<PAGE>
PRELIMINARY PROXY MATERIAL
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
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 the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
NATURAL MICROSYSTEMS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of the transaction:
5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
NATURAL MICROSYSTEMS CORPORATION
100 CROSSING BOULEVARD
FRAMINGHAM, MASSACHUSETTS 01702
(508) 620-9300
March 29, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Natural MicroSystems Corporation (the "Company"), which will be held on April
28, 2000 at 1:00 p.m. at its corporate offices at 100 Crossing Boulevard,
Framingham, Massachusetts.
The following Notice of Annual Meeting of Stockholders and Proxy Statement
describe the items to be considered by the stockholders and contain certain
information about the Company and its directors and officers.
Please sign and return the enclosed proxy card as soon as possible in the
envelope provided so that your shares can be voted at the meeting in
accordance with your instructions. Even if you plan to attend the meeting, we
urge you to sign and promptly return the proxy card. You can revoke it at any
time before it is exercised at the meeting or vote your shares personally if
you attend.
We look forward to seeing you.
Sincerely,
/s/ Robert P. Schechter
Robert P. Schechter
Chairman and Chief Executive Officer
<PAGE>
NATURAL MICROSYSTEMS CORPORATION
100 CROSSING BOULEVARD
FRAMINGHAM, MASSACHUSETTS 01702
(508) 620-9300
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 28, 2000
The Annual Meeting of Stockholders of Natural MicroSystems Corporation (the
"Company") will be held at its corporate offices at 100 Crossing Boulevard,
Framingham, Massachusetts on April 28, 2000 at 1:00 p.m., for the following
purposes:
1. To elect two directors for a three-year term.
2. To vote upon an amendment to the certificate of incorporation of the
Company to increase the number of authorized shares of common stock from
45,000,000 to 125,000,000.
3. To approve the 2000 Equity Incentive Plan.
4. To ratify the Board of Directors' selection of PricewaterhouseCoopers
LLP as the Company's independent auditors for the year ending December 31,
2000.
5. To transact such other business as may properly come before the
meeting and any adjournments thereof.
Stockholders of record at the close of business on March 16, 2000 will be
entitled to notice of and to vote at the meeting and any adjournments thereof.
By Order of the Board of Directors
Dianne L. Callan
Secretary
Dated: March 29, 2000
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES.
<PAGE>
NATURAL MICROSYSTEMS CORPORATION
100 Crossing Boulevard
Framingham, Massachusetts 01702
(508) 620-9300
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished to the holders of common stock, $.01 par
value ("Common Stock"), of Natural MicroSystems Corporation, a Delaware
corporation (the "Company"), in connection with the solicitation of proxies
for use at the Annual Meeting of Stockholders to be held on April 28, 2000 and
at any adjournment of that meeting. The enclosed proxy is solicited on behalf
of the Board of Directors of the Company. Each properly signed proxy will be
voted in accordance with the instructions contained therein and, if no choice
is specified, the proxy will be voted in favor of the proposals set forth in
the Notice of Annual Meeting.
A person giving the enclosed proxy has the power to revoke it by written
notice to the Secretary of the Company, by giving a later-dated proxy, or by
revoking it in person at the meeting.
The approximate date on which this Proxy Statement and the enclosed proxy
will first be sent to stockholders is March 31, 2000. The Company's Annual
Report to Stockholders for 1999 is being mailed together with this Proxy
Statement.
Only holders of Common Stock of record on the stock transfer books of the
Company at the close of business on March 16, 2000 (the "record date") will be
entitled to vote at the meeting and at any adjournment thereof. There were
16,523,553 shares of Common Stock outstanding at the close of business on the
record date.
Each share of Common Stock is entitled to one vote. The affirmative vote of
the holders of a plurality of the shares represented at the meeting, at which
a quorum is present, is required for the election of directors. The
affirmative vote of a majority of the outstanding shares of common stock is
required for approval of the amendment to the Company's certificate of
incorporation. Approval of the other matters which are before the meeting will
require the affirmative vote at the meeting, at which a quorum is present, of
the holders of a majority of the shares of common stock voting with respect to
such matters. Votes will be tabulated by the Company's transfer agent, subject
to the supervision of persons designated by the Board of Directors as
inspectors.
Under the Company's By-Laws, a quorum at the meeting will consist of a
majority of the outstanding shares of Common Stock as of the record date.
Shares voted to abstain or to withhold as to a particular matter (including
shares as to which a nominee, such as a broker holding shares in street name
for a beneficial owner, has no voting authority in respect of such matter)
will be deemed represented for quorum purposes but will not be deemed to be
voting on such matters and, therefore, will not be the equivalent of negative
votes as to such matters. It is the position of the Securities and Exchange
Commission (the "SEC"), however, that, for purposes of approval pursuant to
Rule 16b-3 under the Securities Exchange Act of 1934 (the "1934 Act") of the
third proposal listed on the Notice of Annual Meeting, abstentions will be
deemed the equivalent of negative votes.
1
<PAGE>
STOCK OWNERSHIP OF DIRECTORS,
EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 16, 2000 by (a) each
director of the Company, (b) each of the executive officers named in the
Summary Compensation Table below, (c) all directors and executive officers as
a group and (d) each person known to the Company to own beneficially 5% or
more of its Common Stock. Except as otherwise indicated, each such person has
sole investment and voting power with respect to the shares shown as being
beneficially owned by such person, based on information provided to the
Company.
<TABLE>
<CAPTION>
Number of Shares Percent of
Name Beneficially Owned(1) Outstanding Shares
---- --------------------- ------------------
<S> <C> <C>
Robert P. Schechter................ 516,041 3.1%
Zenas W. Hutcheson, III............ 77,312 *
W. Frank King PhD.................. 27,000 *
Pamela D. A. Reeve................. 19,900 *
Ronald W. White.................... 30,970 *
Robert E. Hult..................... 38,300 *
George D. Kontopodis, Ph.D......... 99,039 *
Dorothy A. Terrell................. 90,028 *
R. Brough Turner................... 199,551 1.2%
Allen P. Carney.................... 80,712 *
All directors and executive
officers as a
group (15 persons)................ 1,431,353 8.7%
FMR Corp.(2)
82 Devonshire Street
Boston, MA 02109.................. 1,448,320 8.8%
</TABLE>
- --------
* Less than 1%.
(1) Includes shares which may be acquired within sixty days after March 16,
2000 by exercise of stock options by the directors and executive officers
as follows: Mr. White, 5,000; Mr. Kontopodis, 5,625; Mr. Hutcheson, 5,000;
Ms. Terrell, 8,047; Dr. King, 10,100; Mr. Turner, 4,375; Mr. Schechter,
12,500; Mr. Carney, 9,687; Mr. Hult, 5,625; all directors and executive
officers as a group, 76,764.
(2) Consists of shares held by Fidelity Growth Company Fund (the "Fund") and
other registered investment companies which are advisory clients of FMR
Corp. ("FMR"). FMR may be deemed to have sole investment power as to all
such shares. The Fund has sole voting power as to 1,119,700 of such
shares. This information is based solely on a Schedule 13G filed with the
SEC.
2
<PAGE>
ELECTION OF DIRECTORS
(Item 1 of Notice)
There are currently five members of the Board of Directors, divided into
three classes with terms expiring respectively at the 2000, 2001 and 2002
annual meetings of stockholders. The Board has fixed the number of directors
for the ensuing year at five and nominated Messrs. Schechter and White, whose
terms are expiring, for reelection. Directors elected at the meeting will
serve a three-year term expiring at the time of the annual meeting of
stockholders in 2003 and when their successors are elected and qualified. The
shares represented by the enclosed proxy will be voted to elect each nominee
unless such authority is withheld by marking the proxy to that effect. Each
nominee has agreed to serve, but in the event a nominee becomes unavailable
for any reason, the proxy, unless authority has been withheld as to such
nominee, may be voted for the election of a substitute.
The following information is furnished with respect to each nominee for
election as a director and for each director whose term of office will
continue after the meeting.
<TABLE>
<CAPTION>
Principal Occupation and Business
Name and Age as of March Director Experience During Last Five Years;
1, 2000 Since Directorships of Public Companies
- ------------------------ -------- ----------------------------------
<S> <C> <C>
Nominees for Reelection for Terms Expiring in 2003
Robert P. Schechter, 1995 Mr. Schechter has served as a member of the
51..................... Board, President and Chief Executive Officer
of the Company since April 1995 and as
Chairman of the Board since March 1996. From
1987 to 1994, Mr. Schechter held various
senior executive positions with Lotus
Development Corporation and from 1980 to 1987
he was a partner of Coopers and Lybrand LLP.
Mr. Schechter is also a director of Infinium
Software, Inc., a developer of enterprise-
level business software applications.
Ronald W. White, 59..... 1988 Mr. White has been, since October 1997, a
partner of Argo Global Capital, formerly
known as GSM Capital, a venture capital fund
focused on wireless technology. Since 1983,
Mr. White has been a partner of Advanced
Technology Development Fund, a venture
capital firm.
Directors Whose Terms
Expire in 2001
W. Frank King, Ph.D., 1997 Dr. King has been, since November 1998, a
60..................... private investor. From 1992 to 1998, he was
Chief Executive Officer and a director of PSW
Technologies, Inc. (formerly a division of
Pencom, Inc.), a provider of software
services. From 1988 to 1992, Dr. King was
Senior Vice President of Development of Lotus
Development Corporation, and for the previous
19 years he served in various positions with
IBM Corporation, including his last position
as Vice President of Development for the
entry system division. He is also a director
of Auspex Systems, Inc., a provider of
network-attached storage devices; eOn
Communications Corporation, formerly known as
Cortelco Systems, Inc., a provider of
telecommunications applications; Excalibur
Technologies Corporation, a developer of
document management software; PSW
Technologies, Inc.; Best Software, Inc., a
supplier of corporate resource management
software solutions; and Perficient, Inc., a
provider of virtual professional services
organizations to Internet software companies.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation and Business
Name and Age as of March Director Experience During Last Five Years;
1, 2000 Since Directorships of Public Companies
- ------------------------ -------- ----------------------------------
<S> <C> <C>
Pamela D. A. Reeve, 50.. 1997 Ms. Reeve has served, since September 1993,
as Chief Executive Officer and a director
and, from 1989 to September 1993, as
President, Chief Operating Officer and a
director of Lightbridge, Inc., a provider of
products and services which enable wireless
telecommunications carriers to improve
customer acquisition and retention processes.
From 1978 to 1989, she was with The Boston
Consulting Group, a management consulting
firm. Ms. Reeve is a director of WebLink
Wireless, Inc., formerly known as PageMart
Wireless, Inc., a provider of wireless
messaging services.
Director Whose Term
Expires in 2002
Zenas W. Hutcheson, III,
46..................... 1989 Mr. Hutcheson has been, since September 1997,
a general partner of St. Paul Venture
Capital, a venture capital firm. From 1996 to
1998, Mr. Hutcheson was Chief Executive
Officer of Vivo Software, Inc., a developer
of web-based video and audio streaming
applications. From 1981 to 1996, Mr.
Hutcheson was president of Hutcheson & Co.,
Inc., a management consulting firm.
</TABLE>
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
The Board of Directors has Audit and Compensation Committees. It does not
have a nominating or similar committee.
The Audit Committee reviews the internal accounting procedures of the
Company and consults with and reviews the services provided by the Company's
independent auditors. The directors currently serving on the Audit Committee
are Dr. King and Ms. Reeve. The Audit Committee held four meetings during
1999.
The Compensation Committee reviews and recommends to the Board the
compensation and benefits of all officers of the Company and reviews general
policy relating to compensation and benefits of employees of the Company. The
Compensation Committee also administers the issuance of stock options. The
directors currently serving on the Compensation Committee are Messrs. White
and Hutcheson. The Compensation Committee met twice during 1999.
During 1999, the Board of Directors of the Company held nine meetings. Each
incumbent director attended at least 75% of the aggregate number of meetings
of the Board and the meetings of the committees of the Board on which he or
she served.
4
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation paid or accrued for services
rendered in 1999, 1998 and 1997 by the chief executive officer and the other
four most highly compensated (in 1999) executive officers of the Company (the
"Named Executive Officers").
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation
------------------ ------------
Shares Under Other
Name and Principal Salary Bonus Option Compensation
Position Year ($) ($) Awards (#) ($)(1)
------------------ ---- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Robert P. Schechter...... 1999 275,000 275,002(2) 70,000 6,516
President and Chief 1998 275,000 -- 40,000 4,999
Executive
Officer 1997 250,000 254,000 -- 5,371
Robert E. Hult........... 1999 200,000 110,000(2) 20,000 1,248
Senior Vice President of 1998 48,844(3) -- 70,000 --
Finance
and Operations, Chief 1997 -- -- -- --
Financial Officer
and Treasurer
George D. Kontopodis, 1999 175,000 84,500(2) 40,000 5,493
Ph.D....................
Senior Vice President of 1998 175,000 -- 75,000 4,999
Engineering
1997 155,000 100,000 -- 4,491
Dorothy A. Terrell....... 1999 225,000 292,500(2) 50,000 6,204
Senior Vice President of 1998 201,635(4) -- 105,000 100,199(5)
Worldwide
Sales and Services and 1997 -- -- -- --
President of the
Services Group
Allen P. Carney.......... 1999 175,000 96,250(2) 40,000 5,493
Vice President of 1998 175,000 -- 20,000 4,999
Marketing
1997 175,000 107,750 -- 4,491
</TABLE>
- --------
(1) Includes, for each of the Named Executive Officers, Company contributions
to the Company's 401(k) retirement plan and premiums paid by the Company
for term life insurance.
(2) Payment of 25% of the 1999 bonus award is contingent upon the achievement
by the Company of certain goals during the first two fiscal quarters of
2000.
(3) Mr. Hult joined the Company in October 1998.
(4) Ms. Terrell joined the Company in February 1998.
(5) Includes $100,000 paid as compensation for joining the Company.
5
<PAGE>
Option Grants in Last Fiscal Year
The following table shows all stock option grants to the Named Executive
Officers during 1999:
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------
% of Total Potential Realizable
Option Shares Value at Assumed
Number of Granted to Annual Rates of Stock
Option Shares Employees in Exercise Price Expiration Price Appreciation
Name Granted Fiscal Year ($/sh) Date for Option Term($)(1)
---- ------------- ------------- -------------- ---------- ---------------------
5% 10%
--------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert P. Schechter..... 70,000 6.8 7.188 01/05/09 819,595 1,305,067
Robert E. Hult.......... 20,000 2.0 7.188 01/05/09 234,170 372,876
George D. Kontopodis,
Ph.D................... 40,000 3.9 7.188 01/05/09 468,340 745,753
Dorothy A. Terrell...... 50,000 4.9 7.188 01/05/09 585,425 932,191
Allen P. Carney......... 40,000 3.9 7.188 01/05/09 468,340 745,753
</TABLE>
- --------
(1) As required by the rules of the Securities and Exchange Commission,
potential values are stated based on the prescribed assumption that Common
Stock will appreciate in value from the date of grant to the end of the
option term at the indicated rates (compounded annually) and therefore are
not intended to forecast possible future appreciation, if any, in the
price of Common Stock.
Option Exercises and Fiscal Year-End Option Values
The following table sets forth, for the Named Executive Officers, the number
of shares for which stock options were exercised in 1999, the realized value or
spread (the difference between the exercise price and market value on the date
of exercise) and the number and unrealized spread of the unexercised options
held by each at fiscal year-end.
<TABLE>
<CAPTION>
Number of Shares
Underlying Value of Unexercised
Unexercised In-the-Money Options
Options at FY-End at FY-End($)(2)
------------------------ -------------------------------
Number of
Shares
Acquired on Value
Name Exercise(1) Realized($) Vested Unvested Total Vested Unvested Total
---- ----------- ----------- ------- -------- ------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert P. Schechter......... -- -- 372,625 111,875 484,500 13,307,529 3,564,377 16,871,906
Robert E. Hult.............. -- -- 21,875 68,125 90,000 792,969 2,537,031 3,330,000
George D. Kontopodis, Ph.D.. -- -- 36,875 74,375 111,250 1,382,667 2,843,984 4,226,651
Dorothy A. Terrell.......... -- -- 50,859 104,141 155,000 1,862,711 3,964,164 5,826,875
Allen P. Carney............. -- -- 35,937 119,063 155,000 1,316,193 4,480,682 5,796,875
</TABLE>
- --------
(1) Does not include 800 shares purchased by each of the Named Executive
Officers during 1999 under the Company's 1993 Employee Stock Purchase
Plan.
(2) Based on the fiscal year end closing price of $46.813 per share.
Severance and Option Vesting on Change-in-Control
The Company has agreed with each of its executive officers, including the
officers named in the Summary Compensation Table above, that he or she will,
upon termination of employment within one year following a change-in-control of
the Company, be entitled to severance compensation equal to one year's salary
and the full vesting of all options.
6
<PAGE>
Director Compensation
Each director of the Company who is not also an employee is paid $2,500 per
quarter and is reimbursed for reasonable out-of-pocket expenses incurred in
attending meetings. Non-employee directors serving on committees of the Board
also receive $250 per committee meeting attended. In addition, non-employee
directors are entitled to certain option grants under the Company's 1993 Non-
Employee Directors Stock Option Plan. Under the Directors Plan each non-
employee director currently receives (i) upon first being elected to the board
an option for 15,000 shares which vests over three years and (ii) annually at
the time of the annual meeting an option for 5,000 shares which vests at the
time of the next annual meeting. Pursuant to the Directors Plan, options vest
upon any change-in-control of the Company. If approved by the stockholders,
the 2000 Equity Incentive Plan will supersede the Directors Plan and it is
anticipated that each non-employee director will be granted, under the 2000
Plan, at the time of the annual meeting and in lieu of any grant under the
Directors Plan, an option for 7,500 shares vesting at the time of the 2001
annual meeting subject to full vesting upon a change-in-control of the
Company. See "Approval of 2000 Equity Incentive Plan."
7
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors, which is comprised of two
non-employee directors. The Compensation Committee works with management to
develop compensation plans for the Company and is responsible for determining
the compensation of each executive officer and recommending such compensation
to the Board of Directors.
The Company's executive compensation program is designed to align executive
compensation with the Company's business objectives and the executive's
individual performance and to enable the Company to attract, retain and reward
executive officers who contribute, and are expected to continue to contribute,
to the Company's long-term success. In establishing executive compensation,
the Compensation Committee is guided by the following principles: (i) the
total compensation payable to executive officers should be sufficiently
competitive with the compensation paid by other companies in the
telecommunications industry for officers in comparable positions so that the
Company can attract and retain qualified executives and (ii) individual
compensation should include components that reflect the financial performance
of the Company and the performance of the individual, including leadership and
the achievement of corporate objectives.
The compensation of the Company's executive officers consists of a
combination of base salary, bonuses and equity-based compensation. The
Compensation Committee believes that executive compensation should be designed
to motivate executives to increase shareholder value and further believes that
executive officers can best increase shareholder value by managing the
operating profit of the Company and by conceiving, developing and positioning
the best products in the Company's chosen markets.
Compensation payments in excess of $1 million to the Chief Executive Officer
or other most highly compensated executive officers are subject to a
limitation of deductibility by the Company under Section 162(m) of the
Internal Revenue Code of 1986. Certain performance-based compensation is not
subject to the limitation on deductibility. It is the policy of the Committee
to preserve the deductibility of the compensation to the extent compatible
with other compensation objectives but, if required by such other objectives,
to authorize benefits and compensation which may exceed the deduction
limitation. The Compensation Committee does not expect compensation in 2000 to
its Chief Executive Officer or any other executive officer will exceed the
deduction limitation.
Base Salary
The Compensation Committee sets the base salary for executives by reviewing
the salaries for comparable positions within the Company's industry, the
historical compensation levels of the Company's executives and the individual
performance of the executives in the preceding year. The Compensation
Committee utilizes salary surveys for reference purposes but its salary
determinations are not subject to specific criteria. In addition, executive
officers whose primary responsibilities are in sales are entitled to receive
commissions based primarily on the Company's revenues or a specific portion of
these revenues. In 1999, the base salaries of the executive officers were not
increased.
Merit Bonus Program
Each year the Compensation Committee adopts a management incentive plan
which reflects the Compensation Committee's belief that a significant portion
of each executive officer's compensation should be tied to the achievement by
the Company of its financial goals and by each executive officer of his or her
individual objectives as determined by the Compensation Committee. The 1999
Management Incentive Plan (the "1999 Incentive Plan") set Company financial
goals and merit bonus goals based on the 1999 operating plan approved by the
Board of Directors. In addition, the 1999 Incentive Plan prescribed an
increase or a decrease in the merit bonuses based upon the Company's actual
financial achievements and the fulfillment of the specific management
objectives for each executive. Under the 1999 Incentive Plan, executive
officers were entitled to receive an average bonus of 56% of base salary if
the Company achieved its financial goals for 1999 and the
8
<PAGE>
individual executive met or exceeded his or her objectives. The bonuses
awarded to executive officers under the plan averaged 56% of their base
salaries. Twenty five percent of each bonus awarded was contingent upon the
achievement by the Company of certain financial goals during the first two
fiscal quarters of 2000.
Stock-Based Compensation
Awards of stock options under the Company's stock option plans are designed
to more closely tie the long-term interests of the Company's executives and
its shareholders and to assist in the retention of executives. The
Compensation Committee selects the executive officers, if any, to receive
stock options and determines the number of shares subject to each option. The
Compensation Committee's determination of the size of option grants is
generally intended to reflect an executive's position with the Company and his
or her contributions to the Company. Options generally have a four-year
vesting period to encourage key executives to continue in the employ of the
Company. The Compensation Committee reviews the outstanding unvested options
of the key executives from time to time and may grant additional options to
encourage the retention of key executives. Options for an aggregate of 317,200
shares were granted to executive officers in 1999 to reward the executive
officers for their performance in 1999 and to establish appropriate
incentives.
Chief Executive Officer's Compensation
The Chief Executive Officer's compensation generally is based on the same
policies and criteria as the other executive officers. The Committee did not
increase Mr. Schechter's base salary in 1999 over his 1998 salary level. Mr.
Schechter was granted an option for 70,000 shares in 1999 based upon his
performance in 1998 and to establish appropriate ongoing incentives. Based on
the Company's revenue and meeting financial expectations and his individual
performance with respect to his objectives, Mr. Schechter received a bonus
under the 1999 Incentive Plan equal to his base salary, of which 25% was
contingent upon the achievement by the Company of certain financial goals
during the first two fiscal quarters of 2000.
Compensation Committee
Ronald W. White
Zenas W. Hutcheson, III
9
<PAGE>
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN
The following performance graph assumes an investment of $100 on December 30,
1994 and compares the change to December 31, 1999 in the market price of the
Common Stock with a broad market index (S&P 500) and an industry index (S&P
Communication Equipment-Manufacturers). The Company paid no dividends during
the periods shown; the performance of the indexes is shown on a total return
(dividend reinvestment) basis. The graph lines merely connect the prices on the
dates indicated and do not reflect fluctuations between those dates.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
12/94 12/95 12/96 12/97 12/98 12/99
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Natural Microsystems 100 230 475 702 110 707
Communications Equipment 100 150 175 228 402 883
S&P Composite 100 138 169 226 290 351
</TABLE>
THE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION AND THE
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN ABOVE SHALL NOT BE DEEMED
"SOLICITING MATERIAL" OR INCORPORATED BY REFERENCE INTO ANY OF THE COMPANY'S
FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
10
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No person serving on the Compensation Committee at any time during 1999 was
a present or former officer or employee of the Company or any of its
subsidiaries. During 1999, no executive officer of the Company served as a
member of the board of directors or compensation committee (or other board
committee performing equivalent functions) of another entity one of whose
executive officers served on the Company's Board of Directors or Compensation
Committee.
SECTION 16 REPORTING
Section 16(a) of the 1934 Act requires the Company's directors and officers
and persons who own more than ten percent of the Common Stock to file reports
with the Securities and Exchange Commission disclosing their ownership of
stock in the Company and changes in such ownership. Copies of such reports are
also required to be furnished to the Company. Based solely on a review of the
copies of such reports received by it, or a written representation from
certain reporting persons that no Form 5 was required for such person, the
Company believes that all required filings were timely made during 1999 except
that Alex N. Braverman filed a late Form 3 in April 1999 and Charles J. Walker
filed a late Form 3 in December 1999.
LOAN TO OFFICER
The Company made loans during 1998 to R. Brough Turner, its senior vice
president of technology, in the aggregate amount of $483,690. As of March 16,
2000, the total principal and accrued interest outstanding was $553,811. Mr.
Turner's indebtedness to the Company is evidenced by a secured promissory note
which becomes due, together with interest at the rate of 9% per annum, on July
9, 2001.
AMENDMENT TO CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES
(Item 2 of Notice)
Article Four of the certificate of incorporation of the Company currently
authorizes the issuance of 45,000,000 shares of common stock and 3,000,000
shares of preferred stock.
As of March 16, 2000, there were 16,523,553 shares of common stock
outstanding. Therefore, 28,476,447 authorized shares of common stock remained
available for issuance without further action by the stockholders of the
Company, of which 1,830,160 were reserved for issuance under the Company's
various stock option and stock purchase plans. No shares of preferred stock
were outstanding, although 15,000 were reserved for issuance under the
Company's rights plan.
On March 7, 2000, the Board of Directors of the Company proposed and
declared advisable an amendment to the certificate of incorporation increasing
the authorized shares of common stock from 45,000,000 to 125,000,000. The
proposed amendment would have no effect upon the terms of the common stock.
The Board of Directors believes that the proposed increase in authorized
shares of common stock is desirable to enhance the Company's flexibility in
connection with possible future actions, such as stock splits, acquisitions,
or financings. Having such authorized shares available for issuance in the
future would allow shares of common stock to be issued for such purposes
without the expense and delay of further stockholder action. There is no
current plan or proposal to issue any of the additional shares proposed to be
authorized.
The increased number of authorized shares could also be used to make more
difficult a change of control of the Company which the Board of Directors
determines not to be in the best interests of its stockholders. For
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instance, such shares could be issued in public or private financing
transactions to persons who might side with the Board of Directors in opposing
a takeover bid. The Board of Directors is not currently aware of any efforts
by any person to gain control of the Company.
The Board of Directors recommends a vote FOR the proposal to amend the
certificate of incorporation. If the enclosed proxy card is returned, the
shares represented by the proxy will be voted to approve the proposed
amendment unless the proxy indicates to the contrary and may be voted in favor
of adjournment of the meeting in order to permit further solicitation of
proxies with respect to the proposed amendment if sufficient votes in favor of
the proposed amendment have not been received. The affirmative vote of a
majority of the outstanding shares of common stock is required for approval of
the amendment.
APPROVAL OF 2000 EQUITY INCENTIVE PLAN
(Item 3 of Notice)
General
On March 7, 2000, the Board of Directors of the Company adopted the 2000
Equity Incentive Plan (the "2000 Plan"). The 2000 Plan provides for the grant
of incentive stock options and stock appreciation rights to employees and
nonstatutory stock options, stock bonuses, rights to purchase restricted stock
and other awards based on the Company's common stock (collectively, "Stock
Awards") to employees, non-employee directors and consultants, of which there
are currently approximately 392, 4, and 26, respectively. The Company's 1993
Stock Option Plan and 1993 Non-Employee Directors Stock Option Plan
(collectively, the "1993 Plans") will be superseded by the 2000 Plan and no
further grants under the 1993 Plans will be made after adoption of the 2000
Plan. Options granted previously under the 1993 Plans will continue to be
governed by the terms of the 1993 Plans.
The Board of Directors believes that approval of the 2000 Plan is in the
best interests of the Company because it will provide the Company with
sufficient equity-based incentives to attract and retain qualified employees,
directors and consultants and to provide incentives for such persons to exert
maximum efforts for the success of the Company. The Board of Directors
recommends a vote FOR the proposal to approve the 2000 Plan. If the enclosed
proxy card is returned, the shares represented by the proxy will be voted to
approve the 2000 Plan unless the proxy indicates to the contrary and may be
voted in favor of adjournment of the meeting in order to permit further
solicitation of proxies with respect to the 2000 Plan if sufficient votes in
favor of approving the Plan have not been received. The affirmative vote of a
majority of the shares of common stock voting on the matter is required for
approval of the 2000 Plan.
Approval by stockholders of the adoption of the 2000 Plan is sought in order
to meet the stockholder approval requirements of (i) Section 422 of the Code,
which requires stockholder approval of an incentive stock option plan, (ii)
Rule 16b-3 under the 1934 Act, which, in the case of certain option plans that
have been approved by stockholders, prevents the grant of options to
directors, executive officers and certain other affiliates from being deemed
"purchases" for purposes of the profit recapture provisions of Section 16(b)
of that Act, (iii) Section 162(m) of the Code, which among other
qualifications requires stockholder approval of any option plan to exempt the
spread (the difference between the exercise price and the market value at the
time of exercise) of options from the limitation on deductibility under that
section, and (iv) the rules applicable to companies whose shares are traded on
the Nasdaq Stock Market.
There follows a brief but not comprehensive summary of the 2000 Plan. A copy
of the 2000 Plan is attached as an exhibit at the end of this Proxy Statement.
Administration
The 2000 Plan provides that it is to be administered by a committee (the
"Committee") composed of not fewer than two members, all of which will be
"non-employee directors" and "outside Directors" within the meanings of the
securities laws and the Internal Revenue Code (the "Code"), respectively.
Subject to the
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provisions of the 2000 Plan, the Committee has the authority to determine (i)
which persons eligible under the 2000 Plan will be granted Stock Awards; (ii)
when and how the Stock Awards will be granted; (iii) whether the Stock Award
will be an incentive stock option, a nonstatutory stock option, a stock bonus,
a right to purchase restricted stock, a stock appreciation right, another
stock-based award or a combination of the foregoing; (iv) the number of shares
involved; (v) the exercise or purchase price; (vi) the type and duration of
transfer or other restrictions; and (vii) any other terms of a Stock Award.
Shares Subject to the 2000 Plan
The aggregate number of shares of the Company's common stock which may be
issued under the 2000 Plan is 2,500,000 plus any shares of the Company's
common stock represented by options granted under the 1993 Plans which are
forfeited, expire or are canceled. On March 16, 2000 the closing sale price of
the Company's common stock on the Nasdaq National Market was $72.13 per share.
If any Stock Award (other than stock appreciation rights) expires or is
terminated without having been exercised in full, the applicable shares will
again be available for issuance under the 2000 Plan. No more than 250,000
shares of common stock will be subject to stock bonuses, restricted stock
purchases, stock appreciation rights and any other awards other than options.
In addition, no person will be granted Stock Awards covering more than 250,000
shares of common stock in any calendar year. For each two shares of common
stock subject to a nonstatutory option with an exercise price below fair
market value, the number of shares of common stock subject to Stock Awards
other than options will be reduced by one share. For each share of common
stock subject to Stock Awards other than options, the number of shares of
common stock subject to a nonstatutory option with an exercise price below
fair market value will be reduced by two shares of common stock. No Stock
Awards have been granted to date.
If there is any change in the shares of common stock subject to the 2000
Plan through stock dividends, subdivisions or combinations, the Board of
Directors is authorized to make appropriate adjustments to the number of
shares and price per share for each Stock Award and the number of common
shares available for Stock Awards. If the Company is acquired or liquidates or
sells substantially all of its assets while unexercised Stock Awards remain
outstanding (i) each Stock Award holder will, upon exercise of his or her
Stock Award, be entitled to such stock or other securities as holders of
common stock received pursuant to the transaction; (ii) all Stock Awards will
become exercisable in full; (iii) all outstanding Stock Awards may be canceled
by the Board of Directors provided that each holder shall have the right to
exercise all Stock Awards (vested or unvested) during the thirty day period
preceding the merger, liquidation or sale; or (iv) all outstanding Stock
Awards may be canceled by the Board of Directors provided that each Stock
Award holder shall have the right to exercise all vested Stock Awards.
Stock Options
The exercise price per share of each incentive stock option granted under
the 2000 Plan will be not less than the closing sale price of the Company's
common stock on the date of the grant of the option (the "Fair Market Value").
The aggregate fair market value (determined as of the time such option is
granted) of the Common Stock for which any employee may have incentive stock
options vest in any calendar year may not exceed $100,000. The exercise price
per share of each nonstatutory stock option granted will be not less than 50%
of Fair Market Value provided that no more than 500,000 nonstatutory shares
may have an exercise price of less than 100% of Fair Market Value.
Options granted under the 2000 Plan will vest (become exercisable) either
initially or in periodic installments as determined by the Committee. No
option will be exercisable after the expiration of ten years from the date it
was granted.
During the optionee's lifetime, an incentive stock option will be
exercisable only by the optionee and will not be transferable except by will
or by the laws of descent and distribution. A nonstatutory stock option may be
transferred upon such terms and conditions as the Committee may determine in
its sole discretion. The optionee
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may designate a third party who, in the event of the death of the optionee,
will be entitled to exercise the vested options, but only within the period
ending on the earlier of (i) twelve months following the date of death and
(ii) the expiration of the term of the option as set forth in the specific
option agreement. In the event an optionee's status as an employee, director
or consultant terminates as a result of disability, the optionee's vested
options must be exercised within the same time frame.
In the event an optionee is terminated as an employee, director or
consultant (other than by death, disability or retirement), the optionee may
exercise his or her vested options only within the period of time ending on
the earlier of (i) 30 days after termination or such longer or shorter period
of time set forth in the specific option agreement or (ii) expiration of the
option's term. If the optionee is terminated for "cause," all options will
terminate immediately. As used in the 2000 Plan, "cause" means (i) a material
breach by the optionee of any agreement to which the optionee and the Company
are both parties, (ii) any act or failure to act by the optionee which may
materially and adversely affect the Company's business or the optionee's
ability to perform services for the Company, or (iii) any material misconduct
or neglect of duties by the optionee in connection with the business or
affairs of the Company.
In the event of retirement of an optionee pursuant to the Company's
retirement policy, or if no policy is in effect then as determined by the
Committee, he or she may exercise any options vested on the retirement date
within twelve months of that date (or 3 months in the case of an incentive
stock option).
The Committee may, but need not, provide to an optionee the right to
exercise his or her options prior to vesting of the options, provided,
however, any unvested options will be subject to a repurchase right by the
Company at the exercise price if the optionee is terminated. The Committee may
also, but need not, provide to an optionee a further option (a "Re-Load
Option") in the event the optionee exercise his or her options by surrendering
shares of the Company's common stock. The Re-Load Options will be equal to the
number of shares surrendered as part of the exercise price, will have the same
expiration date as the option exercised, and will have an exercise price equal
to the Fair Market Value of the common stock surrendered as part of the
exercise.
Stock Bonuses and Restricted Stock
Grants of stock bonuses and restricted stock involve the issuance of shares
to the recipient subject to transfer restrictions, employment restrictions,
vesting restrictions, and the Company's right to repurchase the shares at a
price determined by the Committee if certain conditions (such as continuation
of employment) are not satisfied by the recipient. As the conditions are
satisfied, the repurchase restrictions lapse and the recipient is then free to
hold or sell the shares free of restrictions. Grants of unrestricted stock
involve the issuance of shares free of any transfer or repurchase
restrictions. The Committee will have discretion to determine the number of
shares to be granted, whether or not they will be restricted (and, if so, the
terms of the restrictions) and the amount and form of consideration to be paid
for the shares granted.
Stock Appreciation Rights
The grant of stock appreciation rights entitles the holder to a cash
distribution based on the increase in Fair Market Value per share of a
designated amount of the Company's common stock. The Committee will have the
authority to issue three types of stock appreciation rights under the 2000
Plan:
(a) Tandem Stock Appreciation Rights. These rights will be tied to either
an incentive or nonstatutory stock option and will be subject to the same
terms and conditions applicable to the particular option to which it
pertains. Tandem rights will require the holder to elect to exercise the
underlying option for shares of the Company's common stock or surrender the
option for cash equal to the excess of (i) the Fair Market Value (on the
date of surrender) of shares of the Company's common stock purchasable
under the surrendered option over (ii) the exercise price payable for such
shares.
(b) Concurrent Stock Appreciation Rights. These rights will be granted in
connection with an incentive or nonstatutory stock option and will be
subject to the same terms and conditions applicable to
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the particular option to which it pertains. Concurrent rights will be
exercised automatically at the same time as the underlying option is
exercised. Upon exercise, the holder will be entitled to a cash
distribution in an amount equal to the excess of (i) the Fair Market Value
(on the date of exercise) of the Company's common stock purchased upon
exercise of the option over (ii) the exercise price paid for those shares.
(c) Independent Stock Appreciation Rights. These rights will be granted
independently of any stock option but will be denominated in share
equivalents and will be subject to the same terms and conditions as
nonstatutory stock options. Upon exercise of the independent rights, the
holder will be entitled to a cash distribution in an amount equal to the
excess of (i) the Fair Market Value (at date of exercise) of the number of
shares of the Company's common stock equal to the number of share
equivalents exercised over (ii) the Fair Market Value of such numbers of
shares of the Company's common stock on the date the independent rights are
granted.
Other Stock-Based Awards
The 2000 Plan authorizes the making of loans in connection with the purchase
of shares under an award. The Committee will have the full authority to decide
the terms of any such loan, provided that interest will be payable at least
annually and will be charged at the minimum rate of interest necessary to
avoid the treatment as an interest under any applicable provisions of the
Code. In addition, the 2000 Plan authorizes the grant of other types of awards
that are consistent with the terms of the 2000 Plan.
Repricing
Options granted under the 2000 Plan may not be repriced without shareholder
approval.
Amendment and Termination
The 2000 Plan authorizes the Board of Directors to discontinue, suspend or
amend the 2000 Plan, except that no amendment will be effective without
stockholders' approval if stockholder approval is required by the NASDAQ
National Market. No amendment, suspension or termination of the 2000 Plan or
amendment of a Stock Award by the Board of Directors may alter or impair a
grantee's rights under a Stock Award previously granted without the grantee's
written consent. The 2000 Plan will terminate on April 27, 2010.
Federal Income Tax Consequences under the 2000 Plan
Set forth below is a general summary of the federal income tax consequences
related to options awarded under the 2000 Plan. It is not intended to be
exhaustive, and in particular does not address state, municipal or foreign tax
laws or the individual circumstances of participants. In addition,
administrative and judicial interpretations of the application of the federal
income tax laws are subject to change.
Consequences to the Option holder. There are no federal income tax
consequences to the option holder solely by reason of the grant of incentive
stock options or nonstatutory stock options under the 2000 Plan. The exercise
of an incentive stock option is not a taxable event for regular federal income
tax purposes if certain requirements are satisfied, including the restriction
providing that the option holder generally must exercise the option no later
than three months following termination of his employment. However, the
exercise of an incentive stock option may give rise to an alternative minimum
tax liability (see discussion below).
Upon the exercise of a nonstatutory stock option, the option holder will
generally recognize ordinary income in an amount equal to the excess of fair
market value of the shares at the time of exercise over the amount paid as the
exercise price. The ordinary income recognized in connection with the exercise
by an option holder of a nonstatutory stock option will be subject to both
income and employment tax withholding. The option holder's tax basis in the
shares acquired pursuant to the exercise of an option will be the amount paid
upon exercise plus, in the case of a nonstatutory stock option, the amount of
ordinary income recognized by the option holder upon exercise.
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If any option holder disposes of shares acquired upon the exercise of an
incentive stock option in a taxable transaction, and such disposition occurs
more than two years from the date on which the option is granted and more than
one year after the date on which the shares are transferred to the option
holder pursuant to the exercise of the incentive stock option (a "qualifying
disposition"), the option holder will recognize long-term capital gain or loss
equal to the difference between the amount realized upon such disposition and
the option holder's adjusted basis in such shares (generally the exercise
price).
If the option holder disposes of shares acquired upon the exercise of an
incentive stock option (other than in certain tax-free transactions) within
two years from the date on which the incentive stock option is granted or
within one year after the transfer of the shares to the option holder pursuant
to the exercise of the incentive stock option (a "disqualifying disposition"),
then at the time of disposition the option holder will generally recognize
ordinary income equal to the lesser of (i) the excess of such shares' fair
market value on the date of exercise over the exercise price paid by the
option holder or (ii) the option holder's actual gain (i.e. the excess, if
any, of the amount realized on the disposition over the exercise price paid by
the option holder). If the total amount realized on a taxable disposition
(including return of capital and capital gain) exceeds the fair market value
on the date of exercise, then the option holder will recognize a capital gain
in the amount of such excess. If the option holder incurs a loss on the
disposition (i.e., if the total amount realized is less than the exercise
price paid the option holder), then the loss will be a capital loss.
If any option holder disposes of shares acquired upon exercise of a
nonstatutory stock option in a taxable transaction, the option holder will
recognize capital gain or loss in an amount equal to the difference between
his/her basis (as discussed above) in the shares sold and the total amount
realized upon disposition. Any such capital gain or loss (and any capital gain
or loss recognized on a disqualifying disposition of shares acquired upon
exercise of incentive stock options as discussed above) will be long-term
capital gain or loss if the shares were held for more than one year from the
date such shares were transferred to the option holder.
Alternative minimum tax ("AMT") is imposed in addition to, but only to the
extent it exceeds, the option holder's regular income tax for the taxable
year. Generally, AMT is computed at the rate of 26% on the excess of a
taxpayer's alternative minimum taxable income ("AMTI") over the exemption
amount, but only if such excess amount does not exceed $175,000 ($87,500 in
the case of married individuals filing separate returns). The AMT tax rate is
28% of such excess amount over the $175,000 ($87,500) amount. For these
purposes, the exemption amount is $45,000 for joint returns or returns of
surviving spouses ($33,750 for single taxpayers and $22,500 for married
individuals filing separate returns), reduced by 25% of the excess of AMTI
over $150,000 for joint returns or returns of surviving spouses ($112,500 for
single taxpayers and $75,000 for married individuals filing separate returns).
A taxpayer's AMTI is essentially the taxpayer's taxable income adjusted
pursuant to the AMT provisions and increased by items of tax preference.
The exercise of incentive stock options (but not nonstatutory stock options)
will generally result in an upward adjustment to the option holder's AMTI in
the year of exercise by an amount equal to the excess, if any, of the fair
market value of the stock on the date of exercise over the exercise price. The
basis of the stock acquired for AMT purposes, will equal the exercise price
increased by the prior upward adjustment of the taxpayer's AMTI due to the
exercise of the option. This will result in a corresponding downward
adjustment to the option holder's AMTI in the year of disposition of the
stock. The AMT paid with respect to the exercise of an incentive stock option
is allowed as a credit against the regular tax liability of the option holder
in a subsequent year when he disposes of the stock; therefore, imposition of
the AMT at the time of exercise of an incentive stock option may not increase
the aggregate amount of income tax paid by the option holder, but instead may
only affect the timing of such payments.
Consequences to the Company. There are no federal income tax consequences to
the Company by reason of the grant of incentive stock options or nonstatutory
stock options or the exercise of incentive stock options (other than
disqualifying dispositions). At the time the option holder recognizes ordinary
income from the exercise of a nonstatutory stock option, the Company will be
entitled to a federal income tax deduction in the amount of the ordinary
income so recognized (as described above), provided that the Company satisfies
its tax
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reporting obligations described below. To the extent the option holder
recognizes ordinary income by reason of a disqualifying disposition of the
stock acquired upon exercise of incentive stock options, the Company will be
entitled to a corresponding deduction in the year in which the disposition
occurs, provided that the Company satisfies a tax reporting obligation
described below. The Company will be required to report to the Internal
Revenue Service any ordinary income recognized by any option holder by reason
of the exercise of a nonstatutory stock option or the disqualifying
disposition of stock acquired upon exercise of incentive stock options. The
Company will be required to withhold income and employment taxes (and pay the
employer's share of employment taxes) with respect to ordinary income
recognized by the option holder upon the exercise of nonstatutory stock
options.
Tax Treatment of Restricted Stock. An employee who receives a restricted
stock award under the 2000 Plan generally will not recognize taxable income at
the time the award is received, but will recognize ordinary compensation
income when the transfer and forfeiture restrictions lapse in an amount equal
to the excess of the aggregate fair market value, as of the date the
restrictions lapse, over the amount, if any, paid by the employee for the
restricted stock. Alternatively, an employee receiving stock may elect, in
accordance with Section 83(b) of the Code, to treat as ordinary income the
excess of the fair market value of the shares of restricted stock at the time
of grant over the amount if any, paid by the employee, notwithstanding the
transfer and forfeiture restrictions on the stock. All such taxable amounts
are deductible by the Company at the time and in the amount of the ordinary
compensation income recognized by the employee. The full amount of dividends
or other distributions of property made with respect to restricted stock prior
to the lapse of the transfer and forfeiture restrictions will constitute
ordinary compensation income to the employee and the Company will be entitled
to a deduction at the same time and in the same amount.
Tax Treatment of Unrestricted Stock. Upon receiving an award of unrestricted
stock under the 2000 Plan, the employee will realize ordinary income to the
extent of the fair market value (determined at the time of transfer to the
employee) of such shares, over the amount, if any paid by the employee for the
shares. Such taxable amounts will be deductible as compensation by the
Company.
Tax Treatment of Cash Distributions Pursuant to Stock Appreciation
Rights. Employees receiving a cash distribution pursuant to stock appreciation
rights issued under the 2000 Plan will realize ordinary income in the amount
of such cash distribution. Such taxable amounts will be deductible as
compensation by the Company.
Limitation on Deduction Under Section 162(m) of the Code. Section 162(m) of
the Code generally limits an employer's income tax deduction for compensation
paid to certain key executives of a public company to $1,000,000 per executive
per year. The deduction limitation of Section 162(m) does not apply, however,
to certain performance-based compensation arrangements, including plans
providing for stock options having an exercise price of not less than 100% of
fair market value (determined at the time the options are granted), which
establish specific performance goals and/or limits on awards, which are
administered by a committee composed exclusively of "outside" directors, and
are disclosed to and approved by the stockholders of the public company.
RATIFICATION OF SELECTION OF
INDEPENDENT AUDITORS
(Item 4 of Notice)
On the recommendation of the Audit Committee, the Board of Directors has
selected PricewaterhouseCoopers LLP, independent certified public accountants,
as auditors of the Company for the fiscal year ending December 31, 2000. This
firm has audited the accounts and records of the Company since 1997.
A representative of PricewaterhouseCoopers LLP will be present at the Annual
Meeting to answer questions from stockholders and will have an opportunity to
make a statement if desired.
The selection of independent auditors is not required to be submitted to a
vote of the stockholders. The Board believes, however, it is appropriate as a
matter of policy to request that the stockholders ratify the appointment. If
the stockholders do not ratify the appointment, the Board will reconsider its
selection.
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STOCKHOLDER PROPOSALS FOR 2001 MEETING
Proposals of stockholders intended to be presented at the 2001 Annual
Meeting of Stockholders must be received on or before December 19, 2000 for
inclusion in the proxy materials relating to that meeting. Any such proposals
should be sent to the Company at its principal offices and addressed to the
Chief Financial Officer. Other requirements for inclusion are set forth in
Rule 14a-8 under the 1934 Act. In addition, if the Company receives notice of
a stockholder proposal after February 12, 2001, the persons named as proxies
for the 2001 Annual Meeting will have discretionary authority to vote on such
proposal.
OTHER MATTERS
The Company has no knowledge of any matters to be presented for action by
the stockholders at the Annual Meeting other than as set forth above. However,
the enclosed proxy gives discretionary authority to the persons named therein
to act in accordance with their best judgment in the event that any additional
matters should be presented.
The Company will bear the cost of the solicitation of proxies, including
charges and expenses of brokerage firms and others for forwarding solicitation
material to beneficial owners of Common Stock.
By order of the Board of Directors
Dianne L. Callan
Secretary
March 29, 2000
The Board of Directors hopes that stockholders will attend the meeting.
Whether or not you plan to attend, you are urged to complete, date, sign and
return the enclosed proxy in the accompanying envelope. A prompt response will
greatly facilitate arrangements for the meeting, and your cooperation will be
appreciated. Stockholders who attend the meeting may vote their stock
personally even though they have sent in their proxies.
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Natural MicroSystems Corporation
2000 Equity Incentive Plan
1. INTRODUCTION AND PURPOSE
(a) This 2000 Equity Incentive Plan (the "2000 Plan" or "the Plan")
supersedes the Natural MicroSystems Corporation ("the Company") 1993 Stock
Option Plan and the Company's 1993 Non-employee Directors Stock Option Plan
(collectively the "1993 Plans") for all awards made after the date the 2000
Plan is adopted by the Board of Directors of the Company and approved by the
Company's stockholders. Options granted under the 1993 Plans prior to the
approval of the 2000 Plan shall be governed by the terms of the 1993 Plans.
(b) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) Stock Bonuses, (iv) rights to purchase
Restricted Stock, (v) Stock Appreciation Rights, and (vi) other awards based
upon the Company's Common Stock on such terms and conditions as the Board may
determine.
(c) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company
and its Affiliates, to secure and retain the services of new Employees,
Directors and Consultants, and to provide incentives for such persons to exert
maximum efforts for the success of the Company.
(d) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c)
hereof, be either (i) Options granted pursuant to Section 6 hereof, including
Incentive Stock Options and Nonstatutory Stock Options, (ii) Stock Bonuses or
rights to purchase restricted stock granted pursuant to Section 7 hereof,
(iii) Stock Appreciation Rights granted pursuant to Section 8 hereof or (iv)
other stock based awards granted pursuant to Section 9 hereof. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and shall be in such form as required pursuant
to Section 6 hereof.
2. DEFINITIONS AND RULES OF INTERPRETATION
(a) Definitions.
For the purpose of the Plan. the following terms shall have the respective
meanings set forth below, unless the subject matter or context is inconsistent
therewith:
(i) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections
424(e) and (f) respectively, of the Code.
(ii) "BOARD" means the Board of Directors of the Company.
(iii) "CODE" means the Internal Revenue Code of 1986, as amended.
(iv) "COMMITTEE" means the Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(v) "COMPANY" means Natural MicroSystems Corporation.
(vi) "COMPANY COMMON STOCK" means shares of the common stock of the
Company.
(vii) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT" means a
right granted pursuant to subsection 8(b)(ii) hereof.
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(viii) "CONSULTANT" means any person, including an advisor, engaged by
the Company or an Affiliate to render consulting services and who is
compensated for such services, provided that the term Consultant shall not
include Directors in their capacity as such.
(ix) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means the
employment or relationship as an Employee, Director or Consultant is not
interrupted or terminated by the Company or any Affiliate. The Board, in
its sole discretion, may determine whether Continuous Status as an
Employee, Director or Consultant shall be considered interrupted in the
case of any leave of absence approved by the Board, including sick leave,
military leave, or any other personal leave; provided, however, that for
purposes of Incentive Stock Options and Stock Appreciation Rights
appurtenant thereto, any such leave may not exceed ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
(x) "DIRECTOR" means a member of the Board.
(xi) "DISABILITY" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(xii) "EMPLOYEE" means any person, including Officers and Directors,
employed as a common law employee by the Company or any Affiliate. Neither
service as a Director nor payment of a director's fee by the Company shall
be sufficient to constitute a person as an Employee.
(xiii) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(xiv) "FAIR MARKET VALUE" means the closing price per share on the date
of grant of the option as reported by a nationally recognized stock
exchange, or, if the Common Stock is not listed on such an exchange, as
reported by the National Association of Securities Dealers Automated
Quotation System, Inc. (NASDAQ), or, if the Common Stock is not quoted on
NASDAQ, the fair market value as determined by the Committee.
(xv) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(xvi) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT" means
a right granted under subsection 8(b)(iii) hereof.
(xvii) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary,
does not receive compensation (directly or indirectly) from the Company or
its parent or subsidiary for services rendered as a Consultant or in any
capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K (or
any successor regulation of similar import) promulgated pursuant to the
Securities Act (Regulation S-K)), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K (or any successor regulation of similar import); or (ii) is
otherwise considered a non-employee director for purposes of Rule 16b-3 of
the Exchange Act.
(xviii) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(xix) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(xx) "OPTION" means a stock option granted pursuant to the Plan.
(xxi) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions
of the Plan.
(xxii) "OPTIONEE" means an Employee, Director or Consultant who holds an
outstanding Option.
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(xxiii) "OUTSIDE DIRECTOR" means for any given date of grant a Director
who either (i) is not then a current employee of the Company or an
affiliated corporation (within the meaning of Treasury regulations
promulgated under Section 162(m) of the Code), is not a former employee of
the Company or an affiliated corporation receiving compensation for prior
services (other than benefits under a tax qualified pension plan) during
the then current taxable year, was not an officer of the Company or an
affiliated corporation at any time, and is not then currently receiving
direct or indirect remuneration from the Company or an affiliated
corporation for services in any capacity other than as a Director, and (ii)
is otherwise considered an outside director for purposed of Section 162(m)
of the Code.
(xxiv) "PLAN" or "2000 PLAN" means this 2000 Equity Incentive Plan, as
the same may be amended from time to time.
(xxv) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3.
(xxvi) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(xxvii) "STOCK APPRECIATION RIGHT" means any of the various types of
rights which may be granted under Section 8 hereof.
(xxviii) "STOCK AWARD" means any right granted under the Plan, including
any Option, any stock bonus, any right to purchase restricted stock, and
any Stock Appreciation Right.
(xxix) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions
of an individual Stock Award grant. Each Stock Award Agreement shall be
subject to the terms and conditions of the Plan.
(xxx) "STOCK BONUS" means any stock bonus of the type which may be
granted under Section 7 hereof.
(xxxi) "TANDEM STOCK APPRECIATION RIGHT" or "TANDEM RIGHT" means a right
granted under subsection 8(b)(i) hereof.
The foregoing terms are not the exclusive definitions as used in the Plan
and reference is made to other capitalized terms defined in the context of
their first use herein.
(b) Rules of Interpretation.
(i) The headings and subheadings used herein or in any Option or other
instrument evidencing a Stock Award are solely for convenience of reference
and shall not constitute a part of the Plan or such document or affect the
meaning, construction or effect of any provision thereof.
(ii) All definitions set forth herein shall apply to the singular as well
as the plural form of such defined term, and all references to the
masculine gender shall include reference to the feminine or neuter gender
and vice versa, as the context may require.
(iii) Reference to "including" means including without limiting the
generality of any description preceding such term.
(iv) Unless otherwise expressly stipulated, any reference in the Plan to
any statute, act, regulation or specific provision thereof shall also
extend to any amendment, restatement or other modification to such statute,
act, regulation or specific provision thereof or any successor statute,
act, regulation or provision of similar import.
(v) Unless otherwise expressly provided, any reference in the Plan to any
specific provision of any statute or act shall include any regulations
promulgated thereunder from time to time and interpretations thereof as may
be applicable to the Plan.
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3. ADMINISTRATION
(a) The Plan shall be administered by the Committee.
(b) The Committee shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible under
the Plan shall be granted Stock Awards; when and how Stock Awards shall be
granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a Stock Bonus, a right to purchase restricted
stock, a Stock Appreciation Right, another stock-based award or a
combination of the foregoing; the provisions of each Stock Award granted
(which need not be identical), including the time or times when a person
shall be permitted to receive stock pursuant to a Stock Award; whether a
person shall be permitted to receive stock upon exercise of an Independent
Stock Appreciation Right; and the number of shares with respect to which
Stock Awards shall be granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Committee, in the exercise of this power, may correct
any defect, omission or inconsistency in any Stock Award Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the
Stock Award Agreement fully effective.
(iii) Generally, to exercise such powers and to perform such acts as the
Committee deems necessary or expedient to promote the best interests of the
Company and which are not in conflict with the provisions of the Plan.
(c) Administration of the Plan shall be delegated to a committee composed of
not fewer than two (2) members (the "Committee"), all of the members of which
Committee shall be Non-Employee Directors and Outside Directors. The Committee
shall have, in connection with the administration of the Plan, the powers set
forth in the Plan; subject, however, to such resolutions, not inconsistent
with the provisions of the Plan, as may be adopted from time to time by the
Board. The Board may abolish the Committee at any time and vest in the Board
the administration of the Plan. Notwithstanding anything in this Section 3 to
the contrary, at any time the Board or the Committee may delegate to a
committee of one or more officers of the Company the authority to grant Stock
Awards to eligible persons who are not then subject to Section 16 of the
Exchange Act and to eligible persons with respect to whom the Company does not
wish to comply with Section 162(m) of the Code.
(d) The Board shall have the authority to correct any defect, omission or
inconsistency in the Plan and to amend the Plan as provided in Section 16. The
Board shall have the authority to appoint the Committee and to fill any
vacancy created on the Committee by reason of the death, resignation or
removal of any member thereof by appointing an eligible successor.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 14 hereof relating to adjustments
upon changes in stock, the number of shares of stock that may be issued
pursuant to Stock Awards under the Plan shall be equal to 2,500,000 shares of
Company Common Stock plus any shares of Company Common Stock represented by
awards granted under the 1993 Plans which, after adoption of the Plan by the
Board, are forfeited, expire or are canceled without delivery of shares of
stock. If any Stock Award shall for any reason expire or otherwise terminate
without having been exercised in full, the Company common Stock not purchased
shall again become available for issuance under the Plan. Notwithstanding the
foregoing, Shares of Company Common Stock subject to Stock Appreciation Rights
exercised in accordance with Section 8 hereof shall not be available for
subsequent issuance under the Plan.
(b) The Company Common Stock subject to the Plan may consist in whole or in
part of authorized but unissued shares or treasury shares. Subject to
subsections 4(a), 4(c) and 4(d) hereof, not more than 250,000 shares of
Company Common Stock in the aggregate may be subject to Stock Bonuses and
purchases of restricted
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stock (provided for in Section 7), Stock Appreciation Rights (provided for in
Section 8), and other awards (provided for in Section 9).
(c) For each share of Company Common Stock subject to Stock Bonuses and
purchases of restricted stock (provided for in Section 7), Stock Appreciation
Rights (provided for in Section 8), and other awards (provided for in Section
9), the number of Shares of Company Common Stock which shall be subject to a
nonstatutory Stock Option granted under subsection 6(b) at an exercise price
less than one hundred percent (100%) of Fair Market Value shall be reduced by
two shares of Company Common Stock.
(d) For each two shares of Company Common Stock subject to a nonstatutory
Stock Option granted under subsection 6(b) at an exercise price less than one
hundred percent (100%) of Fair Market Value, the aggregate number of shares of
Company Common Stock subject to Stock Bonuses and purchases of restricted
stock (provided for in Section 7), Stock Appreciation Rights (provided for in
Section 8), and other awards (provided for in Section 9) shall be reduced by
one share of Company Common Stock.
5. ELIGIBILITY.
(a) Incentive Stock Options and Stock Appreciation rights appurtenant
thereto may be granted only to Employees. Other Stock Awards may be granted to
Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) Company Common Stock possessing more than ten
percent (10%) of the total combined voting power of all classes of capital
stock of the Company or of any of its Affiliates unless the exercise price of
such Incentive Stock Option is at least one hundred ten percent (110%) of the
Fair Market Value of such Company Common Stock at the date of grant and the
Incentive Stock Option is not exercisable after the expiration of five (5)
years from the date of grant.
(c) No person shall be eligible to be granted Stock Awards covering more
than 250,000 shares of Company Common Stock in any calendar year, subject to
appropriate adjustment for stock subdivisions, combinations, dividends and
similar capital changes.
6. OPTION PROVISIONS
Each Option Agreement shall be in such form and shall contain such terms and
conditions as the Committee shall deem appropriate. The provisions of separate
Options need not be identical, but each Option Agreement shall include
(through incorporation of provisions hereof by reference in the Option or
otherwise) the substance of each of the following provisions except as
otherwise specifically provided elsewhere in the Plan.
(a) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) PRICE. Subject to subsection 5(b) hereof, the exercise price of each
Incentive Stock Option shall be not less than one hundred percent (100%) of
the Fair Market Value of the Company Common Stock subject to the Option on the
date the Option is granted. The exercise price of each Nonstatutory Stock
Option shall be set by the Committee at the time each Option is granted, but
in no event shall (i) any exercise price be less than fifty percent (50%) of
such Fair Market Value and (ii) subject to subsections 4(c) and 4(d), not more
than 500,000 shares of Company Common Stock shall be subject to a Nonstatutory
Stock Option at an exercise price less than one hundred percent (100%) of such
Fair Market Value.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either: (i) in cash at the time the Option is exercised, or (ii)
at the discretion of the Committee, either at the time of the grant or
exercise of the Option, (A) by delivery to the Company of other Company Common
Stock, (B) according to a deferred payment or other arrangement
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(which may include, without limiting the generality of the foregoing, the use
of other Common Stock of the Company) with the person to whom the Option is
granted or to whom the Option is transferred pursuant to subsection 6(d)
hereof, or (C) in any other form of legal consideration that may be acceptable
to the Committee including delivery of a promissory note of the Optionee to
the Company on terms determined by the Committee.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions
of the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock
Option is granted only by such person. A Nonstatutory Stock Option may be
transferred upon such terms and conditions as are set forth in the Option
Agreement, as the Committee shall determine in its sole discretion.
(e) VESTING. The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not,
be equal). The Option Agreement may provide that from time to time during each
of such installment periods, the Option may become exercisable (vest) with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Committee may deem appropriate. During the remainder of
the term of the Option (if its term extends beyond the end of the installment
periods), the Option may be exercised from time to time with respect to any
shares then remaining subject to the Option. The provisions of this subsection
6(e) are subject to any Option provisions governing the minimum number of
shares as to which an Option may be exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than upon the Optionee's death, Disability or
retirement), the Optionee may exercise his or her Option, but only within such
period of time ending on the earlier of (i) three (3) months after termination
of the Optionee's Continuous Status as an Employee Director or Consultant or
such longer or shorter period of time specified in the Option Agreement, or
(ii) the expiration of the Options term, and only to the extent that the
Optionee was entitled to exercise it at the date of termination (but in no
event later than the expiration of the term of such Option as set forth in the
Option Agreement).
In the event of the retirement of an Optionee from the Company pursuant to
the Company's retirement policy then in effect, or if there be none, then as
determined by the Committee in its sole discretion, he or she may exercise his
or her Option during the period ending twelve (12) months after his or her
retirement date (or three (3) months in the case of an Incentive Stock
Option). If, at the date of termination, the Optionee is not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after termination, the Optionee does not exercise his or
her Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionees Continuous Status as an
Employee, Director or Consultant (other than upon the Optionee's death or
disability) would be prohibited at any time solely because the issuance of
shares would violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the expiration of the
term of the Option set forth in the first paragraph of this subsection 6(f),
or (ii) the expiration of a period of three (3) months after the termination
of the Optionee's Continuous Status as an Employee, Director or Consultant
during which the exercise of the Option would not be in violation of such
registration requirements.
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Notwithstanding the preceding, in the event an Optionee's employment with
(or services to) the Company is terminated by it for cause (as determined by
the Company), the Option shall terminate on the date of termination and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
As used herein, "cause" shall mean (x) any material breach by the Optionee
of any agreement to which the Optionee and the Company are both parties, (y)
any act or omission to act by the Optionee which may have a material and
adverse effect on the Company's business or on the Optionee's ability to
perform services for the Company, including, without limitation, the
commission of any crime (other than ordinary traffic violations), or (z) any
material misconduct or material neglect of duties by the Optionee in
connection with the business or affairs of the Company or any affiliate of the
Company.
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status as
an Employee, Director or Consultant terminates as a result of the Optionee's
Disability, the Optionee may exercise his or her Option, but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination (or such longer or shorter period of time as
specified in the Option Agreement), or (ii) the expiration of the term of the
Option as set forth in the Option Agreement). If, after the date of
termination, the Optionee does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of a death of an Optionee during, or
within a period specified in the Option Agreement after the termination of,
the Optionee's Continuous Status as an Employee, Director or Consultant, the
Option may be exercised by the Optionee's estate, by a person who acquired the
right to exercise the Option by bequest or inheritance, or by a person
designated to exercise the option upon the Optionee's death pursuant to
subsection 6(d) hereof, but only within the period ending on the earlier of
(i) the date twelve (12) months following the date of death (or such longer or
shorter period specified in the Option Agreement) or (ii) the expiration of
the term of such Option as set forth in the Option Agreement. If, at the time
of death, the Optionee was not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
and again become available under the Plan. If, after death, the Option is not
exercised within the time specified herein, the Option shall terminate, and
the shares covered by such Option shall revert to and again become available
for issuance under the Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject
to the Option prior to the full vesting of the Option; provided, however, any
unvested shares shall be subject to a repurchase right in the Company at the
Exercise Price in the event of the termination of the Optionee's Continuous
Status as an Employee, Director or Consultant prior to the time(s) such option
would have become vested.
(j) WITHHOLDING. To the extent provided by the terms of an Option Agreement,
the Optionee may satisfy any minimum required rate of federal, state or local
tax withholding relating to the exercise of such Option by any of the
following means or by a combination of such means: (1) tendering a cash
payment; (2) authorizing the Company to withhold shares from the shares of the
Common Stock otherwise issuable to the Participant as a result of the exercise
of the Option; or (3) delivering to the Company owned and unencumbered shares
of the Common Stock of the Company.
(k) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Committee to make or not to make grants of Options hereunder, the Committee
shall have the authority (but not an obligation) to include as part of any
Option Agreement a provision entitling the Optionee to a further Option (a Re-
Load Option) in the event the Optionee exercises the Option evidenced by the
Option agreement, in whole or in part, by surrendering other shares of Company
Common Stock in accordance with the Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option, (ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to such Re-Load
Option; and (iii) shall
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have an exercise price which is equal to one hundred percent (100%) of the
Fair Market Value of the Common Stock subject to the Re-Load Option on the
date of exercise of the original Option or, in the case of a Re-Load Option
which is an Incentive Stock Option and which is granted to a 10% stockholder
(as described in subsection 5(b) hereof), shall have an exercise price which
is equal to one hundred ten percent (110%) of the Fair Market Value of the
Company Common Stock subject to the Re-Load Option on the date of exercise of
the original Option and shall have a term which is no longer than five (5)
years.
Any such Re-Load Option may be an Incentive Option or a Nonstatutory Stock
Option, as the Committee may designate at the time of the grant of the
original Option; provided, however, that the designation of any Re-Load Option
as an incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on exercisability of Incentive Stock
Options described in subsection 13(d) hereof and in Section 422(d) of the
Code. There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load
Option shall be subject to the availability of sufficient shares under
subsection 4(a) hereof and shall be subject to such other terms and conditions
as the Committee may determine which are not inconsistent with the express
provisions of the Plan regarding the terms of the Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each Stock Bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Committee shall deem
appropriate. The terms and conditions of Stock Bonus or restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate agreements need not be identical, but each Stock Bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions herein by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock purchase
agreement shall be such amount as the Committee shall determine and designate
in such agreement. Notwithstanding the foregoing, the Committee may determine
that eligible participants in the Plan may be granted a Stock Award pursuant
to a Stock Bonus agreement in consideration for past services actually
rendered to the Company for its benefit.
(b) TRANSFERABILITY. Except as otherwise provided elsewhere in the Plan, no
rights under a Stock Bonus or restricted stock purchase agreement shall be
assignable by any participant under the Plan, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution,
and shall be exercisable during the lifetime of the person to whom the rights
are granted only by such person. The person to whom the Stock Award is
granted, may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of such person, shall thereafter be entitled to exercise the rights held
by such person under the Stock Bonus or restricted stock purchase agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to a Stock
Award in the form of a stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the Committee,
according to a deferred payment or other arrangement with the person to whom
the stock is sold; or (iii) in any other form of legal consideration that may
be acceptable to the Committee in its discretion; including delivery of a
promissory note of the Optionee to the Company on terms determined by the
Committee. Notwithstanding the foregoing, the Committee may grant a Stock
Award pursuant to a Stock Bonus agreement in consideration for past services
actually rendered to the Company or for its benefit.
(d) VESTING. Shares of Company Common Stock sold or awarded under the Plan
may, but need not, be subject to a repurchase option in favor of the Company
in accordance with a vesting schedule to be determined by the Committee.
(e) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the event a Participants Continuous Status as an Employee, Director or
Consultant terminates, the Company may repurchase or otherwise reacquire any
or all of the shares of Company Common Stock held by that person which have
not vested as of the date of termination under the terms of the Stock Bonus or
restricted stock purchase agreement between the Company and such person.
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8. STOCK APPRECIATION RIGHTS
(a) The Committee shall have full power and authority, exercisable in its
sole discretion, to grant Stock Appreciation Rights to Employees or Directors
of or Consultants to, the Company or its Affiliates under the Plan. Each such
right shall entitle the holder to a distribution based on the appreciation in
the Fair Market Value per share of a designated amount of Company Common
Stock.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(i) TANDEM STOCK APPRECIATION RIGHTS. Tandem rights will be granted
appurtenant to an Option and will require the holder to elect between the
exercise of the underlying Option for shares of Company Common Stock and
the surrender, in whole or in part, of such Option for an appreciation
distribution equal to the excess of (A) the Fair Market Value (on the date
of Option surrender) of vested shares of Company Common Stock purchasable
under the surrendered Option over (B) the aggregate exercise price payable
for such shares.
(ii) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent rights will be
granted appurtenant to an Option and may apply to all or any portion of the
shares of Company Common Stock subject to the underlying Option and will be
exercised automatically at the same time the Option is exercised for those
shares. The appreciation distribution to which the holder of such
concurrent right shall be entitled upon exercise of the underlying Option
shall be in an amount equal to the excess of (A) the aggregate Fair Market
Value (at date of exercise) of the vested shares purchased under the
underlying Option with such concurrent rights over (B) the aggregate
exercise price paid for those shares.
(iii) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights may be
granted independently of any Option and will entitle the holder upon
exercise to an appreciation distribution equal in amount to the excess of
(A) the aggregate Fair Market Value (at date of exercise) of a number of
shares of Company Common Stock equal to the number of vested share
equivalents exercised at such time (as described in subsection 8(c)(iii))
hereof over (B) the aggregate Fair Market Value of such number of shares of
Company Common Stock at the date of grant.
(c) The terms and conditions applicable to each Tandem Right, Concurrent
Right and Independent Right shall be as follows:
(i) TANDEM RIGHTS:
A. Tandem rights may be tied to either Incentive Stock Options or
Nonstatutory Stock Options. Each such right shall, except as
specifically set forth below, be subject to the same terms and
conditions applicable to the particular Option to which it pertains. If
Tandem Rights are granted appurtenant to an Incentive Stock Option,
they shall satisfy any applicable Treasury Regulations so as not to
disqualify such Option as an Incentive Stock Option under the Code.
B. The appreciation distribution payable on the exercised Tandem
Right shall be in cash in an amount equal to the excess of (i) the Fair
Market Value (on the date of the Option surrender) of the number of
shares of Company Common Stock covered by that portion of the surrender
Option in which the optionee is vested over (ii) the aggregate exercise
price payable for such vested shares.
(ii) CONCURRENT RIGHTS:
A. Concurrent Rights may be tied to any or all of the shares of
Company Common Stock subject to any Incentive Stock Option or
Nonstatutory Stock Option grant made under the Plan. A Concurrent Right
shall, except as specifically set forth below, be subject to the same
terms and conditions applicable to the particular option grant to which
it pertains.
B. A Concurrent Right shall be automatically exercised at the same
time as the underlying Option is exercised with respect to the
particular shares of Company Common Stock to which the Concurrent Right
pertains.
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C. The appreciation distribution payable on an exercised Concurrent
Right shall be in cash in an amount equal to such portion as shall be
determined by the Board or the Committee at the time of the grant of
the excess of (i) the aggregate Fair Market Value (on the date the
Option is exercised) of the vested shares of Company Common Stock
purchased under the underlying Option which have Concurrent Rights
appurtenant to them over (ii) the aggregate exercise price paid for
such shares.
(iii) INDEPENDENT RIGHTS:
A. Independent Rights shall, except as specifically set forth below,
be subject to the same terms and conditions applicable to Nonstatutory
Stock Options as set forth in Section 6 hereof. They shall be
denominated in share equivalents.
B. The appreciation distribution payable on the exercised Independent
Right shall be in cash in an amount equal to the excess of (I) the
aggregate Fair Market Value (on the date of the exercise of the
Independent Right) of a number of shares of Company Common Stock equal
to the number of share equivalents in which the holder is vested under
such Independent Right, and with respect to which the holder is
exercising the Independent Right on such date, over (II) the aggregate
Fair Market Value (on the date of the grant of the Independent Right)
of such number of shares of Company Common Stock.
(iv) TERMS APPLICABLE TO TANDEM RIGHTS, CONCURRENT RIGHTS AND INDEPENDENT
RIGHTS:
A. To exercise any outstanding Tandem, Concurrent or Independent
Right, the holder must provide written notice of exercise to the
Company in compliance with the provisions of the instrument evidencing
such right.
B. If a Tandem, Concurrent or Independent Right is granted to an
individual who is at the time subject to Section 16(b) of the Exchange
Act (a Section 16(b) Insider), then the instrument of grant shall
incorporate all the terms and conditions at the time necessary to
assure that the subsequent exercise of such right shall qualify for the
safe-harbor exemption from short-swing profit liability provided by
Rule 16b-3.
C. Except as otherwise provided in this Section 8, no limitation
shall exist on the aggregate amount of cash payments the Company may
make under the Plan in connection with the exercise of Tandem,
Concurrent or Independent Rights.
9. OTHER STOCK AWARDS.
The Committee shall have the right to grant rights other than those types
described above based upon Company Common Stock having such terms and
conditions as the Committee may determine, including the grant of shares based
upon certain conditions and grant of securities convertible into Company
Common Stock.
10. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) Subject to prior approval by the Company's stockholders, the Board or
the Committee shall have the authority to effect, at any time and from time to
time, with the consent of the affected holders of Options and/or Stock
Appreciation Rights, the repricing of any outstanding Options and/or Stock
Appreciation Rights under the Plan and the grant in substitution therefor of
new Options and/or Stock Appreciation Rights under the Plan covering the same
or different numbers of shares of Company Common Stock, but having an exercise
price per share not less than eighty five percent (85%) of the Fair Market
Value (one hundred percent (100%) of the Fair Market Value in the case of an
Incentive Stock Option) or, in the case of an Incentive Stock Option granted
to a 10% stockholder (as described in subsection 5(b) hereof) not less than
one hundred ten percent (110%) of the Fair Market Value) per share of Company
Common Stock on the new grant date. Notwithstanding the foregoing, the
Committee may grant an Option and/or Stock Appreciation Right with an exercise
price lower than that set forth above if such Option and/or Stock Appreciation
Right is granted as part of a transaction to which section 424(a) of the Code
applies.
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(b) Shares of Company Common Stock subject to an Option or Stock
Appreciation Right canceled under this Section 10 shall continue to be counted
against the maximum award of Options and Stock Appreciation Rights permitted
to be granted to a person pursuant to subsection 5(c) hereof. The repricing of
an Option and/or Stock Appreciation Right under this Section 10, resulting in
a reduction of the exercise price, shall be deemed to be a cancellation of the
original Option and/or Stock Appreciation Right and the grant of a substitute
Option and/or Stock Appreciation Right; in the event of such repricing, both
the original and the substituted Options and Stock Appreciation rights shall
be counted against the maximum awards of Options and Stock Appreciation Rights
permitted to be granted to a person pursuant to subsection 5(c) hereof. The
provisions of this subsection 10(b) shall be applicable only to the extent
required by Section 162(m) of the Code.
11. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of Company Common Stock required to satisfy
such Stock Awards up to the number of shares of Company Common Stock
authorized under the Plan.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of Company Common Stock under the Stock Awards;
provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any Stock Award or any
stock issued or issuable pursuant to any such Stock Award. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems
necessary for the lawful issuance and sale of Company Common Stock under the
Plan, the Company shall be relieved from any liability for failure to issue
and sell Company Common Stock under such Stock Awards unless and until such
authority is obtained.
12. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of Company Common Stock pursuant to Stock Awards
shall constitute general funds of the Company.
13. MISCELLANEOUS.
(a) The Committee shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or
any part thereof will vest, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which
it will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) hereof shall be deemed to be the holder of, or to have
any of the rights of a holder with respect to, any shares of Company Common
Stock subject to such Option unless and until such person has satisfied all
requirements for exercise of the Option pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Director, Consultant,
Optionee, or other holder of Stock Awards any right to continue in the employ
of the Company or any Affiliate (or to continue acting as Director or
Consultant) or shall affect the right of the Company or any Affiliate to
terminate the employment or relationship as a Director or Consultant of any
Employee, Director, Consultant or Optionee, with or without cause.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of Company Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year under all plans of the Company and its Affiliates exceeds one hundred
thousand dollars ($100,000), the Options or portions thereof which exceed such
limit (according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options.
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(e) The Committee shall be authorized to establish procedures pursuant to
which Participants may elect to defer the gain realized upon exercise of a
stock option, or such gain derived from other stock based awards granted under
the Plan.
14. EFFECT OF CHANGE IN STOCK SUBJECT TO THE PLAN.
(a) If any change is made in the Company Common Stock subject to the Plan,
or subject to any Stock Award, without receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of shares subject to options and Stock
Appreciation Rights pursuant to subsection 5(c) hereof, and the outstanding
Stock Awards will be appropriately adjusted in the class(es) and number of
shares and price per share of stock subject to such outstanding Stock Awards.
Such adjustments shall be made by the Board or Committee, the determination of
which shall be final, binding and conclusive. Notwithstanding the preceding
however, the conversion of any convertible securities of the Company shall not
be treated as "transaction not involving the receipt of consideration by the
Company."
(b) In the event of: (1) a dissolution, liquidation or sale of substantially
all of the assets of the Company; (2) a merger or consolidation in which the
Company is not the surviving corporation; or (3) a reverse merger in which the
Company is the surviving corporation but the shares of Company Common Stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then, at the sole discretion of the Committee and to the extent
permitted by applicable law: (i) any surviving corporation or an Affiliate of
such surviving corporation shall assume any Stock Awards and such Stock Awards
shall continue in full force and effect if such surviving corporation and its
Affiliates is willing to do so, or at the sole discretion of the Committee,
and with respect to Stock Awards held by persons who are then determined by
the Committee to be in Continuous Status as Employees, Directors or
Consultants (ii) the Board may waive any discretionary limitations imposed
pursuant to Section 6 hereof so that all Stock Awards from and after a date
prior to the effective date of such merger, consolidation, liquidation or
sale, as the case may be, specified by the Board, shall be exercisable in
full; or (iii) all outstanding Stock Awards may be cancelled by the Board as
of the effective date of any such merger, consolidation, liquidation or sale
provided that notice of such cancellation shall be given to each holder of a
Stock Award, and each holder of an Award shall have the right to exercise such
Award in full (without regard to any discretionary limitations imposed
pursuant hereto) during the 30-day period preceding the effective date of such
merger, consolidation, liquidation or sale; or (iv) all outstanding Awards may
be cancelled by the Board as of the date of any such merger, consolidation,
liquidation or sale provided that notice of such cancellation shall be given
to each holder of a Award, and each holder of a Award shall have right to
exercise such Award but only to the extent exercisable in accordance with any
discretionary limitations imposed pursuant hereto prior to the effective date
of such merger, consolidation, liquidation or sale.
15. GRANT OF OPTIONS IN CONNECTION WITH CERTAIN ACQUISITIONS.
The Board may grant Options under the Plan upon assumption of or in
substitution for incentive stock options or non-statutory stock options
granted under plans of other employers, if such grant occurs by reason of a
corporate merger, consolidation, separation, reorganization, or liquidation to
which the Company is a party, or by reason of the acquisition of property or
stock of another corporation by the Company; provided that, with respect to
any Incentive Stock Option, such transaction is a transaction to which Section
424(a) of the Code applies. The Board may impose such terms and conditions
upon the grant of any Incentive Stock Options under this Section 15 as are
necessary to ensure that the assumption or substitution will not constitute a
modification of the Option under Section 424(h) of the Code, even though any
such term or condition would otherwise be inconsistent with the provisions of
this Plan. Options granted under the provisions of this Section 15 may be
granted at a price less than the Fair Market Value of the Common Stock on the
date such Option is granted, so
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long as the ratio of the Option price to the Fair Market Value of the Common
Stock is no more favorable to the Optionee than the ratio of the Option price
to the Fair Market Value of the stock subject to the old option immediately
before such assumption or substitution. Except as otherwise specifically
provided in the agreement setting forth the terms and conditions of such
Option, the provisions of this Plan shall govern any Options granted under
this Section 15. Nothing in this Section 15 shall be deemed to authorize the
grant of Options under the Plan for a number of shares in excess of the number
set forth in Section 4, nor to limit in any way the authority of the Board to
grant assumed or substituted Options in connection with such transactions
other than under the Plan.
16. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 14 hereof relating to adjustments upon
changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary
for the Plan to satisfy the requirements of the Nasdaq National Market or any
similar organization or of any national securities exchange upon which shares
of Company Common Stock are listed or eligible for trading.
(b) The Board may in its sole discretion submit any other amendments to the
Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code
and the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provision of the Code
and the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(d) Rights and obligations under any Stock Award granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan unless
(i) the Company requests the consent of the persons to whom the Stock Award
was granted and (ii) such person consents in writing.
(e) The Committee at any time, and from time to time, may amend the terms of
any one or more Stock Awards; provided, however, that the rights and
obligations under any Stock Award shall not be altered or impaired by any such
amendment unless (i) the Company requests the consent of the person to whom
the Stock Award was granted and (ii) such person consents in writing.
17. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on April 27, 2010. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan,
except with consent of the person to whom the Stock Award was granted.
18. GOVERNING LAW.
The provisions of the Plan and all Stock Awards made hereunder shall be
governed by and interpreted in accordance with the internal laws of the
Commonwealth of Massachusetts without regard to any applicable conflicts of
law principles thereof.
*******
Adopted by the Board of Directors on March 7, 2000.
Approved by the Company's Stockholders on .
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NATURAL MICROSYSTEMS CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING ON APRIL 28, 2000
The undersigned stockholder of Natural MicroSystems Corporation hereby
acknowledges receipt of the Notice of Annual Meeting and related Proxy Statement
and appoints Robert P. Schechter, Dianne Callan and Richard N. Hoehn, or any one
or more of them, attorneys and proxies for the undersigned with power of
substitution in each to act for and to vote, as designated on the reverse side,
with the same force and effect as the undersigned, all shares of Natural
MicroSystems Corporation common stock standing in the name of the undersigned at
the Annual Meeting of Stockholders of Natural MicroSystems Corporation to be
held at its corporate offices, 100 Crossing Boulevard, Framingham, Massachusetts
on April 28, 2000 at 1:00 p.m., local time and any adjournments thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE NOMINEES FOR DIRECTOR AND "FOR" ALL OTHER PROPOSALS. THE PROXY
WILL BE VOTED IN ACCORDANCE WITH THE HOLDERS' BEST JUDGMENT AS TO ANY OTHER
MATTER.
SEE REVERSE SIDE. If you wish to vote in accordance with the Board of Directors'
recommendations, just sign on the reverse side. You need not mark any boxes.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please sign exactly as your name(s) appear(s) on the books of the Corporation.
Joint owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation or partnership, this signature should be
that of an authorized officer who should state his or her title.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
___________________________________ _______________________________________
___________________________________ _______________________________________
___________________________________ _______________________________________
<PAGE>
NATURAL MICROSYSTEMS CORPORATION
Dear Stockholder:
Please mark the boxes on the proxy card to indicate how your
shares should be voted, then sign and date the card, detach it
and return it in the enclosed postage paid envelope.
Sincerely,
NATURAL MICROSYSTEMS CORPORATION
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
- -------------------------------------------------------------------------------
NATURAL MICROSYSTEMS CORPORATION
- -------------------------------------------------------------------------------
Mark box at right if an address change or comment has been [_]
noted on the reverse side of this card.
1. Elect a Director:
Nominee:
With-
For hold
Robert P. Schechter [_] [_]
Ronald W. White [_] [_]
For Against Abstain
2. Approve an amendment to the Company's Certificate [_] [_] [_]
of Incorporation increasing the authorized number
of shares of common stock issuable thereunder.
3. Approve the adoption of [_] [_] [_]
the Company's 2000 Equity Incentive Plan.
4. Ratify the Board of Directors' [_] [_] [_]
selection of PricewaterhouseCoopers LLP as
independent auditors.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 AND 4.
Please be sure to sign and date this Proxy.
- ------------------Stockholder sign here --------- Co-Owner sign here--
DETACH CARD DETACH CARD
