<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] 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 Rule 14a-11(c) or Rule 14a-12
FastComm Communications Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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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
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statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(4) Date filed:
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<PAGE> 2
[FASTCOMM LOGO]
FASTCOMM COMMUNICATIONS CORPORATION
45472 HOLIDAY DRIVE
STERLING, VA 20166
September 30, 1999
Dear Fellow Shareholder:
Thank you for your interest, support and patience this past year, as
FastComm completed its reorganization. As the company's largest shareholder, I
have watched with concern as our market value deteriorated and as our resources
became consumed with our legal battles. I can tell you that our company is now
moving into what I believe will be a new and productive chapter in our
development. All of us at FastComm are extremely happy to have these
distractions behind us so that we can be 100-percent dedicated to the
development and sale of our product lines. There is a palpable sense of
excitement among our staff, and we're moving forward with a renewed sense of
purpose and direction.
Although FastComm operates in the high-tech market arena, I'm returning to
that low-tech but effective and personal form of communication -- the
letter -- to tell you, as simply and concisely as possible, what this company is
all about. This letter is organized into three parts: our recent history, our
present position, and our plans for the future.
RECENT HISTORY
Before the onset of the lawsuit brought by a former executive of the
company, FastComm had been making good financial progress. From fiscal 1995 to
fiscal 1997, our revenues had grown from $4.1 million to $11.1 million, and our
net loss per share had dropped from $0.49 to $0.06. During this timeframe, the
company reported a string of three successive profitable quarters. We believed
we were close to achieving an annual net profit and that we had the potential
for dramatic revenue growth.
Then in March 1997, during the final quarter of our 1997 fiscal year, the
lawsuit was filed, and we entered a legal process that would last more than two
years. The effect that this situation had on our company was devastating in
financial, operation and human terms. The culmination of the process was a
verdict of $1.2 million against the company, plus enormous legal fees incurred
for our defense. We did not have the funds available to pay this judgment and to
continue to operate our business. In June 1998, in response to the attempted
seizure of our bank account by the judgment creditor in this case, we were
forced into a Chapter 11 bankruptcy filing. We had no alternative. The Company
immediately began implementing a reorganization plan aimed at getting us out of
Chapter 11 as quickly as possible. As a result of these problems, our stock was
delisted from the NASDAQ National Market System in the same month as the
bankruptcy filing. There were some customers who wanted to work with us but were
precluded from doing so as a result of the Chapter 11 "label." The entire
process was extremely draining, plus it hampered our employee recruitment
efforts. Further, it forced FastComm to once again incur substantial legal and
professional fees.
<PAGE> 3
Finally, in late March of this year, we reached the turning point, emerging
from Chapter 11, paying our creditors 100 percent on an accelerated schedule
with interest, settling the pending litigation, and preserving the positions of
our shareholders without the massive dilution usually associated with bankruptcy
cases. Most importantly, we were able to begin the process of rebuilding
relationships with customers and partners, which had suffered as a result of
this difficult situation. In addition to putting the bankruptcy behind us, just
a few days ago the SEC announced that we have settled all issues with them
dating back as far as 1993 and no more recent that 1994 and we reached this
settlement without having to pay any fines. In short, as I write this letter, I
and the others who work for your company feel for the first time in a long time
that the noose has been released from our collective necks. Finally, we can
focus all our attention on the business of selling our products and building our
reputation as a premier telecommunications equipment supplier.
OUR PRESENT POSITION
The technology with which we are engaged is quite complex and, to some,
esoteric. So, I want to discuss briefly and in plain English, what our products
are, and what they do.
From a broad perspective, we're a telecommunications company, and all our
products fall under the heading of enterprise networking products. In basic
terms, this means that our products allow data information in the form of voice,
fax, data and video to be transported within and across networks. For example,
one of our customers, Amadeus, has more than 8,000 geographically dispersed
offices, each of which maintains its own local area network (LAN). Amadeus uses
our router products to transmit information from numerous travel reservation
terminals to the host reservation mainframe computers of various airlines and
hotels.
FastComm offers three categories of enterprise-wide networking products:
data-only products, convergence products, and data center products. Here is a
brief synopsis of all three product types.
- Data-only products. These include our routers, such as our WebRouter(R),
a low-cost Internet Protocol (IP) Internet access platform, as well as
Local Area Network and Legacy Frame Relay Access Devices (known as FRADs).
Data-only products have historically comprised nearly 100 percent of our
total sales, and we have a number of well established customers who buy
these products. Industry forecasts indicate that market growth in this
category will be in the range of 30-40% per year globally. Our competitors
include Cisco, Motorola and 3Com, but we believe our products outperform
our competitors' in such areas as ease of use, price, and special
capabilities. Also, we'll provide customized software on a fast turnaround
basis while our competitors, given their size, generally won't.
- Convergence products. Convergence products support the transmission of
voice, data, video and fax over the internet (known as Voice Over Internet
Protocol, or VOIP) as well as over frame relay ("VOFR"). These products
are a new part of our repertoire, and include the GlobalStack(TM) high-end
central site convergence router and the MetroLAN(TM), a branch office
voice/data router. We began shipping convergence products during the last
quarter. Our key competitors include ACT Networks and Motorola. We think
the advantages of our convergence products over those of the competition
include price, performance and ease of use. We anticipate strong growth in
this market category and expect that convergence products will contribute
a growing portion of our revenue.
- Data center products. This category includes our ChanlComm(R) product
line, which replaces complex and expensive front end processors in IBM
mainframe computer networks. We formally entered the data center product
market in April 1999 with our acquisition of KG Data Systems. These
products are basically networking devices that connect Wide Area Networks
(WANs) directly to mainframe computers, improving the efficiency of
mainframes and dramatically reducing operating costs. We began shipping
these products in the fourth quarter of fiscal 1999 (that is, the
three-month period ended April 30, 1999), and during the first quarter of
this year, we announced a new ChanlComm product that will expand port
capacity from 16 to 256, which provides us a clear competitive
differentiator with others who market to this space, specifically IBM and
Cisco. We believe that our data center products are superior to those of
the competition by virtue of their high performance, ease of use, and
lower cost of ownership. Because these are entirely new types of product,
we expect there will be an incubation period during which customers begin
to see the advantages of the ChanlComm
<PAGE> 4
solution. We are anticipating that as our products become known and
establish a track record in the marketplace, the sales cycle should
shorten and revenues should escalate. We believe our annual growth in this
market will be substantial, and within a year or so, these high-margin
products could contribute more than 50% of our total sales, and show very
strong growth in the succeeding years.
Based on the feedback we've heard from our customers, our products are
viewed as competitive, high-quality, versatile and cost-effective. Now that we
have a complete arsenal of networking tools that are being shipped (with the
exception of the newest ChanlComm product, which we plan to begin shipping later
this year) we can invest additional staff and financial resources in the sales
and marketing effort. These efforts include the launch of new advertising
programs, attending major industry trade shows, and expanding our direct and
indirect sales effort. Although we can and do sell directly to some of the
larger customers, the majority of our sales activity is through distributors,
both in the U.S. and in a number of foreign countries.
My optimism about the company's ability to rebound from the legal battles
and bankruptcy process is reflected in the financial results from the first
quarter of our 2000 fiscal year, which we reported in mid-September. That was
the first complete reporting period since the conclusion of the reorganization.
During that quarter, revenues increased 55% compared to last year's first
quarter, our loss-per-share decreased from $0.16 to $0.05, and our gross margin
improved from 46% to 55%.
THE FUTURE
My team at FastComm knows that I have extremely ambitious goals for the
company. They also know I have a major personal stake in the business. I own
more than 7% of the company's outstanding shares; Ken Bloom, formerly President
of KG Data Systems and now Vice President of our mainframe networking division,
owns more than 4% of the stock. I am please to note that employees and friends
of the Company have demonstrated their commitment to FastComm by investing over
$1 million in our company.
Now that the issues of the past are behind us, I'm often asked, "What are
the signs that we, as investors, should look for to determine if the Company is
moving in the right direction?" Here are some of them:
- Increase sales based upon the convergence products and data center
product lines
- Begin shipping and installing the upgraded version of ChanlComm, and sign
OEM agreements with key data center sales and installation companies
- Expand our direct sales organization
- Win several major enterprise network contracts
- Expand international revenues with quality distributors, particularly in
South America, Asia and Europe
- Add feature sets to products to enhance revenues, and improve margins
through a reduction of product costs
Investors also ask me, "What news releases are you going to issue?" If we
are successful in achieving our near term goals, you should see a stream of
releases related to the items just listed, as well as other significant
developments. Furthermore, as we achieve these milestones, we should also see an
improving income statement and balance sheet. Specifically, we want dramatic
top-line improvements and we want to achieve net-profitability and positive cash
flow. On the balance sheet side, we want to build steadily increasing cash and
short-term asset positions. Our $1 million private placement, announced in July,
included the issuance of warrants; those, combined with other existing
unexercised warrants and stock options, could generate up to an additional $7.4
million, which would further strengthen our capital position and give us the
much greater resources we need to grow the business even more aggressively. We
also want to regain our NASDAQ listing, initially on the SmallCap Market and
eventually back to the National Market System.
<PAGE> 5
I believe that time will show that you our shareholders, have made a wise
investment, and I plan to continue to share the results of our progress with you
through various means of communications, from conference calls to letters to
meetings. Although FastComm may be known as the "little guy" fighting in the
trenches with the Ciscos and 3Coms of the world, our products and their
advantages are being discovered by more and more distributors and customers. We
do not need to win the largest market share to evidence a significant financial
turnaround that we hope will, in turn, rebuild our market value. I am passionate
about our vision and excited about our future -- and our employees who, in the
final analysis are FastComm, share my enthusiasm. I want to thank them for their
support during this difficult time. We are now dedicated to rebuilding value,
and we are not looking back.
Sincerely,
/s/ PETER C. MADSEN
Peter C. Madsen
President and Chief Executive Officer
<PAGE> 6
FASTCOMM COMMUNICATIONS CORPORATION
45472 HOLIDAY DRIVE
STERLING, VA 20166
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 28, 1999
To The Shareholders Of
FastComm Communications Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of FastComm
Communications Corporation, a Virginia corporation (the "Company" or
"FastComm"), will be held on October 28, 1999, at 4:30 p.m. local time, at the
Holiday Inn, Holiday Drive, Sterling, Virginia for the following purposes:
1. To elect four (4) directors of the Company;
2. To consider and act upon a proposal to approve a 1999 Stock Option Plan;
and
3. To ratify the appointment of BDO Seidman, LLP as the independent
auditors for the Company for the fiscal year ending April 30, 2000;
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
All shareholders are cordially invited to attend the meeting, although only
shareholders of record at the close of business on September 10, 1999, are
entitled to notice of and to vote at the meeting.
Shares can be voted at the meeting only if the holder is present or
represented by Proxy. If you do not expect to attend the meeting, you are urged
to date and sign the enclosed proxy and return it in the accompanying envelope
promptly, so that your shares may be voted in accordance with your instructions
and the presence of a quorum may be assured. The prompt return of your signed
proxy, regardless of the number of shares you hold, will aid the Company in
reducing the expense of additional proxy solicitation. The grant of your proxy
does not affect your right to vote in person in the event you attend the
meeting.
By Order of the Board of Directors
MARK H. RAFFERTY,
Secretary
Sterling, Virginia
Dated: September 30, 1999
YOUR VOTE IS IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. HOWEVER,
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE REQUESTED TO COMPLETE, SIGN AND DATE
THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED, SELF-ADDRESSED
STAMPED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF
YOU ATTEND THE ANNUAL MEETING AND SO DESIRE, YOU MAY REVOKE YOUR PROXY AND VOTE
YOUR SHARES IN PERSON.
<PAGE> 7
FASTCOMM COMMUNICATIONS CORPORATION
45472 HOLIDAY DRIVE
STERLING, VIRGINIA 20166
PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by FastComm Communications Corporation, a Virginia corporation (the
"Company" or "FastComm"), for use at the Annual Meeting of Shareholders of the
Company to be held on October 28, 1999, and at any and all adjournments of such
meeting. The Company will bear the cost of this solicitation of proxies. Such
costs are expected to be nominal.
This Proxy Statement and the accompanying proxy card are being mailed to
shareholders commencing on or about September 30, 1999.
RECORD DATE; VOTING SECURITIES; QUORUM; BROKER NON-VOTES.
September 10, 1999, has been fixed as the record date for determination of
shareholders entitled to notice of and to vote at the meeting or any adjournment
thereof. At the close of business on that date, 17,555,160 Common Shares, par
value $.01 per share, of the Company were issued and outstanding. Each Common
Share is entitled to one vote on any matter that properly comes before the
meeting. Cumulative voting is not permitted with respect to the election of
directors. The presence in person or by proxy of the holders of at least a
majority of the Common Shares entitled to be voted at the meeting is required to
constitute a quorum. Shares which are present, or represented by a proxy, at the
Annual Meeting will be counted for quorum purposes regardless of whether the
holder of the shares or proxy fails to specify a choice with respect to any or
all of the proposals or whether a broker with discretionary authority declines
to exercise its discretionary voting authority with respect to any or all of the
proposals (known as "non-votes").
VOTING AND SOLICITATION
Pursuant to regulations of the Securities and Exchange Commission, boxes
and a clear means are provided on the accompanying proxy card for shareholders
to mark if they wish to withhold authority to vote for one or more nominees for
director, or to vote against or abstain on the other proposal. With regard to
Proposal I, election of directors, applicable Virginia law provides that, if a
quorum is present, directors are elected by a plurality of the votes cast; that
is, the nominee receiving the most votes FOR is elected. With regard to
Proposals II and III, under applicable Virginia law abstentions as well as
non-votes will not be counted in determining votes cast because Virginia law
provides that, if a quorum is present, action on a matter (other than election
of directors) is approved if the votes cast in favor exceed the votes cast
against. Therefore, abstentions and non-voters have no effect on the votes on
this proposal.
REVOCABILITY OF PROXIES
Shareholders who execute proxies retain the right to revoke them at any
time by giving written notice of revocation to the Secretary of the Company.
Unless so revoked, the shares represented by signed proxies solicited by the
Company will be voted in accordance with the instructions given therein by the
shareholders. Any signed proxy not specifying to the contrary will be voted FOR
the election of the Board of Directors' nominees as directors referred to in
Proposal I and, FOR the ratification of the appointment of BDO Seidman, LLP as
independent auditors for the Company for the fiscal year 2000 referred to in
Proposal III and for Proposal II. So far as the Company's management is aware,
such matters are the only matters to be acted on at the meeting. As to any other
matter which may properly come before the meeting or any adjournment thereof,
the person named in the accompanying proxy card will vote thereon in accordance
with their best judgment.
2
<PAGE> 8
SOLICITATION
The Company will bear the entire cost of proxy solicitation, including the
costs of preparing, assembling, printing and mailing this Proxy Statement, the
proxy card and any additional material furnished to shareholders. Copies of the
solicitation materials will be furnished to brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others, to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of shares for their expenses in forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of The Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
3
<PAGE> 9
STOCK OWNERSHIP OF MANAGEMENT
AND PRINCIPAL SHAREHOLDERS
At September 10, 1999, there were 17,555,160 shares of Common Stock of the
Company issued and outstanding. As of such date, options to purchase 2,256,881
shares of common Stock were outstanding.
Each holder of shares of Common Stock, but not holders of unexercised
options, is entitled to one vote per share on each matter, which may be
presented at a meeting of shareholders. Cumulative voting is not allowed. Prior
to June 9, 1998, FastComm shares were traded publicly on the NASDAQ National
Market under the symbol FSCX. On June 9, 1998, the Company's shares were
delisted from the National Market System. Effective June 16, 1998, the company's
shares have been quoted on the OTC Bulletin Board under the same symbol.
The following table sets forth information regarding ownership of Common
Stock of the Company at July 8, 1999, by each person who is known by management
of the Company to own beneficially more than five percent of the Common stock
(setting forth the address of each such person), by each director, by the Named
Executive Officers of the Company and by all directors and Named Executive
Officers of the Company as a group. Shares issueable on exercise of options
exercisable within 60 days are deemed to be outstanding for the purpose of
computing the percentage ownership of persons beneficially owning such options,
but have not been deemed to be outstanding for the purpose of computing the
percentage ownership of any other person. Except as otherwise indicated, the
persons indicated below have sole voting and investment power with respect to
the shares indicated as owned by them except as otherwise stated in the notes to
the table.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS(8)
------------------------------------ ----------------------- -------------------
<S> <C> <C>
Peter C. Madsen(1)
Sterling, Virginia..................................... 1,278,220 7.75%
Mark H. Rafferty(1)
Centerville, Virginia.................................. 143,420(2) 0.86
Edward R. Olson(1)
Reston, Virginia....................................... 36,667(3) 0.22
Thomas G. Amon(1)
New York, New York..................................... 33,317(4) 0.20
William A Grant
Ashburn, Virginia...................................... 91,666(5) 0.55
Thomas Colligan
Reston, Virginia....................................... 501,668(6) 3.04
Safa Alkateb
Sterling, Virginia..................................... 37,055(7) 0.22
Kenneth Bloom
Norwalk, Connecticut................................... 719,149 4.36
All executive officers and directors as as a group
(including 8 persons named above)...................... 3,340,158 20.24
</TABLE>
- ---------------
(1) Director
(2) Gives effect to 100,000 options owned by Mr. Rafferty exercisable within 60
days.
(3) Gives effect to 36,667 options owned by Mr. Olson exercisable within 60
days.
(4) Shares are owned by the Thomas G. Amon Pension and Profit Sharing Plans.
Gives effect to 26,667 options owned by Amon exercisable within 60 days.
(5) Gives effect to 54,999 options owned by Mr. Grant exercisable within 60
days.
(6) Gives effect to 41,666 options owned by Mr. Colligan exercisable within 60
days.
(7) Gives effect to 35,555 options owned by Mr. Alketab exercisable within 60
days.
(8) Based upon shares outstanding at July 8, 1999.
The Company is unaware of any arrangement the operation of which could at a
subsequent date result in a change in control of the Company.
4
<PAGE> 10
PROPOSAL I
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
Each of the four persons listed below has been nominated for election as a
director of the Company to serve until the next Annual Meeting of Shareholders,
or until a successor has been duly elected and qualified. If so authorized, the
persons named in the accompanying proxy will vote for the election of each
nominee. Shareholders who do not wish their shares voted for a particular
nominee may so indicate by striking that nominee's name as instructed on the
proxy card.
The Company has been informed that each nominee is willing to serve as a
director. If any one or more of the nominees should become unavailable to serve
at the time of the Annual Meeting, the shares represented by Proxy will be voted
for the remaining nominees and for any substitute nominees designated by the
incumbent Board of Directors. If no substitute is designated, the size of the
Board may be reduced or votes will be cast according to the judgment in such
matters of the persons voting the proxies. Each nominee for election as director
of the Company is an incumbent. The Board knows of no reason why any of the
nominees will be unavailable to serve.
The following lists the nominees for election as directors of the Company,
including the age of each person as of September 10, 1999, the positions with
the Company or principal occupations of each person, certain other directorships
held and the year each person became a director of the Company. The number of
Common Shares of the Company owned beneficially by each person at July 8, 1999,
is set forth beneath the caption "Stock Ownership of Management and Principal
Shareholders" at Page 4.
NOMINEES FOR ELECTION AS DIRECTORS
WITH TERMS EXPIRING AT THE 2000 ANNUAL MEETING
Peter C. Madsen 48 has been President, Chief Executive Officer and a
director of the Company since September 1992. From November 1986 to January
1992, he was an officer of the Newbridge Networks Corporation, a Canadian
telecommunications company, most recently as Vice President and General Manager,
United States Region, and President of Newbridge Networks Inc., Newbridge
Networks Corporation's United States subsidiary. Mr. Madsen served as a director
of Newbridge Networks Corporation from September, 1987 until June, 1998.
Mark Rafferty 45 has been Vice President, Chief Financial Officer and
Treasurer of the Company since August 1993 and a director of the Company since
March 1998. From August 1992 to August 1993, Mr. Rafferty was Vice president,
Finance at Newbridge Networks Inc. From August 1987 through August 1992, Mr.
Rafferty was Controller of Newbridge Networks Inc.
On September 28, 1999, the Securities and Exchange Commission entered an
order in In the Matter of Peter Madsen and Mark Rafferty, Securities Exchange
Act of 1934 Release No. 41935, making findings that Peter Madsen ("Madsen") and
Mark Rafferty ("Rafferty") were each a cause of certain of the Company's
violations of the Exchange Act's periodic reporting, books and records, and
internal control provisions. Messrs Madsen and Rafferty consented without
admitting or denying the commission's findings, to the issuance of a cease and
desist order under Exchange Act Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) and
certain rules promulgated hereunder.
Edward R. Olson 57 has served as a director since January 1989. From 1990
to April 1997, Mr. Olson was the president, Chief Executive Officer and Chairman
of M-C Industries, Inc., a fluid hydraulics equipment manufacturer, commencing
July 1, 1995, Mr. Olson became a principal in KPMG Baymark Strategies LLC, an
independent consulting firm in a strategic alliance with KPMG Peat Marwick, LLP.
KPMG Baymark Strategies LLC has since become Dominion Management LLC. Mr. Olson
was President and COO of Porta Systems Corporation from November 1995 to January
1997. Mr. Olson has been Chairman of S&L Metal products Corporation, Queens, NY
for the last five years.
5
<PAGE> 11
Thomas G. Amon 52 has served as a director since December 1994. For the
past five years, Mr. Amon has been an attorney in private practice in New York
City. Since June 1, 1999, Mr. Amon has been a partner in the law firm of
Sokolow, Dunaud, Mercadier & Carreras, LLP., New York, NY and Paris, France.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held six meetings during fiscal 1999. All directors
attended each of the meetings of the Board of Directors.
The Board of Directors has a standing Audit Committee and Stock Option
Committee. The Board of Directors has no nominating committee.
The Audit Committee, consisting of Messrs Olson, Amon and Madsen met six
times during fiscal 1999. The function of the Audit Committee is to recommend
the appointment of the independent public accountants, to review the nature and
scope of the services of the independent public accountants, to confer with the
independent public accountants and to review the results of their audit and the
Company's internal controls, and to provide assistance to the Board of Directors
with respect to the corporate and reporting practices of the Company.
The Stock Option Committee, consisting of Messrs Olson, Amon and Madsen met
six times during fiscal 1999. The function of this Committee is to make
recommendations to the Board of Directors regarding Stock Option Grants to the
Company's Employees and Executive Officers.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR
ELECTION AS DIRECTORS LISTED ABOVE.
BOARD REPORT ON EXECUTIVE COMPENSATION
The Company does not have a formal compensation committee. Compensation
levels for executive officers are set by the Board of Directors which is
presently comprised of the following individuals: Peter C. Madsen, Thomas G.
Amon, Edward R. Olson and Mark H. Rafferty. Salaries are reviewed annually and
are based on individual performance, the extent of individual responsibility and
comparisons with salaries paid in the industry.
The Company recruits for its executive officer positions from within the
communications industry. In most instances, the source Company is significantly
larger than the Company. It is the policy of the Board of Directors of FastComm
to hire executive officers at levels below that of their current salaries along
with a stock option package intended to make up for the differentiation and to
provide a performance incentive. The Company feels that stock options are an
attractive benefit in that they enhance performance and loyalty at little cost.
The Board establishes compensation levels based on experience and
responsibility.
The Board granted seven executive officers options during fiscal 1999. Six
of these grants were determined by these individuals performance and
responsibility. The remaining grant was a condition of employment.
The Board adheres to a policy of granting options to executive officers
based upon performance and responsibility. In addition, the Board also considers
the relative importance of the job function being performed and the number of
options currently held by the executive officer.
/s/ Peter C. Madsen, /s/ Mark Rafferty, /s/ Thomas G. Amon, /s/ Edward R. Olson
DIRECTOR'S COMPENSATION
Directors receive no cash compensation for their services as such; however,
the Board of Directors has authorized payment of reasonable expenses incurred by
non-employee directors in connection with attendance
6
<PAGE> 12
at meetings of the Board of Directors. Further, members of the Company's Board
of Directors are granted options to purchase common shares pursuant to the
Company's 1992 Stock Option Plan. During fiscal year 1999, the Company granted
options to purchase 20,000 shares each to its two outside Directors. The
Chairman of the Board receives no compensation for serving in such capacity.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Article 10 of the Virginia Stock Corporation Act, the Company can
indemnify its directors and officers against liabilities they may incur in such
capacities, including liabilities under the Securities Act of 1933, as amended.
The Company's Bylaws provide that the Company will indemnify its directors and
officers to the fullest extent permitted by law and require the Company to
advance litigation expenses upon receipt by the Company of an undertaking by the
director or officer to repay such advances if it is ultimately determined that
the director or officer is not entitled to indemnification. The Bylaws further
provide that rights conferred under such Bylaws do not exclude any other right
such persons may have or acquire under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
The Company's Certificate of incorporation provides that, pursuant to
Virginia Law, its directors shall not be liable for monetary damages for breach
of the directors' fiduciary duty of care to the Company and its stockholders.
This provision in the Certificate of Incorporation does not eliminate the duty
of care, and in appropriate circumstances equitable remedies such as injunctive
or other forms of non-monetary relief will remain available under Virginia Law.
In addition, each director will continue to be subject to liability for breach
of the director's duty of loyalty to the Company or its shareholders, for acts
or omissions not in good faith or involving intentional misconduct or knowing
violations of law, for actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Virginia law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.
The Company has entered into agreements to indemnify its directors and
certain of its officers in addition to the indemnification provided for in the
Certificate of Incorporation and Bylaws. These agreements, among other things,
indemnify the Company's directors and certain of its officers for certain
expenses (including attorneys' fees), judgments, fines and settlement amounts
incurred by such person in any action or proceeding, including any action by or
in the right of the Company, on account of services as a director or officer of
the Company, or as a director or officer of any other company or enterprise to
which the person provides services at the request of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year, Peter C. Madsen, Edward R. Olson, Thomas G. Amon and Mark
Rafferty, as directors participated in deliberations of the Company's Board of
Directors concerning executive officer compensation and stock option grants,
including their own. Other than the foregoing, none of such directors was party
to any reportable interlock or participation during fiscal 1999.
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total shareholder return on the Company's Common Stock with that of the
cumulative total return of the NASDAQ Stock Market -- US Index ("NASDAQ STOCK
MRKT -- US") and the NASDAQ Telecommunications Index ("NASDAQ TELECOM") for the
five year period ended on April 30, 1999. The information below is based on an
investment of $100, on April 30, 1994, in the Company's Common Stock, the NASDAQ
STOCK MRKT -- US and the NASDAQ TELECOM. The Company's Management consistently
cautions that the stock price
7
<PAGE> 13
performance shown in the graph below should not be considered indicative of
potential future stock price performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG FASTCOMM COMMUNICATIONS CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX AND
THE NASDAQ TELECOMMUNICATIONS INDEX
COMPARISON GRAPH
<TABLE>
<CAPTION>
FASTCOMM COMMUNICATIONS NASDAQ STOCK MARKET NASDAQ
CORPORATION (U.S.) TELECOMMUNICATIONS
----------------------- ------------------- ------------------
<S> <C> <C> <C>
4/94 $ 100 $ 100 $ 100
4/95 59 116 104
4/96 179 166 143
4/97 51 175 129
4/98 19 262 246
4/99 11 356 422
</TABLE>
* $100 invested on 4/30/94 in stock or index -- including reinvestment of
dividends. Fiscal year ending April 30.
8
<PAGE> 14
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information regarding compensation paid by
the Company to the eight (8) named executives (the "Named Executive Officers")
for services furnished in all capacities to the Company during the fiscal year
ended April 30, 1999, as well as such compensation paid by the Company to the
Named Executive Officers during the Company's two previous fiscal years:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
------------------------------------------ COMPENSATION AWARDS
OTHER ANNUAL ----------------------
COMPENSATION SHARES OF COMMON STOCK
NAME AND PRINCIPAL POSITIONS YEAR SALARY($) BONUS($) ($)(1) UNDERLYING OPTIONS
---------------------------- ---- --------- -------- ------------ ----------------------
<S> <C> <C> <C> <C> <C>
Peter C. Madsen(2)................ 1999 $ 96,154 0 $ 7,320 20,000
President, CEO and Chairman of 1998 98,077 0 7,320 0
the Board 1997 101,757 0 6,613 0
Mark H. Rafferty(3)............... 1999 125,000 0 8,075 20,000
Vice President -- Chief 1998 116,732 0 8,075 0
Financial Officer 1997 108,503 0 5,824 25,000
Robert C. Abbott(4)............... 1999 46,154 0 0 20,000
Vice President -- Engineering 1998 86,999 0 0 0
Corporate Secretary 1997 98,639 0 0 15,000
William A. Flanagan(5)............ 1999 58,731 0 2,511 20,000
Vice President -- Marketing, and 1998 106,645 0 6,632 10,000
Technology 1997 109,417 0 6,632 0
Edward C. Bursk(6)................ 1999 25,239 0 2,400 0
Vice President -- Sales and 1998 116,250 15,000 0
Marketing 1997 52,532 0 55,000
Safa Alkateb(7)................... 1999 89,192 0 0 47,000
Vice President -- Engineering
Thomas Colligan(8)................ 1999 61,058 0 10,000 125,000
Vice President -- Corporate
Development
William A. Grant(9)............... 1999 167,983 0 6,000 35,000
Vice President -- Global Sales 1998 64,098 30,000 3,000 100,000
Kenneth A. Bloom(10).............. 1999 8,333 0 0 120,000
Vice President -- Mainframe
Networking
</TABLE>
- ---------------
(1) Automobile benefit.
(2) At April 30, 1999, Mr. Madsen held 1,278,220 restricted shares of Common
Stock with a market value of $1,358,109 at that date.
(3) At April 30, 1999, Mr. Rafferty held 43,420 restricted shares of Common
Stock with a market value of $46,134 at that date.
(4) At April 30, 1999, Mr. Abbott held 192,408 restricted shares of Common
Stock with a market value of $204,434 at that date. Mr. Abbott died on July
21, 1999.
(5) At April 30, 1999, Mr. Flanagan held 219,421 restricted shares of Common
Stock with a market value of $233,135 at that date. Mr. Flanagan resigned
on October 9, 1998.
(6) At April 30, 1999, Mr. Bursk held 500 restricted shares of Common Stock
with a market value of $531 at that date. Mr. Bursk resigned on July 12,
1998
(7) At April 30, 1999, Mr. Alkateb held 2,000 restricted shares of Common Stock
with a market value of $2,125 at that date.
9
<PAGE> 15
(8) At April 30, 1999, Mr. Colligan held 460,002 restricted shares of Common
Stock with a market value of $488,752 at that date. Includes 200,000 shares
owned by Mr. Colligan's spouse. Mr. Colligan resigned on September 17,
1999.
(9) At April 30, 1999, Mr. Grant held 36,667 restricted shares of Common Stock
with a market value of $38,959 at that date.
(10) At April 30, 1999, Dr. Bloom held 719,149 restricted shares of Common Stock
with a market value of $764,096 at that date.
FISCAL 1999 OPTION GRANTS
The following table sets forth information concerning grants of stock
options to the Named Executive Officers and Directors made pursuant to the
Company's 1992 Stock Option Plan during the fiscal year ended April 30, 1999:
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AS ASSUMED
ANNUAL RATES OF STOCK
PERCENTAGE OF PRICE APPRECIATE FOR
SECURITIES TOTAL OPTIONS OPTION TERM
UNDERLYING GRANTED TO ----------------------
OPTIONS EMPLOYEES IN EXERCISE OR EXPIRATION
NAME GRANTED(#) FISCAL YEAR BASE PRICE($/SH) DATE 5%($) 10%($)
---- ---------- ------------- ---------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Peter C. Madsen........................... 20,000 2.31% $0.46 9/9/03 $ 2,540 $ 5,616
Mark H. Rafferty.......................... 20,000 2.31 0.46 9/9/03 2,540 5,616
Robert C. Abbott.......................... 20,000 2.31 0.46 9/9/03 2,540 5,616
William A. Flanagan....................... 20,000 2.31 0.46 9/9/03 2,540 5,616
Thomas G. Amon............................ 20,000 2.31 0.46 9/9/03 2,540 5,616
Edward R. Olson........................... 20,000 2.31 0.46 9/9/03 2,540 5,616
William A. Grant.......................... 15,000 1.73 0.46 7/31/03 1,905 4,212
Thomas Colligan........................... 125,000 14.4 0.46 7/31/03 15,875 35,100
William A. Grant.......................... 20,000 2.31 0.46 9/9/03 2,540 5,616
Safa Alkateb.............................. 10,000 1.15 0.46 7/30/03 1,270 2,808
Safa Alkateb.............................. 25,000 2.89 0.25 12/14/03 1,725 3,925
Safa Alkateb.............................. 12,000 1.39 0.46 9/13/03 1,524 3,370
</TABLE>
The exercise price of each option may not be less than 100% of the fair
market value of the stock on the date of the grant for incentive options or 85%
of such fair value for non-qualified stock options, as determined by the Board
of Directors. Options vest over a three year period and expire five years from
date of grant and, in most cases, upon termination of employment.
FISCAL 1999 AGGREGATE OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth information concerning each exercise of
stock options during the fiscal year ended April 30, 1999 by each of the Named
Executive Officers and Directors and the fiscal year end value of unexercised
options held by such persons:
<TABLE>
<CAPTION>
SHARES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Peter C. Madsen........................ -- -- 0 20,000 $0 $12,500
Robert C. Abbott....................... -- -- 60,000 25,000 0 12,050
William Flanagan....................... -- -- 20,000 25,000 0 12,050
Thomas G. Amon......................... -- -- 18,333 28,334 0 12,050
Edward R. Olson........................ -- -- 31,666 28,334 0 12,050
Mark H. Rafferty....................... -- -- 100,000 28,334 0 12,050
Edward C. Bursk........................ -- -- -- -- 0 0
Thomas Colligan........................ -- -- -- 125,000 0 75,313
Kenneth A. Bloom....................... -- -- -- -- 0 0
William A. Grant....................... -- -- 33,333 101,667 0 12,050
Safa Alkateb........................... -- -- 32,222 111,444 0 33,568
</TABLE>
10
<PAGE> 16
EMPLOYMENT AND CONTROL ARRANGEMENTS
Pursuant to an Employment Agreement dated September 18, 1992 (i) Mr. Madsen
was elected President and Chief Executive officer of the Company for an initial
term expiring on January 31, 1995 at an initial base salary of $100,000 per
year, (ii) Mr. Madsen was granted an option to purchase up to 425,000 shares of
Common Stock of the Company at an exercise price of $1.09375 per share upon
certain terms and conditions, and (iii) Mr. Madsen and Mr. Peter Sommerer were
elected directors of the Company to fill two vacancies then existing on the
Board of Directors. Mr. Sommerer since resigned from the Board.
Under the Employment Agreement, Mr. Madsen has been granted full control of
and authority over the operations of the Company, subject to the general
oversight of the Board, and the Current Directors agreed not to take any action
inconsistent with their respective obligations thereunder. The Employment
Agreement and the related actions resulted in an effective change in control of
the Company away from Mr. Dennis to Mr. Madsen. The agreement, which currently
expires on January 31, 2000, is renewable thereafter on a year to year basis.
In connection with the acquisition of KG Data, the Company entered into a
three year Employment and Non Competition Agreement on March 31, 1999 with
Kenneth A Bloom. The Agreement provides that Dr. Bloom be employed by the
Company in a senior management capacity at an annual salary of $100,000 plus
incentives based on sales of the ChanlComm(R) product line.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 31, 1999, the United States Bankruptcy Court for the Eastern
District of Virginia approved the transfer of the approved bankruptcy claim of
Gary H. Davison from Mr. Davison to Peter C. Madsen. Mr. Madsen is President,
Chief Executive Officer and Chairman of the Company. As a result of this
transaction, Mr. Madsen assumed the rights held by Mr. Davison against the
Company. As such, Mr. Madsen was paid $225,000 and was issued a convertible
debenture in the amount of $675,000. Mr. Madsen's claim against the Company and
the terms and conditions of the debenture held by Mr. Madsen are consistent with
that of the other approved creditors in the Company's reorganization.
The Company paid the law firm of Amon & Sabatini $50,000 in the fiscal year
ended April 30, 1999. Thomas G. Amon, A Director of the Company since December
1994, was a partner of Amon and Sabatini. In connection with the reorganization,
Mr. Amon's former law firm was paid $5,000 and issued $15,000 in convertible
debentures.
During Fiscal year 1999, the Company loaned $30,000, under normal terms and
conditions, to one of its senior officers.
The terms of the transactions described above were negotiated at arms
length such that the terms were as favorable to the Company as could have been
obtained from an unaffiliated third party.
The Company has entered into separate indemnification agreements with each
of its directors and executive officers that may require the Company, among
other things, to indemnify them against certain liabilities that may arise by
reason of their status or service as directors or officers.
11
<PAGE> 17
PROPOSAL II
APPROVAL OF 1999 STOCK OPTION PLAN
(ITEM 2 ON PROXY CARD)
APPROVAL OF THE IMPLEMENTATION OF THE 1999 STOCK OPTION PLAN
The Company's shareholders are being asked to approve the implementation of
the Company's 1999 Stock Option Plan (the "1999 Plan"), under which 1,500,000
shares of the Company's common stock ("Common Stock") will be reserved for
issuance to officers and other employees of the Company or any subsidiary
corporation, the non-employee Board members and independent consultants and
advisors in the Company's service. The 1999 Plan is necessary for the Company to
attract and retain the services of key individuals essential to the Company's
long-term growth and success.
The share reserve under the 1999 Plan will supplement the 1,500,000 shares
authorized for issuance under the Company's 1992 Stock Option Plan (the "1992
Plan"), which was implemented in July, 1992. Share issuances under the 1999 Plan
will not reduce or otherwise affect the number of shares of the Company's common
stock available for issuance under the 1992 Plan.
The 1999 Plan was adopted by the Board of Directors on July 26, 1999 and,
subject to shareholder approval at the Annual Meeting, will become effective
immediately upon such approval.
The following is a summary of the principal features of the 1999 Plan. The
summary, however, does not purport to be a complete description of all the
provisions of the 1999 Plan. Any stockholder of the Company who wishes to obtain
a copy of the actual plan document may do so upon written request to the Chief
Financial Officer at the Company's principal executive offices in Dulles,
Virginia.
EQUITY INCENTIVE PROGRAMS
The 1999 Plan is comprised of three separate equity incentive programs: (i)
a Discretionary Option Grant program under which eligible individuals in the
Company's employ or service may, at the discretion of the Plan Administrator, be
granted options to purchase shares of Common Stock, (ii) a Stock Issuance
program under which such individuals may, in the Plan Administrator's
discretion, be issued stock directly through the purchase of such shares or as a
bonus tied to the performance of services or the attainment of financial
milestones and (iii) an Automatic Option Grant Program under which eligible
non-employee Board members will automatically receive option grants to purchase
shares of Common Stock at designated intervals over their period of Board
service.
ADMINISTRATION
The Stock Option Committee of the Board (the "Committee") will administer
the Discretionary Option Grant and Stock Issuance programs. However, one or more
additional Board committees may be appointed to administer those programs with
respect to certain designated classes of individuals in the Company's service.
The term "Plan Administrator" as used in this summary will mean the Compensation
Committee and any other appointed committee acting within the scope of its
administrative authority under the 1999 Plan. Administration of the Automatic
Option Grant Program will be self-executing in accordance with the express
provisions of that program, and no Plan Administrator will exercise any
discretion with respect to such program.
SHARE RESERVE
A total of 1,500,000 shares of Common Stock has been reserved for issuance
over the term of the 1999 Plan. Such share reserve will be in addition to the
shares of Common Stock reserved for issuance under the 1992 Plan, and share
issuances under the 1992 Plan will have no effect upon the number of shares of
Common Stock which remain available for issuance under the 1999 Plan.
12
<PAGE> 18
Should an option expire or terminate prior to exercise in full, the shares
subject to the portion of the option not so exercised will be available for
subsequent issuance under the 1999 Plan. Unvested shares issued under the 1999
Plan and subsequently repurchased by the Company at the original option or issue
price paid per share will be added back to the share reserve and will
accordingly be available for subsequent issuance under the 1999 Plan. However,
shares subject to any options surrendered in connection with outstanding stock
appreciation rights under the 1999 Plan will not be available for subsequent
issuance.
ELIGIBILITY
Officers and other employees of the Company or subsidiaries (whether now
existing or subsequently established), non-employee members of the Board or the
board of directors of any subsidiary corporation and consultants and independent
advisor in the service of the Company or any parent and subsidiary corporation
will be eligible to participate in the Discretionary Option Grant and Stock
Issuance programs. Non-employee members of the Board will also be eligible to
participate in the Automatic Option Grant Program.
As of September 10, 1999, approximately 6 executive officers and 45 other
employees were eligible to participate in the Discretionary Option Grant and
Stock Issuance programs, together with two non-employee Board members who were
also eligible to participate in the Automatic Option Grant Program.
VALUATION
The fair market value per share of Common Stock on any relevant date under
the 1999 Plan will be deemed equal to the closing selling price per share on
that date, as reported on the Nasdaq OTC Bulletin Board. On September 10, 1999
the closing selling price per share was $.80.
DISCRETIONARY OPTION GRANT PROGRAM
Options may be granted under the Discretionary Option Grant Program at an
exercise price per share not less than eighty-five percent (85%) of the fair
market value per share of Common Stock on the grant date. No granted option will
have a term in excess of ten years.
Upon cessation of service, the optionee will have a limited period of time
in which to exercise any of his or her outstanding options to the extent those
options are exercisable for vested shares. The Plan Administrator will have
complete discretion to extend the period following the optionee's cessation of
service during which his or her outstanding options may be exercised and/or to
accelerate the exercisability or vesting of such options in whole or in part.
Such discretion may be exercised at any time while the options remain
outstanding, whether before or after the optionee's actual cessation of service.
The Plan Administrator is authorized to issue two types of stock
appreciation rights in connection with option grants made under the
Discretionary Option Grant Program:
Tandem stock appreciation right will provide the holders with the right to
surrender their options for an appreciation distribution from the Company equal
in amount to the excess of (a) the fair market value of the vested shares of
Common Stock subject to the surrendered option over (b) the aggregate exercise
price payable for those shares. Such appreciation distribution may, at the
discretion of the Plan Administrator, be made in cash or in shares of Common
Stock.
Limited stock appreciation rights may be granted to officers of the Company
as part of their option grants. Any option with such a limited stock
appreciation right may be surrendered to the Company upon the successful
completion of a hostile take-over of the Company. In return for the surrendered
option, the officer will be entitled to a cash distribution from the Company in
an amount per surrendered option share equal to the excess of (a) the take-over
price per share over (b) the exercise price payable for such share.
The Plan Administrator will have the authority to effect the cancellation
of outstanding options under the Discretionary Option Grant Program which have
exercise prices in excess of the then current market price of Common stock and
to issue replacement options with an exercise price based on the market price of
Common Stock at the time of the new grant.
13
<PAGE> 19
The shares subject to each discretionary option grant will immediately vest
should any of the following events occur while the optionee continues as an
employee of the Company: an acquisition of the Company by merger or asset sale
or a change in control of the Company effected through a successful tender or
exchange offer for more than 50% of the outstanding voting stock or through a
change in a majority of the Board members by reason of one or more contested
elections for Board membership. In addition, upon the successful completion of a
hostile tender offer for more than 50% of the Company's outstanding voting
stock, each discretionary option grant may be surrendered to the Company for a
cash distribution per surrendered option share in an amount equal to the excess
of (a) the take-over price per share over (b) the exercise price payable for
such share. Shareholder approval of the 1999 Plan will constitute pre-approval
of the exercise of such surrender right in accordance with the provisions of the
Discretionary Option Grant program, and no approval of the Board or the Plan
Administrator will be required at the time of the actual option surrender and
cash distribution.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant program to be in effect under the 1999
Plan, each individual who first becomes a non-employee board member at any time
after the Annual Meeting, whether through appointment by the Board or election
by the shareholders, will automatically be granted at the time of such initial
appointment or election an option grant for 30,000 shares of Common Stock,
provided such individual has not previously been in the Company's employ. In
addition, on the date of each Annual Shareholders Meeting, beginning with the
Annual Meeting, each individual who is to continue to serve as a non-employee
Board member will automatically be granted an option to purchase 30,000 shares
of Common stock, provided such individual has served as a non-employee Board
member for at least six (6) months. There will be no limit on the number of such
30,000 shares of Common Stock, provided such individual has served as a
non-employee Board member for at least six (6) months. In no event, however,
will any non-employee Board member receive any option grants under the Automatic
Option Grant program if such individual owns (directly or indirectly) securities
possessing more than five percent (5%) of the total combined voting power of all
classes of stock of the Company (or any parent or subsidiary) or such person is
otherwise affiliated with, or a representative of, a person or entity that is
such a five percent (5%) stockholder.
Shareholder approval of the 1999 Plan will constitute approval of each
option grant made pursuant to the provisions of the Automatic Option Grant
program on or after the date of the Annual Meeting. Each option will have an
exercise price per share equal to 100% of the fair market value per share of
common Stock on the option grant date and a maximum term of ten years measured
from the option grant date.
Each option will be exercisable for one third of the option shares
annually, commencing one year after the date of grant, but any purchased shares
will be subject to repurchase by the Company, at the exercise price paid per
share, upon the optionee's cessation of Board service prior to vesting in those
shares. The shares subject to each initial option grant will vest (and the
Company's repurchase rights will lapse) in three equal annual installments of
one-third each, over the optionee's period of Board service, with the first such
installment to vest upon the completion of one year of Board service measured
from the grant date. Each annual option grant will vest (and the company's
repurchase rights will lapse) on the day immediately preceding the date of the
Annual Shareholders Meeting held in the year immediately following the year of
the option grant, provided the optionee continues in Board service through such
date.
The shares subject to each automatic option grant will immediately vest
should the optionee die or become permanently disabled while a Board member or
should any of the following event occur while the optionee continues in Board
Service: an acquisition of the company by merger or asset sale or a change in
control of the company effected through a successful tender or exchange offer
for more than 50% of the outstanding voting stock or through a change in a
majority of the Board members by reason of one or more contested elections for
Board membership. In addition, upon the successful completion of a hostile
tender offer for more than 50% of the Company's outstanding voting stock, each
automatic option grant may be surrendered to the Company for a cash distribution
per surrendered option share in an amount equal to the excess of (a) the
take-over price per share over (b) the exercise price payable for such share.
Shareholder
14
<PAGE> 20
approval of the 1999 Plan will constitute pre-approval of the exercise of such
surrender right in accordance with the provisions of the Automatic Option Grant
program, and no approval of the Board or the Plan Administrator will be required
at the time of the action option surrender and cash distribution.
STOCK ISSUANCE PROGRAM
Shares may be sold under the Stock Issuance program at a price per share
not less than eighty-five percent (85%) of fair market value, payable in case or
through a promissory note payable to the Company. Shares may also be issued
solely as a bonus for past services.
The issued shares may either be immediately vested upon issuance or subject
to a vesting schedule tied to the performance of service or the attainment of
performance goals. The Plan Administrator will, however, have the discretionary
authority at any time to accelerate the vesting of any outstanding shares under
the Stock Issuance program.
GENERAL PROVISIONS
ACCELERATION
In the event that the Company is acquired by merger or asset sale, each
outstanding option under the Discretionary Option Grant Program will
automatically accelerate and vest in full, and all unvested shares under the
Stock Issuance Program will immediately vest, except to the extent the Company's
repurchase rights with respect to those shares are to be assigned to the
successor corporation. Any options assumed in connection with such acquisition
will immediately accelerate, and any unvested shares which do not vest at the
time of such acquisition will vest in full, in the event the individual's
service is subsequently terminated within 18 months following the acquisition.
The Plan Administrator will have the discretionary authority to provide for
automatic acceleration of outstanding options under the Discretionary Grant
program and the automatic vesting of outstanding shares under the Stock Issuance
program upon the subsequent termination of an individual's service within 18
months following a change in control or ownership of the Company effected
through a successful tender or exchange offer for more than 50% of the
outstanding voting stock or through a change in the majority of the Board of
reason of one or more contested elections for Board membership.
The acceleration of vesting in the event of a change in ownership or
control of the Company may be seen as an anti-takeover provision and may have
the effect of discouraging a merger proposal, a takeover attempt or other effort
to gain control of the Company.
FINANCIAL ASSISTANCE
The Plan Administrator may permit one or more participants to pay the
exercise price of outstanding options or the purchase price of issued shares
under the 1999 Plan by delivering a full-recourse, interest-bearing promissory
note payable in installments. The maximum amount of financing provided any
participant may not exceed the cash consideration payable for the issued shares
plus all applicable taxes incurred in connection with the acquisition of the
shares. Any such promissory note may be subject to forgiveness in whole or in
part, at the discretion of the Plan Administrator, over the participant's period
of service.
SPECIAL TAX ELECTION
The Plan Administrator may provide one or more holders of options or
unvested shares with the right to have the Company withhold a portion of the
shares otherwise issuable to such individuals in satisfaction of the tax
liability incurred in connection with the exercise of those options or the
vesting of those shares. Alternatively, the Plan Administrator may allow such
individuals to deliver previously acquired shares of Common Stock in payment of
such tax liability.
15
<PAGE> 21
CHANGES IN CAPITALIZATION
In the event any change is made to the outstanding shares of Common Stock
by reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will be
made to (i) the maximum number and/or class of securities issuable under the
1999 Plan, (ii) the number and/or class of securities for which any one person
may be granted stock options, separately exercisable stock appreciation rights
and direct stock issuances under the 1999 Plan per calendar year, (iii) the
number and/or class of securities for which grants are subsequently to be made
under the Automatic Option Grant Program to new and continuing non-employee
Board members and (iv) the number and/or class of securities and the exercise
price per share in effect under each outstanding option in order to prevent the
dilution or enlargement of benefits thereunder.
AMENDMENT AND TERMINATION
The Board may amend or modify the 1999 Plan at any time, subject to any
required stockholder approval. The 1999 Plan will terminate on the earliest of
(i) October 27, 2009, (ii) the date on which all shares available for issuance
under the 1999 Plan have been issued as fully-vested shares or (iii) the
termination of all outstanding options in connection with certain changes in
control or ownership of the Company.
OPTION GRANTS UNDER 1999 PLAN
Stock options were granted on August 2, 1999 under the 1999 Plan subject to
shareholder approval to four executive officers, aggregating 430,000 options at
an exercise price of $1.03.
FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS
Options granted under the 1999 Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
Incentive Options. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchase shares are sold or otherwise made the
subject of disposition. For Federal tax purposes, dispositions are divided into
two categories: (i) qualifying and (ii) disqualifying. A qualifying disposition
occurs if the sale or other disposition is made after the optionee has held the
shares for more than two years after the option grant date and more than one
year after the exercise date. If either of these two holding periods is not
satisfied, then a disqualifying disposition will result.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the option exercise date over (ii) the exercise
price paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will generally recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary
16
<PAGE> 22
income, as and when the Company's repurchase right lapses, an amount equal to
the excess of (i) the fair market value of the shares on the date share vest
over (ii) the exercise price paid for those shares. The optionee may, however,
elect under Section 83(b) of the Internal Revenue code to include as ordinary
income in the year of exercise of the option an amount equal to the excess of
(i) the fair market value of the purchased shares on the exercise date over (ii)
the exercise price paid for such shares. If the Section 83(b) election is made,
the optionee will not recognize any additional income as and when the repurchase
right lapses.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the optionee.
STOCK APPRECIATION RIGHTS
An optionee who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to the amount of the appreciation
distribution. The Company will be entitled to an income tax deduction equal to
the appreciation distribution for the taxable year in which the ordinary income
is recognized by the optionee.
DIRECT STOCK ISSUANCE
The tax principles applicable to direct stock issuances under the 1999 Plan
will be substantially the same as those summarized above for the exercise on
non-statutory option grants.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Company anticipates that any compensation deemed paid by it in
connection with disqualifying dispositions of incentive stock option shares or
exercises of non-statutory options granted with exercise prices equal to the
fair market value of the option shares on the grant date will qualify as
performance-based compensation for purposes of code Section 162(m) and will not
have to be taken into account for purposes of the $1 million limitation per
covered individual on the deductibility of the compensation paid to certain
executive officers of the Company. Accordingly, all compensation deemed paid
with respect to those options will remain deductible by the Company without
limitation under Code Section 162(m).
ACCOUNTING TREATMENT
Option grants or stock issuances with exercise or issue prices less than
the fair market value of the shares on the grant or issue date will generally
result in a compensation expense to the Company's earnings equal to the
difference between the exercise or issue price and the fair market value of the
shares on the grant or issue date. Such expense will be accruable by the Company
over the period that the shares are to vest. Option grants or stock issuances
with an exercise price or issue price equal to 100% of the fair market value of
the shares on the grant or issue date will generally not result in any charge to
the Company's earnings, but the Company must disclose, in pro-forma statements
to the Company's financial statements, the impact those options would have upon
the Company's reported earnings were the value of those options at the time of
grant treated as compensation expense. Whether or not granted at a discount, the
number of outstanding options is a factor used in determining the Company's
earnings per share.
Should one or more optionees be granted stock appreciation rights which
have no conditions upon exercisability other than a service or employment
requirement, then such rights will result in compensation expense to the
Company's earnings.
SHAREHOLDER APPROVAL
The affirmative vote of a majority of the outstanding voting shares of the
Company present or represented and entitled to vote at the Annual Meeting is
required for approval of the implementation of the 1999 Plan.
17
<PAGE> 23
Should such shareholder approval not be obtained, then the 1999 Plan will not
become effective, and no option grants or stock issuances under the 1999 Plan
will be made.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL II
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<PAGE> 24
PROPOSAL III
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(ITEM 3 ON PROXY CARD)
The Board of Directors has appointed BDO Seidman, LLP as independent
certified public accountants to examine the financial statements of the Company
for the fiscal year ending April 30, 2000, and to perform other appropriate
accounting services.
A proposal will be presented at the meeting to ratify the Board's
appointment of BDO Seidman, LLP as the Company's independent certified public
accountants. If the appointment is not ratified by the shareholders represented
at the meeting, the Board of Directors may reconsider its recommendation. One or
more representatives of BDO Seidman, LLP are expected to be present at the
Annual Meeting and have an opportunity to make a statement and/or respond to
appropriate questions from Shareholders.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the outstanding shares of the Company
present or represented and entitled to vote at the Annual Meeting is required
for ratification of the selection of BDO Seidman LLP to serve as the Company's
independent auditors for the fiscal year ended April 30, 2000. Should such
shareholder approval not be obtained, then the Board of Directors will
reconsider such selection. Under all circumstances, the Board retains the
corporate authority to change the auditors at a later date.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the shareholders vote for the
proposal to ratify the selection of BDO Seidman LLP as independent auditors for
the year ending April 30, 2000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL III.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC") and with the National Association of Securities Dealers, Inc. Automated
Quotations (NASDAQ) system. Officers, directors and greater than ten percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that during its fiscal year ended April 30, 1999, all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with.
OTHER BUSINESS
The Board of Directors of the Company knows of no other business which may
come before the meeting. However, if any additional matters are properly
presented at the meeting, it is intended that the persons named in the enclosed
proxy, or their substitutes, will vote such proxy in accordance with their
judgment on such matters.
19
<PAGE> 25
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Under the present rules of the SEC, the deadline for shareholders to submit
proposals to be considered for inclusion in the Company's Proxy Statement for
next year's Annual Meeting of Shareholders is May 20, 2000. Such proposals may
be included in next year's Proxy Statement if they comply with certain rules and
regulations promulgated by the SEC.
In addition, the proxy solicited by the Board of Directors for next year's
Annual Meeting of Shareholders will confer discretionary authority to vote on
any shareholder proposal presented at that meeting, unless the Company is
provided with notice of such proposal no later than June 30, 2000.
ANNUAL REPORT TO SHAREHOLDERS
Enclosed with this Proxy Statement is the Annual Report to Shareholders for
the fiscal year ended April 30, 1999, including audited consolidated financial
statements for the year then ended, which includes the Company's Annual Report
on Form 10-K as filed with the Securities and Exchange Commission. The Annual
Report is not incorporated in the Proxy Statement and is not to be considered a
part of the soliciting materials.
FASTCOMM COMMUNICATIONS CORPORATION
The Board of Directors
Sterling, Virginia,
September 30, 1999.
<PAGE> 26
PROXY FASTCOMM COMMUNICATIONS CORPORATION
PROXY FOR MEETING OF SHAREHOLDERS
The undersigned hereby appoints Peter C. Madsen and Mark H. Rafferty, and each
or any of them, proxy for the undersigned, with power of substitution to vote
all the shares of Common Stock of FastComm Communications Corporation held of
record by the undersigned on September 10, 1999, at the Annual Meeting of
Shareholders to be held at 4:30 p.m., October 28, 1999, and at any adjournments
thereof, upon the matters designated on the other side and as more fully set
forth in the Proxy Statement and for the transaction of such business as may
properly come before the meeting.
H PLEASE MARK VOTES AS IN THIS EXAMPLE.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATION MADE. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
1. ELECTION OF DIRECTORS FOR ONE YEAR TERMS EXPIRING AT THE 2000 ANNUAL MEETING:
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
each such nominee's name in the following space:_____________________________
[]FOR Nominee: Peter C. Madsen, Edward R. Olson,
Mark Rafferty, Thomas G. Amon
2. PROPOSAL TO ADOPT []FOR []AGAINST []ABSTAIN
1999 STOCK OPTION PLAN
3. PROPOSAL TO APPROVE [] FOR [] AGAINST []ABSTAIN
THE APPOINTMENT OF
BDO SEIDMAN, LLP AS
THE INDEPENDENT AUDI-
TORS FOR THE COMPANY
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued and to be signed and dated on the reverse side)
<PAGE> 27
(Continued from other side)
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY USING THE ENCLOSED ENVELOPE.
Dated: October ____, 1999
______________________________
______________________________
______________________________
Please sign exactly as name
appears. When shares are held
by joint tenants, both should
sign. When signing in a
representative capacity,
please give full title as
such. If a corporation, please
sign in corporation's name by
President or other autho-
rized person.
