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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]Confidential, for Use of the
[_]Preliminary Proxy Statement Commission Only (as permitted by
Rule 14a-6(e)(2))
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CLARENT CORPORATION
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[_]$500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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[_]Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
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2. Form, Schedule or Registration Statement No.:
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3.Filing Party:
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4. Date Filed:
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[CLARENT LOGO]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 15, 2000
TO THE STOCKHOLDERS OF CLARENT CORPORATION:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of CLARENT
CORPORATION, a Delaware corporation (the "Company"), will be held on Tuesday
February 15, 2000 at 11:00 a.m. local time at the Company's principal
executive offices at 700 Chesapeake Drive, Redwood City, CA 94063 to act on
the following matters:
1. To approve an amendment to the Company's Certificate of Incorporation to
increase the authorized number of shares of Common Stock from 50,000,000
shares to 200,000,000 shares.
2. To approve an amendment to the Company's 1999 Amended and Restated
Equity Incentive Plan to increase the aggregate number of shares of
Common Stock authorized for issuance under such plan by 2,641,830
shares, from 11,358,170 shares to 14,000,000 shares.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on January 5, 2000 as
the record date for the determination of stockholders entitled to notice of
and to vote at this Special Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
/s/ Richard J. Heaps
Richard J. Heaps
Secretary
Redwood City, California
January 11, 2000
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK
OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE
RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
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[CLARENT LOGO]
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
To Be Held
February 15, 2000
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of
Clarent Corporation, a Delaware corporation (the "Company"), for use at the
Special Meeting of Stockholders to be held on Tuesday, February 15, 2000 at
11:00 a.m. local time (the "Special Meeting"), or at any adjournment or
postponement thereof, for the purposes set forth herein and in the
accompanying Notice of Special Meeting. The Special Meeting will be held at
the Company's principal executive offices located at 700 Chesapeake Drive,
Redwood City, California 94063. The Company intends to mail this proxy
statement and accompanying proxy card on or about January 14, 2000 to all
stockholders entitled to vote at the Special Meeting.
Solicitation
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses,
fiduciaries and custodians holding in their names shares of Common Stock
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of Common Stock for their
costs of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or
other regular employees for such services. We do not currently intend but may
retain services of a third-party proxy solicitor that will be paid its
customary fee, estimated to be about $7,000, if it renders solicitation
services.
Voting Rights and Outstanding Shares
Only holders of record of Common Stock at the close of business on January
5, 2000 (the "Record Date") will be entitled to notice of and to vote at the
Special Meeting. On the Record Date, the Company had 30,985,984 shares of
Common Stock outstanding and entitled to vote.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Special
Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. The affirmative vote of a majority of the
outstanding shares of Common Stock is required to approve Proposal 1 to be
voted on at the Special Meeting. For purposes of Proposal 1, abstentions and
broker non-votes will have the same effect as negative votes. The affirmative
vote of the holders of a majority of the shares present in person or
represented by proxy and entitled to vote will be required to approve Proposal
2 to be voted on at the Special Meeting. For purposes of Proposal 2,
abstentions will be counted towards the tabulation of votes cast on proposals
presented to the stockholders and will have the same effect as negative votes.
Broker non-votes will be counted towards a quorum, but will not be counted for
any purpose in determining whether a matter has been approved.
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Revocability of Proxies
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 700
Chesapeake Drive, Redwood City, California 94063, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
Stockholder Proposals
Pursuant to the Company's bylaws, a stockholder proposal or a nomination for
director that is not to be included in such proxy statement and proxy at the
Company's 2000 annual meeting of stockholders must provide specified
information to the Company between February 9, 2000 and March 10, 2000 (unless
such matters are included in the Company's proxy statement pursuant to Rule
14a-8 under the Securities Exchange Act of 1934, as amended).
PROPOSAL 1
APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK
The Board of Directors has adopted, subject to stockholder approval, an
amendment to the Company's Amended and Restated Certificate of Incorporation
to increase the Company's authorized number of shares of Common Stock from
50,000,000 shares to 200,000,000 shares.
The additional Common Stock to be authorized by adoption of the amendment
would have rights identical to the currently outstanding Common Stock of the
Company. Adoption of the proposed amendment and issuance of the Common Stock
would not affect the rights of the holders of currently outstanding Common
Stock of the Company, except for effects incidental to increasing the number
of shares of the Company's Common Stock outstanding, such as dilution of the
earnings per share and voting rights of current holders of Common Stock. If
the amendment is adopted, it will become effective upon filing of a
Certificate of Amendment of the Company's Amended and Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware, a form of
which is attached hereto as Exhibit A.
In addition to the 30,985,984 shares of Common Stock outstanding at January
5, 2000, as of January 5, 2000, the Board had reserved (i) 8,054,821 shares
for issuance upon exercise of outstanding options granted and heretofore
unexercised under the Company's 1999 Amended and Restated Equity Incentive
Plan; (ii) 553,074 shares for issuance under the 1999 Employee Stock Purchase
Plan; and (iii) 291,000 shares of issuance upon exercise of options granted
under the 1999 Non-Employee Directors Stock Option Plan.
The Board desires to have additional authorized shares for future business
and financial purposes. The additional shares may be used, without further
stockholder approval, for various purposes including, without limitation,
stock dividends, raising capital, providing equity incentives to employees,
officers or directors, establishing certain strategic relationships with other
companies and expanding the Company's business or product lines through
acquisitions of other businesses or products. The Company currently has no
plans, proposals or understandings for the use of the additional shares,
including any plans with respect to the acquisition of other businesses or
products.
The additional shares of Common Stock that would become available for
issuance if this proposal were adopted could also be used by the Company to
oppose a hostile takeover attempt or delay or prevent changes in control or
management of the Company. For example, without further stockholder approval,
the Board could (i) adopt a "poison pill" which would, under certain
circumstances related to an acquisition not approved by the
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Board of Directors, give certain holders the right to acquire additional
shares of Common Stock at a low price, or (ii) sell shares of Common Stock in
a private transaction to purchasers who would oppose a takeover or favor the
current Board. Although this proposal to increase the authorized Common Stock
has been prompted by business and financial considerations and not by the
threat of any known or threatened hostile takeover attempt, stockholders
should be aware that approval of this proposal could facilitate future efforts
by the Company to deter or prevent changes in control of the Company,
including transactions in which the stockholders might otherwise receive a
premium for their shares over then current market prices.
In addition, certain existing provisions of our Certificate of Incorporation
and Bylaws and Delaware law may discourage, delay or prevent a merger or
acquisition that a stockholder may consider favorable. These provisions
include:
. having classified Board of Directors;
. requiring a two-thirds majority vote of stockholders to remove the
directors without cause;
. authorizing the Board of Directors to issue additional preferred stock;
. prohibiting cumulative voting in the election of the directors;
. limiting the persons who may call special meetings of stockholders;
. prohibiting stockholder action by written consent; and
. establishing advance notice requirements for nominations for the election
of the Board of Directors or for proposing matters that can be acted on
by stockholders at stockholder meetings.
We are also subject certain provisions of Delaware law which could delay,
deter or prevent us from entering into an acquisition, including Section 203
of the Delaware General Corporation Law, which prohibits a Delaware
corporation from engaging in a business combination with an interested
stockholder unless specific conditions are met.
In addition, the directors, executive officers and their affiliates own
approximately 47% of the Company's outstanding Common Stock. Two of our
executive officers, Mr. Heaps and Mr. McIlvane, have employment agreements
with the Company that provide for certain severance payments and acceleration
of vesting of options under certain circumstances in the event of a change of
control.
The affirmative vote of the holders of a majority of the outstanding shares
of the Common Stock will be required to approve this amendment to the
Company's Amended and Restated Certificate of Incorporation. As a result,
abstentions and broker non-votes will have the same effect as negative votes.
The Board Of Directors Recommends
That Stockholders Vote FOR Proposal 1.
PROPOSAL 2
APPROVAL OF AMENDMENT TO 1999 AMENDED AND RESTATED EQUITY INCENTIVE PLAN
In October 1996, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's 1996 Stock Option Plan. On April 8, 1999,
the Board of Directors amended and restated the above plan in the form of the
1999 Amended and Restated Equity Incentive Plan (the "1999 Plan"), which was
subsequently approved by the stockholders of the Company. On December 27,
1999, the Board of Directors approved the amendment increasing the number of
shares authorized for issuance under the 1999 Plan discussed below and the
solicitation of stockholders to approve such amendment.
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At January 5, 2000, options (net of cancelled or expired options) covering
an aggregate of 10,482,753 shares of the Company's Common Stock had been
granted under the 1999 Plan, and only 875,417 shares (plus any shares that
might in the future be returned to the plans as a result of cancellation or
expiration of options) remained available for future grant under the 1999
Plan. During the last fiscal year, under the 1999 Plan, the Company granted to
all employees as a group (excluding executive officers) options to purchase
2,873,350 shares at exercise prices of $1.50 to $81.25 per share. No options
have been granted since the end of the last fiscal year.
Stockholders are requested in this Proposal 2 to approve an amendment to the
1999 Plan to increase the number of shares authorized for issuance under the
1999 Plan by 2,641,830 shares, from a total of 11,358,170 shares to 14,000,000
shares. The purpose of this amendment is to ensure that the Company can
continue to grant stock options to employees and consultants at levels
determined appropriate by the Board and Compensation Committee. The Company
believes that its ability to continue to provide employees with attractive
equity-based incentives is critical in allowing it to attract and retain
qualified individuals. The Company believes the grant of stock options
encourages employees to build long-term stockholder value. The affirmative
vote of the holders of a majority of the shares present in person or
represented by proxy and entitled to vote at the meeting will be required to
approve the increase to the 1999 Plan. Abstentions will be counted toward the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether this matter
has been approved.
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The Board Of Directors Recommends
That Stockholders Vote FOR Proposal 2.
Summary of Terms of the 1999 Plan
General
The 1999 Plan provides for the grant or issuance of incentive stock options
to employees and nonstatutory stock options, restricted stock purchase awards,
stock bonuses and stock appreciation rights to consultants, employees
(including executive officers) and directors. Incentive stock options granted
under the 1999 Plan are intended to qualify as "incentive stock options"
within the meaning of Section 422 of the Code. Nonstatutory stock options
granted under the 1999 Plan are intended not to qualify as incentive stock
options under the Code. See "Federal Income Tax Information" for a discussion
of the tax treatment of the various awards included in the 1999 Plan. A
complete copy of the 1999 Plan, as amended, is attached hereto as Exhibit B.
Purpose
The 1999 Plan was adopted to provide a means by which selected employees and
directors of and consultants to the Company and its affiliates could be given
an opportunity to receive stock in the Company, to assist in retaining the
services of employees, directors and consultants holding key positions, to
secure and retain the services of persons capable of filling such positions
and to provide incentives for such persons to exert maximum efforts for the
success of the Company. All of the Company's 268 employees (as of November 30,
1999) and all of the Company's consultants are eligible to participate in the
1999 Plan, however, only employees of the Company or its affiliates may be
granted incentive stock options pursuant to the 1999 Plan.
Administration
The 1999 Plan is administered by the Board of Directors of the Company. The
Board has the power to construe and interpret the 1999 Plan and, subject to
the provisions of the 1999 Plan, to determine the persons to whom and the
dates on which Stock Awards will be granted, the type of Stock Award that will
be granted, the number of shares to be subject to each Stock Award, the time
or times during the term of each Stock Award within which all or a portion of
such Stock Award may be exercised, the exercise price, the type of
consideration and other terms of the Stock Award. The Board of Directors is
authorized to delegate administration of the 1999 Plan to a committee composed
of not fewer than two members of the Board. The 1999 Plan provides that, in
the Board's discretion, all directors serving on such committee may be "non-
employee directors" within the meaning of Rule 16b-3 and/or "outside
directors" within the meaning of Section 162(m) of the Code. If administration
is delegated to a committee, the committee has the power to delegate
administrative powers to one or more subcommittees of two or more directors.
The Board has delegated administration of the 1999 Plan to the Compensation
Committee of the Board. As used herein with respect to the 1999 Plan, the
"Board" refers to the Compensation Committee (and, if applicable, such a
subcommittee) as well as to the Board of Directors itself.
Eligibility
Incentive stock options may be granted only to employees. Nonstatutory stock
options, restricted stock purchase awards, stock bonuses and stock
appreciation rights may be granted only to employees, directors or
consultants.
No person is eligible for the grant of an incentive stock option if, at the
time of grant, such person owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company unless the
exercise price of such option is at least 110% of the fair market value of
such Common Stock subject to the option at the date of grant and the option is
not exercisable after the expiration of five years from the date of grant. For
incentive stock options granted under the 1999 Plan, the aggregate fair market
value, determined at the time of grant, of the shares of Common Stock with
respect to which such options are exercisable for the first time by an
optionee during any calendar year (under all such plans of the Company and its
affiliates) may not exceed $100,000.
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Subject to adjustment provisions of the 1999 Plan, no person shall be
eligible to be granted Stock Awards covering more than 720,000 shares of
Common Stock in one calendar year.
Stock Subject to the 1999 Plan
The Common Stock that may be sold pursuant to Stock Awards under the 1999
Plan shall not exceed in the aggregate 14,000,000 shares of the Company's
Common Stock. However, each year on January 31, starting January 31, 2000 and
continuing through January 31, 2004, the aggregate number of shares of Common
Stock that may be issued pursuant to stock awards (other than incentive stock
options) under the 1999 Plan shall automatically be increased by that number
of shares of Common Stock that is equal to two and one-half percent (2.5%) of
the Company's outstanding shares of Common Stock on that date (or a lesser
amount as determined by the Board of Directors for each year). As of January
5, 2000, 8,054,821 shares were subject to outstanding options and 875,417
remained available for future grant under the 1999 Plan. If any Stock Award
expires or terminates, in whole or in part, without having been exercised in
full, the stock not purchased under such Stock Award will revert to and again
become available for issuance under the 1999 Plan. The Common Stock subject to
the 1999 Plan may be unissued shares or reacquired shares, bought on the
market or otherwise.
Stock Awards
The 1999 Plan provides for incentive stock options, nonstatutory stock
options, restricted stock purchase awards, stock appreciation rights and stock
bonuses (collectively "Stock Awards").
Terms of Stock Awards
The following is a description of the permissible terms of Stock Awards
under the 1999 Plan. Individual grants may be more restrictive as to any or
all of the permissible terms described below.
Exercise Price; Payment. The exercise price of each incentive stock option
will not be less than 100% of the fair market value of the Company's Common
Stock on the date of grant. The exercise price of each nonstatutory stock
option will not be less than 100% of the fair market value of the Company's
Common Stock on the date of grant. The purchase price of a restricted stock
purchase award will not be less than 100% of the fair market value of the
Company's Common Stock on the date such award is made. Stock bonuses may be
awarded in consideration of past services actually rendered to the Company or
for its benefit. At January 5, 2000, the closing price of the Company's Common
Stock as reported on the Nasdaq National Market System was $ per share.
In the event of a decline in the value of the Company's Common Stock, the
Board has the authority to offer employees the opportunity to replace
outstanding higher priced options, whether incentive or nonstatutory, with new
lower priced options. To the extent required by Section 162(m), an option
repriced under the 1999 Plan is deemed to be cancelled and a new option
granted. Both the option deemed to be cancelled and the new option deemed to
be granted will be counted against the 720,000 share limitation.
The purchase price of stock acquired pursuant to a Stock Award is paid
either in cash at the time of exercise or purchase, or (if determined by the
Board at the time of grant for an option) by deferred payment or other
arrangement or in any other form of legal consideration that may be acceptable
to the Board. Additionally, in the case of an option and in the discretion of
the Board at the time of the grant of an option, the purchase price may be
paid by delivery to the Company of other Common Stock of the Company. In the
case of any deferred payment arrangement, interest will be payable at least
annually and will be charged at the minimum rate of interest necessary to
avoid the treatment as interest of amounts that are not stated to be interest.
Option Exercise. The total number of shares of stock subject to an option
may, but need not, be allotted in periodic installments. The option or stock
appreciation rights agreement may provide that from time to time during each
of such installment periods, the option may become exercisable ("vest") with
respect to some or all
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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. The option
agreement may also provide that an optionee may exercise an option prior to
full vesting, provided that the Company may have a repurchase right with
respect to any unvested shares.
Restricted stock purchase awards and stock bonuses granted under the 1999
Plan may be granted pursuant to a repurchase option in favor of the Company in
accordance with a vesting schedule determined by the Board.
Term and Termination. No option is exercisable after the expiration of ten
years from the date it was granted. In the event an optionee's continuous
status as an employee, director or consultant is terminated, the optionee may
exercise his or her option or stock appreciation right (to the extent that the
optionee was entitled to exercise it at the time of termination) but only
within the earlier of (i) the date three months after the termination of the
optionee's continuous status as an employee, director or consultant (or such
longer or shorter period as specified in the option agreement) or (ii) the
expiration of the term of the option as set forth in the option agreement.
The Board may, at any time, with the consent of the optionee, extend the
post-termination exercise period and provide for continued vesting; however,
any extension beyond three months from the date of termination will cause an
incentive stock option to become a nonstatutory stock option.
In the event an optionee's continuous status as an employee, director or
consultant terminates as a result of the optionee's death or disability, the
optionee (or such optionee's estate, heirs or beneficiaries) may exercise his
or her option, but only within the period ending on the earlier of (i) 12
months (upon disability) or (ii) 18 months (upon death) following such
termination (or such longer or shorter period as specified in the option
agreement).
In the event a stock bonus or restricted stock purchase award recipient's
continuous status as an employee, director or consultant terminates, the
Company may repurchase or otherwise reacquire any or all of the shares of
stock held by that person which have not vested as of the date of termination
under the terms of the stock bonus or restricted stock purchase agreement
between the Company and such person.
Adjustment Provisions
If any change is made to the Common Stock subject to the 1999 Plan due to a
change in corporate capitalization and without receipt of consideration by the
Company (through reincorporation, stock dividend, stock split, reverse stock
split, combination or reclassification of shares) the class(es) and maximum
number of shares subject to the 1999 Plan will be appropriately adjusted. If
any change is made in the Common Stock subject to any Stock Award, without
receipt of consideration by the Company (through merger, consolidation,
reorganization, recapitalization, reincorporation, separation, stock dividend,
dividend in property other than cash, stock split, reverse stock split,
liquidating dividend, combination of shares, exchange of shares, change in
corporate structure or otherwise), the maximum annual award applicable under
the 1999 Plan and the class(es) and number of shares and price per share of
stock subject to outstanding Stock Awards will be appropriately adjusted.
Unless an option agreement specifies otherwise, in the event of a merger or
consolidation, in which the Company is not the surviving corporation, the sale
of substantially all of the Company's assets or a reverse merger in which the
Company is the surviving corporation but the shares of the Company's Common
Stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise, any surviving corporation shall assume or continue any Stock Awards
outstanding under the 1999 Plan or shall substitute similar awards for those
outstanding under the 1999 Plan or such Stock Awards shall continue in full
force and effect. In the event a surviving corporation refuses to assume or
continue such Stock Awards or substitute similar awards, then, with respect to
Stock Awards held by persons then performing services as employees, directors
or consultants, the time during which such Stock Awards may be exercised shall
be accelerated prior to completion of such transaction and such Stock Awards
shall be terminated if not exercised prior to such transaction.
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Unless an option agreement specifies otherwise, in the event of an
acquisition by any person, entity or group within the meaning of Section 13(d)
or 14(d) of the Exchange Act (other than any employee benefit plan, or related
trust, sponsored or maintained by the Company or an affiliate) of the
beneficial ownership of securities of the Company representing at least 50% of
the combined voting power entitled to vote in the election of directors, then,
with respect to Stock Awards held by persons then performing services as
employees, directors or consultants, the vesting of such Stock Awards (and if
applicable, time during which such Stock Awards may be exercised) shall be
accelerated in full.
Duration, Amendment and Termination
The Board at any time, and from time to time, may amend the 1999 Plan.
However, no amendment shall be effective unless approved by the stockholders
of the Company within 12 months before or after the adoption of the amendment,
where such amendment requires stockholder approval in order for the 1999 Plan
to satisfy the requirements of Section 422 of the Code or to comply with the
requirements of Rule 16b-3 of the Exchange Act or Nasdaq or any securities
exchange listing requirements. The Board may in its sole discretion submit any
other amendment to the 1999 Plan for stockholder approval.
The Board may suspend or terminate the 1999 Plan at any time. Unless sooner
terminated, the 1999 Plan will terminate in March 2009. No Stock Awards may be
granted under the 1999 Plan while the 1999 Plan is suspended or after it is
terminated.
Restrictions on Transfer
An incentive stock option shall not be transferable 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 option is granted only by such
person. A stock bonus or restricted stock purchase award shall not be
transferable except by will or by the laws of descent and distribution or
pursuant to a domestic relations order. A nonstatutory stock option shall be
transferable only to the extent specifically provided for in the option
agreement evidencing the nonstatutory stock option, provided that if the
nonstatutory stock option agreement does not provide for transferability, then
the option is not transferable except by will or by the laws of descent and
distribution or pursuant to a domestic relations order. An award holder may
designate a beneficiary who may exercise his or her award after death.
Federal Income Tax Information
Incentive Stock Options. Incentive stock options under the 1999 Plan are
intended to be eligible for the favorable federal income tax treatment
accorded "incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive stock
option for more than two years from the date on which the option is granted
and more than one year from the date on which the shares are transferred to
the optionee upon exercise of the option, any gain or loss on a disposition of
such stock will be long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods
(a "disqualifying disposition"), at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (a) the excess of the
stock's fair market value on the date of exercise over the exercise price, or
(b) the optionee's actual gain, if any, on the purchase and sale. The
optionee's additional gain, or any loss, upon the disqualifying disposition
will be a capital gain or loss, which will be long-term or short-term
depending on whether the stock was held for more than one year. Capital gains
currently are generally
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subject to lower tax rates than ordinary income. The maximum long-term capital
gains rate for an individual for federal income tax purposes is currently 20%
while the maximum ordinary income rate is 39.6% at the present time. Slightly
different rules may apply to optionees who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled to a
corresponding business expense deduction in the tax year in which the
disqualifying disposition occurs.
Nonstatutory Stock Options. Nonstatutory stock options granted under the
1999 Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonstatutory stock option. Upon exercise of a nonstatutory
stock option, the optionee normally will recognize taxable ordinary income
equal to the excess of the stock's fair market value on the date of exercise
over the option exercise price. With respect to employees, the Company is
generally required to withhold from regular wages or supplemental wage
payments an amount based on the ordinary income recognized. Generally, the
Company will be entitled to a business expense deduction equal to the taxable
ordinary income realized by the optionee. Upon disposition of the stock, the
optionee will recognize a capital gain or loss equal to the difference between
the selling price and the sum of the amount paid for such stock plus any
amount recognized as ordinary income upon exercise of the option. Such gain or
loss will be long-term or short-term depending on whether the stock was held
for more than one year. Slightly different rules may apply to optionees who
acquire stock subject to certain repurchase options or who are subject to
Section 16(b) of the Exchange Act. Stock appreciation rights will be subject
to similar tax treatment.
Restricted Stock Purchase Awards and Stock Bonuses. Restricted stock
purchase awards and stock bonuses granted under the 1999 Plan generally have
the following federal income tax consequences:
Upon acquisition of the stock, the recipient normally will recognize taxable
ordinary income equal to the excess of the stock's fair market value over the
purchase price, if any. However, to the extent the stock is subject to certain
types of vesting restrictions, the taxable event will be delayed until the
vesting restrictions lapse unless the recipient elects to be taxed on receipt
of the stock. With respect to employees, the Company is generally required to
withhold from regular wages or supplemental wage payments an amount based on
the ordinary income recognized. Generally, the Company will be entitled to a
business expense deduction equal to the taxable ordinary income realized by
the optionee. Upon disposition of the stock, the optionee will recognize a
capital gain or loss equal to the difference between the selling price and the
sum of the amount paid for such stock plus any amount recognized as ordinary
income upon acquisition (or vesting) of the stock. Such gain or loss will be
long-term or short-term depending on whether the stock was held for more than
one year. Slightly different rules may apply to optionees who acquire stock
subject to certain repurchase options or who are subject to Section 16(b) of
the Exchange Act.
Potential Limitation on Company Deductions. As part of the Omnibus Budget
Reconciliation Act of 1993, the U.S. Congress amended the Code to add Section
162(m) which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1 million for a covered employee. It is possible that
compensation attributable to Stock Awards granted in the future under the 1999
Plan, when combined with all other types of compensation received by a covered
employee from the Company, may cause this limitation to be exceeded in any
particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m), compensation
attributable to stock options will qualify as performance-based compensation,
provided that the option is granted by a compensation committee comprised
solely of "outside directors" and either: (i) the option plan contains a per-
employee limitation on the number of shares for which options may be granted
during a
9
<PAGE>
specified period, the per-employee limitation is approved by the stockholders,
and the exercise price of the option is no less than the fair market value of
the stock on the date of grant; or (ii) the option is granted (or exercisable)
only upon the achievement (as certified in writing by the compensation
committee) of an objective performance goal established in writing by the
compensation committee while the outcome is substantially uncertain, and the
option is approved by stockholders.
ADDITIONAL EQUITY INCENTIVE PLANS
In addition to the 1999 Plan, the Company currently has the following equity
incentive plans.
I. 1999 Non-Employee Directors' Stock Option Plan.
In April 1999, the Board of Directors adopted the 1999 Non-Employee
Directors' Stock Option Plan (the "Directors' Plan") to provide for the
automatic grant of options to purchase shares of Common Stock to our non-
employee directors who are not any of our affiliates' employees or
consultants. The Board of Directors administers the Directors' Plan, but may
delegate the administration to a committee. The aggregate number of shares of
Common Stock that may be issued under options granted under the Directors'
Plan is 300,000 shares. Under the terms of the Directors' Plan each person who
is elected or appointed for the first time to be a non-employee director after
the initial public offering automatically shall, upon the date of his or her
initial election or appointment to be a non-employee director by the Board of
Directors or stockholders, be granted an option to purchase 5,000 shares of
Common Stock. In addition, on the day of each regular meeting of the Board of
Directors, commencing with the third regular meeting subsequent to the date of
the initial public offering or, if later, the date of each non-employee
directors' initial grant under the Director's Plan, each person who is then
serving as a non-employee director automatically shall be granted an option to
purchase 2,000 shares of Common Stock.
The exercise price of the options granted under the Directors' Plan will be
equal to the fair market value of the Common Stock on the date of grant. No
option granted under the Directors' Plan may be exercised after the expiration
of ten years from the date it was granted. Options granted under the
Directors' Plan vest and become exercisable immediately. Options granted under
the Directors' Plan generally are non-transferable. However, an optionee may
designate a beneficiary who may exercise the option following the optionee's
death. An optionee whose service relationship with us or any of our
affiliates, whether as one of our non-employee directors or subsequently as
our affiliates' employee, director or consultant, ceases for any reason, may
exercise a vested option during the period provided in the option agreement,
which is three months generally, 12 months in the event of optionee's
disability and 18 months in the event of optionee's death. As of January 5,
2000, options for 9,000 shares have been granted under the Directors' Plan.
II. 1999 Employee Stock Purchase Plan.
In April 1999, the Board of Directors approved the 1999 Employee Stock
Purchase Plan (the "Purchase Plan") covering an aggregate of 600,000 shares of
Common Stock. The Purchase Plan is intended to qualify as an employee stock
purchase plan within the meaning of Section 423 of the Internal Revenue Code.
Under the Purchase Plan, the Board of Directors or a committee may authorize
participation by eligible employees, including officers, in periodic offerings
following the adoption of the Purchase Plan. The offering period for any
offering will be no more than 27 months.
Under the Purchase Plan, employees are eligible to participate if they are
employed by us or one of our affiliates designated by the Board of Directors
and are employed at least 20 hours per week and at least five months per year.
Employees who participate in an offering will have the right to purchase up to
the number of shares of common stock purchasable pursuant to a percentage
designated by the Board of Directors (up to 10%) of an employee's earnings
withheld pursuant to the Purchase Plan and applied, on specified dates
determined by the Board of Directors, to the purchase of shares of Common
Stock. The price of Common Stock purchased under the Purchase Plan will be
equal to 85% of the lower of the fair market value of the Common Stock on the
commencement date of each offering period or the relevant purchase date.
Employees may end their participation in the offering at any time during the
offering period, and participation ends automatically on termination of
employment with us. In the event of changes in control, the Board of Directors
has discretion to provide that
10
<PAGE>
each right to purchase Common Stock will be assumed or an equivalent right
will be substituted by the successor corporation, or that such rights may
continue in full force and effect, or that all sums collected by payroll
deductions will be applied to purchase stock immediately prior to the change
in control. The Purchase Plan will terminate at the Board of Directors'
discretion or when all of the shares reserved for issuance under the Purchase
Plan have been issued. As of January 5, 2000, 46,926 shares of Common Stock
have been purchased under the Purchase Plan.
11
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of January 5, 2000:
. each stockholder who is known by us to own beneficially more than 5% of
our Common Stock;
. each of our named executive officers;
. each of our directors; and
. all of our directors and executive officers as a group.
Unless otherwise indicated, to our knowledge, all persons listed below have
sole voting and investment power with respect to their shares of our Common
Stock, except to the extent authority is shared by spouses under applicable
law. Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Applicable percentage ownership is based
on 30,985,984 shares of common stock outstanding as of January 5, 2000,
together with options for that stockholder that are currently exercisable or
exercisable within 60 days of January 5, 2000. In computing the number and
percentage of shares beneficially owned by a person, shares of common stock
subject to options currently exercisable, or exercisable within 60 days of
January 5, 2000 are counted as outstanding, while these shares are not counted
as outstanding for computing the percentage ownership of any other person.
<TABLE>
<CAPTION>
Shares Beneficially
Shares Issuable Owned After Offering
pursuant to (Including the Number of
Options Shares Shown in
Exercisable the First Column)
within 60 days of ---------------------------
Name of Beneficial Owner 1999 January 5, 2000 Number Percent
----------------------------- ----------------- -------------- ------------
<S> <C> <C> <C>
WK Technology Funds (1)
6F, No. 15
Section 2, Tiding Avenue
Taipei 114, Taiwan........... 0 4,575,568 14.77%
1998 Wang/Chang Family
Revocable Trust (2)
c/o Clarent Corporation 700
Chesapeake Drive
Redwood City, California
94063........................ 0 2,622,308 8.46%
1998 Vargo Family Trust
c/o Clarent Corporation 700
Chesapeake Drive
Redwood City, California
94063........................ 0 2,468,950 7.97%
The Goldman Sachs Group, Inc.
(3)
85 Broad Street
New York, New York 10004..... 0 1,727,658 5.58%
Jerry Shaw-Yau Chang (4)...... 0 2,622,308 8.46%
Richard J. Heaps.............. 135,582 160,930 *
Michael F. Vargo (5).......... 0 2,468,950 7.97%
Mark E. McIlvane.............. 376,973 378,515 1.21%
Heidi H. Bersin (6)........... 206,250 626,889 2.01%
Mong Hong (Mahan) Wu.......... 46,666 548,568 1.77%
Wen Chang Ko (7).............. 2,000 6,377,568 20.58%
Syaru Shirley Lin (8)......... 2,000 1,729,658 5.58%
William R. Pape............... 5,000 5,000 *
All officers and directors as
a group (9 persons) (9)...... 14,918,386 46.97%
</TABLE>
- --------
* Represents beneficial ownership of less than one percent of the common
stock.
12
<PAGE>
(1) Consists of 463,514 shares held by WK Global Fund Ltd., 954,670 shares
held by WK Technology Fund, 926,134 shares held by WK Technology Fund II,
1,047,336 shares held by WK Technology Fund III, 583,914 shares held by WK
Technology Fund IV and 600,000 shares held by WK Technology Fund V. Mr. Ko
is the chairman and a beneficial owner of each of the above entities and
exercises sole voting and dispositive powers with respect to the shares
held of record by the WK Technology Funds.
(2) Consists of 2,617,750 shares held by the 1998 Wang/Chang Family Revocable
Trust of which Mr. Chang is a trustee, and 4,558 shares held by Alice
Wang, Mr. Chang's spouse, and the other trustee of the 1998 Wang/Chang
Family Revocable Trust.
(3) Consists of 1,234,042 shares held by The Goldman Sachs Group, Inc.,
114,435 shares held by Bridge Street Fund 1998, L.P. and 379,181 shares
held by Stone Street Fund 1998, L.P. Bridge Street Fund 1998, L.P. and
Stone Street Fund 1998, L.P. are affiliates of The Goldman Sachs Group,
Inc. The Goldman Sachs Group, Inc. is the general partner or managing
general partner of each of these investment partnerships. The Goldman
Sachs Group, Inc. disclaims beneficial ownership of the shares owned by
these investment partnerships to the extent attributable to partnership
interests therein held by persons other than The Goldman Sachs Group, Inc.
and its affiliates. Each of these investment partnerships shares voting
and investment power with some of its respective affiliates.
(4) Consists of 2,617,750 shares held by the 1998 Wang/Chang Family Revocable
Trust, of which Mr. Chang is a trustee, and 4,558 shares held by Alice
Wang, Mr. Chang's spouse.
(5) Consists of 2,468,950 shares held by the 1998 Vargo Family Trust, of which
Mr. Vargo is a trustee.
(6) Consists of 420,000 shares held by the Bersin Family Trust, of which Ms.
Bersin is a trustee.
(7) Includes 4,575,568 shares held by the WK Technology Funds. Mr. Ko is the
chairman of the WK Technology Funds. Mr. Ko disclaims beneficial ownership
of these shares except to the extent of his interest as a stockholder
thereof.
(8) Consists of 1,727,658 shares held by The Goldman Sachs Group, Inc. and its
affiliated entities. Ms. Lin is an executive director in the Principal
Investment Area of Goldman Sachs (Asia) Limited. Ms. Lin disclaims
beneficial ownership of these shares.
(9) Includes an aggregate of 4,575,568 shares held by the WK Technology Funds,
2,617,750 shares held by the 1998 Wang/Chang Family Revocable Trust,
2,468,950 shares held by the 1998 Vargo Family Trust, 420,000 shares held
by the Bersin Family Trust, 1,727,658 shares held by The Goldman Sachs
Group, Inc. and its affiliated entities and 4,558 shares held by Alice
Wang.
13
<PAGE>
EXECUTIVE COMPENSATION
Directors' Compensation
Directors who are also executive officers do not receive any additional
compensation for serving as members of the board of directors or any committee
of the Board of Directors. Non-employee directors who join the Board of
Directors after our initial public offering are expected to receive an initial
option to purchase 5,000 shares of Common Stock and all non-employee directors
are expected to receive an option to purchase 2,000 shares of Common Stock
under our 1999 Non-Employee Directors' Stock Option Plan at each regular
meeting of the Board of Directors, beginning with the third meeting after our
initial public offering or after the initial grant of 5,000 shares.
Executive Compensation
The following table sets forth information for the years ended December 31,
1998 and December 31, 1999, regarding the compensation of our chief executive
officer and each of our four most highly-compensated executive officers whose
salary and bonus for the years ended December 31, 1998 and December 31, 1999
were in excess of $100,000 on an annualized basis:
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation Awards
--------------------------------- --------------------- All Other
Other Annual Securities Underlying Compensations
Name and Principal Year Salary Bonus($) Compensation (2) Options (#) ($)(3)
Position ---- -------- -------- --------------- --------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jerry Shaw-Yau Chang
President and Chief 1999 $230,000 $25,000 $ 3,000 -- --
Executive Officer....... 1998 100,000 -- -- -- --
Richard J. Heaps (4)
Chief Operating Officer,
Chief Financial Officer
General Counsel and 1999 196,667 70,000 3,928,838 200,000 --
Secretary............... 1998 67,500 6,160 -- 400,000 --
Michael F. Vargo
Chief Technology 1999 160,000 32,500 3,000 -- --
Officer................. 1998 131,875 7,500 -- -- --
Mark E. McIlvane
Vice President, 1999 278,969 12,500 3,309,184 -- $2,000
Worldwide Sales......... 1998 202,717 20,000 7,800 160,000 2,000
Mong Hong (Mahan) Wu
Vice President and
General Manager, 1999 153,841 35,000 -- -- --
Asia Pacific............ 1998 131,640 26,145 -- -- --
</TABLE>
- --------
(1) Mr. McIlvane's salary consists of a salary of $150,000 and sales
commissions of $52,717 for the fiscal year ended December 31, 1998 and a
salary of $162,500 and sales commissions of $116,469 for the fiscal year
ended December 31, 1999.
(2) Consists of reimbursement of automobile expenses and proceeds from the
sale of shares of common stock pursuant to option exercises.
(3) Consists of life insurance premiums.
(4) Mr. Heaps started his employment with us in September 1998. Mr. Heaps
would have earned a salary of $180,000 for the fiscal year ended
December 31, 1998 if he had been employed by us for the entire year.
14
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
The following table sets forth certain information relating to stock options
awarded to each of the named executive officers during the fiscal year ended
December 31, 1999. All such options were awarded under the 1999 Amended and
Restated Equity Incentive Plan.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term (2)
------------------------------------------ ----------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees Price Per Expiration
Granted in 1999(1) Price Date 5% 10%
---------- ---------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Jerry Shaw-Yau Chang.... -- -- -- -- -- --
Richard J. Heaps........ 200,000 6.5% $5.00 03/08/09 $9,716,709 $16,953,06
Michael F. Vargo........ -- -- -- -- -- --
Mark E. McIlvane........ -- -- -- -- -- --
Mong Hong (Mahan) Wu.... -- -- -- -- -- --
</TABLE>
- --------
(1) The total number of options granted to our employees in fiscal year 1999
was 3,073,350.
(2) In order to comply with the rules of the Securities and Exchange
Commission, we are including the gains or "option spreads" that would
exist for the respective options we granted to the named executive
officers. We calculate these gains based upon the initial public offering
price of $15.00 per share appreciating at 5% and 10% compounded annually
from the date of the option grant until the termination date of the
option. These gains do not represent our estimate or projection of the
future common stock price.
15
<PAGE>
AGGREGATED OPTIONS EXERCISED IN 1999 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised in-
Number of Securities the-
Shares Underlying Unexercised Money Options at
Acquired Value Options at December 31, 1999 December 31, 1999 (1)
on Realized -------------------------------- -------------------------
Name Exercise (#) (1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- -------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jerry Shaw-Yau Chang.... -- -- -- -- -- --
Richard J. Heaps........ 72,750 $ 5,610,844 102,249 425,001 $ 7,708,874 $ 32,105,282
Michael F. Vargo........ -- -- -- -- -- --
Mark E. McIlvane........ 40,625 3,162,656 363,750 95,625 28,286,177 7,425,276
Mong Hong (Mahan) Wu.... 128,336 9,990,958 23,333 186,667 1,816,474 14,532,025
</TABLE>
- --------
(1) The amount set forth represents the difference between the fair market
value of the underlying common stock as of December 31, 1999 ($77.875) and
the exercise price of the option, multiplied by the number of shares
underlying the option.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Wen-Chang Ko and Syaru
Shirley Lin.
By Order of the Board of Directors
/s/ Richard J. Heaps
Richard J. Heaps
Secretary
January 11, 2000
16
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CLARENT CORPORATION
CLARENT CORPORATION, a corporation organized and existing under and by
virtue of the General Corporation Law of the state of Delaware, does hereby
certify:
FIRST: The name of the corporation is Clarent Corporation.
SECOND: The date on which the Certificate of Incorporation of the
corporation was filed with the Secretary of State of the State of Delaware was
April 6, 1999. A Certificate of Amendment to the Certificate of Incorporation
was filed with the Secretary of State of the State of Delaware on June 28,
1999. An Amended and Restated Certificate of Incorporation of the corporation
was filed with the Secretary of State of the State of Delaware on July 7,
1999.
THIRD: The Board of Directors of the corporation, acting in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware, adopted resolutions to amend the Amended and Restated Certificate of
Incorporation of the corporation by deleting the first paragraph of Article IV
and substituting therefor a new first paragraph of Article IV in the following
form:
"This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock' and "Preferred Stock.' The total
number of shares which the corporation is authorized to issue is two
hundred five million (205,000,000) shares. Two hundred million
(200,000,000) shares shall be Common Stock, each having a par value of one-
tenth of one cent ($.001). Five million (5,000,000) shares shall be
Preferred Stock, each having a par value of one-tenth of one cent ($.001)."
FOURTH: Thereafter, pursuant to a resolution of the Board of Directors, this
Certificate of Amendment was submitted to the stockholders of the corporation
for their approval and was duly adopted in accordance with the provision of
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Clarent Corporation has caused this Certificate of
Amendment to be signed by its President and Chief Executive Officer and
attested to by its Secretary this day of February, 2000.
CLARENT CORPORATION
___________________________________
Jerry Shaw-Yau Chang
President and Chief Executive Officer
ATTEST:
___________________________________
Richard J. Heaps
Secretary
17
<PAGE>
EXHIBIT B
CLARENT CORPORATION
1999 AMENDED AND RESTATED EQUITY INCENTIVE PLAN
Adopted April 8, 1999
Approved By Stockholders June 22, 1999
Termination Date: April 7, 2009
This Clarent Corporation 1999 Amended and Restated Equity Incentive Plan
amends and restates, in its entirety, the Clarent Corporation 1996 Stock
Option Plan adopted October 11, 1996, and amended on May 29, 1997, May 29,
1998 and October 22, 1998.
1. Purposes.
(a) Eligible Stock Award Recipients. The persons eligible to receive Stock
Awards are the Employees, Directors and Consultants of the Company and
its Affiliates.
(b) Available Stock Awards. The purpose of the Plan is to provide a means
by which selected Employees, Directors and Consultants may be given an
opportunity to benefit from increases in value of the Common Stock
through the granting of: (i) Incentive Stock Options, (ii) Nonstatutory
Stock Options, (iii) stock bonuses, (iv) rights to acquire restricted
stock and (v) Stock Appreciation Rights.
(c) General Purpose. The Company, by means of the Plan, seeks to retain the
services of persons who are now Employees, Directors or Consultants, to
secure and retain the services of new Employees, Directors and
Consultants and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are
defined in Sections 424(e) and (f), respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance with
subsection 3(c).
(e) "Common Stock" means the common stock of the Company.
(f) "Company" means Clarent Corporation, a California corporation.
(g) "Concurrent Stock Appreciation Right" or "Concurrent Right" means a
right granted pursuant to subsection 8(b)(ii) of the Plan.
(h) "Consultant" means any person, including an advisor, (1) engaged by the
Company or an Affiliate to render consulting or advisory services and
who is compensated for such services or (2) who is a member of the
Board of Directors of an Affiliate. However, the term "Consultant"
shall not include either Directors of the Company who are not
compensated by the Company for their services as Directors or Directors
of the Company who are merely paid a director's fee by the Company for
their services as Directors.
(i) "Continuous Service" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or
Consultant, is not interrupted or terminated. The Participant's
Continuous Service shall not be deemed to have terminated merely
because of a change in the capacity in which the Participant renders
service to the Company or an Affiliate as an Employee, Consultant or
Director or a change in the entity for which the Participant renders
such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status
18
<PAGE>
from an Employee of the Company to a Consultant of an Affiliate or a
Director of the Company will not constitute an interruption of
Continuous Service. The Board or the chief executive officer of the
Company, in that party's sole discretion, may determine whether
Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military
leave or any other personal leave.
(j) "Covered Employee" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the
Exchange Act, as determined for purposes of Section 162(m) of the Code.
(k) "Director" means a member of the Board.
(l) "Disability" means (i) before the Listing Date, the inability of a
person, in the opinion of a qualified physician acceptable to the
Company, to perform the major duties of that person's position with the
Company or an Affiliate of the Company because of the sickness or
injury of the person and (ii) after the Listing Date, the permanent and
total disability of a person within the meaning of Section 22(e)(3) of
the Code.
(m) "Employee" means any person employed by the Company or an Affiliate.
Neither service as a Director nor payment of a director's fee by the
Company or an Affiliate shall be sufficient to constitute "employment"
by the Company or an Affiliate.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(o) "Fair Market Value" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
traded on the NASDAQ National Market System or the NASDAQ SmallCap
Market, the Fair Market Value of a share of Common Stock shall be the
closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such exchange or market (or the exchange
or market with the greatest volume of trading in the Common Stock) on
the last market trading day prior to the time of determination (which
may be the same calendar day), as reported in The Wall Street Journal
or such other source as the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the Fair Market
Value shall be determined in good faith by the Board.
(iii) Prior to the Listing Date, the value of the Common Stock shall be
determined in a manner consistent with Section 260.140.50 of Title
10 of the California Code of Regulations.
(p) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code
and the regulations promulgated thereunder.
(q) "Independent Stock Appreciation Right" or "Independent Right" means a
right granted pursuant to subsection 8(b)(iii) of the Plan.
(r) "Listing Date" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on
any securities exchange or designated (or approved for designation)
upon notice of issuance as a national market security on an interdealer
quotation system if such securities exchange or interdealer quotation
system has been certified in accordance with the provisions of Section
25100(o) of the California Corporate Securities Law of 1968.
(s) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a
subsidiary, does not receive compensation (directly or indirectly) from
the Company or its parent or a subsidiary for services rendered as a
consultant or in any capacity other than as a Director (except for an
amount as to which disclosure would not be required under Item 404(a)
of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a)
19
<PAGE>
of Regulation S-K and is not engaged in a business relationship as to
which disclosure would be required under Item 404(b) of Regulation S-K;
or (ii) is otherwise considered a "non-employee director" for purposes
of Rule 16b-3.
(t) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(u) "Officer" means (i) before the Listing Date, any person designated by
the Company as an officer and (ii) on and after the Listing Date, 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.
(v) "Option" means an Incentive Stock Option or a Nonstatutory Stock Option
granted pursuant to the Plan.
(w) "Option Agreement" means a written agreement between the Company and an
Optionholder evidencing the terms and conditions of an individual
Option grant. Each Option Agreement shall be subject to the terms and
conditions of the Plan.
(x) "Optionholder" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding
Option.
(y) "Outside Director" means a Director of the Company who either (i) is
not a current employee of the Company or an "affiliated corporation"
(within the meaning of Treasury Regulations promulgated under Section
162(m) of the Code), is not a former employee of the Company or an
"affiliated corporation" receiving compensation for prior services
(other than benefits under a tax qualified pension plan), was not an
officer of the Company or an "affiliated corporation" at any time and
is not currently receiving direct or indirect remuneration from the
Company or an "affiliated corporation" for services in any capacity
other than as a Director or (ii) is otherwise considered an "outside
director" for purposes of Section 162(m) of the Code.
(z) "Participant" means a person to whom a Stock Award is granted pursuant
to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.
(aa) "Plan" means this Clarent Corporation 1999 Equity Incentive Plan.
(bb) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(cc) "Securities Act" means the Securities Act of 1933, as amended.
(dd) "Stock Appreciation Right" means any of the various types of rights
which may be granted under Section 8 of the Plan.
(ee) "Stock Award" means any right granted under the Plan, including an
Option, a stock bonus, any right to acquire restricted stock and any
Stock Appreciation Right.
(ff) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of
an individual Stock Award grant. Each Stock Award Agreement shall be
subject to the terms and conditions of the Plan.
(gg) "Tandem Stock Appreciation Right" or "Tandem Right" means a right
granted pursuant to subsection 8(b)(1) of the Plan.
(hh) "Ten Percent Stockholder" means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of
stock of the Company or of any of its Affiliates.
3. Administration.
(a) Administration by Board. The Board will administer the Plan unless and
until the Board delegates administration to a Committee, as provided in
subsection 3(c).
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(b) Powers of Board. The Board shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible under
the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; what type or combination of types of Stock
Award shall be granted; the provisions of each Stock Award granted
(which need not be identical), including the time or times when a
person shall be permitted to receive stock pursuant to a Stock
Award; and the number of shares with respect to which a Stock Award
shall be granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may
correct any defect, omission or inconsistency in the Plan or in any
Stock Award Agreement, in a manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in Section 13.
(iv) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of
the Company which are not in conflict with the provisions of the
Plan.
(c) Delegation to Committee.
(i) General. The Board may delegate administration of the Plan to a
Committee or Committees of one or more members of the Board, and the
term "Committee" shall apply to any person or persons to whom such
authority has been delegated. If administration is delegated to a
Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the
Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions,
not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the Committee
at any time and revest in the Board the administration of the Plan.
(ii) Committee Composition when Common Stock is Publicly Traded. At such
time as the Common Stock is publicly traded, in the discretion of
the Board, a Committee may consist solely of two or more Outside
Directors, in accordance with Section 162(m) of the Code, and/or
solely of two or more Non-Employee Directors, in accordance with
Rule 16b-3. Within the scope of such authority, the Board or the
Committee may (i) delegate to a committee of one or more members of
the Board who are not Outside Directors, the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered
Employees and are not expected to be Covered Employees at the time
of recognition of income resulting from such Stock Award or (b) not
persons with respect to whom the Company wishes to comply with
Section 162(m) of the Code and/or (ii) delegate to a committee of
one or more members of the Board who are not Non-Employee Directors
the authority to grant Stock Awards to eligible persons who are not
then subject to Section 16 of the Exchange Act.
4. Shares Subject to the Plan.
(a) Share Reserve. Subject to the provisions of Section 12 relating to
adjustments upon changes in stock, the stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate Fourteen
Million (14,000,000) shares of Common Stock, such number to be
increased each year on, respectively, January 31 2000, January 31,
2001, January 31, 2002, January 31, 2003, and January 31, 2004, by that
number of shares equal to two and one-half percent (2.5%) of the
Company's outstanding shares, measured as of such date. Notwithstanding
the foregoing (and subject to the provisions of Section 12), the stock
that may be issued pursuant to Incentive Stock Options shall not exceed
in the aggregate Fourteen Million (14,000,000) shares of Common Stock,
and the stock that may be issued pursuant to stock bonuses or
restricted stock agreements shall not exceed thirty percent (30%) of
the Share Reserve.
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(b) Reversion of Shares to the Share Reserve. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full (or vested in the case of restricted
stock), the stock not acquired under such Stock Award shall revert to
and again become available for issuance under the Plan. If any Common
Stock acquired pursuant to the exercise of an Option shall for any
reason be repurchased by the Company under an unvested share repurchase
option provided under the Plan, the stock repurchased by the Company
under such repurchase option shall revert to and again become available
for issuance, pursuant to Stock Awards other than Incentive Stock
Options, under the Plan. Shares subject to Stock Appreciation Rights
exercised in accordance with Section 8 of the Plan shall not be
available for subsequent issuance under the Plan.
(c) Source of Shares. The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.
(d) Share Reserve Limitation. Prior to the Listing Date, at no time shall
the total number of shares issuable upon exercise of all outstanding
Options and the total number of shares provided for under any stock
bonus or similar plan of the Company exceed the applicable percentage
as calculated in accordance with the conditions and exclusions of
Section 260.140.45 of Title 10 of the California Code of Regulations,
based on the shares of the Company which are outstanding at the time
the calculation is made.
5. Eligibility.
(a) Eligibility for Specific Stock Awards. Incentive Stock Options and
Stock Appreciation Rights appurtenant thereto may be granted only to
Employees. Stock Awards other than Incentive Stock Options and Stock
Appreciation Rights thereto may be granted to Employees, Directors and
Consultants.
(b) Ten Percent Stockholders. No Ten Percent Stockholder shall be eligible
for the grant of an Incentive Stock Option unless the exercise price of
such Option is at least one hundred ten percent (110%) of the Fair
Market Value of the Common Stock at the date of grant and the Option is
not exercisable after the expiration of five (5) years from the date of
grant.
Prior to the Listing Date, no Ten Percent Stockholder shall be
eligible for the grant of a Nonstatutory Stock Option unless the
exercise price of such Option is at least one hundred ten percent (110%)
of the Fair Market Value of the Common Stock at the date of grant.
Prior to the Listing Date, no Ten Percent Stockholder shall be
eligible for a restricted stock award unless the purchase price of the
restricted stock is at least one hundred percent (100%) of the Fair
Market Value of the Common Stock at the date of grant.
(c) Section 162(m) Limitation. Subject to the provisions of Section 12
relating to adjustments upon changes in stock, no employee shall be
eligible to be granted Options and Stock Appreciation Rights covering
more than seven hundred twenty thousand (720,000) shares of the Common
Stock during any calendar year. This subsection 5(c) shall not apply
prior to the Listing Date and, following the Listing Date, this
subsection 5(c) shall not apply until (i) the earliest of: (1) the
first material modification of the Plan (including any increase in the
number of shares reserved for issuance under the Plan in accordance
with Section 4); (2) the issuance of all of the shares of Common Stock
reserved for issuance under the Plan; (3) the expiration of the Plan;
or (4) the first meeting of stockholders at which Directors of the
Company are to be elected that occurs after the close of the third
calendar year following the calendar year in which occurred the first
registration of an equity security under Section 12 of the Exchange
Act; or (ii) such other date required by Section 162(m) of the Code and
the rules and regulations promulgated thereunder.
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(d) Consultants.
(i) Prior to the Listing Date, a Consultant shall not be eligible for the
grant of a Stock Award if, at the time of grant, either the offer or
the sale of the Company's securities to such Consultant is not exempt
under Rule 701 of the Securities Act ("Rule 701") because of the
nature of the services that the Consultant is providing to the
Company, or because the Consultant is not a natural person, or as
otherwise provided by Rule 701, unless the Company determines that
such grant need not comply with the requirements of Rule 701 and will
satisfy another exemption under the Securities Act as well as comply
with the securities laws of all other relevant jurisdictions.
(ii) From and after the Listing Date, a Consultant shall not be eligible
for the grant of a Stock Award if, at the time of grant, a Form S-8
Registration Statement under the Securities Act ("Form S-8") is not
available to register either the offer or the sale of the Company's
securities to such Consultant because of the nature of the services
that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by the
rules governing the use of Form S-8, unless the Company determines
both (i) that such grant (A) shall be registered in another manner
under the Securities Act (e.g., on a Form S-3 Registration
Statement) or (B) does not require registration under the Securities
Act in order to comply with the requirements of the Securities Act,
if applicable, and (ii) that such grant complies with the securities
laws of all other relevant jurisdictions.
(iii) As of April 7, 1999 Rule 701 and Form S-8 generally are available
to consultants and advisors only if (i) they are natural persons;
(ii) they provide bona fide services to the issuer, its parents,
its majority-owned subsidiaries or majority-owned subsidiaries of
the issuer's parent; and (iii) the services are not in connection
with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain
a market for the issuer's securities.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and a separate certificate or certificates
will be issued for shares purchased on exercise of each type of Option.
The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by
reference in the Option or otherwise) the substance of each of the
following provisions:
(a) Term. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Incentive Stock Option shall be exercisable
after the expiration of ten (10) years from the date it was granted.
(b) Exercise Price of an Incentive Stock Option. Subject to the provisions
of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred
percent (100%) of the Fair Market Value of the stock subject to the
Option on the date the Option is granted. Notwithstanding the
foregoing, an Incentive Stock Option may be granted with an exercise
price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Section 424(a) of the
Code.
(c) Exercise Price of a Nonstatutory Stock Option. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the
exercise price of each Nonstatutory Stock Option granted prior to the
Listing Date shall be not less than one hundred percent (100%) of the
Fair Market Value of the stock subject to the Option on the date the
Option is granted. The exercise price of each Nonstatutory Stock Option
granted on or after the Listing Date shall be not less than one hundred
percent (100%)of the Fair Market Value of the stock subject to the
Option on the date the Option is granted. Notwithstanding the
foregoing, a Nonstatutory Stock Option may be granted with an exercise
price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Section 424(a) of the
Code.
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(d) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes
and regulations, either (i) in cash at the time the Option is exercised
or (ii) at the discretion of the Board at the time of the grant of the
Option (or subsequently in the case of a Nonstatutory Stock Option) by
delivery to the Company of other Common Stock, according to a deferred
payment or other arrangement (which may include, without limiting the
generality of the foregoing, the use of other Common Stock) with the
Participant or in any other form of legal consideration that may be
acceptable to the Board; provided, however, that at any time that the
Company is incorporated in Delaware, payment of the Common Stock's "par
value," as defined in the Delaware General Corporation Law, shall not
be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any
applicable provisions of the Code, of any amounts other than amounts
stated to be interest under the deferred payment arrangement.
(e) Transferability of an Incentive Stock Option. An Incentive Stock Option
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. Notwithstanding the foregoing
provisions of this subsection 6(e), the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
(f) Transferability of a Nonstatutory Stock Option. Except to the extent
permitted by law, a Nonstatutory Stock Option granted prior to the
Listing Date shall not be transferable except by will or by the laws of
descent and distribution and shall be exercisable during the lifetime
of the Optionholder only by the Optionholder. A Nonstatutory Stock
Option granted on or after the Listing Date shall be transferable to
the extent provided in the Option Agreement. If the Nonstatutory Stock
Option does not provide for transferability, then the Nonstatutory
Stock Option shall not be transferable except by will or by the laws of
descent and distribution and shall be exercisable during the lifetime
of the Optionholder only by the Optionholder. Notwithstanding the
foregoing provisions of this subsection 6(f), the Optionholder may, by
delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
(g) Vesting Generally. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable
in periodic installments which may, but need not, be equal. The Option
may be subject to such other terms and conditions on the time or times
when it may be exercised (which may be based on performance or other
criteria) as the Board may deem appropriate. The vesting provisions of
individual Options may vary. The provisions of this subsection 6(g) are
subject to any Option provisions governing the minimum number of shares
as to which an Option may be exercised.
(h) Minimum Vesting Prior to the Listing Date. Notwithstanding the
foregoing subsection 6(g), Options granted prior to the Listing Date
shall provide for vesting of the total number of shares at a rate of at
least twenty percent (20%) per year over five (5) years from the date
the Option was granted, subject to reasonable conditions such as
continued employment. However, in the case of such Options granted to
Officers, Directors or Consultants, the Option may become fully
exercisable, subject to reasonable conditions such as continued
employment, at any time or during any period established by the
Company; for example, the vesting provision of the Option may provide
for vesting of less than twenty percent (20%) per year of the total
number of shares subject to the Option.
(i) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death
or Disability), the Optionholder may exercise his or her Option (to the
extent that the Optionholder was entitled to exercise it as of the date
of termination) but only within such period of time ending on the
earlier of (i) the date three (3) months following the
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termination of the Optionholder's Continuous Service (or such longer or
shorter period specified in the Option Agreement, which, for Options
granted prior to the Listing Date, shall not be less than thirty (30)
days, unless such termination is for cause) or (ii) the expiration of
the term of the Option as set forth in the Option Agreement. If, after
termination, the Optionholder does not exercise his or her Option within
the time specified in the Option Agreement, the Option shall terminate.
(j) Extension of Termination Date. An Optionholder's Option Agreement may
also provide that if the exercise of the Option following the
termination of the Optionholder's Continuous Service (other than upon
the Optionholder's death or Disability) would be prohibited at any time
solely because the issuance of shares would violate the registration
requirements under the Securities Act, then the Option shall terminate
on the earlier of (i) the expiration of the term of the Option set
forth in subsection 6(a) or (ii) the expiration of a period of three
(3) months after the termination of the Optionholder's Continuous
Service during which the exercise of the Option would not be in
violation of such registration requirements.
(k) Disability of Optionholder. In the event an Optionholder's Continuous
Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise it as of the date of
termination), but only within such period of time ending on the earlier
of (i) the date twelve (12) months following such termination (or such
longer or shorter period specified in the Option Agreement, which, for
Options granted prior to the Listing Date, shall not be less than six
(6) months) or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination, the Optionholder
does not exercise his or her Option within the time specified herein,
the Option shall terminate.
(l) Death of Optionholder. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder's Continuous
Service for a reason other than death, then the Option may be exercised
(to the extent the Optionholder was entitled to exercise the Option as
of the date of death) by the Optionholder's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or
by a person designated to exercise the option upon the Optionholder's
death pursuant to subsection 6(e) or 6(f), but only within the period
ending on the earlier of (1) the date eighteen (18) months following
the date of death (or such longer or shorter period specified in the
Option Agreement, which, for Options granted prior to the Listing Date,
shall not be less than six (6) months) or (2) the expiration of the
term of such Option as set forth in the Option Agreement. If, after
death, the Option is not exercised within the time specified herein,
the Option shall terminate.
(m) Early Exercise. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the
Optionholder's Continuous Service terminates to exercise the Option as
to any part or all of the shares subject to the Option prior to the
full vesting of the Option. Subject to the "Repurchase Limitation" in
subsection 11(h), any unvested shares so purchased may be subject to an
unvested share repurchase option in favor of the Company or to any
other restriction the Board determines to be appropriate.
(n) Right of Repurchase. Subject to the "Repurchase Limitation" in
subsection 11(h), the Option may, but need not, include a provision
whereby the Company may elect, prior to the Listing Date, to repurchase
all or any part of the vested shares acquired by the Optionholder
pursuant to the exercise of the Option.
(o) Right of First Refusal. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to
exercise a right of first refusal following receipt of notice from the
Optionholder of the intent to transfer all or any part of the shares
exercised pursuant to the Option. Except as expressly provided in this
subsection 6(o), such right of first refusal shall otherwise comply
with any applicable provisions of the Bylaws of the Company.
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(p) Re-Load Options. Without in any way limiting the authority of the Board
to make or not to make grants of Options hereunder, the Board shall
have the authority (but not an obligation) to include as part of any
Option Agreement a provision entitling the Optionholder to a further
Option (a "Re-Load Option") in the event the Optionholder exercises the
Option evidenced by the Option Agreement, in whole or in part. Any such
Re-Load Option shall (i) provide for a number of shares equal to the
number of shares acquired upon exercise of such Option; (ii) have an
expiration date which is the same as the expiration date of the Option
the exercise of which gave rise to such Re-Load Option; and (iii) have
an exercise price which is equal to one hundred percent (100%) of the
Fair Market Value of the Common Stock subject to the Re-Load Option on
the date of exercise of the original Option. Notwithstanding the
foregoing, a Re-Load Option shall be subject to the same exercise price
and term provisions heretofore described for Options under the Plan,
including the provisions of Section 5(b) applicable to Ten Percent
Stockholders.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the
grant of the original Option; provided, however, that the designation of
any Re-Load Option as an Incentive Stock Option shall be subject to the
one hundred thousand dollars ($100,000) annual limitation on
exercisability of Incentive Stock Options described in subsection 11(d)
and in Section 422(d) of the Code. There shall be no Re-Load Options on
a Re-Load Option. Any such Re-Load Option shall be subject to the
availability of sufficient shares under subsection 4(a) and the "Section
162(m) Limitation" on the grants of Options under subsection 5(c) and
shall be subject to such other terms and conditions as the Board may
determine which are not inconsistent with the express provisions of the
Plan regarding the terms of Options.
7. Provisions of Stock Awards other than Options.
(a) Stock Bonus Awards. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of stock bonus agreements may
change from time to time, and the terms and conditions of separate
stock bonus agreements need not be identical, but each stock bonus
agreement shall include (through incorporation of provisions hereof by
reference in the agreement or otherwise) the substance of each of the
following provisions:
(i) Consideration. A stock bonus shall be awarded in consideration for
past services actually rendered to the Company for its benefit.
(ii) Vesting. Subject to the "Repurchase Limitation" in subsection 11(h),
shares of Common Stock awarded under the stock bonus agreement may,
but need not, be subject to a share repurchase option in favor of
the Company in accordance with a vesting schedule to be determined
by the Board.
(iii) Termination of Participant's Continuous Service. Subject to the
"Repurchase Limitation" in subsection 11(h), in the event a
Participant's Continuous Service terminates, the Company may
reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination
under the terms of the stock bonus agreement.
(iv) Transferability. Shares of Common Stock granted pursuant to a stock
bonus agreement shall not be transferable prior to the time they
become vested.
(b) Restricted Stock Awards. Each restricted stock purchase agreement shall
be in such form and shall contain such terms and conditions as the
Board shall deem appropriate. The terms and conditions of the
restricted stock purchase agreements may change from time to time, and
the terms and conditions of separate restricted stock purchase
agreements need not be identical, but each restricted stock purchase
agreement shall include (through incorporation of provisions hereof by
reference in the agreement or otherwise) the substance of each of the
following provisions:
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(i) Purchase Price. Subject to the provisions of subsection 5(b)
regarding Ten Percent Stockholders, the purchase price under each
restricted stock purchase agreement shall be such amount as the
Board shall determine and designate in such restricted stock
purchase agreement. For restricted stock awards made prior to the
Listing Date, the purchase price shall not be less than one hundred
percent (100%) of the stock's Fair Market Value on the date such
award is made or at the time the purchase is consummated. For
restricted stock awards made on or after the Listing Date, the
purchase price shall not be less than eighty-five percent (85%) of
the stock's Fair Market Value on the date such award is made or at
the time the purchase is consummated.
(ii) Consideration. The purchase price of stock acquired pursuant to the
restricted stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the Board,
according to a deferred payment or other arrangement with the
Participant; or (iii) in any other form of legal consideration that
may be acceptable to the Board in its discretion; provided, however,
that at any time that the Company is incorporated in Delaware,
payment of the Common Stock's "par value," as defined in the
Delaware General Corporation Law, shall not be made by deferred
payment.
(iii) Vesting. Subject to the "Repurchase Limitation" in subsection
11(h), shares of Common Stock acquired under the restricted stock
purchase agreement may, but need not, be subject to a share
repurchase option in favor of the Company in accordance with a
vesting schedule to be determined by the Board.
(iv) Termination of Participant's Continuous Service. Subject to the
"Repurchase Limitation" in subsection 11(h), in the event a
Participant's Continuous Service terminates, the Company may
repurchase or otherwise reacquire any or all of the shares of Common
Stock held by the Participant which have not vested as of the date
of termination under the terms of the restricted stock purchase
agreement.
(v) Transferability. Except to the extent permitted by law, for a
restricted stock award made before the Listing Date, rights to
acquire shares under the restricted stock purchase agreement shall
not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the
Participant only by the Participant. For a restricted stock award
made on or after the Listing Date, rights to acquire shares under
the restricted stock purchase agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in
the restricted stock purchase agreement, as the Board shall
determine in its discretion, so long as stock awarded under the
restricted stock purchase agreement remains subject to the terms of
the restricted stock purchase agreement.
8. Stock Appreciation Rights.
(a) The Board or Committee shall have full power and authority, exercisable
in its sole discretion, to grant Stock Appreciation Rights under the
Plan to Employees or Directors of or Consultants to, the Company or its
Affiliates. To exercise any outstanding Stock Appreciation Right, the
holder must provide written notice of exercise to the Company in
compliance with the provisions of the Stock Award Agreement evidencing
such right. Except as provided in subsection 5(c), no limitation shall
exist on the aggregate amount of cash payments the Company may make
under the Plan in connection with the exercise of a Stock Appreciation
Right.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(i) Tandem Stock Appreciation Rights. Tandem Stock Appreciation Rights
will be granted appurtenant to an Option (other than an Incentive
Stock Option), and shall, except as specifically set forth in this
Section 8, be subject to the same terms and conditions applicable to
the particular Option grant to which it pertains. Tandem Stock
Appreciation Rights will require the holder to elect between the
exercise of the underlying Option for shares of stock and the
surrender, in whole or in part, of such Option for an appreciation
distribution. The appreciation distribution payable on the exercised
Tandem Right shall be in cash (or, if so provided, in an equivalent
number of
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shares of stock based on Fair Market Value on the date of the Option
surrender) in an amount up to the excess of (A) the Fair Market Value
(on the date of the Option surrender) of the number of shares of
stock covered by that portion of the surrendered Option in which the
Optionholder is vested over (B) the aggregate exercise price payable
for such vested shares.
(ii) Concurrent Stock Appreciation Rights. Concurrent Rights will be
granted appurtenant to an Option and may apply to all or any portion
of the shares of stock subject to the underlying Option and shall,
except as specifically set forth in this Section 8, be subject to
the same terms and conditions applicable to the particular Option
grant to which it pertains. A Concurrent Right shall be exercised
automatically at the same time the underlying Option is exercised
with respect to the particular shares of stock to which the
Concurrent Right pertains. The appreciation distribution payable on
an exercised Concurrent Right shall be in cash (or, if so provided,
in an equivalent number of shares of stock based on Fair Market
Value on the date of the exercise of the Concurrent Right) in an
amount equal to such portion as shall be determined by the Board or
the Committee at the time of the grant of the excess of (A) the
aggregate Fair Market Value (on the date of the exercise of the
Concurrent Right) of the vested shares of stock purchased under the
underlying Option which have Concurrent Rights appurtenant to them
over (B) the aggregate exercise price paid for such shares.
(iii) Independent Stock Appreciation Rights. Independent Rights will be
granted independently of any Option and shall, except as
specifically set forth in this Section 8, be subject to the same
terms and conditions applicable to Nonstatutory Stock Options as
set forth in Section 6. They shall be denominated in share
equivalents. The appreciation distribution payable on the exercised
Independent Right shall be not greater than an amount equal to the
excess of (A) the aggregate Fair Market Value (on the date of the
exercise of the Independent Right) of a number of shares of Company
stock equal to the number of share equivalents in which the holder
is vested under such Independent Right, and with respect to which
the holder is exercising the Independent Right on such date, over
(B) the aggregate Fair Market Value (on the date of the grant of
the Independent Right) of such number of shares of Company stock.
The appreciation distribution payable on the exercised Independent
Right shall be in cash or, if so provided, in an equivalent number
of shares of stock based on Fair Market Value on the date of the
exercise of the Independent Right.
9. Covenants of the Company.
(a) Availability of Shares. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of
Common Stock required to satisfy such Stock Awards.
(b) Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and
sell shares of Common Stock upon exercise of the Stock Awards;
provided, however, that this undertaking shall not require the Company
to register under the Securities Act the Plan, any Stock Award or any
stock issued or issuable pursuant to any such Stock Award. If, after
reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock under
the Plan, the Company shall be relieved from any liability for failure
to issue and sell stock upon exercise of such Stock Awards unless and
until such authority is obtained.
10. Use of Proceeds from Stock.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
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11. Miscellaneous.
(a) Acceleration of Exercisability and Vesting. The Board shall have the
power to accelerate the time at which a Stock Award may first be
exercised and/or the time during which a Stock Award or any part
thereof will vest in accordance with the Plan, notwithstanding the
provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(b) Stockholder Rights. No Participant shall be deemed to be the holder of,
or to have any of the rights of a holder with respect to, any shares
subject to an Option unless and until such Participant has satisfied
all requirements for exercise of the Option pursuant to its terms.
(c) No Employment or Other Service Rights. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall
confer upon any Participant or other holder of Stock Awards any right
to continue to serve the Company or an Affiliate in the capacity in
effect at the time the Stock Award was granted or shall affect the
right of the Company or an Affiliate to terminate (i) the employment of
an Employee with or without notice and with or without cause, for any
reason, (ii) the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate or (iii) the
service of a Director pursuant to the Bylaws of the Company or an
Affiliate, and any applicable provisions of the corporate law of the
state in which the Company or the Affiliate is incorporated, as the
case may be.
(d) Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of stock
with respect to which Incentive Stock Options are exercisable for the
first time by any Optionholder during any calendar year (under all
plans of the Company and its Affiliates) exceeds one hundred thousand
dollars ($100,000), the Options or portions thereof which exceed such
limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.
(e) Investment Assurances. The Company may require a Participant, as a
condition of exercising or acquiring stock under any Stock Award, (i)
to give written assurances satisfactory to the Company as to the
Participant'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 matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the
merits and risks of exercising the Stock Award; and (ii) to give
written assurances satisfactory to the Company stating that the
Participant is acquiring the stock subject to the Stock Award for the
Participant's own account and not with any present intention of selling
or otherwise distributing the stock. The foregoing requirements, and
any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares upon the exercise or
acquisition of stock under the Stock Award has been registered under a
then currently effective registration statement under the Securities
Act 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
stock.
(f) Withholding Obligations. To the extent provided by the terms of a Stock
Award Agreement, the Participant may satisfy any federal, state or
local tax withholding obligation relating to the exercise or
acquisition of stock under a Stock Award by any of the following means
(in addition to the Company's right to withhold from any compensation
paid to the Participant by the Company) or by a combination of such
means: (i) tendering a cash payment; (ii) authorizing the Company to
withhold shares from the shares of the Common Stock otherwise issuable
to the Participant as a result of the exercise or acquisition of stock
under the Stock Award; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.
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(g) Information Obligation. Prior to the Listing Date, to the extent
required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to
Participants at least annually. This subsection 11(g) shall not apply
to key Employees whose duties in connection with the Company assure
them access to equivalent information.
(h) Repurchase Limitation. The terms of any repurchase option shall be
specified in the Stock Award and may be either at Fair Market Value at
the time of repurchase or at not less than the original purchase price.
To the extent required by Section 260.140.41 and Section 260.140.42 of
Title 10 of the California Code of Regulations, any repurchase option
contained in a Stock Award granted prior to the Listing Date to a
person who is not an Officer, Director or Consultant shall be upon the
terms described below:
(i) Fair Market Value. If the repurchase option gives the Company the
right to repurchase the shares upon termination of employment at not
less than the Fair Market Value of the shares to be purchased on the
date of termination of Continuous Service, then (i) the right to
repurchase shall be exercised for cash or cancellation of purchase
money indebtedness for all but not less than all of the shares
within ninety (90) days of termination of Continuous Service (or in
the case of shares issued upon exercise of Stock Awards after such
date of termination, within ninety (90) days after the date of the
exercise) or such longer period as may be agreed to by the Company
and the Participant (for example, for purposes of satisfying the
requirements of Section 1202(c)(3) of the Code regarding "qualified
small business stock") and (ii) the right terminates when the shares
become publicly traded.
(ii) Original Purchase Price. If the repurchase option gives the Company
the right to repurchase the shares upon termination of Continuous
Service at the original purchase price, then (i) the right to
repurchase at the original purchase price shall lapse at the rate of
at least twenty percent (20%) of the shares per year over five (5)
years from the date the Stock Award is granted (without respect to
the date the Stock Award was exercised or became exercisable) and
(ii) the right to repurchase shall be exercised for cash or
cancellation of purchase money indebtedness for all but not less
than all of the shares within ninety (90) days of termination of
Continuous Service (or in the case of shares issued upon exercise of
Options after such date of termination, within ninety (90) days
after the date of the exercise) or such longer period as may be
agreed to by the Company and the Participant (for example, for
purposes of satisfying the requirements of Section 1202(c)(3) of the
Code regarding "qualified small business stock").
12. Adjustments upon Changes in Stock.
(a) Capitalization Adjustments to Stock Subject to the Plan. If any change
is made in the stock subject to the Plan due to a change in corporate
capitalization and without the receipt of consideration by the Company
(through reincorporation, stock dividend, stock split, reverse stock
split, combination or reclassification of shares), the Plan will be
appropriately adjusted in the class(es) and maximum number of
securities subject to the Plan pursuant to subsection 4(a). Such
adjustments shall be made by the Board, the determination of which
shall be final, binding and conclusive.
(b) Capitalization and Transaction Adjustments to Outstanding Stock
Awards. If any change is made in the stock subject to any outstanding
Stock Award without the receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, separation, stock dividend, dividend in property other
than cash, stock split, reverse stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of
consideration by the Company), such outstanding Stock Awards shall be
appropriately adjusted in the classes and number of securities and
price per share of stock subject to such outstanding Stock Awards. Such
adjustments shall be made by the Board, the determination of which
shall be final, binding and conclusive.
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(c) Capitalization and Transaction Adjustments (Section 162(m)). If any
change is made in the stock subject to the Plan, or subject to any
Stock Award, without the receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, separation, stock dividend, dividend in property other
than cash, stock split, reverse stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted
in the maximum number of securities subject to award to any person
pursuant to subsection 5(c). (The conversion of any convertible
securities of the Company shall not be treated as a transaction
"without receipt of consideration" by the Company.) Such adjustments
shall be made by the Board, the determination of which shall be final,
binding and conclusive.
(d) Change in Control--Dissolution or Liquidation. In the event of a
dissolution or liquidation of the Company, then such Stock Awards shall
be terminated if not exercised (if applicable) prior to such event.
(e) Change in Control--Asset Sale, Merger, Consolidation or Reverse
Merger. In the event of (1) a sale of all or substantially all of the
assets of the Company, (2) a merger or consolidation in which the
Company is not the surviving corporation or (3) a reverse merger in
which the Company is the surviving corporation but the shares of Common
Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of
securities, cash or otherwise, then any surviving corporation or
acquiring corporation shall assume or continue any Stock Awards
outstanding under the Plan or shall substitute similar stock awards
(including an award to acquire the same consideration paid to the
stockholders in the transaction described in this subsection 12(e) for
those outstanding under the Plan. In the event any surviving
corporation or acquiring corporation refuses to assume or continue such
Stock Awards or to substitute similar stock awards for those
outstanding under the Plan, then with respect to Stock Awards held by
Participants whose Continuous Service has not terminated, the vesting
of such Stock Awards (and, if applicable, the time during which such
Stock Awards may be exercised) shall be accelerated in full prior to
such event, and the Stock Awards shall terminate if not exercised (if
applicable) at or prior to such event. With respect to any other Stock
Awards outstanding under the Plan, such Stock Awards shall terminate if
not exercised (if applicable) prior to such event.
(f) Change in Control--Securities Acquisition. After the Listing Date, in
the event of an acquisition by any person, entity or group within the
meaning of Section 13(d) or 14(d) of the Exchange Act, or any
comparable successor provisions (excluding any employee benefit plan,
or related trust, sponsored or maintained by the Company or an
Affiliate) of the beneficial ownership (within the meaning of Rule 13d-
3 promulgated under the Exchange Act, or comparable successor rule) of
securities of the Company representing at least fifty percent (50%) of
the combined voting power entitled to vote in the election of
Directors, then with respect to Stock Awards held by Participants whose
Continuous Service has not terminated, the vesting of such Stock Awards
(and, if applicable, the time during which such Stock Awards may be
exercised) shall be accelerated in full.
13. Amendment of the Plan and Stock Awards.
(a) Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 12 relating to
adjustments upon changes in stock, no amendment shall be effective
unless approved by the stockholders of the Company to the extent
stockholder approval is necessary to satisfy the requirements of
Section 422 of the Code, Rule 16b-3 or any NASDAQ or securities
exchange listing requirements.
(b) Stockholder Approval. The Board may, in its sole discretion, submit any
other amendment to the Plan for stockholder approval, including, but
not limited to, amendments to the Plan intended to satisfy the
requirements of Section 162(m) of the Code and the regulations
thereunder regarding the exclusion of performance-based compensation
from the limit on corporate deductibility of compensation paid to
certain executive officers.
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(c) Contemplated Amendments. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or
advisable to provide eligible Employees with the maximum benefits
provided or to be provided under the provisions of the Code and the
regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under
it into compliance therewith.
(d) No Impairment of Rights. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the
Plan unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
(e) Amendment of Stock Awards. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided,
however, that the rights under any Stock Award shall not be impaired by
any such amendment unless (i) the Company requests the consent of the
Participant and (ii) the Participant consents in writing.
14. Termination or Suspension of the Plan.
(a) Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before
the tenth (10th) anniversary of the date the Plan is adopted by the
Board or approved by the stockholders of the Company, whichever is
earlier. No Stock Awards may be granted under the Plan while the Plan
is suspended or after it is terminated. Notwithstanding the foregoing,
all Incentive Stock Options shall be granted, if at all, no later than
the last day preceding the tenth (10th) anniversary of the earlier of
(i) the date on which the latest increase in the maximum number of
shares issuable under the Plan was approved by the stockholders of the
Company or (ii) the date such amendment was adopted by the Board.
(b) No Impairment of Rights. Rights and obligations under any Stock Award
granted while the Plan is in effect shall not be impaired by suspension
or termination of the Plan, except with the written consent of the
Participant.
15. Effective Date of Plan.
The Plan shall become effective as of the date on which it is adopted
by the Board, but no Stock Award shall be exercised (or, in the case of
a stock bonus, shall be granted) unless and until the Plan has been
approved by the stockholders of the Company, which approval shall be
within twelve (12) months before or after the date the Plan is adopted
by the Board.
16. Choice of Law.
All questions concerning the construction, validity and interpretation
of this Plan shall be governed by the law of the State of California,
without regard to such state's conflict of laws rules.
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FORM OF PROXY
CLARENT CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE SPECIAL MEETING OF
STOCKHOLDERS TO BE HELD ON FEBRUARY 15, 2000
The undersigned hereby appoints Jerry Shaw-Yau Chang and Richard J. Heaps
and each of them, as attorneys and proxies of the undersigned, with full power
of substitution, to vote all of the shares of stock of Clarent Corporation,
which the undersigned may be entitled to vote at the Special Meeting of
Stockholders of Clarent Corporation to be held at 700 Chesapeake Drive,
Redwood City, CA 94063 on Tuesday, February 15, 2000 at 11:00 a.m. (local
time), and at any and all postponements, continuations and adjournments
thereof, with all powers that the undersigned would posses if personally
present, upon and in respect of the following matters and in accordance with
the following instructions, with discretionary authority as to any and all
other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
PROPOSAL 1 AND FOR PROPOSAL 2, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY
STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN
ACCORDANCE THEREWITH.
(Continued and to be signed on other side)
FOLD AND DETACH HERE
<PAGE>
Please mark [_]
your vote
as indicated
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
PROPOSAL 1: To approve an amendment to the Company's Certificate of
Incorporation to increase the authorized number of shares of Common Stock from
50,000,000 shares to 200,000,000 shares.
[_] FOR [_] AGAINST [_] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2
PROPOSAL 2: To approve an amendment to the Company's 1999 Amended and Restated
Equity Incentive Plan to increase the aggregate number of shares of Common Stock
authorized for issuance under such plan by 2,641,830 shares, from 11,358,170
shares to 14,000,000 shares.
[_] FOR [_] AGAINST [_] ABSTAIN
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
DATED ____________________, 2000 _____________________________________________
SIGNATURE(S)
Please sign exactly as your name appears hereon.
If the stock is registered in the names of two
or more persons, each should sign. Executors,
administrators, trustees, guardians and
attorneys-in-fact should add their titles. If
signer is a corporation, please give full
corporate name and have a duly authorized
officer sign, stating title. If signer is a
partnership, please sign in partnership name by
authorized person.
