<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
Symmetricom, 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):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
SYMMETRICOM, INC.
2300 ORCHARD PARKWAY
SAN JOSE, CA 95131-1017
Notice of Annual Meeting of Shareholders
To be Held October 25, 1999
The Annual Meeting of Shareholders of Symmetricom, Inc., a California
corporation (the "Company"), will be held on Monday, October 25, 1999 at 10:00
a.m. at the offices of the Company, at 2300 Orchard Parkway, San Jose,
California 95131-1017.
At the meeting, shareholders will consider and vote upon the following
proposals:
1. To elect a Board of Directors of the Company;
2. To approve the adoption of the Company's 1999 Employee Stock Plan
and the reservation of 900,000 shares of the Company's Common Stock
for issuance thereunder;
3. To approve the adoption of the Company's 1999 Director Stock Option
Plan and the reservation of 300,000 shares of the Company's Common
Stock for issuance thereunder;
4. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the current fiscal year; and
5. To transact such other business as may properly come before the
meeting or any and all postponements or adjournments thereof.
The Board of Directors has fixed the close of business on September 8, 1999
as the record date for the determination of shareholders entitled to notice of
and to vote at the meeting. Accordingly, only shareholders of record at the
close of business on that day will be entitled to vote at the meeting,
notwithstanding any transfer of shares on the books of the Company after that
date.
A Proxy Statement which contains information with respect to the matters to
be voted upon at the meeting and a Proxy card and return envelope are
furnished herewith. Management urges each shareholder to carefully read the
Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Mary A. Rorabaugh
Mary A. Rorabaugh
Secretary
San Jose, California
Dated: September 23, 1999
IT IS DESIRABLE THAT AS MANY OF THE SHAREHOLDERS AS POSSIBLE BE REPRESENTED
AT THE MEETING IN PERSON OR BY PROXY. YOU ARE CORDIALLY INVITED TO ATTEND IN
PERSON. REGARDLESS OF WHETHER YOU INTEND TO BE PRESENT AT THE MEETING, YOU ARE
URGED TO SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY SO THAT YOUR SHARES WILL
BE REPRESENTED IN THE EVENT YOU ARE UNABLE TO ATTEND. SIGNING A PROXY AT THIS
TIME WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON SHOULD YOU LATER DECIDE TO
ATTEND THE MEETING.
<PAGE>
SYMMETRICOM, INC.
2300 ORCHARD PARKWAY
SAN JOSE, CA 95131-1017
PROXY STATEMENT
GENERAL
Date, Time and Place
This Proxy Statement is furnished to the shareholders of Symmetricom, Inc.,
a California corporation (the "Company"), in connection with the solicitation
of Proxies by the Board of Directors of the Company for use at the Annual
Meeting of Shareholders to be held at 10:00 a.m. on Monday, October 25, 1999,
at the principal executive offices of the Company at the address set forth
above, and any and all postponements or adjournments thereof. It is
anticipated that this Proxy Statement and the enclosed Proxy card will be sent
to such shareholders on or about September 27, 1999.
Purposes of the Annual Meeting
The Purposes of the Annual Meeting are to (1) elect a Board of Directors of
the Company, (2) approve the adoption of the Company's 1999 Employee Stock
Plan and reservation of 900,000 shares of the Company's Common Stock for
issuance thereunder, (3) approve the adoption of the Company's 1999 Director
Stock Option Plan and reservation of 300,000 shares of the Company's Common
Stock for issuance thereunder, (4) ratify the appointment of Deloitte & Touche
LLP as the Company's independent auditors for the current fiscal year and (5)
transact such other business as may properly come before the meeting or any
and all postponements or adjournments thereof.
Proxy/Voting Instruction Cards and Revocability of Proxies
When the Proxy in the enclosed form is returned, properly executed, the
shares represented thereby will be voted at the meeting in accordance with the
instructions given by the shareholder. If no instructions are given, the
returned Proxy will be voted in favor of the election of the nominees named
herein as directors and in favor of each of the other proposals. Any
shareholder, including a shareholder personally attending the meeting, may
revoke his or her Proxy at any time prior to its use by filing with the
Secretary of the Company, at the corporate offices at 2300 Orchard Parkway,
San Jose, California 95131-1017, a written notice of revocation or a duly
executed Proxy bearing a later date or by voting in person at the Annual
Meeting.
Record Date and Share Ownership
Shareholders of record at the close of business on September 8, 1999 (the
"Record Date") are entitled to notice of and to vote at the meeting. At the
Record Date, 15,023,808 shares of the Company's Common Stock were issued and
outstanding. For information regarding security ownership by management and by
5% shareholders, see "Other Information--Share Ownership by Principal
Shareholders and Management."
Voting and Solicitation; Quorum
Every shareholder voting for the election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
the shareholder's shares are entitled, or distribute the shareholder's votes
on the same principle among as many candidates as the shareholder thinks fit,
provided that votes cannot be cast for more than the number of candidates to
be elected. However, no shareholder shall be entitled to cumulate votes unless
the candidate's name has been placed in nomination prior to the voting and the
shareholder, or any other shareholder, has given notice at the meeting prior
to the voting of the intention to cumulate the shareholder's votes. The
Company will
<PAGE>
cumulate votes in the event that additional persons are nominated at the
Annual Meeting for election as directors.
On matters other than the election of directors, each share has one vote.
Votes against any such proposal will be counted for determining the presence
or absence of a quorum and will also be counted as having been voted with
respect to the proposal for purposes of determining whether the requisite
majority of voting shares has been obtained, but will be treated as votes
against the proposal.
An automated system administered by the Company's transfer agent tabulates
the proxies received prior to the date of the Annual Meeting. While there is
no definitive statutory or case law authority in California as to the proper
treatment of abstentions in the counting of votes with respect to a proposal,
the Company believes that abstentions should be counted for purposes of
determining both (i) the presence or absence of a quorum for the transaction
of business and (ii) the total number of votes cast with respect to a
proposal. In the absence of controlling precedent to the contrary, the Company
intends to treat abstentions in this manner. Accordingly, abstentions will
have the same effect as a vote against the proposal. Broker non-votes will be
counted for purposes of determining the presence or absence of a quorum for
the transaction of business, but will not be counted for purposes of
determining the number of votes cast with respect to a proposal.
A majority of the outstanding shares constitutes the quorum required to
transact business at the Annual Meeting.
The cost of this solicitation will be borne by the Company. In addition, the
Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
material to such beneficial owners. Proxies may also be solicited by certain
of the Company's directors, officers and regular employees, without additional
compensation, personally or by telephone, telegram or facsimile.
Shareholder Proposals for the Next Annual Meeting
Any proposal to be presented at the Company's next Annual Meeting of
Shareholders must be received at the Company's principal office no later than
May 27, 2000 in order to be considered for inclusion in the Company's proxy
materials for such meeting. Any such proposals must be submitted in writing
and addressed to the attention of the Company's Corporate Secretary at 2300
Orchard Parkway, San Jose, California 95131-1017.
2
<PAGE>
PROPOSAL NO. ONE
ELECTION OF DIRECTORS
Nominees
The Bylaws of the Company presently provide for a Board of four to seven
directors, and the number of directors is presently fixed at six. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for management's six nominees named below, all of whom are presently directors
of the Company. In the event that any nominee of the Company is unable or
declines to serve as a director at the time of the Annual Meeting, the proxies
will be voted for any nominee who shall be designated by the present Board of
Directors to fill the vacancy. It is not expected that any nominee will be
unable or will decline to serve as a director. The term of office of each
person elected as a director will continue until the next Annual Meeting of
Shareholders or until his successor has been elected and qualified.
The names of the nominees, and certain information about them, are set forth
below:
<TABLE>
<CAPTION>
Director
Name Age Since Principal Occupation or Employment
---- --- -------- ------------------------------------
<C> <C> <C> <S>
Nominees
Richard W. Oliver(1)........ 53 1997 Chairman of the Board of the
Company; Professor of Management at
the Owen Graduate School of
Management, Vanderbilt University
Thomas W. Steipp(1)......... 50 1998 Chief Executive Officer and Chief
Financial Officer of the Company
Robert M. Neumeister(2)(3).. 49 1998 Vice President, Finance and Director
of Finance of Intel Corporation
Krish A. Prabhu(3).......... 45 1998 Chief Operating Officer of Alcatel
Telecom, a division of Alcatel;
President and Chief Executive
Officer of Alcatel USA, a division
of Alcatel
William D. Rasdal(1)........ 66 1985 Retired
Richard N. Snyder(2)........ 54 1999 President and Chief Executive
Officer of Corum Cove Consulting
</TABLE>
- --------
(1) Member of the Nominating and Governance Committee
(2) Member of the Audit Committee.
(3) Member of the Stock Option and Compensation Committee.
Mr. Oliver has been Chairman of the Board of the Company since June 1998,
and has been a Professor of Management at the Owen Graduate School of
Management, Vanderbilt University, since September 1992. From 1977 to
September 1992, Mr. Oliver served in various marketing and corporate
positions, including as Vice President of Business and Residential Services,
Vice President of Corporate Marketing and special assistant to the Chairman
and Chief Executive Officer for Northern Telecom Limited, a telecommunications
Company ("Northern Telecom"). Mr. Oliver is also a director of Applied
Innovation, Inc., a manufacturer of data communication equipment in the
telephone industry, as well as several private companies.
Mr. Steipp has served as Chief Executive Officer and Chief Financial Officer
of the Company since December 1998. Mr. Steipp served as President and Chief
Operating Officer, Telecom Solutions, a division of the Company, from March
1998 to December 1998. Prior to joining the Company, from February 1996 to
February 1998, Mr. Steipp served as Vice President and General Manager of
Broadband Data Networks, a division of Scientific-Atlanta. From January 1979
to January 1996, Mr. Steipp held various management positions in operations
and marketing with Hewlett-Packard. Mr. Steipp served as General Manager of
the Federal Computer Division from January 1991 to January 1996 and Manager of
Federal Sales & Marketing from August 1990 to January 1991. From January 1989
to August 1990, Mr. Steipp was Manager, Systems Integration Operations.
3
<PAGE>
Mr. Neumeister has served as Vice President, Finance and Director of Finance
of Intel Corporation, a semiconductor manufacturer, since December 1998. From
September 1995 to November 1998, Mr. Neumeister served as Chief Financial
Officer of Sprint PCS, a telecommunications company. Mr. Neumeister served in
various positions with Northern Telecom. Between 1991 and 1995, Mr. Neumeister
served as Vice President of Finance and Information Services for Northern
Telecom-Canada/Latin America, a division of Northern Telecom, Senior Vice
President and Chief Financial Officer of Motorola Nortel Communications Co., a
division of Northern Telecom, and Vice President of Finance-Americas, Vice
President Finance-Broadband Networks, Customer Network Solutions and Vice
President Finance, all with Northern Telecom.
Mr. Prabhu has served as Chief Operating Officer and Executive Vice
President of Alcatel Telecom, a division of Alcatel, a telecommunications
company, since August 1999 and March 1997, respectively, and as President and
Chief Executive Officer of Alcatel USA, a division of Alcatel, since 1997. Mr.
Prabhu joined Alcatel in 1991 when Rockwell International ("Rockwell"), where
Mr. Prabhu had served since 1984, was acquired by Alcatel. After Alcatel's
acquisition of Rockwell, Mr. Prabhu served as Vice President of Business
Development and Chief Technical Officer of Alcatel Network Systems, a division
of Alcatel, from 1994 to 1995. Mr. Prabhu also served Alcatel Telecom in
Belgium as President of the Broadband Products Division from 1995 to 1997.
Prior to Alcatel, Mr. Prabhu served as a member of the technical staff at AT&T
Bell Laboratories.
In June 1998, Mr. Rasdal retired as Chairman of the Board and Chief
Executive Officer of the Company. Mr. Rasdal served as Chairman of the Board
of the Company since July 1989 and as Chief Executive Officer since joining
the Company in November 1985. In addition, Mr. Rasdal served as President and
Chief Operating Officer of Telecom Solutions, a division of the Company, from
January 1997 to March 1998. From November 1985 until July 1989, Mr. Rasdal was
President and a Director of the Company. Mr. Rasdal has also served as a
Director of both Celeritek, Inc., a provider of gallium arsenide integrated
circuits, since April 1985 and of Advanced Fibre Communications, Inc., a
manufacturer of telecommunications systems, since February 1993. From March
1980 until March 1985, Mr. Rasdal was associated with Granger Associates, a
manufacturer of telecommunications products. His last position with Granger
Associates was President and Chief Operating Officer. From November 1972 to
January 1980, Mr. Rasdal was employed by Avantek as Vice President and
Division Manager for Avantek's microwave integrated circuit and semiconductor
operations. For the thirteen years prior to joining Avantek, he was associated
with TRW in various management positions.
Mr. Snyder has served as President and Chief Executive Officer of Corum Cove
Consulting LLC, a consulting company which provides assistance to early stage
technology companies, since August 1997. From February 1996 to August 1997,
Mr. Snyder served as Senior Vice President of Worldwide Sales, Marketing,
Service and Support at Compaq Computer Corporation. From February 1995 to
February 1996, Mr. Snyder served as Senior Vice President of Dell Computer
Corporation. Between September 1992 and February 1995, Mr. Snyder served as
Group General Manager for Hewlett-Packard Company. Mr. Snyder is also a
director of VTEL Corporation, a manufacturer of multimedia digital visual
communications systems, as well as several private companies.
Vote Required; Recommendation of Board of Directors
With respect to the election of directors, shareholders have cumulative
voting rights, which means that each shareholder has the number of votes equal
to the number of shares held multiplied by the number of directors to be
elected. Each shareholder may give all such votes to one candidate or
distribute such shareholder's votes among the candidates as the shareholder
chooses. However, the right to cumulate votes may not be exercised until the
candidate or candidates have been nominated and a shareholder has given notice
at the Annual Meeting of the shareholder's intention to vote cumulatively. If
any shareholder present at the Annual Meeting gives such notice, all
shareholders may cumulate their votes. The candidates receiving the highest
number of votes of shares entitled to vote for them, up to the number of
directors to be elected, shall be elected. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE "FOR" THE NOMINEES SET FORTH HEREIN.
4
<PAGE>
The Board of Directors and its Committees
The Board of Directors has a Nominating and Governance Committee, an Audit
Committee and a Stock Option and Compensation Committee. The Nominating and
Governance Committee assists the Board as a whole in meeting its
responsibility to represent shareholder interest in building long-term value,
to consider and review all candidates for service on the Board, to consider
and recommend director compensation and to institute a process to formally
evaluate the Board as a whole and the Chief Executive Officer. The Audit
Committee monitors the performance of the independent auditors, recommends
their engagement or dismissal to the Board of Directors and monitors the
Company's internal financial and accounting organization and financial
reporting. The Stock Option and Compensation Committee recommends executive
compensation arrangements for action by the Board as a whole, and administers
the Company's stock option plans. During the 1999 fiscal year, the Nominating
and Governance Committee held two meetings, the Audit Committee held three
meetings and the Stock Option and Compensation Committee held five meetings.
During the 1999 fiscal year, there were twelve meetings of the Board of
Directors. Each of the Company's present directors attended at least 75% of
the aggregate of (i) the total number of meetings of the Board of Directors
and (ii) the total number of meetings of committees of the Board of Directors
on which such person served during the 1999 fiscal year except Krish Prabhu
who attended 63% of the meetings of the Board of Directors and 67% of the
Stock Option and Compensation Committee meetings.
Director Compensation
Under the terms of the 1990 Director Stock Option Plan, each non-employee
director automatically receives a nonstatutory stock option to purchase 10,000
shares of the Company's Common Stock (i) on the date on which such person
first becomes an outside director and (ii) on January 1 of each year, if on
such date, such person shall have served on the Board of Directors for at
least six months. The non-employee Chairman of the Board is paid $15,000 per
quarter and $500 for each teleconference Board meeting attended. Non-employee
directors of the Company are paid $2,500 for each Board meeting attended in
person, $500 for each teleconference Board meeting attended, and $250 for each
Committee meeting attended, unless such Committee meets on the same day as an
in-person Board meeting, in which case no additional payment is made for the
Committee meeting. The Company also reimburses its directors for certain
expenses incurred by them in their capacity as directors or in connection with
attendance at Board meetings.
PROPOSAL NO. TWO
ADOPTION OF THE COMPANY'S 1999 EMPLOYEE STOCK PLAN
AND THE RESERVATION OF 900,000 SHARES OF THE COMPANY'S
COMMON STOCK FOR ISSUANCE THEREUNDER
On August 6, 1999, the Board of Directors of the Company (the "Board")
adopted the 1999 Employee Stock Plan (the "Plan"), subject to the approval of
the Company's shareholders. The Plan is intended to replace the Company's 1990
Employee Stock Plan (the "1990 Plan") which expires on October 23, 2000.
Stockholders are being asked to approve the adoption of the Plan and the
reservation of 900,000 shares thereunder. The fair market value of the Common
Stock as of September 8, 1999 was $8.75 per share.
The Board believes that the Plan has been important to the Company's efforts
to encourage employee equity participation and increase worker retention by
aligning employee interests with those of the stockholders. The Board is
pleased with the success of the 1990 Plan in increasing the level of employee
interest in the Company's stock price, and believes that the offer of equity
incentives to all employees has been a key factor in the Company's overall
financial performance. As of August 31, 1999, options to purchase 2,742,742
shares of Common Stock were outstanding under the 1990 Plan, and 485,873
shares of Common Stock were available for future grant.
5
<PAGE>
The following is a summary description of the Plan under which no options or
stock purchase rights have yet been granted.
Summary of the Plan
Purposes. The purposes of the Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to employees, directors and consultants (collectively,
the "Service Providers"), and to promote the success of the Company's
business.
Shares Subject to the Plan. The Board has reserved a maximum of 900,000
shares of Common Stock for issuance under the Plan. The shares may be
authorized but unissued, or reacquired Common Stock.
Administration. The Plan may be administered by different Committees with
respect to different groups of Service Providers (as applicable, the
"Administrator"). The Administrator may make any determinations deemed
necessary or advisable for the Plan.
Eligibility. Nonstatutory stock options and stock purchase rights may be
granted to Service Providers. Incentive stock options may be granted only to
employees. The Administrator, in its discretion, selects the Service Providers
to whom options and stock purchase rights may be granted, and the exercise
price and number of shares subject to each such grant. Currently,
approximately 422 employees of the Company are eligible to participate in the
Plan.
Limitations. Section 162(m) of the Internal Revenue Code, as amended (the
"Code") places limits on the deductibility for federal income tax purposes of
compensation paid to certain executive officers of the Company. In order to
preserve the Company's ability to deduct the compensation income associated
with the options granted to such persons, the Plan provides that no employee
may be granted, in any fiscal year of the Company, options to purchase more
than 250,000 shares of Common Stock. Notwithstanding this limit, however, in
connection with an individual's initial employment with the Company, he or she
may be granted options to purchase up to an additional 250,000 shares of
Common Stock.
Terms and Conditions of Options. Each option is evidenced by a stock option
agreement between the Company and the optionee, and is subject to the
following terms and conditions:
(a) Exercise Price. The Administrator determines the exercise price of
options at the time the options are granted. However, the exercise price of
a nonstatutory stock option may not be less than 85% of the fair market
value of the Common Stock on the date the option is granted. The exercise
price of an incentive stock option may not be less than 100% of the fair
market value of the Common Stock on the date such option is granted;
provided, however, that the exercise price of an incentive stock option
granted to a 10% shareholder may not be less than 110% of the fair market
value on the date such option is granted. The fair market value of the
Common Stock is generally determined with reference to the closing sale
price for the Common Stock (or the closing bid if no sales were reported)
on the same trading day as the date the option is granted.
(b) Exercise of Option; Form of Consideration. The Administrator
determines when options become exercisable. An option shall be exercisable
in whole or in part by giving written notice to the Company, stating the
number of shares with respect to the options being exercised, accompanied
by payment in full for such shares. The means of payment for shares issued
upon exercise of an option is specified in each option agreement. The Plan
permits payment to be made by cash, check, promissory note, other shares of
Common Stock of the Company (with some restrictions), cashless exercises,
certain other shares of Common Stock, a reduction in the amount of Company
liability to the optionee, any other form of consideration permitted by an
applicable law, or any combination thereof.
(c) Term of Option. The Administrator determines the term of each option.
However, the term of an incentive stock option may be no more than ten (10)
years from the date of grant; provided, however, that in the case of an
incentive stock option granted to a 10% shareholder, the term of the option
may be no more than five (5) years from the date of grant. No option may be
exercised after the expiration of its term.
6
<PAGE>
(d) Termination as a Service Provider. If an optionee's employment,
director or consulting relationship terminates for any reason (excluding
death or disability), then the optionee generally may exercise the option
within 3 months of such termination to the extent that the option is vested
on the date of termination, (but in no event later than the expiration of
the term of such option as set forth in the option agreement). If an
optionee's employment, director or consulting relationship terminates due
to the optionee's disability or death, the optionee (or the optionee's
estate or the person who acquires the right to exercise the option by
bequest or inheritance) generally may exercise the option, to the extent
the option was vested on the date of termination, within 6 months from the
date of such termination.
(e) Nontransferability of Options. Unless otherwise determined by the
Administrator, options granted under the Plan are not transferable other
than by will or the laws of descent and distribution, and may be exercised
during the optionee's lifetime only by the optionee.
(f) Other Provisions. The stock option agreement may contain other terms,
provisions and conditions not inconsistent with the Plan as may be
determined by the Administrator.
Stock Purchase Rights. Stock purchase rights may be issued either alone, in
addition, or in tandem with other awards granted under the Plan. The
Administrator determines who will be offered Common Stock and the conditions
and restrictions related to the offer, including the number of shares to be
offered, the price to be paid (which may not be less than 50% of the fair
market value of the Common Stock on the date of the offer) and the time which
the offer must be accepted (which may not be longer than 30 days from the date
of the offer). Unless the Administrator determines otherwise, the restricted
stock purchase agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment with the Company for any reason (including death or disability).
The purchase price for shares repurchased pursuant to the restricted stock
purchase agreement shall be the original price paid by the purchaser and may
be paid by cancellation of any indebtedness of the purchaser to the Company.
The repurchase option shall lapse at a rate determined by the Administrator.
Adjustments Upon Changes in Capitalization. In the event that the Common
Stock of the Company changes by reason of any stock split, reverse stock
split, stock dividend, combination, reclassification or other similar change
in the capital structure of the Company effected without the receipt of
consideration, appropriate adjustments shall be made in the number and class
of shares of stock subject to the Plan, the number and class of shares of
stock subject to any option or stock purchase right outstanding under the
Plan, and the exercise price of any such outstanding option and stock purchase
right.
In the event of a liquidation or dissolution, any unexercised options or
stock purchase rights will terminate. The Administrator may, in its sole
discretion, provide that each optionee shall have the right to exercise all or
any part of the option, including shares as to which the option would not
otherwise be exercisable. In addition, the Administrator may provide that any
Company repurchase option applicable to shares purchased upon exercise of an
option or stock purchase right will lapse as to all shares, provided the
proposed dissolution or liquidation takes place as contemplated.
In connection with any merger of the Company with or into another
corporation or the sale of all or substantially all of the assets of the
Company, each outstanding option and stock purchase right shall be assumed or
an equivalent option or stock purchase right substituted by the successor
corporation. If the successor corporation refuses to assume the options or
stock purchase rights or to substitute substantially equivalent options or
stock purchase rights, the optionee shall have the right to exercise the
option as to all the optioned stock, including shares not otherwise vested or
exercisable. In such event, the Administrator shall notify the optionee that
the option is fully exercisable for fifteen (15) days from the date of such
notice and that the option terminates upon expiration of such period.
Change of Control. In the event of a change of control, except as otherwise
determined by the Board, any options and stock purchase rights outstanding on
the date of such change in control that are not yet exercisable and vested on
such date shall become fully vested and exercisable, and such option and stock
purchase right
7
<PAGE>
shall, except as otherwise determined by the Board, be terminated in exchange
for a cash payment equal to the "change in control" price (as defined in the
Plan) reduced by the exercise price applicable to such options or stock
purchase rights. A change of control is defined as (i) the acquisition of at
least fifty percent of the Company by a "person" (as defined in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934) or (ii) the occurrence of a
transaction requiring shareholder approval, and involving the sale or
disposition of substantially all of the Company's assets or the merger of the
Company with or into another corporation.
Amendment and Termination of the Plan. The Board may amend, alter, suspend
or terminate the Plan, or any part thereof, at any time and for any reason.
However, the Company shall obtain stockholder approval for any amendment to
the Plan to the extent necessary and desirable to comply with applicable law.
No such action by the Board or stockholders may alter or impair any option
previously granted under the Plan without the written consent of the optionee.
Unless terminated earlier, the Plan shall terminate ten years from the date
the Plan was adopted by the Board.
Federal Income Tax Consequences. The following discussion summarizes certain
U.S. federal income tax considerations for persons receiving options under the
Plan and certain tax effects on the Company, based upon the provisions of the
Code as in effect on the date of this Proxy Statement, current regulations and
existing administrative rulings of the IRS. However, the summary is not
intended to be a complete discussion of all the federal income tax
consequences of these plans:
(a) Incentive Stock Options. An optionee who is granted an incentive
stock option does not recognize taxable income at the time the option is
granted or upon its exercise, although the exercise is an adjustment item
for alternative minimum tax purposes and may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two
years after grant of the option and one year after exercise of the option,
any gain or loss is treated as long-term capital gain or loss. Net capital
gains on shares held more than 12 months may be taxed at a maximum federal
rate of 20%. Capital losses are allowed in full against capital gains and
up to $3,000 against other income. If these holding periods are not
satisfied, the optionee recognizes ordinary income at the time of
disposition equal to the difference between the exercise price and the
lower of (i) the fair market value of the shares at the date of the option
exercise or (ii) the sale price of the shares. Any gain or loss recognized
on such a premature disposition of the shares in excess of the amount
treated as ordinary income is treated as long-term or short-term capital
gain or loss, depending on the holding period. A different rule for
measuring ordinary income upon such a premature disposition may apply if
the optionee is also an officer, director, or 10% shareholder of the
Company. Unless limited by Section 162(m) of the Code, the Company is
entitled to a deduction in the same amount as the ordinary income
recognized by the optionee.
(b) Nonstatutory Stock Options. An optionee does not recognize any
taxable income at the time he or she is granted a nonstatutory stock
option. Upon exercise, the optionee recognizes taxable income generally
measured by the excess of the then fair market value of the shares over the
exercise price. Any taxable income recognized in connection with an option
exercise by an employee of the Company is subject to tax withholding by the
Company. Unless limited by Section 162(m) of the Code, the Company is
entitled to a deduction in the same amount as the ordinary income
recognized by the optionee. Upon a disposition of such shares by the
optionee, any difference between the sale price and the optionee's exercise
price, to the extent not recognized as taxable income as provided above, is
treated as long-term or short-term capital gain or loss, depending on the
holding period. Net capital gains on shares held more than 12 months may be
taxed at a maximum federal rate of 20%. Capital losses are allowed in full
against capital gains and up to $3,000 against other income.
(c) Stock Purchase Rights. Stock purchase rights will generally be taxed
in the same manner as nonstatutory stock options. However, restricted stock
is generally purchased upon the exercise of a stock purchase right. At the
time of purchase, restricted stock is subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code, because the
Company may repurchase the stock when the purchaser ceases to provide
services to the Company. As a result of this substantial risk of
forfeiture, the purchaser
8
<PAGE>
will not recognize ordinary income at the time of purchase. Instead, the
purchaser will recognize ordinary income on the dates when the stock is no
longer subject to a substantial risk of forfeiture (i.e., when the
Company's right of repurchase lapses). The purchaser's ordinary income is
measured as the difference between the purchase price and the fair market
value of the stock on the date the stock is no longer subject to right of
repurchase.
The purchaser may accelerate to the date of purchase his or her recognition
of ordinary income, if any, and begin his or her capital gains holding period
by timely filing, (i.e, within thirty days of the purchase), an election
pursuant to Section 83(b) of the Code. In such event, the ordinary income
recognized, if any, is measured as the difference between the purchase price
and the fair market value of the stock on the date of purchase, and the
capital gain holding period commences on such date. The ordinary income
recognized by a purchaser who is an employee will be subject to tax
withholding by the Company. Different rules may apply if the purchaser is also
an officer, director, or 10% stockholder of the Company.
Option Information as of August 31, 1999. The Company had approximately 173
employees with outstanding option grants under the 1990 Plan.
While it believes that establishment of the Plan can result in dilution to
existing stockholders, the Board believes that the positive effect on the
Company's performance that the 1990 Plan had and the Plan will have more than
offset the dilution to existing stockholders.
With the demand for highly skilled employees at an all time high, especially
in the technology industries, the Board believes it is critical to the
Company's success to maintain competitive employee compensation programs,
including the Plan.
Vote Required
The affirmative vote of a majority of the shares of Common Stock of the
Company represented in person or by proxy at the Meeting and entitled to vote
will be required to approve the adoption of the Plan. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
PROPOSAL NO. THREE
ADOPTION OF THE COMPANY'S 1999 DIRECTOR STOCK OPTION PLAN
AND THE RESERVATION OF 300,000 SHARES OF THE COMPANY'S
COMMON STOCK FOR ISSUANCE THEREUNDER
On August 6, 1999, the Board of Directors of the Company (the "Board")
adopted the 1999 Director Stock Option Plan (the "1999 Director Plan"),
subject to the approval of the Company's shareholders. The 1999 Director Plan
is intended to replace the Company's 1990 Director Stock Option plan (the
"1990 Director Plan") which expires on October 23, 2000. The Board of
Directors has reserved a maximum of 300,000 shares of Common Stock for
issuance under the 1999 Director Plan. The fair market value of the Common
Stock as of September 8, 1999 was $8.75 per share.
The Board believes that the 1990 Director Plan has been important to the
Company's efforts to encourage director equity participation and increase
retention. Although non-employee directors have an interest in acquiring
approval for the 1999 Director Plan since they will be the beneficiaries of
the approval, the Board is pleased with the success of the 1990 Plan in
increasing the level of director interest in the Company's stock price, and
believes that the offer of equity incentives to all directors has been a key
factor in the Company's overall financial performance. As of August 31, 1999,
options to purchase 60,000 shares of Common Stock were outstanding under the
1990 Director Plan, and 180,000 shares of Common Stock were available for
future grant.
9
<PAGE>
The following is a summary description of the 1999 Director Plan under which
no options have yet been granted.
Summary of the 1999 Director Plan
Purposes. The purposes of the 1999 Director Plan are to attract and retain
the best available personnel for service as Directors who are not Employees
("Outside Directors") of the Company, to provide additional incentive to
Outside Directors of the Company to serve as directors, and to encourage their
continued service on the Board.
Shares Subject to the 1999 Director Plan. The Board has reserved a maximum
of 300,000 shares of Common Stock for issuance under the 1999 Director Plan.
The Shares may be authorized, but unissued, or reacquired Common Stock.
Administration. The 1999 Director Plan provides for grants of options to be
made in two ways:
(a) Each Outside Director is automatically granted an option to purchase
10,000 shares (the "First Option") upon the date such individual first
becomes a director, whether through election by the stockholders of the
Company or by appointment by the Board in order to fill a vacancy; and
(b) Each Outside Director is automatically granted an option to purchase
10,000 shares (the "Subsequent Option") on January 1 of each year, if on
such date he or she shall have served on the Board for at least the
preceding six (6) months.
The Board has the authority, in its discretion, to: (i) determine the fair
market value of the Common Stock; (ii) interpret the Director Plan; (iii)
prescribe, amend and rescind rules and regulations relating to the Director
Plan; (iv) authorize any person to execute, on behalf of the Company, any
instrument required to effectuate the grant of an option previously granted
under the 1999 Director Plan; and (v) make all other determinations deemed
necessary or advisable for the administration of the Director Plan. All
decisions, determinations and interpretations of the Board shall be final.
Eligibility; Limitations. Only non-employee directors of the Board are
eligible to receive nonstatutory stock options under the 1999 Director Plan.
Terms and Conditions of Options. Each option is evidenced by a director
option agreement between the Company and the optionee, and is subject to the
following additional terms and conditions:
(a) Exercise Price. The exercise price of options granted under the
Director Plan is 100% of the fair market value per share of the Common
Stock on the date of grant, generally determined with reference to the
closing sale price for the Common Stock (or the closing bid if no sales
were reported) on the date of grant.
(b) Exercise of Option. Both the First Option and the Subsequent Option
shall vest as to 25% of the optioned stock on the first anniversary after
the date of grant, and as to an additional 25% of the optioned stock on the
second anniversary after the date of grant, and as to an additional 50% on
the third anniversary after the date of grant. An option shall be
exercisable in whole or in part by giving written notice to the Company,
stating the number of shares with respect to which the option is being
exercised, accompanied by payment in full for such shares.
(c) Forms of Consideration. The means of payment for shares issued upon
exercise of an option is specified in each option agreement. The 1999
Director Plan permits payment to be made by cash, check, promissory note,
other shares of Common Stock of the Company (with some restrictions),
cashless exercises, any payment permitted by an applicable law, or any
combination thereof.
(d) Term of Option. The term of any option shall be ten (10) years from
the date of grant. No option may be exercised after the expiration of its
term.
10
<PAGE>
(e) Termination of Directorship. If an optionee's status as a director
terminates for any reason, then all options held by the optionee under the
1999 Director Plan expire three months following the termination. If the
optionee's status as a director terminates due to death or disability, then
all options held by the optionee under the 1999 Director Plan expire six
months following the termination. In no case may an option be exercised
after the expiration date of the option.
(f) Nontransferability of Options. Options granted under the 1999
Director Plan are not transferable other than by will or the laws of
descent and distribution, and may be exercised during the optionee's
lifetime only by the optionee.
(g) Other Provisions. The director option agreement may contain other
terms, provisions and conditions not inconsistent with the 1999 Director
Plan as may be determined by the Board.
Adjustments Upon Changes in Capitalization. In the event that the stock of
the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of
stock subject to the 1999 Director Plan, the number and class of shares of
stock subject to any option outstanding under the Director Plan, and the
exercise price of any such outstanding option.
Unless otherwise determined by the Board, in the event of a proposed
liquidation or dissolution, any unexercised options will terminate prior to
such action. The Board may give the optionee the right to exercise any
unexercised options, including shares as to which the option would not
otherwise be exercisable, prior to their termination.
In the event of a merger of the Company or the sale of substantially all of
the assets of the Company, each option may be assumed or an equivalent option
substituted for by the successor corporation. If an option is assumed or
substituted for by the successor corporation, it shall continue to vest as
provided in the 1999 Director Plan. If the successor corporation does not
agree to assume or substitute for the option, each option shall become fully
vested and exercisable for a period of fifteen (15) days from the date the
Board notifies the optionee of the option's full exercisability, after which
period the option will terminate.
Change in Control. In the event of a change of control, except as otherwise
determined by the Board, any options outstanding on the date of such change in
control that are not yet exercisable and vested on such date shall become
fully vested and exercisable. A change of control is defined as the
acquisition of at least fifty percent of the voting power of the Company by a
"person" (as defined in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934).
Amendment and Termination of the 1999 Director Plan. The Board may amend,
alter, suspend or terminate the 1999 Director Plan, or any part thereof, at
any time and for any reason. However, the Company shall obtain stockholder
approval for any amendment to the 1999 Director Plan to the extent necessary
to comply with applicable laws or regulations. No such action by the Board or
shareholders may alter or impair any option previously granted under the 1999
Director Plan without the consent of the optionee. Unless terminated earlier,
the 1999 Director Plan shall terminate ten years from the date of its approval
by the shareholders or the Board, whichever is earlier.
11
<PAGE>
Federal Income Tax Consequences. The following discussion summarizes certain
U.S. federal income tax considerations for directors receiving options under
the 1999 Director Plan and certain tax effects on the Company, based upon the
provisions of the Code as in effect on the date of this Proxy Statement,
current regulations and existing administrative rulings of the Internal
Revenue Service. However, the summary is not intended to be a complete
discussion of all the federal income tax consequences of these plans:
(a) Nonstatutory Stock Options. Options granted under the 1999 Director
Plan do not qualify as incentive stock options under Section 422 of the
Code. An optionee does not recognize any taxable income at the time he or
she is granted a nonstatutory stock option. Upon exercise, the optionee
recognizes taxable income generally measured by the excess of the then fair
market value of the shares over the exercise price. The Company is entitled
to a deduction in the same amount as the ordinary income recognized by the
optionee. Upon a disposition of such shares by the optionee, any difference
between the sale price and the optionee's exercise price, to the extent not
recognized as taxable income as provided above, is treated as long-term or
short-term capital gain or loss, depending on the holding period. Net
capital gains on shares held more than 12 months may be taxed at a maximum
federal rate of 20%. Capital losses are allowed in full against capital
gains and up to $3,000 against other income.
Vote Required
The affirmative vote of a majority of the shares of Common Stock of the
Company represented in person or by proxy at the Meeting and entitled to vote
will be required to approve the adoption of the 1999 Director Plan. THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
PROPOSAL NO. FOUR
RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS OF THE COMPANY
Deloitte & Touche LLP, Certified Public Accountants, have been the
independent auditors for the Company since 1976 and, upon recommendation of
the Audit Committee, their reappointment as independent auditors for the 2000
fiscal year has been approved by the Board of Directors, subject to
ratification by the shareholders.
The Company has been advised by Deloitte & Touche LLP that neither it nor
any of its members has had any relationship with the Company or any of its
affiliates during the past three years other than as independent auditors. The
Company has been advised that a representative of Deloitte & Touche LLP will
be present at the Annual Meeting, will be available to respond to appropriate
questions, and will be given an opportunity to make a statement if he or she
so desires.
Vote Required; Recommendation of the Board of Directors
Although not required to be submitted for shareholder approval, the Board of
Directors has conditioned its appointment of its independent auditors upon
receiving the affirmative vote of a majority of the shares represented, in
person or by proxy, and voting at the Annual Meeting. In the event the
shareholders do not approve the selection of Deloitte & Touche LLP, the
appointment of independent auditors will be reconsidered by the Board of
Directors. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS
PROPOSAL.
12
<PAGE>
OTHER INFORMATION
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's officers and
directors and persons, who own more than 10% of a registered class of the
Company's equity securities, to file certain reports regarding ownership of,
and transactions in, the Company's securities with the Securities and Exchange
Commission (the "SEC"). Such officers, directors and 10% shareholders are also
required by SEC rules to furnish the Company with copies of all Section 16(a)
forms that they file.
Based solely on its review of such forms furnished to the Company and
written representations from certain reporting persons, the Company believes
that all filing requirements applicable to the Company's executive officers,
directors and more than 10% shareholders were complied with.
Share Ownership by Principal Shareholders and Management
The following table sets forth the beneficial ownership of Common Stock of
the Company as of July 31, 1999, by (i) all persons known to the Company to be
the beneficial owners of more than 5% of the Company's Common Stock, (ii) each
of the officers named in the Summary Compensation Table (the "Named Executive
Officers"), (iii) each director and (iv) all directors and executive officers
as a group. A total of 15,002,871 shares of the Company's Common Stock were
issued and outstanding as of July 31, 1999.
<TABLE>
<CAPTION>
Shares Approximate
Beneficially Percent
Name and Address Owned Owned
---------------- ------------ -----------
<S> <C> <C>
Dimensional Fund Advisors Inc.(1).................... 1,038,600 6.9
1055 Washington Blvd.
Stamford, CT 06901
William D. Rasdal(2)................................. 503,288 3.3
Roger A. Strauch(3).................................. 186,250 1.2
Thomas W. Steipp(4).................................. 73,928 *
J. Scott Kamsler(5).................................. 71,616 *
Dale A. Pelletier(6)................................. 59,535 *
Frederick B. Stroupe(7).............................. 44,217 *
Mary A. Rorabaugh(8)................................. 43,689 *
Richard W. Oliver(9)................................. 33,750 *
Robert M. Wolfe(10).................................. 29,000 *
Anthony A. Haddrell(11).............................. 25,597 *
Robert M. Neumeister................................. 1,000 *
James J. Peterson.................................... -- --
Krish A. Prabhu...................................... -- --
Richard N. Snyder.................................... -- --
All directors and executive officers as a group (11
persons)(12)........................................ 814,004 5.3
</TABLE>
- --------
* Less than one percent (1%)
(1) Based on information received from Dimensional Fund Advisors Inc.
("Dimensional"). Dimensional, an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940, furnishes investment
advice to four investment companies registered under the Investment
Company Act of 1940, and serves as investment manager to certain other
investment vehicles, including commingled group trusts. These investment
companies and investment vehicles own 1,038,600 shares, and Dimensional
disclaims beneficial ownership of such securities.
(2) Includes 97,500 shares subject to options exercisable within 60 days of
July 31, 1999. Also includes 405,788 shares held by the Rasdal Family
Trust, dated July 16, 1983, as amended, of which William D. Rasdal and
Marilyn K. Rasdal are Co-Trustees.
(3) Includes 173,750 shares subject to options exercisable within 60 days of
July 31, 1999.
(4) Includes 62,500 shares subject to options exercisable within 60 days of
July 31, 1999.
(5) Includes 65,116 shares held by the Kamsler Bishop Trust, dated September
22, 1995, of which J. Scott Kamsler and Linda C. Bishop are Co-Trustees
and 6,500 shares held by J. Scott Kamsler and Linda C. Bishop as joint
tenants.
(6) Includes 54,749 shares subject to options exercisable within 60 days of
July 31, 1999.
(7) Includes 38,456 shares subject to options exercisable within 60 days of
July 31, 1999.
(8) Includes 40,939 shares subject to options exercisable within 60 days of
July 31, 1999.
(9) Includes 33,750 shares subject to options exercisable within 60 days of
July 31, 1999.
(10) Includes 20,000 shares subject to options exercisable within 60 days of
July 31, 1999.
(11) Includes 23,774 shares subject to options exercisable within 60 days of
July 31, 1999.
13
<PAGE>
(12) Includes 371,668 shares subject to options exercisable within 60 days of
July 31, 1999. Excludes shares held and shares subject to options
exercisable within 60 days of July 31, 1999 by J. Scott Kamsler, James J.
Peterson and Roger A. Strauch who resigned from the Company prior to July
31, 1999.
EXECUTIVE OFFICER COMPENSATION
Summary Compensation Table
The following table sets forth compensation earned in the last three fiscal
years by (i) the Company's Chief Executive Officer, (ii) the four most highly
compensated executive officers, other than the Chief Executive Officer, who
were serving as executive officers at the end of the fiscal year ended June
30, 1999, and (iii) J. Scott Kamsler, James J. Peterson and Roger A. Strauch,
who would have qualified as executive officers pursuant to items (i) and (ii)
but for the fact that they were not serving as executive officers at the end
of the fiscal year ended June 30, 1999.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
---------------------------- ------------
Other Annual Securities All Other
Name and Salary Bonus Compensation Underlying Compensation
Principal Position Year ($) ($) ($)(1) Options (#) ($)(2)
------------------ ---- ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Current Executive Officers
- --------------------------------------------------------------------------------------------------
Thomas W. Steipp 1999 257,407 208,848 170,926(3) -- 500
Chief Executive Officer 1998 72,115 -- 106,000(4) 250,000 500
And Chief Financial Officer 1997 -- -- -- -- --
- --------------------------------------------------------------------------------------------------
Frederick B. Stroupe 1999 109,998 500 168,594(5) 20,000 500
Senior Vice President, Worldwide 1998 109,038 -- 128,763(5) 10,000 500
Sales and Service 1997 100,000 -- 196,900(5) 21,000 300
- --------------------------------------------------------------------------------------------------
Anthony A. Haddrell 1999 170,881 32,946 30,122(6) 45,000 --
Senior Vice President, 1998 105,930 36,557 12,738(6) 3,000 --
Engineering 1997 100,169 4,418 11,038(6) 2,700 --
- --------------------------------------------------------------------------------------------------
Dale A. Pelletier 1999 184,408 33,381 -- 15,000 500
Senior Vice President, 1998 175,846 -- -- 10,000 500
Operations 1997 162,000 119,312 -- 23,000 300
- --------------------------------------------------------------------------------------------------
Mary A. Rorabaugh 1999 162,475 55,959 -- 60,000 500
Vice President, 1998 127,994 -- -- 10,000 500
Finance and Secretary 1997 119,545 69,296 -- 18,000 300
- --------------------------------------------------------------------------------------------------
Former Executive Officers
- --------------------------------------------------------------------------------------------------
J. Scott Kamsler(7) 1999 264,894 -- -- -- --
Former Senior Vice President, 1998 208,462 -- -- 30,000 500
Finance, Chief Financial Officer 1997 189,723 244,914 -- 15,000 300
And Secretary
- --------------------------------------------------------------------------------------------------
James J. Peterson (8) 1999 190,784 311,536 158,712(9) -- 300
Former President and Chief 1998 248,019 -- -- -- 300
Operating Officer, Linfinity 1997 165,163 46,148 121,020(10) -- 300
Microelectronics Inc.
- --------------------------------------------------------------------------------------------------
Roger A. Strauch (11) 1999 84,359 1,080 -- 170,000 --
Former Chief Executive Officer and 1998 12,308 -- -- 10,000
Chief Financial Officer 1997 -- -- -- -- --
</TABLE>
- --------
(1) Excludes certain perquisites and other personal benefits, securities or
property which, for any executive officer, in the aggregate did not
exceed the lesser of $50,000 or 10% of the total annual salary and bonus
for such executive officer.
(2) Represents Company matching 401(k) Plan contributions.
(3) Represents note forgiven, interest forgiven and other compensation,
$100,000, $18,000 and $52,926, respectively.
14
<PAGE>
(4) Represents note and interest forgiven, $100,000 and $6,000, respectively.
(5) Represents primarily commissions.
(6) Represents certain perquisites and other personal benefits.
(7) Mr. Kamsler resigned as Chief Financial Officer on July 2, 1998. In
connection with his resignation, Mr. Kamsler was paid a one-time payment
of $210,000.
(8) Mr. Peterson resigned as President and Chief Operations Officer,
Linfinity Microelectronics Inc. ("Linfinity") upon the April 14, 1999
sale of Linfinity by the Company.
(9) Represents note forgiven and other compensation, $150,000 and $8,712,
respectively.
(10) Represents commissions earned as a percentage of net sales of Linfinity.
(11) Mr. Strauch resigned as Chief Executive Officer and Chief Financial
Officer on December 1, 1998.
Option Grants in Last Fiscal Year
The following table sets forth, as to the Named Executive Officers, certain
information relating to stock options granted during fiscal year 1999. The
following table includes options that were repriced pursuant to the Company's
option repricing effected on July 14, 1998.
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------
Potential
Realizable Value
at Assumed Annual
Number of % of Total Rates of Stock
Securities Options Price
Underlying Granted to Appreciation for
Options Employees Exercise or Option Term (3)
Granted in Fiscal Base Price Expiration -----------------
Name (#) Year (1) ($/SH) (2) Date 5% ($) 10% ($)
---- ---------- ---------- ----------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Current Executive
Officers
Thomas W. Steipp........ -- -- -- -- -- --
Anthony A. Haddrell..... 45,000 2.5 5.875 7/27/08 166,264 421,346
11,775(4) .6 6.438 7/14/08 47,671 120,808
Dale A. Pelletier....... 15,000 .8 5.875 7/27/08 55,421 140,449
49,910(4) 2.7 6.438 7/14/08 202,061 512,062
Mary A. Rorabaugh....... 60,000 3.3 5.875 7/27/08 221,685 561,794
30,940(4) 1.7 6.438 7/14/08 125,261 317,436
Frederick B. Stroupe.... 20,000 1.1 5.875 7/27/08 73,895 187,265
42,001(4) 2.3 6.438 7/14/08 170,041 430,918
Former Executive Officer
Roger A. Strauch........ 160,000 8.7 5.875 7/27/08 591,161 1,498,118
10,000 .5 7.000 1/04/09 44,023 111,562
20,000(4) 1.1 6.438 7/14/08 80,970 205,194
</TABLE>
- --------
(1) The total number of shares subject to options granted to employees of the
Company in fiscal 1999 was 1,839,447.
(2) The exercise price per share is equal to the closing price of the
Company's Common Stock on the date of grant.
(3) The Potential Realizable Value is calculated based on the fair market
value on the date of grant, which is equal to the exercise price of
options granted in fiscal 1999, assuming that the stock appreciates in
value from the date of grant until the end of the option term at the
annual rate specified (5% and 10%). Potential Realizable Value is net of
the option exercise price. The assumed rates of appreciation are specified
in rules of the SEC, and do not represent the Company's estimate or
projection of future stock price. Actual gains, if any, resulting from
stock option exercises and Common Stock holdings are dependent on the
future performance of the Common Stock, overall stock market conditions,
as well as the option holders' continued employment through the
exercise/vesting period. There can be no assurance that the amounts
reflected in this table will be achieved.
(4) In July 1998, in response to the substantial decline in the Company's
stock price over the previous twelve months, the Company entered into
agreements to reprice "under water" options at an exercise price of $6.44
per share, the closing price of the Company's stock on July 14, 1998.
These grants are included in the Ten-Year Option Repricings Table noted
below.
15
<PAGE>
Ten-Year Option Repricings
The following table sets forth, as to the Named Executive Officers, certain
information relating to stock option repricings during the previous ten fiscal
years. The following table includes options that were repriced pursuant to the
Company's option repricings effected on July 14, 1998, April 18, 1996 and July
28, 1994. In considering repricings, the Board evaluated the weakened
incentive effects of having a substantial number of options priced above the
prevailing market price, the intensely competitive labor market and the risk
of losing key personnel to other companies in the industry. The Board
determined that the importance of retaining key personnel in the face of the
current challenges facing the Company outweighed the potentially dilutive
effect of the repricings on the Company's shareholders.
<TABLE>
<CAPTION>
Market
Number of Price Exercise
Securities of Stock Price at Length of
Underlying at Time Original
Options Time of of Option Term
Repriced Repricing Repricing New Remaining at
or or or Exercise Date of
Amended Amendment Amendment Price Repricing or
Name Date ($) ($) ($) ($) Amendment (Yrs)
---- ------- ---------- --------- --------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Current Executive
Officers
Anthony A. Haddrell
(1)(2)................. 7/14/98 3,750 6.438 16.063 6.438 6.0
7/14/98 3,750 6.438 11.984 6.438 7.8
7/14/98 2,025 6.438 13.250 6.438 8.0
7/14/98 2,250 6.438 16.000 6.438 9.0
4/18/96 5,000 11.984 22.750 11.984 9.3
Dale A. Pelletier (1)... 7/14/98 7,998 6.438 17.750 6.438 5.0
7/14/98 6,116 6.438 16.250 6.438 5.3
7/14/98 7,294 6.438 8.938 6.438 6.0
7/14/98 3,750 6.438 22.750 6.438 7.0
7/14/98 6,000 6.438 13.250 6.438 8.0
7/14/98 11,251 6.438 14.438 6.438 8.8
7/14/98 7,501 6.438 16.000 6.438 9.0
Mary A. Rorabaugh
(1)(2)(3).............. 7/14/98 1,500 6.438 8.938 6.438 6.0
7/14/98 8,438 6.438 11.984 6.438 7.8
7/14/98 6,001 6.438 13.250 6.438 8.0
7/14/98 7,500 6.438 14.438 6.438 8.8
7/14/98 7,501 6.438 16.000 6.438 9.0
4/18/96 15,000 11.984 22.750 11.984 9.3
7/28/94 10,000 8.938 13.000 8.938 9.3
Frederick B. Stroupe
(1)(2)(3).............. 7/14/98 7,500 6.438 8.938 6.438 6.0
7/14/98 11,250 6.438 11.984 6.438 7.8
7/14/98 4,500 6.438 13.250 6.438 8.0
7/14/98 11,251 6.438 14.438 6.438 8.8
7/14/98 7,500 6.438 16.000 6.438 9.0
4/18/96 15,000 11.984 22.750 11.984 9.3
7/28/94 5,000 8.938 16.250 8.938 9.3
Former Executive
Officers
Roger A. Strauch (1).... 7/14/98 5,000 6.438 14.625 6.438 6.5
7/14/98 5,000 6.438 13.750 6.438 7.5
7/14/98 5,000 6.438 20.000 6.438 8.5
7/14/98 5,000 6.438 12.250 6.438 9.5
</TABLE>
- --------
(1) On July 14, 1998, in response to the substantial decline in the Company's
stock price over the previous twelve months, the Company entered into an
agreement to reprice "under water" options at an exercise price of $6.44
per share, the closing price of the Company's stock on July 14, 1998. Non-
director employees
16
<PAGE>
participating in the repricing were granted options for three shares in
exchange for every four shares tendered for repricing. Directors were
granted repriced options at the rate of one share for every two shares
tendered. In addition, each participant agreed not to dispose of any shares
acquired pursuant to repriced options until January 14, 1999.
(2) On April 18, 1996, in response to the substantial decline in the Company's
stock price over the previous twelve months, the Company entered into an
agreement to reprice "under water" options at an exercise price of $11.98
per share, the closing price of the Company's stock on April 18, 1996.
(3) On July 28, 1994, in response to the substantial decline in the Company's
stock price over the previous twelve months, the Company entered into an
agreement to reprice "under water" options at an exercise price of $8.94
per share, the closing price of the Company's stock on July 28, 1994.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
The following table provides information with respect to option exercises in
fiscal 1999 by the Named Executive Officers and the value of such officers'
unexercised options at the close of business on June 25, 1999 (the last
trading day prior to the end of the Company's 1999 fiscal year).
<TABLE>
<CAPTION>
Number of Value of Unexercised
Securities Underlying In-the-Money Options
Unexercised Options at at Fiscal Year End ($)
Fiscal Year End (#) (1)
------------------------- -------------------------
Shares Acquired Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Current Executive
Officers
Thomas W. Steipp........ -- -- 62,500 187,500 78,125 234,375
Anthony A. Haddrell..... -- -- 9,074 47,701 17,581 117,733
Dale A. Pelletier....... -- -- 45,498 29,254 102,215 65,117
Mary A. Rorabaugh....... -- -- 18,559 72,381 35,958 173,988
Frederick B. Stroupe.... -- -- 28,498 33,503 55,215 76,162
Former Executive
Officers
J. Scott Kamsler........ 17,441 52,221 -- -- -- --
William D. Rasdal....... -- -- 93,750 21,250 123,516 35,547
Roger A. Strauch........ -- -- 173,750 16,250 426,641 25,859
</TABLE>
- --------
(1) Market value of underlying securities based on the closing price of $8.375
of the Company's Common Stock on June 25, 1999 (the last trading day prior
to the end of the Company's 1999 fiscal year), minus the exercise price.
Compensation Committee Interlocks and Insider Participation
The Stock Option and Compensation Committee of the Company's Board of
Directors (the "Compensation Committee") is currently composed of non-employee
directors Robert M. Neumeister, Krish A. Prabhu and Robert M. Wolfe. No
interlocking relationship exists between the Company's Board of Directors or
the compensation committee of any other company, nor has any such interlocking
relationship existed in the past.
CERTAIN TRANSACTIONS
Relocation Loans to and Agreement with Thomas W. Steipp. In March 1998, in
connection with his acceptance of employment with the Company and the related
relocation of his personal residence, Mr. Steipp borrowed $400,000 from the
Company pursuant to a Promissory Note Secured by Deed of Trust bearing
interest at the rate of 6% per year (the "Interest Bearing Note") and $500,000
pursuant to a separate Promissory Note Secured by Deed of Trust that is
interest free (the "Interest Free Note"). Both the Interest Bearing Note and
the Interest Free Note become fully due and payable upon the earliest to occur
of: (i) five days after Mr. Steipp's voluntary resignation or termination for
good cause; (ii) 360 days after Mr. Steipp's termination by the Company
17
<PAGE>
without good cause; (iii) on the date of transfer of Mr. Steipp's principal
residence, under certain circumstances; or (iv) on March 25, 2008. The
Interest Free Note and the Interest Bearing Note are secured by a second deed
of trust on Mr. Steipp's principal residence.
The principal and interest on the Interest Bearing Loan is forgivable in
four equal installments on each of June 25, 1998, 1999, 2000 and 2001, if Mr.
Steipp remains employed by the Company at such times. The Interest Free Note
does not provide for such forgiveness. In addition to the foregoing, Mr.
Steipp's offer letter provides that, in the event of Mr. Steipp's termination
by the Company without cause, the Company will continue to pay Mr. Steipp's
salary until the earlier of (i) twelve months after such termination or (ii)
such time as Mr. Steipp accepts alternative employment.
Agreements with James J. Peterson. In July 1998, Linfinity Microelectronics
Inc., a subsidiary of the Company ("Linfinity") loaned Mr. Peterson $150,000
pursuant to an interest free demand note (the "Note"). In September 1998,
Linfinity and Mr. Peterson entered into an agreement providing that: (i) if
Mr. Peterson was terminated without cause prior to February 15, 1999,
Linfinity would pay Mr. Peterson a bonus of $250,000 and forgive the Note;
(ii) if Mr. Peterson was still employed by Linfinity on February 15, 1999 and
had provided Linfinity at least 30 days advance notice of his intention to
resign effective that date, Linfinity would pay Mr. Peterson a bonus of
$100,000 and forgive the Note upon his actual resignation; (iii) if Mr.
Peterson was employed by Linfinity after February 15, 1999 and he was
terminated without cause after that date but prior to August 15, 1999,
Linfinity would pay Mr. Peterson a bonus of $250,000 plus an additional $7,692
per week for every week he was employed after February 15, 1999, up to a
maximum aggregate amount of $450,000, and will forgive the Note; (iv) if Mr.
Peterson was still employed by Linfinity by August 15, 1999 and had provided
Linfinity at least 30 days advance notice of his intention to resign effective
that date, Linfinity would pay Mr. Peterson a bonus of $200,000 and forgive
the Note upon his actual resignation; and (v) if Mr. Peterson was employed by
Linfinity after August 15, 1999, Linfinity would not pay Mr. Peterson any
bonus, but would forgive the Note on such date. In September 1998, Linfinity
and Mr. Peterson entered into another agreement that provided that if, while
Mr. Peterson was employed by Linfinity, a transaction was consummated
resulting in a disposition of Linfinity's assets or a change of control of
Linfinity (a "Sale"), then Mr. Peterson would be entitled to receive a special
bonus equal to approximately 2-3.5% of the amount by which the total
consideration received in the Sale exceeds certain thresholds. The foregoing
agreements stipulate that if Mr. Peterson was eligible to receive payments
under both agreements, he would only be entitled to receive payments under
whichever agreement yields the higher aggregate payment to Mr. Peterson.
Linfinity was sold on April 14, 1999 to Microsemi Corporation. In accordance
with the agreements noted above, Mr. Peterson was paid a total bonus of
$311,536, and the loan to Mr. Peterson of $150,000 was forgiven.
COMPENSATION COMMITTEE REPORT
The Compensation Committee is currently comprised of three independent, non-
employee directors who have no interlocking relationships, as defined by the
Securities and Exchange Commission. As part of its duties, the Compensation
Committee reviews compensation levels of the executive officers and evaluates
their performance. The Compensation Committee also administers the Company's
stock option plans. In connection with such duties, the Compensation Committee
determines base salary levels and short-term incentive bonus programs for the
Company's executive officers at or about the start of the fiscal year, and
determines actual bonuses after the end of such fiscal year based upon the
achievement of Company or subsidiary profit levels. The Compensation Committee
also determines stock option awards to executives throughout the year.
The Company's executive pay programs are designed to attract and retain
executives who will contribute to the Company's long-term success, to reward
executives for achieving both short and long-term strategic Company goals, to
link executive and shareholder interest through equity-based plans, and to
provide a compensation package that recognizes individual contributions and
Company performance. A substantial portion of each executive's total
compensation is intended to be variable and to relate to and be contingent
upon the achievement of Company or subsidiary profit levels.
18
<PAGE>
The three key components of the Company's executive compensation program in
fiscal 1999 were base salary, short-term incentives, represented by the
Company's annual bonus program, and long-term incentives, represented by the
Company's stock programs. The Company also provides benefits to its executives
to provide for health, welfare and security needs, as well as for executive
efficiency. The Company's policies with respect to the three principal
elements of its executive compensation program, as well as the basis for the
compensation awarded to Mr. Steipp, the Company's present Chief Executive
Officer, and Mr. Strauch, the Company's former Chief Executive Officer, are
discussed below.
Base Salary
Base salaries of executive officers are initially determined by evaluating
the responsibilities of the position held and the experience and performance
of the individual, with reference to the competitive marketplace for executive
talent, including a comparison to base salaries for comparable positions for
high technology companies. The Compensation Committee considers not only the
achievement of corporate and business unit financial and strategic goals, but
also individual performance, including managerial effectiveness, teamwork and
customer satisfaction. Base salaries of executive officers in fiscal 1999 were
set at levels comparable to levels at other companies in the technology sector
to help the Company attract and retain highly talented individuals in an
increasingly competitive market, and in a period in which the Company has
experienced substantial fluctuations in its stock price.
Annual Bonus Program
At the beginning of the 1999 fiscal year, the Compensation Committee
determined maximum annual incentive bonus payments based on profit targets
compared to fiscal 1998. Following the end of the 1999 fiscal year, the
Compensation Committee determined the amount of the annual incentive payments
for each executive officer based on its evaluation of the achievement of the
profit target set for the Company. The Compensation Committee's philosophy is
to set high profit targets, and to make each executive officer's maximum
incentive bonus payout target high in relation to such executive officer's
salary and in comparison with other high technology companies, in order to
obtain significant linkage between overall executive compensation and the
achievement of the applicable profit target.
Equity-Based Compensation
Under the Company's 1990 Employee Stock Plan, stock options may be granted
to executive officers and other key employees of the Company. The size of
stock option awards is based primarily on an individual's performance and the
individual's responsibilities and position with the Company, as well as on the
individual's present outstanding vested and unvested options. Options are
designed to align the interests of executive officers with those of
shareholders. Stock options are granted with an exercise price equal to the
fair market value of the Company's Common Stock on the date of grant, and
current grants generally vest over four years, subject to the Compensation
Committee's discretion to vary the vesting schedule. This approach is designed
to encourage the creation of shareholder value over the long term since no
benefit is realized from the stock option grant unless the price of the Common
Stock rises over a number of years.
In July 1998, in response to the substantial decline in the Company's stock
price over the previous twelve months, the Company entered into agreements to
reprice "under water" options at an exercise price of $6.44 per share, the
closing price of the Company's stock on July 14, 1998. Non-director employees
participating in the repricing were granted options for three shares in
exchange for every four shares tendered for repricing. Directors were granted
repriced options at the rate of one share for every two shares tendered. In
addition, each participant agreed not to dispose of any shares acquired
pursuant to repriced options until January 14, 1999. In considering the
repricing, the Board evaluated the weakened incentive effects of having a
substantial number of options priced above the prevailing market price, the
intensely competitive labor market and the risk of losing
19
<PAGE>
key personnel to other companies in the industry. The Board determined that
the importance of retaining key personnel in the face of the current
challenges facing the Company outweighed the potentially dilutive effect of
the repricing on the Company's shareholders.
In addition to the 1990 Employee Stock Plan, all eligible employees of the
Company, including executive officers, may participate in a payroll deduction
Employee Stock Purchase Plan pursuant to which Common Stock of the Company may
be purchased at the end of each six-month offering period, at a purchase price
equal to 85% of its fair market value at the beginning or ending of such
offering period, whichever is lower.
Compensation of the Chief Executive Officer
The Compensation Committee meets without the Chief Executive Officer present
to evaluate his performance. The Chief Executive Officer's base salary and
annual incentive bonus were determined based on a number of factors, including
comparative salaries of chief executive officers of similar performance high
technology companies, and the Company's performance in fiscal 1998, as well as
targets for fiscal 1999. Mr. Strauch's base salary for fiscal 1999 was set at
levels competitive with industry standards because of the Compensation
Committee's philosophy set forth above in "Base Salary." Based on Mr.
Strauch's resignation in fiscal 1999, Mr. Strauch did not receive any
incentive bonus for the fiscal year. On July 27, 1998 the Compensation
Committee granted Mr. Strauch an option, to provide him with a substantial
equity stake in the future of the Company, to purchase up to 160,000 shares of
Common Stock at an exercise price of $5.875 per share, the fair market value
on the date of the grant, which option vests monthly over a four month period
from the date of grant. Mr. Steipp's base salary for fiscal 1999 was set at
levels competitive with industry standards because of the Compensation
Committee's philosophy set forth above in "Base Salary." Mr. Steipp received
an incentive bonus of $203,000 for fiscal 1999 of which $163,000 was
guaranteed in accordance with Mr. Steipp's offer letter dated February 19,
1998. Mr. Steipp did not receive any options to purchase Common Stock during
the fiscal year.
Stock Option and Compensation
Committee
Robert M. Neumeister
Krish A. Prabhu
Robert M. Wolfe
20
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total shareholders' return on the
Company's Common Stock for the last five fiscal years with the total return on
the S&P 500 Index and the S&P Technology Sector over the same period (assuming
the investment of $100 in the Company's Common Stock, the S&P 500 Index and the
S&P High Technology--Composite Index, and reinvestment of all dividends).
PERFORMANCE GRAPH
SYMMETRICOM, INC.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
SYMMETRICOM, INC., S&P
500 INDEX AND
S&P HIGH TECHNOLOGY-COMPOSITE INDEX
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Symmetricom, Inc. .................................. 272 169 180 75 102
S & P 500........................................... 126 159 214 279 342
S & P Technology Sector Index....................... 163 194 295 396 653
</TABLE>
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent
as the Board of Directors may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Mary A. Rorabaugh
Mary A. Rorabaugh
Secretary
Dated: September 23, 1999
21
<PAGE>
Exhibit 99.1
SYMMETRICOM, INC.
1999 EMPLOYEE STOCK PLAN
1. Purposes of the Plan. The purposes of this 1999 Stock Plan are:
--------------------
. to attract and retain the best available personnel for positions
of substantial responsibility,
. to provide additional incentive to Employees, Directors and
Consultants, and
. to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees as shall
-------------
be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
---------------
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a committee of Directors appointed by the Board
---------
in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
------------
(g) "Company" means Symmetricom, Inc., a California corporation.
-------
(h) "Consultant" means any person, including an advisor, engaged by
----------
the Company or a Parent or Subsidiary to render services to such entity.
(i) "Director" means a member of the Board.
--------
<PAGE>
(j) "Disability" means total and permanent disability as defined in
----------
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety (90)
days, unless reemployment upon expiration of such leave is guaranteed by statute
or contract. If reemployment upon expiration of a leave of absence approved by
the Company is not so guaranteed, on the 181st day of such leave any Incentive
Stock Option held by the Optionee shall cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option. Neither service as a Director nor payment of a director's fee by the
Company shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the same day as the date of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as
----------------------
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(p) "Notice of Grant" means a written or electronic notice evidencing
---------------
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.
-2-
<PAGE>
(q) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the Plan.
------
(s) "Option Agreement" means an agreement between the Company and an
----------------
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(t) "Option Exchange Program" means a program whereby outstanding
-----------------------
Options are surrendered in exchange for Options with a lower exercise price.
(u) "Optioned Stock" means the Common Stock subject to an Option or
--------------
Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option or Stock
--------
Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1999 Employee Stock Plan.
----
(y) "Restricted Stock" means shares of Common Stock acquired pursuant
----------------
to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "Restricted Stock Purchase Agreement" means a written agreement
-----------------------------------
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
----------
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "Section 16(b)" means Section 16(b) of the Exchange Act.
-------------
(cc) "Service Provider" means an Employee, Director or Consultant.
----------------
(dd) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase Common Stock
--------------------
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
-3-
<PAGE>
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
-------------------------
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is 900,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
--------
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Multiple Administrative Bodies. The Plan may be
------------------------------
administered by different Committees with respect to different groups of Service
Providers.
(ii) Section 162(m). To the extent that the Administrator
--------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
----------
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) Other Administration. Other than as provided above, the
--------------------
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
-4-
<PAGE>
(v) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Option or Stock Purchase Right granted
hereunder. Such terms and conditions include, but are not limited to, the
exercise price, the time or times when Options or Stock Purchase Rights may be
exercised (which may be based on performance criteria), any vesting acceleration
or waiver of forfeiture restrictions, and any restriction or limitation
regarding any Option or Stock Purchase Right or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined. All elections by an Optionee
to have Shares withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
----------------------------------
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
-----------
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
-5-
<PAGE>
6. Limitations.
-----------
(a) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year
of the Company, Options to purchase more than 250,000 Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 250,000 Shares,
which shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall
------------
become effective upon its adoption by the Board. It shall continue in effect
for a term of ten (10) years unless terminated earlier under Section 15 of the
Plan.
8. Term of Option. The term of each Option shall be stated in the Option
--------------
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
-6-
<PAGE>
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Exercise Price. The per share exercise price for the Shares to
--------------
be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator, but shall in no event
be less than 85% of the Fair Market Value of the Common Stock. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with
a per Share exercise price of less than 100% of the Fair Market Value per Share
on the date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
---------------------
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
-7-
<PAGE>
(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an
--------------------------------------------------
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the
-8-
<PAGE>
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
----------------------
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for six (6) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
-----------------
the Option may be exercised within such period of time as is specified in the
Option Agreement, (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for six (6) months following the Optionee's termination. If, at the
time of death, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall immediately revert to
the Plan. The Option may be exercised by the executor or administrator of the
Optionee's estate or, if none, by the person(s) entitled to exercise the Option
under the Optionee's will or the laws of descent or distribution. If the Option
is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to
-----------------
buy out for a payment in cash or Shares an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid
(which price shall not be less than 50% of the Fair Market Value of the Shares
as of the date of the offer), and the time within which the offeree must accept
such offer, which shall in no event exceed thirty (30) days from the date upon
which the Administrator made the determination to grant the Stock Purchase
Right. The offer shall be accepted by execution of a Restricted Stock Purchase
Agreement in the form determined by the Administrator.
-9-
<PAGE>
(b) Repurchase Option. Unless the Administrator determines
-----------------
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless
--------------------------------------------------------
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
------------------------------------------------------------------
Asset Sale.
- ----------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
-10-
<PAGE>
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the
event that the successor corporation refuses to assume or substitute for the
Option or Stock Purchase Right, the Optionee shall fully vest in and have the
right to exercise the Option or Stock Purchase Right as to all of the Optioned
Stock, including Shares as to which it would not otherwise be vested or
exercisable. If an Option or Stock Purchase Right becomes fully vested and
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Administrator shall notify the Optionee in writing or
electronically that the Option or Stock Purchase Right shall be fully vested and
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option or Stock Purchase Right shall terminate upon the expiration of such
period. For the purposes of this paragraph, the Option or Stock Purchase Right
shall be considered assumed if, following the merger or sale of assets, the
option or right confers the right to purchase or receive, for each Share of
Optioned Stock subject to the Option or Stock Purchase Right immediately prior
to the merger or sale of assets, the consideration (whether stock, cash, or
other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
(d) Change in Control. In the event of a "Change in Control" of the
-----------------
Company, as defined in paragraph (e) below, any or all or none of the following
acceleration and valuation provisions shall apply, as the Board, in its
discretion, shall determine prior to such Change of Control:
(i) Any Options and Stock Purchase Rights outstanding as of
the date such Change in Control is determined to have occurred that are not
yet exercisable and vested on such date shall become fully exercisable and
vested;
-11-
<PAGE>
(ii) To the extent they are exercisable and vested, the value
of all outstanding Options and Stock Purchase Rights shall, unless
otherwise determined by the Board at or after grant, shall be cashed out at
the Change in Control Price, reduced by the exercise price applicable to
such Options or Stock Purchase Rights. The cash out proceeds shall be paid
to the Optionee or, in the event of death of an Optionee prior to payment,
to the estate of the Optionee or to a person who acquired the right to
exercise the Option or Stock Purchase Right by bequest or inheritance.
(e) Definition of "Change in Control". For purposes of this Section
---------------------------------
13, a "Change in Control" means the happening of any of the following:
(i) When any "person," as such term is used in Sections 13(d)
and 14(d) of the Exchange Act (other than the Company, a Subsidiary or a
Company employee benefit plan, including any trustee of such plan acting as
trustee) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the combined voting
power of the Company's then outstanding securities; or
(ii) The occurrence of a transaction requiring shareholder
approval, and involving the sale of all or substantially all of the assets
of the Company or the merger of the Company with or into another
corporation.
(f) Change in Control Price. For purposes of this Section 13,
------------------------
"Change in Control Price" shall be, as determined by the Board, (i) the highest
closing sale price of a Share of Common Stock as reported by the NASDAQ System
and as appearing in the Wall Street Journal (or, in the event the Common Stock
is listed on a stock exchange, the highest closing price on such exchange as
reported on the Composite Transaction Reporting System), at any time within the
60-day period immediately preceding the date of determination of the Change in
Control Price by the Board (the "60-Day Period"), or (ii) the highest price paid
or offered, as determined by the Board, in any bona fide transaction or bona
fide offer related to the Change in Control of the Company, at any time within
the 60-Day Period, or (iii) some lower price as the Board, in its discretion,
determines to be a reasonable estimate of the fair market value of a share of
Common Stock.
14. Date of Grant. The date of grant of an Option or Stock Purchase Right
-------------
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall
be provided to each Optionee within a reasonable time after the date of such
grant.
15. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
--------------------
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
-12-
<PAGE>
(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
----------------------------------
(a) Legal Compliance. Shares shall not be issued pursuant to the
----------------
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an
--------------------------
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
17. Inability to Obtain Authority. The inability of the Company to obtain
-----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Shareholder Approval. The Plan shall be subject to approval by the
--------------------
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
-13-
<PAGE>
EXHIBIT 99.2
SYMMETRICOM, INC.
1999 EMPLOYEE STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number __________________________________
Date of Grant __________________________________
Vesting Commencement Date __________________________________
Exercise Price per Share $_________________________________
Total Number of Shares Granted __________________________________
Total Exercise Price $_________________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: __________________________________
Vesting Schedule:
----------------
Subject to accelerated vesting as set forth below, this Option may be
exercised, in whole or in part, in accordance with the following schedule:
[25% of the Shares subject to the Option shall vest twelve months after the
Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall
vest each month thereafter, subject to the Optionee continuing to be a Service
Provider on such dates].
<PAGE>
Termination Period:
------------------
This Option may be exercised for three months after Optionee ceases to be a
Service Provider. Upon the death or Disability of the Optionee, this Option may
be exercised for six months after Optionee ceases to be a Service Provider. In
no event shall this Option be exercised later than the Term/Expiration Date as
provided above.
II. AGREEMENT
---------
A. Grant of Option.
----------------
The Plan Administrator of the Company hereby grants to the Optionee
named in the Notice of Grant attached as Part I of this Agreement (the
"Optionee") an option (the "Option") to purchase the number of Shares, as set
forth in the Notice of Grant, at the exercise price per share set forth in the
Notice of Grant (the "Exercise Price"), subject to the terms and conditions of
the Plan, which is incorporated herein by reference. Subject to Section 15(c)
of the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
B. Exercise of Option.
-------------------
(a) Right to Exercise. This Option is exercisable during its term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
------------------
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to the Company. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by such aggregate Exercise
Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
-2-
<PAGE>
C. Method of Payment.
------------------
Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
1. cash; or
2. check; or
3. surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
D. Non-Transferability of Option.
------------------------------
This Option may not be transferred in any manner otherwise than by
will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by the Optionee. The terms of the Plan and this
Option Agreement shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
E. Term of Option.
---------------
This Option may be exercised only within the term set out in the
Notice of Grant, and may be exercised during such term only in accordance with
the Plan and the terms of this Option Agreement.
F. Tax Consequences.
-----------------
Some of the federal tax consequences relating to this Option, as of
the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING
OF THE SHARES.
G. Exercising the Option.
----------------------
1. Nonstatutory Stock Option. The Optionee may incur regular
-------------------------
federal income tax liability upon exercise of a NSO. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price. If the
Optionee is an Employee or a former Employee, the Company will be required to
withhold from his or her compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
-3-
<PAGE>
2. Incentive Stock Option. If this Option qualifies as an ISO, the
----------------------
Optionee will have no regular federal income tax liability upon its exercise,
although the excess, if any, of the Fair Market Value of the Exercised Shares on
the date of exercise over their aggregate Exercise Price will be treated as an
adjustment to alternative minimum taxable income for federal tax purposes and
may subject the Optionee to alternative minimum tax in the year of exercise. In
the event that the Optionee ceases to be an Employee but remains a Service
Provider, any Incentive Stock Option of the Optionee that remains unexercised
shall cease to qualify as an Incentive Stock Option and will be treated for tax
purposes as a Nonstatutory Stock Option on the date three (3) months and one (1)
day following such change of status.
3. Disposition of Shares.
---------------------
(a) NSO. If the Optionee holds NSO Shares for at least one
---
year, any gain realized on disposition of the Shares will be treated as long-
term capital gain for federal income tax purposes.
(b) ISO. If the Optionee holds ISO Shares for at least one
---
year after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If
-------------------------------------------------
the Optionee sells or otherwise disposes of any of the Shares acquired pursuant
to an ISO on or before the later of (i) two years after the grant date, or (ii)
one year after the exercise date, the Optionee shall immediately notify the
Company in writing of such disposition. The Optionee agrees that he or she may
be subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
H. Entire Agreement; Governing Law.
--------------------------------
The Plan is incorporated herein by reference. The Plan and this
Option Agreement constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and Optionee. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.
-4-
<PAGE>
I. NO GUARANTEE OF CONTINUED SERVICE.
----------------------------------
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE
PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED,
BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS
OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT
OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE
PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: SYMMETRICOM, INC.
_____________________________ __________________________________
Signature By
_____________________________ __________________________________
Print Name Title
_____________________________
Residence Address
_____________________________
-5-
<PAGE>
EXHIBIT A
---------
SYMMETRICOM, INC.
1999 EMPLOYEE STOCK PLAN
EXERCISE NOTICE
Symmetricom, Inc.
2300 Orchard Parkway
San Jose, CA 95131
Attention: [Title]
1. Exercise of Option. Effective as of today, ________________, _____,
------------------
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of Symmetricom, Inc (the "Company") under and
pursuant to the 1999 Employee Stock Plan (the "Plan") and the Stock Option
Agreement dated, _____ (the "Option Agreement"). The purchase price for the
Shares shall be $_____, as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
----------------------------
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the
---------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 13 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
----------------
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
tax advice.
-6-
<PAGE>
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
-------------------------------
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.
Submitted by: Accepted by:
PURCHASER: SYMMETRICOM, INC.
________________________________ _______________________________
Signature By
________________________________ _______________________________
Print Name Its
Address: Address:
- ------- -------
Symmetricom, Inc.
________________________________
2300 Orchard Parkway
San Jose, CA 95131
________________________________
_______________________________
Date Received
-2-
<PAGE>
EXHIBIT 99.3
SYMMETRICOM, INC.
1999 DIRECTOR STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this 1999 Director Stock
--------------------
Option Plan are to attract and retain the best available personnel for service
as Outside Directors (as defined herein) of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and to
encourage their continued service on the Board.
All options granted hereunder shall be nonstatutory stock
options.
2. Definitions. As used herein, the following definitions shall
-----------
apply:
(a) "Board" means the Board of Directors of the Company.
-----
(b) "Code" means the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" means the common stock of the Company.
------------
(d) "Company" means Symmetricom, Inc., a California corporation.
-------
(e) "Director" means a member of the Board.
--------
(f) "Disability" means total and permanent disability as defined
----------
in section 22(e)(3) of the Code.
(g) "Employee" means any person, including officers and
--------
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director"s fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(i) "Fair Market Value" means, as of any date, the value of
-----------------
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the same day as the date of determination as reported in The Wall Street Journal
or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock for the last market
<PAGE>
trading day prior to the time of determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(j) "Inside Director" means a Director who is an Employee.
---------------
(k) "Option" means a stock option granted pursuant to the Plan.
------
(l) "Optioned Stock" means the Common Stock subject to an
--------------
Option.
(m) "Optionee" means a Director who holds an Option.
--------
(n) "Outside Director" means a Director who is not an Employee.
----------------
(o) "Parent" means a "parent corporation," whether now or
------
hereafter existing, as defined in Section 424(e) of the Code.
(p) "Plan" means this 1999 Director Stock Option Plan.
----
(q) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 10 of the Plan.
(r) "Subsidiary" means a "subsidiary corporation," whether now
----------
or hereafter existing, as defined in Section 424(f) of the Internal Revenue Code
of 1986.
3. Stock Subject to the Plan. Subject to the provisions of Section
-------------------------
10 of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 300,000 Shares (the "Pool"). The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration and Grants of Options under the Plan.
---------------------------------------------------
(a) Procedure for Grants. All grants of Options to Outside
--------------------
Directors under this Plan shall be automatic and nondiscretionary and shall be
made strictly in accordance with the following provisions:
(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of Shares
to be covered by Options.
-2-
<PAGE>
(ii) Each Outside Director shall be automatically
granted an Option to purchase 10,000 Shares (the "First Option") on the date on
which such person first becomes an Outside Director, whether through election by
the shareholders of the Company or appointment by the Board to fill a vacancy;
provided, however, that an Inside Director who ceases to be an Inside Director
but who remains a Director shall not receive a First Option.
(iii) Each Outside Director shall be automatically granted
an Option to purchase 10,000 Shares (a "Subsequent Option") on January 1 of each
year provided he or she is then an Outside Director and if as of such date, he
or she shall have served on the Board for at least the preceding six (6) months.
(iv) Notwithstanding the provisions of subsections
(ii) and (iii) hereof, any exercise of an Option granted before the Company has
obtained shareholder approval of the Plan in accordance with Section 16 hereof
shall be conditioned upon obtaining such shareholder approval of the Plan in
accordance with Section 16 hereof.
(v) The terms of a First Option granted hereunder shall
be as follows:
(A) the term of the First Option shall be ten (10)
years.
(B) the First Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set
forth in Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of
the Fair Market Value per Share on the date of grant of the First Option.
(D) subject to Section 10 hereof, the First Option
shall become exercisable as to 25% percent of the Shares subject to the First
Option on the first anniversary after the date of grant and as to an additional
25% of the Shares subject to the First Option on the second anniversary after
the date of grant and as to an additional 50% of the Shares subject to the First
Option on the third anniversary from the date of grant, provided that the
Optionee continues to serve as a Director on such dates.
(vi) The terms of a Subsequent Option granted hereunder
shall be as follows:
(A) the term of the Subsequent Option shall be ten
(10) years.
(B) the Subsequent Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set
forth in Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of
the Fair Market Value per Share on the date of grant of the Subsequent Option.
(D) subject to Section 10 hereof, the Subsequent
Option shall become exercisable as to 25% percent of the Shares subject to the
Subsequent Option on the first
-3-
<PAGE>
anniversary after the date of grant and as to an additional 25% of the Shares
subject to the Subsequent Option on the second anniversary after the date of
grant and as to an additional 50% of the Shares subject to the Subsequent Option
on the third anniversary from the date of grant, provided that the Optionee
continues to serve as a Director on such dates.
(vii) In the event that any Option granted under the Plan
would cause the number of Shares subject to outstanding Options plus the number
of Shares previously purchased under Options to exceed the Pool, then the
remaining Shares available for Option grant shall be granted under Options to
the Outside Directors on a pro rata basis. No further grants shall be made until
such time, if any, as additional Shares become available for grant under the
Plan through action of the Board or the shareholders to increase the number of
Shares which may be issued under the Plan or through cancellation or expiration
of Options previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors.
-----------
All Options shall be automatically granted in accordance with the terms set
forth in Section 4 hereof.
The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate the Director"s relationship with the
Company at any time.
6. Term of Plan. The Plan shall become effective upon the earlier
------------
to occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid for the
---------------------
Shares to be issued upon exercise of an Option, including the method of payment,
shall consist of (i) cash, (ii) check, (iii) promissory note, (iv) other shares
which (x) in the case of Shares acquired upon exercise of an option, have been
owned by the Optionee for more than six (6) months on the date of surrender, and
(y) have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised, (v)
consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan, (vi) any combination of
the foregoing methods of payment, or (vii) such other consideration and method
of payment for the issuance of Shares to the extent permitted under applicable
law.
8. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times as are set forth in Section
4 hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
-4-
<PAGE>
An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may consist of any consideration and
method of payment allowable under Section 7 of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. A share certificate for the number of Shares so acquired
shall be issued to the Optionee as soon as practicable after exercise of the
Option. No adjustment shall be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued, except as
provided in Section 10 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Relationship as a Director. Subject to
-----------------------------------------
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or Disability), the Optionee may exercise
his or her Option, but only within three (3) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of such termination, and to the extent that the
Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event Optionee's status as a
----------------------
Director terminates as a result of Disability, the Optionee may exercise his or
her Option, but only within six (6) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of termination, or if he or she does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of an Optionee's death, the
-----------------
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within six (6) months
following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee"s estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
-5-
<PAGE>
9. Non-Transferability of Options. The Option may not be sold,
------------------------------
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger
---------------------------------------------------------------
or Asset Sale.
- -------------
(a) Changes in Capitalization. Subject to any required action
-------------------------
by the shareholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for issuance
under the Plan but as to which no Options have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option, as well
as the price per Share covered by each such outstanding Option, and the number
of Shares issuable pursuant to the automatic grant provisions of Section 4
hereof shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action, unless otherwise determined by the Board.
The Board may, in the exercise of its sole discretion in such instances, declare
that any Option shall terminate as of a date fixed by the Board and give each
Optionee the right to exercise his Option as to all or any part of the Optioned
Stock, including Shares as to which the Option would not otherwise be
exercisable.
(c) Merger or Asset Sale. Subject to paragraph (d) below, in
--------------------
the event of a merger of the Company with or into another corporation or the
sale of substantially all of the assets of the Company, outstanding Options may
be assumed or equivalent options may be substituted by the successor corporation
or a Parent or Subsidiary thereof (the "Successor Corporation"). If an Option is
assumed or substituted for, the Option or equivalent option shall continue to be
exercisable as provided in Section 4 hereof for so long as the Optionee serves
as a Director or a director of the Successor Corporation.
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of fifteen (15) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of
-6-
<PAGE>
Optioned Stock subject to the Option immediately prior to the merger or sale of
assets, the consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for each
Share held on the effective date of the transaction (and if holders were offered
a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares). If such consideration received in the
merger or sale of assets is not solely common stock of the successor corporation
or its Parent, the Administrator may, with the consent of the successor
corporation, provide for the consideration to be received upon the exercise of
the Option, for each Share of Optioned Stock subject to the Option, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
(d) Change in Control. In the event of a "Change in Control" of
-----------------
the Company, as defined in paragraph (e) below, any Options outstanding as of
the date such Change in Control is determined to have occurred that are not yet
exercisable and vested on such date shall become fully exercisable and vested.
(e) Definition of "Change in Control". For purposes of this
---------------------------------
section 10, a "Change in Control" means when any "person", as such term is used
in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, a
Subsidiary or a Company employee benefit plan, including any trustee of such
plan acting as trustee) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the combined voting power of
the Company"s then outstanding securities.
11. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any applicable
law, regulation or stock exchange rule, the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall,
------------------------
for all purposes, be the date determined in accordance with Section 4 hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon
-7-
<PAGE>
which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company"s counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
14. Reservation of Shares. The Company, during the term of this
---------------------
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
16. Shareholder Approval. The Plan shall be subject to approval by
--------------------
the shareholders of the Company within twelve (12) months after the date the
Plan is adopted. Such shareholder approval shall be obtained in the degree and
manner required under applicable state and federal law and any stock exchange
rules.
-8-
<PAGE>
EXHIBIT 99.4
SYMMETRICOM, INC.
DIRECTOR OPTION AGREEMENT
Symmetricom, Inc., (the "Company"), has granted to ___________________
(the "Optionee"), an option to purchase a total of [________ (____)] shares of
the Company's Common Stock (the "Optioned Stock"), at the price determined as
provided herein, and in all respects subject to the terms, definitions and
provisions of the Company's 1999 Director Stock Option Plan (the "Plan") adopted
by the Company which is incorporated herein by reference. The terms defined in
the Plan shall have the same defined meanings herein .
1. Nature of the Option. This Option is a nonstatutory option and
--------------------
is not intended to qualify for any special tax benefits to the Optionee.
2. Exercise Price. The exercise price is $_______ for each share of
--------------
Common Stock.
3. Exercise of Option. This Option shall be exercisable during its
------------------
term in accordance with the provisions of Section 8 of the Plan as follows:
(i) Right to Exercise.
-----------------
(a) This Option shall become exercisable as provided in
Section 4 of the Plan; provided, however, that in no event shall any Option be
exercisable prior to the date the stockholders of the Company approve the Plan.
(b) This Option may not be exercised for a fraction of a
share.
(c) In the event of Optionee's death, Disability or
other termination of service as a Director, the exercisability of the Option is
governed by Section 8 of the Plan.
(ii) Method of Exercise. This Option shall be exercisable by
------------------
written notice which shall state the election to exercise the Option and the
number of Shares in respect of which the Option is being exercised. Such written
notice, in the form attached hereto as Exhibit A, shall be signed by the
Optionee and shall be delivered in person or by certified mail to the Secretary
of the Company. The written notice shall be accompanied by payment of the
exercise price.
4. Method of Payment. Payment of the exercise price shall be by any
-----------------
of the following, or a combination thereof, at the election of the Optionee:
(i) cash;
(ii) check; or
(iii) surrender of other shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised; or
(iv) delivery of a properly executed exercise notice together
with such other documentation as the Company and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price.
<PAGE>
5. Restrictions on Exercise. This Option may not be exercised if the
------------------------
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
6. Non-Transferability of Option. This Option may not be transferred
-----------------------------
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by the Optionee. The
terms of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
7. Term of Option. This Option may not be exercised more than ten
--------------
(10) years from the date of grant of this Option, and may be exercised during
such period only in accordance with the Plan and the terms of this Option.
8. Taxation Upon Exercise of Option. Optionee understands that, upon
--------------------------------
exercise of this Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then Fair Market Value of the Shares purchased
over the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the date of exercise of the Option, to the extent
not included in income as described above, will be treated as capital gain or
loss.
DATE OF GRANT: ______________
Symmetricom, Inc.,
a California corporation
By:_________________________________
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.
Dated: _________________
______________________________
Optionee
-2-
<PAGE>
EXHIBIT A
DIRECTOR OPTION EXERCISE NOTICE
Symmetricom, Inc.
2300 Orchard Parkway
San Jose, CA 95131
Attention: Corporate Secretary
1. Exercise of Option. The undersigned ("Optionee") hereby elects to
------------------
exercise Optionee's option to purchase ______ shares of the Common Stock (the
"Shares") of Symmetricom, Inc. (the "Company") under and pursuant to the
Company's 1999 Director Stock Option Plan and the Director Option Agreement
dated _______________ (the "Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Agreement.
3. Federal Restrictions on Transfer. Optionee understands that the
--------------------------------
Shares must be held indefinitely unless they are registered under the Securities
Act of 1933, as amended (the "1933 Act"), or unless an exemption from such
registration is available, and that the certificate(s) representing the Shares
may bear a legend to that effect. Optionee understands that the Company is under
no obligation to register the Shares and that an exemption may not be available
or may not permit Optionee to transfer Shares in the amounts or at the times
proposed by Optionee.
4. Tax Consequences. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. Delivery of Payment. Optionee herewith delivers to the Company the
-------------------
aggregate purchase price for the Shares that Optionee has elected to purchase
and has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.
6. Entire Agreement. The Agreement is incorporated herein by reference.
----------------
This Exercise Notice and the Agreement constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements of
the Company and Optionee with respect to the
<PAGE>
subject matter hereof. This Exercise Notice and the Agreement are governed by
California law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: SYMMETRICOM, INC.
By:_____________________ By:_______________________________
Its:______________________________
Address:
Dated:__________________ Dated:____________________________
-2-
<PAGE>
your votes
as indicated in X
this example. -----
FOR all nominees WITHHOLD Authority
listed below to vote for all nominees
(except as indicated). listed.
1. Election of Directors ------ ------
If you wish to withhold authority
to vote for any individual nominee,
strike a line through that
nominee's name in the list below:
Richard W. Oliver
Thomas W. Steipp
Robert M. Neumeister
Krish A. Prabhu
William D. Rasdal
Richard N. Snyder
FOR AGAINST ABSTAIN
2. Proposal to approve the adoption ------- ------- -------
of the Company's 1999 Employee Stock Option
Plan and the reservation of 900,000 shares ------- ------- -------
of the Company's Common Stock for
issuance thereunder.
3. Proposal to approve the adoption of the ------- ------- -------
Company's 1999 Director Stock Option Plan
and the reservation of 300,000 shares of ------- ------- -------
the Company's Common Stock for issuance
thereunder.
4. Proposal to ratify the appointment of Deloitte ------- ------- -------
& Touche LLP as the independent auditors of
the Company for the 2000 fiscal year. ------- ------- -------
And upon such other matters that may properly
come before the meeting and any adjournment(s)
thereof.
(This Proxy should be dated, signed by
the shareholder(s) exactly as his or her
name appears hereon, and returned promptly
in the enclosed envelope. Persons signing
in a fiduciary capacity should so indicate.
If shares are held by joint tenants or as
community property, both should sign.)
Signature __________________ Signature__________________ Dated:___________, 1999
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SYMMETRICOM, INC.
1999 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of Symmetricom, Inc., a California corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and
Proxy Statement, each dated September 23, 1999, and hereby appoints Thomas W.
Steipp and Mary A. Rorabaugh, and each of them, proxies and attorneys-in-fact,
with full power to each of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the 1999 Annual Meeting of
Shareholders of Symmetricom, Inc. to be held on October 25, 1999, at 10:00 a.m.,
at the offices of the Company, at 2300 Orchard Parkway, San Jose, California
95131-1017, and at any adjournments thereof, and to vote all shares of Common
Stock, which the undersigned would be entitled to vote if then and there
personally present on the matters set forth below:
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED,
WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS NAMED HEREIN, "FOR" EACH PROPOSAL
LISTED, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME
BEFORE THE MEETING. EITHER OF SUCH ATTORNEYS OR SUBSTITUTES SHALL HAVE AND MAY
EXERCISE ALL OF THE POWERS OF SAID ATTORNEYS-IN-FACT HEREUNDER.
(Continued, and to be marked, dated and signed, on the other side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
