<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:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
SYCAMORE NETWORKS, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1)Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------------
2)Aggregate number of securities to which transaction applies:
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3)Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4)Proposed maximum aggregate value of transaction:
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5)Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1)Amount previously paid:
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2)Form, Schedule or Registration Statement No.:
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3)Filing Party:
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4)Date Filed:
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<PAGE>
SYCAMORE NETWORKS, INC.
150 Apollo Drive
Chelmsford, MA 01824
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 14, 2000
----------------
To the Stockholders of Sycamore Networks, Inc.:
The Annual Meeting of Stockholders of Sycamore Networks, Inc., a Delaware
corporation (the "Corporation"), will be held on Thursday, December 14, 2000
(the "Annual Meeting") at 9:00 A.M., local time, at The Omni Parker House
Hotel, 60 School Street, Boston, Massachusetts 02108 to consider and act upon
the following matters:
1. To elect two (2) members of the Board of Directors to serve for three-
year terms as Class I Directors and until their respective successors
are elected and qualified.
2. To amend the Corporation's Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of Common
Stock of the Corporation from 1,500,000,000 shares to 2,500,000,000
shares.
3. To approve an amendment of the Corporation's 1999 Stock Incentive Plan
to (a) increase the number of shares of common stock reserved for
issuance under the plan by 25,000,000, and (b) revise the automatic
annual 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 fiscal year of the Corporation by an
amount equal to the lesser of (i) 18,000,000 shares, (ii) five percent
(5%) of the number of shares of common stock outstanding on the first
day of each fiscal year of the Corporation, or (iii) such lesser number
of shares as determined by the Corporation's Board of Directors.
4. To ratify the selection of PricewaterhouseCoopers LLP as auditors for
the fiscal year ending July 31, 2001.
5. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Stockholders entitled to notice of and to vote at the meeting shall be
determined as of October 24, 2000, the record date fixed by the Board of
Directors for such purpose.
By Order of the Board of Directors,
Frances M. Jewels
Secretary
Mail Date: November 6, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED STAMPED
ENVELOPE OR VOTE ELECTRONICALLY VIA THE INTERNET OR VOTE BY TELEPHONE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES AT THE ANNUAL MEETING. NO POSTAGE NEED
BE AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
<PAGE>
SYCAMORE NETWORKS, INC.
150 Apollo Drive
Chelmsford, MA 01824
----------------
PROXY STATEMENT
----------------
November 6, 2000
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Sycamore Networks, Inc. (the
"Corporation") for use at the Annual Meeting of Stockholders to be held on
Thursday, December 14, 2000 (the "Annual Meeting") at 9:00 A.M., local time,
at The Omni Parker House Hotel, 60 School Street, Boston, Massachusetts 02108,
and any adjournments thereof. This Proxy Statement and the form of proxy were
first mailed to stockholders on or about November 6, 2000.
Only stockholders of record as of October 24, 2000 (the "Record Date") will
be entitled to vote at the Annual Meeting and any adjournments thereof. As of
that date, [ ] shares of common stock, $.001 par value (the "Common Stock"),
of the Corporation were issued and outstanding. The holders of Common Stock
are entitled to one vote per share on any proposal presented at the Annual
Meeting. Stockholders may vote in person or by proxy. Execution of a proxy
will not in any way affect a stockholder's right to attend the Annual Meeting
and vote in person. Any proxy may be revoked by a stockholder at any time
before it is exercised by delivery of a written revocation or a later executed
proxy to the Secretary of the Corporation.
All share and per share information in this Proxy Statement has been
adjusted to reflect all stock splits.
VOTING SECURITIES AND VOTES REQUIRED
The representation in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum for the transaction of business. Each share
of Common Stock outstanding on the Record Date is entitled to one vote. For
purposes of determining the presence of a quorum, abstentions and broker "non-
votes" will be counted as present at the Annual Meeting.
In the election of directors, the nominees receiving the highest number of
affirmative votes of the shares present or represented and entitled to vote at
the Annual Meeting shall be elected as directors. Abstentions and broker non-
votes will have no effect on the voting outcome with respect to the election
of directors.
The affirmative vote of the holders of a majority of the shares of Common
Stock present or represented and entitled to vote at the Annual Meeting is
necessary for approval of the proposal to amend the Corporation's 1999 Stock
Incentive Plan and for approval of the ratification of PricewaterhouseCoopers
LLP as auditors for the fiscal year ending July 31, 2001. Abstentions have the
practical effect of a vote against these proposals, as will broker non-votes
in the case of the proposal to amend the Corporation's 1999 Stock Incentive
Plan.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock entitled to vote at the Annual Meeting is necessary for
approval of the proposal to amend the Corporation's Amended and Restated
Certificate of Incorporation. Accordingly, abstentions have the practical
effect of a vote "against" this proposal.
The persons named as attorneys in the proxies are officers of the
Corporation. All properly executed proxies returned in time to be counted at
the Annual Meeting will be voted in accordance with the instructions contained
therein, and if no choice is specified, such proxies will be voted in favor of
the matters set forth in the accompanying Notice of Annual Meeting.
<PAGE>
The Board of Directors of the Corporation knows of no other matters to be
presented at the Annual Meeting. If any other matter should be presented at
the Annual Meeting upon which a vote properly may be taken, shares represented
by all proxies received by the Board of Directors will be voted with respect
thereto in accordance with the judgment of the persons named as attorneys in
the proxies.
Voting Shares Registered Directly in the Name of the Stockholder
Stockholders with shares registered directly in their name in the
Corporation's stock records maintained by the Corporation's transfer agent,
Boston EquiServe, may vote their shares (1) through the Internet, (2) by
making a toll-free telephone call from the U.S. and Canada to Boston EquiServe
or (3) by mailing their signed proxy card. Specific voting instructions are
set forth on the enclosed proxy card. Votes submitted through the Internet or
by telephone through Boston EquiServe must be received by Boston EquiServe by
5:00 P.M. on December 13, 2000.
Voting Shares Registered in the Name of a Brokerage Firm or Bank
Stockholders with shares registered in the name of a brokerage firm or bank
participating in the ADP Investor Communication Services program may vote
their shares through the Internet or by telephone in accordance with the
instructions set forth on the voting form or by mailing their signed voting
form. Votes submitted through the Internet or by telephone through the ADP
program must be received by ADP Investor Communication Services by 5:00 P.M.
on December 13, 2000.
Revocation of Proxies Submitted Electronically or by Telephone
To revoke a proxy previously submitted electronically through the Internet
or by telephone, a stockholder may simply vote again at a later date, using
the same procedures, in which case the later submitted vote will be recorded
and the earlier vote revoked.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of September 29,
2000, with respect to beneficial ownership of Common Stock by: (i) each person
who, to the knowledge of the Corporation, beneficially owned more than 5% of
the shares of Common Stock outstanding as of such date; (ii) each director of
the Corporation; (iii) each executive officer identified in the Summary
Compensation Table set forth below under the heading "Compensation and Other
Information Concerning Directors and Officers"; and (iv) all directors and
executive officers as a group.
2
<PAGE>
For purposes of the following table, beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission. Except as
otherwise noted in the footnotes below, the Corporation believes that each
person or entity named in the table has sole voting and investment power with
respect to all shares of its Common Stock shown as beneficially owned by them,
subject to applicable community of property laws. The percentage of shares of
Common Stock outstanding is based on 272,765,327 shares of Common Stock
outstanding as of September 29, 2000. In computing the number of shares
beneficially owned by a person named in the following table and the percentage
ownership of that person, shares of Common Stock that are subject to options
held by that person that are currently exercisable or exercisable within 60
days of September 29, 2000 are deemed outstanding. These shares are not,
however, deemed outstanding for the purpose of computing the percentage
ownership of any other person.
<TABLE>
<CAPTION>
Percentage
Amount and Nature of of
Name and Address of Beneficial Owner(1) Beneficial Ownership Outstanding
--------------------------------------- -------------------- -----------
<S> <C> <C>
Gururaj Deshpande(2)......................... 47,222,807 17.3
Daniel E. Smith(3)........................... 42,946,349 15.7
Ryker Young(4)............................... 2,473,107 1.0
Frances M. Jewels............................ 1,161,905 *
Kurt Trampedach.............................. 1,128,000 *
Jeffry A. Kiel............................... 1,057,660 *
Timothy A. Barrows(5)........................ 16,102,355 5.9
Paul J. Ferri(5)............................. 15,215,641 5.6
John W. Gerdelman(6)......................... 101,850 *
Matrix V Management Co., L.L.C.(7)........... 15,002,607 5.5
Platyko Partners, L.P........................ 21,775,000 8.0
The Gururaj Deshpande Grantor Retained
Annuity Trust............................... 17,918,400 6.6
All executive officers and directors as a
group (17 persons)(8)....................... 135,374,263 49.4
</TABLE>
--------
* Less than 1% of the total number of outstanding shares of Common Stock.
(1) Except as otherwise noted, the address of each person owning more than 5%
of the outstanding shares of Common Stock is: c/o Sycamore Networks, Inc.,
150 Apollo Drive, Chelmsford, Massachusetts 01824.
(2) Includes 3,937,500 shares held by the Deshpande Irrevocable Trust and
17,918,400 shares held by the Gururaj Deshpande Grantor Retained Annuity
Trust. Mr. Deshpande's wife serves as a trustee of each of these trusts.
Mr. Deshpande disclaims beneficial ownership of these shares.
(3) Includes 21,775,000 shares held by Platyko Partners, L.P., of which Mr.
Smith and his wife serve as general partners.
(4) Includes 180,000 shares held by the E. Ryker Young Irrevocable Trust. Mr.
Young disclaims beneficial ownership of these shares.
(5) Includes 13,284,540 shares held by Matrix Partners V, L.P. and 1,718,067
shares held by Matrix V Entrepreneurs Fund, L.P. Matrix V Management Co.,
L.L.C. is the general partner of each of Matrix Partners V, L.P. and Matrix
V Entrepreneurs Fund, L.P. Messrs. Barrows and Ferri, directors of the
Corporation, are general partners of Matrix V Management Co., L.L.C.
Messrs. Barrows and Ferri disclaim beneficial ownership of the shares held
by Matrix Partners V, L.P. and Matrix V Entrepreneurs Fund, L.P. except to
the extent of their pecuniary interests therein arising from their general
partnership interests in Matrix V Management Co., L.L.C.
(6) Includes 90,000 options that are currently exercisable.
(7) Comprised of 13,284,540 shares held by Matrix Partners V, L.P. and
1,718,067 shares held by Matrix V Entrepreneurs Fund, L.P. Matrix V
Management Co., L.L.C. is the general partner of each of Matrix Partners V,
L.P. and Matrix V Entrepreneurs Fund, L.P. Messrs. Barrows and Ferri,
directors of the Corporation, are general partners of Matrix V Management
Co., L.L.C. Messrs. Barrows and Ferri disclaim beneficial ownership of the
shares held by Matrix Partners V, L.P. and Matrix V Entrepreneurs Fund,
L.P. except to the extent of their pecuniary interests therein arising from
their general partnership interests in Matrix V Management Co., L.L.C. The
address of Matrix V Management Co., L.L.C. is 1000 Winter Street, Suite
4500 Waltham, MA 02154.
(8) Includes an aggregate of 1,084,107 options that are currently exercisable.
3
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
In accordance with the Corporation's Amended and Restated Certificate of
Incorporation, the Corporation's Board of Directors is divided into three
classes, each of whose members serve for a staggered three-year term. Upon the
expiration of the term of a class of directors, directors in such class will be
elected for three-year terms at the annual meeting of stockholders in the year
in which such term expires.
Two Class I Directors will be elected at the Annual Meeting for three-year
terms. The Class I nominees, Messrs. Barrows and Gerdelman, currently are
serving as directors of the Corporation.
Shares represented by all proxies received by the Board of Directors and not
marked to withhold authority to vote for Messrs. Barrows and Gerdelman will be
voted FOR the election of all nominees. Messrs. Barrows and Gerdelman will be
elected to hold office until the Annual Meeting of Stockholders to be held in
2003 and until their respective successors are duly elected and qualified. All
of the nominees have indicated their willingness to serve, if elected. However,
if any of the nominees should be unable or unwilling to serve, the proxies will
be voted for a substitute nominee designated by the Board of Directors or for
fixing the number of directors at a lesser number.
The following table sets forth for each nominee to be elected at the Annual
Meeting and for each director whose term of office will extend beyond the
Annual Meeting, the year each such nominee or director was first elected a
director, the positions currently held by each nominee or director with the
Corporation, the year each nominee's or director's current term will expire and
the class of director of each nominee or director.
<TABLE>
<CAPTION>
Nominee or Director's
Name and Year Nominee Year Current
or Director First Became Term Will Class of
a Director Position(s) Held Expire Director
------------------------ ----------------------------------------------- ------------ --------
<S> <C> <C> <C>
Gururaj Deshpande
(1998)................. Chairman of the Board of Directors 2001 II
Daniel E. Smith (1998).. President, Chief Executive Officer and Director 2002 III
Timothy A. Barrows
(1998)................. Director 2000 I
Paul J. Ferri (1998).... Director 2001 II
John W. Gerdelman
(1999)................. Director 2000 I
</TABLE>
The Nominees to serve for three-year terms as Class I Directors and until
their respective successors are elected and qualified are:
Timothy A. Barrows................... Timothy A. Barrows has served as a
director since February 1998. Mr.
Barrows has been a general partner
of Matrix V Management Co., LLC
since September 1985. Mr. Barrows
also serves on the board of
directors of SilverStream Software,
Inc.
John W. Gerdelman.................... John W. Gerdelman has served as a
director since September 1999. Mr.
Gerdelman has been Managing Director
of River 2 Communications since
January 2000. From April 1999
through December 1999, he was
President and Chief Executive
Officer of USA Net Inc. Mr.
Gerdelman was employed by MCI
Telecommunications Corporation as
President of the Network and
Information Technology Division from
September 1994 to April 1999 and
Senior Vice President of Sales and
Service Operations from June 1992 to
September 1994. Mr. Gerdelman also
serves on the board of directors of
Genuity Inc.
4
<PAGE>
Recommendation of the Board of Directors
The Board of Directors unanimously recommends a vote FOR the election of the
nominees listed above.
Board of Directors' Meetings and Committees
During fiscal year 2000, the Board of Directors held eleven meetings. No
director serving on the Board of Directors in fiscal 2000 attended fewer than
75% of such meetings of the Board of Directors and the Committees on which he
serves.
The Board of Directors has established a Compensation Committee and an Audit
Committee.
Compensation Committee
The Compensation Committee, which consists of Messrs. Ferri and Barrows, is
responsible for establishing and monitoring policies governing compensation of
executive officers. The Committee has the responsibility to review the
performance and compensation levels for executive officers, set salary and
bonus levels for these individuals and make restricted stock awards or option
grants for these individuals under the Corporation's option plan. The
objectives of the Committee are to correlate executive officer compensation
with the Corporation's business objectives, profitability and performance, and
to enable the Corporation to attract, retain and reward executive officers who
contribute to the long-term success of the Corporation. The Committee will seek
to reward executives in a manner consistent with the Corporation's annual and
long-term performance goals and to recognize individual initiative and
achievement among executive officers. During fiscal 2000, the Compensation
Committee held three meetings. For additional information concerning the
Compensation Committee, see "Compensation Committee Report on Executive
Compensation."
Audit Committee
The Audit Committee consists of Messrs. Ferri, Barrows and Gerdelman, each of
whom is independent, as defined by the applicable listing standards of the
National Association of Securities Dealers. The Audit Committee reviews the
professional services provided by the Corporation's independent accountants,
the independence of such accountants from the Corporation's management, the
Corporation's annual and quarterly financial statements and the Corporation's
system of internal accounting controls. The Audit Committee also reviews such
other matters with respect to its accounting, auditing and financial reporting
practices and procedures as it may find appropriate or may be brought to its
attention.
The Corporation's Board of Directors has adopted a written charter for the
Audit Committee, a copy of which is attached as Appendix A to this Proxy
Statement. During fiscal 2000, the Audit Committee held four meetings. In
connection with the preparation and filing of the Corporation's Annual Report
on Form 10-K for the year ended July 31, 2000, the Audit Committee (i) reviewed
and discussed the audited financial statements with the Corporation's
management, (ii) discussed with PricewaterhouseCoopers LLP, the Corporation's
independent auditors, the matters required to be discussed by Statement of
Auditing Standards 61 (as modified or supplemented), (iii) received the written
disclosures and the letter from PricewaterhouseCoopers LLP required by
Independence Standards Board Standard No. 1 (as modified or supplemented), and
(iv) discussed with the PricewaterhouseCoopers LLP, its independence. Based on
the review and discussions referred to above, the Audit Committee recommended
to the Board that the audited financial statements be included in the
Corporation's Annual Report on Form 10-K for the year ended July 31, 2000.
5
<PAGE>
MANAGEMENT
Executive Officers and Directors
The executive officers and directors of the Corporation, and their respective
ages and positions as of October 24, 2000, are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Gururaj Deshpande....... 49 Chairman of the Board of Directors
Daniel E. Smith......... 51 President, Chief Executive Officer and Director
Frances M. Jewels....... 35 Chief Financial Officer, Vice President, Finance
and Administration, Treasurer and Secretary
Chikong Shue............ 49 Executive Vice President, Central Engineering
Senior Vice President, Worldwide Sales and
Ryker Young............. 36 Support
Richard A. Barry........ 34 Chief Technical Officer
Anita Brearton.......... 41 Vice President, Corporate Marketing
John E. Dowling......... 47 Vice President, Operations
Vice President and General Manager, Core
Jeffry A. Kiel.......... 36 Switching
Kevin J. Oye............ 42 Vice President, Business Development
Jonathan Reeves......... 40 Vice President and General Manager, Optical Edge
Vice President and General Manager, Core
Eric A. Swanson......... 40 Networking
Kurt Trampedach......... 56 Vice President, International Sales
Leif Uptegrove.......... 42 Vice President and General Manager, Transport
Timothy A.
Barrows(1)(2).......... 43 Director
Paul J. Ferri(1)(2)..... 61 Director
John W. Gerdelman(1).... 48 Director
</TABLE>
--------
(1) Member of Audit Committee
(2) Member of Compensation Committee
Set forth below is information regarding the professional experience for each
of the above-named persons.
Gururaj Deshpande has served as Chairman of the Corporation's Board of
Directors since its inception in February 1998. He served as the Corporation's
Treasurer and Secretary from February 1998 to June 1999 and as the
Corporation's President from February 1998 to October 1998. Before founding the
Corporation, Mr. Deshpande founded Cascade Communications Corp., a provider of
wide area network switches. From October 1990 to April 1992, Mr. Deshpande
served as President of Cascade and from April 1992 to June 1997, he served as
Cascade's Executive Vice President of Marketing and Customer Service. Mr.
Deshpande was a member of the board of directors of Cascade since its inception
and was chairman of the board of directors of Cascade from 1996 to 1997.
Daniel E. Smith has served as the Corporation's President, Chief Executive
Officer and as a member of the Corporation's Board of Directors since October
1998. From June 1997 to July 1998, Mr. Smith was Executive Vice President and
General Manager of the Core Switching Division of Ascend Communications, Inc.,
a provider of wide area network switches and access data networking equipment.
Mr. Smith was also a member of the board of directors of Ascend Communications,
Inc. during that time. From April 1992 to June 1997, Mr. Smith served as
President and Chief Executive Officer and a member of the board of directors of
Cascade Communications Corp.
6
<PAGE>
Frances M. Jewels has served as the Corporation's Vice President of Finance
and Administration, Treasurer and Secretary since June 1999 and Chief Financial
Officer since July 1999. From June 1997 to June 1999, Ms. Jewels served as Vice
President and General Counsel of Ascend Communications, Inc. From April 1994 to
June 1997, Ms. Jewels served as Corporate Counsel of Cascade Communications
Corp. Prior to April 1994, Ms. Jewels practiced law in private practice and,
prior to that, practiced as a certified public accountant.
Chikong Shue has served as the Corporation's Executive Vice President,
Central Engineering since July 2000. From July 2000 to May 2000, Mr. Shue
served as the Corporation's Executive Vice President, Transport and Central
Engineering and from August 1998 to April 2000, Mr. Shue served as the
Corporation's Vice President of Engineering. From June 1997 to July 1998, Mr.
Shue was Vice President of Software and Systems Engineering of the Core
Switching Division of Ascend Communications, Inc. Mr. Shue was a co-founder of
Cascade Communications Corp. and served as director of software engineering at
Cascade from May 1991 to August 1994 and as a corporate fellow and Vice
President of Cascade's Remote Access Engineering division from September 1994
until March 1997.
Ryker Young has served as the Corporation's Senior Vice President, Worldwide
Sales and Support since October 2000. From August 1998 to October 2000, Mr.
Young served as the Corporation's Vice President, Sales. From July 1997 to
August 1998, Mr. Young was Central Region Director of Sales for Ascend
Communications, Inc. From January 1996 to June 1997, Mr. Young was the South
Central Regional District Manager for Cascade Communications Corp. From October
1994 to December 1995, Mr. Young was Major Account Manager for Cisco Systems,
Inc.
Richard A. Barry has served as the Corporation's Chief Technical Officer
since July 1999 and as the Corporation's Director of Architecture from the
Corporation's inception in February 1998 to July 1999. Prior to co-founding the
Corporation, from September 1994 to February 1998, Mr. Barry was Chief Network
Architect of the Advanced Networks Group at MIT's Lincoln Laboratory. Mr. Barry
was an assistant professor in the Electrical Engineering and Computer Science
Department at George Washington University from September 1993 to August 1994.
Anita Brearton has served as the Corporation's Vice President, Corporate
Marketing since July 1999 and as Director of Marketing Programs from September
1998 to July 1999. From September 1997 to August 1998, Ms. Brearton served as
Vice President of Marketing for Artel Video Systems, Inc., a producer of fiber
optic video transmission and routing products. From June 1997 to September
1997, Ms. Brearton was Director of Marketing Programs for the core switching
division of Ascend Communications, Inc. Ms. Brearton served as Director of
Marketing Programs for Cascade Communications Corp. from November 1995 to June
1997. From July 1980 to August 1995, Ms. Brearton held several positions at
General DataCom Industries, Inc., most recently as International Marketing
Programs Manager.
John E. Dowling has served as the Corporation's Vice President of Operations
since August 1998. From July 1997 to August 1998, Mr. Dowling served as Vice
President of Operations of Aptis Communications, a manufacturer of carrier-
class access switches for network service providers. Mr. Dowling served as Vice
President of Operations of Cascade Communications Corp. from May 1994 to June
1997.
Jeffry A. Kiel has served as the Corporation's Vice President and General
Manager, Core Switching since May 2000. From July 1999 to April 2000, Mr. Kiel
served as Vice President, Product Marketing and as Director of Marketing from
September 1998 to July 1999. Mr. Kiel served as Director of Product Marketing
at Ascend Communications, Inc. from June 1997 to September 1998. From August
1996 to June 1997, Mr. Kiel served as Product Marketing Manager of Cascade
Communications Corp. From October 1993 to August 1996, Mr. Kiel was Senior
Manager, Technical Staff at BellSouth Telecommunications.
Kevin J. Oye has served as the Corporation's Vice President, Business
Development since October 1999. From March 1998 to October 1999, Mr. Oye served
as Vice President, Strategy and Business Development at Lucent Technologies,
Inc. and from September 1993 to March 1998, Mr. Oye served as the Director of
Strategy,
7
<PAGE>
Business Development, and Architecture at Lucent Technologies, Inc. From June
1980 to September 1993, Mr. Oye held various positions with AT&T Bell
Laboratories where he was responsible for advanced market planning as well as
development and advanced technology management.
Jonathan Reeves has served as the Corporation's Vice President and General
Manager, Optical Edge since September 2000. From January 1999 to September
2000, Mr. Reeves was President, Chief Executive Officer and Chairman of Sirocco
Systems, Inc. From June 1997 to November 1998, Mr. Reeves served as Vice
President of Strategic Planning of Ascend Communications. From January 1997
until June 1997, Mr. Reeves served as Vice President and General Manager of
Broadband Access at Cascade Communications. From June 1995 to January 1997, Mr.
Reeves served as Chief Executive Officer and Chairman of Sahara Networks, Inc.
Eric A. Swanson, a co-founder of the Corporation, has served as the
Corporation's Vice President and General Manager, Core Networking since May
2000. From the Corporation's inception in February 1998 to April 2000, Mr.
Swanson served as the Corporation's Chief Scientist. From 1982 to February
1998, Mr. Swanson was Associate Group Leader of the Advanced Networks Group at
MIT's Lincoln Laboratory.
Kurt Trampedach has served as the Corporation's Vice President of
International Sales since July 1999. From June 1999 to July 1999, Mr.
Trampedach was Vice President, Carrier Market Development for Lucent
Technologies, Inc. From June 1997 to June 1999 he was Vice President, Carrier
Market Development for Ascend Communications, Inc. From September 1996 to June
1997, Mr. Trampedach was Vice President, International Sales for Cascade
Communications Corp. Mr. Trampedach was Vice President, European Operations for
Alcatel USA, Inc. from April 1994 to September 1996.
Leif Uptegrove has served as the Corporation's Vice President and General
Manager, Transport since July 2000. From August 1998 to July 2000, Mr.
Uptegrove served as the Corporation's Director, SQA. From June 1997 to July
1998, Mr. Uptegrove served as a Consulting Engineer at Ascend Communications,
Inc. From September 1992 to June 1997, Mr. Uptegrove held several positions at
Cascade Communications Corp., most recently as Manager, SQA and Consulting
Engineer.
Timothy A. Barrows has served as a director since February 1998. Mr. Barrows
has been a general partner of Matrix V Management Co., LLC since September
1985. Mr. Barrows also serves on the board of directors of SilverStream
Software, Inc.
Paul J. Ferri has served as a director since February 1998. Mr. Ferri has
been a general partner of Matrix V Management Co., LLC, a venture capital firm,
since February 1982. Mr. Ferri also serves on the board of directors of Sonus
Networks, Inc. and Applix, Inc.
John W. Gerdelman has served as a director since September 1999. Mr.
Gerdelman has been Managing Director of River 2 Communications since January
2000. From April 1999 through December 1999, he was President and Chief
Executive Officer of USA Net Inc. Mr. Gerdelman was employed by MCI
Telecommunications Corporation as President of the Network and Information
Technology Division from September 1994 to April 1999 and Senior Vice President
of Sales and Service Operations from June 1992 to September 1994. Mr. Gerdelman
also serves on the board of directors of Genuity Inc.
Each executive officer serves at the discretion of the Board of Directors and
holds office until his or her successor is elected and qualified or until his
or her earlier resignation or removal. There are no family relationships among
any of the directors or executive officers of the Corporation.
8
<PAGE>
COMPENSATION AND OTHER INFORMATION CONCERNING
DIRECTORS AND OFFICERS
Executive Compensation
The table below sets forth, for the fiscal year ended July 31, 2000, the
compensation earned by:
. the Corporation's Chief Executive Officer; and
. the four other most highly compensated executive officers who received
annual compensation in excess of $100,000, collectively referred to
below as the Named Executive Officers.
In accordance with the rules of the Securities and Exchange Commission, the
compensation set forth in the table below does not include medical, group life
or other benefits which are available to all of the Corporation's salaried
employees, and perquisites and other benefits, securities or property which do
not exceed the lesser of $50,000 or 10% of the person's salary and bonus shown
in the table. In the table below, columns required by the regulations of the
Securities and Exchange Commission have been omitted where no information was
required to be disclosed under those columns.
Summary Compensation Table(1)
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------------------------- -------------------------
Securities
Other Annual Underlying All Other
Year Salary Bonus Compensation Options/SARS Compensation
---- ------- ------- ------------ ------------ ------------
($) ($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C>
Daniel E. Smith
President and Chief 2000 100,000 -- -- -- --
Executive
Officer............... 1999 73,077(2) -- -- -- --
Ryker Young
Senior Vice President,
Worldwide 2000 125,000 650,920(3) -- -- --
Sales and Support..... 1999 117,788 49,998(4) 9,326(5) 180,000 --
Kurt Trampedach 2000 125,000 98,723(6) -- -- --
Vice President,
International Sales... 1999 -- (7) -- -- 1,125,000 --
Frances M. Jewels
Chief Financial
Officer, Vice
President, Finance
and
Administration,
Treasurer and 2000 125,000 30,000 -- -- --
Secretary............. 1999 22,980(8) -- -- 180,000 --
Jeffry A. Kiel
Vice President and
General 2000 100,000 25,000 -- -- --
Manager, Core
Switching............. 1999 84,769 -- -- 360,000 --
</TABLE>
--------
(1) As of July 31, 2000, the remaining number of shares of restricted Common
Stock held by the above executive officers that had not vested and the
value of this stock was as follows: Mr. Smith: 6,581,250 shares,
$811,513,536; Mr. Young: 1,875,532 shares, $231,266,037; Ms. Jewels:
900,000 shares, $110,881,260; and Mr. Kiel: 585,000 shares, $72,141,849.
The value is based on the fair market value at July 31, 2000 ($123.3125
per share as quoted on the Nasdaq National Market) less the purchase price
paid per share. Holders of restricted Common Stock are entitled to receive
any dividends the Corporation may pay on its Common Stock.
9
<PAGE>
(2) Represents compensation Mr. Smith received in fiscal 1999. Mr. Smith joined
the Corporation in October 1998.
(3) Includes $630,920 of commissions paid in fiscal 2000.
(4) Represents advance commission income.
(5) Represents reimbursement for relocation expenses.
(6) Includes $92,473 of commissions paid in fiscal 2000 and $6,250 sign-on
bonus.
(7) No compensation was paid in fiscal 1999. Mr. Trampedach joined the
Corporation in July 1999.
(8) Represents compensation Ms. Jewels received in fiscal 1999. Ms. Jewels
joined the Corporation in May 1999.
Change in Control Agreements
Each of the Corporation's executive officers has entered into a change in
control agreement with the Corporation. Under these agreements, each option or
restricted stock grant held by the executive officer which is scheduled to vest
within the 12 months after the effectiveness of a change of control of the
Corporation will instead vest immediately prior to the change in control. In
addition, in the event of a "Subsequent Acquisition" of the Corporation (as
defined in these agreements) following a change in control, all options or
restricted stock granted by the Corporation to such officers will vest
immediately prior to the effectiveness of such acquisition. If an officer is
subject to any excise tax on amounts characterized as excess parachute
payments, due to the benefits provided under this agreement, the officer shall
be entitled to reimbursement of up to $1,000,000 for any excess parachute
excise taxes the officer may incur.
In the event of a termination of an executive officer's employment following
a change of control, either by the surviving entity without cause or by the
executive due to a constructive termination, (1) all options and restricted
stock of the officer vest, (2) the officer is entitled to continued paid
coverage under the Corporation's group health plans for 18 months after such
termination, (3) the officer shall receive a pro rata portion of his or her
incentive bonus for the year in which the termination occurred, (4) the officer
shall receive an amount equal to 18 months of his or her base salary and (5)
the officer shall receive an amount equal to 150% of his or her annual
incentive bonus for the year in which the termination occurred.
Under these agreements, each executive officer agrees to abide by the
Corporation's confidentiality and proprietary rights agreements and, for a
period of one year after such termination, not to solicit the Corporation's
employees or customers.
Compensation Committee Report on Executive Compensation
The Compensation Committee is comprised of two outside directors of the Board
of Directors and is responsible for establishing and monitoring policies
governing the compensation of executive officers.
Compensation Philosophy
Since the Corporation's inception in February of 1998, the Corporation sought
to attract, retain and reward executive officers primarily through long-term
equity incentives in the form of restricted stock and stock options. As such,
the salary component of the executive officers compensation reflected base
salary at a lower level and the stock component at a higher level than that of
a more established company in the same industry. In fiscal 2000, compensation
for the Corporation's executive officers consisted of base salary and potential
bonuses based upon the executive officer's individual performance.
During fiscal 2000, the Corporation engaged a compensation consultant firm to
survey the compensation practices of companies in the Corporation's industry to
ascertain whether the Corporation's compensation structure (a) is competitive
in the industry; (b) motivates executive officers to achieve the Corporation's
business objectives; and (c) aligns the interests of executive officers with
the long-term interests of stockholders. This survey showed that base salaries
of the Corporation's executive officers were at the low to mid-range level of
10
<PAGE>
comparable companies. The Committee also reviewed the Corporation's financial
performance in fiscal 2000, certain milestones achieved by the Corporation
(including several new product introductions, sales levels, profitability and
the Corporation's successful initial and follow on public offerings) and
individual executive officer duties.
Base Salary
Base salaries for fiscal 2000 reflected the Corporation's position as a start
up company. Based on the review of the market data submitted by the consulting
firm, the Committee set executive compensation for the upcoming fiscal year
within the range of compensation of executive officers who have comparable
qualifications, experience and responsibilities at companies in similar
businesses of comparable size and success. The Committee intends to continue to
adjust compensation appropriately in order to compete for and retain executives
who operate the Corporation effectively and align the interests of its
executive officers with the long-term interests of stockholders.
Performance Bonuses
During fiscal 2000, the Corporation's bonus plan was based upon certain
individual objectives and upon individual performance during the year. The
Committee implemented a bonus plan for the upcoming fiscal year which will pay
out a portion of the annual cash compensation of each executive officer based
upon the performance of the Corporation, as well as individual performance. The
Committee intends to approve an executive bonus plan each year.
Long-Term Equity Incentives
The Committee strongly believes in granting restricted stock or stock options
to the Corporation's executive officers to tie executive officer compensation
directly to the long-term success of the Corporation and increases in
stockholder value. During fiscal 2000, the Committee reviewed the stock and
option holdings of the Named Executive Officers and determined that the stock
and option holdings of the Named Executive Officers adequately aligned their
interests with those of the stockholders of the Corporation.
In determining the size of each stock option grant awarded to each executive
officer in the future, the Committee intends to take into account the executive
officer's position with the Corporation, the executive officer's past
performance and the number and price of unvested options and restricted stock
then held by the executive officer. Stock options granted to executive officers
under the Corporation's 1999 Stock Incentive Plan generally have an exercise
price equal to the fair market value on the date of grant and vest over a five-
year period, subject to acceleration of vesting upon a change in control of the
Corporation.
Chief Executive Officer Compensation
Mr. Smith has served as the Corporation's Chief Executive Officer since
October 1998. As described above for the Corporation's other executive
officers, Mr. Smith's base salary for fiscal 2000 was established by the
Corporation based upon the start up nature of the Corporation. After
consideration of Mr. Smith's significant equity interest in the Corporation ,
Mr. Smith's salary for fiscal 2000 remained virtually unchanged, on an
annualized basis, from the previous year and was below the low-point of the
range of comparable companies. Mr. Smith did not receive a bonus for fiscal
2000 and was not granted any restricted stock or stock options in fiscal 2000.
The Compensation Committee may adjust Mr. Smith's salary in the future, based
upon comparative salaries of chief executive officers in the Corporation's
industry, and other factors which may include the financial performance of the
Corporation and Mr. Smith's success in meeting strategic goals.
Policy on Deductibility of Executive Compensation
The Committee does not believe Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"), which disallows a tax deduction for certain
compensation in excess of $1 million, will likely have an
11
<PAGE>
effect on the Corporation in the near future. The Committee believes that stock
options granted under the Corporation's 1999 Stock Incentive Plan meet the
exception for qualified performance-based compensation in accordance with
Internal Revenue Code Regulations, so that amounts otherwise deductible with
respect to such options will not count toward the $1 million deduction limit.
The Committee's general policy is to take into account the deductibility of
compensation in determining the type and amount of compensation payable to
executive officers.
Respectfully submitted by the Compensation
Committee:
Paul J. Ferri
Timothy A. Barrows
Compensation Committee Interlocks and Insider Participation
Prior to the appointment of the Compensation Committee, the Corporation's
full Board of Directors (which includes Messrs. Deshpande and Smith) was
responsible for the functions of a Compensation Committee. No interlocking
relationship exists between any member of the Corporation's Board of Directors
or its Compensation Committee and any member of the Board of Directors or
compensation committee of any other company.
Compensation of Directors
The Corporation reimburses directors for reasonable out-of-pocket expenses
incurred in attending meetings of the Board of Directors and committees.
Pursuant to the Corporation's 1999 Non-Employee Director Plan, (the "Director's
Option Plan"), all directors who are not employees of the Corporation are
automatically granted non-qualified stock options to purchase 90,000 shares of
Common Stock upon the latest to occur of (i) their initial appointment to the
Board of Directors or (ii) August 17, 1999. Thereafter, on an annual basis
immediately following each annual meeting of stockholders, each non-employee
director is granted an option to purchase 30,000 shares of Common Stock. Under
the plan, options are fully exercisable on the date of grant, however, shares
purchased on exercise of such options are subject to repurchase by the
Corporation prior to completion of the applicable vesting period. The exercise
price per share of all options granted under the Director's Option Plan is
equal to the fair market value of the Corporation's Common Stock on the date of
grant, and such options expire on the date which is ten years from the date of
option grant. Options to purchase 270,000 shares of Common Stock were granted
in fiscal 2000 under the Director's Option Plan.
Stock Performance Graph
The following graph compares the yearly percentage change in the cumulative
total stockholder return on the Corporation's Common Stock during the period
from the Corporation's initial public offering through July 31, 2000, with the
cumulative total return on the S&P 500 and the Nasdaq Telecommunications Index.
The comparison assumes $100 was invested on October 22, 1999 (the date of the
Corporation's initial public offering) in the Corporation's Common Stock and in
each of the foregoing indices and assumes reinvestment of dividends, if any.
The performance shown is not necessarily indicative of future performance.
12
<PAGE>
Comparison of Five Year* Cumulative Total Return Among
Sycamore Networks, Inc.,
The S&P 500 and
The Nasdaq Telecommunications Index
<TABLE>
<CAPTION>
Sycamore S&P Nasdaq
Networks 500 Telecomm
-------- ------ --------
<S> <C> <C> <C>
October 22, 1999....................................... 100.00 100.00 100.00
January 28, 2000....................................... 815.46 104.50 139.06
July 31, 2000.......................................... 973.52 109.92 117.08
</TABLE>
--------
* Prior to October 22, 1999 the Corporation's Common Stock was not publicly
traded. Comparative data is provided only for the period since that date.
Notwithstanding anything to the contrary set forth in any of the
Corporation's filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate other
filings with the Securities and Exchange Commission, including this Proxy
Statement, in whole or in part, the Compensation Committee Report on Executive
Compensation and the Stock Price Performance Graph shall not be deemed
incorporated by reference into any such filings.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During October 1999, Kevin Oye, the Corporation's Vice President of Business
Development, purchased an aggregate of 7,893 shares of Common Stock for $12.67
per share pursuant to a stock option agreement that gives the Corporation the
right to repurchase all or a portion of the shares at their purchase price in
the event that Mr. Oye ceases to be employed by the Corporation. Mr. Oye's
purchase of the Corporation's stock was financed by a loan from the
Corporation in the principal amount of $99,978 that bears interest at 8.25%
per annum. This loan is due December 1, 2000 and is secured by shares of the
Corporation's Common Stock. The repurchase right lapses over a period of five
years from the date of issue, subject to acceleration of such lapse upon a
change in control of the Corporation. During fiscal 1999, Eric Swanson, the
Corporation's Vice President and General Manager, Core Networking, purchased
an aggregate of 1,912,500 shares of Common Stock. Mr. Swanson's purchases of
such Common Stock were financed by loans from the Corporation in an aggregate
principal amount of $180,000 which were repaid in full in March, 2000.
In July 2000, the Corporation and Gururaj Deshpande, the Chairman of the
Corporation's Board of Directors, entered into an Investor Agreement with
Tejas Networks India Private Limited, a private company incorporated in India
("Tejas"), pursuant to which the Corporation and Mr. Deshpande agreed to each
invest $2,200,000 in Tejas in exchange for equity shares of Tejas. Mr.
Deshpande serves as a member of the Board of Directors of Tejas. The
Corporation has also entered into a Services Consulting Agreement and an
International Distributor Agreement with Tejas, under which Tejas will perform
consulting services to the Corporation and will act as an international
distributor of the Corporation.
All transactions involving the Corporation and its officers, directors,
principal stockholders and their affiliates, including those since the
Corporation's initial public offering, will be and have been approved by a
majority of the Board of Directors, including a majority of the independent
and disinterested directors on the Board of Directors, and will be and have
been on terms no less favorable to the Corporation than could be obtained from
unaffiliated third parties.
13
<PAGE>
PROPOSAL NO. 2
AMEND THE CORPORATION'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK OF THE CORPORATION FROM
1,500,000,000 SHARES TO 2,500,000,000 SHARES
General
The Corporation's Amended and Restated Certificate of Incorporation currently
authorizes the issuance of 1,500,000,000 shares of Common Stock and 5,000,000
shares of Preferred Stock. In October 2000, the Board of Directors adopted a
resolution approving an amendment to the Amended and Restated Certificate of
Incorporation to increase the authorized number of shares of Common Stock to
2,500,000,000 shares, subject to stockholder approval of the amendment. No
change is being proposed to the authorized number of shares of Preferred Stock.
Current Use of Shares
As of October 24, 2000, the Corporation had approximately [#] shares of
Common Stock outstanding, approximately [#] shares of Common Stock reserved for
future issuance under the Corporation's stock plans, of which approximately [#]
shares are covered by outstanding options and approximately [#] shares are
available for future grant or purchase. Based upon the foregoing number of
outstanding and reserved shares of Common Stock, the Corporation has
approximately [#] shares authorized under its Amended and Restated Certificate
of Incorporation remaining available for other purposes.
Proposed Amendment to the Amended and Restated Certificate of Incorporation
The Board of Directors has adopted resolutions setting forth the proposed
amendment to Article 4 of the Corporation's Amended and Restated Certificate of
Incorporation (the "Amendment"), declaring the advisability of the Amendment,
and calling for submission of the Amendment for approval by the Corporation's
stockholders at the Annual Meeting. The following is the text of Article 4 of
the Corporation's Amended and Restated Certificate of Incorporation, as
proposed to be amended:
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 2,505,000,000 shares,
consisting of (i) 2,500,000,000 shares of Common Stock, $.001 par value per
share ("Common Stock"), and (ii) 5,000,000 shares of Preferred Stock, $.01
par value per share ("Preferred Stock").
Purpose and Effect of the Proposed Amendment
The Board of Directors believes that it is in the Corporation's best
interests to increase the number of shares of Common Stock that the Corporation
is authorized to issue. The Board of Directors believes that the availability
of additional authorized but unissued shares will provide the Corporation with
the flexibility to issue Common Stock for proper corporate purposes which may
be identified in the future, such as to raise equity capital, to make
acquisitions through the use of stock, to establish strategic relationships
with other companies, to adopt additional employee benefit plans or reserve
additional shares for issuance under such plans and to effect stock splits,
where the Board of Directors determines it advisable to do so.
The Board of Directors believes that the proposed increase in the authorized
Common Stock will make available sufficient shares to effect one or more of the
previously mentioned purposes. No additional action or authorization by the
Corporation'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 Corporation reserves the right to seek a
further increase in authorized shares from time to time in the future as
considered appropriate by the Board of Directors.
14
<PAGE>
Under the Corporation's Amended and Restated Certificate of Incorporation,
the Corporation's stockholders do not have preemptive rights with respect to
issuances of Common Stock. Thus, should the Board of Directors elect to issue
additional shares of Common Stock, existing stockholders would not have any
preferential rights to purchase such shares. In addition, if the Board of
Directors elects to issue additional shares of Common Stock, such issuance
could have a dilutive effect on earnings per share, voting power and share
holdings of current stockholders.
The proposed Amendment could, under certain circumstances, have an anti-
takeover effect. For example, in the event of an attempt to take control of
the Corporation, it may be possible for the Corporation to endeavor to impede
the attempt by issuing shares of the Common Stock, thereby diluting the voting
power of the other outstanding shares and increasing the potential cost to
acquire control of the Corporation. The Amendment therefore may have the
effect of discouraging unsolicited takeover attempts. By potentially
discouraging initiation of any such unsolicited takeover attempt, the proposed
Amendment may limit the opportunity for the Corporation's stockholders to
dispose of their shares at the higher price generally available in takeover
attempts or that may be available under a merger proposal. The proposed
Amendment may have the effect of permitting the Corporation's current
management, including the current Board of Directors, 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 Corporation's
business. However, the Board of Directors is not currently aware of any
attempt to take control of the Corporation and the Board of Directors has not
presented this proposal in response to any such attempt.
Recommendation of the Board
The Board of Directors recommends that the stockholders vote FOR the
proposal to amend the Corporation's Amended and Restated Certificate of
Incorporation to increase the authorized number of shares of Common Stock from
1,500,000,000 shares to 2,500,000,000 shares.
PROPOSAL NO. 3
AMEND THE CORPORATION'S 1999 STOCK INCENTIVE PLAN
The Corporation's 1999 Stock Incentive Plan (the "1999 Plan") was adopted by
the Board of Directors in August 1999 and approved by the stockholders of the
Corporation in September 1999. The 1999 Plan will expire in accordance with
its terms on October 21, 2009. Upon closing of the Corporation's initial
public offering in October 1999, any shares not yet issued under the
Corporation's predecessor 1998 Stock Incentive Plan were made available under
the 1999 Plan. In addition, the 1999 Plan provides for an annual increase on
the first day of the Corporation's fiscal year of the lesser of:
. 9,000,000 shares;
. 5% of the outstanding shares on the date of the increase; or
. a lesser amount determined by the Board.
As of October 24, 2000, a total of [#] shares of common stock were reserved
for issuance under the 1999 Plan. As of October 24, 2000, options to purchase
[#] shares have been granted under the 1999 Plan and [#] remained available
for future grant. All of such outstanding options were held by employees of
the Corporation.
The 1999 Plan provides for the grant of incentive stock options intended to
qualify under Section 422 of the Internal Revenue Code, non-qualified stock
options, restricted stock awards and other stock-based awards.
The Corporation's officers, employees, directors, consultants and advisors
and those of its subsidiaries are eligible to receive awards under the 1999
Plan. Under present law, however, incentive stock options may only be
15
<PAGE>
granted to employees. No participant in the 1999 Plan may receive any award for
more than 1,500,000 shares in any calendar year.
Optionees receive the right to purchase a specified number of shares of
Common Stock at a specified option price and subject to such other terms and
conditions as are specified in connection with the option grant. The
Corporation may grant options at an exercise price less than, equal to or
greater than the fair market value of the Common Stock on the date of grant.
Under present law, incentive stock options and options intended to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue
Code may not be granted at an exercise price less than the fair market value of
the Common Stock on the date of grant or less than 110% of the fair market
value in the case of incentive stock options granted to optionees holding more
than 10% of the voting power of the company. The 1999 Plan permits the
Corporation's Board of Directors to determine how optionees may pay the
exercise price of their options, including by cash, check or in connection with
a "cashless exercise" through a broker, by surrender to us of shares of Common
Stock, by delivery to us of a promissory note or by any combination of the
permitted forms of payment.
The Corporation's Board of Directors administers the 1999 Plan and has the
authority to adopt, amend and repeal the administrative rules, guidelines and
practices relating to the plan and to interpret its provisions. The Board may
delegate authority under the 1999 Plan to one or more committees of the Board
of Directors and, subject to certain limitations, to one or more of the
Corporation's executive officers. The Corporation's Board of Directors has
authorized the Compensation Committee or another committee appointed by the
board to administer the 1999 Plan, including the granting of options to
executive officers. Subject to any applicable limitations contained in the 1999
Plan, the Corporation's Board of Directors, its Compensation Committee or any
other committee or executive officer to whom the Board delegates authority, as
the case may be, selects the recipients of awards and determines:
. the number of shares of Common Stock covered by options and the dates
upon which such options become exercisable;
. the exercise price of options;
. the duration of options; and
. the number of shares of Common Stock subject to any restricted stock or
other stock-based awards and the terms and conditions of such awards,
including the conditions for repurchase, issue price and repurchase
price.
In the event of a merger, consolidation, asset sale, liquidation or similar
transaction resulting in a change of control of the Corporation, each
outstanding option will immediately become fully exercisable with respect to
the total number of shares subject to the option. However, an option would not
so accelerate if the option is assumed or otherwise continued in full force by
the successor entity, if the option is replaced with a cash incentive program
of the successor corporation which presents the spread at the time of the
change of control on the shares which were not otherwise then exercisable, or
if the acceleration of the option is subject to other limitations imposed on
the date of grant. Notwithstanding the foregoing, the number of vested shares
will, immediately prior to a change of control, be increased by the number of
shares that would have become vested on the date 12 months following a change
of control (six months for persons employed less than one year prior to the
change of control). If following a change of control the successor corporation
terminates the employee without cause, all of his or her options will become
vested upon the termination of his or her employment.
No award may be granted under the 1999 Plan after the tenth anniversary of
the effective date, but the vesting and effectiveness of Awards previously
granted may extend beyond that date. The Corporation's Board of Directors may
at any time amend, suspend or terminate the 1999 Plan, except that no award
granted after an amendment of the 1999 Plan and designated as subject to
Section 162(m) of the Internal Revenue Code by the Corporation's Board of
Directors shall become exercisable, realizable or vested, to the extent such
amendment was required to grant such award, unless and until such amendment is
approved by the Corporation's stockholders.
16
<PAGE>
Certain Federal Income Tax Effects
The following discussion of certain relevant federal income tax effects
applicable to options and other awards which have been or are expected to be
made under the 1999 Plan is a summary only, and reference is made to the Code
and the regulations promulgated thereunder for a complete statement of all
relevant federal tax provisions.
Non-Qualified Stock Options
An optionee generally will not be taxed upon the grant of a non-qualified
stock option. Rather, at the time of exercise of such non-qualified stock
option, the optionee will recognize ordinary income for federal income tax
purposes in an amount equal to the excess of the fair market value of the
shares purchased over the option exercise price. The Corporation will generally
be entitled to a tax deduction at such time and in the same amount that the
optionee recognizes ordinary income.
If shares acquired upon exercise of a non-qualified stock option are later
sold or exchanged, then the difference between the sales price and the fair
market value of such stock on the date that ordinary income was recognized with
respect thereto will generally be taxable as long-term or short-term capital
gain or loss, depending upon the length of time such shares were held by the
optionee.
Incentive Stock Options
An optionee will not be in receipt of taxable income upon the grant or
exercise of an incentive stock option. If stock acquired pursuant to the timely
exercise of an incentive stock option is later disposed of, the optionee will,
except as noted below, recognize long-term capital gain or loss equal to the
difference between the amount realized upon such sale and the option price. The
Corporation, under these circumstances, will not be entitled to any federal
income tax deduction in connection with either the exercise of the incentive
stock option or the sale of such stock by the optionee. Exercise of an
incentive stock option will be timely if made during its term and if the
optionee remains an employee of the Corporation or a subsidiary at all times
during the period beginning on the date of grant of the incentive stock option
and ending on the date three months before the date of exercise (or one year
before the date of exercise in the case of a disabled optionee).
If, however, stock acquired pursuant to the exercise of an incentive stock
option is disposed of by the optionee prior to the expiration of two years from
the date of grant of the incentive stock option or within one year from the
date such stock is transferred to him upon exercise (a "disqualifying
disposition"), any gain realized by the optionee generally will be taxable at
the time of such disqualifying disposition at ordinary income rates. In such
case, the Corporation may claim a federal income tax deduction at the time of
such disqualifying disposition for the amount taxable to the optionee as
ordinary income.
Stock Awards
A plan participant generally will not be taxed upon the grant of an award of
restricted stock, but rather will recognize ordinary income in an amount equal
to the fair market value of the stock at the time the shares are no longer
subject to a substantial risk of forfeiture (less any amounts paid by the
participant). The Corporation will be entitled to a deduction at the time when,
and in the amount that, the participant recognizes ordinary income. However, a
participant may elect (not later than 30 days after acquiring such shares) to
recognize ordinary income at the time the restricted shares are awarded in an
amount equal to their fair market value at that time (less any amounts paid by
the participant), notwithstanding the fact that such shares are subject to
restrictions and a substantial risk of forfeiture. If such an election is made,
no additional taxable income will be recognized by such participant at the time
the restrictions lapse. The Corporation will be entitled to a tax deduction at
the time when, and to the extent that, income is recognized by such
participant. However, if shares in respect of which such election was made are
later forfeited, no tax deduction is allowable to the participant for the
forfeited shares, and the Corporation will be deemed to recognize ordinary
income equal to the amount of the deduction allowed to the Corporation at the
time of the election in respect of such forfeited shares.
17
<PAGE>
Proposal and Reasons for the Amendments
The Corporation's stockholders are being asked to approve an amendment to
the 1999 Plan which will (a) increase the number of shares of Common Stock
reserved for issuance under the plan by 25,000,000, and (b) revise the
automatic annual share increase provision of the 1999 Plan so that the number
of shares of Common Stock reserved for issuance under the 1999 Plan will
automatically increase on the first day of each fiscal year of the Corporation
by an amount equal to the lesser of (i) 18,000,000 shares, (ii) five percent
(5%) of the number of shares of Common Stock outstanding on the first day of
each fiscal year of the Corporation, or (iii) such lesser number of shares as
determined by the Corporation's Board of Directors.
The Corporation's Board of Directors has approved the amendment to the 1999
Plan, subject to stockholder approval. The Board believes the amendment to be
in the Corporation's best interests because it will help the Corporation
attract, retain and motivate the best available employees and officers and
provide them with proprietary interest in the Corporation. The Corporation is
experiencing rapid growth and competition for qualified employees is intense.
The Board believes that the amendment will better enable the Corporation to
respond to the demands of its rapid growth in an environment of extremely
competitive hiring.
Recommendation of the Board of Directors
The Board of Directors recommends that the stockholders vote FOR the
proposal to amend the Corporation's 1999 Stock Incentive Plan to (a) increase
the number of shares of Common Stock reserved for issuance under the 1999 Plan
by 25,000,000, and (b) revise the automatic annual share increase provision of
the 1999 Plan so that the number of shares of Commons Stock reserved for
issuance under the plan will automatically increase on the first day of each
fiscal year of the Corporation by an amount equal to the lesser of (i)
18,000,000 shares, (ii) five percent (5%) of the number of shares of Common
Stock outstanding on the first day of each fiscal year of the Corporation, or
(iii) such lesser number of shares as determined by the Corporation's Board of
Directors.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Corporation has selected
PricewaterhouseCoopers LLP as independent auditors to audit the financial
statements of the Corporation for the year ending July 31, 2001.
PricewaterhouseCoopers LLP has acted as the Corporation's independent auditors
since the Corporation's inception. A representative of PricewaterhouseCoopers
LLP is expected to be present at the Annual Meeting with the opportunity to
make a statement if the representative desires to do so, and is expected to be
available to respond to appropriate questions. If the stockholders do not
ratify the Board of Director's selection of PricewaterhouseCoopers LLP as the
Corporation's independent auditors for fiscal year 2001, the Board of
Directors will consider the matter at its next meeting.
Recommendation of the Board of Directors
The Board of Directors recommends a vote FOR the ratification of this
selection.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act of 1934, as amended, requires the
Corporation's directors, executive officers and holders of more than 10% of
the Corporation's outstanding shares of Common Stock (collectively, "Reporting
Persons") to file with the Securities and Exchange Commission (the
"Commission") initial reports of ownership and reports of changes in ownership
of Common Stock of the Corporation. Such persons are required by regulations
of the Commission to furnish the Corporation with copies of all such filings.
Based solely
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on its review of the copies of such filings received by it with respect to the
fiscal year ended July 31, 2000, the Corporation believes that all Reporting
Persons complied with all Section 16(a) filing requirements in the fiscal year
ended July 31, 2000.
STOCKHOLDER PROPOSALS
To be eligible for inclusion in the proxy statement to be furnished to all
stockholders entitled to vote at the 2001 Annual Meeting of Stockholders of the
Corporation, proposals of stockholders must be received at the Corporation's
principal executive offices not later than July 9, 2001 and must otherwise
satisfy the conditions established by the Commission for stockholder proposals
to be included in the Corporation's proxy statement for that meeting. In
accordance with the Corporation's Amended and Restated Bylaws, proposals of
stockholders intended for presentation at the 2001 Annual Meeting of the
Stockholders of the Corporation (but not intended to be included in the proxy
statement for that meeting) must be received no earlier than September 15, 2001
and no later than October 5, 2001. In order to curtail any controversy as to
the date on which a proposal was received by the Corporation, it is suggested
that proponents submit their proposals by Certified Mail, Return Receipt
Requested.
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business which the Board of
Directors intends to present or knows that others will present at the Annual
Meeting is as set forth above. If any other matter or matters are properly
brought before the Annual Meeting, or an adjournment or postponement thereof,
it is the intention of the persons named in the accompanying form of proxy to
vote the proxy on such matters in accordance with their best judgment.
EXPENSES AND SOLICITATION
The cost of soliciting proxies will be borne by the Corporation. Proxies may
be solicited by certain of the Corporation's directors, officers and regular
employees, without additional compensation, in person or by telephone or
facsimile. In addition, the Corporation may retain the services of one or more
firms to assist in the solicitation of proxies, for an estimated fee of $6,000
plus reimbursement of expenses and may also reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding solicitation materials to such beneficial owners.
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Appendix A
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF SYCAMORE NETWORKS, INC.
The Audit Committee (the "Committee") is appointed by the Board of Directors
(the "Board") of Sycamore Networks, Inc. (the "Company") to assist the Board
in monitoring (1) the integrity of the financial statements of the Company,
(2) the compliance by the Company with legal and regulatory requirements and
internal controls, and (3) the independence and performance of the Company's
auditors.
The Committee shall be comprised of three or more directors as determined by
the Board. Each member of the Committee shall be an "independent" director
within the meaning of the Nasdaq rules and, as such, shall be free from any
relationship that may interfere with the exercise of his or her independent
judgment as a member of the Committee. Notwithstanding the foregoing, as
permitted by the rules of the Nasdaq, under exceptional and limited
circumstances, one director who does not meet certain of the criteria for
"independence" may be appointed to the Committee if the Board determines in
its business judgment that membership on the Committee by such person is
required by the best interests of the Company and its stockholders and the
Company discloses in the annual proxy statement the nature of such person's
relationship and the reasons for the Board's determination. All members of the
Committee shall be financially literate at the time of their election to the
Committee or shall become financially literate within a reasonable period of
time after their appointment to the Committee. "Financial literacy" shall be
determined by the Board in the exercise of its business judgment, and shall
include a working familiarity with basic finance and accounting practices and
an ability to read and understand fundamental financial statements. At least
one member of the Committee shall have accounting or related financial
management expertise, as such qualification may be determined in the business
judgment of the Board. Committee members, if they or the Board deem it
appropriate, may enhance their understanding of finance and accounting by
participating in educational programs conducted by the Company or an outside
consultant or firm.
The Committee shall have the authority to retain special legal, accounting
or other consultants to advise the Committee. The Committee may request any
officer or employee of the Company or the Company's outside counsel or
independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee. It is the objective of the
Committee to maintain free and open means of communications among the Board,
the independent accountants and the financial and senior management of the
Company.
The Committee shall make regular reports to the Board.
The Committee shall:
1. Review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval.
2. Review the annual audited financial statements with management,
including major issues regarding accounting principles and practices as
well as the adequacy of internal controls that could significantly
affect the Company's financial statements.
3. Discuss with management and the independent auditor the significant
financial reporting issues and judgments made in connection with the
preparation of the company's financial statements.
4. Review with management and the outside auditors the audited financial
statements to be included in the Company's Annual Report on Form 10-K
and review and consider with the outside auditors the matters required
to be discussed by Statement of Auditing Standard No. 61, as amended.
5. Review with management and the independent auditor the Company's
quarterly financial statements prior to the filing of the Form 10-Q.
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6. Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to monitor
and control such exposures.
7. Review major changes to the Company's accounting principles and
practices as suggested by the independent auditor or management.
8. Recommend to the Board the appointment of the independent auditor,
which firm is ultimately accountable to the Audit Committee and the
Board, as representatives of the stockholders of the Company.
9. Review and approve the annual engagement letter from the independent
auditors, including the audit fees to be paid to the independent
auditor.
10. Oversee the independence of the Company's independent auditors by,
among other things:
(i) requiring the independent auditors to deliver to the Committee on a
periodic basis a formal written statement delineating any
relationships that may reasonably be thought to bear on the
independence between the independent auditors and the Company; and
(ii) actively engaging in a dialogue with the independent auditors with
respect to any disclosed relationships or services that may impact
the objectivity and independence of the independent auditors and
recommending that the Board take appropriate action to oversee the
independence of the outside auditor.
11. Evaluate together with the Board the performance of the independent
auditor and, if so determined by the Audit Committee, recommend that
the Board replace the independent auditor.
12. Meet with the independent auditor prior to the audit to review the
planning and scope of the audit.
13. Obtain from the independent auditor assurance that it will inform the
company's management concerning any information indicating that an
illegal act has or may have occurred that could have a material effect
on the company's financial statements, and assure that such information
has been conveyed to the audit committee.
14. Discuss with management and the independent auditor any condition which
comes to their attention indicating that the Company's subsidiaries and
affiliated entities, domestic and foreign, are not conforming to the
applicable legal requirements or the Company's Code of Conduct.
15. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61, as amended,
relating to the conduct of the audit.
16. Review with the independent auditor any problems or difficulties the
auditor may have encountered and any management letter provided by the
auditor and the Company's response to that letter. Such review should
include:
(i) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to
required information; and
(ii) Any changes required in the planned scope of the audit.
17. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
18. Advise the Board with respect to the Company's policies and procedures
regarding compliance with applicable laws and regulations and with the
Company's Code of Conduct.
19. Review with the Company's general counsel legal matters that may have a
material impact on the financial statements, the Company's compliance
policies and any material reports or inquiries received from regulators
or governmental agencies.
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20. Meet with such frequency and at such intervals as the Committee shall
determine is necessary to carry out its duties and responsibilities. As
part of its purpose to foster open communications, the Committee shall
meet at least annually with management and the Company's independent
accountants in separate executive sessions to discuss any matters that
the Committee or each of these groups or persons believe should be
discussed privately. In addition, the Committee (or the Chairman)
should meet or confer with the independent accountants and management
quarterly to review the Company's periodic financial statements prior
to their filing with the Securities and Exchange Commission ("SEC").
The Chairman should work with the Chief Financial Officer and
management to establish the agendas for Committee meetings. The
Committee, in its discretion, may ask members of management or others
to attend its meetings (or portions thereof) and to provide pertinent
information as necessary. The Committee shall maintain minutes of its
meetings and records relating to those meetings and the Committee's
activities and provide copies of such minutes to the Board.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor. Nor is it
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations and the Company's Code of Conduct.
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<CAPTION>
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<S> <C>
It's fast, convenient, and immediate! It's fast, convenient and your vote is
Call Toll-Free on a Touch-Tone Phone immediately confirmed and posted.
1-877-PRX-VOTE (1-877-779-8683)
------------------------------------------------- -------------------------------------------
Follow these four easy steps: Follow these four easy steps:
1. Read the accompanying Proxy Statement 1. Read the accompanying Proxy
and Proxy Card. Statement and Proxy Card
2. Call the toll-free number 2. Go to the Website
1-877-PRX-VOTE (1-877-779-8683) http://www.eproxyvote.com/scmr
------------------------------
3. Enter your 14-digit Voter Control 3. Enter your 14-digit Voter Control
Number located on your Proxy Card Number located on your Proxy Card
above your name. above your name.
4. Follow the recorded instructions. 4. Following the instructions provided.
------------------------------------------------- -------------------------------------------
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</TABLE>
RECEIVE FUTURE PROXY MATERIALS ELECTRONICALLY. Receiving stockholder material
electronically reduces mailing and printing costs and is better for the
environment. Would you like to receive future proxy materials electronically? If
so go to: http://www.eproxyvote.com/scmr and follow the instructions provided.
Do not return your Proxy Card if you are voting by Telephone or Internet
<PAGE>
[X] Please mark votes as in this example
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED "FOR" THE PROPOSALS IN ITEMS 1 THROUGH 4.
1. To elect the following two nominees to the Board of Directors to serve for
three year terms as Class I Directors and until their respective successors are
elected and qualified:
Nominees:
Timothy Barrows
John Gerdelman
[_] FOR [_] WITHHELD
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For all nominees except as noted above. To withhold authority to vote for any
individual nominee, write the name of the nominee on the above line.
2. To amend the Corporation's Amended and Restated Certificate of Incorporation
to increase the number of authorized shares of Common Stock of the Corporation
from 1,500,000,000 shares to 2,500,000,000 shares.
[_] FOR [_] AGAINST [_] ABSTAIN
3. To approve an amendment of the Corporation's 1999 Stock Incentive Plan to (a)
increase the number of shares of Common Stock reserved for issuance under the
plan by 25,000,000, and (b) revise the automatic annual 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 fiscal year
of the Corporation by an amount equal to the lesser of (i) 18,000,000 shares,
(ii) five percent (5%) of the number of shares of Common Stock outstanding on
the first day of each fiscal year of the Corporation, or (iii) such lesser
number of shares as determined by the Corporation's Board of Directors.
[_] FOR [_] AGAINST [_] ABSTAIN
4. To ratify the selection of the firm of PricewaterhouseCoopers LLP as auditors
of the Corporation for the fiscal year ending July 31, 2000.
[_] FOR [_] AGAINST [_] ABSTAIN
5. To transact such other business as may properly come before the meeting and
any adjournment thereof.
[_] MARK HERE IF YOU PLAN TO ATTEND THE MEETING
[_] MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW
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If signing as attorney, executor, trustee or guardian, please give your full
title as such. If stock is held jointly, each owner should sign.
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Signature Date
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Signature Date
<PAGE>
SYCAMORE NETWORKS, INC.
PROXY
Proxy for Annual Meeting of Stockholders
December 14, 2000
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Daniel E. Smith and Frances M. Jewels, and each
of them, proxies, with full power of substitution, to vote all shares of stock
of Sycamore Networks, Inc. (the "Corporation") which the undersigned is entitled
to vote at the Annual Meeting of Stockholders of the Corporation to be held on
Thursday, December 14, 2000 (the "Annual Meeting") at 9:00 A.M., local time, at
The Omni Parker House Hotel, 60 School Street, Boston, Massachusetts 02108, and
at any postponements and adjournments thereof, upon matters set forth in the
Notice of Annual Meeting of Stockholders and Proxy Statement dated November 6,
2000, a copy of which has been received by the undersigned. The proxies are
further authorized to vote, in their discretion, upon such other business as may
properly come before the meeting or any postponements or adjournments thereof.
SEE REVERSE SIDE
