-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q79D1ilc6pShDURl963Qd8NZJGr1/WCbeXB09mqe5/duwu8Ns0nWRTCVv+i/TGo/ 2WgCzCbfFlNjASpFKR0cEA== /in/edgar/work/20000814/0000891618-00-004373/0000891618-00-004373.txt : 20000921 0000891618-00-004373.hdr.sgml : 20000921 ACCESSION NUMBER: 0000891618-00-004373 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METRICOM INC / DE CENTRAL INDEX KEY: 0000884318 STANDARD INDUSTRIAL CLASSIFICATION: [3663 ] IRS NUMBER: 770294597 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19903 FILM NUMBER: 698805 BUSINESS ADDRESS: STREET 1: 980 UNIVERSITY AVE CITY: LOS GRATOS STATE: CA ZIP: 95030 BUSINESS PHONE: 4083998200 MAIL ADDRESS: STREET 1: 980 UNIVERSITY AVE CITY: LOS GATOS STATE: CA ZIP: 95030 10-Q 1 e10-q.txt FORM 10-Q FOR QUARTERLY PERIOD ENDED JUNE 30, 2000 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended JUNE 30, 2000 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________ to ________ Commission file number 0-19903 METRICOM, INC. (Exact name of Registrant as specified in its charter) DELAWARE 77-0294597 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 333 WEST JULIAN STREET, SAN JOSE, CA 95110-2335 (Address of principal executive offices, including zip code) (408) 282-3000 (Registrant's telephone number, including area code) 980 UNIVERSITY AVENUE, LOS GATOS, CA 95032-2375 (Former address of principal executive offices, including zip code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares of common stock outstanding as of July 31, 2000 was 30,716,980. 2 TABLE OF CONTENTS
PAGE SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets 4 Condensed Consolidated Statements of Operations 5 Condensed Consolidated Statements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview 11 Results of Operations 12 Liquidity and Capital Resources 16 ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK 18 PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 19 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 19 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 20 SIGNATURE PAGE 21 EXHIBIT INDEX 22
2 3 SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS This document contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that are based on our current expectations about our company and our industry. We use words such as "plan," "expect," "intend," "believe," "anticipate," "estimate" and other similar expressions to identify some forward-looking statements, but not all forward-looking statements include these words. Some of these forward-looking statements relate to the timing of our planned network deployment, the launch of our high-speed service, our market opportunities, our strategy, our anticipated revenues from MCI WorldCom, our competitive position, our management's discussion and analysis of our financial condition and results of operations and the timing and extent of our funding needs. All of our forward-looking statements involve risks and uncertainties. Our actual results may differ significantly from our expectations and from the results expressed in or implied by these forward-looking statements. Some of the factors that could cause our results to differ include our limited experience in marketing our new Ricochet service, the uncertainty of demand for that service, the short timeframe in which we believe we must deploy our high-speed network to be competitive, the magnitude of our deployment and launch, our dependence on third parties to deploy our high-speed network and manufacture modems and other network equipment on a timely and cost-effective basis, the shortage of supply of components experienced by our manufacturers, our dependence on channel partners such as MCI Worldcom and our need to gain acceptance by other channel partners, and risks related to regulatory approvals. These and other risks that we currently consider material are described in the section captioned "Risk Factors" appearing in our 1999 Annual Report on Form 10-K. We urge you to consider these cautionary statements carefully in evaluating our forward-looking statements. Except as required by law, we undertake no obligation to publicly update any forward-looking statements to reflect subsequent events and circumstances. 3 4 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS METRICOM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
JUNE 30, DECEMBER 31, 2000 1999 ----------- ------------ (Unaudited) ASSETS Current Assets: Cash and cash equivalents.............................................. $ 640,294 $ 354,820 Restricted cash and cash equivalents .................................. 21,858 -- Short-term investments ................................................ 282,212 144,521 Restricted short-term investments ..................................... 38,987 -- Accounts receivable, net .............................................. 1,733 2,387 Inventories, net ...................................................... 3,325 586 Prepaid expenses and other ............................................ 13,408 3,116 ----------- --------- Total current assets .............................................. 1,001,817 505,430 Property and equipment, net ............................................. 26,813 12,233 Network construction in progress ........................................ 282,618 22,034 Other assets ............................................................ 15,705 6,950 Restricted long-term investments ........................................ 35,745 -- ----------- --------- Total assets....................................................... $ 1,362,698 $ 546,647 =========== ========= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities: Accounts payable ...................................................... $ 77,266 $ 9,649 Accrued liabilities ................................................... 48,715 12,642 Note payable .......................................................... 908 4,521 ----------- --------- Total current liabilities ......................................... 126,889 26,812 ----------- --------- Long-term debt .......................................................... 242,242 385 ----------- --------- Other liabilities ....................................................... 281 321 ----------- --------- Redeemable convertible preferred stock .................................. 574,653 573,329 ----------- --------- Stockholders' Equity (Deficit) Common stock .......................................................... 31 25 Warrants to purchase common stock ..................................... 61,869 -- Additional paid-in capital ............................................ 771,653 283,763 Accumulated deficit ................................................... (414,520) (337,988) Accumulated other comprehensive loss .................................. (400) -- ----------- --------- Total stockholders' equity (deficit) ................................ 418,633 (54,200) ----------- --------- Total liabilities and stockholders' equity (deficit)............... $ 1,362,698 $ 546,647 =========== =========
The accompanying notes are an integral part of these condensed consolidated statements. 4 5 METRICOM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED ----------------------------- ------------------------------ JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 2000 JUNE 30, 1999 ------------- ------------- ------------- ------------- REVENUES: Service revenues .................... $ 2,135 $ 2,195 $ 4,469 $ 4,626 Product revenues .................... 172 2,468 1,061 4,223 -------- -------- -------- -------- Total revenues .................. 2,307 4,663 5,530 8,849 -------- -------- -------- -------- COSTS AND EXPENSES: Cost of service revenues ............ 21,701 4,071 35,519 8,183 Cost of product revenues ............ 1,627 2,011 1,927 3,337 Research and development ............ 9,201 8,559 17,308 16,598 Selling, general and administrative ................... 12,356 4,099 19,688 7,814 Depreciation and amortization ....... 2,428 1,065 4,532 2,007 -------- -------- -------- -------- Total costs and expenses ............ 47,313 19,805 78,974 37,939 -------- -------- -------- -------- Loss from operations .............. (45,006) (15,142) (73,444) (29,090) Interest expense ...................... (3,522) (1,601) (10,994) (2,814) Interest and other income ............. 17,193 186 33,787 329 -------- -------- -------- -------- Net loss .......................... (31,335) (16,557) (50,651) (31,575) Preferred dividends ................... 12,939 -- 25,881 -- -------- -------- -------- -------- Net loss attributable to common stockholders ................. $(44,274) $(16,557) $(76,532) $(31,575) ======== ======== ======== ======== Net loss attributable to common stockholders per share .............. $ (1.44) $ (0.86) $ (2.60) $ (1.65) ======== ======== ======== ======== Weighted average shares outstanding ................. 30,654 19,296 29,409 19,084 ======== ======== ======== ========
The accompanying notes are an integral part of these condensed consolidated statements. 5 6 METRICOM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
SIX MONTHS ENDED -------------------------- JUNE 30, JUNE 30, 2000 1999 --------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss .......................................................... $ (50,651) $(31,575) Adjustments to reconcile net loss to net cash used in operating activities- Depreciation and amortization ................................ 4,532 2,007 Loss on retirement of fixed assets ........................... 490 -- Accretion of long-term debt .................................. 2,376 -- Non-cash compensation expense ................................ 741 -- Increase in accounts receivable, prepaid expenses and other current assets .................. (9,638) (3,488) (Increase) decrease in inventories ........................... (2,739) 1,562 Increase (decrease) in accounts payable, accrued liabilities and other liabilities .......................... 76,190 (345) --------- -------- Net cash provided by (used in) operating activities ...... 21,301 (31,839) --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment .................................. (19,602) (3,159) Network construction in progress .................................... (248,670) -- Increase in other assets ............................................ (8,755) -- Purchase of short-term investments .................................. (350,036) -- Sale of short-term investments ...................................... 172,958 -- Purchase of long-term investments ................................... (35,745) -- --------- -------- Net cash used in investing activities .................... (489,850) (3,159) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock ............................ 477,793 6,816 Proceeds from sale of warrants to purchase common stock ........... 61,869 -- Proceeds from the issuance of long-term debt ...................... 236,382 -- (Payments of) additions to notes payable, net ..................... (10) 9,871 (Payments of) additions to long-term debt ......................... (153) 20,000 --------- -------- Net cash provided by financing activities ................. 775,881 36,687 --------- -------- Net increase in cash and cash equivalents ........................... 307,332 1,689 Cash and cash equivalents, beginning of period ...................... 354,820 19,141 --------- -------- Cash and cash equivalents, end of period ............................ $ 662,152 $ 20,830 ========= ======== SUMMARY OF NON-CASH TRANSACTIONS: Property and equipment acquired under capital lease ............... $ -- $ 280 Network construction in progress acquired under capital lease ..... 3,954 -- Interest capitalized on network construction in progress .......... 7,960 -- Common stock issued upon conversion of debt ....................... 4,304 -- Preferred dividends ............................................... 25,881 --
The accompanying notes are an integral part of these condensed consolidated statements. 6 7 METRICOM, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. BASIS OF PRESENTATION The condensed consolidated financial statements of Metricom, Inc. (the "Company") presented in this Form 10-Q are unaudited. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments (which include only normal recurring adjustments) which are necessary for a fair presentation of operations for the six- month periods ended June 30, 2000 and June 30, 1999. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999, as filed with the Securities and Exchange Commission. Certain amounts on the accompanying consolidated financial statements have been reclassified from the previously reported balances to conform to the 2000 presentation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the six-month periods ended June 30, 2000 and June 30, 1999 are not necessarily indicative of the results expected for the full fiscal year or for any other fiscal period. NOTE 2. INVESTMENTS The Company's investments in securities are considered available-for-sale and are recorded at their fair values as determined by quoted market prices with any unrealized holding gains or losses classified as a separate component of stockholders' equity. Upon sale of the investments, any previously unrealized gains or losses are recognized in results of operations. NOTE 3. NETWORK CONSTRUCTION IN PROGRESS In 1999, the Company began deployment of its high-speed Ricochet networks in a number of markets in the United States. As of June 30, 2000, the Company had incurred and capitalized $282.6 million of costs associated with network deployment. Network deployment costs include labor costs for site acquisition, radio frequency engineering, zoning and construction management, material costs for equipment and component inventory, as well as capitalized interest cost. The Company had capitalized interest cost of $7.96 million for the six-month period ended June 30, 2000. As commercial service is launched in each market, the capitalized costs associated with the 7 8 network equipment assets in each market will be transferred to Property and Equipment and depreciated over an estimated useful life of four years. NOTE 4. LONG-TERM DEBT, COMMON STOCK AND PREFERRED STOCK OFFERINGS In February 2000, the Company, together with its wholly owned finance subsidiary, Metricom Finance, Inc., as co-issuers and co-obligors, issued $300 million aggregate principal amount of 13% Senior Notes due 2010. Metricom Finance has no independent assets or operations. The Company has fully and unconditionally guaranteed the obligations of Metricom Finance, Inc. under the notes. Interest on the notes will be payable on February 15 and August 15 of each year, beginning August 15, 2000. The notes will mature on February 15, 2010. The notes were offered together with warrants to purchase 1,425,000 shares of common stock of the Company at an initial exercise price of $87.00 per share. Each warrant enables the holder to purchase 4.75 shares of common stock and is exercisable on or after August 15, 2000. Each warrant was sold for $212.06 per each associated $1,000 principal amount of notes, and each note was sold for $787.94. The warrants will expire on February 15, 2010. Net proceeds to the Company from the notes and warrants offering was approximately $291.8 million, $73.1 million of which was deposited in a restricted pledge account to secure the payment of the first four scheduled interest payments on the notes. In February 2000, the Company issued 5,750,000 shares of common stock at $87.00 per share in a public offering. Net proceeds to the Company were approximately $473.2 million, after deducting underwriting discounts, commissions and estimated offering expenses. In November 1999, the Company issued and sold to MCI WorldCom, Inc. 30 million shares of newly-designated Series A1 preferred stock at a price of $10 per share, and the Company issued and sold to Vulcan Ventures 30 million shares of newly-designated Series A2 preferred stock at a price of $10 per share, for gross aggregate proceeds to the Company of $600 million. Both series of preferred stock bear cumulative dividends at the rate of 6.5% per annum for three years, payable in cash or additional shares of preferred stock. In addition, each series has the right to elect one director to the Company's Board of Directors, although voting rights otherwise will be generally limited to specified matters. The preferred stock is subject to mandatory redemption by the Company at the original issuance price in 10 years following initial issuance and to redemption at the option of the holder upon the occurrence of specified changes in control or major acquisitions. Both series of preferred stock will accrete at approximately $2.7 million per year over the 10-year period from the beginning aggregate net book value of $573 million up to its redemption value of $600 million. This accretion will be charged against retained earnings (accumulated deficit). 8 9 NOTE 5. COMPREHENSIVE INCOME (LOSS)
SIX MONTHS ENDED JUNE 30, ------------------------- 2000 1999 -------- -------- Net loss attributable to common stockholders .......................... $(76,532) $(31,575) Other comprehensive income/(loss): Unrealized holding loss on available-for-sale securities ............. (400) -- -------- -------- Comprehensive income (loss) ........................................... $(76,932) $(31,575) ======== ========
NOTE 6. BASIC AND DILUTED NET LOSS PER SHARE Basic and diluted net loss per share has been computed using the weighted average number of shares of common stock outstanding. Potential common equivalent shares from options and warrants to purchase common stock and from conversion of the convertible preferred stock have been excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive. NOTE 7. SEGMENT REPORTING The information in the following table is derived directly from the Company's internal financial reporting used for corporate management purposes. The Company evaluates its segments' performance based on several factors, of which the primary financial measures are revenue and gross margin. Corporate overhead and other costs are not allocated to business segments for management reporting purposes. The Company does not allocate assets by segment for management reporting purposes. All of the Company's operations are located in the United States. The Company's reportable operating segments include Ricochet and UtiliNet. Ricochet designs and manufactures and markets wireless data communications solutions. UtiliNet manufactures and markets customer-owned networks and related products. In February 2000, UtiliNet technology was licensed to Schlumberger Resources Management Services, Inc. The agreement grants Schlumberger the exclusive right to design, manufacture and sell UtiliNet products in return for license and royalty fees. A summary of operating results by reportable operating segment in the second quarter of 2000 is as follows: 9 10
SIX MONTHS ENDED JUNE 30, --------------------- 2000 1999 ------- ------ Ricochet Revenue ............. $ 4,962 $5,598 Utilinet Revenue ............. 568 3,251 ------- ------ Total .................... $ 5,530 $8,849 ======= ====== Cost of Service Ricochet ..... $35,519 $8,158 Cost of Service Utilinet ..... -- 25 ------- ------ Total .................... $35,519 $8,183 ======= ====== Cost of Product Ricochet ..... $ 1,746 $1,938 Cost of Product Utilinet ..... 181 1,399 ------- ------ Total .................... $ 1,927 $3,337 ======= ======
NOTE 8. NEW ACCOUNTING STANDARDS In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards for derivative instruments, hedging activities and exposure definition. The pronouncement is effective for fiscal years beginning after June 15, 2000. The Company believes the pronouncement will not have a material effect on its financial statements. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements." SAB 101 provides guidance on applying generally accepted accounting principles to revenue recognition issues in financial statements. The Company will adopt SAB 101 as required in the fourth quarter of 2000. The Company does not expect the adoption of SAB 101 to have a material effect on the Company's consolidated results of operations and financial position. 10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Since inception, we have devoted significant resources to the development, deployment and commercialization of our wireless network products and services. Historically, a significant portion of our revenues has been derived primarily from the development contracts and sales of customer-owned networks and related products, known as UtiliNet, to utility companies. In recent years, we have deployed a commercial wireless data network known as Ricochet in various metropolitan areas of the United States. For several years we have provided Ricochet commercial service, which offers mobile wireless internet and LAN access at average speeds of 28.8 kbps, in the San Francisco Bay Area, Seattle and Washington D.C. metropolitan areas. In July and August of 2000, we launched our new commercial high-speed Ricochet service, which operates at average speeds of 128 kbps, in the San Diego and Atlanta metropolitan areas. We are currently constructing our high-speed service in numerous additional metropolitan areas in the United States. While we believe we are substantially on track with the overall national network deployment described in our 1999 Annual Report on Form 10-K, the planned New York service area launch is facing delays relating to timeframes for zoning approvals as well as utility agreement negotiations. In addition, progress in three other planned service areas is proceeding slowly, and we are currently assessing the impact on these market area launches. In February 2000, in order to focus our operations on deployment of our high-speed network, we entered into an agreement to license our UtiliNet technology to Schlumberger Resources Management Services, Inc. The agreement grants Schlumberger the exclusive right to design, manufacture and sell UtiliNet products in return for license and royalty fees. We do not expect UtiliNet to be a significant source of revenues in the future. We currently derive substantially all of our revenues from subscription fees paid to us by users of our current Ricochet service. In the future, we expect to derive substantially all of our revenues from subscription fees paid to us by channel partners, which will resell our service directly to their customers. In connection with the launch of our high-speed service, we expect to curtail our business operations related to our current Ricochet service. As we deploy our high-speed network and launch our high-speed service, we expect our operating expenses to increase significantly from historical levels and to exceed revenues for the foreseeable future. We expect to generate substantial net losses to common stockholders for the foreseeable future. 11 12 RESULTS OF OPERATIONS Revenues Currently, we derive revenues from the sale of our services and products. We derive service revenues from Ricochet subscriber fees and Ricochet modem rentals, and we recognize these revenues ratably over the service period. We derive product revenues from the sale of Ricochet modems and recognize these revenues upon shipment. Total revenues decreased to $2.3 million in the second quarter of 2000 from $4.7 million for the same period of 1999 and to $5.5 million for the first six months of 2000 from $8.8 million for the same period of 1999. The decline in 2000 was primarily due to a decrease in product revenues. Product revenues declined to $0.2 million for the second quarter of 2000 from $2.5 million for the same period of last year, and to $1.1 million for the first six months of 2000 from $4.2 million for the first six months of 1999. The decline in 2000 resulted primarily from the licensing of our UtiliNet technology to Schlumberger. It was also partly due to our strategic decision to restrict sales of our 28.8 kbps modems in order to focus on the launch of our high-speed service. Service revenues decreased to $2.1 million in the second quarter of 2000 from $2.2 million in the same period of 1999 and to $4.5 million for the first six months of 2000 from $4.6 million in the same period of 1999. The slight decrease in the second quarter was primarily the result of a decrease in UtiliNet service revenues of approximately $0.5 million, offset by a $0.4 million increase in Ricochet service revenues. Ricochet service revenues increased as a result of a slight increase in the average number of subscribers during the second quarter of 2000 compared with the second quarter of 1999. Total UtiliNet revenues decreased to $0.1 million in the second quarter of 2000 from $2.2 million in the same period of 1999 as a result of our licensing of our UtiliNet technology to Schlumberger. We expect that our UtiliNet revenues will continue to be insignificant in the future as a result of our focus on the launch of our high-speed service. In the future, after we launch our high-speed service, we expect to curtail our business operations related to our current Ricochet 28.8 kbps service. We expect to derive substantially all of our future revenues from subscription fees paid to us by channel partners. We anticipate that our channel partners will pay us subscription fees based on flat rates for each user they enroll for our service. We will require each of our channel partners to charge its subscribers a flat rate for use of our service, although each channel partner will set the particular rate it charges its customers. We currently have three channel partner relationships. MCI WorldCom, Juno Online Services, Inc. and Wireless WebConnect! have all entered into agreements with us to sell our high-speed service to their customers. In our agreement with MCI Worldcom, MCI WorldCom has agreed to pay us a per-subscriber fee, subject to an agreed minimum revenue level of at least $388 million over the five years following the launch of our high speed service, assuming that our deployment schedule is not delayed, that we place our network into service on schedule and that we meet quality-of-service and network performance standards. Subject to these limitations, we currently expect MCI WorldCom to pay us the following minimum amounts during the first five years after we launch our service: 12 13 First year........................ $ 5.6 million Second year....................... 40.6 million Third year........................ 83.6 million Fourth year....................... 117.4 million Fifth year........................ 141.0 million
Notwithstanding the foregoing, if MCI WorldCom's sales efforts result in fewer subscribers than MCI WorldCom has agreed contractually to provide, but the number of subscribers provided by MCI WorldCom and its authorized resellers nevertheless represent more than a specified percentage of our total users, MCI WorldCom will pay us only the greater of a per-subscriber rate for each of its subscribers or the subscription fees we receive from all of our other channel partners, which could be substantially less than the minimum revenues we currently expect from MCI WorldCom. Accordingly, our ability to achieve the minimum revenue levels we expect from our agreement with MCI WorldCom may depend on our ability to enter into channel agreements with one or more large channel partners that can successfully sell subscriptions to our service so that subscribers provided by MCI WorldCom and its resellers represent less than the threshold percentage of our total users. In addition, if our deployment schedule is delayed or if we fail to meet deployment schedule deadlines or fail to comply with quality-of-service standards relating to data transmission performance, network availability, coverage and latency, ease of use and size of modems, all as specified in our agreement, MCI WorldCom may delay or reduce its minimum payments to us or, in the case of a deployment delay in excess of 12 months, may terminate the contract. Cost of Revenues Cost of service revenues consists primarily of network operations costs and real estate management costs on network equipment. Network operations costs include the costs associated with the field managers, engineers and technicians who operate and maintain our high-speed network, as well as the costs associated with field offices we maintain, including our network operations centers. Network operations costs also include the telecommunications costs we incur to transmit data between our wired access points and network interface facilities and the Internet. Real estate management costs include the costs associated with the maintenance of lease agreements for our poletop radios, wired access points and network interface facilities and the ongoing rental payments for these sites. Real estate management costs also consist of the internal and external labor costs associated with maintaining right-of-way agreements in the markets where our network is currently deployed. Cost of service revenues increased to $21.7 million in the second quarter of 2000 compared with $4.1 million in the second quarter of 1999, and to $35.5 million for the first six months of 2000 compared with $8.2 million for the same period of 1999. The significant increase in 2000 was due to increases in staffing, property, telecommunications and support costs associated with the deployment of our new high-speed service in various markets. Staffing of personnel who manage network deployment and operations increased by over 500% from June 30, 1999 to June 30, 2000. In the past year, we have entered into over 1,600 site leases for network equipment and opened up over ten new operations field offices. We expect all 13 14 components of our cost of service revenues to continue to increase significantly and rapidly as we expand the scope of our operations through the deployment of our high-speed network. Cost of product revenues consists primarily of the inventory and manufacturing costs associated with Ricochet modem product sales. Cost of product revenues in the second quarter of 2000 decreased to $1.6 million from $2.0 million in the second quarter of 1999 and to $1.9 million for the first six months of 2000 from $3.3 million for the same period of 1999. Ricochet cost of product revenues as a percentage of Ricochet product revenues increased to over 1100% in the second quarter of 2000 from 125% for the second quarter of last year and to over 300% for the first six months of 2000 from 98% for the same period of 1999. The increase was primarily due to a $1.3 million loss provision established in June 2000 for high-speed modems included in inventory which are planned for sale at less than cost. This increase is offset in part by a decrease resulting from shipments of refurbished modems for which the majority of costs have been charged to operations in previous periods. We expect Ricochet cost of product revenues to increase in 2000 as we procure and sell modem inventory directly to channel partners for resale to new subscribers to our high-speed service. In subsequent years, we anticipate that our channel partners may begin to purchase modems directly from our licensed third-party manufacturers. Research and Development Research and development costs include the costs incurred to develop our network technology and subscriber modems, as well as to obtain rights-of-way and related site agreements in markets where we plan to offer service. Research and development expenses increased to $9.2 million in the second quarter of 2000 from $8.6 million in the second quarter of 1999 and to $17.3 million for the first six months of 2000 from $16.6 million for the same period of 1999. The increase in the second quarter of 2000 compared with 1999 was primarily due to increases in staffing costs associated with the development of our networking products and services. The increase in the first six months of 2000 compared with the same period of 1999 also reflects an increase in costs incurred to obtain right-of-way and site agreements in metropolitan areas where we currently plan to offer service. Right-of-way acquisition costs included in research and development for the first six months of 2000 increased to $6.7 million from $6.5 million in the same period of 1999. We plan to continue to spend a substantial amount on staffing and support needed to obtain right-of-way agreements in markets under development. We intend to spend a substantial amount on the development of our networking products to reduce the cost of our system components, increase the speed and performance of our services and develop additional applications for our services. We also plan to continue to improve and upgrade our network and service to address the emerging demands for mobile data access. As a result, we expect that research and development costs will continue to increase significantly in absolute dollars for the foreseeable future. Selling, General and Administrative Selling, general and administrative expenses include our corporate overhead and the costs associated with our efforts to obtain and support our channel partners, promote the Ricochet brand and our high-speed service, and develop and implement our marketing strategy for our service and modems. Selling, general and administrative expenses increased to $12.4 million for the second quarter of 2000 from $4.1 million for the second quarter of 1999 and to $19.7 million 14 15 for the first six months of 2000 from $7.8 million for the same period of 1999. Nearly all of the increase in the second quarter of 2000 was due to increased product marketing, advertising and public relations expenditures related to commercialization and launch of our high-speed service. Approximately one-third of the increase in the first six months was due to increases in administrative staff and the labor, travel and support costs associated with supporting the widespread deployment of our high-speed service. We expect selling, general and administrative costs to increase significantly from historical levels as we implement our planned advertising campaign related to the launch of the various phases of our high-speed service. We expect to spend more than $50 million on sales and marketing efforts in 2000 and substantially more in 2001. We also expect to continue to expand our corporate and administrative infrastructure to support our planned growth. Depreciation and Amortization Depreciation and amortization expenses increased to $2.4 million for the second quarter of 2000 from $1.1 million for the second quarter of 1999 and to $4.5 million for the first six months of 2000 from $2.0 million for the same period of 1999. The increases resulted principally from the purchase and lease of over $25 million of property, plant and equipment, primarily computer equipment and software, since June 30, 1999. We expect depreciation and amortization to increase substantially in the second half of 2000 and in future years as we launch our commercial high-speed Ricochet service in each metropolitan area. As we launch our service in each market, capitalized costs associated with the network equipment assets in the market will be transferred to Property and Equipment and depreciated over an estimated useful life of four years. Interest and Other Income and Interest Expense Interest and other income increased to $17.2 million in the second quarter of 2000 from $0.2 million in the second quarter of 1999 and to $33.8 million for the first six months of 2000 from $0.3 million in the same period of 1999 due primarily to a significantly higher average balance of cash, cash equivalents and investments on hand in 2000. As a result of the November 1999 sale of our preferred stock for net proceeds of $573.2 million and the February 2000 sale of common stock, 13% senior notes due 2010 and warrants to purchase common stock, we have approximately $1 billion in cash and investments on hand. We are using these cash resources to fund the deployment of our network, to fund operating losses and working capital requirements through the first two phases of our network deployment, and to fund interest on long-term debt and dividends on our preferred stock outstanding. Pending these uses, we have invested this cash in high-quality, short-term, interest-bearing securities. Accordingly, although in the short-term we expect to continue to generate a substantial amount of interest income, this interest income will decline rapidly over time as we use this cash. Interest expense increased to $3.5 million in the second quarter of 2000 from $1.6 million in the second quarter of 1999 and to $11.0 million for the first six months of 2000 from $2.8 million for the same period of 1999 as a result of the increase in our outstanding debt in 2000. In the second quarter of 2000, interest expense was reduced by approximately $8.0 million as a result of capitalization of interest into network construction in progress. Due to our senior notes and warrants offering in February 2000, we have approximately $300 million in outstanding debt. 15 16 The senior notes require semi-annual cash interest payments commencing August 15, 2000. We deposited approximately $73.1 million of the net proceeds from the sale of the senior notes in a pledge account to secure the first four interest payments on these securities. We therefore will continue to incur a substantial expense, a portion of which will be non-cash, for interest on these obligations. If we incur additional debt in the future to fund our expansion plans, our interest costs will increase. Preferred Dividends In November 1999, we issued 60,000,000 shares of preferred stock to Vulcan Ventures Incorporated and MCI WorldCom, Inc. for gross proceeds of $600 million. Each share of preferred stock bears a cumulative dividend at the rate of $.65 per year for the first three years after issuance, which we may pay in cash or in additional shares of preferred stock. We have historically paid and currently expect to continue to pay future dividends on the preferred stock in cash. Because the preferred stock sold to Vulcan Ventures is immediately convertible into common stock at the holder's option at a conversion price of $10.00 per share, which was below $11.06, the per share closing price of our common stock on the date immediately prior to our execution of the preferred stock purchase agreement, we recorded an additional dividend of $31.8 million in the fourth quarter of 1999 to reflect the beneficial conversion privilege associated with this series of preferred stock. The preferred stock issued to MCI WorldCom is also deemed to have been issued with a beneficial conversion privilege. However, that series of preferred stock does not begin to become convertible into common stock at the holder's option until May 2002. As a result, this discount will be amortized over the 48-month period, which began in November 1999, during which this series of preferred stock becomes convertible into common stock at the holder's option. Accordingly, for both series of preferred stock in the aggregate, we will record preferred stock dividends in addition to our cash dividend on the preferred stock as follows: 2000.................. $10.1 million 2001.................. $10.1 million 2002.................. $7.8 million 2003.................. $2.6 million
Both series of preferred stock will accrete at approximately $2.7 million per year in total over the ten-year period from the beginning aggregate net book value of $573 million up to its aggregate face value of $600 million. This accretion will be charged against retained earnings (accumulated deficit). In the second quarter of 2000, preferred dividends included $9.7 million of accrued dividends payable, $2.5 million of beneficial conversion privilege and $0.7 million of accretion related to the preferred stock. LIQUIDITY AND CAPITAL RESOURCES We have financed our operations and capital expenditures primarily through the public and private sale of equity and debt securities. In 1996, we completed a private placement of 8% Convertible Subordinated Notes due 2003 with net proceeds of approximately $43.4 million. In January 1998, we completed a private placement of common stock with Vulcan Ventures with 16 17 net proceeds of approximately $53.7 million. In November 1999, we completed a private placement of redeemable convertible preferred stock with Vulcan Ventures and MCI WorldCom with net proceeds of approximately $573 million. In February 2000, we completed a public offering of common stock with net proceeds of approximately $473 million and a public offering of 13% senior notes due 2010 and warrants to purchase common stock with available net proceeds of approximately $219 million, after establishing the required reserve to secure the first four interest payments on the notes. This large amount of indebtedness could adversely affect our business, for example, by requiring us to dedicate a substantial portion of our cash flow from operations to required payments on indebtedness or limiting our ability to acquire additional financing in the future. See "Risk Factors - We have a substantial amount of debt, which could adversely affect our business, financial condition and results of operations" in our 1999 Annual Report on Form 10-K. Since inception, we have devoted significant resources to the development, deployment and commercialization of wireless network products and services. As a result, as of June 30, 2000, we had incurred $415 million of cumulative net losses. Our operations have required substantial capital investments for the purchase of network equipment, modems and computer and office equipment. Including network construction in progress, capital expenditures were $156.2 million during the second quarter of 2000. Network construction in progress at June 30, 2000 included approximately $73 million related to the purchase of component inventory located at our vendors. We expect that our vendors holding this inventory will use these components in the manufacture and assembly of network equipment for us in 2000. We expect that capital expenditures will significantly increase in the future as a result of our ongoing deployment and commercialization of the high-speed network. Our principal uses of cash for the foreseeable future will be to fund the deployment of our high-speed network, to fund operating losses and to pay interest on our debt securities issued in February 2000, as well as dividends on our preferred stock. Based on our current projections, we believe that our cash, cash equivalents and unrestricted investments of approximately $922 million as of June 30, 2000 will be sufficient to fund the first two phases of our network deployment. We believe that, in addition to the funds on hand at June 30, 2000, we will require additional cash resources of approximately $300 to $500 million to enable us to complete the three-phase deployment of our network, as well as for the other purposes described above. However, the funds we may actually require to complete any phase of the deployment may vary materially from our estimates. In addition, we could incur unanticipated costs or be required to alter our plans in order to respond to changes in competitive or other market conditions, which could require us to raise additional capital sooner than we expect. Further, although it is not our current intention to do so, we may decide to use a portion of our cash resources to acquire licensed spectrum or to license, acquire or invest in new products, technologies or businesses that we consider complementary to our business. We cannot assure you that the additional capital we will require to complete the third phase of our network deployment or for these other purposes will be available on commercially reasonable terms or at all. If we are unable to secure additional financing as necessary, we may need to delay or curtail our expansion plans. See "Risk Factors -- We will require significant additional capital in the future to fund our continuing development, deployment and marketing of our high-speed network and service" in our 1999 Annual Report on Form 10-K. 17 18 Our current and future operations will require substantial capital investments for the purchase of our network equipment, which consists primarily of network radios, wired access points and network interface facilities. Significant labor costs associated with deploying our network equipment include design of the network, site acquisition, zoning, construction and installation of equipment. In July 1999, we entered into an agreement with Sanmina Corporation to manufacture our poletop radios and network radios installed at wired access points. In October 1999, we entered into agreements with Wireless Facilities, Inc., General Dynamics Worldwide Telecommunications Systems and Whalen & Company to provide us with expertise and personnel to assist with the deployment of our network. At June 30, 2000, we had outstanding commitments to purchase approximately $368 million of network equipment and related labor from these suppliers. We expect to incur significant expenditures to procure high-speed modems in the future. We have agreed to purchase 57,700 modems from our current modem supplier, Alps Electric (USA), Inc., in 2000, representing a commitment of approximately $24 million. As of June 30, 2000, we had received approximately 8,800 modems from Alps. In January 2000, we entered into a two-year agreement with NatSteel Electronics, Ltd. for the purchase of additional modems. In November 1999 and October 1999, we entered into agreements with Sierra Wireless and Novatel, respectively to develop and manufacture custom personal computer card modems. We have agreed with both Sierra Wireless and Novatel to purchase a minimum of 150,000 units in the first year of deliveries from each, representing a total commitment of approximately $68 million. Deliveries from Alps began in the second quarter of 2000 and we anticipate that deliveries from Sierra Wireless and Novatel will begin in early 2001. In April 2000, we entered into an agreement with National Semiconductor Corporation to integrate the Ricochet modem technology onto a microchip set. ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK Our exposure to financial market risk, including changes in interest rates and marketable securities prices, relates primarily to our investment portfolio, long-term debt and redeemable convertible preferred stock outstanding. Our cash equivalents and short-term investments subject to interest rate risk are primarily highly liquid corporate debt securities from high credit quality issuers. We do not have any significant investments in foreign currencies and we do not have any foreign exchange contracts or derivative instruments. We performed a sensitivity analysis to assess the impact of a change in interest rates. In the analysis, the fair value of our investment portfolio would not be significantly impacted by a 100-basis point change in interest rates, due primarily to the fixed rate, short-term nature of our portfolio. The fair value of our redeemable convertible preferred stock would not change materially in the event of a 100-basis point change in interest rates, due primarily to the fixed and relatively short-term nature of its 6.5% coupon rate. We estimate that the fair value of our long-term debt would decrease or increase by approximately $9 million in the event of a 100-basis point increase or decrease, respectively, in interest rates. 18 19 PART II. OTHER INFORMATION ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS In June 2000, the stockholders approved an amendment to the Company's Restated Certificate of Incorporation to increase the authorized number of shares of capital stock from 230,000,000 to 580,000,000 shares and to increase the Company's authorized number of shares of Common Stock from 150,000,000 to 500,000,000. The additional common stock to be authorized will have rights identical to the currently outstanding Common Stock of the Company. ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS a) The Annual Meeting of Stockholders of Metricom, Inc. was held on June 26, 2000. b) The matters voted upon at the meeting and the voting of stockholders with respect thereto are as follows: 1) Elect the following persons as Directors to hold office until the respective Annual Meeting of Stockholders in the year the term expires and until their successors are elected:
For Against Term Expires ---------- --------- ------------ William D. Savoy 27,831,925 1,270,077 2003 David M. Moore 27,835,840 1,266,162 2003
2) Approve the 1997 Equity Incentive Plan, as amended. For: 13,235,902 Against: 6,037,228 Abstain: 62,789 3) Approve the Company's 1991 Employee Stock Purchase Plan, as amended. For: 18,907,006 Against: 360,035 Abstain: 68,878 4) Approve an amendment to the Restated Certificate of Incorporation. For: 86,917,234 Against: 2,128,058 Abstain: 56,710 5) Ratify the selection of Arthur Andersen LLP as independent auditors of the Company for its fiscal year ending December 31, 2000 For: 28,993,854 Against: 76,437 Abstain: 31,711 19 20 ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits: 3.1(a) Restated Certificate of Incorporation 3.1(b) Certificate of Amendment of Amended and Restated Certificate of Incorporation dated August 2, 2000. 10.8 1991 Employee Stock Purchase Plan, as amended 10.17 1997 Equity Incentive Plan, as amended 10.18 2000 Equity Incentive Plan 27.1 Financial Data Schedule b. Reports on Form 8-K: None 20 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. METRICOM, INC. (Registrant) Date: August 14, 2000 /s/ TIMOTHY A. DREISBACH ------------------------------------ Timothy A. Dreisbach Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer) /s/ JAMES E. WALL ------------------------------------ James E. Wall Chief Financial Officer (Principal Financial and Accounting Officer) 21 22 EXHIBIT INDEX 3.1(a) Restated Certificate of Incorporation 3.1(b) Certificate of Amendment of Amended and Restated Certificate of Incorporation dated August 2, 2000. 10.8 1991 Employee Stock Purchase Plan, as amended 10.17 1997 Equity Incentive Plan, as amended 10.18 2000 Equity Incentive Plan 27.1 Financial Data Schedule 22 EX-3.1(A) 2 ex3-1a.txt EXHIBIT 3.1(A) 1 EXHIBIT 3.1(a) RESTATED CERTIFICATE OF INCORPORATION OF METRICOM, INC. Timothy A. Dreisbach and Dale W. Marquart hereby certify that: ONE: The original name of this corporation is Metricom (Delaware), Inc., and the date of filing the original Certificate of Incorporation of this corporation with the Secretary of State of the State of Delaware is October 24, 1991. TWO: They are the duly elected and acting President and Secretary, respectively, of Metricom, Inc., a Delaware corporation. THREE: The Certificate of Incorporation of this corporation is hereby amended and restated to read as follows: I. The name of the corporation is METRICOM, INC. (the "Corporation" or the "Company"). II. The address of the registered office of the Corporation in the State of Delaware is 1013 Centre Road, City of Wilmington, County of New Castle, and the name of the registered agent of the corporation in the State of Delaware at such address is The Prentice-Hall Corporation System, Inc. III. The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware. IV. A. This Corporation is authorized to issue two classes of stock to be designated, respectively, "Common Stock" and "Preferred Stock." The total number of shares which the Corporation is authorized to issue is two hundred thirty million (230,000,000) shares, one hundred fifty million (150,000,000) shares of which shall be Common Stock (the "Common Stock") and eighty million (80,000,000) shares of which shall be Preferred Stock (the "Preferred Stock"). The Preferred Stock shall have a par value of one tenth of one cent ($0.001) per share and the Common Stock shall have a par value of one tenth of one cent ($0.001) per share. B. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares of Common Stock then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation (voting together on an as-if-converted basis). 1. 2 C. The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized, within the limitations and restrictions stated in this Restated Certificate of Incorporation, to fix or alter the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock, and the number of shares constituting any such Series and the designation thereof, or any of them; and to increase or decrease the number of shares of any series prior or subsequent to the issue of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series. D. Thirty-six million (36,000,000) of the authorized shares of Preferred Stock are hereby designated "Series A1 Preferred Stock" (the "Series A1 Preferred") and thirty-six million (36,000,000) of the authorized shares of Preferred Stock are hereby designated "Series A2 Preferred" (the "Series A2 Preferred"). E. The rights, preferences, privileges, restrictions and other matters relating to the Series A1 Preferred are as follows: 1. DIVIDEND RIGHTS. a. The holders of record of shares of Series A1 Preferred shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available for the payment of dividends, cumulative dividends payable, at the option of the Company, in cash or additional shares of Series A1 Preferred, at the annual rate per share of six and one-half percent (6.5%) of the Original Issue Price of the Series A1 Preferred (as adjusted for any stock dividend, split, combination or other similar event with respect to such shares). Dividends shall be payable annually, in arrears, on the 15th day of December in each year (each such date being referred to herein as a "Series A1 Preferred Dividend Payment Date"), commencing on the first Series A1 Preferred Dividend Payment Date which is at least fifteen (15) days after the date that the first share of Series A1 Preferred is issued. The rights of the holders of Series A1 Preferred to additional cumulative dividends under this paragraph (a) shall terminate on the third anniversary of the date that the first share of Series A1 Preferred was issued (the "Series A1 Preferred Dividend Termination Date"). The "Original Issue Price" of the Series A1 Preferred shall be ten dollars ($10.00). Dividends payable to the holders of the Series A1 Preferred shall be payable prior and in preference to any dividends to the holders of Series A2 Preferred and Common Stock. b. Dividends payable pursuant to paragraph (a) of this Section 1 shall begin to accrue on each share of Series A1 Preferred on a daily basis and shall be cumulative from the date that the first share of Series A1 Preferred is issued (the "Series A1 Preferred Original Issue Date"), whether or not earned or declared. The amount of dividends so payable shall be determined on the basis of twelve (12) 30-day months and a 360-day year. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A1 Preferred in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares of the 2. 3 Series A1 Preferred at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A1 Preferred entitled to receive payment of a dividend declared thereon, which record date shall be no more than sixty (60) days prior to the date fixed for the payment thereof. c. Unless accrued dividends payable pursuant to paragraph (a) on all outstanding shares of Series A1 Preferred shall have been fully paid for all past dividend periods and the full dividends thereon payable pursuant to paragraph (a) for the dividend period current at the time shall have been paid or declared and funds set apart therefor, no dividend shall be paid upon or declared or set apart for the Series A2 Preferred or (except a dividend payable in Common Stock) for the Common Stock (collectively, the "Junior Stock"). d. Following the Series A1 Preferred Dividend Termination Date, dividends shall be payable on the Series A1 Preferred only when, as and if declared by the Board of Directors. Except as otherwise set forth in this Section 1, holders of Series A1 Preferred shall not be entitled to receive any dividends, whether in cash or property. 2. VOTING RIGHTS. a. GENERAL RIGHTS. The Series A1 Preferred shall not have any voting rights, except as otherwise provided herein or as required by law. b. SEPARATE VOTES OF SERIES A1 PREFERRED. For so long as more than seven million five hundred thousand (7,500,000) shares of Series A1 Preferred (subject to adjustment for any stock dividend, split, combination or other similar event with respect to such shares) remain outstanding, in addition to any other vote or consent required herein or by law, the vote or written consent of the holders of at least a majority of the outstanding Series A1 Preferred shall be necessary for effecting or validating the following actions: (i) Any amendment, alteration, or repeal of any provision of the Restated Certificate of Incorporation of the Company (including any filing of a Certificate of Designation), that alters or changes the voting powers, preferences, or other special rights or privileges, or restrictions of the Series A1 Preferred so as to affect the Series A1 Preferred adversely in a manner different from other classes or series of stock; (ii) Any issuance of any new class or series of stock or any other equity securities of the Company, in each case ranking senior to the Series A1 Preferred in right of liquidation preference or dividends or any issuance of debt securities of the Company convertible into equity securities of the Company at a conversion price below the Original Issue Price of the Series A1 Preferred (as adjusted for any stock dividend, split, combination or other similar event with respect to such shares); (iii) Any redemption or repurchase of Junior Stock, except for (A) acquisitions of Junior Stock (not to exceed one percent (1%) per year of the total of the then-outstanding Common Stock of the Company, determined on a fully diluted basis) by the Company at cost (plus an interest factor not to exceed ten percent (10%) per annum if applicable), pursuant to compensatory plans or agreements which permit the Company to 3. 4 repurchase such shares upon termination of services to the Company or (B) redemptions of the Series A2 Preferred pursuant to the terms of Section F.5. hereof; or (iv) Any declaration or payment of any dividend on outstanding Common Stock, unless funds legally available therefor are at least equal to the net operating income of the Company reported in its audited financial statements for its most recent fiscal year plus net operating income of the Company reported in its unaudited financial statements for any subsequent interim periods. c. ELECTION OF BOARD OF DIRECTORS. For so long as more than seven million five hundred thousand (7,500,000) shares of Series A1 Preferred remain outstanding (as adjusted for any stock dividend, split, combination or other similar event with respect to such shares) the holders of Series A1 Preferred, voting as a separate class, shall be entitled to elect one (1) member of the Company's Board of Directors and to remove from office such director and to fill any vacancy caused by the resignation, death or removal of such director; provided, however, that the holders of the outstanding shares of Series A1 Preferred may waive such right from time to time and instead may designate an observer who shall have the right to receive reasonable notice of and to attend all meetings of the Company's Board of Directors and the Committees thereof, other than any committee or other meeting of the Independent Directors (as defined in Section V.A. hereof) or any meeting at which the Board or any Committee thereof may discuss or consider any matter for which attendance of such observer would not be in the best interests of the stockholders of the Company as determined by the Company's Chief Executive Officer. 3. LIQUIDATION RIGHTS. a. Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, before any distribution or payment shall be made to the holders of any Junior Stock, the holders of Series A1 Preferred shall be entitled to be paid out of the assets of the Company an amount per share of Series A1 Preferred equal to the greater of (i) the Series A1 Preferred Original Issue Price, plus all accrued but unpaid dividends on the Series A1 Preferred (as adjusted for any stock dividend, split, combination, or other similar event with respect to such shares) or (ii) the amount such holder would have received if such share had been converted to Common Stock pursuant to Section 4 hereof, for each share of Series A1 Preferred held by such holders. If, upon any such liquidation, distribution or winding up, the assets of the Company shall be insufficient to make payment in full to all holders of Series A1 Preferred of the liquidation preference set forth in this Section 3(a), then such assets shall be distributed among the holders of Series A1 Preferred at the time outstanding, ratably in proportion to the full amounts to which each such holder would otherwise be entitled. b. After the payment of the full liquidation preference of the Series A1 Preferred as set forth in Section 3(a) above, the remaining assets of the Company legally available for distribution, if any, shall be distributed to the holders of Junior Stock in accordance with this Restated Certificate of Incorporation. c. The following events shall be considered a liquidation under this Section: 4. 5 (i) any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than fifty percent (50%) (on an as-converted basis, assuming conversion of all outstanding shares of Series A1 and Series A2 Preferred) of the Company's voting power immediately after such consolidation, merger or reorganization, or any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent (50%) (on an as-converted basis, assuming conversion of all outstanding shares of Series A1 and Series A2 Preferred) of the Company's voting power is transferred, excluding any consolidation or merger effected exclusively to change the domicile of the Company (an "Acquisition"); or (ii) a sale, lease or other disposition of all or substantially all of the assets of the Company (an "Asset Transfer"). (iii) In any of such events, if the consideration received by the Company is other than cash, its value will be deemed its fair market value as determined in good faith by the Board of Directors. Any securities shall be valued as follows: (a) Securities not subject to investment letter or other similar restrictions on free marketability covered by paragraph (b) below: (1) If traded on a securities exchange or through the Nasdaq National Market, the value shall be deemed to be the average of the closing prices of the securities on such quotation system over the 30-day period ending three (3) days prior to the closing; (2) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the 30-day period ending three (3) days prior to the closing; and (3) If there is no active public market, the value shall be the fair market value thereof, as determined by the Board of Directors. (b) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in paragraphs (a)(1), (2) or (3) to reflect the approximate fair market value thereof, as determined by the Board of Directors. 4. CONVERSION. The Series A1 Preferred shall be subject to the following provisions with respect to the conversion of the Series A1 Preferred into shares of Common Stock: a. VOLUNTARY CONVERSION. Subject to and in compliance with the provisions of this Section 4, any shares of Series A1 Preferred may, at any time, at the option of the holder, be converted into fully paid and nonassessable shares of Common Stock, subject to 5. 6 the following limitations: no shares of Series A1 Preferred shall be convertible prior to the second anniversary of the Series A1 Preferred Original Issue Date. Commencing on the date that is six (6) months following such second anniversary, twenty-five percent (25%) of the shares of Series A1 Preferred issued on the Series A1 Preferred Original Issue Date shall become convertible into Common Stock and, on each 6-month anniversary thereafter, an additional twenty-five percent (25%) shall become convertible into Common Stock, until all such shares shall have become convertible into Common Stock. Such right to convert shall be allocated among the holders of Series A1 Preferred ratably in accordance with their holdings of Series A1 Preferred. Notwithstanding the above, the foregoing limitations shall terminate and be of no further force or effect and all shares of the Series A1 Preferred shall become immediately convertible at the option of the holder immediately prior to the occurrence of a Change in Control of the Company or a Major Acquisition by the Company (as defined elsewhere in this Section 4). The number of shares of Common Stock to which a holder of Series A1 Preferred shall be entitled upon conversion shall be the product obtained by multiplying the "Series A1 Preferred Conversion Rate" then in effect (determined as provided in Section 4(b)) by the number of shares of Series A1 Preferred being converted. b. SERIES A1 PREFERRED CONVERSION RATE. The conversion rate in effect at any time for conversion of the Series A1 Preferred (the "Series A1 Preferred Conversion Rate") shall be the quotient obtained by dividing the Original Issue Price of the Series A1 Preferred by the "Series A1 Preferred Conversion Price," calculated as provided in Section 4(c). c. SERIES A1 PREFERRED CONVERSION PRICE. The conversion price for the Series A1 Preferred shall initially be the Original Issue Price of the Series A1 Preferred (the "Series A1 Preferred Conversion Price"). Such initial Series A1 Preferred Conversion Price shall be adjusted from time to time in accordance with this Section 4. All references to the Series A1 Preferred Conversion Price herein shall mean the Series A1 Preferred Conversion Price as so adjusted. d. MECHANICS OF CONVERSION. Each holder of Series A1 Preferred who desires to convert the same into shares of Common Stock pursuant to this Section 4 shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Company or any transfer agent for the Series A1 Preferred, and shall give written notice to the Company at such office that such holder elects to convert the same. Such notice shall state the number of shares of Series A1 Preferred being converted. Thereupon, the Company shall promptly issue and deliver at such office to such holder a certificate or certificates for the number of shares of Common Stock to which such holder is entitled and shall promptly pay (i) any accrued but unpaid dividends on the shares of Series A1 Preferred being converted and (ii) the value of any fractional share of Common Stock otherwise issuable to any holder of Series A1 Preferred in cash (at the Common Stock's fair market value determined by the Board of Directors as of the date of conversion). Such conversion shall be deemed to have been made at the close of business on the date of such surrender of the certificates representing the shares of Series A1 Preferred to be converted, and the person entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such shares of Common Stock on such date. 6. 7 e. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company shall at any time or from time to time after the Series A1 Preferred Original Issue Date effect a subdivision of the outstanding Common Stock without a corresponding subdivision of the Preferred Stock, the Series A1 Preferred Conversion Price in effect immediately before that subdivision shall be proportionately decreased. Conversely, if the Company shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock into a smaller number of shares without a corresponding combination of the Preferred Stock, the Series A1 Preferred Conversion Price in effect immediately before the combination shall be proportionately increased. Any adjustment under this Section 4(e) shall become effective at the close of business on the date the subdivision or combination becomes effective. f. ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If the Company at any time or from time to time after the Original Issue Date makes, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, in each such event the Series A1 Preferred Conversion Price that is then in effect shall be decreased as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Series A1 Preferred Conversion Price then in effect by a fraction (i) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (ii) the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series A1 Preferred Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series A1 Preferred Conversion Price shall be adjusted pursuant to this Section 4(f) to reflect the actual payment of such dividend or distribution. g. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If at any time or from time to time after the Original Issue Date, the Common Stock issuable upon the conversion of the Series A1 Preferred is changed into the same or a different number of shares of any class or classes of stock or other securities or property, whether by recapitalization, reclassification or otherwise (other than an Acquisition or Asset Transfer as defined in Section 3(c) or a subdivision or combination of shares or stock dividend or a reorganization, merger, consolidation or sale of assets provided for elsewhere in this Section 4), in any such event each holder of Series A1 Preferred shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares of Common Stock into which such shares of Series A1 Preferred could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof. h. REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. If at any time or from time to time after the Series A1 Preferred Original Issue Date, there is a 7. 8 capital reorganization of the Common Stock or a merger or consolidation of the Company with or into, or a sale of all or substantially all of the Company's assets to, another person, corporation or other entity (other than an Acquisition or Asset Transfer as defined in Section 3(c) or a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares provided for elsewhere in this Section 4), as a part of such capital reorganization, merger, consolidation or sale of assets, provision shall be made so that the holders of the Series A1 Preferred shall thereafter be entitled to receive upon conversion of the Series A1 Preferred the number of shares of stock or other securities or property of the Company to which a holder of the number of shares of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, subject to adjustment in respect of such stock or securities by the terms thereof. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 with respect to the rights of the holders of Series A1 Preferred after the capital reorganization to the end that the provisions of this Section 4 (including adjustment of the Series A1 Preferred Conversion Price then in effect and the number of shares issuable upon conversion of the Series A1 Preferred) shall be applicable after that event and be as nearly equivalent as practicable. i. CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or readjustment of the Series A1 Preferred Conversion Price for the number of shares of Common Stock or other securities issuable upon conversion of the Series A1 Preferred, if the Series A1 Preferred is then convertible pursuant to this Section 4, the Company, at its expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of Series A1 Preferred at the holder's address as shown in the Company's books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (i) the Series A1 Preferred Conversion Price at the time in effect, and (ii) the type and amount, if any, of other property which at the time would be received upon conversion of the Series A1 Preferred. j. NOTICES OF RECORD DATE. Upon (i) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or (ii) any Acquisition (as defined in Section 3(c)) or other capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company, any merger or consolidation of the Company with or into any other corporation, or any Asset Transfer (as defined in Section 3(c)), or any voluntary or involuntary dissolution, liquidation or winding up of the Company, the Company shall mail to each holder of Series A1 Preferred at least ten (10) days prior to the earlier of the record date specified therein or the date on which any such action is to become effective (or such shorter period approved by a majority of the outstanding Series A1 Preferred) a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend or distribution and a description of such dividend or distribution, (B) the date on which any such Acquisition, reorganization, reclassification, transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or winding up is expected to become effective, and (C) the date, if any, that is to be fixed as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or 8. 9 other property deliverable upon such Acquisition, reorganization, reclassification, transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or winding up. k. AUTOMATIC CONVERSION. (i) Subject to Section 4(a), each share of Series A1 Preferred shall automatically be converted into shares of Common Stock, based on the then-effective Series A1 Preferred Conversion Price, immediately upon the transfer of such share by the original purchaser of such share from the Company to a transferee that is not a Purchaser or an Affiliate of a Purchaser (as such terms are defined in the Preferred Stock Purchase Agreement, dated as of June 20, 1999, between the Company and the Purchasers named therein). Upon such automatic conversion, any accrued but unpaid dividends shall be paid in accordance with the provisions of Section 4(d). (ii) Subject to Section 4(a), upon the occurrence of the event specified in Section 4(k)(i) above, the applicable shares of Series A1 Preferred shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Company or its transfer agent; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless the certificates evidencing such shares of Series A1 Preferred are either delivered to the Company or its transfer agent as provided below, or the holder notifies the Company or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates. Upon the occurrence of such automatic conversion of the Series A1 Preferred, the holders of Series A1 Preferred shall surrender the certificates representing such shares at the office of the Company or any transfer agent for the Series A1 Preferred. Thereupon, there shall be issued and delivered to such holder promptly at such office and in its name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of Common Stock into which the shares of Series A1 Preferred surrendered were convertible on the date on which such automatic conversion occurred, and any accrued but unpaid dividends shall be paid in accordance with the provisions of Section 4(d). l. FRACTIONAL SHARES. No fractional shares of Common Stock shall be issued upon conversion of Series A1 Preferred. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series A1 Preferred by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of any fractional share, the Company shall, in lieu of issuing any fractional share, pay cash equal to the product of such fraction multiplied by the Common Stock's fair market value (as determined by the Board of Directors) on the date of conversion. m. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series A1 Preferred, 9. 10 such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series A1 Preferred. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A1 Preferred, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. n. NOTICES. Any notice required by the provisions of this Section 4 shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All notices shall be addressed to each holder of record at the address of such holder appearing on the books of the Company. o. PAYMENT OF TAXES. The Company will pay all taxes (other than taxes based upon income) and other governmental charges that may be imposed with respect to the issue or delivery of shares of Common Stock upon conversion of shares of Series A1 Preferred, excluding any tax or other charge imposed in connection with any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the shares of Series A1 Preferred so converted were registered. p. NO DILUTION OR IMPAIRMENT. Without the consent of the holders of then outstanding Series A1 Preferred as required under Section 2(b), the Company shall not amend its Restated Certificate of Incorporation or participate in any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or take any other voluntary action, for the purpose of avoiding or seeking to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times in good faith assist in carrying out all such action as may be reasonably necessary or appropriate in order to protect the conversion rights of the holders of the Series A1 Preferred against dilution or other impairment. 5. REDEMPTION. a. The Company shall redeem, from any funds legally available therefor, all of the outstanding shares of Series A1 Preferred on the date that is the tenth anniversary of the Series A1 Preferred Original Issue Date (the "Series A1 Preferred Redemption Date"). The Company shall effect such redemption on the Series A1 Preferred Redemption Date by paying in cash, in exchange for the shares of Series A1 Preferred to be redeemed, a sum equal to the Original Issue Price per share of Series A1 Preferred (as adjusted for any stock dividend, split, combination or other similar event with respect to such shares), plus all accrued but unpaid dividends on such shares (the "Series A1 Preferred Redemption Price"). b. Within a reasonable time following a "Change in Control" of the Company or a "Major Acquisition" by the Company, the Company shall provide written notice 10. 11 (the "A1 Offer Notice"), by first class mail, postage prepaid, to each holder of record (at the close of business on the business day next preceding the day on which notice is given) of Series A1 Preferred offering to redeem such shares at the option of the holder thereof and specifying a date not less than twenty (20) nor more than forty (40) days following the date of such notice on which the shares of Series A1 Preferred shall be redeemed (the "Optional Series A1 Preferred Redemption Date"). Each holder of Series A1 Preferred shall thereafter have the right to require the Company to redeem all, but not less than all, of the shares of Series A1 Preferred then held by such holder. A holder may exercise its right to require redemption of the Series A1 Preferred held by it by notifying the Company in writing, within ten (10) days following the date of the A1 Offer Notice by the Company, of its intent to exercise its right. The Company shall redeem, on the Optional Series A1 Preferred Redemption Date, all the shares of Series A1 Preferred of holders who have timely elected to participate in the redemption. The Company shall effect such redemption on the Optional Series A1 Preferred Redemption Date by paying in cash, in exchange for the shares of Series A1 Preferred to be redeemed, a sum per share equal to one hundred and one percent (101%) of the Original Issue Price of the Series A1 Preferred (as adjusted for any stock dividend, split, combination or other similar event with respect to such shares), plus all accrued but unpaid dividends on such shares (the "Optional Series A1 Preferred Redemption Price"). For the purposes hereof, a "Change of Control" of the Company shall mean an event or series of related events as a result of which any "person" or "group" (as such terms are used in Sections 13(d)(3) and 14(d) of the Securities Exchange Act of 1934 as amended (the "Exchange Act")), other than Vulcan Ventures Incorporated, MCI WorldCom, Inc. and their respective affiliates, (i) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of more than thirty percent (30%) of the outstanding equity securities of the Company (determined on a fully diluted basis) or (ii) acquires the right to elect at least thirty percent (30%) of the Board of Directors of the Company. For the purposes hereof, a "Major Acquisition" by the Company shall mean the acquisition by the Company of more than fifty percent (50%) of the outstanding equity securities or all or substantially all of the assets of any corporation or other entity or the merger of the Company with another entity in which the Company is the surviving entity, in each case, in consideration of the issuance of equity securities of the Company which exceed, in the aggregate, twenty-five percent (25%) of the outstanding equity securities of the Company, determined on a fully diluted basis; provided, however, that a Major Acquisition shall not include any acquisition of equity securities or assets of any entity of which the Company owned, at the Series A1 Preferred Original Issue Date, at least fifty percent (50%) of its outstanding equity securities or assets. c. As used herein and in Sections 5(d) and 5(e) below, the term "A1 Redemption Date" shall refer to each of "Series A1 Preferred Redemption Date" and the "Optional Series A1 Preferred Redemption Date," and the term "A1 Redemption Price" shall refer to each of "Series A1 Preferred Redemption Price" and the "Optional Series A1 Preferred Redemption Price." At least twenty (20) but no more than forth (40) days prior to each Series A1 Preferred Redemption Date, written notice shall be mailed, first class postage prepaid, to each holder of record (at the close of business on the business day next preceding the day on which notice is given) of the Series A1 Preferred to be redeemed, at the address last shown on the records of the Company for such holder, notifying such holder of the redemption to be effected, specifying the number of shares to be redeemed from such holder, the A1 Redemption 11. 12 Date, the A1 Redemption Price, the place at which payment may be obtained and calling upon such holder to surrender to the Company, in the manner and at the place designated, his certificate or certificates representing the shares to be redeemed (the "A1 Redemption Notice"). Except as provided in Section 5(d), on or after the A1 Redemption Date, each holder of Series A1 Preferred to be redeemed shall surrender to the Company the certificate or certificates representing such shares, in the manner and at the place designated in the A1 Redemption Notice or A1 Offer Notice, and thereupon the A1 Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. In the event less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. d. From and after the A1 Redemption Date, unless there shall have been a default in payment of the A1 Redemption Price, all rights of the holders of shares of Series A1 Preferred designated for redemption in the A1 Redemption Notice as holders of Series A1 Preferred (except the right to receive the A1 Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Company or be deemed to be outstanding for any purpose whatsoever. If the funds of the Company legally available for redemption of shares of Series A1 Preferred on any A1 Redemption Date are insufficient to redeem the total number of shares of Series A1 Preferred to be redeemed on such date, those funds which are legally available will be used to redeem the maximum possible number of such shares ratably among the holders of such shares to be redeemed based upon their holdings of Series A1 Preferred. The shares of Series A1 Preferred not redeemed shall remain outstanding and entitled to all the rights and preferences provided herein. If any of the A1 Redemption Price shall remain unpaid on the A1 Redemption Date, interest shall accrue on such unpaid amounts at the rate of eighteen percent (18%) per annum or, if lower, at the highest rate permitted by law. At any time thereafter when additional funds of the Company are legally available for the redemption of shares of Series A1 Preferred, such funds will immediately be used to redeem the balance of the shares which the Company has become obliged to redeem on any A1 Redemption Date, but which it has not redeemed, and to pay any interest thereon. No payment of the A2 Redemption Price or any interest thereon shall be made so long as any of the A1 Redemption Price or any interest thereon shall remain unpaid. e. On or prior to each A1 Redemption Date, the Company shall deposit the A1 Redemption Price of all shares of Series A1 Preferred designated for redemption in the A1 Redemption Notice and not yet redeemed with a bank or trust corporation having aggregate capital and surplus in excess of $100,000,000 as a trust fund for the benefit of the respective holders of the shares designated for redemption and not yet redeemed, with irrevocable instructions and authority to the bank or trust corporation to pay the A1 Redemption Price for such shares to their respective holders on or after the A1 Redemption Date upon receipt of notification from the Company that such holder has surrendered his share certificate to the Company pursuant to Section 5(d) above. As of the A1 Redemption Date, the deposit shall constitute full payment of the shares to their holders, and from and after the A1 Redemption Date the shares so called for redemption shall be redeemed and shall be deemed to be no longer outstanding, and the holders thereof shall cease to be stockholders with respect to such shares 12. 13 and shall have no rights with respect thereto except the rights to receive from the bank or trust corporation payment of the A1 Redemption Price of the shares, without interest, upon surrender of their certificates therefor. Such instructions shall also provide that any funds deposited by the Company pursuant to this Section 5(e) for the redemption of shares thereafter converted into shares of the Company's Common Stock pursuant to Section 4 hereof prior to the A1 Redemption Date shall be returned to the Company forthwith upon such conversion. The balance of any funds deposited by the Company pursuant to this Section 5(e) remaining unclaimed at the expiration of two (2) years following the A1 Redemption Date shall thereafter be returned to the Company upon its request expressed in a resolution of its Board of Directors. 6. NO REISSUANCE OF SERIES A1 PREFERRED. No share or shares of Series A1 Preferred acquired by the Company by reason of redemption, purchase, conversion or otherwise shall be reissued, and the Board of Directors is authorized pursuant to Section 243 of the Delaware General Corporation Law to retire any such share or shares. The retirement of any such share or shares shall not reduce the total authorized number of shares of Preferred Stock. F. The rights, preferences, privileges, restrictions and other matters relating to the Series A2 Preferred are as follows: 1. DIVIDEND RIGHTS. a. The holders of record of shares of Series A2 Preferred shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available for the payment of dividends, cumulative dividends payable, at the option of the Company, in cash or additional shares of Series A2 Preferred, at the annual rate per share of six and one-half percent (6.5%) of the Original Issue Price of the Series A2 Preferred (as adjusted for any stock dividend, split, combination or other similar event with respect to such shares). Dividends shall be payable annually, in arrears, on the 15th day of December in each year (each such date being referred to herein as a "Series A2 Preferred Dividend Payment Date"), commencing on the first Series A2 Preferred Dividend Payment Date which is at least fifteen (15) days after the date that the first share of Series A2 Preferred is issued. The rights of the holders of Series A2 Preferred to additional cumulative dividends under this paragraph (a) shall terminate on the third anniversary of the date that the first share of Series A2 Preferred was issued (the "Series A2 Preferred Termination Date"). The "Original Issue Price" of the Series A2 Preferred shall be ten dollars ($10.00). Dividends payable to the holders of the Series A1 Preferred shall be prior and in preference to any dividends payable to the holders of Series A2 Preferred, and dividends payable to the holders of Series A2 Preferred shall be prior and in preference to any dividends payable to the holders of Common Stock. b. Dividends payable pursuant to paragraph (a) of this Section 1 shall begin to accrue on each share of Series A2 Preferred on a daily basis and shall be cumulative from the date that the first share of Series A2 Preferred is issued (the "Series A2 Preferred Original Issue Date"), whether or not earned or declared. The amount of dividends so payable shall be determined on the basis of twelve (12) 30-day months and a 360-day year. Accrued but 13. 14 unpaid dividends shall not bear interest. Dividends paid on the shares of Series A2 Preferred in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares of the Series A2 Preferred at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A2 Preferred entitled to receive payment of a dividend declared thereon, which record date shall be no more than sixty (60) days prior to the date fixed for the payment thereof. c. Unless accrued dividends payable pursuant to paragraph (a) on all outstanding shares of Series A2 Preferred shall have been fully paid for all past dividend periods and the full dividends thereon for the dividend period current at the time shall have been paid or declared and funds set apart therefor, no dividend (except a dividend payable in Common Stock) shall be paid upon or declared or set apart for the Common Stock. d. Following the Series A2 Preferred Dividend Termination Date, dividends shall be payable on the Series A2 Preferred only when, as and if declared by the Board of Directors. Except as otherwise set forth in this Section 1, holders of Series A2 Preferred shall not be entitled to receive any dividends, whether in cash or property. 2. VOTING RIGHTS. a. GENERAL RIGHTS. The Series A2 Preferred shall not have any voting rights, except as otherwise provided herein or as required by law. b. SEPARATE VOTES OF SERIES A2 PREFERRED. For so long as more than seven million five hundred thousand (7,500,000) shares of Series A2 Preferred (subject to adjustment for any stock dividend, split, combination or other similar event with respect to such shares) remain outstanding, in addition to any other vote or consent required herein or by law, the vote or written consent of the holders of at least a majority of the outstanding Series A2 Preferred shall be necessary for effecting or validating the following actions: (i) Any amendment, alteration, or repeal of any provision of the Restated Certificate of Incorporation of the Company (including any filing of a Certificate of Designation), that alters or changes the voting powers, preferences, or other special rights or privileges, or restrictions of the Series A2 Preferred so as to affect the Series A2 Preferred adversely in a manner different from other classes or series of stock; (ii) Any issuance of any new class or series of stock or any other equity securities of the Company, in each case ranking senior to the Series A2 Preferred in right of liquidation preference or dividends or any issuance of debt securities convertible into the equity securities of the Company at a conversion price below the Original Issue Price of the Series A2 Preferred (as adjusted for any stock dividend, split, combination or other similar event with respect to such shares); (iii) Any redemption or repurchase of Common Stock, except for acquisitions of Common Stock (not to exceed one percent (1%) per year of the total of the then-outstanding Common Stock of the Company, determined on a fully diluted basis) by the 14. 15 Company at cost (plus an interest factor not to exceed ten percent (10%) per annum if applicable), pursuant to compensatory plans or agreements which permit the Company to repurchase such shares upon termination of services to the Company; or (iv) Any declaration or payment of any dividend on outstanding Common Stock, unless funds legally available therefor are at least equal to the net operating income of the Company reported in its audited financial statements for its most recent fiscal year plus net operating income of the Company reported in its unaudited financial statements for any subsequent interim periods. c. ELECTION OF BOARD OF DIRECTORS. For so long as more than seven million five hundred thousand (7,500,000) shares of Series A2 Preferred remain outstanding (as adjusted for any stock dividend, split, combination or other similar event with respect to such shares) the holders of Series A2 Preferred, voting as a separate class, shall be entitled to elect one (1) member of the Company's Board of Directors and to remove from office such director and to fill any vacancy caused by the resignation, death or removal of such director. 3. LIQUIDATION RIGHTS. a. Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, before any distribution or payment shall be made to the holders of any Common Stock, the holders of Series A2 Preferred shall be entitled to be paid out of the assets of the Company an amount per share of Series A2 Preferred equal to the greater of (i) the Series A2 Preferred Original Issue Price, plus all accrued but unpaid dividends on the Series A2 Preferred (as adjusted for any stock dividend, split, combination, or other similar event with respect to such shares) or (ii) the amount such holder would have received if such share had been converted to Common Stock pursuant to Section 4 hereof, for each share of Series A2 Preferred held by such holders. If, upon any such liquidation, distribution or winding up, the assets of the Company shall be insufficient to make payment in full to all holders of Series A2 Preferred of the liquidation preference set forth in this Section 3(a), then such assets shall be distributed among the holders of Series A2 Preferred at the time outstanding, ratably in proportion to the full amounts to which each such holder would otherwise be entitled. b. After the payment of the full liquidation preference of the Series A2 Preferred as set forth in Section 3(a) above, the remaining assets of the Company legally available for distribution, if any, shall be distributed ratably to the holders of Common Stock. c. The following events shall be considered a liquidation under this Section: (i) an Acquisition; or (ii) an Asset Transfer. 15. 16 (iii) In any of such events, if the consideration received by the Company is other than cash, its value will be deemed its fair market value as determined in good faith by the Board of Directors. Any securities shall be valued as follows: (a) Securities not subject to investment letter or other similar restrictions on free marketability covered by paragraph (b) below: (1) If traded on a securities exchange or through the Nasdaq National Market, the value shall be deemed to be the average of the closing prices of the securities on such quotation system over the 30-day period ending three (3) days prior to the closing; (2) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the 30-day period ending three (3) days prior to the closing; and (3) If there is no active public market, the value shall be the fair market value thereof, as determined by the Board of Directors. (b) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in paragraphs (a)(1), (2) or (3) to reflect the approximate fair market value thereof, as determined by the Board of Directors. 4. CONVERSION. The Series A2 Preferred shall be subject to the following provisions with respect to the conversion of the Series A2 Preferred into shares of Common Stock: a. VOLUNTARY CONVERSION. Subject to and in compliance with the provisions of this Section 4, any shares of Series A2 Preferred may, at any time, at the option of the holder, be converted into fully paid and nonassessable shares of Common Stock. The number of shares of Common Stock to which a holder of Series A2 Preferred shall be entitled upon conversion shall be the product obtained by multiplying the "Series A2 Preferred Conversion Rate" then in effect (determined as provided in Section 4(b)) by the number of shares of Series A2 Preferred being converted. b. SERIES A2 PREFERRED CONVERSION RATE. The conversion rate in effect at any time for conversion of the Series A2 Preferred (the "Series A2 Preferred Conversion Rate") shall be the quotient obtained by dividing the Original Issue Price of the Series A2 Preferred by the "Series A2 Preferred Conversion Price," calculated as provided in Section 4(c). c. SERIES A2 PREFERRED CONVERSION PRICE. The conversion price for the Series A2 Preferred shall initially be the Original Issue Price of the Series A2 Preferred (the "Series A2 Preferred Conversion Price"). Such initial Series A2 Preferred Conversion Price shall be adjusted from time to time in accordance with this Section 4. All references to the 16. 17 Series A2 Preferred Conversion Price herein shall mean the Series A2 Preferred Conversion Price as so adjusted. d. MECHANICS OF CONVERSION. Each holder of Series A2 Preferred who desires to convert the same into shares of Common Stock pursuant to this Section 4 shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Company or any transfer agent for the Series A2 Preferred, and shall give written notice to the Company at such office that such holder elects to convert the same. Such notice shall state the number of shares of Series A2 Preferred being converted. Thereupon, the Company shall promptly issue and deliver at such office to such holder a certificate or certificates for the number of shares of Common Stock to which such holder is entitled and shall promptly pay (i) any accrued but unpaid dividends on the shares of Series A2 Preferred being converted and (ii) the value of any fractional share of Common Stock otherwise issuable to any holder of Series A2 Preferred in cash (at the Common Stock's fair market value determined by the Board of Directors as of the date of conversion). Such conversion shall be deemed to have been made at the close of business on the date of such surrender of the certificates representing the shares of Series A2 Preferred to be converted, and the person entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such shares of Common Stock on such date. e. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company shall at any time or from time to time after the Series A2 Preferred Original Issue Date effect a subdivision of the outstanding Common Stock without a corresponding subdivision of the Preferred Stock, the Series A2 Preferred Conversion Price in effect immediately before that subdivision shall be proportionately decreased. Conversely, if the Company shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock into a smaller number of shares without a corresponding combination of the Preferred Stock, the Series A2 Preferred Conversion Price in effect immediately before the combination shall be proportionately increased. Any adjustment under this Section 4(e) shall become effective at the close of business on the date the subdivision or combination becomes effective. f. ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If the Company at any time or from time to time after the Original Issue Date makes, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, in each such event the Series A2 Preferred Conversion Price that is then in effect shall be decreased as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Series A2 Preferred Conversion Price then in effect by a fraction (i) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (ii) the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series A2 Preferred Conversion Price shall be recomputed accordingly as of the close of business on such record date 17. 18 and thereafter the Series A2 Preferred Conversion Price shall be adjusted pursuant to this Section 4(f) to reflect the actual payment of such dividend or distribution. g. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If at any time or from time to time after the Original Issue Date, the Common Stock issuable upon the conversion of the Series A2 Preferred is changed into the same or a different number of shares of any class or classes of stock or other securities or property, whether by recapitalization, reclassification or otherwise (other than an Acquisition or Asset Transfer as defined in Section 3(c) or a subdivision or combination of shares or stock dividend or a reorganization, merger, consolidation or sale of assets provided for elsewhere in this Section 4), in any such event each holder of Series A2 Preferred shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares of Common Stock into which such shares of Series A2 Preferred could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof. h. REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. If at any time or from time to time after the Series A2 Preferred Original Issue Date, there is a capital reorganization of the Common Stock or a merger or consolidation of the Company with, or a sale of all or substantially all of the Company's assets to, another person, corporation or other entity (other than an Acquisition or Asset Transfer as defined in Section 3(c) or a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares provided for elsewhere in this Section 4), as a part of such capital reorganization, merger, consolidation or sale of assets, provision shall be made so that the holders of the Series A2 Preferred shall thereafter be entitled to receive upon conversion of the Series A2 Preferred the number of shares of stock or other securities or property of the Company to which a holder of the number of shares of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, subject to adjustment in respect of such stock or securities by the terms thereof. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 with respect to the rights of the holders of Series A2 Preferred after the capital reorganization to the end that the provisions of this Section 4 (including adjustment of the Series A2 Preferred Conversion Price then in effect and the number of shares issuable upon conversion of the Series A2 Preferred) shall be applicable after that event and be as nearly equivalent as practicable. i. CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or readjustment of the Series A2 Preferred Conversion Price for the number of shares of Common Stock or other securities issuable upon conversion of the Series A2 Preferred, if the Series A2 Preferred is then convertible pursuant to this Section 4, the Company, at its expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of Series A2 Preferred at the holder's address as shown in the Company's books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based, including a 18. 19 statement of (i) the Series A2 Preferred Conversion Price at the time in effect, and (ii) the type and amount, if any, of other property which at the time would be received upon conversion of the Series A2 Preferred. j. NOTICES OF RECORD DATE. Upon (i) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or (ii) any Acquisition (as defined in Section 3(c)) or other capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company, any merger or consolidation of the Company with or into any other corporation, or any Asset Transfer (as defined in Section 3(c)), or any voluntary or involuntary dissolution, liquidation or winding up of the Company, the Company shall mail to each holder of Series A2 Preferred at least ten (10) days prior to the earlier of the record date specified therein or the date on which any such action is to become effective (or such shorter period approved by a majority of the outstanding Series A2 Preferred) a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend or distribution and a description of such dividend or distribution, (B) the date on which any such Acquisition, reorganization, reclassification, transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or winding up is expected to become effective, and (C) the date, if any, that is to be fixed as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such Acquisition, reorganization, reclassification, transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or winding up. k. AUTOMATIC CONVERSION. (i) Each share of Series A2 Preferred shall automatically be converted into shares of Common Stock, based on the then-effective Series A2 Preferred Conversion Price, immediately upon the transfer of such share by the original purchaser of such share from the Company to a transferee that is not a Purchaser or an Affiliate of a Purchaser (as such terms are defined in the Preferred Stock Purchase Agreement, dated as of June 20, 1999, between the Company and the Purchasers named therein). Upon such automatic conversion, any accrued but unpaid dividends shall be paid in accordance with the provisions of Section 4(d). (ii) Upon the occurrence of the event specified in Section 4(k)(i) above, the applicable shares of Series A2 Preferred shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Company or its transfer agent; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless the certificates evidencing such shares of Series A2 Preferred are either delivered to the Company or its transfer agent as provided below, or the holder notifies the Company or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates. Upon the occurrence of such automatic conversion of the Series A2 Preferred, the holders of Series A2 Preferred shall surrender the certificates representing such shares at the office of the Company or any transfer agent for the Series A2 Preferred. Thereupon, there shall be issued and delivered to such holder 19. 20 promptly at such office and in its name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of Common Stock into which the shares of Series A2 Preferred surrendered were convertible on the date on which such automatic conversion occurred, and any accrued but unpaid dividends shall be paid in accordance with the provisions of Section 4(d). l. FRACTIONAL SHARES. No fractional shares of Common Stock shall be issued upon conversion of Series A2 Preferred. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series A2 Preferred by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of any fractional share, the Company shall, in lieu of issuing any fractional share, pay cash equal to the product of such fraction multiplied by the Common Stock's fair market value (as determined by the Board of Directors) on the date of conversion. m. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series A2 Preferred, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series A2 Preferred. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A2 Preferred, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. n. NOTICES. Any notice required by the provisions of this Section 4 shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All notices shall be addressed to each holder of record at the address of such holder appearing on the books of the Company. o. PAYMENT OF TAXES. The Company will pay all taxes (other than taxes based upon income) and other governmental charges that may be imposed with respect to the issue or delivery of shares of Common Stock upon conversion of shares of Series A2 Preferred, excluding any tax or other charge imposed in connection with any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the shares of Series A2 Preferred so converted were registered. p. NO DILUTION OR IMPAIRMENT. Without the consent of the holders of then outstanding Series A2 Preferred as required under Section 2(b), the Company shall not amend its Restated Certificate of Incorporation or participate in any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or take any other voluntary 20. 21 action, for the purpose of avoiding or seeking to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times in good faith assist in carrying out all such action as may be reasonably necessary or appropriate in order to protect the conversion rights of the holders of the Series A2 Preferred against dilution or other impairment. 5. REDEMPTION. a. The Company shall redeem, from any funds legally available therefor, all of the outstanding shares of Series A2 Preferred on the date that is the tenth anniversary of the Series A2 Preferred Original Issue Date (the "Series A2 Preferred Redemption Date"). The Company shall effect such redemption on the Series A2 Preferred Redemption Date by paying in cash, in exchange for the shares of Series A2 Preferred to be redeemed, a sum equal to the Original Issue Price per share of Series A2 Preferred (as adjusted for any stock dividend, split, combination or other similar event with respect to such shares), plus all accrued but unpaid dividends on such shares (the "Series A2 Preferred Redemption Price"). b. Within a reasonable time following a "Change in Control" of the Company or a "Major Acquisition" by the Company, the Company shall provide written notice (the "A2 Offer Notice"), by first class mail, postage prepaid, to each holder of record (at the close of business on the business day next preceding the day on which notice is given) of Series A2 Preferred offering to redeem such shares at the option of the holder thereof and specifying a date not less than twenty (20) nor more than forth (40) days following the date of such notice on which the shares of Series A2 Preferred shall be redeemed (the "Optional Series A2 Preferred Redemption Date"). Each holder of Series A2 Preferred shall thereafter have the right to require the Company to redeem all, but not less than all, of the shares of Series A2 Preferred then held by such holder. A holder may exercise its right to require redemption of the Series A2 Preferred held by it by notifying the Company in writing, within ten (10) days following the date of the A2 Offer Notice by the Company, of its intent to exercise its right. The Company shall redeem, on the Optional Series A2 Preferred Redemption Date, all the shares of Series A2 Preferred of holders who have timely elected to participate in the redemption. The Company shall effect such redemption on the Optional Series A2 Redemption Date by paying in cash, in exchange for the shares of Series A2 Preferred to be redeemed, a sum per share equal to one hundred and one percent (101%) of the Original Issue Price of the Series A2 Preferred (as adjusted for any stock dividend, split, combination or other similar event with respect to such shares), plus all accrued but unpaid dividends on such shares (the "Optional Series A2 Preferred Redemption Price"). For the purposes hereof, a "Change of Control" of the Company shall mean an event or series of related events as a result of which any "person" or "group" (as such terms are used in Sections 13(d)(3) and 14(d) of the Securities Exchange Act of 1934 as amended (the "Exchange Act")), other than Vulcan Ventures, Incorporated, MCI WorldCom, Inc. and their respective affiliates, (i) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of more than thirty percent (30%) of the outstanding equity securities of the Company (determined on a fully diluted basis) or (ii) acquires the right to elect at least thirty percent (30%) of the Board of Directors of the Company. For the purposes hereof, a "Major Acquisition" by the Company shall mean the acquisition by the Company of more than fifty percent (50%) of the outstanding equity securities 21. 22 or all or substantially all of the assets of any corporation or other entity or the merger of the Company with another entity in which the Company is the surviving entity, in each case, in consideration of the issuance of equity securities of the Company which exceed, in the aggregate, twenty-five percent (25%) of the outstanding equity securities of the Company, determined on a fully diluted basis; provided, however, that a Major Acquisition shall not include any acquisition of equity securities or assets of any entity of which the Company owned, at the Series A2 Preferred Original Issue Date, at least fifty percent (50%) of its outstanding equity securities or assets. c. As used herein and in Sections 5(d) and 5(e) below, the term "A2 Redemption Date" shall refer to each of "Series A2 Preferred Redemption Date" and the "Optional Series A2 Preferred Redemption Date," and the term "A2 Redemption Price" shall refer to each of "Series A2 Preferred Redemption Price" and the "Optional Series A2 Preferred Redemption Price." At least twenty (20) but no more than forty (40) days prior to each A2 Redemption Date, written notice shall be mailed, first class postage prepaid, to each holder of record (at the close of business on the business day next preceding the day on which notice is given) of the Series A2 Preferred to be redeemed, at the address last shown on the records of the Company for such holder, notifying such holder of the redemption to be effected, specifying the number of shares to be redeemed from such holder, the A2 Redemption Date, the A2 Redemption Price, the place at which payment may be obtained and calling upon such holder to surrender to the Company, in the manner and at the place designated, his certificate or certificates representing the shares to be redeemed (the "A2 Redemption Notice"). Except as provided in Section 5(d), on or after the A2 Redemption Date, each holder of Series A2 Preferred to be redeemed shall surrender to the Company the certificate or certificates representing such shares, in the manner and at the place designated in the A2 Redemption Notice or A2 Offer Notice, and thereupon the A2 Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. In the event less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. d. From and after the A2 Redemption Date, unless there shall have been a default in payment of the A2 Redemption Price, all rights of the holders of shares of Series A2 Preferred designated for redemption in the A2 Redemption Notice as holders of Series A2 Preferred (except the right to receive the A2 Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Company or be deemed to be outstanding for any purpose whatsoever. If the funds of the Company legally available for redemption of shares of Series A2 Preferred on any A2 Redemption Date are insufficient to redeem the total number of shares of Series A2 Preferred to be redeemed on such date, those funds which are legally available will be used to redeem the maximum possible number of such shares ratably among the holders of such shares to be redeemed based upon their holdings of Series A2 Preferred. The shares of Series A2 Preferred not redeemed shall remain outstanding and entitled to all the rights and preferences provided herein. If any of the A2 Redemption Price shall remain unpaid on the A2 Redemption Date, interest shall accrue on such unpaid amounts at the rate of eighteen percent (18%) per annum or, if lower, at the highest rate permitted by law. 22. 23 At any time thereafter when additional funds of the Company are legally available for the redemption of shares of Series A2 Preferred, such funds will immediately be used to redeem the balance of the shares which the Company has become obliged to redeem on any A2 Redemption Date, but which it has not redeemed, and to pay any interest thereon. No payment of the A2 Redemption Price or any interest thereon shall be made so long as any of the A1 Redemption Price or any interest thereon shall remain unpaid. e. On or prior to each A2 Redemption Date, the Company shall deposit the A2 Redemption Price of all shares of Series A2 Preferred designated for redemption in the A2 Redemption Notice and not yet redeemed with a bank or trust corporation having aggregate capital and surplus in excess of $100,000,000 as a trust fund for the benefit of the respective holders of the shares designated for redemption and not yet redeemed, with irrevocable instructions and authority to the bank or trust corporation to pay the A2 Redemption Price for such shares to their respective holders on or after the A2 Redemption Date upon receipt of notification from the Company that such holder has surrendered his share certificate to the Company pursuant to Section 5(d) above. As of the A2 Redemption Date, the deposit shall constitute full payment of the shares to their holders, and from and after the A2 Redemption Date the shares so called for redemption shall be redeemed and shall be deemed to be no longer outstanding, and the holders thereof shall cease to be stockholders with respect to such shares and shall have no rights with respect thereto except the rights to receive from the bank or trust corporation payment of the A2 Redemption Price of the shares, without interest, upon surrender of their certificates therefor. Such instructions shall also provide that any funds deposited by the Company pursuant to this Section 5(e) for the redemption of shares thereafter converted into shares of the Company's Common Stock pursuant to Section 4 hereof prior to the A2 Redemption Date shall be returned to the Company forthwith upon such conversion. The balance of any funds deposited by the Company pursuant to this Section 5(e) remaining unclaimed at the expiration of two (2) years following the A2 Redemption Date shall thereafter be returned to the Company upon its request expressed in a resolution of its Board of Directors. 6. NO REISSUANCE OF SERIES A2 PREFERRED. No share or shares of Series A2 Preferred acquired by the Company by reason of redemption, purchase, conversion or otherwise shall be reissued, and the Board of Directors is authorized pursuant to Section 243 of the Delaware General Corporation Law to retire any such share or shares. The retirement of any such share or shares shall not reduce the total authorized number of shares of Preferred Stock. V. For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of the Corporation, of its directors and of its stockholders or any class thereof, as the case may be, it is further provided that: A. The management of the business and the conduct of the affairs of the Corporation shall be vested in its Board of Directors. The number of directors which shall constitute the 23. 24 whole Board of Directors shall be fixed exclusively by one or more resolutions adopted from time to time by the Board of Directors. The directors shall be divided into three classes designated as Class I, Class II and Class III, respectively. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors. At the first annual meeting of stockholders following the closing of the Corporation's initial public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of the Common Stock of the corporation (the "Initial Public Offering"), the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second annual meeting of stockholders following the closing of the Initial Public Offering, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following the closing of the Initial Public Offering, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting. Notwithstanding the foregoing provisions of this Article, each director shall serve until his successor is duly elected and qualified or until his death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes shall be filled by either (i) the affirmative vote of the holders of a majority of the voting power of the then-outstanding shares of voting stock of the corporation entitled to vote generally in the election of directors (the "Voting Stock") voting together as a single class; or (ii) by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. Newly created directorships resulting from any increase in the number of directors shall, unless the Board of Directors determines by resolution that any such newly created directorship shall be filled by the stockholders, be filled only by the affirmative vote of the directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successor shall have been elected and qualified. Notwithstanding the foregoing, in the event of any vacancy on the Board of Directors resulting from the resignation, death, disability, removal or disqualification of any director serving on the Board of Directors both prior to and immediately after the closing of the transactions contemplated by the Common Stock Purchase Agreement, dated October 10, 1997, between the Company and the purchaser named therein, or any successor thereto, or successor of such successor (an "Independent Director"), a committee of the Board of Directors consisting of the remaining Independent Directors shall, pursuant to Section 141(a) of the Delaware General Corporation Law, fill such vacancy by a majority vote of such directors. Any director so elected by such committee shall be an "Independent Director" for purposes of this paragraph. 24. 25 B. The Bylaws may be altered or amended or new Bylaws adopted by the affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of the Voting Stock. In furtherance and not in limitation of the power conferred by statute, the Board of Directors is expressly authorized to adopt, amend, supplement or repeal the Bylaws. C. The directors of the Corporation need not be elected by written ballot unless the Bylaws so provide. D. No action shall be taken by the stockholders of the Corporation except at an annual or special meeting of stockholders called in accordance with the Bylaws and no action shall be taken by the stockholders by written consent; provided, however, that notwithstanding anything to the contrary contained herein, the stockholders may act without a meeting, without prior notice and without a vote solely in the election of directors to fill vacancies on the Board of Directors (other than a vacancy resulting from the resignation, death, disability, removal or disqualification of any Independent Director). E. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the corporation shall be given in the manner provided in the Bylaws of the corporation. F. Any director, or the entire Board of Directors, may be removed from office at any time (i) with cause by the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class; or (ii) without cause by the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of the Voting Stock. VI. A. The liability of the directors of the Corporation for monetary damages shall be eliminated to the fullest extent under applicable law. B. The Corporation is authorized to provide indemnification of agents (as defined in Section 145 of the Delaware General Corporation Law) for breach of duty to the Corporation and its stockholders through bylaw provisions, through agreements with the agents, and/or through stockholder resolutions, or otherwise, in excess of the indemnification otherwise permitted by Section 145 of the Delaware General Corporation Law. C. Any repeal or modification of this Article VI shall be prospective only and shall not effect the rights under this Article VI in effect at the time of the alleged occurrence of any action or omission to act giving rise to liability or indemnification. VII. Notwithstanding any other provisions of this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the Voting Stock required by law, this 25. 26 Certificate of Incorporation or any Preferred Stock Designation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class, shall be required to alter, amend or repeal Article V, Article VII or Article X. VIII. The Corporation is to have perpetual existence. IX. The Corporation elects not to be governed by Section 203 of the Delaware General Corporation Law, as the same may be amended from time to time. This election shall be effective as of the earliest date permitted by law. X. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, except as provided in Article VII of this Certificate, and all rights conferred upon the stockholders herein are granted subject to this right. * * * * FOUR: This Restated Certificate of Incorporation has been duly approved by the Board of Directors of this Corporation. FIVE: This Restated Certificate of Incorporation has been duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware by the Board of Directors and the stockholders of the Corporation. 26. 27 IN WITNESS WHEREOF, METRICOM, INC. has caused this Restated Certificate of Incorporation to be signed by the President and the Secretary in Los Gatos, California this 18th day of October 1999. METRICOM, INC. By: /s/ Timothy A. Dreisbach --------------------------------- Timothy A. Dreisbach President ATTEST: By: Dale W. Marquart -------------------------------- Dale W. Marquart Secretary 27. EX-3.1(B) 3 ex3-1b.txt EXHIBIT 3.1(B) 1 EXHIBIT 3.1(b) CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF METRICOM, INC. METRICOM, INC., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), does hereby certify that: 1. The name of the corporation is Metricom, Inc. 2. The date on which the Restated Certificate of Incorporation was filed with the Secretary of State of the State of Delaware was November 12, 1999. 3. The Board of Directors of the Corporation adopted the following resolutions as required by Section 151 of the General Corporation Law of the State of Delaware at a meeting duly called and held on February 18, 2000: RESOLVED, that upon the effective date of this Amendment of the Restated Certificate of Incorporation, Paragraph A of Article IV of the Restated Certificate of Incorporation shall read as follows: "A. This Corporation is authorized to issue two classes of stock to be designated, respectively, "Common Stock" and "Preferred Stock." The total number of shares which the corporation is authorized to issue is Five hundred eighty million (580,000,000) shares. Five hundred million (500,000,000) shares shall be designated Common Stock, each having a par value of one tenth of one cent ($0.001). Eighty million (80,000,000) shares shall be Preferred Stock, each having a par value of one-tenth of one cent ($0.001)." 4. Thereafter pursuant to a resolution of the Board of Directors this Certificate of Amendment was submitted to the stockholders of the corporation for their approval in accordance with the provisions of Sections 222 and 242 of the General Corporation Law of the State of Delaware at a meeting duly called and held on June 26, 2000. 5. The above Amendment has been duly adopted in accordance with the provisions of Sections 222 and 242 of the General Corporation Law of the State of Delaware. 6. All other provisions of the Restated Certificate of Incorporation shall remain in full force and effect. 2 IN WITNESS WHEREOF, Metricom, Inc. has caused this certificate to be signed by its President and Chief Executive Officer, Timothy A. Dreisbach, and attested to by its Secretary, Dale W. Marquart, this 2nd day of August 2000. METRICOM, INC. /s/ Timothy A. Dreisbach ------------------------------------- Timothy A. Dreisbach President and Chief Executive Officer ATTEST: /s. Dale W. Marquart - ----------------------------------- Dale W. Marquart Secretary 2 EX-10.8 4 ex10-8.txt EXHIBIT 10.8 1 EXHIBIT 10.8 METRICOM, INC. 1991 EMPLOYEE STOCK PURCHASE PLAN Adopted November 12, 1991 Approved March 19, 1992 Amended January 24, 1996 Approved April 24, 1996 Amended April 29, 1998 Approved June 26, 1998 Amended August 16, 1999 Approved October 15, 1999 Amended February 18, 2000 Approved June 26, 2000 1. PURPOSE. (a) The purpose of the Plan is to provide a means by which employees of Metricom, Inc., a California corporation (the "Company"), and its Affiliates, as defined in subparagraph 1(b), which are designated as provided in subparagraph 2(b), may be given an opportunity to purchase stock of the Company. (b) The word "Affiliate" as used in the Plan means any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended (the "Code"). (c) The Company, by means of the Plan, seeks to retain the services of its employees, to secure and retain the services of new employees, and to provide incentives for such persons to exert maximum efforts for the success of the Company. (d) The Company intends that the rights to purchase stock of the Company granted under the Plan be considered options issued under an "employee stock purchase plan" as that term is defined in Section 423(b) of the Code. 2. ADMINISTRATION. (a) The Plan shall be administered by the Board of Directors (the "Board") of the Company unless and until the Board delegates administration to a Committee, as provided in subparagraph 2(c). Whether or not the Board has delegated administration, the Board shall have the final power to determine all questions of policy and expediency that may arise in the administration of the Plan. (b) The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan: (i) To determine when and how rights to purchase stock shall be granted and the provisions of each offering of such rights (which need not be identical). 1. 2 (ii) To designate from time to time which Affiliates of the Company shall be eligible to participate in the Plan. (iii) To construe and interpret the Plan and rights granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective. (iv) To amend the Plan as provided in paragraph 13. (v) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company. (c) The Board may delegate administration of the Plan to a Committee composed of not fewer than two (2) members of the Board (the "Committee"). If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. 3. SHARES SUBJECT TO THE PLAN. Subject to the provisions of paragraph 12 relating to adjustments upon changes in stock, the stock that may be sold pursuant to rights granted under the Plan shall not exceed in the aggregate one million fifty thousand (1,050,000) shares of the Company's common stock (the "Common Stock"). If any right granted under the Plan shall for any reason terminate without having been exercised, the Common Stock not purchased under such right shall again become available for the Plan. 4. GRANT OF RIGHTS; OFFERING. The Board or the Committee may from time to time grant or provide for the grant of rights to purchase Common Stock of the Company under the Plan to eligible employees (an "Offering") on a date or dates (the "Offering Date(s)") selected by the Board or the Committee. Each Offering shall be in such form and shall contain such terms and conditions as the Board or the Committee shall deem appropriate. If an employee has more than one right outstanding under the Plan, unless he or she otherwise indicates in agreements or notices delivered hereunder: (1) each agreement or notice delivered by that employee will be deemed to apply to all of his or her rights under the Plan, and (2) a right with a lower exercise price (or an earlier-granted right, if two rights have identical exercise prices), will be exercised to the fullest possible extent before a right with a higher exercise price (or a later-granted right, if two rights have identical exercise prices) will be exercised. The provisions of separate Offerings need not be identical, but each Offering shall include (through incorporation of the provisions of this Plan by reference in the Offering or otherwise) the substance of the provisions contained in paragraphs 5 through 8, inclusive. 2. 3 5. ELIGIBILITY. (a) Rights may be granted only to employees of the Company or, as the Board or the Committee may designate as provided in subparagraph 2(b), to employees of any Affiliate of the Company. Except as provided in subparagraph 5(b), an employee of the Company or any Affiliate shall not be eligible to be granted rights under the Plan, unless, on the Offering Date, such employee has been in the employ of the Company or any Affiliate for such continuous period preceding such grant as the Board or the Committee may require, but in no event shall the required period of continuous employment be equal to or greater than two (2) years. In addition, unless otherwise determined by the Board or the Committee, no employee of the Company or any Affiliate shall be eligible to be granted rights under the Plan, unless, on the Offering Date, such employee's customary employment with the Company or such Affiliate is at least twenty (20) hours per week and at least five (5) months per calendar year. (b) The Board or the Committee may provide that, each person who, during the course of an Offering, first becomes an eligible employee of the Company or designated Affiliate will, on a date or dates specified in the Offering which coincides with the day on which such person becomes an eligible employee or occurs thereafter, receive a right under that Offering, which right shall thereafter be deemed to be a part of that Offering. Such right shall have the same characteristics as any rights originally granted under that Offering, as described herein, except that: (i) the date on which such right is granted shall be the "Offering Date" of such right for all purposes, including determination of the exercise price of such right; (ii) the Offering Period for such right shall begin on its Offering Date and end coincident with the end of such Offering; and (iii) the Board or the Committee may provide that if such person first becomes an eligible employee within a specified period of time before the end of the Offering, he or she will not receive any right under that Offering. (c) No employees shall be eligible for the grant of any rights under the Plan if, immediately after any such rights are granted, such employee owns stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any Affiliate. For purposes of this subparagraph 5(d), the rules of Section 424(d) of the Code shall apply in determining the stock ownership of any employee, and stock which such employee may purchase under all outstanding rights and options shall be treated as stock owned by such employee. (d) An eligible employee may be granted rights under the Plan only if such rights, together with any other rights granted under "employee stock purchase plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of the Code, do not permit such employee's rights to purchase stock of the Company or any Affiliate to accrue at a rate which exceeds twenty-five thousand dollars ($25,000) of fair market value of such stock (determined at the time such rights are granted) for each calendar year in which such rights are outstanding at any time. 3. 4 6. RIGHTS; PURCHASE PRICE. (a) On each Offering Date, each eligible employee, pursuant to an Offering made under the Plan, shall be granted the right to purchase the number of shares of Common Stock of the Company purchasable with up to fifteen percent (15%) of such employee's Earnings (as defined in Section 7(a)) during the period which begins on the Offering Date (or such later date as the Board determines for a particular Offering) and ends on the date stated in the Offering, which date shall be no more than twenty-seven (27) months after the Offering Date (the "Offering Period"). In connection with each Offering made under this Plan, the Board or the Committee shall specify a maximum number of shares which may be purchased by any employee as well as a maximum aggregate number of shares which may be purchased by all eligible employees pursuant to such Offering. In addition, in connection with each such Offering, the Board or the Committee may specify a maximum aggregate number of shares which may be purchased by all eligible employees on any given Exercise Date (as defined in the Offering) under the Offering. If the aggregate purchase of shares upon exercise of rights granted under the Offering would exceed any such maximum aggregate number, the Board or the Committee shall make a pro rata allocation of the shares available in as nearly a uniform manner as shall be practicable and as it shall deem to be equitable. (b) The purchase price of stock acquired pursuant to rights granted under the Plan shall be not less than the lesser of: (i) an amount equal to eighty-five percent (85%) of the fair market value of the stock on the Offering Date; or (ii) an amount equal to eight-five percent (85%) of the fair market value of the stock on the Exercise Date. 7. PARTICIPATION; WITHDRAWAL; TERMINATION. (a) An eligible employee may become a participant in an Offering by delivering an agreement to the Company within the time specified in the Offering, in such form as the Company provides. Each such agreement shall authorize payroll deductions of up to fifteen percent (15%) of such employee's Earnings during the Offering Period. "Earnings" is defined as base salary or wages and including amounts elected to be deferred by the employee (that would otherwise have been paid) under the Company's 401(k) Plan, and may include or exclude bonuses, commissions, overtime pay, incentive pay, profit sharing, other remuneration paid directly to the employee, the cost of employee benefits paid for by the Company or an Affiliate, education or tuition reimbursements, imputed income arising under any group insurance or benefit program, traveling expenses, business and moving expense reimbursements, income received in connection with stock options, contributions made by the Company or an Affiliate under any employee benefit plan, and similar items of compensation as determined by the Board or Committee and as set forth in the Offering. The payroll deductions made for each participant shall be credited to an account for such participant under the Plan and shall be deposited with the general funds of the Company. At any time during the Offering a participant may terminate his or her payroll deductions. A participant may reduce, increase or begin such payroll deductions after the beginning of any Offering Period only as provided for in the Offering. A participant 4. 5 may not make any additional payments into his or her account unless expressly provided for in the Offering. (b) If a participant terminates his or her payroll deductions, such participant may withdraw from the Offering by delivering to the Company a notice of withdrawal in such form as the Company provides. Such withdrawal may be elected at any time prior to the end of the Offering Period. Upon such withdrawal from the Offering by a participant, the Company shall distribute to such participant all of his or her accumulated payroll deductions (reduced to the extent, if any, such deductions have been used to acquire stock for the participant) under the Offering without interest, and such participant's interest in that Offering shall be automatically terminated. A participant's withdrawal from an Offering will have no effect upon such participant's eligibility to participate in any other Offerings under the Plan but such participant will be required to deliver a new participation agreement in order to participate in other Offerings under the Plan. (c) Rights granted pursuant to any Offering under the Plan shall terminate immediately upon cessation of any participating employee's employment with the Company or an Affiliate, for any reason, and the Company shall distribute to such terminated employee all of his or her accumulated payroll deductions (reduced to the extent, if any, such deductions have been used to acquire stock for the terminated employee), without interest; provided, however, that subject to the right of the terminated employee to withdraw from the Offering and receive a distribution of his or her accumulated payroll deductions (as described in paragraph 7(b)), in the event that a participating employee's employment ceases within three (3) months of the next Exercise Date, the balance in such employee's account shall be held and used to purchase Common Stock for the terminated employee on such Exercise Date pursuant to the terms of the ongoing Offering. (d) Rights granted under the Plan shall not be transferable, and shall be exercisable only by the person to whom such rights are granted. 8. EXERCISE. (a) On each exercise date, as defined in the relevant Offering (an "Exercise Date"), each participant's accumulated payroll deductions (without any increase for interest) will be applied to the purchase of whole shares of stock of the Company, up to the maximum number of shares permitted pursuant to the terms of the Plan and the applicable Offering, at the purchase price specified in the Offering. No fractional shares shall be issued upon the exercise of rights granted under the Plan. The amount, if any, of accumulated payroll deductions remaining in each participant's account after the purchase of shares which is less than the amount required to purchase one share of stock on the final Exercise Date of an Offering shall be held in each such participant's account for the purchase of shares under the next Offering under the Plan, unless such participant withdraws from such next Offering, as provided in subparagraph 7(b), or is no longer eligible to be granted rights under the Plan, as provided in paragraph 5, in which case such amount shall be distributed to such participant after such Exercise Date, without interest. The amount, if any, of accumulated payroll deductions remaining in any participant's account after the purchase of shares which is equal to the amount required to purchase whole shares of stock 5. 6 on the final Exercise Date of an Offering shall be distributed in full to such participant after such Exercise Date, without interest. (b) No rights granted under the Plan may be exercised to any extent unless the Plan (including rights granted thereunder) is covered by an effective registration statement pursuant to the Securities Act of 1933, as amended. If, on an Exercise Date of any Offering hereunder, the Plan is not so registered, no rights granted under the Plan or any Offering shall be exercised and all payroll deductions accumulated and not previously applied to the purchase of Common Stock shall be distributed to the participants, without interest. 9. COVENANTS OF THE COMPANY. (a) During the terms of the rights granted under the Plan, the Company shall keep available at all times the number of shares of stock required to satisfy such rights. (b) The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to issue and sell shares of stock upon exercise of the rights granted under the Plan. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell stock upon exercise of such rights unless and until such authority is obtained. 10. USE OF PROCEEDS FROM STOCK. Proceeds from the sale of stock pursuant to rights granted under the Plan shall constitute general funds of the Company. 11. RIGHTS AS A SHAREHOLDER. A participant shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to rights granted under the Plan unless and until certificates representing such shares shall have been issued. 12. ADJUSTMENTS UPON CHANGES IN STOCK. (a) If any change is made in the stock subject to the Plan, or subject to any rights granted under the Plan (through merger, consolidation, reorganization, recapitalization, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or otherwise), the Board shall make appropriate adjustments in the maximum number of shares subject to the Plan and the number of shares and price per share of stock subject to outstanding rights. (b) In the event of: (1) a dissolution or liquidation of the Company; (2) a merger or consolidation in which the Company is not the surviving corporation; (3) a reverse merger in which the Company is the surviving corporation but the shares of the Company's Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (4) any other capital 6. 7 reorganization in which more than fifty percent (50%) of the shares of the Company entitled to vote are exchanged, then, as determined by the Board in its sole discretion, any surviving corporation shall assume outstanding rights or substitute similar rights for those under the Plan, such rights shall continue in full force and effect, or such rights shall be exercised immediately prior to such event. 13. AMENDMENT OF THE PLAN. (a) The Board at any time, and from time to time, may amend the Plan. However, except as provided in paragraph 12 relating to adjustments upon changes in stock, no amendment shall be effective unless approved by the shareholders of the Company within 12 months before or after the adoption of the amendment, where the amendment will: (i) Increase the number of shares reserved for rights under the Plan; or (ii) Modify the provisions as to eligibility for participation in the Plan or modify the Plan in any other way to the extent such modification requires shareholder approval in order for the Plan to obtain employee stock purchase plan treatment under Section 423 of the Code. It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible employees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to employee stock purchase plans and/or to bring the Plan and/or rights granted under it into compliance therewith. (b) Rights and obligations under any rights granted before amendment of the Plan shall not be altered or impaired by any amendment of the Plan, except with the consent of the person to whom such rights were granted. 14. TERMINATION OR SUSPENSION OF THE PLAN. (a) The Board may suspend or terminate the Plan at any time. No rights may be granted under the Plan while the Plan is suspended or after it is terminated. (b) Rights and obligations under any rights granted while the Plan is in effect shall not be altered or impaired by suspension or termination of the Plan, except with the consent of the person to whom such rights were granted. 7. EX-10.17 5 ex10-17.txt EXHIBIT 10.17 1 EXHIBIT 10.17 METRICOM, INC. 1997 EQUITY INCENTIVE PLAN ADOPTED MARCH 14, 1997 APPROVED BY STOCKHOLDERS MAY 1, 1997 AMENDED BY THE BOARD OF DIRECTORS ON APRIL 29, 1998 APPROVED BY STOCKHOLDERS ON JUNE 26, 1998 AMENDED BY THE BOARD OF DIRECTORS ON AUGUST 16, 1999 APPROVED BY STOCKHOLDERS ON OCTOBER 15, 1999 AMENDED BY THE BOARD OF DIRECTORS ON FEBRUARY 18, 2000 APPROVED BY STOCKHOLDERS ON JUNE 26, 2000 1. PURPOSES. (a) The purpose of the Plan is to provide a means by which selected Employees and Directors of and Consultants to the Company and its Affiliates may be given an opportunity to benefit from increases in value of the common stock of the Company ("Common Stock") through the granting of (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) stock bonuses and (iv) rights to purchase restricted stock, all as defined below. (b) The Company, by means of the Plan, seeks to retain the services of persons who are now Employees, Directors or Consultants, to secure and retain the services of new Employees, Directors and Consultants, and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates. (c) The Company intends that the Stock Awards issued under the Plan shall, in the discretion of the Board or any Committee to which responsibility for administration of the Plan has been delegated pursuant to subsection 3(c), be either (i) Options granted pursuant to Section 6 hereof, including Incentive Stock Options and Nonstatutory Stock Options, or (ii) stock bonuses or rights to purchase restricted stock granted pursuant to Section 7 hereof. All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and a separate certificate or certificates will be issued for shares purchased on exercise of each type of Option. 2. DEFINITIONS. (a) "AFFILIATE" means any parent corporation or subsidiary corporation, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f) respectively, of the Code. (b) "BOARD" means the Board of Directors of the Company. (c) "CODE" means the Internal Revenue Code of 1986, as amended. (d) "COMMITTEE" means a Committee appointed by the Board in accordance with subsection 3(c) of the Plan. 1. 2 (e) "COMPANY" means Metricom, Inc., a Delaware corporation. (f) "CONSULTANT" means any person, including an advisor, engaged by the Company or an Affiliate to render consulting services and who is compensated for such services, provided that the term "Consultant" shall not include Directors who are paid only a director's fee by the Company or who are not compensated by the Company for their services as Directors. (g) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means the employment or relationship as a Director or Consultant is not interrupted or terminated. The Board, in its sole discretion, may determine whether Continuous Status as an Employee, Director or Consultant shall be considered interrupted in the case of: (i) any leave of absence approved by the Board, including sick leave, military leave, or any other personal leave; or (ii) transfers between locations of the Company or between the Company, Affiliates or their successors. (h) "DIRECTOR" means a member of the Board. (i) "DISABILITY" means the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code. (j) "EMPLOYEE" means any person, including Officers and Directors, employed by the Company or any Affiliate of the Company. Neither service as a Director nor payment of a director's fee by the Company shall be sufficient to constitute "employment" by the Company. (k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. (l) "FAIR MARKET VALUE" means, as of any date, the value of the Common Stock of the Company determined as follows: (i) If the Common Stock is listed on any established stock exchange, or traded on the Nasdaq National Market or The Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in Common Stock) on the last market trading day prior to determination, as reported in the Wall Street Journal or such other source as the Board deems reliable; (ii) In the absence of such markets for the Common Stock, the Fair Market Value shall be determined in good faith by the Board. (m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder. (n) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a current Employee or Officer of the Company or its parent or subsidiary, does not receive compensation (directly or indirectly) from the Company or its parent or subsidiary for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to 2. 3 the Securities Act of 1933 ("Regulation S-K"), does not possess an interest in any other transaction as to which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship as to which disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-employee director" for purposes of Rule 16b-3. (o) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as an Incentive Stock Option. (p) "OFFICER" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. (q) "OPTION" means a stock option granted pursuant to the Plan. (r) "OPTION AGREEMENT" means a written agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan. (s) "OPTIONEE" means a person to whom an Option is granted pursuant to the Plan. (t) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current employee of the Company or an "affiliated corporation" (within the meaning of Treasury regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an "affiliated corporation" receiving compensation for prior services (other than benefits under a tax qualified pension plan), was not an officer of the Company or an "affiliated corporation" at any time, and is not currently receiving direct or indirect remuneration from the Company or an "affiliated corporation" for services in any capacity other than as a Director, or (ii) is otherwise considered an "outside director" for purposes of Section 162(m) of the Code. (u) "PLAN" means this 1997 Equity Incentive Plan. (v) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan. (w) "SECURITIES ACT" means the Securities Act of 1933, as amended. (x) "STOCK AWARD" means any right granted under the Plan, including any Option, any stock bonus, and any right to purchase restricted stock. (y) "STOCK AWARD AGREEMENT" means a written agreement between the Company and a holder of a Stock Award evidencing the terms and conditions of an individual Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan. 3. ADMINISTRATION. (a) The Plan shall be administered by the Board unless and until the Board delegates administration to a Committee, as provided in subsection 3(c). 3. 4 (b) The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan: (i) To determine from time to time which of the persons eligible under the Plan shall be granted Stock Awards; when and how each Stock Award shall be granted; whether a Stock Award will be an Incentive Stock Option, a Nonstatutory Stock Option, a stock bonus, a right to purchase restricted stock, or a combination of the foregoing; the provisions of each Stock Award granted (which need not be identical), including the time or times when a person shall be permitted to receive stock pursuant to a Stock Award; and the number of shares with respect to which a Stock Award shall be granted to each such person. (ii) To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective. (iii) To amend the Plan or a Stock Award as provided in Section 12. (iv) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company which are not in conflict with the provisions of the Plan. (c) The Board may delegate administration of the Plan to a committee or committees ("Committee") of one (1) or more members of the Board. In the discretion of the Board, a Committee may consist solely of two (2) or more Outside Directors, in accordance with Code Section 162(m), or solely of two (2) or more Non-Employee Directors, in accordance with Rule 16b-3. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or such a subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. 4. SHARES SUBJECT TO THE PLAN. (a) Subject to the provisions of Section 11 relating to adjustments upon changes in stock, the stock that may be issued pursuant to Stock Awards shall not exceed in the aggregate five million two hundred seventy-five thousand (5,275,000) shares of Common Stock. If any Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full (or vested in the case of Restricted Stock), the stock not acquired under such Stock Award shall revert to and again become available for issuance under the Plan. (b) The stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise. 4. 5 5. ELIGIBILITY. (a) Incentive Stock Options may be granted only to Employees. Stock Awards other than Incentive Stock Options may be granted only to Employees, Directors or Consultants. (b) No person shall be eligible for the grant of an Incentive Stock Option if, at the time of grant, such person owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any of its Affiliates unless the exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value of such stock at the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant. (c) Subject to the provisions of Section 11 relating to adjustments upon changes in stock, no person shall be eligible to be granted Stock Awards covering more than four hundred thousand (400,000) shares of Common Stock in any calendar year. (d) A Consultant shall not be eligible for the grant of a Stock Award if, at the time of grant, a Form S-8 Registration Statement under the Securities Act ("Form S-8") is not available to register either the offer or the sale of the Company's securities to such Consultant because of the nature of the services that the Consultant is providing to the Company, or because the Consultant is not a natural person, or as otherwise provided by the rules governing the use of Form S-8, unless the Company determines both (i) that such grant (A) shall be registered in another manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or (B) does not require registration under the Securities Act in order to comply with the requirements of the Securities Act, if applicable, and (ii) that such grant complies with the securities laws of all other relevant jurisdictions. 6. OPTION PROVISIONS. Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions: (a) TERM. No Option shall be exercisable after the expiration of ten (10) years from the date it was granted. (b) PRICE. The exercise price of each Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the stock subject to the Option on the date the Option is granted, and the exercise price of each Nonstatutory Stock Option shall be not less than eighty-five percent (85%) of the Fair Market Value of the stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code. (c) CONSIDERATION. The purchase price of stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the 5. 6 time the Option is exercised, or (ii) at the discretion of the Board or Committee, at the time of the grant of the Option, (A) by delivery to the Company of other Common Stock of the Company, (B) according to a deferred payment or other arrangement (which may include, without limiting the generality of the foregoing, the use of other Common Stock of the Company) with the person to whom the Option is granted or to whom the Option is transferred pursuant to subsection 6(d), or (C) in any other form of legal consideration that may be acceptable to the Board; provided, however, that at any time that the Company is incorporated in Delaware, payment of the Common Stock's "par value," as defined in the Delaware General Corporation Law, shall not be made by deferred payment. In the case of any deferred payment arrangement, interest shall be payable at least annually and shall be charged at the minimum rate of interest necessary to avoid the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement. (d) TRANSFERABILITY. An Incentive Stock Option shall not be transferable except by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the person to whom the Incentive Stock Option is granted only by such person. A Nonstatutory Stock Option may be transferred to the extent provided in the Option Agreement; provided that if the Option Agreement does not expressly permit the transfer of a Nonstatutory Stock Option, the Nonstatutory Stock Option shall not be transferable except by will, by the laws of descent and distribution or pursuant to a domestic relations order satisfying the requirements of Rule 16b-3, and shall be exercisable during the lifetime of the person to whom the Option is granted only by such person or any transferee pursuant to a domestic relations order. Notwithstanding the foregoing, the person to whom the Option is granted may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionee, shall thereafter be entitled to exercise the Option. (e) VESTING. The total number of shares of stock subject to an Option may, but need not, be allotted in periodic installments (which may, but need not, be equal). The Option Agreement may provide that from time to time during each of such installment periods, the Option may become exercisable ("vest") with respect to some or all of the shares allotted to that period, and may be exercised with respect to some or all of the shares allotted to such period and/or any prior period as to which the Option became vested but was not fully exercised. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Board may deem appropriate. The provisions of this subsection 6(e) are subject to any Option provisions governing the minimum number of shares as to which an Option may be exercised. (f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT. In the event an Optionee's Continuous Status as an Employee, Director or Consultant terminates (other than upon the Optionee's death or Disability), the Optionee may exercise his or her Option within such period of time designated by the Board, which shall in no event be later than the expiration of the term of the Option as set forth in the Option Agreement (the "Post-Termination Exercise Period") and only to the extent that the Optionee was entitled to exercise the Option on the date Optionee's Continuous Status as an Employee, Director or Consultant terminates. In the case of an Incentive Stock Option, the Board shall determine the Post-Termination Exercise Period at the time the Option is granted, and the term of such Post-Termination Exercise Period shall in no event exceed three (3) months from the date of termination, and may, in the event 6. 7 Optionee's Continuous Status as an Employee, Director or Consultant terminates for Cause (as defined in subsection 11(b)), terminate of the date of such Optionee's termination. In addition, the Board may at any time, with the consent of the Optionee, extend the Post-Termination Exercise Period and provide for continued vesting; provided however, that any extension of such period by the Board in excess of three (3) months from the date of termination shall cause an Incentive Stock Option so extended to become a Nonstatutory Stock Option, effective as of the date of Board action. If, at the date of termination, the Optionee is not entitled to exercise his or her entire Option, the shares covered by the unexercisable portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified in the Option Agreement or as otherwise determined above, the Option shall terminate, and the shares covered by such Option shall revert to the Plan. Notwithstanding the foregoing, the Board shall have the power to permit an Option to continue to vest during the Post-Termination Exercise Period. An Optionee's Option Agreement may also provide that if the exercise of the Option following the termination of the Optionee's Continuous Status as an Employee, Director, or Consultant (other than upon the Optionee's death or Disability) would result in liability under Section 16(b) of the Exchange Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day after the last date on which such exercise would result in such liability under Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may also provide that if the exercise of the Option following the termination of the Optionee's Continuous Status as an Employee, Director or Consultant (other than upon the Optionee's death or Disability) would be prohibited at any time solely because the issuance of shares would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in the first paragraph of this subsection 6(f), or (ii) the expiration of a period of three (3) months after the termination of the Optionee's Continuous Status as an Employee, Director or Consultant during which the exercise of the Option would not be in violation of such registration requirements. (g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status as an Employee, Director or Consultant terminates as a result of the Optionee's Disability, the Optionee may exercise his or her Option (to the extent that the Optionee was entitled to exercise it at the date of termination), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, at the date of termination, the Optionee is not entitled to exercise his or her entire Option, the shares covered by the unexercisable portion of the Option shall revert to and again become available for issuance under the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the shares covered by such Option shall revert to and again become available for issuance under the Plan. (h) DEATH OF OPTIONEE. In the event of the death of an Optionee during, or within a three (3)-month period after the termination of, the Optionee's Continuous Status as an Employee, Director or Consultant, the Option may be exercised to the extent vested by the Optionee's estate, by a person who acquired the right to exercise the Option by bequest or 7. 8 inheritance or by a person designated to exercise the option upon the Optionee's death pursuant to subsection 6(d), but only within the period ending on the earlier of (i) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of such Option as set forth in the Option Agreement. If, at the time of death, the Optionee was not entitled to exercise his or her entire Option, the shares covered by the unexercisable portion of the Option shall revert to and again become available for issuance under the Plan. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate, and the shares covered by such Option shall revert to and again become available for issuance under the Plan. (i) EARLY EXERCISE. The Option may, but need not, include a provision whereby the Optionee may elect at any time while an Employee, Director or Consultant to exercise the Option as to any part or all of the shares subject to the Option prior to the full vesting of the Option. Any unvested shares so purchased may be subject to a repurchase right in favor of the Company or to any other restriction the Board determines to be appropriate. (j) RE-LOAD OPTIONS. Without in any way limiting the authority of the Board or Committee to make or not to make grants of Options hereunder, the Board or Committee shall have the authority (but not an obligation) to include as part of any Option Agreement a provision entitling the Optionee to a further Option (a "Re-Load Option") in the event the Optionee exercises the Option evidenced by the Option Agreement, in whole or in part, by surrendering other shares of Common Stock in accordance with this Plan and the terms and conditions of the Option Agreement. Any such Re-Load Option (i) shall be for a number of shares equal to the number of shares surrendered as part or all of the exercise price of such Option; (ii) shall have an expiration date which is the same as the expiration date of the Option the exercise of which gave rise to such Re-Load Option; and (iii) shall have an exercise price which is equal to one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Re-Load Option on the date of exercise of the original Option. Notwithstanding the foregoing, a Re-Load Option which is an Incentive Stock Option and which is granted to a 10% stockholder (as described in subsection 5(b)), shall have an exercise price which is equal to one hundred ten percent (110%) of the Fair Market Value of the stock subject to the Re-Load Option on the date of exercise of the original Option and shall have a term which is no longer than five (5) years. Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory Stock Option, as the Board or Committee may designate at the time of the grant of the original Option; provided, however, that the designation of any Re-Load Option as an Incentive Stock Option shall be subject to the one hundred thousand dollars ($100,000) annual limitation on exercisability of Incentive Stock Options described in subsection 10(d) of the Plan and in Section 422(d) of the Code. There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall be subject to the availability of sufficient shares under subsection 4(a) and shall be subject to such other terms and conditions as the Board or Committee may determine which are not inconsistent with the express provisions of the Plan regarding the terms of Options. 7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK. Each stock bonus or restricted stock purchase agreement shall be in such form and shall contain such terms and conditions as the Board or Committee shall deem appropriate. The terms 8. 9 and conditions of stock bonus or restricted stock purchase agreements need not be identical, but each stock bonus or restricted stock purchase agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions as appropriate: (a) PURCHASE PRICE. The purchase price under each restricted stock purchase agreement shall be such amount as the Board or Committee shall determine and designate in such agreement but in no event shall the purchase price be less than eighty-five percent (85%) of the stock's Fair Market Value on the date such award is made. Notwithstanding the foregoing, the Board or Committee may determine that eligible participants in the Plan may be awarded stock pursuant to a stock bonus agreement in consideration for past services actually rendered to the Company for its benefit. (b) TRANSFERABILITY. No rights under a stock bonus or restricted stock purchase agreement shall be transferable except by will or the laws of descent and distribution or, if the agreement so provides, pursuant to a domestic relations order satisfying the requirements of Rule 16b-3, so long as stock awarded under such agreement remains subject to the terms of the agreement. (c) CONSIDERATION. The purchase price of stock acquired pursuant to a stock purchase agreement shall be paid either: (i) in cash at the time of purchase; (ii) at the discretion of the Board or Committee, according to a deferred payment or other arrangement with the person to whom the stock is sold; or (iii) in any other form of legal consideration that may be acceptable to the Board or Committee in its discretion; provided, however, that at any time that the Company is incorporated in Delaware payment of the Common Stock's "par value," as defined in the Delaware General Corporation Law, shall not be made by deferred payment. Notwithstanding the foregoing, the Board or Committee to which administration of the Plan has been delegated may award stock pursuant to a stock bonus agreement in consideration for past services actually rendered to the Company or for its benefit. (d) VESTING. Shares of stock sold or awarded under the Plan may, but need not, be subject to a repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Board or Committee. (e) TERMINATION OF CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT. In the event a Participant's Continuous Status as an Employee, Director or Consultant terminates, the Company may repurchase or otherwise reacquire any or all of the shares of stock held by that person which have not vested as of the date of termination under the terms of the stock bonus or restricted stock purchase agreement between the Company and such person. 8. COVENANTS OF THE COMPANY. (a) During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of stock required to satisfy such Stock Awards. (b) The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to issue and sell shares under Stock Awards; provided, however, that this undertaking shall not require the Company to 9. 10 register under the Securities Act of 1933, as amended (the "Securities Act") either the Plan, any Stock Award or any stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell stock upon exercise of such Stock Awards unless and until such authority is obtained. 9. USE OF PROCEEDS FROM STOCK. Proceeds from the sale of stock pursuant to Stock Awards shall constitute general funds of the Company. 10. MISCELLANEOUS. (a) The Board shall have the power to accelerate the time at which a Stock Award may first be exercised or the time during which a Stock Award or any part thereof will vest, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which it will vest. (b) Neither an Employee, Director nor a Consultant nor any person to whom a Stock Award is transferred in accordance with the Plan shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to such Stock Award unless and until such person has satisfied all requirements for exercise of the Stock Award pursuant to its terms. (c) Nothing in the Plan or any instrument executed or Stock Award granted pursuant thereto shall confer upon any Employee, Consultant or other holder of Stock Awards any right to continue in the employ of the Company or any Affiliate, or to continue serving as a Consultant and Director, or shall affect the right of the Company or any Affiliate to terminate the employment of any Employee with or without notice and with or without cause, or the right to terminate the relationship of any Consultant pursuant to the terms of such Consultant's agreement with the Company or Affiliate or service as a Director pursuant to the Company's Bylaws. (d) To the extent that the aggregate Fair Market Value (determined at the time of grant) of stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionee during any calendar year under all plans of the Company and its Affiliates exceeds one hundred thousand dollars ($100,000), the Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options. (e) The Company may require any person to whom a Stock Award is granted, or any person to whom a Stock Award is transferred in accordance with the Plan, as a condition of exercising or acquiring stock under any Stock Award, (1) to give written assurances satisfactory to the Company as to such person's knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters, and that he or she is capable of 10. 11 evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (2) to give written assurances satisfactory to the Company stating that such person is acquiring the stock subject to the Stock Award for such person's own account and not with any present intention of selling or otherwise distributing the stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (i) the issuance of the shares upon the exercise or acquisition of stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act, or (ii) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the stock. (f) To the extent provided by the terms of a Stock Award Agreement, the person to whom a Stock Award is granted may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of stock under a Stock Award by any of the following means or by a combination of such means: (1) tendering a cash payment; (2) authorizing the Company to withhold shares from the shares of the Common Stock otherwise issuable to the participant as a result of the exercise or acquisition of stock under the Stock Award; or (3) delivering to the Company owned and unencumbered shares of the Common Stock of the Company. Notwithstanding the foregoing, the Company shall not be authorized to withhold shares of Common Stock at rates in excess of the maximum statutory withholding rates for federal and state tax purposes, including payroll taxes. 11. ADJUSTMENTS UPON CHANGES IN STOCK. (a) If any change is made in the stock subject to the Plan, or subject to any Stock Award, without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Plan will be appropriately adjusted in the class(es) and maximum number of shares subject to the Plan and the maximum number of shares subject to award to any person during any calendar year, and the outstanding Stock Awards will be appropriately adjusted in the class(es) and number of shares and price per share of stock subject to such outstanding Stock Awards. Such adjustments shall be made by the Board or Committee, the determination of which shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a "transaction not involving the receipt of consideration by the Company.") (b) In the event of a Change in Control, (i) any surviving or acquiring corporation shall assume Stock Awards outstanding under the Plan or shall substitute similar Stock Awards for those outstanding under the Plan, or (ii) in the event any surviving or acquiring corporation refuses to assume such Stock Awards or to substitute similar Stock Awards for those outstanding under the Plan, (A) with respect to Stock Awards held by persons then performing services as Employees, Directors or Consultants, the vesting of such Stock Awards and the time during 11. 12 which such Stock Awards may be exercised shall be accelerated prior to such event and the Stock Awards terminated if not exercised after such acceleration and at or prior to such event, and (B) with respect to any other Stock Awards outstanding under the Plan, such Stock Awards shall be terminated if not exercised prior to such event. In addition, subject to the limitation set forth in subsection 11(c) below, with respect to any person who was providing services as an Employee, Director or Consultant immediately prior to the consummation of the Change in Control, any Stock Awards held by such persons shall immediately become fully vested and exercisable, and any repurchase right by the Company with respect to shares acquired by such person under a Stock Award shall lapse, if such person's Continuous Status as an Employee, Director or Consultant is terminated other than for Cause within twelve (12) months following consummation of the Change in Control. For purposes of the Plan, "Cause" shall mean willful conduct that is materially injurious to the business of the person's employer, whether financial or otherwise. For purposes of this Plan, "Change in Control" means: (1) a dissolution, liquidation, or sale of all or substantially all of the assets of the Company; (2) a merger or consolidation in which the Company is not the surviving corporation; (3) a reverse merger in which the Company is the surviving corporation but the shares of the Company's common shares outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (4) the acquisition by any person, entity or group within the meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the Company or any Affiliate of the Company) of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule) of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors. (c) If any acceleration of the vesting of a Stock Award or lapse of a repurchase right to which such Stock Award is subject or any other payment or benefit the holder of such Stock Award would receive pursuant to a Change in Control from the Company or otherwise ("Payment") would (i) constitute a "parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then such Payment shall be reduced to the Reduced Amount. The "Reduced Amount" shall be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in the Stock Award holder's receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting "parachute payments" is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the following order unless the Stock Award holder elects in writing a different order (provided, however, that such election shall be subject to Company approval if made on or after the effective date of the Change in Control): reduction of cash payments; cancellation of accelerated vesting of stock awards or 12. 13 lapse of repurchase rights; reduction of employee benefits. In the event that acceleration of vesting of stock award or lapse of repurchase right compensation is to be reduced, such acceleration shall be cancelled in the reverse order of the date of grant of the stock awards unless the Stock Award holder elect in writing a different order for cancellation. The accounting firm engaged by the Company for general audit purposes as of the day prior to the effective date of the Change in Control shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint a nationally recognized accounting firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder. The accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Company and the Stock Award holder within fifteen (15) calendar days after the date on which the Stock Award holder's right to a Payment is triggered (if requested at that time by the Company or the Stock Award holder) or such other time as requested by the Company or the Stock Award holder. If the accounting firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Amount, it shall furnish the Company and the Stock Award holder with an opinion reasonably acceptable to the Stock Award holder that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon the Company and the Stock Award holder. 12. AMENDMENT OF THE PLAN AND STOCK AWARDS. (a) The Board at any time, and from time to time, may amend the Plan. However, except as provided in Section 11 relating to adjustments upon changes in stock, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary for the Plan to satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities exchange listing requirements. (b) The Board may in its sole discretion submit any other amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 162(m) of the Code and the regulations thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to certain executive officers. (c) It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees, Directors or Consultants with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options granted under it into compliance therewith. (d) Rights and obligations under any Stock Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the 13. 14 consent of the person to whom the Stock Award was granted and (ii) such person consents in writing. (e) The Board at any time, and from time to time, may amend the terms of any one or more Stock Award; provided, however, that the rights and obligations under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the person to whom the Stock Award was granted and (ii) such person consents in writing. 13. TERMINATION OR SUSPENSION OF THE PLAN. (a) The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate ten (10) years from the date the Plan is adopted by the Board or approved by the stockholders of the Company, whichever is earlier. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated. (b) Rights and obligations under any Stock Award granted while the Plan is in effect shall not be impaired by suspension or termination of the Plan, except with the consent of the person to whom the Stock Award was granted. 14. EFFECTIVE DATE OF PLAN. This Plan shall become effective on the date of adoption by the Board, but no Stock Awards granted under the Plan shall be exercised unless and until the Plan has been approved by the stockholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board. 14. EX-10.18 6 ex10-18.txt EXHIBIT 10.18 1 EXHIBIT 10.18 METRICOM, INC. 2000 EQUITY INCENTIVE PLAN Adopted April 11, 2000 1. PURPOSES. (a) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive Stock Awards are the Employees, Directors and Consultants of the Company and its Affiliates. (b) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a means by which eligible recipients of Stock Awards may be given an opportunity to benefit from increases in value of the Common Stock through the granting of the following Stock Awards: (i) Nonstatutory Stock Options, (ii) stock bonuses and (iii) rights to acquire restricted stock. The Plan is also intended to provide a means by which the Company may grant Stock Awards to persons not previously employed by the Company as an inducement essential to those persons' entering employment contracts with the Company. These inducement grants may be made to persons who ultimately are employed by the Company as Officers. (c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain the services of the group of persons eligible to receive Stock Awards, to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates. 2. DEFINITIONS. (a) "AFFILIATE" means any parent corporation or subsidiary corporation of the Company, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code. (b) "BOARD" means the Board of Directors of the Company. (c) "CODE" means the Internal Revenue Code of 1986, as amended. (d) "COMMITTEE" means a committee of one or more members of the Board appointed by the Board in accordance with subsection 3(c). (e) "COMMON STOCK" means the common stock of the Company. (f) "COMPANY" means Metricom, Inc., a Delaware corporation. (g) "CONSULTANT" means any person, including an advisor, (i) engaged by the Company or an Affiliate to render consulting or advisory services and who is compensated for such services or (ii) who is a member of the Board of Directors of an Affiliate. However, the term "Consultant" shall not include either Directors who are not compensated by the Company 1 2 for their services as Directors or Directors who are merely paid a director's fee by the Company for their services as Directors. (h) "CONTINUOUS SERVICE" means that the Participant's service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. The Participant's Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant's Continuous Service. For example, a change in status from an Employee of the Company to a Consultant of an Affiliate or a Director will not constitute an interruption of Continuous Service. The Board or the chief executive officer of the Company, in that party's sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave. (i) "COVERED EMPLOYEE" means the chief executive officer and the four (4) other highest compensated officers of the Company for whom total compensation is required to be reported to shareholders under the Exchange Act, as determined for purposes of Section 162(m) of the Code. (j) "DIRECTOR" means a member of the Board of Directors of the Company. (k) "DISABILITY" means the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code. (l) "EMPLOYEE" means any person employed by the Company or an Affiliate. Mere service as a Director or payment of a director's fee by the Company or an Affiliate shall not be sufficient to constitute "employment" by the Company or an Affiliate. (m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. (n) "FAIR MARKET VALUE" means, as of any date, the value of the Common Stock determined as follows: (i) If the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of grant, or if the date of grant is not a market trading day, then the last market trading day prior to the date of grant, as reported in The Wall Street Journal or such other source as the Board deems reliable. (ii) In the absence of such markets for the Common Stock, the Fair Market Value shall be determined in good faith by the Board. (o) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a current Employee or Officer of the Company or its parent or a subsidiary, does not receive compensation (directly or indirectly) from the Company or its parent or a subsidiary for services rendered as a 2 3 consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act ("Regulation S-K")), does not possess an interest in any other transaction as to which disclosure would be required under Item 404(a) of Regulation S-K and is not engaged in a business relationship as to which disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-employee director" for purposes of Rule 16b-3. (p) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Code and the regulations promulgated thereunder. (q) "OFFICER" means a person who possesses the authority of an "officer" as that term is used in Rule 4460(i)(1)(A) of the Rules of the National Association of Securities Dealers, Inc. For purposes of the Plan, a person in the position of "Vice President" or higher shall be classified as an "Officer" unless the Board or Committee expressly finds that such person does not possess the authority of an "officer" as that term is used in Rule 4460(i)(1)(A) of the Rules of the National Association of Securities Dealers, Inc. (r) "OPTION" means a Nonstatutory Stock Option granted pursuant to the Plan. (s) "OPTION AGREEMENT" means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan. (t) "OPTIONHOLDER" means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option. (u) "PARTICIPANT" means a person to whom a Stock Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award. (v) "PLAN" means this Metricom, Inc. 2000 Equity Incentive Plan. (w) "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time. (x) "SECURITIES ACT" means the Securities Act of 1933, as amended. (y) "STOCK AWARD" means any right granted under the Plan, including an Option, a stock bonus and a right to acquire restricted stock. (z) "STOCK AWARD AGREEMENT" means a written agreement between the Company and a holder of a Stock Award evidencing the terms and conditions of an individual Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan. 3. ADMINISTRATION. (a) ADMINISTRATION BY BOARD. The Board shall administer the Plan unless and until the Board delegates administration to a Committee, as provided in subsection 3(c). 3 4 (b) POWERS OF BOARD. The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan: (i) To determine from time to time which of the persons eligible under the Plan shall be granted Stock Awards; when and how each Stock Award shall be granted; what type or combination of types of Stock Award shall be granted; the provisions of each Stock Award granted (which need not be identical), including the time or times when a person shall be permitted to receive Common Stock pursuant to a Stock Award; and the number of shares of Common Stock with respect to which a Stock Award shall be granted to each such person. (ii) To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective. (iii) To amend the Plan or a Stock Award as provided in Section 12. (iv) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company which are not in conflict with the provisions of the Plan. (c) DELEGATION TO COMMITTEE. (i) GENERAL. The Board may delegate administration of the Plan to a Committee or Committees of one (1) or more members of the Board, and the term "Committee" shall apply to any person or persons to whom such authority has been delegated. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. (ii) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY TRADED. At such time as the Common Stock is publicly traded, in the discretion of the Board, a Committee may consist solely of two or more Outside Directors, in accordance with Section 162(m) of the Code, and/or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such authority, the Board or the Committee may (1) delegate to a committee of one or more members of the Board who are not Outside Directors the authority to grant Stock Awards to eligible persons who are either (a) not then Covered Employees and are not expected to be Covered Employees at the time of recognition of income resulting from such Stock Award or (b) not persons with respect to whom the Company wishes to comply with Section 162(m) of the Code and/or) (2) delegate to a committee of one or more members of the Board who are not Non-Employee Directors the authority to grant Stock Awards to eligible persons who are not then subject to Section 16 of the Exchange Act. 4 5 (d) EFFECT OF BOARD'S DECISION. All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons. 4. SHARES SUBJECT TO THE PLAN. (a) SHARE RESERVE. Subject to the provisions of Section 11 relating to adjustments upon changes in Common Stock, the Common Stock that may be issued pursuant to Stock Awards shall not exceed in the aggregate one million five hundred thousand (1,500,000) shares of Common Stock. (b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, the shares of Common Stock not acquired under such Stock Award shall revert to and again become available for issuance under the Plan. (c) SOURCE OF SHARES. The shares of Common Stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise. 5. ELIGIBILITY. (a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Subject to the provisions of subsection 5(b) below, Stock Awards may be granted to Employees, Directors and Consultants. (b) RESTRICTIONS ON ELIGIBILITY. The aggregate number of shares issued pursuant to Stock Awards granted to Officers and Directors shall not exceed forty percent (40%) of the number of shares reserved for issuance under the Plan as determined at the time of each such issuance to an Officer or Director, except that there shall be excluded from this calculation shares issued to Officers not previously employed by the Company pursuant to Stock Awards granted as an inducement essential to such individuals entering into employment contracts with the Company. (c) CONSULTANTS. A Consultant shall not be eligible for the grant of a Stock Award if, at the time of grant, a Form S-8 Registration Statement under the Securities Act ("Form S-8") is not available to register either the offer or the sale of the Company's securities to such Consultant because of the nature of the services that the Consultant is providing to the Company, or because the Consultant is not a natural person, or as otherwise provided by the rules governing the use of Form S-8, unless the Company determines both (i) that such grant (A) shall be registered in another manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or (B) does not require registration under the Securities Act in order to comply with the requirements of the Securities Act, if applicable, and (ii) that such grant complies with the securities laws of all other relevant jurisdictions.1 - --------------- (1) Form S-8 generally is available to consultants and advisors only if (i) they are natural persons; (ii) they provide bona fide services to the issuer, its parents, its majority-owned subsidiaries or majority-owned subsidiaries of the issuer's parent; and (iii) the services are not in connection with the offer or sale of securities in a capital-raising transaction, and do not directly or indirectly promote or maintain a market for the issuer's securities. 5 6 6. OPTION PROVISIONS. Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions: (a) TERM. The term of an Option shall be the term determined by the Board, either at the time of grant of the Option or as the Option may be amended thereafter. (b) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. The exercise price of each Nonstatutory Stock Option shall be not less than eighty-five percent (85%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code. (c) CONSIDERATION. The purchase price of Common Stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the time the Option is exercised or (ii) at the discretion of the Board at the time of the grant of the Option (or subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the Company of other Common Stock, (2) according to a deferred payment or other similar arrangement with the Optionholder or (3) in any other form of legal consideration that may be acceptable to the Board. Unless otherwise specifically provided in the Option, the purchase price of Common Stock acquired pursuant to an Option that is paid by delivery to the Company of other Common Stock acquired, directly or indirectly from the Company, shall be paid only by shares of the Common Stock of the Company that have been held for more than six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes). At any time that the Company is incorporated in Delaware, payment of the Common Stock's "par value," as defined in the Delaware General Corporation Law, shall not be made by deferred payment. In the case of any deferred payment arrangement, interest shall be compounded at least annually and shall be charged at the minimum rate of interest necessary to avoid the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement. (d) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory Stock Option shall be transferable to the extent provided in the Option Agreement. If the Nonstatutory Stock Option does not provide for transferability, then the Nonstatutory Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form 6 7 satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option. (e) VESTING GENERALLY. The total number of shares of Common Stock subject to an Option may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this subsection 6(e) are subject to any Option provisions governing the minimum number of shares of Common Stock as to which an Option may be exercised. (f) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's Continuous Service terminates (other than upon the Optionholder's death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder's Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate. (g) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement may also provide that if the exercise of the Option following the termination of the Optionholder's Continuous Service (other than upon the Optionholder's death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in the Option Agreement, or (ii) the expiration of a period of three (3) months after the termination of the Optionholder's Continuous Service during which the exercise of the Option would not be in violation of such registration requirements. (h) DISABILITY OF OPTIONHOLDER. In the event that an Optionholder's Continuous Service terminates as a result of the Optionholder's Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination (or such longer or shorter period specified in the Option Agreement) or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein, the Option shall terminate. (i) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's Continuous Service terminates as a result of the Optionholder's death or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder's Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder's estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Optionholder's death 7 8 pursuant to subsection 6(d), but only within the period ending on the earlier of (1) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement) or (2) the expiration of the term of such Option as set forth in the Option Agreement. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate. (j) EARLY EXERCISE. The Option may, but need not, include a provision whereby the Optionholder may elect at any time before the Optionholder's Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior to the full vesting of the Option. Any unvested shares of Common Stock so purchased may be subject to a repurchase option in favor of the Company or to any other restriction the Board determines to be appropriate. The Company will not exercise its repurchase option until at least six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes) have elapsed following exercise of the Option unless the Board otherwise specifically provides in the Option. 7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS. (a) STOCK BONUS AWARDS. Each stock bonus agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of stock bonus agreements may change from time to time, and the terms and conditions of separate stock bonus agreements need not be identical, but each stock bonus agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions: (i) CONSIDERATION. A stock bonus may be awarded in consideration for past services actually rendered to the Company or an Affiliate for its benefit. (ii) VESTING. Shares of Common Stock awarded under the stock bonus agreement may, but need not, be subject to a share repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Board. (iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the event a Participant's Continuous Service terminates, the Company may reacquire any or all of the shares of Common Stock held by the Participant which have not vested as of the date of termination under the terms of the stock bonus agreement. (iv) TRANSFERABILITY. Rights to acquire shares of Common Stock under the stock bonus agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the stock bonus agreement, as the Board shall determine in its discretion, so long as Common Stock awarded under the stock bonus agreement remains subject to the terms of the stock bonus agreement. (b) RESTRICTED STOCK AWARDS. Each restricted stock purchase agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of the restricted stock purchase agreements may change from time to time, and the terms and conditions of separate restricted stock purchase agreements need not be identical, but each restricted stock purchase agreement shall include (through incorporation of 8 9 provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions: (i) PURCHASE PRICE. The purchase price under each restricted stock purchase agreement shall be such amount as the Board shall determine and designate in such restricted stock purchase agreement. The purchase price shall not be less than eighty-five percent (85%) of the Common Stock's Fair Market Value on the date such award is made or at the time the purchase is consummated. (ii) CONSIDERATION. The purchase price of Common Stock acquired pursuant to the restricted stock purchase agreement shall be paid either: (i) in cash at the time of purchase; (ii) at the discretion of the Board, according to a deferred payment or other similar arrangement with the Participant; or (iii) in any other form of legal consideration that may be acceptable to the Board in its discretion; provided, however, that at any time that the Company is incorporated in Delaware, then payment of the Common Stock's "par value," as defined in the Delaware General Corporation Law, shall not be made by deferred payment. (iii) VESTING. Shares of Common Stock acquired under the restricted stock purchase agreement may, but need not, be subject to a share repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Board. (iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the event a Participant's Continuous Service terminates, the Company may repurchase or otherwise reacquire any or all of the shares of Common Stock held by the Participant which have not vested as of the date of termination under the terms of the restricted stock purchase agreement. (v) TRANSFERABILITY. Rights to acquire shares of Common Stock under the restricted stock purchase agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the restricted stock purchase agreement, as the Board shall determine in its discretion, so long as Common Stock awarded under the restricted stock purchase agreement remains subject to the terms of the restricted stock purchase agreement. 8. COVENANTS OF THE COMPANY. (a) AVAILABILITY OF SHARES. During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Stock Awards. (b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until such authority is obtained. 9 10 9. USE OF PROCEEDS FROM STOCK. Proceeds from the sale of Common Stock pursuant to Stock Awards shall constitute general funds of the Company. 10. MISCELLANEOUS. (a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have the power to accelerate the time at which a Stock Award may first be exercised or the time during which a Stock Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which it will vest. (b) SHAREHOLDER RIGHTS. No Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Stock Award unless and until such Participant has satisfied all requirements for exercise of the Stock Award pursuant to its terms. (c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any instrument executed or Stock Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Stock Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant's agreement with the Company or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be. (d) INVESTMENT ASSURANCES. The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant's knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Stock Award for the Participant's own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (1) the issuance of the shares of Common Stock upon the exercise or acquisition of Common Stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act or (2) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock. 10 11 (e) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of a Stock Award Agreement, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under a Stock Award by any of the following means (in addition to the Company's right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Stock Award; provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering to the Company owned and unencumbered shares of Common Stock. 11. ADJUSTMENTS UPON CHANGES IN STOCK. (a) CAPITALIZATION ADJUSTMENTS. If any change is made in the Common Stock subject to the Plan, or subject to any Stock Award, without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Plan will be appropriately adjusted in the class(es) and maximum number of securities subject to the Plan pursuant to subsection 4(a), and the outstanding Stock Awards will be appropriately adjusted in the class(es) and number of securities and price per share of Common Stock subject to such outstanding Stock Awards. The Board shall make such adjustments, and its determination shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a transaction "without receipt of consideration" by the Company.) (b) DISSOLUTION OR LIQUIDATION. In the event of a dissolution or liquidation of the Company, then all outstanding Stock Awards shall terminate immediately prior to such event. (c) CHANGE IN CONTROL. In the event of a Change in Control, (i) any surviving or acquiring corporation shall assume Stock Awards outstanding under the Plan or shall substitute similar Stock Awards for those outstanding under the Plan, or (ii) in the event any surviving or acquiring corporation refuses to assume such Stock Awards or to substitute similar Stock Awards for those outstanding under the Plan, (A) with respect to Stock Awards held by persons then performing services as Employees, Directors, or Consultants, the vesting of such Stock Awards and the time during which such Stock Awards may be exercised shall be accelerated prior to such event and the Stock Awards terminated if not exercised after such acceleration and at or prior to such event, and (B) with respect to any other Stock Awards outstanding under the Plan, such Stock Awards shall be terminated if not exercised prior to such event. In addition, with respect to any person who was providing services as an Employee, Director, or Consultant immediately prior to the consummation of the Change in Control, any Stock Awards held by such persons shall immediately become fully vested and exercisable, and any repurchase right by the Company with respect to shares acquired by such person under a Stock Award shall lapse, if such person's Continuous Service as an Employee, Director, or Consultant is terminated other than for Cause within twelve (12) months following consummation of the Change in Control. For purposes of the Plan, "Cause" shall mean willful conduct that is materially injurious to the business of the person's employer, whether financial or otherwise. For purposes of this Plan, 11 12 "Change in Control" means: (1) a sale of all or substantially all of the assets of the Company; (2) a merger or consolidation in which the Company is not the surviving corporation; (3) a reverse merger in which the Company is the surviving corporation but the shares of the Company's common shares outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (4) the acquisition by any person, entity or group within the meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the Company or any Affiliate of the Company) of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule) of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors. 12. AMENDMENT OF THE PLAN AND STOCK AWARDS. (a) AMENDMENT OF PLAN. The Board at any time, and from time to time, may amend the Plan. However, except as provided in Section 11 relating to adjustments upon changes in Common Stock, no amendment shall be effective unless approved by the shareholders of the Company to the extent shareholder approval is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities exchange listing requirements. (b) SHAREHOLDER APPROVAL. The Board may, in its sole discretion, submit any other amendment to the Plan for shareholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 162(m) of the Code and the regulations thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to certain executive officers. (c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder and/or to bring the Plan and/or Options into compliance therewith. (d) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing. (e) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to time, may amend the terms of any one or more Stock Awards; provided, however, that the rights under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing. 13. TERMINATION OR SUSPENSION OF THE PLAN. (a) PLAN TERM. The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate on the day before the tenth (10th) anniversary of the date the Plan is adopted by the Board or approved by the shareholders of the Company, whichever is earlier. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated. 12 13 (b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan shall not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the Participant. 14. EFFECTIVE DATE OF PLAN. The Plan shall become effective upon its adoption by the Board. 15. CHOICE OF LAW. The law of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state's conflict of laws rules. 13 14 TABLE OF CONTENTS
PAGE ---- 1. PURPOSES.................................................1 2. DEFINITIONS..............................................1 3. ADMINISTRATION...........................................3 4. SHARES SUBJECT TO THE PLAN...............................5 5. ELIGIBILITY..............................................5 6. OPTION PROVISIONS........................................6 7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS............9 8. COVENANTS OF THE COMPANY................................10 9. USE OF PROCEEDS FROM STOCK..............................10 10. MISCELLANEOUS...........................................10 11. ADJUSTMENTS UPON CHANGES IN STOCK.......................11 12. AMENDMENT OF THE PLAN AND STOCK AWARDS..................13 13. TERMINATION OR SUSPENSION OF THE PLAN...................13 14. EFFECTIVE DATE OF PLAN..................................13 15. CHOICE OF LAW...........................................13
15 An extra section break has been inserted above this paragraph. Do not delete this section break if you plan to add text after the Table of Contents/Authorities. Deleting this break will cause Table of Contents/Authorities headers and footers to appear on any pages following the Table of Contents/Authorities. EX-27.1 7 ex27-1.txt FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 662,152 321,199 3,223 (1,490) 3,325 1,001,817 60,215 (33,402) 1,362,698 126,889 242,242 574,653 0 31 418,602 1,362,698 1,061 5,530 1,927 37,446 41,528 0 10,994 (76,532) 0 (76,532) 0 0 0 (76,532) (0.86) (0.86)
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