<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
PRONET INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 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:
------------------------------------------------------------------------
/X/ 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>
PRONET INC.
600 DATA DRIVE, SUITE 100
PLANO, TEXAS 75075
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 25, 1995
To the Stockholders of ProNet Inc.
Notice is hereby given that the Annual Meeting of Stockholders of ProNet
Inc., a Delaware corporation (the "Company"), will be held at the Westin Hotel,
Galleria Dallas, 13340 Dallas Parkway, Dallas, Texas, 75240, on Thursday, May
25, 1995, at 10:00 a.m., Dallas, Texas time, for the following purposes:
(a) To elect six directors to hold office until the next Annual Meeting
of Stockholders;
(b) To amend the Certificate of Incorporation to increase the number of
authorized shares of Common Stock, par value $.01 per share, from 10,000,000
shares to 20,000,000 shares and to increase the number of authorized shares
of Preferred Stock, par value $1.00 per share, from 1,000,000 to 5,000,000
shares;
(c) To consider and act upon a proposal to adopt the Company's 1995
Long-Term Incentive Plan and reserve 1,000,000 shares of the Company's
Common Stock for issuance thereunder; and
(d) To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.
The close of business on April 10, 1995, has been fixed by the Board of
Directors as the record date for the Annual Meeting. Only stockholders of record
on that date will be entitled to notice of and to vote at the Annual Meeting or
any adjournment(s) thereof, notwithstanding the transfer of any stock on the
books of the Company after such record date.
A Proxy Statement, Proxy Card and Annual Report on the Company's operations
during the fiscal year ended December 31, 1994, accompany this notice.
It is important that your shares be represented at the Annual Meeting.
Therefore, if you do not expect to attend in person, please sign and date the
enclosed Proxy Card and return it in the enclosed envelope. No postage is
required. If you attend the Annual Meeting, you will be entitled to vote in
person. In any event, a proxy may be revoked at any time before it is exercised.
By Order of the Board of Directors
MARK A. SOLLS
SECRETARY
Plano, Texas
April 25, 1995
<PAGE>
PRONET INC.
600 DATA DRIVE, SUITE 100
PLANO, TEXAS 75075
PROXY STATEMENT
SOLICITATION OF PROXIES
This Proxy Statement is furnished to stockholders of ProNet Inc., a Delaware
corporation (the "Company"), in connection with the solicitation of proxies by
the Board of Directors of the Company to be voted at the Annual Meeting of
Stockholders (the "Annual Meeting") of the Company to be held at the Westin
Hotel, Galleria Dallas, 13340 Dallas Parkway, Dallas, Texas, 75240, on Thursday,
May 25, 1995, at 10:00 a.m., Dallas, Texas time, or at any adjournment(s)
thereof, for the purposes set forth in the accompanying Notice of Annual Meeting
of Stockholders. The Board of Directors solicits your proxy on the enclosed
form.
The enclosed proxy is solicited by and on behalf of the Board of Directors
of the Company. The cost of the solicitation of proxies for this meeting,
including the cost of mailing, will be borne by the Company. In addition to the
solicitation of proxies by use of the mails, proxies also may be solicited by
personal interview, telecopy or telephone by directors, officers, employees and
agents of the Company, with no additional compensation to such persons. The
Company also may engage the service of others to solicit proxies in person or by
telephone or telecopy. The cost of all such additional solicitations, together
with the expenses of brokers who at the request of the Company mail proxy
material to their customers, will be borne by the Company.
The approximate date on which this Proxy Statement and the enclosed form of
proxy are first being sent to stockholders is April 25, 1995.
The record date for the determination of the stockholders entitled to notice
of and to vote at the Annual Meeting has been established by the Board of
Directors as the close of business on April 10, 1995. Only stockholders of
record at the close of business on that date will be entitled to vote at the
Annual Meeting, notwithstanding any subsequent transfer of any stock on the
books of the Company. As of April 10, 1995, the Company had issued and
outstanding and entitled to vote at the Annual Meeting 6,130,021 shares of
Common Stock, $.01 par value per share ("Common Stock").
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock of the Company entitled to vote is necessary
to constitute a quorum at the Annual Meeting. Except for the election of
directors, any matters to be voted on will be decided by a majority of the
shares represented and voting in person or by proxy. Directors will be elected
by a plurality of the votes of the shares represented voting in person or by
proxy. With respect to the election of directors, votes may be cast in favor or
withheld. A holder of Common Stock will be entitled to one vote per share on
each matter properly brought before the Annual Meeting. Cumulative voting is not
permitted in the election of directors.
Brokers who hold shares in street name for customers are required to vote
those shares in accordance with instructions received from the beneficial
owners. In addition, brokers are entitled to vote on certain "discretionary
items" even when they have not received instructions from beneficial owners.
Brokers are not permitted to vote (a "broker non-vote") for other
"non-discretionary" items without specific instructions from the beneficial
owners. Broker non-votes on non-discretionary items will be treated as shares as
to which voting power has been withheld by the beneficial owner and, therefore,
as shares not entitled to vote on the item as to which there is a broker
non-vote. Any stockholder giving the proxy enclosed with this Proxy Statement
has the power to revoke such proxy at any time prior to the exercise thereof by
giving written notice of such revocation to the Company at or prior to the
Annual Meeting, by executing and submitting a proxy bearing a later date or by
attending the Annual Meeting and voting in person the shares of stock such
stockholder is entitled to vote.
<PAGE>
Proxies in the accompanying form, if properly executed and returned, will be
voted at the Annual Meeting in accordance with the instructions thereon. Any
proxy upon which no instructions have been indicated with respect to any of the
following matters will be voted as follows: (i) "FOR" the election of the six
persons named in this Proxy Statement as the Board of Directors' nominees for
election to the Board of Directors; (ii) "FOR" the amendment of the Certificate
of Incorporation to increase the number of authorized shares of Common Stock
from 10,000,000 shares to 20,000,000 shares and to increase the number of
authorized shares of preferred stock, par value $1.00 per share ("Preferred
Stock"), from 1,000,000 shares to 5,000,000 shares; (iii) "FOR" the adoption of
the Company's 1995 Long-Term Incentive Plan and to reserve 1,000,000 shares of
the Company's Common Stock for issuance thereunder; and (iv) in accordance with
the discretion of the holders of such proxies with respect to any other business
that properly comes before the stockholders at the Annual Meeting or any
adjournment(s) thereof. The Board of Directors knows of no matters, other than
those stated above, to be presented for consideration at the Annual Meeting. If,
however, other matters properly come before the Annual Meeting, it is the
intention of the persons named in the accompanying proxy to vote such proxy in
accordance with their judgment on any such matters. The persons named in the
accompanying proxy may also, if it is deemed to be advisable, vote such proxy to
adjourn the Annual Meeting from time to time.
STOCK OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of April 10, 1995,
regarding the amount and nature of the beneficial ownership of the Company's
Common Stock by (i) each person known to the Company to be the beneficial owner
of more than five percent of the outstanding shares of Common Stock, (ii) each
of its directors and nominees for director, (iii) each executive officer of the
Company named in the Summary Compensation Table below and (iv) all of the
Company's directors and executive officers as a group. Except as otherwise
noted, the persons named in the table have sole voting and investment power in
the shares of Common Stock shown as beneficially owned by such persons.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
AS OF
APRIL 10, 1995
-------------------------------
NUMBER OF PERCENT OF
SHARES OF OUTSTANDING
NAME OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------------------------------------------ -------------- ---------------
<S> <C> <C>
DIRECTORS AND OFFICERS:
Bo Bernard (1)........................................................ 135,136 2.18%
Thomas V. Bruns (2)................................................... 7,500 *
Harvey B. Cash (3).................................................... 108,341 1.77
Jan E. Gaulding (4)................................................... 91,260 1.48
Edward E. Jungerman (2)............................................... 7,500 *
Jackie R. Kimzey (5).................................................. 206,061 3.31
Mark C. Masur (6)..................................................... 25,000 *
Jeffery A. Owens (7).................................................. 68,026 1.10
David J. Vucina (2)................................................... 110,132 1.76
All directors and executive officers as a group (10 persons) (8)...... 758,956 11.51
<FN>
- ------------------------
* REPRESENTS LESS THAN 1% OF THE SHARES OUTSTANDING
(1) Includes 60,500 shares subject to currently exercisable options or options
exercisable within 60 days after the date of this Proxy Statement.
(2) Represents shares subject to currently exercisable options.
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
(3) Includes 7,500 shares subject to currently exercisable options and 79,091
shares beneficially owned by Berry Cash Southwest Partnership, of which Mr.
Cash is a general partner. Mr. Cash shares voting and investment power in
the shares beneficially owned by such partnership.
(4) Includes 51,500 shares subject to currently exercisable options or options
exercisable within 60 days after the date of this Proxy Statement.
(5) Includes 101,354 shares subject to currently exercisable options or options
exercisable within 60 days after the date of this Proxy Statement, and
61,000 shares beneficially owned by Mr. Kimzey's children.
(6) Includes 7,500 shares subject to currently exercisable options and 10,000
shares beneficially owned by Silver Creek Fund of which Mr. Masur is the
sole general partner. Mr. Masur has sole voting and investment power in the
shares beneficially owned by such partnership.
(7) Includes 51,300 shares subject to currently exercisable options or options
exercisable within 60 days after the date of this Proxy Statement.
(8) Includes 404,786 shares subject to currently exercisable options or options
exercisable within 60 days after the date of this Proxy Statement.
</TABLE>
Section 16(a) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and beneficial
owners of more than ten percent of the Company's Common Stock, to file with the
SEC and the National Association of Securities Dealers, Inc. reports of
ownership and changes in ownership of the Company's Common Stock. Copies of such
reports are required to be furnished to the Company. Based solely on its review
of the copies of such reports furnished to the Company, or written
representations that no reports were required, the Company believes that each of
such persons complied with all applicable Section 16(a) filing requirements
during 1994.
ELECTION OF DIRECTORS
Six directors are to be elected at the Annual Meeting to serve until the
next Annual Meeting of Stockholders or until their successors are elected and
qualified.
Votes authorized by the enclosed proxy will be cast for the six persons
named below. If any of such persons are unavailable for election at the date of
the Annual Meeting, the stock represented by proxy will be voted for such
nominees as the Board of Directors shall designate. There is no family
relationship between or among any director, executive officer or person
nominated or chosen to become a director or executive officer of the Company.
Management at this time has no reason to believe that any of the nominees will
be unavailable for election.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED
BELOW.
Thomas V. Bruns, age 62, has been a director of the Company since May 1991.
Mr. Bruns has been Chairman of the Board of Zaun Equipment Company, a power
equipment distributor, since 1986.
Harvey B. Cash, age 56, has been a director of the Company since 1982. Mr.
Cash was Chairman of the Board of the Company from 1982 until March 1990. Mr.
Cash is currently general partner of Berry Cash Southwest Partnership, a venture
capital fund. Mr. Cash is a director of Convex Computer Corporation, a computer
hardware manufacturer; Aurora Electronics, Inc., an electronics maintenance
service company; Cirrus Logic, Inc., a semiconductor manufacturer; and Cyrix
Corporation, a semiconductor manufacturer.
Edward E. Jungerman, age 52, has been a director of the Company since May
1992. Mr. Jungerman has been President of Impulse Telecommunications
Corporation, a strategic telecommunications consulting firm, since 1986. He has
over 25 years experience in the telecommunications field, including senior
executive positions at Northern Telecom, Inc. and private, start-up ventures in
the specialized advanced telecommunications services field.
3
<PAGE>
Jackie R. Kimzey, age 42, is a founder of the Company and has been a
director of the Company since 1983. Mr. Kimzey has been Chairman of the Board of
the Company since March 1990 and Chief Executive Officer of the Company since
May 1983. Mr. Kimzey served as President of the Company from May 1983 until May
1991.
Mark C. Masur, age 41, has been a director of the Company since 1984. Mr.
Masur co-founded and since September 1988 has been a general partner of
O'Donnell & Masur, a venture capital partnership. Mr. Masur served in various
management capacities for InterFirst Venture Corporation in Dallas, Texas and
its successor entities from 1982 until September 1988.
David J. Vucina, age 41, joined the Company in August 1988 and has been a
director of the Company since 1994. Mr. Vucina served as Executive Vice
President of the Company and President and Chief Operating Officer of ProNet
Medical Communications, the Company's medical communications division, until May
1991, at which time he was elected President and Chief Operating Officer of the
Company.
RELATED TRANSACTIONS
Since March 1992, upon management's request, Impulse Telecommunications
Corporation ("Impulse") has provided consulting services in the area of personal
communications services to the Company. Mr. Jungerman is the President of, and
owns a controlling interest in, Impulse. During the last fiscal year, the
Company paid Impulse approximately $6,600 for these consulting services, an
amount which management believes is fair and reasonable and as favorable to the
Company as could have been obtained from a wholly unrelated party.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held seven meetings in 1994. Each director attended
at least 75% of the aggregate of (i) the total number of meetings held by the
Board of Directors and (ii) the total number of meetings held by all committees
of the Board of Directors on which he served.
The Board of Directors has a Compensation Committee that in 1994 consisted
of Messrs. Bruns, Cash, Jungerman, and Masur. The Compensation Committee makes
recommendations to the Board of Directors concerning compensation policies and
salaries of executive officers. The Compensation Committee also administers the
Company's 1987 Stock Option Plan, the 1994 Employee Stock Purchase Plan, and
upon approval by the stockholders, the 1995 Long-Term Incentive Plan. The
Compensation Committee met once during 1994.
The Board of Directors has an Audit Committee that in 1994 consisted of
Messrs. Cash, Bruns and Masur. The Audit Committee consults with the Company's
independent auditors and with personnel from the Company's financial department
on corporate accounting and financial reporting matters. The Audit Committee
also makes recommendations to the Board of Directors regarding the appointment
of independent auditors to serve as auditors for the Company. The Audit
Committee met once in 1994.
The Board of Directors does not have a nominating committee.
The Company currently has a policy whereby each non-employee director
receives a $2,000 annual retainer and $500 for each Board meeting attended. All
directors of the Company are reimbursed for traveling costs and other
out-of-pocket expenses incurred in attending meetings of the Board of Directors.
On May 22, 1991, the Company granted to Mr. Bruns, as a newly elected
non-employee director, an option to purchase 7,500 shares of Common Stock at an
exercise price equal to the closing price of the Common Stock as quoted on the
NASDAQ National Market System on May 22, 1991. On July 2, 1991, the Company
adopted a Non-Employee Director Stock Option Plan which provides for a one-time
grant of an option to purchase 7,500 shares of Common Stock of the Company to
each non-employee director of the Company who at the time of adoption previously
had not received a stock
4
<PAGE>
option grant (Messrs. Cash and Masur), and to any subsequent outside director
who is elected and begins serving on the Company's Board of Directors on or
before July 1, 2001 (Mr. Jungerman). Options granted under this plan may be
exercised after the director has completed six months of service as a member of
the Board after the date on which the director was granted the option. The
exercise price of each option granted under this plan on the effective date of
the plan (July 2, 1991) was the closing price of the Company's Common Stock as
quoted on the NASDAQ National Market System on such effective date, and the
exercise price of subsequently granted options is the closing price of the
Company's Common Stock as quoted on the NASDAQ National Market System as of the
date the grantee is elected to the Company's Board of Directors.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME OFFICE CURRENTLY HELD
- ------------------------------------------- ---------------------------------------------
<S> <C>
Jackie R. Kimzey........................... Chairman of the Board and Chief Executive
Officer
David J. Vucina............................ President, Chief Operating Officer and
Director
Bo Bernard................................. Executive Vice President
Jan E. Gaulding............................ Senior Vice President, Treasurer and Chief
Financial Officer
Mark A. Solls.............................. Vice President, Secretary and General Counsel
Jeffery A. Owens........................... Vice President - Engineering
</TABLE>
Mr. Kimzey is currently a director of the Company. See "Election of
Directors" above for additional information regarding Mr. Kimzey.
Mr. Vucina is currently a director of the Company. See "Election of
Directors" above for additional information regarding Mr. Vucina.
Mr. Bernard, age 49, is a founder of the Company. He served as Senior Vice
President of the Company from May 1983 until July 1991. In July 1991, he was
elected Executive Vice President of the Company. Mr. Bernard is responsible for
all marketing activities for the Company.
Ms. Gaulding, age 40, joined the Company in March 1984 and served as Vice
President - Finance, Treasurer and Chief Financial Officer until January 1994 at
which time she was elected Senior Vice President, Treasurer and Chief Financial
Officer of the Company. Ms. Gaulding served as Secretary of the Company from
February 1986 until December 1994. As Chief Financial Officer, Ms. Gaulding has
primary responsibility for the Company's financial, treasury, accounting and
information systems functions.
Mr. Solls, age 38, joined the Company in December 1994 as Vice President,
Secretary and General Counsel. From February 1993 until joining the Company, Mr.
Solls engaged in the private practice of law. From November 1990 until February
1993, Mr. Solls served as Senior Vice President, Secretary and General Counsel
of Maxum Health Corp., a provider of medical diagnostic services. From 1988 to
1990, he served as Associate General Counsel for Republic Health Corporation
(since renamed OrNda Health Corp.), a hospital management company.
Mr. Owens, age 41, joined the Company in May 1984 as Vice President -
Engineering. Prior to joining the Company, Mr. Owens was a communications system
engineer and engineering manager for Motorola Communications and Electronics,
Inc. Mr. Owens is responsible for the Company's system engineering and
installation operations.
5
<PAGE>
Officers are appointed by the Board of Directors and serve until their
resignation or their respective successors are appointed and qualified by the
Board of Directors.
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
compensation of the Company's Chief Executive Officer and the Company's four
most highly compensated executive officers other than the Chief Executive
Officer (the "Named Executives"), as well as the total compensation earned by
each such individual for the last three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS- ALL OTHER
COMPENSATION OPTIONS (1) COMPENSATION
------------------------ ------------- -------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (#) (2)
- ------------------------------------------------- --------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Jackie R. Kimzey................................. 1994 $ 191,435 $ 92,736 70,000 $ 15,708
Chief Executive Officer 1993 178,440 86,722 50,000 12,686
1992 170,100 42,525 -- 12,686
David J. Vucina.................................. 1994 149,511 108,675 70,000 8,290
President 1993 138,276 106,520 50,000 6,143
1992 131,436 52,574 -- 6,143
Bo Bernard....................................... 1994 114,708 55,545 30,000 4,847
Executive Vice President 1993 108,000 40,594 15,000 3,937
1992 102,372 17,150 -- 3,937
Jan E. Gaulding.................................. 1994 94,704 30,590 50,000 3,607
Senior Vice President 1993 87,900 23,484 10,000 3,248
1992 83,712 13,818 -- 3,248
Jeffery A. Owens................................. 1994 91,781 22,218 35,000 4,435
Vice President - Engineering 1993 86,736 10,117 10,000 4,106
1992 83,160 5,000 -- 4,106
<FN>
- ------------------------
(1) Options to acquire shares of Common Stock.
(2) Amount represents premiums paid by the Company for disability insurance and
compensatory split-dollar life insurance including the portion attributable
to term life insurance (less than $1,000 for each Named Executive) that is
taxable compensation to the Named Executive.
</TABLE>
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes options to acquire shares of Common Stock
granted to the Named Executives during 1994.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SHARE) DATE 5% 10%
- ---------------------------- --------------- ------------ ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Jackie R. Kimzey............ 20,000 5.10% $ 11.00 2/28/1999 $ 60,720 $ 134,420
50,000 12.66 13.50 12/06/1999 186,300 412,425
David J. Vucina............. 20,000 5.10 11.00 2/28/1999 60,720 134,420
50,000 12.66 13.50 12/06/1999 186,300 412,425
Bo Bernard.................. 15,000 3.80 11.00 2/28/1999 45,540 100,815
15,000 3.80 13.50 12/06/1999 55,890 123,727
Jan E. Gaulding............. 15,000 3.80 11.00 2/28/1999 45,540 100,815
35,000 8.86 13.50 12/06/1999 130,410 288,697
Jeffery A. Owens............ 15,000 3.80 11.00 2/28/1999 45,540 100,815
20,000 5.10 13.50 12/06/1999 74,520 164,970
<FN>
- ------------------------
(1) All options were granted pursuant to the 1987 Incentive Stock Option Plan.
The exercise price represents the fair market value of the stock on the
date of grant. The options have a term of five years and vest in 20%
cumulative annual increments over that period beginning with the first
anniversary date of the grant, or if earlier, 100% upon a change in control
of the Company.
(2) The potential realizable value portion of the table illustrates the values
that might be realized upon exercise of the options immediately prior to
the expiration of their term, assuming the specified compounded rates of
appreciation to the Company's Common Stock over the term of the options.
The prices of Common Stock at the end of the five year term of the options
would be $14.04 and $17.23, respectively, assuming 5% annual appreciation
and would be $17.72 and $21.75, respectively, assuming 10% annual
appreciation. These amounts represent assumed rates of appreciation only.
Actual gains, if any, on stock option exercises depend on the future
performance of the Common Stock and overall market conditions. There can be
no assurances that the potential values set forth in this table reflect the
actual values that may be obtained by any of the Named Executives.
</TABLE>
7
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table summarizes options exercised during 1994 and presents
the value of unexercised options held by the Named Executives at fiscal
year-end:
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
VALUE AT FISCAL YEAR-END (#) AT FISCAL YEAR-END (1)
SHARES ACQUIRED REALIZED -------------------------- --------------------------
NAME ON EXERCISE (#) (2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jackie R. Kimzey........... -- -- 112,168 114,000 $ 914,052 $ 497,500
David J. Vucina............ 100 $ 800 103,732 120,500 843,635 547,813
Bo Bernard................. -- -- 57,500 45,000 524,687 193,125
Jan E. Gaulding............ 10,000 120,000 48,500 59,000 416,562 164,375
Jeffery A. Owens........... -- -- 48,300 45,200 461,612 160,325
<FN>
- ------------------------
(1) The last sales price of Common Stock as reported on the NASDAQ National
Market System on December 30, 1994, the last trading day of 1994, was
$14.50. Value is calculated on the basis of the remainder of $14.50 minus
the exercise price multiplied by the number of shares of Common Stock
underlying the option.
(2) Value is calculated based on the remainder of the closing market price of
Common Stock on the date of the exercise minus the exercise price
multiplied by the number of shares to which the exercise relates.
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1994, the Compensation Committee was composed of Messrs. Bruns, Cash,
Jungerman and Masur. See "Meetings and Committees of the Board of Directors." No
member of the Compensation Committee is an officer of the Company. Since March
1992, upon management's request, Impulse has provided consulting services in the
area of personal communications technologies and services to the Company. Mr.
Jungerman is the President and owns a controlling interest in Impulse. During
the last fiscal year, the Company paid Impulse approximately $6,600 for these
consulting services.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors has provided the
following report:
GENERAL
Executive compensation for 1994 reflected a successful year for the Company.
Executive total compensation levels were above initial compensation targets
which mirrored the Company's performance in 1994.
Because of the capital intensive nature of the paging industry, the
financial performance measurement generally used by the investment community is
earnings before other income (expense), income taxes, depreciation and
amortization ("EBITDA"). The Company's EBITDA increased 59% from 1993 to 1994
compared to an increase of 25% from 1992 to 1993. In addition, net revenue for
the Company increased 63% from 1993 to 1994 compared to an increase of 15% from
1992 to 1993. These increases in the Company's financial performance are a
direct result of the implementation of the Company's growth strategy as
discussed below.
In early 1993, after several months of study, the Company announced its
plans to accelerate the Company's growth through a program of acquiring smaller
paging businesses that serve the broader commercial paging marketplace. In 1994,
the Company completed the acquisitions of four paging operations for a total
purchase price of $37.5 million. These transactions increased the Company's
subscriber base by 180,000 and, along with internal growth, increased the total
number of paging subscribers to approximately 354,000 subscribers at the end of
1994, almost a three-fold increase over the paging subscriber base of 130,000 at
the end of 1993. An EBITDA margin in 1994 of 36%,
8
<PAGE>
consistent with the Company's 1993 performance, indicates that management has
effectively and efficiently integrated the acquired companies into the Company's
new decentralized operating organization.
By the end of 1994, in addition to the completed transactions, the Company
had signed letters of intent or agreements to purchase four additional paging
operations having approximately 231,200 subscribers for a total purchase price
of $42.5 million. To date in 1995, the Company has signed letters of intent to
purchase five additional paging operations having approximately 114,000
subscribers for a total purchase price of $27.5 million. Two of these nine
transactions have been completed to date in 1995.
As indicated in the enclosed Stock Performance Graph, the cumulative total
stockholder return (assuming reinvestment of dividends) to the Company's
stockholders also shows a marked improvement from 1993. The index level for the
Company increased from $204.00 for 1993 to $232.00 for 1994, a 14% increase
compared to index levels for the Company's industry peer group of $195.56 in
1993 and $182.92 in 1994, a 6% decrease.
EXECUTIVE COMPENSATION POLICY
The Company's overall compensation philosophy is as follows:
* Attract and retain quality talent, which is critical to both the
short-term and long-term success of the Company.
* Reinforce strategic performance objectives through the use of both annual
and long-term incentive compensation programs.
* Create a mutuality of interest between executive officers and
stockholders through compensation structures that share the rewards and
risks of strategic decision making.
* Require executives to achieve levels of ownership of stock in the Company
that will align the executives' interests with those of the stockholders.
BASE COMPENSATION
The Compensation Committee of the Board of Directors annually examines
market compensation levels and trends observed in the labor market. For its
purposes, the Committee has defined the labor market as the pool of executives
who are currently employed in similar positions in public companies with similar
sales, with special emphasis placed on salaries paid by other companies in the
paging industry. Market information is used as a frame of reference for annual
salary adjustments and starting salaries. Salaries may also be adjusted for
increased responsibilities or improved performance.
The Committee makes salary decisions in a structured annual review with
input from the Chief Executive Officer ("CEO"). This annual review considers the
decision-making responsibilities of each position and the experience, work
performance and team-building skills of position incumbents. The Committee
places equal weight on work performance and team-building skills. The average
base salaries for the four executive officers (excluding the CEO) which appear
in the summary compensation table increased 7% in 1994.
ANNUAL INCENTIVE COMPENSATION
Annual incentive levels for executive officers are determined by the
Compensation Committee of the Board of Directors and range from 15% to 45% of
base salaries with maximum payout at two times the stated percentage. The annual
incentive level for the CEO is 30% and the average annual incentive level for
the four executive officers (excluding the CEO) which appear in the summary
compensation table was 28% of the related base salaries. These levels are
intended to contribute to management's dedication to achieve significant
improvements in the Company's long-term financial performance. Management
believes that over time, maximizing growth as evidenced by increased net
revenues and EBITDA contributes to stockholder return through increased stock
price. All executive officers have
9
<PAGE>
annual incentives based on these two financial measures. The equally weighted
financial measures of net revenues and EBITDA are set in November of the
preceding fiscal year by the Committee with input from the CEO.
The average annual incentive earned in 1994 by the four executive officers
(other than the CEO) which appear in the summary compensation table was 48% of
their base salaries. The increase in the incentive earned over the annual
incentive level is directly related to the improvement in Company net revenues
and EBITDA over the goals set by the Committee.
LONG-TERM INCENTIVE COMPENSATION
Long-term incentives for executive officers are provided through grants of
stock options under the Company's stock option plans. Stock options are intended
to attract, retain and motivate executive officers by providing them with an
equity participation in the Company, which further provides them with an
incentive to maximize stockholder value. Stock options are granted based on
competitive practice and position level, are priced at the prevailing market
value and will only have value if the Company's stock price increases. The
option program utilizes vesting periods of four and five years. Further, all
options shall vest automatically upon a change in control of the Company.
CEO COMPENSATION
Mr. Kimzey's base salary increased in 1994 by 7% and his annual incentive
award was 48% of his base salary. The increase in the incentive earned over the
annual incentive level is directly related to the improvement in Company net
revenues and EBITDA over the goals set by the Committee.
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
The CEO and President of the Company have entered into Employment Agreements
with the Company. These agreements specify the terms of employment, including
the duties and certain restrictions and the compensation and benefits of such
executives. The Employment Agreements state that if the executive's employment
is terminated by the Company without cause or by the executive for good reason
(as defined in the Employment Agreements) prior to a change in control of the
Company, the executive shall be paid a lump sum in cash equal to his full annual
base salary and his bonus paid in the prior fiscal year, as well as certain
benefits. If the executive's employment is terminated by the Company without
cause or by the executive for good reason after a change in control of the
Company, the executive shall be paid a lump sum in cash equal to two (2) times
his annual base salary and his bonus paid for the prior fiscal year, as well as
certain benefits. The Company has also entered into Change In Control Agreements
with the remaining three (3) named executive officers. The Change In Control
Agreements provide for a payment of a lump sum in cash equal to the executive's
annual base salary and bonus paid for the prior fiscal year (as well as certain
benefits), payable to such executive in the event of a termination of employment
without cause by the Company or by the executive for good reason (as defined in
the Change In Control Agreement) after a change in control of the Company. The
Employment Agreements and Change In Control Agreements also provide that an
executive whose employment has terminated shall keep certain information
confidential and shall not compete with the Company or its subsidiaries for one
year following termination of employment.
SUMMARY
The Committee believes the executive compensation policies and programs
described in this Report serve the interests of the stockholders and the
Company. Pay delivered to executives is intended to be linked to, and
commensurate with, Company performance and with stockholder expectations. We
will continue to monitor the effectiveness and appropriateness of each of the
components to reflect changes in the business environment.
<TABLE>
<S> <C>
Harvey B. Cash, Thomas V. Bruns, MEMBER
CHAIRMAN OF THE Edward E. Jungerman, MEMBER
COMPENSATION COMMITTEE Mark C. Masur, MEMBER
</TABLE>
10
<PAGE>
CORPORATE PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's Common Stock, with the
cumulative total return of the NASDAQ Stock Market (U.S. Companies) Index and an
index of peer companies selected by the Company for the period beginning
December 29, 1989, and ending December 30, 1994. The comparison assumes $100 was
invested on December 29, 1989, in the Company's Common Stock and in each of the
foregoing indices and assumes reinvestment of dividends. The peer group index
consists of: A+ Communications, Inc., Arch Communications Group, Inc., Dial
Page, Inc., Metrocall, Inc., Mobile Telecommunications Technologies Corp., Page
America Group, Inc., Paging Network, Inc. and U.S. Paging Corporation. For
purposes of the peer group index, the returns of the component issuers were
weighted according to each issuer's stock market capitalization.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PRONET INC. PEER GROUP NASDAQ U.S.
<S> <C> <C> <C>
12/29/89 100.00 100.00 100.00
12/31/90 82.00 77.14 84.92
12/31/91 128.00 89.57 136.26
12/31/92 118.00 121.53 158.57
12/31/93 204.00 195.56 180.93
12/30/94 232.00 182.92 176.91
</TABLE>
LEGEND
<TABLE>
<CAPTION>
INDEX DESCRIPTION 12/29/89 12/31/90 12/31/91 12/31/92 12/31/93 12/30/94
- ------------------------------------------------- --------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PRONET INC....................................... $ 100.00 $ 82.00 $ 128.00 $ 118.00 $ 204.00 $ 232.00
PEER GROUP....................................... 100.00 77.14 89.57 121.53 195.56 182.92
NASDAQ Stock Market (U.S. Companies)............. 100.00 84.92 136.26 158.57 180.93 176.91
Notes:
<FN>
- --------------------------
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
C. The index level for all series was set to 100.00 on 12/29/89.
</TABLE>
11
<PAGE>
PROPOSAL TO AMEND THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK AND PREFERRED STOCK
The Company's Restated Certificate of Incorporation (the "Certificate of
Incorporation") presently authorizes the issuance of a total of 11,000,000
shares of all stock, of which 1,000,000 shares may be Preferred Stock and
10,000,000 shares may be Common Stock. No Preferred Stock is currently issued
and outstanding. It is proposed that the Certificate of Incorporation be amended
to increase the total number of authorized shares of all classes to 25,000,000
shares of which 5,000,000 may be shares of Preferred Stock, and 20,000,000 may
be shares of Common Stock.
The terms of the Preferred Stock to be authorized pursuant to the proposed
amendment to the Certificate of Incorporation including dividend or interest
rates, conversion prices, voting rights, redemption prices, maturity dates, and
similar matters will be determined by the Board of Directors. The Common Stock
to be authorized pursuant to the proposal amendment to the Certificate of
Incorporation will not have preemptive rights.
No specific transaction is contemplated which would result in the issuance,
after amendment of the Certificate of Incorporation, of any of the additional
shares of stock authorized thereby. However, the Board of Directors believes
that it would be advantageous to the Company to have such additional shares
available for issuance to meet possible future development and financing
requirements, without the expense and delay of calling a special meeting of the
stockholders to secure authorization each time a specific need arises. Among the
purposes for which such additional authorized but unissued shares of stock could
be used would be the acquisition of desirable properties or businesses and the
raising of funds for general corporate requirements.
If this proposal is adopted, the authorized but unissued shares of Common
Stock and Preferred Stock could be issued in the discretion of the Board of
Directors for any corporate purpose without further action by the stockholders.
It is therefore proposed that the stockholders approve an amendment to the
Certificate of Incorporation increasing the number of shares of all classes of
stock which the Company shall have authority to issue from 11,000,000 to
25,000,000, increasing the number of authorized shares of Common Stock from
10,000,000 to 20,000,000, and increasing the number of authorized shares of
Preferred Stock from 1,000,000 to 5,000,000.
The affirmative vote of the holder of a majority of the outstanding shares
of Common Stock is required for this amendment to the Certificate of
Incorporation.
Unless instructed otherwise, it is the intention of the persons named in the
accompanying form of proxy to vote shares represented by properly executed
proxies in favor of the amendment to the Certificate of Incorporation to
increase the number of authorized shares of Common Stock and Preferred Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL TO ADOPT THE COMPANY'S 1995 LONG-TERM INCENTIVE PLAN
AND TO RESERVE 1,000,000 SHARES OF THE COMPANY'S COMMON STOCK
FOR ISSUANCE THEREUNDER
On March 30, 1995, the Board of Directors adopted the Company's 1995
Long-Term Incentive Plan (the "Incentive Plan"), subject to approval and
ratification at the Annual Meeting by the holders of at least a majority of the
Company's outstanding Common Stock present in person or represented by proxy at
the Annual Meeting. Additionally, the Board of Directors voted to reserve
1,000,000 shares to be available for issuance under the Incentive Plan. The
Company believes that the Incentive Plan
12
<PAGE>
will contribute to the Company's ability to attract and retain Directors, as
well as valued key employees, and will strengthen such persons' incentive to
achieve the objectives of the Company's stockholders.
The following summary of the Incentive Plan is qualified in its entirety by
the full text of the Incentive Plan, a copy of which is attached hereto as
Appendix A. What follows is a brief description of the material provisions of
the Incentive Plan.
TYPES OF AWARDS. The types of awards that may be granted under the
Incentive Plan include
(i) incentive stock options ("Incentive Stock Options"), as defined in Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), (ii) stock
options other than Incentive Stock Options ("Non-qualified Stock Options" and,
together with Incentive Stock Options, "Stock Options"), (iii) stock
appreciation rights, and (iv) restricted stock ("Restricted Stock")
(collectively, "Awards").
ADMINISTRATION OF PLAN. The Incentive Plan will be administered by a
Committee appointed by the Board of Directors (the "Committee"). The Committee
will consist of two or more directors who will be eligible to receive certain
Awards (other than Incentive Stock Options) under the Incentive Plan.
Under the Incentive Plan, the Committee will have wide discretion and
flexibility, thus enabling the Committee to administer the Incentive Plan in the
manner that it determines, from time to time, is in the best interest of the
Company. The Committee also will have authority to interpret the Incentive Plan,
to determine the terms and provisions of Awards, and to make all other
determinations necessary or advisable for Plan administration.
SHARES OF COMMON STOCK SUBJECT TO THE INCENTIVE PLAN. Subject to certain
exceptions set forth in the Incentive Plan, the aggregate number of shares of
the Company's Common Stock that may be the subject of Awards under the Incentive
Plan is 1,000,000. Awards to which such shares of Common Stock relate may be
awarded (subject to previous grants of Awards and options granted to non-
employee directors as described below) to any one eligible participant or
allocated among the eligible participants, as determined by the Committee.
ELIGIBILITY. Employees eligible to participate in the Incentive Plan will
be designated by the Committee and will be chosen from among those employees
determined to be Key Employees. "Key Employees" are those employees of the
Company and its subsidiaries determined by the Committee to have a direct and
significant impact on the performance of the Company. The Company's executive
officers are among the employees who would be eligible to receive Awards under
the Incentive Plan. In addition, the Incentive Plan provides for automatic
annual grants of Non-qualified Stock Options to purchase 2,500 shares of Common
Stock to each non-employee director. The exercise price of each such director
option will be the fair market value per share of Common Stock on the date of
grant.
TERMS AND CONDITIONS OF STOCK OPTIONS. The purchase price of Common Stock
under each Non-qualified Stock Option (other than automatic grants to the
Company's non-employee directors) will be determined by the Committee; provided,
however, that the exercise price for Common Stock subject to an Incentive Stock
Option will not be less than the greater of the par value or 100% of the fair
market value of the Common Stock on the date of grant of such Incentive Stock
Option. The purchase price of Common Stock under a Non-qualified Stock Option
(other than automatic grants to the Company's non-employee directors) will be at
least equal to the par value of the Common Stock on the date of grant, but may
be less than the fair market value of the Common Stock on the date of grant. The
aggregate fair market value (determined at the time an Incentive Stock Option is
granted) of the Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by an employee during any calendar year (under
all stock option plans of the Company) will not exceed $100,000, or such other
amount as may be prescribed under the Code or applicable regulations and rulings
from time to time.
13
<PAGE>
Except for Non-qualified Stock Options granted to non-employee directors,
Stock Options may be exercised as determined by the Committee, but in no event
later than ten years from the date of grant in the case of Incentive Stock
Options.
Upon the exercise of a Stock Option, the participant must pay the purchase
price in full either in cash, a cash equivalent acceptable to the Committee, or
a combination of cash and its equivalent acceptable to the Committee. The
purchase price may be paid, with the approval of the Committee, by assigning and
delivering to the Company shares of Common Stock or a combination of cash and
such shares equal in value to the exercise price. In addition, at the request of
a participant and to the extent permitted by applicable law, the Committee may
approve arrangements with a brokerage firm under which such brokerage firm, on
behalf of the participant, will pay the exercise price of the stock options
being exercised to the Company and the Company will promptly deliver to such
firm the shares exercised.
TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS. A Stock Appreciation
Right ("SAR") may be granted either in tandem with or independent of a Stock
Option. A SAR is the right to receive an amount equal to the excess of the fair
market value of a share of the Company's Common Stock on the date of exercise
over the fair market value of a share of Common Stock on the date of grant (in
the case of SARs granted independent of a Stock Option) or the exercise price of
the related Stock Option (in the case of a SAR granted in tandem with a Stock
Option).
A SAR granted in tandem with a Stock Option will require the holder, upon
exercise, to surrender the related Stock Option or any portion thereof to the
extent unexercised, with respect to the number of shares as to which such SAR is
exercised, and to receive payment as described above. The surrendered Stock
Option will then cease to be exercisable. A tandem SAR will be exercisable or
transferable only to the extent that the related Stock Option is exercisable or
transferable.
A SAR granted independent of a Stock Option will be exercisable as
determined by the Committee. An independent SAR will entitle the holder, upon
exercise, to receive payment as described above. The Committee may limit the
amount payable upon exercise of any tandem or independent SAR. Any such
limitation will be specified at the time the SAR is granted.
Payment upon the exercise of SARs will be made, at the discretion of the
Committee, in cash, in shares of Common Stock, or a combination of cash and
shares of Common Stock.
TERMS AND CONDITIONS OF RESTRICTED STOCK. Restricted Stock is the grant of
shares of Common Stock or the right to purchase Common Stock at a price
determined by the Committee, which is nontransferable and subject to substantial
risk of forfeiture until specific conditions are met. Certificates evidencing
Restricted Stock will bear a legend making reference to the restrictions
imposed. The restrictions will lapse in accordance with a schedule or other
conditions determined by the Committee. During the restriction period, the
holder of Restricted Stock may, in the discretion of the Committee, be given
certain rights as a stockholder, including the right to vote the stock subject
to the Award and/ or receive dividends with respect thereto.
ACCELERATION OF VESTING AND EXERCISABILITY. If an employee's employment
relationship with the Company is terminated for any reason other than normal
retirement, death or disability, then any and all Awards held by such employee
that are not then exercisable (or for which restrictions have not lapsed) shall
become null and void as of the date of such termination. The portion, if any, of
such Awards that are exercisable as of the date of termination shall be
exercisable for a period of the lesser of the remaining term of the Incentive
Award or 180 days after the date of termination. In addition, if an employee's
employment relationship is terminated as a result of a normal retirement, death
or disability, then any and all Awards held by such employee that are not then
exercisable (or for which restrictions have not lapsed) shall become exercisable
(and the restrictions thereon, if any, shall lapse) as of the date of
termination. All such Awards which have become exercisable as of the date of
such
14
<PAGE>
termination (either as a result of the acceleration of exercisability as
described herein or otherwise) shall remain exercisable for the lesser of the
remaining term of such Awards or 180 days after the date of termination.
ADJUSTMENT PROVISIONS. The Incentive Plan contains provisions that
automatically modify the terms of Awards or permit the Committee to modify the
terms of Awards when a subdivision, consolidation or change in control of the
Company occurs or when the Company undergoes certain restructurings that do not
result in a change in control of the Company.
The terms of an Award and the maximum number of shares of Common Stock
authorized for issuance under the Incentive Plan will be adjusted if the Company
subdivides as a whole the number of shares of Common Stock then outstanding into
a greater number of shares of Common Stock (such as in a stock split) or
consolidates as a whole the number of shares of Common Stock then outstanding
into a lesser number of shares of Common Stock (such as in a reverse stock
split). In addition, if the Common Stock is subdivided or consolidated into one
or more different kinds of securities, the holders of Awards will be entitled to
purchase or receive (in lieu of the shares of Common Stock originally subject to
the Award) the kinds of securities into which the Common Stock is subdivided or
consolidated.
Upon a "change in control" of the Company, (1) each holder of a Stock Option
will be granted corresponding SARs, (2) all outstanding SARs and Stock Options
will become immediately and fully vested and exercisable in full, and (3) the
restriction period on any Restricted Stock will be accelerated and the
restrictions will expire.
In general, under the Incentive Plan, a "change in control" of the Company
occurs in any of five situations: (1) a person other than the Company, certain
affiliated companies or benefit plans, or a company with the same ownership as
the Company, acquires 50% or more of the voting power of the Company's
outstanding voting securities; (2) a majority of the Board of Directors is not
comprised of the members of the Board of Directors at the effective date of the
Incentive Plan and persons whose election as directors were approved by those
original directors or their approved successors; (3) a person described in
clause (1) announces a tender offer for 50% or more of the Company's outstanding
voting securities and the Board of Directors approves or does not oppose the
tender offer; (4) the Company merges or consolidates with another corporation or
partnership, or the Company's stockholders approve such a merger or
consolidation, other than mergers or consolidations in which the Company's
voting securities are converted into securities having the majority of voting
power in the surviving company; or (5) the Company liquidates or sells all or
substantially all of its assets, or the Company's stockholders approve such a
liquidation or sale, except sales to corporations having substantially the same
ownership as the Company.
In addition, if a change in control occurs in connection with a merger or
consolidation of the Company pursuant to which the Company is not the surviving
corporation or a sale of all or substantially all of the Company's assets, then
the holders of Awards will be entitled to receive (upon payment of the exercise
price, if applicable) the same consideration to which they would have been
entitled had they exercised their options, or had the restrictions on any
Restricted Stock lapsed, immediately prior to such transaction.
If a restructure of the Company occurs that does not constitute a change in
control of the Company, the Committee may (but need not) cause the Company to
take any one or more of the following actions: (1) accelerate in whole or in
part the time of vesting and exercisability of any outstanding Stock Options and
SARs in order to permit those Stock Options and SARs to be exercisable before,
upon or after the completion of the restructure; (2) grant each optionholder
corresponding SARs; (3) accelerate in whole or in part the expiration of some or
all of the restrictions on any Restricted Stock; (4) if the restructure involves
a transaction in which the Company is not the surviving entity, cause the
surviving entity to assume in whole or in part any one or more of the
15
<PAGE>
outstanding Awards upon such terms and provisions as the Committee deems
desirable; or (5) redeem in whole or in part any one or more of the outstanding
Awards (whether or not then exercisable) in consideration of a cash payment,
adjusted for withholding obligations.
A restructure generally is any merger of the Company or the direct or
indirect transfer of all or substantially all of the Company's assets (whether
by sale, merger, consolidation, liquidation or otherwise) in one transaction or
a series of transactions.
AMENDMENT AND TERMINATION OF THE INCENTIVE PLAN. No Award may be granted
under the Incentive Plan after the tenth anniversary of the adoption of the
Incentive Plan. The Board of Directors may, insofar as permitted by law, with
respect to any shares which, at the time, are not subject to Awards, suspend or
discontinue the Incentive Plan.
The Board of Directors may amend or modify the Incentive Plan at any time
for any purpose, to the extent permitted by law. However, the Incentive Plan may
not be amended without the consent of the holders of a majority of the shares of
Common Stock then outstanding to (a) increase materially the aggregate number of
shares of Common Stock that may be issued under the Incentive Plan, (b) increase
materially the benefits accruing to eligible individuals under the Incentive
Plan or (c) modify materially the eligibility requirements for participation in
the Incentive Plan; provided, however, that such amendments may be made without
the consent of stockholders of the Company if changes occur in law or other
legal requirements that would permit such changes.
The Incentive Plan is intended to comply with the requirements of Section
162(m) of the Code to the extent required to cause Stock Options and SARs to be
classified as "performance-based compensation" under Section 162(m)(4)(C) of the
Code. However, regulations under Section 162(m) of the Code, when finalized, and
interpretations of Section 162(m) and such regulations, could require certain
amendments to the Incentive Plan to accomplish this classification. To the
extent amendments to the Incentive Plan are required, the Board of Directors may
adopt such amendments that it determines are necessary but will not solicit
stockholder approval of such amendments unless stockholder approval is required
under Section 162(m) of the Code or other applicable law.
FEDERAL INCOME TAX CONSEQUENCES. A participant receiving Non-qualified
Stock Options or SARs shall not recognize taxable income at the time the
Non-qualified Stock Option or SAR is granted. At the time the Non-qualified
Stock Option or SAR is exercised, the participant will recognize ordinary
taxable income in an amount equal to the difference between the exercise price
(or fair market value of the Common Stock at the time of grant of SARs granted
independent of Stock Options) and the fair market value of the Company's Common
Stock on the date of exercise. The Company will be entitled to a concurrent
deduction equal to the ordinary income recognized by the participant, provided
that the Company withholds taxes.
An employee granted an Incentive Stock Option will not recognize taxable
income at the time of grant or, subject to certain conditions, at the time of
exercise. The excess of the fair market value of the Common Stock received over
the option price is an item of tax preference income potentially subject to the
alternative minimum tax. If stock acquired upon exercise of an Incentive Stock
Option is held for a minimum of two years from the date of grant and one year
from the date of exercise, the gain or loss (in an amount equal to the
difference between the sales price and the exercise price) upon disposition of
the stock will be treated as long-term capital gain or loss, and the Company
will not be entitled to any deduction.
If the holding period requirement is not met, the Incentive Stock Option
will be treated as one which does not meet the requirements of the Code for
Incentive Stock Options and the employee will recognize ordinary income in an
amount equal to the lesser of (i) the excess of the fair market value of Common
Stock on the date of exercise over the exercise price or (ii) the amount
realized on the sale of such stock over the exercise price.
An employee receiving Restricted Stock will not recognize taxable income at
the time of grant. At the time the restrictions lapse, the employee will
recognize ordinary taxable income equal to the
16
<PAGE>
difference between the fair market value of the Common Stock at the time the
restrictions lapse and the price, if any, paid by the employee for such Common
Stock. Any dividends received by the employee before the termination of
restrictions will be taxed as ordinary income. The Company will be entitled to a
deduction equal to the ordinary income reported by the employee, provided the
Company withholds taxes. Upon the disposition of the Common Stock, the employee
will recognize taxable gain or loss equal to the difference between the fair
market value of the Common Stock at the time the restrictions lapse and the
amount realized upon the disposition of the Common Stock. The gain or loss will
be taxable as a capital gain or loss, provided the employee held the Common
Stock as a capital asset.
An employee may elect to report and recognize income at the time of grant or
purchase of Restricted Stock by filing an election under Section 83(b) of the
Code (a "Section 83(b) election"). If the employee makes a Section 83(b)
election, the Company will be entitled to a deduction equal to the ordinary
income reported by the employee in the year of the election, provided the
Company withholds taxes. However, dividends received before the restrictions
lapse will not be deductible by the Company. Upon the disposition of the Common
Stock, the employee will recognize gain or loss equal to the difference between
the amount realized and the sum of the income recognized by the employee as a
result of the Section 83(b) election and any amounts paid by the employee for
the Restricted Stock.
Special rules may apply with respect to employees subject to Section 16(b)
of the Securities Exchange Act of 1934. Other than in the case of an Incentive
Stock Option held in accordance with the specified holding period requirements,
the amount and timing of the recognition of income by an employee subject to
Section 16(b) (and the concurrent deduction by the Company) on the exercise of a
Stock Option or SAR generally will be based on the fair market value of the
shares received when the restrictions of Section 16(b) lapse, unless the
employee elects otherwise by making a Section 83(b) election.
NEW PLAN BENEFITS
ProNet Inc. 1995 Long-Term Incentive Plan
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
NAME AND PRINCIPAL POSITION UNDERLYING AWARDS
- ------------------------------------------------------------------------- -------------------
<S> <C>
Jackie R. Kimzey (1)
Chief Executive Officer................................................. 0
David J. Vucina (1)
President............................................................... 0
Bo Bernard (1)
Executive Vice President................................................ 0
Jan E. Gaulding (1)
Senior Vice President................................................... 0
Jeffery A. Owens (1)
Vice President - Engineering............................................ 0
Executive Group (6 persons) (1).......................................... 0
Non-Employee Director.................................................... 2,500
Non-Executive Officer Employee Group (1)................................. 0
Total Shares Available for Awards to All Directors, Executive Officers
and Other Eligible Persons.............................................. 1,000,000
<FN>
- ------------------------
(1) Not determinable because all awards to such persons are discretionary.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
17
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INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors has
selected Ernst & Young LLP as the Company's independent auditor for the fiscal
year ending December 31, 1995. Ernst & Young LLP has been the auditor of the
Company since the Company was founded in 1982. The Company anticipates that
representatives of Ernst & Young LLP will be present at the Annual Meeting, will
have the opportunity to make a statement if they desire to do so, and will be
available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Should any stockholder desire to present a proposal at the 1996 Annual
Meeting of Stockholders, the proposal must be received by the Company at its
offices at 600 Data Drive, Suite 100, Plano, Texas 75075 by not later than
December 22, 1995.
OTHER MATTERS
The Board of Directors of the Company does not know of any other matters to
be brought before the Annual Meeting. However, if any other matters are properly
brought before the Annual Meeting by the Board of Directors or any stockholder,
the persons named in the accompanying proxy will have discretionary authority to
vote such proxy in accordance with their best judgment on such matters.
By Order of the Board of Directors
MARK A. SOLLS
SECRETARY
Dated: April 25, 1995
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APPENDIX A
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PRONET INC.
1995 LONG-TERM INCENTIVE PLAN
SCOPE AND PURPOSE OF PLAN
ProNet Inc., a Delaware corporation (the "Corporation"), has adopted this
1995 Long-Term Incentive Plan (the "Plan") to provide for the granting of:
(a) Incentive Options (hereafter defined) to certain Key Employees
(hereafter defined);
(b) Nonstatutory Options (hereafter defined) to certain Key Employees and
Non-Employee Directors (hereafter defined);
(c) Restricted Stock Awards (hereafter defined) to certain Key Employees;
and
(d) Stock Appreciation Rights (hereafter defined) to certain Key Employees.
The purpose of the Plan is to provide an incentive for Key Employees and
directors of the Corporation or its Subsidiaries (hereafter defined) to remain
in the service of the Corporation or its Subsidiaries, to extend to them the
opportunity to acquire a proprietary interest in the Corporation so that they
will apply their best efforts for the benefit of the Corporation, and to aid the
Corporation in attracting able persons to enter the service of the Corporation
and its Subsidiaries.
SECTION 1. DEFINITIONS
1.1 "Acquiring Person" means any Person other than the Corporation, any
Subsidiary of the Corporation, any employee benefit plan of the Corporation or
of a Subsidiary of the Corporation or of a corporation owned directly or
indirectly by the stockholders of the Corporation in substantially the same
proportions as their ownership of Stock of the Corporation, or any trustee or
other fiduciary holding securities under an employee benefit plan of the
Corporation or of a Subsidiary of the Corporation or of a corporation owned
directly or indirectly by the stockholders of the Corporation in substantially
the same proportions as their ownership of Stock of the Corporation.
1.2 "Affiliate" means (a) any Person who is directly or indirectly the
beneficial owner of at least 10% of the voting power of the Voting Securities or
(b) any Person controlling, controlled by, or under common control with the
Company or any Person contemplated in clause (a) of this Subsection 1.2.
1.3 "Award" means the grant of any form of Option, Restricted Stock Award,
or Stock Appreciation Right under the Plan, whether granted individually, in
combination, or in tandem, to a Holder pursuant to the terms, conditions, and
limitations that the Committee may establish in order to fulfill the objectives
of the Plan.
1.4 "Award Agreement" means the written agreement between the Corporation
and a Holder evidencing the terms, conditions, and limitations of the Award
granted to that Holder.
1.5 "Board of Directors" means the board of directors of the Corporation.
1.6 "Business Day" means any day other than a Saturday, a Sunday, or a day
on which banking institutions in the state of Texas are authorized or obligated
by law or executive order to close.
1.7 "Change in Control" means the event that is deemed to have occurred if:
(a) any Acquiring Person is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing fifty percent or more of the
combined voting power of the then outstanding Voting Securities of the
Corporation; or
(b) members of the Incumbent Board cease for any reason to constitute at
least a majority of the Board of Directors; or
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(c) a public announcement is made of a tender or exchange offer by any
Acquiring Person for fifty percent or more of the outstanding Voting
Securities of the Corporation, and the Board of Directors approves or fails
to oppose that tender or exchange offer in its statements in Schedule 14D-9
under the Exchange Act; or
(d) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation or partnership
(or, if no such approval is required, the consummation of such a merger or
consolidation of the Corporation), other than a merger or consolidation that
would result in the Voting Securities of the Corporation outstanding
immediately before the consummation thereof continuing to represent (either
by remaining outstanding or by being converted into Voting Securities of the
surviving entity or of a parent of the surviving entity) a majority of the
combined voting power of the Voting Securities of the surviving entity (or
its parent) outstanding immediately after that merger or consolidation; or
(e) the stockholders of the Corporation approve a plan of complete
liquidation of the Corporation or an agreement for the sale or disposition
by the Corporation of all or substantially all the Corporation's assets (or,
if no such approval is required, the consummation of such a liquidation,
sale, or disposition in one transaction or series of related transactions)
other than a liquidation, sale, or disposition of all or substantially all
the Corporation's assets in one transaction or a series of related
transactions to a corporation owned directly or indirectly by the
stockholders of the Corporation in substantially the same proportions as
their ownership of Stock of the Corporation.
1.8 "Code" means the Internal Revenue Code of 1986, as amended.
1.9 "Committee" means the committee appointed pursuant to Section 3 by the
Board of Directors to administer the Plan.
1.10 "Convertible Securities" means evidences of indebtedness, shares of
capital stock, or other securities that are convertible into or exchangeable for
shares of Stock, either immediately or upon the arrival of a specified date or
the happening of a specified event.
1.11 "Corporation" means ProNet Inc., a Delaware corporation.
1.12 "Date of Grant" has the meaning given it in Subsection 5.3.
1.13 "Disability" has the meaning given it in Subsection 10.3.
1.14 "Disinterested Person" means a Person that meets the definition of
both a "disinterested person" under Rule 16b-3(c)(2)(i) and an "outside
director" under Section 162(m).
1.15 "Effective Date" means the earlier of (a) the date the Plan is adopted
by the Board of Directors or (b) the date the Plan is approved by the
stockholders of the Corporation.
1.16 "Eligible Individuals" means (a) Key Employees and (b) Non-Employee
Directors only for purposes of Nonstatutory Options granted hereunder.
Notwithstanding the foregoing provisions of this Subsection 1.16, to ensure that
the requirements of the fourth sentence of Subsection 3.1 are satisfied, the
Board of Directors may from time to time specify individuals who shall not be
eligible for the grant of Awards or equity securities under any plan of the
Corporation or its Affiliates. Nevertheless, the Board of Directors may at any
time determine that an individual who has been so excluded from eligibility
shall become eligible for grants of Awards and grants of such other equity
securities under any plans of the Corporation or its Affiliates so long as that
eligibility will not impair the Plan's satisfaction of the conditions of Rule
16b-3.
1.17 "Employee" means any employee of the Corporation or of any of its
Subsidiaries, including officers and directors of the Corporation who are also
employees of the Corporation or of any of its Subsidiaries.
1.18 "Exchange Act" means the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder, or any successor law, as it may be
amended from time to time.
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1.19 "Exercise Notice" has the meaning given it in Subsection 6.5.
1.20 "Exercise Price" has the meaning given it in Subsection 6.4.
1.21 "Fair Market Value" means, for a particular day:
(a) If shares of Stock of the same class are listed or admitted to
unlisted trading privileges on any national or regional securities exchange
at the date of determining the Fair Market Value, then the last reported
sale price, regular way, on the composite tape of that exchange on the last
Business Day before the date in question or, if no such sale takes place on
that Business Day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to unlisted
trading privileges on that securities exchange; or
(b) If shares of Stock of the same class are not listed or admitted to
unlisted trading privileges as provided in Subsection 1.21(a) and sales
prices for shares of Stock of the same class in the over-the-counter market
are reported by the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") Stock Market (or such other system
then in use) at the date of determining the Fair Market Value, then the last
reported sales price so reported on the last Business Day before the date in
question or, if no such sale takes place on that Business Day, the average
of the high bid and low asked prices so reported; or
(c) If shares of Stock of the same class are not listed or admitted to
unlisted trading privileges as provided in Subsection 1.21(a) and sales
prices for shares of Stock of the same class are not reported by the NASDAQ
Stock Market (or a similar system then in use) as provided in Subsection
1.21(b), and if bid and asked prices for shares of Stock of the same class
in the over-the-counter market are reported by NASDAQ (or, if not so
reported, by the National Quotation Bureau Incorporated) at the date of
determining the Fair Market Value, then the average of the high bid and low
asked prices on the last Business Day before the date in question; or
(d) If shares of Stock of the same class are not listed or admitted to
unlisted trading privileges as provided in Subsection 1.21(a) and sales
prices or bid and asked prices therefor are not reported by NASDAQ (or the
National Quotation Bureau Incorporated) as provided in Subsection 1.21(b) or
Subsection 1.21(c) at the date of determining the Fair Market Value, then
the value determined in good faith by the Committee, which determination
shall be conclusive for all purposes; or
(e) If shares of Stock of the same class are listed or admitted to
unlisted trading privileges as provided in Subsection 1.21(a) or sales
prices or bid and asked prices therefor are reported by NASDAQ (or the
National Quotation Bureau Incorporated) as provided in Subsection 1.21(b) or
Subsection 1.21(c) at the date of determining the Fair Market Value, but the
volume of trading is so low that the Board of Directors determines in good
faith that such prices are not indicative of the fair value of the Stock,
then the value determined in good faith by the Committee, which
determination shall be conclusive for all purposes notwithstanding the
provisions of Subsections 1.21(a), (b), or (c).
For purposes of valuing Incentive Options, the Fair Market Value of Stock shall
be determined without regard to any restriction other than one that, by its
terms, will never lapse. For purposes of the redemption provided for in
Subsection 9.3(d)(v), Fair Market Value shall have the meaning and shall be
determined as set forth above; PROVIDED, HOWEVER, that the Committee, with
respect to any such redemption, shall have the right to determine that the Fair
Market Value for purposes of the redemption should be an amount measured by the
value of the shares of Stock, other securities, cash, or property otherwise
being received by holders of shares of Stock in connection with the
Restructuring and upon that determination the Committee shall have the power and
authority to determine Fair Market Value for purposes of the redemption based
upon the value of such shares of stock, other securities, cash, or property. Any
such determination by the Committee, as evidenced by a resolution of the
Committee, shall be conclusive for all purposes.
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1.22 "Fair Value" means such value as is determined by a majority of the
"disinterested" directors of the Corporation, as evidenced by a resolution of
such disinterested directors, even if the disinterested directors of the
Corporation constitute less than a quorum. If the Corporation does not have any
disinterested directors, the Fair Value shall be such value as is determined by
a nationally recognized investment banking firm selected by the Corporation, the
expenses of which shall be borne by the Corporation.
1.23 "Holder" means an Eligible Individual to whom an outstanding Award has
been granted.
1.24 "Incumbent Board" means the individuals who, as of the Effective Date,
constitute the Board of Directors and any other individual who becomes a
director of the Corporation after that date and whose election or appointment by
the Board of Directors or nomination for election by the Corporation's
stockholders was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board.
1.25 "Incentive Option" means an incentive stock option as defined under
Section 422 of the Code and regulations thereunder.
1.26 "Key Employee" means any Employee whom the Committee identifies as
having a direct and significant effect on the performance of the Corporation or
any of its Subsidiaries.
1.27 "Non-employee Director" means a director of the Corporation who while
a director is not an Employee.
1.28 "Nonstatutory Option" means a stock option that does not satisfy the
requirements of Section 422 of the Code or that is designated at the Date of
Grant or in the applicable Award Agreement to be an option other than an
Incentive Option.
1.29 "Non-Surviving Event" means an event of Restructuring as described in
either Subsection 1.36(b) or Subsection 1.36(c).
1.30 "Normal Retirement" means the separation of a Holder from employment
with the Corporation and its Subsidiaries with the right to receive an immediate
benefit under a retirement plan approved by the Corporation.
1.31 "Option" means either an Incentive Option or a Nonstatutory Option, or
both.
1.32 "Person" means any person or entity of any nature whatsoever,
specifically including (but not limited to) an individual, a firm, a company, a
corporation, a partnership, a trust, or other entity. A Person, together with
that Person's affiliates and associates (as "affiliate" and "associate" are
defined in Rule 12b-2 under the Exchange Act for purposes of this definition
only), and any Persons acting as a partnership, limited partnership, joint
venture, association, syndicate, or other group (whether or not formally
organized), or otherwise acting jointly or in concert or in a coordinated or
consciously parallel manner (whether or not pursuant to any express agreement),
for the purpose of acquiring, holding, voting, or disposing of securities of the
Corporation with that Person, shall be deemed a single "Person."
1.33 "Plan" means the Corporation's 1995 Long-Term Incentive Plan, as it
may be amended from time to time.
1.34 "Restricted Stock" means Stock that is nontransferable or subject to
substantial risk of forfeiture until specific conditions are met.
1.35 "Restricted Stock Award" means the grant or purchase, on the terms and
conditions of Section 8 or that the Committee otherwise determines, of
Restricted Stock.
1.36 "Restructuring" means the occurrence of any one or more of the
following:
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(a) The merger or consolidation of the Corporation with any Person,
whether effected as a single transaction or a series of related
transactions, with the Corporation remaining the continuing or surviving
entity of that merger or consolidation and the Stock remaining outstanding
and not changed into or exchanged for stock or other securities of any other
Person or of the Corporation, cash, or other property;
(b) The merger or consolidation of the Corporation with any Person,
whether effected as a single transaction or a series of related
transactions, with (i) the Corporation not being the continuing or surviving
entity of that merger or consolidation or (ii) the Corporation remaining the
continuing or surviving entity of that merger or consolidation but all or a
part of the outstanding shares of Stock are changed into or exchanged for
stock or other securities of any other Person or the Corporation, cash, or
other property; or
(c) The transfer, directly or indirectly, of all or substantially all of
the assets of the Corporation (whether by sale, merger, consolidation,
liquidation, or otherwise) to any Person, whether effected as a single
transaction or a series of related transactions.
1.37 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Exchange Act
as adopted in Exchange Act Release No. 34-29131 (April 26, 1991), or any
successor rule, as it may be amended from time to time.
1.38 "Section 162(m)" means Section 162(m) of the Code, or any successor
section under the Code, as it may be amended from time to time and as
interpreted by final or proposed regulations promulgated thereunder from time to
time.
1.39 "Securities Act" means the Securities Act of 1933 and the rules and
regulations promulgated thereunder, or any successor law, as it may be amended
from time to time.
1.40 "Stock" means the Corporation's authorized common stock, par value
$.01 per share, or any other securities that are substituted for the Stock as
provided in Section 9.
1.41 "Stock Appreciation Right" means the right to receive an amount equal
to the excess of the Fair Market Value of a share of Stock (as determined on the
date of exercise) over, as appropriate, the Exercise Price of a related Option
or the Fair Market Value of the Stock on the Date of Grant of the Stock
Appreciation Right.
1.42 "Subsidiary" means, with respect to any Person, any corporation, or
other entity of which a majority of the Voting Securities is owned, directly or
indirectly, by that Person.
1.43 "Total Shares" has the meaning given it in Subsection 9.2.
1.44 "Voting Securities" means any securities that are entitled to vote
generally in the election of directors, in the admission of general partners or
in the selection of any other similar governing body.
SECTION 2. SHARES OF STOCK SUBJECT TO THE PLAN
2.1 MAXIMUM NUMBER OF SHARES. Subject to the provisions of Subsections 2.2
and 2.5 and Section 9, the aggregate number of shares of Stock that may be
issued or transferred pursuant to Awards under the Plan shall be one million
(1,000,000). Awards to which shares of such Stock relate may be awarded to any
one Eligible Individual or allocated among the Eligible Individuals, as
determined by the Committee and subject in all respects to the other terms
hereof (including, without limitation, Section 5).
2.2 LIMITATION OF SHARES. For purposes of the limitations specified in
Subsection 2.1, the following principles shall apply:
(a) the following shall count against and decrease the number of shares
of Stock that may be issued for purposes of Subsection 2.1: (i) shares of
Stock subject to outstanding Options, outstanding shares of Restricted
Stock, and shares subject to outstanding Stock Appreciation Rights
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granted independent of Options (based on a good faith estimate by the
Corporation or the Committee of the maximum number of shares for which the
Stock Appreciation Right may be settled (assuming payment in full in shares
of Stock)), and (ii) in the case of Options granted in tandem with Stock
Appreciation Rights, the greater of the number of shares of Stock that would
be counted if one or the other alone was outstanding (determined as
described in clause (i) above);
(b) the following shall be added back to the number of shares of Stock
that may be issued for purposes of Subsection 2.1: (i) shares of Stock with
respect to which Options, Stock Appreciation Rights granted independent of
Options, or Restricted Stock Awards expire, are cancelled, or otherwise
terminate without being exercised, converted, or vested, as applicable, and
(ii) in the case of Options granted in tandem with Stock Appreciation
Rights, shares of Stock as to which an Option has been surrendered in
connection with the exercise of a related ("tandem") Stock Appreciation
Right, to the extent the number surrendered exceeds the number issued upon
exercise of the Stock Appreciation Right; provided that, in any case, the
holder of such Awards did not receive any dividends or other benefits of
ownership with respect to the underlying shares being added back, other than
voting rights and the accumulation (but not payment) of dividends of Stock;
(c) shares of Stock subject to Stock Appreciation Rights granted
independent of Options (calculated as provided in clause (a) above) that are
exercised and paid in cash shall be added back to the number of shares of
Stock that may be issued for purposes of Subsection 2.1, provided that the
Holder of such Stock Appreciation Right did not receive any dividends or
other benefits of ownership, other than voting rights and the accumulation
(but not payment) of dividends, of the shares of Stock subject to the Stock
Appreciation Right;
(d) shares of Stock that are transferred by a Holder of an Award (or
withheld by the Corporation) as full or partial payment to the Corporation
of the purchase price of shares of Stock subject to an Option or the
Corporation's or any Subsidiary's tax withholding obligations shall not be
added back to the number of shares of Stock that may be issued for purposes
of Subsection 2.1 and shall not again be subject to Awards; and
(e) if the number of shares of Stock counted against the number of
shares that may be issued for purposes of Subsection 2.1 is based upon an
estimate made by the Corporation or the Committee as provided in clause (a)
above and the actual number of shares of Stock issued pursuant to the
applicable Award is greater or less than the estimated number, then, upon
such issuance, the number of shares of Stock that may be issued pursuant to
Subsection 2.1 shall be further reduced by the excess issuance or increased
by the shortfall, as applicable.
Notwithstanding the provisions of this Subsection 2.2, no Stock shall be
treated as issuable under the Plan to (i) Eligible Individuals subject to
Section 16 of the Exchange Act if otherwise prohibited from issuance under Rule
16b-3 or (ii) Persons subject to Section 162(m) if otherwise prohibited from
issuance under Section 162(m).
2.3 DESCRIPTION OF SHARES. The shares to be delivered under the Plan shall
be made available from (a) authorized but unissued shares of Stock, (b) Stock
held in the treasury of the Corporation, or (c) previously issued shares of
Stock reacquired by the Corporation, including shares purchased on the open
market, in each situation as the Board of Directors or the Committee may
determine from time to time at its sole option.
2.4 REGISTRATION AND LISTING OF SHARES. From time to time, the Board of
Directors and appropriate officers of the Corporation shall and are authorized
to take whatever actions are necessary to file required documents with
governmental authorities, stock exchanges, and other appropriate Persons to make
shares of Stock available for issuance pursuant to the exercise of Awards.
2.5 REDUCTION IN OUTSTANDING SHARES OF STOCK. Nothing in this Section 2
shall impair the right of the Corporation to reduce the number of outstanding
shares of Stock pursuant to repurchases, redemptions, or otherwise; PROVIDED,
HOWEVER, that no reduction in the number of outstanding shares
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of Stock shall (a) impair the validity of any outstanding Award, whether or not
that Award is fully exercisable or fully vested, or (b) impair the status of any
shares of Stock previously issued pursuant to the exercise of an Award or
thereafter issued pursuant to a then-outstanding Award as duly authorized,
validly issued, fully paid, and nonassessable shares.
SECTION 3. ADMINISTRATION OF THE PLAN
3.1 COMMITTEE. The Committee shall administer the Plan with respect to all
Eligible Individuals who are subject to Section 16(b) of the Exchange Act or
Section 162(m), but shall not have the power to appoint members of the
Committee. The Board of Directors may administer the Plan with respect to all
other Eligible Individuals or may delegate all or part of that duty to the
Committee. Except for references in Subsections 3.1, 3.2, and 3.3, and unless
the context otherwise requires, references herein to the Committee shall also
refer to the Board of Directors as administrator of the Plan for Eligible
Individuals who are not subject to Section 16(b) of the Exchange Act or Section
162(m). The Committee shall be constituted so that, as long as Stock is
registered under Section 12 of the Exchange Act, each member of the Committee
shall be a Disinterested Person and so that the Plan in all other applicable
respects will qualify transactions related to the Plan for the exemptions from
Section 16(b) of the Exchange Act provided by Rule 16b-3 and the exemption from
the deductibility limitation imposed by Section 162(m) provided by the
performance-based compensation exception described in Section 162(m), to the
extent exemptions thereunder may be available. No discretion regarding Awards to
Eligible Individuals who are subject to Section 16(b) of the Exchange Act or
Section 162(m) shall be afforded to a Person who is not a Disinterested Person.
The number of Persons that shall constitute the Committee shall be determined
from time to time by a majority of all the members of the Board of Directors
and, unless that majority of the Board of Directors determines otherwise or Rule
16b-3 or Section 162(m) is amended to require otherwise, shall be no less than
two Persons. Persons elected to serve on the Committee as Disinterested Persons
shall not be eligible to receive Awards or equity securities under any plan of
the Corporation or its affiliates while they are serving as members of the
Committee; shall not have received Awards or such equity securities under any
plan of the Corporation or its Affiliates within one year before their
appointment to the Committee becomes effective; and shall not be eligible to
receive Awards or such equity securities under any plan of the Corporation or
its Affiliates for such period following service on the Committee as may be
required by Rule 16b-3 for that person to remain a Disinterested Person, in each
case except for Awards or equity securities granted as provided in paragraphs
(c)(2)(i)(A), (B), (C), or (D) of Rule 16b-3. Notwithstanding the foregoing, the
Board of Directors may designate the Compensation Committee of the Board of
Directors to serve as the Committee hereunder, provided that each member of such
Compensation Committee is a Disinterested Person and satisfies the requirements
of the immediately preceding sentence.
3.2 DURATION, REMOVAL, ETC. The members of the Committee shall serve at
the discretion of the Board of Directors, which shall have the power, at any
time and from time to time, to remove members from or add members to the
Committee. Removal from the Committee may be with or without cause. Any
individual serving as a member of the Committee shall have the right to resign
from membership in the Committee by at least three days' written notice to the
Board of Directors. The Board of Directors, and not the remaining members of the
Committee, shall have the power and authority to fill all vacancies on the
Committee. The Board of Directors shall promptly fill any vacancy that causes
the number of members of the Committee to be below two or any other number that
Rule 16b-3 or Section 162(m) may require from time to time.
3.3 MEETINGS AND ACTIONS OF COMMITTEE. The Board of Directors shall
designate which of the Committee members shall be the chairman of the Committee.
If the Board of Directors fails to designate a Committee chairman, the members
of the Committee shall elect one of the Committee members as chairman, who shall
act as chairman until he ceases to be a member of the Committee or until the
Board of Directors elects a new chairman. The Committee shall hold its meetings
at those times and places as the chairman of the Committee may determine. At all
meetings of the Committee, a quorum for the transaction of business shall be
required and a quorum shall be deemed present if at
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least a majority of the members of the Committee are present. At any meeting of
the Committee, each member shall have one vote. All decisions and determinations
of the Committee shall be made by the majority vote or majority decision of all
of its members present at a meeting at which a quorum is present; PROVIDED,
HOWEVER, that any decision or determination reduced to writing and signed by all
of the members of the Committee shall be as fully effective as if it had been
made at a meeting that was duly called and held. The Committee may make any
rules and regulations for the conduct of its business that are not inconsistent
with the provisions of the Plan, the Certificate of Incorporation of the
Corporation, the by-laws of the Corporation, and Rule 16b-3 and Section 162(m)
so long as applicable, as the Committee may deem advisable.
3.4 COMMITTEE'S POWERS. Subject to the express provisions of the Plan and
Rule 16b-3, the Committee shall have the authority, in its sole and absolute
discretion, to (a) adopt, amend, and rescind administrative and interpretive
rules and regulations relating to the Plan; (b) determine the Eligible
Individuals to whom, and the time or times at which, Awards shall be granted;
(c) determine the amount of cash and the number of shares of Stock, Stock
Appreciation Rights, or Restricted Stock Awards, or any combination thereof,
that shall be the subject of each Award; (d) determine the terms and provisions
of each Award Agreement (which need not be identical), including provisions
defining or otherwise relating to (i) the term and the period or periods and
extent of exercisability of the Options, (ii) the extent to which the
transferability of shares of Stock issued or transferred pursuant to any Award
is restricted, (iii) the effect of termination of employment of a Holder on the
Award, and (iv) the effect of approved leaves of absence (consistent with any
applicable regulations of the Internal Revenue Service); (e) accelerate,
pursuant to Section 9, the time of exercisability of any Option that has been
granted; (f) construe the respective Award Agreements and the Plan; (g) make
determinations of the Fair Market Value of the Stock pursuant to the Plan; (h)
delegate its duties under the Plan to such agents as it may appoint from time to
time, provided that the Committee may not delegate its duties with respect to
making Awards to, or otherwise with respect to Awards granted to, Eligible
Individuals who are subject to Section 16(b) of the Exchange Act or Section
162(m); (i) subject to ratification by the Board of Directors, terminate,
modify, or amend the Plan; and (j) make all other determinations, perform all
other acts, and exercise all other powers and authority necessary or advisable
for administering the Plan, including the delegation of those ministerial acts
and responsibilities as the Committee deems appropriate. Subject to Rule 16b-3
and Section 162(m), the Committee may correct any defect, supply any omission,
or reconcile any inconsistency in the Plan, in any Award, or in any Award
Agreement in the manner and to the extent it deems necessary or desirable to
carry the Plan into effect, and the Committee shall be the sole and final judge
of that necessity or desirability. The determinations of the Committee on the
matters referred to in this Subsection 3.4 shall be final and conclusive.
SECTION 4. ELIGIBILITY AND PARTICIPATION
4.1 ELIGIBLE INDIVIDUALS. Subject to the limitations set forth in Section
5, Awards may be granted pursuant to the Plan only to persons who are Eligible
Individuals at the time of the grant thereof.
4.2 GRANT OF AWARDS. Subject to the express provisions of the Plan
(including, without limitation, Section 5), the Committee shall determine which
Eligible Individuals shall be granted Awards from time to time. In making
grants, the Committee shall take into consideration the contribution that the
potential Holder has made or may make to the success of the Corporation or its
Subsidiaries and such other considerations as the Board of Directors may from
time to time specify. The Committee shall also determine the number of shares
subject to each of the Awards and shall authorize and cause the Corporation to
grant Awards in accordance with those determinations.
4.3 DATE OF GRANT. Subject to the last sentence of this Subsection 4.3 and
clause (ii) of the first sentence of Subsection 10.9, the date on which the
Committee completes all action resolving to offer an Award to an individual,
including the specification of the number of shares of Stock to be subject to
the Award, shall be the date on which the Award covered by an Award Agreement is
granted (the
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"Date of Grant"), even though certain terms of the Award Agreement may not be
determined at that time and even though the Award Agreement may not be executed
until a later time. In no event shall a Holder gain any rights in addition to
those specified by the Committee in its grant, regardless of the time that may
pass between the grant of the Award and the actual execution of the Award
Agreement by the Corporation and the Holder.
4.4 AWARD AGREEMENTS. Each Award granted under the Plan shall be evidenced
by an Award Agreement that is executed by the Corporation and the Eligible
Individual to whom the Award is granted and incorporating those terms that the
Committee shall deem necessary or desirable. More than one Award may be granted
under the Plan to the same Eligible Individual and be outstanding concurrently.
In the event an Eligible Individual is granted both one or more Incentive
Options and one or more Nonstatutory Options, those grants shall be evidenced by
separate Award Agreements, one for each of the Incentive Option grants and one
for each of the Nonstatutory Option grants.
4.5 LIMITATION FOR INCENTIVE OPTIONS. Notwithstanding any provision
contained herein to the contrary, (a) a person shall not be eligible to receive
an Incentive Option unless he is an Employee of the Corporation or a corporate
Subsidiary (but not a partnership Subsidiary) and (b) a Person shall not be
eligible to receive an Incentive Option if, immediately before the time the
Option is granted, that person owns (within the meaning of Sections 422 and
424(d) of the Code) stock possessing more than ten percent of the total combined
voting power or value of all classes of outstanding stock of the Corporation or
a Subsidiary. Nevertheless, Subsection 4.5(b) shall not apply if, at the time
the Incentive Option is granted, the Exercise Price of the Incentive Option is
at least one hundred ten percent of Fair Market Value and the Incentive Option
is not, by its terms, exercisable after the expiration of five years from the
Date of Grant.
4.6 NO RIGHT TO AWARD. The adoption of the Plan shall not be deemed to
give any Person a right to be granted an Award.
SECTION 5. AWARDS TO NON-EMPLOYEE DIRECTORS
5.1 INELIGIBILITY FOR OTHER AWARDS. Non-employee Directors shall not be
eligible to receive any Awards under the Plan other than the automatic Awards
specified in this Section 5.
5.2 AUTOMATIC GRANT OF AWARDS. Awards of Nonstatutory Options shall be
made automatically to Non-employee Directors as follows: Beginning in 1995, each
Non-employee Director who is a director of the Corporation as of both the day
immediately preceding the annual meeting of the Corporation's stockholders and
the day immediately following the annual meeting shall automatically be granted
a Nonstatutory Option for the purchase of 2,500 shares of Stock effective on the
date of the first meeting of the Board of Directors following the annual
meeting, whether or not that director is in attendance at that meeting.
5.3 AVAILABLE STOCK. The automatic Awards specified in Subsection 5.2
shall be made in the amounts specified in Subsection 5.2 only if the number of
shares of Stock available to be issued, transferred or exercised pursuant to
Awards under the Plan (as calculated in Subsection 2) is sufficient to make all
automatic grants required to be made in Subsection 5.2 on the Date of Grant of
those automatic Awards. If a lesser number of shares of Stock are available to
be issued or transferred pursuant to Awards under the Plan on the Date of Grant
of the automatic Awards described in Subsection 5.2, but their number is
insufficient to permit the grant of the entire number of shares specified in the
automatic Awards, then the number of available shares shall be apportioned
equally among the automatic Awards made on that date, and the number of shares
apportioned to each automatic Award shall be the amount of shares automatically
subject to that automatic Award.
5.4 TERMS AND CONDITIONS OF AUTOMATIC AWARD. Award Agreements for
Nonstatutory Option Awards to Non-employee Directors shall be in the form
attached hereto as Annex A and, except as expressly provided in those Award
Agreements, the automatic Awards to Non-employee Directors shall not be subject
to the provisions of Sections 9.2, 9.3 or 10. In addition, the following terms
and conditions shall apply to automatic Awards pursuant to Subsection 5.2: (a)
the exercise price for each
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share of Stock subject to the Option shall be the Fair Market Value of a share
of Stock on the Date of Grant of such Option; (b) the Option shall become vested
and exercisable with respect to 833 shares of Stock (or, if less, one-third of
the number determined pursuant to Subsection 5.3) on each of the first two
anniversaries of that Date of Grant, and with respect to 834 shares of Stock
(or, if less, one-third of the number determined pursuant to Subsection 5.3) on
the third anniversary of the Date of Grant, so long as the Non-employee Director
remains a director of the Corporation after the Date of Grant through those
dates; and (c) the Option shall terminate on the earliest of (i) 11:59 p.m.,
Dallas, Texas, time, on the date ten years from the Date of Grant, (ii)
immediately when the Holder ceases to be a director, if the Board demands or
requests the Holder's resignation from the Board, (iii) 11:59 p.m., Dallas,
Texas, time, on the date 90 days after the Holder ceases to be a director for
any reason other than the reasons specified in the preceding clause (ii) or the
following clause (iv), or (iv) 11:59 p.m., Dallas, Texas, time, on the date one
year after the Holder ceases to be a director because of death or permanent
disability (as defined in Annex A attached hereto).
5.5 TAX WITHHOLDING. The Corporation shall have the right to require a
Non-employee Director to pay to the Corporation the amount necessary to satisfy
the Corporation's current or future obligation to withhold federal, state or
local income or other taxes that the Non-employee Director incurs by the
granting, vesting or exercising of an Option. Tax withholding obligations in
respect of Options to Non-employee Directors may not be satisfied by the
Corporation's withholding of Stock subject to the Option or by the Non-employee
Director's transfer of Stock to the Corporation.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS
All Options granted under the Plan (other than Options granted to
Non-employee Directors pursuant to Section 5) shall comply with, and the related
Award Agreements shall be deemed to include and be subject to, the terms and
conditions set forth in this Section 6 (to the extent each term and condition
applies to the form of Option) and also to the terms and conditions set forth in
Sections 9 and 10; PROVIDED, HOWEVER, that the Committee may authorize an Award
Agreement that expressly contains terms and provisions that differ from the
terms and provisions set forth in Subsections 9.2, 9.3, and 9.4 and any of the
terms and provisions of Section 10 (other than Subsections 10.8 and 10.9).
6.1 NUMBER OF SHARES. Each Award Agreement shall state the total number of
shares of Stock to which it relates.
6.2 VESTING. Each Award Agreement shall state the time or periods in
which, or the conditions upon satisfaction of which, the right to exercise the
Option or a portion thereof shall vest and the number of shares of Stock for
which the right to exercise the Option shall vest at each such time, period, or
fulfillment of condition.
6.3 EXPIRATION OF OPTIONS. Options may be exercised during the term
determined by the Committee and set forth in the Award Agreement; PROVIDED THAT
no Incentive Option shall be exercised after the expiration of a period of ten
years commencing on the Date of Grant of the Incentive Option.
6.4 EXERCISE PRICE. Each Award Agreement shall state the exercise price
per share of Stock (the "Exercise Price"); PROVIDED, HOWEVER, that the exercise
price per share of Stock subject to an Incentive Option shall not be less than
the greater of (a) the par value per share of the Stock or (b) 100% of the Fair
Market Value per share of the Stock on the Date of Grant of the Option, and the
exercise price per share of Stock subject to a Nonstatutory Option shall not be
less than the par value per share of the Stock (but may be less than the Fair
Market Value of a share of the Stock on the Date of Grant).
6.5 METHOD OF EXERCISE. The Option shall be exercisable only by written
notice of exercise (the "Exercise Notice") delivered to the Corporation during
the term of the Option, which notice shall (a) state the number of shares of
Stock with respect to which the Option is being exercised, (b) be signed by the
Holder of the Option or, if the Holder is dead or becomes affected by a
Disability, by the person authorized to exercise the Option pursuant to
Subsection 10.3, (c) be accompanied by the Exercise Price for all shares of
Stock for which the Option is being exercised, and (d) include such
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other information, instruments, and documents as may be required to satisfy any
other condition to exercise contained in the Award Agreement. The Option shall
not be deemed to have been exercised unless all of the requirements of the
preceding provisions of this Subsection 6.5 have been satisfied.
6.6 INCENTIVE OPTION EXERCISES. Except as otherwise provided in Subsection
10.3, during a Holder's lifetime, only the Holder may exercise an Incentive
Option.
6.7 MEDIUM AND TIME OF PAYMENT. The Exercise Price of an Option shall be
payable in full upon the exercise of the Option (a) in cash or by an equivalent
means acceptable to the Committee, (b) on the Committee's prior consent, with
shares of Stock owned by the Holder (including shares received upon exercise of
the Option or shares of Restricted Stock already held by the Holder) and having
a Fair Market Value at least equal to the aggregate Exercise Price payable in
connection with such exercise, or (c) by any combination of clauses (a) and (b).
If the Committee elects to accept shares of Stock in payment of all or any
portion of the Exercise Price, then (for purposes of payment of the Exercise
Price) those shares of Stock shall be deemed to have a cash value equal to their
aggregate Fair Market Value determined as of the date the certificate for such
shares is delivered to the Corporation. If the Committee elects to accept shares
of Restricted Stock in payment of all or any portion of the Exercise Price, then
an equal number of shares issued pursuant to the exercise shall be restricted on
the same terms and for the restriction period remaining on the shares used for
payment.
6.8 PAYMENT WITH SALE PROCEEDS. In addition, at the request of a Holder
and to the extent permitted by applicable law, the Committee may (but shall not
be required to) approve arrangements with a brokerage firm under which that
brokerage firm, on behalf of the Holder, shall pay to the Corporation the
Exercise Price of the Option being exercised and the Corporation shall promptly
deliver the exercised shares of Stock to the brokerage firm. To accomplish this
transaction, the Holder must deliver to the Corporation an Exercise Notice
containing irrevocable instructions from the Holder to the Corporation to
deliver the Stock certificates representing the shares of Stock directly to the
broker. Upon receiving a copy of the Exercise Notice acknowledged by the
Corporation, the broker shall sell that number of shares of Stock or loan the
Holder an amount sufficient to pay the Exercise Price and any withholding
obligations due. The broker then shall deliver to the Corporation that portion
of the sale or loan proceeds necessary to cover the Exercise Price and any
withholding obligations due. The Committee shall not approve any transaction of
this nature if the Committee believes that the transaction would give rise to
the Holder's liability for short-swing profits under Section 16(b) of the
Exchange Act.
6.9 PAYMENT OF TAXES. The Committee may, in its discretion, require a
Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation), at the time of the exercise
of an Option or thereafter, the amount that the Committee deems necessary to
satisfy the Corporation's or its Subsidiary's current or future obligation to
withhold federal, state, or local income or other taxes that the Holder incurs
by exercising an Option. In connection with the exercise of an Option requiring
tax withholding, a Holder may (a) direct the Corporation to withhold from the
shares of Stock to be issued to the Holder the number of shares necessary to
satisfy the Corporation's obligation to withhold taxes, that determination to be
based on the shares' Fair Market Value as of the date of exercise; (b) deliver
to the Corporation sufficient shares of Stock (based upon the Fair Market Value
as of the date of such delivery) to satisfy the Corporation's tax withholding
obligation, which tax withholding obligation is based on the shares' Fair Market
Value as of the later of the date of exercise or the date as of which the shares
of Stock issued in connection with such exercise become includible in the income
of the Holder; or (c) deliver sufficient cash to the Corporation to satisfy its
tax withholding obligations. Holders who elect to use such a Stock withholding
feature must make the election at the time and in the manner that the Committee
prescribes. The Committee may, at its sole option, deny any Holder's request to
satisfy withholding obligations through Stock instead of cash. In the event the
Committee subsequently determines that the aggregate Fair Market Value (as
determined above) of any shares of Stock withheld or delivered as payment
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of any tax withholding obligation is insufficient to discharge that tax
withholding obligation, then the Holder shall pay to the Corporation,
immediately upon the Committee's request, the amount of that deficiency in the
form of payment requested by the Committee.
6.10 LIMITATION ON AGGREGATE VALUE OF SHARES THAT MAY BECOME FIRST
EXERCISABLE DURING ANY CALENDAR YEAR UNDER AN INCENTIVE OPTION. Except as
otherwise provided in Subsection 9.3, with respect to any Incentive Option
granted under the Plan, the aggregate Fair Market Value of shares of Stock
subject to an Incentive Option and the aggregate Fair Market Value of shares of
Stock or stock of any Subsidiary (or a predecessor of the Corporation or a
Subsidiary) subject to any other incentive stock option (within the meaning of
Section 422 of the Code) of the Corporation or its Subsidiaries (or a
predecessor corporation of any such corporation) that first become purchasable
by a Holder in any calendar year may not (with respect to that Holder) exceed
$100,000, or such other amount as may be prescribed under Section 422 of the
Code or applicable regulations or rulings from time to time. As used in the
previous sentence, Fair Market Value shall be determined as of the Date of Grant
of the Incentive Option. For purposes of this Subsection 6.10, "predecessor
corporation" means (a) a corporation that was a party to a transaction described
in Section 424(a) of the Code (or which would be so described if a substitution
or assumption under that Section had been effected) with the Corporation, (b) a
corporation which, at the time the new incentive stock option (within the
meaning of Section 422 of the Code) is granted, is a Subsidiary of the
Corporation or a predecessor corporation of any such corporations, or (c) a
predecessor corporation of any such corporations. Failure to comply with this
provision shall not impair the enforceability or exercisability of any Option,
but shall cause the excess amount of shares to be reclassified in accordance
with the Code.
6.11 NO FRACTIONAL SHARES. The Corporation shall not in any case be
required to sell, issue, or deliver a fractional share with respect to any
Option. In lieu of the issuance of any fractional share of Stock, the
Corporation shall pay to the Holder an amount in cash equal to the same fraction
(as the fractional Stock) of the Fair Market Value of a share of Stock
determined as of the date of the applicable Exercise Notice.
6.12 MODIFICATION, EXTENSION, AND RENEWAL OF OPTIONS. Subject to the terms
and conditions of and within the limitations of the Plan, Rule 16b-3, and any
consent required by the last sentence of this Subsection 6.12, the Committee may
(a) modify, extend, or renew outstanding Options granted under the Plan, (b)
accept the surrender of Options outstanding hereunder (to the extent not
previously exercised) and authorize the granting of new Options in substitution
for outstanding Options (to the extent not previously exercised), and (c) amend
the terms of an Incentive Option at any time to include provisions that have the
effect of changing the Incentive Option to a Nonstatutory Option. Nevertheless,
without the consent of the Holder, the Committee may not modify any outstanding
Options so as to specify a higher or lower Exercise Price or accept the
surrender of outstanding Incentive Options and authorize the granting of new
Options in substitution therefor specifying a higher or lower Exercise Price. In
addition, no modification of an Option granted hereunder shall, without the
consent of the Holder, alter or impair any rights or obligations under any
Option theretofore granted to such Holder under the Plan except, with respect to
Incentive Options, as may be necessary to satisfy the requirements of Section
422 of the Code or as permitted in clause (c) of this Subsection 6.12.
6.13 OTHER AGREEMENT PROVISIONS. Subject in all respects to Section 5, the
Award Agreements authorized under the Plan shall contain such provisions in
addition to those required by the Plan (including, without limitation,
restrictions or the removal of restrictions upon the exercise of the Option and
the retention or transfer of shares thereby acquired) as the Committee may deem
advisable. Each Award Agreement shall identify the Option evidenced thereby as
an Incentive Option or Nonstatutory Option, as the case may be, and no Award
Agreement shall cover both an Incentive Option and a Nonstatutory Option. Each
Award Agreement relating to an Incentive Option granted hereunder shall contain
such limitations and restrictions upon the exercise of the Incentive Option to
which it relates as shall be necessary for the Incentive Option to which such
Award Agreement relates to constitute an incentive stock option, as defined in
Section 422 of the Code.
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SECTION 7. STOCK APPRECIATION RIGHTS
All Stock Appreciation Rights granted under the Plan shall comply with, and
the related Award Agreements shall be deemed to include and be subject to, the
terms and conditions set forth in this Section 7 (to the extent each term and
condition applies to the form of Stock Appreciation Right) and also the terms
and conditions set forth in Sections 9 and 10; PROVIDED, HOWEVER, that the
Committee may authorize an Award Agreement related to a Stock Appreciation Right
that expressly contains terms and provisions that differ from the terms and
provisions set forth in Subsections 9.2, 9.3, and 9.4 and any of the terms and
provisions of Section 10 (other than Subsection 10.9).
7.1 FORM OF RIGHT. A Stock Appreciation Right may be granted to an
Eligible Individual (a) in connection with an Option, either at the time of
grant or at any time during the term of the Option, or (b) independent of an
Option.
7.2 RIGHTS RELATED TO OPTIONS. A Stock Appreciation Right granted pursuant
to an Option shall entitle a Holder, upon exercise, to surrender that Option or
any portion thereof, to the extent unexercised, and to receive payment of an
amount computed pursuant to Subsection 7.2(b). That Option shall then cease to
be exercisable to the extent surrendered. Stock Appreciation Rights granted in
connection with an Option shall be subject to the terms of the Award Agreement
governing the Option, which shall comply with the following provisions in
addition to those applicable to Options:
(a) EXERCISE AND TRANSFER. Subject to Subsection 10.10, a Stock
Appreciation Right granted in connection with an Option shall be exercisable
only at such time or times and only to the extent that the related Option is
exercisable and shall not be transferable except to the extent that the
related Option is transferable.
(b) VALUE OF RIGHT. Upon the exercise of a Stock Appreciation Right
related to an Option, a Holder shall be entitled to receive payment from the
Corporation of an amount determined by Multiplying:
(i) The difference obtained by subtracting the Exercise Price of a
share of Stock specified in the related Option from the Fair Market Value
of a share of Stock on the date of exercise of the Stock Appreciation
Right, by
(ii) The number of shares as to which that Stock Appreciation Right
has been exercised.
7.3 RIGHT WITHOUT OPTION. A Stock Appreciation Right granted independent
of an Option shall be exercisable as determined by the Committee and set forth
in the Award Agreement governing the Stock Appreciation Right, which Award
Agreement shall comply with the following provisions:
(a) NUMBER OF SHARES. Each Award Agreement shall state the total
number of shares of Stock to which the Stock Appreciation Right relates.
(b) VESTING. Each Award Agreement shall state the time or periods in
which the right to exercise the Stock Appreciation Right or a portion
thereof shall vest and the number of shares of Stock for which the right to
exercise the Stock Appreciation Right shall vest at each such time or
period.
(c) EXPIRATION OF RIGHTS. Each Award Agreement shall state the date at
which the Stock Appreciation Rights shall expire if not previously
exercised.
(d) VALUE OF RIGHT. Each Stock Appreciation Right shall entitle a
Holder, upon exercise thereof, to receive payment of an amount determined by
multiplying:
(i) The difference obtained by subtracting the Fair Market Value of a
share of Stock on the Date of Grant of the Stock Appreciation Right from
the Fair Market Value of a share of Stock on the date of exercise of that
Stock Appreciation Right, by
(ii) The number of shares as to which the Stock Appreciation Right
has been exercised.
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7.4 LIMITATIONS ON RIGHTS. Notwithstanding Subsections 7.2(b) and 7.3(d),
the Committee may limit the amount payable upon exercise of a Stock Appreciation
Right. Any such limitation must be determined as of the Date of Grant and be
noted on the Award Agreement evidencing the Holder's Stock Appreciation Right.
7.5 PAYMENT OF RIGHTS. Payment of the amount determined under Subsection
7.2(b) or 7.3(d) and Subsection 7.4 may be made, in the sole discretion of the
Committee, unless specifically provided otherwise in the Award Agreement, solely
in whole shares of Stock valued at Fair Market Value on the date of exercise of
the Stock Appreciation Right, solely in cash, or in a combination of cash and
whole shares of Stock. If the Committee decides to make full payment in shares
of Stock and the amount payable results in a fractional share, payment for the
fractional share shall be made in cash.
7.6 PAYMENT OF TAXES. The Committee may, in its discretion, require a
Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation), at the time of the exercise
of a Stock Appreciation Right or thereafter, the amount that the Committee deems
necessary to satisfy the Corporation's or its Subsidiary's current or future
obligation to withhold federal, state, or local income or other taxes that the
Holder incurs by exercising a Stock Appreciation Right. In connection with the
exercise of a Stock Appreciation Right requiring tax withholding, a Holder may
(a) direct the Corporation to withhold from the shares of Stock to be issued to
the Holder the number of shares necessary to satisfy the Corporation's
obligation to withhold taxes, that determination to be based on the shares' Fair
Market Value as of the date of exercise; (b) deliver to the Corporation
sufficient shares of Stock (based upon the Fair Market Value as of the date of
such delivery) to satisfy the Corporation's tax withholding obligation, which
tax withholding obligation is based on the shares' Fair Market Value as of the
later of the date of exercise or the date as of which the shares of Stock issued
in connection with such exercise become includible in the income of the Holder;
or (c) deliver sufficient cash to the Corporation to satisfy its tax withholding
obligation. Holders who elect to have Stock withheld pursuant to (a) or (b)
above must make the election at the time and in the manner that the Committee
prescribes. The Committee may, in its sole discretion, deny any Holder's request
to satisfy withholding obligation through Stock instead of cash. In the event
the Committee subsequently determines that the aggregate Fair Market Value (as
determined above) of any shares of Stock withheld or delivered as payment of any
tax withholding obligation is insufficient to discharge that tax withholding
obligation, then the Holder shall pay to the Corporation, immediately upon the
Committee's request, the amount of that deficiency in the form of payment
requested by the Committee.
7.7 OTHER AGREEMENT PROVISIONS. The Award Agreements authorized relating
to Stock Appreciation Rights shall contain such provisions in addition to those
required by the Plan (including, without limitation, restrictions or the removal
of restrictions upon the exercise of the Stock Appreciation Right and the
retention or transfer of shares thereby acquired) as the Committee may deem
advisable.
SECTION 8. RESTRICTED STOCK AWARDS
All Restricted Stock Awards granted under the Plan shall comply with and be
subject to, and the related Award Agreements shall be deemed to include, the
terms and conditions set forth in this Section 8 and also to the terms and
conditions set forth in Sections 9 and 10; PROVIDED, HOWEVER, that the Committee
may authorize an Award Agreement related to a Restricted Stock Award that
expressly contains terms and provisions that differ from the terms and
provisions set forth in Subsections 9.2, 9.3, and 9.4 and the terms and
provisions set forth in Section 10 (other than Subsections 10.8 and 10.9).
8.1 RESTRICTIONS. All shares of Restricted Stock Awards granted or sold
pursuant to the Plan shall be subject to the following conditions:
(a) TRANSFERABILITY. The shares may not be sold, transferred, or
otherwise alienated or hypothecated until the restrictions are removed or
expire.
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(b) CONDITIONS TO REMOVAL OF RESTRICTIONS. Conditions to removal or
expiration of the restrictions may include, but are not required to be
limited to, continuing employment or service as a director, officer,
consultant, or advisor or achievement of performance objectives described in
the Award Agreement.
(c) LEGEND. Each certificate representing Restricted Stock Awards
granted pursuant to the Plan shall bear a legend making appropriate
reference to the restrictions imposed.
(d) POSSESSION. The Committee may require the Corporation to retain
physical custody of the certificates representing Restricted Stock Awards
during the restriction period and may require a Holder of the Award to
execute stock powers in blank for those certificates and deliver those stock
powers to the Corporation, or the Committee may require the Holder to enter
into an escrow agreement providing that the certificates representing
Restricted Stock Awards granted or sold pursuant to the Plan shall remain in
the physical custody of an escrow holder until all restrictions are removed
or expire.
(e) OTHER CONDITIONS. The Committee may impose other conditions on any
shares granted or sold as Restricted Stock Awards pursuant to the Plan as it
may deem advisable, including without limitation (i) restrictions under the
Securities Act or Exchange Act, (ii) the requirements of any securities
exchange upon which the shares or shares of the same class are then listed,
and (iii) any state securities law applicable to the shares.
8.2 EXPIRATION OF RESTRICTIONS. The restrictions imposed in Subsection 8.1
on Restricted Stock Awards shall lapse as determined by the Committee and set
forth in the applicable Award Agreement, and the Corporation shall promptly
deliver to the Holder of the Restricted Stock Award a certificate representing
the number of shares for which restrictions have lapsed, free of any restrictive
legend relating to the lapsed restrictions. Each Restricted Stock Award may have
a different restriction period as determined by the Committee in its sole
discretion. The Committee may, in its discretion, prospectively reduce the
restriction period applicable to a particular Restricted Stock Award.
8.3 RIGHTS AS A STOCKHOLDER. Subject to the provisions of Subsections 8.1
and 10.9, the Committee may, in its discretion, determine what rights, if any, a
Holder shall have with respect to the Restricted Stock Awards granted or sold,
including the right to vote the shares and receive all dividends and other
distributions paid or made with respect thereto.
8.4 PAYMENT OF TAXES. The Committee may, in its discretion, require a
Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation) the amount that the Committee
deems necessary to satisfy the Corporation's or its Subsidiary's current or
future obligation to withhold federal, state, or local income or other taxes
that the Holder incurs by reason of the Restricted Stock Award. A Holder may (a)
direct the Corporation to withhold from the shares of Stock to be issued to the
Holder the number of shares necessary to satisfy the Corporation's obligation to
withhold taxes, that determination to be based on the shares' Fair Market Value
as of the date on which tax withholding is to be made; (b) deliver to the
Corporation sufficient shares of Stock (based upon the Fair Market Value as of
the date of such delivery) to satisfy the Corporation's tax withholding
obligation, which tax withholding obligation is based on the shares' Fair Market
Value as of the later of the date of issuance or the date as of which the shares
of Stock issued become includible in the income of the Holder; or (c) deliver
sufficient cash to the Corporation to satisfy its tax withholding obligations.
Holders who elect to have Stock withheld pursuant to (a) or (b) above must make
the election at the time and in the manner that the Committee prescribes. The
Committee may, in its sole discretion, deny any Holder's request to satisfy
withholding obligations through Stock instead of cash. In the event the
Committee subsequently determines that the aggregate Fair Market Value (as
determined above) of any shares of Stock withheld or delivered as payment of any
tax withholding obligation is insufficient to discharge that tax withholding
obligation, then the Holder shall pay to the Corporation, immediately upon the
Committee's request, the amount of that deficiency.
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8.5 OTHER AGREEMENT PROVISIONS. The Award Agreements relating to
Restricted Stock Awards shall contain such provisions in addition to those
required by the Plan as the Committee may deem advisable.
SECTION 9. ADJUSTMENT PROVISIONS
9.1 ADJUSTMENT OF AWARDS AND AUTHORIZED STOCK. The terms of an Award and
the number of shares of Stock authorized pursuant to Subsection 2.1 for issuance
under the Plan shall be subject to adjustment from time to time, in accordance
with the following provisions:
(a) If at any time, or from time to time, the Corporation shall
subdivide as a whole (by reclassification, by a Stock split, by the issuance
of a distribution on Stock payable in Stock, or otherwise) the number of
shares of Stock then outstanding into a greater number of shares of Stock,
then (i) the maximum number of shares of Stock available for the Plan as
provided in Subsection 2.1 shall be increased proportionately, and the kind
of shares or other securities available for the Plan shall be appropriately
adjusted, (ii) the number of shares of Stock (or other kind of shares or
securities) that may be acquired under any Award shall be increased
proportionately, and (iii) the price (including the Exercise Price) for each
share of Stock (or other kind of shares or securities) subject to then
outstanding Awards shall be reduced proportionately, without changing the
aggregate purchase price or value as to which outstanding Awards remain
exercisable or subject to restrictions.
(b) If at any time, or from time to time, the Corporation shall
consolidate as a whole (by reclassification, reverse Stock split, or
otherwise) the number of shares of Stock then outstanding into a lesser
number of shares of Stock, (i) the maximum number of shares of Stock
available for the Plan as provided in Subsection 2.1 shall be decreased
proportionately, and the kind of shares or other securities available for
the Plan shall be appropriately adjusted, (ii) the number of shares of Stock
(or other kind of shares or securities) that may be acquired under any Award
shall be decreased proportionately, and (iii) the price (including the
Exercise Price) for each share of Stock (or other kind of shares or
securities) subject to then outstanding Awards shall be increased
proportionately, without changing the aggregate purchase price or value as
to which outstanding Awards remain exercisable or subject to restrictions.
(c) Whenever the number of shares of Stock subject to outstanding Awards
and the price for each share of Stock subject to outstanding Awards are
required to be adjusted as provided in this Subsection 9.1, the Committee
shall promptly prepare a notice setting forth, in reasonable detail, the
event requiring adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the change in price and the number
of shares of Stock, other securities, cash, or property purchasable subject
to each Award after giving effect to the adjustments. The Committee shall
promptly give each Holder such a notice.
(d) Adjustments under Subsections 9.1(a) and (b) shall be made by the
Committee, and its determination as to what adjustments shall be made and
the extent thereof shall be final, binding, and conclusive. No fractional
interest shall be issued under the Plan on account of any such adjustments.
9.2 CHANGES IN CONTROL. Upon the occurrence of a Change in Control, (a)
each Holder of an Option shall immediately be granted corresponding Stock
Appreciation Rights; (b) all outstanding Stock Appreciation Rights and Options
shall immediately become fully vested and exercisable in full, including that
portion of any Stock Appreciation Right or Option that pursuant to the terms and
provisions of the applicable Award Agreement had not yet become exercisable (the
total number of shares of Stock as to which a Stock Appreciation Right or Option
is exercisable upon the occurrence of a Change in Control is referred to herein
as the "Total Shares"); and (c) the restriction period of any Restricted Stock
Award shall immediately be accelerated and the restrictions shall expire. If a
Change in Control involves a Restructuring or occurs in connection with a series
of related transactions involving a Restructuring and if such Restructuring is
in the form of a Non-Surviving Event and as a
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part of such Restructuring shares of Stock, other securities, cash, or property
shall be issuable or deliverable in exchange for Stock, then a Holder of an
Award shall be entitled to purchase or receive (in lieu of the Total Shares that
the Holder would otherwise be entitled to purchase or receive), as appropriate
for the form of Award, the number of shares of Stock, other securities, cash, or
property to which that number of Total Shares would have been entitled in
connection with such Restructuring (and, for Options, at an aggregate exercise
price equal to the Exercise Price that would have been payable if that number of
Total Shares had been purchased on the exercise of the Option immediately before
the consummation of the Restructuring). Nothing in this Subsection 9.2 shall
impose on a Holder the obligation to exercise any Award immediately before or
upon the Change of Control or cause the Holder to forfeit the right to exercise
the Award during the remainder of the original term of the Award because of a
Change in Control.
9.3 RESTRUCTURING WITHOUT CHANGE IN CONTROL. In the event a Restructuring
shall occur at any time while there is any outstanding Award hereunder and that
Restructuring does not occur in connection with a Change in Control or a series
of related transactions involving a Change in Control, then:
(a) no outstanding Option or Stock Appreciation Right shall immediately
become fully vested and exercisable in full merely because of the occurrence
of the Restructuring;
(b) no Holder of an Option shall automatically be granted corresponding
Stock Appreciation Rights;
(c) the restriction period of any Restricted Stock Award shall not
immediately be accelerated and the restrictions expire merely because of the
occurrence of the Restructuring; and
(d) at the option of the Committee, the Committee may (but shall not be
required to) cause the Corporation to take any one or more of the following
actions:
(i) accelerate in whole or in part the time of the vesting and
exercisability of any one or more of the outstanding Stock Appreciation
Rights and Options so as to provide that those Stock Appreciation Rights
and Options shall be exercisable before, upon, or after the consummation
of the Restructuring;
(ii) grant each Holder of an Option corresponding Stock Appreciation
Rights;
(iii) accelerate in whole or in part the expiration of some or all of
the restrictions on any Restricted Stock Award;
(iv) if the Restructuring is in the form of a Non-Surviving Event,
cause the surviving entity to assume in whole or in part any one or more
of the outstanding Awards upon such terms and provisions as the Committee
deems desirable; or
(v) redeem in whole or in part any one or more of the outstanding
Awards (whether or not then exercisable) in consideration of a cash
payment, as such payment may be reduced for tax withholding obligations
as contemplated in Subsections 6.9, 7.6, or 8.4, as applicable, in an
amount equal to:
(A) for Options and Stock Appreciation Rights granted in
connection with Options, the excess of (1) the Fair Market Value,
determined as of the date immediately preceding the consummation of
the Restructuring, of the aggregate number of shares of Stock subject
to the Award and as to which the Award is being redeemed over (2) the
Exercise Price for that number of shares of Stock;
(B) for Stock Appreciation Rights not granted in connection with
an Option, the excess of (1) the Fair Market Value, determined as of
the date immediately preceding the consummation of the Restructuring,
of the aggregate number of shares of Stock subject to the Award and
as to which the Award is being redeemed over (2) the Fair Market
Value of the number of shares of Stock on the Date of Grant; and
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(C) for Restricted Stock Awards, the Fair Market Value,
determined as of the date immediately preceding the consummation of
the Restructuring, of the aggregate number of shares of Stock subject
to the Award and as to which the Award is being redeemed.
The Corporation shall promptly notify each Holder of any election or action
taken by the Corporation under this Subsection 9.3. In the event of any election
or action taken by the Corporation pursuant to this Subsection 9.3 that requires
the amendment or cancellation of any Award Agreement as may be specified in any
notice to the Holder thereof, the Holder shall promptly deliver that Award
Agreement to the Corporation in order for that amendment or cancellation to be
implemented by the Corporation and the Committee. The failure of the Holder to
deliver any such Award Agreement to the Corporation as provided in the preceding
sentence shall not in any manner affect the validity or enforceability of any
action taken by the Corporation and the Committee under this Subsection 9.3,
including without limitation any redemption of an Award as of the consummation
of a Restructuring. Any cash payment to be made by the Corporation pursuant to
this Subsection 9.3 in connection with the redemption of any outstanding Awards
shall be paid to the Holder thereof currently with the delivery to the
Corporation of the Award Agreement evidencing that Award; PROVIDED, HOWEVER,
that any such redemption shall be effective upon the consummation of the
Restructuring notwithstanding that the payment of the redemption price may occur
subsequent to the consummation. If all or any portion of an outstanding Award is
to be exercised or accelerated upon or after the consummation of a Restructuring
that does not occur in connection with a Change in Control and is in the form of
a Non-Surviving Event, and as a part of that Restructuring shares of stock,
other securities, cash, or property shall be issuable or deliverable in exchange
for Stock, then the Holder of the Award shall thereafter be entitled to purchase
or receive (in lieu of the number of shares of Stock that the Holder would
otherwise be entitled to purchase or receive) the number of shares of Stock,
other securities, cash, or property to which such number of shares of Stock
would have been entitled in connection with the Restructuring (and, for Options,
upon payment of the aggregate exercise price equal to the Exercise Price that
would have been payable if that number of Total Shares had been purchased on the
exercise of the Option immediately before the consummation of the Restructuring)
and such Award Agreement shall be subject to adjustments that shall be as nearly
equivalent as may be practical to the adjustments provided for in this Section
9. Notwithstanding the provisions of this Subsection 9.3, the Committee shall
not have the power or authority to take any action pursuant to this Subsection
9.3 that causes the Plan not to be in compliance with the requirements of Rule
16b-3 and any such action purported to be taken by the Committee shall be null
and void and without any force or effect.
9.4 NOTICE OF RESTRUCTURING. The Corporation shall attempt to keep all
Holders informed with respect to any Restructuring or of any potential
Restructuring to the same extent that the Corporation's stockholders are
informed by the Corporation of any such event or potential event.
SECTION 10. ADDITIONAL PROVISIONS
10.1 TERMINATION OF EMPLOYMENT. If a Holder is an Eligible Individual
because the Holder is an Employee and if that employment relationship is
terminated for any reason other than (a) Normal Retirement, (b) that Holder's
death, or (c) that Holder's Disability (hereinafter defined), then any and all
Awards held by such Holder in such Holder's capacity as an Employee as of the
date of the termination that are not yet exercisable (or for which restrictions
have not lapsed) shall become null and void as of the date of such termination
and the portion, if any, of such Awards that are exercisable as of the date of
termination shall be exercisable for a period of the lesser of (a) the remainder
of the term of the Award or (b) the date which is 180 days after the date of
termination. If a Holder is an Eligible Individual because such Holder is an
Employee and if that employment relationship is terminated as a result of (a)
Normal Retirement, (b) that Holder's death, or (c) that Holder's Disability,
then any and all Awards held by such Holder in such Holder's capacity as an
Employee as of the date of termination that are not yet exercisable (or for
which restrictions have not lapsed) shall become exercisable (and the
restrictions thereon, if any, shall lapse) as of the date of termination, and
all such Awards held by that Holder as of the date of termination that are
exercisable (either as a result of this sentence or otherwise) shall be
exercisable for a period of the lesser of (a) the remainder
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of the term of the Award or (b) the date which is 180 days after the date of
termination. Any portion of any such Award not exercised upon the expiration of
the lesser of the periods specified in (a) or (b) of the preceding two sentences
shall be null and void upon the expiration of such period, as applicable.
10.2 OTHER LOSS OF ELIGIBILITY. If a Holder is an Eligible Individual
because the Holder is serving in a capacity other than as an Employee and if
that capacity is terminated for any reason other than the Holder's death or
Disability, then that portion, if any, of any and all Awards held by the Holder
that were granted because of that capacity which are not yet exercisable (or for
which restrictions have not lapsed) as of the date of the termination shall
become null and void as of the date of the termination; PROVIDED, HOWEVER, that
the portion, if any, of any and all Awards held by the Holder that are then
exercisable as of the date of the termination shall survive the termination and
shall be exercisable for a period of the lesser of (a) the remainder of the term
of the Award or (b) 180 days following the date such capacity terminated. If a
Holder is an Eligible Individual because the Holder is serving in a capacity
other than as an Employee and if that capacity is terminated by reason of the
Holder's death or Disability, then the portion, if any, of any and all Awards
held by the Holder that are not yet exercisable (or for which restrictions have
not lapsed) as of the date of that termination for death or Disability shall
become exercisable (and the restrictions thereon, if any, shall lapse) and all
such Awards held by that Holder as of the date of termination that are
exercisable (either as a result of this sentence or otherwise) shall be
exercisable for a period of the lesser of (a) the remainder of the term of the
Award or (b) the date which is 180 days after the date of termination. Any
portion of an Award not exercised upon the expiration of the lesser of the
periods specified in (a) or (b) of the preceding two sentences shall be null and
void upon the expiration of such period, as applicable.
10.3 DEATH OR DISABILITY. Upon the death or Disability of a Holder, any
and all Awards held by the Holder that are not yet exercisable (or for which
restrictions have not lapsed) as of the date of the Holder's death or Disability
may be exercised by, in the case of the Holder's Disability, the Holder, his
guardian or his legal representative or, in the case of the Holder's death, by
the Holder's legal representatives, heirs, legatees, or distributees, in each
case for the periods prescribed in Subsection 10.1 or Subsection 10.2, as
applicable. "Disability" shall have the meaning given it in the employment
agreement of the Holder; PROVIDED, HOWEVER, that if that the Holder has no
employment agreement, "Disability" shall mean, as determined by the Board of
Directors in the sole discretion exercised in good faith of the Board of
Directors, a physical or mental impairment of sufficient severity that either
the Holder is unable to continue performing the duties he performed before such
impairment or the Holder's condition entitles him to disability benefits under
any insurance or employee benefit plan of the Corporation or its Subsidiaries
and that impairment or condition is cited by the Corporation as the reason for
termination of the Holder's employment or participation as a member of the Board
of Directors.
10.4 LEAVE OF ABSENCE. With respect to an Award, the Committee may, in its
sole discretion, determine that any Holder who is on leave of absence for any
reason will be considered to still be in the employ of the Corporation, provided
that rights to that Award during a leave of absence will be limited to the
extent to which those rights were earned, vested, or exercisable when the leave
of absence began.
10.5 TRANSFERABILITY OF AWARDS. In addition to such other terms and
conditions as may be included in a particular Award Agreement, an Award
requiring exercise shall be exercisable during a Holder's lifetime only by that
the Holder or by that the Holder's guardian or legal representative. An Award
requiring exercise shall not be transferrable other than by will or the laws of
descent and distribution.
10.6 FORFEITURE AND RESTRICTIONS ON TRANSFER. Each Award Agreement may
contain or otherwise provide for conditions giving rise to the forfeiture of the
Stock acquired pursuant to an Award or otherwise and may also provide for those
restrictions on the transferability of shares of the Stock acquired pursuant to
an Award or otherwise that the Committee in its sole and absolute discretion may
deem proper or advisable. The conditions giving rise to forfeiture may include,
but need not be
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limited to, the requirement that the Holder render substantial services to the
Corporation or its Subsidiaries for a specified period of time. The restrictions
on transferability may include, but need not be limited to, options and rights
of first refusal in favor of the Corporation and stockholders of the Corporation
other than the Holder of such shares of Stock who is a party to the particular
Award Agreement or a subsequent holder of the shares of Stock who is bound by
that Award Agreement.
10.7 DELIVERY OF CERTIFICATES OF STOCK. Subject to Subsection 10.8, the
Corporation shall promptly issue and deliver a certificate representing the
number of shares of Stock as to which (a) an Option has been exercised after the
Corporation receives an Exercise Notice and upon receipt by the Corporation of
the Exercise Price and any tax withholding as may be requested, (b) a Stock
Appreciation Right has been exercised (to the extent the Committee determines to
pay such Stock Appreciation Right in shares of Stock pursuant to Subsection 7.5)
and upon receipt by the Corporation of any tax withholding as may be requested,
and (c) restrictions have lapsed with respect to a Restricted Stock Award and
upon receipt by the Corporation of any tax withholding as may be requested. The
value of the shares of Stock or cash transferable because of an Award under the
Plan shall not bear any interest owing to the passage of time, except as may be
otherwise provided in an Award Agreement. If a Holder is entitled to receive
certificates representing Stock received for more than one form of Award under
the Plan, separate Stock certificates shall be issued with respect to Incentive
Options and Nonstatutory Options.
10.8 CONDITIONS TO DELIVERY OF STOCK. Nothing herein or in any Award
granted hereunder or any Award Agreement shall require the Corporation to issue
any shares with respect to any Award if that issuance would, in the opinion of
counsel for the Corporation, constitute a violation of the Securities Act or any
similar or superseding statute or statutes, any other applicable statute or
regulation, or the rules of any applicable securities exchange or securities
association, as then in effect. At the time of any exercise of an Option or
Stock Appreciation Right, or at the time of any grant of a Restricted Stock
Award, the Corporation may, as a condition precedent to the exercise of such
Option or Stock Appreciation Right or vesting of any Restricted Stock Award,
require from the Holder of the Award (or in the event of his death, his legal
representatives, heirs, legatees, or distributees) such written representations,
if any, concerning the Holder's intentions with regard to the retention or
disposition of the shares of Stock being acquired pursuant to the Award and such
written covenants and agreements, if any, as to the manner of disposal of such
shares as, in the opinion of counsel to the Corporation, may be necessary to
ensure that any disposition by that Holder (or in the event of the Holder's
death, his legal representatives, heirs, legatees, or distributees) will not
involve a violation of the Securities Act or any similar or superseding statute
or statutes, any other applicable state or federal statute or regulation, or any
rule of any applicable securities exchange or securities association, as then in
effect.
10.9 CERTAIN DIRECTORS AND OFFICERS. With respect to Holders who are
directors or officers of the Corporation or any of its Subsidiaries and who are
subject to Section 16(b) of the Exchange Act, (i) Awards and all rights under
the Plan shall be exercisable during a Holder's lifetime only by the Holder or
the Holder's guardian or legal representative, but not for at least six months
after the date of grant, as determined in accordance with Rule 16b-3, and (ii)
all Awards granted prior to the date the stockholders of the Corporation shall
have approved the Plan shall be subject to such stockholder approval, may not be
transferred or exercised, as applicable, until such stockholder approval is
obtained, and shall become null and void on the first anniversary of the
Effective Date if such stockholder approval is not obtained on or before the
Effective Date. In addition, no such officer or director shall have shares of
Stock withheld to pay tax withholding obligations within the first six months
after the date of grant of an Award, as determined in accordance with Rule
16b-3, unless permitted under Rule 16b-3 and agreed to by the Committee. Any
election by any such officer or director to have tax withholding obligations
satisfied by the withholding of shares of Stock shall be irrevocable and shall
be communicated to the Committee during the period beginning on the third day
following the date of release of quarterly or annual summary statements of sales
and earnings and ending on the twelfth business day following such date (the
"Window Period"), by an irrevocable
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election communicated to the Committee at least six months before the date of
exercise of the Award for which such withholding is desired, or as otherwise
permitted under Rule 16b-3. Any election by such an officer or director to
receive cash in full or partial settlement of a Stock Appreciation Right, as
well as any exercise by such individual of a Stock Appreciation Right for such
cash, in either case to the extent permitted under the applicable Award
Agreement or otherwise permitted by the Committee, shall be made during the
Window Period or within any other periods that the Committee shall specify from
time to time.
10.10 SECURITIES ACT LEGEND. Certificates for shares of Stock, when
issued, may have the following legend, or statements of other applicable
restrictions, endorsed thereon and may not be immediately transferable:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.
THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, TRANSFERRED, OR
OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY
TO THE ISSUER (WHICH, IN THE DISCRETION OF THE ISSUER, MAY INCLUDE AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH OFFER, SALE,
PLEDGE, TRANSFER, OR OTHER DISPOSITION WILL NOT VIOLATE APPLICABLE FEDERAL
OR STATE LAWS.
This legend shall not be required for shares of Stock issued pursuant to an
effective registration statement under the Securities Act.
10.11 LEGEND FOR RESTRICTIONS ON TRANSFER. Each certificate representing
shares issued to a Holder pursuant to an Award granted under the Plan shall, if
such shares are subject to any transfer restriction, including a right of first
refusal, provided for under the Plan or an Award Agreement, bear a legend that
complies with applicable law with respect to the restrictions on transferability
contained in this Subsection 10.11, such as:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY IMPOSED BY THAT CERTAIN INSTRUMENT ENTITLED
"PRONET INC. 1995 LONG-TERM INCENTIVE PLAN" AS ADOPTED BY PRONET INC. (THE
"CORPORATION"), ON MARCH 30, 1995, AND AN AGREEMENT THEREUNDER BETWEEN THE
CORPORATION AND THE INITIAL HOLDER THEREOF DATED , 199 , AND
MAY NOT BE TRANSFERRED, SOLD, OR OTHERWISE DISPOSED OF EXCEPT AS THEREIN
PROVIDED. THE CORPORATION WILL FURNISH A COPY OF SUCH INSTRUMENT AND
AGREEMENT TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE ON REQUEST
TO THE CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.
10.12 RIGHTS AS A STOCKHOLDER. A Holder shall have no right as a
stockholder with respect to any shares covered by his Award until a certificate
representing those shares is issued in his name. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash or other property) or
distributions or other rights for which the record date is before the date that
certificate is issued, except as contemplated by Section 9 hereof. Nevertheless,
dividends, dividend equivalent rights and voting rights may be extended to and
made part of any Award (other than Options or Stock Appreciation Rights)
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 payment denominated in Stock or units of
Stock.
10.13 FURNISH INFORMATION. Each Holder shall furnish to the Corporation
all information requested by the Corporation to enable it to comply with any
reporting or other requirement imposed upon the Corporation by or under any
applicable statute or regulation.
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10.14 OBLIGATION TO EXERCISE. The granting of an Award hereunder shall
impose no obligation upon a Holder to exercise the same or any part thereof.
10.15 ADJUSTMENTS TO AWARDS. Subject to the general limitations set forth
in Sections 5, 6, 7, and 9, the Committee may make any adjustment in the
exercise price of, the number of shares subject to, or the terms of a
Nonstatutory Option or Stock Appreciation Right by cancelling an outstanding
Nonstatutory Option or Stock Appreciation Right and regranting a Nonstatutory
Option or Stock Appreciation Right. Such adjustment shall be made by amending,
substituting, or regranting an outstanding Nonstatutory Option or Stock
Appreciation Right. Such amendment, substitution, or regrant may result in terms
and conditions that differ from the terms and conditions of the original
Nonstatutory Option or Stock Appreciation Right. The Committee may not, however,
impair the rights of any Holder of previously granted Nonstatutory Options or
Stock Appreciation Rights without that Holder's consent. If such action is
effected by amendment, such amendment shall be deemed effective as of the Date
of Grant of the amended Award.
10.16 REMEDIES. The Corporation shall be entitled to recover from a Holder
reasonable attorneys' fees incurred in connection with the enforcement of the
terms and provisions of the Plan and any Award Agreement whether by an action to
enforce specific performance or for damages for its breach or otherwise.
10.17 INFORMATION CONFIDENTIAL. As partial consideration for the granting
of each Award hereunder, a Holder shall agree with the Corporation that he will
keep confidential all information and knowledge that he has relating to the
manner and amount of his participation in the Plan; PROVIDED, HOWEVER, that such
information may be disclosed as required by law and may be given in confidence
to the Holder's spouse, tax or financial advisors, or to a financial institution
to the extent that such information is necessary to secure a loan. In the event
any breach of this promise comes to the attention of the Committee, it shall
take into consideration that breach in determining whether to recommend the
grant of any future Award to that Holder, as a factor mitigating against the
advisability of granting any such future Award to that Person.
10.18 CONSIDERATION. No Option or Stock Appreciation Right shall be
exercisable and no restriction on any Restricted Stock Award shall lapse with
respect to a Holder unless and until the Holder thereof shall have paid cash or
property to, or performed services for, the Corporation or any of its
Subsidiaries that the Committee believes is equal to or greater in value than
the par value of the Stock subject to such Award.
SECTION 11. EFFECTIVENESS, DURATION AND AMENDMENT OF PLAN
11.1 EFFECTIVENESS; DURATION. Notwithstanding the provisions of the Plan,
Awards granted prior to the date the stockholders of the Corporation approve the
Plan shall be subject to such stockholder approval and may not be transferred or
exercised, as applicable, until such stockholder approval is obtained. All such
Awards shall become null and void, and the Plan shall terminate, on the first
anniversary date of the Effective Date if such stockholder approval is not
obtained on or before such date. No Awards may be granted hereunder after the
date that is ten years from the earlier of (a) the date the Plan is adopted by
the Board of Directors or (b) the date the Plan is approved by the stockholders
of the Corporation.
11.2 AMENDMENT. The Committee may, insofar as permitted by law and subject
to ratification of the Board of Directors, with respect to any shares which, at
the time, are not subject to Awards, suspend or discontinue the Plan or revise
or amend it in any respect whatsoever and may amend any provision of the Plan or
any Award Agreement to make the Plan or the Award Agreement, or both, comply
with Section 16(b) of the Exchange Act and the exemptions from those sections in
the regulations thereunder. The Committee may also, subject to ratification of
the Board of Directors, amend, modify, suspend, or terminate the Plan for the
purpose of meeting or addressing any changes in other legal requirements
applicable to the Corporation or the Plan or for any other purpose permitted by
law. The Plan may not be amended without the consent of the holders of a
majority of the
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shares of Stock then outstanding to (a) increase materially the aggregate number
of shares of Stock that may be issued under the Plan (except for adjustments
pursuant to Section 9 hereof), (b) increase materially the benefits accruing to
Eligible Individuals under the Plan, or (c) modify materially the requirements
about eligibility for participation in the Plan; PROVIDED, HOWEVER, that such
amendments may be made without the consent of stockholders of the Corporation if
changes occur in law or other legal requirements (including Rule 16b-3 or
Section 162(m)) that would permit such changes. Notwithstanding the provisions
of this Subsection 11.2, the Committee specifically shall have the authority,
subject to ratification by the Board of Directors, to amend the Plan (without
approval of the holders of the shares of Stock then outstanding) to the extent
required to cause the Plan, as it relates to Options and Stock Appreciation
Rights granted to Eligible Individuals subject to Section 162(m), to comply with
the requirements for classification of Awards as "performance-based
compensation" under Section 162(m)(4)(C), except for such amendments that
require such stockholder approval under Section 162(m).
SECTION 12. GENERAL
12.1 APPLICATION OF FUNDS. The proceeds received by the Corporation from
the sale of shares pursuant to Awards may be used for any general corporate
purpose.
12.2 RIGHT OF THE CORPORATION AND SUBSIDIARIES TO TERMINATE
EMPLOYMENT. Nothing contained in the Plan, or in any Award Agreement, shall
confer upon any Holder the right to continue in the employ of the Corporation or
any Subsidiary or interfere in any way with the rights of the Corporation or any
Subsidiary to terminate the Holder's employment at any time.
12.3 NO LIABILITY FOR GOOD FAITH DETERMINATIONS. Neither the members of
the Board of Directors nor any member of the Committee shall be liable for any
act, omission or determination taken or made in good faith with respect to the
Plan or any Award granted under it; and members of the Board of Directors and
the Committee shall be entitled to indemnification and reimbursement by the
Corporation in respect of any claim, loss, damage, or expense (including
attorneys' fees, the costs of settling any suit, provided such settlement is
approved by independent legal counsel selected by the Corporation, and amounts
paid in satisfaction of a judgment, except a judgment based on a finding of bad
faith) arising therefrom to the full extent permitted by law and under any
directors' and officers' liability or similar insurance coverage that may from
time to time be in effect. This right to indemnification shall be in addition
to, and not a limitation on, any other indemnification rights any member of the
Board of Directors or the Committee may have.
12.4 OTHER BENEFITS. Participation in the Plan shall not preclude a Holder
from eligibility in any other stock or stock option plan of the Corporation or
any Subsidiary or any old age benefit, insurance, pension, profit sharing,
retirement, bonus, or other extra compensation plans that the Corporation or any
Subsidiary has adopted, or may, at any time, adopt for the benefit of its
Employees. Neither the adoption of the Plan by the Board of Directors nor the
submission of the Plan to the stockholders of the Corporation for approval shall
be construed as creating any limitations on the power of the Board of Directors
to adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of stock options and the awarding of stock and
cash otherwise than under the Plan and such arrangements may be either generally
applicable or applicable only in specific cases.
12.5 EXCLUSION FROM PENSION AND PROFIT-SHARING COMPENSATION. By acceptance
of an Award (regardless of form), as applicable, each Holder shall be deemed to
have agreed that the Award is special incentive compensation that will not be
taken into account in any manner as salary, compensation, or bonus in
determining the amount of any payment under any pension, retirement, or other
employee benefit plan of the Corporation or any Subsidiary unless any pension,
retirement, or other employee benefit plan of the Corporation or any Subsidiary
expressly provides that such Award shall be so considered for purposes of
determining the amount of any payment under any such plan. In addition, each
beneficiary of a deceased Holder shall be deemed to have agreed that the Award
will not
A-23
<PAGE>
affect the amount of any life insurance coverage, if any, provided by the
Corporation or a Subsidiary on the life of a Holder that is payable to the
beneficiary under any life insurance plan covering employees of the Corporation
or any Subsidiary.
12.6 EXECUTION OF RECEIPTS AND RELEASES. Any payment of cash or any
issuance or transfer of shares of Stock to a Holder, or to his legal
representative, heir, legatee, or distributee, in accordance with the provisions
hereof, shall, to the extent thereof, be in full satisfaction of all claims of
such persons hereunder. The Committee may require any Holder, legal
representative, heir, legatee, or distributee, as a condition precedent to such
payment, to execute a release and receipt therefor in such form as it shall
determine.
12.7 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 Holders who are entitled to cash, Stock, or rights thereto under
the Plan, any such accounts shall be used merely as a bookkeeping convenience.
The Corporation 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 Corporation nor the
Board of Directors nor 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
Corporation to any Holder 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 Corporation shall be deemed to be secured by any pledge or other encumbrance
on any property of the Corporation. Neither the Corporation nor the Board of
Directors 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.
12.8 NO GUARANTEE OF INTERESTS. Neither the Committee nor the Corporation
guarantees the Stock of the Corporation from loss or depreciation.
12.9 PAYMENT OF EXPENSES. All expenses incident to the administration,
termination, or protection of the Plan, including, but not limited to, legal and
accounting fees, shall be paid by the Corporation or its Subsidiaries.
12.10 CORPORATION RECORDS. Records of the Corporation or its Subsidiaries
regarding a Holder's period of employment, termination of employment and the
reason therefor, leaves of absence, re-employment, and other matters shall be
conclusive for all purposes hereunder, unless determined by the Committee to be
incorrect.
12.11 INFORMATION. The Corporation and its Subsidiaries shall, upon
request or as may be specifically required hereunder, furnish or cause to be
furnished all of the information or documentation which is necessary or required
by the Committee to perform its duties and functions under the Plan.
12.12 NO LIABILITY OF CORPORATION. The Corporation assumes no obligation
or responsibility to a Holder or his legal representatives, heirs, legatees, or
distributees for any act of, or failure to act on the part of, the Committee.
12.13 CORPORATION ACTION. Any action required of the Corporation shall be
by resolution of its Board of Directors or by a person authorized to act by
resolution of the Board of Directors.
12.14 SEVERABILITY. In the event that any provision of the Plan, or the
application hereof to any Person or circumstance, is held by a court of
competent jurisdiction to be invalid, illegal, or unenforceable in any respect
under present or future laws effective during the effective term of any such
provision, such invalid, illegal, or unenforceable provision shall be fully
severable; and the Plan shall then be construed and enforced as if such invalid,
illegal, or unenforceable provision had not been contained in the Plan; and the
remaining provisions of the Plan shall remain in full force and effect and shall
not be affected by the illegal, invalid, or unenforceable provision or by its
severance from the Plan. Furthermore, in lieu of each such illegal, invalid, or
unenforceable provision, there shall be
A-24
<PAGE>
added automatically as part of the Plan a provision as similar in terms to such
illegal, invalid, or unenforceable provision as may be possible and be legal,
valid, and enforceable. If any of the terms or provisions of the Plan conflict
with the requirements of Rule 16b-3 (as those terms or provisions are applied to
Eligible Individuals who are subject to Section 16(b) of the Exchange Act), then
those conflicting terms or provisions shall be deemed inoperative to the extent
they so conflict with the requirements of Rule 16b-3 and, in lieu of such
conflicting provision, there shall be added automatically as part of the Plan a
provision as similar in terms to such conflicting provision as may be possible
and not conflict with the requirements of Rule 16b-3. If any of the terms or
provisions of the Plan conflict with the requirements for classification of
Awards as "performance-based compensation" under Section 162(m)(4)(C) of the
Code (as those terms or provisions are applied to Options or Stock Appreciation
Rights granted to Eligible Individuals who are subject to Section 162(m) of the
Code), then those conflicting terms or provisions shall be deemed inoperative to
the extent they so conflict with such requirements of Section 162(m)(4)(C) of
the Code and, in lieu of such conflicting provision, there shall be added
automatically as part of the Plan a provision as similar in terms to such
conflicting provision as may be possible and not conflict with such requirements
of Section 162(m)(4)(C) of the Code. If any of the terms or provisions of the
Plan conflict with the requirements of Section 422 of the Code (with respect to
Incentive Options), then those conflicting terms or provisions shall be deemed
inoperative to the extent they so conflict with the requirements of Section 422
of the Code and, in lieu of such conflicting provision, there shall be added
automatically as part of the Plan a provision as similar in terms to such
conflicting provision as may be possible and not conflict with the requirements
of Section 422 of the Code. With respect to Incentive Options, if the Plan does
not contain any provision required to be included herein under Section 422 of
the Code, that provision shall be deemed to be incorporated herein with the same
force and effect as if that provision had been set out at length herein;
PROVIDED, HOWEVER, that, to the extent any Option that is intended to qualify as
an Incentive Option cannot so qualify, that Option (to that extent) shall be
deemed a Nonstatutory Option for all purposes of the Plan.
12.15 NOTICES. Whenever any notice is required or permitted hereunder,
such notice must be in writing and personally delivered or sent by mail. Any
notice required or permitted to be delivered hereunder shall be deemed to be
delivered on the date on which it is actually received, addressed to the
applicable party as specified in the applicable Award Agreement. The Corporation
or a Holder may change, at any time and from time to time, by written notice to
the other, the address which it or he had previously specified for receiving
notices. Until changed in accordance herewith, the Corporation and each Holder
shall specify as its and his address for receiving notices the address set forth
in the Award Agreement pertaining to the shares to which such notice relates.
Any person entitled to notice hereunder may waive such notice.
12.16 SUCCESSORS. The Plan shall be binding upon the Holder, his legal
representatives, heirs, legatees, and distributees, upon the Corporation, its
successors and assigns and upon the Committee and its successors.
12.17 HEADINGS. The titles and headings of Sections and Subsections are
included for convenience of reference only and are not to be considered in
construction of the provisions hereof.
12.18 GOVERNING LAW. All questions arising with respect to the provisions
of the Plan shall be determined by application of the laws of the State of
Delaware, without giving effect to any conflict of law provisions thereof,
except to the extent Delaware law is preempted by federal law. Questions arising
with respect to the provisions of an Award Agreement that are matters of
contract law shall be governed by the laws of the state specified in the Award
Agreement, except to the extent Delaware corporate law conflicts with the
contract law of such state, in which event Delaware corporate law, without
giving effect to any conflict of law provisions thereof, shall govern. The
obligation of the Corporation to sell and deliver Stock hereunder is subject to
applicable federal and state laws and to the approval of any governmental
authority required in connection with the authorization, issuance, sale, or
delivery of such Stock.
A-25
<PAGE>
12.19 AVAILABILITY OF EXEMPT TRANSACTIONS. Notwithstanding the provisions
of the Plan, nothing contained in the Plan shall prohibit any transactions
permitted by Rule 16a-2(d) promulgated under the Exchange Act to the extent such
transactions are approved by the Committee and are not in violation of, and do
not otherwise cause the Plan not to be in compliance with, Rule 16b-3.
12.20 WORD USAGE. Words used in the masculine shall apply to the feminine
where applicable, and wherever the context of the Plan dictates, the plural
shall be read as the singular and the singular as the plural.
IN WITNESS WHEREOF, ProNet Inc., acting by and through its officer hereunto
duly authorized, has executed this instrument this day of , 1995.
PRONET INC.
By: /s/ JACKIE R. KIMZEY
-----------------------------------
Jackie R. Kimzey
CHAIRMAN OF THE BOARD
A-26
<PAGE>
ANNEX A
PRONET INC.
INCENTIVE PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
AWARD FOR NON-EMPLOYEE DIRECTORS
<TABLE>
<S> <C>
To: --------------------------------------- Date of Grant: ----------------------------
Number of Shares: ------------------------ Exercise Price Per Share: ------------------
</TABLE>
PRONET INC., a Delaware corporation (the "Corporation"), is pleased to grant you
a Nonstatutory Option (the "Option") to purchase shares of the Corporation's
common stock, par value $.01 per share. The number of shares subject to this
Option and the exercise price per share are stated above. This Option is granted
under Subsection 5.2 of the ProNet Inc. 1995 Long-Term Incentive Plan dated
, 1995 (the "Plan") and is governed by the terms of the Plan. All
terms having their initial letters capitalized have the meanings given them in
the Plan unless otherwise defined in this Agreement or unless the context
requires otherwise.
THIS OPTION IS NOT BINDING ON THE CORPORATION UNTIL YOU COMPLETE YOUR ADDRESS
FOR NOTICE IN PARAGRAPH 7, SIGN THIS DOCUMENT, AND RETURN IT TO THE
CORPORATION'S HUMAN RESOURCES DEPARTMENT.
1. VESTING AND EXERCISABILITY. This Option will vest and will be
exercisable at the times and with respect to the number of shares of Stock
indicated as follows:
<TABLE>
<CAPTION>
OPTION EXERCISABLE ON AND NUMBER OF SHARES OF STOCK AS TO
AFTER: WHICH THE OPTION MAY BE EXERCISED
- ------------------------------ ------------------------------------------
<S> <C>
------------ ,------
------- shares of Stock
------------ ,------
------- additional shares of Stock
------------ ,------
------- additional shares of Stock
</TABLE>
In accordance with the preceding schedule, the Option may be exercised, from
time to time, in whole or in part.
2. METHOD OF EXERCISE. The Option shall be exercisable only by written or
recorded electronic notice of exercise delivered to the Corporation's Human
Resources Department or designee, in accordance with instructions generally
applicable to all optionholders, during the term of the Option. The notice must
(a) state the number of shares of Stock with respect to which the Option is
being exercised, (b) be signed or otherwise given by you (or by your legal
representative, legatee, or distributee in the case of your death or by your
guardian or legal representative in case of your disability), (c) be accompanied
by the Exercise Price for all shares of Stock for which the Option is exercised
(unless you have provided for the payment of such Exercise Price pursuant to
Subsection 6.7 of the Plan (regarding cashless exercises)), and (d) be
accompanied by the amount that the Corporation is required to withhold for
federal income or other tax purposes. The Option shall not be deemed to have
been exercised unless all of these requirements are satisfied.
3. DURATION. The Option will terminate on the earliest of (a) 11:59 p.m.,
Dallas, Texas, time, on the date ten years from the Date of Grant; (b)
immediately when you cease to be a director of the Corporation, if the Board of
Directors of the Corporation demands or requests your resignation from the Board
of Directors; (c) 11:59 p.m. Dallas, Texas, time, on the date 90 days after you
cease to be a director of the Corporation for any reason other than the reasons
specified in the preceding clause (b) or the following clause (d); or (d) 11:59
p.m., Dallas, Texas, time, on the date one year after you cease to be a director
because of your death or Disability. In this Option, "Disability" means a
physical or mental impairment of sufficient severity such that, in the opinion
of a physician selected by the Corporation (which may be your physician or any
other physician), you are unable to continue to serve as a director of the
Corporation and that in fact results in the cessation of your service.
<PAGE>
4. TRANSFERABILITY. This Option is not transferable other than by will or
the laws of descent and distribution.
5. RIGHTS AS A STOCKHOLDER. You will have no right as a stockholder with
respect to any shares subject to this Option until a certificate representing
those shares is issued in your name. No adjustment will be made for dividends
(ordinary or extraordinary, whether in cash or other property) or distributions
or other rights for which the record date is before the date that certificate is
issued, except as contemplated by the Plan.
6. INCORPORATION OF PLAN. The terms and provisions of the Plan are hereby
expressly incorporated herein and made a part of this Agreement and shall be
applicable for all purposes under this Agreement with any necessary changes in
points of detail.
7. NOTICE. For purposes of notice hereunder, which shall be given in
accordance with Subsection 2.15 of the Plan, the Corporation, the Committee, and
you agree that any notices shall be given to the Corporation or you at the
following addresses:
<TABLE>
<S> <C>
Corporation or ProNet Inc.
Committee: 600 Data Drive, Suite 100
Plano, Texas 75075
Attn: Human Resources Department
Option Notice
You:
</TABLE>
The Corporation or you may change the address previously specified for receiving
notices at any time and from time to time by written notice to the other in
accordance with Subsection 12.15 of the Plan.
<TABLE>
<S> <C>
PRONET INC. DIRECTOR
By: --------------------------------------- -------------------------------------------
Name:
</TABLE>
<PAGE>
PROXY
PRONET INC.
600 DATA DRIVE,
SUITE 100
PLANO, TX 75075
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PRONET INC.
The undersigned hereby appoints Jackie R. Kimzey and Mark A. Solls, or
either of them, as proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and to vote, as designated below,
all the shares of Common Stock of ProNet Inc. held of record by the undersigned
on April 10, 1995 at the Annual Meeting of Stockholders to be held on
May 25, 1995, or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2 AND 3. THE INDIVIDUALS NAMED ABOVE ARE AUTHORIZED TO
VOTE IN THEIR DISCRETION ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE
MEETING.
(Continued on reverse side)
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
/X/ Please mark your votes as this
- -----------
COMMON
1. ELECTION OF DIRECTORS.
FOR all nominees listed to the right (except as marked to the contrary).
/ /
WITHHOLD AUTHORITY to vote for all nominees listed to the right.
/ /
Nominees:
Thomas V. Bruns
Harvey B. Cash
Edward E. Jungerman
Jackie R. Kimzey
Mark C. Masur
David J. Vucina
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.)
2. To consider and amend the Certificate of Incorporation to increase the number
of authorized shares of Common Stock from 10,000,000 shares to 20,000,000 shares
and to increase the number of authorized shares of Preferred Stock from
1,000,000 shares to 5,000,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
3. To consider and adopt the Company's 1995 Long-Term Incentive Plan and reserve
1,000,000 shares of the Company's Common Stock for issuance thereunder.
FOR AGAINST ABSTAIN
/ / / / / /
4. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Dated:_________________________, 1995
- -------------------------------------
SIGNATURE
- -------------------------------------
SIGNATURE (if held jointly)
Please sign exactly as your name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by the president or other authorized officer. If a
partnership, please sign in full partnership name by authorized person.
