<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[ ] 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 Under Rule 14a-12
</TABLE>
CapRock Communications Corp.
- --------------------------------------------------------------------------------
(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)(1) 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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<PAGE> 2
CAPROCK COMMUNICATIONS CORP.
15601 Dallas Parkway, Suite 700
Dallas, Texas 75001
May 15, 2000
To Our Shareholders:
We are pleased to invite you to attend CapRock Communications Corp.'s 2000
Annual Meeting, which will be held at the Hotel Inter-Continental Dallas, 15201
Dallas Parkway, Addison, Texas at 10:00 a.m. local time on Thursday, June 1,
2000. The doors will open at 9:00 a.m.
The matters to be acted on at the meeting are described in the Proxy
Statement. We hope that you will be able to attend the meeting. However, whether
or not you attend, it is important that you vote. Please mark, date, sign and
return the enclosed proxy card to ensure that your shares will be represented at
the meeting.
The Board of Directors and the management team look forward to seeing you
at the meeting.
Sincerely,
Jere W. Thompson, Jr.
Chairman Of The Board
<PAGE> 3
CAPROCK COMMUNICATIONS CORP.
--------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 1, 2000
--------------------------
To the Shareholders of CapRock Communications Corp.:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Shareholders of
CapRock Communications Corp., a Texas corporation ("CapRock"), will be held on
June 1, 2000, at 10:00 a.m. local time at the Hotel Inter-Continental Dallas,
15201 Dallas Parkway, Addison, Texas for the following purposes:
1. To elect directors to serve for the following year and until their
successors are duly elected and qualified;
2. To consider and act upon a proposal to amend CapRock's 1998 Equity
Incentive Plan by increasing the number of shares reserved for issuance
under the plan;
3. To ratify the appointment of KPMG LLP as independent accountants of
CapRock for the fiscal year ending December 31, 2000; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Shareholders of record at the close of business on April 5, 2000 are
entitled to notice of, and to vote at, the meeting. Only holders of record of
CapRock's common stock on that date are entitled to vote on matters coming
before the meeting and any adjournment or postponement thereof. A complete list
of shareholders entitled to vote at the meeting will be maintained in CapRock's
offices at 15601 Dallas Parkway, Suite 700, Dallas, Texas 75001 for ten days
prior to the meeting and will be open to the examination of any shareholder
during ordinary business hours of CapRock.
Please advise CapRock's Transfer Agent, ChaseMellon Shareholder Services,
L.L.C., Overpeck Centre, 85 Challenger Road, Ridgefield Park, New Jersey 07660
of any change in your address.
All shareholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy as soon as possible in the envelope
enclosed for that purpose. Any shareholder attending the meeting may vote in
person even if he or she previously returned a Proxy.
By Order of the Board of Directors
Kevin W. McAleer
Secretary
Dallas, Texas
May 15, 2000
<PAGE> 4
CAPROCK COMMUNICATIONS CORP.
15601 DALLAS PARKWAY, SUITE 700
DALLAS, TEXAS 75001
--------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
JUNE 1, 2000
--------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
CapRock Communications Corp. (the "Company" or "CapRock") for the 2000 Annual
Meeting of Shareholders to be held on June 1, 2000, at 10:00 a.m. local time at
the Hotel Inter-Continental Dallas, 15201 Dallas Parkway, Addison, Texas, or any
adjournment or adjournments thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting.
This proxy statement and the enclosed proxy card are being sent beginning
approximately May 15, 2000, to all shareholders entitled to vote at the meeting.
CapRock's annual report for the fiscal year ended December 31, 1999 is being
mailed herewith to all shareholders entitled to vote at the Annual Meeting. The
annual report does not constitute a part of the soliciting materials.
RECORD DATE; OUTSTANDING SHARES
Only shareholders of record at the close of business on April 5, 2000 (the
"Record Date") are entitled to receive notice of and to vote at the meeting. The
outstanding voting securities of CapRock as of such date consisted of 33,315,579
shares of common stock, par value $.01 per share (the "Common Stock"). CapRock
has no other class of stock outstanding. For information regarding holders of
more than 5% of the outstanding Common Stock, see "Election of Directors --
Security Ownership of Certain Beneficial Owners and Management."
REVOCABILITY OF PROXIES
The enclosed proxy is revocable at any time before its use by delivering to
CapRock a written notice of revocation or a duly executed proxy bearing a later
date. If a person who has executed and returned a proxy is present at the
meeting and wishes to vote in person, he or she may elect to do so and thereby
suspend the power of the proxy holders to vote his or her proxy.
VOTING AND SOLICITATION
Every shareholder of record on the Record Date is entitled, for each share
held, to one vote on each proposal or item that comes before the meeting. Each
shareholder will be entitled to vote for six nominees in the election of
directors, and the six nominees with the greatest number of votes will be
elected. There are no cumulative voting rights. Proxies will not be voted for
greater than six directors.
The cost of this solicitation will be borne by CapRock. CapRock may
reimburse expenses incurred by brokerage firms and other persons representing
beneficial owners of shares in forwarding soliciting materials to beneficial
owners. Proxies may be solicited by certain of CapRock's directors, officers and
regular employees, without additional compensation, personally, by telephone, by
facsimile or by telegram.
<PAGE> 5
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting
is a majority of the shares of Common Stock entitled to vote at the Annual
Meeting, in person or by proxy. Shares that are voted "FOR," "AGAINST" or
"WITHHELD FROM" a matter are treated as being present at the meeting for
purposes of establishing a quorum and are also treated as shares "represented
and voting" at the Annual Meeting (the "Votes Cast") with respect to such
matter.
While there is no definitive statutory or case law authority in Texas as to
the proper treatment of abstentions, CapRock believes that abstentions should be
counted for purposes of determining both (i) the presence or absence of the
quorum for the transaction of business and (ii) the total number of Votes Cast
with respect to a proposal. In the absence of controlling precedent to the
contrary, CapRock intends to treat abstentions in this manner. Accordingly,
abstentions will have the same effect as a vote against a proposal.
Broker non-votes will not be counted for purposes of determining the
presence or absence of a quorum for the transaction of business or for purposes
of determining the number of Votes Cast with respect to a proposal.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of CapRock that are intended to be presented by
such shareholders at CapRock's 2001 Annual Meeting must be received by CapRock,
addressed to the Corporate Secretary, CapRock Communications Corp., 15601
Dallas Parkway, Suite 700, Dallas, Texas 75001, no later than January 15, 2000,
for inclusion in the proxy statement and form of proxy relating to that meeting.
Such proposals must comply with the Bylaws of CapRock and the requirements of
Regulation 14A (including Rule 14a-8) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
Pursuant to Rule 14a-4 of the Exchange Act, CapRock may exercise
discretionary voting authority at the 2001 Annual Meeting under proxies it
solicits to vote on a proposal made by a shareholder that does not meet the
requirements of Rule 14a-8, unless CapRock is notified about the proposal no
later than March 31, 2001 (assuming that CapRock's 2001 Annual Meeting of
Shareholders is held on a date that is within 30 days from the date on which the
2000 Annual Meeting was held), and the shareholder satisfies the other
requirements of Rule 14a-4(c).
With respect to business to be brought before the Annual Meeting to be held
on June 1, 2000, CapRock has not received any notices from shareholders that
CapRock is required to include in this Proxy Statement.
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<PAGE> 6
ELECTION OF DIRECTORS
(ITEM 1)
A Board of six directors is to be elected at the meeting. All nominees are
currently directors. Unless otherwise instructed, the proxy holders will vote
all of the proxies received by them for CapRock's six nominees named below. In
the event that additional persons are nominated for election as directors, the
proxy holders intend to vote all proxies received by them in such a manner as
will ensure the election of as many of the nominees listed below as possible
and, in such event, the specific nominees to be voted for will be determined by
the proxy holders. In the event that any of the nominees shall become
unavailable, the proxy holders will vote in their discretion for a substitute
nominee. It is not expected that any nominee will be unavailable. The term of
office of each person elected as a director will continue until the next Annual
Meeting of Shareholders and until his successor has been elected and qualified.
VOTE REQUIRED
The six nominees receiving the highest number of affirmative votes of the
shares entitled to be voted shall be elected to the Board of Directors. Votes
withheld from any director are counted for purposes of determining the presence
or absence of a quorum and for purposes of determining the total number of votes
cast regarding such director, but have no other legal effect under Texas law.
If any nominee of CapRock is unable or declines to serve as a director at
the time of the meeting, the proxies will be voted for any nominee who is
designated by the present Board of Directors to fill the vacancy. It is not
expected that any nominee will be unable or will decline to serve as a director.
Ignatius W. Leonards, who is currently a director of CapRock, has declined to
stand for re-election as a director, thereby creating a vacancy on the Board of
Directors. CapRock has not, as of the date of this Proxy Statement, identified a
candidate to fill such vacancy. However, CapRock intends to continue searching
for suitable candidates and expects to fill such vacancy prior to its 2001
Annual Meeting.
The Board of Directors recommends that shareholders vote FOR the nominees
listed below.
The names and certain information about the nominees for directors are set
forth below:
<TABLE>
<CAPTION>
POSITION(S)/PRINCIPAL DIRECTOR
NAME AGE OCCUPATION SINCE
---- --- ---------- -----
<S> <C> <C> <C>
Jere W. Thompson, Jr.(1).................... 43 Chairman of the Board, Chief 1998
Executive Officer and Director
Leo J. Cyr.................................. 44 President, Chief Operating Officer 1999
and Director
Timothy W. Rogers........................... 37 Executive Vice President of 1998
Integrated Services Sales and
Marketing and Director
Mark Langdale(1)(2)......................... 45 President of Posadas USA, Inc. 1998
Christopher J. Amenson(1)(2)(3)............. 49 President, Chief Executive Officer 1998
and Director of SBS Technologies, Inc.
John R. Harris(1)(2)(3)..................... 51 President, Chief Executive Officer 1998
and Director of ztango.com
</TABLE>
- -------------------
(1) Member of the Nominating Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
3
<PAGE> 7
Except as set forth below, each of the nominees has been engaged in the
principal occupation described above during the past five years.
Set forth below is certain information with respect to each of the nominees
for director and each other executive officer of CapRock:
NOMINEES
Mr. Jere W. Thompson, Jr. has served as Chairman of the Board and Chief
Executive Officer of CapRock since its formation in February 1998. Mr. Thompson
also has served as President of CapRock Telecommunications Corp. ("CapRock
Telecommunications"), one of our predecessor companies, since April 1994, and
since July 1992, upon founding CapRock Fiber Network Ltd. ("CapRock Fiber"),
another of our predecessor companies, as the President of its general partner.
In 1987, Mr. Thompson joined The Thompson Company, an investment company, where
he became a Vice President and assisted in the acquisition and management of
several of The Thompson Company portfolio companies. From 1982 to 1986, Mr.
Thompson worked in commercial real estate as a broker and then with Trammell
Crow Community Development Company. Since 1989, Mr. Thompson has been a member
of the board of directors and since 1995 he has served as Chairman of the North
Texas Tollway Authority and its predecessor, the Texas Turnpike Authority. Mr.
Thompson is also a board member of Cistercian Preparatory School and the
Southwestern Medical Foundation. Mr. Thompson has a B.A. in Economics from
Stanford University and a M.B.A. from the University of Texas Graduate School of
Business.
Mr. Leo J. Cyr has served as President, Chief Operating Officer and
Director of CapRock since October 1999. Prior thereto, Mr. Cyr was Senior Vice
President of MCI WorldCom's Intelligent Network Architecture and Development
Organization from September 1998 to September 1999, where he was responsible for
designing and maintaining intelligent network systems. Mr. Cyr spent 13 years
with MCI in various operational positions and as Vice President and Senior Vice
President of several engineering organizations. Additionally, Mr. Cyr was
President, CEO and co-founder of Unisite, Inc., a successful start-up company
managing wireless sites supporting multiple wireless operators. Prior to joining
MCI WorldCom, Mr. Cyr spent five years in the U.S. Army and worked with Peat
Marwick Mitchell & Co. as a management consultant. Mr. Cyr holds an engineering
degree from the U.S. Military Academy.
Mr. Timothy W. Rogers has served as Executive Vice President of
Integrated Services Sales and Marketing since January 2000 and as a director of
CapRock since its formation in February 1998. From February 1998 until January
2000, Mr. Rogers served as Executive Vice President of Retail Sales and Network
Operations of CapRock. Mr. Rogers served as Executive Vice President of Retail
Sales and Network Operations and as a Director of CapRock Telecommunications
since April 1994. In 1992, Mr. Rogers co-founded Synergy Telecommunications,
Inc., a telecommunications company responsible for marketing a fiber network in
West Texas, Oklahoma, Colorado and New Mexico, and from February 1992 to April
1994 served as one of its three executive officers. In April 1994, CapRock
Investors purchased half of Synergy and subsequently Synergy changed its name to
CapRock Telecommunications. From August 1989 to December 1991, Mr. Rogers was a
sales manager of Qwest. From July 1988 to August 1989, Mr. Rogers was a Senior
Account Executive for Southwest Network Services. From April 1987 to June 1988,
Mr. Rogers was an account executive with Sprint. Mr. Rogers has a B.B.A. in
Marketing from Southwest Texas State University.
Mr. Mark Langdale has served as a director of CapRock since its
formation in February 1998. Mr. Langdale served as a Director of CapRock
Telecommunications since April 1994 and Secretary of the general partner of
CapRock Fiber since 1992. Mr. Langdale is President of Posadas USA, Inc., a
subsidiary of Grupo Posadas S.A. De C.V., a hotel management company domiciled
in Mexico, a position he has held since 1989. From 1987 to 1989, he served as
Vice President for Thompson Realty Company, a real estate investment company.
Mr. Langdale currently serves as a member of the Board of Directors of Grupo
Posadas S.A. De C.V. and as Chairman of the Texas Department of Economic
Development. Mr. Langdale earned his LL.B. at the University of Houston and a
B.B.A. with honors in Finance at the University of Texas.
4
<PAGE> 8
Mr. Christopher J. Amenson has served as a director of CapRock since
its formation in February 1998. Mr. Amenson has served as a director of IWL
Communications, Incorporated ("IWL Communications"), one of our predecessor
companies, since June 1997. Mr. Amenson has served as President and Chief
Operating Officer of SBS Technologies, Inc., a manufacturer of computer
components, since April 1992 and as a director since August 1992. In October
1996 he became the Chief Executive Officer and in May 1997 he became Chairman of
the Board of Directors of SBS Technologies, Inc. For five years before joining
SBS Technologies, Inc., Mr. Amenson was President of Industrial Analytics, Inc.,
a Boston-based investment banking firm. Mr. Amenson holds a B.A. Degree in
Government from the University of Notre Dame and a Master's Degree in Business
Management from the Sloan Fellows Program at the Massachusetts Institute of
Technology.
Mr. John R. Harris has served as a director of CapRock since August
1998. Since December 1999, Mr. Harris has served as President and Chief
Executive Officer and a director of ztango.com, a wireless Internet software and
services company. Prior thereto, Mr. Harris served as a Corporate Vice President
at Electronic Data Systems Corporation, an information and technology
outsourcing and data processing company ("EDS"), from 1997 until March 31, 1999
(when he resigned from EDS), where he was responsible for marketing and
corporate strategy. From 1989 to 1997, he served as President of the
Communications Industry Group at EDS where he was responsible for four business
units directed toward wirelines, wireless, media and interactive services. Mr.
Harris is on the Board of Directors of Applied Graphics Technologies, Inc., an
independent provider of digital prepress services. Mr. Harris received his
undergraduate and graduate degrees in Business Administration from West Georgia
University.
OTHER EXECUTIVE OFFICERS
Mr. Kevin W. McAleer, age 49, has served as Senior Vice President and
Chief Financial Officer of CapRock since April 1998 and as Treasurer and
Secretary since August 1998. From 1996 to 1997, Mr. McAleer served as Chief
Financial Officer, Secretary and as a member of the Executive Management
Committee of American Pad and Paper Co., one of the largest manufacturers and
marketers of paper-based office products in North America. From 1990 to 1996,
Mr. McAleer served as Executive Vice President, Chief Financial Officer and as a
member of the Executive Management Committee of Rexene Corporation, which
manufactures plastic film and plastic resins. From 1985 to 1990, Mr. McAleer
served as Senior Vice President-Administration, Chief Financial Officer,
Secretary and Treasurer, and as a member of the Executive Management Committee
and the Board of Directors of Varo, Inc., which manufactures electronics
supplied primarily to U.S. military agencies, such as proprietary night vision
systems, high-reliability power systems and airborne missile launchers. From
1981 to 1985, Mr. McAleer served as Vice President-Finance, Chief Financial
Officer, Secretary and Treasurer, and as a member of the Executive Management
Committee of Tocom, Inc., which designs and manufactures high-technology
communications products and services for the cable industry. Mr. McAleer is a
certified public accountant and is a member of the American Institute of
Certified Public Accountants and the Texas Society of Certified Public
Accountants. Mr. McAleer has a B.S. in Accounting/Economics from LaSalle
University in Philadelphia, Pennsylvania.
Mr. T. George Hess, age 55, has served as Senior Vice President of
Network Services of CapRock since January 2000. From April 1998 until January
2000, Mr. Hess served as Assistant Vice President Operations and Service
Delivery for GTE Internetworking, a division of GTE providing Internet services
to medium and large corporations, where he was responsible for broadband
provisioning, network control center and the technical workforce for the 17,000
mile Internet backbone network. Prior to joining GTE, Mr. Hess was Chief
Operating Officer for Digital Teleport Inc. in St. Louis where he raised capital
for a six state fiber network. From 1996 to 1997 Mr. Hess was Chief Service
Officer for Tie Communications and responsible for consolidating customer
service operations into a single center. From 1993 to 1996, Mr. Hess was Chief
Service Officer for MFS Intelenet, the CLEC business unit of MFS Communications
Company, Inc., where he was responsible for switch maintenance, engineering,
provisioning, installation and repair, customer service, billing and network
control center operations. Mr. Hess spent 16 years with United
Telecommunications holding a number of management positions including Vice
President Voice Services where he created the operator services organization for
Sprint. Mr. Hess started his telecommunications career at Ohio Bell in 1967
after graduating from Ohio Wesleyan.
5
<PAGE> 9
Mr. Claude A. Robertson, age 37, has been with CapRock since February
1998. Mr. Robertson joined CapRock as the director of Carrier Sales, and was
promoted to Vice President of Carrier Sales in June 1998. In February 2000, Mr.
Robertson was promoted to Senior Vice President of Carrier Sales. From 1996 to
January 1998, Mr. Robertson served as City Vice President at MFS WorldCom, Inc.
in Denver. From 1994 to 1996, he served as Senior Account Executive at MFS
Communications. From 1988 to 1993 Mr. Robertson worked for Sprint Communications
and held various sales positions with the firm. Mr. Robertson graduated from
Texas A&M University with a degree in Finance.
Mr. Kenneth L. Monblatt, age 34, started as the Senior Vice President
and Chief Information Officer of CapRock in February 2000. From 1999 to 2000,
Mr. Monblatt served as the Senior Vice President and Chief Information Officer
of PageNet. From 1995 to 1999, Mr. Monblatt served in several senior management
roles as a Director of Information Technology for PrimeCo Personal
Communications. From 1987 to 1995, Mr. Monblatt served in a management
consulting capacity with several top tier consulting companies including TRW
(formerly BDM), American Management Systems and Modis Solutions (formerly Berger
& Co.). Consulting engagements centered on strategy, business development,
process development and large-scale systems implementations for communications
providers worldwide. Mr. Monblatt has his B.S. in Management Information Systems
from the University of Maryland, in addition to executive program certifications
from the Yale School of Management and Stanford's Graduate School of Business.
Mr. Matthew M. Kingsley, age 35, has served as Corporate Controller of
CapRock since August 1998. From August 1996 to August 1998, Mr. Kingsley was an
audit manager for KPMG LLP and held various positions with that firm from
January 1988 until February 1992. From February 1992 until August 1996, Mr.
Kingsley held various positions, including Senior Manager of Financial Planning,
with DSC Communications Corporation, a telecommunications equipment
manufacturer. Mr. Kingsley is a certified public accountant and is a member of
the American Institute of Certified Public Accountants and the Texas Society of
Certified Public Accountants. Mr. Kingsley has a B.B.A. in Accounting from the
University of Wisconsin.
Each director serves until the next annual meeting of shareholders and
until his successor is duly elected and qualified. CapRock's Board of Directors
has seven seats with six directors to be elected at the annual meeting and one
vacancy expected to be filled by the Board of Directors thereafter. Our officers
are elected by and serve at the discretion of the Board of Directors. There are
no family relationships among any of our directors or executive officers. Mr.
Cyr's employment agreement provides that it is the intent of Mr. Cyr and CapRock
that Mr. Cyr serve as a director throughout the term of his employment agreement
with CapRock.
6
<PAGE> 10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 31, 2000, certain information
with respect to the beneficial ownership of CapRock's Common Stock by (i) each
person known by CapRock to own beneficially more than five percent (5%) of the
outstanding shares of Common Stock, (ii) each current director and director
nominee of CapRock, (iii) the executive officers of CapRock named in the table
under "Executive Compensation - Summary Compensation Table," and (iv) all
directors and executive officers as a group. CapRock does not know of any
agreements among its shareholders that relate to voting or investment power of
its shares of Common Stock. The address for Messrs. Jere W. Thompson, Jr., Cyr,
Rogers, Roberts, Terrell and McAleer, CapRock Investors and Greenway Holdings,
L.P. is 15601 Dallas Parkway, Suite 700, Dallas, Texas 75001. The address for
Mr. Leonards is 12000 Aerospace Ave., Suite 200, Houston, Texas 77034.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENT OF SHARES OF
COMMON STOCK COMMON STOCK
NAME AND ADDRESS BENEFICIALLY OWNED(1) OUTSTANDING(1)
- ---------------- -------------------- --------------------
<S> <C> <C>
Jere W. Thompson, Jr.(2).......................................... 7,461,776 22.3%
Leo J. Cyr(3)..................................................... 100,000 *
Ignatius W. Leonards(4)........................................... 1,693,510 5.1%
Timothy W. Rogers(5).............................................. 2,679,610 8.0%
Scott L. Roberts(6)............................................... 2,595,110 7.8%
Timothy M. Terrell(7)............................................. 2,573,110 7.7%
Kevin W. McAleer(8)............................................... 20,000 *
Mark Langdale (9)................................................. 8,344,967 25.0%
5950 Berkshire, Suite 990
Dallas, TX 75225
Christopher J. Amenson(10)........................................ 12,665 *
c/o SBS Technologies, Inc.
2400 Louisiana Blvd., N.E.
AFC Building 5, Suite 600
Albuquerque, NM 87110
John R. Harris(11)................................................ 10,999 *
2808 McKinney Avenue, Suite 220
Dallas, TX 75204
Jere W. Thompson, Sr.(12)......................................... 7,025,046 21.0%
Two Turtle Creek Village
3838 Oak Lawn Ave., Suite 1850
Dallas, TX 75219
Greenway Holdings, L.P.(2)........................................ 2,014,082 6.0%
CapRock Investors(2).............................................. 4,320,981 12.9%
All executive officers and directors as a group(13) (twelve
persons).......................................................... 15,948,814 47.6%
</TABLE>
- ---------------
* Less than 1% of the outstanding shares of the class.
(1) Based upon 33,440,856 shares of Common Stock issued and outstanding as of
March 31, 2000. The information contained in this table with respect to
beneficial ownership reflects "beneficial ownership" as defined in Rule
13d-3 under the Exchange Act, which means generally any person who,
directly or indirectly, has or shares voting power or investment power with
respect to a security. Shares of
7
<PAGE> 11
Common Stock not outstanding but deemed beneficially owned by virtue of
the right of an individual or group to acquire such shares within 60
days after March 31, 2000 are treated as outstanding only when
determining the amount and percentage of Common Stock owned by such
individual or group. All information with respect to the beneficial
ownership of any principal shareholder was furnished by such principal
shareholder and we believe that, except as otherwise noted or pursuant
to community property laws, each shareholder has sole voting and
investment power with respect to shares shown.
(2) Includes 4,320,981 shares held of record by CapRock Investors, 108,932
shares held of record by CapRock Systems, Inc., 2,014,082 shares held
of record by Greenway Holdings, L.P. CapRock Investors is a Texas joint
venture, of which Jere W. Thompson, Jr. is the managing venturer and in
which he owns a controlling interest and 17,000 shares subject to
currently exercisable options. The Joint Venture Agreement of CapRock
Investors grants to Mr. Thompson, Jr. certain authority, including the
authority to decide and cast all votes on behalf of CapRock Investors
as a shareholder of CapRock. As a consequence, both CapRock Investors
and Mr. Thompson, Jr. may each be deemed to be the beneficial owner of
all of the shares. CapRock Systems, Inc. is a Texas corporation of
which Mr. Thompson, Jr. owns 50% of the outstanding common stock and is
an officer and a director; as a result he has shared voting,
investment, and dispositive power with respect to the 108,932 shares
held by CapRock Systems, Inc. Greenway Holdings, L.P. is a Texas
limited partnership of which Mr. Thompson, Jr. is the general partner
and has sole voting, investment and dispositive power; as a result, he
may be deemed to be the beneficial owner of all of the shares held of
record by Greenway Holdings, L.P.
(3) Represents 100,000 shares of restricted stock issued under the
Company's 1998 Equity Incentive Plan and subject to vesting in equal
installments over a three-year period beginning in 2000.
(4) Includes 20,166 shares held by Ignatius W. Leonards as custodian for
minor children and 12,500 shares subject to currently exercisable
options.
(5) Includes 8,970 shares held by Neal S. Rogers as custodian for minor
children of Timothy W. Rogers and 12,500 shares subject to currently
exercisable options. Neal S. Rogers is Timothy W. Roger's brother.
(6) Includes 8,000 shares subject to currently exercisable options.
(7) Includes 11,000 shares subject to currently exercisable options.
(8) Represents 20,000 shares subject to currently exercisable options.
(9) Includes 4,320,981 shares held of record by CapRock Investors, 108,932
shares held of record of CapRock Systems, Inc., 628,064 shares held of
record by Mr. Langdale as Trustee of the Mark Langdale 1999 Trust u/a/d
April 12, 1999, 628,064 shares held of record by Mr. Langdale as
Trustee of the Patricia Langdale 1999 Trust u/a/d April 12, 1999 and
3,333 shares subject to currently exercisable options. Under the Joint
Venture Agreement of CapRock Investors, the approval of a
majority-in-interest of the venturers is required to approve the
disposition of the shares. Because of the ownership interest of Jere W.
Thompson, Jr., Mark Langdale, and Jere W. Thompson, Sr., two of the
three acting together can authorize or prevent a disposition of the
shares. As a result, each may be deemed to be the beneficial owner of
all of the shares. CapRock Systems, Inc. is a Texas corporation of
which Mr. Langdale owns 50% of the outstanding common stock and is an
officer and a director; as a result he has shared voting, investment
and dispositive power with respect to the 108,932 shares held by
CapRock Systems, Inc.
(10) Includes 10,665 shares subject to currently exercisable options.
(11) Includes 3,999 shares subject to currently exercisable options.
8
<PAGE> 12
(12) Includes 1,302,283 shares held of record by The Williamsburg
Corporation, 4,320,981 shares held of record by CapRock Investors and
63,077 shares held of record by Jere W. Thompson, Sr.'s spouse. Under
the Joint Venture Agreement of CapRock Investors, the approval of a
majority-in-interest of the venturers is required to approve the
disposition of the shares. Because of the ownership interest of Jere W.
Thompson, Jr., Mark Langdale, and Jere W. Thompson, Sr., two of the
three acting together can authorize or prevent a disposition of the
shares. As a result, each may be deemed to be the beneficial owner of
all of the shares. The Williamsburg Corporation is a Texas corporation,
of which Mr. Thompson, Sr. is the president and a director; as a result
he has shared voting, investment, and dispositive power with respect to
the 1,302,283 shares held by The Williamsburg Corporation.
(13) Includes 95,997 shares subject to currently exercisable options and
115,000 shares of restricted stock subject to vesting provisions.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of CapRock held a total of twelve meetings during
the fiscal year ended December 31, 1999. In addition, the Board of Directors
acted two times by unanimous consent during the fiscal year ended December 31,
1999. During the fiscal year ended December 31, 1999, each director attended at
least 75% of the aggregate number of meetings of the Board of Directors and
meetings of committees on which such director served held during the period for
which he was a director or a member of the committee.
The Audit Committee, currently consisting of directors Christopher J.
Amenson, John R. Harris and Mark Langdale (who was elected to the Audit
Committee on February 18, 1999), met two times during the last fiscal year. The
Audit Committee, among other things, reviews our internal accounting procedures,
consults with and reviews the services provided by our independent auditors,
reviews the Company's annual financial statements and reviews legal, disclosure
and regulatory matters that may have a material impact on the financial
statements, and reports to the Board of Directors with such recommendations as
the committee deems appropriate.
The Compensation Committee, currently consisting of directors Christopher
J. Amenson and John R. Harris, met twice during the last fiscal year. In
addition, the Compensation Committee acted ten times by unanimous consent during
the last fiscal year. The Compensation Committee reviews and recommends to the
Board of Directors the compensation and benefits of all our executives and
establishes and reviews general policies relating to compensation and benefits
of our employees, including the administering of our 1998 Equity Incentive Plan.
All members of the Compensation Committee are and will be "Non-Employee
Directors" within the meaning of Rule 16b-3 under the Exchange Act and "outside
directors" within the meaning of Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code").
The Nominating Committee, currently consisting of directors Jere W.
Thompson, Jr., Christopher J. Amenson, John R. Harris and Mark Langdale, was
appointed in August 1999 and did not meet during the fiscal year ended December
31, 1999. The Nominating Committee is responsible for developing a policy on the
size and composition of the Board of Directors, reviewing possible candidates
for membership on the Board of Directors, and recommending a slate of nominees.
The Nominating Committee will consider shareholder proposals of persons to be
nominated for election to the Board of Directors. See "Deadline for Receipt of
Shareholder Proposals."
BOARD COMPENSATION
We reimburse each member of our Board of Directors for out-of-pocket
expenses incurred for attending board meetings. Each non-employee director
receives a $10,000 annual retainer and a $1,000 fee for each meeting of the
Board of Directors and each meeting of any committee of the Board attended by
the director. No employee director on our Board of Directors currently receives
any additional cash compensation. Our non-employee directors are eligible to
participate in and receive nonqualified stock options under our 1998 Director
Stock Option Plan.
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<PAGE> 13
During the fiscal year ended December 31, 1999, Christopher J. Amenson and
John R. Harris, who are non-employee directors of CapRock, were each granted
options to purchase 2,000 shares of Common Stock at an exercise price of $27.50
per share of Common Stock.
REPORT OF THE COMPENSATION COMMITTEE
The following is the Report of the Compensation Committee of CapRock,
describing the compensation policies and rationale applicable to CapRock's
executive officers with respect to the compensation paid to the executive
officers for the fiscal year ended December 31, 1999. The information contained
in the Report of the Compensation Committee shall not be deemed to be
"soliciting material" or to be "filed" with the SEC, nor shall such information
be incorporated by reference into any future filing under the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act except to the
extent that CapRock specifically incorporates it by reference into such filing.
TO THE BOARD OF DIRECTORS:
The Compensation Committee of the Board of Directors currently consists of
Messrs. Amenson and Harris. Decisions regarding compensation of CapRock's
executive officers are made by the Compensation Committee. The Compensation
Committee also administers CapRock's Equity Incentive Plan and other
discretionary bonuses for CapRock's employees. No member of the Compensation
Committee is an employee of CapRock.
Compensation Policies Toward Executive Officers
The goals of the Compensation Committee in establishing CapRock's executive
compensation program are as follows:
(1) To fairly compensate the executive officers of CapRock for their
contributions to CapRock's short-term and long-term performance. The
elements of CapRock's compensation program are (i) annual base salaries,
(ii) annual cash bonuses and (iii) equity incentives.
(2) To allow CapRock to attract, motivate and retain the management
personnel necessary to CapRock's success by providing an executive
compensation program comparable to that offered by similar companies.
(3) To provide an executive compensation program with incentives
linked to the financial performance of CapRock. Under such program,
incentive compensation for executive officers is linked to the general
financial performance of CapRock as measured by such items as revenues and
income from operations.
Base Salaries. The annual base salaries of the Chief Executive Officer and
certain of the other executive officers of CapRock were predetermined pursuant
to employment agreements that were entered into by CapRock and such individuals
prior to the appointment of the Compensation Committee. The annual base salaries
of Leo J. Cyr, T. George Hess, Claude A. Robertson, Kenneth L. Monblatt and
Matthew M. Kingsley were determined by the Compensation Committee. The
Compensation Committee has reviewed all such base salaries in light of corporate
performance, individual performance, experience and a comparison with salary
ranges reflecting similar positions, duties and levels of responsibility of
other companies in similar industries and with comparable revenues and has found
them to be reasonable. Each executive officer's base salary is reviewed annually
by the Compensation Committee and is subject to upward adjustment on the basis
of individual and corporate performance.
Annual and Other Bonuses. CapRock's annual bonuses to its executive
officers are based upon CapRock's financial performance in the current year, the
furthering of CapRock's strategic position in the marketplace and individual
performance.
Equity Incentives. Equity incentives, including grants of stock options,
are determined based on the Compensation Committee's assessment of the ability
of such officers to positively impact CapRock's future performance and enhance
shareholder value as determined by their individual performances. Stock option
grants and other equity incentives are not awarded annually but as the
individual performance and experience of each
10
<PAGE> 14
executive officer warrants. Option awards generally vest over three to five
years. The amount and vesting of stock options are not contingent on achievement
of any specific performance targets. All options granted will benefit the
executive only to the extent that there is appreciation in the market price of
the Common Stock during the option period. The stock options granted to
CapRock's executive officers under the Company's 1998 Equity Incentive Plan
provide for accelerated vesting upon a Change of Control (as such term is
defined in such plan). In addition, the Restricted Stock Agreement granting
shares of restricted stock to Mr. Cyr provides for accelerated vesting upon a
change of control of CapRock and, subject to certain limitations, requires the
Company to make a loan to Mr. Cyr in an amount equal to certain tax liabilities
which Mr. Cyr may incur as a result of such change of control. Additionally, Mr.
Cyr obtained a loan of $900,000 from CapRock, which will be forgiven in
accordance with the schedule of loan forgiveness set forth in the promissory
note evidencing such loan. The promissory note also provides that the schedule
of loan forgiveness will be accelerated upon a change of control of CapRock.
Equity and cash incentives are not limited to executive officers. Grants of
stock options have been made to employees upon joining CapRock in amounts
consistent with guidelines established by the Compensation Committee and are
also made to selected employees as performance related awards and as awards for
certain promotions. The amounts of such grants are determined based on the
individual employee's position with CapRock and his or her potential ability to
beneficially impact the performance of CapRock. By giving employees a stake in
the financial performance of CapRock, the Compensation Committee's goal is to
provide incentives to employees of CapRock to enhance the financial performance
of CapRock.
Chief Executive Officer Compensation. Mr. Thompson's compensation is
determined by application of the policies described above. Mr. Thompson
generally participates in the same executive compensation plans and arrangements
available to the other executive officers. Accordingly, his compensation
consists of annual base salary, bonus, and equity incentives. The Compensation
Committee's general approach in establishing Mr. Thompson's compensation is to
be competitive with peer companies, and to have a large percentage of his target
compensation based upon the long-term performance of CapRock, as reflected in
the market price of CapRock's common stock.
Mr. Thompson's compensation during the year ended December 31, 1999,
included $250,769 in base salary and $200,000 in cash bonus. Mr. Thompson's
salary and bonus payments for 1999 were based, in part, on CapRock's performance
and the 1998 compensation of chief executive officers of peer companies,
although his compensation was not targeted to any particular group of these
companies.
Respectfully Submitted,
Compensation Committee
Christopher J. Amenson
John R. Harris
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of Board of Directors consists of Messrs.
Amenson and Harris.
During the last fiscal year, no executive officer of CapRock served as a
member of the Board of Directors or compensation committee of any entity that
has one or more executive officers serving as a member of CapRock's Board of
Directors or Compensation Committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our operations support system was developed by RiverRock Systems, Ltd.
CapRock owns a 49% limited partnership interest in RiverRock and David E.
Thompson, the brother of Jere W. Thompson, Jr., owns a 50% limited partnership
interest in RiverRock. Thompson Technology, Inc., a Texas corporation that is
owned by David E. Thompson ("TTI"), is the general partner and owns a 1% general
partnership interest in RiverRock. Although it is the intention of RiverRock to
market and sell licenses for the system to third parties, as of the date of this
Proxy Statement, no marketing or sales to third parties have been made.
RiverRock was formed when CapRock and TTI
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<PAGE> 15
transferred all rights to the system developed by CapRock and TTI into
RiverRock. CapRock has been granted a royalty-free, perpetual and non-exclusive
license for the use of the system. CapRock also receives upgrades, maintenance
and other support from RiverRock for three years, without the payment of any
fees or royalties, which expires in June 2001. Thereafter, CapRock will be
required to pay the same fees and royalties for system upgrades, maintenance and
support as other licensees of RiverRock. CapRock committed to fund $700,000 for
the development of the system. During the years ended December 31, 1998 and
1999, CapRock contributed a total of $170,000 and $550,000, respectively, to
RiverRock for such development.
CapRock currently leases private line services from TISP, Inc. ("TISP").
TISP is owned by Patrick J. Thompson, a brother of Jere W. Thompson, Jr. Total
payments to TISP in the years ended December 31, 1998 and 1999 were $1,176,000
and $1,810,000, respectively. We believe that the prices charged for such
services do not exceed prices charged by unrelated parties for such services.
Pricing of private line services is a function of the capacity, term and
distance of the circuit involved. Circuits are usually available from multiple
vendors, and vendors are selected on the basis of price, speed of provisioning
and circuit diversity. Rates are fixed and payable monthly, generally in
advance. The actual rates paid to TISP are determined in the same manner as
rates for unrelated parties.
In connection with the employment agreement between CapRock and Leo J. Cyr,
Mr. Cyr executed a promissory note in favor of CapRock in the original principal
amount of $900,000 bearing interest at prime rate as published in the "Money
Rates" table in The Wall Street Journal from time to time, payable in three
annual installments. Mr. Cyr's employment agreement provides that the loan due
under such note will be forgiven during the term of Mr. Cyr's employment with
CapRock pursuant to his employment agreement and upon certain key events,
including a change of control of CapRock.
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<PAGE> 16
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on an
investment of $100 on August 27, 1998 (the date CapRock's Common Stock started
trading after completion of its business combination with its predecessor
companies) in (i) CapRock's Common Stock, (ii) the S&P 500 Index, and (iii) the
Total Return Index of the Nasdaq Stock Market -- Telecommunications Components.
The values with each investment as of August 27, 1998 are based on share price
appreciation and the reinvestment of dividends.
The information contained in the Performance Graph shall not be deemed to
be "soliciting material" or to be "filed" with the SEC, nor shall such
information be incorporated by reference into any future filing under the
Securities Act or the Exchange Act except to the extent that CapRock
specifically incorporates it by reference into such filing.
[Stock Performance Graph]
The graph above assumes $100 invested on August 27, 1998 and was plotted
using the following data:
<TABLE>
<CAPTION>
CAPROCK
COMMUNICATIONS NASDAQ
MEASUREMENT PERIOD CORP. S & P 500 TELECOMMUNICATIONS
<S> <C> <C> <C>
8/98 100 100 100
9/98 93 94 92
12/98 72 114 129
3/99 211 120 162
6/99 438 128 171
9/99 251 120 157
12/99 351 138 228
3/00 530 141 239
</TABLE>
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<PAGE> 17
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table shows, for the three years
ended December 31, 1999, compensation that we paid or awarded to our Chief
Executive Officer and our other four most highly compensated executive officers
for the year ended December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------- --------------------------
RESTRICTED SHARES
STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(S) YEAR SALARY(1) BONUS AWARDS OPTIONS COMPENSATION
- ------------------------------ ---- --------- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Jere W. Thompson, Jr............. 1999 $ 250,769 $ 200,000(2) $ -- 30,000 $ 3,333(3)
Chief Executive Officer and 1998 194,583 110,000(4) -- 125,000 --
Chairman of the Board
1997 146,920(5) 100,000(6) -- -- 205,908(7)
Leo J. Cyr....................... 1999 48,077 600,000 2,000,000(8) 500,000 --
President, Chief Operating
Officer and Director
Kevin W. McAleer................. 1999 198,461 100,000(2) -- -- 3,333(3)
Senior Vice President, Chief 1998 128,846 80,000(4) -- 100,000 18,750(9)
Financial Officer, Secretary and
Treasurer
Timothy M. Terrell............... 1999 152,307 175,000(2) -- 25,000 3,333(3)
Executive Vice President 1998 135,555 107,500(4) -- 55,000 --
1997 125,781 125,000(10) -- -- --
Timothy W. Rogers................ 1999 169,108 140,000(2) -- 25,000 3,333(3)
Executive Vice President 1998 138,555 100,000(4) -- 62,500 --
1997 126,814 125,000(10) -- -- --
</TABLE>
- --------------------
(1) Under the terms of their employment agreements with CapRock (which were
entered into in February 1998 and which each provide for a salary increase
upon review annually by the Board of Directors), the annual base salaries
for Messrs. Thompson, Terrell and Rogers through December 31, 1999 were
$265,000, $165,000, and $180,000, respectively. Mr. McAleer became an
employee of CapRock in May 1998. Under the terms of his employment
agreement with CapRock (which was entered into in May 1998 and expired in
May 1999), the annual base salary for Mr. McAleer through December 31, 1998
was $200,000. Under the terms of his employment agreement with CapRock
(which was entered into in October 1999), the annual base salary for Mr.
Cyr through December 31, 1999 was $250,000, subject to increase upon review
annually by the Board of Directors. The $48,077 salary listed for Mr. Cyr
represents the portion of Mr. Cyr's annual salary for fiscal 1999 since his
employment commenced in October 1999. In February 2000, Mr. Terrell's
employment agreement was amended and, in connection therewith, Mr. Terrell
is employed by but no longer serves as an executive officer of CapRock.
(2) Represents bonus amount earned from CapRock in fiscal year 1999 and paid in
fiscal year 2000.
(3) Represents the amounts of matching contributions and allocations made by
the Company in 1999 for such participating officers under the Company's
401(k) Plan.
(4) Represents bonus amount earned from CapRock in fiscal year 1998 and paid in
fiscal year 1999.
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<PAGE> 18
(5) Includes $24,638 salary paid to Mr. Thompson by CapRock Fiber.
(6) Represents bonus amount earned from CapRock Telecommunications in fiscal
year 1997 and paid in fiscal year 1998.
(7) Such amounts represent the fees paid by the general partner of CapRock
Fiber and were based upon the total construction services revenues earned
by the general partner of CapRock Fiber in 1996 and 1997.
(8) CapRock awarded 100,000 shares of restricted stock during 1999, all of
which such shares were awarded to Leo J. Cyr on October 18, 1999. As of
such date, the shares were valued at $2,000,000 based on a closing price of
CapRock's Common Stock as reported on the Nasdaq Stock Market's National
Market on October 15, 1999 of $20.00 per share. These shares are entitled
to receive dividends, if declared by the Board of Directors, equal to those
received by the holders of CapRock's Common Stock. As of December 31, 1999,
these shares were valued at $3,243,750 based on a closing price on such
date of $32.4375 per share.
(9) Represents amounts paid to Mr. McAleer as a consultant prior to his
employment.
(10) Includes $125,000 bonus earned from CapRock Telecommunications in fiscal
year 1997 and paid in fiscal year 1998.
Option Grants in Last Fiscal Year. The following table contains information
concerning the stock option grants made to each of our executive officers who
are named in the "Summary Compensation Table" during the fiscal year ended
December 31, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(2)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -----------------------
GRANTED(1) FISCAL YEAR PRICE DATE 5% 10%
---------- ------------ ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Jere W. Thompson, Jr........... 30,000 1.27% $ 23.25 10/01/09 $ 438,654 $ 1,111,635
Leo J. Cyr..................... 500,000 21.10% 20.00 10/18/09 7,310,900 18,527,256
Timothy M. Terrell............. 25,000 1.05% 23.25 10/01/09 365,545 926,363
Timothy W. Rogers.............. 25,000 1.05% 23.25 10/01/09 365,545 926,363
</TABLE>
- --------------------
(1) The options vest over three to five-year periods and expire on the tenth
anniversary of the date of grant.
(2) The potential realizable value is calculated based on the term of the
option at its time of grant (ten years). It is calculated assuming that the
fair market value of the Common Stock on the date of grant appreciates at
the indicated annual rate compounded annually for the entire term of the
option and that the option is exercised and sold on the last day of its
term for the appreciated stock price.
Aggregated Option Exercises and Fiscal Year-End Option Values. The
following table contains information through December 31, 1999 concerning
options held by each of our executive officers who are named in the "Summary
Compensation Table".
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1999 AT DECEMBER 31, 1999(1)
ACQUIRED VALUE --------------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE(2) UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- -------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jere W. Thompson, Jr..... 8,000 $201,504 17,000 130,000 $440,938 $2,869,375
Leo J. Cyr............... -- -- -- 500,000 -- 6,218,750
Kevin W. McAleer......... -- -- 20,000 80,000 518,750 2,075,000
Timothy M. Terrell....... -- -- 11,000 69,000 285,313 1,370,938
Timothy W. Rogers........ -- -- 12,500 75,000 324,219 1,526,563
</TABLE>
15
<PAGE> 19
- --------------
(1) Value is determined by subtracting the exercise price from the fair market
value of the Common Stock at December 31, 1999 ($32.4375 per share, based
on the closing price of such shares on the Nasdaq Stock Market's National
Market on such date), multiplied by the number of shares underlying the
options.
(2) "Exercisable" refers to those options which were vested and exercisable at
December 31, 1999, while "Unexercisable" refers to those options which were
unvested at such time.
EMPLOYMENT AGREEMENTS
In February 1998 we entered into employment agreements with each of Jere W.
Thompson, Jr. and Timothy W. Rogers, and in October 1999, we entered into an
employment agreement with Leo J. Cyr (collectively, the "Employment
Agreements"). In the first quarter of 2000, the Employment Agreement of Mr.
Rogers was amended. The following is a summary of the principal terms of the
Employment Agreements, as amended.
Each Employment Agreement is for an initial term of three years, subject to
the right of either party to terminate their agreement upon 30 days' advance
written notice. The initial term relating to Mr. Rogers' employment was extended
by the amendment to his Employment Agreement.
Mr. Thompson's Employment Agreement provides for him to serve as Chief
Executive Officer of the Company. Mr. Thompson receives an annual base salary of
$265,000 pursuant to the terms of his Employment Agreement. Mr. Cyr's Employment
Agreement provides that Mr. Cyr serve as President and Chief Operating Officer
of the Company and receive an annual base salary of $250,000, subject to
increase upon review annually by the Board of Directors. Mr. Cyr's Employment
Agreement also provides that it is intended for Mr. Cyr to serve as a director
of CapRock throughout the term of the Employment Agreement. Mr. Rogers'
Employment Agreement provides for Mr. Rogers to serve as an Executive Vice
President of the Company. Mr. Rogers receives an annual base salary of $180,000
pursuant to the terms of his Employment Agreement.
Each Employment Agreement provides that, at the discretion of the Board of
Directors, each employee may be paid bonus compensation or may be allowed to
participate in a management incentive bonus plan should we adopt one or both.
Each Employment Agreement also provides for certain insurance benefits and
provides that the employee be eligible to participate in all retirement and
other benefit plans generally available to employees of CapRock and any equity
or other employee benefit plan of CapRock that is generally available to senior
executive officers of CapRock. In addition, each Employment Agreement provides
for certain payments and benefits if the employee is terminated without cause or
due to death or permanent disability.
Each Employment Agreement generally provides that the employee will keep
confidential certain non-public information regarding our company and further
provides that, during the period after termination of employment specified
therein (generally two years), the employee will not, subject to certain
exceptions, own, manage, control, or participate in the ownership, management or
control of, or be employed by or otherwise associated with, or receive
compensation from or otherwise engage in any business in which we are engaged in
during such restricted period, including the provision of local and long
distance telecommunications services. The restricted territory under each
Employment Agreement is generally the entire United States, but in certain cases
is limited to certain Southern states. Each employee further agrees that during
the restricted period he will not (1) solicit or engage the business of any of
our clients or our clients of our affiliates or (2) solicit any of our employees
or employees of our affiliates to terminate any relationship that person may
have with us or our affiliates or engage, employ or compensate any of our
employees or employees of our affiliates.
16
<PAGE> 20
In May 1998, CapRock entered into an employment agreement with Kevin W.
McAleer, with such employment agreement providing for an initial term of one
year as well as other similar provisions as those set forth above. Mr.
McAleer's employment agreement provided that he serve as CapRock's Senior Vice
President and Chief Financial Officer. Mr. McAleer's employment agreement
expired in May 1999, however, Mr. McAleer continues to serve as CapRock's
Senior Vice President and Chief Financial Officer (Mr. McAleer also serves as
our Treasurer and Secretary).
In February 1998, CapRock entered into an employment agreement with Timothy
M. Terrell, who was serving as an Executive Vice President of CapRock at such
time, with such employment agreement providing for an initial term of three
years as well as other similar provisions as those set forth above. In February
2000, Mr. Terrell's employment agreement was amended and, in connection
therewith, Mr. Terrell is employed by but no longer serves as an executive
officer of CapRock.
INDEBTEDNESS OF MANAGEMENT
See "Certain Relationships and Related Transactions" above.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires CapRock's officers and
directors, and persons who own more than ten percent of a registered class of
CapRock's equity securities, to file reports of ownership on Form 3 and changes
in ownership on Form 4 or Form 5 with the SEC. Such officers, directors and ten
percent stockholders are also required by SEC rules to furnish CapRock with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
CapRock believes that, during the fiscal year ended December 31, 1999, CapRock's
officers, directors and ten percent shareholders complied with all applicable
Section 16(a) filing requirements, except that Jere W. Thompson, Jr. reported an
option exercise late in a Form 5 filed on February 11, 2000.
17
<PAGE> 21
AMENDMENT OF THE 1998 EQUITY INCENTIVE PLAN
(ITEM 2)
The Board of Directors and shareholders initially adopted the CapRock
Communications Corp. 1998 Equity Incentive Plan (the "Equity Incentive Plan") in
1998 to provide a means by which selected employees of and consultants to the
Company and its affiliates may be given an opportunity to acquire a proprietary
interest in the Company. The Equity Incentive Plan was amended by a First
Amendment in October 1999.
The Board of Directors believes that the granting of awards under the
Equity Incentive Plan is an effective method of recruiting and retaining
valuable employees of the Company. An increase in the aggregate number of shares
of Common Stock reserved for issuance under the Equity Incentive Plan is
necessary to continue the Company's efforts to attract and retain qualified key
executives, directors and other personnel.
On April 24, 2000, the Board of Directors approved (subject to the
approval of the amendment by the shareholders at the 2000 Annual Meeting) the
Second Amendment to the Equity Incentive Plan to increase the number of shares
reserved for issuance under the Equity Incentive Plan (as described in more
detail below under "--Shares Subject to the Plan, General Terms").
The affirmative vote of the holders of a majority of CapRock's Common
Stock represented and voting at the meeting will be required to approve and
ratify such amendment to the Equity Incentive Plan. The Board of Directors
recommends voting "FOR" approval of such amendment to the Equity Incentive Plan.
The following is a summary of certain principal features of the Equity
Incentive Plan, as amended. This summary is qualified in its entirety by
reference to the complete text of the Equity Incentive Plan, as amended, which
is attached to this proxy statement as Appendix A. Shareholders are urged to
read the actual text of the Equity Incentive Plan in its entirety.
THE EQUITY INCENTIVE PLAN
The Equity Incentive Plan provides for the awards of (1) stock options,
(2) stock appreciation rights, (3) restricted stock, (4) deferred stock, (5)
stock reload options and (6) other stock-based awards (collectively, "Awards").
Our employees and consultants and the employees of and consultants to our
subsidiaries are eligible to participate in the Equity Incentive Plan.
ADMINISTRATION
The Equity Incentive Plan generally is administered by our Compensation
Committee. The Committee has full authority, subject to the provisions of the
Equity Incentive Plan, to determine the persons to whom from time to time Awards
may be granted ("Participants"), the specific type of Awards to be granted
(e.g., stock options, restricted stock, etc.), the number of shares subject to
each Award, share prices, any restrictions or limitations on such Awards and any
vesting, exchange, deferral, surrender, cancellation, acceleration, termination,
exercise or forfeiture provisions related to such Awards. The Committee has
complete discretion to make all decisions relating to the interpretation,
administration and operation of the Equity Incentive Plan.
SHARES SUBJECT TO THE PLAN, GENERAL TERMS
Prior to the amendment, the Equity Incentive Plan authorized the
granting of Awards which allowed up to an aggregate of 5,000,000 shares of
Common Stock to be acquired by the Participants. As amended, the Equity
Incentive Plan will authorize the granting of Awards to Participants to acquire
up to an aggregate of that number of shares equal to 20% of the shares of Common
Stock of the Company issued and outstanding (such determination as to the number
of shares available for grant to be made on June 1, 2000 and October 1, 2000
and, in each calendar year thereafter, as of January 1, April 1, July 1 and
October 1 of each such year for which the Equity Incentive Plan is in effect)
but not to exceed, in any event, 50,000,000 shares, subject to adjustment. The
Equity Incentive Plan provides that a maximum of 2,500,000 shares of Common
Stock may be issued to any one Participant. In order to prevent dilution or
enlargement of the
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rights of Participants under the Equity Incentive Plan, the number of shares of
Common Stock authorized by the Equity Incentive Plan is subject to adjustment by
the Board if any increase or decrease in the number of shares of outstanding
Common Stock results from a stock dividend, stock split, reverse stock split,
merger, reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Common Stock. If any shares granted under the
Equity Incentive Plan are forfeited or terminated, these shares will again be
available for distribution of Awards subsequently granted. As of December 31,
1999 we have granted 4,030,190 options under the Equity Incentive Plan and these
options generally vest over three to five years. As of December 31, 1999,
453,620 of the options granted were forfeited and canceled, 76,300 options
granted were exercised and 3,500,270 of the options were outstanding. As of
December 31, 1999, we have also granted a total of 100,000 shares of Restricted
Stock. The remaining Awards available for future grant as of December 31, 1999
was 1,423,430, and no determination has been made as to the number of Awards
that may be allocated to the individuals named in the Summary Compensation
Table, current executive officers as a group, current directors who are not
executive officers as a group, or all employees (including all current officers
who are not executive officers) as a group, as a result of the amendment as set
forth herein.
ELIGIBILITY
Subject to the provisions of the Equity Incentive Plan, Awards may be
granted to key employees, officers, directors, consultants and other
Participants who have rendered or are expected to render significant services to
us or our subsidiaries. Incentive stock options may be awarded only to our
employees or employees of our subsidiaries at the time the award is granted.
TYPES OF AWARDS
Stock Options. Options granted under the Equity Incentive Plan may be
either options that are intended to qualify for treatment as "incentive stock
options" under Section 422 of the Code ("Incentive Stock Options") or options
that are not, which are non-qualified stock options ("Non-Statutory Stock
Options"). The exercise price of Incentive Stock Options must be at least the
fair market value of a share of the Common Stock on the date of grant, and not
less than 110% of the fair market value in the case of an Incentive Stock Option
granted to an optionee owning 10% or more of the Common Stock. The exercise
price of Non-Statutory Stock Options may be less than 100% of the fair market
value of a share of the Common Stock on the date of grant.
The term of an option may not exceed ten years (or five years in the
case of an Incentive Stock Option granted to an optionee owning 10% or more of
the Common Stock). Options may be granted that may be exercised in whole or in
part upon certain defined events causing a "change of control." The accelerated
vesting of outstanding options upon the occurrence of such a "change in control"
transaction could have the effect of delaying, deferring, or preventing a change
in control of our company.
Stock Appreciation Rights. The Committee may grant stock appreciation
rights ("SARs" or singularly "SAR") in conjunction with all or part of any stock
option granted under the Equity Incentive Plan or may grant SARs on a
freestanding basis. If granted in conjunction with Non-Statutory Stock Options,
SARs may be granted either at or after the time of the grant of the
Non-Statutory Stock Options. If granted in conjunction with Incentive Stock
Options, SARs may be granted only at the time of the grant of an Incentive Stock
Option. An SAR entitles the holder to receive an amount (payable in cash and/or
Common Stock, as determined by the Committee) equal to the fair market value of
one share of Common Stock over the SAR price or the exercise price of the
related Option, multiplied by the number of shares subject to the SAR.
Restricted Stock Awards. The Committee may award shares of restricted
stock ("Restricted Stock") either alone or in addition to other Awards granted
under the Equity Incentive Plan. The Committee shall determine the restricted
period during which the shares of stock may be forfeited if, for example, the
Participant's employment is terminated. In order to enforce the forfeiture
provisions, the Equity Incentive Plan requires that all shares of Restricted
Stock awarded to the Participant remain in our physical custody until the
restrictions on these shares have terminated.
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Deferred Stock. The Committee may award shares of deferred stock
("Deferred Stock") either alone or in addition to other Awards granted under the
Equity Incentive Plan. The Committee shall determine the deferral period during
which time the receipt of the stock is deferred. The Award may specify, for
example, that the Participant must remain employed during the entire deferral
period in order to be issued the stock.
Stock Reload Options. The Committee may grant stock reload options with
any option granted under the Equity Incentive Plan. Stock reload options may be
granted only at the time of the grant of an Incentive Stock Option or, in the
case of a Non-Statutory Stock Option, either at or after the time of the grant
of a Non-Statutory Stock Option. A stock reload option permits a Participant who
exercises an option by delivering already owned stock (i.e., the stock-for-stock
method) to receive back from us a new option, at the current market price, for
the same number of shares delivered to exercise the option. The new option may
not be exercised until one year after it was granted and expires on the date the
original option would have expired had it not been previously exercised.
Other Stock-Based Awards. The Committee may grant performance shares
and shares of stock valued by our performance. Performance grants may be made
either alone or in addition to or in tandem with stock options, restricted stock
or deferred stock. Subject to the terms of the Equity Incentive Plan, the
Committee has complete discretion to determine the terms and conditions
applicable to any such stock-based awards. Terms and conditions of Awards may
require continued employment or the attainment of specified performance
objectives or both.
TERMINATION OF AWARDS
Generally, no option, or any portion thereof, granted under the Equity
Incentive Plan may be exercised by the holder later than three months following
the date of termination of such holder's employment or consulting relationship
with CapRock or any affiliate and may terminate earlier. However, if the
holder's status as an employee with or consultant to CapRock or its affiliates
is terminated due to the death or disability of the holder prior to termination
of the holder's right to exercise the option in accordance with the provisions
of the holder's stock option agreement, without having totally exercised the
option, the option may be exercised, to the extent to which the option could
have been exercised by the holder on the date of the holder's termination, by
(1) the holder's estate or by the person who acquired the right to exercise the
option by bequest or inheritance, in the event of the holder's death, or (2) the
holder or his or her personal representative, in the event of the holder's
disability; provided in either case that the option is exercised not more than
twelve (12) months (or such shorter period specified in the option agreement
granting such option) from the date of the holder's termination, but in no event
later than the expiration date of such option. If holder's disability is not a
"disability" as such term is defined in Section 22(e)(3) of the Code, then in
the case of an Incentive Stock Option such Incentive Stock Option will
automatically cease to be treated for tax purposes as an Incentive Stock Option
and will instead be treated for tax purposes as a Non-Statutory Stock Option on
the day that is three months and one day following such termination.
TERM AND TERMINATION OF THE EQUITY INCENTIVE PLAN
The Equity Incentive Plan became effective upon shareholder approval on
August 24, 1998. Unless terminated by the Board of Directors, the Equity
Incentive Plan will continue to remain effective until no further Awards may be
granted and all Awards granted under the Equity Incentive Plan are no longer
outstanding. Grants of Incentive Stock Options may only be made during the
ten-year period from August 24, 1998.
AMENDMENTS TO THE PLAN
The Board of Directors may amend or terminate the Equity Incentive Plan
as long as no amendment or termination affects Awards previously granted. If the
Board of Directors amends the plan, shareholder approval will be sought only if
required by an applicable law.
FEDERAL TAX CONSEQUENCES
The following is a general discussion of the principal federal income
tax consequences under the Equity Incentive Plan. Because the United States
federal income tax rules governing options and related payments are
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complex and subject to change, optionees are advised to consult their tax
advisors prior to exercise of options or dispositions of stock acquired pursuant
to option exercise. The Equity Incentive Plan does not constitute a qualified
retirement plan under Section 401(a) of the Code (which generally covers trusts
forming part of a stock bonus, pension or profit-sharing plan funded by the
employer and/or employee contributions which are designed to provide retirement
benefits to participants under certain circumstances) and is not subject to the
Employee Retirement Income Security Act of 1974 (the pension reform law which
regulates most types of privately funded pension, profit sharing and other
employee benefit plans).
Consequences to Employees: Incentive Stock Options. No income is
recognized for federal income tax purposes by an optionee at the time an
Incentive Stock Option is granted, and, except as discussed below, no income is
recognized by an optionee upon his or her exercise of an Incentive Stock Option.
If the optionee disposes of the shares received upon exercise after two years
from the date such option was granted and after one year from the date such
option is exercised, the difference between the exercise price of the option and
the amount received for the shares at the time of disposition will be taxable
at long-term capital gain rates. If the optionee disposes of shares acquired
upon exercise of an Incentive Stock Option within two years after being granted
the option or within one year after acquiring the shares, any amount realized
from such disqualifying disposition will be taxable at ordinary income rates in
the year of disposition to the extent that (i) the lesser of (a) the fair market
value of the shares on the date the Incentive Stock Option was exercised or (b)
the fair market value at the time of such disposition exceeds (ii) the Incentive
Stock Option exercise price. Any amount realized upon disposition in excess of
the fair market value of the shares on the date of exercise will be treated as
short-term or long-term capital gain, depending upon the length of time the
shares have been held. The use of stock acquired through exercise of an
Incentive Stock Option to exercise an Incentive Stock Option will constitute a
disqualifying disposition if the applicable holding period requirements have not
been satisfied. For alternative minimum tax purposes, the excess of the fair
market value of the stock as of the date of exercise over the exercise price is
included in the optionee's alternative minimum taxable income for the year of
exercise. However, if the shares are disposed of in the same year, the maximum
alternative minimum taxable income with respect to those shares is the gain on
disposition.
Consequences to Employees: Non-Statutory Stock Options. An optionee
recognizes no income at the time Non-Statutory Stock Options are granted under
the Equity Incentive Plan. In general, at the time shares are issued to an
optionee pursuant to exercise of Non-Statutory Stock Options, the optionee will
recognize income taxable at ordinary income tax rates equal to the excess of the
fair market value of the shares on the date of exercise over the exercise price
of such shares. An optionee will recognize gain or loss on the subsequent sale
of shares acquired upon exercise of a Non-Statutory Stock Options in an amount
equal to the difference between the selling price and the tax basis of the
shares, which will include the price paid plus the amount included in the
optionee's taxable income by reason of the exercise of the Non-Statutory Stock
Options. Provided the shares are held as a capital asset, any gain or loss
resulting from a subsequent sale will be short-term or long-term capital gain or
loss depending upon the length of time the shares have been held.
Consequences to Company: Incentive Stock Options. The Company will not
be allowed a deduction for federal income tax purposes at the time of the grant
or exercise of an Incentive Stock Option. There are also no United States
federal income tax consequences to the Company as a result of the disposition of
shares acquired upon exercise of an Incentive Stock Option if the disposition is
not a disqualifying disposition. At the time of a disqualifying disposition by
an optionee, the Company will be entitled to a deduction for the amount received
by ordinary income tax rates.
Consequences to Company: Non-Statutory Stock Options. The Company
generally will be entitled to a deduction for United States federal income tax
purposes in the same year and in the same amount as the optionee is considered
to have recognized income taxable at ordinary income tax rates in connection
with the exercise of Non-Statutory Stock Options. In certain instances, the
Company may be denied a deduction for compensation attributable to awards
granted to certain officers of the Company to the extent such compensation
exceeds $1,000,000 in a given year.
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RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(ITEM 3)
The Board of Directors has selected KPMG LLP, independent accountants, to
audit the books, records and accounts of CapRock for the fiscal year ending
December 31, 2000. KPMG LLP has audited CapRock's financial statements beginning
with the fiscal year ended December 31, 1997, and the financial statements of
IWL Communications, one of its predecessor companies, for the four fiscal years
ended June 30, 1997.
The affirmative vote of the holders of a majority of CapRock's Common Stock
represented and voting at the meeting will be required to approve and ratify the
Board's selection of KPMG LLP. The Board of Directors recommends voting "FOR"
approval and ratification of such selection. In the event of a negative vote on
such ratification, the Board of Directors will reconsider its selection.
A representative of KPMG LLP is expected to be available at the Annual
Meeting to make a statement if such representative desires to do so and to
respond to appropriate questions.
On January 20, 1998, Burds, Reed & Mercer, P.C. resigned as the independent
certified public accountants of CapRock Telecommunications and CapRock Fiber,
two of CapRock's predecessor companies. On the same day, the Board of Directors
of CapRock Telecommunications and the Board of Directors of the general partner
of CapRock Fiber approved the appointment of KPMG LLP to replace Burds, Reed &
Mercer, P.C. as independent certified public accountants. As a result, Burds,
Reed & Mercer, P.C. did not perform the audit of the financial statements of
CapRock Telecommunications or CapRock Fiber for the fiscal year ended December
31, 1997. The accountant's report on the financial statements for the fiscal
year ended December 31, 1996 did not contain any adverse opinion or disclaimer
of opinion or qualification or modification as to uncertainty, audit scope, or
accounting principles. During CapRock Telecommunications' and CapRock Fiber's
fiscal years ended December 31, 1995 and 1996, and through the date of their
replacement, there have been no disagreements between CapRock Telecommunications
or CapRock Fiber and Burds, Reed & Mercer, P.C. on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures and there were no "reportable events," as that term is defined in
item 304(a)(1)(v) of Regulation S-K under the Securities Act.
OTHER MATTERS
Management does not intend to bring before the meeting any matters other
than those set forth herein, and has no present knowledge that any other matters
will or may be brought before the meeting by others. However, if any other
matters properly come before the meeting, it is the intention of the persons
named in the enclosed form of Proxy to vote the Proxies in accordance with their
judgment.
CapRock has borne the cost of preparing, assembling and mailing this proxy
solicitation material. CAPROCK WILL PROVIDE WITHOUT CHARGE A COPY OF CAPROCK'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999,
INCLUDING THE FINANCIAL STATEMENTS, TO EACH SHAREHOLDER UPON WRITTEN REQUEST TO
INVESTOR RELATIONS, CAPROCK COMMUNICATIONS CORP., 15601 DALLAS PARKWAY, SUITE
700, DALLAS, TEXAS 75001.
By Order Of The Board of Directors
Kevin W. McAleer
Secretary
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APPENDIX A
CAPROCK COMMUNICATIONS CORP.
1998 EQUITY INCENTIVE PLAN
Adopted August 24, 1998
1. PURPOSE OF THE PLAN.
The purpose of the Plan is to provide a means by which selected
Employees of and Consultants to the Company and its Affiliates may be given an
opportunity to acquire a proprietary interest in the Company. Under the Plan,
the Company may provide various types of long-term incentive awards, including
Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock,
Stock Reload Options and Other Stock-Based Awards, in order to retain the
services of persons who are now Employees of or Consultants to the Company and
its Affiliates, to secure and retain the services of new Employees and
Consultants, and to provide incentives for such persons to exert maximum efforts
for the success of the Company and its Affiliates. Stock Options granted under
the Plan may be Incentive Stock Options or Nonqualified Stock Options, as
determined by the Committee at the time of grant of an Option and subject to the
applicable provisions of Section 422 of the Code and the regulations promulgated
thereunder.
2. DEFINITIONS.
As used herein, the following definitions shall apply:
(a) "Affiliate" means, with respect to any Person, any Parent or
Subsidiary of such Person, whether such Parent or Subsidiary is now or hereafter
existing.
(b) "Agreement" means the agreement between the Company and the Holder
setting forth the terms and conditions of an Award under the Plan.
(c) "Applicable Laws" means the legal requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code and the applicable laws of any
foreign country or jurisdiction where Options are, or will be, granted under the
Plan.
(d) "Award" means an award of Options, Stock Appreciation Rights,
Restricted Stock, Deferred Stock, Stock Reload Options or Other Stock-Based
Awards under the Plan.
(e) "Beneficial Owner" means a "beneficial owner" as defined in Rule
13d-3 of the Exchange Act.
(f) "Board" means the Board of Directors of the Company.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
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(h) "Change of Control" means the occurrence at any time after the
effective time of the Mergers of (i) any Person or Group of Persons becoming for
the first time the Beneficial Owner, directly or indirectly, of more than fifty
percent (50%) of the total combined voting power of all classes of capital stock
of the Company normally entitled to vote for the election of directors of the
Company ("Voting Stock"), other than as a result of a transfer or series of
related transfers of Voting Stock from a Person or Group of Persons who
immediately prior to such transfer or transfers was the Beneficial Owner, and
who after giving effect to such transfer or transfers continues to be the
Beneficial Owner, of more than fifty percent (50%) of the Voting Stock of the
Company; (ii) a merger (other than the Mergers) or consolidation of the Company
with or into another Person or the merger of another Person into the Company as
a consequence of which those Persons who held all of the Voting Stock of the
Company immediately prior to such merger or consolidation do not hold either
directly or indirectly a majority of the Voting Stock of the Company (or, if
applicable, the surviving company of such merger or consolidation) after the
consummation of such merger or consolidation; (iii) the sale of all or
substantially all of the assets of the Company to any Person or Group of Persons
(other than to an entity which owns a majority or more of the Common Stock of
the Company, a Subsidiary of the Company, or to an entity whose equity interests
are owned directly or indirectly by the Company or by an entity which owns
directly or indirectly a majority or more of the Common Stock of the Company);
or (iv) any event or series of events (which event or series of events must
include a proxy fight or proxy solicitation with respect to the election of
directors of the Company made in opposition to the nominees recommended by the
Continuing Directors) during any period of 12 consecutive months all or any
portion of which is after the effective time of the Mergers, as a result of
which a majority of the Board of Directors of the Company consists of
individuals other than Continuing Directors; provided, however, that a "Change
of Control" shall not be deemed to have occurred as a result of the Mergers.
(i) "Committee" means the Compensation Committee of the Board of
Directors.
(j) "Common Stock" means the Common Stock, par value $.01 per share, of
the Company.
(k) "Company" means CapRock Communications Corp.
(l) "Consultant" means (i) any person who is engaged by the Company or
any Parent or Subsidiary to render consulting or advisory services and is
compensated for such services and (ii) any Director of the Company, whether such
Director is compensated for such services or not.
(m) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship with the Company or any Affiliate is not
interrupted or terminated. Continuous Status as an Employee or Consultant shall
not be considered interrupted in the case of (i) any leave of absence approved
by the Company or (ii) transfers between locations of the Company or between the
Company or any Affiliate or any successor. A leave of absence approved by the
Company shall include sick leave, military leave, or any other personal leave
approved by an authorized representative of the Company. For purposes of
Incentive Stock Options, no such leave may exceed
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90 days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract. If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, on the 91st day of such leave any
Incentive Stock Option held by the Holder shall cease to be treated for tax
purposes as an Incentive Stock Option and shall be treated for tax purposes as a
Nonqualified Stock Option.
(n) "Deferred Stock" means Stock to be received at the end of a
specified deferral period under an Award made pursuant to Section 10 below.
(o) "Director" means a member of the Board of Directors of the Company.
(p) "Employee" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. The payment of a
Director's fee by the Company shall not be sufficient to constitute "employment"
by the Company.
(q) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(r) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq
Stock Market, its Fair Market Value shall be the closing sales price
for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or system for the last market trading day prior
to the time of determination, as reported in The Wall Street Journal or
such other source as the Committee deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean between the high bid and low asked prices for
the Common Stock on the last market trading day prior to the day of
determination; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith
by the Committee.
(s) "Group" means a "group" as such term is used in Section 13(d)(3) of
the Exchange Act.
(t) "Holder" means a person who has received an Award under the Plan.
(u) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
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(v) "Mergers" means the proposed combination of the businesses of
CapRock Telecommunications Corp., CapRock Fiber Network, Ltd., and IWL
Communications contemplated by the Agreement and Plan of Merger and Plan of
Exchange entered into on February 16, 1998.
(w) "Nonqualified Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.
(x) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(y) "Option" means a Stock Option granted pursuant to the Plan.
(z) "Option Agreement" shall mean the written option agreement,
substantially in the form attached hereto as Exhibit A(or such other form as may
be approved by the Committee for use under the Plan pursuant to Section 3(b)(v)
hereof), between the Company and Holder evidencing the grant of an Option.
(aa) "Optioned Stock" means the Common Stock subject to an Option.
(bb) "Other Stock-Based Awards" means awards (other than Stock Options,
Stock Appreciation Rights, Restricted Stock, Deferred Stock and Stock Reload
Options) denominated or payable in, valued in whole or in part by reference to,
or otherwise based on, or related to shares of Common Stock.
(cc) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(dd) "Person" means an individual or entity.
(ee) "Plan" means this 1998 Equity Incentive Plan.
(ff) "Restricted Stock" means Stock, received under an Award made
pursuant to Section 9 below, that is subject to restrictions under said Section
9.
(gg) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act
or any successor rule thereto.
(hh) "Section 16(b)" means Section 16(b) of the Exchange Act.
(ii) "SAR Value" means the excess of the Fair Market Value of one share
of Common Stock over the exercise price per share specified in a related Stock
Option in the case of a Stock Appreciation Right granted in tandem with a Stock
Option and the Stock Appreciation Right price per share in the case of a Stock
Appreciation Right awarded on a free standing basis, in each case
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multiplied by the number of shares in respect of which the Stock Appreciation
Right shall be exercised, on the date of exercise.
(jj) "Share" means a share of the Common Stock of the Company.
(kk) "Stock" means the Common Stock of the Company.
(ll) "Stock Appreciation Right' means the right, pursuant to an Award
granted under Section 8 hereof, to recover an amount equal to the SAR Value.
(mm) "Stock Option" means any Option to purchase shares of Stock which
is granted pursuant to the Plan.
(nn) "Stock Reload Option" means any option granted under Section 7(e)
as a result of the payment of the exercise price of a Stock Option and/or the
withholding tax related thereto in the form of Stock owned by the Holder or the
withholding of Stock by the Company.
(oo) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code, including without
limitation, in the case of the Company, IWL Communications, Incorporated and
CapRock Telecommunications Corp. (f/k/a CapRock Communications Corp.) and
including without limitation CapRock Fiber Network, Ltd.
(pp) "Tandem Stock Appreciation Right" means a Stock Appreciation Right
granted in tandem with all or part of any Stock Option granted under the Plan.
3. ADMINISTRATION OF THE PLAN.
(a) Plan Administration. The Plan at all times shall be administered by
the Committee, which shall be comprised solely of not less than two members who
shall be (i) "Non-Employee Directors" within the meaning of Rule 16b-3 and (ii)
unless otherwise determined by the Board of Directors, "outside directors"
within the meaning of Treasury Regulation Section 1.162-27(e)(3) under Section
162(m) of the Code.
(b) Powers of the Committee. Subject to the provisions of the Plan and
subject to the approval of any relevant authorities, including the approval, if
required, of any stock exchange upon which the Common Stock is listed, the
Committee shall have the full authority to award: (i) Stock Options, (ii) Stock
Appreciation Rights, (iii) Restricted Stock, (iv) Deferred Stock, (v) Stock
Reload Options and/or (vi) Other Stock-Based Awards. For purposes of
illustration and not of limitation, the Committee shall have the authority
(subject to the express provisions of the Plan):
(i) to determine the Fair Market Value of the Common Stock;
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(ii) to select the Consultants and Employees to whom Awards
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Awards or any
combination thereof are granted hereunder;
(iv) to determine the number of Shares to be covered by each
such Award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Award granted hereunder. Such terms
and conditions include, but are not limited to, the exercise price of
an Option; any specified performance goals or other criteria which must
be attained for the vesting of an Award; any restrictions or
limitations; and any vesting, exchange, surrender, cancellation,
acceleration, termination, exercise or forfeiture provisions; and
(vii) to construe and interpret the terms of the Plan and
Awards granted pursuant to the Plan.
(c) Effect of Committee's Decision. All decisions, determinations and
interpretations of the Committee shall be final and binding on all Holders of
any Awards. No member of the Board or any Committee administering the Plan shall
be liable for any action taken or determination made in good faith with respect
to the Plan or any Option granted hereunder.
4. STOCK SUBJECT TO THE PLAN.
The maximum aggregate number of Shares that may be acquired by Holders
of any Awards granted under the Plan is 5,000,000 Shares and the maximum number
of Shares that may be acquired by an individual Holder under the Plan shall not
exceed 2,500,000 (in each case subject to adjustment as provided in Section 12
of the Plan). The Shares may be authorized but unissued or reacquired Common
Stock.
If any shares of Stock that have been granted pursuant to a Stock
Option cease to be subject to a Stock Option, or if any shares of Stock that are
subject to any Stock Appreciation Right, Restricted Stock, Deferred Stock award,
Reload Stock Option or Other Stock-Based Award granted hereunder are forfeited
or any such award otherwise terminates without a payment being made to the
Holder in the form of Stock, such shares shall again be available for
distribution in connection with future grants and awards under the Plan. Only
net shares issued upon a stock-for-stock exercise (including stock used for
withholding taxes) shall be counted against the number of shares available under
the Plan.
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5. ELIGIBILITY.
(a) Awards may be made or granted to key employees, officers, directors
and consultants of the Company who are deemed to have rendered or to be able to
render significant services to the Company or its Subsidiaries and who are
deemed to have contributed or to have the potential to contribute to the success
of the Company. No Incentive Stock Option shall be granted to any person who is
not an employee of the Company or a Subsidiary at the time of grant.
(b) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonqualified Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company or any Affiliate) exceeds $100,000, such Options shall
be treated for tax purposes as Nonqualified Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. For purposes of this Section 5(b), the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
(c) Neither the Plan nor any Award shall confer upon any Holder any
right with respect to continuation of his or her employment or consulting
relationship with the Company or any Affiliate, nor shall it interfere in any
way with his or her right or the Company's right to terminate his or her
employment or consulting relationship at any time, with or without cause.
6. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per Share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Committee, but
in the case of an Incentive Stock Option:
(i) granted to an Employee who, at the time of grant of such
Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Affiliate,
the per Share exercise price shall not be less than 110% of the Fair
Market Value per Share on the date of grant; and
(ii) granted to any other Employee, the per Share exercise
price shall not be less than 100% of the Fair Market Value per Share on
the date of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Committee (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration shall be paid, to the
extent permitted by applicable statutes and regulations at the time the Option
is exercised, either (i) in cash or check, or (ii) at the discretion of the
Committee, in one or a combination of the following ways (which may be in
combination with or in lieu of payment by cash or check): (A) by delivery to the
Company of other Shares of Common Stock of the Company to be valued at their
Fair
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Market Value on the exercise date, (B) according to a deferred payment or other
arrangement with the Person to whom the Option is granted or to whom the Option
is transferred pursuant to Section 15, (C) withholding of Shares that would
otherwise be issued upon the exercise of the Option, valued at their Fair Market
Value on the exercise date, or (D) in any other form of legal consideration that
may be acceptable to the Committee. In making its determination as to the type
of consideration to accept, the Committee shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company. In addition,
such consideration shall be accompanied by the delivery by the Optionee of a
properly executed exercise notice together with such other documentation as the
Committee and a broker, if applicable, shall require to effect an exercise of
the Option and delivery to the Company of the sale or loan proceeds required to
pay the exercise price.
7. EXERCISE OF OPTION.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Committee, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan. The total number of Shares subject to an Option may, but need not, be
allotted in periodic installments (which may, but need not, be equal). The
Option Agreement may provide that from time to time during each of such
installment periods, the Option may become exercisable with respect to some or
all of the Shares allotted to that period and may be exercised with respect to
some or all of the Shares allotted to such period and/or any prior period as to
which the Option became vested but was not fully exercised.
An Option may not be exercised for a fraction of a Share. Exercise of
an Option in any manner shall result in a decrease in the number of Shares that
thereafter may be available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
Subject to Section 18, an Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Option Agreement by the Person entitled to exercise the Option
and full payment for the Shares with respect to which the Option is exercised
has been received by the Company. To the extent required by applicable federal,
state, local or foreign law, an Optionee shall make arrangements satisfactory to
the Company for the satisfaction of any withholding tax obligations that arise
by reason of an Option exercise or any sale of Shares, which obligations may, as
authorized by the Committee, consist of any consideration and method of payment
allowable under Section 6(b) hereof. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote, receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly upon
exercise of the Option. No adjustment shall be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 12 hereof.
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(b) Termination of Employment or Consulting Relationship. Subject to
paragraph (c) below, in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant, such Optionee may exercise his or her
Option to the extent that the Optionee was entitled to exercise it at the date
of such termination; provided, however, that such Option may be exercised only
within such period of time as is determined by the Committee at the date of
grant. Such time period shall not, in the case of an Incentive Stock Option,
exceed three (3) months after the date of such termination and shall not, in any
case, be later than the expiration date of the term of such Option as set forth
in the Option Agreement. To the extent that the Optionee was not entitled to
exercise the Option at the date of such termination, or if the Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan. An Optionee's Continuous Status as an Employee or Consultant shall
not be terminated in the event of Optionee's change of status from an Employee
to a Consultant or from a Consultant to an Employee; provided, however, that in
the event of an Optionee's change of status from an Employee to a Consultant,
any Incentive Stock Option granted to such Employee shall automatically cease to
be treated for tax purposes as an Incentive Stock Option and shall be treated
for tax purposes as a Nonqualified Stock Option on the day three months and one
day following such change of status.
(c) Disability of Optionee. In the event of termination of an
Optionee's Continuous Status as an Employee or Consultant as a result of his or
her disability, the Optionee may, but only within twelve (12) months from the
date of such termination (and in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement), exercise the Option
to the extent he or she otherwise was entitled to exercise it at the date of
such termination. If such disability is not a "disability" as such term is
defined in Section 22(e)(3) of the Code, then in the case of an Incentive Stock
Option such Incentive Stock Option shall automatically cease to be treated for
tax purposes as an Incentive Stock Option and shall be treated for tax purposes
as a Nonqualified Stock Option on the day three months and one day following
such termination. To the extent that the Optionee was not entitled to exercise
the Option at the date of termination, or if the Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement) by the Optionee's estate or by any
Person who acquired the right to exercise the Option by bequest or inheritance
(the "Option Beneficiary"), but only to the extent that the Optionee was
entitled to exercise the Option on the date of death. To the extent that, at the
time of death, the Optionee was not entitled to exercise the Option, or if the
Option Beneficiary does not exercise the Option within the time specified
herein, the Option shall terminate and the Shares covered by such Option shall
revert to the Plan.
(e) Stock Reload Option. The Committee may also grant to the Holder
(concurrently with the grant of an Incentive Stock Option and at or after the
time of grant in the case of a Non-Qualified Stock Option) a Stock Reload Option
up to the amount of shares of Stock held by the
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Holder for at least six months and used to pay all or part of the exercise price
of an Option and, if any, withheld by the Company as payment for withholding
taxes. Such Stock Reload Option shall have an exercise price of the Fair Market
Value as of the date of the Stock Reload Option grant. Unless the Committee
determines otherwise, a Stock Reload Option may be exercised commencing one year
after it is granted and shall expire on the date of expiration of the Option to
which the Stock Reload Option is related.
8. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
tandem with (i.e., Tandem Stock Appreciation Right) or in conjunction with all
or part of any Stock Option granted under the Plan or may be granted on a
free-standing basis. In the case of a Non-Qualified Stock Option, a Tandem Stock
Appreciation Right may be granted either at or after the time of the grant of
such Non-Qualified Stock Option. In the case of an Incentive Stock Option, a
Tandem Stock Appreciation Right may be granted only at the time of the grant of
such Incentive Stock Option.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
the following terms and conditions:
(i) Exercisability. Tandem Stock Appreciation Rights shall be
exercisable only at such time or times and to the extent that the Stock
Options to which they relate shall be exercisable in accordance with
the provisions of Section 7 hereof and this Section 8 and may be
subject to the Code with respect to related Incentive Stock Options and
such additional limitations on exercisability as shall be determined by
the Committee and set forth in the Agreement. Other Stock Appreciation
Rights shall be exercisable at such time or times and subject to such
terms and conditions as shall be determined by the Committee and set
forth in the Agreement.
(ii) Termination. A Tandem Stock Appreciation Right shall
terminate and shall no longer be exercisable upon the termination or
exercise of the related Stock Option, except that, unless otherwise
determined by the Committee at the time of grant, a Tandem Stock
Appreciation Right granted with respect to less than the full number of
shares covered by a related Stock Option shall not be reduced until
after the number of shares remaining under the related Stock Option
equals the number of shares covered by the Tandem Stock Appreciation
Right.
(iii) Method of Exercise. A Tandem Stock Appreciation Right
may be exercised by a Holder by surrendering the applicable portion of
the related Stock Option. Upon such exercise and surrender, the Holder
shall be entitled to receive such amount in the form determined
pursuant to Section 8(b)(iv) below. Stock Options which have been so
surrendered, in whole or in part, shall no longer be exercisable to the
extent the related Tandem Stock Appreciation Rights have been
exercised.
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(iv) Receipt of SAR Value. Upon the exercise of a Stock
Appreciation Right, a Holder shall be entitled to receive up to, but
not more than, an amount in cash and/or shares of Stock equal to the
SAR Value with the Committee having the right to determine the form of
payment.
(v) Shares Affected Upon Plan. Upon the exercise of a Tandem
Stock Appreciation Right, the Stock Option or part thereof to which
such Tandem Stock Appreciation Right is related shall be deemed to have
been exercised for the purpose of the limitation set forth in Section 4
hereof on the number of shares of Common Stock to be issued under the
Plan, but only to the extent of the number of shares, if any, issued
under the Tandem Stock Appreciation Right at the time of exercise based
upon the SAR Value.
9. RESTRICTED STOCK.
(a) Grant. Shares of Restricted Stock may be awarded either alone or in
addition to other Awards granted under the Plan. The Committee shall determine
the eligible persons to whom, and the time or times at which, grants of
Restricted Stock will be awarded, the number of shares to be awarded, the price
(if any) to be paid by the Holder, the time or times within which such Awards
may be subject to forfeiture ("Restriction Period"), the vesting schedule and
rights to acceleration thereof, and all other terms and conditions of the
Awards.
(b) Terms and Conditions. Each Restricted Stock Award shall be subject
to the following terms and conditions:
(i) Certificates. Restricted Stock, when issued, will be
represented by a stock certificate or certificates registered in the
name of the Holder to whom such Restricted Stock shall have been
awarded. During the Restriction Period, certificates representing the
Restricted Stock and any securities constituting Retained Distributions
(as defined below) shall bear a legend to the effect that ownership of
the Restricted Stock (and such Retained Distributions), and the
enjoyment of all rights appurtenant thereto, are subject to the
restrictions, terms and conditions provided in the Plan and the
Agreement. Such certificates shall be deposited by the Holder with the
Company, together with stock powers or other instruments of assignment,
each endorsed in blank, which will permit transfer to the Company of
all or any portion of the Restricted Stock and any securities
constituting Retained Distributions that shall be forfeited or that
shall not become vested in accordance with the Plan and the Agreement.
(ii) Rights of Holder. Restricted Stock shall constitute
issued and outstanding shares of Common Stock for all corporate
purposes. The Holder will have the right to vote such Restricted Stock,
to receive and retain all regular cash dividends and other cash
equivalent distributions as the Board may in its sole discretion
designate, pay or distribute on such Restricted Stock and to exercise
all other rights, powers and privileges of a holder of Common Stock
with respect to such Restricted Stock, with the exceptions that (A) the
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Holder will not be entitled to delivery of the stock certificate or
certificates representing such Restricted Stock until the Restriction
Period shall have expired and unless all other vesting requirements with
respect thereto shall have been fulfilled; (B) the Company will retain
custody of the stock certificate or certificates representing the
Restricted Stock during the Restriction Period; (C) other than regular cash
dividends and other cash equivalent distributions as the Board may in its
sole discretion designate, pay or distribute, the Company will retain
custody of all distributions ("Retained Distributions") made or declared
with respect to the Restricted Stock (and such Retained Distributions will
be subject to the same restrictions, terms and conditions as are applicable
to the Restricted Stock) until such time, if ever, as the Restricted Stock
with respect to which such Retained Distributions shall have been made,
paid or declared shall have become vested and with respect to which the
Restriction Period shall have expired; (D) a breach of any of the
restrictions, terms or conditions contained in this Plan or the Agreement
or otherwise established by the Committee with respect to any Restricted
Stock or Retained Distributions will cause a forfeiture of such Restricted
Stock and any Retained Distributions with respect thereto.
(iii) Vesting: Forfeiture. Upon the expiration of the Restriction
Period with respect to each Award of Restricted Stock and the satisfaction
of any other applicable restrictions, terms and conditions (A) all or part
of such Restricted Stock shall become vested in accordance with the terms
of the Agreement, and (B) any Retained Distributions with respect to such
Restricted Stock shall become vested to the extent that the Restricted
Stock related thereto shall have become vested. Any such Restricted Stock
and Retained Distributions that do not vest shall be forfeited to the
Company and the Holder shall not thereafter have any rights with respect to
such Restricted Stock and Retained Distributions that shall have been so
forfeited.
10. DEFERRED STOCK.
(a) Grant. Shares of Deferred Stock may be awarded either alone or in
addition to other Awards granted under the Plan. The Committee shall determine
the eligible persons to whom and the time or times at which grants of Deferred
Stock shall be awarded, the number of shares of Deferred Stock to be awarded to
any person, the duration of the period ("Deferral Period") during which, and the
conditions under which receipt of the shares will be deferred, and all the other
terms and conditions of the Awards.
(b) Terms and Conditions. Each Deferred Stock Award shall be subject to the
following terms and conditions:
(i) Certificates. At the expiration of the Deferral Period (or the
Additional Deferral Period referred to in Section 10(b)(iii) below, where
applicable), share certificates shall be delivered to the Holder, or his
legal representative, representing the number equal to the shares covered
by the Deferred Stock Award.
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(ii) Vesting; Forfeiture. Upon the expiration of the Deferral Period
(or the Additional Deferral Period, where applicable) with respect to each
Award of Deferred Stock and the satisfaction of any other applicable
limitations, terms or conditions, such Deferred Stock shall become vested
in accordance with the terms of the Agreement. Any Deferred Stock that does
not vest shall be forfeited to the Company and the Holder shall not
thereafter have any rights with respect to such Deferred Stock that has
been so forfeited.
(iii) Additional Deferral Period. A Holder may request to, and the
Committee may at any time, defer the receipt of an Award (or an installment
of an Award) for an additional specified period or until a specified event
("Additional Deferral Period"). Subject to any exceptions adopted by the
Committee, such request must generally be made at least one year prior to
expiration of the Deferral Period for such Deferred Stock Award (or such
installment).
11. OTHER STOCK-BASED AWARDS.
(a) Grant and Exercise. Other Stock-Based Awards may be awarded,
subject to limitations under applicable law, that are denominated or
payable in, valued in whole or in part by reference to, or otherwise based
on, or related to, shares of Common Stock, as deemed by the Committee to be
consistent with the purposes of the Plan, including, without limitation,
purchase rights, shares of Common Stock awarded which are not subject to
any restrictions or conditions, convertible or exchangeable debentures, or
other rights convertible into shares of Common Stock and Awards valued by
reference to the value of securities of or the performance of specified
Subsidiaries. Other Stock-Based Awards may be awarded either alone or in
addition to or in tandem with any other Awards under this Plan or any other
plan of the Company.
(b) Eligibility For Other Stock-Based Awards. The Committee shall
determine the eligible persons to whom and the time or times at which
grants of such Other Stock-Based Awards shall be made, the number of shares
of Common Stock to be awarded pursuant to such Awards, and all other terms
and conditions of the Awards.
(c) Terms and Conditions. Each Other Stock-Based Award shall be
subject to such terms and conditions as may be determined by the Committee.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Award, and the number of shares of Common Stock which
have been authorized for issuance under the Plan but as to which no Awards
have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Award, as well as the price per share of
Common Stock covered by each such outstanding Award, shall be
proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock
split, stock dividend,
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combination or reclassification of the Common Stock, or any other increase
or decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company. The conversion of any convertible
securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible or exchangeable
into shares of stock of any class, shall affect, and no adjustment by
reason thereof shall be made with respect to, the number or exercise price
of shares of Common Stock subject to an Award.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Committee shall notify the
Holder at least fifteen (15) days prior to such proposed action. To the
extent it has not been previously exercised, the Award shall terminate
immediately prior to the consummation of such proposed action; provided,
however, that the Committee may, in the exercise of its sole discretion in
such instances, declare that any Award shall terminate as of an earlier
date fixed by the Committee and give each Holder the right to exercise his
or her rights as to all or any part of the Award, including Shares as to
which the Award would not otherwise be exercisable.
(c) Merger or Asset Sale. Subject to Section 12(d), in the event of
the merger of the Company into, or the consolidation of the Company with,
another corporation in which the shareholders of the Company receive cash
or securities of another issuer, or any combination thereof, in exchange
for their shares of Common Stock, or the sale of all or substantially all
of the assets of the Company, each outstanding Award shall be assumed or an
equivalent option or right substituted by the successor corporation or an
Affiliate of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Award, the Holder shall
fully vest in and have the right to exercise the Award (provided it has not
already terminated), including Shares as to which it would not otherwise be
vested or exercisable. If an Award becomes fully vested and exercisable in
lieu of assumption or substitution in the event of a merger, consolidation
or sale of assets, the Committee shall notify the Holder that the Award
shall be fully exercisable for a period of fifteen (15) days from the date
of such notice, and the Award shall terminate upon the expiration of such
period. For the purposes of this paragraph, the Award shall be considered
assumed if, following the merger, consolidation or sale of assets, the
option substituted for such Award confers the right to purchase or receive,
for each Share of Stock subject to the Award immediately prior to the
merger, consolidation or sale of assets, the per Share consideration
(whether stock, cash, or other securities or property) received in the
merger, consolidation or sale of assets by holders of Common Stock (and if
holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger, consolidation
or sale of assets is not solely common stock of the successor corporation
or its Parent (if any), the Committee may, with the consent of the
successor corporation, provide for the consideration to be received upon
the exercise of the Award, for each Share of Stock subject to the Award, to
be solely common stock of the successor corporation or its Parent (if any)
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equal in fair market value to the per Share consideration received by
holders of Common Stock in the merger, consolidation or sale of assets.
(d) Change of Control. Notwithstanding anything to the contrary, the
Committee may grant Awards which provide for the acceleration of the
vesting of Shares subject to the Award upon a Change of Control. Such
provisions shall be set forth in the Agreement.
(e) Further Adjustments. In the event of any change of a type
described in paragraphs (a) or (c) above, the Committee shall make any
further adjustment to the maximum number of Shares which may be acquired
under the Plan pursuant to the exercise of Awards, the maximum number of
Shares for which Awards may be granted to any one Employee and the number
of Shares and price per Share subject to outstanding Awards as shall be
equitable to prevent dilution or enlargement of rights under such Awards,
and the determination of the Committee as to these matters shall be
conclusive and binding on the Holder; provided, however, that (i) each such
adjustment with respect to an Incentive Option shall comply with the rules
of Section 424(a) of the Code (or any successor provision) and (ii) in no
event shall any adjustment be made which would render any Incentive Stock
Option granted hereunder other than an "incentive stock option" as defined
in Section 422 of the Code.
(f) No Limitation on Right to Merge, Etc. The grant of Awards pursuant
to the Plan shall not restrict in any way the right or power of the Company
to make adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge, consolidate, dissolve,
liquidate, or sell or transfer all or any part of its business or assets.
13. TERM OF PLAN.
The Plan shall become effective upon the earlier to occur of its adoption
by the Committee or its approval by the shareholders of the Company, as
described in Section 21 of the Plan. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 17 of the Plan.
14. TERM OF OPTIONS.
The term of each Option shall be the term stated in the Option Agreement;
provided, however, that the term shall be no more than ten (10) years from the
date of grant thereof; and provided further that in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Affiliate, the term of the Option shall
be no more than five (5) years from the date of grant thereof.
15. NON-TRANSFERABILITY OF AWARDS.
An Incentive Stock Option shall not be transferrable except by will or by
the laws of descent and distribution and shall be exercisable during the
lifetime of the Person to whom the Incentive Stock
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Option is granted only by such Person. Any other Award, including a Nonqualified
Stock Option, shall not be transferrable except by will or by the laws of
descent and distribution or pursuant to a qualified domestic relations order, as
defined by the Code or by Title I of the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder (a "QDRO"), and shall be
exercisable during the lifetime of the Person to whom the Option is granted only
by such Person or any transferee pursuant to a QDRO.
16. TIME OF GRANTING AWARDS.
The date of grant of an Award shall, for all purposes, be the date on which
the Committee makes the determination granting such Award, or such other date as
is determined by the Committee. Notice of the determination shall be given to
each Employee or Consultant to whom an Award is so granted within a reasonable
time after the date of such grant.
17. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may amend or terminate the Plan in any respect whatsoever,
provided that any such amendment or termination of the Plan shall not affect
Award already granted and such Award shall remain in full force and effect as if
the Plan had not been amended or terminated. In addition, to the extent
necessary and desirable to comply with Rule 16b-3 (or any other applicable law
or regulation, including the requirements of the NASD or an established stock
exchange), the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required.
18. CONDITIONS UPON ISSUANCE OF SHARES.
Shares shall not be issued pursuant to an Award unless the issuance and
delivery of such Shares pursuant thereto shall comply with all relevant
Applicable Laws, including, without limitation, the Securities Act of 1933, as
amended (the "Securities Act"), the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed or any automatic quotation system upon which the
Shares may then be quoted, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
The Company may require any Optionee or other Holder, as a condition of
receiving Shares pursuant to an Award, (i) to give written assurances
satisfactory to the Company as to the Holder's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matter, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Award; (ii) to give written assurances satisfactory to the
Company stating that such Person is acquiring the Shares subject to the Award
for such Person's own account and not with any present intention of selling or
otherwise distributing such Shares; and (iii) to deliver such other
documentation as may be necessary to comply with federal and
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state securities laws. These requirements, and any assurances given pursuant to
such requirements, shall be inoperative if (i) the issuance of the Shares upon
the exercise of the Award has been registered under a then currently effective
registration statement under the Securities Act and all applicable state
securities laws, or (ii) as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to comply
with applicable securities laws, including, but not limited to, legends
restricting the transfer of the Shares, and may enter stop-transfer orders
against the transfer of the Shares issued upon the exercise of an Award.
The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
19. RESERVATION OF SHARES.
The Company, during the term of the Plan, shall at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
20. AGREEMENTS.
Options shall be evidenced by Option Agreements in such form as the
Committee shall approve from time to time. Other Awards shall be evidenced by
similar Agreements.
21. SHAREHOLDER APPROVAL.
Continuance of the Plan shall be subject to approval by the shareholders of
the Company within twelve (12) months before or after the date the Plan is
adopted. Such shareholder approval shall be obtained to the extent and in manner
required under Applicable Laws and the rules of any stock exchange upon which
the Common Stock is listed or any automatic quotation system upon which the
Common Stock is quoted.
22. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options or other Awards shall
constitute general funds of the Company.
17
<PAGE> 43
23. MISCELLANEOUS.
(a) Acceleration of Vesting. The Committee shall have the power to
accelerate the time at which an Award may first be exercised or the time
during which an Award or any part thereof will vest, notwithstanding the
provisions in the Award Agreement stating the time at which it may first be
exercised or the time during which it will vest.
(b) Rule 16b-3. With respect to Persons subject to Section 16 of the
Exchange Act, transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 and with respect to such Persons all
transactions shall be subject to such conditions regardless of whether they
are expressly set forth in the Plan or the Award Agreement. To the extent
any provision of the Plan or action by the Committee fails to so comply, it
shall not apply to such Persons or their transactions and shall be deemed
null and void, to the extent permitted by law and deemed advisable by the
Committee.
(c) Grants Exceeding Allotted Shares. If the number of shares of Stock
subject to an Award granted pursuant to the Plan exceeds, as of the date of
grant, the number of Shares that may be issued under the Plan without
additional shareholder approval, such Award shall be void with respect to
such excess Shares, unless shareholder approval of an amendment
sufficiently increasing the number of Shares subject to the Plan is timely
obtained in accordance with Section 17 of the Plan.
(d) Notice. Any written notice to the Company required by any of the
provisions of the Plan shall be addressed to the Secretary of the Company
and shall become effective when it is received. Any written notice to
Holders required by any provisions of the Plan shall be addressed to the
Holder at the address on file with the Company and shall become effective
three days after it is mailed by certified mail, postage prepaid to such
address or at the time of delivery if delivered sooner by messenger or
overnight courier.
(e) Savings Clause. Notwithstanding any other provision hereof, the
Plan is intended to qualify as a plan pursuant to which Incentive Stock
Options may be issued under Section 422 of the Code. If the Plan or any
provision of the Plan shall be held to be invalid or to fail to meet the
requirements of Section 422 of the Code or the regulations promulgated
thereunder, such invalidity or failure shall not affect the remaining parts
of the Plan, but rather it shall be construed and enforced as if the Plan
or the affected provision thereof, as the case may be, complied in all
respects with the requirements of Section 422 of the Code.
(f) Governing Law. The Plan and all rights and obligations thereunder
shall be construed in accordance with and governed by the laws of the State
of Texas without regard to its conflict of laws rules.
18
<PAGE> 44
EXHIBIT A
CAPROCK COMMUNICATIONS CORP.
1998 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's name and address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of this Option Agreement and the Plan,
including the provisions thereof relating to increases in the number of shares
covered by this Option upon the occurrence of certain specified events, as
follows:
<TABLE>
<S> <C>
Grant Number ...........................
Date of Grant ..........................
Vesting Commencement Date ..............
Exercise Price per Share ............... $
Total Number of Shares Granted .........
Total Exercise Price ................... $
Type of Option: ........................ ____ Incentive Stock Option
____ Nonqualified Stock Option
Term/Expiration Date:
(No more than 10 years from date
of grant, 5 years for certain grants)
</TABLE>
Vesting Schedule
This Option may be exercised, in whole or in part, in accordance with the
following schedule. Except only as specifically provided elsewhere herein or in
the Plan, this Option shall be exercisable in the following cumulative
installments:
[NOTE: TO BE COMPLETED UPON GRANT OF OPTIONS]
Termination Period
You may exercise this Option for three months (or such shorter period
provided for elsewhere herein) after your employment or consulting relationship
with the Company terminates, or for such
19
<PAGE> 45
longer period upon your death or disability as provided in the Plan. If your
status changes from Employee to Consultant or Consultant to Employee, this
Option Agreement shall remain in effect. In no case may you exercise this Option
after the Term/Expiration Date as provided above. Notwithstanding the foregoing,
in the event the Company terminates your employment for Cause (as defined
below), this Option will terminate on the date of the termination of your
employment and will not be exercisable thereafter. For purposes of this
Agreement, "Cause" means the occurrence of any of the following events or
reasons:
(a) Optionee's conviction for a felony offense or commission by Optionee of
any act abhorrent to the community that the Company considers materially
damaging to or tending to discredit the reputation of the Company;
(b) Dishonesty, fraud, willful misconduct, unlawful discrimination or theft
on the part of Optionee;
(c) Optionee's using for his or her own benefit any confidential or
proprietary information of the Company, or willfully or negligently divulging
any such information to third parties without the prior written consent of the
Company;
(d) Optionee's public drunkenness, public use of illegal substances or
drugs or the use, possession, distribution or being under the influence of
alcohol or illegal substances or drugs in the workplace (the only exception is
that Optionee may consume alcohol reasonably and responsibly, if he or she so
chooses, at legitimate business events and functions where alcohol is legally
available); or
(e) the determination by the Company that Optionee has continually failed
or refused to comply, after notice of and a reasonable opportunity to cure such
failure or refusal, with the policies, standards, regulations, instructions, or
directions of the Company as they currently exist or as they may be modified
from time to time.
II. AGREEMENT
1. Grant of Option. CapRock Communications Corp. (the "Company") hereby
grants to the Optionee named in Section I hereof (the "Optionee") an option
(the"Option") to purchase the total number of shares of Common Stock (the
"Shares") set forth in Section I hereof, at the exercise price per share set
forth in Section I hereof (the "Exercise Price") subject to the terms,
definitions and provisions of the 1998 Stock Option Plan (the "Plan") adopted by
the Company, which is incorporated herein by reference. Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings in
this Option Agreement.
If designated in Section I hereof as an Incentive Stock Option, this Option
is intended (subject to Section 5(b) of the Plan) to qualify as an Incentive
Stock Option as defined in Section 422 of the Code.
20
<PAGE> 46
2. Exercise of Option.
(a) Right to Exercise. This Option shall be exercisable during its term in
accordance with the Vesting Schedule set out in Section I hereof and with the
applicable provisions of the Plan and this Option Agreement. In the event of
Optionee's death, disability or other termination of the employment or
consulting relationship, this Option shall be exercisable in accordance with the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by written notice
(in the form attached hereto as Exhibit A) which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as may be
required by the Company pursuant to the provisions of the Plan. Such written
notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the Exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the
Exercise Price.
The Optionee shall, upon notification of the amount due (if any) as a
result of the exercise of the Option and prior to or concurrent with delivery of
the certificate representing the Shares, pay to the Company as provided in the
Plan amounts necessary to satisfy applicable federal, state and local tax
withholding requirements.
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed
or any automatic quotation system upon which the Shares may then be quoted.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
3. Method of Payment. The purchase price of Optioned Shares acquired
pursuant to the Option shall be paid as set forth in the Plan. THE USE OF SHARES
OF STOCK ACQUIRED OR TO BE ACQUIRED TO PAY FOR EXERCISED SHARES MAY HAVE INCOME
TAX CONSEQUENCES FOR THE OPTIONEE.
4. Restrictions on Exercise. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, and may
not be exercised if the issuance of such Shares upon such exercise or the method
of payment of consideration for such shares would constitute a violation of any
applicable federal or state securities or other law or regulation, including any
rule under Part 207 of Title 12 of the Code of Federal Regulations as
promulgated by the Federal Reserve Board.
21
<PAGE> 47
5. Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution or as
otherwise set forth in the Plan and may be exercised during the lifetime of
Optionee only by Optionee or a permitted transferee as set forth in the Plan.
The terms of the Plan and this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
6. Term of Option. This Option may be exercised only within the term set
out in Section I hereof, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Sections 5 and 6 of the Plan regarding Options designated as Incentive Stock
Options and Options granted to more than ten percent (10%) shareholders shall
apply to this Option.
7. Tax Consequences. The grant and/or exercise of the Option will have
federal and state income tax consequences. THE OPTIONEE SHOULD CONSULT A TAX
ADVISER UPON THE GRANT OF THE OPTION AND BEFORE EXERCISING THE OPTION OR
DISPOSING OF THE SHARES ACQUIRED UPON EXERCISE, PARTICULARLY WITH RESPECT TO HIS
OR HER STATE'S TAX LAWS.
8. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and this Option Agreement may not be
amended except by means of a writing signed by the Company and Optionee. This
Option Agreement is governed by Texas law except for that body of law pertaining
to conflict of laws.
9. Warranties, Representations and Covenants. The undersigned Optionee
warrants and represents that he or she has reviewed the Plan and this Option
Agreement in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Option Agreement and fully understands all
provisions of the Plan and Option Agreement. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Committee
upon any questions relating to the Plan and Option Agreement. Optionee further
agrees to notify the Company upon any change in the residence address indicated
below. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS OPTION AGREEMENT, NOR IN THE PLAN, WHICH IS INCORPORATED
HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO
CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE
IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
22
<PAGE> 48
CAPROCK COMMUNICATIONS CORP.
By:
-----------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
OPTIONEE:
---------------------------------------------
Signature
---------------------------------------------
Print Name
---------------------------------------------
Residence Address
---------------------------------------------
Area Code/Telephone Number
23
<PAGE> 49
EXHIBIT A
CAPROCK COMMUNICATIONS CORP.
1998 EQUITY INCENTIVE PLAN
EXERCISE NOTICE
CapRock Communications Corp.
Two Galleria Tower, Suite 1925
13455 Noel Road
Dallas, Texas 75240-6638
Attention: Secretary
1. Exercise of Option. Effective as of today, ________, 199__, the
undersigned ("Purchaser") hereby elects to purchase ______ shares (the "Shares")
of the Common Stock of CapRock Communications Corp. (the "Company") under and
pursuant to the 1998 Stock Option Plan (the "Plan") and the Stock Option
Agreement dated _______, 199__ (the "Option Agreement"). The purchase price for
the Shares shall be $_____, as specified in the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the full
purchase price for the Shares of _____________________________________________.
THE USE OF SHARES OF STOCK ACQUIRED OR TO BE ACQUIRED FOR EXERCISED SHARES MAY
HAVE INCOME TAX CONSEQUENCES FOR THE OPTIONEE.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. Rights as Shareholder. The Purchaser shall not be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any Shares
subject for which such Option is exercised including, but not limited to, rights
to vote or to receive dividends unless and until the Purchaser has satisfied all
requirements for exercise of the Option pursuant to its terms, the certificates
evidencing such Shares have been issued and the Purchaser has become a record
holder of such Shares. A share certificate for the number of Shares so acquired
shall be issued to the Optionee as soon as practicable after exercise of the
Option. No adjustment will be made for a dividend or other right for which the
record date is prior to the date all the conditions set forth above are
satisfied, except as provided in Section 12 of the Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents
24
<PAGE> 50
that Purchaser has consulted with any tax consultants Purchaser deems advisable
in connection with the purchase or disposition of the Shares and that Purchaser
is not relying on the Company for any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and this Agreement may not be amended except by means of a writing
signed by the Company and Purchaser. This Agreement is governed by Texas law
except for that body of law pertaining to conflict of laws.
<TABLE>
<S> <C>
Submitted by: Accepted by:
PURCHASER: CAPROCK COMMUNICATIONS CORP.
By:
- --------------------------- --------------------------------
Signature
Its:
- --------------------------- --------------------------------
Print Name
Address: Address:
- -------------------------- Two Galleria Tower, Suite 1925
13455 Noel Road
- -------------------------- Dallas, Texas 75240-6638
</TABLE>
25
<PAGE> 51
CAPROCK COMMUNICATIONS CORP.
FIRST AMENDMENT TO
1998 EQUITY INCENTIVE PLAN
On or about June 20, 1998, CapRock Communications Corp., a Texas
corporation (the "Company"), adopted the CapRock Communications Corp. 1998
Equity Incentive Plan (the "Plan"). The Company desires to amend the Plan as set
forth herein:
1. The definition of "Committee" as set forth in Section 2(i) of the Plan
is hereby amended to read in its entirety as set forth below:
(i) "Committee" means (a) the Compensation Committee of the Board of
Directors with respect to Awards granted to all Employees and Consultants
(other than "Non-Employee Directors" of the Company within the meaning of
Rule 16b-3) and (b) the entire Board of Directors with respect to Awards
granted to "Non-Employee Directors" of the Company within the meaning of
Rule 16b-3.
2. A definition entitled "Continuing Directors of the Company" is hereby
added as new Section 2(m) of the Plan to read in its entirety as set forth
below:
(m) "Continuing Directors of the Company" means, with the respect to
any period of 12 consecutive months, (i) any members of the Board of
Directors of the Company on the first day of such period, (ii) any members
of the Board of Directors of the Company elected after the first day of
such period at any annual meeting of shareholders who were nominated by the
Board of Directors or a committee thereof, if a majority of the members of
the Board of Directors or such committee were Continuing Directors of the
Company within the meaning of clause (i) above at the time of such
nomination, and (iii) any members of the Board of Directors of the Company
elected to succeed Continuing Directors of the Company by the Board of
Directors or a committee thereof, if a majority of the members of the Board
of Directors or such committee were Continuing Directors of the Company
within the meaning of clause (i) or (ii) above at the time of such
election.
3. Existing Section 2(m), "Continuous Status as an Employee or Consultant,"
through existing Section 2(oo), "Tandem Stock Appreciation Right," are hereby
re-lettered as Sections 2(n) through 2(pp), respectively, of the Plan.
4. The remaining terms and provisions of the Plan shall continue in full
force and effect.
5. This First Amendment to the Plan was adopted by the Board of Directors
on October 7, 1999.
<PAGE> 52
CAPROCK COMMUNICATIONS CORP.
SECOND AMENDMENT TO
1998 EQUITY INCENTIVE PLAN
On or about June 20, 1998, CapRock Communications Corp., a Texas
corporation (the "Company"), adopted the CapRock Communications Corp. 1998
Equity Incentive Plan (the "Plan"), which was amended on October 7, 1999. The
Company desires to further amend the Plan as set forth herein:
1. The first paragraph of Section 4 of the Plan, entitled "Stock Subject to
Plan," is hereby amended to read in its entirety as set forth below:
"4. STOCK SUBJECT TO PLAN.
Subject to adjustment as provided in Section 12 of the Plan, the total
number of Shares available for grant under the Plan shall be that number of
shares equal to 20% of the shares of Common Stock of the Company issued and
outstanding (such determination as to the number of Shares available for grant
to be made on June 1, 2000 and October 1, 2000 and, in each calendar year
thereafter, as of January 1, April 1, July 1, and October 1 of each such year
for which the Plan is in effect); provided that in no event may more than fifty
million (50,000,000) Shares be cumulatively available for the grant of Awards
under the Plan and the maximum number of Shares that may be acquired by an
individual Holder under the Plan shall not exceed 2,500,000 (in each case,
subject to adjustment as provided in Section 12 of the Plan). The Shares may be
authorized but unissued or reacquired Common Stock."
2. The remaining terms and provisions of the Plan shall continue in full
force and effect.
3. This Second Amendment to the Plan was adopted by the Board of Directors
on April 24, 2000.
<PAGE> 53
CAPROCK COMMUNICATIONS CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
2000 ANNUAL MEETING OF SHAREHOLDERS - JUNE 1, 2000
The undersigned shareholder(s) of CapRock Communications Corp., a Texas
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement and hereby appoints Jere W. Thompson, Jr. and
Kevin W. McAleer, and each of them, Proxies and Attorneys-in-Fact, with full
power to each of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the Annual Meeting of Shareholders of CapRock
Communications Corp. to be held June 1, 2000, at 10:00 a.m. local time at the
Hotel Inter-Continental Dallas, 15201 Dallas Parkway, Addison, Texas, and any
adjournments thereof, and to vote all shares of Common Stock that the
undersigned is entitled to vote on the matters set forth below.
1. ELECTION OF DIRECTORS [ ] FOR all nominees [ ] WITHHOLD AUTHORITY
listed below to vote for all nominees
(except as indicated) listed below
(IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME BELOW)
Jere W. Thompson, Jr., Leo J. Cyr, Timothy W. Rogers, Mark Langdale, Christopher
J. Amenson, and John R. Harris.
2. PROPOSAL TO AMEND CAPROCK'S 1998 EQUITY INCENTIVE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG LLP AS INDEPENDENT ACCOUNTANTS OF
CAPROCK FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. IF YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE CHECK THIS BOX: [ ]
(Continued on other side)
<PAGE> 54
(Continued from reverse side)
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS BALLOT WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES NAMED ABOVE, FOR THE
AMENDMENT TO CAPROCK'S 1998 EQUITY INCENTIVE PLAN, FOR RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS INDEPENDENT ACCOUNTANTS AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS ALLOWED BY RULE 14a-4 OF THE SECURITIES
EXCHANGE ACT OF 1934 AS MAY COME BEFORE THE MEETING.
--------------------------------------------
Signature
--------------------------------------------
Signature (To be signed if shares are held
by joint tenants as community property.)
--------------------------------------------
Title, if applicable
Dated , 2000
-------------------------------
--------------------------------------------
This proxy should be dated and signed by the
Shareholder(s) exactly as his or her name
appears thereon and returned promptly in the
enclosed envelope. Persons signing in a
fiduciary capacity should so indicate. If
shares are held by joint tenants as
community property, both should sign.
