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 Rule 240.14a-11(c)
or Rule 240.14a-12
Network Systems International, 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.
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NETWORK SYSTEMS INTERNATIONAL, INC.
200 North Elm Street
Greensboro, North Carolina 27401
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 1, 2000
TO THE STOCKHOLDERS OF NETWORK SYSTEMS INTERNATIONAL, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders of Network Systems International, Inc., a
Nevada corporation (the "Company"), will be held on March 1,
2000, at 11:00 A.M. local time at 200 North Elm Street,
Greensboro, North Carolina for the following purposes:
1. To elect five (5) directors to serve for the ensuing
year and until their successors are elected and have
qualified, or until such director's earlier death,
resignation or removal.
2. To consider and act upon a proposal to adopt the
Network Systems International, Inc. and Subsidiaries Long
Term Stock Incentive Plan.
3. To ratify the selection of KPMG LLP as independent
auditors of the Company for its fiscal year ending
September 30, 2000.
4. To transact such other business as may properly come
before the meeting or any adjournment or postponement
thereof.
The Board of Directors has fixed the close of business
on January 19, 2000, as the record date for the
determination of stockholders entitled to notice of and to
vote at this Annual Meeting and at any adjournment or
postponement thereof.
By Order of the Board of Directors
/s/ Michael T. Spohn
Michael T. Spohn
Secretary
Greensboro, North Carolina
January 28, 2000
Greensboro, North Carolina
January 28, 2000
ALL STOCKHOLDERS are cordially invited to attend the
meeting in person. Whether or not you expect to attend the
meeting, please complete, date, sign and return the enclosed
proxy as promptly as possible in order to ensure your
representation at the meeting. Even if you have given your
proxy, you may still vote in person if you attend the
meeting. Please note, however, that if your shares are held
of record by a broker, bank or other nominee and you wish to
vote at the meeting, you must obtain from the record holder
a proxy issued in your name.
NETWORK SYSTEMS INTERNATIONAL, INC.
200 North Elm Street
Greensboro, North Carolina 27401
(336) 271-8400
PROXY STATEMENT
For Annual Meeting of Stockholders
March 1, 2000
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board
of Directors of Network Systems International, Inc., a
Nevada corporation, (the "Company"), for use at the Annual
Meeting of Stockholders to be held on March 1, 2000 at 11:00
am local time (the "Annual Meeting"), or at any adjournment
or postponement thereof, for the purposes set forth herein
and in the accompanying Notice of Annual Meeting. The
Annual Meeting will be held at 200 North Elm Street, in
Greensboro, North Carolina. The Company intends to mail
this proxy statement and accompanying proxy card on or about
February 1, 2000 to all stockholders entitled to vote at the
Annual Meeting. Holders of the Company's common stock, par
value $.001 per share (the "Common Stock") are entitled to
one vote per share on the matters to be considered at this
Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation
of proxies, including preparation, assembly, printing and
mailing of this proxy statement, the proxy and any
additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage
houses, fiduciaries and custodians holding in their names
shares of Common Stock beneficially owned by others to
forward to such beneficial owners. The Company may
reimburse persons representing beneficial owners of Common
Stock for their costs of forwarding solicitation materials
to such beneficial owners. Original solicitation of proxies
by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other
regular employees of the Company. No additional
compensation will be paid to directors, officers or other
regular employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of
business on January 19, 2000 will be entitled to notice of
and to vote at the Annual Meeting. At the close of business
on January 19, 2000 the Company had outstanding and entitled
to vote 7,803,154 shares of Common Stock.
Each holder of record of Common Stock on such date will
be entitled to one vote for each share held on all matters
to be voted upon at the Annual Meeting. The Common Stock
will vote together on all matters contained in this Proxy
Statement as one class. A majority of the outstanding
shares will constitute a quorum for the transaction of
business at the Annual Meeting. Directors will be elected
by a plurality of the votes cast by the holders of shares
entitled to vote at the Annual meeting, provided a quorum is
present. All other corporate action by vote of the
stockholders shall be authorized by a majority of the votes
cast by the holders of shares entitled to vote on such
matters at the Annual Meeting, provided a quorum is present.
Cumulative voting is not allowed.
All votes will be tabulated by the inspector of
elections appointed for the meeting, who will separately
tabulate affirmative and negative votes, abstentions and
broker non-votes. Abstentions will be counted towards the
votes cast on proposals presented to the stockholders and
will have the same effect as negative votes. Abstentions
and broker non-votes are counted towards a quorum, but are
not counted for any purpose in determining whether a matter
has been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation
has the power to revoke it at any time before it is voted.
It may be revoked by filing with the Secretary of the
Company at the Company's principal executive office, 200
North Elm Street, Greensboro, North Carolina 27401, a
written notice of revocation or a duly executed proxy
bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting
will not, by itself, revoke a proxy.
STOCKHOLDER PROPOSALS
Proposals which stockholders intend to present at the
Company's 2001 Annual Meeting of Stockholders and wish to
have included in the Company's proxy materials pursuant to
Rule 14a-8 promulgated under the Securities Exchange Act of
1934, as amended, must be received by the Company no later
than September 30, 2000. If a proponent fails to notify the
Company by December 14, 2000 of a non-Rule 14a-8 stockholder
proposal which it intends to submit at the Company's 2001
Annual Meeting of Stockholders, the proxy solicited by the
Board of Directors with respect to such meeting may grant
discretionary authority to the proxies named therein to vote
with respect to such matter.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's By-Laws provide that the Board of
Directors of the Company shall consist of from one to ten
directors, as determined by resolution of the Board from
time to time. During fiscal 1999, the Company's Board
consisted of the following seven directors: Robbie M.
Efird, E. W. "Sonny" Miller, Jr., David F. Christian,
Christopher N. Baker, Rick Tuberosa, Carlton Joseph Mertens
and Michael T. Spohn. On August 17, 1999, Rick Tuberosa
resigned as a member of the Board. The position on the
Board formerly held by Mr. Tuberosa has not yet been
replaced. On January 19, 2000, the Board set the number of
directors at five effective at the 2000 Annual Meeting. At
the 2000 Annual Meeting, five directors are to be elected to
serve until the 2001 Annual Meeting of Stockholders and
until their respective successors have been duly elected and
qualified, or until any director's earlier death,
resignation or removal.
Shares represented by executed proxies will be voted,
if authority to do so has not been withheld, for the
election of the five nominees listed below. In the event
any nominee should be unavailable for election as a result
of an unexpected occurrence, such shares will be voted for
the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to
serve if elected, and management has no reason to believe
that any nominee will be unable to serve.
Directors are elected by a plurality of the votes
present in person or represented by proxy and entitled to
vote.
NOMINEES
At the time of the Annual Meeting, if any of the
nominees named below is not available to serve as a director
(an event which the Board of Directors does not now
anticipate), the proxies will be voted for the election as
directors of such other person or persons as the Board of
Directors may designate, unless the Board of Directors, in
its discretion, adopts a resolution reducing the number of
directors.
The Board of Directors has nominated the persons listed
below for election as directors. Three of the nominees are
presently directors of the Company. These nominees are
Robbie M. Efird, Christopher N. Baker and Carlton Joseph
Mertens. The other two nominees, Joseph M. Brower and Olin
H. Broadway, Jr., are to become directors contingent upon
stockholders' approval. Set forth below are the names and
ages of each of the nominees, the principal occupation of
each, the year in which first elected a director of the
Company, the business experience of each for the past five
years and certain other information concerning each of the
nominees.
Name of Nominee Age Principal Occupation Director Since
Robbie M. Efird 36 Chairman of the Board 1986
and Chief Executive
Officer,
Network Systems
International, Inc.
Christopher N. Baker 39 President and Chief 1999
Operating Officer,
Network Systems
International, Inc.
Carlton Joseph Mertens 34 President and Chief 1999
Operating Officer,
Savoir Technology Group,
Inc.
Joseph M. Brower 40 Managing Director Nominee
Soles Brower Smith & Co.
Olin H. Broadway, Jr. 63 Chief Executive Officer Nominee
and President, BroadNet
Robbie M. Efird has served as a director of the
Company and its predecessors since August, 1986. In
addition, Mr. Efird has served as Chairman of the Board and
Chief Executive Officer of the Company since June 1994. He
joined Network Information Services, Inc. in 1986 and
immediately initiated the design and development of the
Textile Management System (TMS). The Company sold TMS in
the manufacturing market space from 1986 until 1989. In
1990, Mr. Efird initiated the next generation of proprietary
software products and guided the analytical research,
design, development, quality assurance, packaging, and sales
strategies for new markets. This new product formed the
foundation for the net collectionT, one of the company's
current brands of software products. Mr. Efird is a Magna
Cum Laude graduate of DeVry Institute of Technology in
Atlanta, Georgia, and attended the Masters in Business
Administration program at the University of North Carolina
in Greensboro, N.C.
Christopher N. Baker has served as a director of the
Company since 1999. In addition, Mr. Baker has served as
President and Chief Operating Officer of the Company since
April 1999. From 1985 to 1991, he held various accounting
and manufacturing positions with Pillowtex Corporation
including Executive Vice President-Manufacturing from 1988
to 1991. Mr. Baker served as Vice President of Operations
of The Company Store from 1991 to 1993. He rejoined
Pillowtex Corporation in 1993 serving in several senior
executive positions including President of Operations for
the corporation. Mr. Baker served on the Board of Directors
and the Executive Committee for Pillowtex Corporation from
1995 until 1998. Mr. Baker holds a Bachelor of Science in
Accounting with High Honors from the University of Southern
Mississippi and is a Certified Public Accountant.
Carlton Joseph Mertens has served as a director of the
Company since 1999. Mr. Mertens, President and Chief
Operating Officer of Savoir Technology Group, Inc., received
his B.B.A. in Marketing from the University of Texas at
Austin. From 1984 to 1997, Mr. Mertens held numerous
sales and management positions with Star Data Systems/Sirius
Computer Solutions. In 1991, he was named as Executive Vice
President of the company, with primary responsibility for
the wholesale and distribution divisions. In 1997, after
the sale of wholesale and distribution divisions of the
company, Mr. Mertens was named as President and Chief
Executive Officer of Business Partner Solutions, a
subsidiary of Savoir Technology Group. During 1999, he
became President and Chief Operating Officer of Savoir
Technology Group. Mr. Mertens is member of the Board of
Directors for Savoir Technology Group, Inc. and serves on
the IBM Distributor Advisory Council.
Joseph M. Brower is a Board nominee. Mr. Brower is a
founding member and Managing Director of Soles Brower Smith
& Company. From 1986 to 1988, he served as Vice President
in the Investment Banking Group of First Union National
Bank. Mr. Brower was a Vice President in the High Yield
Origination Group of Citicorp Securities Markets, Inc. from
1988 to 1990. He joined Samuel Montagu U.S./Midland Bank
PLC as a Director in the U.S. Private Placement Group where
he served until 1994. In 1994, he and a partner formed
Soles Brower Smith & Company. Mr. Brower earned a Bachelor
of Arts with Distinction in Economics from the University of
Virginia and a Masters in Business Administration from the
Darden Graduate School of the University of Virginia.
Olin H. Broadway, Jr. is a Board nominee. Mr. Broadway
is the founder, Chief Executive Officer and President of
BroadNet, Inc. In 1981, he was a founding member of
Broadway & Seymour, Inc. where he served as its Chief
Executive Officer until 1990. Mr. Broadway was Chairman and
Chief Executive Officer of Egret Holdings/Osprey Systems,
Inc. from 1992 to 1996. In 1996, he founded BroadNet, Inc.
which serves as a holding company for firms who provide
software solutions to the financial sector. Mr. Broadway
has over 30 years experience in the technology industry and
has been instrumental in the founding of numerous companies
that serve the industry. He is a graduate of Wake Forest
University where he earned a Bachelor of Science degree in
Mathematics.
CURRENT DIRECTORS NOT NOMINATED FOR RE-ELECTION
Three of the current directors of the Company, E. W. "Sonny"
Miller, Jr., David F. Christian and Michael T. Spohn, are
not nominated for re-election due to a determinations that
it would be in the best interests of the Company and its
Stockholders to maximize the number of directors who are not
employed or former employees of the Company. Set forth
below are the names and ages of each of the listed
individuals, the principal occupation of each, the year in
which first elected a director of the Company, the business
experience of each for the past five years and certain other
information concerning each of the nominees.
Name of Nominee Age Principal Occupation Director Since
E.W. "Sonny" Miller, Jr. 57 Consultant 1999, Former 1985
Senior VP of
Sales/Marketing 1985 -
1999, Network Systems
International, Inc.
David F. Christian 45 VP of Research & 1990
Development,
Network Systems
International, Inc.
Michael T. Spohn 31 Chief Financial Officer, 1999
Network Systems
International, Inc.
E. W. "Sonny" Miller, Jr.: From 1961 to 1966 Mr. Miller was
employed as the Director of Information Systems for the
National Bank of Fort Benning, Fort Benning, Georgia. In
1964, Mr. Miller took a position with Fieldcrest Mills, Inc.
as its Corporate Systems Coordinator where he served until
1968. Thereafter, Mr. Miller was employed as Corporate
Manager of In Plant Systems for Burlington Industries, Inc.
from 1968 until 1971. From 1971 until 1980 Mr. Miller
served as Corporate Systems Manager for Texfi Industries in
Greensboro, North Carolina. In mid 1980 Mr. Miller was
appointed Director of Management Information Services for
Flynt Fabrics, Inc. and thereafter, in 1982, Mr. Miller held
the same position with TiCaro, Inc. until 1985. In early
1985 Mr. Miller established Sonny Miller and Associates as a
free lance contract programmer for the manufacturing
industry. Later in the year, Mr. Miller incorporated his
business under the name of Network Information Services,
Inc. Mr. Miller had served as Director and Senior Vice
President of Sales and Marketing for the Company from 1985
until 1999. In 1999, Mr. Miller became an independent
consultant for the Company. Mr. Miller attended the
University of Georgia in Columbus, Georgia.
David Christian: Mr. Christian was employed by Spencer's,
a children's clothing manufacturer from 1972 until 1975.
From 1975 until 1979, Mr. Christian served in various
management positions for a restaurant chain and subsequently
held a management position with Davidson's, a multi-state
wholesale distributor of sporting goods. From 1989 until
1990, Mr. Christian served as manager of CEW Imports. In
1990, Mr. Christian joined the Company as Director of
Product Development and is now Vice President of Research
and Development for the Network Systems Division. Mr.
Christian is a graduate of the Electronic Computer
Programming Institute in Greensboro, North Carolina.
Michael Spohn: Mr. Spohn has served as a director of the
Company since 1999. In addition, Mr. Spohn has served as
Chief Financial Officer of the Company since July 1998.
Previous to this, Mr. Spohn was an audit manager with BDO
Seidman, LLP, a national accounting and consulting
organization and a member firm of BDO International from
1993 until June 1998. Mr. Spohn received his Bachelor of
Science in Finance from the University of North Carolina at
Greensboro and holds a Bachelor of Science in Accounting
from High Point University and is Certified Public
Accountant.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended September 30, 1999 the
Board held 5 regularly scheduled and/or specially called
meetings. The Board has an Audit Committee, Compensation
Committee and an Executive Committee. All directors
attended at least 75 percent of all meetings of the Board
and of their respective Committees during fiscal year1999.
The Audit Committee meets with the Company's
independent auditors at least annually to review the results
of the annual audit and discuss financial statements; to
review financial and auditing issues of the Company; to
recommend to the Board whether the independent auditors
should be retained; to receive and consider the accountant's
comments as to controls, adequacy of staff and management
performance and procedures in connection with audit and
financial controls and makes recommendations to the Board.
The members of the Audit Committee for fiscal year 1999 were
Christopher N. Baker, Carlton Joseph Mertens and Rick
Tuberosa. On August 17, 1999, Rick Tuberosa resigned as a
director of the Company and as a member of the Audit
Committee. The Company will fill Mr. Tuberosa's former
position on the Audit Committee with an outside director
prior to the Audit Committee's first meeting for fiscal year
2000. The Audit Committee held one meeting during the year
on November 15, 1999.
The purpose of the Board's Compensation Committee is to
meet annually to review the annual cash and non-cash
compensation of officers and other key associates of the
Company, bonuses for associates and other remuneration
considerations, and to make recommendations to the Board.
Current members of the Compensation Committee are Robbie M.
Efird, Christopher N. Baker and Carlton Joseph Mertens. The
committee held one meeting during fiscal year1999.
The Board's Executive Committee meets to discuss the
Company's progress in meeting the goals of its published
business plan and makes recommendations to the Board as to
actions deemed appropriate and necessary to fulfill the
established goals. The Committee currently includes Robbie
M. Efird, Christopher N. Baker, Michael T. Spohn, E.W.
"Sonny" Miller, Jr. and David F. Christian. The Committee
met on four occasions during the Company's 1999 fiscal year.
The Company does not have a nominating committee.
The Board of Directors recommends that you vote FOR each of
the nominees
PROPOSAL 2
ADOPTION OF LONG-TERM STOCK INCENTIVE PLAN
In April 1999, the Board of Directors of the Company
adopted, subject to stockholder approval, the Company's Long-
Term Stock Incentive Plan (the "Stock Incentive Plan"). The
purposes of the Stock Incentive Plan are to closely
associate the interests of the key associates (management
and certain other employees) of the Company and its adopting
subsidiaries with the stockholders by reinforcing the
relationship between participants' rewards and stockholder
gains, to provide key associates with an equity ownership in
the Company commensurate with Company performance, as
reflected in increased stockholder value, to maintain
competitive compensation levels, and to provide an incentive
to key associates for continuous employment with the
Company.
The following is a summary description of the Stock
Incentive Plan and is qualified in its entirety by reference
to the full text of the Stock Incentive Plan, which is
attached hereto as Exhibit A.
Under the Stock Incentive Plan, the Company may grant (i)
incentive stock options intended to qualify under Section
422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and (ii) options that are not qualified as
incentive stock options ("nonqualified stock options").
Executive officers, management and other employees of the
Company capable of making a substantial contribution to the
success of the Company are eligible to participate in the
Stock Incentive Plan.
The Stock Incentive Plan is administered by a Committee
consisting of three members appointed by the Board of
Directors of the Company (the "Committee"). The Committee,
in its sole discretion, has the authority to: (i) designate
the key associates or classes of key associates eligible to
participate in the Stock Incentive Plan; (ii) to grant
awards provided in the Stock Incentive Plan in the form and
amount determined by the Committee; (iii) to impose such
limitations, restrictions and conditions upon any such award
as the Committee shall deem appropriate; and (iv) to
interpret the Stock Incentive Plan.
The maximum aggregate number of shares of Common Stock
available for issuance under the Stock Incentive Plan is
500,000 shares. The market value of a share of Common Stock
underlying the options was $ 3.875 as of January 19, 2000.
The shares of Common Stock available for issuance under the
Stock Incentive Plan are subject to adjustment for any stock
dividend or distribution, recapitalization, merger,
consolidation, split-up, combination, exchange of shares or
the like. Shares issued may consist in whole or in part of
authorized but unissued shares or treasury shares. Shares
tendered by a participant as payment for shares issued upon
exercise of an option shall be available for issuance under
the Stock Incentive Plan. Any shares of Common Stock subject
to an option which for any reason is terminated unexercised
or expires shall again be available for issuance under the
Stock Incentive Plan.
Subject to the provisions of the Stock Incentive Plan, the
Committee may award incentive stock options and nonqualified
stock options and determine the number of shares to be
covered by each option, the option price therefor and the
conditions and limitations applicable to the exercises of
the option. Each option shall be exercisable at such times
and subject to such terms and conditions as the Committee
may specify in the applicable award or thereafter.
Incentive stock options granted under the Stock Incentive
Plan are intended to qualify as such under section 422 of
the Code. No incentive stock option granted under the Stock
Incentive Plan may be exercisable more than ten years from
the date of grant.
The option price per share for nonqualified stock options
and incentive stock options must at least equal the fair
market value of the Common Stock on the date the option is
granted.
Each option shall be evidenced by a written stock option
agreement, in such form as the Committee may from time to
time determine, executed by the Company and the grantee,
stating the number of shares of Common Stock subject to the
option.
Whenever the Company proposes or is required to issue or
transfer shares of Common Stock under the Stock Incentive
Plan, the Company, if required to withhold taxes upon
issuance or transfer of shares, will have the right to
require the optionee to remit to the Company an amount
sufficient to satisfy any Federal, state and/or local
withholding tax requirements prior to the delivery of any
certificate or certificates for such shares. Alternatively,
the Company may issue or transfer such shares of Common
Stock net of the number of shares sufficient to satisfy the
withholding tax requirements.
The Committee may at any time and from time to time
terminate or modify or amend the Stock Incentive Plan in any
respect, except that without stockholder approval the
Committee may not (i) increase the maximum number of shares
of Common Stock which may be issued under the Stock
Incentive Plan, (ii) extend the period during which any
award may be granted or exercised, (iii) extend the term of
the Stock Incentive Plan, or (iv) change the
associates/employees or group of associates/employees
eligible to receive incentive stock options.
Contingent upon stockholder approval of the Stock Incentive
Plan, on April 13, 1999 the Committee initially granted options
to acquire 210,000 shares of Common Stock to various
participants, including options to acquire 10,000 shares of
Common Stock to an executive officer of the Company. At the
time of the grant, the option price per share of Common
Stock was $4, based upon the fair market value of a share of
Common Stock on such date as determined by the closing bid
price. As of the date of this Proxy Statement, none of the
participants in the Stock Incentive Plan has exercised their
options.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief description of the Federal income
tax consequences to the participants and the Company of the
issuance and exercise of stock options under the Stock
Incentive Plan. All ordinary income recognized by a
participant with respect to awards under the Stock Incentive
Plan shall be subject to both wage withholding and
employment taxes. The deduction allowed to the Company for
the ordinary income recognized by a participant with respect
to an award under the Stock Incentive Plan will be limited
to amounts that constitute reasonable, ordinary and
necessary business expenses of the Company.
Incentive Stock Options. In general, no income will result
for Federal income tax purposes upon either the granting or
the exercise of any incentive option issued under the Stock
Incentive Plan. If certain holding period requirements (at
least two years from the date of grant of the option and at
least one year from the date of exercise of the option) are
satisfied prior to a disposition of stock acquired upon
exercise of an incentive option, the excess of the sales
price upon disposition over the option exercise price
generally will be recognized by the participant as a capital
gain, and the Company will not be allowed a business expense
deduction.
If the holding period requirements with respect to incentive
options are not met, the participant generally will
recognize, at the time of the disposition of the stock,
ordinary income in an amount equal to the difference between
the option price of such stock and the lower of the fair
market value of the stock on the date of exercise and the
amount realized on the sale or exchange. The difference
between the option price of such stock and the fair market
value of the stock on the date of exercise is a tax
preference item for purposes of calculating the alternative
minimum tax on an participant's federal income tax return.
If the amount realized on the sale or exchange exceeds the
fair market value of the stock on the date of exercise, then
such excess generally will be recognized as a capital gain.
In the case of a disposition prior to satisfaction of the
holding period requirements which results in the recognition
of ordinary income by the participant, the Company generally
will be entitled to a deduction in the amount of such
ordinary income in the year of the disposition.
If an participant delivers shares of the Company's Common
Stock in payment of the option price, the participant
generally will be treated as having made a like-kind
exchange of such shares for an equal number of the shares so
purchased, and no gain or loss will be recognized with
respect to the shares surrendered to the Company in payment
of said option price. In such a case, the participant will
have a tax basis in a number of shares received pursuant to
the exercise of the option equal to the number of shares of
Common Stock used to exercise the option and equal to such
participant's tax basis in the shares of Common Stock
submitted in payment of the option price. The remaining
shares of Common Stock acquired pursuant to the exercise of
the option will have a tax basis equal to the gain, if any,
recognized on the exercise of the option and any other
consideration paid for such shares on the exercise of the
option.
Notwithstanding the foregoing, if a participant delivers any
stock that was previously acquired through the exercise of
an incentive stock option in payment of all or a portion of
the option price of an option, and the holding period
requirements described above have not been satisfied with
respect to the shares of stock so delivered, the use of such
stock to pay a portion of the option price will be treated
as a disqualifying disposition of such shares, and the
participant generally will recognize income.
Nonqualified Stock Options. The grant of nonqualified stock
options under the Stock Incentive Plan will not result in
any income being taxed to the participant at the time of the
grant or in any tax deduction for the Company at such time.
At the time a nonqualified stock option is exercised, the
participant will be treated as having received ordinary
income equal to the excess of the fair market value of the
shares of Common Stock acquired as of the date of exercise
over the price paid for such stock. At that time, the
Company will be allowed a deduction for Federal income tax
purposes equal to the amount of ordinary income attributable
to the participant upon exercise. The participant's holding
period for the shares of Common Stock acquired will commence
on the date of exercise, and the tax basis of the shares
will be the greater of their fair market value at the time
of exercise or the exercise price.
The affirmative vote of a majority of the votes of holders
of the Common Stock present in person or by proxy at the
Annual Meeting is required for adoption of Proposal 2.
The Board of Directors recommends that stockholders vote FOR
approval of Proposal 2.
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG LLP as the
Company's independent auditors for the fiscal year ended
September 30, 2000 and has further directed that management
submit the selection of independent auditors for
ratification by the stockholders at the Annual Meeting. The
Company utilized the services of KPMG LLP to audit the
Company's books and records beginning in 1999.
Representatives of KPMG LLP will be present at the Annual
Meeting to respond to questions and to make a statement if
they desire to do so.
The Board of Directors recommends that stockholders vote FOR
approval of Proposal 3
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information
regarding the beneficial ownership of the Company's Common
Stock as of January 19, 2000 by: (1) each director or
nominee for director; (2) each of the executive officers
named in the summary compensation table; (3) all executive
officers and directors of the Company as a group; and (4)
all those known by the Company to be beneficial owners of
more than five percent of its Common Stock. In general,
"beneficial ownership" includes those shares a director or
executive officer has the power to vote, or the power to
transfer, and stock options that are exercisable currently
or become exercisable within 60 days.
<TABLE>
<CAPTION>
Beneficial Ownership (1)
Beneficial Owner Number of Percent of
Shares Total
<S> <C> <C>
Robbie M. Efird (2) 2,720,991 34.9
E.W. "Sonny" Miller, Jr.(3) 1,475,533 18.9
David F. Christian 894,622 11.5
James W. Moseley 594,622 7.6
Carlton Joseph Mertens 3,750 -
Michael T. Spohn - -
Christopher N. Baker - -
Joseph M. Brower - -
Olin H. Broadway, Jr - -
All Executive Officers and
Directors as a Group (9 persons) 5,689,518 72.9
<FN>
(1) This table is based upon information supplied by the
Company's stock transfer agent. Unless otherwise noted
and subject to community property laws where
applicable, the Company believes that each of the
stockholders named in this table has sole voting and
investment power with respect to the shares indicated
as beneficially owned. Applicable percentages are
based on 7,803,154 shares outstanding as of January 19,
2000, adjusted as required by rules promulgated by the
Securities and Exchange Commission (SEC).
(2) Includes 12,500 shares of common stock of the Company
beneficially held by Mr. Efird on behalf of his minor
son.
(3) Includes 1,562 shares of common stock of the Company
held by Mr. Miller's wife.
</TABLE>
Compliance with the Reporting Requirements of Section 16(a)
Section 16(a) of the Securities and Exchange Act of
1934 (the "1934 Act") requires the Company's directors and
executive officers, and persons who own more than ten
percent of a registered class of the Company's equity
securities, to file with the SEC initial reports of
ownership and reports of changes in ownership of Common
Stock and other equity securities of the Company. Specific
dates for such reporting have been established and the
Company is required to report in this Proxy Statement any
failure to file by the established dates during the last
fiscal year. In the last fiscal year, to the Company's
knowledge, all of these filing requirements were satisfied
by the Company's directors, officers and greater than ten
percent stockholders. Officers, directors and greater than
ten percent stockholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms
they file. Based solely on its review of the copies of such
forms received by it, or written representations from
certain reporting persons that no Form 5 were required for
those persons, the Company believes all filing requirements
applicable to its officers, directors, and greater than ten
percent beneficial owners were complied with during the
period from October 1, 1998 through September 30, 1999.
Compensation of Directors
The current outside directors of the Company receive
5,000 shares of the Company's common stock annually as
remuneration for their services as members of the Board of
Directors and for their service on various committees of the
Board. Directors who are employees of the Company are not
separately compensated for their services as members of the
Board of Directors.
Compensation of Executive Officers
The following table shows for the fiscal years ended
1997, 1998 and 1999, compensation awarded or paid to, or
earned by, the Company's Chief Executive Officer and all
other executive officers whose total annual compensation
exceeds $100,000 at September 30, 1999 (the "Named Executive
Officers"):
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term
Annual Compensation Compensation
Other Securities
Name and Principal Year Salary Bonus(3) Annual Underlying
Position(1) Compensation(2) Options(#)
<S> <C> <C> <C> <C> <C>
Robbie M. Efird 1999 $167,456 - $ 6,970 -
Chairman of the 1998 $150,000 $ 5,718 $ 3,220 -
Board 1997 $152,500 - $ 2,493 -
and Chief
Executive Officer
Christopher N. 1999 $138,505 - $60,996 500,000
Baker
President and
Chief Operating
Officer
<FN>
(1) The salary figures presented represent the salary
compensation of the named executives for the period
October 1, 1998 through September 30, 1999 since the
Company changed its fiscal year end.
(2) Represents the value of estimated personal use of
Company owned vehicles, relocation expenses and the value of
disability insurance premiums paid by the Company under a
salary continuation program.
(3) Incentive bonuses are paid as described in the section
titled Employment Contracts below.
</TABLE>
Stock Option Plans
The following tables set forth certain information with
respect to the stock options granted to the named executive
officers during fiscal 1999 and the aggregate number of and
value of options exercisable and unexercisable held by the
named executive officers during fiscal 1999.
<TABLE>
Option Grants in Last Fiscal Year
<CAPTION>
Individual Grants
Number of % of Total
Securities Options
Underlying Granted to
Options Employees in Exercise Expiration
Granted Fiscal Year Price Date
<S> <C> <C> <C> <C>
Christopher N. Baker 500,000 63.45% $1.00 April 15, 2009
President and Chief
Operating Officer
</TABLE>
<TABLE>
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
<CAPTION>
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options at
Name and Principal Options at Fiscal Fiscal Year
Position Year End (#) End($)
Exercisable/Unexercisable Exercisable/Unexercisable
Unexercisable Unexercisable
<S> <C> <C>
Christopher N. Baker - / 500,000 - / $2,687,500
President and Chief
Operating Officer
</TABLE>
Employment Contracts
Robbie M. Efird. In June 1999, the Company entered into an
employment agreement with Robbie M. Efird, its Chief
Executive Officer, which entitled Mr. Efird to a minimum
annual salary of $200,000, the right to participate in the
Company's Stock Incentive Plan and incentive bonuses at the
discretion of the Company's Board of Directors. Mr. Efird's
employment agreement has a three-year initial term, but
automatically continues for successive one-year periods
unless terminated by either party upon written notice in
accordance with the terms of the agreement. In addition,
Mr. Efird receives additional benefits from the Company
including a company automobile, reimbursement for country
club dues, a term life insurance policy and such other
employment benefits as may be generally available to
executive employees of the Company. Under the agreement, if
the Company terminates Mr. Efird's employment other than for
cause, Mr. Efird shall receive the greater of his base
salary until the expiration of the term then in effect or
one year's base salary as a severance payment. Mr. Efird's
employment agreement also contains noncompetition and
confidentiality provisions. The noncompetition provision
prohibits Mr. Efird from directly or indirectly competing
with the Company so long as he is an employee of the Company
and for a period of one year thereafter.
Christopher N. Baker. In April 1999, the Company entered
into an employment agreement with Christopher N. Baker, its
President and Chief Operating Officer, which entitled Mr.
Baker to a minimum annual salary of $200,000 and incentive
bonuses at the discretion of the Company's Board of
Directors. Mr. Baker's employment agreement has a three-year
initial term, but automatically continues for successive one-
year periods unless terminated by either party upon written
notice in accordance with the terms of the agreement. In
addition, Mr. Baker receives additional benefits from the
Company including a company automobile, reimbursement for
country club dues, relocation expenses and such other
employment benefits as may be generally available to senior
executives of the Company. Under the agreement, if the
Company terminates Mr. Baker's employment other than for
cause, Mr. Baker shall receive the greater of his base
salary until the expiration of the term then in effect or
one year's base salary as a severance payment. Mr. Baker's
employment agreement also contains noncompetition and
confidentiality provisions. The noncompetition provision
prohibits Mr. Baker from directly or indirectly competing
with the Company so long as he is an employee of the Company
and for a period of one year thereafter.
In connection with the execution of the agreement, the
Company granted to Mr. Baker options to purchase 500,000
shares of Common Stock of the Company at an exercise price
of $1.00 per share pursuant to the terms of a Stock Option
Agreement between the Company and Mr. Baker. Under the
Stock Option Agreement, Mr. Baker can exercise the option
for up to 25% of the total number of optioned shares on or
after April 15, 2000, up to an additional 25% of the total
number of optioned shares on or after April 15, 2001, up to
an additional 25% of the total number of optioned shares on
or after April 15, 2002, and up to an additional 25% of the
total number of optioned shares on or after April 15, 2003.
CERTAIN TRANSACTIONS
On April 18, 1997, Robbie M. Efird, Chairman of the Board
and CEO of the Company borrowed $60,278 for purposes of
paying taxes on undistributed income while the Company was a
SubChapter S corporation. Mr. Efird signed a note to the
Company for the funds borrowed which bears interest at a
rate of 5% per annum and is secured by common stock in the
Company individually owned by Mr. Efird.
OTHER MATTERS
The Board of Directors knows of no other matters that
will be presented for consideration at the Annual Meeting.
If any other matters are properly brought before the
meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance
with their best judgment.
By Order of the Board of Directors
/s/ Michael T. Spohn
Michael T. Spohn
Secretary
EXHIBIT A
Network Systems International, Inc. and Subsidiaries
Long-Term Stock Incentive Plan
ARTICLE I GENERAL
1.01. Purpose.
The purposes of this Long-Term Stock Incentive Plan (the
"Plan") are to: (1) closely associate the interests of the
key associates (management and certain other employees) of
Network Systems International, Inc., a Nevada corporation,
and its adopting Subsidiaries (the "Company") with the
stockholders by reinforcing the relationship between
participants' rewards and stockholder gains; (2) provide key
associates with an equity ownership in the Company
commensurate with Company performance, as reflected in
increased stockholder value; (3) maintain competitive
compensation levels; and (4) provide an incentive to key
associates for continuous employment with the Company.
1.02. Administration.
(a) The Plan shall be administered by a Committee (the
"Committee"), appointed by the Board of Directors of Network
Systems International, Inc. (the "Board"), which shall
consist of at least three members, all of whom shall be
members of the Board.
(b) The Committee shall have the authority, in its sole
discretion and from time to time to:
(i) designate the key associates or classes of key
associates eligible to participate in the Plan;
(ii) grant awards provided in the Plan in such form and
amount as the Committee shall determine;
(iii) impose such limitations, restrictions and
conditions upon any such award as the Committee shall
deem appropriate; and
(iv) interpret the Plan, adopt, amend and rescind rules
and regulations relating to the Plan, and make all other
determinations and take all other action necessary or
advisable for the implementation and administration of
the Plan.
(c) Decisions and determinations of the Committee on all
matters relating to the Plan shall be in its sole discretion
and shall be conclusive so long as such decisions shall
conform to applicable federal and state law. No member of
the Committee shall be liable for any action taken or
decision made in good faith relating to the Plan or any
award thereunder.
1.03. Eligibility for Participation.
Participants in the Plan shall be selected by the
Committee from the executive officers, management, and other
employees (collectively "associates") of the Company who
have the capability of making a substantial contribution to
the success of the Company. In making this selection and in
determining the form and amount of awards, the Committee
shall consider any factors deemed relevant, including the
individual's functions, responsibilities, value of services
to the Company and past and potential contributions to the
Company's profitability and sound growth. The Committee's
determinations need not be uniform and may be made by the
Committee selectively among the persons who receive, or are
eligible to receive, Options under the Plan, whether or not
such persons are similarly situated.
1.04. Types of Awards Under Plan.
Awards under the Plan may be in the form of any one or
more of the following:
(i) Stock Options, as described in Article II; and
(ii) Incentive Stock Options, as described in Article
III.
1.05. Aggregate Limitation on Awards.
(a) Shares of stock which may be issued under the Plan
shall be authorized Common Stock of Network Systems
International, Inc. a Nevada corporation, par value $.001
per share ("Common Stock"). The maximum number of shares of
Common Stock which may be issued under the Plan shall be
five hundred thousand.
(b) For purposes of calculating the maximum number of
shares of Common Stock which may be issued under the Plan:
(i) all the shares issued (including the shares, if any,
withheld for tax withholding requirements) shall be
counted when cash is used as full payment for shares
issued upon exercise of a Stock Option or Incentive Stock
Option; and only the net shares issued (including the
shares, if any, withheld for tax withholding
requirements) shall be counted when shares of Common
Stock are used as full or partial payment for shares
issued upon exercise of a Stock Option or Incentive Stock
Option.
(c) Shares tendered by a participant as payment for
shares issued upon exercise of a Stock Option or Incentive
Stock Option shall be available for issuance under the Plan.
Any shares of Common Stock subject to a Stock Option or
Incentive Stock Option which for any reason is terminated
unexercised or expires shall again be available for issuance
under the Plan.
1.06. Effective Date and Term of Plan.
The Plan shall become effective on the date approved by
the Board and shall remain in effect for a period of ten
years from such date.
ARTICLE II STOCK OPTIONS
2.01. Award of Stock Options.
The Committee may from time to time, and subject to the
provisions of the Plan and such other terms and conditions
as the Committee may grant to any person eligible to
participate in the Plan one or more options to purchase for
cash or shares the number of shares of Common Stock ("Stock
Options") allotted by the Committee. The date a Stock Option
is granted shall mean the date selected by the Committee as
of which the Committee allots a specific number of shares to
a participant pursuant to the Plan.
2.02. Stock Option Agreements.
The grant of a Stock Option shall be evidenced by a
written Stock Option Agreement ("Stock Option Agreement"),
executed by the Company and the holder of a Stock Option
(the "Optionee"), stating the number of shares of Common
Stock subject to the Stock Option evidenced thereby, and in
such form as the Committee may from time to time determine.
2.03. Stock Option Price.
The option price per share of Common Stock deliverable
upon the exercise of a Stock Option shall be, at least, 100%
of the fair market value of a share of Common Stock on the
date the Stock Option is granted.
2.04. Term and Exercise.
Each Stock Option shall be fully exercisable as set forth
in the Stock Option Agreement, but in any event not sooner
than one year from the date of its grant, and unless a
shorter period is provided by the Committee or by another
Section of this Plan, may be exercised during a period of
ten years from the date of grant thereof (the "option
term"). No Stock Option shall be exercisable after the
expiration of its option term.
2.05. Manner of Payment.
Each Stock Option Agreement shall set forth the procedure
governing the exercise of the Stock Option granted
thereunder, and shall provide that, upon such exercise in
respect of any shares of Common Stock subject thereto, the
Optionee shall pay to the Company, in full, the option price
for such shares with cash or with previously owned Common
Stock at the discretion of the Company.
2.06. Death of Optionee.
(a) Upon the death of the Optionee, any rights to the
extent exercisable on the date of death may be exercised by
the Optionee's estate, or by a person who acquires the right
to exercise such Stock Option by bequest or inheritance or
by reason of the death of the Optionee, provided that such
exercise occurs within both the remaining effective term of
the Stock Option and twelve months after the Optionee's
death.
(b) The provisions of this Section shall apply
notwithstanding the fact that the Optionee's employment may
have terminated prior to death, but only to the extent of
any rights exercisable on the date of death.
2.07 Retirement or Disability.
Upon termination of the Optionee's employment by reason
of retirement or permanent disability (as each is determined
by the Committee), the Optionee may, within 12 months from
the date of termination, exercise any Stock Options to the
extent such options are exercisable during such 12-month
period.
2.08. Termination for Other Reasons.
Except as provided in Sections 2.06 and 2.07, or except
as otherwise determined by the Committee, all Stock Options
shall terminate sixty (60) days after the termination of the
Optionee's employment for any other reason.
ARTICLE III INCENTIVE STOCK OPTIONS
3.01. Award of Incentive Stock Options.
The Committee may, from time to time and subject to the
provisions of the Plan and such other terms and conditions
as the Committee may prescribe, grant to any employee of the
Company who is eligible to participate in the Plan one or
more "incentive stock options" (intended to qualify as such
under the provisions of section 422 of the Internal Revenue
Code of 1986, as amended ("Incentive Stock Options") to
purchase for cash or shares the number of shares of Common
Stock allotted by the Committee. The date an Incentive Stock
Option is granted shall mean the date selected by the
Committee as of which the Committee allots a specific number
of shares to a participant pursuant to the Plan.
Notwithstanding the foregoing, Incentive Stock Options shall
not be granted to any owner of 10% or more of the total
combined voting power of the Company and its subsidiaries.
3.02. Incentive Stock Option Agreements.
The grant of an Incentive Stock Option shall be evidenced
by a written Incentive Stock Option Agreement, executed by
the Company and the grantee of an Incentive Stock Option
(the "Optionee"), stating the number of shares of Common
Stock subject to the Incentive Stock Option evidenced
thereby, and in such form as the Committee may from time to
time determine.
3.03. Incentive Stock Option Price.
The option price per share of Common Stock deliverable
upon the exercise of an Incentive Stock Option shall be at
least 100% of the fair market value of a share of Common
Stock on the date the Incentive Stock Option is granted.
3.04. Term and Exercise.
Each Incentive Stock Option shall be fully exercisable as
set forth in the Long Term Incentive Stock Option Agreement,
but in any event not sooner than one year from the date of
grant and in compliance with current IRS guidelines.
Options may be exercised during a period of ten years from
the date of grant (the "option term"). No Incentive Stock
Option shall be exercisable after the expiration of its
option term.
3.05. Maximum Amount of Incentive Stock Option Grant.
No Optionee may be granted an Incentive Stock Option in
any calendar year if the aggregate fair market value
(determined as of the date the Option is granted) of the
Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by such Optionee during
any calendar year, under this and all other incentive stock
option plans (as defined in Section 422 of the Internal
Revenue Code) of the Company, would exceed One Hundred
Thousand Dollars ($100,000).
3.06. Death of Optionee.
(a) Upon the death of the Optionee, any Incentive Stock
Option exercisable on the date of death may be exercised by
the Optionee's estate or by a person who acquires the right
to exercise such Incentive Stock Option by bequest or
inheritance or by reason of the death of the Optionee,
provided that such exercise occurs within both the remaining
option term of the Incentive Stock Option and one year after
the Optionee's death.
(b) The provisions of this Section shall apply
notwithstanding the fact that the Optionee's employment may
have terminated prior to death, but only to the extent of
any Incentive Stock Options exercisable on the date of
death.
3.07. Retirement or Disability.
Upon the termination of the Optionee's employment by
reason of permanent disability or retirement at age 65 (or
at such other times as each shall be determined by the
Committee), the Optionee may exercise Incentive Stock
Options to the extent such Incentive Stock Options were
exercisable at the date of such termination of employment.
In addition, these options can only be exercised up to the
end of the time periods set forth in Section 422 of the
Internal Revenue Code of 1986, which states that exercise of
an Incentive Stock Option will not be available to an
Optionee who exercises any Incentive Stock Options more than
(i) 12 months after the date of termination of employment
due to permanent disability or (ii) three months after the
date of termination of employment due to retirement.
3.08. Termination for Other Reasons.
Except as provided in Sections 3.06 and 3.07 or except as
otherwise determined by the Committee, all Incentive Stock
Options shall terminate sixty (60) days after the
termination of the Optionee's employment with the Company.
3.09. Applicability of Stock Options Section.
Section 2.05, Manner of Payment applicable to Stock
Options, shall apply equally to Incentive Stock Options.
Said Section is incorporated by reference in this Article
III as though fully set forth herein.
ARTICLE IV MISCELLANEOUS
4.01. General Restriction.
Each award under the Plan shall be subject to the
requirement that, if at any time the Committee shall
determine that (i) the listing, registration or
qualification of the shares of Common Stock subject or
related thereto upon any securities exchange or under any
state or Federal law, or (ii) the consent or approval of any
government regulatory body, or (iii) an agreement by the
Optionee of an award with respect to the disposition of
shares of Common Stock, is necessary or desirable as a
condition of, or in connection with, the granting of such
award or the issue or purchase of shares of Common Stock
thereunder, such award may not be consummated in whole or in
part unless such listing, registration, qualification,
consent, approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the
Committee.
4.02. Non-Assignability.
No award under the Plan shall be assignable or
transferable by the recipient thereof, except by will or by
the laws of descent and distribution, nor shall any award
under the Plan be subject to attachment, execution or other
similar process. During the life of the recipient, such
award shall be exercisable only by such person or by such
person's guardian or legal representative.
4.03. Withholding Taxes.
Whenever the Company proposes or is required to issue or
transfer shares of Common Stock under the Plan, the Company,
if required to withhold taxes upon issuance or transfer of
shares, will have the right to require the Optionee to remit
to the Company an amount sufficient to satisfy any Federal,
state and/or local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares.
Alternatively, the Company may issue or transfer such shares
of Common Stock net of the number of shares sufficient to
satisfy the withholding tax requirements. For withholding
tax purposes, the shares of Common Stock shall be valued on
the date the withholding obligation is incurred.
4.04. Right to Terminate Employment.
Nothing in the Plan or in any agreement entered into
pursuant to the Plan shall confer upon any Optionee or
stockholder any right to continue in the employment of the
Company or affect any right which the Company may have to
terminate the employment of any Optionee or stockholder.
4.05. Rights as a Stockholder.
An Optionee shall have no rights as a stockholder with
respect to shares of Common Stock subject to an option
granted to the Optionee unless and until certificates for
shares of Common Stock are issued to the Optionee pursuant
to such option.
4.06. Definitions.
In this Plan the following definitions shall apply:
(a) "Subsidiary" means any corporation of which, at the
time more than 50% of the shares entitled to vote generally
in an election of directors are owned directly or indirectly
by Network Systems International, Inc., a Nevada
corporation, or any Subsidiary thereof.
(b) "Fair market value" as of any date and in respect of
any share of Common Stock means the closing bid price on
such date or on the next business day, if such date is not a
business day, of a share of Common Stock reflected in the
consolidated trading tables of The Wall Street Journal
(presently the NASDAQ) or any other publication selected by
the Committee, provided that, if shares of Common Stock
shall not have been traded on the NASDAQ market for more
than 10 days immediately preceding such date or if deemed
appropriate by the Committee for any other reason, the fair
market value of shares of Common Stock shall be as
determined by the Committee in such other manner as it may
deem appropriate.
(d) "Option" means Stock Option or Incentive Stock
Option.
(e) "Option price" means the purchase price per share of
Common Stock deliverable upon the exercise of a Stock Option
or Incentive Stock Option.
4.07 Leaves of Absence.
The Committee shall be entitled to make such rules,
regulations and determinations, consistent with any
applicable laws, as it deems appropriate under the Plan in
respect of any leave of absence taken by the recipient of
any award. Without limiting the generality of the foregoing,
the Committee shall be entitled to determine (i) whether or
not any such leave of absence shall constitute a termination
of employment within the meaning of the Plan and (ii) the
impact, if any, of any such leave of absence on awards under
the Plan theretofore made to any recipient who takes such
leave of absence.
4.08. Newly Eligible Employees.
The Committee shall be entitled to make such
determinations and awards as it deems appropriate in respect
of any employee who becomes eligible to participate in the
Plan or any portion thereof after the commencement of an
award or incentive period.
4.09. Adjustments of and Changes in Stock of Network.
In any event of any change in the outstanding Common
Stock by reason of a stock dividend or distribution,
recapitalization, merger, consolidation, split-up,
combination, exchange of shares or the like, the Committee
may appropriately adjust the number of shares of Common
Stock which may be issued under the Plan, the number of
shares of Common Stock subject to Options theretofore
granted under the Plan, the option price of Options
theretofore granted under the Plan, and any and all other
matters deemed appropriate by the Committee. In the event
of a "Change in Control" of the Company any Option
previously granted under the Plan to an Optionee shall be
immediately exercisable in full on such date, without regard
to any times of exercise established under Section 2.04 or
3.04 hereof and any Sections outlined in the Stock Option
Agreement or Long Term Incentive Stock Option Agreement, as
the case may be. The term "Change in Control" shall mean
the occurrence, at any time during the specified term of an
Option granted under the Plan, of any of the following
events:
(a) The Company is merged or consolidated or reorganized
into or with or shares of stock of the Company are exchanged
for stock or securities of, another corporation or other
legal person and as a result of such, merger, consolidation,
reorganization or exchange less than 51% of the outstanding
voting securities or other capital interests of the
surviving, resulting or acquiring corporation or other legal
person are owned in the aggregate by the stockholders of the
Company immediately prior to such merger, consolidation,
reorganization or exchange;
(b) The Company sells all or substantially all of its
business and/or assets to any other corporation or other
legal person, less than 51% of the outstanding voting
securities or other capital interests of which are owned in
the aggregate by the stockholders of the Company, directly
or indirectly, immediately prior to or after such sale;
(c) There is a report filed on Schedule 13D or Schedule 14D-
1 (or any successor schedule, form or report), as
promulgated pursuant to the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), disclosing that any person
or group (as the terms "person" and "group" are used in
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act and
the rules and regulations promulgated thereunder) has become
the beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of 20% or more of the
issued and outstanding shares of voting securities of the
Company; or
(d) During any period of two consecutive years, individuals
who at the beginning of any such period constitute the
directors of the Company cease for any reason to constitute
at least a majority thereof unless the election, or
nomination for election by the Company's stockholders of
each new director of the Company was approved by a vote of
at least two-thirds of such directors of the Company then
still in office who were directors of the Company at the
beginning of any such period.
4.10. Amendment of the Plan.
(a) The Committee may, without further action by the
stockholders of the Company and without receiving further
consideration from the participants or paying further
consideration to participants, amend this Plan or condition
or modify awards under this Plan in response to changes in
securities or other laws or rules, regulations or regulatory
interpretations thereof applicable to this Plan or to comply
with stock exchange rules or requirements.
(b) The Committee may at any time and from time to time
terminate or modify or amend the Plan in any respect, except
that without stockholder approval the Committee may not (i)
increase the maximum number of shares of Common Stock which
may be issued under the Plan (other than increases pursuant
to Section 4.09), (ii) extend the period during which any
award may be granted or exercised, (iii) extend the term of
the Plan, or (iv) change the associates/employees or group
of associates/employees eligible to receive Incentive Stock
Options. The termination or any modification or amendment of
the Plan, except as provided in subsection (a), shall not,
without the consent of a participant, affect his or her
rights under an award previously granted to him or her.
4.11. Effective Date of the Plan.
Effectiveness of the Plan is subject to approval by the
stockholders of the Company within twelve (12) months from
the date the Plan is adopted by the Board. Notwithstanding
any other provision hereof, options may be granted under the
Plan prior to obtaining stockholder approval, however no
Option granted hereunder may be exercised prior to approval
of the Plan by the stockholders of the Company and, in the
event the stockholders do not approve the Plan within one
year from the adoption of the Plan by the Board, all Options
granted hereunder shall be void ab initio.
