<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
HATHAWAY CORPORATION
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/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:
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</TABLE>
<PAGE>
[LOGO]
September 21, 2000
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Hathaway Corporation to be held on Thursday, October 26, 2000, commencing at
2:00 p.m. (Mountain Time) at the Lone Tree Country Club, 9808 Sunningdale Blvd.,
Littleton, Colorado. The Board of Directors and management look forward to
personally greeting those shareholders able to attend the meeting.
At the Annual Meeting you will be asked to consider and vote on the election
of five directors to serve until the next annual meeting and on approval of a
stock incentive plan and an employee stock purchase plan.
Your Board of Directors unanimously recommends a vote FOR the election of
directors nominated by the Board, FOR the approval of the Company's Year 2000
Stock Incentive Plan and FOR the approval of the Company's 2001 Employee Stock
Purchase Plan.
Regardless of the number of shares you own and whether or not you plan to
attend, it is important that your shares are represented and voted at the Annual
Meeting. Accordingly, you are requested to sign, date and mail the enclosed
proxy at your earliest convenience.
On behalf of the Board of Directors, thank you for your cooperation and
support.
Sincerely,
/s/ Richard D. Smith
Richard D. Smith
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
HATHAWAY CORPORATION
8228 PARK MEADOWS DRIVE
LITTLETON, COLORADO 80124
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 26, 2000
------------------------
To the shareholders of
HATHAWAY CORPORATION:
You are hereby notified that the annual meeting of shareholders (the "Annual
Meeting") of Hathaway Corporation, a Colorado corporation (the "Company"), will
be held on October 26, 2000 at 2:00 p.m. (Mountain Time) at the Lone Tree
Country Club, 9808 Sunningdale Blvd., Littleton, Colorado, for the following
purposes:
1. to elect five persons to the Company's Board of Directors to serve until
the next annual meeting of shareholders or until their successors are
duly elected and have qualified;
2. to consider and act upon the approval of the Company's Year 2000 Stock
Incentive Plan for key employees and directors.
3. to consider and act upon the approval of the Company's 2001 Employee
Stock Purchase Plan which will be available to all employees of the
Company and subsidiaries.
4. to consider and act upon such other business as may properly be
presented for action at the Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on August 31, 2000 as
the record date (the "Record Date") for the Annual Meeting. Only shareholders of
record at the close of business on the Record Date will be entitled to notice of
and to vote at the Annual Meeting. The Company's transfer books will not be
closed.
The Board of Directors of the Company extends a cordial invitation to all
shareholders to attend the Annual Meeting, as it is important that your shares
be represented at the meeting. Even if you plan to attend the Annual Meeting,
you are strongly encouraged to mark, date, sign and mail the enclosed proxy in
the return envelope provided as promptly as possible.
You may revoke your proxy by following the procedures set forth in the
accompanying proxy statement. If you are unable to attend, your written proxy
will assure that your vote is counted.
By Order of the Board of Directors
/s/ Susan M. Chiarmonte
Susan M. Chiarmonte
SECRETARY
Denver, Colorado
September 21, 2000
<PAGE>
HATHAWAY CORPORATION
8228 PARK MEADOWS DRIVE
LITTLETON, COLORADO 80124
------------------------
PROXY STATEMENT
---------------------
This proxy statement and the accompanying proxy card are being furnished to
the holders of common stock, no par value ("Common Stock"), of Hathaway
Corporation, a Colorado corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company to be voted at
the annual meeting of shareholders (the "Annual Meeting") to be held on
October 26, 2000 at 2:00 p.m. (Mountain Time) at the Lone Tree Country Club,
9808 Sunningdale Blvd., Littleton, Colorado. The Annual Meeting is called for
the purposes set forth in the accompanying notice of annual meeting of
shareholders. This proxy statement and the accompanying proxy card were first
mailed to shareholders on or about September 21, 2000.
QUORUM AND VOTING RIGHTS
The presence, in person or by proxy, of the holders of a majority of the
votes entitled to be cast on the matter presented is necessary to constitute a
quorum at the Annual Meeting. Broker non-votes are shares held in street name
for which the broker indicates that instructions have not been received from the
beneficial owners or other persons entitled to vote, and the broker does not
have discretionary voting authority. Broker non-votes and abstentions will be
counted as shares present in determining whether a quorum is present. The
affirmative vote of the holders of two-thirds of the shares of Common Stock
entitled to vote at the Annual Meeting is required for the election of directors
(Item 1). Since election of directors requires the approving vote to be measured
against all shares of Common Stock entitled to vote, withholding authority
(including broker non-votes) from that vote is the equivalent of a vote against
election of nominated directors. Approval of Items 2 and 3 requires the
affirmative vote of a majority of the votes cast at the meeting. Broker
non-votes and abstentions will not be counted as affirmative or negative in
determining the number of shares voted on Items 2 and 3. The record date for
determination of shareholders entitled to notice of, and to vote at, the Annual
Meeting is the close of business on August 31, 2000 (the Record Date). As of the
close of business on the Record Date, there were 4,475,601 shares of Common
Stock outstanding, each of which is entitled to one vote at the Annual Meeting.
All shares of Common Stock represented by properly executed proxies will,
unless such proxies have been revoked previously, be voted in accordance with
the instructions indicated in such proxies. If no such instructions are
indicated, such shares will be voted FOR the election of the five nominees for
director (Item 1), FOR the approval of the Company's Year 2000 Stock Incentive
Plan (Item 2), FOR the approval of the Company's 2001 Employee Stock Purchase
Plan (Item 3), and in the discretion of the proxy holders on any other matter
that may properly come before the Annual Meeting (Item 4). Any holder of Common
Stock has the unconditional right to revoke his or her proxy at any time prior
to the voting thereof at the Annual Meeting by filing with the Secretary of the
Company written revocation of his or her proxy prior to the voting thereof,
giving a duly executed proxy bearing a later date, or voting in person at the
Annual Meeting. If a shareholder's shares are held by a nominee and the
shareholder seeks to vote shares in person at the Annual Meeting, the
shareholder must bring to the Annual Meeting a written statement from the
nominee confirming the shareholder's beneficial ownership of a stated number of
shares and that such shares have not been voted by the nominee. Attendance by a
shareholder at the Annual Meeting will not in itself revoke his or her proxy.
Solicitation of proxies for use at the Annual Meeting may be made in person
or by mail, telephone or telegram, by directors, officers and regular employees
of the Company. Such persons will receive no special compensation for any
solicitation activities. In addition, the Company may retain the services of
<PAGE>
D.F. King & Co., Inc. to aid in the solicitation of proxies in person, by mail,
telephone or telegram. If retained, the costs are not expected to exceed $6,500
plus expenses. The Company will request banking institutions, brokerage firms,
custodians, trustees, nominees and fiduciaries to forward solicitation materials
to the beneficial owners of Common Stock held of record by such entities, and
the Company will, upon the request of such record holders, reimburse reasonable
forwarding expenses. The costs of preparing, printing, assembling and mailing
the proxy statement, proxy card and all materials used in the solicitation of
proxies to shareholders of the Company, and all clerical and other expenses of
such solicitation, will be borne by the Company.
ITEM 1: ELECTION OF DIRECTORS
The Company's articles of incorporation and bylaws provide for a board
consisting of not less than three and not more than six persons, as such number
is determined by the Board of Directors. The board has determined that the board
will consist of five directors, all of whom will be elected annually to serve
until the next annual meeting of shareholders and until their successors are
elected and qualified, or until the director resigns or is otherwise removed.
In February 2000, Chester H. Clarridge, who had served as a director of the
Company since 1989, announced his resignation effective immediately. Since the
Board of Directors has determined that the size of the board will be decreased
to five directors, no person has been nominated by the board to fill the vacancy
created by Mr. Clarridge's resignation.
All incumbent directors, with the exception of Mr. Clarridge, have been
nominated to succeed themselves as directors. The affirmative vote of the
holders of two-thirds of the shares of Common Stock entitled to vote at the
Annual Meeting is required for the election of directors. If the number of votes
required for the election of directors is not received, directors will continue
in office until the next annual meeting or until resignation or removal. Unless
authority is withheld, it is intended that the shares represented by proxy at
the Annual Meeting will be voted in favor of the five nominees named below. All
nominees have agreed to serve if elected.
If any nominee becomes unable or unwilling to serve at the time of the
Annual Meeting, the shares of Common Stock represented by proxy at the Annual
Meeting will be voted for the election of such other person as the Board of
Directors of the Company may recommend.
MANAGEMENT RECOMMENDS A VOTE "FOR" EACH NOMINEE NAMED.
NOMINEES
The following information concerning the nominees for election as directors
has been provided by the respective nominee:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- -------- ----------------------------------
<S> <C> <C>
Eugene E. Prince.................. 68 Chairman of the Board of Directors
Richard D. Smith.................. 53 President, Chief Executive
Officer, Chief Financial Officer
and Director
Delwin D. Hock.................... 65 Director
Graydon D. Hubbard................ 66 Director
George J. Pilmanis................ 62 Director
</TABLE>
Mr. Prince has served as a director of the Company since October 1975 and as
Chairman of the Board of Directors since January 1981. He served as President of
the Company from October 1975 and as Chief Executive Officer from
September 1976 until his resignation from those offices on August 13, 1998. He
retired from his employment with the Company effective August 31, 1998 but
served as a paid consultant
2
<PAGE>
through November 1999. Pursuant to his consulting agreement, as long as
Mr. Prince owns at least 10% of the issued shares of the Company, the Board of
Directors shall nominate him for election to the Board of Directors. If he is
elected, the Board of Directors will request that he be nominated for Chairman
of the Board of Directors.
Mr. Smith was appointed President and Chief Executive Officer of the Company
on August 13, 1998. He was Executive Vice President from August 1993 until
August 1998. Mr. Smith served as Vice-President of Finance from June 1983 to
August 1993. He has served as Chief Financial Officer since June 1983. From June
1983 until October 1999, Mr. Smith was the Company's Treasurer and from
January 1990 until October 1996, he was the Company's Secretary. He has served
as a director since August 1996. Pursuant to Mr. Smith's employment agreement,
as long as he is President and Chief Executive Officer of the Company and is
willing to serve, the Board of Directors will nominate him for election to the
Board.
Mr. Hock has served as a director of the Company since February 1997. He
retired from his position as Chief Executive Officer of Public Service Company
of Colorado, a gas and electric utility, in January 1996 and as Chairman of the
Board of Directors in July 1997. From September 1962 to January 1996, Mr. Hock
held various management positions at Public Service Company. He serves as a
director of J.D. Edwards & Company, RMI.NET, Inc. and on six separate entities
overseeing the operation of 34 funds in the American Century Investors fund
complex.
Mr. Hubbard has served as a director of the Company since 1991. He is a
retired certified public accountant and was a partner of Arthur Andersen LLP,
the Company's independent public accountants, in its Denver office for more than
five years prior to his retirement in November 1989. Mr. Hubbard is also an
author.
Mr. Pilmanis has served as a director of the Company since 1993. For more
than five years he has been chairman and president of Balriga International
Corp., a privately held company concerned with business development in the Far
East and Eastern Europe.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held four regular meetings and one special meeting
during the fiscal year ended June 30, 2000. Each director attended or
participated in 75% or more of the total number of meetings of the board held
during the period for which he has been a director and all committees of the
board on which such director served.
The Board of Directors has established an Audit Committee and a Compensation
Committee, each of which is composed of directors who are not employees of the
Company. No nominating committee has been established. The Board of Directors
selects the Company's nominees for election to the board. The board will
consider nominees recommended by shareholders who meet the requirements for
shareholder proposals set forth on the last page of the Proxy Statement.
The principal responsibilities of the Audit Committee are to make
recommendations to the Board of Directors concerning the selection of the firm
of independent auditors and the scope of auditing and accounting matters and to
consult with the Company's independent auditors regarding auditing and
accounting matters. The members of the Audit Committee during the fiscal year
ended June 30, 2000 were Messrs. Clarridge (through his resignation from the
board effective February 15, 2000 and as Chairman through February 7, 2000) and
Hubbard. Effective February 7, 2000, Mr. Hock was appointed to the Committee,
and as Chairman. Effective May 3, 2000, Mr. Pilimanis was appointed to the
Committee. The members of the Audit Committee are independent as defined in Rule
4200(a)(14) of the National Association of Securities Dealers Listing Standards.
The Audit Committee held one meeting during the fiscal year ended June 30, 2000.
Representatives from the Company's independent auditors make a presentation
annually to the Board of Directors after the completion of the fiscal year end
audit. At that time, the entire Board has an opportunity to discuss issues with
or ask questions of the auditors. On May 3,
3
<PAGE>
2000 the Board unanimously adopted the Company's Audit Committee Charter which
is attached to this Proxy Statement as Exhibit C.
The principal responsibility of the Compensation Committee is to make
recommendations to the Board of Directors concerning the compensation of the
Company's management employees including its executive officer. The members of
the Compensation Committee are Messrs. Pilmanis (Chairman) and Hock. The
Compensation Committee held two meetings during the fiscal year ended June 30,
2000.
EXECUTIVE OFFICER
Set forth below is information regarding the Executive Officer of the
Company.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- -------- ----------------------------------
<S> <C> <C>
Richard D. Smith.................. 53 President, Chief Executive
Officer, Chief Financial Officer
and Director
</TABLE>
Information with respect to employment experience is provided above.
INDEBTEDNESS OF MANAGEMENT
The Company encourages officers and directors to own shares in the Company
and has lent money to officers and directors for the purpose of purchasing
shares. During fiscal year 2000, Richard D. Smith, Director, President, CEO,
Treasurer and CFO had an outstanding loan in the principal amount of $133,652
which he obtained for the purpose of exercising stock options. Interest is
payable at the applicable treasury rate which was 5.25% per annum during the
first six months and 5.80 % per annum during the last six months. The largest
aggregate amount of indebtedness, including accrued interest outstanding during
fiscal year 2000 was $140,260. The amount outstanding, including accrued
interest, as of August 31, 2000, was $139,032. Mr. Smith paid accrued interest
of $6,608 on December 31, 1999. The difference between interest paid by
Mr. Smith and interest at a fair market value rate is considered compensation to
Mr. Smith. The loan is due October 31, 2001.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and notes set forth, as of the Record Date (except for
Mr. Albert for whom information is provided as of March 16, 2000), the
beneficial ownership, as defined by the regulations of the Securities and
Exchange Commission, of Common Stock by each person known to the Company to be
the beneficial owner of more than 5% of the outstanding shares of Common Stock
(based on the records of the Company's stock transfer agent or a representation
by the beneficial owner), each director and nominee, the executive officer and
all persons who serve as executive officers and directors of the Company, as a
group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS(2)
------------------------------------ ----------------------- -------------------
<S> <C> <C>
Eugene E. Prince ....................................... 918,050(3) 20.2%
7560 Panorama Drive
Boulder, Colorado 80303
Richard D. Smith ....................................... 365,410(4) 7.7%
8228 Park Meadows Drive
Littleton, Colorado 80124
Ira Albert ............................................. 274,300(5) 6.1%
1304 SW 160th Avenue, Suite 209
Ft. Lauderdale, FL 33326
Delwin D. Hock.......................................... 27,500(6) --
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS(2)
------------------------------------ ----------------------- -------------------
<S> <C> <C>
Graydon D. Hubbard...................................... 12,500(7) --
George J. Pilmanis...................................... 4,000(8) --
Directors and executive officers of the Company as a
group (5 persons)..................................... 1,327,460(9) 27.4%
</TABLE>
------------------------
(1) All beneficial ownership is sole and direct unless otherwise noted.
(2) No percent of class is shown for holdings of less than 1%.
(3) Includes 75,500 shares of Common Stock which Mr. Prince has the right to
acquire within 60 days of the Record Date upon exercise of options. Includes
88,800 shares of Common Stock held by the Prince Children's Trusts, of which
Mr. Prince's wife is trustee and as to which Mr. Prince disclaims beneficial
ownership.
(4) Includes 250,000 shares of Common Stock which Mr. Smith has the right to
acquire within 60 days of the Record Date upon exercise of outstanding
options and 101,927 shares of Common Stock held by the Company's Employee
Stock Ownership Plan ("ESOP") as of the Record Date, as to which Mr. Smith
could be deemed to have shared investment power as a trustee of the ESOP,
which includes 3,868 shares of Common Stock credited to the ESOP account of
Mr. Smith. Includes 12,583 shares of Common Stock held by Smith Family
Trust, of which Mr. Smith is trustee.
(5) Based on Schedule 13D filed by Mr. Albert with the Securities and Exchange
Commission on or about March 16, 2000; includes 117,600 shares of Common
Stock, held by Albert Investment Associates, L.P., as to which Mr. Albert
has sole voting and investment power; includes 133,200 shares of Common
Stock held by various accounts as to which Mr. Albert has sole investment
power.
(6) Includes 21,500 shares of Common Stock which Mr. Hock has the right to
acquire within 60 days of the Record Date upon exercise of outstanding
options.
(7) Consists of 12,500 shares of Common Stock which Mr. Hubbard has the right to
acquire within 60 days of the Record Date upon exercise of outstanding
options.
(8) Consists of 4,000 shares of Common Stock which Mr. Pilmanis has the right to
acquire within 60 days of the Record Date upon exercise of outstanding
options.
(9) Includes 363,500 shares of Common Stock which directors and executive
officers have the right to acquire within 60 days of the Record Date upon
exercise of outstanding options and 101,927 shares of Common Stock held by
the ESOP as to which Mr. Smith has shared investment power as trustee of the
ESOP, which includes 3,868 shares of Common Stock held by the ESOP for the
account of Mr. Smith.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
The Board of Directors holds four regular full day meetings each year.
Non-employee directors are compensated at the rate of $3,300 per full day
meeting of the board, $1,000 for each additional one-half day meeting, $450 per
hour for a telephone meeting, $1,000 per committee meeting, and $1,000 per half
day for official travel to locations outside the Denver area.
Board members are compensated at the rate of $250 per hour for the time
spent consulting with the Company at the request of the Board of Directors or
the President, preparing minutes of the Audit or Compensation Committees and on
special assignment of such committees. During the 2000 fiscal year, Mr. Hock
received $250 and Mr. Pilmanis received $450 for preparation of Committee
Minutes.
5
<PAGE>
The Company entered into a Consulting Agreement with Mr. Prince effective
after his retirement from employment on August 31, 1998. Under the Agreement,
Mr. Prince will provide consulting services to the Company primarily on matters
involving the Company's motion control products, but also on other matters as
requested by the President. He will be compensated at the rate of $250 per hour.
During fiscal 2000, Mr. Prince was paid $66,000 for consulting services.
INDEMNIFICATION
The Company indemnifies its directors and officers to the fullest extent
permitted by law so they will serve free from undue concern that they will not
be indemnified. Indemnification is required under the Company's Bylaws. The
Company has also signed agreements with each of its directors contractually
obligating the Company to provide the indemnification to them.
SUMMARY OF CASH AND OTHER COMPENSATION OF EXECUTIVE OFFICER
The following table shows the compensation earned by the Chief Executive
Officer (the "Named Executive Officer") of the Company during fiscal year 2000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
------------------- UNDERLYING ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
------------------------- -------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Richard D. Smith ......................... 2000 $206,250 $42,000 69,000 $17,547(1)
President and CEO 1999 $176,481 $ 0 100,000 $17,237
1998 $149,125 $ 0 0 $15,628
</TABLE>
------------------------
(1) All other compensation for Mr. Smith during fiscal year 2000 consists of
Company contributions to defined contribution plans of $4,662, Company paid
life insurance premiums of $10,845, and interest on a loan to Mr. Smith of
$2,040 calculated as the difference between interest accrued and the fair
market rate at the time the interest rate was determined.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides a summary of all stock options granted during
fiscal year 2000 to the Named Executive Officer. It also shows a calculation of
the potential realizable value if the fair market value of the Company's shares
were to appreciate at either a 5% or 10% annual rate over the period of the
option term.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(1) FISCAL YEAR ($/SH)(2) DATE 5%($) 10%($)
---- ---------- ------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Smith............. 69,000 42.1 $1.75 07/06/2006 $49,157 $114,558
</TABLE>
------------------------
(1) The options granted have a seven year term and were immediately exercisable.
The grants permit the exercise of options in exchange for shares of the
Company's common stock as well as for cash. In connection with a merger,
sale of assets, share exchange, or change of control of the Company, the
Committee may allow surrender for cash, substitution or cancellation.
(2) Exercise price was established at quoted market price for company shares on
the date of grant.
6
<PAGE>
See discussion under COMPENSATION COMMITTEE REPORT regarding consideration
for new options to be granted to Mr. Smith subsequent to fiscal year 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information regarding option exercises during
the 2000 fiscal year and unexercised stock options held as of the 2000 fiscal
year end by the Named Executive Officer:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES VALUE OPTIONS AT FY-END (#) OPTIONS AT FY-END ($)(1)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Smith........... 0 $0 250,000 -0- $799,063 $0
</TABLE>
------------------------
(1) Fair market value of unexercised in-the-money options at fiscal year end is
based on the closing price of $5.375 of Common Stock on June 30, 2000.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
Long-term incentives are provided through stock option grants. See the
discussion under COMPENSATION COMMITTEE REPORT.
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICER
The Company has an Employment Agreement with Richard D. Smith which became
effective August 13, 1998 for an initial term of five years and continues
subsequently on a year-to-year basis unless the Company or the officer gives
termination notice at least 60 days prior to expiration of the initial or
subsequent terms.
BASE SALARY. The Agreement provides a base salary of not less than $210,000
for Mr. Smith, and may be reviewed annually for increase on a merit basis. In
August 2000, Mr. Smith's salary was increased to $225,000.
ANNUAL INCENTIVE PLAN. Annual incentive bonuses are paid based on achieving
performance criteria established annually by the Board of Directors. The
performance criteria will recognize the overall financial performance of the
Company or the performance of its separate segments and the improvements made in
financial results. See discussion under COMPENSATION COMMITTEE REPORT.
LONG-TERM INCENTIVE PLAN PAYMENT. The Company utilizes stock options for
long-term incentives based on criteria described in the COMPENSATION COMMITTEE
REPORT.
CERTAIN DISPOSITIONS. A separate cash bonus will be paid to Mr. Smith in
the event of dispositions of equity interests, assets or product lines of a
subsidiary or division of the Company. The bonus is an amount equal to a
percentage ranging from 1% to 5% of the cumulative sales price received on
dispositions that are consummated before September 30, 2000.
OTHER PROVISIONS. Mr. Smith participates in other benefits and perquisites
as are generally provided by the Company to its employees. In addition, the
Company provides Mr. Smith with $500,000 of life insurance and an automobile.
In the event of death, disability or termination by the Company prior to a
change in control, other than for cause, the Agreement with Mr. Smith provides
for limited continuations of salary and insurance benefits and for bonus
prorations or settlements.
7
<PAGE>
CHANGE IN CONTROL ARRANGEMENTS
In 1989 the Company entered into an agreement with Mr. Smith pursuant to
which, upon termination by the Company (other than for cause as defined in the
Agreement) or by Mr. Smith for good reason (as defined in the Agreement) within
90 days prior to or 24 months following a change in control of the Company, he
is entitled to receive a severance payment equal to 2.5 times the sum of current
annual base salary plus the amount paid under the Incentive Compensation Plan
for the preceding fiscal year, an allocation for incentive compensation for the
current year up to the date of termination and two year continuation of
insurance benefits. The agreement expires on December 31 of each year, however,
it is extended automatically on January 1 of each year for a term of two years,
unless notice of non-renewal is given by the Company not later than the
September 30 immediately preceding renewal. The Company has similar agreements
(providing lower severance multiples) with other key executives. The change in
control agreements are applicable to a change in control of the Company or of
the subsidiary or division for which the executive is employed and require the
key executives to remain in the employ of the Company for a specified period in
the event of a potential change in control of the Company and provide employment
security to them in the face of current pressures to sell the Company or in the
event of take-over threats, so that they can devote full time and attention to
the Company's efforts free of concern about discharge in the event of a change
in control of the Company. These agreements are common at other public
companies. They are not excessive and are within industry standards. In fiscal
year 2000, the Board of Directors considered termination of these agreements and
determined that the reasons for executing change in control agreements continue
to be valid and concluded that notices of non-renewal would not be in the best
interests of shareholders, except that notice of non-renewal was given to one
executive whose management responsibilities had changed.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 2000 the Compensation Committee was comprised of Messrs.
Pilmanis and Hock who are both non employees. See the caption EXECUTIVE
COMPENSATION--COMPENSATION OF DIRECTORS for information concerning compensation
paid to directors for attending and participating in board and committee
meetings and special assignments.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 that might incorporate future filings, including this proxy statement,
in whole or in part, the following report and the performance graph on page 9
shall not be incorporated by reference into any such filings.
COMPENSATION COMMITTEE REPORT
Base salary for the chief executive officer is reviewed annually in relation
to corporate performance and increased responsibilities. As a result of
achievements in the Company's performance for fiscal year 2000, an increase of
7% was recommended for Mr. Smith in August 2000.
In recommending target levels of achievement for the Annual Incentive Plan,
the Committee reviews past operating results and the forecasts and business
plans of the Company for the ensuing year. For fiscal 2000 the Committee
recommended target achievement levels to be based on two components of the
Company's performance, one relating to the motion control business and the other
to the balance of the Company's operations. For motion control, the target level
was to achieve a 146% improvement in pretax net income over 1999 results. Since
pretax income for motion control well exceeded the target level, a bonus of
$42,000 or 20% of his salary was paid to Mr. Smith for fiscal 2000 . For the
balance of the Company, the target level was to achieve a $2,200,000 improvement
in pretax net income over 1999's pretax loss of $1,800,000. No bonus was paid in
relation to the balance of the Company for fiscal 2000, because the threshold
performance level was not achieved.
8
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The Company's long-term incentive program is based on stock options. Only a
limited number of shares remain available under the Company's current option
plan. In August 2000, the committee recommended that the remaining shares
available in the Company's current option plan be granted to certain key
operations personnel and recognized that no more options would be available for
grant to Mr. Smith at this time. As discussed below, the committee recommended
the Board approve a resolution to request shareholders to vote on a new stock
option plan at the October 26, 2000 shareholders' meeting. The committee also
recommended that if the plan is approved by shareholders, the Board should
consider granting options to Mr. Smith under the Company's long-term incentive
program at the October 2000 Board of Directors meeting that immediately follows
the shareholders' meeting .
The Committee acknowledges the importance of providing attractive
compensation and benefit packages in recruiting and retaining qualified
personnel. In today's business environment, stock incentive programs have become
an increasingly popular inducement to individuals who are responsible for the
conduct and management of the Company's business or who are involved in
endeavors significant to its success to advance the interests of the Company and
its shareholders and to remain affiliated with the Company. The committee
recommended asking shareholders to approve a new stock option program available
to employees or directors whose judgment, initiative and continued efforts are
expected to contribute to the success of the Company's business. The committee
also recommended asking shareholders to approve an employee stock purchase plan
whereby employees of the Company will have an opportunity to participate in the
ownership of the business to help achieve the unity of purpose essential to the
continued growth of the Company and for the mutual benefit of its employees and
shareholders.
GEORGE J. PILMANIS
DELWIN D. HOCK
PERFORMANCE GRAPH
The following performance graph reflects change in the Company's cumulative
total stockholder return on common stock as compared with the cumulative total
return of the NASDAQ Stock Market Index and the NASDAQ Measuring and Controlling
Devices Index for the period of five fiscal years ended June 30, 2000.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG NASDAQ (U.S. COMPANIES), NASDAQ MEASURING DEVICES AND THE COMPANY
Dollars
<TABLE>
<CAPTION>
6/30/95 6/30/96 6/30/97 6/30/98 6/30/99 6/30/00
<S> <C> <C> <C> <C> <C> <C>
NASDAQ (U.S) 100 128 156 206 296 437
NASDAQ Measuring 100 131 166 133 189 436
Hathaway Corp 100 153 124 89 74 213
</TABLE>
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SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than ten percent of
the Company's Common Stock to report their ownership and any changes in that
ownership to the Securities and Exchange Commission. The Company believes that
all Section 16(a) filing requirements applicable to its directors, executive
officers and greater than ten percent beneficial owners have been met except
that one Form 4 for one director was filed late.
ITEM 2: APPROVAL OF THE COMPANY'S YEAR 2000 STOCK INCENTIVE PLAN
DESCRIPTION OF THE YEAR 2000 STOCK INCENTIVE PLAN
Upon approval by the Company's shareholders, the Company proposes to adopt
its Year 2000 Stock Incentive Plan in October, 2000. The Plan is being proposed
because the Company's existing stock option plans no longer have sufficient
shares of stock available for future grants of options. The purpose of the Plan
is to attract and retain the services of eligible participants whose judgment,
interest and special efforts will contribute to the success of the Company and
will enhance the value of the Company, to provide incentive compensation
opportunities that are comparable to those of the Company's competitors, and to
align participants' personal interests to those of the Company's other
stockholders. The full text of the proposed Year 2000 Plan is attached to this
Proxy Statement as Exhibit A. The following description of the Plan is qualified
in its entirety by reference to Exhibit A.
The number of shares issuable under the Plan is 600,000. The Plan provides
for the granting of stock options, stock appreciation rights and restricted
stock awards. Incentive stock options may be granted (i) only to employees and
employee-directors who are responsible for the conduct and management of the
Company's business, (ii) for a period of up to ten years (five years for persons
owning more than 10% of the total combined voting power of the Company or any
subsidiary), (iii) at exercise prices not less than fair market value at the
date of grant (110% of fair market value if the optionee owns more than 10% of
the total combined voting power), and (iv) in amounts for which options first
become exercisable in any calendar year which do not exceed $100,000 per
employee. Nonstatutory options may be granted (i) to employees and non-employee
directors, (ii) for a period of up to ten years, (iii) at exercise prices no
less than 85% of fair market value at the date of grant. Stock appreciation
rights may be awarded to employees and directors and will be exercisable at the
time, to the extent and upon the terms and conditions set forth in each award.
Restricted stock may be awarded which is subject to a risk of forfeiture or
other restrictions that will lapse upon the achievement of one or more goals as
is prescribed in each award. The Plan is administered by the Board of Directors
(or by a committee of two or more persons appointed by the Board), which has the
authority to select eligible participants for awards, designate the number of
shares to be covered by each award, determine whether a stock option granted is
to be an incentive stock option or a nonstatutory option, determine
restrictions, conditions and contingencies and specify other terms of the
awards.
No participant shall be granted, in any calendar year, awards to acquire in
the aggregate more than 200,000 shares of common stock. This limitation is
intended to satisfy the requirements applicable to awards intended to qualify as
performance-based compensation under Internal Revenue Code Section 162(m).
Each award granted pursuant to the Plan will be evidenced by an Award
Agreement, which will set forth the terms applicable to that award. Awards may
be granted under the Plan until October 26, 2010. The exercise price for options
granted under the Plan may be paid in cash or cashier's check, surrender of
shares previously owned by the participant, or a combination of the above.
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Awards granted under the Plan may not be transferred other than by will or
by the laws of descent and distribution. During the lifetime of the participant,
an award may be exercised only by the participant or his or her legal
representative.
If a participant's employment or other association with the Company or a
subsidiary is terminated for any reason other than for cause, or because of the
death or disability of the participant, any outstanding option or stock
appreciation right will be exercisable (to the extent then exercisable) for a
period of 30 days following such termination. If a participant's employment or
other association with the Company or a subsidiary is terminated because of the
participant's disability, any outstanding option or stock appreciation right
will be exercisable (to the extent then exercisable) for a period of 90 days
following such termination. If a participant dies while employed by or
associated with the Company or a subsidiary, any outstanding option or stock
appreciation right will be exercisable (to the extent then exercisable) for a
period of six months following such death. If a participant's employment or
other association with the Company or a subsidiary is terminated for cause, all
outstanding options (whether or not vested) will be forfeited and canceled.
If the number of outstanding shares of common stock of the Company is
changed by a stock dividend, stock split, combination, or similar change in the
capital structure of the Company, the number of shares of common stock available
for award grants and the exercise price per share for each outstanding award
under the Plan will be proportionately adjusted, subject to any required action
by the Board or the stockholders of the Company.
In general, in the event of any approved transaction, all outstanding awards
held by employees whose employment is affected (either by termination or
transfer to successor employer) by the approved transaction shall become vested
and exercisable in full. Approved transactions generally include (a) the
acquisition of beneficial ownership (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of 50% or more of the outstanding voting
securities by any person (other than the Company, any subsidiary, or any
employee benefit plan) during any period of 12 consecutive months; (b) the sale,
exchange or other disposition of all or substantially all of the assets of any
subsidiary or any division of the Company or a subsidiary; (c) any merger or
consolidation of the Company with one or more other corporations, whether or not
the Company is the surviving corporation; (d) any sale or other disposition of
all or substantially all of the assets of the Company pursuant to a plan which
provides for the liquidation of the Company; (e) any exchange by the holders of
more than 50% of the outstanding shares of common stock for securities issued by
another entity; or (f) a change in the majority of the members of the Board
other than by reason of voluntary resignation, retirement or death.
The Company may amend or terminate the Plan at any time, except that no
amendment or modification may become effective without approval by the
stockholders, if stockholder approval is required, to enable the Plan to satisfy
any applicable statutory or regulatory requirements. Subject to the specific
terms of the Plan, the Committee may accelerate the vesting of any award, or
waive any conditions or restrictions pursuant to an award at anytime.
FEDERAL INCOME TAX CONSEQUENCES
In general, no income results to the holder of an incentive stock option
upon the grant of the option or issuance of shares. The amount realized on the
disposition of such shares in excess of the option price will be considered
capital gain, except that if a disposition occurs within one year after the
exercise of the option or two years after the grant of the option the
participant will realize compensation income, for federal income tax purposes,
on the amount by which the lesser of (i) the fair market value on the date of
exercise or (ii) the amount realized on the sale of the shares exceeds the
option price. For the purpose of determining alternative minimum taxable income,
an incentive stock option is treated as a nonstatutory option.
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In connection with the exercise of a nonstatutory option, an optionee will
generally realize compensation income, for federal income tax purposes, on the
difference between the option price and the fair market value of the shares
acquired on the date of exercise.
If an option is exercised and payment is made by means of previously held
shares, or shares and cash, there is no gain or loss recognized to the optionee
on the previously held shares so long as these shares have been held for the
required holding period, if applicable. In the case of a nonstatutory option,
the optionee's basis and holding period of the previously held shares will be
carried over to an equivalent number of shares received under the option. Any
additional shares received under the option will have a basis equal to the
compensation realized by the optionee for federal income tax purposes plus the
amount of any additional cash paid.
Exercising a nonstatutory option with shares which were originally acquired
on the exercise of an incentive stock option will not constitute a
"disqualifying disposition" of such previously held shares. If, however, the new
shares are not held for the balance of the required holding period, there will
be a disqualifying disposition for federal income tax purposes, resulting in
recognition of compensation income to the participant in an amount equal to the
lesser of (i) the excess of the fair market value over the option price at the
time such incentive shares were originally acquired or (ii) the amount realized
on the sales of the shares minus the option price. However, exercising an
incentive stock option with shares acquired on the exercise of an incentive
stock option will constitute a disqualifying disposition of such previously held
shares if the one and the two-year holding periods described above have not been
met before such exercise.
To the extent individual optionees qualify for capital gains tax treatment,
the Company will generally not be entitled to a deduction for federal income tax
purposes. In other cases the Company will generally receive a federal income tax
deduction at the same time, and in the same amount, as the amount which is
taxable to the employee as compensation income.
The grant of a stock appreciation right will not result in taxable income to
the participant. Upon exercise, the amount of cash or the fair market value of
shares received will be taxable to the participant as ordinary income and a
corresponding deduction will be allowed to the Company. Gains or losses realized
by the participant upon disposition of shares will be treated as capital gains
and losses, with the basis in such shares equal to the fair market value of the
shares at the time of exercise.
The grant of a restricted stock award will not result in taxable income to
the participant and the Company will not be entitled to a deduction at that
time, assuming that the restrictions constitute a "substantial risk of
forfeiture" for federal income tax purposes. Upon the vesting of shares subject
to an award, the participant will realize ordinary income in an amount equal to
the then fair market value of those shares, and the Company will be entitled to
a corresponding deduction. Gains or losses realized by the participant upon
disposition of shares will be treated as capital gains and losses, with the
basis in such shares equal to the fair market value of the shares at the time of
exercise.
Approval requires the affirmative vote of a majority of the votes cast on
the proposed Plan.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE COMPANY'S YEAR 2000 STOCK INCENTIVE
PLAN.
ITEM 3: APPROVAL OF THE COMPANY'S 2001 EMPLOYEE STOCK PURCHASE PLAN
DESCRIPTION OF THE 2001 EMPLOYEE STOCK PURCHASE PLAN
Upon approval by the Company's shareholders, the Company proposes to adopt
its 2001 Employee Stock Purchase Plan (the Purchase Plan) covering an aggregate
of 500,000 shares of the Company's Common Stock. The full text of the proposed
Purchase Plan is attached to this Proxy Statement as Exhibit B. The following
description of the Purchase Plan is qualified in its entirety by reference to
Exhibit B. The Purchase Plan is intended to be an employee stock purchase plan
under Section 423 of the Internal
12
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Revenue Code of 1986, as amended. Under the Purchase Plan, the Company shall
make ten successive offerings of shares of Common Stock with the first offering
commencing on January 1, 2001 and terminating on June 30, 2001 and subsequent
offerings covering successive six month periods from July 1 to December 31 and
January 1 to June 30, of each year until the tenth and final offering under the
Purchase Plan which commences on July 1, 2005 and terminates on December 31,
2005. The Purchase Plan permits eligible employees to purchase Common Stock
through payroll deductions in multiples of 1% each, from 1% to 10% of the
employee's compensation at the lower of 85% of the fair market value of the
Common Stock at the beginning or at the end of each offering period. Under the
Purchase Plan, for each offering, employees are entitled to participate after
completing 30 days of employment, except that employees who own more than 5% of
the outstanding Common Stock when combined with all outstanding options are not
eligible. Employees may end their participation in the offering at any time
before the end of the offering period.
Eligible employees may elect to participate in the offering periods by
submitting appropriate enrollment forms to the Company before the start of the
offering period. Once enrolled, a participant automatically will participate in
subsequent offering periods unless he or she withdraws from the offering period.
Upon enrollment, a participant authorizes payroll deductions of up to 10% of the
participant's base salary during the offering period. A participant may change
his or her payroll deduction elections once during any offering period. All
payroll deductions received or held by the Company under the Purchase Plan may
be used by the Company for any corporate purposes and the Company is not
obligated to segregate such payroll deductions.
The number of shares a participant may purchase in any offering period is
determined by dividing the total amount of payroll deductions withheld for the
participant during the offering period by the price per share determined as
described above. The purchase takes place automatically on the last day of the
offering period. Any cash balance remaining in the participant's account
following the purchase will be carried forward without interest to the next
offering period, subject to certain limited exceptions.
A participant may withdraw from the Purchase Plan or any offering period by
giving written notice to the Company. If notice is received by the 15th day
before the end of the offering period, payroll deductions for that offering
period will cease and all deductions credited to the participant's account will
be returned promptly, without interest. No payroll deductions will be made for
any succeeding offering period unless the employee enrolls in a new offering
period.
Termination of the employee's employment for any reason immediately
terminates his or her participation in the Purchase Plan. In the event of a
termination of employment, all payroll deductions credited to the participant's
account will be returned to him or her or, in the case of his or her death, to
his or her legal representatives, without interest.
If the number of outstanding shares of common stock of the Company is
changed by a stock dividend, stock split, combination, or similar change in the
capital structure of the Company, the number of shares of common stock available
under the Purchase Plan will be proportionately adjusted.
The Company may amend or terminate the Purchase Plan except that an
amendment may not be made without approval of the stockholders of the Company
which would change the designation of the employees (or class of employees)
eligible for participation in the Purchase Plan or if the amendment requires
stockholder approval under applicable law.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal federal income tax
consequences of transactions under the Purchase Plan based on current federal
income tax laws. This summary is not intended to be exhaustive and does not
describe state, local or other tax consequences. Each eligible participant is
advised to consult his or her tax advisor as to the particular tax consequences
of transactions under the Purchase
13
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Plan applicable to him or her, including income tax return reporting
requirements and the applicability and effect of any state, local or foreign tax
laws.
Upon the participant's election to reduce his or her pay in order to
purchase stock in any offering period, the participant's after-tax pay will be
reduced by the percentage elected by the participant. At the termination of the
offering period, the amounts withheld pursuant to the participant's election
will be applied to purchase Common Stock. In general, no income will be
recognized by a participant upon the grant (the election to participate in the
Purchase Plan) or exercise of an option to purchase stock under the Purchase
Plan.
The federal income tax treatment of any gain or loss realized by the
participant upon the sale or other disposition of shares acquired under the
Purchase Plan will depend on the timing of the disposition. If the participant
disposes of the shares after the later of (i) one year after the date of the
stock is transferred to the participant, and (ii) two years after the date of
grant of the option to purchase stock under the Purchase Plan (the statutory
holding periods), the participant will recognize ordinary income equal to the
lesser of (a) the amount by which the fair market value of the stock at the time
the option was granted exceeds the option price, and (b) the amount by which the
fair market value of the stock at the time of disposition exceeds the purchase
price of the Common Stock. Any additional gain is taxed as capital gain. The
Company will not be entitled to an income tax deduction by reason of any
disposition.
If the sales price is less than the option price, the participant will not
recognize ordinary income. Instead, the participant will have a long-term
capital loss equal to the difference.
If the participant disposes of the shares acquired under the Purchase Plan
before the end of the statutory holding periods (a Disqualifying Disposition),
the participant generally will recognize ordinary income in the year of such
disposition to the extent of the difference between the option price for the
stock and the fair market value of the stock on the date of exercise. Any
additional gain is taxed as capital gain. The Company will be entitled to an
income tax deduction for its taxable year in which the Disqualifying Disposition
occurs equal to the amount of ordinary income recognized by the participant.
Approval requires the affirmative vote of a majority of the votes cast on
the proposed Plan.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE COMPANY'S 2001 EMPLOYEE STOCK
PURCHASE PLAN.
ITEM 4: OTHER MATTERS
The Board of Directors knows of no business to be presented for action at
the Annual Meeting except as described above. However, if other matters are
properly presented for a vote, the proxies will be voted upon such matters
(including matters incident to the conduct of the meeting) in accordance with
the judgment of the persons acting under the proxies.
YEAR 2000 MATTERS
In fiscal 1999, the Company adopted a "Y2K Readiness Program" and prepared
for Year 2000 effects on the proper functioning of computer systems included in
its products, software systems used in its business and items purchased from its
suppliers. The Company has not experienced, and does not anticipate experiencing
in the future any Year 2000 related failures in its products. In addition there
was no interruption in or failure of normal business activities or operations
due to Year 2000 failures experienced in its internal systems, processes and
facilities or from its key vendors, supplier or subcontractors nor are any
anticipated in the future.
The Company's activities related to Year 2000 compliance were performed with
internal resources. All payroll and associated costs related to the Year 2000
issue were expensed as incurred. Year 2000 activities did not delay other
projects or materially impact the Company's business; however, certain customers
may
14
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have deferred purchases of certain power products due to their own Year 2000
concerns. With the Year 2000 rollover completed, the Company believes it has
obtained any such deferred sales. The Company will continue to monitor whether
it needs to further address any anticipated costs, problems and uncertainties
associated with Year 2000 consequences.
INDEPENDENT PUBLIC ACCOUNTANT
Arthur Andersen LLP served as independent auditors of the Company for the
fiscal year ended June 30, 2000. A representative of Arthur Andersen LLP is
expected to be present at the Annual Meeting. He will have an opportunity to
make a statement if he so desires, and is expected to be available to respond to
appropriate questions.
The Audit Committee of the Board of Directors has not yet made a
recommendation to the Board of Directors with respect to the selection of
independent certified public accountants for fiscal 2001.
ANNUAL REPORT
The Company's Annual Report for the year ended June 30, 2000 has been mailed
to shareholders with this Proxy statement.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Shareholders' proposals for the 2001 annual meeting of shareholders must be
submitted in writing to the Secretary of the Company at the address of the
Company set forth on the first page of this Proxy Statement no later than
May 22, 2001 in order to be presented at the annual meeting or be considered for
inclusion in the Company's 2001 proxy statement and proxy card.
PLEASE SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY.
HATHAWAY CORPORATION
September 21, 2000
15
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EXHIBIT A
HATHAWAY CORPORATION
YEAR 2000 STOCK INCENTIVE PLAN
SECTION 1
INTRODUCTION
1.1 ESTABLISHMENT. Hathaway Corporation hereby establishes the Hathaway
Corporation Year 2000 Stock Incentive Plan.
1.2 PURPOSES. The Plan is provided in order that selected Eligible
Participants who are responsible for the conduct and management of the Company's
business or who are involved in endeavors significant to its success, may be
given an inducement to acquire a proprietary interest in the Company, to gain an
added incentive to advance the interests of the Company and to remain affiliated
with the Company.
SECTION 2
DEFINITIONS
2.1 DEFINITIONS. The following terms shall have the meanings set forth
below:
(a) "APPROVED TRANSACTION" has the meaning set forth in Section 5.2.
(b) "AWARD" means any award or benefit granted under the Plan,
including, without limitation, the grant of Options, Stock Appreciation
Rights, and Restricted Stock Awards.
(c) "AWARD AGREEMENT" means the written document, in such form as is
determined by the Committee from time to time, which reflects the terms and
conditions of an Award to an Eligible Participant.
(d) "BOARD" means the Board of Directors of the Company.
(e) "CAUSE" means, unless otherwise defined in the Award Agreement:
(i) an Eligible Participant's willful or gross misconduct, or willful
or gross negligence, in the performance of his or her duties for the
Employer, after prior written notice of such misconduct or negligence and
the continuance thereof for a period of 30 days after receipt by such
Eligible Participant of such notice;
(ii) an Eligible Participant's intentional or habitual neglect of his
or her duties for the Employer after prior written notice of such neglect
and the continuance thereof for a period of 30 days after receipt by such
Eligible Participant of such notice;
(iii) an Eligible Participant's illegal use of drugs or excessive and
habitual use of alcohol, either of which substantially affects the
Eligible Participant's ability to perform his or her duties for the
Employer; or
(iv) an Eligible Participant's theft or misappropriation of funds or
property of the Employer, or the commission of a felony.
(f) "CODE" means the Internal Revenue Code of 1986, as it may be amended
from time to time.
(g) "COMMITTEE" means the committee established under Section 3.1.
(h) "COMPANY" means Hathaway Corporation, or any successor thereto.
(i) "DIRECTOR" means an individual who is a director of the Company or
any Parent or Subsidiary on the date of an Award grant, and who is not a
common-law employee of the Company or any Parent or Subsidiary.
A-1
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(j) "DIVIDEND EQUIVALENTS" means, with respect to Restricted Stock to be
issued at the end of the Restriction Period, but only to the extent
specified by the Committee, an amount equal to all dividends and other
distributions (or the economic equivalent thereof) that are payable to
stockholders of record during the Restriction Period on a like number of
Shares of Stock.
(k) "EFFECTIVE DATE" means the effective date of the Plan, which will be
October 26, 2000, subject to approval of the Plan by the Company's
stockholders.
(l) "ELIGIBLE PARTICIPANTS" means an officer or employee of the
Employer, or a Director, whose judgment, initiative, and continued efforts
are expected to contribute to the successful conduct of the business of the
Employer, as determined by the Committee.
(m) "EMPLOYER" means the Company, any Parent, and any Subsidiary.
(n) "EXERCISE PRICE" means that price at which an Option or an SAR may
be exercised.
(o) "FAIR MARKET VALUE" means the average of the closing bid and asked
price in the over-the counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") for the date in question (whether the common stock is traded on
the NASDAQ Small Cap Market or the NASDAQ National Market System), or such
other system then in use. If there are no Stock transactions on such date,
the Fair Market Value shall be determined as of the immediately preceding
date on which there were Stock transactions or, if on any such date the
Stock is not quoted by any such organization, the average of the closing bid
and asked price as furnished by a professional market maker making a market
in the Stock, as selected by the Committee. In the event the Stock is not
traded in the over-the-counter market or no market maker is making a market
in the Stock, the Fair Market Value of the Stock on any date shall be
determined in good faith by the Committee after such consultation with
outside legal, accounting and other experts as the Committee may deem
advisable.
(p) "INCENTIVE STOCK OPTION" or "ISO" means any Option designated as
such and granted in accordance with the requirements of Code Section 422.
(q) "NON-STATUTORY OPTION" or "NSO" means any Option other than an
Incentive Stock Option.
(r) "OPTION" means a right to purchase Stock at a stated price (the
Exercise Price) for a specified period of time. As used in this Plan, the
term "Option" will refer both to any Non-Statutory Option and any Incentive
Stock Option.
(s) "OPTION PERIOD" means that period during which a vested Option or
other vested Award may be exercised.
(t) "PARENT" means any company during any period in which it is a parent
corporation, as defined in Code Section 424(e), with respect to the Company.
(u) "PLAN" means this Hathaway Corporation Year 2000 Stock Incentive
Plan, as it may be amended from time to time.
(v) "RESTRICTED STOCK" means Shares of Stock which are subject to a risk
of forfeiture or other restrictions that will lapse upon the achievement of
one or more goals relating to completion of service by the Eligible
Participant or achievement of performance or other objectives by the
Eligible Participant, as determined by the Committee.
(w) "RESTRICTION PERIOD" means a period of time beginning on the date of
each Award of Restricted Stock and ending on the vesting date with respect
to such Award.
(x) "RETAINED DISTRIBUTIONS" has the meaning set forth in
Section 7.2(b).
(y) "SHARE" or "SHARES" means a share or shares of Stock.
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(z) "STOCK" means the common stock, no par value, of the Company.
(aa) "STOCK APPRECIATION RIGHT" or "SAR" means the right to receive, in
cash or Shares (as determined in accordance with Section 6.5) with a value
equal to (or otherwise based on) the excess of (i) the Fair Market Value of
a specified number of Shares at the time of exercise; over (ii) the Exercise
Price for such Shares.
(bb) "SUBSIDIARY" means any company during any period in which it is a
subsidiary corporation, as defined in Code Section 424(f), with respect to
the Company.
2.2 GENDER AND NUMBER. Except where otherwise indicated by the context,
the masculine gender also shall include the feminine gender, and the definition
of any term herein in the singular also shall include the plural.
SECTION 3
PLAN ADMINISTRATION
3.1 COMMITTEE. The authority to control and manage the operation and
administration of the Plan will be vested in the "Committee" described in this
Section 3.1. The Committee will be appointed by the Board and generally will
consist of two or more members of the Board. If a Committee does not exist, or
for any other reason determined by the Board, the Board may take any action
under the Plan that otherwise would be the responsibility of the Committee. The
Board may appoint such special committees as the Board determines necessary or
desirable in accordance with the following provisions:
(a) With respect to the grant of Awards to persons who are or may become
"covered employees," as such term is defined in Code Section 162(m), the
Awards will be granted by a Committee consisting only of two or more outside
directors. For purposes of this Section 3.1(a), a Director will be treated
as an "outside director" if the director (i) is not a current employee of
the Company or its affiliates; (ii) is not a former employee of the Company
or its affiliates who receives compensation for prior services (other than
benefits under a tax-qualified retirement plan) during the taxable year;
(iii) has not been an officer of the Company or its affiliates; and
(iv) does not receive remuneration, either directly or indirectly, in any
capacity other than as a director. For purposes of this subsection, the
Company's affiliates will be determined based on the regulations promulgated
under Code Section 162(m).
(b) With respect to the grant of Awards for which the exemption from
Section 16(b) of the Securities Exchange Act of 1934 provided by Rule 16b-3
is desired, the Award will be granted by a Committee consisting of (i) only
"non-employee directors" or (ii) the full Board. Alternatively, the Award
may be granted by a Committee consisting of persons who are not non-employee
directors; provided that the Award is approved by the full Board.
3.2 POWER AND AUTHORITY OF COMMITTEE. The Committee's administration of
the Plan will be subject to the following:
(a) Subject to the provisions of the Plan, the Committee will have the
authority and discretion to select from among the Eligible Participants
those persons who will receive Awards, to determine the time or times of
receipt, to determine the types of Awards and the number of shares covered
by the Awards, to establish the terms, conditions, performance criteria,
restrictions, and other provisions of such Awards, to accelerate vesting of
Awards, to waive compliance (either generally or in any one or more
particular instances) by an Eligible Participant with the requirements of
any rule or regulation with respect to an Award, subject to the Plan
provisions or other applicable requirements; and (subject to the
restrictions imposed by Section 9.2) to cancel or suspend Awards.
(b) To the extent that the Committee determines that the restrictions
imposed by the Plan preclude the achievement of the material purposes of the
Awards in jurisdictions outside the United
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States, the Committee will have the authority and discretion to modify those
restrictions as the Committee determines to be necessary or appropriate to
conform to applicable requirements or practices of jurisdictions outside of
the United States.
(c) The Committee will have the authority and discretion to interpret
the Plan, to establish, amend, and rescind any rules and regulations
relating to the Plan, to determine the terms and provisions of any Award
Agreement made pursuant to the Plan, to decide all questions and settle all
controversies and disputes which may arise in connection with the Plan, and
to make all other determinations that may be necessary or advisable for the
administration of the Plan.
(d) Any interpretation of the Plan by the Committee and any decision
made by it under the Plan will be final and binding on all persons.
(e) In controlling and managing the operation and administration of the
Plan, the Committee will take action in a manner that conforms to the
articles and by-laws of the Company, and applicable state corporate law.
3.3 DELEGATION BY COMMITTEE. Except to the extent prohibited by applicable
law or the applicable rules of a stock exchange, the Committee may allocate all
or any portion of its responsibilities and powers to any one or more of its
members and may delegate all or any part of its responsibilities and powers to
any person or persons selected by it. Any such allocation or delegation may be
revoked by the Committee at any time.
3.4 INDEMNIFICATION. In addition to any other rights of indemnification,
the Company shall provide indemnification, either directly or indirectly through
insurance policies or otherwise, for directors, Committee members, employees and
former employees against liabilities and expenses they incur with respect to
this Plan in connection with holding such positions, in each case to the fullest
extent permitted by law. Whenever such a person seeks indemnification by the
Company against any liability or expenses incurred in any threatened, pending or
completed proceeding in which such person is a party because he or she holds or
has held any such position, the Company shall proceed diligently and in good
faith to make a determination whether indemnification is permissible in the
circumstances. If indemnification is determined to be permissible, the Company
shall indemnify such persons to the fullest extent permissible, provided that
any indemnification for expenses shall be limited to the amount found to be
reasonable by an evaluation conducted in a manner permitted by applicable law,
and this authorization shall include reimbursement for reasonable expenses
incurred in advance of final disposition of the proceeding. This Section shall
not be interpreted to limit in any manner any indemnification the Company may be
required to pay pursuant to applicable statutes, any court order, or any
contract, resolution or other commitment which is legally valid.
SECTION 4
STOCK SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. 600,000 Shares are authorized for issuance under the
Plan in accordance with the provisions of the Plan. Shares which may be issued
upon the grant or exercise of Awards shall be applied to reduce the maximum
number of Shares remaining available under the Plan. At all times during the
term of the Plan and while any Awards are outstanding, the Company shall retain
as authorized and unissued stock at least the number of Shares from time to time
required under the provisions of the Plan, or otherwise assure itself of its
ability to perform its obligations hereunder. In addition, the following
additional maximums will apply:
(a) The number of Shares of Stock that may be issued under Options
intended to be treated as ISOs shall not exceed the maximum number of Shares
available for issuance under the Plan, as set forth above.
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(b) The maximum number of Shares of Stock that may be issued in
conjunction with Restricted Stock Awards granted pursuant to Section 7 shall
equal 10% of the maximum number of Shares available for issuance under the
Plan, as set forth above.
(c) The maximum number of Shares of Stock that may be covered by Awards
granted to any one Eligible Participant shall be 200,000 Shares during any
calendar year.
4.2 UNUSED AND FORFEITED STOCK. Any Shares that are subject to an Award
under this Plan which are not used because the terms and conditions of the Award
are not met, including any Shares that are subject to an Award which expires or
is terminated or canceled for any reason, any Shares which are used for full or
partial payment of the purchase price of Shares with respect to which an Award
is exercised, and any Shares retained by the Company to satisfy applicable
withholding obligations automatically shall become available for use under the
Plan.
SECTION 5
CAPITAL CHANGES AND CORPORATE TRANSACTIONS
5.1 ADJUSTMENTS FOR STOCK SPLIT, STOCK DIVIDEND, ETC.
(a) If the Company shall at any time increase or decrease the number of
its outstanding Shares of Stock, or change in any way the rights and
privileges of such Shares by means of the payment of a stock dividend or any
other distribution upon such Shares payable in Stock, or through a stock
split, subdivision, consolidation, combination, reclassification or
recapitalization involving the Stock, then in relation to the Stock that is
affected by one or more of the above events, the numbers, rights and
privileges of the following shall be increased, decreased or changed in like
manner as if such Shares had been issued and outstanding, fully paid and
nonassessable at the time of such occurrence:
(i) the Shares of Stock as to which Awards may be granted under the
Plan; and
(ii) the Shares of Stock then included in each outstanding Award
granted hereunder.
(b) If any adjustment or substitution provided for in this Section 5.1
shall result in the creation of a fractional share under any Award, the
fraction shall be disregarded, and the Company shall have no obligation to
make any cash or other payment with respect to such fractional share.
(c) Adjustments under this Section 5.1 shall be made by the Committee,
whose determinations with regard thereto shall be final and binding upon all
parties.
5.2 DEFINITIONS RELATED TO APPROVED TRANSACTIONS.
(a) APPROVED TRANSACTION. "Approved Transaction" means:
(i) the acquisition directly or indirectly by any person (other than
the Company, any Subsidiary, or any employee stock ownership plan or
other employee benefit plan of the Company or any Subsidiary) during any
period of 12 consecutive months of beneficial ownership (within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, as in effect on the date of this Plan) of voting stock of any
Subsidiary representing in the aggregate more than 50% of the total
voting power of all voting stock of the Subsidiary;
(ii) the sale, exchange or other disposition (other than by reason of
the pledge or assignment of such assets as security for a loan) of all or
substantially all of the assets of any Subsidiary or any division of the
Company or a Subsidiary, if immediately after such transaction
substantially all of such assets are not owned by the Company, any
Subsidiary, or any employee stock ownership plan or other employee
benefit plan of the Company or any Subsidiary;
(iii) any merger or consolidation of the Company with one or more
other corporations, whether or not the Company is the surviving
corporation;
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(iv) any sale or other disposition of all or substantially all of the
assets of the Company pursuant to a plan which provides for the
liquidation of the Company;
(v) any exchange by the holders of more than 50% of the outstanding
Shares of Stock for securities issued by another entity, or in whole or
in part for cash or other property, pursuant to a plan of exchange
approved by the holders of a majority of such outstanding Shares;
(vi) a change in the majority of the members of the Board other than
by reason of voluntary resignation, retirement or death; or
(vii) any transaction to which Code Section 424(a) applies and to
which the Company is a party.
(b) DIVISION. A "division" means any operating or business unit
designated by the Company, in its discretion, as constituting a division of
the Company or of a Subsidiary.
(c) AFFECTED EMPLOYMENT. An Eligible Participant's employment with the
Company or a Subsidiary is "affected" in an Approved Transaction if such
employment is terminated by the Company or Subsidiary solely as a result of
the Approved Transaction, if such employment is transferred to any employer
other than the Company or a Parent or Subsidiary, or if the Eligible
Participant remains employed with a Subsidiary which is no longer a
Subsidiary of the Company as a result of the Approved Transaction. The
Committee will determine whether any Eligible Participant's employment is
affected by any Approved Transaction.
5.3 ACCELERATED VESTING UPON APPROVED TRANSACTION. In the event of any
Approved Transaction, notwithstanding any contrary waiting period, installment
period, vesting schedule or Restriction Period in any Award Agreement or in the
Plan, unless the applicable Award Agreement provides otherwise:
(a) in the case of an Option or SAR, each such outstanding Option or SAR
held by an Eligible Participant whose employment is affected by the Approved
Transaction shall become exercisable in full in respect of the aggregate
number of Shares covered thereby.
(b) in the case of Restricted Stock, the Restriction Period applicable
to each such Award of Restricted Stock held by an Eligible Participant whose
employment is affected by the Approved Transaction shall be deemed to have
expired and all such Restricted Stock, any related Retained Distributions
and any unpaid Dividend Equivalents shall become vested and any cash amounts
payable pursuant to the applicable Award Agreement shall be adjusted in such
manner as may be provided in the Award Agreement.
SECTION 6
OPTIONS AND STOCK APPRECIATION RIGHTS
6.1 GRANT OF OPTIONS AND SARS.
(a) GRANT OF OPTIONS. An Eligible Participant may be granted one or
more Options. The Committee, in its sole discretion, shall designate whether
an Option is to be considered an ISO or an NSO. The Committee may grant both
an ISO and an NSO to the same Eligible Participant at the same time or at
different times. ISOs and NSOs, whether granted at the same or different
times, shall be deemed to have been awarded in separate grants, shall be
clearly identified, and in no event shall the exercise of one Option affect
the right to exercise any other Option or affect the number of Shares for
which any other Option may be exercised.
(b) GRANT OF SARS. An SAR may be granted to an Eligible Participant
who has been granted an Option (hereinafter called a "related Option") with
respect to all or a portion of the Shares subject to the related Option (a
"Tandem SAR") or may be granted separately to an Eligible Participant (a
"Free Standing SAR").
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(i) A Tandem SAR either may be granted concurrently with the grant of
the related Option or (if the related Option is an NSO) at any time
thereafter prior to the complete exercise, termination, expiration or
cancellation of such related Option. Tandem SARs will 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
Award Agreement may provide), and in no event after the complete
termination or full exercise of the related Option. Upon the exercise or
termination of the related Option, the Tandem SARs with respect thereto
will be canceled automatically to the extent of the number of shares of
Stock with respect to which the related Option was so exercised or
terminated.
(ii) Free Standing SARs will be exercisable at the time, to the
extent and upon the terms and conditions set forth in the applicable
Award Agreement.
6.2 PARTICIPATION. ISOs shall not be granted to non-employee Directors.
Eligible Participants who have been granted Options or SARS may, if otherwise
eligible, be granted additional Options, SARs, or other Awards.
6.3 AWARD AGREEMENTS. Each Option or SAR granted under the Plan shall be
evidenced by a written Award Agreement which shall be entered into by the
Company and the Eligible Participant to whom the Option or SAR is granted, and
which shall contain such terms and conditions as the Committee may consider
appropriate in each case. In the event of any inconsistency between the
provisions of the Plan and any such agreement entered into hereunder, the
provisions of the Plan shall govern.
(a) NUMBER OF SHARES. Each Award Agreement shall state that it covers
a specified number of Shares, as determined by the Committee.
(b) LIMIT ON ISOS GRANTED: Notwithstanding any other provision of the
Plan, for any Eligible Participant, the aggregate Fair Market Value of the
Shares with respect to which an ISO first is exercisable in any calendar
year, under this Plan or any other plan, shall not exceed $100,000. For this
purpose, the Fair Market Value of the Shares shall be determined as of the
time the Option is granted.
(c) EXERCISE PRICE. The Exercise Price for any Option or SAR shall be
determined by the Committee and shall be set forth in the Award Agreement.
(i) In no event shall the Exercise Price for each Share covered by an
ISO be less than the Fair Market Value of the Stock on the date the ISO
is granted.
(ii) The Exercise Price for each Share covered by an ISO granted to
an Eligible Participant who then owns stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or
of any Parent or Subsidiary must be at least 110% of the Fair Market
Value of the Stock on the date the Option is granted.
(iii) The Exercise Price for an NSO or SAR may be any price, including
a price less than Fair Market Value, in the sole discretion of the
Committee, but in no event shall the Exercise Price be less than 85% of
Fair Market Value of the Stock.
(iv) The Exercise Price for any NSO or SAR granted in compliance with
the Code Section 162(m) performance-based compensation rules shall be not
less than 100% of the Fair Market Value of the Stock.
(d) OPTION PERIOD AND VESTING OF OPTIONS. Each Award Agreement shall
state the Option Period and any vesting requirements applicable to the
Option or SAR.
(i) The Option Period must expire, in all cases, not more than ten
years from the date an Award is granted; provided, however, that the
Option Period of an ISO granted to an Eligible Participant who then owns
stock possessing more than 10% of the total combined voting power of
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all classes of stock of the Company or of any Parent or Subsidiary must
expire not more than five years from the date such ISO is granted.
(ii) Each Award Agreement also shall state the periods of time, if
any, as determined by the Committee, when incremental portions of each
Option or other Award shall vest.
(e) TERMINATION OF EMPLOYMENT, DEATH, DISABILITY, ETC. Except as
otherwise set forth in the Award Agreement, each Option and each SAR shall
be subject to the following requirements with respect to the exercise of the
Option or SAR upon termination of the employment or the death of the
Eligible Participant:
(i) TERMINATION FOR CAUSE. If the employment of the Eligible
Participant is terminated within the Option Period for Cause, as
determined by the Company, the Option or SAR (whether or not vested)
thereafter shall be canceled and void for all purposes.
(ii) DEATH. If the Eligible Participant dies during the Option
Period while still employed with the Employer, the Option or SAR may be
exercised by those entitled to do so under the Eligible Participant's
will or by the laws of descent and distribution within six (6) months
after the Eligible Participant's death (provided that such exercise must
occur within the Option Period), but not thereafter. In any such case,
the Option or SAR may be exercised only as to the Shares as to which the
Option or SAR had become exercisable on or before the date of the
Eligible Participant's death.
(iii) DISABILITY. If the Eligible Participant becomes disabled
(within the meaning of Code Section 22(e)) during the Option Period while
still employed with the Employer, the Option or SAR may be exercised
within ninety (90) calendar days after the Eligible Participant's
termination of employment due to such disability (provided that such
exercise must occur within the Option Period), but not thereafter. In any
such case, the Option or SAR may be exercised only as to the Shares as to
which the Option or SAR had become exercisable on or before the date of
the Eligible Participant's disability.
(iv) OTHER TERMINATIONS. If the employment of the Eligible
Participant with the Employer is terminated within the Option Period for
any reason other than Cause, disability, or the Eligible Participant's
death, the Option or SAR may be exercised by the Eligible Participant
within thirty (30) calendar days after the date of such termination
(provided that such exercise must occur within the Option Period), but
not thereafter. In any such case, the Option or SAR may be exercised only
as to the Shares as to which the Option or SAR had become exercisable on
or before the date of termination of employment.
(v) APPLICABILITY OF SECTION TO DIRECTORS. Unless otherwise
provided in the Award Agreement, the provisions relating to exercise
periods in this Section 6.3(e) after termination of an Eligible
Participant's employment will apply to each Director by substituting a
reference to the Director's service as a Director for each reference to
an Eligible Participant's employment in this Section.
(f) EXERCISE, PAYMENTS, ETC.
(i) Except as otherwise provided in the Award Agreement, an Option or
SAR shall be exercised by delivery to the Corporate Secretary of the
Company of written notice specifying the particular Option or SAR (or
portion thereof) which is being exercised, the number of Shares with
respect to which such Option or SAR is exercised and, in the case of an
Option, including payment of the Exercise Price. Such notice shall be in
a form satisfactory to the Committee. The exercise of the Option or SAR
shall be deemed effective upon receipt of such notice by the Corporate
Secretary and, if applicable, payment to the Company of the Exercise
Price.
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(ii) The purchase of such Stock shall take place at the principal
offices of the Company upon delivery of such notice, at which time the
purchase price of the Stock shall be paid in full by any of the methods
or any combination of the methods set forth in (iii) below. A properly
executed certificate or certificates representing the Stock shall be
issued by the Company and delivered to the Eligible Participant.
(iii) With respect to the exercise of an Option, the Exercise Price
shall be paid by any of the following methods or any combination of the
following methods:
(A) in cash;
(B) by cashier's check payable to the order of the Company;
(C) if approved by the Committee, by delivery to the Company of
certificates representing the number of Shares then owned by the
Eligible Participant, the Fair Market Value of which equals the
purchase price of the Stock purchased pursuant to the Option,
properly endorsed for transfer to the Company; provided however, that
Shares used for this purpose must have been held by the Eligible
Participant for such minimum period of time as may be established
from time to time by the Committee. The Fair Market Value of any
Shares delivered in payment of the purchase price upon exercise of
the Option shall be the Fair Market Value as of the exercise date and
the exercise date shall be the day of the delivery of the
certificates for the Stock used as payment of the Exercise Price.
(g) DATE OF GRANT. An Option or SAR shall be considered as having been
granted on the date specified in the grant resolution of the Committee.
(h) BONUSES. The Committee, in conjunction with any NSO granted under
this Plan may grant a cash bonus to any Eligible Participant to pay in whole
or in part for any portion of the exercise price or any tax liability
incurred by the exercise of an Options. The amount of any bonus and the time
of payment shall be determined in the sole discretion of the Committee and
may be included in any Award Agreement in conjunction with which a bonus is
to be granted.
6.4 STOCKHOLDER PRIVILEGES. Prior to the exercise of the Option and the
transfer of Shares to the Eligible Participant, an Eligible Participant shall
have no rights as a stockholder with respect to any Shares subject to any Option
or SAR granted to such person under this Plan, and until the Eligible
Participant becomes the holder of record of such Stock, no adjustments shall be
made for dividends or other distributions or other rights as to which there is a
record date preceding the date such Eligible Participant becomes the holder of
record of such Stock, except as provided in Section 6.
6.5 SETTLEMENT OF AWARD. Shares of Stock delivered pursuant to the
exercise of an Option or SAR will be subject to such conditions, restrictions
and contingencies as the Committee may establish in the applicable Award
Agreement. Settlement of SARs may be made in shares of Stock (valued at their
Fair Market Value at the time of exercise), in cash, or in a combination
thereof, as determined in the discretion of the Committee. The Committee, in its
discretion, may impose such conditions, restrictions and contingencies with
respect to shares of Stock acquired pursuant to the exercise of an Option or a
SAR as the Committee determines to be desirable.
SECTION 7
RESTRICTED STOCK AWARDS
7.1 GRANT OF RESTRICTED STOCK AWARDS. Subject to the limitations of the
Plan, the Committee shall designate those eligible persons to be granted awards
of Restricted Stock, shall determine the time when each such Award shall be
granted, whether Shares covered by Awards of Restricted Stock will be issued at
the beginning or the end of the Restriction Period and whether Dividend
Equivalents will be paid during the Restriction Period in the event Shares are
to be issued at the end of the Restriction Period, and shall
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designate (or set forth the basis for determining) the vesting provisions
applicable to each Award of Restricted Stock. The Committee shall determine the
price, if any, to be paid by the Eligible Participant for the Restricted Stock.
All determinations made by the Committee pursuant to this Section 7 shall be
specified in the Award Agreement.
7.2 ISSUANCE OF RESTRICTED STOCK AT BEGINNING OF THE RESTRICTION
PERIOD. If Shares of Stock are issued at the beginning of the Restriction
Period, the stock certificate or certificates representing such Restricted Stock
shall be registered in the name of the Eligible Participant to whom such
Restricted Stock shall have been awarded. During the Restriction Period,
certificates representing the Restricted Stock and any securities constituting
Retained Distributions shall bear a restrictive legend to the effect that
ownership of the Restricted Stock (and such Retained Distributions), and the
enjoyment of all rights appurtenant thereto, are subject to the restrictions,
terms and conditions provided in the Plan and the applicable Award Agreement.
Such certificates shall remain in the custody of the Company and the Eligible
Participant shall deposit with the Company stock powers or other instruments of
assignment, each endorsed in blank, so as to permit retransfer to the Company of
all or any portion of the Restricted Stock and any securities constituting
Retained Distributions that shall be forfeited or otherwise not become vested in
accordance with the Plan and the applicable Award Agreement.
(a) Restricted Stock issued at the beginning of the Restriction Period
shall constitute issued and outstanding Stock for all corporate purposes.
(b) The Eligible Participant will have the right to vote such Restricted
Stock, to receive and retain such dividends and distributions, as the
Committee may in its sole discretion designate, paid or distributed on such
Restricted Stock and to exercise all other rights, powers and privileges of
a holder of Stock with respect to such Restricted Stock; except, that
(i) the Eligible Participant will not be entitled to delivery of the stock
certificate or certificates representing such Restricted Stock until the
Restriction Period shall have expired and unless all other vesting
requirements with respect thereto shall have been fulfilled or waived;
(ii) the Company will retain custody of the stock certificate or
certificates representing the Restricted Stock during the Restriction Period
as provided in Section 7.2; (iii) other than such dividends and
distributions as the Committee may in its sole discretion designate, the
Company will retain custody of all distributions ("Retained Distributions")
made or declared with respect to the Restricted Stock (and such Retained
Distributions will be subject to the same restrictions, terms and vesting
and other conditions as are applicable to the Restricted Stock) until such
time, if ever, as the Restricted Stock with respect to which such Retained
Distributions shall have been made, paid or declared shall have become
vested, and such Retained Distributions shall not bear interest or be
segregated in a separate account; (iv) the Eligible Participant may not
sell, assign, transfer, pledge, exchange, encumber or dispose of the
Restricted Stock or any Retained Distributions or his interest in any of
them during the Restriction Period; and (v) a breach of any restrictions,
terms or conditions provided in the Plan or established by the Committee
with respect to any Restricted Stock or Retained Distributions will cause a
forfeiture of such Restricted Stock and any Retained Distributions with
respect thereto.
7.3 ISSUANCE OF STOCK AT END OF THE RESTRICTION PERIOD. Restricted Stock
issued at the end of the Restriction Period shall not constitute issued and
outstanding Shares of Stock and the Eligible Participant shall not have any of
the rights of a stockholder with respect to the Stock covered by such an Award
of Restricted Stock, in each case until such Stock shall have been transferred
to the Eligible Participant at the end of the Restriction Period. If and to the
extent that Shares of Stock are to be issued at the end of the Restriction
Period, the Eligible Participant shall be entitled to receive Dividend
Equivalents with respect to the Stock covered thereby either (i) during the
Restriction Period or (ii) in accordance with the rules applicable to Retained
Distributions, as the Committee may specify in the Award Agreement.
7.4 CASH AWARDS. In connection with any Award of Restricted Stock, an
Award Agreement may provide for the payment of a cash amount to the Eligible
Participant who is granted such Restricted Stock
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at any time after such Restricted Stock shall have become vested. Such cash
awards shall be payable in accordance with such additional restrictions, terms
and conditions as shall be prescribed by the Committee in the Award Agreement
and shall be in addition to any other salary, incentive, bonus or other
compensation payments which such Eligible Participant shall be otherwise
entitled or eligible to receive from the Company.
7.5 COMPLETION OF RESTRICTION PERIOD. Upon the vesting of each Award of
Restricted Stock, and the satisfaction of any other applicable restrictions,
terms and conditions (a) all or the applicable portion of such Restricted Stock
shall become vested, (b) any Retained Distributions and any unpaid Dividend
Equivalents with respect to such Restricted Stock shall become vested to the
extent that the Restricted Stock related thereto shall have become vested and
(c) any cash award to be received by the Eligible Participant with respect to
such Restricted Stock shall become payable, all in accordance with the terms of
the applicable Award Agreement. Any such Restricted Stock, Retained
Distributions and any unpaid Dividend Equivalents that shall not become vested
shall be forfeited to the Company and the Eligible Participant shall not
thereafter have any rights (including dividend and voting rights) with respect
to such Restricted Stock, Retained Distributions and any unpaid Dividend
Equivalents that shall have been so forfeited. The Committee may, in its
discretion, provide that the delivery of any Restricted Stock, Retained
Distributions and unpaid Dividend Equivalents that shall have become vested, and
payment of any cash awards that shall have become payable, shall be deferred
until such date or dates as the recipient may elect. Any election of a recipient
pursuant to the preceding sentence shall be filed in writing with the Committee
in accordance with such rules and regulations, including any deadline for the
making of such an election, as the Committee may provide.
SECTION 8
OPERATION AND ADMINISTRATION
8.1 EMPLOYMENT. Nothing contained in the Plan or in any Award shall confer
upon any Eligible Participant any right with respect to the continuation of his
or her employment by the Employer, or interfere in any way with the right of the
Employer, subject to the terms of any separate employment agreement to the
contrary, at any time to terminate such employment or to increase or decrease
the compensation of such Employee from the rate in existence at the time of the
grant of an Award.
8.2 LEAVES OF ABSENCE. Whether an authorized leave of absence, or absence
in military or government service, shall constitute a termination of employment
shall be determined by the Committee at the time.
8.3 TRANSFERS OF AWARDS. Except as otherwise provided in the Award
Agreement, or as the Committee shall determine from time to time, no right or
interest of any Eligible Participant in an Award granted pursuant to the Plan
(including any Options) shall be assignable or transferable during the lifetime
of the Eligible Participant, either voluntarily or involuntarily, or be
subjected to any lien, directly or indirectly, by operation of law, or
otherwise, including execution, levy, garnishment, attachment, pledge or
bankruptcy. In the event of an Eligible Participant's death, an Eligible
Participant's rights and interests in Awards shall, to the extent provided in
this Plan, be transferable by testamentary will or the laws of decent and
distribution. In the opinion of the Committee, if an Eligible Participant is
disabled from caring for his or her affairs because of mental condition,
physical condition or age, such Eligible Participant's Awards shall be exercised
by such person's guardian, conservator or other legal personal representative
upon furnishing the Committee with evidence satisfactory to the Committee of
such status.
8.4 WITHHOLDING REQUIREMENTS.
(a) GENERALLY. The Company's obligations to deliver Shares or other
payment upon the exercise of an Option, SAR or other Award shall be subject
to the Eligible Participant's satisfaction of all applicable federal, state
and local income and other tax withholding requirements.
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(b) WITHHOLDING WITH STOCK. At the time an Option is exercised by the
Eligible Participant, the Committee, in its sole discretion, may permit the
Eligible Participant to pay all such amounts of tax withholding, or any part
thereof, by transferring to the Company, or directing the Company to
withhold from Shares otherwise issuable to such Eligible Participant, Shares
having a value equal to the amount required to be withheld or such lesser
amount as may be determined by the Committee at such time. The value of
Shares to be withheld shall be based on the Fair Market Value of the Stock
on the date that the amount of tax to be withheld is to be determined.
8.5 INVESTMENT REPRESENTATIONS. The Company may require any person to whom
an Award is granted, as a condition of exercising such Award or receiving Stock
under the Award, to give written assurances, in the substance and form
satisfactory to the Company and its counsel, to the effect that such person is
acquiring the Stock subject to the Award for his own account for investment and
not with any present intention of selling or otherwise distributing the same,
and to such other effects as the Company deems necessary or appropriate in order
to comply with federal and applicable state securities laws. Legends evidencing
such restrictions may be placed on the certificates evidencing the Stock.
8.6 COMPLIANCE WITH SECURITIES LAWS. Each Award shall be subject to the
requirement that, if at any time counsel to the Company shall determine that the
listing, registration or qualification of the Shares subject to such Award upon
any securities exchange or under any state or federal law, or the consent or
approval of any governmental or regulatory body, is necessary as a condition of,
or in connection with, the issuance or purchase of Shares thereunder, such Award
may not be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained on
conditions acceptable to the Committee. Nothing herein shall be deemed to
require the Company to apply for or to obtain such listing, registration or
qualification.
8.7 STOCK RESTRICTION AGREEMENT. The Committee may provide that shares of
Stock issuable upon the exercise or grant of an Award shall, under certain
conditions, be subject to restrictions whereby the Company has a right of first
refusal with respect to such shares or a right or obligation to repurchase all
or a portion of such shares, which restrictions may survive an Eligible
Participant's term of employment with the Company.
8.8 OTHER EMPLOYEE BENEFITS. The amount of any compensation deemed to be
received by an Eligible Participant as a result of the exercise or grant of an
Award shall not constitute "earnings" with respect to which any other employee
benefits of such Eligible Participant are determined, including without
limitation benefits under any pension, profit sharing, life insurance or salary
continuation plan.
SECTION 9
PLAN AMENDMENT, MODIFICATION AND TERMINATION
9.1 TERMINATION AND AMENDMENT OF PLAN. The Board may at any time
terminate, and from time-to-time may amend or modify, the Plan; provided,
however, that no amendment or modification may become effective without approval
of the amendment or modification by the stockholders if stockholder approval is
required to enable the Plan to satisfy any applicable statutory or regulatory
requirements, or if the Company, on the advice of counsel, determines that
stockholder approval otherwise is necessary or desirable. Shareholder approval
shall be required in order to:
(a) increase the maximum number of Shares of Stock that may be subject
to Awards (unless necessary to effect the adjustments required by
Section 5.1);
(b) extend the term of the Plan beyond the period provided in
Section 9.3; or
(c) materially modify the requirements as to eligibility for
participation in the Plan.
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9.2 NO AFFECT ON OUTSTANDING AWARDS. No termination, amendment, or
modification shall adversely affect the rights and obligations with respect to
Awards outstanding under the Plan, without the consent of the Eligible
Participant holding such Award.
9.3 DURATION OF PLAN. If not sooner terminated under Section 9.1, the Plan
shall fully cease and expire at midnight on the date that is ten years from the
Effective Date of the Plan. Options outstanding at the time of the Plan
termination may continue to be exercised in accordance with their terms.
SECTION 10
REQUIREMENTS OF LAW
10.1 FEDERAL SECURITIES LAW REQUIREMENTS. With respect to persons subject
to Section 16 of the 1934 Act, transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under the
1934 Act. To the extent any provision of the Plan or action by the Committee
fails to so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Committee.
10.2 GOVERNING LAW. The Plan and all Award Agreements hereunder shall be
construed in accordance with and governed by the laws of the State of Colorado.
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EXHIBIT B
HATHAWAY CORPORATION
2001 EMPLOYEE STOCK PURCHASE PLAN
1. ESTABLISHMENT OF PLAN. Hathaway Corporation (the "Company"), proposes
to grant options for the purchase of Hathaway Corporation Common Stock, no par
value (the "Common Stock") to eligible employees of the Company and its
Subsidiaries (as hereinafter defined) pursuant to this 2001 Employee Stock
Purchase Plan (the "Plan"). For purposes of this Plan, "Parent" and "Subsidiary"
(collectively "Subsidiaries") shall have the same meanings as "parent
corporation" and "subsidiary corporation" as provided in Sections 424(e) and
424(f), respectively, of the Internal Revenue Code of 1986, as amended (the
"Code"). The Company intends this Plan to qualify as an "employee stock purchase
plan" under Section 423 of the Code (including any amendments to or replacements
of such Section) and this Plan shall be so construed. Any term not expressly
defined in this Plan but defined for purposes of Section 423 of the Code shall
have the same definition herein.
2. SHARES RESERVED FOR ISSUANCE. A total of 500,000 shares of Common Stock
is reserved for issuance under this Plan. Such number shall be subject to
adjustments effected in accordance with Section 15 of this Plan.
3. PURPOSE. The purpose of this Plan is to provide eligible employees of
the Company and its Subsidiaries with a convenient means of acquiring an equity
interest in the Company through payroll deductions, in order to enhance such
employees' sense of participation in the affairs of the Company and its
Subsidiaries and to provide an incentive for continued employment.
4. ADMINISTRATION.
a. This Plan shall be administered by a committee (the "Committee")
appointed by the Board of Directors of the Company (the "Board"). As used in
this Plan, references to the "Committee" shall mean either such committee or
the Board if no committee has been established. Subject to the provisions of
this Plan and the limitations of Section 423 of the Code or any successor
provision in the Code, all questions of interpretation or application of
this Plan shall be determined by the Committee and its decisions shall be
final and binding upon all participants. Members of the Board shall receive
no compensation for their services in connection with the administration of
this Plan, other than standard fees as established from time to time by the
Board for services rendered by Board members serving on Board Committees.
All expenses incurred in connection with the administration of this Plan
shall be paid by the Company.
b. In addition to any other rights of indemnification, the Company
shall provide indemnification, either directly or indirectly through
insurance policies or otherwise, for directors, Committee members, employees
and former employees against liabilities and expenses they incur with
respect to this Plan in connection with holding such positions, in each case
to the fullest extent permitted by law. Whenever such a person seeks
indemnification by the Company against any liability or expenses incurred in
any threatened, pending or completed proceeding in which such person is a
party because he or she holds or has held any such position, the Company
shall proceed diligently and in good faith to make a determination whether
indemnification is permissible in the circumstances. If indemnification is
determined to be permissible, the Company shall indemnify such persons to
the fullest extent permissible, provided that any indemnification for
expenses shall be limited to the amount found to be reasonable by an
evaluation conducted in a manner permitted by applicable law, and this
authorization shall include reimbursement for reasonable expenses incurred
in advance of final disposition of the proceeding. This Section shall not be
interpreted to limit in any manner any indemnification the Company may be
required to pay pursuant to applicable statutes, any court order, or any
contract, resolution or other commitment which is legally valid.
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5. ELIGIBILITY. Any employee of the Company or any of its Subsidiaries is
eligible to participate in an Offering Period (as hereinafter defined) under
this Plan commencing on the first Offering Period after such employee completes
thirty (30) days of employment, except the following employees:
a. Employees who are not employed by the Company or Subsidiaries as of
the beginning of such Offering Period;
b. Employees who (after taking into account stock attributed to the
Employee under Code Section 424(d)) own stock or hold options to purchase
stock possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Company or any of its
Subsidiaries (including Employees who, as a result of the purchase of stock
under this Plan during any Offering Period, would own stock or hold options
to purchase stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or any of its
Subsidiaries.
6. OFFERING DATES. Except as otherwise specified by the Board, the
offering periods of this Plan (each, an "Offering Period") shall be of six
(6) months duration commencing on January 1 and July 1 of each year and ending
on June 30 and December 31 of each year. The first Offering Period will commence
on January 1, 2001 (the "First Offering Period") Each Offering Period shall
consist of one six-month purchase period (individually, a "Purchase Period")
during which payroll deductions of participants are accumulated under this Plan.
The first business day of each Offering Period is referred to as the "Offering
Date." The last business day of each Purchase Period is referred to as the
"Purchase Date." The Board shall have the power to change the duration of
Offering Periods or Purchase Periods with respect to future offerings without
stockholder approval if such change is announced at least fifteen (15) days
prior to the scheduled beginning of the First Offering Period or Purchase Period
to be affected.
7. PARTICIPATION IN THIS PLAN.
a. Eligible employees may become participants in an Offering Period
under this Plan on the first Offering Date after satisfying the eligibility
requirements by delivering to the Company's Human Resources Department (the
"Human Resources Department") not later than the close of business on the
first day of the Offering Period, or such other date specified by the
Committee, a Subscription Agreement in a form designated by the Company
setting forth such employee's payroll deductions as provided in Section 10
of this Plan.
b. An eligible employee who does not deliver a subscription agreement
to the Human Resources Department by such date after becoming eligible to
participate in such Offering Period shall not participate in that Offering
Period or any subsequent Offering Period, unless such employee enrolls in
this Plan by filing a Subscription Agreement with the Human Resources
Department not later than the commencement of a subsequent Offering Period
or such other date specified by the Committee. Once an employee becomes a
participant in an Offering Period, such employee automatically will
participate in the next following Offering Period, and in each subsequent
Offering Period, unless the employee withdraws or is deemed to withdraw from
this Plan or terminates further participation in the Offering Period as set
forth in Section 12 below. Such participant is not required to file any
additional Subscription Agreement in order to continue participation in this
Plan.
8. GRANT OF OPTION ON ENROLLMENT. Enrollment by an eligible employee in
this Plan with respect to an Offering Period will constitute the grant (as of
the Offering Date) by the Company to such employee of an option to purchase, on
the Purchase Date, up to that number of shares of Common Stock determined by
dividing (a) the amount accumulated in such employee's payroll deduction account
during such Purchase Period by (b) the lesser of (i) eighty-five percent (85%)
of the fair market value of a share of the Common Stock on the Offering Date, or
(ii) eighty-five percent (85%) of the fair market value of a share of the Common
Stock on the Purchase Date; PROVIDED, HOWEVER that the number of shares of the
Common Stock subject to options granted pursuant to this Plan shall not exceed
the lesser of (a) the maximum
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number of shares set by the Board pursuant to Section 11(c) below with respect
to the applicable Offering Period, or (b) with respect to any participant, the
maximum number of shares which may be purchased pursuant to Section 11(b) below
with respect to the applicable Offering Period. The fair market value of a share
of the Common Stock shall be determined as provided in Section 9 hereof.
9. PURCHASE PRICE. The purchase price per share at which a share of Common
Stock will be sold in any Offering Period shall be eighty-five percent (85%) of
the lesser of:
a. The fair market value of a share of Common Stock on the Offering
Date; or
b. The fair market value of a share of Common Stock on the Purchase
Date.
For purposes of this Plan, the term "fair market value" will mean the average of
the closing bid and asked price in the over-the counter market, as reported by
the National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") for the date in question (whether the Common Stock is traded on the
NASDAQ Small Cap Market or the NASDAQ National Market System), or such other
system then in use. If there are no Common Stock transactions on such date, the
fair market value shall be determined as of the immediately preceding date on
which there were Common Stock transactions or, if on any such date the Common
Stock is not quoted by any such organization, the average of the closing bid and
asked price as furnished by a professional market maker making a market in the
Common Stock, as selected by the Committee. In the event the Common Stock is not
traded in the over-the-counter market or no market maker is making a market in
the Common Stock, the fair market value of the Common Stock on any date shall be
determined in good faith by the Committee after such consultation with outside
legal, accounting and other experts as the Committee may deem advisable.
10. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS, ISSUANCE OF
SHARES.
a. The purchase price of the shares for each respective participant
shall be the aggregate of the participant's payroll deductions made during
each Offering Period. The payroll deductions are made as a percentage of a
participant's compensation in one percent (1%) increments not to exceed ten
percent (10%) or any lower limit set by the Committee. Compensation shall
mean all W-2 compensation, including, but not limited to base salary, wages,
bonuses, commissions and overtime, and including employee salary reduction
contributions under Code Section 125 (cafeteria plan contributions) and Code
Section 401(k). Payroll deductions shall commence on the first payday
following the Offering Date and shall continue to the end of the Offering
Period unless sooner altered or terminated as provided in this Plan.
b. A participant may lower or increase the rate of payroll deductions
during an Offering Period by filing with the Human Resources Department a
new authorization for payroll deductions, in which case the new rates shall
become effective for the next payroll period after the Human Resources
Department's receipt of the authorization and shall continue for the
remainder of the Offering Period unless changed as described below. Such
changes in the rate of payroll deductions may be made at any time during an
Offering Period, but not more than one change may be made effective during
any six month period. A participant may increase or decrease the rate of
payroll deductions for any subsequent Offering Period by filing with the
Human Resources Department a new authorization for payroll deductions not
later than the beginning of such Offering Period.
c. All payroll deductions are credited to the respective participant's
account established under this Plan and are deposited with the general funds
of the Company. No interest accrues on such amounts. All amounts received or
held by the Company under this Plan may be used by the Company for any
corporate purposes, and the Company shall not be obligated to segregate such
amounts.
d. On each Purchase Date, so long as this Plan remains in effect and
provided that the participant has not withdrawn from the Offering Period
under Section 12, the Company shall apply the funds then in the
participant's account to the purchase of whole shares of Common Stock
reserved
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under the option granted to such participant with respect to the Offering
Period to the extent that such option is exercisable on the Purchase Date.
The Purchase Price per share shall be as specified in Section 9 of this
Plan. Any cash remaining in a participant's account (with respect to
fractional shares) after such purchase of shares shall be applied toward a
subsequent Offering Period unless requested by the participant to be
returned to the participant, provided that, if the remaining cash in a
participant's account is less than $5.00, such amount will not be returned
to the participant but will be applied toward the next Offering Period if
the participant remains a participant for that subsequent Offering Period.
No Common Stock shall be purchased on a Purchase Date on behalf of any
employee whose participation in this Plan has terminated prior to such
Purchase Date.
e. As promptly as practicable after the Purchase Date, the Company
shall arrange the delivery to each participant, or his or her designated
agent, a certificate representing the shares purchased upon exercise of his
option.
f. During a participant's lifetime, such participant's option to
purchase shares hereunder is exercisable only by him or her. The participant
will have no interest or voting right in shares covered by his or her option
until such option has been exercised and Shares issued to the participant.
Shares to be delivered to a participant under this Plan will be registered
in the name of the participant or in the name of the participant and, if so
designated, his or her spouse.
11. LIMITATIONS ON SHARES TO BE PURCHASED.
a. A participant may not purchase stock under this Plan at a rate
which, when aggregated with his or her rights to purchase stock under all
other employee stock purchase plans of the Company or any Subsidiary,
exceeds Twenty-Five Thousand Dollars ($25,000) for any calendar year (based
on the fair market value determined as of the Offering Date).
b. No employee shall be entitled to purchase more than the Maximum
Share Amount (as defined below) on any single Purchase Date. Not less than
fifteen (15) days prior to the commencement of any Offering Period, the
Board, in its sole discretion, may set a maximum number of shares which may
be purchased by an employee at any single Purchase Date (hereinafter the
"Maximum Share Amount"). If a Maximum Share Amount is set, then all
participants must be notified of such Maximum Share Amount not less than
five (5) days prior to the commencement of the next Offering Period. Once
the Maximum Share Amount is set, it shall continue to apply with respect to
all succeeding Purchase Dates and Offering Periods unless revised by the
Board as set forth above.
c. If the number of shares to be purchased on a Purchase Date by all
employees participating in this Plan exceeds the number of shares then
available for issuance under this Plan, or exceeds the Maximum Share Amount,
then the Company will make a pro rata allocation of the remaining shares in
as uniform a manner as shall be reasonably practicable and as the Board
shall determine to be equitable. In such event, the Company shall give
written notice of such allocation of shares to be purchased under a
participant's option to each participant affected thereby.
d. Any payroll deductions accumulated in a participant's account which
are not used to purchase stock due to the limitations in this Section 11
shall be returned to the participant as soon as practicable after the end of
the applicable Purchase Period, without interest.
12. WITHDRAWAL.
a. Each participant may withdraw from an Offering Period under this
Plan by signing and delivering to the Human Resources Department written
notice on the form provided for such purpose. Such withdrawal may be elected
at any time at least fifteen (15) days prior to the end of an Offering
Period.
b. Upon withdrawal from this Plan, the accumulated payroll deductions
shall be returned to the withdrawn participant without interest, and his or
her interest in this Plan shall terminate. In the event
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a participant voluntarily elects to withdraw from this Plan, he or she may
not resume his or her participation in this Plan during the same Offering
Period, but he or she may participate in any Offering Period under this Plan
which commences on a date subsequent to such withdrawal by filing a new
Subscription Agreement in the same manner as set forth above for initial
participation in this Plan.
13. TERMINATION OF EMPLOYMENT. Termination of a participant's employment
for any reason, including retirement or death, immediately terminates his or her
participation in this Plan. In such event, the payroll deductions credited to
the participant's account will be returned to him or her or, in the case of his
or her death, to his or her legal representatives without interest. For purposes
of this Section 13, an employee will be not deemed to have terminated employment
or failed to remain in the continuous employ of the Company in the event of
(a) a transfer to or from the Company and to or from any Subsidiary that the
Board has designated as eligible to participate in this Plan, or (b) sick leave,
military leave, or any other leave of absence approved by the Board; PROVIDED,
that such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
14. RETURN OF PAYROLL DEDUCTIONS. In the event a participant's interest in
this Plan is terminated by withdrawal, termination of employment or otherwise,
or in the event this Plan is terminated by the Board, the Company promptly shall
deliver to the participant all payroll deductions credited to such participant's
account. No interest shall accrue on the payroll deductions of a participant in
this Plan.
15. CAPITAL CHANGES.
a. Subject to any required action by the stockholders of the Company,
the number of shares of Common Stock covered by each option under this Plan
which has not yet been exercised and the number of shares of Common Stock
which have been authorized for issuance under this Plan but have not yet
been placed under option (collectively, the "Reserves"), as well as the
price per share of Common Stock covered by each option under this Plan which
has not yet been exercised, shall be proportionately adjusted for any
increase or decrease in the number of issued and outstanding shares of
Common Stock of the Company resulting from a stock split or the payment of a
stock dividend (but only in the Common Stock) or any other increase or
decrease in the number of issued and outstanding shares of Common Stock
effected without receipt of any consideration by the Company; PROVIDED,
HOWEVER, that conversion of any convertible securities of the Company shall
not be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination shall be final,
binding and conclusive. Except as expressly provided herein, no issue by the
Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to the number or price of shares of
Common Stock subject to an option.
b. In the event of the proposed dissolution or liquidation of the
Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Board. The Board, in the exercise of its sole discretion in such instances,
may declare that the options under this Plan shall terminate as of a date
fixed by the Board and give each Participant the right to exercise his or
her option as to all of the optioned stock, including shares which would not
otherwise be exercisable. In the event of a proposed sale of all or
substantially all of the assets of the Company or of a Subsidiary or a
division of the Company, or the merger or consolidation of the Company with
or into another corporation, each option under this Plan held by a
participant whose employment is affected by such sale shall be assumed or an
equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Board
determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, that the participant shall have the right to
exercise the option as to all of the optioned stock. If the Board makes an
option exercisable in lieu of assumption or substitution in the event of a
merger, consolidation or sale of assets, the Board shall notify the affected
participant that the option
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shall be fully exercisable for a period of fifteen (15) days from the date
of such notice, and the option will terminate upon the expiration of such
period.
(1) A "division" means any operating or business unit designated by
the Company, in its discretion, as constituting a division of the Company
or of a Subsidiary.
(2) A participant's employment with the Company or a Subsidiary is
"affected" in a transaction described above if such employment is
terminated by the Company or Subsidiary solely as a result of the
transaction, if such employment is transferred to any employer other than
the Company or a Subsidiary, or if the participant remains employed with
a Subsidiary which is no longer a Subsidiary of the Company as a result
of the transaction. The Committee will determine whether any
participant's employment is affected by any transaction.
c. The Board, if it so determines in the exercise of its sole
discretion, also may make provision for adjusting the Reserves, as well as
the price per share of Common Stock covered by each outstanding option, in
the event that the Company effects one or more reorganizations,
recapitalizations, rights offerings or other increases or reductions of
shares of its outstanding Common Stock, or in the event of the Company being
consolidated with or merged into any other corporation.
16. NONASSIGNABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares of Common Stock under this Plan may be assigned, transferred,
pledged or otherwise disposed of in any way (other than by will, the laws of
descent and distribution or as provided in Section 24 hereof) by the
participant. Any such attempt at assignment, transfer, pledge or other
disposition shall be void and without effect.
17. RESTRICTION ON TRANSFER/HOLDING PERIOD. Unless otherwise determined by
the Committee, the shares issued upon exercise of the options granted under any
Offering Period may not be assigned, transferred, pledged or otherwise disposed
of in any way prior to the expiration of the "Holding Period" described as
follows: Not less than fifteen (15) days prior to the commencement of any
Offering Period, the Board, in its sole discretion, may set the minimum Holding
Period, which will commence immediately after the Purchase Date. If a Holding
Period is set for any Offering Period, then all participants must be notified of
such Holding Period not less than five (5) days prior to the commencement of the
Offering Period. Any such attempt at assignment, transfer, pledge or other
disposition shall be void and without effect. Certificates evidencing all such
shares issued pursuant to Offering Periods during the Holding Period shall bear
the following legend:
"The securities represented by this stock certificate are subject to a
restriction on transfer set forth in the 2001 Employee Stock Purchase
Plan of the Company, a copy of which will be made available upon request
to the registered holder hereof."
18. REPORTS. Individual accounts will be maintained for each participant
in this Plan. Each participant shall receive promptly after the end of each
Purchase Period a report of his or her account setting forth (i) the total
payroll deductions accumulated; (ii) the number of shares of Commons Stock
purchased, (iii) the per share price thereof and (iv) the remaining cash
balance, if any, to be carried forward to the next Purchase Period or Offering
Period, as the case may be.
19. NOTICE OF DISPOSITION. Each participant shall notify the Company if
the participant disposes of any of the shares purchased in any Offering Period
pursuant to this Plan if such disposition occurs within two (2) years from the
Offering Date or within one (1) year from the Purchase Date on which such shares
were purchased (the "Notice Period"). Unless such participant is disposing of
any of such shares during the Notice Period, such participant shall keep the
certificates representing such shares in his or her name (and not in the name of
a nominee) during the Notice Period. The Company, at any time during the Notice
Period, may place a legend or legends on any certificate representing shares
acquired pursuant to this Plan requesting the Company's transfer agent to notify
the Company of any transfer of the shares. The
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obligation of the participant to provide such notice shall continue
notwithstanding the placement of any such legend on the certificates.
20. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant of
any option hereunder shall confer any right on any employee to remain in the
employ of the Company or any Subsidiary, or restrict the right of the Company or
any Subsidiary to terminate such employee's employment.
21. EQUAL RIGHTS AND PRIVILEGES. All eligible employees shall have equal
rights and privileges with respect to this Plan so that this Plan qualifies as
an "employee stock purchase plan" within the meaning of Section 423 or any
successor provision of the Code and the related regulations. Any provision of
this Plan which is inconsistent with Section 423 or any successor provision of
the Code shall, without further act or amendment by the Company or the Board, be
revised to comply with the requirements of Section 423. This Section 21 shall
take precedence over all other provisions in this Plan.
22. NOTICES. All notices or other communications by a participant under or
in connection with the Plan shall be deemed to have been duly given when
received in the form specified by the Company at the location, or other person,
designated by the Company for the receipt thereof.
23. TERMS; STOCKHOLDER APPROVAL. After this Plan is adopted by the Board,
this Plan will become effective on the date that is the commencement of the
First Offering Period (as defined above). This Plan shall be approved by the
stockholders of the Company, in any manner permitted by applicable corporate
law, within twelve (12) months before or after the date this Plan is adopted by
the Board. This Plan shall continue until the earlier to occur of
(a) termination of this Plan by the Board (which termination may be effected by
the Board at any time), (b) issuance of all of the shares of the Common Stock
reserved for issuance under this Plan, or (c) five (5) years from the date of
the expiration of the First Offering Period.
24. DESIGNATION OF BENEFICIARY.
a. A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account under
this Plan in the event of such participant's death subsequent to the end of
a Purchase Period but prior to delivery to him or her of such shares and
cash. In addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's account under
this Plan in the event of such participant's death prior to a Purchase Date.
b. Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and
in the absence of a beneficiary validly designated under this Plan who is
living at the time of such participant's death, the Company shall deliver
such shares and cash to the executor or administrator of the estate of the
participant or if not such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its discretion, may deliver
such shares or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is
known to the Company, then to such other person as the Company may
designate.
25. CONDITIONS UPON ISSUANCE OF SHARES; SECURITIES LAW LIMITATIONS ON SALE
OF SHARES. Shares shall not be issued with respect to an option unless the
exercise of such option and the issuance and delivery of such shares pursuant
thereto shall comply with all applicable provisions of law, domestic or foreign,
including, without limitation, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, the rules and regulations promulgated
thereunder, state securities law and regulations and the requirements of any
stock exchange or automated quotation system upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.
26. APPLICABLE LAW. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of Colorado.
B-7
<PAGE>
27. AMENDMENTS OR TERMINATION OF THIS PLAN. The Board may, at any time,
amend, terminate or extend the term of this Plan, except that any such
termination cannot affect options previously granted under this Plan, nor may
any amendments make any change in an option previously granted which would
adversely affect the right of any participant, nor may an amendment be made
without approval of the stockholders of the Company obtained in accordance with
Section 23 hereof within twelve (12) months of the adoption of such amendment
(or earlier if required by Section 23) if such amendment would:
a. Increase the number of shares that may be issued under this Plan;
b. Change the designation of the employees (or class of employees)
eligible for participation in this Plan; or
c. Constitute an amendment for which stockholder approval is necessary
or convenient in order to comply with any provision of the law (including
but not limited to Rule 16b-3 or any successor rule of the Securities
Exchange Act of 1934), as determined by the Company in its discretion.
IN WITNESS WHEREOF, the undersigned officer of the Company, being duly
authorized by the Board, has executed this Plan to be effective as of the
Effective Date.
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<S> <C>
HATHAWAY CORPORATION
By:
--------------------------------------------
Name:
--------------------------------------------
Title:
--------------------------------------------
</TABLE>
B-8
<PAGE>
EXHIBIT C
HATHAWAY CORPORATION
AUDIT COMMITTEE CHARTER
The Board of Directors of the Company has unanimously adopted the following
Audit Committee Charter on May 3, 2000.
PURPOSE
The audit committee is a committee of the board of directors. The audit
committee shall provide assistance to the board in fulfilling their
responsibility to the shareholders, potential shareholders, and investment
community relating to corporate accounting policies and the quality and
integrity of the financial reports and disclosure practices of the corporation.
It is the responsibility of the audit committee to maintain free and open means
of communication between the directors, the independent auditors and the
financial management of the corporation.
COMPOSITION
The audit committee will consist of at least three independent members of
the board of directors who shall serve the full board of directors. Audit
committee members and the committee chairman shall be appointed by the full
board of directors. All members of the audit committee shall have a working
familiarity with basic finance and accounting practices, and at least one member
of the committee shall have accounting or related financial management
expertise. The duties and responsibilities of a member of the audit committee
are in addition to those duties set out for a member of the board of directors.
MEETINGS
The committee shall meet at least once per year, or more frequently as
circumstances require and may ask members of management or others to attend
meetings and provide pertinent information as necessary. The committee shall
meet separately with the independent auditors at least once per year to discuss
any matters that the committee or independent auditors believe should be
discussed privately. The committee intends to continue its long-standing
practice of asking the independent auditors to meet annually with the full board
of directors.
RESPONSIBILITIES & DUTIES
1. Provide an open avenue of communication between the independent auditors and
the board of directors.
2. Report the committee's activities to the board of directors and make
recommendations as the committee deems appropriate.
3. Review the committee's charter annually and update as necessary.
4. Recommend to the board of directors the independent auditors to be selected
and approve their compensation. Review and approve the discharge of the
independent auditors, if necessary.
5. Instruct the independent auditors that the board of directors is the
auditors' client.
6. Confirm and assure the independence and the objectivity of the independent
auditors, including a review of management consulting services provided and
the related fees.
7. Consider, in consultation with the independent auditors and financial
management of the corporation, the plan and scope of the proposed audit for
the current year.
8. Inquire of management and the independent auditors about significant risks
or exposures and assess the steps management has taken to minimize such
risks.
C-1
<PAGE>
9. Consider and review with the independent auditors the adequacy of the
corporation's internal controls and any related significant findings and
recommendations.
10. At the completion of the annual audit, review with management and the
independent auditors the corporation's annual financial statements and
related footnotes, the independent auditors' audit and report thereon,
significant changes required in the audit plan, difficulties or disputes
with management encountered during the course of the audit and other matters
related to the conduct of the audit which are to be communicated to the
committee under generally accepted auditing standards.
11. Meet with the independent auditors and management in separate sessions to
discuss any matters that these groups believe should be discussed privately.
12. Review any legal and regulatory matters that may have a material impact on
accounting policies or the financial statements.
13. Conduct or authorize investigations into any matters within the scope of the
committee's responsibilities with the power to retain outside counsel or
auditors for this purpose if, in its judgment, that is appropriate.
14. Perform other functions as requested by the board of directors.
C-2
<PAGE>
HATHAWAY CORPORATION
8228 PARK MEADOWS DRIVE
LITTLETON, COLORADO 80124
The undersigned hereby appoints Eugene E. Prince and Richard D. Smith, or
either of them, proxies of the undersigned, each with the power of substitution,
and hereby authorizes them to vote, as designated below, all the shares of
common stock, no par value, of the undersigned at the annual meeting of
shareholders of Hathaway Corporation (the "Company") to be held on October 26,
2000, and at all adjournments thereof, with respect to the following:
ITEM 1. ELECTION OF DIRECTORS--Nominees of the Board:
E. E. Prince, R. D. Smith, D. D. Hock, G. D. Hubbard, and G. J. Pilmanis,
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<S> <C> <C> <C> <C>
/ / FOR all nominees (except as indicated to / / WITHHOLD AUTHORITY to vote for all
the contrary below). nominees.
<S> <C>
</TABLE>
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, PRINT
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
IF AUTHORITY TO VOTE FOR NOMINEES IS NOT EXPRESSLY WITHHELD, IT SHALL BE DEEMED
GRANTED.
--------------------------------------------------------------------------------
ITEM 2. APPROVAL OF THE YEAR 2000 STOCK INCENTIVE PLAN
/ / FOR / / AGAINST / / ABSTAIN
ITEM 3. APPROVAL OF THE 2001 EMPLOYEE STOCK PURCHASE PLAN
/ / FOR / / AGAINST / / ABSTAIN
(TO BE SIGNED AND DATED ON OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
ITEM 4. OTHER MATTERS--In the proxies discretion on such other business matters
as may properly come before the Annual Meeting.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY, AND MAY BE REVOKED PRIOR TO ITS EXERCISE. THIS PROXY, WHEN PROPERLY
EXECUTED, WILL BE VOTED AS DIRECTED ABOVE BY THE UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS MADE, IT WILL BE VOTED FOR THE NOMINEES NAMED IN ITEM 1, FOR
APPROVAL OF THE COMPANY'S YEAR 2000 STOCK INCENTIVE PLAN, FOR APPROVAL OF THE
COMPANY'S 2001 EMPLOYEE STOCK PURCHASE PLAN, AND IN THE PROXIES' DISCRETION ON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
..................................
BY:...............................
Your signature should appear
exactly as your name appears in
the space at the left. For joint
accounts, all owners should sign.
When signing in a fiduciary or
representative capacity, please
give your full title as such.
Date: ............................
,
2000
PLEASE SIGN AND RETURN THIS PROXY
IN THE ENCLOSED POSTAGE PAID
ENVELOPE AS PROMPTLY AS POSSIBLE.
