PAMET SYSTEMS, INC.
1000 Main Street
Acton, Massachusetts 01720
___________________________
NOTICE OF ANNUAL
MEETING OF STOCKHOLDERS
____________________________
Acton, Massachusetts
May 14, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
PAMET SYSTEMS, INC. (the "Company"), a Massachusetts corporation,
will be held at the executive offices of the Company, 1000 Main
Street, Acton, Massachusetts 01720 on June 12, 1998, at 10:00 a.m.
(Eastern Standard Time), for the purposes of considering and voting
upon the following matters, as more fully described in the attached
Proxy Statement:
1. To elect Dr. Stanley J. Robboy and David T. McKay to serve as
directors for a term of three years (expiring in 2001) and until
their respective successors are elected and qualified: and
2. To approve the adoption of the Pamet Systems, Inc. 1998 Stock
Option Plan (the 1998 Plan).
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only those stockholders of record at the close of business on April
17, 1998 shall be entitled to receive notice of, and vote at the
meeting and any adjournment(s) thereof. Such stockholders may vote in
person or by proxy. The stock transfer books will not be closed.
All stockholders are cordially invited to attend the meeting in
person. In any event, please mark your votes, then date, sign and
return the accompanying proxy in the envelope enclosed for that
purpose (to which no postage need be affixed if mailed in the United
States) whether or not you expect to attend the meeting in person.
The proxy is revocable by you at any time prior to its exercise. The
prompt return of the proxy will be of assistance in preparing for the
meeting and your cooperation in this respect will be appreciated.
The Annual Report of the Company for the fiscal year ended December
31, 1997 is also enclosed.
By order of the Board Of Directors
ARTHUR V. JOSEPHSON, JR. Clerk
<PAGE>
PAMET SYSTEMS, INC.
1000 Main Street
Acton, Massachusetts 01720
___________________
PROXY STATEMENT
___________________
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 12,1998
This Proxy Statement is furnished to holders of Common Stock, $.01
par value per share (the "Common Stock") of Pamet Systems, Inc. (the
"Company") in connection with the solicitation of proxies, in the
accompanying form, by the Board of Directors of the Company, for use
at the Annual Meeting of Stockholders to be held at the executive
offices of the Company, 1000 Main Street, Acton, Massachusetts on
June 12, 1998, at 10:00 a.m., and at any and all adjournments
thereof. Stockholders may revoke the authority granted by their
execution of proxies at any time prior to their use by filing with
the Clerk of the Company a written revocation or duly executed proxy
bearing a later date or by attending the meeting and voting in
person. Solicitation of proxies will be made chiefly through the
mails, but additional solicitation may be made by telephone or
telegram by the officers or regular employees of the Company. The
Company may also enlist the aid of brokerage houses in soliciting
proxies. All solicitation expenses, including costs of preparing,
assembling and mailing proxy material, will be borne by the Company.
This proxy statement and accompanying form of proxy are being mailed
to stockholders on or about May 14, 1998.
Shares of the Company's Common Stock represented by executed and
unrevoked proxies will be voted in accordance with the choice or
instructions specified thereon. It is the intention of the persons
named in the proxy, unless otherwise specifically instructed in the
proxy, to vote all proxies received by them (i) FOR the election of
Dr. Stanley J. Robboy and David T. McKay to serve as directors for a
term of three years (expiring in 2001) and until their successors are
elected and qualified and (ii) FOR the adoption of the 1998 Plan and
(iii) in the discretion of such persons named in the proxy on any
other proposals to properly come before the meeting or any
adjournment thereof.
VOTING
Only stockholders of record at the close of business on April 17,
1998 will be entitled to vote at the meeting or any and all
adjournments thereof. As of April 17, 1998, the Company had issued
and outstanding 2,535,250 shares of Common Stock. Each holder of
Common Stock will be entitled to one vote for each share of Common
Stock registered in his or her name on the record date. The holders
of fifty-one percent (51%) of the outstanding shares of Common Stock
constitute a quorum and are required to be present in person or by
proxy to conduct business at the meeting.
Directors are elected by a plurality of the votes cast at the
meeting. A favorable vote of a majority of the votes cast at the
meeting is necessary to adopt the 1998 Plan. Abstentions are counted
as a vote against the 1998 Plan but have no effect on the election of
directors. Broker non-votes will have no effect on the outcome of the
matters scheduled to be considered at the Annual Meeting. The Board
of Directors recommends a vote FOR each of the nominees named below
and for the adoption of the 1998 Plan.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. One class of
directors will be elected at the 1998 Annual Meeting. The directors
in Class II, Dr. Stanley J. Robboy and David T. Mc Kay, are nominated
for a term of three years and until their successors are duly elected
and have qualified. Each nominee has indicated to the Company that
he is willing to serve as a director of the Company if elected, and
the Board of Directors has no reason to believe that any of the
nominees will become unable or unwilling to serve. However, in the
event that any nominee should become unavailable for election for any
presently unforeseen reason, the persons named in the form of proxy
will vote for any nominee who shall be designated by the present
Board of Directors.
The information set forth below as to the ages and principal
occupations of these nominees and the other members of the Board of
Directors has been furnished to the Company by such nominees or
directors.
<TABLE>
<CAPTION>
NOMINEES WHOSE TERMS EXPIRE IN 2001
(Class II)
Director Name Age Principal Occupation Director Since
<S> <C> <C> <C>
1990
Dr. Stanley J. Robboy 56 Since January 1998, Dr. Robboy
has been Vice Chairman of the
department of Pathology at Duke
University Medical Center which is in
addition to the positions he has held
since April 1993 Since April 1993 he
has been Professor of Pathology,
Obstetrics and Gynecology and Head of
the Division of Gynecologic Pathology
of the Department of Pathology at Duke
University Medical Center. From January
1992 through April 1993, Dr. Robboy was
Professor of Pathology and Chief of the
Division of Surgical Pathology of the
Department of Pathology at Duke
University Medical Center.
David T. McKay 55 President and Chief Executive 1997
Officer of the Company since June 1997.
Mr. McKay served as the Global Systems
Manager for Mobil Oil, an oil production
company, from 1996 to 1997. From 1994 to
1996 he was the Vice President of
Information Systems at Moore Corporation,
a business forms company. From 1992 to
1994 he was a Vice President of Gartner
Group, a computer consulting firm.
DIRECTORS WHOSE TERMS EXPIRE IN 2000
(Class I)
Director Since
Director Name Age Principal Occupation
Richard C. Becker 52 Mr. Becker has been 1991
Vice President Finance and
Administration since June 1997,
Assistant Clerk since February
1991 and Treasurer since May 1991.
He was Vice President and Chief
Operating officer of the Company
from June 1993 through May 1997 and
Vice President of Finance and
Administration of the Company from
January 1991 through June 1993.
Arthur V. Josephson,Jr 54 Mr. Josephson has served 1988
as Clerk for the Company since
September 1990.In addition
to his responsibilities to the
Company, since 1985 Mr. Josephson
has served as an accounting
consultant to a number of clients
in Massachusetts. Mr. Josephson
also served as the Treasurer of
Assabet Valley Home Health
Association,Inc.,a visiting nurse
agency, from 1977 through October
1994.
Bruce J. Rogow 52 Mr. Rogow has served as 1997
a Gartner Group Fellow since 1992
and executive principal of Rogow
Opportunity Capital, a private
investment firm, since 1997.
DIRECTORS WHOSE TERMS EXPIRE IN 1999
(Class III)
Director Since
Director Name Age Principal Occupation
Dr. Joel B. Searcy 62 Dr.Searcy has been Chairman 1987
of the Board of Directors
of the Company since the Company's
inception in 1987, was President
and CEO until June 1997,Treasurer
until May 1991 and served as Clerk
until September 1990.
Lee Spelke 65 Mr. Spelke has been a 1990
financial consultant since 1994
and served as President of Spelke
Financial Services, Inc., a
financial consulting firm, for more
than five years, through 1994.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the fiscal year ended December 31, 1997 the Board of Directors
of the Company held twelve meetings. During such period, each of the
current directors of the Company attended 75% or more of the
aggregate of (a) the total number of meetings of the Board of
Directors and (b) the total number of meetings held by all committees
of the Board on which such director served.
The Board of Directors has two committees, an Audit Committee and a
Compensation Committee. The Board of Directors does not have a
nominating committee.
The Audit Committee consists of Lee Spelke, Bruce J. Rogow and
Stanley J. Robboy. The Audit Committee acts as a liaison between the
Company and its independent auditors and reports on matters
pertaining to the Company's independent audit and the Company's
accounting policies The Audit Committee met once during fiscal 1997.
The Compensation Committee consists of Arthur Josephson, Jr., Bruce
J. Rogow, Stanley Robboy, and Lee Spelke. The Compensation Committee
was formed to make recommendations to the Board of Directors with
respect to the compensation of the officers of the Company for each
year and to administer the Company's employee benefit plans. The
Compensation Committee met once during fiscal 1997.
Directors who are not officers of the Company are entitled to receive
an annual stipend of $1,000 for serving on the Board and its
committees and reimbursement for out-of-pocket expenses in connection
with their attendance at directors' meetings. Additionally, each
non-employee director who is a director of the Company on the last
day of a calendar year or has ceased to be a director during the
calendar year due to his or her death or attainment of an age greater
than 65 is automatically granted a non-qualified stock option to
purchase 2,000 shares of Common Stock on January 1 of the succeeding
calendar year at the fair market value per share on the date of
grant.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's executive officers and directors are required under
Section 16(a) of the Securities Exchange Act of 1934, as amended, to
file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Copies of those reports must also
be furnished to the Company. Based solely on the Company's review of
the copies of such reports it has received, the Company believes that
all of its other executive officers and directors, and greater than
ten percent beneficial owners complied with all filing requirements
applicable to them except that Richard C. Becker and Dr. Stanley J.
Robboy were each late in filing two Form 4s and one Form 5 (each such
late filing related to one transaction), Dr. Joel B. Searcy was late
in filing one Form 5 (which related to three transactions) and
Laurence B. Berger, a former director, was late in filing one Form 4
(such late filing related to one transaction).
SECURITY OWNERSHIP OF CERTAIN STOCKHOLDERS
The following table provides information regarding beneficial
ownership as of April 17, 1998 of the Company's Common Stock as to
(i) each nominee and director of the Company, (ii) each of the Named
Executive Officers (hereafter defined), (iii) each person who is
known to the Company to be the beneficial owner of more than 5% of
the Company's voting securities and (iv) all directors and executive
officers as a group. The information set forth below as to nominees,
directors, and officers has been furnished to the Company by such
nominee, officer or director.
</TABLE>
<TABLE>
<CAPTION>
Percent of Common
Name and Address of Amount and Nature of Stock (if over 1%)
Beneficial Owner Beneficial Ownership Owned Beneficially
<S> <C> <C>
Dr. Joel B. Searcy 417,727(1) 16.3%
1000 Main Street
Acton, MA 01720
David T. McKay 50,000(2) 1.9%
Lee Spelke 16,000(3)
Richard C. Becker 97,000(4) 3.7%
Arthur V. Josephson, Jr. 55,750(5) 2.2%
Dr. Stanley J. Robboy 253,500(6) 9.8%
104 Donegal Drive
Chapel Hill, NC 27514
Calvin Hori 145,000(7) 5.7%
35 Norwich Road
Wellesley, MA 02181
Henry Mehlman 161,698(8) 6.4%
40 Bartlett Street
Marblehead, MA 01945
Bruce J. & Winnie R. Rogow 476,250(9) 18.9%
220 Ocean Avenue
Marblehead, MA 01945
All directors and executive 1,366,227(10) 48.7%
officers as a group (6 people)
</TABLE>
(1) Includes 22,000 shares issuable upon the exercise of currently
exercisable options. See "Certain Relationships and Related transactions."
(2) Represents 50,000 shares issuable upon the exercise of
currently exercisable options.
(3) Includes 14,000 shares issuable upon the exercise of currently
exercisable options
(4) Includes 96,000 shares issuable upon the exercise of currently
excisable options. See "Certain Relationships and related Transactions"
(5) Includes 31,000 shares issuable upon the exercise of currently
exercisable options.
(6) Includes 58,000 shares issuable upon the exercise of currently
exercisable options.
(7) As reported on Schedule 13D filed with the Securities and
Exchange Commission on August 11,1995.
(8) As reported on Schedule 13D filed with the Securities and
Exchange Cornmission on June 5,1995.
(9) As reported on Amendment No.2 to the Schedule 13D filed with
the Securities and Exchange Commission on March 12, 1998, filed by Bruce J.
Rogow and Winnie R. Rogow relating to the beneficial ownership of (i) 5,000
shares of Common Stock held by Mr. Rogow's 401(k) account, (ii) 20,000 shares
held by Mr. Rogow's retirement money purchase account, (iii) 95,000 shares
of Common Stock held jointly, (iv) 4,000 shares held by Mrs. Rogow as custodian
for Mr. and Mrs. Rogow's minor child, (v) 325,000 shares of Common Stock held by
Rogow Opportunity Capital, LLC, a Massachusetts limited liability company
("Rogow Opportunity") of which Mr. and Mrs. Rogow are the sole members, and (vi)
warrants (the "Warrants") held by Rogow Opportunity exercisable at any time or
from time to time prior to March 2, 2003, to purchase up to 31,250 shares of
Common Stock at an exercise price of $4.25 per share.
(10) Includes 271,000 shares issuable upon the exercise of
currently exercisable options held by all directors and officers of the Company
as a group.
EXECUTIVE COMPENSATION
The following table sets forth the compensation for services in all
capacities paid by the Company during the three fiscal years ended
December 31, 1997 to the chief executive officer and the executive
officers whose total cash compensation exceeded $100,000 during the
fiscal year ended December 31, 1997. The table excludes perquisites
and other personal benefits which are less than 10% of the total
annual salary and bonus for Named Executive Officers.
<TABLE>
<CAPTION>
The "Named Executive Officers Summary Compensation Table"
Annual Compensation Long Term
Compensation
Name and Principal Securities Under
Position Year Salary lying Options #
<S> <C> <C> <C>
Dr. Joel B. Searcy 1997 $132,000 10,000
Chairman 1996 120,000 10,000
1995 121,340
David T. Mckay 1997 93,334(1) 150,000
President and Chief
Executive Officer
</TABLE>
(1)(Represents salary from June 1, 1997, the date on which Mr. McKay
commenced employment)
Option Grants In The Last Fiscal Year
The following table sets forth each grant of stock options made
during the year ended December 31, 1997 to each Named Executive
Officer who received options during such year.
<TABLE>
<CAPTION>
(1)
Potential Realized
Number of % of Total Value at Assumed
Securities Options Annual Rates of
Underlying Granted to Stock Price
Options Employees in Exercise Expir- Appreciation
Granted Fiscal year Price ation for Option Term
Name (#) (%) ($/sh) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Joel B. Searcy 10,000 18.4% 3.50 10/4/06 $22,011 $55,650
David T. McKay 50,000 21.3% 2.75 5/30/07 $86,487 $219,175
100,000 42.6% 3.25 8/27/07 $204,425 $578,050
</TABLE>
(1) Potential realizable values are based on the fair market value
per share as determined by the Company on the date of the grant and
represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The
dollar amounts set forth in these columns are the results of
calculations at the five percent and ten percent rates set by the
Securities and Exchange Commission, and are not intended to forecast
future appreciation, if any, of the Company's Common Stock price.
There can be no assurance that such potential realizable values will
not be more or less than that indicated in the table above.
Employment Agreements
Dr. Joel B. Searcy was employed by the Company pursuant to an
employment agreement which commenced on November 8, 1990, and
terminated on December 31, 1993, but which was renewed through April
30, 1997. On May 30, 1997, Dr. Search entered into a new employment
agreement with the Company which terminates on December 31, 1999,
under which Dr. Searcy will serve as Chairman of the Board of the
Company. The term of the employment agreement will automatically
renew for an additional one year term if neither party give the other
notice of its intent not to renew at least 180 days prior to the
expiration date of the initial term or any extensions thereof.
Pursuant to his new employment agreement, Dr. Searcy is to receive a
base salary of $132,000 per annum, the use of an automobile and
certain other fringe benefits during the term of the agreement. In
addition, Dr. Searcy may receive bonus compensation, including grants
of stock options or other equity of the Company, at the discretion of
the Board of Directors of the Company.
Pursuant to Dr. Searcy's employment agreement, Dr. Searcy may be
terminated by the Company at any time upon written notice to Dr.
Searcy with or without cause or by Dr. Searcy upon a constructive
termination, change of control of the Company or upon 2 months prior
written notice. In the event that Dr. Searcy's employment is
terminated by the Company for cause (as defined in the agreement) or
voluntarily by Dr. Searcy, Dr. Searcy will be entitled only to
compensation and benefits accrued through the date of such
termination. If Dr. Searcy's employment is terminated as the result
of constructive termination (as defined in the agreement) or by the
Company without cause, he will receive (i) his base salary and all
fringe benefits until the later of twelve months from the date of
termination or the expiration date of the employment agreement and
(ii) an additional bonus amount for each twelve month portion of such
period equal to the highest annualized bonus paid to him during the
term. In the event that Dr. Searcy's employment is terminated which
90 days following a change of control, he will be entitled to
receive, in addition to all compensation and benefits accrued through
the date of such termination, a lump sum amount equal to 2.99
multiplied by the sum of (i) his base salary and (ii) all bonus
compensation paid or payable for the most recent year. For purposes
of Dr. Searcy's employment agreement, a "change of control" is
defined as (i) the election at a meeting of the Company's
stockholders of directors, a majority of whom are not nominated by
the incumbent Board of Directors, or (ii) the acquisition by any
person or entity, other than the Company, Dr. Searcy or any group
with which he is affiliated, or any person who was a member of the
Board of Directors of the Company as of June 1, 1997, of beneficial
ownership of 30% or more of the securities entitled to vote for the
election of directors, subject to certain exceptions set forth in the
agreement.
Pursuant to Dr. Searcy's employment agreement for a period of
twenty-four months following termination of his employment with the
Company, Dr. Searcy will not compete directly or indirectly, with any
service or product made or sold by the Company without the Company's
prior written consent. In addition, during the term of his employment
and for a period of twenty-four months following the termination
thereof, Dr. Searcy may not, directly or indirectly, (i) recruit
employees of the Company or induce them to terminate their employment
with the Company or (ii) contact, solicit, or sell to any of the
customers or prospective customers of the Company.
David T. McKay entered into an employment agreement with the
Company, dated as of May 30, 1997, pursuant to which Mr. McKay will
serve as President and Chief Executive Officer of the Company for a
term commencing on June 1, 1997, and terminating on the first
anniversary thereof. The term of the employment agreement will
automatically renew for any additional one year term if neither party
give the other notice of its intent not to renew at least 90 days
prior to the expiration date and, unless 90 days non-renewal notice
is given by either party prior to the end of such first renewal
period, the agreement will automatically extend for an additional two
year period. Pursuant to his employment agreement, Mr. McKay is to
receive a base salary of $160,000 per annum, additional contractual
salary based on performance levels, including grants of stock options
or other equity of the Company, at the discretion of the Board of
Directors of the Company, and certain other fringe benefits during
the term of the agreement. The employment agreement also provides
that, on the commencement date of Mr. McKay's employment he will
receive fully-vested options to purchase 50,000 shares of the common
stock of the Company and, if Mr. McKay is employed on August 25,
1997, he will receive additional options to purchase 100,000 share of
the common stock of the Company which will vest at the rate of 25%
per year.
Except as described below, the termination provisions of Mr. McKay's
employment agreement are substantially identical to those in Mr.
Searcy's employment agreement, describe above. In the event that
during (a) the first year or (b) second year of Mr. McKay's
employment with the Company, his employment is terminated as the
result of constructive termination (as defined in the agreement) or
by the Company without cause, in addition to compensation and
benefits accrued through the date of such termination, he will only
be entitled to receive his base salary and all fringe benefits and
additional bonus amounts for an additional (a) three months period or
(b) six month period, respectively.
Mr. McKay's employment agreement includes non-competition and
non-solicitation provisions which are substantially to those in Dr.
Searcy's employment agreement described above.
Richard C. Becker entered into an employment agreement with the
Company, dated as of May 30, 1997, pursuant to which Mr. Becker will
serve as Vice President of the Company for a term commencing June 1,
1997 and terminating on December 31, 1999. The term of the employment
agreement will automatically renew for an additional one year term if
neither party gives the other notice of its intent not to renew at
least 180 days prior to the expiration date of the initial term of
any extensions thereof. Pursuant to his employment agreement, Mr.
Becker is to receive a base salary of $93,500 per annum, bonus
compensation, including grants of stock options or other equity of
the Company, at the discretion of the Board of Directors of the
Company, and certain other fringe benefits during the term of the
agreement.
Mr. Becker's employment agreement contains termination provisions,
and non-competition and non-solicitation provisions which are
substantially identical to those in Dr. Searcy's employment agreement
described above.
Option Plan
The Company maintains the Pamet Systems, Inc. 1990 Stock Option Plan
(the "1990 Plan"), which was adopted by the Board and approved by the
stockholders of the Company in September 1990. The 1990 Plan, which
has a maximum of 400,000 shares of Common Stock reserved for
issuance, provides for the discretionary grant of options intended to
qualify as "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code") to
key employees of the Company and of non-qualified stock options to
key employees and consultants (but not non-employee directors) of the
Company, and for the automatic grant of non-qualified options to
non-employee directors of the Company. See "The Board of Directors
and its Committees". The maximum number of shares available under
the 1990 Plan have been granted.
APPROVAL OF THE PAMET SYSTEMS, INC. STOCK OPTION PLAN
General
The Board of Directors adopted on May 6, 1998 a new incentive stock
option plan entitled the "Pamet Systems, Inc. 1998 Stock Option Plan
(the "1998 Plan") for officers, directors and key employees of, and
consultants to, the Company. The 1998 Plan will be effective upon
stockholder approval at the 1998 Annual Meeting. The Board of
Directors believes that the 1998 Plan will assist the Company in
attracting, retaining and rewarding key employees and will enable
such employees to acquire or increase a proprietary interest in the
Company and thus align the interests of such employees and the
Company's stockholders.
The 1998 Plan is intended to supplement the Company's 1990 Plan (the
"1990 Plan"). All 400,000 shares authorized under the 1990 Plan have
been utilized. Any stock option, to the extent it is still
outstanding, previously granted under the 1990 Plan will remain
outstanding in accordance with its terms.
A summary of the principal provisions of the 1998 Plan is set forth
below. This summary is qualified in its entirety by reference to the
full text of the 1998 Plan, which is attached as Exhibit A to this
Proxy Statement. Capitalized terms used herein will, unless
otherwise defined, have the meanings assigned to them in the text of
the 1998 Plan.
Administration
The 1998 Plan will be administered by the Board of Directors or, in
its discretion, a Compensation Committee (the "Committee") of the
Board of Directors, provided that the Committee satisfies the
requirements of Rule 16b-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). The Committee is authorized, among
other things, to construe, interpret and implement the provisions of
the 1998 Plan, to select the employees to whom awards will be
granted, to determine the terms and conditions of such awards and to
make all other determinations deemed necessary or advisable for the
administration of the 1998 Plan.
Shares Available
The aggregate number of shares of Common Stock available for issuance
under the 1998 Plan will be 250,000, subject to adjustment as
described below. Such shares may be authorized and unissued shares
or treasury shares. If any shares of Common Stock subject to an
Option are forfeited or the Option is settled in cash or otherwise
terminates for any reason whatsoever without an actual distribution
of shares, the shares subject to such Option will again be available
for awards. If the Committee determines that any stock dividend,
recapitalization, split, reorganization, merger, consolidation,
combination, repurchase, or other similar corporate transaction or
event affects the Common Stock or the book value of the Company such
that adjustment is appropriate in order to prevent dilution or
enlargement of the rights of participants, then the Committee may
make appropriate adjustments. The Committee may also adjust
performance conditions and other terms of Options in response to
unusual or nonrecurring events or to changes in applicable laws,
regulations, or accounting principles, except to the extent that such
adjustment would adversely affect the status of any outstanding
Option as "performance-based compensation" under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code").
Options
Pursuant to the 1998 Plan, the Committee is authorized to grant
incentive stock options ("ISOs"), which can result in potentially
favorable tax treatment to the participant, and nonqualified stock
options ("NQSOs" and together with ISOs, "Options"). The exercise
price per share of Common Stock subject to an Option is determined by
the Committee, provided that the exercise price for an ISO may not be
less than the fair market value of the Common Stock on the date of
grant (110% of fair market value in the case of a grant of an ISO to
a 10% shareholder of the Company). The Committee may grant Options
alone, in addition to, in tandem with, or in substitution for, any
other Option under the 1998 Plan, or any other option or incentive
granted under other Company plans or other rights to payment from the
Company. Options granted in addition to or in tandem with other
Options may be granted either at the same time or at different times.
If an Option is granted in substitution for another Option, the
participant must surrender such other Option in consideration for the
grant of the new Option. The terms of each Option, the times at
which each Option will be exercisable, and provisions requiring
forfeiture of unexercised Options at or following termination of
employment will be fixed by the Committee. However, no ISO will have
a term exceeding ten years (5 years in the case of a grant of an ISO
to a 10% shareholder of the Company). Options may be exercised by
payment of the exercise price in cash or in Common Stock, outstanding
Options or other property (including notes or obligations to make
payment on a deferred basis, or through "cashless exercises") having
a fair market value equal to the exercise price, as the Committee may
determine from time to time.
The maximum number of shares of Common Stock which may be granted as
Options to any participant in any calendar year shall not exceed
100,000 shares of Common Stock.
Other Terms of Options
Options granted under the 1998 Plan may not be pledged or otherwise
encumbered. Generally, unless the Committee determines otherwise in
its discretion, Options are not transferable except by will or by the
laws of descent and distribution.
The 1998 Plan grants the Committee broad discretion in the operation
and administration of the 1998 Plan. This discretion includes the
authority to make adjustments in the terms and conditions of, and the
criteria included in performance conditions related to, any Options
in recognition of unusual or nonrecurring events affecting the
Company, to take account of a change in the Company's strategy,
performance of comparable companies or other circumstances, or in
response to changes in applicable laws, regulations or accounting
principles. However, no such adjustment may adversely affect the
status of any outstanding Option as performance-based compensation
within the meaning of Section 162(m) of the Internal Revenue Code of
1986.
Change of Control
In the event of a change of control of the Company, all Options
granted under the 1998 Plan that are outstanding and not yet vested
or exercisable, will become immediately 100% vested in each
participant, and will be exercisable for the remaining duration of
the Option. All Options that are exercisable as of the effective date
of the change of control will remain exercisable for the remaining
duration of the Option.
Under the 1998 Plan, a change of control occurs upon any of the
following events: (i) the acquisition, in one or more transactions,
of beneficial ownership by any person or group, (other than all
trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a subsidiary), of any securities of
the Company such that, as a result of such acquisition, such person
or group, either beneficially owns, directly or indirectly, more than
30% of the Company's outstanding voting securities entitled to vote
on a regular basis for a majority of the members of the Board of
Directors; (ii) a change in the composition of the Board of Directors
such that a majority of the members of the Board of Directors are not
Continuing Directors; or (iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result
in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity) at
least 80% of the total voting power represented by the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders
of the Company approve a plan of complete liquidation of the Company
or an agreement for the sale or disposition by the Company, in one or
more transactions, of all or substantially all the Company's assets.
The foregoing events will not be deemed to be a change of control if
the transaction or transactions causing such change were approved in
advance by the affirmative vote of at least a majority of the
Continuing Directors.
Amendment and Termination
The 1998 Plan is of indefinite duration continuing until all shares
of Common Stock reserved therefore have been issued or until
terminated by the Board of Directors. The Board of Directors may
amend, alter, suspend, discontinue, or terminate the 1998 Plan or the
Committee's authority to grant awards thereunder without further
stockholder approval or the consent of the participants; provided,
however, that without the consent of an affected Participant, no
amendment, alteration, suspension, discontinuation, or termination of
the Plan may materially and adversely affect the rights of such
Participant under any Option theretofore granted and any option
agreement relating thereto. Further, the Committee may waive any
conditions or rights under, or amend, alter, suspend, discontinue, or
terminate, any Option theretofore granted and any option agreement
relating thereto; provided, however, that without the consent of an
affected Participant no such amendment, alteration, suspension,
discontinuation, or termination of any Option may materially and
aversely affect the rights of such Participant under such Option.
Certain Federal Income Tax Consequences to the Company and the
Participant
Set forth below is a description of the federal income tax
consequences under the Code, of the grant and exercise of the
benefits awarded under the 1998 Plan.
There will be no federal income tax consequences to employees,
directors or the Corporation on the grant of a NQSO. On the exercise
of a NQSO, the holder will have taxable ordinary income equal to the
excess of the fair market value of the shares of Common Stock
received on the exercise date over the Option price of the shares.
The Corporation will be entitled to a tax deduction in an amount
equal to such excess, provided the Corporation complies with
applicable withholding and/or reporting rules. Any ordinary income
realized by a holder upon exercise of a NQSO will increase his tax
basis in the Common Stock thereby acquired. Upon the sale of Common
Stock acquired by exercise of a NQSO, holders will realize capital
gain or loss (assuming that the holder holds such Common Stock as a
capital asset (i.e., generally for investment)). Recent legislation
has created various categories of capital gains applicable to
individuals.
An employee or director who surrenders shares of Common Stock in
payment of the exercise price of a NQSO will not recognize gain or
loss on his surrender of such shares, but will recognize ordinary
income on the exercise of the NQSO as described above. Of the shares
received in such an exchange, that number of shares equal to the
number of shares surrendered will have the same tax basis and capital
gains holding period as the shares surrendered. The balance of the
shares received will have a tax basis equal to their fair market
value on the date of exercise, and the capital gains holding period
will begin on the date of exercise.
If the Corporation delivers cash, in lieu of fractional shares, or
shares of Common Stock to an employee pursuant to a cashless exercise
program, the employee will recognize ordinary income equal to the
cash paid and the fair market value of such shares as of the date of
the exercise. An amount equal to any such ordinary income will be
deductible by the Corporation, provided it complies with applicable
withholding and/or reporting requirements.
The exercise of any portion of an Option that is accelerated, as a
result of a change in control or a similar event, may cause payments
with respect to such accelerated Options to be treated as "parachute
payments" as defined in the Code. Any such parachute payments may be
non-deductible to the Corporation in whole or in part and may subject
the employee or director to a non-deductible 20% federal excise tax
on all or a portion of such payment in addition to other taxes
ordinarily payable.
The 1998 Plan is not subject to any provisions of the Employee
Retirement Income Security Act of 1974 and is not required to be
qualified under Section 401(a) of the Code.
Section 162(m) Provisions
The 1998 Plan was designed to permit the deduction by the Company of
the compensation realized by certain officers in respect of NQSO's
granted under the 1998 Plan which is intended by the Committee to
qualify as "performance-based compensation" under Section 162(m) of
the Code. Section 162(m) of the Code generally disallows a deduction
to the Company for compensation paid in any year in excess of $1
million to any Covered Employee. Certain compensation, including
compensation that meets the specified requirements for
"performance-based compensation," is not subject to this deduction
limit. The compensation element of NQSOs granted under the 1998 Plan
with an exercise price at least equal to the fair market value of the
Common Stock on the date of grant should not be subject to the
deduction limit of Section 162(m) of the Code.
Board Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
Adoption of the proposal will require a favorable vote of a majority
of the votes cast at the Annual Meeting. Proxies not indicated to the
contrary will be voted for the approval of the proposal.
NEW PLAN BENEFITS
With respect to the grant of options to executive officers of the
Company, the decision whether or not to make any such grants, to whom
such grants are made and the number and terms of options granted are
entirely at the discretion of the Committee.
With respect to the grant of options to non-employee directors of the
Company, in the past years, on January 1 of each calendar year, an
NQSO to purchase 2,000 shares of Common Stock has been granted to
each non-employee director who is a director of the Company on the
last day of the prior calendar year or has ceased to be a director
during the calendar year due to his or her death or attainment of an
age greater than 65, at the fair market value per share on the date
of grant. The Company anticipates continuing this practice in the
future.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1997 the Company entered in to an agreement with Dr. Stanley
J. Robboy a stockholder and director pursuant to which he agreed to
lend money to the Company. The agreement provided for an partially
secured $300,000 line of credit. The agreement provides for interest
on the outstanding balance at the rate of 12% per annum. In
connection with the loan, Dr. Robboy was granted options for up to
100,000 shares of common stock at a price of $2.00. per share. Dr.
Searcy and Mr. Becker were each granted 10,000 options priced at
$2.00 in return for their guarantee of Dr. Robboy's line of credit.
At December 31, 1997, the loan balance was $192,439 and interest paid
during 1997 was $21,321. At April 24, 1998, the balance of the loans
was $267,439.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Representatives of Carlin Charron & Rosen LLP, the Company's
auditors, are expected to be present at the meeting. The
representatives will have the opportunity to make a statement if they
so desire and will be available to respond to appropriate questions
from stockholders.
STOCKHOLDER PROPOSALS
All stockholder proposals which are intended to be presented at the
next Annual Meeting of Stockholders of the Company contemplated to be
held in 1999 must be received by the Company on or before January 12,
1998, for inclusion in the Board of Directors' proxy statement and
form of proxy relating to the meeting.
MISCELLANEOUS
The Board of Directors knows of no other business to be acted upon at
the meeting. However, if any other business properly comes before the
meeting, it is the intention of the persons named in the enclosed
proxy to vote on such matters in accordance with their best judgment.
The prompt return of your proxy will be appreciated and helpful in
obtaining the necessary vote. Therefore, whether or not you expect to
attend the meeting, please sign the proxy and return it in the
enclosed envelope.
A copy of the Company's Annual report on Form 10-KSB for the fiscal
year ended December 31, 1997 is available without charge from
Investor Relations, Pamet Systems, Inc., 1000 Main Street, Acton,
Massachusetts 01720, Telephone: (978) 263-2060.
By order of the Board of Directors
ARTHUR V. JOSEPHSON, Jr. Clerk
Acton, Massachusetts
May 14, 1998
PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD NOW.
<PAGE>
Attachment A - 1998 Stock Option Plan
PAMET SYSTEMS, INC.
1998 STOCK OPTION PLAN
..................................................
Section 1. Purpose of the Plan
The purpose of the PAMET SYSTEMS, INC. 1998 Stock Option Plan (the
"Plan") is to further the interests of Pamet Systems, Inc. (the
"Company") and its shareholders by providing long-term incentives to
those Employees of the Company and its Subsidiaries who are largely
responsible for the management, growth and protection of the business
of the Company and its Subsidiaries by granting them options to
acquire the common stock, $.01 par value, of the Company ("Common
Stock).
Section 2. Definitions
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Change of Control" means and includes each of the following:
(i) the acquisition, in one or more transactions, of beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act)
by any person or entity or any group of persons or entities who
constitute a group (within the meaning of Section 13(d)(3) of the
Exchange Act), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a
Subsidiary, of any securities of the Company such that, as a result
of such acquisition, such person, entity or group beneficially owns
(within the meaning of Rule l3d-3 under the Exchange Act), directly
or indirectly, more than 30% of the Company's outstanding voting
securities entitled to vote on a regular basis for a majority of the
members of the Board of Directors of the Company; (ii) a change in
the composition of the Board of Directors of the Company such that a
majority of the members of the Board of Directors of the Company are
not Continuing Directors; or (iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result
in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity) at
least 80% of the total voting power represented by the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders
of the Company approve a plan of complete liquidation of the Company
or an agreement for the sale or disposition by the Company of (in one
or more transactions) all or substantially all of the Company's
assets.
Notwithstanding the foregoing, the preceding events shall not be
deemed to be a Change of Control if, prior to any transaction or
transactions causing such change, a majority of the Continuing
Directors shall have voted not to treat such transaction or
transactions as resulting in a Change of Control.
(b) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(c) A "Continuing Director" means, as of any date of determination,
any member of the Board of Directors of the Company who (i) was a
member of such Board on the effective date of the Plan or (ii) was
nominated for election or elected to such Board with the affirmative
vote of a majority of the Continuing Directors who were members of
such Board at the time of such nomination or election.
(d) "Employee" means all key employees, officers and directors of, or
consultants to the Company or any Subsidiary of the Company.
(e) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(f) "Fair Market Value" means, with the fair market value of Common
Stock determined by such methods or procedures as shall be
established from time to time by the Committee in good faith and in
accordance with applicable law. Unless otherwise determined by the
Committee, the Fair Market Value of Common Stock on a particular day
shall mean the last reported sale price as shown on the Composite
Tape of the New York Stock Exchange, or, in case no such reported
sale price is quoted on such day, the average of the last reported
closing bid and asked prices on the New York Stock Exchange, or, if
the Common Stock is not listed or admitted to trading on such
exchange, the last reported sales price, or in case no such reported
sales price is quoted on such day, the average of the last reported
closing bid and asked prices on the principal national securities
exchange (including, for purposes hereof, the National Association of
Securities Dealers, Inc. National Market System) on which the Common
Stock is listed or admitted to trading, or, if it is not listed or
admitted to trading on any national securities exchange, the average
of the last high closing bid price and the low closing asked price as
reported on an inter-dealer quotation system. In the absence of any
available public quotations for the Common Stock, the Board of
Directors of the Company shall determine in good faith the fair value
of the Common Stock, which determination shall be set forth in a
certificate by the Secretary of the Company.
(g) "ISO" means any Option designated as an incentive stock option
within the meaning of Section 422 of the Code.
(h) "Option" means a right granted to a Participant pursuant to
Section 6(b) to purchase Common Stock at a specified price during
specified time periods. An Option may be either an ISO or a
nonstatutory Option (an Option not designated as an ISO).
(i) "Option Agreement" shall mean the written agreement, instrument
or document evidencing an Option.
(j) "Participant" shall mean any individual receiving Options under
the Plan.
(k) "Subsidiary" shall mean any subsidiary corporation (within the
meaning of Section 424(f) of the Code) of the Company.
Section 3. Administration of the Plan
The Plan shall be administered by the Board of Directors or, in its
discretion, the Compensation Committee of the Board of Directors of
the Company, provided that the Committee satisfies the requirements
of Rule 16b-3 under the Exchange Act (the "Committee"). Any action
of the Committee in administering the Plan shall be final, conclusive
and binding on all persons, including the Company, its Subsidiaries,
Employees, Participants, persons claiming rights from or through
Participants and stockholders of the Company.
Subject to the provisions of the Plan, the Committee shall have full
and final authority in its discretion (a) to select those key
employees from among the Employees who will receive Options pursuant
to the Plan ("Participants"), (b) to determine the number of shares
of Common Stock for which an Option will be granted and the terms and
conditions of any Option granted under the Plan (including, but not
limited to, restrictions as to transferability or forfeiture,
exercisability or settlement of an Option and waivers or
accelerations thereof, and waivers of, or modifications to,
performance conditions relating to an Option, based in each case on
such considerations as the Committee shall determine) and all other
matters to be determined in connection with an Option; (c) to
correct any defect or supply any omission or reconcile any
inconsistency in the Plan, and to adopt, amend and rescind such rules
and regulations as, in its opinion, may be advisable in the
administration of the Plan; and (d) to make all other determinations
as it may deem necessary or advisable for the administration of the
Plan. The Committee may delegate to officers or managers of the
Company or any Subsidiary or to unaffiliated service providers the
authority, subject to such terms as the Committee shall determine, to
perform administrative functions and to perform such other functions
as the Committee may determine, to the extent permitted under Rule
16b-3, Section 162(m) of the Code and applicable law.
Section 4. Participation in the Plan
Participants in the Plan shall be selected by the Committee in its
sole discretion from among the Employees of the Company and its
Subsidiaries.
Section 5. Plan Limitations; Shares Subject to the Plan
Subject to the provisions of Section 8(a) hereof, the aggregate
number of shares of Common Stock, available for issuance as Options
under the Plan shall not exceed 250,000 shares.
No Option may be granted if the number of shares to which such Option
relates, when added to the number of shares previously issued under
the Plan and the number of shares which may then be acquired pursuant
to other outstanding, unexercised Options, exceeds the number of
shares available for issuance pursuant to the Plan. If any shares
subject to an Option are forfeited or such Option is settled in cash
or otherwise terminates for any reason whatsoever without an actual
distribution of shares to the Participant, any shares counted against
the number of shares available for issuance pursuant to the Plan with
respect to such Option shall, to the extent of any such forfeiture,
settlement, or termination, again be available for Options under the
Plan; provided, however, that the Committee may adopt procedures for
the counting of shares relating to any Option to ensure appropriate
counting, avoid double counting, and provide for adjustments in any
case in which the number of shares actually distributed differs from
the number of shares previously counted in connection with such
Option.
The maximum number of shares of Common Stock which may be granted as
Options to any Participant in any calendar year shall not exceed
100,000 shares.
Section 6. Option Terms and Conditions
(a) General. Options may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on
any Option or the exercise thereof, at the date of grant or
thereafter (subject to Section 8(a)), such additional terms and
conditions, not inconsistent with the provisions of the Plan, as the
Committee shall determine, including terms requiring forfeiture of
Options in the event of termination of employment by the Participant;
provided, however, that the Committee shall retain full power to
accelerate or waive any such additional term or condition as it may
have previously imposed. All Options shall be evidenced by an Option
Agreement.
(b) Options. The Committee may grant Options to Participants on the
following terms and conditions:
(i) Exercise Price. The exercise price of each Option shall be
determined by the Committee at the time the Option is granted.
(ii) Time and Method of Exercise. The Committee shall determine the
time or times at which an Option may be exercised in whole or in
part, whether the exercise price shall be paid in cash or by the
surrender at Fair Market Value of Common Stock, or by any combination
of cash and shares of Common Stock, including, without limitation,
cash, Common Stock, other Options, or other property (including notes
or other contractual obligations of Participants to make payment on a
deferred basis, such as through "cashless exercise" arrangements, to
the extent permitted by applicable law), and the methods by which
Common Stock will be delivered or deemed to be delivered to
Participants.
(iii) Incentive Stock Options. Options intended to be ISO shall be
granted only to Participants who are key employees of the Company or
any Subsidiary. The terms of any Option granted under the Plan as an
ISO shall comply in all respects with the provisions of Section 422
of the Code, including, but not limited to, the requirement that no
ISO shall be granted more than ten years after the effective date of
the Plan.
Section 7. Additional Provisions Applicable to Options
(a) Stand-Alone, Additional, Tandem, and Substitute Options. Options
granted under the Plan may, in the discretion of the Committee, be
granted either alone or in addition to, in tandem with, or in
substitution for, any other Option granted under the Plan or any
option or other incentive granted under any other plan of the Company
or any Subsidiary, or any business entity acquired by the Company or
any Subsidiary, or any other right of a Participant to receive
payment from the Company or any Subsidiary. If an Option is granted
in substitution for another Option, the Committee shall require the
surrender of such other Option in consideration for the grant of the
new Option. Options granted in addition to, or in tandem with, other
Options may be granted either as of the same time as, or a different
time from, the grant of such other Option or Options. The per share
exercise price of any Option:
(i) granted in substitution for an outstanding Option shall be not
less than the lesser of (A) the Fair Market Value of a share of
Common Stock at the date such substitute Option is granted or (B)
such Fair Market Value at that date, reduced to reflect the Fair
Market Value at that date of the Option required to be surrendered by
the Participant as a condition to receipt of the substitute Option;
or
(ii) retroactively granted in tandem with an outstanding Option,
shall not be less than the lesser of the Fair Market Value of a share
of Common Stock at the date of grant of the later Option or at the
date of grant of the earlier Option.
(b) Exchange and Buy Out Provisions. The Committee may at any time
offer to exchange or buy out any previously granted Option for a
payment in cash, Common Stock, other Options (subject to Section
7(a)), or other property based on such terms and conditions as the
Committee shall determine and communicate to a Participant at the
time that such offer is made.
(c) Performance Conditions. The right of a Participant to exercise
any Option, and the timing thereof, may be subject to such
performance conditions as may be specified by the Committee.
(d) Term of Options. The term of each Option shall, except as
provided herein, be for such period as may be determined by the
Committee; provided, however, that in no event shall the term of any
ISO exceed a period of ten years from the date of its grant (or such
shorter period as may be applicable under Section 422 of the Code).
(e) Loan Provisions. With the consent of the Committee, and subject
at all times to laws and regulations and other binding obligations or
provisions applicable to the Company, the Company may make,
guarantee, or arrange for a loan or loans to a Participant with
respect to the exercise of any Option or other payment in connection
with any Option, including the payment by a Participant of any or all
federal, state, or local income or other taxes due in connection with
any Option. Subject to such limitations, the Committee shall have
full authority to decide whether to make a loan or loans hereunder
and to determine the amount, terms, and provisions of any such loan
or loans, including the interest rate to be charged in respect of any
such loan or loans, whether the loan or loans are to be with or
without recourse against the borrower, the terms on which the loan is
to be repaid and the conditions, if any, under which the loan or
loans may be forgiven.
(f) Change of Control. In the event of a Change of Control of the
Company, all Options granted under the Plan that are still
outstanding and not yet vested or exercisable shall become
immediately 100% vested in each Participant, as of the first date
that the definition of Change of Control has been fulfilled, and
shall be exercisable for the remaining duration of the Option. All
Options that are exercisable as of the effective date of the Change
of Control will remain exercisable for the remaining duration of the
Option.
Section 8. Adjustments upon Changes in Capitalization;
Acceleration in Certain Events
In the event that the Committee shall determine that any stock
dividend, recapitalization, forward split or reverse split,
reorganization, merger, consolidation, spin-off, combination,
repurchase or share exchange, or other similar corporate transaction
or event, affects the Common Stock such that an adjustment is
appropriate in order to prevent dilution or enlargement of the rights
of Participants under the Plan, then the Committee shall, in such
manner as it may deem equitable, adjust any or all of (i) the number
and kind of shares of Common Stock which may thereafter be issued in
connection with Options, (ii) the number and kind of shares of Common
Stock issuable in respect of outstanding Options, (iii) the aggregate
number and kind of shares of Common Stock available under the Plan,
and (iv) the exercise price relating to any Option or, if deemed
appropriate, make provision for a cash payment with respect to any
outstanding Option; provided, however, in each case, that no
adjustment shall be made which would cause the Plan to violate
Section 422(b)(1) of the Code with respect to ISOs or would adversely
affect the status of any Option as "performance-based compensation"
under Section 162(m) of the Code.
Section 9. General Provisions
(a) Changes to the Plan and Options. The Board of Directors of the
Company may amend, alter, suspend, discontinue, or terminate the Plan
or the Committee's authority to grant Options under the Plan without
the consent of the Company's stockholders or Participants, except
that any such amendment, alteration, suspension, discontinuation, or
termination shall be subject to the approval of the Company's
stockholders if such stockholder approval is required by any federal
or state law or regulation or the rules of any stock exchange or
automated quotation system on which the Common Stock may then be
listed or quoted, and the Board may otherwise, in its discretion,
determine to submit other such changes to the Plan to the
stockholders for approval; provided, however, that without the
consent of an affected Participant, no amendment, alteration,
suspension, discontinuation, or termination of the Plan may
materially and adversely affect the rights of such Participant under
any Option theretofore granted and any Option Agreement relating
thereto. The Committee may waive any conditions or rights under, or
amend, alter, suspend, discontinue, or terminate, any Option
theretofore granted and any Option Agreement relating thereto;
provided, however, that without the consent of an affected
Participant, no such amendment, alteration, suspension,
discontinuation, or termination of any Option may materially and
adversely affect the rights of such Participant under such Option.
The foregoing notwithstanding, any performance condition specified in
connection with an Option shall not be deemed a fixed contractual
term, but shall remain subject to adjustment by the Committee, in its
discretion at any time in view of the Committee's assessment of the
Company's strategy, performance of comparable companies, and other
circumstances, except to the extent that any such adjustment to a
performance condition would adversely affect the status of any Option
as "performance-based compensation" under Section 162(m) of the Code.
(b) No Right to Option or Employment. No employee or other person
shall have any claim or right to receive an Option under the Plan.
Neither the Plan nor any action taken hereunder shall be construed as
giving any employee any right to be retained in the employ of the
Company or any Subsidiary.
(c) Taxes. The Company or any Subsidiary is authorized to withhold
from any payment relating to the exercise of an Option under the
Plan, including from any payroll or other payment to a Participant
amounts of withholding and other taxes due in connection with any
transaction involving an Option, and to take such other action as the
Committee may deem advisable to enable the Company and Participants
to satisfy obligations for the payment of withholding taxes and other
tax obligations relating to any Option. This authority shall include
authority to withhold or receive Common Stock or other property and
to make cash payments in respect thereof in satisfaction of a
Participant's tax obligations.
(d) Limits on Transferability; Beneficiaries. No Option or other
right or interest of a Participant under the Plan shall be pledged,
encumbered, or hypothecated to, or in favor of, or subject to any lien,
obligation, or liability of such Participants to, any party, other than
the Company or any Subsidiary, or assigned or transferred by such
Participant otherwise than by will or the laws of descent and distribution,
and such Options and rights shall be exercisable during the lifetime of the
Participant only by the Participant or his or her guardian or legal
representative. Notwithstanding the foregoing, the Committee may, in its
discretion, provide that Options (other than an Option which is an ISO) be
transferable, without consideration, to immediate family members
(i.e., children, grandchildren or spouse), to trusts for the benefit of such
immediate family members and to partnerships in which such family members are
the only partners. The Committee may attach to such transferability feature
such terms and conditions as it deems advisable.
(e) No Rights to Options; No Stockholder Rights. No Participant shall have
any claim to be granted any Option under the Plan, and there is no obligation
for uniformity of treatment of Participants. No Option shall confer on any
Participant any of the rights of a stockholder of the Company unless and until
Common Stock is duly issued or transferred to the Participant in accordance with
the terms of the Option.
(f) Discretion. In exercising, or declining to exercise, any grant of
authority or discretion hereunder, the Committee may consider or ignore such
factors or circumstances and may accord such weight to such factors and
circumstances as the Committee alone and in its sole judgment deems appropriate
and without regard to the affect such exercise, or declining to exercise such
grant of authority or discretion, would have upon the affected Participant, any
other Participant, any employee, the Company, any Subsidiary, any stockholder
or any other person.
(g) Effective Date. The Plan is effective as of the date of approval hereof
by the stockholders.
(h) Stockholder Approval. Unless and until the Plan is approved by the
stockholders of the Company at the Company's 1998 Annual Meeting of
Stockholders, no Option may be granted.
