<PAGE>
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
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 Under Rule 14a-12
FOUNDRY NETWORKS, INC.
(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 transactions 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>
FOUNDRY NETWORKS, INC.
Notice of Annual Meeting of Stockholders
To Be Held June 20, 2000
The Annual Meeting of Stockholders (the "Annual Meeting") of Foundry
Networks, Inc., a Delaware corporation (the "Company"), will be held at the
Santa Clara Marriott, located at 2700 Mission College Boulevard, Santa Clara,
CA 95054 on Tuesday, June 20, 2000, at 9:00 a.m., local time, for the
following purposes:
1.To elect three (3) directors to serve until the next Annual Meeting or
until their respective successors are elected and qualified;
2.To ratify the appointment of Arthur Andersen LLP as the independent
auditors of the Company for the fiscal year ending December 31, 2000;
3.To approve amendment of the Company's Certificate of Incorporation to
increase the authorized number of shares of common stock from 200,000,000
shares to 300,000,000;
4.To approve amendment of the Company's 1996 Stock Plan to (a) increase
the number of shares of common stock reserved for issuance under the plan
by 5,000,000 shares, and (b) revise the automatic share increase provision
of the plan so that the number of shares of common stock reserved for
issuance under the plan will automatically increase on the first day of
each of the fiscal years 2001 through 2006 in an amount equal to the lesser
of (i) 5,000,000 shares, (ii) five percent (5%) of the number of shares of
common stock outstanding on the last day of the immediately preceding
fiscal year or (iii) such lesser number of shares as determined by the
Board of Directors.
5.To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
These proposals are more fully described in the Proxy Statement which is
attached and made a part of this Notice. Although only stockholders of record
at close of business on April 21, 2000 are entitled to vote at the Annual
Meeting, all stockholders are cordially invited to attend it in person.
Whether or not you expect to attend the Annual Meeting in person, however,
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,
/s/ Joshua L. Green
Joshua L. Green
Secretary
San Jose, California
May 19, 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>
FOUNDRY NETWORKS, INC.
2100 GOLD STREET
P.O. BOX 649100
SAN JOSE, CALIFORNIA 95164-9100
----------------
PROXY STATEMENT
----------------
General
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of Foundry Networks, Inc., a Delaware
corporation (the "Company"), of proxies in the enclosed form for use in voting
at the Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
Santa Clara Marriott, located at 2700 Mission College Boulevard, Santa Clara,
CA 95054 on Tuesday, June 20, 2000, at 9:00 a.m., local time, and any
adjournment or postponement thereof.
This Proxy Statement, the enclosed proxy card and the Company's Annual
Report to Stockholders for the year ended December 31, 1999, including
financial statements, were first mailed to stockholders entitled to vote at
the meeting on or about May 19, 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:
Jeff Davitt) 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 Friday, April 21, 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 115,490,000 shares of common stock outstanding and held of
record by approximately 424 stockholders.
Voting and Solicitation
Each outstanding share of common stock on the Record Date is entitled to
one vote 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 (the "Inspector") with the assistance of the
Company's transfer agent. The Inspector will also determine whether or not a
quorum is present. In general, Delaware law provides that for most matters a
quorum consists of a majority of the shares entitled to vote and present in
person or represented by proxy. The nominees for election as directors at the
Annual Meeting will be elected by a plurality of the votes of the shares of
common stock present in person or represented by proxy at the meeting provided
a quorum is present. The amendment to the Company's Certificate of
Incorporation will require the affirmative vote of a majority of the
outstanding shares of the Company's common stock. All other matters submitted
to the stockholders will require the affirmative vote of a majority of shares
present in person or represented by proxy at the meeting provided a quorum is
present. The Inspector will treat abstentions as shares that are present and
entitled to vote for purposes of determining the presence of a quorum and as
negative votes for purposes of determining the approval of any matter
submitted to the stockholders for a vote.
Any proxy which is returned using the form of proxy enclosed and which is
not marked as to a particular item will be voted (i) FOR the election of the
nominated directors, (ii) FOR ratification of the appointment of
<PAGE>
Arthur Andersen LLP as the Company's independent auditors for the fiscal year
ending December 31, 2000, (iii) FOR approval of amendment of the Certificate
of Incorporation to increase authorized number of shares of common stock from
200,000,000 to 300,000,000, (iv) FOR approval of amendment of the 1996 Stock
Plan to increase the number of shares of common stock reserved for issuance
under the plan by 5,000,000 shares and revise the automatic annual share
increase provision, and (v) as the proxy holders deem advisable, FOR 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 ("broker non-votes"), those shares will not be
considered as present with respect to that matter. The Company believes that
the tabulation procedures to be followed by the Inspector are consistent with
the general requirements of Delaware law 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. In addition,
the Company may reimburse 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. In addition, the Company has
retained the proxy solicitation firm of Georgeson Shareholder Communications,
Inc. and will pay all fees and expenses incurred by that firm which are
expected to approximate $15,000.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
Nominees
At the Annual Meeting, the stockholders will elect three (3) directors to
serve until the 2001 Annual Meeting of Stockholders or until their respective
successors are 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 (3) nominees receiving the highest
number of votes 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 (3) 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 Board has nominated the current members of the Board to be reelected to
serve until the 2001 Annual Meeting or until their respective successors are
elected and qualified. The names of the nominees, their ages as of April 21,
2000 and certain other information about them are set forth below:
<TABLE>
<CAPTION>
Name of Nominee Age Principal Occupation Director Since
--------------- --- -------------------- --------------
<C> <C> <S> <C>
Bobby R. Johnson, Jr. .. 43 President, Chief Executive 1996
Officer and Chairman of the
Board of Directors of Company
Seth D. Neiman(1)....... 45 Managing Partner of Crosspoint 1996
Venture Partners
Andrew K. Ludwick(1).... 54 Private Investor 1999
</TABLE>
--------
(1) Member of audit committee and compensation committee.
There are no family relationships among any of the directors or executive
officers of the Company.
2
<PAGE>
Bobby R. Johnson, Jr. co-founded Foundry and has served as President, Chief
Executive Officer and Chairman of the board of directors of Foundry since its
inception in May 1996. From August 1993 to October 1995, Mr. Johnson co-
founded and served as President, Chief Executive Officer and Chairman of the
board of directors of Centillion Networks, Inc., a provider of local area
network switches. From September 1991 to February 1993, Mr. Johnson was Vice
President and General Manager of Internetworking Hardware for Network
Equipment Technologies, a wide area networking company. Mr. Johnson holds a
B.S. with honors from North Carolina State University.
Seth D. Neiman has served as a member of the board of directors of Foundry
since its inception in May 1996. Mr. Neiman is Managing Partner of Crosspoint
Venture Partners, a venture capital firm, where he has been a principal since
August 1994. Mr. Neiman serves as Chairman of the Board of Brocade
Communications Systems, Inc., and as a member of the board of Avanex
Corporation, as well as a number of privately held companies. Mr. Neiman holds
a B.A. from Ohio State University.
Andrew K. Ludwick has served as a member of the board of directors of
Foundry since May 1999. From September 1995 to October 1997, Mr. Ludwick was
Chief Executive Officer of Bay Networks, a networking company. From July 1985
to September 1995, Mr. Ludwick was founder, President and Chief Executive
Officer of SynOptics, an internetworking company. Mr. Ludwick currently serves
as a member of the boards of directors of a number of private companies. Mr.
Ludwick holds a B.A. from Harvard College and an M.B.A. from Harvard Business
School.
Meetings and Committees of the Board of Directors
During the period from January 1, 1999 through December 31, 1999 (the "last
fiscal year"), the Board met ten times and no director attended fewer than 75%
of the aggregate number of meetings of the Board.
The Board has two committees, an audit committee and a compensation
committee, both of which consist of Mr. Neiman and Mr. Ludwick. The audit
committee recommends the engagement of the Company's independent auditors 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 establishes and administers the Company's policies
regarding annual executive salaries, cash incentives, and equity incentive
plans. During the year ended December 31, 1999, the Board performed the
functions of the audit committee and compensation committee and, accordingly,
these committees did not meet separately from the complete Board during that
year. The Board has no nominating committee or committee performing such
functions.
A nomination for a director made by a stockholder to be decided at this
year's annual meeting must be submitted to Jeff Davitt at the address of the
Company's executive offices set forth above on or before May 30, 2000.
Nominations that are intended to be included in the Company's proxy statement
for the 2001 Annual Meeting must be submitted no later than January 19, 2001.
See "Deadline for Receipt of Stockholder Proposals for 2001 Annual Meeting."
Compensation of Directors
Directors currently receive no cash fees for services provided in that
capacity. The Company's 1999 Directors' Stock Option Plan (the "Directors'
Plan"), which took effect upon the closing of its initial public offering in
October 1999, provides that each person who becomes a nonemployee director of
the Company will be granted a nonstatutory stock option to purchase 225,000
shares of common stock on the date on which the optionee first becomes a
nonemployee director of the Company. Thereafter, on the date of each annual
meeting of the Company's stockholders at which a director is elected, each
such nonemployee director shall be granted an option to purchase 60,000 shares
of common stock if, on such date, he or she shall have served on the Company's
Board of Directors for at least six months. Both Mr. Neiman and Mr. Ludwick
will have served for more than six months at the time of the Annual Meeting,
and so will receive options to purchase 60,000 shares of the Company's common
stock under the Directors' Plan if they are reelected to the Board at the
Annual Meeting.
3
<PAGE>
Recommendation of the Board:
THE BOARD RECOMMENDS A VOTE FOR ELECTION OF ALL NOMINEES NAMED ABOVE.
PROPOSAL NO. 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
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 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 APPOINTMENT OF ARTHUR
ANDERSEN LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2000.
PROPOSAL NO. 3: APPROVAL OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION
General
The Company's Certificate of Incorporation currently authorizes the
issuance of 200,000,000 shares of common stock and 5,000,000 shares of
preferred stock. On January 10, 2000, the Company effectuated a two-for-one
forward stock split of its outstanding common stock in the form of a stock
dividend. As of April 21, 2000 and after taking into account the effect of the
stock dividend, the Company had approximately 115,490,000 shares of common
stock outstanding and approximately 21,524,000 shares of common stock reserved
for future issuance under the Company's equity incentive plans, leaving
available for other purposes only 62,986,000 shares of common stock as of that
date.
Proposal and Reasons for the Amendment
At the Annual Meeting, the Company's stockholders are being asked to
approve an amendment to the Company's Certificate of Incorporation to increase
the number of shares of common stock authorized for issuance from 200,000,0000
shares to 300,000,000 shares. No change is proposed to the authorized number
of shares of preferred stock.
The Board has adopted a resolution approving the proposed amendment and
believes it to be in the Company's best interests because it will enable the
Company to effect additional stock splits in the future should the Board
determine such a split to be in the Company's best interests. In addition,
although the Company has no present commitments to do so, the Board believes
that the availability of additional authorized but unissued shares will enable
the Company to issue common stock for other proper corporate purposes which
may be identified in the future, such as to raise additional capital through
the sale of securities, to acquire another company or its business or assets,
to establish strategic relationships with corporate partners, to provide
equity incentives to employees, officers or directors or to pursue other
business opportunities.
Under the Company's Certificate of Incorporation, the Company's
stockholders will not have any preferential rights to purchase any newly
issued shares of common stock. An issuance of additional common stock could
have a dilutive effect on earnings per share, voting power, and share holdings
of current stockholders. No additional action or authorization by the
Company's stockholders would be necessary prior to the issuance of such
additional shares, unless required by applicable law or the rules of any stock
exchange or national securities association trading system on which the common
stock is then listed or quoted. The Company reserves the right to seek a
further increase in authorized shares from time to time in the future as
considered appropriate by the Board.
4
<PAGE>
The proposed amendment could, under certain circumstances, have an anti-
takeover effect, although this is not the intention of this proposal. For
example, in the event of a hostile attempt to take over control of the
Company, it may be possible for the Company to endeavor to impede the attempt
by issuing shares of common stock, thereby diluting the voting power of the
other outstanding shares and increasing the potential cost to acquire control
of the Company. This could potentially discourage an unsolicited takeover
attempt which may in turn limit the opportunity for the Company's stockholders
to dispose of their shares at the higher price generally available in takeover
attempts. The proposed amendment may also have the effect of permitting the
Company's current management, including the current Board, to retain its
position, and place it in a better position to resist changes that
stockholders may wish to make if they are dissatisfied with the conduct of the
Company's business. However, the Board is not aware of any attempt to take
control of the Company and the Board has not presented this proposal with the
intent that it be utilized as a type of anti-takeover device.
Required Vote
The affirmative vote of the holders of a majority of the outstanding shares
of the Company's common stock is necessary for approval of the amendment to
the Company's Certificate of Incorporation. Therefore, abstentions and broker
non-votes (which may occur if a beneficial owner of stock whose shares are
held in a brokerage or bank account fails to provide the broker or the bank
voting instructions as to such shares) effectively count as votes against the
amendment.
Recommendation of the Board
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION.
PROPOSAL NO. 4: APPROVAL OF AMENDMENT OF THE 1996 STOCK PLAN
General
The Company's 1996 Stock Plan (the "1996 Plan") was adopted by the Board in
July 1996 and will expire in accordance with its stated termination date of
July 2006. The 1996 Plan provides for the grant to employees of incentive
stock options within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), and for the grant of nonstatutory stock
options and stock purchase rights to employees, consultants and directors
(including non-employee directors). See "United States Federal Income Tax
Information" below for information concerning the tax treatment of both
incentive stock options and nonstatutory stock options.
To date, a total of 46,235,683 shares of common stock have been reserved
for issuance under the 1996 Plan. In addition, the 1996 Plan currently
contains a provision which automatically increases on the first day of each of
the Company's fiscal years 2000 through 2006 the number of shares of common
stock reserved for issuance under the plan in an amount equal to the lesser of
(i) 4,500,000 shares, (ii) three percent (3%) of the outstanding common stock
on the last day of the immediately preceding fiscal year or (iii) such lesser
number of shares as determined by the Board.
As of April 21, 2000, 26,645,890 shares had been issued upon exercise of
options granted under the 1996 Plan, options to purchase 14,971,362 shares
were outstanding and 2,924,868 shares remained available for future grant. All
of such outstanding options were held by employees, including current officers
who are not executive officers, 1,080,000 of such options were held by current
executive officers (four persons). As of April 21, 2000, the fair market value
of all shares of common stock subject to outstanding options under the 1996
Plan was $1,302,508,494 based on the closing sale price of $87.00 for the
Company's common stock as reported on the Nasdaq National Market on such date.
The 1996 Plan is not a qualified deferred compensation plan under Section
401(a) of the Code, and is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
5
<PAGE>
Proposal and Reasons for the Amendments
At the Annual Meeting, the Company's stockholders are being asked to
approve two amendments to the 1996 Plan. The first amendment will reserve
5,000,000 additional shares of common stock for issuance under the plan. The
second amendment will revise the automatic annual share increase provision so
that the number of shares of common stock reserved for issuance under the plan
will automatically increase on the first day of each fiscal year beginning in
2001 and ending in 2006 in an amount equal to the lesser of (i) 5,000,000
shares, (ii) five percent (5%) of the number of shares of common stock
outstanding on the last day of the immediately preceding fiscal year or (iii)
such lesser number of shares as is determined by the Board. The amendments
would result in an aggregate increase in the number of shares reserved for
issuance under the 1996 Plan of 8,000,000 shares.
The Board has adopted resolutions approving the proposed amendments and
believes them to be in the Company's best interests because they will help the
Company attract, retain, and motivate the best available employees, officers
and directors and provide them with adequate proprietary interest in the
Company which is critical to the continued growth and success of the Company.
The Company is experiencing a period of rapid growth and competition for
skilled employees in high-technology companies is intense, particularly in the
San Francisco Bay Area. In addition, the initial option grants to many of the
Company's executive officers and key employees will become fully vested or
nearly fully vested during the years 2000 and 2001, and the Company believes
it will be necessary to provide them with additional option grants to help
ensure their continued service to the Company. With respect to the automatic
annual share increase provision in particular, the Board believes that, based
on anticipated hiring needs and competitive market conditions, the Company's
annual option needs will likely be greater than the current provision will
provide.
Required Vote
The approval of the amendment of the 1996 Plan requires the affirmative
vote of the holders of a majority of the shares of the Company's common stock
present at the Annual Meeting in person or by proxy and entitled to vote.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF AMENDMENT OF THE
1996 STOCK PLAN.
The following is a summary of principal features of the 1996 Plan. The
summary, however, does not purport to be a complete description of all the
provisions of the 1996 Plan. Any stockholder of the Company who wishes to
obtain a copy of the actual plan document may do so upon written request to
Jeff Davitt at the Company's principal offices at 2100 Gold Street, P.O. Box
649100, San Jose, California 95164-9100.
Administration
If permitted by Rule 16b-3 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), Section 162(m) of the Code, and by the legal
requirements relating to the administration of incentive stock option plans,
if any, of applicable securities laws and the Code (collectively, the
"Applicable Laws"), grants under the 1996 Plan may (but need not) be made by
different administrative bodies with respect to employees or consultants who
are also officers or directors and employees who are neither directors nor
officers.
With respect to grants of options to employees or consultants who are also
officers or directors of the Company, grants under the 1996 Plan shall be made
by (A) the Board, if the Board may make grants under the 1996 Plan in
compliance with Rule 16b-3 of the Exchange Act and Section 162(m) of the Code
as the latter applies so as to qualify grants of options to certain executive
officers as performance-based compensation, or (B) a committee designated by
the Board to make grants under the 1996 Plan, which committee shall be
constituted in such a manner as to permit grants under the 1996 Plan to comply
with Rule 16b-3, to qualify grants of options to certain executive officers as
performance-based compensation under Section 162(m) of the Code and otherwise
so as to satisfy the Applicable Laws.
6
<PAGE>
With respect to grants of options to employees or consultants who are
neither directors nor officers of the Company, the 1996 Plan will be
administered by (A) the Board or (B) a committee designated by the Board,
which committee will be constituted in such a manner so as to satisfy the
Applicable Laws. The Board or the committee designated by the Board to
administer the 1996 Plan is referred to in this Proxy Statement as the
"Administrator." The Administrator receives no additional compensation for its
services in connection with the administration of the 1996 Plan.
Eligibility
The 1996 Plan provides that options may be granted to employees (including
officers and directors who are also employees) and consultants of the Company
(including non-employee directors). Incentive stock options may be granted
only to employees. The Administrator selects the optionees and determines the
number of shares and the exercise price to be associated with each option. In
making such determination, the Administrator takes into account the duties and
responsibilities of the optionee, the value of the optionee's services, the
optionee's present and potential contribution to the success of the Company,
and other relevant factors. As of April 21, 2000, there are approximately 306
employees, officers and directors eligible to participate in the 1996 Plan.
The 1996 Plan provides that the maximum number of shares of common stock
which may be granted under options and stock purchase rights to any one
employee under the 1996 Plan during any fiscal year is 3,000,000, subject to
adjustment as provided in the 1996 Plan. There is also a limit on the
aggregate market value of shares subject to all incentive stock options that
may be granted to an optionee during any calendar year.
Terms of Options
The terms of options granted under the 1996 are determined by the
Administrator. Each option is evidenced by a stock option agreement between
the Company and the optionee and is subject to the following additional terms
and conditions:
Exercise of the Option. The Administrator determines when options are
exercisable. With respect to options granted after the effective date of the
Company's initial public offering, optionees must earn the right to exercise
options by continuing to work for the Company. Options granted prior to the
Company's initial public offering were generally exercisable by an optionee in
full immediately upon grant, subject to the Company's right to repurchase at
cost any shares that remained unvested upon cessation of the optionee's
employment with the Company. An option is exercised by giving written notice
of exercise to the Company specifying the number of full shares of common
stock to be purchased, and by tendering payment of the purchase price to the
Company. The method of payment of the exercise price of the shares purchased
upon exercise of an option is determined by the Administrator.
Exercise Price. The exercise price of options granted under the 1996 Plan
is determined by the Administrator, and must be at least equal to the fair
market value of the shares on the date of grant, in the case of incentive
stock options, as determined by the Administrator, based upon the closing
sales price on the Nasdaq National Market on the date of grant. Incentive
stock options granted to stockholders owning more than 10% of the total
combined voting power of all classes of the Company's stock (such holders are
referred to as "10% Stockholders") are subject to the additional restriction
that the exercise price on such options must be at least 110% of the fair
market value on the date of the grant. Nonstatutory stock options granted to
certain of the Company's executive officers are subject to the additional
restriction that the exercise price on such options must be at least 100% of
the fair market value on the date of grant if such options are intended to
qualify as performance-based compensation under Section 162(m) of the Code.
Termination of Employment. If the optionee's employment or consulting
relationship with the Company is terminated for any reason other than death or
disability, options under the 1996 Plan may be exercised not later than three
months (or such lesser amount of time to be determined by the Administrator
but not less than
7
<PAGE>
thirty days) after the date of such termination to the extent the option was
exercisable on the date of such termination. In no event may an option be
exercised by any person after the expiration of its term.
Disability. If an optionee is unable to continue his or her employment or
consulting relationship with the Company as a result of or her disability,
options may be exercised within six months (twelve months in the case of a
total and permanent disability) after the date of termination and may be
exercised only to the extent the option was exercisable on the date of
termination, but in no event may the option be exercised after its termination
date.
Death. If an optionee should die while either (a) employed or retained by
the Company and such optionee has been continuously employed or retained by
the Company since the date of grant of the option, or (b) within thirty days
after the optionee has ceased to be continuously employed or retained by the
Company, then the option may be exercised within six months after 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 to the extent the option was
exercisable on the date of death, or if earlier, termination, but in no event
may the option be exercised after its termination date.
Option Termination Date. Options granted under the 1996 Plan expire ten
years from the date of grant unless a shorter period is provided in the option
agreement. Incentive stock options granted to 10% Stockholders may not have a
term of more than five years.
Nontransferability of Options. Incentive stock options are not transferable
by the optionee, other than by will or the laws of descent and distribution,
and are exercisable only by the optionee during his or her lifetime or, in the
event of death, by a person who acquires the right to exercise the option by
bequest or inheritance or by reason of the death of the optionee. In the case
of nonstatutory stock options, the Administrator may at its discretion in
certain circumstances allow the transferability of such options.
Other Provisions. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the 1996 Plan as may be
determined by the Administrator.
Adjustments Upon Changes in Capitalization
In the event any change, such as a stock split, reverse stock split, stock
dividend, combination or reclassification, is made in the Company's
capitalization that results in an increase or decrease in the number of
outstanding shares of common stock without receipt of consideration by the
Company, appropriate adjustment shall be made in the exercise price of each
outstanding option, the number of shares subject to each option, and the
annual limitation on grants to employees, as well as the number of shares
available for issuance under the 1996 Plan. In the event of the proposed
dissolution or liquidation of the Company, each option will terminate unless
otherwise provided by the Administrator.
Merger/Sale of Assets
In the event the Company sells all or substantially all of its assets or
merges with another corporation, each option and stock purchase right may be
assumed or an equivalent option or right substituted by the successor
corporation. However, if the successor corporation does not agree to this
assumption or substitution, the option of stock purchase right will terminate
upon the closing of the transaction. Outstanding repurchase rights will
terminate unless assigned to the acquiror or purchaser. Stock option
agreements issued to employees under the 1996 Plan provide for accelerated
vesting of specified percentages of outstanding unvested options prior to the
closing of a transaction involving a change of control.
Stock Purchase Rights
In addition to stock options, the Administrator may issue stock purchase
rights under the 1996 Plan to employees, non-employees directors and
consultants. The Administrator determines the number of shares, price, terms,
conditions and restrictions related to a grant of stock purchase rights. The
purchase price of a stock
8
<PAGE>
purchase right granted under the 1996 Plan will be determined by the
Administrator. The period during which the stock purchase right is held open
is determined by the Administrator, but in no case shall this period exceed 30
days. Unless the Administrator determines otherwise, the recipient of a stock
purchase right must execute a restricted stock purchase agreement granting the
Company an option to repurchase unvested shares at cost upon termination of
the recipient's relationship with the Company.
Amendment and Termination
The Board may amend the 1996 Plan at any time or from time to time or may
terminate it without approval of the stockholders; provided, however, that
stockholder approval will be obtained as required by the applicable laws.
However, no action by the Board or the stockholders may alter or impair any
option previously granted under the 1996 Plan, unless mutually agreed
otherwise between the optionee and the Board. The 1996 Plan shall terminate in
July 2006, provided that any options then outstanding under the 1996 Plan
shall remain outstanding until they expire by their terms.
United States Federal Income Tax Information
The following is a brief summary of the U.S. federal income tax
consequences of transactions under the 1996 Plan based on federal income tax
laws in effect on the date of this Proxy Statement. This summary is not
intended to be exhaustive and does not address all matters which may be
relevant to a particular optionee based on his or her specific circumstances.
The summary addresses only current U.S. federal income tax law and expressly
does not discuss the income tax laws of any state, municipality, non-U.S.
taxing jurisdiction or gift, estate or other tax laws other than federal
income tax law. The Company advises all optionees to consult their own tax
advisor concerning the tax implications of option grants and exercises, stock
purchases, and the disposition of stock acquired upon such exercises and
purchases, under the Plan.
Stock Options
Options granted under the 1996 Plan may be either incentive stock options,
which are intended to qualify for the special tax treatment provided by
Section 422 of the Code, or nonstatutory stock options, which will not
qualify. If an option granted under the 1996 Plan is an incentive stock
option, the optionee will recognize no income upon grant of the incentive
stock option and will incur no tax liability due to the exercise, except to
the extent that such exercise causes the optionee to incur alternative minimum
tax. (See discussion below.) The Company will not be allowed a deduction for
federal income tax purposes as a result of the exercise of an incentive stock
option regardless of the applicability of the alternative minimum tax. Upon
the sale or exchange of the shares more than two years after grant of the
option and one year after exercise of the option by the optionee, any gain
will be treated as a long-term capital gain. If both of these holding periods
are not satisfied, the optionee will recognize ordinary income equal to the
difference between the exercise price and the lower of the fair market value
of the common stock on the date of the option exercise or the sale price of
the Common Stock, provided that either the common stock is not subject to any
Company repurchase right at the time of exercise or, if it is subject to such
a company repurchase right, the optionee makes a timely Section 83(b) election
(see below). The Company will be entitled to a deduction in the same amount as
the ordinary income recognized by the optionee. Any gain or loss recognized on
a disposition of the shares prior to completion of both of the above holding
periods in excess of the amount treated as ordinary income will be
characterized as long-term capital gain if the sale occurs more than one year
after exercise of the option or as short-term capital gain if the sale is made
earlier. For individual taxpayers, the current maximum U.S. federal income tax
rate on long-term capital gains is 20%, whereas the maximum rate on other
income is 39.6%. Capital losses for individual taxpayers are allowed in full
against capital gains plus $3,000 of other income.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory stock options. An optionee will not recognize any
taxable income at the time he or she is granted a nonstatutory stock option.
However, upon its exercise, the optionee will recognize ordinary income for
tax purposes measured by the excess of the fair market value of the shares
over the exercise price, provided that either the common stock is not subject
to any Company repurchase right at the time of exercise or, if it is subject
to such a company
9
<PAGE>
repurchase right, the optionee makes a timely Section 83(b) election (see
below). The income recognized by an optionee who is also an employee of the
Company will be subject to income and employment tax withholding by the
Company by payment in cash by the optionee or out of the optionee's current
earnings. Upon the sale of such shares by the optionee, any difference between
the sale price and the fair market value of the shares as of the date of
exercise of the option will be treated as capital gain or loss, and will
qualify for long-term capital gain or loss treatment if the shares have been
held for more than one year from the date of exercise.
Alternative Minimum Tax
The exercise of an incentive stock option may subject the optionee to the
alternative minimum tax under Section 55 of the Code. The alternative minimum
tax is calculated by applying a tax rate of 26% to alternative minimum taxable
income of joint filers up to $175,000 ($87,500 for married taxpayers filing
separately) and 28% to alternative minimum taxable income above that amount.
Alternative minimum taxable income is equal to (i) taxable income adjusted for
certain items, plus (ii) items of tax preference less (iii) an exemption
amount of $45,000 for joint returns, $33,750 for unmarried individual returns
and $22,500 in the case of married taxpayers filing separately (which
exemption amounts are phased out for upper income taxpayers). Alternative
minimum tax will be due if the tax determined under the foregoing formula
exceeds the regular tax of the taxpayer for the year.
In computing alternative minimum taxable income, shares purchased upon
exercise of an incentive stock option are treated as if they had been acquired
by the optionee pursuant to exercise of a nonstatutory stock option. As a
result, the optionee recognizes alternative minimum taxable income equal to
the excess of the fair market value of the common stock on the date of
exercise over the option exercise price, provided that either the common stock
is not subject to any Company repurchase right at the time of exercise or, if
it is subject to such a company repurchase right, the optionee makes a timely
Section 83(b) election (see below). Because the alternative minimum tax
calculation may be complex, optionees should consult their own tax advisors
prior to exercising incentive stock options.
If an optionee pays alternative minimum tax, the amount of such tax may be
carried forward as a credit against any subsequent year's regular tax in
excess of the alternative minimum tax for such year.
Option Stock Subject to Company Repurchase Right
If common stock issued upon exercise of an option is subject to a company
repurchase right entitling the Company to buy back the shares at the option
exercise price upon termination of services prior to satisfaction of a vesting
period, then the income tax consequences of exercising an option will vary
depending on whether the optionee does or does not make a special tax election
referred to as a "Section 83(b) election." If a timely Section 83(b) election
is made, then the income tax consequences of exercising an option will be as
summarized above. If, however, the optionee does not make a timely Section
83(b) election, then the amount of alternative minimum taxable income (if the
option is an incentive stock option) or regular taxable income (if the option
is a nonstatutory stock option or common stock acquired upon exercise of an
incentive stock option is disposed of prior to completion of both holding
periods described previously) attributable to exercise of an option will be
determined as follows. No alternative minimum or regular taxable income, as
applicable, will be recognized at the time of exercise, but instead such
income will be recognized by the optionee with respect to each share of common
stock at the time the Company repurchase right lapses with respect to such
common stock upon the applicable vesting date. The amount of alternative
minimum or regular taxable income, as applicable, recognized on each vesting
date will equal the excess of the fair market value as of the vesting date of
the common stock then vesting over the exercise price paid for such common
stock. A Section 83(b) election must be filed within thirty days after
exercise of an option.
The purchase of shares of common stock pursuant to the exercise of a stock
purchase right and the sale of such shares by a purchaser are generally taxed
in the same manner as nonstatutory stock options, as described above.
Optionees should consult their own tax advisors regarding the advisability
of making a Section 83(b) election under their particular circumstances and
the procedural requirements for making such election.
10
<PAGE>
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of our common stock as of April 21, 2000 by: (a) each of our
directors and the executive officers named in the Compensation of Executive
Officers table of this Proxy Statement (the "Named Executive Officers");
(b) all directors and executive officers as a group; and (c) each person who
is known to us to own beneficially more than 5% of our common stock.
<TABLE>
<CAPTION>
Percent of
Number Common
Name and Address of Shares Stock
---------------- ---------- ----------
<S> <C> <C>
Directors and Executive Officers:
Bobby R. Johnson, Jr.(a)................................ 22,950,000 19.9%
Robert W. Shackleton(b)................................. 1,206,771 1.0
William S. Kallaos(c)................................... 1,150,318 1.0
Ken K. Cheng(d)......................................... 1,375,980 1.2
Wilburn W. McGill(e).................................... 1,391,906 1.2
Seth D. Neiman(f)....................................... 13,721,359 11.9
Andrew K. Ludwick(g).................................... 872,500 *
All directors and executive officers as a group (10
persons)(h) ........................................... 50,894,399 43.7
5% Stockholders:
Entities affiliated with Crosspoint Venture Partners(i)
....................................................... 13,646,629 11.8
2925 Woodside Road
Woodside, CA 94062
Entities affiliated with Institutional Venture
Partners(j) ........................................... 8,169,834 7.1
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
</TABLE>
--------
*Less than one percent of the outstanding shares of common stock.
(a) Includes 735,937 shares subject to our right of repurchase at cost upon
cessation of employment.
(b) Includes 1,327,500 shares subject to stock pledge agreements in favor of
Foundry, 202,499 of which are subject to our right of repurchase at cost
upon cessation of employment, 15,000 shares transferred to his minor
children and held in custodial accounts on their behalf, and 150,000
shares issuable upon the exercise of an option which was exercisable as of
April 21, 2000.
(c) Includes 1,215,000 shares subject to a stock pledge agreement in favor of
Foundry, 303,750 of which are subject to our right of repurchase at cost
upon cessation of employment, 269,406 shares transferred to a grantor
retained annuity trust and 429,766 shares transferred to a living trust.
(d) Includes 1,245,000 shares subject to stock pledge agreements in favor of
Foundry and 806,562 shares subject to our right of repurchase at cost upon
cessation of employment.
(e) Includes 1,260,000 shares subject to stock pledge agreements in favor of
Foundry, 276,562 of which are subject to our right of repurchase at cost
upon cessation of employment and 15,000 of which are held jointly with
Billie J. McGill, and 225,000 shares issuable upon the exercise of an
option which was exercisable as of April 21, 2000.
(f) Includes 9,752,987 shares held by Crosspoint Venture Partners (1996) and
3,893,642 shares held by Crosspoint Venture Partners LS 1997. Seth D.
Neiman is a general partner of the general partner of the Crosspoint
entities and is a director of Foundry. He disclaims beneficial ownership
of the shares held by the Crosspoint entities except to the extent of his
pecuniary interest in these shares.
(g) Includes 377,500 shares sold to a family trust of which Mr. Ludwick is a
trustee and 15,000 shares transferred to his minor children and held in
custodial accounts on their behalf.
(h) Includes 13,646,629 shares held by entities affiliated with Mr. Neiman as
described in Note (f), 2,756,247 shares subject to our right of repurchase
upon cessation of employment by officers and 1,080,000 shares issuable
upon the exercise of options which were exercisable as of April 21, 2000.
11
<PAGE>
(i) Includes 9,752,987 shares held by Crosspoint Venture Partners (1996) and
3,893,642 shares held by Crosspoint Venture Partners LS 1997. The
following natural persons exercise voting and/or dispositive powers for
the shares held by these funds: Robert A. Hoff, Donald B. Milder, John B.
Mumford, Seth D. Neiman and Rich Shapero.
(j) Includes 134,304 shares held by Institutional Venture Management VII, L.
P., 319,752 shares held by IVP Founders Fund I, L.P. and 7,715,778 shares
held by Institutional Venture Partners VII, L.P. The following natural
persons exercise voting and/or dispositive powers for the shares held by
these funds: Samuel D. Colella, Reid W. Dennis, Mary Jane Elmore, Norman
A. Fogelsong, Ruthann Quindlen, L. James Strand, William P. Tai, T. Peter
Thomas and Geoffrey Y. Yang.
Except as otherwise noted, the address of each person listed in the table
is c/o Foundry Networks, Inc., 2100 Gold Street, P.O. Box 649100, San Jose,
California, 95164-9100. Beneficial ownership is determined in accordance with
the rules of the Securities and Exchange Commission and includes voting and
investment power with respect to shares. To our knowledge, except under
applicable community property laws or as otherwise indicated, the persons
named in the table have sole voting and sole investment control with respect
to all shares beneficially owned.
The table includes all shares of common stock issuable within 60 days of
April 21, 2000 upon the exercise of options and other rights beneficially
owned by the indicated stockholders on that date.
The applicable percentage of ownership for each stockholder is based on
115,490,000 shares of common stock outstanding as of April 21, 2000 together
with applicable options for that stockholder. Shares of common stock issuable
upon exercise of options and other rights beneficially owned are deemed
outstanding for the purpose of computing the percentage ownership of the
person holding those options and other rights, but are not deemed outstanding
for computing the percentage ownership of any other person.
12
<PAGE>
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 which
follows 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 (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. It also makes
recommendations to the Board concerning the granting of options under the
Company's 1996 Stock Option Plan. Bobby R. Johnson, Jr., who is a director as
well as the Company's President and Chief Executive Officer, has not
participated in deliberations or decisions involving his own compensation.
During the last fiscal year, Seth D. Neiman and Andrew K. Ludwick served as
the sole members of the compensation committee.
General Compensation Policy
Under the supervision of the Board, the Company's compensation policy is
designed to attract and retain qualified 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 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 stockholders.
The summary below describes in more detail the factors which the Board
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 stockholder values.
Awards under this plan by the Board 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 stockholders.
Factors considered in making such awards include the
13
<PAGE>
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 equal monthly 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
Bobby R. Johnson, Jr. has served as the Company's President and Chief
Executive Officer since the Company's inception in May 1996. His base salary
for fiscal 1999 remained virtually unchanged from the previous year and was
based primarily on his previous compensation at the Company and by comparison
to competitive salaries of chief executive officers in the Company's peer
group. He received no other compensation during 1999.
The compensation committee may adjust Mr. Johnson's salary in the future,
based primarily on comparative salaries of chief executive officers in the
Company's peer group, although it may consider other factors as well such as
the financial performance of the Company and Mr. Johnson's success in meeting
key strategic goals.
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 Plan
and others outside of the plan to such officers 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: Seth D. Neiman
Andrew K. Ludwick
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors currently consists of
Seth D. Neiman and Andrew K. Ludwick. No member of the Compensation Committee
or executive officer of the Company has a relationship that would constitute
an interlocking relationship with executive officers or directors of another
entity.
14
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows the compensation earned by (a) Bobby R.
Johnson, Jr., the Company's Chief Executive Officer during the fiscal year
ended December 31, 1999, (b) the four other most highly compensated
individuals who served as an executive officer of the Company during the
fiscal year ended December 31, 1999; and (c) the compensation received by each
such individual during fiscal year ended December 31, 1998. The amounts in the
column entitled "Other Annual Compensation" represent commissions paid, based
on total sales, to Messrs. Shackleton and Kallaos and partial forgiveness by
the Company of loans and interest outstanding under loans made to Mr. McGill
in connection with the exercise of options. The amounts in the column titled
"All Other Compensation" consist of life insurance premiums paid by the
Company.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------------------- ------------
Securities
Fiscal Other Annual Underlying All Other
Name & Principal Position Year Salary($) Bonus($) Compensation($) Options(#) Compensation($)
------------------------- ------ --------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Bobby R. Johnson, Jr. ... 1999 $140,000 -- -- -- --
President, Chief 1998 139,090 -- -- -- $470
Executive Officer,
Chairman of the Board of
Directors
Robert W. Shackleton..... 1999 110,000 5,000 119,447 150,000 323
Vice President, North 1998 111,590 2,500 74,112 22,500 504
American Sales
William S. Kallaos....... 1999 110,000 -- 75,618 -- --
Vice President, 1998 109,090 -- 35,821 -- 370
International Sales
Ken K. Cheng............. 1999 145,000 4,500 -- 150,000 --
Vice President, 1998 54,519(1) -- -- 1,245,000 --
Marketing
Wilburn W. McGill........ 1999 137,500 2,500 -- 225,000 --
Vice President, 1998 125,090 11,500 12,830 45,000 430
Manufacturing
</TABLE>
--------
(1) Mr. Cheng's employment with Foundry commenced in July 1998.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides certain information with respect to stock
options granted to the Named Executive Officers in the last fiscal year. In
addition, as required by Securities and Exchange Commission rules, the table
sets forth the hypothetical gains that would exist for the options based on
assumed rates of annual compound stock price appreciation during the option
term.
These stock options were granted outside of the Company's 1996 Stock Plan.
They were immediately exercisable when granted, subject to the Company's right
to repurchase at cost any shares that remain unvested at the time of the
officer's cessation of employment. The shares vest at a rate of 1/48th per
month so long as the officer continues to provide services to the Company and
provide for partial acceleration upon a change of control. See section
entitled "Compensation of Executive Officers--Change of Control Agreements
with Named Executive Officers" for description of change of control provision.
The percentages below are based on the aggregate of 12,041,000 shares
subject to options granted by the Company in 1999. The exercise price per
share of each option was equal to the fair market value of our common stock on
the date of grant as determined by our Board of Directors.
15
<PAGE>
The potential realizable value assumes that the fair market value of our
common stock on the date of grant appreciates at the indicated annual rate
compounded annually for the entire 10-year term of the option and that the
option is exercised and sold on the last day of its term for the appreciated
stock price. The 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by the rules of the SEC, and do not represent our
prediction of stock performance. Actual gains, if any, on stock option
exercises will depend on the future performance of our common stock. The gains
shown are net of the option exercise price, but do not include deductions for
taxes and other expenses payable upon the exercise of the option or for sale
of underlying shares of common stock.
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------------
Potential Realizable
Value At Assumed
Number Of % Of Total Annual Rates of Stock
Securities Options Exercise Price Appreciation For
Underlying Granted To Price Option Term
Options Employees in per Expiration -----------------------
Granted Fiscal Year Share Date 5% 10%
---------- ------------ -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Bobby R. Johnson, Jr. .. -- -- % $ -- -- $ -- $ --
Robert W. Shackleton.... 150,000 1.2 0.83 1/25/09 78,297 198,421
William S. Kallaos...... -- -- -- -- -- --
Ken K. Cheng............ 150,000 1.2 0.83 (1) 78,297 198,421
Wilburn W. McGill....... 225,000 1.0 0.83 1/25/09 117,446 297,631
</TABLE>
--------
(1) Exercised by Mr. Cheng on September 17, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to stock
options exercised by the Named Executive Officers during the fiscal year ended
December 31, 1999. In addition, the table sets forth the number of shares
covered by stock options as of the fiscal year ended December 31, 1999, and
the value of "in-the-money" stock options, which represents the positive
spread between the exercise price of a stock option and the market price of
the shares subject to such option at the end of the fiscal year ended
December 31, 1999.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Number of Unexercised In-the-Money
Shares Options at Options at
Acquired on Value Fiscal Year Fiscal Year
Name Exercise Realized End (1) End (2)
---- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Bobby R. Johnson, Jr......... -- $ -- -- $ --
Robert W. Shackleton......... -- -- 150,000 22,501,500
William S. Kallaos........... -- -- -- --
Ken K. Cheng................. 150,000 1,750,500(3) -- --
Wilburn W. McGill............ -- -- 225,000 33,752,250
</TABLE>
--------
(1) No stock appreciation rights (SARs) were outstanding during fiscal 1999.
All unexercised options were exercisable as of December 31, 1999, subject
to the Company's right to repurchase any unvested shares upon cessation of
the officer's employment.
(2) Based on the $150.84 per share closing price of the Company's common stock
on The Nasdaq Stock Market on December 31, 1999, less the exercise price
of the options.
(3) The value realized represents the difference between $12.50, the value
which the Company has assumed to be the fair market value of its common
stock on the day of exercise for the purposes of this table only, and the
exercise price of the option, and does not necessarily indicate that the
optionee sold such stock.
16
<PAGE>
CHANGE OF CONTROL AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
On June 6, 1996, the Company sold Bobby R. Johnson, Jr. 23,550,000 shares
of common stock at a purchase price of $0.0033 per share. In June 1999, Mr.
Johnson voluntarily sold 1,200,000 of these shares back to the Company at
$0.0033 per share. The Company holds the right to purchase any shares held by
Mr. Johnson that remain unvested upon either a voluntary termination of
employment by Mr. Johnson or a termination by the Company for cause. If Mr.
Johnson is constructively terminated or terminated other than for cause, then
the Company will not have this repurchase right. In addition, all shares not
previously released from the Company's repurchase option will be immediately
released upon a sale of all or substantially all of the assets of the Company
or the merger of the Company with or into another corporation where the
stockholders of the Company immediately prior to such sale or merger do not
own a majority of the outstanding voting securities of the acquiring or
surviving company.
The Company has entered into Stock Option Agreements with Robert W.
Shackleton, William S. Kallaos, Ken K. Cheng and Wilburn W. McGill which
provide for partial acceleration of vesting of their options upon a "Change in
Control" transaction, defined as a merger or other transaction in which more
than fifty percent of the voting control of the Company is transferred or a
sale of all or substantially all of the assets of the Company. The following
table summarizes the terms of these Stock Option Agreements:
<TABLE>
<CAPTION>
Vesting
Commencement Current Vesting
Name Shares Date Schedule Acceleration %(1)
---- --------- ---------------- ---------------- ------------------------------
<S> <C> <C> <C> <C>
Robert W. Shackleton.... 1,305,000 April 1, 1997 1/48th per month 50% of unvested shares
22,500 June 11, 1998 1/48th per month Up to 37.5% of unvested shares
150,000 January 26, 1999 1/48th per month Up to 37.5% of unvested shares
William S. Kallaos...... 1,215,000 April 2, 1997 1/48th per month 50% of unvested shares
Ken K. Cheng............ 1,245,000 August 11, 1998 1/48th per month Up to 37.5% of unvested shares
150,000 January 26, 1999 1/48th per month Up to 37.5% of unvested shares
Wilburn W. McGill....... 1,215,000 March 19, 1997 1/48th per month Up to 37.5% of unvested shares
45,000 April 30, 1998 1/48th per month Up to 37.5% of unvested shares
225,000 January 26, 1999 1/48th per month Up to 37.5% of unvested shares
</TABLE>
--------
(1) With respect to acceleration of "up to 37.5% of unvested options," the
optionee will receive acceleration of up to eighteen months of vesting,
provided that the aggregate amount of total vesting after such
acceleration cannot exceed twenty four months.
TRANSACTIONS WITH MANAGEMENT
On June 25, 1997, the Company provided a loan to Drusilla Demopolous, its
former Vice President of Marketing, in connection with her exercise of an
option for the purchase of common stock, pursuant to a note secured by a stock
pledge agreement in the principal amount of $54,000 with an interest rate of
6.68%, due upon the earlier of June 25, 2002 or twelve months after the
closing of Foundry's initial public offering. On April 29, 1998, the Company
provided a second loan to Ms. Demopolous in connection with her exercise of a
second option for the purchase of common stock pursuant to a note secured by a
stock pledge agreement in the principal amount of $9,600 with an interest rate
of 5.58% due upon the earlier of April 28, 2003 or twelve months after the
closing of Foundry's initial public offering. In December, 1999, Ms.
Demopolous repaid both these loans in full.
On October 6, 1998, the Company provided a loan to Ken K. Cheng in
connection with his exercise of an option for the purchase of common stock,
pursuant to a note secured by a stock pledge agreement in the principal amount
of $207,458 with an interest rate of 5.03% due upon the earlier of October 5,
2003 or twelve months after the closing of Foundry's initial public offering.
17
<PAGE>
On June 28, 1999, Andrew K. Ludwick, one of the Company's directors,
exercised a fully vested option to purchase 480,000 shares of our common stock
at an exercise price of $2.67 per share granted him in connection with his
appointment as a member of our board of directors. Additionally, on June 9,
1999, the Company sold 375,000 shares of its Series C Preferred Stock at a
purchase price of $2.67 per share to a family trust of which Mr. Ludwick is a
trustee.
The Company believes that the transactions identified in this section were
on terms no less favorable to it than could have been obtained from
unaffiliated third parties.
18
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return data
for the Company's stock for the period beginning September 28, 1999 (the date
on which the Company's stock was first publicly traded on The Nasdaq National
Market) and ending on December 31, 1999 to the cumulative return over such
period of (i) The Nasdaq National Market Composite Index and (ii) the Nasdaq
Computer Manufacturer Composite Index. The graph assumes that $100 was
invested on September 28, 1999 in the common stock of the Company and in each
of the comparative indices, and reinvestment of any dividends. The graph
further assumes that such amount was initially invested in the common stock of
the Company at a per share price of $12.50, the price to which such stock was
first offered to the public by the Company on the date of its initial public
offering. The stock price performance on the following graph is not
necessarily indicative of future stock price performance.
[LOGO OF PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Cumulative Total Return
------------------------------------------
9/28/99 9/30/99 10/31/99 11/30/99 12/31/99
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Foundry Networks, Inc............... 100.00 504.00 758.00 940.50 1,206.75
Nasdaq Stock Market................. 100.00 99.57 107.34 119.88 146.69
Nasdaq Computer manufacturer........ 100.00 99.25 106.11 125.03 148.54
</TABLE>
19
<PAGE>
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Proposals of stockholders intended to be included in the Company's proxy
statement for the 2001 Annual Meeting of Stockholders must be received by Jeff
Davitt, Foundry Networks, Inc., 2100 Gold Street, P.O. Box 649100, San Jose,
CA 95164-9100 later than January 19, 2001. If the Company is not notified of a
stockholder proposal by April 4, 2001, then the proxies held by management of
the Company provide discretionary authority to vote against such stockholder
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 with the exception of the
following: (a) Seth D. Neiman inadvertently failed to include his purchase of
shares of common stock in the Company's initial public offering on any Form 4s
filed with the SEC until a filing on April 10, 2000; and (b) the Company filed
a Form 4 with the SEC on September 27, 1999, which mistakenly reported that
Timothy D. Heffner held options for the purchase of 84,000 shares of common
stock. The correct number of 45,000 shares was subsequently reported on a
Form 5 filed with the SEC on February 25, 2000.
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. Stockholders are urged to mark, date, execute and promptly
return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
/s/ Joshua L. Green
Joshua L. Green
Secretary
May 19, 2000
San Jose, California
20
<PAGE>
Foundry Networks, Inc.
1996 STOCK PLAN
1. Purposes of the Plan. The purposes of this 1996 Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants
of the Company and its Subsidiaries and to promote the success of the
Company's business. Options granted under the Plan may be incentive stock
options (as defined under Section 422 of the Code) or nonstatutory stock
options, as determined by the Administrator at the time of grant of an option
and subject to the applicable provisions of Section 422 of the Code, as
amended, and the regulations promulgated thereunder. Stock purchase rights may
also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees appointed
pursuant to Section 4 of the Plan.
(b) "Affiliate" means an entity other than a Subsidiary in which the
Company owns an equity interest or which, together with the Company, is
under common control of a third person or entity.
(c) "Applicable Laws" means the legal requirements relating to the
administration of stock option, restricted stock purchase and stock bonus
plans under applicable U.S. state corporate laws, U.S. federal and
applicable state securities laws, the Code, any stock exchange rules or
regulations and the applicable laws of any other country or jurisdiction
where Options or Stock Purchase Rights are granted under the Plan, as such
laws, rules, regulations and requirements shall be in place from time to
time.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means the Committee appointed by the Board of Directors
in accordance with Section 4(a) of the Plan.
(g) "Common Stock" means the Common Stock of the Company.
(h) "Company" means Foundry Networks, Inc., a Delaware corporation,
formerly known as StarRidge Networks, Inc.
(i) "Consultant" means any person, including an advisor, who is engaged
by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any Director of the Company whether
compensated for such services or not.
(j) "Continuous Status as an Employee or Consultant" means the absence
of any interruption or termination of service as an Employee or Consultant.
Continuous Status as an Employee or Consultant shall not be considered
interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any
other leave of absence approved by the Administrator, provided that such
leave is for a period of not more than ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted
from time to time; or (iv) in the case of transfers between locations of
the Company or between the Company, its Subsidiaries or their respective
successors. For purposes of this Plan, a change in status from an Employee
to a Consultant or from a Consultant to an Employee will not constitute an
interruption of Continuous Status as an Employee or Consultant.
(k) "Director" means a member of the Board.
(l) "Employee" means any person (including if appropriate, any Named
Executive, Officer or Director) employed by the Company or any Parent,
Subsidiary or Affiliate of the Company, with the status of employment
determined based upon such minimum number of hours or periods worked as
shall be determined by the Administrator in its discretion, subject to any
requirements of the Code. The payment by the Company of a director's fee to
a Director shall not be sufficient to constitute "employment" of such
Director by the Company.
<PAGE>
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" means, as of any date, the fair market value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, its Fair Market Value shall be the closing
sales price for such stock (or the closing bid, if no sales were
reported), as quoted on such system or exchange, or the exchange with
the greatest volume of trading in Common Stock for the last market
trading day prior to the time of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but not on
the National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean between the high bid and low asked prices for
the Common Stock for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(o) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable written option agreement.
(p) "Listed Security" means any security of the Company that is listed
or approved for listing on a national securities exchange or designated or
approved for designation as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc.
(q) "Named Executive" means any individual who, on the last day of the
Company's fiscal year, is the chief executive officer of the Company (or is
acting in such capacity) or among the four most highly compensated officers
of the Company (other than the chief executive officer). Such officer
status shall be determined pursuant to the executive compensation
disclosure rules under the Exchange Act.
(r) "Nonstatutory Stock Option" means an Option not intended to qualify
as an Incentive Stock Option, as designated in the applicable written
option agreement.
(s) "Officer" means a person who is an officer of the Company within the
meaning of Section 16(a) of the Exchange Act and the rules and regulations
promulgated thereunder.
(t) "Option" means a stock option granted pursuant to the Plan.
(u) "Optioned Stock" means the Common Stock subject to an Option or a
Stock Purchase Right.
(v) "Optionee" means an Employee or Consultant who receives an Option or
a Stock Purchase Right.
(w) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code, or any successor
provision.
(x) "Plan" means this 1996 Stock Plan.
(y) "Reporting Person" means an officer, director, or greater than ten
percent stockholder of the Company within the meaning of Rule 16a-2 under
the Exchange Act, who is required to file reports pursuant to Rule 16a-3
under the Exchange Act.
(z) "Restricted Stock" means shares of Common Stock acquired pursuant to
a grant of a Stock Purchase Right under Section 11 below.
(aa) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act,
as the same may be amended from time to time, or any successor provision.
2
<PAGE>
(bb) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(cc) "Stock Exchange" means any stock exchange or consolidated stock
price reporting system on which prices for the Common Stock are quoted at
any given time.
(dd) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to Section 11 below.
(ee) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code, or any
successor provision.
(ff) "Ten Percent Holder" means a person who owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of
the Company or any Parent or Subsidiary.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is 51,235,683 shares of Common Stock, plus an automatic annual
increase on the first day of each of the Company's fiscal years beginning in
2001 and ending in 2006 equal to the lesser of: (i) 5,000,000 Shares; (ii)
five percent (5%) of the Shares outstanding on the last day of the immediately
preceding fiscal year; or (iii) such lesser number of shares as is determined
by the Board of Directors. 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
that were subject thereto shall, unless the Plan shall have been terminated,
become available for future grant under the Plan. In addition, any Shares of
Common Stock which are retained by the Company upon exercise of an Option or
Stock Purchase Right in order to satisfy the exercise or purchase price for
such Option or Stock Purchase Right or any withholding taxes due with respect
to such exercise shall be treated as not issued and shall continue to be
available under the Plan. Shares repurchased by the Company pursuant to any
repurchase right which the Company may have shall not be available for future
grant under the Plan.
4. Administration of the Plan.
(a) General. The Plan shall be administered by the Board or a Committee,
or a combination thereof, as determined by the Board. The Plan may be
administered by different administrative bodies with respect to different
classes of Optionees and, if permitted by the Applicable Laws, the Board
may authorize one or more officers (who may (but need not) be Officers) to
grant Options or Stock Purchase Rights to Employees and Consultants.
(b) Administration With Respect to Reporting Persons. With respect to
Options and Stock Purchase Rights granted to Reporting Persons and Named
Executives, the Plan may (but need not) be administered so as to permit
such Options and Stock Purchase Rights to qualify for the exemption set
forth in Rule 16b-3 and to qualify as performance-based compensation under
Section 162(m) of the Code.
(c) Powers of the Administrator. Subject to the provisions of the Plan
and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the
Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(n) of the Plan;
(ii) to select the Consultants and Employees to whom Options and
Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock to be covered
by each such award granted hereunder;
3
<PAGE>
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions (including, without
limitation, vesting schedules), not inconsistent with the terms of the
Plan, of any award granted hereunder;
(vii) to determine whether and under what circumstances an Option may
be settled in cash under Section 10(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was
granted;
(ix) to determine the terms and restrictions applicable to Stock
Purchase Rights and the Restricted Stock purchased by exercising such
Stock Purchase Rights; and
(x) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan; and
(xi) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options or Stock Purchase Rights
to participants who are foreign nationals or employed outside of the
United States in order to recognize differences in local law, tax
policies or customs.
(d) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
holders of Options or Stock Purchase Rights.
5. Eligibility.
(a) Recipients of Grants. Nonstatutory Stock Options and Stock Purchase
Rights may be granted to Employees and Consultants. Incentive Stock Options
may be granted only to Employees, provided however that Employees of
Affiliates shall not be eligible to receive Incentive Stock Options. An
Employee or Consultant who has been granted an Option or Stock Purchase
Right may, if he or she is otherwise eligible, be granted additional
Options or Stock Purchase Rights.
(b) Type of Option. Each Option shall be designated in the written
option agreement as either an Incentive Stock Option or a Nonstatutory
Stock Option. However, notwithstanding such designations, to the extent
that the aggregate Fair Market Value of Shares with respect to which
Options designated as Incentive Stock Options are exercisable for the first
time by any Optionee during any calendar year (under all plans of the
Company or any Parent or Subsidiary) exceeds $100,000, such excess Options
shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the
order in which they were granted, and the Fair Market Value of the Shares
subject to an Incentive Stock Option shall be determined as of the date of
the grant of such Option.
(c) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company,
nor shall it interfere in any way with such Optionee's right or the
Company's right to terminate his or her employment or consulting
relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the stockholders
of the Company as described in Section 20 of the Plan. It shall continue in
effect for a term of ten (10) years unless sooner terminated under Section 16
of the Plan.
7. Term of Option. The term of each Option shall be the term stated in the
Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement and provided further that, in the case of an
Option granted to an Optionee who, at the time the Option is granted, is a Ten
Percent Holder, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the written option
agreement. After the date, if any, on which the Common Stock becomes a Listed
Security, the five (5) year limitation on option grants to Ten Percent Holders
described above shall only apply to the grant of Incentive Stock Options.
4
<PAGE>
8. Limitation on Grants to Employees. Subject to adjustment as provided in
Section 14 below, the maximum number of Shares which may be subject to Options
and Stock Purchase Rights granted to any one Employee under this Plan for any
fiscal year of the Company shall be 1,500,000 Shares.
9. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Board and
set forth in the applicable agreement, but shall be subject to the
following:
(i) In the case of an Incentive Stock Option that is:
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, is a Ten Percent Holder, the per Share
exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of grant.
(B) granted to any other Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the
date of grant.
(ii) In the case of a Nonstatutory Stock Option that is:
(A) granted, prior to the date, if any, on which the Common Stock
becomes a Listed Security, to a person who, at the time of the grant
of such Option, is a Ten Percent Holder, the per Share exercise
price shall be no less than 110% of the Fair Market Value per Share
on the date of the grant; or
(B) granted to a person who, at the time of the grant of such
Option, is a Named Executive, the per share Exercise Price shall be
no less than 100% of the Fair Market Value on the date of grant if
such Option is intended to qualify as performance-based compensation
under Section 162(m) of the Code;
(C) granted, prior to the date, if any, on which the Common Stock
becomes a Listed Security, to a person other than a Named Executive
or a Ten Percent Holder, the per Share exercise price shall be no
less than 85% of the Fair Market Value per Share on the date of
grant if required by the Applicable Laws and, if not so required,
shall be such price as is determined by the Administrator.
(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price other than as required above pursuant to a
merger or other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall
be determined at the time of grant) and may consist entirely of (1) cash,
(2) check, (3) promissory note, (4) other Shares that (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee
for more than six months on the date of surrender or such other period as
may be required to avoid a charge to the Company's earnings, and (y) have a
Fair Market Value on the date of surrender equal to the aggregate exercise
price of the Shares as to which such Option shall be exercised,
(5) authorization for the Company to retain from the total number of Shares
as to which the Option is exercised that number of Shares having a Fair
Market Value on the date of exercise equal to the exercise price for the
total number of Shares as to which the Option is exercised, (6) delivery of
a properly executed exercise notice together with such other documentation
as the Administrator and the broker, if applicable, shall require to effect
an exercise of the Option and delivery to the Company of the sale or loan
proceeds required to pay the exercise price and any applicable income or
employment taxes, (7) any combination of the foregoing methods of payment,
or (8) such other consideration and method of payment for the issuance of
Shares to the extent permitted under Applicable Laws. In making its
determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably
expected to benefit the Company.
5
<PAGE>
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Administrator, and reflected in the written option
agreement, which may include vesting requirements and/or performance
criteria with respect to the Company and/or the Optionee; provided that if
required by the Applicable Laws, any option granted prior to the date, if
any, upon which the Common Stock becomes a Listed Security, shall become
exercisable at the rate of at least twenty percent (20%) per year over five
(5) years from the date the Option is granted. In the event that any of the
Shares issued upon exercise of an Option (which exercise occurs prior to
the date, if any, upon which the Common Stock becomes a Listed Security)
should be subject to a right of repurchase in the Company's favor, such
repurchase right shall, if required by the Applicable Laws, lapse at the
rate of at least twenty percent (20%) per year over five (5) years from the
date the Option is granted. Notwithstanding the above, in the case of an
Option granted to an officer, Director or Consultant of the Company or any
Parent, Subsidiary or Affiliate of the Company, the Option may become fully
exercisable, or a repurchase right, if any, in favor of the Company shall
lapse, at any time or during any period established by the Administrator.
The Administrator shall have the discretion to determine whether and to
what extent the vesting of Options shall be tolled during any unpaid leave
of absence; provided however that in the absence of such determination,
vesting of Options shall be tolled during any such leave.
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
the Company has received full payment for the Shares with respect to
which the Option is exercised. Full payment may, as authorized by the
Board, consist of any consideration and method of payment allowable
under Section 8(b) 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
stockholder shall exist with respect to the Optioned Stock, not
withstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such stock certificate promptly upon exercise of
the Option. No adjustment 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 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares that thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of
Shares as to which the Option is exercised.
(b) Termination of Employment or Consulting Relationship. Subject to
Section 10(c), in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant with the Company, such Optionee may,
but only within three (3) months (or such other period of time not less
than thirty (30) days as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the
time of grant of the Option and not exceeding three (3) months) after the
date of such termination (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), exercise his
or her Option to the extent that the Optionee was entitled to exercise it
at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of such termination, or if
Optionee does not exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate. No termination shall
occur and this Section 10(b) shall not apply if (i) the Optionee is a
Consultant who becomes an Employee; or (ii) the Optionee is an Employee who
becomes a Consultant.
(c) Disability of Optionee.
(i) Notwithstanding Section 10(b) above, in the event of termination
of an Optionee's Continuous Status as an Employee or Consultant as a
result of his or her total and permanent disability (within the meaning
of Section 22(e)(3) of the Code), Optionee may, but only within twelve
(12) months from the date of such termination (but in no event later
than the expiration date of the term of
6
<PAGE>
such Option as set forth in the Option Agreement), exercise the Option
to the extent otherwise entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise
the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein,
the Option shall terminate.
(ii) In the event of termination of an Optionee's Continuous Status
as an Employee or Consultant as a result of a disability which does not
fall within the meaning of total and permanent disability (as set forth
in Section 22(e)(3) of the Code), Optionee may, but only within six (6)
months from the date of such termination (but in no event later than
the expiration date of the term of such Option as set forth in the
Option Agreement), exercise the Option to the extent otherwise entitled
to exercise it at the date of such termination. However, to the extent
that such Optionee fails to exercise an Option which is an Incentive
Stock Option ("ISO") (within the meaning of Section 422 of the Code)
within three (3) months of the date of such termination, the Option
will not qualify for ISO treatment under the Code. To the extent that
Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent
so entitled within six months (6) from the date of termination, the
Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee during
the period of Continuous Status as an Employee or Consultant since the date
of grant of the Option, or within thirty (30) days following termination of
Optionee's Continuous Status as an Employee or Consultant, the Option may
be exercised, at any time within six (6) months following the date of death
(but in no event later than the expiration date of the term of such Option
as set forth in the Option Agreement), by 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 death or, if earlier, the date of termination of Optionee's
Continuous Status as an Employee or Consultant. To the extent that Optionee
was not entitled to exercise the Option at the date of death or
termination, as the case may be, or if Optionee's estate or the person who
acquired the right to exercise the option by bequest or inheritance does
not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.
(e) Rule 16b-3. Options granted to Reporting Persons shall comply with
Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption for Plan
transactions.
(f) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it
shall advise the offeree in writing of the terms, conditions and
restrictions related to the offer, including the number of Shares that such
person shall be entitled to purchase, the price to be paid, and the time
within which such person must accept such offer, which shall in no event
exceed thirty (30) days from the date upon which the Administrator made the
determination to grant the Stock Purchase Right. In the case of a Stock
Purchase Right granted prior to the date, if any, on which the Common Stock
becomes a Listed Security and if required by the Applicable Laws at such
time, the purchase price of Shares subject to such Stock Purchase Rights
shall not be less than 85% of the Fair Market Value of the Shares as of the
date of the offer, or, in the case of a Ten Percent Holder, the price shall
not be less than 100% of the Fair Market Value of the Shares as of the date
of the offer. If the Applicable Laws do not impose the requirements set
forth in the preceding sentence and with respect to any Stock Purchase
Rights granted after the date, if any, on which the Common Stock becomes a
Listed Security, the purchase price of Shares subject to Stock Purchase
Rights shall be as determined by the Administrator. The offer shall be
accepted by execution of a Restricted Stock purchase agreement in the form
determined by the Administrator. Shares purchased pursuant to the grant of
a Stock Purchase Right shall be referred to herein as "Restricted Stock."
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(b) Repurchase Option. Unless the Administrator determines otherwise,
the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination
of the purchaser's employment with the Company for any reason (including
death or disability). The purchase price for Shares repurchased pursuant to
the Restricted Stock purchase agreement shall be the original purchase
price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall
lapse at such rate as the Administrator may determine, provided, however,
that with respect to a Stock Purchase Right granted prior to the date, if
any, on which the Common Stock becomes a Listed Security to a purchaser who
is not an officer (including an Officer), Director or Consultant of the
Company or any Parent or Subsidiary of the Company, it shall lapse at a
minimum rate of 20% per year.
(c) Other Provisions. The Restricted Stock purchase agreement shall
contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.
In addition, the provisions of Restricted Stock purchase agreements need
not be the same with respect to each purchaser.
(d) Rights as a Stockholder. Once the Stock Purchase Right is exercised,
the purchaser shall have the rights equivalent to those of a stockholder,
and shall be a stockholder when his or her purchase is entered upon the
records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is
prior to the date the Stock Purchase Right is exercised, except as provided
in Section 12 of the Plan.
12. Taxes.
(a) As a condition of the exercise of an Option or Stock Purchase Right
granted under the Plan, the Participant (or in the case of the
Participant's death, the person exercising or receiving the Option or Stock
Purchase Right) shall make such arrangements as the Administrator may
require for the satisfaction of any applicable federal, state, local or
foreign withholding tax obligations that may arise in connection with the
exercise of Option or Stock Purchase Right and the issuance of Shares. The
Company shall not be required to issue any Shares under the Plan until such
obligations are satisfied.
(b) In the case of an Employee and in the absence of any other
arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from his or her compensation an amount sufficient to
satisfy such tax obligations from the next payroll payment otherwise
payable after the date of an exercise of the Option or Stock Purchase
Right.
(c) This Section 12(c) shall apply only after the date, if any, upon
which the Common Stock becomes a Listed Security. In the case of
Participant other than an Employee (or in the case of an Employee where the
next payroll payment is not sufficient to satisfy such tax obligations,
with respect to any remaining tax obligations), in the absence of any other
arrangement and to the extent permitted under the Applicable Laws, the
Participant shall be deemed to have elected to have the Company withhold
from the Shares to be issued upon exercise of the Option or Stock Purchase
Right that number of Shares having a Fair Market Value determined as of the
applicable Tax Date (as defined below) equal to the statutory minimum
amount required to be withheld. For purposes of this Section 12, the Fair
Market Value of the Shares to be withheld shall be determined on the date
that the amount of tax to be withheld is to be determined under the
Applicable Laws (the "Tax Date").
(d) If permitted by the Administrator, in its discretion, a Participant
may satisfy his or her tax withholding obligations upon exercise of an
Option or Stock Purchase Right by surrendering to the Company Shares that
(i) in the case of Shares previously acquired from the Company, have been
owned by the Participant for more than six (6) months on the date of
surrender, and (ii) have a Fair Market Value determined as of the
applicable Tax Date equal to the statutory minimum amount required to be
withheld.
(e) Any election or deemed election by a Participant to have Shares
withheld to satisfy tax withholding obligations under Section 12(c) or (d)
above shall be irrevocable as to the particular Shares as to which the
election is made and shall be subject to the consent or disapproval of the
Administrator. Any election by a Participant under Section 12(d) above must
be made on or prior to the applicable Tax Date.
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(f) In the event an election to have Shares withheld is made by a
Participant and the Tax Date is deferred under Section 83 of the Code
because no election is filed under Section 83(b) of the Code, the
Participant shall receive the full number of Shares with respect to which
the Option or Stock Purchase Right is exercised but such Participant shall
be unconditionally obligated to tender back to the Company the proper
number of Shares on the applicable Tax Date.
13. Adjustments Upon Changes in Capitalization, Merger or Certain Other
Transactions.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered
by each outstanding Option or Stock Purchase Right, the number of shares of
Common Stock that have been authorized for issuance under the Plan but as
to which no Options or Stock Purchase Rights have yet been granted or that
have been returned to the Plan upon cancellation or expiration of an Option
or Stock Purchase Right, the number of Shares described in Section 3(a)(i)
and 8 above, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, 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, recapitalization 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 or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Board shall notify the Optionee at least
fifteen (15) days prior to such proposed action. To the extent it has not
been previously exercised, the Option or Stock Purchase Right will
terminate immediately prior to the consummation of such proposed action.
(c) Merger or Sale of Assets. Except as may be otherwise set forth in
the Notice of Stock Option Grant, in the event of a proposed sale of all or
substantially all of the Company's assets or a merger of the Company with
or into another corporation in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Company are
transferred to a person or persons different form the persons holding those
securities immediately prior to such transaction, each outstanding Option
or Stock Purchase Right shall be assumed or an equivalent option or right
shall be substituted by such successor corporation or a parent or
subsidiary of such successor corporation, unless the successor corporation
does not agree to assume the Option or Stock Purchase Right or to
substitute an equivalent option or right, in which case such Option or
Stock Purchase Right shall terminate upon the consummation of the merger or
sale of assets.
(d) Certain Distributions. In the event of any distribution to the
Company's stockholders of securities of any other entity or other assets
(other than dividends payable in cash or stock of the Company) without
receipt of consideration by the Company, the Administrator may, in its
discretion, appropriately adjust the price per share of Common Stock
covered by each outstanding Option or Stock Purchase Right to reflect the
effect of such distribution.
14. Non-Transferability of Options and Stock Purchase Rights. Options and
Stock Purchase Rights 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, provided that, after the date, if any, upon which the
Common Stock becomes a Listed Security, the Administrator may in its
discretion grant transferable Nonstatutory Stock Options pursuant to Option
Agreements specifying (i) the manner in which such Nonstatutory Stock Options
are transferable and (ii) that any such transfer shall be subject to the
Applicable Laws. The designation of a beneficiary by an Optionee will not
constitute a transfer. An Option or Stock Purchase Right may be exercised,
during the lifetime of the holder of Option or Stock Purchase Right, only by
such holder or a transferee permitted by this Section 16.
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<PAGE>
15. Time of Granting Options and Stock Purchase Rights. The date of grant
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Board. Notice of
the determination shall be given to each Employee or Consultant to whom an
Option or Stock Purchase Right is so granted within a reasonable time after
the date of such grant.
16. Amendment and Termination of the Plan.
(a) Authority to Amend or Terminate. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made that would impair the rights of
any Optionee under any grant theretofore made, without his or her consent.
In addition, to the extent necessary and desirable to comply with the
Applicable Laws, the Company shall obtain stockholder approval of any Plan
amendment in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. No amendment or termination of
the Plan shall adversely affect Options already granted, unless mutually
agreed otherwise between the Optionee and the Board, which agreement must
be in writing and signed by the Optionee and the Company.
17. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
to the exercise of an Option or Stock Purchase Right unless the exercise of
such Option or Stock Purchase Right 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, and the
requirements of any Stock Exchange. As a condition to the exercise of an
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right 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 law.
18. 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. The inability of the
Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company's counsel to be necessary to the
lawful issuance and sale of any Shares hereunder, shall relieve the Company of
any liability in respect of the failure to issue or sell such Shares as to
which such requisite authority shall not have been obtained.
19. Agreements. Options and Stock Purchase Rights shall be evidenced by
written agreements in such form as the Administrator shall approve from time
to time.
20. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before
or after the date the Plan is adopted. Such stockholder approval shall be
obtained in the degree and manner required under the Applicable Laws. All
Options and Stock Purchase Rights issued under the Plan shall become void in
the event such approval is not obtained.
21. Information to Optionees and Purchasers. Prior to the date, if any,
upon which the Common Stock becomes a Listed Security and if required by the
Applicable Laws, the Company shall provide financial statements at least
annually to each Optionee and to each individual who acquired Shares Pursuant
to the Plan, during the period such Optionee or purchaser has one or more
Options or Stock Purchase Rights outstanding, and in the case of an individual
who acquired Shares pursuant to the Plan, during the period such individual
owns such Shares. The Company shall not be required to provide such
information if the issuance of Options or Stock Purchase Rights under the Plan
is limited to key employees whose duties in connection with the Company assure
their access to equivalent information. In addition, at the time of issuance
of any securities under the Plan, the Company shall provide to the Optionee or
the Purchaser a copy of the agreement(s) pursuant to which securities under
the Plan are issued.
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF FOUNDRY NETWORKS, INC. FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 20, 2000
The undersigned stockholder of Foundry Networks, Inc., a Delaware
corporation, (the "Company") hereby acknowledges receipt of the Notice of
Annual Meeting of Stockholders and Proxy Statement, each dated May 19, 2000,
and hereby appoints Bobby R. Johnson, Jr. and Timothy D. Heffner 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 Stockholders of Foundry Networks, Inc. to be held on
Tuesday June 20, 2000, at 9:00 a.m., local time, at the Santa Clara Marriott,
2700 Mission College Boulevard, Santa Clara, CA 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:
1. ELECTION OF DIRECTORS:
[_] For all nominees listed below (except as indicated).
[_] Withhold authority to vote for all
nominee(s) listed below.
If you wish to withhold authority to vote for any individual nominee, strike
a line through that nominee's name in the list below:
Nominees:
Bobby R. Johnson, Jr.
Seth D. Neiman Andrew K. Ludwick
2.RATIFICATION OF APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000:
[_] FOR [_] AGAINST [_] ABSTAIN
3.APPROVAL OF AMENDMENT OF CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED NUMBER OF SHARES OF COMMON STOCK FROM 200,000,000 TO 300,000,000:
[_] FOR [_] AGAINST [_] ABSTAIN
4.APPROVAL OF AMENDMENT OF 1996 STOCK PLAN TO INCREASE THE NUMBER OF SHARES OF
COMMON STOCK RESERVED FOR ISSUANCE UNDER THE PLAN BY 5,000,000 SHARES AND
REVISE THE AUTOMATIC ANNUAL SHARE INCREASE PROVISION:
[_] FOR [_] AGAINST [_] ABSTAIN
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.
PLEASE SIGN ON REVERSE SIDE AND RETURN IMMEDIATELY
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED AS FOLLOWS: (1) FOR THE ELECTION OF ALL NOMINATED DIRECTORS; (2)
FOR RATIFICATION OF APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000; (3) FOR APPROVAL OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF
COMMON STOCK FROM 200,000,000 TO 300,000,000; (4) FOR APPROVAL OF AMENDMENT OF
THE 1996 STOCK PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK RESERVED
FOR ISSUANCE UNDER THE PLAN BY 5,000,000 SHARES AND REVISE THE AUTOMATIC ANNUAL
SHARE INCREASE PROVISION; AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER
MATTERS AS MAY COME BEFORE THE MEETING.
Date: ___________________________
---------------------------------
Signature(s)
Date: ___________________________
---------------------------------
Signature(s)
(This Proxy should be marked,
dated, signed by the
stockholder(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.)
