SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
TELEPAD CORPORATION
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(Name of Registrant as Specified in Its Charter)
----------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if
other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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<PAGE>
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
------------------------------------------------------------
(4) Proposed Maximum aggregate value of transaction:
------------------------------------------------------------
(5) Total fee paid:
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[X] 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.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
TELEPAD CORPORATION
380 HERNDON PARKWAY, SUITE 1900
HERNDON, VIRGINIA 22070
-----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 19, 1996
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of
Stockholders (the "Meeting") of TelePad Corporation (the "Company") will be held
at the Company's executive offices at 380 Herndon Parkway, Suite 1900, Herndon,
Virginia on Thursday, September 19, 1996, at 11:00 A.M., Eastern Daylight
Savings Time, to consider and act upon the following matters:
1. A proposal to amend the Company's By-Laws to provide for the
classification of directors into three classes;
2. The election of seven directors of the Company to serve as the
Board of Directors. If the amendment to the Company's By-Laws
to create a classified Board is approved by the stockholders,
the directors will be elected to a classified Board, with two
directors being elected for a term of one year, two directors
being elected for a term of two years and three directors
being elected for a term of three years, and until their
successors are duly elected and qualified. In the event such
proposal is not approved, all seven directors will be elected
for a term of one year, and until their successors are duly
elected and qualified;
3. A proposal to adopt the Company's 1996 Stock Incentive Plan
(the "1996 Plan"). The 1996 Plan is designed to provide an
incentive to key employees, and to consultants and directors
who are not employees, of the Company and to offer an
additional inducement in obtaining the services of such
persons;
4. A proposal to ratify the action of the Board of Directors in
appointing Ernst & Young, LLP as the Company's independent
public accountants for the year ending December 31, 1996; and
5. The transaction of such other business as may properly come
before the Meeting or any adjournment or postponement thereof.
Information regarding the matters to be acted upon at the
Meeting is contained in the accompanying Proxy Statement.
The close of business on August 13, 1996 has been fixed as the
record date for the determination of stockholders entitled to notice of and to
vote at the Meeting and any adjournment or postponement thereof. A list of such
stockholders will be open for examination by any stockholder for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting at the offices of the Company, 380 Herndon Parkway,
Suite 1900, Herndon, Virginia.
By Order of the Board of Directors,
JOSEPH J. ELKINS,
Secretary
Herndon, Virginia
August 14, 1996
<PAGE>
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. EACH STOCKHOLDER
IS URGED TO SIGN, DATE AND RETURN THE ENCLOSED FORM OF PROXY WHICH IS BEING
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. AN ENVELOPE ADDRESSED TO THE
COMPANY'S TRANSFER AGENT IS ENCLOSED FOR THAT PURPOSE AND NEEDS NO POSTAGE IF
MAILED IN THE UNITED STATES.
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<PAGE>
TELEPAD CORPORATION
380 Herndon Parkway, Suite 1900
Herndon, Virginia 22070
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
September 19, 1996
This Proxy Statement is furnished to the holders of Common
Stock, par value $.01 per share ("Common Stock"), of TelePad Corporation (the
"Company") in connection with the solicitation of proxies by the Board of
Directors of the Company ("Proxy" or "Proxies") for use at the Annual Meeting of
Stockholders (the "Meeting") to be held on Thursday, September 19, 1996, at
11:00 A.M., Eastern Daylight Savings time, at the Company's executive offices at
380 Herndon Parkway, Suite 1900, Herndon, Virginia, and at any adjournment or
postponement thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting. The approximate mailing date of this Proxy Statement is August
15, 1996.
The close of business on August 13, 1996 has been fixed by the
Board of Directors as the record date (the "Record Date") for the determination
of stockholders entitled to notice of, and to vote at, the Meeting and any
adjournment thereof. As of the Record Date, there were 11,351,738 shares of
Class A Common Stock outstanding and 250,000 shares of Class B Common Stock
(excluding options), which are the only classes of voting securities of the
Company, issued and outstanding. Each share of Class A Common Stock outstanding
on the Record Date will be entitled to one vote on all matters to come before
the Meeting. Each share of Class B Common Stock outstanding on the Record Date
will be entitled to five votes on all matters to come before the Meeting.
Cumulative voting is not permitted. A majority of the shares entitled to vote,
represented in person or by proxy, is required to constitute a quorum for the
transaction of business. Proxies submitted which contain abstentions or broker
nonvotes will be deemed present at the Meeting in determining the presence of a
quorum.
Directors are elected by a plurality of the votes cast at the
Meeting (Proposal 2). The affirmative vote of a majority of the shares present,
in person or by proxy, and entitled to vote at the Meeting will be required to
(a) amend the Company's By-Laws to provide for the classification of directors
into three classes (Proposal 1), (b) adopt the Company's 1996 Stock Incentive
Plan, which is designed to provide an incentive to key employees, and to
consultants and directors who are not employees, of the Company and to offer an
additional inducement in obtaining the services of such persons (Proposal 3),
and (c) ratify the appointment of Ernst & Young, LLP as the Company's
independent public accountants for the Company's fiscal year ending December 31,
1996 (Proposal 4). Abstentions are considered as shares entitled to vote and,
therefore, are effectively negative votes for each of Proposals 1, 3, and 4.
Broker nonvotes with respect to any matter are not considered as shares entitled
to vote and, therefore, will have no effect on the outcome of the vote on
Proposals 1, 3, and 4. The Board of Directors has unanimously recommended a vote
in favor of each nominee named in the Proxy and FOR Proposals 1, 3, and 4.
Unless otherwise specified, all Proxies received will be voted
for the election of all nominees named herein to serve as directors and in favor
of each other. A Proxy may be revoked at any time before its exercise by filing
with the Secretary of the Company an instrument of revocation or a duly executed
proxy bearing a later date, or by attendance at the Meeting and electing to vote
in person. Attendance at the Meeting will not in and of itself constitute
revocation of a Proxy.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date, certain
information as to the beneficial ownership of Class A Common Stock and Class B
Common Stock of each of the Company's directors, all executive officers and
directors as a group, and all persons known by the Company to be the beneficial
owner of more than five percent of the Company's Class A Common Stock and Class
B Common Stock:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT PERCENT PERCENT
NAME AND ADDRESS OF BENEFICIAL OF OF OF
BENEFICIAL STOCKHOLDER OWNERSHIP (1)(2) CLASS A (2) CLASS B VOTING (2)
- ----------------------------------------- ----------------- -------------- ------------ ----------------
<S> <C> <C> <C> <C>
Donald W. Barrett -0- (3) 0% 0% 0%
380 Herndon Parkway Herndon, VA 22070
Sydney H. Dankman 149,480(4) 1.31% 0% 1.18%
380 Herndon Parkway Herndon, VA 22070
Ronald C. Oklewicz 357,188(5) 3.05% 0% 2.76%
380 Herndon Parkway Herndon, VA 22070
Joseph J. Elkins 47,266(6) 0.41% 0% 0.37%
380 Herndon Parkway Herndon, VA 22070
John M. Toups 15,555(7) 0.14% 0% 0.12%
380 Herndon Parkway Herndon, VA 22070
John P. Diesel 53,159(8) 0.47% 0% 0.42%
380 Herndon Parkway Herndon, VA 22070
E. Donald Shapiro 12,500(9) 0.11% 0% 0.10%
57 Worth Street
New York, NY 10013
Alan B. Salisbury -0- 0% 0% 0%
380 Herndon Parkway Herndon, VA 22070
Scott J. Dankman 287,500(10)(11) 0% 100% 11.37%
6040 Lands End Lane
Alexandria, VA 22315
All current officers and directors as a group 635,148 5.35% 0% 4.84%
(8 persons)(12)
</TABLE>
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(1) Except as otherwise indicated, each of the parties listed has sole
voting and investment power with respect to all shares of Common Stock
indicated. Beneficial ownership is calculated in accordance with Rule
13d-3(d) under the Exchange Act. The Company has two classes of Common
Stock outstanding, being Class A and Class B Common Stock, with all
outstanding shares of Class B Common Stock being owned by Scott J.
Dankman.
(2) As adjusted to reflect the exercise of all outstanding immediately
exercisable Class A, Class B and Class C Warrants and all Class B
Warrants issuable upon exercise of outstanding Class A Warrants. Does
not reflect issuance of 1,864,866 shares of Class A Common Stock
issuable upon exercise of outstanding Unit Purchase Options, except as
indicated with respect to listed holders.
(3) Does not reflect 400,000 shares of Class A Common Stock underlying
options which shall vest and become exercisable as follows: 100,000
options shall vest and become exercisable on December 31, 1996; 100,000
options
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<PAGE>
shall vest and become exercisable on December 31, 1997; and 200,000
options shall vest and become exercisable on December 31, 1998;
provided, however, that in the event of a change in control (as defined
in Mr. Barrett's employment agreement) of the Issuer, the non-vested
portion of the options shall automatically accelerate to the date of
such change in control. Options to acquire 396,500 shares of Class A
Common Stock have been granted to Mr. Barrett under the Company's
Amended and Restated 1993 Stock Option Plan, as Amended (the "SOP").
The Company has also agreed to grant Mr. Barrett additional options to
acquire 3,500 shares of Class A Common Stock under the 1996 Plan
subject to stockholder approval of such plan.
(4) Includes 64,194 shares of Class A Common Stock underlying immediately
exercisable stock options and Class C Warrants.
(5) Includes (i) 150,938 shares of Class A Common Stock underlying
immediately exercisable stock options and Class C Warrants acquired in
the 1994 Private Placement; (ii) 200,000 shares underlying options
which may become exercisable within 60 days and (iii) 6,250 shares of
Class A Common Stock jointly owned by Mr. Oklewicz and his spouse, who
share power to vote and dispose of such shares.
(6) Consists of (i) 46,666 shares of Class A Common Stock underlying
immediately exercisable options and (ii) 600 shares of Class A Common
Stock jointly owned by Mr. Elkins and his spouse, who share power to
vote and dispose of such shares.
(7) Consists of 15,555 shares of Class A Common Stock underlying
immediately exercisable options.
(8) Includes 19,409 shares of Class A Common Stock underlying immediately
exercisable stock options and Class C Warrants.
(9) Consists of 12,500 shares of Class A Common Stock underlying currently
exercisable Class D Warrants.
(10) Includes 37,500 shares of Class B Common Stock underlying immediately
exercisable stock options. Mr. Dankman has agreed to grant a voting
proxy covering all of his shares of Class B Common Stock to the
directors of the Company who are not also employees. Therefore, such
directors may be deemed to have power to vote such shares.
(11) Each share owned by Mr. Scott Dankman is Class B Common Stock, which is
identical in all respects to the Class A Common Stock of the Company,
except that on every matter for which each share of Class A Common
Stock is entitled to one vote, each share of Class B Common Stock is
entitled to five votes.
(12) Includes all of the shares of Class A Common Stock that have been
listed as being included in notes (3), (4), (5), (6), (7), (8) and (9)
above. Does not include the voting power attributable to the 250,000
shares of Class B Common Stock currently held by Mr. Scott Dankman, as
to which Mr. Dankman has granted a voting proxy to the directors of the
Company who are not employees. Including such shares, the Company's
officers and directors will have 14.37% of the voting power of the
Company's Common Stock.
================================================================================
PROPOSAL 1
PROPOSED AMENDMENT TO THE COMPANY'S
BY-LAWS TO PROVIDE FOR THE CLASSIFICATION
OF THE BOARD OF DIRECTORS
================================================================================
The Board of Directors of the Company at a meeting held on July 10,
1996 adopted a resolution approving a proposal to amend, subject to stockholder
approval, Section 2 of Article III of the By-Laws of the Company to provide for
the division of the Board into three classes of directors serving staggered
three-year terms with each class being as nearly equal in number as possible. As
a result, approximately one-third of the Board of Directors would be elected
each year. Initially, members of all three classes will be first elected at the
-5-
<PAGE>
Meeting. Directors then elected to the first class would serve until the Annual
Meeting of Stockholders to be held in 1997. Directors initially elected to the
second and third classes would serve until the Annual Meetings to be held in
1998 and 1999, respectively, and until their respective successors are elected
and qualified. Commencing with the election of directors to the first class in
1997, each class of directors elected at an Annual Meeting would be elected to
three-year terms. Any vacancies or newly created directorships, however
occurring, may be filled by a vote of the majority of the Directors then
remaining in office. Once elected, a Director filling a vacancy or newly created
directorship will hold office for the term expiring at the Annual Meeting of
Stockholders for the term of the class of which they have been elected expires.
This summary of the terms and effect of establishing a classified Board
of Directors does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the proposed amendment to Section 2 of Article III
of the Company's By-Laws which is set forth under the heading "Proposed New
Article III, Section 2 to the Company's By-Laws" in Exhibit A of this Proxy
Statement.
The Board of Directors believes that the amendments to create a
classified board are in the best interests of the Company and its stockholders.
Board classification will help lend continuity and stability to the management
of the Company and will assure continuity and stability in the Board's
leadership and policies. Following the adoption of the classified board
structure, at any given time approximately two-thirds of the members of the
Board of Directors will have had prior experience as directors of the Company.
The Board believes that this will facilitate long-range planning, strategy and
policy, because it will enhance the likelihood of continuity and stability in
the composition of the Board and its policies. The Board of Directors believes
that this, in turn, will permit the Board to more effectively represent the
interests of all stockholders.
With a classified Board of Directors, it will generally take a
stockholder two Annual Meetings of Stockholders (rather than one) to elect a
majority of the Board of Directors. As a result, a classified board may
discourage proxy contests for the election of directors or purchases of a
substantial block of stock because its provisions could operate to prevent
obtaining control of the Board in a relatively short period of time. Although
this could provide the Board with more time to evaluate any takeover or control
proposal and thus enable it to better protect the interests of the Company and
the remaining stockholders in the event someone obtains voting control of a
majority of the Company's stock, this is not the reason why the Board is
recommending Board classification. Classification is recommended because the
Board believes it will enhance the quality and stability of the Board and will
provide better opportunity for review of the Board member performance.
The information concerning the current nominees for election as
directors at the Meeting and the classes to which they would be elected is set
forth under the caption "Proposal 2 Election of Directors." If the proposal to
adopt a classified board is not approved and implemented, all directors elected
at the Meeting will serve for a one-year term.
The Board of Directors recommends that stockholders vote FOR this
proposal.
================================================================================
PROPOSAL 2
ELECTION OF DIRECTORS
================================================================================
If the proposed amendment to the Company's By-Laws are adopted by the
stockholders (see Proposal 1), three separate classes of directors, designated
as Class I, Class II and Class III, will be elected at the Meeting and each
class will consist of two members. The two directors nominated for Class I will
serve for a one-year term expiring in 1997, the two directors nominated for
Class II will serve for a two-year term expiring in 1998 and the three directors
nominated for Class III will serve for a three-year term expiring in 1999, and
in each case
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<PAGE>
until their successors shall be duly elected and qualified. At each Annual
Meeting of Stockholders subsequent to the meeting, one class of directors will
be elected to succeed those directors in the class whose terms then expire, for
terms expiring at the third succeeding Annual Meeting of Stockholders. All of
the nominees are currently directors of the Company whose term as directors
expires at the Meeting.
If the stockholders do not adopt the proposed amendment to the By-Laws,
seven (7) directors will be elected at the Meeting as one class, each director
to hold office until the next Annual Meeting of Stockholders and until his
successor is elected and qualified. In such case, unless otherwise directed, all
proxies will be voted in favor of the election of Messrs. Barrett, Oklewicz,
Dankman, Diesel, Salisbury, Shapiro and Toups as directors of the Company.
The Board of Directors has no reason to expect that any of the nominees
will be unable to stand for election at the date of the Meeting. In the event
that a vacancy among the original nominees occurs prior to the Meeting, the
proxies will be voted for a substitute nominee or nominees, if any are named by
the Board of Directors, and for the remaining nominees.
INFORMATION ABOUT NOMINEES
The following table sets forth information regarding the nominees:
<TABLE>
<CAPTION>
NAME AGE CLASS POSITIONS WITH THE COMPANY
- -------------------------- -------- ------------- ----------------------------------------------
<S> <C> <C> <C>
Donald W. Barrett 50 III Chief Executive Officer and Chairman of
the Board of Directors
Ronald C. Oklewicz 48 II President, Chief Operating Officer and
Director
Sydney H. Dankman 78 I Director
John P. Diesel 69 III Director
Alan B. Salisbury 59 II Director
E. Donald Shapiro 64 III Director
John M. Toups 70 I Director
</TABLE>
- --------------------
DONALD W. BARRETT has been Chief Executive Officer and Chairman of the
Board of Directors of the Company since April 1996. From July 1991 to April
1996, Mr. Barrett served as President and Chief Executive Officer of Ideas,
Inc., an information systems firm. Mr. Barrett served as President, Government
Systems Group of Contel Federal Systems, Inc. from June 1987 to July 1991. From
March 1984 to June 1987, Mr. Barrett served as President, Custom Products Group
of Unisys.
RONALD C. OKLEWICZ has been President and a Director of the Company
since August 1992. From August 1992 until April 1996, Mr. Oklewicz also served
as Chief Executive Officer of the Company, at which latter date he became Chief
Operating Officer. From November 1991 until August 1992, Mr. Oklewicz served as
a consultant to the Company. Mr. Oklewicz served in an executive capacity at
Wollongong Group, a software communications firm, from 1990 through 1991. Mr.
Oklewicz served in various positions at Apple Computer
-7-
<PAGE>
from 1986 through 1991, including serving as General Manager of the Federal
System Division. Mr. Oklewicz also spent 13 years with Xerox Corporation in
various sales and marketing positions.
SYDNEY H. DANKMAN has been a Director of the Company since April 1990.
Mr. Dankman, who has been retired for a period in excess of five years, is an
investor in early development technology ventures.
JOHN P. DIESEL has been a Director of the Company since June 1995. Mr.
Diesel, who has been retired since 1991, was formerly the President of Tenneco
Inc. from 1979 until 1991. Mr. Diesel currently is a Director of Aluminum
Corporation of America, Brunswick Corporation and Financial Institutions
Insurance Group, Ltd.
ALAN B. SALISBURY has been a Director of the Company since July 1996.
Mr. Salisbury has been a Director and the President of Learning Tree
International Inc. since April 1993 and has been a Director of Sybase, Inc.
since July 1993. Mr. Salisbury served as Executive Vice President and Chief
Operating Officer of Microelectronics & Computer Technology Corporation from May
1991 to April 1993.
E. DONALD SHAPIRO has been a Director of the Company since April 1996.
Mr. Shapiro has been the Joseph Solomon Distinguished Professor of Law at New
York Law School since 1983 where he served as both Dean and Professor of Law
from 1973 to 1983. Mr. Shapiro is Supernumerary Fellow of St. Cross College at
Oxford University, England and Visiting Distinguished Professor Bar-Ilan
University, Tel-Aviv, Israel. Mr. Shapiro received a J.D. degree at Harvard Law
School and has been conferred honorary degrees by both Oxford University and New
York Law School. Mr. Shapiro currently serves on the Boards of Directors for
several public companies including Loral Corporation, Eyecare Products PLC,
Kranzco Realty Trust, Group Health Incorporated, Interferon Sciences, Inc.,
Future Medical Products, Inc., MacroChem Corporation, and Premier Laser Systems
and also serves on the Board of Directors of Bank Leumi NY. Mr. Shapiro is a
Fellow, Institute of Judicial Administration, NY, and American Academy of
Forensic Sciences and a life member of the American Law Institute. Mr. Shapiro
is author or co-author of more than 50 publications including books and journal
articles dealing with medicine, forensic science and the law.
JOHN M. TOUPS has been a Director of the Company since April 1995. Mr.
Toups, who has been retired since 1987, was the President and Chief Executive
Officer of Planning Research Corporation from 1978 until 1987. Mr. Toups
currently serves on the board of NVR Inc, CACI International and Halifax
Corporation. NVR, Inc. is the successor to NVR L.P., which sought protection
under the bankruptcy laws on April 7, 1992. Mr. Toups was elected to the Board
of Directors of NVR, Inc. In 1993, after its emergence from bankruptcy as the
successor to NVR L.P.
EXECUTIVE OFFICERS
DONALD W. BARRETT has been Chief Executive Officer and Chairman of the
Board of Directors since April 1996. Please refer to "Information About
Nominees" for more information regarding Mr. Barrett.
RONALD C. OKLEWICZ has been President and a Director of the Company
since August 1992. Please refer to "Information About Nominees" for more
information regarding Mr. Oklewicz.
JOSEPH J. ELKINS has been Vice President of the Company since August
1993, Secretary of the Company since July 1994 and was Chief Operating Officer
from April 1995 to April 1996. In addition, Mr. Elkins served as a Director from
September 1994 until July 1995 and as Chief Financial Officer of the Company
from August 1993 until April 1995. Prior to joining the Company, Mr. Elkins was
President of two information management firms, Blyth Software, Inc. and Elkins
and Company, following a 23-year tenure at KPMG Peat Marwick, where he oversaw
development of that firm's financial management software products. Mr. Elkins is
a certified public accountant.
-8-
<PAGE>
ROBERT D. RUSSELL has been Vice President, Treasurer and Chief
Financial Officer of the Company since May 1995. Prior to joining the Company,
Mr. Russell was Vice President, Finance and Administration, Secretary and
Treasurer of Falcon Microsystems, Inc. from 1986 until 1994 and an independent
consultant from August 1994 until May 1995.
BOARD MEETINGS AND COMMITTEES
The Board of Directors is responsible for the management of the
Company. During the year ended December 31, 1995, the Board of Directors held 11
regular meetings and 2 special meetings. Each incumbent director attended at
least 75% of all meetings of the Board and committees on which the person served
which were held during the year.
The Audit Committee, which currently consists of Messrs. Toups and
Diesel, has authority with respect to the financial audit and reporting
functions of the Company, including the review of internal accounting procedures
and the review and oversight of the Company's independent accountants. The Audit
Committee met on one occasion during 1995.
The Compensation Committee, which currently consists of Messrs. Shapiro
and Dankman, has power and authority with respect to all matters pertaining to
compensation payable by the Company and the administration of employee benefits,
deferred compensation and the stock option plans of the Company. The
Compensation Committee held one meeting during 1995. The Nominating Committee,
which currently consists of Messrs. Diesel and Shapiro, is responsible for the
nomination of individuals for election to the Company's Board of Directors. The
Nominating Committee held one meeting during 1995.
The Company established in April 1996 an Executive Committee, which
currently consists of Messrs. Barrett, Diesel, Shapiro and Toups. The Executive
Committee is charged with the review and oversight of the management of the
Company and monitoring its corporate activities.
COMPENSATION OF DIRECTORS
Directors of the Company are reimbursed for their expenses in attending
board meetings. Each non-employee director is entitled to an annual option to
purchase 6,667 shares of Class A Common Stock at the fair market value on the
date of grant (see "1994 Non-Employee Director Stock Option Plan").
Beginning in April 1996, the Board of Directors of the Company
authorized that each Director will receive an annual retainer of $18,000 plus a
payment of $1,000 for each regular or special meeting of the Board plus a
payment of $500 for any committee meeting held in conjunction with a Board
meeting plus $1,000 for any committee meeting held separately from a Board
meeting. See "Proposal 3 - Adoption of the Company's 1996 Stock Incentive Plan,"
which, if ratified by the stockholders, would grant each non-employee director,
in lieu of the options referred to in the above paragraph, an option to purchase
90,000 shares of Common Stock of the Company upon becoming a director of the
Company, which options would vest over a two-year period.
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<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following sets forth the compensation paid by the Company during
the three fiscal years ended December 31, 1995 to (i) its current President and
Chief Operating Officer, and (ii) its current Vice President and Secretary (the
"Named Officers"). No other executive officer of the Company received
compensation in excess of $100,000 for the fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- AWARDS
OTHER ANNUAL -------------------
SALARY COMPENSATION OPTIONS
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#)
- ---------------------------------------- ---- ---------- --------------- -------------------
<S> <C> <C> <C> <C>
Ronald C. Oklewicz(1)
President and Chief Operating Officer 1995 $123,885 $ 0 200,000(2)
1994 $120,000 $5,376 30,000(3)
1993 $125,000 $ 0 60,000
Joseph J. Elkins
Vice President & Secretary 1995 $103,750 $ 0 40,000(4)
1994 $ 85,000 $3,117 20,000
1993 $ 31,875 $ 0 20,000
</TABLE>
- -------------------
(1) Mr. Oklewicz served as the Company's Chief Executive Officer from
August 5, 1992 to April 15, 1996.
(2) Represents options to purchase shares of Class A Common Stock at an
exercise price of $1.75 per share (the average of the closing bid and
asked prices of the Common Stock on the date of grant), with such
options becoming exercisable as specific conditions are met.
(3) Represents options to purchase shares of Class A Common Stock at an
exercise price of $6.56 per share (the average of the closing bid and
asked prices of the Common Stock on the date of grant), with such
options becoming exercisable one-third per year from the date of grant.
(4) Represents options to purchase shares of Class A Common Stock at an
exercise price of $5.3125 per share (the average of the closing bid and
asked prices of the Common Stock on the date of grant), with such
options becoming exercisable one-third per year from the date of grant.
OPTION GRANTS IN FISCAL 1995
Shown below is information concerning stock option grants of Class A
Common Stock awarded to the Named Officers during the Company's 1995 fiscal
year.
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<PAGE>
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF SHARES %OF TOTAL OPTIONS EXERCISE OR
UNDERLYING OP GRANTED TO EMPLOYEES BASE PRICE EXPIRATION
NAME TIONS GRANTED (1) IN FISCAL 1995 ($/SH) (2) DATE
- ------------------------ ---------------------- ----------------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Ronald C. Oklewicz 200,000 65.4% $1.75 11/14/02
Joseph J. Elkins 40,000 13.1% $5.3125 4/20/02
</TABLE>
- ------------------------
(1) The options are nonqualified stock options.
(2) The exercise price is equal to the fair market value of the shares of
Class A Common Stock on the date of grant of the option.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
The following table sets forth, for the Named Officers of the Company,
information regarding aggregate exercises of options in 1995 and the number and
value of unexercised options at December 31, 1995:
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF SHARES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT END OF
NUMBER OF OPTIONS AT END OF FISCAL 1995
SHARES ACQUIRED VALUE FISCAL YEAR EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE(1)
- -------------------- ---------------- -------- --------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Ronald C. Oklewicz 0 0 173,438(2)/210,000 $71,550/$0
Joseph J. Elkins 0 0 26,667/53,333 $0/$0
- ------------------
(1) Based upon the difference between the exercise prices of the options
and the closing bid price of the Class A Common Stock, as reported on
the OTC Bulletin Board on December 29, 1995, of $1.125 per share.
(2) Includes 3,438 shares of Class A Common Stock underlying Class C
Warrants acquired by Mr. Oklewicz in the 1994 Private Placement.
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Donald W.
Barrett, dated as of April 10, 1996. The employment is "at-will" and may be
terminated by either party at any time, subject only to the terms of the
employment agreement and the By-Laws of the Company. Pursuant to the agreement,
Mr. Barrett will serve as Chairman of the Board and Chief Executive Officer of
the Company at a salary of $250,000. The agreement provides that Mr. Barrett is
entitled to receive specified bonuses in the aggregate amount of $220,000 upon
the occurrence of specified events and achievement of specified sales and
financial milestones by the Company, as well as other supplemental benefits at
the discretion of the Board of Directors. In addition, the agreement provides
for the receipt of options to purchase 396,500 shares of the Company's Class A
Common Stock at the market price on April 10, 1996, the date of grant, which was
$3.8125, pursuant to the SOP, and the Company has also agreed to grant Mr.
Barrett options to purchase 3,500 shares of Class A Common Stock under the 1996
Plan subject to stockholder approval of such plan. Such options shall vest and
become exercisable (i)
-11-
<PAGE>
in the amount of 100,000 shares on December 31, 1996, 100,000 shares on December
31, 1997 and 200,000 shares on December 31, 1998, subject to certain
acceleration provisions, including the occurrence of a "change in control" (as
defined therein) of the Company or the termination of Mr. Barrett other than for
"cause" or "disability" (as such terms are defined therein). The agreement also
provides that if Mr. Barrett is terminated other than for "cause" or
"disability," the Company will pay to Mr. Barrett his compensation for 12 months
following such termination. During the term of employment and for a period of
one year after such employment has terminated, the agreement provides that Mr.
Barrett will not solicit the Company's employees.
The Company has entered into an employment agreement with Ronald C.
Oklewicz, dated as of November 15, 1995, for a term ending not earlier than
December 31, 1996. The agreement is subject to automatic renewal through
December 31, 1997 unless the Board of Directors gives written notice of
cancellation on or before June 30, 1996. Pursuant to the agreement, Mr. Oklewicz
serves as President and Chief Operating Officer of the Company at a salary of
$150,000 per annum. The agreement provides that Mr. Oklewicz is entitled to
receive specified bonuses in the aggregate amount of $150,000 upon the
occurrence of specified events and achievement of specified sales and financial
milestones by the Company, as well as other supplemental benefits at the
discretion of the Board of Directors. In addition, the agreement provides for
the receipt of options to purchase 200,000 shares of the Company's Class A
Common Stock pursuant to the SOP, which options vest (i) in the amounts of
50,000, 50,000 and 100,000 at such time, if any, as the "ask" price of the Class
A Common Stock reaches $5.00, $7.50 and $10.00; (ii) upon the effective
termination date if Mr. Oklewicz is terminated without cause; but (iii) in no
event later than December 31, 1996, so long as Mr. Oklewicz remains an executive
officer of the Company through the applicable vesting date. The agreement also
provides that if Mr. Oklewicz is terminated other than for "cause" (as defined
therein) or dies, the Company will pay to Mr. Oklewicz (or his spouse or estate
if he dies) his compensation and other benefits for 12 months following
termination. The agreement contains a confidentiality provision and provides
that during the term of employment and for a period of one year after such
employment has terminated, Mr. Oklewicz will not interfere with the Company's
customers or solicit the Company's employees.
The Company has entered into an employment agreement with Joseph J.
Elkins, dated as of January 1, 1993, for a term of four years pursuant to which
Mr. Elkins initially served as Vice President and Chief Financial Officer of the
Company at a base salary for the first year of $85,000, which amount was
subsequently increased to $110,000 and which may be further increased by the
Board of Directors. The Board promoted Mr. Elkins from Chief Financial Officer
to Chief Operating Officer in May 1995. Mr. Elkins relinquished the title of
Chief Operating Officer in April 1996 upon the appointment of Mr. Barrett as
Chief Executive Officer and Mr. Oklewicz as Chief Operating Officer, but he
remains as a Vice President of the Company, subject to the terms and conditions
of the employment agreement. The agreement provides that Mr. Elkins is entitled
to receive bonuses and other supplemental benefits at the discretion of the
Board of Directors. The agreement also provides that if Mr. Elkins is terminated
other than for "cause" (as defined therein) or dies, the Company will pay him
(or his spouse or estate if he dies) severance in the amount of 12 months'
salary. The agreement contains a confidentiality provision and provides that
during the term of employment and for a period of one year after such employment
has terminated, Mr. Elkins will not interfere with the Company's customers or
solicit the Company's employees.
AMENDED AND RESTATED 1993 STOCK OPTION PLAN
In April 1993, the Board of Directors adopted and the stockholders of
the Company approved the SOP, which provides for the grant of both "incentive
stock options" under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), as well as nonqualified stock options. The SOP is
administered by the Compensation Committee, whose members are not eligible to
receive options under the SOP. The SOP provides for the granting of options only
to executive officers and key employees of the Company that are selected by the
Compensation Committee. The Board of Directors has reserved a total of 975,000
shares of the authorized but
-12-
<PAGE>
unissued Class A Common Stock of the Company for issuance under the SOP. All of
the options under the SOP have been granted to date.
1994 EMPLOYEE STOCK PURCHASE PLAN
In May 1994, the Board of Directors adopted, and in June 1994 the
stockholders of the Company approved, the 1994 Employee Stock Purchase Plan (the
"SPP"), which provides certain employees of the Company with a opportunity to
purchase Class A Common Stock through payroll deductions, subject to certain
limitations. There are an aggregate of 250,000 shares of Class A Common Stock
reserved for issuance under the SPP. The SPP is administered by the Board of
Directors and/or a duly appointed committee of the Board.
To date, no shares have been issued under the SPP.
1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
In May 1994, the Board of Directors adopted, and in June 1994 the
stockholders of the Company approved, the 1994 Non-Employee Director Stock
Option Plan (the "NESOP"), which provides directors of the Company who are not
employed by the Company or any affiliate of the Company an option to purchase
6,667 shares of Class A Common Stock on an annual basis at 100% of fair market
value on the date the option is granted. Options granted under the NESOP vest in
three annual one-third increments. There are an aggregate of 175,000 shares of
Class A Common Stock reserved for issuance under the NESOP. The NESOP is
administered by the Compensation Committee and was not intended to qualify under
Section 422 of the Code. As of December 31, 1995, stock options to purchase a
total of 26,668 shares of Class A Common Stock under the NESOP were outstanding.
Of these stock options, 11,110 are presently exercisable.
-13-
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company did not engage in any related transactions in its 1995
fiscal year.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") requires the Company's executive officers and directors, and
persons who beneficially own more than 10% of the Company's Common Stock, to
file initial reports of ownership and reports of changes of ownership with the
Securities and Exchange Commission and furnish copies of those reports to the
Company. Based solely on a review of the copies of the reports furnished to the
Company to date, or written representations that no reports were required, the
Company believes that all reports required to be filed by such persons with
respect to the Company's fiscal year ending December 31, 1995 were timely made,
except for certain reports to be filed by Messrs. Diesel, Toups and Russell.
================================================================================
PROPOSAL 3
ADOPTION OF THE COMPANY'S
1996 STOCK INCENTIVE PLAN
================================================================================
On July 10, 1996, the Board of Directors adopted, subject to
stockholder approval at the Meeting, the Company's 1996 Stock Incentive Plan
(the "1996 Plan"). The 1996 Plan is designed to provide an incentive to key
employees, and to consultants and directors who are not employees, of the
Company and to offer an additional inducement in obtaining the services of such
persons.
The following summary of certain material features of the 1996 Plan
does not purport to be complete and is qualified in its entirety by reference to
the text of the 1996 Plan, a copy of which is set forth as Exhibit B to this
Proxy Statement.
SHARES SUBJECT TO THE OPTION PLAN AND ELIGIBILITY
The 1996 Plan authorizes the issuance of stock awards and the grant of
options to purchase a maximum of 1,200,000 shares of the Company's Class A
Common Stock (subject to adjustment as described below) to key employees
(including officers and directors who are key employees), to consultants and to
directors who are not employees of the Company. Upon expiration, cancellation or
termination of unexercised options, the shares of the Company's Class A Common
Stock subject to such options will again be available for the grant of options
under the 1996 Plan. No options have been granted to date under the 1996 Plan.
TYPE OF OPTIONS
Options granted under the 1996 Plan may either be incentive stock
options ("ISOs"), within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), or nonqualified stock options which do not
qualify as ISOs ("NQSOs"). ISOs, however, may only be granted to employees. The
Company makes no representations or warranties as to the qualification of any
option as an incentive stock option.
ADMINISTRATION
The 1996 Plan will be administered by a committee of the Board of
Directors consisting of at least two members of the Board (the "Committee").
Each member of the Committee is a "disinterested person" within the
-14-
<PAGE>
meaning of Rule 16b-3 (as the same may be in effect and interpreted from time to
time, "Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") until such time as the amendments to Rule 16b-3
adopted by the Securities and Exchange Commission on May 30, 1996 in Release No.
34-37260 (the "Rule 16b-3 Amendments") become effective with respect to the 1996
Plan; from and after such time as the Rule 16b-3 Amendments become effective
with respect to the 1996 Plan, each member of the Committee will be a
"non-employee director" within the meaning of Rule 16b-3. It is also intended
that each member of the Committee will be an "outside director" within the
meaning of Section 162(m) of the Code. The initial members of the Committee are
Messrs. Shapiro and Dankman.
Among other things, the Committee is empowered to determine, within the
express limits contained in the 1996 Plan: the employees and consultants to be
granted options, whether an option granted to an employee is to be an ISO or a
NQSO, the number of shares of Class A Common Stock to be subject to each option,
the exercise price of each option, the term of each option, the date each option
shall become exercisable as well as any terms, conditions or installments
relating to the exercisability of each option, whether to accelerate the date of
exercise of any option or installment, the form of payment of the exercise
price, the amount, if any, required to be withheld with respect to an option,
and with the consent of the optionee, to modify an option. The Committee is also
authorized to prescribe, amend and rescind rules and regulations relating to the
1996 Plan and to make all other determinations necessary or advisable for
administering the 1996 Plan, and to construe each stock option contract
("Contract") entered into by the Company with an optionee under the 1996 Plan.
NON-EMPLOYEE DIRECTORS OPTIONS
Every individual who, on the date the 1996 Plan is approved by
stockholders, is a Non-Employee Director (as defined in the 1996 Plan) will be
granted on such date a Non-Employee Director Option to purchase 90,000 shares of
Class A Common Stock. Thereafter, on the date an individual first becomes a
Non-Employee Director, he will be granted an option to purchase 90,000 shares of
Class A Common Stock. Non-Employee Director Options shall vest over a two-year
period. The Committee shall not have any discretion with respect to the
selection of directors to receive Non-Employee Director Options or the amount,
the price or the timing with respect thereto; and such Non-Employee Directors
may not receive any other award under the 1996 Plan. The exercise price of such
Non-Employee Director Option is the fair market value of the underlying shares
of Class A Common Stock on the date of grant, payable in cash, provided,
however, that in no event may the exercise price of any option granted before
September 29, 1997 be less than the fair market value of the underlying shares
on the date of grant or $3.5088 per share, whichever is greater. The options
will have a term of six years, subject to earlier termination if the director is
removed for cause, and may be exercised at any time after vesting during such
term.
TERMS AND CONDITIONS OF OPTIONS
Options granted under the 1996 Plan will be subject to, among other
things, the following terms and conditions:
(a) The exercise price of each option (other than a Non-Employee
Director Option) will be determined by the Committee;
PROVIDED, HOWEVER, that the exercise price of an ISO may not
be less than the fair market value of the Company's Class A
Common Stock on the date of grant (110% of such fair market
value if the optionee owns (or is deemed to own) more than 10%
of the voting power of the Company).
(b) Options (other than Non-Employee Director Options) may be
granted for terms determined by the Committee; PROVIDED,
HOWEVER, that the term of an ISO may not exceed 10 years (5
years if the optionee owns (or is deemed to own) more than 10%
of the voting power of the Company).
-15-
<PAGE>
(c) The maximum number of shares of the Company's Class A Common
Stock for which options may be granted to an employee in any
calendar year is 300,000. In addition, the aggregate fair
market value of shares with respect to which ISOs may be
granted to an employee which are exercisable for the first
time during any calendar year may not exceed $100,000.
(d) The exercise price of each option is payable in full upon
exercise or, if the applicable Contract permits, in
installments. Payment of the exercise price of an option may
be made in cash, certified check or, if the applicable
Contract permits, in shares of the Company's Class A Common
Stock or any combination thereof.
(e) Options may not be transferred other than by will or by the
laws of descent and distribution, and may be exercised during
the optionee's lifetime only by him or her (or by his or her
legal representative).
(f) Except as may otherwise be provided in the applicable
Contract, if the optionee's relationship with the Company as
an employee or consultant is terminated for any reason (other
than the death or disability of the optionee), the option may
be exercised, to the extent exercisable at the time of
termination of such relationship, within three months
thereafter, but in no event after the expiration of the term
of the option. However, if the relationship was terminated
either for cause or without the consent of the Company, the
option will terminate immediately. In the case of the death of
an optionee while an employee or consultant (or, generally,
within three months after termination of such relationship, or
within one year after termination of such relationship by
reason of disability), except as otherwise provided in the
Contract, his or her legal representative or beneficiary may
exercise the option, to the extent exercisable on the date of
death, within one year after such date, but in no event after
the expiration of the term of the option. Except as may
otherwise be provided in the applicable Contract, an optionee
whose relationship with the Company was terminated by reason
of his or her disability may exercise the option, to the
extent exercisable at the time of such termination, within one
year thereafter, but not after the expiration of the term of
the option. Options are not affected by a change in the status
of an optionee so long as he continues to be an employee of,
or a consultant to, the Company.
(g) The Company may withhold cash and/or shares of the Company's
Class A Common Stock having an aggregate value equal to the
amount which the Company determines is necessary to meet its
obligations to withhold any federal, state and/or local taxes
or other amounts incurred by reasons of the grant or exercise
of an option, its disposition or the disposition of shares
acquired upon the exercise of the option. Alternatively, the
Company may require the optionee to pay the Company such
amount, in cash, promptly upon demand.
RESTRICTED STOCK AWARDS
The Committee may from time to time, in its sole discretion, grant
shares of the Company's Class A Common Stock to key employees (including
officers and directors who are key employees) of, or consultants to, the
Company, which may be subject to such contingencies and restrictions as set
forth in the applicable Contract. Prior to the occurrence of any specified
contingency, the shares shall be considered outstanding shares owned by the
award holder, who shall, subject to the contingencies and restrictions set forth
in the award, have all rights of a stockholder of record with respect to such
shares, including the right to vote and to receive distributions. The shares
shall vest in the award holder when all of the restrictions and contingencies
lapse. Accordingly, the Committee may require that such shares be held by the
Company, together with a stock power duly endorsed in blank by the award holder,
until the shares vest in the award holder.
-16-
<PAGE>
ADJUSTMENT IN EVENT OF CAPITAL CHANGES
Appropriate adjustments will be made in the number and kind of shares
available under the 1996 Plan, in the number and kind of shares subject to each
outstanding option and the exercise prices of such options, the number and kind
of shares subject to future non-employee director options and the limitation on
the number of shares that may be granted to any employee in any calendar year,
in the event of any change in the Company's Class A Common Stock by reason of
any stock dividend, spinoff, split-up, combination, reclassification,
recapitalization, merger in which the Company is the surviving corporation,
exchange of shares or the like. In the event of (a) the liquidation or
dissolution of the Company, or (b) a merger in which the Company is not the
surviving corporation or a consolidation, any outstanding options shall
terminate upon the earliest of any such event, unless other provision is made
therefor on the transaction.
DURATION AND AMENDMENT OF THE 1996 PLAN
No ISO may be granted under the 1996 Plan after July 10, 2006. The
Board of Directors may at any time terminate or amend the 1996 Plan; PROVIDED,
HOWEVER, that, without the approval of the Company's stockholders, no amendment
may be made which would (a) except as a result of the anti-dilution adjustments
described above, increase the maximum number of shares available for the grant
of options or increase the maximum number of options that may be granted to an
employee in any year, (b) materially increase the benefits accruing to
participants under the 1996 Plan, or (c) change the eligibility requirements for
persons who may receive options. No termination or amendment may adversely
affect the rights of an optionee with respect to an outstanding option without
the optionee's consent.
FEDERAL INCOME TAX TREATMENT
The following is a general summary of the federal income tax
consequences under current tax law of options and restricted stock. It does not
purport to cover all of the special rules, including special rules relating to
optionees subject to Section 16(b) of the Exchange Act and the exercise of an
option with previously-acquired shares, or the state or local income or other
tax consequences inherent in the ownership and exercise of stock options and the
ownership and disposition of the underlying shares or the ownership and
disposition of restricted stock.
An optionee will not recognize taxable income for federal income tax
purposes upon the grant of a NQSO or an ISO.
Upon the exercise of a NQSO, the optionee will recognize ordinary
income in an amount equal to the excess, if any, of the fair market value of the
shares acquired on the date of exercise over the exercise price thereof, and the
Company will generally be entitled to a deduction for such amount at that time.
If the optionee later sells shares acquired pursuant to the exercise of a NQSO,
he or she will recognize long-term or short-term capital gain or loss, depending
on the period for which the shares were held. Long-term capital gain is
generally subject to more favorable tax treatment than ordinary income or
short-term capital gain. Proposed legislation would treat long-term capital gain
even more favorably. There can be no assurance, however, that such proposed
legislation will be enacted.
Upon the exercise of an ISO, the optionee will not recognize taxable
income. If the optionee disposes of the shares acquired pursuant to the exercise
of an ISO more than two years after the date of grant and more than one year
after the transfer of the shares to him or her, the optionee will recognize
long-term capital gain or loss and the Company will not be entitled to a
deduction. However, if the optionee disposes of such shares within the required
holding period, all or a portion of the gain will be treated as ordinary income
and the Company will generally be entitled to deduct such amount.
-17-
<PAGE>
In addition to the federal income tax consequences described above, an
optionee may be subject to the alternative minimum tax, which is payable to the
extent it exceeds the optionee's regular tax. For this purpose, upon the
exercise of an ISO, the excess of the fair market value of the shares over the
exercise price therefor is an adjustment which increases alternative minimum
taxable income. In addition, the optionee's basis in such shares is increased by
such excess for purposes of computing the gain or loss on the disposition of the
shares for alternative minimum tax purposes. If an optionee is required to pay
an alternative minimum tax, the amount of such tax which is attributable to
deferral preferences (including the ISO adjustment) is allowed as a credit
against the optionee's regular tax liability in subsequent years. To the extent
the credit is not used, it is carried forward.
An employee who receives a grant of restricted stock will generally
receive ordinary income equal to the fair market value of the stock at the time
the restriction lapses. Alternatively, the employee may elect to be taxed on the
value at the time of grant. The Company is generally entitled to a deduction
equal to the amount requested to be included in income by the employee, and this
deduction may be taken at the time such request by the employee is made.
REQUIRED VOTE
Approval of the 1996 Plan requires the affirmative vote of the holders
of a majority of the shares of Class A Common Stock present, in person or by
proxy, at the Meeting and entitled to vote on this proposal. If the 1996 Plan is
not approved by Stockholders, the 1996 Plan will not be effective. The Board of
Directors recommends a vote "FOR" approval of the 1996 Plan.
================================================================================
PROPOSAL 4
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
================================================================================
The firm of Ernst & Young, LLP has audited the financial statements of
the Company. The Board of Directors has, subject to ratification by
stockholders, appointed that firm to act as its independent public accountants
for the year ending December 31, 1996. Accordingly, management will present to
the Meeting a resolution ratifying the appointment of Ernst & Young, LLP as the
Company's independent public accountants for the fiscal year ending December 31,
1996.
A representative of Ernst & Young, LLP is expected to be present at the
Meeting with the opportunity to make a statement if the representative desires
to do so and is expected to be available to respond to appropriate questions
addressed by stockholders.
MISCELLANEOUS
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the 1997 Annual
Meeting of Stockholders must be received by the Company not later than April 9,
1997 for inclusion in the Company's proxy statement and form of proxy for that
meeting.
SOLICITATION OF PROXIES
The cost of preparing, assembling and mailing the Notice of Annual
Meeting, this Proxy Statement and Proxies is to be borne by the Company. The
Company will also reimburse brokers who are holders of record of Common Stock
for their expenses in forwarding Proxies and Proxy soliciting material to the
beneficial owners
-18-
<PAGE>
of such shares. In addition to the use of the mails, Proxies may be solicited
without extra compensation by directors, officers and employees of the Company
by telephone, telecopy, telegraph or personal interview.
OTHER MATTERS
Management does not intend to bring before the Meeting for action any
matters other than those specifically referred to above and is not aware of any
other matters which are proposed to be presented by others. If any other matters
or motions should properly come before the Meeting, the persons named in the
Proxy intend to vote thereon in accordance with their judgment on such matters
or motions, including any matters or motions dealing with the conduct of the
Meeting.
PROXIES
All stockholders are urged to fill in their choices with respect to the
matters to be voted upon, sign and promptly return the enclosed form of Proxy.
By Order of the Board of Directors,
JOSEPH J. ELKINS
Secretary
Herndon, Virginia
August 14, 1996
-19-
<PAGE>
PROXY PROXY
- ----- -----
TELEPAD CORPORATION
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS)
The undersigned holder of Common Stock of TELEPAD CORPORATION, revoking
all proxies heretofore given, hereby constitutes and appoints Joseph J. Elkins
and Robert D. Russell and each of them, Proxies, with full power of
substitution, for the undersigned and in the name, place and stead of the
undersigned, to vote all of the undersigned's shares of said stock, according to
the number of votes and with all the powers the undersigned would possess if
personally present, at the Annual Meeting of Stockholders of TELEPAD
CORPORATION, to be held at the Company's executive offices at 380 Herndon
Parkway, Suite 1900, Herndon, Virginia on Thursday, September 19, 1996, at 11:00
A.M., Eastern Daylight Savings Time, and at any adjournments or postponements
thereof.
The undersigned hereby acknowledges receipt of the Notice of Meeting
and Proxy Statement relating to the meeting and hereby revokes any proxy or
proxies heretofore given.
Each properly executed Proxy will be voted in accordance with the
specifications made on the reverse side of this Proxy and in the discretion of
the Proxies on any other matter that may properly come before the meeting. Where
no choice is specified, this Proxy will be voted FOR all listed nominees to
serve as directors and FOR Proposals 1, 3 and 4.
PLEASE MARK, DATE AND SIGN THIS PROXY ON THE REVERSE SIDE
<PAGE>
__________________ _______________ PLEASE MARK YOUR [X]
ACCOUNT NUMBER COMMON CHOICE LIKE THIS IN
BLUE OR BLACK INK:
Will attend the meeting [_]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL
LISTED NOMINEES AND FOR PROPOSALS 1, 3 AND 4.
(1) Proposal to amend the Company's By-Laws to provide for
the classification of directors into three classes
FOR AGAINST ABSTAIN
[_] [_] [_]
(2) Election of seven Directors
FOR all nominees listed WITHHOLD AUTHORITY to vote
(except as marked to the contrary) for all listed nominees below
[_] [_]
CLASS I CLASS II CLASS III
------- -------- ---------
Nominees: Sydney H. Dankman Ronald C. Oklewicz Donald W. Barrett
John M. Toups Alan B. Salisbury John P. Diesel
E. Donald Shapiro
In the event the proposal to amend the Company's by-laws to provide for
the classification of directors is not approved, a vote FOR would be for the
election of all seven directors for a term of one year and until their
successors are duly elected and qualified.
(Instruction: To withhold authority to vote for any individual nominee, circle
that nominee's name in the list provided above.)
(3) Proposal to adopt the Company's 1996 Stock Incentive
Plan
FOR AGAINST ABSTAIN
[_] [_] [_]
(4) Ratify the appointment of Ernst & Young, LLP as the
Company' independent public accountants
FOR AGAINST ABSTAIN
[_] [_] [_]
(5) In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before
the Annual Meeting.
FOR AGAINST ABSTAIN
|_| |_| |_|
Dated _____________, 1996
___________________________
___________________________
Signature(s)
(Signatures should conform
to names as registered. For
jointly owned shares, each
owner should sign. When
signing as attorney,
executor, administrator,
trustee, guardian or
officer of a corporation,
please give full title.)
PLEASE MARK AND SIGN ABOVE AND RETURN PROMPTLY
<PAGE>
EXHIBIT A
PROPOSED NEW ARTICLE III, SECTION 2
TO THE COMPANY'S BY-LAWS
3. ELECTION, TERM AND VACANCIES. The Board of Directors shall
be divided into three classes, designated Class I, Class II and Class III. Such
classes shall be as nearly equal in number as the then total number of directors
constituting the entire Board permits. At the September 19, 1996 annual meeting
of stockholders, Class I, Class II and Class III directors shall be elected for
initial terms expiring at the next succeeding annual meeting, the second
succeeding annual and the third succeeding annual meeting, respectively, and
until their respective successors are elected and qualified. At each annual
meeting of stockholders after September 19, 1996, the directors chosen to
succeed those in the class whose terms then expire shall be elected by the
stockholders for terms expiring at the third succeeding annual meeting after
their election and until their respective successors are elected and qualified.
Newly created directorships or any decrease in directorships resulting from
increases and decreases in the number of directors shall be so apportioned among
the classes as to make all the classes as nearly equal in number as possible;
provided, that when the Board increases the number of directors and fills the
vacancies created thereby such director will hold office for the term expiring
at the annual meeting of stockholders for the term of the class to which they
have been elected expires. Any director may resign at any time upon written
notice to the corporation. Except as General Corporation Law may otherwise
require, in the term between annual meetings of stockholders or special meetings
of stockholders called for the election of directors and/or the removal of one
or more directors and for the filling of any vacancy in that connection, newly
created directors and any vacancies in the Board of Directors, including
unfilled vacancies from the removal of directors for cause or without cause, may
be filled by the vote of a majority of the remaining directors then in office,
although less than a quorum, or by the sole remaining director. Any person
receiving a plurality of the votes cast at any election held at a meeting of
stockholders shall become a director in the class for which such person is a
nominee. Vacancies on the Board shall not affect the validity of any actions
taken by the Board.
<PAGE>
EXHIBIT B
1996 STOCK INCENTIVE PLAN
OF
TELEPAD CORPORATION
1. PURPOSES OF THE PLAN. This stock incentive plan (the
"Plan") is designed to provide an incentive to key employees (including
directors and officers who are key employees) and to consultants and directors
who are not employees of TELEPAD CORPORATION, a Delaware corporation (the
"Company"), or any of its Subsidiaries (as defined in Paragraph 20), and to
offer an additional inducement in obtaining the services of such persons. The
Plan provides for the grant of "incentive stock options" ("ISOs") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), nonqualified stock options which do not qualify as ISOs ("NQSOs") and
stock of the Company which may be subject to restrictions (collectively,
"Awards"). The Company makes no representation or warranty, express or implied,
as to the qualification of any option as an "incentive stock option" under the
Code.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Paragraph 13, the aggregate number of shares of Class A Common Stock, $.01 par
value per share, of the Company ("Class A Common Stock") for which Awards may be
granted under the Plan shall not exceed 1,200,000. Such shares of Class A Common
Stock may, in the discretion of the Board of Directors of the Company (the
"Board of Directors"), consist either in whole or in part of authorized but
unissued shares of Class A Common Stock or shares of Class A Common Stock held
in the treasury of the Company. Subject to the provisions of Paragraph 14, any
shares of Class A Common Stock subject to an option which for any reason
expires, is canceled or is terminated unexercised or which ceases for any reason
to be exercisable or a restricted stock Award which for any reason is forfeited,
shall again become available for the granting of Awards under the Plan. The
Company shall at all times during the term of the Plan reserve and keep
available such number of shares of Class A Common Stock as will be sufficient to
satisfy the requirements of the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered
by a committee of the Board of Directors consisting of not less than two
directors (the "Committee"). Each member of the Committee shall be (a) a
"disinterested person" within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (as the same may be in effect and
interpreted from time to time, "Rule 16b-3") until such time as the amendments
to Rule 16b-3 adopted by the Securities Exchange Commission on May 30, 1996 in
Release No. 34- 37260 become effective with respect to the Plan (the "New Rule
Date") and (b) from and after the New Rule Date, a "non-employee director"
within the meaning of Rule 16b-3. A majority of the members of the Committee
shall constitute a quorum, and the acts of a majority of the members present at
any meeting at which a quorum is present, and any acts approved in writing by
all members without a meeting, shall be the acts of the Committee.
Subject to the express provisions of the Plan, the Committee
shall have the authority, in its sole discretion, with respect to Awards to key
employees or consultants to determine: the key employees and consultants who
shall be granted Awards; the type of Award
<PAGE>
to be granted; the times when an Award shall be granted; the number of shares of
Class A Common Stock to be subject to each Award; the term of each option; the
date each option shall become exercisable; whether an option shall be
exercisable in whole, in part or in installments and, if in installments, the
number of shares of Class A Common Stock to be subject to each install ment,
whether the installments shall be cumulative, the date each installment shall
become exercisable and the term of each installment; whether to accelerate the
date of exercise of any option or installment; whether shares of Class A Common
Stock may be issued upon the exercise of an option as partly paid and, if so,
the dates when future installments of the exercise price shall become due and
the amounts of such installments; the exercise price of each option; the form of
payment of the exercise price; whether to restrict the sale or other disposition
of a stock Award or the shares of Class A Common Stock acquired upon the
exercise of an option and, if so, whether and under what conditions to waive any
such restriction; whether and under what conditions to subject all or a portion
of the grant or exercise of an option or the vesting of a stock Award or the
shares acquired pursuant to the exercise of an option to the fulfillment of
certain restrictions or contingencies as specified in the contract referred to
in Paragraph 12 hereof (the "Contract"), including without limitation,
restrictions or contingencies relating to entering into a covenant not to
compete with the Company, any of its Subsidiaries or a Parent (as defined in
Paragraph 20), to financial objectives for the Company, any of its Subsidiaries
or a Parent, a division of any of the foregoing, a product line or other
category, and/or to the period of continued employment of the Award holder with
the Company, any of its Subsidiaries or a Parent, and to determine whether such
restrictions or contingencies have been met; whether an Award holder is Disabled
(as defined in Paragraph 20); and with respect to all Awards, subject prior to
the New Rule Date to the limitations with respect to formula plans under Rule
16b-3 in the case of Non-Employee Director Options (as defined in Paragraph 20):
to determine the amount, if any, necessary to satisfy the obligation of the
Company, a Subsidiary or Parent to withhold taxes or other amounts; the fair
market value of a share of Class A Common Stock; to construe the respective
Contracts and the Plan; with the consent of the Award holder, to cancel or
modify an Award, PROVIDED, that the modified provision is permitted to be
included in an Award granted under the Plan on the date of the modification, and
FURTHER, PROVIDED, that in the case of a modification (within the meaning of
Section 424(h) of the Code) of an ISO, such Award as modified would be permitted
to be granted on the date of such modification under the terms of the Plan; to
prescribe, amend and rescind rules and regulations relating to the Plan; from
and after the New Rule Date, to approve any provision which under Rule 16b-3
requires the approval of the Board of Directors, a committee of non-employee
directors or the stockholders to be exempt (unless otherwise specifically
provided herein); and to make all other determinations necessary or advisable
for administering the Plan. Any controversy or claim arising out of or relating
to the Plan, any Award granted under the Plan or any Contract shall be
determined unilaterally by the Committee in its sole discretion. The
determinations of the Committee on the matters referred to in this Paragraph 3
shall be conclusive and binding on the parties. No member or former member of
the Committee shall be liable for any action, failure to act or determination
made in good faith with respect to the Plan or any option hereunder.
4. OPTION ELIGIBILITY; GRANTS. The Committee may from time to
time, in its sole discretion, consistent with the purposes of the Plan, grant
Employee Options to key employees (including officers and directors who are key
employees) of, and Consultant Options to consultants to, the Company or any of
its Subsidiaries. Such options granted shall cover such number of shares of
Class A Common Stock as the Committee may determine, in its sole discretion, as
set forth in the applicable Contract; PROVIDED, HOWEVER, that the maximum number
of shares subject to Employee Options that may be granted to any individual
during any calendar year under the Plan (the "162(m) Maximum") shall be 300,000
shares; and FURTHER,
<PAGE>
PROVIDED, that the aggregate market value (determined at the time the option is
granted in accordance with Paragraph 5) of the shares of Class A Common Stock
for which any eligible employee may be granted ISOs under the Plan or any other
plan of the Company, or of a Parent or a Subsidiary of the Company, which are
exercisable for the first time by such optionee during any calendar year shall
not exceed $100,000. Such ISO limitation shall be applied by taking ISOs into
account in the order in which they were granted. Any option granted in excess of
such ISO limitation amount shall be treated as a NQSO to the extent of such
excess.
Every individual who, on the date the Plan is approved by
stockholders, is a Non-Employee Director (as defined in Paragraph 20) shall be
granted on such date a Non-Employee Director Option to purchase 90,000 shares of
Class A Common Stock. Thereafter, on the date an individual first becomes a
Non-Employee Director, he shall be granted an option to purchase 90,000 shares
of Class A Common Stock. In the event the remaining shares available for grant
under the Plan are not sufficient to grant the Non-Employee Director Options to
each such Non-Employee Director at any time, the number of shares subject to the
Non-Employee Director Options to be granted at such time shall be reduced
proportionately. Each Non-Employee Director Option (i) shall be immediately
exercisable as to one-third of the number of shares subject thereto, (ii) shall
become exercisable as to an additional one-third of the shares upon the first
Annual Meeting of the Company following the completion of the year in which the
grant was made, provided that the Non-Employee Director holding such Option
continues as a director of the Company upon the completion of such Annual
Meeting, and (iii) shall become exercisable as to an additional one-third of the
shares upon the second Annual Meeting of the Company following the completion of
the year in which the grant was made, provided that the Non-Employee Director
holding such Option continues as a director of the Company upon the completion
of such Annual Meeting. The Committee shall not have any discretion with respect
to the selection of directors to receive Non-Employee Director Options or the
amount, the price or the timing with respect thereto.
5. EXERCISE PRICE. The exercise price of the shares of Class A
Common Stock under each Employee Option and Consultant Option shall be
determined by the Committee, in its sole discretion, as set forth in the
applicable Contract; PROVIDED, HOWEVER, that the exercise price of an ISO shall
not be less than the fair market value of the Class A Common Stock subject to
such option on the date of grant; and FURTHER, PROVIDED, that if, at the time an
ISO is granted, the optionee owns (or is deemed to own under Section 424(d) of
the Code) stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company, of any of its Subsidiaries or of a Parent,
the exercise price of such ISO shall not be less than 110% of the fair market
value of the Class A Common Stock subject to such ISO on the date of grant. The
exercise price of the shares of Class A Common Stock under each Non-Employee
Director Option shall be equal to the fair market value of the Class A Common
Stock subject to such option on the date of grant. Notwithstanding the
foregoing, in no event may the exercise price of any option granted before
September 29, 1997 be less than the fair market value of the underlying shares
on the date of grant or $3.5088 per share, whichever is greater.
The fair market value of a share of Class A Common Stock on
any day shall be (a) if the principal market for the Class A Common Stock is a
national securities exchange, the average of the highest and lowest sales prices
per share of Class A Common Stock on such day as reported by such exchange or on
a composite tape reflecting transactions on such exchange, (b) if the principal
market for the Class A Common Stock is not a national securities exchange and
the Class A Common Stock is quoted on The Nasdaq Stock Market ("Nasdaq"), and
(i) if actual sales price information is available with respect to the Class A
Common Stock, the average of the high-
<PAGE>
est and lowest sales prices per share of Class A Common Stock on such day on
Nasdaq, or (ii) if such information is not available, the average of the highest
bid and lowest asked prices per share of Class A Common Stock on such day on
Nasdaq, or (c) if the principal market for the Class A Common Stock is not a
national securities exchange and the Class A Common Stock is not quoted on
Nasdaq, the average of the highest bid and lowest asked prices per share of
Class A Common Stock on such day as reported on the OTC Bulletin Board Service
or by National Quotation Bureau, Incorporated or a comparable service; PROVIDED,
HOWEVER, that if clauses (a), (b) and (c) of this Paragraph are all
inapplicable, or if no trades have been made or no quotes are available for such
day, the fair market value of the Class A Common Stock shall be determined by
the Board of Directors by any method consistent with applicable regulations
adopted by the Treasury Department relating to stock options.
6. TERM. The term of each Employee Option and Consultant
Option granted pursuant to the Plan shall be such term as is established by the
Committee, in its sole discretion, as set forth in the applicable Contract;
PROVIDED, HOWEVER, that the term of each ISO granted pursuant to the Plan shall
be for a period not exceeding 10 years from the date of grant thereof; and
FURTHER, PROVIDED, that if, at the time an ISO is granted, the optionee owns (or
is deemed to own under Section 424(d) of the Code) stock possessing more than
10% of the total combined voting power of all classes of stock of the Company,
of any of its Subsidiaries or of a Parent, the term of the ISO shall be for a
period not exceeding five years from the date of grant. Employee Options and
Consultant Options shall be subject to earlier termination as hereinafter
provided. Subject to earlier termination as hereinafter provided, each
Non-Employee Director Option shall be for a term of six years commencing on the
date of grant.
7. EXERCISE. An option (or any part or installment thereof),
to the extent then exercisable, shall be exercised by giving written notice to
the Company at its principal office stating which option is being exercised,
specifying the number of shares of Class A Common Stock as to which such option
is being exercised and accompanied by payment in full of the aggregate exercise
price therefor (or the amount due on exercise if the Contract with respect to an
Employee Option permits installment payments) (a) in cash or by certified check
or (b) in the case of an Employee Option or a Consultant Option, if the
applicable Contract permits, with previously acquired shares of Class A Common
Stock having an aggregate fair market value on the date of exercise (determined
in accordance with Paragraph 5) equal to the aggregate exercise price of all
options being exercised, or with any combination of cash, certified check or
shares of Class A Common Stock having such value. The Company shall not be
required to issue any shares of Class A Common Stock pursuant to any such option
until all required payments, including any required withholding, have been made.
The Committee may, in its sole discretion, permit payment of
the exercise price of an option by delivery by the optionee of a properly
executed notice, together with a copy of his irrevocable instructions to a
broker acceptable to the Committee to deliver promptly to the Company the amount
of sale or loan proceeds sufficient to pay such exercise price. In connection
therewith, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.
A person entitled to receive Class A Common Stock upon the
exercise of an option shall not have the rights of a stockholder with respect to
such shares of Class A Common Stock until the date of issuance of a stock
certificate for such shares or in the case of uncertificated shares, an entry is
made on the books of the Company's transfer agent representing such shares;
PROVIDED, HOWEVER, that until such stock certificate is issued or book entry is
made,
<PAGE>
any optionee using previously acquired shares of Class A Common Stock in payment
of an option exercise price shall continue to have the rights of a stockholder
with respect to such previously acquired shares.
In no case may a fraction of a share of Class A Common Stock
be purchased or issued under the Plan.
8. TERMINATION OF RELATIONSHIP. Except as may otherwise be
expressly provided in the applicable Contract, any holder of an Employee Option
or Consultant Option whose relationship with the Company, its Parent and
Subsidiaries as an employee or a consultant has terminated for any reason (other
than as a result of the death or Disability of the optionee) may exercise such
option, to the extent exercisable on the date of such termination, at any time
within three months after the date of termination, but not thereafter and in no
event after the date the option would otherwise have expired; PROVIDED, HOWEVER,
that if such relationship is terminated either (a) for Cause (as defined in
Paragraph 20), or (b) without the consent of the Company, such option shall
terminate immediately.
For the purposes of the Plan, an employment relationship shall
be deemed to exist between an individual and the Company, any of its
Subsidiaries or a Parent if, at the time of the determination, the individual
was an employee of such corporation for purposes of Section 422(a) of the Code.
As a result, an individual on military, sick leave or other bona fide leave of
absence shall continue to be considered an employee for purposes of the Plan
during such leave if the period of the leave does not exceed 90 days, or, if
longer, so long as the individual's right to reemployment with the Company, any
of its Subsidiaries or a Parent is guaranteed either by statute or by contract.
If the period of leave exceeds 90 days and the individual's right to
reemployment is not guaranteed by statute or by contract, the employment
relationship shall be deemed to have terminated on the 91st day of such leave.
Except as may otherwise be expressly provided in the
applicable Contract, Employee Options and Consultant Options granted under the
Plan shall not be affected by any change in the status of the optionee so long
as the optionee continues to be an employee of, or a consultant to, the Company,
or any of the Subsidiaries or a Parent (regardless of having changed from one to
the other or having been transferred from one corporation to another).
The holder of a Non-Employee Director Option who ceases to be
a director of the Company for any reason (other than as a result of his death or
Disability) may exercise such option, to the extent exercisable on the date of
such termination, at any time within three months after the date of termination,
but not thereafter and in no event after the date the option would otherwise
have expired; PROVIDED, HOWEVER, that if such relationship is terminated for
Cause, such option shall terminate immediately. The Non-Employee Director
Option, however, shall not be affected by the optionee becoming an employee of
the Company, any of its Subsidiaries or a Parent.
Nothing in the Plan or in any option granted under the Plan
shall confer on any optionee any right to continue in the employ of, or as a
consultant to, the Company, any of its Subsidiaries or a Parent, or as a
director of the Company, or interfere in any way with any right of the Company,
any of its Subsidiaries or a Parent to terminate the optionee's relationship at
any time for any reason whatsoever without liability to the Company, any of its
Subsidiaries or a Parent.
<PAGE>
9. DEATH OR DISABILITY OF AN OPTIONEE. Except as may otherwise
be expressly provided in the applicable Contract, if an optionee dies (a) while
he is an employee of, or consultant to, the Company, any of its Subsidiaries or
a Parent, (b) within three months after the termination of such relationship
(unless such termination was for Cause or without the consent of the Company) or
(c) within one year following the termination of such relationship by reason of
his Disability, his Employee Option or Consultant Option may be exercised, to
the extent exercisable on the date of his death, by his Legal Representative (as
defined in Paragraph 20) at any time within one year after death, but not
thereafter and in no event after the date the option would otherwise have
expired.
Except as may otherwise be expressly provided in the
applicable Contract, any optionee whose relationship as an employee of, or
consultant to, the Company, its Parent and Subsidiaries has terminated by reason
of such optionee's Disability may exercise his Employee Option or Consultant
Option, to the extent exercisable upon the effective date of such termi nation,
at any time within one year after such date, but not thereafter and in no event
after the date the option would otherwise have expired.
The holder of a Non-Employee Director Option who ceases to be
a director of the Company as a result of his death or Disability may exercise
such option, to the extent exercisable on the date of such termination, at any
time within one year after the date of termination, but not thereafter and in no
event after the date the option would otherwise have expired. In the case of the
death of the optionee, the option may be exercised by his Legal Representative.
10. STOCK AWARDS. The Committee may from time, in its sole
discretion, consistent with the purposes of the Plan, grant shares of Class A
Common Stock to key employees (including officers and directors who are key
employees) of, or consultants to, the Company or any of its Subsidiaries, which
maybe subject to such contingencies and restrictions as the Committee may
determine, as set forth in the Contract. Prior to the occurrence of any
specified contingency, the shares shall be considered outstanding shares owned
by the Award holder, who shall, subject to the contingencies and restrictions
set forth in the Award, have all rights of a stockholder of record with respect
to such shares, including the right to vote and to receive distributions. Upon
the occurrence of any such contingency, the Award holder may be required to
forfeit all or a portion of such shares back to the Company. The shares shall
vest in the Award holder when all of the restrictions and contingencies lapse.
Accordingly, the Committee may require that such shares be held by the Company,
together with a stock power duly endorsed in blank by the Award holder, until
the shares vest in the Award holder.
11. COMPLIANCE WITH SECURITIES LAWS. The Committee may
require, in its sole discretion, as a condition to the exercise of any option
that either (a) a Registration Statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the shares of Class A Common
Stock to be issued upon such exercise shall be effective and current at the time
of exercise, or (b) there is an exemption from registration under the Securities
Act for the issuance of the shares of Class A Common Stock upon such exercise.
Nothing herein shall be construed as requiring the Company to register shares
subject to any option under the Securities Act or to keep any Registration
Statement effective or current.
The Committee may require, in its sole discretion, as a
condition to the receipt of an Award or the exercise of any option that the
Award holder execute and deliver to the Company his representations and
warranties, in form, substance and scope satisfactory to the Committee, which
the Committee determines are necessary or convenient to facilitate the
<PAGE>
perfection of an exemption from the registration requirements of the Securities
Act, applicable state securities laws or other legal requirement, including
without limitation that (a) the shares of Class A Common Stock to be received
under the Award or issued upon the exercise of the option are being acquired by
the Award holder for his own account, for investment only and not with a view to
the resale or distribution thereof, and (b) any subsequent resale or
distribution of shares of Class A Common Stock by such Award holder will be made
only pursuant to (i) a Registration Statement under the Securities Act which is
effective and current with respect to the shares of Class A Common Stock being
sold, or (ii) a specific exemption from the registration requirements of the
Securities Act, but in claiming such exemption, the Award holder shall prior to
any offer of sale or sale of such shares of Class A Common Stock provide the
Company with a favorable written opinion of counsel satisfactory to the Company,
in form, substance and scope satisfactory to the Company, as to the
applicability of such exemption to the proposed sale or distribution.
In addition, if at any time the Committee shall determine, in
its sole discretion, that the listing or qualification of the shares of Class A
Common Stock subject to any Award or option on any securities exchange, Nasdaq
or under any applicable law, or the consent or approval of any governmental
agency or regulatory body, is necessary or desirable as a condition to, or in
connection with, the granting of an Award or the issuing of shares of Class A
Common Stock thereunder, such Award may not be granted and such option may not
be exercised in whole or in part unless such listing, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
12. AWARD CONTRACTS. Each Award shall be evidenced by an
appropriate Contract which shall be duly executed by the Company and the Award
holder, and shall contain such terms, provisions and conditions not inconsistent
herewith as may be deter mined by the Committee. The terms of each Award and
Contract need not be identical.
13. ADJUSTMENTS UPON CHANGES IN CLASS A COMMON STOCK.
Notwithstanding any other provision of the Plan, in the event of a stock
dividend, recapitalization, merger in which the Company is the surviving
corporation, spin-off, split-up, combination or exchange of shares or the like
which results in a change in the number or kind of shares of Class A Common
Stock which is outstanding immediately prior to such event, the aggregate number
and kind of shares subject to the Plan, the aggregate number and kind of shares
subject to each outstanding option and the exercise price thereof, and the
number and kind of shares subject to future grants of Non-Employee Director
Options and the 162(m) Maximum shall be appropriately adjusted by the Board of
Directors, whose determination shall be conclusive and binding on all parties.
Such adjustment may provide for the elimination of fractional shares which might
otherwise be subject to options without payment therefor.
In the event of (a) the liquidation or dissolution of the
Company, or (b) a merger in which the Company is not the surviving corporation
or a consolidation, any outstanding options or unvested stock shall terminate
upon the earliest of any such event, unless other provision is made therefor in
the transaction.
14. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was
adopted by the Board of Directors on July 10, 1996. No ISO may be granted under
the Plan after July 9, 2006. The Board of Directors, without further approval of
the Company's stockholders, may at any time suspend or terminate the Plan, in
whole or in part, or amend it from time to time in such respects as it may deem
advisable, including, without limitation, in order that ISOs granted hereunder
meet the requirements for "incentive stock options" under the Code, to comply
with the
<PAGE>
provisions of Rule 16b-3, Section 162(m) of the Code, or any change in
applicable law, regulations, rulings or interpretations of administrative
agencies; PROVIDED, HOWEVER, that no amendment shall be effective without the
requisite prior or subsequent stockholder approval which would (a) except as
contemplated in Paragraph 12, increase the maximum number of shares of Class A
Common Stock for which Awards may be granted under the Plan or the 162(m)
Maximum, (b) prior to the New Rule Date, materially increase the benefits
accruing to participants under the Plan or (c) change the eligibility
requirements to receive Awards hereunder. Notwithstanding the foregoing, prior
to the New Rule Date, the provisions regarding the selection of directors for
participation in, and the amount, the price or the timing of, Non-Employee
Director Options shall not be amended more than once every six months, other
than to comport with changes in the Code, the Employee Retirement Income
Security Act or the rules thereunder. No termination, suspension or amendment of
the Plan shall, without the consent of the holder of an existing and outstanding
Award affected thereby, adversely affect his rights under such option. The power
of the Committee to construe and administer any Awards granted under the Plan
prior to the termination or suspension of the Plan nevertheless shall continue
after such termination or during such suspension.
15. NON-TRANSFERABILITY. No option granted under the Plan
shall be transferable otherwise than by will or the laws of descent and
distribution, and options may be exercised, during the lifetime of the optionee,
only by the optionee or his Legal Representatives. Except as may otherwise be
expressly provided in the Contract, stock Awards which have not vested shall not
be transferable otherwise than by will or the laws of descent and distribution.
Except to the extent provided above, Awards may not be assigned, transferred,
pledged, hypothecated or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar process,
and any such attempted assignment, transfer, pledge, hypothecation or
disposition shall be null and void AB INITIO and of no force or effect.
16. WITHHOLDING TAXES. The Company, a Subsidiary or Parent may
withhold (a) cash, (b) subject to any limitations under Rule 16b-3, shares of
Class A Common Stock to be issued under a stock Award or upon exercise of an
option having an aggregate fair market value on the relevant date (determined in
accordance with Paragraph 5), or (c) any combination thereof, in an amount equal
to the amount which the Committee determines is necessary to satisfy the
obligation of the Company, a Subsidiary or Parent to withhold Federal, state and
local income taxes or other amounts incurred by reason of the grant, vesting or
disposition of an Award, the exercise of an option, or the disposition of the
underlying shares of Class A Common Stock. Alternatively, the Company may
require the holder to pay to the Company such amount, in cash, promptly upon
demand.
17. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such
legend or legends upon the certificates for shares of Class A Common Stock
issued under a stock Award or upon exercise of an option under the Plan and may
issue such "stop transfer" instructions to its transfer agent in respect of such
shares as it determines, in its discretion, to be necessary or appropriate to
(a) prevent a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act and any applicable state securities laws, (b)
implement the provisions of the Plan or any agreement between the Company and
the Award holder with respect to such shares of Class A Common Stock, or (c)
permit the Company to determine the occurrence of a "disqualifying disposition,"
as described in Section 421(b) of the Code, of the shares of Class A Common
Stock issued or transferred upon the exercise of an ISO granted under the Plan.
<PAGE>
The Company shall pay all issuance taxes with respect to the
issuance of shares of Class A Common Stock under a stock Award or upon the
exercise of an option granted under the Plan, as well as all fees and expenses
incurred by the Company in connection with such issuance.
18. USE OF PROCEEDS. The cash proceeds received upon the
exercise of an option under the Plan shall be added to the general funds of the
Company and used for such corporate purposes as the Board of Directors may
determine.
19. SUBSTITUTIONS AND ASSUMPTIONS OF AWARDS OF CERTAIN
CONSTITUENT CORPORATIONS. Anything in this Plan to the contrary notwithstanding,
the Board of Directors may, without further approval by the stockholders,
substitute new Awards for prior options or restricted stock of a Constituent
Corporation (as defined in Paragraph 20) or assume the prior options or
restricted stock of such Constituent Corporation.
20. DEFINITIONS. For purposes of the Plan, the following
terms shall be defined as set forth below:
(a) Cause. The term "Cause" shall mean (i) in the case
of an employee or consultant, if there is a written employment or consulting
agreement between the Award holder and the Company, any of its Subsidiaries or a
Parent which defines termination of such relationship for cause, cause as
defined in such agreement, and (ii) in all other cases, cause as defined by
applicable state law.
(b) Constituent Corporation. The term "Constituent
Corporation" shall mean any corporation which engages with the Company, any of
its Subsidiaries or a Parent in a transaction to which Section 424(a) of the
Code applies (or would apply if the option assumed or substituted were an ISO),
or any Parent or any Subsidiary of such corporation.
(c) Consultant Option. The term "Consultant Option"
shall mean a NQSO granted pursuant to the Plan to a person who, at the time of
grant, is a consultant to the Company or a Subsidiary of the Company, and at
such time is not an employee of the Company or any of its Subsidiaries.
(d) Disability. The term "Disability" shall mean a
permanent and total disability within the meaning of Section 22(e)(3) of the
Code.
(e) Employee Option. The term "Employee Option" shall
mean an option granted pursuant to the Plan to an individual who, at the time of
grant, is a key employee of the Company or any of its Subsidiaries.
(f) Legal Representative. The term "Legal
Representative" shall mean the executor, administrator or other person who at
the time is entitled by law to exercise the rights of a deceased or
incapacitated optionee with respect to an option granted under the Plan.
(g) Non-Employee Director. The term "Non-Employee
Director" shall mean a person who is a director of the Company, but is not an
employee of the Company, any of its Subsidiaries or a Parent.
<PAGE>
(h) Non-Employee Director Option. The term
"Non-Employee Director Option" shall mean a NQSO granted pursuant to the Plan to
a person who, at the time of the grant, is a Non-Employee Director.
(i) Parent. The term "Parent" shall have the same
definition as "parent corporation" in Section 424(e) of the Code.
(j) Subsidiary. The term "Subsidiary" shall have the
same definition as "subsidiary corporation" in Section 424(f) of the Code.
21. GOVERNING LAW; CONSTRUCTION. The Plan, the Awards and
Contracts hereunder and all related matters shall be governed by, and construed
in accordance with, the laws of the State of Delaware, without regard to
conflict of law provisions.
Neither the Plan nor any Contract shall be construed or
interpreted with any presumption against the Company by reason of the Company
causing the Plan or Contract to be drafted. Whenever from the context it appears
appropriate, any term stated in either the singular or plural shall include the
singular and plural, and any term stated in the masculine, feminine or neuter
gender shall include the masculine, feminine and neuter.
22. PARTIAL INVALIDITY. The invalidity, illegality or
unenforceability of any provision in the Plan, any Award or Contract shall not
affect the validity, legality or enforceability of any other provision, all of
which shall be valid, legal and enforceable to the fullest extent permitted by
applicable law.
23. STOCKHOLDER APPROVAL. The Plan shall be subject to
approval by a majority of the votes present in person or by proxy and entitled
to vote hereon at the next duly held meeting of the Company's stockholders at
which a quorum is present. No options granted hereunder may be exercised and no
stock Award granted hereunder may vest prior to such approval; PROVIDED,
HOWEVER, that the date of grant of any Award shall be determined as if the Plan
had not been subject to such approval. Notwithstanding the foregoing, if the
Plan is not approved by a vote of the stockholders of the Company on or before
July 9, 1997, the Plan and any Awards granted hereunder shall terminate.
