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240.14a-12
Stanford Telecommunications, Inc.
- - ---------------------------------------------------------------------------
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Not Applicable
- - ---------------------------------------------------------------------------
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[STANFORD TELECOMMUNICATIONS LETTERHEAD]
May 31, 1995
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Stanford Telecommunications, Inc., which will be held Wednesday, June 28, 1995
at 6:00 p.m., local time at the Sunnyvale Sheraton Inn, 1100 North Mathilda
Avenue, Sunnyvale, California 94089.
The formal notice of the Annual Meeting and the Proxy Statement have been made a
part of this invitation.
To assure that your shares are represented, please read the Proxy Statement and
promptly mark, date, sign and return the enclosed Proxy in the prepaid envelope
provided.
The Board of Directors and management look forward to seeing you at the meeting.
Sincerely,
Dr. James J. Spilker, Jr.
Chairman of the Board and President
STANFORD TELECOMMUNICATIONS, INC.
Notice of Annual Meeting of Stockholders
To Be Held June 28, 1995
The Annual Meeting of the Stockholders of Stanford Telecommunications, Inc.
(the "Company") will be held at the Sunnyvale Sheraton Inn, 1100 North Mathilda
Avenue, Sunnyvale, California 94089, on Wednesday, June 28, 1995, at 6:00 P.M.,
local time for the following purposes:
1. To elect eight directors to serve for the ensuing year as set forth in
the attached Proxy Statement.
2. To amend the Company's Certificate of Incorporation to increase the
number of authorized shares of Common Stock, par value $.01 per share, from
10,000,000 to 15,000,000, and to eliminate provisions which authorize the Board
of Directors to issue the Common Stock in series and which designate a series
entitled "Series B Common Stock."
3. To amend and restate the Company's 1991 Stock Option Plan.
4. To ratify the selection of Arthur Andersen LLP as the Company's
independent public accountants for the current fiscal year.
5. To transact such other business as may properly come before the meeting
and any adjournment thereof.
The Board of Directors has fixed the close of business on May 1, 1995 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournment thereof. In accordance with
Delaware law, a complete list of stockholders entitled to notice of and to vote
at the meeting will be available at the Company's executive offices, 1221
Crossman Avenue, Sunnyvale, California for ten days prior to the meeting.
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN. DATE AND RETURN
THE ENCLOSED PROXY PROMPTLY.
By order of the Board of Directors,
GARY S. WOLF
Secretary
Sunnyvale, California
May 31, 1995
May 31, 1995
STANFORD TELECOMMUNICATIONS, INC.
1221 CROSSMAN AVENUE
SUNNYVALE, CALIFORNIA 94089
PROXY STATEMENT
---------------
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Stanford Telecommunications, Inc., a Delaware
corporation (the "Company"), of proxies in the accompanying form to be used at
the Annual Meeting of Stockholders to be held on June 28, 1995 and any
adjournment thereof. Proxies may be revoked at any time before they are voted
by filing with the Secretary of the Company a written notice of revocation, or
by duly executing a proxy bearing a later date. A proxy may also be revoked by
any stockholder present at the meeting who expresses a desire to vote his or her
shares in person. Subject to any such revocation, all shares represented by
properly executed proxies will be voted in accordance with specifications on the
enclosed proxy. If no choice is so specified, the shares will be voted FOR the
election of the eight nominees for director listed in this Proxy Statement, FOR
the amendment of the Company's Certificate of Incorporation, FOR the amendment
and restatement of the Company's 1991 Stock Option Plan and FOR the ratification
of Arthur Andersen LLP as the Company's independent public accountants.
The close of business on May 1, 1995 has been fixed as the record date
for determining the holders of the Common Stock entitled to notice of and to
vote at the meeting. On such date the Company had 6,233,973 shares of Common
Stock (the "Common Stock") outstanding and entitled to vote. Each outstanding
share of Common Stock is entitled to one vote on all matters including the
election of directors whose names have been placed in nomination. Those eight
persons receiving the highest number of votes will be elected as the directors
of the Company. A majority of the outstanding shares will constitute a quorum
at the meeting. Abstentions and broker nonvotes are counted for purposes of
determining the presence or absence of a quorum for the transaction of business.
Abstentions are counted in tabulations of the votes cast on proposals presented
to stockholders and, as a result, have the same effect as negative votes.
Broker nonvotes will have the same effect as negative votes with respect to the
proposal to amend the Company's Certificate of Incorporation, but will not be
counted for purposes of determining whether any other proposal has been
approved.
A copy of the Company's 1995 Annual Report to Stockholders containing
financial statements for the fiscal year ended March 31, 1995 accompanies this
Proxy Statement.
The expense of printing and mailing proxy material will be borne by the
Company. The Company will reimburse brokers and nominees for their reasonable
out-of-pocket expenses in forwarding soliciting material to beneficial owners of
shares held of record by such brokers and nominees. In addition to the
solicitation of proxies by mail, solicitation may be made by certain directors,
officers and other employees of the Company by personal interview, telephone or
telegraph; no additional compensation will be paid for such solicitation.
-1-
ELECTION OF DIRECTORS
Eight directors are to be elected to serve until the next Annual
Meeting of Stockholders and until their respective successors are duly elected.
All of the nominees named below are presently directors of the Company. In the
event that any such nominees become unable or decline to serve for any reason,
proxies may be voted for the election of the balance of those nominees named and
for such other person or persons as the proxy holders or the present Board of
Directors (the "Board") may select, or the size of the Board may be reduced in
accordance with the By-laws of the Company. The Board has no reason to believe
that any of the nominees named will be unable or unwilling to serve.
INFORMATION WITH RESPECT TO NOMINEES AND DIRECTORS
- - --------------------------------------------------
Set forth below are the names and ages of the nominees and directors,
their principal occupations at present and for the past five years, certain
directorships held by certain of the nominees and the year in which each became
a director of the Company.
Name and Principal Occupation
at Present and for the Past Director
Five Years; Directorships Since Age
----------------------------- -------- ---
James J. Spilker, Jr. . . . . . . . . . . . 1973 61
Dr. Spilker, a founder of the
Company, is Chairman of the Board,
Chief Executive Officer and
President. From the Company's
organization in May 1973 until
August 1981, Dr. Spilker was
Chairman of the Board, Executive
Vice President and Technical
Director. He has been President
and Chief Executive Officer since
August 1981.
Michael Berberian . . . . . . . . . . . . . 1989 61
Mr. Berberian, a private investor,
was appointed to fill a vacancy on
the Board of Directors in December
1989. From 1973 to 1990, he served
on the Board of Directors of
Lockheed Corp.
Leonard Schuchman . . . . . . . . . . . . . 1985 58
Mr. Schuchman was elected as a
Director of the company in April
1985. Mr. Schuchman joined the
Company in January 1976 and became
Vice President in February 1977.
In March 1982, he was elected
Senior Vice President responsible
for directing the Company's Systems
Engineering Division. In March
1994, he was appointed President of
the Company's Systems Integration
Group.
-2-
Name and Principal Occupation
at Present and for the Past Director
Five Years; Directorships Since Age
----------------------------- -------- ---
John W. Brownie . . . . . . . . . . . . . . 1973 61
Mr. Brownie, a founder of the
Company, served as Executive Vice
President from June 1982 to January
1985 and General Manager from July
1981 to January 1985 when he
retired from the Company. He was a
Director and Vice President
commencing with the Company's
organization in May 1973.
P. Marshall Fitzgerald . . . . . . . . . . 1973 62
Dr. Fitzgerald, a founder of the
Company, has served as a Director
since its organization in May 1973
and as President from May 1973 to
July 1981 when he retired from the
Company.
Val P. Peline . . . . . . . . . . . . . . . 1985 64
Dr. Peline was elected a Director
of the Company in October 1985.
Dr. Peline served as President of
the Electronic Systems Group, a
division of Lockheed Corp., from
1987 until he retired from this
position in March 1995. Dr. Peline
had been President of the Lockheed
Space Division from 1984 to
March 1987. Dr. Peline will join
the Company as its President and
Chief Executive Officer effective
June 1, 1995.
Milton W. Holcombe . . . . . . . . . . . . 1990 62
Mr. Holcombe was appointed to fill
a vacancy on the Board of Directors
in September 1990. Mr. Holcombe
served as President of Chrysler
Technologies Airborne Systems, Inc.
from 1988 to 1990. In 1970, he
co-founded Electrospace Systems,
Inc. where he served as Group Vice
President and Assistant Treasurer.
C. Jerome Waylan . . . . . . . . . . . . . 1994 53
Dr. Waylan was appointed to fill a
vacancy on the Board of Directors
in May 1994. Dr. Waylan has served
as executive vice president with
GTE Personal Communications since
1993. Prior to his current
position, Dr. Waylan served as
president of GTE Spacenet
Corporation from 1985 to 1993.
Dr. Waylan founded the Southern
Pacific Satellite Company in 1981,
which was acquired by GTE in 1983.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL
---
NOMINEES NAMED.
-3-
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
- - ------------------------------------------
The Company's Board held six meetings during fiscal year 1995. Each
director attended 75% or more of the aggregate number of meetings of the Board
and of the committees of the Board on which he serves, with the exception of Dr.
Peline who attended 50% of the Audit Committee meetings and was absent from a
Board meeting and abstained from participating in a Board meeting in which the
Board discussed his qualifications and voted upon his election as President and
Chief Executive Officer of the Company.
The Board has appointed a Compensation Committee, an Audit Committee, a
Stock Plans Committee and an Executive Committee. There is no nominating
committee.
The Compensation Committee held one meeting in fiscal year 1995. Its
function is to determine or review and pass upon management's recommendations
with respect to executive compensation and incentive bonuses. The members of
the Compensation Committee during fiscal year 1995 were Dr. Fitzgerald and
Messrs. Brownie, Berberian and Holcombe.
The Audit Committee held two meetings in fiscal year 1995. Its
functions are to monitor the effectiveness of the audit effort, to supervise the
Company's financial and accounting organization and financial reporting and to
select a firm of independent public accountants, whose duty it is to audit the
books and accounts of the Company. The members of the Audit Committee during
fiscal year 1995 were Dr. Peline and Messrs. Brownie, Berberian and Holcombe.
The Stock Plans Committee took all necessary actions by unanimous
written consent and by one telephone meeting in fiscal year 1995. Its functions
are to supervise and manage the Company's Employee Stock Purchase Plan, the 1982
Stock Option Plan and the 1991 Stock Option Plan. The members of the Stock
Plans Committee during fiscal year 1995 were Dr. Fitzgerald and Messrs. Brownie
and Berberian.
The Executive Committee did not meet in fiscal year 1995. Its
functions are to address long term strategies and assess key business plans and
make recommendations to management. The members of the Executive Committee
during fiscal year 1995 were Dr. Fitzgerald and Messrs. Brownie and Berberian.
DIRECTORS' FEES
- - ---------------
Each non-employee director of the Company receives an annual fee of
$15,000.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning
compensation paid to the Company's Chief Executive Officer and each of the other
four most highly compensated executive officers for the fiscal years ended
March 31, 1993, 1994 and 1995.
-4-
Long-Term
Compensation
Annual Compensation Awards
------------------------------- -------------
Securities
Fiscal Underlying All Other
Name and Principal Position Year Salary Bonus(1) Options (#) Compensation(2)
- - --------------------------- ------ ------ -------- ----------- ---------------
James J. Spilker, Jr 1995 $234,452 $35,000 4,300 $7,208
Chairman, Chief Executive 1994 $215,010 $0 4,300 $7,706
Officer and President 1993 $215,010 $40,000 0 $7,678
Leonard Schuchman 1995 $181,479 $30,000 28,500 $6,222
Senior Vice President, 1994 $172,822 $17,000 3,220 $5,712
President of Systems 1993 $161,013 $30,000 0 $5,859
Integration Group and
Director
John E. Ohlson 1995 $168,002 $0 3,360 $5,776
Senior Vice President and 1994 $166,926 $10,000 3,220 $5,099
Chief Technical Officer 1993 $153,630 $30,000 0 $5,050
Gary S. Wolf 1995 $159,440 $20,000 18,080 $4,936
Senior Vice President, Chief 1994 $151,850 $ 5,000 2,800 $4,757
Financial Officer, Secretary 1993 $140,005 $12,000 0 $4,740
and Treasurer
Hatch Graham 1995 $152,403 $15,000 2,760 $4,148
Vice President 1994 $135,556 -- 12,400 $3,725
1993 $120,016 -- 30,000 $2,466
_____________
<FN>
(1) Represents incentive bonuses paid during the fiscal year for prior
year's performance pursuant to the Company's Officer Incentive
Compensation Plan. Mr. Graham first became eligible for an incentive
bonus pursuant to this plan during fiscal year 1995.
(2) For fiscal year 1995 includes the Company's contribution to the Pension
and Profit Sharing portions of the Stanford Telecommunications, Inc.
Employee Retirement Program as follows: J. J. Spilker, Jr., $6,457; L.
Schuchman, $5,702; J. E. Ohlson, $5,314; G. S. Wolf, $4,711; and H.
Graham, $3,975; and Company-paid life insurance premiums as follows:
J. J. Spilker, Jr., $751; L. Schuchman, $520; J. E. Ohlson, $462; G. S.
Wolf, $225; and H. Graham, $173.
-5-
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option amounts in fiscal
year 1995 to the named executive officers.
Percent of
Number of Total Potential Realized Value
Securities Options of Assumed Annual Rate of
Underlying Granted to Stock Price Appreciation
Securities Employees Exercise for Option Term(2)
Options in Fiscal Price Exercise --------------------------
Name Granted(1) Year Per Share Date 0% 5% 10%
---- ---------- ---------- --------- -------- -- -- ----
James J. Spilker, Jr. 4,300 3.4% $15.75 5/17/99 $0 $ 18,711 $ 41,437
Leonard Schuchman 28,500 22.8% 15.75 5/17/99 0 124,015 274,043
John E. Ohlson 3,360 2.7% 15.75 5/17/99 0 14,621 32,308
Gary S. Wolf 3,080 2.5% 15.75 5/17/99 0 13,402 29,616
15,000 12.0% 13.125 3/10/00 0 54,393 120,194
Hatch Graham 2,760 2.2% 15.75 5/17/99 0 12,010 26,539
_____________
<FN>
(1) All options granted in fiscal year 1995 were granted pursuant to the
1991 Stock Option Plan ("Plan"). The Plan provides for granting either
incentive or non-qualified stock options. All options granted in
fiscal year 1995 were nonqualified stock options granted at 100% of the
fair market value of the Common Stock on the date of grant. The
options expire five years from date of grant, unless earlier terminated
in certain events related to termination of employment. The options
vest 25% per year on each of the first four anniversaries of the option
grant date, but vesting ceases when the optionee terminates employment.
Options which have been held for at least one year will vest in full in
the event of the sale, dissolution or liquidation of the Company, a
merger or consolidation in which the Company is not the surviving
corporation or becomes the subsidiary of another entity, or an offer to
all stockholders of the Company to purchase more than 50% of the
Company's outstanding shares.
(2) The 5% and the 10% assumed rates of appreciation applied to the option
exercise price over the ten-year term are prescribed by the rules of
the Securities and Exchange Commission and do not represent the
Company's estimate or projection of the future price of its Common
Stock. If the Company's Common Stock does not appreciate above the
exercise price, the named executive officers will receive no benefit
from the options.
-6-
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table shows the number of shares of Common Stock
represented by outstanding stock options held by each of the named executive
officers as of March 31, 1995. On March 31, 1995, the Company's Common Stock
price was $15.50.
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options at
Options at FY-End FY-End
----------------- ---------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
---- --------------- -------- ------------- ---------------
James J. Spilker, Jr. 0 shares 0 1,075/7,525 $6,719/$20,156
Common Stock Common Stock
Leonard Schuchman 0 shares 0 20,805/30,915 $75,731/$15,094
Common Stock Common Stock
John E. Ohlson 0 shares 0 805/5,775 $5,031/$15,094
Common Stock Common Stock
Gary S. Wolf 10,000 shares $54,500 700/20,180 $4,375/$48,750
Common Stock Common Stock
Hatch Graham 0 shares 0 16,225/23,935 $130,313/$128,437
Common Stock Common Stock
COMPENSATION AND STOCK PLANS COMMITTEES
REPORT ON EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
developing and recommending to the Board policies on compensation of the
Company's senior executives. The Stock Plans Committee of the Board of
Directors administers the Company's stock option plan and recommends to the
Board policies on stock options and other equity-based incentives. Set forth
below, in accordance with the rules of the Securities and Exchange Commission
("SEC"), is a joint report of the Compensation and Stock Plans Committees
concerning those policies and how they were applied to the fiscal year 1995
compensation of Dr. James J. Spilker, Jr., President, Chief Executive Officer
and Chairman of the Board, and all other executive officers.
GENERAL EXECUTIVE COMPENSATION POLICIES
The Company's compensation program is designed to attract and retain
qualified executives and to ensure that their efforts are directed toward the
long-term interests of the Company and its stockholders. To that end, the
Company strives to pay competitive base salaries and to provide incentive to
its executives by linking individual compensation to Company and business unit
performance through
-7-
the incentive compensation plan, and to link executive and stockholder interests
through the Company's stock option plan.
The Compensation and Stock Plans Committees annually review salaries,
incentive compensation and stock options, and other aspects of executive
compensation. In general, the purpose of this evaluation is to ensure that the
Company's overall executive compensation program remains competitive with other
companies that are similar in revenues, profitability, asset size and markets
served and that executive pay reflects both the individual's performance and
the overall performance of the Company. Salary survey information from
Western Management Group and Radford Associates for companies designated as
"high technology companies," many of which are included in the S&P High
Technology Index, as well as other publicly available sources are used in
the evaluation to determine the competitiveness of the executive compensation
program. The Compensation Committee attempts to establish base salaries for
the Company's executive officers in the median range of those companies
surveyed. Incentive compensation paid to those executive officers is
targeted in the low range of those companies surveyed.
In determining fiscal year 1995 compensation for executive officers,
the Compensation Committee reviewed the Company's financial results for fiscal
year 1994, together with a comparison against plan and results achieved during
prior fiscal years. For fiscal year 1994, revenues and net income, excluding
the cumulative effect of a change in accounting method, increased approximately
6% and 145% respectively from the previous fiscal year. The Compensation
Committee evaluates company performance based primarily on profitability, with
consideration also given to revenue growth.
SUMMARY OF FISCAL YEAR 1995 COMPENSATION PROGRAMS
For fiscal year 1995, the executive compensation program consisted of
base salary and participation in the Corporate Officer Incentive Compensation
Plan and the Officer's Option Incentive Program.
BASE SALARY
The Compensation Committee determines the base salaries of the
Company's executive officers based on the Company's revenues and profitability
for the prior year, its assessment of individual performance, and the
comparability considerations described above. During fiscal year 1993, no base
salary increases were awarded to the Company's executive officers. This
decision was made consistent with the Company's efforts to reduce operating
expenses. The average base salary increase for executive officers during fiscal
years 1994 and 1995 was 4.5% and 5.6%, respectively, not including an increase
in one officer's base salary during fiscal 1995 due to his promotion to an
executive officer position.
CORPORATE OFFICER INCENTIVE COMPENSATION PLAN
The Corporate Officer Incentive Compensation Plan is an annual
incentive bonus plan that links the participant's incentive bonus award to the
Company's profitability as measured by net income achieved as a percent of
revenues for the most recently completed fiscal year. An incentive pool is
established by first computing the Company's net income as a percentage of
revenues. A numerical factor is assigned to the outcome of the first
computation. The numerical factor increases as the percentage of net income to
revenues increases. That factor is then multiplied by the net income dollars
achieved for the most recent fiscal year to yield the incentive pool. Awards
are made on the basis of each participant's individual contribution, as
determined by the Compensation Committee, to the achievement of profitable
operations. The Compensation Committee may distribute none or any portion
-8-
of the pool to the executive officers. During fiscal year 1995, the
Compensation Committee distributed 90% of the available pool.
Dr. Spilker and Messrs. Schuchman, Wolf and Graham were participants in
the Corporate Officer Incentive Compensation Plan and earned incentive bonus
awards during fiscal year 1995 for their fiscal year 1994 performance.
STOCK OPTIONS
The Compensation and Stock Plans Committees view stock options as a
means of linking executive and stockholder interests. Each year, the
Compensation and Stock Plans Committees consider and may approve stock option
grants, determining such aspects as grant size, vesting schedules and plan
participants.
In May 1993, the Board of Directors adopted an Officer's Option
Incentive Program to establish a uniform policy governing annual option grants
to eligible officers. All executive officers and other officers who have profit
and loss responsibility are eligible to participate in the program. The number
of options already held by the eligible participants is not a factor in
determining whether an otherwise eligible officer will receive an option grant.
It is anticipated that annual option grants will be made to certain officers of
the Company, including the President as well as the four other most highly paid
executive officers; however, the Compensation and Stock Plans Committees may
exclude certain officers from receiving options as they deem appropriate.
Options proposed under this program are subject to the Stock Plans Committee's
discretion under the provisions of the Company's 1991 Stock Option Plan. During
fiscal year 1995, a total of 39,167 options were granted pursuant to the
Officer's Option Incentive Program, of which the President and the four other
most highly paid executive officers received 17,000 options. The size of each
grant depended primarily on a formula tied to the recipient's base salary.
In addition to options granted pursuant to the Officer's Option
Incentive Program, the Stock Plans Committee approved separate grants to Messrs.
Schuchman and Wolf of 25,000 and 15,000 options, respectively, during fiscal
year 1995, due to Mr. Schuchman's promotion to a position as President of a
business unit and due to the committee's assessment of Mr. Wolf's contributions
to the Company and the comparability of his previous option grants to those of
other Company executives.
DR. SPILKER'S FISCAL YEAR 1995 COMPENSATION
The Compensation and Stock Plans Committees annually review Dr.
Spilker's performance to determine his base salary, incentive compensation and
stock option grants. The purpose of this review is to ensure that Dr. Spilker's
compensation package remains competitive with chief executives of other
companies similar to the Company in revenues, profitability, asset size and
markets served. Salary survey information from Western Management Group and
Radford Associates as well as other publicly available sources are used in the
evaluation to determine the competitiveness of Dr. Spilker's overall
compensation. The Compensation Committee has determined that the President's
base salary should approximate the median of those companies contained in the
salary surveys, but that his incentive compensation should primarily be tied to
the Company's profitability. Given the Company's increased revenues and
profitability in fiscal year 1994 and the Compensation Committee's assessment of
Dr. Spilker's contribution to those performance measures during fiscal year
1994, Dr. Spilker received incentive compensation of $35,000 during fiscal year
1995.
In the Compensation Committee's opinion, Dr. Spilker is properly
compensated when compared to others holding like positions in companies similar
to the Company in revenues, profitability, asset size
-9-
and markets served. In addition, Dr. Spilker is a substantial stockholder in
the Company and thus has significant motivation to act on behalf of all
stockholders to optimize overall Company performance.
OTHER
In 1993, the Internal Revenue Code (the "Code") was amended to add
section 162(m), which generally disallows a tax deduction for compensation paid
to a company's senior executive officers in excess of $1,000,000 per person per
year. Certain performance based compensation that has been approved by
stockholders is not subject to the deduction limit. The Company intends to
qualify compensation attributable to executive officer stock options for
deduction under the Code, including new section 162(m). The Company is
submitting for a vote of the stockholders at the Annual Meeting amendments to
the 1991 Stock Option Plan that would, among other things, limit the number of
options that can be granted to any individual over the life of the plan in order
to maximize the deductibility of option grants under the plan. However, the
Company reserves the right to pay compensation to its executives that may not be
tax deductible.
COMPENSATION COMMITTEE
Milton Holcombe, Chairman
Michael Berberian
John Brownie
P. Marshall Fitzgerald
STOCK PLANS COMMITTEE
Michael Berberian, Chairman
John Brownie
P. Marshall Fitzgerald
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The SEC requires disclosure where an executive officer of a company served
or serves as a director or on the compensation committee of another entity and
an executive officer of such other entity served or serves as a director or on
the compensation committee of the company. The Company does not have any such
interlocks. Decisions as to executive compensation are made by the Compensation
Committee and the Stock Plans Committee. During fiscal year 1995, the
Compensation and Stock Plans Committees were comprised entirely of non-employee
Directors. Dr. Fitzgerald and Mr. Brownie, who serve as members of both such
committees, were former officers of the Company. Dr. Fitzgerald retired from
the Company in 1981 and Mr. Brownie retired in 1985.
-10-
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the percentage change in the
cumulative total stockholder return on the Company's Common Stock against the
cumulative total return of the S&P 500 Composite Index and the S&P High
Technology Composite Index for a period of five fiscal years ended March 31,
1995. "Total return," for the purpose of this graph, assumes reinvestment of
all dividends.
Comparison of Cumulative Total Return
Stanford Telecommunications, Inc. Common Stock
S & P 500 Composite Index and S & P High Technology Composite Index
[LINE GRAPH]
1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------
S & P 500 100.00 114.41 127.05 148.39 148.55 171.88
S & P High Technology 100.00 109.17 111.71 122.75 144.38 182.71
Stanford Telecom 100.00 109.68 77.42 119.35 208.06 200.00
-11-
STOCK OWNERSHIP
The following table sets forth, as of March 31, 1995, the names and
addresses of all persons who beneficially owned, to the knowledge of the
Company, more than 5% of the outstanding shares of Common Stock, and the number
of shares beneficially owned by all directors and nominees, each executive
officer named in the Summary Compensation Table and all directors and executive
officers as a group. Except as otherwise indicated and subject to community
property laws where applicable, each person has sole investment and voting power
with respect to the shares shown. Ownership information is based upon
information furnished by the respective persons.
Beneficial Ownership
Of Common Stock
----------------------------
Number Percent
of Shares of Class
--------- ---------
James J. Spilker, Jr.(1) . . . . . . . . . 672,878 10.8%
1221 Crossman Avenue
Sunnyvale, California 94089
Michael Berberian . . . . . . . . . . . . . 605,475 9.7%
2444 Main Street #220
Fresno, California 93721
Leonard Schuchman(2) . . . . . . . . . . . 162,110 2.6%
John W. Brownie(3) . . . . . . . . . . . . 34,975 *
P. Marshall Fitzgerald . . . . . . . . . . 10,552 *
Val P. Peline . . . . . . . . . . . . . . . 1,250 *
Milton W. Holcombe . . . . . . . . . . . . 0 --
John E. Ohlson(4) . . . . . . . . . . . . . 79,620 1.3%
Gary S. Wolf(5) . . . . . . . . . . . . . . 32,223 *
Hatch Graham(6) . . . . . . . . . . . . . . 17,998 *
All directors and executive officers
as a group (11 persons)(7) . . . . . . . . . 1,618,781 25.7%
Kopp Investment Advisors, Inc.(8) . . . . 2,095,850 33.6%
6600 France Avenue South, Suite 672
Edina, Minnesota 55435
__________________
<FN>
* Less than 1%.
(1) Includes 3,225 shares subject to options exercisable within 60 days and
10,000 shares held by Dr. Spilker's wife.
(2) Includes 28,735 shares subject to options exercisable within 60 days.
-12-
(3) Consists of shares held in trust for John W. and Alice Brownie.
(4) Includes 2,450 shares subject to options exercisable within 60 days.
(5) Includes 2,170 shares subject to options exercisable within 60 days and
1,500 shares held by Mr. Wolf's minor daughter.
(6) Includes 17,515 shares subject to options exercisable within 60 days.
(7) Includes 55,595 shares subject to options exercisable within 60 days.
(8) As disclosed on Schedule 13G, dated February 10, 1995. Kopp Investment
Advisors, Inc. exercises investment discretion as to these shares,
although it does not vote the shares and is not the owner of record.
Kopp Investment Advisors, Inc. Profit Sharing Plan beneficially owns and
exercises sole voting and dispositive power as to 1,000 shares. LeRoy
C. Kopp, who is the sole owner of Kopp Investment Advisors, Inc. and
sole trustee of the Kopp Investment Advisors, Inc. Profit Sharing Plan,
beneficially owns and exercises sole voting and dispositive power as to
61,000 shares. Mr. Kopp controls the Caring and Sharing Foundation,
which is the beneficial owner of 20,000 shares.
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 10,000,000
TO 15,000,000, TO ELIMINATE PROVISIONS AUTHORIZING THE BOARD OF DIRECTORS
TO ISSUE THE COMMON STOCK IN SERIES, AND TO ELIMINATE THE COMPANY'S
SERIES B COMMON STOCK
The Board of Directors has unanimously approved the amendment of Article 4
of the Company's Certificate of Incorporation to increase the number of
authorized shares of Common Stock, par value $.01 per share ("Common Stock"),
from 10,000,000 to 15,000,000 and to eliminate certain provisions which
currently authorize the Board of Directors to issue Common Stock in series and
which designate a series of Common Stock entitled "Series B Common Stock." The
Board of Directors recommends that the Company's stockholders approve this
amendment.
The Board of Directors believes that it is in the Company's best interests
to increase the number of authorized shares of Common Stock in order to have
additional authorized shares available for issuance to meet business needs as
they arise. The Board of Directors believes that the availability of such
additional shares will help the Company to attract and retain talented employees
through the grant of stock options and other stock-based incentives. The
availability of such shares will also provide the Company with the flexibility
to issue Common Stock for other proper corporate purposes which may be identi-
fied by the Board of Directors in the future, such as stock dividends,
financings or acquisitions. No such transaction is currently contemplated by
the Company. The additional authorized shares could also be issued pursuant to
the Company's stockholder rights plan, which was adopted by the Board of
Directors on May 9, 1995. The rights plan provides that when a single
stockholder or a group of stockholders (the "acquiror") becomes the beneficial
owner of 15% or more of the Company's Common Stock, all rights holders
except for the acquiror may elect to purchase additional shares of Common Stock
from the Company at an exercise price equal to one-half of the current stock
price (or, in the event that there are insufficient shares of Common Stock
available for issuance, the Company may take other measures to deliver value to
rights holders, including a reduction in the exercise price of the rights, the
delivery of debt or equity securities, or the delivery of cash or other assets).
The dilutive effect to the acquiror of any such issuance would tend to
discourage a change in control of the Company. The rights plan permits the
Company to deliver consideration other than shares of Common Stock if the rights
plan is triggered and there are insufficient shares of Common Stock available
for issuance at that time. Accordingly, the increase in the number of
authorized shares of Common Stock being recommended to the Company's
stockholders is not necessary in order to implement the rights plan. However,
the availability of additional shares of Common Stock will give the Company
greater flexibility in implementing the rights plan in the event that it is
triggered.
Of the 10,000,000 shares of Common Stock currently authorized for issuance,
approximately 3,119,520 shares are unissued and unreserved for issuance. If the
proposed amendment to the Certificate of Incorporation is approved, the
authorized shares of Common Stock in excess of those issued and reserved will be
available for issuance at such times and for such corporate purposes as the
Board of Directors may deem advisable without further action by the Company's
stockholders, except as may be
-13-
required by applicable laws or the rules of any stock exchange or national
securities association trading system on which the Company's securities may be
listed or traded. The Board of Directors does not intend to issue any Common
Stock except on terms which the Board deems to be in the best interests of the
Company and its then-existing stockholders. Management has no arrangements,
agreements, understandings or plans at the present time for the issuance or use
of the additional shares of Common Stock proposed to be authorized, except for
the reservation of shares pursuant to the Company's employee benefit
arrangements and stockholder rights plan, as described above. Because holders
of Common Stock do not have preemptive rights, any future issuances of Common
Stock could have a dilutive effect.
The Board of Directors also believes that it is in the Company's best
interests to delete the provisions of Article 4 of the Certificate of
Incorporation which permit the issuance of Common Stock in various series, each
having potentially different rights and restrictions. Of the 10,000,000 shares
of shares of Common Stock currently authorized, the Certificate of Incorporation
currently permits up to 800,000 shares to be issued as part of a series
designated the "Series B Common Stock," and up to 200,000 shares to be issued
in one or more additional series of Common Stock to be designated in the
future. No shares of Series B Common Stock or of any such additional series
have been issued, and no such issuances are planned. The Board of Directors
believes that the Company can maintain an appropriate capital structure without
reserving to the Board the ability to create various series of Common Stock.
The full text of Article 4, as such Article is proposed to be amended, is
as follows:
The Corporation is authorized to issue only one class of shares
of stock to be designated "Common Stock" and the total number of
shares of stock which the Corporation shall have the authority to
issue is fifteen million (15,000,000) shares of Common Stock, par
value one cent ($.01) per share.
The affirmative vote of the holders of a majority of the Company's
outstanding Common Stock is required to approve this proposal. If approved by
the stockholders, the proposed amendment to the Certificate of Incorporation
will become effective upon the filing of a certificate of amendment with the
Secretary of State of Delaware, which is expected to be accomplished on June 28,
1995 or as soon thereafter as practicable.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND
---
ARTICLE 4 OF THE COMPANY'S CERTIFICATE OF INCORPORATION.
PROPOSAL TO APPROVE THE AMENDMENT AND RESTATEMENT OF THE
COMPANY'S 1991 STOCK OPTION PLAN
In February 1995, the Board of Directors amended and restated the Company's
1991 Stock Option Plan (the "1991 Plan"), subject to approval by the
stockholders, to: (i) increase the number of shares of Common Stock authorized
for issuance pursuant to options granted under the 1991 Plan by 500,000 shares,
(ii) permit nonstatutory stock options ("NSOs") to be granted with terms greater
than 10 years, (iii) permit non-employee directors who do not serve on the
committee which administers the 1991 Plan to receive discretionary grants of
NSOs, (iv) include technical changes to conform the 1991 Plan to the
deductibility requirements of section 162(m) of the Internal Revenue Code (the
"Code") as described below and to Rule 16b-3 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and (v) make certain other technical
changes.
-14-
In 1993, the Code was amended to add section 162(m). Section 162(m) places
a limit of $1,000,000 on the amount of compensation that may be deducted by the
Company in any tax year with respect to each of the Company's highest paid
executives, including compensation relating to the exercise of stock options.
However, such compensation is not subject to deduction limits if certain
limitations approved by stockholders are applied to stock options granted to
executives. In order to maximize the deductibility of compensation relating to
stock options granted to executive officers, the Company is requesting
stockholder approval of the amendments to the 1991 Plan at the Annual Meeting.
The following is intended to be a summary of the 1991 Plan's principal
terms as amended and does not purport to be a complete statement of such terms.
It is subject to and qualified in its entirety by reference to the text of the
1991 Plan, as proposed to be amended, a copy of which is available without
charge from Gary S. Wolf, Senior Vice President, Chief Financial Officer,
Secretary and Treasurer, Stanford Telecommunications, Inc., 1221 Crossman
Avenue, Sunnyvale, California 94089.
SHARES AVAILABLE FOR FUTURE GRANTS. As of May 11, 1995, 500,000 shares of
Common Stock were authorized under the 1991 Plan, of which 96,735 shares were
available for future grants. Upon approval of the amendment and restatement of
the 1991 Plan, an additional 500,000 shares will become available for issuance
pursuant to options granted under the 1991 Plan.
ADMINISTRATION AND ELIGIBILITY. The 1991 Plan is administered by the Stock
Plans Committee of the Board of Directors (the "Committee"). Currently, the
Committee consists of at least three persons who are disinterested persons as
defined in Rule 16b-3 under the Exchange Act. The Company is proposing to amend
the 1991 Plan to comply with the amended provisions of Rule 16b-3 regarding the
number of disinterested persons required to serve on the Committee.
The Committee selects the key employees of the Company or any subsidiary
who will receive stock options. Currently, there are approximately 141
participants in the 1991 Plan. The Company is proposing to amend the 1991 Plan
to permit NSOs to be granted on a discretionary basis to non-employee directors
who do not serve on the Committee.
The Committee also determines (i) whether an option will be an incentive
stock option ("ISO") or an NSO, (ii) the size of an option, (iii) the option
vesting conditions and (iv) the term of the option, including the
post-termination exercise periods. The Company is proposing to amend the 1991
Plan to provide that no key employee shall receive options for more than 250,000
shares of Common Stock over the term of the Plan. The Company is also proposing
to amend the 1991 Plan to provide that the term of an NSO may exceed 10 years,
and to provide that options may be transferred by a key employee, if the option
agreement so provides. This latter amendment is an exception to the 1991 Plan's
general rule that such transfers, other than by will or the laws of descent and
distribution, are void.
Under the 1991 Plan, the exercise price of an ISO must be equal to or
greater than the fair market value of the Common Stock on the date of grant.
The 1991 Plan permits the grant of NSOs with an exercise price of at least 85%
of fair market value on the date of grant. The closing price per share of the
Company's Common Stock as reported on the Nasdaq National Market on May 11, 1995
was $14.00.
The exercise price of an option may be paid in any lawful form permitted by
the Committee. Permitted forms include (without limitation) the surrender of
shares of Common Stock owned by the optionee for more than six months (or such
lesser period as may be required by the Committee). The 1991 Plan also allows
the optionee to pay the exercise price of an option by giving "exercise/sale
directions." If exercise/sale directions are given, option shares sufficient to
pay the exercise price and any withholding taxes are issued directly to a
securities broker selected by the Company who, in turn,
-15-
sells these shares in the open market. The broker remits to the Company the
proceeds from the sale of these shares, and the optionee receives the remaining
option shares or cash.
The Company is also proposing to amend the 1991 Plan to permit further
amendments of the 1991 Plan to be effected by the Board of Directors without
further action of the Company's stockholders except as required by applicable
law.
FEDERAL INCOME TAX CONSEQUENCES. The following discussion of the federal
income tax consequences of the ISOs and NSOs granted under the 1991 Plan is
intended to be a summary of applicable federal law. State and local tax
consequences may differ. Because the federal income tax rules governing options
are complex and subject to frequent change, optionees are advised to consult
their tax advisors prior to exercise of options or dispositions of stock
acquired pursuant to option exercise.
ISOs and NSOs are treated differently for federal income tax purposes.
ISOs are intended to comply with the requirements of section 422 of the Code.
NSOs need not comply with such requirements.
An optionee is not taxed on the grant or exercise of an ISO. The
difference between the exercise price and the fair market value of the shares on
the exercise date will, however, be a preference item for purposes of the
alternative minimum tax. If an optionee holds the shares acquired upon exercise
of an ISO for at least two years following grant and at least one year following
exercise, the optionee's gain, if any, upon a subsequent disposition of such
shares is long-term capital gain. The measure of the gain is the difference
between the proceeds received on disposition and the optionee's basis in the
shares (which generally equals the exercise price). If an optionee disposes of
stock acquired pursuant to exercise of an ISO before satisfying the one and
two-year holding periods described above, the optionee will recognize both
ordinary income and capital gain in the year of disposition. The amount of
the ordinary income will be the lesser of (i) the amount realized on disposition
less the optionee's adjusted basis in the stock (usually the option price) or
(ii) the difference between the fair market value of the stock on the exercise
date and the option price. The balance of the consideration received on such a
disposition will be long-term capital gain if the stock had been held for at
least one year following exercise of the ISO. The Company is not entitled to
an income tax deduction on the grant or exercise of an ISO or on the optionee's
disposition of the shares after satisfying the holding period requirement
described above. If the holding periods are not satisfied, the Company will be
entitled to a deduction in the year the optionee disposes of the shares, in an
amount equal to the ordinary income recognized by the optionee.
An optionee is not taxed on the grant of an NSO. On exercise, however, the
optionee recognizes ordinary income equal to the difference between the option
price and the fair market value of the shares on the date of exercise. The
Company is entitled to an income tax deduction in the year of exercise in the
amount recognized by the optionee as ordinary income. Any gain on subsequent
disposition of the shares is long-term capital gain if the shares are held for
at least one year following exercise. The Company does not receive a deduction
for this gain.
NEW PLAN BENEFITS. The Committee will have full discretion to determine
the number and amount of options to be granted to key employees and non-employee
directors under the 1991 Plan. Therefore, the benefits and amounts that will be
received by each of the named executive officers, the executive officers as a
group, all other key employees and the non-employee directors as a group are
not determinable. Details on stock options granted during the last three years
to the named executive officers are presented in the table entitled "Summary
Compensation Table."
-16-
REQUIRED APPROVAL. The affirmative vote of the holders of a majority of
the shares of Common Stock represented and entitled to vote at the Annual
Meeting is required to approve the amendment and restatement of the 1991 Stock
Option Plan. Unless marked to the contrary, proxies received will be voted FOR
approval of the amendment and restatement of the Company's 1991 Stock Option
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND AND
---
RESTATE THE COMPANY'S 1991 STOCK OPTION PLAN.
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected Arthur Andersen LLP to serve as the Company's
independent public accountants for fiscal year 1996. While it is not required
to do so, the Board is submitting to the stockholders the selection of that firm
for ratification in order to ascertain the stockholders' views. If such
selection is not ratified by the affirmative vote of a majority of the shares of
Common Stock present or represented at the meeting and entitled to vote, the
Board will reconsider its selection.
Representatives of Arthur Andersen LLP are expected to be present at the
meeting and available to respond to appropriate questions. Such representatives
will have the opportunity to make a statement if they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS RATIFICATION OF THE APPOINTMENT OF ARTHUR
ANDERSEN LLP.
STOCKHOLDER PROPOSALS
To be considered for presentation at the 1996 Annual Meeting of
Stockholders, a stockholder proposal must be received at the offices of the
Company not later than February 1, 1996.
OTHER MATTERS
Management knows of no other business which will be presented for
consideration at the meeting. If any other business is properly brought before
the meeting, it is intended that proxies in the enclosed form will be voted in
respect thereof in accordance with the judgment of the persons voting the
proxies.
Whether or not you intend to be present at this meeting, you are urged to
return your proxy promptly.
By order of the Board of Directors
GARY S. WOLF
Secretary
-17-
PROXY
STANFORD TELECOMMUNICATIONS, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS JUNE 28, 1995
James J. Spilker, Jr. and Gary Wolf, or either of them, each with the power
of substitution, are hereby authorized to represent and vote as designated on
the reverse side the shares of the undersigned at the Annual Meeting of
Stockholders of Stanford Telecommunications, Inc. to be held on Wednesday,
June 28, 1995, or at any adjournment of the Annual Meeting.
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO THE VOTE AT THE
ANNUAL MEETING.
The undersigned hereby revokes any proxy or proxies heretofore given to
vote such shares, and acknowledges receipt of the Notice of Annual Meeting
and Proxy Statement relating to the June 28, 1995 Annual Meeting of
Stockholders.
Shares represented by this proxy will be voted as directed by the
stockholder. If no such directions are indicated, the proxies will have the
authority to vote "FOR" the election of directors and "FOR" Items 2, 3 and 4.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT IN THE
ACCOMPANYING ENVELOPE.
/x/ Please mark /
votes as in /
this example. /-----
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS
AND "FOR" ITEMS 2, 3 and 4.
For Against Abstain
1. Election of Directors. 2. Amendment of the / / / / / /
Company's Certificate
Nominees: Michael Berberian, of Incorporation to
John W. Brownie, P. Marshall increase the number of
Fitzgerald, Milton W. authorized shares of
Holcombe, Val P. Peline, Common Stock from
Leonard Schuchman, James J. 10,000,000 to 15,000,000,
Spilker, Jr., C. Jerome to eliminate provisions
Waylan authorizing the Board of
/ / FOR / / WITHHELD Directors to issue the
ALL FROM ALL Common Stock in series,
NOMINEES NOMINEES and to eliminate the
Company's Series B
Common Stock.
3. Amendment and / / / / / /
restatement of the
Company's 1991
Stock Option Plan.
4. Ratification of the / / / / / /
appointment of
Arthur Andersen &
Co. as the Company's
independent auditors
for the current fiscal
year.
5. Upon any other matters which might properly
come before the meeting.
MARK HERE / /
FOR ADDRESS
CHANGE AND
NOTE AT LEFT
Please sign exactly as your name Signature: ______________ Date ______ 1995
appears on this proxy. If signing
for estates, trusts or corporations, Signature: ______________ Date ______ 1995
title and capacity should be stated.
If shares are held jointly, each
holder should sign.
STANFORD TELECOMMUNICATIONS, INC.
---------------------------------
1991 STOCK OPTION PLAN
----------------------
(Amended and Restated Effective February 15, 1995)
TABLE OF CONTENTS
Page
1. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Committee Procedures . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Committee Responsibilities . . . . . . . . . . . . . . . . . . . . 4
(c) Modification, Extension and Renewal of Options . . . . . . . . . . 6
5. Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Ten Percent Shareholders . . . . . . . . . . . . . . . . . . . . . 7
(b) Stock Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) Outstanding Stock . . . . . . . . . . . . . . . . . . . . . . . . . 7
6. Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7. Terms and Conditions of Options . . . . . . . . . . . . . . . . . . . . 8
(a) Number of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Medium and Time of Payment . . . . . . . . . . . . . . . . . . . . 9
(d) Agreement To Serve . . . . . . . . . . . . . . . . . . . . . . . 10
(e) Term and Exercise of Options; Nontransferability of Options . . . 10
(f) Termination of Employment . . . . . . . . . . . . . . . . . . . . 11
(g) Rights as a Stockholder . . . . . . . . . . . . . . . . . . . . . 11
(h) Other Provisions . . . . . . . . . . . . . . . . . . . . . . . . 11
8. Term of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9. Adjustment of and Changes in the Shares . . . . . . . . . . . . . . . 12
10. Securities Law Requirements . . . . . . . . . . . . . . . . . . . . . 15
11. Amendment of the Plan . . . . . . . . . . . . . . . . . . . . . . . . 16
12. Deliveries of Certificates and Resale . . . . . . . . . . . . . . . . 16
13. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
14. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
15. Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-i-
STANFORD TELECOMMUNICATIONS, INC.
---------------------------------
1991 STOCK OPTION PLAN
----------------------
(Amended and Restated Effective February 15, 1995)
1. Purpose. This amended and restated Stock Option Plan of Stanford
-------
Telecommunications, Inc., a Delaware corporation (the "Corporation"), and its
eligible subsidiaries, is intended to provide incentive to employees of the
Corporation or of its subsidiaries, to encourage employee proprietary interest
in the Corporation, to encourage employees to remain in the employ of the
Corporation or of its subsidiaries and to attract and retain the best available
personnel for service as directors of the Corporation. Options granted under
the Plan may include both Nonstatutory Options and Incentive Stock Options.
This amended and restated Plan (a) increases the number of shares subject to the
Plan, (b) permits the grant of options to certain nonemployee directors, (c)
adds an individual grant limitation required by Code section 162(m) for option
income for certain individuals to be tax deductible by the Corporation, and (d)
makes certain additional changes.
2. Definitions.
-----------
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Corporation.
-1-
(d) "Committee" shall mean the Committee, if any, appointed by the Board
in accordance with Section 4 of the Plan.
(e) "Corporation" shall mean Stanford Telecommunications, Inc., a Delaware
corporation.
(f) "Employee" shall mean an individual (who may be an officer or a
director) employed by the Company (within the meaning of Code section 3401 and
the regulations thereunder).
(g) "Exercise Price" shall mean the price per Share of Common Stock,
determined by the Committee, at which an option may be exercised.
(h) "Fair Market Value" shall mean the value of one (1) Share of Common
Stock, determined as follows:
(i) If the shares are traded on an exchange, the price at which
Shares traded at the close of business on the date of valuation;
(ii) If the shares are traded over-the-counter on The Nasdaq
Stock Market, the mean between the bid and the asked price at the
close of business on the date of valuation, or, in the event the
shares are traded on The Nasdaq Stock Market, the last price on the
date of valuation; and
(iii) If neither (i) nor (ii) applies, the Fair Market Value as
determined by the Committee in good faith. Such determination shall
be conclusive and binding on all persons.
(i) "Incentive Stock Option" shall mean an Option described in Code
section 422(b).
-2-
(j) "Nonstatutory Option" shall mean an employee stock option not
described in sections 422(b), 423(b) or 424(b) of the Code.
(k) "Option" shall mean an Incentive Stock Option or a Nonstatutory Option
granted pursuant to the Plan.
(l) "Purchase Price" shall mean the Exercise Price times the number of
whole Shares with respect to which an Option is exercised.
(m) "Optionee" shall mean an Employee or a nonemployee member of the Board
who has received an Option.
(n) "Plan" shall mean this stock option plan, as amended and restated
herein.
(o) "Share" shall mean one Share of Common Stock, adjusted in accordance
with Section 9 of the Plan (if applicable).
(p) "Subsidiary" shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation where each
of the corporations in the unbroken chain (other than the last corporation) owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
3. Effective Date. This amended and restated Plan was adopted by the
--------------
Board effective February 15, 1995; provided, however, that if the Plan, as
hereby amended and restated, is not approved by the stockholders of the
Corporation within twelve (12) months from the date of its adoption by the
Board,
-3-
the amended and restated Plan shall terminate and all Options granted
hereunder shall be cancelled.
4. Administration.
--------------
(a) Committee Procedures. The Committee shall be designated by the Board
--------------------
and shall have such membership composition which enables the Plan to qualify
under Rule 16b-3 issued under the Securities Exchange Act of 1934 (the "Exchange
Act") with regard to the grant of Options to persons who are subject to Section
16 of the Exchange Act. The Committee may hold meetings at such times and
places as it shall determine. The acts of a majority of the Committee members
present at meetings at which a quorum exists, or acts reduced to or approved in
writing by all Committee members, shall be valid acts of the Committee.
(b) Committee Responsibilities. Subject to the provisions of the Plan,
--------------------------
the Committee shall have full authority and discretion to take the following
actions:
(i) To interpret the Plan and to apply its provisions;
(ii) To adopt, amend or rescind rules, procedures and forms
relating to the Plan;
(iii) To authorize any person to execute, on behalf of the
Corporation, any instrument required to carry out the purposes of the
Plan;
(iv) To determine when Options are to be granted under the Plan;
(v) To select the recipients of Options;
-4-
(vi) To determine the number of shares to be subject to each
Option;
(vii) To prescribe the terms and conditions of each Option,
including (without limitation) the exercise price, the vesting or
duration of the Option (including accelerating the vesting of the
Option), to determine whether an Option is to be classified as an
incentive stock option or a nonstatutory option, and to specify the
provisions of the Option Agreement relating to such Option;
(viii) To amend any outstanding Option, subject to applicable
legal restrictions and to the consent of the Optionee who entered into
such agreement;
(ix) To prescribe the consideration for the grant of each Option
under the Plan and to determine the sufficiency of such consider-
ation;
(x) To determine the disposition of each Option under the Plan
in the event of an Employee's divorce or dissolution of marriage;
(xi) To determine whether Options will be granted in replacement
of other grants under an incentive or other compensation plan of an
acquired business;
(xii) To correct any defect, supply any omission, or reconcile
any inconsistency in the Plan, or any Option; and
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(xiii) To take any other actions deemed necessary or advisable
for the administration of the Plan.
Subject to the requirements of applicable law, the Committee may designate
persons other than members of the Committee to carry out its responsibilities
and may prescribe such conditions and limitations as it may deem appropriate,
except that the Committee may not delegate its authority with regard to the
selection for participation of or the granting of Options under the Plan to
persons subject to Section 16 of the Exchange Act. All decisions,
interpretations and other actions of the Committee shall be final and binding on
all Optionees, and all persons deriving their rights from an Optionee. No
member of the Committee shall be liable for any action that he or she has taken
or has failed to take in good faith with respect to the Plan or any Option to
acquire Shares under the Plan.
(c) Modification, Extension and Renewal of Options. Within the
----------------------------------------------
limitations of the Plan, the Committee may modify, extend or renew outstanding
Options or may accept the cancellation of outstanding Options (to the extent not
previously exercised) in return for the grant of new Options at the same or a
different price or without regard to such grants. The foregoing notwith-
standing, no modification of an Option shall, without the consent of the
Optionee, impair his rights or increase his obligations under such Option.
5. Eligibility. Optionees shall be such key Employees (who may be
-----------
officers, whether or not they are directors) of the Corporation or of its
Subsidiaries as the Committee shall, in
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its complete discretion, select, but subject to the terms and conditions set
forth below. Optionees may also include any nonemployee member of the Board
who is not a member of the Committee at the time of the grant.
(a) Ten Percent Shareholders. An Employee who owns more than ten percent
------------------------
(10%) of the total combined voting power of all classes of outstanding stock of
the Corporation, its parent or any of its Subsidiaries shall not be eligible to
receive an Incentive Stock Option pursuant to this Plan unless, at the time such
Option is granted to him or her, the Exercise Price of the Shares subject to
such Option to such Employee is at least one hundred and ten percent (110%) of
the Fair Market Value of such Shares, and such Option by its terms is not
exercisable after the expiration of five (5) years from the date such Option is
granted.
(b) Stock Ownership. For purposes of this section, in determining stock
---------------
ownership, an Employee shall be considered as owning the Shares owned, directly
or indirectly, by or for his brothers and sisters, spouse, ancestors, and lineal
descendants. Shares owned, directly or indirectly, by or for a corporation,
partnership, estate, or trust shall be considered as being owned proportionately
by or for its shareholders, partners, or beneficiaries. Shares with respect to
which such Employee holds an option shall not be counted.
(c) Outstanding Stock. For purposes of this section, "Outstanding Stock"
-----------------
shall include all Shares actually issued and outstanding immediately after the
grant of the Incentive Stock
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Option to the Optionee. Outstanding Stock shall not include treasury Shares or
Shares authorized for issue under outstanding Options held by the optionee or by
any other person.
6. Stock. The stock subject to Options authorized to be granted under the
-----
Plan shall consist of one million (1,000,000) Shares of the Corporation's
authorized but unissued or reacquired Common Stock. In the event that any
outstanding Option for any reason expires or is terminated, the Shares allocable
to the unexercised portion of such Option may again be subject to an Option.
The limitations established by this Section 6 shall be subject to
adjustment upon the occurrence of the events specified and in the manner
provided in Section 9 hereof.
7. Terms and Conditions of Options. Options shall be evidenced by written
-------------------------------
agreements in such form as the Committee shall from time to time determine,
which agreements shall comply with and be subject to the following terms and
conditions:
(a) Number of Shares. Each Option shall state the number of Shares to
----------------
which it pertains and shall provide for the adjustment thereof in accordance
with the provisions of Section 9 hereof. The Stock Option Agreement shall also
specify whether the option is an Incentive Stock Option or a Nonstatutory
Option. Notwithstanding the foregoing, no Optionee shall be granted Options
pertaining to more than two hundred thousand (200,000) Shares over the life of
the Plan.
(b) Exercise Price. Each Option shall state the Exercise Price. The
--------------
Exercise Price under an Incentive Stock Option shall
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not be less than the Fair Market Value of a Share on the date of grant, or, in
the case of an Option granted to an optionee who is described in Section 5(a)
hereof, than one hundred ten percent (110%) of the Fair Market Value of a
Share on the date of grant. The Exercise Price under a Nonstatutory Option
shall be not less than eighty-five percent (85%) of the Fair Market Value of
a Share on the date of grant.
(c) Medium and Time of Payment. The Purchase Price shall be payable in
--------------------------
full in United States dollars upon the exercise of the Option; provided,
however, that, in its discretion, the Committee may permit the Purchase Price to
be paid by one of the following the alternative methods:
(i) The surrender of Shares in good form for transfer, owned for
such period prescribed by the Committee by the person exercising the
Option and having a Fair Market Value on the date of exercise equal to
the Purchase Price;
(ii) In any combination of cash and Shares, so long as the sum
of the cash so paid and the Fair Market Value of the Shares so
surrendered equals the Purchase Price;
(iii) In whole or in part with a full recourse promissory note
executed by the Optionee. No Share shall be issued until full payment
therefor has been made.
(iv) By delivery (on a form prescribed by the Committee) of an
irrevocable direction to a securities
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broker to sell Shares and to deliver all or part of the sale proceeds
to the Company in payment of the aggregate exercise price.
As a condition to the exercise of an Option, the Optionee shall make such
arrangements as the Committee may require for the satisfaction of any federal,
state or local tax obligations that may arise in connection with such exercise.
The Optionee shall also make such arrangements as the Committee may require for
the satisfaction of any federal, state or local tax obligations that may arise
in connection with the disposition of Shares acquired by exercising an
Option. Such arrangements may include share withholding or the delivery of
previously owned Shares in accordance with the Committee's rules.
(d) Agreement To Serve. Each Optionee shall agree that he or she will
------------------
remain in the Corporation's or a Subsidiary's employ or service for at least one
year from the date of grant. Such provision does not offset the Corporation's
right to terminate an Optionee's employ or service at any time and for any
reason.
(e) Term and Exercise of Options; Nontransferability of Options. Each
-----------------------------------------------------------
Option shall specify the date when all or any installment of the Option is to
become exercisable. The Option shall also specify the term of the Option, but
in no event shall the term of an ISO be greater than ten (10) years from the
date of grant. Subject to the preceding two sentences, the Committee in its
sole discretion shall determine when all or any installment of an Option is to
become exercisable and when an Option is to expire. Except to the extent the
Option agreement
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otherwise provides, each Option shall be transferable only by will or the laws
of descent and distribution and shall only be exercisable by the Optionee during
his or her lifetime.
(f) Termination of Employment. Each Option shall set forth the extent to
-------------------------
which the Optionee shall have the right to exercise the Option following
termination of employment and/or service with the Corporation or a Subsidiary,
and the right to exercise the Option of any executors or administrators of the
Optionee's estate or any person who has acquired such Option(s) directly from
the Optionee by bequest or inheritance. Such provisions shall be determined in
the sole discretion of the Committee, need not be uniform among all Options
issued pursuant to the Plan, and may reflect distinctions based on the reasons
for termination of employment and/or service.
(g) Rights as a Stockholder. An Optionee or a transferee of an Optionee
-----------------------
shall have no rights as a stockholder with respect to any Shares covered by his
or her Option until the date of the issuance of a stock certificate for such
Shares. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued,
except as provided in Section 9.
(h) Other Provisions. The Option agreements authorized under the Plan
----------------
shall contain such other provisions not inconsistent with the terms of the Plan,
including, without limitation,
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restrictions upon the exercise of the Option, as the Committee shall deem
advisable.
8. Term of the Plan. Options may be granted until the termination of the
----------------
Plan on January 26, 2001.
9. Adjustment of and Changes in the Shares. In the event the outstanding
---------------------------------------
Shares, as presently constituted, shall be changed into or exchanged for a
different number or kind of shares of stock or other securities of the
Corporation or of another corporation (whether by reason of reorganization,
merger, consolidation, recapitalization, reclassification, split-up, combination
of shares, or otherwise), or if the number of the outstanding Shares of the
Corporation shall be increased through the payment of a stock dividend, the
Committee shall substitute for or add to each Share theretofore appropriated or
thereafter subject to or which may become subject to an Option, the number and
kind of shares of stock or other securities into which each outstanding Share
shall be so changed, or for which each Share shall be exchanged, or to which
each such Share shall be entitled, as the case may be. In addition, the
Committee shall make appropriate adjustment in the number and kind of shares as
to which outstanding Options, or portions thereof then unexercised, shall be
exercisable, so that any Optionee's proportionate interest in the Corporation by
reason of his rights under unexercised portions of such Options shall be main-
tained as before the occurrence of such event. Such adjustment in outstanding
options shall be made without change in the total
-12-
price to the unexercised portion of the Option and with a corresponding
adjustment in the Option price per Share.
Notwithstanding the foregoing, in the event of the sale, dissolution or
liquidation of the Corporation, a merger or consolidation in which the
Corporation is not the surviving or resulting corporation, or a merger or
consolidation in which the Corporation becomes the subsidiary of another person
or entity, the Committee shall have the power to cause the termination of every
Option outstanding hereunder, except that the surviving, resulting or parent
corporation may, in its absolute and uncontrolled discretion, tender an option
or options to purchase its shares on its terms and conditions, both as to the
number of shares and otherwise; provided, however, that in all events, each
Optionee shall have the right, immediately prior to such sale, dissolution,
liquidation, merger or consolidation, to notification thereof as soon as
practicable and, thereafter, to exercise each Option with respect to which a
period of at least one (1) year has elapsed from the date of grant of the
Option, and purchase Shares subject thereto to the extent of any unexercised
portion of such Option, regardless of any vesting provisions hereunder. This
right of exercise shall be conditioned upon the execution of a final plan of
dissolution or liquidation or a definitive agreement of merger or consolidation
and upon the Corporation's receipt of written notice of such exercise at
least five (5) days prior to such sale, dissolution, liquidation, merger or
consolidation. For purposes of this paragraph, the Corporation shall be
deemed to be a "subsidiary" of any
-13-
person or entity that owns or controls, directly or indirectly, more than fifty
percent (50%) of the outstanding shares of the Corporation.
In the event of an offer by any person or entity to all shareholders of the
Corporation to purchase more than fifty percent (50%) of the Shares outstanding
immediately prior to such offer (or shares of stock or other securities which
shall be substituted for such Shares or to which such Shares shall be adjusted
as provided in this Section 9), any Optionee shall have the right upon the
commencement of such offer to exercise each Option with respect to which of a
period at least one year has elapsed from the date of grant of the Option, and
purchase Shares subject thereto to the extent of any unexercised or unvested
portion of such Option, regardless of any vesting provisions hereunder. This
right of exercise shall be conditioned upon the consummation of the transaction
described in the preceding sentence and upon the Corporation's receipt of
written notice of such exercise at least five (5) days prior to the consummation
of such transaction.
No right to purchase fractional Shares shall result from any adjustment in
Options pursuant to this Section 9. In case of any such adjustment, the Shares
subject to the Option shall be rounded down to the nearest whole Share. Notice
of any adjustment shall be given by the Committee to each Optionee and such
adjustment (whether or not such notice is given) shall be effective and binding
for all purposes of the Plan.
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To the extent any adjustments required pursuant to this Section 9 relate to
stock or securities of the Corporation, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive.
Except as expressly provided in this Section 9, an Optionee shall have no
rights by reason of any of the following events: (i) a subdivision or
consolidation of shares of stock of any class; (ii) payment of any stock
dividend; (iii) any other increase or decrease in the number of shares of stock
of any class; or (iv) any dissolution, liquidation, merger, consolidation or
spin-off of assets or stock of another corporation. Any issue by the
Corporation of shares of stock of any class, or securities convertible into
shares of any class, shall not affect the number or price of Shares subject to
the Option, and no adjustment by reason thereof shall be made.
The grant of an Option pursuant to the Plan shall not affect in any way the
right or power of the Corporation to make adjustments, reclassifications,
recapitalizations, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell, or
transfer all or any part of its business or assets.
10. Securities Law Requirements. No Shares shall be issued upon the
---------------------------
exercise of any Option unless and until the Corporation has determined that:
(i) it and the Optionee have taken all actions required to register the Shares
under the Securities Act of 1933 or perfect an exemption from the registration
requirements thereof; (ii) any applicable listing
-15-
requirement of any stock exchange on which the Common Stock is listed has been
satisfied; and (iii) any other applicable provision of state or federal law has
been satisfied.
11. Amendment of the Plan. The Board may suspend or discontinue the Plan
---------------------
or revise or amend it in any respect whatsoever, and any such action shall be
subject to the approval of the Corporation's stockholders only to the extent
required by applicable laws, regulations or rules.
12. Deliveries of Certificates and Resale. Certificates for the Shares
-------------------------------------
acquired through the exercise of an Option shall be delivered to the Optionee
involved as soon as possible after such exercise and the receipt by the
Corporation of payment for such Shares. Such certificates shall be subject to
such legends, stop-transfer instructions, or other conditions as counsel for the
Corporation may require in order to ensure the Corporation's compliance with all
applicable state and federal laws. There is no assurance that an Optionee may
sell the Shares acquired through the exercise of an Option until such Shares
have been registered or qualified for such sale with the Securities and Exchange
Commission and any appropriate state agencies. The Corporation is not
obligated to so register or qualify such Shares.
13. Construction. As used herein, the singular shall include the plural,
------------
and vice versa, and the masculine shall include the feminine.
14. Governing Law. The interpretation and performance of the Plan shall
-------------
be governed by the laws of the State of Delaware.
-16-
15. Execution. To record the adoption of the amended and restated Plan by
---------
the Board, the Corporation has caused its duly authorized officer to affix the
corporate name and seal hereto.
STANFORD TELECOMMUNICATIONS, INC.
By _______________________________
As its ___________________________
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