting of shareholders for the year ending
December 31, 1998 is expected to be held on or about June 18, 1999. Shareholder
proposals for that meeting must be prepared in accordance with the proxy rules
and received by the Company on or before January 15, 1999.
By Order of the Board of Directors
/s/ JEFFREY J. MICHAEL
Jeffrey J. Michael
President and Chief Executive Officer
May 15, 1998
-23-
<PAGE>
AMENDED AND RESTATED
ENSTAR 1996 STOCK INCENTIVE PLAN
Section 1. Purpose.
The purpose of the Plan is to promote the interests of the Company and its
shareholders by aiding the Company in attracting and retaining key management
personnel capable of assuring the future success of, and Non-Employee Directors
capable of providing strategic direction to, the Company, to offer such
personnel and directors incentives to put forth maximum efforts for the success
of the Company's business, to afford such personnel and directors an opportunity
to acquire a proprietary interest in the Company and to align further the
interests of such personnel and directors with the Company's shareholders.
Section 2. Definitions.
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean (i) any entity that, directly or
indirectly through one or more intermediaries, is controlled by the Company and
(ii) any entity in which the Company has a significant equity interest, in each
case as determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent
or Other Stock-Based Award granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract
or other instrument or document evidencing any Award granted under the Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any regulations promulgated thereunder.
(e) "Committee" shall mean a committee of the Board of Directors
of the Company designated by such Board to administer the Plan, which shall
consist of members appointed from time to time by the Board of Directors and
shall be comprised of not less than such number of directors as shall be
required to permit the Plan to satisfy the requirements of Rule 16b-3. Each
member of the Committee shall be an "outside director" within the meaning of
Section 162(m) of the Code.
(f) "Company" shall mean ENStar Inc., a Minnesota corporation,
and any successor corporation.
(g) "Dividend Equivalent" shall mean any right granted under
Section 6(e) of the Plan.
(h) "Eligible Person" shall mean any employee, officer,
consultant, Non-Employee Director or independent contractor providing services
to the Company or any Affiliate who the Committee determines to be an Eligible
Person.
(i) "Exchange Act" shall mean the Securities and Exchange Act of
1934, as amended.
(j) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair market
value of such property determined by such methods or procedures as shall be
established from time to time by the Committee. Notwithstanding the foregoing,
unless otherwise determined by the Committee, the Fair Market Value
<PAGE>
of Shares on a given date for purposes of the Plan shall be the last sale price
of the Shares as reported on the Nasdaq National Market on such date or, if such
Market is not open for trading on such date, on the day closest to such date
when such Market is open for trading.
(k) "Incentive Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is intended to meet the requirements of Section
422 of the Code or any successor provision.
(l) "Non-Employee Director" shall mean a director who is not
also an employee of the Company or an Affiliate.
(m) "Non-Qualified Stock Option" shall mean an option granted
under Section 6(a) of the Plan that is not intended to be an Incentive Stock
Option.
(n) "Option" shall mean an Incentive Stock Option or a
Non-Qualified Stock Option, and shall include Reload Options.
(o) "Other Stock-Based Award" shall mean any right granted under
Section 6(f) of the Plan.
(p) "Participant" shall mean an Eligible Person designated to be
granted an Award under the Plan.
(q) "Performance Award" shall mean any right granted under
Section 6(d) of the Plan.
(r) "Person" shall mean any individual, corporation,
partnership, association or trust.
(s) "Plan" shall mean this ENStar 1996 Stock Incentive Plan, as
amended from time to time.
(t) "Reload Option" shall mean any Option granted under Section
6(a)(iv) of the Plan.
(u) "Restricted Stock" shall mean any Share granted under
Section 6(c) of the Plan.
(v) "Restricted Stock Unit" shall mean any unit granted under
Section 6(c) of the Plan evidencing the right to receive a Share (or a cash
payment equal to the Fair Market Value of a Share) at some future date.
(w) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Exchange Act or any successor rule
or regulation.
(x) "Shares" shall mean shares of Common Stock, $.01 par value,
of the Company or such other securities or property as may become subject to
Awards pursuant to an adjustment made under Section 4(c) of the Plan.
(y) "Stock Appreciation Right" shall mean any right granted
under Section 6(b) of the Plan.
Section 3. Administration.
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<PAGE>
(a) Power and Authority of the Committee. The Plan shall be
administered by the Committee; provided, however, that Section 7 of the Plan
shall not be administered by the Committee but rather by the Board of Directors
subject to the provisions and restrictions of Section 7. Subject to the
express provisions of the Plan and to applicable law, and except with respect to
Section 7 of the Plan, the Committee shall have full power and authority to: (i)
designate Participants; (ii) determine the type or types of Awards to be granted
to each Participant under the Plan; (iii) determine the number of Shares to be
covered by (or with respect to which payments, rights or other matters are to be
calculated in connection with) each Award; (iv) determine the terms and
conditions of any Award or Award Agreement; (v) amend the terms and conditions
of any Award or Award Agreement and accelerate the exercisability of Options or
the lapse of restrictions relating to Restricted Stock, Restricted Stock Units
or other Awards; (vi) determine whether, to what extent and under what
circumstances Awards may be exercised in exchange for cash, Shares, promissory
notes, other securities, other Awards or other property, or canceled, forfeited
or suspended; (vii) determine whether, to what extent and under what
circumstances cash, Shares, other securities, other Awards, other property and
other amounts payable with respect to an Award under the Plan shall be deferred
either automatically or at the election of the holder thereof or the Committee;
(viii) interpret and administer the Plan and any instrument or agreement
relating to, or Award made under, the Plan; (ix) establish, amend, suspend or
waive such rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; and (x) make any other
determination and take any other action that the Committee deems necessary or
desirable for the administration of the Plan. Unless otherwise expressly
provided in the Plan, all designations, determinations, interpretations and
other decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time and shall be
final, conclusive and binding upon any Participant, any holder or beneficiary of
any Award and any employee of the Company or any Affiliate.
(b) Delegation. The Committee may delegate its powers and
duties under the Plan to one or more officers of the Company or any Affiliate or
a committee of such officers, subject to such terms, conditions and limitations
as the Committee may establish in its sole discretion; provided, however, that
the Committee shall not delegate its powers and duties under the Plan (i) with
regard to officers or directors of the Company or any Affiliate who are subject
to Section 16 of the Exchange Act or (ii) in such a manner as would cause the
Plan not to comply with the requirements of Section 162(m) of the Code.
(c) Power and Authority of the Board of Directors.
Notwithstanding anything to the contrary contained herein, the Board of
Directors may, at any time and from time to time, without any further action of
the Committee, exercise the powers and duties of the Committee under the Plan
with regard to any Person who is not (i) an officer or director of the Company
or (ii) an Affiliate, in each case subject to Section 16 of the Exchange Act.
Section 4. Shares Available for Awards.
(a) Shares Available. Subject to adjustment as provided in
Section 4(c), the aggregate number of Shares which may be issued under all
Awards under the Plan shall be 500,000. Shares to be issued under the Plan may
be either Shares reacquired and held in the treasury or authorized but unissued
Shares. If any Shares covered by an Award or to which an Award relates are not
purchased or are forfeited, or if an Award otherwise terminates without delivery
of any Shares, then the number of Shares counted against the aggregate number of
Shares
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<PAGE>
available under the Plan with respect to such Award, to the extent of any such
forfeiture or termination, shall again be available for granting Awards under
the Plan. Notwithstanding the foregoing, the number of Shares available for
granting Incentive Stock Options under the Plan shall not exceed 300,000,
subject to adjustment as provided in the Plan and Section 422 or 424 of the Code
or any successor provision.
(b) Accounting for Awards. For purposes of this Section 4, if
an Award entitles the holder thereof to receive or purchase Shares, the number
of Shares covered by such Award or to which such Award relates shall be counted
on the date of grant of such Award against the aggregate number of Shares
available for granting Awards under the Plan.
(c) Adjustments. In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of cash,
Shares, other securities or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company or other similar corporate transaction or event
affects the Shares such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and type of Shares (or other securities or other property) which
thereafter may be made the subject of Awards, (ii) the number and type of Shares
(or other securities or other property) subject to outstanding Awards and (iii)
the purchase or exercise price with respect to any Award; provided, however,
that the number of Shares covered by any Award or to which such Award relates
shall always be a whole number.
(d) Award Limitations Under the Plan. No Eligible Person may be
granted any Award or Awards under the Plan, the value of which Awards is based
solely on an increase in the value of the Shares after the date of grant of such
Awards, for more than 170,000 Shares in the aggregate in any calendar year. The
foregoing annual limitation specifically includes the grant of any Awards
representing "qualified performance-based compensation" within the meaning of
Section 162(m) of the Code.
Section 5. Eligibility.
Any Eligible Person, including any Eligible Person who is an
officer or director of the Company or any Affiliate, shall be eligible to be
designated a Participant. In determining which Eligible Persons shall receive
an Award and the terms of any Award, the Committee may take into account the
nature of the services rendered by the respective Eligible Persons, their
present and potential contributions to the success of the Company or such other
factors as the Committee, in its discretion, shall deem relevant.
Notwithstanding the foregoing, an Incentive Stock Option may only be granted to
full or part-time employees (which term as used herein includes, without
limitation, officers and directors who are also employees), and an Incentive
Stock Option shall not be granted to an employee of an Affiliate unless such
Affiliate is also a "subsidiary corporation" of the Company within the meaning
of Section 424(f) of the Code or any successor provision.
Section 6. Awards.
(a) Options. The Committee is hereby authorized to grant
Options to Participants with the following terms and conditions and with such
additional terms and conditions not inconsistent with the provisions of the Plan
as the Committee shall determine:
(i) Exercise Price. The purchase price per Share
purchasable under an Option shall be determined by the Committee; provided,
however, that such purchase price
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<PAGE>
shall not be less than 100% of the Fair Market Value of a Share on the date
of grant of such Option.
(ii) Option Term. The term of each Option shall be
fixed by the Committee.
(iii) Time and Method of Exercise. The Committee shall
determine the time or times at which an Option may be exercised in whole or
in part and the method or methods by which, and the form or forms
(including, without limitation, cash, Shares, promissory notes, other
securities, other Awards or other property, or any combination thereof,
having a Fair Market Value on the exercise date equal to the relevant
exercise price) in which, payment of the exercise price with respect
thereto may be made or deemed to have been made.
(iv) Reload Options. The Committee may grant Reload
Options, separately or together with another Option, pursuant to which,
subject to the terms and conditions established by the Committee and any
applicable requirements of Rule 16b-3 or any other applicable law, the
Participant would be granted a new Option when the payment of the exercise
price of a previously granted option is made by the delivery of Shares
owned by the Participant pursuant to Section 6(a)(iii) hereof or the
relevant provisions of another plan of the Company, and/or when Shares are
tendered or forfeited as payment of the amount to be withheld under
applicable income tax laws in connection with the exercise of an Option,
which new Option would be an Option to purchase the number of Shares not
exceeding the sum of (A) the number of Shares so provided as consideration
upon the exercise of the previously granted option to which such Reload
Option relates and (B) the number of Shares, if any, tendered or withheld
as payment of the amount to be withheld under applicable tax laws in
connection with the exercise of the option to which such Reload Option
relates pursuant to the relevant provisions of the plan or agreement
relating to such option. Reload Options may be granted with respect to
Options previously granted under the Plan or any other stock option plan of
the Company, and may be granted in connection with any Option granted under
the Plan or any other stock option plan of the Company at the time of such
grant. Such Reload Options shall have a per share exercise price equal
to the Fair Market Value as of the date of grant of the new Option. Any
Reload Option shall be subject to availability of sufficient Shares for
grant under the Plan. Shares surrendered as part or all of the exercise
price of the Option to which it relates that have been owned by the
optionee less than six months will not be counted for purposes of
determining the number of Shares that may be purchased pursuant to a Reload
Option.
(b) Stock Appreciation Rights. The Committee is hereby
authorized to grant Stock Appreciation Rights to Participants subject to the
terms of the Plan and any applicable Award Agreement. A Stock Appreciation
Right granted under the Plan shall confer on the holder thereof a right to
receive upon exercise thereof the excess of (i) the Fair Market Value of one
Share on the date of exercise (or, if the Committee shall so determine, at any
time during a specified period before or after the date of exercise) over (ii)
the grant price of the Stock Appreciation Right as specified by the Committee,
which price shall not be less than 100% of the Fair Market Value of one Share on
the date of grant of the Stock Appreciation Right. Subject to the terms of the
Plan and any applicable Award Agreement, the grant price, term, methods of
exercise, dates of exercise, methods of settlement and any other terms and
conditions of any Stock Appreciation Right shall be as determined by the
Committee. The Committee may impose such conditions or restrictions on the
exercise of any Stock Appreciation Right as it may deem appropriate.
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<PAGE>
(c) Restricted Stock and Restricted Stock Units. The Committee
is hereby authorized to grant Awards of Restricted Stock and Restricted Stock
Units to Participants with the following terms and conditions and with such
additional terms and conditions not inconsistent with the provisions of the Plan
as the Committee shall determine:
(i) Restrictions. Shares of Restricted Stock and
Restricted Stock Units shall be subject to such restrictions as the
Committee may impose (including, without limitation, any limitation on the
right to vote a Share of Restricted Stock or the right to receive any
dividend or other right or property with respect thereto), which
restrictions may lapse separately or in combination at such time or times,
in such installments or otherwise as the Committee may deem appropriate.
(ii) Stock Certificates. Any Restricted Stock granted
under the Plan shall be evidenced by issuance of a stock certificate or
certificates, which certificate or certificates shall be held by the
Company. Such certificate or certificates shall be registered in the name
of the Participant and shall bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such Restricted Stock. In
the case of Restricted Stock Units, no Shares shall be issued at the time
such Awards are granted.
(iii) Forfeiture; Delivery of Shares. Except as otherwise
determined by the Committee, upon termination of employment (as determined
under criteria established by the Committee) during the applicable
restriction period, all Shares of Restricted Stock and all Restricted
Stock Units at such time subject to restriction shall be forfeited and
reacquired by the Company; provided, however, that the Committee may, when
it finds that a waiver would be in the best interest of the Company, waive
in whole or in part any or all remaining restrictions with respect to
Shares of Restricted Stock or Restricted Stock Units. Any Share
representing Restricted Stock that is no longer subject to restrictions
shall be delivered to the holder thereof promptly after the applicable
restrictions lapse or are waived. Upon the lapse or waiver of restrictions
and the restricted period relating to Restricted Stock Units evidencing the
right to receive Shares, such Shares shall be issued and delivered to the
holders of the Restricted Stock Units.
(d) Performance Awards. The Committee is hereby authorized to
grant Performance Awards to Participants subject to the terms of the Plan and
any applicable Award Agreement. A Performance Award granted under the Plan (i)
may be denominated or payable in cash, Shares (including, without limitation,
Restricted Stock and Restricted Stock Units), other securities, other Awards or
other property and (ii) shall confer on the holder thereof the right to receive
payments, in whole or in part, upon the achievement of such performance goals
during such performance periods as the Committee shall establish. Subject to
the terms of the Plan and any applicable Award Agreement, the performance goals
to be achieved during any performance period, the length of any performance
period, the amount of any Performance Award granted, the amount of any payment
or transfer to be made pursuant to any Performance Award and any other terms and
conditions of any Performance Award shall be determined by the Committee.
(e) Dividend Equivalents. The Committee is hereby authorized to
grant Dividend Equivalents to Participants under which such Participants shall
be entitled to receive payments (in cash, Shares, other securities, other Awards
or other property as determined in the discretion of the Committee) equivalent
to the amount of cash dividends paid by the Company to holders of Shares with
respect to a number of Shares determined by the Committee. Subject to the terms
of the Plan and any applicable Award Agreement, such Dividend Equivalents may
have such terms and conditions as the Committee shall determine.
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<PAGE>
(f) Other Stock-Based Awards. The Committee is hereby
authorized to grant to Participants such other Awards that are denominated or
payable in, valued in whole or in part by reference to, or otherwise based on or
related to, Shares (including, without limitation, securities convertible into
Shares), as are deemed by the Committee to be consistent with the purpose of the
Plan; provided, however, that such grants must comply with Rule 16b-3 and
applicable law. Subject to the terms of the Plan and any applicable Award
Agreement, the Committee shall determine the terms and conditions of such
Awards. Shares or other securities delivered pursuant to a purchase right
granted under this Section 6(f) shall be purchased for such consideration, which
may be paid by such method or methods and in such form or forms (including,
without limitation, cash, Shares, promissory notes, other securities, other
Awards or other property or any combination thereof), as the Committee shall
determine, the value of which consideration, as established by the Committee,
shall not be less than 100% of the Fair Market Value of such Shares or other
securities as of the date such purchase right is granted.
(g) General. Except as otherwise specified with respect to
Awards to Non-Employee Directors pursuant to Section 7 of the Plan:
(i) No Cash Consideration for Awards. Awards shall be
granted for no cash consideration or for such minimal cash consideration as
may be required by applicable law.
(ii) Awards May Be Granted Separately or Together.
Awards may, in the discretion of the Committee, be granted either alone or
in addition to, in tandem with or in substitution for any other Award or
any award granted under any plan of the Company or any Affiliate other than
the Plan. Awards granted in addition to or in tandem with other Awards or
in addition to or in tandem with awards granted under any such other plan
of the Company or any Affiliate may be granted either at the same time as
or at a different time from the grant of such other Awards or awards.
(iii) Forms of Payment under Awards. Subject to the
terms of the Plan and of any applicable Award Agreement, payments or
transfers to be made by the Company or an Affiliate upon the grant,
exercise or payment of an Award may be made in such form or forms as the
Committee shall determine (including, without limitation, cash, Shares,
promissory notes, other securities, other Awards or other property or
any combination thereof), and may be made in a single payment or
transfer, in installments or on a deferred basis, in each case in
accordance with rules and procedures established by the Committee. Such
rules and procedures may include, without limitation, provisions for the
payment or crediting of reasonable interest on installment or deferred
payments or the grant or crediting of Dividend Equivalents with respect
to installment or deferred payments.
(iv) Limits on Transfer of Awards. No Award and no
right under any such Award shall be transferable by a Participant
otherwise than by will or by the laws of descent and distribution;
provided, however, that, if so determined by the Committee, a
Participant may, in the manner established by the Committee, designate a
beneficiary or beneficiaries to exercise the rights of the Participant
and receive any property distributable with respect to any Award upon
the death of the Participant. Each Award or right under any Award shall
be exercisable during the Participant's lifetime only by the Participant
or, if permissible under applicable law, by the Participant's guardian
or legal representative. No Award or right under any such Award may
be pledged, alienated, attached or otherwise encumbered, and any
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<PAGE>
purported pledge, alienation, attachment or encumbrance thereof shall be
void and unenforceable against the Company or any Affiliate.
(v) Term of Awards. The term of each Award shall be for
such period as may be determined by the Committee.
(vi) Restrictions; Securities Exchange Listing. All
certificates for Shares or other securities delivered under the Plan
pursuant to any Award or the exercise thereof shall be subject to such stop
transfer orders and other restrictions as the Committee may deem advisable
under the Plan or the rules, regulations and other requirements of the
Securities and Exchange Commission and any applicable federal or state
securities laws, and the Committee may cause a legend or legends to be
placed on any such certificates to make appropriate reference to such
restrictions. If the Shares or other securities are traded on a securities
exchange, the Company shall not be required to deliver any Shares or other
securities covered by an Award unless and until such Shares or other
securities have been admitted for trading on such securities exchange.
Section 7. Options to Non-Employee Directors.
(a) Eligibility. If the Plan is approved by the shareholders of
the Company, Options shall be granted automatically under the plan to each
Non-Employee Director under the terms and conditions contained in this Section
7. The authority of the Committee under this Section 7 shall be limited to
ministerial and non-discretionary matters.
(b) Annual Option Grants. Each Non-Employee Director shall be
granted an Option to purchase 4,000 Shares upon his or her election or
appointment to the Board of Directors, and shall be granted an Option to
purchase 1,000 Shares on the date of the annual meeting of shareholders each
year, commencing with the 1997 Annual Meeting of Shareholders, if the
Non-Employee Director will remain in office immediately following such meeting.
The exercise price of each Option shall be equal to 100 percent of the Fair
Market Value per Share on the date of grant. Such Options shall be
Non-Qualified Stock Options, shall become exercisable six months after the date
of grant, and shall terminate on the fifth anniversary of the date of grant,
unless previously exercised or terminated. Such Options shall be subject to the
terms and conditions of Sections 6(a) and 10 of the Plan and to other standard
terms and conditions contained in the form of Non-Qualified Stock Option
Agreement used by the Company from time to time. Such Options shall also
terminate three months following the date upon which the participant ceases to
be a director of the Company, except that:
(i) In the event that a Non-Employee Director who is
granted an Option shall cease to be a director of the Company by reason
of such director's willful and material misconduct, the Options shall
terminate as of the date of such misconduct, and
(ii) If a Non-Employee Director who is granted an Option
shall die while a director of the Company or within three months after he
or she ceases to be a director of the Company for any reason other than
willful and material misconduct, or if such director ceases to be a
director of the Company by reason of his or her disability and he or she
shall not have fully exercised the Option, the Option may be exercised at
any time within 12 months after such director's death, or 12 months after
cessation of directorship, in accordance with its terms by such director's
legal representatives or administrators or by any person or persons to whom
the Option has been transferred by will or the applicable laws of descent
and distribution, but only to the extent of the full number of Shares such
director was entitled to purchase under the Option on the date of death or
cessation of directorship.
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<PAGE>
(c) Exercise of Non-Employee Director Options. Non-Qualified
Stock Options granted to Non-Employee Directors may be exercised in whole or in
part from time to time by serving written notice of exercise on the Company at
its principal executive offices, to the attention of the Company's Secretary.
The notice shall state the number of Shares as to which the Option is being
exercised and be accompanied by payment of the purchase price. A Non-Employee
Director may, at such Director's election, pay the purchase price by check
payable to the Company, by promissory note, in Shares, or in any combination
thereof having a Fair Market Value on the exercise date equal to the applicable
exercise price. If payment or partial payment is made by promissory note, such
note shall be (i) full recourse, (ii) limited in principal amount to the maximum
amount permitted under applicable laws, rules and regulations, (iii) bear
interest at a rate not less than the minimum rate required to avoid the
imputation of income, original issue discount or a below-market-rate loan
pursuant to Sections 483, 1274 or 7872 of the Code or any successor provisions
thereto.
(d) Amendments to Section 7. The provisions of this Section 7
may not be amended more often than once every six months other than to comply
with changes in the Code or the rules and regulations promulgated under the
Code.
Section 8. Amendment and Termination; Adjustments.
Except to the extent prohibited by applicable law and unless
otherwise expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board of Directors of the
Company may amend, alter, suspend, discontinue or terminate the Plan; provided,
however, that, notwithstanding any other provision of the Plan or any Award
Agreement, without the approval of the shareholders of the Company, no such
amendment, alteration, suspension, discontinuation or termination shall be made
that, absent such approval:
(i) would cause Rule 16b-3 to become unavailable with
respect to the Plan;
(ii) would violate the rules or regulations of the Nasdaq
Stock Market, the National Association of Securities Dealers, Inc. or any
securities exchange that are applicable to the Company; or
(iii) would cause the Company to be unable, under the
Code, to grant Incentive Stock Options under the Plan.
(b) Amendments to Awards. The Committee may waive any
conditions of or rights of the Company under any outstanding Award,
prospectively or retroactively. The Committee may not amend, alter, suspend,
discontinue or terminate any outstanding Award, prospectively or retroactively,
without the consent of the Participant or holder or beneficiary thereof, except
as otherwise herein provided or in the Award Agreement.
(c) Correction of Defects, Omissions and Inconsistencies. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem desirable to carry the Plan into effect.
Section 9. Income Tax Withholding; Tax Bonuses.
(a) Withholding. In order to comply with all applicable federal
or state income tax laws or regulations, the Company may take such action as it
deems appropriate to ensure that all
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<PAGE>
applicable federal or state payroll, withholding, income or other taxes, which
are the sole and absolute responsibility of a Participant are withheld or
collected from such Participant. In order to assist a Participant in paying
all or a portion of the federal and state taxes to be withheld or collected upon
exercise or receipt of (or the lapse of restrictions relating to) an Award, the
Committee, in its discretion and subject to such additional terms and conditions
as it may adopt, may permit the Participant to satisfy such tax obligation by
(i) electing to have the Company withhold a portion of the Shares otherwise to
be delivered upon exercise or receipt of (or the lapse of restrictions relating
to) such Award with a Fair Market Value equal to the amount of such taxes or
(ii) delivering to the Company Shares other than Shares issuable upon exercise
or receipt of (or the lapse of restrictions relating to) such Award with a Fair
Market Value equal to the amount of such taxes. The election, if any, must be
made on or before the date that the amount of tax to be withheld is determined.
(b) Tax Bonuses. The Committee, in its discretion, shall have
the authority, at the time of grant of any Award under this Plan or at any time
thereafter, to approve cash bonuses to designated Participants to be paid upon
their exercise or receipt of (or the lapse of restrictions relating to) Awards
in order to provide funds to pay all or a portion of federal and state taxes due
as a result of such exercise or receipt (or the lapse of such restrictions).
The Committee shall have full authority in its discretion to determine the
amount of any such tax bonus.
Section 10. General Provisions.
(a) No Rights to Awards. No Eligible Person, Participant or
other Person shall have any claim to be granted any Award under the Plan, and
there is no obligation for uniformity of treatment of Eligible Persons,
Participants or holders or beneficiaries of Awards under the Plan. The terms
and conditions of Awards need not be the same with respect to any Participant or
with respect to different Participants.
(b) Delegation. The Committee may delegate to one or more
officers of the Company or any Affiliate or a committee of such officers the
authority, subject to such terms and limitations as the Committee shall
determine, to grant Awards to Eligible Persons who are not (i) officers or
directors of the Company or (ii) Affiliates, in each case subject to Section 16
of the Exchange Act.
(c) Award Agreements. No Participant will have rights under an
Award granted to such Participant unless and until an Award Agreement shall have
been duly executed on behalf of the Company and, if requested by the Company,
signed by the Participant.
(d) No Limit on Other Compensation Arrangements. Nothing
contained in the Plan shall prevent the Company or any Affiliate from adopting
or continuing in effect other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable only in specific
cases.
(e) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant or Non-Employee Director the right to be
retained in the employ of the Company or any Affiliate, nor will it affect in
any way the right of the Company or an Affiliate to terminate such employment at
any time, with or without cause. In addition, the Company or an Affiliate may
at any time dismiss a Participant or Non-Employee Director from employment free
from any liability or any claim under the Plan, unless otherwise expressly
provided in the Plan or in any Award Agreement.
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<PAGE>
(f) Governing Law. The validity, construction and effect of the
Plan or any Award, and any rules and regulations relating to the Plan or any
Award, shall be determined in accordance with the laws of the State of
Minnesota.
(g) Severability. If any provision of the Plan or any Award is
or becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction or would disqualify the Plan or any Award under any law deemed
applicable by the Committee (or, in the case of grants under Section 7 of the
Plan, the Board of Directors), such provision shall be construed or deemed
amended to conform to applicable laws, or if it cannot be so construed or deemed
amended without, in the determination of the Committee (or, in the case of
grants under Section 7 of the Plan, the Board of Directors), materially altering
the purpose or intent of the Plan or the Award, such provision shall be stricken
as to such jurisdiction or Award, and the remainder of the Plan or any such
Award shall remain in full force and effect.
(h) No Trust or Fund Created. Neither the Plan nor any Award
shall create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant or
any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
(i) No Fractional Shares. No fractional Shares shall be issued
or delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash shall be paid in lieu of any fractional Shares or whether
such fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
(j) Headings. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of the Plan or any provision thereof.
(k) Other Benefits. No compensation or benefit awarded to or
realized by any Participant under the Plan shall be included for the purpose of
computing such Participant's compensation under any compensation-based
retirement, disability, or similar plan of the Company unless required by law or
otherwise provided by such other plan.
Section 11. Section 16(b) Compliance.
The Plan is intended to comply in all respects with Rule 16b-3 or
any successor provision, as in effect from time to time, and in all events the
Plan shall be construed in accordance with the requirements of Rule 16b-3. If
any Plan provision does not comply with Rule 16b-3 as hereafter amended or
interpreted, the provision shall be deemed inoperative. The Board of Directors,
in its absolute discretion, may bifurcate the Plan so as to restrict, limit or
condition the use of any provision of the Plan to participants who are (i)
officers or directors of the Company or (ii) Affiliates, in each case subject to
Section 16 of the Exchange Act, without so restricting, limiting or conditioning
the Plan with respect to other participants.
Section 12. Effective Date of the Plan.
The Plan shall be effective as of the date of its approval by the
Board of Directors of the Company; provided, however, that if the Company's
shareholders do not approve the Plan, the Plan shall be null and void and all
Awards granted pursuant to the Plan shall be of no force or effect.
- 11 -
<PAGE>
Section 13. Term of the Plan.
Awards shall only be granted under the Plan during a 10-year
period beginning on the effective date of the Plan. However, unless otherwise
expressly provided in the Plan or in an applicable Award Agreement, any Award
theretofore granted may extend beyond the end of such 10-year period, and the
authority of the Committee provided for hereunder with respect to the Plan and
any Awards, and the authority of the Board of Directors of the Company to amend
the Plan, shall extend beyond the termination of the Plan.
- 12 -
<PAGE>
[FRONT OF CARD]
ENSTAR INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 18, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, hereby appoints Jeffrey J. Michael and Thomas S. Wargolet,
as proxies, each with the power to appoint a substitute, and hereby authorizes
them to present and to vote, as designated below, all shares of common stock of
ENStar Inc. (the "Company") the undersigned is entitled to vote at the Annual
Meeting of Shareholders of the Company, to be held on June 18, 1998, and at all
adjournments thereof:
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed / / WITHHOLD AUTHORITY to vote for
below (except as marked all nominees listed below
to the contrary below)
(Instruction: To withhold authority for any individual nominee,
strike a line through the nominee's name in the list below.)
James H. Michael, Miles E. Efron, Richard J. Braun, Jeffrey J. Michael
2. PROPOSAL TO APPROVE AN AMENDMENT TO THE ENSTAR INC. 1996 STOCK INCENTIVE
PLAN TO PROVIDE FOR ADDITIONAL AUTHORIZED SHARES AND PARTICIPATION BY
NON-EMPLOYEE DIRECTORS
/ / FOR / /AGAINST / / ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
<PAGE>
[BACK OF CARD]
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 ITEMS 1 AND 2 AND IN THE DISCRETION OF THE NAMED PROXIES ON ALL
OTHER MATTERS.
INSTRUCTIONS: Please sign exactly as your
name appears on the label affixed hereto.
When shares are held by joint tenants, both
should sign. When signing as attorney,
executor, administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in the full
corporate name by an authorized officer. If
a partnership, please sign in partnership
name by authorized person
Dated , 1998
----------------
-----------------------------------
Signature
-----------------------------------
Please print name
-----------------------------------
Signature if held jointly
-----------------------------------
Please print name
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY. A RETURN ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE.
