<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] 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 Rule 14a-11(c) or Rule 14a-12
SPYGLASS, 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)(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.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
SPYGLASS, INC.
Naperville Corporate Center
1240 East Diehl Road
Naperville, Illinois 60563
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
ON WEDNESDAY, FEBRUARY 12, 1997
To the Stockholders of Spyglass, Inc.
The Annual Meeting of Stockholders of Spyglass, Inc. (the "Company") will
be held at the Holiday Inn, 1801 Naper Boulevard, Naperville, Illinois 60563, on
Wednesday, February 12, 1997 at 10:00 a.m., local time, to consider and act upon
the following matters:
1. To elect two Class II directors, each to serve for a three-year term.
2. To approve an Amendment to the Company's 1995 Stock Incentive Plan
(the "1995 Plan") increasing the number of shares issuable under the
1995 Plan from 1,800,000 to 2,550,000.
3. To ratify the selection of Price Waterhouse LLP as the Company's
independent auditors for the current fiscal year.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on December 27, 1996 will
be entitled to notice of and to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors
THOMAS S. LEWICKI, Secretary
Naperville, Illinois
January 6, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY
IS MAILED IN THE UNITED STATES.
<PAGE> 3
SPYGLASS, INC.
Naperville Corporate Center
1240 East Diehl Road
Naperville, Illinois 60563
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON FEBRUARY 12, 1997
INTRODUCTION
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Spyglass, Inc. (the "Company") for use at
the Annual Meeting of Stockholders to be held on February 12, 1997, and at any
adjournment of that meeting. All proxies will be voted in accordance with the
stockholders' instructions, and if no choice is specified, the proxies will be
voted in favor of the matters set forth in the accompanying Notice of Meeting.
Any proxy may be revoked by a stockholder at any time before its exercise by
delivery of written revocation or a subsequently dated proxy to the Secretary of
the Company or by voting in person at the Annual Meeting.
The Company's Annual Report for the fiscal year ended September 30, 1996
("Fiscal 1996") was mailed to stockholders, along with these proxy materials, on
or about January 6, 1997.
QUORUM REQUIREMENT
At the close of business on December 27, 1996, the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, there were outstanding and entitled to vote an aggregate of 11,923,037
shares of Common Stock of the Company, constituting all of the outstanding
voting stock of the Company. Holders of Common Stock are entitled to one vote
per share.
The holders of a majority of the shares of Common Stock outstanding and
entitled to vote at the Annual Meeting shall constitute a quorum for the
transaction of business at the Annual Meeting. Shares of Common Stock
represented in person or by proxy (including shares which abstain or otherwise
do not vote with respect to one or more of the matters presented for stockholder
approval) will be counted for purposes of determining whether a quorum is
present at the Annual Meeting.
VOTES REQUIRED
The affirmative vote of the holders of shares of Common Stock representing
a plurality of the votes cast by the holders of Common Stock is required for the
election of directors. The affirmative vote of the holders of shares of Common
Stock representing a majority of the votes cast is required for the approval of
the proposed amendment to the Company's 1995 Stock Incentive Plan and the
ratification of the selection of Price Waterhouse LLP as the Company's
independent auditors for the current fiscal year.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by a broker or nominee who indicates on a proxy that it does
not have discretionary authority to vote as to a particular matter, will not be
voted in favor of such matter, and also will not be counted as votes cast on
such matter. Accordingly, abstentions and "broker non-votes" will have no effect
on the voting on a matter that requires the affirmative vote of a certain
percentage of the votes cast on that matter (such as the election of the Class
II directors, the approval of the proposed amendment to the 1995 Stock Incentive
Plan and the ratification of the selection of independent auditors).
1
<PAGE> 4
BENEFICIAL OWNERSHIP OF VOTING STOCK
The following table sets forth the beneficial ownership of the Company's
Common Stock as of October 31, 1996 (i) by each person who is known by the
Company to beneficially own more than 5% of the outstanding shares of Common
Stock, (ii) by each director, (iii) by each of the executive officers named in
the Summary Compensation Table set forth under the caption "Executive
Compensation" below (the "Named Executives"), and (iv) by all current directors
and executive officers as a group:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES OUTSTANDING
BENEFICIAL OWNER BENEFICIALLY OWNED(1) COMMON STOCK(2)
--------------------- ---------------
<S> <C> <C>
5% STOCKHOLDERS
Twentieth Century Companies, Inc.(3)..................... 995,600 8.4%
4500 Main Street, P.O. Box 418210
Kansas City, MO 64141-9210
Timothy K. Krauskopf(4).................................. 639,375 5.3%
c/o Spyglass, Inc.
Naperville Corporate Center
1240 East Diehl Road
Naperville, IL 60563
OTHER DIRECTORS
Douglas P. Colbeth(5).................................... 440,402 3.6%
William S. Kaiser(6)..................................... 83,834 *
Ray Rothrock(7).......................................... 15,862 *
Steven R. Vana-Paxhia(8)................................. 10,000 *
OTHER NAMED EXECUTIVES
Thomas E. Banahan(9)..................................... 11,775 *
Michael F. Tyrrell(10)................................... 122,757 1.0%
Gary L. Vilchick......................................... 0 *
All directors and executive officers as a group (10 1,370,185 11.0%
persons)(11)...........................................
</TABLE>
- -------------------------
* Less than 1%
(1) Each stockholder possesses sole voting and investment power with respect to
the shares listed, except as otherwise indicated. In accordance with the
rules of the Securities and Exchange Commission, each stockholder is deemed
to beneficially own any shares subject to stock options which are currently
exercisable or which become exercisable within 60 days after October 31,
1996, and any reference in these footnotes to shares subject to stock
options held by the person or entity in question refers only to such stock
options. The inclusion herein of shares listed as beneficially owned does
not constitute an admission of beneficial ownership.
(2) Number of shares deemed outstanding includes 11,841,057 shares outstanding
as of October 31, 1996 and any shares subject to stock options held by the
person or entity in question.
(3) Investors Research Corporation ("IRC"), a wholly-owned subsidiary of
Twentieth Century Companies, Inc. ("TCC"), manages the investments of
Twentieth Century Investors, Inc. ("TCI"). Mr. James E. Stowers, Jr.
controls TCC by virtue of his beneficial ownership of a majority of the
voting stock of TCC. Each of IRC, TCC, TCI and Mr. Stowers are reported to
have sole voting and dispositive power over these 995,600 shares held by
TCI. IRC, TCC and Mr. Stowers disclaim beneficial ownership of these
shares. This share ownership information is taken from a Schedule 13G,
dated February 9, 1996.
(4) Includes 142,375 shares issuable upon the exercise of outstanding options.
(5) Includes 252,500 shares issuable upon the exercise of outstanding options.
Also includes 187,444 shares held by the Douglas P. Colbeth Trust.
2
<PAGE> 5
(6) Includes 8,000 shares issuable upon the exercise of outstanding options.
Excludes 138,888 shares owned by Greylock Equity Limited Partnership. Mr.
Kaiser has a pecuniary interest in certain of the shares owned by Greylock
Equity Limited Partnership, but disclaims beneficial ownership of the
balance of the shares. Mr. Kaiser is a General Partner of Greylock Equity
Limited Partnership.
(7) Includes 8,000 shares issuable upon the exercise of outstanding options.
Excludes 184,160 shares owned by Venrock Associates and 82,558 shares owned
by Venrock Associates II, L.P., as to which shares Mr. Rothrock disclaims
beneficial ownership. Mr. Rothrock is a General Partner of both Venrock
Associates and Venrock Associates II, L.P.
(8) Includes 8,000 shares issuable upon the exercise of outstanding options.
(9) Includes 11,200 shares issuable upon the exercise of outstanding options.
(10) Includes 95,600 shares issuable upon the exercise of outstanding options.
(11) Includes 565,175 shares issuable upon the exercise of outstanding options.
3
<PAGE> 6
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, with
members of each class holding office for staggered three-year terms. There are
currently two Class I directors, whose terms expire at the Annual Meeting of
Stockholders following the fiscal year ending September 30, 1998 ("Fiscal
1998"), two Class II directors, whose terms expire at this Annual Meeting of
Stockholders, and one Class III director, whose term expires at the Annual
Meeting of Stockholders following the fiscal year ending September 30, 1997
("Fiscal 1997") (in all cases subject to the election and qualification of their
successors or to their earlier death, resignation or removal).
The persons named in the enclosed proxy will vote to elect Timothy K.
Krauskopf and William S. Kaiser as Class II directors, unless authority to vote
for the election of either or both of the nominees is withheld by marking the
proxy to that effect. Each of Messrs. Krauskopf and Kaiser is currently a Class
II director of the Company. Both of the nominees have indicated their
willingness to serve, if elected, but if either should be unable or unwilling to
stand for election, proxies may be voted for a substitute nominee designated by
the Board of Directors.
DIRECTORS OF THE COMPANY
Set forth below are the names and certain information with respect to each
director of the Company, including the two nominees for Class II directors.
NOMINEES FOR CLASS II DIRECTORS (HOLDING OFFICE FOR TERM EXPIRING AT THIS
ANNUAL MEETING; NOMINATED FOR TERM EXPIRING AT THE ANNUAL MEETING FOR THE
FISCAL YEAR ENDED SEPTEMBER 30, 1999):
MR. KRAUSKOPF, age 33, has been a director of the Company since October
1992. Mr. Krauskopf was a co-founder of the Company, served as Director of
Software Development of the Company from its inception to October 1994, as Vice
President, Research and Development from October 1994 to March 1996 and as Chief
Technical Officer since April 1996. Prior to founding the Company, Mr. Krauskopf
was employed at the National Center for Supercomputing Applications at the
University of Illinois at Urbana-Champaign for four years in various software
development positions.
MR. KAISER, age 41, has been a director of the Company since December 1990.
Mr. Kaiser is a general partner of Greylock Capital Limited Partnership,
Greylock Investments Limited Partnership, Greylock Limited Partnership and
Greylock Equity Limited Partnership, private venture capital partnerships. Mr.
Kaiser has been affiliated with Greylock Management Corporation, the service
company to the Greylock Partnerships, since 1986. Mr. Kaiser is also a member of
the Board of Directors of Avid Technology, Inc., Open Market, Inc. and Raptor
Systems, Inc.
CLASS III DIRECTOR (HOLDING OFFICE FOR TERM EXPIRING AT THE ANNUAL MEETING
FOR FISCAL 1997):
MR. VANA-PAXHIA, age 49, has been a director of the Company since March
1995. Mr. Vana-Paxhia has been President, Chief Executive Officer and a director
of INSO Corporation (formerly InfoSoft International, Inc.), a software
publishing company, since its inception in March 1994. Mr. Vana-Paxhia was
director of the Software Division of Houghton Mifflin Company from November 1990
until March 1994 and was a Vice President of Houghton Mifflin from April 1991
until March 1994. Mr. Vana-Paxhia is also a member of the Board of Directors of
MathSoft, Inc.
CLASS I DIRECTORS (HOLDING OFFICE FOR TERM EXPIRING AT THE ANNUAL MEETING
FOR FISCAL 1998):
MR. COLBETH, age 41, has been President, Chief Executive Officer and a
director of the Company since he joined the Company in April 1991. Prior to
joining the Company, Mr. Colbeth spent four years at Stellar/Stardent Computer
Corp., a high-end graphics workstation supplier, in various management
positions, most recently as Vice President/General Manager of its AVS software
business unit.
MR. ROTHROCK, age 42, has been a director of the Company since September
1991. Mr. Rothrock has been a Partner of both Venrock Associates and Venrock
Associates II, L.P., venture capital firms, since
4
<PAGE> 7
1995, and was an Associate of Venrock Associates from 1988 until 1995. Mr.
Rothrock is also a member of the Board of Directors of CheckPoint Software
Technologies, Ltd. and DIGEX, Inc.
There are no family relationships among any of the executive officers or
directors of the Company.
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board of Directors, which
meets with the Company's auditors to review and evaluate the Company's audit
procedures and to recommend and implement any desired changes to the Company's
audit procedures. The members of the Audit Committee are Messrs. Kaiser,
Rothrock and Vana-Paxhia. The Audit Committee met three times during Fiscal
1996.
The Company has a standing Compensation Committee which establishes (a) the
compensation of each of the Company's executive officers, (b) compensation
policies applicable to the Company's executive officers and (c) the bases for
the compensation of the Company's Chief Executive Officer, including the facts
and criteria on which it is based. The members of the Compensation Committee are
Messrs. Kaiser, Rothrock and Vana-Paxhia. The Compensation Committee met four
times during Fiscal 1996.
The Board of Directors met twelve times during Fiscal 1996. Each incumbent
director attended at least 75% of the number of meetings of the Board and of the
committees on which he then served.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee is comprised of Messrs. Kaiser,
Rothrock and Vana-Paxhia, the Company's three non-employee directors.
COMPENSATION OF DIRECTORS
Directors of the Company are reimbursed for expenses incurred in connection
with their attendance at Board and committee meetings. Directors receive no
other cash compensation for serving as directors.
Under the Company's 1995 Director Stock Option Plan (the "Director Option
Plan"), each non-employee director initially elected to the Board of Directors
in the future will be granted an option, upon his or her initial election as a
director, to purchase 20,000 shares of Common Stock. Each non-employee director
is also entitled to receive an option for 5,000 shares on the date of each
Annual Meeting of Stockholders. On January 24, 1996, the date of the Company's
last Annual Meeting of Stockholders, each of Messrs. Kaiser, Rothrock and
Vana-Paxhia was granted an option to purchase 5,000 shares of Common Stock at an
exercise price of $42.50 per share. All options granted under the Director
Option Plan have or will have an exercise price equal to the fair market value
of the Common Stock on the date of grant, will vest over a four-year period,
provided the optionholder continues to serve as a director of the Company, and
will expire ten years from the date of grant (subject to earlier termination in
the event the optionee ceases to serve as a director of the Company). The total
number of shares of Common Stock that may be issued under the Director Option
Plan is 200,000 shares.
5
<PAGE> 8
EXECUTIVE COMPENSATION
Summary Compensation
The following Summary Compensation Table sets forth certain information
concerning the compensation for each of the last three fiscal years of the
Company's Chief Executive Officer and the Company's four other most highly
compensated executive officers during Fiscal 1996 (the "Named Executives").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION-
AWARDS(2)
-------------
ANNUAL NUMBER OF
COMPENSATION(1) SHARES
NAME AND FISCAL --------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS STOCK OPTIONS COMPENSATION(3)
- --------------------------------- ------ -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Douglas P. Colbeth............... 1996 $140,668 $ 42,000 0 $ 2,850
President and Chief Executive 1995 125,400 62,500 50,000 3,978
Officer 1994 104,400 26,100 90,000 0
Timothy K. Krauskopf............. 1996 120,354 36,000 0 1,800
Chief Technical Officer 1995 100,300 50,000 50,000 0
1994 67,400 15,600 116,500 0
Michael F. Tyrrell............... 1996 117,654 80,994(5) 20,000 3,648
Executive Vice President, 1995 74,400 218,800(4) 30,000 1,302
Business Development 1994 74,400 82,285(4) 30,000 0
Gary L. Vilchick(6).............. 1996 93,702 27,750 100,000 1,000
Executive Vice President,
Finance, Administration and
Operations and Chief Financial
Officer
Thomas E. Banahan(7)............. 1996 98,611 129,003(4) 40,000 2,892
Vice President, Sales
</TABLE>
- -------------------------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted because such perquisites and other personal benefits
constituted less than the lesser of $50,000 or 10% of the total of annual
salary and bonus for the executive officer for each fiscal year.
(2) The Company did not make any restricted stock awards, grant any stock
appreciation rights or make any long-term incentive plan payouts during the
years ended September 30, 1994, 1995 and 1996 (referred to respectively as
"Fiscal 1994," "Fiscal 1995" and "Fiscal 1996").
(3) Represents the value of the Company's contributions to the 401(k) accounts
of the Named Executives.
(4) Represents sales commissions.
(5) Represents bonus and sales commissions.
(6) Mr. Vilchick joined the Company in December 1995 and thus received
compensation for only a portion of Fiscal 1996. His annual salary as of
September 30, 1996 was $120,000.
(7) Mr. Banahan became an executive officer of the Company in November 1995. Mr.
Banahan left the Company on November 1, 1996.
6
<PAGE> 9
Option Grants
The following table sets forth certain information concerning grants of
stock options during Fiscal 1996 to each of the Named Executives.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF STOCK
NUMBER OF TOTAL OPTIONS EXERCISE PRICE APPRECIATION
SHARES GRANTED TO PRICE FOR OPTION TERM (2)
UNDERLYING EMPLOYEES IN PER EXPIRATION ---------------------
OPTIONS GRANTED FISCAL YEAR SHARE(1) DATE 5% 10%
--------------- ------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Douglas P. Colbeth.......... 0 0 N/A N/A 0 0
Timothy K. Krauskopf........ 0 0 N/A N/A 0 0
Michael F. Tyrrell.......... 20,000 2.2% $17.44 10/17/05 $219,333 $ 555,834
Gary L. Vilchick............ 100,000 11.2% $14.63 7/23/06 $919,758 $2,330,848
Thomas E. Banahan........... 40,000 4.5% $17.44 10/17/05 $438,667 $1,111,667
</TABLE>
- -------------------------
(1) Options are incentive stock options, become exercisable over a four-year
period and generally terminate three months following termination of the
executive officer's employment with the Company or the expiration date,
whichever occurs earlier. The exercise price of each option was determined
to be equal to the fair market value per share of the Common Stock on the
date of grant.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses associated
with the exercise of the option or the sale of the underlying shares. The
actual gains, if any, on the exercises of stock options will depend on the
future performance of the Common Stock, the optionholder's continued
employment through the option period, and the date on which the options are
exercised.
Option Exercises and Holdings
The following table sets forth certain information concerning the aggregate
number of shares of Common Stock acquired upon option exercises by the Named
Executives during Fiscal 1996 and the value realized upon exercise as well as
the number and value of unexercised options held by each of the Named Executives
on September 30, 1996.
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR END FISCAL YEAR END(2)
SHARES --------------- -------------------
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED(1) UNEXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- ----------- --------------- -------------------
<S> <C> <C> <C> <C>
Douglas P. Colbeth........... 0 $ 0 237,500/47,500 $4,455,813/$884,763
Timothy K. Krauskopf......... 0 0 127,376/54,124 $2,386,032/$1,009,261
Michael F. Tyrrell........... 0 0 82,500/42,500 $1,527,163/$428,213
Gary L. Vilchick............. 0 0 0/100,000 $0/$424,500
Thomas E. Banahan............ 30,000 $ 728,794 0/65,000 $0/$457,725
</TABLE>
- -------------------------
(1) Based on the fair market value of the Common Stock on the date of exercise
less the option exercise price.
(2) Based on a value of $18.875 per share, the fair market value of the Common
Stock on September 30, 1996, less the option exercise price.
7
<PAGE> 10
EMPLOYMENT AND SEVERANCE AGREEMENTS
In April 1991, the Company entered into an Employment and Confidentiality
Agreement with Mr. Colbeth, pursuant to which the Company agreed to employ Mr.
Colbeth as its Chief Executive Officer. Under the terms of this Agreement, which
has no stated term, the Company issued 331,590 shares of Common Stock to Mr.
Colbeth in the form of a bonus; the Company had certain repurchase rights with
respect to some or all of such shares in the event of the termination of Mr.
Colbeth's employment on or before March 31, 1995. This Agreement also includes a
covenant by Mr. Colbeth not to compete with the business of the Company, or to
solicit any employees of the Company, during the two-year period following his
employment termination, and contains customary confidentiality and invention
assignment provisions.
In April 1991, the Company entered into an Employment and Confidentiality
Agreement with Mr. Tyrrell. Under the terms of this Agreement, the Company
issued 60,000 shares of Common Stock to Mr. Tyrrell in the form of a bonus; the
Company had certain repurchase rights with respect to some or all of such shares
in the event of the termination of Mr. Tyrrell's employment on or before May 31,
1993. This Agreement also includes a covenant by Mr. Tyrrell not to compete with
the business of the Company, or to solicit any employees of the Company, during
the two-year period following his employment termination, and contains customary
confidentiality and invention assignment provisions.
The Company is also party to an Employment and Confidentiality Agreement
with Mr. Krauskopf which includes a covenant by Mr. Krauskopf not to compete
with the business of the Company, or to solicit any employees of the Company,
during the two-year period following his employment termination, and contains
customary confidentiality and invention assignment provisions.
The Company is party to senior management retention agreements providing
contingent severance payments ("Retention Agreements") with seven executive
officers (including Messrs. Colbeth, Krauskopf, Tyrrell and Vilchick) which
would become operative following a "change in control" of the Company, as
defined in the Retention Agreements. The Company believes that these agreements
will better ensure the retention of those officers and enable them to devote
their full attention and energies to the Company's business without the
distractions that might arise in the circumstances addressed in the agreements.
The Retention Agreements continue in effect while the executive is employed by
the Company until December 31, 1998, automatically renew for additional one year
terms unless specified advance written notice is given by the Company and remain
in effect for 24 months after the date of a change in control. If the
executive's employment is terminated within 24 months following a change in
control, the executive would become entitled to various benefits under the
Retention Agreements, including (i) the executive's annual base salary through
the date of termination, (ii) a bonus for the current fiscal year through the
date of termination equal to a prorated fraction of the executive's bonus for
the most recently completed fiscal year, (iii) one year's salary and bonus equal
to the highest salary and bonus received by the executive in the five year
period prior to the change in control and (iv) continued employee benefits for
12 months after the date of termination. If, within 24 months following a change
in control, an executive voluntarily terminates his or her employment without
"good reason," as defined in the Retention Agreements, or the executive's
employment is terminated because of death or disability, the executive is
entitled only to items (i) and (ii) described above. If, within 24 months
following a change in control, the executive is terminated by the Company for
"cause," as defined in the Retention Agreements, he or she is only entitled to
receive the payment described in item (i) above.
The Retention Agreements provide that the above payments would be subject
to reduction to the extent that any payment was subject to the excise tax
imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code") if such reduction would result in a greater after tax payment to the
executive.
REPORT OF COMPENSATION COMMITTEE
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors (the "Committee"), which is
comprised of Messrs. Kaiser, Rothrock and Vana-Paxhia, the Company's three
non-employee directors. The Committee is responsible for determining the
salaries of, establishing bonus programs for, and granting stock options to, the
Company's executive officers. In making decisions regarding executive
compensation, the Committee receives and considers input from the Company's
8
<PAGE> 11
Chief Executive Officer (the "CEO") in addition to the results of an annual
executive compensation review prepared by an outside consultant. The Company's
executive compensation plan is comprised of several elements designed to attract
and retain key personnel, reward outstanding performance, link executive pay to
long-term Company performance and to align executive interests with stockholder
interests. These elements consist of a base salary, annual bonuses, and
long-term incentive stock awards.
The base salaries of the Company's executive officers are determined by the
Committee and, for executive officers other than the CEO, are based upon
recommendations from Mr. Colbeth. In establishing base salaries for executive
officers the Committee considers numerous factors such as: a review of salaries
in comparable software companies, the executive's responsibilities, the
executive's importance to the Company, the executive's performance in the prior
year, historical salary levels of the executive and relative salary levels
within the Company. Increases in base salary are generally based upon enhanced
individual performance and/or increases in an executive's responsibilities.
The Committee believes that it is important to tie a significant portion of
the compensation of executive officers to the attainment of corporate success,
thus aligning the objectives and rewards of Company executives with those of the
stockholders of the Company. The Committee awards executive bonuses based upon a
review of the bonuses given by comparable software companies, and, for executive
officers other than the CEO, based upon recommendations from Mr. Colbeth.
Individual bonuses are paid as a percentage of salary and are based upon the
Company meeting certain financial goals, in addition to the attainment of
individual achievement goals. The Company financial goals are established by the
Committee at the beginning of the fiscal year, in the form of gross revenue and
net income benchmarks. If the specified gross revenue and net income benchmarks
are achieved the Committee has discretion to distribute bonuses to the Company's
executives based upon their individual contributions to the achievement of the
Company's financial benchmarks. Individual achievement goals are established for
each executive by Mr. Colbeth and an executive's performance in meeting his or
her specified individual achievement goals, coupled with attainment of the
Company's gross revenue and net income goals, determines the total bonus for
each executive in any given year.
The criteria used in determining the CEO's annual bonus are also
established by the Compensation Committee at the beginning of the fiscal year.
In Fiscal 1996, Mr. Colbeth's bonus was based upon the attainment of specified
Company revenue and pre-tax income goals and the enhancement of the Company's
management team.
The Company's 1995 Stock Incentive Plan (the "1995 Plan") authorizes the
Committee to grant incentive or non-qualified stock options to employees of the
Company. The Committee determines the prices and terms at which such options are
granted. The Committee uses stock options as a significant element of the
compensation package of executive officers, because it believes options provide
an incentive to executives to maximize stockholder value and because they
compensate executives only to the extent that the Company's stockholders receive
a return on their investment. Moreover, because options granted to executive
officers become exercisable over a four-year period and terminate upon or
shortly after the termination of the executive's employment with the Company,
stock options serve as a means of retaining these executives. In determining the
total number of shares of Common Stock to be covered by option grants to
executive officers in a given year, the Committee takes into account the number
of outstanding shares of Common Stock, the number of shares reserved for
issuance under the Company's 1995 Plan, recommendations of management concerning
option grants to employees below executive level, and the Company's projected
hiring needs for the coming year. In making individual stock option grants to
executives, the Committee considers the same factors considered in the
determination of base salary levels, as well as the stock and option holdings of
each executive and the remaining vesting schedule of such executive's options.
Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), certain executive compensation in excess of $1 million paid to the five
most highly paid executives of the Company will not be deductible by the Company
for federal income tax purposes unless the compensation is awarded under a
performance-based plan approved by the stockholders of the Company. The Company
has structured the 1995 Plan and the grants of options thereunder such that
gains realized by executives upon the exercise of
9
<PAGE> 12
such stock options generally should be deductible under Section 162(m). The
Committee intends to periodically review the potential effect of Section 162(m)
and may in the future decide to structure certain other executive compensation
programs so that they comply with the performance-based requirements of Section
162(m).
Compensation Committee
William S. Kaiser
Ray Rothrock
Steven R. Vana-Paxhia
10
<PAGE> 13
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Common Stock of the Company from June 27, 1995 (the date the Common Stock of the
Company commenced public trading) through September 30, 1996 (the end of Fiscal
1996) with the cumulative total return during this period of (i) the Nasdaq
Composite Index and (ii) the Inter@ctive Week Internet Index. This graph assumes
the investment of $100 on June 27, 1995 in the Company's Common Stock, the
Nasdaq Composite Index and the Inter@ctive Week Internet Index, and assumes
dividends are reinvested.
<TABLE>
<CAPTION>
June 27, 1995 September 30, 1995 September 30, 1996
<S> <C> <C> <C>
Spyglass, Inc. $100.00 $168.66 $139.17
NASDAQ Composite Index $100.00 $113.48 $133.42
Inter@ctive Week
Internet Index $100.00 $119.30 $141.45
</TABLE>
APPROVAL OF AMENDMENT TO 1995 STOCK INCENTIVE PLAN
On December 10, 1996, the Board of Directors adopted, subject to
stockholder approval, an amendment (the "Amendment") to the Company's 1995 Stock
Incentive Plan (the "1995 Plan") increasing the number of shares of Common Stock
authorized for issuance pursuant to the 1995 Plan from 1,800,000 to 2,550,000,
in the aggregate. The Amendment was adopted because the Company believes that
available shares under the 1995 Plan will not be sufficient to satisfy the
Company's compensation and hiring needs through Fiscal 1997. The Board of
Directors believes that awards under the 1995 Plan, including stock options,
have been and will continue to be an important compensation element in
attracting and retaining key employees who are expected to contribute to the
Company's growth and success. ACCORDINGLY, THE BOARD OF DIRECTORS BELIEVES THAT
THE APPROVAL OF THE AMENDMENT IS IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS AND RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
SUMMARY OF THE 1995 PLAN
The Company's 1995 Plan took effect upon the closing of the Company's
initial public offering of Common Stock on June 30, 1995. The 1995 Plan enables
the Company to grant options to purchase Common Stock, to make awards of
restricted Common Stock, and to issue certain other equity-related securities of
the Company to employees and directors of and consultants to the Company. Stock
options entitle the optionee to purchase Common Stock from the Company for a
specified exercise price during a period specified in the applicable option
agreement. Restricted stock awards entitle the recipient to purchase Common
Stock from
11
<PAGE> 14
the Company under terms which provide for vesting over a period of time and a
right of repurchase in favor of the Company of the unvested portion of the
Common Stock subject to the award upon the termination of the recipient's
employment or other relationship with the Company. The 1995 Plan is administered
by the Compensation Committee of the Board of Directors, which selects the
persons to whom stock options and restricted stock awards are granted and
determines the number of shares of Common Stock covered by the option or award,
its exercise price or purchase price, its vesting schedule and (in the case of
stock options) its expiration date. Stock options granted under the 1995 Plan
are generally nontransferable, and they generally become exercisable over a
four-year period and expire ten years after the date of grant (subject to
earlier termination in the event of the termination of the optionee's employment
with the Company).
As option grants and the grants of other equity-related securities under
the 1995 Plan are discretionary, the Company cannot now determine the number of
any such securities to be granted to any particular executive officer, executive
officers as a group, non-employee directors or non-executive officers and
employees as a group.
As of November 30, 1996, the Company had granted options under the 1995
Plan to purchase an aggregate of 1,489,849 shares of Common Stock. Of these,
options for 320,000 shares of Common Stock were granted to the current executive
officers of the Company. None of the options granted under the 1995 Plan as of
November 30, 1996 were granted to the non-employee directors of the Company. As
of November 30, 1996, the Company had not granted any stock appreciation rights,
performance shares, or restricted or unrestricted stock under the 1995 Plan. As
of November 30, 1996 there were 175 employees and directors of the Company who
were eligible to receive awards under the 1995 Plan. As of November 30, 1996,
343,916 shares remained available for future issuance under the 1995 Plan.
The 1995 Plan will remain in effect until May 7, 2005 (except that it will
continue in effect as to equity related securities outstanding on that date),
unless earlier terminated by the Board of Directors. The Board of Directors may
amend, suspend or terminate the 1995 Plan or any portion thereof at any time,
provided that no amendment shall be made without stockholder approval if such
approval is necessary to comply with any applicable tax or regulatory
requirement.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to stock options and
restricted stock awards granted under the 1995 Plan and with respect to the sale
of Common Stock acquired under the 1995 Plan. It does not address the tax
consequences that may arise with respect to any gift or disposition other than
by sale of Common Stock; nor does it address the tax consequences that may be
applicable to a participant who exercises a stock option within six months after
it is granted under the 1995 Plan if the participant is required to file reports
under Section 16(a) of the Securities Exchange Act of 1934, as amended. For
precise advice as to any specific transaction or set of circumstances,
participants should consult with their own tax advisors. Participants should
also consult with their own tax advisors regarding the application of any state,
local, and foreign taxes and any federal gift, estate, and inheritance taxes.
The 1995 Plan is not a qualified plan under Section 401(a) of the Code.
Incentive Stock Options. In general, a participant will not recognize
taxable income upon the grant or exercise of an incentive stock option. Instead,
a participant will recognize taxable income with respect to an incentive stock
option only upon the sale of Common Stock acquired through the exercise of the
option ("ISO Stock"). Nevertheless, in the case of a participant who has not
been an employee of the Company at all times commencing on the date on which a
particular option was granted (the "Grant Date") and ending on the date that is
three months before the date on which the option is exercised (the "Exercise
Date"), an option will be treated as though it were a non-statutory option and
taxed as described below under "Non-Statutory Options". Similarly, options will
be treated as non-statutory options for purposes of the alternative minimum tax.
Although a participant will pay alternative minimum tax only to the extent of
the excess of that tax over the participant's regular tax, the treatment of an
option as a non-statutory option for purposes of the alternative minimum tax
could create such an excess.
12
<PAGE> 15
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the Grant Date and one year from the Exercise Date, then the
participant will recognize long-term capital gain in an amount equal to the
excess of the sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock prior to having owned it for at least
two years from the Grant Date and one year from the Exercise Date (a
"Disqualifying Disposition"), then the participant generally will recognize
ordinary compensation income in an amount equal to the lesser of (i) the excess
of the fair market value of the ISO Stock on the Exercise Date over the exercise
price and (ii) the excess of the sale price of the ISO Stock over the exercise
price.
A participant making a Disqualifying Disposition will also recognize
capital gain in an amount equal to any excess of the sale price of the ISO Stock
over the fair market value of the ISO Stock on the Exercise Date. This capital
gain will be a long-term capital gain if the participant has held the ISO Stock
for more than one year prior to the date of the sale and will be a short-term
capital gain if the participant has held the ISO Stock for a shorter period.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of the sale and will be a short-term capital loss if
the participant has held the ISO Stock for a shorter period.
Non-Statutory Options. As in the case of an incentive stock option, a
participant will not recognize taxable income upon the grant of a non-statutory
option. However, a participant generally will recognize ordinary compensation
income upon the exercise of a non-statutory option in an amount equal to the
excess of the fair market value of the Common Stock acquired through the
exercise of the option (the "NSO Stock") on the Exercise Date over the exercise
price.
A participant will have a tax basis for any NSO Stock equal to the exercise
price plus any income recognized upon the exercise of the option. Upon selling
NSO Stock, a participant generally will recognize capital gain or loss in an
amount equal to the difference between the sale price of the NSO Stock and the
participant's tax basis in the NSO Stock. This capital gain or loss will be a
long-term capital gain or loss if the participant has held the NSO Stock for
more than one year prior to the date of the sale and will be a short-term
capital gain or loss if the participant has held the NSO Stock for a shorter
period.
Delivery of Common Stock Upon Exercise of Stock Options. Where provided
for in the applicable option agreement the 1995 Plan permits a participant to
exercise a stock option by delivering to the Company Common Stock having a fair
market value equal in amount to the exercise price. The use of this method of
exercise generally will not alter the tax consequences described above, and it
may enable a participant to dispose of appreciated Common Stock without
immediately recognizing capital gain on the disposition. The participant's tax
basis in any shares of Common Stock delivered to the Company to exercise an
option generally will be carried over to an equal number of shares of Common
Stock acquired upon exercising the option. Nevertheless, participants should
consider that the delivery to the Company of ISO Stock or stock acquired
pursuant to the Company's employee stock purchase plan will constitute a
Disqualifying Disposition, having all of the adverse tax consequences described
above, if the holding period requirements described above are not satisfied with
respect to that stock.
Restricted Stock. A participant will not recognize taxable income upon the
grant of a restricted stock award, unless the participant makes a election under
Section 83(b) of the Code. If the participant makes a Code Section 83(b)
election within 30 days of the date of the grant, then the participant will
recognize ordinary income, for the year in which the award is granted, in an
amount equal to the excess of the fair market value of the Common Stock at the
time the award is granted over the purchase price paid for the Common Stock. If
such election is made and the participant subsequently forfeits some or all of
the shares, the participant will not be entitled to any refund of taxes paid as
the result of a Code Section 83(b) election. If a Code Section 83(b) election is
not made, the participant will recognize ordinary income at the time that the
13
<PAGE> 16
forfeiture provisions or restrictions on transfer lapse in an amount equal to
the difference between the fair market value of the Common Stock at the time of
such lapse and the original purchase price paid for the Common Stock. The
participant will have a basis in the Common Stock acquired equal to the sum of
the price paid and the amount of ordinary income recognized either at the time
the Code Section 83(b) election is made or at the time the forfeiture provisions
or transfer restrictions lapse, as applicable.
Upon the disposition of the Common Stock acquired pursuant to a restricted
stock award the participant will recognize a capital gain or loss equal to the
difference between the sale price of the Common Stock and the participant's
basis in the Common Stock. The gain or loss will be a long-term gain or loss if
the shares are held for more than one year. For this purpose, the holding period
shall begin on the day after the date on which the forfeiture provisions or
restrictions lapse if a Code Section 83(b) election is not made, or on the day
after the award is granted if a Code Section 83(b) election is made.
Tax Consequences to the Company. The grant of a stock option or restricted
stock award under the 1995 Plan will have no tax consequences to the Company.
Moreover, in general, neither the exercise of an incentive stock option acquired
under the 1995 Plan nor the sale of any Common Stock acquired under the 1995
Plan will have any tax consequences to the Company. However, the Company
generally will be entitled to a business-expense deduction with respect to any
ordinary compensation income recognized by a participant under the 1995 Plan.
Any such deduction will be subject to the limitations of Section 162(m) of the
Code.
Withholding. Although a participant's Disqualifying Disposition of ISO
Stock will result in the recognition of ordinary compensation income, the
Company will have no withholding obligation with respect to that income. In
contrast, the Company will have a withholding obligation with respect to
ordinary compensation income recognized with respect to a non-statutory option
or restricted stock award by a participant who is employed by the Company. The
Company will require any such participant to make arrangements to satisfy this
withholding obligation.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Price Waterhouse LLP as the
Company's independent auditors for the current fiscal year. Price Waterhouse LLP
has served as the independent auditors for the Company (or its predecessor
Illinois corporation) since 1991. Although stockholder approval of the Board of
Directors' selection of Price Waterhouse LLP is not required by law, the Board
of Directors believes that it is advisable to give stockholders an opportunity
to ratify this selection. If this proposal is not approved at the Annual
Meeting, the Board of Directors may reconsider its selection.
Representatives of Price Waterhouse LLP are expected to be present at the
Annual Meeting and will have the opportunity to make a statement if they desire
to do so and will also be available to respond to appropriate questions from
stockholders.
14
<PAGE> 17
OTHER MATTERS
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Richard M. Houle, Executive Vice President, Development and Services of the
Company, filed his Initial Statement of Beneficial Ownership of Securities on
Form 3 26 days after the required filing date. Randall T. Littleson, Vice
President, Marketing of the Company, filed his Initial Statement of Beneficial
Ownership of Securities on Form 3 five days after the required filing date.
MATTERS TO BE CONSIDERED AT THE MEETING
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matters are properly presented
to the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote, or otherwise act, in accordance with their judgment
on such matters. Stockholders should be aware that the Company's By-laws (a copy
of which is available upon request to the Secretary of the Company) contain
provisions requiring certain advance notice from a stockholder who wishes to
bring business before the Annual Meeting.
SOLICITATION OF PROXIES
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's Directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph, facsimile, email and personal interviews. Georgeson & Company Inc.
has been engaged by the Company to solicit proxies on behalf of the Company. For
these services, the Company will pay Georgeson & Company Inc. a fee of $5,000
plus reimbursement of out-of-pocket expenses. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the owners
of stock held in their names, and the Company will reimburse them for their
out-of-pocket expenses in this connection.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Annual Meeting of
Stockholders for Fiscal 1997 must be received by the Company at its principal
office not later than September 8, 1997 for inclusion in the proxy statement for
that meeting.
By Order of the Board of Directors,
THOMAS S. LEWICKI,
Secretary
January 6, 1997
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
15
<PAGE> 18
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
- --------------------------------------------------------------------------------
A VOTE FOR THE DIRECTOR NOMINEES AND FOR PROPOSAL NUMBERS 2 AND 3 IS
RECOMMENDED BY THE BOARD OF DIRECTORS.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
WITH- FOR AGAINST ABSTAIN
FOR HOLD
1. Election of Class II Directors [ ] [ ] 2. Amendment to the [ ] [ ] [ ]
Timothy K. Krauskopf and Company's 1995 Stock
William S. Kaiser Incentive Plan.
3. Ratification of [ ] [ ] [ ]
IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" appointment of
A PARTICULAR NOMINEE, MARK THE "FOR" independent
BOX AND STRIKE A LINE THROUGH THE NOMINEE'S accountants.
NAME. YOUR SHARES WILL BE VOTED FOR
THE REMAINING NOMINEE. MARKING THE "FOR" BOX,
WITHOUT STRIKING A LINE THROUGH A NOMINEE'S NAME,
INDICATES A VOTE FOR BOTH NOMINEES. MARK BOX AT RIGHT IF [ ]
COMMENTS OR ADDRESS
HAVE BEEN NOTED ON THE
REVERSE SIDE OF THIS CARD.
</TABLE>
PLEASE BE SURE TO SIGN AND DATE THIS PROXY. PLEASE READ THE REVERSE SIDE OF
THIS CARD.
SIGNATURE(S)______________________________________________________DATE_________
Stockholder sign here Co-owner sign here
Please sign this proxy exactly as your name appears hereon. Joint owners should
each sign personally. Trustees and other fiduciaries should indicate the
capacity in which they sign. If a corporation or partnership, this signature
should be that of an authorized officer who should state his or her title.
<PAGE> 19
SPYGLASS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
Annual Meeting of Stockholders - FEBRUARY 12, 1997
Those signing on the reverse side, revoking any prior proxies, hereby
appoint(s) Douglas P. Colbeth and Gary L. Vilchick, and each of them with full
power of substitution, as proxies for those signing on the reverse side to act
and vote at the Annual Meeting of Stockholders of Spyglass, Inc. to be held on
February 12, 1997 and at any adjournments thereof as indicated upon all matters
referred to on the reverse side and described in the Proxy Statement for the
Meeting, and, in their discretion, upon any other matters which may properly
come before the Meeting or any adjournment thereof. Attendance of the
undersigned at the meeting or at any adjourned session thereof will not be
deemed to revoke this proxy unless the undersigned shall affirmatively indicate
thereat the intention of the undersigned to vote said shares in person. If the
undersigned hold(s) any of the shares of the Company in a fiduciary, custodial
or joint capacity or capacities, this proxy is signed by the undersigned in
every such capacity as well as individually.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO OTHER INDICATION IS MADE, THE PROXIES
SHALL VOTE "FOR" PROPOSAL NUMBERS 1, 2 AND 3.
PLEASE VOTE, DATE, AND SIGN ON THE OTHER SIDE
AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
<TABLE>
<S> <C>
HAS YOUR ADDRESS CHANGED?, DO YOU HAVE ANY COMMENTS?
_______________________________ _______________________________
_______________________________ _______________________________
_______________________________ _______________________________
</TABLE>
<PAGE> 20
APPENDIX B
SPYGLASS, INC.
1995 STOCK INCENTIVE PLAN, AS AMENDED
1. Purpose
The purpose of this 1995 Stock Incentive Plan (the "Plan") of
Spyglass, Inc., a Delaware corporation (the "Company"), is to advance the
interests of the Company by enhancing its ability to attract and retain key
employees, consultants and others who are in a position to contribute to the
Company's future growth and success.
2. Definitions
"Award" means any Option, Stock Appreciation Right, Performance
Shares, Restricted Stock or Unrestricted Stock awarded under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" means a committee of not less than two members of the
Board appointed by the Board to administer the Plan, provided that if and when
the Common Stock is registered under Section 12 of the Exchange Act, each
member of the Committee shall be a "Non-Employee Director" within the meaning
of Rule 16b-3 under the Exchange Act ("Rule 16b-3").
"Common Stock" means the Common Stock, $.01 par value per share, of
the Company.
"Company" means Spyglass, Inc. and, except where the context otherwise
requires, all present and future subsidiaries of Spyglass, Inc. as defined in
Section 424(f) of the Code.
"Designated Beneficiary" means the beneficiary designated by a
Participant, in a manner determined by the Board, to receive amounts due or
exercise rights of the Participant in the event of the Participant's death. In
the absence of an effective designation by a Participant, Designated
Beneficiary shall mean the Participant's estate.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
<PAGE> 21
"Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the Board in
good faith or in the manner established by the Board from time to time.
"Incentive Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under Section 6 which is intended to meet the
requirements of Section 422 of the Code or any successor provision.
"Nonstatutory Stock Option" means an option to purchase shares of
Common Stock awarded to a Participant under Section 6 which is not intended to
be an Incentive Stock Option.
"Option" means an Incentive Stock Option or a Nonstatutory Stock
Option.
"Participant" means a person selected by the Board to receive an Award
under the Plan.
"Performance Shares" mean shares of Common Stock which may be earned
by the achievement of performance goals established for a Participant under
Section 8.
"Reporting Person" means a person subject to Section 16 of the
Exchange Act or any successor provision.
"Restricted Period" means the period of time selected by the Board
during which shares subject to a Restricted Stock Award may be repurchased by
or forfeited to the Company.
"Restricted Stock" means shares of Common Stock awarded to a
Participant under Section 9.
"Stock Appreciation Right" or "SAR" means a right to receive any
excess in Fair Market Value of shares of Common Stock over the exercise price
awarded to a Participant under Section 7.
"Unrestricted Stock" means shares of Common Stock awarded to a
Participant under Section 9(c).
3. Administration
The Plan will be administered by the Board. The Board shall have
authority to make Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable
from time to time, and to interpret the provisions of the Plan. The Board's
decisions shall be final and binding. No member of the Board shall be liable
for
-2-
<PAGE> 22
any action or determination relating to the Plan made in good faith. To the
extent permitted by applicable law, the Board may delegate to one or more
executive officers of the Company the power to make Awards to Participants who
are not Reporting Persons and all determinations under the Plan with respect
thereto, provided that the Board shall fix the maximum amount of such Awards to
be made by such executive officers and a maximum amount for any one
Participant. To the extent permitted by applicable law, the Board may appoint
a Committee to administer the Plan and, in such event, all references to the
Board in the Plan shall mean such Committee or the Board. All decisions by the
Board or the Committee pursuant to the Plan shall be final and binding on all
persons having or claiming any interest in the Plan or in any Award.
4. Eligibility
All of the Company's employees, officers, directors, consultants and
advisors who are expected to contribute to the Company's future growth and
success, other than persons who have irrevocably elected not to be eligible,
are eligible to be Participants in the Plan. Incentive Stock Options may be
awarded only to persons eligible to receive Incentive Stock Options under the
Code.
5. Stock Available for Awards
(a) Subject to adjustment under subsection (b) below, Awards may
be made under the Plan for up to 2,550,000 shares of Common Stock. If any
Award in respect of shares of Common Stock expires or is terminated unexercised
or is forfeited for any reason or settled in a manner that results in fewer
shares outstanding than were initially awarded, the shares subject to such
Award or so surrendered, as the case may be, to the extent of such expiration,
termination, forfeiture or decrease, shall again be available for award under
the Plan, subject, however, in the case of Incentive Stock Options, to any
limitation required under the Code and provided that shares made available
pursuant to this sentence shall be available for Awards to Reporting Persons
only to the extent consistent with Rule 16b-3. Shares issued under the Plan
may consist in whole or in part of authorized but unissued shares or treasury
shares.
(b) In the event that the Board, in its sole discretion,
determines that any stock dividend, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination or other similar transaction affects the Common Stock such that an
adjustment is required in order to preserve the benefits or potential benefits
intended to be made
-3-
<PAGE> 23
available under the Plan, then the Board, subject, in the case of Incentive
Stock Options, to any limitation required under the Code, shall equitably
adjust any or all of (i) the number and kind of shares in respect of which
Awards may be made under the Plan, (ii) the number and kind of shares subject
to outstanding Awards, and (iii) the award, exercise or conversion price with
respect to any of the foregoing, and if considered appropriate, the Board may
make provision for a cash payment with respect to an outstanding Award,
provided that the number of shares subject to any Award shall always be a whole
number.
(c) The Board may grant Awards under the Plan in substitution for
stock and stock based awards held by employees of another corporation who
concurrently become employees of the Company as a result of a merger or
consolidation of the employing corporation with the Company (or a subsidiary of
the Company) or the acquisition by the Company (or a subsidiary of the Company)
of property or stock of the employing corporation. The substitute Awards shall
be granted on such terms and conditions as the Board considers appropriate in
the circumstances.
(d) Subject to adjustment under Section 5(b), the maximum number
of shares with respect to which an Award may be granted to any employee under
the Plan shall not exceed 150,000 per calendar year. For purposes of
calculating such maximum number, (a) an Award shall continue to be treated as
outstanding notwithstanding its repricing, cancellation or expiration and (b)
the repricing of an outstanding Award or issuance of a new Award in
substitution for a cancelled Award shall be deemed to constitute the grant of a
new additional Award separate from the original grant of the Award that is
repriced or cancelled.
6. Stock Options
(a) General
(i) Subject to the provisions of the Plan, the Board
may award Incentive Stock Options and Nonstatutory Stock Options, and determine
the number of shares of Common Stock to be covered by each Option, the option
price of such Option and the conditions and limitations applicable to the
exercise of such Option. The terms and conditions of Incentive Stock Options
shall be subject to and comply with Section 422 of the Code, or any successor
provision, and any regulations thereunder.
(ii) The Board shall establish the exercise price at
the time each Option is awarded. In the case of Incentive Stock Options, such
price shall not be less than 100% of the Fair Market Value of the Common Stock
on the date of award.
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<PAGE> 24
(iii) Each Option shall be exercisable at such times and
subject to such terms and conditions as the Board may specify in the applicable
Award or thereafter. The Board may impose such conditions with respect to the
exercise of Options, including conditions relating to applicable federal or
state securities laws, as it considers necessary or advisable.
(iv) Options granted under the Plan may provide for the
payment of the exercise price by delivery of cash or check in an amount equal
to the exercise price of such Options or, to the extent permitted by the Board
at or after the award of the Option, by (A) delivery of shares of Common Stock
owned by the optionee for at least six months (or such shorter period as is
approved by the Board), valued at their Fair Market Value, (B) delivery of a
promissory note of the optionee to the Company on terms determined by the
Board, (C) delivery of an irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise price or delivery
of irrevocable instructions to a broker to deliver promptly to the Company cash
or a check sufficient to pay the exercise price, (D) payment of such other
lawful consideration as the Board may determine, or (E) any combination of the
foregoing.
(v) The Board may provide for the automatic award of
an Option upon the delivery of shares to the Company in payment of the exercise
price of an Option for up to the number of shares so delivered.
(vi) The Board may at any time accelerate the time at
which all or any part of an Option may be exercised.
(b) Incentive Stock Options
Options granted under the Plan which are intended to be
Incentive Stock Options shall be subject to the following additional terms and
conditions:
(i) All Incentive Stock Options granted under the Plan
shall, at the time of grant, be specifically designated as such in the option
agreement covering such Incentive Stock Options. The Option exercise period
shall not exceed ten years from the date of grant.
(ii) If any employee to whom an Incentive Stock Option is
to be granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company (after taking into account the attribution
of stock ownership rule of Section 424(b) and of the Code), then the following
special
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provisions shall be applicable to the Incentive Stock Option granted to such
individual:
(x) The purchase price per share of the Common
Stock subject to such Incentive Stock Option shall not be less than
110% of the Fair Market Value of one share of Common Stock at the time
of grant; and
(y) The option exercise period shall not exceed
five years from the date of grant.
(iii) For so long as the Code shall so provide, options
granted to any employee under the Plan (and any other incentive stock option
plans of the Company) which are intended to constitute Incentive Stock Options
shall not constitute Incentive Stock Options to the extent that such options,
in the aggregate, become exercisable for the first time in any one calendar
year for shares of Common Stock with an aggregate Fair Market Value (determined
as of the respective date or dates of grant) of more than $100,000.
(iv) No Incentive Stock Option may be exercised unless, at
the time of such exercise, the Participant is, and has been continuously since
the date of grant of his or her Option, employed by the Company, except that:
(x) an Incentive Stock Option may be exercised
within the period of three months after the date the Participant
ceases to be an employee of the Company (or within such lesser period
as may be specified in the applicable option agreement), provided,
that the agreement with respect to such Option may designate a longer
exercise period and that the exercise after such three-month period
shall be treated as the exercise of a Nonstatutory Stock Option under
the Plan;
(y) if the Participant dies while in the employ
of the Company, or within three months after the Participant ceases to
be such an employee, the Incentive Stock Option may be exercised by
the Participant's Designated Beneficiary within the period of one year
after the date of death (or within such lesser period as may be
specified in the applicable Option agreement); and
(z) if the Participant becomes disabled (within
the meaning of Section 22(e)(3) of the Code or any successor provision
thereto) while in the employ of the Company, the Incentive Stock
Option may be exercised within the period of one year after the date
of death (or within such lesser
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period as may be specified in the applicable Option agreement).
For all purposes of the Plan and any Option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.
(v) Incentive Stock Options shall not be assignable or
transferable by the person to whom they are granted, either voluntarily or by
operation of law, except by will or the laws of descent and distribution, and,
during the life of the optionee, shall be exercisable only by the optionee.
7. Stock Appreciation Rights
(a) The Board may grant SARs entitling recipients on exercise of
the SAR to receive an amount, in cash or Common Stock or a combination thereof
(such form to be determined by the Board), determined in whole or in part by
reference to appreciation in the Fair Market Value of the Common Stock between
the date of the Award and the exercise of the Award. A SAR shall entitle the
Participant to receive, with respect to each share of Common Stock as to which
the SAR is exercised, the excess of the share's Fair Market Value on the date
of exercise over its Fair Market Value on the date the SAR was granted. The
Board may also grant SARs that provide that, following a change in control of
the Company (as defined by the Board at the time of the Award), the holder of
such SAR will be entitled to receive, with respect to each share of Common
Stock subject to the SAR, an amount equal to the excess of a specified value
(which may include an average of values) for a share of Common Stock during a
period preceding such change in control over the Fair Market Value of a share
of Common Stock on the date the SAR was granted.
(b) SARs may be granted in tandem with, or independently of,
Options granted under the Plan. A SAR granted in tandem with an Option which
is not an Incentive Stock Option may be granted either at or after the time the
Option is granted. A SAR granted in tandem with an Incentive Stock Option may
be granted only at the time the Option is granted.
(c) When SARs are granted in tandem with Options, the following
provisions will apply:
(i) The SAR will be exercisable only at such time or
times, and to the extent, that the related Option is exercisable
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and will be exercisable in accordance with the procedure required for exercise
of the related Option.
(ii) The SAR will terminate and no longer be exercisable
upon the termination or exercise of the related Option, except that a SAR
granted with respect to less than the full number of shares covered by an
Option will not be reduced until the number of shares as to which the related
Option has been exercised or has terminated exceeds the number of shares not
covered by the SAR.
(iii) The Option will terminate and no longer be
exercisable upon the exercise of the related SAR.
(iv) The SAR will be transferable only with the related
Option.
(v) A SAR granted in tandem with an Incentive Stock
Option may be exercised only when the market price of the Common Stock subject
to the Option exceeds the exercise price of such Option.
(d) A SAR not granted in tandem with an Option will become
exercisable at such time or times, and on such conditions, as the Board may
specify.
(e) The Board may at any time accelerate the time at which all or
any part of the SAR may be exercised.
8. Performance Shares
(a) The Board may make Performance Share Awards entitling
recipients to acquire shares of Common Stock upon the attainment of specified
performance goals. The Board may make Performance Share Awards independent of
or in connection with the granting of any other Award under the Plan. The
Board in its sole discretion shall determine the performance goals applicable
under each such Award, the periods during which performance is to be measured,
and all other limitations and conditions applicable to the awarded Performance
Shares; provided, however, that the Board may rely on the performance goals and
other standards applicable to other performance plans of the Company in setting
the standards for Performance Share Awards under the Plan.
(b) Performance Share Awards and all rights with respect to such
Awards may not be sold, assigned, transferred, pledged or otherwise encumbered.
(c) A Participant receiving a Performance Share Award shall have
the rights of a stockholder only as to shares actually received by the
Participant under the Plan and not with respect to shares subject to an Award
but not actually
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received by the Participant. A Participant shall be entitled to receive a
stock certificate evidencing the acquisition of shares of Common Stock under a
Performance Share Award only upon satisfaction of all conditions specified in
the agreement evidencing the Performance Share Award.
(d) The Board may at any time accelerate or waive any or all of
the goals, restrictions or conditions imposed under any Performance Share
Award.
9. Restricted and Unrestricted Stock
(a) The Board may grant Restricted Stock Awards entitling
recipients to acquire shares of Common Stock, subject to the right of the
Company to repurchase all or part of such shares at their purchase price (or to
require forfeiture of such shares if purchased at no cost) from the recipient
in the event that conditions specified by the Board in the applicable Award are
not satisfied prior to the end of the applicable Restricted Period or
Restricted Periods established by the Board for such Award. Conditions for
repurchase (or forfeiture) may be based on continuing employment or service or
achievement of pre-established performance or other goals and objectives.
(b) Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered, except as permitted by the Board,
during the applicable Restricted Period. Shares of Restricted Stock shall be
evidenced in such manner as the Board may determine. Any certificates issued
in respect of shares of Restricted Stock shall be registered in the name of the
Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company
(or its designee). At the expiration of the Restricted Period, the Company (or
such designee) shall deliver such certificates to the Participant or if the
Participant has died, to the Participant's Designated Beneficiary.
(c) The Board may, in its sole discretion, grant (or sell at a
purchase price determined by the Board, which shall not be lower than 85% of
Fair Market Value on the date of sale) to Participants shares of Common Stock
free of any restrictions under the Plan ("Unrestricted Stock").
(d) The purchase price for each share of Restricted Stock and
Unrestricted Stock shall be determined by the Board of Directors and may not be
less than the par value of the Common Stock. Such purchase price may be paid
in the form of past
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services or such other lawful consideration as is determined by the Board.
(e) The Board may at any time accelerate the expiration of the
Restricted Period applicable to all, or any particular, outstanding shares of
Restricted Stock.
10. General Provisions Applicable to Awards
(a) Applicability of Rule 16b-3. Those provisions of the Plan
which make an express reference to Rule 16b-3 shall apply to the Company only
at such time as the Company's Common Stock is registered under the Exchange
Act, or any successor provision, and then only to Reporting Persons.
(b) Reporting Person Limitations. Notwithstanding any other
provision of the Plan, to the extent required to qualify for the exemption
provided by Rule 16b-3, (i) any Option, SAR, Performance Share Award or other
similar right related to an equity security issued under the Plan to a
Reporting Person shall not be transferable other than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined by the Code or Title I or the Employee Retirement Income Security Act
("ERISA"), or the rules thereunder, and shall be exercisable during the
Participant's lifetime only by the Participant or the Participant's guardian or
legal representative, and (ii) the selection of a Reporting Person as a
Participant and the terms of his or her Award shall be determined only in
accordance with the applicable provisions of Rule 16b-3.
(c) Documentation. Each Award under the Plan shall be evidenced
by an instrument delivered to the Participant specifying the terms and
conditions thereof and containing such other terms and conditions not
inconsistent with the provisions of the Plan as the Board considers necessary
or advisable. Such instruments may be in the form of agreements to be executed
by both the Company and the Participant, or certificates, letters or similar
documents, acceptance of which will evidence agreement to the terms thereof and
of this Plan.
(d) Board Discretion. Except as otherwise provided by the Plan,
each type of Award may be made alone, in addition to or in relation to any
other type of Award. The terms of each type of Award need not be identical,
and the Board need not treat Participants uniformly. Except as otherwise
provided by the Plan or a particular Award, any determination with respect to
an Award may be made by the Board at the time of award or at any time
thereafter.
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(e) Termination of Status. Subject to the provisions of Section
6(b)(iv), the Committee shall determine the effect on an Award of the
disability, death, retirement, authorized leave of absence or other termination
of employment or other status of a Participant and the extent to which, and the
period during which, the Participant's legal representative, guardian or
Designated Beneficiary may exercise rights under such Award.
(f) Mergers, Etc. In the event of a consolidation, merger or
other reorganization in which all of the outstanding shares of Common Stock are
exchanged for securities, cash or other property of any other corporation or
business entity (an "Acquisition") or in the event of a liquidation of the
Company, the Board of Directors of the Company, or the board of directors of
any corporation assuming the obligations of the Company, may, in its
discretion, take any one or more of the following actions as to outstanding
Awards: (i) provide that such Awards shall be assumed, or substantially
equivalent Awards shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof) on such terms as the Board determines to
be appropriate, (ii) upon written notice to Participants, provide that all
unexercised Options or SARs will terminate immediately prior to the
consummation of such transaction unless exercised by the Participant within a
specified period following the date of such notice, (iii) in the event of an
Acquisition under the terms of which holders of the Common Stock of the Company
will receive upon consummation thereof a cash payment for each share
surrendered in the Acquisition (the "Acquisition Price"), make or provide for a
cash payment to Participants equal to the difference between (A) the
Acquisition Price times the number of shares of Common Stock subject to
outstanding Options or SARs (to the extent then exercisable at prices not in
excess of the Acquisition Price) and (B) the aggregate exercise price of all
such outstanding Options or SARs in exchange for the termination of such
Options and SARs, and (iv) provide that all or any outstanding Awards shall
become exercisable or realizable in full prior to the effective date of such
Acquisition.
(g) Withholding. The Participant shall pay to the Company, or
make provision satisfactory to the Board for payment of, any taxes required by
law to be withheld in respect of Awards under the Plan no later than the date
of the event creating the tax liability. In the Board's discretion, and
subject to such conditions as the Board may establish, such tax obligations may
be paid in whole or in part in shares of Common Stock, including shares
retained from the Award creating the tax obligation, valued at their Fair
Market Value. The Company may, to the extent permitted by law, deduct any such
tax obligations from any payment of any kind otherwise due to the Participant.
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(h) Foreign Nationals. Awards may be made to Participants who are
foreign nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Board considers
necessary or advisable to achieve the purposes of the Plan or comply with
applicable laws.
(i) Amendment of Award. The Board may amend, modify or terminate
any outstanding Award, including substituting therefor another Award of the
same or a different type, changing the date of exercise or realization and
converting an Incentive Stock Option to a Nonstatutory Stock Option, provided
that the Participant's consent to such action shall be required unless the
Board determines that the action, taking into account any related action, would
not materially and adversely affect the Participant.
(j) Cancellation and New Grant of Options. The Board of Directors
shall have the authority to effect, at any time and from time to time, with the
consent of the affected optionees, (i) the cancellation of any or all
outstanding Options under the Plan and the grant in substitution therefor of
new Options under the Plan covering the same or different numbers of shares of
Common Stock and having an option exercise price per share which may be lower
or higher than the exercise price per share of the cancelled Options or (ii)
the amendment of the terms of any and all outstanding Options under the Plan to
provide an option exercise price per share which is higher or lower than the
then current exercise price per share of such outstanding Options.
(k) Conditions on Delivery of Stock. The Company will not be
obligated to deliver any shares of Common Stock pursuant to the Plan or to
remove restrictions from shares previously delivered under the Plan (i) until
all conditions of the Award have been satisfied or removed, (ii) until, in the
opinion of the Company's counsel, all applicable federal and state laws and
regulations have been complied with, (iii) if the outstanding Common Stock is
at the time listed on any stock exchange, until the shares to be delivered have
been listed or authorized to be listed on such exchange upon official notice of
notice of issuance, and (iv) until all other legal matters in connection with
the issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Common Stock has not been registered under the
Securities Act of 1933, as amended, the Company may require, as a condition to
exercise of the Award, such representations or agreements as the Company may
consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Common Stock bear an appropriate legend
restricting transfer.
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11. Miscellaneous
(a) No Right To Employment or Other Status. No person shall have
any claim or right to be granted an Award, and the grant of an Award shall not
be construed as giving a Participant the right to continued employment or
service for the Company. The Company expressly reserves the right at any time
to dismiss a Participant free from any liability or claim under the Plan,
except as expressly provided in the applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any
rights as a stockholder with respect to any shares of Common Stock to be
distributed under the Plan until he or she becomes the record holder thereof.
(c) Exclusion from Benefit Computations. No amounts payable upon
exercise of Awards granted under the Plan shall be considered salary, wages or
compensation to Participants for purposes of determining the amount or nature
of benefits that Participants are entitled to under any insurance, retirement
or other benefit plans or programs of the Company.
(d) Effective Date and Term. The Plan shall become effective upon
the closing of the Company's initial public offering. No Award granted under
the Plan shall become effective until the Plan shall have been approved by the
Company's stockholders. If such stockholder approval is not obtained within
twelve months after the date of the Board's adoption of the Plan, no Options
previously granted under the Plan shall be deemed to be Incentive Stock Options
and no Incentive Stock Options shall be granted thereafter. No Award may be
made under the Plan after May 7, 2005, but Awards previously granted may extend
beyond that date.
(e) Amendment of Plan. The Board may amend, suspend or terminate
the Plan or any portion thereof at any time, provided that no amendment shall
be made without stockholder approval if such approval is necessary to comply
with any applicable tax or regulatory requirement. Amendments requiring
stockholder approval shall become effective when adopted by the Board of
Directors, but no Incentive Stock Option granted after the date of such
amendment shall become exercisable (to the extent that such amendment to the
Plan was required to enable the Company to grant such Incentive Stock Option to
a particular Participant) unless and until such amendment shall have been
approved by the Company's stockholders. If such stockholder approval is not
obtained within twelve months of the Board's adoption of such amendment, any
Incentive Stock Options granted on or after the date of such amendment shall
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terminate to the extent that such amendment to the Plan was required to enable
the Company to grant such option to a particular Participant.
(f) Governing Law. The provisions of the Plan shall be governed
by and interpreted in accordance with the laws of the State of Delaware.
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