<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
SBE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box)
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1. Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
4. Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
5. Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
6. Amount Previously Paid:
-----------------------------------------------------------------------
7. Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
8. Filing Party:
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9. Date Filed:
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<PAGE>
[SBE LOGO]
SBE, INC.
4550 NORRIS CANYON ROAD
SAN RAMON, CALIFORNIA 94583
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 22, 1998
TO THE STOCKHOLDERS OF SBE, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of SBE, Inc.,
a Delaware corporation (the "Company"), will be held on Thursday, October 22,
1998, at 9:00 a.m. local time at the Company's principal offices at 4550 Norris
Canyon Road, San Ramon, California for the following purposes:
1. To approve the Company's 1992 Employee Stock Purchase Plan, as amended
to increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 100,000 shares and to extend the term of such plan.
2. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on September 21, 1998
as the record date for the determination of stockholders entitled to notice of
and to vote at this Special Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
/s/ Timothy J. Repp
Timothy J. Repp
CHIEF FINANCIAL OFFICER, VICE
PRESIDENT, FINANCE AND SECRETARY
San Ramon, California
September 29, 1998
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. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. 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.
<PAGE>
SBE, INC.
4550 NORRIS CANYON ROAD
SAN RAMON, CALIFORNIA 94583
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
OCTOBER 22, 1998
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of SBE, Inc., a Delaware corporation (the "Company"), for use at a
Special Meeting of Stockholders to be held on October 22, 1998, at 9:00 a.m.
local time (the "Special Meeting"), or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Special Meeting. The Special Meeting will be held at the Company's principal
offices at 4550 Norris Canyon Road, San Ramon, California. The Company intends
to mail this proxy statement and accompanying proxy card on or about September
29, 1998 to all stockholders entitled to vote at the Special 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 September
21, 1998 will be entitled to notice of and to vote at the Special Meeting. At
the close of business on September 21, 1998, the Company had outstanding and
entitled to vote 2,679,414 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 Special Meeting. All votes will be tabulated
by the inspector of election appointed for the meeting, who will separately
tabulate affirmative and negative votes, abstentions and broker non-votes.
Abstentions will be counted towards the tabulation of votes cast on proposals
presented to the stockholders and will have the same effect as negative votes.
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 office, 4550 Norris Canyon
Road, San Ramon, California, a written notice of revocation or a
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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 of stockholders that are intended to be presented at the Company's
1999 Annual Meeting of Stockholders must be received by the Company not later
than October 27, 1998 in order to be included in the proxy statement and proxy
relating to that Annual Meeting.
In addition, pursuant to the Company's bylaws, stockholders who wish to
bring matters or propose nominees for director at the Company's 1999 Annual
Meeting of Stockholders must provide specified information to the Company not
earlier than December 24, 1998 and not later than January 23, 1999 (unless such
matters are included in the Company's proxy statement pursuant to Rule 14a-8
under the Securities Exchange Act of 1934, as amended). Notwithstanding the
foregoing, in the event the date of the 1999 Annual Meeting of Stockholders is
changed by more than 30 days from the date contemplated at the time the
Company's proxy statement for the 1998 Annual Meeting of Stockholders was sent
to stockholders:
1. If public announcement of the new date is made fewer than 70 days prior
to the such date, stockholders who wish to bring matters or propose nominees for
director must provide such information to the Company within 10 days after such
public announcement is made; or
2. Otherwise, stockholders who wish to bring matters or propose nominees
for director must provide such information to the Company no earlier than 90
days prior to such meeting and no later than 60 days prior to such meeting.
PROPOSAL
APPROVAL OF 1992 EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
In January 1992, the Board adopted the 1992 Employee Stock Purchase Plan
(the "Purchase Plan") authorizing the issuance of 100,000 shares of the
Company's Common Stock. The stockholders of the Company approved the adoption of
the Purchase Plan in March 1992. At August 31, 1998, an aggregate of 99,915
shares had been issued under the Purchase Plan and only 85 shares remained for
the grant of future rights under the Purchase Plan. In September 1998, the Board
of the Company adopted amendments to the Purchase Plan to increase the number of
shares authorized for issuance under the Purchase Plan to 200,000 shares and to
extend the term of the Purchase Plan. These amendments are intended to afford
the Company greater flexibility in providing employees with stock incentives and
ensures that the Company can continue to provide such incentives at levels
determined appropriate by the Board.
Stockholders are requested to approve the Purchase Plan, as amended. The
affirmative vote of the holders of a majority of the shares present in person or
represented by proxy and entitled to vote at the meeting will be required to
approve the Purchase Plan, as amended.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF THIS PROPOSAL
The essential features of the Purchase Plan, as amended, are outlined below:
PURPOSE
The purpose of the Purchase Plan is to provide a means by which employees of
the Company (and any parent or subsidiary of the Company designated by the Board
of Directors to participate in the Purchase Plan) may be given an opportunity to
purchase Common Stock of the Company through payroll deductions, to assist the
Company in retaining the services of its employees, to secure and
2
<PAGE>
retain the services of new employees, and to provide incentives for such persons
to exert maximum efforts for the success of the Company. Approximately 58 of the
Company's approximately 65 employees are eligible to participate in the Purchase
Plan.
The rights to purchase Common Stock granted under the Purchase Plan are
intended to qualify as options issued under an "employee stock purchase plan" as
that term is defined in Section 423(b) of the Internal Revenue Code of 1986, as
amended (the "Code").
ADMINISTRATION
The Purchase Plan is administered by the Board, which has the final power to
construe and interpret the Purchase Plan and the rights granted under it. The
Board has the power, subject to the provisions of the Purchase Plan, to
determine when and how rights to purchase Common Stock of the Company will be
granted, the provisions of each offering of such rights (which need not be
identical), and whether any parent or subsidiary of the Company shall be
eligible to participate in such plan. The Board has the power to delegate
administration of such plan to a committee of not less than two Board members.
The Board may abolish any such committee at any time and revest in the Board the
administration of the Purchase Plan.
OFFERINGS
The Purchase Plan is implemented by offerings of rights to all eligible
employees from time to time by the Board. Generally, each such offering is of
six months' duration.
ELIGIBILITY
Any person who is customarily employed at least 20 hours per week and five
months per calendar year by the Company (or by any parent or subsidiary of the
Company designated from time to time by the Board) on the first day of an
offering period is eligible to participate in that offering under the Purchase
Plan, provided such employee has been in the continuous employ of the Company
for a continuous period preceding the first day of the offering period as the
Board may require, but in no event will the required period be equal to or
greater than two years.
Notwithstanding the foregoing, no employee is eligible for the grant of any
rights under the Purchase Plan if, immediately after such grant, the employee
would own, directly or indirectly, stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or of any
parent or subsidiary of the Company (including any stock that such employee may
purchase under all outstanding rights and options), nor will any employee be
granted rights that would permit him to buy more than $25,000 worth of stock
(determined at the fair market value of the shares at the time such rights are
granted) under all employee stock purchase plans of the Company in any calendar
year.
PARTICIPATION IN THE PLAN
Eligible employees become participants in the Purchase Plan by delivering to
the Company, prior to the date selected by the Board as the offering date for
the offering, an agreement authorizing payroll deductions of up to 15% of such
employees' base compensation during the purchase period.
PURCHASE PRICE
The purchase price per share at which shares are sold in an offering under
the Purchase Plan cannot be less than the lower of (a) 85% of the fair market
value of a share of Common Stock on the date of commencement of the offering, or
(b) 85% of the fair market value of a share of Common Stock on the last day of
the purchase period.
3
<PAGE>
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the offering period. At any time during the purchase period, a participant may
reduce or terminate his or her payroll deductions. A participant may increase or
begin payroll deductions after the beginning of an offering period only as
provided for in the offering. All payroll deductions made for a participant are
credited to his or her account under the Purchase Plan and deposited with the
general funds of the Company. A participant may make additional payments into
his or her account only if provided for in the offering.
PURCHASE OF STOCK
By executing an agreement to participate in the Purchase Plan, the employee
is entitled to purchase shares under such plan. In connection with offerings
made under the Purchase Plan, the Board specifies a maximum number of shares any
employee may be granted the right to purchase and the maximum aggregate number
of shares that may be purchased pursuant to such offering by all participants.
If the aggregate number of shares to be purchased upon exercise of rights
granted in the offering would exceed the maximum aggregate number, the Board
would make a pro rata allocation of shares available in a uniform and equitable
manner. Unless the employee's participation is discontinued, his right to
purchase shares is exercised automatically at the end of the purchase period at
the applicable price. See "Withdrawal."
WITHDRAWAL
While each participant in the Purchase Plan is required to sign an agreement
authorizing payroll deductions, the participant may withdraw from a given
offering by terminating his or her payroll deductions and by delivering to the
Company a notice of withdrawal from the Purchase Plan. Such withdrawal may be
elected at any time prior to the end of the applicable offering period.
Upon any withdrawal from an offering by the employee, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, less any accumulated deductions previously applied to the purchase of
stock on the employee's behalf during such offering, and such employee's
interest in the offering will be automatically terminated. The employee is not
entitled to again participate in such offering. An employee's withdrawal from an
offering will not have any effect upon such employee's eligibility to
participate in subsequent offerings under the Purchase Plan.
TERMINATION OF EMPLOYMENT
Rights granted pursuant to any offering under the Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason, and the
Company will distribute to such employee all of his or her accumulated payroll
deductions, without interest.
RESTRICTIONS ON TRANSFER
Rights granted under the Purchase Plan are not transferable and may be
exercised only by the person to whom such rights are granted.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Purchase Plan at any time. Unless
terminated earlier, such plan will terminate on September 13, 2008.
The Board may amend the Purchase Plan at any time. Any amendment of the
Purchase Plan must be approved by the stockholders within 12 months of its
adoption by the Board if the amendment would (a) increase the number of shares
of Common Stock reserved for issuance under the Purchase Plan, (b) modify the
requirements relating to eligibility for participation in the Purchase Plan, or
4
<PAGE>
(c) modify any other provision of the Purchase Plan in a manner that would
materially increase the benefits accruing to participants under the Purchase
Plan, if such approval is required in order to comply with the requirements of
Rule 16b-3 under the Exchange Act.
Rights granted before amendment or termination of the Purchase Plan will not
be altered or impaired by any amendment or termination of such plan without
consent of the person to whom such rights were granted.
EFFECT OF CERTAIN CORPORATE EVENTS
In the event of a dissolution, liquidation or specified type of merger of
the Company, the surviving corporation either will assume the rights under the
Purchase Plan or substitute similar rights, or the exercise date of any ongoing
offering will be accelerated such that the outstanding rights may be exercised
immediately prior to, or concurrent with, any such event.
STOCK SUBJECT TO PURCHASE PLAN
If rights granted under the Purchase Plan expire, lapse or otherwise
terminate without being exercised, the Common Stock not purchased under such
rights again becomes available for issuance under such plan.
FEDERAL INCOME TAX INFORMATION
Rights granted under the Purchase Plan are intended to qualify for favorable
federal income tax treatment associated with rights granted under an employee
stock purchase plan which qualifies under provisions of Section 423 of the Code.
A participant will be taxed on amounts withheld for the purchase of shares
as if such amounts were actually received. Other than this, no income will be
taxable to a participant until disposition of the shares acquired, and the
method of taxation will depend upon the holding period of the purchase shares.
If the stock is disposed of at least two years after the beginning of the
offering period and at least one year after the stock is transferred to the
participant, then the lesser of (a) the excess of the fair market value of the
stock at the time of such disposition over the exercise price or (b) the excess
of the fair market value of the stock as of the beginning of the offering period
over the exercise price (determined as of the beginning of the offering period)
will be treated as ordinary income. Any further gain or any loss will be taxed
as long-term capital gain or loss. Such capital gains currently are generally
subject to lower tax rates than ordinary income.
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, then the excess of the fair market value of the
stock on the exercise date over the exercise price will be treated as ordinary
income at the time of such disposition. The balance of any gain will be treated
as short-term or long-term capital gain. Even if the stock is later disposed of
for less than its fair market value on the exercise date, the same amount of
ordinary income is attributed to the participant, and a capital loss is
recognized equal to the difference between the sales price and the fair market
value of the stock on such exercise date. Any capital gain or loss will be
short-term or long-term depending on how long the stock has been held.
There are no federal income tax consequences to the Company by reason of the
grant or exercise of rights under the Purchase Plan. The Company is entitled to
a deduction to the extent amounts are taxed as ordinary income to a participant
(subject to the requirement of reasonableness, the provisions of Section 162(m)
of the Code and the satisfaction of a tax reporting obligation).
5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP TABLE
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of August 31, 1998 by (a) all those
known by the Company to be beneficial owners of more than 5% of its Common
Stock; (b) each director of the Company; (c) each of the executive officers
named in the Summary Compensation Table; and (d) all executive officers and
directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP (1)
------------------------
NUMBER PERCENT
BENEFICIAL OWNER OF SHARES OF TOTAL (2)
- ---------------------------------------------------------------------- --------- ------------
<S> <C> <C>
Mr. Steven T. Newby .................................................. 302,250 11.3%
6116 Executive Boulevard, Suite 701
Rockville, MD 20852
Mr. William B. Heye, Jr. (3) ......................................... 150,197 5.3%
4550 Norris Canyon Road
San Ramon, CA 94583
Mr. Franklin P. Johnson .............................................. 133,995 5.0%
2275 E. Bayshore Road, Suite 150
Palo Alto, CA 94301
Mr. Raimon L. Conlisk (3) ............................................ 13,500 *
Mr. George E. Grega (3) .............................................. 13,500 *
Mr. Ronald J. Ritchie (3) ............................................ 1,250 *
Dr. Randall L-W. Caudill (3) ......................................... 1,250 *
Mr. Michael R. Coker (3) ............................................. 58,906 2.2%
Mr. Timothy J. Repp (3) .............................................. 28,200 1.0%
Mr. Samuel J. Penny (3) .............................................. 49,520 1.8%
All executive officers and directors as a group (8 persons) (3) ...... 316,323 10.7%
</TABLE>
- ------------------------------
* Less than one percent.
(1) This table is based on information supplied by officers, directors and
principal stockholders of the Company and on any Schedules 13D or 13G filed
with the Securities and Exchange Commission. Unless otherwise indicated in
the footnotes to this table 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.
(2) Applicable percentages are based on 2,679,414 shares outstanding on August
31, 1998, adjusted as required by rules promulgated by the Securities and
Exchange Commission.
(3) Includes 146,900, 13,500, 13,500, 1,250, 1,250, 55,000, 27,500, and 16,683
shares that Messrs. Heye, Conlisk, Grega and Ritchie, Dr. Caudill and
Messrs. Coker, Repp and Penny, respectively, have the right to acquire
within 60 days of the date of this table under the Company's option plans.
Mr. Penny retired in April 1998.
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 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 Securities
and Exchange Commission ("Commission") initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten percent stockholders are
required by Commission regulation to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year
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ended October 31, 1997, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners were complied
with.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
During fiscal 1997, non-employee directors received for their services as
directors a quarterly participation fee of $3,000 plus fees of $1,000 for each
Board and committee meeting attended and a fee of $500 for each telephone
conference Board or committee meeting in which such director participated. Each
committee chairman also receives an additional quarterly fee of $750. The
Chairman of the Board receives, in lieu of all other fees, an annual fee of
$40,000. In fiscal 1997, the total compensation paid to non-employee directors
as directors' fees was $103,500. The members of the Board are also eligible for
reimbursement for their expenses in connection with attendance at Board meetings
in accordance with Company policy.
Each non-employee director of the Company also receives stock option grants
under the 1991 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan"). Only non-employee directors of the Company are eligible to receive
options under the Directors' Plan. Options granted under the Directors' Plan are
not incentive stock options under the Code.
Option grants under the Directors' Plan are non-discretionary. On April 1 of
each year (or the next business day should such date be a legal holiday), each
member of the Company's Board who is not an employee of the Company is
automatically granted under the Directors' Plan, without further action by
either the Company, the Board or the stockholders, an option to purchase 5,000
shares of Common Stock of the Company. No other options may be granted at any
time under the Directors' Plan. The exercise price of options granted under the
Directors' Plan is 100% of the fair market value of the Common Stock subject to
the option on the date of the option grant. Options granted under the Directors'
Plan vest in four equal installments commencing on the date one year after the
grant of the option, provided that the optionee has, during the entire year
prior to each such vesting date, provided continuous service to the Company as a
non-employee director or as an employee of the Company or an affiliate of the
Company. The term of options granted under the Directors' Plan is five years. In
the event of a merger of the Company with or into another corporation or a
consolidation, acquisition of assets or other change-in-control transaction
involving the Company, the vesting of each option will accelerate and the option
will terminate if not exercised prior to the consummation of the transaction
unless any surviving corporation assumes such options or substitutes similar
options for such options.
During fiscal 1997, the Company granted options covering an aggregate of
20,000 shares to the non-employee directors of the Company at an exercise prices
of $4.38 to $4.88 per share, the fair market value of the Common Stock on the
date of grant (based on the closing sales price as reported on the Nasdaq
National Market on the date of grant). As of August 31, 1998, 12,250 options had
been exercised under the Directors' Plan.
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COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table shows, for the fiscal years ended October 31, 1997, 1996
and 1995, as applicable, compensation awarded or paid to, or earned by, the
Company's Chief Executive Officer and its other three executive officers at
October 31, 1997 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
----------------------
ANNUAL COMPENSATION NUMBER OF
SHARES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY (1) BONUS OPTIONS (2) COMPENSATION (3)
- ------------------------------------------------------- ---- ---------- -------- ---------------------- ----------------
<S> <C> <C> <C> <C> <C>
1997 $ 210,060 $236,094 -- $13,906
Mr. William B. Heye, Jr. .............................. 1996 $ 210,060 -- 15,000 $ 6,573
President and Chief Executive Officer 1995 $ 200,060 -- -- $ 6,865
Mr. Michael R. Coker (4) .............................. 1997 $ 264,962 $ 71,624 20,000 $11,244
Vice President, Sales and Marketing 1996 $ 128,540 $ 20,000 60,000 $ 2,533
Mr. Timothy J. Repp ................................... 1997 $ 126,206 $102,714 -- $ 9,659
Vice President, Finance, Chief Financial Officer and 1996 $ 105,000 $ 3,000 27,500 $ 3,539
Secretary 1995 $ 93,000 -- 5,000 $ 1,727
Mr. Samuel J. Penny (5) ............................... 1997 $ 128,307 $ 58,476 20,000 $10,207
Vice President, Engineering
</TABLE>
- ------------------------------
(1) Includes amounts earned but deferred at the election of the Named Executive
Officer pursuant to the Company's Savings and Investment Plan and Trust.
(2) Includes $2,394, $357, $184 and $1,673 attributable in fiscal 1997 to
Messrs. Heye, Coker, Repp and Penny, $1,995, $283, and $167 attributable in
fiscal 1996 to Messrs. Heye, Coker and Repp and $995 and $152 attributable
in fiscal 1995 to Messrs. Heye and Repp, respectively, to premiums paid by
the Company for group term life insurance. The remaining sum for each Named
Executive Officer was paid by the Company as matching contributions to the
Company's Savings and Investment Plan and Trust.
(3) Fiscal 1996 amounts include certain options granted in fiscal 1996 and prior
fiscal years that were repriced in fiscal 1996.
(4) Mr. Coker became an executive officer in March 1996. Therefore, no amounts
are shown for fiscal 1995.
(5) Mr. Penny became an executive officer in March 1997. Therefore, no amounts
are shown for fiscal 1996 or 1995. Mr. Penny retired in April 1998.
8
<PAGE>
STOCK OPTION INFORMATION
The following tables show for fiscal 1997 certain information regarding
stock options granted to the Named Executive Officers during fiscal 1997 and
options held by the Named Executive Officers at fiscal year end. No Named
Executive Officer exercised any options during fiscal 1997.
STOCK OPTION GRANTS DURING FISCAL 1997
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------
NAME GRANTED (1) FISCAL YEAR (2) PER SHARE (3) DATE 5% 10%
- --------------------------------------------- ----------- --------------- ------------- --------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Mr. William B. Heye, Jr...................... -- -- -- -- -- --
Mr. Michael R. Coker......................... 20,000 9.9% $5.25 4/16/04 $42,746 $99,614
Mr. Timothy J. Repp.......................... -- -- -- -- -- --
Mr. Samuel J. Penny.......................... 20,000 9.9% $4.25 3/26/04 $34,604 $80,641
</TABLE>
- ------------------------------
(1) Generally, options granted vest annually in equal increments over a period
of four years and have a term of seven years.
(2) Options to purchase 202,100 shares of Common Stock were granted to employees
in fiscal 1997.
(3) Exercise price is the closing sales price of the Company's Common Stock as
reported on the Nasdaq National Market on the date of grant.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS AT
OPTIONS AT FISCAL YEAR END FISCAL YEAR END (1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mr. William B. Heye, Jr............................................... 143,150 11,250 $ 1,372,275 $ 39,375
Mr. Michael R. Coker.................................................. 45,000 35,000 $ 413,550 $261,250
Mr. Timothy J. Repp................................................... 30,375 8,125 $ 245,633 $ 35,938
Mr. Samuel J. Penny................................................... 10,000 22,000 $ 86,240 $208,000
</TABLE>
- ------------------------------
(1) Fair market value of the Company's Common Stock at October 31, 1997 ($14.00)
minus the exercise price of the options.
EMPLOYMENT AGREEMENT
On August 23, 1997, the Company entered into a Severance Agreement with its
Vice President of Sales and Marketing, Michael R. Coker, providing that, if Mr.
Coker's employment is terminated without cause prior to August 23, 1999, the
Company will continue to pay Mr. Coker his base salary, commission, bonus and
health benefits for six months following termination and all of Mr. Coker's
outstanding stock options will immediately vest. Furthermore, pursuant to the
Severance Agreement, in the event Mr. Coker is terminated within one year after
an acquisition of the Company or similar corporate event, and prior to August
23, 1999, the Company will continue to pay Mr. Coker his base salary, commission
bonus and health benefits for one year following termination and all of Mr.
Coker's outstanding stock options will immediately vest.
9
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION (1)
The Compensation Committee of the Board is responsible for the
administration of the compensation programs in effect for the Company's
executive officers. These programs have been designed to ensure that the
compensation paid to the executive officers is substantially linked to both
Company and individual performance. Accordingly, a significant portion of the
compensation for which an executive officer is eligible is comprised of variable
components based upon individual achievement and Company performance measures.
EXECUTIVE COMPENSATION PRINCIPLES
The design and implementation of the Company's executive compensation
programs are based on a series of general principles. These principles may be
summarized as follows:
- Align the interests of management and stockholders to build stockholder
value by the encouragement of consistent, long-term Company growth.
- Attract and retain key executive officers essential to the long-term
success of the Company.
- Reward executive officers for long-term corporate success by facilitating
their ability to acquire an ownership interest in the Company.
- Provide direct linkage between the compensation payable to executive
officers and the Company's attainment of annual and long-term financial
goals and targets.
- Emphasize reward for performance at the individual and corporate level.
COMPONENTS OF EXECUTIVE COMPENSATION
The components of the Company's executive compensation programs may be
listed as follows, with a detailed summary provided below:
- Base Salary
- Cash Bonus
- Long-Term Incentives
- Benefits and Perquisites
Each component is calibrated to a competitive market position, with market
information provided by compensation surveys prepared by independent consulting
firms and information collected from companies selected by the Board's
Compensation Committee as appropriate comparators of compensation practices. The
companies selected by the Compensation Committee as appropriate comparators are
generally represented in the Nasdaq Computer Manufacturing Index, whose
performance over the past five years is compared to that of the Company in the
chart appearing under the heading "Performance Measurement Comparison."
BASE SALARY
The base salary for each executive officer is determined on the basis of
individual performance, the functions performed by the executive officer and the
scope of the executive officer's ongoing responsibilities, and the salary levels
in effect for comparable positions based on information provided by the
compensation surveys referenced above and comparator information. The weight
given to each of these factors varies from individual to individual. In general,
base salary is designed primarily to be competitive within the relevant industry
and geographic market. Most executive officer salaries in fiscal 1997 remained
unchanged from fiscal 1996.
- ------------------------------
(1) This Section is not "soliciting material", is not deemed "filed" with the
Commission and is not to be incorporated by reference in any filing of the
Company under the Securities Act of 1933, as amended (the "Securities Act")
or the Exchange Act, whether made before or after the date hereof and
irrespective of any general incorporation language in any such filing.
10
<PAGE>
Each executive officer's base salary is reviewed annually to ensure
appropriateness, and increases to base salary are made to reflect competitive
market increases and individual factors. Company performance does not play a
significant role in the determination of base salary.
CASH BONUS
The Company's Management Incentive Plan provides for the funding of a bonus
pool based upon the Company's year-to-year rate of revenue growth and profit
before tax. No funding of the bonus pool occurs if profit before tax does not
exceed a threshold determined by comparing the cost of capital to the return on
assets employed. The sales growth from fiscal 1996 to fiscal 1997, combined with
the profit before tax generated, resulted in a bonus pool of $453,308, which was
paid to executive officers in fiscal 1998.
LONG-TERM INCENTIVES
Long-term incentives are provided through stock option grants. These option
grants are intended to motivate the executive officers to manage the business to
improve long-term Company performance. Customarily, option grants are made with
exercise prices equal to the market price of the shares on the date of grant and
will be of no value unless the market price of the Company's outstanding Common
Stock appreciates, thereby aligning a substantial part of the executive
officer's compensation package with the return realized by the stockholders.
The size of each option grant is designed to create a meaningful opportunity
for stock ownership and is based upon several factors, including relevant
information contained in the compensation surveys described above, an assessment
of the option grants of comparable companies and the individual performance of
each executive officer.
Each option grant allows the executive officer to acquire shares of the
Company's Common Stock at a fixed price per share (customarily the market price
on the grant date) over a specified period of time (customarily four years). The
option generally vests in equal installments over a period of four years,
contingent upon the executive officer's continued employment with the Company.
Accordingly, the option will provide a return to the executive officer only
if the executive officer remains employed by the Company and the market price of
the underlying shares appreciates over the option term.
In fiscal 1997, the Committee granted stock options to its executive
officers as set forth in the table entitled "Stock Option Grants in Fiscal Year
1997" contained elsewhere in this proxy statement. The Committee believes that
stock options, particularly incentive stock options, encourage long-term Company
stock ownership, and therefore that such grants are in the best interests of the
Company and its stockholders.
BENEFITS AND PERQUISITES
The benefits and perquisites component of executive compensation is
generally similar to that which is offered to all of the Company's employees.
CHIEF EXECUTIVE OFFICER COMPENSATION
In setting the compensation payable to the Chief Executive Officer, William
B. Heye, Jr., the goal is to provide compensation competitive with other
companies in the industry while at the same time making a significant percentage
of Mr. Heye's potential earnings subject to consistent, positive, long-term
Company performance. In general, the factors utilized in determining Mr. Heye's
compensation were similar to those applied to the other executive officers in
the manner described in the preceding paragraphs.
11
<PAGE>
Mr. Heye's salary in fiscal 1997 remained unchanged from fiscal 1996. As a
result of the Company's performance during fiscal 1997, the Committee granted
Mr. Heye a cash bonus of $236,094. The Committee had not awarded a cash bonus to
Mr. Heye with respect to either of the Company's two preceding fiscal years due
to the Company's performance. During fiscal 1997, Mr. Heye purchased 336 shares
of Common Stock at a price of $5.20 per share under the Company's 1992 Employee
Stock Purchase Plan.
George E. Grega, Chairman
Raimon L. Conlisk
Ronald J. Ritchie
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, during the fiscal year ended October 31, 1997, the
Compensation Committee consisted of Messrs. Conlisk, Ritchie and Grega, none of
whom is an employee of the Company. In December 1996, the Company sold all the
assets of its manufacturing operation to XeTel Corporation, a contract
manufacturing company. Additionally, the Company entered into a four-year
exclusive agreement to purchase manufacturing services from XeTel and subleased
a portion of its San Ramon facility to XeTel. Mr. Conlisk, a director of the
Company, is also a director of XeTel Corporation.
12
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON (1)
The following chart shows the value of an investment of $100 on October 31,
1992 in cash of (a) the Company's Common Stock, (b) the Nasdaq Computer
Manufacturing Index ("Nasdaq Computers") and (c) the CRSP Total Return Index for
the Nasdaq Stock Market (United States companies) ("Nasdaq Total Return"). All
values assume reinvestment of the full amount of all dividends and are
calculated as of October 31 of each year.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN ON INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SBE, INC. NASDAQ COMPUTERS NASDAQ
COMMON STOCK MANUFACTURERS INDEX TOTAL RETURN INDEX
<S> <C> <C> <C>
Oct-92 $100.00 $100.00 $100.00
Oct-93 $75.93 $101.81 $128.80
Oct-94 $57.41 $115.27 $129.49
Oct-95 $90.74 $195.79 $174.40
Oct-96 $30.56 $249.02 $205.78
Oct-97 $103.70 $323.93 $271.02
</TABLE>
<TABLE>
<CAPTION>
OCT. 92 OCT. 93 OCT. 94 OCT. 95 OCT. 96 OCT. 97
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
SBE........................................................................ 100.000 75.926 57.407 90.741 30.556 103.704
Nasdaq Computers........................................................... 100.000 101.812 115.269 195.794 249.019 323.929
Nasdaq Total Return........................................................ 100.000 128.801 129.486 174.397 205.780 271.020
</TABLE>
- ------------------------------
(1) This Section is not "soliciting material", is not deemed "filed" with the
Commission and is not to be incorporated by reference in any filing of the
Company under the Securities Act or the Exchange Act, whether made before or
after the date hereof and irrespective of any general incorporation language
in any such filing.
13
<PAGE>
OTHER MATTERS
The Board knows of no other matters that will be presented for consideration
at the Special 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/ Timothy J. Repp
Timothy J. Repp
CHIEF FINANCIAL OFFICER, VICE
PRESIDENT,
FINANCE AND SECRETARY
September 29, 1998
1570-SP-98 14
<PAGE>
SBE, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR A SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 22, 1998
The undersigned hereby appoints WILLIAM B. HEYE, JR. and TIMOTHY J.
REPP, and each of them, as attorneys and proxies of the undersigned, with
full power of substitution, to vote all of the shares of stock of SBE, Inc.
that the undersigned may be entitled to vote at a Special Meeting of
Stockholders of SBE, Inc. to be held at the Company's principal offices at
4550 Norris Canyon Road, San Ramon, California, on Thursday, October 22, 1998
at 9:00 a.m. (local time), and at any and all postponements, continuations
and adjournments thereof, with all powers that the undersigned would possess
if personally present, upon and in respect of the following matter and in
accordance with the following instructions, with discretionary authority as
to any and all other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
THE PROPOSAL SET FORTH BELOW, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY
STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED
IN ACCORDANCE THEREWITH.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL.
PROPOSAL: To approve the Company's 1992 Employee Stock Purchase Plan, as
amended to increase the aggregate number of shares of Common Stock
authorized for issuance under such plan by 100,000 shares and to
extend the term of such plan.
/ / FOR / / AGAINST / / ABSTAIN
DATED ___________________ _________________________________________________
_________________________________________________
SIGNATURE(S)
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON.
IF THE STOCK IS REGISTERED IN THE NAMES OF TWO OR
MORE PERSONS, EACH SHOULD SIGN. EXECUTORS,
ADMINISTRATORS, TRUSTEES, GUARDIANS AND
ATTORNEYS-IN-FACT SHOULD ADD THEIR TITLES. IF
SIGNER IS A CORPORATION, PLEASE GIVE FULL
CORPORATE NAME AND HAVE A DULY AUTHORIZED OFFICER
SIGN, STATING TITLE. IF SIGNER IS A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED
PERSON.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
<PAGE>
SBE, INC.
1992 EMPLOYEE STOCK PURCHASE PLAN
Adopted January 9, 1992
Approved by Stockholders on March 24, 1992
As Amended through September 14, 1998
Approved by Stockholders on __________, 199_
1. PURPOSE.
(a) The purpose of the 1992 Employee Stock Purchase Plan (the
"Plan") is to provide a means by which employees of SBE, Inc., a Delaware
corporation (the "Company"), and its Affiliates, as defined in subparagraph
1(b) which are designated as provided in subparagraph 2(b), may be given an
opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are
defined in Sections 424(e) and (f), respectively, of the Internal Revenue
Code of 1986, as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain the
services of its employees, to secure and retain the services of new
employees, and to provide incentives for such persons to exert maximum
efforts for the success of the Company.
(d) The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued under an
"employee stock purchase plan" as that term is defined in Section 423(b) of
the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration
to a Committee, as provided in subparagraph 2(c). Whether or not the Board
has delegated administration, the Board shall have the final power to
determine all questions of policy and expediency that may arise in the
administration of the Plan.
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of
the Company shall be granted and the provisions of each offering of such
rights (which need not be identical).
(ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.
<PAGE>
(iii) To construe and interpret the Plan and rights granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent
it shall deem necessary or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests
of the Company.
(c) The Board may delegate administration of the Plan to a
Committee composed of not fewer than two (2) members of the Board (the
"Committee"). If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, subject, however, to such resolutions,
not inconsistent with the provisions of the Plan, as may be adopted from time
to time by the Board. The Board may abolish the Committee at any time and
revest in the Board the administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to
adjustments upon changes in stock, the stock that may be sold pursuant to
rights granted under the Plan shall not exceed in the aggregate two hundred
thousand (200,000) shares of the Company's common stock (the "Common Stock").
If any right granted under the Plan shall for any reason terminate without
having been exercised, the Common Stock not purchased under such right shall
again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
The Board or the Committee may from time to time grant or provide
for the grant of rights to purchase Common Stock of the Company under the
Plan to eligible employees (an "Offering") on a date or dates (the "Offering
Date(s)") selected by the Board or the Committee. Each Offering shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. If an employee has more than one right
outstanding under the Plan, unless he or she otherwise indicates in
agreements or notices delivered hereunder: (1) each agreement or notice
delivered by that employee will be deemed to apply to all of his or her
rights under the Plan, and (2) a right with a lower exercise price (or an
earlier-granted right, if two rights have identical exercise prices), will be
exercised to the fullest possible extent before a right with a higher
exercise price (or a later-granted right, if two rights have identical
exercise prices) will be exercised. The provisions of separate Offerings need
not be identical, but each Offering shall include (through incorporation of
the provisions of this Plan by reference in the Offering or otherwise) the
substance of the provisions contained in paragraphs 5 through 8, inclusive.
2.
<PAGE>
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as
the Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee
has been in the employ of the Company or any Affiliate for such continuous
period preceding such grant as the Board or the Committee may require, but
in no event shall the required period of continuous employment be equal to or
greater than two (2) years. In addition, unless otherwise determined by the
Board or the Committee and set forth in the terms of the applicable Offering,
no employee of the Company or any Affiliate shall be eligible to be granted
rights under the Plan, unless, on the Offering Date, such employee's
customary employment with the Company or such Affiliate is at least twenty
(20) hours per week and at least five (5) months per calendar year.
(b) The Board or the Committee may provide that, each person who,
during the course of an Offering, first becomes an eligible employee of the
Company or designated Affiliate will, on a date or dates specified in the
Offering which coincides with the day on which such person becomes an
eligible employee or occurs thereafter, receive a right under that Offering,
which right shall thereafter be deemed to be a part of that Offering. Such
right shall have the same characteristics as any rights originally granted
under that Offering, as described herein, except that:
(i) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of
the exercise price of such right;
(ii) the Purchase Period (as defined below) for such right
shall begin on its Offering Date and end coincident with the end of such
Offering; and
(iii) the Board or the Committee may provide that if such
person first becomes an eligible employee within a specified period of time
before the end of the Purchase Period (as defined below) for such Offering,
he or she will not receive any right under that Offering.
(c) No employee shall be eligible for the grant of any rights
under the Plan if, immediately after any such rights are granted, such
employee owns stock possessing five percent (5 %) or more of the total
combined voting power or value of all classes of stock of the Company or of
any Affiliate. For purposes of this subparagraph 5(c), the rules of Section
424(d) of the Code shall apply in determining the stock ownership of any
employee, and stock which such employee may purchase under all outstanding
rights and options shall be treated as stock owned by such employee.
(d) An eligible employee may be granted rights under the Plan only
if such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's rights to purchase stock
of the Company or any Affiliate to accrue at a rate which exceeds twenty-five
thousand dollars ($25,000) of fair market value of such stock (determined at
3.
<PAGE>
the time such rights are granted) for each calendar year in which such rights
are outstanding at any time.
(e) Officers of the Company and any designated Affiliate shall be
eligible to participate in Offerings under the Plan, provided, however, that
the Board may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase up to
the number of shares of Common Stock of the Company purchasable with a
percentage designated by the Board or the Committee not exceeding fifteen
percent (15%) of such employee's Earnings (as defined in Section 7(a)) during
the period which begins on the Offering Date (or such later date as the Board
or the Committee determines for a particular Offering) and ends on the date
stated in the Offering, which date shall be no more than twenty-seven (27)
months after the Offering Date (the "Purchase Period"). In connection with
each Offering made under this Plan, the Board or the Committee shall specify
a maximum number of shares which may be purchased by any employee as well as
a maximum aggregate number of shares which may be purchased by all eligible
employees pursuant to such Offering. In addition, in connection with each
Offering which contains more than one Exercise Date (as defined in the
Offering), the Board or the Committee may specify a maximum aggregate number
of shares which may be purchased by all eligible employees on any given
Exercise Date under the Offering. If the aggregate purchase of shares upon
exercise of rights granted under the Offering would exceed any such maximum
aggregate number, the Board or the Committee shall make a pro rata allocation
of the shares available in as nearly a uniform manner as shall be practicable
and as it shall deem to be equitable.
(b) The purchase price of stock acquired pursuant to rights
granted under the Plan shall be not less than the lesser of,
(i) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Exercise Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in an Offering
by delivering a participation agreement to the Company within the time
specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during
the Purchase Period. "Earnings" is defined as the total compensation paid to
an employee, including all salary, wages (including amounts elected to be
deferred by the employee, that would otherwise have been paid, under any cash
or deferred arrangement established by the Company), overtime pay,
commissions, bonuses, and other remuneration paid
4.
<PAGE>
directly to the employee, but excluding profit sharing, the cost of employee
benefits paid for by the Company, education or tuition reimbursements,
imputed income arising under any Company group insurance or benefit program,
traveling expenses, business and moving expense reimbursements, income
received in connection with stock options, contributions made by the Company
under any employee benefit plan, and similar items of compensation. The
payroll deductions made for each participant shall be credited to an account
for such participant under the Plan and shall be deposited with the general
funds of the Company. A participant may reduce (including to zero), increase
or begin such payroll deductions after the beginning of any Purchase Period
only as provided for in the Offering. A participant may make additional
payments into his or her account only if specifically provided for in the
Offering and only if the participant has not had the maximum amount withheld
during the Purchase Period.
(b) At any time during a Purchase Period a participant may
terminate his or her payroll deductions under the Plan and withdraw from the
Offering by delivering to the Company a notice of withdrawal in such form as
the Company provides. Such withdrawal may be elected at any time prior to the
end of the Purchase Period except as provided by the Board or the Committee
in the Offering. Upon such withdrawal from the Offering by a participant, the
Company shall distribute to such participant all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire stock for the participant) under the Offering, without
interest, and such participant's interest in that Offering shall be
automatically terminated. A participant's withdrawal from an Offering will
have no effect upon such participant's eligibility to participate in any
other Offerings under the Plan but such participant will, be required to
deliver a new participation agreement in order to participate in subsequent
Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating employee's
employment with the Company and any designated Affiliate, for any reason, and
the Company shall distribute to such terminated employee all of his or her
accumulated payroll deductions (reduced to the extent, if any, such
deductions have been used to acquire stock for the terminated employee),
under the Offering, without interest.
Rights granted under the Plan shall not be transferable, and shall be
exercisable only by the person to whom such rights are granted.
8. EXERCISE.
(a) On each exercise date, as defined in the relevant Offering (an
"Exercise Date"), each participant's accumulated payroll deductions and other
additional payments specifically provided for in the Offering (without any
increase for interest) will be applied to the purchase of whole shares of
stock of the Company, up to the maximum number of shares permitted pursuant
to the terms of the Plan and the applicable Offering, at the purchase price
specified in the Offering. No fractional shares shall be issued upon the
exercise of rights granted under the Plan. The amount, if any, of accumulated
payroll deductions remaining in each participant's account after the purchase
of shares which is less than the amount required to purchase one share of
stock on the final Exercise Date of an Offering shall be held in each such
participant's account for the purchase of shares under the next Offering
under the Plan, unless
5.
<PAGE>
such participant withdraws from such next Offering, as provided in
subparagraph 7(b), or is no longer eligible to be granted rights under the
Plan, as provided in paragraph 5, in which case such amount shall be
distributed to the participant after said final Exercise Date, without
interest. The amount, if any, of accumulated payroll deductions remaining in
any participant's account after the purchase of shares which is equal to the
amount required to purchase whole shares of stock on the final Exercise Date
of an Offering shall be distributed in full to the participant after such
Exercise Date, without interest.
(b) No rights granted under the Plan may be exercised to any
extent unless the Plan (including rights granted thereunder) is covered by an
effective registration statement pursuant to the Securities Act of 1933, as
amended (the "Securities Act"). If on an Exercise Date of any Offering
hereunder the Plan is not so registered, no rights granted under the Plan or
any Offering shall be exercised on said Exercise Date and the Exercise Date
shall be delayed until the Plan is subject to such an effective registration
statement, except that the Exercise Date shall not be delayed more than two
(2) months and the Exercise Date shall in no event be more than twenty-seven
(27) months from the Offering Date. If on the Exercise Date of any Offering
hereunder, as delayed to the maximum extent permissible, the Plan is not
registered, no rights granted under the Plan or any Offering shall be
exercised and all payroll deductions accumulated during the purchase period
(reduced to the extent, if any, such deductions have been used to acquire
stock) shall be distributed to the participants, without interest.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the
Company shall keep available at all times the number of shares of stock
required to satisfy such rights.
The Company shall seek to obtain from each regulatory commission or agency
having jurisdiction over the Plan such authority as may be required to issue
and sell shares of stock upon exercise of the rights granted under the Plan.
If, after reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell
stock upon exercise of such rights unless and until such authority is
obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under
the Plan shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have
any of the rights of a holder with respect to, any shares subject to rights
granted under the Plan unless and until certificates representing such shares
shall have been issued.
6.
<PAGE>
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or
subject to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or otherwise), the Plan and
outstanding rights will be appropriately adjusted in the class(es) and
maximum number of shares subject to the Plan and the class(es) and number of
shares and price per share of stock subject to outstanding rights.
(b) In the event of: (1) a dissolution or liquidation of the
Company; (2) a merger or consolidation in which the Company is not the
surviving corporation; (3) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's Common Stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise; or (4) any other capital reorganization in which more than fifty
percent (50%) of the shares of the Company entitled to vote are exchanged,
then, as determined by the Board in its sole discretion (i) any surviving
corporation may assume outstanding rights or substitute similar rights for
those under the Plan, (ii) such rights may continue in full force and effect,
or (iii) participants' accumulated payroll deductions may be used to purchase
Common Stock immediately prior to the transaction described above and the
participants' rights under the ongoing Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the
Plan. However, except as provided in paragraph 12 relating to adjustments
upon changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company within twelve (12) months before or after the
adoption of the amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under
the Plan;
(ii) Modify the provisions as to eligibility for
participation in the Plan (to the extent such modification requires
stockholder approval in order for the Plan to obtain employee stock purchase
plan treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended ("Rule 16b-3")); or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3. It is expressly contemplated that the Board may
amend the Plan in any respect the Board deems necessary or advisable to
provide eligible employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to employee stock purchase plans and/or to bring the
Plan and/or rights granted under it into compliance therewith.
(b) Rights and obligations under any rights granted before
amendment of the Plan shall not be altered or impaired by any amendment of
the Plan, except with the consent of
7.
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the person to whom such rights were granted or except as necessary to comply
with any laws or governmental regulation.
14. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on September 13, 2008. No
rights may be granted under the Plan while the Plan is suspended or after it
is terminated.
(b) Rights and obligations under any rights granted while the Plan
is in effect shall not be altered or impaired by suspension or termination of
the Plan, except with the consent of the person to whom such rights were
granted or except as necessary to comply with any laws or governmental
regulation.
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
rights granted under the Plan shall be exercised unless and until the Plan
has been approved by the stockholders of the Company.
8.
