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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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Metricom, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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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):
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
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<PAGE> 2
METRICOM, INC.
980 UNIVERSITY AVENUE
LOS GATOS, CALIFORNIA 95030-2375
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 7, 1996
TO THE STOCKHOLDERS OF METRICOM, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Metricom,
Inc., a Delaware corporation (the "Company"), will be held on Wednesday, August
7, 1996 at 9:00 a.m. local time at the Company's offices at 980 University
Avenue, Los Gatos, California for the following purposes:
1. To approve an amendment to the Company's Restated Certificate of
Incorporation to increase the authorized number of shares of Common
Stock from 20,000,000 to 50,000,000.
2. To approve the Company's 1988 Stock Option Plan, as amended to
increase the aggregate number of shares of Common Stock authorized
for issuance thereunder to 4,119,500.
3. To approve the Company's 1991 Employee Stock Purchase Plan, as
amended to increase the aggregate number of shares authorized for
issuance thereunder to 350,000.
4. To approve an amendment to the Company's 1993 Non-Employee Directors'
Stock Option Plan, as amended to increase the number of shares
authorized for issuance thereunder to 300,000 and to permit
additional non-discretionary grants of options to non-employee
directors.
The Board of Directors has fixed the close of business on June 17, 1996 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
WILLIAM D. SWAIN
Secretary
Los Gatos, California
June 26, 1996
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> 3
METRICOM, INC.
980 UNIVERSITY AVENUE
LOS GATOS, CALIFORNIA 95030-2375
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors
(the "Board") of Metricom, Inc., a Delaware corporation (the "Company"), for use
at the Special Meeting of Stockholders to be held on August 7, 1996, 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 offices at
980 University Avenue, Los Gatos, California. The Company intends to mail this
proxy statement and accompanying proxy card on or about June 26, 1996 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 employees of the Company
or, at the Company's request, Corporate Investor Communications. No additional
compensation will be paid to directors, officers or other employees for such
services, but Corporate Investor Communications will be paid its customary fee,
estimated to be about $4,000 if it renders solicitation services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on June
17, 1996 will be entitled to notice of and to vote at the Special Meeting. At
the close of business on June 17, 1996, the Company had outstanding and entitled
to vote ____________________ 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 elections appointed for
the meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. With regard to Proposal 1, abstentions and
broker non-votes will have the same effect as negative votes. With regard to
Proposals 2, 3 and 4, 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 will be counted towards a quorum,
but will not be counted for any purpose in determining whether a matter has been
approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power
to revoke it at any time before it is voted. It may be revoked by filing with
the Secretary of the Company at the Company's principal executive office, 980
University Avenue, Los Gatos, California 95030-2375, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
1.
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STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1997 Annual Meeting of Stockholders must be received by the Company
not later than December 26, 1996 in order to be included in the proxy statement
and proxy relating to that Annual Meeting.
PROPOSAL 1
APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board has adopted, subject to stockholder approval, an amendment to
the Company's Restated Certificate of Incorporation to increase the Company's
authorized number of shares of Common Stock from 20,000,000 to 50,000,000.
The additional Common Stock to be authorized by adoption of the
amendment would have rights identical to the currently outstanding Common Stock
of the Company. Adoption of the proposed amendment and issuance of the Common
Stock would not affect the rights of the holders of currently outstanding Common
Stock of the Company, except for effects incidental to increasing the number of
shares of the Company's Common Stock outstanding, such as dilution of the
earnings per share and voting rights of current holders of Common Stock. If the
amendment is adopted, it will become effective upon filing of a Certificate of
Amendment of the Company's Restated Certificate of Incorporation with the
Secretary of State of the State of Delaware.
In June 1996, the Company sold $_______________ aggregate principal
amount of ____% Convertible Subordinated Notes due 2003 (the "Notes") in a
private placement (the "Private Placement"). The Notes are convertible into
______________ shares of Common Stock (subject to adjustment in certain events).
The Notes and the underlying Common Stock (collectively referred to herein as
the "Securities") have not been registered under the Securities Act of 1993, as
amended (the "Securities Act"), and may not be offered or sold in the United
States absent registration or an applicable exemption from registration
requirements. The Securities were offered and sold only to "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act) and to
a limited number of institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) and outside the United
States to certain persons in offshore transactions in reliance on Regulation S
under the Securities Act. The Company plans to use the net proceeds from the
Private Placement to finance the continuing development, deployment and
commercialization of its Ricochet networks.
In June 1996, in connection with the Private Placement, the Board
reserved 2.7 million shares of Common Stock for issuance upon conversion of the
Notes. Of the 2.7 million shares currently authorized for issuance upon
conversion of the Notes, 415,000 shares were initially authorized for issuance
pursuant to the Company's 1988 Stock Option Plan, 1991 Employee Stock Purchase
Plan and 1993 Non-Employee Directors' Stock Option Plan. In June 1996, the Board
decreased the shares of Common Stock authorized for issuance pursuant to the
Company's 1988 Stock Option Plan, 1991 Employee Stock Purchase Plan and 1993
Non-Employee Directors' Stock Option Plan (collectively, the "Plans") by
115,000, 160,000 and 140,000 shares of Common Stock, respectively. No
outstanding options to purchase shares of the Company's Common Stock were
affected by these decreases.
Effective upon the amendment of the Company's Restated Certificate of
Incorporation to increase the Company's authorized number of shares of Common
Stock from 20,000,000 to 50,000,000, the Board will increase the number of
shares authorized for issuance upon conversion of the Notes to _____________. In
addition, effective upon the amendment of the Company's Restated Certificate of
Incorporation to increase the Company's authorized number of shares of Common
Stock from 20,000,000 to 50,000,000, and subject to stockholder approval, the
Board will (i) increase the number of shares authorized for issuance under the
Company's 1988 Stock Option Plan by 115,000 to 4,119,500 shares, which amount
was previously approved by the stockholders at the Company's 1996 Annual
Meeting, (ii) increase the number of shares authorized for issuance under the
Company's 1991 Employee Stock Purchase Plan by 160,000 to 350,000 shares, which
amount was previously approved by the stockholders at
2.
<PAGE> 5
the Company's 1996 Annual Meeting, and (iii) increase the number of shares
authorized for issuance under the Company's 1993 Non-Employee Directors Stock
Option Plan by 140,000 to 300,000 shares, which amount was previously approved
by the stockholders at the Company's 1995 Annual Meeting. (See Proposals 2, 3
and 4 herein.)
In addition to the 13,354,591 shares of Common Stock outstanding at May
31, 1996, without taking into account the amendments to the Plans resulting from
the Private Placement, the Board had authorized 4,769,500 shares for issuance
upon exercise of options and rights granted under the Company's stock option and
stock purchase plans, and up to approximately 394,295 shares of Common Stock
that may be issued upon exercise of warrants outstanding.
Although at present the Board has no other plans to issue the
additional shares of Common Stock, it desires to have such shares available to
provide additional flexibility to use its capital stock for business and
financial purposes in the future. The additional shares may be used, without
further stockholder approval, for various purposes including, without
limitation, raising additional capital, providing equity incentives to
employees, officers or directors, establishing strategic relationships with
other companies and expanding the Company's business or product lines through
the acquisition of other businesses or products.
The additional shares of Common Stock that would become available for
issuance if the proposal were adopted could also be used by the Company to
oppose a hostile takeover attempt or delay or prevent changes in control or
management of the Company. For example, without further stockholder approval,
the Board could adopt a "poison pill" that would, under certain circumstances
related to an acquisition of shares not approved by the Board of Directors, give
certain holders the right to acquire additional shares of Common Stock at a low
price, or the Board could strategically sell shares of Common Stock in a private
transaction to purchasers who would oppose a takeover or favor the current
Board. Although this proposal to increase the authorized Common Stock has been
prompted by business and financial considerations and not by the threat of any
hostile takeover attempt (nor is the Board currently aware of any such attempts
directed at the Company), nevertheless, stockholders should be aware that
approval of this proposal could facilitate future efforts by the Company to
deter or prevent changes in control of the Company, including transactions in
which the stockholders might otherwise receive a premium for their shares over
then current market prices.
The affirmative vote of the holders of a majority of the shares of
Common Stock will be required to approve this amendment to the Company's
Restated Certificate of Incorporation. As a result, abstentions and broker
non-votes will have the same effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 1
PROPOSAL 2
APPROVAL OF THE 1988 STOCK OPTION PLAN, AS AMENDED
In March 1988, the Board adopted, and the stockholders subsequently
approved, the 1988 Stock Option Plan (the "1988 Plan"). In January 1996, the
Board adopted, and the stockholders subsequently approved, an amendment to
increase the number of shares authorized for issuance under the 1988 Plan by
450,000 shares, from 3,669,500 to 4,119,500 shares. The Board adopted this
amendment to ensure that the Company could continue to grant stock options to
employees at levels determined appropriate by the Board and the Compensation
Committee. In June 1996, in order to provide for additional shares to authorize
for issuance upon conversion of the Notes issued pursuant to the Private
Placement as described above, the Board approved an amendment to the 1988 Plan
to reduce the number of shares authorized for issuance thereunder by 115,000,
from 4,119,500 to 4,004,500 shares. At the same time, the Board approved,
subject to stockholder approval, the later amendment to the 1988 Plan to
increase the number of shares authorized for issuance thereunder by 115,000,
from 4,004,500 back to 4,119,500 shares, effective upon the amendment of the
Company's Restated Certificate of Incorporation to increase the authorized
number of shares of Common Stock from 20,000,000 to 50,000,000.
3.
<PAGE> 6
As of May 31, 1996, (a) options (net of canceled or expired options)
covering an aggregate of 3,801,774 shares of the Company's Common Stock had been
granted under the 1988 Plan, of which options to purchase 2,895,907 shares were
outstanding with exercise prices ranging from $0.20 to $19.75 per share, (b) a
total of 905,866 shares had been purchased through the exercise of options
granted under the 1988 Plan, and (c) without taking into account the amendments
to the 1988 Plan resulting from the Private Placement, 317,726 shares remained
available for future grant under the 1988 Plan. During the last fiscal year,
under the 1988 Plan, the Company has granted to all current executive officers
as a group options to purchase 66,000 shares at an exercise price of $17.00 per
share and to all employees (excluding executive officers) as a group options to
purchase 595,750 shares at exercise prices of $15.00 to $22.125 per share.
Stockholders are requested in this Proposal 2 to approve the 1988 Plan,
as amended to increase the number of shares authorized for issuance thereunder
to the previously approved amount of 4,119,500. 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 amendment to
the 1988 Plan.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2
The essential features of the 1988 Plan are outlined below:
GENERAL
The 1988 Plan provides for the grant of both incentive and nonstatutory
stock options. Incentive stock options granted under the 1988 Plan are intended
to qualify as "incentive stock options" within the meaning of Section 422 of the
Code. Nonstatutory stock options granted under the 1988 Plan are intended not to
qualify as incentive stock options under the Code. See "Federal Income Tax
Information" for a discussion of the tax treatment of incentive and nonstatutory
stock options.
PURPOSE
The 1988 Plan was adopted to provide a means by which selected
officers, employees and directors of and consultants to the Company and its
affiliates could be given an opportunity to purchase stock in the Company, to
assist in retaining the services of employees holding key positions, to secure
and retain the services of persons capable of filling such positions and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
ADMINISTRATION
The 1988 Plan is administered by the Board. The Board has the power to
construe and interpret the 1988 Plan and, subject to the provisions of the 1988
Plan, to determine the persons to whom and the dates on which options will be
granted, the number of shares to be subject to each option, the time or times
during the term of each option within which all or a portion of such option may
be exercised, the exercise price, the type of consideration and other terms of
the option. The Board is authorized to delegate administration of the 1988 Plan
to a committee composed of not fewer than two members of the Board. The Board
has delegated administration of the 1988 Plan to the Compensation Committee and,
to a limited extent, the Non-Officer Stock Option Administration Committee of
the Board. As used herein with respect to the 1988 Plan, the "Board" refers to
the Compensation Committee and, where applicable, the Non-Officer Stock Option
Administration Committee, as well as to the Board itself.
The regulations under Section 162(m) of the Internal Revenue Code, as
amended (the "Code"), require that the directors who serve as members of the
Compensation Committee must be "outside directors." The 1988 Plan provides that,
in the Board's discretion, directors serving on the Committee will also be
"outside directors" within the meaning of Section 162(m). This limitation
excludes from the Compensation Committee (a) current employees of the Company,
(b) former employees of the Company receiving compensation for past services
(other than benefits
4.
<PAGE> 7
under a tax-qualified pension plan), (c) current and former officers of the
Company, (d) directors currently receiving direct or indirect remuneration from
the Company in any capacity (other than as a director), unless any such person
is otherwise considered an "outside director" for purposes of Section 162(m).
ELIGIBILITY
Incentive stock options may be granted under the 1988 Plan only to
selected key employees (including officers) of the Company and its affiliates.
Selected key employees (including officers), directors and consultants are
eligible to receive nonstatutory stock options under the 1988 Plan.
No option may be granted under the 1988 Plan to any person who, at the
time of the grant, owns (or is deemed to own) stock possessing more than 10% of
the total combined voting power of the Company or any affiliate of the Company,
unless the option exercise price is at least 110% of the fair market value of
the stock subject to the option on the date of grant, and the term of the option
does not exceed five years from the date of grant. For incentive stock options
granted under the 1988 Plan, the aggregate fair market value, determined at the
time of grant, of the shares of Common Stock with respect to which such options
are exercisable for the first time by an optionee during any calendar year
(under all such plans of the Company and its affiliates) may not exceed
$100,000.
The 1988 Plan contains a per-person, per-calendar year limitation equal
to 400,000 shares of Common Stock. The purpose of this limitation is generally
to permit the Company to be able to deduct for tax purposes the compensation
attributable to the exercise of options granted under the 1988 Plan. Prior to
the adoption of such limitation in May 1995, the Board or the Compensation
Committee determined in its discretion the number of shares subject to an option
for any employee and no such formal limitation was placed on the number of
shares available for an option to an employee. To date, the Company has not
granted to any employee in any calendar year options to purchase a number of
shares equal to or in excess of the limitation.
STOCK SUBJECT TO THE 1988 PLAN
If options granted under the 1988 Plan expire or otherwise terminate
without being exercised, the Common Stock not purchased pursuant to such options
again becomes available for issuance under the 1988 Plan.
TERMS OF OPTIONS
The following is a description of the permissible terms of options
under the 1988 Plan. Individual option grants may be more restrictive as to any
or all of the permissible terms described below.
Exercise Price; Payment. The exercise price of incentive stock options
under the 1988 Plan may not be less than the fair market value of the Common
Stock subject to the option on the date of the option grant, and in some cases
(see "Eligibility"), may not be less than 110% of such fair market value. The
exercise price of nonstatutory options under the 1988 Plan may not be less than
85% of the fair market value of the Common Stock subject to the option on the
date of the option grant. However, if options were granted with exercise prices
below market value, deductions for compensation attributable to the exercise of
such options could be limited by Section 162(m) of the Code. See "Federal Income
Tax Information." In the event of a decline in the value of the Company's Common
Stock, the Board has the authority to offer employees the opportunity to replace
outstanding higher priced options, whether incentive or nonstatutory, with new
lower priced options. To the extent required by Section 162(m), an option
repriced under the 1988 Plan is deemed to be canceled and a new option granted.
Both the option deemed to be canceled and the new option deemed to be granted
will be counted against the 400,000 share limitation.
The exercise price of options granted under the 1988 Plan must be paid
either: (a) in cash at the time the option is exercised; or (b) at the
discretion of the Board, (1) by delivery of other Common Stock of the Company,
(2) pursuant to a deferred payment arrangement or (3) in any other form of legal
consideration acceptable to the Board.
5.
<PAGE> 8
Option Exercise. Options granted under the 1988 Plan may become
exercisable in cumulative increments ("vest") as determined by the Board. Shares
covered by currently outstanding options under the 1988 Plan typically vest at
the rate of 25% after one year and 2.0833% per month thereafter during the
optionee's employment or service as a director or consultant. Shares covered by
options granted in the future under the 1988 Plan may be subject to different
vesting terms. The Board has the power to accelerate the time during which an
option may be exercised. In addition, options granted under the 1988 Plan may
permit exercise prior to vesting, but in such event the optionee may be required
to enter into an early exercise stock purchase agreement that allows the Company
to repurchase shares not yet vested at their exercise price should the optionee
leave the employ of the Company before vesting. To the extent provided by the
terms of an option, an optionee may satisfy any federal, state or local tax
withholding obligation relating to the exercise of such option by a cash payment
upon exercise, by authorizing the Company to withhold a portion of the stock
otherwise issuable to the optionee, by delivering already-owned stock of the
Company or by a combination of these means.
Term. The maximum term of options under the 1988 Plan is ten years,
except that in certain cases (see "Eligibility") the maximum term is five years.
Options under the 1988 Plan terminate three months after the optionee ceases to
be employed by or serve as a director or consultant to the Company or any
affiliate of the Company, unless (a) the termination of such relationship is due
to such person's permanent and total disability (as defined in the Code), in
which case the option may, but need not, provide that it may be exercised at any
time within one year of such termination, (b) the optionee dies while employed
by or serving as a director or consultant to the Company or any affiliate of the
Company, or within three months after termination of such relationship, in which
case the option may, but need not, provide that it may be exercised (to the
extent the option was exercisable at the time of the optionee's death) within
eighteen months of the optionee's death by the person or persons to whom the
rights to such option pass by will or by the laws of descent and distribution,
or (c) the option by its terms specifically provides otherwise. Individual
options by their terms may provide for exercise within a longer period of time
following termination of employment or the director or consulting relationship.
The option term may also be extended in the event that exercise of the option
within these periods is prohibited for specified reasons.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the 1988 Plan or subject
to any option granted under the 1988 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 1988 Plan and options
outstanding thereunder will be appropriately adjusted as to the class and the
maximum number of shares subject to such plan, the maximum number of shares
which may be granted to any person during a calendar year, and the class, number
of shares and price per share of stock subject to such outstanding options.
EFFECT OF CERTAIN CORPORATE EVENTS
The 1988 Plan provides that, in the event of a specified type of merger
or other corporate reorganization, to the extent permitted by law, any surviving
corporation will be required to either assume options outstanding under the 1988
Plan or substitute similar options for those outstanding under such plan, or
such outstanding options will continue in full force and effect. In the event
that any surviving corporation declines to assume or continue options
outstanding under the 1988 Plan, or to substitute similar options, then the time
during which such options may be exercised will be accelerated and the options
terminated if not exercised prior to such event. In the event of any dissolution
or liquidation of the Company, any options outstanding under the 1988 Plan will
terminate if not exercised prior to such event. The acceleration of an option in
the event of an acquisition or similar corporate event may be viewed as an
antitakeover provision, which may have the effect of discouraging a proposal to
acquire or otherwise obtain control of the Company.
6.
<PAGE> 9
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the 1988 Plan without stockholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the 1988 Plan will terminate on March 7, 1998.
The Board may also amend the 1988 Plan at any time or from time to
time. However, no amendment will be effective unless approved by the
stockholders of the Company within twelve months before or after its adoption by
the Board if the amendment would: (a) increase the number of shares authorized
for options under the plan, (b) materially modify the requirements as to
eligibility for participation under the plan, or (c) materially increase the
benefits accruing to participants under the plan. The Board may submit any other
amendment to the 1988 Plan for stockholder approval, including, but not limited
to, amendments intended to satisfy the requirements of Section 162(m) of the
Code regarding the exclusion of performance-based compensation from the
limitation on the deductibility of compensation paid to certain employees.
RESTRICTIONS ON TRANSFER
Under the 1988 Plan, an option may not be transferred by the optionee
otherwise than by will or by the laws of descent and distribution. During the
lifetime of an optionee, an option may be exercised only by the optionee. In
addition, shares subject to repurchase by the Company under an early exercise
stock purchase agreement may be subject to restrictions on transfer which the
Board deems appropriate.
FEDERAL INCOME TAX INFORMATION
Incentive Stock Options. Incentive stock options under the 1988 Plan
are intended to be eligible for the favorable federal income tax treatment
accorded "incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee
or the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive
stock option for at least two years from the date on which the option is granted
and at least one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of such
stock will be long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods
(a "disqualifying disposition"), at the time of disposition the optionee will
realize taxable ordinary income equal to the lesser of (a) the excess of the
stock's fair market value on the date of exercise over the exercise price, or
(b) the optionee's actual gain, if any, on the purchase and sale. The optionee's
additional gain, or any loss, upon the disqualifying disposition will be a
capital gain or loss which will be long-term or short-term depending on whether
the stock was held for more than one year. Long-term capital gains currently are
generally subject to lower tax rates than ordinary income. The maximum capital
gains rate for federal income tax purposes is currently 28%, while the maximum
ordinary income rate is effectively 39.6% at the present time. Slightly
different rules may apply to optionees who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of Securities Exchange
Act of 1934, as amended (the "Exchange Act").
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will be entitled (subject to the
requirement of reasonableness, the provisions of Section 162(m) of the Code and
the satisfaction of a tax reporting obligation) to a corresponding business
expense deduction in the tax year in which the disqualifying disposition occurs.
Nonstatutory Stock Options. Nonstatutory stock options granted under
the 1988 Plan generally have the following federal income tax consequences:
7.
<PAGE> 10
There are no tax consequences to the optionee or the Company by reason
of the grant of a nonstatutory stock option. Upon exercise of a nonstatutory
stock option, the optionee normally will recognize taxable ordinary income equal
to the excess of the stock's fair market value on the date of exercise over the
option exercise price. Generally, with respect to employees, the Company is
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Subject to the requirement of
reasonableness, the provisions of Section 162(m) of the Code and the
satisfaction of a tax reporting obligation, the Company will generally be
entitled to a business expense deduction equal to the taxable ordinary income
realized by the optionee. Upon disposition of the stock, the optionee will
recognize a capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for such stock plus any amount recognized
as ordinary income upon exercise of the option. Such gain or loss will be long
or short-term depending on whether the stock was held for more than one year.
Slightly different rules apply to optionees who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange Act.
Potential Limitation on Company Deductions. As part of the Omnibus
Budget Reconciliation Act of 1993, the U.S. Congress amended the Code to add
Section 162(m), which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1,000,000 for a covered employee. It is possible that
compensation attributable to stock options, when combined with all other types
of compensation received by a covered employee from the Company, may cause this
limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m), compensation
attributable to stock options will qualify as performance-based compensation,
provided that the option is granted by a compensation committee comprised solely
of "outside directors" and either: (a) the option plan contains a per-employee
limitation on the number of shares for which options may be granted during a
specified period, the per-employee limitation is approved by the stockholders,
and the exercise price of the option is no less than the fair market value of
the stock on the date of grant, or (b) the option is granted (or exercisable)
only upon the achievement (as certified in writing by the compensation
committee) of an objective performance goal established in writing by the
compensation committee while the outcome is substantially uncertain, and the
option is approved by stockholders.
PROPOSAL 3
APPROVAL OF 1991 EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
In November 1991, the Board adopted, and the stockholders subsequently
approved, the 1991 Employee Stock Purchase Plan (the "Purchase Plan")
authorizing the issuance of 150,000 shares of the Company's Common Stock. In
January 1996, the Board adopted, and the stockholders subsequently approved, an
amendment to the Purchase Plan to increase the number of shares authorized for
issuance under the Purchase Plan to 350,000. The Board adopted this amendment to
afford the Company greater flexibility in providing employees with stock
incentives and to ensure that the Company could continue to provide such
incentives at levels determined appropriate by the Board. In June 1996, in order
to provide for additional shares to authorize for issuance upon conversion of
the Notes issued pursuant to the Private Placement as described above, the Board
approved an amendment to the Purchase Plan to reduce the number of shares
authorized for issuance thereunder by 160,000, from 350,000 to 190,000 shares.
At the same time, the Board approved, subject to stockholder approval, the later
amendment to the Purchase Plan to increase the number of shares authorized for
issuance thereunder by 160,000, from 190,000 back to 350,000 shares, effective
upon the amendment of the Company's Restated Certificate of Incorporation to
increase the authorized number of shares of Common Stock from 20,000,000 to
50,000,000.
At May 31, 1996, an aggregate of 130,744 shares had been issued under
the Purchase Plan and, without taking into account the amendments to the
Purchase Plan resulting from the Private Placement, 219,256 shares remained for
the grant of future rights under the Purchase Plan. During the last fiscal year,
shares were purchased in the following amounts under the Purchase Plan: Mr.
Dilworth 1,960 shares, Mr. Swain 1,549 shares, Mr. Green
8.
<PAGE> 11
1,960 shares, all current executive officers as a group 5,469 shares, and all
employees (excluding executive officers) as a group 30,417 shares. All of such
shares were purchased for $12.75 per share.
Stockholders are requested in this Proposal 3 to approve the Purchase
Plan, as amended to increase the number shares authorized for issuance
thereunder to the previously approved amount of 350,000. The affirmative vote of
the holders of a majority of the shares present in person or represented by
proxy and entitled to vote will be required to approve the Purchase Plan, as
amended.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3
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 key
employees of the Company (and any subsidiary of the Company designated by the
Board 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 retain the
services of new employees, and to provide incentives for such persons to exert
maximum efforts for the success of the Company. Approximately 155 of the
Company's approximately 180 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 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 will be eligible
to participate in such plan. The Board has the power, which it has not
exercised, to delegate administration of such plan to a committee of not less
than three 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 at least four months preceding the first day of the offering period.
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 which 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
9.
<PAGE> 12
(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 is the lower of (a) 85% of the fair market value of a
share of Common Stock on the date of commencement of the offering, and (b) 85%
of the fair market value of a share of Common Stock on the last day of the
purchase period.
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 not
increase or begin such payroll deductions after the beginning of any purchase
period, except, if the Board provides, in the case of an employee who first
becomes eligible to participate as of a date specified during the purchase
period. 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 not make any additional payments into such account.
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 which 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.
10.
<PAGE> 13
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 in November 2001.
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 authorized for issuance under the Purchase Plan, (b) modify the
requirements relating to eligibility for participation in the Purchase Plan, or
(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 a long-term capital gain or loss.
11.
<PAGE> 14
Capital gains currently are generally subject to lower tax rates than ordinary
income. The maximum capital gains rate for federal income tax purposes is 28%
while the maximum ordinary rate is effectively 39.6% at the present time.
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, and the Company may, in the
future, be required to withhold income taxes relating to such ordinary income
from other payments made to the participant. The balance of any gain will be
treated as 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 long or short-term
depending on whether the stock has been held for more than one year.
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).
PROPOSAL 4
APPROVAL OF THE 1993 NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN, AS AMENDED
In February 1993, the Board adopted, and the stockholders subsequently
approved, the 1993 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan"). In January 1995, the Board adopted, and the stockholders subsequently
approved, an amendment to the Directors' Plan to increase the number of shares
authorized for issuance under the Directors' Plan from 200,000 to 300,000
shares. The Board adopted this amendment to ensure that the Company could
continue to grant stock options to non-employee directors at the levels set
forth in the Directors' Plan. In June 1996, in order to provide for additional
shares to authorize for issuance upon conversion of the Notes issued pursuant to
the Private Placement as described above, the Board approved an amendment of the
Directors' Plan to reduce the number of shares authorized for issuance
thereunder by 140,000, from 300,000 to 160,000 shares. At the same time, the
Board approved, subject to stockholder approval, the later amendment to the
Directors' Plan to increase the number of shares authorized for issuance
thereunder by 140,000, from 160,000 back to 300,000 shares, effective upon the
amendment of the Company's Restated Certificate of Incorporation to increase the
authorized number of shares of Common Stock from 20,000,000 to 50,000,000. In
June 1966, the Board also adopted an amendment to the Directors' Plan to
provide for non-discretionary grants of nonstatutory stock options to purchase
7,000 shares of Common Stock on January 1 of each year to each non-employee
director who has been a non-employee director for at least three months prior to
such date. The Board adopted this amendment to facilitate the Company's goal of
attracting additional non-employee directors.
As of May 31, 1996, options covering an aggregate of 140,000 shares of
the Company's Common Stock had been granted under the Directors' Plan, of which
options to purchase 112,000 shares were outstanding, with exercise prices
ranging from $6.1875 to $23.37. As of May 31, 1996, a total of 14,000 shares had
been exercised under the Directors' Plan. As of May 31, 1996, without taking
into account the amendments to the Directors' Plan resulting from the Private
Placement, 160,000 shares remained available for future grants under the
Directors' Plan.
Stockholders are requested in this Proposal 4 to approve the Directors'
Plan, as amended to increase the number of shares authorized for issuance
thereunder to the previously approved amount of 300,000 shares and to permit
additional non-discretionary grants of options to non-employee directors. 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 Directors' Plan, as amended.
12.
<PAGE> 15
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 4
The essential features of the Directors' Plan are outlined below:
GENERAL
The Directors' Plan, and the right of non-employee directors to receive
options and purchase stock thereunder, is intended to qualify as a formula award
plan having "disinterested administration" as promulgated under Rule 16b-3 of
the Exchange Act ("Rule 16b-3"). The Directors' Plan provides for
non-discretionary grants of nonstatutory stock options. Options granted under
the Directors' Plan are not intended to qualify as incentive stock options, as
defined under Section 422 of the Code. See "Federal Income Tax Information"
below for a discussion of the tax treatment of nonstatutory stock options.
The purpose of the Directors' Plan is to retain the services of persons
now serving as non-employee directors of the Company, to attract and retain the
services of persons capable of serving on the Board of Directors of the Company
and to provide incentives for such persons to exert maximum efforts to promote
the success of the Company.
ADMINISTRATION
The Directors' Plan is administered by the Board of Directors of the
Company. The Board of Directors has the final power to construe and interpret
the Directors' Plan and options granted under it, and to establish, amend and
revoke rules and regulations for its administration.
The Board of Directors is authorized to delegate administration of the
Directors' Plan to a committee of not less than two members of the Board. The
Board of Directors does not presently contemplate delegating administration of
the Directors' Plan to any committee of the Board of Directors.
ELIGIBILITY
The Directors' Plan provides that options may be granted only to
non-employee directors of the Company. A "non-employee director" is defined in
the Directors' Plan as a director of the Company and its affiliates who is not
otherwise an employee of the Company or any affiliate. Six of the Company's
eight current directors (all except Messrs. Dilworth and Smelick) are eligible
to participate in the Directors' Plan.
TERMS OF OPTIONS
Each option under the Directors' Plan is subject to the following terms
and conditions:
Non-Discretionary Grants. Option grants under the Directors' Plan are
non-discretionary. On the date the Board approved the Directors' Plan, February
9, 1993, each non-employee director received an option to purchase 7,000 shares
of Common Stock of the Company. On January 1, 1994 and January 1, 1995, each
such non-employee director received an option to purchase an additional 7,000
shares of Common Stock of the Company. In addition, each person who became a
non-employee director of the Company after the adoption of the Directors' Plan
received, (a) upon the date of initial election and (b) after such non-employee
director had been a non-employee director for at least three months, on January
1 of the next two years, an option to purchase 7,000 shares of Common Stock of
the Company. Subject to stockholder approval as requested in this Proposal 4,
without further action by the Company, the Board or the stockholders of the
Company, (i) each person who becomes a non-employee director of the Company will
receive an option to purchase 7,000 shares of Common Stock upon the date of
initial election, and (ii) on January 1 of each year, each member of the Board
who has continuously served as a non-employee director for at least three months
prior to such date will automatically be granted an option to purchase 7,000
shares of Common Stock of the Company.
13.
<PAGE> 16
Option Exercise. An option granted under the Directors' Plan becomes
exercisable in three equal installments beginning on the first anniversary of
the grant of the option. Such vesting is conditioned upon continued service as a
director, employee or consultant of the Company.
Exercise Price; Payment. The exercise price of options granted under the
Directors' Plan shall be equal to 100% of the fair market value of the Common
Stock subject to such options on the date such option is granted. The exercise
price of options granted under the Directors' Plan must be paid in cash at the
time the option is exercised.
Transferability; Term. Under the Directors' Plan, an option may not be
transferred by the optionee, except by will or the laws of descent and
distribution. During the lifetime of an optionee, an option may be exercised
only by the optionee or his or her guardian or legal representative.
No option granted under the Directors' Plan is exercisable by any person
after the expiration of 10 years from the date the option is granted.
Other Provisions. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Directors' Plan as may be
determined by the Board.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the Directors' Plan or
subject to any option granted under the Directors' 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
Directors' Plan and options outstanding thereunder will be appropriately
adjusted as to the class and the maximum number of shares subject to the plan
and the class, number of shares and price per share of stock subject to
outstanding options.
EFFECT OF CERTAIN CORPORATE EVENTS
In the event of a dissolution or liquidation of the Company or a specified
type of merger or other corporate reorganization, to the extent permitted by
law, the vesting of any outstanding options under the Directors' Plan shall
accelerate and the options terminate if unexercised prior to the occurrence of
the event.
DURATION, AMENDMENT AND TERMINATION
The Board may amend, suspend or terminate the Directors' Plan
at any time or from time to time; provided, however, that the Board may not
amend the Directors' Plan with respect to the amount, price or timing of grants
more often than once every six months other than to comport with changes to the
Code or ERISA. No amendment will be effective unless approved by the
stockholders of the Company within twelve months before or after its adoption by
the Board if the amendment would: (a) increase the number of shares authorized
for options under the plan, (b) modify the requirements as to eligibility for
participation in the plan (to the extent such modification requires stockholder
approval in order for the plan to comply with the requirements of Rule 16b-3),
or (c) modify the plan in any other way if such modification requires
stockholder approval in order for the plan to meet the requirements of Rule
16b-3. Unless sooner terminated, the Directors' Plan shall terminate in February
2003.
FEDERAL INCOME TAX INFORMATION
The following is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Directors' Plan, does not purport to be complete, and does not
discuss the income tax laws of any state or foreign country in which an optionee
may reside.
14.
<PAGE> 17
Options granted under the Directors' Plan are nonstatutory options. There
are no tax consequences to the optionee or the Company by reason of the grant of
a nonstatutory stock option. Upon exercise of a nonstatutory stock option, the
optionee generally will recognize ordinary income for tax purposes measured by
the excess of the then fair market value of the shares over the option price.
Because the optionee is a director of the Company, under existing laws the date
of taxation (and the date of measurement of taxable ordinary income) may in some
instances be deferred unless the optionee files an election under Section 83(b)
of the Code. The filing of a Section 83(b) election with respect to the exercise
of an option may affect the time of taxation and the amount of income recognized
at each such time. At the time the optionee recognizes ordinary income due to
the exercise of the option, the Company will generally be entitled to a business
expense deduction equal to the taxable ordinary income realized by the optionee.
Upon resale of such shares by the optionee, any difference between the sales
price and the exercise price, to the extent not recognized as ordinary income as
provided above, generally will be treated as capital gain or loss, and will
qualify for long-term capital gain or loss treatment if the shares have been
held for at least one year.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of May 31, 1996 by: (a) each director; (b) the
Chief Executive Officer and the Company's four most highly compensated executive
officers other than the Chief Executive Officer; (c) all executive officers and
directors of the Company as a group; and (d) all those known by the Company to
be beneficial owners of more than five percent of its outstanding Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
-----------------------
PERCENT
OF
NAME NUMBER OF SHARES TOTAL
---- ---------------- -----
<S> <C> <C>
Lindner Fund, Inc.(2) 1,905,000 14.3%
7711 Carondelet Avenue
P.O. Box 16900
St. Louis, MO 63105
Vulcan Ventures Incorporated 1,888,245 14.1%
13810 S.E. Eastgate Way, Suite 480
Bellevue, WA 98005-4442
Robert M. Smelick(3) 383,472 2.9%
c/o Sterling Payot
222 Sutter Street, Eighth Floor
San Francisco, CA 94108
Cornelius C. Bond, Jr.(4) 24,648 *
Robert S. Cline(5) 19,499 *
Robert P. Dilworth(6) 163,218 1.2%
Gary M. Green(7) 172,298 1.3%
Justin Jaschke(8) 6,250 *
George W. Levert(9) 379,489 2.8%
LeRoy D. Nosbaum(10) 4,000 *
Donald Rumsfeld(11) 86,999 *
William D. Swain(12) 8,792 *
Donald F. Wood(13) 52,082 *
Directors and executive officers as a group
(11 persons)(14) 1,269,739 9.0%
</TABLE>
- ---------------
* Less than one percent.
15.
<PAGE> 18
(1) This table is based upon information supplied by directors, officers
and principal stockholders and Schedules 13D and 13G filed with the
Securities and Exchange Commission (the "SEC"). Unless otherwise
indicated below, the persons named in the table have sole voting and
investment power with respect to all shares beneficially owned by them,
subject to community property laws where applicable. For purposes of
this table, shares held by stockholders include any shares held as
tenants in common or joint tenants with spouses. Percentages are based
on a total of 13,354,591 shares outstanding on May 31, 1996 adjusted in
accordance with the rules promulgated by the SEC.
(2) Based on a Form 13G filed with the SEC on January 25, 1996. Includes
1,316,500 shares held by Lindner Growth Fund and 588,500 shares held by
entities affiliated with Ryback Management Corporation. Ryback
Management Corporation has sole voting and dispositive power over the
shares held by Lindner Growth Fund. Ryback Management Corporation
disclaims beneficial ownership of the shares in which it has no
pecuniary interest.
(3) Includes 170,872 shares held by Mr. Smelick individually and 555 shares
held by Sterling Payot Company. Includes 200,000 shares held by
Sterling Payot Capital, L.P. which are subject to an outstanding
warrant exercisable within 60 days of the date of this table. The
Company retains the right to repurchase certain shares underlying the
warrant under certain circumstances. Also includes 3,645 shares held by
Sterling Payot Management, Inc. Mr. Smelick is the Managing Director
and sole stockholder of Sterling Payot Management, Inc., the general
partner of Sterling Payot Capital, L.P. and a managing principal,
director and stockholder of Sterling Payot Company, a limited partner
of Sterling Payot Capital, L.P. Mr. Smelick disclaims beneficial
ownership of these shares. Also includes 1,200 shares held by The
Gillian Sterling Smelick Trust U/A/D 4/17/90, Robert M. Smelick,
Trustee, 1,200 shares held by The Christopher P.M. Smelick Trust U/A/D
4/17/90, Robert M. Smelick, Trustee, 1,200 shares held by The Alexandra
McBride Smelick Trust U/A/D 4/17/90, Robert M. Smelick, Trustee, 1,600
shares held by Mr. Smelick as custodian for Alexandra Smelick under the
UTMA, 1,600 shares held by Mr. Smelick as custodian for Christopher
Smelick under the UTMA and 1,600 shares held by Mr. Smelick as
custodian for Gillian Smelick under the UTMA. Mr. Smelick has the power
to vote and control the disposition of the shares held as trustee and
custodian and therefore may be deemed to be a beneficial owner of such
shares.
(4) Includes 13,999 shares of Common Stock subject to options exercisable
within 60 days of the date of this table.
(5) Includes 19,499 shares of Common Stock subject to options exercisable
within 60 days of the date of this table.
(6) Includes 117,395 shares of Common Stock subject to options exercisable
within 60 days of the date of this table.
(7) Includes 142,854 shares of Common Stock subject to options exercisable
within 60 days of the date of this table.
(8) Includes 6,250 shares of Common Stock subject to options exercisable
within 60 days of the date of this table.
(9) Includes 284,387 shares held by UVCC I and 81,103 shares subject to an
outstanding warrant held by UVCC I exercisable within 60 days of the
date of this table. Mr. Levert, a director of the Company, is Vice
President and Managing Director of Arete, which manages UVCC I. Mr.
Levert shares voting and investment powers with the other general
partners of UVCC I and disclaims beneficial ownership of the shares in
which he has no pecuniary interest. Also includes 13,999 shares of
Common Stock subject to options exercisable within 60 days of the date
of this table.
(10) Includes 20,081 shares of Common Stock subject to options exercisable
within 60 days of the date of this table.
(11) Includes 6,999 shares of Common Stock subject to options exercisable
within 60 days of the date of this table.
(12) Includes 8,541 shares of Common Stock subject to options exercisable
within 60 days of the date of this table.
(13) Includes 52,082 shares of Common Stock subject to options exercisable
within 60 days of the date of this table.
(14) Includes shares held by entities affiliated with certain officers and
directors as described in the footnotes above. Also includes 662,721
shares of Common Stock subject to options and warrants exercisable
within 60 days of the date of this table.
16.
<PAGE> 19
EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
Each non-employee director of the Company, except for Mr. Smelick,
receives an annual retainer of $6,000 and a per meeting fee of $1,000 (plus $250
for each committee meeting attended by committee members). The members of the
Board are also eligible for reimbursement for their expenses incurred in
connection with attendance at Board and committee meetings in accordance with
Company policy. In fiscal 1995, the total compensation paid to non-employee
directors as a group was $51,000.
Each non-employee director of the Company also receives stock option
grants under 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 intended by the Company not to qualify as incentive stock
options under the Code.
Option grants under the Directors' Plan are non-discretionary. On the date
the Board approved the Directors' Plan, February 9, 1993, each non-employee
director received an option to purchase 7,000 shares of Common Stock of the
Company. On January 1, 1994 and January 1, 1995, each such non-employee director
received an option to purchase an additional 7,000 shares of Common Stock of the
Company. In addition, each person who became a non-employee director of the
Company after the adoption of the Directors' Plan received, (a) upon the date of
initial election and (b) after such non-employee director had been a
non-employee director for at least three months, on January 1 of the next two
years, an option to purchase 7,000 shares of Common Stock of the Company.
Subject to stockholder approval as requested in Proposal 4, without further
action by the Company, the Board or the stockholders of the Company, (i) each
person who becomes a non-employee director of the Company will receive an option
to purchase 7,000 shares of Common Stock upon the date of initial election, and
(ii) on January 1 of each year, each member of the Board who has continuously
served as a non-employee director for at least three months prior to such date
will automatically be granted an option to purchase 7,000 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 may not be exercised
until the date upon which such optionee has provided one year of continuous
service as a non-employee director following the date of grant of such option,
whereupon such option will become exercisable as to one third of the option
shares and one third of the option shares will become exercisable each year
thereafter in accordance with its terms. The term of options granted under the
Directors' Plan is ten 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.
During the last fiscal year, the Company granted options covering 7,000
shares to Messrs. Cline and Mr. Rumsfeld at an exercise price per share of
$14.75. The fair market value of such Common Stock on the date of grant was
$14.75 per share (based on the closing sales price reported in the National
Market System for the date of grant). As of May 31, 1996, options to purchase
14,000 shares of the Company's Common Stock had been exercised under the
Directors' Plan.
Directors who are employees of the Company do not receive separate
compensation for their services as directors.
17.
<PAGE> 20
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows for fiscal 1995, 1994 and 1993, compensation
awarded or paid to, or earned by the Chief Executive Officer and each of the
four other most highly compensated executive officers as of the end of fiscal
1995 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
NAME AND ------------------- UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS SATION(1)
------------------ ---- ------ ----- ------- ---------
<S> <C> <C> <C> <C> <C>
Robert P. Dilworth ...................... 1995 $255,766 $137,500 20,000 $ 7,735
President and Chief 1994 $231,532 $125,000 25,000 $ 6,341
Executive Officer 1993 $200,000 $138,890 195,000 $ 3,379
William D. Swain ........................ 1995 $136,840 $ 22,500 10,000 $ 3,241
Chief Financial Officer 1994 $121,920 $ 18,500 10,000 $ 3,102
and Secretary 1993 $112,514 $ 20,340 35,000 $ 2,809
Gary M. Green ........................... 1995 $182,310 $ 58,200 12,000 $34,053
Executive Vice President 1994 $170,003 $ 43,500 14,000 $33,880
and Chief Operating Officer 1993 $159,627 $ 53,335 60,000 $33,379
LeRoy D. Nosbaum(2) ..................... 1995 $165,005 $ 20,000 12,000 $ 2,583
Executive Vice President, 1994 $153,470 $ 23,000 12,000 $ 2,583
Marketing 1993 $139,388 $ 25,425 37,500 $ 2,427
Donald F. Wood(3) ....................... 1995 $167,313 $ 45,000 12,000 $ 1,989
Executive Vice President
Wireless Services Division
</TABLE>
- --------------
(1) Includes the Company's matching payment of $1,000 for each executive
officer under its 401(k) plan. For fiscal 1993, includes payments for
term life insurance in the amounts of $2,379, $1,809, $2,379 and $1,427
for Messrs. Dilworth, Swain, Green and Nosbaum, respectively, and loan
principal forgiveness in the amount of $30,000 for Mr. Green. For
fiscal 1994, includes payments for term life insurance in the amounts
of $3,456, $2,102, $2,880 and $1,583 for Messrs. Dilworth, Swain, Green
and Nosbaum, respectively, loan principal forgiveness in the amount of
$30,000 for each of Mr. Green and an automobile allowance of $1,885 for
Mr. Dilworth. For fiscal 1995, includes payments for term life
insurance in the amounts of $3,456, $2,241, $3,053, $1,583 and $989 for
Messrs. Dilworth, Swain, Green, Nosbaum and Wood, respectively, loan
principal forgiveness in the amount of $30,000 for Mr. Green and an
automobile allowance of $3,279 for Mr. Dilworth.
(2) Effective March 1996, Mr. Nosbaum no longer is an executive officer of
the Company.
(3) Mr. Wood became an officer of the Company in November 1994.
18.
<PAGE> 21
COMPENSATION PURSUANT TO PLANS
STOCK OPTION GRANTS
The following table sets forth for each of the Named Executive Officers
each grant of stock options made during fiscal 1995:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
PERCENT POTENTIAL REALIZABLE
OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF
NUMBER OF GRANTED TO STOCK PRICE
SECURITIES EMPLOYEES EXERCISE APPRECIATION FOR
UNDERLYING IN OR OPTION TERM(3)(4)
OPTIONS FISCAL BASE PRICE EXPIRATION -------------------
NAME GRANTED(1) YEAR(2) PER SHARE(3) DATE 5% 10%
- ---- ----------- --------- ------------ ---------- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Robert P. Dilworth . . . 20,000 3.3% $17.00 05/15/05 $213,824 $541,872
William D. Swain . . . . 10,000 1.6% $17.00 05/15/05 $106,912 $270,936
Gary M. Green . . . . . . 12,000 1.9% $17.00 05/15/05 $128,295 $325,123
LeRoy D. Nosbaum . . . . 12,000 1.9% $17.00 05/15/05 $128,295 $325,123
Donald F. Wood . . . . . 12,000 1.9% $17.00 05/15/05 $128,295 $325,123
</TABLE>
- -------------------------------------
(1) Options granted under the Company's 1988 Plan typically vest 25% after
one year and approximately two percent per month thereafter, such that
the options are fully vested in four years. The options will fully vest
upon a change of control, as defined in the 1988 Plan, unless the
acquiring company assumes the options or substitutes similar options.
(2) Based on an aggregate of options covering 613,250 shares granted in
fiscal 1995 under the 1988 Plan to employees of the Company, including
the Named Executive Officers.
(3) In January 1996, the Board approved the replacement of each outstanding
stock option with a per share exercise price of $15.00 or greater, upon
the timely request of the optionee, with a stock option having an
exercise price of $13.125 per share and certain extended vesting terms
(the "Repricing Program"). All of the Named Executive Officers except
Mr. Nosbaum have elected to participate in the Repricing Program. Upon
replacement, each option described above will have an exercise price of
$13.125 per share and the potential realizable values for such options
will be (a) at 5%, $165,085, $82,542, $99,051 and $99,051 for Messrs.
Dilworth, Swain, Green and Wood, respectively, and (b) at 10%,
$418,357, $209,179, $251,014 and $251,014 for Messrs. Dilworth, Swain,
Green and Wood, respectively,
(4) The potential realizable value is calculated based on the term of the
option at its time of grant (10 years). It is calculated by assuming
that the stock price on the date of grant appreciates at the indicated
annual rate compounded annually for the entire term of the option and
that the option is exercised and sold on the last day of its term for
the appreciated stock price. No gain to the optionee is possible unless
the stock price increases over the option term, which will benefit all
stockholders.
19.
<PAGE> 22
The following table shows for fiscal 1995 certain information regarding
options exercised by and held at year end by the Named Executive Officers:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
NUMBER OF OPTIONS AT OPTIONS AT
SHARES FISCAL YEAR END FISCAL YEAR END(1)(2)
ACQUIRED ON VALUE -------------------------- ---------------------------
NAME EXERCISE REALIZED(3) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert P. Dilworth 25,000 $312,000 208,851 118,649 $ 939,071 $ 75,929
William D. Swain 6,000 $ 73,250 26,581 30,419 $ 69,930 $ 21,695
Gary M. Green -- -- 163,706 43,794 $1,335,141 $ 54,234
LeRoy D. Nosbaum 12,500 $169,250 57,143 34,357 $ 324,602 $ 27,117
Donald F. Wood -- -- 33,854 103,146 $ 59,245 $159,506
</TABLE>
(1) Assuming replacement of certain options pursuant to the Repricing
Program as of the end of fiscal 1995, the value of the Named Executive
Officers' in-the-money options on such date would have been (a) for
exercisable options, $987,351, $78,679, $1,347,390 and $59,245 for
Messrs. Dilworth, Swain, Green and Wood, respectively, and (b) for
unexercisable options, $130,149, $35,446, $72,485 and $165,506 for
Messrs. Dilworth, Swain, Green and Wood, respectively.
(2) Fair market value of the Company's Common Stock at December 31, 1995
($13.625) (based on the closing sales price reported on the Nasdaq
National Market on such date) minus the exercise price of the options.
(3) Value realized is based on the fair market value of the Company's
Common Stock on the date of exercise (the closing sales price reported
on the Nasdaq National Market on such date) minus the exercise price,
and does not necessarily indicate that the optionee sold such stock.
20.
<PAGE> 23
OTHER MATTERS
No other matters will be presented for consideration at the Special
Meeting.
By Order of the Board of Directors
WILLIAM D. SWAIN
Secretary
June 26, 1996
21.
<PAGE> 24
METRICOM, INC
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 7, 1996
The undersigned hereby appoints ROBERT P. DILWORTH and WILLIAM D.
SWAIN, 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 Metricom, Inc. (the
"Company") that the undersigned may be entitled to vote at the Special Meeting
of Stockholders of the Company to be held at the offices of the Company at 980
University Avenue, Los Gatos, California on Wednesday, August 7, 1996 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.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2, 3 AND 4 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 PROPOSAL 1, 2, 3 AND 4
PROPOSAL 1: To approve an amendment to the Company's Restated
Certificate of Incorporation to increase the authorized number
of shares of Common Stock from 20,000,000 to 50,000,000.
/ / FOR / / AGAINST / / ABSTAIN
PROPOSAL 2: To approve the Company's 1988 Stock Option Plan, as amended
to increase the aggregate number of shares of Common Stock
authorized for issuance thereunder to 4,119,500.
/ / FOR / / AGAINST / / ABSTAIN
PROPOSAL 3: To approve the Company's 1991 Employee Stock Purchase Plan,
as amended to increase the aggregate number of shares
authorized for issuance thereunder to 350,000.
/ / FOR / / AGAINST / / ABSTAIN
PROPOSAL 4: To approve the Company's 1993 Non-Employee Directors' Stock
Option Plan, as amended to increase the number of shares
authorized for issuance thereunder to 300,000 and to permit
additional non-discretionary grants of options to non-employee
directors.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE> 25
DATED ____________, 1996
-----------------------------------------
-----------------------------------------
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> 26
METRICOM, INC.
1993 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
Adopted February 9, 1993
Amended November 1, 1993
Approved December 23, 1993
Amended January 1995
Approved May 16, 1995
Amended June 6, 1996
Amended June 6, 1996 and Approved ________________
1. PURPOSE
(a) The purpose of the 1993 Non-Employee Directors' Stock Option Plan
(the "Plan") is to provide a means by which each director of Metricom, Inc. (the
"Company") who is not otherwise an employee of the Company or of any Affiliate
of the Company (each such person being hereafter referred to as a "Non-Employee
Director") will 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 from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
1.
<PAGE> 27
2. ADMINISTRATION
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(b).
(b) 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 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to options granted
under the Plan shall not exceed in the aggregate three hundred thousand
(300,000) shares of the Company's common stock. If any option granted under the
Plan shall for any reason expire or otherwise terminate without having been
exercised in full, the stock not purchased under such option 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. ELIGIBILITY
Options shall be granted only to Non-Employee Directors of the Company.
2.
<PAGE> 28
5. NON-DISCRETIONARY GRANTS
(a) Each person who is first elected or appointed as a Non-Employee
Director on or after June 6, 1996 shall, upon such date of initial election or
appointment, be granted an option to purchase seven thousand (7,000) shares of
common stock of the Company on the terms and conditions set forth herein.
(b) On January 1 of each calendar year thereafter, each person who is
serving as a Non-Employee Director shall be granted an option to purchase seven
thousand (7,000) shares of common stock of the Company on the terms and
conditions set forth herein, provided such person has continuously served as a
Non-Employee Director for at least three (3) months prior to the January 1 grant
date.
6. OPTION PROVISIONS
Each option shall contain the following terms and conditions:
(a) The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date ("Expiration
Date") ten (10) years from the date of grant. If the optionee's service as a
Non-Employee Director of the Company terminates for any reason or for no reason,
the option shall terminate on the earlier of the Expiration Date or the date
three (3) months following the date of termination of service; provided,
however, that if such termination of service is due to the optionee's death, the
option shall terminate on the earlier of the Expiration Date or eighteen (18)
months following the date of the optionee's death. In any and all circumstances,
an option may be exercised following termination of the optionee's service as a
Non-Employee Director of the Company only as to that number of shares as to
which it was exercisable on the date of termination of such service under the
provisions of subparagraph 6(e).
3.
<PAGE> 29
(b) Subject to subparagraph 4(b), the exercise price of each option
shall be one hundred percent (100%) of the fair market value of the stock
subject to such option on the date such option is granted.
(c) Payment of the exercise price of each option is due in full in cash
upon any exercise.
(d) An option shall not be transferable except by will or by the laws
of descent and distribution, and shall be exercisable during the lifetime of the
person to whom the option is granted only by such person or by his guardian or
legal representative.
(e) The option shall become exercisable in three (3) equal annual
installments commencing on the date one (1) year after the date of grant of the
option, provided that the optionee has, during the twelve (12)-month period
prior to such annual vesting date, continuously served as a Non-Employee
Director or as an employee of or consultant to the Company or any Affiliate of
the Company, whereupon such option shall become exercisable with respect to that
portion of the shares represented by such installment.
(f) The Company may require any optionee, or any person to whom an
option is transferred under subparagraph 6(d), as a condition of exercising any
such option: (i) to give written assurances satisfactory to the Company as to
the optionee's knowledge and experience in financial and business matters; and
(ii) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the option for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise of the option has been registered under a then-currently-effective
registration statement under the Securities Act of 1933, as amended (the
4.
<PAGE> 30
"Securities Act"), or (ii), as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then-applicable securities laws.
(g) Notwithstanding anything to the contrary contained herein, an
option may not be exercised unless the shares issuable upon exercise of such
option are then registered under the Securities Act or, if such shares are not
then so registered, the Company has determined that such exercise and issuance
would be exempt from the registration requirements of the Securities Act.
7. COVENANTS OF THE COMPANY
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) 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 options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If 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 options.
8. USE OF PROCEEDS FROM STOCK
Proceeds from the sale of stock pursuant to options granted under the
Plan shall constitute general funds of the Company.
5.
<PAGE> 31
9. MISCELLANEOUS
(a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
(b) Throughout the term of any option granted pursuant to the Plan, the
Company shall make available to the holder of such option, not later than one
hundred twenty (120) days after the close of each of the Company's fiscal years
during the option term, upon request, such financial and other information
regarding the Company as comprises the annual report to the stockholders of the
Company provided for in the Bylaws of the Company and such other information
regarding the Company as the holder of such option may reasonably request.
(c) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate or shall affect any right of the Company, its
Board or stockholders or any Affiliate to terminate the service of any
Non-Employee Director with or without cause.
(d) No Non-Employee Director, individually or as a member of a group,
and no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.
(e) In connection with each option made pursuant to the Plan, it shall
be a condition precedent to the Company's obligation to issue or transfer shares
to a Non-Employee Director, or to evidence the removal of any restrictions on
transfer, that such Non-Employee Director make arrangements satisfactory to the
Company to insure that the amount of any federal or other
6.
<PAGE> 32
withholding tax required to be withheld with respect to such sale or transfer,
or such removal or lapse, is made available to the Company for timely payment of
such tax.
10. ADJUSTMENTS UPON CHANGES IN STOCK
(a) If any change is made in the stock subject to the Plan, or subject
to any option 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 all
outstanding options thereunder 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 options.
(b) In the event of: (1) a merger or consolidation in which the Company
is not the surviving corporation; (2) 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 (3) any other capital reorganization in which more than fifty
percent (50%) of the shares of the Company entitled to vote are exchanged, then,
to the extent permitted by applicable law, the time during which such option may
be exercised shall be accelerated and the options terminated if not exercised
prior to such event.
11. AMENDMENT OF THE PLAN
(a) The Board at any time, and from time to time, may amend the Plan,
provided, however, that the Board shall not amend the Plan more than once every
six (6) months, with respect to the provisions of the Plan which relate to the
amount, price and timing of grants, other than to comport with changes in the
Code, the Employee Retirement Income Security Act,
7.
<PAGE> 33
or the rules thereunder. Except as provided in paragraph 10 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 which may be
issued under the Plan;
(ii) Modify the requirements as to eligibility
for participation in the Plan (to the extent such modification requires
stockholder approval in order for the Plan to comply with the requirements of
Rule 16b-3); or
(iii) Modify the Plan in any other way if such
modification requires stockholder approval in order for the Plan to comply with
the requirements of Rule 16b-3.
(b) Rights and obligations under any option granted before any
amendment of the Plan shall not be altered or impaired by such amendment unless
(i) the Company requests the consent of the person to whom the option was
granted and (ii) such person consents in writing.
12. 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 February 8, 2003. No options may
be granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any option 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 the option was granted.
(c) The Plan shall terminate upon the occurrence of any of the events
described in Section 10(b) above.
8.
<PAGE> 34
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE
(a) The Plan shall become effective upon adoption by the Board of
Directors, subject to the condition subsequent that the Plan is approved by the
stockholders of the Company.
(b) No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13(a) above has been met.
9.
<PAGE> 35
METRICOM, INC.
1991 EMPLOYEE STOCK PURCHASE PLAN
Adopted November 12, 1991
Amended January 1996
Approved April 24, 1996
Amended June 6, 1996
Amended June 6, 1996 and Approved_______________
1. PURPOSE.
(a) The purpose of the Plan is to provide a means by which
employees of Metricom, Inc., a California 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.
1.
<PAGE> 36
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.
(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
2.
<PAGE> 37
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 three hundred and fifty
thousand (350,000) 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.
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
3.
<PAGE> 38
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.
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, 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
4.
<PAGE> 39
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 employees 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(d), 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
5.
<PAGE> 40
twenty-five thousand dollars ($25,000) of fair market value of such stock
(determined at the time such rights are granted) for each calendar year in which
such rights are outstanding at any time.
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 the number
of shares of Common Stock of the Company purchasable with up to fifteen percent
(15%) of such employee's Base Compensation (as defined in Section 7(a)) during
the period which begins on the Offering Date (or such later date as the Board
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 such 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 (as defined in
the Offering) 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:
6.
<PAGE> 41
(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 eight-five percent (85%) of the
fair market value of the stock on the date of purchase.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in an Offering
by delivering an 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 fifteen percent (15%) of such employee's
Base Compensation during the Purchase Period. Base Compensation is defined as
total cash compensation exclusive of commissions, bonuses, overtime, allowances,
loans, educational assistance and premium pay such as shift differential, but
including amounts elected to be deferred by the employee (that would otherwise
have been paid) under the Company's 401(k) Plan. 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. At any time
during the Purchase Period a participant may terminate his or her payroll
deductions. A participant may reduce, increase or begin such payroll deductions
after the beginning of any Purchase Period only as provided for in the Offering.
A participant may not make any additional payments into his or her account
unless expressly provided for in the Offering.
(b) If a participant terminates his or her payroll deductions,
such participant may 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
7.
<PAGE> 42
Purchase Period. 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 other 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 or an 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), without interest; provided, however,
that subject to the right of the terminated employee to withdraw from the
Offering and receive a distribution of his or her accumulated payroll deductions
(as described in paragraph 7(b)), in the event that a participating employee's
employment ceases within three (3) months of the next Exercise Date, the balance
in such employee's account shall be held and used to purchase Common Stock for
the terminated employee on such Exercise Date pursuant to the terms of the
ongoing Offering.
(d) 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.
8.
<PAGE> 43
(a) On each exercise date, as defined in the relevant Offering (an
"Exercise Date"), each participant's accumulated payroll deductions (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 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
such participant after such 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 such 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 and all payroll deductions accumulated during
the purchase period shall be distributed to the participants, without interest.
9.
<PAGE> 44
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.
(b) 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 SHAREHOLDER.
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.
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 Board shall make
10.
<PAGE> 45
appropriate adjustments in the maximum number of shares subject to the Plan and
the 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, any surviving corporation shall assume outstanding rights or
substitute similar rights for those under the Plan, such rights shall continue
in full force and effect, or such rights shall be exercised immediately prior to
such event.
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
shareholders of the Company within 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; or
(ii) Modify the provisions as to eligibility for
participation in the Plan or modify the Plan in any other way to the extent such
modification requires shareholder approval in order for the Plan to obtain
employee stock purchase plan treatment under Section 423 of the Code).
11.
<PAGE> 46
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 the person to whom such rights were granted.
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 ten (10) years from the date
the Plan is adopted by the Board or approved by the shareholders of the Company,
whichever is earlier. 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.
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 vote of the shareholders of the Company, and, if required,
an appropriate permit has been issued by the Commissioner of Corporations of the
State of California.
12.
<PAGE> 47
METRICOM, INC.
1988 STOCK OPTION PLAN
Adopted March 1988
Approved July 1988
Amended September 1989
Approved February 1990
Amended October 1990
Approved December 1990
Amended October 1991
Approved March 1992
Amended November 1, 1993
Approved December 23, 1993
Amended January 1995
Amended April 1995
Approved May 16, 1995
Amended January 1996
Approved April 24, 1996
Amended June 6, 1996
Amended June 6, 1996 and Approved_______________
1. PURPOSE.
(a) The purpose of the Plan is to provide a means by which
selected key employees, consultants, officers and directors (if declared
eligible under paragraph 4) of Metricom, Inc. (the "Company"), and its
Affiliates, as defined in subparagraph 1(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 from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the
services of persons now employed by or serving as employees, consultants,
officers, directors or other service providers to the Company, to secure and
retain the services of persons capable of filling such positions, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(d) The Company intends that the options issued under the Plan
shall, in the discretion of the Board of Directors of the Company (the "Board")
or any committee to which responsibility for administration of the Plan has been
delegated pursuant to subparagraph 2(c), be either incentive stock options as
that term is used in Section 422 of the Code ("Incentive
1.
<PAGE> 48
Stock Options"), or options which do not qualify as incentive stock options
("Nonstatutory Stock Options"). All options shall be separately designated
Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and
in such form as issued pursuant to paragraph 5, and a separate certificate or
certificates shall be issued for shares purchased on exercise of each type of
option. An option designated as a Nonstatutory Stock Option shall not be treated
as an Incentive Stock Option.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and
until the Board delegates administration to a committee, as provided in
subparagraph 2(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the
persons eligible under the Plan shall be granted options; when and how the
option shall be granted; whether the option will be an Incentive Stock Option or
a Nonstatutory Stock Option; the provisions of each option granted (which need
not be identical), including the time or times during the term of each option
within which all or portions of such option may be exercised; and the number of
shares for which an option shall be granted to each such person.
(2) To construe and interpret the Plan and options
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 or in any option agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(3) To amend the Plan as provided in paragraph 10.
(4) 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 (the "Committee"), all of
the members of which Committee shall be disinterested persons, if required and
as defined by the provisions of subparagraph 2(d) and may also be, in the
discretion of the Board, "outside directors" as defined in subparagraph 2(e). 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 and
references to the Board herein shall be construed as references to the
Committee. The Board may abolish the Committee at any time and revest in the
Board the administration of the Plan.
2.
