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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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.
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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.
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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.
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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.
