SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission (as permitted by Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
SPEEDUS.COM, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
SPEEDUS.COM, INC.
------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
|X| No Fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction: _______________
5) Total fee paid: _____________________
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: ___________
2) Form, Schedule or Registration Statement No: _____________
3) Filing Party: ___________
4) Date Filed: ____________
<PAGE>
SPEEDUS.COM, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held September 30, 1999
To the Stockholders of SPEEDUS.COM, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
SPEEDUS.COM, INC., a Delaware corporation ("SPEEDUS.COM" or the "Company"), will
be held at the Company's Network Operations Center located at its Executive
offices at the Brooklyn Army Terminal, 140 58th Street, Suite 7E, Brooklyn, New
York 11220, on Thursday, September 30, 1999, at 10:00 AM, Eastern daylight
savings time, or at any postponement or adjournment thereof for the following
purposes:
1. To elect four members to the Board of Directors of the Company to
serve until the next annual meeting of stockholders to be held in
2000 (the "2000 Annual Meeting") or until their successors are duly
elected;
2. To appoint independent auditors of the Company for the 1999 fiscal
year to serve until the 2000 Annual Meeting or until their
successors are duly elected;
3. To approve the Company's 1995 Stock Incentive Plan, as amended to
increase the number of shares of Common Stock available for issuance
by 500,000 shares from 1,250,000 shares to 1,750,000 shares; and
4. To act upon such other business as may properly come before the
Annual Meeting.
In accordance with the provisions of the Company's By-Laws, the Board of
Directors has fixed the close of business on August 25, 1999 as the record date
for the determination of the holders of Common Stock entitled to notice of, and
to vote at, the Annual Meeting.
For this year's Annual Meeting, depending upon how your shares are held,
SPEEDUS.COM is providing you two additional options for voting your proxy. You
can vote by using the Internet, by telephoning a toll-free number or by
completing, signing and returning the enclosed proxy card in the envelope
provided. In all cases, please follow the instructions on the proxy card. To
ensure that your shares are represented at the Annual Meeting, you are urged to
vote your proxy in one of these fashions. You may revoke your proxy at any time
before it is voted at the Annual Meeting. If you attend the Annual Meeting, you
may vote your shares in person.
Your attention is directed to the accompanying Proxy Statement.
By Order of the Board of Directors
Shant S. Hovnanian
Chairman, President and
August 30, 1999 Chief Executive Officer
-2-
<PAGE>
SPEEDUS.COM, INC.
140 58th Street, Suite 7E
Brooklyn, New York 11220
--------------------------
ANNUAL MEETING OF STOCKHOLDERS
September 30, 1999
--------------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of SPEEDUS.COM, INC. ("SPEEDUS.COM"
or the "Company"), a Delaware corporation, to be voted at the Annual Meeting of
Stockholders of the Company to be held at the Company's Network Operations
Center located at its Executive offices at the Brooklyn Army Terminal, 140 58th
Street, Suite 7E, Brooklyn, New York 11220, on Thursday, September 30, 1999, at
10:00 AM, Eastern daylight savings time, or at any postponement or adjournment
thereof. This Proxy Statement, the Notice of Annual Meeting and the accompanying
form of proxy are first being mailed to stockholders on or about August 31,
1999.
Only holders of record of the Company's common stock, par value $.01 per
share ("Common Stock"), at the close of business on August 25, 1999 (the "Record
Date"), are entitled to vote on the matters to be presented at the Annual
Meeting. The number of shares of Common Stock outstanding on the Record Date and
entitled to vote was 19,670,959. Holders of Common Stock are entitled to one
vote on each matter to be voted upon by the stockholders at the Annual Meeting
for each share held.
At the Annual Meeting, stockholders will be asked to: (1) elect four
directors (the "Nominees") to the Board to serve until the 2000 Annual Meeting
or until their successors are duly elected (the "Board Proposal"); (2) appoint
the firm of PricewaterhouseCoopers LLP (formerly Coopers & Lybrand L.L.P.),
independent auditors, to serve as the Company's independent auditors for the
1999 fiscal year until the 2000 Annual Meeting (the "Independent Auditors
Proposal"), and (3) approve the Company's 1995 Stock Incentive Plan, as amended
to increase the number of shares of Common Stock available for issuance by
500,000 shares from 1,250,000 shares to 1,750,000 shares (the "Stock Incentive
Plan Proposal" and, such proposals collectively, "the Proposals").
At the Annual Meeting, stockholders may also be asked to consider and take
action with respect to such other matters as may properly come before the Annual
Meeting.
QUORUM AND VOTE REQUIREMENTS
The presence, in person or by proxy, of holders of record of a majority of
the shares of Common Stock issued and outstanding and entitled to vote is
required for a quorum to transact business at the Annual Meeting, but if a
quorum should not be present, the Annual Meeting may be adjourned from time to
time until a quorum is obtained. The Proposals will be determined by the
affirmative vote of the holders of a majority of the shares of Common Stock
present, in person or by proxy, and entitled to vote at the Annual Meeting.
Broker "non-votes" (i.e., proxies from brokers or nominees indicating that such
persons have not
-3-
<PAGE>
received instructions from the beneficial owner or other persons entitled to
vote shares as to a matter with respect to which the brokers or nominees do not
have discretionary power to vote) and shares for which duly executed proxies
have been received but with respect to which holders of shares have abstained
from voting will be treated as present for purposes of determining the presence
of a quorum at the Annual Meeting. Broker "non-votes" are only counted for
purposes of determining whether a quorum is present and, therefore, will not be
included in vote totals and will have no effect on the outcome of the votes on
the proposals to be acted upon at the Annual Meeting. Abstentions will be
counted as present and entitled to vote, and will have the effect of a negative
vote with respect to the proposals to be acted upon at the Annual Meeting.
SOLICITATION AND REVOCATION
PROXIES IN THE FORM ENCLOSED ARE BEING SOLICITED BY, OR ON BEHALF OF, THE
BOARD. THE PERSONS NAMED IN THE ACCOMPANYING FORM OF PROXY HAVE BEEN DESIGNATED
AS PROXIES BY THE BOARD.
All Common Stock represented by properly executed proxies which are
returned and not revoked prior to the time of the Annual Meeting will be voted
in accordance with the instructions given. If no instructions are provided in an
executed proxy, it will be voted (1) FOR the Board Proposal, (2) FOR the
Independent Auditors Proposal, (3) FOR the Stock Incentive Plan Proposal and in
accordance with the proxyholder's best judgment as to any other business raised
at the Annual Meeting. Any stockholder who executes a proxy may revoke it at any
time before it is voted by delivering to the Company a written statement
revoking such proxy, by executing and delivering a later dated proxy, or by
voting in person at the Annual Meeting. Attendance at the Annual Meeting by a
stockholder who has executed and delivered a proxy to the Company shall not in
and of itself constitute a revocation of such proxy.
The Company will bear the costs of soliciting proxies, which will be done
initially by mail. Directors, officers and employees of the Company personally,
by telephone or otherwise, may solicit proxies but will not be specifically
compensated for such services. Arrangements have been made with brokerage firms
and other nominees to forward proxy materials to beneficial owners of the
Company's Common Stock. The Company will pay these entities customary and
reasonable fees and expenses. The Company may also retain third parties for
advisory, information agent and ballot solicitation services. The Company will
pay these third parties customary and reasonable fees and expenses.
-4-
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The table below sets forth the names, ages and titles of the persons who
were directors and/or executive officers of the Company as of July 31, 1999.
Name Age Position
- -------------------------------- ----- -----------------------------------
Shant S. Hovnanian........... 40 Chairman of the Board of Directors,
President, Chief Executive Officer and
Chief Financial Officer
Vahak S. Hovnanian........... 67 Director
Matthew J. Rinaldo........... 67 Director
Bernard B. Bossard........... 64 Director
Catherine Petrossian......... 39 Director
Michael Bacon................ 34 Executive Vice President of Operations
Shant S. Hovnanian has served as Chairman of the Board of Directors,
President and Chief Executive Officer of the Company since October 1995 and as
Chief Financial Officer since June 1998. He has also served as Chief Executive
Officer and a member of the Board of Representatives of SPEEDUSNY since July
1993. Mr. Hovnanian formerly served as Chief Executive Officer of CellularVision
Technology & Telecommunications, L.P. ("CT&T") from 1993 to 1995 and continues
to serve on its Board of Representatives. From June 1980 until January 1991, Mr.
Hovnanian served as Executive Vice President of the V. S. Hovnanian Group (the
"Hovnanian Group"), consisting of home building operations, real estate
development and utility companies. In 1995, Mr. Hovnanian served as a U.S.
Delegate to the World Radio Conference of the International Telecommunications
Union in Geneva, Switzerland. Mr. Hovnanian is the son of Mr. Vahak S.
Hovnanian.
Vahak S. Hovnanian has served as a Director of the Company since October
1995 and as a member of the Board of Representatives of SPEEDUSNY and CT&T since
July 1993. Mr. Hovnanian has served as a principal of Suite 12 and
CellularVision Capital Corporation since 1986 and 1988, respectively, and as
Chairman of the Board and President of the Hovnanian Group since 1968. Mr.
Hovnanian is the father of Mr. Shant S. Hovnanian.
Matthew J. Rinaldo has served as a Director of the Company since February
1996. Congressman Rinaldo was President of International CellularVision
Association ("ICVA"), a Local Multipoint Distribution Service ("LMDS") trade
association from 1993 until its dissolution in 1999. He served as Chairman of
the Advanced Telecommunications Institute of the Stevens Institute of Technology
from 1993 to 1996. He was elected to the U.S. House of Representatives in 1973
and re-elected until his retirement in 1993. During his term in the House of
Representatives, he was the ranking Republican member of the Telecommunications
and Finance Subcommittee of the House Energy and Commerce Committee. Congressman
Rinaldo has been the recipient of numerous honors and awards.
Bernard B. Bossard has served as a Director of the Company since October
1995. Mr. Bossard served as Executive Vice President and Chief Technical Officer
of the Company from October 1995 until August 1998 and as the Chief Engineering
Officer of SPEEDUSNY from July 1993 until August 1998. Mr. Bossard is also an
officer and member of the Board of Representatives of CT&T. He previously served
as Senior Vice President and group publisher of three periodicals in the
microwave, electronic and
-5-
<PAGE>
communications industries from 1977 to 1990. For the past 37 years, he has been
involved in research, development and manufacturing of microwave communication,
low-noise receivers and microwave transistors. Mr. Bossard was a research group
leader of RCA Communications, president of National Electric Laboratories
("NEL"), president of KMC Semiconductor Corporation (merged with NEL in 1970)
("KMC"), and general manager of KMC after its purchase by M/A-COM, Inc., in
1973. He holds nine patents and has many patents pending.
Catherine Petrossian has served as a Director of the Company since July
1999. Ms. Petrossian has been a partner at the law firm of Sheridan & Petrossian
LLP since 1997 where she concentrates in real estate and civil litigation. From
1993 to 1996, she served as an Assistant District Attorney for the County of
Nassau and from 1992 to 1993 worked for a U.S. District Judge in the Southern
District of New York. From 1988 to 1992, Ms. Petrossian was in private practice
and concentrated in Real Estate and Civil litigation. From 1986 to 1988, Ms.
Petrossian was an associate at a Manhattan law firm that concentrated in real
estate law. Ms. Petrossian is admitted to practice in the Courts of New York
State and the United States District courts for the Southern and Eastern
Districts of New York and in the Courts of the State of New Jersey and the
United States District Court for the District of New Jersey.
Michael Bacon has served as Executive Vice President of Operations since
June 1999. Prior to joining the Company, Mr. Bacon was employed by Booz Allen &
Hamilton, a leading international management and technology consulting firm,
since 1996. From 1994 to 1996, Mr. Bacon was with Deloitte & Touche Consulting.
In consulting, he led teams that recommended or implemented the establishment of
and improvement in service operations in a variety of industries, including the
telecommunications industry. Mr. Bacon previously worked for three years at
International Business Machines in marketing and sales and for two years with
General Electric Company where he developed information systems.
-6-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
MANAGEMENT AND DIRECTORS
The following table sets forth information as of July 31, 1999 with
respect to the beneficial ownership of the Common Stock by (i) each person known
by the Company to be the beneficial owner of more than 5% of the Common Stock;
(ii) each person serving as a director or director nominee of the Company; (iii)
each executive officer of the Company, and (iv) all directors and executive
officers of the Company as a group. Unless otherwise indicated, all shares are
owned directly and the indicated owner has sole voting and dispositive power
with respect thereto.
Common Stock
Beneficially
Owned (1)
-----------------------------
Beneficial Owner Number Percent
------------------------------------ ------------- -------------
Shant S. Hovnanian (2)(3).......... 3,644,554 18.5%
Vahak S. Hovnanian (4)(5).......... 2,856,655 14.5
Matthew J. Rinaldo (4)............. 21,000 *
Bernard B. Bossard (6)............. 1,612,656 8.2
Catherine Petrossian (7)........... 6,000 *
Michael Bacon...................... 0 *
NEXTLINK Communications, Inc. (8). 2,000,000 10.2
All Directors and Executive Officers
as a group (total 6 persons).... 8,140,865 41.4%
* Less than 1% of the outstanding Common Stock
(1) Pursuant to the regulations of the Securities and Exchange Commission (the
"Commission"), shares are deemed to be "beneficially owned" by a person if
such person directly or indirectly has or shares (i) the power to vote or
dispose of such shares, whether or not such person has any pecuniary
interest in such shares, or (ii) the right to acquire the power to vote or
dispose of such shares within 60 days, including any right to acquire
through the exercise of any option, warrant or right.
(2) Includes options to purchase 5,400 shares of Common Stock pursuant to the
Company's 1995 Stock Incentive Plan which are fully vested and
exercisable.
(3) Includes 100,000 shares of Common Stock owned by Mr. Shant S. Hovnanian's
minor child, Vahak Willem Hovnanian, for which Mr. Hovnanian, as
custodian, has sole voting power.
(4) Includes options to purchase 15,000 shares of Common Stock pursuant to the
Stock Incentive Plan, which are fully vested and exercisable, including
options for 1,000 shares of Common Stock that will be automatically
granted upon election to the Board at the 1999 Annual Meeting.
(5) Includes 55,431 and 22,175 shares of Common Stock which Mr. Vahak S.
Hovnanian is required to sell upon the exercise of outstanding warrants at
a per share exercise price of $13.16 and $11.28, respectively. It also
includes 100,000 shares of Common Stock which Mr. Hovnanian donated to
-7-
<PAGE>
The Vahak and Paris Hasmig Foundation, Inc. which Mr. Hovnanian controls,
as well as 312,655 shares of Common Stock given to his wife, Paris Hasmig
Hovnanian.
(6) Includes options to purchase 10,000 shares of Common Stock pursuant to the
Stock Incentive Plan, which are fully vested and exercisable.
(7) Includes options to purchase 6,000 shares of Common Stock pursuant to the
Stock Incentive Plan, which are fully vested and exercisable, including
options for 1,000 shares of Common Stock that will be automatically
granted upon election to the Board at the 1999 Annual Meeting.
(8) Pursuant to a Stock Purchase Agreement dated as of June 13, 1999, the
Company is required to use its best efforts to cause a NEXTLINK
representative to be elected to the Company's Board. To date, NEXTLINK has
not exercised this right.
Stockholders Agreements. Bell Atlantic Corporation has the right to
appoint one director (the "Bell Atlantic Nominee") to the Board, so long as Bell
Atlantic shall hold at least 1% of the shares of Common Stock outstanding on a
fully diluted basis. To date, Bell Atlantic has not exercised this right.
Shant S. Hovnanian, Bernard B. Bossard and Vahak S. Hovnanian
(collectively, the "Founders"), who in the aggregate beneficially own 41.2% of
the Company's outstanding shares of Common Stock, have entered into a
Stockholders Agreement (the "Stockholders Agreement") pursuant to which the
parties thereto will vote and, to the extent consistent with fiduciary duty
under applicable law, take all other necessary or desirable actions within their
control, in order to cause each Founder to be nominated for election to the
Board and to be continued in such office so long as such Founder owns 5% or more
of the shares of Common Stock outstanding on a fully diluted basis.
Under the terms of these agreements, the Founders have agreed not to vote
to remove any Founder or the Bell Atlantic Nominee so elected except for "cause"
as defined in Section 141 of the Delaware General Corporation Law. At the
meeting of the Nominating Committee of the Board held on May 26, 1999, over his
objection, Mr. Bossard was not nominated for re-election to the Board. The
Company recognizes the possibility that there may be litigation among the
Founders in which the question of "cause" may be litigated.
-8-
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CT&T License Agreement. Shant S. Hovnanian, Chairman of the Board,
President and Chief Executive Officer, Vahak S. Hovnanian, a Director of the
Company, and Bernard B. Bossard, a Director and former officer of the Company,
are 80% controlling owners of CT&T. SPEEDUSNY is a party to a licensing
agreement with CT&T, which could present these individuals with conflicts of
interest.
Reserved Channel Rights Agreement. The Founders are parties to an
agreement with SPEEDUSNY, pursuant to which they have the nontransferable right
to require SPEEDUSNY to make available 60 MHz of continuous spectrum per
polarization in the spectrum awarded by the Federal Communications Commission
("FCC") for the purpose of providing certain programming (other than telephony,
two-way voice or data communication services) developed by them.
VisionStar, Inc. On May 18, 1998, the Company received an offer from Shant
S. Hovnanian to convey to the Company all of the outstanding shares of
VisionStar Inc. ("VisionStar"), a company wholly-owned by him, together with
related patent application rights. VisionStar holds a license from the FCC,
granted in May 1997, to construct, launch and operate a geostationary Ka-band
telecommunications satellite at 113 degrees West Longitude, a position
overlooking the continental United States. According to the FCC order granting
the license, VisionStar proposes to offer interactive broadband services
covering the nation and in urban areas in conjunction with broadband operators
such as LMDS operators. These broadband services may include high-speed Internet
access, high-speed data services, video teleconferencing, distance learning and
video programming. VisionStar proposes to offer services on a non-common carrier
basis.
The FCC requires Ka-band licensees to adhere to a strict timetable for
system implementation, including a requirement that construction must be
commenced within one year of license grant, and that the satellite be launched
and operational within five years of grant. VisionStar has informed the Company
that it has entered into an agreement with a satellite manufacturer for
construction of its satellite. Mr. Hovnanian's offer contemplated reimbursement
by the Company of his verifiable VisionStar-related, out-of-pocket expenses, in
an amount not to exceed $300,000, which would have been payable in the form of a
note due March 31, 1999, or upon the earlier consummation by the Company of a
financing of $10,000,000 or more. The Company, through a special committee of
the Board of Directors, had been considering Mr. Hovnanian's offer. At a meeting
of the Board of Directors on August 19, 1998, the Board declined to accept Mr.
Hovnanian's offer. Thereafter, the Board and Mr. Hovnanian have had additional
discussions on the Company pursuing this opportunity but there is currently no
open offer and the matter has been tabled.
On May 6, 1999, Bernard B. Bossard commenced a lawsuit in New York State
court against Mr. Hovnanian and VisionStar alleging that, among other things,
insofar as Mr. Hovnanian procured the Ka-band satellite license for his own
company, VisionStar, Mr. Hovnanian breached the partnership agreement among
Shant S. Hovnanian, Vahak S. Hovnanian and Bernard B. Bossard, which Mr. Bossard
claims entitles him to one-third of any benefits directly or indirectly derived
from or used in conjunction with technology owned by CT&T. In the lawsuit, Mr.
Bossard claims that VisionStar represented in its application to the FCC that
the Ka-band license would be used in conjunction with CT&T's technology. Mr.
Bossard is requesting that the court grant him one-third of the value of
VisionStar and its Ka-band license and that the court impose a constructive
trust on the shares and assets of VisionStar, including the Ka-band license. The
Company is not a party to this lawsuit, either as a plaintiff or a defendant.
-9-
<PAGE>
International CellularVision Association ("ICVA"). SPEEDUSNY has had an
agreement with ICVA to fund, along with all other members of ICVA, operating
expenses of ICVA. SPEEDUSNY funded $209,000, $264,000 and $287,000 for the years
ended December 31, 1998, 1997 and 1996, respectively. The Company had also
subleased certain office space for ICVA on a month-to-month basis which is
included in the foregoing totals. Congressman Matthew J. Rinaldo, a director of
the Company, served as President of ICVA. ICVA was dissolved in 1999.
-10-
<PAGE>
BOARD OF DIRECTORS; BOARD COMMITTEES
Board of Directors Meetings; Board Committee Meetings
During 1998, the Board met nine times; the Nominating Committee met one
time; the Audit Committee met one time; and the Compensation Committee met one
time. Each of the Company's current Directors attended all of the Board and
Committee meetings on which he served during 1998.
Nominating Committee
The Nominating Committee of the Board, which currently consists of Shant
S. Hovnanian, Bernard B. Bossard and Vahak S. Hovnanian, identifies and submits
on an annual basis to the full Board nominees to be placed on the ballot for
election to the Board at each annual meeting of stockholders. The Nominating
Committee will consider suggested nominees to be placed on the ballot for
election to the Board at each annual meeting of stockholders in accordance with
applicable rules and regulations promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Such rules and regulations provide
that the Company is not required to include a stockholder proposal in its proxy
materials unless it is received by a specified date. Accordingly, all
recommended nominations to be placed on the ballot for election to the Board at
the 2000 Annual Meeting of Stockholders must be in writing and must be received
by the Company on or before its close of business on December 31, 1999.
Audit Committee
The Audit Committee of the Board, which currently consists of Vahak S.
Hovnanian and Congressman Matthew J. Rinaldo, provides oversight of the
Company's financial reporting process, reviews the services provided by the
Company's independent auditors, consults with such auditors on audits and
proposed audits, reviews the need for internal auditing procedures and assesses
the adequacy of internal controls.
Compensation Committee; Compensation Committee Interlocks and Insider
Participation
The Compensation Committee of the Board, which currently consists of Vahak
S. Hovnanian and Congressman Matthew J. Rinaldo, establishes, reviews and
approves compensation programs of the Company generally, and approves salaries
and bonuses for officers and certain other salaried employees of the Company. In
addition, the Compensation Committee (as well as the Board of Directors,
effective December 1998) administers the Company's Stock Incentive Plan and
determines which eligible employees and consultants of the Company may
participate in the Plan and the type, extent and terms of the awards to be
granted to them.
The Founders serve as directors and, in some cases, as executive officers,
of both the Company, CT&T and related entities. In addition, Vahak S. Hovnanian,
a director of the Company, serves as an officer and a director of the companies
comprising the Hovnanian Group. Congressman Rinaldo, a director of the Company,
served as President of ICVA. (See "Certain Relationships and Related
Transactions.")
Section 16(a) Beneficial Ownership Reporting Compliance
Under the Exchange Act, the Company's directors and executive officers,
and any persons holding more than 10% of the outstanding Common Stock are
required to report their initial ownership of Common Stock and any subsequent
changes in that ownership to the Commission. Specific due dates for these
reports have been established by the Commission, and the Company is required to
disclose in this
-11-
<PAGE>
Proxy Statement any failure by such persons to file these reports in a timely
manner during the 1998 fiscal year. Based solely upon the Company's review of
copies of such reports furnished to it, the Company believes that during the
1998 fiscal year its executive officers and directors and the holders of more
than 10% of the outstanding Common Stock complied with all reporting
requirements of Section 16(a) under the Exchange Act.
-12-
<PAGE>
EXECUTIVE COMPENSATION
Compensation Committee Report on Executive Compensation
Executive Compensation Policy. The Company's compensation policy for all
of its executive officers is formulated and administered by the Compensation
Committee of the Board. The Compensation Committee (as well as the Board of
Directors, effective December 1998) also administers the Company's Stock
Incentive Plan, under which grants of various stock-based incentives may be made
to employees (including executive officers), directors and consultants.
The primary goals of the Company's compensation policy are to attract,
retain and motivate skilled executive officers and to incent them to act in the
best interests of the Company's stockholders. In determining the level of
executive compensation, certain quantitative and qualitative factors, including,
but not limited to, the Company's operating and financial performance, the
individual's level of responsibilities, experience, commitment, leadership and
accomplishments relative to stated objectives, and marketplace conditions are
taken into consideration.
Chief Executive Officer's Compensation. For 1998, the compensation of
Shant S. Hovnanian, the Chief Executive Officer of the Company, was set by the
terms of his employment agreement. A summary of the key provisions of Mr.
Hovnanian's employment agreement is included elsewhere in this Proxy Statement
under "Employment Agreements". Mr. Hovnanian also participates in benefit
programs that are generally available to employees of the Company, including
medical benefits and a 401(k) savings plan. In December 1998, the Board granted
options under the Company's Stock Incentive Plan to all employees based upon
their months of service with the Company. As part of this grant, Mr. Hovnanian
was granted 5,400 options.
Executive Officer Compensation. The Company had entered into employment
agreements with Bernard B. Bossard and John G. Walber. Summaries of the key
provisions of these employment agreements are included elsewhere in this Proxy
Statement under "Employment Agreements". For the year ended December 31, 1998,
compensation accrued or paid to the executive officers of the Company was
determined pursuant to the terms of the employment agreements negotiated by the
Company with the executives. During 1998, no discretionary compensation was
accrued or paid to executive officers that is not set by their respective
employment agreements or, in the case of Mr. Walber, his termination agreement.
Section 162(m) of the Code. Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"), generally limits the deductibility by the Company
of compensation paid in any one year to any executive officer named in the
Summary Compensation Table to $1,000,000. Compensation attributable to awards
issued pursuant to the Company's Stock Incentive Plan is currently exempt from
the limits of Section 162(m) because the Plan was adopted prior to the time of
the Company's initial public offering. If the amendment to the Stock Incentive
Plan is approved by stockholders, option awards under the Plan made in
conformity with the "performance-based" exemption from Section 162(m) will
continue to be exempt from the limits of Section 162(m). The Company intends
that all option awards under the Stock Incentive Plan will be exempt from
Section 162(m). Since none of the executive officers of the Company are
currently paid cash compensation in excess of $1,000,000, the Company has not
yet
-13-
<PAGE>
developed a policy with respect to Section 162(m) of the Code, other than with
respect to option awards under the Stock Incentive Plan.
Vahak S. Hovnanian
Matthew J. Rinaldo
Performance Graph
The following graph compares the cumulative return on the Company's Common
Stock from February 8, 1996, the first day of trading on the Nasdaq National
Market (the "NNM"), to December 31, 1998 with the Total Return Index for The
Nasdaq Stock Market (US) (the "NNM Index") as prepared for Nasdaq by the Center
for Research in Security Prices ("CRSP") and an industry peer group. Since the
Company has discontinued its subscription television business in late 1998 and
is now a super high-speed Internet Service Provider, the Company has selected a
new industry peer group. The New Peer Group consists of all companies in the
Total Return Index for Nasdaq Telecommunications Stocks, as prepared by CRSP.
The Old Peer Group consists of the eleven companies, listed in Note 2 below,
engaged in the provision of telecommunications, direct broadcast satellite,
cable television and wireless cable services determined by the Company in the
past to have had similar industry characteristics as the Company and to have
provided types of services similar to those historically offered by the Company.
The performance graph assumes (i) $100 was invested on February 8, 1996
and (ii) reinvestment of dividends. Each measurement point on the graph below
represents the cumulative stockholder return as measured by the last sale price
(or in the case of Old Peer Group companies which are no longer traded on a
national securities exchange or the NNM, the mean between the last bid and asked
price) at the end of each period during the period from February 8, 1996 through
December 31, 1998. As depicted in the graph below, the cumulative total return
during this period was 104.7% for the NNM Index, 132.4% for the New Peer Group,
14.3% for the Old Peer Group and (94.1)% for the Company's Common Stock.
[LINE GRAPH]
INDEXED RETURNS [2/8/96 (1)=100]
RETURN RETURN RETURN
DEC. 1996 DEC. 1997 DEC. 1998
------- ------- -------
NNM Index ............................... $118.69 $147.99 $204.69
New Peer Group .......................... $ 96.12 $142.34 $232.44
Old Peer Group .......................... $ 60.88 $ 69.59 $114.34
SPEEDUS.COM ............................. $ 45.90 $ 39.34 $ 5.94
-14-
<PAGE>
(1) Represents February 8, 1996, the first day of trading of the Common Stock
on the NNM following the Initial Public Offering for which the initial
price to the public was $15.00 per share.
(2) The Old Peer Group consists of the following companies: American
Telecasting Inc., CAI Wireless Systems, Inc., Cox Communications, Inc.,
Cablevision Systems, Inc., EchoStar Communications Corporation, Heartland
Wireless Communications, Inc., ICG Communications, Inc., People's Choice
TV Corp., U.S. Satellite Broadcasting, Wireless One, Inc. and Winstar
Communications, Inc.
Executive Compensation
The following table shows, for the fiscal years ended December 31, 1998,
1997 and 1996, the cash compensation paid by the Company and its subsidiaries,
as well as certain other compensation paid or accrued for those years, to each
of the most highly compensated executive officers of the Company in 1998 (the
"Named Executive Officers") in all capacities in which they served. See
Employment Agreements.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
----------------------------
Other
Annual Securities All Other
Compen- Underlying Compen-
Name and Principal Position Year Salary Bonus sation Options(#) sation
- --------------------------------------------- ---- -------- ----- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Shant S. Hovnanian .......................... 1998 $250,000 $ -- $ -- 5,400 $ --
Chairman of the Board of 1997 250,000 -- -- -- --
Directors, President, Chief Executive Officer 1996 250,000 -- -- -- --
and Chief Financial Officer
Bernard B. Bossard (1) ...................... 1998 $106,370 $ -- $ 54,142 -- $ --
Former Executive Vice President and Chief ... 1997 170,000 -- 63,868 -- --
Technical Officer ........................... 1996 170,000 -- 55,185 -- --
John G. Walber (2) .......................... 1998 $144,018 $ -- $ -- -- $ 96,408
Former President and Chief Operating Officer 1997 195,000 -- -- 50,000 --
1996 165,000 110,000 -- 30,000 --
</TABLE>
(1) Mr. Bossard's employment agreement provided for a leased automobile
for Mr. Bossard and the use of the Company's New York City apartment. The
aggregate cost to the Company for these items for each of the years 1998, 1997
and 1996 is set forth under "Other Annual Compensation" in the above Summary
Compensation Table. For 1998, the cost to the Company for the apartment was
$45,000 and the cost of the automobile (including insurance) was $9,142.
(2) The amount set forth below "All Other Compensation" in 1998 for Mr.
Walber represents the amounts due him under the terms of a termination agreement
upon his departure from the Company.
-15-
<PAGE>
Stock Option Grants Table
The following table sets forth information concerning individual grants of
options to purchase Common Stock made to Named Executive Officers during 1998.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Number of % of Total Annual Rates of Stock
Securities Options Price Appreciation for
Underlying Granted to Exercise Option Term
Options Employees or Base Expiration ----------------------
Name Granted in fiscal year Price Date 5% 10%
- --------------------- ---------- -------------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Shant S. Hovnanian .. 5,400 5.9% $ .89 12/2/08 $3,000 $7,600
Bernard B. Bossard .. 0 0 -- -- -- --
Charles N. Garber ... 0 0 -- -- -- --
John G. Walber ...... 0 0 -- -- -- --
</TABLE>
For additional information regarding stock option grants to employees in 1998,
see the Company's Annual Report on Form 10-K, "Notes to Consolidated Financial
Statements--Note 6, Stock Options and Warrants."
Aggregate Stock Option Exercise Table
The following table sets forth information regarding the number and value
of unexercised Options which were held by the Named Executive Officers as of
December 31, 1998. None of the Named Executive Officers exercised any options
during 1998.
<TABLE>
<CAPTION>
Number of
Securities
Underlying Value of
Number of Unexercised Unexercised
Shares Options In-the-Money
Acquired Value Exercisable/ Options
Name on Exercise Realized Unexercisable Exercisable/Unexercisable
- ----------------------- ----------- -------- ------------- -------------------------
<S> <C> <C> <C> <C>
Shant S. Hovnanian .... 0 $0 5,400/0 $100/0
Bernard B. Bossard .... 0 0 0 0/0
Charles N. Garber ..... 0 0 0 0/0
John G. Walber ........ 0 0 0 0/0
</TABLE>
-16-
<PAGE>
For additional information regarding stock option granted in 1998, see the
Company's Annual Report on Form 10-K, "Notes to Consolidated Financial
Statements--Note 6, Stockholders' Equity".
Director Compensation
Directors of the Company who are not officers or employees of the Company
("Non-Employee Directors") receive an annual fee of $5,000 and $500 per Board
meeting and Board committee meeting attended. Upon the consummation of the
Company's initial public offering in February 1996, each Non-Employee Director
was granted an option to purchase 5,000 shares of Common Stock. Upon their
initial election to the Board, new Non-Employee Directors are granted options to
purchase 5,000 shares of Common Stock which are fully vested and immediately
exercisable. Upon the date of each annual meeting, Non-Employee Directors are
granted options to purchase an additional 1,000 shares of Common Stock which are
fully vested and immediately exercisable. Directors of the Company who are
officers or employees of the Company do not receive any additional compensation
for serving on the Board or on any Board committee.
Employment Agreements
The Company entered into an employment agreement with Mr. Shant S.
Hovnanian in October 1995. The agreement provides that Mr. Hovnanian will act as
President and Chief Executive Officer of the Company and will devote
substantially all of his working time and efforts to the Company's affairs.
Pursuant to the agreement, Mr. Hovnanian may devote such working time and
efforts to CT&T and its affiliates as the due and faithful performance of his
obligations under the agreement permits. The agreement has a one-year term and
provides for an annual salary of $250,000, effective February 7, 1996. Upon the
expiration of the initial employment term on February 7, 1997, the agreement
provides for automatic extensions on a month-to-month basis, unless terminated
by either party upon 30 days advance written notice. Mr. Hovnanian is continuing
to serve as Chairman, President and Chief Executive Officer pursuant to the
terms of this employment agreement.
The Company had entered into an employment agreement dated October 18,
1995 with Mr. Bernard B. Bossard. The agreement provided that Mr. Bossard would
act as Executive Vice President and Chief Technical Officer of the Company and
devote such substantial portion of his time and effort to the affairs of the
Company as the Company's Board of Directors reasonably required. The agreement
had a three-year term and provided for an annual salary of $170,000, and the use
of an automobile and the Company's New York City apartment effective February 7,
1996. Mr. Bossard's contract was terminated in August 1998.
-17-
<PAGE>
The Company had entered into an employment agreement dated January 1, 1997
with Mr. John Walber. The agreement provided that Mr. Walber would continue to
serve as Vice President of the Company and as President and Chief Operating
Officer of SPEEDUSNY. The agreement had an initial term of two years and
provided for an annual salary of $195,000, a monthly commuting expense allowance
of $1,500, and an annual bonus in the amount of up to $195,000 based on the
executive's attainment of certain performance goals. Pursuant to the terms of
this agreement, Mr. Walber was granted 50,000 options to purchase shares of the
Company's stock at the market value as of the effective date of the agreement.
On December 31, 1997, 25,000 options became exercisable and the remaining 25,000
options were to become exercisable on December 31, 1998. As of August 1998, the
Company and Mr. Walber entered into a termination agreement upon his departure
from the Company. At December 31, 1998, Mr. Walber's options had expired.
PROPOSAL 1--THE BOARD PROPOSAL
The Board currently consists of five directors (with six vacancies) who
are elected to serve until the next annual meeting of stockholders or until
their successors are duly elected and qualified. The Nominating Committee has
designated the Nominees listed below for election as directors to the Board to
serve until the 2000 Annual Meeting or until their successors are duly elected
and qualified. If any Nominee shall, prior to the Annual Meeting, become
unavailable for election as a director, the persons named in the accompanying
proxy card will vote for such other nominee, if any, in their discretion as may
be recommended by the Nominating Committee.
NOMINEES
Name Age Position
- ----------------------------- --- -----------------------------------------
Shant S. Hovnanian...... 40 Chairman of the Board of Directors,
President and Chief Executive Officer and
Chief Financial Officer
Vahak S. Hovnanian...... 67 Director
Matthew J. Rinaldo...... 67 Director
Catherine Petrossian.... 39 Director
Recommendation and Vote
Approval of the election of the Nominees to the Board requires the
affirmative vote of a majority of the shares of Common Stock present, in person
or by proxy, and entitled to vote at the Annual Meeting.
The Board recommends a vote FOR the election of the Nominees to the
Board.
PROPOSAL 2--THE INDEPENDENT AUDITORS PROPOSAL
Upon the recommendation of the Audit Committee of the Board, the Board
proposes that the stockholders appoint the firm of PricewaterhouseCoopers LLP
("PwC") to serve as the independent auditors of the Company for the 1999 fiscal
year until the 2000 Annual Meeting. PwC has served as the Company's independent
auditors since the 1996 fiscal year. A representative of PwC will attend the
-18-
<PAGE>
Annual Meeting, will be available to respond to questions and may make a
statement if he or she so desires.
Recommendation and Vote
Approval of the Independent Auditors Proposal requires the affirmative
vote of a majority of the shares of Common Stock present, in person or by proxy,
at the Annual Meeting.
The Board recommends a vote FOR the approval of the Independent
Auditors Proposal.
PROPOSAL 3--THE STOCK INCENTIVE PLAN PROPOSAL
On October 18, 1995, the Board adopted the Company's 1995 Stock Incentive
Plan (the "Stock Incentive Plan"), under which 1,250,000 shares of Common Stock
were reserved for issuance under the Stock Incentive Plan. On July 28, 1999, the
Board amended and restated the Stock Incentive Plan (as amended and restated,
the "Amended Incentive Plan"), subject to stockholder approval, to increase the
number of shares of Common Stock available for issuance under the Incentive Plan
by 500,000 shares from 1,250,000 to 1,750,000.
The Company is seeking stockholder approval of the Amended Incentive Plan
in order to comply with the requirements of Sections 162(m) and 422 of the Code
and the requirements of NASDAQ. The following summary of the Amended Incentive
Plan is qualified in its entirety by express reference to the text of the
Amended Incentive Plan, a copy of which was filed with the Securities and
Exchange Commission. Under the Amended Incentive Plan, Options may be granted
which are qualified as "incentive stock options" within the meaning of Section
422 of the Code ("ISOs") and which are not so qualified ("NQSOs"). In addition,
stock appreciation rights ("SARs"), restricted shares of Common Stock
("Restricted Stock"), awards of Common Stock with performance related vesting
criteria ("Performance Shares"), phantom stock units ("Phantom Stock Units") and
Common Stock bonus awards ("Bonus Stock") may be granted (collectively or
individually, "Awards").
Purpose and Eligibility
The purpose of the Amended Incentive Plan is to promote the long-term
financial success of the Company by enhancing the ability of the Company to
attract, retain and reward individuals who can and do contribute to such success
and to further align the interests of the Company's key personnel with its
stockholders. Officers, key employees, directors and consultants of the Company
and its subsidiaries are eligible to receive Awards under, and participate in,
the Amended Incentive Plan. The approximate number of officers, key employees,
directors, and consultants eligible to participate in the Amended Incentive Plan
is currently 25.
Administration
The Amended Incentive Plan is administered by the Board or a Committee
(the entity administering the Amended Incentive Plan hereafter called the
"Committee") appointed by the Board of Directors from among its members. The
Committee, in its sole discretion, determines which individuals may participate
in the Amended Incentive Plan and the type, extent and terms of the Awards to be
granted. In addition, the Committee interprets the Amended Incentive Plan and
makes all other determinations with respect to the administration of the Amended
Incentive Plan.
-19-
<PAGE>
Awards
The Amended Incentive Plan allows for the discretionary grant of Options,
SARs, Performance Shares, Phantom Stock Units, Restricted Stock and Bonus Stock.
In addition, Board members who are not also employees of the Company
("Non-Employee Directors") are eligible to receive automatic grants of Options
pursuant to the formula set forth below. The terms and conditions of Awards
granted under the Amended Incentive Plan are set out from time to time in
agreements between the Company and the individuals receiving such Awards.
Options. The Committee may grant Options to any eligible person; provided,
however, that only employees of the Company and its subsidiaries may receive
ISOs. The exercise price of the Options will be determined by the Committee at
the time of grant and will be set forth in a Stock Option Agreement between the
Company and the participant; provided, however, that the exercise price of an
ISO will not be less than the fair market value of the Common Stock on the date
of grant and the exercise price of a NQSO will not be less than the par value of
the Common Stock. Options will vest and become exercisable within such period or
periods (not to exceed 10 years) as determined by the Committee and set forth in
the Stock Option Agreement. Unless otherwise set forth in the Stock Option
Agreement, all Options expire on the earlier of (i) ten years after grant, (ii)
three months after (A) retirement, (B) termination of employment or service with
the Company or a subsidiary due to complete and permanent disability, (C) any
termination of employment or service with the written approval of the Committee,
or (D) termination of employment or service by the Company without cause (each a
"Normal Termination"), (iii) immediately upon termination of employment other
than by Normal Termination or death, (iv) twelve months after the death of the
optionee while still employed or within three months of a Normal Termination, or
(v) the expiration date set forth in the Stock Option Agreement. Unless
otherwise set forth in the Stock Option Agreement, Options will vest and become
exercisable only during the period of employment or service with the Company and
its subsidiaries such that upon such termination of employment or service the
unvested portion of any outstanding Option will expire. Options that have become
exercisable may be exercised by delivery of written notice of exercise to the
Committee accompanied by full payment of the Option exercise price and any
applicable withholding. The Option exercise price may be paid in cash and/or
shares of Common Stock valued at the fair market value at the time of exercise
or, in the discretion of the Committee, either (i) in other property having fair
market value on the date of exercise equal to the Option exercise price, or (ii)
through a brokered exercise.
SARs. The Committee may grant to any eligible person a SAR, either in
conjunction with any Option or independent of the grant of an Option. A SAR
gives the holder the right to receive upon exercise the excess of the fair
market value of one share of Common Stock on the date of exercise over the fair
market value of one share of Common Stock on the date of grant multiplied by the
number of shares underlying the SAR (the "Spread"). Such payment will be made,
at the discretion of the Committee, in shares of Common Stock or cash equal to
the value of the Spread or any combination thereof. A SAR granted in connection
with an Option will become exercisable, be transferable and expire according to
the same schedule as the Option. A SAR granted independent of an Option will
become exercisable, be transferable and expire in accordance with a vesting
schedule established by the Committee. Once a SAR becomes exercisable, the
holder of the SAR may exercise the SAR by filing an irrevocable written notice
with the Committee specifying the number of SARs to be exercised. Unexercised
SARs that are in-the-money just prior to their expiration will automatically be
exercised by the Company and the holders will receive the value of the Spread.
-20-
<PAGE>
Performance Shares. The Committee may establish Performance Share programs
to be effective over designated periods of not less than three years nor more
than five years ("Award Periods") and will determine the number of performance
share units ("Performance Share Units") to be awarded to each participant who is
selected by the Committee. At the beginning of each Award Period, the Committee
will establish performance goals in writing based upon financial objectives for
the Company for such Award Period and a schedule relating the accomplishment of
such goals to the amount of Performance Share Units to be earned by
participants. Performance goals may include absolute or relative growth in
earnings per share or rate of return on stockholders' equity or other
measurement of corporate performance and may be determined on an individual
basis or by categories of participants. The Committee may adjust performance
goals or performance measurement standards as it deems equitable in recognition
of extraordinary or non-recurring events experienced during an Award Period. At
the completion of an Award Period, or at other times as specified by the
Committee, the Committee will calculate the amount earned with respect to each
participant's Award of Performance Share Units. The amount earned with respect
to such Award will be paid as soon as practicable in shares of Common Stock
having an equal fair market value. The Committee may upon the request of a
participant and at its discretion pay such amount in cash.
Restricted Stock and Phantom Stock. The Committee may grant shares of
Restricted Stock and Phantom Stock Units to eligible persons and may establish
terms, conditions and restrictions applicable thereto.
Subject to the restrictions on such Restricted Stock as set forth below,
holders will generally have all the rights and privileges of a stockholder
including the right to vote such Restricted Stock. Shares of Restricted Stock
will be subject to restrictions on transferability set forth in the Award
agreement and will be subject to forfeiture as set forth below. To the extent
such shares are forfeited, the stock certificates shall be returned to the
Company, and all rights of the holder to such shares and as a shareholder will
terminate.
In the case of a Phantom Stock Unit Award, no shares of Common Stock will
be issued at the time the Award is made, and the Company will not be required to
set aside a fund for the payment of any such Award. Until the restrictions on
Phantom Stock Units are lifted or expire, such Awards will be subject to
forfeiture as set forth below.
The restricted period for Restricted Stock and Phantom Stock Units will
commence on the date of grant and will expire from time to time as to that part
of the Restricted Stock and/or Phantom Stock Unit Award indicated in a schedule
established by the Committee and set forth in the respective Award Agreement.
The Committee, in its sole discretion, may remove any or all restrictions on the
Restricted Stock or Phantom Stock Units whenever it determines that such action
is appropriate.
With respect to Awards of both Restricted Stock and Phantom Stock Units,
the following forfeiture provisions will apply. In the event the recipient of
such Award resigns or is discharged from employment or service with the Company
or its subsidiary for cause, the non-vested portion of the Award will be
completely forfeited. Upon the Normal Termination of the recipient of such
Award, the non-vested portion of the Award will be prorated for service during
the restricted period and paid as soon as practicable after termination. If the
recipient of such an Award dies, the non-vested portion of the Award will be
prorated for service during the restricted period and paid to the recipient's
beneficiary as soon as practicable following death.
-21-
<PAGE>
Upon the expiration of the restricted period with respect to any shares of
Restricted Stock, a stock certificate evidencing the shares of Common Stock will
be delivered without charge to the participant, or his beneficiary, free of all
restrictions under the Plan. Upon the expiration of the restricted period with
respect to any Phantom Stock Units, the Company will deliver to the participant,
or his beneficiary, without charge one share of Common Stock for each Phantom
Stock Unit; provided, however, that the Committee may, in its sole discretion,
pay any portion of such Award in cash and/or shares of Common Stock.
Automatic Option Grants to Non-Employee Directors. Unless otherwise
determined by the Committee, on the date any person first becomes a Non-Employee
Director, such person shall be automatically granted an Option to purchase 5,000
shares of Common Stock. Additionally, unless otherwise determined by the
Committee, for the remainder of the term of the Plan and provided he or she
remains a Non-Employee Director of the Company, on the date of each of the
Company's Annual Meeting of stockholders, each Non-Employee Director shall be
automatically granted an Option to purchase 1,000 shares of Common Stock. All
such Options granted to Non-Employee Directors are hereinafter referred to as
Non-Employee Director Options.
All Non-Employee Director Options have an exercise price per share equal
to the Fair Market Value (as defined in the Plan) of a share of Common Stock on
the date of grant. All Non-Employee Director Options are be fully vested and
exercisable as of the date of grant. The term of each Non-Employee Director
Option ("Term"), after which each such Option shall expire, will be ten years
from the date of grant, unless such Option expires earlier as set forth below.
If prior to the expiration of the Term the Non-Employee Director ceases to
be a member of the Board for any reason other than his death, the Non-Employee
Director Option will expire on the earlier of the expiration of the Term or the
date that is three months after the date of such cessation. If prior to the
expiration of the Term of a Non-Employee Director Option a Non-Employee Director
dies, the Non-Employee Director Option will expire on the earlier of the
expiration of the Term or the date that is one year after the date of death.
Non-Employee Director Options with vesting provisions will vest and become
exercisable only during a Non-Employee Director's service with the Company.
Therefore, in the event that a Non-Employee Director ceases to be a member of
the Board for any reason, any unexpired Non-Employee Director Option will
thereafter be exercisable until its expiration only to the extent that such
Option was exercisable at the time of such cessation.
Each Non-Employee Director Option will be evidenced by a Stock Option
Agreement, which will contain such provisions as may be determined by the
Committee. Unless otherwise designated by the Committee, Non-Employee Director
Options will not be transferable except by will or the laws of descent and
distribution and will be exercisable during the Non-Employee Director's lifetime
only by him.
Bonus Stock. The Committee may issue shares of unrestricted Common Stock
under the Plan to Eligible Persons, alone or in tandem with other Awards, in
such amounts and subject to such terms and conditions as the Committee from time
to time in its sole discretion determines. Bonus Stock Awards may be granted as,
or in payment of, a bonus, or to provide incentives or recognize special
achievements or contributions.
Adjustments for Recapitalization, Merger, etc. of the Company
Awards, and any agreements evidencing such Awards, and any performance
goals with respect to such Awards, shall be subject to adjustment or
substitution, as determined by the Committee in its sole
-22-
<PAGE>
discretion, as to the number, price or kind of a share of stock or other
consideration subject to such Awards or as otherwise determined by the Committee
to be equitable (i) in the event of changes in the outstanding Common Stock or
in the capital structure of the Company by reason of stock dividends, stock
splits, reverse stock splits, recapitalizations, reorganizations, mergers,
consolidations, combinations, exchanges, or other relevant changes in
capitalization occurring after the date of grant of any such Award or (ii) in
the event of any change in applicable laws or any change in circumstances which
results in or would result in any substantial dilution or enlargement of the
rights granted to, or available for, participants in the Amended Incentive Plan,
or which otherwise warrants equitable adjustment because it interferes with the
intended operation of the Amended Incentive Plan. In addition, in the event of
any such adjustments or substitution, the aggregate number of shares of Common
Stock available under the Amended Incentive Plan shall be appropriately adjusted
by the Committee, whose determination shall be conclusive.
Effect of Change in Control
In the event of a Change in Control (as defined in the Amended Incentive
Plan), notwithstanding any vesting schedule provided for in the Plan or by the
Committee with respect to an Award of Options (including Non-Employee Director
Options), SARs, Phantom Stock Units or Restricted Stock, such Option or SAR
shall become immediately exercisable with respect to 100 percent of the shares
subject to such Option or SAR, and the restricted period for Phantom Stock Units
and Restricted Stock shall expire immediately with respect to 100 percent of the
Phantom Stock Units or shares of Restricted Stock subject to restrictions.
In the event of a Change in Control, all incomplete Award Periods in
effect on the date the Change in Control occurs shall end on the date of such
change, and the Committee shall, (i) determine the extent to which performance
goals with respect to each such Award Period have been met based upon such
audited or unaudited financial information then available as it deems relevant,
and (ii) cause to be paid to each participant partial or full Awards with
respect to performance goals for each such Award Period based upon the
Committee's determination of the degree of attainment of performance goals.
Notwithstanding anything herein to the contrary, in the event of certain
merger, change in control situations (not necessarily enumerated under the
definition of "Change in Control") or other extraordinary corporate transaction
the Committee may upon at least 10 days advance notice cancel any outstanding
Awards and pay to the holders thereof, in cash, the value of such Awards.
Shares Subject to the Amended Incentive Plan
As noted above, the Company has amended the Stock Incentive Plan to
reserve an additional 500,000 shares of Common Stock. The total number of shares
of Common Stock reserved for issuance under the Amended Incentive Plan is
1,750,000. No more than 500,000 shares of Common Stock may be issued to any one
person pursuant to awards of Options or stock appreciation rights during any one
year.
Market Value
The closing price of the Common Stock on NASDAQ as of July 31, 1999 was $
5.625 per share.
Amendment and Termination
The Board may at any time terminate the Plan. With the express written
consent of an individual participant (subject to any other allowable adjustments
under the Plan to outstanding Awards without the
-23-
<PAGE>
consent of any participant), the Board or the Committee may cancel or reduce or
otherwise alter the outstanding Awards thereunder if, in its judgment, the tax,
accounting, or other effects of the Plan or potential payouts thereunder would
not be in the best interest of the Company. The Board or the Committee may, at
any time, or from time to time, amend or suspend and, if suspended, reinstate,
the Plan in whole or in part, subject to any limitations set forth in the Plan.
Federal Tax Consequences
The following is a brief discussion of the Federal income tax consequences
of transactions with respect to Options under the Amended Incentive Plan based
on the Code, as in effect as of the date of this summary. This discussion is not
intended to be exhaustive and does not describe any state or local tax
consequences.
ISOs. No taxable income is realized by the optionee upon the grant or
exercise of an ISO. If Common Stock is issued to an optionee pursuant to the
exercise of an ISO, and if no disqualifying disposition of such shares is made
by such optionee within two years after the date of grant or within one year
after the transfer of such shares to such optionee, then (1) upon the sale of
such shares, any amount realized in excess of the Option price will be taxed to
such optionee as a long-term capital gain and any loss sustained will be a
long-term capital loss, and (2) no deduction will be allowed to the Company for
Federal income tax purposes.
If the Common Stock acquired upon the exercise of an ISO is disposed of
prior to the expiration of either holding period described above, generally, (1)
the optionee will realize ordinary income in the year of disposition in an
amount equal to the excess (if any) of the Fair Market Value of such shares at
exercise (or, if less, the amount realized on the disposition of such shares)
over the Option price paid for such shares and (2) the Company will be entitled
to deduct such amount for Federal income tax purposes if the amount represents
an ordinary and necessary business expense. Any further gain (or loss) realized
by the optionee upon the sale of the Common Stock will be taxed as short-term or
long-term capital gain (or loss), depending on how long the shares have been
held, and will not result in any deduction by the Company.
If an ISO is exercised more than three months following termination of
employment (subject to certain exceptions for disability or death), the exercise
of the Option will generally be taxed as the exercise of a NQSO, as described
below.
For purposes of determining whether an optionee is subject to an
alternative minimum tax liability, an optionee who exercises an ISO generally
would be required to increase his or her alternative minimum taxable income, and
compute the tax basis in the stock so acquired, in the same manner as if the
optionee had exercised a NQSO. Each optionee is potentially subject to the
alternative minimum tax. In substance, a taxpayer is required to pay the higher
of his/her alternative minimum tax liability or his/her "regular" income tax
liability. As a result, a taxpayer has to determine his/her potential liability
under the alternative minimum tax.
NQSOs. With respect to NQSOs: (1) no income is realized by the optionee at
the time the Option is granted; (2) generally, at exercise, ordinary income is
realized by the optionee in an amount equal to the excess, if any, of the Fair
Market Value of the shares on such date over the exercise price, and the Company
is generally entitled to a tax deduction in the same amount, subject to
applicable tax withholding requirements; and (3) at sale, appreciation (or
depreciation) after the date of exercise is
-24-
<PAGE>
treated as either short-term or long-term capital gain (or loss) depending on
how long the shares have been held.
Special Rules Applicable to Corporate Insiders
As a result of the rules under Section 16(b) of the Exchange Act
("Section 16(b)"), and depending upon the particular exemption from the
provisions of Section 16(b) utilized, officers and directors of the Company and
persons owning more than 10 percent of the outstanding shares of stock of the
Company ("Insiders") may not receive the same tax treatment as set forth above
with respect to the grant and/or exercise of Options. Generally, Insiders will
not be subject to taxation until the expiration of any period during which they
are subject to the liability provisions of Section 16(b) with respect to any
particular Option. Insiders should check with their own tax advisers to
ascertain the appropriate tax treatment for any particular Option.
New Plan Benefits
The following table sets forth the Options to be granted to the
Non-Employee Directors under the automatic formula grant provision of the
Amended Incentive Plan at the upcoming Annual Meeting.
Name and Position Dollar Value Number of Units
----------------- ------------ ---------------
Non-Executive Director Group N/A 3,000
Except for the automatic formula grant of Options to Non-Employee
Directors, the grant of Awards under the Amended Incentive Plan is entirely
within the discretion of the Committee. The Company cannot forecast the extent
of Awards that will be granted in the future. Therefore, except for the
automatic formula grants to Non-Employee Directors set forth above, the Company
has omitted the tabular disclosure of the benefits or amounts allocated under
the Amended Incentive Plan. Information with respect to compensation paid and
other benefits, including Options, granted in respect of the 1998 fiscal year to
the Named Executive Officers is set forth in the Summary Compensation Table.
Recommendation and Vote
Approval of the Stock Incentive Plan Proposal requires the affirmative
vote of a majority of the shares of Common Stock present, in person or by proxy,
at the Annual Meeting, and entitled to vote thereon. Until such approval is
obtained, the Amended Incentive Plan and any Option, Restricted Stock or Other
Award granted thereunder shall not be effective. If the Amended Incentive Plan
is not approved, the Stock Incentive Plan will continue in operation and Awards
may continue to be granted thereunder.
The Board recommends a vote FOR the approval of the Stock Incentive
Plan proposal.
-25-
<PAGE>
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholder proposals to be included in the Company's proxy statement with
respect to the 2000 Annual Meeting of Stockholders must be received by the
Company at its executive offices located at 140 58th Street, Suite 7E, Brooklyn,
New York 11220 no later than December 31, 1999.
OTHER BUSINESS OF THE MEETING
The Company is not aware of any matters to come before the Annual Meeting
other than those stated in this Proxy Statement. However, since matters which
management of the Company is not now aware of may come before the Annual Meeting
or any adjournment, the proxies confer discretionary authority with respect to
acting on these matters. The persons named in the proxies intend to vote, act
and consent in accordance with their best judgment with respect to these
matters. Upon receipt of proxies in time for voting, the shares represented will
be voted as indicated thereon and in this Proxy Statement.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1998 IS INCLUDED IN THIS MAILING WITH THE PROXY STATEMENT.
ADDITIONAL COPIES MAY BE OBTAINED WITHOUT CHARGE BY ANY STOCKHOLDER UPON WRITTEN
REQUEST TO SPEEDUS.COM, INC., 140 58TH STREET, SUITE 7E, BROOKLYN, NEW YORK
11220; BY CALLING US AT 718.567.4300, OR BY VISITING OUR WEBSITE AT
WWW.SPEEDUS.COM.
By Order of the Board of Directors
Shant S. Hovnanian
Chairman, President and
Chief Executive Officer
August 30, 1999
-26-
<PAGE>
|x| PLEASE MARK VOTES AS IN THIS EXAMPLE
- -----------------
SPEEDUS.COM, INC.
- -----------------
Mark box at right if an address change or comment has been noted |_|
on the reverse side this Proxy Card.
CONTROL NUMBER:
RECORD DATE SHARES:
1. To elect to the Board of Directors the four directors listed below currently
serving thereon to serve until the Company's 2000 Annual Meeting of Stockholders
or until their successors are duly elected.
For Withhold For All
Except
Shant S. Hovnanian, Vahak S. Hovnanian |_| |_| |_|
Mathew J. Rinaldo, Catherine Petrossian
NOTE: If you do not wish your shares voted "for" a particular nominee(s), mark
the "for all except" box and strike a line through the names of the nominee(s).
your shares will be voted for the remaining nominee(s).
For Against Abstain
2. Ratification of the appointment of |_| |_| |_|
PricewaterhouseCoopers LLP as independent
auditors of the Company.
For Against Abstain
3. To approve the Company's 1995 Stock Incentive |_| |_| |_|
Plan, as amended to increase the number of shares
of Common Stock available for issuance by 500,000
from 1,250,000 shares to 1,750,000 shares.
Please be sure to sign and date this Proxy Card. Date __________
- -------------------------- --------------------
Stockholder sign here Co-owner sign here
<PAGE>
DETACH CARD DETACH CARD
SPEEDUS.COM, INC.
Dear Stockholder,
Please take note of the important information enclosed with this Proxy Card.
There are three proposals related to the management and operation of
SPEEDUS.COM, INC. (the "Company") that require your immediate attention. These
are discussed in detail in the enclosed Proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on this Proxy Card to indicate how your shares will be
voted. Then sign the card, detach it and return your Proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders of the
Company to be held on September 30, 1999.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Shant S. Hovnanian
Chairman, President and Chief Executive Officer
SPEEDUS.COM, INC.
140 58th Street, Suite 7E
Brooklyn, New York 11220
Annual Meeting of Stockholders - September 30, 1999
Proxy Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Shant S. Hovnanian and Michael Bacon as Proxies,
with full power of substitution to each, to vote for and on behalf of the
undersigned at the 1999 Annual Meeting of Stockholders of SPEEDUS.COM, INC. to
be held at the Company's Network Operations Center located at its Executive
offices at the Brooklyn Army Terminal, 140 58th Street, Suite 7E, Brooklyn, New
York 11220, on Thursday, September 30, 1999 at 10:00 a.m., Eastern daylight
savings time, and at any adjournment or adjournments thereof. The undersigned
hereby directs the said Proxies to vote in accordance with his judgment on any
matters which may properly come before the Annual Meeting, all as indicated in
the Notice of Annual Meeting, receipt of which is hereby acknowledged, and to
act on the following matters set forth in such notice as specified by the
undersigned. In their discretion, the Proxies are authorized to vote upon any
other business that may properly come before the Annual Meeting or at any
adjournment(s) thereof.
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
"FOR" PROPOSALS 1, 2 AND 3.
THE SUBMISSION OF THIS PROXY, IF PROPERLY EXECUTED, REVOKES ALL PRIOR PROXIES.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please sign exactly as your name(s) appear(s) on the books of the Company. Joint
owners should each sign. Trustees, custodians and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If the stockholder is a corporation, the signature should
be that of an authorized officer who should indicate his or her title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------- -------------------------
- ------------------------- -------------------------
- ------------------------- -------------------------
<PAGE>
EXHIBIT A
SPEEDUS.COM, INC.
1995 STOCK INCENTIVE PLAN
(Amended and Restated as of July 28, 1999)
Purpose
The purpose of the Plan is to provide a means through which the Company
and its Subsidiaries may attract able persons to become and remain directors of
the Company and enter and remain in the employ of the Company and its
Subsidiaries and to provide a means whereby employees, directors and consultants
of the Company and its Subsidiaries can acquire and maintain Common Stock
ownership, or be paid incentive compensation measured by reference to the value
of Common Stock, thereby strengthening their commitment to the welfare of the
Company and its Subsidiaries and promoting an identity of interest between
stockholders and these employees, directors and consultants.
So that the appropriate incentive can be provided, the Plan provides for
granting Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation
Rights, Restricted Stock Awards, Phantom Stock Unit Awards, Performance Share
Unit Awards and Stock Bonus Awards, or any combination of the foregoing.
Definitions
The following definitions shall be applicable throughout the Plan.
"Award" means, individually or collectively, any Incentive Stock Option,
Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock
Award, Phantom Stock Unit Award, Performance Share Unit Award or Stock
Bonus Award.
"Award Period" means a period of time within which performance is measured
for the purpose of determining whether an Award of Performance Share Units
has been earned.
"Board" means the Board of Directors of the Company.
"Cause" means the Company or a Subsidiary having cause to terminate a
Participant's employment or service under any existing employment,
consulting or any other agreement between the Participant and the Company
or a Subsidiary or, in the absence of such an employment, consulting or
other agreement, upon (i) the determination by the Committee that the
Participant has ceased to perform his duties to the Company or a
Subsidiary (other than as a result of his incapacity due to physical or
mental illness or injury), which failure amounts
1
<PAGE>
to an intentional and extended neglect of his duties to such party, (ii)
the Committee's determination that the Participant has engaged or is about
to engage in conduct materially injurious to the Company or a Subsidiary
or (iii) the Participant having been convicted of a felony.
"Change in Control" shall, unless the Board otherwise directs by
resolution adopted prior thereto or, in the case of a particular award,
the applicable Award agreement states otherwise, be deemed to occur if (i)
any "person" (as that term is used in Sections 13 and 14(d)(2) of the
Exchange Act) other than a Founder (as defined below) is or becomes the
beneficial owner (as that term is used in Section 13(d) of the Exchange
Act), directly or indirectly, of 30% or more of either the outstanding
shares of Common Stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally, (ii) during any
period of two consecutive years beginning on the date of the consummation
of the IPO, individuals who constitute the Board at the beginning of such
period cease for any reason to constitute at least a majority thereof,
unless the election or the nomination for election by the Company's
shareholders of each new director was approved by a vote of at least
three-quarters of the directors then still in office who were directors at
the beginning of the period or (iii) the Company undergoes a liquidation
or dissolution or a sale of all or substantially all of the assets of the
Company. Neither the IPO nor any merger, consolidation or corporate
reorganization in which the owners of the combined voting power of the
Company's then outstanding voting securities entitled to vote generally
prior to said combination, own 50% or more of the resulting entity's
outstanding voting securities shall, by itself, be considered a Change in
Control. As used herein, "Founder" means Shant S. Hovnanian, Vahak S.
Hovnanian or Bernard B. Bossard.
"Code" means the Internal Revenue Code of 1986, as amended. Reference in
the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations
under such section.
"Committee" means the Board, the Compensation Committee of the Board or
such other committee of at least two people as the Board may appoint to
administer the Plan.
"Common Stock" means the common stock par value $0.01 per share, of the
Company.
"Company" means SPEEDUS.COM, INC.
"Date of Grant" means the date on which the granting of an Award is
authorized or such other date as may be specified in such authorization.
2
<PAGE>
"Disability" means disability as defined in the long-term disability plan
of the Company or a Subsidiary, as may be applicable to the Participant in
question, or, in the absence of such a plan, the complete and permanent
inability by reason of illness or accident to perform the duties of the
occupation at which a Participant was employed or served when such
disability commenced or, if the Participant was retired when such
disability commenced, the inability to engage in any substantial gainful
activity, in either case as determined by the Committee based upon medical
evidence acceptable to it.
"Disinterested Person" means a person who is (i) a "non-employee director"
within the meaning of Rule 16b-3 under the Exchange Act, or any successor
rule or regulation and (ii) an "outside director" within the meaning of
Section 162(m) of the Code; provided, however, that clause (ii) shall
apply only with respect to grants of Awards with respect to which the
Company's tax deduction could be limited by Section 162(m) of the Code if
such clause did not apply.
"Eligible Person" means any (i) person regularly employed by the Company
or a Subsidiary; provided, however, that no such employee covered by a
collective bargaining agreement shall be an Eligible Person unless and to
the extent that such eligibility is set forth in such collective
bargaining agreement or in an agreement or instrument relating thereto;
(ii) director of the Company or a Subsidiary; or (iii) consultant to the
Company or a Subsidiary.
"Exchange Act" means the Securities Exchange Act of 1934.
"Fair Market Value" on a given date means (i) if the Stock is listed on a
national securities exchange, the mean between the highest and lowest sale
prices reported as having occurred on the primary exchange with which the
Stock is listed and traded on the date prior to such date, or, if there is
no such sale on that date, then on the last preceding date on which such a
sale was reported; (ii) if the Stock is not listed on any national
securities exchange but is quoted in the National Market System of the
National Association of Securities Dealers Automated Quotation System on a
last sale basis, the average between the high bid price and low ask price
reported on the date prior to such date, or, if there is no such sale on
that date, then on the last preceding date on which a sale was reported;
(iii) if the Stock is not listed on a national securities exchange nor
quoted in the National Market System of the National Association of
Securities Dealers Automated Quotation System on a last sale basis, the
amount determined by the Committee to be the fair market value based upon
a good faith attempt to value the Stock accurately and computed in
accordance with applicable regulations of the Internal Revenue Service; or
(iv) notwithstanding clauses (i) - (iii) above, with respect to Awards
granted as of the consummation of the
3
<PAGE>
IPO, the price at which Stock is sold to the public in the IPO.
"Holder" means a Participant who has been granted an Award.
"Incentive Stock Option" means an Option granted by the Committee to a
Participant under the Plan which is designated by the Committee as an
Incentive Stock Option pursuant to Section 422 of the Code.
"Interest Portion" has the meaning ascribed thereto in Section 9(g).
"IPO" means the initial offering of Common Stock to the public through an
effective registration statement.
"IPO Option" means Non-Employee Director Options granted upon the
consummation of the IPO.
"IPO Price" means the price per share that the Common Stock is first
offered to the public in the IPO.
"Non-Employee Director" means a director of the Company who is not also an
employee of the Company.
"Non-Employee Director Option" means an Option granted automatically to
Non-Employee Directors pursuant to Section 8.
"Nonqualified Stock Option" means an Option granted under the Plan which
is not designated as an Incentive Stock Option.
"Normal Termination" means termination of employment or service with the
Company and all Subsidiaries and Affiliates:
Upon retirement pursuant to the retirement plan of the Company or a
Subsidiary, as may be applicable at the time to the Participant in
question;
On account of Disability;
With the written approval of the Committee; or
By the Company or a Subsidiary without Cause.
"Option" means an Award granted under Section 7 or 8 of the Plan.
"Option Period" means the period described in Section 7(c).
"Option Price" means the exercise price set for an Option described in
Section 7(a).
"Participant" means an Eligible Person who has been selected by the
Committee to participate in the Plan and to receive an
4
<PAGE>
Award or a Non-Employee Director who has received an automatic grant
pursuant to Section 8.
"Performance Goals" means the performance objectives of the Company, a
Subsidiary or Affiliate during an Award Period or Restricted Period
established for the purpose of determining whether, and to what extent,
Awards will be earned for an Award Period or Restricted Period.
"Performance Share Unit" means a hypothetical investment equivalent equal
to one share of Stock granted in connection with an Award made under
Section 10 of the Plan.
"Phantom Stock Unit" means a hypothetical investment equivalent equal to
one share of Stock granted in connection with an Award made under Section
11 of the Plan, or credited with respect to Awards of Performance Share
Units which have been deferred under Section 9.
"Phantom Stock Unit Portion" has the meaning ascribed thereto in Section
10(g).
"Plan" means the Company's 1995 Stock Incentive Plan.
"Restricted Period" means, with respect to any share of Restricted Stock
or any Phantom Stock Unit, the period of time determined by the Committee
during which such Award is subject to the restrictions set forth in
Section 11.
"Restricted Stock" means shares of Stock issued or transferred to a
Participant subject to forfeiture and the other restrictions set forth in
Section 11.
"Restricted Stock Award" means an Award of Restricted Stock granted under
Section 11 of the Plan.
"Securities Act" means the Securities Act of 1933, as amended.
"Stock" means the Common Stock or such other authorized shares of stock of
the Company as from time to time may be authorized for use under the Plan.
"Stock Appreciation Right" or "SAR" means an Award granted under Section 9
of the Plan.
"Stock Bonus" means an Award granted under Section 12 of the Plan.
"Stock Option Agreement" means the agreement between the Company and a
Participant who has been granted an Option pursuant to Section 7 which
defines the rights and obligations of the parties as required in Section
7(d).
5
<PAGE>
"Subsidiary" means any subsidiary of the Company as defined in Section
424(f) of the Code.
"Term" means the term of a Non-Employee Director Option as set forth in
Section 8.
"Valuation Date" means the last day of an Award Period or the date of
death of a Participant, as applicable.
"Vested Unit" shall have the meaning ascribed thereto in Section 11(e).
Effective Date, Duration and Shareholder Approval
The Plan is effective as of October 18, 1995, the date of adoption of the
Plan by the Board. The effectiveness of the Plan and the validity of any and all
Awards granted pursuant to the Plan is contingent upon approval of the Plan by
the stockholders of the Company in a manner which complies with Rule 16b-3
promulgated pursuant to the Exchange Act and 422(b)(1) of the Code. Unless and
until the stockholders approve the Plan in compliance therewith, no Award
granted under the Plan shall be effective. See Section 18 for the applicability
of the shareholder approval requirements of Section 162(m) of the Code.
The expiration date of the Plan, after which no Awards may be granted
hereunder, shall be October 18, 2005; provided, however, that the administration
of the Plan shall continue in effect until all matters relating to the payment
of Awards previously granted have been settled.
Administration
The Committee shall administer the Plan. Unless otherwise determined by
the Board, each member of the Committee shall, at the time he takes any action
with respect to an Award under the Plan, be a Disinterested Person. The majority
of the members of the Committee shall constitute a quorum. The acts of a
majority of the members present at any meeting at which a quorum is present or
acts approved in writing by a majority of the Committee shall be deemed the acts
of the Committee.
Subject to the provisions of the Plan, the Committee shall have exclusive
power to:
Select the Eligible Persons to participate in the Plan;
Determine the nature and extent of the Awards to be made to each Eligible
Person;
Determine the time or times when Awards will be made to Eligible Persons;
6
<PAGE>
Determine the duration of each Award Period and Restricted Period;
Determine the conditions to which the payment of Awards may be subject;
Establish the Performance Goals for each Award Period;
Prescribe the form of Stock Option Agreement or other form or forms
evidencing Awards; and
Cause records to be established in which there shall be entered, from time
to time as Awards are made to Participants, the date of each Award, the number
of Incentive Stock Options, Nonqualified Stock Options, SARs, Phantom Stock
Units, Performance Share Units, shares of Restricted Stock and Stock Bonuses
awarded by the Committee to each Participant, the expiration date, the Award
Period and the duration of any applicable Restricted Period.
The Committee shall have the authority, subject to the provisions of the
Plan, to establish, adopt, or revise such rules and regulations and to make all
such determinations relating to the Plan as it may deem necessary or advisable
for the administration of the Plan. The Committee's interpretation of the Plan
or any documents evidencing Awards granted pursuant thereto and all decisions
and determinations by the Committee with respect to the Plan shall be final,
binding, and conclusive on all parties unless otherwise determined by the Board.
Grant of Awards; Shares Subject to the Plan
The Committee may, from time to time, grant Awards of Options, Stock
Appreciation Rights, Restricted Stock, Phantom Stock Units, Performance Share
Units and/or Stock Bonuses to one or more Eligible Persons and, unless otherwise
determined by the Committee, Non-Employee Directors will automatically receive
Awards pursuant to the formula set forth in Section 8; provided, however, that:
Subject to Section 14, the aggregate number of shares of Stock made
subject to all Awards may not exceed 1,750,000;
Such shares shall be deemed to have been used in payment of Awards
whether they are actually delivered or the Fair Market Value equivalent of
such shares is paid in cash. In the event any Option, SAR not attached to
an Option, Restricted Stock, Phantom Stock Unit or Performance Share Unit
shall be surrendered, terminate, expire, or be forfeited, the number of
shares of Stock no longer subject thereto shall thereupon be released and
shall thereafter be available for new Awards under the Plan to the fullest
7
<PAGE>
extent permitted by Rule 16b-3 under the Exchange Act (if applicable at
the time);
Stock delivered by the Company in settlement of Awards under the
Plan may be authorized and unissued Stock or Stock held in the treasury of
the Company or may be purchased on the open market or by private purchase;
and
Following the date that the exemption from the application of
Section 162(m) of the Code described in Section 18 (or any other exemption
having similar effect) ceases to apply to Awards, no Participant may
receive Options or SARs under the Plan with respect to more than 500,000
shares of Stock in any one year.
Eligibility
Participation shall be limited to Eligible Persons who have received
written notification from the Committee, or from a person designated by the
Committee, that they have been selected to participate in the Plan and to
Non-Employee Directors who will receive automatic grants of Nonqualified Stock
Options pursuant to Section 8.
Discretionary Grant of Stock Options
The Committee is authorized to grant one or more Incentive Stock Options
or Nonqualified Stock Options to any Eligible Person; provided, however, that no
Incentive Stock Options shall be granted to any Eligible Person who is not an
employee of the Company or a Subsidiary. Each Option so granted shall be subject
to the following conditions, or to such other conditions as may be reflected in
the applicable Stock Option Agreement.
Option price. The exercise price ("Option Price") per share of Stock for
each Option shall be set by the Committee at the time of grant but shall
not be less than (i) in the case of an Incentive Stock Option, and subject
to Section 7(e), the Fair Market Value of a share of Stock at the Date of
Grant, and (ii) in the case of a Non-Qualified Stock Option, the par value
per share of Stock; provided, however, that following the date that the
exemption from the application of Section 162(m) of the Code described in
Section 18 (or any other exemption having similar effect) ceases to apply
to Options, all Options intended to qualify as "performance-based
compensation" under Section 162(m) of the Code shall have an Option Price
per share of Stock no less than the Fair Market Value of a share of Stock
on the Date of Grant.
Manner of exercise and form of payment. Options which have become
exercisable may be exercised by delivery of written notice of exercise to
the Committee accompanied by payment of the Option Price. The Option Price
shall be payable in cash and/or shares of Stock valued at the Fair Market
Value at the
8
<PAGE>
time the Option is exercised or, in the discretion of the Committee,
either (i) in other property having a fair market value on the date of
exercise equal to the Option Price, or (ii) by delivering to the Committee
a copy of irrevocable instructions to a stockbroker to deliver promptly to
the Company an amount of sale or loan proceeds sufficient to pay the
Option Price.
Option Period and Expiration. Options shall vest and become exercisable in
such manner and on such date or dates determined by the Committee and
shall expire after such period, not to exceed ten years, as may be
determined by the Committee (the "Option Period"); provided, however, that
notwithstanding any vesting dates set by the Committee, the Committee may
in its sole discretion accelerate the exercisability of any Option, which
acceleration shall not affect the terms and conditions of any such Option
other than with respect to exercisability. If an Option is exercisable in
installments, such installments or portions thereof which become
exercisable shall remain exercisable until the Option expires. Unless
otherwise stated in the applicable Option Agreement, the Option shall
expire earlier than the end of the Option Period in the following
circumstances:
If prior to the end of the Option Period, the Holder shall undergo a
Normal Termination, the Option shall expire on the earlier of
the last day of the Option Period or the date that is three
months after the date of such Normal Termination. In such
event, the Option shall remain exercisable by the Holder until
its expiration, only to the extent the Option was exercisable
at the time of such Normal Termination.
If the Holder dies prior to the end of the Option Period and while
still in the employ or service of the Company, a Subsidiary or
Affiliate, or within three months of Normal Termination, the
Option shall expire on the earlier of the last day of the
Option Period or the date that is twelve months after the date
of death of the Holder. In such event, the Option shall remain
exercisable by the person or persons to whom the Holder's
rights under the Option pass by will or the applicable laws of
descent and distribution until its expiration, only to the
extent the Option was exercisable by the Holder at the time of
death.
If the Holder ceases employment or service with the Company and all
Subsidiaries and Affiliates for reasons other than Normal
Termination or death,
9
<PAGE>
the Option shall expire immediately upon such cessation of
employment or service.
Stock Option Agreement - Other Terms and Conditions. Each Option granted
under the Plan shall be evidenced by a Stock Option Agreement, which shall
contain such provisions as may be determined by the Committee and, except
as may be specifically stated otherwise in such Stock Option Agreement,
which shall be subject to the following terms and conditions:
Each Option issued pursuant to this Section 7 or portion thereof
that is exercisable shall be exercisable for the full amount
or for any part thereof.
Each share of Stock purchased through the exercise of an Option
issued pursuant to this Section 7 shall be paid for in full at
the time of the exercise. Each Option shall cease to be
exercisable, as to any share of Stock, when the Holder
purchases the share or exercises a related SAR or when the
Option expires.
Subject to Section 13(k), Options issued pursuant to this Section 7
shall not be transferable by the Holder except by will or the
laws of descent and distribution and shall be exercisable
during the Holder's lifetime only by him.
Each Option issued pursuant to this Section 7 shall vest and become
exercisable by the Holder in accordance with the vesting
schedule established by the Committee and set forth in the
Stock Option Agreement.
Each Stock Option Agreement may contain a provision that, upon
demand by the Committee for such a representation, the Holder
shall deliver to the Committee at the time of any exercise of
an Option issued pursuant to this Section 7 a written
representation that the shares to be acquired upon such
exercise are to be acquired for investment and not for resale
or with a view to the distribution thereof. Upon such demand,
delivery of such representation prior to the delivery of any
shares issued upon exercise of an Option issued pursuant to
this Section 7 shall be a condition precedent to the right of
the Holder or such other person to purchase any shares. In the
event certificates for Stock are delivered under the Plan with
respect to which such investment representation has been
obtained, the Committee may cause a legend or legends to be
placed on such certificates to
10
<PAGE>
make appropriate reference to such representation and to
restrict transfer in the absence of compliance with applicable
federal or state securities laws.
Each Incentive Stock Option Agreement shall contain a provision
requiring the Holder to notify the Company in writing
immediately after the Holder makes a disqualifying disposition
of any Stock acquired pursuant to the exercise of such
Incentive Stock Option. A disqualifying disposition is any
disposition (including any sale) of such Stock before the
later of (a) two years after the Date of Grant of the
Incentive Stock Option or (b) one year after the date the
Holder acquired the Stock by exercising the Incentive Stock
Option.
Incentive Stock Option Grants to 10% Stockholders. Notwithstanding
anything to the contrary in this Section 7, if an Incentive Stock Option
is granted to a Holder who owns stock representing more than ten percent
of the voting power of all classes of stock of the Company or of a
Subsidiary, the Option Period shall not exceed five years from the Date of
Grant of such Option and the Option Price shall be at least 110 percent of
the Fair Market Value (on the Date of Grant) of the Stock subject to the
Option.
$100,000 Per Year Limitation for Incentive Stock Options. To the extent
the aggregate Fair Market Value (determined as of the Date of Grant) of
Stock for which Incentive Stock Options are exercisable for the first time
by any Participant during any calendar year (under all plans of the
Company and its Subsidiaries) exceeds $100,000, such excess Incentive
Stock Options shall be treated as Nonqualified Stock Options.
Voluntary Surrender. The Committee may permit the voluntary surrender of
all or any portion of any Nonqualified Stock Option issued pursuant to
this Section 7 and its corresponding SAR, if any, granted under the Plan
to be conditioned upon the granting to the Holder of a new Option for the
same or a different number of shares as the Option surrendered or require
such voluntary surrender as a condition precedent to a grant of a new
Option to such Participant. Such new Option shall be exercisable at an
Option Price, during an Option Period, and in accordance with any other
terms or conditions specified by the Committee at the time the new Option
is granted, all determined in accordance with the provisions of the Plan
without regard to the Option Price, Option Period, or any other terms and
conditions of the Nonqualified Stock Option surrendered.
Automatic Grant of Options
11
<PAGE>
Upon the consummation of the IPO each Non-Employee Director shall be
automatically granted an IPO Option to purchase 5,000 shares of Stock.
Thereafter, unless otherwise determined by the Committee, on the date any person
first becomes a Non-Employee Director, such person shall be automatically
granted without further action by the Board or the Committee a Nonqualified
Stock Option to purchase 5,000 shares of Stock. Thereafter, unless otherwise
determined by the Committee, for the remainder of the term of the Plan and
provided he remains a Non-Employee Director of the Company, on the date of each
of the Company's Annual Meeting of Stockholders, each Non-Employee Director
shall be automatically granted without further action by the Board or the
Committee a Nonqualified Stock Option to purchase 1,000 shares of Stock. All
such Options granted to Non-Employee Directors shall hereinafter be referred to
as Non-Employee Director Options.
Option Price; Term. IPO Options shall have an Option Price per share equal
to the IPO Price. All other Non-Employee Director Options shall have an
Option Price per share equal to the Fair Market Value of a share of Stock
on the Date of Grant. IPO Options shall vest and become exercisable over a
period of two years at the rate of 50% of each grant annually on each of
the two consecutive anniversaries of the Date of Grant directly following
the Date of Grant provided the Non-Employee Director's services as a
director continues through each such anniversary. All other Non-Employee
Director Options shall be fully vested and exercisable as of the date of
grant. The term of each Non-Employee Director Option ("Term"), after which
each such Option shall expire, shall be ten years from the date of Grant.
Expiration. If prior to the expiration of the Term of a Non-Employee
Director Option the Non-Employee Director shall cease to be a member of
the Board for any reason other than his death, the Non-Employee Director
Option shall expire on the earlier of the expiration of the Term or the
date that is three months after the date of such cessation. If prior to
the expiration of the Term of a Non-Employee Director Option a
Non-Employee Director shall cease to be a member of the Board by reason of
his death, the Non-Employee Director Option shall expire on the earlier of
the expiration of the Term or the date that is one year after the date of
such cessation. In the event a Non-Employee Director ceases to be a member
of the Board for any reason, any unexpired Non-Employee Director Option
shall thereafter be exercisable until its expiration only to the extent
that such Option was exercisable at the time of such cessation.
Stock Option Agreement. Each Non-Employee Director Option shall be
evidenced by a Stock Option Agreement, which shall contain such provisions
as may be determined by the Committee; provided, however, that such
provisions shall not be
12
<PAGE>
inconsistent with the formula grant provisions of Rule 16b-3(c)(2)(ii)
pursuant to the Exchange Act.
Nontransferability. Subject to Section 13(k), Non-Employee Director
Options shall not be transferable except by will or the laws of descent
and distribution and shall be exercisable during the Non-Employee
Director's lifetime only by him.
Stock Appreciation Rights
Any Option (other than Non-Employee Director Options) granted under the
Plan may include SARs, either at the Date of Grant or, except in the case of an
Incentive Stock Option, by subsequent amendment. The Committee also may award
SARs independent of any Option. An SAR shall be subject to such terms and
conditions not inconsistent with the Plan as the Committee shall impose,
including, but not limited to, the following:
Vesting. SARs granted in connection with an Option shall become
exercisable, be transferable and shall expire according to the same
vesting schedule, transferability rules and expiration provisions as the
corresponding Option. An SAR granted independent of an Option shall become
exercisable, be transferable and shall expire in accordance with a vesting
schedule, transferability rules and expiration provisions as established
by the Committee and reflected in an Award agreement. Notwithstanding the
above, an SAR shall not be exercisable by a person subject to Section
16(b) of the Exchange Act for at least six months following the Date of
Grant.
Automatic exercise. If on the last day of the Option Period (or in the
case of an SAR independent of an Option, the period established by the
Committee after which the SAR shall expire), the Fair Market Value of the
Stock exceeds the Option Price (or in the case of an SAR granted
independent of an Option, the Fair Market Value of the Stock on the Date
of Grant), the Holder has not exercised the SAR or the corresponding
Option, and neither the SAR nor the corresponding Option has expired, such
SAR shall be deemed to have been exercised by the Holder on such last day
and the Company shall make the appropriate payment therefor.
Payment. Upon the exercise of an SAR, the Company shall pay to the Holder
an amount equal to the number of shares subject to the SAR multiplied by
the excess, if any, of the Fair Market Value of one share of Stock on the
exercise date over the Option Price, in the case of an SAR granted in
connection with an Option, or the Fair Market Value of one share of Stock
on the Date of Grant, in the case of an SAR granted independent of an
Option. The Company shall pay such excess in cash, in shares of Stock
valued at Fair Market Value, or
13
<PAGE>
any combination thereof, as determined by the Committee. Fractional shares
shall be settled in cash.
(d) Method of exercise. A Holder may exercise an SAR after such time as
the SAR vests by filing an irrevocable written notice with the Committee
or its designee, specifying the number of SARs to be exercised, and the
date on which such SARs were awarded. Such time or times determined by the
Committee may take into account any applicable "window periods" required
by Rule 16b-3 under the Exchange Act.
(e) Expiration. Except as otherwise provided, in the case of SARs granted
in connection with Options, an SAR shall expire on a date designated by
the Committee which is not later than ten years after the Date of Grant of
the SAR.
Performance Shares
Award grants. The Committee is authorized to establish Performance Share
programs to be effective over designated Award Periods determined by the
Committee. The Committee may grant Awards of Performance Share Units to
Eligible Persons in accordance with such Performance Share programs. At
the beginning of each Award Period, the Committee will establish written
Performance Goals based upon financial objectives for the Company for such
Award Period and a schedule relating the accomplishment of the Performance
Goals to the Awards to be earned by Participants. Performance Goals may
include absolute or relative growth in earnings per share or rate of
return on stockholders' equity or other measurement of corporate
performance and may be determined on an individual basis or by categories
of Participants. The Committee shall determine the number of Performance
Share Units to be awarded, if any, to each Eligible Person who is selected
to receive such an Award. The Committee may add new Participants to a
Performance Share program after its commencement by making pro rata
grants.
Determination of Award. At the completion of a Performance Share Award
Period, or at other times as specified by the Committee, the Committee
shall calculate the number of shares of Stock earned with respect to each
Participant's Performance Share Unit Award by multiplying the number of
Performance Share Units granted to the Participant by a performance factor
representing the degree of attainment of the Performance Goals.
Partial Awards. A Participant for less than a full Award Period, whether
by reason of commencement or termination of employment or otherwise, shall
receive such portion of an Award, if any, for that Award Period as the
Committee shall determine.
14
<PAGE>
Payment of Performance Share Unit Awards. Performance Share Unit Awards
shall be payable in that number of shares of Stock determined in
accordance with Section 10(b); provided, however, that, at its discretion,
the Committee may make payment to any Participant in the form of cash upon
the specific request of such Participant. The amount of any payment made
in cash shall be based upon the Fair Market Value of the Stock on the day
prior to payment. Payments of Performance Share Unit Awards shall be made
as soon as practicable after the completion of an Award Period.
Adjustment of Performance Goals. The Committee may, during the Award
Period, make such adjustments to Performance Goals as it may deem
appropriate, to compensate for, or reflect, (i) extraordinary or
non-recurring events experienced during an Award Period by the Company or
by any other corporation whose performance is relevant to the
determination of whether Performance Goals have been attained; (ii) any
significant changes that may have occurred during such Award Period in
applicable accounting rules or principles or changes in the Company's
method of accounting or in that of any other corporation whose performance
is relevant to the determination of whether an Award has been earned or
(iii) any significant changes that may have occurred during such Award
Period in tax laws or other laws or regulations that alter or affect the
computation of the measures of Performance Goals used for the calculation
of Awards; provided, however, that following the date that the exemption
from the application of Section 162(m) of the Code described in Section 18
(or any other exemption having similar effect) ceases to apply to
Performance Share Unit Awards, with respect to such Awards intended to
qualify as "performance-based compensation" under Section 162(m) of the
Code, such adjustment shall be made only to the extent that the Committee
determines that such adjustments may be made without a loss of
deductibility for such Award under Section 162(m) of the Code.
Restricted Stock Awards and Phantom Stock Units
Award of Restricted Stock and Phantom Stock Units.
The Committee shall have the authority (1) to grant Restricted Stock
and Phantom Stock Unit Awards, (2) to issue or transfer
Restricted Stock to Eligible Persons, and (3) to establish
terms, conditions and restrictions applicable to such
Restricted Stock and Phantom Stock Units, including the
Restricted Period, which may differ with respect to each
grantee, the time or times at which Restricted Stock or
Phantom Stock Units shall be granted or become vested and the
number of shares or units to be covered by each grant.
15
<PAGE>
The Holder of a Restricted Stock Award shall execute and deliver to
the Company an Award agreement with respect to the Restricted
Stock setting forth the restrictions applicable to such
Restricted Stock. If the Committee determines that the
Restricted Stock shall be held in escrow rather than delivered
to the Holder pending the release of the applicable
restrictions, the Holder additionally shall execute and
deliver to the Company (i) an escrow agreement satisfactory to
the Committee, and (ii) the appropriate blank stock powers
with respect to the Restricted Stock covered by such
agreements. If a Holder shall fail to execute a Restricted
Stock agreement and, if applicable, an escrow agreement and
stock powers, the Award shall be null and void. Subject to the
restrictions set forth in Section 11(b), the Holder shall
generally have the rights and privileges of a stockholder as
to such Restricted Stock, including the right to vote such
Restricted Stock. At the discretion of the Committee, cash
dividends and stock dividends with respect to the Restricted
Stock may be either currently paid to the Holder or withheld
by the Company for the Holder's account, and interest may be
paid on the amount of cash dividends withheld at a rate and
subject to such terms as determined by the Committee. Cash
dividends or stock dividends so withheld by the Committee
shall not be subject to forfeiture.
Upon the Award of Restricted Stock, the Committee shall cause a
stock certificate registered in the name of the Holder to be
issued and, if it so determines, deposited together with the
stock powers with an escrow agent designated by the Committee.
If an escrow arrangement is used, the Committee shall cause
the escrow agent to issue to the Holder a receipt evidencing
any stock certificate held by it registered in the name of the
Holder.
The terms and conditions of a grant of Phantom Stock Units shall be
reflected in a written Award agreement. No shares of Stock shall be issued
at the time a Phantom Stock Unit Award is made, and the Company will not
be required to set aside a fund for the payment of any such Award. Holders
of Phantom Stock Units shall receive an amount equal to the cash dividends
paid by the Company upon one share of Stock for each Phantom Stock Unit
then credited to such Holder's account ("Dividend Equivalents"). The
Committee shall, in its sole discretion, determine whether to credit to
the account of, or to currently pay to, each Holder of an Award of Phantom
Stock Units such Dividend Equivalents. Dividend
16
<PAGE>
Equivalents credited to a Holder's account shall be subject to forfeiture
on the same basis as the related Phantom Stock Units, and may bear
interest at a rate and subject to such terms as are determined by the
Committee.
Restrictions.
Restricted Stock awarded to a Participant shall be subject to the
following restrictions until the expiration of the Restricted
Period, and to such other terms and conditions as may be set
forth in the applicable Award agreement: (1) if an escrow
arrangement is used, the Holder shall not be entitled to
delivery of the stock certificate; (2) the shares shall be
subject to the restrictions on transferability set forth in
the Award agreement; (3) the shares shall be subject to
forfeiture to the extent provided in subparagraph (d) and the
Award Agreement and, to the extent such shares are forfeited,
the stock certificates shall be returned to the Company, and
all rights of the Holder to such shares and as a shareholder
shall terminate without further obligation on the part of the
Company.
Phantom Stock Units awarded to any Participant shall be subject to
(1) forfeiture until the expiration of the Restricted Period,
to the extent provided in subparagraph (d) and the Award
agreement, and to the extent such Awards are forfeited, all
rights of the Holder to such Awards shall terminate without
further obligation on the part of the Company and (2) such
other terms and conditions as may be set forth in the
applicable Award agreement.
The Committee shall have the authority to remove any or all of the
restrictions on the Restricted Stock and Phantom Stock Units
whenever it may determine that, by reason of changes in
applicable laws or other changes in circumstances arising
after the date of the Restricted Stock Award or Phantom Stock
Award, such action is appropriate.
Restricted Period. The Restricted Period of Restricted Stock and Phantom
Stock Units shall commence on the Date of Grant and shall expire from time
to time as to that part of the Restricted Stock and Phantom Stock Units
indicated in a schedule established by the Committee and set forth in a
written Award agreement.
17
<PAGE>
Forfeiture Provisions. Except to the extent determined by the Committee and
reflected in the underlying Award agreement, in the event a Holder terminates
employment with the Company and all Subsidiaries during a Restricted Period,
that portion of the Award with respect to which restrictions have not expired
("Non-Vested Portion") shall be treated as follows.
Upon the voluntary resignation of a Participant or discharge by the
Company or a Subsidiary for Cause, the Non-Vested Portion of
the Award shall be completely forfeited.
Upon Normal Termination, the Non-Vested Portion of the Award shall
be prorated for service during the Restricted Period and shall
be received as soon as practicable following termination.
Upon death, the Non-Vested Portion of the Award shall be prorated
for service during the Restricted Period and paid to the
Participant's beneficiary as soon as practicable following
death.
Delivery of Restricted Stock and Settlement of Phantom Stock Units. Upon
the expiration of the Restricted Period with respect to any shares of
Stock covered by a Restricted Stock Award, the restrictions set forth in
Section 11(b) and the Award agreement shall be of no further force or
effect with respect to shares of Restricted Stock which have not then been
forfeited. If an escrow arrangement is used, upon such expiration, the
Company shall deliver to the Holder, or his beneficiary, without charge,
the stock certificate evidencing the shares of Restricted Stock which have
not then been forfeited and with respect to which the Restricted Period
has expired (to the nearest full share) and any cash dividends or stock
dividends credited to the Holder's account with respect to such Restricted
Stock and the interest thereon, if any.
Upon the expiration of the Restricted Period with respect to any Phantom
Stock Units covered by a Phantom Stock Unit Award, the Company shall deliver to
the Holder, or his beneficiary, without charge, one share of Stock for each
Phantom Stock Unit which has not then been forfeited and with respect to which
the Restricted Period has expired ("Vested Unit") and cash equal to any Dividend
Equivalents credited with respect to each such Vested Unit and the interest
thereon, if any; provided, however, that, if so noted in the applicable Award
agreement, the Committee may, in its sole discretion, elect to pay cash or part
cash and part Stock in lieu of delivering only Stock for Vested Units. If cash
payment is made in lieu of delivering Stock, the amount of such payment shall be
equal to the Fair Market Value of the Stock as of the date on which the
Restricted Period lapsed with respect to such Vested Unit.
18
<PAGE>
Stock Restrictions. Each certificate representing Restricted Stock awarded
under the Plan shall bear the following legend until the end of the
Restricted Period with respect to such Stock:
"Transfer of this certificate and the shares represented
hereby is restricted pursuant to the terms of a Restricted Stock
Agreement, dated as of ____________, between SPEEDUS.COM, INC. and
____________________. A copy of such Agreement is on file at the offices
of the Company."
Stop transfer orders shall be entered with the Company's transfer agent and
registrar against the transfer of legended securities.
Stock Bonus Awards
The Committee may issue unrestricted Stock under the Plan to Eligible
Persons, alone or in tandem with other Awards, in such amounts and subject to
such terms and conditions as the Committee shall from time to time in its sole
discretion determine. Stock Bonus Awards under the Plan shall be granted as, or
in payment of, a bonus, or to provide incentives or recognize special
achievements or contributions.
General
Additional Provisions of an Award. Awards under the Plan also may be
subject to such other provisions (whether or not applicable to the benefit
awarded to any other Participant) as the Committee determines appropriate
including, without limitation, provisions to assist the Participant in
financing the purchase of Stock upon the exercise of Options, provisions
for the forfeiture of or restrictions on resale or other disposition of
shares of Stock acquired under any Award, provisions giving the Company
the right to repurchase shares of Stock acquired under any Award in the
event the Participant elects to dispose of such shares, and provisions to
comply with Federal and state securities laws and Federal and state tax
withholding requirements. Any such provisions shall be reflected in the
applicable Award agreement.
Privileges of Stock Ownership. Except as otherwise specifically provided
in the Plan, no person shall be entitled to the privileges of stock
ownership in respect of shares of Stock which are subject to Awards
hereunder until such shares have been issued to that person.
Government and Other Regulations. The obligation of the Company to make
payment of Awards in Stock or otherwise shall be subject to all applicable
laws, rules, and regulations, and to such approvals by governmental
agencies as may be required. Notwithstanding any terms or conditions of
any Award to the contrary, the Company shall be under no obligation to
offer to sell or to sell and shall be prohibited from offering to sell
19
<PAGE>
or selling any shares of Stock pursuant to an Award unless such shares
have been properly registered for sale pursuant to the Securities Act with
the Securities and Exchange Commission or unless the Company has received
an opinion of counsel, satisfactory to the Company, that such shares may
be offered or sold without such registration pursuant to an available
exemption therefrom and the terms and conditions of such exemption have
been fully complied with. The Company shall be under no obligation to
register for sale under the Securities Act any of the shares of Stock to
be offered or sold under the Plan. If the shares of Stock offered for sale
or sold under the Plan are offered or sold pursuant to an exemption from
registration under the Securities Act, the Company may restrict the
transfer of such shares and may legend the Stock certificates representing
such shares in such manner as it deems advisable to ensure the
availability of any such exemption.
Tax Withholding. Notwithstanding any other provision of the Plan, the
Company or a Subsidiary, as appropriate, shall have the right to deduct
from all Awards cash and/or Stock, valued at Fair Market Value on the date
of payment, in an amount necessary to satisfy all Federal, state or local
taxes as required by law to be withheld with respect to such Awards and,
in the case of Awards paid in Stock, the Holder or other person receiving
such Stock may be required to pay to the Company or a Subsidiary, as
appropriate, prior to delivery of such Stock, the amount of any such taxes
which the Company or Subsidiary is required to withhold, if any, with
respect to such Stock. Subject in particular cases to the disapproval of
the Committee, the Company may accept shares of Stock of equivalent Fair
Market Value in payment of such withholding tax obligations if the Holder
of the Award elects to make payment in such manner and, with respect to a
Holder subject to Section 16(b) of the Exchange Act, if at least six
months prior to the date such tax obligation is determined; provided,
however, that such six-month advance election shall not be required if it
is not necessary in order for the withholding election to be exempt from
the application of such Section 16(b);
Claim to Awards and Employment Rights. No employee or other person shall
have any claim or right to be granted an Award under the Plan or, having
been selected for the grant of an Award, to be selected for a grant of any
other Award. Neither the Plan nor any action taken hereunder shall be
construed as giving any Participant any right to be retained in the employ
or service of the Company or a Subsidiary.
Designation and Change of Beneficiary. Each Participant may file with the
Committee a written designation of one or more persons as the beneficiary
who shall be entitled to receive the rights or amounts payable with
respect to an Award due under the Plan upon his death. A Participant may,
from time
20
<PAGE>
to time, revoke or change his beneficiary designation without the consent
of any prior beneficiary by filing a new designation with the Committee.
The last such designation received by the Committee shall be controlling;
provided, however, that no designation, or change or revocation thereof,
shall be effective unless received by the Committee prior to the
Participant's death, and in no event shall it be effective as of a date
prior to such receipt. If no beneficiary designation is filed by the
Participant, the beneficiary shall be deemed to be his or her spouse or,
if the Participant is unmarried at the time of death, his or her estate.
Payments to Persons Other Than Participants. If the Committee shall find
that any person to whom any amount is payable under the Plan is unable to
care for his affairs because of illness or accident, or is a minor, or has
died, then any payment due to such person or his estate (unless a prior
claim therefor has been made by a duly appointed legal representative)
may, if the Committee so directs the Company, be paid to his spouse,
child, relative, an institution maintaining or having custody of such
person, or any other person deemed by the Committee to be a proper
recipient on behalf of such person otherwise entitled to payment. Any such
payment shall be a complete discharge of the liability of the Committee
and the Company therefor.
No Liability of Committee Members. No member of the Committee shall be
personally liable by reason of any contract or other instrument executed
by such member or on his behalf in his capacity as a member of the
Committee nor for any mistake of judgment made in good faith, and the
Company shall indemnify and hold harmless each member of the Committee and
each other employee, officer or director of the Company to whom any duty
or power relating to the administration or interpretation of the Plan may
be allocated or delegated, against any cost or expense (including counsel
fees) or liability (including any sum paid in settlement of a claim)
arising out of any act or omission to act in connection with the Plan
unless arising out of such person's own fraud or willful bad faith;
provided, however, that approval of the Board shall be required for the
payment of any amount in settlement of a claim against any such person.
The foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which such persons may be entitled under the
Company's Articles of Incorporation or By-Laws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or
hold them harmless.
Governing law. The Plan shall be governed by and construed in accordance
with the internal laws of the State of New York without regard to the
principles of conflicts of law thereof.
Funding. No provision of the Plan shall require the Company, for the
purpose of satisfying any obligations under the Plan,
21
<PAGE>
to purchase assets or place any assets in a trust or other entity to which
contributions are made or otherwise to segregate any assets, nor shall the
Company maintain separate bank accounts, books, records or other evidence
of the existence of a segregated or separately maintained or administered
fund for such purposes. Holders shall have no rights under the Plan other
than as unsecured general creditors of the Company, except that insofar as
they may have become entitled to payment of additional compensation by
performance of services, they shall have the same rights as other
employees under general law.
Nontransferability. A person's rights and interest under the Plan,
including amounts payable, may not be sold, assigned, donated, or
transferred or otherwise disposed of, mortgaged, pledged or encumbered
except, in the event of a Holder's death, to a designated beneficiary to
the extent permitted by the Plan, or in the absence of such designation,
by will or the laws of descent and distribution; provided, however, the
Committee may, in its sole discretion, allow for transfer of Awards other
than Incentive Stock Options to other persons or entities, subject to such
conditions or limitations as it may establish to ensure that Awards
intended to be exempt from Section 16(b) of the Exchange Act pursuant to
Rule 16b-3 under the Exchange Act continue to be so exempt or for other
purposes.
Reliance on Reports. Each member of the Committee and each member of the
Board shall be fully justified in relying, acting or failing to act, and
shall not be liable for having so relied, acted or failed to act in good
faith, upon any report made by the independent public accountant of the
Company and its Subsidiaries and upon any other information furnished in
connection with the Plan by any person or persons other than himself.
Relationship to Other Benefits. No payment under the Plan shall be taken
into account in determining any benefits under any pension, retirement,
profit sharing, group insurance or other benefit plan of the Company or
any Subsidiary except as otherwise specifically provided in such other
plan.
Expenses. The expenses of administering the Plan shall be borne by the
Company and its Subsidiaries.
Pronouns. Masculine pronouns and other words of masculine gender shall
refer to both men and women.
Titles and Headings. The titles and headings of the sections in the Plan
are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings shall control.
22
<PAGE>
Termination of Employment. For all purposes herein, a person who transfers
from employment or service with the Company to employment or service with
a Subsidiary or vice versa shall not be deemed to have terminated
employment or service with the Company or a Subsidiary.
Changes in Capital Structure.Awards granted under the Plan and any
agreements evidencing such Awards, the maximum number of shares of Stock
subject to all Awards and the maximum number of shares of Stock with
respect to which any one person may be granted Options or SARs during any
year shall be subject to adjustment or substitution, as determined by the
Committee in its sole discretion, as to the number, price or kind of a
share of Stock or other consideration subject to such Awards or as
otherwise determined by the Committee to be equitable (i) in the event of
changes in the outstanding Stock or in the capital structure of the
Company by reason of stock dividends, stock splits, reverse stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges, or other relevant changes in capitalization occurring after the
Date of Grant of any such Award or (ii) in the event of any change in
applicable laws or any change in circumstances which results in or would
result in any substantial dilution or enlargement of the rights granted
to, or available for, Participants in the Plan, or which otherwise
warrants equitable adjustment because it interferes with the intended
operation of the Plan. In addition, in the event of any such adjustments
or substitution, the aggregate number of shares of Stock available under
the Plan shall be appropriately adjusted by the Committee, whose
determination shall be conclusive. Any adjustment in Incentive Stock
Options under this Section 14 shall be made only to the extent not
constituting a "modification" within the meaning of Section 424(h)(3) of
the Code, and any adjustments under this Section 14 shall be made in a
manner which does not adversely affect the exemption provided pursuant to
Rule 16b-3 under the Exchange Act. Further, following the date that the
exemption from the application of Section 162(m) of the Code described in
Section 18 (or any other exemption having similar effect) ceases to apply
to Awards, with respect to Awards intended to qualify as
"performance-based compensation" under Section 162(m) of the Code, such
adjustments or substitutions shall be made only to the extent that the
Committee determines that such adjustments or substitutions may be made
without a loss of deductibility for such Awards under Section 162(m) of
the Code. The Company shall give each Participant notice of an adjustment
hereunder and, upon notice, such adjustment shall be conclusive and
binding for all purposes.
Notwithstanding the above, in the event of any of the following:
23
<PAGE>
A. The Company is merged or consolidated with another
corporation or entity and, in connection therewith, consideration is
received by shareholders of the Company in a form other than stock
or other equity interests of the surviving entity;
B. All or substantially all of the assets of the Company are
acquired by another person;
C. The reorganization or liquidation of the Company; or
D. The Company shall enter into a written agreement to undergo
an event described in clauses A, B or C above,
then the Committee may, in its discretion and upon at least 10 days advance
notice to the affected persons, cancel any outstanding Awards and pay to the
Holders thereof, in cash, the value of such Awards based upon the price per
share of Stock received or to be received by other shareholders of the Company
in the event. The terms of this Section 14 may be varied by the Committee in any
particular Award agreement.
Effect of Change in Control
Except to the extent reflected in a particular Award agreement:
In the event of a Change in Control, notwithstanding any vesting schedule
with respect to an Award of Options, SARs, Phantom Stock Units or
Restricted Stock, such Option or SAR shall become immediately exercisable
with respect to 100 percent of the shares subject to such Option or SAR,
and the Restricted Period shall expire immediately with respect to 100
percent of such Phantom Stock Units or shares of Restricted Stock.
In the event of a Change in Control, all incomplete Award Periods in
effect on the date the Change in Control occurs shall end on the date of
such change, and the Committee shall (i) determine the extent to which
Performance Goals with respect to each such Award Period have been met
based upon such audited or unaudited financial information then available
as it deems relevant, (ii) cause to be paid to each Participant partial or
full Awards with respect to Performance Goals for each such Award Period
based upon the Committee's determination of the degree of attainment of
Performance Goals, and (iii) cause all previously deferred Awards to be
settled in full as soon as possible.
The obligations of the Company under the Plan shall be binding upon any
successor corporation or organization resulting from the merger,
consolidation or other reorganization of the
24
<PAGE>
Company, or upon any successor corporation or organization succeeding to
substantially all of the assets and business of the Company. The Company
agrees that it will make appropriate provisions for the preservation of
Participant's rights under the Plan in any agreement or plan which it may
enter into or adopt to effect any such merger, consolidation,
reorganization or transfer of assets.
Nonexclusivity of the Plan
Neither the adoption of this Plan by the Board nor the submission of this
Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under this Plan, and such arrangements
may be either applicable generally or only in specific cases.
Amendments and Termination
The Board may at any time terminate the Plan. Subject to Section 14, with
the express written consent of an individual Participant, the Board or the
Committee may cancel or reduce or otherwise alter outstanding Awards if, in its
judgment, the tax, accounting, or other effects of the Plan or potential payouts
thereunder would not be in the best interest of the Company. The Board or the
Committee may, at any time, or from time to time, amend or suspend and, if
suspended, reinstate, the Plan in whole or in part; provided, however, that
without further stockholder approval neither the Board nor the Committee shall
make any amendment to the Plan which would:
Materially increase the maximum number of shares of Stock which may be
issued pursuant to Awards, except as provided in Section 13;
Extend the maximum Option Period;
Extend the termination date of the Plan; or
Change the class of persons eligible to receive Awards under the Plan;
and further provided, however, that provisions of Section 8 shall not be amended
more than once every six months other than to comport with changes in the Code,
the Employee Retirement Income Security Act, or the rules thereunder.
Effect of Section 162(m) of the Code
All Options and SARs issued under the Plan, are intended to be eligible
(as determined by the Committee) for exemption from the application of Section
162(m) of the Code, which restricts
25
<PAGE>
under certain circumstances the Federal income tax deduction for compensation
paid by a public company to named executives in excess of $1 million per year.
The exemption is based on Treasury Regulation Section 1.162-27(e)(2)(vi), with
the understanding that such regulation generally exempts from the application of
Section 162(m) of the Code compensation paid by a public company pursuant to
options and stock appreciation rights granted with a strike price equal to the
fair market value of the underlying stock on the date of grant by a compensation
committee of "outside directors", within the meaning of Treasury Regulation
Section 1.162-27(e)(3) under a plan approved by the shareholders of the company.
Under Treasury Regulation 1.162-27(e)(4)(vi), this exemption is available to the
Plan for the duration of the period that lasts until the earlier of (i) the
expiration or material modification of the Plan, or (ii) the exhaustion of the
maximum number of shares of Stock available for Awards under the Plan, as set
forth in Section 5(a). The Committee may, without shareholder approval (unless
otherwise required to
comply with Rule 16b-3 under the Exchange Act), amend the Plan retroactively
and/or prospectively to the extent it determines necessary in order to comply
with any subsequent clarification of Section 162(m) of the Code required to
preserve the Company's Federal income tax deduction for compensation paid
pursuant to the Plan. To the extent that the Committee determines as of the Date
of Grant of an Award that (i) the Award is intended to comply with Section
162(m) of the Code and (ii) the exemption described above is no longer available
with respect to such Award, such Award shall not be effective until any
stockholder approval required under Section 162(m) of the Code has been
obtained.
* * *
As adopted by the Board of Directors of
SPEEDUS.COM, INC. as of
October 18, 1995, and as amended and
restated as of December 2, 1998, and
as further amended and restated as of
July 28, 1999.
By: Shant S. Hovnanian
Title: Chairman and Chief Executive Officer
26
