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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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
METRO ONE TELECOMMUNICATIONS, INC.
--------------------------------------------------------------------------------
(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 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:
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(4) Date Filed:
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<PAGE>
METRO ONE TELECOMMUNICATIONS, INC.
11200 Murray Scholls Place
Beaverton, Oregon 97007
December __, 2000
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Metro One Telecommunications, Inc. The meeting will be held on January [___],
2001, at 3:30 p.m., local time, at Metro One Telecommunications, Inc., 11200
Murray Scholls Place, Beaverton, Oregon, 97007.
At the meeting, you will be asked to approve the proposed sale and
issuance to Sonera Media Holding B.V. of 4,000,000 shares of our Common Stock at
a price of US$17 per share, or a total of US$68 million, which would represent
approximately 25.5% of our outstanding Common Stock after the issuance. Sonera
Media Holding B.V. is a wholly-owned subsidiary of Sonera Corporation, a
publicly traded telecommunications company organized in Finland. Sonera
Corporation has been making a series of strategic investments worldwide in the
telecommunications industry, including the areas of directory assistance and
information services. In addition, you will be asked to approve an amendment of
our 1994 Stock Incentive Plan to increase the number of shares available for
issuance.
WHETHER OR NOT YOU PLAN TO ATTEND, IT IS IMPORTANT THAT YOUR SHARES BE
REPRESENTED AND VOTED AT THE MEETING. THEREFORE, I URGE YOU TO SIGN, DATE, AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. IF YOU
DECIDE TO ATTEND THE MEETING AND VOTE IN PERSON, YOU WILL, OF COURSE, HAVE THAT
OPPORTUNITY.
On behalf of the Board of Directors, I would like to express our
continued appreciation for your interest in Metro One's affairs.
Sincerely,
Timothy A. Timmins
President and Chief Executive Officer
<PAGE>
METRO ONE TELECOMMUNICATIONS, INC.
11200 Murray Scholls Place
Beaverton, Oregon 97007
------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY [__], 2001
------------------------------
To the Shareholders of
Metro One Telecommunications, Inc.:
Notice is hereby given that a Special Meeting of Shareholders of Metro
One Telecommunications, Inc. will be held on January [__], 2001 at 3:30 p.m.,
local time, at Metro One Telecommunications, Inc., 11200 Murray Scholls Place,
Beaverton, Oregon, 97007 for the following purposes:
1. To approve the sale and issuance, at US$17 per share or US$68
million in the aggregate, to Sonera Media Holding B.V. of 4,000,000 shares of
our Common Stock, which would represent approximately 25.5% of our outstanding
Common Stock after the issuance.
2. To approve an amendment of our 1994 Stock Incentive Plan to
increase the number of shares of Common Stock authorized for issuance.
3. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed December __, 2000, as the record date
for the determination of shareholders entitled to notice of and to vote at the
meeting. Only shareholders of record at the close of business on that date will
be entitled to notice of and to vote at the meeting or any adjournments or
postponements thereof.
By Order of the Board of Directors
Gary E. Henry
Secretary
Beaverton, Oregon
December __, 2000
<PAGE>
METRO ONE TELECOMMUNICATIONS, INC.
11200 Murray Scholls Place
Beaverton, Oregon 97007
------------------------------
PROXY STATEMENT
------------------------------
THE SPECIAL MEETING
This Proxy Statement is furnished to shareholders of Metro One
Telecommunications, Inc. in connection with the solicitation by the Board of
Directors of proxies for use at the Special Meeting of Shareholders to be held
on January [__], 2001 at 3:30 p.m., local time, and at any adjournments or
postponements thereof.
At the meeting, you will be asked to approve the sale and issuance, at
US$17 per share or US$68 million in the aggregate, of 4,000,000 shares of our
Common Stock to Sonera Media Holding B.V., to approve an amendment to our 1994
Stock Incentive Plan to increase the number of shares authorized for issuance,
and to transact such other business as may properly come before the meeting.
This Proxy Statement, together with the enclosed proxy, is first being mailed to
shareholders on or about December __, 2000.
RECORD DATE AND QUORUM
The Board of Directors has fixed December __, 2000 as the record date
for the determination of the shareholders entitled to notice of and to vote at
the meeting. Accordingly, only holders of record of shares of Common Stock at
the close of business on that date will be entitled to notice of and to vote at
the meeting, with each such share entitling its owner to one vote on all matters
properly presented at the meeting. On the record date, there were _____________
shares of Common Stock outstanding. The presence, in person or by proxy, of a
majority of the total number of outstanding shares of Common Stock entitled to
vote at the meeting is necessary to constitute a quorum for the transaction of
business.
VOTING
If the enclosed form of proxy is properly executed and returned in time
to be voted at the meeting, the shares represented by the proxy will be voted in
accordance with the instructions as marked. Executed but unmarked proxies will
be voted FOR approval of the issuance of 4,000,000 shares of our Common Stock to
Sonera Media Holding B.V. and FOR the amendment to our 1994 Stock Incentive
Plan.
Abstentions and broker non-votes are counted for purposes of
determining whether a quorum exists but are not counted as votes cast and have
no effect on the results of the vote on the proposals being put before the
shareholders.
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REVOCATION OF PROXIES
Your presence at the meeting will not automatically revoke your proxy.
You may, however, revoke your proxy at any time prior to its exercise by filing
a written notice of revocation with, or by delivering a duly executed proxy
bearing a later date to, Secretary, Metro One Telecommunications, Inc., 11200
Murray Scholls Place, Beaverton, Oregon 97007, or by attending the meeting and
voting in person. All valid, unrevoked proxies will be voted at the meeting.
APPROVAL OF THE ISSUANCE OF OUR COMMON STOCK TO SONERA
(PROPOSAL I)
At the meeting, your are being asked to approve of the sale and
issuance, at US$17 per share or US$68 million in the aggregate, of 4,000,000
shares of our Common Stock to Sonera Media Holding B.V., a company organized
under the laws of the Netherlands and a wholly owned subsidiary of Sonera
Corporation, a limited liability company organized under the laws of Finland.
After this issuance, Sonera would indirectly own approximately 25.5% of our
outstanding Common Stock.
BACKGROUND
In May 2000, Sonera approached us to explore a potential strategic
relationship and investment. We were aware that Sonera had been making
substantial strategic investments in telecommunications companies in the U.S.
and elsewhere and that one division of Sonera is engaged in the directory
assistance services business, providing such services primarily in Europe
through a variety of channels. Around the time of this initial contact, we were
contacted by other possible strategic investors. This caused the Board, in June
2000, to direct management to engage the services of an investment banking firm
to guide it with respect to any such investments and to explore with the Board
other alternatives. On July 31, 2000, Metro One engaged Donaldson, Lufkin &
Jenrette (now Credit Suisse First Boston) as its financial advisor, and we will
pay a fee to that firm in connection with the issuance. Metro One will also pay
fees to D.A. Davidson & Co. and Needham & Company, Inc. in connection with the
issuance.
Our talks with Sonera continued throughout the months of July, August,
September, October and into November, and Sonera was permitted to conduct
extensive due diligence of our business and financial affairs. In September
2000, meetings were held in Portland, Oregon, and the negotiations reached a
stage to warrant a visit late in September by Messrs. Timmins and Rutherford to
Sonera's offices in Helsinki, Finland.
On October 13, 2000, the Board of Directors was presented with a
form of Stock Purchase Agreement and an outline of the proposed terms of an
Investment Agreement and Registration Rights Agreement. After a presentation
by our financial advisor and discussion, the Board authorized entering into a
Stock Purchase Agreement and these ancillary agreements as approved by our
officers, and the issuance of the shares of Common Stock provided by the
Stock Purchase Agreement. The Board was advised that approval of the
transaction contemplated by the Stock Purchase Agreement would make the
anti-takeover provisions of Oregon Business Corporation Act Section 60.835
inapplicable to any future business combination with Sonera. During
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this period through November 8th, the parties continued to negotiate the terms
of the Stock Purchase Agreement and of the ancillary agreements.
The Stock Purchase Agreement, with the forms of an Investment Agreement
and Registration Rights Agreement attached, was signed with Sonera Media Holding
B.V., in the evening of November 8, 2000, and we announced the signing
simultaneously with Sonera on the morning (evening in Helsinki) of November 9.
The Registration Rights Agreement and Investment Agreement will be signed at the
closing of the transaction.
STOCK PURCHASE AGREEMENT
Pursuant to the Stock Purchase Agreement, Sonera has agreed to purchase
from us 4,000,000 shares of our Common Stock at US$17 per share, or an aggregate
purchase price of US$68 million.
The Stock Purchase Agreement contains various representations and
warranties of the parties. Our representations and warranties relate, among
other things, to our organization, capitalization, reports and financial
statements filed with the Securities and Exchange Commission, intellectual
property and permits, as well as the absence of conflicts with the agreements
and of litigation.
The closing of the purchase is subject to the satisfaction of certain
conditions, including the accuracy of the representations and warranties of the
parties, the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (which waiting period has
been terminated), entering into an Investment Agreement and a Registration
Rights Agreement with Sonera substantially in the forms attached to the Stock
Purchase Agreement, and approval by our shareholders, if required by the Nasdaq
Marketplace Rules. It is anticipated that the closing will take place shortly
following shareholder approval of the sale and issuance to Sonera.
Sonera Corporation has guaranteed its affiliate's obligations under the
Stock Purchase Agreement, the Investment Agreement and the Registration Rights
Agreement.
The Stock Purchase Agreement is subject to termination:
- by either party in the event of the inaccuracy of
representations and warranties of the other party or its
failure to comply with its covenants;
- by mutual consent of the parties;
- by either party if the closing shall not have occurred on or
prior to April 30, 2001 because approval of our shareholders
is required by the Nasdaq Marketplace Rules; or
- by either party if the requisite shareholder approval is not
obtained.
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INVESTMENT AGREEMENT
The Investment Agreement to be entered into with Sonera will provide,
among other things, for the following:
- DESIGNATION OF DIRECTORS. The number of members of our Board
of Directors will be increased to seven, and two directors
designated by Sonera will be added to the Board. Sonera is
entitled to proportional representation if the number of our
directors exceeds 10.
- SONERA'S PURCHASE RIGHTS. If, at any time after the closing
and prior to the eighth anniversary of the closing, we propose
to issue or sell for cash any Common Stock, or securities
convertible into or exchangeable for Common Stock, Sonera will
have the right to purchase all or a portion of these
securities under certain circumstances, some of which cause
the price and terms to approximate market prices and terms,
subject to the overall limitation on Sonera's maximum
percentage interest described below. The shares purchased by
Sonera under the Stock Purchase Agreement and any shares
purchased pursuant to Sonera's purchase rights are sometimes
referred to as the "Purchased Shares."
- STANDSTILL. Prior to the third anniversary of the closing,
Sonera will be prohibited from acquiring an interest greater
than 33% of our Common Stock on a fully-diluted basis and from
soliciting proxies or consents or participating in an election
process, except in limited circumstances including a third
party tender offer or acquisition by a third person or group
of an interest representing over 33% of our Common Stock on a
fully-diluted basis.
- RESTRICTION ON TRANSFERS OF PURCHASED SHARES. Except with
respect to transfers to permitted affiliated transferees,
Sonera will be prohibited from transferring any Purchased
Shares prior to the third anniversary of the closing;
provided, however, that shares may be sold under certain
limited circumstances and, after the second anniversary of the
closing, pursuant to Rule 144 under the Securities Act of
1933, as amended (the "1933 Act"), or in an offering
registered under the 1933 Act pursuant to the Registration
Rights Agreement. From the third to the eighth anniversary of
the closing, if Sonera seeks to transfer any Purchased Shares
to a nonaffiliated transferee, we will have the right to
purchase all or designated blocks of the Purchased Shares
under certain circumstances.
- SONERA PARTICIPATION IN CERTAIN DISPOSITION TRANSACTIONS. If
we initiate any process to effect a change in control (as
defined in the Investment Agreement), Sonera will have the
right to participate on at least an equal basis with any other
third party participants in the negotiations. If we effect a
change in control, under certain conditions Sonera will have
tag-along rights and we will have drag-along rights with
respect to the transaction.
- CERTAIN TRANSACTIONS INVOLVING SONERA. In the event that
Sonera enters into a transaction that results in a change in
control, and that transaction involves a
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competitor (as defined in the Investment Agreement), we will
have the right to purchase the Purchased Shares from Sonera or
require Sonera to use its reasonable best efforts to transfer
the Purchased Shares to a third person or persons who are not
competitors.
Certain of the foregoing rights are subject to termination upon the
occurrence of certain events, such as the failure of Sonera to retain a
specified number of Purchased Shares or the passage of time.
REGISTRATION RIGHTS AGREEMENT
The Registration Rights Agreement will provide Sonera (and its
permitted affiliated transferees and certain other transferees), subject to
certain conditions, with three demand registrations and five piggyback
registrations under the 1933 Act with respect to the Purchased Shares. These
rights may be exercised at any time on or after the second anniversary of the
closing, or earlier under certain circumstances. These rights do not expire but
are subject to termination in certain circumstances.
REASONS FOR THE TRANSACTION
The Board of Directors has unanimously approved the proposed issuance
of shares to Sonera and believes that the issuance is in the best interests of
our shareholders for both financial and strategic reasons.
From a financial standpoint, the Board considers the price of US$17 per
share to be a favorable price for the sale of this large a block of Common
Stock, particularly with the restrictions on transfer imposed by the Investment
Agreement. The closing bid price of our Common Stock on November 8, 2000, the
last day before our announcement of entering into the Stock Purchase Agreement,
was US$15.38, and the average closing bid price for the five trading days
through November 8, 2000 was US$14.14. In addition, the transaction will provide
us with substantial capital to fund future growth and to pay down approximately
US$35 million in debt, saving approximately US$4 million annually in interest
expense. After the repayment of debt and subject to business results and other
business activities through the date of closing, we will have approximately
US$30 million in cash from the investment and will have significantly improved
our debt-to-equity ratio and borrowing capacity. We view the purchase rights of
Sonera under the Investment Agreement to be a potential means of meeting our
additional needs for equity capital in the future while keeping Sonera's
ownership no higher than 33%.
We also expect to derive benefits from the proposed strategic
relationship with Sonera. Sonera offers directory services by acquiring,
processing and distributing content through various channels. In addition to
short message services (SMS), wireless application protocol (WAP) and Internet
services, Sonera offers operator assisted and automated voice services. Our
principal strength has been the operator-assisted voice services provided
through a network of strategically located call centers. This strategic
relationship is intended to assist us in the development of the electronic side
of the telephony business, particularly in the areas of WAP, wireless web,
enhanced messaging and e-business.
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VOTE REQUIRED
We have been informally advised by the Nasdaq Stock Market that
shareholder approval will be required for the issuance of the shares because of
the application of the Nasdaq Marketplace Rules. Accordingly, we are seeking
shareholder approval in conformity with these Rules. A majority of the total
votes cast on the proposal in person or by proxy is required to approve any
issuance to which the Rules would apply.
YOUR BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE SALE AND ISSUANCE OF
THE COMMON STOCK TO SONERA.
AMENDMENT OF THE 1994 STOCK INCENTIVE PLAN
(PROPOSAL II)
At the meeting, you are being asked to approve an amendment to the
Company's 1994 Stock Incentive Plan (the "Plan") that will increase the number
of shares of Common Stock available for issuance under the Plan by 600,000
shares, from 2,300,000 to 2,900,000 shares of Common Stock. The Plan was
approved by the Board of Directors on November 30, 1994 and by the shareholders
on November 29, 1995. The number of shares of Common Stock available for
issuance under the Plan was increased by the Board of Directors and the
shareholders to 2,300,000 in 1999. On December 4, 2000, the Board of Directors
unanimously adopted an amendment, subject to issuance of the 4,000,000 shares of
Common Stock to Sonera and to shareholder approval, increasing to 2,900,000 the
number of shares of Common Stock available for issuance under the Plan.
As of November 30, 2000, there were 246,422 shares available for
future issuance under the Plan, and 1,437,551 shares reserved for issuance on
exercise of outstanding options. The Board of Directors believes that,
particularly in view of the proposed capital infusion by Sonera and the plans
for growth and expansion of our business, it is important that the number of
shares available for issuance under the Plan be increased to enhance
opportunities to attract, retain and motivate the best available personnel
for the successful conduct of our business. The addition of 600,000 shares
amounts to 15% of the number of shares proposed to be issued to Sonera, and
the amendment of the Plan is expressly conditioned upon the closing of that
issuance. In addition, the number of shares reserved for issuance on exercise
of outstanding options plus the number of shares available for future
issuance under the Plan would equal 15% of our outstanding Common Stock after
the issuance to Sonera. Sonera has indicated its support for this increase.
The principal terms and provisions of the Plan are summarized below.
The summary, however, is not intended to be a complete description of all the
terms of the Plan. A copy of the Plan, as amended, will be furnished to any
shareholder upon written request to the Corporate Secretary at our corporate
offices.
DESCRIPTION OF THE PLAN
The purposes of the Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to our employees and consultants and to promote the success of our
business. The Plan may be administered by the
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Board of Directors or by a committee appointed by the Board. The Plan is
currently administered by the Compensation Committee of the Board. In accordance
with the terms of the Plan, the Board or the committee may grant options: (i)
intended to qualify as Incentive Stock Options ("ISOs") under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), to employees; or (ii)
not intended to qualify as ISOs under Section 422 of the Code ("NSOs") to
employees or consultants. Direct stock grants or sales may also be made under
the Plan.
SECURITIES OFFERED. The stock options that may be granted under the
Plan may be exercised to purchase shares of our Common Stock, 2,300,000 shares
of which presently have been authorized for issuance pursuant to the provisions
of the Plan.
ELIGIBILITY. Employees, defined as any person, including officers and
directors, employed by us or any parent or subsidiary of ours, are eligible to
be granted options under the Plan. Consultants, defined as any person who is
engaged by us or any subsidiary to render consulting services, and who is
compensated for such services, and directors whether compensated for such
services or not, are also eligible to be granted options under the Plan. If an
employee is granted an ISO which, when aggregated with all other ISOs granted to
such employee by us, or by any parent or subsidiary, would result in shares of
the Common Stock having an aggregate fair market value in excess of $100,000
becoming available for purchase upon the exercise of one or more ISOs during any
calendar year, then such excess ISOs shall be treated as NSOs.
OPTION TERMS. The term of each ISO shall be ten years from the date of
grant or such shorter term as may be stated in the agreement granting the ISO;
provided, however, that the term of an ISO granted to an employee who, at the
time of such grant, owns shares representing more than 10% of the voting power
of all classes of our or any parent's or subsidiary's stock, shall be five years
from the date of grant or such shorter term as may be stated in the agreement
granting the ISO. The term of each NSO shall be ten years and one day from the
date of grant or such other term as may be stated in the agreement granting the
NSO; provided, however, that the term of a NSO granted to an employee who, at
the time of such grant, owns shares representing more than 10% of the voting
power of all classes of our or any parent's or subsidiary's stock shall be five
years and one day or such shorter term as may be stated in the agreement
granting the NSO.
An option granted pursuant to the provisions of the Plan may be
exercised at such times and under such conditions as the Board determines. If an
employee to whom an ISO or NSO has been granted ceases to be an employee other
than by reason of death or disability, he or she may exercise an ISO or NSO only
during such period as the Board specified at the time the ISO or NSO was
granted, which period of time may in no event exceed 90 days from the date of
termination, and only to the extent that he or she could have exercised it on
the date of termination. An option may not be sold, transferred or otherwise
disposed of in any manner other than by the laws of descent and distribution.
During the lifetime of the person to whom an option was granted, the option
generally may be exercised only by the optionee. If an optionee ceases to be an
employee or a consultant by reason of disability, then the optionee may exercise
the option at any time during the two month period following the date of
termination (to the extent that he or she could have exercised it on the date of
termination). In the event of the death of an optionee, the option generally may
be exercised (to the extent it was exercisable on the date of death)
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during the 12-month period following the date of death by the optionee's estate
or by a person who acquired an option by bequest or inheritance.
The Board shall determine the exercise price of ISOs granted under the
Plan, but the price may not be less than 100% of the fair market value per share
of the Common Stock on the date the option is granted, or not less than 110% if
granted to an employee owning shares constituting more than 10% of the voting
power. The Board shall determine the exercise price of NSOs granted under the
Plan, but the price may not be less than 85% of the fair market value per share
of the Common Stock on the date the option is granted. The Board shall
determine, in its discretion, the fair market value of the Common Stock;
provided, however, that if there is a public market for the Common Stock, the
fair market value shall be the closing price of a share of the Common Stock on
the last market trading day prior to the date of grant of an option or the date
of authorization of a sale. The Board shall determine the consideration to be
paid upon the exercise of an option or pursuant to a sale, including the method
of payment, which may consist of cash, check, transfer of previously owned
shares of the Common Stock having a fair market value equal to the option
exercise price, delivery of instructions to withhold shares of Common Stock that
would otherwise be issued upon the exercise of the option having a fair market
value equal to the option exercise price, or any combination of the foregoing
methods of payment.
AMENDMENT OF THE PLAN. The Board may amend or terminate the Plan at any
time; provided, however, that no amendment regarding amount, price or timing of
the option grants may be made more frequently than once every six months other
than to comply with changes in the requirements of the Code or the Securities
Exchange Act of 1934. No amendment or termination shall affect any options
outstanding at that time. Any amendment that would increase the number of shares
that may be issued under the Plan (other than with respect to changes in the
capitalization of the Company), modify the requirements as to eligibility for
participation in the Plan, or materially increase the benefits accruing to
participants in the Plan, must be approved by our shareholders.
RESALE RESTRICTIONS. Shares of Common Stock purchased under the Plan
(whether by the exercise of an option or by direct sale) by our officers and
directors, or a beneficial owner of 10% or more of any class of our equity
securities, will be eligible for resale in accordance with Rule 144 under the
Securities Act of 1933. In addition, affiliates must hold any shares issuable
upon the exercise of an option, or a direct grant or sale, for at least six
months from the date the option is granted, or from the date the shares are
granted or sold, respectively.
FEDERAL INCOME TAX CONSEQUENCES
Under federal income tax law currently in effect, the optionee of an
ISO will recognize no income upon the grant or exercise of the ISO. However, the
optionee will have a preference item for alternative minimum tax purposes upon
exercise of the ISO in the amount by which the fair market value of the shares
subject to the ISO at the time of exercise exceeds the exercise price. If an
optionee exercises an ISO and does not dispose of any of the shares acquired
within two years following the date of the ISOs grant and within one year
following the date of exercise, then any gain realized upon subsequent
disposition of such shares will be taxable as capital gain. If an optionee
disposes of shares acquired upon exercise of an ISO before the expiration of
either the one-year holding period or two years from the date of grant, any
amount
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realized will be taxable as ordinary income in the year of the disqualifying
disposition to the extent that the lesser of the fair market value of the shares
on the exercise date, or the amount realized on disposition of the shares,
exceeds the exercise price.
There are no federal income tax consequences to us by reason of the
grant or exercise of an ISO. In the event of a disqualifying disposition by an
optionee, we will be generally entitled to a deduction in the tax year in which
the disposition occurred to the extent the optionee recognized ordinary income.
Under federal income tax law currently in effect, the optionee of a NSO
will recognize no income upon the grant of the NSO. At the time the NSO is
exercised, the optionee will recognize ordinary income in the amount by which
the fair market value of the shares subject to the NSO at the time of exercise
exceeds the exercise price, and we will be generally entitled to a deduction for
the same amount (conditioned upon proper withholding). Upon the optionee's
disposition of shares acquired pursuant to exercise of an NSO, the excess of the
amount realized from the disposition over the fair market value of the shares on
the exercise date will be taxable as short- or long-term capital gain depending
on how long the shares have been held.
PROPOSED AMENDMENT
If the proposal is adopted, the first paragraph of Section 3 of the
Plan will be amended to read as follows:
Subject to the provisions of Section 11 of the Plan, the maximum
aggregate number of Shares which may be optioned and/or Sold under the
Plan is 2,900,000 shares of Common Stock. The Shares may be authorized,
but unissued, or reacquired Common Stock.
VOTE REQUIRED
This proposal will be approved if a majority of the votes cast on the
proposal are voted for approval.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE AMENDMENT OF
THE 1994 STOCK INCENTIVE PLAN.
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EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal year ended December 31,
1999, certain summary information concerning compensation of our named executive
officers, or the person serving as our chief executive officer and our four
other most highly paid executive officers whose total annual salary and bonus
exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
---------------------------
Annual Compensation Awards
-------------------------------------------------------------------
Securities Underlying
Name and Principal Position Year Salary($) Bonus($) Options/SARs(#)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Timothy A. Timmins............................... 1999 $150,026 $ ---- ----
President, Chief Executive Officer 1998 150,026 150,000 ----
and Director 1997 150,026 3,000 ----
Gary E. Henry.................................... 1999 $164,176 ---- 7,500
Senior Vice President-Operations, 1998 138,220 ---- 30,000
Secretary 1997 98,752 ---- 28,570
Stebbins B. Chandor, Jr. (1)..................... 1999 $159,714 ---- ----
Senior Vice President, Chief Financial 1998 119,954 ---- 20,000
Officer and Secretary 1997 110,417 ---- ----
Karen L. Johnson................................. 1999 $124,968 ---- ----
Senior Vice President-Corporate 1998 100,154 ---- 20,000
Development 1997 88,044 ---- 45,712
Hugh Knox (2).................................... 1999 $126,814 ---- ----
Vice President-Sales and Marketing 1998 ---- ---- 65,000
1997 ---- ---- ----
-----------
</TABLE>
(1) Mr. Chandor resigned from the Company effective March 10, 2000.
(2) Mr. Knox resigned from the Company effective January 18, 2000.
10
<PAGE>
OPTION GRANTS
During the year ended December 31, 1999, the following named executive
officers were granted options to purchase Common Stock pursuant to the Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Rates of Stock Price
Appreciation for
Individual Grants Option Term
----------------------------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted(#) Fiscal Year ($/Sh) Date 5% 10%
------------------------------------------------------------------------------------------ -----------------------
<S> <C> <C> <C> <C> <C> <C>
Gary E. Henry 7,500 13.7% $12.63 6/29/09 $60,259 $158,165
</TABLE>
The following table provides information regarding exercises of options
during 1999 and unexercised options held, as of December 31, 1999, by the named
executive officers.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities Under- Value of
lying Unexercised Unexercised In-the-
Options/SARs At Money Options/SARs
FY-End(#) at FY-End ($)
Shares
Acquired on Value Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
----------------------------------- --------------- ---------------- ------------------------ ------------------------
<S> <C> <C> <C> <C>
Timothy A. Timmins................ ---- ---- 399,981/0 $1,979,906/$0
Gary E. Henry..................... ---- ---- 62,721/49,061 $189,471/$101,806
Stebbins B. Chandor, Jr. (1)...... ---- ---- 76,426/15,000 $361,359/$23,400
Karen L. Johnson ---- ---- 50,406/43,876 $170,347/$137,268
Hugh Knox (2) .................... ---- ---- 16,250/48,750 $73,125/$219,375
-----------
</TABLE>
(1) Mr. Chandor resigned from the Company effective March 10, 2000
canceling 13,750 options on the same number of shares.
(2) Mr. Knox resigned from the Company effective January 18, 2000 canceling
40,626 options on the same number of shares.
11
<PAGE>
COMPENSATION COMMITTEE REPORT
Under rules established by the Securities and Exchange Commission (the
"SEC"), we are required to provide certain data and information in regard to the
compensation and benefits provided to the Chief Executive Officer and the four
other most highly compensated executive officers. In fulfillment of this
requirement, the Compensation Committee has prepared the following report for
inclusion in this Proxy Statement.
COMPENSATION PHILOSOPHY. The Compensation Committee of the Board of
Directors, which is responsible for reviewing and evaluating the compensation of
Metro One's executive officers, approves and recommends to the Board of
Directors compensation and award levels for executive officers. With regard to
compensation actions affecting Mr. Timmins, all of the members of the Board of
Directors except for Mr. Timmins act as the approving body.
Metro One's executive compensation program has been designed to:
- Support a pay-for-performance policy that is tied to corporate
and individual performance;
- Motivate executive officers to achieve strategic business
initiatives and reward them for their achievement;
- Provide compensation opportunities which are comparable to
those offered by similarly-sized telecommunications and
technology-based companies; and
- Align the interests of executives with the long-term interests
of shareholders through award opportunities that can result in
ownership of Common Stock.
The executive compensation program is comprised of a base salary and
long-term incentive opportunities in the form of stock options, along with
benefits offered to all Metro One employees.
BASE SALARIES. The 1999 base salaries of Metro One's executive officers
were established effective December 1998, except for that of Mr. Timmins, which
was established by employment contract in 1995. In approving those salaries, the
Compensation Committee considered information about salaries paid by companies
of comparable size in the telecommunications outsourcing industry, individual
performance, position, and internal comparability considerations. While all of
these factors were considered, the Compensation Committee did not assign
specific weights to any of these factors.
STOCK PLANS. The long-term, performance-based compensation of executive
officers takes the form of option awards under Metro One's 1994 Stock Incentive
Plan (the "Plan"), which is designed to align a significant portion of the
executive compensation program with long-term shareholder interests. The Plan
permits the granting of several different types of stock-based awards. The
Compensation Committee believes that equity-based compensation ensures that
Metro One's executive officers have a continuing stake in the long-term success
of the Company. All options granted by Metro One have been granted with an
exercise price equal to the market price of the Company's Common Stock on the
date of grant and, accordingly, will
12
<PAGE>
only have value if Metro One's stock price increases. In granting options under
the Plan, the Compensation Committee generally takes into account each
executive's responsibilities, relative position and past grants.
CHIEF EXECUTIVE OFFICER COMPENSATION. In 1995, Metro One entered into
an employment contract with Mr. Timmins for employment for a five-year period
ending in 2000. The amendment allows for a base annual compensation and
increases based upon achievement of certain corporate goals and upon a formula
tied to Metro One's profitability. The agreement provides for an adjusted base
salary for Mr. Timmins of $150,000. The employment agreement provides for annual
bonuses up to 100 percent of adjusted base salary for annual earnings per share
growth from 8 percent to 30 percent. In developing its recommendations regarding
Mr. Timmins' compensation, the Committee considered a number of factors,
including analyses of compensation in similarly-sized companies in the
telecommunications outsourcing industry, analyses of compensation levels in
similar companies in Metro One's local geographic area and Metro One's improved
performance in revenue and net income as compared to the prior year.
On March 6, 2000, and effective as of January 1, 2000, Metro One
amended the employment agreement to extend Mr. Timmins' employment contract
through December 2002. The amendment provides for an adjusted base salary for
Mr. Timmins of $200,000. The amendment also limits annual bonuses to 150 percent
of adjusted base salary in any year following a year in which the total net
income is less than that of the previous year.
The employment agreement also provides for payment to Mr. Timmins of
one additional year of adjusted base salary and a pro rata portion of annual
bonuses in the event of termination of employment upon death or for reasons
other than cause, six months additional adjusted base salary and pro rata
portion of annual bonuses due to disability, or six months additional adjusted
base salary and no bonuses if for cause. Under the employment agreement, Mr.
Timmins has been granted certain indemnification rights. In addition, the
employment agreement prevents Mr. Timmins from competing with Metro One or
soliciting the employment of other individuals employed by Metro One during Mr.
Timmins' employment and for a period of one year thereafter. Under the
employment agreement, Mr. Timmins may not disclose Metro One's confidential
information to outsiders during employment and for a period of two years
thereafter.
Compensation Committee
James M. Usdan, Chairman
A. Jean de Grandpre
William D. Rutherford
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During the fiscal year ended December 31, 1999, the members of the
Compensation Committee were Messrs. de Grandpre, Rutherford, and Usdan. There
were no employee directors on the Compensation Committee and no Interlocks.
13
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total shareowner return on
our Common Stock for the period beginning August 23, 1996, the date our Common
Stock began trading on the Nasdaq National Market, and ending December 31, 1999,
as compared with the cumulative total return on the Russell 2000 Index and a
Peer Group Index. The Peer Group consists of: Billing Concepts Corp., Boston
Communications Group, Lightbridge, Inc., Premiere Technologies, Inc., SCC
Communications Corp. and West Teleservices Corp. The total shareowner return for
each company in the Peer Group has been weighted according to the company's
stock market capitalization. This graph assumes an investment of $100 on August
23, 1996 in each of the company's common stock, the Russell 2000 Index and the
Peer Group Index, and assumes reinvestment of dividends, if any. The stock price
performance shown on the graph below is not necessarily indicative of future
stock price performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MTON Russell Peer Group
<S> <C> <C> <C>
8/23/96 100.0 100.0 100.0
12/31/96 76.8 109.3 111.7
12/31/97 81.7 131.7 114.1
12/31/98 129.3 127.2 51.5
12/31/99 126.8 152.1 76.1
</TABLE>
14
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table shows certain information regarding the ownership
of our Common Stock as of November 30, 2000 by the following:
- Each person we know to beneficially own more than 5% of the
outstanding shares of our Common Stock;
- Each director;
- Each named executive officer; and
- All directors and named executive officers as a group.
<TABLE>
<CAPTION>
Shares
Beneficially Percent
Named Executive Officers, Directors and 5% Shareholders(1) Owned(2) of Class
------------------------------------------------------- ----- --------
<S> <C> <C>
Fidelity Management
82 Devonshire Street 1,354,400(3) 11.6%
Boston, Massachusetts 01209
Timothy A. Timmins 423,166 3.6%
A. Jean de Grandpre 222,071 1.9%
William D. Rutherford 145,902 1.2%
David Williams 150,001 1.1%
James M. Usdan 50,300 *
Stebbins B. Chandor, Jr. (4) 82,076(4) *
Gary E. Henry 88,363 *
Karen L. Johnson 73,155 *
Hugh Knox (5) 24,374(5) *
All directors and executive officers as a group (9 persons) 1,259,408 10.8%
------------
</TABLE>
* Less than one percent
(1) Unless otherwise indicated, the address of each beneficial owner identified
is 11200 Murray Scholls Place, Beaverton, Oregon, 97007.
(2) For purposes of this table, beneficial ownership is determined in
accordance with rules of the Securities and Exchange Commission, and
includes voting power and investment power with respect to shares. Shares
issuable upon the exercise of outstanding stock options that are currently
exercisable or become exercisable within 60 days of November 30, 2000 are
considered outstanding for purposes of calculating the percentage owned by
a person, but not for purposes of calculating the percentage owned by any
other person. The numbers of shares that are issuable upon the exercise of
options that are currently exercisable or exercisable within 60 days are as
follows: Timothy A. Timmins - 412,480; A. Jean de Grandpre - 157,139;
William D. Rutherford 104,283; James M. Usdan 50,000; Gary E. Henry -
86,737; Karen L. Johnson 72,955, David Williams - 20,000.
(3) Based on information provided in Schedule 13G, filed with the Commission on
March 10, 2000.
15
<PAGE>
(4) Mr. Chandor resigned from Metro One effective March 10, 2000. Shares
beneficially owned is based on the number of shares listed in Metro
One's definitive proxy statement, filed with the Commission on May 9, 2000.
This total includes 4,400 shares of Common Stock Mr. Chandor owned upon
his resignation, plus options to purchase 77,676 shares. In accordance
with the terms of the Plan, Mr. Chandor exercised all of these options
and purchased 77,676 shares of Common Stock subsequent to his
resignation. Metro One is unable to ascertain how many shares Mr.
Chandor currently owns.
(5) Mr. Knox resigned from Metro One effective January 18, 2000. Shares
beneficially owned is based on the number of exercisable options held
by Mr. Knox upon his resignation from Metro One. In accordance with
the terms of the Plan, Mr. Knox exercised all of these options and
purchased 24,374 shares of Common Stock subsequent to his resignation.
Metro One is unable to ascertain how many shares Mr. Knox currently owns.
We believe that the persons listed above have sole investment and
voting power with respect to their shares of Common Stock. Applicable percentage
ownership in the table is based on 11,697,072 shares of Common Stock outstanding
as of November 30, 2000.
OTHER BUSINESS
The Board of Directors does not know of any matters other than those
described in the Notice of Special Meeting that are to come before the meeting.
If any other matters are properly brought before the meeting, the persons named
in the proxy will vote the shares represented by such proxy upon such matters as
recommended by the Board of Directors. Under Oregon law, only business within
the purposes described in the meeting notice may be conducted at a special
meeting. Accordingly, the only other business would be postponement or
adjournment.
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Any shareholder proposal intended for inclusion in the proxy statement
and form of proxy relating to our 2001 annual meeting of shareholders must be
received by us no later than January 9, 2001, pursuant to the proxy soliciting
regulations of the Securities and Exchange Commission. Nothing in this paragraph
shall be deemed to require us to include in our proxy statement or form of proxy
for such meeting any shareholder proposal that does not meet the requirements of
the Commission in effect at the time.
COST OF SOLICITATION
We will bear the cost of soliciting proxies. In addition to use of the
mails, proxies may be solicited personally or by telephone by our directors,
officers and employees, who will not be additionally compensated for these
activities. Solicitation may be made personally, or by mail, facsimile,
telephone, telegraph or messenger. We will also request persons, firms and
companies holding shares in their names or in the name of their nominees, which
are beneficially owned by others, to send proxy materials to and obtain proxies
from these beneficial owners. We will reimburse these persons for their
reasonable expenses incurred in that process.
16
<PAGE>
ADDITIONAL INFORMATION
We were required to file an Annual Report on Form 10-K for our fiscal
year ended December 31, 1999 with the Securities and Exchange Commission. The
Commission maintains a web site, www.sec.gov, that contains reports, proxy
statements, and certain other information filed electronically by us with the
Commission. Shareholders may obtain, free of charge, a copy of the Form 10-K,
without exhibits, by writing to Investor Relations, Metro One
Telecommunications, Inc., 11200 Murray Scholls Place, Beaverton, Oregon 97007 or
visiting our web site at www.metro1.com.
By Order of the Board of Directors
Gary E. Henry
Secretary
December __, 2000
17
<PAGE>
Appendix to Proxy Statement
METRO ONE TELECOMMUNICATIONS, INC.
1994 STOCK INCENTIVE PLAN
DATED JULY 28, 1995
AS AMENDED DECEMBER 18, 1996, MAY 8, 1997 AND JUNE 29, 1999
1. PURPOSES OF THE PLAN. The purposes of this Stock Incentive Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.
Options granted hereunder may be either "incentive stock options," as
defined in Section 422 of the Internal Revenue Code of 1986, as amended, or
"nonqualified stock options," at the discretion of the Board and as reflected in
the terms of the written option agreement. In addition, shares of the Company's
Common Stock may be Sold hereunder independent of any Option grant.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "BOARD" shall mean the Committee, if one has been appointed, or
the Board of Directors of the Company, if no Committee is appointed.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" shall mean the Common Stock of the Company.
(d) "COMPANY" shall mean Metro One Telecommunications, Inc., an Oregon
corporation.
(e) "COMMITTEE" shall mean the Committee appointed by the Board of
Directors in accordance with Section 4(a) of the Plan, if one is appointed.
(f) "CONSULTANT" shall mean any person who is engaged by the Company
or any Subsidiary to render consulting services and is compensated for such
consulting services and any director of the Company whether compensated for such
services or not.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any other
leave of absence approved by the Board; provided that such leave is for a period
of not more than ninety days or reemployment upon the expiration of such leave
is guaranteed by contract or statute.
1-STOCK INCENTIVE PLAN
<PAGE>
(h) "EMPLOYEE" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(i) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(j) "INCENTIVE STOCK OPTION" shall mean an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(k) "NONQUALIFIED STOCK OPTION" shall mean an Option not intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(l) "OPTION" shall mean a stock option granted pursuant to the Plan.
(m) "OPTIONED STOCK" shall mean the Common Stock subject to an Option.
(n) "OPTIONEE" shall mean an Employee or Consultant who receives an
Option.
(o) "PARENT" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424 of the Code.
(p) "PLAN" shall mean this 1994 Stock Incentive Plan.
(q) "SALE" or "SOLD" shall include, with respect to the sale of Shares
under the Plan, the sale of Shares for consideration in the form of cash or
notes, as well as a grant of Shares without consideration, except past or future
services.
(r) "SHARE" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(s) "SUBSIDIARY" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424 of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and/or
Sold under the Plan is 2,300,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
Option grants and/or Sales under the Plan.
2-STOCK INCENTIVE PLAN
<PAGE>
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURES. The Plan shall be administered by the Board of
Directors of the Company.
The Board of Directors may appoint a Committee consisting of not less than
two (2) members of the Board of Directors to administer the Plan on behalf of
the Board of Directors, subject to such terms and conditions as the Board of
Directors may prescribe. Once appointed, the Committee shall continue to serve
until otherwise directed by the Board of Directors. From time to time the Board
of Directors may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new members
in substitution therefor, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan.
Members of the Board who are either eligible for Options and/or Sales or
have been granted Options or Sold Shares may vote on any matters affecting the
administration of the Plan or the grant of any Options or Sale of any Shares
pursuant to the Plan, except that no such member shall act upon the granting of
an Option or Sale of Shares to himself, but any such member may be counted in
determining the existence of a quorum at any meeting of the Board during which
action is taken with respect to the granting of Options or Sale of Shares to
him.
(b) POWERS OF THE BOARD. Subject to the provisions of the Plan, the
Board shall have the authority, in its discretion: (i) to grant Incentive Stock
Options in accordance with Section 422 of the Code, or Nonqualified Stock
Options; (ii) to authorize Sales of Shares of Common Stock hereunder; (iii) to
determine, upon review of relevant information and in accordance with Section
8(b) of the Plan, the fair market value of the Common Stock; (iv) to determine
the exercise/purchase price per Share of Options to be granted or Shares to be
Sold, which exercise/purchase price shall be determined in accordance with
Section 8(a) of the Plan; (v) to determine the Employees or Consultants to whom,
and the time or times at which, Options shall be granted and the number of
Shares to be represented by each Option; (vi) to determine the Employees or
Consultants to whom, and the time or times at which, Shares shall be Sold and
the number of Shares to be Sold; (vii) to interpret the Plan; (viii) to
prescribe, amend and rescind rules and regulations relating to the Plan; (ix) to
determine the terms and provisions of each Option granted (which need not be
identical) and, with the consent of the holder thereof, modify or amend each
Option; (x) to determine the terms and provisions of each Sale of Shares (which
need not be identical) and, with the consent of the purchaser thereof, modify or
amend each Sale; (xi) to accelerate or defer (with the consent of the Optionee)
the exercise date of any Option, (xii) to accelerate or defer (with the consent
of the Optionee or purchaser of Shares) the vesting restrictions applicable to
Shares Sold under the Plan or pursuant to Options granted under the Plan; (xiii)
to authorize any person to execute on behalf of the Company any instrument
required to effectuate the grant of an Option or Sale of Shares previously
granted or authorized by the Board; (xiv) to determine the restrictions on
transfer, vesting restrictions, repurchase rights, or other restrictions
applicable to Shares issued under the Plan; (xv) to effect, at any time and from
time to time, with the consent of the affected Optionees, the cancellation of
an; or all outstanding Options under the Plan and to grant in substitution
therefor new Options under the Plan covering the same or different numbers of
Shares, but having an Option price per Share
3-STOCK INCENTIVE PLAN
<PAGE>
consistent with the provisions of Section 8 of this Plan as of the date of the
new Option grant; (xvi) to establish, on a case-by-case basis, different terms
and conditions pertaining to exercise or vesting rights upon termination of
employment, whether at the time of an Option grant or Sale of Shares, or
thereafter; and (xvii) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(c) EFFECT OF BOARD'S DECISION. All decisions, determinations
determinations and interpretations of the Board shall be final and binding on
all Optionees and any other holders of any Options granted under the Plan or
Shares Sold under the Plan.
5. ELIGIBILITY.
(a) PERSONS ELIGIBLE. Options may be granted and/or Shares Sold only
to Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option or Sold
Shares may, if he is otherwise eligible, be granted an additional Option or
Options or Sold additional Shares.
(b) ISO LIMITATION. No Incentive Stock Option may be granted to an
Employee which, when aggregated with all other Incentive Stock Options granted
to such Employee by the Company or any Parent or Subsidiary, would result in
Shares having an aggregate fair market value (determined for each Share as of
the date of grant of the Option covering such Share) in excess of $100,000
becoming first available for purchase upon exercise of one or more Incentive
Stock Options during any calendar year.
(c) SECTION 5(b) LIMITATIONS. Section 5(b) of the Plan shall apply
only to an Incentive Stock Option evidenced by an "Incentive Stock Option
Agreement" which sets forth the intention of the Company and the Optionee that
such Option shall qualify as an Incentive Stock Option. Section 5(b) of the Plan
shall not apply to any Option evidenced by a "Nonqualified Stock Option
Agreement" which sets forth the intention of the Company and the Optionee that
such Option shall be a Nonqualified Stock Option.
(d) NO RIGHT TO CONTINUED EMPLOYMENT. The Plan shall not confer upon
any Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his right
or the Company's right to terminate his employment or consulting relationship at
any time.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the stockholders of
the Company as described in Section 17 of the Plan. It shall continue in effect
for a term of ten (10) years, unless sooner terminated under Section 13 of the
Plan.
7. TERM OF OPTION. The term of each Incentive Stock Option shall be ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Stock Option Agreement. The term of each Nonqualified Stock
Option shall be ten (10) years and one (1) day from the date of grant thereof or
such other term as may be provided in the Stock Option Agreement. However, in
the case of an Option granted to an Optionee who, at the time the
4-STOCK INCENTIVE PLAN
<PAGE>
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
(a) if the Option is an Incentive Stock Option, the term of the Option shall be
five (5) years from the date of grant thereof or such shorter time as may be
provided in the Stock Option Agreement, or (b) if the Option is a Nonqualified
Stock Option, the term of the Option shall be five (5) years and one (1) day
from the date of grant thereof or such other term as may be provided in the
Stock Option Agreement.
8. EXERCISE/PURCHASE PRICE AND CONSIDERATION.
(a) EXERCISE/PURCHASE PRICE. The per-Share exercise/purchase price for the
Shares to be issued pursuant to exercise of an Option or a Sale (other than a
Sale which is a grant for which no purchase price is payable) shall be such
price as is determined by the Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than one hundred ten
percent (110%) of the fair market value per Share on the date of the grant.
(B) granted to any other Employee, the per Share exercise price
shall be no less than one hundred percent (100%) of the fair market value per
Share on the date of grant.
(ii) In the case of a Nonqualified Stock Option or Sale
(A) granted or Sold to a person who, at the time of the grant of
such Option or authorization of such Sale, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise/purchase price shall be no less
than one hundred ten percent (110%) of the fair market value per Share on the
date of the grant or authorization of Sale, unless otherwise expressly
determined by the Board of Directors.
(B) granted or Sold to any other person, the per Share .
exercise/purchase price shall be no less than eighty-five percent (85%) of the
fair market value per Share on the date of grant or authorization of Sale,
unless otherwise expressly determined by the Board of Directors.
(C) Any determination to sell stock at less than fair market
value on the date of the grant or authorization of Sale shall be accompanied by
an express finding by the Board of Directors specifying that the sale is in the
best interest of the Company, and specifying both the fair market value and the
grant or sale price of the stock.
5-STOCK INCENTIVE PLAN
<PAGE>
(iii) In the case of an Option granted or Sale authorized on or after
the effective date of registration of any class of equity security of the
Company pursuant to Section 12 of the Exchange Act and prior to six (6) months
after the termination of such registration, the per Share exercise/purchase
price shall be no less than one hundred percent (100%) of the fair market value
per Share on the date of grant or authorization of Sale.
(b) FAIR MARKET VALUE. The fair market value per Share shall be determined
by the Board in its discretion; provided, however, that where there is a public
market for the Common Stock, the fair market value per Share shall be the
closing price of the Common Stock for the date of grant or authorization of
Sale, as reported in THE WALL STREET JOURNAL (or, if not so reported, as
otherwise reported by the National Association of Securities Dealers Automated
Quotation (NASDAQ) System) or, in the event the Common Stock is listed on a
stock exchange, the fair market value per Share shall be the closing price on
such exchange on the date of grant of the Option or authorization of Sale, as
reported in THE WALL STREET JOURNAL.
(c) CONSIDERATION. The consideration to be paid for the Shares to be issued
upon exercise of an Option or pursuant to a Sale, including the method of
payment, shall be determined by the Board and may consist in whole or part of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) transfer to the Company of Shares having a Fair Market Value at
the time of such exercise equal to the Option exercise price; or
(v) delivery of instructions to the Company to withhold from the
Shares that would otherwise be issued on the exercise that number of Shares
having a Fair Market Value at the time of such exercise equal to the Option
exercise price.
If the Fair Market Value of the number of whole Shares transferred or the
number of whole Shares surrendered is less than the total exercise price of the
Option, the shortfall must be made up in cash or by check.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
6-STOCK INCENTIVE PLAN
<PAGE>
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(c) of the Plan.
Each Optionee who exercises an Option shall, upon notification of the amount due
(if any) and prior to or concurrent with delivery of the certificate
representing the Shares, pay to the Company amounts necessary to satisfy
applicable federal, state and local tax withholding requirements. An Optionee
must also provide a duly executed copy of any stock transfer agreement then in
effect and determined to be applicable by the Board. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock certificate is issued,
except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT. If an Employee or
Consultant ceases to serve as an Employee or Consultant (as the case may be), he
may, but only within three (3) months (or such other period of time not
exceeding the limitations of Section 7 above as is determined by the Board at
the time of grant of an Option or thereafter) after the date he ceases to be an
Employee or Consultant (as the case may be) of the Company, exercise his Option
to the extent that he was entitled to exercise it at the date of such
termination. To the extent that he was not entitled to exercise the Option at
the date of such termination, or if he does not exercise such Option (which he
was entitled to exercise) within the time specified herein, the Option shall
terminate.
(c) DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 9(b)
above, in the event an Employee or Consultant is unable to continue his
employment or consulting relationship (as the case may be) with the Company as a
result of his total and permanent disability (as defined in Section 22(e)(3) of
the Code), he may, but only within twelve (12) months (or such other period of
time not exceeding the limitations of Section 7 above as is determined by the
Board at the time of grant of an Option or thereafter) from the date of
termination, exercise his Option to the extent he was entitled to exercise it at
the date of such termination. To the extent that he was not entitled to exercise
the Option at the date of termination, or if he does not exercise such Option
(which he was entitled to exercise) within the time specified herein, the Option
shall terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee during the
term of the Option who is at the time of his death an Employee or Consultant of
the Company and who shall have been in Continuous Status as an Employee or
Consultant since the date of grant of the Option, the Option may be exercised,
at any time within twelve (12) months (or such
7-STOCK INCENTIVE PLAN
<PAGE>
other period of time not exceeding the limitations of Section 7 above as is
determined by the Board at the time of grant of an Option or thereafter)
following the date of death, by the Option's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise as of the date of death.
10. NONTRANSFERABILITY OF OPTIONS. An Option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will, or by the laws of descent and distribution, and may be exercised during
the lifetime of the Optionee only by the Optionee or, if incapacitated, by his
or her legal guardian or legal representative.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to any
required action by the stockholders of the Company, the number of shares of
Common Stock covered by each outstanding Option and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or Sales made or which have been returned
to the Plan upon cancellation or expiration of an Option, as well as the price
per share of Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option.
In the event of the proposed dissolution or liquidation of the Company, the
Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, the Option shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, that the Optionee shall have the right to exercise
the Option as to all of the Optioned Stock, including Shares as to which the
Option would not otherwise be exercisable. If the Board makes an Option fully
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Board shall notify the Optionee that the Option shall be
fully exercisable for a period of thirty (30) days from the date of such notice
or such shorter period as the Board may specify in the notice, and the Option
will terminate upon the expiration of such period.
8-STOCK INCENTIVE PLAN
<PAGE>
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for all
purposes, be the date on which the Board makes the determination granting such
Option. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided, however, that if required to qualify the Plan under Rule 16b-3
promulgated under Section 16 of the Securities Exchange Act of 1934, as amended,
no amendment shall be made more than once every six months that would change the
amount, price or timing of the option grants, other than to comport with changes
in the Internal Revenue Code of 1986, as amended, or the rules and regulations
promulgated thereunder; and provided, further, that, if required to qualify the
Plan under Rule 16b-3, no amendment shall be made without the approval of the
stockholders of the Company in the manner described in Section 17 of the Plan if
the amendment would:
(i) increase the number of Shares subject to the Plan, other than
in connection with an adjustment under Section 11 of the Plan;
(ii) make a change in the designation of the class of Employees
or Consultants eligible to be granted Options; or
(iii) if the Company has a class of equity security registered
under Section 12 of the Exchange Act at the time of such revision or amendment,
cause any material increase in the benefits accruing to participants under the
Plan.
(b) STOCKHOLDER APPROVAL. If any amendment requiring stockholder
approval under Section 13(a) of the Plan is made subsequent to the first
registration of any class of equity security by the Company under Section 12 of
the Exchange Act, such stockholder approval shall be solicited as described in
Section 17 of the Plan.
(c) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued pursuant
to the exercise of an Option or a Sale unless the exercise of such Option or
consummation of the Sale and the issuance and delivery of such Shares pursuant
thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, applicable state securities
laws, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange (including NASDAQ) upon which the Shares
may then be listed, and shall be further subject to the approval of counsel for
the Company with respect to such compliance.
9-STOCK INCENTIVE PLAN
<PAGE>
As a condition to the exercise of an Option or a Sale, the Company may
require the person exercising such Option or to whom Shares are being Sold to
represent and warrant at the time of any such exercise or Sale that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve months before or
before or after the date the Plan is adopted. If such stockholder approval is
obtained at a duly held stockholders' meeting, it may be obtained by the
affirmative vote of the holders of a majority of the outstanding shares of the
Company, such holders being present or represented and entitled to vote thereon.
If and in the event that the Company registers any class of any equity security
pursuant to Section 12 of the Exchange Act, the approval of such stockholders of
the Company shall be:
(a) SOLICITATION.
(i) solicited substantially in accordance with Section 14(a) of
the Exchange Act and the rules and regulations promulgated thereunder, or
(ii) solicited after the Company has furnished in writing to the
holders entitled to vote substantially the same information concerning the Plan
as that which would be required by the rules and regulations in effect under
Section 14(a) of the Exchange Act at the time such information is furnished; and
(b) TIME. Obtained at or prior to the first annual meeting of
stockholders held subsequent to the first registration of any class of equity
securities of the Company under Section 12 of the Exchange Act.
If such stockholder approval is obtained by written consent, it must be
obtained by the written consent of stockholders of the Company in compliance
with the requirements of applicable state law.
10-STOCK INCENTIVE PLAN
<PAGE>
18. SIX MONTH HOLDING PERIOD FOR AFFILIATES. If the Company registers any
class of any equity security pursuant to Section 12 of the Exchange Act, then
from the effective date of such registration until six (6) months after the
termination of such registration (the Public Period), these limits will apply to
each officer, director and beneficial owner of ten percent (10%) or more of any
class of equity securities of the Company (Affiliates.) During the Public
Period, any Affiliate shall hold Shares Sold hereunder at least six months from
the date of Sale. During the Public Period, at least six months must elapse from
the date of grant of an Option to an Affiliate to the date the Affiliate
disposes of the Shares acquired upon exercise of the Option, or (if the Option
is disposed of other than by exercise) to the date of disposition of the Option
itself.
11-STOCK INCENTIVE PLAN
<PAGE>
METRO ONE TELECOMMUNICATIONS, INC.
PROXY FORM
SPECIAL MEETING OF SHAREHOLDERS
___________ ___, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF METRO ONE TELECOMMUNICATIONS, INC.
FOLD AND DETACH HERE
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The undersigned shareholder of record of Metro One Telecommunications,
Inc., an Oregon corporation (the "Company"), hereby appoints Timothy A. Timmins
and William D. Rutherford, or either of them, with full power of substitution,
as proxies to cast all votes which the undersigned shareholder is entitled to
cast at the Special Meeting of Shareholders to be held at 3:30 p.m. on January
__, 2001, at Metro One Telecommunications, Inc., 11200 Murray Scholls Place,
Beaverton, Oregon, 97007, or any adjournments or postponements thereof upon the
matters listed herein AND IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
FOLD AND DETACH HERE
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Please mark your votes as indicated in this example /X/
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. UNLESS DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED "FOR" THE ISSUANCE OF COMMON STOCK TO SONERA DESCRIBED IN PROPOSAL I,
"FOR" AN AMENDMENT TO THE COMPANY'S 1994 STOCK INCENTIVE PLAN DESCRIBED IN
PROPOSAL II, AND IN ACCORDANCE WITH THE RECOMMENDATIONS OF A MAJORITY OF THE
BOARD OF DIRECTORS AS TO OTHER MATTERS. The undersigned hereby acknowledges
receipt of the Company's Proxy Statement and hereby revokes any proxy or proxies
previously given.
1. To approve the sale and issuance of Common Stock to Sonera.
FOR / / AGAINST / / ABSTAIN / /
2. To approve an amendment of the Company's 1994 Stock Incentive Plan.
FOR / / AGAINST / / ABSTAIN / /
I PLAN TO ATTEND THE SPECIAL MEETING. / /
I DO NOT PLAN TO ATTEND THE SPECIAL MEETING. / /
Please sign below exactly as your name appears on this Proxy Card. If shares are
registered in more than one name, all such persons should sign. A corporation
should sign in its full corporate
<PAGE>
name by a duly authorized officer, stating his/her title. Trustees, guardians,
executors and administrators should sign in their official capacity, giving
their full title as such. If a partnership, please sign in the partnership name
by authorized person(s).
If you receive more than one Proxy Card, please sign and return all such cards
in the accompanying envelope.
Please return promptly in the enclosed envelope, which requires no postage, if
mailed in the U.S.A.
Typed or Printed Name(s)
---------------------------------------
Title or Authority, if applicable
------------------------------
Authorized Signature
-------------------------------------------
Date
-----------------------------------------------------------
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD TODAY IN THE ENCLOSED,
PRE-ADDRESSED ENVELOPE.
