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Given the ease with which those on the current board part with their shares, why do you think they wouldn't sell at this very same premium? While the long shareholders have purchased more on the dips to average down, we have yet to see the same from anyone on the board with regularity. There are longs who have more of their own cash vested in this company than those on the board.
Many of you kneck deep in the kool-aid pool act like this company owes you- they owe you nothing and have treated you as such. This is an investment that others have taken to the next level. At some point even your beloved board may get frustrated at the glacial pace and decide it's time to move on- especially if the support from this shareholder base fracturers.
Next quarter will be the one that will tell the tale IMO. So much s being made about the pushing back of BASF. Let's see if that holds true. If not- they are going to have a mutiny brewing.
New Wave
I agree with you that this crisis runs far greater than the press has covered. The information has been out there, but you had to be on the lookout for it. I read earlier this year that the debt rations on all this bad paper in the CDO's and other types of paper is leverages at the minimum of something on the order of 25 to 1. What I have been waiting to see is coming up shortly and that is the effect that the vast number of ARM resetting starting the 1st quarter of this year- which totals more than reset in all of last year and is just as bad in Q2 before trailing off. There are also cracks showing in the liar loans which weren't discussed when the lousy numbers were projected earlier this year. The fed has already added over a trillion in cash to the money stream since the 1st of the year and I don't think that is going to slow up as the credit markets continue to seize up.
These factors added together will make it very difficult for the next funding that wave will need, especially if there is no substantial increase in revenue generation. It was disconcerning to see that only 2 customers break the 10% revenue number in the latest 10K. Without an apparent increase in revenues the next funding may look akin to a mafia shakedown.
Dave
Nick, you may get beaten up for posting that, but the facts are such that these conference calls are the one crucial place to glean information to make an astute investing decision. The boards are nice but, as we have seen, much of the information is speculative at best. One would hope the same caveat dosen't have to be placed on the CEO's words- buyer beware should never enter into that converstion.
Dave
Market researchers: HP overtakes Dell on the worldwide computer market
According to figures from the market researcher iSuppli, 268 million computers were delivered worldwide last year. 49.5 million of them came from Hewlett-Packard, which – after six quarters at the top of the rankings – has thus also taken over from Dell as the market leader in the year as a whole. The market researchers analyse their provisional figures as indicating that HP has shown a strong presence in the marketing channels and has put its money on notebooks.
Dell supplied 39.7 million PCs, 1.7 per cent more than in 2006, while HP was able to show growth of almost 30 per cent. As in the previous year, Acer was in third place, with 24 million devices delivered and, with 33 per cent, showed the greatest growth over 2006. It was followed by Lenovo and Toshiba.
The statistics for the fourth quarter on its own show the firms in the same order. In contrast to the table for the year, the figures for Apple, number six on the list, are also given here. It has held this place since the third quarter of 2007. The figures indicate that Apple contributed almost 2.2 million to the total of 76 million devices delivered worldwide in the closing quarter, thus taking a 2.9 per-cent market share. With 39.3 per cent, Apple showed the greatest growth. The market researchers say this is explained by Apple's changeover to Intel processors.
Computers delivered worldwide in 4th quarter of 2007 (in 1000s)
Ranking Company Deliveries
Q4 2007 Deliveries
Q4 2006 Market share
Q4 2007 Growth over previous year
1 Hewlett-Packard 14.567 11.606 19,1% 25,5%
2 Dell 11.320 9.642 14,9% 17,4%
3 Acer* 7.220 5.777 9,5% 25,0%
4 Lenovo 5.760 4.750 7,6% 21,3%
5 Toshiba 3.070 2.450 4,0% 25,3%
6 Apple 2.197 1.577 2,9% 39,3%
andere 32.038 30.896 42,1% 3,7%
gesamt 76.172 66.698 100,0% 14,2%
Computers delivered worldwide in all of 2007 (in 1000s)
Ranking
Company Deliveries
2007 Deliveries
2006 Market share
2007 Growth over previous year
1 Hewlett-Packard 49.571 38.222 18,5% 29,7%
2 Dell 39.690 39.009 14,8% 1,7%
3 Acer* 24.361 18.308 9,1% 33,1%
4 Lenovo 20.108 16.597 7,5% 21,2%
5 Toshiba 11.140 9.091 4,2% 22,5%
andere 123.502 117.484 46,0% 5,1%
gesamt 268.371 238.711 100,0% 12,4%
*) including the gateway figures, source: iSuppli
(anw/c't)
http://www.heise.de/english/newsticker/news/print/104646
The Patent Reform Act will harm the U.S. technology industry
Posted by Steve Tobak | Post a comment
The proposed Patent Reform Act of 2007 will be coming up for a vote in the Senate in a few months. A similar version of the bill has already passed in the House.
The bill has certain relatively benign provisions, but let's ignore them since they just cloud the argument and are of little interest to either side in the debate.
United States Senate
Let's instead just cut to the chase. In lay terms, the bill makes it easier to challenge issued patents and harder for patent holders to obtain compensation through the U.S. legal system.
Regardless of how that sounds to you, make no mistake - this debate is between two opposing sides with their own interests at heart.
In one corner are big technology companies such as Apple, Cisco, Dell, Google, HP, Intel, Microsoft, Oracle and SAP. These folks make a living selling products and services. They say that patent abuses in the current system are stifling innovation.
In the other corner are technology licensing companies such as 3M, Qualcomm, Rambus, Tessera, and biotech and pharmaceutical companies. They say the act will limit patent holder's rights and stifle innovation.
While each side claims the other limits innovation, the truth is that neither side cares about innovation; they are only concerned with their business model. That's not necessarily a bad thing, since a company's duty is primarily to its shareholders, but it does bear mentioning here.
US Patent and Trademark Office
Here's how I see it: Over time, U.S. technology companies actually manufacture fewer and fewer products. We are now under intense and growing competitive pressure from companies in China, India, Taiwan, etc. Our technology lead is being challenged like never before. Nobody seems to debate that.
That said, we continue to be the world's technology leader because we invent. And the U.S. courts are the first line of defense for U.S. technology companies and inventors alike against all offenders, domestic or international. That's right. When a U.S. company believes its patents are being violated, its first and best line of defense is to seek an injunction barring products that incorporate the technology in question from entering the U.S.
The proposed Patent Reform Act will therefore weaken the rights of U.S. patent holders, whoever they are, and wherever the offending company is, period. Moreover, it will have a ripple effect in international patent offices and courts, thus further weakening the patent rights of U.S. companies overseas.
So, forget all the special interests for a moment and look at the obvious. While some patent reforms might make sense, The Patent Reform Act in its present form will ultimately harm the competitiveness of the U.S. technology industry at a time when we can least afford it. And it only gets worse from here.
Dory I realize that. I think some folks were putting the cart before the horse wioth some of the numbers being tossed around. If the consumer is educated about the FDE and the option is easily found, then one would think they would pretty much sell themselves. We need to see solid revenue driven numbers. Weby said it best earlier today.
Steven can talk up the product, the opportunity and partners until he is blue in the face. The numbers need to be there as well.
Dave
xxxx I don't think the FDE number he was using was Dell, just Seagate drives in general. The Dell FDE speculation is premature. These are an option on the laptops and were just made available on the Latitudes in January one of 6 HD choices I believe. The numbers he stated on Dell were also 10% of the yearly sales of laptops I believe with his numbers based on a 50% upgrade rate on that 10%.
Dave
Doma, the 800 seats was the largest customer to date. Steven said that of the FDE that have been sold 85% are getting the server. There was no number given. The 2000 seats were for a European-foreign language speaking gov. that wave was helping with the disc encryption. I don't know if they were bought yet or not. .70 to .75 per dell machine. 7.00 to 7.50 per FDE sold. ERA in the 40+ range I think is what I heard. FDE and ERA combo about 50. Service contract avg. out to 11.00 per year.
Steven also said the Dell deal was extended through 2011, FDE available on Latitude as an option, the price point on Dell was negotiated up for wave, Intel should be having a push in the coming weeks.
Steven also mention that he thought the price point for them with the FDE would drop as competition and costs became a factor, thought the 7/7.50 figure would be good the next 6 months to a year. There is a replay of the broadcast to be available probably later today.
Dave
Weby my point wasn't that this is where the sales were being made, but more of a contributing factor to the turn off of the consumer towards DELL's product. I feel this is contributing to more HP consumer sales per se, and this add's to the overall picture as to why HP has become number 1 in PC sales with DELL falling behind as other manufacturers besides HP pick up sales. I also recall some problems with DELL delaying orders earlier this fall or late in the summer this year as well- that could not have helped.
Dave
Weby one of the biggest problems with the channel change for DELL has been the help at these mall kiosks. Those manning the stands don't seem very knowledgeable or enthusiastic for the product line- knowledgeable is the biggest problem here. The tchie geeks at the big boxes seem much more engaging with the products they sell- and if they weren't I came away with a bad impression of the box store not the brand. In DELL's kiosks, the impression clouds the product.
Dave
Snackman, we should not have to wait a year if SKS was not misleading the shareholders about the demand he was receiving for these drives.
Dave
Snackman don't be so closed minded. There have been other security products on the market over the last few years- Wave's very own ETS system for one, and you can see these companies have effectively shunned all of them to date. We can debate the pros and cons , but there have been hundreds available. And many companies are still at risk today. This is not to say they won't incorporate the Wave FDE at all. One could almost read your response and come away thinking these companies have been waiting on the sidelines until FDE was made available. This just isn't true. These corporations haven't had the financial pain to motivate them ........yet.
Dave
I will not argue the loss of credit information with you. The fact is this has been going on in a huge fashion for at least the last 5 or 6 years, incurring billions of dollars in financial damages. Any product liabillity lawyer who has represented major companies will tell you there is a number that is acceptable to that company as far as a liabillity is concerned. This I have from one of the top corporate defense attorneys in this country today. To date we can safely say that number has not been reached or breached, as unbelievable as that may seem. TJX is one glaring example. How many major corporations have stepped forward to announce any sort of security initiative? In light of TJX there should have been many. The cost threshold for many of these companies hasn't been breached, as unbelievable as it seems. Until the courts lean on these breached companies, the uptake will continue at the same pace. The auto industry is littered with many such egregious examples of neglect, the faulty parts resulting in multi-million dollar lawsuits time and time again.
I won't dispute the security between the two products. The factors I would look at in the near term is the number of corporations entering the upgrade cycle- again this falls back to the cash liabillity threshold, and the marked availability advantage that HP has. The number of PC's sold to date is probably more consumer driven than business, which I think only hurts Dell right now. I do feel the availabillity of Dell prodcuts starting recently in Wal-Mart and store like Staples can only help close this gap. We will see soon enough with the first quarters of Wave/FDE on the horizon. I can only hope these numbers are where everybody thinks they should be. Shareholders should not accept anything less.
Dave
It could also be that HP had a better visibility, not ad campaign, but hands on visibilty and off the shelf availabillity , along with some very competative pricing to which consumers may very well have been swayed if they were deciding between these 2 brands- shipping cost and waiting for the DELL or same day for the HP in most cases. HP also has it's secure tools- which are probably lacking if you listen to the techies here- but it probably serves the purpose for those who were looking to upgrade PC security that have a very minimal working knowledge of the products available. We know the Seagate FDE could revolutionize the security of the PC, yet the sales of PC's didn't grind to a halt as the world awaited it's rollout. Visibility is the key, and we shall see what effect the Dell/Seagate/Wave advert has in the near future.
Dave
Wavxmaster
I hadn't looked and had an e-mail exchange a few weeks back where I was told the employee count was stagnant- was told it was basically the same as the last stated number- which unless I am wrong came out in spring. This could be a very good sign, unless it is replacing employees who have left. I think I will follow up to find out.
Dave
The Wave/Safeboot dilema.
As some of you may have seen this weekend, the State of Ohio has decided to go with Safeboot for the state's computer security. This was the lead story on the 50,000 watt blowtorch of a radio station on every half hour today from 6am til as I type, not to mention the TV coverage as well. As I made the rounds today, 4 companies that I see on a daily basis have there IT departments looking into the solution the state just deployed. A banking corp, health care system and insurance provider that account for over 50,000 jobs in our area- not small potatoes. This was the scenario I thought could damage Wave the most outside of the fund shortfall. The longer it takes for them to deploy, other soltuions gain traction and others follow suit.
Once these solutions are in place, as long as it does just enough, the chance they will replace these systems is slim to none. The security will operate in the background, there are many examples of companies who shelled out huge sums of money for software programs that don't work the way the need them to, but the continue using it- because of the cost, and these are in their face everyday. These amounts can be measuresd in huge dollar amounts and not the spare change Wave stock is selling for today. If Wave dosen't have traction via the FDE drive- traction that can be measured on the balance sheet- the next PP is only delaying the inevitable. The total cost for the state of Ohio was in the 600- 800K range. I know we cannot know how much the cost would have been to deploy the ETS alone or the FDE solution, but one must wonder if cost is going to be a consideration going forward- especially if they want security now and don't have new PC's in the budget for the FDE equipped machines.
While some brave souls may look at this level as a great buying opportunity, I will gladly sit on the sidelines here. SKS said once before that the sales staff would expand when it was needed, I don't believe it has. This is an indicator that I will be watching with greater interest than the shareprice.
Dave
Greetings Board....
I have been extremely busy and had some issues with the ISP so I haven't been monitoring the day to day activities. With the lack of news going into this quarter I took a short position which I closed this week. I have closed my position entirely. This was the first time since I have held that I made any money in this stock. Coupled with the gains I took from sales of WFMI and HANS I have the option of buying back in with the same amount of shares at a later date and a higher price- 6-7 dollar range. Given the length of the slog and the unreliability of the information that has been given this shareholder base, I felt this was the proper action to take at this time.
Everyone here has deserved far better than we have received from the braintrust running this company. There are still so many unanswered questions this late in the game, sliding price scales, lack of upgrades and the like. At this point I know Seagate is coming- but I NEED to see the real figures attached with that deployment, not what it is expected to generate. Those expected numbers have caused too many irrational buys in the past. Good luck to everyone here.
Dave
shareholder 1999-2007
OKNPV
This seems to be another example of perceiving that Vista and Bit-Locker is good enough. I can think of no reason as to why Dell would not offer the ETS at the very minimum as an advertised option with this product after having it available through Dell for as long as it has been now.
Dave
How to finance-borrow the money
Put up WXP as collateral, whatever it takes to secure the money. In the big picture 14M isn't that great a sum. Seagate is in the pipeline. There are many successful and not so successful companies carrying debt. This is one area that is always looked upon as a positive- Wave has no long term debt. Fine, nice. What benefit has it given the company? We can speculate, but truth is there isn't any. They have not taken on any debt so we cannot say absolutely what adverse effect it had. None. Only that it sounds nice to say Wave is debt free. With Seagate in the pipeline and so many other things coming, allegedly,( only because there are still no concrete $$ generating deals on the table that guarentee) there should be no reason that debt should not be a consideration. One can make the arguement that it won't look good on the books for those on the Street. I can also make a case for the compensation given the companies performance looking just as bad. The only reason I can think of for this company not to take on debt versus a PP would be a continued lag in the revenue flow. 14M in debt isn't really that much when you look at what this company has lost over the years dosen't even amount to 5% of that total and if I read it right 800K is what they lose to process the PP and put it through. If they are that close to a steady revenue flow than maybe it's time to take on some debt.
Dave
CSL.................
I am waiting to see what this brings from Intel as well. I was a little more than disappointed to see in the annual report that Intel made up less than 10% of everyhing Wave brought in last year. Considering the length of time that they have been with Intel and the number of MB that we are on I would have thought this figure would have grown along with revenue ramp.
Dave
Just the pre-CC rise........again.
No Vista for first quarter, no announced guarenteed rev deals, no Seagate. This first quarter will be flat as a pancake unless something comes out of left field. 850-975K I think is about right. Q2 should be a whole nother story from Q1 however. Nobody who has followed the developements should be expecting anything of substance for Q1- this isn't bashing or bitching.
Dave
Survey Shatters Technology Assumptions
By ANICK JESDANUN
NEW YORK - A broad survey about the technology people have, how they use it, and what they think about it shatters assumptions and reveals where companies might be able to expand their audiences.
The Pew Internet and American Life Project found that adult Americans are broadly divided into three groups: 31 percent are elite technology users, 20 percent are moderate users and the remainder have little or no usage of the Internet or cell phones.
But Americans are divided within each group, according to a Pew analysis of 2006 data released Sunday.
The high-tech elites, for instance, are almost evenly split into:
_ "Omnivores," who fully embrace technology and express themselves creatively through blogs and personal Web pages.
_ "Connectors," who see the Internet and cell phones as communications tools.
_ "Productivity enhancers," who consider technology as largely ways to better keep up with their jobs and daily lives.
_ "Lackluster veterans," those who use technology frequently but aren't thrilled by it.
John Horrigan, Pew's associate director, said he started the survey believing that the more gadgets people have, the more they are likely to embrace technology and use so-called Web 2.0 applications for generating and sharing content with the world.
"Once we got done, we were surprised to find the tensions within groups of users with information technology," Horrigan said.
Many longtime Internet users, the lackluster veterans, remain stuck in the decade-old technologies they started with, Horrigan said. That a quarter of high-tech elites fall into this category, he said, shows untapped potential for companies that can design next-generation applications to pique this group's interest.
The moderate users were also evenly divided into "mobile centrics," those who primarily use the cell phone for voice, text messaging and even games, and "connected but hassled," those who have used technology but find it burdensome.
Mobile companies, he said, can target the mobile centrics with premium services, especially once faster wireless networks become available.
The Pew study found 15 percent of all Americans have neither a cell phone nor an Internet connection. Another 15 percent use some technology and are satisfied with what it currently does for them, while 11 percent use it intermittently and find connectivity annoying.
Eight percent _ mostly women in the early 50s _ occasionally use technology and might use more given more experience. They tend to still be on dial-up access and represent potential high-speed customers "with the right constellation of services offered," Horrigan said.
The telephone study of 4,001 U.S. adults, including 2,822 Internet users, was conducted Feb. 15 to April 6, 2006, and has a margin of sampling error of plus or minus 2 percentage points
He has been feed up with the options discussion tying up the board, dosen't like it- not product, not DD I guess. I think there is a lot more credence to this some of the dot connecting that has gone on over the last 10 years. There is a real consequence to what happens here- and for the record we have no clue, none, of how the outcome will effect this company, good or bad, but that it will effect the company in some way- at the very least it should make these folks realize that it won't be business as usual with regards to what they try and run past the shareholders. If that is the least or most of what passes here, that is more pertinent to the shareholders connection to Wave than the 90% of DD that ends up going nowhere.
Dave
Robert with all that has gone on I would tend to think this 1st qt CC is being moved UP in an effort by SKS to try and plead manglements case. They went over 3 months for Q4 results with what can only be described as a major disappointment. Now they come back less than 2 months since the last CC- with no Seagate revs to report, minimal at best Vista revs-if any- and no PR's released to even hang any hope on that this 1st quarter will be any more of what we saw in Q4. I can only guess this will be cheerleading and innuendo at best- I would like to think it was something more, but what I have to go on leads me to believe it won't be so. This is the last best chance Wave has to plead it's case for this proxy before the vote. IMO that's why it has been moved forward.
Dave
Intel is negilgible in revs 2006 Go Kite
Look at the filling, page F-30 Their slice of the rev was less than 10% of everything Wave took in last year. This sure opened my eyes when I saw it.
Dave
Don't expect that much. No Seagate this quarter, minimal Vista revs as the software wasn't ready until late in the quarter. We never got a big "christmas push" bump I was hoping we would see for Q4. I don't expect much- matter of fact I almost expect flat or worse than Q4. What hard facts do we have to go on? None. Everything we can venture a guess on has been wildly off base or simply deduced from other sources other than the company we are trying to estimate.
Dave
Nick
The problem is apparent that the rest of the world dosen't see things in the same light. Until that happens Wave will continue to fight this uphill battle. As this moves forward one thing that looks to be underestimated is the "help" we will get from the other companies offering our tech. At this point it looks like the OEM's are content to let the marketplace determine the solution it wants, and not the other way around. It may change at some point, but the revenue for Wave is telling a different story. By Q3 that will be a little clearer one way or the other as far as Seagate/Wave are concerned.
Dave
Who checks Wave's books?
http://www.sec.gov/Archives/edgar/data/919013/000110465907019918/a07-5576_110k.htm
A mistake on F-30 showing revs listed 2,523,512
A quick punch of the numbers shows it should be 2,524,512.
Some may say it's just a small mistake. It's the attention to details, or lack thereof that is glaring. Just like the proxy, and one can only guess if this is transpiring as they try to conduct business. I would surely hope not.
This is unbelievable. Absolutely no accountabillity seems to be coming from up north. And people bitch about the cost to redo the proxy? How about making sure the filings with the SEC are correct.
Dave
Only if somebody is buying is there an advantage.
Dave
I don't know you.
I also didn't say you were a pawn. I did say-infer might be better- you were being used to relay a message from Wave to the board. Why no contact to all the shareholders that Steven was available? This message came through you Larry. I am not faulting you in any way. I just think that if the company was truly concerned they would have reached out further than just through the message boards that's all. There could very well be a whole segment of investors that have no inkling of what is going on until the proxy drops in their laps. This is not meant with any disrespect, but as a mixed message. You say shareholders were concerned and asked you to call. Why not politely decline and have them each make contact-obvously they were open to this. Why take it upon yourself to inform SKS about the uproar over this issue, and not let the chips fall where they may. Lastly why reveal you had a conversation with SKS and that it changed your mind-why not state your mind was changed and let it be? I just think this options issue and the lack of response to the shareholders is going to do a disservice to the company going forward.
Dave
Ambler Snackman has been used.
I think he has been used by Wave in this whole affair. Many have asked why Wave has not reached out to the shareholders via a letter or some sort of release. It happens other, companies have done it. For whatever reason Wave has choosen not to. Wave is very aware of these stock boards, and has said as much publically. This also means that they realize those holding a vast majority of the outstanding shares frequent these boards. For better or worse Snackman is looked upon by those in this community as the face if you will of these boards. His ability to contact Steven- the dinner a few years back only cements this-wether he wants to believe this or not. By reaching out to the board- it dosen't matter who initiated the contact- through Snackman, his status would be enough to guide enough votes one way because of the block of shares collectively held here. I think this may be what Lee had hoped after the reaction was so heated and vigorously debated once it was released. I think this was purely damage control. I still feel this will be defeated. This isn't sitting well with a lot of shareholders and the reasoning given paired with the lack of trying to contact All shareholders, not just those on the boards, don't pass the sniff test for many. The unfortunate thing is that I feel that this episode is only going to alienate more shareholders and foster a new era of distrust of those steering the ship. An arguement is had about the monies that would be spent to redo the proxy. I know there is a cost to do the PP's as well- the cost to Wave in 2006 alone was over 1 million to place these pipes. The price of not doing anything is going to be far greater and resound far longer than any cost associated with getting this right in the eyes of the shareholders.
Dave
One thing that could have helped avoid the options issue
I have been reviewing a couple of proxies I just received and what I am finding is that there is a dollar cap on the value of options that can be cashed in a year time frame. This could have eliminated this argument about the number of options issued. For arguments sake we could have voted on a 250K dollar amount per year limit for example. That would give the company the number of options they wanted and also given the shareholders some sort of comfort knowing that there would not be any quick turnaround on these options flooding the market being sold. While the number exercised at today's price would be just north of 97K per year, that figure would go down as the shareprice would increase. And if the shareprice would show a sustained increase then this cap could be voted on and raised-which would be passed, if the fortunes of this company were to head in the expected direction. This is a solution I think we all could live with.
Dave
Kev that language was in in 2004
"-Options granted under the Plan may, in the discretion of the Board of Directors or the Committee, as the case may be, include the right to acquire a reload option (a "Reload Option"). The Reload Option shall give the holder thereof the right to purchase a number of Shares equal to the number of Shares tendered by an optionee in exercising an option, and the number of whole Shares, if any, withheld by the Company as payment for any withholding taxes due. The exercise price of the Reload Option shall equal the fair market value of the Shares on the date of grant of the Reload Option and the term of the Reload Option shall end on the expiration date of the option with respect to which the Reload Option was granted."
Dave
From 2004
Stock options may be exercised by an optionee in whole or in part by giving notice to the Company and the exercise price therefore may be paid by delivering cash or shares of unrestricted Common Stock having a fair market value equal to the cash exercise price of the options being exercised. Optionees may also utilize a cashless exercise feature that will enable them to exercise their options without a concurrent payment of the option price, provided that the purchased option shares are immediately sold by a designated broker and the option price is paid directly to the Company out of the sale proceeds. Options granted under the 1994 Employee Plan, as amended, may, at the discretion of the Compensation Committee or the Board of Directors, the right to acquire a reload option (the "Reload Option") to purchase the number of shares of Class A Common Stock tendered by an optionee in exercising a stock option. The exercise price of the Reload Option shall equal the fair market value of the Class A Common Stock on the date of the grant of the Reload Option.
From 2003 stock option vote
SUMMARY OF THE 1994 EMPLOYEE STOCK OPTION PLAN, AS AMENDED
The following summary of material features of the 1994 Employee Stock Option Plan, as amended (the "1994 Employee Plan"), is qualified in its entirety by reference to the full text of the 1994 Employee Plan, as amended, a copy of which is attached hereto as EXHIBIT 1.
GENERAL
The 1994 Employee Plan permits the Company to grant ISOs and NQSOs to salaried officers and other key employees, and terminates on January 1, 2004, which will be extended until January 1, 2009 if the 2003 Amendment B is approved. No options may be granted after the Termination Date. The 1994 Employee Plan covers a maximum of 13,000,000 shares of Class A Common Stock, which will be increased to a total of 15,500,000 if the 2003 Amendment A is approved (subject to share adjustments as described below), which may be either authorized and unissued shares of Class A Common Stock or shares of Common Stock held in the Company's treasury. When an option lapses, expires, terminates or is forfeited, the related shares of Class A Common Stock may be available for distribution in connection with future options. Adjustments may be made in the number of shares of Class A
10
--------------------------------------------------------------------------------
Common Stock reserved under the 1994 Employee Plan, in the option price and in the number of shares of Class A Common Stock subject to stock options, in the event of a merger, reorganization, consolidation, recapitalization or stock dividend, and in the event of certain other changes described in the 1994 Employee Plan, as amended, or any other changes in the Company's corporate structure that affect the Class A Common Stock or has an effect similar to any of the foregoing. No employee may be granted options covering, in the aggregate, more than 500,000 shares of Class A Common Stock in any fiscal year of the Company (subject to adjustment as provided above).
Because grants under the 1994 Employee Plan, as amended, are discretionary, the Company cannot now determine the number of options to be received by any particular current executive officer, by all current executive officers as a group or by non-executive officer employees or directors as a group. The number of such options and awards shall be determined by the Compensation Committee, pursuant to the terms of the 1994 Employee Plan, as amended by the 2003 Amendment. It is currently estimated that there are 100 employees eligible to participate in the 1994 Employee Plan, as amended. For information concerning the ownership of options by the Named Executive Officers, see "Executive Compensation" above.
ADMINISTRATION
The 1994 Employee Plan, as amended, is administered by the Compensation Committee. The Compensation Committee is comprised of directors who are non-employee directors within the meaning of Rule 16b-3 promulgated under the Exchange Act. The Compensation Committee has the sole and complete discretion, subject to the terms of the 1994 Employee Plan, as amended, to (i) select the individuals from among the eligible employees of the Company and its subsidiaries to whom options may be granted, (ii) determine the type of options to be granted and the terms and conditions of any options granted, and (iii) determine the number of shares of Class A Common Stock subject to each option granted. In addition, the Compensation Committee is authorized to interpret the 1994 Employee Plan, as amended, to make and rescind rules and regulations related thereto, and to make all determinations necessary or advisable for the administration of the 1994 Employee Plan, as amended.
STOCK OPTIONS
Stock options granted under the 1994 Employee Plan, as amended, may be either ISOs or NQSOs. The aggregate fair market value (determined as of the time of the grant of an ISO) of the Class A Common Stock with respect to which ISOs are exercisable for the first time by a single optionee during any calendar year under the Plan and any other stock option plan of the Company may not exceed $100,000.
The exercise price for stock options shall be determined by the Compensation Committee and shall be set forth in an option agreement entered into with the optionee, provided, however, that the exercise price for an option shall not be less than the fair market value of a share of Class A Common Stock on the date of grant (110% in the case of an ISO granted to a 10% or more stockholder). On May 30, 2003, the last reported bid price for the Company's Class A Common Stock, was $0.84 per share.
The Compensation Committee is to specify the time or times at which such options will be exercisable, except that the termination date for any stock option shall not exceed 10 years from the date of grant (five years in the case of an ISO granted to a 10% or more stockholder). Options may be exercised within three months following the retirement of an optionee and within twelve months following the death or disability of an optionee; provided, that no option may be exercised following the period of exercisability set forth in the agreement related thereto.
11
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Stock options may be exercised by an optionee in whole or in part by giving notice to the Company and the exercise price therefore may be paid by delivering cash or shares of unrestricted Common Stock having a fair market value equal to the cash exercise price of the options being exercised. Optionees may also utilize a cashless exercise feature that will enable them to exercise their options without a concurrent payment of the option price, provided that the purchased option shares are immediately sold by a designated broker and the option price is paid directly to the Company out of the sale proceeds. Options granted under the 1994 Employee Plan, as amended, may, at the discretion of the Compensation Committee or the Board of Directors give the option holder the right to acquire a reload option (the "Reload Option") to purchase the number of shares of Class A Common Stock tendered by an optionee in exercising a stock option. The exercise price of the Reload Option shall equal the fair market value of the Class A Common Stock on the date of the grant of the Reload Option.
Stock options are nontransferable other than by will or by the laws of descent and distribution, and stock options are exercisable during the optionee's lifetime only by the optionee.
CHANGE OF CONTROL
In the event of a "Change of Control," as defined in the 1994 Employee Plan, as amended, all options outstanding shall be immediately and fully exercisable and shall become fully vested.
AMENDMENTS
The Board of Directors may terminate, suspend or amend the 1994 Employee Plan, as amended, provided that such amendment, suspension, or termination may not affect the validity of the then outstanding options, and provided further that the Board may not, without the approval of stockholders (i) increase the maximum number of shares of Class A Common Stock which may be issued pursuant to the provisions of the 1994 Employee Plan, as amended, (ii) change the class of individuals eligible to receive options under the 1994 Employee Plan, as amended, (iii) materially increase the benefits accruing to participants under the 1994 Employee Plan, as amended, or (iv) extend the term of the 1994 Employee Plan, as amended.
WITHHOLDING TAXES
The 1994 Employee Plan, as amended, provides that the Company may deduct from any distribution to an employee an amount equal to all federal, state and local income taxes or other amounts as may be required by law to be withheld.
FEDERAL INCOME TAX CONSEQUENCES
The following general description of federal income tax consequences is based upon current statutes, regulations and interpretations. This description is not intended to address specific tax consequences applicable to individual participants.
INCENTIVE STOCK OPTIONS
No regular income tax consequences result from the grant of an ISO or the exercise of an ISO by the employee, provided the employee continues to hold the stock acquired on the exercise of an ISO for the requisite holding periods described below. The employee will be taxed only upon the sale or disposition of the stock acquired under an ISO and the gain recognized at that time will be long-term capital gain. The holding period requirements necessary for ISO treatment are as follows: (i) such shares may not be disposed of within two years from the date the ISO is granted, and (ii) such shares must be held for at least one year from the date the shares are transferred to the employee upon the exercise of the ISO. In addition, to receive ISO treatment, the option holder generally must be an
12
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employee of the Company or a subsidiary of the Company from the date the stock option is granted until three months before the date of exercise.
If an employee disposes of stock acquired upon exercise of an ISO before expiration of the applicable holding periods, the employee will be taxed at ordinary income tax rates on the date of disposition measured by the lesser of; (i) the fair market value of the stock on the date of exercise of the ISO minus the option price or (ii) the amount realized on disposition minus the option price, and the Company will receive a corresponding income tax deduction. In the case of a sale where a loss, if sustained, would be recognized, the amount of the optionee's income, and the amount of the Company's corresponding expense deduction, will not exceed the difference between the sale price and the adjusted basis of the shares.
The amount by which the fair market value of shares of Class A Common Stock received upon exercise of an ISO exceeds the option price constitutes an item of tax preference that may be subject to the alternative minimum tax. If an employee is subject to the alternative minimum tax as a result of the exercise of an ISO, for purposes of calculating the gain on a disposition of the stock solely for purposes of the alternative minimum tax, the amount treated as a preference item will be added to his or her tax basis for the stock. Gain realized by an employee upon the disposition of stock acquired through the exercise of an ISO is taxable in the year of disposition, but such income is not subject to income tax withholding if the requisite holding periods have been satisfied. If either of the holding periods is not satisfied, however, the disposition of the stock may result in taxable income to the employee as additional compensation that is subject to withholding.
NON-QUALIFIED STOCK OPTIONS
With regard to NQSOs, the employee will recognize ordinary income at the time of the exercise of the option in an amount equal to the difference between the exercise price and the fair market value of the shares of Class A Common Stock received on the date of exercise. Such income will be subject to withholding. When the employee disposes of shares of Class A Common Stock acquired upon the exercise of the option, any amount received in excess of the fair market value of the shares of Class A Common Stock on the date of exercise will be treated as long-term or short-term capital gain, depending upon the holding period of the shares of Class A Common Stock. If the amount received upon sale is less than the fair market value of the shares of Class A Common Stock on the date of exercise, the loss will be treated as long-term or short-term capital loss, depending upon the holding period of the shares of Class A Common Stock.
Section 162(m) of the Code generally prohibits the Company from deducting compensation of a "covered employee" to the extent the compensation exceeds $1,000,000 per year. For this purpose, "covered employee" means the Chief Executive Officer of the Company and the four other highest compensated officers of the Company. Certain performance-based compensation (including, under certain circumstances, stock option compensation) will not be subject to, and will be disregarded in applying, the $1,000,000 deduction limitation. It is the Company's intention that options granted under the 1994 Employee Plan, as amended, qualify as "performance-based" compensation under Section 162(m).
PROPOSAL NO. 2
APPROVAL OF AN AMENDMENT TO THE 1994 EMPLOYEE STOCK OPTION PLAN TO
INCREASE THE NUMBER OF SHARES OF CLASS A COMMON STOCK AUTHORIZED
FOR ISSUANCE THEREUNDER FROM 13,000,000 TO 15,500,000
The Board of Directors adopted on May 22, 2003, subject to approval by the stockholders, an amendment and restatement (the "2003 Amendment A") to the Company's 1994 Employee Stock Option Plan (the "1994 Employee Plan"). The 2003 Amendment A will only increase, by a total of
13
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2,500,000, the number of shares of Class A Common Stock reserved for issuance under the 1994 Employee Plan. The Company has in the past used, and intends to continue to use, stock options as an incentive device to motivate and compensate its salaried officers and other key employees, and believes that equity incentives represented by stock options enhance the Company's ability to attract and retain the best available personnel. There are no current plans, proposals or arrangements to award any of these additional options. As of August 15, 2003, options to purchase an aggregate of 3,942,507 shares of Class A Common Stock had been exercised under the 1994 Employee Plan, and options to purchase 7,983,833 shares of Class A Common Stock were outstanding under the 1994 Employee Plan. Accordingly, only 1,073,660 shares remained available for future grants under the 1994 Employee Plan as of such date.
Under the terms of the 1994 Employee Plan, the Company is authorized to grant stock options that qualify as incentive stock options ("ISOs") under Section 422 of the Code and non-qualified stock options ("NQSOs") to salaried officers and other key employees of the Company and its subsidiaries who are in a position to affect materially the profitability and growth of the Company and its subsidiaries, for up to an aggregate of 13,000,000 shares of Class A Common Stock. See above for a summary of certain features of the 1994 Employee Plan, as amended.
RECOMMENDATION AND VOTE
An affirmative vote of the holders of a majority of shares of Common Stock present in person or by proxy and entitled to vote at the Special Meeting is required to approve the adoption of the 2003 Amendment A.
The Board of Directors deems Proposal No. 2 to be in the best interests of the Company and its shareholders and recommends that the shareholders vote "FOR" approval of the 2003 Amendment A.
PROPOSAL NO. 3
APPROVAL OF AN AMENDMENT TO THE 1994 EMPLOYEE STOCK OPTION PLAN
TO EXTEND THE TERMINATION DATE
The Board of Directors adopted on May 22, 2003, subject to approval by the stockholders, an additional amendment and restatement (the "2003 Amendment B") to the 1994 Employee Plan. The 2003 Amendment B will only extend the termination date, as defined in Article XXI of the 1994 Employee Plan, from January 1, 2004 to January 1, 2009. Currently, because the 1994 Employee Plan terminates on January 1, 2004, the Company will not be able to provide future stock option grants under the 1994 Employee Plan to its key employees subsequent to that date. Accordingly, the Company has adopted the 2003 Amendment B, and seeks stockholder approval for such amendment so that it may continue to grant stock options to its key employees subsequent to January 1, 2004.
RECOMMENDATION AND VOTE
An affirmative vote of the holders of a majority of shares of Common Stock present in person or by proxy and entitled to vote at the Special Meeting is required to approve the adoption of the 2003 Amendment B.
The Board of Directors deems Proposal No. 3 to be in the best interests of the Company and its shareholders and recommends that the shareholders vote "FOR" approval of the 2003 Amendment B.
14
From 2000
"Options
granted under the 1994 Employee Plan may also provide for the option holder to
receive an additional option (the "Reload Option") to purchase the number of
shares tendered by an optionee in exercising a stock option. The exercise price
of the Reload Option shall equal the fair market value of the Class A Common
Stock on the date of the grant of the Reload Option."
AMENDMENT TO THE 1994 EMPLOYEE STOCK OPTION PLAN
The Board of Directors adopted on March 23, 2000, subject to approval by the
stockholders, an amendment (the "2000 Amendment") to the Company's 1994 Employee
Stock Option Plan (the "1994 Employee Plan"). The 2000 Amendment increases by a
total of 5,000,000 the number of shares of the Company's Class A Common Stock
reserved for issuance under the 1994 Employees Plan. The Company has in the past
used, and intends in the future to use, stock options as an incentive device to
motivate and compensate its salaried officers and other key employees, and
believes that equity incentives represented by stock options enhance the
Company's ability to attract and retain needed personnel. As of April 26, 2000,
options to purchase an aggregate of 1,720,566 shares of Class A Common Stock had
been exercised under the 1994 Employee Plan, and options to purchase 6,206,462
shares of Class A Common Stock were outstanding under the 1994 Employee Plan.
Accordingly, only 72,972 shares remained available for future grants under the
1994 Employee Plan as of such date.
Under the terms of the 1994 Employee Plan, as currently in effect, the
Company is authorized to grant stock options that qualify as incentive stock
options ("ISOs") under Section 422 of the Code and non-qualified stock options
("NQSOs") to salaried officers and other key employees of the Company and its
subsidiaries who are in a position to affect materially the profitability and
growth of the Company and its subsidiaries, for up to an aggregate of 8,000,000
shares of Class A Common Stock. The following summary of certain features of the
1994 Employee Plan is qualified in its entirety by reference to the full text of
the 1994 Employee Plan, a copy of which will be furnished to any stockholder,
upon written request of such stockholder directed to Mr. Gerard T. Feeney,
Secretary, 480 Pleasant Street, Lee, Massachusetts 01238.
SUMMARY OF THE 1994 EMPLOYEE PLAN AND THE 2000 AMENDMENT
GENERAL
The 1994 Employee Plan, as amended in 1998 and currently in effect, permits
the Company to grant ISOs and NQSOs to salaried officers and other key
employees. The 1994 Employee Plan terminates on January 1, 2004 and no options
may be granted after the termination date. The 1994 Employee Plan covers a
maximum of 8,000,000 shares of Class A Common Stock, which will be increased to
a total of 13,000,000 shares if the 2000 Amendment is approved (subject to share
adjustments as described below), which may be either authorized and unissued
shares of Class A Common Stock or shares held in the Company's treasury. When an
option lapses, expires, terminates or is forfeited, the related shares of
Class A Common Stock may be available for distribution in connection with future
options. Adjustments may be made in the number of shares reserved under the 1994
Employee Plan, in the option price and in the number of shares subject to stock
options, in the event of a merger, reorganization, consolidation,
recapitalization or stock dividend, and in the event of certain other changes
described in the 1994 Employee Plan or any other changes in the Company's
corporate structure that affect the Class A Common Stock or has an effect
similar to any of the foregoing. No employee may be granted options covering, in
the aggregate, more than 500,000 shares of Class A Common Stock in any fiscal
year of the Company (subject to adjustment as provided above).
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<PAGE>
Because grants under the 1994 Employee Plan are discretionary, the Company
cannot now determine the number of options to be received by any particular
current executive officer, by all current executive officers as a group or by
non-executive officer employees or directors as a group. The number of such
options and awards shall be determined by the Compensation Committee, pursuant
to the terms of the 1994 Employee Plan. It is currently estimated that there are
170 employees eligible to participate in the 1994 Employee Plan. For information
concerning the ownership of options by the Named Executive Officers, see
"Executive Compensation" above.
ADMINISTRATION
The 1994 Employee Plan is administered by the Compensation Committee. The
Compensation Committee is comprised of directors who are non-employee directors
within the meaning of Rule 16b-3 promulgated under the Exchange Act. The
Compensation Committee has the sole and complete discretion, subject to the
terms of the 1994 Employee Plan, to (i) select the individuals from among the
eligible employees of the Company and its subsidiaries to whom options may be
granted, (ii) determine the type of options to be granted and the terms and
conditions of any options granted, and (iii) determine the number of shares of
common stock subject to each option granted. In addition, the Compensation
Committee is authorized to interpret the 1994 Employee Plan, to make and rescind
rules and regulations related thereto, and to make all determinations necessary
or advisable for the administration of the 1994 Employee Plan.
STOCK OPTIONS
Stock options granted under the 1994 Employee Plan may be either ISOs or
NQSOs. The aggregate fair market value (determined as of the time of the grant
of an ISO) of the Class A Common Stock with respect to which ISOs are
exercisable for the first time by a single optionee during any calendar year
under the Plan and any other stock option plan of the Company may not exceed
$100,000.
The exercise price for stock options shall be determined by the Compensation
Committee and shall be set forth in an option agreement entered into with the
optionee, provided, however, that the exercise price for an option shall not be
less than the fair market value of a share of Class A Common Stock on the date
of grant (110% in the case of an ISO granted to a 10% or more stockholder). On
December 31, 1999, the last reported bid price for the Company's Class A Common
Stock, was $11.9375 per share.
The Compensation Committee is to specify the time or times at which such
options will be exercisable, except that the termination date for any stock
option shall not exceed 10 years from the date of grant (five years in the case
of an ISO granted to a 10% or more stockholder). Options may be exercised within
three months following the retirement of an optionee and within twelve months
following the death or disability of an optionee; provided, that no option may
be exercised following the period of exercisability set forth in the agreement
related thereto.
Stock options may be exercised by an optionee in whole or in part by giving
notice to the Company and the exercise price therefor may be paid by delivering
cash or shares of unrestricted common stock having a fair market value equal to
the cash exercise price of the options being exercised. Optionees may also
utilize a cashless exercise feature which will enable them to exercise their
options without a concurrent payment of the option price, provided that the
purchased option shares are immediately sold by a designated broker and the
option price is paid directly to the Company out of the sale proceeds. Options
granted under the 1994 Employee Plan may also provide for the option holder to
receive an additional option (the "Reload Option") to purchase the number of
shares tendered by an optionee in exercising a stock option. The exercise price
of the Reload Option shall equal the fair market value of the Class A Common
Stock on the date of the grant of the Reload Option.
Stock options are nontransferable other than by will or by the laws of
descent and distribution, and stock options are exercisable during the
optionee's lifetime only by the optionee.
12
<PAGE>
CHANGE OF CONTROL
In the event of a "Change of Control," as defined in the 1994 Employee Plan,
all options outstanding shall be immediately and fully exercisable and shall
become fully vested.
AMENDMENTS
The Board of Directors may terminate, suspend or amend the 1994 Employee
Plan, provided that such amendment, suspension, or termination may not affect
the validity of the then outstanding options, and provided further that the
Board may not, without the approval of stockholders (i) increase the maximum
number of shares which may be issued pursuant to the provisions of the 1994
Employee Plan, (ii) change the class of individuals eligible to receive options
under the 1994 Employee Plan, (iii) materially increase the benefits accruing to
participants under the 1994 Employee Plan, or (iv) extend the term of the 1994
Employee Plan.
13
<PAGE>
WITHHOLDING TAXES
The 1994 Employee Plan provides that the Company may deduct from any
distribution to an employee an amount equal to all federal, state and local
income taxes or other amounts as may be required by law to be withheld.
FEDERAL INCOME TAX CONSEQUENCES
The following general description of federal income tax consequences is
based upon current statutes, regulations and interpretations. This description
is not intended to address specific tax consequences applicable to individual
participants.
INCENTIVE STOCK OPTIONS
No regular income tax consequences result from the grant of an ISO or the
exercise of an ISO by the employee, provided the employee continues to hold the
stock acquired on the exercise of an ISO for the requisite holding periods
described below. The employee will be taxed only upon the sale or disposition of
the stock acquired under an ISO and the gain recognized at that time will be
long-term capital gain. The holding period requirements necessary for ISO
treatment are as follows: (i) such shares may not be disposed of within two
years from the date the ISO is granted, and (ii) such shares must be held for at
least one year from the date the shares are transferred to the employee upon the
exercise of the ISO. In addition, to receive ISO treatment, the option holder
generally must be an employee of the Company or a subsidiary of the Company from
the date the stock option is granted until three months before the date of
exercise.
If an employee disposes of stock acquired upon exercise of an ISO before
expiration of the applicable holding periods, the employee will be taxed at
ordinary income tax rates on the date of disposition measured by the lesser of:
(i) the fair market value of the stock on the date of exercise of the ISO minus
the option price or (ii) the amount realized on disposition minus the option
price, and the Company will receive a corresponding income tax deduction. In the
case of a sale where a loss, if sustained, would be recognized, the amount of
the optionee's income, and the amount of the Company's corresponding expense
deduction, will not exceed the difference between the sale price and the
adjusted basis of the shares.
The amount by which the fair market value of shares received upon exercise
of an ISO exceeds the option price constitutes of an item of tax preference that
may be subject to the alternative minimum tax. If an employee is subject to the
alternative minimum tax as a result of the exercise of an ISO, for purposes of
calculating the gain on a disposition of the stock solely for purposes of the
alternative minimum tax, the amount treated as a preference item will be added
to his tax basis for the stock. Gain realized by an employee upon the
disposition of stock acquired through the exercise of an ISO is taxable in the
year of disposition, but such income is not subject to income tax withholding if
the requisite holding periods have been satisfied. If either of the holding
periods is not satisfied, however, the disposition of the stock may result in
taxable income to the employee as additional compensation which is subject to
withholding.
NON-QUALIFIED STOCK OPTIONS
With regard to NQSOs, the employee will recognize ordinary income at the
time of the exercise of the option in an amount equal to the difference between
the exercise price and the fair market value of the shares received on the date
of exercise. Such income will be subject to withholding. When the employee
disposes of shares acquired upon the exercise of the option, any amount received
in excess of the fair market value of the shares on the date of exercise will be
treated as long-term or short-term capital gain, depending upon the holding
period of the shares. If the amount received upon sale is less than the fair
market value of the shares on the date of exercise, the loss will be treated as
long-term or short-term capital loss, depending upon the holding period of the
shares.
14
<PAGE>
Section 162(m) of the Code generally prohibits the Company from deducting
compensation of a "covered employee" to the extent the compensation exceeds
$1,000,000 per year. For this purpose, "covered employee" means the chief
executive officer of the Company and the four other highest compensated officers
of the Company. Certain performance-based compensation (including, under certain
circumstances, stock option compensation) will not be subject to, and will be
disregarded in applying, the $1,000,000 deduction limitation. It is the
Company's intention that options granted under the 1994 Employee Plan qualify as
"performance-based" compensation under Section 162(m).
RECOMMENDATION AND VOTE
An affirmative vote of the holders of a majority of shares of common stock
present in person or by proxy and entitled to vote at the Annual Meeting is
required to approve the 2000 Amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE 2000 AMENDMENT.
Kev/ Nick- This is from the 1997 filing
"Options
granted under the 1994 Employee Plan may also provide for the option holder to
receive an additional option (the "Reload Option") to purchase the number of
shares tendered by an optionee in exercising a stock option. The exercise price
of the Reload Option shall equal the fair market value of the Class A Common
Stock on the date of the grant of the Reload Option."
Summary of the 1994 Employee Plan and the 1997 Amendment
General. The 1994 Employee Plan, as currently in effect, permits the
Company to grant ISOs and NQSOs to salaried officers and other key employees.
The 1994 Employee Plan terminates on January 1, 2004 and no options may be
granted after the termination date. The 1994 Employee Plan covers a maximum of
2,000,000 shares of Class A Common Stock, which will be increased to a total of
3,000,000 shares if the 1997 Amendment is approved (subject to share adjustments
as described below), which may be either authorized and unissued shares of Class
A Common Stock or shares held in the Company's treasury. When an option lapses,
expires, terminates or is forfeited, the related shares of Class A Common Stock
may be available for distribution in connection with future options. Adjustments
may be made in the number of shares reserved under the 1994 Employee Plan, in
the option price and in the number of shares subject to stock options, in the
event of a merger, reorganization, consolidation, recapitalization or stock
dividend, and in the event of certain other changes described in the 1994
Employee Plan or any other changes in the Company's corporate structure that
affect the Class A Common Stock or has an effect similar to any of the
foregoing. No employee may be granted options covering, in the aggregate, more
than 100,000 shares of Class A Common Stock in any fiscal year of the Company
(subject to adjustment as provided above).
Because grants under the 1994 Employee Plan are discretionary, the Company
cannot now determine the number of options to be received by any particular
current executive officer, by all current executive officers as a group or by
non-executive officer employees or directors as a group. The number of such
options and awards shall be determined by the Compensation Committee, pursuant
to the terms of the 1994 Employee Plan. It is currently estimated that there are
40 employees eligible to participate in the 1994 Employee Plan. For information
concerning the ownership of options by the Named Executive Officers, see
"Executive Compensation" above.
Administration. The 1994 Employee Plan is administered by the Compensation
Committee. The Compensation Committee is comprised of directors who are
non-employee directors within the meaning of Rule 16b-3 promulgated under the
Exchange Act. The Compensation Committee has the sole and complete discretion,
subject to the terms of the 1994 Employee Plan, to (i) select the individuals
from among the eligible employees of the Company and its subsidiaries to whom
options may be granted, (ii) determine the type of options to be granted and the
terms and conditions of any options granted, and (iii) determine the number of
shares of common stock subject to each option granted. In addition, the
Compensation Committee is authorized to interpret the 1994 Employee Plan, to
make and rescind rules and regulations related thereto, and to make all
determinations necessary or advisable for the administration of the 1994
Employee Plan.
Stock Options. Stock options granted under the 1994 Employee Plan may be
either ISOs or NQSOs. The aggregate fair market value (determined as of the time
of the grant of an ISO) of the Class A Common Stock with respect to which ISOs
are exercisable for the first time by a single optionee during any calendar year
under the Plan and any other stock option plan of the Company may not exceed
$100,000.
The exercise price for stock options shall be determined by the
Compensation Committee and shall be set forth in an option agreement entered
into with the optionee, provided, however, that the exercise price for an option
shall not be less than the fair market value of a share of Class A Common Stock
on the date of grant (110% in the case of an ISO granted to a 10% or more
stockholder). On June 13, 1997, the closing sale price of the Class A Common
Stock, as reported by Nasdaq, was $1.375 per share.
The Compensation Committee is to specify the time or times at which such
options will be exercisable, except that the termination date for any stock
option shall not exceed 10 years from the date of grant (five years in the case
of an ISO granted to a 10% or more stockholder). Options may be exercised within
three months following the retirement of an optionee and within twelve months
following the death or disability of an optionee; provided, that no option may
be exercised following the period of exercisability set forth in the agreement
related thereto.
Stock options may be exercised by an optionee in whole or in part by giving
notice to the Company and the exercise price therefor may be paid by delivering
cash or shares of unrestricted common stock having a fair market value equal to
the cash exercise price of the options being exercised. Optionees may also
utilize a cashless exercise feature which will enable them to exercise their
options without a concurrent payment of the option price, provided that the
purchased option shares are immediately sold by a designated broker and the
option price is paid directly to the Company out of the sale proceeds. Options
granted under the 1994 Employee Plan may also provide for the option holder to
receive an additional option (the "Reload Option") to purchase the number of
shares tendered by an optionee in exercising a stock option. The exercise price
of the Reload Option shall equal the fair market value of the Class A Common
Stock on the date of the grant of the Reload Option.
Stock options are nontransferable other than by will or by the laws of
descent and distribution, and stock options are exercisable during the
optionee's lifetime only by the optionee.
Change of Control. In the event of a "Change of Control," as defined in the
1994 Employee Plan, all options outstanding shall be immediately and fully
exercisable and shall become fully vested.
Amendments. The Board of Directors may terminate, suspend or amend the 1994
Employee Plan, provided that such amendment, suspension, or termination may not
affect the validity of the then outstanding options, and provided further that
the Board may not, without the approval of stockholders (i) increase the maximum
number of shares which may be issued pursuant to the provisions of the 1994
Employee Plan, (ii) change the class of individuals eligible to receive options
under the 1994 Employee Plan, (iii) materially increase the benefits accruing to
participants under the 1994 Employee Plan, or (iv) extend the term of the 1994
Employee Plan.
Withholding Taxes. The 1994 Employee Plan provides that the Company may
deduct from any distribution to an employee an amount equal to all federal,
state and local income taxes or other amounts as may be required by law to be
withheld.
Federal Income Tax Consequences
The following general description of federal income tax consequences is
based upon current statutes, regulations and interpretations. This description
is not intended to address specific tax consequences applicable to individual
participants.
Incentive Stock Options. No regular income tax consequences result from the
grant of an ISO or the exercise of an ISO by the employee, provided the employee
continues to hold the stock acquired on the exercise of an ISO for the requisite
holding periods described below. The employee will be taxed only upon the sale
or disposition of the stock acquired under an ISO and the gain recognized at
that time will be long-term capital gain. The holding period requirements
necessary for ISO treatment are as follows: (i) such shares may not be disposed
of within two years from the date the ISO is granted, and (ii) such shares must
be held for at least one year from the date the shares are transferred to the
employee upon the exercise of the ISO. In addition, to receive ISO treatment,
the option holder generally must be an employee of the Company or a subsidiary
of the Company from the date the stock option is granted until three months
before the date of exercise.
If an employee disposes of stock acquired upon exercise of an ISO before
expiration of the applicable holding periods, the employee will be taxed at
ordinary income tax rates on the date of disposition measured by the lesser of:
(i) the fair market value of the stock on the date of exercise of the ISO minus
the option price or (ii) the amount realized on disposition minus the option
price, and the Company will receive a corresponding income tax deduction. In the
case of a sale where a loss, if sustained, would be recognized, the amount of
the optionee's income, and the amount of the Company's corresponding expense
deduction, will not exceed the difference between the sale price and the
adjusted basis of the shares.
The amount by which the fair market value of shares received upon exercise
of an ISO exceeds the option price constitutes an item of tax preference that
may be subject to the alternative minimum tax. If an employee is subject to the
alternative minimum tax as a result of the exercise of an ISO, for purposes of
calculating the gain on a disposition of the stock solely for purposes of the
alternative minimum tax, the amount treated as a preference item will be added
to his tax basis for the stock. Gain realized by an employee upon the
disposition of stock acquired through the exercise of an ISO is taxable in the
year of disposition, but such income is not subject to income tax withholding if
the requisite holding periods have been satisfied. If either of the holding
periods is not satisfied, however, the disposition of the stock may result in
taxable income to the employee as additional compensation which is subject to
withholding.
Non-Qualified Stock Options. With regard to NQSOs, the employee will
recognize ordinary income at the time of the exercise of the option in an amount
equal to the difference between the exercise price and the fair market value of
the shares received on the date of exercise. Such income will be subject to
withholding. When the employee disposes of shares acquired upon the exercise of
the option, any amount received in excess of the fair market value of the shares
on the date of exercise will be treated as long-term or short-term capital gain,
depending upon the holding period of the shares. If the amount received upon
sale is less than the fair market value of the shares on the date of exercise,
the loss will be treated as long-term or short-term capital loss, depending upon
the holding period of the shares.
Section 162(m) of the Code generally prohibits the Company from deducting
compensation of a "covered employee" to the extent the compensation exceeds
$1,000,000 per year. For this purpose, "covered employee" means the chief
executive officer of the Company and the four other highest compensated officers
of the Company. Certain performance-based compensation (including, under certain
circumstances, stock option compensation) will not be subject to, and will be
disregarded in applying, the $1,000,000 deduction limitation. It is the
Company's intention that options granted under the 1994 Employee Plan qualify as
"performance-based" compensation under Section 162(m).
Recommendation and Vote
An affirmative vote of the holders of a majority of shares of common stock
present in person or by proxy and entitled to vote at the Annual Meeting is
required to approve the 1997 Amendment. If no direction is given to the
contrary, all proxies received by the Board of Directors will be voted "FOR"
approval of the 1997 Amendment.
The Board of Directors recommends that the stockholders vote "FOR" approval
of the 1997 Amendment.
4. APPROVAL OF THE 1996 PERFORMANCE STOCK OPTION PLAN
The Board of Directors adopted on September 5, 1996, subject to approval by
the stockholders, the 1996 Performance Stock Option Plan (the "Performance
Plan"). The Performance Plan reserves 800,000 shares of Class A Common Stock to
be granted to employees of the Company or any of its subsidiaries, consultants
and others to purchase shares of the Company's Class A Common Stock. The
Performance Plan is designed to enable the Company to attract and retain the
best available personnel, to provide additional incentive to employees,
consultants and others, to promote the success of the Company and reward those
who are contributing to the success of the Company as it commercializes its
technology.
Under the terms of the Performance Plan, the Company is authorized to grant
options that qualify as incentive stock options or ISOs under Section 422 of the
Internal Revenue Code and non-qualified options or NQSOs to employees of the
Company or any of its subsidiaries, to consultants and others to purchase shares
of the Company's capital stock. The options pursuant to the Performance Plan are
a matter of separate inducement and are not in lieu of any salary or other
compensation for services. The following summary of certain features of the
Performance Plan is qualified in its entirety by reference to the full text of
the Performance Plan, a copy of which will be furnished to any stockholder, upon
written request of such stockholder directed to Mr. James Stokes Hatch,
Secretary, 480 Pleasant Street, Lee, Massachusetts 01238.
Summary of the Performance Plan
General. The Performance Plan permits the Company to grant ISOs and NQSOs
to employees, consultants and others. The Performance Plan is designed to create
specific incentives to achieve specifically defined performance benchmarks by
providing certain key personnel with options that will vest upon the occurrence
of such specifically defined performance benchmarks. The Performance Plan
terminates at the close of business on September 5, 1996, unless sooner
terminated by action of the Compensation Committee, or the Board of Directors if
there is no Compensation Committee. The Performance Plan covers a maximum of
800,000 shares of the authorized Class A Common Stock, which may be either
authorized and unissued shares of Class A Common Stock or shares of Class A
Common Stock held in the Company's treasury, or both, at the discretion of the
Company. When any outstanding option or portion thereof expires, is canceled, is
forfeited or is otherwise terminated for any reason without having been
exercised or payment having been made in respect of the entire option, the
related shares of Class A Common Stock may be available for distribution in
connection with other options granted under the Performance Plan. Adjustments
may be made in the number of shares reserved under the Performance Plan, in the
option price and in the number of shares subject to stock options and shares of
the Company may be appropriately substituted for new shares in the event of any
stock dividend, stock split, combination or exchange of shares, recapitalization
or other change in the capital structure of the Company, corporate separation or
division, sale by the Company of all or a substantial portion of its assets,
rights offering, merger, consolidation, reorganization or partial complete
liquidation, or any other corporate transaction or event having an effect
similar to any of the foregoing.
Because grants under the Performance Plan are discretionary, the Company
cannot now determine the number of options to be received by any particular
person. The number of such options shall be determined by the Compensation
Committee, or the Board of Directors if there is no Compensation Committee,
pursuant to the terms of the Performance Plan. It is currently estimated that 10
employees are eligible to participate in the Performance Plan.
Administration. The Performance Plan is administered by the Compensation
Committee, or the Board of Directors if there is no Compensation Committee. The
Compensation Committee is comprised of no fewer than two members of the Board of
Directors, who are non-employee directors within the meaning of Rule 16b-3
promulgated under the Exchange Act. The Compensation Committee has the sole and
complete discretion, subject to the terms of the Performance Plan, to (i) select
employees of the Company, consultants, and others as recipients of options; (ii)
determine the number and type of options to be granted; (iii) determine the
terms and conditions of any options granted; (iv) adopt, alter and repeal such
administrative rules, guidelines and practices governing the Performance Plan as
it shall deem advisable; (v) interpret the terms and provisions of the
Performance Plan and any option granted and any agreements relating thereto; and
(vi) otherwise supervise the administration of the Performance Plan.
Stock Options. Stock options granted under the Performance Plan may be
either ISOs or NQSOs. If the aggregate fair market value (determined as of the
time of the grant of an ISO) of shares with respect to which ISOs are
exercisable for the first time by a single optionee during any calendar year
under the Performance Plan and any other stock option plan of the Company and
any parent or any subsidiary of the Company exceeds $100,000, any options which
otherwise qualify as Incentive Options, to the extent of the excess, will be
treated as NQSOs.
The exercise price for stock options shall be determined by the
Compensation Committee, or the Board of Directors if there is no Compensation
Committee, and shall be set forth in an option agreement entered into with the
optionee, provided, however, that the exercise price for an option shall not be
less than the fair market value of a share of Class A Common Stock on the date
of grant (110% in the case of an ISO granted to a 10% or more stockholder). On
June 13, 1997, the closing sale price of the Class A Common Stock, as reported
by Nasdaq, was $1.375 per share.
The Compensation Committee is to specify the time or times at which such
options will be exercisable, except that the termination date for any stock
option shall not exceed 10 years from the date of grant (five years in the case
of an ISO granted to a 10% or more stockholder). Options may be exercised within
three months following the retirement of an optionee and within twelve months
following the death or disability of an optionee, provided, that no option may
be exercised following the period of exercisability set forth in the agreement
related thereto. Except as otherwise determined by the Compensation Committee if
an optionee voluntarily terminates his or her employment, or is discharged, any
option granted under the Performance Plan shall be canceled and the optionee
shall have no further rights to exercise any such option and all of the
optionee's rights shall terminate as of the effective date of such termination
of employment.
Stock options may be exercised by an optionee in whole or in part by giving
written notice to the Secretary of the Company and the exercise price therefor
may be paid by delivering cash or shares of unrestricted Class A Common Stock
having a fair market value equal to the cash exercise price of the options being
exercised. If the Company in its sole discretion establishes other cashless
exercise features optionees may also exercise their options without a concurrent
payment of the option price, provided that the purchased option shares are
immediately sold by a designated broker and the option price is paid directly to
the Company out of the sale proceeds.
Stock options are nontransferable other than by will or by the laws of
descent and distribution, and stock options are exercisable during the
optionee's lifetime only by the optionee.
Change of Control. In the event of a "Change of Control," as defined in the
Performance Plan, all options outstanding shall be immediately and fully
exercisable during the remaining term thereof, shall become fully vested and
shall remain so, whether or not the optionee to whom such options have been
granted remains an employee of the company or its subsidiaries.
Amendments. The Compensation Committee may terminate, suspend or amend the
Performance Plan, provided that such amendment, suspension, or termination may
not affect the validity of the then outstanding options, and provided further
that the Compensation Committee may not, without the approval of stockholders
(i) increase the total number of shares which may be issued under the
Performance Plan, (ii) modify the provisions of the Performance Plan relating to
eligibility, (iii) materially increase the benefits accruing to participants
under the Performance Plan, or (iv) extend the maximum period of the Performance
Plan.
Withholding Taxes. The Performance Plan provides that the Company may
deduct from any distribution to an employee, consultant or other an amount equal
to all federal, state and local income taxes or other amounts as may be required
by law to be withheld.
Federal Income Tax Consequences
The following general description of federal income tax consequences is
based upon current statutes, regulations and interpretations. This description
is not intended to address specific tax consequences applicable to individual
participants.
Incentive Stock Options. No regular income tax consequences result from the
grant of an ISO or the exercise of an ISO by the employee, provided the employee
continues to hold the stock acquired on the exercise of an ISO for the requisite
holding periods described below. The employee will be taxed only upon the sale
or disposition of the stock acquired under an ISO and the gain recognized at
that time will be long-term capital gain. The holding period requirements
necessary for ISO treatment are as follows: (i) such shares may not be disposed
of within two years from the date the ISO is granted, and (ii) such shares must
be held for at least one year from the date the shares are transferred to the
employee upon the exercise of the ISO. In addition, to receive ISO treatment,
the option holder generally must be an employee of the Company or a subsidiary
of the Company from the date the stock option is granted until three months
before the date of exercise.
If an employee disposes of stock acquired upon exercise of an ISO before
expiration of the applicable holding periods, the employee will be taxed at
ordinary income tax rates on the date of disposition measured by the lesser of:
(i) the fair market value of the stock on the date of exercise of the ISO minus
the option price or (ii) the amount realized on disposition minus the option
price, and the Company will receive a corresponding income tax deduction. In the
case of a sale where a loss, if sustained, would be recognized, the amount of
the optionee's income, and the amount of the Company's corresponding expense
deduction, will not exceed the difference between the sale price and the
adjusted basis of the shares.
The amount by which the fair market value of shares received upon exercise
of an ISO exceeds the option price constitutes an item of tax preference that
may be subject to the alternative minimum tax. If an employee is subject to the
alternative minimum tax as a result of the exercise of an ISO, for purposes of
calculating the gain on a disposition of the stock solely for purposes of the
alternative minimum tax, the amount treated as a preference item will be added
to his tax basis for the stock. Gain realized by an employee upon the
disposition of stock acquired through the exercise of an ISO is taxable in the
year of disposition, but such income is not subject to income tax withholding if
the requisite holding periods have been satisfied. If either of the holding
periods is not satisfied, however, the disposition of the stock may result in
taxable income to the employee as additional compensation which is subject to
withholding.
Non-Qualified Stock Options. With regard to NQSOs, the employee will
recognize ordinary income at the time of the exercise of the option in an amount
equal to the difference between the exercise price and the fair market value of
the shares received on the date of exercise. Such income will be subject to
withholding. When the employee disposes of shares acquired upon the exercise of
the option, any amount received in excess of the fair market value of the shares
on the date of exercise will be treated as long-term or short-term capital gain,
depending upon the holding period of the shares. If the amount received upon
sale is less than the fair market value of the shares on the date of exercise,
the loss will be treated as long-term or short-term capital loss, depending upon
the holding period of the shares
Section 162(m) of the Code generally prohibits the Company from deducting
compensation of a "covered employee" to the extent the compensation exceeds
$1,000,000 per year. For this purpose, "covered employee" means the chief
executive officer of the Company and the four other highest compensated officers
of the Company. Certain performance-based compensation (including, under certain
circumstances, stock option compensation) will not be subject to, and will be
disregarded in applying, the $1,000,000 deduction limitation. It is the
Company's intention that options granted under the Performance Plan qualify as
"performance-based" compensation under Section 162(m).
John I believe that a watershed with the shareholders has been reached.
What you see here is a combination of things. TPM in the marketplace, the number of huge players seemingly in Wave's corner, the DOD consulting situation last year and the prominent place within the TCG that Wave holds. You then offset that with lackluster revs at best, a slower uptake for whatever reason in the face of continual rosy prediction by SKS and still only PG to hold out as a working example of Wave in action. You have the perfect brew for this sort of scenario. Regardless of the need for these option shares, for the Lee gang to put a figure out there the negates the reverse split for them -wether they intended to cash all of these in a year or not- is at the very core of this problem. It certainly gives the impression of putting themselves to the front of the line.
Dave
Someone set up a survey page here
http://www.investorshub.com/boards/board.asp?board_id=9075
Dave
There is so much not to like here and it all isn't in the proxy. It's in the way it is being presented, it's in the way the excuses have been flying around, and in dire predictions of what will happen should a no vote prevail. This is all the company's doing, the shareholders have done nothing, and that in and of itself has added to this situation. These guys have had carte blanche and gotten it to this point from these shareholders. They have raised salaries and bonuses and loaned monies and have not been penalized by these same shareholders. There is absolutley no reason that this vote cannot be postponed None. This is about getting everything one has asked for without any major opposition ever. If I was in the shoes at Lee in the face of all this debate, I damn well sure would be working the phones and all the avenues to protect what I had. There is more at stake than these options now folks. It has opened up a lot of anger and regret and a look back at a lot of things that have led up to this point. It's time for a shake up in Lee.
Dave