SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 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 pervious
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously
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4) Date Filed:...........................................
<PAGE>
Naperville Corporate Center
1240 East Diehl Road
Naperville, Illinois 60563
Notice of Annual Meeting of Stockholders to be Held
Tuesday, February 9, 1999
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 Tuesday, February 9, 1999 at 10:00
a.m., central standard time, to consider and act upon the following
matters:
1. To elect two Class I directors to serve for a three-year
term.
2. To approve (i) an amendment to the Company's 1995 Stock
Incentive Plan (the "1995 Plan") increasing the number of
shares issuable under the 1995 Plan from 3,300,000 to
4,250,000 and (ii) the continuance of the 1995 Plan, as
amended.
3. To ratify the selection of Ernst & Young 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 18,
1998 will be entitled to notice of and to vote at the meeting or any
adjournment thereof.
By Order of the Board of Directors
GARY L. VILCHICK, Secretary
Naperville, Illinois
December 30, 1998
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.SPYGLASS, INC.
<PAGE>
Naperville Corporate Center
1240 East Diehl Road
Naperville, Illinois 60563
PROXY STATEMENT
for the Annual Meeting of Stockholders on February 9, 1999
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 9, 1999, 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, 1998 ("Fiscal 1998") was mailed to stockholders, along
with these proxy materials, on or about December 30, 1998.
Quorum Requirement
At the close of business on December 18, 1998, 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 14,973,795 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 the 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, and the continuance of, the Company's 1995 Stock
Incentive Plan and the ratification of the selection of Ernst & Young
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 I directors, the approval of the proposed amendment to, and
continuance of, the Company's 1995 Stock Incentive Plan and the
ratification of the selection of independent auditors).
<PAGE>
Beneficial Ownership of Voting Stock
The following table sets forth the beneficial ownership of the
Company's Common Stock as of November 2, 1998 (i) by each director,
(ii) by each of the executive officers named in the Summary
Compensation Table set forth under the caption "Executive
Compensation" below, and (iii) by all current directors and executive
officers as a group. No person is known by the Company to
beneficially own more than 5% of the outstanding shares of Common
Stock.
<TABLE>
Number of Percentage o
Shares Outstanding
Beneficially Common Stock
Beneficial Owner Owned (1) (2)
<S> <C> <C>
Directors
Charles T. Brumback 2,000 *
Douglas P. Colbeth (3) 386,756 2.6%
Brian J. Jackman (4) 9,000 *
Timothy K. Krauskopf 177,000 1.2%
John Shackleton 0 *
Named Executives
Richard M. Houle 0 *
Randall T. Littleson(5) 65,790 *
Christian T. Nall(6) 69,540 *
Michael F. Tyrrell(7) 71,570 *
Gary L. Vilchick (8) 92,520 *
All current directors and executive
officers as a group (9 persons) (9) 874,176 5.8%
</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 November 2, 1998,
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 14,679,143 shares
outstanding as of November 2, 1998 and any shares subject to stock
options held by the person in question.
(3) Includes 221,000 shares issuable upon the exercise of outstanding
options. Also includes 165,756 shares held by the Douglas P.
Colbeth Trust. Douglas P. Colbeth is the trustee of the Douglas
P. Colbeth Trust.
(4) Includes 8,000 shares issuable upon the exercise of outstanding
options.
(5) Includes 37,680 shares issuable upon the exercise of outstanding
options.
(6) Includes 36,040 shares issuable upon the exercise of outstanding
options.
(7) Includes 36,080 shares issuable upon the exercise of outstanding
options.
(8) Includes 55,020 shares issuable upon the exercise of outstanding
options.
(9) Includes 393,820 shares issuable upon the exercise of outstanding
options.
<PAGE>
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. Currently there are two Class I directors, whose terms expire
at this Annual Meeting of Stockholders, two Class II directors, whose
terms expire at the Annual Meeting of Stockholders following the
fiscal year ending September 30, 1999 ("Fiscal 1999"), and one Class
III director, whose term expires at the Annual Meeting of
Stockholders following the fiscal year ending September 30, 2000
("Fiscal 2000") (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
Charles T. Brumback and Douglas P. Colbeth as Class I directors,
unless authority to vote for the election of the nominees is withheld
by marking the proxy to that effect. Mr. Brumback and Mr. Colbeth
are currently Class I directors of the Company. They have indicated
their willingness to serve, if elected, but if they should be unable
or unwilling to stand for election, proxies may be voted for
substitute nominees 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 nominees for
Class I directors.
Nominees for Class I directors (holding office for term expiring
at this Annual Meeting; nominated for the term expiring at the Annual
Meeting for the fiscal year ending September 30, 2001):
MR. BRUMBACK, age 70, has been a director of the Company since
July 1998. Mr. Brumback served as Chairman of the Tribune Company, a
media company, from 1993 until his retirement in 1997 and as
President and CEO from 1990 to 1993. Mr. Brumback is also a member
of the Board of Directors of Avid Technology, Inc.
MR. COLBETH, age 43, 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.
Class II director (holding office for term expiring at the
Annual Meeting for Fiscal 1999):
MR. KRAUSKOPF, age 35, has been a director of the Company since
October 1992. Mr. Krauskopf has been the Head of Information Systems
at the Field Museum, Chicago, a natural history museum, since July
1997. Mr. Krauskopf was a co-founder of the Company, served as
Director of Software Development of the Company from January 1990 to
October 1994, as Vice President, Research and Development from
October 1994 to March 1996 and as Chief Technical Officer from March
1996 to April 1997. Mr. Krauskopf is also a member of the Board of
Directors of PC Quote, Inc.
<PAGE>
MR. SHACKLETON, age 54, has been a director of the Company since
January 1998. Mr. Shackleton has been the Chief Executive Officer of
Open Text Corporation, a provider of Internet application software,
since November 1998. Mr. Shackleton was the President of PLATINUM
Technology Solutions, a provider of software and services for
managing and improving information technology infrastructures, from
July 1996 to November1998. Mr. Shackleton was the Vice President of
Professional Services for the Central United States and South America
for Sybase, Inc., an independent software company, from October 1993
to July 1996.
Class III director (holding office for term expiring at the
Annual Meeting for Fiscal 2000):
MR. JACKMAN, age 57, has been a director of the Company since
April 1997. Mr. Jackman has been President of Tellabs Operations,
Inc., a voice and data communications equipment company, since 1992.
Mr. Jackman is also a member of the Board of Directors of Tellabs,
Inc., Advanced Fibre Communications, Inc. and Universal Electronics,
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. Brumback, Jackman, and
Shackleton. The Audit Committee met four times during Fiscal 1998.
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 basis 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. Brumback, Jackman, and Shackleton. The Compensation
Committee met once during Fiscal 1998.
The Board of Directors met four times during Fiscal 1998. 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. Brumback, Jackman, and Shackleton three of the Company's 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.
<PAGE>
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 14, 1998, the date of his
appointment to the board of directors, Mr. Shackleton was granted an
option to purchase 20,000 shares of Common Stock at an exercise price
of $5.313 per share. On February 8, 1998 the date of the last Annual
Meeting of Shareholders, each of Messrs. Jackman, Shackleton, and
Krauskopf was granted an option to purchase 5,000 shares of Common
Stock at an exercise price of $5.531 per share. On July 9, 1998, the
date of his appointment to the board of directors, Mr. Brumback was
granted an option to purchase 20,000 shares of Common Stock at an
exercise price of $11.25 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.
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 (i) the Company's Chief Executive Officer, (ii) the
four most highly compensated executive officers who were serving as
executive officers at the end of Fiscal 1998, and (iii) one other
person who served as an executive officer during Fiscal 1998, but was
not so serving at the end of Fiscal 1998 (collectively, the "Named
Executives").
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
Long-Term
Compensation
Awards (2)
Annual
Compensation(1) Restricted Securities All Other
Name and Fiscal Stock Underlying Compensatiion
Principal Position Year Salary Bonus Awards (3) Options (4)
<S> <C> <C> <C> <C> <C> <C>
Douglas P. Colbeth 1998 $ 190,000 $ 0 $ 252,650 50,000 $ 3,000
President and 1997 190,352 22,800 0 20,000 2,850
Chief Exective 1996 140,668 42,000 0 0 2,850
Officer
Christian T. Nall 1998 116,250 149,791(5) 151,590 20,000 2,000
Vice President,
Business
Development and
Sales
Randall T. 1998 140,000 68,689 101,060 20,000 2,300
Littleson 1997 140,250 16,800 0 120,000 3,108
Vice President and 1996 31,100(6) 0 0 10,000 550
General Manager
Michael F. Tyrrell 1998 150,000 0 101,060 40,000 3,000
Executive Vice 1997 176,852 55,500(5) 0 52,000 2,850
President, 1996 117,654 80,994(5) 0 20,000 3,648
Business Development
Gary L. Vilchick 1998 150,000 0 151,590 40,000 6,500
Executive Vice 1997 150,351 18,000 0 116,000 65,393
President, 1996 93,702(7) 27,750 0 100,000 1,000
Finance,
Administration
and Operations and
Chief
Financial Officer
Richard M. 1998 155,570 0 0 0 0
Houle(8) 1997 151,891(9) 33,500 0 200,000 0
Former Executive
Vice President,
Development
</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 in those instances
where 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 the fiscal year.
(1) The Company did not grant any stock appreciation rights or make
any long-term incentive plan payouts during the years ended
September 30, 1996, 1997 and 1998 ("Fiscal 1996", "Fiscal 1997"
and "Fiscal 1998", respectively).
<PAGE>
(2) As of September 30, 1998, 150,000 shares of restricted stock had
been issued to the Named Executives with a value of $1,911,000
on such date, based on the fair market value of the Company's
Common Stock on such date of $12.75 per share. These shares
generally vest in equal annual installments over four years
commencing on the one-year anniversary of the date of grant,
subject to accelerated vesting in the event certain performance
objectives of the Company are met. Dividends will be paid on
the shares of restricted stock to the extent dividends are
declared and paid on the Company's Common Stock.
(3) Represents the value of the Company's contribution to the 401(k)
accounts of the Named Executives and, with respect to Mr.
Vilchick, includes $2,300 and $60,940 in 1998 and 1997,
respectively, which represents reimbursement for moving
expenses.
(4) Represents bonus and sales commissions.
(5) Mr. Littleson joined the Company in June 1996 and thus received
compensation for only a portion of Fiscal 1996. His annual
salary as of September 30, 1996 was $100,000.
(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. Houle's employment with the Company terminated on March 2,
1998.
(8) Mr. Houle joined the Company in November 1996 and thus received
compensation for only a portion of Fiscal 1997. His annual
salary as of September 30, 1997 was $160,000.
<PAGE>
Option Grants
The following table sets forth certain information concerning
grants of stock options during Fiscal 1998 to each of the Named
Executives.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
Individual Grants
Potential
Percent of Realizable
Total Value at Assumed
Options Annual Rates
Number of Granted to Exercise of Stock Price
Shares Employees Price Appreciation for
Underlying in Per Option Term(2)
Options Fiscal Share Expiration
Name Granted Year (1) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Douglas P.
Colbeth 30,000 1.84% $4.375 12/26/07 $82,542 $209,178
20,000 1.23% 5.500 02/09/08 69,178 175,312
Christian T.
Nall 10,000 0.61% 4.375 12/26/07 27,514 69,726
10,000 0.61% 5.500 02/09/08 34,589 87,656
Randall T.
Littelson 10,000 0.61% 4.375 12/26/07 27,514 69,726
10,000 0.61% 5.500 02/09/08 34,589 87,656
Michael F.
Tyrrell 20,000 1.23% 4.375 12/26/07 55,028 139,452
20,000 1.23% 5.500 02/09/08 69,178 175,312
Gary L.
Vilchick 10,000 0.61% 4.375 12/26/07 27,514 69,726
30,000 1.84% 5.500 02/09/08 103,768 262,968
Richard M.
Houle 0 - - - - -
</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.
<PAGE>
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 1998 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, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES
<TABLE>
Number of Shares
Shares Underlying Unexercised Value of Unexercised
Acquired Value Options at In-the-Money Options at
on Realized Fiscal Year End Fiscal Year End (2)
Name Exercise (1) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Douglas P.
Colbeth 45,000 $464,952 224,200 60,800 $2,731,050 $423,250
Christian T.
Nall 0 0 38,640 53,360 223,860 344,140
Randall T. 433,330
Littleson 0 0 30,080 69,920 170,420
Michael F.
Tyrrell 37,000 370,414 48,560 53,440 442,290 391,460
Gary L.
Vilchick 2,500 14,687 46,460 87,040 272,952 577,610
Richard M.
Houle 55,600 296,169 0 0 0 0
</TABLE>
(1) Based on the fair market value of the Common Stock on the date of
the exercise less the option exercise price.
(2) Based on a value of $12.75 per share, the fair market value of
the Common Stock on September 30, 1998, less the option exercise
price.
Employment 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.
<PAGE>
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 party to senior management retention agreements
providing contingent severance payments ("Retention Agreements") with
four executive officers (including Messrs. Colbeth, Littleson,
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 following 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 the 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 if such reduction would result in a greater
after tax payment to the executive.
Report of Compensation Committee
<PAGE>
The Company's executive compensation program is administered by
the Compensation Committee of the Board of Directors (the
"Committee"), which is comprised of Messrs. Brumback, Jackman and
Shackleton, three of the Company's 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 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 Company engaged a
third party consultant to assist in the review, comparison and
evaluation of the overall compensation program including but not
limited to specific recommendations for individual executives.
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 Board of Directors 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, if any,
are also established by the Compensation Committee at the beginning
of the fiscal year. In Fiscal 1998, the Compensation Committee
decided that a cash bonus would not be paid to the CEO until such
time as the Company returned to profitability.
<PAGE>
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.
Furthermore, the 1995 Plan authorizes the Committee to grant
awards of restricted stock entitling recipients to purchase common
stock from the Company. The Committee determines the prices and
terms at which such awards are granted. As part of the Committee's
long-term compensation plan for 1998, restricted stock awards for an
aggregate of 150,000 shares of Common Stock were issued to
executives, including the CEO. Such awards generally vest over four
years in equal annual installments commencing on the one-year
anniversary of the date of grant, subject to accelerated vesting in
the even certain performance objectives of the Company are met. The
unvested portion of the common stock subject to the award is subject
to a right of repurchase in favor of the Company upon the termination
of the recipient's employment or other relationship with the Company.
Under Section 162(m) of the Internal Revenue Code of 1986, as
amended, 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 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
Charles T. Brumback
Brian J. Jackman
John Shackleton
<PAGE>
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, 1998 (the end of Fiscal 1998) 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.
[Stock Performance Graph]
<TABLE>
June 27, September September September September
1995 30, 1995 30, 1996 30, 1997 30, 1998
<S> <C> <C> <C> <C> <C>
Spyglass, Inc. $100.00 $168.66 $139.17 $ 71.89 $94.01
Nasdaq Composite
Index $100.00 $113.48 $133.42 $183.31 $184.20
Inter@ctive Week
Internet Index $100.00 $119.30 $141.45 $160.66 $208.03
</TABLE>
APPROVAL OF AMENDMENT TO 1995 STOCK INCENTIVE PLAN
On October 7, 1998, the Board of Directors adopted, subject to
stockholder approval, an 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
3,300,000 to 4,250,000, 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 1999. Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), generally disallows a
tax deduction to public companies for compensation over $1 million
paid to the corporation's chief executive officers and four other
most highly compensated executive officers. Qualifying performance-
based compensation is not subject to the deduction limit if certain
requirements are met. In particular, income recognized upon the
exercise of a stock option is not subject to the deduction limit if
the option was issued under a plan approved by stockholders that
provides a limit to the number of shares that may be issued under the
plan to any individual.
In order for options and restricted stock awarded under the 1995
Plan, as amended by the amendment, to comply with Section 162(m)
after the Annual Meeting, the continuance of the 1995 Plan must be
approved by stockholders. If the stockholders do not vote to
continue the 1995 Plan, the Company will not grant any further
options or make any further awards of restricted stock under the 1995
Plan.
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.
<PAGE>
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 27, 1995.
The 1995 Plan enables the Company to grant options (including options
intended to qualify as incentive stock options under Section 422 of
the Code) 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 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. However, under the terms of the 1995 Plan, no employee may be
granted awards or options with respect to more than 150,000 shares
during any calendar year.
Options may be granted at an exercise price which may be less
than, equal to or greater than the fair market value of the Common
Stock on the date of grant. Under present law, however, incentive
stock options and options intended to qualify as performance-based
compensation under Section 162(m) of the Code may not be granted at
an exercise price less than the fair market value of the Common Stock
on the date of grant (or less than 110% of the fair market value in
the case of incentive stock options granted to optionees holding more
than 10% of the voting power of the Company). The 1995 Plan permits
the Board to determine the manner of payment of the exercise price of
options, including through payment by cash, check or in connection
with a "cashless exercise" through a broker, by surrender to the
Company of shares of Common Stock, by delivery to the Company of a
promissory note, or by any other lawful means.
As of November 30, 1998, the Company had granted options under
the 1995 Plan to purchase an aggregate of 4,242,325 shares of Common
Stock. Of these options 552,500 were granted to the current
executive officers of the Company and none were granted to non-
employee directors of the Company. As of November 30, 1998, the
Company has granted 150,000 shares of restricted stock to current
executive officers of the Company. As of November 30, 1998 the
Company had not granted any stock appreciation rights, performance
shares, or unrestricted stock under the 1995 Plan. As of November
30, 1998 there were 126 employees and directors of and consultants to
the Company who were eligible to receive awards under the 1995 Plan.
As of November 30, 1998, 30,830 shares remained available for future
issuance under the 1995 Plan.
<PAGE>
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 terminated earlier 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
option and restricted stock awards granted under the 1995 Plan and
with respect to the sale of Common Stock acquired under the 1995
Plan.
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"). The exercise of an incentive stock option, however, may
subject the participant to the alternative minimum tax.
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 date the option was
granted (the "Grant Date") and one year from the date the option was
exercised (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 for more than the exercise
price 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 all or a portion of the gain recognized by the
participant will be ordinary compensation income and the remaining
gain, if any, will be a capital gain. 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 sale.
If a participant sells ISO Stock for less than the exercise
price, then the participant will recognize capital loss in an amount
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 sale.
Nonstatutory Stock Options. As in the case of an incentive
stock option, a participant will not recognize taxable income upon
the grant of a nonstatutory stock option. Unlike the case of an
incentive stock option, however, a participant who exercises a
nonstatutory stock option generally will recognize ordinary
compensation income in an amount equal to the excess of the fair
market value of the Common Stock acquired through the exercise of the
option ("NSO Stock") on the Exercise Date over the exercise price.
<PAGE>
With respect to any NSO Stock, a participant will have a tax
basis 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.
Restricted Stock. A participant will not recognize taxable
income upon the grant of a restricted stock Award unless the
participant makes an election under Section 83(b) of the Code (a
"Section 83(b) Election"). If the participant makes a Section 83(b)
Election within 30 days of the date of the grant, then the
participant will recognize ordinary compensation income, for the year
in which the Award is granted, in an amount equal to the difference
between the fair market value of the Common Stock at the time the
Award is granted and the purchase price paid for the Common Stock.
If a Section 83(b) Election is not made, then the participant will
recognize ordinary compensation income, at the time that the
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 tax basis in the
Common Stock acquired equal to the sum of the price paid and the
amount of ordinary compensation income recognized.
Upon the disposition of the Common Stock acquired pursuant to a
restricted stock Award, the participant will recognize a capital gain
or loss in an amount equal to the difference between the sale price
of the Common Stock and the participant's tax basis in the Common
Stock. This capital gain or loss will be a long-term capital gain or
loss if the shares are held for more than one year. For this
purpose, the holding period shall begin just after the date on which
the forfeiture provisions or restrictions lapse if a Section 83(b)
Election is not made, or just after the Award is granted if a Section
83(b) Election is made.
Tax Consequences to the Company. The grant of an Award under
the 1995 Plan will have no tax consequences to the Company.
Moreover, in general, neither the exercise of an incentive stock
option nor the sale of any Common Stock acquired under the 1995 Plan
will have any tax consequences to the Company. The Company generally
will be entitled to a business-expense deduction, however, with
respect to any ordinary compensation income recognized by a
participant under the 1995 Plan, including in connection with a
restricted stock Award or as a result of the exercise of a
nonstatutory stock option or a Disqualifying Disposition. Any such
deduction will be subject to the limitations of Section 162(m) of the
Code.
<PAGE>
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Ernst & Young
LLP as the Company's independent auditors for the current fiscal
year. Ernst & Young LLP has served as the Company's independent
auditors since July 1997. Although stockholder approval of the Board
of Directors' selection of Ernst & Young 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 Ernst & Young 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.
Previously, PricewaterhouseCoopers LLP (formerly Price
Waterhouse LLP) served as the independent auditors for the Company
(or its predecessor Illinois corporation) since 1991. The Company
dismissed PricewaterhouseCoopers LLP as its independent auditors
effective July 9, 1997. The report of PricewaterhouseCoopers LLP on
the Company's financial statements for the fiscal years ended
September 30, 1995 and 1996 did not contain an adverse opinion or a
disclaimer of opinion, nor was it qualified or modified as to
uncertainty, audit scope, or accounting principles. The decision to
dismiss PricewaterhouseCoopers LLP was recommended by management and
the Company's Audit Committee and was approved by the Board of
Directors. During the fiscal years ended September 30, 1995 and 1996
and the interim period ended July 9, 1997, there were no
disagreements with PricewaterhouseCoopers LLP on any matter of
accounting principles or practices, financial statement disclosure,
or auditing scope or procedure, which disagreement(s), if not
resolved to the satisfaction of PricewaterhouseCoopers LLP, would
have caused it to make a reference to the subject matter of the
disagreement(s) in connection with its report.
PricewaterhouseCoopers did not advise the Registrant during the
Registrant's two most recent fiscal years or during the interim
period ended July 9, 1997: (A) that the internal controls necessary
for the Registrant to develop reliable financial statements did not
exist; (B) that information had come to its attention that had led it
to no longer be able to rely on management's representations, or that
had made it unwilling to be associated with the financial statements
prepared by management; (C) of the need to expand significantly the
scope of its audit, or that information had come to its attention
during fiscal years ended September 30, 1995 and 1996 and the interim
period ended July 9, 1997 that if further investigated might (i)
materially have impacted the fairness or reliability of either: a
previously issued audit report or the underlying financial
statements, or the financial statements issued or to be issued
covering the fiscal period(s) subsequent to the date of the most
recent financial statements covered by an audit report or (ii) have
caused it to be unwilling to rely on management's representations or
be associated with the Company's financial statements; or (D) that
information had come to its attention that it had concluded
materially impacts the fairness or reliability of either: (i) a
previously issued audit report or the underlying financial
statements, or (ii) the financial statements issued or to be issued
covering the fiscal period(s) subsequent to the date of the most
recent financial statements covered by an audit report.
<PAGE>
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on its review of reports filed by "reporting
persons" of the Company under Section 16(a) of the Securities
Exchange Act of 1934, as amended ("Section 16(a)"), the Company
believes that during Fiscal 1998 all filings required to be made by
reporting persons were timely made in accordance with the
requirements of Section 16(a), except as described below.
John Shackleton, Director of the Company, filed his Initial
Statement of Beneficial Ownership of Securities on Form 3 fifteen
days after the required filing date. Douglas P. Colbeth, President
and Chief Exective Officer of the Company, Randall T. Littleson, Vice
President and General Manager of the Company, Michael F. Tyrrell,
Executive Vice President Business Development of the Company, Gary L.
Vilchick, Chief Financial Officer and Vice President Finance,
Administration and Operation of the Company and John Shackleton and
Brian J. Jackman, Directors of the Company, filed their Statements of
Changes in Beneficial Ownership on Form 4 seventeen days after the
required filing date. Timothy Krauskopf, Director of the Company,
filed his Statement of Changes in Beneficial Ownership on Form 4 two
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.
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 and Company Inc. has been
engaged by the Company to solicit proxies on behalf of the Company.
For these services, the Company will pay Georgeson and 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 submitted pursuant to Rule 14a-8 under
the Securities Exchange Act of 1934 (the "Exchange Act") to be
presented at the Annual Meeting of Stockholders for the fiscal year
ending September 30, 1999 must be received by the Company at its
principal executive offices no later than September 1, 1999 in order
to be considered for inclusion in the Company's proxy materials for
the meeting.
<PAGE>
The Company's by-laws require that the Company be given advance
written notice of stockholder nominations for election to the
Company's Board of Directors and of other matters which stockholders
wish to present for action at an annual meeting of stockholders
(other than matters included in the Company's proxy materials in
accordance with Rule 14a-8 under the Exchange Act). The Secretary
must receive such notice at the Company's principal executive offices
not less than 60 days nor more than 90 days prior to the date of the
meeting; provided, however, that if less than 70 days' notice or
prior public disclosure of the date of the meeting is given or made
to stockholders, notice by the stockholder to be timely must be
delivered or mailed to the Secretary not later than the close of
business on the tenth day following the date on which the notice of
the meeting was mailed or public disclosure was made, whichever
occurs first. The Company's by-laws also specify requirements
relating to the content of the notice which stockholders must provide
to the Secretary of the Company for any matter, including a
stockholder nomination for director, to be properly presented at a
stockholder meeting.
By Order of the Board of
Directors,
GARY L. VILCHICK
Secretary
December 30, 1998
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.
[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>
<S><C> WITH-
FOR HOLD FOR AGAINST ABSTAIN
1. Election of two 2. Amendment to the
Class I Directors, Company's 1995 Stock
Charles T. Brumback Incentive Plan and
and Douglas P. Colbeth [ ] [ ] the continuance of
the 1995 Stock
Incentive Plan, as
amended [ ] [ ] [ ]
If you do not wish 3. Ratification of
your shares to be appointment of
voted "FOR" a independent
particular nominee, accountants [ ] [ ] [ ]
mark the "FOR" box and
strike a line through
the nominee's name.
Your shares will be
voted for the Mark box at right if
remaining nominee. comments or address
Marking the "FOR" box have been noted on
without striking a the reverse side of
line through the this card. [ ]
nominee's name
indicates a vote for
both nominees.
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.
</TABLE>
---------------------------------------------------------------------
SPYGLASS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
Annual Meeting of Stockholders - FEBRUARY 9, 1999
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 9, 1999 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.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
___________________________ _________________________
___________________________ _________________________
___________________________ _________________________
APPENDIX
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.
"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 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 4,250,000 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 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.
(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
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 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 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 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 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.
(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.
(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.
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.<PAGE>
(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 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.
