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 ss. 240.14a-11(c) or ss. 240.14a-12
MICRO-INTEGRATION CORP.
(Name of Registrant as Specified In Its Charter)
Not Applicable
(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)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
----------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
MICRO-INTEGRATION CORP.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 28, 1998
The Annual Meeting of Stockholders of Micro-Integration Corp. (the
"Company") will be held on July 28, 1998 at the offices of the Company, One
Science Park, Frostburg, Maryland 21532 at 3:00 p.m., for the purpose of
considering and acting upon the following proposals:
(1) To elect a Board of four (4) directors to hold office until the
next annual meeting of stockholders or until their respective successors
have been elected and qualified;
(2) To approve the amendment and restatement of the 1994 Stock Plan of
Micro-Integration Corp. (the "1994 Plan");
(3) To ratify the designation of Ernst & Young LLP as independent
accountants for the period ending March 31, 1999;
(4) To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on June 15, 1998 as
the record date for determination of stockholders entitled to notice of and to
vote at the Annual Meeting and at any postponements or adjournments thereof.
The Company's March 31, 1998 Annual Report to Stockholders accompanies this
Notice of Meeting and Proxy Statement.
By Order of the Board of Directors
/s/ SHARON L. MCCAIN
-----------------------------
Sharon L. McCain
Secretary
Frostburg, Maryland
June 29, 1998
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE ACCOMPANYING PROXY CARD
IN THE ENCLOSED ENVELOPE.
<PAGE>
MICRO-INTEGRATION CORP.
One Science Park
Frostburg, Maryland 21532
(301) 689-0800
--------------------
PROXY STATEMENT
--------------------
ANNUAL MEETING OF STOCKHOLDERS
JULY 28, 1998
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of Micro-Integration Corp., a Delaware
corporation (the "Company"), of proxies for use at the Annual Meeting of
Stockholders of the Company to be held on July 28, 1998. This proxy statement
and the accompanying form of proxy are being mailed to stockholders on or about
June 29, 1998.
VOTING RIGHTS
Stockholders of record of the Company as of the close of business on June
15, 1998 have the right to receive notice of and to vote at the Annual Meeting.
On June 15, 1998, the Company had issued and outstanding 2,867,811 shares of
Common Stock (the "Common Stock"), the only class of voting securities
outstanding. Each share of Common Stock is entitled to one vote for as many
separate nominees as there are directors to be elected and for or against all
other matters presented. For action to be taken at the Annual Meeting, the
majority of the shares entitled to vote must be represented at the meeting in
person or by proxy. Shares of stock may not be voted cumulatively. Abstentions
and broker non-votes each will be included in determining the number of shares
present and voting at the Meeting. Abstentions will be counted in tabulations of
the votes cast on proposals, whereas broker non-votes will not be counted for
purposes of determining whether a proposal has been approved.
PROXIES
Proxies for use at the Annual Meeting are being solicited by the Board of
Directors of the Company from its stockholders.
Shares represented by properly executed proxies received by the Company
will be voted at the Annual Meeting in accordance with the instructions thereon.
It is intended that shares represented by proxies received by the Company with
no instructions will be voted in favor of all proposals set forth in the Notice
of Meeting and for the nominees as described below.
Any person giving a proxy in the form accompanying this Proxy Statement has
the power to revoke it at any time before its exercise by (i) filing with the
Secretary of the Company a signed written statement revoking his or her proxy or
(ii) submitting an executed proxy bearing a date later than that of the proxy
being revoked. A proxy may also be revoked by attendance at the Annual Meeting
and election to vote in person. Attendance at the Annual Meeting will not by
itself constitute the revocation of a proxy.
A copy of the Company's Annual Report on Form 10-KSB for the year ended
March 31, 1998, with exhibits, may be obtained by any stockholder of the
Company, without charge, by writing to: Micro-Integration Corp., Attention:
Sharon L. McCain, One Science Park, Frostburg, Maryland 21532.
-1-
<PAGE>
PROPOSAL NUMBER 1
NOMINATION AND ELECTION OF DIRECTORS
The Company's Bylaws currently provide for the number of directors of the
Company to be established by resolution of the Board of Directors. By resolution
dated February 8, 1995, the Board fixed the size of the Board at four (4)
persons. At the Annual Meeting, a Board of four (4) directors will be elected.
Except as set forth below, unless otherwise instructed, the proxy holders will
vote the proxies received by them for Management's nominees named below. All of
the nominees are presently directors of the Company. In the event that any
Management nominee shall become unavailable, or if other persons are nominated,
the proxy holders will vote in their discretion for a substitute nominee. It is
not expected that any nominee will be unavailable. The term of office of each
person elected as a director will continue until the next Annual Meeting of
Stockholders or until a successor has been elected and qualified.
The proxies solicited hereby cannot be voted for a number of persons
greater than the number of nominees named below. The Restated Certificate of
Incorporation of the Company does not permit cumulative voting. A plurality of
the votes of the holders of the outstanding shares of Common Stock represented
at a meeting at which a quorum is present may elect directors.
THE DIRECTORS NOMINATED BY MANAGEMENT ARE:
John A. Parsons, 54, has been President, Chairman of the Board of Directors
and a Director of the Company since it was founded in 1986. He held the same
positions at Micro-Integration, Inc., the Company's predecessor, from its
founding in 1978. From 1975 to 1978, he was an independent consultant doing
business as John A. Parsons and Associates, specializing in IBM mainframe
communications systems. He was with Avon Products, Inc. as Project and Group
Leader, Software and Communications Systems from 1972 to 1975 and was a Data
Processing Supervisor for AT&T from 1964 to 1972. He was awarded the ICCP
(Institute for the Certification of Computer Professionals) CDP (Certificate in
Data Processing) in 1977.
Wayne M. Lee, 52, was elected as a Director of the Company in September
1994. He currently serves as Chairman of Ryan Lee & Co., Inc., a McLean,
Virginia-based investment banking and brokerage firm, which underwrote the May
1994 initial public offering of the Company and which makes a market in shares
of its stock. Mr. Lee was formerly a Managing Director at Bankers Trust New York
Corporation from 1987 to 1990, where he was a senior investment banker.
Maxwell F. Eveleth, Jr., 60, is a Director of the Company and joined the
Board of Directors in 1986 when the Company acquired i.e. Systems, Inc. ("IES").
Mr. Eveleth was also Executive Vice President of the Company from 1986 to 1987.
Prior to the Company's acquisition of IES, he was Chairman of the Board,
President and Chief Executive Officer of IES. Currently, Mr. Eveleth is Vice
President Sales, MatchWare Technologies, Inc. He has held this position since
1993. From October 1987 to 1993, he was the managing partner and lead consultant
of The Metanoic Group, an industry and technology market consulting firm which
generally served small information technology companies.
W. Braun Jones, Jr., 53, was elected as a Director of the Company in
September 1994. From June 1993 to April 1994, Mr. Jones served as President and
Chief Executive Officer of Genesys Information Systems Corporation, a leading
provider of document imaging software to government and commercial users. Mr.
Jones was also founder, Chairman and Chief Executive Officer of Carlyn Computer
Systems Inc., a computer dealer and leasing company, from 1980 to 1995. Mr.
Jones was co-founder and Vice Chairman of the Board for five years, from 1985 to
1991, of Suburban Bank, a $160 million institution with six Washington, D.C.
area offices. He has also served on numerous other boards of private companies.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" MANAGEMENT'S NOMINEES.
-2-
<PAGE>
Committees and Meetings
The Board of Directors held six meetings during fiscal 1997-98. The Board
of Directors has standing Audit and Compensation Committees. The Audit Committee
conducted its business during the regular meetings of the Board of Directors
during the last fiscal year and in addition, conferred from time to time as
necessary. The Compensation Committee, in addition to meetings as part of the
regular meetings of the Board of Directors, also conferred from time to time as
necessary. The Board of Directors has no standing nominating committee. All
directors attended more than 75% of the Board meetings and the meetings of the
committees of the Board on which such directors served.
The Audit Committee of the Board presently consists of Mr. Eveleth and Mr.
Lee. The Audit Committee has the responsibility to review the scope of the
annual audit, recommend to the Board of Directors the appointment of the
independent auditors, and meet with the independent auditors for review and
analysis of the Company's systems, the adequacy of controls and the sufficiency
of financial reporting and accounting compliance.
Messrs. Lee and Jones currently serve on the Compensation Committee. The
Compensation Committee administers the Company's 1994 Plan and determines the
compensation to be paid to each of the Company's executive officers.
-3-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of June 15, 1998 by: (i) each person who is
known by the Company to beneficially own more than five percent of the Common
Stock, (ii) each of the Company's directors, (iii) the Company's Chief Executive
Officer ("CEO") and the Company's most highly compensated executive officer
other than the CEO who was serving at the end of the last completed fiscal year
and whose total annual salary and bonus exceeded $100,000, (the CEO and the
executive officer being collectively referred to as the "Named Individuals"),
and (iv) all directors and executive officers of the Company as a group. Except
as indicated in the footnotes to this table, the persons named in the table have
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them, subject to community property laws where
applicable.
<TABLE>
<CAPTION>
Name of Beneficial Owner Number of Shares Percent
------------------------ Beneficially Owned -------
on June 15, 1998
------------------
<S> <C> <C>
John A. Parsons(1) ..................................................... 1,107,313 38.6%
Micro-Integration Corp. ................................................
One Science Park
Frostburg, MD 21532
Russell Hinnershitz(2) ................................................. 345,967 12.1%
CompSource, Inc. .......................................................
546 Penn Avenue
West Reading, PA 19611
Maxwell F. Eveleth, Jr.(3) ............................................. 66,086 2.3%
1 Atlantic Circle
Kennebunk, ME 04043
W. Braun Jones, Jr.(4) ................................................. 5,450 *
UOL Publishing, Inc. ...................................................
1650 Tysons Blvd., Suite 400
McLean, VA 22102
Wayne M. Lee(5) ........................................................ 41,220 1.4%
Ryan, Lee & Company
7929 Westpark Drive, Suite 203
McLean, VA 22102
Barry S. Wirtanen(6) ................................................... 12,132 *
311 White Oak Lane
Frostburg, MD 21532
All directors and executive officers as a group ........................ 1,236,785 43.1%
(6 persons) (1)(3)(4)(5)(6)
===============================================================================================================
</TABLE>
* Less than 1%.
(1) Includes 15,252 shares held in the Micro-Integration Corp. Employee
Savings and Stock Ownership Plan, 4,993 shares of which are held by Mr.
Parson's wife. Also includes 202,175 shares held by Mr. Parson's wife and
31,850 held by each of three children. Mr. Parsons disclaims beneficial
ownership of his wife's shares and his children's shares.
(2) Includes 2,083 shares subject to options exercisable within 60 days
after June 15, 1998.
(3) Includes 3,750 shares subject to options exercisable within 60 days
after June 15, 1998.
(4) Includes 3,750 shares subject to options exercisable within 60 days
after June 15, 1998.
(5) Includes 28,470 shares subject to a warrant exercisable on or after May
25, 1995 and 3,750 shares subject to options exercisable within 60 days
after June 15, 1998.
(6) Includes 216 shares held in the Micro-Integration Corp. Employee
Savings and Stock Ownership Plan. Also includes 11,916 shares subject to
options exercisable within 60 days after June 15, 1998.
-4-
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
The Securities and Exchange Commission requires disclosure where an
executive officer of a company served or serves as a director or on the
compensation committee of an entity other than the Company and an executive
officer of such other entity served or serves as a director or on the
compensation committee of the Company. The Company does not have any such
interlocks. Decisions as to executive compensation are made by the Compensation
Committee. Messrs. Lee and Jones are members of the Compensation Committee.
CERTAIN TRANSACTIONS
There are no transactions to report.
-5-
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth all compensation for the fiscal years
ending March 31, 1996, 1997 and 1998 awarded to, earned by, or paid for services
rendered to the Company in all capacities by, the Named Individuals.
Summary Compensation Table
<TABLE>
<CAPTION>
Name and Principal Position Fiscal Annual Compensation
--------------------------- Year ------------------- All Other
Ending Compensation ($)
March 31 ----------------
--------
Salary ($) Bonus ($)
---------- ---------
<S> <C> <C> <C> <C>
John A. Parsons 1998 $150,000 $10,400 $18,800(1)
Chairman, President, Chief 1997 $150,000 $250 $17,600(2)
Executive Officer 1996 $148,194 $1,000 $ 9,330(3)
Barry S. Wirtanen 1998 $125,000 $12,000 $-0-
Vice President, Sales 1997 $125,000 $3,250 -0-
1996 $144,768 $1,000 -0-
=================================================================================================
</TABLE>
(1) Includes payments by the Company of premiums on a life insurance policy for
Mr. Parsons ($14,890) and an automobile allowance ($3,910).
(2) Includes payments by the Company of premiums on a life insurance policy for
Mr. Parsons ($11,877), reimbursement for accrued vacation time not taken
($5,293), and an automobile allowance ($430).
(3) Includes payments by the Company of premiums on a life insurance policy for
Mr. Parsons ($8,910) and an automobile allowance ($420).
-6-
<PAGE>
Option Grants in Last Fiscal Year
No options were granted during the fiscal year ended March 31, 1998 to the Named
Individuals.
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value Table
No options were exercised during the fiscal year ended March 31, 1998 by
any of the Named Individuals. The last sale price of the Common Stock as
reported on the Nasdaq Stock Market on March 31, 1998, the fiscal year-end, was
$1.875 per share.
Directors' Compensation
Nonemployee directors are compensated as follows: $1,200 per meeting
attended, $1,500 per year for committee membership, and a cash payment equal to
135% of the value of 500 shares of Common Stock at the stock price as of the
first day of each calendar quarter. In addition, the Company's 1994 Plan
provides for automatic grants of stock options to nonemployee directors. Under
the Plan, each nonemployee director who has served for one full year is granted
stock options for 1,000 shares of Common Stock on the date of the Annual Meeting
of Stockholders. Such options vest in full on the first anniversary of the date
of grant. Directors must serve one full quarter in order to be eligible for
compensation. Directors are reimbursed for expenses in attending Board meetings.
-7-
<PAGE>
Employment Agreements
The Company entered into an employment agreement with John A. Parsons dated
as of January 20, 1997. Mr. Parsons serves as the Chairman of the Board of
Directors, President and Chief Executive Officer of the Company. His employment
agreement provides compensation in the form of an annual salary in the amount of
$150,000 per year and a cash bonus equal to the increase in value of 15,000
shares of the Company's Common Stock, if any, during the term of the fiscal
year. The agreement renews automatically for one year terms, unless either Mr.
Parsons or the Company gives notice to the other of an intention to terminate
the agreement. Also, both Mr. Parsons and the Company may terminate the
agreement at any time upon two weeks written notice. The Company may also
terminate the agreement for gross misconduct upon reasonable notice.
The Company had an employment agreement with Barry S. Wirtanen effective
January 20, 1997 through March 31, 1998 (the "1997 Agreement") and currently has
an employment agreement with Mr. Wirtanen effective as of April 1, 1998 (the
"1998 Agreement"). Mr. Wirtanen serves as Vice President for U.S. Sales for the
Company. The 1997 Agreement provided for compensation in the form of a salary of
$125,000 per year, options to purchase 13,000 shares of the Company's Common
Stock (which were granted on April 1, 1998) and an annual performance bonus. The
bonus was paid as follows: a $1,000 per month payment, with the balance of any
bonus due paid in a lump sum in December. Under the 1997 Agreement, Mr. Wirtanen
was not required to return any bonus payment to the Company. The Company and Mr.
Wirtanen could each terminate the employment agreement for any reason upon
reasonable notice. The terms of the 1998 Agreement are essentially the same as
those of the 1997 Agreement except that: Mr. Wirtanen's compensation is paid in
the form of a salary of $94,500 per year, options to purchase 14,000 shares of
the Company's Common Stock (13,000 of which were granted on April 1, 1998) and a
performance bonus. The performance bonus is fixed at $10,125 for the first three
months and paid semi-monthly. After the first three months, the performance
bonus is based on the annual change in gross margins and percentage of net
profits of the Company's subsidiaries, Computer One of Ohio, Inc., Computer
Site, Inc., and Suite One Computer Services, Inc., and paid semi-monthly for the
next three months.
Indemnification of Directors and Officers
As permitted by Section 145 of the Delaware General Corporation Law, the
Company's Certificate of Incorporation includes a provision that eliminates the
personal liability of its directors for monetary damages for breach or alleged
breach of their duty of care. In addition, as permitted by Section 145 of the
Delaware General Corporation Law, the Bylaws of the Company provide generally
that the Company shall indemnify its directors and officers to the fullest
extent permitted by Delaware law, including those circumstances in which
indemnification would otherwise be discretionary.
The Company has entered into indemnification agreements with each of its
directors and executive officers that provide the maximum indemnity allowed to
directors and executive officers by Section 145 of the Delaware General
Corporation Law and the Bylaws, as well as certain additional procedural
protections. In addition, the indemnification agreements provide generally that
the Company will advance expenses incurred by directors and executive officers
in any action or proceeding as to which they may be indemnified.
The indemnification provision in the Bylaws, and the indemnification
agreements entered into between the Company and its directors and executive
officers, may be sufficiently broad to permit indemnification of the officers
and directors for liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act").
The indemnification agreements provide that the Company may purchase and
maintain director and officer liability insurance. During the 1997-1998 fiscal
year the Company purchased $1,000,000 in director and officer liability
insurance from AH&T Insurance at an annual cost of $33,500. The insurance is
renewable in November 1998.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
-8-
<PAGE>
PROPOSAL NUMBER 2
AMENDMENT AND RESTATEMENT OF THE 1994 STOCK PLAN
OF MICRO-INTEGRATION CORP.
1994 Plan
On May 7, 1998, the Board of Directors unanimously approved an amendment
and restatement of the 1994 Plan, subject to stockholder approval, to increase
the number of shares available for grant under the 1994 Plan by 150,000 shares,
from 150,000 to 300,000 shares, all of which shares will be available for grant
to directors and selected employees, advisors and consultants of the Company.
The Board of Directors believes that the 150,000 additional shares are necessary
for the Company to continue to compete effectively in its market by attracting
and retaining key talent with stock options. In addition, the 1994 Plan has been
amended to conform to certain changes in Rule 16b under the Securities Exchange
Act of 1934, as amended, (the "Exchange Act"). Specifically, the 1994 Plan has
been amended to provide that it will be administered by a committee which
satisfies the requirements of Rule 16b-3 under the Exchange Act and to permit
nonqualified stock option agreements to contain language permitting certain
transfers of stock options.
Under the 1994 Plan, as amended and restated (the "Amended and Restated
Plan"), only employees of the Company or any subsidiary (including, without
limitation, independent contractors who are not members of the Board of
Directors) are eligible to receive grants of Nonstatutory Stock Options ("NSOs")
by the Compensation Committee. In addition, only employees who are common-law
employees of the Company or any subsidiary are eligible for the grant of
Incentive Stock Options ("ISOs"). Nonemployee directors are only eligible for
fixed grants of NSOs, as set forth in the Amended and Restated Plan. The Amended
and Restated Plan is administered by the Compensation Committee of the Board of
Directors, which selects the employees to whom options will be granted,
determines the number of shares to be made subject to each grant, and prescribes
other terms and conditions, including the type of consideration to be paid to
the Company for the grant of each option and vesting schedules in connection
with each grant.
Set forth below is an explanation of the Amended and Restated Plan and a
summary of its principal terms. The text of the Amended and Restated Plan is set
forth in Exhibit A to this Proxy Statement.
The following summary does not purport to be a complete statement of the
Amended and Restated Plan's terms and is subject to and qualified in its
entirety by reference to Exhibit A.
Shares Subject to the Amended and Restated Plan
Prior to the proposed amendment of the 1994 Plan, there are 150,000 shares
of Common Stock authorized for option grants. In the Amended and Restated Plan
there are 300,000 shares of Common Stock authorized for option grants. The
authorized shares issuable in connection with the Amended and Restated Plan are
subject to adjustment in the event of stock dividends, mergers or other
reorganizations and other situations.
As of June 15, 1998, the Company had options outstanding under the 1994
Plan to purchase an aggregate of 131,000 shares of Common Stock at exercise
prices ranging from $1.75 to $7.00 per share, or a weighted average per share
exercise price of $2.35. As of June 15, 1998, a total of 19,000 shares of Common
Stock was available for future issuance under the 1994 Plan. If the Amended and
Restated Plan is adopted, a total of 169,000 shares of Common Stock will be
available for future issuance. If any option granted under the Amended and
Restated Plan expires or is canceled or otherwise terminated, the shares
allocable to the unexercised portion of such option shall again be available for
additional option grants.
Participants
All directors, employees, advisors, and consultants of the Company are
eligible to receive options under the Amended and Restated Plan either by
automatic grant for the Board of Directors made pursuant to the Amended
-9-
<PAGE>
and Restated Plan or if selected by the Compensation Committee. Currently, 12
persons participate in the 1994 Plan.
In addition, the Amended and Restated Plan provides that no person may be
granted in any single calendar year options to purchase in excess of 15,000
shares of Common Stock, subject to certain specified adjustments.
Terms of Stock Options
The exercise price of NSOs under the Amended and Restated Plan shall not be
less than 85% of the fair market value of a share of the Company's Common Stock
on the date of grant. The exercise price of all NSOs granted to a nonemployee
director shall be equal to 100% of the fair market value of a share of the
Company's Common Stock on the date of grant.
The exercise price of ISOs granted to the Company's employees shall not be
less than 100% of the fair market value of a share of the Company's Common Stock
on the date of grant, except that ISOs granted to 10% stockholders shall have an
exercise price equal to 110% of the fair market value of a share of the
Company's Common Stock on the date of grant.
The term of any Option granted under the Amended and Restated Plan shall
not exceed 10 years from the date of grant, except that ISOs granted to 10%
stockholders are not exercisable after the expiration of 5 years from the date
of grant.
The Compensation Committee: (1) administers the Amended and Restated Plan,
and except for automatic grants for the Board of Directors made pursuant to the
Amended and Restated Plan, (2) determines the number of shares and options to be
granted under the Amended and Restated Plan, and the timing, vesting, and other
terms of such grants, including, without limitation, the purchase price for each
award or sale of shares and the exercise price of each option.
Federal Income Tax Consequences
The following discussion of the federal income tax consequences of the
Amended and Restated Plan is intended to be a summary of applicable federal law.
State and local tax consequences may differ. Because the federal income tax
rules governing options and related payments are complex and subject to frequent
change, optionees are advised to consult their tax advisors prior to exercise of
options or dispositions of stock acquired pursuant to option exercise.
ISOs and NSOs are treated differently for federal income tax purposes. ISOs
are intended to comply with the requirements of Section 422 of the Internal
Revenue Code. NSOs need not comply with such requirements.
An employee is not taxed on the grant or exercise of an ISO. The difference
between the exercise price and the fair market value on the exercise date of the
shares acquired under an ISO will, however, be a preference item for purposes of
the alternative minimum tax. If an optionee holds the shares acquired upon
exercise of an ISO for at least two years following grant and at least one year
following exercise, the optionee's gain, if any, upon a subsequent disposition
of such shares is long-term capital gain. If such shares are held longer than 18
months, the long-term capital gains rate is generally 20%. If such shares are
held less than 18 months, the rate is 28%. The measure of the gain is the
difference between the proceeds received on disposition and the optionee's basis
in the shares (which generally equals the exercise price). If an optionee
disposes of stock acquired pursuant to exercise of an ISO before satisfying the
one- and two-year holding periods described above, the optionee may recognize
both ordinary income and capital gain in the year of disposition. The amount of
the ordinary income will be the lesser of (i) the amount realized on disposition
less the optionee's adjusted basis in the stock (usually the option exercise
price) or (ii) the difference between the fair market value of the stock on the
exercise date and the option exercise price. The balance of the consideration
received on such a disposition will be capital gain (long-term capital gain if
the stock had been held for at least one year following exercise of the ISO).
The Company is not entitled to an income tax deduction on the grant or exercise
of an ISO or on the optionee's disposition of the shares after satisfying the
holding period requirement described above. If the holding periods are not
satisfied, the Company will be entitled to a deduction in the year the optionee
disposes of the shares, in an amount equal to the ordinary income recognized by
the optionee.
-10-
<PAGE>
An employee is not taxed on the grant of an NSO. On exercise, however, the
optionee recognizes ordinary income equal to the difference between the option
price and the fair market value of the shares on the date of exercise. The
Company is entitled to an income tax deduction in the year of exercise in the
amount recognized by the optionee as ordinary income. Any gain on subsequent
disposition of the shares is long-term capital gain if the shares are held for
at least one year following exercise. The Company does not receive a deduction
for this gain.
New Plan Benefits
The Compensation Committee has full discretion to determine the number and
amount of options to be granted to employees under the Amended and Restated
Plan. Therefore, the benefits and amounts that will be received by each of the
officers named in the Summary Compensation Table above, the executive officers
as a group, the directors who are not executive officers as a group, and all
other employees under the Amended and Restated Plan are not presently
determinable.
The number of options to be received by each nonemployee director pursuant
to the terms of the Amended and Restated Plan, subject to stockholder approval,
are fixed, as discussed above.
Required Approval
For action to be taken at the Annual Meeting, a quorum must be present. To
be considered approved, the amendment and restatement of the 1994 Plan must
receive the affirmative vote of the holders of a majority of the shares
represented and voting at the Annual Meeting.
Unless marked to the contrary, proxies received will be voted "FOR" the
amendment and restatement of the Amended and Restated Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT AND
RESTATEMENT OF THE COMPANY'S 1994 PLAN.
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PROPOSAL NUMBER 3
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has approved the retention of Ernst & Young LLP as
independent auditors for the Company for the current fiscal year. The
stockholders are asked to ratify the designation of Ernst & Young LLP as
independent auditors for the Company for the fiscal year ending March 31, 1999.
A representative of Ernst & Young LLP is expected to be present at the Annual
Meeting to make a statement if he or she desires to do so, and such
representative is expected to be available to respond to appropriate questions.
Should the stockholders fail to ratify the designation of Ernst & Young LLP
as independent auditors, retention of the firm for the fiscal year ending March
31, 1999 will be reconsidered by the Board of Directors.
Unless marked to the contrary, proxies received will be voted "FOR"
ratification of the designation of Ernst & Young LLP as independent auditors for
the Company's fiscal year ending March 31, 1999.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
COMPANY'S INDEPENDENT AUDITORS.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who beneficially own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission (the "SEC") reports on Forms 3, 4 and 5 of ownership and
changes in ownership of the Company's securities. Officers, directors and
greater than ten percent stockholders are required by SEC regulations to furnish
the Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
are not required to file a Form 5 for the fiscal year ended March 31, 1998, the
Company believes that all of its officers, directors and greater than ten
percent stockholders complied with all filing requirements applicable to them
with respect to transactions during the fiscal year ended March 31, 1998, except
that Terry D. Frost, an executive officer of the Company, inadvertently filed
her Form 3 late, on January 9, 1998, which Form 3 was due within ten days after
Ms. Frost became an executive officer of the Company on August 4, 1997.
OTHER MATTERS
Proposals Intended to be Presented at Next Annual Meeting. Proposals of
security holders intended to be presented at the Company's 1999 Annual Meeting
of Stockholders must be received by the Company for inclusion in the Company's
proxy statement and form of proxy no later than March 1, 1999.
Other Matters. Management knows of no business that will be presented for
consideration at the Annual Meeting other than as stated in the Notice of
Meeting. If, however, other matters are properly brought before the meeting, it
is the intention of the persons named in the accompanying form of proxy to vote
the shares represented thereby on such matters in accordance with their best
judgment.
Proxy Solicitation. The expense of solicitation of proxies will be borne by
the Company. In addition to solicitation of proxies by mail, certain officers,
directors and Company employees who will receive no additional compensation for
their services may solicit proxies by telephone, telegraph or personal
interview. The Company is required to request brokers and nominees who hold
stock in their name to furnish this proxy material to beneficial owners of the
stock and will reimburse such brokers and nominees for their reasonable
out-of-pocket expenses in so doing.
By Order of the Board of Directors,
/s/ SHARON L. MCCAIN
------------------------------------
Sharon L. McCain
Secretary
Frostburg, Maryland
June 29, 1998
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EXHIBIT A
AMENDED AND RESTATED
1994 STOCK PLAN
OF
MICRO-INTEGRATION CORP.
SECTION 1. ESTABLISHMENT AND PURPOSE.
The Plan was established on March 21, 1994, effective April 1, 1994, to
offer directors and selected employees, advisors and consultants an opportunity
to acquire a proprietary interest in the success of the Company, or to increase
such interest, by purchasing Shares of the Company's Common Stock. The Plan
provides both for the direct award or sale of Shares and for the grant of
Options to purchase Shares. Options granted under the Plan may include
Nonstatutory Options as well as ISOs intended to qualify under section 422 of
the Code.
The Plan is intended to comply in all respects with Rule 16b-3 (or its
successor) under the Exchange Act and shall be construed accordingly.
SECTION 2. DEFINITIONS.
(a) "Board of Directors" shall mean the Board of Directors of the Company,
as constituted from time to time.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean a committee of the Board of Directors, as
described in Section 3(a).
(d) "Company" shall mean Micro-Integration Corp., a Delaware corporation.
(e) "Employee" shall mean (i) any individual who is a common-law employee
of the Company or of a Subsidiary, (ii) an Outside Director and (iii) an
independent contractor who performs services for the Company or a Subsidiary and
who is not a member of the Board of Directors. Service as an Outside Director or
independent contractor shall be considered employment for all purposes of the
Plan, except as provided in Subsections (a) and (b) of Section 4.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
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(g) "Exercise Price" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Committee in the
applicable Stock Option Agreement.
(h) "Fair Market Value" shall mean the market price of Stock, determined by
the Committee as follows:
(i) If Stock was traded on a stock exchange on the date in question, then
the Fair Market Value shall be equal to the closing price reported for such date
by the applicable composite-transactions report;
(ii) If Stock was traded over-the-counter on the date in question and was
traded on the Nasdaq system or the Nasdaq National Market, then the Fair Market
Value shall be equal to the last-transaction price quoted for such date by the
Nasdaq system or the Nasdaq National Market;
(iii) If Stock was traded over-the-counter on the date in question but was
not traded on the Nasdaq system or the Nasdaq National Market, then the Fair
Market Value shall be equal to the mean between the last reported representative
bid and asked prices quoted for such date by the principal automated
inter-dealer quotation system on which Stock is quoted or, if the Stock is not
quoted on any such system, by the "Pink Sheets" published by the National
Quotation Bureau, Inc.; and
(iv) If none of the foregoing provisions is applicable, then the Fair
Market Value shall be determined by the Committee in good faith on such basis as
it deems appropriate.
In all cases, the determination of Fair Market Value by the Committee shall be
conclusive and binding on all persons.
(i) "ISO" shall mean an employee incentive stock option described in
section 422(b) of the Code.
(j) "Nonstatutory Option" shall mean an employee stock option not described
in sections 422(b) or 423(b) of the Code.
(k) "Offeree" shall mean an individual to whom the Committee has offered
the right to acquire Shares under the Plan (other than upon exercise of an
Option).
(l) "Option" shall mean an ISO or Nonstatutory Option granted under the
Plan and entitling the holder to purchase Shares.
(m) "Optionee" shall mean an individual who holds an Option.
(n) "Outside Director" shall mean a member of the Board of Directors who is
not a common-law employee of the Company or of a Subsidiary.
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(o) "Plan" shall mean this Amended and Restated 1994 Stock Plan of
Micro-Integration Corp.
(p) "Purchase Price" shall mean the consideration for which one Share may
be acquired under the Plan (other than upon exercise of an Option), as specified
by the Committee.
(q) "Service" shall mean service as an Employee.
(r) "Share" shall mean one share of Stock, as adjusted in accordance with
Section 9 (if applicable).
(s) "Stock" shall mean the Common Stock of the Company.
(t) "Stock Option Agreement" shall mean the agreement between the Company
and an Optionee which contains the terms, conditions and restrictions pertaining
to his or her Option.
(u) "Stock Purchase Agreement" shall mean the agreement between the Company
and an Offeree who acquires Shares under the Plan which contains the terms,
conditions and restrictions pertaining to the acquisition of such Shares.
(v) "Subsidiary" shall mean any corporation, if the Company and/or one or
more other Subsidiaries own not less than 50 percent of the total combined
voting power of all classes of outstanding stock of such corporation. A
corporation that attains the status of a Subsidiary on a date after the adoption
of the Plan shall be considered a Subsidiary commencing as of such date.
(w) "Total and Permanent Disability" shall mean that the Optionee is unable
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted, or can be expected to last, for a continuous period
of not less than one year.
SECTION 3. ADMINISTRATION.
(a) Committee Membership. The Plan shall be administered by the Committee.
The "Committee" shall mean the full Board of Directors and/or a committee
designated by the Board of Directors, which is authorized to administer the Plan
under this Section. The Committee's membership shall enable the Plan to qualify
under Rule 16b-3 with regard to the grant of Shares and Options under the Plan
to persons who are subject to Section 16 of the Exchange Act. Subject to the
requirements of applicable law, the Committee may designate persons other than
members of the Committee to carry out its responsibilities and may prescribe
such conditions and limitations as it may deem appropriate, except that the
Committee may not delegate its authority with regard to the selection for
participation of or the granting of Shares or Options under the Plan to persons
subject to Section 16 of the Exchange Act.
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(b) Committee Procedures. The Committee shall designate one of its members
as chairman. The Committee may hold meetings at such times and places as it
shall determine. The acts of a majority of the Committee members present at
meetings at which a quorum exists, or acts reduced to or approved in writing by
all Committee members, shall be valid acts of the Committee.
(c) Committee Responsibilities. Subject to the provisions of the Plan, the
Committee shall have full authority and discretion to take the following
actions:
(i) To interpret the Plan and to apply its provisions;
(ii) To adopt, amend or rescind rules, procedures and forms relating to the
Plan;
(iii) To authorize any person to execute, on behalf of the Company, any
instrument required to carry out the purposes of the Plan;
(iv) To determine when Shares are to be awarded or offered for sale and
when Options are to be granted under the Plan;
(v) To select the Offerees and Optionees;
(vi) To determine the number of Shares to be offered to each Offeree or to
be made subject to each Option;
(vii) To prescribe the terms and conditions of each award or sale of
Shares, including (without limitation) the Purchase Price, and to specify the
provisions of the Stock Purchase Agreement relating to such award or sale;
(viii) To prescribe the terms and conditions of each Option, including
(without limitation) the Exercise Price, to determine whether such Option is to
be classified as an ISO or as a Nonstatutory Option, and to specify the
provisions of the Stock Option Agreement relating to such Option;
(ix) To amend any outstanding Stock Purchase Agreement or Stock Option
Agreement, subject to applicable legal restrictions and, to the extent such
amendments adverse to the Offeree's or Optionee's interest, to the consent of
the Offeree or Optionee who entered into such agreement;
(x) To prescribe the consideration for the grant of each Option or other
right under the Plan and to determine the sufficiency of such consideration; and
(xi) To take any other actions deemed necessary or advisable for the
administration of the Plan.
All decisions, interpretations and other actions of the Committee shall be final
and
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binding on all Offerees, all Optionees, and all persons deriving their rights
from an Offeree or Optionee. No member of the Committee shall be liable for any
action that he or she has taken or has failed to take in good faith with respect
to the Plan, any Option, or any right to acquire Shares under the Plan.
SECTION 4. ELIGIBILITY.
(a) General Rules. Only Employees (including, without limitation,
independent contractors who are not members of the Board of Directors) shall be
eligible for designation as Optionees or Offerees by the Committee. In addition,
only Employees who are common-law employees of the Company or a Subsidiary shall
be eligible for the grant of ISOs. Employees who are Outside Directors shall
only be eligible for the grant of the Nonstatutory Options described in
Subsection (b) below.
(b) Outside Directors. Any other provision of the Plan notwithstanding, the
participation of Outside Directors in the Plan shall be subject to the following
restrictions:
(i) Outside Directors shall receive no grants other than the Nonstatutory
Options described in this Subsection (b).
(ii) Each Outside Director who first becomes a member of the Board of
Directors after the effective date of the Company's registration statement on
Form 8-A under the Exchange Act shall receive a one-time grant of a Nonstatutory
Option covering 3,000 Shares (subject to adjustment under Article 9). Such
Nonstatutory Option shall be granted on the date when such Outside Director
first joins the Board of Directors and shall become exercisable ratably over a
four-year period.
(iii) Upon the conclusion of each regular annual meeting of the Company's
stockholders, each Outside Director who will continue serving as a member of the
Board of Directors thereafter shall receive a Nonstatutory Option covering 1,000
Shares (subject to adjustment under Article 9), except that such Nonstatutory
Option shall not be granted in the calendar year in which the same Outside
Director received the Nonstatutory Option described in Paragraph (ii) above.
Nonstatutory Options granted under this Paragraph (iii) shall become exercisable
in full on the first anniversary of the date of grant.
(iv) All Nonstatutory Options granted to an Outside Director under this
Subsection (b) shall also become exercisable in full in the event of the
termination of such Outside Director's service because of death, Total and
Permanent Disability or voluntary retirement at or after age 65.
(v) The Exercise Price under all Nonstatutory Options granted to an Outside
Director under this Subsection (b) shall be equal to 100 percent of the Fair
Market Value of a Share on the date of grant, payable in one of the forms
described in Subsection (a), (b), (c) or (d) of Section 8.
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(vi) All Nonstatutory Options granted to an Outside Director under this
Subsection (b) shall terminate on the earliest of (A) the 10th anniversary of
the date of grant, (B) the date three months after the termination of such
Outside Director's service for any reason other than death or Total and
Permanent Disability or (C) the date 12 months after the termination of such
Outside Director's service because of death or Total and Permanent Disability.
The Committee may provide that the Nonstatutory Options that otherwise would be
granted to an Outside Director under this Subsection (b) shall instead be
granted to an affiliate of such Outside Director. Such affiliate shall then be
deemed to be an Outside Director for purposes of the Plan, provided that the
service-related vesting and termination provisions pertaining to the
Nonstatutory Options shall be applied with regard to the service of the Outside
Director.
(c) Ten-Percent Stockholders. An Employee who owns more than 10 percent of
the total combined voting power of all classes of outstanding stock of the
Company or any of its Subsidiaries shall not be eligible for the grant of an ISO
unless (i) the Exercise Price is at least 110 percent of the Fair Market Value
of a Share on the date of grant and (ii) such ISO by its terms is not
exercisable after the expiration of five years from the date of grant.
(d) Attribution Rules. For purposes of Subsection (c) above, in determining
stock ownership, an Employee shall be deemed to own the stock owned, directly or
indirectly, by or for such Employee's brothers, sisters, spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its stockholders, partners or beneficiaries. Stock
with respect to which such Employee holds an option shall not be counted.
(e) Outstanding Stock. For purposes of Subsection (c) above, "outstanding
stock" shall include all stock actually issued and outstanding immediately after
the grant. "Outstanding stock" shall not include shares authorized for issuance
under outstanding options held by the Employee or by any other person.
SECTION 5. STOCK SUBJECT TO PLAN.
(a) Basic Limitation. Shares offered under the Plan shall be authorized but
unissued Shares or treasury Shares. The aggregate number of Shares which may be
issued under the Plan (upon exercise of Options or other rights to acquire
Shares) shall not exceed 300,000 Shares, subject to adjustment pursuant to
Section 9. The number of Shares which are subject to Options or other rights
outstanding at any time under the Plan shall not exceed the number of Shares
which then remain available for issuance under the Plan. The Company, during the
term of the Plan, shall at all times reserve and keep available sufficient
Shares to satisfy the requirements of the Plan.
(b) Additional Shares. In the event that any outstanding Option or other
right for any reason expires or is canceled or otherwise terminated, the Shares
allocable to
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the unexercised portion of such Option or other right shall again be available
for the purposes of the Plan. In the event that Shares issued under the Plan are
reacquired by the Company pursuant to a forfeiture provision, a right of
repurchase or a right of first refusal, such Shares shall again be available for
the purposes of the Plan.
SECTION 6. TERMS AND CONDITIONS OF AWARDS OR SALES.
(a) Stock Purchase Agreement. Each award or sale of Shares under the Plan
(other than upon exercise of an Option) shall be evidenced by a Stock Purchase
Agreement between the Offeree and the Company. Such award or sale shall be
subject to all applicable terms and conditions of the Plan and may be subject to
any other terms and conditions which are not inconsistent with the Plan and
which the Committee deems appropriate for inclusion in a Stock Purchase
Agreement. The provisions of the various Stock Purchase Agreements entered into
under the Plan need not be identical.
(b) Duration of Offers and Nontransferability of Rights. Any right to
acquire Shares under the Plan (other than an Option) shall automatically expire
if not exercised by the Offeree within 30 days after the grant of such right was
communicated to the Offeree by the Committee. Such right shall not be
transferable and shall be exercisable only by the Offeree to whom such right was
granted.
(c) Purchase Price. The Purchase Price of Shares to be offered under the
Plan shall not be less than 85 percent of the Fair Market Value of such Shares.
Subject to the preceding sentence, the Purchase Price shall be determined by the
Committee at its sole discretion. The Purchase Price shall be payable in a form
described in Section 8.
(d) Withholding Taxes. As a condition to the award, sale or vesting of
Shares, the Offeree shall make such arrangements as the Committee may require
for the satisfaction of any federal, state, local or foreign withholding tax
obligations that arise in connection with such Shares. The Committee may permit
the Offeree to satisfy all or part of his or her tax obligations related to such
Shares by having the Company withhold a portion of any Shares that otherwise
would be issued to him or her or by surrendering any Shares that previously were
acquired by him or her. The Shares withheld or surrendered shall be valued at
their Fair Market Value on the date when taxes otherwise would be withheld in
cash. The payment of taxes by assigning Shares to the Company, if permitted by
the Committee, shall be subject to such restrictions as the Committee may
impose, including any restrictions required by rules of the Securities and
Exchange Commission.
(e) Restrictions on Transfer of Shares. Any Shares awarded or sold under
the Plan shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Purchase Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Shares.
SECTION 7. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreement. Each grant of an Option under the Plan
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shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms and conditions of
the Plan and may be subject to any other terms and conditions which are not
inconsistent with the Plan and which the Committee deems appropriate for
inclusion in a Stock Option Agreement. The provisions of the various Stock
Option Agreements entered into under the Plan need not be identical.
(b) Number of Shares. Each Stock Option Agreement shall specify the number
of Shares that are subject to the Option and shall provide for the adjustment of
such number in accordance with Section 9. Options granted to any Optionee in a
single calendar year shall in no event cover more than 15,000 Shares, subject to
adjustment in accordance with Section 9. The Stock Option Agreement shall also
specify whether the Option is an ISO or a Nonstatutory Option.
(c) Exercise Price. Each Stock Option Agreement shall specify the Exercise
Price. The Exercise Price of an ISO shall not be less than 100 percent of the
Fair Market Value of a Share on the date of grant, except as otherwise provided
in Section 4(c). The Exercise Price of a Nonstatutory Option shall not be less
than 85 percent of the Fair Market Value of a Share on the date of grant.
Subject to the preceding two sentences, the Exercise Price under any Option
shall be determined by the Committee at its sole discretion. The Exercise Price
shall be payable in a form described in Section 8.
(d) Withholding Taxes. As a condition to the exercise of an Option, the
Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state, local or foreign withholding tax obligations
that arise in connection with such exercise. The Optionee shall also make such
arrangements as the Committee may require for the satisfaction of any federal,
state, local or foreign withholding tax obligations that may arise in connection
with the disposition of Shares acquired by exercising an Option. The Committee
may permit the Optionee to satisfy all or part of his or her tax obligations
related to the Option by having the Company withhold a portion of any Shares
that otherwise would be issued to him or her or by surrendering any Shares that
previously were acquired by him or her. Such Shares shall be valued at their
Fair Market Value on the date when taxes otherwise would be withheld in cash.
The payment of taxes by assigning Shares to the Company, if permitted by the
Committee, shall be subject to such restrictions as the Committee may impose,
including any restrictions required by rules of the Securities and Exchange
Commission.
(e) Exercisability and Term. Each Stock Option Agreement shall specify the
date when all or any installment of the Option is to become exercisable. The
vesting of any Option shall be determined by the Committee at its sole
discretion. A Stock Option Agreement may provide for accelerated exercisability
in the event of the Optionee's death, Total and Permanent Disability or
retirement or other events. The Stock Option Agreement shall also specify the
term of the Option. The term shall not exceed 10 years from the date of grant,
except as otherwise provided in Section 4(c). Subject to the preceding sentence,
the Committee at its sole discretion shall determine when an Option is to
expire.
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(f) Nontransferability. During an Optionee's lifetime, such Optionee's
Option(s) shall be exercisable only by him or her and shall not be transferable,
unless permitted by the Stock Option Agreement. In the event of an Optionee's
death, such Optionee's Option(s) shall not be transferable other than by will,
by a beneficiary designation executed by the Optionee and delivered to the
Company, or by the laws of descent and distribution.
(g) Termination of Service (Except by Death). If an Optionee's Service
terminates for any reason other than the Optionee's death, then such Optionee's
Option(s) shall expire on the earliest of the following occasions:
(i) The expiration date determined pursuant to Subsection (e) above;
(ii) The date 90 days after the termination of the Optionee's Service for
any reason other than Total and Permanent Disability; or
(iii) The date six months after the termination of the Optionee's Service
by reason of Total and Permanent Disability.
The Optionee may exercise all or part of his or her Option(s) at any time before
the expiration of such Option(s) under the preceding sentence, but only to the
extent that such Option(s) had become exercisable before the Optionee's Service
terminated or became exercisable as a result of the termination. The balance of
such Option(s) shall lapse when the Optionee's Service terminates. In the event
that the Optionee dies after the termination of the Optionee's Service but
before the expiration of the Optionee's Option(s), all or part of such Option(s)
may be exercised (prior to expiration) by his or her designated beneficiary (if
applicable), by the executors or administrators of the Optionee's estate or by
any person who has acquired such Option(s) directly from the Optionee by bequest
or inheritance, but only to the extent that such Option(s) had become
exercisable before the Optionee's Service terminated or became exercisable as a
result of the termination.
(h) Leaves of Absence. For purposes of Subsection (g) above, Service shall
be deemed to continue while the Optionee is on military leave, sick leave or
other bona fide leave of absence (as determined by the Committee). The foregoing
notwithstanding, in the case of an ISO granted under the Plan, Service shall not
be deemed to continue beyond the first 90 days of such leave, unless the
Optionee's reemployment rights are guaranteed by statute or by contract.
(i) Death of Optionee. If an Optionee dies while he or she is in Service,
then such Optionee's Option(s) shall expire on the earlier of the following
dates:
(i) The expiration date determined pursuant to Subsection (e) above; or
(ii) The date six months after the Optionee's death.
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All or part of the Optionee's Option(s) may be exercised at any time before the
expiration of such Option(s) under the preceding sentence by his or her
designated beneficiary (if applicable), by the executors or administrators of
the Optionee's estate or by any person who has acquired such Option(s) directly
from the Optionee by bequest or inheritance, but only to the extent that such
Option(s) had become exercisable before the Optionee's death or became
exercisable as a result of the Optionee's death. The balance of such Option(s)
shall lapse when the Optionee dies.
(j) No Rights as a Stockholder. An Optionee, or a transferee of an
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his or her Option until the date of the issuance of a stock
certificate for such Shares. No adjustments shall be made, except as provided in
Section 9.
(k) Modification, Extension and Renewal of Options. Within the limitations
of the Plan, the Committee may modify, extend or renew outstanding Options or
may accept the cancellation of outstanding Options (to the extent not previously
exercised) in return for the grant of new Options at the same or a different
price. The foregoing notwithstanding, no modification of an Option shall,
without the consent of the Optionee, impair such Optionee's rights or increase
his or her obligations under such Option.
(l) Restrictions on Transfer of Shares. Any Shares issued upon exercise of
an Option shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Option Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Shares.
SECTION 8. PAYMENT FOR SHARES.
(a) General Rule. The entire Purchase Price or Exercise Price of Shares
issued under the Plan shall be payable in lawful money of the United States of
America at the time when such Shares are purchased, except as follows:
(i) In the case of Shares sold under the terms of a Stock Purchase
Agreement subject to the Plan, payment shall be made only pursuant to the
express provisions of such Stock Purchase Agreement. However, the Committee (at
its sole discretion) may specify in the Stock Purchase Agreement that payment
may be made in one or all of the forms described in Subsections (e), (f) and (g)
below.
(ii) In the case of an ISO granted under the Plan, payment shall be made
only pursuant to the express provisions of the applicable Stock Option
Agreement. However, the Committee (at its sole discretion) may specify in the
Stock Option Agreement that payment may be made pursuant to Subsections (b),
(c), (d), (f) or (g) below.
(iii) In the case of a Nonstatutory Option granted under the Plan, the
Committee (at its sole discretion) may accept payment pursuant to Subsections
(b), (c), (d), (f) or (g) below.
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(b) Surrender of Stock. To the extent that this Subsection (b) is
applicable, payment may be made all or in part with Shares which have already
been owned by the Optionee or his or her representative for more than 12 months
and which are surrendered to the Company in good form for transfer. Such Shares
shall be valued at their Fair Market Value on the date when the new Shares are
purchased under the Plan.
(c) Exercise/Sale. To the extent that this Subsection (c) is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell
Shares and to deliver all or part of the sales proceeds to the Company in
payment of all or part of the Exercise Price and any withholding taxes.
(d) Exercise/Pledge. To the extent that this Subsection (d) is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to pledge Shares to a securities broker or lender approved
by the Company, as security for a loan, and to deliver all or part of the loan
proceeds to the Company in payment of all or part of the Exercise Price and any
withholding taxes.
(e) Services Rendered. To the extent that this Subsection (e) is
applicable, Shares may be awarded under the Plan in consideration of services
rendered to the Company or a Subsidiary prior to the award. If Shares are
awarded without the payment of a Purchase Price in cash, the Committee shall
make a determination (at the time of the award) of the value of the services
rendered by the Offeree and the sufficiency of the consideration to meet the
requirements of Section 6(c).
(f) Promissory Note. To the extent that this Subsection (f) is applicable,
a portion of the Purchase Price or Exercise Price, as the case may be, of Shares
issued under the Plan may be payable by a full-recourse promissory note,
provided that (i) the par value of such Shares must be paid in lawful money of
the United States of America at the time when such Shares are purchased, (ii)
the Shares are security for payment of the principal amount of the promissory
note and interest thereon and (iii) the interest rate payable under the terms of
the promissory note shall be no less than the minimum rate (if any) required to
avoid the imputation of additional interest under the Code. Subject to the
foregoing, the Committee (at its sole discretion) shall specify the term,
interest rate, amortization requirements (if any) and other provisions of such
note.
(g) Other Forms of Payment. To the extent that this Subsection (g) is
applicable, payment may be made in any other form approved by the Committee,
consistent with applicable laws, regulations and rules.
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SECTION 9. ADJUSTMENT OF SHARES.
(a) General. In the event of a subdivision of the outstanding Stock, a
declaration of a dividend payable in Shares, a declaration of a dividend payable
in a form other than Shares in an amount that has a material effect on the value
of Shares, a combination or consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of Shares, a
recapitalization, a spinoff or a similar occurrence, the Committee shall make
appropriate adjustments in one or more of (i) the number of Shares available for
future grants under Section 5, (ii) the number of Nonstatutory Options to be
granted to Outside Directors under Section 4(b), (iii) the number of Shares
covered by each outstanding Option or (iv) the Exercise Price under each
outstanding Option.
(b) Reorganizations. In the event that the Company is a party to a merger
or other reorganization, outstanding Options shall be subject to the agreement
of merger or reorganization. Such agreement may provide, without limitation, for
the assumption of outstanding Options by the surviving corporation or its
parent, for their continuation by the Company (if the Company is a surviving
corporation), for payment of a cash settlement equal to the difference between
the amount to be paid for one Share under such agreement and the Exercise Price,
or for the acceleration of their exercisability followed by the cancellation of
Options not exercised, in all cases without the Optionees' consent. Any
cancellation shall not occur until after such acceleration is effective and
Optionees have been notified of such acceleration. In the case of Options that
have been outstanding for less than 12 months, a cancellation need not be
preceded by an acceleration.
(c) Reservation of Rights. Except as provided in this Section 9, an
Optionee or Offeree shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any dividend or
any other increase or decrease in the number of shares of stock of any class.
Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of Shares subject to an Option. The grant of an Option pursuant
to the Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure, to merge or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.
SECTION 10. SECURITIES LAWS.
Shares shall not be issued under the Plan unless the issuance and delivery
of such Shares complies with (or is exempt from) all applicable requirements of
law, including (without limitation) the Securities Act of 1933, as amended, the
rules and regulations promulgated thereunder, state securities laws and
regulations, and the regulations of any stock exchange on which the Company's
securities may then be listed.
SECTION 11. NO RETENTION RIGHTS.
Neither the Plan nor any Option shall be deemed to give any individual a
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right to remain an employee, consultant or director of the Company or a
Subsidiary. The Company and its Subsidiaries reserve the right to terminate the
service of any employee, consultant or director at any time, with or without
cause, subject to applicable laws, the Company's certificate of incorporation
and by-laws and a written employment agreement (if any).
SECTION 12. DURATION AND AMENDMENTS.
(a) Term of the Plan. The Plan, as set forth herein, shall become effective
as of April 1, 1994. The Plan shall terminate automatically 10 years after its
initial adoption by the Board of Directors on March 31, 1994, and may be
terminated on any earlier date pursuant to Subsection (b) below.
(b) Right to Amend or Terminate the Plan. The Board of Directors may,
subject to applicable law, amend, suspend or terminate the Plan at any time and
for any reason. An amendment to the Plan shall require stockholder approval only
to the extent required by applicable law.
(c) Effect of Amendment or Termination. No Shares shall be issued or sold
under the Plan after the termination thereof, except upon exercise of an Option
granted prior to such termination. The termination of the Plan, or any amendment
thereof, shall not affect any Share previously issued or any Option previously
granted under the Plan.
SECTION 13. EXECUTION.
To record the adoption of the Plan by the Board of Directors on May 7, 1998
and by the Company's stockholders on July 28, 1998, the Company has caused its
authorized officer to execute the same.
MICRO-INTEGRATION CORP.
By _________________________
Its ________________________
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MICRO-INTEGRATION CORP.
One Science Park, Frostburg, Maryland 21532
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF STOCKHOLDERS, July 28, 1998
The undersigned hereby appoints John A. Parsons and Terry D. Frost, and
each of them, proxies, with full power of substitution, for and in the name or
names of the undersigned, to vote all shares of Common Stock of
Micro-Integration Corp. held of record by the undersigned at the Annual Meeting
of Stockholders to be held on Tuesday, July 28, 1998, at 9:00 p.m. at the
offices of the Company, One Science Park, Frostburg, Maryland 21532, and at any
adjournment thereof, upon the matters described in the accompanying Notice of
Annual Meeting and Proxy Statement, receipt of which is hereby acknowledged, and
upon any other business that may properly come before, and matters incident to
the conduct of, the meeting or any adjournment thereof. Said persons are
directed to vote on the matters described in the Notice of Annual Meeting and
Proxy Statement as follows, and otherwise in their discretion upon such other
business as may properly come before, and matters incident to the conduct of,
the meeting and any adjournment thereof.
1. To elect a Board of four (4) Nominees: John A. Parsons, Wayne M.
directors to hold office Lee, Maxwell F. Eveleth,
until the next annual meeting Jr., W. Braun Jones, Jr.
of stockholders or until
their respective successors
have been elected and
qualified:
[ ] FOR: nominees listed at right [ ] WITHHOLD authority to vote for
(except as indicated to the nominee(s) specified below
contrary below)
INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), write
the applicable name(s) in the space provided below.
2. To approve the amendment and restatement of the 1994 Stock Plan of
Micro-Integration Corp.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the designation of Ernst & Young LLP as independent accountants
for the period ending March 31, 1999:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To transact such other business as may properly come before the meeting.
(Continued and to be signed on the reverse side)
<PAGE>
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THIS PROXY CARD IN THE
ENCLOSED ENVELOPE.
THIS PROXY WILL BE VOTED AS
DIRECTED OR, IF NO DIRECTION
IS INDICATED, WILL BE VOTED
"FOR" THE STATED PROPOSALS.
________________________________
Signature of Stockholder
________________________________
Signature if held jointly
Dated:____________________, 1998
IMPORTANT: If shares are jointly owned, both owners should sign. If signing as
attorney, executor, administrator, trustee, guardian or other person signing in
a representative capacity, please give your full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
