SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
By Rule 14a-6(e) (2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11 (c) or Section 240.14a-12
( ) Fee computed on table below per Exchange Act Rules 14a- OPTELECOM, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
6(i) (4) and 0-11.
1) Title of each class of securities to which transactions applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials
( ) Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 27, 2000
TO OUR STOCKHOLDERS:
The Annual Meeting of Stockholders of Optelecom, Inc. (the "Company") will
be held April 27, 2000 at 1:00 PM local time at Quality Suites, 3 Research
Court, Rockville, Maryland 20850 or at any adjournment thereof, for the
following purposes:
1. to elect Clyde A. Heintzelman and Pradeep Wahi as directors of the
Company for a three-year term ending in 2003
2. to elect David R. Lipinski as a director of the Company for a one-year
term ending in 2001.
3. to approve the Optelecom, Inc. Employee Stock Purchase Plan
4. to approve the Optelecom, Inc. 2000 Non-Qualified Stock Option Plan
5. to transact such other business as may properly come before the
meeting
Only stockholders of record at the close of business on March 1, 2000 will
be entitled to notice of, and to vote at, the meeting. A list of stockholders as
of such record date can be inspected by any stockholder for any purpose germane
to the meeting during the ten days preceding the meeting. Any such inspection
must be made at the Company's offices during normal business hours.
By Order of the Board of Directors
Howard E. Deutch
Secretary
Gaithersburg, Maryland
March 31, 2000
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IMPORTANT -
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WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN
IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE WHICH WILL
REQUIRE NO POSTAGE IF MAILED IN THE UNITED STATES.
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OPTELECOM, INC.
9300 Gaither Road
Gaithersburg, MD 20877
(Address of Principal Executive Office)
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 27, 2000
GENERAL
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Solicitation of Proxies
- -----------------------
This Proxy Statement is furnished in connection with the solicitation by
and on behalf of the Board of Directors of Optelecom, Inc. (the "Company") of
proxies to be voted at an Annual Meeting of Stockholders. In addition to
solicitation of proxies by use of the mails, proxies may be solicited by the
officers and regular employees of the Company, without additional remuneration,
by telephone, facsimile, telegraph, cable or personal interview. The Company
will bear all costs of solicitation. The Company will also request brokerage
houses, nominees, custodians, and fiduciaries to forward proxy material to the
beneficial owners of shares held of record by them and reimburse their expenses.
The approximate date on which this Proxy Statement and accompanying Proxy
will first be sent or given to stockholders is March 31, 2000.
Time and Place of Meeting
- -------------------------
The Annual Meeting of Stockholders will be held at Quality Suites, 3
Research Court, Rockville, Maryland 20850 on April 27, 2000 at 1:00 PM local
time.
Voting and Revocation of Proxies
- --------------------------------
All shares of Common Stock, $0.03 par value (the "Common Stock")
represented by effective proxies will be voted at the meeting or any adjournment
thereof in accordance with the instructions indicated thereon. In the absence of
instructions, shares represented by such proxies will be voted in favor of all
proposals. With respect to any other matter that may properly come before the
meeting or any adjournment thereof, proxies will be voted at the discretion of
the Board of Directors. The Board of Directors is not aware of any such other
matters.
The holders of 33-1/3% of the stock issued and outstanding and entitled to
vote, present in person or represented by proxy, shall constitute a quorum. (See
Securities Entitled to Vote and Record Date for the number of shares outstanding
- -------------------------------------------
and entitled to vote). The Board of Directors reserves the right to adjourn the
Annual Meeting of Stockholders if a quorum is not obtained by the date set for
the meeting. At any subsequent reconvening of the meeting, the Board of
Directors may cause the proxies solicited hereby to be voted in the same manner
as they were voted or could have been voted at the original meeting, except that
any proxies effectively revoked prior to the reconvening of the meeting shall
not be voted.
Any stockholder who executes and delivers a proxy may revoke it at any time
prior to its use either in person at the meeting or by sending written notice of
such revocation (or a later-dated proxy) to the Company.
Securities Entitled to Vote and Record Date
- -------------------------------------------
The Board of Directors has fixed the close of business on March 1, 2000 as
the date for determining stockholders entitled to receive notice of, and to vote
at, the Annual Meeting. On that date the Company had 2,060,293 shares of Common
Stock outstanding. Stockholders will be entitled to one vote on each proposal
for each share held of record on such record date.
1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of February 22, 2000, the name and
address of each person or group (other than directors of the Company) who is
known by the Company to be the beneficial owner of more than 5% of the Company's
outstanding Common Stock, the number of shares of Common Stock beneficially
owned by each such person, and the percentage of the Company's outstanding
Common Stock so owned.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership Of Class
- ------------------- -------------------- --------
Joel D. Rosenthal 118,000/(1)/ 5.73%
7620 Cabin Road
Cabin John, MD 20818
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TOTAL 118,000 5.73%
======= ======
_____________________
(1) Sole power to dispose or direct the disposition of these shares.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock of the Company as of February 22, 2000
by each director, nominee for director and all directors and officers as a
group.
Shares of Common Stock Percent
Name of Beneficial Owner Owned Beneficially/(1)/ Of Class
- ------------------------ ------------------------ --------
Clyde A. Heintzelman 23,500/(2)/ 1.14%
Edmund D. Ludwig 125,310/(2)(3)/ 6.08%
Carl Rubbo, Jr. 6,000/(2)/ *
Richard Kreter 16,750/(2)/ *
___________________ _______
All directors and Executive Officers as a group (4 persons) 171,560/(1)(2)(3)/ 8.33%
* Less than 1%
(1) For purposes of this proxy statement "beneficial ownership" of a security
exists when a person directly or indirectly has or shares "investment
power", which includes the power to dispose or direct the disposition of
such security, or "voting power", which includes the power to vote or
direct the voting of such security.
(2) Includes shares of common stock that were subject to options entitling the
holder to acquire the shares subject thereto within 60 days of February 22,
2000. On that date Messrs. Heintzelman, Ludwig, Rubbo and Kreter held such
options for the purchase of 13,500, 13,500, 6,000, and 10,500 shares
respectively.
(3) Includes 11,999 shares held in trust by the Company for Mr. Ludwig and
23,693 shares which Mr. Ludwig owns jointly with his wife, Mrs. Roberta
Ludwig.
PROPOSAL 1 - ELECTION OF DIRECTORS
----------------------------------
Directors are divided into three classes. One class of directors is elected
each year to serve for a term of three years and until successors are duly
qualified.
On February 17, 2000 Mr. Alex Karpinski, whose three-year term as a
Director was scheduled to expire at the Annual Meeting of Stockholders in 2000,
resigned from the Board of Directors. On March 27, 2000 Mr. Pradeep Wahi was
appointed as a Director by the Board of Directors to replace Mr. Karpinski and
has served since that time. The Board has nominated Mr. Wahi to serve on the
Board for a three- year term until the Annual Meeting of Stockholders in 2003
and until his successor is elected.
2
Mr. Clyde A. Heintzelman was appointed as a Director by the Board of
Directors on December 7, 1998 and has served since that time. The Board has
nominated Mr. Heintzelman to serve on the Board for a three-year term until the
Annual Meeting of Stockholders in 2003 and until his successor is elected.
Mr. David R. Lipinski was appointed as a Director by the Board of Directors
on March 27, 2000 and has served since that time. The Board has nominated Mr.
Lipinski to serve on the Board for a one-year term until the Annual Meeting of
Stockholders in 2001 and until his successor is elected.
The nominees have indicated that they are willing and able to serve as
directors if elected. If the nominees should become unable or unwilling to
serve, it is the intention of the persons designated as proxies to vote instead,
at their discretion, for such other person or persons as may be designated as
nominee(s) by the management of the Company.
Set forth in the table below is certain information regarding the nominee
and each person whose term of office will continue after the meeting. Except as
set forth therein and in the schedule of Security Ownership of Certain
Beneficial Owners, to the knowledge of the Company, no person owns of record or
beneficially more than five percent of the Company's Common Stock.
Present Term Year in Which
Expires at Service as a
Name, Age, Position with the Company and Annual Director
Principal Occupation during Last 5 Years Meeting in Began
---------------------------------------- ---------- -----
Clyde A. Heintzelman, 61 - President of NET2000 2000 1998
Communications, Inc. since November 1999, President and
CEO of SAVVIS Communications, Inc from December 1998 to
November, 1999; President and COO of Digex, Inc. from May
1995 to September 1997; co-founder of CSI, Inc. and
executive of that company from 1992 to 1995.
David R. Lipinski, 48 - Executive Director - Corporate 2000 2000
Development of Methode Electronics, Inc. since April,
1996; Independent consultant in Corporate finance from
June, 1995 to April, 1996; Vice President for Corporate
Development for Comarco, Inc. from August, 1992 to June,
1995
Edmund D. Ludwig, 60 - President and Chief Executive 2001 1980
Officer of the Company since January 1991.
Richard Kreter, 54 - Managing Partner of Kreter & 2002 1999
Associates from 1983 to present.
Carl Rubbo, Jr., 40 - Vice President and CFO of Capital 2002 1999
Programs Management, Inc. since August 1999; Vice
President of Branch Banking & Trust Company and Senior
Vice President of Franklin National Bank from May 1996 to
August 1999; Senior Vice President of Chevy Chase Federal
Savings Bank from 1994 to May 1996.
Pradeep Wahi, 49 - President and Chief Executive Officer 2000 2000
of Antenna Research Associates, Inc. since September, 1989
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Required Stockholder Vote
- -------------------------
The affirmative vote of the holders of a majority of the outstanding Common
Stock represented at the meeting is required to elect directors.
The Board of Directors recommends a vote FOR this proposal.
PROPOSAL 2 - APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN
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The Board of Directors has adopted the Optelecom, Inc.. Employee Stock
Purchase Plan (the "Purchase Plan") and directed that the Purchase Plan be
submitted to a vote of the stockholders at the Annual Meeting. If approved by
the stockholders, the Purchase Plan will become effective May 1, 2000. On
February 22, 2000, the closing sale price reported on the NASDAQ Stock Market
for a share of the Common Stock was $21.00. A copy of the Purchase Plan is
attached to this proxy statement as Exhibit A. The description contained herein
is qualified in its entirety by reference to the complete Purchase Plan. The
Board of Directors recommends a vote For this proposal.
Purpose
- -------
The purpose of the Purchase Plan is to provide eligible employees of the
Company and its subsidiaries with a method to acquire a proprietary interest in
the Company through the purchase of shares of its Common Stock by payroll
deduction at a discount and thus to develop a stronger incentive to work for the
continued success of the Company. The Purchase Plan is intended to qualify as
an employee stock purchase plan under Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code").
Administration
- --------------
The Purchase Plan will be administered by the Compensation Committee of the
Board of Directors (the Committee). Subject to the provisions of the Purchase
Plan, the Committee is authorized to determine any questions arising in the
administration, interpretation and application of the Purchase Plan and to make
such uniform rules as may be necessary to carry out its provisions.
Eligibility and Number of Shares
- --------------------------------
Up to 200,000 shares of Common Stock of the Company are available for
distribution under the Purchase Plan, subject to appropriate adjustments by the
Committee in the event of certain changes in the outstanding shares of Common
Stock. Shares delivered pursuant to the Purchase Plan may be acquired by
purchase for the accounts of participants on the open market or in privately
negotiated transactions by the Company or by a registered securities
broker/dealer selected by the Company, by direct issuance from the Company
(whether newly issued or treasury shares) or by any combination thereof.
Any employee of the Company or, under certain circumstances, a subsidiary
of the Company (including officers and any directors who are also employees)
will be eligible to participate in the Purchase Plan for any Offering that
begins on any January 1, March 1, July 1, or October 1 after the employee has
completed at least 12 months of continuous service.
Any eligible employee may elect to become a participant in the Purchase
Plan by filing an enrollment form in advance of the Offering to which it
relates. The enrollment form will authorize payroll deductions beginning with
the first payday in such Offering period and continuing until the employee
modifies his or her authorization, withdraws from the Purchase Plan, or ceases
to be eligible to participate.
No employee may participate in the Purchase Plan if he or she would be
deemed for purposes of the Code to own stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company.
The Company currently has approximately 64 employees who are eligible to
participate in the Purchase Plan.
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Participation
-------------
An eligible employee who elects to participate in the Purchase Plan will
authorize the Company to make payroll deductions of a specified fixed dollar
amount or whole percentage from 1% to 15% of the employee's gross cash
compensation as defined in the Purchase Plan. A participant may, on January I
or July 1, direct the Company to increase or decrease the amount of deductions
(within those limits) or make no further deductions, as set forth in greater
detail in the Purchase Plan. A participant may also elect to withdraw from the
Purchase Plan at any time before the end of an Offering period. In the event of
a withdrawal, all future payroll deductions will cease and the amounts withheld
will be paid to the participant in cash within 30 days. Any participant who
stops payroll deductions may not thereafter resume payroll deductions for that
Offering period, and any participant who withdraws from the Purchase Plan will
not be eligible to reenter the Purchase Plan until the next succeeding Offering
period.
Amounts withheld under the Purchase Plan will be held by the Company as
part of its general assets until the end of the Offering period and then applied
to the purchase of Common Stock of the Company as described in the Purchase
Plan. No interest will be credited to a participant for amounts withheld.
Purchase of Stock
- -----------------
As of the last day of each Offering period, the amounts withheld for a
participant in the Purchase Plan will be used to purchase shares of Common Stock
of the Company. The purchase price of each share will be equal to 85% of the
lesser of the Fair Market Value (as defined in the Purchase Plan) of a share of
Common Stock on either the first or last day of the Offering period. All
amounts so withheld will be used to purchase the number of shares of Common
Stock that can be purchased with such amounts at such price, unless the
participant has properly notified the Company that he or she elects to receive
the entire amount in cash. If some or all of such shares are acquired for the
accounts of participants on the open market or in privately negotiated
transactions, the Company will pay any brokerage fees and expenses in addition
to the funds available from participants' payroll deductions.
No more than $25,000 in Fair Market Value of shares of Common Stock may be
purchased under the Purchase Plan and all other employee stock purchase plans,
if any, of the Company and any subsidiary of the Company by any participant for
each calendar year.
If purchases by all participants would exceed the number of shares of
Common Stock available for purchase under the Purchase Plan, each participant
will be allocated a ratable portion of such available shares. Any amount not
used to purchase shares of Common Stock will be refunded to the participant in
cash.
As of the ending date of each Offering, each participant shall be deemed to
have elected to purchase, the maximum number of whole shares that may be
purchased with his or her payroll deduction account, unless the Committee has
received timely and proper notice of a withdrawal. The shares purchased will be
credited to the brokerage account. Any cash remaining in the participant's
payroll deduction account that is not applied toward the purchase of shares
shall be carried forward and applied in subsequent offerings. No participant
shall have any rights of a stockholder with respect to any shares until the
shares have been purchased in accordance with the Purchase Plan. Any cash
dividends paid on shares credited to the brokerage account shall be
automatically applied to purchase, at Company expense, additional shares from
the Company at the fair market value of such shares as of the business day
immediately preceding the date of purchase, or on the open market at the market
price at the time of purchase, and such additional shares shall be credited to
the brokerage account.
A participant may receive all, but not less than all, the shares of Common
Stock in his or her brokerage account at any time by completing a written
request therefor and filing it with the Committee.
Death, Disability, Retirement or Other Termination of Employment
- ----------------------------------------------------------------
If the employment of a participant terminates for any reason, including
death, disability or retirement, the amounts previously withheld will be
returned to the participant or beneficiary, as the case may be, and the
participant's interest in the brokerage account will be liquidated as described
in the Purchase Plan.
5
Rights Not Transferable
- -----------------------
The rights of a participant under the Purchase Plan are exercisable only by
the participant during his or her lifetime. No right or interest of any
participant in the Purchase Plan may be sold, pledged, assigned or transferred
in any manner other than by will or the laws of descent and distribution.
Amendment or Modification
- -------------------------
The Board of Directors may at any time amend the Purchase Plan in any
respect which shall not adversely affect the rights of participants pursuant to
shares previously acquired under the Purchase Plan, provided that approval by
the stockholders of the Company is required to increase the number of shares to
be reserved under the Purchase Plan (except for adjustments by reason of stock
dividends, stock splits, corporate separations, recapitalizations, mergers,
consolidations, combinations, exchanges of shares and similar transactions).
Termination
- -----------
The Purchase Plan shall terminate at the earliest of the following: (a) the
date of the filing of a "Statement of Intent to Dissolve" by the Company or the
effective date of a merger or consolidation wherein the Company is not to be the
surviving corporation, which merger or consolidation is not between or among
corporations affiliated with the Company; or (b) the date the Board of Directors
acts to terminate the Purchase Plan; or (c) the date when all the shares that
were reserved for issuance under the Purchase Plan have been purchased. Prior
to termination of the Purchase Plan, the Company may change the ending date of a
pending Offering. Upon termination of the Purchase Plan, the Company shall
refund to each participant the remaining amount credited to each participant's
payroll deduction account after all purchases have been made.
Federal Tax Considerations
- --------------------------
The following discussion is intended to provide an overview of the U.S. federal
income tax laws that are generally applicable to the Purchase Plan as of the
date of this proxy statement. People or entities in differing circumstances may
have different tax consequences, and the tax laws may change in the future.
This discussion is not to be construed as tax advice.
Payroll deductions under the Purchase Plan will be made on an after-tax
basis. Participants will not recognize any additional income as a result of
participation in the Purchase Plan until the disposal of shares acquired under
the Purchase Plan or the death of the participant. Participants who hold their
shares for more than 24 months after the end of the Offering period or die while
holding their shares will recognize capital gains in the year of disposition or
death equal to the lesser of (i) the excess of the fair market value of the
shares on the date of disposition or death over the purchase price paid by the
participant or (ii) the excess of the fair market value of the shares on the
last day of the Offering period over the purchase price paid by the participant.
If the 24-month holding period has been satisfied when the participant sells the
shares or if the participant dies while holding the shares, the Company will not
be entitled to any deduction in connection with the transfer of such shares to
the participant.
Participants who dispose of their shares within 24 months after the shares
were purchased will be considered to have realized ordinary income in the year
of disposition in an amount equal to the excess of the fair market value of the
shares on the date they were purchased by the participant over the purchase
price paid by the participant. If such dispositions occur, the Company
generally will be entitled to a deduction at the same time and in the same
amount as the participants who make those dispositions are deemed to have
realized ordinary income.
Participants will have a basis in their shares equal to the purchase price
of their shares plus any amount that must be treated as ordinary income at the
time of disposition of the shares. Any additional gain or loss realized on the
disposition of shares acquired under the Purchase Plan will be capital gain or
loss.
Recommendation by Board of Directors
- ------------------------------------
The Board of Directors recommends that stockholders vote YES on this
proposal. The affirmative vote of the holders of a majority of the shares of
Common Stock voting at the Annual Meeting will be required for adoption of the
proposal.
6
PROPOSAL 3 - APPROVAL OF OPTELECOM, INC. 2000 NON-QUALIFIED STOCK OPTION PLAN
- -----------------------------------------------------------------------------
The Board of Directors has adopted the Optelecom, Inc. 2000 Non-Qualified
Stock Option Plan (the "Stock Option Plan") and directed that the Stock Option
Plan be submitted to a vote of the stockholders at the Annual Meeting. If
approved by the stockholders, the Stock Option Plan will become effective April
1, 2000. On February 22, 2000, the closing sale price reported on the NASDAQ
Stock Market for a share of the Common Stock was $21.00. The Board of Directors
recommends a vote For this proposal.
The Board of Directors believes that the continued success of the Company
depends upon its ability to attract and retain highly qualified and competent
key employees and that stock options and other awards enhance that ability and
provide motivation to employees to advance the interest of the Company and its
stockholders. The Company expects to issue options and Restricted Stock awards
under the Stock Option Plan in the ordinary course of business to attract,
retain and motivate employees as it deems such issuance to be appropriate. The
Board of Directors believes that the shares authorized for issuance under the
Stock Option Plan are necessary to facilitate the Company's growth. The
Company's only other employee stock option plan, the Optelecom, Inc. 1991 Stock
Option Plan, will terminate on December 31, 2000.
The following summary of certain features of the Stock Option Plan is
qualified in its entirety by reference to the full text thereof, which is set
forth in Appendix B attached hereto.
Generally
- ---------
The Stock Option Plan is a flexible plan that will provide the Compensation
Committee ("Committee") broad discretion to fashion the terms of awards to
provide employees with such stock-based incentives as the Committee deems
appropriate. It will permit the issuance of awards in the form of (i) Non-
Qualified Stock Options ("NQSOs" or "Options") and (ii) Restricted Stock.
Administration
- --------------
The Stock Option Plan will be administered by the Compensation Committee
which consist of not less than three non-employee directors of the Company
(notwithstanding the above, at any time that the Company has less than three
non-employee directors, the Committee will consist of such lesser number of non-
employee directors). Subject to the express provisions of the Stock Option
Plan, the Committee will have sole discretion and authority to determine from
among eligible employees those to whom and the time or times at which (i)
Options may be granted and the number of shares of Stock that will be subject to
each Option, and/or (ii) Restricted Stock will be granted and the number of such
shares that will be granted to each such employee and all other terms and
conditions related to such Restricted Stock. Subject to the express provisions
of the Plan, the Committee will also have complete authority to interpret the
Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan, to determine the details and provisions of each Stock Option Agreement and
Restricted Stock Award Agreement, and to make all other determinations necessary
or advisable in the administration of the Plan
Eligibility
- -----------
In general, all full-time employees of the Company or any subsidiary of the
Company are eligible to receive awards under the Stock Option Plan.
Number of Shares Available
- --------------------------
The Stock Option Plan provides for the grant of up to 300,000 shares of
Common Stock. Under certain circumstances, shares subject to an award that
remain unissued upon termination of the award will become available for
additional awards under the Stock Option Plan. In the event of a stock
dividend, stock split, recapitalization or similar event, the Committee will
equitably adjust the aggregate number of shares subject to the Stock Option Plan
and the number, class and price of shares subject to awards that are
outstanding.
Amendment and Termination
- -------------------------
The Stock Option Plan may be amended, modified or terminated by the Board
of Directors, except that certain amendments relating to SEC rulings, NASDAQ or
other securities exchange requirements, changes in eligibility, increases in
the number of shares, or reduction of the minimum option price, require
stockholder
7
approval. Unless earlier terminated by the Board of Directors or stockholders,
the Stock Option Plan will terminate on March 31, 2010.
Awards Under the Stock Option Plan
----------------------------------
Options
- -------
All Stock Options granted under the Plan will be Non-qualified Stock
Options. The Committee in its discretion will determine the number of shares
of Common Stock subject to Options to be granted to each participant. Options
granted under the Stock Option Plan will provide for the purchase of Common
Stock at prices determined by the Committee, but in any event not less then 50%
of the fair market value thereof on the date the Stock Option is granted.
However, if the Committee grants a Stock Option at a price less than 85% of its
fair market value on the specified date, the Committee shall include in the
minutes of the meeting at which it approved such grant, or in the written
consent of the Committee which evidences the approval of the grant, its reasons
for selecting such lesser Option price.
If the Option is granted pursuant to Article VII of the Stock Option Plan
(see Options Linked to Performance Incentives below) the exercise price will be
the market price (or a specified percentage of the market price) on the
beginning date of the performance measurement period.
Each Option will expire at the earlier of (a) the date five (5) years after
the date of grant, (b) thirty (30) days after an Optionee's employment is
terminated as a result of a layoff; (c) the first date when the Optionee is no
longer an employee of the Company or any Subsidiary by reason of his or her
voluntary termination; or (d) the date notice is given to an Optionee that he or
she is being terminated for cause. A termination will not be deemed voluntary
if it results from the employee's death or disability. For purposes of this
Plan, "disability" means a medically-determinable physical or mental impairment
which can be expected to result in death or has lasted (or can be expected to
last) for a continuous period of not less than 12 months and which renders the
Optionee unable to reasonably perform those functions for the Company (or any
Subsidiary) for which he or she was responsible immediately prior to such
disability.
Stock Options are exercisable in installments as follows: (i) commencing
with the date one year from the granting of an Option, to the extent of 25% of
the total number of shares subject to the Option; (ii) commencing with the date
two years from the granting of an Option, to the extent of an additional 25% of
the total number of shares subject to the Option; (iii) commencing with the date
three years from the granting of an Option, to the extent of an additional 25%
of the total number of shares subject to the Option; and (iv) commencing with
the date four years from the granting of the Option, to the extent of the
remaining 25% of the total number of shares subject to the Option. To the
extent not exercised, installments accumulate and are exercisable, in whole or
in part, in any subsequent period. The Committee may in its sole discretion
waive any or all of the time periods for exercise of Options or provide for
different exercise times, whether more or less stringent. Such waivers or
variations will be for individual cases as the Committee determines, and no
waiver or variance will be deemed precedent for any other Option. In no event
will any Option be exercisable more than five years from the date it is granted.
No Option can be transferred by the Optionee otherwise than by will or the
laws of descent and distribution. During the lifetime of an Optionee, the
Option is exercisable only by him or her.
Options Linked to Performance Incentives
- ----------------------------------------
The Committee has the right, from time to time, to establish individual
performance programs that are linked to Options under the Stock Option Plan.
Each performance program will contain the following elements:
(a) It shall be in writing.
(b) It shall state specific goals for that employee.
(c) It shall state the beginning and ending date of the performance
measurement period.
(d) It shall state the number of shares related to accomplishment of each
goal.
8
(e) At the end of the performance measurement period, management will
evaluate the employee's performance and determine what percent of each
goal the employee has accomplished. Management will apply each such
percentage to the number of shares related to such goal.
(f) The Committee shall grant an Option to the employee based on
management's evaluation as set forth in items (d) and (e) above.
(g) The Stock Option Agreement will be identical to all other Stock Option
Agreements issued pursuant to the Plan except that the exercise price
will be the market price (or a specified percentage of the market
price) on the beginning date of the performance measurement period.
Restricted Stock
- ----------------
The Committee may, from time to time, grant Restricted Stock to employees
of the Company or its subsidiaries. Each grant of Restricted Stock will be
evidenced by a written Restricted Stock Award Agreement between the participant
and the Company setting forth the terms and conditions of the grant as
determined by the Committee, in its discretion, to be necessary or desirable.
Terms may include a requirement for payment by the participant to the Company
for the Restricted Stock that is granted.
Each grant of Restricted Stock will be subject to restrictions, determined
by the Committee in its discretion, for a period of at least one (1) year (the
"Restricted Period"). Such restrictions may include only the requirement of
continued employment or may include other financial performance-based criteria
established by the Committee. The Restricted Stock will be forfeitable (and
all rights of the participant in the Restricted Stock will terminate) unless the
participant has remained a full-time employee of the Company or any of its
subsidiaries until the expiration of the Restricted Period and any other
conditions prescribed by the Committee are met. However, the Committee may,
after a grant, in its discretion, shorten the Restricted Period or waive any
condition to the lapse of the restrictions. The Restricted Stock Award
Agreement may, at the discretion of the Committee and subject to any prescribed
terms and conditions, also provide for the lapse of restrictions upon the
occurrence of such specified events as a change in control of the Company or the
termination of the participant's employment by reason of his or her death,
disability, retirement or discharge without cause.
During the Restricted Period, the participant will have all the rights of a
Company stockholder, including the right to receive dividends and vote the
shares of Restricted Stock, except as follows. Cash dividends will be paid
either in cash or in Restricted Stock, as the Committee determines. In
addition, the Restricted Stock may not be transferred, assigned or encumbered
unless and until all restrictions have lapsed. The Restricted Stock will be
forfeited to the Company if all conditions to the lapse of the restrictions have
not been met or waived at or prior to the expiration of the Restricted Period.
Changes in Control
- ------------------
Upon the occurrence of certain change in control events (i) all Stock
Options outstanding will become immediately exercisable and (ii) all
restrictions on Restricted Stock will immediately lapse.
Federal Tax Consequences
------------------------
The following discussion is intended to provide an overview of the U.S. federal
income tax laws that are generally applicable to the Stock Option Plan as of the
date of this proxy statement. People or entities in differing circumstances may
have different tax consequences, and the tax laws may change in the future.
This discussion is not to be construed as tax advice.
Stock Options
- -------------
There are generally no federal tax consequences either to the employee
receiving an NQSO (the "Optionee") or to the Company upon the grant of an NQSO.
On exercise of an NQSO, the amount by which the fair market value of the Common
Stock on the date of exercise exceeds the option exercise price will generally
be taxable to the Optionee as compensation income and will generally be
deductible for tax purposes by the Company. The dispositions of shares of
Common Stock acquired upon exercise of a NQSO will generally result in a capital
gain or loss for the Optionee, but will have no tax consequences for the
Company.
9
Restricted Stock
- ----------------
The Company is of the opinion that the participant will realize
compensation income in an amount equal to the fair market value of the
Restricted Stock (whether received as a grant or as a dividend), less any amount
paid for such Restricted Stock, at the time when the participant's rights with
respect to such Restricted Stock are no longer subject to a substantial risk of
forfeiture, unless the participant elected, pursuant to a special election
provided in the Code, to be taxed on the Restricted Stock at the time it was
granted or received as a dividend, as the case may be. Dividends paid to the
participant during the Restricted Period will be taxable as compensation income,
rather than as dividend income, unless the election referred to above was made.
The Company is also of the opinion that it will be entitled to a deduction under
the Code in the amount and at the time that compensation income is realized by
the participant.
The amount of income realized by each participant and the amount of the
deduction available to the Company will be affected by any change in the market
price of the Common Stock during the limitation period.
No awards have been made under the Stock Option Plan as of the date of this
Proxy Statement. It is not possible to determine the benefits or amounts that
will be received by any persons or groups of persons under the Stock Option Plan
or that would have been received had it been in effect during the last fiscal
year.
Recommendation by Board of Directors
- ------------------------------------
The Board of Directors recommends that stockholders vote YES on this
proposal. The affirmative vote of the holders of a majority of the shares of
Common Stock voting at the Annual Meeting will be required for adoption of the
proposal.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
-----------------------------------------
The Board of Directors held 16 meetings during 1999 and all directors
attended at least 75% of such meetings. The Board of Directors does not have a
nominating committee.
Compensation Committee
- ----------------------
The duties of the Compensation Committee are to review executive
compensation and make recommendations to the Board of Directors concerning
compensation levels of officers. The current members of the Compensation
Committee are Mr. Clyde Heintzelman, Mr. Richard Kreter and Mr. Carl Rubbo, Jr.
Mr. Kreter has been the Chairman since August 23, 1999. The Compensation
Committee met three times during 1999.
Compensation Committee Report on
Executive Compensation
To the Stockholders
Optelecom, Inc.
Compensation Philosophy
The Company's philosophy is that total compensation for its Chief Executive
Officer ("CEO") and other executives should be established by the same process
used for its other salaried employees, except that: (1) executives should have a
greater portion of their compensation at risk than other employees, (2) a larger
portion of executive compensation should be tied directly to the performance of
the business and (3) executives should share in the same risks and rewards as do
stockholders of the Company.
The Company also believes that executive compensation should be subject to
objective review. For this reason, the Compensation Committee of the Board of
Directors ("Committee") has been established. The Committee is comprised of
three directors, none of whom are employees or former employees of the Company.
The Committee's role is to assure that the compensation strategy of the Company
is aligned with the interests of the stockholders, and that the Company's
compensation structure will allow for fair and reasonable base salary levels and
the opportunity for senior executives to earn short-term and long-term
compensation that reflects both Company and individual performance as well as
industry practice. The Committee has, from time to time, utilized the expertise
of independent compensation consultants in discharging its responsibilities.
10
It is the Company's practice to set total compensation targets for each
executive at levels equivalent to the median (50/th/ percentile) of comparable
electronic technology and general industry companies of similar size, as
measured by annual revenues.
Compensation Programs and Policies
- ----------------------------------
The Company's executive compensation programs are designed to motivate,
retain and reward executives who are successful in helping the Company achieve
its business objectives. The Company operates in a growing industry
characterized by increasingly demanding technology and highly competitive global
operating environments. Executives compensation programs of the Company are
designed to address these considerations.
For the CEO and other executive officers, base salary is determined by the
level of job responsibility, the competitiveness of the executive's salaries to
the external marketplace and the degree to which established objectives have
been achieved.
Based on these factors and the recent financial performance of the Company,
the committee decided that the compensation provided to the CEO was appropriate.
Salary
- ------
The CEO's base salary for 1999 was $150,000 and there was no additional
compensation.
Audit Committee
- ---------------
The Audit Committee was established in February of 1998. This Committee is
charged with the responsibility for:
1. Reviewing the annual financial report to shareholders and the annual
report (Form 10-K) filed with the Securities and Exchange Commission;
2. Reviewing the quarterly reporting process;
3. Overseeing the monitoring of the Company's system of internal controls;
4. Recommending annually to the Board of Directors the selection of the
Company's independent auditors;
5. Determining the independent auditors' qualifications including the
firm's membership in the SEC practice section of the AICPA and
compliance with that organization's requirements for peer review and
independence;
6. Reviewing annually the audit plans of the independent auditors;
7. Meeting with the independent auditors at the completion of their annual
examination to review their evaluation of the financial reporting and
internal controls of the Company and any changes required in the
originally planned audit program;
8. Reviewing the reports on examinations by regulatory authorities;
9. Monitoring the Company's policies and procedures for the review of
expenses and perquisites of selected members of senior management;
10. Performing any special reviews, investigations or oversight
responsibilities required by the Board of Directors; and
11. Reporting to the Board of Directors on the results of the activities
of the Committee.
11
The current members of the Audit Committee are Mr. Kreter and Mr. Carl
Rubbo. During 1999 the members of the Audit Committee were Mr. Carl Rubbo and
Mr. Alex Karpinski. In 1999 Mr. Karpinski was Chairman of the Committee. Mr.
Rubbo has been the Chairman since August 23, 1999. The Audit Committee met two
times during 1999
SUMMARY COMPENSATION TABLE
The following table shows a three-year history of the compensation of the
Company's Chief Executive Officer, who was the only executive officer of the
Company (the "Named Executive") serving as such as of the end of 1999 whose
total salary and bonus for the year ended December 31, 1999 was in excess of
$100,000 for services rendered in all capacities for such year.
Summary Compensation Table
Long-term
Annual Compensation Compensation
-----------------------------------------------------------
Securities
Name and Principal Year Salary Bonus Other Annual Underlying All Other
Position Compensation Options (#) Compensation
- -----------------------------------------------------------------------------------------------------------------
Edmund Ludwig, President, 1999 $150,720 -0- - - -
Chief Executive Officer 1998 147,433 $34,000/(1)/ - - -
and Director 1997 133,613 30,000/(1)/ - 12,000 $6,810
- -----------------------------------------------------------------------------------------------------------------
(1) Bonus paid for the prior fiscal year-end results.
AGGREGATED OPTION EXERCISES IN LAST YEAR AND YEAR-END OPTION VALUES
-------------------------------------------------------------------
The Company did not grant any stock options to the Named Executive during
1999. The following table shows information regarding the stock options
exercised by the Company's Named Executive during 1999 and the number and value
of unexercised stock options at December 31, 1999. The value of unexercised
stock options is based on the closing price of $4.125 per share of common stock
on December 31, 1999, the last trading day of 1999.
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year-End Option Values
Number of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
December 31, 1999 (#) December 31, 1999 ($)
Shares Acquired Value
Name on Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------------------
Edmund Ludwig 0 $0 9,000 9,000 $0 $0
1996 Directors Stock Option Plan
- --------------------------------
On May 17, 1995 the Board of Directors approved the 1996 Directors Stock
Option Plan (the "1996 Directors Plan") under which each non-employee director
who attends a Board meeting is granted as remuneration for attendance at such
Board meeting, an option to purchase 500 shares of common stock at the fair
market value of the Common Stock (750 shares after giving effect to the 1997 50%
stock dividend) on the date of such Board meeting.
At December 31, 1999 options to purchase 103,500 shares were outstanding
under the 1996 Directors Plan at an average exercise price of $5.47 per share.
No options were exercised during 1999.
Employment Contracts
- --------------------
Mr. Edmund D. Ludwig is compensated pursuant to an employment agreement
that expires December 31, 2000. The agreement continues for successive one-year
periods thereafter unless terminated by either party upon at least on 60 days
notice. Under terms of the agreement, the Board of Directors establishes Mr.
Ludwig's salary each
12
year for the succeeding year. The agreement provides that if Mr. Ludwig dies,
the Company will pay his estate one year's salary. Mr. Ludwig was elected
President and Chief Executive Officer on January 1, 1991.
Five Year Performance Comparison
- --------------------------------
The following graph compares the cumulative total shareholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total return on the NASDAQ US Index, the S&P 500 Index and the NASDAQ Telecom
Index. The comparisons in this table are required by the Securities and
Exchange Commission and are not intended to forecast or be indicative of
possible future performance of the Company's stock.
[GRAPH APPEARS HERE]
12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- --------
NASDAQ US 100 123.0396384 150.7532395 212.5669177 393.3831828
S&P 500 100 123.2936879 164.575408 211.9708376 436.3223306
NASDAQ TELECOM 100 101.7221246 149.2595023 247.1217958 437.2614285
OPTC 100 300.0545554 531.9148936 153.4369885 225.0409165
MISCELLANEOUS
-------------
Compliance with Section 16(a) of the Securities Exchange Act of 1934
- --------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the NASD. Officers, directors and greater than ten-percent stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company, or written representations that no Forms 4 were required, the Company
believes that during 1999 all Section 16(a) filing requirements applicable to
its officers, directors and greater than ten-percent beneficial owners were
complied with.
Accountants
- -----------
The Board of Directors has selected Deloitte & Touche LLP as independent
public accountants for the Company for the year ending December 31, 2000.
Deloitte & Touche LLP has served as independent public accountants for the
Company since October 20, 1995. To the knowledge of the Company, at no time has
Deloitte & Touche LLP had any direct or indirect financial interest in or any
connection with the Company other than in connection with services rendered to
the Company.
13
The selection of Deloitte & Touche LLP was based on the recommendation of
the Audit Committee, which is composed wholly of outside directors. The Audit
Committee meets periodically with the Company's Chief Financial Officer and
independent public accountants to review the scope and results of the audit
function and the policies relating to audit scope and estimated fees for the
coming year.
The Company anticipates that a representative of Deloitte & Touche LLP will
attend the Annual Meeting for the purpose of responding to appropriate questions
from stockholders.
Nominations, Other Business and Deadline for Stockholder Proposals
- ------------------------------------------------------------------
Under an amendment to the Company's By-Laws adopted in February, 1998,
nominations for director may be made only by the Board or a Board committee or
by a stockholder entitled to vote in accordance with the following procedures.
A stockholder may nominate a candidate for election as a director at an Annual
Meeting of stockholders only by delivering notice to the Company not less than
90 nor more than 120 days prior to the first anniversary of the preceding year's
Annual Meeting, except that if the Annual Meeting is called for a date that is
not within 30 days before or after such anniversary date, notice must be
received not later than the tenth day following the earlier of the date the
Company's notice of the meeting is first given or announced publicly. With
respect to a Special Meeting called to elect directors because the election of
directors is not held on the date fixed for the Annual Meeting, a stockholder
must deliver notice not later than the tenth day following the earlier of the
date that the Company's notice of the meeting is first given or announced
publicly. Any stockholder delivering notice of nomination must include certain
information about the stockholder and the nominee, as well as a written consent
of the proposed nominee to serve if elected.
The By-Laws also provide that no business may be brought before an Annual
Meeting except as specified in the notice of the meeting (which includes
stockholder proposals that the Company is required to set forth in its proxy
statement under SEC Rule 14a-8) or as otherwise brought before the meeting by or
at the direction of the Board or by a stockholder entitled to vote in accordance
with the following procedures. A stockholder may bring business before an Annual
Meeting only by delivering notice to the Company within the time limits
described above for delivering notice of a nomination for the election of a
director at an Annual Meeting. Such notice must include a description of and the
reasons for bringing the proposed business before the meeting, any material
interest of the stockholder in such business and certain other information about
the stockholder. These requirements are separate and apart from and in addition
to the SEC's requirements that a stockholder must meet in order to have a
stockholder proposal included in the Company's proxy statement under SEC Rule
14a-8.
A copy of the full text of the By-Law provisions discussed above may be
obtained by writing to the Secretary of the Company.
14
EXHIBIT A
OPTELECOM, INC.
EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I - PURPOSE OF THE PLAN
The Company has established this Plan to provide eligible employees of the
Company and its Subsidiaries with a method to acquire a proprietary interest in
the Company through the purchase of shares of its Common Stock by payroll
deduction at a discount and thus to develop a stronger incentive to work for the
continued success of the Company. The Plan is intended to qualify as an
"employee stock purchase plan" under Section 423 of the Code and shall be
construed and operated consistently with the requirements of that Section.
ARTICLE 2 - DEFINITIONS
2.1 "Beneficiary" means the person designated by the Participant on a form
provided by and acceptable to the Committee to receive the Participant's Payroll
Deduction Account in the event of his death. In the absence of any such
designation, "Beneficiary" shall mean the Participant's estate.
2.2 "Board" means the Board of Directors of the Company.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Commencement Date" means the January 1, April 1, July I or October 1,
as the case may be, on which a particular Offering begins.
2.5 "Committee" means the Compensation Committee of the Board of Directors.
2.6 "Company" means Optelecom, Inc.
2.7 "Designated Person" means the person designated by the Committee to
receive any forms or agreements required or permitted under the Plan. More than
one person may be designated by the Committee. Different persons may be
designated for different forms or agreements. The Designated Person may be an
individual or an entity. The Committee shall notify Participants in writing of
the identity of each Designated Person and the forms or agreements to be sent to
each such person.
2.8 "Effective Date" means April 1, 2000.
2.9 "Ending Date" means the March 31, June 30, September 30 or December 31,
as the case may be, on which a particular Offering concludes.
2.10 "Enrollment Agreement" means the enrollment form acceptable to the
Committee that a Participant who wishes to participate in the Plan must submit
to the Designated Person prior to the Commencement Date.
2.11 "Offering" means each three (3) consecutive month offering period for
the purchase and sale of Shares under the Plan.
2.12 "Participant" means an employee who has satisfied the eligibility
requirements of Article 3 and who has complied with the requirements of Article
4.
2.13 "Pay" means and includes (i) a Participant's regular salary or
earnings; (ii) a Participant's overtime pay; and (iii) bonuses designated by the
Committee as being eligible to be used to purchase Shares under this Plan.
"Pay'' shall not include any other compensation, taxable or otherwise, including
without limitation moving/relocation expenses, imputed income, option income,
tax-gross-ups and taxable benefits.
2.14 "Payroll Deduction Account" shall mean the Company's bookkeeping entry
that reflects the amount deducted from each Participant's Pay for the purpose of
purchasing Shares under the Plan, reduced by amounts refunded to the Participant
and amounts applied to purchase Shares hereunder. Amounts deducted from each
15
Participant's Pay may be commingled with the general funds of the Company. No
interest shall be paid or allowed on a Participant's payroll deductions.
2.15 "Plan" means the Optelecom, Inc. Employee Stock Purchase Plan.
2.16 "Purchase Price" means the price per Share as set forth in Article 6
paid by a Participant to acquire Shares hereunder.
2.17 "Shares" means shares of the Company's common stock.
2.18 "Subsidiaries" means any present or future domestic or foreign
corporation that would be a "subsidiary corporation" of the Company as that term
is defined in Section 424(f) of the Code.
2.19 "Withdrawal" means a Participant's election to withdraw from an
Offering pursuant to Article 11.
ARTICLE 3 - ELIGIBILITY
Any employee of the Company or any of its Subsidiaries shall be eligible to
participate in the Plan as of the Commencement Date coinciding with or next
following the completion of twelve (12) consecutive months of employment
following his date of hire. For the purpose of determining an employee's
initial eligibility, an employee's period of employment with any business
entity, the assets, business or stock of which has been acquired, in whole or in
part by the Company or any of its Subsidiaries through purchase, merger or
otherwise ("Acquired Business"), shall be taken into account. An employee's
period of employment with the Company, any of its Subsidiaries, or any Acquired
Business prior to the Effective Date shall be taken into account. If an
employee terminates employment with the Company or any of its Subsidiaries for
any reason and is later rehired, such employee, regardless of whether he is
eligible to participate in the Plan prior to his termination, shall be treated
as a new employee and will be eligible to participate in the Plan as of the
Commencement Date coinciding with or next following the completion of twelve
(12) consecutive months of employment following his date of rehire. For
purposes of this Article, an employee's employment with the Company or any of
its Subsidiaries shall not be considered interrupted or terminated in the case
of a leave of absence or suspension, provided that such leave is approved by the
Company or the employee's reemployment with the Company or any of its
Subsidiaries upon the expiration of such leave is guaranteed by contract or
statute.
ARTICLE 4 - PARTICIPATION
An eligible employee may become a Participant by completing an Enrollment
Agreement provided by the Company and filing it with the Designated Person prior
to the deadline set by the Committee that precedes the Commencement Date of the
Offering to which it relates. Participation in one Offering under the Plan
shall neither limit, nor require, participation in any other Offering; provided,
however, that at the conclusion of each Offering, the Company shall
automatically re-enroll each Participant in the next Offering at the same rate
of payroll deduction, unless the Participant has advised the Designated Person
otherwise in a written form acceptable to the Committee.
ARTICLE 5 - OFFERINGS
Each Offering shall be for three (3) consecutive months. The first Offering
shall commence on April 1, 2000 Thereafter, Offerings shall commence on each
subsequent July 1, October 1 January 1, and April 1, and shall continue until
the Plan is terminated in accordance with Section 15.5.
ARTICLE 6 - PURCHASE PRICE
The "Purchase Price" per Share pursuant to an Offering shall be the lesser
of (a) 85% of the fair market value per Share on the Commencement Date of such
Offering or, if the Commencement Date is not a business day, the nearest
subsequent business day; or (b) 85% of the fair market value of such Share on
the Ending Date of such Offering or, if the Ending Date is not a business day,
the nearest prior business day. "Fair market value" for this purpose shall mean
the closing price as reported on the National Association of Securities Dealers
Automated Quotation National Market System (the "NASDAQ-NMS") or, if the Shares
are not reported on the NASDAQ-NMS, on the stock exchange, market, or system on
which the Shares are traded as reported that is designated by the Committee as
controlling for purposes of the Plan. In the event shares are not so traded or
reported, no purchase
16
shall be made and each Participant's interest in the amount credited to the
Payroll Deduction Account shall be returned to each Participant without
interest.
ARTICLE 7 - LIMITATIONS ON SHARE OWNERSHIP
7.1 The maximum number of Shares that a Participant may acquire during an
Offering shall be the amount credited to such Participant's Payroll Deduction
Account as of the Ending Date of such Offering, divided by the Purchase Price
per Share.
7.2 The maximum, aggregate number of Shares that will be offered under the
Plan is two hundred thousand (200,000). If, as of any Ending Date, the total
number of Shares to be purchased exceeds the number of Shares then available
under this Article (after deduction of all Shares that have been previously
purchased under the Plan), the Committee shall make a pro rata allocation of the
Shares that remain available in as nearly a uniform manner as shall be
practicable and as it shall determine, in its sole judgment, to be equitable.
In such event, any amount credited to each Participant's Payroll Deduction
Account that remains after purchase of such reduced number of Shares shall be
refunded as soon as reasonably practicable, and no further payroll deductions or
Offerings shall occur under this Plan unless and until additional shares are
authorized.
7.3 Notwithstanding anything herein to the contrary, the maximum number of
Shares that may be purchased by any Participant as of any Ending Date shall be
reduced to that number which, when the voting power or value thereof is added to
the total combined voting power or value of all classes of shares of capital
stock of the Company and its Subsidiaries the person is already deemed to hold
(excluding any number of Shares which such person would be entitled to purchase
under the Plan), is one share less than five percent (5%) of the total combined
voting power or value of all classes of shares of capital stock of the Company
and its Subsidiaries. For purposes of the foregoing, the rules of Section
424(d) of the Code shall apply. In addition, no Participant shall be allowed to
purchase Shares as of any Ending Date to the extent such purchase would cause
the sum of the fair market value of all Shares purchased by such Participant
under this Plan and any other plan qualified under Code Section 423 during the
calendar year during which such Ending Date occurs to exceed $25,000. For
purposes of the preceding sentence, "fair market value" shall be the value as of
the date of grant of each such Offering and the rules of Section 423(b)(8) of
the Code shall apply.
ARTICLE 8 - PAYROLL DEDUCTIONS
8.1 At the time the Enrollment Agreement is filed with the Designated
Person and for so long as a Participant participates in the Plan, each
Participant may authorize the Company to make payroll deductions of either (a) a
fixed dollar amount per pay period, or (b) a whole percentage (in 1% increments)
of Pay per pay period; provided, however, that no payroll deduction shall exceed
15% of Pay per pay period. The Committee, in its discretion, may establish from
time to time a minimum fixed dollar deduction that a Participant must authorize
under this Plan; provided, however, that a Participant's existing rights under
any Offering that has already commenced may not be adversely affected thereby.
8.2 The amount of each Participant's payroll deductions shall be credited
to his Payroll Deduction Account. No interest or other amount shall be credited
to a Payroll Deduction Account.
8.3 Commencing with respect to the first payroll period beginning on or
after the Plan's Effective Date, a Participant's authorized payroll deductions
shall be deducted from each paycheck paid during an Offering and shall continue
until changed by the Participant or by amendment or termination of this Plan. A
Participant may elect to increase or decrease his authorized payroll deductions
effective as of January I or July I of each year upon prior notice acceptable to
the Company. Except for a Withdrawal and discontinuance of payroll deductions
permitted under this Plan, no change in payroll deductions may be effective on a
date other than January I or July 1, including without limitation, any change in
the amount or rate of payroll deductions during an Offering.
8.4 With respect to each payroll period during an Offering, a Participant's
authorized payroll deductions shall be deducted from Pay only after all other
discretionary and nondiscretionary payroll deductions attributable to such
Participant have first been deducted from Pay for such period. To the extent a
Participant's Pay after such discretionary and nondiscretionary payroll
deductions have been deducted is less than the Participant's authorized payroll
deductions hereunder, the Participant's remaining Pay, if any, shall be credited
on his behalf to the Payroll Deduction Account and the difference between the
authorized and actual deduction shall be disregarded and never deducted from
payroll or credited to the Payroll Deduction Account.
17
ARTICLE 9 - PURCHASE OF SHARES
9.1 As of the Ending Date of each Offering, each Participant shall be
deemed to have elected to purchase at the Purchase Price, the maximum number of
whole Shares that may be purchased with such Participant's Payroll Deduction
Account in accordance with the terms of this Plan, unless the Designated Person
has received timely and proper notice of a Withdrawal. The Shares purchased
hereunder will be credited to the Brokerage Account. Any cash remaining in the
Participant's Payroll Deduction Account that is not applied toward the purchase
of Shares shall be carried forward and applied in subsequent Offerings. No
Participant shall have any rights of a stockholder with respect to any Shares
until the Shares have been purchased in accordance herewith. Shares purchased
hereunder may be acquired by purchase for the accounts of participants on the
open market or in privately negotiated transactions by the Company or by a
registered securities broker/dealer selected by the Company (the "Agent"), by
direct issuance from the Company (whether newly issued or treasury shares) or by
any combination thereof, at the option of the Committee.
9.2 Any cash dividends paid on Shares credited to the Brokerage Account
shall be automatically applied to purchase, at Company expense, additional
Shares from the Company at the fair market value (as defined in Article 6) of
such Shares as of the business day immediately preceding the date of purchase,
or on the open market at the market price at the time of purchase, and such
additional shares shall be credited to the Brokerage Account.
9.3 A Participant may receive all, but not less than all, the Shares of
Stock in his Brokerage Account at any time by completing a written request
therefor and filing it with the Designated Person.
9.4 Notwithstanding the preceding provisions of this Article or any other
provision to the contrary, no Shares shall be purchased hereunder or credited to
the Brokerage Account until the Plan is approved by the stockholders of the
Company as provided in Section 15. 1.
ARTICLE 10 - EVIDENCE OF OWNERSHIP OF SHARES
Following the Ending Date of each Offering, the Shares that are purchased
by each Participant shall be recorded in book entry form and credited to the
Brokerage Account.
ARTICLE 11 - WITHDRAWAL
11.1 A Participant may "Withdraw" from an Offering, in whole but not in
part, by notifying the Designated Person, in writing on a form acceptable to the
Committee, in which event (i) the Participant's payroll deductions shall stop as
soon as is reasonably practicable following receipt of such notice by the
Designated Person, (ii) the Company shall refund the amount credited to the
Participant's Payroll Deduction Account as soon as reasonably practicable, and
(iii) no Shares shall be purchased on behalf of the Participant with respect to
such Offering. The notice described in this Section must be received by the
Designated Person prior to the deadline set by the Committee, provided that if
the Committee fails to set such a deadline, such notice must be received by the
Ending Date (or the immediately preceding business day if the Ending Date is not
a business day).
11.2 An eligible employee who has previously withdrawn from the Plan may
re-enter by complying with the Participation requirements. Upon compliance with
such requirements, an employee's re-entry into the Plan will be effective as of
the Commencement Date coinciding with or next following the satisfaction of such
requirements.
11.3 As soon as reasonably practicable after a Participant has withdrawn
from the Plan, the Company will have a stock certificate issued to the
Participant or his designee for any whole Shares credited to the Brokerage
Account on his behalf.
ARTICLE 12 - RIGHTS NOT TRANSFERABLE
No Participant shall be permitted to sell, assign, transfer, pledge, or
otherwise dispose of or encumber such Participant's interest in the Payroll
Deduction Account or any rights to purchase or to receive Shares under the Plan
other than by will or the laws of descent and distribution, and such rights and
interests shall not be subject to a Participant's debts, contracts, or
liabilities. If a Participant purports to make a transfer, or a third party
makes a claim in respect of a Participant's rights or interests, whether by
garnishment, levy, attachment or otherwise, such purported transfer or claim
shall be treated as a Withdrawal.
18
ARTICLE 13 - TERMINATION OF EMPLOYMENT
As soon as reasonably practicable following termination of a Participant's
employment with the Company or any of its Subsidiaries for any reason
whatsoever, including, but not limited to, by reason of death, disability or
retirement, (i) the amount credited to the Payroll Deduction Account on behalf
of the Participant shall be returned to the Participant or the Participant's
Beneficiary, as the case may be, subject to Section 15.1 and (ii) the
Participant's interest in the Brokerage Account shall be liquidated in the
manner described below. As part of the procedure to liquidate the Participant's
interest in the Brokerage Account, a certificate for the whole Shares credited
to the Brokerage Account on his behalf will be issued to the Participant.
ARTICLE 14 - ADMINISTRATION
The Plan shall be administered by the Committee, which may engage such
persons, entities or agents as it shall deem advisable to assist in the
administration of the Plan. A majority of the members of the Committee shall
constitute a quorum and the acts of a majority of the members present at a
meeting or the consent in writing signed by all the members of the Committee
shall constitute the acts of the Committee. The Committee shall be vested with
full authority to make, administer, and interpret such rules and regulations as
it deems necessary to administer the Plan, and any determination, decision, or
action of the Committee in connection with the construction, interpretation,
administration or application of the Plan shall be final, conclusive, and
binding upon all parties, including the Company, the Participants and any and
all persons that claim rights or interests under or through a Participant. The
Committee may delegate all or part of its authority to one or more of its
members.
AMENDMENT 15 - MISCELLANEOUS
15.1 Approval of the Plan. Notwithstanding any provision in this Plan to
the contrary, if the Plan is not approved by the Stockholders of' the Company
within twelve ( 12) months after the Effective Date of the Plan, the balance of
each Participant's Payroll Deduction Account shall be refunded in its entirety,
without interest, as soon as reasonably practicable. If an eligible employee
terminates employment after the Ending Date of any Offering but prior to the
approval of the Plan by the stockholders of the Company, then such employee may
elect in writing, on a form acceptable to the Committee, which form must be
received by the Designated Person by the deadline set by the Committee, to have
the balance credited to the Payroll Deduction Account on his behalf as of any
Such Ending Date retained and applied to purchase Shares following the
subsequent approval of the Plan by the stockholders of' the Company, or returned
to the employee at a later date in the event the stockholders do not approve the
Plan. If such election is not timely made or if such employee elects to receive
cash, such employee shall receive the balance credited to the Payroll Deduction
Account on his behalf as of any such Ending Date as soon as reasonably
practicable after the passage of such deadline for making such election.
15.2 Amendment or Discontinuance of the Plan. The Board shall have the
right to amend, modify or terminate the Plan at any time without notice,
provided that (i) no Participant's existing rights under any Offering that is in
progress may be adversely affected thereby, and (ii) in the event that the Board
desires to retain the favorable tax treatment under Sections 421 and 423 of the
Code. no such amendment of the Plan shall increase the number of Shares that
were reserved for issuance hereunder unless the Company's stockholders approve
such an increase.
15.3 Changes in Capitalization. In the event of reorganization,
recapitalization, stock split, stock dividend, combination of shares, merger,
consolidation; offerings of rights, or any other change in the capital structure
of the Company, the number, kind and price of the Shares that are available for
purchase under the Plan and the number of Shares that an employee is entitled to
purchase shall be automatically adjusted to reflect the change in Capital
structure; provided, however, that the Board shall retain the right to modify
any such adjustment in the manner it deems appropriate.
15.4 Notices. All notices or other communications by a Participant under or
in connection with the Plan, including but not limited to Enrollment Agreements,
shall be deemed to have been duly given when received by the Designated Person
in the form specified by the Committee.
15.5 Termination of the Plan. This Plan shall terminate at the earliest of
the following:
(a) The date of the filing of a "Statement of Intent to Dissolve" by
the Company or the effective date of a merger or consolidation
wherein the Company is not to be the surviving corporation, which
merger or consolidation is not between or among corporations
affiliated with the Company; or
19
(b) The date the Board acts to terminate the Plan; or
(c) The date when all of the Shares that were reserved for issuance
hereunder have been purchased.
Prior to termination of the Plan, the Company may change the Ending Date of
a pending Offering. Upon termination of the Plan, the Company shall refund to
each Participant the remaining amount credited to each Participant's Payroll
Deduction Account after all purchases have been made.
15.6 Notice of and Limitations on Sale of Stock Purchased Under the Plan.
The Plan is intended to provide Shares for investment and not for resale. The
Company does not, however, intend to restrict or influence the conduct of any
employee's affairs beyond established Company policies. A current or former
Participant may, therefore, sell Shares that are purchased under the Plan at any
time at his expense, subject to compliance with any applicable federal or state
securities laws and Company policies. Each current and former Participant
assumes the risk of any market fluctuations in the price of the Shares. Each
current or former Participant must notify the Company of any disposition of
Shares purchased under this Plan that is described in Section 423(a)(I) of the
Code, which is any disposition within two years after the date of grant of the
option to purchase or any disposition within one year after the transfer of the
Shares to him.
15.7 Governmental Regulation. The Company's obligation to sell and deliver
Shares under this Plan is subject to any governmental approval that is required
in connection with the authorization, issuance or sale of such Shares.
15.8 No Employment Rights. This Plan does not, directly or indirectly,
create in any employee or class of employees any right with respect to
continuation of employment by the Company, and it shall not be deemed to
interfere in any way with the Company's right to terminate, or otherwise modify,
an employee's employment at any time.
15.9 Governing Law. The law of the State of Maryland shall govern all
matters that relate to this Plan except to the extent it is superseded by the
laws of the United States.
15.10 Text of Plan Documents Controls. Titles of Articles and Sections in
this Plan are inserted for convenience of reference only and in the event of any
conflict, the text of this instrument, rather than such titles, shall control.
15.11 Non-gender Clause. Any words herein used in the masculine shall be
read and be construed in the feminine where they would so apply. Words in the
singular shall be read and be construed as though used in the plural in all
cases where they would so apply.
20
EXHIBIT B
OPTELECOM, INC.
2000 NON-QUALIFIED STOCK OPTION PLAN
Article I
Definitions
As used herein, the following terms have the meanings hereinafter set forth
unless the context clearly indicates to the contrary:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Committee" shall mean the Compensation Committee of the Board.
(c) "Company" shall mean Optelecom, Inc.
(d) "Fair Market Value" on any day shall mean the closing bid price of the
Stock on that day as reported on the National Association of Securities Dealers
Automated Quotation Service ("NASDAQ") or, if the Stock is traded on a national
securities exchange, the last reported trade price on that day. If the Stock at
any time is neither quoted on NASDAQ nor traded on a national securities
exchange, "Fair Market Value" shall be determined in good faith by the
Committee.
(e) "Non-Qualified Stock Option" shall mean a non-statutory option that is
taxable under Title 26, Subtitle A, Chapter 1, Subchapter B, Part 11, Section 83
of the Internal Revenue Code.
(f) "Option" shall mean any Non-Qualified Stock Option to purchase Stock
that is granted pursuant to the provisions hereof.
(g) "Optionee" shall mean any person who is granted an Option under the
Plan.
(h) "Plan" shall mean the Optelecom, Inc. 2000 Non-Qualified Stock Option
Plan, effective as of April 1 , 2000, as amended from time to time, the terms of
which are set forth herein.
(i) "Restricted Stock" shall mean Shares that contain restrictions
pursuant to Article IX of this Plan.
(j) "Shares" shall mean shares of the Stock.
(k) "Stock" shall mean the common stock of the Company or, in the event
that the outstanding shares of common stock are hereafter changed into or
exchanged for shares of a different stock or security of the Company or some
other corporation, "Stock" shall mean such other stock or security.
(l) "Stock Option Agreement" shall mean the agreement between the Company
and the Optionee under which the Optionee may purchase Stock hereunder.
(m) "Subsidiary" shall mean any corporation, the majority of the
outstanding capital stock of which is owned, directly or indirectly, by the
Company.
Article II
The Plan
2.1 Name. This Plan shall be known as the "Optelecom, Inc. 2000 Non-
----------
Qualified Stock Option Plan".
2.2 Purpose. The purpose of the Plan is to advance the interests of the
-------------
Company and its Subsidiaries by encouraging and enabling the acquisition of a
financial interest in the Company by officers and other key employees of the
Company. In addition, the Plan is intended to aid the Company and its
Subsidiaries in attracting and retaining
21
employees, to stimulate the efforts of such employees on behalf of the Company
and its Subsidiaries and to strengthen their desire to remain in the employ of
the Company and its Subsidiaries.
2.3 Term of the Plan. The Plan shall be effective as of April 1, 2000,
----------------------
subject to approval by the holders of a majority of the shares of stock of the
Company entitled to vote at a meeting of the shareholders, within twelve (12)
months of the effective date, and all Options granted prior to such approval
shall be subject to such approval. The Plan shall terminate on March 31, 2010,
or on such earlier date as may be determined by the Board. Termination of the
Plan, however, shall not affect the rights of Optionees under Options
theretofore granted to them, and all unexpired Options shall continue in force
and operation after termination of the Plan except as they may lapse or be
terminated by their own terms and conditions.
Article III
Participants
Options may be granted to such employees of the Company or its Subsidiaries
as the Committee shall select from time to time. The Committee may grant Options
to any eligible person in accordance with such determinations as the Committee,
in its sole discretion, shall make. Any eligible person may hold more than one
Option.
Article IV
Administration
4.1 Duties and Powers of Committee. The Plan shall be administered by the
------------------------------------
Committee that shall consist of not less than three non-employee directors of
the Company. Notwithstanding the above, at any time that the Company has less
than three non-employee directors, the Committee shall consist of such lesser
number of non-employee directors. Subject to the express provisions of the Plan,
the Committee shall have sole discretion and authority to determine from among
eligible persons those to whom and the time or times at which (a) Options may be
granted and the number of shares of Stock that shall be subject to each Option
and/or (b) Restricted Stock shall be granted and the number of such shares that
will be granted to each such person and all other terms and conditions related
to such Restricted Stock. Subject to the express provisions of the Plan, the
Committee shall also have complete authority to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the details and provisions of each Stock Option Agreement and
Restricted Stock Award Agreement, and to make all other determinations necessary
or advisable in the administration of the Plan
4.2 Majority Rule. A majority of the members of the Committee shall
-------------------
constitute a quorum, and any action taken by a majority present at a meeting at
which a quorum is present or any action taken without a meeting evidenced by a
writing executed by all of the members of the Committee shall constitute the
action of the Committee.
4.3 Company Assistance. The Company shall supply full and timely
------------------------
information to the Committee on all matters relating to eligible persons,
including their death, retirement, disability or other termination of service to
the Company and its Subsidiaries, and such other pertinent facts as the
Committee may require. The Company shall furnish the Committee with such
clerical and other assistance as is necessary in the performance of its duties.
Article V
Shares of Stock Subject to Plan
5.1 Shares Subject to Plan. The Stock to be subject to Options under the
----------------------------
Plan shall be shares of the Company's Common Stock having par value of $.03 per
share, either authorized and unissued or treasury shares. The total of the
maximum number of shares of Stock for which Options may be granted and the
maximum number of shares of Restricted Stock that may be granted shall not
exceed an aggregate of 300,000 shares, subject to adjustment in accordance with
the terms of Article 5.2 hereof. The shares subject to the unexercised portion
of any terminated or expired Options under the Plan may again be subjected to
Options under the Plan.
5.2 Adjustments. In the event that the outstanding shares of Stock are
-----------------
hereafter changed into or exchanged for a different number or kind of shares or
other securities of the Company or of another corporation by reason of merger,
consolidation, other reorganization, recapitalization, reclassification,
combination of shares, stock split-up or stock dividend:
22
(a) The aggregate number and kind of shares subject to Options which
may be granted hereunder shall be adjusted appropriately;
(b) Rights under outstanding Options granted hereunder, both as to
the number of subject shares and the option price, shall be adjusted
appropriately; and
(c) Where dissolution or liquidation of the Company or any merger or
combination in which the Company is not a surviving corporation is
involved, each outstanding Option granted hereunder shall terminate,
but the Optionee shall have the right, immediately prior to such
dissolution, liquidation, merger or combination, to exercise his
Option in whole or in part, to the extent that it shall not have been
exercised, without regard to any installment exercise provisions.
The foregoing adjustments and the manner of application of the foregoing
provisions shall be determined solely by the Committee, and any such adjustment
may provide for the elimination of fractional share interests.
Article VI
Stock Options
6.1 Option Grant and Agreement. Each Option granted hereunder shall be
--------------------------------
evidenced by minutes of a meeting or the written consent of the Committee and by
a written Stock Option Agreement dated as of the date of grant and executed by
the Company, which Agreement shall set forth such terms and conditions as may be
determined by the Committee to be consistent with the Plan. Options may be
granted to employees of the Company and its Subsidiaries. Each Option must be
granted within ten (10) years from the effective date of the Plan.
6.2 Option Price.
------------------
(a) The Option Price per share of the Stock subject to each Option shall
be determined by the Committee, but the per share price shall not be
less than 50% of the Fair Market Value of the Stock on the date the
Option is granted. Notwithstanding the above, if the Option is granted
pursuant to Article VII, the exercise price shall be the market price
(or a specified percentage of the market price) on the beginning date
of the performance measurement period.
(b) If the Committee grants an Option at a price less than 85% of its Fair
Market Value on the specified date, the Committee shall include in the
minutes of the meeting at which it approved such grant, or in the
written consent of the Committee which evidences the approval of the
grant, its reasons for selecting such lesser Option price.
6.3 Term of Option. Each Option shall expire at the earlier of (a) the
--------------------
date five (5) years after the date of grant, as determined pursuant to Article
6.1 hereof; (b) thirty (30) days after an Optionee's employment is terminated as
a result of a layoff; (c) the first date when the Optionee is no longer an
employee of the Company or any Subsidiary by reason of such Optionee's voluntary
termination; or (d) the date notice is given to an Optionee that such Optionee
is being terminated for cause. A termination shall not be deemed voluntary if it
results from the employee's death or disability. For purposes of this Plan,
"disability" shall mean a medically-determinable physical or mental impairment
which can be expected to result in death or has lasted (or can be expected to
last) for a continuous period of not less than 12 months and which renders the
Optionee unable to reasonably perform those functions for the Company (or any
Subsidiary) for which he was responsible immediately prior to such disability.
6.4 Exercise or Option.
-----------------------
(a) Except as set forth below, each Option granted hereunder shall
become exercisable in installments as follows:
(i) Commencing with the date one year from the granting of an
Option, to the extent of 25% of the total number of shares
subject to the Option; and
(ii) Commencing with the date two years from the granting of an
Option, to the extent of an additional 25% of the total
number of shares subject to the Option; and
(iii) Commencing with the date three years from the granting of
an Option, to the extent of an additional 25% of the total
number of shares subject to the Option; and
23
(iv) Commencing with the date four years from the granting of
the Option, to the extent of the remaining 25% of the
total number of shares subject to the Option.
To the extent not exercised, installments shall accumulate and be
exercisable, in whole or in part, in any subsequent period. The Committee may in
its sole discretion waive any or all of the time periods for exercise of Options
or provide for different exercise times, whether more or less stringent. Such
waivers or variations shall be for individual cases as the Committee determines,
and no waiver or variance shall be deemed precedent for any other Option.
(b) In no event shall any Option be exercisable more than five years
from the date the Option is granted.
(c) Subject to the provisions hereof, an Option may be exercised from
time to time, in whole or in part, up to the total number of shares
with respect to which it is then exercisable, by delivery to the
Company of a completed exercise form, together with payment of the
exercise price.
(d) The exercise price shall be paid to the Company in cash or by
check acceptable to the Company.
(e) In addition to and at the time of payment of the Option price,
the Optionee shall pay to the Company in cash the full amount of any
federal and state withholding or other employment taxes applicable to
the taxable income of any Optionee resulting from such exercise.
6.5 Nontransferability of Option.
---------------------------------
(a) No Option shall be transferred by the Optionee otherwise than by will
or the laws of descent and distribution. During the lifetime of an
Optionee, the Option shall be exercisable only by him.
(b) No transfer of an Option by the Optionee by will or by the laws of
descent and distribution shall be effective to bind the Company unless
the Company shall have been furnished with written notice thereof and
an authenticated copy of the will and/or such other evidence as the
Committee may deem necessary to establish the validity of the transfer
and the conditions of such Option.
6.6 Rights as Shareholder
--------------------------
An Optionee or a transferee of an Option shall have no rights as a
stockholder prior to the purchase of such shares by exercise of such Option as
provided herein.
Article VII
Options Linked to Performance Incentives
The Committee shall have the right, from time to time, to establish
individual performance programs that are linked to Options under the Plan. Each
performance program shall contain the following elements:
(a) It shall be in writing.
(b) It shall state specific goals for that employee.
(c) It shall state the beginning and ending date of the performance
measurement period.
(d) It shall state the number of shares related to accomplishment of each
goal.
(e) At the end of the performance measurement period, management will
evaluate the employee's performance and determine what percent of each
goal the employee has accomplished. Management will apply each such
percentage to the number of shares related to such goal.
(f) The Committee shall grant an Option to the employee based on
management's evaluation as set forth in items (d) and (e) above.
24
(g) The Stock Option Agreement shall be identical to all other Stock
Option Agreements issued pursuant to this Plan except that the
exercise price shall be the market price (or a specified percentage of
the market price) on the beginning date of the performance measurement
period.
Article VIII
Stock Certificates
The Company shall not be required to issue or deliver any certificate for
shares of Stock purchased upon the exercise of any Option granted hereunder or
any portion thereof, prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which the Stock is then listed;
(b) The completion of any registration or other qualification of such
shares under any federal or state law or under the rulings or
regulations of the Securities and Exchange Commission or any other
governmental regulatory body which the Committee shall, in its sole
discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any federal or
state governmental agency which the Committee shall, in its sole
discretion, deem necessary or advisable; and
(d) The lapse of such reasonable period of time following the exercise of
the Option as the Committee from time to time may establish for
reasons of administrative convenience.
Article IX
Restricted Stock
9.1 Grants. The Committee may, from time to time in its discretion, grant
------------
Restricted Stock to such employees of the Company or its Subsidiaries as it
shall select ("Employees") and may determine the number of Shares of Restricted
Stock to be granted and the terms and conditions of, and the amount of payment,
if any, to be made by the Employee for, such Restricted Stock. A grant of
Restricted Stock may require the Employee to pay for such Shares of Restricted
Stock, but the Committee may establish a price below Fair Market Value at which
the Employee can purchase the Shares of Restricted Stock. Each grant of
Restricted Stock will be evidenced by a Restricted Stock Award Agreement
containing terms and conditions not inconsistent herewith as the Committee shall
determine to be appropriate in its sole discretion. Such Restricted Stock shall
be granted subject to the restrictions prescribed pursuant hereto and the
Restricted Stock Award Agreement.
9.2 Restricted Period; Lapse of Restrictions. At the time a grant of
---------------------------------------------
Restricted Stock is made, the Committee shall establish a period or periods of
time (the "Restricted Period") applicable to such grant which, unless the
Committee otherwise provides, shall not be less than one (1) year. Subject to
the other provisions of this Article IX at the end of the Restricted Period all
restrictions shall lapse and the Restricted Stock shall vest in the Employee. At
the time a grant is made, the Committee may, in its discretion, prescribe
conditions for the incremental lapse of restrictions during the Restricted
Period and for the lapse or termination of restrictions upon the occurrence of
other conditions in addition to or other than the expiration of the Restricted
Period with respect to all or any portion of the Restricted Stock. Such
conditions may, but need not, include without limitation, (a) the death,
disability or retirement of the Employee to whom Restricted Stock is granted or
(b) the occurrence of a Change in Control. The Committee may also, in its
discretion, shorten or terminate the Restricted Period, or waive any conditions
for the lapse or termination of restrictions with respect to all or any portion
of the Restricted Stock at any time after the date the grant is made.
9.3 Rights of Holder; Limitations Thereon. Upon a grant of Restricted
-------------------------------------------
Stock, a stock certificate (or certificates) representing the number of Shares
of Restricted Stock granted to the Employee shall be registered in the
Employee's name and shall be held in custody by the Company or a bank selected
by the Company for the Employee's account. Following such registration, the
Employee shall have the rights and privileges of a stockholder as to such
Restricted Stock, including the right to receive dividends and to vote such
Restricted Stock, except that, the right to receive cash dividends shall be the
right to receive such dividends either in cash currently or by payment in
Restricted Stock, as the Committee shall determine, and except further that, the
following restrictions shall apply:
25
(a) The Employee shall not be entitled to delivery of a certificate until
the expiration or termination of the Restricted Period for the Shares
represented by such certificate and the satisfaction of all other
conditions prescribed by the Committee;
(b) None of the Shares of Restricted Stock may be sold, transferred,
assigned, pledged, or otherwise encumbered or disposed of during the
Restricted Period and until the satisfaction of all other conditions
prescribed by the Committee including, without limitation,
restrictions under applicable Federal or state securities laws; and
(c) Subject to any conditions for incremental lapse of restrictions
pursuant to Article 9.2, all of the Shares of Restricted Stock that
have not vested shall be forfeited and all rights of the Employee to
such Restricted Stock shall terminate without further obligation on
the part of the Company unless the Employee has remained a full-time
employee of the Company or any of its Subsidiaries until the
expiration or termination of the Restricted Period and the
satisfaction of all other conditions prescribed by the Committee
applicable to such Restricted Stock. Upon the forfeiture of any Shares
of Restricted Stock, such forfeited Shares shall be transferred to the
Company without further action by the Employee, and shall, in
accordance with Section 5.1 again be available for grant hereunder.
With respect to any Shares received as a result of adjustments under
Section 5.2 and any Shares received with respect to cash dividends declared on
Restricted Stock, the Employee shall have the same rights and privileges, and be
subject to the same restrictions, as are set forth in this Article IX.
9.4 Delivery of Unrestricted Shares. Upon the expiration or termination of
-------------------------------------
the Restricted Period for any Shares of Restricted Stock and the satisfaction of
all other conditions prescribed by the Committee, the restrictions applicable to
such Restricted Stock shall lapse and a stock certificate for the number of
Shares of Restricted Stock with respect to which the restrictions have lapsed
shall be delivered, free of all such restrictions except any that may be imposed
by law, to the holder of the Restricted Stock. The Company shall not be
required to deliver any fractional Share but will pay, in lieu thereof, the Fair
Market Value (determined as of the date the restrictions lapse) of such
fractional share to the holder thereof. Prior to or concurrently with the
delivery of a certificate for Restricted Stock, the holder shall be required to
pay an amount necessary to satisfy any applicable federal, state and local tax
requirements as set out in Article 6.4.
Article X
Securities Act Requirements
10.1 Registration or Exemption. Shares of Stock purchased under the Plan
--------------------------------
may not be sold or otherwise disposed of except (i) pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "Act"),
or in a transaction which, in the opinion of counsel for the Company, is exempt
from registration under the Act, and (ii) in compliance with state securities
laws. The Company reserves the right to seek registration of the Plan or to
rely on an applicable exemption from such registration. In the event that sales
of securities under this Plan are determined to be exempt from registration
under the Securities Act of 1933, any resale of such securities by the Optionee
shall be restricted in accordance with Rule 144 of the Act.
10.2 Investor Representations. Upon issuance of Stock to an Optionee or
-------------------------------
to his heirs, the recipient of such Stock shall, if so required by the Company,
represent that the shares of Stock are taken for investment purposes and not
resale, except in accordance with Rule 144 of the Act, and shall make such other
representations as may be necessary to qualify the issuance of shares as exempt
from the Act. The Company reserves the right to place a legend on any Stock
certificate issued pursuant to the Plan to assure compliance with this
paragraph. No shares of Stock shall be required to be distributed until the
Company shall have taken such action, if any, as is then required to comply with
the provisions of the Securities Act of 1933 or any other then applicable
securities law.
Article XI
Change in Control
11.1 Notwithstanding any other provision of the Plan, upon the occurrence
----
of a Change in Control (as defined in Article 11.3), all restrictions on
restricted stock shall immediately lapse and the Restricted Stock shall vest in
the Employee, all Options then outstanding under the Plan shall become
immediately exercisable in full for the remainder of their terms and each
Optionee shall have the right for a period of 30 days following a Change in
Control, to require the Company to purchase his outstanding Options for cash at
the aggregate Acceleration Price (as
26
defined in Article 11.2) for all shares of Stock subject to such Options held by
such Optionee; provided, however, that, if then permitted or required under
rulings or regulations of the Securities and Exchange Commission, Optionees
shall have the right to exercise outstanding Options or require the Company to
purchase such Options only if at least six (6) months have elapsed between the
date of grant of such Options and the Change in Control date.
11.2 The "Acceleration Price" shall be the excess of the highest of the
----
following over each applicable Option price per share (as the same may be
adjusted from time to time pursuant to Article 5.2) on the Change in Control
date: (i) the highest reported ask price of the Stock, as reported on NASDAQ or
the principal securities exchange or market upon which the Stock is then listed
or traded, on or within the 60 days prior to and including the Change in Control
date; (ii) the highest purchase or sale price of the Stock reported in a
Schedule 13D or an amendment thereto as paid or received on or within the 60
days prior to and including the Change in Control date; (iii) the highest tender
offer price paid or offered for the Stock on or within the 60 days prior to and
including the Change in Control date; and (iv) the highest cash merger or
similar price paid or offered for the Stock on or within the 60 days prior to
and including the Change in Control date.
11.3 A "Change in Control" (and the Change in Control date) shall be the
----
occurrence of any one of the following events (certain defined terms used in
this Article 11.3 are defined in Article 11.4): (i) the first day of receipt
by the Company of Schedule 13D, any amendment thereto or notice of a public
announcement confirming that any Person (other than any employee benefit plan of
the Company or of any Subsidiary of the Company or any Person organized,
appointed or established pursuant to the terms of any such benefit plan or any
Person who is an Optionee), together with his Affiliates or Associates, is or
becomes the Beneficial Owner of securities representing at least 20% of the
combined voting power of the Company, unless such ownership is approved by the
Continuing Directors prior to ownership; (ii) the first day on which two or
more of the members of the Board are not Continuing Directors; (iii) the day on
which the stockholders of the Company approve (a) any business combination,
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the Stock
would be converted into cash, securities or other property, other than a merger
of the Company in which the holders of the Stock immediately prior the merger
have the same proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (b) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company unless, in either case, such
transaction is approved by the Continuing Directors prior to submission for such
stockholder approval; or (iv) the day on which the stockholders of the Company
approve any plan or proposal for the liquidation or dissolution of the Company,
unless approved by the Continuing Directors prior to submission for such
stockholder approval.
11.4 For purposes of this Article XI: (i) a "Person" shall mean any
----
individual, firm, corporation, partnership, trust or other entity; (ii)
"Affiliate" and "Associate" shall have the respective meanings ascribed to such
terms in Rule 12b-2 under the Exchange Act; (iii) a Person shall be a
"Beneficial Owner" of securities (a) which such Person beneficially owns,
directly or indirectly, or (b) which such Person has the right to acquire
(whether such right is exercisable immediately or only with the passage of time)
pursuant to any agreement, arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights, exchange rights, rights,
warrants, Options or otherwise, other than if such Person acquires or has the
right to acquire such securities as an underwriter, broker, dealer or selling
group member in connection with the public or private distribution of such
securities pursuant to an underwriting or similar agreement with the Company;
and (iv) "Continuing Directors" means any member of the Board who was a member
of the Board on April 1, 2000, and any successor of a Continuing Director who is
recommended or elected to succeed the Continuing Director by a majority of the
remaining Continuing Directors.
11.5 The Committee shall not have authority to modify the time when
----
Options may be exercised under this Article XI.
Article XII
Amendment, Suspension and Termination of Plan
The Board shall have the right to amend, suspend or terminate the Plan or
any portion hereof at any time; provided, however, that stockholder approval of
any amendment to the Plan shall also be obtained if (a) then required by (i)
rulings or regulations of the Securities and Exchange Commission in order for
the Plan to remain qualified under Rule 16b-3 (or any successor provision) under
the Exchange Act, or (ii) the quotation or listing requirements of NASDAQ or any
principal securities exchange or market on which the Stock is then traded in
order to maintain the Stock's quotation or listing thereon; (b) such amendment
materially modifies the eligibility
27
requirements as provided in Article III; (c) such amendment increases the total
number of shares of Stock which may be purchased pursuant to the exercise of
Options granted under the Plan as provided in Article V or the grant of shares
of Restricted Stock as provided in Article IX; or (d) such amendment reduces the
minimum Option price per share at which Options may be granted to less than 50%
of the fair market value of the Stock, as provided in Article 6.2. No amendment,
suspension or termination of the Plan shall alter, impair or adversely affect
any of the rights, benefits or obligations of any Optionee under any outstanding
Option previously granted thereto, unless the written consent of such Optionee
is obtained.
Article XIII
Miscellaneous
13.1 Powers of Company Not Affected. The existence of the Plan or any
------------------------------------
Options granted under the Plan (including the Stock Option Agreement or
instruments evidencing such Options) or any Restricted Stock granted under the
Plan (including any Restricted Stock Award Agreement relating thereto) shall not
affect in any way the right or power of the Company or its stockholders to make
or authorize all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger,
consolidation or business combination of the Company, or any issuance of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Stock
or the rights of the holders thereof, or dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business or
any other corporate act or proceeding, whether of a similar character or
otherwise.
13.2 Corporate Mergers and Other Consolidations. The Committee may also
------------------------------------------------
grant options having terms and provisions which vary from those specified in the
Plan, provided that any options granted pursuant to this Article 13.2 are
granted in substitution for, or in connection with the assumption of, existing
options or similar rights granted by another corporation and assumed or
otherwise agreed to be provided for the Company pursuant to or by reason of a
transaction involving a corporate merger, consolidation, acquisition, business
combination or other reorganization to which the Company or a Subsidiary is a
party.
13.3 Employment. Nothing in the Plan or in any Option granted hereunder
-----------------
or in any Stock Option Agreement relating thereto, or in any Restricted Stock or
in any Restricted Stock Award Agreement relating thereto shall confer upon any
Optionee or any recipient of any Restricted Stock the right to continue in the
employ of the Company or any Subsidiary.
13.4 Other Compensation Plans. The adoption of the Plan shall not
-------------------------------
preclude the Company from establishing any other forms of incentive or other
compensation for employees of the Company or any Subsidiary.
13.5 Plan Binding on Successors. The Plan shall be binding upon the
---------------------------------
successors and assigns of the Company.
13.6 Singular, Plural; Gender. Whenever used herein, nouns in the
-------------------------------
singular shall include the plural, and the masculine pronoun shall include the
feminine gender.
13.7 Headings, Etc., No Part of Plan. Headings of Articles and Sections
-------------------------------------
hereof are inserted for convenience and reference; they constitute no part of
the Plan.
28
OPTELECOM, INC
BOARD OF DIRECTORS
PROXY FOR
ANNUAL MEETING
The undersigned hereby appoints Edmund D. Ludwig and Carl Rubbo Jr. or
either of them, attorneys and proxies with full power of substitution in each of
them, in the name, place and stead of the undersigned to vote as proxy all the
stock of the undersigned in Optelecom, Inc.
1. To elect the nominees as directors of the Company.
Nominees for a three-year term ending in 2003:
[_] FOR
Mr. Clyde A. Heintzelman
Mr. Pradeep Wahi
[_] WITHHOLD AUTHORITY
Nominee for a one-year term ending in 2001:
Mr. David Lipinski
To withhold authority to vote for an individual
nominee, write that nominee's name on the line
below.
-----------------------
FOR AGAINST ABSTAIN
[_] [_] [_] 2. To approve the Optelecom, Inc. Employee Stock
Purchase Plan.
[_] [_] [_] 3. To approve the Optelecom, Inc. 2000 Non-Qualified
Stock Option Plan.
[_] [_] [_] 4. To transact such other business as may properly
before the meeting.
In the absence of instructions, shares represented by this proxy will be voted
in favor of all proposals.
Receipt of the notice of the meeting, the proxy statement and the annual report
of the company for the year ended December 31, 1999 is hereby acknowledged.
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
YOUR PROXY IS IMPORTANT TO ASSURE A QUORUM AT THE MEETING WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING IN PERSON. YOU MAY REVOKE THIS PROXY AT ANY TIME, AND
THE GIVING OF IT WILL NOT AFFECT YOUR RIGHT TO ATTEND THE MEETING AND VOTE IN
PERSON.
_______________________________L.S. ____________________________L.S.
Dated: ________________, 2000
NOTE: Please sign exactly as your name appears hereon. Executors,
administrators, trustees, etc. should indicate when signing, giving full title
as such. If signer is a corporation, execute in full corporate name by
authorized officer. If shares are held in the name of two or more persons, all
should sign.