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The following is an excerpt from a DEF 14A SEC Filing, filed by KVH INDUSTRIES INC \DE\ on 4/25/2001.
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KVH INDUSTRIES INC \DE\ - DEF 14A - 20010425 - PROPOSAL_1

Proposal II - Amendment to Our 1996 Incentive and Non-Qualified Stock Option Plans to Increase the Number of Shares Available under the Plans by 500,000 Shares.

The following proposal has been included on the agenda for the meeting. Our Board of Directors has approved an amendment that would increase the shares reserved for issuance under the 1996 Incentive and Non-Qualified Stock Option Plans by 500,000 shares to a total of 809,460 shares. As of December 31, 2000, there were options to purchase a total of 907,360 shares of common stock outstanding under the 1996 Incentive and Non-Qualified Stock Option Plans and 483,960 shares were available for issuance.

We believe that stock options are an important incentive to attract and retain skilled employees. We are experiencing a period of rapid expansion, and in the coming year we expect to hire a larger number of new employees than we have in previous years. This potential increase in the number of employees will require us to award a larger number of stock options to employees than in previous years.

The Board recommends that you vote FOR the amendment to increase the shares available under the 1996 Incentive and Non-Qualified Stock Option Plans.

Proposal III - Amendment to Our 1996 Employee Stock Purchase Plan to Increase the Number of Shares Available under the Plan by 100,000 Shares

The following proposal has been included on the agenda for the meeting. Our Board of Directors has approved an amendment that would increase the shares reserved for issuance under the 1996 Employee Stock Purchase Plan by 100,000 shares to a total of 169,054 shares. As of December 31, 2000, employees had purchased a total of 226,595 shares under the 1996 Employee Stock Purchase Plan and there were 69,054 shares available in the plan for issuance to employees. We believe that employees that are also stockholders are more committed and loyal to KVH. Approval of the amendment would allow us to continue to offer our employees the incentive to participate in our growth as stockholders.

The Board recommends that you vote FOR the increase in shares available under the 1996 Employee Stock Purchase Plan.

Proposal IV - Amendment to the 1995 Incentive Stock Option Plan and the 1996 Incentive and Non-Qualified Stock Option Plan to restrict our ability to grant stock options at exercise prices less than fair market value or to reduce the exercise price of outstanding stock options.

The following proposal has been included on the agenda for the meeting. Our Board of Directors has approved an amendment to our 1995 Incentive Stock Option Plan, our 1996 Incentive and Non-Qualified Stock Option Plan to restrict our ability to grant stock options at exercise prices less than the fair market value of our Common Stock or to change the exercise price of outstanding stock options, unless such action was approved by the holders of a majority of shares present and entitled to vote at a meeting of stockholders. The amendment would also provide that these restrictions may not be amended or repealed without the affirmative vote of the holders of a majority of shares of our common stock present and entitled to vote at a meeting of stockholders.

On December 29, 2000, we issued and sold 800,000 shares of common stock to the State of Wisconsin Investment Board in a private transaction. On April 2, 2001, we issued and sold 615,385 shares of common stock to certain investment funds in a private transaction. This purchaser has also agreed to purchase an additional 615,385 shares of common stock upon our satisfaction of certain requirements. As part of these transactions we agreed that we would not at any time without the approval of our stockholders, (i) reduce the exercise price of outstanding stock options granted to employees and others under our 1995 Incentive Stock Option Plan, our 1996 Incentive and Non-Qualified Stock Option Plan, or any similar plan or (ii) grant any stock option with an exercise price that is less than 100% of the fair market value of the underlying stock on the date of grant (except pursuant to the Employee Stock Purchase Plan or similar plan). We also agreed that we would recommend to our stockholders that they approve such amendments to our 1995 Incentive Stock Option Plan and our 1996 Incentive and Non-Qualified Stock Option Plan to reflect this agreement.

The Board recommends that you vote FOR the amendments to the 1995 Incentive Stock Option Plan and the 1996 Incentive and Non-Qualified Stock Option Plan.

Proposal V -To vote to approve the sale of a maximum of 700,000 shares of common stock at a discount on the market price of our common stock as of the date we agree to sell the shares, but, unless otherwise approved by the unanimous vote of our board of directors, at a price not less than $6.50 per share.

The following proposal has been included on the agenda for the meeting. As part of our plan to increase our research and development activities, our board of directors has adopted a program of increasing our equity capitalization through the sale of shares of our common stock. We are actively engaged in discussing this sale of stock with a select group of strategic partners and institutional investors.

As part of this plan, on April 2, 2001, we completed the sale of 615,385 shares of our common stock at a purchase price of $6.50 per share, a $.81 discount per share on the market price of our common stock on such date. The purchasers in the April transaction have also agreed to purchase an additional 615,385 shares of common stock at a purchase price of $6.50 per share. The purchase price of $6.50 per share may or may not represent a discount from the market price of our common stock at the time of the sale. To complete this financing plan we may sell up to an additional 1,076,922 shares (in addition to the 615,835 shares we have agreed to sell as part of the April transaction). If we are successful in selling all of the shares we are offering, the aggregate number of shares sold will exceed 20% of our outstanding common stock by approximately 700,000 shares.

Our common stock is listed on the Nasdaq Stock Market, and we have agreed to comply with Nasdaq's listing rules. Rule 4350 of the Nasdaq listing rules sets forth certain corporate governance standards for issuers whose common stock is listed on the Nasdaq Stock Market. Rule 4350 requires, among other matters, that an issuer obtain stockholder approval for the sale or issuance, other than through a public offering, of a number of shares of common stock, at a price less than the market price of the common stock, which equals 20% or more of the common stock or the voting power of the company outstanding prior to the issuance. Therefore, in order to comply with Rule 4350, we are asking you to approve the sale of up to a maximum of 700,000 shares of common stock at a discount on the market price of our common stock as of the date we agree to sell the shares, but, unless otherwise approved by the unanimous vote of our board of directors, at a price not less than $6.50 per share.

Based on our equity capitalization immediately prior to our April 2, 2001 sale of stock, the date we are required to use pursuant to the Nasdaq's listing rules, our proposed sale of an aggregate of up to 2,307,692 shares would represent the sale of more than 20% of the outstanding shares of our common stock. In the last six months the closing price of our common stock has ranged from $5.50 to $10.44. The volatility of the Nasdaq market and the trading price of our stock have made it difficult for us to complete our financing plan. We need the flexibility to sell these shares at a discount to market in order to complete the financing plan.

The Board recommends that you vote FOR the approval of the sale of a maximum of 700,000 shares of common stock at a discount on the market price of our common stock as of the date we agree to sell the shares, but, unless otherwise approved by the unanimous vote of our board of directors, at a price not less than $6.50 per share.

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