<PAGE> 1
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
/X/ Definitive Proxy Statement, Proxy card, Notice of Annual Meeting and
Letter to Stockholders
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
MICROCOM, INC.
(Name of Registrant as Specified In Its Charter)
MICROCOM, INC.
(Name of Person(s) Filing Proxy Statement)
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)
/ / $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:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing fee 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:
[1] Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
MICROCOM, INC.
500 RIVER RIDGE DRIVE
NORWOOD, MASSACHUSETTS 02062-5028
June 20, 1995
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Microcom, Inc. (the "Company"), to be held on Thursday, July 20, 1995 at 10:00
A.M. (Boston time) in The Auditorium, Main Lobby, The First National Bank of
Boston, 100 Federal Street, Boston, Massachusetts 02110. The Board of Directors
and I look forward to greeting personally those stockholders able to attend.
At the Annual Meeting, the following proposals will be submitted for
stockholder approval:
1. To elect two candidates to the Board of Directors. For a discussion of
this proposal, please refer to pages 3 and 4 of the attached Proxy
Statement.
2. To approve an amendment to the Company's Long Term Performance Plan.
For a discussion of this proposal, please refer to pages 10 through 13
of the attached Proxy Statement.
3. To approve an amendment to the Company's Employee Stock Purchase Plan.
For a discussion of this proposal, please refer to pages 13 through 15
of the attached Proxy Statement.
4. To approve several amendments to the Company's Non-Employee Director
Stock Option Plan. For a discussion of this proposal, please refer to
pages 15 and 16 of the attached Proxy Statement.
5. To approve the selection by the Board of Arthur Andersen & Co. as the
Company's independent auditors for the fiscal year ending March 31,
1996. Please refer to page 17 of the attached Proxy Statement.
For the reasons noted in the attached Proxy Statement, the Board
unanimously recommends a vote FOR the adoption of all of the above proposals at
the Annual Meeting of Stockholders.
Regardless of the number of shares you own, it is important that they be
represented and voted. WHETHER OR NOT YOU PLAN PERSONALLY TO ATTEND THE MEETING,
PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD IN THE RETURN ENVELOPE
PROVIDED.
Very truly yours,
[SIGNATURE]
ROLAND D. PAMPEL
President and Chief Executive
Officer
<PAGE> 3
MICROCOM, INC.
500 RIVER RIDGE DRIVE
NORWOOD, MASSACHUSETTS 02062-5028
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 20, 1995
The Annual Meeting of Stockholders of Microcom, Inc. (the "Company") will
be held in The Auditorium, Main Lobby, The First National Bank of Boston, 100
Federal Street, Boston, Massachusetts 02110, on Thursday, July 20, 1995 at 10:00
A.M. (Boston time) to consider and act upon the following matters:
1. To elect two Class I directors to hold office for terms ending on the
date of the third annual meeting of stockholders following their
election and until the election and qualification of their respective
successors.
2. To approve an amendment to the Company's Long Term Performance Plan.
3. To approve an amendment to the Company's Employee Stock Purchase Plan.
4. To approve several amendments to the Company's Non-Employee Director
Stock Option Plan.
5. To approve the selection by the Board of Directors of Arthur Andersen
LLP as the Company's independent auditors for the fiscal year ending
March 31, 1996.
6. To transact such other business as may properly come before the meeting
or any adjournment or postponement of the meeting.
Stockholders of record at the close of business on May 26, 1995, are
entitled to notice of and to vote at the meeting. The stock transfer books of
the Company will remain open between such date and the meeting date.
All stockholders are cordially invited to attend the meeting.
By order of the Board of Directors
[SIGNATURE]
WILLIAM C. ROGERS, Clerk
June 20, 1995
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF MAILED IN
THE UNITED STATES.
<PAGE> 4
MICROCOM, INC.
500 RIVER RIDGE DRIVE
NORWOOD, MASSACHUSETTS 02062-5028
PROXY STATEMENT FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 20, 1995
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Microcom, Inc. (the
"Company") for use at the Annual Meeting of Stockholders to be held on July 20,
1995 at 10:00 A.M. (Boston time) and at any adjournment or postponement of that
meeting. All proxies will be voted in accordance with the instructions contained
in the respective proxies, and, if no choice is specified, the proxies will be
voted in favor of the proposals set forth in the Notice of the Annual Meeting.
Any proxy may be revoked by a stockholder at any time before it is exercised by
filing a later dated proxy or written notice of revocation with William C.
Rogers, Clerk of the Company, or by voting in person at the meeting.
The Company's Annual Report to Stockholders for the fiscal year ended March
31, 1995 is being mailed to stockholders at the same time as this Proxy
Statement. The date of mailing of this Proxy Statement is expected to be on or
about June 20, 1995.
The Board has fixed May 26, 1995 as the record date for determination of
stockholders entitled to vote at the Annual Meeting. At the close of business on
May 26, 1995, there were outstanding and entitled to vote 11,270,789 shares of
common stock of the Company. Each share is entitled to one vote. The affirmative
vote of the holders of a plurality of the shares present or represented at the
meeting, at which a quorum is present, is required for the election of
directors. Approval of the other matters which are before the meeting will
require the affirmative vote at a meeting at which a quorum is present of the
holders of a majority of votes cast with respect to such matters.
For purposes of the matters before the Annual Meeting, under the Company's
By-Laws, a quorum consists of a majority of all shares of stock then issued and
outstanding and entitled to vote at the meeting. Shares voted to abstain or to
withhold as to a particular matter, or as to which a nominee (such as a broker
holding shares in street name for a beneficial owner) has no voting authority in
respect of a particular matter, shall be deemed represented for quorum purposes.
Under the Company's By-Laws, such shares shall not be deemed to be voting on
such matters, and therefore will not be the equivalent of negative votes as to
such matters. It is the position of the Securities and Exchange Commission,
however, that, with respect to stockholder approval pursuant to Rule 16b-3 under
the Securities Exchange Act of 1934 (the "Exchange Act") of the second, third
and fourth proposals listed on the Notice of Annual Meeting, abstentions shall
be deemed the equivalent of negative votes.
<PAGE> 5
<TABLE>
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's common stock (including common stock issuable upon
exercise of outstanding stock options) as of May 15, 1995, except as noted
below, by (a) each executive officer named in the Summary Compensation Table set
forth below, (b) each director of the Company, (c) each person known by the
Company to own beneficially 5% or more of its common stock, and (d) all current
directors and executive officers as a group. Except as otherwise indicated, the
Company believes that the beneficial owners of the common stock listed below,
based on information furnished by such owners, have sole investment and voting
power with respect to the shares of common stock shown as being beneficially
owned by them.
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY OF
BENEFICIAL OWNER OWNED COMMON STOCK
---------------- ------------ ------------
<S> <C> <C>
Roland D. Pampel.............................................. 335,000(1) 2.9%
Richard A. Barbari............................................ 45,700(2) *
Lewis A. Bergins.............................................. 295,882(3) 2.6%
Peter J. Minihane............................................. 186,500(4) 1.7%
Gregory Pearson............................................... 96,333(5) *
William Andrews............................................... 79,333(6) *
Jerry L. Falk................................................. 70,112(7) *
Mark J. Freitas............................................... 77,556(8) *
Joseph P. King, Jr............................................ 25,833(9) *
Elizabeth H. Rock............................................. 15,615(10) *
Eugene Y.G. Chang............................................. 16,666(11) *
Donald G. Kennedy............................................. 38,000(12) *
Fred L. Luconi................................................ 115,500(13) 1.0%
Michael I. Schneider.......................................... 79,752(14) *
John C. Rutherford............................................ 583,619(15) 5.2%
James M. Dow.................................................. 641,160(16) 5.6%
c/o Microcom, Inc.
500 River Ridge Drive
Norwood, Massachusetts 02062
FMR Corp. and Edward C. Johnson 3d............................ 1,036,700(17) 9.3%
82 Devonshire Street
Boston, Massachusetts 02109
All current directors and executive officers as a group (16
persons).................................................... 2,702,561(18) 21.7%
<FN>
- ---------------
* Less than 1%.
(1) Includes 320,000 shares subject to currently exercisable options.
(2) Includes 5,000 shares subject to currently exercisable options.
(3) Includes 69,115 shares subject to currently exercisable options and 54,882
shares held by Mr. Bergin's wife.
(4) Includes 48,225 shares subject to currently exercisable options. Also
includes 6,000 shares held for the benefit of Mr. Minihane's children, as
to all of which shares Mr. Minihane disclaims beneficial ownership.
</TABLE>
2
<PAGE> 6
(5) Includes 46,383 shares subject to currently exercisable options.
(6) Consists of shares subject to currently exercisable options.
(7) Includes 54,000 shares subject to currently exercisable options.
(8) Includes 69,015 shares subject to currently exercisable options and 3,546
shares held by Mr. Freitas' wife.
(9) Consists of shares subject to currently exercisable options.
(10) Consists of shares subject to currently exercisable options.
(11) Consists of shares subject to currently exercisable options.
(12) Includes 16,000 shares subject to currently exercisable options.
(13) Includes 16,000 shares subject to currently exercisable options and 21,000
shares as to which Dr. Luconi has shared voting and shared investment power
with his wife. Also includes 2,500 shares held in trust for the benefit of
certain members of Dr. Luconi's family, as to all of which shares Dr.
Luconi disclaims beneficial ownership.
(14) Includes 16,000 shares subject to currently exercisable options and 38,500
shares as to which Dr. Schneider has shared voting and investment power
with his wife.
(15) Consists of 280,000 shares held by Mr. Rutherford, 16,000 shares subject to
currently exercisable options granted to Mr. Rutherford, 152,619 shares
held by The Parthenon Group, Inc. a management consulting and investment
company of which Mr. Rutherford is a managing director and a principal
stockholder, and 135,000 shares of common stock subject to currently
exercisable options granted to The Parthenon Group, Inc.
(16) Includes 381,000 shares subject to currently exercisable options. Also
includes 33,666 shares of Common Stock held for the benefit of certain
members of Mr. Dow's family, as to all of which shares Mr. Dow disclaims
beneficial ownership.
(17) Consists of shares held by various investment companies (the "Funds") for
which Fidelity Management & Research Company ("Fidelity"), a subsidiary of
FMR Corp., acts as investment advisor. Mr. Johnson is chairman of the board
of FMR Corp. Fidelity exercises voting power regarding such shares under
guidelines established by the respective Funds' boards of directors. Each
of FMR Corp., Fidelity and the respective Funds' board of directors has
dispositive power with respect to such shares. This figure and the related
information is as of April 30, 1995 based solely on information contained
in filings made by FMR Corp. with the Securities and Exchange Commission
pursuant to Section 13(d) or 13(g) of the Exchange Act or in communications
by FMR Corp. to the Company or the Company's representatives.
(18) Includes 1,329,185 shares subject to currently exercisable options granted
to such directors and executive officers.
ELECTION OF DIRECTORS
The persons named in the proxy will vote, as permitted by the By-Laws of
the Company, to elect Messrs. Pampel and Kennedy as Class I directors, unless
authority to vote for the election of directors is withheld by marking the proxy
to that effect. Messrs. Pampel and Kennedy are currently directors of the
Company.
3
<PAGE> 7
The Company's Articles of Organization provide for three classes of
directors. If Messrs. Pampel and Kennedy are elected, each will continue to
serve as Class I directors for a new term expiring at the 1998 Annual Meeting of
Stockholders. If either or both of Messrs. Pampel and Kennedy become unavailable
for election (although that is not currently contemplated), the person acting
under the proxy may vote the proxy for election of a substitute or substitutes.
<TABLE>
The following information is furnished with respect to each nominee for
election as a director and for each director whose term of office will continue
after the meeting.
<CAPTION>
NAME AGE POSITION
---- ---- --------
<S> <C> <C>
James M. Dow............................ 44 Director (Chairman)
Fred L. Luconi.......................... 53 Director (Vice Chairman)
President, Chief Executive Officer and
Roland D. Pampel........................ 60 Director
Donald G. Kennedy....................... 69 Director
John C. Rutherford...................... 45 Director
Michael I. Schneider.................... 58 Director
</TABLE>
Mr. Dow, a founder of the Company, has served as a Director, and until
March 1994 as its President and Chief Executive Officer, since the Company's
organization in October 1980. He was named Chairman of the Board when the
position was created in January 1994. Mr. Dow is currently serving as a Class
III Director for a term expiring at the 1997 Annual Meeting of Stockholders.
Dr. Luconi has served as a Director of the Company since October 1992. He
was named Vice Chairman of the Board when the position was created in January
1994. Dr. Luconi is currently serving as a Class III Director for a term
expiring at the 1997 Annual Meeting of Stockholders. Since January 1992, Dr.
Luconi has been a visiting faculty member at the Sloan School of Management of
the Massachusetts Institute of Technology and a private investor. From January
1988 to March 1991, Dr. Luconi served as President of Index Technology
Corporation (the predecessor of Intersolv Inc.), a developer and manufacturer of
application software.
Mr. Pampel has served as President, Chief Executive Officer and a Director
since March 1994. From September 1991 to February 1994, Mr. Pampel was Chief
Executive Officer, President and a Director of Nicolet Instrument Corporation, a
manufacturer of biomedical and analytical instruments. From July 1989 to August
1991, he was Chief Executive Officer, President and a Director of Bull HN
Information Systems, Inc., a computer manufacturer. Since August 1993, Mr.
Pampel has served on the board of directors of Best Power Technology, Inc., a
manufacturer of power technology and backup recovery products.
Mr. Kennedy has served as a Director of the Company since November 1985.
Since March 1985, Mr. Kennedy has been an independent management consultant and
since 1987 he has been a member of the Panel of Arbitrators of the American
Arbitration Association.
Mr. Rutherford has served as a Director of the Company since January 1994.
He is currently serving as a Class II Director for a term expiring at the 1996
Annual Meeting of Stockholders. Mr. Rutherford has been a Managing Director and
a principal stockholder of The Parthenon Group, Inc., a management consulting
investment company, since its founding in July 1991. From 1974 to April 1990,
Mr. Rutherford held various executive positions, including that of Director, at
Bain & Company, Inc., a management consulting company.
Dr. Schneider has served as a Director of the Company since January 1986.
He is currently serving as a Class II Director for a term expiring at the 1996
Annual Meeting of Stockholders. He has been employed by Data General Corporation
since 1971 and has served as a Vice President in various management capacities
since January 1979.
4
<PAGE> 8
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
The Board of Directors has Audit, Compensation and Nominating Committees.
The Audit Committee reviews the internal accounting procedures of the
Company and consults with and reviews the services provided by the Company's
independent auditors. The directors currently serving on the Audit Committee are
Mr. Kennedy and Dr. Luconi. The Audit Committee met four times in fiscal 1995.
The Compensation Committee reviews and recommends to the Board the
compensation and benefits of all executive officers of the Company and reviews
general policy relating to compensation and benefits of employees of the
Company. The Compensation Committee also administers the issuance of stock
options. The directors currently serving on the Compensation Committee are Mr.
Kennedy and Dr. Schneider. The Compensation Committee met eight times in fiscal
1995.
The Nominating Committee, which was established in 1994, identifies and
nominates candidates for election to the Board. The Committee also considers
nominees for directors nominated by stockholders. Such recommendations, with
relevant supporting data, should be submitted to the Clerk of the Company. The
directors currently serving on the Nominating Committee are Messrs. Dow and
Rutherford. The Nominating Committee did not formally meet in fiscal 1995 but
its members consulted as to nominees at various times.
During fiscal 1995, the Board of Directors held nine meetings. Each
incumbent director attended at least 75% of the aggregate number of the meetings
of the Board and the meetings of the committees of the Board on which he served.
DIRECTORS COMPENSATION
Each non-employee director of the Company is entitled to receive $10,000
annually (paid at the rate of $2,500 per quarter) for serving as a director and
an additional $1,000 for each Board meeting attended. The non-employee directors
of the Company are Drs. Luconi and Schneider and Messrs. Dow, Kennedy, and
Rutherford. The Company also reimburses non-employee directors for expenses
incurred in attending Board meetings. No additional compensation is paid to
directors for attending Board or committee meetings.
Under the Company's 1993 Non-Employee Director Stock Option Plan (the
"Directors Plan"), each non-employee director of the Company shall be entitled
to receive an option exercisable for 4,000 shares of common stock on April 15 of
each year, commencing in 1996. In addition, under the Directors Plan as amended
and restated on March 17, 1995 by the Board subject to stockholder approval (see
"Approval of Amendments to 1993 Non-Employee Director Stock Option Plan" below),
each of the current non-employee directors received an option to purchase 16,000
shares of common stock on March 17, 1995, exercisable at $11.875 per share (the
fair market value of the common stock on the date of grant) and any person who
first becomes a non-employee director on or after March 17, 1995 shall receive
an option to purchase 16,000 shares, exercisable at the fair market value of the
common stock on the date of grant.
5
<PAGE> 9
<TABLE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation the Company paid or accrued
for services rendered in fiscal 1993, 1994 and 1995 to (i) the Company's chief
executive officer and (ii) and the other four most highly compensated executive
officers of the Company during fiscal 1995 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES
NAME AND PRINCIPAL FISCAL -------------------- UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Roland D. Pampel.................... 1995 $225,000 $50,000 -- --
Chief Executive Officer (1) 1994 17,898 -- 265,000 --
William Andrews..................... 1995 194,197(2) -- 13,000 --
Vice President, 1994 179,757(2) -- 40,000 --
North American Sales 1993 165,769(2) -- -- --
Lewis A. Bergins,................... 1995 239,817(3) 20,000 18,000 $2,362(5)
Executive Vice 1994 165,000 -- 175,000(4) 2,183(5)
President, Operations 1993 165,000 -- 60,000(4) 1,089(5)
Peter J. Minihane,.................. 1995 165,000 9,120 18,000 --
Executive Vice President, 1994 165,000 -- 175,000(6) --
Chief Financial Officer and
Treasurer 1993 165,000 -- -- --
Gregory Pearson,.................... 1995 120,000 5,600 10,000 --
Senior Vice President, 1994 120,000 -- 65,000(7) --
Technology Management 1993 120,000 -- -- --
<FN>
- ---------------
(1) Mr. Pampel was named President and Chief Executive Officer of the Company on
March 3, 1994.
(2) Includes $94,189, $79,757 and $65,769 in sales commissions paid in fiscal
1995, 1994 and 1993, respectively.
(3) Includes $74,812 in sales commissions.
(4) Includes 120,000 shares subject to options granted in prior fiscal years
which were repriced and the expiration dates of which were extended during
fiscal 1994.
(5) Represents the premium paid by the Company with respect to term life
insurance for the benefit of Mr. Bergins.
(6) Includes 140,000 shares subject to options granted in prior fiscal years
which were repriced and the expiration dates of which were extended during
fiscal 1994.
(7) Includes 40,000 shares subject to options granted in prior fiscal years
which were repriced and the expiration dates of which were extended during
fiscal 1994.
</TABLE>
6
<PAGE> 10
<TABLE>
The following table shows all stock options grants to the Named Executive
Officers during fiscal 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
PERCENT OF RATES OF STOCK PRICE
NUMBER TOTAL OPTIONS APPRECIATION FOR OPTION
OF SHARES GRANTED TO EXCERCISE TERM(2)
UNDERLYING EMPLOYEES IN PRICE PER EXPIRATION -----------------------
NAME OPTIONS GRANTED(1) FISCAL YEAR SHARE DATE 5% 10%
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Roland D. Pampel............. -- -- -- -- -- --
William Andrews.............. 13,000 2.6% $ 5.375 6/8/2004 $ 43,944 $ 111,363
Lewis A. Bergins............. 18,000 3.6 5.375 6/8/2004 60,846 154,195
Peter J. Minihane............ 18,000 3.6 5.375 6/8/2004 60,846 154,195
Gregory Pearson.............. 10,000 2.0 5.375 6/8/2004 33,803 85,664
<FN>
- ---------------
(1) Vesting occurs over a four-year period in equal annual installments and is
contingent upon continued employment by the Company and/or on attainment of
the Company's business plan objectives for operating income in fiscal 1996.
(2) As required by rules of the Securities and Exchange Commission, potential
values stated are based on the prescribed assumption that the Company's
common stock will appreciate in value from the date of grant to the end of
the option term at rates (compounded annually) of 5% and 10%, respectively,
and therefore are not intended to forecast possible future appreciation, if
any, in the price of the Company's common stock. The total of all stock
options granted to employees, including executive officers, during fiscal
1995 was approximately 4.5% of the total shares of common stock outstanding
at the end of the fiscal year.
</TABLE>
The following option exercise and year-end value table sets forth
information with respect to the exercise of stock options by the Named Executive
Officers during fiscal 1995 and the number and unrealized value (the difference
between the exercise price and the market value) of unexercised options issued
by the Company and held by such officers on March 31, 1995. All of such options
were then exercisable, but some of the underlying shares were unvested. Unvested
shares are subject to repurchase by the Company at a price equal to the exercise
price paid for such shares by the optionee.
<TABLE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT FISCAL VALUE OF UNEXERCISED IN-THE-MONEY
NUMBER YEAR END (ALL EXERCISABLE AT OPTIONS AT FISCAL YEAR END($)
OF SHARES FISCAL YEAR END) (ALL EXERCISABLE AT FISCAL YEAR END)
ACQUIRED ON DOLLAR VALUE ------------------------------- ------------------------------------
NAME EXERCISE(1) REALIZED(1) VESTED UNVESTED TOTAL VESTED UNVESTED TOTAL
- ------------------------------- ------------ ------ -------- ------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Roland D. Pampel.... -- -- 62,500 187,500 250,000 $404,300 $1,212,900 $1,617,200
William Andrews..... 10,000(1) $ 70,000 18,750 69,250 88,000 121,290 447,964 569,254
Lewis A. Bergins.... -- -- 33,115 48,000 81,115 214,214 310,502 524,716
Peter J. Minihane... -- -- 13,475 46,750 60,225 87,167 302,416 389,583
Gregory Pearson..... -- -- 21,800 31,250 53,050 141,019 202,150 343,169
<FN>
- ---------------
(1) All of such shares were vested when exercised.
</TABLE>
7
<PAGE> 11
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Mr. Pampel in March
1994 pursuant to which he was paid an annual base salary of $225,000 and an
incentive bonus of $50,000 in the last fiscal year, as set forth in the Summary
Compensation Table above. Under the employment agreement, Mr Pampel's base
salary is subject to annual review for increases by the Compensation Committee.
In the event of an involuntary termination of Mr. Pampel's employment other than
"for cause", Mr. Pampel will receive severance compensation of one year's salary
continuance at the annual base compensation rate in effect at the time of
termination.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION POLICY
It is the duty of the Compensation Committee of the Company's Board of
Directors (the "Committee") to recommend and administer policies that govern the
compensation of the Company's executive officers, including the Chief Executive
Officer, and the granting of stock options to all key employees. The Committee
is composed of two non-employee directors of the Company. The Committee's
general policy with respect to compensating the Company's executive officers is
to establish compensation levels which, while providing appropriate incentives
for Company and individual performances, remain competitive within the data
communications industry allowing the Company to attract, retain and reward
executive officers who contribute to the long term success of the Company.
EXECUTIVE COMPENSATION
The primary components of the Company's executive officer compensation
programs are base salary, incentive cash bonus, stock options and, in the case
of executives with sales responsibilities, commissions.
1. Base Salary. A base salary is established for each executive which is
deemed to be competitive with comparable positions in both computer
hardware and software companies (including data communications
companies) of similar size and appropriate to the executive's level of
responsibility within the Company. The aim is to arrive at salary
levels in the middle of the range of comparables. These comparables are
not necessarily the same as the companies included in the industry
index shown on the performance graph following this report.
2. Incentive Bonus. Each year, the Board of Directors reviews and
approves a business plan for the Company which outlines the financial
and operational goals of the Company. This business plan becomes the
primary bench mark for measuring the performance of the executive
management team. Bonuses are based primarily on the broad performance
of the Company as measured against the business plan and in terms of
increases in net revenue, operating income and earnings per share. In
addition, executives are measured against specific objectives directly
related to their respective functions. These factors are considered,
weighted and applied in the discretion of the Committee and not
pursuant to an established formula.
3. Commissions. In the case of executives with sales responsibilities,
commissions are based on net revenue and contribution in the
executive's geographic area of responsibility.
4. Stock Option Program. Stock options have been a key component of
executive compensation since the Company was founded. The Committee
believes that stock options, as a component of performance compensation
arrangements, are beneficial in aligning management's and employees'
interests and incentives with stockholders' interests toward the
enhancement of stockholder value.
8
<PAGE> 12
The Committee further believes that stock option programs with future
vesting dates are an effective means to encourage employees to remain
with the Company and increase its long-term value. In determining the
size of option grants, the Committee considers the number of options
previously granted to the recipient, the recipient's equity interest in
the Company generally, as well as the recipient's performance and the
importance of the recipient to achieving the Company's long-term
performance goals. The options granted have been at exercise prices
equal to the fair market value of the underlying common stock on the
date of grant and generally have vested over four years. The Committee
further refined its policies with respect to combining stock based
performance compensation arrangements with incentive cash bonuses by
the adoption of the Long Term Performance Plan which was approved by
stockholders at the Annual Meeting in July, 1994. The Committee and the
Board of Directors has continued this approach for fiscal 1995 by
amending the Long Term Performance Plan to increase the number of
shares available for option grants thereunder by 400,000. This
amendment is being presented to the stockholders for a vote of approval
with this proxy statement as noted below.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Roland D. Pampel was hired as the Company's President and Chief
Executive Officer effective March 3, 1994. Based on his prior employment
compensation level and the advice of the Company's executive search experts as
to comparables, Mr. Pampel's base salary was set at $225,000 per year and he was
granted an option to purchase 250,000 shares under the Company's Stock Option
Program. In addition, as part of his employment agreement Mr. Pampel was granted
an incentive bonus of $50,000 and an option to purchase 15,000 shares of the
Company's stock contingent upon achieving specified revenue and earnings per
share goals based on the Company's business plan for fiscal 1995.
DISCUSSION OF CORPORATE TAX DEDUCTION IN EXCESS OF ONE MILLION DOLLARS
($1,000,000) A YEAR
Internal Revenue Code Section 162(m), enacted in 1993, precludes a public
corporation from taking deduction in 1994 or subsequent years for compensation
in excess of one million dollars ($1,000,000) for its Chief Executive Officer or
any of its four other highest paid officers. Certain performance based
compensation, however, is specifically exempt from the deduction limit.
In December 1993, the Internal Revenue Service issued proposed regulations
implementing this legislation and, in December 1994, issued amended proposed
regulations. Final regulations will not become final until some time after the
prescribed periods for public comment have expired. The terms of the Company's
Stock Option and Stock Purchase Plan and the Long Term Performance Plan, are
designed to meet the requirements of the proposed regulations so that options
granted under both plans will be excluded from the deduction limit.
The Compensation Committee is continuing to follow this matter. When final
regulations are issued, the Committee will assess the practical impact of the
new tax legislation on executive compensation and determine what future action,
if any, is appropriate.
The Committee believes that executive compensation should be related to
both short-term and long-term Company performance as shown by the policies
described above and that its determination of fiscal 1995 compensation was
reflective of those policies consistently applied.
Compensation Committee
Michael I. Schneider, Chairman
Donald G. Kennedy
9
<PAGE> 13
<TABLE>
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN
The following graph assumes an investment of $100 on April 1, 1990 and
compares annual changes thereafter in the market price of the Company's common
stock with a broad market index (S&P 500) and an industry index (S&P Computer
Software and Services). The Company paid no dividends during the period shown;
the performance of the indexes is shown on a total return (dividend
reinvestment) basis. The graph lines merely connect fiscal year-end dates and do
not reflect fluctuations between these dates.
<CAPTION>
Computer
Measurement Period Microcom, S&P 500 In- Software &
(Fiscal Year Covered) Inc. dex Services
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 33.78 114.41 91.23
1992 62.16 127.05 118.11
1993 20.27 146.39 156.05
1994 31.76 148.55 175.09
1995 61.32 171.68 236.18
</TABLE>
The Compensation Committee Report and the Comparison of Cumulative Total
Stockholder Return above shall not be deemed "soliciting material" or
incorporated by reference into any of the Company's filings with the Securities
and Exchange Commission by implication or by any reference in any such filing to
this Proxy Statement.
APPROVAL OF AMENDMENT TO LONG TERM PERFORMANCE PLAN
The Company's Long Term Performance Plan (the "Performance Plan") was
adopted in 1994 in order to create incentives for superior performance, to link
compensation to stockholder returns and to facilitate the retention by the
Company and its subsidiaries of valued executive officers and other key
employees. The Performance Plan was approved by the stockholders at the 1994
Annual Meeting. The Board has adopted, subject to stockholder approval, an
amendment to the Performance Plan which increases the number of shares of common
stock which may be subject to options granted under the Performance Plan by
400,000 shares to 700,000 shares. The purpose of the increase is to permit the
continuing grant of stock options and other stock-based incentive awards, which
the Board believes provides a greater community of interest between key
employees and the Company's stockholders and enables the Company to attract and
retain individuals of outstanding ability.
10
<PAGE> 14
The Board recommends a vote "FOR" this proposal because it believes that
stock-based incentives are an effective means of attracting, retaining and
rewarding officers and other key employees and closely aligning their interests
with those of the stockholders. It is intended that shares represented by the
enclosed proxy will be voted (unless the proxy indicates to the contrary) to
approve the Performance Plan and may be voted to approve adjournment of the
meeting in order to permit further solicitation of proxies with respect to the
proposal, if sufficient votes approving the Plan have not been received.
DESCRIPTION OF THE LONG-TERM PERFORMANCE PLAN
The Performance Plan permits the grant of stock options, stock appreciation
rights ("SARs"), stock and cash awards to officers and key employees of the
Company. The terms of the plan require that it be administered by two or more
outside directors within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), who shall also be "disinterested
persons", within the meaning of Rule 16b-3 under the Exchange Act. The
Compensation Committee presently satisfies these requirements and is
administering the plan.
The administrator of the Performance Plan designates award recipients and
establishes the terms and conditions of subplans and individual awards,
including performance goals and vesting and exercisability restrictions. The
administrator also has the power to interpret the plan, adopt rules and
regulations for its implementation and modify or waive the terms and conditions
of outstanding awards.
No participant in the plan may be granted in any fiscal year of the Company
options or SARs with respect to more than 100,000 shares. No option or SAR may
be granted under the plan the exercise price of which is less than the fair
market value of the common stock on the date of grant. The fair market value of
the Company's common stock on May 26, 1995 (the closing price thereof as
reported on The Nasdaq Stock Market) was $11.00 per share.
Only officers and key employees of the Company are eligible to receive
awards under the Performance Plan. On March 31, 1995, there were 10 executive
officers and 17 other key employees of the Company eligible to participate in
the plan.
Stock options granted under the plan may be in the form of incentive stock
options ("ISOs"), within the meaning of Section 422 of the Code, or
non-qualified stock options ("NQOs"). Incentive stock options may not be
exercisable more than ten years after the date of grant. Options may be
exercised with the payment of cash or, if permitted by the administrator, by
tendering shares of stock or another award having a fair market value equal to
the exercise price.
<TABLE>
The following table sets forth the number of shares of the Company's common
stock subject to all options granted under the Performance Plan during fiscal
1995 to the Named Executive Officers, all current executive officers as a group
and the non-executive officer employees as a group.
<S> <C>
Roland D. Pampel................................................ --
William Andrews................................................. 13,000
Lewis A. Bergins................................................ 18,000
Peter J. Minihane............................................... 18,000
Gregory Pearson................................................. 10,000
Current Executive Officers as a Group........................... 125,000
Non-Executive Officer Employees................................. 64,500
</TABLE>
Of the 300,000 shares issuable under the Performance Plan, as of March 31,
1995, options for the purchase of 189,500 shares have been granted and exercised
and 110,500 shares remained available for issuance. No other awards have been
granted under the Performance Plan.
11
<PAGE> 15
The Performance Plan will terminate in June 2004, subject to earlier
termination by the Board. The Board may amend the Performance Plan at any time;
provided, however, that the plan may not be amended without the consent of
stockholders to (a) increase the aggregate number of shares issuable under the
plan, (b) decrease the option price of options or SARs to less than the fair
market value of the common stock on the date of grant, or (c) materially modify
the requirements as to eligibility for participation in the plan.
Unless the agreement evidencing an award under the Performance Plan
specifies otherwise, the administrator may cancel any unexpired, unpaid or
deferred award if the recipient is not in compliance with certain provisions of
the plan relating to non-competition, non-disclosure of proprietary information
and assignment of inventions. Also, unless an award agreement specifies
otherwise, no award is transferable by the recipient other than by will or the
laws of descent and distribution and each award is exercisable during the
recipient's lifetime only by him.
There is currently no accounting charge to the income of the Company in
connection with the grant or exercise of a stock option with an exercise price
equal to the fair market value of the underlying stock on the date of grant and
when the number of options is known and fixed on the date of grant; most other
stock option Performance Plan awards do require a charge. SARs result in such a
charge when the market value of the shares to which the SAR grants relate
exceeds the exercise price at which the SARs were granted.
FEDERAL INCOME TAX CONSEQUENCES
Under the Code, as presently in effect, an optionee will not be deemed to
receive any income for federal income tax purposes at the time an option, a
purchase authorization or SAR is granted or a restricted stock award is made,
nor will the Company be entitled to a tax deduction at that time. However, when
any part of an option, a purchase authorization or SAR is exercised, when
restrictions on restricted stock lapse, or when an unrestricted stock award is
made, the federal income tax consequences may be summarized as follows:
1. In the case of an exercise of a NQO or purchase authorization, the
optionee will recognize ordinary income in an amount equal to the
difference between the option price and the Fair Market Value of the shares
on the exercise date.
2. In the case of an exercise of an SAR, the optionee will recognize
ordinary income on the exercise date in the amount equal to any cash and
unrestricted shares, at Fair Market Value, received.
3. In the case of an exercise of an option or SAR payable in
restricted stock, or in the case of an award of restricted stock, the
immediate federal income tax effect for the recipient will depend on the
nature of the restrictions. Generally, the Fair Market Value of the stock
will not be taxable to the recipient as ordinary income until the year in
which his or her interest in the stock is freely transferable or is no
longer subject to a substantial risk of forfeiture. However, the recipient
may elect to recognize income when the stock is received, rather than when
his or her interest in the stock is freely transferable or is no longer
subject to a substantial risk of forfeiture. If the recipient makes this
election, the amount taxed to the recipient as ordinary income is
determined as of the date of receipt of the restricted stock.
4. In the case of ISOs, there is no tax liability at time of
exercise. However, the excess of the Fair Market Value of the stock on the
exercise date over the option price is included in the optionee's income
for purposes of the alternative minimum tax. If no disposition of the ISO
stock is made before the later of one year from the date of exercise and
two years from the date of grant, the optionee will realize a long-term
capital gain or loss upon a sale of the stock, equal to the difference
between the option price and the sale price. If the stock is not held for
the required period, ordinary income tax treatment will generally apply to
the amount of any gain at sale or exercise, whichever is less, and the
balance of any gain or any
12
<PAGE> 16
loss will be treated as capital gain or loss (long-term or short-term,
depending on whether the shares have been held for more than one year).
5. Upon exercise of a NQO, a purchase authorization or SAR, the award
of stock, or the recognition of income on restricted stock, the Company
will generally be allowed an income tax deduction equal to the ordinary
income recognized by the employee. The Company does not receive an income
tax deduction as a result of the exercise of an ISO, provided that the ISO
stock is held for the required period as described above. When a cash
payment is made pursuant to the Award, the recipient will recognize the
amount of the cash payment as ordinary income, and the Company will
generally be entitled to a deduction in the same amount.
6. Under Section 162(m) of the Code, the Company may not deduct
compensation of more than $1,000,000 that is paid in a taxable year to an
individual who, on the last day of the taxable year, is the Company's chief
executive officer or among one of its four other highest compensated
officers for that year. The deduction limit, however, does not apply to
certain types of compensation, including qualified performance-based
compensation. The Performance Plan has been designed to meet the
requirements of Section 162(m) of the Code and the Company believes that
compensation attributable to stock options and stock appreciation rights
granted under the Performance Plan will be treated as qualified
performance-based compensation and therefore will not be subject to the
deduction limit.
The foregoing is a general summary of federal income tax considerations
only and does not purport to be complete. Reference is made to the applicable
sections of the Code.
APPROVAL OF AMENDMENT TO
1987 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1987 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted in 1987. The Purchase Plan was subsequently amended in 1991 and 1993.
The Board has adopted, subject to stockholder approval, a further amendment to
the Purchase Plan increasing the total number of shares of common stock
available under the plan from 1,045,000 to 1,345,000 shares. Stockholder
approval of this increase is required by the terms of the Purchase Plan and is
sought to meet the stockholder approval requirements of the Code.
The Board recommends a vote "FOR" this proposal because it believes that
the Purchase Plan has been and will continue to be an effective means of
attracting and retaining employees and giving them a financial interest in the
Company. It is intended that the shares represented by the enclosed proxy will
be voted (unless the proxy indicates to the contrary) to approve the increase in
the number of shares reserved under the Purchase Plan and may be voted to
approve adjournment of the meeting in order to permit further solicitation of
proxies with respect to the proposal, if sufficient votes in favor thereof have
not been received.
DESCRIPTION OF THE PURCHASE PLAN
The Purchase Plan is administered by the Committee. The Board may amend or
terminate the Purchase Plan at any time, provided that no amendment shall,
without stockholder approval, materially increase the number of shares of stock
available for purchase under the plan or materially modify the requirements as
to the eligibility for participation in the plan.
Participation in the Purchase Plan is voluntary. In general, all employees
of the Company (and of such subsidiaries as are designated by the Board) may
participate in the plan, provided they have been credited with at least one day
of employment with the Company and are customarily employed by the Company for
at least twenty hours per week and for more than five months in each year.
However, officers of the Company who are also "highly compensated employees" of
the Company (as defined in Section 414(q) of the Code)
13
<PAGE> 17
and individuals who own 5% or more of the Company's stock are not eligible to
participate in the Purchase Plan.
The Purchase Plan is implemented by a series of offerings of such number of
shares of common stock as is determined by the Board prior to each offering. The
commencement date and duration of each offering are established by the Board in
its discretion, but no offering period may be longer than twenty-seven months.
The maximum number of shares of common stock an eligible employee may
purchase in any offering is equal to 15% of his base pay (determined as of the
beginning of the offering period) for the offering period, divided by 85% of the
fair market value of a share of common stock on the first day of the offering
period. An eligible employee may participate in an offering by electing payroll
deductions or, if permitted by the Board, a lump sum payment prior to the end of
the offering period, in an amount that, in the aggregate, does not exceed 10% of
the participant's base pay, determined as of the beginning of the offering
period, for the offering period. Upon completion of the offering period, the
employee is deemed to have automatically exercised an option (unless the
employee has withdrawn from the offering) to purchase the number of shares which
such employee's accumulated payroll deductions and lump sum cash payments, if
any, will purchase at a price equal to the lower of (1) the fair market value of
a share of common stock on the first day of the offering period or (2) the fair
market value of a share of common stock on the last day of the offering period,
up to the maximum number of shares purchasable.
An employee has no right, title or interest in any stock subject to an
option unless the stock has been purchased. Neither amounts credited to an
employee's account nor any rights to exercise an option or to receive shares of
common stock under the Purchase Plan may be assigned, transferred, pledged or
otherwise disposed of in any way by the employee other than by will or the laws
of descent and distribution. An employee may not be granted an option if,
immediately after the grant, such employee would own and/or hold outstanding
options to purchase, stock possessing 5% or more of the voting power or value of
the Company's common stock. In addition, during any calendar year, no employee
may purchase stock under the Purchase Plan having a fair market value which
exceeds the difference between $25,000 and the fair market value of any other
shares of stock purchased or purchasable during the calendar year under the
Purchase Plan or any other employee stock purchase plans of the Company which
meet the requirements of Section 423 of the Code.
The Purchase Plan is intended to qualify as an "employee stock purchase
plan" within the meaning of Section 423 of the Code. Section 423 provides that
no federal income tax is paid by the employee, and the Company is entitled to no
deduction at either the beginning or end of an offering. The federal income tax
consequences upon disposition of the shares acquired pursuant to an offering
under the Purchase Plan depend on when such disposition occurs. If the
disposition occurs after the expiration of both (i) two years from the offering
commencement date and (ii) one year from the purchase date, and the fair market
value of the stock on the date of disposition is higher than the price paid for
the stock, the employee will recognize compensation taxable as ordinary income
equal to the lesser of (1) the excess of the fair market value of the stock on
the offering commencement date over the option price; and (2) the excess of the
fair market value of the stock at the time of disposition over the price paid
for it. If the disposition occurs before the expiration of either of the above
two dates, the employee will recognize the excess of the fair market value of
the stock on the date of purchase over the option price as compensation taxable
as ordinary income even though there may have been no gain on the disposition of
the stock. To the extent of reported ordinary income in such case, the Company
will be allowed a tax deduction in an equal amount. Any gain recognized in
excess of the amount reported as ordinary income will be reported as long- or
short-term capital gain, depending on how long after the purchase date the
disposition occurs. The foregoing is a general summary of federal income tax
considerations only and does not purport to be complete. Reference is made to
the applicable provisions of the Code.
14
<PAGE> 18
During the three-year period ending March 31, 1995, a total of 403
employees elected to participate in the Purchase Plan and purchased an aggregate
of 543,205 shares at prices ranging from $3.61 to $9.14 per share. During the
fiscal year ended March 31, 1995, 204,161 shares were purchased by employees
under the Purchase Plan. As of May 26, 1995, an aggregate of 990,842 shares had
been issued under the Purchase Plan pursuant to 15 offerings and there remained
available for issuance 354,158 shares (giving effect to the increase in the
number of shares available under the amendment to the plan adopted by the Board
on April 24, 1995). No executive officers or directors of the Company have ever
participated in the Purchase Plan.
APPROVAL OF AMENDMENTS TO 1993 NON-EMPLOYEE
DIRECTOR STOCK OPTION PLAN
The Company's 1993 Non-Employee Director Stock Option Plan (the "Director
Plan") was adopted by the Board and approved by the stockholders in April 1993.
The Board has adopted amendments to the Director Plan, subject to stockholder
approval, to provide (i) that non-employee directors serving on the Board on
March 17, 1995 shall each receive an option to purchase 16,000 shares of common
stock as of such date, (ii) that non-employee directors first elected to the
Board after March 17, 1995 shall receive an initial grant of an option to
purchase 16,000 shares, and (iii) for an increase in the number of shares that
may be subject to options granted under the Plan by 50,000 to 150,000 shares.
Stockholder approval of the plan is sought to meet the stockholder approval
requirements of Rule 16b-3 under the Exchange Act.
The Board recommends a vote "FOR" this proposal because it believes that
the Director Plan will continue to be an effective means of attracting and
retaining non-employee directors and further aligning their interests with those
of the stockholders by providing for or increasing their equity interests in the
Company. It is intended that shares represented by the enclosed proxy will be
voted (unless the proxy indicates to the contrary) to approve the Director Plan
and may be voted to approve adjournment of the meeting in order to permit
further solicitation of proxies with respect to the proposal, if sufficient
votes approving the plan have not been received.
DESCRIPTION OF THE DIRECTOR PLAN
The Director Plan provides for the grant of stock options for the purchase
of common stock of the Company to directors of the Company who are not employees
of the Company or any of its subsidiaries. In addition to the grants described
above, on April 15 of each year, commencing in 1996, each non-employee director
shall be entitled to receive an option exercisable for 4,000 shares (the "Annual
Grants"). The exercise price of all options granted under the plan is equal to
the fair market value of the common stock of the Company on the date of grant.
The plan provides for the payment of the exercise price in cash.
Option grants, other than Annual Grants, vest in three annual installments
of 32%, 33% and 35% each on the first, second and third anniversaries of the
date of the Initial Grant. Annual Grants shall become fully vested on the first
anniversary of the date of grant. Options granted under the Directors Plan may
be exercised before becoming fully vested, but any shares remaining unvested at
termination are subject to repurchase by the Company and no option granted under
the Director Plan may be exercised after the date which is the earlier of (a)
the third anniversary of the date on which an optionee ceases to be a director,
or (b) the tenth anniversary of the date of grant. Any options granted under the
Director Plan within one year prior to the date a director ceases to serve as
such shall terminate in full unless the director ceased serving as a result of
such director's death or permanent disability, in either of which events all
options granted to such director would vest in full on such date of death or
disability.
Optionees will not recognize taxable income for federal income tax purposes
at the time any option is granted under the Director Plan. However each optionee
will recognize compensation taxable as ordinary
15
<PAGE> 19
income at the time of exercise of options under the Plan. The amount of such
compensation will be the difference between the option price and the fair market
value of the shares on the date of exercise of the option. An optionee under the
Director Plan will recognize gain or loss when such director disposes of shares
obtained upon exercise of an option in an amount equal to the difference between
the selling price and such director's tax basis in such shares. Such gain or
loss will be treated as long-term or short-term capital gain or loss, depending
upon the holding period. The foregoing is a general summary of federal income
tax considerations only and does not purport to be complete. Reference is made
to the applicable sections of the Code.
Options granted under the plan shall be non-transferrable other than by
will or the laws of descent and distribution. No options may be granted under
the plan after April 15, 2003.
In fiscal 1995, options exercisable for 16,000 shares were granted to each
of Drs. Luconi and Schneider and Messrs. Dow, Kennedy and Rutherford at an
exercise price in each case of $11.875 per share. As of May 26, 1995, options
for the purchase of 30,000 had been granted under the Director Plan and
exercised, options for the purchase of 80,000 shares were outstanding, and
(giving effect to the increase in the number of shares available under the
Director Plan approved by the Board on April 13, 1995) 40,000 shares remain
available for grant.
<TABLE>
CERTAIN TRANSACTIONS
On October 16, 1986, the Company granted a loan in the amount of $79,500 to
Mr. Bergins, an Executive Vice President of the Company. On March 31, 1987, the
Company granted an additional loan to Mr. Bergins in the amount of $40,000. The
proceeds from these loans were used to exercise stock options granted by the
Company to Mr. Bergins for 120,000 shares and the related tax liability. These
loans were evidenced by promissory notes due October 16, 1991 and bearing
interest at the rate of 7.2% per annum. The largest aggregate amount outstanding
on these loans during fiscal 1995, and the aggregate amount owed at March 31,
1995, was $174,786 and $173,620, respectively. In November 1993 the Company
converted these loans to a loan under the loan program described in the
following paragraph and the following table.
In October 1993 the Board established a loan program primarily for the
purpose of permitting senior officers and directors of the Company to borrow
from the Company in order to exercise stock options. Principal is payable in
full nine years from the date of each loan. Interest accrues and is due and
payable annually, unless forgiven. The following table sets forth information
with respect to all loans made under the loan program as of June 7, 1995.
<CAPTION>
TOTAL HIGHEST
NAME AND LOAN AMOUNT INTEREST
PRINCIPAL POSITION AMOUNTS(1) OUTSTANDING(2) RATE
------------------ -------- -------- ----
<S> <C> <C> <C>
Roland D. Pampel..................................... $ 73,125 $ 77,999 5.36%
Chief Executive Officer and President
Richard Barbari...................................... 215,000 234,735 6.92
Executive Vice President, Marketing and Latin
America and Africa Sales
Lewis A. Bergins..................................... 728,620 772,396 4.9
Executive Vice President, Operations
Peter J. Minihane.................................... 405,000 429,333 4.92
Executive Vice President, Chief Financial Officer
and Treasurer
Gregory Pearson...................................... 123,594 130,803 4.92
Senior Vice President, Technology Development
</TABLE>
16
<PAGE> 20
<TABLE>
<CAPTION>
TOTAL HIGHEST
NAME AND LOAN AMOUNT INTEREST
PRINCIPAL POSITION AMOUNTS(1) OUTSTANDING(2) RATE
------------------ --------- ------------- ----
<S> <C> <C> <C>
Michael I. Schneider................................. 34,250 36,308 4.92
Director 53,000 56,302 5.07
Donald G. Kennedy.................................... 34,250 36,308 4.92
Director 53,000 56,467 5.32
Fred L. Luconi....................................... 168,750 179,087 5.00
Director
John C. Rutherford................................... 57,750 62,064 5.88
Director
<FN>
- ---------------
(1) Also represents, in each case, the highest amount of principal outstanding
to date.
(2) Includes accrued interest which, in each case, has been forgiven by the
Company.
</TABLE>
The Parthenon Group, Inc. ("Parthenon"), a management consulting investment
company of which Mr. Rutherford, a director of the Company, is a managing
director and fifty percent stockholder, was first hired by the Company in 1993
to work with the Company in reviewing and revising the Company's approach to its
products and marketplace. During fiscal 1995, the Company granted Parthenon, for
various consulting services rendered, a stock option exercisable for an
aggregate of 47,619 shares of common stock at an exercise price of $5.25 per
share and with an expiration date of June 3, 1997.
APPROVAL OF AUDITORS
The Board has selected the firm of Arthur Andersen LLP, independent public
accountants, as auditors of the Company for the fiscal year ending March 31,
1995, and is submitting the selection to stockholders for approval. The Board
recommends a vote "FOR" this proposal. Unless the proxy indicates otherwise, the
shares represented by the enclosed proxy will be voted to approve such
selection.
Although there is no legal requirement that this matter be submitted to a
vote of the stockholders, the Board believes that the selection of independent
auditors is of sufficient importance to seek stockholder ratification. In the
event Arthur Andersen LLP is not ratified by the affirmative vote of the holders
of a majority of the shares cast at the Annual Meeting, the Board will
reconsider its selection.
Representatives of Arthur Andersen LLP are expected to attend the Annual
Meeting of Stockholders. They will have an opportunity to make a statement if
they desire to do so and will also be available to respond to appropriate
questions from stockholders.
STOCKHOLDER PROPOSALS FOR 1996 MEETING
Proposals of stockholders intended to be presented at the 1995 Annual
Meeting of Stockholders must be received by the Company at its principal office,
500 River Ridge Drive, Norwood, Massachusetts 02062-5028, Attention: Peter J.
Minihane, Executive Vice President, Chief Financial Officer and Treasurer, not
later than March 21, 1996 for inclusion in the proxy statement for that meeting.
Other requirements for inclusion are set forth in Rule 14a-8 under the Exchange
Act.
17
<PAGE> 21
OTHER MATTERS
The Board does not know of any other matters which may come before the
Annual Meeting. However, if any other matters are properly presented to the
Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise to act, in accordance with their judgment on such
matters.
All costs of solicitation of proxies by management will be borne by the
Company. In addition to solicitations by mail, the Company's directors, officers
and regular employees, without additional remunera-
tion, may solicit proxies by telephone or personal interviews. Brokers,
custodians and fiduciaries will be requested to forward proxy soliciting
materials to the beneficial owners of the Company's stock held in the names of
such brokers, custodians and fiduciaries, and the Company will reimburse them
for their out-of-pocket expenses in this connection.
By order of the Board of Directors
[Signature]
WILLIAM C. ROGERS, Clerk
June 20, 1995
THE BOARD HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING, WHETHER OR NOT
YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT RESPONSE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE MEETING, AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
18
<PAGE> 22
ANNEX A
Form of Proxy Card
<PAGE> 23
PROXY
MICROCOM, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS - JULY 20, 1995
The undersigned hereby acknowledge(s) receipt of the Notice and
accompanying Proxy Statement, revoke(s) any prior proxies, and appoint(s)
Roland D. Pampel, Peter J. Minihane and William C. Rogers, and each of them,
with power of substitution in each, attorneys for the undersigned to act for
and vote, as specified below, all shares of stock which the undersigned may be
entitled to vote at the Annual Meeting of the Stockholders of Microcom, Inc. to
be held on Thursday, July 20, 1995, in the Auditorium, Main Lobby, The First
National Bank of Boston, 100 Federal Street, Boston, Massachusetts at 10:00
a.m. and at any adjourned sessions thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. ALL PROPOSALS SET FORTH ON THE REVERSE
OF THIS PROXY CARD HAVE BEEN PROPOSED BY THE BOARD OF DIRECTORS. IF NO
DIRECTION IS GIVEN, THIS PROXY CARD WILL BE VOTED "FOR" THE NOMINEES FOR
DIRECTOR AND "FOR" ALL OTHER PROPOSALS. THE PROXY WILL BE VOTED IN ACCORDANCE
WITH THE HOLDER'S BEST JUDGMENT AS TO ANY OTHER MATTER.
-------------
SEE REVERSE
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE SIDE
-------------
<PAGE> 24
/ X / PLEASE MARK
VOTES AS IN
THIS EXAMPLE
<TABLE>
<S> <C>
1. To elect two Directors. FOR AGAINST WITHHELD
DIRECTOR NOMINEES: Roland D. Pampel and 2. Approve an amendment to the / / / / / /
Donald G. Kennedy Long Term Performance Plan
as adopted by the Board of
FOR WITHHELD Directors.
/ / / / 3. Approve an amendment to the / / / / / /
Employee Stock Purchase Plan
as adopted by the Board of
Directors.
- --------------------------------------- 4. Approve several amendments / / / / / /
For both nominess except as noted above to the Non-Employee Director
Stock Option Plan as adopted
by the Board of Directors.
5. Ratify the selection of Arthur / / / / / /
Andersen LLP as independent
accountants.
MARK HERE
FOR ADDRESS / /
CHANGE AND
NOTE AT LEFT
Please sign exactly as your name appears Signature: ______________________________ Date __________
hereon. Joint owners should each sign. If
acting as attorney, executor, trustee or Signature: ______________________________ Date __________
in any other representative capacity, sign
name and title.
</TABLE>
<PAGE> 25
ANNEX B
Long Term Performance Plan
<PAGE> 26
MICROCOM, INC.
LONG TERM PERFORMANCE PLAN
(As Amended and Restated Effective as of April 13, 1995)
_______________
1. PURPOSE
-------
The purpose of this Microcom, Inc. Long Term Performance Plan (the
"Plan") is to advance the interests of Microcom, Inc. (the "Company") by
enabling the Company to attract and retain officers, executives and other key
employees, and reward them for making major contributions to the success of the
Company. This purpose is accomplished by making stock and cash awards under
the Plan, thereby providing Participants with a proprietary interest in the
growth and performance of the Company and cash bonuses to recognize and reward
their performance.
2. DEFINITIONS
-----------
(a) "AWARD" shall mean the grant of any form of stock option,
stock appreciation right, stock, or cash award, whether granted singly, in
combination or in tandem, to a Participant pursuant to such terms, conditions,
performance requirements, restrictions and limitations as the Committee may
establish in order to fulfill the purpose of the Plan.
(b) "AWARD AGREEMENT" shall mean a written plan document adopted
by the Company or a written agreement between the Company and a Participant
that sets forth the terms, conditions, performance requirements, restrictions
and limitations applicable to an Award.
(c) "BOARD" shall mean the Board of Directors of the Company.
(d) "CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(e) "COMMITTEE" shall mean the committee designated by the Board
to administer the Plan. The Committee shall consist solely of two or more
outside directors, within the meaning of Section 162(m) of the Code, and shall
be constituted to permit the Plan to comply with Rule 16b-3 promulgated under
the Securities Exchange Act of 1934 or any successor rule. No member of the
Committee may receive Awards under the Plan.
(f) "COMMON STOCK" or "STOCK" shall mean authorized and issued or
unissued $0.01 par value Common Stock of the Company.
(g) "COMPANY" shall mean Microcom, Inc. and its subsidiaries
including subsidiaries of subsidiaries and partnerships and other business
ventures in which Microcom, Inc. has a significant equity interest, as
determined in the sole discretion of the Committee.
(h) "FAIR MARKET VALUE" shall mean the value of Common Stock as
determined in accordance with procedures established in good faith by the
Committee and, with regard to
<PAGE> 27
incentive stock options, in conformity with the Code and regulations with
regard to incentive stock options.
(i) "PARTICIPANT" shall mean an employee of the Company to whom
an Award has been made under the Plan.
3. ELIGIBILITY
-----------
Awards may be granted to such officers, executives and key employees
of the Company who hold positions of responsibility and who in the judgment of
the Committee or the management of the Company can have a significant effect on
the success of the Company.
4. STOCK AVAILABLE FOR AWARDS
--------------------------
The number of shares that may be issued under the Plan for Awards
granted wholly or partly in Stock is 700,000 (the "Share Limit"). Included in
the Share Limit are Awards denominated in units of Stock that may be redeemed
or exercised for cash as well as for Stock. Also included in the Share Limit
are shares of Stock withheld by the Company in connection with the exercise of
any stock option or other Award to satisfy tax withholding requirements or to
pay the exercise price of such stock options or Awards. Stock related to
Awards that are forfeited, terminated, expire unexercised, or settled in such
manner that all or some of the shares covered by an Award are not issued to a
Participant, or are exchanged for Awards that do not involve Stock, shall
immediately become available for Awards and will not be included within the
Share Limit; provided, in the case of shares reacquired by the Company pursuant
to a repurchase right, the holder thereof did not receive any benefits with
respect to the ownership thereof other than voting rights.
5. ADMINISTRATION
--------------
The Plan shall be administered by the Committee, which shall have full
and exclusive power to interpret the Plan, and to adopt such rules, regulations
and guidelines for carrying out the Plan as it may deem necessary or proper,
all of which powers shall be executed in the best interests of the Company and
in keeping with the purpose of the Plan. These powers include, but are not
limited to, designating the Participants, designating the Awards made to each
Participant, establishing performance goals and subplans, establishing vesting
and exercisability restrictions, and waiving any or all restrictions previously
attached to any Award. These powers include the adoption of modifications,
amendments, procedures, subplans and the like as are necessary to comply with
provisions of the laws and regulations of the countries in which the Company
operates in order to assure the viability of Awards granted under the Plan and
to enable Participants regardless of where employed to receive advantages and
benefits under the Plan and such laws and regulations.
-2-
<PAGE> 28
6. DELEGATION OF AUTHORITY
-----------------------
The Committee may delegate to the chief executive officer and to other
senior officers of the Company its duties under the Plan pursuant to such
conditions or limitations as the Committee may establish, except that only the
Committee may select, and grant Awards to, Participants who are subject to
Section 16 of the Securities Exchange Act of 1934 ("Section 16 Persons").
7. AWARDS
------
The Committee shall determine the type or types of Award(s) to be made
to each Participant and shall set forth in the related Award Agreement the
terms, conditions, performance requirements, and limitations applicable to each
Award. Awards may include but are not limited to those listed in this Section
7. Awards may be granted singly, in combination or in tandem. Awards may also
be made in combination or in tandem with, in replacement of, or as alternatives
to, grants or rights under any other employee plan of the Company, including
the plan of any acquired entity. Any other provision hereof notwithstanding,
no Participant shall be granted within any fiscal year of the Company Awards of
stock options or SAR's the aggregate of which shall exceed 100,000 shares.
(a) STOCK OPTIONS. A stock option is the grant by the Company to
a Participant of a right to purchase a specified number of shares of Stock the
purchase price of which shall be not less than 100% of Fair Market Value on the
date of grant of such right, as determined by the Committee. A stock option
may be in the form of (i) a nonqualified option which shall be subject to
terms, conditions and limitations established by the Committee or (ii) an
incentive stock option ("ISO") which, in addition to being subject to
applicable terms, conditions and limitations established by the Committee,
complies with Section 422 of the Code which, among other limitations, provides
that the aggregate Fair Market Value (determined at the time the option is
granted) of Stock for which ISO's are exercisable for the first time by a
Participant during any calendar year shall not exceed $100,000; that ISO's
shall be priced at not less than 100% of the Fair Market Value on the date of
the grant; and that ISO's shall be exercisable for a period of not more than
ten years.
(b) STOCK APPRECIATION RIGHTS. A stock appreciation right
("SAR") is a right of a Participant to receive from the Company a payment, in
cash and/or Stock, equal to the excess of the Fair Market Value of a specified
number of shares of Stock on the date the SAR is exercised over the Fair Market
Value on the date of grant of the SAR, as set forth in the Award Agreement.
(c) STOCK AWARD. An Award may be made in shares of Stock or
denominated in units of Stock. All or part of any Stock Award may be subject
to terms, conditions and limitations established by the Committee, and set
forth in the Award Agreement, which may include, but are not limited to,
continuous service with the Company, achievement of specific individual,
divisional or Company-wide business objectives, increases in specified
indices, attaining financial growth rates, and other comparable measurements of
performance. When
-3-
<PAGE> 29
transfer of Stock is so restricted or subject to forfeiture provisions, it
is referred to as "Restricted Stock."
(d) CASH AWARD. An Award may be denominated in cash with the
eventual payment amount subject to future service and such other restrictions
and conditions established by the Committee and set forth in the Award
Agreement, including, but not limited to, continuous service with the Company,
achievement of specific individual, divisional or Company-wide business
objectives, increases in specified indices, attaining financial growth rates,
and other comparable measurements of performance.
8. PAYMENT OF AWARDS
-----------------
Payment of Awards may be made in the form of cash, Stock, or
combinations thereof, and may include such restrictions as the Committee shall
determine, including in the case of Stock, restrictions on transfer and
forfeiture provisions. If the Committee specifies in the Award Agreement,
payment of Awards shall be deferred, either in the form of installments or as a
future lump sum payment. The Committee may permit Participants to elect to
defer payments of some or all types of Awards in accordance with procedures
established by the Committee which are intended to permit such deferrals to
comply with applicable requirements of the Code including, at the choice of the
Participant, the capability to make further deferrals for payment after
retirement. Any deferred payment, whether elected by the Participant or
specified by the Award Agreement, may require the payment to be forfeited in
accordance with the provisions of Section 13 of the Plan. Dividends or
dividend equivalent rights may be extended to and made a part of any Award
denominated in Stock or units of Stock, subject to such terms, conditions and
restrictions as the Committee may establish. The Committee may also establish
rules and procedures for the crediting of interest on deferred cash payments
and dividend equivalents for deferred payments denominated in Stock or units of
Stock. At the discretion of the Committee, a Participant may be offered an
election to substitute an Award for another Award or Awards of the same or
different type.
9. STOCK OPTION EXERCISE
---------------------
The price at which shares of Stock may be purchased under a Stock
Option shall be paid in full at the time of the exercise in cash or, if
permitted by the Committee, by means of tendering Stock or surrendering another
Award, including Restricted Stock, valued at Fair Market Value on the date of
exercise, or any combination thereof. The Committee shall determine acceptable
methods for tendering Common Stock or other Awards and may impose such
conditions on the use of Common Stock or other Awards to exercise a stock
option as it deems appropriate. In the event shares of Restricted Stock are
tendered as consideration for the exercise of a stock option, a number of the
shares issued upon the exercise of the stock option, equal to the number of
shares of Restricted Stock used as consideration therefor, shall be subject to
the same restrictions as the Restricted Stock so submitted plus any additional
restrictions that may be imposed by the Committee.
-4-
<PAGE> 30
10. TAX WITHHOLDING
---------------
The Company shall have the right to deduct applicable taxes from any
Award payment and withhold, at the time of delivery or vesting of shares under
the Plan, an appropriate number of shares for payment of taxes required by law
or to take such other action as may be necessary in the opinion of the Company
to satisfy all obligations for withholding of such taxes; provided that with
respect to Section 16 Persons the Company shall in all cases where tax
withholding is required with respect to such Participants, withhold shares of
Stock having a value equal to such withholding obligation. If Stock or
Restricted Stock is used to satisfy tax withholding, such Stock shall be valued
based on the Fair Market Value when the tax withholding is required to be made.
11. AMENDMENT, MODIFICATION, SUSPENSION OR DISCONTINUANCE OF THE PLAN
-----------------------------------------------------------------
The Board may amend, modify, suspend or terminate the Plan for the
purpose of meeting or addressing any changes in legal requirements or for any
other purpose permitted by law. Subject to changes in law or other legal
requirements that would permit otherwise, the Plan may not be amended without
the approval of the shareholders, to (i) increase the aggregate number of
shares of Common Stock that may be issued under the Plan (except for
adjustments pursuant to Section 15 of the Plan), (ii) decrease the option price
to less than 100% of Fair Market Value for stock options or SAR's, or (iii)
materially modify the requirements as to eligibility for participation in the
Plan.
12. TERMINATION OF EMPLOYMENT
-------------------------
If the employment of a Participant terminates, other than pursuant to
paragraphs (a) or (b) of this Section 12, all unexercised, deferred and unpaid
Awards shall be cancelled immediately, unless the Award Agreement provides
otherwise.
(a) RETIREMENT UNDER A COMPANY RETIREMENT PLAN. When a
Participant's employment terminates as a result of retirement in accordance
with the terms of a Company retirement plan, the Committee (in the form of an
Award Agreement or otherwise) may permit Awards to continue in effect beyond
the date of retirement in accordance with the applicable Award Agreement and
the exercisability and vesting of any Award may be accelerated.
(b) DEATH OR DISABILITY OF A PARTICIPANT.
(i) In the event of a Participant's death, the Participant's
estate or beneficiaries shall have a period of one year from the date of the
Participant's death, or other period specified in the Award Agreement, within
which to receive or exercise any outstanding Award held by the Participant to
the extent such Award was exercisable by the Participant on the date of his
death, provided that no Award shall be exercisable by anyone after the
termination date otherwise applicable to the Award. Rights to any such
outstanding Awards shall pass by will or the laws of descent and distribution
in the following order:
-5-
<PAGE> 31
(1) to beneficiaries so designated by the Participant; if none, then (2) to a
legal representative of the Participant; if none, then (3) to the persons
entitled thereto as determined by a court of competent jurisdiction. Subject
to subparagraph (iii) below, Awards so passing shall be exercised or paid out
at such times and in such manner as if the Participants were living.
(ii) In the event a Participant is deemed by the Company to
be disabled, Awards and rights to any such Awards may be paid to or exercised
by the Participant, if legally competent, or a committee or other legally
designated guardian or representative if the Participant is legally incompetent
by virtue of such disability; in the event of the Participant's disability the
Participant (or such legally designated guardian) shall have a period of one
year after the Participant ceases to perform services on account of disability,
or other period specified in the Award Agreement, within which to receive or
exercise any outstanding Award held by the Participant to the extent such Award
was exercisable by the Participant on the date he ceased to perform services,
provided that no Award shall be exercisable by anyone after the termination
date otherwise applicable to the Award.
(iii) After the death or disability of a Participant, the
Committee may in its sole discretion at any time (1) terminate restrictions in
Award Agreements; (2) accelerate any or all installments and rights: and (3)
instruct the Company to pay the total of any accelerated payments in a lump sum
to the Participant, the Participant's estate, beneficiaries or representative,
notwithstanding that, in the absence of such termination of restrictions or
acceleration of payments, any or all of the payments due under the Awards might
ultimately have become payable to other beneficiaries.
(iv) In the event of uncertainty as to interpretation of or
controversies concerning this paragraph (b) of Section 12, the Committee's
determination shall be binding and conclusive.
13. CANCELLATION AND RESCISSION OF AWARDS
-------------------------------------
Unless the Award Agreement specifies otherwise, the Committee may cancel
any unexpired, unpaid, or deferred Awards at any time if the Participant is not
in compliance with all other applicable provisions of the Award Agreement, the
Plan and with the following conditions:
(a) A Participant shall not render services for any organization or
engage directly or indirectly in any business which, in the judgment of the
chief executive officer of the Company or other senior officer designated by
the Committee, is or becomes competitive with the Company, or which
organization or business, or the rendering of services to such organization or
business, is or becomes otherwise prejudicial to or in conflict with the
interests of the Company. For a Participant whose employment has terminated,
the judgment of the chief executive officer shall be based on the Participant's
position and responsibilities while employed by the Company, the Participant's
post-employment responsibilities and position with the other organization or
business, the extent of past, current and potential competition or conflict
between the Company and the other organization or business, the effect on the
Company's customers, suppliers and competitors of the Participant's assuming
-6-
<PAGE> 32
the post-employment position, and such other considerations as are deemed
relevant given the applicable facts and circumstances.
(b) A Participant shall not, without prior written authorization
from the Company, disclose to anyone outside the Company, or use in other than
the Company's business, any confidential information or material relating to
the business of the Company, acquired by the Participant either during or after
employment with the Company.
(c) A Participant shall disclose promptly and assign to the
Company all right, title, and interest in any invention or idea, patentable or
not, made or conceived by the Participant during employment by the Company,
relating in any manner to the actual or anticipated business, research or
development work of the Company and shall do anything reasonably necessary to
enable the Company to secure a patent where appropriate in the United States
and in other countries.
(d) Upon exercise, payment or delivery pursuant to an Award, the
Participant shall certify on a form acceptable to the Committee that he or she
is in compliance with the terms and conditions of the Plan. Failure to comply
with the provisions of paragraph (a), (b) or (c) of this Section 13 prior to,
or during the six months after, any exercise, payment or delivery pursuant to
an Award shall cause such exercise, payment or delivery to be rescinded. The
Company shall notify the Participant in writing of any such rescission within
two years after such exercise, payment or delivery. Within ten days after
receiving such a notice from the Company, the Participant shall pay to the
Company the amount of any gain realized or payment received as a result of the
rescinded exercise, payment or delivery pursuant to an Award. Such payment
shall be made either in cash or by returning to the Company the number of
shares of Stock that the Participant received in connection with the rescinded
exercise, payment or delivery.
(e) Nothing in the Plan shall interfere with or limit in any way
the right of the Company to terminate any Participant's employment at any time,
for any reason or no reason in the Company's sole discretion, nor confer upon
any Participant any right to continue in the employ of the Company. For
purposes of the Plan, transfer of employment of a Participant between the
Company and any one of its subsidiaries (or between subsidiaries) shall not be
deemed a termination of employment.
(f) No employee shall have the right to be selected to receive an
Award under this Plan, or, having been so selected, to be selected to receive a
future Award.
14. NON-TRANSFERABILITY
-------------------
Unless the Award Agreement specifies otherwise, no Award shall be
transferable by a Participant otherwise than by will or by the laws of descent
and distribution and each Award shall be exercisable during a Participant's
lifetime only by him.
-7-
<PAGE> 33
15. ADJUSTMENTS
-----------
In the event of any change in the outstanding Stock of the Company by
reason of a stock split, stock dividend, combination or reclassification of
shares, recapitalization, merger, or similar event, the Committee may adjust
proportionally (a) the number of shares of Stock (i) reserved under the Plan,
(ii) available for ISO's, (iii) for which Awards may be granted to an
individual Participant, and (iv) covered by outstanding Awards denominated in
Stock or units of Stock; (b) the Stock prices related to outstanding Awards;
and (c) the appropriate Fair Market Value and other price determinations for
such Awards. In the event of any other change affecting the Stock or any
distribution (other than normal cash) to holders of Stock, such adjustments as
may be deemed equitable by the Committee, including adjustments to avoid
fractional shares, shall be made to give proper effect to such event. In the
event of a corporate merger, consolidation, acquisition of property or stock,
reorganization or liquidation, the Committee is authorized to issue or assume
stock options, whether or not in a transaction to which Section 424(a) of the
Code applies, by means of substitution of new stock options for previously
issued stock options or an assumption of previously issued stock options.
If the Company is merged into or consolidated with another corporation
under circumstances where the Company is not the surviving corporation, or if
the Company is liquidated or sells or otherwise disposes of substantially all
of its assets to another corporation while Awards remain outstanding under the
Plan, (i) subject to the provisions of clauses (iii), (iv) and (v) below, after
the effective date of such merger, consolidation or sale, as the case may be,
each holder of an outstanding Award shall be entitled, upon exercise of such
Award, to receive in lieu of Stock of the Company, shares of such stock or
other securities as the holders of Stock received pursuant to the terms of the
merger, consolidation or sale; or (ii) the Committee may waive any
discretionary limitations imposed with respect to the exercise of the Award so
that all Awards from and after a date prior to the effective date of such
merger, consolidation, liquidation or sale, as the case may be, specified by
the Committee, shall be exercisable or payable in full; or (iii) all
outstanding Awards may be cancelled by the Committee as of the effective date
of any such merger, consolidation, liquidation or sale provided that notice of
such cancellation shall be given to each holder of an Award, and each such
holder thereof shall have the right to exercise such Award in full (without
regard to any discretionary limitations imposed with respect to the Award)
during a 30-day period preceding the effective date of such merger,
consolidation, liquidation or sale; or (iv) all outstanding Awards may be
cancelled by the Committee as of the date of any such merger, consolidation,
liquidation or sale provided that notice of such cancellation shall be given to
each holder of an Award, and each such holder thereof shall have the right to
exercise such Award but only to the extent exercisable in accordance with any
discretionary limitations imposed with respect to the Award prior to the
effective date of such merger, consolidation, liquidation or sale; or (v) the
Committee may provide for the cancellation of all outstanding Awards and for
the payment to the holders thereof some part or all of the amount by which the
value thereof exceeds the payment, if any, which the holder would have been
required to make to exercise such Award.
-8-
<PAGE> 34
16. NOTICE
------
Any notice to the Company required by any of the provisions of the Plan
shall be addressed to the chief financial officer of the Company in writing,
and shall become effective when it is received by the chief financial officer.
17. UNFUNDED PLAN
-------------
Insofar as it provides for Awards of cash and Stock, the Plan shall be
unfunded. Although bookkeeping accounts may be established with respect to
Participants who are entitled to cash, Stock or rights thereto under the Plan,
any such accounts shall be used merely as a bookkeeping convenience. The
Company shall not be required to segregate any assets that may at any time be
represented by cash, Stock or rights thereto, nor shall the Plan be construed
as providing for such segregation, nor shall the Company or the Board or the
Committee be deemed to be a trustee of any cash, Stock or rights thereto to be
granted under the Plan. Any liability of the Company to any Participant with
respect to a grant of cash, Stock or rights thereto under the Plan shall be
based solely upon any contractual obligations that may be created by the Plan
and any Award Agreement; no such obligation of the Company shall be deemed to
be secured by any pledge or other encumbrance on any property of the Company.
Neither the Company nor the Board nor the Committee shall be required to give
any security or bond for the performance of any obligation that may be created
by the Plan.
18. GOVERNING LAW
-------------
The Plan and all determinations made and actions taken pursuant hereto,
to the extent not otherwise governed by the laws of the United States, shall be
governed by the laws of The Commonwealth of Massachusetts and construed
accordingly.
19. EFFECTIVE AND TERMINATION DATES
-------------------------------
The Plan became effective on June 8, 1994, the date it was adopted by the
Board, and was approved by stockholders on July 21, 1994. This amendment and
restatement of the Plan was approved by the Board effective April 13, 1995,
subject to approval of the stockholders on or before April 12, 1996. The Plan
shall terminate ten years after the date it is initially adopted by the Board,
subject to earlier termination by the Board pursuant to Section 11, after which
no Awards may be made under the Plan, but any such termination shall not affect
Awards then outstanding or the authority of the Committee to continue to
administer the Plan.
-9-
<PAGE> 35
ANNEX C
1993 Non-Employee Directors Stock Option Plan
<PAGE> 36
MICROCOM, INC.
1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
(As Amended and Restated Effective March 17, 1995)
_______________
Section 1. Purpose of Plan
- ---------- ---------------
The purpose of this Microcom, Inc. 1993 Non-Employee Director Stock
Option Plan ("Plan") is to enable Microcom, Inc. (the "Company") to attract and
retain non-employee directors and further align their interests with those of
the shareholders by providing for or increasing their equity interests in the
Company.
Section 2. Administration
- ---------- --------------
This Plan shall be administered by the Board of Directors of the
Company (the "Board") or by the Compensation Committee appointed by the Board
(the "Committee"). In the event the Board refrains from delegating
administration of this Plan to the Committee, the Board shall have all power
and authority to administer this Plan. In such event, the word "Committee"
wherever used herein shall be deemed to mean the Board. The Committee shall,
subject to the provisions of the Plan, have the power to construe this Plan, to
determine all questions hereunder, and to adopt and amend such rules and
regulations for the administration of this Plan as it may deem desirable.
Section 3. Persons Eligible Under Plan
- ---------- ---------------------------
Each member of the Board who is not an employee of the Company or any
of its subsidiaries (a "Non-Employee Director") shall be eligible for the grant
of Options (as hereinafter defined) under this Plan.
Section 4. Available Shares
- ---------- ----------------
The total number of shares of Common Stock, par value $.01 per share,
of the Company ("Common Shares"), for which options may be granted under this
Plan shall not exceed 150,000 shares, subject to adjustment as provided in
Section 6 hereof. Shares subject to this Plan are authorized but unissued
Common Shares or Common Shares that were once issued and subsequently
reacquired by the Company. If any Options (as hereinafter defined) granted
under this Plan are surrendered before exercise or lapse without exercise, in
whole or in part, the Common Shares reserved therefor shall continue to be
available under this Plan.
Section 5. Options
- ---------- -------
(a) INITIAL GRANTS. Each person who is a Non-Employee Director
shall, on March 17, 1995 without further action by the Board or the Committee,
automatically be granted an option ("Option") to purchase 16,000 Common Shares,
subject to adjustment as provided in Section 6 hereof. In addition, each
<PAGE> 37
person who first becomes a Non-Employee Director after March 17, 1995 shall, on
the date such person becomes a Non-Employee Director, without further action by
the Board or Committee, automatically be granted an Option to purchase 16,000
Common Shares, subject to adjustment as provided in Section 6 hereof.
(b) ANNUAL GRANTS. On April 15, 1996 and on April 15 of each
succeeding year during the term of this Plan, or, if April 15 shall not be a
business day, the business day immediately preceding such date, each person who
is a Non-Employee Director shall without further action by the Board or
Committee automatically be granted an Option to purchase 4,000 Common Shares,
subject to adjustment as provided in Section 6 hereof.
(c) INSUFFICIENT SHARES. Notwithstanding the foregoing, if, on any
date upon which Options are to be granted under Section 5(a) or (b) hereof, the
number of Common Shares remaining available for issuance under this Plan is
insufficient for the grant of Options to purchase the total number of Common
Shares specified in such section, then each Non-Employee Director entitled to
receive an Option on such date shall be granted an Option to purchase a
proportionate amount of the available number of Common Shares (rounded down to
the greatest number of whole shares). Except for the specific Options referred
to in Section 5(a) and (b) above, no other Options shall be granted under this
Plan.
(d) OPTION PRICE AND TERMS. Each Option shall be evidenced by a
written option agreement that shall contain the following terms and provisions:
(i) The exercise price per Common Share shall be equal to the Fair
Market Value (as hereinafter defined) of one Common Share on the date
of grant of such Option. If, at the time an Option is granted the
Company's Common Shares are publicly traded, "Fair Market Value" shall
be determined as of the last business day for which the prices or
quotes discussed in this sentence are available prior to the date such
Option is granted and shall mean (i) the average (on that date) of the
high and low prices of the Common Shares on the principal national
securities exchange on which the Common Shares are traded, if the
Common Shares are then traded on a national securities exchange; or
(ii) the last reported sale price (on that date) of the Common Shares
on the Nasdaq National Market System, if the Common Shares are not
then traded on a national securities exchange; or (iii) the closing
bid price (or average of bid prices) last quoted (on that date) by an
established quotation service for over-the-counter securities, if the
Common Shares are not then reported on the Nasdaq National Market
System or on a national securities exchange. If, at the time an
Option is granted under the Plan, the Company's Common Shares are not
-2-
<PAGE> 38
publicly traded, "Fair Market Value" shall be the fair market value on
the date the Option is granted as determined by the Committee in good
faith.
(ii) Payment of the exercise price of the Option shall be made in
full in cash or by check concurrently with the exercise of the Option.
(iii) The Option shall be nontransferable by the optionee other
than by will or the laws of descent and distribution, and shall be
exercisable during the optionee's life time only by the optionee or
the optionee's guardian or legal representative.
(iv) Options granted pursuant to this Section 5 shall be
immediately exercisable and shall expire upon the first to occur of
the following:
(A) the third anniversary of the date upon which the optionee
shall cease to be Non-Employee Director, or
(B) the tenth anniversary of the date of grant.
(v) Shares issued upon exercise of an Option granted hereunder
which are unvested shall be subject to repurchase by the Company, at
the Company's election, at a price equal to the exercise price of the
Option if the optionee either (A) ceases to be a Non-Employee Director
for any reason whatsoever other than death or permanent disability or
(B) proposes to sell or otherwise transfer such shares. Shares shall
vest and become free of the Company's repurchase right in accordance
with the following:
(a) shares issued upon exercise of an Option granted pursuant
to Section 5(a) shall vest in three annual installments of 32%, 33% and
35% on the first, second and third anniversaries, respectively, of the
date of grant;
(b) shares issued upon exercise of an Option granted pursuant
to Section 5(b) shall vest in full on the first anniversary of the date
of grant; and
(c) shares issued upon exercise of any Option granted under the
Plan to an optionee who ceases to be a Non- Employee Director due to
death of permanent disability shall be fully vested upon such cessation
of service.
Within 30 days of the date of notice from the Company of exercise of
its repurchase rights, the shares to be repurchased shall be
transferred by the optionee to the Company against payment by the
Company of the purchase price specified above. If the Company shall
fail to exercise its
-3-
<PAGE> 39
repurchase rights within 120 days of the date the optionee ceases to
serve as a Non-Employee Director, the repurchase rights with respect
to the shares imposed by this Section 5(v) shall terminate and the
optionee may thereafter transfer the shares, subject, however, to such
other restrictions on transfer as may then exist thereon. If an
optionee fails to comply with any of the provisions of this Section
5(v), the Company, at its option, and in addition to its other
remedies, may suspend the rights of the optionee to vote or receive
dividends on the shares or may refuse to register on its books any
transfer of the shares or otherwise recognize any transfer or change
in the ownership of the shares or in the right to vote thereon, until
the provisions of this Section are complied with to the satisfaction
of the Company.
(vi) Such other terms and conditions, not inconsistent with the
terms of this Plan, as the Committee shall include in the written
option agreement.
Section 6. Adjustments
- ---------- -----------
(a) STOCK DIVIDENDS, RECAPITALIZATION, ETC. If the outstanding
securities of the class then subject to this Plan are increased, decreased or
exchanged for or converted into a different number or kind of securities of the
Company, or if cash, property or securities are distributed in respect of such
outstanding securities, in either case as a result of a reorganization, merger,
consolidation, recapitalization, restructuring, reclassification, dividend
(other than a regular cash dividend) or other distribution, stock split,
reverse stock split or the like, then, unless the terms of such transaction
shall provide otherwise, the Committee shall make appropriate and proportionate
adjustments in (i) the number and type of shares or other securities or cash or
other property that may be acquired pursuant to Options theretofore granted
under this Plan, and (ii) the maximum number and type of shares or other
securities that may be issued pursuant to Options thereafter granted under this
Plan.
(b) MERGER, SALE OF ASSETS, ETC. If the Company is merged into or
consolidated with another corporation under circumstances where the Company is
not the surviving corporation or if the Company is liquidated or sells or
otherwise disposes of all or substantially all of its assets while unexercised
Options remain outstanding under the Plan, as of the date thirty (30) days
prior to such transaction (i) all outstanding Options shall become fully vested
and exercisable in full, and (ii) any Options which remain unexercised as of
the day prior to the effective date of the transaction shall be cancelled as of
such day and shall not thereafter be exercisable by anyone; provided that the
accelerated exercisability of Options shall be contingent on completion of the
transaction and shall be null and void if the
-4-
<PAGE> 40
transaction is not consummated; and provided, further, that accelerated
exercisability pursuant to this provision shall not extend the expiration date
for any Option determined pursuant to Section 5.
Section 7. Amendment and Termination of Plan
- ---------- ---------------------------------
The Board may amend or terminate this Plan at any time and in any
manner, subject to the following:
(a) no such amendment or termination shall deprive the recipient of
any Option theretofore granted under this Plan, without the consent of such
recipient, of any of his or her rights thereunder or with respect thereto; and
(b) Section 5 hereof shall not be amended more than once every six
months other than to comport with changes in the Internal Revenue Code, the
Employee Retirement Income Security Act of 1974, or the rules thereunder.
Section 8. Effective Date and Duration of Plan
- ---------- -----------------------------------
The Plan became effective on April 21, 1993, the date it was
originally adopted by the Board, and was approved by stockholders on July 15,
1993. This amendment and restatement of the Plan was approved by the Board
effective March 17, 1995, subject to approval of the stockholders on or before
March 16, 1996. This Plan shall terminate and no Options shall be granted
hereunder after April 15, 2003.
-5-
<PAGE> 41
ANNEX D
1987 Employee Stock Purchase Plan
<PAGE> 42
MICROCOM, INC.
1987 EMPLOYEE STOCK PURCHASE PLAN
(As Amended and Restated Effective as of April 24, 1995)
1. PURPOSES. The Microcom, Inc. 1987 Employee Stock Purchase Plan (the
"Plan") is intended to provide a method whereby employees of Microcom, Inc.
("Microcom") and its subsidiary corporations (collectively referred to, unless
the context otherwise requires, as the "Company") will have an opportunity to
share in the growth and development of the Company by acquiring a proprietary
interest therein through the purchase of shares of the common stock, $0.01 par
value per share, of Microcom, Inc. (the "Common Stock"). It is the intention
of the Company to have the Plan qualify as an "employee stock purchase plan"
under Section 423 of the Internal Revenue Code of 1986, as it may be amended
(the "Code"). Accordingly, the provisions of the Plan shall be construed so as
to extend and limit participation in a manner consistent with the requirements
of that section of the Code.
2. DEFINITIONS.
(a) "Base Pay" means regular straight time earnings including commissions
and shift premiums, but excluding payments for overtime, incentive
compensation, bonuses, and other special payments.
(b) "Eligible employee" means any person who is customarily employed for 20
or more hours per week and more than five months in a calendar year by the
Company and whose period of employment by the Company is at least three months;
provided that for purposes of determining eligibility under this Section, the
Company, in its discretion may credit an employee with the period of time he
was employed by a subsidiary of the Company or an entity acquired by and merged
into the Company if, at the time such entity is acquired, the employee was so
employed. An eligible employee shall not include an employee of the Company
who is an officer and who is also a highly compensated employee, as this term
is defined in Section 414(q) of the Code.
(c) "Subsidiary corporation" shall mean any present or future corporation
which is a "subsidiary corporation" of Microcom as that term is defined in
Section 425 of the Code.
3. ELIGIBILITY.
(a) Only eligible employees shall be eligible to participate in an Offering
(as defined below) under the Plan.
<PAGE> 43
(b) Any provision of the Plan to the contrary notwithstanding, no employee
shall be granted an Option under the Plan:
(i) If, immediately after the grant, such employee would own stock,
and/or hold outstanding options to purchase stock, possessing 5% or more of the
total combined voting power or value of all classes of stock of the Company or
any subsidiary of the Company (for purposes of this paragraph the rules of
Section 425(d) of the Code shall apply in determining stock ownership of any
employee); or
(ii) Which permits such employee to purchase stock during a calendar
year having a fair market value which exceeds the difference between $25,000
and the fair market value of any other shares of stock purchased or purchasable
during that calendar year under any other employee stock purchase plans of the
Company which meet the requirements of Section 423 of the Code. For purposes
of this Section 3(b)(ii), the fair market value of the stock shall be
determined as of the date the option to which it relates was granted.
4. OFFERING DATES. The Plan will be implemented by a series of offerings
(each of which is referred to herein individually as an "Offering") of such
number of shares of Common Stock as is determined prior to the Offering by the
Board of Directors of the Company (the "Board"). An Offering shall begin on
June 1st and December 1st of each year or such other dates as are approved by
the Board, except for the first Offering which shall begin on December 3, 1987
(each such date referred to as the "Offering Commencement Date"). Each
Offering shall be of such duration and shall end as of such date (each such
date referred to as the "Offering Termination Date"), as is determined prior to
the Offering by the Board, provided that the duration of an Offering shall in
no event exceed 27 months from the Offering Commencement Date.
5. PARTICIPATION. An eligible employee may become a participant in an
Offering by completing such application form as is provided by the Company and
filing it with the Company's Treasurer at such time as is determined by the
Board (or person(s) to whom the Board has delegated such authority).
6. METHOD OF PAYMENT. With respect to each Offering:
(a) The method of payment for shares of Common Stock purchased upon
exercise of rights granted hereunder shall be through regular payroll
deductions or by lump sum cash payment or both, as determined with respect to
each Offering by the Board. To the extent a participant's method of payment is
through regular payroll deductions, the participant shall elect to have
deductions made from his or her pay on each payday during the time he or she is
a participant in the Offering at a specified percentage of the participant's
compensation, in whole integers,
<PAGE> 44
that, when aggregated with the amount of any lump sum cash payment the
participant elects, does not exceed 10% of the participant's base pay. If on
an Offering Commencement Date a participant is participating in one or more
other Offerings under the Plan, the aggregate percentage of the participant's
compensation he or she may elect as a payment (by payroll deduction, lump sum
cash payment, or both) with respect to all such Offerings shall not exceed 10%
of the participant's base pay.
(b) Payroll deductions for a participant shall commence on the first pay
day after the Offering Commencement Date, or as of such later date as a
prospectus with respect to the offering of Common Stock covered by the Plan is
provided to the participant, and shall end with the last pay day prior to the
Offering Termination Date unless sooner terminated by the participant as
provided in Paragraph 10.
(c) All payroll deductions and lump sum cash payments made for or by a
participant shall be credited to the participant's account under the Plan.
(d) A participant may discontinue participation in an Offering as provided
in Paragraph 10 and may reduce prospectively the rate of payroll deduction once
during the Offering (effective on the first pay day following the twentieth day
after the participant notifies the Human Resources Department of the Company of
such reduction), but no other changes can be made during such Offering.
7. GRANTING OF OPTION. With respect to each Offering during the term of
the Plan:
(a) Subject to the limits of Paragraph 3(b), a participant shall be deemed
to have been granted, on the Offering Commencement Date, an option (an
"Option") to purchase a maximum number of shares of Common Stock determined as
follows: 15% of the participant's base pay, determined as of the Offering
Commencement Date (with changes, if any, in such base pay which are made
applicable to the Offering by the Board) for the period of the Offering divided
by 85% of the fair market value of a share of Common Stock on the Offering
Commencement Date.
(b) The purchase price of a share of Common Stock in any Offering (the
"Option Exercise Price") shall be the lower of:
(i) 85% of the fair market value of a share of Common Stock on the
Offering Commencement Date; or
(ii) 85% of the fair market value of a share of Common Stock on the
Offering Termination Date.
(c)(i) For purposes of this Paragraph, the fair market value of a share of
Common Stock shall be the last sales price for a
<PAGE> 45
share of Common Stock on the appropriate date (or on the next regular business
day on which the Common Stock is traded in the over-the-counter market in the
event that no shares of Common Stock are traded on such date), as reported on
the National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") National Market, rounded up to the nearest one-fourth of a dollar.
(ii) If the Common Stock is listed on a national securities exchange,
the fair market value shall then be the closing price of a share of Common
Stock on such exchange on the appropriate date (or on the next regular business
day on which shares of the Common Stock be traded on the exchange in the event
that no shares of the Common Stock shall have been traded on such date),
rounded up to the nearest dollar.
8. EXERCISE OF OPTION. With respect to each Offering during the term of
the Plan:
(a) Unless a participant gives written notice of withdrawal to the Company
as hereinafter provided, the Option will be deemed to have been exercised
automatically on the Offering Termination Date for the purchase of the number
of full shares of Common Stock which the accumulated payroll deductions and
lump sum cash payments, if any, in the account at that time will purchase at
the Option Exercise Price (but not in excess of the maximum number of shares
calculated pursuant to Paragraph 7(a)).
(b) By written notice to the Human Resources Department of the Company at
an time prior to the Offering Termination Date, a participant may elect to
withdraw all of the accumulated payroll deductions and lump sum cash payments,
if any, in the participant's account at such time, as provided in Paragraph
10(a), and the Option will terminate unexercised.
(c) Fractional shares will not be issued under the Plan and any accumulated
payroll deductions and lump sum cash payments, if any, which would have been
used to purchase fractional shares shall be reported to the participant and
will be carried forward to the next Offering unless the participant does not
elect to participate in such Offering, in which event such amounts will be
returned to the participant promptly following the Offering Termination Date.
Any accumulated payroll deductions and lump sum cash payments, if any, which
are in excess of the limitations of Paragraphs 7(a) and 12(a) will also be
returned to the participant promptly following the Offering Termination Date.
9. DELIVERY. As promptly as practicable after the Offering Termination
Date, the Company will deliver to each participant, as appropriate, the
certificate or certificates representing the shares of Common Stock purchased
upon the exercise of the Option.
<PAGE> 46
10. WITHDRAWAL.
(a) As indicated in Paragraph 8(b), a participant may withdraw payroll
deductions and lump sum cash payments, if any, credited to his or her account
under any such Offering at any time prior to the Offering Termination Date by
giving written notice of withdrawal to the Human Resources Department of the
Company. All of the participant's payroll deductions and lump sum cash
payments, if any, credited to such account will be paid to the participant
promptly after receipt of notice of withdrawal, and the participant's Option
will terminate. The participant will not be permitted to elect any further
payroll deductions or lumps sum cash payments during such Offering. The
Company may, in its discretion, treat any attempt by a participant to borrow on
the security of accumulated payroll deductions or lump sum cash payments as an
election to withdraw such amounts.
(b) A participant's withdrawal from an Offering will not have any effect
upon eligibility to participate in any future Offering pursuant to the Plan or
in any similar plan which may hereafter be adopted by the Company.
(c) Upon termination of the participant's employment with the Company for
any reason, including retirement but excluding death during an Offering, the
participant's Option will terminate and the payroll deductions and lump sum
cash payments, if any, credited to the participant's account with respect to
the then current Offering will be returned to the participant or, in the case
of death subsequent to the termination of employment, to the person or persons
entitled thereto under Paragraph 14.
(d) Upon termination of the participant's employment with the Company
because of death, the beneficiary (as defined in Paragraph 14) shall have the
right to elect, by written notice given to the Human Resources Department of
the Company prior to the expiration of 30 days commencing with the date of
death of the participant, either:
(i) To withdraw all of the payroll deductions and lump sum cash
payments, if any, credited to the participant's account with respect to the
then current Offering; or
(ii) To exercise the participant's Option for the purchase of stock
pursuant to the then current Offering on the Offering Termination Date for the
purchase of the number of full shares of stock specified in the participant's
Option (or, if less, for periods with respect to which payroll deductions and
lump sum cash payments, if any, have been made for participation generally, the
number of full shares of stock that the accumulated payroll deductions and lump
sum cash payments, if any, in the participant's account at the date of the
participant's death will purchase at the Option Exercise Price (subject to the
limitations contained in Paragraphs 7(a) and
<PAGE> 47
12(a)), and any excess in such account will be returned to the beneficiary). In
the event that no such written notice of election shall be received by the
Human Resources Department of the Company, a notice of withdrawal shall be
deemed to have been received within the meaning of Paragraph 10(a), and the
amounts due shall be paid promptly to the beneficiary in accordance with the
terms of Paragraph 14.
11. INTEREST. No interest will be paid or allowed on any money paid into
the Plan or credited to the account of any participant.
12. STOCK.
(a) The maximum number of shares of Common Stock which shall be made
available for sale under all Offerings in the aggregate pursuant to the Plan
shall be 1,345,000 shares subject to adjustment upon changes in capitalization
of Microcom as provided in Paragraph 17. Such shares may be authorized and
unissued shares or may be "treasury" shares. Any shares subject to an Option
which for any reason expires or is terminated unexercised as to such shares may
again be subject to an Option under the Plan. If the total number of shares
for which Options are exercised on any Offering Termination Date in accordance
with Paragraph 8 exceeds the number of shares offered in such Offering or
available under the Plan, the Company shall make a pro rata allocation of the
shares available for delivery and distribution in as nearly a uniform manner as
shall be practicable and as it, in its sole discretion, shall determine to be
equitable, and the balance of payroll deductions and lump sum cash payments, if
any, credited to the account of each participant under the Plan shall be
handled as provided in Paragraph 8(c).
(b) The participant will have no interest in shares of Common Stock covered
by an Option until such Option has been exercised.
(c) Stock to be delivered to a participant pursuant to an Offering under
the Plan will be registered in the name of the participant, or, if the
participant so directs by written notice to the Human Resources Department
prior to the Offering Termination Date, in the names of the participant and one
other person designated by the participant, as joint tenants with right of
survivorship, to the extent permitted by applicable law.
(d) The Board may, in its discretion, require as conditions to the exercise
of any Option that the shares of Common stock reserved for issuance upon the
exercise of the Option shall have been duly listed upon official notice of
issuance upon any national securities exchange upon which the Common Stock is
listed, and that either:
(i) A Registration Statement under the Securities Act of 1933, as
amended, with respect to such shares shall have become effective; or
<PAGE> 48
(ii) The participant shall have represented in form and substance
satisfactory to the Company that it is the participant's intention to purchase
such shares for investment.
13. ADMINISTRATION. The Plan shall be administered by the Board or, to
the extent delegated by the Board, a compensation committee (the "Committee").
Subject to the provisions of the Plan, the Board or the Committee shall have
full power to construe and interpret the Plan and to establish, amend and
rescind rules and regulations for its administration. Determinations made by
the Committee and approved by the Board with respect to any other matter or
provision contained in this Plan shall be final, conclusive and binding upon
the Company and upon all participants, their heirs or legal representatives.
Any rules or regulations adopted by the Committee or the Board shall remain in
full force and effect unless and until altered, amended or repealed by the
Committee or the Board.
14. DESIGNATION OF BENEFICIARY. A participant may file with the Human
Resources Department of the Company a written designation of a beneficiary who
is to receive any shares of Common Stock and/or cash in the event of the death
of the participant prior to the delivery of such shares or cash to the
participant. Such designation of beneficiary may be changed by the participant
at any time by written notice to the Human Resources Department. Within 30
days after the participant's death, the beneficiary may, as provided in
Paragraph 10(d), elect to exercise the participant's Option when it becomes
exercisable on the Offering Termination Date of the then current Offering.
Upon the death of a participant and upon receipt by the Company of proof of
identity and existence at the participant's death of a beneficiary validly
designated by him or her under the Plan and notice of election of the
beneficiary to exercise the Option, the Company shall deliver such stock and/or
cash to such beneficiary. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such stock
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company) the Company, in its discretion, may deliver such stock and/or cash
to the spouse or to any one or more dependents of the participant as the
Company may designate. No beneficiary shall, prior to the death of the
participant by whom he or she has been designated, acquire any interest in the
shares of Common Stock or cash credited to the participant under the Plan.
15. TRANSFERABILITY. Neither payroll deductions and lump sum cash
payments, if any, credit to a participant's account nor any rights to exercise
an Option or to receive shares of Common Stock under the Plan may be assigned,
transferred, pledged, or otherwise disposed of in any way by the participant
otherwise than by will or the laws of descent and distribution, and no rights
under the Plan may be exercisable during the participant's
<PAGE> 49
lifetime by anyone other than the participant or his guardian or legal
representative.
16. USE OF FUNDS. All payroll deductions and lump sum cash payments, if
any, received or held by the Company under this Plan may be used by the Company
for any corporate purpose and the Company shall not be obligated to segregate
such payroll deductions and lump sum cash payments, if any.
17. EFFECT OF CHANGES IN THE COMMON STOCK. In the event of any changes of
the shares of the Common Stock by reason of stock dividends, subdivisions,
combinations and exchanges of shares, recapitalizations, mergers in which
Microcom is the surviving company, consolidations, and the like, the aggregate
number and class of shares available under this Plan and the Option Exercise
Price per share shall be appropriately adjusted by the Board, whose
determination shall be conclusive. Any such adjustments may provide for the
elimination of any fractional shares which would otherwise become subject to
any options.
18. AMENDMENT OR TERMINATION. The Board may at any time terminate or
amend the Plan. No such termination can affect Options previously granted, nor
may an amendment make any change in any Option theretofore granted which would
adversely affect the rights of any participant without the participant's
consent nor may an amendment be made without prior approval of the stockholders
of Microcom if such amendment would:
(a) Materially increase the number of securities which may be issued under
the Plan; or
(b) Materially modify the requirements as to eligibility for participation
in the Plan.
19. NOTICES. All notices or other communications by a participant under
or in connection with the Plan shall be deemed to have been duly given when
received by the Treasurer of the Company.
20. MERGER OR CONSOLIDATION. If Microcom shall at any time merge into or
consolidate with another corporation, the holder of each Option then
outstanding will thereafter be entitled to receive at the Offering Termination
Date, in lieu of each share of Common Stock to which the holder would otherwise
be entitled, the securities or property which a holder of one share of the
Common Stock was entitled to receive upon and at the time of such merger or
consolidation. The Board shall take such steps in connection with such merger
or consolidation as the Board shall deem necessary to assure that the
provisions of Paragraph 17 shall thereafter be applicable, as nearly as
reasonably may be, in relation to said securities or property which the holder
might thereafter be entitled to receive pursuant to the Option. A sale of all
or substantially all of the assets of Microcom shall be deemed a merger or
consolidation for the foregoing purposes.
<PAGE> 50
21. APPROVAL OF STOCKHOLDERS. The Plan was originally approved by the
Board on August 13, 1987, and was approved by stockholders on July 19, 1988.
Subsequent amendments and restatements of the Plan were approved by the Board
and stockholders effective as of March 31, 1989, April 18, 1991 and April 21,
1993. This amendment and restatement of the Plan was approved by the Board
effective April 24, 1995, subject to approval of the stockholders on or before
April 23, 1996.
22. REGISTRATION AND QUALIFICATION OF THE PLAN UNDER APPLICABLE SECURITIES
LAWS. No option shall be exercised under the Plan until such time as the
Company has qualified or registered the shares which are subject to options
under the applicable state and Federal securities laws to the extent required
by such laws.
23. TERMINATION OF THE PLAN. Unless the Plan is terminated earlier by the
Board of Directors, the Plan shall terminate and no shares offered hereunder
shall be purchased after August 12, 1997. Upon termination of the Plan, all
amounts in the accounts of participants, to the extent not used to purchase
shares of Common Stock under the Plan, shall be promptly refunded to
participants.
