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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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or 240.14a-12
</TABLE>
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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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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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(4) Proposed maximum aggregate value of transaction:
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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
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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(4) Date Filed:
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METRICOM, INC.
980 UNIVERSITY AVENUE
LOS GATOS, CALIFORNIA 95030-2375
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 26, 1998
TO THE STOCKHOLDERS OF METRICOM, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Metricom,
Inc., a Delaware corporation (the "Company"), will be held on Friday, June 26,
1998 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 elect three directors to hold office until the 2001 Annual Meeting of
Stockholders.
2. To approve the Company's 1997 Equity Incentive Plan, as amended to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 400,000 shares.
3. To approve the Company's 1991 Employee Stock Purchase Plan, as amended
to increase the aggregate number of shares of Common Stock authorized
for issuance under such plan by 200,000 shares.
4. To approve the Company's 1993 Non-Employee Directors' Stock Option Plan,
as amended to increase the aggregate number of shares of Common Stock
authorized for issuance under such plan by 75,000 shares.
5. To ratify the selection of Arthur Andersen LLP as independent auditors
of the Company for its fiscal year ending December 31, 1998.
6. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on May 15, 1998 as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
WILLIAM D. SWAIN
Secretary
Los Gatos, California
May 22, 1998
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE> 3
METRICOM, INC.
980 UNIVERSITY AVENUE
LOS GATOS, CALIFORNIA 95030-2375
------------------------
PROXY STATEMENT
------------------------
FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 26, 1998
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Metricom, Inc., a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held on Friday, June 26, 1998, at 9:00 a.m. local
time (the "Annual Meeting"), or at any adjournment or postponement thereof, for
the purposes set forth herein and in the accompanying Notice of Annual Meeting.
The Annual Meeting will be held at 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 May 22, 1998 to all stockholders
entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on May 15,
1998 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on May 15, 1998 the Company had outstanding and entitled to
vote 18,509,327 shares of Common Stock. Each holder of record of Common Stock on
such date will be entitled to one vote for each share held on all matters to be
voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office at 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.
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STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1999 Annual Meeting of Stockholders must be received by the Company
not later than January 22, 1999 in order to be included in the proxy statement
and proxy relating to that Annual Meeting. Stockholders are also advised to
review the Company's By-laws, which contain additional requirements with respect
to advance notice of stockholder proposals and director nominations.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation and By-laws provide
that the Board of Directors will be divided into three classes, each class
consisting, as nearly as possible, of one-third of the total number of
directors, with each class having a three-year term. Vacancies on the Board may
be filled only by persons elected by a majority of the remaining directors. A
director elected by the Board to fill a vacancy (including a vacancy created by
an increase in the Board of Directors) will serve for the remainder of the full
term of the class of directors in which the vacancy occurred and until such
director's successor is elected and qualified.
The Board of Directors is presently composed of seven members. There are
three directors in the class whose term of office expires in 1998. Each of the
nominees for election to this class is currently a director of the Company. Mr.
Dilworth was previously elected by the stockholders. Mr. Derrickson was
appointed by the Board of Directors in April 1998. Mr. Dreisbach was appointed
by the Board of Directors in May 1998. If elected at the Annual Meeting, each of
the nominees would serve until the 2001 annual meeting and until his successor
is elected and has qualified, or until such director's earlier death,
resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the two nominees named below. In the event that any nominee should
be unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected, and
management has no reason to believe that any nominee will be unable to serve.
Set forth below is biographical information for each person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2001 ANNUAL MEETING
ROBERT P. DILWORTH
Robert P. Dilworth, 56, has served as a director since August 1987 and as
Chairman of the Board since March 1997. Mr. Dilworth also served as President
from September 1987 to March 1997 and as Chief Executive Officer from August
1987 to May 1998. Prior to joining the Company, he served as President of Zenith
Data Systems Corp., a microcomputer manufacturer and a wholly-owned subsidiary
of Zenith Electronics Corp., from May 1985 to November 1987. Mr. Dilworth is
also a director of VLSI Technology, Inc. and Data Technology Corporation.
RALPH DERRICKSON
Ralph Derrickson, 39, has served as a director of the Company since April
1998. Mr. Derrickson has been a representative of Vulcan Northwest, Inc., a
venture capital firm affiliated with Vulcan Ventures Incorporated, the Company's
largest stockholder ("Vulcan"), since December 1996. Since June 1993, Mr.
Derrickson has also served as Vice President of Product Development at Starwave
Corporation, an internet technology company and creator and producer of online
sports, news and entertainment services. From December 1989 to May 1993, Mr.
Derrickson was with NeXT Computer Inc., a computer company, most recently as
Director of NeXTEdge.
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TIMOTHY A. DREISBACH
Timothy A. Dreisbach, 48, has served as President and Chief Executive
Officer and a director of the Company since May 1998. From January 1997 through
January 1998, Mr. Dreisbach served as President and Chief Executive Officer of
Premenos Technology Corporation, an electronic commerce software company that
merged with Harbinger Corp. in December 1997. From April 1992 to December 1996,
Mr. Dreisbach served as Senior Vice President, North American Sales and Service
for Boole & Babbage Inc., a systems management software company.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
ROBERT S. CLINE
Robert S. Cline, 60, has served as a director of the Company since January
1994. He currently serves as Chairman and Chief Executive Officer of Airborne
Freight Corp., an air express company. Mr. Cline has been employed by Airborne
Freight Corp. since 1968. In addition to Airborne Freight Corp., Mr. Cline is
also a director of SAFECO Corp. and Seattle-First National Bank.
JUSTIN L. JASCHKE
Justin L. Jaschke, 40, has served as a director of the Company since June
1996. He currently serves as Chief Executive Officer and a Director of Verio
Inc., an internet service provider. Prior to forming Verio, Mr. Jaschke served
as Chief Operating Officer of Nextel Communications, a telecommunications
company, following its merger with OneComm Corporation ("OneComm"), a
telecommunications company, in July 1995. From April 1993 to July 1995, he
served as OneComm's president and a member of its Board of Directors. From May
1990 to April 1993, he served as President and Chief Executive Officer of Bay
Area Cellular Telephone Company, a provider of cellular service in the San
Francisco Bay Area, and from November 1987 to May 1990, as Vice President of
Corporate Development for PacTel Cellular, a telecommunications company.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
WILLIAM D. SAVOY
William D. Savoy, 33, has served as a director of the Company since January
1998. Mr. Savoy has served as the President of Vulcan Northwest, Inc. since
January 1990. Mr. Savoy is a director of c/net, Inc., Harbinger Corporation,
Telescan, Inc., U.S. Satellite Broadcasting, Inc., Ticketmaster Group, Inc. and
USA Network, Inc.
DAVID E. LIDDLE
David E. Liddle, Ph.D., 53, has served as a director of the Company since
January 1998. Dr. Liddle served as Chief Executive Officer of Interval Research
Corporation, a research and development company affiliated with Vulcan, since
March 1992.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1997 the Board of Directors held
eight meetings. The Board has an Audit Committee, a Compensation Committee and a
Non-Officer Stock Option Administration Committee. The Board does not have a
nominating committee or any committee that functions as a nominating committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements, recommends to the Board the independent
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auditors to be retained, and receives and considers the accountants' comments as
to controls, adequacy of staff and management performance and procedures in
connection with audit and financial controls. During fiscal 1997, the Audit
Committee was composed of two non-employee directors: Messrs. Jaschke and George
Levert, a former director. It met once during such fiscal year. The Audit
Committee is currently composed of two non-employee directors: Messrs. Jaschke
and Savoy.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plans and otherwise determines compensation levels
and performs such other functions regarding compensation as the Board may
delegate. During fiscal 1997, the Compensation Committee was composed of two
non-employee directors: Messrs. Cline and Cornelius C. Bond, Jr., a former
director. It met four times during such fiscal year. The Compensation Committee
is currently composed of two non-employee directors: Messrs. Cline and Liddle.
The Non-Officer Stock Option Administration Committee administers the
Company's stock option plans for non-officer employees only and makes stock
option grants to such employees not in excess of 25,000 shares. All option
grants in excess of this limit and all option grants to officers must be
approved by the Compensation Committee. The Non-Officer Stock Option
Administration Committee is composed of Mr. Dilworth, who is the Chief Executive
Officer and Chairman of the Board of Directors of the Company.
During the fiscal year ended December 31, 1997, each Board member attended
75% or more of the aggregate of the meetings of the Board and of the committees
on which he served, held during the period for which he was a director or
committee member, respectively.
PROPOSAL 2
APPROVAL OF 1997 EQUITY INCENTIVE PLAN, AS AMENDED
The Company's 1997 Equity Incentive Plan (the "Incentive Plan") was adopted
by the Board of Directors in March 1997 and approved by the stockholders in May
1997. As of March 31, 1998, there were 675,000 shares reserved for issuance
under the Incentive Plan.
As of March 31, 1998, options (net of cancelled or expired options)
covering an aggregate of 237,500 shares had been granted under the Incentive
Plan and only 437,500 shares (plus any shares that might in the future be
returned to the Incentive Plan as a result of cancellations or expiration of
options) remained available for future grant under the Plan. In April 1998, the
Board approved an amendment to the Incentive Plan, subject to stockholder
approval, to increase the number of shares authorized for issuance under the
Incentive Plan from 675,000 shares to 1,075,000 shares. This amendment is
intended to afford the Company greater flexibility in providing employees with
stock incentives and ensures that the Company can continue to provide such
incentives at levels determined appropriate by the Board.
Stockholders are requested in this Proposal 2 to approve the Incentive
Plan, as amended.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2
The essential features of the Incentive Plan, as amended, are outlined
below:
GENERAL
The Incentive Plan provides for the grant or issuance of incentive stock
options, nonstatutory stock options, restricted stock purchase awards and stock
bonuses (collectively, "Stock Awards") to employees, directors and consultants.
Incentive stock options granted under the Incentive Plan are intended to qualify
as "incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). Nonstatutory stock options
granted under the Incentive 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 the various awards included in the Incentive Plan.
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PURPOSE
The Incentive Plan provides a means by which selected employees and
directors of and consultants to the Company, and its affiliates, may be given an
opportunity to purchase Common Stock of the Company. The Company, by means of
the Incentive Plan, seeks to retain the services of persons who are now
employees or directors of or consultants to the Company or its affiliates, to
secure and retain the services of new employees, directors and consultants, and
to provide incentives for such persons to exert maximum efforts for the success
of the Company and its affiliates. Approximately 80% of the Company's
approximately 260 employees are eligible to participate in the Incentive Plan.
ADMINISTRATION
The Incentive Plan is administered by the Board unless and until the Board
delegates administration to a committee composed of one or more Board members,
all of the members of which committee may be non-employee directors (as defined
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) and
may also be, in the discretion of the Board, outside directors (as defined under
the Code). If administration is delegated to a committee, such committee will
have, in connection with the administration of the Incentive Plan, the powers
possessed by the Board, subject, however, to such resolutions, not inconsistent
with the provisions of the Incentive Plan, as may be adopted from time to time
by the Board. The Board or the committee may delegate to a subcommittee of one
or more members of the Board the authority to grant Stock Awards to eligible
persons who are not then subject to Section 16 of the Exchange Act and/or who
are either (a) not then employees covered by Section 162(m) of the Code and are
not expected to be covered by Section 162(m) of the Code at the time of
recognition of income resulting from such Stock Award or (b) not persons with
respect to whom the Company wishes to avoid the application of Section 162(m) of
the Code. The Board may abolish a committee or subcommittee at any time and
revest in the Board the administration of the Incentive Plan. The Board has
delegated the administration of the Incentive Plan to the Compensation Committee
and, to a limited extent, the Non-Officer Stock Option Administration Committee.
See "Proposal 1 -- Election of Directors -- Board Committees and Meetings." As
used herein, with respect to the Incentive 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 Board has the power to determine from time to time which of the persons
eligible under the Incentive Plan will be granted awards, the type of awards to
be granted, when and how each award will be granted, to construe and interpret
the Incentive Plan and awards granted under it, and to establish, amend and
revoke rules and regulations for its administration. The Board may correct any
defect in the Incentive Plan or in any award agreement to make the Incentive
Plan fully effective.
SHARES SUBJECT TO THE PLAN
The Common Stock that may be issued pursuant to awards under the Incentive
Plan may not exceed in the aggregate 1,075,000 shares of the Company's Common
Stock. If any award expires or terminates, in whole or in part, without having
been exercised in full, the stock not purchased under such award will revert to
and again become available for issuance under the Incentive Plan. The Common
Stock subject to the Incentive Plan may be unissued shares or reacquired shares,
bought on the market or otherwise.
ELIGIBILITY
Incentive stock options may be granted only to employees. Nonstatutory
stock options, restricted stock purchase awards and stock bonuses may be granted
only to employees, directors or consultants.
No person is eligible for the grant of an incentive stock option if, at the
time of grant, such person owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company unless the exercise
price of such option is at least 110% of the fair market value of such Common
Stock subject to the option at the date of grant and the option is not
exercisable after the expiration of five years from the date of grant, or in the
case of a restricted stock purchase award, the purchase price is at least 100%
of the
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fair market value of Common Stock subject to the award at date of grant. No
person is eligible to be granted Stock Awards covering more than 400,000 shares
of the Company's Common Stock in any calendar year.
TERM AND TERMINATION
No option is exercisable after the expiration of ten years from the date it
was granted.
In the event an optionee's continuous status as an employee, director or
consultant is terminated, the optionee may exercise his or her option (to the
extent that the optionee was entitled to exercise it at the time of termination)
but only before the earlier of (a) the date three months after the termination
of the optionee's continuous status as an employee, director or consultant and
(b) the expiration of the term of the option as set forth in the option
agreement.
An optionee's option agreement may also provide that if the exercise of the
option following the termination of the optionee's continuous status as an
employee, director, or consultant would result in liability under Section 16(b)
of the Exchange Act, then the option will terminate on the earlier of (a) the
expiration of the term of the option set forth in the option agreement and (b)
the tenth day after the last date on which such exercise would result in such
liability under Section 16(b) of the Exchange Act. Finally, an optionee's option
agreement may also provide that if the exercise of the option following the
termination of the optionee's continuous status as an employee, director or
consultant would be prohibited at any time solely because the issuance of shares
would violate the registration requirements under the Securities Act of 1933, as
amended (the "Securities Act") then the option will terminate on the earlier of
(a) the expiration of the term of the option as set forth in the immediately
preceding paragraph and (b) the expiration of a period of three months after the
termination of the optionee's continuous status as an employee, director or
consultant during which the exercise of the option would not be in violation of
such registration requirements.
In the event an optionee's continuous status as an employee, director or
consultant terminates as a result of the optionee's death or disability, the
optionee (or such optionee's estate, heirs or beneficiaries) may exercise his or
her option, but only within the period ending on the earlier of (a) 12 months
following such termination (or such longer or shorter period as specified in the
option agreement) and (b) the expiration of the term of the option as set forth
in the option agreement.
In the event a stock bonus or restricted stock recipient's continuous
status as an employee, director or consultant terminates, the Company may
repurchase or otherwise reacquire any or all of the shares of stock held by that
person that have not vested as of the date of termination under the terms of the
stock bonus or restricted stock purchase agreement between the Company and such
person.
EXERCISE/PURCHASE PRICE
The exercise price of each incentive stock option will not be less than
100% of the fair market value of the Company's Common Stock on the date of
grant. The exercise price of each nonstatutory stock option will not be less
than 85% of the fair market value on the date of grant. The purchase price of
restricted stock will not be less than 85% of the fair market value of the
Company's Common Stock on the date such award is made. Stock bonuses may be
awarded in consideration for past services actually rendered to the Company or
for its benefit. At March 31, 1998, the closing price of the Company's Common
Stock as reported on the Nasdaq National Market was $9.875 per share.
CONSIDERATION
The purchase price of stock acquired pursuant to a Stock Award is paid
either in cash at the time of exercise or purchase, or (if determined by the
Board at the time of grant for an option) by deferred payment or other
arrangement or in any other form of legal consideration that may be acceptable
to the Board. Additionally, in the case of an option and in the discretion of
the Board at the time of the grant of an option, by delivery to the Company of
other Common Stock of the Company. In the case of any deferred payment
arrangement, interest will be payable at least annually and will be charged at
the minimum rate of interest necessary to avoid the treatment as interest of
amounts that are not stated to be interest.
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TRANSFERABILITY
An incentive stock option is not transferable except by will or by the laws
of descent and distribution, and is exercisable during the lifetime of the
person to whom the incentive stock option is granted only by such person. A
stock bonus or restricted stock award is not transferable except by will or by
the laws of descent and distribution or pursuant to a domestic relations order.
A nonstatutory stock option is transferable only to the extent specifically
provided for in the option agreement evidencing the nonstatutory stock option,
provided that if the nonstatutory stock option agreement does not provide for
transferability, then the option is not transferable except by will or by the
laws of descent and distribution or pursuant to a domestic relations order. An
award holder may designate a beneficiary who may exercise his or her award after
death.
VESTING
The total number of shares of stock subject to an option may, but need not,
be allotted in periodic installments. The option agreement may provide that from
time to time during each of such installment periods, the option may become
exercisable ("vest") with respect to some or all of the shares allotted to that
period, and may be exercised with respect to some or all of the shares allotted
to such period or any prior period as to which the option became vested but was
not fully exercised. The option agreement may also provide that an optionee may
exercise an option prior to full vesting, provided that the Company may have a
repurchase right with respect to any unvested shares.
Restricted stock purchase awards and stock bonuses granted under the
Incentive Plan may be granted pursuant to a repurchase option in favor of the
Company in accordance with a vesting schedule determined by the Board.
ADJUSTMENTS UPON CHANGES IN STOCK
If any change is made in the Common Stock subject to the Incentive Plan, or
subject to any Stock Award, without receipt of consideration by the Company
(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 class(es) and maximum number of shares subject to
the Incentive Plan, the maximum annual award applicable under the Incentive Plan
and the class(es) and number of shares and price per share of stock subject to
outstanding Stock Awards will be appropriately adjusted.
In the event of a merger, consolidation, liquidation, dissolution or the
sale of substantially all of the Company's assets or 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, any surviving corporation will assume any Stock Awards outstanding
under the Incentive Plan or will substitute similar awards for those outstanding
under the Incentive Plan or such Stock Awards will continue in full force and
effect. In the event a surviving corporation refuses to assume such Stock Awards
or substitute similar awards, then, with respect to stock awards held by persons
then performing services as employees, directors or consultants, the time during
which such Stock Awards may be exercised will be accelerated prior to completion
of such transaction and such Stock Awards terminated if not exercised prior to
such transaction. In addition, with respect to any person who was providing
services as an employee, director or consultant immediately prior to such
transaction, the time during which Stock Awards may be exercised will be
accelerated and any repurchase right of the Company with respect to such Stock
Awards will lapse if such person is terminated without cause within 12 months of
such transaction. The acceleration of a Stock Award 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.
AMENDMENT OF THE INCENTIVE PLAN
The Board at any time, and from time to time, may amend the Incentive Plan.
However, no amendment will be effective unless approved by the stockholders of
the Company within 12 months before or after the
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adoption of the amendment, where the amendment will increase the number of
shares reserved for issuance under the Incentive Plan, modify the requirements
as to eligibility for participation or in any other way if such modification
requires stockholder approval in order for the Incentive Plan to satisfy the
requirements of Section 422 of the Code or to comply with the requirements of
Rule 16b-3 of the Exchange Act. The Board may in its sole discretion submit any
other amendment to the Incentive Plan for stockholder approval.
TERMINATION OR SUSPENSION OF THE INCENTIVE PLAN
The Board may suspend or terminate the Incentive Plan at any time. Unless
sooner terminated, the Incentive Plan will terminate in March 2007. No Stock
Awards may be granted under the Incentive Plan while the Incentive Plan is
suspended or after it is terminated.
FEDERAL INCOME TAX INFORMATION
Incentive Stock Options. Incentive stock options under the Incentive 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 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 and (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, mid-term or short-term depending on how long the
optionee has held the stock. Capital gains currently are generally subject to
lower tax rates than ordinary income. Slightly different rules may apply to
optionees who acquire stock subject to certain repurchase options or who are
subject to Section 16(b) of the Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, Code Section 162(m) 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 generally have the
following federal income tax consequences:
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. With respect to employees, the Company is generally
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Generally, 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
short-term, mid-term or long-term depending on how long the stock was held.
Slightly different rules may apply to optionees who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Exchange
Act.
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<PAGE> 11
Restricted Stock Purchase Awards and Stock Bonuses. Restricted stock
purchase awards and stock bonuses granted under the Incentive Plan generally
have the following federal income tax consequences:
Upon acquisition of the stock, the recipient normally will recognize
taxable ordinary income equal to the excess of the stock's fair market value
over the purchase price, if any. However, to the extent the stock is subject to
certain types of vesting restrictions, the taxable event will be delayed until
the vesting restrictions lapse unless the recipient elects to be taxed on
receipt of the stock. With respect to employees, the Company is generally
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. 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 acquisition (or vesting) of the stock. Such gain or loss will be
long-term, mid-term or short-term depending on how long the stock was held.
Slightly different rules may 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. Section 162(m) of the Code
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
million for a covered employee. It is possible that compensation attributable to
awards granted in the future under the Incentive Plan, 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.
Compensation attributable to restricted stock will qualify as
performance-based compensation, provided that: (i) the award is granted by a
compensation committee comprised solely of "outside directors;" and (ii) the
purchase price of the award is no less than the fair market value of the stock
on the date of grant. Stock bonuses qualify as performance-based compensation
under the Treasury regulations only if: (i) the award is granted by a
compensation committee comprised solely of "outside directors;" (ii) the award
is granted (or exercisable) only upon the achievement of an objective
performance goal established in writing by the compensation committee while the
outcome is substantially uncertain; (iii) the compensation committee certifies
in writing prior to the granting (or exercisability) of the award that the
performance goal has been satisfied and (iv) prior to the granting (or
exercisability of the award, stockholders have approved the material terms of
the award (including the class of employees eligible for such award, the
business criteria on which the performance goal is based, and the maximum amount
(or formula used to calculate the amount) payable upon attainment of the
performance goal).
PROPOSAL 3
APPROVAL OF 1991 EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
In November 1991, the Board of Directors adopted the 1991 Employee Stock
Purchase Plan (the "Purchase Plan") authorizing the issuance of 300,000 shares
of the Company's Common Stock. The Board of Directors subsequently amended the
Purchase Plan to increase the number of shares authorized for issuance
thereunder to an aggregate of 350,000 shares. The stockholders of the Company
approved the adoption and
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<PAGE> 12
the amendments to the Purchase Plan in November 1991 and April 1996,
respectively. At March 31, 1998, an aggregate of 293,882 shares had been issued
under the Purchase Plan and only 56,118 shares remained for the grant of future
rights under the Plan. In April 1998, the Board of Directors adopted an
amendment to the Purchase Plan to increase the number of shares authorized for
issuance under the Purchase Plan to 550,000 shares. This amendment is intended
to afford the Company greater flexibility in providing employees with stock
incentives and ensures that the Company can continue to provide such incentives
at levels determined appropriate by the Board. During the last fiscal year,
shares were purchased by the executive officers and other employees of the
Company in the amounts and at the weighted average prices per share under the
Purchase Plan as follows: Robert P. Dilworth, 0 shares; Donald F. Wood, 3,403
shares ($4.7813); Gary M. Green, 3,619 shares ($6.9074); William D. Swain, 3,491
shares ($6.7607); Vanessa A. Wittman, 0 shares; all current executive officers
as a group, 10,513 shares ($6.1705); and all employees (excluding executive
officers) as a group, 92,542 shares ($6.9574).
Stockholders are requested in this Proposal 3 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 parent or subsidiary of the Company designated
by the Board of Directors to participate in the Purchase Plan) may be given an
opportunity to purchase Common Stock of the Company through payroll deductions,
to assist the Company in retaining the services of its employees, to secure and
retain the services of new employees, and to provide incentives for such persons
to exert maximum efforts for the success of the Company. Approximately 80% of
the Company's approximately 260 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 of Directors, 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
10
<PAGE> 13
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
(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 salary 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" below.
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.
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<PAGE> 14
An employee's withdrawal from an offering will not have any effect upon such
employee's eligibility to participate in subsequent offerings under the Purchase
Plan.
TERMINATION OF EMPLOYMENT
Rights granted pursuant to any offering under the Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason, and the
Company will distribute to such employee all of his or her accumulated payroll
deductions, without interest.
RESTRICTIONS ON TRANSFER
Rights granted under the Purchase Plan are not transferable and may be
exercised only by the person to whom such rights are granted.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Purchase Plan at any time. Unless
terminated earlier, such plan will terminate 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 reserved for issuance under the Purchase Plan or (b) modify the
requirements relating to eligibility for participation in the Purchase Plan.
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 and (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 mid-term or long-term capital gain or loss depending on how long the stock
has been held. Such capital gains currently are generally subject to lower tax
rates than ordinary income.
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<PAGE> 15
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, then the excess of the fair market value of the
stock on the exercise date over the exercise price will be treated as ordinary
income at the time of such disposition. The balance of any gain will be treated
as capital gain. Even if the stock is later disposed of for less than its fair
market value on the exercise date, the same amount of ordinary income is
attributed to the participant, and a capital loss is recognized equal to the
difference between the sales price and the fair market value of the stock on
such exercise date. Any capital gain or loss will be short-term, mid-term or
long-term depending on how long the stock has been held.
There are no federal income tax consequences to the Company by reason of
the grant or exercise of rights under the Purchase Plan. The Company is entitled
to a deduction to the extent amounts are taxed as ordinary income to a
participant (subject to the requirement of reasonableness, the provisions of
Section 162(m) of the Code and the satisfaction of a tax reporting obligation).
PROPOSAL 4
APPROVAL OF 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. In June 1996, the Board adopted, and the stockholders subsequently
approved, 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.
As of March 31, 1998, options covering an aggregate of 238,000 shares of
the Company's Common Stock had been granted under the Directors' Plan, of which
options to purchase 224,000 shares were outstanding, with exercise prices
ranging from $6.1875 to $23.37. As of March 31, 1998, a total of 14,000 shares
had been exercised under the Directors' Plan and 62,000 shares remained
available for future grants under the Directors' Plan. In April 1998, the Board
of Directors adopted an amendment to the Directors' Plan to increase the number
of shares authorized for issuance under such plan to 375,000 shares. This
amendment is intended to allow the Company to continue to attract and retain
qualified non-employee directors.
Stockholders are requested in this Proposal 4 to approve the Directors'
Plan, as amended.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 4
The essential features of the Directors' Plan, as amended, 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.
PURPOSE
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
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<PAGE> 16
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.
SHARES SUBJECT TO THE PLAN
The Common Stock that may be issued pursuant to options granted under the
Directors' Plan may not exceed in the aggregate 375,000 shares of Common Stock.
If any option expires or terminates, in whole or in part, without having been
exercised in full, the stock not purchased under such option will revert to and
again become available for issuance under the Directors' Plan. The Common Stock
subject to the Directors' Plan may be unissued shares or reacquired shares,
bought on the market or otherwise.
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. Five of the Company's
seven current directors (all except Messrs. Dreisbach and Dilworth) 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 that the Board of Directors approved the
Directors' Plan, each non-employee director on such date received an option to
purchase 7,000 shares of the Company's Common Stock. Each non-employee director
joining the Board of Directors after such date receives a similar option upon
such person's date of initial election to the Board of Directors. In addition,
each non-employee director on January 1 of each year (provided such person has
been a non-employee director for at least three months on such date) receives an
addition option to purchase 7,000 shares of Common Stock.
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, advisory board member, employee or consultant of the Company.
Exercise Price; Payment. The exercise price of options granted under the
Directors' Plan is equal to 100% of the fair market value of the Common Stock
subject to such options on the date of grant. 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.
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<PAGE> 17
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
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 short-, mid- or long-term capital gain or loss treatment depending
on how long the shares have been held.
PROPOSAL 5
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Arthur Andersen LLP
has audited the Company's financial statements since its inception in 1988.
Representatives of Arthur Andersen LLP are expected to be present at the Annual
Meeting, will have an opportunity to make a statement if they so desire and will
be available to respond to appropriate questions.
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<PAGE> 18
Stockholder ratification of the selection of Arthur Andersen LLP as the
Company's independent auditors is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of Arthur Andersen LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee and the Board in their discretion may direct the
appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 5
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 March 31, 1998 by: (a) each current director
and nominee for director; (b) each of the executive officers named in the
Summary Compensation Table under the caption "Executive Compensation" below
(including one former executive officer); (c) all current 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 Common Stock.
<TABLE>
<CAPTION>
OWNERSHIP(1)
------------------------------------
NAME NUMBER OF SHARES PERCENT OF TOTAL
---- ---------------- ----------------
<S> <C> <C>
Vulcan Ventures Incorporated(2)....................... 9,121,745 49.3%
110-110th Avenue NE, Suite 550
Bellevue, WA 98004
Lindner Investments(3)................................ 1,546,390 8.4%
7711 Carondelet Avenue
P.O. Box 16900
St. Louis, MO 63105
Robert S. Cline(4).................................... 45,999 *
Ralph Derrickson...................................... -- --
Robert P. Dilworth(4)................................. 187,073 1.0%
Timothy A. Dreisbach.................................. -- --
Gary M. Green(4)...................................... 160,133 *
Justin L. Jaschke(4).................................. 23,916 *
David E. Liddle....................................... -- --
William D. Savoy(2)................................... 9,121,745 49.3%
William D. Swain(4)................................... 51,530 *
Vanessa A. Wittman(4)................................. 25,750 *
Donald F. Wood(5)..................................... 55,144 *
Directors and current executive officers as a group (9
persons)(4)(5)(6)................................... 9,671,290 51.1%
</TABLE>
- ---------------
* Less than one percent.
(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 18,507,702 shares
outstanding on March 31, 1998 adjusted in accordance with the rules
promulgated by the SEC.
(2) Based on a Schedule 13D filed with the SEC on October 28, 1993 and most
recently amended on January 30, 1998. Includes 25,000 shares held by Paul
Allen, the sole stockholder of Vulcan. Mr. Savoy is an affiliate of Vulcan.
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<PAGE> 19
(3) Based on a Schedule 13D filed with the SEC on December 26, 1996 and most
recently amended on October 12, 1997 and a Schedule 13G Amendment filed on
August 28, 1996. Includes 1,546,390 shares of Common Stock issuable upon
conversion of 8% Convertible Notes due 2003. Ryback Management Corporation
has sole voting and dispositive power over the shares held by Lindner
Investments. Ryback Management Corporation disclaims beneficial ownership of
the shares in which it has no pecuniary interest.
(4) Includes 45,999, 141,250, 130,250, 23,416, 50,098 and 18,750 shares of
Common Stock subject to options exercisable within 60 days of the date of
this table held by Messrs. Cline, Dilworth, Green, Jaschke and Swain and Ms.
Wittman, respectively.
(5) Mr. Wood left the Company in January 1998. Includes 50,000 shares of Common
Stock subject to options exercisable within 60 days of the date of this
table.
(6) Includes shares held by entities affiliated with certain officers and
directors as described in the footnotes above.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), requires the Company's directors and executive officers, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file with the SEC initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than ten percent stockholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each non-employee director of the Company 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). In the fiscal year ended December 31, 1997, the
total compensation paid to non-employee directors was $78,500. The members of
the Board of Directors are also eligible for reimbursement for their expenses
incurred in connection with attendance at Board of Directors and Committee
meetings in accordance with Company policy. Each non-employee director of the
Company also receives stock option grants under the Directors' Plan.
During the last fiscal year, the Company granted options covering 42,000
shares to each non-employee director of the Company at an exercise price per
share of $14.5625. The fair market value of such Common Stock on the date of
grant was $14.5625 (based on the closing sale price reported on the Nasdaq
National Market for the date of grant). As of March 31, 1998, options to
purchase 14,000 shares of 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 the fiscal years ended December 31, 1997,
1996 and 1995 compensation awarded or paid to, or earned by, the Chief Executive
Officer, each of the other current executive officers of the Company and one
former executive officer who left the Company in January 1998 (the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
SHARES OF
COMMON
STOCK
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) OPTIONS(2) COMPENSATION(3)
--------------------------- ---- -------- --------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Robert P. Dilworth(4)................ 1997 $305,000 $228,750 330,000 $ 6,400
Chief Executive Officer 1996 $281,960 $305,000 255,000 $12,396
1995 $255,766 $137,500 20,000 $ 7,375
Donald F. Wood(4).................... 1997 $223,748 $141,000 362,000 $ 2,357
President 1996 $179,846 $ 98,000 37,000 $ 1,118
1995 $167,313 $ 45,000 12,000 $ 1,989
Gary M. Green........................ 1997 $206,774 $ 81,000 121,000 $ 6,472
Executive Vice President 1996 $193,232 $ 72,000 86,000 $36,157
and Chief Operating Officer 1995 $182,310 $ 58,200 12,000 $34,053
William D. Swain..................... 1997 $155,695 $ 48,900 95,000 $ 5,050
Vice President, 1996 $145,424 $ 61,400 65,000 $ 4,789
Administration and Secretary 1995 $136,840 $ 22,500 10,000 $ 3,241
Vanessa A. Wittman(4)................ 1997 $ 94,058 $ 26,500 75,000 $ 1,258
Chief Financial Officer
</TABLE>
- ---------------
(1) For fiscal 1997 and 1996, includes amounts earned but deferred at the
election of the Named Executive Officer under the Company's Non-Qualified
Deferred Compensation Plan. Also for fiscal 1997 and 1996, includes shares
of stock issued in connection with the Company's year-end bonuses paid in
cash and stock. Each of the Named Executive Officers deferred the amount of
the bonus received in stock. In fiscal 1996, Messrs. Dilworth, Wood, Green
and Swain, respectively, received $101,668, $32,675, $34,003 and $20,475 in
stock, based on a per share value of $12.1875, the fair market value of the
Company's Common Stock on the date bonuses were paid (based on the average
of the previous day's high and low sales price reported in the Nasdaq
National Market). In fiscal 1997, Messrs. Dilworth, Wood, Green and Swain
and Ms. Wittman, respectively, received $76,258, $47,003, $27,003, $16,301
and $8,835 in stock, based on a per share value of $11.3125, the fair market
value of the Company's Common Stock on the date bonuses were paid (based on
the average of the previous day's high and low sales price reported in the
Nasdaq National Market).
(2) Includes repriced options. In January 1996, the Board approved the
replacement of each outstanding stock option with a per share exercise price
of $14.00 or greater, upon the timely request of the optionee, with a
nonstatutory stock option having an exercise price of $13.125 per share and
certain extended vesting terms. Amounts for fiscal 1996 include 205,000,
12,000, 61,000 and 45,000 shares subject to repriced options for Messrs.
Dilworth, Wood, Green and Swain, respectively. In September 1997, the Board
approved the replacement of each outstanding option held by an executive
officer with a per share exercise price of $11.00 per share or greater, upon
the timely request of the optionee, with a nonstatutory stock option having
an exercise price of $6.75 per share and certain delayed exercise
provisions. Amounts for fiscal 1997 include 225,000, 162,000, 86,000, and
65,000 shares subject to repriced options for Messrs. Dilworth, Wood, Green
and Swain, respectively. See "Option Repricing Information."
(3) Includes the Company's matching payment of $1,000 for each executive officer
under its 401(k) plan. For fiscal 1995, includes payments for term life
insurance in the amounts of $3,456, $989, $3,053 and
18
<PAGE> 21
$2,241 for Messrs. Dilworth, Wood, Green and Swain, respectively, loan
principal forgiveness in the amount of $30,000 for Mr. Green and an
automobile allowance of $5,996 for Mr. Dilworth. For fiscal 1996, includes
payments for term life insurance in the amounts of $5,400, $1,117, $5,157
and $3,789 for Messrs. Dilworth, Wood, Green and Swain, respectively, loan
principal forgiveness in the amount of $30,000 for Mr. Green and an
automobile allowance of $5,996 for Mr. Dilworth. For fiscal 1997, includes
payments for term life insurance in the amounts of $5,400, $1,357, $5,472,
$4,050 and $258 for Messrs. Dilworth, Wood, Green and Swain and Ms. Wittman,
respectively.
(4) Timothy A. Dreisbach became President and Chief Executive Officer in May
1998. Mr. Wood left the Company in January 1998. Ms. Wittman joined the
Company in May 1997.
COMPENSATION PURSUANT TO PLANS
The following tables show for the fiscal year ended December 31, 1997,
certain information regarding options granted to, exercised by and held at
year-end by the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE VALUE AT
SHARES OF OPTIONS ASSUMED ANNUAL RATES OF
COMMON STOCK GRANTED TO STOCK PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(1)
OPTIONS IN FISCAL PRICE PER EXPIRATION ------------------------------
NAME GRANTED(2)(3) YEAR(4) SHARE(3) DATE 5% 10%
---- ------------- ---------- --------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Dilworth......... 75,000 2.3% 6.3125 04/30/07 $297,742 $ 754,537
50,000 1.6% 6.7500 04/23/06 $186,037 $ 458,307
20,000 0.6% 6.7500 05/15/05 $ 64,456 $ 154,384
25,000 0.8% 6.7500 05/09/04 $ 68,698 $ 160,096
160,000 5.0% 6.7500 10/17/03 $367,303 $ 833,286
Mr. Wood............. 200,000 6.8% 6.3125 04/30/07 $793,979 $2,012,100
25,000 0.8% 6.7500 04/23/06 $ 93,037 $ 229,154
12,000 0.3% 6.7500 05/15/05 $ 38,674 $ 92,631
125,000 8.9% 6.7500 11/08/04 $343,491 $ 800,480
Mr. Green............ 35,000 1.1% 6.3125 04/30/07 $138,496 $ 352,117
25,000 0.8% 6.7500 04/23/06 $ 93,037 $ 229,154
12,000 0.3% 6.7500 05/15/05 $ 38,674 $ 92,631
14,000 0.4% 6.7500 05/09/04 $ 38,471 $ 89,654
35,000 1.1% 6.7500 10/17/03 $ 80,348 $ 182,281
Mr. Swain............ 30,000 0.9% 6.3125 04/30/07 $119,097 $ 301,815
20,000 0.6% 6.7500 04/23/06 $ 74,429 $ 183,323
10,000 0.3% 6.7500 05/15/05 $ 32,228 $ 77,192
10,000 0.3% 6.7500 05/09/04 $ 27,479 $ 64,038
25,000 0.8% 6.7500 10/17/03 $ 57,391 $ 130,201
Ms. Wittman.......... 75,000 2.3% 6.3750 05/04/07 $300,690 $ 762,008
</TABLE>
- ---------------
(1) For new grants, the potential realizable value is calculated based on the
term of the option at its time of grant (ten years). For repriced options it
is based on the length of the original term remaining at the time of
repricing. See "Option Repricing Information." Potential realizable value 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
(2) In September 1997, the Board approved the replacement of each outstanding
stock option held by an executive officer with a per-share exercise price of
$11.00 or greater, upon the timely request of the optionee, with a
nonstatutory stock option having an exercise price of $6.75 per share and
certain delayed exercise terms. All options listed above with an exercise
price of $6.75 per share are "repriced" options. See "Option Repricing
Information."
(3) Options granted under the Company's employee stock option plans typically
vest 25% after one year and approximately two percent per month thereafter,
such that the options are fully vested in four years.
(4) Based on options covering a total of 3,201,650 shares of Common Stock
granted to employees and options covering 1,991,650 shares of Common Stock
issued to employees in option repricings in fiscal 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK UNDERLYING VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES OF COMMON FISCAL YEAR-END(1) FISCAL YEAR-END(1)(2)
STOCK ACQUIRED --------------------------- ---------------------------
NAME ON EXERCISE VALUE REALIZED(3) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------------- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Dilworth......... -- -- 122,500 330,000 $486,412 $ 877,612
Mr. Wood............. -- -- -- 362,000 -- $1,014,220
Mr. Green............ 25,000 $71,875 121,500 121,000 $679,165 $ 325,072
Mr. Swain............ -- -- 10,000 95,000 $ 31,225 $ 415,706
Ms. Wittman.......... -- -- -- 75,000 -- $ 220,125
</TABLE>
- ---------------
(1) Includes repriced options. See "Option Repricing Information."
(2) Value is based on the fair market value of the Company's Common Stock at
December 31, 1997 of $9.31 (based on the average sale price reported on the
Nasdaq National Market on such date) minus the exercise price of the option.
(3) Value realized is based on the fair market value of the Company's Common
Stock on the date of exercise (the closing sale 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.
CHANGE IN CONTROL ARRANGEMENTS
KEY EMPLOYEE SEVERANCE PLAN
In October 1997, in light of the transactions then being negotiated with
Vulcan, the Compensation Committee of the Board adopted the Company's Key
Employee Severance Plan (the "Severance Plan"). An employee is eligible to
participate in the Severance Plan if (a) such employee is notified in writing
that he or she is eligible to participate in the Severance Plan and (b) such
employee's employment with the Company is terminated due to an involuntary
termination or a constructive termination (generally, a voluntary termination
following an adverse change in the employee's position, circumstances or
compensation) within 12 months following a Designated Event (other than for
cause). Such 12-month period may be extended to 18 months for executive officers
who are so notified in writing. Approximately 32 key employees of the Company,
including the Named Executive Officers, have been notified of their eligibility
to participate in the Severance Plan. "Designated Event" means any transaction
or series of transactions having a significant effect on the ability of any
person or group to direct or cause the direction of the Company's management and
policies that is specifically declared by the Board to be a Designated Event.
The Board has determined the sale of Common Stock to Vulcan in January 1998.
The benefits provided by the Severance Plan are, subject to certain
limitations: (a) continuation of salary for 12 months following termination of
employment; (b) payment of any bonus to which the employee would have been
entitled under the Company's incentive bonus plan for the 12 months following
termination of employment, assuming such employee's full employment with the
Company during such 12-month period and
20
<PAGE> 23
the achievement of certain incentive targets by the Company and the employee;
(c) continuation of health, life and other insurance benefits for the employee
(and any dependents covered as of the date of termination) for 12 months
following the termination of employment (or five years, if the employee is age
55 or older upon termination of employment, subject to earlier termination if
the employee and his or her dependents become covered by another group insurance
plan providing similar benefits; and (d) amendment of all stock options held by
such employee upon termination of employment so that (i) such options become
vested for an additional 12 months on the date of termination and (ii) the
employee may exercise such options for 12 months following termination of
employment. To receive the benefits provided by the Severance Plan, an eligible
employee must execute a release of claims in favor of the Company, and such
release must become effective in accordance with its terms.
KEY EMPLOYEE RETENTION INCENTIVE PLAN
In October 1997, the Compensation Committee of the Board also adopted the
Company's Key Employee Retention Incentive Plan (the "Retention Plan").
Approximately 32 employees of the Company, including the Named Executive
Officers, have been notified of their eligibility to participate in the
Retention Plan.
The Retention Plan provides the following benefits: (a) if an eligible
employee is employed by the Company on the date that is six months after the
Designated Event (as defined above), such employee will receive a lump sum
payment equal to 50% of the Bonus Amount (as defined below); and (b) if the
employee is also employed by the Company on the date that is 12 months after the
Designated Event, such employee will receive a lump sum payment for the
remaining 50% of the Bonus Amount.
For purposes of the Retention Plan, Bonus Amount means the bonus to which
an eligible employee would be entitled under the Company's incentive bonus plan
if (a) the Company's incentive bonus plan for the 12 months following a
Designated Event were the same as during the full year most recently completed
prior to the Designated Event; (b) the eligible employee were to remain
continuously employed by the Company for 12 months following the Designated
Event and to the bonus payment date in the same capacity in which such employee
was employed on the date of the Designated Event; and (c) the employee and the
Company were to achieve 100% of any objectives affecting individual bonus
amounts under such incentive bonus plan.
ACCELERATION OF VESTING UNDER STOCK OPTION PLANS
The Company currently maintains three stock option plans for the benefit of
employees and consultants of the Company: the 1988 Stock Option Plan; the 1997
Equity Incentive Plan; and the 1997 Non-Officer Equity Incentive Plan. Options
to purchase approximately 2,852,140, 350,000 and 479,050 shares of Common Stock,
respectively, were outstanding under such plans as of March 31, 1998. The Equity
Incentive Plan and the 1997 Non-Officer Equity Incentive Plan provide that, in
the event an optionee is terminated other than for cause within 12 months after
a Change in Control (as defined in such plans), the options held by such
optionee under such plans will become fully vested. In addition, repriced
options issued by the Company in 1997 under the 1988 Stock Option Plan provide
the same acceleration of vesting benefits.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company applies a consistent philosophy to compensation for all
employees, including senior management. It is based on the premise that
achievements of the Company result from the coordinated efforts of all
individuals working toward common objectives focused on meeting customer and
stockholder expectations.
The goals of the Company's compensation program are to align compensation
with business objectives and performance while enabling the Company to attract,
retain and reward employees who contribute to the long-term success of the
Company. In all cases, attention is given to fairness in the administration of
compensation and to assuring that all employees understand the related
performance evaluation and administrative process.
21
<PAGE> 24
The Company's compensation program for executive officers is based on the
principles described above and it is administered by the Compensation Committee.
For fiscal 1997, the Compensation Committee was composed of Mr. Robert S. Cline,
who is Chairman of the Committee, and Mr. Cornelius C. Bond, Jr., both
non-employee directors of the Company. In January 1998, Mr. Bond ceased to be a
member of such committee. In April 1998, David Liddle, a non-employee director,
joined the Compensation Committee. There were no interlocking or other type of
relationships affecting the independence of the committee members during fiscal
1997.
The Company's executive compensation is intended to be consistent with
leading companies in the electronics and communications industries while being
contingent upon the Company's achievement of near-and long-term objectives and
goals. For fiscal 1997, the principal measures the Compensation Committee looked
to in evaluating the Company's progress towards these objectives and goals were
(1) efforts to attract Ricochet subscribers to target numbers, and (2) to raise
sufficient capital to sustain and continue operations. Other management
objectives considered by the Compensation Committee included expanding the
installation of Ricochet networks in current markets, and continuing the
development of the next generation network. The Company's executive compensation
is based on four components, each of which is intended to serve the overall
compensation philosophy.
BASE SALARY
Base salary is targeted toward the middle of the range established by
comparable companies in the electronics and communications industries. Base
salaries are reviewed annually to ensure that the Company's salaries are
competitive within the target range. For the purpose of establishing these
levels for fiscal 1997, the Company relied in part on American Electronics
Association salary surveys, on a survey conducted by a nationally recognized
compensation consultant of U.S.-based high technology companies and on data
obtained from executive search firms that place executives with Silicon Valley
companies. As a review of data for comparable companies is performed primarily
to establish target ranges for competitive compensation, the Company does not
consider the performance of the comparable companies. The comparison groups in
these surveys and data sources include a broader range of companies than the
sample represented in the Standard & Poor's 500 Communications Equipment Index
contained in the Performance Measurement Comparison because the Company competes
for talented executives with a broad range of companies in industries outside of
the communications equipment industry. The Company has been increasing executive
salaries gradually from a level that was significantly below the targeted range.
Recognizing the competitive environment in the Company's industry and in the
Silicon Valley area generally, the increases approved by the Compensation
Committee in 1997 were intended to keep salaries in the mid-range of targeted
companies in order to retain valuable employees.
MERIT INCREASE
Merit increases are designed to encourage management to perform at
consistently high levels. Salaries for executives are reviewed by the
Compensation Committee on an annual basis and may be increased at that time
based on the Compensation Committee's agreement that the individual's overall
contribution to the Company merits recognition. The salary adjustments reflected
in the Summary Compensation Table were also affected, in the case of executive
officers other than the Chief Executive Officer, by the evaluation of individual
contributions to the Company as provided to the Compensation Committee by the
Chief Executive Officer.
BONUSES
Bonuses for executives are intended to be used as an incentive to encourage
management to perform at a high level or to recognize a particular contribution
by an employee or exceptional Company performance. Generally, the higher the
employee's level of job responsibility, the larger the portion of the
individual's compensation package that may be represented by a bonus. Whether a
bonus will be given, and the amount of any such bonus, is determined on a yearly
basis. Bonus awards must be approved by the Chief Executive
22
<PAGE> 25
Officer and the Compensation Committee in the case of executives other than the
Chief Executive Officer and by the Compensation Committee alone in the case of
the Chief Executive Officer.
In determining the bonus element of compensation, the Compensation
Committee places particular emphasis on the Company's performance against the
management objectives and goals described above. The Compensation Committee
evaluated the Company's performance against these objectives as follows: In
fiscal 1997, the Company made substantial progress in attracting new
subscribers, ending the year with almost 19,000 subscribers, and in raising
capital, obtaining Vulcan's commitment to a private placement of $55.8 million
(before deducting expenses). The Company also made substantial progress in
building out its current markets, increasing population under coverage to 10
million in its three major markets. By the end of fiscal 1997, development of
the next generation high-speed network was well under way. In light of the
Company's success in achieving important objectives in fiscal 1997, the
Compensation Committee decided to award bonuses to executives at 75% of their
target levels.
In addition to the bonuses described above, certain employees engaged in
sales and marketing receive commissions based on the results of their efforts.
STOCK OPTIONS
The Compensation Committee believes that stock ownership by management is
beneficial in aligning management and stockholders interests with respect to
enhancing stockholder value. Stock options are also used to retain executives
and motivate them to improve long-term stock market performance. Stock options
are granted at the prevailing market value and will only have value if the
Company's stock price increases. Generally, stock option grants vest 25% after
the first year and thereafter monthly in 36 equal amounts over three years.
The Compensation Committee determines the number of options to be granted
based upon the competitive marketplace, with a particular focus on determining
what level of equity incentive is necessary to retain a particular individual.
Outstanding historical performance by an individual is additionally recognized
through larger than normal option grants.
CHIEF EXECUTIVE OFFICER
The Compensation Committee uses the same philosophy described above with
respect to other executive officers in setting the compensation for the Chief
Executive Officer, Mr. Dilworth. Recognizing that Mr. Dilworth's base salary in
1995 was at a level below the average salary of comparable executives at the
companies covered by the surveys and other data described above, the
Compensation Committee approved the surveys and other data described above, the
Compensation Committee approved an increase in salary for Mr. Dilworth to
$305,000 in fiscal 1996. Mr. Dilworth's salary remained at $305,000 in fiscal
1997. Based upon the same factors considered with respect to the awarding of
bonuses to executives in the Company generally, the Compensation Committee
awarded Mr. Dilworth a bonus of $228,750. Mr. Dilworth was also granted options
to purchase an aggregate of 75,000 shares of Common Stock in fiscal 1997, based
upon the Compensation Committee's view of the equity incentive level required to
retain his services in a competitive market, as well as the Compensation
Committee's desire to maintain a clear alignment of management and stockholder
interests.
SECTION 162(M)
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1 million of compensation paid to certain
Named Executive Officers in a taxable year. Compensation above $1 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code. The Compensation Committee has determined that stock options granted under
the Company's 1988 Stock Option Plan with an exercise price at least equal to
the fair market value of the Company's common stock on the date of grant will be
treated as "performance-based compensation." As a result, the Company's
stockholders were asked to approve, and did approve in May 1995, an amendment to
23
<PAGE> 26
such plan that allows any compensation recognized by a Named Executive Officer
as a result of the grant of such a stock option to be deductible by the Company.
Compensation Committee
Robert S. Cline, Chairman
David E. Liddle
OPTION REPRICING INFORMATION
The following table shows certain information concerning the repricing of
options received by the Named Executive Officers during the last ten years.
TEN YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF ORIGINAL
NUMBER OF SHARES MARKET PRICE OPTION TERM
OF COMMON STOCK OF COMMON EXERCISE PRICE REMAINING AT
UNDERLYING OPTIONS STOCK AT AT TIME OF NEW EXERCISE DATE
NAME DATE REPRICED TIME OF REPRICING REPRICING PRICE OF REPRICING
---- -------- ------------------ ----------------- -------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Dilworth......... 09/27/97 50,000 $ 6.750 $13.500 $ 6.750 8.6
205,000 $ 6.750 $13.125 $ 6.750 8.3
02/01/96 160,000 $13.125 $19.750 $13.125 7.7
25,000 $13.125 $19.625 $13.125 8.3
20,000 $13.125 $17.000 $13.125 9.3
Mr. Wood............. 09/27/97 125,000 $ 6.750 $11.875 $ 6.750 7.1
25,000 $ 6.750 $13.500 $ 6.750 8.6
12,000 $ 6.750 $13.125 $ 6.750 8.3
02/01/96 12,000 $13.125 $17.000 $13.125 9.3
Mr. Green............ 09/27/97 25,000 $ 6.750 $13.500 $ 6.750 8.6
61,000 $ 6.750 $13.125 $ 6.750 8.3
02/01/96 35,000 $13.125 $19.750 $13.125 7.7
15,000 $13.125 $19.625 $13.125 8.3
Mr. Swain............ 09/27/97 20,000 $ 6.750 $13.500 $ 6.750 8.6
45,000 $ 6.750 $13.125 $ 6.750 8.3
02/01/96 25,000 $13.125 $19.750 $13.125 7.7
10,000 $13.125 $19.625 $13.125 8.3
10,000 $13.125 $17.000 $13.125 9.3
</TABLE>
COMPENSATION COMMITTEE REPORT ON OPTION REPRICINGS
In January 1996, after a steady decline in the market price of the Common
Stock, the Board implemented a Company-wide repricing program pursuant to which
all employees (including executive officers) and consultants were offered the
opportunity to have those of their stock options with exercise prices greater
than $14.00, which was above the then-market value of the Common Stock, replaced
with non-qualified stock options with an exercise price of $13.125, the fair
market value of the Common Stock on the effective date of the repricing, and
certain delayed vesting terms. The Board took this action because it determined
that the purpose of the Company's stock option program of providing an equity
incentive for optionees to remain in the employ of or service to the Company and
work diligently in its best interests would not be achieved for optionees
holding options exercisable above the market price, particularly in light of the
intense competition in the Company's industry for talented employees, and that
retaining the services of such employees was absolutely critical in fostering
the best interest of the Company and the stockholders.
In August 1997, the market price of the Common Stock continued to decline,
reaching a five-year low of $4.375 per share. In mid-August 1997, the Board
determined that a second option repricing was necessary in order to retain and
continue to provide the proper incentives to its non-officer employees. In such
repricing, all non-officer employees and consultants were offered the
opportunity to have those of their stock options with exercise prices greater
than $7.00 per share, which was above the then-market value of the Common Stock,
24
<PAGE> 27
replaced with non-qualified stock options with an exercise price of $4.53 per
share, the fair market value of the Common Stock on the effective date of the
repricing, and certain delayed exercise provisions. In late September 1997, the
Board determined that it was imperative to effect a similar option repricing for
its executive officers in order to retain and continue to provide the proper
incentives to them. In such repricing, all executive officers were offered the
opportunity to have those of their stock options with exercise prices greater
than $11.00 per share, which was above the then-market value of the Common
Stock, replaced with non-qualified stock options with an exercise price of $6.75
per share, the fair market value of the Common Stock on the effective date of
the repricing, and certain delayed exercise provisions.
PERFORMANCE MEASUREMENT COMPARISON
The following graph shows the total stockholder return of an investment of
$100 in cash on December 31, 1992 for (a) the Company's Common Stock, (b) the
Standards & Poor's 500 Communications-Equipment/ Manufacturers Index ("S&P") and
(c) the Nasdaq-United States Index ("NASDAQ"). All values assume reinvestment of
the full amount of all dividends and are calculated as of December 31 of each
year:
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Metricom NASDAQ S&P
<S> <C> <C> <C>
Dec-92 100 100 100
Dec-93 369 115 96
Dec-94 231 112 110
Dec-95 210 159 164
Dec-96 231 195 192
Dec-97 148 240 251
</TABLE>
25
<PAGE> 28
CERTAIN TRANSACTIONS
SALE OF COMMON STOCK TO VULCAN VENTURES INCORPORATED
In January 1998, the Company sold 4,650,000 newly-issued shares of Common
Stock to Vulcan Ventures Incorporated, a stockholder of the Company, for $12.00
per share in cash. In connection with such transaction, the Company granted
certain contractual rights to Vulcan including the right to nominate up to four
members of the Board of Directors. As of March 31, 1998, Vulcan owned
approximately 49.3% of the outstanding Common Stock. Messrs. Savoy, Liddle and
Derrickson directors of the Company, are affiliated with Vulcan.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's By-laws provide that the Company will indemnify its directors
and executive officers and may indemnify its other officers, employees and other
agents to the fullest extent permitted by Delaware law. The Company is also
empowered under its By-laws to enter into indemnification agreements with its
directors and officers and to purchase insurance on behalf of any person whom it
is required or permitted to indemnify. Pursuant to these provisions, the Company
has entered into indemnification agreements with each of its directors and
officers and has obtained director and officer liability insurance.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
WILLIAM D. SWAIN
Secretary
May 22, 1998
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K, AS AMENDED, FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
IS AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO: CORPORATE SECRETARY,
METRICOM, INC., 980 UNIVERSITY AVENUE, LOS GATOS, CALIFORNIA 95030-2375.
26
<PAGE> 29
METRICOM, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 26, 1998
The undersigned hereby appoints Timothy A. Dreisbach and Vanessa A.
Wittman, 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 Annual
Meeting of Stockholders of the Company to be held at the offices of the Company
at 980 University Avenue, Los Gatos, California on Friday, June 26, 1998 at 9:00
a.m. local time, and at any and all postponements, continuations and
adjournments thereof, with all powers that the undersigned would possess if
personally present, upon and in respect of the following matters and in
accordance with the following instructions, with discretionary authority as to
any and all other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3, 4 AND 5, AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR
LISTED BELOW.
PROPOSAL 1: To elect three directors to hold office until the 2001 Annual
Meeting of Stockholders.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees
below). listed below.
NOMINEES: Robert P. Dilworth, Timothy A. Dreisbach and Ralph Derrickson.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S), WRITE SUCH NOMINEE(S)' NAME(S)
BELOW:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 2, 3, 4 AND 5.
<PAGE> 30
PROPOSAL 2: To approve the Company's 1997 Equity Incentive Plan, as
amended to increase the aggregate number of shares of
Common Stock authorized for issuance under such plan by
400,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 3: To approve the Company's 1991 Employee Stock Purchase
Plan, as amended to increase the aggregate number of shares
of Common Stock authorized for issuance under such plan by
200,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 4: To approve the Company's 1993 Non-Employee Directors'
Stock Option Plan, as amended to increase the aggregate
number of shares of Common Stock issuable under such plan
by 75,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 5: To ratify selection of Arthur Andersen LLP as independent
auditors of the Company for its fiscal year ending
December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
DATED _________________ ________________________________________
________________________________________
SIGNATURE(S)
Please sign exactly as your name appears
hereon. If the stock is registered in
the names of two or more persons, each
should sign. Executors, administrators,
trustees, guardians and
attorneys-in-fact should add their
titles. If signer is a corporation,
please give full corporate name and have
a duly authorized officer sign, stating
title. If signer is a partnership,
please sign in partnership name by
authorized person.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
<PAGE> 1
METRICOM, INC.
1997 EQUITY INCENTIVE PLAN
ADOPTED MARCH 14, 1997
APPROVED BY STOCKHOLDERS MAY 1, 1997
AMENDED BY THE BOARD OF DIRECTORS ON APRIL 29, 1998
APPROVED BY STOCKHOLDERS ON __________, 1998
INTRODUCTION
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company and its Affiliates may
be given an opportunity to benefit from increases in value of the common stock
of the Company ("Common Stock") through the granting of (i) Incentive Stock
Options, (ii) Nonstatutory Stock Options, (iii) stock bonuses and (iv) rights to
purchase restricted stock, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees, Directors or Consultants, to secure and retain
the services of new Employees, Directors and Consultants, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
be either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, or (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and a separate certificate or certificates will be
issued for shares purchased on exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means Metricom, Inc., a Delaware corporation.
<PAGE> 2
(f) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means the
employment or relationship as a Director or Consultant is not interrupted or
terminated. The Board, in its sole discretion, may determine whether Continuous
Status as an Employee, Director or Consultant shall be considered interrupted in
the case of: (i) any leave of absence approved by the Board, including sick
leave, military leave, or any other personal leave; or (ii) transfers between
locations of the Company or between the Company, Affiliates or their successors.
(h) "DIRECTOR" means a member of the Board.
(i) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(k) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock of the Company determined as follows:
(1) If the Common Stock is listed on any established stock
exchange, or traded on the Nasdaq National Market or The Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in Common Stock) on the last market trading day prior to
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(2) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(l) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(m) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
of 1933 ("Regulation S-K"), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
2
<PAGE> 3
(n) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(o) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(p) "OPTION" means a stock option granted pursuant to the Plan.
(q) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(r) "OPTIONEE" means a person to whom an Option is granted pursuant to
the Plan.
(s) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(t) "PLAN" means this 1997 Equity Incentive Plan.
(u) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.
(v) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus, and any right to purchase restricted stock.
(w) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(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 Stock Awards; when and how each Stock Award
shall be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted stock,
or a combination of the foregoing; the provisions of each Stock Award granted
(which need not be identical), including the time or times when a person shall
be
3
<PAGE> 4
permitted to receive stock pursuant to a Stock Award; and the number of shares
with respect to which a Stock Award shall be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards 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 Stock Award 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 or a Stock Award as provided in Section 13.
(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 which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee or
committees ("Committee") of one (1) or more members of the Board. In the
discretion of the Board, a Committee may consist solely of two (2) or more
Outside Directors, in accordance with Code Section 162(m), or solely of two (2)
or more Non-Employee Directors, in accordance with Rule 16b-3. 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,
including the power to delegate to a subcommittee any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or such a subcommittee), 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.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 12 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate one million seventy-five thousand (1,075,000) shares
of Common Stock. If any Stock Award shall for any reason expire or otherwise
terminate, in whole or in part, without having been exercised in full (or vested
in the case of Restricted Stock), the stock not acquired under such Stock Award
shall revert to and again become available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees. Stock
Awards other than Incentive Stock Options may be granted only to Employees,
Directors or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of any
of its Affiliates unless the exercise price of such Option is at
4
<PAGE> 5
least one hundred ten percent (110%) of the Fair Market Value of such stock at
the date of grant and the Option is not exercisable after the expiration of five
(5) years from the date of grant.
(c) Subject to the provisions of Section 12 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Stock Awards
covering more than four hundred thousand (400,000) shares of Common Stock in any
calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted, and the exercise price
of each Nonstatutory Stock Option shall be not less than eighty-five percent
(85%) of the Fair Market Value of the stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, an Option may be granted
with an exercise price lower than that set forth in the preceding sentence if
such Option is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Section 424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other Common Stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other Common Stock of the
Company) with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form of legal
consideration that may be acceptable to the Board. In the case of any deferred
payment arrangement, interest shall be payable at least annually and shall be
charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any amounts other than
amounts stated to be interest under the deferred payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock 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 Incentive Stock Option
is granted only by such person. A Nonstatutory Stock Option may be transferred
to the extent provided in the Option Agreement; provided that if the Option
Agreement does not expressly permit the transfer of a Nonstatutory Stock Option,
the Nonstatutory Stock Option shall not be transferable except by will, by the
laws of descent and distribution or pursuant to a domestic relations order
satisfying the requirements of Rule 16b-3, and shall be exercisable during the
lifetime of the person to whom the Option is granted only by
5
<PAGE> 6
such person or any transferee pursuant to a domestic relations order.
Notwithstanding the foregoing, the person to whom the Option is granted may, by
delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Optionee, shall
thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option within such period of
time designated by the Board, which shall in no event be later than the
expiration of the term of the Option as set forth in the Option Agreement (the
"Post-Termination Exercise Period") and only to the extent that the Optionee was
entitled to exercise the Option on the date Optionee's Continuous Status as an
Employee, Director or Consultant terminates. In the case of an Incentive Stock
Option, the Board shall determine the Post-Termination Exercise Period at the
time the Option is granted, and the term of such Post-Termination Exercise
Period shall in no event exceed three (3) months from the date of termination,
and may, in the event Optionee's Continuous Status as an Employee, Director or
Consultant terminates for Cause (as defined in subsection 12(b)), terminate of
the date of such Optionee's termination. In addition, the Board may at any time,
with the consent of the Optionee, extend the Post-Termination Exercise Period
and provide for continued vesting; provided however, that any extension of such
period by the Board in excess of three (3) months from the date of termination
shall cause an Incentive Stock Option so extended to become a Nonstatutory Stock
Option, effective as of the date of Board action. If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement or as otherwise
determined above, the Option shall terminate, and the shares covered by such
Option shall revert to the Plan. Notwithstanding the foregoing, the Board shall
have the power to permit an Option to continue to vest during the
Post-Termination Exercise Period.
An Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Status as an
Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day
after the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may
also provide that if the exercise of
6
<PAGE> 7
the Option following the termination of the Optionee's Continuous Status as an
Employee, Director or Consultant (other than upon the Optionee's death or
disability) would be prohibited at any time solely because the issuance of
shares would violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the first paragraph of this subsection 6(f), or (ii)
the expiration of a period of three (3) months after the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant during which
the exercise of the Option would not be in violation of such registration
requirements.
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, at the date of termination, the Optionee is
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a three (3)-month period after the termination of, the Optionee's
Continuous Status as an Employee, Director or Consultant, the Option may be
exercised to the extent vested by the Optionee's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionee's death pursuant to
subsection 6(d), but only within the period ending on the earlier of (i) the
date eighteen (18) months following the date of death (or such longer or shorter
period specified in the Option Agreement), or (ii) the expiration of the term of
such Option as set forth in the Option Agreement. If, at the time of death, the
Optionee was not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available for issuance under the Plan. If, after death, the Option is not
exercised within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
(j) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the Board
or Committee shall have the authority (but not an obligation) to include as part
of any Option Agreement a provision entitling the Optionee to a further Option
(a "Re-Load Option") in the event the Optionee exercises the Option evidenced by
the Option Agreement, in whole or in part, by surrendering
7
<PAGE> 8
other shares of Common Stock in accordance with this Plan and the terms and
conditions of the Option Agreement. Any such Re-Load Option (i) shall be for a
number of shares equal to the number of shares surrendered as part or all of the
exercise price of such Option; (ii) shall have an expiration date which is the
same as the expiration date of the Option the exercise of which gave rise to
such Re-Load Option; and (iii) shall have an exercise price which is equal to
one hundred percent (100%) of the Fair Market Value of the Common Stock subject
to the Re-Load Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Re-Load Option which is an Incentive Stock
Option and which is granted to a 10% stockholder (as described in subsection
5(b)), shall have an exercise price which is equal to one hundred ten percent
(110%) of the Fair Market Value of the stock subject to the Re-Load Option on
the date of exercise of the original Option and shall have a term which is no
longer than five (5) years.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee may designate at the time
of the grant of the original Option; provided, however, that the designation of
any Re-Load Option as an Incentive Stock Option shall be subject to the one
hundred thousand dollars ($100,000) annual limitation on exercisability of
Incentive Stock Options described in subsection 11(d) of the Plan and in Section
422(d) of the Code. There shall be no Re-Load Options on a Re-Load Option. Any
such Re-Load Option shall be subject to the availability of sufficient shares
under subsection 4(a) and shall be subject to such other terms and conditions as
the Board or Committee may determine which are not inconsistent with the express
provisions of the Plan regarding the terms of Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or Committee shall
deem appropriate. The terms and conditions of stock bonus or restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate agreements need not be identical, but each stock bonus or restricted
stock purchase agreement shall include (through incorporation of provisions
hereof by reference in the agreement or otherwise) the substance of each of the
following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement but in no event shall the purchase
price be less than eighty-five percent (85%) of the stock's Fair Market Value on
the date such award is made. Notwithstanding the foregoing, the Board or
Committee may determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company for its benefit.
(b) TRANSFERABILITY. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws of descent
and distribution or, if the agreement so provides, pursuant to a domestic
relations order satisfying the requirements of Rule 16b-3, so long as stock
awarded under such agreement remains subject to the terms of the agreement.
8
<PAGE> 9
(c) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal consideration that may be acceptable to the
Board or Committee in its discretion. Notwithstanding the foregoing, the Board
or Committee to which administration of the Plan has been delegated may award
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company or for its benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or Committee.
(e) TERMINATION OF CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.
8. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or Committee shall have the authority to effect, at any
time and from time to time, (i) the repricing of any outstanding Options under
the Plan and/or (ii) with the consent of any adversely affected holders of
Options, the cancellation of any outstanding Options under the Plan and the
grant in substitution therefor of new Options under the Plan covering the same
or different numbers of shares of stock, but having an exercise price per share
not less than: eighty-five percent (85%) of the Fair Market Value for a
Nonstatutory Stock Option, one hundred percent (100%) of the Fair Market Value
in the case of an Incentive Stock Option or, in the case of an Incentive Stock
Option held by a 10% stockholder (as described in subsection 5(b)), not less
than one hundred ten percent (110%) of the Fair Market Value per share of stock
on the new grant date. Notwithstanding the foregoing, the Board or Committee may
grant an Option with an exercise price lower than that set forth above if such
Option is granted as part of a transaction to which section 424(a) of the Code
applies.
(b) Shares subject to an Option canceled under this Section 8 shall
continue to be counted against the maximum award of Options permitted to be
granted pursuant to the Plan. The repricing of an Option hereunder resulting in
a reduction of the exercise price, shall be deemed to be a cancellation of the
original Option and the grant of a substitute Option; in the event of such
repricing, both the original and the substituted Options shall be counted
against the maximum awards of Options permitted to be granted pursuant to the
Plan, to the extent required by Section 162(m) of the Code.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.
9
<PAGE> 10
(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 under Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
of 1933, as amended (the "Securities Act") either the Plan, any Stock Award or
any stock issued or issuable pursuant to any such Stock Award. 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 Stock Awards unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
11. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or any
part thereof will vest, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.
(b) Neither an Employee, Director nor a Consultant nor any person to
whom a Stock Award is transferred in accordance with the Plan 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 Stock Award unless and until such person has satisfied
all requirements for exercise of the Stock Award pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or any
Affiliate, or to continue serving as a Consultant and Director, or shall affect
the right of the Company or any Affiliate to terminate the employment of any
Employee with or without notice and with or without cause, or the right to
terminate the relationship of any Consultant pursuant to the terms of such
Consultant's agreement with the Company or Affiliate or service as a Director
pursuant to the Company's By-Laws.
(d) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred in accordance with the Plan,
as a condition of exercising or acquiring stock under any Stock Award, (1) to
give written assurances satisfactory
10
<PAGE> 11
to the Company as to such person's knowledge and experience in financial and
business matters and/or to employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and experienced in financial
and business matters, and that he or she is capable of evaluating, alone or
together with the purchaser representative, the merits and risks of exercising
the Stock Award; and (2) to give written assurances satisfactory to the Company
stating that such person is acquiring the stock subject to the Stock Award for
such person's own account and not with any present intention of selling or
otherwise distributing the stock. The foregoing requirements, and any assurances
given pursuant to such requirements, shall be inoperative if (i) the issuance of
the shares upon the exercise or acquisition of stock under the Stock Award has
been registered under a then currently effective registration statement under
the 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. The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to comply
with applicable securities laws, including, but not limited to, legends
restricting the transfer of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the Common Stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award; or
(3) delivering to the Company owned and unencumbered shares of the Common Stock
of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan and the maximum number of shares subject to
award to any person during any calendar year, and the outstanding Stock Awards
will be appropriately adjusted in the class(es) and number of shares and price
per share of stock subject to such outstanding Stock Awards. Such adjustments
shall be made by the Board or Committee, the determination of which shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(b) In the event of a Change in Control, (i) any surviving or acquiring
corporation shall assume Stock Awards outstanding under the Plan or shall
substitute similar Stock Awards for those outstanding under the Plan, or (ii) in
the event any surviving or acquiring corporation refuses to assume such Stock
Awards or to substitute similar Stock Awards for those outstanding under the
Plan, (A) with respect to Stock Awards held by persons then performing services
as
11
<PAGE> 12
Employees, Directors or Consultants, the vesting of such Stock Awards and the
time during which such Stock Awards may be exercised shall be accelerated prior
to such event and the Stock Awards terminated if not exercised after such
acceleration and at or prior to such event, and (B) with respect to any other
Stock Awards outstanding under the Plan, such Stock Awards shall be terminated
if not exercised prior to such event.
In addition, with respect to any person who was providing services as an
Employee, Director or Consultant immediately prior to the consummation of the
Change in Control, any Stock Awards held by such persons shall immediately
become fully vested and exercisable, and any repurchase right by the Company
with respect to shares acquired by such person under a Stock Award shall lapse,
if such person's Continuous Status as an Employee, Director or Consultant is
terminated other than for Cause within twelve (12) months following consummation
of the Change in Control. For purposes of the Plan, "Cause" shall mean willful
conduct that is materially injurious to the business of the person's employer,
whether financial or otherwise.
For purposes of this Plan, "Change in Control" means: (1) a dissolution,
liquidation, or sale of all or substantially all of the assets 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 shares 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) the
acquisition by any person, entity or group within the meaning of Section 13(d)
or 14(d) of the Exchange Act, or any comparable successor provisions (excluding
any employee benefit plan, or related trust, sponsored or maintained by the
Company or any Affiliate of the Company) of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the election of
directors.
13. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company to the extent stockholder approval is necessary for the Plan to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide eligible
Employees, Directors or Consultants with the maximum benefits provided or to be
provided under the provisions of the Code and the
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<PAGE> 13
regulations promulgated thereunder relating to Incentive Stock Options and/or to
bring the Plan and/or Incentive Stock Options granted under it into compliance
therewith.
(d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
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 stockholders of the Company,
whichever is earlier. No Stock Awards may be granted under the Plan while the
Plan is suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be impaired by suspension or termination of the Plan,
except with the consent of the person to whom the Stock Award was granted.
15. EFFECTIVE DATE OF PLAN.
This Plan shall become effective on the date of adoption by the Board,
but no Stock Awards granted under the Plan shall be exercised unless and until
the Plan has been approved by the stockholders of the Company, which approval
shall be within twelve (12) months before or after the date the Plan is adopted
by the Board.
13
<PAGE> 1
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
Approved August 7, 1996
Amended January 30, 1998
Amended April 29, 1998
Approved __________, 1998
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.
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.
1.
<PAGE> 2
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 seventy-five
thousand (375,000) 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.
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).
(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.
2.
<PAGE> 3
(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
"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.
(h) Notwithstanding anything to the contrary contained herein, a
Non-Employee Director's service as such shall be deemed to continue for purposes
of subparagraphs 6(a) and 6(e) above if such Non-Employee Director terminates
service and immediately becomes a member of the Company's Advisory Board;
provided, however, that a Non-Employee Director shall be credited with such
deemed service only until the date of termination of membership on the Advisory
Board. The last day of such deemed period of service as a Non-Employee Director
shall be considered the last day of actual service as a Non-Employee Director
for purposes of subparagraphs 6(a) and 6(e) above.
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.
3.
<PAGE> 4
(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.
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 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.
4.
<PAGE> 5
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, 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.
5.
<PAGE> 6
(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.
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.
6.
<PAGE> 1
METRICOM, INC.
1991 EMPLOYEE STOCK PURCHASE PLAN
Adopted November 12, 1991
Approved March 19, 1992
Amended January 1996
Approved April 24, 1996
Amended November 1996
Amended April 29, 1998
Approved _________, 1998
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.
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 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.
1.
<PAGE> 2
(iii) To construe and interpret the Plan and rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
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 five hundred and fifty thousand
(550,000) 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 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
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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
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 Offering Period 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 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 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 Earnings (as
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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 "Offering 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:
(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 Exercise Date.
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
Earnings during the Offering Period. "Earnings" is defined as base salary or
wages and including amounts elected to be deferred by the employee (that would
otherwise have been paid) under the Company's 401(k) Plan, and may include or
exclude bonuses, commissions, overtime pay, incentive pay, profit sharing, other
remuneration paid directly to the employee, the cost of employee benefits paid
for by the Company or an Affiliate, education or tuition reimbursements, imputed
income arising under any group insurance or benefit program, traveling expenses,
business and moving expense reimbursements, income received in connection with
stock options, contributions made by the Company or an Affiliate under any
employee benefit plan, and similar items of compensation as determined by the
Board or Committee and as set forth in the Offering. 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 Offering a participant may terminate his or her payroll
deductions. A participant may reduce, increase or begin such payroll deductions
after the beginning of any Offering 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
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<PAGE> 5
the Company provides. Such withdrawal may be elected at any time prior to the
end of the Offering 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.
(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. If,
on an Exercise Date of any Offering hereunder, the
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Plan is not so registered, no rights granted under the Plan or any Offering
shall be exercised and all payroll deductions accumulated and not previously
applied to the purchase of Common Stock shall be distributed to the
participants, without interest.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
(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
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.
6.
<PAGE> 7
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.
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.
7.
