<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
</TABLE>
NETRO CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
NETRO CORPORATION
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 25, 2000
The Annual Meeting of Shareholders (the "Annual Meeting") of Netro
Corporation, a California corporation (the "Company"), will be held at the
Westin Hotel, Alameda Room, located at 5101 Great America Parkway, Santa Clara,
California 95054 on Thursday, May 25, 2000, at 7:30 a.m., Pacific time, for the
following purposes:
1. To elect the following Class I directors of the Company each to serve
until the 2002 Annual Meeting or until their respective successors have
been elected or appointed: Thomas R. Baruch, Irwin Federman and Robert
J. Wynne;
2. To approve the amendment of the Company's 1997 Directors' Stock Option
Plan to increase the initial grant to new directors to 50,000 shares,
vesting in four equal increments on the first four anniversaries of the
date the director joins the board, and to increase the annual grant to
all directors to 12,500 shares, vesting in full on the fourth
anniversary of the date of grant;
3. To ratify the appointment of Arthur Andersen LLP as the Independent
Public Accountants of the Company for the fiscal year ending December
31, 2000; and
4. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
The foregoing items of business, including the nominees for directors, are
more fully described in the Proxy Statement which is attached and made a part of
this Notice.
The Board of Directors has fixed the close of business on April 6, 2000 as
the record date for determining the shareholders entitled to notice of and to
vote at the Annual Meeting and any adjournment or postponement thereof.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, whether or not you expect to attend the Annual Meeting in
person, you are urged to mark, date, sign and return the enclosed proxy card as
promptly as possible in the postage-prepaid envelope provided to ensure your
representation and the presence of a quorum at the Annual Meeting. If you send
in your proxy card and then decide to attend the Annual Meeting to vote your
shares in person, you may still do so. Your proxy is revocable in accordance
with the procedures set forth in the Proxy Statement.
By Order of the Board of Directors,
Tae Hea Nahm
Secretary
San Jose, California
April 27, 2000
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. IF A QUORUM IS NOT REACHED, THE COMPANY WILL HAVE THE ADDED EXPENSE OF
RE-ISSUING THESE PROXY MATERIALS. IF YOU ATTEND THE MEETING AND SO DESIRE, YOU
MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
THANK YOU FOR ACTING PROMPTLY.
<PAGE> 3
NETRO CORPORATION
3860 N. FIRST STREET
SAN JOSE, CALIFORNIA 95134
------------------------
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of Netro Corporation, a California
corporation (the "Company"), of proxies in the enclosed form for use in voting
at the Annual Meeting of Shareholders (the "Annual Meeting") to be held at the
Westin Hotel, Alameda Room, located at 5101 Great America Parkway, Santa Clara,
California 95054 on Thursday, May 25, 2000, at 7:30 a.m., Pacific time, and any
adjournment or postponement thereof.
This Proxy Statement, the enclosed proxy card and the Company's Annual
Report to Shareholders for the fiscal year ended December 31, 1999, including
financial statements, were first mailed to shareholders entitled to vote at the
meeting on or about April 27, 2000.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
Fred A.M. Bauer, General Counsel) a written notice of revocation or a duly
executed proxy bearing a later date, or by attending the Annual Meeting and
voting in person.
RECORD DATE; VOTING SECURITIES
The close of business on April 6, 2000 has been fixed as the record date
(the "Record Date") for determining the holders of shares of Common Stock of the
Company entitled to notice of and to vote at the Annual Meeting. At the close of
business on the Record Date, the Company had approximately 49,959,023 shares of
Common Stock outstanding and held of record by approximately 302 shareholders.
VOTING AND SOLICITATION
Holders of Common Stock on the Record Date are entitled to one vote per
share on all matters. Shares of Common Stock may not be voted cumulatively.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspector of Elections with the assistance of the Company's transfer agent.
The Inspector of Elections will also determine whether or not a quorum is
present. The affirmative vote of a majority of shares represented and voting at
a duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute at least a majority of the required quorum) is
required under California law for approval of proposals presented to
shareholders. In general, California law also provides that a quorum consists of
a majority of the shares entitled to vote, represented either in person or by
proxy. The Inspector of Elections will treat abstentions as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum but as not voting for purposes of determining the approval of any matter
submitted to the shareholders for a vote. Thus, an abstention will have the same
effect as a vote against a particular proposal.
The shares represented by the proxies received, properly marked, dated,
signed and not revoked, will be voted at the Annual Meeting. Where such proxies
specify a choice with respect to any matter to be acted upon, the shares will be
voted in accordance with the specifications made. Any proxy in the enclosed form
which is returned but is not marked will be voted FOR the election of directors,
FOR amendment of the Company's 1997 Directors' Stock Option Plan, FOR
ratification of the appointment of the designated independent auditors and as
the proxy holders deem advisable on other matters that may come before the
meeting, as the case may be with respect to the item not marked. If a broker
indicates on the enclosed proxy or its substitute that it does not have
discretionary authority as to certain shares to vote on a particular matter
<PAGE> 4
("broker non-votes"), those shares will be considered as represented for
purposes of determining a quorum, but will not be considered as voting, with
respect to that matter. While there is no definitive specific statutory or case
law authority in California concerning the proper treatment of abstentions and
broker non-votes, the Company believes that the tabulation procedures to be
followed by the Inspector of Elections are consistent with the general statutory
requirements in California concerning voting of shares and determination of a
quorum.
The solicitation of proxies will be conducted by mail and the Company will
bear all attendant costs. These costs will include the expense of preparing and
mailing proxy solicitation materials for the Annual Meeting and reimbursements
paid to brokerage firms and others for their expenses incurred in forwarding
solicitation materials regarding the Annual Meeting to beneficial owners of the
Company's Common Stock. The Company may conduct further solicitation personally,
telephonically or by facsimile through its officers, directors and employees,
none of whom will receive additional compensation for assisting with the
solicitation.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES FOR CLASS I DIRECTOR
The Company's Board of Directors currently consists of six members,
including three Class I directors and three Class II directors. Each Class I and
Class II director is elected for two year terms, with Class I directors elected
in even-numbered years (e.g., 2000) and the Class II directors elected in
odd-numbered years (e.g., 2001). Class I director Neal Douglas resigned as a
Class I director in April 2000 for reasons unrelated to the Company, and the
Board subsequently reduced the authorized number of directors from seven to six.
The Board has nominated the three persons named below to serve as Class I
directors until the next Annual Meeting of Shareholders at which Class I
directors are elected or until their successors are duly elected and qualified.
In the event any nominee is unable or unwilling to serve as a director at the
time of the Annual Meeting, the proxies may be voted for the balance of those
nominees named and for any substitute nominee designated by the present Board or
the proxy holders to fill such vacancy, or for the balance of the nominees named
without nomination of a substitute, or the size of the Board may be reduced in
accordance with the Bylaws of the Company. The Board has no reason to believe
that any of the persons named below will be unable or unwilling to serve as a
nominee or as a director if elected.
Assuming a quorum is present, the three nominees receiving the highest
number of affirmative votes of shares entitled to be voted for them will be
elected as directors of the Company for the ensuing year. Unless marked
otherwise, proxies received will be voted FOR the election of each of the three
nominees named below. In the event that additional persons are nominated for
election as directors, the proxy holders intend to vote all proxies received by
them in such a manner as will ensure the election of as many of the nominees
listed below as possible, and, in such event, the specific nominees to be voted
for will be determined by the proxy holders.
The names of the nominees for Class I director, their ages as of March 31,
2000 and certain other information about them are set forth below:
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
--------------- --- -------------------- --------------
<S> <C> <C> <C>
Thomas R. Baruch................... 61 General Partner, CMEA Ventures 1994
Irwin Federman..................... 64 General Partner, U.S Venture 1995
Partners
Robert J. Wynne.................... 57 Private Consultant 2000
</TABLE>
There are no family relationships among any of the directors or executive
officers of the Company.
THOMAS R. BARUCH has been a director since November 1994. Mr. Baruch has
been a General Partner in CMEA Ventures, a venture capital firm, since 1988. Mr.
Baruch is also a Special Partner in New Enterprise Associates, a venture capital
firm. Prior to joining CMEA, Mr. Baruch was the President and Chief Executive
Officer of Microwave Technology, Inc., from 1983 to 1988. Mr. Baruch serves on
the boards of directors of
2
<PAGE> 5
Physiometrix Inc., a developer and manufacturer of non-invasive advanced medical
products, Symyx Technologies, Inc., a developer of industrial materials, and
several privately held companies.
IRWIN FEDERMAN has been a director since June 1995. Mr. Federman has been a
general partner of U.S. Venture Partners, a venture capital firm, since 1990.
Mr. Federman serves on the boards of directors of CheckPoint Software
Technologies, Inc., a network security software company, Komag Incorporated, a
disk drive media manufacturer, MMC Networks, Inc., a developer and supplier of
network processors, QuickLogic, Inc., a semiconductor company, SanDisk
Corporation, a solid-state memory system company and several privately-held
companies.
ROBERT J. WYNNE has been a director since February 2000. Mr. Wynne has
served as a consultant to Sony Pictures Entertainment since January 2000. Prior
to that time, he served Sony Pictures Entertainment in a variety of roles
including most recently as Co-President and Chief Operating Officer. He joined
Sony Pictures Entertainment in November 1995 as Corporate Executive Vice
President. Prior to joining Sony Pictures Entertainment, Mr. Wynne was a founder
and partner of Hill Wynne Troop & Meisinger, a law firm. Mr. Wynne serves as a
member of the board of directors of, or as an advisor or consultant to, several
privately held companies and venture funds.
CLASS II DIRECTORS
The names of the Company's Class II directors, and certain information
about them as of March 31, 2000, are set forth below:
<TABLE>
<CAPTION>
NAME OF DIRECTOR AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
---------------- --- -------------------- --------------
<S> <C> <C> <C>
Richard M. Moley................... 60 Private Investor 1997
Gideon Ben-Efraim.................. 57 President and Chief Executive 1994
Officer of the Company
John L. Walecka.................... 40 General Partner, Redpoint Ventures 1995
</TABLE>
RICHARD M. MOLEY has been a director since November 1997, Chairman of the
Board of Directors from March 1998 to April 2000 and Chairman Emeritus since
April 2000. Since August 1997, Mr. Moley has been a private investor. From July
1996 to August 1997, he served as Senior Vice President, Networking and as a
director of Cisco Systems, Inc., following Cisco Systems' purchase of StrataCom,
Inc., where he was, from June 1986 to July 1996, Chairman of the Board, Chief
Executive Officer and President. Mr. Moley serves on the boards of directors of
Linear Technology Corporation, a designer and manufacturer of linear integrated
circuits, Echelon Corporation, a developer of control network hardware and
software products, and several privately held companies.
GIDEON BEN-EFRAIM has served as the Company's President, Chief Executive
Officer, a director since founding the Company in November 1994 and Chairman of
the Board of Directors since April 2000. From November 1994 to March 1998, Mr.
Ben-Efraim was also Chairman of the Board of Directors. Prior to joining Netro,
Mr. Ben-Efraim was a founder of and Executive Vice President, Engineering and
Business Development at P-Com Inc., a digital microwave radio company, from June
1991 to November 1994. Mr. Ben-Efraim received a B.S. in Industrial Engineering
and Management from Tel Aviv University.
JOHN L. WALECKA has been a director since November 1995. Mr. Walecka is a
founding partner at Redpoint Ventures, a venture capital firm formed in
September 1999. From 1990 to September 1999, Mr. Walecka was a general partner
at Brentwood Venture Capital, a venture capital firm. Mr. Walecka serves on the
boards of directors of Rhythms NetConnections Inc., a service provider using
digital subscriber line technology, Vitria Technology, Inc. a provider of
integration software, and several privately held companies.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1999 (the "last fiscal year"),
the Board met seven times and no director attended fewer than 75% of the
aggregate number of meetings of the Board and meetings of the committees of the
Board on which he or she serves. The Board has an Audit Committee and a
Compensation
3
<PAGE> 6
Committee. The Board does not have a nominating committee or a committee
performing the functions of a nominating committee. A nomination for a director
made by a shareholder must be submitted to Fred A. M. Bauer, General Counsel, at
the address of the Company's executive offices set forth above on or after
February 27, 2001 and on or before May 8, 2001. Nominations that are intended to
be included in the Company's proxy statement for the 2001 Annual Meeting must be
submitted no later than December 29, 2000. See "Deadline for Receipt of
Shareholder Proposals for 2001 Annual Meeting."
The Audit Committee consists of directors Federman, Walecka and Wynne,
three of the Company's non-employee directors, and held four meetings during the
last fiscal year. The Audit Committee recommends the engagement of the firm of
certified public accountants to audit the financial statements of the Company
and monitors the effectiveness of the audit effort, the Company's financial and
accounting organization and its system of internal accounting controls.
The Compensation Committee consists of directors Baruch and Walecka, and
held four meetings during the last fiscal year. Its functions are to establish
and administer the Company's policies regarding annual executive salaries and
cash incentives and long-term equity incentives.
COMPENSATION OF DIRECTORS
Directors currently receive no cash fees for services provided in that
capacity but are reimbursed for out-of-pocket expenses incurred in connection
with attendance at meetings of the Board. The Company's 1997 Directors' Stock
Option Plan (the "Directors' Plan"), as amended by the Board in January 2000,
provides that: each person who becomes a nonemployee director of the Company
after such amendment will receive an initial grant of 50,000 shares, which vests
in four equal increments on the first four anniversaries of the date the
director joins the board; and each director of the Company will receive an
annual grant of 12,500 shares on the first day of each fiscal year, which vests
in full on the fourth anniversary of the date of grant. However, each
non-employee director who received a 20,000 share initial grant under the
original version of the Directors' Plan will be eligible to receive an annual
grant of a fully vested option to purchase 5,000 shares of common stock until
the first day of the Company's fiscal year following the date on which the
initial 20,000 share option has fully vested under the terms of that option.
After that 20,000 share option has fully vested, each director will be eligible
to receive an annual grant of a fully vested option to purchase 12,500 shares of
common stock each year. During 1999, Messrs. Baruch, Douglas, Federman, Moley
and Walecka were non-employee directors who received a 20,000 share initial
grant under the original version of the Directors' Plan. In 1999, each of these
received an option to purchase 5,000 shares at an exercise price of $2.00 per
share.
RECOMMENDATION OF THE BOARD:
THE BOARD RECOMMENDS A VOTE FOR
THE ELECTION OF ALL NOMINEES NAMED ABOVE.
PROPOSAL NO. 2
AMENDMENTS TO 1997 DIRECTORS' STOCK OPTION PLAN
At the Annual Meeting, the Company's shareholders are being asked to
approve amendments to the Company's 1997 Directors' Stock Option Plan (the
"Directors' Plan") in order to increase the initial grant to new directors to
50,000 shares, vesting in four equal increments on the first four anniversaries
of the date the director joins the board, and to increase the annual grant to
all directors to 12,500 shares, vesting in full on the fourth anniversary of the
date of grant. The following is a summary of principal features of the
Directors' Plan. This summary, however, does not purport to be a complete
description of all the provisions of the Directors' Plan. Any shareholder of the
Company who wishes to obtain a copy of the actual plan document may do so upon
written request to the General Counsel at the principal executive offices of the
Company.
4
<PAGE> 7
PLAN DESCRIPTION
The Directors' Plan was adopted by the Board in December 1997, amended in
June 1999 and amended again by the Board in January 2000. The June 1999
amendments were approved by the Company's shareholders in August 1999. As of
December 31, 1999:
- a total of 300,000 shares of common stock had been reserved for issuance;
- options to purchase 125,000 shares of common stock were outstanding at a
weighted average price of $2.00; and
- 175,000 shares remained available for future grants.
In January 2000, the Board amended the Directors' Plan to provide that the
initial grant to new directors be increased to 50,000 shares, vesting in four
equal increments on the first four anniversaries of the date the director joins
the Board. In addition, the amendment also increased the size of the annual
grant to all directors to 12,500 shares, which shares vest in full on the fourth
anniversary of the date of grant. These modifications are subject to, and will
become effective as of the date of, the approval of the Company's shareholders,
which is being solicited hereby. Under the Directors' Plan prior to this
amendment, each individual who first became a non-employee director after the
effective date of the June 1999 amendment received an automatic initial grant of
an option to purchase 10,000 shares of common stock. Initial grants to
non-employee directors will be vested and exercisable in full as of the date of
grant. The Directors' Plan also provided, prior to the January 2000 amendment,
for additional grants of fully vested options to purchase 10,000 shares of
common stock on the first day of each fiscal year to each non-employee director
who has served on the Board for at least six months. A non-employee director who
received a 20,000 share initial grant under the original version of the
Directors' Plan, however, will be eligible to receive an annual grant of a fully
vested option to purchase 5,000 shares of common stock until the first day of
the Company's fiscal year following the date on which the initial 20,000 share
option has fully vested under the terms of that option. After that 20,000 share
option has fully vested, prior to the January 2000 amendment, each director was
eligible to receive an annual grant of a fully vested option to purchase 10,000
shares of common stock each year. The per share exercise price of all stock
options granted under the Directors' Plan must be equal to the fair market value
of a share of the Company's common stock on the grant date. Options granted
under the Directors' Plan have a term of ten years. Unvested options, however,
will terminate when the optionee ceases to serve as a director and vested
options will terminate if they are not exercised within 12 months after the
director's death or disability or within 90 days after the director ceases to
serve as a director for any other reason.
In the event of change of control of the Company, each non-employee
director will be entitled to have his options assumed by the successor or else
his existing options will become fully vested.
The Directors' Plan is designed to work automatically without
administration. However, to the extent administration is necessary, it will be
performed by the Board other than the director or directors who have a personal
interest at stake. Although the Board may amend or terminate the Directors'
Plan, it may not take any action that might adversely affect any outstanding
option. The Directors' Plan will have a term of ten years unless terminated
earlier.
U.S. FEDERAL INCOME TAX INFORMATION
The following is a brief summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Directors' Plan, does not purport to be complete, and does not
discuss the income tax laws of any municipality, state or foreign country in
which an optionee may reside. The Company advises all eligible directors to
consult their own tax advisors concerning tax implications of option grants and
exercises and the disposition of stock acquired upon such exercises under the
Directors' Plan.
Options granted under the Directors' Plan are nonstatutory stock options.
An optionee will not recognize any taxable income under U.S. tax law at the time
he or she is granted a nonstatutory stock option. However, upon its exercise,
the optionee will generally recognize ordinary income for U.S. income tax
purposes
5
<PAGE> 8
measured by the excess of the then fair market value of the shares over the
option price. Upon resale of such shares by the optionee, any difference between
the sale price and the exercise price, to the extent not recognized as ordinary
income as provided above, will be treated as capital gain (or loss), and will be
long-term capital gain if the optionee has held the shares more than one year.
The Company will be entitled to a tax deduction in the amount and at the time
that the optionee recognizes ordinary income with respect to shares acquired
upon exercise of a nonstatutory stock option.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the Common Stock
represented and voting at the Annual Meeting (which shares voting affirmatively
also represent a majority of the required quorum) is required for the approval
of the amendments to the Directors' Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS:
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE APPROVAL OF THE
AMENDMENT OF THE 1997 DIRECTORS' STOCK OPTION PLAN.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has served as the Company's independent auditors since
1998 and has been appointed by the Board to continue as the Company's
independent auditors for the fiscal year ending December 31, 2000. In the event
that ratification of this selection of auditors is not approved by a majority of
the shares of Common Stock voting at the Annual Meeting in person or by proxy,
the Board will reconsider its selection of auditors.
A representative of Arthur Andersen LLP is expected to be present at the
Annual Meeting. This representative will have an opportunity to make a statement
and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD:
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF ARTHUR
ANDERSEN LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2000.
6
<PAGE> 9
MANAGEMENT
Our executive officers and other key employees and their ages as of March
31, 2000 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gideon Ben-Efraim.................. 57 President, Chief Executive Officer and Director
Michael T. Everett................. 50 Executive Vice President and Chief Financial Officer
Matthew Powell..................... 45 Senior Vice President, Worldwide Sales
John Perry......................... 52 Chief Technology Officer and Vice President, Engineering
Stuart M. Feeney................... 35 Vice President and Chief Scientist
Francis Ngai....................... 48 Vice President, Customer Advocacy
Man Wong........................... 47 Vice President, Operations
Zohar Lotan........................ 51 Vice President, Technical Support
James F. Hannigan.................. 55 Vice President, Software Engineering
David A. Cassens................... 42 Vice President, Radio Engineering
Robert Benattar.................... 40 Vice President, European and African Sales
Peter Carson....................... 52 Vice President, Americas Sales
Fred A. M. Bauer................... 47 General Counsel and Vice President, Human Resources
</TABLE>
GIDEON BEN-EFRAIM has served as our President, Chief Executive Officer and
a director since founding Netro in November 1994. From November 1994 to March
1998, Mr. Ben-Efraim was also Chairman of the Board of Directors. Prior to
joining Netro, Mr. Ben-Efraim was a founder of and Executive Vice President,
Engineering and Business Development at P-Com Inc., a digital microwave radio
company, from June 1991 to November 1994. Mr. Ben-Efraim received a B.S. in
Industrial Engineering and Management from Tel Aviv University.
MICHAEL T. EVERETT has served as our Chief Financial Officer since joining
Netro in March 1997, at which time he was appointed Senior Vice President. He
has served as our Executive Vice President since January 1999. From December
1996 to February 1997, he served as Executive Vice President and Chief Financial
Officer at Diva Communications Inc. Mr. Everett spent ten years at Raychem
Corporation, a telecommunication and electronic components supplier, from April
1987 to November 1996, as General Counsel and Chief Financial Officer, and most
recently, Senior Vice President, Asia. Mr. Everett received a B.A. from
Dartmouth College and a J.D. from the University of Pennsylvania Law School.
MATTHEW POWELL has served as our Senior Vice President, Worldwide Sales
since March 1998. Prior to joining Netro, Mr. Powell served as Director of
Marketing at Cisco Systems from February 1997 to March 1998 and in various sales
management positions at StrataCom from 1986 to February 1997. Mr. Powell
received a B.A. from Tulane University and an M.B.A. from The Wharton School,
University of Pennsylvania.
JOHN PERRY has served as our Chief Technology Officer and Vice President,
Engineering since joining Netro in September 1998. Prior to joining Netro, Mr.
Perry served as Vice President, Engineering at Diva Communications Inc. from
January 1996 to September 1998, and Vice President, Engineering at Ericsson
Raynet from October 1993 to December 1995. Mr. Perry received a Bachelor's
degree in Electrical Engineering and Device Electronics from the University of
Hertfordshire, England.
STUART M. FEENEY has served as our Vice President and Chief Scientist since
December 1999. Prior to that time, he served in radio engineering positions of
increasing responsibility since joining Netro in May 1995. Prior to joining
Netro, Mr. Feeney served as Director of System Engineering at P-Com from June
1992 to May 1995. Mr. Feeney received a Bachelor's degree in Applied Physics
from the University of Salford, England, and a general business education from
the University of Manchester Institute of Science and Technology.
FRANCIS NGAI has served as our Vice President, Customer Advocacy since July
1999. Prior to joining Netro, Mr. Ngai was Director of Customer Support at
Heuristic Physics Laboratory, from October 1998 to
7
<PAGE> 10
June 1999. From September 1995 to September 1998, he was the Director of
Customer Satisfaction at GaSonics International, a semiconductor equipment
manufacturer. From October 1989 to August 1995, Mr. Ngai was a Manager of
Service Business for IBM. Mr. Ngai received a B.Sc. from the University of South
Carolina and a M.Sc. from Stanford University in electrical engineering.
MAN WONG has served as our Vice President, Operations since joining Netro
in May 1999. Prior to joining Netro, Mr. Wong was Director of Operations at
GaSonics International Corporation from March 1996 to May 1999. From October
1993 to March 1996, Mr. Wong was the Manufacturing Engineering and Advanced
Development Manager at Litton Electron Devices Division. Mr. Wong received a
B.S. in Physics from The Chinese University, Hong Kong, an M.B.A. from Golden
Gate University, and an M.Sc. and Ph.D. in Physics from the University of
Waterloo (Canada).
ZOHAR LOTAN joined Netro in April 1995 as Director of Engineering and
acting Vice President, Engineering. In May 1996, he joined the marketing team as
Senior Director for Program Management and became Vice President, Customer
Service in September 1998 and Vice President, Technical Support in July 1999.
Prior to joining Netro, Mr. Lotan managed a software design team at Nortel from
August 1988 to April 1995, developing wireless and ISDN communications. Mr.
Lotan received a B.Sc. degree in Electrical Engineering from the Technion,
Israel Institute of Technology and M.Sc. degree in Engineering Economic Systems
from Stanford University, California.
JAMES F. HANNIGAN has served as our Vice President, Software Engineering
since June 1999. Prior to joining Netro, Mr. Hannigan served as Vice President,
Software at Cisco Systems from May 1998 to May 1999. From March 1982 to June
1997, he was at Tandem Computer, in various engineering positions, including as
Vice President, Software Development for the non-stop software division. Mr.
Hannigan received a B.Sc. in Mathematics from California Polytechnic University
in San Luis Obispo.
DAVID A. CASSENS has served as our Vice President, Radio Engineering since
December 1999. Prior to becoming Vice President, Mr. Cassens served as our
Director of Radio Products from February 1998. Prior to joining Netro, Mr.
Cassens served in various positions at P-Com, Inc. from April 1992 to December
1997, including Vice President of Engineering. Mr. Cassens received a B.S. in
Physics from Eastern Oregon State College, a B.S. in Electrical Engineering from
Oregon State University, and an M.Sc. in Electrical Engineering from Stanford
University.
ROBERT BENATTAR has served as our Vice President, European and African
Sales since October 1999. Prior to that position, Mr. Benattar was our Director
of Southern European Sales, where he was responsible for developing Netro's
business in Spain, Portugal and Italy. Prior to joining Netro, Mr. Benattar was
General Manager at Synoptics, Inc. from January 1991 to May 1994 and Sales
Director/Director Northern Europe at StrataCom, Inc. from June 1994 to September
1996, and Director, Southern Europe at Xylan Corporation from October 1996 to
April 1998. Mr. Benattar received a B.A.C., I.F.O.P., and D.E.S.E. from the
University of Paris.
PETER CARSON has served as our Vice President, Americas Sales since January
2000. From April 1993 to November 1999, Mr. Carson was Vice President-General
Manager of Raychem Corporation's worldwide Transportation Electronics Division.
Prior to that, he was in charge of Raychem's Interconnect Division from April
1989 to March 1993. Mr. Carson received a B.S. from Vanderbilt University in
Materials Engineering and an M.B.A. from Harvard University.
FRED A. M. BAUER has served as our General Counsel and Vice President,
Human Resources since February 2000. Prior to joining Netro, Mr. Bauer was
Director, Human Resources at Acuson Corporation, a medical equipment
manufacturer, from November 1997 to February 2000. For more than five years
prior to joining Acuson, Mr. Bauer served in various human resources and legal
positions at Raychem Corporation, including Director, Business Practices and
Human Resources and Vice President, Human Resources and General Counsel of
Raychem's Raynet subsidiary. Mr. Bauer received an A.B. from Harvard College and
J.D. from Harvard Law School.
8
<PAGE> 11
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's common stock as of March 31, 2000 by:
- each person who is known by us to own beneficially more than 5% of our
common stock;
- each of our directors;
- the Company's Chief Executive Officer and next five highest compensated
executive officers (the "named executive officers"); and
- all directors and executive officers as a group.
Percentage of beneficial ownership is based on 49,963,857 shares of common
stock outstanding as of March 31, 2000, together with options that are
exercisable within 60 days of March 31, 2000 for each shareholder. Beneficial
ownership is determined in accordance with the rules of the SEC. The percentages
for beneficial ownership after the offering assume that the underwriters do not
exercise their over-allotment option.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
---------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
------------------------------------ ---------- -------
<S> <C> <C>
Gideon Ben-Efraim(1)........................................ 4,500,000 8.9%
Venture Fund I, L.P.(2)..................................... 4,216,071 8.4
U.S. Venture Partners(3).................................... 3,313,342 6.6
Brentwood Venture Capital(4)................................ 2,401,284 4.8
Richard M. Moley(5)......................................... 493,750 1.0
Michael T. Everett(6)....................................... 491,485 *
Stuart Feeney(7)............................................ 343,858 *
Matthew Powell(8)........................................... 258,017 *
Thomas R. Baruch(9)......................................... 225,000 *
John Perry(10).............................................. 145,741 *
Neal Douglas(11)............................................ 25,000 *
Irwin Federman(12).......................................... 25,000 *
John L. Walecka(13)......................................... 25,000 *
Robert Wynne(14)............................................ 10,000 *
All directors and executive officers as a group (13
persons)(15).............................................. 16,637,350 32.1
</TABLE>
- ---------------
* Less than 1%.
(1) Includes 283,335 shares issuable upon exercise of options exercisable
within 60 days of March 31, 2000, 2,800,000 shares held by a family trust
and 1,200,000 shares held by adult children of Mr. Ben-Efraim. Mr.
Ben-Efraim disclaims beneficial ownership with respect to the shares held
by his adult children. Mr. Ben-Efraim has the right to immediately exercise
unvested options to purchase an additional 100,000 shares within 60 days of
March 24, 2000; however, these shares would be subject to a right of
repurchase by the Company.
(2) Represents 4,216,071 shares held by Venture Fund I, L.P. Neal Douglas, a
director of the Company as of March 31, 2000 who resigned from the Board in
April 2000, is a general partner of the general partner of this
partnership. He shares voting and investment power with respect to the
shares held by this entity, and disclaims beneficial ownership of shares in
which he has no pecuniary interest. See note 13. The address for Venture
Fund I, L.P. is 295 North Maple Avenue, Rm. 3354A2, Basking Ridge, NJ
07920.
(3) Represents 2,866,040 shares held by U.S. Venture Partners IV, L.P., 347,903
shares held by Second Ventures II, L.P. and 99,399 shares held by USVP
Entrepreneur Partners II, L.P. Irwin Federman, a director of the Company,
is a general partner of the general partner of each of these partnerships.
He shares voting and investment power with respect to the shares held by
these entities, and disclaims
9
<PAGE> 12
beneficial ownership of shares in which he has no pecuniary interest. See
note 14. The address for U.S. Venture Partners is 2180 Sand Hill Road,
Suite 300, Menlo Park, CA 94025.
(4) Represents 2,361,982 shares held by Brentwood Associates VI, L.P. and
39,302 shares held by Brentwood Affiliates Fund, L.P. John L. Walecka, a
director of the Company, is a general partner of the general partner of
each of these partnerships. He shares voting and investment power with
respect to the shares held by these entities and disclaims beneficial
ownership of shares in which he has no pecuniary interest. See note 15. The
address for Brentwood Venture Capital is 11150 Santa Monica Blvd., Suite
1200, Los Angeles, CA 90025.
(5) Includes 43,750 shares issuable upon exercise of options exercisable within
60 days of March 31, 2000, and 400,000 shares held by a trust for the
benefit of an adult child of Mr. Moley, who disclaims beneficial ownership
of such 400,000 shares.
(6) Includes 287,360 shares issuable upon exercise of options exercisable
within 60 days of March 31, 2000. Mr. Everett has the right to immediately
exercise unvested options to purchase an additional 102,640 shares within
60 days of March 24, 2000; however, these shares would be subject to a
right of repurchase by the Company.
(7) Includes 158,333 shares issuable upon exercise of options exercisable
within 60 days of March 31, 2000. Mr. Feeney has the right to immediately
exercise an unvested option to purchase an additional 60,000 shares within
60 days of March 24, 2000; however, these shares would be subject to a
right of repurchase by the Company.
(8) Represents 256,666 shares issuable upon exercise of options exercisable
within 60 days of March 31, 2000.
(9) Includes 25,000 shares issuable upon exercise of options exercisable within
60 days of March 31, 2000. The address for Mr. Baruch is 235 Montgomery
Street, Suite 920, San Francisco, CA 94104.
(10) Represents 144,999 shares issuable upon exercise of options exercisable
within 60 days of March 31, 2000.
(11) Represents 25,000 shares issuable upon exercise of options exercisable
within 60 days of March 31, 2000. Excludes 4,216,071 shares held by Venture
Fund I, L.P. See note 2.
(12) Represents 25,000 shares issuable upon exercise of options exercisable
within 60 days of March 31, 2000. Excludes 3,313,342 shares held by U.S.
Venture Partners IV, L.P. and its affiliates. See note 3.
(13) Represents 25,000 shares issuable upon exercise of options exercisable
within 60 days of March 31, 2000. Excludes 2,401,284 shares held by
Brentwood Associates VI, L.P. and Brentwood Affiliates Fund, L.P. See note
4.
(14) Represents 10,000 shares issuable upon exercise of options exercisable
within 60 days of March 31, 2000.
(15) Includes 9,930,697 shares held by entities affiliated with certain
directors as described in notes 2, 3 and 4 and 1,651,040 shares issuable
upon exercise of options exercisable within 60 days of March 31, 2000.
Except as otherwise noted, the address of each person listed in the table
is c/o Netro Corporation, 3860 N. First Street, San Jose, CA 95134, and the
persons named in the table have sole voting and investment power with respect to
all shares of common stock shown as beneficially owned by them, subject to
community property laws where applicable.
10
<PAGE> 13
COMPENSATION OF EXECUTIVE OFFICERS
The following table provides certain summary information concerning the
compensation received for services rendered to the Company during the fiscal
years ended December 31, 1999 and December 31, 1998 by our Chief Executive
Officer and each of our other four most highly compensated executive officers
serving as such as of December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS
--------------------------- -------- -------- ------------
<S> <C> <C> <C> <C>
Gideon Ben-Efraim................................ 1999 $220,000 $110,000 475,000
Chief Executive Officer, President and Director 1998 200,000 50,000 --
Michael T. Everett............................... 1999 180,000 55,000 305,000
Chief Financial Officer and Executive Vice
President 1998 165,077 52,500 --
Matthew Powell................................... 1999 130,000 130,000 230,000
Senior Vice President, Worldwide Sales 1998 100,000 120,000 400,000
John Perry....................................... 1999 180,000 40,000 270,000
Chief Technology Officer and 1998 56,654 20,000 200,000
Vice President, Engineering
Stuart Feeney.................................... 1999 140,000 30,000 150,000
Vice President, Radio Engineering
</TABLE>
The following table provides summary information regarding stock options
granted to the persons named in the Summary Compensation Table from our 1996
stock option plan and 1999 executive stock option plan during the fiscal year
ended December 31, 1999. The 5% and 10% assumed annual rates of compounded stock
price appreciation are mandated by the rules of the SEC.
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------------
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
---- ---------- ------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gideon Ben-Efraim.......... 175,000 4.8% $34.31 12/13/09 $3,778,656 $9,577,364
300,000 8.2 3.50 4/5/09 2,734,909 4,793,784
Michael T. Everett......... 80,000 2.2 34.31 12/13/09 1,727,385 4,378,223
225,000 6.1 3.50 4/5/09 2,051,182 3,595,338
Matthew Powell............. 80,000 2.2 34.31 12/13/09 1,727,385 4,378,223
150,000 4.1 3.50 4/5/09 1,367,454 2,396,892
John Perry................. 70,000 1.9 34.31 12/13/09 1,511,462 3,830,945
200,000 5.5 3.50 4/5/09 1,823,273 3,195,856
Stuart Feeney.............. 50,000 1.4 34.31 12/13/09 1,079,616 2,736,390
100,000 2.7 3.50 4/5/09 911,636 1,597,928
</TABLE>
11
<PAGE> 14
The following table provides summary information concerning the exercise of
options by the persons named in the Summary Compensation Table in 1999 and the
shares of common stock represented by outstanding stock options held by each of
them as of December 31, 1999. The value realized is based on the market value on
the date of exercise, net of the exercise price. The value of unexercised
in-the-money options is calculated based on the difference between the exercise
price of the option and the fair market value of the common stock at December
31, 1999.
AGGREGATE OPTION EXERCISES IN FISCAL 1999 AND FISCAL YEAR-END OPTION
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gideon Ben-Efraim....... 50,000 $1,537,500 166,666(1) 658,334 $ 8,166,634 $26,154,116
Michael T. Everett...... 5,000 30,000 262,707(2) 457,293 12,872,643 19,485,057
Matthew Powell.......... -- -- 175,000 455,000 8,575,000 19,485,200
John Perry.............. -- -- 62,500 407,500 3,062,500 17,405,800
Stuart Feeney........... -- -- 92,707(3) 247,293 4,868,267 10,361,233
</TABLE>
- ---------------
(1) An additional 183,334 option shares are immediately exercisable at $2.00 per
share as of December 31, 1999; however, these shares are subject to a right
of repurchase by the Company.
(2) An additional 152,293 option shares are immediately exercisable at $2.00 per
share as of December 31, 1999; however, these shares are subject to a right
of repurchase by the Company.
(3) An additional 85,000 option shares are immediately exercisable at $2.00 per
share as of December 31, 1999; however, these shares are subject to a right
of repurchase by the Company.
Notwithstanding anything to the contrary set forth in any of the Company's
filings under the Securities Act of 1933 or the Securities Exchange Act of 1934
that might incorporate future filings, including this Proxy Statement, in whole
or in part, the following report and the Stock Performance Graph of this proxy
statement shall not be deemed to be incorporated by reference into any such
filings.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following is a report of the Compensation Committee of the Board of
Directors (the "Committee") describing the compensation policies applicable to
the Company's executive officers during the fiscal year ended December 31, 1999.
The Committee is responsible for establishing and monitoring the general
compensation policies and compensation plans of the Company, as well as the
specific compensation levels for executive officers. Executive officers who are
also directors have not participated in deliberations or decisions involving
their own compensation.
GENERAL COMPENSATION POLICY
Under the supervision of the Board of Directors, the Company's compensation
policy is designed to attract and retain qualified key executives critical to
the Company's growth and long-term success. It is the objective of the Board of
Directors to have a portion of each executive's compensation contingent upon the
Company's performance as well as upon the individual's personal performance.
Accordingly, each executive officer's compensation package is comprised of three
elements: (i) base salary which reflects individual performance and expertise,
(ii) variable bonus awards payable in cash and tied to the achievement of
certain performance goals that the Board of Directors establishes from time to
time for the Company and (iii) long-term stock-based incentive awards which are
designed to strengthen the mutuality of interests between the executive officers
and the Company's shareholders.
12
<PAGE> 15
The summary below describes in more detail the factors which the Board of
Directors considers in establishing each of the three primary components of the
compensation package provided to the executive officers.
BASE SALARY
The level of base salary is established primarily on the basis of the
individual's qualifications and relevant experience, the strategic goals for
which he or she has responsibility, the compensation levels at companies which
compete with the Company for business and executive talent, and the incentives
necessary to attract and retain qualified management. Base salary is adjusted
each year to take into account the individual's performance and to maintain a
competitive salary structure. Company performance does not play a significant
role in the determination of base salary.
CASH-BASED INCENTIVE COMPENSATION
Cash bonuses are awarded on a discretionary basis to executive officers on
the basis of their success in achieving designated individual goals and the
Company's success in achieving specific company-wide goals, such as customer
satisfaction, revenue growth and earnings growth.
LONG-TERM INCENTIVE COMPENSATION
The Company has utilized its stock option plans to provide executives and
other key employees with incentives to maximize long-term shareholder values.
Awards under this plan by the Board of Directors take the form of stock options
designed to give the recipient a significant equity stake in the Company and
thereby closely align his or her interests with those of the Company's
shareholders. Factors considered in making such awards include the individual's
position in the Company, his or her performance and responsibilities, and
internal comparability considerations.
Each option grant allows the executive officer to acquire shares of Common
Stock at a fixed price per share (the fair market value on the date of grant)
over a specified period of time (up to 10 years). The options typically vest in
periodic installments over a four-year period, contingent upon the executive
officer's continued employment with the Company. Accordingly, the option will
provide a return to the executive officer only if he or she remains in the
Company's service, and then only if the market price of the Common Stock
appreciates over the option term.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Gideon Ben-Efraim has served as the Company's President and Chief Executive
Officer since the Company's inception in 1994. His base salary for fiscal 1999
was $220,000 and he earned a bonus of $110,000.
The factors discussed above in "Base Salaries," "Cash-Based Incentive
Compensation," and "Long-Term Incentive Compensation" were also applied in
establishing the amount of Mr. Ben-Efraim's salary and stock option grant.
Significant factors in establishing Mr. Ben-Efraim's compensation were the
amount of his current stock ownership, including the portion that was unvested,
changes in the compensation for similarly situated Chief Executives, achievement
of revenue targets and customer contracts, growth of the Company as it prepared
for its initial public offering, and successful completion of the initial public
offering.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Committee has considered the impact of Section 162(m) of the Internal
Revenue Code adopted under the Omnibus Budget Reconciliation Act of 1993, which
section disallows a deduction for any publicly held corporation for individual
compensation exceeding $1 million in any taxable year for the CEO and four other
most highly compensated executive officers, respectively, unless such
compensation meets the requirements for the "performance-based" exception to
Section 162(m). As the cash compensation paid by the Company to each of its
executive officers is expected to be below $1 million and the Committee believes
that options granted under the Company's 1996 Stock Option Plan and 1999
Executive Stock Plan to such officers
13
<PAGE> 16
will meet the requirements for qualifying as performance-based, the Committee
believes that Section 162(m) will not affect the tax deductions available to the
Company with respect to the compensation of its executive officers. It is the
Committee's policy to qualify, to the extent reasonable, its executive officers'
compensation for deductibility under applicable tax law. However, the Company
may from time to time pay compensation to its executive officers that may not be
deductible.
Compensation Committee:
/s/ THOMAS BARUCH
/s/ JOHN L. WALECKA
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors currently consists of
Thomas Baruch and John L. Walecka. No member of the Compensation Committee
serves as a member of the board of directors or the compensation committee of
any entity that has one or more executive officers serving as a member of our
board of directors or compensation committee.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
EMPLOYMENT AND CHANGE-OF-CONTROL AGREEMENTS
In March 1995, the Company entered into an employment agreement with Gideon
Ben-Efraim, the Company's Chief Executive Officer, President and Director. The
initial base salary under this agreement was $120,000 per year, with an
automatic increase to $145,000 upon the closing of the Company's Series A
preferred stock financing. Mr. Ben-Efraim's base salary has since been increased
pursuant to annual review by the Board. Pursuant to the agreement, Mr.
Ben-Efraim receives a cash bonus equal to 20% of his base salary, in addition to
participation in any annual executive bonus plan of the Company. In the event of
termination other than for cause, the agreement entitles Mr. Ben-Efraim to
severance benefits equal to twelve months of his then-current base salary as
well as a lapse of 25% of the Company's repurchase option on unvested shares
then held by Mr. Ben-Efraim, including those held by his family trust. If the
Company enters into certain change-of-control transactions, Mr. Ben-Efraim's
options and shares subject to repurchase, including those held by his family
trust, will become fully vested. The agreement also provides that, in the event
the Company grants registration rights to any officers or investors, the Company
will grant no less favorable rights to Mr. Ben-Efraim.
The Company has entered into change-of-control agreements with director
Richard M. Moley and officers Peter Carson, Michael T. Everett, James Hannigan,
Francis Ngai, Matthew Powell, John Perry and Man Wong as follows:
- Under Mr. Moley's agreement, in the event of a change of control, all
unvested shares and options held by Mr. Moley, or his affiliates, will
vest immediately as if he had been employed by the Company for two
additional years.
- Under Mr. Everett's agreement, if Mr. Everett's employment with the
Company is terminated without cause within one year following a change of
control or if he is not offered a comparable position by the acquiror,
all unvested options will vest as if he had been employed by the Company
for two additional years.
- Under Mr. Powell's agreement, in the event that Mr. Powell is terminated
without cause following a change of control or is not offered a
comparable position by the acquiror, unvested shares and options held by
Mr. Powell will vest immediately as if he had been employed by the
Company for one additional year.
14
<PAGE> 17
- Under the agreements with Messrs. Carson, Hannigan, Ngai, Perry and Wong,
in the event the employee is terminated without cause following a change
of control or does not receive an offer of a comparable position with the
acquiror, and the termination occurs before the employee has completed
one year of employment, unvested shares and options held by that employee
will vest immediately as if he had been employed for one full year.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with its directors
and officers containing provisions that are in some respects broader than the
specific indemnification provisions contained in the California Corporations
Code. The indemnification agreements may require us:
- to indemnify directors and officers against liabilities that may arise by
reason of their status or service as directors or officers, other than
liabilities arising from willful misconduct of a culpable nature;
- to advance their expenses incurred as a result of any proceeding against
them as to which they could be indemnified; and
- to obtain directors' and officers' insurance if available on reasonable
terms.
The Company currently has a policy for directors' and officers' insurance.
At present, there is no pending litigation or proceeding involving any director,
officer, employee or agent of ours in which indemnification would be required or
permitted. The Company is not aware of any threatened litigation or proceeding
that might result in a claim for indemnification. The Company believes that its
charter provisions and indemnification agreements are necessary to attract and
retain qualified persons as directors and officers.
TRANSACTIONS WITH DIRECTORS
The Company loaned Richard M. Moley, the chairman of the Board, $800,000 in
December 1998 in connection with the exercise of an option to purchase common
stock of the Company. The note was secured by such shares of the Company's
common stock owned by Mr. Moley and a trust controlled by him, with a rate of
5.44% and a due date of April 17, 2002. This note was paid in full in February
2000.
PRIVATE PLACEMENT TRANSACTIONS
In January, April, July and October 1998 and January, February, April and
June 1999, the Company issued an aggregate of 4,190,512 shares of Series D
preferred stock at $7.78 per share to 26 investors. The table below summarizes
the shares of preferred stock purchased in fiscal year 1999 by our executive
officers, directors and 5% shareholders and persons and entities associated with
them in this private placement transaction.
<TABLE>
<CAPTION>
SERIES D
INVESTOR SHARES
-------- --------
<S> <C>
Venture Fund I, L.P. and Neal Douglas....................... 125,991
U.S. Venture Partners and Irwin Federman.................... 123,767
Brentwood Venture Capital and John Walecka.................. 89,698
</TABLE>
15
<PAGE> 18
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return data
for the Company's stock since August 19, 1999 (the date on which the Company's
stock was first registered under Section 12 of the Securities Exchange Act of
1934, as amended) to the cumulative return over such period of (i) The Nasdaq
Stock Market Composite Index, and (ii) the Nasdaq Telecommunications Index. The
graph assumes that $100 was invested on the date on which the Company completed
the initial public offering of its Common Stock, in the Common Stock of the
Company and in each of the comparative indices. The graph further assumes that
such amount was initially invested in the Common Stock of the Company at the
price to which such stock was first offered to the public by the Company on the
date of its initial public offering, and reinvestment of any dividends. The
stock price performance on the following graph is not necessarily indicative of
future stock price performance.
COMPARISON OF 4 MONTH CUMULATIVE TOTAL RETURN*
AMONG NETRO CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ TELECOMMUNICATIONS INDEX
LOGO
- ---------------
* Assumes $100 invested on August 19, 1999 in stock or index, including
reinvestment of dividends. Fiscal year ending December 31, 1999.
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
8/19/99 12/31/99
-------- --------
<S> <C> <C>
Netro Corporation........................................... $100.00 $637.50
Nasdaq Stock Market (U.S.).................................. $100.00 $154.14
Nasdaq Telecommunications................................... $100.00 $155.57
</TABLE>
16
<PAGE> 19
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Proposals of shareholders intended to be included in the Company's proxy
statement for the 2001 Annual Meeting of shareholders must be received by Fred
A.M. Bauer, General Counsel, Netro Corporation, 3860 N. First Street, San Jose,
California 95134, no later than December 29, 2000. If the Company is not
notified of a shareholder proposal by on or after February 27, 2001 and on or
before May 8, 2001, then the proxies held by management of the Company provide
discretionary authority to vote against such shareholder proposal, even though
such proposal is not discussed in the Proxy Statement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than 10% of the Company's Common
Stock (collectively, "Reporting Persons") to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and changes in
ownership of the Company's Common Stock. Reporting Persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) reports they
file. To the Company's knowledge, based solely on its review of the copies of
such reports received or written representations from certain Reporting Persons
that no other reports were required, the Company believes that during its fiscal
year ended December 31, 1999, all Reporting Persons complied with all applicable
filing requirements, except as follows: (1) in October 1999, Cynthia Hillery who
served at the time as the Company's Vice President, Marketing, reported a
purchase and sale which occurred in August 1999, and (2) in December 1999,
Gideon Ben-Efraim reported an option exercise which occurred in September 1999.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented to
the Annual Meeting. If any other business is properly brought before the Annual
Meeting, proxies in the enclosed form will be voted in respect thereof as the
proxy holders deem advisable.
It is important that the proxies be returned promptly and that your shares
be represented. Shareholders are urged to mark, date, execute and promptly
return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
Tae Hea Nahm
Secretary
April 27, 2000
San Jose, California
17
<PAGE> 20
APPENDIX A
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
NETRO CORPORATION
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 25, 2000
The undersigned shareholder of Netro Corporation, a California corporation,
(the "Company") hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated April 27, 2000, and hereby appoints
Gideon Ben-Efraim and Michael T. Everett or either of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the Annual Meeting of
Shareholders of Netro Corporation to be held on Thursday, May 25, 2000 at 7:30
a.m., local time, at Westin Hotel, Alamada Room, 5101 Great America Parkway,
Santa Clara, California 95054 and at any adjournment or postponement thereof,
and to vote all shares of Common Stock which the undersigned would be entitled
to vote if then and there personally present, on the matters set forth below:
PLEASE COMPLETE, DATE AND SIGN ON THE REVERSE SIDE
AND MAIL IN THE ENCLOSED ENVELOPE.
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PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
PLEASE MARK YOUR
A [X] VOTES AS IN THIS
EXAMPLE.
FOR WITHHOLD
1. ELECTION OF DIRECTORS all nominees authority to
listed (except vote for all
as indicated). nominees listed.
[ ] [ ]
If you wish to withhold authority to vote Nominees: Thomas R. Baruch
for any individual nominee, strike a line Irwin Federman
through that nominee's name in the list Robert J. Wynne
at right:
-----------------------------------------
FOR AGAINST ABSTAIN
2. PROPOSAL TO AMEND THE 1997 DIRECTORS' STOCK PLAN: [ ] [ ] [ ]
3. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR [ ] [ ] [ ]
ANDERSEN LLP AS THE INDEPENDENT PUBLIC ACCOUNTANTS
OF THE COMPANY FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2000:
and, in their discretion, upon such other
matter or matters that may properly come
before the meeting and any postponement(s)
or adjournment(s) thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF
NO CONTRARY DIRECTION IS INDICATED, WILL BE
VOTED AS FOLLOWS: (1) FOR THE ELECTION OF
DIRECTORS; (2) FOR AMENDMENT OF THE 1997
DIRECTORS' STOCK OPTION PLAN; (3) FOR
RATIFICATION OF THE APPOINTMENT OF ARTHUR
ANDERSEN LLP AS THE INDEPENDENT PUBLIC
ACCOUNTANTS OF THE COMPANY FOR THE FISCAL
YEAR ENDING DECEMBER 31, 2000; AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER
MATTERS AS MAY COME BEFORE THE MEETING.
Signature: Date:
------------------------------------------------ ---------------
Signature: Date:
------------------------------------------------ ---------------
NOTE: (This Proxy should be marked, dated, signed by the shareholder(s) exactly
as his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should
sign.)
<PAGE> 22
APPENDIX B
NETRO CORPORATION
1997 DIRECTORS' STOCK OPTION PLAN
(AS AMENDED THROUGH JANUARY 20, 1999)
1. PURPOSES OF THE PLAN. The purposes of this Directors' Stock Option
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Netro Corporation, a California corporation.
(e) "Continuous Status as a Director" shall mean the absence of any
interruption or termination of service as a Director.
(f) "Director" shall mean a member of the Board.
(g) "Employee" shall mean any person, including any officer or
director, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(i) "Option" shall mean a stock option granted pursuant to the Plan.
All options shall be nonstatutory stock options (i.e., options that are not
intended to qualify as incentive stock options under Section 422 of the Code).
(j) "Optioned Stock" shall mean the Common Stock subject to an
Option.
(k) "Optionee" shall mean an Outside Director who receives an Option.
(l) "Outside Director" shall mean a Director who is not an Employee.
(m) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
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(n) "Plan" shall mean this 1997 Directors' Stock Option Plan.
(o) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(p) "Subsidiary" shall mean a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 300,000 Shares (the "Pool") of Common ---- Stock. The Shares
may be authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan. If Shares which were acquired upon exercise of an Option
are subsequently repurchased by the Company, such Shares shall not in any event
be returned to the Plan and shall not become available for future grant under
the Plan.
4. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN.
(a) ADMINISTRATOR. Except as otherwise required herein, the Plan
shall be administered by the Board.
(b) PROCEDURE FOR GRANTS. All grants of Options hereunder shall be
automatic and nondiscretionary and shall be made strictly in accordance with the
following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted an
Option to purchase 50,000 Shares (a "First Option") on the date on which such
person first becomes an Outside Director, whether through election by the
shareholders of the Company or appointment by the Board of Directors to fill a
vacancy.
(iii) Each Outside Director shall be automatically granted an
Option on the first day of each fiscal year (beginning with 2001) immediately
following which such Outside Director is serving on the Board, provided that, on
such date, he or she shall have served on the Board for at least six (6) months
prior to such date (a "Subsequent Option"). With respect to grants to an Outside
Director who was granted an option under the Plan in December 1997 ("Current
Directors"), a Subsequent Option granted prior to the first day of the Company's
fiscal year in 2002 shall be an option to purchase 12,500 Shares. With respect
to grants (A) to all other Outside Directors and (B) to Current Directors on and
after the first day of the Company's fiscal year in 2002, a Subsequent Option
shall be an option to purchase 12,500 Shares.
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<PAGE> 24
(iv) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, in the event that a grant would cause the number of Shares subject to
outstanding Options plus the number of Shares previously purchased upon exercise
of Options to exceed the Pool, then each such automatic grant shall be for that
number of Shares determined by dividing the total number of Shares remaining
available for grant by the number of Outside Directors receiving an Option on
such date on the automatic grant date. Any further grants shall then be deferred
until such time, if any, as additional Shares become available for grant under
the Plan through action of the shareholders to increase the number of Shares
which may be issued under the Plan or through cancellation or expiration of
Options previously granted hereunder.
(v) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, any grant of an Option made before the Company has obtained shareholder
approval of the Plan in accordance with Section 17 hereof shall be conditioned
upon obtaining such shareholder approval of the Plan in accordance with Section
17 hereof.
(vi) The terms of each First Option granted hereunder shall be as
follows:
(1) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 9 hereof;
(2) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the First Option, determined in
accordance with Section 8 hereof; and
(3) the First Option shall vest with respect to 1/4th of
the total Shares subject thereto on each of the first, second, third and fourth
anniversaries of the date of grant.
(vii) The terms of each Subsequent Option granted hereunder shall
be as follows:
(1) the Subsequent Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Section 9 hereof;
(2) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the Subsequent Option, determined
in accordance with Section 8 hereof; and
(3) the Subsequent Option shall be fully vested and
exercisable in its entirety on the fourth anniversary of the date of grant.
(c) POWERS OF THE BOARD. Subject to the provisions and restrictions
of the Plan, the Board shall have the authority, in its discretion: (i) to
determine, upon review of relevant information and in accordance with Section
8(b) of the Plan, the fair market value of the Common Stock; (ii) to determine
the exercise price per share of Options to be granted, which exercise price
shall be determined in accordance with Section 8(a) of the Plan; (iii) to
interpret the Plan; (iv) to
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<PAGE> 25
prescribe, amend and rescind rules and regulations relating to the Plan; (v) to
authorize any person to execute on behalf of the Company any instrument required
to effectuate the grant of an Option previously granted hereunder; and (vi) to
make all other determinations deemed necessary or advisable for the
administration of the Plan.
(d) EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
(e) SUSPENSION OR TERMINATION OF OPTION. If the President or his or
her designee reasonably believes that an Optionee has committed an act of
misconduct, the President may suspend the Optionee's right to exercise any
option pending a determination by the Board of Directors (excluding the Outside
Director accused of such misconduct). If the Board of Directors (excluding the
Outside Director accused of such misconduct) determines an Optionee has
committed an act of embezzlement, fraud, dishonesty, nonpayment of an obligation
owed to the Company, breach of fiduciary duty or deliberate disregard of the
Company rules resulting in loss, damage or injury to the Company, or if an
Optionee makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the Company
or induces any principal for whom the Company acts as agent to terminate such
agency relationship, neither the Optionee nor his or her estate shall be
entitled to exercise any option whatsoever. In making such determination, the
Board of Directors (excluding the Outside Director accused of such misconduct)
shall act fairly and shall give the Optionee an opportunity to appear and
present evidence on Optionee's behalf at a hearing before the Board or a
committee of the Board.
5. ELIGIBILITY. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) hereof. An Outside Director who has been granted an Option may, if
he or she is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.
6. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective on
December 9, 1997. It shall continue in effect for a term of ten (10) years
unless sooner terminated under Section 13 of the Plan.
7. TERM OF OPTIONS. The term of each Option shall be ten (10) years from
the date of grant thereof.
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8. EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be 100% of the fair market value
per Share on the date of grant of the Option.
(b) FAIR MARKET VALUE. The fair market value shall be determined in
good faith by the Board; provided, however, that where there is a public market
for the Common Stock, the fair market value per Share shall be the mean of the
bid and asked prices of the Common Stock in the over-the-counter market on the
date of grant, as reported in The Wall Street Journal (or, if not so reported,
as otherwise reported by the National Association of Securities Dealers
Automated Quotation ("Nasdaq") System) or, in the event the Common Stock is
traded on the Nasdaq National Market or listed on a stock exchange, the fair
market value per Share shall be the closing price on such system or exchange on
the date of grant of the Option (or, in the event that the Common Stock is not
traded on such date, on the immediately preceding trading date), as reported in
The Wall Street Journal.
(c) FORM OF CONSIDERATION. The consideration to be paid for the
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised (which, if acquired from the Company, shall have been
held for at least six months), or any combination of such methods of payment
and/or any other consideration or method of payment as shall be permitted under
applicable corporate law.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4(b) hereof; provided, however, that no Options shall be exercisable prior to
shareholder approval of the Plan in accordance with Section 17 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 8(c) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. A share certificate for the number of Shares so acquired shall be issued
to the Optionee as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
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Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) TERMINATION OF STATUS AS A DIRECTOR. If an Outside Director
ceases to serve as a Director, he or she may, but only within ninety (90) days
after the date he or she ceases to be a Director of the Company, exercise his or
her Option to the extent that he or she was entitled to exercise it at the date
of such termination. Notwithstanding the foregoing, in no event may the Option
be exercised after its term set forth in Section 7 has expired. To the extent
that such Outside Director was not entitled to exercise an Option at the date of
such termination, or does not exercise such Option (which he or she was entitled
to exercise) within the time specified herein, the Option shall terminate.
(c) DISABILITY OF OPTIONEE. Notwithstanding Section 9(b) above, in
the event a Director is unable to continue his or her service as a Director with
the Company as a result of his or her total and permanent disability (as defined
in Section 22(e)(3) of the Code), he or she may, but only within six (6) months
(or such other period of time not exceeding twelve (12) months as is determined
by the Board) from the date of such termination, exercise his or her Option to
the extent he or she was entitled to exercise it at the date of such
termination. Notwithstanding the foregoing, in no event may the Option be
exercised after its term set forth in Section 7 has expired. To the extent that
he or she was not entitled to exercise the Option at the date of termination, or
if he or she does not exercise such Option (which he or she was entitled to
exercise) within the time specified herein, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee:
(i) During the term of the Option who is, at the time of his or
her death, a Director of the Company and who shall have been in Continuous
Status as a Director since the date of grant of the Option, the Option may be
exercised, at any time within six (6) months following the date of death, by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
would have accrued had the Optionee continued living and remained in Continuous
Status as Director for six (6) months (or such lesser period of time as is
determined by the Board) after the date of death. Notwithstanding the foregoing,
in no event may the Option be exercised after its term set forth in Section 7
has expired; or
(ii) Within three (3) months after the termination of Continuous
Status as a Director, the Option may be exercised, at any time within six (6)
months following the date of death, by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent of the right to exercise that had accrued at the date of termination.
Notwithstanding the foregoing, in no event may the option be exercised after its
term set forth in Section 7 has expired.
10. NONTRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution or pursuant to a qualified
domestic relations order (as defined by the Code
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or the rules thereunder). The designation of a beneficiary by an Optionee does
not constitute a transfer. An Option may be exercised during the lifetime of an
Optionee only by the Optionee or a transferee permitted by this Section.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
(a) ADJUSTMENT. Subject to any required action by the shareholders of
the Company, the number of shares of Common Stock covered by each outstanding
Option, the number of shares of Common Stock which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, and the number of shares of Common Stock authorized for issuance under
the automatic grant provisions of Sections 4(b)(ii) and (iii) hereof, as well as
the price per share of Common Stock covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option.
(b) CORPORATE TRANSACTIONS. In the event of (i) a dissolution or
liquidation of the Company, (ii) a sale of all or substantially all of the
Company's assets, (iii) a merger or consolidation in which the Company is not
the surviving corporation, or (iv) any other capital reorganization in which
more than fifty percent (50%) of the shares of the Company entitled to vote are
exchanged, the Company shall give to the Eligible Director, at the time of
adoption of the plan for liquidation, dissolution, sale, merger, consolidation
or reorganization, either a reasonable time thereafter within which to exercise
the Option, including Shares as to which the Option would not be otherwise
exercisable, prior to the effectiveness of such liquidation, dissolution, sale,
merger, consolidation or reorganization, at the end of which time the Option
shall terminate, or the right to exercise the Option, including Shares as to
which the Option would not be otherwise exercisable (or receive a substitute
option with comparable terms), as to an equivalent number of shares of stock of
the corporation succeeding the Company or acquiring its business by reason of
such liquidation, dissolution, sale, merger, consolidation or reorganization.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
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13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act (or any other applicable law or regulation), the Company
shall obtain approval of the shareholders of the Company to Plan amendments to
the extent and in the manner required by such law or regulation.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance. As a
condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares, if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. Inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the shareholders of the Company at or prior to the first annual
meeting of shareholders held subsequent to the granting of an Option hereunder.
If such shareholder approval is obtained at a duly held shareholders' meeting,
it may be obtained by the affirmative vote of the holders of a majority of the
outstanding shares of the Company present or represented and entitled to vote
thereon. If such shareholder approval is obtained by written consent, it may be
obtained by the written consent of the holders of a majority of the outstanding
shares of the Company. Options may be granted, but not exercised, before such
shareholder approval.
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