PAMET SYSTEMS, INC.
1000 Main Street
Acton, Massachusetts 01720
___________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
___________________________
To Be Held July 10, 2000
The Annual Meeting of Stockholders (the "Annual Meeting") of Pamet
Systems, Inc., a Massachusetts corporation (the "Company"), will be held at
the executive offices of the Company, located at 1000 Main Street, Acton,
Massachusetts 01720 on July 10, 2000, at 10:00 a.m., local time, for the
following purposes:
1. To elect Bruce J. Rogow and Richard C. Becker to serve as
directors for a term of three years or until their respective successors are
elected and qualified;
2. To amend the Company's Restated and Amended Articles of
Organization to increase the authorized number of shares of Common Stock from
7,500,000 shares to 30,000,000 shares;
3. To approve the Company's 2000 Stock Option Plan; and
4. To transact such other business as may properly come before
the meeting or any adjournment or postponement thereof.
The foregoing items of business, including the nominees for directors,
are more fully described in the Proxy Statement which is attached to and made
a part of this Notice.
The Board of Directors has fixed the close of business on May 31, 2000 as the
record date for determining the Stockholders entitled to notice of and to vote
at the Annual Meeting and any adjournment or postponement thereof.
All Stockholders are cordially invited to attend the Annual Meeting in
person. However, whether or not you plan to attend the Annual Meeting in
person, you are urged to mark, date, sign and return the enclosed proxy card
as promptly as possible in the postage-prepaid envelope provided to ensure
your representation and the presence of a quorum at the Annual Meeting. If you
send in your proxy card and then decide to attend the Annual Meeting to vote
your shares in person, you may still do so. Your proxy is revocable in
accordance with the procedures set forth in the Proxy Statement.
The Annual Report of the Company for the fiscal year ended December
31, 1999 is also enclosed.
By order of the Board of
Directors,
/s/ Arthur V. Josephson, Jr.
Arthur V. Josephson, Jr.
Clerk of the Company
Acton, Massachusetts
June 13, 2000
PAMET SYSTEMS, INC.
1000 Main Street
Acton, Massachusetts 01720
___________________
PROXY STATEMENT
___________________
General
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors (the "Board of Directors") of Pamet Systems, Inc., a
Massachusetts corporation (the "Company"), of proxies in the enclosed form for
use in voting at the Annual Meeting of Stockholders (the "Annual Meeting"), to
be held at the executive offices of the Company, located at 1000 Main Street,
Acton, Massachusetts 01720 on July 10, 2000, at 10:00 a.m., local time, and
any adjournment or postponement thereof.
This Proxy Statement and the enclosed proxy card are being mailed to
stockholders entitled to vote at the meeting on or about June 13, 2000.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Company a
written notice of revocation or a duly executed proxy bearing a later date, or
by attending the Annual Meeting and voting in person. Written notices of
revocation and related correspondence should be delivered to: Pamet Systems,
Inc., 1000 Main Street, Acton, Massachusetts 01720, Attention: Assistant
Clerk.
Record Date; Voting Securities
The close of business on May 31, 2000 has been fixed as the record
date (the "Record Date") for determining the holders of shares of common stock,
par value $0.01 per share ("Common Stock"), of the Company entitled to notice
of and to vote at the Annual Meeting. As of the Record Date, the Company had
approximately 3,836,282 shares of Common Stock outstanding and entitled to
vote.
Voting and Solicitation
Each outstanding share of Common Stock on the Record Date is entitled
to one vote on all matters, subject to the conditions described below.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of the Company's Common Stock entitled to vote is necessary
to constitute a quorum at the Annual Meeting. Nominee directors will be
elected by a plurality of the votes cast by the holders of the Company's
Common Stock voting in person or represented by proxy at the Annual Meeting.
The proposal to amend the Company's Restated and Amended Articles of
Organization to increase the authorized number of shares of Common Stock from
7,500,000 shares to 30,000,000 shares will require the affirmative vote of a
majority of the outstanding shares of Common Stock of the Company entitled to
vote at the Annual Meeting. The proposal to approve the Company's 2000 Stock
Option Plan will require the affirmative vote of a majority of the votes
represented by the shares of Common Stock present in person or represented by
proxy at the Annual Meeting. Abstentions and broker non-votes will have the
same practical effect as a negative vote against the proposal to approve the
amendment to the Company's Restated and Amended Articles of Organization.
Abstentions and broker non-votes will have no effect on the vote for election
of directors or the outcome of the proposal to approve the Company's 2000
Stock Option Plan.
The shares represented by the proxies received, properly marked,
dated, signed and not revoked will be voted at the Annual Meeting. Where
such proxies specify a choice with respect to any matter to be acted upon,
the shares will be voted in accordance with the specifications made. Any
proxy in the enclosed form which is returned but is not marked will be voted
FOR the election of each of the two nominee directors named below, FOR the
amendment to the Company's Restated and Amended Articles of Organization, FOR
the adoption of the Company's 2000 Stock Option Plan, and as the proxy holders
deem advisable on other matters that may come before the Annual Meeting.
The expense of solicitation of proxies will be borne by the Company.
Certain of the Company's directors, officers and other employees, without
additional compensation, may also solicit proxies personally or by written
communication, telephone or other electronic means. The Company is required
to request brokers and nominees who hold stock in their name to furnish the
Company's proxy materials to beneficial owners of stock and will reimburse
such brokers and nominees for their reasonable out-of-pocket expenses in doing
so.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. Class I
directors, consisting of Richard C. Becker and Bruce J. Rogow, will be elected
at the Annual Meeting. The Class I directors are nominated for a term of three
years or until their respective successors are elected and have qualified.
Each nominee has indicated to the Company that he is willing to serve as a
director of the Company if elected, and the Board of Directors has no reason
to believe that any of the nominees will become unable or unwilling to serve.
If, for any reason, at the time of the election any of the nominees should be
unable or unwilling to accept election, it is intended that such proxy will be
voted for the election, in such nominee's place, of a substitute nominee
recommended by the Board of Directors. However, the Board of Directors has no
reason to believe that any nominee will be unable or unwilling to serve as a
director.
Set forth below is certain information with respect to each nominee
for Class I Director to be elected at the Annual Meeting and for each Class II
Director and Class III Director.
Class I Directors Nominated for Election
Name Age Position with the Company
Bruce J. Rogow 54 Chairman of the Board of Directors
Richard C. Becker 54 Vice President - Finance and
Administration, Assistant Clerk,
Treasurer and Director
Bruce J. Rogow has been Chairman of the Board of the Company since
June 1999, and has served as a Gartner Group Fellow since 1992 at Gartner
Group, a computer consulting firm, and executive managing principal of Rogow
Opportunity Capital, a private investment firm, since 1997.
Richard C. Becker has been the Company's Vice President - Finance and
Administration since June 1997, Assistant Clerk since February 1991 and
Treasurer since May 1991. Mr. Becker was Vice President and Chief Operating
Officer of the Company from June 1993 through May 1997 and Vice President of
Finance and Administration of the Company from January 1991 through June 1993.
Class II Directors with terms expiring in 2001
Name Age Position with the Company
Dr. Stanley J. Robboy 58 Director
David T. McKay 57 President, Chief Executive Officer
and Director
Dr. Stanley J. Robboy has been Vice Chairman of the Department of
Pathology at Duke University Medical Center since January 1998 which is in
addition to the positions of Professor of Pathology, Obstetrics and Gynecology
and Head of the Division of Gynecologic Pathology of the Department of
Pathology at Duke University Medical Center, which he has held since April
1993.
David T. McKay has been President and Chief Executive Officer of the
Company since June 1997. From 1996 to 1997, Mr. McKay served as the Global
Systems Manager for Mobil Oil, an oil production company. From 1994 to 1996,
Mr. McKay was the Vice President of Information Systems at Moore Corporation,
a business forms company. From 1992 to 1994, Mr. McKay was a Vice President of
Gartner Group, a computer consulting firm.
Class III Directors with terms expiring in 2002
Name Age Position with the Company
Dr. Joel Searcy 64 Director
Dr. Davinder Sethi 65 Director
Dr. Joel B. Searcy served as Chairman of the Board of Directors of the
Company from the Company's inception in 1987 until June 1999, President and
Chief Executive Officer until June 1997, Treasurer until May 1991 and Clerk
until September 1990.
Dr. Davinder Sethi has been an independent advisor since 1996 and
served as a Senior Advisor to Barclays de Zoete Wedd, an investment banking
firm, from 1990 until 1996.
Meetings and Committees of the Board of Directors
During the 1999 fiscal year, the Board of Directors met or took action
by unanimous written consent on fourteen occasions, and no director then in
office attended fewer than 75% of the aggregate number of meetings of the
Board of Directors and meetings of the committees of the Board of Directors on
which he served. The Board of Directors has an Audit Committee and a
Compensation Committee. There is no standing nominating committee.
The Audit Committee consists of Bruce J. Rogow, Stanley J. Robboy and
Davinder Sethi, and met one time during the 1999 fiscal year. The Audit
Committee acts as a liaison between the Company and its independent auditors
and reports on matters pertaining to the Company's independent audit and
accounting policies.
The Compensation Committee consists of Arthur Josephson, Jr., Bruce J.
Rogow, Stanley Robboy, and Davinder Sethi, and met two times during the 1999
fiscal year. The Compensation Committee was formed to make recommendations to
the Board of Directors with respect to the compensation of the officers of the
Company and to administer the Company's employee benefit plans.
Director Compensation
Directors who are not officers of the Company who were nominated and
elected prior to November 1998 are entitled to receive an annual stipend of
$1,000 for serving on the Board of Directors and its committees and
reimbursement for out-of-pocket expenses in connection with their attendance
at directors' meetings. Additionally, under the 1990 Stock Option Plan each
non-employee director who was a director of the Company on the last day of a
calendar year or has ceased to be a director during the calendar year due to
his or her death or attainment of an age greater than 65 was automatically
granted a non-qualified stock option to purchase 2,000 shares of Common Stock
on January 1 of the succeeding calendar year at the fair market value per
share on the date of grant.
In November 1998, the Company implemented a new compensation program
for non-employee Directors. Under the new system Directors who are not
officers of the Company who were nominated and elected after November 1998
will be granted a non-qualified stock option to purchase 45,000 shares of
Common Stock. The vesting of the grant is over three years. In addition
these Directors are entitled to receive an annual stipend of $6,000 for
serving on the Board and its committees and reimbursement for out of pocket
expenses in connection with their attendance at directors meetings. It is
expected that Directors will be able to elect to receive their annual cash
stipend in the form of the Company's Common Stock.
In April 2000, the Company adopted the 2000 Non-Employee Directors'
Stock Option Plan (the "Plan"). Under the Plan, upon each election to the
Board by the stockholders (generally every three years) by the stockholders,
each non-employee director who is not a beneficial owner (as defined pursuant
to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), of more than 3% of the outstanding shares will be granted a
non-qualified stock option to purchase 45,000 shares of Common Stock. Newly
nominated non-employee directors who do not own more than 3% of the
outstanding shares and who have not yet been elected by the stockholders will
be granted a non-qualified stock option to purchase 15,000 shares of Common
Stock upon each annual meeting until first elected by the stockholders as
provided above. If the non-employee director is the beneficial owner of more
than 3% of the outstanding shares, upon election to the Board by the
stockholders, each such non-employee director will be granted a non-qualified
stock option to purchase 24,000 shares of Common Stock. Newly nominated
non-employee directors who own more than 3% of the outstanding shares and who
have not yet been elected by the stockholders will be granted a non-qualified
stock option to purchase 8,000 shares of Common Stock upon each annual meeting
until elected by the stockholders as provided above. The vesting of each grant
is three years. In addition, non-employee directors are entitled to receive
an annual stipend of $6,000 for serving on the Board and its committees and
reimbursement for out of pocket expenses in connection with their attendance
at meetings.
EXECUTIVE OFFICER COMPENSATION AND OTHER MATTERS
Summary Compensation Table
The following table summarizes the compensation earned by the
individual who served as the Company's Chief Executive Officer during the
fiscal year ended December 31, 1999 (the "Named Executive"):
Name and Principal Position Year Salary Bonus Long Term
$ $ Compensation
Securities Underlying
Options
David T. McKay 1999 160,000 20,000 76,000
President and Chief Executive Officer
1998 160,000 9,334 50,000
1997 *93,334 - - 150,000
* Represents salary from June 1, 1997 the date on which Mr. McKay commenced
employment.
Options Grants and Exercises
The following table provides certain information relating to stock
options granted to the Named Executive during the fiscal year ended December
31, 1999. In addition, as required by the Securities and Exchange
Commission's rules, the table sets forth the hypothetical gains that would
exist for the shares subject to such options based on assumed annual
compounded rates of stock price appreciation during the option term.
Name Number of % of Total Exercise Expiration Potential
Securities Options Price Date Realized Value at
Underlying Granted to ($/sh) Assumed Annual
Options Employees Rates of Stock
Granted (#) in Fiscal Price Appreciation
year (%) for Option Term
5% 10%
David T. McKay 76,500 36.0 2.50 07/13/09 $120,277 $304,795
(1) Potential realizable values are based on the fair market value per share
as determined by the Company on the date of the grant and represent
hypothetical gains that could be achieved for the respective options if
exercised at the end of the option term. The dollar amounts set forth in these
columns are the results of calculations at the five percent and ten percent
rates set by the Securities and Exchange Commission, and are not intended to
forecast future appreciation, if any, of the Company's Common Stock price.
There can be no assurance that such potential realizable values will not be
more or less than that indicated in the table above.
There were no stock options exercised by the Named Executive during
the 1999 fiscal year.
Employment Agreements with Executive Officers
The Company entered into an Employment Agreement, dated September
1997, employing David T. McKay as President and Chief Executive Officer of the
Company for a two year term. The employment agreement automatically extends
for an additional period of two years provided that neither party gives the
other notice of its intent not to renew at least 90 days prior to the
expiration date of the initial term or any extensions thereof. Mr. McKay is
entitled to receive a base salary of $160,000 per annum, bonus compensation,
including grants of stock options or other equity of the Company, at the
discretion of the Board of Directors of the Company, and certain other fringe
benefits during the term of the agreement. Mr. McKay was also granted
fully-vested options to purchase 50,000 shares of the common stock and an
additional grant of options to purchase 100,000 share of the common stock of
the Company which will vest at the rate of 25% per year. If Mr. McKay's
employment is terminated as the result of constructive termination (as defined
in the employment agreement) or by the Company without cause (as defined in
the employment agreement), in addition to compensation and benefits accrued
through the date of such termination, he will only been entitled to receive
his base salary and all fringe benefits and additional bonus amounts for an
additional (a) three months period or (b) six month period, respectively. Mr.
McKay's employment agreement also includes non-competition, confidentiality
and indemnification provisions. On February 25, 2000 the Company received
from Mr. McKay a notice of non-renewal of the Employment Agreement. The terms
for a new agreement have subsequently been finalized.
INFORMATION REGARDING BENEFICIAL OWNERSHIP OF
PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information with respect to
beneficial ownership of shares of the Company's Common Stock as of June 1,
2000 by (i) each person known by us to be the beneficial owner of more than 5%
of the outstanding shares of Common Stock, (ii) each of the directors of the
Company, (iii) the Named Executive and (iv) all directors and executive
officers of the Company as a group. Unless otherwise noted, the Company
believes that all persons named in the table have sole voting and investment
power with respect to all shares of voting stock beneficially owned by them.
Name of Person Amount and Nature of Approximate Percentage of
Identity of Group Beneficial Ownership Common Stock Outstnading
Bruce J. Rogow 869,147(1) 21.5%
David T. McKay 218,000(2) 5.4%
Dr. Joel B. Searcy 319,027(3) 8.2%
Richard C. Becker 119,625(4) 3.0%
Dr. Stanley J. Robboy 448,137(5) 11.2%
Dr. Davinder Sethi 33,208(6) **
BSI SA 783,334(7) 17.9%
William J. Bell 1993 Trust 544,826(8) 13.3%
Leonardo Capital Fund 200,000(9) 5.1%
Limited Hemisphere
Management (Ireland)
Limited
West Country Partners 337,500(10) 8.5%
All directors and 2,007,144(11) 43.9%
executive officers as
a group (7 people)
** Represents less than 1% percent of the outstanding number of shares of
Common Stock.
(1) As reported on an Amendment No. 3 to the Schedule 13D filed
with the Securities and Exchange Commission on January 6, 1999, filed by Bruce
J. Rogow and Winnie R. Rogow relating to the beneficial ownership of (i) 5,000
shares of Common Stock held by Mr. Rogow's 401(k) account, (ii) 20,000 shares
held by Mr. Rogow's retirement money purchase account, (iii) 62,000 shares of
Common Stock held jointly, (iv) 15,000 shares held by Mrs. Rogow as custodian
for Mr. and Mrs. Rogow's minor child, (v) 531,897 shares of Common Stock held
by Rogow Opportunity Capital, LLC, a Massachusetts limited liability company
("Rogow Opportunity") of which Mr. and Mrs. Rogow are the sole members, (vi)
warrants held by Rogow Opportunity exercisable at any time or from time to
time prior to March 2, 2003, to purchase up to 31,250 shares of Common Stock
at an exercise price of $4.25 per share, (vii) warrants exercisable at any
time or from time to time prior to November 5, 2003, to purchase 120,000
shares of Common Stock at an exercise price of $2.50 per share, (viii)
warrants exercisable at any time or from time to time prior to July 13, 2009,
to purchase 68,000 shares of Common Stock at an exercise price of $2.50 per
share, and (ix) warrants exercisable at any time or from time to time prior to
September 28, 2009, to purchase 10,000 shares of Common Stock at an exercise
price of $3.19 per share, (xi) 6,000 shares issuable upon the exercise of 3
grants of currently exercisable director options at prices ranging $1.56 to
$4.00.
(2) Includes 214,000 shares issuable upon the exercise of currently
exercisable options.
(3) Includes 33,750 shares issuable upon the exercise of currently
exercisable options.
(4) Includes 119,500 shares issuable upon the exercise of currently
exercisable options.
(5) As reported on the Schedule 13G filed with the Securities and
Exchange Commission on February 15, 2000, filed by Stanley J. Robboy, and
updated based on the Company's records relating to the beneficial ownership of
(i) 307,591 shares of Common Stock held by Mr. Robboy and (ii) 136,500 shares
issuable upon the exercise of currently exercisable options.
(6) Includes 30,000 share issuable upon the exercise of currently
exercisable options.
(7) Includes, based solely on the Company's records, 150,000 shares of
Common Stock issuable upon conversion of a $375,000 note convertible until
May 14, 2001 at a conversion price of $2.50 per share, 150,000 shares
issuable upon the exercise of warrants exercisable at any time from time to
time prior to May 15, 2004 at an exercise price of $2.50 per share, 175,000
shares issuable upon the exercise of warrants exercisable at any time or from
time to time prior to December 3, 2004 at an exercise price of $2.50 per
share, and 66,667 shares issuable upon the exercise of warrants exercisable at
any time or from time to time prior to April 11, 2005 at an exercise price of
$3.50 per share.
(8) Includes, based solely on the Company's records, 172,413 shares issuable
upon the exercise of warrants exercisable at any time from time to time prior
to November 12, 2003 at an exercise price of $1.45 per share, and 100,000
shares issuable upon the exercise of warrants exercisable at any time or from
time to time prior to February 4, 2004 at an exercise price of $2.50 per share.
(9) Includes, based solely on the Company's records, 100,000 shares issuable
upon the exercise of warrants exercisable at any time or from time to time
prior to December 12, 2004 at an exercise price of $2.50 per share.
(10) Includes, based solely on the Company's records, 29,500 shares of Common
Stock held by James Schmitt, the General Partner of West Country Partners;
80,000 shares held by West Country Partners; 14,000 shares of Common Stock
issuable upon conversion of a $35,000 note convertible until May 15, 2001 at
a conversion price of $2.50 per share, 14,000 shares issuable upon the
exercise of warrants exercisable at any time or from time to time prior to
May 15, 2004 at an exercise price of $2.50 per share, 50,000 shares issuable
upon the exercise of warrants exercisable at any time or from time to time
prior to November 18, 2004 at an exercise price of $2.50 per share, and 50,000
shares issuable upon the exercise of warrants exercisable at any time or from
time to time prior to March 29, 2005 at an exercise price of $3.50 per share.
(11) Includes 737,796 shares issuable upon the exercise of currently
exercisable options held by all directors and executive officers of the Company
as a group.
PROPOSAL NO. 2
AMENDMENT TO THE COMPANY'S
RESTATED AND AMENDED ARTICLES OF ORGANIZATION
The Company's Restated and Amended Articles of Organization authorize
the issuance of 7,500,000 shares of Common Stock. The Board of Directors has
proposed an amendment to the Restated and Amended Articles of Organization to
increase the authorized number of shares of Common Stock from 7,500,000 shares
to 30,000,000 shares. The Restated and Amended Articles of Organization will
remain the same in all other respects. The stockholders are being asked to
approve the amendment in accordance with Massachusetts law.
On June 1, 2000, there were approximately 3,836,282 shares of Common
Stock issued and outstanding. This number does not include 2,797,533 shares
reserved for issuance under outstanding conversion rights, options and
warrants to purchase shares of Common Stock.
The purpose of the amendment is to allow the Company to have a
sufficient number of shares of authorized and unissued Common Stock which can
be issued in connection with such corporate purposes as may, from time to
time, be considered advisable by the Board of Directors. Such corporate
purposes include raising capital in order to have necessary capital resources
to grow the business, having shares (pursuant to options or other equity
incentives) available for employees and prospective employees and for
acquisitions or other business combinations or collaborations. Having such
shares available for issuance in the future will give the Company greater
flexibility and will allow such shares to be issued as determined by the Board
of Directors without the expense and delay of a special stockholders' meeting
to approve such additional authorized capital stock.
Required Vote
Approval of the amendment to the Company's Restated and Amended Articles of
Organization requires the affirmative vote of a majority of the outstanding
shares of Common Stock of the Company entitled to vote at the Annual Meeting.
Recommendation of the Board
The Board of Directors recommends a vote FOR approval of the amendment
to the Company's Restated and Amended Articles of Organization to increase the
authorized number of shares of Common Stock from 7,500,000 shares to
30,000,000 shares.
PROPOSAL NO. 3
ADOPTION OF THE COMPANY'S 2000 STOCK OPTION PLAN
On April 10, 2000, the Board of Directors approved, subject to
stockholder approval, a new stock-based, long-term incentive plan entitled the
"2000 Stock Option Plan of Pamet Systems, Inc." for officers, key employees
and consultants of the Company. The 2000 Stock Option Plan is effective,
subject to stockholder approval, as of April 10, 2000.
The Board of Directors and the Compensation Committee believe that the
2000 Stock Option Plan will assist the Company in attracting, retaining and
rewarding officers, key employees and consultants, will enable such employees
to acquire or increase a proprietary interest in the Company in order to
promote a closer identity of interests between such employees and the
Company's stockholders and will provide to such employees an increased
incentive to expend their maximum efforts for the success of the Company's
businesses. In addition, the 2000 Stock Option Plan is intended to permit the
maximum flexibility in granting or changing incentives so as to be flexible in
responding to changes both in the Company and its businesses, as well as to
permit the adoption of innovative compensation arrangements.
A summary of the principal provisions of the 2000 Stock Option Plan is
set forth below. This summary is qualified in its entirety by reference to the
full text of the 2000 Stock Option Plan, which is attached as Annex A to this
Proxy Statement. Capitalized terms used herein will, unless otherwise defined,
have the meanings assigned to them in the text of the 2000 Stock Option Plan.
Administration of the 2000 Stock Option Plan
The 2000 Stock Option Plan will be administered by the Compensation
Committee of the Board of Directors. No member of the Compensation Committee
while serving as such shall be eligible for participation in the 2000 Stock
Option Plan. The Compensation Committee is authorized, among other things, to
construe, interpret and implement the provisions of the 2000 Stock Option
Plan, to select the officers and key employees to whom Options will be
granted, to determine the number of shares of Common Stock for which an Option
will be granted, the terms and conditions of any Options and to make all other
determinations deemed necessary or advisable for the administration of the
2000 Stock Option Plan.
Participation in the Plan
Persons eligible to participate in the 2000 Stock Option Plan include
all officers and key employees of the Company and its subsidiaries, as
determined by the Compensation Committee; provided, however, only employees
are eligible to receive incentive stock options ("ISOs").
Shares Available
The aggregate number of shares of Common Stock available for issuance
under the 2000 Stock Option Plan will be 1,300,000 and the maximum number of
shares of Common Stock which may be granted to any one person in any one
calendar year shall not exceed 500,000, subject in each case to adjustment as
described below. On June 1, 2000, the closing price of the Common Stock on The
Nasdaq Stock Market over-the-counter exchange was $2.38 per share.
No Option may be granted if the number of shares to which such Option
relates, when added to the number of shares previously issued under the 2000
Stock Option Plan and the number of shares which may then be acquired pursuant
to other outstanding, unexercised Options, exceeds the number of shares
available for issuance pursuant to the 2000 Stock Option Plan. If any shares
subject to an Option are forfeited or such Option is settled in cash or
otherwise terminates for any reason whatsoever without an actual distribution
of shares to the Participant, any shares counted against the number of shares
available for issuance pursuant to the 2000 Stock Option Plan with respect to
such Option shall, to the extent of any such forfeiture, settlement, or
termination, again be available for Options under the 2000 Stock Option Plan;
provided, however, that the Committee may adopt procedures for the counting of
shares relating to any Option to ensure appropriate counting, avoid double
counting, and provide for adjustments in any case in which the number of
shares actually distributed differs from the number of shares previously
counted in connection with such Option.
Awards
The 2000 Stock Option Plan is designed to give the Compensation
Committee the maximum flexibility in providing incentive compensation to
officers and key employees. The 2000 Stock Option Plan provides for the grant
of incentive stock options and non-qualified stock options. Since the
Compensation Committee may, in its discretion, grant a combination of an
option and other stock-based awards, it is possible that one or more
restrictions or requirements in the 2000 Stock Option Plan applicable to any
individual type of award, including the requirements that options be granted
at Fair Market Value, can, in effect, be avoided.
Stock Options
The Compensation Committee is authorized to grant stock options,
including both ISOs, which can result in potentially favorable tax treatment
to the participant, and nonqualified stock options. The exercise price per
share of Common Stock subject to an option is determined by the Compensation
Committee, provided that the exercise price may not be less than the Fair
Market Value of the Common Stock on the date of grant. However, the 2000
Stock Option Plan also allows the Compensation Committee to grant an option
allowing the purchase of Common Stock at an exercise price or grant price less
than Fair Market Value when it is granted in substitution for some other award
or retroactively in connection with an outstanding award. In those cases, the
exercise or grant price may be the Fair Market Value at that date, at the date
of the earlier award or at that date reduced by the Fair Market Value of the
award required to be surrendered as a condition to the receipt of the
substitute award. The terms of the option, the times at which the option will
be exercisable, and provisions requiring forfeiture of unexercised options at
or following termination of employment will be fixed by the Compensation
Committee, except that no ISO granted in connection therewith will have a term
exceeding ten years. The Committee shall determine the time or times at which
an Option may be exercised in whole or in part, whether the exercise price
shall be paid in cash or by the surrender at Fair Market Value of Common
Stock, or by any combination of cash and shares of Common Stock, including,
without limitation, cash, Common Stock, other Options, or other property
(including notes or other contractual obligations of Participants to make
payment on a deferred basis, such as through "cashless exercise" arrangements,
to the extent permitted by applicable law), and the methods by which Common
Stock will be delivered or deemed to be delivered to Participants.
Other Terms of Awards
The Compensation Committee may impose on any Option or the exercise
thereof, at the date of grant or thereafter (subject to adjustment), such
additional terms and conditions, not inconsistent with the provisions of the
2000 Stock Option Plan, as the Compensation Committee shall determine,
including terms requiring forfeiture of Options in the event of termination of
employment by the Participant; provided, however, that the Compensation
Committee shall retain full power to accelerate or waive any such additional
term or condition as it may have previously imposed. All Options shall be
evidenced by an Option Agreement.
Options granted under the 2000 Stock Option Plan may, in the
discretion of the Compensation Committee, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Option granted
under the 2000 Stock Option Plan or any option or other incentive granted
under any other plan of the Company or any Subsidiary, or any business entity
acquired by the Company or any Subsidiary, or any other right of a Participant
to receive payment from the Company or any Subsidiary. If an Option is granted
in substitution for another Option, the Committee shall require the surrender
of such other Option in consideration for the grant of the new Option. Options
granted in addition to, or in tandem with, other Options may be granted either
as of the same time as, or a different time from, the grant of such other
Options.
Adjustments
In the event that the Compensation Committee shall determine that any
stock dividend, recapitalization, forward split or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase or
share exchange, or other similar corporate transaction or event, affects the
Common Stock such that an adjustment is appropriate in order to prevent
dilution or enlargement of the rights of Participants under the 2000 Stock
Option Plan, then the Compensation Committee shall, in such manner as it may
deem equitable, adjust any or all of (i) the number and kind of shares of
Common Stock which may thereafter be issued in connection with Options, (ii)
the number and kind of shares of Common Stock issuable in respect of
outstanding Options, (iii) the aggregate number and kind of shares of Common
Stock available under the 2000 Stock Option Plan, and (iv) the exercise price
relating to any Option or, if deemed appropriate, make provision for a cash
payment with respect to any outstanding Option; provided, however, in each
case, that no adjustment shall be made which would cause the 2000 Stock Option
Plan to violate Section 422(b)(1) of the Code with respect to ISOs or would
adversely affect the status of any Option as "performance-based compensation"
under Section 162(m) of the Code.
Change of Control
In the event of a Change of Control of the Company, all Options
granted under the 2000 Stock Option Plan that are still outstanding and not
yet vested or exercisable shall become immediately 100% vested in each
Participant, as of the first date that the definition of Change of Control has
been fulfilled, and shall be exercisable for the remaining duration of the
Option. All Options that are exercisable as of the effective date of the
Change of Control will remain exercisable for the remaining duration of the
Option.
Under the 2000 Stock Option Plan, a change of control occurs upon any
of the following events: (i) any "person" (as such term is defined within the
meaning of Section 13(d)(3) of the Exchange Act), other than any person who as
of the date hereof beneficially owns (as defined in Rule 13d-3 of the Exchange
Act) directly or indirectly 10% or more of the Company's outstanding Common
Stock or as of the date hereof is on, or has designated a member of, the Board
of Directors, becomes a beneficial owner directly or indirectly of securities
of the Company representing in excess of fifty percent (50%) of the Company's
then outstanding securities having the right to vote for the election of
directors, (ii) the Company shall have consummated the sale of all or
substantially all of the assets of the Company, (iii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation (or other entity), other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than
fifty percent (50%) of the voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such merger or
consolidation; (iv) the stockholders of the Company approve a plan of complete
liquidation of the Company; or (v) the following individuals cease for any
reason to constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board of Directors and any
new director (other than a director whose initial assumption of office is in
connection with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board of Directors or
nomination for election by the Company's stockholders was approved or
recommended by a vote of at least a majority of the directors then still in
office who either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved or recommended.
Amendment and Termination
The Board of Directors may amend, alter, suspend, discontinue, or
terminate the 2000 Stock Option Plan or the Compensation Committee's authority
to grant awards thereunder without further stockholder approval or the consent
of the participants, except stockholder approval must be obtained within one
year after the effectiveness of such action if required by law or regulation
or under the rules of the securities exchange on which the Common Stock is
then quoted or listed or as otherwise required by Rule 16b-3 under the
Exchange Act. Notwithstanding the foregoing, unless approved by the
stockholders, no amendment will: (i) change the class of persons eligible to
receive Options; (ii) materially increase the benefits accruing to
participants under the 2000 Stock Option Plan; or (iii) increase the number of
shares of Common Stock subject to the 2000 Stock Option Plan.
Certain Federal Income Tax Consequences
The following discussion is a brief summary of the principal United
States Federal income tax consequences under current federal income tax laws
relating to awards under the 2000 Stock Option Plan. This summary is not
intended to be exhaustive and, among other things, does not describe state,
local or foreign income and other tax consequences.
A participant will not realize any income upon the award of an option
nor will the Company be entitled to any tax deduction upon the grant of an
option under the 2000 Stock Option Plan.
When a participant who has been granted an option which is not an ISO
exercises that option and receives Common Stock which is either "transferable"
or not subject to a "substantial risk of forfeiture," within the meaning of
Section 83(c) of the Code, the participant will realize compensation income
subject to withholding taxes. The amount of that compensation income will
equal the excess of the Fair Market Value of the Common Stock (without regard
to any restrictions) on the date of exercise of the Option over its exercise
price, and the Company will generally be entitled to a tax deduction in the
same amount and at the same time as the compensation income is realized by the
participant. The participant's tax basis for the Common Stock so acquired will
equal the sum of the compensation income realized and the exercise price. Upon
any subsequent sale or exchange of the Common Stock, the gain or loss will
generally be taxed as a capital gain or loss and will be a long-term capital
gain or loss if the Common Stock has been held for more than one year after
the date of exercise.
If a participant exercises an option which is an ISO and the
participant has been an employee of the Company or its subsidiaries throughout
the period from the date of grant of the ISO until three months prior to its
exercise, the participant will not realize any income upon the exercise of the
ISO (although alternative minimum tax liability may result), and the Company
will not be entitled to any tax deduction. If the participant sells or
exchanges any of the shares acquired upon the exercise of the ISO more than
one year after the transfer of the shares to the participant and more than two
years after the date of grant of the ISO, any gain or loss (based upon the
difference between the amount realized and the exercise price of the ISO) will
be treated as long-term capital gain or loss to the participant. If such sale,
exchange or other disposition takes place within two years of the grant of the
ISO or within one year of the transfer of shares to the participant, the sale,
exchange or other disposition will generally constitute a "disqualifying
disposition" of such shares. As a result, to the extent that the gain realized
on the disqualifying disposition does not exceed the difference between the
Fair Market Value of the shares at the time of exercise of the ISO over the
exercise price, such amount will be treated as compensation income in the year
of the disqualifying disposition, and the Company will be entitled to a
deduction, subject to the Company satisfying its reporting obligations, in the
same amount and at the same time as the compensation income is realized by the
participant. The balance of the gain, if any, will be treated as capital gain
and will not result in any deduction by the Company.
The Compensation Committee may condition the payment, exercise or
vesting of any award on the payment of the withholding taxes and may provide
that a portion of the Common Stock or other property to be distributed will be
withheld (or previously acquired stock or other property surrendered by the
participant) to satisfy such withholding and other tax obligations.
Finally, amounts paid pursuant to an award which vests or becomes
exercisable, or with respect to which restrictions lapse, upon a change in
control may constitute a "parachute payment" under Section 280G of the Code.
To the extent any such payment constitutes an "excess parachute payment," the
Company would not be entitled to deduct such payment and the participant would
be subject to a 20 percent excise tax (in addition to regular income tax).
Section 162(m) Provisions
The 2000 Stock Option Plan was designed to permit the deduction by the
Company of the compensation realized by certain officers in respect of
long-term incentive compensation granted under the 2000 Stock Option Plan
which is intended by the Compensation Committee to qualify as "performance-
based compensation" under Section 162(m) of the Code. Section 162(m) of the
Code generally disallows a deduction to the Company for compensation paid in
any year in excess of $1 million to the Covered Employees. Certain
compensation, including compensation that meets the specified requirements for
"performance-based compensation," is not subject to this deduction limit.
Among the requirements for compensation to qualify as "performance-based
compensation" is that the material terms pursuant to which the compensation is
to be paid be disclosed to, and approved by, the stockholders of the Company
in a separate vote prior to the payment. The 2000 Stock Option Plan satisfies
the requirements under Section 162(m) of the Code so that the compensation
derived from options which are not ISOs and which are granted with an exercise
price equal to the Fair Market Value of the Company's Common Stock on the date
of the grant will not be subject to the deduction limit of Section 162(m) of
the Code.
Required Vote
Approval of the Company's 2000 Stock Option Plan requires the affirmative vote
of a majority of the votes represented by the shares of Common Stock present
in person or by represented by proxy at the Annual Meeting.
Recommendation of the Board
The Board of Directors recommends a vote FOR the adoption of the
Company's 2000 Stock Option Plan.
CERTAIN TRANSACTIONS
On November 13, 1998, the Company entered into an agreement with the
William James Bell 1993 Trust. The Bell Trust loaned the Company $250,000 and
was given a convertible promissory note. The note is convertible until
November 12, 2000 into 172,413 shares of Common Stock at a price of $1.45 per
share. In connection with the note the Bell Trust was granted a five year
warrant to purchase 172,413 shares of Common Stock at a price of $1.45 per
share.
On February 8, 1999, the Bell Trust loaned the Company an additional
$250,000 and was given a convertible promissory note. The note is convertible
until February 7, 2001 into 100,000 shares of Common Stock at a price of $2.50
per share. In connection with the note the Bell Trust was granted a five year
warrant to purchase 100,000 shares of Common Stock at a price of $2.50 per
share. On April 4, 2000 the Bell Trust converted both notes to 272,413 shares
of Common Stock.
On April 14, 1999, Dr. Stanley J. Robboy and Mr. Bruce Rogow converted
their $300,000 promissory notes into 109,090 and 206,896 shares of Common
Stock respectively. In addition Mr. Rogow, Dr. Robboy, Richard C. Becker and
Dr. Joel B. Searcy agreed to provide a credit facility for up to $300,000.
Interest on these loans would be paid at 11% per annum. Warrants were awarded
to the lenders if the notes are utilized for the balance of the note
outstanding, for each six month period, at a rate of 1,000 warrants per
$10,000 utilized, at the fair market value of the Company's shares on that
date. On April 12, 2000 the credit line was increased to $425,000 and the
maturity date was extended to June 1, 2001. At that time the warrant
compensation was changed to be 1,250 warrants per $10,000 committed for the
remaining fourteen month period, the warrant price was set at $3.00 per share.
On May 14, 1999, the Company entered into an agreement with BSI SA, a
financial institution in Lugano Switzerland. BSI SA loaned the Company
$375,000 and was given a convertible promissory note. The note is convertible
until May 13, 2001 into 150,000 shares of Common Stock at a price of $2.50 per
share. In connection with the note, BSI SA was granted a five year warrant to
purchase 150,000 shares of Common Stock at a price of $2.50 per share. On
December 3, 1999 the Company issued 175,000 shares to BSI SA for an aggregate
purchase price of $350,000 based on a purchase price of $2.00 per share. In
connection with this agreement BSI SA was granted a five year warrant to
purchase 175,000 shares of Common Stock at a price of $2.50 per share. . In
addition, on April 11, 2000 the Company issued 66,667 shares to BSI SA for an
aggregate purchase price of $200,000 based on a purchase price of $3.00 per
share. In connection with this agreement BSI SA was granted a five year
warrant to purchase 66,667 shares of Common Stock at a price of $3.50 per
share.
On May 16, 1999, the Company entered into an agreement with West
Country Partners, a California Limited Partnership of which James S. Schmitt
is the General Partner. West Country Partners loaned the Company $35,000 and
was given a convertible promissory note. The note is convertible until May 15,
2001 into 14,000 shares of Common Stock at a price of $2.50 per share. In
connection with the note, West Country Partners was granted a five year
warrant to purchase 14,000 shares of Common Stock at a price of $2.50 per
share. On November 18, 1999 the Company issued 50,000 shares to West Country
Partners for an aggregate purchase price of $100,000 based on a purchase price
of $2.00 per share. In connection with this agreement West Country Partners
was granted a five year warrant to purchase 50,000 shares of Common Stock at a
price of $2.50 per share. In addition, on March 29, 2000 the Company issued
50,000 shares to West Country Partners for an aggregate purchase price of
$150,000 based on a purchase price of $3.00 per share. In connection with this
agreement West Country Partners was granted a five year warrant to purchase
50,000 shares of Common Stock at a price of $3.50 per share.
On December 14, 1999, the Company issued 100,000 shares to the
Leonardo Capital Fund in Dublin Ireland for an aggregate purchase price of
$200,000 based on a purchase price of $2.00 per share. In connection with this
agreement Leonardo Capital Fund was granted a five year warrant to purchase
100,000 shares of Common Stock at a price of $2.50 per share.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's executive officers, directors and persons who own more
than 10% of the Company's Common Stock (collectively, "Reporting Persons") are
required under the Securities Exchange Act of 1934, as amended, to file
reports of ownership and changes in ownership of the Company's Common Stock
with the Commission. The Commission's regulations require that copies of
those reports be furnished to the Company. Based solely on the Company's
review of the copies of such reports it has received from its Reporting
Persons, the Company believes that during the fiscal year ended December 31,
1999 all Reporting Persons complied with all applicable filing requirements
except: Arthur V. Josephson, Jr., Davinder Sethi and David T. McKay were each
late in filing one Form 4 (each such filing related to one transaction); Bruce
J. Rogow was late in filing two Form 4s (each such filing related to one
transaction); Richard C. Becker was late in filing three Form 4s (each such
filing related to one transaction); and Stanley J. Robboy and Joel B. Searcy
were each late in filing four Form 4s (each such filing related to one
transaction) .
RELATIONSHIP WITH INDEPENDENT AUDITORS
Representatives of Carlin Charron & Rosen LLP, the Company's auditors,
are expected to be present at the meeting. The representatives will have the
opportunity to make a statement and respond to appropriate questions from
stockholders.
ANNUAL REPORTS AND FINANCIAL STATEMENTS
The Company's Annual Report to Stockholders for the year ended December 31,
1999 is being furnished herewith. The Annual Report to Stockholders for the
year ended December 31, 1999 is not to be considered a part of this Proxy
Statement.
The Company will also furnish to any stockholder of the Company a copy
of the Annual Report on Form 10-KSB for the year ended December 31, 1999 and
any exhibit listed thereon, upon request and upon payment of the Company's
reasonable expenses of furnishing such exhibit. Requests should be directed to
Assistant Clerk, Pamet Systems, Inc., 1000 Main Street, Acton, Massachusetts
01720.
STOCKHOLDER PROPOSALS
FOR 2001 ANNUAL MEETING OF STOCKHOLDERS
Proposals of Stockholders intended to be included in the Company's
proxy statement relating to the 2001 Annual Meeting of Stockholders must be
received no later than February 13, 2001. All stockholder proposals should be
marked for the attention of the Assistant Clerk, Pamet Systems, Inc., 1000
Main Street, Acton, Massachusetts 01720. The Company reserves the right to
reject, rule out of order, or take other appropriate action with respect to
any proposal that does not comply with these and other applicable
requirements.
OTHER MATTERS
The Board of Directors of the Company knows of no other business that will be
presented at the Annual Meeting. If any other business is properly brought
before the Annual Meeting, or any adjournment thereof, proxies in the enclosed
form will be voted in respect thereof as the proxy holders deem advisable.
It is important that the proxies be returned promptly and that your
shares be represented. Stockholders are urged to mark, date, sign and
promptly return the accompanying proxy card in the enclosed envelope.
By order of the Board of
Directors,
/s/ Arthur V. Josephson, Jr.
Arthur V. Josephson, Jr.
Clerk of the Company
Acton, Massachusetts
June 13, 2000
PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD NOW
ANNEX A
2000 STOCK OPTION PLAN
OF
PAMET SYSTEMS, INC.
Section 1. Purpose of the Plan
The purpose of the Pamet Systems, Inc. 2000 Stock Option Plan (the
"Plan") is to further the interests of Pamet Systems, Inc., a Massachusetts
corporation (the "Company"), and its stockholders by providing long-term
incentives to those officers, key employees and consultants of the Company and
its Subsidiaries, if any, who are largely responsible for the management,
growth and protection of the business of the Company and its Subsidiaries by
granting them options to acquire the common stock, par value $0.01 per share
("Common Stock"), of the Company.
Section 2. Definitions
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Change of Control" shall mean that (i) any "person" (as such term
is defined within the meaning of Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), other than any person who as of
the date hereof beneficially owns (as defined in Rule 13d-3 of the Exchange
Act) directly or indirectly 10% or more of the Company's outstanding Common
Stock or as of the date hereof is on, or has designated a member of, the Board
of Directors of the Company (the "Board"), becomes a beneficial owner directly
or indirectly of securities of the Company representing in excess of fifty
percent (50%) of the Company's then outstanding securities having the right to
vote for the election of directors, (ii) the Company shall have consummated
the sale of all or substantially all of the assets of the Company, (iii) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation (or other entity), other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the voting power of the voting securities
of the Company or such surviving entity outstanding immediately after such
merger or consolidation; (iv) the stockholders of the Company approve a plan
of complete liquidation of the Company; or (v) the following individuals cease
for any reason to constitute a majority of the number of directors then
serving: individuals who, on the date hereof, constitute the Board and any new
director (other than a director whose initial assumption of office is in
connection with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board or nomination for
election by the Company's stockholders was approved or recommended by a vote
of at least a majority of the directors then still in office who either were
directors on the date hereof or whose appointment, election or nomination for
election was previously so approved or recommended.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) A "Continuing Director" means, as of any date of determination,
any member of the Board of the Company who (i) was a member of such Board on
the effective date of the Plan or (ii) was nominated for election or elected
to such Board with the affirmative vote of a majority of the continuing
directors who were members of such Board at the time of such nomination or
election.
(d) "Fair Market Value" means, with the fair market value of Common
Stock determined by such methods or procedures as shall be established from
time to time by the Committee in good faith and in accordance with applicable
law. Unless otherwise determined by the Committee, the Fair Market Value of
Common Stock shall mean the mean of the high and low sales prices of Common
Stock on the relevant date as reported on the stock exchange or market on
which the Common Stock is primarily traded, or if no sale is made on such
date, then the Fair Market Value is the weighted average of the mean of the
high and low sales prices of the Common Stock on the next preceding day and
the next succeeding day on which such sales were made, as reported on the
stock exchange or market on which the Common Stock is primarily traded.
(e) "ISO" means any Option designated as an incentive stock option
within the meaning of Section 422 of the Code.
(f) "Option" means a right granted to a Participant (as defined below)
pursuant to Section 6(b) to purchase Common Stock at a specified price during
specified time periods. An Option may be either an ISO or a nonstatutory
Option (an Option not designated as an ISO).
(g) "Option Agreement" shall mean the written agreement, instrument or
document evidencing an Option.
(h) "Subsidiary" shall mean any subsidiary corporation (within the
meaning of Section 424(f) of the Code) of the Company.
Section 3. Administration of the Plan
The Plan shall be administered by the Compensation Committee of the
Board (the "Committee"). No member of the Committee while serving as such
shall be eligible for participation in the Plan. Any action of the Committee
in administering the Plan shall be final, conclusive and binding on all
persons, including the Company, its Subsidiaries, employees, Participants,
persons claiming rights from or through Participants and stockholders of the
Company.
Subject to the provisions of the Plan, the Committee shall have full
and final authority in its discretion (a) to select the officers, key
employees and consultants who will receive Options pursuant to the Plan
("Participants"), (b) to determine the number of shares of Common Stock for
which an Option will be granted and the terms and conditions of any Option
granted under the Plan (including, but not limited to, restrictions as to
transferability or forfeiture, exercisability or settlement of an Option and
waivers or accelerations thereof, and waivers of, or modifications to,
performance conditions relating to an Option, based in each case on such
considerations as the Committee shall determine) and all other matters to be
determined in connection with an Option; (c) to correct any defect or supply
any omission or reconcile any inconsistency in the Plan, and to adopt, amend
and rescind such rules and regulations as, in its opinion, may be advisable in
the administration of the Plan; and (d) to make all other determinations as it
may deem necessary or advisable for the administration of the Plan. The
Committee may delegate to officers or managers of the Company or any
Subsidiary or to unaffiliated service providers the authority, subject to such
terms as the Committee shall determine, to perform administrative functions
and to perform such other functions as the Committee may determine, to the
extent permitted under Rule 16b-3 of the Exchange Act, Section 162(m) of the
Code and applicable law.
Section 4. Participation in the Plan
Participants in the Plan shall be selected by the Committee from among
the officers, key employees and employees of the Company and its Subsidiaries,
provided however only employees are eligible to receive ISOs.
Section 5. Plan Limitations; Shares Subject to the Plan
Subject to the provisions of Section 8(a) hereof, the aggregate number
of shares of Common Stock, available for issuance as Options under the Plan
shall not exceed 1,300,000 shares.
No Option may be granted if the number of shares to which such Option
relates, when added to the number of shares previously issued under the Plan
and the number of shares which may then be acquired pursuant to other
outstanding, unexercised Options, exceeds the number of shares available for
issuance pursuant to the Plan. If any shares subject to an Option are
forfeited or such Option is settled in cash or otherwise terminates for any
reason whatsoever without an actual distribution of shares to the Participant,
any shares counted against the number of shares available for issuance
pursuant to the Plan with respect to such Option shall, to the extent of any
such forfeiture, settlement, or termination, again be available for Options
under the Plan; provided, however, that the Committee may adopt procedures for
the counting of shares relating to any Option to ensure appropriate counting,
avoid double counting, and provide for adjustments in any case in which the
number of shares actually distributed differs from the number of shares
previously counted in connection with such Option.
The maximum number of shares of Common Stock which may be granted as
Options to any Participant in any calendar year shall not exceed 500,000
shares
Section 6. Option Terms and Conditions
(a) General. Options may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on any Option
or the exercise thereof, at the date of grant or thereafter (subject to
Section 8(a)), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including terms
requiring forfeiture of Options in the event of termination of employment by
the Participant; provided, however, that the Committee shall retain full power
to accelerate or waive any such additional term or condition as it may have
previously imposed. All Options shall be evidenced by an Option Agreement.
(b) Options. The Committee may grant Options to Participants on the
following terms and conditions:
(i) Exercise Price. The exercise price of each Option shall be
determined by the Committee at the time the Option is granted, but (except as
provided in Section 7(a)) the exercise price of any Option shall not be less
than the Fair Market Value of the shares covered thereby at the time the
Option is granted.
(ii) Time and Method of Exercise. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part, whether
the exercise price shall be paid in cash or by the surrender at Fair Market
Value of Common Stock, or by any combination of cash and shares of Common
Stock, including, without limitation, cash, Common Stock, other Options, or
other property (including notes or other contractual obligations of
Participants to make payment on a deferred basis, such as through "cashless
exercise" arrangements, to the extent permitted by applicable law), and the
methods by which Common Stock will be delivered or deemed to be delivered to
Participants.
(iii) Incentive Stock Options. The terms of any Option granted under
the Plan as an ISO shall comply in all respects with the provisions of Section
422 of the Code, including, but not limited to, the requirement that no ISO
shall be granted more than ten years after the effective date of the Plan.
Section 7. Additional Provisions Applicable to Options
(a) Stand-Alone, Additional, Tandem, and Substitute Options. Options
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution for, any
other Option granted under the Plan or any option or other incentive granted
under any other plan of the Company or any Subsidiary, or any business entity
acquired by the Company or any Subsidiary, or any other right of a Participant
to receive payment from the Company or any Subsidiary. If an Option is granted
in substitution for another Option, the Committee shall require the surrender
of such other Option in consideration for the grant of the new Option. Options
granted in addition to, or in tandem with, other Options may be granted either
as of the same time as, or a different time from, the grant of such other
Options. The per share exercise price of any Option:
(i) granted in substitution for an outstanding Option shall be not
less than the lesser of (A) the Fair Market Value of a share of Common Stock
at the date such substitute Option is granted or (B) such Fair Market Value at
that date, reduced to reflect the Fair Market Value at that date of the Option
required to be surrendered by the Participant as a condition to receipt of the
substitute Option; or
(ii) retroactively granted in tandem with an outstanding Option, shall
not be less than the lesser of the Fair Market Value of a share of Common
Stock at the date of grant of the later Option or at the date of grant of the
earlier Option.
(b) Exchange and Buy Out Provisions. The Committee may at any time
offer to exchange or buy out any previously granted Option for a payment in
cash, Common Stock, other Options (subject to Section 7(a)), or other property
based on such terms and conditions as the Committee shall determine and
communicate to a Participant at the time that such offer is made.
(c) Performance Conditions. The right of a Participant to exercise any
Option, and the timing thereof, may be subject to such performance conditions
as may be specified by the Committee.
(d) Term of Options. The term of each Option shall, except as provided
herein, be for such period as may be determined by the Committee; provided,
however, that in no event shall the term of any ISO exceed a period of ten
years from the date of its grant (or such shorter period as may be applicable
under Section 422 of the Code).
(e) Loan Provisions. With the consent of the Committee, and subject at
all times to laws and regulations and other binding obligations or provisions
applicable to the Company, the Company may make, guarantee, or arrange for a
loan or loans to a Participant with respect to the exercise of any Option or
other payment in connection with any Option, including the payment by a
Participant of any or all federal, state, or local income or other taxes due
in connection with any Option. Subject to such limitations, the Committee
shall have full authority to decide whether to make a loan or loans hereunder
and to determine the amount, terms, and provisions of any such loan or loans,
including the interest rate to be charged in respect of any such loan or
loans, whether the loan or loans are to be with or without recourse against
the borrower, the terms on which the loan is to be repaid and the conditions,
if any, under which the loan or loans may be forgiven.
(f) Change of Control. In the event of a Change of Control of the
Company, all Options granted under the Plan that are still outstanding and not
yet vested or exercisable shall become immediately 100% vested in each
Participant, as of the first date that the definition of Change of Control has
been fulfilled, and shall be exercisable for the remaining duration of the
Option. All Options that are exercisable as of the effective date of the
Change of Control will remain exercisable for the remaining duration of the
Option.
Section 8. Adjustments upon Changes in Capitalization; Acceleration in Certain
Events
In the event that the Committee shall determine that any stock
dividend, recapitalization, forward split or reverse split, reorganization,
merger, consolidation, spin-off, combination, repurchase or share exchange, or
other similar corporate transaction or event, affects the Common Stock such
that an adjustment is appropriate in order to prevent dilution or enlargement
of the rights of Participants under the Plan, then the Committee shall, in
such manner as it may deem equitable, adjust any or all of (i) the number and
kind of shares of Common Stock which may thereafter be issued in connection
with Options, (ii) the number and kind of shares of Common Stock issuable in
respect of outstanding Options, (iii) the aggregate number and kind of shares
of Common Stock available under the Plan, and (iv) the exercise price relating
to any Option or, if deemed appropriate, make provision for a cash payment
with respect to any outstanding Option; provided, however, in each case, that
no adjustment shall be made which would cause the Plan to violate Section
422(b)(1) of the Code with respect to ISOs or would adversely affect the
status of any Option as "performance-based compensation" under Section 162(m)
of the Code.
Section 9. General Provisions
(a) Changes to the Plan and Options. The Board may amend, alter,
suspend, discontinue, or terminate the Plan or the Committee's authority to
grant Options under the Plan without the consent of the Company's stockholders
or Participants, except that any such amendment, alteration, suspension,
discontinuation, or termination shall be subject to the approval of the
Company's stockholders within one year after such Board action if such
stockholder approval is required by any federal or state law or regulation or
the rules of any stock exchange or automated quotation system on which the
Common Stock may then be listed or quoted, and the Board may otherwise, in its
discretion, determine to submit other such changes to the Plan to the
stockholders for approval; provided, however, that without the consent of an
affected Participant, no amendment, alteration, suspension, discontinuation,
or termination of the Plan may materially and adversely affect the rights of
such Participant under any Option theretofore granted and any Option Agreement
relating thereto. The Committee may waive any conditions or rights under, or
amend, alter, suspend, discontinue, or terminate, any Option theretofore
granted and any Option Agreement relating thereto; provided, however, that
without the consent of an affected Participant, no such amendment, alteration,
suspension, discontinuation, or termination of any Option may materially and
adversely affect the rights of such Participant under such Option.
The foregoing notwithstanding, any performance condition specified in
connection with an Option shall not be deemed a fixed contractual term, but
shall remain subject to adjustment by the Committee, in its discretion at any
time in view of the Committee's assessment of the Company's strategy,
performance of comparable companies, and other circumstances, except to the
extent that any such adjustment to a performance condition would adversely
affect the status of any Option as "performance-based compensation" under
Section 162(m) of the Code.
Notwithstanding the foregoing, unless approved by the stockholders of
the Company, no amendment will: (i) change the class of persons eligible to
receive Options; (ii) materially increase the benefits accruing to
Participants under the Plan, or (iii) increase the number of shares of Common
Stock subject to the Plan.
(b) No Right to Option or Employment. No employee or other person
shall have any claim or right to receive an Option under the Plan. Neither the
Plan nor any action taken hereunder shall be construed as giving any employee
any right to be retained in the employ of the Company or any Subsidiary.
(c) Taxes. The Company or any Subsidiary is authorized to withhold
from any payment relating to the exercise of an Option under the Plan,
including from any payroll or other payment to a Participant amounts of
withholding and other taxes due in connection with any transaction involving
an Option, and to take such other action as the Committee may deem advisable
to enable the Company and Participants to satisfy obligations for the payment
of withholding taxes and other tax obligations relating to any Option. This
authority shall include authority to withhold or receive Common Stock or other
property and to make cash payments in respect thereof in satisfaction of a
Participant's tax obligations.
(d) Limits on Transferability; Beneficiaries. No Option or other right
or interest of a Participant under the Plan shall be pledged, encumbered, or
hypothecated to, or in favor of, or subject to any lien, obligation, or
liability of such Participants to, any party, other than the Company or any
Subsidiary, or assigned or transferred by such Participant otherwise than by
will or the laws of descent and distribution, and such Options and rights
shall be exercisable during the lifetime of the Participant only by the
Participant or his or her guardian or legal representative. Notwithstanding
the foregoing, the Committee may, in its discretion, provide that Options
(other than an Option which is an ISO) be transferable, without consideration,
to immediate family members (i.e., children, grandchildren or spouse), to
trusts for the benefit of such immediate family members and to partnerships in
which such family members are the only partners. The Committee may attach to
such transferability feature such terms and conditions as it deems advisable.
(e) No Rights to Options; No Stockholder Rights. No Participant shall
have any claim to be granted any Option under the Plan, and there is no
obligation for uniformity of treatment of Participants. No Option shall confer
on any Participant any of the rights of a stockholder of the Company unless
and until Common Stock is duly issued or transferred to the Participant in
accordance with the terms of the Option.
(f) Discretion. In exercising, or declining to exercise, any grant of
authority or discretion hereunder, the Committee may consider or ignore such
factors or circumstances and may accord such weight to such factors and
circumstances as the Committee alone and in its sole judgment deems
appropriate and without regard to the affect such exercise, or declining to
exercise such grant of authority or discretion, would have upon the affected
Participant, any other Participant, any employee, the Company, any Subsidiary,
any stockholder or any other person.
(g) Effective Date. The effective date of the Plan is April 10, 2000.