<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement, Proxy Card, Letter to Stockholders, and Notice
of Meeting
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
MICROCOM, INC.
500 River Ridge Drive
Norwood, Massachusetts 02062-5028
June 14, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Microcom, Inc. (the "Company"), to be held on Thursday, July 18, 1996 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 Stock Option and Stock Purchase
Plan. For a discussion of this proposal, please refer to pages 11, 12,
13 and 14 of the attached Proxy Statement.
3. To approve the selection by the Board of Arthur Andersen LLP as the
Company's independent auditors for the fiscal year ending March 31,
1997. Please refer to pages 15 and 16 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,
/s/ Roland D. Pampel
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 18, 1996
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 18, 1996 at 10:00
A.M. (Boston time) to consider and act upon the following matters:
1. To elect two Class II 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 Stock Option and Stock Purchase
Plan.
3. 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, 1997.
4. 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 30, 1996, 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
/s/ William C. Rogers
William C. Rogers, Clerk
June 14, 1996
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 18, 1996
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 18,
1996 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, 1996 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 18, 1996.
The Board has fixed May 30, 1996 as the record date for determination of
stockholders entitled to vote at the Annual Meeting. At the close of business on
May 30, 1996, there were outstanding and entitled to vote 15,820,616 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 proposal
listed on the Notice of Annual Meeting, abstentions shall be deemed the
equivalent of negative votes.
<PAGE> 5
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND PRINCIPAL STOCKHOLDERS
<TABLE>
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 30, 1996, 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>
PERCENTAGE
SHARES OF
BENEFICIAL OWNER BENEFICIALLY OWNED COMMON STOCK
- ---------------- ------------------ ------------
<S> <C> <C>
Roland D. Pampel.............................................. 272,500(1) 1.7%
Lewis A. Bergins.............................................. 204,762(2) 1.3
Peter J. Minihane............................................. 146,800(3) *
Richard Barbari............................................... 49,200(4) *
William Andrews............................................... 4,167(5) *
Donald G. Kennedy............................................. 35,000(6) *
Fred L. Luconi................................................ 120,995(7) *
Michael I. Schneider.......................................... 67,752(8) *
John C. Rutherford............................................ 445,079(9) 2.8
James M. Dow
c/o Microcom, Inc.
500 River Ridge Drive
Norwood, Massachusetts 02062................................ 414,086(10) 2.6
Twentieth Century Companies, Inc.
4500 Main Street
Kansas City, Missouri 64141-9210............................ 1,600,000(11) 10.1
Husic Capital Management
555 California Street
Suite 2900
San Francisco, California 94104............................. 1,112,000(12) 7.0
All current directors and executive officers as a group (14
persons).................................................... 2,002,736(13) 12.1
<FN>
- ---------------
* Less than 1%
(1) Includes 257,500 shares subject to currently exercisable options.
(2) Includes 68,235 shares subject to currently exercisable options and 12,762
shares held by Mr. Bergin's wife.
(3) Includes 59,225 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.
(4) Includes 15,000 shares subject to currently exercisable options.
(5) Consists of shares subject to currently exercisable options.
(6) Includes 20,000 shares subject to currently exercisable options.
</TABLE>
2
<PAGE> 6
(7) Includes 20,000 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.
(8) Includes 20,000 shares subject to currently exercisable options and 38,500
shares as to which Dr. Schneider has shared voting and investment power
with his wife.
(9) Includes 20,000 shares subject to currently exercisable options.
(10) Includes 20,000 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.
(11) Consists of 800,000 shares held by each of two investment companies,
Twentieth Century Investors, Inc. ("TCI") and TCI Portfolios, Inc. ("TCP")
(together, the "Funds"). Investors Research Corporation ("IRC"), a
wholly-owned subsidiary of Twentieth Century Companies, Inc. ("TCC"), acts
as investment advisor to the Funds. Mr. James E. Stowers, Jr. controls TCC
by virtue of his beneficial ownership of a majority of the voting stock of
TCC. Each of TCI and TCP has voting and dispositive power with respect to
the shares held by each respectively. IRC has voting and dispositive power
over the shares held by each of the Funds. By virtue of TCC's control of
IRC, and by virtue of Mr. Stowers' control of TCC, each of TCC and Mr.
Stowers share voting and dispositive power with respect to all such shares.
These figures and the related information are as of February 29, 1996 and
based solely on a combined Schedule 13G filing, as amended, made by TCC,
IRC, the Funds and Mr. Stowers with the Securities and Exchange Commission.
(12) Consists of shares held by Husic Capital Management ("HCM"), an investment
advisory company, on behalf of its clients. Frank J. Husic and Co. ("Corp")
is the sole general partner of HCM, a limited partnership, and Mr. Frank J.
Husic is the sole shareholder of Corp. HCM has discretionary authority to
dispose of all of the shares, and by virtue of Corp's control of HCM and
Mr. Husic's control over Corp, each of Corp and Mr. Husic is deemed to have
dispositive power over such shares. HCM has discretionary authority to vote
967,600 such shares, and by virtue of Corp's control of HCM and Mr. Husic's
control over Corp, each of Corp and Mr. Husic is deemed to share voting
power with respect to 967,600 such shares. These figures and the related
information are as of December 31, 1995 and based solely on a combined
Schedule 13G filing made by HCM, Corp and Mr. Husic with the Securities and
Exchange Commission.
(13) Includes 659,977 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 Mr. Rutherford and Dr. Schneider as Class II directors,
unless authority to vote for the election of directors is withheld by marking
the proxy to that effect. Mr. Rutherford and Dr. Schneider are currently
directors of the Company.
The Company's Articles of Organization provide for three classes of
directors. If Mr. Rutherford and Dr. Schneider are elected, each will continue
to serve as Class II directors for a new term expiring at the 1999 Annual
Meeting of Stockholders. If either or both of Mr. Rutherford and Dr. Schneider
become unavailable
3
<PAGE> 7
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....................... 45 Director (Chairman)
Fred L. Luconi..................... 54 Director (Vice Chairman)
Roland D. Pampel................... 61 President, Chief Executive Officer and Director
Donald G. Kennedy.................. 70 Director
John C. Rutherford................. 46 Director
Michael I. Schneider............... 59 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. He is currently serving as a Class I director for a term
expiring at the 1998 Annual Meeting of Stockholders. 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. Mr. Pampel has served on the boards of directors of Best Power
Technology, Inc., a manufacturer of power technology and backup recovery
products, since August 1993, and of Software 2000, Inc., a developer of
enterprise-level business software applications, since October 1995.
Mr. Kennedy has served as a Director of the Company since November 1985. He
is currently serving as a Class I director for a term expiring at the 1998
Annual Meeting of Stockholders. Since March 1985, Mr. Kennedy has been an
independent management consultant. Since 1987 he has been a member of the Panel
of Arbitrators of the American Arbitration Association. Since 1993, Mr. Kennedy
has been an arbitrator for the National Association of Securities Dealers, Inc.
Mr. Rutherford has served as a Director of the Company since January 1994.
Mr. Rutherford has been a Managing Director and a principal stockholder of The
Parthenon Group, Inc., a management consulting 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 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 1996.
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 seven times in fiscal
1996.
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 1996 but
its members consulted as to nominees at various times.
During fiscal 1996, the Board of Directors held fifteen 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 is entitled to
receive an option exercisable for 4,000 shares of common stock on April 15 of
each year, exercisable at the fair market value of the common stock on the date
of grant. In addition, 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 1994, 1995 and 1996 to (i) the Company's chief
executive officer and (ii) and the other four most highly compensated executive
officers of the Company during fiscal 1996 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
------------------
ANNUAL COMPENSATION NUMBER OF
FISCAL -------------------- SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS COMPENSATION
- --------------------------- ------ -------- ------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Roland D. Pampel,................... 1996 $247,917 $50,000 70,000 --
Chief Executive Officer(1) 1995 225,000 50,000 -- --
1994 17,898 -- 265,000 --
William Andrews,.................... 1996 227,525(4) -- 15,000 --
Vice President, North 1995 194,197(4) -- 13,000 --
American Sales(2) 1994 179,757(4) -- 40,000 --
Lewis A. Bergins,................... 1996 348,188(5) 30,000 15,000 2,690(9)
Executive Vice President, 1995 239,817(5) 20,000 18,000 2,362(9)
International Operations and 1994 165,000 -- 175,000(7) 2,183(9)
Modulation Business
Peter J. Minihane,.................. 1996 169,813 28,800 15,000 --
Executive Vice President 1995 165,000 9,120 18,000 --
of Operations, 1994 165,000 -- 175,000(8) --
Chief Financial Officer and
Treasurer
Richard Barbari,.................... 1996 206,708(6) 66,708 15,000 --
Vice President, Marketing and 1995 124,402(6) -- -- --
Latin America and Africa Sales(3)
<FN>
- ---------------
(1) Mr. Pampel was named President and Chief Executive Officer of the Company on
March 3, 1994.
(2) Mr. Andrews resigned from the Company as of April 10, 1996.
(3) Mr. Barbari joined the Company on May 23, 1994.
(4) Includes $109,191, $94,189 and $79,757 in sales commissions paid in fiscal
1996, 1995 and 1994, respectively.
(5) Includes $178,374 and $74,812 in sales commissions paid in fiscal 1996 and
1995, respectively.
(6) Includes $66,708 and $4,333 in sales commissions paid in fiscal 1996 and
1995, respectively.
(7) 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.
(8) 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.
(9) Represents the premium paid by the Company with respect to term life
insurance for the benefit of Mr. Bergins.
</TABLE>
6
<PAGE> 10
<TABLE>
The following table shows all stock options grants to the Named Executive
Officers during fiscal 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF STOCK PRICE
SHARES PERCENT OF EXERCISE APPRECIATION FOR
UNDERLYING TOTAL OPTIONS PRICE OPTION TERM(2)
OPTIONS GRANTED TO EMPLOYEES IN PER -------------------
NAME GRANTED(1) FISCAL YEAR SHARE EXPIRATION DATE 5% 10%
---- ---------- ----------------------- -------- --------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Roland D. Pampel...... 70,000 9.5% $ 9.625 May 5, 2001 $229,139 $519,839
William Andrews....... 10,000 1.5% 10.875 April 17, 2005 68,392 173,319
5,000 .5% 15.063 July 3, 2001 25,614 58,109
Lewis A. Bergins...... 15,000 2.0% 10.875 April 17, 2005 102,588 259,979
Peter J. Minihane..... 15,000 2.0% 10.875 April 17, 2005 102,588 259,979
Richard Barbari....... 15,000 2.0% 10.875 April 17, 2005 102,588 259,979
<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 1997.
(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
1996 was approximately 4.7% 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 1996 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, 1996. 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
NUMBER OF FISCAL YEAR END VALUE OF UNEXERCISED IN-THE-MONEY
SHARES (ALL EXERCISABLE AT FISCAL OPTIONS AT FISCAL YEAR END($)
ACQUIRED DOLLAR YEAR-END) (ALL EXERCISABLE AT FISCAL YEAR-END)
ON VALUE --------------------------- ------------------------------------
NAME EXERCISE(1) REALIZED VESTED UNVESTED TOTAL VESTED UNVESTED TOTAL
---- ----------- -------- ------ -------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Roland D. Pampel....... 42,500 $772,813 62,500 195,000 257,500 $1,562,500 $4,875,000 $6,437,500
William Andrews........ 39,416 680,227 -- 66,750 66,750 -- 1,093,750 1,093,750
Lewis A. Bergins....... 11,880 139,293 32,235 52,000 84,235 655,875 1,000,000 1,655,875
Peter J. Minihane...... -- -- 25,725 49,500 75,225 493,125 937,500 1,430,625
Gregory Pearson........ -- -- -- 30,000 30,000 -- 750,000 750,000
<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 $247,917 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. The
8
<PAGE> 12
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. In keeping with
their belief in the importance of these options, the Committee and the
Board of Directors amended the Company's Stock Option and Stock Purchase
Plan to increase the number of shares available for option grants
thereunder by 700,000. This amendment is being presented to the
stockholders for a vote of approval with this proxy statement as noted
below. 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.
Last year, the Committee and the Board of Directors increased the number
of shares available under that plan which increase was approved by
stockholders at the Annual Meeting in July 1995, and remains committed
to its use as an effective incentive component to compensation.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Roland D. Pampel was hired as the Company's President and Chief
Executive Officer effective March 3, 1994. Mr. Pampel's base salary for fiscal
1996 was set at $247,917 per year and he was granted an option to purchase
50,000 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 20,000 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 1996.
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 deductions 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. 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 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 1996 compensation was
reflective of those policies consistently applied.
Compensation Committee
Michael I. Schneider, Chairman
Donald G. Kennedy
9
<PAGE> 13
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN
<TABLE>
The following graph assumes an investment of $100 on April 1, 1991 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 Software &
(Fiscal Year Covered) Inc. Index Services
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 184.00 111.04 129.46
1993 60.00 127.95 171.04
1994 94.00 129.84 191.91
1995 181.50 150.05 258.87
1996 478.00 198.22 365.96
</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.
10
<PAGE> 14
SECTION 16 REPORTING
Section 16(a) of the 1934 Act requires the Company's directors and
executive officers and persons who own more than ten percent of the common stock
to file reports with the Securities and Exchange Commission disclosing their
ownership of stock in the Company and changes in such ownership. Copies of such
reports are also required to be furnished to the Company. Based solely on a
review of the copies of such reports received by it, or a written representation
from certain reporting persons, the Company believes that all required filings
were timely made during fiscal 1996, except that Joanne K. Masingill, an
executive officer of the Company, was late in filing a Form 4 in fiscal 1996
relating to the grant in October 1995 of a stock option exercisable for 10,000
shares of common stock, and Fred L. Luconi, a director of the Company, was late
in filing a Form 4 relating to his acquisition of 1,495 shares of common stock
in November 1995.
APPROVAL OF AMENDMENT TO STOCK OPTION AND STOCK PURCHASE PLAN
On January 26, 1996, subject to stockholder approval, the Board approved an
amendment to the Company's Stock Option and Stock Purchase Plan (the "Option
Plan"), which provides for the grant of stock options and stock purchase
authorizations to key employees, consultants and directors of the Company,
increasing the number of shares issuable thereunder from 4,828,000 to 5,528,000.
Stockholder approval of the Option Plan as amended and restated by the Board is
required by the terms of the Option Plan and is sought, with respect to certain
amendments, to meet the stockholder approval requirements of (a) Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), and (b) Rule 16b-3
under the Securities and Exchange Act of 1934, as amended (the "1934 Act"),
which, in the case of certain option plans which have been approved by
stockholders, prevents the grant of options to directors, officers and certain
other affiliates from being deemed "purchases" for purpose of the profit
recapture provisions of Section 16(b) of the 1934 Act.
The Board recommends a vote "FOR" this proposal because it believes that
the Option 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 Option Plan
as amended and restated by the Board 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 OPTION PLAN AS AMENDED AND RESTATED
The Option Plan provides for the grant of options intended to qualify as
"incentive stock options" ("ISOs") within the meaning of Section 422 of the Code
to key employees (currently 225 persons) and for the grant of non-qualified
stock options ("NQOs") and purchase authorizations to key employees and
consultants (currently one).
The Option Plan is administered by the Compensation Committee of the Board,
which is composed of non-employee Directors. The Compensation Committee
determines the persons to receive options ("participants" or "optionees"), the
number of options granted to each participant, and the terms and conditions of
options and purchase authorizations granted under the Option Plan.
The price payable upon exercise of an ISO is set by the Compensation
Committee, but may not be less than 100% (110% in the case of a participant
owning more than 10% of the Company's stock) of the fair market value of the
Company's stock on the date the option is granted. The price payable upon
exercise of a purchase authorization or a NQO is set by the Compensation
Committee. The fair market value of such stock under the Option Plan is
determined by the Compensation Committee based on the closing sale price of the
11
<PAGE> 15
stock on the date of grant. The fair market value of the common stock on June
10, 1996 (the closing sale price of the common stock as reported on The Nasdaq
Stock Market) was $16.75 per share.
All options granted to date under the Option Plan have been immediately
exercisable in full. Shares of common stock made subject to options or purchase
authorizations issued pursuant to the plan are subject to transfer and
repurchase restrictions (vesting) which lapse periodically from the date of
grant of the option or purchase authorization (typically 25% per year). Any
shares with respect to which an option or purchase authorization has been
exercised that are not vested upon the participant's termination of service are
subject to the Company's right of repurchase at the participant's original cost.
No option is exercisable later than ten years (five years in the case of a
participant owning more than 10% of the Company) after the date of grant, and no
purchase authorization may be exercised later than three months after the date
of grant.
The number of shares of stock for which options or purchase authorizations
may be granted to any participant in any single fiscal year of the Company
cannot exceed 50,000, except that in the case of a newly hired employee there
can be a one-time option or purchase authorization for up to an additional
350,000 shares.
On exercise of an option or purchase authorization, the purchase price must
be paid in full (i) by cash or check; (ii) if permitted by the Compensation
Committee, by delivery and assignment to the Company of shares of the Company's
stock; (iii) if permitted by the Committee, by a cashless exercise, or (iv) a
combination of (i), (ii) and (iii). A participant may satisfy state and federal
tax withholding obligations resulting from the exercise of an option or purchase
authorization by electing to (i) pay cash, (ii) have the Company withhold shares
or (iii) deliver to the Company shares of the Company's stock having a fair
market value equal to the withholding obligations, provided that executive
officers subject to the requirements of Section 16 of the 1934 Act may not make
such election, and in such cases the Company shall withhold shares of common
stock having a value equal to withholding obligations of such persons. No option
or purchase authorization is transferable by a participant in the Option Plan
other than upon death, and each option or purchase authorization is exercisable
during the participant's lifetime only by the participant.
If a participant's service with the Company terminates because of
disability or death, an option previously granted to such participant may be
exercised (to the extent the option was exercisable on the date of such
termination) by the participant (or, in the case of death, by those to whom the
participant's rights under the option pass by will or by the laws of descent and
distribution) within one year and one day (one year in the case of ISOs) after
the date of such disability or death. If a participant's service with the
Company terminates for any reason other than cause, disability, death or
resignation or other voluntary action before such participant is eligible to
retire, an option previously granted to such participant may be exercised within
three months after the date of such termination. If a participant's service with
the Company terminates because of disability or death, a purchase authorization
previously granted to such participant is nonetheless exercisable for its stated
term. In all other cases, options and purchase authorizations terminate and may
no longer be exercised fifteen days after a participant ceases to render
services to the Company. However, in no event is an option or purchase
authorization exercisable by anyone after the date of expiration. Shares subject
to an option or purchase authorization which are not purchased prior to the
expiration or termination of such option or purchase authorization, and any
shares purchased by a participant which are subsequently repurchased by the
Company pursuant to the terms of the option or purchase authorization, will
thereafter be available for grants of future options or purchase authorizations
under the Option Plan. The Compensation Committee may in its discretion
establish different terms and conditions pertaining to the effect of a
participant's termination of employment by the Company.
The Board may amend or terminate the Option Plan at any time, provided that
no amendment shall, without stockholder approval, increase the number of shares
available for options and purchase authorizations,
12
<PAGE> 16
change the class of individuals eligible to participate in the Option Plan, or
materially increase the benefits accruing to participants in the Option Plan.
<TABLE>
The following table sets forth the number of shares of common stock subject
to options granted issued under the Option Plan during fiscal 1996 to the Named
Executive Officers, the current executive officers as a group, and the
non-executive officer employees.
<S> <C>
Roland D. Pampel........................................................... 70,000
William Andrews............................................................ 5,000
Lewis A Bergins............................................................ --
Peter J. Minihane.......................................................... --
Richard Barbari............................................................ --
Current executive officers as a group...................................... 165,000
Non-executive officer employees............................................ 323,368
</TABLE>
As of May 30, 1996, options to purchase an aggregate of 1,254,332 shares of
common stock and no purchase authorizations were outstanding under the Option
Plan and 652,628 shares remained available for future grant of options and
purchase authorizations thereunder.
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 or a
purchase authorization is granted, nor will the Company be entitled to a tax
deduction at that time. However, when any part of an option or a purchase
authorization is exercised, 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 unless and to the extent that the option is payable in
restricted stock.
2. In the case of an exercise of an option or purchase authorization
payable in restricted stock, the excess of the then current fair market
value of the stock over the option price paid will not be taxable to the
optionee 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, but will then be taxable based on the fair market value
of the stock at such later point in time. However, the optionee may elect
under Section 83(b) of the Code to recognize income when the stock is
received, based on the then current fair market value, 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 optionee makes this election,
the amount taxed to the optionee as ordinary income is determined as of the
date of receipt of the restricted stock.
3. In the case of ISOs, there is no tax liability at time of exercise,
except that the excess of the fair market value of the stock over the
option price (generally on the exercise date) 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 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).
4. Upon exercise of a NQO or a purchase authorization or the lapse of
restrictions with respect to 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
13
<PAGE> 17
of the exercise of an ISO, but is entitled to a tax deduction if the
employee recognizes ordinary income on account of a premature disposition
of ISO stock in the same amount and at the same time as the employee's
recognition of income, provided that the ISO stock is held for the required
period as described above.
The foregoing is a general summary of federal income tax considerations
only and does not purport to be complete. It is based on federal income tax laws
as of the date of this proxy statement which are subject to change at any time.
14
<PAGE> 18
<TABLE>
CERTAIN TRANSACTIONS
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 May 30, 1996.
<CAPTION>
TOTAL HIGHEST
OUTSTANDING AMOUNT IN
NAME AND AMOUNTS AS OF FISCAL 1996 INTEREST
PRINCIPAL POSITION MAY 30, 1996(1) OUTSTANDING(1) RATE
------------------ --------------- -------------- --------
<S> <C> <C> <C>
Roland D. Pampel...................................... $192,375 $192,375 5.73%
Chief Executive Officer and President
Richard Barbari....................................... 182,750 215,000 6.92
Executive Vice President, Marketing and Latin
America and Africa Sales
Lewis A. Bergins...................................... 496,931 728,670 4.92
Executive Vice President, International Operations
and Modulation Business
Peter J. Minihane..................................... 248,840 405,000 4.92
Executive Vice President of Operations, Chief
Financial Officer and Treasurer
Gregory Pearson....................................... 120,000 127,209 4.92
Senior Vice President, Technology Development
Michael I. Schneider.................................. 34,250 36,308 4.92
Director 53,000 56,302 5.07
Donald G. Kennedy..................................... 10,275 34,250 4.92
Director 52,500 53,000 5.32
Fred L. Luconi........................................ 168,750 179,087 5.00
Director
John C. Rutherford.................................... 57,750 62,064 5.88
Director
<FN>
- ---------------
(1) Includes accrued interest.
</TABLE>
The Parthenon Group, Inc. ("Parthenon"), a management consulting 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 1996, the Company granted Parthenon, for various
consulting services rendered, a stock option exercisable for an aggregate of
23,810 shares of common stock at an exercise price of $11.75 per share and with
an expiration date of June 1, 2002.
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,
1997, 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.
15
<PAGE> 19
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 1997 MEETING
Proposals of stockholders intended to be presented at the 1997 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 of Operations, Chief Financial Officer and
Treasurer, not later than March 17, 1997 for inclusion in the proxy statement
for that meeting. Other requirements for inclusion are set forth in Rule 14a-8
under the Exchange Act.
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 remuneration, 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
/s/ William C. Rogers
William C. Rogers, Clerk
June 14, 1996
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.
16
<PAGE> 20
MICROCOM, INC.
STOCK OPTION AND STOCK PURCHASE PLAN
Amended and Restated Effective as of January 26, 1996
-----------------------------------------------------
1. PURPOSE. The purpose of this Plan is to advance the interests of
Microcom, Inc. (the "Company") by providing an opportunity to selected key
employees and directors of and consultants to the Company, its parent, if any,
and its subsidiaries to purchase shares of the Company's common stock, $.01 par
value per share (the "Common Stock"). By encouraging such stock ownership, the
Company seeks to attract, retain and motivate employees, consultants and
directors of training, experience and ability. It is intended that this purpose
will be effected by granting stock purchase authorizations, "incentive stock
options" which will qualify under the provisions of Section 422 of the Internal
Revenue Code of 1986, as it may be amended (the "Code"), and non-statutory stock
options.
2. EFFECTIVE DATE. This Plan originally became effective on May 25,
1982, the date it was adopted by the Board of Directors of the Company (the
"Board"), and was subsequently amended and restated effective as of March 31,
1987, March 31, 1989, January 9, 1990, April 17, 1992, and June 8, 1994. The
amendments made by this amendment and restatement are effective as of January
26, 1996, the date they were adopted by the Board.
3. STOCK SUBJECT TO THE PLAN. Only shares of Common Stock shall be
subject to options and purchase authorizations granted hereunder. The maximum
number of shares of Common Stock that may
<PAGE> 21
be subject to options and purchase authorizations under the Plan shall be
5,528,000 (the "Plan Limit"). Any shares of Common Stock withheld by the Company
on or after April 26, 1991 in connection with the exercise of options or
purchase authorizations to satisfy tax withholding requirements or to pay the
exercise price of such options or purchase authorizations shall be counted
toward the Plan Limit. Any shares subject to an option or purchase authorization
which for any reason expires or is terminated unexercised as to such shares and
any shares reacquired by the Company pursuant to a repurchase right may again be
the subject of an option or purchased under the Plan and will not be counted
toward the Plan 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. The shares
delivered upon exercise of options or purchase authorizations under this Plan
may, in whole or in part, be either authorized but unissued shares or issued
shares reacquired by the Company.
4. ADMINISTRATION. This Plan shall be administered by a committee (the
"Committee") consisting of two (2) or more members of the Board, all of whom are
both (i) "outside directors" within the meaning of Section 162(m) of the Code,
and (ii) "disinterested persons" within the meaning of Rule 16b-3(c)(2)(i) under
the Securities Exchange Act of 1934. Subject to the provisions of this Plan, the
Committee shall have full power to
2
<PAGE> 22
(i) construe and interpret the Plan, (ii) establish, amend and rescind rules and
regulations for its administration, (iii) establish, amend and waive the terms
and conditions of individual options and purchase authorizations granted
hereunder, including, without limitation, terms and conditions relating to
vesting, exercisability and effect of termination of employment by the Company.
5. ELIGIBLE PARTICIPANTS. Options may be granted to such key employees,
directors or consultants of the Company, its parent, if any, or of any of its
subsidiaries as are selected by the Committee; provided that incentive stock
options shall only be granted to employees of the Company, its parent, if any,
or of any of its subsidiaries. Stock purchase authorizations shall only be
granted to key employees and consultants of the Company.
6. DURATION OF THE PLAN. This Plan shall terminate on May 25, 2002,
unless terminated earlier pursuant to Paragraph 13 hereafter, and no options or
purchase authorizations may be granted thereafter.
7. RESTRICTIONS ON INCENTIVE STOCK OPTIONS. Incentive stock options
granted under this Plan shall be subject to the following restrictions:
(a) LIMITATION ON NUMBER OF SHARES. (i) With respect to incentive
stock options granted before January 1, 1987, the aggregate fair market value,
determined as of the date the incentive stock option is granted, of the shares
for which an employee may be granted options in any calendar year shall not
3
<PAGE> 23
exceed $100,000 plus any "unused limit carryovers," as that term was defined
under Section 422A(c)(4) of the Code (as in effect immediately prior to its
amendment by the Tax Reform Act of 1986), available in such year; or (ii) for
incentive stock options granted after December 31, 1986, the aggregate fair
market value, determined as of the date the incentive stock option is granted,
of the shares with respect to which incentive stock options are exercisable for
the first time by an employee during any calendar year shall not exceed
$100,000. In the event that such employee is eligible to participate in any
other stock incentive plans of the Company, its parent, if any, or a subsidiary
which are also intended to comply with the provisions of Section 422 of the
Code, such annual limitation shall apply to the aggregate number of shares for
which options may be granted under all such plans.
(b) 10% STOCKHOLDER. If any employee to whom an incentive stock
option is granted pursuant to the provisions of the Plan is on the date of the
grant the owner of stock (as determined under Section 424(d) of the Code)
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, its parent, if any, or subsidiaries, then the following
special provisions shall be applicable to the incentive stock option granted to
such employee:
(i) The option price per share subject to such incentive stock
option shall not be less than 110% of the fair market value of
one share on the date of grant; and
4
<PAGE> 24
(ii) The incentive stock option shall not have a term in excess of
five (5) years from the date of grant.
(c) EFFECT OF OTHER OUTSTANDING INCENTIVE OPTIONS. NO incentive
option granted before January 1, 1987 shall be exercisable by any participant
while there is "outstanding," within the meaning of former Section 422A(c)(7) of
the Code (as in effect immediately prior to the Tax Reform Act of 1986), any
incentive stock option which was granted to the participant before the granting
of the incentive stock option under this Plan and which permits the participant
to purchase stock in (i) the Company, (ii) a corporation which (at the time of
the granting of the incentive stock option under this Plan) is a parent or
subsidiary of the Company, or (iii) a predecessor corporation of any of such
corporations.
8. INDIVIDUAL PARTICIPANT LIMITATION. Any other provision of this
Plan notwithstanding, the number of shares of Common Stock for which options or
purchase authorizations may be granted in any single fiscal year of the Company
to any participant shall not exceed 50,000; provided, however, that in the case
of newly hired employees only, the Company may make a one-time option or
purchase authorization grant for up to an additional 350,000 shares (the
"Individual Limit"). For purposes of the foregoing limitation, if an option or
purchase authorization is cancelled, the cancelled option or purchase
authorization shall continue to be counted against the Individual Limit; if
after grant the exercise price of an option or purchase authorization is
5
<PAGE> 25
modified, the transaction shall be treated as the cancellation of the option or
purchase authorization. In any such case, both the option or purchase
authorization that is cancelled and the option or purchase authorization deemed
to be granted shall be counted against the Individual Limit.
9. TERMS AND CONDITIONS OF OPTIONS AND PURCHASE AUTHORIZATIONS. Options
and purchase authorizations granted under this Plan shall be evidenced by
agreements in such form and containing such terms and conditions as the
Committee shall determine; provided, however, that such agreements shall
evidence among their terms and conditions the following:
(a) PRICE. Subject to the condition of Paragraph 7(b), if applicable,
the purchase price per share of stock payable upon the exercise of each
incentive stock option granted hereunder shall be not less than 100% of the fair
market value of the stock on the day the option is granted. The purchase price
per share of stock payable on exercise of each non-statutory stock option or
purchase authorization shall be determined by the Committee. Fair market value
shall be determined in accordance with procedures to be established in good
faith by the Committee and, with regard to incentive stock options, in
conformity with regulations issued by the Internal Revenue Service with regard
to such incentive stock options.
(b) NUMBER OF SHARES. Subject to Paragraph 8, each option or purchase
authorization shall specify the number of shares to which it pertains.
6
<PAGE> 26
(c) EXERCISABILITY. Subject to Paragraph 7(c), each option shall be
exercisable for the full amount or for any part thereof and at such intervals or
in such installments as the Committee may determine at the time it grants such
option; provided, however, that no option shall be exercisable with respect to
any shares later than ten (10) years after the date of the grant of such option.
Each purchase authorization shall be immediately exercisable in full or in part
for such period as the Committee may determine at the time it grants such
purchase authorization; provided, however, that no purchase authorization shall
be exercisable with respect to any shares later than three (3) months after the
date of grant of such purchase authorization.
(d) NOTICE OF EXERCISE AND PAYMENT. An option or purchase
authorization shall be exercisable only by delivery of a written notice to the
Company's Treasurer or any other officer of the Company designated by the
Committee to accept such notices on its behalf, specifying the number of shares
for which it is exercised. If said shares are not at that time effectively
registered under the Securities Act of 1933, as amended, the participant shall
include with such notice a letter, in form and substance satisfactory to the
Company, confirming that the shares are being purchased for the participant's
own account for investment and not with a view to distribution. Payment shall be
made in full at the time of delivery to the participant of a certificate or
certificates covering the number of shares for
7
<PAGE> 27
which the option or purchase authorization was exercised. Payment shall be made
either by (i) cash or check, (ii) if permitted by the Committee, by delivery and
assignment to the Company of shares of Company stock, (iii) if permitted by the
Committee, by delivery to the Company or irrevocable instructions to a broker to
(a) either sell the shares subject to the option or purchase authorization being
exercised or hold such shares as collateral for a margin loan and (b) properly
deliver to the Company the amount of the sale or loan proceeds required to pay
the exercise price or purchase price, as the case may be, or (iv) by a
combination (i), (ii) and (iii). The value of the Company stock for such purpose
shall be its fair market value as of the date the option is exercised, as
determined in accordance with procedures to be established by the Committee.
Payment option (iii) shall not be available with respect to incentive stock
options granted prior to June 8, 1994.
(e) WITHHOLDING TAXES; DELIVERY OF SHARES. The Company's obligation
to deliver shares of Common Stock upon exercise of an option or purchase
authorization, in whole or in part, shall be subject to the participant's
satisfaction of all applicable federal, state and local income and employment
tax withholding obligations. The participant may satisfy the obligation, in
whole or in part, by electing to (1) have the Company withhold shares of Common
Stock or (2) deliver to the Company already-owned shares of Common Stock, having
a value equal to the amount required to be withheld; provided, however,
8
<PAGE> 28
that participants who are subject to the requirements of Section 16 of the
Securities Exchange Act of 1934 ("Section 16 Persons") shall not have the
benefit of the foregoing election but rather the Company shall, in all cases
where tax withholding is required with respect to such participants, withhold
shares of Common Stock having a value equal to such withholding obligations. The
value of shares to be withheld or delivered shall be based on the fair market
value of the shares on the date the amount of tax to be withheld is to be
determined (the "Tax Date"). The election by a participant who is not a Section
16 Person to have shares withheld for this purpose will be subject to the
following restrictions: (1) the election must be made prior to the Tax Date, (2)
the election must be irrevocable, and (3) the election will be subject to the
disapproval of the Committee.
(f) NON-TRANSFERABILITY. No option or purchase authorization shall be
transferable by a participant otherwise than by will or by the laws of descent
and distribution, and each option or purchase authorization shall be exercisable
during a participant's lifetime only by him.
(g) TERMINATION. Each option or purchase authorization shall
terminate and may no longer be exercised fifteen (15) days after the participant
ceases for any reason to perform services for the Company, its parent, if any,
or a subsidiary, except that, with respect to options (but not purchase
authorizations):
(i) if the participant ceases to perform services for any reason
other than cause, resignation or other voluntary action before
his eligibility to retire,
9
<PAGE> 29
disability or death, he may at any time within a period of three
(3) months after such cessation of services exercise his option
to the extent that the option was exercisable by him on the date
he ceased to perform services.
(ii) if the participant ceases to perform services because of
disability within the meaning of Section 22(e)(3) of the Code, he
may at any time within a period of one (1) year and one (1) day
(one (1) year in the case of incentive stock options) after such
cessation of services exercise his option to the extent that the
option was exercisable by him on the date he ceased to perform
services; and
(iii) if the participant ceases to perform services because of death,
the option, to the extent that the participant was entitled to
exercise it on the date of his death, may be exercised within a
period of one (1) year and one (1) day (one (1) year in the case
of incentive stock options) after the participant's death by the
person or persons to whom the participant's rights under the
option shall pass by will or by the laws of descent and
distribution;
and except that, with respect to purchase authorizations (but not options), such
purchase authorizations will remain exercisable for their stated term in the
event a participant ceases to perform services by reason of disability or death;
provided, however, that no option or purchase authorization may be exercised to
any extent by anyone after the date of its expiration. Notwithstanding the
provisions above in this Paragraph 9(g), the Committee may, in its sole
discretion, establish different terms and conditions pertaining to the effect of
a participant's termination of employment by the Company.
(h) RIGHTS AS SHAREHOLDER. The participant shall have no rights as a
shareholder with respect to any shares covered by his option or purchase
authorization until the date of issuance
10
<PAGE> 30
of a stock certificate to him for such shares.
10. STOCK DIVIDENDS; STOCK SPLITS; STOCK COMBINATIONS; RECAPITALIZATONS.
Appropriate adjustment shall be made in the maximum number of shares of Common
Stock subject to the Plan and in the number, kind, and option price of shares
covered by outstanding options granted hereunder to give effect to any stock
dividends, stock splits, stock combinations, recapitalizations and other similar
changes in the capital structure of the Company after the effective date of the
Plan.
11. MERGER; SALE OF ASSETS; DISSOLUTION. In the event of a change of the
Common Stock resulting from a merger of similar reorganization as to which the
Company is the surviving corporation, the number and kind of shares which
thereafter may be optioned and sold under the Plan and the number and kind of
shares then subject to options or purchase authorizations granted hereunder and
the price per share thereof shall be appropriately adjusted in such manner as
the Board may deem equitable to prevent substantial dilution or enlargement of
the rights available or granted hereunder. Except as otherwise determined by the
Board, a merger or a similar reorganization which the Company does not survive
or a sale of all or substantially all of the assets of the Company shall cause
every option and purchase authorization outstanding hereunder to terminate, to
the extent not then exercised, unless any surviving entity agrees to assume the
obligations hereunder.
11
<PAGE> 31
12. DEFINITIONS.
(a) The term "employee" shall have, for purposes of this Plan, the
meaning ascribed to it under Section 3401(c) of the Code and the regulations
promulgated thereunder; the term "key employees" means those executive,
administrative or managerial employees who are determined by the Committee to be
eligible for options under this Plan.
(b) The term "participant" means a key employee, consultant or
Director to whom an option or purchase authorization is granted under this Plan.
(c) The term "parent" shall have, for purposes of this Plan, the
meaning ascribed to it under Section 424(e) of the Code and the regulations
promulgated thereunder.
(d) The term "subsidiary" shall have, for purposes of this Plan, the
meaning ascribed to it under Section 424(f) of the Code and the regulations
promulgated thereunder.
13. TERMINATION OR AMENDMENT OF PLAN. The Board may at any time
terminate the Plan or make such changes in or additions to the Plan as it deems
advisable without further action on the part of the shareholders of the Company,
provided that:
(a) no such termination or amendment shall adversely affect or
impair any then outstanding option or purchase authorization without the consent
of the participant holding such option or purchase authorization;
(b) any such amendment which (i) increases the maximum number of
share subject to this Plan, (ii) changes the class of
12
<PAGE> 32
individuals eligible to participate in the Plan or (iii) materially increases
the benefits accruing to participants in the Plan shall be subject to approval
by shareholders of the Company within one (1) year from the effective date of
such amendment and shall be null and void if such approval is not obtained; and
(c) no such amendment shall be made that would cause the incentive
stock options granted hereunder to fail to qualify as incentive stock options
under the Code.
13
<PAGE> 33
MICROCOM, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
P ANNUAL MEETING OF STOCKHOLDERS - JULY 18, 1996
R
O The undersigned hereby acknowledge(s) receipt of the Notice and
X accompanying Proxy Statement, revoke(s) any prior proxies, and appoint(s)
Y Roland D. Pampel, Peter J. Minihane and William C. Rodgers, 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 18, 1996, 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 JUDGEMENT AS TO ANY OTHER MATTER.
-----------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-----------
<PAGE> 34
DETACH HERE MIC F
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
/ / Please mark
votes as in
this example.
FOR AGAINST ABSTAIN
1. To elect two Directors. 2. Approve an amendment to the / / / / / /
Director Nominees: John C. Rutherford and 1982 Stock Option and Stock
Michael I. Schneider Purchase Plan as adopted by
the Board of Directors.
FOR WITHHELD 3. Ratify the selection of Arthur / / / / / /
/ / / / Anderson LLP as independent
accountants.
/ /
---------------------------------------
For both nominees except as noted above MARK HERE
FOR ADDRESS / /
CHANGE AND
NOTE AT LEFT
Please sign exactly as your name appears hereon. Joint
Owners should each sign. If acting as attorney, executor,
trustee or in ay other representative capacity, sign name
and title.
Signature Date Signature Date
-------------------------- ----------- -------------------------- ------------
</TABLE>
