SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
NETWORK EQUIPMENT TECHNOLOGIES, 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):
|_| No Fee Required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4. Proposed maximum aggregate value 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 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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4. Date Filed:
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<PAGE>
[LOGO]
6530 Paseo Padre Parkway
Fremont, California 94555
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
August 8, 2000
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Network
Equipment Technologies, Inc., doing business as net.com, a Delaware corporation,
will be held on Tuesday, August 8, 2000, at 10:00 a.m., local time, at the
principal offices of net.com, 6530 Paseo Padre Parkway, Fremont, California, for
the following purposes:
1. To elect Walter J. Gill and Hubert A. J. Whyte as Class I Directors
to serve for the term specified in the accompanying Proxy Statement
and until their successors are elected and qualified.
2. To ratify the appointment of Deloitte & Touche LLP as independent
public accountants of net.com for the fiscal year ending March 31,
2001.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on June 9, 2000 are
entitled to notice of and to vote at the Meeting and at any continuation or
adjournment of the Meeting.
By order of the Board of Directors,
/s/ HUBERT A.J. WHYTE
HUBERT A.J. WHYTE
President and Chief Executive Officer
Fremont, California
July 10, 2000
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO VOTE,
SIGN, AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE
POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE.
<PAGE>
[LOGO]
6530 Paseo Padre Parkway
Fremont, California 94555
PROXY STATEMENT
For the Annual Meeting of Stockholders
To Be Held
August 8, 2000
The enclosed Proxy is solicited by the Board of Directors of Network
Equipment Technologies, Inc., doing business as net.com, a Delaware corporation,
for use at the Annual Meeting of Stockholders to be held at 10:00 a.m. on August
8, 2000 (the "Annual Meeting" or "Meeting"), at the principal offices of net.com
located at 6530 Paseo Padre Parkway, Fremont, California 94555 and at any
postponement or adjournment of this Meeting. Stockholders of record on June 9,
2000 will be entitled to notice of and to vote at the Annual Meeting.
net.com intends to mail this Proxy Statement and accompanying Proxy Card
(the "Proxy"), together with the Annual Report to stockholders, on approximately
July 13, 2000. On June 9, 2000, there were outstanding and entitled to vote
21,539,584 shares of the Common Stock of net.com ("Common Stock").
Voting
By properly marking, dating, signing and returning the enclosed Proxy
Card, the shares represented on the card will be voted at the Annual Meeting in
accordance with the instructions of the stockholder. Each stockholder is
entitled to one (1) vote for each share of Common Stock held by such
stockholder. All votes will be tabulated by the inspector of election appointed
for the Annual Meeting, who will separately tabulate affirmative and negative
votes, abstentions and broker non-votes. Abstentions and broker non-votes will
be counted in determining whether a quorum is present at the Annual Meeting. For
purposes of determining whether a proposal has been approved or not, however,
abstentions will be counted toward the tabulation of votes cast on proposals
presented to the stockholders and will have the same effect as negative votes,
whereas broker non-votes will not be counted toward the tabulation of votes.
Any person giving a Proxy has the power to revoke it at any time before
its exercise at the Annual Meeting by delivering to the Secretary of net.com at
6530 Paseo Padre Parkway, Fremont, California 94555, a written revocation or a
duly executed Proxy bearing a later date, or by attending the Annual Meeting and
voting in person.
Solicitation
net.com will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy and any additional
soliciting materials furnished to stockholders. net.com does not presently
intend to solicit Proxies other than by mail. net.com reserves the right to have
an outside solicitor conduct the solicitation of Proxies and to pay the
solicitor for its services.
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PROPOSAL NO. 1 - ELECTION OF DIRECTORS
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Election of Directors
The Certificate of Incorporation of net.com provides for a classified
Board of Directors. The Board is divided into three classes, designated as Class
I, Class II and Class III. The respective current terms for each of these three
classes expire at the 2000, 2001 and 2002 Annual Meetings of Stockholders. Under
the Bylaws of net.com, the Board may consist of between five and eight
Directors, the exact number of Directors to be determined by the Board within
the specified limits. The number of Directors is currently set at seven.
The nominees for Class I Directors are Messrs. Gill and Whyte. They have
agreed to serve if elected, and management has no reason to believe that Messrs.
Gill and Whyte will be unable to serve. Unless otherwise instructed, the Proxy
holders will vote the Proxies received by them for Messrs. Gill and Whyte. The
candidates receiving the majority of the votes of the shares entitled to vote at
the Annual Meeting will be elected Class I Directors of net.com. The recipients
of the majority of the votes will hold office until the Annual Meeting of
Stockholders in the year 2003 and until a successor, if any, is elected or
appointed, or until death, resignation or removal.
Directors
Set forth below is information regarding the Directors of net.com,
including nominees for Director, Messrs. Gill and Whyte.
Class and
Director Year Current
Name of Nominee Age Since Term Expires
--------------- --- ----- ------------
Walter J. Gill ............... 65 1991 Class I-2000*
Hubert A.J. Whyte ............ 49 1999 Class I-2000*
Name of Incumbent
-----------------
Dixon R. Doll ................ 57 1984 Class II-2001
James K. Dutton .............. 67 1995 Class III-2002
George M. Scalise ............ 66 1997 Class III-2002
Peter Sommerer .............. 51 2000 Class II-2001
Hans A. Wolf ................. 71 1992 Class II-2001
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* Upon re-election, their terms will expire in 2003.
Dixon R. Doll has been a Director of net.com since April 1984. In December
1996, he founded Doll Capital Management, a private venture capital firm that
invests in entrepreneurial companies in the information technology and
communications markets, where he serves as Managing General Partner. From
September 1994 to December 1996, Dr. Doll was actively engaged in venture
capital activities as a private investor. From September 1985 to September 1994,
Dr. Doll was a partner of Accel Partners, a private venture capital firm. Dr.
Doll holds a Bachelor of Science degree in electrical engineering from Kansas
State University and Master of Science and Ph.D. degrees in electrical
engineering from the University of Michigan. Dr. Doll is also a Director of
About.com and Zamba, Inc., both of which are public companies, and of several
private companies.
James K. Dutton has been a Director of net.com since October 1995. He is a
retired business executive. Currently Mr. Dutton serves as a Director of ECCS,
Inc., a public company. He was also a director of Caere Corporation, a public
company, until it was acquired in March 2000.
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Walter J. Gill, a founder of net.com, has served as a Director since
January 1991. From 1983 until October 1994 when he retired from his full-time
management position, he served as Vice President and Chief Technology Officer.
He has also held several senior management positions within net.com, including
Vice President and General Manager, Private Network Division, and Chief
Technical Officer from April 1987 to February 1988, and Vice President,
Engineering from July 1983 until April 1987.
George M. Scalise has served as a Director of net.com since October 1997.
In June 1997, he became President of the Semiconductor Industry Association
after having served as Executive Vice President at Apple Computer. From 1991 to
1996, Mr. Scalise was at National Semiconductor Corporation where he served as
Executive Vice President and Chief Administrative Officer. Prior to that, he was
President and Chief Executive Officer of Maxtor Corporation, and served in
senior executive capacities at Advanced Micro Devices, Fairchild Semiconductor
and Motorola Semiconductor. Mr. Scalise is also a Director of Cadence Design
Systems, Inc. He has served on several other corporate, association and
community boards.
Peter Sommerer has served as a Director of net.com since April 2000. He is
the founder and currently the Chairman of Coventus, an internet-based service
for business travelers based in Ontario, Canada. Most recently Mr. Sommerer was
Executive Chairman and founder of Vienna Systems, a leading vendor of voice over
IP products. Vienna was acquired by Nokia in 1998. In the early 1990's Mr.
Sommerer was Vice Chairman, President and Chief Operating Officer of Newbridge
Networks, spearheading its emergence as a world premier networking company.
Prior to Newbridge, Mr. Sommerer served in a number of technical, administrative
and general management roles at Mitel Corporation and ITT Austria, now part of
Alcatel.
Hubert A.J. Whyte has served as a Director of net.com since June 1, 1999,
when he joined net.com as its President and Chief Executive Officer. From 1994
until he joined net.com, Mr. Whyte served as President and CEO of Advanced
Computer Communications (ACC), where he created a new vision and strategy for
the company, successfully restructured the organization and almost doubled
annual revenues before initiating the acquisition of ACC by Ericsson for
approximately $290 million. Prior to joining ACC, Mr. Whyte served as Vice
President and General Manager of the Access Products unit of Newbridge Networks
Corporation. Earlier in his career, Mr. Whyte gained industry experience with
British Telecom, Ericsson, Shell Oil, Business Intelligence Services, Mitel and
Siemens.
Hans A. Wolf has served as a Director of net.com since August 1992. On
December 31, 1992 Mr. Wolf retired as Vice Chairman of the Board of Syntex
Corporation, a worldwide pharmaceutical company, and later in December 1993 he
retired from the Syntex Board of Directors. He headed several of Syntex's
business units and served as Chief Administrative Officer from 1975 until his
retirement. Previously, Mr. Wolf spent 20 years at Texas Instruments where he
held a number of positions, including Vice President and Treasurer. Mr. Wolf is
Chairman of the Board of Tab Products Co., Inc., which is a public company.
Stock Ownership of Five Percent Stockholders, Directors, and Executive Officers
The following table sets forth certain information as of June 1, 2000
(except as otherwise noted), regarding ownership of net.com's Common Stock by
(i) each person known by net.com to be the beneficial owner of five percent (5%)
or more of net.com's Common Stock, (ii) each Director and nominee, (iii) each
current Executive Officer of net.com who is also named in the Summary
Compensation Table ("Named Executive Officer"), and (iv) all Executive Officers,
including those not named in the Summary Compensation Table, and Directors of
net.com as a group. Unless otherwise indicated, each of the stockholders has
sole voting and investment power with respect to the shares beneficially owned,
subject to community property laws where applicable.
3
<PAGE>
Five Percent (5%) Stockholders, Approximate
Directors, Named Executive Percentage of
Officers, and all Directors Number of Outstanding
and Executive Officers as a Group Shares Shares
--------------------------------- ------ ------
State of Wisconsin Investment Board (1) ......... 2,788,400 12.95%
121 East Wilson Street
Madison, WI 53707
R. Eliot King & Associates (1) .................. 2,051,025 9.52%
3000 Sand Hill Road, Building 2, Suite 245
Menlo Park, CA 94025-7195
Heartland Advisors, Inc. (1) .................... 1,703,500 7.91%
790 North Milwaukee Street
Milwaukee, WI 53202
Dimensional Fund Advisors, Inc. (1) ............. 1,586,950 7.37%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
John Batty ...................................... 1,221 *
Dixon R. Doll ................................... 201,792 *
James K. Dutton (3) ............................. 41,109 *
Craig W. Forbes (4) ............................. 11,759 *
Walter J. Gill (5) .............................. 85,000 *
Hans Kramer (6) ................................. 32,072 *
Raymond E. Peverell (7) ......................... 132,562 *
George M. Scalise (8) ........................... 12,498 *
Hubert A.J. Whyte (9) ........................... 94,791 *
Hans A. Wolf (10) ............................... 87,495 *
All Executive Officers and Directors as a
group as of June 1, 2000 (eleven persons) (11) .. 708,485 3.2%
* Represents less than 1% of the outstanding shares.
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(1) This information was acquired through an investment research firm from
publicly available information filed with the Securities and Exchange
Commission ("SEC") as of March 2000. Based on these filings, net.com
believes that: the State of Wisconsin Investment Board has sole voting and
dispositive power with respect to all of the shares shown opposite its
name; R. Eliot King & Associates, Inc. has shared voting and dispositive
power with respect to all of the shares shown opposite its name; Heartland
Advisors, Inc. has sole voting and dispositive power with respect to all
of the shares shown opposite its name; and Dimensional Fund Advisors, Inc.
has sole voting and dispositive power with respect to all of the shares
shown opposite its name. net.com has not independently verified the
accuracy of this information.
(2) Includes the following shares as to which Dr. Doll disclaims beneficial
ownership: 200 shares owned by a son and 4,800 shares owned by
International Synergies, Ltd., a corporation in which Dr. Doll has a
beneficial interest. Includes 114,995 shares issuable within 60 days of
June 1, 2000, upon exercise of outstanding options.
(3) Includes 37,109 shares issuable within 60 days of June 1, 2000, upon
exercise of outstanding options.
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<PAGE>
(4) Includes 8,872 shares issuable within 60 days of June 1, 2000, upon
exercise of outstanding options.
(5) Includes 10,000 shares issuable within 60 days of June 1, 2000, upon
exercise of outstanding options.
(6) Includes 29,543 shares issuable within 60 days of June 1, 2000, upon
exercise of outstanding options
(7) Includes 126,562 shares issuable within 60 days of June 1, 2000, upon
exercise of outstanding options.
(8) Includes 11,498 shares issuable within 60 days of June 1, 2000, upon
exercise of outstanding options.
(9) Includes 94,791 shares issuable within 60 days of June 1, 2000, upon
exercise of outstanding options.
(10) Includes 86,995 shares issuable within 60 days of June 1, 2000, upon
exercise of outstanding options.
(11) See notes (2) through (10) above. Includes executive officers not named in
the Summary Compensation Table. Includes 528,551 shares issuable within 60
days of June 1, 2000, upon exercise of outstanding options.
Board Committees, Meetings, and Remuneration
There are currently two committees of the Board: the Audit Committee and
the Compensation Committee ("Committees" or "Committee"). Compensation is paid
and stock options are granted to members of the Audit and Compensation
Committees, all of whom are non-employee Directors. Audit Committee members are
Messrs. Doll, Dutton and Wolf. Compensation Committee members are Messrs. Doll,
Dutton and Scalise.
The functions of the Audit Committee include reviewing the audit plan and
results of each audit with the independent accountants, and reviewing with
management the scope and quality of internal accounting and financial reporting
controls in effect. The functions of the Compensation Committee include
determining remuneration for Executive Officers and Directors, and administering
net.com's stock plans and variable compensation programs.
During the fiscal year ended March 31, 2000 ("Fiscal Year 2000"), the
Board of Directors held ten meetings, the Audit Committee held four meetings,
and the Compensation Committee held four meetings. Each Director attended 75% or
more of the aggregated total number of meetings of the Board of Directors and
the aggregated total number of meetings of the Committees on which he served
during the fiscal year. There are no family relationships among Executive
Officers and/or Directors of net.com.
Each non-employee Board member receives $18,000 per year as compensation
for his annual Board service. In addition, each non-employee Board member
receives $1,000 for attendance at each meeting of the Board and $1,000 for
attendance at a meeting of any standing Committee of the Board for which
compensation is paid and on which the Director serves. Committee chairmen
receive a total fee of $2,000 for attending a meeting of their Committee. The
Chairman of the Board receives $1,000 per Board meeting attended and $3,000 per
month for services rendered. Non-employee Directors are eligible for
reimbursement of expenses for attending Board of Directors meetings or for
attending any Committee meetings. net.com entered into an Employment Agreement
with Walter J. Gill in October 1994. Until October 1999, when the employment
agreement expired, Mr. Gill provided services to net.com for up to an average of
20 hours per month, for which he was compensated $3,230 per month. During the
term of the Employment Agreement, Mr. Gill received employee medical, dental,
group life and disability insurance coverages and his employee stock options
continued to vest. He did not, however, accrue vacation, holiday, or sick leave.
Nor did he receive non-employee Board member compensation or stock options under
the Automatic Option Grant Program of net.com's 1993 Stock Option Plan. As of
the expiration of the employment agreement, Mr. Gill now serves as a
non-employee Board member and is compensated accordingly.
Non-employee Directors are eligible to participate in the Automatic Option
Grant Program ("Automatic Grant Program" or "Program") of the 1993 Stock Option
Plan. This Program authorizes the granting of options to non-employee members of
the Board. At each Annual Meeting, each non-employee Board member who is first
elected or re-elected at that Meeting is automatically granted an option to
purchase 12,000 shares of Common Stock. Each non-employee Board member who is
first elected or appointed other than on the date of an Annual Meeting is
granted an option to purchase shares of Common Stock ("share options") in an
amount prorated based on months of service. The Chairman of the Board receives
an annual grant of an additional 4,000 share options. Each non-employee Board
member who serves on the Audit or Compensation Committee is automatically
granted 4,000 share options annually for each Committee on which he serves. An
additional annual grant of 4,000 share options is made to the Chairmen of the
Audit and/or Compensation Committees. A prorated number of shares is awarded to
each non-employee Board member who is first appointed to either the Audit or
Compensation Committee or to the chairmanship of either of these Committees
other than on the date of an Annual Meeting. The option price per share for each
automatic grant is the fair market value per share of Common Stock on the date
of grant, and is payable in cash or shares of Common Stock or through a cashless
exercise procedure.
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Automatic option grants become exercisable as follows: one-third of the
share options are exercisable beginning one year after the grant date and the
remainder of the share options are exercisable in monthly installments over 24
months following the grant date, provided the optionee remains a member of the
Board. Share options granted to Directors who have served for at least three
years as non-employee Board members and who are at least age 65 at the time of
retirement from the Board become fully exercisable on the date Board service
ends and remain exercisable until the expiration or sooner termination of the
applicable option agreement.
Share options become exercisable immediately upon the occurrence of a
Corporate Transaction and Change in Control (as such terms are defined in the
1993 Stock Option Plan). Also, each share option will be automatically cancelled
upon the occurrence of a Hostile Take-Over (as defined in the 1993 Stock Option
Plan), whether or not the option is then exercisable; in return, the optionee
will be entitled to a cash distribution as provided in the 1993 Stock Option
Plan.
If a non-employee Board member or retired Board member dies, options
exercisable at the time of death may subsequently be exercised by the personal
representative of the optionee's estate or by the person(s) to whom such options
are transferred by either the optionee's will or the laws of inheritance,
provided that any exercise must be within 12 months of the optionee's death.
Pursuant to a policy adopted by the Board in 1992, non-employee Directors
first elected to the Board after the 1992 Annual Meeting must retire at age 72.
All other non-employee Directors must retire at age 75.
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PROPOSAL NO. 2 - RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
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net.com is asking the stockholders to ratify the selection of Deloitte &
Touche LLP as net.com's independent public accountants for the fiscal year
ending March 31, 2001. The affirmative vote of the holders of a majority of the
shares represented and voting at the Annual Meeting will be required to ratify
the selection of Deloitte & Touche LLP.
In the event the stockholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the selection is ratified, the
Board in its discretion may direct the appointment of a different independent
accounting firm at any time during the year if the Board determines that such a
change would be in the best interest of net.com and its stockholders.
Deloitte & Touche LLP has audited net.com's financial statements since
inception. Its representatives are expected to be present at the Annual Meeting,
will have the opportunity to make a statement if they desire to do so, and will
be available to respond to appropriate questions.
The Board of Directors recommends that the stockholders vote FOR the
ratification of the appointment of Deloitte & Touche LLP to serve as net.com's
independent accounting firm for the fiscal year ending March 31, 2001.
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EXECUTIVE COMPENSATION AND RELATED INFORMATION
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Summary of Cash and Certain Other Compensation
The following table sets forth the compensation earned by net.com's Chief
Executive Officer, former Chief Executive Officer and each of net.com's six (6)
other most highly compensated Executive Officers during fiscal 2000 (the "Named
Executive Officers"), four of whom were employed with net.com on March 31, 2000
and two of whom were not, for services rendered in all capacities to net.com for
each of the last three (3) fiscal years.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Restricted Securities All
Name and Fiscal Salary Other Annual Stock Underlying LTIP Other
Principal Position Year ($)(1) Bonus ($) Comp. ($) Awards ($)(2) Options (#) Payouts($) Comp.
------------------ ---- ------ --------- --------- ------------- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Hubert A.J. Whyte, 2000 $337,906(3) $ 0 $ 0 $ 0 600,000 $ 0 $57,275(4)
President and Chief 1999 0 0 0 0 0 0 0
Executive Officer 1998 0 0 0 0 0 0 0
Joseph J. Francesconi, 2000 462,110(6) 0 0 0 25,000 0 40,000(7)
President and Chief 1999 400,202 0 0 0 100,000 251,250 0
Executive Officer (5) 1998 401,999 220,000 0 0 75,000 63,750 0
Raymond E. Peverell, 2000 234,808(8) 103,243(8) 0 0 40,000 89,375(8) 10,703(8)
Senior Vice President, 1999 225,000 0 0 0 20,000 36,875 0
International (5) 1998 225,865 65,000 0 0 35,000 28,750 0
Hans Kramer, 2000 179,104 50,000(9) 0 0 72,750 0 0
Vice President and 1999 148,953 21,525 0 0 0 0 0
General Manager, 1998 169,220 41,000 0 0 0 0 0
Broadband
Craig W. Forbes, 2000 159,821 30,000(10) 0 0 67,500 0 0
Vice President Marketing 1999 131,761 14,000 0 0 0 0 0
And General Manager, 1998 131,548 20,930 0 0 0 0 0
Narrowband
John C. Batty, 2000 73,558 116,250(11) 0 0 150,000 0 0
Senior Vice President and 1999 0 0 0 0 0 0 0
Chief Financial officer 1998 0 0 0 0 0 0 0
G. Michael Schumacher, 2000 259,615(12) 0 0 0 30,000 114,375(12) 2,000(12)
Senior Vice President, 1999 225,000 44,375 0 0 25,000 0 0
Product Operations (5) 1998 225,865 135,000 0 0 35,000 27,500 0
Roger A. Barney, 2000 242,564(13) 0 0 0 50,000 106,750(13) 2,000(13)
Senior Vice President, 1999 180,212 30,250 0 0 25,000 0 0
Corporate Services and 1998 171,123 90,000 0 0 20,000 19,000 0
Assistant Secretary (5)
</TABLE>
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(1) Salary includes amounts deferred pursuant to net.com's 401(k) Plan.
(2) Shares awarded to and purchased by individuals under the 1988 Restricted
Stock Award Plan may not be sold until they vest. All of the shares of
restricted stock held as of March 31, 2000 were awarded in Fiscal Year
1996 (other than for an award of 5,000 shares in Fiscal Year 1995 to Mr.
Schumacher, which are 100% vested) and vest 25% on each anniversary of the
award date over four years. As of March 31, 2000, the number of shares and
value of restricted stock held is as follows: Mr. Francesconi held 20,000
shares valued at $465,000; Mr. Peverell held 6,000 shares valued at
$139,500; and Mr. Barney held 5,000 shares valued at $116,250.
(3) Salary includes $983 of extra CHOICES dollars.
(4) This amount was paid to Mr. Whyte for relocation assistance.
(5) These individuals are no longer employed by net.com.
(6) Salary includes $61,539 of unused vacation and $571 of extra CHOICES
dollars.
(7) This amount was included as part of Mr. Francesconi's severance.
(8) Mr. Peverell resigned from net.com effective April 1, 2000. Under the
terms of his employment termination agreement, Mr. Peverell receives his
salary at the time of his termination for a period of up to one year from
his termination date. He also received additional payments reflected in
the Summary Compensation Table, as follows: Salary includes $25,583 of
unused vacation; Bonus consists of commissions earned during net.com's
last fiscal year; LTIP Payout consists of amounts accrued prior to Fiscal
Year 2000 and paid out upon severance as part of Mr. Peverell's employment
termination agreement; and All Other Compensation consists of payment for
medical and dental insurance.
(9) Bonus consists of special retention bonuses.
(10) Bonus consists of a special retention bonus.
(11) Bonus consists of $101,250 guaranteed bonus for Fiscal Year 2000 and
$15,000 special retention bonus.
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(12) Mr. Schumacher resigned from net.com effective July 30, 1999. Under the
terms of his employment termination agreement, Mr. Schumacher receives his
salary at the time of his termination for a period of up to one year from
his termination date. He also received additional payments reflected in
the Summary Compensation Table, as follows: Salary includes $34,615 of
unused vacation; LTIP Payout consists of amounts accrued prior to Fiscal
Year 2000 and paid out upon severance as part of Mr. Schumacher's
employment termination agreement; and All Other Compensation consists of
payment for tax planning. Mr. Schumacher also receives continuation of
medical, dental, life and disability insurance during the period of salary
continuance.
(13) Mr. Barney resigned from net.com effective July 30, 1999. Under the terms
of his employment termination agreement, Mr. Barney receives his salary at
the time of his termination for a period of up to one year from his
termination date. He also received additional payments reflected in the
Summary Compensation Table, as follows: Salary includes $32,308 of unused
vacation and $256 of extra CHOICES dollars; LTIP Payout consists of
amounts accrued prior to Fiscal Year 2000 and paid out upon severance as
part of Mr. Barney's employment termination agreement; and All Other
Compensation consists of payment for tax planning. Mr. Barney also
receives continuation of medical, dental, life and disability insurance
during the period of salary continuance and immediate vesting on his
employment termination date of all non-qualified stock options and all
shares of restricted stock.
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STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table shows all grants of options to the Named Executive
Officers in Fiscal Year 2000 under the 1993 Option Plan. Pursuant to SEC rules,
the table also shows the value of options granted at the end of the option terms
(ten years) if the stock price were to appreciate annually by 5% and 10%,
respectively. There is no assurance that the stock price will appreciate at the
rates shown in the table. The table also indicates that if the stock price does
not appreciate, there will be no increase in the potential realizable value of
the options granted.
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
-------------------------------------------------------- Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Options Price Appreciation for
Underlying Granted to Exercise or Option Term ($)
Options Employees in Base Price Expiration ---------------------------
Name Granted Fiscal Year ($/Share) Date 5% 10%
---- ---------- ------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Hubert A.J. Whyte 350,000 10.0100% $ 9.4375 06-01-09 $2,077,318 $5,264,331
250,000 7.1500 8.8125 08-10-09 1,385,533 3,511,214
Joseph J. Francesconi 25,000 0.7100 7.5000 04-19-09 117,918 298,827
Raymond E. Peverell 30,000 0.8600 7.5000 04-19-09 141,501 358,592
10,000 0.2900 8.8125 08-10-09 55,421 140,449
Hans Kramer 4,350 0.1200 7.5000 04-19-09 20,518 51,996
13,400 0.3800 10.0625 06-24-09 84,799 214,896
10,000 0.2900 8.8125 08-10-09 55,421 140,449
15,000 0.4300 9.8750 10-18-09 93,155 236,073
30,000 0.8600 10.1875 03-29-10 192,206 487,088
Craig W. Forbes 2,500 0.0700 7.5000 04-19-09 11,792 29,883
25,000 0.7100 8.8125 08-10-09 138,553 351,121
40,000 1.1400 10.1875 03-29-10 256,275 649,450
John C. Batty 150,000 4.2900 9.9375 01-14-10 937,446 2,375,672
G. Michael Schumacher 30,000 0.8600 7.5000 04-19-09 141,501 358,592
Roger A. Barney 50,000 1.4300 7.5000 04-19-09 235,835 597,653
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning the exercise of
options during Fiscal Year 2000 and unexercised options held as of the end of
such year by the Named Executive Officers.
<TABLE>
<CAPTION>
Number of Securities Value Of Unexercised
Underlying Unexercised In-The-Money
Options at FY-End (#) Options at FY-End ($)
--------------------------- ----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Hubert A.J. Whyte 0 600,000 $ 0 $493,750
Joseph J. Francesconi 545,000 0 568,750 0
Raymond E. Peverell 108,019 66,981 16,125 86,875
Hans Kramer 22,504 79,846 13,250 24,625
Craig W. Forbes 7,025 74,249 2,338 35,938
John C. Batty 0 150,000 0 9,375
G. Michael Schumacher 104,269 61,981 0 75,000
Roger A. Barney 161,487 0 150,711 0
</TABLE>
9
<PAGE>
COMPENSATION COMMITTEE REPORT
Introduction
net.com's compensation programs are administered by the Compensation
Committee of the Board of Directors (the "Committee"). The Committee approves
all compensation, including stock options, for the CEO and other executive
officers, administers all net.com stock option plans, and approves all variable,
incentive or other such compensation programs. The Committee is composed
entirely of outside Directors who have never served as executive officers of
net.com.
Compensation Philosophy And Objectives
The Committee operates under a compensation philosophy designed to attract
and retain qualified executive officers and other key employees critical to
net.com's success. Part of the Committee's philosophy is to reward performance.
The Committee also considers the competitive environment for executive and other
employees. Incentive and other compensation programs for all employees are
performance-based with a focus on both individual and company performance. For
executive officers, compensation amounts are weighted heavily on company rather
than individual performance and require net.com to achieve designated financial
targets.
With this philosophy as a guide, net.com's executive compensation programs
are designed to meet the following objectives:
1. Compensation should aid in attracting and retaining executive
officers with competitive total compensation packages that take into
account compensation practices of competitive companies.
2. Compensation should align the financial interests of executive
officers with those of shareholders by providing equity-based,
long-term incentives.
3. Compensation should reflect corporate wide performance. Executive
officers should have a substantial portion of their variable
compensation be dependent upon company financial performance and
meeting other key objectives for the success of net.com.
4. Compensation should reflect individual performance. Those executive
officers who meet identified goals and objectives and perform at a
higher level will be rewarded accordingly. Executives who fail to
meet identified goals and objectives will have that fact reflected
in their compensation.
Compensation Factors
There are three components to net.com's executive officer compensation: 1)
base salary; 2) incentive compensation; and 3) long-term equity-based
incentives.
In setting the compensation levels of the Chief Executive Officer, the
Committee works with net.com's Human Resources Department which retains outside
consultants to provide them with compensation surveys and other competitive
data. Competitive data focuses on net.com's direct competitors as well as
networking companies generally in the Silicon Valley where net.com is
headquartered. In setting the compensation for other executive officers, the CEO
makes recommendations to the Committee supported by competitive and other
information provided by the Human Resources Department. The Committee makes all
final decisions regarding executive compensation and acts in its sole
discretion.
1. Base Salary. Base salary is established primarily by reference to
competitive salaries for comparable positions at companies within the networking
industry located in Silicon Valley. The base salary for executive officers is
targeted at the sixtieth (60th) percentile based upon competitive compensation
practices. The Committee believes that net.com's most direct competitors for
executive talent are not necessarily the companies that net.com uses in a
comparison for stockholder returns. As a result, the compensation comparison
group is not the same as the industry group index in the Stock Performance Graph
on page 12 of this Proxy Statement.
10
<PAGE>
2. Incentive Compensation. net.com's executive officers along with all
employees are eligible to participate in the Incentive Compensation program.
Awards to executive officers under this program are based primarily on
achievement of corporate financial performance objectives. If the financial
performance objectives are met, then individual performance is also considered.
Individual performance is measured against objectives established early in the
fiscal year. These objectives are reviewed periodically throughout the fiscal
year and may be modified or new objectives added if the CEO or the Committee
determines that changes are in the best interest for achieving overall company
objectives. In Fiscal Year 2000, the Committee measured net.com's performance
and found that objectives for operating income and revenue were not met. As a
result of not meeting required objectives, no incentive compensation was paid
out to executive officers for Fiscal Year 2000.
3. Long-term variable compensation. As originally designed, net.com's Long
Term Variable Compensation Plan ("LTVC") was intended to promote retention of
executive officers and focus them on objectives that span more than one year.
Under the LTVC, executive officers were eligible for annual awards of up to
one-half of the amount provided under the Incentive Compensation Plan described
above, or an amount determined at the discretion of the Committee. So long as
the executive officer remained an employee, the officer would be paid LTVC in
four equal annual installments beginning the year after the award. Because no
Incentive compensation was awarded for Fiscal Year 2000, no Long-Term Variable
Compensation was awarded.
At the April 18, 2000 Compensation Committee meeting, the Committee
approved new compensation programs for executive officers and all employees
based upon analysis of competitive and other factors. Executive compensation
will now be made up of base salary, incentive compensation and stock options.
The Long Term Variable Compensation Plan was viewed as ineffective in achieving
its objectives and is no longer in effect.
Equity Incentives. net.com's 1993 Stock Option Plan provides executive
officers with incentives to maximize stockholder value and manage net.com from
the viewpoint of our shareholders by awarding an equity stake in the company.
Awards under these Plans can take the form of stock options, restricted stock or
stock appreciation rights. No restricted stock or stock appreciation rights
awards were made in Fiscal Year 2000.
The Committee has established general guidelines for making option grants
to executive officers based upon the executive's position within net.com and the
executive's existing holdings of vested and unvested options. The Committee does
not strictly adhere to these guidelines, however, and may vary the size of the
option grant made to an Executive Officer as circumstances warrant.
During Fiscal Year 2000, the Committee granted options to all Messrs.
Batty, Kramer, Forbes and Peverell. All options were granted with an exercise
price equal to the market value on the grant date. The option grants will be of
no value until: 1) the option vests; and 2) the market price for net.com Common
Stock exceeds the market price on the grant date. Options vest in periodic
installments over a 4-year period contingent upon the executive officer's
continued employment with net.com. The vesting period facilitates retention and
the grant price aligns that portion of the executive's compensation with the
return realized by stockholders. All of net.com's executive officers hold stock
options.
CEO Compensation
Hubert A.J. Whyte became President, Chief Executive Officer and a Director
of net.com on June 1, 1999. In addition to his base salary, Mr. Whyte had been
guaranteed variable compensation for Fiscal Year 2000 of $167,000. Because
net.com failed to meet its corporate performance objectives for Fiscal Year
2000, Mr. Whyte recommended and the Committee agreed that Mr. Whyte would be
paid $55,000 of the total guaranteed variable compensation with the remaining
$112,000 to be paid at the end of Fiscal Year 2001 if net.com meets its
financial objectives. The payment of the $112,000 would be in addition to any
other incentive compensation awarded Mr. Whyte. In line with all other executive
officers, Mr. Whyte received no award of Incentive Compensation or Long Term
Variable Compensation in Fiscal Year 2000. Mr. Whyte was granted 600,000 share
options upon joining net.com. 250,000 of those shares were subject to
shareholder approval which was given at the August 10, 1999 Annual Stockholders
meeting. He received no additional stock option grants during Fiscal Year 2000.
Vesting for the share options is over a 4-year period with 25% of the options
granted vesting one year after grant date and the remaining 75% vesting prorata
monthly.
11
<PAGE>
Mr. Whyte received relocation assistance for his move to the Bay Area. As
part of that assistance, net.com purchased Mr. Whyte's former residence. Due to
market fluctuations, net.com was unable to sell his former residence for the
purchase price. The difference between what was paid by net.com to Mr. Whyte for
the purchase of his residence and what the residence was later sold for became
income to Mr. Whyte.
Joseph J. Francesconi was President, Chief Executive Officer and a
Director of net.com until June 1, 1999. Until that time, Mr. Francesconi
received his annual salary. Under the terms of Mr. Francesconi's employment
termination agreement, Mr. Francesconi receives his salary at the time of his
termination for a period of up to three years from his termination date. He also
received additional payments reflected in the Summary Compensation Table along
with continuation of medical, dental, life and disability insurance during the
period of salary continuance and immediate vesting on his employment termination
date of all non-qualified stock options and all shares of restricted stock.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code (the "Code") limits net.com to
a deduction for federal income tax purposes of no more than $1 million of
compensation paid to Executive Officers named in the Summary Compensation Table
in a taxable year. Compensation above $1 million may be deducted if it is
"performance based" within the meaning of the Code.
The Committee believes that stock options granted to net.com's Executive
Officers with an exercise price equal to or greater than the fair market value
of net.com's Common Stock on the date of grant will qualify for the
performance-based compensation to the deduction limit. The Committee does not
expect that cash compensation to any Named Executive Officer, together with
other compensation paid to such Executive Officer in Fiscal Year 2000 that is
not exempt from the limitations of Section 162(m), will exceed $1 million.
We conclude our report with the acknowledgment that no member of the
Committee is a former or current Executive Officer or employee of net.com or any
of its subsidiaries.
Compensation Committee Members
Dixon R. Doll, Chairman
James K. Dutton
George M. Scalise
12
<PAGE>
Stock Performance Graph
The graph depicted below shows net.com's stock price as an index assuming
$100 invested over the five year period beginning on March 31, 1995, along with
the composite prices of companies listed in the S&P 500 Index and H&Q Technology
Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
net.com, S&P 500 INDEX &
H&Q TECHNOLOGY INDEX
[The following table was depicted as a line chart in the printed material.]
Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00
--------------------------------------------------------------------------------
net.com $100 $120 $ 53 $ 64 $ 35 $ 39
S & P 500 $100 $132 $158 $234 $278 $327
H & Q TECHNOLOGY INDEX $100 $136 $158 $234 $330 $676
--------------------------------------------------------------------------------
The graph assumes that $100 is invested on March 31, 1995 in net.com stock, the
S&P 500 Index, and the H&Q Technology Industry Index and that all dividends are
reinvested. Stockholder returns over the indicated period should not be
considered indicative of future stockholder returns.
Employment Contracts
Each of net.com's executive officers, including Mr. Whyte, has an
agreement ("Change of Control Vesting Agreement") with net.com that provides for
immediate vesting of all the executive officer's outstanding stock options in
the event of the executive officer's termination within one year from a
Corporate Transaction or Change of Control as those terms are defined in
net.com's 1993 Stock Option Plan. No other compensation is provided for under
the terms of these agreements upon a Corporate Transaction or a Change of
Control. For Mr. Whyte, this Change of Control Vesting Agreement supercedes an
agreement previously signed wherein upon a Change of Control, Corporate
Transaction, or other involuntary termination for reasons other than cause, Mr.
Whyte would
13
<PAGE>
have received for two years after his termination, base salary continuance,
variable compensation paid at the mid point of the range, medical, dental, life
and disability insurance, and continued vesting of stock options and restricted
stock during salary continuance.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Under the securities laws of the United States, net.com's Directors,
executive officers and any persons holding more than 10% of net.com's Common
Stock are required to report initial ownership of the Common Stock and any
subsequent changes in ownership to the SEC. Specific due dates have been
established by the SEC and net.com is required to disclose in this Proxy
Statement any failure to file by these dates. Based upon (i) the copies of
Section 16(a) reports which net.com received from such persons for their Fiscal
Year 2000 transactions, and (ii) the written representations received from one
or more of such persons, net.com has concluded that none of net.com's Directors
or Executive Officers failed to file timely Forms 4 or Forms 5 regarding changes
in ownership.
--------------------------------------------------------------------------------
OTHER BUSINESS
--------------------------------------------------------------------------------
The Board of Directors knows of no other business that will be presented
for consideration at the Annual Meeting. If other matters are properly brought
before the Annual Meeting, however, it is the intention of the persons named in
the accompanying Proxy Card to vote the shares represented thereby on such
matters in accordance with their best judgment.
--------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
--------------------------------------------------------------------------------
Proposals of stockholders that are intended to be presented at net.com's
Annual Meeting of Stockholders to be held in 2001 must be received by net.com no
later than March 15, 2001 in order to be included, if appropriate, in the Proxy
Statement and Proxy relating to that Meeting.
In addition, pursuant to net.com's Bylaws, in order for any stockholder to
propose any business (including nominations for Director) at an Annual Meeting,
such stockholder is required to provide net.com with advance written notice at
least 60 days prior to such meeting (no later than June 15, 2001 with respect to
the Annual Meeting to be held August 14, 2001). The notice must contain certain
information regarding such stockholder (and any nominee for Director), any
arrangements between the stockholder and the nominee, and any other information
regarding such nominee or each matter of business proposed by the stockholder
that would be required to be disclosed in a Proxy Statement filed with the SEC
for solicitations of Proxies to approve such proposed business.
Any such proposals or notices should be directed to the attention of the
Corporate Secretary, net.com, 6530 Paseo Padre Parkway in Fremont, California
94555.
By order of the Board of Directors,
/s/ HUBERT A.J. WHYTE
HUBERT A.J. WHYTE
July 10, 2000 President and Chief Executive Officer
14
<PAGE>
PROXY
NETWORK EQUIPMENT TECHNOLOGIES, INC.
6530 Paseo Padre Parkway, Fremont, CA 94555
This Proxy is Solicited on Behalf of the Board of Directors of
Network Equipment Technologies, Inc.
The undersigned revokes all previous proxies, acknowledges receipt of the Notice
of Annual Meeting of Stockholders and the Proxy Statement and appoints John C.
Batty and David N. Wagenseller, and each of them, the Proxy of the undersigned,
with full power of substitution, to vote all shares of Common Stock of Network
Equipment Technologies, Inc. (the "Company") held of record by the undersigned
on June 9, 2000, either on his or her own behalf or on behalf of any entity or
entities, at the Annual Meeting of Stockholders of the Company to be held on
Tuesday, August 8, 2000, at 10:00 a.m. local time at the principal offices of
the Company, 6530 Paseo Padre Parkway, Fremont, California, and at any
adjournment or postponement thereof, with the same force and effect as the
undersigned might or could do if personally present. The shares represented by
this Proxy shall be voted in the manner set forth on the reverse side.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
This Proxy, when properly executed, will be voted in the manner directed herein.
This Proxy will be voted FOR the proposals if no specification is made.
1. To elect Walter J. Gill and Hubert A. J. Whyte as Class I Directors to
serve for the term specified in the accompanying Proxy Statement and until
their successors are elected and qualified.
FOR WITHHELD
Walter J. Gill ____________________ _____________________
Hubert A. J. Whyte ____________________ _____________________
2. To ratify the appointment of Deloitte & Touche LLP to serve as the
Company's independent accountants for the fiscal year ending March 31,
2001.
|_| FOR |_| AGAINST |_| ABSTAIN
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Please sign exactly as your name(s) is (are) shown on the share certificate to
which the Proxy applies. When shares are held by joint tenants, both should
sign. When signing as an attorney, executor, administrator, trustee or guardian,
please give full title, as such. If a corporation, please sign in full corporate
name by the President or other authorized officer. If a partnership, please sign
in the partnership name by an authorized person.
Dated:_________________________, 2000
___________________________________ Please mark, sign, date and
Signature return the proxy card promptly
using the enclosed envelope
___________________________________
Signature if held jointly
