-2-
SCHEDULE 14A
(Rule 14a-101)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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 Rule 14a-11(c) or Rule
14a-12
ACE*COMM Corporation
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which
transaction applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11 (set
forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary
materials:
[ ] Check box if any part of the fee is
offset as
provided by Exchange Act Rule 0-11(a)(2)
and
identify the filing for which the
offsetting
fee was paid previously. Identify the
previous
filing by registration statement number, or
the
Form or Schedule and the date of its
filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
ACE*COMM CORPORATION
704 Quince Orchard Road
Gaithersburg, Maryland 20878
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of ACE*COMM
Corporation (the "Company"), will be held at ACE*COMM
Corporation, 704 Quince Orchard Road, Gaithersburg, MD
20878, on November 19, 1997, at 10:00 a.m. local time for
the following purposes:
1. To elect directors to serve until
their successors are elected and qualify;
2. To consider and act upon a proposal
to amend the Amended and Restated Omnibus
Stock Plan;
3. To consider and act upon a proposal
to amend the Amended and Restated Stock
Option Plan for Directors;
4. To consider and act upon a proposal
to ratify the appointment of Price Waterhouse
LLP as the Company's independent auditors for
the fiscal year ending June 30, 1998; and
5. To consider and act upon such other
business as may properly come before the
meeting.
The Board of Directors has fixed the close of business
on October 3, 1997 as the record date for the purpose of
determining stockholders entitled to notice of, and to vote
at, the meeting.
All stockholders are cordially invited to attend the
meeting in person. TO ENSURE YOUR REPRESENTATION AT THE
MEETING, PLEASE COMPLETE AND PROMPTLY MAIL YOUR PROXY IN THE
RETURN ENVELOPE PROVIDED. This will not prevent you from
voting in person, should you so desire, but will help to
secure a quorum and will avoid added solicitation costs.
By Order of the Board of
Directors
LORETTA L. RIVERS
Secretary
October 21, 1997
Gaithersburg, Maryland
<PAGE>
ACE*COMM CORPORATION
704 Quince Orchard Road
Gaithersburg, Maryland 20878
PROXY STATEMENT
Annual Meeting of Stockholders
November 19, 1997
SOLICITATION OF PROXIES
The enclosed proxy is solicited by the Board of
Directors of ACE*COMM Corporation (the "Company") for use at
the Annual Meeting of Stockholders of the Company to be held
on November 19, 1997 and at any and all adjournments or
postponements thereof. It is anticipated that such proxy,
together with this Proxy Statement, will be first
transmitted to the Company's stockholders on or about
October 21, 1997. All shares represented by each properly
executed, unrevoked proxy received in time for the meeting
will be voted. Any proxy given may be revoked at any time
prior to its exercise by filing with the Secretary of the
Company an instrument revoking it or a duly executed proxy
bearing a later date, or by attending the meeting and voting
in person.
In addition to use of the mails, proxies may be
solicited, in person and by telephone, by regular employees
of the Company, who will not receive any additional
compensation for such solicitation. Any cost of
solicitation of proxies will be borne by the Company.
EQUITY SECURITIES AND CERTAIN HOLDERS THEREOF
Stockholders of record at the close of business on
October 3, 1997, are entitled to vote at the meeting (the
"Record Date"). As of the Record Date, the Company had
outstanding 8,641,505 shares of ACE*COMM Corporation Common
Stock. Stockholders of shares are entitled to one vote for
each share held and will vote as a single class on each
matter to be considered at the meeting. The presence in
person or by proxy of the stockholders entitled to cast a
majority of the votes at the meeting is required to
constitute a quorum for the transaction of business.
The following table sets forth certain information with
respect to the beneficial ownership of Common Stock for (i)
each of the Company's directors and nominees, each of the
Company's executive officers named in the Summary
Compensation Table below (see "Executive Compensation and
Other Information"), and all directors, nominees and
executive officers of the Company as a group, and (ii) each
person known by the Company to own more than 5% of the
Company's Common Stock as of the Record Date,
<PAGE>
based solely on the contents of Schedules 13D and 13G filed
with the Securities and Exchange Commission as of the Record
Date.
"Beneficial ownership" is determined in accordance with
Rule 13d-3(d)(1) of the Securities Exchange Act of 1934 and
includes as to each officer of the Company any options to
purchase shares of Company Common Stock which are
exercisable within 60 days of the Record Date. Except as
indicated in the footnotes to this table, the Company
believes that the persons and entities named in the table
have sole voting and investment power with respect to all
shares of Common Stock shown beneficially owned by them,
subject to community property laws where applicable.
<PAGE>
Name and Address(1) Amounts and Nature Percent of
of Ownership Outstanding
Shares
Directors, Nominees and
Officers
George T. Jimenez 2,175,486(2) 24.60%
Gilbert A. Wetzel 16,500(3) *
Gary P. Golding 2,628(4) *
Paul G. Casner, Jr. 22,500(5) *
Thomas V. Russotto 156,368(6) 1.81
S. Joseph Dorr 608,383(7) 7.01
James M. Moore 4,248(8) *
Jeffrey S. Simpson 1,481(9) *
All Directors, Nominees 3,025,065(10) 33.85
and Executive Officers
as a group (9 persons)
Other 5% Stockholders
Amerindo Investment 1,092,500 12.64
Advisors Inc.
Alberto W. Vilar
Gary A. Tanaka
One Embarcadero Center,
Suite 2300
San Francisco,
California 94111
CEO Venture Fund II 1,254,246(11) 14.51
2000 Technology Drive
Pittsburgh,
Pennsylvania 15219
___________________
*Less than one percent of stock outstanding.
(1) Unless otherwise indicated, the address is c/o ACE*COMM
Corporation, 704 Quince Orchard Road, Gaithersburg,
Maryland 20878 and the designated owner has voting and
investment power with respect to the shares.
(2) Includes 200,605 shares issuable upon the exercise of
options. Does not include 950 shares held by his
mother-in-law, as to which his wife has voting and
investment power and as to which Mr. Jimenez disclaims
beneficial ownership.
<PAGE>
(3) Includes 9,000 shares issuable upon the exercise of
options.
(4) Does not include shares held by CEO Venture Fund II
(see note 11).
(5) Includes 9,000 shares issuable upon the exercise of
options.
(6) Includes 5,041 shares issuable upon the exercise of
options.
(7) Includes 39,441 shares issuable upon the exercise of
options.
(8) Includes 1,748 shares issuable upon the exercise of
options.
(9) Includes 981 shares issuable upon the exercise of
options.
(10) Includes 294,287 shares issuable upon the exercise of
options.
(11) Includes 1,254,546 shares held by CEO Venture Fund II,
21,888 shares held by William R. Newlin, 21,888 shares held
by James Colker and 2,628 shares held by Gary P. Golding.
Colker and Newlin Management Associates II ("CNMA II"), as
the general partner of CEO Venture Fund II, exercises voting
and investment power with respect to the 1,254,546 shares
held by CEO Venture Fund II. Messrs. Colker and Newlin, as
managing general partners of CNMA II, exercise shared voting
and investment power with respect to these shares and
Messrs. Golding, E.R. Yost and G.F. Chatfield, as general
partners of CNMA II, exercise shared investment power with
respect to these shares. CNMA II and Messrs. Colker,
Newlin, Golding, Yost and Chatfield disclaim beneficial
ownership of the shares held by CEO Venture Fund II other
than to the extent of its or his individual partnership
interest.
ELECTION OF DIRECTORS
Two directors are to be elected at the meeting.
The Board of Directors has nominated the persons named
below for election as Class I directors.
Gilbert A. Wetzel
Gary P. Golding
The directors are divided into three classes,
denominated as Class I, Class II, and Class III, with the
terms of office of each Class initially expiring at the
1997, 1998 and 1999 annual meetings of stockholders,
respectively. At each annual meeting following such initial
classification and election, directors elected to succeed
those directors whose terms expire shall be elected for a
term to expire at the third succeeding annual meeting of
stockholders after their election. The directors were
initially divided into classes as follows: Class I: Gary P.
Golding and Gilbert A. Wetzel; Class II: Paul G.
Casner, Jr.; Class III: George T. Jimenez. There are no
family relationships among any of the Company's directors
and executive officers.
<PAGE>
Shares represented by the enclosed proxy are intended
to be voted, unless authority is withheld, for the election
of Gilbert A. Wetzel and Gary P. Golding, who currently
serve as Class I directors, at the Annual Meeting of
Stockholders to be held on November 19, 1997. Messrs.
Wetzel and Golding each has consented to the nomination and
has informed the Company that he will be available to serve
as a director. The other members of the Board of Directors
who are not currently standing for election continue to be
available to serve. If any of the nominees should not be
available for election, the persons named as proxies may
vote for other persons in their discretion.
The Board of Directors recommends a vote FOR each of
the nominees for director.
Direct Class
Name Age or of Recent Business Experience
Since Directo
r
George T. 61 1983 III Chief Executive Officer of
Jimenez the Company, since 1996,
and President and Treasurer
of the Company since 1983.
Paul G. 59 1983 II President of DRS Electronic
Casner, Jr. Systems Group, a division
of DRS Technologies, Inc.,
a defense electronics
corporation, since 1994;
and Chairman and Chief
Executive Officer of
Technology Applications &
Service Company from March
1991 to September 1993.
Gary P. 40 1991 I General Partner of the CEO
Golding Venture Fund II since 1989.
Gilbert A. 65 1992 I Executive Vice President,
Wetzel Right Management
Consultants, an
international human
resources consulting firm,
since 1994; retired
Chairman and Chief
Executive Officer of Bell
of Pennsylvania and Diamond
State Telephone and founder
and retired Chief Executive
Officer of Geographic
Business Publishers, Inc.
Information as to the directors' beneficial ownership
of Common Stock is set forth above, under "Equity Securities
and Certain Holders Thereof."
<PAGE>
The Board of Directors has established an Audit
Committee and a Compensation Committee. The Audit Committee
oversees actions taken by the Company's independent
auditors, recommends the engagement of auditors and reviews
any internal audits the Company may perform. The current
members of the Audit Committee are Messrs. Golding, Wetzel
and Casner. The Audit Committee did not meet during fiscal
1997. The Compensation Committee reviews the compensation
of executives of the Company, makes recommendations to the
Board of Directors with respect to standards for setting
compensation levels and administers the Company's Amended
and Restated Omnibus Stock Plan (the "Stock Plan"). The
current members of the Compensation Committee are
Messrs. Golding, Wetzel and Casner, none of whom is employed
by the Company. The Compensation Committee met three times
during fiscal 1997.
During fiscal year 1997, the Board of Directors held
six meetings. All of the Directors were in attendance at
each of the Board meetings and each of the Committee
meetings of which he was a member.
Directors are reimbursed for their travel expenses in
attending Board and Committee meetings. In fiscal 1997, the
directors received no cash compensation for their services
as director. On August 5, 1996, each of the Company's
current non-employee directors (other than Mr. Golding) was
granted an option to purchase 4,500 shares of the Company's
Common Stock for each year such director was elected to
serve, at an exercise price of $7.00 per share, pursuant to
the Company's Amended and Restated Stock Option Plan for
Directors (the "Directors' Stock Plan"). Accordingly, in
August 1996, Messrs. Wetzel and Casner received options to
purchase 4,500 and 9,000 shares of Common Stock,
respectively. Each option becomes exercisable in equal
installments of 4,500 shares on each anniversary of the date
of grant, provided that the option holder still serves as a
director on such date or, if he ceases to be a director
(other than by reason of termination for cause) within 45
days prior to such date, he has served as a director for at
least 12 consecutive months as of such date. Each option
expires upon the earlier of five years from the date of
grant, the expiration of six months following death,
resignation or removal other than for cause, or upon removal
of a director for cause.
For fiscal 1998, following a review of director
compensation by an independent consulting firm, the Board
approved changes to the compensation of directors.
Effective as of July 1, 1997, the Board approved an annual
payment to each director of $8,000 for fiscal 1998 and
$12,000 for fiscal 1999 and for each fiscal year thereafter,
payable quarterly. In addition, upon his election or
appointment to serve as a director each such director would
receive an option to purchase 3,000 shares of the Company's
Common Stock for each year such director is elected or
appointed to serve, at an exercise price equal to the fair
market value on the date of grant, pursuant to the
Directors' Stock Plan as proposed to be amended. If the
stockholders approve the amendment of the Directors' Stock
Plan, as proposed, and if they are reelected to serve as
directors, Messrs. Golding and Wetzel would each be granted
on
<PAGE>
the date of the Annual Meeting an option to purchase 9,000
shares of Common Stock.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Compensation Committee Report
The Company's officer compensation policy is to offer a
package including a competitive salary, an incentive bonus
based upon achievement of the Company's financial objectives
and of individual performance goals, and competitive
benefits. The Company also encourages broad-based employee
ownership of Company stock through a stock option program in
which key employees are eligible to participate.
The Company's compensation policy for officers is
similar to that for other employees, and is designed to
promote continued performance and attainment of corporate
and personal goals.
The Compensation Committee of the Board of Directors
(comprised entirely of non-employee directors) reviews and
approves individual officer salaries, bonus plan financial
performance goals, bonus plan allocations, and stock option
grants. The Committee also reviews guidelines for
compensation, bonus, and stock option grants for all
employees. In fiscal 1997, the Compensation Committee
asked an independent consulting firm to review the
compensation of its executives and to assist the Committee
in more formally articulating and refining its compensation
guidelines. As a result of these discussions, the Company
modified its compensation structure. In addition, the
Committee adopted changes to the Company's compensation
structure in 1997 based on the following principles: (i)
enable the Company to attract highly qualified executives
and management talent from within the telecommunications and
other relevant industries, (ii) retain top performers and
ensure future management continuity, (iii) reward
achievement of the Company's strategic goals and financial
targets, and (iv) provide compensation that is consistent
with marketplace competitiveness for companies of similar
size, Company and individual performance, and stockholder
returns.
Officers of the Company are paid salaries in line with
their responsibilities and experience. These salaries are
structured to be within the range of salaries paid by
competitors in the telecommunications and other relevant
industries. Competitors selected for salary comparison
purposes may differ from the companies included in the
comparative performance indexes in the Performance Graph
below.
Officers also participate in a bonus plan. Each
officer other than the Chief Executive Officer is eligible
to receive a discretionary bonus of up to 10% of base salary
based upon achievement of certain performance goals
established for each individual. Officers are also eligible
for financial performance bonuses of up to a pre-determined
70-85% of base salary, with amounts payable based on a
graduated formula which takes into account predetermined
corporate revenue and pre-tax income goals and, in the case
of officers with divisional profit and
<PAGE>
loss responsibility, cash flow, divisional revenue and
operational profit goals. The maximum total bonus under the
Executive Bonus Plan is 95% of base salary. Under a
deferral plan (the "Bonus Deferral Plan"), the Compensation
Committee has the right to cause deferral of the payment of
any or all of the bonus to which the officer otherwise would
be entitled, except such portion as is attributable to
achievement of cash flow targets. Deferred bonuses are
payable to the extent vested, on the October 1 which follows
the third anniversary of the end of the fiscal year for
which the bonus was awarded, or earlier termination of
employment. One third of the deferred amount vests on
October 1 which follows the first anniversary of the end of
the fiscal year with respect to which the bonus was payable,
and one third each vests on the second and third October 1
thereafter, provided that the employee remains in the employ
of the Company as of such vesting date, and subject to
acceleration under certain circumstances, including a change
of control or termination of the employee by the Company
without cause (as defined in the plan). Pursuant to the
terms of the Bonus Deferral Plan, the Compensation Committee
elected to defer payment of all bonuses otherwise payable to
executive officers for fiscal 1997 performance.
Stock option grants to officers are designed to promote
success by aligning the officers' financial interests with
long-term stockholder value and by providing an incentive
for individual long-term performance and the achievement of
short-term financial performance of the Company. Grants of
stock options are based on various subjective factors
primarily relating to the responsibilities of the individual
officers, and also to their expected future contributions
and prior option grants. Generally, officers are granted
options which vest six to eight years from the date of
grant, subject to earlier vesting based on a graduated
formula which takes into account predetermined corporate
revenue and pre-tax income goals and, in the case of
officers with divisional profit and loss responsibility,
cash flow, divisional revenue and operational profit goals.
Options which vest on an accelerated basis become
exercisable over three years, provided that the officer
remains in the continuous employ of the Company. In fiscal
1997, certain additional options were granted to officers,
which will become exercisable three years from the date of
grant if the officer remains employed by the Company during
such period.
As noted above, the Company's compensation policy is
based primarily upon the practice of pay-for-performance.
Section 162(m) of the Internal Revenue Code imposes a
limitation on the deductibility of nonperformance-based
compensation in excess of $1 million paid to Named Executive
Officers. The Committee currently believes that the Company
should be able to continue to manage its executive
compensation program for Named Executive Offers so as to
preserve the related federal income tax deductions.
The Compensation Committee annually reviews and
approves the compensation of George Jimenez, the Chief
Executive Officer. Mr. Jimenez participates in the bonus
plan, with his bonus tied to corporate revenue and pre-tax
income goals, but he does not participate in the individual
performance portion of the plan. His maximum possible bonus
<PAGE>
for fiscal 1997 was 70% of his base salary. In fiscal 1997,
Mr. Jimenez was also awarded a one-time bonus for his
exceptional performance in connection with the Company's
initial public offering ("IPO") of Common Stock in August
1996. The Committee elected to defer, under the Bonus
Deferral Plan, bonuses payable for 1997 performance and with
respect to the IPO for Mr. Jimenez, as for all other
executive officers. In 1997, Mr. Jimenez received options
to purchase stock for performance in fiscal 1996, pursuant
to the Company's previously existing compensation program.
Under the Company's new option grant program, Mr. Jimenez
received options which vest based on performance in fiscal
1997, a portion of which vested as of October 1, 1997,
certain of which generally will become exercisable over
three years and others of which generally will become
exercisable three years from the date of grant. The
Committee believes Mr. Jimenez is paid a reasonable salary,
and his regular bonus and option grants are based on the
same corporate financial goals as for the other corporate
officers of the Company. In addition, Mr. Jimenez is a
significant stockholder in the Company, and to the extent
his performance as CEO translates into an increase in the
value of the Company's stock, all stockholders, including
Mr. Jimenez, share the benefits.
COMPENSATION COMMITTEE
Paul G. Casner, Jr.
Gary P. Golding
Gilbert A. Wetzel
<PAGE>
Cash Compensation
Cash compensation paid or accrued for services in all
capacities for 1995, 1996 and 1997 fiscal years for the
Chief Executive Officer and each of the other four most
highly compensated executive officers of the Company during
such years (the "Named Executive Officers") is set forth in
the following table.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Ter
m
Annual Compensation(1) Compensa
tion
Awards
Name Fisc Salar Bonus Other Number All
and al y Annua of Other
Principal Year l Shares Compen-
Position Compe Underlyi sation
n- ng (4)
satio Options(
n(2) 3)
<S> <C> <C> <C> <C> <C> <C>
George T. 1997 $190, $173,11 -- 32,637 15,046
Jimenez 1996 000 4(5) -- 71,384 15,778
President, Chief 1995 158,0 54,079 -- 33,413 15,592
Executive 00 22,563
Officer and 150,0
Chairman of the 00
Board
Thomas V. 1997 145,0 84,970 -- 26,922 4,420
Russotto 00
Vice President 1996 121,0 67,601 -- 69,071 5,851
of 1995 00 22,563 -- 22,783 5,789
TEL*COMM 110,0
Division 00
S. Joseph Dorr 1997 128,2 65,362 -- 19,704 4,088
00
Vice President 1996 120,0 37,281 -- 36,753 4,562
of 1995 00 8,000 -- 0 4,508
NET*COMM 116,0
Division 00
James M. Moore 1997 132,2 52,486 $26,2 16,691 0
00 55
Vice President 1996 129,0 0 -- 81,000 0
of Marketing 00
1995 -- -- -- -- --
Jeffrey S. 1997 122,2 48,515 -- 11,477 0
Simpson 1996 00 -- -- -- --
Vice President 1995 -- -- -- -- --
of Finance --
</TABLE>
(1) Includes salary deferrals under the Company's 401(k)
plan and bonus amounts deferred by the Compensation
Committee under the Bonus Deferral Plan, vesting over three
years (subject to acceleration in the event of termination
without cause, or death, disability or change of control)
and payable to the extent vested on the earlier of October
1, 2000, or the termination of the officer's employment with
the Company.
(2) Comprises certain relocation expenses. Does not
include perquisites and personal benefits aggregating less
than 10% of the officer's salary and bonus.
<PAGE>
(3) In fiscal 1996, includes options granted in fiscal 1997
for performance in fiscal 1996, based on the Company's
previously existing compensation program.
(4) Consists of Company contributions to the Company's
401(k) plan on behalf of each Named Executive Officer and
amounts paid in connection with a life insurance policy for
Mr. Jimenez and disability insurance policies for certain
Named Executive Officers as follows: (i) Mr. Jimenez,
$3,875 for the 401(k) plan, $6,975 for life insurance and
$4,196 for disability insurance; (ii) Dr. Russotto, $3,154
for the 401(k) plan and $1,266 for disability insurance, and
(iii) Mr. Dorr, $2,996 for the 401(k) plan and $1,092 for
disability insurance.
(5) Includes one-time cash bonus of $75,000 for performance
in connection with the Company's initial public offering of
stock, payment of which was deferred (See note (1)).
Option Grants
The following table shows, as to the Named Executive
Officers, the options to purchase Common Stock granted by
the Company in fiscal 1997.
<PAGE>
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
Number Percentag Potential
of e of Realizable Value
Shares Total Exerci at Assumed Rates
Underlyi Options se Expirat of Stock Price
Name ng Granted Price ion Appreciation for
Options to Per Date Option Term(1)
Granted Employees Share
in Fiscal 0% 5%
1997 10%
<S> <C> <C> <C> <C> <C <C> <C>
>
George T. 71,384(2) 9.59% $7.00 8/13/01 $0 $138, $305,
Jimenez 24,087(3) 3.23 11.875 4/24/07 0 057 095
8,550(4) 1.15 11.875 4/24/07 0 179,8 455,8
82 71
63,85 161,8
1 17
Thomas V. 61,727(2) 8.29 7.00 8/13/01 0 119,3 263,8
Russotto 7,344(2) 0.99 14.75 1/27/02 0 80 21
20,748(3) 2.79 11.875 4/24/07 0 29,92 66,13
6,174(4) 0.83 11.875 4/24/07 0 7 3
154,9 392,6
46 77
46,10 116,8
7 49
S. Joseph 31,569(2) 4.24 7.00 8/13/01 0 61,05 134,9
Dorr 5,184(2) 0.70 14.75 1/27/02 0 4 26
13,935(3) 1.87 11.875 4/24/07 0 21,12 46,68
5,769(4) 0.77 11.875 4/24/07 0 5 2
104,0 263,7
67 34
43,08 109,1
3 84
James M. 11,733(3) 1.58 11.875 4/24/07 0 87,62 222,0
Moore 4,958(4) 0.67 11.875 4/24/07 0 2 59
37,02 93,83
6 5
Jeffrey S. 6,894(3) 0.93 11.875 4/24/07 0 51,48 130,4
Simpson 4,583(4) 0.62 11.875 4/24/07 0 4 76
34,22 86,73
6 8
____________________________
</TABLE>
(1) Amounts are based on the 0%, 5%, and 10% annual
compounded rates of appreciation of the Common Stock price,
prescribed by the Securities and Exchange Commission, and
are not intended to forecast future appreciation of the
Company's Common Stock. The prices of the Common Stock,
assuming such annual compounded rates of appreciation over
the term of the option, would be as follows:
Exercise price Term of Option 0% 5% 10%
$ 7.000 5 years $0 $ 8.934 $11.274
14.750 5 years 0 18.825 23.765
11.875 10 years 0 19.343 30.801
(2) Options granted under previously existing compensation
program in fiscal year 1997 for fiscal year 1996
performance, exerciseable in full, for a term of five
years from the date of grant.
(3) Option granted pursuant to the Company's current bonus
plan, subject to vesting in full or in part as of 10/1/97,
based on the Company's achievement of previously-established
performance
<PAGE>
targets for fiscal year 1997. Option shares vested as of
10/1/97 become exercisable in one-third increments as of
10/1/97, 10/1/98 and 10/1/99, provided that the officer is
then employed by the Company (or sooner, under certain
circumstances such as a change of control of the Company).
One-third of any option shares not vested as of 10/1/97 will
become exercisable on each of 4/24/03, 4/24/04, and 4/24/05,
provided that the officer is then employed by the Company.
(4) Option granted pursuant to the Company's current bonus
plan, subject to vesting in full or in part as of
10/1/97, based on the Company's achievement of
previously established performance targets for fiscal
year 1997. Option shares vested as of 10/1/97 become
exercisable in full on 4/24/00, provided that the
officer is then employed by the Company (or sooner,
under certain circumstances such as a change of control
of the Company). One-third of any option shares not
vested as of 10/1/97 will become exercisable on each of
4/24/03, 4/24/04, and 4/24/05, provided that the
officer is then employed by the Company.
Fiscal 1997 Stock Option Exercises and Year-End Option
ValuesThe following table shows, as to the Named Executive
Officers, the information concerning exercises of stock
options in the last fiscal year and 1997 fiscal year-end
option values.
Fiscal 1997 Stock Option Exercises and Year-End Option
Values
<TABLE>
<CAPTION>
Share Number of Shares
s Underlying Value of
Acqui Value Unexercised Unexercised
Name red Realized Options at In-the-Money
on (1) Fiscal Options at
Exerc Year-End Fiscal Year-
ise End(2)
Exercisable/Unexe Exercisable/Unex
rcisable ercisable
<S> <C> <C> <C> <C> <C> <C>
George T. 6,741 $83,027 247,595 32,637 $4,274, $252,937
Jimenez 340
Thomas V. 138,6 1,742,91 0 26,922 0 208,646
Russotto 59 8
S. Joseph Dorr 120,5 1,805,07 36,753 19,704 423,831 152,706
55 2
James M. Moore 0 0 0 97,691 0 1,151,98
1
Jeffrey S. 0 0 0 11,477 0 88,947
Simpson
___________
</TABLE>
(1) Value realized represents the positive spread between
the respective exercise prices of the exercised options
and the fair market value per share on the respective
dates of exercise.
(2) Value for "in-the-money" options represent the positive
spread between the respective exercise prices of
outstanding options and the market price on June 30,
1997.
<PAGE>
Employment Agreements and Change in Control Arrangements
The Company currently has no employment contracts with
any of the Named Executive Officers, and the Company has no
compensatory plan or arrangement with such Named Executive
Officers where the amounts to be paid exceed $100,000 and
which are activated upon resignation, termination or
retirement of any such executive officers upon a change in
control of the Company.
Performance Graph
In accordance with current Securities Exchange Act of
1934 regulations, the following performance graph compares
the performance of the Company's Common Stock to the
Nasdaq Stock Market Index and to the Nasdaq
Telecommunications Index. The graph assumes that the value
of the investment in the Company's Common Stock and each
index was $100 at August 14, 1996 and that all dividends
were reinvested. The measurement period is limited to that
period during which the Company's Common Stock has been
registered under Section 12 of the Securities Exchange Act
of 1934 (i.e., since the initial public offering).
<PAGE>
SECTION 16A BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Mr. Casner filed a Form 4 one day late reporting a
single transaction. Messrs. Moore and Simpson each filed a
Form 4 late each reporting a single transaction.
CERTAIN TRANSACTIONS
In connection with the purchase of certain assets by
the Company at its inception, Mr. Jimenez, the Company's
President, loaned $150,000 to the Company to assist in
financing the acquisition. The note bore interest at the
federal short-term rate established periodically by the U.S.
Treasury. Principal was payable upon demand and interest was
paid quarterly. The outstanding loan balance was paid
entirely out of proceeds of the Company's initial public
offering in August 1996.
In fiscal 1997, the Company loaned to Messrs. Russotto
and Moore $232,000 and $133,000, respectively, for interim
housing financing and relocation expenses, respectively.
The notes bear interest at 5.9% per annum. Mr. Russotto's
note was repaid in full on June 24, 1997. Mr. Moore's note
is due and payable on May 14, 1998.
PROPOSAL TO AMEND THE AMENDED AND RESTATED OMNIBUS
STOCK PLAN
The Board of Directors finds it desirable to amend the
Company's Amended and Restated Omnibus Stock Plan (the
"Stock Plan"), to expand the number of shares issuable
pursuant to options granted under the plan. The Board of
Directors has approved and recommends that the stockholders
approve the amendment to the Plan. The maximum number of
shares of Common Stock in respect of which stock-based
awards may be granted under the Stock Plan will be increased
from 2,200,000 to 3,200,000. The shares of Common Stock to
be delivered under the plan are available from the
authorized but unissued shares of Common Stock.
A copy of the Stock Plan is attached as an exhibit
hereto and the description set forth below is qualified in
its entirety by reference to such Plan.
The Stock Plan is administered by the Compensation
Committee of the Board of Directors (the "Committee"), upon
which no director who is an officer of the Company may
serve, and which comprises only Directors who are "non-
employee directors" within the meaning of Rule 16b-3 of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and who are "outside directors" within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). All employees of the Company,
including employee directors, are eligible to participate in
the Stock Plan. The Committee's determinations of which
eligible individuals are granted awards and the terms
thereof are based on each individual's present and potential
contribution to the success of the Company.
Stock options may be granted under the Stock Plan at
the discretion of the Committee and subject to such terms
and conditions
<PAGE>
determined by the Committee and set forth in a grant
agreement. Options granted under the Stock Plan may be
either nonqualified options or incentive stock options. The
Committee has discretion to fix the exercise price of such
options at a price not less than 100% of the fair market
value of the underlying shares of Common Stock at the time
of grant thereof. The closing price of the Common Stock on
October 14, 1997 was $19.88. The Committee has broad
discretion as to the terms and conditions upon which options
shall be exercisable, but under no circumstances will an
incentive stock option have a term exceeding 10 years from
date of grant.
The option exercise price may be satisfied in cash or,
in the discretion of the Committee, by exchanging shares of
Common Stock owned or surrendered by the optionee, by a
combination of cash and shares of Common Stock or by such
other means as the Committee may prescribe. The ability to
pay the option exercise price in shares of Common Stock
would, if permitted by the Committee, enable an optionee to
engage in a series of successive stock-for-stock exercises
of an option (sometimes referred to as "pyramiding") and
thereby fully exercise an option with little or no cash
investment. The Company also may make or guarantee loans to
optionees to assist optionees in exercising stock options.
The terms of an option may provide for the automatic
grant of a new award, exercisable for not more than the
number of shares tendered when the exercise price of the
option and/or related tax obligation is paid by tendering
shares of Common Stock (sometimes referred to as "reload
options"), subject to certain limitations set forth in the
Stock Plan.
Incentive stock option awards under the Stock Plan must
comply with Section 422 of the Code. Incentive stock option
awards made to an optionee who owns more than 10% of the
outstanding stock of the Company must have an exercise price
that is not less than 110% of the fair market value of the
underlying shares on the date of grant, a term not exceeding
five years, and the aggregate fair market value of shares of
Common Stock with respect to which all incentive stock
options first become exercisable by an optionee in any
calendar year shall either not exceed $100,000 or be treated
as non-qualified options.
The Committee also may grant stock appreciation rights.
Upon the exercise of a stock appreciation right with respect
to a share of Common Stock, a participant would be entitled
to receive the excess of the fair market value of such
shares over the base price of such right, which is specified
by the Committee upon grant and may not be less than 100% of
the fair market value of the underlying shares at the date
of grant. The Committee has the authority to determine
whether the value of a stock appreciation right is paid in
cash or shares of Common Stock or a combination of both.
The Committee also has discretion to make contingent
grants of performance shares which will be earned to the
extent performance goals established by the Committee are
achieved over a period of time specified by the Committee.
The Committee will have discretion to
<PAGE>
determine the value of each performance share, to adjust the
performance goals as it deems equitable to reflect events
affecting the Company or changes in law or accounting
principles or other factors, and to determine the number of
performance shares which have been earned based on
performance relative to such performance goals. The value of
performance shares that are earned may, in the discretion of
the Committee, be paid in the form of cash, shares of Common
Stock, or a combination of both.
Awards of stock under the Stock Plan will be made at
the discretion of the Committee and may be subject to
forfeiture and restrictions on transfer. In general, a
participant who has been granted restricted stock will from
the date of grant have the benefits of ownership in respect
of such shares, including the right to vote such shares and
to receive dividends and other distributions thereon,
subject to the restrictions set forth in the Stock Plan and
in the instrument evidencing such award. The shares of
restricted stock will be held by the Company, or by an
escrow agent designated by the Company, during the
restricted period and may not be sold, assigned,
transferred, pledged, or otherwise encumbered until the
restrictions have lapsed. The Committee has authority to
determine the duration of the restricted period and the
conditions under which stock may be forfeited, as well as
the other terms and conditions of such awards.
The Stock Plan also authorizes the Committee to grant
to participants awards that are valued in whole or in part
by reference to, or are otherwise based on, the value of
shares of Common Stock ("Stock Unit Awards"). The Committee
has discretion to determine the participants to whom Stock
Unit Awards are to be made, the times at which such awards
are to be made, the size of such awards, and all other
conditions of such awards, including any restrictions,
deferral periods, or performance requirements. The
provisions of the Stock Unit Awards will be subject to such
rules and regulations as the Committee shall determine at
the time of grant.
Any award under the Stock Plan may provide that the
participant has the right to receive currently or on a
deferred basis dividends or dividend equivalents and/or
other cash payments in addition to or in lieu of such award,
all as the Committee shall determine.
If the Committee determines that any stock split, stock
dividend or other distribution (whether in the form of cash,
securities, or other property), recapitalization,
reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of shares, issuance of
warrants or other rights to purchase shares at a price below
fair market value, or other similar corporate event affects
the Common Stock such that an adjustment is required in
order to preserve the benefits intended under the Stock
Plan, then the Committee has discretion to make
(i) equitable adjustments (a) in the number and kind of
shares that may be the subject of future awards under the
Stock Plan or (b) the number and kind of shares (or other
securities or property) subject to outstanding awards and
the respective grant of exercise
<PAGE>
prices thereof and/or, (ii) if appropriate, to provide for
the payment of cash to a participant.
The Committee has broad discretion as to the specific
terms and conditions of each award and any rules applicable
thereto, including but not limited to the effect thereon of
the death, retirement, or other termination of employment of
the participant and the effect, if any, of a change in
control of the Company. The terms of each award are to be
evidenced by a written instrument delivered to the
participant. The awards authorized under the Stock Plan are
subject to applicable tax withholding by the Company which
may be satisfied by the withholding of shares issuable under
the Stock Plan.
No award may be granted under the Stock Plan after the
tenth anniversary of the effective date of the Stock Plan.
The Stock Plan may be amended or terminated at any time
by the Board of Directors, except that no amendment may be
made without stockholder approval if such approval is
necessary to comply with any tax or regulatory requirement.
The Stock Plan is not subject to any provision of the
Employee Retirement Income Security Act of 1974, as amended,
and is not qualified under Section 401(a) of the Code.
Special rules apply to a participant who is subject to
Section 16 of the Exchange Act. Certain additional special
rules apply if the exercise price for an option is paid in
shares of Common Stock previously owned by the optionee
rather than in cash.
Counsel has provided the Company with the following
brief summary of the Federal income tax consequences under
the Code as currently in effect with respect to
(i) incentive stock options, (ii) non-qualified stock
options and (iii) restricted stock awards:
(i) Incentive Stock Options. No taxable income is
realized by the optionee upon the grant or exercise of an
incentive stock option. If there were no disposition of the
option shares until more than two years after the option is
granted and more than one year after the option is
exercised, the gain or loss realized by the optionee on the
sale of such shares would be eligible for capital gain or
loss treatment, and the Company would not be entitled to any
income tax deduction by reason of the grant or exercise of
the option. Recently enacted federal income tax legislation
applies preferential tax rates to capital gains arising with
respect to capital assets held for longer than twelve
months, eighteen months or five years prior to sale on
exchange. If the option shares were disposed of in a sale,
exchange, gift or other "disqualifying disposition" prior to
the expiration of the two-years-from-grant/one-year-from-
exercise holding period, generally (a) the optionee would
realize taxable ordinary income in the year of such
disposition in an amount equal to the excess (if any) of the
fair market value of such shares at the time of exercise of
the option over the option price thereof (except that, if
the disposition is a sale or
<PAGE>
exchange of the type on which a loss, if sustained, would be
recognized to such optionee, ordinary income would be
realized by such optionee in an amount equal to only the
gain realized on such sale or exchange if such gain is less
than such excess) and would realize capital gain on the
balance of the gain, and (b) the Company generally would be
entitled to a deduction for such year in the amount of the
ordinary taxable income to the optionee.
(ii) Non-Qualified Options. No taxable income is
realized by the optionee upon the grant of a non-qualified
option. On exercise, the excess of the fair market value of
the shares at the time of exercise over the option price of
such shares would be treated as compensation. Special rules
may apply to a participant who is subject to Section 16 of
the Exchange Act. Any amounts treated as compensation
(a) would be taxable at ordinary income tax rates in the
year of exercise, (b) would be subject to withholding for
Federal income tax purposes, and (c) generally would be an
allowable income tax deduction to the Company. The
optionee's tax basis for shares acquired upon exercise of a
non-qualified option would be equal to the option price paid
for the shares plus any amounts treated as compensation. An
optionee would generally be entitled to capital gain
treatment on the difference between his tax basis and the
sale price of the shares acquired upon exercise if holding
period requirements are satisfied.
(iii) Restricted Stock Awards. No income would be
realized by an employee in connection with the grant of a
restricted stock award. When the restrictions lapse, the
employee would be required to include as taxable ordinary
income the fair market value of such shares at the time the
restrictions lapse. The Company would be entitled to a
deduction for Federal income tax purposes equal to the
amount so included in such employee's income. An employee
may, by making a Section 83(b) election within 30 days after
the transfer of stock, choose to recognize income upon the
grant of a restricted stock award. Any appreciation in the
stock value after the grant date will be eligible for
capital gain treatment upon the subsequent sale of the
stock. However, if the stock is forfeited later, the loss
deduction allowable is limited to the price paid for the
stock (if any) minus any amounts received upon such
forfeiture.
(iv) Payment of Withholding Taxes. The Company may
withhold, or require a participant to remit to the Company,
an amount sufficient to satisfy any Federal, state and local
withholding tax requirements. The Committee may permit a
participant to satisfy a tax withholding requirement on
exercise of an option by delivery to the Company of shares
of its Common Stock owned by the participant, including
shares the participant is entitled to receive upon exercise
of the option.
(v) Code Section 162(m). Section 162(m) of the Code
limits the tax deduction available for compensation paid to
the Company's five most highly-compensated individuals in
excess of $1,000,000. To the extent practicable, awards
under the Stock Plan to designated executives will qualify
as "performance-based" compensation which is excluded from
the Section 162(m) cap on deductibility. Stock options and
stock
<PAGE>
appreciation rights issued under the Stock Plan are expected
to be fully deductible as performance-based.
(vi) Other. To the extent payments which are
contingent on a change in control are determined to exceed
certain Code limitations, they may be subject to a 20%
nondeductible excise tax and the Company's deduction with
respect to the associated compensation expense may be
disallowed in whole or in part.
The foregoing discussion summarizes the Federal income
tax consequences of the Stock Plan based on current
provisions of the Code which are subject to change. This
summary does not cover any state or local tax consequences
of participation in the Stock Plan.
No additional benefits have been granted under the
Stock Plan pending stockholder approval of the amendment of
the plan.
The Board of Directors recommends a vote FOR the
proposal to amend the Amended and Restated Omnibus Stock
Plan.
PROPOSAL TO AMEND THE AMENDED AND RESTATED STOCK OPTION
PLAN FOR DIRECTORS
The Board of Directors finds it desirable to amend the
Company's Amended and Restated Stock Option Plan for
Directors (the "Directors' Stock Plan"), to reduce the
number of shares issuable pursuant to options granted under
the plan and to make certain other changes, including the
effect of a change of control of the Company. The Board of
Directors has approved and recommends that the stockholders
approve the amendments to the Plan. Under the plan, the
Directors currently are eligible to receive options for
4,500 per year, upon election. Under the plan as proposed
to be amended, the number of shares would be reduced to
3,000. The shares of Common Stock to be delivered under the
plan are available from the authorized but unissued shares
of Common Stock.
A copy of the Directors' Stock Plan is attached as an
exhibit hereto and the description set forth below is
qualified in its entirety by reference to the plan.
The Directors' Stock Plan is a formula plan, in which
only non-employee Directors, who have been approved by the
Chairman of the Board for participation are eligible. An
eligible non-employee Director who is elected (or re-
elected) by the stockholders or appointed by the Board to
serve as a Director on or after July 1, 1997, shall receive
an option to purchase 3,000 shares of Common Stock,
multiplied by the number of years for which such Director
has then been elected or appointed to serve, which option
shall be granted as of the date on which such Director has
been elected, reelected or appointed, as the case may be.
The number of years in a Director's term of office shall be
rounded to the nearest whole number of years. The exercise
price of each option granted under the plan shall be equal
to the fair market value per share of the Common Stock on
the date of grant of the option.
<PAGE>
Each option granted under the Directors' Stock Plan
shall become exercisable in equal installments of 3,000
shares (in the case of options granted on or after July 1,
1997) upon each successive anniversary of the date on which
such option was granted (the "Vesting Date"), provided that:
(i) the holder still serves as a Director on such Vesting
Date; or (ii) in the event of the expiration or termination
of the holder's term of office (other than by reason of his
or her removal for cause) within 45 days prior to such
Vesting Date, such holder has served as a Director for at
least twelve consecutive months as of the date of the
expiration or termination of his or her term of office. All
or any part of an exercisable, but unexercised, installment
shall be exercisable at any time thereafter, except to the
extent the option has terminated or expired.
Each option shall expire and terminate, to the extent
not then exercised, upon the earliest of: (1)the expiration
of five years following the date of grant of such option; or
(2) the expiration of six months following the optionee's
death, resignation, or removal as a Director for any reason
other than for cause; or (3) the removal of the optionee as
a Director for cause.
To exercise an option in whole or in part, the optionee
shall give written notice of exercise to the Secretary of
the Company, which notice shall specify the number of shares
as to which the option is being exercised, accompanied by
payment in full of the option Price for such shares in cash.
Not less than 500 shares may be purchased at any one time
unless the number purchased is the total number purchasable
under the option. Options are transferable only by will or
the laws of descent and distribution.
In the event of a stock split, stock dividend,
reclassification, reorganization, or other capital
adjustment of shares of Common Stock of the Company, the
number of shares of Common Stock covered by each outstanding
option, and the exercise price per share for each such
option, shall be proportionately adjusted without any change
in the aggregate option Price.
In the event of any proposed change in control of the
Company (as defined in the plan), the Company shall take
such action as it deems appropriate and equitable to
effectuate the purposes of this Plan and to protect the
grantees of options, which action may include, but without
limitation, any one or more of the following:
(i) acceleration or change of the exercise dates of any
option; (ii) arrangements with grantees for the payment of
appropriate consideration to them for the cancellation and
surrender of any option; and (iii) in any case where equity
securities other than Common Stock of the Company are
proposed to be delivered in exchange for or with respect to
Common Stock of the Company, arrangements providing that any
option shall become one or more options with respect to such
other equity securities.
In the event the Company dissolves and liquidates
(other than pursuant to a plan of merger or reorganization),
then notwithstanding any restrictions on exercise set forth
in this Plan or any option:
<PAGE>
(i) each holder shall have the right to exercise his option,
at any time up to ten (10) days prior to the effective date
of such liquidation and dissolution; and (ii) the Company
may make arrangements with the holders for the payment of
appropriate consideration to them for the cancellation and
surrender of any option that is so canceled or surrendered
at any time up to ten (10) days prior to the effective date
of such liquidation and dissolution. The Company may
establish a different period (and different conditions) for
such exercise, delivery, cancellation, or surrender to avoid
subjecting the holder to liability under Section 16(b) of
the Exchange Act. Any option not so exercised, canceled, or
surrendered shall terminate on the last day for exercise
prior to such effective date.
No options may be granted after July 1, 2000. The
Board may amend, revise, suspend or discontinue the Plan,
from time to time, provided that no amendments may be made
within six months of the last date the Plan was amended by
the Board, except as required to comply with ERISA or the
Internal Revenue Code, and no amendment may be made without
approval of the stockholders, unless such approval is not
required to comply with Rule 16b-3 of the Securities
Exchange Commission, or any successor provision.
Counsel has provided the Company with the following
brief summary of the Federal income tax consequences under
the Code as currently in effect:
No taxable income is realized by the optionee upon the
grant of an option. On exercise, the excess of the fair
market value of the shares at the time of exercise over the
option price of such shares would be treated as
compensation. Special rules may apply to a participant who
is subject to Section 16 of the Exchange Act. Any amounts
treated as compensation (a) would be taxable at ordinary
income tax rates in the year of exercise, (b) would be
subject to withholding for Federal income tax purposes, and
(c) generally would be an allowable income tax deduction to
the Company. The optionee's tax basis for shares acquired
upon exercise of a non-qualified option would be equal to
the option price paid for the shares plus any amounts
treated as compensation. An optionee would generally be
entitled to capital gain treatment on the difference between
his tax basis and the sale price of the shares acquired upon
exercise, provided that the required holding periods are
satisfied.
The Company may withhold, or require a participant to
remit to the Company, an amount sufficient to satisfy any
Federal, state and local withholding tax requirements.
The foregoing discussion summarizes the Federal income
tax consequences of the Directors' Stock Plan based on
current provisions of the Code which are subject to change.
This summary does not cover any state or local tax
consequences of participation in the Directors' Stock Plan.
<PAGE>
If the Directors' Stock Plan is approved by the
stockholders, Messrs. Golding and Casner each will be
granted an option to purchase 9,000 shares exercisable at
the fair market value of the Common Stock on the date of the
Stockholders' Meeting.
The Board of Directors recommends a vote FOR the
proposal to amend the Amended and Restated Stock Option Plan
for Directors.
SELECTION OF INDEPENDENT AUDITORS
Price Waterhouse LLP served as independent auditors of
the Company for its fiscal year ended June 30, 1997. Price
Waterhouse LLP will serve as the independent auditors of the
Company for the current fiscal year, subject to ratification
by the stockholders. If the appointment is not ratified,
the Board of Directors will appoint another firm as the
Company's independent auditor for the year ending June 30,
1998. The Board of Directors also retains the power to
appoint another independent auditor for the Company to
replace an auditor ratified by the stockholders in the event
that the Board of Directors determines that the interests of
the Company require such a change.
The affirmative vote of a majority of the votes cast at
the meeting shall be required to ratify the appointment of
Price Waterhouse LLP as independent auditors of the Company
for the fiscal year ending June 30, 1998.
Price Waterhouse LLP is not presently expected to have
a representative present at the meeting and, therefore, will
not make a statement or respond to questions at the meeting.
The Board of Directors recommends a vote FOR the
appointment of Price Waterhouse LLP as independent auditors
of the Company for the fiscal year ending June 30, 1998.
VOTE REQUIRED TO APPROVE MATTERS
The presence in person or by proxy of shareholders
entitled to cast a majority of the votes at the Annual
Meeting will constitute a quorum. Votes cast by proxy or in
person at the meeting will be tabulated by the inspectors of
election appointed for the meeting. Proxies marked with
abstentions, broker non-votes (i.e., proxies from brokers or
nominees marked to indicate that such persons have not
received instructions from the beneficial owner or other
persons entitled to vote shares as to the vote on a
particular matter with respect to which the brokers or
nominees do not have discretionary power to vote), and
stockholders present at the meeting who abstain from voting,
will be treated as present for purposes of determining the
presence of a quorum.
The election of directors requires a plurality of votes
cast at the Annual Meeting. The amendment to the Stock Plan
requires the affirmative vote of a majority of the votes
cast at the Annual Meeting. The amendment to the Directors'
Stock Plan requires the affirmative vote
<PAGE>
of holders of a majority of the shares present in person or
by proxy and entitled to vote. The ratification of the
appointment of Price Waterhouse LLP as independent
accountants of the Company requires the affirmative vote of
a majority of the votes cast at the meeting. Any
abstentions or broker non-votes will be disregarded for
purposes of determining approval of the aforementioned
matters, with the exception of the approval of the
Directors' Stock Plan with respect to which abstentions will
have the effect of a vote against the proposal.
There is no reason to believe that any other business
will be presented at this Annual Meeting; however, if any
other business should properly and lawfully come before the
Annual Meeting, the proxies will vote in accordance with
their best judgment.
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING OF
STOCKHOLDERS;
ADDITIONAL INFORMATION
Stockholder proposals to be presented at the 1998
Annual Meeting of Stockholders must be received at the
Company's executive offices at 704 Quince Orchard Road,
Gaithersburg, Maryland 20878 by June 23, 1998 in order to be
included in the Company's proxy statement relating to that
meeting.
The Company will provide to a stockholder without
charge a copy of the Company's Annual Report on Form 10-K
for the most recent fiscal year, upon written request to the
Secretary, at the Company's address set forth above.
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
As of the date of this Proxy Statement, the Company
knows of no business other than that described herein that
will be presented for consideration at the meeting. If,
however, any other business shall come properly before the
meeting, the proxy holders intend to vote the proxies in
accordance with their best judgment.
By Order of the Board of
Directors,
LORETTA L. RIVERS
Secretary
October 21, 1997
<PAGE>
ACE*COMM CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints George T. Jimenez and
Loretta L. Rivers, or either of them, the proxy or proxies
of the undersigned with full powers of substitution, to vote
all shares of Common Stock of ACE*COMM Corporation held of
record by the undersigned at the close of business on
October 3, 1997 at the Annual Meeting of Stockholders of the
Company to be held on Tuesday, November 19, 1997 at 10:00
am, Eastern Time and at any adjournment or adjournments
thereof, upon the matters set forth herein.
PLEASE MARK YOUR CHOICE IN BLUE OR BLACK INK, PLEASE SIGN,
DATE AND RETURN THIS PROXY PROMPTLY USING THE ACCOMPANYING
ENVELOPE
X Please If properly executed, the shares represented
mark by this proxy will be voted in the manner
votes as directed herein by the undersigned
in stockholder, or to the extent directions are
this not given, such shares will be voted FOR each
example of the nominees and each other proposal.
The Board of Directors recommends a vote "FOR" the nominees
listed below and a vote "FOR" Proposals 2, 3 AND 4.
1. ELECTION OF DIRECTORS.
Nominees: Gilbert A. Wetzel
Gary P. Golding
FOR ALL NOMINEES LISTED WITHHOLD AUTHORITY FOR
(EXCEPT AS INDICATED) ALL NOMINEES LISTED
To withhold authority to vote for any nominee, write that
nominee's name in the space provided.
For Against Abstain
2 TO CONSIDER AND ACT UPON A
. PROPOSAL TO AMEND THE AMENDED
AND RESTATED OMNIBUS STOCK
PLAN
3 TO CONSIDER AND ACT UPON A
. PROPOSAL TO AMEND THE AMENDED
AND RESTATED STOCK OPTION
PLAN FOR DIRECTORS
4 RATIFICATION OF APPOINTMENT
. PRICE WATERHOUSE LLP AS
INDEPENDENT AUDITORS
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE
UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR
ANY ADJOURNMENT THEREOF.
<PAGE>
MARK HERE FOR
ADDRESS
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Exhibit A
ACE*COMM CORPORATION
AMENDED AND RESTATED OMNIBUS STOCK PLAN
1. Establishment, Purpose and Types of Awards
ACE*COMM CORPORATION hereby establishes the AMENDED AND
RESTATED ACE*COMM CORPORATION OMNIBUS STOCK PLAN (the
"Plan"). The purpose of the Plan is to promote the long-
term growth and profitability of ACE*COMM CORPORATION (the
"Corporation") by (i) providing key people with incentives
to improve stockholder value and to contribute to the growth
and financial success of the Corporation, and (ii) enabling
the Corporation to attract, retain and reward the best
available persons for positions of substantial
responsibility.
The Plan permits the granting of stock options
(including nonqualified stock options and incentive stock
options qualifying under Section 422 of the Code), stock
appreciation rights (including free-standing, tandem and
limited stock appreciation rights), restricted or
unrestricted stock awards, phantom stock, performance
awards, or any combination of the foregoing (collectively,
"Awards").
2. Definitions
Under this Plan, except where the context otherwise
indicates, the following definitions apply:
(a) "Award" shall mean any stock option, stock
appreciation right, stock award, phantom stock award, or
performance award.
(b) "Board" shall mean the Board of Directors of the
Corporation.
(c) "Change in Control" shall mean (i) any sale,
exchange or other disposition of substantially all of the
Corporation's assets; or (ii) any merger, share exchange,
consolidation or other reorganization or business
combination in which the Company is not the surviving or
continuing corporation, or in which the Corporation's
stockholders become entitled to receive cash or securities
of another issuer in exchange for their stock of the
Company.
(d) "Code" shall mean the Internal Revenue Code of
1986, as amended, and any regulations issued thereunder.
(e) "Committee" shall mean the compensation committee
of the Board; provided, however, that in the event all the
members of such compensation committee do not constitute
both "Non-Employee Directors" within the meaning of Rule 16b-
3 and "outside directors" within the meaning of Section
162(m) of the Code, than the term "Committee" shall mean
such other committee of two or more Board members appointed
by the Board to administer the Plan whose members do
constitute both "Non-Employee Directors" within the meaning
of Rule 16b-3 and, to the extent
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that Section 162(m) of the Code is applicable to Awards
granted under the Plan, "outside directors" within the
meaning of Section 162(m) of the Code.
(f) "Common Stock" shall mean shares of common stock
of the Corporation, par value of $0.01 per share.
(g) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
(h) "Fair Market Value" of a share of the
Corporation's Common Stock for any purpose on a particular
date shall be determined in a manner such as the Committee
shall in good faith determine to be appropriate; provided,
however, that if the Common Stock is publicly traded, then
Fair Market Value shall mean the last reported sale price
per share of Common Stock, regular way, or, in case no such
sale takes place on such day, the average of the closing bid
and asked prices, regular way, in either case as reported in
the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on a
national securities exchange or included for quotation on
the Nasdaq-National Market, or if the Common Stock is not so
listed or admitted to trading or included for quotation, the
last quoted price, or if the Common Stock is not so quoted,
the average of the high bid and low asked prices, regular
way, in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer in use, the
principal other automated quotations system that may then be
in use or, if the Common Stock is not quoted by any such
organization, the average of the closing bid and asked
prices, regular way, as furnished by a professional market
maker making a market in the Common Stock as selected in
good faith by the Committee or by such other source or
sources as shall be selected in good faith by the Committee;
and provided further, that in the case of incentive stock
options, the determination of Fair Market Value shall be
made by the Committee in good faith in conformance with the
Treasury Regulations under Section 422 of the Code. If, as
the case may be, the relevant date is not a trading day, the
determination shall be made as of the next preceding trading
day. As used herein, the term "trading day" shall mean a
day on which public trading of securities occurs and is
reported in the principal consolidated reporting system
referred to above, or if the Common Stock is not listed or
admitted to trading on a national securities exchange or
included for quotation on the Nasdaq-National Market, any
day other than a Saturday, a Sunday or a day in which
banking institutions in the State of New York are closed.
(i) "Grant Agreement" shall mean a written agreement
between the Corporation and a grantee memorializing the
terms and conditions of an Award granted pursuant to the
Plan.
(j) "Grant Date" shall mean the date on which the
Committee formally acts to grant an Award to a grantee or
such other date as the Committee shall so designate at the
time of taking such formal action.
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(k) "Parent" shall mean a corporation, whether now or
hereafter existing, within the meaning of the definition of
"parent corporation" provided in Section 424(e) of the Code,
or any successor thereto of similar import.
(l) "Rule 16b-3" shall mean Rule 16b-3 as in effect
under the Exchange Act on the effective date of the Plan, or
any successor provision prescribing conditions necessary to
exempt the issuance of securities under the Plan (and
further transactions in such securities) from Section 16(b)
of the Exchange Act.
(m) "Subsidiary" and "subsidiaries" shall mean only a
corporation or corporations, whether now or hereafter
existing, within the meaning of the definition of
"subsidiary corporation" provided in Section 424(f) of the
Code, or any successor thereto of similar import.
3. Administration
(a) Procedure. The Plan shall be administered by the
Committee.
The Committee shall meet at such times and places
and upon such notice as it may determine. A majority of the
Committee shall constitute a quorum. Any acts by the
Committee may be taken at any meeting at which a quorum is
present and shall be by majority vote of those members
entitled to vote. Additionally, any acts reduced to writing
or approved in writing by all of the members of the
Committee shall be valid acts of the Committee.
Members of the Committee who are either eligible
for Awards or have been granted Awards may vote on any
matters affecting the administration of the Plan or the
grant of Awards pursuant to the Plan, except that no such
member shall act upon the granting of an Award to himself or
herself, but any such member may be counted in determining
the existence of a quorum at any meeting of the Committee
during which action is taken with respect to the granting of
an Award to him or her.
(b) Powers of the Committee. The Committee shall have
all the powers vested in it by the terms of the Plan, such
powers to include authority, in its sole and absolute
discretion, to grant Awards under the Plan, prescribe Grant
Agreements evidencing such Awards and establish programs for
granting Awards. The Committee shall have full power and
authority to take all other actions necessary to carry out
the purpose and intent of the Plan, including, but not
limited to, the authority to:
(i) determine the eligible persons to whom,
and the time or times at which Awards shall be
granted,
(ii) determine the types of Awards to be
granted,
(iii) determine the number of shares to be
covered by or used for reference purposes for each
Award,
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(iv) impose such terms, limitations,
restrictions and conditions upon any such Award as
the Committee shall deem appropriate,
(v) modify, extend or renew outstanding
Awards, accept the surrender of outstanding Awards
and substitute new Awards, provided that no such
action shall be taken with respect to any
outstanding Award which would adversely affect the
grantee without the grantee's consent,
(vi) accelerate or otherwise change the time
in which an Award may be exercised or becomes
payable and to waive or accelerate the lapse, in
whole or in part, of any restriction or condition
with respect to such Award, including, but not
limited to, any restriction or condition with
respect to the vesting or exercisability of an
Award following termination of any grantee's
employment, and
(vii) to establish objectives and
conditions, if any, for earning Awards and
determining whether Awards will be paid after the
end of a performance period.
The Committee shall have full power and authority to
administer and interpret the Plan and to adopt such rules,
regulations, agreements, guidelines and instruments for the
administration of the Plan and for the conduct of its
business as the Committee deems necessary or advisable and
to interpret same, all within the Committee's sole and
absolute discretion.
(d) Limited Liability. To the maximum extent
permitted by law, no member of the Board or Committee shall
be liable for any action taken or decision made in good
faith relating to the Plan or any Award thereunder.
(e) Indemnification. To the maximum extent permitted
by law, the members of the Board and Committee shall be
indemnified by the Corporation in respect of all their
activities under the Plan.
(f) Effect of Committee's Decision. All actions taken
and decisions and determinations made by the Committee on
all matters relating to the Plan pursuant to the powers
vested in it hereunder shall be in the Committee's sole and
absolute discretion and shall be conclusive and binding on
all parties concerned, including the Corporation, its
stockholders, any participants in the Plan and any other
employee of the Corporation, and their respective successors
in interest.
4. Shares Available for the Plan; Maximum Awards
Subject to adjustments as provided in Section 12 of the
Plan, the shares of stock that may be delivered or purchased
or used for reference purposes (with respect to stock
appreciation rights, phantom stock units or performance
awards payable in cash) with respect to Awards granted
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under the Plan, including with respect to incentive stock
options intended to qualify under Section 422 of the Code,
shall not exceed an aggregate of 3,200,000 shares of Common
Stock of the Corporation. The Corporation shall reserve
said number of shares for Awards under the Plan, subject to
adjustments as provided in Section 12 of the Plan. If any
Award, or portion of an Award, under the Plan expires or
terminates unexercised, becomes unexercisable or is
forfeited or otherwise terminated, surrendered or canceled
as to any shares without the delivery of shares of Common
Stock or other consideration, the shares subject to such
Award shall thereafter be shares with respect to which
further Awards may be granted under the Plan.
The maximum number of shares of Common Stock subject to
Awards of any combination that may be granted during any one
calendar year to any one individual shall be limited to
500,000. To the extent required by Section 162(m) of the
Code and so long as Section 162(m) of the Code is applicable
to persons eligible to participate in the Plan, shares of
Common Stock subject to the foregoing limit with respect to
which the related Award is terminated, surrendered or
canceled shall not again be available for grant under this
limit.
5. Participation
Participation in the Plan shall be open to all
employees of the Corporation, or of any Parent or Subsidiary
of the Corporation, as may be selected by the Committee from
time to time. Notwithstanding the foregoing, participation
in the Plan with respect to Awards of incentive stock
options shall be limited to employees of the Corporation or
of any Parent or Subsidiary of the Corporation.
Awards may be granted to such eligible persons and for
or with respect to such number of shares of Common Stock as
the Committee shall determine, subject to the limitations in
Section 4 of the Plan. A grant of any type of Award made in
any one year to an eligible person shall neither guarantee
nor preclude a further grant of that or any other type of
Award to such person in that year or subsequent years.
6. Stock Options
Subject to the other applicable provisions of the Plan,
the Committee may from time to time grant to eligible
participants Awards of nonqualified stock options or
incentive stock options as that term is defined in Section
422 of the Code. The stock option Awards granted shall be
subject to the following terms and conditions.
(a) Grant of Option. The grant of a stock option
shall be evidenced by a Grant Agreement, executed by the
Corporation and the grantee, stating the number of shares of
Common Stock subject to the stock option evidenced thereby
and the terms and conditions of such stock option, in such
form as the Committee may from time to time determine.
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(b) Price. The price per share payable upon the
exercise of each stock option ("exercise price") shall be
determined by the Committee; provided, however, that in no
event shall the exercise price be less than 100% of the Fair
Market Value of the shares on the date the stock option is
granted.
(c) Payment. Stock options may be exercised in whole
or in part by payment of the exercise price of the shares to
be acquired in accordance with the provisions of the Grant
Agreement, and/or such rules and regulations as the
Committee may have prescribed, and/or such determinations,
orders, or decisions as the Committee may have made.
Payment may be made in cash (or cash equivalents acceptable
to the Committee) or, unless otherwise determined by the
Committee, in shares of Common Stock or a combination of
cash and shares of Common Stock, or by such other means as
the Committee may prescribe. The Fair Market Value of
shares of Common Stock delivered on exercise of stock
options shall be determined as of the date of exercise.
Shares of Common Stock delivered in payment of the exercise
price may be previously owned shares or, if approved by the
Committee, shares acquired upon exercise of the stock
option. Any fractional share will be paid in cash. The
Corporation may make or guarantee loans to grantees to
assist grantees in exercising stock options.
If the Common Stock is registered under Section 12(b)
or 12(g) of the Exchange Act, the Committee, subject to such
limitations as it may determine, may authorize payment of
the exercise price, in whole or in part, by delivery of a
properly executed exercise notice, together with irrevocable
instructions, to: (i) a brokerage firm designated by the
Corporation to deliver promptly to the Corporation the
aggregate amount of sale or loan proceeds to pay the
exercise price and any withholding tax obligations that may
arise in connection with the exercise, and (ii) the
Corporation to deliver the certificates for such purchased
shares directly to such brokerage firm.
(d) Terms of Options. The term during which each
stock option may be exercised shall be determined by the
Committee; provided, however, that in no event shall an
incentive stock option be exercisable more than ten years
from the date it is granted. Prior to the exercise of the
stock option and delivery of the shares certificates
represented thereby, the grantee shall have none of the
rights of a stockholder with respect to any shares
represented by an outstanding stock option.
(e) Reload Options. The terms of a stock option may
provide for the automatic grant of a new stock option Award
when the exercise price of the stock option and/or any
related tax withholding obligation is paid by tendering
shares of Common Stock. Any stock option Award which would
automatically be granted pursuant to this Section 6(e)
without any further Committee action may be exercisable for
not more than the number of shares tendered to exercise the
initial stock option and/or to pay any tax withholding
obligation related to such exercise, shall have an exercise
price set at the then Fair Market Value of such shares, and
shall have a term that does not extend beyond the term of
the initial stock option. The Committee may include such a
reload feature in a
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stock option Award at the time of the initial grant of the
Award or may add such a reload feature to an outstanding
stock option Award as the Committee deems desirable;
provided, however, that a reload feature shall not be added
to any outstanding incentive stock option Award without the
consent of the grantee.
(f) Restrictions on Incentive Stock Options.
Incentive stock option Awards granted under the Plan shall
comply in all respects with Code Section 422 and, as such,
shall meet the following additional requirements:
(i) Grant Date. An incentive stock option must
be granted within 10 years of the earlier of the Plan's
adoption by the Board of Directors or approval by the
Corporation's shareholders.
(ii) Exercise Price and Term. The exercise price
of an incentive stock option shall not be less than
100% of the Fair Market Value of the shares on the date
the stock option is granted. Also, the exercise price
of any incentive stock option granted to a grantee who
owns (within the meaning of Section 422(b)(6) of the
Code, after the application of the attribution rules in
Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of shares of the
Corporation or its Parent or Subsidiary corporations
(within the meaning of Sections 422 and 424 of the
Code) shall be not less than 110% of the Fair Market
Value of the Common Stock on the grant date and the
term of such stock option shall not exceed five years.
(iii) Maximum Grant. The aggregate Fair
Market Value (determined as of the Grant Date) of
shares of Common Stock with respect to which all
incentive stock options first become exercisable by any
grantee in any calendar year under this or any other
plan of the Corporation and its Parent and Subsidiary
corporations may not exceed $100,000 or such other
amount as may be permitted from time to time under
Section 422 of the Code. To the extent that such
aggregate Fair Market Value shall exceed $100,000, or
other applicable amount, such stock options shall be
treated as nonqualified stock options. In such case,
the Corporation may designate the shares of Common
Stock that are to be treated as stock acquired pursuant
to the exercise of an incentive stock option by issuing
a separate certificate for such shares and identifying
the certificate as incentive stock option shares in the
stock transfer records of the Corporation.
(iv) Grantee. Incentive stock options shall only
be issued to employees of the Corporation, or of a
Parent or Subsidiary of the Corporation.
(v) Designation. No stock option shall be an
incentive stock option unless so designated by the
Committee at the time of grant or in the Grant
Agreement evidencing such stock option.
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(g) Other Terms and Conditions. Stock options may
contain such other provisions, not inconsistent with the
provisions of the Plan, as the Committee shall determine
appropriate from time to time.
7. Stock Appreciation Rights
(a) Award of Stock Appreciation Rights. Subject to
the other applicable provisions of the Plan, the Committee
may at any time and from time to time grant stock
appreciation rights ("SARs") to eligible participants,
either on a free-standing basis (without regard to or in
addition to the grant of a stock option) or on a tandem
basis (related to the grant of an underlying stock option),
as it determines. SARs granted in tandem with or in
addition to a stock option may be granted either at the same
time as the stock option or at a later time; provided,
however, that a tandem SAR shall not be granted with respect
to any outstanding incentive stock option Award without the
consent of the grantee. SARs shall be evidenced by Grant
Agreements, executed by the Corporation and the grantee,
stating the number of shares of Common Stock subject to the
SAR evidenced thereby and the terms and conditions of such
SAR, in such form as the Committee may from time to time
determine. The term during which each SAR may be exercised
shall be determined by the Committee. The grantee shall
have none of the rights of a stockholder with respect to any
shares of Common Stock represented by an SAR.
(b) Restrictions of Tandem SARs. No incentive stock
option may be surrendered in connection with the exercise of
a tandem SAR unless the Fair Market Value of the Common
Stock subject to the incentive stock option is greater than
the exercise price for such incentive stock option. SARs
granted in tandem with stock options shall be exercisable
only to the same extent and subject to the same conditions
as the stock options related thereto are exercisable. The
Committee may, in its discretion, prescribe additional
conditions to the exercise of any such tandem SAR.
(c) Amount of Payment Upon Exercise of SARs. An SAR
shall entitle the grantee to receive, subject to the
provisions of the Plan and the Grant Agreement, a payment
having an aggregate value equal to the product of (i) the
excess of (A) the Fair Market Value on the exercise date of
one share of Common Stock over (B) the base price per share
specified in the Grant Agreement (which shall be determined
by the Committee but which shall not be less than 100% of
the Fair Market Value of one share of Common Stock on the
date of grant of the SAR), times (ii) the number of shares
specified by the SAR, or portion thereof, which is
exercised. In the case of exercise of a tandem SAR, such
payment shall be made in exchange for the surrender of the
unexercised related stock option (or any portion or portions
thereof which the grantee from time to time determines to
surrender for this purpose).
(d) Form of Payment Upon Exercise of SARs. Payment by
the Corporation of the amount receivable upon any exercise
of an SAR may be made by the delivery of Common Stock or
cash, or any combination of Common Stock and cash, as
determined in the sole discretion of the
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Committee from time to time. If upon settlement of the
exercise of an SAR a grantee is to receive a portion of such
payment in shares of Common Stock, the number of shares
shall be determined by dividing such portion by the Fair
Market Value of a share of Common Stock on the exercise
date. No fractional shares shall be used for such payment
and the Committee shall determine whether cash shall be
given in lieu of such fractional shares or whether such
fractional shares shall be eliminated.
8. Stock Awards (Including Restricted and Unrestricted
Shares and Phantom Stock)
(a) Stock Awards, In General. Subject to the other
applicable provisions of the Plan, the Committee may at any
time and from time to time grant stock Awards to eligible
participants in such amounts and for such consideration,
including no consideration or such minimum consideration as
may be required by law, as it determines. A stock Award may
be denominated in shares of Common Stock or stock-equivalent
units ("phantom stock"), and may be paid in Common Stock, in
cash, or in a combination of Common Stock and cash, as
determined in the sole discretion of the Committee from time
to time.
(b) Restricted Shares. Each stock Award shall specify
the applicable restrictions, if any, on such shares of
Common Stock, the duration of such restrictions, and the
time or times at which such restrictions shall lapse with
respect to all or a specified number of shares of Common
Stock that are part of the Award. Notwithstanding the
foregoing, the Committee may reduce or shorten the duration
of any restriction applicable to any shares of Common Stock
awarded to any grantee under the Plan. Share certificates
with respect to restricted shares of Common Stock granted
pursuant to a stock Award may be issued at the time of grant
of the stock Award, subject to forfeiture if the
restrictions do not lapse, or upon lapse of the
restrictions. If share certificates are issued at the time
of grant of the stock Award, the certificates shall bear an
appropriate legend with respect to the restrictions
applicable to such stock Award or, alternatively, the
grantee may be required to deposit the certificates with the
Corporation during the period of any restriction thereon and
to execute a blank stock power or other instrument of
transfer therefor. Except as otherwise provided by the
Committee, during such period of restriction following
issuance of share certificates, the grantee shall have all
of the rights of a holder of Common Stock, including but not
limited to the rights to receive dividends (or amounts
equivalent to dividends) and to vote with respect to the
restricted shares. If share certificates are issued upon
lapse of restrictions on a stock Award, the Committee may
provide that the grantee will be entitled to receive any
amounts per share pursuant to any dividend or distribution
paid by the Corporation on its Common Stock to stockholders
of record after grant of the stock Award and prior to the
issuance of the share certificates.
(c) Phantom Stock. The grant of phantom stock units
shall be evidenced by a Grant Agreement, executed by the
Corporation and the grantee, that incorporates the terms of
the Plan and states the number
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of phantom stock units evidenced thereby and the terms and
conditions of such phantom stock units in such form as the
Committee may from time to time determine. Phantom stock
units granted to a participant shall be credited to a
bookkeeping reserve account solely for accounting purposes
and shall not require a segregation of any of the
Corporation's assets. Phantom stock units may be exercised
in whole or in part by delivery of an appropriate exercise
notice to the Committee in accordance with the provisions of
the Grant Agreement, and/or such rules and regulations as
the Committee may prescribe, and/or such determinations,
orders, or decisions as the Committee may make. Except as
otherwise provided in the applicable Grant Agreement, the
grantee shall have none of the rights of a stockholder with
respect to any shares of Common Stock represented by a
phantom stock unit as a result of the grant of a phantom
stock unit to the grantee. Phantom stock units may contain
such other provisions, not inconsistent with the provisions
of the Plan, as the Committee shall determine appropriate
from time to time.
9. Performance Awards
The Committee may in its discretion grant performance
Awards which become payable on account of attainment of one
or more performance goals established by the Committee.
Performance Awards may be paid by the delivery of Common
Stock or cash, or any combination of Common Stock and cash,
as determined in the sole discretion of the Committee from
time to time. Performance goals established by the
Committee may be based on the Corporation's operating income
or one or more other business criteria selected by the
Committee that apply to an individual or group of
individuals, a business unit, or the Corporation as a whole,
over such performance period as the Committee may designate.
The Committee in its discretion may recommend to the Board
of Directors of the Corporation that the material terms of
any performance Award or program with respect to some or all
eligible participants be submitted for approval by the
stockholders.
10. Withholding of Taxes
The Corporation may require, as a condition to the
grant of any Award under the Plan or exercise pursuant to
such Award or to the delivery of certificates for shares
issued or payments of cash to a grantee pursuant to the Plan
or a Grant Agreement (hereinafter collectively referred to
as a "taxable event"), that the grantee pay to the
Corporation, in cash or, unless otherwise determined by the
Corporation, in shares of Common Stock, including shares
acquired upon grant of the Award or exercise of the Award,
valued at Fair Market Value on the date as of which the
withholding tax liability is determined, any federal, state
or local taxes of any kind required by law to be withheld
with respect to any taxable event under the Plan. The
Corporation, to the extent permitted or required by law,
shall have the right to deduct from any payment of any kind
(including salary or bonus) otherwise due to a grantee any
federal, state or local taxes of any kind required by law to
be withheld with respect to any taxable event under the
Plan, or to retain or sell without notice a sufficient
number of the shares to be issued to such grantee to cover
any such taxes.
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11. Transferability
To the extent required to comply with Rule 16b-3, and
in any event in the case of an incentive stock option or a
stock appreciation right granted with respect to an
incentive stock option, no Award granted under the Plan
shall be transferable by a grantee otherwise than by will or
the laws of descent and distribution. The Committee shall
have sole and absolute discretion to determine whether and
to whom an Award granted under the Plan is transferable.
Unless otherwise determined by the Committee in accord with
the provisions of this Section 11, an Award may be exercised
during the lifetime of the grantee, only by the grantee or,
during the period the grantee is under a legal disability,
by the grantee's guardian or legal representative.
12. Adjustments; Business Combinations
In the event of a reclassification, recapitalization,
stock split, stock dividend, combination of shares, or other
similar event, the maximum number and kind of shares
reserved for issuance or with respect to which Awards may be
granted under the Plan as provided in Section 4 shall be
adjusted to reflect such event, and the Committee shall make
such adjustments as it deems appropriate and equitable in
the number, kind and price of shares covered by outstanding
Awards made under the Plan, and in any other matters which
relate to Awards and which are affected by the changes in
the Common Stock referred to above.
In the event of any proposed Change in Control, the
Committee shall take such action as it deems appropriate and
equitable to effectuate the purposes of this Plan and to
protect the grantees of Awards, which action may include,
but without limitation, any one or more of the following:
(i) acceleration or change of the exercise dates of any
Award; (ii) arrangements with grantees for the payment of
appropriate consideration to them for the cancellation and
surrender of any Award; and (iii) in any case where equity
securities other than Common Stock of the Corporation are
proposed to be delivered in exchange for or with respect to
Common Stock of the Corporation, arrangements providing that
any Award shall become one or more Awards with respect to
such other equity securities.
The Committee is authorized to make adjustments in the
terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events
(including, without limitation, the events described in the
preceding two paragraphs of this Section 12) affecting the
Corporation, or the financial statements of the Corporation
or any Subsidiary, or of changes in applicable laws,
regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate
in order to prevent dilution or enlargement of the benefits
or potential benefits intended to be made available under
the Plan.
In the event the Corporation dissolves and liquidates
(other than pursuant to a plan of merger or reorganization),
then notwithstanding
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any restrictions on exercise set forth in this Plan or any
Grant Agreement, or other agreement evidencing a stock
option, stock appreciation right or restricted stock Award:
(i) each grantee shall have the right to exercise his stock
option or stock appreciation right, or to require delivery
of share certificates representing any such restricted stock
Award, at any time up to ten (10) days prior to the
effective date of such liquidation and dissolution; and
(ii) the Committee may make arrangements with the grantees
for the payment of appropriate consideration to them for the
cancellation and surrender of any stock option, stock
appreciation right or restricted stock Award that is so
canceled or surrendered at any time up to ten (10) days
prior to the effective date of such liquidation and
dissolution. The Committee may establish a different period
(and different conditions) for such exercise, delivery,
cancellation, or surrender to avoid subjecting the grantee
to liability under Section 16(b) of the Exchange Act. Any
stock option or stock appreciation right not so exercised,
canceled, or surrendered shall terminate on the last day for
exercise prior to such effective date; and any restricted
stock as to which there has not been such delivery of share
certificates or that has not been so canceled or
surrendered, shall be forfeited on the last day prior to
such effective date.
13. Termination and Modification of the Plan
The Board, without further approval of the
stockholders, may modify or terminate the Plan or any
portion thereof at any time, except that no modification
shall become effective without prior approval of the
stockholders of the Corporation if stockholder approval is
necessary to comply with any tax or regulatory requirement
or rule of any exchange or Nasdaq System upon which the
Common Stock is listed or quoted; including for this purpose
stockholder approval that is required to enable the
Committee to grant incentive stock options pursuant to the
Plan.
The Committee shall be authorized to make minor or
administrative modifications to the Plan as well as
modifications to the Plan that may be dictated by
requirements of federal or state laws applicable to the
Corporation or that may be authorized or made desirable by
such laws. The Committee may amend or modify the grant of
any outstanding Award in any manner to the extent that the
Committee would have had the authority to make such Award as
so modified or amended.
14. Non-Guarantee of Employment
Nothing in the Plan or in any Grant Agreement
thereunder shall confer any right on an employee to continue
in the employ of the Corporation or shall interfere in any
way with the right of the Corporation to terminate an
employee at any time.
15. Termination of Employment
For purposes of maintaining a grantee's continuous
status as an employee and accrual of rights under any Award,
transfer of an employee
<PAGE>
among the Corporation and the Corporation's Parent or
Subsidiaries shall not be considered a termination of
employment. Nor shall it be considered a termination of
employment for such purposes if an employee is placed on
military or sick leave or such other leave of absence which
is considered as continuing intact the employment
relationship; in such a case, the employment relationship
shall be continued until the date when an employee's right
to reemployment shall no longer be guaranteed either by law
or contract.
16. Written Agreement
Each Grant Agreement entered into between the
Corporation and a grantee with respect to an Award granted
under the Plan shall incorporate the terms of this Plan and
shall contain such provisions, consistent with the
provisions of the Plan, as may be established by the
Committee.
17. Non-Uniform Determinations
The Committee's determinations under the Plan
(including without limitation determinations of the persons
to receive Awards, the form, amount and timing of such
Awards, the terms and provisions of such Awards and the
agreements evidencing same) need not be uniform and may be
made by it selectively among persons who receive, or are
eligible to receive, Awards under the Plan, whether or not
such persons are similarly situated.
18. Compliance with Securities Law
Common Stock shall not be issued with respect to an
Award granted under the Plan unless the exercise of such
Award and the issuance and delivery of share certificates
for such Common Stock pursuant thereto shall comply with all
relevant provisions of law, including, without limitation,
the Securities Act of 1933, the Exchange Act, the rules and
regulations promulgated thereunder, and the requirements of
any national securities exchange or Nasdaq System upon which
the Common Stock may then be listed or quoted, and shall be
further subject to the approval of counsel for the
Corporation with respect to such compliance to the extent
such approval is sought by the Committee. All certificates
for Common Stock 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, any stock exchange or Nasdaq System upon which
such securities are then listed or quoted, and any
applicable Federal or state laws, and the Committee may
cause a legend or legends to be put on any such certificates
to make appropriate reference to such restrictions.
19. No Limit on Other Compensation Arrangements
Nothing contained in the Plan shall prevent the
Corporation or its Parent or Subsidiary corporations from
adopting or continuing in effect
<PAGE>
other compensation arrangements (whether such arrangements
be generally applicable or applicable only in specific
cases) as the Committee in its discretion determines
desirable, including without limitation the granting of
stock options, stock awards, stock appreciation rights or
phantom stock units otherwise than under the Plan.
20. 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 Corporation and a
grantee or any other person. To the extent that any grantee
or other person acquires a right to receive payments from
the Corporation pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of
the Corporation.
21. Governing Law
The validity, construction and effect of the Plan, of
Grant Agreements entered into pursuant to the Plan, and of
any rules, regulations, determinations or decisions made by
the Board or Committee relating to the Plan or such Grant
Agreements, and the rights of any and all persons having or
claiming to have any interest therein or thereunder, shall
be determined exclusively in accordance with applicable
federal laws and the laws of the State of Maryland, without
regard to its conflict of laws rules and principles.
22. Plan Subject to Charter and By-Laws
This Plan is subject to the Charter and By-Laws of the
Corporation, as they may be amended from time to time.
23. Effective Date; Termination Date
The Plan is effective as of the date on which the Plan
is adopted by the Board, subject to approval of the
stockholders within twelve months before or after such date.
No Award shall be granted under the Plan after the close of
business on the day immediately preceding the tenth
anniversary of the effective date of the Plan. Subject to
other applicable provisions of the Plan, all Awards made
under the Plan prior to such termination of the Plan shall
remain in effect until such Awards have been satisfied or
terminated in accordance with the Plan and the terms of such
Awards.
Date Approved by the Board: September 18, 1997
Date Approved by the Shareholders: ___________________
<PAGE>
Exhibit B
ACE*COMM CORPORATION
AMENDED AND RESTATED STOCK OPTION PLAN FOR DIRECTORS
(as amended as of 1997)
1. Purpose
The purpose of this Amended and Restated Stock Option
Plan for Directors is to advance the interests of ACE*COMM
Corporation by enhancing its ability to attract, retain and
motivate members of its Board of Directors who are not
employees of the company or any of its subsidiaries by
providing for the grant of nonqualified stock options to
such members.
2. Definitions
For the purposes of this Plan, the following terms
shall have the meanings ascribed to them below:
2.1 "Board of Directors" or "Board" shall mean the
Board of Directors of the Company.
2.2 "Fair Market Value" of a share of Stock of the
Company for any purpose on a particular date shall be
determined in a manner such as the Committee shall in good
faith determine to be appropriate; provided, however, that
if the Common Stock is publicly traded, then Fair Market
Value shall mean the last reported sale price per share of
Common Stock, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on a
national securities exchange or included for quotation on
the Nasdaq-National Market, or if the Common Stock is not so
listed or admitted to trading or included for quotation, the
last quoted price, or if the Common Stock is not so quoted,
the average of the high bid and low asked prices, regular
way, in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer in use, the
principal other automated quotations system that may then be
in use or, if the Common Stock is not quoted by any such
organization, the average of the closing bid and asked
prices, regular way, as furnished by a professional market
maker making a market in the Common Stock as selected in
good faith by the Committee or by such other source or
sources as shall be selected in good faith by the Committee;
and provided further, that in the case of ISOs, the
determination of Fair Market Value shall be made by the
Committee in good faith in conformance with the Treasury
Regulations under Section 422 of the Code. If, as the case
may be, the relevant date is not a trading day, the
determination shall be made as of the next preceding trading
day. As used herein, the term "trading day" shall mean a
day on which public trading of securities occurs and is
reported in the principal consolidated reporting system
referred to
<PAGE>
above, or if the Common Stock is not listed or admitted to
trading on a national securities exchange or included for
quotation on the Nasdaq-National Market, any day other than
a Saturday, a Sunday or a day in which banking institutions
in the State of New York are closed.
2.3 "Company" shall mean ACE*COMM Corporation, a
Maryland corporation.
2.4 "Common Stock" shall mean shares of the Company's
common stock having a par value of $.01 per share, subject
to adjustment pursuant to Section 9.
2.5 "Option" shall mean any option granted under this
Plan.
2.6 "Option Agreement" shall mean the agreement
executed by the Company and an Optionee pursuant to Section
5.5 of this Plan.
2.7 "Option Price" shall mean the purchase price per
share of Common Stock subject to an Option.
2.8 "Optionee" shall mean any person to whom an Option
has been granted under this Plan.
2.9 "Plan" shall mean this Amended and Restated Stock
Option Plan for Directors, as amended from time to time.
2.10 "Subsidiary" shall mean a corporation in which the
Company owns, directly or indirectly, shares of stock
representing 50% or more of the outstanding voting power of
all classes of stock of such corporation, at the time of the
granting of an Option under this Plan.
2.11 "Change in Control" shall mean (i) any sale,
exchange or other disposition of substantially all of the
Company's assets; or (ii) any merger, share exchange,
consolidation or other reorganization or business
combination in which the Company is not the surviving or
continuing corporation, or in which the Corporation's
stockholders become entitled to receive cash or securities
of another issuer in exchange for their stock of the
Company.
3. Participation
Each member of the Board of the Company who (i) is not
an employee of either the Company or any of its Subsidiaries
(a "Non-Employee Director") and (ii) is designated to
participate under the Plan by the Chairman of the Board of
the Company, shall receive Options from time to time in
accordance with Section 5 below.
4. Shares Subject to Plan
The stock subject to Options granted under this Plan
shall be shares of the authorized but unissued shares of
Common Stock. The aggregate number of shares of Common
Stock which may be issued under the Plan pursuant to the
exercise of Options may not exceed 200,000 shares,
<PAGE>
subject to adjustment as provided in Section 9. In the
event that any outstanding Options expire or terminate for
any reason, without having been exercised in full, the
shares of Common Stock allocable to such unexercised portion
shall become available for issuance under other Options
under this Plan.
5. Stock Option Grants
5.1 Option Shares and Date of Grant. The Company
shall grant to each
Non-Employee Director:
(1) in the case of a Non-Employee Director who is
elected (or re-elected) by the stockholders or appointed by
the Board to serve as a Director on or after August 1, 1996
and prior to July 1, 1997, an Option to purchase 4,500
shares of Common Stock, multiplied by the number of years
for which such Director has then been elected or appointed
to serve, which Option shall be granted as of the date on
which such Non Employee Director has then been elected,
reelected or appointed, as the case may be; and
(2) in the case of a Non-Employee Director who is
elected (or re-elected) by the stockholders or appointed by
the Board to serve as a Director on or after July 1, 1997,
an Option to purchase 3,000 shares of Common Stock,
multiplied by the number of years for which such Director
has then been elected or appointed to serve, which Option
shall be granted as of the date on which such Director has
been elected, reelected or appointed, as the case may be.
For the purposes of this Section 5.1, the number of
years in a Director's term of office shall be rounded to the
nearest whole number of years.
5.2 Option Price. The Option Price shall be equal to
the fair market value per share of the Common Stock on the
date of grant of the Option.
5.3 Vesting. Each Option shall be and become
exercisable in equal installments of 4,500 shares of Common
Stock (or 3,000 shares in the case of Options granted on or
after July 1, 1997) upon each successive anniversary of the
date on which such Option was granted (the "Vesting Date"),
provided that: (i) the Optionee still serves as a Director
on such Vesting Date; or (ii) in the event of the expiration
or termination of the Optionee's term of office (other than
by reason of his or her removal for cause) within 45 days
prior to such Vesting Date, such Optionee has served as a
Director for at least twelve consecutive months as of the
date of the expiration or termination of his or her term of
office. All or any part of an exercisable, but unexercised,
installment shall be exercisable at any time thereafter,
except to the extent the Option has terminated or expired.
5.4 Expiration. Each Option shall expire and
terminate, to the extent not then exercised, upon the
earliest of:
<PAGE>
(1) the expiration of five years following the
date of grant of such Option; or
(2) the expiration of six months following the
Optionee's death, resignation, or removal as a Director for
any reason other than for cause; or
(3) the removal of the Optionee as a Director for
cause.
5.5 Option Agreement. Promptly after the grant of an
Option, the Company and the Optionee shall execute an Option
Agreement which incorporates the terms of this Plan and
specifies: (i) the Option Price; (ii) the number of shares
of Common Stock covered by the Option; and (iii) the other
terms and conditions of the Option and its exercise
consistent with the terms of this Plan.
6. Manner of Exercise
6.1 Manner. To exercise an Option in whole or in
part, the Optionee shall give written notice of exercise to
the Secretary of the Company, which notice shall specify the
number of shares as to which the Option is being exercised,
accompanied by payment in full of the Option Price for such
shares in cash. Not less than 500 shares may be purchased
at any one time unless the number purchased is the total
number purchasable under the Option.
6.2 Preconditions to Exercise. An Option may not be
exercised unless and until the Company has effected or
obtained compliance with all laws and regulations applicable
to the issuance of shares under the Option, including
without limitation, federal and state tax and securities
laws, to the Company's satisfaction.
7. No Rights of Stockholder
No Optionee shall have any of the rights of a
stockholder with respect to the shares covered by his or her
Option until such shares have been issued to him or her upon
the due exercise of the Option.
8. Non-Transferability of Options
No Option shall be transferable otherwise than by will
or the laws of descent and distribution.
9. Stock Adjustment
9.1 Adjustments. In the event of a stock split, stock
dividend, reclassification, reorganization, or other capital
adjustment of shares of Common Stock of the Company, the
number of shares of Common Stock covered by each outstanding
Option, and the Option Price per share for each such Option,
shall be proportionately adjusted without any change in the
aggregate Option Price.
<PAGE>
9.2 Merger, Consolidation, Liquidation, or
Dissolution. In the event of any proposed Change in
Control, the Company shall take such action as it deems
appropriate and equitable to effectuate the purposes of this
Plan and to protect the grantees of Options, which action
may include, but without limitation, any one or more of the
following: (i) acceleration or change of the exercise dates
of any Option; (ii) arrangements with grantees for the
payment of appropriate consideration to them for the
cancellation and surrender of any Option; and (iii) in any
case where equity securities other than Common Stock of the
Company are proposed to be delivered in exchange for or with
respect to Common Stock of the Company, arrangements
providing that any Option shall become one or more Options
with respect to such other equity securities.
In the event the Company dissolves and liquidates
(other than pursuant to a plan of merger or reorganization),
then notwithstanding any restrictions on exercise set forth
in this Plan or any Option: (i) each holder shall have the
right to exercise his Option, at any time up to ten (10)
days prior to the effective date of such liquidation and
dissolution; and (ii) the Company may make arrangements with
the holders for the payment of appropriate consideration to
them for the cancellation and surrender of any Option that
is so canceled or surrendered at any time up to ten (10)
days prior to the effective date of such liquidation and
dissolution. The Company may establish a different period
(and different conditions) for such exercise, delivery,
cancellation, or surrender to avoid subjecting the holder to
liability under Section 16(b) of the Exchange Act. Any
Option not so exercised, canceled, or surrendered shall
terminate on the last day for exercise prior to such
effective date.
9.3 Limitation on Rights of Optionee. Except as
expressly provided in Section 9.1 or 9.2 hereof, an Optionee
shall have no rights by reason of the issuance of (i) shares
of Common Stock of the Company pursuant to this Plan, (ii)
shares of preferred stock or Common Stock, (iii) any other
security convertible into Common Stock, (iv) or any other
equity security, including issuance pursuant to a plan of
merger, consolidation, or statutory share exchange, and no
adjustment by reason thereof shall be made with respect to
the number of shares of Common Stock subject to an Option or
the Option Price.
9.4 Rights of Company. The grant of an Option
pursuant to the Plan shall not affect in any way the right
or power of the Company to make adjustments,
reclassification, reorganizations or changes in its capital
or business structure or to participate in a merger,
consolidation, or share exchange with another corporation,
or to dissolve, liquidate or sell or transfer all or any
part of its business or assets.
10. Term of Plan
Options may be granted pursuant to the Plan from time
to time until July 1, 2000.
<PAGE>
11. Amendment of the Plan
The Board may amend, revise, suspend or discontinue the
Plan, from time to time, provided that no amendments may be
made within six months of the last date the Plan was amended
by the Board, except as required to comply with ERISA or the
Internal Revenue Code, and no amendment may be made without
approval of the stockholders, unless such approval is not
required to comply with Rule 16b-3 of the Securities
Exchange Commission, or any successor provision.
12. Withholding Taxes
The Company shall have the right to deduct from any
compensation or any other payment of any kind due Optionee
the amount of any federal, state or local taxes required by
law to be withheld as the result of the exercise of an
Option. In lieu of such deduction, the Company may require
the Optionee to make a cash payment to the Company equal to
the amount required to be withheld. In the event the
Optionee does not make such payment when requested, the
Company may refuse to issue any stock certificate pursuant
to the exercise of any Option until arrangements
satisfactory to the Company for such payment have been made.
13. Miscellaneous
13.1 Gender. As used herein the masculine gender shall
include the feminine as the identity of an Optionee may
require.
13.2 Governing Law. This Plan shall be governed by and
construed in accordance with the internal substantive laws
of the State of Maryland, without regard to its conflict of
laws rules or principles.
13.3 Headings. The headings in this Plan are for
reference purposes only and shall not affect the meaning or
interpretation of the Plan.
13.4 Notices. All notices and other communications
made or given pursuant to the Plan shall be in writing and
shall be sufficiently made or given if hand delivered or
mailed by certified mail, addressed to the Optionee at the
address contained in the records of the Company, or to the
Company at the principal office of the Company.
AMENDED AS OF JULY 1, 1997
