PRELIMINARY
[Moscom Logo]
MOSCOM CORPORATION
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 14, 1998
To THE STOCKHOLDERS OF
MOSCOM Corporation:
Notice is hereby given that the Annual Meeting of Stockholders of
MOSCOM Corporation (the Corporation or the Company) will be held at Oak
Hill Country Club, Rochester, New York, on May 14, 1998, beginning at 10:00
AM, local time, for the following purposes:
(1) To elect four Directors to serve terms of either one, two, or
three years;
(2) To consider and vote upon the proposed amendments to the
Corporations Certificate of Incorporation, providing for the classification
of the Directors into three classes, to provide that any vacancy on the
Board shall be filled by the remaining Directors then in office, and
certain other amendments to the Corporations Certificate of Incorporation,
as set forth in the Restated Certificate of Incorporation attached as
Exhibit A to the Proxy Statement;
(3) To consider and vote upon a change in the Corporations name to
Veramark Technologies, Inc.;
(4) To consider and vote upon an amendment of the Corporations
Certificate of Incorporation to increase the number of shares of capital
stock the Corporation is authorized to issue from 20,000,000 to 60,000,000,
including an increase in the authorized Common Stock from 20,000,000 to
59,000,000 shares of Common Stock, and to authorize 1,000,000 shares of
Preferred Stock, as set forth in the Restated Certificate of Incorporation
attached as Exhibit A to the Proxy Statement;
(5) To consider and vote upon the adoption of new By-laws of the
Corporation, which new By-laws, among other things, incorporate the proposed
amendments to the Corporations Certificate of Incorporation,
and are attached as Exhibit B to the Proxy Statement;
(6) To consider and vote upon the 1998 Long-Term Incentive Plan
covering up to 2,500,000 shares of Common Stock, as set forth in Exhibit C
to the Proxy Statement;
(7) To consider and vote upon the 1998 Employee Stock Purchase Plan
covering 2,000,000 shares of Common Stock, as set forth in Exhibit D to the
Proxy Statement; and
(8) To approve the appointment independent auditors for the year
ending December 31, 1998.
The Board of Directors has fixed the close of business on March 17,
1998 as the record date for the determination of Stockholders entitled to
notice of and vote at the meeting.
All Stockholders are invited to attend the meeting in person.
However, if you are unable to attend the meeting, it is nevertheless
important that your stock be represented. A Proxy is enclosed for that
purpose. Please sign, date and return promptly the enclosed Proxy in the
accompanying envelope. No postage is necessary if mailed in the United
States.
Your attention is directed to the Proxy Statement submitted with this
notice.
Dated: March 19, 1998 By Order of the Board of Directors
Robert L. Boxer, Secretary
MOSCOM CORPORATION
3750 MONROE AVENUE
PITTSFORD, NEW YORK 14534
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 14, 1998
This Proxy Statement is furnished in connection with solicitation of
the enclosed proxy by the Board of Directors of MOSCOM Corporation (the
Corporation) in connection with the Annual Meeting of Stockholders of the
Corporation to be held on May 14 1998. The principal executive offices of
the Corporation are located at 3750 Monroe Avenue, Pittsford, New York
14534.
The close of business on March 17, 1998 has been fixed as the record
date for determination of the stockholders entitled to notice of, and to
vote at, the meeting. On that date there were outstanding and entitled to
vote 7,6XX,XXX shares of common stock, par value $.10 per share, of the
Corporation (the Common Stock) each of which is entitled to one vote on
each matter at the meeting. The approximate date on which this Proxy
Statement and the enclosed proxy are being sent to stockholders is March
26, 1998.
The enclosed proxy, if properly completed, signed and returned prior
to the meeting, will be voted at the meeting in accordance with the choices
specified thereon and, if no choices are specified, will be voted FOR (i)
the election as Directors of the persons nominated by the Board of
Directors, (ii) the approval of the proposed amendments to the Corporations
Certificate of Incorporation providing for the classification of the
Directors into three classes and related matters, (iii) the change of the
Corporations name, (iv) the amendment to the Corporations Certificate of
Incorporation to increase the authorized capital stock of the Corporation
and the authorization of preferred stock, (v) the adoption of new By-laws
of the Corporation, (vi) the adoption of the 1998 Long Term Incentive Plan
of the Corporation, (vii) the adoption of the 1998 Employee Stock Purchase
Plan, and (viii) for the appointment of Arthur Andersen, LLP as independent
auditors for 1998. A stockholder giving a proxy may revoke it at any time
before it has been voted at the meeting. The Corporation will bear the
cost of its solicitation of proxies for use at the Annual Meeting.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of March 13, 1998, with
respect to the persons believed by the Company, to be the beneficial owners
of more than 5% of its outstanding Common Stock, by certain executive
officers and by all Directors and Officers as a group. Further information
is presented under Election of Directors. Beneficial ownership is used in
this proxy statement as defined in Rule 13d-3 under the Securities Exchange
Act of 1934.
Name and Address Number of Shares Percent of Class
Albert J. Montevecchio 1,098,878 (1) 14.4%
20 Fairfield Drive
Fairport, New York 14450
Executive Officers:
Paul A. Babarik 19,400 (2) .3%
Robert L. Boxer 19,025 (3) .2%
James W. Karr 5,150 (4) *
David G. Mazzella 22,000 .3%
All Directors and Officers
as a Group
(Nine Individuals) 117,663 (5) 1.5%
(1) Includes 260,056 shares owned by Montevecchio Associates, a Limited
Partnership of which Albert J. Montevecchio is a General Partner.
(2) Includes 13,000 shares which may be acquired within 60 days through
the exercise of stock options and 2,000 shares owned by his wife.
(3) Includes 7,500 shares which may be acquired within 60 days through the
exercise of stock options.
(4) Includes 2,750 shares which may be acquired within 60 days through the
exercise of stock options.
(5) Includes 23,250 shares which may be acquired within 60 days through
the exercise of stock options by officers and 18,411 shares which may be
acquired within 60 days through the exercise of warrants by directors
nominated for re-election.
*Less than .1%.
Election of Directors
(Proposal No. 1)
At the meeting, four directors, comprising the entire membership of
the Board of Directors of the Company, are to be elected. The Companys
Amended Certificate of Incorporation, as proposed herein (see Proposal No.
2), provides that the Directors shall be divided into three classes with
each class consisting, as nearly as possible, of one-third of the total
number of Directors. Ultimately, one class will stand for election to a
three-year term each year. For the first election of a staggered Board,
Class I will be elected to a one-year term. Class II will be elected to a
two-year term, and Class III will be elected to a three-year term. In the
event stockholders do not approve the amendment to the Companys Certificate
of Incorporation, the election of all nominated Directors will be for one-
year terms. Each elected Director will serve until the next Annual Meeting
following the completion of their terms or until their successors are
elected.
The shares represented by the enclosed Proxy will be voted for the
election as directors of the five nominees named below. All of such
nominees are members of the present Board. If any nominee becomes
unavailable to stand for re-election for any reason or if a vacancy on the
Board shall occur before the election (which events are not anticipated),
the holders of the Proxy may vote for such other person in accordance with
their best judgment, but not more than five persons may be voted to serve
as directors.
The information appearing in the following table, with notes thereto,
has been furnished to the Company by the respective nominees. All figures
for securities owned are as of March 13, 1998.
<TABLE>
<CAPTION>
Amount and
Nature of
Term of Beneficial
Election if Ownership Percentage
Board is Principal Occupation Director Common of Common
Name of Nominee Class Classified Age For Past Five Years Since Stock Stock
<S> <C> <C> <C> <C> <C> <C> <C>
John E. Gould 1 1 Year 53 For more than five 1997 6,163 (6) *
(1)(2)(3)(5) years, a Partner in
Gould & Wilkie, a
general practice law
firm in New York
City. Mr. Gould is
also Chairman of the
American Geographical
Society. Director of
Harvard Club of New
York.
William J. Reilly 2 2 Years 49 Executive Vice 1997 6,163 (6) *
(2)(3)(4)(5) President of
International Sales
and Operations of
Checkpoint Systems,
Inc., (NYSE:CKP) a
manufacturer and
distributor of
systems for
electronic article
surveillance,
electronic access
control, closed
circuit television
and radio frequency
identification for
more than five years.
David G. Mazzella 3 3 Years 57 President and Chief 1997 22,000 .3%
(1)(4) Executive Officer of
the Company since
June, 1997.
President and Chief
Operating Officer of
the Company from
February, 1997 until
June, 1997. From
June, 1994, to
February, 1997,
engaged in management
consulting. From
January, 1992 to
June, 1994, President
and CEO of Scotgroup
Enterprises, Inc.,
which was engaged in
the development and
sale of
telecommunications
software equipment
and the sale of
paging and cellular
telephone services.
John E. Mooney 3 3 Years 53 Chairman of the Board 1985 37,934 (7) .5%
(1)(2)(3)(4)(5) of the Company since
June, 1997. For more
than five years Chief
Executive Officer of
Essex Investment
Group, an investment
management and
financial services
firm, General Partner
of Cephis Capital, a
venture capital fund,
and Director of
Performance
Technologies, Inc.
(Nasdaq:PTIX), a
manufacturer of
computer boards and
products.
(1) Member of Executive Committee.
(2) Member of Compensation Committee.
(3) Member of Audit Committee.
(4) Member of Nominating Committee.
(5) Member of Stock Option Committee.
(6) Includes 3,163 shares which may be acquired through the exercise of
warrants.
(7) Includes 10,282 shares which may be acquired through the exercise of
warrants.
*Less than .1%.
</TABLE>
During 1997, the full Board of Directors held seven meetings. The Audit
Committee of the Board, which is responsible for evaluating audits
performed by the Companys independent auditors and for reviewing the
Companys internal accounting principles and controls, met once during the
year. The Compensation Committee of the Board, which reviews and sets
compensation for the Companys officers, met twice during 1997. The Boards
Executive Committee held four meetings during 1997. The Executive
Committee has authority to act on behalf of the full Board of Directors
during intervals between meetings of the full Board. The Board has a
Nominating Committee which did not meet during 1997. The Nominating
Committee will consider recommendations submitted by Stockholders to the
Companys Secretary. The Stock Option Committee of the Board met three
times during 1997 to review administration of the Companys stock option
plan and to approve grants of stock options to employees.
During 1997, all Directors nominated for re-election attended 100% of
Board meetings or meetings of committees of which they were members.
Subject to approval by Stockholders of the 1998 Long Term Incentive Plan
(Proposal No. 6), it is the intention of the Board to compensate outside
Directors exclusively with stock options. Beginning in 1998, each outside
Director will receive each year an option to purchase 10,000 shares of the
Companys common stock at a price based upon the closing price of the
Companys common stock on the last trading day of the prior year. The
option price will be 100% of such closing price if an incentive stock
option and 85% of such closing price if a non-qualified option. If the
Long Term Incentive Plan is not approved, Directors who are not employees
of the Company will receive an annual fee of $5,000 for services as
Directors, $500 for each day on which a meeting of the Board is attended
and $400 for each additional day on which a meeting of a Board Committee is
attended.
Proposed Amendments to Certificate of Incorporation To Provide for a
Classified Board of Directors and Related Matters
(Proposal No. 2)
General. The Corporations Board of Directors has unanimously approved
amendments to the Corporations Certificate of Incorporation and has voted
to recommend to that the Corporations stockholders approve such amendments.
The proposed amendments would: (1) classify the Board of Directors into
three classes, as nearly equal in number as possible, each of which, after
an interim arrangement, will serve for three years, with one class being
elected each year; (2) provide that Directors may only be removed for cause
and only with the approval of a majority of the entire Board of Directors
or by the holders of not less than 75% of the outstanding shares of capital
stock entitled to vote for the election of Directors; (3) provide that any
vacancy on the Board of Directors shall be filled by the remaining
Directors then in office, though less than a quorum; and (4) increase the
stockholder vote required to amend or repeal, or to adopt any provision
inconsistent with, the foregoing amendments from a majority to 75% of the
voting power of the Corporation (collectively, the Amendments).
The proposed Amendments are being presented to stockholders of the
Corporation for their approval as a single proposal. As more fully
discussed below, the Board of Directors believes the proposed Amendments,
taken together, would, if adopted, effectively reduce the possibility that
a third party could effect a sudden or surprise change in the majority
control of the Corporations Board of Directors without the support of the
incumbent Board.
Adoption of this set of proposed Amendments may have significant
effects on the ability of stockholders of the Corporation to change the
composition of the incumbent Board of Directors and to benefit from certain
transactions which are opposed by the incumbent Board. Accordingly,
stockholders are urged to read carefully the following sections of this
Proxy Statement, which describe this set of proposed Amendments and their
purposes and effects, and Exhibit A attached hereto, which sets forth the
full text of the proposed Amendments, before voting on the proposed
Amendments to provide for a classified Board of Directors and related
matters.
Purposes and Effects of the Proposed Amendments.
Delaware, like many other states, permit a corporation to adopt a
number of measures through amendment of the corporate charter (or by-laws)
or otherwise, which along with certain provisions of the Delaware General
Corporation Law, may have the effect of delaying or deterring any
unsolicited takeover attempts notwithstanding that a majority of the
stockholders might benefit from such a takeover attempt. The Board of
Directors of the Corporation is asking stockholders to consider and adopt
the proposed Amendments to the Certificate of Incorporation which
Amendments could make the acquisition of the Corporation by means of a
tender offer, a proxy contest or otherwise difficult. These Amendments are
expected to discourage certain types of coercive takeover practices and
inadequate takeover bids and to encourage persons seeking to acquire
control of the Corporation to negotiate first with the Corporations Board
of Directors. The Corporation believes that the benefits of these
provisions outweigh the potential disadvantages of discouraging such change
of control proposals because, among other things, negotiation of such
change of control proposals might result in an improvements of their terms.
One method used by third parties to accomplish a takeover or a
restructuring or sale of all or part of a company or other similar
extraordinary corporation action, is the accumulation of substantial stock
positions in the target company. Such actions are often undertaken by the
third party without advance notice to or consultation with management of
the target company. In many cases, the purchaser seeks representation on
the target companys board of directors in order to increase the likelihood
that its proposal will be implemented by the target company. If the target
company resists the efforts of the purchaser to obtain representation on
the target companys board of directors, it may commence a proxy contest to
have its nominees elected to the board of directors in place of certain
directors, or the entire board of directors of the target company. In some
cases, the purchaser may not truly be interested in taking over the target
company, but uses the threat of a proxy fight and/or a bid to take over the
target company as a means of forcing the target company to repurchase the
purchasers equity position at a substantial premium over market price.
The Board of Directors of the Corporation believes that an imminent
threat of removal of the Corporations management severely curtails its
ability to negotiate effectively with such purchasers. Management is
deprived of the time and information necessary to evaluate the takeover
proposal, to study alternative proposals and to help ensure that the best
price is obtained in any transaction involving the Corporation which may
ultimately be undertaken. If the real purpose of a takeover bid is to
force the Corporation to repurchase an accumulated stock interest at a
premium price, management faces the risk that if it does not repurchase the
purchasers stock interest, the Corporations business and management will be
disrupted, perhaps irreparably. On the other hand, such a repurchase
diverts valuable corporate resources to the benefit of a single
stockholder.
Takeovers or changes in management of the Corporation which are
proposed and effected without prior consultation and negotiation with the
Corporations management are not necessarily detrimental to the Corporation
and its stockholders. However, the Board believes that the benefits of
seeking to protect its ability to negotiate with the proponent of an
unfriendly or unsolicited proposal to take over or restructure the
Corporation outweigh the disadvantages of discouraging such proposals.
The adoption of the proposed Amendments would make more difficult or
discourage a proxy contest or the assumption of control by a holder of a
substantial block of the Corporations stock or the removal of the incumbent
Board and could thus have the effect of entrenching incumbent management.
At the same time, the Amendments would help ensure that the Board, if
confronted by a surprise proposal from a third party who has recently
acquired a block of the Corporations stock, will have sufficient time to
review the proposal and appropriate alternatives to the proposal and to
seek a premium price for the stockholders.
The proposed Amendments are intended to encourage persons seeking to
acquire control of the Corporation to initiate such an acquisition through
arms-length negotiations with the Corporations management and Board of
Directors. The Amendments, if they are adopted, could also have the effect
of discouraging a third party from making a tender offer or otherwise
attempt to obtain control of the Corporation, even though such an attempt
might be beneficial to the Corporation and its stockholders. In addition,
since the Amendments are designed to discourage accumulations of large
blocks of the Corporations stock by a purchaser whose objective is to have
such stock repurchased by the Corporation at a premium, adoption of the
Amendments could tend to reduce the temporary fluctuations in the market
price of the Corporations stock which are caused by such accumulations.
Accordingly, stockholders could be deprived of certain opportunities to
sell their stock at a temporarily high market price.
The Corporations Certificate of Incorporation does not permit
cumulative voting in the election of Directors. Accordingly, the holders
of a majority of the outstanding shares entitled to vote for the election
of directors can elect all of the Directors then being elected at any
annual or special meeting of the Corporations stockholders.
The proposed Amendments are permitted under the Delaware law and are
consistent with the rules of the Nasdaq National Market System, upon which
the Corporations Common Stock is listed and traded. The Amendments are not
the result of any specific efforts of which the Corporation is aware to
accumulate the Corporations securities or to obtain control of the
Corporation. The Board of Directors, which unanimously approved the
Amendments and recommended that they be submitted to the Corporations
stockholders for adoption, does not presently contemplate recommending the
adoption of any further amendments to the Certificate of Incorporation
which would affect the ability of third parties to take over or change
control of the Corporation.
Description of the Proposed Amendments.
Classification of the Board of Directors. The Corporations By-laws
now provide that all Directors are to be elected to the Corporations Board
of Directors annually for a term of one year. The Board has set the number
of directors at five. The proposed amendments to Article V of the
Certificate of Incorporation provide that the Board shall be divided into
three classes of directors, each class to be as nearly equal in number of
directors as possible. If the proposed Amendments are adopted, the
Corporations directors will be divided into three classes and one director
will be elected for a term expiring at the 1999 Annual Meeting, two
directors will be elected for a term expiring at the 2000 Annual Meeting
and the remaining two directors will be elected for a term expiring at the
2001 Annual Meeting (in each case, until their respective successors are
duly elected and qualified). Starting with the 1999 Annual Meeting, one
class of Directors will be elected each year for a three year term.
The classification of the Directors will have the effect of making it
more difficult for stockholders, including those holding a majority of the
outstanding shares, to force an immediate change in the composition of the
Board of Directors. At least two stockholder meetings, instead of one,
will be required to effect a change in the majority control of the Board,
except in the event of vacancies resulting from removal for cause or other
reason (in which case the remaining directors will fill the vacancies
created -- See Removal of Directors; Filling Vacancies on the Board of
Directors below). The longer time required to elect a majority of a
classified Board will also help to assure continuity and stability of the
Corporations management and policies, since a majority of the Directors at
any given time will have prior experience as Directors of the Corporation.
It should be noted that the classification provision will apply to every
election of Directors, whether or not a change in the Board would be
beneficial to the Corporation and it stockholders and whether or not a
majority of the Corporations stockholders believes that such a change would
be desirable.
Removal of Directors; Filling of Vacancies on the Board of Directors.
The proposed Amendments provide that Directors may be removed only for
cause, whereas at present a Director, or the entire Board of Directors, may
be removed by the stockholders with or without cause. The Amendments also
provide that the affirmative vote of a majority of the entire Board of
Directors or of the holders of at least 75% of the voting power of the
shares entitled to vote for the election of Directors would be required to
remove a Director from office. Currently, any Director elected by the
holders of Common Stock may be removed from the Board with or without cause
by the affirmative vote of the holders of the majority of the shares of
Common Stock outstanding and entitled to vote thereon (which is the same as
the minimum vote required under the corporation law of Delaware).
Currently, Article III of the By-laws provides that a vacancy on the
Board, including a vacancy created by an increase in the number of
Directors, may be filled by the remaining Directors, though less than a
quorum, except that a vacancy created by the removal of a director by the
stockholders may be filled by the stockholders. Any newly-elected Director
shall serve for the term of office to which appointed and until the
election and qualification of his or her successor, typically, the next
Annual Meeting. The proposed Amendments retain the provision that a
vacancy on the Board occurring during the course of the year, including a
vacancy created by an increase in the number of Directors, may be filled by
the remaining Directors, but do not permit stockholders to fill any
vacancies on the Board, even Directors removed by the stockholders for
cause.
The provisions of the proposed Amendments relating to the removal of
Directors and the filling of vacancies on the Board will preclude a third
party from removing incumbent Directors without cause and simultaneously
gaining control of the Board by filling the vacancies created by removal
with its nominees. The provisions will also reduce the power of
stockholders, even those with a majority interest in the Corporation, to
remove incumbent Directors and to fill vacancies on the Board. Under the
proposed Amendment, stockholders will have the power to remove Directors
for cause with a 75% vote, but only the Directors will have the power to
fill the vacancies created by such removal.
Increased Stockholder Vote for Amendment, Repeal, etc. of Proposed
Amendments. Under the corporation law of Delaware, amendments of the
Certificate of Incorporation require the approval of the holders of a
majority of the outstanding stock entitled to vote thereon. Delaware law
also permits provisions in the Certificate of Incorporation which require a
greater vote than the vote otherwise required by law for any corporate
action. The proposed Amendments would require the concurrence of the
holders of at least 75% of the voting power of the Corporation entitled to
vote for the election of Directors for the amendment or repeal of, or the
adoption of any provision inconsistent with, the proposed Amendments
discussed above. The requirement of an increased stockholder vote is
designed to prevent a stockholder with a majority of the voting power of
the Corporation from avoiding the requirements of the proposed amendments
by simply amending all of the provisions again.
Stockholder Rights Agreement. In considering the proposed Amendments
set forth above, stockholders should consider the provisions and effects of
the Corporations newly adopted Stockholder Rights Agreement (the Rights
Agreement).
General. On December 15, 1997, the Board of Directors adopted the
Rights Agreement and declared a dividend of one common stock purchase right
(a Right) for each share of Common Stock of the Corporation outstanding on
January 9, 1998 (the Record Date), and further authorized and directed the
issuance of one Right with respect to each share of Common Stock that shall
become outstanding between the Record Date and the earliest of the
Distribution Date, the Redemption Date or the Final Expiration Date (as
such terms are defined below). Except as set forth below, each Right, when
it becomes exercisable, entitles the registered holder to purchase from the
Corporation one share of Common Stock at a price of $40.00 per share (the
Purchase Price), subject to adjustment.
The Rights Agreement. Initially, the Rights will be evidenced by the
certificates for Common Stock registered in the names of the holders of
Common Stock and not by separate Rights certificates. The Rights will
separate from the Common Stock upon the earliest to occur of: (i) a person
being declared an adverse person by the Board of Directors after a
determination that such person, alone or together with its affiliates and
associates, has become the beneficial owner of 10% or more of the Common
Stock, or (ii) a person or group of affiliated or associated persons having
acquired beneficial ownership of 15% or more of the outstanding shares of
Common Stock (except pursuant to a Permitted Offer, as defined below), or
(iii) 10 days (or such later date as the Board of Directors may determine)
following the commencement of, or announcement of an intention to make, a
tender offer or exchange offer the consummation of which would result in a
person or group becoming an Acquiring Person (as herein defined) (the
earliest of such dates being called the Distribution Date). A person or
group whose acquisition of Common Stock causes a Distribution Date pursuant
to clauses (i) or (ii) above is an Acquiring Person. The date a person or
group becomes an Acquiring Person is the Stock Acquisition Date.
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the Common Stock. Until the
Distribution Date (or earlier Redemption Date or Final Expiration Date),
new Common Stock certificates issued after the Record Date upon transfer or
new issuance of Common Stock will contain a notation incorporating the
Rights Agreement by reference. Until the Distribution Date (or earlier
Redemption Date or Final Expiration Date), the surrender for transfer of
any certificate or certificates for Common Stock outstanding as of the
Record Date, even without such notation or a copy of a summary of the
Rights being attached thereto, will also constitute the transfer of the
Rights associated with the Common Stock represented by such certificate.
As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights (Rights Certificates) will be mailed to
holders of record of the Common Stock as of the close of business on the
Distribution Date, and such separate Right Certificates alone will evidence
the Rights.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on December 14, 2007, unless earlier
terminated by the Corporation as described below.
Flip-In-Right. In the event that any person becomes an Acquiring
Person (except pursuant to a tender or exchange offer which is for all
outstanding Common Stock at price and on terms which a majority of certain
members of the Board of Directors determines to be adequate and in the best
interests of the Corporation, its stockholders, other than such Acquiring
Person, its affiliates and associates (a Permitted Offer)), each holder of
a Right will thereafter have the right (the Flip-In-Right) to receive upon
exercise the number of shares of Common Stock (or, in certain
circumstances, other securities of the Corporation) having a value
(immediately prior to such triggering event) equal to two times the
Purchase Price. Notwithstanding the foregoing, following the occurrence of
the event described above, all Rights that are, or were, beneficially owned
by any Acquiring Person or any affiliate or associate thereof will be null
and void.
Flip-Over-Right. In the event that, on or following the Stock
Acquisition Date, (i) the Corporation is consolidated with, or merged with
and into, any Acquiring Person, affiliate or associate of an Acquiring
Person or any other person in which any such Acquiring Person, affiliate or
associate has an interest or any person acting on behalf of or in concert
with any such Acquiring Person, affiliate or associate (Interested
Stockholder) or, if in such merger or consolidation all holders of Common
Stock are not treated alike, any other Person, (ii) the Corporation
consolidates with, or merges with, any Interested Stockholder or, if in
such merger or consolidation all holders of Common Stock are not treated
alike, any other Person, and the Corporation is the surviving corporation
of such consolidation or merger (other than, in a case of any transaction
described in (i) or (ii), a merger or consolidation which would result in
all of the securities generally entitled to vote in the election of
directors ( voting securities) of the Corporation outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or
by being converted into securities of the surviving entity) all of the
voting securities of the Corporation or such surviving entity outstanding
immediately after such merger or consolidation and the holders of such
securities not having changed as a result of such merger or consolidation),
or (iii) the Corporation sells or otherwise transfers assets or earning
power aggregating more than 50% of the assets or earning power of the
Corporation and its subsidiaries (taken as a whole) to any Interested
Stockholder or, if in such transaction all holders of Common Stock are not
treated alike, any other person, then each holder of Right (except Rights
which previously have been voided as set forth above), shall thereafter
have the right (the Flip-Over Right) to receive, upon the exercise, common
shares of the acquiring company having a value equal to two times the
Purchase Price. The holder of a Right will continue to have the Flip-Over
Right whether or not such holder exercises or surrenders the Flip-In Right.
The Purchase Price payable, and the number of shares of Common Stock
or other securities issuable upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a
stock dividend on, or a subdivision, combination or reclassification of,
the Common Stock, (ii) upon the grant to holders of the Common Stock of
certain rights or warrants to subscribe for or purchase Common Stock at a
price, or securities convertible into Common Stock with a conversion price,
less than the then current market price of the Common Stock or (iii) upon
the distribution to holders of the Common Stock of evidences of
indebtedness or assets (excluding regular periodic dividends) or of
subscription rights or warrants (other than the Rights).
Redemption. At any time prior to the earlier to occur of (i) a person
becoming an Acquiring Person or (ii) the Final Expiration Date, and under
certain other circumstances, the Corporation may redeem the Rights in
whole, but not in part, at a price of $.001 per Right (the Redemption
Right), which redemption shall be effective upon the action of the Board of
Directors. Additionally, following the Stock Acquisition Date, the
Corporation may redeem the then outstanding Rights in whole, but not in
part, at the Redemption Price provided that such redemption is in
connection with a merger or other business combination transaction or
series of transactions involving the Corporation in which all holders of
the Common Stock are treated alike but not involving any Acquiring Person
or its affiliates or associates.
Effect. The distribution of the Rights may have the effect of
delaying, deferring or preventing a change in control of the Corporation
notwithstanding that a majority of the stockholders might benefit form such
a change in control.
The Board of Directors unanimously recommends a vote FOR the proposed
Amendments to the Certificate of Incorporation.
Change of Corporations Name
(Proposal No. 3)
The Board of Directors of the Corporation propose that the
Corporations name be changed to VERAMARK TECHNOLOGIES, INC. The Directors
and Management of the Company believe that the significant changes
undertaken by the Company during the past year in terms of products,
markets and management can best be reflected in a change in the Companys
name and that such a change will be viewed favorably by customers,
employees and investors.
The Board of Directors unanimously recommends a vote FOR the change in the
Corporations name to Veramark Technologies, Inc.
Increase of Authorized Capital Stock; Increase of
Authorized Common Stock; and Authorization of Preferred Stock
(Proposal No. 4)
The Corporations Board of Directors have approved a proposed Restated
Certificate of Incorporation (Restated Certificate) of the Corporation,
subject to approval by the Corporations stockholders. The following
summary of the material terms of the Restated Certificate with respect to
the Corporations authorized capital stock is qualified in its entirety by
reference to the full text of the Restated Certificate attached as Exhibit
A to this Proxy Statement.
The Corporation is presently authorized to issue 20,000,000 shares of
Common Stock. As of March 13, 1998, there were 7,6XXXXX shares of Common
Stock issued and outstanding, and there were 7,6XXXXX shares remaining and
available for issuance under the Corporations 1993 Stock Option Plan and
12,000,000 shares reserved for issuance under the Corporations Stockholder
Rights Agreement. (See Stockholder Rights Agreement). Assuming the
adoption and ratification of the 1998 Long-Term Incentive Plan and the 1998
Employee Stock Purchase Plan, 4,000,000 additional shares of Common Stock
will be reserved for issuance under those plans. The Corporation will have
8,3XX,XXX unreserved, uncommitted shares of Common Stock available for
issuance.
The Restated Certificate will increase the number of shares of Common
Stock the Corporation is authorized to issue from 20,000,000 shares to
59,000,000 and create a new class of 1,000,000 authorized shares of
undesignated blank check preferred stock, par value $.10 per share (the
Preferred Stock). The availability of blank check Preferred Stock will
afford the Board of Directors the sole discretion, without having to obtain
further stockholder approval, to establish from time to time a series of
Preferred Stock with such rights and privileges as the Board of Directors
may determine is appropriate under the circumstances. It is possible that
rights and privileges granted upon a series of Preferred Stock at the time
of issuance may have an adverse affect on the availability of earnings for
distribution to holders of Common Stock or on other rights of the shares of
Common Stock. In addition, Preferred Stock could also be used to impede a
non-negotiated acquisition of the Corporation by diluting the ownership
interest of a substantial stockholder, increasing the total amount of
consideration necessary for a person to obtain control of the Corporation,
or increasing the voting power of friendly third parties.
The Board of Directors of the Corporation believe that it is desirable
to have the additional authorized shares of Common Stock and the authorized
shares of Preferred Stock available for, among other things, possible
future financing and acquisition transactions, stock dividend or splits,
employee benefit plans (including the 1998 Employee Stock Purchase Plan
being submitted herewith for approval by the stockholders), and other
general corporate purposes.
Although the Board of Directors does not have any specific plans,
arrangements, understandings, agreements, negotiations or commitments for
the issuance of additional shares of stock, the Corporation may consider,
among other things, adopting a new stockholder rights agreement to replace
the current plan, providing for the right to purchase shares, or fractional
shares, of Preferred Stock, or issuing shares of Common Stock and/or
Preferred Stock in connection with any future acquisitions. Having such
additional authorized shares of Common Stock and Preferred Stock available
for issuance in the future will give the Corporation greater flexibility
and may allow such shares to be issued without the expense and delay of a
special stockholders meeting. All authorized but unissued shares of Common
Stock, including the additional shares of Common Stock and the Preferred
Stock authorized by the amendment, will be available for issuance without
further action by the stockholders, unless such action is required by
applicable law.
The Board of Directors unanimously recommends a vote FOR the
proposed amendment of the Corporations Certificate of
Incorporation to increase the number of shares of capital
stock the Corporation is authorized to issue from 20,000,000
to 60,000,000, to increase the authorized Common Stock from
20,000,000 to 59,000,000 shares of Common Stock, and to
authorize 1,000,000 shares of Preferred Stock.
Adoption of New By-laws
(Proposal No. 5)
The Corporations Board of Directors has unanimously adopted the new
By-laws of the Corporation, subject to the approval of the Corporations
stockholder, and has voted to recommend that the Corporations stockholders
adopt such By-laws to be the new By-laws of the Corporation. The new By-
laws (i) incorporate the proposed Amendments to the Corporations
Certificate of Incorporation set forth above in Proposal 2, and (ii) delete
Article X of the Corporations current By-laws, which currently restricts
the borrowing of the Corporation to three times the aggregate of the sum
of: (a) stockholders equity and (b) the adjusted consolidated capital and
revenue reserves of the Corporation and its subsidiaries, without the
approval of a majority of all of the holders of Common Stock.
The full text of the new By-laws is attached as Exhibit B to this
Proxy Statement.
The Board of Directors unanimously recommends a vote FOR the
new By-laws.
1998 Long-Term Incentive Plan
(Proposal No. 6)
The stockholders of the Corporation are being asked to approve a new
stock option plan, the 1998 Long-Term Incentive Plan (the Plan). The
following summary of the material features of the Plan is qualified in its
entirety by reference to the full text of the Plan attached as Exhibit C to
this Proxy Statement.
The Corporation currently has a stock option plan, the 1993 Stock
Option Plan (the 1993 Plan), under which there are currently approximately
32,000 shares remaining and available for issuance. In the high technology
environment in which MOSCOM operates, the cumulative knowledge of our
employees is the Corporations greatest strength and resource. The
Corporations success depends almost entirely on the skill, creativity, hard
work, and dedication of our employees. Effective recruitment, retention
and motivation of the best available people are among the most important
functions of the Corporation and the most certain means of optimizing
returns to our stockholders and customers. We also want each one of our
employees and outside directors to bring to every Corporation task the
pride and dedication derived from owning a portion of the Corporation. To
foster that ownership and to assist in attracting and retaining the best
available people, the Board of Directors has approved the Long Term
Incentive Plan and recommends approval by stockholders.
The Board of Directors approved the Plan on December 15, 1997, and on
that date granted options to purchase 740,000 shares at a price of $5.10
per share to 47 employees and directors including the Executive Officers
named in the table entitled Stock Options Granted in Last Fiscal Year on
Page __ herein. Including among those totals were options granted to each
of three outside directors nominated for re-election for 10,000 shares as
compensation for serving on the Board during 1998, and options for 5,000
shares granted to each of the three outside directors who were not
nominated for re-election for the 1998 annual meeting. On January 30,
1998, the Board of Directors granted options to purchase 24,610 shares at a
price of $5.74 per share to 24 employees and an option to purchase 10,000
shares at a price of $5.74 per share to John E. Mooney, an outside director
who serves as Chairman of the Board. The exercisability of the options
approved by the Board on December 15, 1997 and January 30, 1998 vest over
four or five years and in each case is conditional on approval of the 1998
Long Term Incentive Plan by stockholders.
Description of the Plan.
Purpose of the Plan. The purpose of the Plan is to provide the
Corporation with a means of attracting and retaining employees (including
executive officers) and non-employee directors of outstanding ability and
to promote the identification of their interests with those of the
stockholders of the Corporation. The Plan would be administered by a
committee of the Board (the Committee) appointed by the Board. The Plan is
designed to give the Committee maximum flexibility in granting awards under
the Plan consistent with applicable laws and the terms of the Plan.
Types of Awards and Eligibility. The Plan authorizes the Committee to
make a variety of stock-based awards, as well as cash awards, to the
Corporations employees and non-employee directors. Under the Plan, the
Committee may award incentive stock options, non-qualified stock options,
stock appreciation rights, restricted stock and incentive shares to
employees and non-employee directors of the Corporation and its related
companies. Participation in the Corporations 1993 Plan has been limited to
employees of the Corporation and its subsidiaries.
Incentive Stock Options. Incentive stock options are stock options
that satisfy the requirements of Section 422 of the Internal Revenue Code
of 1986, as amended (the Code). Non-qualified stock options are stock
options that do not satisfy the requirements of Section 422 of the Code.
Options granted under the Plan would entitle the participant, upon
exercise, to purchase a specified number of shares of Common Stock from the
Corporation at a specified exercise price per share. The per share
exercise price of an option will be determined by the Committee at the time
the option is granted; except that the exercise price for an incentive
stock option may not be less than the fair market value of a share of
Common Stock as of the date of grant, determined in the manner specified by
the Plan. In the case of a participant who owns or is treated as owning
(under Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Corporation (a 10%
Stockholder), the per share exercise price of an option may not be less
than 110% of the fair market value of a share of Common Stock on the date
of the grant.
Stock Appreciate Rights. Stock appreciation rights under the Plan may
be granted in connection with the grant of a stock option or by amendment
of an outstanding stock option (in either case, a related right) or
independently of any option. The exercise of a stock appreciation right
under the Plan would entitle the participant to receive either cash or
Common Stock, or a combination thereof, with a value equal to the excess of
the fair market value per share of Common Stock on the date of exercise of
the right over either (1) the fair market value per share of Common Stock
on the date of grant of the right if it is not a related right or (2) the
exercise price as provided in the related option if the right is a related
right.
Restricted Stock. Restricted stock awards under the Plan would
consist of shares of Common Stock that are nontransferable, subject to
forfeiture and subject to such other terms, for such periods, as shall be
determined by the Committee. Such terms may provide, in the discretion of
the Committee, for the vesting of restricted stock awards to be contingent
upon the achievement of one or more performance goals. Performance goals
may be based on cash generation targets, profit, revenue and market share
targets, profitability targets as measured by return ratios, and
stockholder returns, or any other objective goals established by the
Committee, and may be absolute in their terms or measured against or in
relationship to other publicly-traded companies (Performance Goals).
Performance Goals may be particular to the participant or the department,
branch, subsidiary or other division in which the participant works, or may
be based upon the performance of the Corporation generally, and may cover
such period as may be specified by the Committee.
Incentive Shares. Incentive share awards under the Plan consist of
shares of Common Stock that may be issued subject to achievement of
Performance Goals or other goals and on such other terms as the Committee
establishes. Unlike restricted stock, shares of Common Stock are not
issued immediately pursuant to incentive share awards, but instead are
issued upon the achievement or satisfaction of Performance Goals or other
goals and terms.
Administration. Subject to the provisions of the Plan, the Committee
would have plenary authority and discretion to determine the terms of all
awards under the Plan, including the exercise price of options, the time or
times at which awards are made, the number of shares of Common Stock
covered by awards, any provisions relating to transferability, any
provisions relating to vesting, any circumstances in which options would
terminate, the period during which options and stock appreciation rights
may be exercised, the period during which options and restricted stock are
subject to restrictions, and the manner of exercising options. These terms
need not be identical for all awards. In determining the terms of awards
under the Plan, the Committee may take into account the nature of the
services rendered by the award recipients, their present and potential
contributions to the success of the Corporation and its related companies,
and such other factors as the Committee may deem relevant. Subject to the
provisions of the Plan, the Committee also would have plenary authority to
interpret the Plan, prescribe, amend and rescind rules and regulations
relating to it, and make all other determinations deemed necessary or
advisable for the administration of the Plan.
Shares Subject to Grant and Adjustment. The maximum number shares of
Common Stock that may be delivered to participants and their beneficiaries
under the Plan shall be equal to the sum of: (I) 2,000,000 shares of Common
Stock and (II) up to 500,000 shares of Common Stock reacquired in the open
market or in a private transaction. The number of shares subject to the
Plan (and the number of shares and terms of any award or maximum number of
shares with respect to which an individual may receive awards) may be
adjusted by the Committee in the event of any change in the outstanding
Common Stock by reason of any stock dividend, split-up, recapitalization,
reclassification, combination or exchange of shares, merger, consolidation
or liquidation or similar event. March 13, 1998, the closing sale price of
the Corporations Common Stock on the Nasdaq National Market was $_____.
Exercise Period and Transferability. Options and stock appreciation
rights granted under the Plan may be exercised during such periods as may
be established by the Committee, except that incentive stock options may be
exercised for a period of no more than ten years from the date of grant
(five years in the case of incentive stock options granted to a 10%
Stockholder). Except with respect to incentive stock option awards, which
are not transferable other than by will or the laws of descent and
distribution, the Committee will have plenary authority and discretion to
determine the terms of any provisions relating to transferability with
respect to all other awards.
Payment of Exercise Price. Under the Plan, the Committee may provide
that the exercise price of an option may be paid by any combination of (1)
cash, (2) check, (3) delivery to the Corporation of shares of Common Stock
having a fair market value on the date of surrender equal to the exercise
price, (4) delivery to the Corporation of a properly executed exercise
notice and irrevocable instructions to a registered securities broker to
promptly deliver to the Corporation cash equal to the exercise price, and
(5) a cashless exercise arrangement whereby an optionee, without payment of
the exercise price, receives upon exercise, shares of Common Stock having
an aggregate fair market value as of the date of surrender equal to the
number of shares subject to the option being surrendered multiplied by an
amount equal to the excess of the fair market value of a share of Common
Stock on the exercise date over the per share exercise price of the option.
Discontinuance, Cancellation, Amendment and Termination. Neither
adoption of the Plan nor the grant of awards to a participant under the
Plan will affect the Corporations right to grant to such participant awards
that are not subject to the Plan, to issue to such participant shares of
Common Stock as a bonus or otherwise, or to adopt other plans or
arrangements under which shares of Common Stock may be issued to
individuals eligible under the Plan.
The Board of Directors may at any time discontinue granting awards
under the Plan. The Board of Directors may at any time or times alter or
amend the Plan or any outstanding award for any purpose which may at the
time be permitted by law, or may at any time terminate the Plan as to any
further grants of awards, provided that (except to the extent expressly
required or permitted by the Plan) no such amendment will, without the
approval of (a) the Corporations stockholders, to the extent stockholder
approval of the amendment is required by applicable law or regulations or
the requirements of the principal exchange or interdealer quotation system
on which the Common Stock is listed or quoted, (i) increase the maximum
number of shares available under the Plan, (ii) change the group of persons
eligible to receive awards under the Plan, (iii) extend the time within
which awards may be granted, or (iv) amend the provisions of the Plan
relating to amendment and termination of the Plan, and (b) each affected
participant if the amendment, alteration or termination would adversely
affect the participants rights or obligations under any award made prior to
the date of the amendment, alteration or termination. The termination of
the Plan would not affect the validity of any award outstanding on the date
of termination.
Summary of Certain Federal Income Tax Consequences.
Incentive Stock Options. Generally, an optionee will not recognize
income on the grant or exercise of an incentive stock option. If an
optionee does not exercise an incentive stock option within certain
specified periods after termination of employment, however, the optionee
will recognize ordinary income on the exercise of an incentive stock option
in the same manner as on the exercise of a non-qualified stock option, as
described below. The exercise of an incentive stock option may result in a
tax to the optionee under the alternative minimum tax even if the exercise
would not otherwise be taxable.
The general rule is that gain or loss from the sale or exchange of
shares acquired on the exercise of an incentive stock option will be
treated as capital gain or loss. If certain holding period requirements
are not satisfied, however, the optionee will recognize ordinary income at
the time of the disposition. Gain recognized on the disposition in excess
of the ordinary income resulting therefrom will be capital gain, and any
loss recognized will be capital loss. If an optionee recognizes ordinary
income on exercise of an incentive stock option or as a result of a
disposition of the shares acquired on exercise, the Corporation will be
entitled to a deduction in the same amount.
Non-Qualified Stock Options. An optionee will not recognize income on
the grant of a non-qualified stock option, but will recognize ordinary
income on the exercise of a non-qualified stock option. The amount of
income recognized on the exercise of a non-qualified stock option will be
equal to the excess of the fair market value of the shares at the time of
exercise over the aggregate exercise price paid for the shares, regardless
of whether the exercise price is paid in cash, in stock, or in part with a
note. The Corporation will be entitled to a deduction in the amount of
ordinary income so recognized.
Stock Appreciation Rights. A grantee will not recognize income on the
grant of a stock appreciation right, but will recognize ordinary income on
the exercise of a stock appreciation right. The amount of income
recognized on the exercise of a stock appreciation right will be equal to
the amount of cash and the fair market value of any shares received on the
date of exercise plus the amount of any cash or stock withheld to satisfy
withholding taxes. The Corporation will be entitled to a deduction in the
amount of ordinary income so recognized. Gain or loss from the sale or
exchange of shares acquired pursuant to the exercise of a stock
appreciation right will be treated as capital gain or capital loss.
Restricted Stock. A grantee of restricted stock is not required to
include the value of such shares in ordinary income until the shares are no
longer subject to a substantial risk of forfeiture, unless the grantee
elects to be taxed on receipt of the shares. In either case, the amount of
such income will be equal to the fair market value of the shares at the
time the income is recognized. The Corporation will be entitled to a
deduction in the amount of ordinary income so recognized.
Incentive Shares. A grantee of incentive shares will recognize
ordinary income on the date the incentive shares are issued in an amount
equal to the fair market value of the shares on such date. The Corporation
will be entitled to a deduction in the amount of ordinary income so
recognized. Gain or loss from the sale or exchange of shares acquired on
the issuance of incentive shares will be treated as capital gain or capital
loss.
Parachute Payments. Where payments to an employee that are contingent
on a change in control of the Corporation exceed limits specified in the
Code, the employee generally is liable for a 20% excise tax on, and the
Corporation generally is not entitled to any deduction for, a specified
portion of such payments. The Plan provides for the acceleration of
vesting of option upon a change in control, such accelerated vesting would
be relevant in determining whether the excise tax and deduction
disallowance rules would be triggered.
Performance Based Compensation. Subject to certain exceptions,
Section 162(m) of the Code disallows federal income tax deductions for
compensation paid by a publicly held corporation to certain executives to
the extent the amount paid to an executive exceeds $1 million for the
taxable year. The Plan has been designed to allow the Committee to make
awards under the Plan that qualify under an exception to the deduction
limit of Section 162(m) for performance-based compensation.
General. The rules governing the tax treatment of options, stock
appreciation rights, restricted stock and incentive shares, and the receipt
of shares in connection with such grants or awards, are highly technical,
so that the above description of tax consequences is necessarily general in
nature and does not purport to be complete. Moreover, statutory provisions
are subject to change, as are their interpretations, and their application
may vary in individual circumstances. Finally, the tax consequences under
applicable state law may not be the same as under the federal income tax
laws.
Accounting Treatment.
Under current accounting principles, as applied by the Corporation,
neither the grant nor the exercise of an incentive stock option or a non-
qualified stock option under the Plan with an exercise price not less than
the fair market value of Common Stock at the date of grant requires any
charge against earnings, but the Corporation will, beginning in fiscal
1998, disclose in footnotes to its financial statements the effect on its
results of operations had expense for stock compensation awards been
recognized based on FASB-specified guidelines.
Stock appreciation rights require a charge against the earnings of the
Corporation each accounting period the value of such rights increases. The
charge related to stock appreciation rights will vary depending upon, among
other factors, the amount of stock appreciation rights granted, stock price
changes above the grant price, and the length of time that stock
appreciation rights have been outstanding. Such charge is based, generally
speaking, on the difference between the exercise price specified in the
related right, or the market value of Common Stock on the date of grant,
and the current market price of the Common Stock. In the event of a
decline in the market price of Common Stock subsequent to a charge against
earnings related to the estimated costs of stock appreciation rights, a
reversal of prior charges is made (but not to exceed aggregate prior
charges).
Restricted stock and incentive shares will require a charge to
earnings representing the value of the benefit conferred, which, in the
case of restricted stock, may be spread over the restrictive period. Such
charge is based on the market value of the shares transferred at the time
of issuance.
Registration. Assuming the adoption of the Plan by the stockholders, the
Corporation expects to register the options and shares of Common Stock
covered by the Plan under the Securities Act of 1933 as soon as practicable
after such approval is obtained. The Corporation, however, may
nevertheless require each person exercising options to give written
representation that he or she is acquiring the stock for his or her own
account for investment and not with a view to the distribution thereof.
The Board of Directors unanimously recommends a vote FOR the
1998 Long-Term Incentive Plan.
1998 Employee Stock Purchase Plan
(Proposal No. 7)
The stockholders of the Corporation are being asked to approve an
employee stock purchase plan, the 1998 Employee Stock Purchase Plan (the
Plan). The following summary of the material features of the Plan is
qualified in its entirety by reference to the full text of the Plan
attached as Exhibit D to this Proxy Statement.
The Plan provides for the purchase of up to 2,000,000 shares of Common
Stock (the Shares) by employees of the Corporation at a discount from
market price. The purpose of the Plan is to provide employees of the
Corporation and its subsidiaries with a convenient means to purchase
shares of Common Stock of the Corporation at favorable prices through
accumulated payroll deductions and to thereby encourage ownership in the
Corporation. It is the intention of the Corporation to have the Plan
qualify as an Employee Stock Purchase Plan under Section 423 of the
Internal Revenue Code of 1986, as amended (the Code). The Plan is not
subject to any of the provisions of the Employee Retirement Income Security
Act of 1974, as amended, and is not qualified under Section 401(a) of the
Code.
Description of the Plan.
All regular employees of the Corporation and its subsidiaries who work
at least 20 hours per week and who have been employed by the Corporation
for more than five months in any calendar year are eligible to participate
in the Plan. For purposes of the Plan, an individual will continue to be
deemed an eligible employee while the individual is on sick leave or other
leave of absence approved by the Corporation; provided, however, that where
the period of leave exceeds 90 days and the individuals right to
reemployment is not guaranteed either by statute or by contract, the
employee will be deemed to have been terminated on the 91st day of such
leave.
The Plan will be administered by the Board of Directors of the
Corporation, and will continue for ten years unless earlier terminated by
the Board.
The Plan will be implemented by consecutive offering periods, ranging
from six (6) months to twenty four (24) months (each of which is referred
to herein as an Offering Period). The precise duration of any Offering
Period will be announced by the Board at least five (5) days prior to its
commencement. As of the first day of each Offering Period (Enrollment
Date), each eligible employee participating in such Offering Period will be
granted an option to purchase on the last day of each Offering Period (the
Exercise Date) up to a number of Shares determined by dividing such
employees payroll deductions accumulated prior to such Exercise Date and
retained in the employees account as of the Exercise Date by the applicable
Purchase Price (as such term is defined below); provided that in no event
shall an employee be permitted to purchase during each Offering Period more
than 5,000 shares of the Corporations Common Stock. The applicable
Purchase Price shall mean an amount equal to 85% of the fair market value
of a share of Common Stock on the Enrollment Date or on the Exercise Date,
whichever is lower, as determined under the Plan.
In no event will any employee be granted an option under the Plan (i)
to the extent that, immediately after the grant, such employee (or any
other person whose stock would be attributed to such employee pursuant to
Section 424(d) of the Code) would own capital stock of the Corporation
and/or hold outstanding options to purchase such stock possessing five
percent (5%) or more of the total combined voting power or value of all
classes of the capital stock of the Corporation or of any subsidiary, or
(ii) to the extent that his or her rights to purchase stock under all
employee stock purchase plans of the Corporation and its subsidiaries
accrues at a rate which exceeds $25,000 worth of stock (determined at the
fair market value of the shares at the time such option is granted) for
each calendar year in which such option is outstanding at any time.
Unless a participant employee withdraws from the Plan, his or her
option for the purchase of Shares will be exercised automatically on the
Exercise Date, and the maximum number of full Shares subject to option will
be purchased for such employee participant at the applicable Purchase Price
with the accumulated payroll deductions in his or her account. No
fractional shares will be purchased; any payroll deductions accumulated in
an employee participants account which are not sufficient to purchase a
full share will be retained in the employee participants account for the
subsequent Offering Period, subject to withdrawal by the employee
participant.
Neither payroll deductions credited to an employee participants
account nor any rights with regard to the exercise of an option or to
receive Shares under the 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 otherwise provided in the Plan) by the employee
participant. In addition, the Board will have the power to impose such
restrictions on the transfer of Shares that may be issued under the Plan
during any Offering Period, if such restrictions are announced at least
five (5) days prior to the scheduled beginning of the Offering Period to be
affected by such restrictions.
The Board of Directors of the Corporation may at any time and for any
reason terminate or amend the Plan, except no such termination can affect
options previously granted, provided that an Offering Period may be
terminated by the Board of Directors on any Exercise Date if the Board
determines that the termination of the Plan is in the best interests of the
Corporation and its stockholders, and no amendment may make any change in
any option theretofore granted which adversely affects the rights of any
participant.
Summary of Federal Income Tax Consequences of the Plan.
The Plan is intended to qualify as an employee stock purchase plan
within the meaning of Section 423 of the Code. Under the Code, no employee
participant will recognize income for federal income tax purposes on the
purchase of the Shares, but will instead defer the tax consequences until
the employee participant sells or otherwise disposes of the Shares.
If the participant employee disposes of Shares purchased under the
Plan more than the later of two years from the beginning of the applicable
Offering Period or one year from the Exercise Date, the employee
participant would be deemed to have received compensation at the time of
sale or other disposition taxable as ordinary income equal to the lesser of
(a) the amount of the discount allowed on the Shares purchased under the
Plan; or (b) the excess of the fair market value of the Shares at the time
of disposition over the purchase price. Any gain on the disposition in
excess of the amount treated as ordinary income would be treated as long-
term capital gain. The Corporation is not entitled to take a deduction for
the amount of the discount in the circumstances indicated above.
If the employee participant disposes of Shares purchased pursuant to
the Plan before the expiration of either of the required holding periods
described above (the disqualifying deposition), the employee participant
would recognized ordinary income at the time of the sale or other
disposition taxable to the extent that the fair market value of the Common
Stock on the Exercise Date was greater than the Purchase Price (i.e., the
spread at purchase). This amount is considered ordinary compensation
income in the year of sale or other disposition even if no gain is realized
on the sale or disposition, and the Corporation is entitled to a deduction
equal to the amount the employee participant is required to report as
ordinary compensation income.
As of March 13, 1998, approximately _______ employees would be
eligible to participate in the Plan. Because the price of the Shares to be
purchased will not be established until the end of the first Offering
Period, and because benefits to be received depends upon participants
decisions to participate throughout the Offering Periods, the benefits to
be received under the Plan by the foregoing persons is not determinable at
the date of this Proxy Statement. The closing sale price of the Common
Stock on the Nasdaq National Market on March 13, 1998 was $_____ per Share.
Registration. Assuming the adoption of the Plan by the stockholders, the
Corporation expects to register the shares of Common Stock covered by the
Plan under the Securities Act of 1933 as soon as practicable after such
approval is obtained.
The Board of Directors unanimously recommends a vote FOR the
1998 Employee Stock Purchase Plan.
EXECUTIVE COMPENSATION
The following tables relate to the compensation paid or accrued to
executive officers of the Company whose cash compensation exceeded $90,000
during 1997 (the Named Executives).
Summary Compensation Table
Annual Compensation Long Term
Compensation
Awards
Name and Year Salary Bonus Other Annual Options
Principal ($) ($) Compensation
Position ($) (1)
David G. Mazzella 1997 168,077 0 11,235 500,000
President, CEO (2)
Robert L. Boxer 1997 108,923 0 12,174 130,000
Vice President, 1996 106,500 0 12,078 0
Secretary, 1995 102,500 5,750 12,197 0
General Counsel
Paul T. Babarik 1997 100,462 0 12,653 80,000
Vice President, 1996 97,000 0 8,479 0
Sales 1995 113,118 0 8,420 2,650
James W. Karr 1997 97,308 0 12,912 25,000
Vice President, 1996 95,000 0 12,663 0
Sales 1995 92,500 0 12,665 0
Albert J. Montevecchio 1997 111,477 0 7,642 0
Chairman, CEO (3) 1996 220,000 0 18,561 0
1995 176,850 21,792 19,516 0
(1) Includes (i) Personal Use of Company Car, (ii) Life Insurance
Premiums, (iii) Company Contribution to 401(K) Plan, and (iv) Medical
Expense Reimbursement.
(2) Started February 25, 1997. Current annual salary is $225,000.
(3) Retired on May 22, 1997.
Employment Agreements
Pursuant to an agreement between the Board of Directors and Mr.
Mazzella, in the event, prior to his reaching age 65, his employment is
either terminated without cause or his responsibilities and title are
significantly diminished without cause, he will be paid a lump sum equal to
two years salary and benefits. In the event such termination or demotion
occurs as a result of a change in control of the Company, the lump sum
payment shall be equal to three years salary and benefits. In either case,
all Company stock options held by Mr. Mazzella at the time of such event
shall become immediately exercisable at 50% of the original option price
and remain exercisable at such price for the balance of the original 10-
year term.
Retirement Benefits
The Named Executives listed below are vested in a defined benefit
retirement plan of the Company. The amount of the retirement benefit,
payable from age 65, will vary depending upon length of service, retirement
age and average salary. The other Named Executives presently employed by
the Company are not vested under the Plan. The maximum annual benefit is
50% of average salary for the last three full fiscal years of employment by
the Company and is payable until death.
Assuming continued employment by the Company until age 65 with average
salary increases of 3% per year the projected retirement benefit at age 65
for each executive officer is shown below:
Name Age Years of Service Annual Benefit at
to Date at Age 65
Robert L. Boxer 44 15 $93,437
James W. Karr 54 15 $65,961
Stock Options
The Company has a stock option plan under which employees may be
granted Incentive Stock Options and Non-Qualified Stock Options to purchase
the Companys Common Stock. All full-time employees of the Company and its
subsidiaries are eligible to receive Stock Options. The Stock Option
Committee of the Board of Directors administers the Plan and makes all
determinations with respect to eligibility, option price, term and
exercisability, except that the option price on Incentive Stock Options may
not be less than 100% of fair market value on the date of grant and the
term of any option may not exceed ten years.
The following tables set forth information regarding stock option
transactions involving the Named Executives.
<TABLE>
Stock Option Exercises and Year-End Value Table
<CAPTION>
Number of Unexercised Value of Unexercised In-the-
Options at FY-End Money Options at FY-End (1)
Name Shares Value Exercisable Unexercisable Exercisable Unexercisable
Acquired Realized ($) ($)
on ($)
Exercise
(#)
<S> <C> <C> <C> <C>
David G. Mazzella 0 0 0 500,000 0 1,864,000
Paul T. Babarik 0 0 13,000 80,000 49,810 204,400
Robert L. Boxer 0 0 7,500 130,000 23,150 280,400
James W. Karr 0 0 2,750 25,000 12,705 51,800
Albert J. Montevecchio 46,500 160,545 0 0 0 0
(1) Based on year-end price of $6.62 per share.
</TABLE>
Stock Option Grants in Last Fiscal Year
The potential realizable value portion of the following table
illustrates the gain that might be realized upon the exercise of the
options immediately prior to the expiration of their term, assuming the
specified compounded rates of appreciation of the Companys Common Stock
over the term of the option. Actual gains, if any, on the stock option
exercises are dependent on the future performance of the Common Stock,
overall market conditions, as well as the option holders continued
employment through the vesting period. The amounts reflected in this table
may not necessarily be achieved.
<TABLE>
<CAPTION>
Potential Realizable Value of
Assumed Annual Rates of Stock
Price Appreciation for Option
Term
Name Options % of Total Exercise Expiration 0% 5% 10%
Granted (1) Options Price Date
Granted to
Employees in
Fiscal Year
<S> <C> <C> <C> <C> <C> <C> <C>
David G. Mazzella 400,000(1) 31.8 $2.34 5/21/07 $1,712,000 $3,376,000 $5,932,000
100,000(1) 8.0 $5.10 12/14/07 152,000 568,000 1,207,000
Paul T. Babarik 30,000(1) 2.4 $2.34 5/21/07 $128,400 $253,200 $444,900
50,000(1) 4.0 $5.10 12/14/07 76,000 284,000 603,500
Robert L. Boxer 30,000(1) 2.4 $2.34 5/21/07 $128,400 $253,000 $444,900
100,000(1) 8.0 $5.10 12/14/07 152,000 568,000 1,207,000
James W. Karr 5,000(1) 0.4 $2.34 5/21/07 $21,400 $42,200 $74,150
20,000(2) 1.6 $5.10 12/14/07 30,400 113,600 241,400
(1) Exercisable over four years.
(2) Exercisable over five years.
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board sets compensation levels for the
CEO and all other officers of the Company, establishes compensation and
incentive plans for officers and approves payments under such incentive
plans. The Compensation Committee is composed of four independent, non-
employee directors who have no interlocking relationships as defined by the
S.E.C.
The Committees compensation policies are designed to attract and retain
highly skilled executives, reward outstanding individual performance,
encourage cooperative team efforts and provide an incentive to enhance long
term shareholder value. The Companys executive officer compensation program
consists of base salary, annual contingent bonus compensation, long term
stock options and retirement benefits tied to age and years of service.
In establishing salaries for the Companys CEO and other officers,
consideration is given to salary ranges for comparable positions in similar
size companies. Data for such comparisons is obtained from nationwide
surveys conducted by independent compensation consulting firms and from proxy
statements of similar size companies located near the Companys headquarters.
As a result of basing compensation in part on overall company performance,
in any particular year the Companys executives may be paid more or less than
the average executive compensation levels of comparably sized companies.
In setting salaries within competitive ranges, the Committee considers
performance related factors including the Companys overall results during the
past year and its performance relative to a budgeted plan or stated
objectives. For officers other than the CEO, consideration also is given to
the individuals contribution to the Company and the accomplishments of
departments for which that officer has management responsibility. Potential
for future contributions to the Company is taken into account for all
officers.
The Company has a bonus compensation plan for senior and middle
management including the CEO and all other officers. Under this Plan the
Compensation Committee each year establishes a schedule for calculating
aggregate incentive compensation based upon the Companys financial
performance. The total plan award is allocated to the CEO and other
officers by the Compensation Committee through a combination of objective
formulas based upon salaries and subjective performance related
considerations. No bonuses were paid under the plan for 1997 because the
minimum performance standards set by the Board were not met.
The Stock Option Committee is responsible for selecting the recipients
of stock options, the timing of grants, and the option exercise price within
the terms of the Companys Stock Option Plan. The Stock Option Committee
considers the recommendations of the CEO and Compensation Committee with
respect to officers in this regard. Stock options are viewed as a long-term
incentive for officers and a means to more closely align the interests of
officers with those of stockholders.
Ten-Year Option Repricing
On May 22, 1997, the Company announced the retirement of its founder
and Chief Executive Officer. Also, at that time the Company was in the
midst of a major restructuring that involved the closing of several
subsidiaries, elimination of several product lines and a reduction in
operating expenses by approximately 40%. The objective was to re-focus the
Company on a smaller number of products and markets in which it could excel
and be profitable. The Board of Directors believed that this marked a
major transition for the Company and wanted employees to have a renewed
sense of opportunity both for the Company and individually. On that date
all employee stock options previously granted under the Companys 1993 Stock
Option Plan had exercise prices in excess of the market value.
Accordingly, the Board on May 22, 1997, gave every employee (including the
Executive Officers named below) the opportunity to terminate outstanding
options under the 1993 Plan in exchange for a new option for the same
number of shares with a new four-year vesting schedule. The new option
price was set at 85% of the closing bid price on May 21, 1997. The table
below shows every re-pricing of a stock option held by an Executive Officer
for the past ten years.
<TABLE>
<CAPTION>
Name of Officer Date of Grant Number of Market Price Exercise Price New Length of
Option of Stock at at Time of Exercise Original
Shares Repricing Repricing Price Option Term
Repriced Remaining at
Date of
Repricing
<S> <C> <C> <C> <C> <C> <C>
David G. Mazzella May 22, 1997 115,000 $3.00 $5.10 $2.34 10 Years
Paul T. Babarik May 22, 1997 2,500 $3.00 $6.80 $2.34 8 Years
May 22, 1997 5,000 $3.00 $5.10 $2.34 10 Years
Robert L. Boxer May 22, 1997 5,000 $3.00 $8.32 $2.34 9 Years
May 22, 1997 5,000 $3.00 $5.10 $2.34 10 Years
Ronald C. Lundy May 22, 1997 2,000 $3.00 $6.80 $2.34 8 Years
May 22, 1997 5,000 $3.00 $5.10 $2.34 10 Years
</TABLE>
John E. Mooney,
Chairman of Compensation Committee
John E. Gould
William J. Reilly
Certain Relationships and Related Transactions
On May 22, 1997, Albert J. Montevecchio, the Companys founder, Chief
Executive Officer, Chairman of the Board, and owner of 14.5% of the
Companys common stock, retired as an officer of the Company. Pursuant to
an Employment Agreement between the Company and Mr. Montevecchio, which was
entered into in 1991, Mr. Montevecchios term of employment was to continue
until December, 2001, after which he would be entitled to receive until
December, 2016 a pension benefit equal to 90% of the average of his three
highest years compensation plus benefits. In 1996, Mr. Montevecchios
compensation was $220,000. The Company instead agreed to pay Mr.
Montevecchio $225,000 per year plus benefits until July, 2001, and $129,000
per year plus benefits thereafter until July, 2014. Mr. Montevecchio also
agreed to refrain from competing directly or indirectly with the Company,
to not disclose Company confidential information or trade secrets, to vote
with the majority of stockholders (other than officers and directors) with
respect to certain significant events submitted for stockholder approval,
to not acquire shares of the Company in a private transaction or to solicit
proxies from Company shareholders, and to not privately sell any shares of
the Companys common stock without first offering to sell such shares to the
Company.
COMMON STOCK PERFORMANCE
The following graph shows a five-year comparison of cumulative total
returns for owners of the Companys common stock compared to an Index for
NASDAQ stocks and the NASDAQ Telecommunications Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Dec 92 Dec 93 Dec 94 Dec 95 Dec 96 Dec 97
Moscom 100 167 176 169 164 138
NASDAQ
Stock Market 100 115 112 159 195 240
NASDAQ
Telecommunications 100 154 129 169 172 254
Section 16(a) Beneficial Ownership Reporting Compliance
Based upon reports filed by the Company with the Securities and
Exchange Commission and copies of filed reports received by the Company,
the Company believes all reports of ownership and changes in ownership of
the Common Stock of the Company required to be filed with the Securities
and Exchange Commission during 1997 were filed in compliance with Section
16(a) of the Securities Act of 1934.
Stockholder Proposals
Under SEC rules, any stockholder wishing to present a proposal at the
Companys 1999 Annual Meeting must submit the proposal to the Companys
Secretary no later than December 4, 1998 in order for the proposal to be
included in the proxy and proxy statement for the meeting.
Approval of Appointment of Independent Auditors
(Proposal No. 8)
On the recommendation of the Audit Committee, the Board of Directors
has appointed Arthur Andersen, LLP as independent auditors for the fiscal
year ending December 31, 1998. Arthur Andersen also acted as the
independent auditors for the company in 1997. For all previous years since
the companys founding in 1983, Deloitte & Touche (or predecessor, Touche
Ross & Co.) were the independent auditors for the Company. Representatives
of Arthur Andersen are expected to be present at the Annual Meeting. They
will be available to respond to appropriate questions and will have an
opportunity to make a statement if they so desire.
Although the appointment of independent auditors is not required to be
submitted to a vote by Stockholders, the Board believes as a matter of
policy that it is appropriate to do so. If the Stockholders should not
approve the appointment of Arthur Andersen, LLP, the Audit Committee and
Board of Directors will consider other certified public accountants for
appointment.
Other Matters
As of the date of this Proxy Statement, the Board of Directors does
not intend to present, and has not been informed that any other person
intends to present, any matter for action at the meeting other than those
described above. If any other matters properly come before the meeting, it
is intended that the persons named in the enclosed Proxy will vote the
shares represented by signed proxies in accordance with their best
judgment.
By Order of the Board of Directors
Robert L. Boxer
Secretary
Pittsford, New York
March 19, 1998
<PAGE>
A __X__ Please mark your votes as in this example.
This proxy will be voted as specified. If no direction is given, the
shares represented will be voted for all 8 proposals.
Nominees: John E. Gould
David G. Mazzella
John E. Mooney
William J. Reilly
1. Election of Directors For ___ Withheld _____
For, except vote withheld for the following nominees(s):
_____________________________________________________
2. The proposed amendments to the Corporations Certificate of
Incorporation, providing for the classification of the Directors
into three classes.
For ___ Against ___ Abstain ___
3. Change in the Corporations name to Veramark Technologies Inc.
For ___ Against ___ Abstain ___
4. Amendment of the Corporations Certificate of Incorporation to
increase the number of shares of capital stock.
For ___ Against ___ Abstain ___
5. Adoption of new By-laws of the Corporation.
For ___ Against ___ Abstain ___
6. Approval of the 1998 Long-Term Incentive Plan.
For ___ Against ___ Abstain ___
7. Approval of the 1998 Employee Stock Purchase Plan.
For ___ Against ___ Abstain ___
8. Approval of the appointment of Arthur Andersen LLP as auditors for
the year ending December 31, 1998.
For ___ Against ___ Abstain ___
At their discretion, the Proxies are authorized to vote upon such
other matters as may properly come before the meeting. The
undersigned hereby revokes all proxies related to the Annual Meeting.
Signature ___________________ Date ____________
Signature ___________________ Date ____________
(Signature if held jointly)
(NOTE: Stockholder must sign exactly as your name appears hereon.
Joint owners must each sign.)
MOSCOM CORPORATION
LONG-TERM INCENTIVE PLAN
Section 1 General
1.1 Purpose. The Moscom Corporation Long-Term Incentive Plan (the
Plan) has been established by Moscom Corporation (the Company) (a) to attract
and retain persons eligible to participate in the Plan; (b) motivate
Participants, by means of appropriate incentives, to achieve long-range
goals; (c) provide incentive compensation opportunities that are competitive
with those of other similar companies; and (d) further identify Participants
interests with those of the Companys other shareholders through compensation
that is based on the Companys common stock; and thereby promote the long-term
financial interest of the Company and the Related Companies, including the
growth in value of the Companys equity and enhancement of long-term
shareholder return.
1.2 Participation. Subject to the terms and conditions of the Plan,
the Committee shall determine and designate, from time to time, from among
the Eligible Individuals, those persons who will be granted one or more
Awards under the Plan, and thereby become Participants in the Plan. In the
discretion of the Committee, a Participant may be granted any Award permitted
under the provisions of the Plan, and more than one Award may be granted to
a Participant. Awards may be granted as alternatives to or replacement of
awards outstanding under the Plan, or any other plan or arrangement of the
Company or a Related Company (including a plan or arrangement of a business
or entity, all or a portion of which is acquired by the Company or a Related
Company).
1.3 Operation, Administration and Definitions. The operation and
administration of the Plan, including the Awards made under the Plan, shall
be subject to the provisions of Section 4 (relating to Operation and
Administration). Capitalized terms in the Plan shall be defined as set forth
in the Plan (including the definition provisions of Section 7 of the Plan).
Section 2. Options and SARs
2.1 Definitions.
(a) The grant of an Option entitles the Participant to purchase shares
of Stock at an Exercise Price established by the Committee. Options granted
under this Section 2 may be either Incentive Stock Options or Non-Qualified
Stock Options, as determined in the discretion of the Committee. An
Incentive Stock Option is an Option that is intended to satisfy the
requirements applicable to an incentive stock option described in Section
422(b) of the Code. A Non-Qualified Option is an Option that is not intended
to be an incentive stock option as that term is described in Section 422(b)
of the Code.
(b) A stock appreciation right (a SAR) entitles the Participant to
receive, in cash or Stock (as determined in accordance with subsection 2.5),
value equal to all or a portion of the excess of: (a) the Fair Market Value
of a specified number of shares of Stock at the time of exercise; over (b) an
Exercise Price established by the Committee.
2.2 Exercise Price. The Exercise Price of each Option and SAR granted
under this Section 2 shall be established by the Committee or shall be
determined by a method established by the Committee at the time the Option or
SAR is granted; except that the Exercise Price for Incentive Stock Options
shall not be less than 100% of the Fair Market Value of a share of Stock as
of the Pricing Date. For purposes of the preceding sentence, the Pricing Date
shall be the date on which the Option or SAR is granted.
2.3 Exercise. An Option and SAR shall be exercisable in accordance
with such terms and conditions and during such periods as may be established
by the Committee.
2.4 Payment of Option Exercise Price. The payment of the Exercise
Price of an Option granted under this Section 2 shall be subject to the
following:
(a) Subject to the following provisions of this subsection 2.4, the
full Exercise Price for shares of Stock purchased upon the exercise of any
Option shall be paid at the time of such exercise (except that, in the case
of an exercise arrangement approved by the Committee and described in
subsection 2.4(c), payment may be made as soon as practicable after the
exercise).
(b) The Exercise Price shall be payable in cash or, at the option of
the Committee, by tendering shares of Stock (by either actual delivery of
shares or by attestation, with such shares valued at Fair Market Value as of
the day of exercise), or in any combination thereof, as determined by the
Committee.
(c) The Committee may permit a Participant to elect to pay the Exercise
Price upon the exercise of an Option by authorizing a third party to sell
shares of Stock (or a sufficient portion of the shares) acquired upon
exercise of the Option and remit to the Company a sufficient portion of the
sale proceeds to pay the entire Exercise Price and any tax withholding
resulting from such exercise.
2.5 Settlement of Award. Distribution following exercise of an Option
or SAR, and shares of Stock distributed pursuant to such exercise, shall be
subject to such conditions, restrictions and contingencies as the Committee
may establish. 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 SAR as the Committee determines to be desirable.
Section 3 Other Awards
3.1 Stock Award. A Stock Award is a grant of shares of Stock or of a
right to receive shares of Stock (or their cash equivalent or a combination
of both) in the future. Each Stock Award shall be subject to such
conditions, restrictions and contingencies as the Committee shall determine.
These may include continuous service and/or the achievement of performance
goals. The performance goals that may be used by the Committee for such
Awards may consist of cash generation targets, profit, revenue and market
share targets, profitability targets as measured by return ratios, and
stockholder returns. The Committee may designate a single goal criterion or
multiple goal criteria for performance measurement purposes, with the
measurement based on absolute Company or business unit performance and/or on
performance as compared with that of other publicly-traded companies.
3.2 Cash Award. A Cash Award is a right denominated in cash or cash
units to receive a payment, which may be in the form of cash, shares of Stock
or a combination, based on the attainment of pre-established performance
goals and such other conditions, restrictions and contingencies as the
Committee shall determine. The performance goals that may be used by the
Committee for such awards shall consist of cash generation targets, profits,
revenue and market share targets, profitability targets as measured by return
ratios and shareholder returns. The Committee may designate a single goal
criterion or multiple goal criteria for performance measurement purposes with
the measurement based on absolute Company or business unit performance and/or
on performance as compared with that of other publicly-traded companies.
Section 4 Operation and Administration
4.1 Effective Date. Subject to the approval of the shareholders of the
Company at the Companys 1998 annual meeting of its shareholders, the Plan
shall be effective as of December 15, 1997 (the Effective Date); provided,
however, that to the extent that Awards are made under the Plan prior to its
approval by shareholders, they shall be contingent on approval of the Plan by
the shareholders of the Company. The Plan shall be unlimited in duration
and, in the event of Plan termination, shall remain in effect as long as any
Awards under it are outstanding; provided, however, that, to the extent
required by the Code, no Incentive Stock Options may be granted under the
Plan on a date that is more than ten years from the date the Plan is adopted
or, if earlier, the date the Plan is approved by shareholders.
4.2 Shares Subject to Plan.
(a) (i) Subject to the following provisions of this subsection 4.2,
the maximum number shares of Stock that may be delivered to Participants and
their beneficiaries under the Plan shall be equal to the sum of: (I)
2,000,000 shares of Stock and (II) up to 2,000,000 shares of Stock, to the
extent authorized by the Board, which are reacquired in the open market or in
a private transaction after the Effective Date.
(ii) Any shares of Stock granted under the Plan that are forfeited
back to the Company because of the failure to meet an Award contingency or
condition shall again be available for delivery pursuant to new Awards
granted under the Plan. To the extent any shares of Stock covered by an
Award are not delivered to a Participant or beneficiary because the Award is
forfeited or canceled, or the shares of Stock are not delivered because the
Award is settled in cash, such shares shall not be deemed to have been
delivered for purposes of determining the maximum number of shares of Stock
available for delivery under the Plan.
(iii) If the Exercise Price of any stock option granted under
the Plan or any Prior Plan is satisfied by tendering shares of Stock to the
Company (by either actual delivery or by attestation), only the number of
shares of Stock issued net of the shares of Stock tendered shall be deemed
delivered for purposes of determining the maximum number of shares of Stock
available for delivery under the Plan.
(iv) Shares of Stock delivered under the Plan in settlement,
assumption or substitution of outstanding awards (or obligations to grant
future awards) under the plans or arrangements of another entity shall not
reduce the maximum number of shares of Stock available for delivery under the
Plan, to the extent that such settlement, assumption or substitution as a
result of the Company or a Related Company acquiring another entity (or an
interest in another entity).
(b) Subject to subsection 4.2(c), the following additional maximums are
imposed under the Plan.
(i) The maximum number of shares of Stock that may be issued by
Options intended to be Incentive Stock Options shall be 1,500,000 shares.
(ii) The maximum number of shares that may be covered by Awards
granted to any one individual pursuant to Section 2 (relating to Options and
SARs) shall be 500,000 shares during any three consecutive calendar years.
(iii) The maximum payment that can be made for awards granted
to any one individual pursuant to Section 3 (relating to Stock Awards and
Cash Awards) shall be $500,000 for any single or combined performance goals
established for any specified performance period. If an Award granted under
Section 3 is, at the time of grant, denominated in shares, the value of the
shares of Stock for determining this maximum individual payment amount will
be the Fair Market Value of a share of Stock on the first day of the
applicable performance period.
(c) Subject to Section 4.14 below relating to changes in control, in
the event of a corporate transaction involving the Company (including,
without limitation, any stock dividend, stock split, extraordinary cash
dividend, recapitalization, reorganization, merger, consolidation, split-up,
spin-off, combination or exchange of shares), the Committee (a) will make any
appropriate adjustments to the maximum number of shares of Stock that may be
delivered to Participants and their beneficiaries under this subsection
4.2(a) and (b), and (b) adjust Awards to preserve the benefits or potential
benefits of the Awards. Action by the Committee may include adjustment of:
(i) the number and kind of shares which may be delivered under the Plan; (ii)
the number and kind of shares subject to outstanding Awards; and (iii) the
Exercise Price of outstanding Options and SARs; as well as any other
adjustments that the Committee determines to be equitable.
4.3 Limit on Distribution. Distribution of shares of Stock or other
amounts under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company shall
have no liability to deliver any shares of Stock under the Plan or make any
other distribution of benefits under the Plan unless such delivery or
distribution would comply with all applicable laws (including, without
limitation, the requirements of the Securities Act of 1933), and the
applicable requirements of any securities exchange or similar entity.
(b) To the extent that the Plan provides for issuance of stock
certificates to reflect the issuance of shares of Stock, the issuance may be
effected on a noncertificated basis, to the extent not prohibited by
applicable law or the applicable rules of any stock exchange.
4.4 Tax Withholding. Whenever the Company proposes or is required to
distribute Stock under the Plan, the Company may require the recipient to
remit to the Company an amount sufficient to satisfy any Federal, state and
local tax withholding requirements prior to the delivery of any certificate
for such shares or, in the discretion of the Committee, the Company may
withhold from the shares to be delivered shares sufficient to satisfy all or
a portion of such tax withholding requirements. Whenever under the Plan
payments are to be made in cash, such payments may be net of an amount
sufficient to satisfy any Federal, state and local tax withholding
requirements.
4.5 Dividends and Dividend Equivalents. An Award may provide the
Participant with the right to receive dividends or dividend equivalent
payments with respect to Stock which may be either paid currently or credited
to an account for the Participant, and may be settled in cash or Stock as
determined by the Committee. Any such settlements, and any such crediting of
dividends or dividend equivalents or reinvestment in shares of Stock, may be
subject to such conditions, restrictions and contingencies as the Committee
shall establish, including the reinvestment of such credited amounts in Stock
equivalents.
4.6 Payments. Awards may be settled through cash payments, the
delivery of shares of Stock, the granting of replacement Awards, or
combination thereof as the Committee shall determine. Any Award settlement,
including payment deferrals, may be subject to such conditions, restrictions
and contingencies as the Committee shall determine. The Committee may permit
or require the deferral of any Award payment, subject to such rules and
procedures as it may establish, which may include provisions for the payment
or crediting of interest, or dividend equivalents, including converting such
credits into deferred Stock equivalents.
4.7 Transferability. Except as otherwise provided by the Committee,
Awards under the Plan are not transferable except as designated by the
Participant by will or by the laws of descent and distribution.
4.8 Form and Time of Elections. Unless otherwise specified herein,
each election required or permitted to be made by any Participant or other
person entitled to benefits under the Plan, and any permitted modification,
or revocation thereof, shall be in writing filed with the Committee at such
times, in such form, and subject to such restrictions and limitations, not
inconsistent with the terms of the Plan, as the Committee shall require.
4.9 Agreement With Company. At the time of an Award to a Participant
under the Plan, the Committee may require a Participant to enter into an
agreement with the Company (the Agreement) in a form specified by the
Committee, agreeing to the terms and conditions of the Plan and to such
additional terms and conditions, not inconsistent with the Plan, as the
Committee may, in its sole discretion, prescribe.
4.10 Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason of the
Plan, acquire any right in or title to any assets, funds or property of the
Company or any Related Company whatsoever, including, without limitation, any
specific funds, assets, or other property which the Company or any Related
Company, in their sole discretion, may set aside in anticipation of a
liability under the Plan. A Participant shall have only a contractual right
to the stock or amounts, if any, payable under the Plan, unsecured by any
assets of the Company or any Related Company. Nothing contained in the Plan
shall constitute a guarantee that the assets of such companies shall be
sufficient to pay any benefits to any person.
(b) The Plan does not constitute a contract of employment, and
selection as a Participant will not give any Eligible Individual the right to
be retained in the employ of the Company or any Related Company, nor any
right or claim to any benefit under the Plan, unless such right or claim has
specifically accrued under the terms of the Plan. Except as otherwise
provided in the Plan, no Award under the Plan shall confer upon the holder
thereof any right as a shareholder of the Company prior to the date on which
the individual fulfills all conditions for receipt of such rights.
4.11 No Fractional Shares. No fractional shares of Stock shall be
issued or delivered pursuant to the Plan or any Award, and the Committee
shall determine whether cash shall be paid or transferred in lieu of any
fractional shares of Stock, or whether such fractional shares of Stock or any
rights thereto shall be canceled.
4.12 Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting
on it considers pertinent and reliable, and signed, made or presented by the
proper party or parties.
4.13 Exceeding Limitations. To the extent that the aggregate Fair
Market Value of Stock (determined at the time the Option is granted) with
respect to which Incentive Stock Options are exercisable for the first time
by a Participant during any calendar year (under all plans of the Company and
all Related Companies) exceeds $100,000, such Options shall be treated as
Non-Qualified Stock Options, to the extent required by Section 422 of the
Code.
4.14 Change in Control. Subject to the provisions of subsection 4.2
(relating to the adjustment of shares), and except as otherwise provided in
the Plan or the agreement reflecting the applicable Award, upon the
occurrence of a Change in Control:
(a) All outstanding Options (regardless of whether in tandem with
SARs) shall become fully exercisable.
(b) All outstanding SARs (regardless of wh ether in tandem with
Options) shall become fully exercisable.
(c) All Stock Awards shall become fully vested.
4.15. Action by Company or Related Company. Any action required or
permitted to be taken by the Company or any Related Company shall be by
resolution of its board of directors, or by action of one or more members of
the board (including a committee of the board) who are duly authorized to act
for the board, or (except to the extent prohibited by applicable law or
applicable rules of any stock exchange) by a duly authorized officer of the
company.
4.16. Gender and Number. Where the context admits, words in any
gender shall include any other gender, words in the singular shall include
the plural and the plural shall include the singular.
Section 5 Committee
5.1. Administration. The authority to control and manage the operation
and administration of the Plan shall be vested in a committee (the Committee)
in accordance with this Section 5.
5.2. Selection of Committee. The Committee shall be selected by the
Board, and shall consist of two or more members of the Board.
5.3. Powers of Committee. The authority to manage and control the
operation and administration of the Plan shall be vested in the Committee,
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 Individuals those
persons who shall 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, and (subject to the
restrictions imposed by Section 6) to cancel or suspend Awards. In making
such Award determinations, the Committee may take into account the nature of
services rendered by the individual, the individuals present and potential
contribution to the Companys success and such other factors as the Committee
deems relevant.
(b) Subject to the provisions of the Plan, the Committee will have the
authority and discretion to determine the extent to which Awards under the
Plan will be structured to conform to the requirements applicable to
performance-based compensation as described in Code Section 162(m), and to
take such action, establish such procedures, and impose such restrictions at
the time such Awards are granted as the Committee determines to be necessary
or appropriate to conform to such requirements.
(c) The Committee will have the authority and discretion to establish
terms and conditions of Awards as the Committee determines to be necessary or
appropriate to conform to applicable requirements or practices of
jurisdictions outside of the United States.
(d) 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 agreements made
pursuant to the Plan, and to make all other determinations that may be
necessary or advisable for the administration of the Plan.
(e) Any interpretation of the Plan by the Committee and any decision
made by it under the Plan is final and binding.
(f) Except as otherwise expressly provided in the Plan, where the
Committee is authorized to make a determination with respect to any Award,
such determination shall be made at the time the Award is made, except that
the Committee may reserve the authority to have such determination made by
the Committee in the future (but only if such reservation is made at the time
the Award is granted and is expressly stated in the Agreement reflecting the
Award).
(g) In controlling and managing the operation and administration of the
Plan, the Committee shall act by a majority of its then members, by meeting
or by a writing filed without a meeting. The Committee shall maintain and
keep adequate records concerning the Plan and concerning its proceedings and
acts in such form and detail as the Committee may decide.
5.4 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.
5.5 Information to be Furnished to Committee. The Company and Related
Companies shall furnish the Committee with such data and information as may
be required for it to discharge its duties. The records of the Company and
Related Companies as to an Eligible Individuals employment or other provision
of services, termination of employment or cessation of the provision of
services, leave of absence, reemployment and compensation shall be conclusive
on all persons unless determined to be incorrect. Participants and other
persons entitled to benefits under the Plan must furnish the Committee such
evidence, data or information as the Committee considers desirable to carry
out the terms of the Plan.
Section 6 Effect, Discontinuance, Cancellation, Amendment and Termination
6.1 Effect on Other Awards or Bonuses. Neither adoption of the Plan
nor the grant of Awards to a Participant will affect the Companys right to
grant to such Participant Awards that are not subject to the Plan, to issue
to such Participant Stock as a bonus or otherwise, or to adopt other plans or
arrangements under which Stock may be issued to Eligible Individuals.
6.2 Discontinuance, Cancellation, Amendment and Termination. The Board
may at any time discontinue granting Awards under the Plan. The Board may at
any time or times alter or amend the Plan or any outstanding Award for any
purpose which may at the time be permitted by law, or may at any time
terminate the Plan as to any further grants of Awards, provided that (except
to the extent expressly required or permitted by the Plan) no such amendment
will, without the approval of (a) the Companys stockholders, to the extent
stockholder approval of the amendment is required by applicable law or
regulations or the requirements of the principal exchange or interdealer
quotation system on which the Stock is listed or quoted, (i) increase the
maximum number of shares available under the Plan, (ii) change the group of
persons eligible to receive Awards under the Plan, (iii) extend the time
within which Awards may be granted, or (iv) amend the provisions of this
Section 6.2, and (b) each affected Participant if the amendment, alteration
or termination would adversely affect the Participants rights or obligations
under any Award made prior to the date of the amendment, alteration or
termination. The termination of the Plan would not affect the validity of
any Award outstanding on the date of termination.
Section 7 Defined Terms
For purposes of the Plan, the terms listed below shall be defined as
follows:
(a) Award. The term Award shall mean any award or benefit granted to
any Participant under the Plan, including, without limitation, the grant of
Options, SARs, Stock Awards and Cash Awards.
(b) Board. The term Board shall mean the Board of Directors of the
Company.
(c) Change in Control. The term Change in Control means a change in
control of a nature that would be required to be reported in a proxy
statement with respect to the Company (even if the Company is not actually
subject to said reporting requirements) in response to Item 6(e) (or any
comparable or successor Item) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934, as amended (the Exchange Act),
except that any merger, consolidation or corporate reorganization in which
the owners of the Companys capital stock to vote in the election of directors
(the Voting Stock) prior to said combination receive 75% or more of the
resulting entitys Voting Stock shall not be considered a change in control
for the purposes of this Plan; and provided that, without limitation of the
foregoing, such change in control shall be deemed to have occurred if (i) any
person (as that term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act, excluding any stock purchase or employee stock ownership plan maintained
by the Company or a Related Company) is or becomes the beneficial owner (as
that term is defined by the Securities and Exchange Commission for purposes
of Section 13(d) of the Exchange Act), directly or indirectly, of more than
15% of the outstanding Voting Stock of the Company or its successors; or (ii)
during any period of two consecutive years a majority of the Board of
Directors no longer consists of individuals who were members of the Board of
Directors at the beginning of such period, unless the election of each
director who was not a director at the beginning of the period was approved
by a vote of at least 75% of the directors still in office who were directors
at the beginning of the period.
(d) Code. The term Code means the Internal Revenue Code of 1986, as
amended. A reference to any provision of the Code shall include reference to
any successor provision of the Code.
(e) The term Eligible Individual shall mean any employee, officer or
non-employee director of the Company or a Related Company.
(f) Fair Market Value. For purposes of determining the Fair Market
Value of a share of Stock, the following rules shall apply:
(i) If the Stock is at the time listed or admitted to trading on
any stock exchange, then the Fair Market Value shall be the mean between the
lowest and highest reported sale prices of the Stock on the date in question
on the principal exchange on which the Stock is then listed or admitted to
trading. If no reported sale of Stock takes place on the date in question on
the principal exchange, then the reported closing asked price of the Stock on
such date on the principal exchange shall be determinative of Fair Market
Value.
(ii) If the Stock is not at the time listed or admitted to trading
on a stock exchange, the Fair Market Value shall be the mean between the
lowest reported bid price and highest reported asked price of the Stock on
the date in question in the over-the-counter market, as such prices are
reported in a publication of general circulation selected by the Committee
and regularly reporting the market price of Stock in such market.
(iii) If the Stock is not listed or admitted to trading on any
stock exchange or traded in the over-the-counter market, the Fair Market
Value shall be as determined in good faith by the Committee.
(g) Related Companies. The term Related Company means (i) any
corporation, partnership, joint venture or other entity during any period in
which it owns, directly or indirectly, at least 50% of the voting power of
all classes of stock of the Company (or successor to the Company) entitled to
vote; and (ii) any corporation, partnership, joint venture or other entity
during any period in which at least 50% voting or profits interest is owned,
directly or indirectly, by the Company, by any entity that is a successor to
the Company, or by any entity that is a Related Company by reason of clause
(i) next above.
(h) Stock. The term Stock shall mean shares of common stock of the
Company.
MOSCOM CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1998 Employee Stock
Purchase Plan of Moscom Corporation.
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is
the intention of the Company to have the Plan qualify as an Employee Stock
Purchase Plan under Section 423 of the Internal Revenue Code of 1986, as
amended. The provisions of the Plan, accordingly, shall be construed so as
to extend and limit participation in a manner consistent with the
requirements of that section of the Code.
2. Definitions.
(a) Board shall mean the Board of Directors of the Company.
(b) Code shall mean the Internal Revenue Code of 1986, as
amended.
(c) Common Stock shall mean the Common Stock of the Company.
(d) Company shall mean Moscom Corporation and any Designated
Subsidiary of the Company.
(e) Compensation shall mean all base straight time gross
earnings, but exclusive of payments for overtime, shift premium,
commissions, incentive compensation, incentive payments, bonuses and other
compensation.
(f) Designated Subsidiary shall mean any Subsidiary which has
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) Employee shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at
least twenty (20) hours per week and more than five (5) months in any
calendar year. For purposes of the Plan, the employment relationship shall
be treated as continuing intact while the individual is on sick leave or
other leave of absence approved by the Company. Where the period of leave
exceeds 90 days and the individuals right to reemployment is not guaranteed
either by statute or by contract, the employment relationship shall be
deemed to have terminated on the 91st day of such leave.
(h) Enrollment Date shall mean the first day of each Offering
Period.
(i) Exercise Date shall mean the last day of each Offering
Period.
(j) Fair Market Value shall mean, as of any date, the value of
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day on the date of such
determination, as reported in The Wall Street Journal or such other source
as the Board deems reliable, or;
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean of the closing bid and asked prices for the Common
Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;
(3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by
the Board, or;
(k) Offering Period shall mean a period ranging from six (6)
months to twenty four (24) months (the precise duration of any Offering
Period to be the Offering Period announced at least five (5) days prior to
its commencement as set forth in Section 4 of this Plan) during which an
option granted pursuant to the Plan may be exercised, commencing on the
first Trading Day on or after the termination date of the previous Offering
Period; provided, however, that the first Offering Period under the Plan
shall commence with the first Trading Day on or after the date on which the
Securities and Exchange Commission declares the Companys Registration
Statement effective and ending on the last Trading Day on or before the
termination of the duration of such Offering Period selected by the Board.
The duration and timing of Offering Periods may be changed pursuant to
Section 4 of this Plan.
(l) Plan shall mean this Employee Stock Purchase Plan.
(m) Purchase Price shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(n) Reserves shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and
the number of shares of Common Stock which have been authorized for
issuance under the Plan but not yet placed under option.
(o) Subsidiary shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(p) Trading Day shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding,
no Employee shall be granted an option under the Plan (i) to the extent
that, immediately after the grant, such Employee (or any other person whose
stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own capital stock of the Company and/or hold outstanding
options to purchase such stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of the capital stock of
the Company or of any Subsidiary, or (ii) to the extent that his or her
rights to purchase stock under all employee stock purchase plans of the
Company and its subsidiaries accrues at a rate which exceeds Twenty-Five
Thousand Dollars ($25,000) worth of stock (determined at the fair market
value of the shares at the time such option is granted) for each calendar
year in which such option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive
Offering Periods with a new Offering Period commencing on the first Trading
Day on or after the termination of the previous Offering Period, or on such
other date as the Board shall determine, and continuing thereafter until
terminated in accordance with Section 20 hereof; provided, however, that
the first Offering Period under the Plan shall commence with the first
Trading Day on or after the date on which the Securities and Exchange
Commission declares the Companys Registration Statement effective and
ending on the last Trading Day on or before the termination of such
Offering Period. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced
at least five (5) days prior to the scheduled beginning of the first
Offering Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the
form of Exhibit A to this Plan and filing it with the Companys payroll
office prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is applicable,
unless sooner terminated by the participant as provided in Section 10
hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each
pay day during the Offering Period in an amount not exceeding ten percent
(10%) of the Compensation which he or she receives on each pay day during
the Offering Period.
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be withheld in
whole percentages only. A participant may not make any additional payments
into such account.
(c) A participant may discontinue his or her participation in
the Plan as provided in Section 10 hereof, or may decrease the rate of his
or her payroll deductions during the Offering Period by completing or
filing with the Company a new subscription agreement authorizing a change
in payroll deduction rate. The Board may, in its discretion, limit the
number of participation rate changes during any Offering Period. The
change in rate shall be effective with the first full payroll period
following five (5) business days after the Companys receipt of the new
subscription agreement unless the Company elects to process a given change
in participation more quickly. A participants subscription agreement shall
remain in effect for successive Offering Periods unless terminated as
provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participants payroll deductions may be decreased to zero percent (0%) at
any time during an Offering Period. Payroll deductions shall recommence at
the rate provided in such participants subscription agreement at the
beginning of the first Offering Period which is scheduled to end in the
following calendar year, unless terminated by the participant as provided
in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or
at the time some or all of the Companys Common Stock issued under the Plan
is disposed of, the participant must make adequate provision for the
Companys federal, state or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common
Stock. At any time, the Company may, but shall not be obligated to,
withhold from the participants compensation the amount necessary for the
Company to meet applicable withholding obligations, including any
withholding required to make available to the Company any tax deductions or
benefits attributable to sale or early disposition of Common Stock by the
Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be
granted an option to purchase on each Exercise Date during such Offering
Period (at the applicable Purchase Price) up to a number of shares of the
Companys Common Stock determined by dividing such Employees payroll
deductions accumulated prior to such Exercise Date and retained in the
participants account as of the Exercise Date by the applicable Purchase
Price; provided that in no event shall an Employee be permitted to purchase
during each Offering Period more than 5,000 shares of the Companys Common
Stock (subject to any adjustment pursuant to Section 19), and provided
further that such purchase shall be subject to the limitations set forth in
Sections 3(b) and 12 hereof. Exercise of the option shall occur as
provided in Section 8 hereof, unless the participant has withdrawn pursuant
to Section 10 hereof. The option shall expire on the last day of the
Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan
as provided in Section 10 hereof, his or her option for the purchase of
shares shall be exercised automatically on the Exercise Date, and the
maximum number of full shares subject to option shall be purchased for such
participant at the applicable Purchase Price with the accumulated payroll
deductions in his or her account. No fractional shares shall be purchased;
any payroll deductions accumulated in a participants account which are not
sufficient to purchase a full share shall be retained in the participants
account for the subsequent Offering Period, subject to earlier withdrawal
by the participant as provided in Section 10 hereof. Any other monies left
over in a participants account after the Exercise Date shall be returned to
the participant. During a participants lifetime, a participants option to
purchase shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery
to each participant, as appropriate, of a certificate representing the
shares purchased upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to
exercise his or her option under the Plan at any time by giving written
notice to the Company in the form of Exhibit B to this Plan. All of the
participants payroll deductions credited to his or her account shall be
paid to such participant promptly after receipt of notice of withdrawal and
such participants option for the Offering Period shall be automatically
terminated, and no further payroll deductions for the purchase of shares
shall be made for such Offering Period. If a participant withdraws from an
Offering Period, payroll deductions shall not resume at the beginning of
the succeeding Offering Period unless the participant delivers to the
Company a new subscription agreement.
(b) A participants withdrawal from an Offering Period shall not
have any effect upon his or her eligibility to participate in any similar
plan which may hereafter be adopted by the Company or in succeeding
Offering Periods which commence after the termination of the Offering
Period from which the participant withdraws.
11. Termination of Employment. Upon a participants ceasing to be an
Employee, for any reason, he or she shall be deemed to have elected to
withdraw from the Plan and the payroll deductions credited to such
participants account during the Offering Period but not yet used to
exercise the option shall be returned to such participant or, in the case
of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participants option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who
receives payment in lieu of notice of termination of employment shall be
treated as continuing to be an Employee for the participants customary
number of hours per week of employment during the period in which the
participant is subject to such payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of
a participant in the Plan.
13. Stock.
(a) The maximum number of shares of the Companys Common Stock
which shall be made available for sale under the Plan shall be Two Million
(2,000,000) shares, subject to adjustment upon changes in capitalization of
the Company as provided in Section 19 hereof. If, on a given Exercise
Date, the number of shares with respect to which options are to be
exercised exceeds the number of shares then available under the Plan, the
Company shall make a pro rata allocation of the shares remaining available
for purchase in as uniform a manner as shall be practicable and as it shall
determine to be equitable.
(b) The participant shall have no interest or voting right in
shares covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall
be registered in the name of the participant or in the name of the
participant and his or her spouse. Certificates representing shares may
contain such legends as may be necessary or appropriate pursuant to
applicable securities laws, including any legends relating to restrictions
on transfer as may be imposed by the Board pursuant to Section 16 of the
Plan.
14. Administration. The Plan shall be administered by the Board or
a committee of members of the Board appointed by the Board. The Board or
its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine
eligibility and to adjudicate all disputed claims filed under the Plan.
Every finding, decision and determination made by the Board or its
committee shall, to the full extent permitted by law, be final and binding
upon all parties.
15. 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
participants account under the Plan in the event of such participants death
subsequent to an Exercise Date on which the option is exercised but prior
to delivery to such participant 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 participants account under the Plan in the event
of such participants death prior to exercise of the option. If a
participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.
(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
the Plan who is living at the time of such participants death, the Company
shall deliver such shares and/or cash to the executor or administrator of
the estate of the participant, or if no such executor or administrator has
been appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such shares and/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.
16. Transferability. Neither payroll deductions credited to a
participants account nor any rights with regard to the exercise of an
option or to receive shares under the 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 15 hereof) by the
participant. Any such attempt at assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat such
act as an election to withdraw funds from an Offering Period in accordance
with Section 10 hereof. The Board shall have the power to impose such
restrictions on the transfer of shares of Common Stock that may be issued
under the Plan during any Offering Period, if such restrictions are
announced at least five (5) days prior to the scheduled beginning of the
Offering Period to be affected by such restrictions.
17. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.
18. Reports. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to
participating Employees at least annually, which statements shall set forth
the amounts of payroll deductions, the Purchase Price, the number of shares
purchased and the remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the Reserves, the maximum number of shares
each participant may purchase each Offering Period (pursuant to Section 7),
as well as the price per share and the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised
shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of 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 in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance 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) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in
progress shall be shortened by setting a new Exercise Date (the New
Exercise Date), and shall terminate immediately prior to the consummation
of such proposed dissolution or liquidation, unless provided otherwise by
the Board. The New Exercise Date shall be before the date of the Companys
proposed dissolution or liquidation. The Board shall notify each
participant in writing, at least ten (10) business days prior to the New
Exercise Date, that the Exercise Date for the participants option has been
changed to the New Exercise Date and that the participants option shall be
exercised automatically on the New Exercise Date, unless prior to such date
the participant has withdrawn from the Offering Period as provided in
Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each outstanding option shall be
assumed or an equivalent option substituted by the successor corporation or
a parent or subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the option, any
Offering Periods then in progress shall end on the New Exercise Date. The
New Exercise Date shall be before the date of the Companys proposed sale or
merger. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date
for the participants option has been changed to the New Exercise Date and
that the participants option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from
the Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and
for any reason terminate or amend the Plan. Except as provided in Section
19 hereof, no such termination can affect options previously granted,
provided that an Offering Period may be terminated by the Board of
Directors on any Exercise Date if the Board determines that the termination
of the Plan is in the best interests of the Company and its shareholders.
Except as provided in Section 19 hereof, no amendment may make any change
in any option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the
Code (or any successor rule or provision or any other applicable law,
regulation or stock exchange rule), the Company shall obtain shareholder
approval in such a manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether
any participant rights may be considered to have been adversely affected,
the Board (or its committee) shall be entitled to change the Offering
Periods, limit the frequency and/or number of changes in the amount
withheld during an Offering Period, establish the exchange ratio applicable
to amounts withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a participant in order to
adjust for delays or mistakes in the Companys processing of properly
completed withholding elections, establish reasonable waiting and
adjustment periods and/or accounting and crediting procedures to ensure
that amounts applied toward the purchase of Common Stock for each
participant properly correspond with amounts withheld from the participants
Compensation, and establish such other limitations or procedures as the
Board (or its committee) determines in its sole discretion advisable which
are consistent with the Plan.
21. Notices. All notices or other communications by a participant to
the Company 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 by the person, designated by the Company for the receipt
thereof.
22. Conditions Upon issuance 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, as amended, the rules and regulations promulgated thereunder,
and the requirements of any stock exchange 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.
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the
time of any such exercise that the shares are being purchased only for
investment and without any present intention to sell or distribute such
shares if, in the opinion of counsel for the Company, such a representation
is required by any of the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term often
(10) years unless sooner terminated under Section 20 hereof.
