SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934 (Amendment No. ____)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
SPANLINK COMMUNICATIONS, 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:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing:
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
SPANLINK COMMUNICATIONS, INC.
7125 NORTHLAND TERRACE
MINNEAPOLIS, MN 55428
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 13,1998
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of Spanlink Communications, Inc., a
Minnesota corporation (the "Company"), will be held on Tuesday, May 13, 1998, at
4:00 p.m. local time, at the offices of the Company, 7125 Northland Terrace,
Minneapolis, Minnesota for the following purposes:
1) To elect one director to a three-year term;
2) To approve the 1998 Employee Stock Purchase Plan;
3) To act upon such other business as may properly come before the
Annual Meeting, or any adjournment or adjournments thereof.
Shareholders of record at the close of business on March 27, 1998 are
entitled to notice of and to vote at the Annual Meeting or any adjournment or
adjournments thereof.
Your attention is directed to the Proxy Statement accompanying this Notice
for a more complete statement of matters to be considered at the Annual Meeting.
A copy of the Company's Annual Report for the fiscal year ended December 31,
1997 also accompanies this Notice.
You are cordially invited to attend the Annual Meeting. Whether or not you
plan to attend, please sign, date and return your proxy in the reply envelope
provided.
By Order of the Board of Directors,
Loren A. Singer, Jr.
Secretary
Minneapolis, Minnesota
Dated: April 6, 1998
<PAGE>
PLEASE SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
SPANLINK COMMUNICATIONS, INC.
7125 NORTHLAND TERRACE
MINNEAPOLIS, MN 55428
PROXY STATEMENT
Annual Meeting of the Shareholders
May 13, 1998
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors (the "Board") of Spanlink Communications, Inc. (the
"Company") of proxies for use at the Annual Meeting of the Shareholders (the
"Meeting") to be held on May 13, 1998, at the offices of the Company, 7125
Northland Terrace, Minneapolis, MN 55428, at 4:00 P.M. local time, and at any
adjournment thereof, for the purposes set forth in the Notice of Annual Meeting
of Shareholders. This Proxy Statement and the accompanying proxy form are
furnished in connection with the proxy solicitation and are first being mailed
to shareholders on or about April 6, 1998.
Shares represented by properly executed and returned proxies will be
voted as specified on the proxies. Shares represented by proxies where no
specification has been made will be voted (i) FOR the nominee for election to
the Board of Directors; (ii) FOR approval of the Company's 1998 Employee Stock
Purchase Plan; and (iii) in the discretion of the proxy holders, as to any other
matter that properly comes before the meeting.
A proxy may be revoked at any time prior to its exercise by providing
written notice of revocation or another proxy bearing a later date to the
Secretary of the Company at the address set forth above.
A copy of the Company's Annual Report for the fiscal year ended
December 31, 1997, is enclosed herewith. The Annual Report describes the
financial condition of the Company as of December 31, 1997. The Company will
furnish without charge to any person whose proxy is being solicited a copy of
the Company's Annual Report on Form 10-KSB for fiscal year 1997 as filed with
the Securities and Exchange Commission, including financial statements
therewith, upon written request to Spanlink Communications, Inc. 7125 Northland
Terrace, Minneapolis, MN 55428, Attention: Timothy Briggs - V. P. Finance.
<PAGE>
The Company will pay all expenses incurred in connection with the
solicitation of proxies. Proxies are being solicited by mail and may also be
solicited personally, by telephone, or telegram by directors, officers, and
other employees of the Company without additional compensation to them. The
Company has requested brokerage houses, nominees, custodians, and fiduciaries to
forward solicitation materials to the beneficial owners of Common Stock of the
Company and will reimburse such persons for their expenses. The Company may
reimburse banks, brokerage firms, and other custodians, nominees, and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to beneficial owners of Common Stock.
RECORD DATE AND VOTING
Shareholders of record on March 27, 1998, are the only persons entitled
to vote at the Meeting. As of March 27, 1998, there were issued and outstanding
5,080,500 shares of no par value Common Stock, the only authorized and issued
voting security of the Company. Each shareholder is entitled to one vote for
each share of Common Stock held. As provided in the Articles of Incorporation of
the Company, there is no right of cumulative voting.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the election inspectors appointed for the meeting and will
determine whether or not a quorum is present. The election inspectors will treat
abstentions as shares that are present and entitled to vote for purposes of
determining the presence of a quorum, but as unvoted for purposes of determining
the approval of any matter submitted to the shareholders for a vote. An
abstention as to any proposal will therefore have the same effect as a vote
against the proposal. If a broker indicates on the form of proxy that the broker
does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will be considered to be present for the purpose
of determining whether a quorum is present, but will not be considered as
present and entitled to vote with respect to that particular matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth the information as of March 27, 1998,
regarding beneficial ownership of the Company's Common Stock for (i) each
director, and (ii) each executive officer named in the Summary Compensation
table set forth in the "Executive Compensation" section of this proxy statement,
(iii) all directors and executive officers as a group and (iv) each person known
by the Company to be the beneficial owner of more than 5% of the outstanding
shares of Common Stock of the Company.
<PAGE>
SHARES BENEFICIALLY
OWNED
Name of Beneficial Owner Number Percent (1)
- ------------------------ ------------ -----------
Brett A. Shockley(2) 900,000 17.7%
Loren A. Singer, Jr.(2) 900,000 17.7
Todd A. Parenteau(2) 900,000 17.7
Patrick P. Irestone(3) 387,000(3) 7.2
Stephen H. Bostwick 15,000(4) *
Bruce E. Humphrey 13,000(5) *
Thomas F. Madison 13,000(5) *
Joseph D. Mooney 13,000(5) *
All Current Executive Officers
and Directors as a group (8 persons) 1,914,500(6) 37.0%
* Less than 1%.
(1) Shares of Common Stock subject to options currently exercisable or
exercisable within 60 days are deemed to be outstanding for purposes of
computing the percentage of shares beneficially owned by the person holding
such options, but are not deemed to be outstanding for purposes of
computing such percentage for any other person. Each person or group
identified has sole voting and investment powers with respect to all shares
of Common Stock shown as beneficially owned by them.
(2) The address of Messrs. Shockley, Singer and Parenteau, is 7125 Northland
Terrace, Minneapolis, Minnesota 55428.
(3) Includes currently exercisable options to purchase 318,500 shares of Common
Stock. Includes 67,500 shares owned directly and 1,000 shares owned
indirectly by Mr. Irestone's spouse for the benefit of their child. The
address of Mr. Irestone is 268 Meadowood Lane, Vadnais Heights, MN 55127.
(4) Includes options to purchase 10,000 shares of Common Stock which are
currently exercisable. Also includes 5,000 shares owned indirectly by Mr.
Bostwick's spouse.
(5) Includes options to purchase 12,000 shares of Common Stock which are
currently exercisable.
(6) Includes options to purchase 96,000 shares of Common Stock which are either
currently exercisable or exercisable within 60 days.
<PAGE>
ELECTION OF DIRECTOR
(Proposal 1 on Proxy Card)
The Bylaws of the Company provide that the number of directors that
constitute the Board of Directors shall be fixed from time to time by the Board
of the Company. The number of directors is currently set at five. The Company's
Articles of Incorporation provide that the Board be classified into three
classes with staggered terms. One class of directors will be elected each year,
and the members of such class will hold office for a three-year term or until
their successors are duly elected and qualified or until their death,
resignation or removal from office. Joseph D. Mooney and Loren A. Singer, Jr.
serve in Class 1 with a term expiring in 2000; Bruce E. Humphrey serves in Class
2 with a term expiring at the Annual Meeting; and Brett A. Shockley and Thomas
F. Madison serve in Class 3 with a term expiring in 1999. The Board of Directors
has nominated Mr. Humphrey for election to the Board at the Annual Meeting for a
term expiring at the annual meeting in 2001. The other directors of the Company
will continue in office for their existing terms. The person nominated has
agreed to serve if elected, and the Company knows of no reason why the listed
nominee would be unavailable to serve.
Shares represented by proxy will be voted, if authority to do so is not
withheld, for the election of Mr. Humphrey, unless such nominee should become
unavailable for election by reason of death or other unexpected occurrence, in
which event such shares shall be voted for the election of such substitute
nominee as the Board of Directors may propose.
Set forth below is information regarding the nominee and the directors
whose terms continue after the Annual Meeting, including information furnished
by them as to their principal occupations for the last five years, certain other
directorships held by them, and their ages as of the date hereof. The nominee
may be contacted at the Company offices.
Under applicable Minnesota law, the election of the nominee to the
Board of Directors requires the affirmative vote of the holders of the greater
of (i) a majority of the voting power of the shares represented in person or by
proxy at the Annual Meeting with authority to vote on such matter, or (ii) a
majority of the voting power of the minimum number of shares that would
constitute a quorum for the transaction of business at the Annual Meeting.
The Board recommends that the shareholders vote FOR the election of
Bruce E. Humphrey to the Board of Directors.
<PAGE>
Certain biographical information furnished by the Company's Board of
Directors is set forth below:
BRETT A. SHOCKLEY, age 38, has been the Chief Executive Officer and Chairman of
the Board since 1988 and is a founder of the Company. Mr. Shockley also served
as President from 1988 to September 1994 and since July 1997. Prior to founding
the Company in 1988, Mr. Shockley was a marketing and product management
executive at Onan Corporation, a subsidiary of Cummins Engine Company Inc. From
1982 to 1987, Mr. Shockley was in marketing and product management at ADC
Telecommunications, Inc., a manufacturer of telecommunications equipment.
LOREN A. SINGER, JR., age 42, has been Secretary and a director since 1988 and
is a founder of the Company. Mr. Singer also served as a lead software engineer
from 1988 to June 1997. He currently provides consulting services to the
Company. He has been sole proprietor of Beagle Software since June 1997. Prior
to founding the Company in 1988, Mr. Singer was an Engineering Development
Manager at ADC Telecommunications, Inc. from 1983 to 1987. Mr. Singer was a
design engineer at Porta Systems, Inc. from 1980 to 1983.
THOMAS F. MADISON, age 62, has been a director of the Company since 1996. Mr.
Madison has been the President and Chief Executive Officer of MLM Partners, a
consulting and small business investment company, since January 1993. Since
December 1996, he has been Chairman of Communications Holdings, Inc. From
February 1994 to September 1994, he served as Vice Chairman and Office of Chief
Executive Officer at Minnesota Mutual Life Insurance Company. From June 1987 to
December 1992, Mr. Madison was President of US West Communications Markets, a
division of US West Inc. Mr. Madison was President and Chief Executive Officer
of Northwestern Bell Telephone Company from April 1985 to June 1987. Mr. Madison
also serves on the board of directors of Valmont Industries, Inc., Eltrax
Systems, Inc., Minnegasco Division of Arkla, ACT Telecentrics, and Delaware
Group of Funds. He also serves on the Advisory Board of Aon Risk Services.
JOSEPH D. MOONEY, age 60, has been a director of the Company since 1996. Mr.
Mooney is Chairman and CEO of Greentree Software, Inc. Prior to that he was the
President of Benchmark Computer Systems, Inc. from January 1973 when he founded
the company to August 1996. In addition, he was a founder of Benchmark Network
Systems, Inc. and served as its President from 1984 to 1995. He was also
President of Benchmark Nursing Home Systems, Inc., a software company, from 1973
to 1994. Mr. Mooney also has served as a director for both Paradata
International, Inc. and Cado Systems, Inc.
<PAGE>
BRUCE E. HUMPHREY, age 40, has been a director of the Company since 1996. Mr.
Humphrey has been the President and Chief Executive Officer of CSC Insurance
Center, Inc. since he founded it in December 1982. Mr. Humphrey is also a
director of K-Sun, Inc.
Committees and Meetings of the Board of Directors
The Board has a Compensation Committee, composed of Messrs. Madison
(Chairman), Mooney and Humphrey, which committee makes recommendations
concerning executive compensation and incentive compensation for employees of
the Company, subject to ratification by the Board, and administers the Company's
1996 Omnibus Stock Plan. The Board also has an Audit Committee comprised of
Messrs. Humphrey (Chairman) and Madison. The Audit Committee reviews the results
and scope of the audit and other services provided by the Company's independent
accountants, as well as the Company's accounting principles and its system of
internal controls, and reports the results of its review to the Board. The
Company has no nominating committee.
During fiscal 1997, the Board of Directors met four times. All
directors attended 100 percent of such meetings and the committee meetings on
which such directors served during 1997. The Audit and Compensation Committees
held two meetings each in 1997.
Director Compensation
Members of the Board receive no cash compensation for serving on the
Board, except for reimbursement for expenses incurred in attending meetings.
Each of the three non-employee Directors were issued 1,000 shares of the
Company's Common Stock on February 28, 1996. In addition, pursuant to the
Company's 1996 Omnibus Stock Plan, each Outside Director received an option to
purchase 6,000 shares of Common Stock at both the 1996 and 1997 Annual Meetings
of Shareholders and will receive an option to purchase 4,000 shares of Common
Stock at the 1998 annual meeting.
EXECUTIVE OFFICERS OF THE COMPANY
NAME AGE POSITION
Brett A. Shockley 38 Chairman of the Board, Chief Executive
Officer, President
Stephen H. Bostwick 59 Vice President of Sales and Marketing
Timothy E. Briggs 50 Vice President of Finance, Chief Financial
Officer
Jonathan M. Silverman 44 Vice President of Research & Development
<PAGE>
Brett A. Shockley
Biographical information for Mr. Shockley is provided elsewhere in this Proxy
Statement under "Election of Directors."
Stephen H. Bostwick
Mr. Bostwick joined the Company as Vice President of Sales and Marketing in
December of 1996. From 1995 to 1996, Mr. Bostwick was Vice President of Sales at
Answersoft in Dallas. From 1993 to 1995, he was in various sales positions for
Intervoice Inc., most recently as Vice President of Direct Sales. Prior to that
time he held various executive sales and marketing positions at other
telecommunication companies, including Vice President of Sales at Teknekron
Infoswitch.
Timothy E. Briggs
Mr. Briggs joined the Company as Vice President of Finance and Chief Financial
Officer in October of 1997. From 1985 to 1997, Mr. Briggs held a variety of
positions with Empi, Inc., most recently as Executive Vice President and Chief
Financial Officer. Prior to joining Empi, he served as Treasurer of Conwed
Corporation.
Jonathan M. Silverman
Mr. Silverman joined the Company in September of 1992. Mr. Silverman has held
several positions with the Company and is currently serving as Vice President of
Research and Development. From 1989 to 1992, Mr. Silverman was Director of
Software Development at Racotek, prior to which he was Section Manager for
distributed systems in Honeywell's Corporate Research Center. Mr. Silverman has
published numerous papers in professional journals and holds patents on software
architecture.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides certain summary information for the past three
years ended December 31, 1997, concerning executive compensation paid or accrued
by the Company to the Company's Chief Executive Officer and the other executive
officers whose salary and bonus compensation for 1997 exceeded $100,000.
<PAGE>
<TABLE>
<CAPTION>
Name and Annual Compensation Long-Term All
Principal Position Compensation Awards Other
Compen-
sation
-------------------------------------------------- -------------------------
Restricted
Stock
Salary Bonus Other Annual Awards Options
Year ($) ($) Compensation ($) (#)
(1)
- -------------------------- --------- --------- -------------- --------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Brett A. Shockley 1997 120,667 -0- -0- -0- -0- -0-
Chief Executive Officer 1996 152,175 46,000 $12,025 -0- -0- -0-
1995 93,333 -0- 2,097 -0- -0- -0-
- -------------------------- --------- --------- -------------- --------------- ----------- ------------- ------------
Stephen H. Bostwick 1997 116,500 -0- -0- -0- 100,000 (3) -0-
Vice President of Sales 1996 8,333 -0- -0- -0- 100,000 -0-
and Marketing
- -------------------------- --------- --------- -------------- --------------- ----------- ------------- ------------
Patrick P. Irestone 1997 99,167 -0- -0- -0- -0- -0-
Former President and 1996 167,800 282,250 (2) -0- -0- 404,213 -0-
Chief Operating Officer 1995 133,200 22,350 -0- -0- -0- -0-
- -------------------------- --------- --------- -------------- --------------- ----------- ------------- ------------
</TABLE>
(1) Reflects taxable compensation to Mr. Shockley for personal use of a leased
company automobile and buyout of the Company obligation in 1996.
(2) Reflects value related to the grant of 67,500 shares of Common Stock to Mr.
Irestone on February 28, 1996.
(3) The stock option granted in 1996 was repriced in 1997; thus, the option is
deemed regranted in 1997, which 1997 option replaces the 1996 option, which
is deemed cancelled.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base Price
Name Granted (1) Fiscal 1997 ($/Sh)(2) Expiration Date
------------------------- ----------------- ----------------- ------------------------ ---------------
<S> <C> <C> <C> <C>
Brett A. Shockley -0- -0- -0- -
------------------------- ----------------- ----------------- ------------------------ ---------------
Stephen H. Bostwick 100,000 $2.00 -
------------------------- ----------------- ----------------- ------------------------ ---------------
Patrick P. Irestone -0- -0- -0- -
- ------------------------- ----------------- ----------------- ------------------------ ---------------
</TABLE>
(1) The stock option, originally granted on December 2, 1996, was repriced
and deemed regranted on September 19, 1997. The stock option becomes
exercisable over six years and expires on December 2, 2006.
(2) All stock options were granted with an exercise price equal to the fair
market value of the Common Stock on the date of grant, which was the mean
average of the bid and asked prices of the Common Stock as reported on
the Nasdaq SmallCap Market on such date.
<PAGE>
Aggregate Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The following table sets forth certain information with respect to
options exercised during fiscal 1997 by the Company's Chief Executive Officer
and the executive officers named in the Summary Compensation Table, and with
respect to unexercised options held by such persons at the end of fiscal 1997.
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised in the
Acquired Underlying Unexercised Money Options/SARS
on Value Options/SARS at FY-End at FY-End(1)
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Name (#) ($) (#) (#) ($) ($)
- ------------------------- ------------ ----------- --------------- ----------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Brett A. Shockley -0- -0- -0- -0- -0- -0-
- ------------------------- ------------ ----------- --------------- ----------------- -------------- ----------------
Stephen H. Bostwick -0- -0- 10,000 90,000 -0- -0-
- ------------------------- ------------ ----------- --------------- ----------------- -------------- ----------------
Patrick P. Irestone -0- -0- 318,500 -0- -0- -0-
- ------------------------- ------------ ----------- --------------- ----------------- -------------- ----------------
</TABLE>
(1) The calculations of the value of unexercised options are based on the
difference between the closing bid price on Nasdaq SmallCap Market of the Common
Stock on December 31, 1997 and the exercise price of each option, multiplied by
the number of shares covered by the option.
Report of Repricing of Options
On September 19, 1997, the Compensation Committee repriced all
outstanding options held by current employees and directors, which repriced
options replaced previously granted options having an exercise price in excess
of the then current market price. The Compensation Committee granted the options
to replace previously granted options in order to preserve an economic incentive
for continued commitment to the Company's success.
In connection with the repricing of options, the option to purchase
100,000 shares at $3.375 granted to Stephen C. Bostwick on December 2, 1996 was
repriced to $2.00 per share. No other terms of such option were amended in
connection with the repricing, which terms are set forth in the table under
"Option/SAR Grants in Last Fiscal Year."
Employment Agreements
In September 1994, the Company entered into an Employment Agreement with
Patrick P. Irestone, who at the time was President and Chief Operating Officer
of the Company, which agreement was amended in January 1996. The agreement, as
amended, provided for a base annual salary of $148,000, annual cash bonuses,
stock options and restricted stock. On July 15, 1997, the Company entered into a
Separation Agreement and Release with Patrick P. Irestone. Pursuant to the
agreement, Mr. Irestone resigned as the Company's President and Chief Operating
Officer and as a director of the Company. The agreement provided for severance
payments to Mr. Irestone of $8,333 per month for three months. The agreement
contains mutual releases and is subject to confidentiality provisions.
<PAGE>
Section 16(a) Reporting
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers, directors, and certain shareholders to file
reports of ownership and changes in ownership of the Company's Common Stock with
the Securities and Exchange Commission. To the Company's knowledge, based on a
review of the copies of such reports furnished to the Company and written
representations that no other reports were required, during the Company's fiscal
year ended December 31, 1997, all Section 16(a) filing requirements were
complied with.
CERTAIN TRANSACTIONS
In connection with the employment agreement between the Company and
Patrick P. Irestone as President and Chief Operating Officer of the Company, the
Company loaned an aggregate of $113,500 to Mr. Irestone to pay taxes due as a
result of the grant of 67,500 shares of the Company's Common Stock in February
1996. The loans are evidenced by promissory notes dated (i) December 23,1996 in
the principal amount of $94,500, with interest accruing at 6.31% per annum, and
(ii) April 17, 1997 in the principal amount of $19,000, with interest accruing
at 5.99% per annum. Pursuant to the original notes, principal and interest was
due one year after the date of the respective notes. Pursuant to the Separation
Agreement and Release dated July 15, 1997, the Company agreed to extend the
loans on an annual basis as they come due through April 14, 2002. The loans are
on a nonrecourse basis and are secured by the 67,500 shares granted to Mr.
Irestone in February 1996.
The Company has purchased its Property/Casualty and Group Insurance
policy through CSC Insurance Center, Inc. Bruce E. Humphrey, a director of the
Company, owns 70% of the outstanding shares of CSC Insurance Center, Inc. In
addition, CSC Insurance Center, Inc. acts as the agent for the Company's 401(k)
Plan. All transactions with CSC Insurance Center, Inc. and Mr. Humphrey were on
terms no less favorable than could be obtained from an unaffiliated third party.
The Company did not make any payments directly to Mr. Humphrey.
<PAGE>
The Company believes that the foregoing transactions are on terms no
less favorable to the Company than could have been obtained from unaffiliated
third parties. Such actions have been ratified by a majority of the independent
outside members of the Company's Board of Directors who do not have an interest
in the transactions. All future transactions, including loans, loan guarantees
or forgiveness of loans, with directors, officers or shareholders holding more
than 5% of the Company's outstanding shares, or affiliates of any such persons,
will be on terms no less favorable than could be obtained from an unaffiliated
third party and will be approved by a majority of the independent outside
directors who do not have an interest in the transactions.
APPROVAL OF 1998 EMPLOYEE STOCK PURCHASE PLAN
(Proposal 2 on Proxy Card)
General
On February 26, 1998, the Board of Directors adopted, subject to
shareholder approval, the Company's 1998 Employee Stock Purchase Plan (the
"Stock Purchase Plan"). A general description of the basic features of the Stock
Purchase Plan is presented below, but such description is qualified in its
entirety by reference to the full text of the Stock Purchase Plan, a copy of
which may be obtained without charge upon written request to Timothy E. Briggs.
Description of the 1998 Employee Stock Purchase Plan
Purpose. The purpose of the Stock Purchase Plan is to encourage stock
ownership by the Company's employees and in so doing to provide an incentive to
remain in the Company's employ, to improve operations, to increase profits and
to contribute more significantly to the Company's success.
Eligibility; Term. The Stock Purchase Plan permits employees to
purchase stock of the Company at a favorable price and possibly with favorable
tax consequences to the employees. Generally speaking, all full-time and
part-time employees (including officers) of the Company (or of those
subsidiaries authorized by the Board from time to time) who have been employed
by the Company (or a subsidiary) for at least 30 days and who are customarily
employed for more than 20 hours per week are eligible to participate in any of
the phases of the Stock Purchase Plan. However, any employee who would own (as
determined under the Internal Revenue Code), immediately after the grant of an
option, stock possessing 5% or more of the total combined voting power or value
of all classes of the stock of the Company cannot purchase stock through the
Stock Purchase Plan. Currently, this limitation excludes Brett A. Shockley and
Todd A. Parenteau from participating. As of March 27, 1998, the Company had 79
full-time employees eligible to participate.
<PAGE>
Administration. The Stock Purchase Plan will be administered by the
Compensation Committee. The Stock Purchase Plan gives broad powers to the
Committee to administer and interpret the Stock Purchase Plan, including the
authority to limit the number of shares that may be optioned under the Stock
Purchase Plan during a phase.
Options. Phases of the Stock Purchase Plan will commence on November 1
of each year or the first day of such other months as the Board may determine,
except for the first phase which will commence on May 1, 1998, and end on
October 31, 1998. Before the commencement date of the phase, each participating
employee must elect to have a certain percentage of his or her compensation
deducted during each pay period in such phase; provided, however, that the
payroll deductions during a phase must not exceed 10% of the participant's
compensation. The employee may also elect to pay the designated percentage of
compensation in a lump sum payment prior to the end of the phase.
If the employee has elected to pay the designated percentage of
compensation through payroll deductions, the employee may decrease the payroll
deduction percentage once during a phase. The employee may also request that any
further payroll deductions be discontinued until the next phase, or may request
a withdrawal of all accumulated payroll deductions. If the employee has elected
to pay the designated percentage of compensation in a lump sum, the employee
may, during the last month of the phase, decrease the percentage of compensation
or elect to withdraw any lump sum payments previously made.
Based on the amount of accumulated payroll deductions or lump sum
payment made at the end of the phase, shares will be purchased by each employee
at the termination date of such phase (generally 12 months after the
commencement date). The purchase price to be paid by the employees will be the
lower of the amount determined under Paragraphs A and B below:
A. 85% of the closing price of the Company's Common Stock quoted
by the NASDAQ SmallCap Market as of the commencement date of
the phase; or
B. 85% of the closing price of the Company's Common Stock quoted
by the NASDAQ SmallCap Market as of the termination date of
the phase.
The closing price of one share of the Company's Common Stock on March
27, 1998 was $2.875.
As required by tax law, an employee may not, during any calendar year,
receive options under the Stock Purchase Plan for shares which have a total fair
market value in excess of $25,000 determined at the time such options are
granted. Any amount not used to purchase shares will be carried over to the next
phase, unless the employee requests a refund of that amount. No interest is paid
by the Company on funds withheld, and such funds are used by the Company for
general operating purposes.
<PAGE>
If the employee dies or terminates employment for any reason before the
end of the phase, the employee's payroll deductions or lump sum payments, if
any, will be refunded, without interest, after the end of the phase. If the
employee elected to pay the designated percentage of compensation in a lump sum
and has not made any such payments, that election shall terminate. In either
event, the option granted to the employee shall immediately lapse.
Amendment. The Board of Directors may, from time to time, revise or
amend the Stock Purchase Plan as of the Board may deem proper and in the best
interest of the Company or as may be necessary to comply with Section 423 of the
Internal Revenue Code (the "Code"); provided, that no such revision or amendment
may (i) increase the total number of shares for which options may be granted
under the Stock Purchase Plan except as provided in the case of stock splits,
consolidations, stock dividends or similar events, (ii) modify requirements as
to eligibility for participation in the Stock Purchase Plan, or (iii) materially
increase the benefits accruing to participants under the Stock Purchase Plan,
without prior approval of the Company's stockholders, if such approval is
required to comply with Code Section 423 or the requirements of Section 16(b) of
the Securities Exchange Act of 1934 (the "Act").
Shares Reserved. Under the Stock Purchase Plan, 200,000 shares of the
Company's Common Stock are reserved for issuance during the duration of the
Stock Purchase Plan. The Board of Directors shall equitably adjust the number of
shares remaining reserved for grant, the number of shares of stock subject to
outstanding options and the price per share of stock subject to an option in the
event of certain increases or decreases in the number of outstanding shares of
Common Stock of the Company effected as a result of stock splits or
consolidations, stock dividends or other transactions in which the Company
receives no consideration.
Federal Income Tax Consequences of the Stock Purchase Plan. Options
granted under the Stock Purchase Plan are intended to qualify for favorable tax
treatment to the employees under Code Sections 421 and 423. Employee
contributions are made on an after-tax basis. Under existing federal income tax
provisions, no income is taxable to the optionee upon the grant or exercise of
an option if the optionee remains an employee of the Company or one of its
subsidiaries at all times from the date of grant until three months before the
date of exercise. In addition, certain favorable tax consequences may be
available to the optionee if shares purchased pursuant to the Stock Purchase
Plan are not disposed of by the optionee within two years after the date the
option was granted nor within one year after the date of transfer of purchased
shares to the optionee. The Company generally will not receive an income tax
deduction upon either the grant or exercise of the option.
Plan Benefits. Because participation in the Stock Purchase Plan is
voluntary, the future benefits that may be received by participating individuals
or groups under the Stock Purchase Plan cannot be determined at this time.
<PAGE>
Vote Required
The Board of Directors recommends that the stockholders approve the 1998
Employee Stock Purchase Plan. Approval of the Stock Purchase Plan requires the
affirmative vote of the greater of (i) a majority of the shares represented at
the meeting with authority to vote on such matter or (ii) a majority of the
voting power of the minimum number of shares that would constitute a quorum for
the transaction of business at the meeting.
INDEPENDENT PUBLIC ACCOUNTANT
Price Waterhouse LLP has served as the Company's independent auditors
since 1996. A representative of Price Waterhouse is expected to be present at
the Annual Meeting and will be given an opportunity to make a statement
regarding financial and accounting matters of the Company, if he or she so
desires, and will be available to respond to appropriate questions from the
Company's shareholders.
SHAREHOLDER PROPOSALS AND OTHER MATTERS
Any shareholder proposals for the Company's Annual Meeting for the
fiscal year ending December 31, 1998 must be received by the Company by January
6, 1999, in order to be included in the proxy statement. The proposals also must
comply with all applicable statutes and regulations.
At the time this Proxy Statement was mailed, the Board was not aware of
any matters to be presented for action at the Annual Meeting other than those
discussed in this Proxy Statement. If other matters properly come before the
meeting, the proxy holders have discretionary authority -- unless it is
expressly revoked -- to vote all proxies in accordance with their unanimous
discretion; if the proxy holders are divided on a particular matter to be voted
on with respect to their discretionary voting, the shares subject to such proxy
shall not be voted.
BY ORDER OF THE BOARD OF DIRECTORS
Loren A. Singer, Jr., Secretary
April 6, 1998
<PAGE>
SPANLINK COMMUNICATIONS, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
For the Annual Meeting of Shareholders
May 13, 1998
The undersigned hereby appoints Brett A. Shockley and Timothy E. Briggs, or
either of them, proxies with full power of substitution to vote all shares of
stock of Spanlink Communications, Inc. of record in the name of the undersigned
at the close of business on March 27, 1998, at the Annual Meeting of
Shareholders to be held in Minneapolis, Minnesota on May 13, 1998, or at any
adjournment or adjournments thereof, hereby revoking all former proxies:
<TABLE>
<S><C>
1. ELECTION OF DIRECTOR FOR nominee listed below WITHHOLD AUTHORITY
(except as indicated to the to vote for nominee listed below
contrary)
</TABLE>
(INSTRUCTIONS: To withhold authority to vote for nominee, strike a line through
the nominee's name below.)
Bruce E. Humphrey
2. PROPOSAL TO APPROVE THE 1998 EMPLOYEE STOCK PURCHASE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. IN THEIR DISCRETION, UPON ANY OTHER MATTERS COMING BEFORE THE MEETING.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" THE MATTERS SUMMARIZED
ABOVE UNLESS OTHERWISE SPECIFIED.
Dated: ____________________________, 1998
___________________________________________
___________________________________________
Please sign name(s) exactly as shown at
left. When signing as executor,
administrator, trustee or guardian, give
full title as such; when shares have been
issued in names of two or more persons, all
should sign.
<PAGE>
SPANLINK COMMUNICATIONS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I - ESTABLISHMENT OF PLAN
1.01 Adoption by Board of Directors. By action of the Board of Directors
of Spanlink Communications, Inc. (the "Corporation") on February
26, 1998 and subject to approval by its shareholders, the
Corporation has adopted an employee stock purchase plan pursuant to
which eligible employees of the Corporation and certain of its
Subsidiaries may be offered the opportunity to purchase shares of
Stock of the Corporation. The terms and conditions of this Plan are
set forth in this plan document, as amended from time to time as
provided herein. The Corporation intends that the Plan shall
qualify as an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code of 1986, as amended from time to time,
(the "Code") and shall be construed in a manner consistent with the
requirements of Code Section 423 and the regulations thereunder.
1.02 Shareholder Approval and Term. This Plan shall become effective May
1, 1998, and shall terminate on October 31, 2003; provided,
however, that the Plan shall be subject to approval by the
shareholders of the Corporation within twelve (12) months after the
Plan was adopted by the Board or, if earlier, at the next Annual
Meeting of the Shareholders, in the manner provided under Code
Section 423 and the regulations thereunder; and provided, further,
that the Board of Directors may extend the term of the Plan for
such period as the Board, in its sole discretion, deems advisable.
In the event that the shareholders fail to approve the Plan at such
annual shareholders' meeting, this Plan shall not become effective
and shall have no force or effect.
ARTICLE II - PURPOSE
2.01 Purpose. The primary purpose of the Plan is to provide an
opportunity for Eligible Employees of the Corporation to become
shareholders of the Corporation, thereby providing them with an
incentive to remain in the Corporation's employ, to improve
operations, to increase profits and to contribute more
significantly to the Corporation's success.
ARTICLE III - DEFINITIONS
3.01 "Administrator" means the Compensation Committee (the "Committee")
appointed by the Board of Directors. The Administrator may, in its
sole discretion, authorize the officers of the Corporation to carry
out the day-to-day operation of the Plan. In its sole discretion,
the Board may take such actions as may be taken by the
Administrator, in addition to those powers expressly reserved to
the Board under this Plan.
<PAGE>
3.02 "Board of Directors" or "Board" means the Board of Directors of
Spanlink Communications, Inc.
3.03 "Compensation" means the Participant's gross cash compensation to
be paid during the Phase, including overtime, commissions and
bonuses, but excluding disability payments, severance pay and other
payments excluded from the definition of "covered compensation"
under the Corporation's qualified retirement plans.
3.04 "Corporation" means Spanlink Communications, Inc., a Minnesota
corporation.
3.05 "Disability" means the Participant's inability to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for
a continuous period of not less than twelve (12) months, as
determined by a physician acceptable to the Corporation or
Subsidiary.
3.06 "Eligible Employee" means any employee who is a full-time or
part-time employee of the Corporation or one of its Subsidiaries
and, as of the date set forth in Section 6.01, has been employed by
the Corporation or Subsidiary for at least thirty (30) days and is
customarily employed for more than twenty (20) hours per week;
provided, however, that for the Phase beginning May 1, 1998, all
full-time and part-time employees of the Corporation who are
customarily employed for more than twenty (20) hours per week shall
be eligible.
3.07 "Enrollment Period" means the period determined by the
Administrator for purposes of accepting elections to participate
during a Phase from Eligible Employees.
3.08 "Participant" means an Eligible Employee who has been granted an
option and is participating during a Phase through payroll
deductions or by electing to pay a lump sum amount, subject to the
limitations set forth in Section 9.03.
3.09 "Phase" means the period beginning on the date that the option was
granted, otherwise referred to as the commencement date of the
Phase, and ending on the date that the option is exercised,
otherwise referred to as the termination date of the Phase. Phases
shall be numbered consecutively, beginning with Phase 1.
3.10 "Plan" means the Spanlink Communications, Inc. 1998 Employee Stock
Purchase Plan.
3.11 "Stock" means the voting Common Stock of the Corporation.
3.12 "Subsidiary" or "Subsidiaries" means any corporation defined as a
subsidiary of the Corporation in Code Section 424(f), or any
successor provision, as of the effective date of the Plan, and such
other corporations that qualify as subsidiaries of the Corporation
under Code Section 424(f), or any successor provision, as the Board
approves to participate in this Plan from time to time.
<PAGE>
ARTICLE IV - ADMINISTRATION
4.01 Administration. Except for those matters expressly reserved to the
Board pursuant to any provisions of the Plan, the Administrator
shall have full responsibility for administration of the Plan,
which responsibility shall include, but shall not be limited to,
the following:
(a) The Administrator shall, subject to the provisions of
the Plan, establish, adopt and revise such rules and
procedures for administering the Plan, and shall make
all other determinations as it may deem necessary or
advisable for the administration of the Plan;
(b) The Administrator shall, subject to the provisions of
the Plan, determine all terms and conditions that
shall apply to the grant and exercise of options under
this Plan, including, but not limited to, the number
of shares of Stock that may be granted, the date of
grant, the exercise price and the manner of exercise
of an option. The Administrator may, in its
discretion, consider the recommendations of the
management of the Corporation when determining such
terms and conditions;
(c) The Administrator shall have the exclusive authority
to interpret the provisions of the Plan, and each such
interpretation or determination shall be conclusive
and binding for all purposes and on all persons,
including, but not limited to, the Corporation and its
Subsidiaries, the shareholders of the Corporation and
its Subsidiaries, the Administrator, the Board, the
officers and the employees of the Corporation and its
Subsidiaries, and the Participants and the respective
successors-in-interest of all of the foregoing; and
(d) The Administrator shall keep minutes of its meetings
or other written records of its decisions regarding
the Plan and shall, upon requests, provide copies to
the Board.
<PAGE>
ARTICLE V - PHASES OF THE PLAN
5.01 Phases. The Plan shall be carried out in one or more Phases of
twelve (12) months each; provided, however, that the first Phase
shall commence May 1, 1998, and shall end on the following October
31, 1998. Unless otherwise determined by the Administrator, in its
discretion, all other Phases shall commence on November 1 and shall
end on the following October 31 during the term of the Plan. No two
Phases shall run concurrently.
5.02 Limitations. The Administrator may, in its discretion, limit the
number of shares available for option grants during any Phase as it
deems appropriate. Without limiting the foregoing, in the event all
of the shares of Stock reserved for the grant of options under
Section 12.01 is issued pursuant to the terms hereof prior to the
commencement of one or more Phases or the number of shares of Stock
remaining is so small, in the opinion of the Administrator, as to
render administration of any succeeding Phase impracticable, such
Phase or Phases may be canceled or the number of shares of Stock
limited as provided herein. In addition, if, based on the payroll
deductions or the lump sum payments elected by Participants at the
beginning of a Phase, the Administrator determines that the number
of shares of Stock which would be purchased at the end of a Phase
exceeds the number of shares of Stock remaining reserved under
Section 12.01 hereof for issuance under the Plan, or if the number
of shares of Stock for which options are to be granted exceeds the
number of shares designated for option grants by the Administrator
for such Phase, then the Administrator shall make a pro rata
allocation of the shares of Stock remaining available in as nearly
uniform and equitable a manner as the Administrator shall consider
practicable as of the commencement date of the Phase or, if the
Administrator so elects, as of the termination date of the Phase.
In the event such allocation is made as of the commencement date of
a Phase, the payroll deductions or lump sum payments which
otherwise would have been made by or on behalf of Participants
shall be reduced accordingly.
ARTICLE VI - ELIGIBILITY
6.01 Eligibility. Subject to the limitations of Section 9.03, each
employee who is an Eligible Employee on the October 1 immediately
prior to the commencement of a Phase shall be eligible to
participate in such Phase. If, in the discretion of the
Administrator, any Phase commences on a date other than November 1,
whether an employee is an Eligible Employee shall be determined on
a date selected by the Administrator, which date shall be at least
thirty (30) days prior to the commencement date of the Phase.
<PAGE>
ARTICLE VII - PARTICIPATION
7.01 Participation. Participation in the Plan is voluntary. An Eligible
Employee who desires to participate in any Phase of the Plan must
complete the Plan enrollment form provided by the Administrator and
deliver such form to the Administrator or its designated
representative during the Enrollment Period established by the
Administrator prior to the commencement date of the Phase. The
Administrator may, in its discretion and subject to rules of
uniform application, provide that an Eligible Employee's election
to participate in a Phase shall apply to all subsequent Phases of
the Plan.
ARTICLE VIII - PAYMENT
8.01 Enrollment. Each Participant shall designate on the Plan enrollment
form a percentage of such Participant's Compensation to be paid on
an after-tax basis during the Phase. Such percentage shall be at
least one percent (1%) but not more than ten percent (10%) of such
Participant's Compensation to be paid during such Phase, or such
other maximum percentage as the Administrator may establish from
time to time, and must be designated in whole percentages. In order
to be effective, such Plan enrollment form must be properly
completed and received by the Administrator by the due date
indicated on such form, or by such other date established by the
Administrator.
Each Participant shall also indicate on the Plan enrollment forms
whether the percentage of Compensation elected by such Participant
shall be paid by payroll deductions during the Phase or in a lump
sum payment prior to the termination of the Phase. Participants
must elect either payroll deductions or a lump sum payment and not
a combination of both payment methods. Participants cannot change
the payment method after the due date for submitting the Plan
enrollment form established by the Administrator.
8.02 Payroll Deductions. Payroll deductions for a Participant shall
commence on the first paycheck issued for the payroll period which
begins on or immediately after the commencement date of the Phase
and shall terminate on the last paycheck issued for the payroll
period which begins on or immediately prior to the termination date
of that Phase, unless the Participant elects to discontinue payroll
deductions or exercises his or her right to withdraw all
accumulated payroll deductions previously withheld during the Phase
as provided in Article 10 hereof. The authorized payroll deductions
shall be made over the pay periods of such Phase by deducting from
the Participant's Compensation for each such pay period that
percentage specified by the Participant in the Plan enrollment
form.
<PAGE>
8.03 Lump Sum Payments. Unless otherwise determined by the
Administrator, lump sum payments must be received by the
Corporation on a date prior to the termination of the Phase as
established by the Administrator, and must be in such form as
approved by the Administrator. If payment is not made by such due
date or is made in an unauthorized form, the option granted
pursuant to Article IX shall lapse in its entirety, and any amounts
paid to the Corporation shall be returned to the Participant,
without interest, as soon as administratively feasible. During the
last month of the Phase, a Participant may decrease the percentage
of his or her Compensation designated to be paid in a lump sum
payment by completing and filing such forms as the Administrator
may require.
8.04 Decreases During a Phase. In addition to the right to discontinue
or withdraw payroll deductions during a Phase as provided in
Article X, a Participant may decrease the percentage of
Compensation designated to be deducted as payroll deductions during
a Phase by completing and filing such forms as the Administrator
may require. Such decrease shall be effective with the next payroll
period beginning after the date that the Administrator receives
such forms and shall apply to all remaining Compensation paid
during the Phase. The Participant may exercise the right to
decrease his or her payroll deductions only once during each Phase.
8.05 Change in Compensation During a Phase. In the event that the
Participant elects to make payroll deductions during a Phase and
such Participant's Compensation is discontinued or reduced during
the Phase for any reason, such that the amount actually withheld on
behalf of the Participant as of the termination date of the Phase
is less than the amount anticipated to be withheld as determined on
the commencement date of the Phase, then the extent to which the
Participant may exercise his or her option shall be based on the
amounts actually withheld on his or her behalf. In the event of a
change in the pay period of any Participant, such as from biweekly
to monthly, an appropriate adjustment shall be made to the
deduction in each new pay period so as to insure the deduction of
the proper amount authorized by the Participant.
ARTICLE IX - OPTIONS
9.01 Grant of Option. Subject to Article X, a Participant who has
elected to participate in the manner described in Article VIII and
who is employed by the Corporation or a Subsidiary as of the
commencement date of a Phase shall be granted an option as of such
date to purchase that number of whole shares of Stock determined by
dividing the total amount to be credited to the Participant's
account by the option price per share set forth in Section 9.02(a)
below. The option price per share for such Stock shall be
determined under Section 9.02 hereof, and the number of shares
exercisable shall be determined under Section 9.03 hereof.
<PAGE>
9.02 Option Price. Subject to the limitations hereinbelow, the option
price for such Stock shall be the lower of the amounts determined
under paragraphs (a) and (b) below:
(a) Eighty-five percent (85%) of the closing price for a
share of the Corporation's Stock as reported on the
Nasdaq National Market, Nasdaq SmallCap Market or on
an established securities exchange as of the
commencement date of the Phase; or
(b) Eighty-five percent (85%) of the closing price for a
share of the Corporation's Stock as reported on the
Nasdaq National Market, Nasdaq SmallCap Market or on
an established securities exchange as of the
termination date of the Phase.
In the event that the commencement or termination date of a Phase
is a Saturday, Sunday or holiday, or in the event there was no
trade of the Corporation's Stock on such applicable date, the
amounts determined under the foregoing subsections shall be
determined using the price as of the last preceding trading day.
If the Corporation's Stock is not listed on the Nasdaq National
Market, Nasdaq SmallCap Market or on an established securities
exchange, then the option price shall equal the lesser of (i)
eighty-five percent (85%) of the fair market value of a share of
the Corporation's Stock as of the commencement date of the Phase;
or (ii) eighty-five percent (85%) of the fair market value of such
stock as of the termination date of the Phase. Such "fair market
value" shall be determined by the Board.
9.03 Limitations. No employee shall be granted an option hereunder:
(a) Which permits his or her rights to purchase Stock
under all employee stock purchase plans of the
Corporation or its Subsidiaries to accrue at a rate
which exceeds Twenty-Five Thousand Dollars ($25,000)
of fair market value of such Stock (determined at the
time such option is granted) for each calendar year in
which such option is outstanding at any time;
(b) If such employee would own and/or hold, immediately
after the grant of the option, Stock possessing five
percent (5%) or more of the total combined voting
power or value of all classes of stock of the
Corporation or of any Subsidiary. For purposes of
determining stock ownership under this paragraph, the
rules of Section 424(d), or any successor provision,
of the Code shall apply.
(c) Which, if exercised, would cause the limits
established by the Administrator under Section 5.02 to
be exceeded.
<PAGE>
9.04 Exercise of Option. In addition to a Participant's right of
withdrawal provided in Section 10.01, a Participant may, by written
notice to the Corporation at any time during the last month of the
Phase, elect, effective as of such termination date, not to
exercise the option for any or all of the shares Stock subject to
the option or may elect to reduce the amount of Compensation used
to exercise the option, in which event such option shall be
exercised or shall lapse in whole or in part in accordance with the
Participant's election.
If a Participant fails to give such written notice to the
Corporation, such Participant's option for the purchase of the
shares of Stock will be exercised automatically on the termination
date of that Phase, subject to the timely and appropriate receipt
of any lump sum payment elected by such Participant. Except as
otherwise provided for lump sum payments in Section 9.05, in no
event shall a Participant be allowed to exercise an option for more
shares of Stock than can be purchased with the payroll deductions
accumulated or lump sum payment made by the Participant during such
Phase, whether or not such amounts are less than the full
percentage amount that such Participant elected to contribute at
the beginning of such Phase.
9.05 Delivery of Shares. As promptly as practicable after the
termination of any Phase, the Corporation's transfer agent or other
authorized representative shall deliver to each Participant herein
certificates for that number of whole shares of Stock purchased
upon the exercise of the Participant's option. The Corporation may,
in its sole discretion, arrange with the Corporation's transfer
agent or other authorized representative to establish, at the
direction of the Participant, individual securities accounts to
which will be credited that number of whole shares of Stock that
are purchased upon such exercise, such securities account to be
subject to such terms and conditions as may be imposed by the
transfer agent or authorized representative.
The shares of the Corporation's common stock to be delivered to a
Participant pursuant to the exercise of an option under Section
9.04 of the Plan will be registered in the name of the Participant
or, if the Participant so directs by written notice to the
Administrator prior to the termination date of the Phase, in the
names of the Participant and one other person the Participant may
designate as his joint tenant with rights of survivorship, to the
extent permitted by law.
Any accumulated payroll deductions or portion of a lump sum payment
remaining after the exercise of the Participant's option shall be
returned to the Participant, without interest, on the first
paycheck issued for the payroll period which begins on or
immediately after the commencement date of next Phase; provided,
however, that the Corporation may, under rules of uniform
application, retain such remaining amount in the Participant's
bookkeeping account and apply it toward the purchase of shares of
Stock in the next succeeding Phase, unless the Participant requests
a withdrawal of such amount pursuant to Section 10.01.
<PAGE>
If the Participant elected to make a lump sum payment and the final
amount of such lump sum payment cannot be determined by the end of
the Phase, the Corporation shall have the right to deduct from the
first paycheck issued for the payroll period which begins on or
immediately after the commencement date of the next Phase any
amount that may remain due and payable for the shares of Stock
purchased upon the exercise of the Participant's option.
ARTICLE X - WITHDRAWAL OR DISCONTINUATION
10.01 Withdrawal. At any time during a Phase, a Participant may request a
withdrawal of all accumulated payroll deductions, or during the
last month of the Phase may request a withdrawal of all lump sum
payments, then credited to the Participant's bookkeeping account by
completing such forms as the Administrator may require and
returning such forms to the Administrator on or before the date
established by the Administrator. As soon as administratively
feasible after the Administrator's receipt of such forms, all
payroll deductions or lump sum payments credited to the bookkeeping
account for the Participant during that Phase will be paid to such
Participant, without interest. No further lump sum payments or
payroll deductions will be made by or on behalf of the Participant
in any Phase until the Participant completes a new Plan enrollment
form as provided in Section 8.01 above. If, during a Phase, the
Participant requests a withdrawal, the option granted to the
Participant under that Phase of the Plan shall immediately lapse
and shall not be exercisable. Partial withdrawals are not
permitted, except as permitted in Section 9.04.
10.02 Discontinuation. A Participant may also request that the
Administrator discontinue any further payroll deductions that would
otherwise be made during the remainder of the Phase by completing
such forms as the Administrator may require and by returning such
forms to the Administrator on or before the date established by the
Administrator. The Participant's request shall be effective as of
the beginning of the next payroll period immediately following the
date that the Administrator receives such forms. Upon the effective
date of the Participant's request, the Corporation will discontinue
making payroll deductions for such Participant for that Phase.
ARTICLE XI - TERMINATION OF EMPLOYMENT
11.01 Termination. If a Participant's employment terminates with the
Corporation for any reason, voluntarily or involuntarily, including
by reason of death, before the termination date of a Phase, the
payroll deductions or lump sum payments credited to such
Participant's bookkeeping account for such Phase, if any, will be
returned to the Participant (or, in the case of death, to the
Participant's estate), without interest. If the Participant elected
to make a lump sum payment at the end of the Phase and has not made
such payment prior to termination of employment, such election
shall terminate and shall be of no further force and effect. Any
option granted to such Participant under the Plan shall immediately
lapse and shall not be exercisable. The return of such payroll
deductions or lump sum payments shall be made to the Participant
(or to the Participant's estate) as soon as administratively
practicable. In the event that such termination occurs near the end
of a Phase and the Corporation is unable to discontinue payroll
deductions for such Participant for his or her final paycheck(s),
such deductions shall still be made but shall be returned to the
Participant (or his or her estate) as provided herein. In no event
shall the accumulated payroll deductions be used to purchase any
shares of Stock.
<PAGE>
If the option lapses as a result of the Participant's death, any
accumulated payroll deductions or lump sum payments credited to the
Participant's bookkeeping account will be paid to the Participant's
estate, without interest. In the event a Participant dies after
exercise of the Participant's option but prior to delivery of the
Stock to be transferred pursuant to the exercise of the option
under Section 9.04 above, any such Stock and/or accumulated payroll
deductions or portions of lump sum payments remaining after such
exercise shall be paid by the Corporation to the Participant's
estate.
The Corporation will not be responsible for or be required to give
effect to the disposition of any cash or Stock or the exercise of
any option in accordance with any will or other testamentary
disposition made by such Participant or in accordance with the
provisions of any law concerning intestacy, or otherwise. No person
shall, prior to the death of a Participant, acquire any interest in
any Stock, in any option or in the cash credited to the
Participant's bookkeeping account during any Phase of the Plan.
11.02 Change in Subsidiaries. In the event that any Subsidiary ceases to
be a Subsidiary of the Corporation, the employees of such
Subsidiary shall be considered to have terminated their employment
for purposes of Section 11.01 hereof as of the date the Subsidiary
ceased to be a Subsidiary of the Corporation.
ARTICLE XII - STOCK RESERVED FOR OPTIONS
12.01 Shares Reserved. Two Hundred Thousand (200,000) shares of Stock,
which may be authorized but unissued shares of the Corporation (or
the number and kind of securities to which said 200,000 shares may
be adjusted in accordance with Section 14.01 hereof) are reserved
for issuance upon the exercise of options to be granted under the
Plan. Shares subject to the unexercised portion of any lapsed or
expired option may again be subject to option under the Plan.
<PAGE>
12.02 No Rights as Shareholder. The Participant shall have no rights as a
shareholder with respect to any shares of Stock subject to the
Participant's option until the date of the issuance of a stock
certificate evidencing such shares as provided in Section 9.05. No
adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property), distributions or
other rights for which the record date is prior to the date such
stock certificate is actually issued, except as otherwise provided
in Section 14.01 hereof.
ARTICLE XIII - ACCOUNTING AND USE OF FUNDS
13.01 Bookkeeping Account. Payroll deductions and lump sum payments made
by Participants shall be credited to bookkeeping accounts
established by the Corporation for each such Participant under the
Plan. A Participant may not make any other cash payments into such
account. Such account shall be solely for bookkeeping purposes and
shall not require the Corporation to establish any separate fund or
trust hereunder. All funds from payroll deductions and lump sum
payments received or held by the Corporation under the Plan may be
used, without limitation, for any corporate purpose by the
Corporation, which shall not be obligated to segregate such funds
from its other funds. In no event shall Participants be entitled to
interest on the amounts credited to such bookkeeping accounts.
ARTICLE XIV - ADJUSTMENT PROVISION
14.01 Adjustment of Shares For Certain Events. Subject to any required
action by the shareholders of the Corporation, in the event of an
increase or decrease in the number of outstanding shares of Stock
or in the event the Stock is changed into or exchanged for a
different number or kind of shares of stock or other securities of
the Corporation or another corporation by reason of a
reorganization, merger, consolidation, divestiture (including a
spin-off), liquidation, recapitalization, reclassification, stock
dividend, stock split, combination of shares, rights offering or
any other change in the corporate structure or shares of the
Corporation, the Board (or, if the Corporation is not the surviving
corporation in any such transaction, the board of directors of the
surviving corporation), in its sole discretion, shall adjust the
number and kind of securities subject to and reserved under the
Plan and, to prevent the dilution or enlargement of rights of those
Eligible Employees to whom options have been granted, shall adjust
the number and kind of securities subject to such outstanding
options and, where applicable, the exercise price per share for
such securities.
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In the event of the sale by the Corporation of substantially all of
its assets and the consequent discontinuance of its business, or in
the event of a merger, exchange, consolidation, reorganization,
divestiture (including a spin-off), liquidation, reclassification
or extraordinary dividend (collectively referred to as a
"transaction"), after which the Corporation is not the surviving
corporation, the Board may, in its sole discretion, provide for one
or more of the following:
(a) The acceleration of the exercisability of outstanding
options granted at the commencement of the Phase then
in effect, to the extent of the accumulated payroll
deductions made as of the date of such acceleration
pursuant to Article 8 hereof, and, with respect to
those Participants who elected to make lump sum
payments, the opportunity to make all or a portion of
such payments for the exercise of their options;
(b) The complete termination of this Plan and a refund of
amounts credited to the Participants' bookkeeping
accounts hereunder; or
(c) The continuance of the Plan only with respect to
completion of the then current Phase and the exercise
of options thereunder. In the event of such
continuance, Participants shall have the right to
exercise their options as to an equivalent number of
shares of stock of the corporation succeeding the
Corporation by reason of such transaction.
In the event of a transaction where the Corporation survives, then
the Plan shall continue in effect, unless the Board takes one or
more of the actions set forth above. The grant of an option
pursuant to the Plan shall not limit in any way the right or power
of the Corporation to make adjustments, reclassifications,
reorganizations or changes in its capital or business structure or
to merge, exchange or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.
ARTICLE XV - NONTRANSFERABILITY OF OPTIONS
15.01 Nontransferable. Options granted under any Phase of the Plan shall
not be transferable and shall be exercisable only by the
Participant during the Participant's lifetime. After the
Participant's death, the option shall be exercisable only by the
Participant's validly designated beneficiary or the representative
of the Participant's estate as provided in Article XI.
15.02 Assignment of Account Prohibited. Neither payroll deductions
granted to a Participant's account, nor any rights with regard to
the exercise of an option or to receive Stock under any Phase of
the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way by the Participant. Any such attempted
assignment, transfer, pledge or other disposition shall be null and
void and without effect, except that the Corporation may, at its
option, treat such act as an election to withdraw in accordance
with Section 10.01.
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ARTICLE XVI - AMENDMENT AND TERMINATION
16.01 General. The Plan may be terminated at any time by the Board of
Directors, provided that, except as permitted in Section 14.01
hereof, no such termination shall take effect with respect to any
options then outstanding. The Board may, from time to time, amend
the Plan as it may deem proper and in the best interests of the
Corporation or as may be necessary to comply with Code Section 423,
or any successor provision, or other applicable laws or
regulations; provided, however, no such amendment shall, without
the consent of a Participant, materially adversely affect or impair
the right of a Participant with respect to any outstanding option;
and provided, further, that no such amendment shall, unless the
shareholders of the Corporation have approved the same, directly or
indirectly:
(a) increase the total number of shares for which options
may be granted under the Plan (except as provided in
Section 14.01 herein);
(b) modify the group of Subsidiaries whose employees may
be eligible to participate in the Plan or materially
modify any other requirements as to eligibility for
participation in the Plan; or
(c) materially increase the benefits accruing to
Participants under the Plan.
ARTICLE XVII - NOTICES
17.01 General. All notices, forms, elections or other communications in
connection with the Plan or any Phase thereof shall be in such form
as specified by the Corporation from time to time, and shall be
deemed to have been duly given when received by the Participant or
his or her personal representative or by the Corporation or its
designated representative, as the case may be.
