<PAGE>
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:
/X/ Preliminary Proxy Statement
/ / Confidential For Use of the Commission Only [as permitted by
Rule 14a-6(e)(2)]
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
NETLOJIX COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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 their underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee previously paid 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:
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(4) Date filed:
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<PAGE>
PRELIMINARY COPY
[LOGO]
April 10, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders on
Thursday, May 25, 2000 at 2:30 P.M. at the Hotel Santa Barbara, 533 State
Street, Santa Barbara, California.
In addition to the agenda items described in the Notice and Proxy Statement
accompanying this letter, there will be a report on operations and ample
opportunity for questions to be directed to executive officers regarding company
affairs.
It is important that your shares be represented. Please, therefore, sign and
return the enclosed proxy card in the envelope provided as soon as possible so
that your shares can be voted at the meeting in accordance with your
instructions.
We hope to see you at the meeting.
Very truly yours,
[SIGNATURE]
[SIGNATURE]
Anthony E. Papa
James P. Pisani
CHAIRMAN AND CHIEF
PRESIDENT AND
EXECUTIVE OFFICER
CHIEF OPERATING OFFICER
<PAGE>
PRELIMINARY COPY
NETLOJIX COMMUNICATIONS, INC.
501 BATH STREET
SANTA BARBARA, CALIFORNIA 93101
------------------------
NOTICE OF ANNUAL MEETING
TO BE HELD MAY 25, 2000
------------------------
The Annual Meeting of Stockholders of NetLojix Communications, Inc.
("NetLojix") will be held on Thursday, May 25, 2000 at 2:30 P.M., local time, at
the Hotel Santa Barbara, 533 State Street, Santa Barbara, California.
The items of business to be conducted at the meeting are:
1. Election of five directors for a term of one year.
2. Approval of an amendment to NetLojix's Certificate of Incorporation to
increase the number of authorized shares of Common Stock from 20,000,000
shares to 40,000,000 shares.
3. Approval of an amendment to NetLojix's 1998 Stock Incentive Plan to
increase the number of shares of Common Stock reserved for issuance
thereunder by 1,500,000 shares.
4. Ratification of the appointment of auditors.
5. Such other matters as may properly come before the Annual Meeting.
It is not anticipated that any other business will come before the Annual
Meeting. If, however, such matters are presented, proxies will be voted thereon
as determined by a majority vote of the Board of Directors.
These items are more fully described in the attached Proxy Statement, which
is hereby made a part of this Notice. Only stockholders of record at the close
of business on March 27, 2000 are entitled to vote at the meeting and at any
adjournment thereof. STOCKHOLDERS ARE REMINDED THAT SHARES CANNOT BE VOTED
UNLESS THE STOCKHOLDER IS PRESENT, THE SIGNED PROXY CARD IS RETURNED OR OTHER
ARRANGEMENTS ARE MADE TO HAVE THE SHARES REPRESENTED AT THE MEETING.
By order of the
Board of Directors
[SIGNATURE]
James P. Pisani
SECRETARY
Santa Barbara, California
April 10, 2000
If you have not received the 1999 NetLojix Communications, Inc. Annual
Report (which includes financial statements) along with these materials, kindly
notify NetLojix Communications, Inc., 501 Bath Street, Santa Barbara, California
93101, Telephone (805) 884-6300, Facsimile (805) 884-6311.
<PAGE>
NETLOJIX COMMUNICATIONS, INC.
501 BATH STREET
SANTA BARBARA, CALIFORNIA 93101
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 25, 2000
------------------------
The enclosed proxies are solicited by the Board of Directors of NetLojix
Communications, Inc., a Delaware corporation (the "Company" or "NetLojix") for
use at the Annual Meeting of Stockholders of NetLojix (the "Annual Meeting"), to
be held at 2:30 P.M. on Thursday, May 25, 2000 and at any adjournments or
postponements thereof. The purposes of the Annual Meeting are set forth in this
Proxy Statement and in the accompanying Notice of Annual Meeting of
Stockholders. The mailing address of the executive offices of NetLojix is 501
Bath Street, Santa Barbara, California 93101. This Proxy Statement and the
accompanying proxy materials are being mailed to stockholders on or about
April 10, 2000.
PROCEDURAL MATTERS
Only holders of record of NetLojix's Common Stock, $.01 par value (the
"Common Stock"), at the close of business on March 27, 2000 (the "Record Date")
are entitled to notice of and to vote at the Annual Meeting. On the Record Date,
there were 13,184,753 shares of NetLojix's Common Stock issued and outstanding,
excluding treasury stock. The presence, in person or by proxy, of the holders of
a majority of the shares of Common Stock entitled to vote will constitute a
quorum for the transaction of business at the Annual Meeting.
Each share of Common Stock has one vote on all matters. Stockholders are not
entitled to cumulate their votes with respect to the election of directors. A
stockholder may revoke any proxy given pursuant to this solicitation by
attending the Annual Meeting and voting in person, or by delivering to
NetLojix's Corporate Secretary at NetLojix's executive office referred to above
prior to such meeting, a written notice of revocation or a duly executed proxy
bearing a later date.
The shares represented by a duly executed and unrevoked proxy in the form
accompanying this Proxy Statement will be voted in accordance with the
specifications contained therein. In the absence of specifications, a proxy will
be voted FOR the nominees for director named herein, FOR approval of the
amendment to the Certificate of Incorporation, FOR approval of the amendment to
the 1998 Stock Incentive Plan and FOR the ratification of auditors.
The Board of Directors is not aware of any business to be acted upon at the
Annual Meeting other than as described herein. If, however, other matters are
properly brought before the Annual Meeting, including any adjournment or
postponement thereof, the persons appointed as proxies will vote all shares
subject to proxies as determined by a majority vote of the Board of Directors.
NetLojix will bear the cost of this solicitation. In addition, NetLojix will
reimburse brokerage firms and other persons representing beneficial owners of
shares for their reasonable expenses in forwarding solicitation material to such
beneficial owners. Proxies may be solicited by certain of NetLojix's directors,
officers and regular employees, without additional compensation, personally or
by mail, telephone or otherwise.
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<PAGE>
STOCKHOLDER PROPOSALS
Stockholders of NetLojix who intend to present proposals at NetLojix's next
Annual Meeting of Stockholders must send such proposals to NetLojix for receipt
no later than December 11, 2000 in order for such proposals to be considered for
inclusion in the Proxy Statement and form of proxy relating to that meeting.
DIRECTORS
Listed below are the five existing directors of the Company, each of whom is
nominated for re-election at the Annual Meeting. All of the directors elected at
the Annual Meeting will serve a one-year term expiring at the next annual
meeting of stockholders.
Information with respect to the directors is set forth below:
ANTHONY E. PAPA, age 37, has been the Chairman of the Board and Chief
Executive Officer of NetLojix since October 1996. Mr. Papa was also President of
NetLojix from October 1996 until February 1998. Prior to October 1996, Mr. Papa
had served as President of ICS Communications, Inc., Richardson, Texas, a
national provider of cable television, wireless paging, local and long-distance
telephone services from December 1992. Before joining ICS Communications,
Mr. Papa served as general manager for Spectradyne, Inc., the largest provider
of pay-per-view entertainment and interactive services to the hospitality
industry. Mr. Papa is a director of ABC-Clio, Inc., an international publisher
of historical reference materials for institutions of higher education.
Mr. Papa received a B.S. in Management from Iona College, in New Rochelle, New
York.
JAMES P. PISANI, age 35, has been the President of NetLojix since
February 1998, and has served as Chief Operating Officer and Secretary of
NetLojix since October 1996. Mr. Pisani has also served as Chief Accounting
Officer of NetLojix since October 1998. From October 1996 to May 1999,
Mr. Pisani was the Chief Financial Offer of NetLojix. From October 1996 to
February 1998, Mr. Pisani was the Executive Vice President of NetLojix. Prior to
October 1996, he served as Vice President of Sales and National Accounts for ICS
Communications. While at ICS, Mr. Pisani was responsible for that firm's
business-to-business and consumer sales activities. Prior to joining ICS
Communications, from June 1989 to June 1994, Mr. Pisani served as Vice President
of a national mortgage banking firm serving, primarily, institutional accounts.
Mr. Pisani graduated from Princeton University in 1986, with a degree in
Economics.
JOHN E. ALLEN, age 63, has been a director of NetLojix since December 1997.
He is Vice Chairman of the Boards of Amli Residential Properties Trust (NYSE:
AML) and Amli Commercial Properties Trust, and President of Amli Realty Co., a
commercial real estate firm, which he co-founded in 1980. Since August, 1999, he
has been Executive Vice President, Secretary and General Counsel of United
CreditServ, Inc., a financial services company. United CreditServ, Inc. is a
subsidiary of UICI, a publicly-traded insurance and financial services company
(NYSE: UCI). Prior to co-founding Amli Realty Co., he was a partner at the
Chicago law firm of Mayer, Brown & Platt, with which he had been associated
since 1964. Mr. Allen is also a member of the Board of Directors of Excell
Global Services, an owner and operator of telephone call centers, United
CreditServ, Inc. and its subsidiary, United Credit National Bank. Mr. Allen
received a B.S. in Business from Indiana University and a J.D. from Indiana
University School of Law.
JEFFREY J. JENSEN, age 41, has been a director of NetLojix since
January 1998. He has been the President of Specialized Association
Services, Ltd., which provides marketing and administrative services to trade
associations, for more than five years. Between 1996 and July 1998, Specialized
Association Services was known as CORE Marketing, Inc. and provided direct mail
and telemarketing facilities in addition to its other activities. Mr. Jensen has
also been the Vice President of United Group Service Centers, Inc., an employee
leasing company, for more than five years. In addition, from 1992 to 1995,
Mr. Jensen was a founding partner of Association Dental Plan, which provided
discounted dental services to 40,000 members. Mr. Jensen is a Trustee of Amli
Commercial Properties Trust. He also holds equity interests in
2
<PAGE>
several Internet and technology companies. Mr. Jensen received B.A. degrees in
Economics and Philosophy from Cornell College, in Mount Vernon, Iowa and holds
an M.S. in Information Systems from the University of Texas at Arlington.
ANTHONY D. MARTIN, age 50, has been a director of the Company since
April 1999. Mr. Martin is Managing Director of CrossHill Financial Group Inc., a
position he has held since March 1998. From January 1997 through July 1997, he
served as President and CEO of Nexus Communications, Inc., a start-up company
providing information services. From January 1994 to December 1996, he served as
Vice President, Business Development of MCI Metro, MCI
Telecommunications, Inc.'s local service initiative. Prior to that, he held
several senior management positions at MCI, including Vice President, Access
Services Project Management; Vice President, Systems Engineering and Support
Operations; Vice President, Carrier Marketing and Alliances; Vice President,
Finance Administration; and Vice President, Technical Planning. He received a
B.S. from the United States Naval Academy and an M.B.A. from the University of
Detroit.
There are no family relationships between any directors or executive
officers of NetLojix.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met ten times in 1999, including meetings by
telephone conference call. Each incumbent director attended more than 75% of the
total of all meetings of the Board of Directors and the committees of the Board
on which he served. In December 1997, the Board delegated certain authority to
standing committees to assist the Board in carrying out its duties. The current
committees, and their members, are set forth below.
The Audit Committee meets with the auditors to discuss the scope and results
of audits and oversees internal accounting controls. This committee currently
consists of directors Allen, Jensen and Martin. The Audit Committee met twice
during 1999.
The Compensation Committee reviews and makes recommendations to the Board
regarding the compensation of senior management and has overseen the award of
certain options under the Company's 1997 Stock Incentive Plan and 1998 Stock
Incentive Plan. This Committee currently consists of directors Allen, Jensen and
Martin. The Compensation Committee met twice during 1999. During 1999, the Board
also constituted a Non-Management Option Committee consisting of directors Papa
and Pisani. The Non-Management Option Committee is empowered to award options
under the 1998 Stock Incentive Plan to employees other than senior management
pursuant to share limitations imposed by the Board. The Non-Management Option
Committee met four times in 1999.
Directors Papa and Pisani also comprise the Put Committee of the Board. The
Put Committee is empowered to determine if and when NetLojix shall sell shares
of its Common Stock from time to time under the terms of NetLojix's equity line
agreement with Cambois Finance, Inc., subject to limitations imposed by the
Board. The Put Committee met six times in 1999.
There is no nominating committee or any committee performing that function.
The Company's Bylaws provide that nominations for the election of directors may
be made by the Board of Directors, a committee thereof or by any stockholder
entitled to vote in the election of directors generally. However, a stockholder
may nominate one or more persons for election as directors only at a meeting of
stockholders and only if written notice (in the form required by the Bylaws) of
such stockholder's intent to make such nomination or nominations has been
received by the Secretary of the Company not later than the following dates:
(i) with respect to an election to be held at an annual meeting of stockholders,
60 days in advance of such meeting if such meeting is to be held on a day which
is within 30 days preceding the anniversary of the previous year's annual
meeting, or 90 days in advance of such meeting if such meeting is to be held on
or after the anniversary of the previous year's annual meeting; and (ii) with
respect to an election to be held
3
<PAGE>
at a special meeting of stockholders for the election of directors, the close of
business on the tenth day following the date on which notice of such meeting is
first given to stockholders.
DIRECTORS FEES
The Company's policy is to pay each non-employee director a fee of $1,000
for each Board or committee meeting he attends in person in excess of four such
meetings a year; employee directors do not receive this fee. The Company did not
have more than four in-person meetings during 1999. The Company reimburses
directors' reasonable expenses in connection with attendance at board and
committee meetings. Directors (including non-employee directors) are also
eligible to receive grants of stock options and restricted stock under the
Company's 1997 Stock Incentive Plan and 1998 Stock Incentive Plan.
In April 1999, directors John E. Allen, Jeffrey J. Jensen and Anthony D.
Martin received grants of 25,000 options each under the Company's 1998 Stock
Incentive Plan. One-half of such options became exercisable in April 2000, and
the remainder will become exercisable in April 2001. Unless exercised, the
options will expire in April 2004. The exercise price for Mr. Allen's and
Mr. Jensen's options is $4.88 per share. The exercise price for Mr. Martin's
options is $4.6875 per share.
In January 2000, directors John E. Allen, Jeffrey J. Jensen and Anthony D.
Martin received grants of 50,000, 25,000 and 25,000 options, respectively, under
the Company's 1998 Stock Incentive Plan. One-half of such options will become
exercisable in January 2001, and the remainder will become exercisable in
January 2002. Unless exercised, the options will expire in January 2005. The
exercise price for these options is $3.28 per share.
STOCK OWNERSHIP
The following table reflects shares of NetLojix's Common Stock beneficially
owned by each of the directors, and by all directors and officers as a group, as
of the Record Date.
<TABLE>
<CAPTION>
AMOUNT BENEFICIALLY PERCENT OF
NAME OWNED CLASS(1)
- ---- ------------------- ----------
<S> <C> <C>
Jeffrey J. Jensen(2)...................................... 864,238 6.5%
Anthony E. Papa(3)........................................ 811,401 6.1%
James P. Pisani(3)........................................ 805,001 6.1%
John E. Allen(4).......................................... 197,500 1.5%
Anthony D. Martin(2)...................................... 12,500 *
All directors and executive officers as a group (8
persons)(5)............................................. 2,799,248 20.9%
</TABLE>
- ------------------------
* Represents less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of the Company's Common Stock subject to options held by that person
that are exercisable within sixty (60) days following the Record Date are
deemed outstanding. However, such shares of Common Stock are not deemed
outstanding for the purpose of computing the percentage ownership of any
other person. Unless otherwise indicated in the footnotes to this table, the
persons and entities named in the table have sole voting and sole investment
power with respect to the shares set forth opposite such Company's name. The
percentages of beneficial ownership shares in this table are based upon
13,184,753 shares of the Common Stock outstanding.
(2) Includes 12,500 shares that may be acquired under options that were
exercisable within 60 days of the Record Date.
(3) As to each of Mr. Papa and Mr. Pisani, includes 48,438 shares that may be
acquired under options that were exercisable within 60 days of the Record
Date.
4
<PAGE>
(4) Includes 60,000 shares of restricted stock awarded to Mr. Allen under the
Company's 1997 Stock Incentive Plan. These shares are subject to
restrictions on transfer which will lapse as to 30,000 of such shares on
February 24, 2001, and as to the remaining 30,000 shares on February 24,
2002. The lapse of these restrictions will be accelerated upon Mr. Allen's
retirement from the Board of Directors and upon certain other events set
forth in the 1997 Stock Incentive Plan. Also includes 12,500 shares that may
be acquired under options that were exercisable within 60 days of the Record
Date.
(5) Includes 189,376 shares that may be acquired under options that were
exercisable within 60 days of the Record Date.
EXECUTIVE COMPENSATION
The following table summarizes all compensation paid to the Company's Chief
Executive Officer, each other executive officer of the Company whose total
annual salary and bonus exceeded $100,000 for the fiscal year ended
December 31, 1999 and one individual that ceased to be an executive officer
during such fiscal year (the "Named Executive Officers"). Titles shown are those
held by the Named Executive Officers at December 31, 1999, or, in the case of
the individual that is no longer an executive officer, on the date he ceased to
be an executive officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------------ ---------------------
FISCAL OTHER ANNUAL SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION($) OPTIONS(#)
- --------------------------- -------- -------- -------- --------------- ---------------------
<S> <C> <C> <C> <C> <C>
Anthony E. Papa .................. 1999 $237,187 $25,000 -- 100,000
Chairman and Chief 1998 198,000 50,000 -- --
Executive Officer 1997 158,459 -- -- 31,250
James P. Pisani .................. 1999 $215,625 $25,000 -- 100,000
President, Chief Operating Officer 1998 180,000 50,000 -- --
and Secretary 1997 152,500 -- -- 31,250
Frank A. Leone(1) ................ 1999 $165,000 -- $78,622(2) --
Executive Vice President of Field 1998 27,000 -- -- 150,000
Sales and Services
Joseph Renteria, Jr. ............. 1999 $117,559 $50,000 -- 5,000
Vice President, Information 1998 102,504 -- -- 20,000
Systems 1997 93,726 -- -- --
M. Scott Hall(3) ................. 1999 $121,500 -- -- --
Senior Vice President, Channel 1998 32,500 -- $15,000(2) 150,000(4)
Markets Group
</TABLE>
- ------------------------
(1) Became employed by the Company on November 2, 1998.
(2) Consists of sales commissions paid.
(3) Became employed by the Company on October 1, 1998. Mr. Hall ceased to be an
executive officer as of August 31, 1999, and ceased to be employed by the
Company as of November 30, 1999.
(4) Of these options, 75,000 were cancelled during 1999.
5
<PAGE>
The following table summarizes all option grants to the Named Executive
Officers during the year ended December 31, 1999. No stock appreciation rights
were awarded during such year.
OPTION GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE VALUE AT
TOTAL ASSUMED ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE APPRECIATION
SECURITIES GRANTED TO FOR
UNDERLYING EMPLOYEES OPTION TERM(1)
OPTIONS IN FISCAL EXERCISE --------------------------------
NAME GRANTED YEAR PRICE EXPIRATION DATE 0% 5% 10%
- ---- ---------- ---------- -------- ------------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Anthony E. Papa........... 100,000(2) 20.9% $4.88 April 1, 2009 $ 0 $306,900 $777,746
James P. Pisani........... 100,000(2) 20.9% $4.88 April 1, 2009 $ 0 $306,900 $777,746
Frank A. Leone............ 0 0% -- -- -- -- --
Joseph Renteria, Jr....... 5,000(2) 1.0% $1.88 September 23, 2009 $ 0 $ 5,912 $ 14,981
M. Scott Hall............. 0 0% -- -- -- -- --
</TABLE>
- ------------------------
(1) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of options immediately prior to
the expiration of their term, assuming (for illustrative purposes only) the
specified compounded rates of appreciation of the price of the Common Stock
over the term of the respective option. These amounts represent certain
assumed rates of appreciation in the value of the Common Stock from the fair
market value on the date of grant. The 5% and 10% assumed annual rates of
compounded stock price appreciation are mandated by the rules of the
Securities and Exchange Commission and do not represent NetLojix's estimate
or projection of its future Common Stock prices. These numbers do not take
into account provisions providing for the termination of the option
following termination of employment, nontransferability or difference in
vesting terms.
(2) Options vest in annual increments of 25% over the four years after the grant
date.
The following table provides information with respect to stock options
exercised by the Named Executive Officers during the year ended December 31,
1999, and the unexercised stock options held as of December 31, 1999, by the
Named Executive Officers.
OPTION EXERCISES DURING YEAR ENDED DECEMBER 31, 1999
AND OPTION VALUES AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES DECEMBER 31, 1999 DECEMBER 31, 1999(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Anthony E. Papa........... -- -- 15,625 115,625 $0 $ 0
James P. Pisani........... -- -- 15,625 115,625 $0 $ 0
Frank A. Leone............ -- -- 37,500 112,500 $0 $ 0
Joseph Renteria, Jr....... -- -- 5,000 20,000 $0 $3,400
M. Scott Hall............. 12,500 $12,500 25,000 37,500 $0 $ 0
</TABLE>
- ------------------------
(1) Calculated on the basis of the fair market value of the Company's common
stock on the date of exercise, minus the exercise price of the options.
(2) Calculated on the basis of the fair market value of the Company's common
stock on December 31, 1999, minus the exercise price of the options. The
closing price of the Common Stock on The Nasdaq SmallCap Market(SM) on
December 31, 1999 was $2.56 per share.
6
<PAGE>
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
(1999 GO PLAN)
<TABLE>
<CAPTION>
NAME NUMBER OF UNITS(1) PERIOD UNTIL PAYOUT
- ---- ------------------ ---------------------
<S> <C> <C>
Anthony E. Papa(2).................................... 0 --
James P. Pisani(2).................................... 0 --
Frank A. Leone........................................ 1 Annually over 4 years(1)
Joseph Renteria, Jr................................... 1 Annually over 4 years(1)
M. Scott Hall(2)...................................... 0 --
</TABLE>
- ------------------------
(1) Under its 1999 Go Plan, NetLojix used a total of $78,900 to repurchase
11,075 shares of its own Common Stock commencing on January 29, 1999 (the
"Effective Date"). One quarter of such shares are to be sold at the
prevailing market price on or about each of the first four anniversaries of
the Effective Date (each a "Payout Date"). Each person who was a NetLojix
employee on the Effective Date will receive a pro capita share of the
proceeds received from the sale of such shares on each Payout Date if, and
only if, such person remains a NetLojix employee on such Payout Date.
(2) Mr. Papa and Mr. Pisani are not participants in the 1999 Go Plan. Mr. Hall
ceased to be eligible to participate in the 1999 Go Plan as a result of the
termination of his employment.
AGREEMENTS WITH EXECUTIVE OFFICERS
NetLojix has no employment agreements with its executive officers. However,
NetLojix does have separation arrangements in place with two of its executive
officers.
Michael J. Ussery became NetLojix's Chief Financial Officer on May 3, 1999.
At that time, Mr. Ussery was granted options to purchase 50,000 shares at an
exercise price of $5.63 per share under the 1998 Stock Incentive Plan. On
January 10, 2000, Mr. Ussery was granted options to purchase an additional
30,000 shares at an exercise price of $3.28 per share. Both option grants became
exercisable in annual increments of 25% over the four years after their
respective grant dates. In the event that Mr. Ussery is terminated without cause
by NetLojix, or declines to relocate from Dallas, Texas to NetLojix's Santa
Barbara offices and resigns or is terminated as a result thereof, the 30,000
share option grant shall immediately become exercisable in full and will then
expire on December 31, 2001.
NetLojix has agreed to provide certain salary continuation benefits to
Mr. Leone in the event his employment is terminated by NetLojix. If he is
terminated by NetLojix for non-performance, Mr. Leone will continue to receive
his salary for a period of six months following termination. If he is terminated
by NetLojix without cause, he will continue to receive his salary for a period
of twelve months following termination. Mr. Leone's annual salary is currently
$165,000. All stock options held granted to Mr. Leone will become immediately
exercisable in full upon any merger or consolidation of the Company with or into
another entity or any other corporate reorganization, if more than 50% of the
combined voting power of the continuing or surviving entity's securities
outstanding immediately after such merger, consolidation or other reorganization
is owned by persons who were not stockholders of the Company immediately prior
to such merger, consolidation or other reorganization.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, the Compensation Committee consisted of Mr. Allen, Mr. Jensen
and Mr. Martin. None of such Compensation Committee members was or has been an
officer or employee of the Company or any of its subsidiaries. Certain entities
with which Mr. Jensen was affiliated received payments from the Company during
1999. See "Certain Relationships and Related Transactions."
7
<PAGE>
No executive officer of the Company served at any time during the year ended
December 31, 1999 as a member of the Board of Directors or Compensation
Committee of any entity that has one or more executive officers serving as a
member of the Company's Board or Compensation Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee has overall responsibility for the Company's
executive compensation policies and practices. The Compensation Committee's
functions include:
- Determining the compensation of the Chief Executive Officer and the
President and Chief Operating Officer of the Company.
- Reviewing and approving all other executive officers' compensation,
including salary and bonuses, in each case based in part upon the
recommendations of the Chief Executive Officer and the President and Chief
Operating Officer of the Company.
- Granting awards under the Company's 1997 Stock Incentive Plan and 1998
Stock Incentive Plan.
During 1999, senior management of the Company negotiated and successfully
completed the disposition of the Company's long-distance residential telephone
subsidiary, Matrix Telecom, Inc. This successful disposition of Matrix has
allowed management to focus on the Company's business of providing value-added
integrated network solutions to small and medium sized businesses. The
Compensation Committee took these efforts and their successful results into
consideration in determining management's compensation, including that of
Messrs. Papa and Pisani.
The Compensation Committee bases its determinations of overall executive
compensation, which will include salary, bonus, certain benefits and stock
option and restricted stock awards and possibly other forms of equity-based
compensation, on subjective factors based upon consideration of, among other
factors, the annual and long-term financial performance of the Company,
including the creation of stockholder value, the historical financial
performance of the Company, the individual executive officer's contribution to
the achievement of operating goals and business objectives and levels of
compensation in comparable companies at similar stages of development, with
particular emphasis on those operating in the telecommunications industry. The
Compensation Committee also considers financial performance criteria, including
the price of the Company stock, in the context of the telecommunication industry
as well as the economy in general.
The Compensation Committee believes that the best way to attract and
maintain high caliber executives is to encourage equity ownership in the
Company. Each of Mr. Papa and Mr. Pisani own in excess of six percent of the
Company's outstanding shares of Common Stock. In addition, each executive
officer of the Company has received substantial grants of stock options which
vest over time. As a result, such officers will benefit from a rise in the price
of the Common Stock on the same basis as other stockholders. The Compensation
Committee's compensation philosophy has been to couple this equity incentive
with salaries and bonuses that are competitive in the Company's industry.
The Compensation Committee believes that equity-based compensation is an
effective way of aligning executive compensation with increases in stockholder
value. As discussed elsewhere in this Proxy Statement, the Board of Directors
has approved an amendment to the 1998 Stock Incentive Plan, subject to
stockholder approval, which increases the number of shares which may be issued
under such plan. The Compensation Committee believes that the Company's Stock
Incentive Plans increase the ability of the Company to tie executive interests
to the interests of the Company, thereby benefitting the Company and its
stockholders. The Compensation Committee believes equity compensation, in the
form of stock options and, potentially, restricted stock, is vital to the
long-term success of the Company. The Compensation Committee is committed to
this policy, recognizing the competitive market for talented executives and that
the nature of the Company's business may result in highly variable compensation
for a particular time period.
8
<PAGE>
Each member of the Compensation Committee, except Mr. Jensen, meets the
definition of "non-employee director" under Rule 16b-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and is an "outside
director" within the meaning of Section 162(m) of the Internal Revenue Code of
1986, as amended (the Code).
Section 162(m) of the Code limits the Company's deduction for compensation
paid to a Named Executive Officers to $1 million unless certain requirements are
met. The policy of the Compensation Committee with respect to Section 162(m) has
been to establish and maintain a compensation program which will optimize the
deductibility of compensation. In that regard, no executive officer received
compensation in excess of $1 million during fiscal 1999. The Compensation
Committee, however, reserves the right to use its judgment, where merited by the
Compensation Committee's need for flexibility to respond to changing business
conditions or by an executive officer's individual performance, to authorize
compensation which may not, in a specific case, be fully deductible by the
Company.
By the Compensation Committee
John E. Allen
Jeffrey J. Jensen
Anthony D. Martin
STOCK PERFORMANCE GRAPH
The following graph compares the total return on the Common Stock with the
cumulative total return on the Nasdaq Composite Index (a broad market index) and
the Nasdaq Telecommunications Index (an industry index) for the period from
March 16, 1996, the date upon which the Common Stock was registered pursuant to
Section 12 of the Exchange Act, through December 31, 1999. The comparison
reflects the investment of $100 on March 16, 1996, and the reinvestment of
dividends (if paid), in each of the Company's Common Stock (for which no
dividends have been paid), the Nasdaq Composite Index and the Nasdaq
Telecommunications Index. The Company's Common Stock traded under the name Hi,
Tiger International, Inc. from the date of registration under the Exchange Act
until October 23, 1996. The stock price performance of the Company reflected in
this comparison is not necessarily indicative of the future stock price
performance of the Company's Common Stock.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NETLOJIX COMMUNICATIONS, INC. NASDAQ TELECOMMUNICATIONS INDEX NASDAQ COMPOSITE INDEX
<S> <C> <C> <C>
03/18/96 100.00 100.00 100.00
06/30/96 142.86 104.159 106.951
09/30/96 114.29 98.043 110.760
12/30/96 100.00 98.172 116.233
03/31/97 89.43 91.021 109.930
06/30/97 435.71 114.257 130.067
09/30/97 542.86 132.341 152.079
12/31/97 235.71 143.562 142.422
03/31/98 214.29 182.731 166.680
06/30/98 219.64 193.257 171.259
09/30/98 67.86 171.035 154.653
12/31/98 107.14 236.370 200.691
03/31/99 148.23 293.722 224.493
06/30/99 114.29 312.261 245.622
09/30/99 51.80 289.438 251.244
12/31/99 73.23 411.624 362.570
</TABLE>
9
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
DEALINGS WITH UICI ORGANIZATIONS IN CONNECTION WITH MARKETING
SERVICES. Director Jeffrey J. Jensen, his father, Ronald L. Jensen, and his
adult siblings own approximately 35% of UICI, a publicly-traded insurance and
financial services company. Director John E. Allen is a director and officer of
certain subsidiaries of UICI. Among their other activities in 1999, UICI's
marketing organizations sold certain long distance and Internet products of the
Company's former subsidiary, Matrix Telecom, Inc. ("Matrix"), to their
customers. Matrix paid sales commissions and related payments to UICI, together
with certain other affiliated entities, of $122,930 in 1999. The Company
completed the sale of Matrix to a third party on November 30, 1999, and no
longer sells products or services through the UICI marketing organizations. The
Company believes that it received the foregoing services on terms no less
favorable to the Company than could be obtained from unrelated third parties.
LONG DISTANCE SERVICES. NetLojix provides long distance telephone service
and Internet access to certain affiliates of Mr. Jensen, his father and his
adult siblings, including UICI. The Company received $4,062,921 in 1999 from
UICI and its affiliates for such services. NetLojix also provides long distance
telephone service and Internet access to Amli Residential Properties Trust, Amli
Commercial Properties Trust, Amli Realty Co. and their affiliates. Director John
A. Allen is a director or trustee and officer of each of these entities, and
director Jeffrey J. Jensen is trustee of Amli Commercial Properties Trust. The
Company received $78,788 in 1999 from these entities for such services. The
Company believes that it provides the foregoing services on terms no less
favorable to the Company than could be obtained from unrelated third parties.
RENTERIA NOTE. In October 1996, Joseph Renteria, Jr., NetLojix's Vice
President, Information Systems, financed the purchase of 53,608 shares of Common
Stock through a loan from Ronald L. Jensen, who was then an affiliate of the
Company. In 1998, the Company acquired the note representing this obligation,
which was then in the amount of $80,400. The note bears interest at the rate of
6% per annum, and is due on the earlier of the Company's demand or
September 30, 2001. At December 31, 1999, the total amount owing by
Mr. Renteria under this note was $91,844, which was also the largest amount
outstanding during 1999. Under the original terms of the note and related
documents, the note was secured by all 53,608 shares of common stock, and the
shares were subject to certain put and call rights in Mr. Renteria and the
Company, respectively, in the event of the termination of Mr. Renteria's
employment. The put and call provisions were to terminate in increments over
five years. During 1999, the Company and Mr. Renteria agreed to terminate all of
the remaining put and call provisions and 23,608 shares of common stock were
released from security for the note. In February, 2000, Mr. Renteria paid the
note down to a balance of $62,750 and the security for the note was reduced to
15,000 shares of stock.
POLICY ON RELATED PARTY TRANSACTIONS. In connection with its listing on The
Nasdaq SmallCap Market(SM), the Company has undertaken to conduct an appropriate
review of all related party transactions on an ongoing basis and to utilize the
Audit Committee to review potential conflict of interest situations where
appropriate.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the SEC. Officers, directors and greater than
ten-percent shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.
During the year ended December 31, 1999, Mr. Renteria failed to file a
Form 3 on a timely basis after becoming an executive officer of the Company.
This form, which reported only Mr. Renteria's initial holdings at the time of
his elevation to executive officer status, has been filed subsequently. Based
solely on
10
<PAGE>
a review of the copies of Section 16(a) forms furnished to the Company, and on
written representations that no Forms 5 were required, the Company believes that
during 1999 no other officer, director or greater than ten-percent shareholder
failed to file on a timely basis any report required under Section 16(a).
PRINCIPAL STOCKHOLDERS
The following table sets forth information for the persons known to the
Company to be owners of more than five percent of its outstanding shares as of
the Record Date.
<TABLE>
<CAPTION>
AMOUNT PERCENT OF
NAME AND ADDRESS BENEFICIALLY OWNED CLASS(1)
- ---------------- ------------------ ----------
<S> <C> <C>
Janet J. Jensen(2) .............................. 961,939 7.3%
9003 Airport Freeway
Fort Worth, TX 76180
Jeffrey J. Jensen(2)(3) ......................... 864,238 6.5%
2121 Precinct Line Road
Hurst, TX 76054
James J. Jensen(2) .............................. 800,000 6.1%
6304 Alexandria Circle
Atlanta, GA 30326
Jami J. Jensen(2) ............................... 851,738 6.5%
1933 Swede Gulch
Golden, CO 80120
Julie J. Jensen(2) .............................. 851,738 6.5%
Box 540, Kenwood Station
5257 River Road
Bethesda, MD 20816
Anthony E. Papa(4) .............................. 811,401 6.1%
James P. Pisani(4) .............................. 805,001 6.1%
Gladys J. Jensen(2) ............................. 731,847 5.6%
c/o United Group Association, Inc.
4001 McEwen Drive, Suite 200
Dallas, TX 75244
</TABLE>
- ------------------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "SEC"). In computing the number of
shares beneficially owned by a person and the percentage ownership of that
person, shares of the Company's Common Stock subject to options held by that
person that are exercisable within sixty (60) days following the Record Date
are deemed outstanding. However, such shares of Common Stock are not deemed
outstanding for the purpose of computing the percentage ownership of any
other person. Unless otherwise indicated in the footnotes to this table,
each person named in the table has sole voting and sole investment power
with respect to the shares set forth opposite such person's name. The
percentages of beneficial ownership shares in this table are based upon
13,184,753 shares of the Common Stock outstanding.
(2) Information is derived from a Schedule 13D filed with the SEC on
December 11, 1997 and a Schedule 13D/A filed with the SEC (by Gladys J.
Jensen only) on July 10, 1998 (the "Schedule 13D's"). The Schedule 13D's
note that, because each of these stockholders agreed to certain restrictions
contained in a Registration Rights and Lockup Agreement dated as of
December 1, 1997, such persons may be considered to be a "group" within the
meaning of Section 13 of the Securities
11
<PAGE>
Exchange Act of 1934, as amended. However, the Schedule 13D's state that
each of such persons disclaims beneficial ownership of the shares held by
any other person.
(3) Includes 12,500 shares that may be acquired under options that were
exercisable within 60 days of the Record Date.
(4) As to each of Mr. Papa and Mr. Pisani, includes 48,438 shares that may be
acquired under options that were exercisable within 60 days of the Record
Date. The address of these stockholders is c/o NetLojix
Communications, Inc., 501 Bath Street, Santa Barbara, CA 93101.
MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NetLojix's Bylaws currently permit the Board of Directors to specify the
exact number of authorized directors within the permitted range of five to nine.
Currently, the authorized number of directors is five. Each director is elected
to serve for a one-year term and until his respective successor is elected and
qualified.
The current members of the Board are being nominated for re-election. The
Company's Bylaws require that any nominations for election as a director, other
than nominations by the Board of Directors, must be received at least 60 days in
advance of the Annual Meeting if such meeting is to be held on a day which is
within 30 days preceding the anniversary of the previous year's annual meeting.
The Company did not receive any nominations for directors, other than those
individuals nominated by the Board, by the required date. Accordingly, only
those individuals nominated by the Board will stand for election at the Annual
Meeting. Each director must be elected by a majority of the votes cast at the
Annual Meeting.
If any nominee is unable or declines to serve as a director at the time of
the Annual Meeting, the proxy holders will vote the shares which they represent
for a nominee designated by the present Board of Directors to fill the vacancy.
It is not presently expected that any nominee will be unable or will decline to
serve as a director. Holders of proxies solicited by this Proxy Statement will
vote the proxies received by them as directed on the proxy card, or if no
direction is made, for the election of the Board of Director's nominees named
below. Stockholders are not entitled to cumulate votes in the election of
directors.
The Board's nominees for re-election at the Annual Meeting are directors
Papa, Pisani, Allen, Jensen and Martin.
VOTE REQUIRED
The five nominees for director receiving the highest number of affirmative
votes of the shares entitled to be voted for them shall be elected as directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RE-ELECTION OF DIRECTORS PAPA, PISANI, ALLEN, JENSEN AND MARTIN TO NETLOJIX'S
BOARD OF DIRECTORS.
PROPOSAL NO. 2
APPROVAL OF AN AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED
NUMBER OF SHARES OF COMMON STOCK TO 40,000,000
The Board is proposing an amendment (the "Amendment") to the Company's
Certificate of Incorporation (the "Certificate of Incorporation") to increase
the number of authorized shares of Common Stock from 20,000,000 shares to
40,000,000 shares.
12
<PAGE>
Article IV of the Certificate of Incorporation currently authorizes the
Company to issue 20,000,000 shares of Common Stock. As of the Record Date,
13,184,753 shares of Common Stock were outstanding, excluding 162,905 shares of
treasury stock. Of the remaining authorized but unissued shares, approximately
2,642,267 were reserved for issuance (i) under the Company's Stock Incentive
Plans or upon the exercise of other employee options, (ii) upon conversion of
the Company's Series A Convertible Preferred Stock, or (iii) upon exercise of
warrants issued in connection with financing transactions. The Board of
Directors has adopted an amendment to the Company's 1998 Stock Incentive Plan
that would increase the number of shares reserved for issuance thereunder by
1,500,000. (See "Proposal No. 3" below.) In addition, the Board has reserved up
to 1,037,214 shares that may be issued to Cambois Finance, Inc. from time to
time at the option of the Company pursuant to its equity line agreement with
Cambois Finance, Inc. Accordingly, the Company currently has only 2,972,861
shares of Common Stock remaining available for issuance. If the stockholders
approve the amendment to the Company's 1998 Stock Incentive Plan, the Company
would have only approximately 1,472,861 shares available for issuance.
If the Amendment is approved, 20,000,000 additional shares of Common Stock
would be authorized but unissued. These additional authorized shares of Common
Stock would be available for various business purposes such as financings,
acquisitions, employee benefit plans, stock splits and stock dividends. The
Board of Directors believes that the proposed increase is desirable so that,
when and if the need arises, but subject to the approval of the Board of
Directors, the Company will be able to issue shares of Common Stock without the
expense and delay of a special stockholders' meeting.
Authorized but unissued shares of the Company's Common Stock may be issued
at such times, for such purposes and for such consideration as the Board of
Directors may determine to be appropriate without further authority from the
Company's stockholders, except as otherwise required by Delaware law or the
rules of The Nasdaq Stock Market.
The issuance of additional shares of Common Stock, other than in connection
with stock splits and stock dividends, could have the effect of diluting
earnings per share, voting power and shareholdings of stockholders. It could
also have the effect of making it more difficult for a third party to acquire
control of the Company. Other than in connection with the Company's existing
employee stock option and stock purchase plans, and the other share reservations
described above, the Company has no present intent to issue any shares of Common
Stock.
Upon approval of the Amendment by the stockholders, the first two sentences
of Article IV of the Certificate of Incorporation will be amended to read in
their entirety as follows:
"ARTICLE IV
This Corporation is authorized to issue two classes of shares
designated common and preferred, respectively. The total number of
shares of all classes of stock which the Corporation has authority
to issue is 41,000,000, consisting of 40,000,000 shares of common
stock, par value $0.01, and 1,000,000 shares of preferred stock,
par value $0.01."
If approved by the stockholders, the Amendment will become effective upon
the filing of the Amendment with the Secretary of the State of the State of
Delaware.
VOTE REQUIRED
The affirmative vote of a majority of the shares of Common Stock of the
Company outstanding as of the Record Date will be required to approve the
Amendment.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDMENT AND RECOMMENDS
THAT STOCKHOLDERS VOTE "FOR" THE AMENDMENT.
13
<PAGE>
PROPOSAL NO. 3
APPROVAL OF AN AMENDMENT TO THE COMPANY'S
1998 STOCK INCENTIVE PLAN TO INCREASE THE NUMBER OF
SHARES RESERVED FOR ISSUANCE BY 1,500,000
The Board is proposing an amendment to the Company's 1998 Stock Incentive
Plan (the "1998 Plan") to increase the number of shares reserved for issuance
thereunder by 1,500,000, bringing the total number of shares of Common Stock
reserved for issuance under the 1998 Plan to 3,000,000.
Under the 1998 Plan, employees, outside directors and consultants may be
awarded options to purchase shares of Common Stock, stock appreciation rights
("SARs"), restricted shares and stock units. The 1998 Plan is an integral part
of the Company's compensation program. (See "Compensation Committee Report on
Executive Compensation" above.) The proposed amendment would provide the
additional shares necessary to attract and retain the best available personnel
for positions of substantial responsibility with the Company.
Since the 1998 Plan was approved by the stockholders, options to purchase
the full 1,500,000 shares reserved for issuance have been granted, excluding
options that terminated before being exercised. In January 2000, the
Compensation Committee granted an additional 380,500 options. The exercise of
these recently-granted options is contingent upon approval of the amendment to
the 1998 Plan by the Company's stockholders. In addition, 20,000 shares of
restricted stock have been issued under the 1998 Plan, but subsequently
forfeited back to the Company. No SARs or stock units have been awarded. As of
the Record Date, there were 1,838,000 options to purchase shares outstanding and
62,500 shares of Common Stock had been issued upon the exercise of options.
DESCRIPTION OF THE 1998 PLAN
The following summary of the material features of the 1998 Plan is qualified
in its entirety by reference to the complete text of the 1998 Plan, as amended,
a copy of which has been filed with the Securities and Exchange Commission.
Stockholders of the Company will be provided with a copy of the 1998 Plan upon
written request to the Company.
SHARES ISSUABLE. The Company originally reserved 1,500,000 shares for
issuance under the 1998 Plan. If the stockholders approve the amendment to the
plan proposed by the Board, the number of shares reserved for issuance under the
1998 Plan would be increased by 1,500,000 shares. Shares of Common Stock subject
to outstanding options which expire or terminate prior to exercise, will be
available for future issuance under the 1998 Plan. In addition, if SARs and
stock units are settled under the 1998 Plan, then only the number of shares
actually issued in settlement will reduce the number of shares available for
future issuance under this plan.
ELIGIBILITY. Under the 1998 Plan, employees, outside directors and
consultants may be awarded options to purchase shares of Common Stock, SARs,
restricted shares and stock units. Accordingly, all current directors and
officers of the Company are eligible to participate in the 1998 Plan. On
March 14, 2000, NetLojix had 154 full-time employees, three outside directors
and no eligible consultants.
TYPES OF AWARDS. Awards under the 1998 Plan may be in the form of stock
options, restricted shares, SARs and stock units. Options may be incentive stock
options designed to satisfy Section 422 of the Code or nonstatutory stock
options, which do not meet such requirements. SARs may be awarded in combination
with options, restricted shares or stock units, and such an award may provide
that the SARs will not be exercisable unless the related options, restricted
shares or stock units are forfeited.
ADMINISTRATION. The 1998 Plan is administered by the Board of Directors and
its Compensation Committee. In general, the Compensation Committee has the
discretion to determine which eligible individuals are to receive awards;
determine the award type, number of shares subject to an award, vesting
14
<PAGE>
requirements and other features and conditions of such awards; interpret the
1998 Plan; and make other decisions relating to the operation of the 1998 Plan.
Any awards under the 1998 Plan to directors or executive officers are approved
by the full Board of Directors, with any interested director not participating
in the approval. Pursuant to the terms of the 1998 Plan, in July 1999 the Board
created the Non-Management Option Committee, which consists of directors Papa
and Pisani. The Non-Management Option Committee is empowered to award stock
options under the 1998 Plan to employees other than senior management pursuant
to share limitations imposed by the Board. The Board, the Compensation Committee
or the Non-Management Option Committee, as applicable, are referred to herein as
the "Administrator."
TERMS AND CONDITIONS OF OPTIONS. Each option is evidenced by a stock option
agreement between the Company and the optionee, and is subject to the following
additional terms and conditions:
EXERCISE PRICE. The Administrator determines the exercise price of options
at the time the options are granted. The exercise price of an incentive stock
option may not be less than 100% of the fair market value of the Common Stock on
the date such option is granted; provided, however, the exercise price of an
incentive stock option granted to a 10% shareholder may not be less than 110% of
the fair market value of the Common Stock on the date such option is granted.
The fair market value of the Common Stock is generally determined with reference
to the closing sale price for the Common Stock (or the closing bid if no sales
were reported) on the date the option is granted.
VESTING. The Administrator determines when options become exercisable.
Stock options granted to employees under the 1998 Plan generally vest and become
exercisable over a four-year period. Stock options granted to non-employee
directors vest over a two-year period.
TERM OF OPTION. All options granted under the 1998 Plan expire ten years
from the date of grant, unless a shorter term is provided in the option
agreement. The term of an incentive stock option may be no more than ten years
from the date of grant; provided that in the case of an incentive stock option
granted to a 10% shareholder, the term of the option may be no more than five
(5) years from the date of grant. No option may be exercised after the
expiration of its term.
NONTRANSFERABILITY. Options and stock appreciation rights granted under the
1998 Plan are not transferable other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order, and may be
exercised during the optionee's lifetime only by the optionee, or in the event
of death, by the optionee's estate or by a person who acquires the right to
exercise the option, stock appreciation right or stock purchase right. The right
of an optionee to exercise an option after termination of his or her employment
(including upon his or her death or disability) is limited under the 1998 Plan
and the relevant option agreement.
EXERCISE. The exercise price for options granted under the 1998 Plan may be
paid in cash. Options may also be exercised on a cashless basis, by a pledge of
shares to a broker or by promissory note. The payment for the award of newly
issued restricted shares will be made in cash. If an award of SARs, stock units
or restricted shares from the Company's treasury is granted, no cash
consideration is required.
The Compensation Committee has the authority to modify, extend or assume
outstanding options and SARs or may accept the cancellation of outstanding
options and SARs in return for the grant of new options or SARs for the same or
a different number of shares and at the same or a different exercise price.
The Board may determine that an outside director may elect to receive his
fees from the Company in the form of cash, options, restricted shares, stock
units or a combination thereof. The Board has not yet made this determination.
In the event that it decides to make this option available to outside directors,
the Board will decide how to determine the number and terms of the options,
restricted shares or stock units to be granted to outside directors in lieu of
directors fees.
15
<PAGE>
STOCK APPRECIATION RIGHTS. The Administrator is authorized to grant stock
appreciation rights in connection with all or any part of an option granted
under the 1998 Plan, either concurrently with the grant of the option or at any
time thereafter, and to grant stock appreciation rights independently of
options. A stock appreciation right granted in connection with an option is
exercisable only when and to the extent that the underlying option is
exercisable, and expires no later than the date on which the underlying option
expires. Independent stock appreciation rights are exercisable in whole or in
part at such times as the Administrator specifies in the grant or agreement.
The Company's obligations arising upon the exercise of a stock appreciation
right may be paid in cash or Common Stock, or any combination of the same, as
the Administrator may determine. Shares issued upon the exercise of a stock
appreciation right are valued at their fair market value as of the date of
exercise. When a stock appreciation right is exercised, the aggregate number of
shares of Common Stock available for issuance under the 1998 Plan will be
reduced by the number of underlying shares of Common Stock as to which the stock
appreciation right is exercised.
RESTRICTED STOCK. The Administrator is authorized to grant restricted stock
under the 1998 Plan. Each grant is made pursuant to a written restricted stock
agreement. The restricted stock agreement grants the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment with the Company for any reason (including death or disability). The
purchase price for Shares repurchased pursuant to the agreement is the original
price paid by the purchaser and may be paid by cancellation of any indebtedness
of the purchaser to the Company. The repurchase option lapses at a rate
determined by the Administrator.
ACCELERATION. Upon a change in control, the Compensation Committee may
determine that an option or SAR will become fully exercisable as to all shares
subject to such option or SAR. A change in control includes a merger or
consolidation of the Company, certain changes in the composition of the Board
and acquisition of 50% or more of the combined voting power of the Company's
outstanding stock. In the event of a merger or other reorganization, outstanding
options, SARs, restricted shares and stock units will be subject to the
agreement of merger or reorganization, which may provide for the assumption of
outstanding awards by the surviving corporation or its parent, their
continuation by the Company (if the Company is the surviving corporation),
accelerated vesting and accelerated expiration, or settlement in cash.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event that the stock of
the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of stock
subject to the 1998 Plan, the number and class of shares of stock subject to any
option or stock appreciation right outstanding under the 1998 Plan, and the
exercise price of any such outstanding option or stock appreciation right.
AMENDMENTS. The Board may amend or terminate the 1998 Plan at any time.
Amendments may be subject to stockholder approval to the extent required by
applicable laws. In any event, the 1998 Plan will terminate on March 10, 2008,
unless sooner terminated by the Board.
FEDERAL INCOME TAX CONSEQUENCES.
INCENTIVE STOCK OPTIONS. Certain stock options granted under the 1998 Plan
may be designated as "incentive stock options" within the meaning of
Section 422 of the Code. Under present law, the grantee of an incentive stock
option will not realize taxable income upon the grant or the exercise of the
incentive stock option and the Company will not receive an income tax deduction
at either such time. If the optionee does not sell the Common Stock acquired
upon exercise of an incentive stock option within either (i) two years after the
grant of the incentive stock option or (ii) one year after the date of exercise
of the incentive stock option, the gain upon a subsequent sale of the Common
Stock will be taxed as long-term capital gain.
16
<PAGE>
If the optionee, within either of the above periods, disposes of the Common
Stock acquired upon exercise of the incentive stock option, the optionee will
recognize as ordinary income an amount equal to the lesser of (i) the gain
realized by the optionee upon such disposition or (ii) the difference between
the exercise price and the fair market value of the shares on the date of
exercise. In such event, the Company would be entitled to a corresponding income
tax deduction equal to the amount recognized as ordinary income by the optionee.
The gain in excess of such amount recognized by the optionee as ordinary income
would be taxed as long-term or short-term capital gain (subject to the holding
period requirements for long-term or short-term capital gain treatment).
The exercise of an incentive stock option will generally result in the
excess of the Common Stock' fair market value on the date of exercise over the
exercise price being included in the optionee's alternative minimum taxable
income. Liability for the alternative minimum tax is a complex determination and
depends upon an individual's overall tax situation. Before exercising an
incentive stock option, an optionee should discuss the possible application of
the alternative minimum tax with his or her tax advisor.
NONSTATUTORY STOCK OPTIONS. Upon exercise of a nonstatutory stock option
granted under the 1998 Plan the optionee will recognize ordinary income in an
amount equal to the excess of the fair market value of the Common Stock received
over the exercise price of such Common Stock. That amount will increase the
optionee's basis in the Common Stock acquired pursuant to the exercise of the
option. Upon a subsequent sale of the Common Stock, the optionee will recognize
short-term, mid-term or long-term gain or loss depending upon his holding period
for the Common Stock and upon the subsequent appreciation or depreciation in the
market value of the Common Stock. The Company will be allowed a federal income
tax deduction for the amount recognized as ordinary income by the optionee upon
the optionee's exercise of the option.
RESTRICTED STOCK. At the time of grant or purchase, restricted stock is
subject to a "substantial risk of forfeiture" within the meaning of Section 83
of the Code. As a result, the purchaser will not recognize ordinary income at
the time of grant or purchase. Instead, the purchaser will recognize ordinary
income on the dates when stock ceases to be subject to a substantial risk of
forfeiture. The stock will generally cease to be subject to a substantial risk
of forfeiture when it is no longer subject to the Company's right to repurchase
the stock upon the purchaser's termination of employment with the Company. At
such times, the purchaser will recognize ordinary income measured as the
difference between the purchase price and the fair market value of the stock on
the date the stock is no longer subject to a substantial risk of forfeiture.
The purchaser may accelerate to the date of grant or purchase his or her
recognition of ordinary income, if any, and the beginning of any capital gain
holding period by timely filing an election pursuant to Section 83(b) of the
Code. In such event, the ordinary income recognized, if any, is measured as the
difference between the purchase price and the fair market value of the stock on
the date of purchase, and the capital gain holding period commences on such
date. The ordinary income recognized by a purchaser who is an employee will be
subject to tax withholding by the Company.
STOCK APPRECIATION RIGHTS. No income will be recognized by a recipient in
connection with the grant of a stock appreciation right. When the stock
appreciation right is exercised, the recipient will generally be required to
include as taxable ordinary income in the year of exercise an amount equal to
the sum of the amount of cash received and the fair market value of any Common
Stock received upon the exercise. In the case of a recipient who is also an
employee, any taxable income recognized upon exercise of a stock appreciation
right will constitute wages for which withholding will be required. The Company
will generally be entitled to a tax deduction in the same amount. Any gain or
loss on the resale of Common Stock acquired upon exercise of a stock
appreciation right will be treated as a taxable gain or loss.
SECTION 162(m) OF THE CODE. Section 162(m) of the Code generally disallows
a public company's tax deduction for compensation to executive officers in
excess of $1,000,000 in any tax year. Compensation
17
<PAGE>
that qualifies as "performance-based compensation" is excluded from the
$1,000,000 deductibility cap, and therefore remains fully deductible by the
company that pays it. To qualify as "performance-based" within the meaning of
Section 162(m) of the Code, options and stock appreciation rights must be
granted with an exercise price of not less than 100% of the fair market value of
the Common Stock on the date of the grant, among other things. To the extent
these requirements are met, compensation attributable to options and stock
appreciation rights granted to executive officers under the 1998 Plan will
qualify as performance-based compensation for purposes of Section 162(m) of the
Code, and the Company will generally be entitled to a tax deduction in the
amount recognized by such officers upon exercise of the options. No tax
authority or court has ruled on the applicability of Section 162(m) to the 1998
Plan and any final determination of the deductibility of amounts realized upon
exercise of an option granted under the 1998 Plan could ultimately be made by
the Internal Revenue Service or a court having final jurisdiction with respect
to the matter. The Company retains the right to grant options under the 1998
Plan in accordance with the terms of the 1998 Plan regardless of any final
determination as to the applicability of Section 162(m) of the Code to these
grants.
Compensation attributable to restricted stock granted under the 1998 Plan
will not generally qualify as "performance-based" within the meaning of
Section 162(m) of the Code. As a result, income recognized by executive officers
in connection with stock purchase rights will be subject to the limitations on
deductibility under such section.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION UPON
OPTIONEES, RECIPIENTS OF RESTRICTED STOCK AND STOCK APPRECIATION RIGHTS AND THE
COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF OPTIONS, RESTRICTED STOCK AND
STOCK APPRECIATION RIGHTS UNDER THE 1998 PLAN. IT DOES NOT PURPORT TO BE
COMPLETE, AND DOES NOT DISCUSS THE PROVISIONS OF THE INCOME TAX LAWS OF ANY
STATE OR MUNICIPALITY.
PARTICIPATION IN THE 1998 PLAN
The Administrator, in its discretion, selects the persons to whom options,
restricted shares, SARs and stock units may be granted, the time or times at
which such options, restricted shares, SARs and stock units shall be granted,
and the number of shares subject to each such grant. For this reason, it is not
possible to determine the benefits or amounts that will be received by any
particular individual or individuals in the future.
18
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The following table sets forth certain information as of the Record Date
with respect to options granted under the 1998 Plan since inception to (i) each
Named Executive Officer listed in the Summary Compensation Table; (ii) all
current executive officers as a group; (iii) all current directors, excluding
executive officers, as a group; and (iv) all employees, excluding executive
officers, as a group.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES AVERAGE WEIGHTED
UNDERLYING OPTIONS EXERCISE
NAME GRANTED PRICE PER SHARE
- ---- -------------------- ----------------
<S> <C> <C>
Anthony E. Papa ........................................... 200,000(1) $4.08
Chairman and Chief Executive Officer
James P. Pisani ........................................... 200,000(1) $4.08
President, Chief Operating Officer and Secretary
Frank A. Leone(1) ......................................... 175,000(2) $3.54
Executive Vice President of Field Sales and Service
Joseph Renteria, Jr. ...................................... 50,000(2) $3.43
Vice President, Information Systems
M. Scott Hall ............................................. 75,000 $3.58
Former Senior Vice President, Channel Markets Group
All current executive officers as a group (5 persons)...... 705,000(3) $3.98
All current directors, excluding executive officers, as a
group.................................................... 175,000(4) $3.94
All employees, excluding executive officers, as a group.... 958,000 $3.54
</TABLE>
- ------------------------
(1) Includes a grant of 100,000 options with an exercise price of $3.28 per
share which is contingent upon stockholder approval of the proposed
amendment to the 1998 Plan.
(2) Includes a grant of 25,000 options with an exercise price of $3.28 per share
which is contingent upon stockholder approval of the proposed amendment to
the 1998 Plan.
(3) Includes grants of an aggregate of 280,000 options with an exercise price of
$3.28 per share which are contingent upon stockholder approval of the
proposed amendment to the 1998 Plan.
(4) Includes grants of an aggregate of 100,000 options with an exercise price of
$3.28 per share which are contingent upon stockholder approval of the
proposed amendment to the 1998 Plan.
RECENT STOCK PRICE
On March 14, 2000, the closing price per share of the Common Stock on The
Nasdaq SmallCap Market(SM) was $8.25.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of Common
Stock present, in person or by proxy, at the Annual Meeting, with each share
entitled to one vote, is required for approval of the amendment to the 1998
Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF
THE AMENDMENT TO THE 1998 PLAN.
19
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PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed the firm of KPMG LLP, as NetLojix's
independent auditors for 2000. A representative of KPMG LLP is expected to be
present at the Annual Meeting. Such representative will have the opportunity to
make a statement if he or she desires to do so and will be available to respond
to appropriate questions. KPMG LLP audited the Company's financial statements
for the year ended December 31, 1999.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF KPMG LLP AS NETLOJIX'S INDEPENDENT AUDITORS FOR THE YEAR
2000.
OTHER BUSINESS
The Board does not intend to present any other business for action at the
Annual Meeting and does not know of other matters likely to be brought before
such meeting. If any other matters are introduced, the proxy holders named in
the enclosed proxies will vote shares they represent as the Board recommends.
BY ORDER OF THE BOARD OF DIRECTORS,
[SIGNATURE]
James P. Pisani
SECRETARY
Santa Barbara, California
April 10, 2000
20
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APPENDIX A
1998 STOCK INCENTIVE PLAN, AS AMENDED
<PAGE>
1998 STOCK INCENTIVE PLAN OF
NETLOJIX COMMUNICATIONS, INC.
(AS AMENDED ON JANUARY 10, 2000)
ARTICLE 1. INTRODUCTION
The Plan was adopted by the Board on March 10, 1998, subject to approval
by the Company's stockholders. The purpose of the Plan is to promote the
long-term success of the Company and the creation of stockholder value by (a)
encouraging Employees, Outside Directors and Consultants to focus on critical
long-range objectives, (b) encouraging the attraction and retention of
Employees, Outside Directors and Consultants with exceptional qualifications and
(c) linking Employees, Outside Directors and Consultants directly to stockholder
interests through increased stock ownership. The Plan seeks to achieve this
purpose by providing for Awards in the form of Restricted Shares, Stock Units,
Options (which may constitute incentive stock options or nonstatutory stock
options) or stock appreciation rights.
The Plan shall be governed by, and construed in accordance with, the laws
of the State of Delaware (except their choice-of-law provisions).
ARTICLE 2. ADMINISTRATION
2.1 Committee Composition . The Plan shall be administered by the
Committee. The Committee shall consist exclusively of two or more directors of
the Company, who shall be appointed by the Board. In addition, the composition
of the Committee shall satisfy:
(a) Such requirements as the Securities and Exchange Commission
may establish for administrators acting under plans intended to qualify for
exemption under Rule 16b-3 (or its successor) under the Exchange Act; and
(b) Such requirements as the Internal Revenue Service may
establish for outside directors acting under plans intended to qualify for
exemption under section 162(m)(4)(C) of the Code.
The Board may also appoint one or more separate committees of the Board,
each composed of one or more directors of the Company who need not satisfy the
foregoing requirements, who may administer the Plan with respect to Employees
and Consultants who are not considered officers or directors of the Company
under section 16 of the Exchange Act, may grant Awards under the Plan to such
Employees and Consultants and may determine all terms of such Awards.
2.2 COMMITTEE RESPONSIBILITIES . The Committee shall (a) select the
Employees, Outside Directors and Consultants who are to receive Awards under the
Plan, (b) determine the
<PAGE>
type, number, vesting requirements and other features and conditions of such
Awards, (c) interpret the Plan and (d) make all other decisions relating to the
operation of the Plan. The Committee may adopt such rules or guidelines as it
deems appropriate to implement the Plan. The Committee's determinations under
the Plan shall be final and binding on all persons.
ARTICLE 3. SHARES AVAILABLE FOR GRANTS
3.1 BASIC LIMITATION . Common Shares issued pursuant to the Plan may
be authorized but unissued shares or treasury shares. The aggregate number of
Restricted Shares, Stock Units, Options and SARs awarded under the Plan shall
not exceed 3,000,000. The limitation of this Section 3.1 shall be subject to
adjustment pursuant to Article 10.
3.2 ADDITIONAL SHARES . If Stock Units, Options or SARs are forfeited
or if Options or SARs terminate for any other reason before being exercised,
then the corresponding Common Shares shall again become available for Awards
under the Plan. If Stock Units are settled, then only the number of Common
Shares (if any) actually issued in settlement of such Stock Units shall reduce
the number available under Section 3.1 and the balance shall again become
available for Awards under the Plan. If SARs are exercised, then only the number
of Common Shares (if any) actually issued in settlement of such SARs shall
reduce the number available under Section 3.1 and the balance shall again become
available for Awards under the Plan. If Restricted Shares are forfeited, then
such Shares shall not become available for subsequent Awards under the Plan.
3.3 DIVIDEND EQUIVALENTS . Any dividend equivalents distributed under
the Plan shall not be applied against the number of Restricted Shares, Stock
Units, Options or SARs available for Awards, whether or not such dividend
equivalents are converted into Stock Units.
ARTICLE 4. ELIGIBILITY
4.1 GENERAL RULES . Only Employees, Outside Directors and Consultants
shall be eligible for designation as Participants by the Committee.
4.2 INCENTIVE STOCK OPTIONS . Only Employees shall be eligible for the
grant of ISOs. In addition, an Employee who owns more than 10% of the total
combined voting power of all classes of outstanding stock of the Company or any
of its Parents or Subsidiaries shall not be eligible for the grant of an ISO
unless the requirements set forth in section 422(c)(6) of the Code are
satisfied.
ARTICLE 5. OPTIONS
5.1 STOCK OPTION AGREEMENT . Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms of the Plan and
may be subject to any other terms that are
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<PAGE>
not inconsistent with the Plan. The Stock Option Agreement shall specify whether
the Option is an ISO or an NSO. The provisions of the various Stock Option
Agreements entered into under the Plan need not be identical. Options may be
granted in consideration of a cash payment or in consideration of a reduction in
the Optionee's other compensation.
5.2 NUMBER OF SHARES. Each Stock Option Agreement shall specify the
number of Common Shares subject to the Option and shall provide for the
adjustment of such number in accordance with Article 10. Options granted to any
Optionee in a single calendar year shall in no event cover more than 500,000
Common Shares, subject to adjustment in accordance with Article 10.
5.3 EXERCISE PRICE . Each Stock Option Agreement shall specify the
Exercise Price; provided that the Exercise Price under an ISO shall in no event
be less than 100% of the Fair Market Value of a Common Share on the date of
grant and the Exercise Price under an NSO shall in no event be less than the par
value of the Common Shares subject to such NSO. In the case of an NSO, a Stock
Option Agreement may specify an Exercise Price that varies in accordance with a
predetermined formula while the NSO is outstanding.
5.4 EXERCISABILITY AND TERM . Each Stock Option Agreement shall
specify the date when all or any installment of the Option is to become
exercisable. The Stock Option Agreement shall also specify the term of the
Option; provided that the term of an ISO shall in no event exceed 10 years from
the date of grant. A Stock Option Agreement may provide for accelerated
exercisability in the event of the Optionee's death, disability or retirement or
other events and may provide for expiration prior to the end of its term in the
event of the termination of the Optionee's service. Options may be awarded in
combination with SARs, and such an Award may provide that the Options will not
be exercisable unless the related SARs are forfeited. NSOs may also be awarded
in combination with Restricted Shares or Stock Units, and such an Award may
provide that the NSOs will not be exercisable unless the related Restricted
Shares or Stock Units are forfeited.
5.5 EFFECT OF CHANGE IN CONTROL . The Committee may determine, at the
time of granting an Option or thereafter, that such Option shall become fully
exercisable as to all Common Shares subject to such Option in the event that a
Change in Control occurs with respect to the Company.
5.6 MODIFICATION OR ASSUMPTION OF OPTIONS.. Within the limitations of
the Plan, the Committee may modify, extend or assume outstanding options or may
accept the cancellation of outstanding options (whether granted by the Company
or by another issuer) in return for the grant of new options for the same or a
different number of shares and at the same or a different exercise price. The
foregoing notwithstanding, no modification of an Option shall, without the
consent of the Optionee, alter or impair his or her rights or obligations under
such Option.
ARTICLE 6. PAYMENT FOR OPTION SHARES
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<PAGE>
6.1 GENERAL RULE . The entire Exercise Price of Common Shares issued
upon exercise of Options shall be payable in cash at the time when such Common
Shares are purchased, except as follows:
(a) In the case of an ISO granted under the Plan, payment shall
be made only pursuant to the express provisions of the applicable Stock Option
Agreement. The Stock Option Agreement may specify that payment may be made in
any form(s) described in this Article 6.
(b) In the case of an NSO, the Committee may at any time accept
payment in any form(s) described in this Article 6.
6.2 EXERCISE/SALE . To the extent that this Section 6.2 is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell
Common Shares and to deliver all or part of the sales proceeds to the Company in
payment of all or part of the Exercise Price and any withholding taxes.
6.3 EXERCISE/PLEDGE . To the extent that this Section 6.3 is
applicable, payment may be made by the delivery (on a form prescribed by the
Company) of an irrevocable direction to pledge Common Shares to a securities
broker or lender approved by the Company, as security for a loan, and to deliver
all or part of the loan proceeds to the Company in payment of all or part of the
Exercise Price and any withholding taxes.
6.4 PROMISSORY NOTE . To the extent that this Section 6.4 is
applicable, payment may be made with a full-recourse promissory note; provided
that the par value of the Common Shares shall be paid in cash.
6.5 OTHER FORMS OF PAYMENT . To the extent that this Section 6.5 is
applicable, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 SAR AGREEMENT . Each grant of an SAR under the Plan shall be
evidenced by an SAR Agreement between the Optionee and the Company. Such SAR
shall be subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with the Plan. The provisions of the
various SAR Agreements entered into under the Plan need not be identical. SARs
may be granted in consideration of a reduction in the Optionee's other
compensation.
7.2 NUMBER OF SHARES . Each SAR Agreement shall specify the number of
Common Shares to which the SAR pertains and shall provide for the adjustment of
such number in accordance with Article 10. SARs granted to any Optionee in a
single calendar year shall in no
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<PAGE>
event pertain to more than 500,000 Common Shares, subject to adjustment in
accordance with Article 10.
7.3 EXERCISE PRICE . Each SAR Agreement shall specify the Exercise
Price. An SAR Agreement may specify an Exercise Price that varies in accordance
with a predetermined formula while the SAR is outstanding.
7.4 EXERCISABILITY AND TERM . Each SAR Agreement shall specify the
date when all or any installment of the SAR is to become exercisable. The SAR
Agreement shall also specify the term of the SAR. An SAR Agreement may provide
for accelerated exercisability in the event of the Optionee's death, disability
or retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's service. SARs may
also be awarded in combination with Options, Restricted Shares or Stock Units,
and such an Award may provide that the SARs will not be exercisable unless the
related Options, Restricted Shares or Stock Units are forfeited. An SAR may be
included in an ISO only at the time of grant but may be included in an NSO at
the time of grant or thereafter. An SAR granted under the Plan may provide that
it will be exercisable only in the event of a Change in Control.
7.5 EFFECT OF CHANGE IN CONTROL . The Committee may determine, at the
time of granting an SAR or thereafter, that such SAR shall become fully
exercisable as to all Common Shares subject to such SAR in the event that a
Change in Control occurs with respect to the Company.
7.6 EXERCISE OF SARS . If, on the date when an SAR expires, the
Exercise Price under such SAR is less than the Fair Market Value on such date
but any portion of such SAR has not been exercised or surrendered, then such SAR
shall automatically be deemed to be exercised as of such date with respect to
such portion. Upon exercise of an SAR, the Optionee (or any person having the
right to exercise the SAR after his or her death) shall receive from the Company
(a) Common Shares, (b) cash or (c) a combination of Common Shares and cash, as
the Committee shall determine. The amount of cash and/or the Fair Market Value
of Common Shares received upon exercise of SARs shall, in the aggregate, be
equal to the amount by which the Fair Market Value (on the date of surrender) of
the Common Shares subject to the SARs exceeds the Exercise Price.
7.7 MODIFICATION OR ASSUMPTION OF SARS.. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding SARs or may accept
the cancellation of outstanding SARs (whether granted by the Company or by
another issuer) in return for the grant of new SARs for the same or a different
number of shares and at the same or a different exercise price. The foregoing
notwithstanding, no modification of an SAR shall, without the consent of the
Optionee, alter or impair his or her rights or obligations under such SAR.
ARTICLE 8. RESTRICTED SHARES AND STOCK UNITS .
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<PAGE>
8.1 TIME, AMOUNT AND FORM OF AWARDS. Awards under the Plan may be
granted in the form of Restricted Shares, in the form of Stock Units, or in any
combination of both. Restricted Shares or Stock Units may also be awarded in
combination with NSOs or SARs, and such an Award may provide that the Restricted
Shares or Stock Units will be forfeited in the event that the related NSOs or
SARs are exercised.
8.2 PAYMENT FOR AWARDS . To the extent that an Award is granted in the
form of newly issued Restricted Shares, the Award recipient, as a condition to
the grant of such Award, shall be required to pay the Company in cash an amount
equal to the par value of such Restricted Shares. To the extent that an Award is
granted in the form of Restricted Shares from the Company's treasury or in the
form of Stock Units, no cash consideration shall be required of the Award
recipients.
8.3 VESTING CONDITIONS . Each Award of Restricted Shares or Stock
Units shall become vested, in full or in installments, upon satisfaction of the
conditions specified in the Stock Award Agreement. A Stock Award Agreement may
provide for accelerated vesting in the event of the Participant's death,
disability or retirement or other events. The Committee may determine, at the
time of making an Award or thereafter, that such Award shall become fully vested
in the event that a Change in Control occurs with respect to the Company.
8.4 FORM AND TIME OF SETTLEMENT OF STOCK UNITS . Settlement of vested
Stock Units may be made in the form of (a) cash, (b) Common Shares or (c) any
combination of both, as determined by the Committee. The actual number of Stock
Units eligible for settlement may be larger or smaller than the number included
in the original Award, based on predetermined performance factors. Methods of
converting Stock Units into cash may include (without limitation) a method based
on the average Fair Market Value of Common Shares over a series of trading days.
Vested Stock Units may be settled in a lump sum or in installments. The
distribution may occur or commence when all vesting conditions applicable to the
Stock Units have been satisfied or have lapsed, or it may be deferred to any
later date. The amount of a deferred distribution may be increased by an
interest factor or by dividend equivalents. Until an Award of Stock Units is
settled, the number of such Stock Units shall be subject to adjustment pursuant
to Article 10.
8.5 DEATH OF RECIPIENT . Any Stock Units Award that becomes payable
after the recipient's death shall be distributed to the recipient's beneficiary
or beneficiaries. Each recipient of a Stock Units Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Company. A beneficiary designation may be changed by filing the
prescribed form with the Company at any time before the Award recipient's death.
If no beneficiary was designated or if no designated beneficiary survives the
Award recipient, then any Stock Units Award that becomes payable after the
recipient's death shall be distributed to the recipient's estate.
8.6 CREDITORS' RIGHTS . A holder of Stock Units shall have no rights
other than those of a general creditor of the Company. Stock Units represent an
unfunded and unsecured
-6-
<PAGE>
obligation of the Company, subject to the terms and conditions of the applicable
Stock Award Agreement.
ARTICLE 9. VOTING AND DIVIDEND RIGHTS
9.1 RESTRICTED SHARES . The holders of Restricted Shares awarded under
the Plan shall have the same voting, dividend and other rights as the Company's
other stockholders. A Stock Award Agreement, however, may require that the
holders of Restricted Shares invest any cash dividends received in additional
Restricted Shares. Such additional Restricted Shares shall be subject to the
same conditions and restrictions as the Award with respect to which the
dividends were paid. Such additional Restricted Shares shall not reduce the
number of Common Shares available under Article 3.
9.2 STOCK UNITS . The holders of Stock Units shall have no voting
rights. Prior to settlement or forfeiture, any Stock Unit awarded under the Plan
may, at the Committee's discretion, carry with it a right to dividend
equivalents. Such right entitles the holder to be credited with an amount equal
to all cash dividends paid on one Common Share while the Stock Unit is
outstanding. Dividend equivalents may be converted into additional Stock Units.
Settlement of dividend equivalents may be made in the form of cash, in the form
of Common Shares, or in a combination of both. Prior to distribution, any
dividend equivalents which are not paid shall be subject to the same conditions
and restrictions as the Stock Units to which they attach.
ARTICLE 10. PROTECTION AGAINST DILUTION .
10.1 ADJUSTMENTS . In the event of a subdivision of the outstanding
Common Shares, a declaration of a dividend payable in Common Shares, a
declaration of a dividend payable in a form other than Common Shares in an
amount that has a material effect on the price of Common Shares, a combination
or consolidation of the outstanding Common Shares (by reclassification or
otherwise) into a lesser number of Common Shares, a recapitalization, a spin-off
or a similar occurrence, the Committee shall make such adjustments as it, in its
sole discretion, deems appropriate in one or more of (a) the number of Options,
SARs, Restricted Shares and Stock Units available for future Awards under
Article 3, (b) the limitations set forth in Section 3.1 (c) the number of Stock
Units included in any prior Award which has not yet been settled, (d) the number
of Common Shares covered by each outstanding Option and SAR or (e) the Exercise
Price under each outstanding Option and SAR. Except as provided in this Article
10, a Participant shall have no rights by reason of any issue by the Company of
stock of any class or securities convertible into stock of any class, any
subdivision or consolidation of shares of stock of any class, the payment of any
stock dividend or any other increase or decrease in the number of shares of
stock of any class.
10.2 REORGANIZATIONS . In the event that the Company is a party to a
merger or other reorganization, outstanding Options, SARs, Restricted Shares and
Stock Units shall be subject to the agreement of merger or reorganization. Such
agreement may provide, without limitation, for
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<PAGE>
the assumption of outstanding Awards by the surviving corporation or its parent,
for their continuation by the Company (if the Company is a surviving
corporation), for accelerated vesting and accelerated expiration, or for
settlement in cash.
ARTICLE 11. AWARDS UNDER OTHER PLANS
The Company may grant awards under other plans or programs. Such awards
may be settled in the form of Common Shares issued under this Plan. Such Common
Shares shall be treated for all purposes under the Plan like Common Shares
issued in settlement of Stock Units and shall, when issued, reduce the number of
Common Shares available under Article 3.
ARTICLE 12. PAYMENT OF DIRECTOR'S FEES IN SECURITIES .
12.1 EFFECTIVE DATE . No provision of this Article 12 shall be
effective unless and until the Board has determined to implement such provision.
12.2 ELECTIONS TO RECEIVE NSOS, RESTRICTED SHARES OR STOCK UNITS . An
Outside Director may elect to receive his or her annual retainer payments and
meeting fees from the Company in the form of cash, NSOs, Restricted Shares,
Stock Units, or a combination thereof, as determined by the Board. Such NSOs,
Restricted Shares and Stock Units shall be issued under the Plan. An election
under this Article 12 shall be filed with the Company on the prescribed form.
12.3 NUMBER AND TERMS OF NSOS, RESTRICTED SHARES OR STOCK UNITS . The
number of NSOs, Restricted Shares or Stock Units to be granted to Outside
Directors in lieu of annual retainers and meeting fees that would otherwise be
paid in cash shall be calculated in a manner determined by the Board. The terms
of such NSOs, Restricted Shares or Stock Units shall also be determined by the
Board.
ARTICLE 13. LIMITATION ON RIGHTS
13.1 RETENTION RIGHTS. Neither the Plan nor any Award granted under the
Plan shall be deemed to give any individual a right to remain an Employee,
Outside Director or Consultant of the Company, a Parent or a Subsidiary. The
Company and its Parents and Subsidiaries reserve the right to terminate the
service of any Employee, Outside Director or Consultant at any time, with or
without cause, subject to applicable laws, the Company's certificate of
incorporation and by-laws and a written employment agreement (if any).
13.2 STOCKHOLDERS' RIGHTS . A Participant shall have no dividend
rights, voting rights or other rights as a stockholder with respect to any
Common Shares covered by his or her Award prior to the time when a stock
certificate for such Common Shares is issued or, in the case of an Option, the
time when he or she becomes entitled to receive such Common Shares by filing a
notice of exercise and paying the Exercise Price. No adjustment shall be made
for cash
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dividends or other rights for which the record date is prior to such time,
except as expressly provided in Articles 8, 9 and 10.
13.3 REGULATORY REQUIREMENTS . Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Common Shares under the
Plan shall be subject to all applicable laws, rules and regulations and such
approval by any regulatory body as may be required. The Company reserves the
right to restrict, in whole or in part, the delivery of Common Shares pursuant
to any Award prior to the satisfaction of all legal requirements relating to the
issuance of such Common Shares, to their registration, qualification or listing
or to an exemption from registration, qualification or listing.
ARTICLE 14. LIMITATION ON PAYMENTS
14.1 BASIC RULE . Any provision of the Plan to the contrary
notwithstanding, in the event that the independent auditors most recently
selected by the Board (the "Auditors") determine that any payment or transfer by
the Company under the Plan to or for the benefit of a Participant (a "Payment")
would be nondeductible by the Company for federal income tax purposes because of
the provisions concerning "excess parachute payments" in section 280G of the
Code, then the aggregate present value of all Payments shall be reduced (but not
below zero) to the Reduced Amount; provided that the Committee, at the time of
making an Award under this Plan or at any time thereafter, may specify in
writing that such Award shall not be so reduced and shall not be subject to this
Article 14. For purposes of this Article 14, the "Reduced Amount" shall be the
amount, expressed as a present value, which maximizes the aggregate present
value of the Payments without causing any Payment to be nondeductible by the
Company because of section 280G of the Code.
14.2 REDUCTION OF PAYMENTS . If the Auditors determine that any Payment
would be nondeductible by the Company because of section 280G of the Code, then
the Company shall promptly give the Participant notice to that effect and a copy
of the detailed calculation thereof and of the Reduced Amount, and the
Participant may then elect, in his or her sole discretion, which and how much of
the Payments shall be eliminated or reduced (as long as after such election the
aggregate present value of the Payments equals the Reduced Amount) and shall
advise the Company in writing of his or her election within 10 days of receipt
of notice. If no such election is made by the Participant within such 10-day
period, then the Company may elect which and how much of the Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Payments equals the Reduced Amount) and shall notify the
Participant promptly of such election. For purposes of this Article 14, present
value shall be determined in accordance with section 280G(d)(4) of the Code. All
determinations made by the Auditors under this Article 14 shall be binding upon
the Company and the Participant and shall be made within 60 days of the date
when a Payment becomes payable or transferable. As promptly as practicable
following such determination and the elections hereunder, the Company shall pay
or transfer to or for the benefit of the Participant such amounts as are then
due to him or her under the Plan and shall promptly pay or transfer to or for
the benefit of the Participant in the future such amounts as become due to him
or her under the Plan.
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14.3 OVERPAYMENTS AND UNDERPAYMENTS . As a result of uncertainty in the
application of section 280G of the Code at the time of an initial determination
by the Auditors hereunder, it is possible that Payments will have been made by
the Company which should not have been made (an "Overpayment") or that
additional Payments which will not have been made by the Company could have been
made (an "Underpayment"), consistent in each case with the calculation of the
Reduced Amount hereunder. In the event that the Auditors, based upon the
assertion of a deficiency by the Internal Revenue Service against the Company or
the Participant which the Auditors believe has a high probability of success,
determine that an Overpayment has been made, such Overpayment shall be treated
for all purposes as a loan to the Participant which he or she shall repay to the
Company, together with interest at the applicable federal rate provided in
section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Participant to the Company if and to the extent that such payment
would not reduce the amount which is subject to taxation under section 4999 of
the Code. In the event that the Auditors determine that an Underpayment has
occurred, such Underpayment shall promptly be paid or transferred by the Company
to or for the benefit of the Participant, together with interest at the
applicable federal rate provided in section 7872(f)(2) of the Code.
14.4 RELATED CORPORATIONS . For purposes of this Article 14, the term
"Company" shall include affiliated corporations to the extent determined by the
Auditors in accordance with section 280G(d)(5) of the Code.
ARTICLE 15. WITHHOLDING TAXES
15.1 GENERAL . To the extent required by applicable federal, state,
local or foreign law, a Participant or his or her successor shall make
arrangements satisfactory to the Company for the satisfaction of any withholding
tax obligations that arise in connection with the Plan. The Company shall not be
required to issue any Common Shares or make any cash payment under the Plan
until such obligations are satisfied.
15.2 SHARE WITHHOLDING . The Committee may permit a Participant to
satisfy his or her statutory withholding requirements by having the Company
withhold all or a portion of any Common Shares that otherwise would be issued to
him or her or by surrendering all or a portion of any Common Shares that he or
she previously acquired. Such Common Shares shall be valued at their Fair Market
Value on the date when taxes otherwise would be withheld in cash.
ARTICLE 16. FUTURE OF THE PLAN .
16.1 TERM OF THE PLAN . The Plan, as set forth herein, was adopted on
March 10, 1998, and shall become effective on such date, subject to the approval
of the stockholders of the Company. The Plan shall remain in effect until it is
terminated under Section 16.2, except that no ISOs shall be granted after March
10, 2008.
16.2 AMENDMENT OR TERMINATION . The Board may, at any time and for any
reason, amend or terminate the Plan. An amendment of the Plan shall be subject
to the approval of the
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Company's stockholders only to the extent required by applicable laws,
regulations or rules. No Awards shall be granted under the Plan after the
termination thereof. The termination of the Plan, or any amendment thereof,
shall not affect any Award previously granted under the Plan.
ARTICLE 17. DEFINITIONS.
17.1 "AWARD" means any award of an Option, an SAR, a Restricted Share
or a Stock Unit under the Plan.
17.2 "BOARD" means the Company's Board of Directors, as constituted
from time to time.
17.3 "CHANGE IN CONTROL" shall mean the occurrence of any of the
following events:
(a) The consummation of a merger or consolidation of the
Company with or into another entity or any other corporate reorganization, if
more than 50% of the combined voting power of the continuing or surviving
entity's securities outstanding immediately after such merger, consolidation or
other reorganization is owned by persons who were not stockholders of the
Company immediately prior to such merger, consolidation or other reorganization;
(b) A change in the composition of the Board, as a result of
which fewer than one-half of the incumbent directors are directors who either:
(A) Had been directors of the Company 24 months prior to
such change; or
(B) Were elected, or nominated for election, to the
Board with the affirmative votes of at least a majority of the directors who had
been directors of the Company 24 months prior to such change and who were still
in office at the time of the election or nomination; or
(c) Any "person" (as such term is used in sections 13(d) and
14(d) of the Exchange Act) by the acquisition or aggregation of securities is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 50% or more of the combined voting power of the Company's
then outstanding securities ordinarily (and apart from rights accruing under
special circumstances) having the right to vote at elections of directors (the
"Base Capital Stock"); except that any change in the relative beneficial
ownership of the Company's securities by any person resulting solely from a
reduction in the aggregate number of outstanding shares of Base Capital Stock,
and any decrease thereafter in such person's ownership of securities, shall be
disregarded until such person increases in any manner, directly or indirectly,
such person's beneficial ownership of any securities of the Company.
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<PAGE>
The term "Change in Control" shall not include a transaction, the sole
purpose of which is to change the state of the Company's incorporation.
17.4 "CODE" means the Internal Revenue Code of 1986, as amended.
17.5 "COMMITTEE" means a committee of the Board, as described in
Article 2.
17.6 "COMMON SHARE" means one share of the common stock of the Company.
17.7 "COMPANY" means NetLojix Communications, Inc., a Delaware
corporation.
17.8 "CONSULTANT" means a consultant or adviser who provides bona fide
services to the Company, a Parent or a Subsidiary as an independent contractor.
Service as a Consultant shall be considered employment for all purposes of the
Plan, except as provided in Section 4.2.
17.9 "EMPLOYEE" means a common-law employee of the Company, a Parent or
a Subsidiary.
17.10 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
17.11 "EXERCISE PRICE," in the case of an Option, means the amount for
which one Common Share may be purchased upon exercise of such Option, as
specified in the applicable Stock Option Agreement. "Exercise Price," in the
case of an SAR, means an amount, as specified in the applicable SAR Agreement,
which is subtracted from the Fair Market Value of one Common Share in
determining the amount payable upon exercise of such SAR.
17.12 "FAIR MARKET VALUE" means the market price of Common Shares,
determined by the Committee as follows:
(a) If the Common Shares were traded over-the-counter on the
date in question but were not traded on the Nasdaq system or the Nasdaq National
Market System, then the Fair Market Value shall be equal to the mean between the
last reported representative bid and asked prices quoted for such date by the
principal automated inter-dealer quotation system on which the Common Shares are
quoted or, if the Common Shares are not quoted on any such system, by the "Pink
Sheets" published by the National Quotation Bureau, Inc.;
(b) If the Common Shares were traded over-the-counter on the
date in question and were traded on the Nasdaq system or the Nasdaq National
Market System, then the Fair Market Value shall be equal to the last-transaction
price quoted for such date by the Nasdaq system or the Nasdaq National Market
System;
(c) If the Common Shares were traded on a stock exchange on the
date in question, then the Fair Market Value shall be equal to the closing price
reported by the applicable composite transactions report for such date; and
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(d) If none of the foregoing provisions is applicable, then the
Fair Market Value shall be determined by the Committee in good faith on such
basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee shall
be based on the prices reported in the Western Edition of THE WALL STREET
JOURNAL. Such determination shall be conclusive and binding on all persons.
17.13 "ISO" means an incentive stock option described in section 422(b)
of the Code.
17.14 "NSO" means a stock option not described in sections 422 or 423 of
the Code.
17.15 "OPTION" means an ISO or NSO granted under the Plan and entitling
the holder to purchase one Common Share.
17.16 "OPTIONEE" means an individual or estate who holds an Option or
SAR.
17.17 "OUTSIDE DIRECTOR" shall mean a member of the Board who is not an
Employee. Service as an Outside Director shall be considered employment for all
purposes of the Plan, except as provided in Section 4.2.
17.18 "PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a Parent on
a date after the adoption of the Plan shall be considered a Parent commencing as
of such date.
17.19 "PARTICIPANT" means an individual or estate who holds an Award.
17.20 "PLAN" means this 1998 Stock Incentive Plan of NetLojix
Communications, Inc., as amended from time to time.
17.21 "RESTRICTED SHARE" means a Common Share awarded under the Plan.
17.22 "SAR" means a stock appreciation right granted under the Plan.
17.23 "SAR AGREEMENT" means the agreement between the Company and an
Optionee which contains the terms, conditions and restrictions pertaining to his
or her SAR.
17.24 "STOCK AWARD AGREEMENT" means the agreement between the Company
and the recipient of a Restricted Share or Stock Unit which contains the terms,
conditions and restrictions pertaining to such Restricted Share or Stock Unit.
17.25 "STOCK OPTION AGREEMENT" means the agreement between the Company
and an Optionee which contains the terms, conditions and restrictions pertaining
to his or her Option.
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<PAGE>
17.26 "STOCK UNIT" means a bookkeeping entry representing the equivalent
of one Common Share, as awarded under the Plan.
17.27 "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that attains
the status of a Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.
ARTICLE 18. EXECUTION.
To record the adoption of the Plan by the Board, the Company has caused
its duly authorized officer to affix the corporate name and seal hereto.
NETLOJIX COMMUNICATIONS, INC.
By /s/ ANTHONY E. PAPA
-----------------------------
Anthony E. Papa, Chairman
and Chief Executive Officer
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<PAGE>
NETLOJIX COMMUNICATIONS, INC.
REVOCABLE PROXY
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 25, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Anthony E. Papa and James P. Pisani, and
each of them, as proxies with full power of substitution, to vote all shares of
Common Stock which the undersigned has power to vote at the Annual Meeting of
Stockholders (the "Annual Meeting") of NetLojix Communications, Inc. (the
"Company") to be held on May 25, 2000 at 2:30p.m., local time, at the Hotel
Santa Barbara, 533 State Street, Santa Barbara, California, and at any
adjournment thereof, in accordance with the instructions set forth herein and
with the same effect as though the undersigned were present in person and voting
such shares. The proxies are authorized to vote upon such other business as may
properly come before the meeting in accordance with a majority vote of the Board
of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2, 3 AND 4
1. ELECTION OF DIRECTORS. Election of the following individuals to serve as
directors for a term expiring at the 2001 annual meeting.
John E. Allen Jeffrey J. Jensen Anthony D. Martin Anthony E.
Papa James P. Pisani
/ / FOR all listed nominees / / WITHHOLD AUTHORITY to vote for all listed
nominees
/ / FOR LISTED NOMINEES except the following: (Instruction: To withhold
authority to vote for any individual nominee, write the name of such
nominee(s) on the line below.)
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2. APPROVAL OF AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK TO 40,000,000.
Approval of amendment to Article IV of the Company's Certificate of
Incorporation as set forth in the Company's Notice of Annual Meeting of
Stockholders and Proxy Statement dated April 10, 2000.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
3. APPROVAL OF AN AMENDMENT TO THE COMPANY'S 1998 STOCK INCENTIVE PLAN TO
INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE BY 1,500,000. Approval
of amendment to the Company's 1998 Stock Incentive Plan as set forth in the
Company's Notice of Annual Meeting of Stockholders and Proxy Statement dated
April 10, 2000.
/ / FOR / / AGAINST / / ABSTAIN
4. RATIFICATION OF APPOINTMENT OF AUDITORS. Approval of the selection of [KPMG
LLP] as the Company's independent auditors for the fiscal year ending
December 31, 2000.
/ / FOR / / AGAINST / / ABSTAIN
5. OTHER BUSINESS. Transaction of such other business as may properly come
before the Annual Meeting or any adjournment thereof.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement dated April 10, 2000.
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS MADE, IT WILL BE VOTED
"FOR" ITEMS 1, 2, 3 AND 4.
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
Dated ________________, 2000
____________________________
Signature(s) of
Stockholder(s)
____________________________
Signature if held jointly
PLEASE SIGN exactly as name
appears above. Joint owners
should each sign. Executors,
administrators, trustees,
etc. should so indicate when
signing. If signer is a
corporation, please sign
full name by duly authorized
officer.
