<PAGE>
===============================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NEWCOM, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
NEWCOM, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 25, 1998
To the Stockholders of NewCom, Inc.:
The Annual Meeting of Stockholders of NewCom, Inc., a Delaware corporation
(the "Company"), will be held on Tuesday, August 25, 1998 at 3:00 p.m. PDT, at
the Hyatt Westlake Plaza Hotel, 880 South Westlake Boulevard, Westlake
Village, California, for the following purposes:
(1) To elect a Board of Directors of 10 members;
(2) To approve the adoption of the 1998 Employee Stock Purchase Plan;
(3) To approve the adoption of the Non-Employee Director Stock Option Plan;
and
(4) To transact any other business which may properly come before the
meeting.
Stockholders of record at the close of business on June 26, 1998 will be
entitled to notice of and to vote at the meeting and any adjournments thereof.
All Stockholders are cordially invited to attend the meeting in person.
Whether or not you expect to attend the meeting, PLEASE COMPLETE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. The giving of
your proxy will not affect your right to vote in person should you later
decide to attend the meeting.
Any Stockholder of record of the Company at the close of business on June
26, 1998 may attend. Any beneficial owner of shares with a letter of
authorization from his recordholder may attend the meeting.
By Order of the Board of Directors
/s/ Michael I. Froch
Michael I. Froch
Secretary
Westlake Village, California
July 28, 1998
<PAGE>
NEWCOM, INC.
31166 VIA COLINAS
WESTLAKE VILLAGE, CALIFORNIA 91362
(818) 597-3200
PROXY STATEMENT
JULY 28, 1998
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of NewCom, Inc. ("NewCom" or the "Company")
for the Annual Meeting of Stockholders to be held at 3:00 p.m. on August 25,
1998 (the "Annual Meeting") and any postponements or adjournments thereof. Any
Stockholder giving a proxy may revoke it before or at the meeting by providing
a proxy bearing a later date or by attending the meeting and expressing a
desire to vote in person. All proxies will be voted as directed by the
Stockholder on the proxy card; and, if no choice is specified, they will be
voted (i) "FOR" the directors nominated by the Board of Directors, (ii) "FOR"
the adoption of the 1998 Employee Stock Purchase Plan, (iii) "FOR" the
adoption of the Non-Employee Director Stock Option Plan, and (iv) in the
discretion of the persons acting as proxies, for any other matters. Your
cooperation in promptly returning the enclosed proxy will reduce the Company's
expenses and enable its management and employees to continue their normal
duties for your benefit with minimum interruption for follow-up proxy
solicitation.
Only Stockholders of record at the close of business on June 26, 1998 are
entitled to receive notice of and to vote at the meeting. On that date, NewCom
had outstanding 10,000,000 shares of Common Stock. The shares of Common Stock
vote as a single class. Holders of shares of Common Stock on the record date
are entitled to one vote for each share held. The presence at the Annual
Meeting, either in person or by proxy, of the holders of a majority of the
shares of Common Stock issued, outstanding and entitled to vote is necessary
to constitute a quorum for the transaction of business.
In accordance with Delaware law, abstentions and "broker non-votes" (i.e.
proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owners or other persons entitled to
vote shares as to a matter with respect to which brokers or nominees do not
have discretionary power to vote) will be treated as present for purposes of
determining the presence of a quorum. For purposes of determining approval of
a matter presented at the meeting, abstentions will be deemed present and
entitled to vote and will, therefore, have the same legal effect as a vote
"against" a matter presented at the meeting. Broker non-votes will be deemed
not entitled to vote on the matter as to which the non-vote is indicated and
will, therefore, have no legal effect on the vote on such matter.
In the event that sufficient votes in favor of the proposals are not
received by the date of the Annual Meeting, the persons named as proxies may
propose one or more adjournments of the Annual Meeting to permit further
solicitations of proxies. Any such adjournment will require 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. The persons named as proxies will
vote in favor of such adjournment or adjournments.
The cost of preparing, assembling, printing and mailing the materials, the
Notice and the enclosed form of Proxy, as well as the cost of soliciting
proxies relating to the Annual Meeting, will be borne by the Company. The
Company will request banks, brokers, dealers, and voting trustees or other
nominees to forward solicitation materials to their customers who are
beneficial owners of shares, and will reimburse them for the reasonable out-
of-pocket expenses of such solicitations. The original solicitation of proxies
by mail may be supplemented by telephone, telegram, personal solicitation or
other means by officers and other regular employees or agents of the Company,
but no additional compensation will be paid to such individuals on account of
such activities. This Proxy Statement and the accompanying Notice of Annual
Meeting and form of Proxy are being mailed or delivered to Stockholders on or
about July 28, 1998.
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PLEASE MARK, DATE, AND SIGN THE ENCLOSED PROXY AND RETURN IT AT AN EARLY
DATE IN THE ENCLOSED POSTAGE-PREPAID RETURN ENVELOPE SO THAT, IF YOU ARE
UNABLE TO ATTEND THE ANNUAL MEETING, YOUR SHARES MAY BE VOTED.
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1
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PROPOSAL NO. 1
ELECTION OF 10 NOMINEES FOR DIRECTORS
NOMINEES AND VOTING
The Bylaws of the Company provide for a board of 10 directors. Consequently,
at the Annual Meeting, 10 directors will be elected to serve until the next
Annual Meeting and until their successors are elected and qualified. Proxies
may not be voted for more than 10 persons. The Company has nominated for
election as directors the 10 persons named below. Each of these nominees has
indicated that they are able and willing to serve as directors.
Unless otherwise instructed, the Company's proxy holders intend to vote the
shares of Common Stock represented by the proxies in favor of the election of
these nominees. If for any reason any of these nominees will be unable or
unwilling to serve, the shares represented by the enclosed proxy will be voted
for the election of the balance of those named and such other person or
persons as the Board of Directors may recommend. The Board of Directors has no
reason to believe that any such nominee will be unable or unwilling to serve.
Directors are elected by a plurality of the votes cast.
The Company's nominees and directors are listed below, together with their
ages, principal occupations, offices with the Company and year in which each
became a director of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE ELECTION OF THE 10 NOMINEES FOR DIRECTOR.
IDENTIFICATION OF DIRECTORS
The following table sets forth all of the current directors and executive
officers of NewCom, their age and the office they hold with the Company.
Executive officers serve at the discretion of the Board. All directors hold
office until the next annual meeting of stockholders of the Company and until
their successors have been duly elected and qualified.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTORS AGE SINCE POSITION WITH THE COMPANY
- ----------------- --- -------- -------------------------------------
<S> <C> <C> <C>
Sultan W. Khan............... 53 1994 Chief Executive Officer and Chairman
Asif M. Khan................. 52 1994 Executive Vice President and Director
Steve C. Veen................ 42 1997 Chief Financial Officer and Director
Michael I. Froch............. 36 1997 Secretary and Director
Zane Alsabery................ 40 1997 Director
James M. Curran.............. 47 1997 Director
Gerald S. Papazian........... 42 1997 Director
Alexander Remington.......... 40 1997 Director
Richard A. Rappaport......... 39 1997 Director
Saied Kashani................ 33 1997 Director
</TABLE>
BUSINESS EXPERIENCE OF DIRECTORS AND NOMINEES DURING THE PAST FIVE YEARS
SULTAN W. KHAN, age 53, has been the Chairman of the Board of Directors of
NewCom since June 1997, and the President and Chief Executive Officer of
NewCom since September 1994. From June to September 1994,
2
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Mr. Khan was employed by Aura Systems, Inc. ("Aura") to perform special
projects. Prior to joining Aura, Mr. Khan was a founder and President of Nuvo
Corporation of America, Inc ("Nuvo"), a developer, manufacturer and marketer
of PC peripheral products, which was liquidated in a Chapter 7 bankruptcy
proceeding in 1994. In addition, he founded Computer Peripherals, Inc. which
under his leadership grew into a multi-million dollar sales company and an
industry leader in modem communication products. Prior to Computer
Peripherals, Mr. Khan was employed by Texas Instruments and, prior thereto, by
Data Products, where he was responsible for developing a high speed band
printer family of products. Mr. Khan received his BS in electrical engineering
at Cal Polytechnic Institute, San Luis Obispo, and a MBA at Cal Lutheran
College.
ASIF M. KHAN, age 52, has been Executive Vice President and Director since
September 1994. From June to September 1994, Mr. Khan was employed by Aura to
perform special projects. Prior to joining Aura, from April 1990 through May
1994, Mr. Khan served as Executive Vice President of Nuvo, which was
liquidated in a Chapter 7 bankruptcy proceeding in 1994. Mr. Khan received his
BS in electrical engineering at West Coast University, Los Angeles, his BS in
physics and mathematics at Karachi University, Pakistan, and a MBA at the
University of California at Los Angeles.
STEVEN C. VEEN, age 42, has been Chief Financial Officer and a Director of
NewCom since June 1997. He joined Aura as its Controller in December 1992 and
became its Chief Financial Officer in March 1994, which position he currently
holds. Prior to that, Mr. Veen, a Certified Public Accountant, practiced for
over twelve years in varying capacities in the public accounting profession.
In particular, Mr. Veen served from 1983 to December 1992 with Muller, King,
Black, Mathys & Acker, Certified Public Accountants. He received a BA in
accounting from Michigan State University in 1981.
MICHAEL I. FROCH, age 36, has been Secretary and a Director of NewCom since
June 1997. From July 1994 through February 1997, Mr. Froch served as Corporate
Counsel at Aura, following which he was appointed as Aura's General Counsel
and Secretary. From 1991 through 1994, Mr. Froch was engaged in private law
practice in California. Mr. Froch is admitted to the California and District
of Columbia bars. He received his Juris Doctor degree from Santa Clara
University School of Law in 1989 during which time he served as judicial
extern to the Honorable Spencer M. Williams, United States District Judge for
the Northern District of California. Mr. Froch received his AB Degree from the
University of California, Berkeley, in 1984, serving from 1982 through 1983 as
Staff Assistant to the Honorable Tom Lantos, Member of Congress.
ZANE R. ALSABERY, age 40, has been a Director of NewCom since June 1997.
From September 1994 to June 1997, Mr. Alsabery served as the Company's Vice
President of Special Projects. Prior to joining the Company, from June to
September 1994, he was employed by Aura. From April 1984 to June 1994,
Mr. Alsabery served in several full time positions at Interstate Recruiters
Corporation, most recently as Vice President of Corporate Accounts, where he
managed Interstate's management consulting efforts in the high technology and
computer-related industries. Prior to Interstate, Mr. Alsabery served as the
manager of multi-user system sales at Marcey, Inc. and as a sales
representative at Compal Computer Systems. He received his BA in economics
from the University of California, Los Angeles in 1979.
JAMES M. CURRAN, age 47, has been a Director of NewCom since June 1997. From
August 1996 until the present, Mr. Curran has served as an independent
business consultant. From May 1995 to August 1996 he served as Executive Vice
President, Information Products and Systems, of Visa International. Prior
thereto, Mr. Curran was employed by International Business Machine Corporation
for 22 years, where he most recently served as a Division Director, Software
Solutions Division. He received his BA in philosophy from Cathedral College
Seminary in New York in 1972.
GERALD S. PAPAZIAN, age 42, has been a Director of the Company since June
1997. He joined Aura in August 1988 and currently serves as Aura's President
and Chief Operating Officer. Previously, Mr. Papazian worked at Bear Stearns &
Co., an investment banking firm, where he served from 1986 as Vice President,
Corporate Finance in the Investment Banking Division. Prior to joining Bear
Stearns, Mr. Papazian was an associate attorney in the law firm of Stroock &
Stroock & Lavan. Mr. Papazian received his BA in economics
3
<PAGE>
from the University of Southern California in 1977 and a J.D./M.B.A. from the
University of California, Los Angeles in 1981.
ALEXANDER REMINGTON, age 40, has been a director of NewCom since June 1997.
Mr. Remington is Chief Executive Officer of Micro Equipment Corporation
("M.E.C."), which he founded in 1983. M.E.C. is a distributor and manufacturer
of computer and peripherals products in the U.S. and worldwide. Mr. Remington
holds a Master of Science degree in Information Computer Science (ICS).
RICHARD A. RAPPAPORT, age 39, has been a Director of the Company since
November 1997. Since April 1998, Mr. Rappaport has been Managing Director of
Investment Banking for EBI Securities Corporation. From 1995 to 1998, he was a
Managing Director of Joseph Charles and Associates, Inc., an investment
banking firm. Prior to 1995, Mr. Rappaport was associated with the investment
banking firm of H.J. Meyers, Inc. from 1987. Mr. Rappaport is a graduate of
the University of California at Berkeley and holds a Masters Degree in
Business Administration from the University of California at Los Angeles.
SAIED KASHANI, age 33, has been a Director of the Company since November
1997. Since April 1997, Mr. Kashani has been a lawyer "of counsel" to Leary &
Meiser, a Los Angeles, California law firm. From 1991 to 1997, the Los Angeles
law firm of Shearman & Sterling employed him. Mr. Kashani holds a JD degree in
law from Harvard University and is admitted to the bar in the State of
California.
FAMILY RELATIONSHIPS
There is no family relationship between Sultan W. Khan and Asif M. Khan or
among any other directors, officers or key employees of the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the Company's
Common Stock owned as of May 1, 1998 (i) by each person who is known by NewCom
to be the beneficial owner of more than five percent (5%) of its outstanding
Common Stock, (ii) by each of the Company's directors and nominees and those
executive officers named in the Summary Compensation Table, and (iii) by all
directors and executive officers as a group:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SHARES SHARES
BENEFICIALLY BENEFICIALLY
DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS OWNED(1) OWNED(2)
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
Aura Systems, Inc.(2)(3)............................. 6,882,896 68.83%
Sultan W. Khan(2)(4)................................. 269,634 2.70%
Asif M. Khan(2)(4)................................... 269,634 2.70%
Steven C. Veen(2).................................... 0 *
Michael I. Froch(2).................................. 0 *
Zane Alsabery(2)(5).................................. 35,833 *
Gerald S. Papazian(2)................................ 0 *
Alexander Remington(2)............................... 0 *
James Curran(2)...................................... 0 *
Saied Kashani(2)..................................... 0 *
Richard A. Rappaport(2).............................. 0 *
Mellon Bank Corporation(6)(7)........................ 1,100,000 11.00%
All executive officers and directors as a group (10
persons)............................................ 575,101 5.75%
</TABLE>
- --------
*Denotes less than 1%.
(1) Beneficial ownership is determined in accordance with rules of the
Commission, and includes generally voting power and/or investment power
with respect to securities. Shares of Common Stock subject to options
currently exercisable or exercisable within sixty days are deemed
outstanding for computing the
4
<PAGE>
beneficial ownership percentage of the person holding such options but are
not deemed outstanding for computing the beneficial ownership percentage of
any other person. Except as indicated by footnote, to the knowledge of the
Company, the persons named in the table above have the sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) c/o NewCom, Inc., 31166 Via Colinas, Westlake Village, CA 91362
(3) May be deemed to be a parent or promoter of the Company, as those terms are
defined in the Securities Act. Aura has agreed to vote all shares held by
it for a period of forty-eight (48) months from September, 1997 for the
election to the Company's Board of Directors of two designees of the
Underwriter of the Company's Initial Public Offering reasonably acceptable
to the Company.
(4) Includes 48,329 shares of Common Stock issuable pursuant to options, which
are exercisable within sixty days of May 1, 1998.
(5) Includes 8,777 shares of Common Stock issuable pursuant to options, which
are exercisable within sixty days of May 1, 1998.
(6) Share ownership data based on a Schedule 13G, dated as of January 29, 1998
by Mellon Bank Corporation and affiliated entities.
(7) c/o Mellon Bank Corporation, One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
NewCom's Board of Directors held seven meetings during the year ended
February 28, 1998. Each director, whose term is expected to continue, attended
more than 75% of the Board meetings during Fiscal 1998, except Mr. Remington
who attended more than 70% of the meetings. During the last fiscal year the
Company did not maintain a nominating committee. Since September 1997, the
Company has maintained a Compensation Committee, which currently consists of
Messrs. Curran, Asif M. Khan, Papazian and Remington. The Compensation
Committee is charged with developing and administering the executive
compensation and performance milestones for salary, bonus and stock options
awarded to the key NewCom executive management team. The Compensation Committee
met three times during Fiscal 1998. Since September 1997, the Company has
maintained an Audit Committee, which currently consists of Messrs. Alsabery,
Curran and Veen, Chief Financial Officer of the Company. The Audit Committee
annually approves the selection and engagement of independent accountants for
the purpose of auditing the business results of the Company and writing an
opinion on the results. Since Aura Systems, Inc. had already engaged the
accounting firm of Pannell Kerr Forster for the purpose of assisting in the
initial public offering of the Company, and since Pannell Kerr Forster had
satisfactorily performed its duties, the full Board of Directors voted at its
September 5, 1997 meeting to ratify the engagement of Pannell Kerr Forster as
the Company's outside accountants. There were no separate meetings of the Audit
Committee during the remainder of the fiscal year ended February 28, 1998.
5
<PAGE>
EXECUTIVE COMPENSATION
CASH COMPENSATION FOR EXECUTIVES
The following table summarizes all compensation paid to the Company's Chief
Executive Officer, and to the most highly compensated executive officers of
the Company other than the Chief Executive Officer whose total compensation
exceeded $100,000 during the fiscal year ended February 28, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- ------------
SECURITIES
NAME AND FISCAL UNDERLYING ALL OTHER
PRINCIPAL POSITION(1) YEAR SALARY(2) OPTIONS(3) COMPENSATION(4)
- --------------------- ------ ------------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sultan W. Khan.......... 1998 $165,313 193,316 $1,900
Chief Executive Officer 1997 136,528 -- 1,976
and President 1996 127,783 -- --
Asif M. Khan............ 1998 $165,313 193,316 $1,761
Executive Vice Presi-
dent 1997 136,528 -- 1,431
1996 127,783 -- --
</TABLE>
- --------
(1) The Company has not entered into, and does not currently contemplate
entering into, any employment contracts or compensation agreements with
any of its executive officers.
(2) Includes amounts deferred by each individual under the 401(k) Plan of the
Company or Aura, as applicable. No bonuses were paid to any such
individuals during the periods identified.
(3) During the Fiscal year ended February 28, 1998, options to acquire 193,316
of Common Stock were granted to each individual. No options were
exercised.
(4) Such compensation consists of total matching contributions made by Aura to
the plan account of each individual pursuant to Aura's 401(k) Plan.
RECENT OPTION GRANTS
The following table sets forth certain information regarding options granted
during the fiscal year ended February 28, 1998 to the Named Executive
Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM ($)(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------
NAME GRANTED (#) FISCAL YEAR(1) ($/SHARE) DATE 5% 10%
- ---- ----------- -------------- ----------- ------------ -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Sultan W. Khan.......... 193,316 33.94% $7.98 June 1, 2007 $ 997,511 $ 2,632,964
Asif M. Khan............ 193,316 33.94% $7.98 June 1, 2007 $ 997,511 $ 2,632,964
</TABLE>
- --------
(1) Based on options to purchase an aggregate 569,655 shares of Common Stock
granted during Fiscal 1998.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of five percent (5%) and
ten percent (10%) compounded annually from the date the respective options
were granted to their expiration date and are not presented to forecast
possible future appreciation, if any, in the price of the Common Stock.
The gains shown are net of the option exercise price, but do not include
deductions for taxes or other expenses associated with the exercise of
options or the sale of the underlying shares of Common Stock. The actual
gains, if any, on the stock option exercises will depend on the future
performance of the Common Stock, the optionee's continued employment
through applicable vesting periods and the date on which the options are
exercised.
6
<PAGE>
COMPENSATION OF DIRECTORS
Each of the Company's outside directors (i.e., those who are not compensated
as employees or consultants to the Company) receives an annual retainer of
$25,000, payable on a quarterly basis for each full fiscal quarter during
which the director serves on the Board. The quarterly fees are payable in
arrears during the first month following the end of each such fiscal quarter.
For outside directors who served on the Board during the 12-month period
ending September 30, 1998, the annual retainer fee is payable retroactively
for such service, in four quarterly installments commencing in October 1998.
In July 1998, the Board of Directors approved the adoption of the Non-
Employee Director Stock Option Plan, subject to stockholder approval, pursuant
to which each director who is not an employee of the Company receives upon
initial election to the Board an option to purchase 50,000 shares of Common
Stock. The exercise price per share of the option is equal to the fair market
value of the Company's Common Stock on the date of grant. The options vest in
annual installments of 25% of the total option on each anniversary of the
applicable vesting start date. For a further description of the equity
compensation payable to the Company's outside directors, see "Approval of the
Non-Employee Director Stock Option Plan" below.
The Company pays for director's liability insurance. In addition, the
Company's Certificate of Incorporation and Bylaws provide for indemnification
of the Company's directors (and other agents) to the extent and under the
circumstances permitted by the Delaware General Corporation Law. Each director
has entered into an agreement with the Company whereby the Company will
indemnify the directors against certain liabilities that may arise by reason
of their status or service as directors to the fullest extent not prohibited
by law.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During Fiscal Year 1998, all compensation recommendations and decisions were
made unanimously by the outside directors on the Board of Directors, after
reviewing the recommendations of the Compensation Committee. Neither Mr. Asif
Khan nor Sultan Khan participated in the Board of Director's deliberation or
approval of the compensation plan for executive officers.
COMPENSATION COMMITTEE REPORT
The Compensation Committee is comprised of Directors Messrs. Curran, Asif
Khan, Papazian and Remington. This committee, with the exception of Mr. Asif
Khan, is comprised of outside, disinterested directors who are not employees
or former employees of the Company. It recommends salary practices,
performance bonus parameters and develops the stock option programs for all
employees. It also determines executive officer compensation through a vote by
the majority of the outside, disinterested directors on the Board of
Directors.
Compensation Philosophy
The Company's policy in compensating executive officers is to establish
methods and levels of compensation that will provide strong incentives to
promote the profitability and growth of the Company and reward superior
performance. Compensation of executive officers includes salary, bonus and
stock-based programs. The Board believes that compensation of the Company's
key executives should be sufficient to attract and retain highly qualified
personnel and also provide meaningful incentives for measurably superior
performance. The Company places special emphasis on equity-based compensation,
particularly in the form of options. This approach also serves to match the
interests of the executive officers with the interest of the stockholders. The
Company seeks to reward achievement of long and short-term performance goals,
which are measured by a number of factors including improvements in revenue
and achieving profitability.
Included in the factors considered by the Committee in setting the
compensation of the Company's Chief Executive Officer and the Executive Vice
President are the meeting of revenue and net income goals, increased focus on
significant improvement in accounts receivable, and the building of a top tier
brand name for
7
<PAGE>
NewCom's communications and multimedia products in the retail channel. During
Fiscal 1998 the Company completed an initial public offering of its stock and
increased its net revenue and net income as well as its brand name in the
retail market.
Compensation of Chief Executive Officer and Executive Vice President
The Compensation Committee increased Mr. Sultan W. Khan's and Mr. Asif M.
Khan's salary in January 1998 to $200,000, effective as of November 1997. The
increase reflected the Compensation Committee's assessment of their
performance and service to the Company, and set forth certain goals and
challenges for Fiscal 1999, including the achievement of forecasted net
revenue and net income results, the continuation of the building of a brand
name both in the retail channel and on Wall Street and the design and
management of certain business planning processes.
In addition, the Compensation Committee granted to Mr. Sultan W. Khan and
Mr. Asif Khan each the ability to earn up to an additional $60,000 per year as
a bonus if the Company meets certain quantitative and qualitative goals. These
goals include improved accounts receivable, inventory systems and controls,
information systems, quality assurance programs, personnel management and
certain corporate marketing plans.
COMPENSATION COMMITTEE MEMBERS
James M. Curran
Asif M. Khan
Gerald S. Papazian
Alexander Remington
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Alexander Remington, a director of the Company, founded and currently serves
as Chief Executive Officer of Micro Equipment Corporation ("M.E.C.") and is
the controlling shareholder of C'More, Inc. M.E.C. purchased certain product
from the Company in the aggregate amount of approximately $3.72 million and $0
in Fiscal 1998 and 1997, respectively. The stated terms of the purchases were
payment 30 days from the date of shipment.
In addition, M.E.C. served as a supplier of products and components to the
Company in the amount of approximately $6.3 million and $12.5 million is
Fiscal 1998 and 1997, respectively. The Company may continue to purchase
products and components from M.E.C. in the future, generally consisting of
those products and components included in the Company's communication and
multimedia products currently offered and under development, although the
Company is unable to specifically identify the products or components or
amounts thereof that may be so purchased. Purchases from M.E.C. will only be
made if they are approved by a majority of the Company's disinterested
directors, are on terms no less favorable to the Company than could be
obtained from unaffiliated parties and are reasonably expected to benefit the
Company.
James M. Curran, a director of the Company, has served as a business
consultant to Aura since March 1997. For his services, Mr. Curran has received
$237,000 from Aura through February 28, 1998.
Richard A. Rappaport, a Director of the Company, served as Managing Director
of Investment Banking of Joseph Charles & Associates, Inc. ("Joseph Charles")
from 1995 to April 1998. In September 1997, Joseph Charles served as lead
underwriter of NewCom's initial public offering. In connection with the
offering, Joseph Charles received $1,529,500 in the form of underwriting
discounts and commissions and $546,250 in the form of a non-accountable
expense allowance. In addition, Joseph Charles received an option to purchase
230,000 Units (one common share and one warrant to purchase a common share) at
a price of $13.78 per Unit, exercisable over a period of four years commencing
September 15, 1998.
8
<PAGE>
As part of the underwriting agreement, the Company has agreed to retain
Joseph Charles as a financial consultant for a period of two years from the
date of the offering for a fee of $3,000 per month. For the fiscal year ended
February 28, 1998, Joseph Charles has earned $18,000 for these services. In
addition, the Company has paid Joseph Charles and additional $36,500 for other
investment banking services.
The Company believes that the foregoing transactions were in its best
interests. It is the Company's current policy, adopted in June 1997, that all
transactions by the Company with officers, directors, 5% stockholders and
their affiliates will be entered into only if such transactions are approved
by a majority of the disinterested independent directors, are on terms no less
favorable to the Company than could be obtained from unaffiliated parties and
are reasonably expected to benefit the company. Each of the agreements between
the Company and Aura Systems, Inc. has been approved by a majority of the
Company's disinterested directors in accordance with the foregoing policy.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and beneficial
owners of more than ten percent of the Common Stock, to file with the
Securities and Exchange Commission and the National Association of Securities
Dealers, Inc. reports of ownership and changes in ownership of the Common
Stock. Copies of such reports are required to be furnished to the Company.
Based solely on its review of the copies of such reports furnished to the
Company, or written representations that no reports were required, the Company
believes that during its fiscal year ended February 28, 1998, all filing
requirements applicable to its officers, directors, and ten percent beneficial
owners were satisfied.
INDEPENDENT AUDITORS
Pannell Kerr Forster has been selected to serve as the Company's independent
auditors for the fiscal year ending February 28, 1999. Representatives of
Pannell Kerr Forster are expected to be present at the meeting and will have
the opportunity to make a statement if they so desire, and will be available
to respond to appropriate questions. Pannell Kerr Forster has served as the
Company's independent auditors since 1997.
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return of the
Company with the cumulative total return on the NASDAQ Stock Market (U.S.)
Index and the NASDAQ Computer (U.S.) Index. The comparisons in the graph are
required by the Securities and Exchange Commission and are not intended to
forecast or be indicative of possible future performance of the Company's
common stock. Due to lack of trading history the chart compares the initial
offering price with year-end price. The initial offering price was $9.50 per
Unit consisting of one share valued at $9.40 and one warrant valued at $0.10.
9
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG NEWCOM, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ COMPUTER (U.S.) INDEX
[GRAPH OF COMPARISON OF CUMULATIVE TOTAL RETURN]
$100 INVESTED ON 9/15/97 IN STOCK OR INDEX
(INCLUDING REINVESTMENT OF DIVIDENDS)
FISCAL YEAR ENDING FEBRUARY 28
<TABLE>
<CAPTION>
SEPTEMBER FEBRUARY
1997 1998
--------- --------
<S> <C> <C>
NEWCOM, INC.................................................. 100 150
NASDAQ STOCK MARKET INDEX (U.S.)............................. 100 106
NASDAQ COMPUTER INDEX (U.S.)................................. 100 106
</TABLE>
10
<PAGE>
PROPOSAL NO. 2
APPROVAL OF 1998 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1998 Employee Stock Purchase Plan was adopted by the Board of
Directors on July 21, 1998, subject to stockholder approval, to be effective
as of July 21, 1998 (the "1998 Purchase Plan"). The Board adopted the 1998
Purchase Plan for the purpose of providing the Company's employees with a
means of increasing their equity interest in and sharing in the success of the
Company thereby increasing their incentive to continue in the Company's
service.
The text of the 1998 Purchase Plan is set forth as Annex A to this Proxy
Statement. The following is a summary of the principal features of the 1998
Purchase Plan and does not purport to be complete. Stockholders are urged to
read the 1998 Purchase Plan in its entirety. This summary is subject to and
qualified in its entirety by reference to the 1998 Purchase Plan. Any
capitalized terms which are used in this summary description but not defined
here or elsewhere in this Proxy Statement have the meanings assigned to them
in the 1998 Purchase Plan.
SHARES SUBJECT TO THE 1998 PURCHASE PLAN
Upon approval of this Proposal by the stockholders, there will be a total of
500,000 shares of Common Stock authorized for purchase under the 1998 Purchase
Plan. The authorized shares issuable in connection with the 1998 Purchase Plan
are subject to adjustment in the event of any increase or decrease in the
number of issued shares of Common Stock resulting from a subdivision or
consolidation of shares or any other capital adjustment, the payment of a
stock dividend, or other increase or decrease in such shares effected without
receipt of consideration by the Company. The rights of existing stockholders
will be affected only insofar as the total number of outstanding shares of
Common Stock increases as a result of the purchase and sale of shares under
the 1998 Purchase Plan.
PARTICIPANTS
Any employee of the Company who (i) on the first day of a Participation
Period, as defined below, has been in the employ of the Company for at least
90 days, and (ii) is customarily employed for more than twenty (20) hours per
week and for more than five (5) months per calendar year during such
employment, is eligible to participate in the 1998 Purchase Plan during such
Participation Period. A Participation Period means a period, which may not
exceed the maximum number of months permitted under Code Section 423, during
which contributions may be made toward the purchase of stock under the 1998
Purchase Plan. The Compensation Committee of the Board shall determine the
commencement date and duration of each Participation Period, the purchase
dates that may occur during a Purchase Period and the maximum number of shares
that may be purchased by a Participant during the Participation Period. Once
enrolled in the 1998 Purchase Plan, a Participant will continue to participate
for each succeeding Participation Period until he or she terminates
participation or ceases to be eligible under the 1998 Purchase Plan. The
Company estimates that the number of people eligible to participate in the
1998 Purchase Plan as of July 21, 1998 was 120.
An Eligible Employee becomes a Participant in the 1998 Purchase Plan by
delivering to the Company an agreement authorizing payroll deductions of the
percentage or amount of the Participant's Compensation which he or she elects
to have withheld for the purchase of Stock under the 1998 Purchase Plan, which
may be any whole percentage or dollar amount of the Participant's
Compensation, provided that the aggregate amount so withheld may not exceed
25% of the Participant's Compensation during the relevant Participation
Period.
ADMINISTRATION
The 1998 Purchase Plan shall be administered by the Company, and the
interpretation and construction by the Company of any provision of the Plan or
of any right to purchase stock qualified hereunder shall be conclusive and
binding.
11
<PAGE>
TERMS OF STOCK PURCHASE
An employee who is enrolled in the 1998 Purchase Plan will be granted an
option to purchase shares of Stock solely be means of payroll deductions. The
purchase price for each share of Stock shall be eighty-five percent (85%) of
the Fair Market Value of such share on the last trading day prior to the date
shares are purchased. As of the last day of each Participation Period, the
amount then in a Participant's Plan Account under the 1998 Purchase Plan will
be divided by the Purchase Price, and the number of whole shares which results
shall be purchased from the Company, subject to certain limitations. As of
July 24, 1998, the last reported sales price for the Company's Common Stock
was $9.375 per share as reported on the NASDAQ National Market.
Notwithstanding the foregoing, no employee is eligible for the grant of any
rights under the 1998 Purchase Plan if, immediately after such grant, the
employee would own stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any
parent or subsidiary of the Company, nor will any employee be granted rights
that would permit him or her to buy more than $25,000 worth of stock
(determined at the Fair Market Value at the time of grant) under all qualified
employee stock purchase plans of the Company and its subsidiaries in any
calendar year.
Any amount remaining in the Participant's Plan Account caused by a surplus
due to fractional shares after deducting the amount of the Purchase Price for
the number of whole shares issued to the Participant shall be carried over in
the Participant's Plan Account for the next succeeding participation Period,
without interest. Any amount remaining in the Participant's Plan Account
caused by anything other than a surplus due to fractional shares shall be
refunded to the Participant in cash, without interest.
If the aggregate number of shares that all Participants elect to purchase
during the Participation Period exceeds the number of shares remaining
available under the 1998 Purchase Plan, then each Participant shall be
entitled to the percentage of shares remaining under the 1998 Purchase Plan
corresponding to the percentage that such Participant elected to purchase of
the total number of shares that all participants elected to purchase during
that Participation Period. Any cash remaining in the Participant's Plan
Account under these circumstances shall be refunded to the Participant.
PLAN BENEFITS
The plan benefits to employees derived from the 1998 Purchase Plan will
depend upon such employee's level of participation and the Company's stock
price performance. Therefore, the benefits and amounts of award that will be
received by each of the Named Executive Officers, the executive officers as a
group and all other employees as a group under the 1998 Purchase Plan are not
presently determinable.
STOCKHOLDER RIGHTS
No Participant will have any rights as a stockholder with respect to any
shares he or she may have a right to purchase under the 1998 Purchase Plan
until the date of issuance of a stock certificate to the brokerage account
designated by the Company for shares of Stock issued pursuant to the Plan,
subject to the stockholders approval of the adoption of the Plan.
TERMINATION OF PURCHASE RIGHTS
A Participant may elect to withdraw from participation under the 1998
Purchase Plan at any time up to the last day of a Participation Period. As
soon as practicable after such withdrawal, payroll deduction will cease and
all amounts credited to the Participants Plan Account will be refunded in
cash, without interest. Termination of employment by a participant in the 1998
Purchase Plan for any reason, including death, will be treated as an automatic
withdrawal.
12
<PAGE>
RESTRICTIONS ON TRANSFER
Rights granted under the 1998 Purchase Plan are not transferable by a
Participant other than by will or the laws of descent and distribution. If a
Participant attempts to transfer, assign or otherwise encumber his or her
rights or interest under the 1998 Purchase Plan, such act shall be treated as
an automatic withdrawal from participation in the 1998 Purchase Plan.
AMENDMENT OR TERMINATION OF THE 1998 PURCHASE PLAN
The Board of Directors shall have the right to amend, modify or terminate
the 1998 Purchase Plan at any time without notice, except that certain
amendments may require stockholder approval pursuant to applicable laws or
regulations.
In the event of a dissolution or liquidation of the Company, or a merger or
consolidation to which the Company is a constituent corporation, the 1998
Purchase Plan shall terminate unless the plan of merger, consolidation or
reorganization provides otherwise. If such a termination occurs, all amounts
that each Participant has paid toward the purchase of shares under the 1998
Purchase Plan shall be refunded without interest.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the principal current federal income tax
consequence of transactions under the 1998 Purchase Plan, which is intended to
qualify as an "employee stock purchase plan" within the meaning of Section 423
of the Internal Revenue Code, as amended, is intended to be a summary of
applicable federal law. This summary does not describe all federal tax
consequences, nor does it describe state, local or foreign tax consequences,
which consequences may differ.
There are no federal income tax consequences to the Company by reason of the
grant of rights under the 1998 Purchase Plan. A Participant will be taxed on
amounts withheld for the purchase of shares as if such amounts were actually
received. Other than this, no income will be taxable to a participant until
disposition of the shares acquired, and the method of taxation will depend
upon the holding period of the purchased shares.
If the Participant sells or otherwise disposes of the purchased shares
within two (2) years after his or her entry date into the Participation Period
in which such shares were acquired or within one (1) year after the purchase
date on which those shares were actually acquired, whichever is later, then
the Participant will realize ordinary income in the year of sale or
disposition equal to the amount by which the fair market value of the shares
on the purchase date exceeded the purchase price paid for those shares, and
the Company will be entitled to an income tax deduction, for the taxable year
in which such disposition occurs, equal in amount to such excess.
If the Participant sells or disposes of the purchased shares other than
within two (2) years after his or her entry date into the Participation Period
in which the shares were acquired and one (1) year after the purchase date of
those shares, then the Participant will realize ordinary income in the year of
sale or disposition equal to the lesser of (i) the amount by which the fair
market value of the shares on the sale or disposition date exceeded the
purchase price paid for those shares, or (ii) fifteen percent (15%) of the
fair market value of the shares on the Participant's entry date into that
Participant Period; and any additional gain upon the disposition will taxed as
a long-term capital gain. The Company will not be entitled to an income tax
deduction with respect to such disposition.
STOCKHOLDER APPROVAL
Only stockholders of record on the books of the Company at the close of
business on June 26, 1998 are entitled to vote with respect to approval of the
1998 Purchase Plan. The affirmative vote of the majority of the votes of the
shares present or represented and voting is required for approval of the 1998
Purchase Plan. Unless marked to the contrary, proxies received will be voted
"FOR" approval of the 1998 Purchase Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF
THE 1998 EMPLOYEE STOCK PURCHASE PLAN.
13
<PAGE>
PROPOSAL NO. 3
APPROVAL OF NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Company's Non-Employee Director Stock Option Plan was adopted by the
Board of Directors on July 21, 1998, subject to stockholder approval, to be
effective as of July 21, 1998 (the "Director Plan"). The Board adopted the
Director Plan to promote the long-term success of the Company and the creation
of stockholder value encouraging the attraction and retention of Non-Employee
Directors. The Director Plan seeks to achieve this by providing for
nonstatutory stock options.
The text of the Director Plan is set forth as Annex B to this Proxy
Statement. The following is a summary of the principal features of the
Director Plan and does not purport to be complete. Stockholders are urged to
read the Director Plan in its entirety. This summary is subject to and
qualified in its entirety by reference to Annex B. Any capitalized terms which
are used in this summary description but not defined here or elsewhere in this
Proxy Statement have the meanings assigned to them in the Director Plan.
SHARES SUBJECT TO THE DIRECTOR PLAN
Upon approval of this Proposal by the stockholders, there will be a total of
five hundred thousand (500,000) shares of Common Stock authorized for option
grants under the Director Plan. The authorized shares issuable in connection
with the Director Plan are subject to adjustment in the event of stock splits,
stock dividends and other situations.
If any option granted under the Director Plan expires or terminates for any
reason without having been exercised in full, then the unpurchased shares
subject to that option will once again be available for additional option
grants under the Director Plan.
PARTICIPANTS
The Director Plan provides for formula grants to directors who are not
employees of the Company. Employee directors are not eligible to participate
in the Director Plan. Pursuant to the Director Plan, upon the Initial Grant
Date (defined below), each non-employee director automatically shall be
granted an option to purchase fifty thousand (50,000) Common Shares. The
Initial Grant Date shall be the later to occur of (i) the date the Director
Plan is approved by the stockholders of the Company and (ii) the expiration or
earlier termination of the one-year lock-up provision set forth in the
Company's underwriting agreement with Joseph Charles. Each such Option shall
vest while the Optionee continues to serve as a member of the Board as to
twelve thousand five hundred (12,500) shares on each anniversary of the date
the Optionee's status as a non-employee director commenced and shall expire if
not exercised on the tenth anniversary of the date of grant or, if earlier, on
the first anniversary of the termination of the Optionee's status as a non-
employee director. Each non-employee director first elected to the Board after
the effective date of the Director Plan shall be granted an option to purchase
fifty thousand (50,000) shares of Common Stock. Each such Option shall vest
while the Optionee continues to serve as a member of the Board as to twelve
thousand five hundred (12,500) shares on each anniversary of the date of grant
and shall expire if not exercised on the tenth anniversary of the date of
grant or, if earlier, on the first anniversary of the termination of the
Optionee's status as a non-employee director.
Each Option shall be fully vested in the event of the Optionee's death or
permanent disability (within the meaning of section 22(e)(3) of the Code)
while serving as a non-employee director. Each 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.
Each Option shall be immediately exercisable for any or all of the Option
shares. However, any Common Shares purchased under the Option shall be subject
to repurchase by the Company, at the Exercise Price paid per share, upon the
Optionee's cessation of Board service prior to vesting in those shares. The
Company's repurchase rights shall lapse at the same rate as the Option vests.
Common Shares subject to the Company's repurchase rights shall not be
permitted to be sold, transferred or otherwise disposed of by the Optionee
prior to the lapse of such rights.
14
<PAGE>
ADMINISTRATION
The material terms of each option grant (including the timing and pricing of
the option grant) shall be determined by the express terms of the Plan, and
neither the Board nor any committee of the Board shall exercise any
discretionary functions with respect to option grants made pursuant to the
Plan.
TERMS OF STOCK OPTIONS
Awards under the Director Plan consist of nonstatutory stock options
("NSOs").
The Exercise Price per share shall be equal to one hundred percent (100%) of
the Fair Market Value per Common Share on the option grant date. The last sale
price per share of the Company's Common Stock as reported on the NASDAQ
National Market on July 24, 1998 was $9.375. The option price must be paid in
full at the time of exercise. The price may be paid (1) in cash or check made
payable to the Company; (ii) by shares of Common Stock held for the requisite
period necessary to avoid a charge to the Company's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date; or
(iii) to the extent that the Option is exercised for vested shares, through a
special sale and remittance procedure pursuant to which the Optionee shall
concurrently provide irrevocable written instruction to (a) a Company-
designated brokerage firm to effect the immediate sale of the purchased shares
and remit to the Company, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable Federal, state and local income and
employment taxes required to be withheld by the Company by reason of such
exercise and (b) the Company to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized, payment
of the Exercise Price for the purchased shares must be made on the Exercise
Date.
STOCKHOLDER RIGHTS
An Optionee shall have no dividend rights, voting rights or other rights as
a stockholder with respect to any Common Shares covered by his or her Option
prior to the issuance of a stock certificate for such Common Shares following
the exercise of such Option. No adjustment shall be made for cash dividends or
other rights for which the record date is prior to the date when such
certificate is issued.
RESTRICTIONS OF TRANSFER
Unless the Option Agreement otherwise provides, each option is transferable
only by will or the law of descent and distribution and shall only be
exercisable by the participant during his or her lifetime.
AMENDMENT OR TERMINATION OF THE DIRECTOR PLAN
The Board may, at any time and for any reason, amend or terminate the
Director Plan. An amendment of the Director Plan shall be subject to the
approval of the Company's stockholders only to the extent required by
applicable laws, regulations or rules. No Options shall be granted under the
Director Plan after the termination thereof. The termination of the Director
Plan, or any amendment thereof, shall not affect any Option previously granted
under the Director Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences of the
Director Plan is intended to be a summary of applicable federal law. State and
local tax consequences may differ. Because the federal income tax rules
governing options and related payments are complex and subject to frequent
change, optionees are advised to consult their tax advisors prior to exercise
of options or dispositions of stock acquired pursuant to option exercise.
15
<PAGE>
An Optionee is not taxed on the grant of an NSO. On exercise, however, the
Optionee recognizes ordinary income equal to the difference between the option
price and the fair market value of the shares on the date of exercise. The
Company is entitled to an income tax deduction in the year of exercise in the
amount recognized by the Optionee as ordinary income. Any gain on subsequent
disposition of the shares is long-term capital gain if the shares are held for
more than one (1) year following exercise. The Company does not receive a
deduction for this gain.
REQUIRED APPROVAL
The affirmative vote of the holders of a majority of shares of Common Stock
represented and voting at a duly held meeting at which a quorum is present is
required to approve the adoption of the Director Plan. Unless marked to the
contrary, proxies received will be voted "FOR" approval of the amendment and
restatement of the Company's Director Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE ADOPTION
OF THE COMPANY'S DIRECTOR PLAN.
16
<PAGE>
MISCELLANEOUS
STOCKHOLDER PROPOSALS
Stockholder proposals complying with the applicable rules under the
Securities Exchange Act of 1934 intended to be presented at the 1999 Annual
Meeting of Stockholders must be received at the offices of the Company by
April 16, 1999 to be considered by the Company for inclusion in the Company's
proxy statement and form of proxy relating to that meeting. Such proposals
should be directed to the attention of the Secretary, NewCom, Inc., 31166 Via
Colinas, Westlake Village, California 91362.
OTHER MATTERS
Neither NewCom nor any of the persons named as proxies knows of matters
other than those above stated to be voted on at the Annual Meeting. However,
if any other matters are properly presented at the meeting, it is the
intention of the persons named as proxies to vote in accordance with their
judgment on such matters, subject to direction by the Board of Directors.
The 1998 Annual Report to Stockholders accompanies this Proxy Statement, but
is not to be deemed a part of the proxy soliciting material.
WHILE YOU HAVE THE MATTER IN MIND, PLEASE COMPLETE, SIGN AND RETURN THE
ENCLOSED PROXY CARD PROMPTLY.
17
<PAGE>
ANNEX A TO PROXY STATEMENT
NEWCOM, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
(Adopted Effective July 21, 1998)
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. Establishment of the Plan...................................... A-3
Section 2. Definitions.................................................... A-3
Section 3. Shares Authorized.............................................. A-4
Section 4. Administration................................................. A-4
Section 5. Eligibility and Participation.................................. A-4
Section 6. Participation Periods.......................................... A-4
Section 7. Purchase Price................................................. A-5
Section 8. Employee Contributions......................................... A-5
Section 9. Plan Accounts; Purchase of Shares.............................. A-5
Section 10. Withdrawal From the Plan....................................... A-6
Section 11. Effect of Termination of Employment or Death................... A-6
Section 12. Rights Not Transferable........................................ A-6
Section 13. Recapitalization, Etc.......................................... A-6
Section 14. Limitation on Stock Ownership.................................. A-7
Section 15. No Rights as an Employee....................................... A-7
Section 16. Rights as a Stockholder........................................ A-7
Section 17. Use of Funds................................................... A-7
Section 18. Amendment or Termination of the Plan........................... A-7
Section 19. Governing Law.................................................. A-7
</TABLE>
A-2
<PAGE>
NEWCOM, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. ESTABLISHMENT OF THE PLAN
The NewCom, Inc. 1998 Employee Stock Purchase Plan (the "Plan") is hereby
established to provide Eligible Employees with an opportunity to purchase the
Company's common stock so that they may increase their proprietary interest in
the success of the Company. The Plan, which provides for the purchase of stock
through payroll withholding, is intended to qualify under Section 423 of the
Code.
SECTION 2. DEFINITIONS
(a) "Board of Directors" or "Board" means the Board of Directors of the
Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Company" means NewCom, Inc., a Delaware corporation.
(d) "Compensation" means all base straight time gross earnings paid to a
Participant during a Participation Period in cash or in kind including
overtime, commissions, shift differential, incentive compensation,
incentive payments, bonuses, and other forms of compensation.
(e) "Date of Participation" means the first day of a Participation Period.
(f) "Eligible Employee" means any Employee of a Participating Company (i)
whose customary employment is for more than five months per calendar
year and for more than 20 hours per week and (ii) who is an Employee at
the commencement of a Participation Period.
(g) "Employee" means any common-law employee of a Participating Company who
has completed at least ninety (90) days of employment with such
Participating Company.
(h) "Fair Market Value" means the market price per share of Stock,
determined by the Committee as follows:
1. If the Stock is 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;
2. If the Stock is traded over-the-counter on the date in question and
is classified as a national market issue, then the Fair Market Value
shall be equal to the last-transaction price quoted by the NASDAQ
system for such date;
3. If the Stock is traded over-the-counter on the date in question but
is not classified as a national market issue, then the Fair Market
Value shall be equal to the mean between the last reported
representative bid and asked prices quoted by the NASDAQ system for
such date; and
4. 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.
(i) "Participant" means an Eligible Employee who elects to participate in
the Plan, as provided in Section 5 hereof.
(j) "Participating Company" means the Company and such present or future
Subsidiaries of the Company as the Board of Directors shall from time
to time designate.
A-3
<PAGE>
(k) "Participation Period" means a period during which contributions may be
made toward the purchase of Stock under the Plan, as determined
pursuant to Section 6.
(l) "Plan Account" means the account established for each Participant
pursuant to Section 9(a).
(m) "Purchase Price" means the price at which Participants may purchase
Stock under Section 5 of the Plan, as determined pursuant to Section 7.
(n) "Stock" means the shares of common stock of the Company.
(o) "Subsidiary" means a subsidiary corporation as defined in Section 424
of the Code.
SECTION 3. SHARES AUTHORIZED
The maximum aggregate number of shares that may be offered under the Plan
shall be 500,000 shares of Stock, subject to adjustment as provided in Section
13 hereof.
SECTION 4. ADMINISTRATION
The Plan shall be administered by the Company, and the interpretation and
construction by the Company of any provision of the Plan or of any right to
purchase stock qualified hereunder shall be conclusive and binding on all
persons.
SECTION 5. ELIGIBILITY AND PARTICIPATION
(a) Any person who qualifies or will qualify as an Eligible Employee on the
Date of Participation with respect to a Participation Period may elect
to participate in the Plan for such Participation Period. An Eligible
Employee may elect to participate by executing the participation
agreement prescribed for such purpose by the Company. The participation
agreement shall be filed with the Company no later than the deadline
stated on the participation agreement, and if none is stated, then no
later than the first day of the Participation Period. The Eligible
Employee shall designate on the participation agreement the percentage
or amount of his or her Compensation which he or she elects to have
withheld for the purchase of Stock, which may be any whole percentage
or dollar amount of the Participant's Compensation, provided that the
aggregate amount so withheld may not exceed 25% of the Participant's
Compensation during the relevant Participation Period.
(b) By enrolling in the Plan, a Participant shall be deemed to have elected
to purchase the maximum number of whole shares of Stock which can be
purchased with the amount of the Participant's Compensation which is
withheld during the Participation Period, subject to any limitations
imposed pursuant to Section 6, and/or Section 14.
(c) Once enrolled, a Participant will continue to participate in the Plan
for each succeeding Participation Period until he or she terminates
participation or ceases to qualify as an Eligible Employee. A
Participant who withdraws from the Plan in accordance with Section 10
may again become a Participant, if he or she then is an Eligible
Employee, by following the procedure described in Section 5(a).
SECTION 6. PARTICIPATION PERIODS
(a) The Plan shall be implemented in one or more Participation Periods of
not more than the maximum number of months permitted under Code Section
423. The Compensation Committee of the Board shall determine the
commencement date and duration of each Participation Period; the
purchase dates that may occur during a Purchase Period and the maximum
number of shares that may be purchased by a Participant during the
Participation period.
(b) Unless modified by the Compensation Committee of the Board pursuant to
the preceding paragraph, each Participation Period shall last for three
consecutive months. The first Participation Period shall
A-4
<PAGE>
commence on August 1, 1998 and end on October 31, 1998. Sequential three
month Participation Periods shall commence on each November 1, February
1, May 1 and August 1 thereafter.
(c) At the beginning of each Participation Period, each Participant is
automatically granted an option to purchase shares of Stock. The option
may be exercised at the end of a Participation Period to the extent of
the payroll deductions accumulated during such Participation Period.
SECTION 7. PURCHASE PRICE
The Purchase Price for each share of Stock shall be eighty-five percent
(85%) of the Fair Market Value of such share on the last trading day prior to
the date shares are purchased.
SECTION 8. EMPLOYEE CONTRIBUTIONS
A Participant may purchase shares of Stock solely by means of payroll
deductions. Payroll deductions, as designated by the Participant pursuant to
Section 5(a), shall commence with the first paycheck issued during the
Participation Period and shall be deducted from each subsequent paycheck
throughout the Participation Period. If a Participant desires to decrease the
rate of payroll withholding during the Participation Period, he or she may do
so one time during a Participation Period by filing a new participation
agreement with the Company. Such decrease will be effective as of the first
day of the second payroll period that begins following the receipt of the new
participation agreement. If a Participant desires to increase the rate of
payroll withholding, he or she may do so effective for the next Participation
Period by filing a new participation agreement with the Company on or before
the date specified by the Company, and if none is stated, then no later than
the first day of the Participation Period for which such change is to be
effective.
SECTION 9. PLAN ACCOUNTS; PURCHASE OF SHARES
(a) The Company will maintain a Plan Account on its books in the name of
each Participant. At the close of each pay period, the amount deducted
from the Participant's Compensation will be credited to the
Participant's Plan Account.
(b) As of the last day of each Participation Period, the amount then in the
Participant's Plan Account will be divided by the Purchase Price, and
the number of whole shares of Stock which results (subject to the
limitations described in Sections 5(b), 9(c) and 14) shall be purchased
from the Company with the funds in the Participant's Plan Account.
Share certificates representing the number of shares of Stock so
purchased shall be delivered to the Company and kept in an account
pursuant to a participation agreement between each Participant and the
Company and subject to the conditions described therein which may
include a requirement that shares of Stock be held and not sold for
certain time periods.
(c) In the event that the aggregate number of shares which all Participants
elect to purchase during a Participation Period shall exceed the number
of shares remaining available for issuance under the Plan, then the
number of shares to which each Participant shall become entitled shall
be determined by multiplying the number of shares available for
issuance by a fraction the numerator of which is the sum of the number
of shares the Participant has elected to purchase pursuant to Section
5, and the denominator of which is the sum of the number of shares
which all employees have elected to purchase pursuant to Section 5. Any
cash amount remaining in the Participant's Plan Account under these
circumstances shall be refunded to the Participant.
(d) Any amount remaining in the Participant's Plan Account caused by a
surplus due to fractional shares after deducting the amount of the
Purchase Price for the number of whole shares issued to the Participant
shall be carried over in the Participant's Plan Account for the next
succeeding Participation Period, without interest. Any amount remaining
in the Participant's Plan Account caused by anything other than a
surplus due to fractional shares shall be refunded to the Participant
in cash, without interest.
A-5
<PAGE>
(e) As soon as practicable following the end of each Participation Period,
the Company shall deliver to each Participant a Plan Account statement
setting forth the amount of payroll deductions, the purchase price, the
number of shares purchased and the remaining cash balance, if any.
SECTION 10. WITHDRAWAL FROM THE PLAN
A Participant may elect to withdraw from participation under the Plan at any
time up to the last day of a Participation Period by filing the prescribed
form with the Company. As soon as practicable after a withdrawal, payroll
deductions shall cease and all amounts credited to the Participant's Plan
Account will be refunded in cash, without interest. A Participant who has
withdrawn from the Plan shall not be a Participant in future Participation
Periods, unless he or she again enrolls in accordance with the provisions of
Section 5.
SECTION 11. EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH
(a) Termination of employment as an Eligible Employee for any reason,
including death, shall be treated as an automatic withdrawal from the
Plan under Section 10. A transfer from one Participating Company to
another shall not be treated as a termination of employment.
(b) A Participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the Participant's Account
under the Plan in the event of such Participant's death subsequent to
the purchase of shares but prior to delivery to him of such shares and
cash. In addition, a Participant may file a written designation of a
beneficiary who is to receive any cash from the Participant's Account
under the Plan in the event of such Participant's death prior to the
last day of a Participation Period.
(c) Such designation of beneficiary may be changed by the Participant at
any time by written notice. In the event of the death of a Participant
in the absence of a valid designation of a beneficiary who is living at
the time of such Participant's death, the Company shall deliver such
shares and/or cash to the executor or administrator of the estate of
the Participant; or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such shares and/or cash to the spouse or to any
one or more dependents or relatives of the Participant; or if no
spouse, dependent or relative is known to the Company, then to such
other person as the Company may designate.
SECTION 12. RIGHTS NOT TRANSFERABLE
The rights or interests of any Participant in the Plan, or in any Stock or
moneys to which he or she may be entitled under the Plan, shall not be
transferable by voluntary or involuntary assignment or by operation of law, or
by any other manner other than as permitted by the Code or by will or the laws
of descent and distribution. If a Participant in any manner attempts to
transfer, assign or otherwise encumber his or her rights or interest under the
Plan, other than as permitted by the Code or by will or the laws of descent
and distribution, such act shall be treated as an automatic withdrawal under
Section 10.
SECTION 13. RECAPITALIZATION, ETC.
(a) The aggregate number of shares of Stock offered under the Plan, the
number and price of shares which any Participant has elected to
purchase pursuant to Section 5 and the maximum number of shares which a
Participant may elect to purchase under the Plan in any Participation
Period shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Stock resulting from a subdivision or
consolidation of shares or any other capital adjustment, the payment of
a stock dividend, or other increase or decrease in such shares effected
without receipt of consideration by the Company.
(b) In the event of a dissolution or liquidation of the Company, or a
merger or consolidation to which the Company is a constituent
corporation, this Plan shall terminate, unless the plan of merger,
A-6
<PAGE>
consolidation or reorganization provides otherwise, and all amounts
which each Participant has paid towards the Purchase Price of Stock
hereunder shall be refunded, without interest.
(c) The Plan shall in no event be construed to restrict in any way the
Company's right to undertake a dissolution, liquidation, merger,
consolidation or other reorganization.
SECTION 14. LIMITATION ON STOCK OWNERSHIP
Notwithstanding any provision herein to the contrary, no Participant shall
be permitted to elect to participate in the Plan (i) if such Participant,
immediately after his or her election to participate, would own stock
possessing five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Company or any parent or Subsidiary of
the Company, or (ii) if under the terms of the Plan the rights of the Employee
to purchase Stock under this Plan and all other qualified employee stock
purchase plans of the Company or its Subsidiaries would accrue at a rate which
exceeds twenty-five thousand dollars ($25,000) of the Fair Market Value of
such Stock (determined at the time such right is granted) for each calendar
year for which such right is outstanding at any time. For purposes of this
Section 14, ownership of stock shall be determined by the attribution rules of
Section 424(d) of the Code, and Participants shall be considered to own any
stock which they have a right to purchase under this or any other stock plan.
SECTION 15. NO RIGHTS AS AN EMPLOYEE
Nothing in the Plan shall be construed to give any person the right to
remain in the employ of a Participating Company. Each Participating Company
reserves the right to terminate the employment of any person at any time and
for any reason.
SECTION 16. RIGHTS AS A STOCKHOLDER
A Participant shall have no rights as a stockholder with respect to any
shares he or she may have a right to purchase under the Plan until the date of
issuance of a stock certificate to the brokerage account designated by the
Company for shares of Stock issued pursuant to the Plan, subject to the
stockholders approval of the adoption of the Plan.
SECTION 17. USE OF FUNDS
All payroll deductions received or held by the Company under the Plan may be
used by the Company for any corporate purpose, and the Company shall not be
obligated to segregate such payroll deductions in separate accounts.
SECTION 18. AMENDMENT OR TERMINATION OF THE PLAN
The Board of Directors shall have the right to amend, modify or terminate
the Plan at any time without notice. An amendment of the Plan shall be subject
to stockholder approval only to the extent required by applicable laws,
regulations or rules.
SECTION 19. GOVERNING LAW
The Plan shall be governed by, and construed and interpreted in accordance
with, the laws of the State of California.
To record the adoption of the Plan by the Board of Directors, effective as
July 21, 1998 and subject to stockholder approval, the Company has caused its
authorized officer to execute the same on July , 1998.
NEWCOM, INC.
By /s/ Sultan Khan
---------------
ITS PRESIDENT
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<PAGE>
ANNEX B TO PROXY STATEMENT
NEWCOM, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
(Adopted Effective July 21, 1998)
B-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<C> <S> <C>
ARTICLE 1. INTRODUCTION................................................ B-3
ARTICLE 2. ADMINISTRATION.............................................. B-3
ARTICLE 3. SHARES AVAILABLE FOR GRANTS................................. B-3
3.1 Basic Limitation............................................ B-3
3.2 Additional Shares........................................... B-3
ARTICLE 4. ELIGIBILITY................................................. B-3
ARTICLE 5. OPTIONS..................................................... B-3
5.1 Stock Option Agreement...................................... B-3
5.2 Initial Grants.............................................. B-3
5.3 Effect of Death or Disability............................... B-4
5.4 Effect of Change in Control................................. B-4
5.5 Modification or Assumption of Options....................... B-4
5.6 Exercise Before Vesting..................................... B-4
ARTICLE 6. EXERCISE PRICE AND PAYMENT FOR OPTION SHARES................ B-4
6.1 Exercise Price.............................................. B-4
6.2 Payment..................................................... B-4
ARTICLE 7. PROTECTION AGAINST DILUTION................................. B-4
7.1 Adjustments................................................. B-4
7.2 Reorganizations............................................. B-5
ARTICLE 8. LIMITATION ON RIGHTS........................................ B-5
8.1 Retention Rights............................................ B-5
8.2 Stockholder's Rights........................................ B-5
8.3 Regulatory Requirements..................................... B-5
ARTICLE 9. WITHHOLDING TAXES........................................... B-5
ARTICLE 10. ASSIGNMENT OR TRANSFER OF OPTIONS........................... B-5
ARTICLE 11. FUTURE OF THE PLAN.......................................... B-5
11.1 Term of the Plan............................................ B-5
11.2 Amendment or Termination.................................... B-6
ARTICLE 12. DEFINITIONS................................................. B-6
ARTICLE 13. EXECUTION................................................... B-7
</TABLE>
B-2
<PAGE>
NEWCOM, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
(Adopted Effective July 21, 1998)
ARTICLE 1. INTRODUCTION
The Plan was adopted by the Board on July 21, 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 encouraging the attraction and retention
of Non-Employee Directors. The Plan seeks to achieve this purpose by providing
for nonstatutory stock options.
The Plan shall be governed by, and construed in accordance with, the laws of
the State of Delaware (except their choice-of-law provisions). Capitalized
terms used herein are defined in Article 12 below.
ARTICLE 2. ADMINISTRATION
The material terms of each option grant (including the timing and pricing of
the option grant) shall be determined by the express terms of the Plan, and
neither the Board nor any committee of the Board shall exercise any
discretionary functions with respect to option grants made pursuant to the
Plan.
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
Common Shares issued upon the exercise of Options under the Plan shall not
exceed five hundred thousand (500,000) shares. The limitation of this Section
3.1 shall be subject to adjustment pursuant to Article 7.
3.2 Additional Shares. If Options are forfeited or terminate for any other
reason before being exercised, then the corresponding Common Shares shall
again become available for Options under the Plan.
ARTICLE 4. ELIGIBILITY
Only Non-Employee Directors shall be eligible for the grant of Options under
the Plan.
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.
5.2 Initial Grants. Upon the Initial Grant Date, each Non-Employee Director
automatically shall be granted an option to purchase fifty thousand (50,000)
Common Shares. The Initial Grant Date shall be the later to occur of (i) the
date the Director Plan is approved by the stockholders of the Company and (ii)
the expiration or earlier termination of the one-year lock-up provision set
forth in the Company's underwriting agreement with Joseph Charles. Each such
Option shall vest while the Optionee continues to serve as a member of the
Board as to twelve thousand five hundred (12,500) shares on each anniversary
of the date the Optionee's status as a Non-Employee Director commenced and
shall expire if not exercised on the tenth anniversary of the date of grant
or, if earlier, on the first anniversary of the termination of the Optionee's
status as a Non-Employee Director. Each Non-Employee Director first elected to
the Board after the effective date of the Plan shall be granted an option to
purchase fifty thousand (50,000) Common Shares. Each such Option shall vest
while the Optionee continues to serve as a member of the Board as to twelve
thousand five hundred (12,500) shares on each anniversary of the date of grant
and shall expire if not exercised on the tenth anniversary of the date of
grant or, if earlier, on the first anniversary of the termination of the
Optionee's status as a Non-Employee Director.
B-3
<PAGE>
5.3 Effect of Death or Disability. Each Option shall be fully vested in the
event of the Optionee's death or permanent disability (within the meaning of
section 22(e)(3) of the Code) while serving as a Non-Employee Director.
5.4 Effect of Change in Control . Each 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.
5.5 Modification or Assumption of Options. Within the limitations of the
Plan, the Board may 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 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.
5.6 Exercise Before Vesting. Each Option shall be immediately exercisable
for any or all of the Option shares. However, any Common Shares purchased
under the Option shall be subject to repurchase by the Company, at the
Exercise Price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares. The Company's repurchase right shall lapse
at the same rate as the Option vests. Common Shares subject to the Company's
repurchase rights shall not be permitted to be sold, transferred or otherwise
disposed of by the Optionee prior to the lapse of such rights.
ARTICLE 6. EXERCISE PRICE AND PAYMENT FOR OPTION SHARES
6.1 Exercise Price. The Exercise Price per share shall be equal to one
hundred percent (100%) of the Fair Market Value per Common Share on the option
grant date.
6.2 Payment. The Exercise Price shall become immediately due upon exercise
of the Option and shall be payable in one or more of the forms specified
below:
(i) cash or check made payable to the Company,
(ii) shares of Common Stock held for the requisite period necessary to
avoid a charge to the Company's earnings for financial reporting purposes
and valued at Fair Market Value on the Exercise Date, or
(iii) to the extent the Option is exercised for vested shares,
through a special sale and remittance procedure pursuant to which the
Optionee shall concurrently provide irrevocable written instructions to
(a) a Company-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Company, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be
withheld by the Company by reason of such exercise and (b) the Company to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized, payment
of the Exercise Price for the purchased shares must be made on the Exercise
Date.
ARTICLE 7. PROTECTION AGAINST DILUTION
7.1 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 spinoff or a similar
occurrence, the Board shall make such adjustments as it, in its sole
discretion, deems appropriate in the number of Common Shares covered by each
outstanding Option and/or the Exercise Price under each outstanding Option.
B-4
<PAGE>
Except as provided in this Article 7, an Optionee 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.
7.2 Reorganizations. In the event that the Company is a party to a merger or
other reorganization, outstanding Options shall be subject to the agreement of
merger or reorganization. Such agreement may provide, without limitation, for
the assumption of outstanding Options 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 8. LIMITATION ON RIGHTS
8.1 Retention Rights. Neither the Plan nor any Option granted under the Plan
shall be deemed to give any individual a right to remain a director 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,
consultant or director 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).
8.2 Stockholder's Rights. An Optionee shall have no dividend rights, voting
rights or other rights as a stockholder with respect to any Common Shares
covered by his or her Option prior to the issuance of a stock certificate for
such Common Shares. No adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date when such certificate is
issued.
8.3 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 Option 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 9. WITHHOLDING TAXES
To the extent required by applicable federal, state, local or foreign law,
an Optionee 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.
ARTICLE 10. ASSIGNMENT OR TRANSFER OF OPTIONS
Except as provided in Article 9, an Option granted under the Plan shall not
be anticipated, assigned, attached, garnished, optioned, transferred or made
subject to any creditor's process, whether voluntarily, involuntarily or by
operation of law. An Option may be exercised during the lifetime of the
Optionee only by him or her or by his or her guardian or legal representative.
Any act in violation of this Article 10 shall be void. However, this Article
10 shall not preclude an Optionee from designating a beneficiary who will
receive any outstanding Options in the event of the Optionee's death, nor
shall it preclude a transfer of Options by will or by the laws of descent and
distribution.
ARTICLE 11. FUTURE OF THE PLAN
11.1 Term of the Plan. The Plan, as set forth herein, shall become effective
on July 21, 1998, subject to the approval of the Company's stockholders within
twelve (12) months of such date. The Plan shall remain in effect until it is
terminated under Section 11.2.
B-5
<PAGE>
11.2 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 Company's stockholders only to the extent required by
applicable laws, regulations or rules. No Options shall be granted under the
Plan after the termination thereof. The termination of the Plan, or any
amendment thereof, shall not affect any Option previously granted under the
Plan.
ARTICLE 12. DEFINITIONS
12.1 "Board" means the Company's Board of Directors, as constituted from
time to time.
12.2 "Change in Control" shall be deemed to occur upon any "person" (as
defined in Section 13(d) of the Exchange Act), other than the Company, its
Parent or Subsidiary or employee benefit plan or trust maintained by the
Company, its Parent or Subsidiary, becoming the "beneficial owner" (as defined
in Rule 13d-3 of the Exchange Act), directly or indirectly, of more than
twenty-five percent (25%) of the Common Shares of the Company outstanding at
such time, without the prior approval of the Board.
12.3 "Code" means the Internal Revenue Code of 1986, as amended.
12.4 "Common Share" means one share of the common stock of the Company.
12.5 "Company" means NewCom, Inc., a Delaware corporation.
12.6 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
12.7 "Exercise Price" means the amount for which one Common Share may be
purchased upon exercise of such Option, as specified in the applicable Stock
Option Agreement.
12.8 "Fair Market Value" means the market price of Common Shares, determined
by the Board as follows:
(a) 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;
(b) If the Common Shares were traded over-the-counter on the date in
question but were not classified as a national market issue, then the Fair
Market Value shall be equal to the mean between the last reported
representative bid and asked prices quoted by the NASDAQ system for such
date;
(c) If the Common Shares were traded over-the-counter on the date in
question and were classified as a national market issue, then the Fair
Market Value shall be equal to the last-transaction price quoted by the
Nasdaq system for such date; and
(d) If none of the foregoing provisions is applicable, then the Fair
Market Value shall be determined by the Board in good faith on such basis
as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Board 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.
12.9 "Non-Employee Director" shall mean a member of the Board who is not a
common-law employee of the Company.
12.10 "Option" means an option granted under the Plan and entitling the
holder to purchase Common Shares.
12.11 "Optionee" means an individual or estate who holds an Option.
B-6
<PAGE>
12.12 "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 fifty percent (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.
12.13 "Plan" means the NewCom, Inc. Non-Employee Director Stock Option Plan,
as amended from time to time.
12.14 "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.
12.15 "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 fifty percent (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 13. 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.
NEWCOM, INC.
By /s/ Sultan Khan
---------------
ITS PRESIDENT
B-7
<PAGE>
PROXY NEWCOM, INC.
31166 VIA COLINAS, WESTLAKE VILLAGE, CALIFORNIA 91362
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Sultan W. Khan and Michael I. Froch as
Proxies, each with the power to appoint their substitutes and with full power
to act alone, and hereby authorizes them to represent and to vote as designated
below, all shares of Common Stock of NewCom, Inc. held of record by the
undersigned on June 26, 1998, at the Annual Meeting of Stockholders to be held
on August 25, 1998, including any adjournments or continuances thereof.
The proxies appointed hereby are instructed to vote as indicated herein on
the following proposals as more fully described in the Company's Notice of
Meeting of Stockholders and Proxy Statement, each dated July 28, 1998, receipt
of which is hereby acknowledged, and in their discretion on any other business
which may properly come before the meeting or adjournment thereof.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE NOMINEES SPECIFIED
IN ITEM NO. 1 BELOW, FOR THE ADOPTION OF THE 1998 EMPLOYEE STOCK PURCHASE PLAN
MENTIONED IN ITEM 2 BELOW AND FOR THE ADOPTION OF THE NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN MENTIONED IN ITEM 3 BELOW. THE PROXY WILL BE SO VOTED UNLESS
OTHERWISE SPECIFIED.
<TABLE>
<S> <C> <C>
1. Election of Directors [_] FOR all nominees listed below [_] WITHHOLD AUTHORITY to vote
(except as marked to the contrary below) for all nominees listed below
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee strike a
line through the nominee's name below).
<TABLE>
<S> <C> <C> <C> <C>
Zane R. Alsabery James M. Curran Michael I. Froch Saied Kashani Asif M. Khan
Sultan W. Khan Gerald S. Papazian Richard A. Rappaport Alexander Remington Steven C. Veen
</TABLE>
2. 1998 Employee Stock Purchase Plan. To approve the adoption of the 1998
Employee Stock Purchase Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
3. Non-Employee Director Stock Option Plan. To approve the adoption of the Non-
Employee Director Stock Option Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE
VOTED FOR PROPOSAL NO. 1, PROPOSAL NO. 2 AND PROPOSAL NO. 3.
Dated: ______________________, 1998
Please sign exactly as the name
appears below. When shares are
held by joint tenants, both should
sign. When signing as attorney, as
executor, administrator, trustee
or guardian, please give full
title as such. If a corporation,
please sign in full corporate name
by President or other authorized
officer. If a partnership, please
sign in partnership name by
authorized person.
-----------------------------------
Signature
-----------------------------------
Signature if held jointly
If you also expect to attend the
stockholders' meeting, the Board
of Directors requests you check
the box below:
[_] I/we plan to attend the
stockholders meeting
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
