HAYES CORP, DEF 14A, 1998-04-02

HAYES CORP
DEF 14A, 1998-04-02
COMPUTER INTEGRATED SYSTEMS DESIGN

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<PAGE> 1

SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>

HAYES CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[ ] Fee paid previously with preliminary materials:

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:
<PAGE> 2

(Hayes Logo)

HAYES CORPORATION
5854 PEACHTREE CORNERS EAST
NORCROSS, GEORGIA 30092

April 3, 1998

Dear Stockholder:

We cordially invite you to attend your 1998 Company's Annual Meeting of
Stockholders on Thursday, May 7, 1998. The meeting will be held at Corporate
Headquarters in Norcross, Georgia and will begin at 10:00 a.m.

The formal notice of meeting, proxy statement and form of proxy accompany
this letter and describe in detail the matters to be acted upon at the meeting.

As a stockholder, your vote is important. We urge you to execute and return
your proxy promptly whether or not you plan to attend so that you may ensure
that your shares are represented at the meeting. Returning your completed proxy
will not prevent you from voting in person at the meeting if you wish to do so.

On behalf of your Board of Directors, thank you for your continued support
and interest in Hayes Corporation.

Sincerely,

/s/ Dennis C. Hayes
Dennis C. Hayes
Chairman
<PAGE> 3

(Hayes Logo)

HAYES CORPORATION

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 7, 1998

TO THE STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Hayes
Corporation, a Delaware corporation (the "Company"), will be held on Thursday,
May 7, 1998, at 10:00 a.m., local time, at the Company's business address at
5854 Peachtree Corners East, Norcross, Georgia 30092, for the following
purposes:

1. To elect two Class II directors to serve for a three year term
until their successors are elected.

2. To approve the Hayes Corporation 1998 Stock Incentive Plan and
2,000,000 shares of common stock reserved for issuance thereunder.

3. To approve the Hayes Corporation Employee Stock Purchase Plan and
1,000,000 shares of common stock reserved for issuance thereunder.

4. To ratify the appointment of Coopers & Lybrand LLP as independent
auditors for the Company for the fiscal year ending January 2, 1999.

5. To transact such other business as may properly come before the
meeting or any adjournment thereof.

THE FOREGOING ITEMS OF BUSINESS ARE MORE FULLY DESCRIBED IN THE PROXY
STATEMENT ACCOMPANYING THIS NOTICE.

Only stockholders of record at the close of business on March 16, 1998, are
entitled to notice of and to vote at the meeting and any adjournment thereof.

All stockholders are invited to attend the meeting in person. However, to
assure your shares are represented at the meeting, you are urged to mark, sign,
date and return the enclosed proxy card as promptly as possible in the postage
prepaid envelope enclosed for that purpose. Any stockholder attending the
meeting may vote in person even if he or she has returned a proxy.

Sincerely,

/s/ Dennis C. Hayes
Dennis C. Hayes
Chairman

Norcross, Georgia
April 3, 1998

IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
<PAGE> 4

HAYES CORPORATION

PROXY STATEMENT FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING

GENERAL

The enclosed proxy is solicited on behalf of Hayes Corporation, a Delaware
corporation ("Hayes" or the "Company"), for use at the Annual Meeting of
Stockholders to be held on Thursday, May 7, 1998, at 10:00 a.m., local time, or
at any adjournment thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will
be held at the Company's business address at 5854 Peachtree Corners East,
Norcross, Georgia 30092. The Company's telephone number is (770) 840-9200.

These proxy solicitation materials were mailed on or about April 3, 1998,
together with the Company's 1997 Annual Report to Stockholders, to all
stockholders entitled to vote at the meeting.

The Company effected a one-for-three reverse stock split of its Common
Stock effective as of February 25, 1998. All information with respect to the
Common Stock contained herein has been adjusted to reflect the reverse stock
split.

MERGER WITH ACCESS BEYOND, INC.; CHANGE OF CONTROL

On December 30, 1997, the Company, then known as Access Beyond, Inc.
("Access Beyond"), effected a merger (the "Merger") pursuant to which Hayes
Microcomputer Products, Inc. (with its subsidiaries, "Hayes Microcomputer")
became a wholly-owned subsidiary of the Company, the Company changed its name to
Hayes Corporation and the shareholders of Hayes Microcomputer exchanged their
Hayes Microcomputer shares for and became the owners of approximately 79% of the
then outstanding equity securities of the Company. In connection with the
Merger, all of the then directors of Access Beyond, other than Mr. Ronald Howard
and Barbara Perrier Dreyer, resigned and the other present directors of the
Company were appointed or elected.

RECORD DATE AND PRINCIPAL SHARE OWNERSHIP

Stockholders of record at the close of business on March 16, 1998 (the
"Record Date"), are entitled to notice of and to vote at the meeting. On March
16, 1998, 19,857,625 shares of the Company's Common Stock were issued and
outstanding. Each holder of record of the Company's Series A Preferred Stock is
entitled to one vote for each share of Common Stock that may be acquired by the
holder upon the conversion of the Series A Preferred Stock into Common Stock. As
of the Record Date, 1,217,930 shares of the Company's Series A Preferred Stock
were outstanding and entitled to 405,570 votes as if such holders owned
approximately 405,570 shares of Common Stock as of such Record Date. The
following table sets forth the beneficial ownership of the Company's Common
Stock as of March 16, 1998, as to (i) each person who is known by the Company to
own beneficially more than 5% of the outstanding shares of Common Stock, (ii)
each director of and each nominee for director of the Company, (iii) each of the
executive officers named in the Summary Compensation Table below and (iv) all
directors and executive officers as a group.

<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OWNERSHIP(1) OWNERSHIP(1)(2)
- ------------------------------------ --------------------- ------------ ---------------
<S> <C> <C> <C>
Kaifa Technology (H.K.) Limited(8)............... 1,260,096 6.3 4.9
Chiang Lam(9).................................... 308,595 1.5 1.2
Bruce Meyer(3)................................... 2,160 * *
Keith Mintzer(3)................................. 53,718 * *
S.P. Quek(10).................................... 4,725,360 23.8 18.3
Charles Riehm(3)................................. 12,343 * *
Rinzai Limited(11)............................... 4,725,360 23.8 18.3
M.C. Tam(12)..................................... 1,260,096 6.3 4.9
Cramer Partners, L.P.(13)........................ 1,044,166 5.3 4.0
All Directors and Executive Officers as a Group
(12 Persons)................................... 14,725,122 71.7 55.6
</TABLE>

- ---------------

* Less than 1%
(1) Beneficial ownership has been determined in accordance with Rule 13d-3
under the Securities Exchange Act of 1934. Includes, in certain instances,
shares held in the name of an executive officer's or director's spouse or
minor children, the reporting of which is required by applicable rules of
the Securities and Exchange Commission, but as to which shares the
executive officer or director may have disclaimed beneficial ownership.
Unless otherwise noted, all shares are owned of record by the persons named
and the beneficial ownership consists of sole voting power and sole
investment power.
(2) Assumes the Company's 6% Cumulative Convertible Preferred Stock (the "6%
Convertible Stock") is converted into Common Stock at $7.00.
(3) Consists of options to purchase Common Stock and, with respect to Mr.
Jones, includes 2,833 shares of Common Stock.
(4) Includes 18,332 shares of Common Stock issuable upon the exercise of an
option.
(5) Mrs. Perrier Dreyer and her husband, John Dreyer, have shared voting and
dispositive power with respect to these shares.
(6) Includes 16,666 shares of Common Stock issuable upon the exercise of a
stock option.
(7) Includes 42,500 shares of Common Stock issuable upon exercise of a stock
option.
(8) Kaifa Technology's address is 2201 Hong Kong Worsted Mills Industrial
Building, 31-39 Wo Tong Tsui Street, Kwai Chung, New Territories, Hong
Kong. These shares are also shown as beneficially owned by Mr. Tam.
(9) Consists of warrants to purchase Common Stock.
(10) Consists of 4,347,331 shares of Common Stock held by Rinzai Limited of
which Mr. Quek serves as Chairman and 378,029 shares of Common Stock held
by S.P. Quek Investments, PLC, Ltd. which is an affiliate of Mr. Quek.
(11) Rinzai Limited's address is 17 Jurong Port Road, Singapore 619092. These
shares are also shown as beneficially owned by Mr. Quek.
(12) Consists of Common Stock held by Kaifa Technology (H.K.) Limited of which
Mr. Tam serves as President.
(13) Cramer Partners, L.P. address is 100 Wall Street, 8th Floor, New York, New
York 10004.

REVOCABILITY OF PROXIES

Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the meeting and voting in person.

SOLICITATION

The cost of soliciting proxies will be borne by the Company. The Company
may retain the services of a proxy solicitation firm to aid in solicitation of
proxies from brokers, bank nominees and other institutional

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<PAGE> 6

owners, on terms customary for such services. In addition, the Company may
reimburse brokerage firms and other persons representing beneficial owners of
shares for their expenses in forwarding solicitation material to such beneficial
owners. Proxies may also be solicited by certain of the Company's directors,
officers and regular employees, without additional compensation, personally or
by telephone, facsimile or telegram.

QUORUM; ABSTENTIONS; BROKER NON-VOTES

The presence of the holders of a majority of the outstanding shares of
Common Stock entitled to vote at the Annual Meeting in person or by properly
executed proxy is necessary to constitute a quorum. Abstentions will be
considered shares present for purposes of determining whether a quorum is
present. Broker non-votes will not be considered as shares entitled to vote and
will, therefore, not be considered for purposes of determining whether a quorum
is present; provided, however, in no case will a quorum be less than 33 1/3% of
outstanding shares of common stock.

DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS

Proposals of stockholders of the Company which are intended to be presented
by such stockholders at next year's Annual Meeting must be received by the
Company no later than December 4, 1998 so that they may be included in the proxy
statement and form of proxy relating to that meeting.

PROPOSAL ONE

ELECTION OF DIRECTORS

NOMINEES

The Board of Directors is divided into three classes: Class I, Class II and
Class III. In accordance with this classification, the two Board of Director
positions representing the Class II Directors are to be elected at the meeting.
If elected, each nominee will serve until the 2001 Annual Meeting of
Stockholders or until a successor has been duly elected and qualified. The
directors designated as Class I and Class III have been previously elected to
serve until the 2000 and 1999 Annual Meetings of Stockholders, respectively, or
until their respective successors are duly elected and qualified.

Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Company's two nominees named below, each of whom are
presently directors of the Company. In the event that any nominee of the Company
is unable or declines to serve as a director at the time of the Annual Meeting,
the proxies will be voted for any nominee who shall be designated by the present
Board of Directors to fill the vacancy. In the event that additional persons are
nominated for election as directors, the proxy holders intend to vote all
proxies received by them for the election of the nominees listed below. The
Company is not aware of any nominee who will be unable or will decline to serve
as a director.

<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION INFORMATION DIRECTOR SINCE
- ------------ -------------------------------- --------------
<S> <C> <C>
Class II -- Nominees for Term Expiring at 2001 Annual Meeting
S.P. Quek, 50............... Mr. Quek is Chairman of ACMA Limited, a publicly traded 1997
company in Singapore whose principal business is investment
holdings and contract works. Mr. Quek served as a director of
Hayes Microcomputer from April 1996 to December 1997.
M.C. Tam, 49................ Mr. Tam is Vice Chairman of Kaifa Technology (H.K.) Limited, a
publicly traded company in China, whose principal business is
subcontract manufacturing. Mr. Tam has served as a director of
Hayes Microcomputer from April 1996 to December 1997.

Class III -- Term Expiring at 1999 Annual Meeting
Dennis Hayes, 48 Chairman... Mr. Hayes founded Hayes Microcomputer in 1977 at the age of 27 1997
and has served as Chairman and Director of Hayes Microcomputer
from its inception and is currently serving as Chairman of the
Company, and on the Board of Directors.
</TABLE>

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<PAGE> 7

<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION INFORMATION DIRECTOR SINCE
- ------------ -------------------------------- --------------
<S> <C> <C>
Mr. Hayes worked on the first of four-bit microprocessor
technology while employed at Financial Data Services. After
concluding his studies at Georgia Tech, Mr. Hayes worked for
National Data Corporation where he developed microcomputer
based systems to interconnect networks and maintain
communications systems on large mainframe computers. Mr. Hayes
is active in both community and industry associations
including the Public Policy Committee of the Computing
Technology Industry Association, the Association of On Line
Processionals, Georgia High Tech Alliance, Governor's Advisory
Council on Science and Technology and Georgia Center for
Advanced Telecommunications Technology. Mr. Hayes is also the
Georgia Representative to the Federal Lab Consortium and is
one of the four initial inductees into the Technology Hall of
Fame in Georgia.
Ronald Howard, 41........... Mr. Howard served as Chairman of the Board, President and 1996
Chief Executive Officer of the Company from November 1996 to
December 1997 and has served as Vice Chairman and Chief
Executive Officer of the Company since December 1997. Mr.
Howard served as President of the Datability Networks Division
of Penril from November 1994 to November 1996, and as
Co-President of that division from May 1993 until November
1994. Mr. Howard was President of Datability Inc. from its
founding in 1977 until it was acquired by Penril in May 1993.
Barbara Perrier Dreyer,
42........................ Ms. Perrier Dreyer has served as a Vice President and Chief 1996
Financial Officer of Communications Systems Technology, Inc.,
a developer of software and hardware communications and
control equipment since March 1996, and became a Senior Vice
President in October 1997. In July 1997, Ms. Perrier Dreyer
was appointed a member of the Board of Directors of the
International Teleconferencing Association. Ms. Perrier Dreyer
was President and founder of VideoGrafects, Inc., a multimedia
communications company specializing in the production of video
and computer based material, from its founding in August 1992,
until the Company was sold to French Bray in March 1996. Prior
to founding VideoGrafects, Inc., Ms. Perrier Dreyer was a
special (investing) partner with New Enterprise Associates, a
venture capital firm.
Class I -- Term Expiring at 2000 Annual Meeting
Chiang Lam, 43.............. Mr. Lam is a financial investment advisor serving various 1997
venture capital interests. Mr. Lam has served as a director of
HMP since 1996, and served on the Board of Directors of
Paradigm Technology from June 1994 to August 1996.
P.K. Chan, 60............... Mr. Chan has served as President and Chief Operating Officer 1997
of the Company since December 1997, and served in the same
positions at Hayes Microcomputer since October 1997. He served
as Vice President of Operations from October 1994 to October
1997. Prior to joining Hayes Microcomputer in October 1994,
Mr. Chan served as Managing Director of Achiever Group, a
subsidiary of Achiever
</TABLE>

<PAGE> 8
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION INFORMATION DIRECTOR SINCE
- ------------ -------------------------------- --------------
<S> <C> <C>
Industrial Limited from 1991 to 1994. Prior to joining
Achiever Industrial Limited, he held various positions with
Ampex and Meadville Group, most recently serving as Managing
Director of Manufacturing.
</TABLE>

VOTE REQUIRED

The two nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted shall be elected as
directors.

BOARD MEETINGS AND COMMITTEES

The Board of Directors of the Company held a total of 12 meetings during
the fiscal year ended January 3, 1998. No director participated in fewer than
84% of the aggregate number of meetings of the Board of Directors and meetings
of the committees of the Board on which he or she served.

The Board of Directors has standing Audit and Compensation Committees. It
does not have a nominating committee or a committee performing the functions of
a nominating committee.

The Audit Committee of the Board of Directors, which until December 1997
consisted of directors Barbara Perrier Dreyer and John Howard, held one meeting
in fiscal 1997 at which all members were present. Effective January 1998, the
committee consisted of Barbara Perrier Dreyer, Chiang Lam and Dennis Hayes. The
Audit Committee recommends engagement of the Company's independent auditors, and
is primarily responsible for reviewing and approving the scope of the audit and
other services performed by the Company's independent auditors and for reviewing
and evaluating the Company's accounting principles and its system of internal
accounting controls.

The Compensation Committee of the Board of Directors, which until December
1997 consisted of directors Paul Schaller and Arthur Samberg, held a total of
two meetings during fiscal 1997. Effective January 1998, the Committee consisted
of Barbara Perrier Dreyer and Chiang Lam. The Compensation Committee reviews and
approves the Company's executive compensation policy, the compensation of the
executive officers including the Chairman, the Vice-Chairman and Chief Executive
Officer and the President and the grant of stock options and other stock
incentives.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee, during the 1997 fiscal year, consisted of Paul
Schaller and Arthur Samberg, neither of whom is or has been an officer or
employee of the Company. No interlocking relationship exists between the
Company's Board of Directors or Compensation Committee and the board of
directors or compensation committee of any other company.

PROPOSAL TWO

APPROVAL OF 1998 STOCK INCENTIVE PLAN

At the meeting, the stockholders are being requested to consider and
approve the adoption of the 1998 Hayes Corporation Stock Incentive Plan (the
"Stock Incentive Plan") and the reservation of 2,000,000 shares of the Company's
Common Stock for issuance thereunder. The Stock Incentive Plan is described in
more detail below. Since each executive officer and inside director of the
Company is eligible to receive options under the Stock Incentive Plan, each such
executive officer and director has a personal interest in the Stock Incentive
Plan.

BACKGROUND

In February 1998, the Board of Directors adopted the Stock Incentive Plan,
and reserved 2,000,000 shares of Common Stock for issuance thereunder, subject
to stockholder approval. The number of shares

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reserved for issuance under the Stock Incentive Plan may be adjusted in the
event of certain events affecting the Company's capitalization. The Stock
Incentive Plan is intended to replace the Access Beyond Amended and Restated
1996 Incentive Option Plan and the Hayes Microcomputer Products, Inc. Stock
Option Plan and no further options will be granted under these option plans.
Outstanding options previously granted under the Company's previous stock option
plans will continue in effect until they are exercised, canceled or terminated.

PURPOSE

The Board of Directors believes that it is in the best interests of the
Company and its stockholders to have a stock incentive plan in place for several
reasons. First, the Board of Directors believes that having such a stock plan is
vital to retaining, motivating and rewarding employees, executives and
consultants (collectively referred to herein as "employees") by providing them
with long-term equity participation in the Company relating directly to the
financial performance and long-term growth of the Company. Second, the Board of
Directors believes that granting stock incentives to employees is an important
contributor to aligning the incentives of the Company's employees with the
interests of the Company's stockholders. Third, the number of shares reserved
for issuance under the Stock Incentive Plan will provide the Company with a pool
of options and other stock incentives that the Board believes will enable the
Company to compete effectively with other companies for existing and new
personnel. Competition for qualified personnel in the technology market is
extremely intense and, due to the rapid growth of many successful companies in
this sector, such competition is increasing. The Board of Directors believes
that in order to remain competitive with other technology companies with regard
to its long-term incentive plans, the Company must continue to provide employees
with the opportunity to obtain equity in the Company. Finally, an adequate pool
of stock incentives will enhance the Company's ability to structure attractive
offers to potential acquisition targets by enabling the Company to provide stock
incentives to an acquired company's employees.

SUMMARY OF PLAN

The following summarizes the principal terms of the Stock Incentive Plan.
The summary is qualified in its entirety by reference to the form of the Stock
Incentive Plan, a copy of which is attached to the proxy statement as Exhibit A.
Stockholders should refer to the Stock Incentive Plan for more complete
information.

General. The Stock Incentive Plan provides for the granting of awards of
incentive stock options and nonqualified stock options ("options"), stock
appreciation rights ("SARs") and restricted awards. The material terms of each
type of award are discussed below.

Administration. The Stock Incentive Plan is administered by the
compensation committee of the Board of Directors or by the Board of Directors,
if it assumes administration of the Plan (for purposes hereof, the "Committee").

Eligibility; Limitations. Awards rights may be granted under the Stock
Incentive Plan to employees and independent contractors of the Company and any
parent or subsidiary of the Company.

The Committee, in its discretion, selects the individuals to whom awards
may be granted, the time or times at which such options may be granted, the time
or times at which such awards shall be granted, the types of awards, the number
of shares subject to each such grant, if any, the terms, conditions,
restrictions, limitations and all other matters relating to an award.

Participants granted awards will be subject to certain restrictions on
exercise or vesting (such as restrictions imposed in the event of termination of
employment) as provided in the plan and related agreement. In addition, awards
are not transferable other than by will or the laws of intestate succession.

The Stock Incentive Plan also restricts the maximum amount of awards that
may be granted to any employee. In particular, the Stock Incentive Plan provides
that (subject to capital adjustments) an employee may not be granted awards
under the plan for more than 500,000 shares of Common Stock (or the equivalent
value thereof based on the fair market value of the Common Stock on the date of
grant of the award) during

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<PAGE> 10

any calendar year. The closing sales price of the Common Stock as quoted in the
NASDAQ National Market System was $8.50 as of March 16, 1998.

The Plan provides for the following types of awards:

Stock Options. Each option is subject to the following additional terms
and conditions:

Exercise Price. The Committee determines the exercise price of options at
the time the options are granted. The exercise price of an incentive stock
option may not be less than 100% of the fair market value of the Common Stock on
the date such option is granted; provided, however, the exercise price of an
incentive stock option granted to a greater than 10% stockholder may not be less
than 110% of the fair market value of the Common Stock on the date such option
is granted. The fair market value of the Common Stock is generally determined
with reference to the closing sale price for the Common Stock (or the closing
bid if no sales were reported) on the last market trading day prior to the date
the option is granted.

Exercise of Option; Form of Consideration. The Committee determines when
options become exercisable and any conditions which must be satisfied before the
option may be exercised. The means of payment for shares issued upon exercise of
an option is specified in each option agreement. The Stock Incentive Plan
permits payments to be made by cash, check, other shares of Common Stock of the
Company (with some restrictions), cashless exercises, any other form of
consideration permitted by applicable law, or any combination thereof of these
methods.

Term of Options. The Stock Incentive Plan provides the term of an option
may be no more than ten (10) years from the date of grant. No option may be
exercised after the expiration of its term.

SARs. Under the terms of the plan, SARs may be granted to an optionee of
an option with respect to all or a portion of the shares of Common Stock subject
to the related option or may be granted separately. Upon exercise, a participant
is entitled to receive consideration equal in value to the excess of the fair
market value of a share of Common Stock on the date of exercise over the SAR
price (subject to certain plan limitations). The consideration may be paid in
cash, shares of Common Stock (valued at fair market value on the date of the SAR
exercise), or a combination of cash and shares of Common Stock. SARs are
exercisable according to the terms stated in the related agreement. No SAR may
be exercised more than 10 years after it was granted, or such shorter period as
may apply to related options.

Restricted Awards. The Stock Incentive Plan also authorizes the grant of
restricted awards to such participants in such numbers, upon such terms and at
such times as the Committee may determine. A restricted award may consist of a
restricted stock award or a restricted unit, or both. Restricted awards are
payable in cash or shares of Common Stock (including restricted stock), or
partly in cash and partly in shares of Common Stock, in accordance with the
terms of the plan and in the discretion of the Committee. The Committee may
condition the grant or vesting, or both, of a restricted award upon the
continued service of the recipient for a certain period of time, attainment of
such performance objectives as the Committee may determine, or upon a
combination of continued service and performance objectives. The Committee has
sole authority to determine the extent to which restricted awards are earned.

Performance-Based Compensation -- Section 162(m) Requirements. Section
162(m) of the Internal Revenue Code of 1986 (the "Code") was amended in 1993 to
deny an employer a deduction for compensation paid to covered employees
(generally, the named executives in the summary compensation table) of a
publicly held corporation that exceeds $1 million unless the compensation is
exempt from the $1 million limitation because it is performance-based. The Stock
Incentive Plan authorizes the Committee to determine the extent that awards
granted under the plan to covered employees will comply with the restrictions
imposed by Section 162(m) of the Code.

Pursuant to the plan, restricted awards that are performance based may be
based on such Company business unit and/or individual performance factors and
criteria as the Committee determines, including but not limited to earnings per
share, return on equity, return on assets or total return to stockholders.
Options and SARs which may be granted under the plan meet the Section 162(m)
performance-based criteria as long as, by their terms, compensation is based
solely on an increase in the fair market value of stock after the date of

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<PAGE> 11

grant. The Committee may grant restricted awards under the Stock Incentive Plan
which are not based on the performance criteria specified above, in which case
the compensation paid under such awards to which Section 162(m) of the Code is
applicable may not be deductible.

Change of Control. The Stock Incentive Plan provides that, upon a change
of control (as defined in the plan) (i) all options and SARs outstanding as of
the date of the change of control will become fully exercisable, whether or not
then otherwise exercisable; and (ii) any restrictions applicable to any
restricted awards will be deemed to have expired, and such restricted awards
will become fully vested and payable to the fullest extent of the original
award. However, the plan authorizes the Committee, in the event of a merger,
share exchange, reorganization or other business combination affecting the
Company or a related corporation, to determine that any or all awards shall not
vest or become exercisable on an accelerated basis, if the Board of Directors or
the surviving or acquiring corporation takes such action (including but not
limited to the assumption of plan awards or the grant of substitute awards)
which, in the opinion of the Committee, is equitable or appropriate to protect
the rights and interest of participants under the plan.

Adjustments Upon Changes in Capitalization. In the event that the stock of
the Company changes by reason of any stock split, reverse stock split dividend,
combination, reclassification or other similar change in the capital structure
of the Company effected without the receipt of consideration, appropriate
adjustments shall be made in the number and class of shares of stock subject to
the Stock Incentive Plan, the number and class of shares of stock subject to any
award outstanding under the Stock Incentive Plan, and the exercise price of any
such outstanding option or SAR.

Amendment and Termination of the Plan. The Board of Directors may amend,
alter, suspend or terminate the Stock Incentive Plan or any part thereof, at any
time for any reason. However, the Company shall obtain stockholder approval for
any amendment to the Stock Incentive Plan to the extent necessary to comply with
Section 162(m) and Section 422 of the Code, or any similar rule or statute. No
such action by the Board of Directors or stockholders may alter or impair any
option or stock purchase right previously granted under the Stock Incentive Plan
without the written consent of the optionee. Unless terminated earlier, the
Stock Incentive Plan shall terminate 10 years form the date of approval by the
stockholders or the Board of Directors of the Company, which is earlier.

Certain Federal Income Tax Consequences. The following generally describes
the principal federal (and not state and local) income tax consequences of award
granted under the Stock Incentive Plan. The summary is general in nature and is
not intended to cover all tax consequences that may apply to a particular
employee or to the Company. The provisions of the Code and regulations
thereunder relating to these matters are complicated and their impact in any one
case may depend upon the particular circumstances.

Incentive stock options granted under the Stock Incentive Plan are intended
to qualify as incentive stock options under Section 422 of the Code. Pursuant to
Section 422, the grant and exercise of an incentive stock option generally will
not result in taxable income to the participant (with the possible exception of
alternative minimum tax liability) if the participant does not dispose of shares
received upon exercise of such option less than one year after the date of
exercise and two years after the date of grant, and if the participant has
continuously been an employee of the Company from the date of grant to three
months before the date of exercise (or twelve months in the event of death or
disability). The Company will not be entitled to a deduction for income tax
purposes in connection with the exercise of an incentive stock option. Upon the
disposition of shares acquired upon exercise of an incentive stock option, the
participant will be taxed on the amount by which the amount realized upon such
disposition exceeds the option price, and such amount will be treated as
long-term capital gain or loss. If the holding period requirements for incentive
stock option treatment described above not met, the option will be treated as a
nonqualified stock option.

For federal income tax purposes, the grant of a nonqualified stock option,
SAR or restricted stock award does not result in taxable income to the holder or
a tax deduction to the Company. At the time of exercise of a nonqualified stock
option, the difference between the market value of the stock on the date of
exercise and the option price constitutes taxable ordinary income to the
optionee. The Company is entitled to a deduction in the same year in an amount
equal to the income taxable to the participant. Similarly, at the time of
exercise of an SAR, the amount of cash and fair market value of shares received
by the SAR holder, less cash or other
8
<PAGE> 12

consideration paid (if any), is taxed to the SAR holder as ordinary income and
the Company receives a corresponding income tax deduction.

Upon expiration of the restricted period applicable to a restricted stock
award, the fair market value of such shares at such date and any cash amount
awarded, less cash or other consideration paid (if any), is included in the
participant's ordinary income as compensation, except that, in the case of
restricted stock issued at the beginning of the restriction period, the
participant may elect to include in his ordinary income as compensation at the
time the restricted stock is awarded, an amount equal to the fair market value
of such shares at such time, less any amount paid therefor. The Company is
entitled to a corresponding income tax deduction to the extent that the amount
represents reasonable compensation and an ordinary and necessary business
expense, subject to any required income tax withholding.

The federal income tax consequences of the award of restricted units and
other restricted awards other than restricted stock will depend on the
conditions of the award. Generally, the transfer of cash or property results in
ordinary income to the participant and a tax deduction to the Company. If there
is a substantial risk that the property transferred will be forfeited (for
example, because receipt of the property is conditioned upon the performance of
substantial future services), the taxable event is deferred until the risk of
forfeiture lapses unless the participant elects to accelerate the taxable event
to the date of transfer. Generally, any deduction by the Company occurs only
when ordinary income in respect of an award is recognized by the participant
(and then the deduction is subject to reasonable compensation and withholding
requirements).

CURRENT PLAN BENEFITS

The Company cannot now determine the number of stock awards to be granted
in the future to the Named Executive Officers (as defined in "Management
Compensation and Certain Transactions -- Summary Compensation Table"), all
executive officers as a group, all directors who are not executive officers as a
group or all employees (including officers who are not executive officers) as a
group. However, the following table sets forth information with respect to stock
award grants under all other Company stock plans during the fiscal year ended
January 3, 1998 to such persons:

CURRENT PLAN BENEFITS TABLE

<TABLE>
<CAPTION>
NUMBER
OF SHARES
SUBJECT
TO OPTION DOLLAR
NAME GRANTED(1) VALUE(2)
- ---- ---------- -----------
<S> <C> <C>
Dennis Hayes................................................ 66,667 --
Ronald Howard............................................... 350,000 --
P.K. Chan................................................... 231,445 $ 2,685,457
James Jones................................................. 231,445 2,685,457
Keith Mintzer............................................... 216,015 2,466,952
All executive officers as a group........................... 1,373,889 13,115,767
Non-executive directors group............................... 43,333 --
All other employees as a group.............................. 650,721 5,005,210
</TABLE>

- ---------------

(1) The Company did not grant SARs or restricted awards during 1997.
(2) This dollar value effects the difference between $12.189 (the closing price
of the Company's Common Stock on January 2, 1998, as quoted on the NASDAQ
Stock Market) and the exercise price of such option, multiplied by the
number of shares subject to such option.

9
<PAGE> 13

VOTE REQUIRED

The affirmative vote of a majority of the votes cast at the meeting will be
required to approve the adoption of the Company's Stock Incentive Plan. Any
shares not voted (whether by abstention, broker non-vote or otherwise) will have
no effect.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ADOPTION OF THE COMPANY'S STOCK INCENTIVE PLAN.

PROPOSAL THREE

APPROVAL OF HAYES CORPORATION EMPLOYEE STOCK PURCHASE PLAN

At the meeting, the stockholders are being requested to consider and
approve the adoption of the Company's Employee Stock Purchase Plan (the "Stock
Purchase Plan") and the reservation of 1,000,000 shares of the Company's Common
Stock for issuance thereunder. If approved by stockholders, the Stock Purchase
Plan will enable eligible employees to be granted options to purchase shares of
Common Stock at a discount through payroll deductions or other means established
under the plan.

BACKGROUND

In February 1998, the Board of Directors adopted the Stock Purchase Plan
and reserved 1,000,000 shares of Common Stock for issuance thereunder, subject
to stockholder approval. The Stock Purchase Plan is intended to provide a means
for the Company's employees to acquire the Company's Common Stock and to promote
employee ownership of the Company's Common Stock. The aggregate number of shares
of Common Stock which may be purchased under the Stock Purchase Plan may not
exceed 1,000,000, subject to adjustment in the event of mergers, consolidations,
stock dividends, stock splits or other changes in the outstanding Common Stock
in accordance with plan terms. Shares issued under the plan may be authorized
and unissued shares, treasury shares or shares purchased on the open market.

GENERAL

The purposes of the Stock Purchase Plan are to attract and retain the best
available personnel with the Company, to provide additional incentive to the
employees of the Company and to promote the success of the Company's business.
The Stock Purchase Plan is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code"), and thus to permit participants to receive favorable tax treatment, as
described below.

SUMMARY OF TERMS

The following summary describes the material terms of the Stock Purchase
Plan and is qualified in all respects by reference to the terms of the plan,
which is attached as Exhibit B to this proxy statement. Stockholders should
refer to the Stock Purchase Plan for more complete and detailed information.

Administration. The Stock Purchase Plan will be administered by the Board
of Directors or, upon its delegation, the Compensation Committee of the Board of
Directors (each referred to herein as the "Committee").

Eligibility. Any employee of the Company or a subsidiary of the Company
that has been so employed for 90 days or more is eligible to participate in the
Stock Purchase Plan except for (i) any employee whose customary employment is 20
hours or less per work or (ii) any employee whose customary employment is for
not more than five months in any calendar year. Approximately 651 employees are
eligible to participate at this time, although that number is subject to change
in the future.

Amendments; Term. The Board of Directors may at any time, and from time to
time, modify, amend, suspend or terminate the Stock Purchase Plan or any option,
except that (i) stockholder approval is required of any amendment to the extent
required under Section 423 of the Code or other applicable law or rule; and

10
<PAGE> 14

(ii) no amendment may materially and adversely affect any outstanding option
without the participant's consent. The plan will have a 10-year term unless
terminated earlier by the Board.

Share Purchases. If the Stock Purchase Plan is approved by the
stockholders, beginning July 5, 1998, the Company will grant options on the
first day of each fiscal quarter of each year that the Stock Purchase Plan is in
effect. A purchase period generally will end on the last day of the respective
quarter, although the Committee has authority to modify the duration of purchase
periods. On the offer date for each purchase period, a participant will be
granted the option to purchase such number of shares of Common Stock as is
determined by dividing the amount of the participant's account on such date by
the applicable option price. No participant in the plan is permitted to purchase
Common Stock under the plan at a rate that exceeds $25,000 in fair market value
of Common Stock, determined at the time options are granted, for each calendar
year, and additional restrictions may apply to the purchase of shares based on
the terms of the plan and Section 423 of the Code.

Payroll Deductions. Eligible employees must complete a subscription
agreement authorizing payroll deductions to participate in the Stock Purchase
Plan. Participants may elect to have payroll deductions made each payday at a
rate of not less than 1% or more than 15% (in a whole percentage) of his or her
compensation. Deductions are credited to each participant's account. Payment of
shares of Common Stock purchased under the plan will be made by authorized
payroll deductions from a participant's compensation.

Option Price. The option price is 85% of the fair market value of the
Common Stock on the last day of the purchase period.

Automatic exercise. Unless a participant withdraws or terminates
employment (or ceases to be eligible to participate) before the purchase date,
the option to purchase will be automatically exercised and the participant will
receive the applicable number of shares of Common Stock.

Withdrawal; Termination of Employment. A participant may withdraw all but
not less than all of his account (without interest) at any time before the
applicable exercise date. Upon termination of employment for any reason (or if
the participant is no longer eligible to participate), the participant shall be
deemed to have withdrawn from the Stock Purchase Plan. In such event, all
payroll deductions credited to his account but not yet used to exercise an
option shall be delivered to the participant.

NEW PLAN BENEFITS

It is not possible to determine how many eligible employees will
participate in the Stock Purchase Plan if it is adopted. Therefore, it is not
possible to determine the dollar value or number of shares of Common Stock that
will be distributed under the plan. The Company anticipates, however, that on
the average approximately 100,000 shares of Common Stock will be distributed
annually during the ten-year term of the plan. Based on a per share price of
$8.50 (the closing sales price of the Common Stock on the Nasdaq National Market
on March 16, 1998), the benefits of the Stock Purchase Plan during 1997 would
have been as follows:

HAYES CORPORATION EMPLOYEE STOCK PURCHASE PLAN

<TABLE>
<CAPTION>
NAME DOLLAR VALUE NUMBER OF SHARES
- ---- ------------ ----------------
<S> <C> <C>
Dennis Hayes.............................................. -- --
Ronald Howard............................................. $ 25,000 3,460
P.K. Chan................................................. 22,850 3,163
James Jones............................................... 17,700 2,449
Keith Mintzer............................................. 17,300 2,394
Executive Group........................................... 109,475 15,150
Non-Executive Officer Employee Group...................... 300,000 41,522
</TABLE>

11
<PAGE> 15

CERTAIN FEDERAL TAX CONSEQUENCES

As noted above, the Stock Purchase Plan is intended to qualify as an
employee stock purchase plan within the meaning of Section 423 of the Code.
Under the Code, an employee who elects to participate in the plan will not
realize income (and the Company will not receive a deduction) at the time an
option is granted or when the shares purchased under the plan are transferred to
him, although participants will receive the benefit of the discounted price at
the time of purchase.

Participants will, however, recognize income when they sell or dispose of
the shares. If an employee disposes of such shares after two years from the date
of grant of the option and after one year from the date of the purchase of such
shares, the employee will recognize ordinary income for the year in which such
disposition occurs in an amount equal to the lesser of (i) the excess of the
fair market value of such shares at the time of disposition over the purchase
price, or (ii) the excess of the fair market value of the stock at the time of
the grant of the option over the option price (that is, the option price
discount). The employee's basis in the shares disposed of will be increased by
an amount equal to the amount so includable in his income as compensation. Any
additional gain or loss will be a capital gain or loss, either short-term or
long-term, depending on the holding period for such shares.

If any employee disposes of the shares purchased under the Stock Purchase
Plan within such two-year or one-year period, the employee will recognize
ordinary income for the year in which such disposition occurs in an amount equal
to the excess of the fair market value of such shares on the date of purchase
over the purchase price. The employee's basis in such shares disposed of will be
increased by an amount equal to the amount includable in his income as
compensation, and any gain or loss computed with reference to such adjusted
basis which is recognized at the time of disposition will be a capital gain or
loss, either short-term or long-term, depending on the holding period for such
shares. In the event of a disposition within such two-year or one-year period,
the participant's employer will be entitled to a tax deduction equal to the
amount the employee is required to include in income as a result of such
disposition.

The discussion above is only a summary of certain federal income
consequences to the Company and participating employees, and does not cover the
tax consequences that might arise in every individual circumstance.

VOTE REQUIRED

Adoption of this proposal requires an affirmative vote by the holders of a
majority of the votes cast at the meeting. Any shares not voted (whether by
abstention, broker non-vote or otherwise) will have no effect.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ADOPTION OF THE COMPANY'S STOCK PURCHASE PLAN AND THE RESERVATION OF 1,000,000
SHARES OF COMMON STOCK FOR ISSUANCE THEREUNDER.

PROPOSAL FOUR

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

The Board of Directors has selected Coopers & Lybrand LLP ("Coopers")
independent auditors of financial statements of the Company for the fiscal year
ending January 2, 1999. In the event of a negative vote on ratification, the
Board of Directors will reconsider its selection. Representatives of Coopers are
expected to be present at the Annual Meeting of Stockholders. They will have the
opportunity to make statements if they desire to do so and will be available to
respond to appropriate questions.

On January 9, 1998, on the recommendation and approval of the Audit
Committee of the Board of Directors, management was authorized to retain Coopers
and to dismiss Deloitte & Touche LLP ("Deloitte") effective January 19, 1998, as
the certifying accountant for the Company's consolidated financial statements.

The reports of Deloitte on the consolidated financial statements of Access
Beyond (the successor company to Penril DataComm Networks, Inc.) for each of the
two years ended July 31, 1997, contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or

12
<PAGE> 16

accounting principles. There were no disagreements with Deloitte during the two
years ended July 31, 1997, and up to January 19, 1998, on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure.

There were no events communicated by Deloitte during the two years ended
July 31, 1997, and up to January 19, 1998, regarding the following:

1. That the internal controls necessary for the Company to develop reliable
financial statements did not exist.

2. That information has come to Deloitte's attention that has led it to no
longer be able to rely on management's representatives or that has made it
unwilling to be associated with the financial statements prepared by management.

3. That Deloitte needed to expand significantly the scope of their audit or
that they have become aware of information that if further investigated may
materially impact the fairness and reliability of a previously issued audit
report or underlying financial statements or cause it to be unwilling to rely on
management's representatives or to be associated with the Company's financial
statements.

4. That information has come to Deloitte's attention that it has concluded
materially impacts the fairness or reliability of the previously issued audit
report or underlying financial statements and that due to any reason, as not
been resolved to Deloitte's satisfaction prior to January 19, 1998.

The Company had not previously retained or consulted Coopers with respect
to the application of accounting principles to any transaction, the type of
audit opinion that might be rendered on the Company's consolidated financial
statements, or as to any matter that was either the subject of a disagreement as
defined in Item 304(a)(1)(iv) of Regulation S-K of the Securities and Exchange
Commission, or a reportable event (as described in paragraph (a)(1)(iv) or Item
304 of Regulation S-K.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF COOPERS AS INDEPENDENT AUDITORS.

MANAGEMENT COMPENSATION AND CERTAIN TRANSACTIONS

SUMMARY COMPENSATION TABLE

The following tables provide information with respect to the annual
compensation for services in all capacities to the Company for the fiscal years
ended January 3, 1998, December 31, 1996 and December 31, 1995 of (i) the
Company's Chief Executive Officer and (ii) the other four most highly
compensated executive officers of the Company (the "Named Executive Officers")
who were employed by the Company at the end of fiscal year 1997.

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS OF
ANNUAL COMPENSATION(1) SECURITIES
----------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS ($) OPTIONS(#) COMPENSATION($)
- --------------------------- ---- ---------- --------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Dennis Hayes........................ 1997 $1,021,290 $450,000(2) 66,667 $ 12,597(3)
Chairman 1996 1,000,000 250,000 -- 201,951(3)
1995 1,000,000 -- -- 10,134(3)
Ronald Howard....................... 1997 174,612 -- 50,000 449,999(4)
Vice Chairman and 1996 213,885 -- 100,000 568,275(4)
Chief Executive Officer 1995 188,542 -- -- 6,050(4)
P.K. Chan........................... 1997 228,500 44,850 -- 38,409(5)
President and Chief 1996 198,024 13,792 231,446 1,275(5)
Operating Officer 1995 203,526 14,791 -- --
</TABLE>

13
<PAGE> 17

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS OF
ANNUAL COMPENSATION(1) SECURITIES
----------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS ($) OPTIONS(#) COMPENSATION($)
- --------------------------- ---- ---------- --------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
James Jones......................... 1997 177,333 6,000 -- 11,923(6)
Vice President and 1996 161,064 29,016 231,446 37,396(6)
Chief Financial Officer
Keith Mintzer....................... 1997 173,093 30,000 216,015 408(7)
Vice President of World Wide Sales
</TABLE>

- ---------------

(1) In accordance with the rules of the Securities and Exchange Commission, the
compensation set forth in the table does not include medical, group life
insurance or other benefits which are available to all salaried employees of
Hayes, and certain perquisites and other benefits, securities or property
which do not exceed the lesser or $50,000 or 10% of the Named Executive
Officer's total salary and bonus.
(2) Mr. Hayes received a $450,000 bonus in connection with the Company's merger
with Hayes Microcomputer.
(3) For 1997, amount includes $8,118, $3,267 and $1,212 for payment of life
insurance, automobile use and club dues, respectively. For 1996, amount
includes $192,307 for payout of accrued vacation and $6,690, $1,754 and
$1,200 for payment of life insurance premiums, automobile use and club dues,
respectively. For 1995, amount includes $6,782, $2,134 and $1,218 for
payment of life insurance premiums, automobile use and club dues,
respectively.
(4) Effective December 30, 1997 Mr. Howard became Vice Chairman and Chief
Executive Officer of the Company. Amounts include payments by the Company
prior to that date. For 1997, Mr. Howard received a change of control
payment of $437,500 as a result of the Company's merger with Hayes
Microcomputer which was paid in the form of Common Stock. For 1997, amount
includes payments of $5,899 and $6,600 for payment of life insurance
premiums and car allowance. For 1996, Mr. Howard received a change of
control payment of $562,500 as a result of the acquisition of Penril
DataComm Networks, Inc. by Bay Networks, Inc. 1996 and 1995 amounts also
include $5,775 and $6,050, respectively for a car allowance.
(5) 1997 amount includes $35,601 in relocation expenses and $2,808 for life
insurance premiums. 1996 amount represents life insurance premiums.
(6) Mr. Jones joined the Company in January 1996. Includes payments for
relocation expenses of $11,575 and $37,143 and life insurance premiums of
$408 and $253 for 1997 and 1996, respectively.
(7) Mr. Mintzer joined the Company in January 1997. Represents life insurance
premiums.

14
<PAGE> 18

STOCK OPTIONS GRANTED IN FISCAL 1997 TO NAMED EXECUTIVE OFFICERS

The following table provides information with respect to the option grants
in 1997 for the Named Executive Officers:

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED(1) FISCAL YEAR ($) PER SHARE DATE 5% 10%
- ---- ---------- ------------ ------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dennis Hayes................. 66,666 8.25% $ 14.46 01/01/08 $606,503 $1,537,014
Ronald Howard................ 50,000 6.19 14.46 01/01/08 454,875 1,152,755
Keith Mintzer................ 61,718 7.64 0.64 02/18/07 25,150 63,736
154,297 19.10 0.81 07/03/07 79,278 200,910
</TABLE>

- ---------------

(1) Includes options granted under stock option plans of the Company and Hayes
Microcomputer.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES

The following table provides information with respect to option year end
values for the Named Executive Officers. There were no option exercises in
fiscal 1997 by the Named Executive Officers.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AT FISCAL YEAR END MONEY OPTIONS AT FISCAL YEAR END
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- -------------------------- --------------------------------
<S> <C> <C>
Dennis Hayes................................. 16,666/50,001 --/--
Ronald Howard................................ 45,883/104,167 --/--
P.K. Chan.................................... 77,148/154,297 904,715/1,780,742
James Jones.................................. 77,148/154,297 904,715/1,780,742
Keith Mintzer................................ 61,718/154,297 712,287/1,754,665
</TABLE>

EMPLOYMENT AGREEMENTS

Mr. Hayes is employed pursuant to a three-year employment agreement which
became effective January 1, 1998. Mr. Hayes base salary is $400,000, with annual
increases on each December 30 directly proportional to any increase (but not
decrease) in the cost of living as reflected by the Consumer Price Index for
Urban Wage Earners and Clerical Workers -- All Items ("CPI") published by the
Bureau of Labor Statistics. Mr. Hayes is also eligible for a personal incentive
bonus of up to $500,000 per year based on attaining personal goals approved by
the Board of Directors in respect of his duties on behalf of the Company and a
corporate incentive bonus in the maximum amount of $300,000 per year upon the
Company attaining goals established by the Board of Directors. In addition, Mr.
Hayes will receive on January 1 of each year during the term of the employment
agreement ten year stock options to purchase 66,666 shares of Common Stock with
an exercise price of fair market value on the date of award. Twenty-five percent
(25%) of the options will vest on the date of award, and an additional 25% will
vest on December 31 of such year and each ensuing year. If Mr. Hayes voluntarily
resigns his employment (except in the case of a breach of the employment
agreement by the Company, or in the event of a "change in control" as such term
is defined in the employment agreement) or is discharged for "Cause" as such
term is defined in the employment agreement, then no further vesting will occur
and all unvested options will terminate immediately upon termination of
employment. Mr. Hayes must exercise any vested options after such termination of
employment within the earlier to occur of five years after the date of
termination or the expiration of the 10-year term of the options. Mr. Hayes also
receives certain short-term and long-term disability benefits under the
Company's respective disability plans and a car and driver on a full-time basis.
The Company also pays the premiums on the life insurance policy of Mr. Hayes.
Mr. Hayes will receive a severance payment in an amount equal to three-twelfths
( 3/12) of his base salary in the event of Mr. Hayes' death during the term of
the

15
<PAGE> 19

employment agreement. Mr. Hayes has agreed not to compete with the Company and
not to solicit the Company's employees during the term of his employment and for
18 months thereafter.

Mr. Howard is employed pursuant to a three-year year employment agreement,
which became effective January 1, 1998, as the Vice-Chairman and Chief Executive
Officer of the Company. At any time after December 30, 1998, the Company may
require or Mr. Howard may determine that Mr. Howard cease to be Chief Executive
Officer and in such case, Mr. Howard shall be a consultant to the Company for
the balance of the term and on the same terms. His annual base salary is
$280,000 per year, with annual increases to be reviewed by the Company Board of
Directors. Mr. Howard is also eligible for a cash bonus in an amount calculated
by dividing his base salary by 59.4% and subtracting his base salary from the
resulting amount (the "Bonus Amount"). Such Bonus Amount consists of two parts:
(a) a personal incentive bonus in the maximum amount of 30% of the amount
remaining after subtracting $50,000 from the Bonus Amount, based on attaining
personal goals established by the Board of Directors in respect of Mr. Howard's
duties on behalf of the Company and (b) a corporate incentive bonus in the
maximum amount of $50,000 plus 70% of the amount remaining after subtracting
$50,000 from the Bonus Amount, based on the Company's attaining such goals,
objectives and benchmarks as shall be set the Board of Directors. In addition,
Mr. Howard will receive on January 1 of each year during the term; ten-year
stock options to purchase 50,000 shares of Common Stock with an exercise price
of fair market value on the date of award. Twenty-five percent of the options
vest on the date of award, and an additional 25% vest on December 31 of such
year and each ensuing year. If Mr. Howard voluntarily resigns his employment
(except in the case of a breach of the employment agreement by the Company, or
in the event of a "change in control" as such term is defined in the employment
agreement) or is discharged for "Cause" as such term is defined in the
employment agreement, then no further vesting will occur and all unvested
options will terminate immediately upon termination of employment. Mr. Howard
must exercise any vested options after such termination of employment within the
earlier to occur of five years after the dates of termination or the expiration
of the 10-year term of the options. The Company will also continue to pay the
premiums on the life insurance policy that has been maintained by the Company on
Mr. Howard's life. Mr. Howard has agreed not to compete with the Company, and
not to solicit the Company's customers and employees during the term of his
employment and for 18 months thereafter.

Mr. Chan is employed pursuant to an Executive Employment Agreement dated
October 7, 1996 and amended on October 1, 1997. The term of the agreement is two
(2) years from the date of the agreement as amended. Mr. Chan's annual base
salary is $240,000 and he is entitled to receive additional incentive
compensation of up to $72,000 based upon criteria to be determined by Hayes. He
is generally eligible for participation in the employee benefits programs,
including stock option plans. In the event of a termination for "Cause" (as
defined in the agreement), a voluntary termination by Mr. Chan, or the
expiration of the term, Mr. Chan will receive no right to compensation or other
benefits. If Mr. Chan's employment is terminated by the Board of Directors for
any reason other than "Cause" within the term of the agreement, Mr. Chan is
entitled to receive a severance in the form of salary continuation for twelve
(12) months following the effective date of the termination. Finally, the
Agreement includes an invention assignment and protective covenants of two (2)
years in duration.

Mr. Jones is employed pursuant to an Executive Employment Agreement dated
October 31, 1997. The term of the agreement is two (2) years from the date of
the agreement. Mr. Jones's annual base salary is $181,000 and he is entitled to
receive additional incentive compensation of up to $54,300 based upon criteria
to be determined by the Board of Directors. He is generally eligible for
participation in the employee benefits programs of the Company, including stock
option plans. In the event of a termination for "Cause" (as defined in the
agreement), a voluntary termination by Mr. Jones, or the expiration of the term,
Mr. Jones will receive no right to compensation or other benefits. If Mr.
Jones's employment is terminated by the Board of Directors for any reason other
than "Cause" within the term of the agreement, Mr. Jones is entitled to receive
a severance payment in the form of salary continuation until the later in time
of the remainder of the term of the Agreement or twelve (12) months following
the effective date of the termination. Finally, the agreement includes an
invention assignment and protective covenants of two (2) years in duration.

Mr. Mintzer is employed pursuant to an Executive Employment Agreement dated
January 1997. The terms of the agreement is two years from the date of the
agreement. Mr. Mintzer's base salary is $175,000 and
16
<PAGE> 20

he is entitled to receive additional incentive compensation of up to $75,000
based upon criteria to be determined by the Board of Directors. He is generally
eligible for participation in the employee benefits programs of the Company,
including stock option plans. In the event of a termination for "Cause" (as
defined in the Agreement), a voluntary termination by Mr. Mintzer, or the
expiration of the term, Mr. Mintzer will receive no right to compensation or
other benefits. If Mr. Mintzer's employment is terminated by the Company, the
Chairman of the Board, or the Chief Executive Officer for any reason other than
"Cause" within the term of the Agreement, Mr. Mintzer is entitled to receive a
severance in the form of salary continuation for six (6) months following the
date of termination. In the event of a termination or qualifying resignation
relating to a "Change of Control" (as defined in the Executive Employment
Agreement), then Mr. Mintzer is entitled to receive a severance in the form of
salary continuation for twelve (12) months following the effective date of the
termination. Finally, the agreement includes an invention assignment and
protective covenants of two (2) years in duration.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Introduction. The Compensation Committee is responsible for determining
and administering the Company's compensation policies for the remuneration of
the Company's executives. The Compensation Committee annually evaluates
individual and corporate performance from both a short-term and long-term
perspective.

Philosophy. The Company's executive compensation program seeks to
encourage the achievement of business objectives and superior corporate
performance by the Company's executives. The program enables the Company to
reward and retain highly qualified executives and to foster a
performance-oriented environment wherein management's long-term focus is on
maximizing stockholders value through equity-based incentives. The program calls
for consideration of the nature of each executive's work and responsibilities,
unusual accomplishments or achievements on the Company's behalf, years of
service, the executive's total compensation and the Company's financial
condition generally. Historically, the Company's executive employees have
received cash-based and equity-based compensation. During 1997, these continued
to be the principle elements of executive compensation.

Base Salary. Base salary represents the primary cash component of an
executive employee's compensation and is determined by evaluating the
responsibilities associated with an employee's position at the Company, the
employee's overall level of experience, and industry competitive salaries.

Bonuses. In addition, the Compensation Committee, in its discretion, may
award bonuses. Each of the Named Executive Officers participates in an executive
bonus plan or has an employment agreement that provides for a potential bonus
award. Bonus potentials range from 30% to 200% of base salary.

Equity-Based Compensation. Equity-based compensation principally has been
in the form of stock options. The Compensation Committee and the Board of
Directors believe that stock options represent an important component of a
well-balanced compensation program. Because stock option awards provide value
only in the event of share price appreciation, stock options enhance
management's focus on maximizing long-term stockholder value and thus provide a
direct relationship between an executive's compensation and the stockholders'
interests. No specific formula is used to determine stock option awards for an
employee. Rather, individual award levels are based upon the subjective
evaluation of each employee's overall past and expected future contributions to
the success of the Company.

Compensation of the Chief Executive Officer. The philosophy, factors and
criteria of the Compensation Committee generally applicable to the Company's
officers are also applicable to the Chief Executive Officer. The Chief Executive
Officer's salary for 1997 was based on his previously existing employment
agreement with the Company. The Chief Executive Officer did not receive a bonus
in 1997. In connection with the merger of the Company and Hayes Microcomputer
the Chief Executive Officer and the Company entered into a new employment
agreement recognizing his new responsibilities with the Company. On January 1,
1998 the Company granted the Chief Executive Officer a stock option to purchase
shares of Company Common Stock pursuant to his employment agreement. In
addition, the Chief Executive Officer pursuant to the term, of his

17
<PAGE> 21

previously existing employment agreement was paid, in the form of Common Stock,
a change of control payment of $437,000 in connection with the Company's merger
with Hayes Microcomputer.

Respectfully Submitted,
Compensation Committee Members:
Barbara Perrier Dryer
Chiang Lam

DIRECTORS COMPENSATION

Members of the Board of Directors who are also employees of the Company do
not receive any additional compensation for service on the Board of Directors or
any committees thereof. Members of the Board of Directors who are not employees
receive an annual retainer of $5,000, plus a stipend of $1,000 for each Board of
Directors meeting attended. Non-employee directors receive additional stipends
for service on committees of the Board of Directors of $1,000 per committee
meeting not held on the same day as a Board of Directors meeting.

SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than ten percent of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Executive officers,
directors and greater than 10% stockholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on its review of the copies of such forms received by it, or written
representations from certain reporting persons, the Company believes that during
fiscal 1997 all filing requirements applicable to its executive officers and
directors and greater than 10% shareholders were complied with.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On December 10, 1997, Hayes Microcomputer sold 72,277 shares of common
stock of BVRP Software S.A. ("BVRP"), to an affiliate of ACMA Limited, from a
shareholder of Hayes Microcomputer and now a stockholder of the Company, for a
purchase price of approximately $2.0 million. Such shares were sold at a
discount of 15% from the market price established by the average of the closing
price of BVRP for the three days prior to November 25, 1997. BVRP common stock
is registered and traded on the Nouveau Marche.

Mr. Hayes has an employment agreement with the Company and Hayes
Microcomputer had loaned funds to Mr. Hayes bearing interest at the prime rate.
Such loans were repaid on December 31, 1997. The largest aggregate amount of
indebtedness outstanding during 1997 was $249,043. Mr. Hayes sits on the Boards
of Directors of three companies in which the Company has an ownership interest:
Scaleable Software Solutions, Inc., BVRP Software S.A., and Xylon
Semiconductors, Inc.

Kaifa Technology (H.K.) Limited, ("Kaifa") is a stockholder of the Company
that currently owns 1,260,096 shares of Common Stock. Kaifa and Hayes
Microcomputer have entered into a Subcontract Manufacturing Agreement, pursuant
to which Kaifa performs certain manufacturing work for Hayes Microcomputer in
its factory in Hong Kong.

Rolling Profit Holdings, Ltd. is a stockholder of the Company, currently
owning 630,047 shares of Common Stock. Wong's Electronics Limited ("Wong") is an
affiliate of Rolling Profit Holdings, Ltd. Wong's and Hayes Microcomputer have
entered into a Subcontract Manufacturing Agreement, pursuant to which Wong's
performs certain manufacturing work for Hayes Microcomputer in its factory in
China.

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<PAGE> 22

STOCK PERFORMANCE GRAPH

The following graph compares the monthly percentage change in cumulative
stockholder return on the Common Stock since November 18, 1996, the date on
which the Common Stock began trading on NASDAQ/NMS with (i) the cumulative total
return on the NASDAQ/NMS Stock Market Index, and (ii) Hambrecht and Quist
Technology Index selected by the Company (see below). The figures presented
below assume a reinvestment of all dividends paid on the applicable dividend
payment date and that $100 was invested in the Company's Common Stock, and in
the stock of the companies comprising each of the indices and such stock was
held through January 3, 1998.

COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG HAYES CORPORATION, H&Q TECHNOLOGY INDEX AND THE NASDAQ STOCK MARKET INDEX

<TABLE>
<CAPTION>
MEASUREMENT PERIOD NASDAQ STOCK
(FISCAL YEAR COVERED) HAYES CORPORATION H&Q TECHNOLOGY MARKET - U.S.
<S> <C> <C> <C>
10/31/96 100 100 100
11/30/96 116.67 104.74 103.28
12/31/96 112.96 101.93 103.19
01/31/97 101.85 112.85 110.52
02/28/97 88.89 103.63 104.41
03/31/97 61.11 97.16 97.59
04/30/97 57.41 100.75 100.64
05/31/97 74.07 115.92 112.05
06/30/97 62.96 116.94 115.48
07/31/97 77.78 135.75 127.67
08/31/97 72.22 136.14 127.48
09/30/97 105.56 141.72 135.02
10/31/97 71.29 126.58 128.00
11/30/97 80.55 125.27 128.63
12/31/97 62.03 119.50 126.62
</TABLE>

OTHER MATTERS

The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy to vote the shares they represent as the
Board of Directors may recommend.

It is important that your shares be represented at the meeting, regardless
of the number of shares which you hold. You are therefore urged to execute and
return, at your earliest convenience, the accompanying proxy card in the
envelope which had been enclosed.

THE BOARD OF DIRECTORS

Dated: April 3, 1998

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<PAGE> 23

EXHIBIT A

1998 STOCK INCENTIVE PLAN
OF
HAYES CORPORATION

1. PURPOSE

The purpose of the 1998 Stock Incentive Plan of Hayes Corporation (the
"Plan") is to encourage and enable employees and independent contractors of
Hayes Corporation (the "Corporation") and its related corporations to acquire or
to increase their holdings of common stock of the Corporation (the "Common
Stock") and other proprietary interests in the Corporation in order to promote a
closer identification of their interests with those of the Corporation and its
stockholders, thereby further stimulating their efforts to enhance the
efficiency, soundness, profitability, growth and stockholder value of the
Corporation. This purpose will be carried out through the granting of benefits
(collectively referred to herein as "Awards") to employees and independent
contractors, including the granting of incentive stock options ("Incentive
Options"), nonqualified stock options ("Nonqualified Options"), stock
appreciation rights ("SARs"), restricted stock awards ("Restricted Stock
Awards"), and restricted units ("Restricted Units") to such participants.
Incentive Options and Nonqualified Options shall be referred to herein
collectively as "Options." Restricted Stock Awards and Restricted Units shall be
referred to herein collectively as "Restricted Awards."

2. ADMINISTRATION OF THE PLAN

(a) The Plan shall be administered by the Compensation Committee of the
Board of Directors (the "Committee"); provided, however, that the Board of
Directors of the Corporation may, in its sole discretion, assume administration
of the Plan in whole or in part. (For the purposes herein, references to the
Committee shall also include the Board of Directors if it is acting in its
administrative capacity.) Unless the Board shall determine otherwise, the
Committee shall include no fewer than the minimum number of "non-employee
directors," as such term is defined in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as may be
required by Rule 16b-3.

(b) Any action of the Committee with respect to the Plan may be taken by a
written instrument signed by all of the members of the Committee and any such
action so taken by written consent shall be as fully effective as if it had been
taken by a majority of the members at a meeting duly held and called. Subject to
the provisions of the Plan, and unless authority is granted to the chief
executive officer as provided in Section 2(c), the Committee shall have full and
final authority in its discretion to take any action with respect to the Plan
including, without limitation, the authority (i) to determine all matters
relating to Awards, including selection of individuals to be granted Awards, the
types of Awards, the number of shares of Common Stock, if any, subject to an
Award, and all terms, conditions, restrictions and limitations of an Award; (ii)
to prescribe the form or forms of the agreements evidencing any Awards granted
under the Plan; (iii) to establish, amend and rescind rules and regulations for
the administration of the Plan; and (iv) to construe and interpret the Plan and
agreements evidencing Awards granted under the Plan, to establish and interpret
rules and regulations for administering the Plan and to make all other
determinations deemed necessary or advisable for administering the Plan. The
Committee shall also have authority, in its sole discretion, to accelerate the
date that any Award which was not otherwise exercisable or vested shall become
exercisable or vested in whole or in part without any obligation to accelerate
such date with respect to any other Award granted to any recipient. In addition,
the Committee shall have the authority and discretion to establish terms and
conditions of Awards as the Committee determines to be necessary or appropriate
to conform to the applicable requirements or practices of jurisdictions outside
of the United States.

3. EFFECTIVE DATE

The effective date of the Plan shall be May 8, 1998 (the "Effective Date").
Awards may be granted under the Plan on and after the effective date, but no
Awards will be granted after May 8, 2008.
A-1
<PAGE> 24

4. SHARES OF STOCK SUBJECT TO THE PLAN; AWARD LIMITATIONS

(a) The number of shares of Common Stock that may be issued pursuant to
Awards shall be 2,000,000 shares of authorized but unissued shares or treasury
shares of the Corporation or shares purchased on the open market subject to
adjustments and increases as provided in this Section 4.

(b) The Corporation hereby reserves sufficient authorized shares of Common
Stock to meet the grant of Awards hereunder. Any shares subject to an Award
which is subsequently forfeited, expires or is terminated may again be the
subject of an Award granted under the Plan. To the extent that any shares of
Common Stock subject to an Award are not delivered to a Participant (or his
beneficiary) because the Award is forfeited or canceled or because the Award is
settled in cash, such shares shall not be deemed to have been issued for
purposes of determining the maximum number of shares of Common Stock available
for issuance under the Plan. If the option price of an Option granted under the
Plan is satisfied by tendering shares of Common Stock, only the number of shares
issued net of the shares of Common Stock tendered shall be deemed issued for
purposes of determining the maximum number of shares of Common Stock available
for issuance under the Plan.

(c) If there is any change in the shares of Common Stock because of a
merger, consolidation or reorganization involving the Corporation or a related
corporation, or if the Board of Directors of the Corporation declares a stock
dividend or stock split distributable in shares of Common Stock, or if there is
a change in the capital stock structure of the Corporation or a related
corporation affecting the Common Stock, the number of shares of Common Stock
reserved for issuance under the Plan shall be correspondingly adjusted, and the
Committee shall make such adjustments to Awards or to any provisions of this
Plan as the Committee deems equitable to prevent dilution or enlargement of
Awards.

(d) Subject to the terms of this Section 4, in no event shall an employee
be granted Awards under the Plan for more than 500,000 shares of Common Stock
(or the equivalent value thereof based on the Fair Market Value of the Common
Stock on the date of grant of the Award) during any calendar year.

5. ELIGIBILITY

An Award may be granted only to an individual who satisfies the following
eligibility requirements on the date the Award is granted:

(a) The individual is either (i) an employee of the Corporation or a
related corporation, or (ii) an independent contractor, consultant or
advisor (collectively, "independent contractors") providing services to the
Corporation or a related corporation. For this purpose, an individual shall
be considered to be an "employee" only if there exists between the
individual and the Corporation or a related corporation the legal and bona
fide relationship of employer and employee.

(b) With respect to the grant of Incentive Options, the individual
does not own, immediately before the time that the Incentive Option is
granted, stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Corporation. Notwithstanding
the foregoing, an individual who owns more than ten percent of the total
combined voting power of the Corporation may be granted an Incentive Option
if the option price (as determined pursuant to Section 6(b) herein is at
least 110% of the Fair Market Value of the Common Stock (as defined in
Section 6(b) herein), and the option period (as defined in Section 6(c)
herein) does not exceed five years. For this purpose, an individual will be
deemed to own stock which is attributable to him under Section 424(d) of
the Internal Revenue Code of 1986, as amended (the "Code").

A-2
<PAGE> 25

(c) The individual, being otherwise eligible under this Section 5, is
selected by the Committee as an individual to whom an Award shall be
granted (a "Participant").

6. OPTIONS

(a) Grant of Options: Subject to the limitations of the Plan, the
Committee may in its sole and absolute discretion grant Options to such eligible
individuals in such numbers, upon such terms and at such times as the Committee
shall determine. Both Incentive Options and Nonqualified Options may be granted
under the Plan. To the extent necessary to comply with Section 422 of the Code
and related regulations, if an Option is designated as an Incentive Option but
does not qualify as such under Section 422 of the Code, the Option (or portion
thereof) shall be treated as a Nonqualified Option.

(b) Option Price: The price per share at which an Option may be exercised
(the "option price") shall be established by the Committee at the time the
Option is granted and shall be set forth in the terms of the agreement
evidencing the grant of the Option; provided, that (i) in the case of an
Incentive Option, the option price shall be no less than the Fair Market Value
per share of the Common Stock on the date the Option is granted and (ii) in no
event shall the option price per share of any Option be less than the par value
per share of the Common Stock. In addition, the following rules shall apply:

(i) An Incentive Option shall be considered to be granted on the date
that the Committee acts to grant the Option, or on any later date specified
by the Committee as the effective date of the Option. A Nonqualified Option
shall be considered to be granted on the date the Committee acts to grant
the Option or any other date specified by the Committee as the date of
grant of the Option.

(ii) For the purposes of the Plan, the Fair Market Value of the shares
shall be determined in good faith by the Committee in accordance with the
following provisions: (A) if the shares of Common Stock are listed for
trading on the New York Stock Exchange or the American Stock Exchange, the
Fair Market Value shall be the closing sales price of the shares on the New
York Stock Exchange or the American Stock Exchange (as applicable) on the
date immediately preceding the date the Option is granted, or, if there is
no transaction on such date, then on the trading date nearest preceding the
date the Option is granted for which closing price information is
available, and, provided further, if the shares are quoted on the Nasdaq
National Market or the Nasdaq SmallCap Market of the Nasdaq Stock Market,
the Fair Market Value shall be the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on such system on the
date immediately preceding the date the Option is granted for which such
information is available; or (B) if the shares of Common Stock are not
listed or reported in any of the foregoing, then the Fair Market Value
shall be determined by the Committee in accordance with the applicable
provisions of Section 20.2031-2 of the Federal Estate Tax Regulations, or
in any other manner consistent with the Code and accompanying regulations.

(iii) In no event shall there first become exercisable by an employee
in any one calendar year Incentive Options granted by the Corporation or
any related corporation with respect to shares having an aggregate Fair
Market Value (determined at the time an Incentive Option is granted)
greater than $100,000.

(c) Option Period and Limitations on the Right to Exercise Options: (i)
The term of an Option (the "option period") shall be determined by the Committee
at the time the Option is granted. With respect to Incentive Options, such
period shall not extend more than ten years from the date on which the Option is
granted. Any Option or portion thereof not exercised before expiration of the
option period shall terminate. The period during which an Option may be
exercised shall be determined by the Committee at the time the Option is
granted.

(ii) An Option may be exercised by giving written notice to the Corporation
at such place as the Corporation shall direct. Such notice shall specify the
number of shares to be purchased pursuant to an Option and the aggregate
purchase price to be paid therefor, and shall be accompanied by the payment of
such purchase price. Such payment shall be in the form of (A) cash; (B) shares
of Common Stock owned by the Participant at the time of exercise; (C) shares of
Common Stock withheld upon exercise; (D) delivery of

A-3
<PAGE> 26

written notice of exercise to the Corporation and delivery to a broker of
written notice of exercise and irrevocable instructions to promptly deliver to
the Corporation the amount of sale or loan proceeds to pay the option price; or
(E) a combination of the foregoing methods, as elected by the Participant.
Shares tendered or withheld in payment on the exercise of an Option shall be
valued at their Fair Market Value on the date of exercise, as determined by the
Committee by applying the provisions of Section 6(b)(ii).

(iii) Notwithstanding Section 6(c)(i) herein, no Option granted to a
Participant who was an employee at the time of grant shall be exercised unless
the Participant is, at the time of exercise, an employee as described in Section
5(a), and has been an employee continuously since the date the Option was
granted, subject to the following:

(A) An Option shall not be affected by any change in the terms,
conditions or status of the Participant's employment, provided that the
Participant continues to be an employee of the Corporation or a related
corporation.

(B) The employment relationship of a Participant shall be treated as
continuing intact for any period that the Participant is on military or
sick leave or other bona fide leave of absence, provided that the period of
such leave does not exceed ninety days, or, if longer, as long as the
Participant's right to reemployment is guaranteed either by statute or by
contract. The employment relationship of a Participant shall also be
treated as continuing intact while the Participant is not in active service
because of disability. The Committee shall determine whether a Participant
is disabled.

(C) Unless an individual option agreement provides otherwise, if the
employment of a Participant is terminated because of disability within the
meaning of subparagraph (B), or if the Participant dies while he is an
employee or dies after the termination of his employment because of
disability, the Option may be exercised only to the extent exercisable on
the date of the Participant's termination of employment or death while
employed (the "termination date"), except that the Committee may in its
discretion accelerate the date for exercising all or any part of the Option
which was not otherwise exercisable on the termination date. The Option
must be exercised, if at all, prior to the first to occur of the following,
whichever shall be applicable: (X) the close of the period of twelve months
next succeeding the termination date; or (Y) the close of the option
period. In the event of the Participant's death, such Option shall be
exercisable by such person or persons as shall have acquired the right to
exercise the Option by will or by the laws of intestate succession.

(D) Unless an individual option agreement provides otherwise, if the
employment of the Participant is terminated for any reason other than
disability (as defined in subparagraph (B)) or death or for "cause," his
Option may be exercised to the extent exercisable on the date of such
termination of employment, except that the Committee may in its discretion
accelerate the date for exercising all or any part of the Option which was
not otherwise exercisable on the date of such termination of employment.
The Option must be exercised, if at all, prior to the first to occur of the
following, whichever shall be applicable: (X) the close of the period of 90
days next succeeding the termination date; or (Y) the close of the option
period. If the Participant dies following such termination of employment
and prior to the earlier of the dates specified in (X) or (Y) of this
subparagraph (D), the Participant shall be treated as having died while
employed under subparagraph (C) immediately preceding (treating for this
purpose the Participant's date of termination of employment as the
termination date). In the event of the Participant's death, such Option
shall be exercisable by such person or persons as shall have acquired the
right to exercise the Option by will or by the laws of intestate
succession.

(E) Unless an individual option agreement provides otherwise, if the
employment of the Participant is terminated for "cause," his Option shall
lapse and no longer be exercisable as of the effective time of his
termination of employment, as determined by the Committee. For purposes of
this subparagraph (E) and subparagraph (D), the Participant's termination
shall be for "cause" if such termination results from the Participant's (X)
dishonesty; (Y) refusal to perform his duties for the Corporation; or (Z)
engaging in conduct that could be materially damaging to the Corporation
without a reasonable good

A-4
<PAGE> 27

faith belief that such conduct was in the best interest of the Corporation.
The determination of "cause" shall be made by the Committee and its
determination shall be final and conclusive.

(F) Notwithstanding the foregoing, the Committee shall have authority,
in its discretion, to extend the period during which an Option may be
exercised; provided that, in the event that any such extension shall cause
an Incentive Option to be designated as a Nonqualified Option, no such
extension shall be made without the prior written request and consent of
the Participant.

(iv) Notwithstanding Section 6(c)(i), herein, an Option granted to a
Participant who was an independent contractor or director of the Corporation or
a related corporation at the time of grant (and who does not thereafter become
an employee, in which case he shall be subject to the provisions of Section
6(c)(iii) herein) may be exercised only to the extent exercisable on the date of
the Participant's termination of service to the Corporation or a related
corporation (unless the termination was for cause), and must be exercised, if at
all, prior to the first to occur of the following, as applicable: (X) the close
of the period of 90 days next succeeding the termination date; or (Y) the close
of the option period. If the services of such a Participant are terminated for
cause (as defined in Section 6(c)(iii)(E) herein), his Option shall lapse and no
longer be exercisable as of the effective time of his termination of services,
as determined by the Committee. Notwithstanding the foregoing, the Committee may
in its discretion accelerate the date for exercising all or any part of an
Option which was not otherwise exercisable on the termination date or extend the
period during which an Option may be exercised, or both.

(v) A Participant or his legal representative, legatees or distributees
shall not be deemed to be the holder of any shares subject to an Option unless
and until certificates for such shares are delivered to him or them under the
Plan.

(vi) Nothing in the Plan shall confer upon the Participant any right to
continue in the service of the Corporation or a related corporation as an
employee, director, or independent contractor or to interfere in any way with
the right of the Corporation or a related corporation to terminate the
Participant's employment or service at any time.

(vii) A certificate or certificates for shares of Common Stock acquired
upon exercise of an Option shall be issued in the name of the Participant and
distributed to the Participant (or his beneficiary) as soon as practicable
following receipt of notice of exercise and payment of the purchase price.

(d) Nontransferability of Options: Options shall not be transferable other
than by will or the laws of intestate succession. The designation of a
beneficiary does not constitute a transfer. An Option shall be exercisable
during the Participant's lifetime only by him or by his guardian or legal
representative.

7. STOCK APPRECIATION RIGHTS

(a) Grant of SARs: Subject to the limitations of the Plan, the Committee
may in its sole and absolute discretion grant SARs to such eligible individuals,
in such numbers, upon such terms and at such times as the Committee shall
determine. SARs may be granted to an optionee of an Option (hereinafter called a
"Related Option") with respect to all or a portion of the shares of Common Stock
subject to the Related Option (a "Tandem SAR") or may be granted separately to
an eligible key employee (a "Freestanding SAR"). Subject to the limitations of
the Plan, SARs shall be exercisable in whole or in part upon notice to the
Corporation upon such terms and conditions as are provided in the agreement
relating to the grant of the SAR.

(b) Tandem SARs: A Tandem SAR may be granted either concurrently with the
grant of the Related Option or (if the Related Option is a Nonqualified Option)
at any time thereafter prior to the complete exercise, termination, expiration
or cancellation of such Related Option. Tandem SARs shall be exercisable only at
the time and to the extent that the Related Option is exercisable (and may be
subject to such additional limitations on exercisability as the Committee may
provide in the agreement), and in no event after the complete termination or
full exercise of the Related Option. For purposes of determining the number of
shares of Common Stock that remain subject to such Related Option and for
purposes of determining the number of shares of Common Stock in respect of which
other Awards may be granted, upon the exercise of Tandem SARs, the Related
Option shall be considered to have been surrendered to the extent of the number
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<PAGE> 28

of shares of Common Stock with respect to which such Tandem SARs are exercised.
Upon the exercise or termination of the Related Option, the Tandem SARs with
respect thereto shall be canceled automatically to the extent of the number of
shares of Common Stock with respect to which the Related Option was so exercised
or terminated. Subject to the limitations of the Plan, upon the exercise of a
Tandem SAR, the Participant shall be entitled to receive from the Corporation,
for each share of Common Stock with respect to which the Tandem SAR is being
exercised, consideration equal in value to the excess of the Fair Market Value
of a share of Common Stock on the date of exercise over the Related Option price
per share; provided, that the Committee may, in any agreement granting Tandem
SARs, establish a maximum value payable for such SARs.

(c) Freestanding SARs: Unless an individual agreement provides otherwise,
the base price of a Freestanding SAR shall be not less than 100% of the Fair
Market Value of the Common Stock (as determined in accordance with Section
6(b)(ii) herein) on the date of grant of the Freestanding SAR. Subject to the
limitations of the Plan, upon the exercise of a Freestanding SAR, the
Participant shall be entitled to receive from the Corporation, for each share of
Common Stock with respect to which the Freestanding SAR is being exercised,
consideration equal in value to the excess of the Fair Market Value of a share
of Common Stock on the date of exercise over the base price per share of such
Freestanding SAR; provided, that the Committee may, in any agreement granting
Freestanding SARs, establish a maximum value payable for such SARs.

(d) Exercise of SARs: (i) Subject to the terms of the Plan, SARs shall be
exercisable in whole or in part upon such terms and conditions as are provided
in the agreement relating to the grant of the SAR. The period during which an
SAR may be exercisable shall not exceed ten years from the date of grant or, in
the case of Tandem SARs, such shorter option period as may apply to the Related
Option. Any SAR or portion thereof not exercised before expiration of the period
stated in the agreement relating to the grant of the SAR shall terminate.

(ii) SARs may be exercised by giving written notice to the Corporation at
such place as the Committee shall direct. The date of exercise of the SAR shall
mean the date on which the Corporation shall have received notice from the
Participant of the exercise of such SAR.

(iii) No SAR may be exercised unless the Participant is, at the time of
exercise, an eligible Participant, as described in Section 5, and has been a
Participant continuously since the date the SAR was granted, subject to the
provisions of Sections 6(c)(iii) and (iv) herein.

(e) Consideration; Election: The consideration to be received upon the
exercise of the SAR by the Participant shall be paid in cash, shares of Common
Stock (valued at Fair Market Value on the date of exercise of such SAR in
accordance with Section 6(b)(ii) herein) or a combination of cash and shares of
Common Stock, as elected by the Participant, subject to the terms of the Plan
and the applicable agreement. The Corporation's obligation arising upon the
exercise of the SAR may be paid currently or on a deferred basis with such
interest or earnings equivalent as the Committee may determine. A certificate or
certificates for shares of Common Stock acquired upon exercise of an SAR for
shares shall be issued in the name of the Participant (or his beneficiary) and
distributed to the Participant (or his beneficiary) as soon as practicable
following receipt of notice of exercise. No fractional shares of Common Stock
will be issuable upon exercise of the SAR and, unless otherwise provided in the
applicable agreement, the Participant will receive cash in lieu of fractional
shares.

(f) Limitations: The applicable SAR agreement shall contain such terms,
conditions and limitations consistent with the Plan as may be specified by the
Committee. Unless otherwise so provided in the applicable agreement or the Plan,
any such terms, conditions or limitations relating to a Tandem SAR shall not
restrict the exercisability of the Related Option.

(g) Nontransferability: (i) SARs shall not be transferable other than by
will or the laws of intestate succession. The designation of a beneficiary does
not constitute a transfer. SARs may be exercised during the Participant's
lifetime only by him or by his guardian or legal representative.

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(ii) If the Participant is subject to Section 16 of the Exchange Act,
shares of Common Stock acquired upon exercise of an SAR may not, without the
consent of the Committee, be disposed of by the Participant until the expiration
of six months after the date the SAR was granted.

8. RESTRICTED AWARDS

(a) Grant of Restricted Awards: Subject to the limitations of the Plan,
the Committee may in its sole and absolute discretion grant Restricted Awards to
such individuals in such numbers, upon such terms and at such times as the
Committee shall determine. A Restricted Award may consist of a Restricted Stock
Award or a Restricted Unit, or both. Restricted Awards shall be payable in cash
or whole shares of Common Stock (including Restricted Stock), or partly in cash
and partly in whole shares of Common Stock, in accordance with the terms of the
Plan and the sole and absolute discretion of the Committee. The Committee may
condition the grant or vesting, or both, of a Restricted Award upon the
continued service of the Participant for a certain period of time, attainment of
such performance objectives as the Committee may determine, or upon a
combination of continued service and performance objectives. The Committee shall
determine the nature, length and starting date of the period during which the
Restricted Award may be earned (the "Restriction Period") for each Restricted
Award, which shall be as stated in the agreement to which the Award relates. In
the case of Restricted Awards based upon performance criteria, or a combination
of performance criteria and continued service, the Committee shall determine the
performance objectives to be used in valuing Restricted Awards and determine the
extent to which such Awards have been earned. Performance objectives may vary
from participant to participant and between groups of participants and shall be
based upon such Corporation, business unit and/or individual performance factors
and criteria as the Committee in its sole discretion may deem appropriate,
including, but not limited to, earnings per share, return on equity, return on
assets or total return to stockholders. The Committee shall determine the terms
and conditions of each Restricted Award, including the form and terms of payment
of Awards. The Committee shall have sole authority to determine whether and to
what degree Restricted Awards have been earned and are payable and to interpret
the terms and conditions of Restricted Awards and the provisions herein.

(b) Earning of Restricted Awards: Unless the applicable agreement provides
otherwise, a Restricted Award granted to a Participant shall be deemed to be
earned as of the first to occur of the completion of the Restriction Period,
retirement, displacement, death or disability of the Participant, or
acceleration of the Restricted Award, provided that, in the case of Restricted
Awards based upon performance criteria or a combination of performance criteria
and continued service, the Committee shall have sole discretion to determine if,
and to what degree, the Restricted Awards shall be deemed earned at the end of
the Restriction Period or upon the retirement, displacement, death or disability
of the Participant. In addition, the following rules shall also apply to the
earning of Restricted Awards:

(i) Completion of Restriction Period: For this purpose, a Restricted
Award shall be deemed to be earned upon completion of the Restriction
Period (except as otherwise provided herein for performance-based
Restricted Awards). In order for a Restricted Award to be deemed earned,
the Participant must have been continuously employed or in service during
the Restriction Period. Continuous employment or service shall mean
employment with or service to any combination of the Corporation and one or
more related corporations, and a temporary leave of absence with consent of
the Corporation shall not be deemed to be a break in continuous employment
or service.

(ii) Retirement of the Participant: For this purpose, the Participant
shall be deemed to have retired as of the earlier of (A) his normal
retirement date under the retirement plan established by the Corporation
for its employees which is applicable to the Participant, or (B) his
retirement date under a contract, if any, between the Participant and the
Corporation providing for his retirement from the employment of the
Corporation or a related corporation prior to such normal retirement date,
or (C) a mutually agreed upon early retirement date under such retirement
plan of the Corporation between the Participant and the Corporation.

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(iii) Displacement of the Participant: For this purpose, the
Participant shall be deemed to have been displaced in the event of the
termination of the Participant's employment or service due to the
elimination of the Participant's job or position without fault on the part
of the Participant.

(iv) Death or Disability of the Participant: Except as otherwise
provided herein for performance-based Restricted Awards, if the Participant
shall terminate continuous employment or service because of death or
disability before a Restricted Award is otherwise deemed to be earned
pursuant to this Section 8(b), the Participant shall be deemed to have
earned a percentage of the Award (rounded to the nearest whole share in the
case of Restricted Awards payable in shares) determined by dividing the
number of his full years of continuous employment or service then completed
during the Restriction Period with respect to the Award by the number of
years of such Restriction Period.

(v) Acceleration of Restricted Awards by the
Committee: Notwithstanding the provisions of this Section 8(b), the
Committee, in its sole and absolute discretion, may accelerate the date
that any Restricted Award granted to the Participant shall be deemed to be
earned in whole or in part, without any obligation to accelerate such date
with respect to other Restricted Awards granted to the Participant or to
accelerate such date with respect to Restricted Awards granted to any other
Participant, or to treat all Participants similarly situated in the same
manner.

(c) Forfeiture of Restricted Awards: If the employment or service of a
Participant shall be terminated for any reason, and the Participant has not
earned all or part of a Restricted Award pursuant to the terms herein, such
Award to the extent not then earned shall be forfeited immediately upon such
termination and the Participant shall have no further rights with respect
thereto.

(d) Dividend and Voting Rights; Share Certificates: A Participant shall
have no dividend rights or voting rights with respect to shares reserved in his
name pursuant to a Restricted Award payable in shares but not yet earned
pursuant to Section 8(b). A certificate or certificates for shares of Common
Stock representing a Restricted Award payable in shares shall be issued in the
name of the Participant and distributed to the Participant (or his beneficiary)
as soon as practicable following the date that the shares subject to the Award
are earned as provided in Section 8(b). No certificate shall be issued hereunder
in the name of the Participant (or his beneficiary) except to the extent the
shares represented thereby have been earned.

(e) Nontransferability:

(i) The recipient of a Restricted Award shall not sell, transfer,
assign, pledge or otherwise encumber shares subject to the Award until the
Restriction Period has expired or until all conditions to vesting have been
met.

(ii) Restricted Awards shall not be transferable other than by will or
the laws of intestate succession. The designation of a beneficiary does not
constitute a transfer.

(iii) If a Participant of a Restricted Award is subject to Section 16
of the Exchange Act, shares of Common Stock subject to such Award may not,
without the consent of the Committee, be sold or otherwise disposed of
within six months following the date of grant of such Award.

9. WITHHOLDING

The Corporation shall withhold all required local, state and federal taxes
from any amount payable in cash with respect to an Award. The Corporation shall
require any recipient of an Award payable in shares of the Common Stock to pay
to the Corporation in cash the amount of any tax or other amount required by any
governmental authority to be withheld and paid over by the Corporation to such
authority for the account of such recipient. Notwithstanding the foregoing, the
recipient may satisfy such obligation in whole or in part, and any other local,
state or federal income tax obligations relating to such an Award, by electing
(the "Election") to have the Corporation withhold shares of Common Stock from
the shares to which the recipient is entitled. The number of shares to be
withheld shall have a Fair Market Value as of the date that the amount of tax to
be withheld is determined (the "Tax Date") as nearly equal as possible to (but
not exceeding) the

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amount of such obligations being satisfied. Each Election must be made in
writing to the Committee in accordance with election procedures established by
the Committee.

10. PERFORMANCE-BASED COMPENSATION

To the extent that Section 162(m) of the Code is applicable, the Committee
shall have discretion to determine the extent, if any, that Awards conferred
under the Plan to Covered Employees, as such term is defined in Section 14(b)
herein, shall comply with the qualified performance-based compensation exception
to employer compensation deductions set forth in Section 162(m) of the Code.

11. SECTION 16(B) COMPLIANCE

It is the general intent of the Corporation that transactions under the
Plan which are subject to Section 16 of the Exchange Act shall comply with Rule
16b-3 under the Exchange Act. Notwithstanding anything in the Plan to the
contrary, the Committee, in its sole and absolute discretion, may bifurcate the
Plan so as to restrict, limit or condition the use of any provision of the Plan
to participants who are officers or directors subject to Section 16 of the
Exchange Act without so restricting, limiting or conditioning the Plan with
respect to other participants.

12. NO RIGHT OR OBLIGATION OF CONTINUED EMPLOYMENT

Nothing contained in the Plan shall require the Corporation or a related
corporation to continue the employment or service of a Participant, nor shall
any such individual be required to remain in the employment or service of the
Corporation or a related corporation. Except as otherwise provided in the Plan,
Awards granted under the Plan to employees of the Corporation shall not be
affected by any change in the duties or position of the participant, as long as
such individual remains an employee of, or in service to, the Corporation or a
related corporation.

13. UNFUNDED PLAN; RETIREMENT PLANS

(a) Neither a Participant nor any other person shall, by reason of the
Plan, acquire any right in or title to any assets, funds or property of the
Corporation or any related corporation including, without limitation, any
specific funds, assets or other property which the Corporation or any related
corporation, in their discretion, may set aside in anticipation of a liability
under the Plan. A participant shall have only a contractual right to the Common
Stock or amounts, if any, payable under the Plan, unsecured by any assets of the
Corporation or any related corporation. Nothing contained in the Plan shall
constitute a guarantee that the assets of such corporations shall be sufficient
to pay any benefits to any person.

(b) In no event shall any amounts accrued, distributable or payable under
the Plan be treated as compensation for the purpose of determining the amount of
contributions or benefits to which any person shall be entitled under any
retirement plan sponsored by the Corporation or a related corporation that is
intended to be a qualified plan within the meaning of Section 401(a) of the
Code.

14. CERTAIN DEFINITIONS

For purposes of the Plan, the following terms shall have the meaning
indicated:

(a) "Agreement" means any written agreement or agreements between the
Corporation and the recipient of an Award pursuant to the Plan relating to
the terms, conditions and restrictions of Options, SARs, Restricted Awards
and any other Awards conferred herein.

(b) "Covered Employee" shall have the meaning given the term in
Section 162(m) of the Code or the regulations thereunder.

(c) "Disability" shall mean the inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death, or which has lasted or
can be expected to last for a continuous period of not less than twelve
months.

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<PAGE> 32

(d) "Parent" or "parent corporation" shall mean any corporation (other
than the Corporation) in an unbroken chain of corporations ending with the
Corporation if each corporation other than the Corporation owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in another corporation in the chain.

(e) "Predecessor" or "predecessor corporation" means a corporation
which was a party to a transaction described in Section 424(a) of the Code
(or which would be so described if a substitution or assumption under that
Section had occurred) with the Corporation, or a corporation which is a
parent or subsidiary of the Corporation, or a predecessor of any such
corporation.

(f) "Related corporation" means any parent, subsidiary or predecessor
of the Corporation.

(g) "Restricted Stock" shall mean shares of Common Stock which are
subject to Restricted Awards payable in shares, the vesting of which is
subject to restrictions set forth in the Plan or the agreement relating to
such Award.

(h) "Subsidiary" or "subsidiary corporation" means any corporation
(other than the Corporation) in an unbroken chain of corporations beginning
with the Corporation if each corporation other than the last corporation in
the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in another corporation in the chain.

15. AMENDMENT AND TERMINATION OF THE PLAN

The Plan may be amended or terminated at any time by the Board of Directors
of the Corporation; provided, that (i) such amendment or termination shall not,
without the consent of the recipient of an Award, adversely affect the rights of
the recipient with respect to an outstanding Award; and (ii) approval of an
amendment by the stockholders of the Corporation shall be required in the event
such stockholder approval of any such amendment is required by applicable law,
rule or regulation.

16. RESTRICTIONS ON SHARES

The Committee may impose such restrictions on any shares representing
Awards hereunder as it may deem advisable, including without limitation
restrictions under the Securities Act of 1933, as amended (the "Securities
Act"), under the requirements of any stock exchange or similar organization and
under any blue sky or state securities laws applicable to such shares.
Notwithstanding any other Plan provision to the contrary, the Corporation shall
not be obligated to issue or deliver shares of Common Stock under the Plan or
make any other distribution of benefits under the Plan, or take any other
action, unless such delivery, distribution or action is in compliance with all
applicable laws, rules and regulations (including but not limited to the
requirements of the Securities Act). The Corporation may cause a restrictive
legend to be placed on any certificate issued pursuant to an Award hereunder in
such form as may be prescribed from time to time by applicable laws and
regulations or as may be advised by legal counsel.

17. APPLICABLE LAW

The Plan shall be governed by and construed in accordance with the laws of
the State of Delaware.

18. STOCKHOLDER APPROVAL

The Plan is subject to approval by the stockholders of the Corporation,
which approval must occur, if at all, within 12 months of the effective date of
the Plan. Awards granted prior to such stockholder approval shall be conditioned
upon and shall be effective only upon approval of the Plan by such stockholders
on or before such date.

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19. CHANGE OF CONTROL

(a) Notwithstanding any other provision of the Plan to the contrary, in the
event of a Change of Control (as defined in Section 19(b) herein):

(i) All Options and SARs outstanding as of the date of such Change of
Control shall become fully exercisable, whether or not then otherwise
exercisable.

(ii) Any restrictions including but not limited to the Restriction
Period applicable to any Restricted Award shall be deemed to have expired,
and such Restricted Awards shall become fully vested and payable to the
fullest extent of the original grant of the applicable Award.

(iii) Notwithstanding the foregoing, in the event of a merger, share
exchange, reorganization or other business combination affecting the
Corporation or a related corporation, the Committee may, in its sole and
absolute discretion, determine that any or all Awards granted pursuant to
the Plan shall not vest or become exercisable on an accelerated basis, if
the Board of Directors of the surviving or acquiring corporation, as the
case may be, shall have taken such action, including but not limited to the
assumption of Awards granted under the Plan or the grant of substitute
awards (in either case, with substantially similar terms as Awards granted
under the Plan), as in the opinion of the Committee is equitable or
appropriate to protect the rights and interests of participants under the
Plan. For the purposes herein, the Committee authorized to make the
determinations provided for in this Section 19(a)(iii) shall be appointed
by the Board of Directors, two-thirds of the members of which shall have
been directors of the Corporation prior to the merger, share exchange,
reorganization or other business combinations affecting the Corporation or
a related corporation.

(b) For the purposes herein, unless an individual agreement provides
otherwise, a "Change of Control" shall be deemed to have occurred on the
earliest of the following dates:

(i) The date any entity or person shall have become the beneficial
owner of, or shall have obtained voting control over, thirty percent (30%)
or more of the outstanding Common Stock of the Corporation;

(ii) The date the stockholders of the Corporation approve a definitive
agreement (A) to merge or consolidate the Corporation with or into another
corporation, in which the Corporation is not the continuing or surviving
corporation or pursuant to which any shares of Common Stock of the
Corporation would be converted into cash, securities or other property of
another corporation, other than a merger or consolidation of the
Corporation in which holders of Common Stock immediately prior to the
merger or consolidation have the same proportionate ownership of Common
Stock of the surviving corporation immediately after the merger as
immediately before, or (B) to sell or otherwise dispose of all or
substantially all the assets of the Corporation; or

(iii) The date there shall have been a change in a majority of the
Board of Directors of the Corporation within a 12-month period unless the
nomination for election by the Corporation's stockholders of each new
director was approved by the vote of two-thirds of the directors then still
in office who were in office at the beginning of the 12-month period.

(For purposes herein, the term "person" shall mean any individual,
corporation, partnership, group, association or other person, as such term is
defined in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, other than
the Corporation, a subsidiary of the Corporation or any employee benefit plan(s)
sponsored or maintained by the Corporation or any subsidiary thereof, and the
term "beneficial owner" shall have the meaning given the term in Rule 13d-3
under the Exchange Act.)

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<PAGE> 34

IN WITNESS WHEREOF, this 1998 Stock Incentive Plan of Hayes Corporation,
is, by the authority of the Board of Directors of the Corporation, executed in
behalf of the Corporation, the day of , 1998.

HAYES CORPORATION

Dennis C. Hayes
Chairman

ATTEST:

- --------------------------------------
James A. Jones
Secretary

[Corporate Seal]

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<PAGE> 35

EXHIBIT B

HAYES CORPORATION

EMPLOYEE STOCK PURCHASE PLAN

1. PURPOSE

The purpose of the Hayes Corporation Employee Stock Purchase Plan (the
"Plan") is to give eligible employees of Hayes Corporation, a Delaware
corporation (the "Corporation"), and its Subsidiaries an opportunity to acquire
shares of the common stock of the Corporation (the "Common Stock") and to
continue to promote the Corporation's best interests and enhance its long-term
performance. This purpose will be carried through the granting of options
("options") to purchase shares of the Corporation's Common Stock through payroll
deductions or other means permitted under the Plan. The Plan is intended to
comply with the requirements of Section 423 of the Internal Revenue Code of
1986, as amended (the "Code"), applicable to employee stock purchase plans. The
provisions of the Plan shall be construed so as to comply with the requirements
of Section 423 of the Code.

2. CERTAIN DEFINITIONS

In addition to terms defined elsewhere in the Plan, the following words and
phrases shall have the meanings given below unless a different meaning is
required by the context:

(a) "Board" means the Board of Directors of the Corporation.

(b) "Code" means the Internal Revenue Code of 1986, as amended.

(c) "Committee" means the Compensation Committee of the Board, which
has authority to administer the Plan pursuant to Section 4 herein.

(d) "Common Stock" means shares of the common stock of the
Corporation.

(e) "Corporation" means Hayes Corporation, a Delaware corporation.

(f) "Eligible Employee" means any employee of the Corporation or a
Subsidiary except for (i) any employee whose customary employment is 20
hours or less per week, or (ii) any employee whose customary employment is
for not more than five months in any calendar year. For purposes of the
Plan, the employment relationship shall be treated as continuing intact
while the individual is on sick leave or other leave of absence approved by
the Corporation; provided that, where the period of leave exceeds 90 days
and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.

(g) "Fair Market Value" of the Common Stock as of the applicable Offer
Date shall be determined in good faith by the Committee in accordance with
the following provisions:

(i) if the shares of Common Stock are listed for trading on the New
York Stock Exchange or the American Stock Exchange, the Fair Market
Value shall be the closing sales price of the shares on the New York
Stock Exchange or the American Stock Exchange (as applicable) on the
date immediately preceding the date the option is granted, or, if there
is no transaction on such date, then on the trading date nearest
preceding the date the option is granted for which closing price
information is available, and, provided further, if the shares are
quoted on the Nasdaq National Market or the Nasdaq SmallCap Market of
the Nasdaq Stock Market but are not listed for trading on the New York
Stock Exchange or the American Stock Exchange, the Fair Market Value
shall be the closing sales price for such stock (or the closing bid, if
no sales were reported) as quoted on such system on the date immediately
preceding the date the option is granted for which such information is
available; or

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(ii) if the shares of Common Stock are not listed or reported in
any of the foregoing, then Fair Market Value shall be determined by the
Committee in any other manner consistent with the Code and accompanying
regulations.

Notwithstanding any provision of the Plan to the contrary, no
determination made with respect to the Fair Market Value of Common Stock
subject to an option shall be inconsistent with Section 423 of the Code
or regulations thereunder.

(h) "Offer Date" means the date of grant of an option pursuant to the
Plan. The Offer Date shall be the first date of each Purchase Period,
commencing with the Purchase Period that commences on July 5, 1998.

(i) "Option" means an option granted hereunder which will entitle a
participant to purchase shares of Common Stock in accordance with the terms
of the Plan.

(j) "Option price" means the price per share of Common Stock subject
to an option, as determined in accordance with Section 8(b).

(k) "Participant" means an Eligible Employee who is a participant in
the Plan.

(l) "Plan" means the Hayes Corporation Employee Stock Purchase Plan,
as it may be hereafter amended.

(m) "Purchase Date" means the date of exercise of an option granted
under the Plan. The Purchase Date shall be the last day of each Purchase
Period, commencing with the Purchase Period that terminates on January 3,
1999.

(n) "Purchase Period" means each quarterly period during which an
offering to purchase Common Stock is made to Eligible Employees pursuant to
the Plan, coinciding with each of the fiscal quarters of the Corporation's
fiscal year. The first date of each Purchase Period in a fiscal year shall
be the first date of the corresponding fiscal quarter, and the last date of
each Purchase Period in a fiscal year shall be the last date of the
corresponding fiscal year. Notwithstanding the foregoing, the first
Purchase Period after the effective date of the Plan shall begin on July 5,
1998 and end on October 3, 1998. The Committee shall have the power to
change the duration of Purchase Periods (including the commencement date
thereof) with respect to future offerings without stockholder approval if
such change is announced at least five (5) days prior to the scheduled
beginning of the first Purchase Period to be affected thereafter.

(o) "Subsidiary" means any present or future corporation which (i)
would be a "subsidiary corporation" of the Corporation as that term is
defined in Section 424 of the Code and (ii) is at any time designated as a
corporation whose employees may participate in the Plan.

3. EFFECTIVE DATE

The Effective Date of the Plan shall be May 8, 1998. The first Purchase
Period during which offers to purchase Common Stock will be made shall commence
on July 5, 1998. The Plan shall have a term of 10 years unless sooner terminated
in accordance with Section 16 herein.

4. ADMINISTRATION

(a) The Plan shall be administered by the Board or, upon its delegation, by
the Committee. References to the Committee shall include the Board if it is
acting in its administrative capacity with respect to the Plan.

(b) Any action of the Committee may be taken by a written instrument signed
by all of the members of the Committee and any action so taken by written
consent shall be as fully effective as if it had been taken by a majority of the
members at a meeting duly held and called. Subject to the provisions of the
Plan, the Committee shall have full and final authority, in its discretion, to
take any action with respect to the Plan, including, without limitation, the
following: (i) to establish, amend and rescind rules and regulations for the
administration of the Plan; (ii) to prescribe the form(s) of any agreements or
other written instruments used in connection with the Plan; (iii) to determine
the terms and provisions of the options granted hereunder; and
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(iv) to construe and interpret the Plan, the options, the rules and regulations,
and the agreements or other written instruments, and to make all other
determinations necessary or advisable for the administration of the Plan. The
determinations of the Committee on all matters regarding the Plan shall be
conclusive. The Committee may appoint one or more agents to assist in the
administration of the Plan.

5. SHARES SUBJECT TO PLAN

The aggregate number of shares of Common Stock which may be purchased under
the Plan shall not exceed 1,000,000 shares, subject to adjustment pursuant to
Section 13 herein. Shares of Common Stock granted pursuant to the Plan shall be
authorized but unissued shares, treasury shares or shares purchased on the open
market. The Corporation hereby reserves sufficient authorized shares of Common
Stock to provide for the exercise of options granted hereunder. In the event
that any option granted under the Plan expires unexercised or is terminated,
surrendered or canceled without being exercised, in whole or in part, for any
reason, the number of shares of Common Stock subject to such option shall again
be available for grant as an option and shall not reduce the aggregate number of
shares of Common Stock available for the grant of options as set forth herein.
If, on a given Purchase Date, the number of shares with respect to which options
are to be exercised exceeds the number of shares then available under the Plan,
the Corporation shall make a pro rata allocation of the shares remaining
available for purchase in as uniform a manner as shall be practicable and as it
shall determine to be equitable.

6. ELIGIBILITY

(a) Initial Eligibility. Any Eligible Employee who shall have completed 90
days' employment and shall be employed by the Corporation on any given Offer
Date for a Purchase Period shall be eligible to be a participant during such
Purchase Period.

(b) Certain Limitations. Any provisions of the Plan to the contrary
notwithstanding:

(i) No Eligible Employee shall be granted an option under the Plan to
the extent that, immediately after the option was granted, the individual
would own stock or hold outstanding options to purchase stock (or both)
possessing 5% or more of the total combined voting power or value of all
classes of stock of the Corporation or of any parent or subsidiary of the
Corporation. For purposes of this Section 6(b)(i), stock ownership of an
individual shall be determined under the rules of Section 424(d) of the
Code, and stock which the employee may purchase under outstanding options
shall be treated as stock owned by the employee.

(ii) No Eligible Employee shall be granted an option under the Plan to
the extent that his rights to purchase stock under all employee stock
purchase plans (as defined in Section 423 of the Code) of the Corporation
and any parent or Subsidiary of the Corporation would accrue at a rate
which exceeds $25,000 of fair market value of such stock (determined at the
time of the grant of such option) for each calendar year in which such
option is outstanding at any time. Any option granted under the Plan shall
be deemed to be modified to the extent necessary to satisfy this Section
6(b)(ii).

7. PARTICIPATION; PAYROLL DEDUCTIONS

(a) Commencement of Participation. An Eligible Employee shall become a
participant by completing a subscription agreement authorizing payroll
deductions on the form provided by the Corporation and filing it with the
Corporation prior to the Offer Date for the applicable Purchase Period.
Following the filing of a valid subscription agreement, payroll deductions for a
participant shall commence on the first payroll period which occurs on or after
the Offer Date for the applicable Purchase Period and shall continue for
successive Purchase Periods during which the participant is eligible to
participate in the Plan, unless modified as provided in Section 7(d), or
withdrawn as provided in Section 10 herein.

B-3
<PAGE> 38

(b) Amount of Payroll Deduction; Determination of Compensation. At the
time a participant files his subscription agreement authorizing payroll
deductions, he shall elect to have payroll deductions made on each payday that
he is a participant during a Purchase Period at a rate of not less than 1% nor
more than 15% of his compensation. For the purposes herein, a participant's
"compensation" during any Purchase Period means his base salary or regular rate
of compensation (excluding commissions, bonuses, incentive compensation,
overtime, employee benefits and similar elements of compensation) determined as
of the first day of each Purchase Period. In the case of an hourly employee, an
Eligible Employee's compensation during a pay period shall be determined by
multiplying such employee's hourly rate of pay in effect on the date of the
payroll deduction by the number of hours of work for such employee during such
period. Such compensation rates shall be determined by the Committee in a
nondiscriminatory manner consistent with the provision of Section 423 of the
Code and the regulations thereunder.

(c) Participant's Account. All payroll deductions made for a participant
shall be credited to his account under the Plan and shall be withheld in whole
percentages only.

(d) Changes in Payroll Deductions. A participant may discontinue his
participation in the Plan as provided in Sections 10 and 11, but no other change
may be made during a Purchase Period and, specifically, a participant may not
alter the amount of his payroll deductions for that Purchase Period.

(e) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 6(b) herein, a participant's payroll
deductions may be decreased to zero percent (0%) at any time during a Purchase
Period. Payroll deductions shall recommence at the rate provided in such
participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant pursuant to Section 10 herein.

(f) Participation During Leave of Absence. If a participant goes on a
leave of absence, such participant shall have the right to elect: (i) to
withdraw the balance in his account pursuant to Section 10; (ii) to discontinue
contributions to the Plan but remain a participant in the Plan; or (iii) to
remain a participant in the Plan during such leave of absence, authorizing
deductions to be made from payments by the Corporation to the participant during
such leave of absence and undertaking to make cash payments to the Plan at the
end of each payroll period to the extent that amounts payable by the Corporation
to such participant are insufficient to meet such participant's authorized
payroll deductions.

8. GRANT OF OPTIONS

(a) Number of Option Shares. On the Offer Date of each Purchase Period, a
participant shall be granted an option to purchase on the Purchase Date of such
Purchase Period (at the applicable option price) such number of shares of Common
Stock as is determined by dividing the amount of the participant's payroll
deductions accumulated on the Purchase Date and retained in the participant's
account as of the Purchase Date by the applicable option price (as determined in
accordance with Section 8(b) herein); provided that such purchase shall be
subject to the limitations set forth in Sections 6(b) herein. Exercise of the
option shall occur as provided in Section 9 herein, unless the participant has
withdrawn pursuant to Section 10 herein or terminated employment pursuant to
Section 11 herein.

(b) Option Price. The option price per share of Common Stock purchased
with payroll deductions made during such a Purchase Period for a participant
shall be 85% of the Fair Market Value of a share of the Common Stock on the
Purchase Date for the Purchase Period.

9. EXERCISE OF OPTIONS

(a) Automatic Exercise. Unless a participant gives written notice of
withdrawal to the Corporation as provided in Section 10 or terminates employment
as provided in Section 11, his option for the purchase of Common Stock shall be
exercised automatically on the Purchase Date applicable to such Purchase Period,
and the maximum number of whole shares of Common Stock subject to the option
shall be purchased for the participant at the applicable option price with the
accumulated payroll deductions in his account at that time (subject to the
provisions of Section 6(b) herein).

B-4
<PAGE> 39

(b) Termination of Option. An option granted during any Purchase Period
shall expire on the last day of the Purchase Period, except as otherwise
provided in Sections 10 and 11.

(c) Fractional Shares. Fractional shares will not be issued under the
Plan. Any excess payroll deductions in a participant's account which are not
sufficient to purchase a whole share will be automatically re-invested in a
subsequent Purchase Period unless the participant withdraws his payroll
deductions pursuant to Section 10 herein or terminates employment pursuant to
Section 11 herein.

(d) Delivery of Stock. Within ten (10) business days after the Purchase
Date of each Purchase Period, the Corporation will deliver to each participant
(or his beneficiary) certificate(s) for the shares of Common Stock purchased
upon exercise of his option.

10. WITHDRAWAL

A participant may withdraw all but not less than all payroll deductions and
share certificates credited to his account during a Purchase Period at any time
prior to the applicable Purchase Date by giving written notice to the
Corporation in form acceptable to the Corporation. In the event of such
withdrawal, (i) all of the participant's payroll deductions credited to his
account will be paid to him promptly (without interest) after receipt of his
notice of withdrawal, (ii) certificates for shares held in the participant's
account shall be distributed to him, (iii) such participant's option for the
Purchase Period shall be automatically terminated, and (iv) no further payroll
deductions will be made during such Purchase Period. The Corporation may, at its
option, treat any attempt to borrow by an employee on the security of his
accumulated payroll deductions as an election to withdraw. A participant's
withdrawal during any Purchase Period will not have any effect upon his
eligibility to participate in any succeeding Purchase Period or in any similar
plan which may hereafter be adopted by the Corporation. Notwithstanding the
foregoing, however, if a participant withdraws during a Purchase Period, payroll
deductions shall not resume at the beginning of a succeeding Purchase Period
unless the participant delivers to the Corporation a new subscription agreement
and otherwise complies with the terms of the Plan.

11. TERMINATION OF EMPLOYMENT

Upon termination of a participant's employment for any reason (including
death), or in the event that a participant ceases to be an Eligible Employee, he
shall be deemed to have withdrawn from the Plan. In such event, all payroll
deductions credited to his account during the Purchase Period (without interest)
but not yet used to exercise an option shall be delivered to him, or, in the
case of his death, to a beneficiary duly designated on a form acceptable to the
Committee pursuant to Section 17 herein. Any unexercised options granted to a
participant during such Purchase Period shall be deemed to have expired on the
date of the participant's termination of employment (unless terminated earlier
pursuant to Sections 9(b) or 10 herein).

12. TRANSFERABILITY

Neither payroll deductions credited to a participant's account nor any
option (or rights attendant to an option) granted pursuant to the Plan may be
transferred, assigned, pledged, or hypothecated (whether by operation of law or
otherwise), except as provided by will or the applicable laws of descent or
distribution. No option shall be subject to execution, attachment or similar
process. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of an option, or levy of attachment or similar process upon the
option not specifically permitted herein, shall be null and void and without
effect, except that the Corporation may treat such act as an election to
withdraw funds during a Purchase Period in accordance with Section 10 hereof.
During a participant's lifetime, his option(s) may be exercised only by him.

13. DILUTION AND OTHER ADJUSTMENTS

(a) General. If there is any change in the outstanding shares of Common
Stock of the Corporation as a result of a merger, consolidation, reorganization,
stock dividend, stock split distributable in shares, or other change in the
capital stock structure of the Corporation, the Committee shall make such
adjustments to options (including but not limited to the option price and the
number of shares of Common Stock covered by
B-5
<PAGE> 40

each unexercised option), to the number of shares reserved for issuance under
the Plan, and to any provisions of this Plan as the Committee deems equitable to
prevent dilution or enlargement of options or otherwise advisable to reflect
such change.

(b) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Corporation, or the merger of the
Corporation with or into another corporation, each outstanding option shall be
assumed or an equivalent option substituted (in either case under terms
substantially similar to the terms of the Plan) by the successor corporation or
a parent or subsidiary of the successor corporation. In the event that the
successor corporation fails to agree to assume or substitute the option, the
Purchase Period then in progress shall be shortened by setting a new Purchase
Date (the "New Purchase Date") and the Purchase Period then in progress shall
end on the New Purchase Date. The New Purchase Date shall be before the date of
the Corporation's proposed sale or merger. The Corporation shall notify each
participant in writing, at least ten (10) business days prior to the New
Purchase Date, that the Purchase Date for the participant's option has been
changed to the New Purchase Date and that the participant's option shall be
exercised automatically on the New Purchase Date, unless prior to such date the
participant has withdrawn from the Purchase Period as provided in Section 10
hereof.

14. STOCKHOLDER APPROVAL OF ADOPTION OF PLAN

The Plan is subject to the approval of the Plan by the shareholders of the
Corporation in accordance with applicable law within 12 months of the date of
adoption of the Plan by the Board. The Plan shall be null and void and of no
effect if the foregoing condition is not fulfilled.

15. LIMITATIONS ON OPTIONS

Notwithstanding any other provisions of the Plan:

(a) The Corporation intends that options granted and Common Stock
issued under the Plan shall be treated for all purposes as granted and
issued under an employee stock purchase plan within the meaning of Section
423 of the Code and regulations issued thereunder. Any provisions required
to be included in the Plan under Section 423 and regulations issued
thereunder are hereby included as fully as though set forth in the Plan.

(b) All employees shall have the same rights and privileges under the
Plan, except that the amount of Common Stock which may be purchased by any
employee under options granted pursuant to the Plan shall bear a uniform
relationship to the compensation of employees. All rules and determinations
of the Committee in the administration of the Plan shall be uniformly and
consistently applied to all persons in similar circumstances.

16. AMENDMENT AND TERMINATION OF THE PLAN

The Board may at any time and from time to time modify, amend, suspend or
terminate the Plan or any option granted hereunder, except that (i) stockholder
approval shall be required of any amendment to the extent required under Section
423 of the Code or other applicable law or rule; and (ii) no amendment may
materially and adversely affect any option outstanding at the time of the
amendment without the consent of the holder thereof. The Plan shall terminate in
any event when the maximum number of shares of Common Stock to be sold under the
Plan (as provided in Section 5) has been purchased.

17. DESIGNATION OF BENEFICIARY

The Committee, in its sole discretion, may authorize participants to
designate a person or persons as each such participant's beneficiary, which
beneficiary shall be entitled to the rights of the participant in the event of
the participant's death to which the participant would otherwise be entitled.
The Committee shall have sole discretion to approve the form or forms of such
beneficiary designations, to determine whether such beneficiary designations
will be accepted, and to interpret such beneficiary designations.

B-6
<PAGE> 41

18. LEGAL AND OTHER REQUIREMENTS

The obligations of the Corporation to issue, deliver and transfer shares of
Common Stock subject to the Plan shall be subject to all applicable laws,
regulations, rules and approvals, including, but not by way of limitation, the
effectiveness of a registration statement under the Securities Act of 1933, as
amended, if deemed necessary or appropriate by the Corporation. Certificates for
shares of Common Stock issued hereunder may be legended as the Corporation shall
deem appropriate.

19. INTEREST

No interest shall accrue on the payroll deductions of a participant in the
Plan.

20. NO OBLIGATION TO EXERCISE OPTIONS

The granting of an option shall impose no obligation upon a participant to
exercise such option.

21. USE OF FUNDS

The proceeds received by the Corporation from the sale of Common Stock
pursuant to options will be used for general corporate purposes, and the
Corporation shall not be obligated to segregate such payroll deductions.

22. WITHHOLDING TAXES

Upon the exercise of any option under the Plan, in whole or in part, or at
the time some or all of the Common Stock is disposed of, a participant must make
adequate provision for the Corporation's federal, state or other tax withholding
obligations, if any, which arise from the exercise of the option or the
disposition of the Common Stock. The Corporation shall have the right to require
the participant to remit to the Corporation, or to withhold from the participant
(or both) compensation in an amount sufficient to satisfy all federal, state and
local withholding tax requirements prior to the delivery or transfer of any
certificate or certificates for shares of Common Stock.

23. RIGHT TO TERMINATE EMPLOYMENT

Nothing in the Plan or any agreement entered into pursuant to the Plan
shall confer upon an employee the right to continue in the employment of the
Corporation or any Subsidiary or affect any right which the Corporation or any
Subsidiary may have to terminate the employment of such employee.

24. RIGHTS AS A SHAREHOLDER

No participant or other person shall have any right as a stockholder unless
and until certificates for shares of Common Stock are issued to him.

25. NOTICES

All notices or other communications by a participant to the Corporation
under or in connection with the Plan shall be deemed to have been duly given
when received in the form specified by the Corporation at the location, or by
the person, designated by the Corporation for the receipt thereof.

26. APPLICABLE LAW

All questions pertaining to the validity, construction and administration
of the Plan and options granted hereunder shall be determined in conformity with
the laws of Delaware, to the extent not inconsistent with Section 423 of the
Code and regulations thereunder.

B-7
<PAGE> 42

27. ELIMINATION OF FRACTIONAL SHARES

If under any provision of the Plan which requires a computation of the
number of shares of Common Stock subject to an option, the number so computed is
not a whole number of shares of Common Stock, such number of shares of Common
Stock shall be rounded down to the next whole number.

IN WITNESS WHEREOF, this Hayes Corporation Employee Stock Purchase Plan has
been executed in behalf of the Corporation effective as of the day of May,
1998

HAYES CORPORATION

Dennis C. Hayes, Chairman

Attest:

- --------------------------------------
James A. Jones, Secretary

[Corporate Seal]

B-8
<PAGE> 43
APPENDIX

HAYES CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby acknowledges receipt of the Notice of the Annual
Meeting of Stockholders and Proxy Statement and does hereby appoint Dennis C.
Hayes and Ronald A. Howard and either of them with full power of substitution,
as proxies of the undersigned to represent the undersigned and to vote all
shares of HAYES CORPORATION ("Hayes") common stock which the undersigned would
be entitled to vote if personally present at the Annual Meeting of Stockholders
of Hayes, to be held at 5854 Peachtree Corners East, Norcross, Georgia 30092, at
10:00 o'clock a.m. local time, on May 7, 1998, and at any adjournment thereof.

PROPOSAL 1

Proposal to: Elect S.P. Quek and M.C. Tam as Class II directors to serve for
a three-year term until their successors are elected.

<TABLE>
<S> <C> <C>
[ ] FOR (TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, [ ] WITHHELD
STRIKE THEIR NAME FROM THE LIST ABOVE)
</TABLE>

PROPOSAL 2

Proposal to: Approve the Hayes Corporation 1998 Stock Incentive Plan and
2,000,000 shares of common stock reserved for issuance thereunder.

<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>

PROPOSAL 3

Proposal to: Approve the Hayes Corporation Employee Stock Purchase Plan and
1,000,000 shares of common stock reserved for issuance thereunder.

<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>

PROPOSAL 4

Proposal to: Ratify the appointment of Coopers & Lybrand LLP as independent
auditors for Hayes for the fiscal year ending January 2, 1999.

<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>

In their discretion, the Proxies are authorized to vote on such other
business as may properly come before the meeting or any adjournment(s),
including adjourning the Annual Meeting to permit, if necessary, further
solicitation of proxies. This Proxy may be revoked at any time prior to voting
hereof.

This proxy, when properly executed, duly returned and not revoked will be
voted. It will be voted in accordance with the directions given by the
undersigned stockholder. If no direction is made, it will be voted in favor of
the Proposals listed on this Proxy.

Dated: , 1998
----------------------

------------------------------
Signature(s)

------------------------------

NOTE: Joint owners should each
sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If the
signatory is a corporation,
sign the full corporate name
by a duly authorized officer.