<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the commission Only (as permitted by Rule
14a-6(e)(2)
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Microlog Corporation
-----------------------------------------------
(Name of Registrant as Specified In Its Charter)
----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2), or
Item 22(a)(2) of Schedule 14A..
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1/
------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------
1/ Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount previously paid:
------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------
4) Date Filed:
January 31, 1996
------------------------------------------------------------------
<PAGE>
February 20, 1996
Dear Shareholder:
You are cordially invited to attend the 1996 Annual Meeting of
Shareholders of Microlog Corporation (the "Company") to be held March 26, 1996,
at 10:00 a.m., at the Gaithersburg Marriott Washingtonian Center, 9751
Washingtonian Blvd., Gaithersburg, Maryland, 20878.
The Annual Meeting has been called for the following purposes:
(1) to elect two directors to serve for a term of three
years;
(2) to ratify the appointment by the Board of Directors
of the firm of Price Waterhouse LLP as independent
accountants of the Company for the fiscal year ending
October 31, 1996;
(3) to consider and vote upon a proposed new Stock Option
Plan with 1,000,000 shares of the Company's common
stock reserved for issuance upon the exercise of
options granted under such new Stock Option Plan;
(4) to consider and vote upon proposed amendments to the
Company's Non-Employee Director Stock Option Plan
which would, among other things, (i) increase from
75,000 to 125,000 the number of shares reserved for
issuance upon the exercise of options granted under
the Non-Employee Director Stock Option Plan, (ii)
provide for annual grants of an option to purchase
3,000 shares (rather than 1,000 shares) of the
Company's common stock to each non-employee director
of the Company, and provide that such grants will
occur in December (rather than March) of each fiscal
year, and (iii) extend the term of the plan to April
30, 2001; and
(5) to transact such other business as may properly come
before the Annual Meeting or any adjournments
thereof.
The Board of Directors of Microlog Corporation unanimously recommends that you
vote "FOR" proposals (1), (2), (3), and (4) to be considered at the Annual
Meeting.
Your vote is important, regardless of the number of shares you
own. On behalf of the Board of Directors, I urge you to vote, sign, date, and
return the enclosed proxy card as soon as possible, even if you plan to attend
the Annual Meeting. Signing this proxy will not prevent you from voting in
person should you be able to attend the meeting. Signing the proxy will assure
that your vote is counted if, for any reason, you are unable to attend.
Sincerely yours,
/s/Joe J. Lynn
-----------------------
Joe J. Lynn
Chief Executive Officer
<PAGE>
MICROLOG CORPORATION
20270 Goldenrod Lane
Germantown, MD 20876-4070
(301) 428-9100
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS;
TO BE HELD MARCH 26, 1996
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of
Shareholders of Microlog Corporation (the "Company") will be held on March 26,
1996, at 10:00 a.m., local time, at the Gaithersburg Marriott Washingtonian
Center, 9751 Washingtonian Blvd., Gaithersburg, Maryland, 20878, for the
following purposes:
1. To elect two directors to serve for a term of three
years;
2. To ratify the appointment by the Board of Directors
of the firm of Price Waterhouse LLP as independent
accountants of the Company for the fiscal year ending
October 31, 1996;
3. To consider and vote upon a proposed new Stock Option
Plan with 1,000,000 shares of the Company's common
stock reserved for issuance upon the exercise of
options granted under such new Stock Option Plan;
4. to consider and vote upon proposed amendments to the
Company's Non-Employee Director Stock Option Plan
which would, among other things, (i) increase from
75,000 to 125,000 the number of shares reserved for
issuance upon the exercise of options granted under
the Non-Employee Director Stock Option Plan, (ii)
provide for annual grants of an option to purchase
3,000 shares (rather than 1,000 shares) of the
Company's common stock to each non-employee director
of the Company, and provide that such grants will
occur in December (rather than March) of each fiscal
year, and (iii) extend the term of the plan to April
30, 2001; and
5. To transact such other business as may properly come
before the Annual Meeting or any adjournments
thereof.
Pursuant to the By-Laws of the Company, the Board of Directors
has fixed February 2, 1996 as the record date for the Annual Meeting with
respect to this solicitation. Only shareholders of record at the close of
business on that date will be entitled to notice of and to vote at the Annual
Meeting or any adjournments thereof.
In the event there are not sufficient votes to approve one or
more of the foregoing proposals at the time of the Annual Meeting, the Annual
Meeting may be adjourned in order to permit further solicitation of proxies by
the Company.
By Order of the Board of Directors
/s/Joe J. Lynn
---------------------------
Joe J. Lynn
Chief Executive Officer
Germantown, Maryland
February 20, 1996
<PAGE>
PLEASE FILL OUT, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ENCLOSED POSTAGE-PAID ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
YOU MAY, IF YOU WISH, WITHDRAW YOUR PROXY AND VOTE YOUR SHARES PERSONALLY.
<PAGE>
MICROLOG CORPORATION
20270 Goldenrod Lane
Germantown, MD 20876-4070
(301) 428-9100
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MARCH 26, 1996
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Microlog Corporation, a
Virginia corporation (the "Company"), for use at the 1996 Annual Meeting of
Shareholders to be held on March 26, 1996 at 10:00 a.m., local time, at the
Gaithersburg Marriott Washingtonian Center, 9751 Washingtonian Blvd.,
Gaithersburg, Maryland, 20878, and at any adjournments thereof (the "Annual
Meeting").
The Annual Meeting is being called for the following purposes:
(1) to elect two directors to serve for a term of three
years;
(2) to ratify the appointment of Price Waterhouse LLP as
independent accountants of the Company for the fiscal
year ending October 31, 1996;
(3) to consider and vote upon a proposed new Stock Option
Plan with 1,000,000 shares of the Company's common
stock reserved for issuance upon the exercise of
options granted under such new Stock Option Plan;
(4) to consider and vote upon proposed amendments to the
Company's Non-Employee Director Stock Option Plan
which would, among other things, (i) increase from
75,000 to 125,000 the number of shares reserved for
issuance upon the exercise of options granted under
the Non-Employee Director Stock Option Plan, (ii)
provide for annual grants of an option to purchase
3,000 shares (rather than 1,000 shares) of the
Company's common stock to each non-employee director
of the Company, and provide that such grants will
occur in December (rather than March) of each fiscal
year, and (iii) extend the term of the plan to April
30, 2001; and
(5) to transact such other business as may properly come
before the Annual Meeting or any adjournments
thereof.
Record holders of the Company's common stock, par value $.01
per share ("Common Stock"), at the close of business on February 2, 1996, the
record date, are entitled to notice of, and to vote at, the Annual Meeting. As
of January 19, 1996, there were outstanding 3,964,073 shares of Common Stock.
Each shareholder will be entitled to one vote for each share of Common Stock
held at the close of business on the record date. At the Annual Meeting, votes
will be counted by written ballot.
- 1 -
<PAGE>
This Proxy Statement, and the accompanying notice of the
Annual Meeting and proxy card, will first be sent or given to shareholders on or
about February 20, 1996. The Company's Annual Report to Shareholders for the
fiscal year ended October 31, 1995 accompanies this Proxy Statement.
The shares of Common Stock represented by valid proxies
received by the Company in time for the Annual Meeting will be voted as
specified in such proxies. Executed but unmarked proxies will be voted:
(1) FOR the election of the Board of Directors' nominees
for director;
(2) FOR the ratification of the appointment of Price
Waterhouse LLP as independent accountants of the
Company for the fiscal year ending October 31, 1996;
(3) FOR the approval of the new Company's Stock Option
Plan with 1,000,000 shares of the Company's Common
Stock reserved for issuance upon the exercise of
options granted under such new Stock Option Plan; and
(4) FOR the approval of the amendments to the Company's
Non-Employee Director Stock Option Plan which would,
among other things, (i) increase from 75,000 to
125,000 the number of shares reserved for issuance
upon the exercise of options granted under the
Non-Employee Director Stock Option Plan, (ii) provide
for annual grants of an option to purchase 3,000
shares (rather than 1,000 shares) of the Company's
Common Stock to each non-employee director of the
Company, and provide that such grants will occur in
December (rather than March) of each fiscal year, and
(iii) extend the term of the plan to April 30, 2001.
If any other matters properly come before the Annual Meeting,
the persons named as proxies will, unless the shareholder otherwise specifies in
the proxy, vote upon such matters as determined by a majority of the Board of
Directors.
The election of the Board of Directors' nominees for director
will require the affirmative vote of a plurality of the shares entitled to vote
in the election of directors. Approval of the ratification of independent
accountants, the new Stock Option Plan, and the amendment to the Non-Employee
Director Stock Option Plan requires the affirmative vote of the holders of a
majority of the shares of Common Stock of the Company entitled to vote thereon
and who vote in person or by proxy at the Annual Meeting. In order to approve
the transaction of any other business as may properly come before the Annual
Meeting, or any adjournments thereof, the votes cast at the Annual Meeting
approving the action must exceed the votes cast opposing the action. Abstentions
and broker non-votes will not be counted as either approving or opposing the
action.
Any shareholder giving a proxy has the right to revoke it at
any time before it is exercised by attending the Annual Meeting and voting in
person or by delivering to the Secretary of the Company at 20270 Goldenrod Lane,
Germantown, MD 20876-4070, a written notice of revocation or duly executed proxy
bearing a later date.
The cost of soliciting proxies will be borne by the Company.
In addition to the use of the mails, proxies may be solicited personally or by
telephone, facsimile or telegraph by officers, directors, and employees of the
Company who will not be specially compensated for such solicitation activities.
Arrangements will also be made with brokerage houses and other custodians,
nominees, and fiduciaries for forwarding solicitation materials to the
beneficial owners of such shares held of
-2-
<PAGE>
record by such persons, and the Company will reimburse such persons for their
reasonable expenses incurred in connection therewith.
The Company is required to file an Annual Report on Form 10-K
for the fiscal year ended October 31, 1995 with the Securities and Exchange
Commission ("SEC"). Shareholders can obtain, free of charge, a copy of such
Annual Report by writing to Microlog Corporation, 20270 Goldenrod Lane,
Germantown, MD 20876-4070, Attention: Corporate Secretary.
-3-
<PAGE>
STOCK OWNED BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth information as of January 19,
1996 with respect to the ownership of shares of Common Stock by (i) owners of
more than 5% of the Company's outstanding Common Stock, (ii) each director and
nominee for director of the Company, (iii) each of the named executive officers
of the Company, and (iv) all directors and officers of the Company as a group.
The information is based on the most recent filings with the SEC by such persons
or upon information provided by such persons to the Company. Unless otherwise
indicated, the persons shown in the table are believed to have sole voting and
investment power with respect to the entire number of shares reported.
<TABLE>
<CAPTION>
Name and Address of Number of Shares Percentage of
Beneficial Owner (1) Beneficially Owned Ownership (2)
- -------------------- ------------------ -------------
<S> <C> <C>
Joe J. Lynn 453,350 11.4%
20270 Goldenrod Lane
Germantown, MD 20876-4070
J. Graham Hartwell 404,050 10.2%
20270 Goldenrod Lane
Germantown, MD 20876-4070
Hathaway & Associates, Ltd 314,000 7.9%
119 Rowayton Avenue
Rowayton, Connecticut 06853
Steven R. Delmar 135,305 (3) 3.3%
20270 Goldenrod Lane
Germantown, MD 20876-4070
Richard A. Thompson 112,000 (4) 2.8%
20270 Goldenrod Lane
Germantown, MD 20876-4070
Deborah M. Grove 41,599 (5) 1.0%
20270 Goldenrod Lane
Germantown, MD 20876-4070
Robert E. Gray, Jr. 36,520 (6) *
20270 Goldenrod Lane
Germantown, MD 20876-4070
David M. Gische 29,000 (6) *
20270 Goldenrod Lane
Germantown, MD 20876-4070
All officers and directors as
a group (9 persons) 1,239,233 (7) 29.3%
- ----------------------------
<FN>
* Less than 1% of the shares outstanding.
-4-
<PAGE>
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a
person is deemed to be the beneficial owner of a security for purposes of
the Rule if he or she has or shares voting power or investment power with
respect to such security or has the right to acquire such ownership within
60 days. As used herein, "voting power" is the power to vote or direct the
voting of shares, and "investment power" is the power to dispose or direct
the disposition of shares.
(2) For the purpose of computing the percentage of ownership of each
beneficial owner, any securities which were not outstanding but which were
subject to options, warrants, rights, or conversion privileges held by
such beneficial owner exercisable within 60 days were deemed to be
outstanding in determining the percentage owned by such person but are not
deemed outstanding in determining the percentage owned by any other
person.
(3) Includes 12,000 shares held by the Company's Money Purchase Pension Plan,
of which Mr. Delmar is a trustee. Mr. Delmar disclaims beneficial
ownership of such shares. Also includes 85,000 shares that may be acquired
by Mr. Delmar within 60 days of the record date upon the exercise of stock
options. Does not include 15,000 shares that may be acquired by Mr. Delmar
more than 60 days after the record date upon the exercise of stock
options, which grants are subject to approval by shareholders as described
in Proposal No. 3 below.
(4) Includes 12,000 shares held by the Company's Money Purchase Pension Plan,
of which Mr. Thompson is a trustee. Mr. Thompson disclaims beneficial
ownership of such shares. Also includes 100,000 shares that may be
acquired by Mr. Thompson within 60 days of the record date upon the
exercise of stock options. Does not include 250,000 shares that may be
acquired by Mr. Thompson more than 60 days after the record date upon the
exercise of stock options, which grants are subject to approval by
shareholders as described in Proposal No. 3 below.
(5) Includes 18,333 shares that may be acquired by Ms. Grove within 60 days of
the record date upon the exercise of stock options. Does not include
21,667 shares that may be acquired by Ms. Grove more than 60 days after
the record date upon the exercise of stock options, of which 15,000 shares
are subject to approval by shareholders as described in Proposal No. 3
below.
(6) Includes 26,000 shares that may be acquired within 60 days of the record
date upon the exercise of stock options that have been granted.
(7) Includes 262,000 shares that may be acquired within 60 days of the record
date upon the exercise of stock options. Does not include 320,033 shares
that may be acquired more than 60 days after the record date upon the
exercise of stock options. Includes 12,000 shares held by the Company's
Money Purchase Pension Plan, of which Messrs. Thompson and Delmar are
trustees. Messrs. Thompson and Delmar each disclaims beneficial ownership
of such shares.
</FN>
</TABLE>
-5-
<PAGE>
MATTERS TO BE ACTED UPON
ELECTION OF DIRECTORS
(Proposal No. 1)
The By-Laws of the Company currently provide that the
membership of the Board be divided into three classes. The Board of Directors
currently consists of six directors with each class having two directors. The
term of only one class of directors expires each year, and their successors are
elected for a term of three years and until their successors are duly elected
and qualified. Any director elected to fill any vacancy occurring in the Board
of Directors, including any vacancy created by an increase in the number of
directors, shall hold office for the remainder of the full term of the class of
directors in which the new directorship was created or in which the vacancy
occurred. There is currently one vacancy on the Board.
At the Annual Meeting, two directors will be elected. The
nominees, David M. Gische and Richard A. Thompson, currently are serving as
directors and have indicated their willingness to continue serving if elected.
Two directors were elected in 1995 for three-year terms ending in 1998, and one
director was elected in 1994 for a three-year term ending in 1997. The Board is
presently searching for a suitable candidate to fill the vacancy on the Board.
The following table provides information as to the nominees
for director of the Company for terms ending in 1999, and as to directors whose
terms in office will continue.
Expiration
Name Age of Term
- ---- --- -------
Nominee
- -------
David M. Gische 46 1999
Richard A. Thompson 49 1999
Continuing Directors
- --------------------
J. Graham Hartwell 65 1998
Joe J. Lynn 64 1998
Robert E. Gray, Jr. 54 1997
David M. Gische has been a director of the Company since April
1985. Mr. Gische, an attorney, has been associated with the law firm of Ross,
Dixon & Masback in Washington, D.C. since November 1983. From September 1978
until November 1983, Mr. Gische was associated with the Washington, D.C. law
firm of Hogan & Hartson LLP, counsel to the Company.
Richard A. Thompson has been President and Chief Operating
Officer of the Company since June 1992 and was elected a director of the Company
in September 1992. Prior to joining Microlog Corporation, Mr. Thompson was
President and a director of General Kinetics, Inc., a diversified manufacturing
company from October 1989 to December 1991. Other positions he has held have
been as President of Thompson Associates, a management consulting firm from 1988
to 1989 and as Marketing Manager with General Electric Company from 1985 to
1988. Mr. Thompson is also a Captain in the U. S. Naval Reserve.
J. Graham Hartwell has been Chairman of the Board since March
1986 and a director of the Company since 1969. He was President of the Company
from its organization in
-6-
<PAGE>
1969 until October 1989. In October 1989, Mr. Hartwell became Chief Executive
Officer of the Company and served in that capacity until his retirement on April
30, 1991.
Joe J. Lynn became Chief Executive Officer of the Company on
May 1, 1991. He served as President of the Company from October 1989 to June
1992. Before this, Mr. Lynn was Executive Vice President of the Company and
served as President of the Company's subsidiary, Microlog Corporation of
Maryland. He has been a director of the Company since its formation in 1969.
From 1966 until 1970, Mr. Lynn was employed as a manager with DBA Systems, Inc.
Prior thereto, from 1961 to 1966, he served as a manager at the Kennedy Space
Flight Center for RCA, which is presently a subsidiary of General Electric
Company.
Robert E. Gray, Jr. has been a director of the Company since
1977. He is currently Senior Vice President of Prosperity Bank and Trust, in
Springfield, Virginia. He was employed by Hallmark Bank & Trust Co. from 1985 to
1992 - as Director and Executive Vice President from 1989 to 1992, and prior
thereto as Senior Vice President and Chief Lending Officer. From 1992 to 1993,
he served as Senior Vice President of Suburban Bank of Virginia, NA in McLean,
Virginia.
During fiscal year 1995, there were 6 meetings (including
regularly scheduled and special meetings) of the Board of Directors. All
directors attended more than 75% of such meetings.
The Board has an Audit Committee, a Management Compensation
Committee, and a Stock Option Committee, but does not have a nominating
committee. The Audit, Management Compensation, and Stock Option Committees each
consists of Messrs. Gische and Gray.
The Audit Committee is primarily responsible for approving the
services performed by the Company's independent accountants. The Audit Committee
met 1 time during fiscal year 1995. All members of the Audit Committee attended
this meeting.
The function of the Management Compensation Committee is to
make recommendations to the Board of Directors with respect to the compensation
of certain officers and employees, including the executive officers. The
Management Compensation Committee met 1 time during fiscal year 1995. Each
member of the Management Compensation Committee attended this meeting.
The function of the Stock Option Committee is to make
recommendations to the Board of Directors with respect to the grant of stock
options to officers and employees. The Stock Option Committee met 5 times during
fiscal year 1995. Each member of the Stock Option Committee attended these
meetings.
-7-
<PAGE>
MANAGEMENT
The executive officers of the Company, and their respective
ages as of January 19, 1996, are as follows:
Name Age Offices and Positions Held
- ---- --- --------------------------
Joe J. Lynn 64 Chief Executive Officer and Director
Richard A. Thompson 49 President, Chief Operating Officer and
Director
Steven R. Delmar 39 Executive Vice President and Chief
Financial Officer
Deborah M. Grove 43 President of subsidiary, Old Dominion
Systems Incorporated of Maryland
Steven R. Delmar has been Executive Vice President of the
Company since October 1989 and was President of Microlog Corporation of
Maryland, a wholly-owned subsidiary of the Company, from May 1991 to July 1992.
Mr. Delmar was Microlog's Chief Financial Officer from January 1987 to May 1991.
He served as Chief Operating Officer of Microlog (rather than Chief Financial
Officer) from May 1991 until July 1992, and following the hiring of Mr. Thompson
as President and Chief Operating Officer, Mr. Delmar resumed his position as
Chief Financial Officer. He was Vice President of the Company from January 1987
to October 1989. Since 1979, Mr. Delmar has held various offices with the
Company and its subsidiaries, including Assistant Comptroller, Comptroller,
General Manager and Vice President. A certified public accountant, Mr. Delmar
held accounting positions with Bechtel Power Corporation, a commercial
construction firm, and the Veterans Administration prior to his employment with
Microlog.
Deborah M. Grove became President of Old Dominion Systems
Incorporated of Maryland, a wholly-owned subsidiary of the Company, in May 1991.
From 1983 until May 1991, Ms. Grove was Vice President of Old Dominion Systems
Incorporated of Maryland and from 1985 until May 1991, Vice President of Old
Dominion Services, Inc. Ms. Grove holds a Master of Science degree in Business
and Finance and a Bachelor of Science degree in Business Administration.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Certain Other Compensation
The following table shows, for the fiscal years ending October
31, 1993, 1994, and 1995, the salary, bonus and certain other forms of
compensation paid or accrued for those years by the Company and its subsidiaries
to the Chief Executive Officer and each of the three other executive officers
whose salary and bonus compensation exceeded $100,000 in fiscal 1995 ("named
executive officers").
-8-
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
- --------------------------------------------------------------------------- -----------------------------------
- --------------------------------------------------------------------------- ---------------------- ------------ -----------
Awards Payouts
Other
Annual Restricted All Other
Compensation Stock Options/SALTIP Compensation
Name and Principal Fiscal Salary Bonus ($)(b) Award(s) (#) Payouts ($) ($)(c)
------- ------ --- --- ------
Position Year ($)(a) ($) ($)
-------- ---- ------ --- ---
<S> <C> <C> <C> <C> <C> <C>
Joe J. Lynn 1995 169,919 50,000 7,715 10,851
Chief Executive Officer 1994 169,207 4,513 12,027
1993 162,344 35,500 682 4,904
Richard A. Thompson 1995 160,000 90,000 4,622 100,000 12,125
President and Chief 1994 157,453 5,947 12,500
Operating Officer 1993 144,997 34,776 5,552 3,867
Steven R. Delmar 1995 130,000 40,000 3,980 15,000 10,255
Executive Vice President 1994 129,163 3,873 11,164
and Chief Financial 1993 126,025 29,000 1,669 4,688
Officer
Deborah M. Grove 1995 110,000 40,000 10,039 15,000 8,784
President of subsidiary, 1994 106,386 9,498 8,520
Old Dominion Systems 1993 95,969 16,000 7,464 7,462
Incorporated of Maryland
- --------------------------- ----------- ------------ --------- ------------ ------------ --------- ------------ -----------
<FN>
(a) Includes deferred compensation
For fiscal 1995, 1994, and 1993 Mr. Lynn's deferred compensation included
in his salary was $4,919, $151, and $11,853 respectively. For fiscal 1995,
1994, and 1993 Mr. Delmar's deferred compensation included in his salary
was $0, $149, and $1,017, respectively. For fiscal 1995, 1994, and 1993
Mrs. Grove's deferred compensation included in her salary was $0, $124, and
$847, respectively.
(b) Other annual compensation consists of reimbursements under the Company's
Executive Medical Reimbursement Plan and paid personal leave.
(c) All other compensation consists of 401k matching contributions and pension
plan contributions. For fiscal 1995 Mr. Lynn's 401k matching and pension
contributions were $1,851 and $9,000, respectively. For fiscal 1995 Mr.
Thompson's 401k matching and pension contributions were $3,200 and $9,000,
respectively. For fiscal 1995 Mr. Delmar's 401k matching and pension
contributions were $2,275 and $7,980, respectively. For fiscal 1995 Mrs.
Grove's 401k matching and pension contributions were $1,798 and $6,986,
respectively.
</FN>
</TABLE>
-9-
<PAGE>
Stock Options
The following table contains information with respect to
grants of stock options to each of the named executive officers during the
fiscal year ended October 31, 1995. All such grants were made under the prior
stock option plan or the new Stock Option Plan (subject to shareholder
approval).
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential
Realizable Value at
Assumed Annual Rates
Individual Grants Rates of Stock Price
Appreciation for
% of Total Option Term (a)
Number of Options Granted Exercise Expiration
Options Granted to Employees Price ($/sh) Date 5% ($) 10% ($)
--------------- ------------ ------------ ---- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard A. Thompson (b) 100,000 17.0% $4.375 9/28/05 275,500 697,500
Steven R. Delmar (c) 15,000 2.6% $4.375 9/28/05 41,325 104,625
Deborah M. Grove (c) 15,000 2.6% $4.375 9/28/05 41,325 104,625
10,000 1.7% $1.000 12/20/04 61,300 103,500
- --------------------
<FN>
(a) Share prices for Mr. Thompson assuming a 5% and 10% annual appreciation at
the end of the term of his option are $7.13 and $11.35, respectively;
shares prices for Mr. Delmar assuming a 5% and 10% annual appreciation at
the end of the term of his option are $7.13 and $11.35, respectively; and
shares prices for Ms. Grove assuming a 5% and 10% annual appreciation at
the end of the term of her option are $7.13 and $11.35, respectively.
(b) These options vest over a three-year period with 33.3% vesting at the end
of each year.
(c) These options vest at the end of a five year period. The achievement of
specific objectives could accelerate the vesting to one year.
</FN>
</TABLE>
The following table provides information concerning the
exercise of stock options by the named executive officers during fiscal 1995.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR, AND FY-END OPTION VALUES
Number of Securities Value of Unexercised In-the
Underlying Unexercised Money Options at FY-End
Options at FY End (#) ($)(a)
Shares Acquired on Value Exercisable/ Exercisable/
NAME Exercise (#) Realized ($) Unexercisable Unexercisable
---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Richard A. Thompson -- -- 100,000/100,000 425,000/425,000
Deborah M. Grove -- -- 18,333/21,667 77,915/92,085
Steven R. Delmar -- -- 75,000/25,000 318,750/106,250
- ----------------------------
<FN>
(a) Calculations based on closing price of stock of $4.25 on October 31, 1995.
</FN>
</TABLE>
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<PAGE>
Employment, Deferred Compensation, and Consulting Agreements
The Company is a party to employment agreements with Messrs.
Lynn and Delmar, which provide for employment of these officers through December
31, 1996. The annual salaries of these individuals under the employment
agreements are subject to increase each year as determined by the Board of
Directors, and each individual is entitled to receive discretionary bonuses as
determined by the Board. On December 26, 1995, the Board of Directors set
salaries, to become effective as of November 1, 1995, under these agreements
(exclusive of deferred compensation) for Messrs. Lynn and Delmar of $170,000 and
$135,000, respectively, which represent 3% and 4% increases from the prior year.
The employment contracts entitle the two individuals to certain fringe benefits,
including insurance coverage and various executive perquisites. Upon termination
of employment without cause, each individual will be entitled to receive a lump
sum cash payment equal to the individual's then current salary calculated for
the remaining period of the agreement (without any present value discount). In
the event of a change in control of the Company (as defined in the agreement)
and subsequent termination of the individual's employment, voluntarily or
involuntarily, within two years, the individual will be entitled to receive a
lump sum payment equal to approximately three times his average annual salary
during the five most recent fiscal years of the Company. It currently is
estimated that the amount payable to Messrs. Lynn and Delmar in the event of
their termination following a change in control of the Company would be $474,000
and $381,000, respectively. Further, under the agreements, each individual has
agreed that for a period of one year after termination of employment other than
a termination by the Company without cause, he will not, among other things,
compete with the Company, solicit employees to leave the Company, or solicit
customers to reduce their level of business with the Company.
The Company is a party to an employment agreement with Mr.
Thompson. The agreement provides for employment of Mr. Thompson through December
31, 1998. Mr. Thompson's annual salary under his employment agreement is subject
to increase and discretionary bonuses each year as determined by the Board of
Directors. On December 20, 1995, the Board of Directors set a salary to become
effective as of November 1, 1995 under this agreement for Mr. Thompson of
$165,000, which represents a 3% increase from the prior year. The employment
contract entitles Mr. Thompson to certain fringe benefits, including insurance
coverage and various executive perquisites. Upon termination of employment
without cause, the existing base salary, plus all benefits, will be paid in
monthly installments for twelve months. In the event of his termination without
cause, Mr. Thompson would receive approximately $206,250. The employment
agreement also entitles Mr. Thompson to continue to serve as a director of the
Company for so long as he continues to be an officer of the Company.
The Company is a party to a noncontributory deferred
compensation agreement with Mr. Lynn under which the Company is obligated to
make payments to Mr. Lynn (or his beneficiaries) over the ten-year period
subsequent to his retirement (on or after age 65), permanent disability, or
death. The aggregate amount owed to Mr. Lynn under this agreement is payable
either in equal monthly installments over the ten-year period or in an
appropriately discounted single sum payment (at the election of Mr. Lynn). This
amount is determined by multiplying $2,500 by the number of months of employment
during the period April 1, 1988 to January 1, 1995 and adding an initial
contribution of $10,000. During the fiscal year ended October 31, 1995, the
Company accrued $-0- in deferred compensation and interest for Mr. Lynn under
this contract.
The Company is a party to a consulting and noncompetition
agreement with Mr. Hartwell, who retired from his position as Chief Executive
Officer of the Company effective April 30, 1991. Mr. Hartwell continues to serve
as a director of the Company. The agreement provides for the consulting services
of Mr. Hartwell through May 1, 1996, with an annual consulting fee
-11-
<PAGE>
payment of $80,000. In addition, the agreement provides Mr. Hartwell with
medical insurance coverage.
Management Compensation Committee Report on Executive Compensation
Decisions on compensation of the Company's executives
generally are made by the two-member Management Compensation Committee of the
Board. Each member of the Management Compensation Committee is a non-employee
director. All decisions by the Management Compensation Committee relating to the
compensation of the Company's executive officers are reviewed by the full Board.
Set forth below is a report submitted by the Management Compensation Committee
addressing the Company's compensation policies for fiscal 1995 as they affected
the Company's executive officers, including the Chief Executive Officer and the
named executive officers.
Compensation Policies for Executive Officers. The Company's executive
compensation policies are designed to provide competitive levels of
compensation, assist the Company in attracting and retaining qualified
executives, reward superior corporate performance, and recognize individual
initiative and achievement. Measurement of corporate performance is primarily
based upon Company goals and industry performance levels. The Company considers
compensation paid to its executive officers to be deductible for purposes of
Section 162(m) of the Internal Revenue Code. Target levels of the executive
officers' overall compensation are intended to be consistent with other
executives in the Company's industry, including members of its peer group,
taking into account the size and financial results of these respective
companies. The Management Compensation Committee believes that stock ownership
by management and stock-based performance compensation arrangements are
beneficial in aligning management's and shareholders' interests in the
enhancement of shareholder value.
Relationship of Performance to Executive Compensation. Compensation paid to the
Company's executive officers in fiscal 1995, which related to the performance of
the Company, consisted of the following components: base salary, cash bonuses,
grants of stock options under stock option plans, and executive perquisites.
Base Salary. The Management Compensation Committee reviews
executive base salaries on a regular basis. In view of the Company's improved
financial performance during fiscal 1995 and the lack of any salary increases
during four of the prior five years, base salaries were increased $5,000 per
officer for fiscal 1996.
Cash Bonuses. The Management Compensation Committee also
determines, generally on an annual basis, whether to award bonuses to executive
officers based upon their individual performance or on the performance of the
Company as a whole. In prior years, the Board, at the recommendation of the
Management Compensation Committee, has adopted specific incentive compensation
arrangements for executive officers which consist of cash bonuses payable if the
Company achieved certain pre-tax (and pre-bonus) profit and sales goals. The
Company utilizes an executive bonus plan under which a pool of funds, determined
by formula, are set aside for selected executives. The amount of funds set aside
for the bonus pool is based on the Company's sales and pre-tax income. A new
Executive Bonus Plan with new performance goals was adopted for fiscal 1996.
Bonuses of $244,000 were paid for fiscal 1995 under the Executive Bonus Plan in
effect for fiscal 1995.
Stock Options. The Company provided a long-term incentive
through a stock option plan which was adopted in 1986, and intends to continue
this incentive through a new stock option plan adopted in 1995, subject to
shareholder approval. The stock option plans were and are intended to foster
management team cohesion and align management and shareholder interests.
-12-
<PAGE>
Key employees, including executive officers, were and are eligible for grants
under the stock option plans. The stock option plans were and are administered
by the Stock Option Committee, which consists exclusively of non-employee
directors. Awards are intended to provide incentives for executive officers to
enhance long-term corporate performance, as reflected in stock price, thereby
increasing shareholder value, and to provide non-cash compensation to such
officers as part of their overall compensation package. The Company believes
that the stock option plans encourage superior performance that can result in
significantly enhanced shareholder value. The option price of shares granted
under the stock option plans may be less than the fair market value of the
shares underlying the option on the date of grant, but such options generally
have been granted at fair market value. Options granted under the stock option
plans generally terminate automatically upon termination of employment or
service with the Company, except in cases of disability or death.
In September 1995, Mr. Thompson was awarded options to
purchase 100,000 shares (as was the case in Mr. Thompson's prior contract). As
part of his new three year employment contract, based upon the Board's view that
Mr. Thompson's continued performance as President and Chief Operating Officer is
very important to the Company, particularly as Mr. Lynn, the Chief Executive
Officer, approaches retirement age, the Board recommended (and the Stock Option
Committee of the Board granted) additional options for Mr. Thompson to purchase
150,000 shares of Common Stock, vesting in ten years ending in December 2005.
The additional options contain an accelerated vesting provision based upon the
trading price of the Company's Common Stock in June of each of 1996 ($3.50),
1997 ($5.00), and 1998 ($10.00). The Company's Common Stock was trading at a
price of less than $3.00 when these price targets were initially agreed upon,
and had traded at significantly lower levels in the prior year. Each of the
options granted to Mr. Thompson are subject to approval by shareholders of the
new stock option plan described in Proposal No. 3 below.
With respect to other named executive officers, after
considering the numbers of options held by such officers, the Stock Option
Committee awarded options to purchase 15,000 shares to each of Mr. Delmar and
Ms. Grove, are subject to approval by shareholders of the new stock option plan
described in Proposal No. 3 below.
Executive Perquisites. In prior years the Company has provided
certain perquisites for its executive officers which the Management Compensation
Committee has determined are customary for similar companies. With respect to
fiscal 1996, the Management Compensation Committee decided to set aside
approximately $115,000 for executives and a group of other key employees,
collectively, for executive perquisites selected by such employees. The
Committee determined that self-selection of perquisites would probably be most
efficient for this portion of compensation of the executive and other key
employees, taking advantage of available cost savings, tax benefits, and other
factors.
Other Compensation. In addition to the compensation paid to
executive officers as described above, executive officers and other key
employees receive benefits under the Company's Medical Reimbursement Plan (along
with supplemental health benefits of up to $7,500 per executive), and executive
officers receive, along with and on the same terms as other employees,
contributions by the Company pursuant to the Company's Pension Plan and matching
contributions under the Company's Pre-Tax Savings Plan (401k).
CEO Compensation. In setting the Chief Executive Officer's
salary and incentive compensation for fiscal 1996, the Management Compensation
Committee reviewed the Company's fiscal 1995 financial performance in revenues,
expenses and pre-tax net income. Based upon its review at the outset of fiscal
1996, the Committee approved a modest increase in Mr. Lynn's salary for fiscal
1996 of $5,000. The Committee believes that any significant increase in Mr.
Lynn's compensation for 1996 will come from the executive bonus plan, which is
based on achieving the Company's revenue and net income targets, and that Mr.
Lynn has substantial motivation to increase the value of the Company's Common
Stock due to the large number of shares that he holds.
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<PAGE>
The Committee believes a significant performance-based component of total
compensation serves the interests of shareholders by directly linking management
compensation with corporate performance.
Management Compensation Committee Report
Submitted by the Members of the Management Compensation Committee:
David M. Gische
Robert E. Gray, Jr.
Compensation Committee Interlocks and Insider Participation
None.
Comparative Company Performance
The following line graph compares cumulative total shareholder
return for the Company with a performance indicator of the NASDAQ stock market,
and a peer group index over the last five fiscal years. The peer group consists
of Active Voice, Boston Technology, Brite Voice Systems, Centigram
Communications Inc., Cognitronics, Comverse Technology, Davox Corp., Digital
Sound, Intervoice Inc., Octel Communications, CP., Perception Inc., Syntellect,
Inc.
[GRAPHIC OMITTED]
COMPARISON IF CUMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
- -------------------------------FISCAL YEAR ENDING-------------------------------
COMPANY 1990 1991 1992 1993 1994 1995
MICROLOG CP 100 75.00 50.00 168.75 29.69 212.50
PEER GROUP 100 171.85 213.22 303.97 336.70 409.55
BROAD MARKET 100 127.20 123.22 161.70 171.91 203.93
-14-
<PAGE>
Compensation of Directors
Compensation of Mr. Gische and Mr. Gray, through fiscal 1995,
consisted of $500 per meeting with a maximum of $5,000 per year for each such
director. Effective December 20, 1995, the per meeting fee was increased to
$1,000 per meeting with a maximum of $10,000 per year for each director.
Employee directors are not paid for attending meetings of the Board of
Directors.
The Company has a non-employee director stock option plan (the
"Non-Employee Director Plan"), which was approved by the shareholders, pursuant
to which 75,000 shares of Common Stock have been reserved for issuance to
non-employee directors of the Company upon exercise of options granted under the
Non-Employee Director Plan. The Company believes that options issued under the
Non-Employee Director Plan create an incentive for non-employee directors to
expend maximum effort for the growth and success of the Company. Options for
1,000 shares of Common Stock were granted during fiscal 1995 to each of Messrs.
Gische and Gray under the Non-Employee Director Plan. The option price of all
options granted under the Non-Employee Director Plan equal the fair market value
of the shares underlying the option on the date of grant. Options granted under
the Non-Employee Director Plan expire if not exercised within ten years from the
date of the grant of the option. The terms of the Non-Employee Director Plan and
options to be granted thereunder is proposed to be amended, as described in
Proposal No. 4 below.
Section 16(a) Disclosure
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's officers and directors, and persons who own more than ten-percent
of a registered class of the Company's equity securities, to file reports of
beneficial ownership and changes in beneficial ownership with the Securities and
Exchange Commission. Officers, directors, and greater than ten-percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting persons that
no Form 5's, other than two Form 5's which were filed late for two Directors,
were required for those persons, the Company believes that, during fiscal 1995,
all filing requirements applicable to its officers, directors, and greater than
ten-percent beneficial owners were complied with.
-15-
<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(Proposal No. 2)
The Board of Directors has appointed the firm of Price
Waterhouse LLP as independent accountants of the Company for the fiscal year
ending October 31, 1996, subject to ratification of such appointment by the
shareholders. The appointment of this firm was recommended to the Board of
Directors by its Audit Committee. Price Waterhouse LLP has been acting as
independent accountants of the Company since 1979.
The submission of this matter to shareholders at the Annual
Meeting is not required by law or by the By-Laws of the Company. Nevertheless,
the Board of Directors of the Company is submitting it to the shareholders to
ascertain their views. If this appointment is not ratified by the holders of at
least a majority of the shares of Common Stock of the Company at the Annual
Meeting, the Board of Directors intends to reconsider its appointment of Price
Waterhouse LLP as independent accountants of the Company.
Representatives of Price Waterhouse LLP will be present at the
Annual Meeting and will be available to respond to questions or make a
statement, if they so desire.
-16-
<PAGE>
NEW STOCK OPTION PLAN
(Proposal No. 3)
On September 28, 1995 and December 20, 1995, the Board of
Directors, subject to shareholder approval, adopted the Microlog 1995 Stock
Option Plan (the "New Stock Option Plan") with 1,000,000 shares of Common Stock
of the Company reserved for issuance upon the exercise of options granted
thereunder. Based upon the closing price of the Company's Common Stock on
January 19, 1996, the aggregate market value of the total number of shares of
Common Stock underlying the stock options available for grant, including the
shares reserved for issuance that are subject to shareholder approval, is
$2,315,160.75.
The principal provisions of the New Stock Option Plan are
summarized below. Such summary does not, however, purport to be complete and is
qualified in its entirety by the terms of the New Stock Option Plan, the entire
text of which is attached hereto as Exhibit 1 and incorporated herein by
reference.
Reason for Adoption of the New Stock Option Plan
Approval of adoption of the New Stock Option Plan is being
sought primarily because the prior stock option plan expires by its terms in
April 1996 and no new options may be granted thereunder after such date. In
addition, no shares of authorized but unissued Common Stock remain available for
future grant under the terms of the prior stock option plan. With the recent
streamlining of personnel and in light of the Company's current cash resources,
the Company intends to continue to rely heavily on stock options to encourage
the continued employment of key personnel and to provide an important incentive
for superior performance. The Board of Directors believes that adoption of the
New Stock Option Plan with 1,000,000 shares available for grant thereunder is
appropriate at this time in order to assure that a meaningful number of stock
options will be available for grant to employees of the Company and its
subsidiaries.
Description of the New Stock Option Plan
The New Stock Option Plan was adopted by the Board of
Directors in September 1995 and amended on December 20, 1995, subject to
shareholder approval. Under the terms of the New Stock Option Plan, 1,000,000
shares of Common Stock of the Company will be reserved for issuance to employees
of the Company and its subsidiaries upon exercise of options granted under the
New Stock Option Plan. The Stock Option Committee, consisting of two directors
of the Company, Messrs. Gische and Gray (neither of whom is an officer or
salaried employee of the Company), has authority to administer the New Stock
Option Plan and grant options thereunder.
Incentive stock options may be granted under the New Stock
Option Plan from time to time to any full-time employee of the Company or any of
its subsidiaries, including employees who are officers of the Company and its
subsidiaries (approximately 240 in number as of January 19, 1996). The maximum
number of shares of Common Stock subject to options that may be granted under
the New Stock Option Plan to any executive officer or other employee is 500,000
shares. Non-employee directors are not eligible to receive options under the New
Stock Option Plan. No option may be granted under the New Stock Option Plan
after the tenth anniversary of the effective date of the New Stock Option Plan,
September 28, 2005.
Under the New Stock Option Plan, the option price of incentive
stock options may not be less than the fair market value of the shares
underlying the option on the date the option is granted (or less than 110% of
the fair market value in the case of a person who owns more than 10%
-17-
<PAGE>
of the Company's Common Stock). The option price of nonqualified options may not
be less than the par value of the shares underlying the option. The aggregate
fair market value of Common Stock (determined at the time the option is
granted), with respect to which incentive stock options granted under the New
Stock Option Plan (and all other benefit plans of the Company) are exercisable
for the first time by any employee during any calendar year, may not exceed
$100,000. Payment for shares purchased under the New Stock Option Plan may be
made either in cash or cash equivalents, in shares of Common Stock with a fair
market value equal to the option price, or a combination of cash and shares of
Common Stock. The New Stock Option Plan also allows for "cashless exercise," in
which a licensed broker tenders to the Company cash equal to the exercise price
(plus taxes required to be withheld) at the time the Company issues the stock
certificates.
Options granted under the New Stock Option Plan generally are
not transferable during the lifetime of the employee and Common Stock acquired
prior to six months after the grant of any option may not be transferred.
Options granted under the New Stock Option Plan are expected
to expire if not exercised within ten years from the date of grant and will
terminate automatically upon an optionee's termination of employment or service
with the Company (or three months thereafter, in the case of normal retirement
in accordance with Company policy) unless otherwise provided in the option
agreement pertaining to such option. If any optionee dies while in the employ or
service of the Company or a subsidiary, his or her options, whether or not then
exercisable, may be exercised by his or her estate or by a person who acquires
the right to exercise such option by bequest or inheritance, within one year
after the date of such death (but not later than the date the option would
otherwise expire), unless otherwise provided in the option agreement. If an
optionee's service or employment with the Company or a subsidiary is terminated
by reason of permanent and total disability, his or her options, whether or not
then exercisable, may be exercised within one year after such termination of
service or employment (but not later than the date on which the option would
otherwise expire), unless otherwise provided in the option agreement. In the
event of a change in control of the Company (as defined in the New Stock Option
Plan), all outstanding options generally would immediately become exercisable.
The New Stock Option Plan is intended to qualify for the
exemption provided by Rule 16b-3 under the Securities Exchange Act. To the
extent any provision does not comply with the requirements of Rule 16b-3, it
shall be deemed inoperative to the extent permitted by law and deemed advisable
by the Board.
If the outstanding shares of Common Stock are increased or
decreased or changed into or exchanged for a different number or kind of shares
or other securities of the Company by reason of any recapitalization,
reclassification, stock split, reverse split, combination of shares, exchange of
shares, stock dividend or other distribution payable in Common Stock, or other
increase or decrease in the outstanding shares of Common Stock effected without
receipt of consideration by the Company, occurring after the effective date of
the New Stock Option Plan, the number and kinds of shares for the purchase of
which options may be granted under the New Stock Option Plan will be adjusted
proportionately and accordingly by the Company. In addition, the number and kind
of shares for which options are outstanding will be adjusted proportionately and
accordingly so that the proportionate interest of the holder of the option
immediately following such event will, to the extent practicable, be the same as
immediately prior to such event. Any such adjustment in outstanding options will
not change the aggregate option price payable with respect to shares subject to
the unexercised portion of the option outstanding, but will include a
corresponding proportionate adjustment in the option price per share.
Upon dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation or other business combination of the
Company with one or more other entities in which the Company is not the
surviving entity, or upon the sale of all or substantially all of the
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<PAGE>
assets of the Company to another entity, or upon any transaction (including,
without limitation, a merger or reorganization in which the Company is the
surviving corporation) approved by the Board which results in any person or
entity (or persons or entities acting as a group or otherwise in concert) owning
80 percent or more of the combined voting power of all classes of stock of the
Company, the New Stock Option Plan and all options outstanding thereunder will
terminate, except to the extent a provision is made in connection with such
transaction for the continuation of the New Stock Option Plan and/or the
assumption of the options or for the substitution for such options of new
options covering the stock of a successor employer corporation, or parent or
subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and the per option exercise prices, in which event the New Stock Option
Plan and options theretofore granted will continue in the manner and under the
terms so provided. In the event of such termination, all outstanding options
will be exercisable in full during such period immediately prior to the
occurrence of such termination as the Board of Directors, in its sole
discretion, may determine and designate whether or not such options are
exercisable during such period.
Subject to the foregoing, if the Company is the surviving
corporation in any reorganization, merger, or consolidation of the Company with
one or more corporations, any option granted pursuant to the New Stock Option
Plan will pertain to and apply to the securities to which a holder of the number
of shares of Common Stock subject to such option would have been entitled
immediately following such reorganization, merger, or consolidation, with a
corresponding proportionate adjustment of the per share option exercise price so
that the aggregate option exercise price thereafter will be the same as the
aggregate option exercise price of the shares remaining subject to the option
immediately prior to such reorganization, merger, or consolidation.
The Board of Directors of the Company may, at any time and
from time to time, amend, suspend or terminate the New Stock Option Plan as to
shares of Common Stock as to which options have not been granted. However, the
Board of Directors may not amend the New Stock Option Plan, except subject to
the approval of the Company's shareholders, if such amendment would (1)
materially increase the benefits accruing to eligible individuals under the New
Stock Option Plan; (2) change the requirements as to eligibility to receive
options under the New Stock Option Plan; or (3) increase the maximum number of
shares that may be sold pursuant to options granted under the New Stock Option
Plan, other than adjustments upon changes in capitalization.
Unless previously terminated, the New Stock Option Plan will
terminate automatically on September 28, 2005, the tenth anniversary of the
effective date of the New Stock Option Plan. No termination, suspension or
amendment of the New Stock Option Plan may adversely affect the rights of the
holder of an option without such holder's consent.
Federal Income Tax Consequences
The grant of an incentive stock option will not be a taxable
event for the optionee or the Company. Generally, the grant of a nonqualified
option should not be a taxable event for the optionee or the Company provided
that, if the per-share exercise price of the option is less than the market
value of a share of the Company Common Stock on the date of grant, there is a
substantial risk, on the basis of all the facts and circumstances, that the
value of the Company stock could be less than the option price during the term
of the option.
With respect to "incentive stock options", an optionee will
not recognize taxable income upon the grant or exercise of an incentive option,
and any gain realized upon a disposition of shares acquired pursuant to exercise
of an incentive option will be taxed as long-term capital gain, if the optionee
holds the shares for at least two years after the date the incentive option was
granted and for at least one year after the date the option was exercised.
However, the excess of the fair market value of the Common Stock subject to an
incentive option on the date of exercise (or,
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<PAGE>
in some cases, on the date of expiration of certain securities laws restrictions
as to the disposition of the shares unless the optionee files a special tax
election within 30 days after exercise) over the option exercise price will be
includable in alternative minimum taxable income in the year of exercise (or the
year in which such restrictions expire) for purposes of the alternative minimum
tax. This excess increases the optionee's basis in the stock for purposes of the
alternative minimum tax but not for purposes of the regular income tax. An
optionee may be entitled to a credit against regular tax liability in future
years for minimum taxes paid with respect to the exercise of incentive options.
The Company and its subsidiaries will not be entitled to any business expense
deduction with respect to the grant or exercise of an incentive option, except
as discussed below.
For the exercise of an incentive option to qualify for
favorable tax treatment, the optionee generally must be an employee of the
Company or a subsidiary from the date the option is granted through a date
within three months before the date of exercise. In the case of an optionee who
is disabled, within the meaning of Section 22(e)(3) of the Internal Revenue Code
of 1986, as amended, (the "Code")(or the corresponding provision of any
subsequently enacted tax statute), the three-month period for exercise following
termination of employment is extended to one year. In the case of an employee
who dies, the time for exercising incentive options after termination of
employment and the holding period for stock received pursuant to the exercise of
the option are waived. The New Stock Option Plan generally requires, however,
that incentive options be exercised within one year following the date of death
of an employee, but not later than the time the option would expire by its
terms.
If all of the requirements for incentive option treatment are
met except for the special holding period rules set forth above, the optionee
will recognize ordinary income upon the disposition of the stock, generally in
an amount equal to the excess of the fair market value of the stock at the time
the incentive option was exercised over the option exercise price. The balance
of the realized gain, if any, will be long-or short-term capital gain, depending
upon whether the stock was sold more than one year after the incentive option
was exercised. If the optionee sells the stock prior to satisfaction of the
holding period rules but at a price below the fair market value of the stock at
the time the incentive option was exercised, the amount of ordinary income will
be limited to the excess of the amount realized on the sale over the option
exercise price. If the optionee sells the stock prior to satisfaction of the
holding period rules, the Company will be allowed a business expense deduction
to the extent it complies with applicable reporting requirements and the
optionee recognizes ordinary income.
The New Stock Option Plan provides that optionees may exercise
an incentive option by tendering shares of Common Stock with a fair market value
equal to part or all of the option exercise price. An exchange of common shares
for common shares of the same corporation is ordinarily a nontaxable exchange,
and the tax basis of the shares exchanged is treated as the substituted basis
for the shares received. The shares tendered would be treated as exchanged for
an equivalent number of option shares, which would take the tax basis of the
tendered shares, and the additional option shares would have a zero basis. These
rules would apply to use of shares of Common Stock to exercise an incentive
option unless the shares used to effect the exchange have been received pursuant
to exercise of an incentive option or another statutory option and the requisite
holding period requirements have not been met, in which case the tender of such
shares would be a taxable transaction (with the excess of the fair market value
of the shares tendered over the optionee's basis in those shares being taxable
gain).
Upon exercise of a nonqualified option, however, the optionee
will recognize ordinary income in an amount equal to the difference between the
option exercise price and the fair market value of the Common Stock on the date
of exercise (or, if the optionee is subject to certain restrictions imposed by
the securities laws, upon the lapse of those restrictions, unless the optionee
makes a special tax election within 30 days after exercise). If the Company
complies with the applicable reporting requirements, it will be entitled to a
business expense deduction in the same
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<PAGE>
amount and at the same time as the optionee recognizes ordinary income. Upon a
subsequent sale or exchange of shares acquired pursuant to the exercise of a
nonqualified option, the optionee will have taxable gain or loss, measured by
the difference between the amount realized on the disposition and the tax basis
of the shares (generally, the amount paid for the shares plus the amount treated
as ordinary income at the time the option was exercised). Provided that the
shares have been held for more than one year, such gain or loss would constitute
long-term capital gain or loss.
If an optionee surrenders shares of Common Stock in payment of
part or all of the exercise price of a nonqualified option, no gain or loss will
be recognized with respect to the shares surrendered, and the optionee will be
treated as receiving an equivalent number of shares pursuant to the exercise of
the option in a nontaxable exchange. The basis of the shares surrendered will be
treated as the substituted tax basis for an equivalent number of option shares
received. However, the fair market value of any shares received in excess of the
number of shares surrendered (i.e., the difference between the aggregate option
exercise price and the aggregate fair market value of the shares received
pursuant to exercise of the option) will be taxed as ordinary income. The
optionee's basis of such additional shares is equal to the amount included in
the optionee's income.
Under current federal income tax law, the highest tax rate on
ordinary income is 39.6% and long-term capital gains are subject to a maximum
tax rate of 28%. Because of certain provisions in the law relating to the "phase
out" of personal exemptions and certain limitations on itemized deductions, the
federal income tax consequences to a particular taxpayer of receiving additional
amounts of ordinary income or capital gain may be greater than would be
indicated by application of the foregoing tax rates to the additional amount of
income or gain.
Recommendation of the Board of Directors
Approval of the New Stock Option Plan requires the affirmative
vote of the holders of a majority of the shares of Common Stock of the Company
present, or represented by proxy, and entitled to vote thereon at the Annual
Meeting. The Board of Directors recommends that shareholders vote FOR approval
of the New Stock Option Plan.
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<PAGE>
AMENDMENT TO NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
(Proposal No. 4)
On December 20, 1995, the Board of Directors, subject to
shareholder approval, approved an amendment to the Non-Employee Director Stock
Option Plan (i) to increase from 75,000 to 125,000 the number of shares of
Common Stock of the Company reserved for issuance upon the exercise of options
granted under the Non-Employee Director Stock Option Plan, (ii) to provide for
annual grants of an option to purchase 3,000 shares (rather than 1,000 shares)
of the Company's common stock to each non-employee director of the Company, and
provide that such grants will occur in December (rather than March) of each
fiscal year, and (iii) to extend the term of the plan to April 30, 2001. On
January 19, 1996, the Board further amended the Non-Employee Director Stock
Option Plan to provide for the exercise of options by the surrender of shares
held by the optionee or by "cashless" exercise through a broker and to make a
variety of minor changes to conform certain provisions of the Non-Employee
Director Plan to those of the New Stock Option Plan. Based upon the closing
price of the Company's Common Stock on January 19, 1996, the aggregate market
value of the total number of shares of Common Stock underlying the stock options
available for grant, including the shares that were added to the plan subject to
shareholder approval, is $73,500.
The principal provisions of the Non-Employee Director Stock
Option Plan are summarized below. Such summary does not, however, purport to be
complete and is qualified in its entirety by the terms of the Non-Employee
Director Stock Option Plan, the entire text of which, as amended and restated,
is attached as Exhibit 2 and incorporated herein by reference.
Reasons for Amendment of the Stock Option Plan
The Non-Employee Director Stock Option Plan is intended to
advance the interests of the Company by providing each member serving on the
Board of Directors of the Company who is not an officer or other salaried
employee of the Company or any subsidiary (a "Non-Employee Director") with an
opportunity to acquire or increase a proprietary interest in the Company. The
Board of Directors believes that the opportunity to acquire stock under the
Non-Employee Director Stock Option Plan will create another strong incentive for
Non-Employee Directors to expend maximum effort for the growth and success of
the Company and to remain in the service of the Company. For this reason, the
Board of Directors believes that it is appropriate to extend the term of the
plan to April 30, 2001, which will result in options being granted to
Non-Employee Directors for an additional three years. In addition, the Board of
Directors believes that it is appropriate at this time to increase the annual
grants of options thereunder to purchase 3,000 shares to each of the
Non-Employee Directors. The compensation of the members of the Board of
Directors is believed to be at the lower end for public companies, and the
Company wishes to increase the level of compensation to retain its existing
directors and attract qualified new directors. The use of stock options to
increase director compensation helps conserve the Company's cash resources. The
increase in the number of shares reserved for grant under the Non-Employee
Director Stock Option Plan is being sought to permit the extension of the plan
an increase in annual grants to be implemented. Prior to December 20, 1995,
14,000 shares of authorized but unissued Common Stock remained available for
future grants under the terms of the Non-Employee Director Stock Option Plan.
Finally, the Board believes it is appropriate to permit Non-Employee Directors
to exercise options by exchanging shares held by them or by a "cashless"
exercise procedure.
-22-
<PAGE>
Description of the Non-Employee Director Stock Option Plan
Under the terms of the Non-Employee Director Stock Option Plan
prior to adoption of the amendment, up to 75,000 shares of Common Stock were
reserved for issuance under the Non-Employee Director Stock Option Plan. The
stock options granted under the Non-Employee Director Stock Option Plan are
non-incentive options.
Under the terms of the Non-Employee Director Stock Option
Plan, each Non-Employee Director serving on the Board of Directors on the
effective date of the Non-Employee Director Stock Option Plan (June 10, 1989)
was granted an option to purchase 5,000 shares of Common Stock. Each
Non-Employee Director subsequently elected to the Board of Directors was
entitled to receive an option to purchase 5,000 shares of Common Stock. In
addition, each continuing Non-Employee Director received an automatic grant of a
non-incentive stock option to purchase 1,000 shares of Common Stock in March of
each year from 1990 through 1995, and a special one-time grant of options to
purchase 10,000 shares in December 1992.
The option exercise price under the Non-Employee Director
Stock Option Plan is equal to one hundred percent (100%) of the fair market
value of Common Stock on the date the option is granted. Options granted under
the Non-Employee Director Stock Option Plan expire if not exercised within ten
(10) years from the date of grant.
Payment for shares purchased under the Non-Employee Director
Stock Option Plan, as amended, may be made either in cash or cash equivalents,
in shares of Common Stock with a fair market value equal to the option price, or
a combination of cash and shares of Common Stock. The Non-Employee Director
Stock Option Plan, as amended, also allows for "cashless exercise," in which a
licensed broker tenders to the Company cash equal to the exercise price (plus
taxes required to be withheld) at the time the Company issues the stock
certificates.
Options granted under the Non-Employee Director Stock Option
Plan continue to be in effect for the remainder of their respective terms
notwithstanding termination of any optionee's service with the Company or a
subsidiary.
If the outstanding shares of Common Stock are increased or
decreased or changed into or exchanged for a different number or kind of shares
or other securities of the Company by reason of any recapitalization,
reclassification, stock split, combination of shares, exchange of shares, stock
dividend or other distribution payable in Common Stock, or other increase or
decrease in the outstanding shares of Common Stock, occurring after the
effective date of the Non-Employee Director Stock Option Plan, the number and
kinds of shares for the purchase of which options may be granted under the
Non-Employee Director Stock Option Plan will be adjusted proportionately and
accordingly by the Company. In addition, the number and kind of shares for which
options are outstanding will be adjusted proportionately and accordingly so that
the proportionate interest of the holder of the option immediately following
such event will, to the extent practicable, be the same as immediately prior to
such event. Any such adjustment in outstanding options will not change the
aggregate option price payable with respect to shares subject to the unexercised
portion of the option outstanding but will include a corresponding proportionate
adjustment in the option price per share.
Upon the dissolution or liquidation of the Company, or upon a
merger, consolidation or reorganization of the Company with one or more other
corporations in which the Company is not the surviving corporation, or upon a
sale of all or substantially all of the assets of the Company to another
corporation, or upon any transaction (including, without limitation, a merger or
reorganization in which the Company is the surviving corporation) approved by
the Board which results in any person or entity owing 80 percent or more of the
combined voting power of all classes
-23-
<PAGE>
of stock of the Company, the Non-Employee Director Stock Option Plan and all
options outstanding hereunder will terminate, except to the extent provision is
made in writing in connection with such transaction for the continuation of the
Non-Employee Director Stock Option Plan and/or the assumption of the options
theretofore granted, or for the substitution for such options of new options
covering the stock of a successor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kinds of shares and
exercise prices, in which event the Non-Employee Director Stock Option Plan and
options theretofore granted will continue in the manner and under the terms so
provided.
Subject to the foregoing, if the Company is the surviving
corporation in any reorganization, merger, or consolidation of the Company with
one or more other corporations, any option granted pursuant to the Non-Employee
Director Stock Option Plan will pertain to and apply to the securities to which
a holder of the number of shares of Common Stock subject to such option would
have been entitled immediately following such reorganization, merger, or
consolidation, with a corresponding proportionate adjustment of the option price
per share so that the aggregate option price thereafter will be the same as the
aggregate option price of shares remaining subject to the option immediately
prior to such reorganization, merger, or consolidation.
The Board of Directors may, at any time and from time to time,
amend, suspend or terminate the Non-Employee Director Stock Option Plan as to
any shares of Common Stock as to which options have not been granted. However,
the Company's shareholders must approve any amendment that would (1) materially
change the requirements as to eligibility to receive options under the
Non-Employee Director Stock Option Plan; (2) increase the maximum number of
shares that may be sold pursuant to options granted under the Non-Employee
Director Stock Option Plan, other than adjustments upon changes in
capitalization; (3) change the minimum option price, other than adjustments upon
changes in capitalization; (4) increase the maximum period during which options
may be exercised; (5) extend the term of the Non-Employee Director Stock Option
Plan; or (6) materially increase the benefits accruing to eligible individuals
under the Non-Employee Director Stock Option Plan.
Under the terms of the Non-Employee Director Stock Option Plan
prior to adoption of this amendment, the plan will terminate automatically on
April 30, 1997, unless previously terminated. No termination, suspension or
amendment of the Non-Employee Director Stock Option Plan may, without the
consent of the optionee to whom an option has been granted, adversely affect the
rights of the holder of the option.
Federal Income Tax Consequences
No gain or loss is recognized by the optionee at the time such
an option is granted. Upon exercise of an option, the federal income tax
consequences will be substantially the same as described above with respect to
nonqualified options granted under the New Stock Option Plan.
Option Grants
In December 1995, Messrs. Gische and Gray each were given
annual grants of options to purchase 3,000 shares of Common Stock, subject to
shareholder approval. Each will receive automatic grants of options to purchase
3,000 shares of Common Stock in December of each year through 2001, subject to
shareholder approval. If shareholder approval of the amendment of the
Non-Employee Director Stock Option Plan is not approved, they will instead
receive annual grants of 1,000 shares in March of 1996 and 1997.
-24-
<PAGE>
Recommendation of the Board of Directors
Approval of the amendment to the Non-Employee Director Stock
Option Plan requires the affirmative vote of the holders of a majority of the
shares of Common Stock of the Company entitled to vote thereon and who vote in
person or by proxy at the Annual Meeting. The Board of Directors recommends that
shareholders vote FOR approval of the amendment to the Non-Employee Director
Stock Option Plan.
-25-
<PAGE>
SHAREHOLDER PROPOSALS
AND OTHER MATTERS
Proposals of shareholders intended to be presented at the
Company's 1997 Annual Meeting of Shareholders must be received at the Company's
principal executive offices not later than October 31, 1996 in order for such
proposals to be included in the Company's proxy statement and proxy relating to
the 1997 Annual Meeting of Shareholders. Nothing in this paragraph shall be
deemed to require the Company to include in the proxy statement and proxy
relating to the 1997 Annual Meeting of Shareholders any shareholder proposal
that does not meet all of the requirements for such inclusion in effect at that
time.
The Board of Directors does not intend to present, and has not
been informed that any other person intends to present, any matters for action
at the Annual Meeting other than those specifically referred to herein. If,
however, any other matters should properly come before the Annual Meeting, it is
the intention of the person named in the enclosed proxy to vote the shares
represented thereby in accordance with the determination of a majority of the
Board of Directors.
The Board of Directors of the Company urges each shareholder,
whether or not he or she intends to be present at the Annual Meeting, to
complete, sign and return the enclosed proxy as promptly as possible.
By Order of the Board of Directors
/s/Joe J. Lynn
------------------------------
Joe J. Lynn
Chief Executive Officer
-26-
Exhibit 1
MICROLOG CORPORATION
1995 STOCK OPTION PLAN
Microlog Corporation (the "Corporation") sets forth herein the
terms of this 1995 Stock Option Plan (the "Plan") as follows:
1. PURPOSE
The Plan is intended to advance the interests of the
Corporation by providing eligible individuals (as designated pursuant to Section
4 below) with an opportunity to acquire or increase a proprietary interest in
the Corporation, which thereby will create a stronger incentive to expend
maximum effort for the growth and success of the Corporation and its
subsidiaries, and will encourage such eligible individuals to remain in the
employ of the Corporation or one or more of its subsidiaries. Each stock option
granted under the Plan (an "Option") is intended to be an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code of 1986,
or the corresponding provision of any subsequently-enacted tax statute, as
amended from time to time (the "Code") ("Incentive Stock Option"), except (i) to
the extent that any such Option would exceed the limitations set forth in
Section 7 below; and (ii) for Options specifically designated at the time of
grant as not being "incentive stock options."
2. ADMINISTRATION
(a) Board. The Plan shall be administered by the Board of
Directors of the Corporation (the "Board"), which shall have the full power and
authority to take all actions, and to make all determinations required or
provided for under the Plan or any Option granted or Option Agreement (as
defined in Section 8 below) entered into hereunder and all such other actions
and determinations not inconsistent with the specific terms and provisions of
the Plan deemed by the Board to be necessary or appropriate to the
administration of the Plan or any Option granted or Option Agreement entered
into hereunder. All such actions and determinations shall be by the affirmative
vote of a majority of the members of the Board present at a meeting at which any
issue relating to the Plan is properly raised for consideration or without a
meeting by written consent of the Board executed in accordance with the
Corporation's Certificate of Incorporation and By-Laws, and with applicable law.
The interpretation and construction by the Board of any provision of the Plan or
of any Option granted or Option Agreement entered into hereunder shall be final
and conclusive.
(b) Committee. The Board may from time to time appoint a Stock
Option Committee (the "Committee") consisting of not less than two members of
the Board, none of whom shall be an officer or other salaried employee of the
Corporation or any of its subsidiaries, and each of whom shall qualify in all
respects as a "disinterested person" as defined in Rule l6b-3 of the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). The Board, in its sole discretion, may provide that the
role of the Committee shall be limited to making recommendations to the Board
concerning any determinations to be made and actions to be taken by the Board
pursuant to or with respect to the Plan, or the Board may delegate to the
Committee such powers and authorities related to the administration of the Plan,
as set forth in Section 2(a) above, as the Board shall determine, consistent
with the Certificate of Incorporation and By-Laws of the Corporation and
applicable law. The Board may remove members, add members, and fill vacancies on
the Committee from time to time, all in accordance with the Corporation's
Certificate of Incorporation and By-Laws, and with applicable law. The majority
vote of the Committee, or acts reduced to or approved in writing by a majority
of the members of the Committee, shall be the valid acts of the Committee.
(c) No Liability. No member of the Board or of the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any Option granted or Option Agreement entered into hereunder.
(d) Delegation to the Committee. In the event that the Plan or
any Option granted or Option Agreement entered into hereunder provides for any
action to be taken by or determination to be made by the Board, such action may
be taken by or such determination may be made by the Committee if the power and
authority to do so has been delegated to the Committee by the Board as provided
for in Section 2(b) above. Unless otherwise expressly determined by the Board,
any such action or determination by the Committee shall be final and conclusive.
(e) Action by the Board. The Board may act under the Plan with
respect to any Option granted to or Option Agreement entered into with an
officer, director or shareholder of the Corporation who is subject to Section 16
of the Exchange Act other than by, or in accordance with the recommendations of,
the Committee, constituted as set forth in Section 2(b) above, only if the Board
satisfies the requirements of Rule 16b-3 of the Securities and Exchange
Commission under the Exchange Act relating to "disinterested administration."
3. STOCK
The stock that may be issued pursuant to Options granted under
the Plan shall be shares of Common Stock, par value $.01 per share, of the
Corporation (the "Stock"), which shares may be treasury shares or authorized but
unissued shares. The number of shares of Stock that may be issued pursuant to
Options granted under the Plan shall not exceed in the aggregate 1,000,000
shares. The foregoing number of shares are subject to adjustment as provided in
Section 17 below. If any Option expires, terminates, or is terminated or
canceled for any reason prior to exercise in full, the shares of Stock that were
subject to the unexercised portion of such Option shall be available for future
Options granted under the Plan.
4. ELIGIBILITY
Options may be granted under the Plan to any employee of the
Corporation or any "subsidiary corporation" (a "Subsidiary") thereof within the
meaning of Section 424(f) of the Code (including any such employee who is an
officer or director of the Corporation or any Subsidiary) as the Board shall
determine and designate from time to time prior to expiration or termination of
the Plan. The maximum number of shares of Stock subject to Options that may be
granted under the Plan to any executive officer or other employee of the
Corporation or any Subsidiary is 500,000 shares (subject to adjustment as
provided in Section 17 hereof). An individual may hold more than one Option,
subject to such restrictions as are provided herein.
5. EFFECTIVE DATE AND TERM OF THE PLAN
(a) Effective Date. The Plan shall be effective as of the date
of adoption by the Board, which date is set forth below, subject to approval of
the Plan within one year of such effective date by the affirmative votes of the
holders of a majority of the Stock of the Corporation present, or represented,
and entitled to vote at a meeting duly held in accordance with applicable law;
provided, however, that upon approval of the Plan by the shareholders of the
Corporation as set forth above, all Options granted under the Plan on or after
the effective date shall be fully effective as if the shareholders of the
Corporation had approved the Plan on the effective date. If the shareholders
fail to approve the Plan within one year of such effective date, any options
granted hereunder shall be null and void and of no effect.
(b) Term. The Plan shall terminate on the date ten years from
the effective date.
6. GRANT OF OPTIONS
Subject to the terms and conditions of the Plan, the Board
may, at any time and from time to time, prior to the date of termination of the
Plan, grant to such eligible individuals as the Board may determine
("Optionees"), Options to purchase such number of shares of the Stock on such
terms and conditions as the Board may determine, including any terms or
conditions which may be necessary to qualify such Options as Incentive Stock
Options. The date on which the Board approves the grant of an Option (or such
later date as is specified by the Board) shall be considered the date on which
such Option is granted.
7. LIMITATION ON INCENTIVE STOCK OPTIONS
An Option (other than an Option described in exception (ii) of
Section 1) shall constitute an Incentive Stock Option to the extent that the
aggregate fair market value (determined at the time the option is granted) of
the stock with respect to which Incentive Stock Options are exercisable for the
first time by any Optionee during any calendar year (under the Plan and all
other plans of the Optionee's employer corporation and its parent and subsidiary
corporations within the meaning of Section 422(d) of the Code) does not exceed
$100,000. This limitation shall be applied by taking Options into account in the
order in which they were granted.
8. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by
written agreements ("Option Agreements"), to be executed by the Corporation and
by the Optionee, in such form or forms as the Board shall from time to time
determine. Option Agreements covering Options granted from time to time or at
the same time need not contain similar provisions; provided, however, that all
such Option Agreements shall comply with all terms of the Plan.
9. OPTION PRICE
The purchase price of each share of the Stock subject to an
Option (the "Option Price") shall be fixed by the Board and stated in each
Option Agreement, except that the Option Price of a share of Stock subject to an
Option that is intended to constitute an Incentive Stock Option shall be not
less than 100 percent of the fair market value of a share of the Stock on the
date the Option is granted (as determined in good faith by the Board); provided,
however, that in the event the Optionee would otherwise be ineligible to receive
an Incentive Stock Option by reason of the provisions of Sections 422(b)(6) and
424(d) of the Code (relating to stock ownership of more than ten percent), the
Option Price of an Option that is intended to be an Incentive Stock Option shall
be not less than 110 percent of the fair market value of a share of Stock at the
time such Option is granted. In the event that the Stock is listed on an
established national or regional stock exchange, is admitted to quotation on the
National Association of Securities Dealers Automated Quotation System, or is
publicly traded on an established securities market, in determining the fair
market value of the Stock, the Board shall use the closing price of the Stock on
such exchange or System or in such market (the highest such closing price if
there is more that one such exchange or market) on the trading date immediately
before the Option is granted (or, if there is no such closing price, then the
Board shall use the mean between the high and low prices on such date), or, if
no sale of the Stock had been made on such day, on the next preceding day on
which any such sale shall have been made.
10. TERM AND EXERCISE OF OPTIONS
(a) Term. Each Option granted under the Plan shall terminate
and all rights to purchase shares thereunder shall cease upon the expiration of
ten years from the date such Option is granted, or on such date prior thereto as
may be fixed by the Board and stated in the Option Agreement relating to such
Option; provided, however, that in the event the Optionee would otherwise be
ineligible to receive an Incentive Stock Option by reason of the provisions of
Sections 422(b)(6) and 424(d) of the Code (relating to stock ownership of more
than ten percent), an Option granted to such Optionee that is intended to be an
Incentive Stock Option shall in no event be exercisable after the expiration of
five years from the date it is granted.
(b) Option Period and Limitations on Exercise. Each Option
shall be exercisable, in whole or in part, at any time and from time to time,
over a period commencing on or after the date of grant and ending upon the
expiration or termination of the Option, as the Board shall determine and set
forth in the Option Agreement relating to such Option. Without limiting the
foregoing, the Board, subject to the terms and conditions of the Plan, may in
its sole discretion provide that an Option may not be exercised in whole or in
part for any period or periods of time during which such Option is outstanding;
provided, however, that any such limitation on the exercise of an Option
contained in any Option Agreement may be rescinded, modified or waived by the
Board, in its sole discretion, at any time and from time to time after the date
of grant of such Option, so as to accelerate the time at which the Option may be
exercised. Each Option shall be exercisable, in whole or in part, at any time
and from time to time, over a period commencing on the date of grant and ending
upon the expiration of the Option. Notwithstanding any other provision of the
Plan, no Option granted to an Optionee under the Plan shall be exercisable in
whole or in part prior to the date the Plan is approved by the shareholders of
the Corporation as provided in Section 5 above.
(c) Method of Exercise. An Option that is exercisable
hereunder may be exercised by delivery to the Corporation on any business day,
at its principal office, addressed to the attention of the Committee, of written
notice of exercise, which notice shall specify the number of shares with respect
to which the Option is being exercised. The minimum number of shares of Stock
with respect to which an Option may be exercised, in whole or in part, at any
time shall be the lesser of 100 shares or the maximum number of shares available
for purchase under the Option at the time of exercise. Except as provided below,
payment in full of the Option Price of the shares for which the Option is being
exercised shall accompany the written notice of exercise of the Option and shall
be made either (i) in cash or in cash equivalents; (ii) through the tender to
the Corporation of shares of Stock, which shares shall be valued, for purposes
of determining the extent to which the Option Price has been paid thereby, at
their fair market value (determined in the manner described in Section 9 above)
on the date of exercise; or (iii) by a combination of the methods described in
(i) and (ii); provided, however, that the Board may in its discretion impose and
set forth in the Option Agreement such limitations or prohibitions on the use of
shares of Stock to exercise Options as it deems appropriate. If shares of Stock
that are acquired by the Optionee through exercise of an Option or an option
issued under another stock option plan maintained by the Corporation are
surrendered in payment of the Option Price, the Stock surrendered in payment
must have been (i) held by the Optionee for more than six months at the time of
surrender, or (ii) acquired under an Option granted not less than six months
prior to the time of surrender. Unless the Board shall provide otherwise in the
case of an Option Agreement, payment in full of the Option Price need not
accompany the written notice of exercise provided the notice of exercise directs
that the Stock certificate or certificates for the shares for which the Option
is exercised be delivered to a licensed broker acceptable to the Corporation as
the agent for the individual exercising the Option and, at the time such Stock
certificate or certificates are delivered, the broker tenders to the Corporation
cash (or cash equivalents acceptable to the Corporation) equal to the Option
Price for the shares of Stock purchased pursuant to the exercise of the Option
plus the amount (if any) of federal and other taxes which the Corporation may,
in its judgment, be required to withhold with respect to the exercise of the
Option. An attempt to exercise any Option granted hereunder other than as set
forth above shall be invalid and of no force and effect. Promptly after the
exercise of an Option and the payment in full of the Option Price of the shares
of Stock covered thereby, the individual exercising the Option shall be entitled
to the issuance of a Stock certificate or certificates evidencing his ownership
of such shares. A separate Stock certificate or certificates shall be issued for
any shares purchased pursuant to the exercise of an Option which is an Incentive
Stock Option, which certificate or certificates shall not include any shares
which were purchased pursuant to the exercise of an Option which is not an
Incentive Stock Option. An individual holding or exercising an Option shall have
none of the rights of a shareholder until the shares of Stock covered thereby
are fully paid and issued to him and, except as provided in Section 17 below, no
adjustment shall be made for dividends or other rights for which the record date
is prior to the date of such issuance.
(d) Restrictions on Transfer of Stock. If an Option is
exercised prior to the date that is six months from the later of (i) the date of
grant of the Option or (ii) the date of shareholder approval of the Plan and the
individual exercising the Option is a reporting person under Section 16(a) of
the Exchange Act, then such certificate or certificates shall bear a legend
restricting the transfer of the Stock covered thereby until the expiration of
six months from the later of the date specified in clause (i) above or the date
specified in clause (ii) above.
11. TRANSFERABILITY OF OPTIONS
During the lifetime of an Optionee to whom an Option is
granted, only such Optionee (or, in the event of legal incapacity or
incompetence, the Optionee's guardian or legal representative) may exercise the
Option. No Option shall be assignable or transferable by the Optionee to whom it
is granted, other than by will or the laws of descent and distribution.
12. TERMINATION OF EMPLOYMENT
Upon the termination of the employment of an Optionee with the
Corporation or a Subsidiary, other than by reason of the death or "permanent and
total disability" (within the meaning of Section 22(e)(3) of the Code) of such
Optionee, any Option granted to an Optionee pursuant to the Plan shall
terminate, and such Optionee shall have no further right to purchase shares of
Stock pursuant to such Option; provided, however, that in the event that such
termination of employment is by reason of the Optionee's retirement in
accordance with the normal retirement policies of the Corporation or a
Subsidiary, as the case may be, then such Optionee shall have the right, at any
time within three months after the date of such retirement (or such shorter
period as may be specified in an Option Agreement), and prior to termination of
the Option pursuant to Section 10(a) above, to exercise, in whole or in part,
any Option held by such Optionee at the date of such retirement, whether or not
such Option was exercisable immediately before such retirement; provided,
further, that the Board may provide, by inclusion of appropriate language in any
Option Agreement, that the Optionee may (subject to the general limitations on
exercise set forth in Section 10(b) above), in the event of termination of
employment of the Optionee with the Corporation or a Subsidiary, exercise an
Option, in whole or in part, at any time subsequent to such termination of
employment and prior to termination of the Option pursuant to Section 10(a)
above, either subject to or without regard to any installment limitation on
exercise imposed pursuant to Section 10(b) above. Whether a termination of
employment is to be considered by reason of retirement in accordance with the
normal retirement policies of the Corporation or a Subsidiary, as the case may
be, and whether a leave of absence or leave on military or government service
shall constitute a termination of employment for purposes of the Plan shall be
determined by the Board, which determination shall be final and conclusive. For
purposes of the Plan, a termination of employment with the Corporation or a
Subsidiary shall not be deemed to occur if the Optionee is immediately
thereafter employed by the Corporation or any Subsidiary.
13. RIGHTS IN THE EVENT OF DEATH, DISABILITY OR CHANGE IN CONTROL
(a) Death of an Employee. If an Optionee dies while in the
employ of the Corporation or a Subsidiary or within the period following the
termination of employment during which the Option is exercisable under Section
12 above or Section 13(b) below, the executors or administrators or legatees or
distributees of such Optionee's estate shall have the right (subject to the
general limitations on exercise set forth in Section 10(b) above), at any time
within one year after the date of such Optionee's death and prior to termination
of the Option pursuant to Section 10(a) above (or such shorter period as may be
specified in an Option Agreement), to exercise any Option held by such Optionee
at the date of such Optionee's death, whether or not such Option was exercisable
immediately prior to such Optionee's death; provided, however, that the Board
may provide by inclusion of appropriate language in any Option Agreement that,
in the event of the death of the Optionee, the executors or administrators or
legatees or distributees of such Optionee's estate may exercise an Option
(subject to the general limitations on exercise set forth in Section 10(b)
above), in whole or in part, at any time subsequent to such Optionee's death and
prior to termination of the Option pursuant to Section 10(a) above, either
subject to or without regard to any installment limitation on exercise imposed
pursuant to Section 10(b) above.
(b) Disability of an Employee. If an Optionee terminates
employment with the Corporation or a Subsidiary by reason of the "permanent and
total disability" (within the meaning of Section 22(e)(3) of the Code) of such
Optionee, then such Optionee shall have the right (subject to the general
limitations on exercise set forth in Section 10(b) above), at any time within
one year after such termination of employment and prior to termination of the
Option pursuant to Section 10(a) above (or such shorter period as may be
specified in an Option Agreement), to exercise, in whole or in part, any Option
held by such Optionee at the date of such termination of employment, whether or
not such Option was exercisable immediately prior to such termination of
employment; provided, however, that the Board may provide, by inclusion of
appropriate language in any Option Agreement, that the Optionee may (subject to
the general limitations on exercise set forth in Section 10(b) above), in the
event of the termination of employment of the Optionee with the Corporation or a
Subsidiary by reason of the "permanent and total disability" (within the meaning
of Section 22(e)(3) of the Code) of such Optionee, exercise an Option in whole
or in part, at any time subsequent to such termination of employment and prior
to termination of the Option pursuant to Section 10(a) above, either subject to
or without regard to any installment limitation on exercise imposed pursuant to
Section 10(b) above. Whether a termination of employment is to be considered by
reason of "permanent and total disability" for purposes of this Plan shall be
determined by the Board, which determination shall be final and conclusive.
(c) Change in Control. Except as otherwise provided in Section
17(f) below, in the event of the occurrence of a Change in Control (as defined
below) or in the event that the Board, in its sole and absolute discretion,
determines that there exists a threat of a Change in Control, each Option issued
before the date of such occurrence or such determination, which Option has not
theretofore terminated as provided in Section 10(a) above, shall immediately
become exercisable in full as of the date of such occurrence or such
determination, whether or not such Option was otherwise exercisable immediately
before such occurrence or such determination. For purposes of this Plan, a
"Change in Control" shall be deemed to occur if, at any time, any person
(including, without limitation, any individual, sole proprietorship,
partnership, trust, corporation, association, joint venture, pool, syndicate or
other entity, whether or not incorporated), or any two or more persons acting as
a syndicate or group and thereby deemed collectively to be a "person" within the
meaning of Section 13(d)(3) of the Exchange Act, shall acquire shares of stock
of the Corporation, which acquisition results in such person or persons owning
in the aggregate shares of stock of the Company possessing 20 percent or more of
the total combined voting power of all classes of stock of the Corporation,
unless prior to such acquisition the full Board shall by at least a two-thirds
vote have specifically approved such acquisition and determined that such
acquisition shall not constitute a Change in Control for purposes of the Plan.
Whether there exists a threat of a Change in Control for purposes of this Plan
shall be determined by the Board, which determination shall be final and
conclusive.
14. USE OF PROCEEDS
The proceeds received by the Corporation from the sale of
Stock pursuant to Options granted under the Plan shall constitute general funds
of the Corporation.
15. REQUIREMENTS OF LAW
(a) Violations of Law. The Corporation shall not be required
to sell or issue any shares of Stock under any Option if the sale or issuance of
such shares would constitute a violation by the individual exercising the Option
or the Corporation of any provisions of any law or regulation of any
governmental authority, including without limitation any federal or state
securities laws or regulations. Specifically in connection with the Securities
Act of 1933 (as now in effect or as hereafter amended), upon exercise of any
Option, unless a registration statement under such Act is in effect with respect
to the shares of Stock covered by such Option, the Company shall not be required
to sell or issue such shares unless the Board has received evidence satisfactory
to it that the holder of such Option may acquire such shares pursuant to an
exemption from registration under such Act. Any determination in this connection
by the Board shall be final, binding, and conclusive. The Company may, but shall
in no event be obligated to, register any securities covered hereby pursuant to
the Securities Act of 1933 (as now in effect or as hereafter amended). The
Corporation shall not be obligated to take any affirmative action in order to
cause the exercise of an Option or the issuance of shares pursuant thereto to
comply with any law or regulation of any governmental authority. As to any
jurisdiction that expressly imposes the requirement that an Option shall not be
exercisable unless and until the shares of Stock covered by such Option are
registered or are subject to an available exemption from registration, the
exercise of such Option (under circumstances in which the laws of such
jurisdiction apply) shall be deemed conditioned upon the effectiveness of such
registration or the availability of such an exemption.
(b) Compliance with Rule 16b-3. The intent of this Plan is to
qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the
extent any provision of the Plan does not comply with the requirements of Rule
16b-3, it shall be deemed inoperative to the extent permitted by law and deemed
advisable by the Board and shall not affect the validity of the Plan. In the
event Rule 16b-3 is revised or replaced, the Board, or the Committee acting on
behalf of the Board, may exercise discretion to modify this Plan in any respect
necessary to satisfy the requirements of the revised exemption or its
replacement.
16. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend,
suspend or terminate the Plan as to any shares of Stock as to which Options have
not been granted; provided, however, that no amendment by the Board shall,
without approval by a majority of the votes present and entitled to vote at a
duly held meeting of the shareholders of the Corporation at which a quorum
representing a majority of all outstanding voting stock is, either in person or
by proxy, present and voting on the amendment, or by written consent in
accordance with applicable state law and the Certificate of Incorporation and
By-Laws of the Corporation, materially increase the benefits accruing to
participants under the Plan, change the requirements as to eligibility to
receive Options or increase the maximum number of shares of Stock in the
aggregate that may be sold pursuant to Options granted under the Plan (except as
permitted under Section 17 hereof). Except as permitted under Section 17 hereof,
no amendment, suspension or termination of the Plan shall, without the consent
of the holder of the Option, alter or impair rights or obligations under any
Option theretofore granted under the Plan.
17. EFFECT OF CHANGES IN CAPITALIZATION
(a) Changes in Stock. If the outstanding shares of Stock are
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Corporation by reason of any
recapitalization, reclassification, stock split, reverse split, combination of
shares, exchange of shares, stock dividend or other distribution payable in
capital stock, or other increase or decrease in such shares effected without
receipt of consideration by the Corporation, occurring after the effective date
of the Plan, the number and kinds of shares for the purchase of which Options
may be granted under the Plan shall be adjusted proportionately and accordingly
by the Corporation. In addition, the number and kind of shares for which Options
are outstanding shall be adjusted proportionately and accordingly so that the
proportionate interest of the holder of the Option immediately following such
event shall, to the extent practicable, be the same as immediately prior to such
event. Any such adjustment in outstanding Options shall not change the aggregate
Option Price payable with respect to shares subject to the unexercised portion
of the Option outstanding but shall include a corresponding proportionate
adjustment in the Option Price per share.
(b) Reorganization in Which the Corporation Is the Surviving
Corporation. Subject to Subsection (c) hereof, if the Corporation shall be the
surviving corporation in any reorganization, merger, or consolidation of the
Corporation with one or more other corporations, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger, or consolidation,
with a corresponding proportionate adjustment of the Option Price per share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior to
such reorganization, merger, or consolidation.
(c) Reorganization in Which the Corporation Is Not the
Surviving Corporation or Sale of Assets or Stock. Upon the dissolution or
liquidation of the Corporation, or upon a merger, consolidation, reorganization
or other business combination of the Corporation with one or more other entities
in which the Corporation is not the surviving entity, or upon a sale of all or
substantially all of the assets of the Corporation to another entity, or upon
any transaction (including, without limitation, a merger or reorganization in
which the Corporation is the surviving corporation) approved by the Board which
results in any person or entity (or persons or entities acting as a group or
otherwise in concert) owning 80 percent or more of the combined voting power of
all classes of stock of the Corporation, the Plan and all Options outstanding
hereunder shall terminate, except to the extent provision is made in writing in
connection with such transaction for the continuation of the Plan and/or the
assumption of the Options theretofore granted, or for the substitution for such
Options of new options covering the stock of a successor entity, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kinds of
shares and exercise prices, in which event the Plan and Options theretofore
granted shall continue in the manner and under the terms so provided. In the
event of any such termination of the Plan, each individual holding an Option
shall have the right (subject to the general limitations on exercise set forth
in Section 10(b) above and except as otherwise specifically provided in the
Option Agreement relating to such Option), immediately prior to the occurrence
of such termination and during such period occurring prior to such termination
as the Board in its sole discretion shall determine and designate, to exercise
such Option in whole or in part, whether or not such Option was otherwise
exercisable at the time such termination occurs and without regard to any
installment limitation on exercise imposed pursuant to Section 10(b) above. The
Board shall send written notice of an event that will result in such a
termination to all individuals who hold Options not later than the time at which
the Corporation gives notice thereof to its shareholders.
(d) Adjustments. Adjustments under this Section 17 related to
stock or securities of the Corporation shall be made by the Board, whose
determination in that respect shall be final, binding, and conclusive. No
fractional shares of Stock or units of other securities shall be issued pursuant
to any such adjustment, and any fractions resulting from any such adjustment
shall be eliminated in each case by rounding downward to the nearest whole share
or unit.
(e) No Limitations on Corporation. The grant of an Option
pursuant to the Plan shall not affect or limit in any way the right or power of
the Corporation to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure or to merge, consolidate, dissolve
or liquidate, or to sell or transfer all or any part of its business or assets.
(f) Parachute Payments. Notwithstanding any other provision of
the Plan, if any payment, grant or acceleration of exercisability of an Option
or other benefit to an Optionee under this Plan (a "Plan Benefit") would
otherwise constitute a "parachute payment" within the meaning of Code Section
280G(b)(2) and if, after reduction for any applicable federal excise tax imposed
by Code Section 4999 (the "Excise Tax") and federal income tax imposed by the
Code, the Optionee's net proceeds from receiving the Plan Benefit would be less
than the amount of the Optionee's net proceeds resulting from the receipt of the
Reduced Amount described below, after reduction for federal income taxes, then
the Optionee's Plan Benefit shall be limited to the Reduced Amount. The "Reduced
Amount" shall be the largest Plan Benefit that could be received by the Optionee
such that no Plan Benefit and no other payment or other benefit under any other
agreement, contract, or understanding heretofore or hereafter entered into
between the Optionee and the Corporation or any Subsidiary (the "Other
Agreements") and any formal or informal plan or other arrangement heretofore or
hereafter adopted by the Corporation or any Subsidiary for the direct or
indirect provision of compensation to the Optionee (including groups or classes
of participants or beneficiaries of which the Optionee is a member), whether or
not such compensation is deferred, is in cash, or is in the form of a benefit to
or for the Optionee (a "Benefit Plan") would be subject to the Excise Tax. In
the event that the Plan Benefit to the Optionee shall be limited to the Reduced
Amount, then the Optionee shall have the right, in the Optionee's sole
discretion, to designate the Plan Benefit and those payments or benefits under
any Other Agreements and any Benefit Plans that should be reduced or eliminated
so as to avoid having the Plan Benefit be subject to the Excise Tax.
18. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or Option
Agreement entered into pursuant to the Plan shall be construed to confer upon
any individual the right to remain in the employ of the Corporation or any
Subsidiary, or to interfere in any way with the right and authority of the
Corporation or any Subsidiary either to increase or decrease the compensation of
any individual at any time, or to terminate any employment or other relationship
between any individual and the Corporation or any Subsidiary.
19. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the
Plan to the shareholders of the Corporation for approval shall be construed as
creating any limitations upon the right and authority of the Board to adopt such
other incentive compensation arrangements (which arrangements may be applicable
either generally to a class or classes of individuals or specifically to a
particular individual or individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options or stock
appreciation rights otherwise than under the Plan.
* * *
This Plan was duly adopted and approved by the Board of
Directors of the Corporation by resolution at a meeting held on the 28th day of
September, 1995 and amended by the Board of Directors of the Corporation by
resolution at a meeting held on the 20th day of December, 1995.
Secretary of the Corporation
This Plan was duly approved by the shareholders of the
Corporation at a meeting held on the 26th day of March, 1996.
Secretary of the Corporation
<PAGE>
EXHIBIT 2
(New language is underscored,
deleted language is stricken through.)
MICROLOG CORPORATION
1989 NON-EMPLOYEE DIRECTOR NON-QUALIFIED
STOCK OPTION PLAN
(AS AMENDED AND RESTATED)
=======================
Microlog Corporation (the "Company") sets forth herein the
terms of this Non-Employee Director Stock Option Plan (the "Plan") as follows:
1. PURPOSE
The Plan is intended to advance the interests of the Company
by providing each member serving on the Board of Directors of the Company who is
not an officer or other salaried employee of the Company or any subsidiary (a
"Non-Employee Director") with an opportunity to acquire or increase a
proprietary interest in the Company, which thereby will create a stronger
incentive to expend maximum effort for the growth and success of the Company and
its subsidiaries, and will encourage such Non-Employee Directors to remain in
the service of the Company or that of one or more of its subsidiaries. The stock
options granted under the Plan (an "Option") are not intended to be "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code of
1986 (or the corresponding provision of any subsequently enacted tax statute).
2. STOCK
The stock that may be issued pursuant to Options granted under
the Plan shall be shares of Common Stock, par value $.01 per share, of the
Company (the "Stock"), which shares may be treasury shares or authorized but
unissued shares. The number of shares of Stock that may be issued pursuant to
Options granted under the Plan shall not exceed in the aggregate 125,000 shares,
which number of shares is subject to adjustment as hereinafter provided in
Section 14 below. If any Option expires, terminates, or is terminated for any
reason prior to exercise in full, the shares of Stock that were subject to the
unexercised portion of such Option shall be available for future Options granted
under the Plan.
3. GRANT OF OPTIONS
(a) Grant on Effective Date. On the effective date of this
Plan as provided in Section 5 below, each Non-Employee Director then serving on
the Board of Directors of the Company shall be granted an Option to purchase
5,000 shares of Stock at the price and upon the other terms and conditions
specified in the Plan. Thereafter, subject to Section 3(c) and to the
availability of shares issued under Section 2 of the Plan, an Option to purchase
5,000 shares of Stock, at the price and upon the other terms and conditions
specified in the Plan, shall be granted under the Plan to each Non-Employee
Director of the Company upon the initial election of such Non-Employee Director
to the Board.
(b) Annual Grants. Subject to Section 3(c) and to the
availability of shares issued under Section 2 of the Plan, on the third
Wednesday in March of each year, commencing on March 21, 1990, each of the
Non-Employee Directors then serving on the Board of Directors of the Company
shall be granted an Option to purchase 1,000 shares of Stock at the price and
upon the other terms and conditions specified in this Plan, except that, subject
to approval not later than December 19, 1996, by the affirmative vote of
shareholders who hold at least a majority of the outstanding shares of stock of
the Company entitled to vote thereon and who vote in person or by proxy at a
duly constituted shareholders' meeting, of an amendment to the Plan adopted by
the Board of Directors of the Company on December 20, 1995, commencing on
December 20, 1995, each such Option shall be granted on the third Wednesday in
December of each year commencing on December 20, 1995, and shall be for 3,000
shares of Stock, subject to adjustment under Section 14 hereof.
(c) Excluded Persons. Notwithstanding anything to the contrary
contained in Section 3 of the Plan, no Non-Employee Director designated by Whale
Securities Corp. pursuant to the terms of the Underwriting Agreement dated as of
May 14, 1986 between Whale Securities Corp. and the Company shall be granted any
Options pursuant to this Plan.
(d) Special Grant. An option to purchase 10,000 shares of
Stock, at the price and upon the other terms and conditions specified in the
Plan, is hereby granted under the Plan effective December 22, 1992 to each
Non-Employee Director then serving on the Board of Directors of the Company at
the price and upon the other terms and conditions specified in the Plan, subject
to Section 3(c) and to the availability of shares to be issued under Section 2
of the Plan, and subject to approval of this Section 3(d) on or before April 30,
1993 by an affirmative vote of shareholders who hold at least a majority of the
outstanding shares of stock of the Company entitled to vote thereon, in person
or by proxy, at a duly called meeting of the shareholders; provided, however,
that upon approval of this Section 3(d) by the shareholders of the Company this
Section 3(d) shall be fully effective as if the shareholders of the Company had
approved this Section 3(d) on December 22, 1992.
4. OPTION PRICE
The purchase price of each share of Stock subject to an Option
(the "Option Price") shall be the greater of par value or one hundred percent
(100%) of the fair market value of a share of Stock on the date the Option is
granted. In the event that the Stock is listed on an established national or
regional stock exchange, is admitted to quotation on the National Association of
Securities Dealers Automated Quotation system, or is publicly traded in an
established securities market, the fair market value shall be deemed to the
closing price of the Stock on such exchange or system or in such market (the
highest such closing price if there is more than one such exchange or market) on
the trading date immediately before the Option is granted (or, if there is no
such closing price, the mean between the highest bid and lowest asked prices or
between the high and low prices on such date), or, if no sale of the Stock has
been made on such day, on the immediately preceding day on which any such sale
shall have been made.
5. EFFECTIVE DATE AND TERM OF THE PLAN
(a) Effective Date. This Plan shall be effective as of the
date this Plan is adopted by the Board of Directors of the Company, subject to
approval of the Plan before or within one year after such effective date by an
affirmative vote of shareholders who hold at least a majority of the outstanding
shares of stock of the Company entitled to vote thereon, in person or by proxy,
at a duly called meeting of the shareholders; provided, however, that upon
approval of the Plan by the shareholders of the Company as set forth above, all
Options granted under the Plan on or after the effective date shall be fully
effective as if the shareholders of the Company had approved the Plan on the
effective date. If the shareholders fail to approve the Plan before or within
one year of such effective date, any options granted hereunder shall be null and
void and of no effect.
(b) Term. This Plan shall terminate on April 30, 2001.
6. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by
written agreements ("Option Agreements"), to be executed by the Company and by
the Optionee, substantially in the form attached as Exhibit A to this Plan, with
such changes as the officer or officers executing such Option Agreements may
determine to be necessary or advisable (such determination to be conclusively
evidenced by the execution thereof by such officer or officers).
7. TERM AND EXERCISE OF OPTIONS
(a) Term. Each Option granted under the Plan shall terminate
and all rights to purchase shares thereunder shall cease upon the expiration of
ten (10) years from the date such Option is granted.
(b) Option Period and Limitations on Exercise. Each Option
granted under the Plan shall be exercisable, in whole or in part, at any time
and from time to time, over a period commencing on or after the date of grant
and ending upon the expiration of the Option, except that Options granted on or
after December 20, 1995 shall be exercisable to the extent of 1,000 shares only
until such time as the amendment to the Plan adopted by the Board of Directors
of the Company on December 20, 1995 has been approved by shareholders in
accordance with Section 13 hereof. If an Option is exercised prior to the date
that is six months from the later of (i) the date of grant of the Option or (ii)
the date of shareholder approval of the amendment to the Plan adopted on
December 20, 1995 (to the extent such Option was granted subject to such
approval) and the individual exercising the Option is a reporting person under
Section 16(a) of the Exchange Act, then such certificate or certificates shall
bear a legend restricting the transfer of the Stock covered thereby until the
expiration of six months from the date specified in clause (i) above or the date
specified in clause (ii) above, whichever is applicable to such shares of Stock.
(c) Method of Exercise. An Option that is exercisable
hereunder may be exercised by delivery to the Company on any business day, at
its principal office, addressed to the attention of the Secretary of the
Company, of written notice of exercise, which notice shall specify the number of
shares with respect to which the Option is being exercised, and except as
provided below, shall be accompanied by payment in full of the Option Price of
the shares for which the Option is being exercised in cash. The minimum number
of shares of Stock with respect to which an Option may be exercised, in whole or
in part, at any time shall be the lesser of 100 shares or the maximum number of
shares available for purchase under the Option at the time of exercise. Except
as provided below, payment in full of the Option Price of the shares for which
the Option is being exercised shall accompany the written notice of exercise of
the Option and shall be made (i) in cash or in cash equivalents; (ii) subject to
approval not later than December 19, 1996, by the affirmative vote of
shareholders who hold at least a majority of the outstanding shares of stock of
the Company entitled to vote thereon and who vote in person or by proxy at a
duly constituted shareholders' meeting, of the amendment to the Plan adopted by
the Board of Directors of the Company on December 20, 1995, through the tender
to the Company of shares of Stock, which shares shall be valued, for purposes of
determining the extent to which the Option Price has been paid thereby, at their
fair market value (determined in the manner described in Section 4 above) on the
date of exercise; or (iii) subject to such approval, by a combination of the
methods described in (i) and (ii); provided, however, that the Board may in its
discretion impose and set forth in the Option Agreement such limitations or
prohibitions on the use of shares of Stock to exercise Options as it determines
to be necessary or appropriate under applicable securities or other laws. If
shares of Stock that are acquired by the Optionee through exercise of an Option
or an option issued under another stock option plan maintained by the Company
are surrendered in payment of the Option Price, the Stock surrendered in payment
must have been (i) held by the Optionee for more than six months at the time of
surrender, or (ii) acquired under an Option granted not less than six months
prior to the time of surrender. Subject to approval not later than December 19,
1996, by the affirmative vote of shareholders who hold at least a majority of
the outstanding shares of stock of the Company entitled to vote thereon and who
vote in person or by proxy at a duly constituted shareholders' meeting, of the
amendment to the Plan adopted by the Board of Directors of the Company on
December 20, 1995, payment in full of the Option Price need not accompany the
written notice of exercise provided the notice of exercise directs that the
Stock certificate or certificates for the shares for which the Option is
exercised be delivered to a licensed broker acceptable to the Company as the
agent for the individual exercising the Option and, at the time such Stock
certificate or certificates are delivered, the broker tenders to the Company
cash (or cash equivalents acceptable to the Company) equal to the Option Price
for the shares of Stock purchased pursuant to the exercise of the Option plus
the amount (if any) of federal and other taxes which the Company may, in its
judgment, be required to withhold with respect to the exercise of the Option. An
attempt to exercise any Option granted hereunder other than as set forth above
shall be invalid and of no force and effect. Promptly after the exercise of an
Option and the payment in full of the Option Price of the shares of Stock
covered thereby, the individual exercising the Option shall be entitled to the
issuance of a Stock certificate or certificates evidencing his ownership of such
shares. An individual holding or exercising an Option shall have none of the
rights of a shareholder until the shares of Stock covered thereby are fully paid
and issued to him and, except as provided in Section 14 below, no adjustment
shall be made for dividends or other rights for which the record date is prior
to the date of such issuance.
8. TRANSFERABILITY OF OPTIONS
During the lifetime of an Optionee to whom an Option is
granted, only such Optionee (or, in the event of legal incapacity or
incompetency, the Optionee's guardian or legal representative) may exercise the
Option. No Option shall be assignable or transferable by the Optionee to whom it
is granted, other than by will or the laws of descent and distribution.
9. TERMINATION OF SERVICE
Subject to the provisions of Section 10 of the Plan, upon the
termination of the service of an optionee with the Company or a subsidiary,
Options granted to such optionee pursuant to this Plan shall continue in effect
for the remainder of their respective terms, and shall not terminate.
10. RIGHTS IN THE EVENT OF DEATH
If an Optionee dies, the executors or administrators or
legatees or distributees of such Optionee's estate shall have the right, at any
time prior to termination of the Option as provided in Section 7(a) above, to
exercise any Option held by such Optionee at the date of such Optionee's death.
11. USE OF PROCEEDS
The proceeds received by the Company from the sale of Stock
pursuant to Options granted under the Plan shall constitute general funds of the
Company.
12. REQUIREMENTS OF LAW
The Company shall not be required to sell or issue any shares
of Stock under any Option if the sale or issuance of such shares would
constitute a violation by the individual exercising the Option or the Company of
any provisions of any law or regulation of any governmental authority, including
without limitation any federal or state securities laws or regulations.
Specifically in connection with the Securities Act of 1933 (as now in effect or
as hereafter amended), upon exercise of any Option, unless a registration
statement under such Act is in effect with respect to the shares of Stock
covered by such Option, the Company shall not be required to sell or issue such
shares unless the holder of such Option may acquire such shares pursuant to an
exemption from registration under such Act. The Company may, but shall in no
event be obligated to, register any securities covered hereby pursuant to the
Securities Act of 1933 (as now in effect or as hereafter amended). The Company
shall not be obligated to take any affirmative action in order to cause the
exercise of an Option or the issuance of shares pursuant thereto to comply with
any law or regulation of any governmental authority. As to any jurisdiction that
expressly imposes the requirement that an Option shall not be exercisable unless
and until the shares of Stock covered by such Option are registered or are
subject to an available exemption from registration, the exercise of such Option
(under circumstances in which the laws of such jurisdiction apply) shall be
deemed conditioned upon the effectiveness of such registration or the
availability of such an exemption. The Plan is intended to comply with Rule
16b-3 of the Securities Exchange Commission under the Securities Exchange Act of
1934. Any provision of the Plan inconsistent with Rule 16b-3 will be inoperative
but will not affect the validity of the Plan.
13. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend,
suspend or terminate the Plan as to any shares of Stock as to which Options have
not been granted; provided, however, that no amendment by the Board shall,
without approval by the affirmative vote of shareholders who hold at least a
majority of outstanding shares of stock of the Company entitled to vote thereon
and who vote in person or by proxy at a duly constituted shareholders' meeting,
(a) materially change the requirements as to eligibility to receive Options; (b)
increase the maximum number of shares of Stock in the aggregate that may be sold
pursuant to Options granted under the Plan (except as permitted under Section 14
hereof); (c) change the Option Price set forth in Section 4 hereof (except as
permitted under Section 14 hereof); (d) increase the maximum period during which
Options may be exercised; (e) extend the term of the Plan; or (f) materially
increase the benefits accruing to eligible individuals under the Plan. Except as
permitted under Section 14 hereof, no amendment, suspension or termination of
the Plan shall, without the consent of the holder of the Option, alter or impair
rights or obligations under any Option theretofore granted under the Plan.
14. EFFECT OF CHANGES IN CAPITALIZATION
(a) Changes in Stock. If the outstanding shares of Stock are
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company by reason of any
recapitalization, reclassification, stock split-up, combination of shares,
exchange of shares, stock dividend or other distribution payable in capital
stock, or other increase or decrease in such shares effected without receipt of
consideration by the Company, occurring after the effective date of the Plan,
the number and kinds of shares for the purchase of which Options may be granted
under the Plan shall be adjusted proportionately and accordingly by the Company.
In addition, the number and kind of shares for which Options are outstanding
shall be adjusted proportionately and accordingly so that the proportionate
interest of the holder of the Option immediately following such event shall, to
the extent practicable, be the same as immediately prior to such event. Any such
adjustment in outstanding Options shall not change the aggregate Option Price
payable with respect to shares subject to the unexercised portion of the Option
outstanding but shall include a corresponding proportionate adjustment in the
Option Price per share.
(b) Reorganization in Which the Company Is the Surviving
Corporation. Subject to Subsection (c) hereof, if the Company shall be the
surviving corporation in any reorganization, merger, or consolidation of the
Company with one or more other corporations, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger, or consolidation,
with a corresponding proportionate adjustment of the Option Price per share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior to
such reorganization, merger, or consolidation.
(c) Reorganization in Which the Company Is Not the Surviving
Corporation or Sale of Assets or Stock. Upon the dissolution or liquidation of
the Company, or upon a merger, consolidation or reorganization of the Company
with one or more other corporations in which the Company is not the surviving
corporation, or upon a sale of all or substantially all of the assets of the
Company to another corporation, or upon any transaction (including, without
limitation, a merger or reorganization in which the Company is the surviving
corporation) approved by the Board which results in any person or entity owning
eighty percent (80%) or more of the combined voting power of all classes of
stock of the Company, the Plan and all Options outstanding hereunder shall
terminate, except to the extent provision is made in writing in connection with
such transaction for the continuation of the Plan and/or the assumption of the
Options theretofore granted, or for the substitution for such Options of new
options covering the stock of a successor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kinds of shares and
exercise prices, in which event the Plan and Options theretofore granted shall
continue in the manner and under the terms so provided. The Board shall send
written notice of an event that will result in such a termination to all
individuals who hold Options not later than the time at which the Company gives
notice thereof to its shareholders (provided, however, that the options shall
terminate only the consummation or occurrence of such event).
(d) Fractional Shares. No fractional shares of Stock or units
of other securities shall be issued pursuant to any such adjustment, and any
fractions resulting from any such adjustment shall be eliminated in each case by
rounding downward to the nearest whole share or unit.
(e) No Limitations on Company. The grant of an Option pursuant
to the Plan shall not affect or limit in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure or to merge, consolidate, dissolve or
liquidate, or to sell or transfer all or any part of its business or assets.
15. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or Option
Agreement entered into pursuant to the Plan shall be construed to confer upon
any individual the right to remain in the service of the Company or any
subsidiary, or to interfere in any way with the right and authority of the
Company or any subsidiary either to increase or decrease the compensation of any
individual at any time, or to terminate any relationship between any individual
and the Company or any subsidiary.
16. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the
Plan to the shareholders of the Company for approval shall be construed as
creating any limitations upon the right and authority of the Board to adopt such
other incentive compensation arrangements (which arrangements may be applicable
either generally to a class or classes of individuals or specifically to a
particular individual or individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
* * *
This Plan was duly adopted and approved by the Board of
Directors of the Company by resolution at a meeting held on June 10, 1989,
subject to shareholder approval. This Plan was duly amended by the Board of
Directors, subject to shareholder approval, by resolutions at meetings held on
December 22, 1992, January 22, 1993 and December 20, 1995 and January 25, 1996.
This Plan was duly approved by the shareholders of the Company
at a meeting of the shareholders held on the 24th day of February, 1990.
Amendments to the Plan were duly approved by the shareholders of the Company on
March 13, 1993 and March 26, 1996.
-------------------
SECRETARY
<PAGE>
MICROLOG CORPORATION
NON-EMPLOYEE DIRECTOR NON-QUALIFIED
STOCK OPTION AGREEMENT
This Non-Employee Director Non-Qualified Stock Option
Agreement (the "Option Agreement") is made as of the _____ of _______________,
by and between Microlog Corporation (the "Company"), and __________________
____________________, a member of the Board of Directors of the Company who is
not an officer or other employee of the Company or its subsidiaries (the
"Optionee").
WHEREAS, the Board of Directors of the Company has duly
adopted, subject to approval by the shareholders of the Company, an amended 1989
Non-Employee Director Non-Qualified Stock Option Plan (the "Plan"), which
provides for the grant to members of the Board of Directors of the Company who
are not officers or other employees of the Company or its subsidiaries options
for the purchase of shares of the Company's common stock, $.01 par value
("Stock") according to the terms of the Plan;
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, the parties hereto do hereby agree as follows:
1. Grant of Option. Subject to the terms of the Plan (attached
hereto as Exhibit A, the terms of which are incorporated by reference herein),
the Company hereby grants to the Optionee the right and option (the "Option") to
purchase from the Company, on the terms and subject to the conditions
hereinafter set forth, ( ,000) shares of Stock. This Option shall NOT constitute
an incentive stock option within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.
2. Price. The purchase price (the "Option Price") for the
shares of Stock subject to the Option granted by this Option Agreement is
Dollars ($ .00) per share.
3. Exercise of Option. Except as otherwise provided herein,
the Option granted pursuant to this Option Agreement shall be subject to
exercise as follows:
A. Time of Exercise of Option. The Optionee may exercise the
Option (subject to the limitations on exercise set forth in Subsection E below),
in whole or in part, at any time and from time to time, after the date of grant
of the Option, as set forth in Section 13 below, and prior to the tenth (10th)
anniversary of the date of grant of the Option; provided, however, that no
single exercise of the Option shall be for less than 100 shares, unless the
number of shares purchased is the total number available for purchase under this
Option at the time of exercise.
B. Exercise by Optionee. During the lifetime of the Optionee,
only the Optionee (or, in the event of his or her legal incapacity or
incompetency, the Optionee's guardian or legal representative) may exercise the
Option.
C. Termination of Service. Subject to the provisions of
Subsection E below and Section 7, upon the termination of the service of an
optionee with the Company or a subsidiary, Options granted to such optionee
pursuant to this Agreement shall continue in effect for the remainder of their
respective terms.
D. Death. If an Optionee dies, the executors or administrators
or legatees or distributees of such Optionee's estate shall have the right, at
any time prior to termination of the Option, to exercise any Option held by such
Optionee at the date of such Optionee's death.
E. Limitations on Exercise of Option. Notwithstanding the
foregoing Subsections of Section 3, in no event may the Option be exercised, in
whole or in part, prior to the date the amended Plan is approved by the
shareholders of the Company as provided therein, or after the occurrence of an
event referred to in Section 7 below which results in termination of the Option.
In no event may the Option be exercised for a fractional share.
4. Method of Exercise of Option. An Option that is exercisable
hereunder may be exercised by delivery to the Company on any business day, at
its principal office, addressed to the attention of the Secretary of the
Company, of written notice of exercise, which notice shall specify the number of
shares with respect to which the Option is being exercised, and shall be
accompanied by payment in full of the Option Price of the shares for which the
Option is being exercised. The minimum number of shares of Stock with respect to
which an Option may be exercised, in whole or in part, at any time shall be the
lesser of 100 shares or the maximum number of shares available for purchase
under the Option at the time of exercise. Payment of the Option Price for the
shares of Stock purchased pursuant to the exercise of an Option shall be made
either (i) in cash or by check payable to the order of the Company; (ii) through
the tender to the Company of shares of Stock, which shares shall be valued, for
purposes of determining the extent to which the Option Price has been paid
thereby, at their fair market value (determined in the manner specified in the
Plan) on the date of exercise; or (iii) by a combination of the methods
described in (i) and (ii); provided, however, that any shares of Stock tendered
in exchange for shares of Stock to be issued pursuant to the exercise of the
Option must have been held by the Optionee for at least six months before their
tender to the Company or acquired under an Option granted not less than six
months prior to the time of surrender. Payment in full of the Option Price need
not accompany the written notice of exercise provided the notice of exercise
directs that the Stock certificate or certificates for the shares for which the
Option is exercised be delivered to a licensed broker acceptable to the Company
as the agent for the individual exercising the Option and, at the time such
Stock certificate or certificates are delivered, the broker tenders to the
Company cash (or cash equivalents acceptable to the Company) equal to the Option
Price for the shares of Stock purchased pursuant to the exercise of the Option
plus the amount (if any) of federal and/or other taxes which the Company may, in
its judgment, be required to withhold with respect to the exercise of the
Option. An attempt to exercise any Option granted hereunder other than as set
forth above shall be invalid and of no force and effect. Promptly after the
exercise of an Option and the payment in full of the Option Price of the shares
of Stock covered thereby, the Company shall deliver to the person exercising the
Option a certificate or certificates for the shares being purchased.
5. Limitations on Transfer. The Option is not transferable by
the Optionee, other than by will or the laws of descent and distribution in the
event of death of the Optionee.
6. Rights as Shareholder. Neither the Optionee nor any
executor, administrator, distributee or legatee of the Optionee's estate shall
be, or have any of the rights or privileges of, a shareholder of the Company in
respect of any shares transferable hereunder unless and until such shares have
been fully paid and certificates representing such shares have been endorsed,
transferred and delivered, and the name of the Optionee (or of such executor,
administrator, distributee or legatee of the Optionee's estate) has been entered
as the shareholder of record on the books of the Company. If the Option is
exercised prior to the date that is six months from the later of (i) the date of
grant of the Option or (ii) the date of shareholder approval of the amendment to
the Plan adopted on December 20, 1995 and the individual exercising the Option
is a reporting person under Section 16(a) of the Exchange Act, then the
certificate or certificates for Stock acquired as a result of the exercise of
the Option shall bear a legend restricting the transfer of the Stock covered
thereby until the expiration of six months from the date specified in clause (i)
above or the date specified in clause (ii) above, whichever is applicable to
such shares of Stock.
7. Effect of Changes in Capitalization.
A. Changes in Stock. If the outstanding shares of Stock are
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company by reason of any
recapitalization, reclassification, stock split-up, combination of shares,
exchange of shares, stock dividend or other distribution payable in capital
stock, or other increase or decrease in such shares effected without receipt of
consideration by the Company, the number and kinds of shares for the purchase of
which Options may be granted under the Plan shall be adjusted proportionately
and accordingly by the Company. In addition, the number and kind of shares for
which Options are outstanding shall be adjusted proportionately and accordingly
so that the proportionate interest of the holder of the Option immediately
following such event shall, to the extent practicable, be the same as
immediately prior to such event. Any such adjustment in outstanding Options
shall not change the aggregate Option Price payable with respect to shares
subject to the unexercised portion of the Option outstanding but shall include a
corresponding proportionate adjustment in the Option Price per share.
B. Reorganization in Which the Company Is the Surviving
Corporation. Subject to Subsection C hereof, if the Company shall be the
surviving corporation in any reorganization, merger, or consolidation of the
Company with one or more other corporations, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger, or consolidation,
with a corresponding proportionate adjustment of the Option Price per share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior to
such reorganization, merger, or consolidation.
C. Reorganization in Which the Company Is Not the Surviving
Corporation or Sale of Assets or Stock. Upon the dissolution or liquidation of
the Company, or upon a merger, consolidation or reorganization of the Company
with one or more other corporations in which the Company is not the surviving
corporation, or upon a sale of all or substantially all of the assets of the
Company to another corporation, or upon any transaction (including, without
limitation, a merger or reorganization in which the Company is the surviving
corporation) approved by the Board which results in any person or entity owning
eighty percent (80%) or more of the combined voting power of all classes of
stock of the Company, the Option hereunder shall terminate, except to the extent
provision is made in connection with such transaction for the continuation
and/or the assumption of the Option, or for the substitution for the Option of
new options covering the stock of a successor corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kinds of
shares and exercise prices, in which event the Plan and Options theretofore
granted shall continue in the manner and under the terms so provided. The Board
shall send written notice of an event that will result in such a termination to
all individuals who hold Options not later than the time at which the Company
gives notice thereof to its shareholders (provided, however, that the options
shall terminate only the consummation or occurrence of such event).
D. Fractional Shares. No fractional shares of Stock or units
of other securities shall be issued pursuant to any such adjustment, and any
fractions resulting from any such adjustment shall be eliminated in each case by
rounding downward to the nearest whole share or unit.
8. General Restrictions. The Company shall not be required to
sell or issue any shares of Stock under the Option if the sale or issuance of
such shares would constitute a violation by the individual exercising the Option
or by the Company of any provision of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or
regulations. If at any time the Company shall determine, in its discretion, that
the listing, registration or qualification of any shares subject to the Option
upon any securities exchange or under any state or federal law, or the consent
or approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, the issuance or purchase of shares
hereunder, the Option may not be exercised in whole or in part unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Company, and
any delay caused thereby shall in no way affect the date of termination of the
Option. Specifically in connection with the Securities Act of 1933 (as now in
effect or as hereafter amended), unless a registration statement under such Act
is in effect with respect to the shares of Stock covered by the Option, the
Company shall not be required to sell or issue such shares unless the Company
has received evidence satisfactory to it that the holder of the Option may
acquire such shares pursuant to an exemption from registration under such Act.
Any determination in this connection by the Company shall be final, binding, and
conclusive. The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act of 1933 (as now in
effect or as hereafter amended). The Company shall not be obligated to take any
affirmative action in order to cause the exercise of the Option or the issuance
of shares pursuant thereto to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the
requirement that the Option shall not be exercisable unless and until the shares
of Stock covered by the Option are registered or are subject to an available
exemption from registration, the exercise of the Option (under circumstances in
which the laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.
9. Withholding of Taxes. The parties hereto recognize that the
Company or a subsidiary may be obligated to withhold federal and local income
taxes and Social Security taxes to the extent that the Optionee realizes
ordinary income in connection with the exercise of the Option or in connection
with a disposition of any shares of Stock acquired by exercise of the Option.
The Optionee agrees that the Company or a subsidiary may withhold amounts needed
to cover such taxes from payments otherwise due and owing to the Optionee, and
also agrees that upon demand the Optionee will promptly pay to the Company or a
subsidiary having such obligation any additional amounts as may be necessary to
satisfy such withholding tax obligation. Such payment shall be made in cash or
by certified check payable to the order of the Company or a subsidiary.
10. Disclaimer of Rights. No provision in this Option
Agreement shall be construed to confer upon the Optionee the right to be
employed by the Company or any subsidiary, or to interfere in any way with the
right and authority of the Company or any subsidiary either to increase or
decrease the compensation of the Optionee at any time, or to terminate any
employment or other relationship between the Optionee and the Company or any
subsidiary.
11. Interpretation of this Option Agreement. In the event that
there is any inconsistency between the provisions of this Option Agreement and
of the Plan, the provisions of the Plan shall govern.
12. Governing Law. This Option Agreement is executed pursuant
to and shall be governed by the laws of the Commonwealth of Virginia (but not
including the choice of law rules thereof).
13. Date of Grant. The date of grant of this Option is
____________________.
14. Approval by Shareholders. This Option Agreement and the
issuance of any shares under it are expressly subject to the approval of the
amended Plan by the shareholders of the Company as provided for therein. The
Option shall not in any event be exercisable in whole or in part prior to the
date the Plan is approved by the shareholders of the Company as provided for
therein.
15. Binding Effect. Subject to all restrictions provided for
in this Option Agreement and by applicable law relating to assignment and
transfer of this Option Agreement and the option rights provided for herein,
this Option Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators,
successors, and assigns.
16. Notice. Any notice hereunder by the Optionee to the
Company shall be in writing and shall be deemed duly given if mailed or
delivered to the Company at its principal office, addressed to the attention of
the Secretary of the Company, or if so mailed or delivered to such other address
as the Company may hereafter designate by notice to the Optionee. Any notice
hereunder by the Company to the Optionee shall be in writing and shall be deemed
duly given if mailed or delivered to the Optionee at the address specified below
by the Optionee for such purpose, or if so mailed or delivered to such other
address as the Optionee may hereafter designate by written notice given to the
Company.
17. Entire Agreement. This Option Agreement constitutes the
entire agreement and supersedes all prior understandings and agreements, written
or oral, of the parties hereto with respect to the subject matter hereof.
Neither this Option Agreement nor any term hereof may be amended, waived,
discharged or terminated except by a written instrument signed by the Company
and the Optionee; provided, however, that the Company unilaterally may waive any
provision hereof in writing to the extent that such waiver does not adversely
affect the interests of the Optionee hereunder, but no such waiver shall operate
as or be construed to be a subsequent waiver of the same provision or a waiver
of any other provision hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Option Agreement, or caused this Option Agreement to be duly executed on their
behalf, as of the day and year first above written.
ATTEST: MICROLOG CORPORATION
By:
Title: Title:
OPTIONEE:
ADDRESS FOR NOTICE TO OPTIONEE:
Number Street
City State Zip Code
<PAGE>
REVOCABLE PROXY
MICROLOG CORPORATION
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned shareholder hereby appoints Joe J. Lynn,
Richard A. Thompson, or Steven R. Delmar, or any of them, attorneys and proxies
of the undersigned, with full power of substitution and with authority in each
of them to act in the absence of the other, to vote and act for the undersigned
at the Annual Meeting of Shareholders of the Company to be held at the
Gaithersburg Marriott Washingtonian Center, 9751 Washingtonian Blvd.,
Gaithersburg, Maryland, 20878, on March 26, 1996 at 10:00 a.m., local time, and
at any adjournments thereof, in respect of all shares of the Common Stock of the
Company which the undersigned may be entitled to vote, on the following matters:
1. Election of two directors for a three year term ending in 1999:
David M. Gische
Richard A. Thompson
| | FOR the nominees listed above.
| | WITHHOLD AUTHORITY to vote for the following nominee(s):
2. Proposal to ratify the appointment of Price Waterhouse LLP as
the independent accountants of the Company for the fiscal year
ending October 31, 1996
| | FOR | | AGAINST | | ABSTAIN
3. The approval of the new Company's Stock Option Plan with
1,000,000 the number of shares of the Company's Common Stock
reserved for issuance upon the exercise of options granted
under such new Stock Option Plan;
| | FOR | | AGAINST | | ABSTAIN
4. The approval of the amendments to the Company's Non-Employee
Director Stock Option Plan which would, among other things,
(i) increase from 75,000 to 125,000 the number of shares
reserved for issuance upon the exercise of options granted
under the Non-Employee Director Stock Option Plan, (ii)
provide for annual grants of an option to purchase 3,000
shares (rather than 1,000 shares) of the Company's common
stock to each non-employee director of the Company, and
provide that such grants will occur in December (rather than
March) of each fiscal year, and (iii) extend the term of the
plan to April 30, 2001; and
| | FOR | | AGAINST | | ABSTAIN
5. In their discretion, on any other matters that may properly
come before the meeting, or any adjournments thereof, in
accordance with the recommendations of a majority of the Board
of Directors.
(Continued and to be dated and signed on reverse side.)
<PAGE>
(continued from other side)
This proxy, when properly executed, will be voted as directed herein by the
undersigned shareholder. However, if no direction is given, this proxy will be
voted FOR the nominees in proposal 1, and FOR proposals 2, 3 and 4.
The undersigned hereby acknowledges prior receipt of a copy of
the Notice of Annual Meeting of Shareholders and proxy statement dated February
- ---, 1996 and the 1995 Annual Report to Shareholders, and hereby revokes any
proxy or proxies heretofore given. This Proxy may be revoked at any time before
it is voted by delivering to the Secretary of the Company either a written
revocation of proxy, or a duly executed proxy bearing a later date, or by
appearing at the Annual Meeting and voting in person.
If you receive more than one proxy card, please sign and
return all cards in the accompanying envelope.
| | I PLAN TO ATTEND THE MARCH 26, 1996 ANNUAL SHAREHOLDERS MEETING
Date: , 1996.
----------------------------------------
Signature of Shareholder or Authorized
Representative
Please date and sign exactly as name
appears hereon. Each executor,
administrator, trustee, guardian,
attorney-in-fact and other fiduciary
should sign and indicate his or her full
title. In the case of stock ownership in
the name of two or more persons, both
persons should sign.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY TO ENSURE A QUORUM
AT THE MEETING. IT IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES. DELAY IN
RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO ADDITIONAL EXPENSE.
