<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, for Use of the
|X| Definitive Proxy Statement Commission Only (as permitted by
|_| Definitive Additional Materials Rule 14a-6(e)(2))
|_| Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
NETRIX CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
- --------------------------------------------------------------------------------
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
NETRIX CORPORATION
13595 DULLES TECHNOLOGY DRIVE,
HERNDON, VIRGINIA 20171
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, JUNE 23, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Netrix Corporation, a Delaware corporation, will be held on Friday, June 23,
2000 at 10:00 a.m. at The Tower Club, 8000 Towers Crescent Drive, Vienna,
Virginia 22182 to consider and act upon the following matters:
1. To elect two Class II directors to serve until the 2002 annual meeting;
2. To change amend our Certificate of Incorporation to change our name from
Netrix Corporation to Nx Networks, Inc.;
3. To amend our 1999 Long Term Incentive Plan to increase the number of
authorized shares of common stock under the Plan from 4,825,000 to
7,325,000 shares;
4. To ratify the selection by the Board of Directors of Arthur Andersen LLP
as the Netrix Corporation's independent public accountants for 2000; and
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has no knowledge of any other business to be
transacted at the Annual Meeting.
Stockholders of record at the close of business on April 25, 2000 will
be entitled to notice of and to vote at the meeting or any adjournment thereof.
Netrix Corporation's stock transfer books will remain open following the record
date.
All stockholders of record are cordially invited to attend the meeting.
Regardless of whether you expect to attend the meeting, please complete, sign
and date the enclosed proxy card and return it in the enclosed envelope to
ensure that your shares are represented at the meeting.
By Order of the Board of Directors,
Chief Financial Officer and Secretary
Herndon, Virginia
May 17, 2000
<PAGE>
NETRIX CORPORATION
13595 DULLES TECHNOLOGY DRIVE
HERNDON, VIRGINIA 20171
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 23, 2000
This proxy statement and the enclosed proxy card are being furnished to
you in connection with the upcoming Annual Meeting of Stockholders of Netrix
Corporation. The meeting will be held on June 23, 2000. Our Board of Directors
is soliciting proxies from holders of our common stock to ensure each
stockholder has an opportunity to vote on all matters submitted to a vote of
stockholders at the Annual Meeting, whether or not the stockholder will be
attending the meeting in person.
We mailed The Notice of Meeting, this proxy statement, the enclosed
proxy card and our Annual Report on Form 10-K for the fiscal year ended December
31, 1999 to our stockholders on or about May 19, 2000.
Copies of the exhibits to our Annual Report on Form 10-K for the fiscal
year ended December 31, 1999 are available from us upon written request and
payment of an appropriate processing fee. A request for exhibits should be sent
to: Investor Relations, Netrix Corporation, 13595 Dulles Technology Drive,
Herndon, Virginia 20171.
HOW TO VOTE. You may vote on each matter to be submitted to a vote of
stockholders at the meeting by marking the appropriate box on the proxy card,
signing it and returning it to us in the enclosed envelope. When the proxy card
is properly signed and returned, your shares will be voted at the meeting by the
proxyholders named on the proxy card in accordance with your directions. If the
proxy card is returned without any box marked for a specified matter and without
instructions on the proxy card for voting with respect to the matter, the shares
will be voted on that matter either in favor of the matters set forth in the
accompanying Notice of Meeting or as recommended by the Board of Directors.
MATTERS TO BE SUBMITTED TO A VOTE. The only matters known to us to be
submitted to a vote of stockholders at the Annual Meeting are:
(1) the election of two Class II directors;
(2) a proposal to amend our Certificate of Incorporation to change our
name from Netrix Corporation to Nx Networks, Inc.;
(3) a proposal to amend our 1999 Long Term Incentive Plan to increase
the number of shares that may be issued under the Plan by
2,500,000; and
(4) a proposal to ratify Arthur Andersen LLP as our independent public
accountants for fiscal year 1999.
<PAGE>
When you sign and return a proxy card, the proxy card gives the
proxyholders the discretionary authority to vote your shares in accordance with
their best judgment on any other business that may come before the meeting.
Therefore, unless you specify otherwise on the proxy card, the proxyholders will
vote your shares on any other business as recommended by the Board of Directors.
REVOKING PROXIES. You may revoke your proxy at any time before its
exercise by delivering a written revocation or a subsequently dated proxy to the
Secretary of Netrix or by casting a ballot in person at the Annual Meeting. Your
attendance at the Annual Meeting alone, however, will not in and of itself be
deemed to revoke a proxy unless you give affirmative notice at the Annual
Meeting that you revoke the proxy and vote in person by ballot at the meeting.
Your voting by ballot will cancel any proxy which you previously returned as to
any matter on which you vote on in person by ballot.
NAMING OTHER PROXIES. You may designate as your proxy someone other
than the persons named on the enclosed proxy card by crossing out those names
and inserting the name(s) of the person(s) you wish to have act as your proxy.
If you designate your own proxies, you should designate no more than three
persons. If you want to designate persons to act as your proxy, you must deliver
the proxy card to the designated person or persons and they must be present and
vote at the Annual Meeting. Proxy cards on which you have designated other
proxyholders should not be returned to us.
WHO MAY VOTE. Holders of our Common Stock as of the close of business
on April 25, 2000 are entitled to notice of and to vote at the Annual Meeting.
Each share of our common stock, par value $.05 per share, is entitled to one
vote. As of April 25, 2000, we had 34,159,464 shares of common stock
outstanding.
VOTES REQUIRED AND TABULATION OF VOTES. Under our By-Laws, the
presence, either in person or by proxy, of stockholders holding a majority of
the outstanding shares of common stock entitled to vote at the meeting is
necessary to constitute a quorum for the transaction of business. Shares of
common stock present in person or represented by proxy (including shares that
abstain or do not vote with respect to one or more of the matters presented for
stockholder approval) will be counted for purposes of determining whether a
quorum is present.
Only those votes cast for or against a proposal are used in determining
the results of a vote. Shares that abstain from voting as to a particular
matter, and shares held in "street name" by brokers or nominees who indicate on
their proxies that they do not have discretionary authority to vote their shares
as to a particular matter, will not be counted as votes in favor of such matter,
and will also not be counted as votes cast or shares voting on such matter.
Abstentions and broker non-votes are each included for purposes of determining
the presence or absence of a sufficient number of shares to constitute a quorum.
With respect to the approval of any particular proposal, abstentions are
considered present at the meeting, but since they are not affirmative votes for
the proposal they will have the same effect as votes against the proposal.
Broker non-votes, on the other hand, are not considered present at the meeting
for the particular proposal for which the broker withheld authority to vote.
2
<PAGE>
The following votes are necessary to adopt the proposals expected to be
acted upon at our annual meeting:
ELECTION OF DIRECTORS: Directors are elected by a plurality, and the
two nominees who receive the most votes will be elected. Abstentions and broker
non-votes will not be taken into account in determining the outcome of the
election.
CHANGE OF OUR NAME: To be adopted, the amendment to our Certificate of
Incorporation to change our name must receive the affirmative vote of the
majority of the shares entitled to vote. Brokers do not generally have
discretion to vote shares on this matter without instruction from the beneficial
owners. For purposes of this proposal, abstentions and broker non-votes have the
effect of negative votes.
APPROVAL OF AMENDMENT TO THE 1999 LONG TERM INCENTIVE PLAN. To be
adopted, the amendment to the Plan must receive the affirmative vote of the
majority of the shares present in person or by proxy at the meeting and entitled
to vote. Brokers do not generally have discretion to vote shares on this matter
without instruction from the beneficial owners. Since uninstructed shares may
not be voted, broker non-votes do not affect the outcome. Abstentions have the
effect of negative votes.
APPROVAL OF AUDITORS: To be adopted, this proposal must receive the
affirmative vote of the majority of the shares present in person or by proxy at
the meeting and entitled to vote. Brokers have discretion to vote shares on this
matter without instruction from the beneficial owners. For purposes of this
proposal, abstentions and broker non-votes have the effect of negative votes.
In addition to the solicitation of proxies by mail, our officers or
other employees, without extra remuneration, may solicit proxies by telephone or
personal contact. We will also request brokerage houses, nominees, custodians
and fiduciaries to forward soliciting material to beneficial owners of shares of
common stock and will pay such persons for forwarding such material. Given the
relatively short notice period preceding the Annual Meeting, we may retain a
solicitation agent to help us obtain proxies. We believe the cost of a
solicitation agent would be less than $10,000. We will pay all costs for the
solicitation of proxies by our Board of Directors.
A list of stockholders entitled to vote at the meeting will be
available for examination by stockholders during ordinary business hours during
the 10 days prior to the meeting at our executive offices. Our offices are
located at 13595 Dulles Technology Drive, Herndon, Virginia 20171.
3
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth certain information, as of April 25,
2000, with respect to the beneficial ownership of our common stock by:
o each of our Directors and nominees for Director,
o each of our executive officers named in the Summary Compensation
Table set forth under the caption "Executive Compensation" below,
and
o all of our Directors and executive officers as a group.
As of April 25, 2000, we believe no person beneficially owned more than
5% of the outstanding shares of our common stock.
<TABLE>
<CAPTION>
Number of
Shares Percentage of
Beneficially Common Stock
Beneficial Owner Owned(1) Outstanding (2)
---------------- ------------ ---------------
<S> <C> <C>
Steven Francesco (3).......................................... 1,600,000 4.47%
Lynn C. Chapman............................................... 239,493 *
Douglas J. Mello.............................................. 100,000 *
John M. Faccibene............................................. 100,000 *
Richard Yalen................................................. 100,000 *
Thomas Liebermann............................................. 40,000 *
Robert Glorioso............................................... 31,875 *
William Yundt................................................. 50,000 *
All Directors and executive officers as a group
(11 persons).................................................. 3,166,376 8.48%
</TABLE>
* Less than 1%
(1) The number of shares of Common Stock beneficially owned by each person is
determined under the rules of the Securities and Exchange Commission, and
the information is not necessarily indicative of beneficial ownership for
any other purpose. Under such rules, beneficial ownership includes any
shares as to which the individual has sole or shared voting power or
investment power and also any shares of Common Stock which the individual
has the right to acquire within 60 days after April 25, 2000 through the
exercise of any stock option or other right. The inclusion herein of any
shares of Common Stock deemed beneficially owned does not constitute an
admission of beneficial ownership of those shares. Unless otherwise
indicated, the persons named in the table have sole voting and investment
power with respect to all shares of Common Stock shown as beneficially
owned by them. As of April 25, 2000, all of the shares shown in this column
represent shares which underly stock options. The address of each
beneficial owner is care of the Company.
(2) Number of shares deemed outstanding includes 34,159,464 shares outstanding
as of April 25, 2000, plus any shares subject to options held by the person
or entity in question that are currently exercisable or exercisable within
60 days after April 25, 2000.
(3) Does not include 1,000,000 shares to which Mr. Francesco became entitled in
connection with the OpenRoute merger but which he deferred receipt of until
at least July 2000.
4
<PAGE>
ITEM 1: ELECTION OF DIRECTORS
Our Board of Directors is classified into three classes, designated as
Class I, Class II and Class III Directors, with members of each class holding
office for staggered three year terms. Currently, we have authorized three Class
I Directors, two Class II Directors and three Class III Directors. The terms of
the Class II Directors are scheduled to expire at the 2000 Annual Meeting.
Should any nominee to be a Director become unavailable for election for any
reason not presently known or contemplated, the persons named on the proxy will
have the discretionary authority to vote pursuant to the proxy for a substitute.
Biographical information with respect to each Director and each nominee
to become a Director, including age, position held with Netrix, term of office
as a Director, employment during the past five years, and identification of
certain other directorships held is set forth below.
NOMINEES TO BECOME CLASS II DIRECTORS (TERMS EXPIRING IN 2003)
STEVEN T. FRANCESCO, age 43, has been a Director and Chairman of the
Board since March 1999 and Chief Executive Officer of the Company since May,
1999. Mr. Francesco is founder and President of Darien Corporation, and was
founder and former President and COO of SmartServ Online, Inc. From 1989 to
1991, he was Senior Vice President of Strategic Planning and Operations for a
division of Cantor-Fitzgerald Securities. Mr. Francesco has served as a senior
strategic advisor to GTE Advanced Network Services, KeyTrade and e-Tel. Mr.
Francesco has served as a consultant to numerous companies, including AT&T, GTE,
Citibank, Chemical Bank, Chase Manhattan Bank, J.J. Kenny, ADP, Telerate, and
the Chicago Mercantile Exchange. Mr. Francesco founded the Market Technology
Group, a computer and technology service company providing financial systems and
market data retrieval to the financial services industry.
JOHN M. FACCIBENE, age 55, has been a Director of the Company since
March 1999. Since January 1999, Mr. Faccibene has been Managing Director,
Americas, for IxNet, a subsidiary of IPC Information Systems, Inc. From 1997 to
1998, he was Executive Director of CIBC/Oppenheimer & Co. From 1973 to 1998, he
was a senior member of the Security Industry Association (SIA), and for two
years served as Chairman of the SIA Technology Management Committee. For 22
years, Mr. Faccibene has been a senior member of the Wall Street
Telecommunications Association (WSTA) Executive Committee, and for three years
served as President of the WSTA. He has previously served as Chairman of the
NYNEX Executive Forum, Newbridge Worldwide User Group, Ascom/Timeplex User
Group, and is a Director of the New York Technical College. Mr. Faccibene also
serves as a Director of ADVESTA, a software company, Bridgewater Systems, a
software company, and Timestep, a software security company.
5
<PAGE>
CLASS III DIRECTORS (TERMS EXPIRING IN 2001)
LYNN C. CHAPMAN, age 46, joined the Company in December 1992 and has
been a Director since February 1997. Mr. Chapman was President and Chief
Executive Officer of the Company from 1997 until Mr. Francesco became an
officer. When Mr. Francesco became Chief Executive Officer, Mr. Chapman became
the President and Chief Operating Officer of the Company, which positions he
held until the merger with OpenRoute. Prior to joining the Company, Mr. Chapman
served in various management positions at Data General Corporation from 1989 to
November 1992.
THOMAS LIEBERMANN, age 59, has been a Director of the Company since the
merger with OpenRoute on December 22, 1999 and he was previously a member of
OpenRoute's board of directors since July 1998. Mr. Liebermann has been Chairman
and Chief Executive Officer of Advanced Frequency Products, LLC, which develops
specialized subsystems and components for the wireless communications and motion
sensing markets, since 1997. Prior to that Mr. Liebermann was President and
Chief Executive Officer of Kaye Instruments from 1989 until 1996.
DOUGLAS J. MELLO, age 50, became a Director of the Company in April
1999. Mr. Mello was employed by Bell Atlantic and its predecessor corporations
from 1965 until March, 1999. From 1997 to 1999, he served as President, Large
Business Sales-North for Bell Atlantic. From 1996 to 1997, he was NYNEX Vice
President-Business Marketing and Amp Sales, responsible for all business
customers in the New York and New England areas. From 1994 to 1996, he served as
Vice President-Sales for NYNEX Corporation. Prior to 1994, Mr. Mello was Group
Vice President-Manhattan Market Area for New York Telephone, where he was
responsible for the provisioning of telecommunications technology. From 1985 to
1991, he was President of Business Information Systems Corp. Mr. Mello is a
director of IxNet, Inc. and of Telexis Co.
CLASS I DIRECTORS (TERMS EXPIRING IN 2002)
DR. ROBERT M. GLORIOSO, age 50, has been a Director of the Company
since the merger with OpenRoute on December 22, 1999, and he was previously a
member of OpenRoute's board of directors since March 1997. Since April 1993, Dr.
Glorioso has held the position of President and Chief Executive Officer of, and
has served as a board member of, Marathon Technologies Corp. From January 1976
to December 1992, Dr. Glorioso held several senior executive positions at
Digital Equipment Corporation, including Vice President of Information Systems
Business and Vice President of Executive Consulting.
RICHARD YALEN, age 55, became a Director of the Company in April 1999.
Mr. Yalen is the Chief Executive Officer of Dynamic Telecom Engineering LLC, a
telecommunications company. From 1992 to 1998, prior to joining Dynamic Telecom,
Mr. Yalen served in various positions at Cable & Wireless USA, including that of
Chief Executive Officer.
WILLIAM YUNDT, age 59, has been a Director of the Company since
February 2000. Mr. Yundt is the Vice President of Network Operations at WebTV
Networks, Inc., a wholly-owned subsidiary of Microsoft Corporation, which
6
<PAGE>
position he has held since 1996. From 1994 until joining WebTV, Mr. Yundt
served as a Vice President of BBN Planet, the internet service arm of BBN Inc.
While Director of Networking and Communications Systems at Stanford University,
he founded BARRNET, the San Francisco Bay Area Regional Network, which
pioneered the Internet in Northern California. Mr. Yundt managed the
development of BARRNET until it was purchased by BBN in 1994.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR ELECTION OF THE
NOMINEES NAMED ABOVE.
GENERAL INFORMATION RELATING TO THE BOARD OF DIRECTORS
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
MEETINGS OF THE BOARD. During the fiscal year ended December 31, 1999,
the Board of Directors met eight times in person or by telephonic conference
meeting. Each Director listed above who was then serving attended at least 75%
of all of the meetings of the Board of Directors and the meetings of the
committees of the Board of Directors of which he was a member.
COMMITTEES OF THE BOARD. We have an Audit Committee of the Board of
Directors to facilitate direct contact between our independent accountants and
the Board of Directors. During 1999, the Audit Committee met one time to review
the effectiveness of the accountants during the annual audit, to discuss our
internal accounting policies and procedures and to consider and recommend the
selection of our independent accountants. The current members of the Audit
Committee are Messrs. Faccibene, Liebermann and Yalen.
We have a Compensation Committee of the Board of Directors that
recommends executive and employee compensation programs to the Board of
Directors and administers our stock option and other employee stock plans.
During 1999, the Compensation Committee met six times. The current members of
the Compensation Committee are Messrs. Faccibene and Mello.
We have an authorized Nominating Committee of the Board of Directors to
recommend qualified candidates for nomination to the Board. The Nominating
Committee also considers nominees recommended by stockholders if such
recommendations are submitted in writing prior to the time stockholder proposals
are due to be submitted for inclusion in proxy materials. During 1999, the
Nominating Committee was inactive and members were not appointed.
COMPENSATION OF DIRECTORS
In 1999, each member of the Board of Directors who was not an employee
of the Company was paid a one time grant of 50,000 stock options with an
exercise price equal to $3.31, the fair market value on the grant date. On
September 30, 1999, the Company repriced the options issued to the Board of
Directors to $2.50 per share, the then market value. In recognition of the
demands placed upon the Board in connection with the OpenRoute transaction, each
7
<PAGE>
Director who was not an employee of the Company was granted an additional 50,000
options at December 2, 1999 with an exercise price equal to the market price on
such date. Although the Board compensation for 2000 has not been fixed, we
anticipate that each non-employee Director will be granted an additional 25,000
stock options for 2000 and each subsequent year with an exercise price equal to
the fair market value on the grant date. In addition, Directors are reimbursed
for all reasonable expenses incurred by them in connection with their attendance
at Board or Committee meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee for 1999 were Messrs. Mello
and Faccibene. None of the executive officers of the Company currently serves on
the compensation committee of another entity or any other committee of the board
of directors of another entity performing functions similar to the Compensation
Committee. No interlocking relationships exist between the Company's Board of
Directors or its Compensation Committee and the board of directors of
compensation committee of any other company.
8
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation
for the last three fiscal years of the Company's Chief Executive Officer and the
Company's other most highly compensated executive officers who earned at least
$100,000 in Salary and Bonus in 1999 (together, the "Named Executive Officers")
for the year ended December 31, 1999.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-term
Compensation Awards
Annual Compensation Securities
---------------------------------- Underlying All Other
Name/position Year Salary($) Bonus($) Other(5) Options(#) Compensation
- ------------------ ---- --------- -------- -------- ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Steven T. Francesco(1) 1999 126,201 -- 15,000(2) 1,600,000 1,000,000 shares(3)
Chief Executive 1998 -- -- -- -- --
Officer, Chairman of 1997 -- -- -- -- --
the Board of
Directors and Director
Lynn C. Chapman (4) 1999 156,834 -- 1,000(5) 50,000 --
Chief Operations 1998 160,000 6,583 -- 100,000 --
Officer, Vice 1997 156,546 21,750 2,375(5) 29,000 --
Chairman of the Board
of Directors and
Director
Karl W. Finkelnburg(6) 1999 142,602 -- 956(5) -- --
Former Vice President 1998 163,658 -- 900(5) -- --
Sales and American 1997 197,230 -- 1,544(5) -- --
Operations
</TABLE>
(1) Mr. Francesco became the Chief Executive Officer in May, 1999.
(2) Represents reimbursement of moving expenses.
(3) Upon the merger with OpenRoute, Mr. Francesco became entitled to 1,000,000
shares of common stock pursuant to the change of control provisions of his
employment contract. Mr. Francesco deferred receipt of such payment
until 2000.
(4) Mr. Chapman was Chief Executive Officer through May, 1999.
(5) Represents matching 401(k) plan contributions by the Company.
(6) Mr. Finkelnburg resigned from the Company effective December 31, 1999.
9
<PAGE>
OPTION GRANTS
The following table summarizes option grants during 1999 to the Named
Executive Officers:
<TABLE>
<CAPTION>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
- -------------------------------------------------------------------------------------------------------------------------------
Percent Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
- -------------------------------------------------------------------------------------------------------------------------------
Name Options % of Total Exercise Market Expiration 0%($) 5%($) 10%
Granted Options Price Price (B) Date (C) ($)
(#)(A) granted to (%/
employees Share)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Steven T. Francesco 400,000(D)(E) $1.50 3.31 7/22/09 724,000 1,557,000 2,834,000
1,200,000(D)(E) 23.9 2.75 3.31 7/22/09 672,000 3,170,000 7,002,000
Lynn C. Chapman 50,000(D) * 2.50 2.50 9/29/09 -- 78,000 199,000
Karl Finkelnburg -0- * N/A N/A N/A N/A N/A N/A
</TABLE>
* less than 1 percent of total options granted to employees.
(A) Under the terms of the Company's incentive stock option plan, the Board of
Directors retains discretion, subject to plan limits, to modify the terms
of the outstanding options and to reprice the options. The options were
granted for a term of 10 years, subject to earlier termination in the
event of termination of employment. The options were granted with tandem
tax withholding rights.
(B) Equals fair market value of common stock on the date of grant.
(C) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 0%, 5% and 10%
compounded annually from the date of grant to their expiration date.
Actual gains, if any, on stock option exercises will depend upon the
future performance of the common stock and the date on which the options
are exercised.
(D) Identified options were granted September 29, 1999, and became 100% vested
and exercisable at December 23, 1999. Vesting was accelerated due to the
OpenRoute merger.
(E) Identified options were granted based on terms of employment contract.
OPTION EXERCISES AND YEAR-END VALUES
The following table summarizes option exercises during 1999 by the Named
Executive Officers and the value of the options held by such persons at the end
of 1999:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Shares
Acquired Number of Value of Unexercised
On Value Unexercised Options In-the-money Options
Exercise Realized At Fiscal Year-end (#) At Fiscal Year-end ($)
-------------------------- --------------------------
Name (#) ($) Exercisable\Unexercisable Exercisable\Unexercisable
------ ----- ----- -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Steven Francesco -- -- 1,600,000 -- 20,000,000 --
Lynn C. Chapman -- -- 204,784 86,216 2,547,981 1,032,302
Karl Finkelnburg -- -- 15,692 -- 185,293 --
</TABLE>
10
<PAGE>
EMPLOYMENT AGREEMENT
Steven T. Francesco, the Chairman and Chief Executive Officer of the
Company, entered into an employment agreement effective as of March 22, 1999.
The term of Mr. Francesco's agreement is through March 21, 2002. Under the
agreement, Mr. Francesco is paid a base salary of $160,000 per annum, and he is
eligible for an annual bonus to be established in the sole discretion of the
compensation committee of the Company's Board. In addition, Mr. Francesco has
been issued options to purchase 1,600,000 shares of Netrix common stock. The
first 400,000 options have an exercise price of $1.50 per share and vested upon
grant. The remaining 1,200,000 options are exercisable at $2.75 per share and
400,000 options were scheduled to vest on each anniversary of the agreement,
subject to acceleration if certain performance criteria are met. Pursuant to the
stock option plan under which the options were granted, all 1,200,000 options
vested upon consummation of the OpenRoute merger. Mr. Francesco's employment
agreement also provides that, in the event of a change in control of Netrix, Mr.
Francesco will be issued 1,000,000 shares of Netrix common stock. Mr. Francesco
became entitled to these shares in connection with the OpenRoute merger, but he
deferred receipt of such shares until at least July 2000. In the event Mr.
Francesco's employment is terminated by Netrix without cause or by Mr. Francesco
for good reason, as these terms are described in the employment agreement, he
will be entitled to: (1) receive an amount equal to three times his base salary,
(2) accelerated vesting of all of his stock options and (3) participation in
Netrix benefit plans for up to three years. Mr. Francesco's employment agreement
also contains non-compete provisions for between one and three years after
termination of this employment, that relate to the manner in which his
employment is terminated; provided, that if Mr. Francesco voluntarily resigns
from Netrix, there will be no non-compete covenant unless Netrix pays him an
amount equal to one year's salary, in which case the non-compete period will be
one year. If the payment to Mr. Francesco upon termination or change of control
results in the imposition of a excise tax pursuant to Section 280G of the
Internal Revenue Code, Netrix will pay to Mr. Francesco a tax "gross-up" payment
equal to the amount of his resulting tax liability.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 2000, the Company entered into a $10.0 million line of
credit agreement with its chief executive officer, Steven T. Francesco. The loan
agreement provided for interest of prime plus 5% on the outstanding principal.
No amounts were borrowed under this agreement. Per the agreement, the line was
terminated in March 2000 upon the Company completing an equity offering greater
than $10.0 million.
COMPARATIVE STOCK PERFORMANCE
The following chart compares cumulative total stockholder return on our
common stock during the period from December 31, 1994, through December 31,
1999, with the cumulative return over the same period of (1) the Russell 2000
Index and (2) a peer group* of publicly-traded companies selected by us for
purposes of this comparison. The chart assumes the investment of $100 at the
close of trading on December 31, 1994 in our common stock, the Russell 2000
Index and the specified peer group and assumes reinvestment of dividends.
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Measurement points are at December 31, 1994, December 31, 1995, December 31,
1996, December 31, 1997, December 31, 1998, and December 31, 1999.
COMPARATIVE STOCKHOLDER RETURNS
NETRIX CORPORATION, RUSSELL 2000 INDEX AND PEER GROUP*
(PERFORMANCE RESULTS FROM 12/31/94 THROUGH 12/31/99)
[PERFORMANCE GRAPH OMITTED - DATA REFLECTED IN TABLE BELOW]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
------------ ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NETRIX CORPORATION $100.00 $50.00 $51.53 $11.48 $25.68 $161.49
RUSSELL 2000 INDEX $100.00 $128.40 $149.66 $183.13 $178.46 $216.40
CURRENT PEER GROUP $100.00 $174.28 $200.75 $142.37 $68.92 $92.10
</TABLE>
* The peer group includes the following companies: Coyote Network Systems
Inc. (CYOE), E Net Inc. (ETEL), Hypercom Corp. (HYC), Olicom AS (OLCMF),
Network Equipment Technologies Inc. (NWK), Pairgain Technologies Inc.
(PAIR), Sync Research, Inc. (SYNX), Verilink Corp. (VRLK), Vocaltec
Communications Ltd. (VOCL). The stockholder returns of each company have
been weighted to reflect relative market capitalization. OpenRoute
Networks, Inc. was removed from the peer group we used in the proxy
statement for the 1999 Annual Meeting of Stockholders because they were
acquired by us and ceased to be a public company.
12
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REPORT ON EXECUTIVE COMPENSATION
BY THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS
Policies pertaining to the compensation of Netrix's executive officers
are established and administered by the Compensation Committee of the Board of
Directors (the "Committee"). Pursuant to Netrix's By-Laws, the Committee is
composed of two non-employee directors. Currently, the members of the Committee
are Messrs. Faccibene and Mello. All decisions made by the Committee relating to
compensation of the Company's executive officers are reviewed by the full Board
of Directors. This report, submitted by the Committee, addresses Netrix's
policies during 1999 as applied to Netrix's Chief Executive Officer and the two
next most highly compensated executive officers of Netrix. The Committee was
appointed in April 1999 in connection with substantial changes to the
composition of the Board of Directors. Accordingly, the Committee did not fix
the 1999 salaries for executive officers who held their offices prior to the
appointment of the Committee. The Committee, however, did establish the
compensation for Mr. Francesco, who became the Chief Executive Officer of Netrix
in May 1999, and the executive officers who joined the Company after April 1999.
OBJECTIVES. Netrix's executive compensation program was designed to
promote the following objectives:
o to provide competitive compensation that would help attract,
retain and reward highly qualified executives who contribute to
the long-term success of Netrix, especially in light of the
efforts to recruit new executives in 1999; and
o to align management's interests with stockholders' interests by
providing long-term equity incentives to management.
The Committee believes that Netrix's executive compensation program
provides an overall level of compensation that is competitive within its
industry and among companies of comparable size and complexity. To ensure that
compensation is competitive, Netrix regularly compares its compensation
practices with those of other similar companies and sets its compensation
guidelines based on this review. The Committee also seeks to achieve an
appropriate balance of the compensation paid to a particular individual and the
compensation paid to other executives both inside Netrix and at comparable
companies and attempts to maintain an appropriate mix of salary and incentive
compensation. While compensation data are useful guides for comparative
purposes, the Committee believes that a successful compensation program also
requires the application of judgment and subjective determinations of individual
performance.
To attract the quality of executives Netrix considers necessary to
enable it to succeed in its business plan, the Committee has increased the use
of equity incentive compensation in 1999 relative to prior years. Also, in light
of the increased use of equity incentives and the cash constraints Netrix faced
in 1999, the Committee discontinued the program previously in effect of paying
monthly cash bonus installments based on the economic performance of Netrix. The
Committee believes that these changes are consistent with the trend in the
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industry in which Netrix operates, and are necessary for Netrix to continue to
attract additional qualified management, sales and technical employees.
In 1999, Netrix recruited a new Chief Executive Officer and Chief
Financial Officer, and we entered into employment contracts with each of them.
To date in 2000, Netrix has recruited additional senior executive officers, and
we entered into employment contracts with each of them. The employment contracts
are consistent with the objectives of the Committee's employment program
described in this report.
COMPOSITION OF THE PROGRAM. Netrix's executive compensation program
typically consists of base salary, annual incentive compensation and long-term
equity incentives in the form of stock options. Executive officers also are
eligible to participate in certain benefit programs that generally are available
to all employees of Netrix, such as life insurance programs, Netrix's Employee
Stock Purchase Plan and medical and 401(k) savings plans.
BASE SALARY. At the beginning of each fiscal year, the
Committee establishes an annual salary plan for senior executive officers based
upon recommendations from the Chief Executive Officer. The Committee attempts to
set base salary compensation within the range of salaries of executive officers
with comparable qualifications, experience and responsibilities at other
companies in the same or similar businesses and of comparable size and success.
In addition to external market data, salary determinations depend upon both
Netrix's financial performance and an individual's performance as measured by
certain subjective non-financial criteria. These non-financial criteria include
the individual's contributions to Netrix as a whole, including the ability to
motivate others, the individual's capacity to develop new skills as Netrix
matures, ability to recognize and pursue new business opportunities and ability
to initiate programs to enhance the present and future growth and success of
Netrix. In 1999, the Committee was appointed after the initial establishment of
salaries for continuing executive officers. The Committee, however, established
the salary for the Chief Executive Officer and, based on the recommendation of
the Chief Executive Officer, the salary of each new executive officer who joined
Netrix in 1999 and 2000.
ANNUAL INCENTIVE COMPENSATION. Netrix's bonus program
traditionally was designed to provide its key employees with cash incentives to
achieve Netrix's financial goals. At the beginning of each year, the Committee
typically established target annual bonuses for each executive officer to be
awarded if Netrix achieved its target net income for the year. Cash bonuses were
then paid monthly based upon Netrix's ongoing financial performance on a monthly
and year-to-date basis. In 1999, the Committee did not rely on cash bonuses as
an important part of the compensation structure. Performance criteria were not
established for executive officers at the beginning of the year, and bonuses
were not paid under this structure for 1999. Commencing in 2000, the Committee
intends to evaluate the individual performances of the executive officers,
taking into account the recommendations of the Chief Executive Officer, and the
performance of Netrix as a whole, and make appropriate bonus awards. No
executive officer has been given any guaranteed bonus or target bonus amount for
2000.
LONG-TERM INCENTIVE COMPENSATION. Netrix's stock option plan
is designed to promote an identity of long-term interests between Netrix's
employees and its stockholders as well as to assist in the retention of key
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executives. The size of option grants under the plan generally is intended to
reflect the recipient's position with Netrix and his or her contributions to the
company. Stock options typically vest over a multi-year period in order to
encourage recipients to continue their employment with Netrix.
OTHER BENEFITS. Netrix's executive officers are entitled to
receive medical and life insurance benefits and to participate in Netrix's
401(k) Retirement Savings Plan on the same basis as other full-time employees of
Netrix. Netrix's 1992 Employee Stock Purchase Plan, which is available to
virtually all employees including executive officers, allows participants to
purchase shares at a discount of approximately 15% from the fair market value at
the beginning or end of a purchase period. In addition, as part of the
recruitment of new executive officers, Netrix has granted certain change of
control protections to some of the officers. The Committee believes that many of
the newly recruited executives would not have been willing to join Netrix
without these protections.
SUMMARY OF COMPENSATION OF CHIEF EXECUTIVE OFFICER. In May 1999, Mr.
Francesco joined Netrix as Chief Executive Officer. The Committee negotiated an
employment contract with Mr. Francesco that provided for his compensation for
1999. The terms of the contract are described in detail under the caption
"Employment Agreement" on page 11 of this Proxy Statement. As a result of
Netrix's cash requirements at the time the contract was entered into, the
contract primarily provided Mr. Francesco with the opportunity to earn
additional equity-based compensation in the form of stock options for continuing
his employment with Netrix. The salary in the contract is fixed at $160,000 per
annum. At the time of the merger with OpenRoute, executives of OpenRoute were
earning well in excess of this salary level. Accordingly, in December 1999 the
Committee increased Mr. Francesco's annual salary to $275,000 per annum. No
bonus was paid to Mr. Francesco with respect to 1999.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). In connection with
making decisions with respect to executive compensation, the Committee has taken
into account, as one of the factors which it considers, the provisions of
Section 162(m) of the Internal Revenue Code, which limits the deductibility by
Netrix of certain categories of compensation in excess of $1,000,000 paid
certain executive officers.
COMPENSATION COMMITTEE
John M. Faccibene
Douglas J. Mello
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ITEM 2: CHANGE OF OUR NAME TO NX NETWORKS, INC.
Stockholders are being asked to consider and approve an amendment to
our Certificate of Incorporation to change our name from Netrix Corporation to
Nx Networks, Inc. The text of our Certificate of Incorporation, as proposed to
be amended, is set forth in Exhibit A.
In connection with the merger of Netrix Corporation and OpenRoute
Networks, Inc. we started to conduct business under the name Nx Networks, Inc.
Our goal is to reinforce that a new company emerged from the combination of
Netrix Corporation and OpenRoute Networks, Inc. To date, we have used Nx
Networks as a "d/b/a" or "doing business as." The proposed amendment to our
Certificate of Incorporation permits us to formally change the name of the
corporation to Nx Networks.
If the proposal is approved by the stockholders at the Annual Meeting,
it will become effective at the time we file an amendment to our Certificate of
Incorporation with the Secretary of State of the State of Delaware.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO CHANGE OUR NAME TO NX NETWORKS,
INC.
ITEM 3: AMENDMENT OF THE 1999 LONG-TERM INCENTIVE PLAN
The Board of Directors approved, subject to stockholder approval, an
amendment to our 1999 Long-Term Incentive Plan to increase by 2,500,000 shares
the number of shares of common stock subject to the Plan. The Plan is an
incentive and non-qualified stock-based award plan that currently authorizes the
issuance of up to 4,825,000 shares of common stock to our employees, officers,
directors and consultants through the granting of incentive and non-qualified
stock options, stock appreciation rights, restricted stock, deferred stock,
bonus stock, dividend equivalents and other stock-based awards. A complete copy
of the Plan is attached to this proxy statement as Exhibit B.
Under our stock option plans currently in effect, including those we
assumed in connection with the acquisitions of OpenRoute Networks, Inc. and
AetherWorks Corporation, as of April 25, 2000, we had approximately 8,075,000
options outstanding, which leaves us with approximately 925,000 shares available
for grant. The Board deems it advisable to increase the number of available
shares of common stock under the Plan.
PURPOSE OF THE PLAN. The purpose of the Plan is to advance the
interests of Netrix and its stockholders by providing a means to attract, retain
and reward directors, officers and other key employees and consultants and to
enable those persons to acquire or increase a proprietary interest in Netrix,
thereby promoting a closer identity of interests between them and our
stockholders.
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PLAN ADMINISTRATION. The Plan is administered by the Compensation
Committee of the Board of Directors. The Committee currently is comprised of
Messrs. Faccibene and Mello.
TYPES OF AWARDS AVAILABLE UNDER THE PLAN. The Committee may issue up to
4,825,000 (7,325,000 if the amendment to the Plan is approved) shares of the
common stock to our employees, officers, directors or consultants.
STOCK OPTIONS. The Committee may grant nonqualified stock options and
incentive stock options with the exercise price, timing and method of exercise
to be determined by the Committee. The terms of any incentive stock option must
comply with Section 422 of the Internal Revenue Code. Unless otherwise
determined by the Committee, stock options must be exercised within three months
after a termination of employment. However, if a participant is terminated for
cause, his options shall terminate as of the date of such termination.
STOCK APPRECIATION RIGHTS. A stock appreciation right ("SAR") gives the
recipient the right to receive, upon exercise, the excess of the fair market
value of one share of stock on the date of exercise over the grant price of the
SAR on the date of the grant (which will not be less than the fair market value
of one share of Common Stock on the date of the grant). The Committee shall
determine the times at which such SARs may be exercised, the method for such
exercise, and all other terms and conditions applicable to SARs.
RESTRICTED STOCK. Restricted stock is granted subject to restrictions
on transferability which lapse after a specified period of time. The Committee
shall determine the restrictions applicable to restricted stock and the method
in which any dividends on such restricted stock will be paid. Unless otherwise
provided in the award agreement, restricted stock will be forfeited if the
participant terminates his employment during the applicable restriction period.
DEFERRED STOCK. Deferred stock is delivered to participants after the
expiration of the deferral period specified in the award agreement, subject to
any restrictions imposed by the Committee. Unless otherwise provided in the
award agreement, deferred stock will be forfeited if the Participant terminates
his employment during the applicable restriction period.
BONUS STOCK AND AWARDS IN LIEU OF CASH OBLIGATIONS. The Committee may
grant stock as a bonus, or grant stock and other awards in lieu of Company
obligations to pay cash under other plans or compensatory arrangements.
DIVIDEND EQUIVALENTS. The Committee may grant dividend equivalents,
which entitle the recipient to receive cash, Common Stock, other awards, or
other property equal in value to dividends paid with respect to a specified
number of shares of Common Stock.
OTHER AWARDS. Finally, the Committee may grant other stock-based awards
that may be denominated in, payable in or valued in whole or in part by
reference to or relation to the Company's Common Stock. Such awards may include,
but are not limited to, convertible or exchangeable debt securities, other
rights convertible or exchangeable into Common Stock, purchase rights for Common
Stock, awards with value and payment contingent upon performance of the Company
or any other factors designated by the Committee and awards valued by reference
to the book value of the Common Stock or the value of the securities of
specified subsidiaries of the Company or the performance of specified
subsidiaries.
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OTHER INFORMATION. The Committee shall determine the term of each award
granted under the Plan, provided, however, that in no event shall the term of
any incentive stock option or SAR granted in tandem therewith exceed a period of
ten years from the date of grant. The Board of Directors has a limited right to
modify or amend the proposed plan.
As promptly as practical after the amendment to the 1999 Plan is
approved, we will file a registration with the Securities and Exchange
Commission to permit the resale of the additional common stock issuable under
the 1999 Plan (subject to vesting and other requirements) to the public. During
the term of the proposed 1999 Plan, our eligible Directors, officers, employees
and consultants will receive, upon exercise, the opportunity to profit from any
rise in the market value of our common stock. Consequently, the equity interest
of other stockholders of Netrix will be diluted. The grant and exercise of
options also may affect our ability to obtain additional capital during the term
of any options.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
AMENDMENT TO THE 1999 LONG-TERM INCENTIVE PLAN.
ITEM 4: SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has been recommended by the Audit Committee and
selected by the Board of Directors to audit our books and accounts for 2000.
Arthur Andersen LLP has advised us that neither it nor any of its
members has any direct financial interest in Netrix as a promoter, underwriter,
voting trustee, director, officer or employee.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF ARTHUR
ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
certain officers and persons holding more than 10% of a registered class of the
Company's equity securities to file reports of ownership and reports of changes
in ownership with the Securities and Exchange Commission (the "Commission") and
the Nasdaq National Market. Directors, certain officers and greater than 10%
stockholders are also required by Commission regulations to furnish the Company
with copies of all such reports that they file. Based on the Company's review of
copies of such forms provided to it, the Company believes that all filing
requirements were complied with during the fiscal year ended December 31, 1999,
except for one late filing of a Form 3 and Form 4 by Peter Kendrick, in his
capacity as an executive officer, and one late filing of a Form 4 by each of
Messrs. Faccibene, McNulty, Mello and Yalen, in their capacity as directors of
the Company.
STOCKHOLDER PROPOSALS FOR THE ANNUAL MEETING OF STOCKHOLDERS
Proposals which stockholders wish to have considered for inclusion in
the proxy statement for the 2001 Annual Meeting of Stockholders must be received
at our principal executive offices on or before January 21, 2001. The address of
our principal executive office is: Netrix Corporation, 13595 Dulles Technology
Drive, Herndon, Virginia, 20171.
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EXHIBIT A
PROPOSED AMENDMENT TO THE
ARTICLES OF INCORPORATION
We will amend Article First to our Certificate of
Incorporation if the amendment is approved by stockholders at the Annual
Meeting. Set forth below is the proposed amendment. The proposed new text is in
italics and the proposed deletions are indicated by overstriking.*
ARTICLE FIRST
FIRST: The name of the corporation is NX NETWORKS, INC.
[Netrix Corporation.]
- -----------------------
* EDGAR VERSION ONLY: brackets are used in place of overstriking.
A-1
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EXHIBIT B
AMENDED AND RESTATED
NETRIX CORPORATION
1999 LONG-TERM INCENTIVE PLAN
1. PURPOSE. The purpose of this 1999 Long-Term Incentive Plan (the "Plan")
of Netrix Corporation, a Delaware corporation (the "Company"), is to advance the
interests of the Company and its stockholders by providing a means to attract,
retain, and reward directors, officers and other key employees and consultants
of the Company and its subsidiaries (including consultants providing services of
substantial value) and to enable such persons to acquire or increase a
proprietary interest in the Company, thereby promoting a closer identity of
interests between such persons and the Company's stockholders.
2. DEFINITIONS. The definitions of awards under the Plan, including
Options, SARs (including Limited SARs), Restricted Stock, Deferred Stock, Stock
granted as a bonus or in lieu of other awards, Dividend Equivalents, and Other
Stock-Based Awards, are set forth in Section 6 of the Plan. Such awards,
together with any other right or interest granted to a Participant under the
Plan, are termed "Awards." For purposes of the Plan, the following additional
terms shall be defined as set forth below:
(a) "AWARD AGREEMENT" means any written agreement, contract, or other
instrument or document evidencing an Award.
(b) "BENEFICIARY" shall mean the person, persons, trust, or trusts
which have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under this Plan upon such Participant's death or, if there is no
designated Beneficiary or surviving designated Beneficiary, then the person,
persons, trust, or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
(c) "BOARD" means the Board of Directors of the Company.
(d) A "CHANGE IN CONTROL" shall be deemed to have occurred if:
(i) any person, other than the Company or an employee benefit
plan of the Company, acquires directly or indirectly the Beneficial Ownership
(as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended)
of any voting security of the Company and immediately after such acquisition
such Person is, directly or indirectly, the Beneficial Owner of voting
securities representing 50% or more of the total voting power of all of the
then-outstanding voting securities of the Company;
(ii) the stockholders of the Company shall approve a merger,
consolidation, recapitalization, or reorganization of the Company, a reverse
stock split of outstanding voting securities, or consummation of any such
transaction if stockholder approval is not sought or obtained, other than any
such transaction which would result in at least 75% of the total voting power
represented by the voting securities of the surviving entity outstanding
immediately after such transaction being Beneficially Owned by at least 75% of
the holders of outstanding voting securities of the Company immediately prior to
the transaction, with the voting power of each such continuing holder relative
to other such continuing holders not substantially altered in the transaction;
or
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(iii) the stockholders of the Company shall approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or a substantial portion of the Company's assets (i.e.,
50% or more of the total assets of the Company).
(e) "CODE" means the Internal Revenue Code of 1986, as amended from
time to time. References to any provision of the Code shall be deemed to include
regulations thereunder and successor provisions and regulations thereto.
(f) "COMMITTEE" means the Compensation Committee of the Board, or such
other Board committee as may be designated by the Board to administer the Plan;
PROVIDED, HOWEVER, that to the extent necessary to comply with Rule 16b-3, the
Committee shall consist of two or more directors, each of whom is a
"disinterested person" within the meaning of Rule 16b-3.
(g)`"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time. References to any provision of the Exchange Act shall
be deemed to include rules thereunder and successor provisions and rules
thereto.
(h) "FAIR MARKET VALUE" means, with respect to Stock, Awards, or other
property, the fair market value of such Stock, Awards, or other property
determined by such methods or procedures as shall be established from time to
time by the Committee, provided, however, that (i) if the Stock is listed on a
national securities exchange or quoted in an interdealer quotation system, the
Fair Market Value of such Stock on a given date shall be based upon the last
sales price or, if unavailable, the average of the closing bid and asked prices
per share of the Stock on such date (or, if there was no trading or quotation in
the Stock on such date, on the next preceding date on which there was trading or
quotation) as provided by one of such organizations, (ii) the "fair market
value" of Stock on the date on which shares of Stock are first issued and sold
pursuant to a registration statement filed with and declared effective by the
Securities and Exchange Commission shall be the Initial Public Offering price of
the shares so issued and sold, as set forth in the first final prospectus used
in such offering and (iii) the "fair market value" of Stock prior to the date of
the Initial Public Offering shall be as determined by the Board of Directors.
(i) "INITIAL PUBLIC OFFERING" shall mean an initial public offering of
shares of Stock in a firm commitment underwriting registered with the Securities
and Exchange Commission in compliance with the provisions of the 1933 Act.
(j) "ISO" means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code.
(k) "NON-EMPLOYEE DIRECTOR" shall mean a member of the Board who is not
otherwise an employee of the Company or any subsidiary.
(l) "PARTICIPANT" means a person who, at a time when eligible under
Section 5 hereof, has been granted an Award under the Plan.
(m) "RULE 16B-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(n) "STOCK" means the Common Stock, $.05 par value, of the Company and
such other securities as may be substituted for Stock or such other securities
pursuant to Section 4.
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3. ADMINISTRATION.
(a) AUTHORITY OF THE COMMITTEE. The Plan shall be administered by the
Committee. The Committee shall have full and final authority to take the
following actions, in each case subject to and consistent with the provisions of
the Plan:
(i) to select Participants to whom Awards may be granted;
(ii) to determine the type or types of Awards to be granted to
each Participant;
(iii) to determine the number of Awards to be granted, the
number of shares of Stock to which an Award will relate, the terms and
conditions of any Award granted under the Plan (including, but not limited to,
any exercise price, grant price, or purchase price, any restriction or
condition, any schedule for lapse of restrictions or conditions relating to
transferability or forfeiture, exercisability, or settlement of an Award, and
waivers or accelerations thereof, and waivers of or modifications to performance
conditions relating to an Award, based in each case on such considerations as
the Committee shall determine), and all other matters to be determined in
connection with an Award;
(iv) to determine whether, to what extent, and under what
circumstances an Award may be settled, or the exercise price of an Award may be
paid, in cash, Stock, other Awards, or other property, or an Award may be
cancelled, forfeited, or surrendered;
(v) to determine whether, to what extent, and under what
circumstances cash, Stock, other Awards, or other property payable with respect
to an Award will be deferred either automatically, at the election of the
Committee, or at the election of the Participant;
(vi) to prescribe the form of each Award Agreement, which need
not be identical for each Participant;
(vii) to adopt, amend, suspend, waive, and rescind such rules
and regulations and appoint such agents as the Committee may deem necessary or
advisable to administer the Plan;
(viii) to correct any defect or supply any omission or reconcile
any inconsistency in the Plan and to construe and interpret the Plan and any
Award, rules and regulations, Award Agreement, or other instrument hereunder;
and
(ix) to make all other decisions and determinations as may be
required under the terms of the Plan or as the Committee may deem necessary or
advisable for the administration of the Plan.
(b) MANNER OF EXERCISE OF COMMITTEE AUTHORITY. Unless authority is
specifically reserved to the Board under the terms of the Plan, the Company's
Certificate of Incorporation or Bylaws, or applicable law, the Committee shall
have sole discretion in exercising authority under the Plan. Any action of the
Committee with respect to the Plan shall be final, conclusive, and binding on
all persons, including the Company, subsidiaries of the Company, Participants,
any person claiming any rights under the Plan from or through any Participant,
and stockholders. The express grant of any specific power to the Committee, and
the taking of any action by the Committee, shall not be construed as limiting
any power or authority of the Committee. The Committee may delegate to officers
or managers of the Company or any subsidiary of the Company the authority,
subject to such terms as the Committee shall determine, to perform
administrative functions and, with respect to Participants not subject to
Section 16 of the Exchange Act, to perform such other functions as the Committee
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may determine, to the extent permitted under Rule 16b-3, if applicable, and
other applicable law.
(c) LIMITATION OF LIABILITY. Each member of the Committee shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him by any officer or other employee of the Company or any
subsidiary, the Company's independent certified public accountants, or any
executive compensation consultant, legal counsel, or other professional retained
by the Company to assist in the administration of the Plan. No member of the
Committee, nor any officer or employee of the Company acting on behalf of the
Committee, shall be personally liable for any action, determination, or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Committee and any officer or employee of the Company acting on
their behalf shall, to the extent permitted by law, be fully indemnified and
protected by the Company with respect to any such action, determination, or
interpretation.
4. STOCK SUBJECT TO PLAN.
(a) AMOUNT OF STOCK RESERVED. The total amount of Stock that may be
subject to outstanding Awards, determined immediately after the grant of any
Award, shall not exceed 7,325,000 shares of the total number of shares of Stock
outstanding. Shares subject to ISOs, Restricted Stock or Deferred Stock Awards
shall not be deemed delivered if such Awards are forfeited, expire or otherwise
terminate without delivery of shares to the Participant. If an Award valued by
reference to Stock may only be settled in cash, the number of shares to which
such Award relates shall be deemed to be Stock subject to such Award for
purposes of this Section 4(a). Any shares of Stock delivered pursuant to an
Award may consist, in whole or in part, of authorized and unissued shares or
treasury shares.
(b) ADJUSTMENTS. In the event of any dividend or other distribution
(whether in the form of cash, Stock, or other property), recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, or share exchange, or other similar corporate
transaction or event, affects the Stock such that an adjustment is appropriate
in order to prevent dilution or enlargement of the rights of Participants under
the Plan, then the Committee shall, in such manner as it may deem equitable,
adjust any or all of (i) the number and kind of shares of Stock deemed to be
available thereafter for grants of Awards under Section 4(a) (including with
respect to the limitations relating to ISOs and to Restricted and Deferred
Stock), (ii) the number and kind of shares of Stock that may be delivered or
deliverable in respect of outstanding Awards, and (iii) the exercise price,
grant price, or purchase price relating to any Award (or, if deemed appropriate,
the Committee may make provision for a cash payment with respect to any
outstanding Award). In addition, the Committee is authorized to make adjustments
in the terms and conditions of, and the criteria included in, Awards (including,
without limitation, cash payments in exchange for an Award or substitution of
Awards using stock of a successor or other entity) in recognition of unusual or
nonrecurring events (including, without limitation, events described in the
preceding sentence) affecting the Company or any subsidiary or the financial
statements of the Company or any subsidiary, or in response to changes in
applicable laws, regulations, or accounting principles. The foregoing
notwithstanding, no adjustments shall be authorized under this Section 4(c) with
respect to ISOs or SARs in tandem therewith to the extent that such authority
would cause the Plan to violate Section 422(b)(1) of the Code, and no such
adjustment shall be authorized with respect to Options or other Awards granted
in accordance with Section 7(f) hereof to the extent that such authority would
cause such Options or other Awards to fail to qualify as "performance-based
compensation" under Section 162(m)(4)(C) of the Code and regulations thereunder
(including Regulation 1.162-27(e)(2)).
5. ELIGIBILITY. Executive officers and other key employees of the Company
and its subsidiaries, including any director and persons who provide consulting
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or other services to the Company deemed by the Committee to be of substantial
value to the Company, are eligible to be granted Awards under the Plan. In
addition, a person who has been offered employment by the Company or its
subsidiaries is eligible to be granted an Award under the Plan, provided that
such Award shall be cancelled if such person fails to commence such employment,
and no payment of value may be made in connection with such Award until such
person has commenced such employment. The foregoing notwithstanding,
Non-Employee Directors who are members of the Committee shall not be eligible to
be granted Awards under the Plan.
6. SPECIFIC TERMS OF AWARDS.
(a) GENERAL. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on any Award or
the exercise thereof, at the date of grant or thereafter (subject to Section
8(e)), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including terms
requiring forfeiture of Awards in the event of termination of employment or
service of the Participant. Except as provided in Sections 6(f), 6(h), or 7(a),
or to the extent required to comply with requirements of the Delaware General
Corporation Law that lawful consideration be paid for Stock, only services may
be required as consideration for the grant (but not the exercise) of any Award.
(b) OPTIONS. The Committee is authorized to grant Options to
Participants (including "reload" options automatically granted to offset
specified exercises of options) on the following terms and conditions:
(i) EXERCISE PRICE. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee.
(ii) TIME AND METHOD OF EXERCISE. The Committee shall determine
the time or times at which an Option may be exercised in whole or in part, the
methods by which such exercise price may be paid or deemed to be paid, the form
of such payment, including, without limitation, cash, Stock, other Awards or
awards granted under other Company plans, or other property (including notes or
other contractual obligations of Participants to make payment on a deferred
basis, such as through "cashless exercise" arrangements, to the extent permitted
by applicable law), and the methods by which Stock will be delivered or deemed
to be delivered to Participants.
(iii) ISOS. The terms of any ISO granted under the Plan shall
comply in all respects with the provisions of Section 422 of the Code, including
but not limited to the requirement that no ISO shall be granted more than ten
years after the effective date of the Plan. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to ISOs shall not be interpreted,
amended, or altered, nor shall any discretion or authority granted under the
Plan be exercised, so as to disqualify either the Plan or any ISO under Section
422 of the Code.
(iv) TERMINATION OF EMPLOYMENT. Unless otherwise determined by
the Committee, upon termination of a Participant's employment with the Company
and its subsidiaries, such Participant may exercise any Options during the three
month period following such termination of employment, but only to the extent
such Option was exercisable immediately prior to such termination of employment.
Notwithstanding the foregoing, if the Committee determines that such termination
is for cause, all Options held by the Participant shall immediately terminate.
(c) STOCK APPRECIATION RIGHTS. The Committee is authorized to grant
SARs to Participants on the following terms and conditions:
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(i) RIGHT TO PAYMENT. An SAR shall confer on the Participant to
whom it is granted a right to receive, upon exercise thereof, the excess of (A)
the Fair Market Value of one share of Stock on the date of exercise (or, if the
Committee shall so determine in the case of any such right other than one
related to an ISO, the Fair Market Value of one share at any time during a
specified period before or after the date of exercise), over (B) the grant price
of the SAR as determined by the Committee as of the date of grant of the SAR,
which, except as provided in Section 7(a), shall be not less than the Fair
Market Value of one share of Stock on the date of grant.
(ii) OTHER TERMS. The Committee shall determine the time or
times at which an SAR may be exercised in whole or in part, the method of
exercise, method of settlement, form of consideration payable in settlement,
method by which Stock will be delivered or deemed to be delivered to
Participants, whether or not an SAR shall be in tandem with any other Award, and
any other terms and conditions of any SAR. Limited SARs that may only be
exercised upon the occurrence of a Change in Control may be granted on such
terms, not inconsistent with this Section 6(c), as the Committee may determine.
Limited SARs may be either freestanding or in tandem with other Awards.
(d) RESTRICTED STOCK. The Committee is authorized to grant
Restricted Stock to Participants on the following terms and conditions:
(i) GRANT AND RESTRICTIONS. Restricted Stock shall be subject
to such restrictions on transferability and other restrictions, if any, as the
Committee may impose, which restrictions may lapse separately or in combination
at such times, under such circumstances, in such installments, or otherwise, as
the Committee may determine. Except to the extent restricted under the terms of
the Plan and any Award Agreement relating to the Restricted Stock, a Participant
granted Restricted Stock shall have all of the rights of a stockholder
including, without limitation, the right to vote Restricted Stock or the right
to receive dividends thereon.
(ii) FORFEITURE. Except as otherwise determined by the
Committee, upon termination of employment or service (as determined under
criteria established by the Committee) during the applicable restriction period,
Restricted Stock that is at that time subject to restrictions shall be forfeited
and reacquired by the Company; PROVIDED, HOWEVER, that the Committee may
provide, by rule or regulation or in any Award Agreement, or may determine in
any individual case, that restrictions or forfeiture conditions relating to
Restricted Stock will be waived in whole or in part in the event of termination
resulting from specified causes. Notwithstanding anything contained herein to
the contrary (other than Section 7(g)), all Restricted Stock Awards, other than
an Award granted pursuant to Section 7(f), shall be forfeited upon a
Participant's termination of employment or other service with the Company and
its subsidiaries within three years of the date the award is granted, provided,
however, that the Committee may make exceptions in the event such termination is
by reason of the Participant's death or disability.
(iii) CERTIFICATES FOR STOCK. Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Stock are registered in the name of the
Participant, such certificates shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Restricted Stock, the
Company shall retain physical possession of the certificate, and the Participant
shall have delivered a stock power to the Company, endorsed in blank, relating
to the Restricted Stock.
(iv) DIVIDENDS. Dividends paid on Restricted Stock shall be
either paid at the dividend payment date in cash or in shares of unrestricted
Stock having a Fair Market Value equal to the amount of such dividends, or the
payment of such dividends shall be deferred and/or the amount or value thereof
automatically reinvested in additional Restricted Stock, other Awards, or other
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investment vehicles, as the Committee shall determine or permit the Participant
to elect. Stock distributed in connection with a Stock split or Stock dividend,
and other property distributed as a dividend, shall be subject to restrictions
and a risk of forfeiture to the same extent as the Restricted Stock with respect
to which such Stock or other property has been distributed.
(e) DEFERRED STOCK. The Committee is authorized to grant Deferred
Stock to Participants, subject to the following terms and conditions:
(i) AWARD AND RESTRICTIONS. Delivery of Stock will occur upon
expiration of the deferral period specified for an Award of Deferred Stock by
the Committee (or, if permitted by the Committee, as elected by the
Participant). In addition, Deferred Stock shall be subject to such restrictions
as the Committee may impose, if any, which restrictions may lapse at the
expiration of the deferral period or at earlier specified times, separately or
in combination, in installments, or otherwise, as the Committee may determine.
(ii) FORFEITURE. Except as otherwise determined by the
Committee, upon termination of employment or service (as determined under
criteria established by the Committee) during the applicable deferral period or
portion thereof to which forfeiture conditions apply (as provided in the Award
Agreement evidencing the Deferred Stock), all Deferred Stock that is at that
time subject to deferral (other than a deferral at the election of the
Participant) shall be forfeited; PROVIDED, HOWEVER, that the Committee may
provide, by rule or regulation or in any Award Agreement, or may determine in
any individual case, that restrictions or forfeiture conditions relating to
Deferred Stock will be waived in whole or in part in the event of termination
resulting from specified causes. Notwithstanding anything contained herein to
the contrary (other than Section 7(g)), all Deferred Stock Awards, other than an
Award granted pursuant to Section 7(f), shall be forfeited upon a Participant's
termination of employment or other service with the Company and its subsidiaries
within three years of the date the award is granted, provided, however, that the
Committee may make exceptions in the event such termination is by reason of the
Participant's death or disability.
(f) BONUS STOCK AND AWARDS IN LIEU OF CASH OBLIGATIONS. The Committee
is authorized to grant Stock as a bonus, or to grant Stock or other Awards in
lieu of Company obligations to pay cash under other plans or compensatory
arrangements, provided that, in the case of Participants subject to Section 16
of the Exchange Act, such cash amounts are determined under such other plans in
a manner that complies with applicable requirements of Rule 16b-3 so that the
acquisition of Stock or Awards hereunder shall be exempt from Section 16(b)
liability. Stock or Awards granted hereunder shall be subject to such other
terms as shall be determined by the Committee.
(g) DIVIDEND EQUIVALENTS. The Committee is authorized to grant Dividend
Equivalents to a Participant, entitling the Participant to receive cash, Stock,
other Awards, or other property equal in value to dividends paid with respect to
a specified number of shares of Stock, or other periodic payments. Dividend
Equivalents may be awarded on a free-standing basis or in connection with
another Award. The Committee may provide that Dividend Equivalents shall be paid
or distributed when accrued or shall be deemed to have been reinvested in
additional Stock, Awards, or other investment vehicles as the Committee may
specify.
(h) OTHER STOCK-BASED AWARDS. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other Awards
that may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on, or related to, Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including, without limitation,
convertible or exchangeable debt securities, other rights convertible or
exchangeable into Stock, purchase rights for Stock, Awards with value and
payment contingent upon performance of the Company or any other factors
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designated by the Committee, and Awards valued by reference to the book value of
Stock or the value of securities of or the performance of specified
subsidiaries. The Committee shall determine the terms and conditions of such
Awards. Stock delivered pursuant to an Award in the nature of a purchase right
granted under this Section 6(h) shall be purchased for such consideration, paid
for at such times, by such methods, and in such forms, including, without
limitation, cash, Stock, other Awards, or other property, as the Committee shall
determine. Cash awards, as an element of or supplement to any other Award under
the Plan, shall also be authorized pursuant to this Section 6(h).
7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.
(a) STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution for, any
other Award granted under the Plan or any award granted under any other plan of
the Company, any subsidiary, or any business entity to be acquired by the
Company or a subsidiary, or any other right of a Participant to receive payment
from the Company or any subsidiary. Awards granted in addition to or in tandem
with other Awards or awards may be granted either as of the same time as or a
different time from the grant of such other Awards or awards.
(b) TERM OF AWARDS. The term of each Award shall be for such period as
may be determined by the Committee; PROVIDED, HOWEVER, that in no event shall
the term of any ISO or an SAR granted in tandem therewith exceed a period of ten
years from the date of its grant (or such shorter period as may be applicable
under Section 422 of the Code).
(c) FORM OF PAYMENT UNDER AWARDS. Subject to the terms of the Plan and
any applicable Award Agreement, payments to be made by the Company or a
subsidiary upon the grant or exercise of an Award may be made in such forms as
the Committee shall determine, including, without limitation, cash, Stock, other
Awards, or other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. Such payments may include, without
limitation, provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of Dividend
Equivalents in respect of installment or deferred payments denominated in Stock.
(d) RULE 16B-3 COMPLIANCE.
(i) SIX-MONTH HOLDING PERIOD. Unless a Participant could
otherwise exercise a derivative security or dispose of Stock delivered upon
exercise of a derivative security granted under the Plan without incurring
liability under Section 16(b) of the Exchange Act, (i) Stock delivered under the
Plan other than upon exercise or conversion of a derivative security granted
under the Plan shall be held for at least six months from the date of
acquisition, and (ii), with respect to a derivative security granted under the
Plan, at least six months shall elapse from the date of acquisition of the
derivative security to the date of disposition of the derivative security (other
than upon exercise or conversion) or its underlying equity security.
(ii) TRANSFERABILITY. Except as otherwise provided by the
Committee, Awards under the Plan are not transferable except as designated by
the Participant by will or by the laws of descent and distribution (or pursuant
to a Beneficiary designation).
(iii) REFORMATION TO COMPLY WITH EXCHANGE ACT RULES. It is the
intent of the Company that this Plan comply in all respects with applicable
provisions of Rule 16b-3 or Rule 16a-1(c)(3) under the Exchange Act in
connection with any grant of Awards to or other transaction by a Participant who
is subject to Section 16 of the Exchange Act (except for transactions exempted
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under alternative Exchange Act Rules or acknowledged in writing to be non-exempt
by such Participant). Accordingly, if any provision of this Plan or any Award
Agreement relating to an Award does not comply with the requirements of Rule
16b-3 or Rule 16a-1(c)(3) as then applicable to any such transaction, such
provision will be construed or deemed amended to the extent necessary to conform
to the applicable requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such
Participant shall avoid liability under Section 16(b). In addition, other
provisions of the Plan notwithstanding, the exercise price of any Award carrying
a right to exercise granted to a Participant subject to Section 16 of the
Exchange Act shall be not less than 50% of the Fair Market Value of Stock as of
the date such Award is granted if such pricing limitation is required under Rule
16b-3 at the time of such grant.
(e) LOAN PROVISIONS. With the consent of the Committee, and subject at
all times to, and only to the extent, if any, and in accordance with, laws and
regulations and other binding obligations or provisions applicable to the
Company, the Company may make, guarantee, or arrange for a loan or loans to a
Participant with respect to the exercise of any Option or other payment in
connection with any Award, including the payment by a Participant of any or all
federal, state, or local income or other taxes due in connection with any Award.
Subject to such limitations, the Committee shall have full authority to decide
whether to make a loan or loans hereunder and to determine the amount, terms,
and provisions of any such loan or loans, including the interest rate to be
charged in respect of any such loan or loans, whether the loan or loans are to
be with or without recourse against the borrower, the terms on which the loan is
to be repaid and conditions, if any, under which the loan or loans may be
forgiven.
(f) PERFORMANCE-BASED AWARDS TO "COVERED EMPLOYEES". Other provisions
of the Plan notwithstanding, the provisions of this Section 7(f) shall apply to
any Award the exercisability or settlement of which is subject to the
achievement of performance conditions (other than an Option or SAR granted with
an exercise or base price at least equal to 100% of Fair Market Value of Stock
on the date of grant) if such Award is granted to a person who, at the time of
grant, is a "covered employee." The definition of "covered employee," and other
terms used in this Section 7(f), shall be interpreted in a manner consistent
with Section 162(m) of the Code and regulations thereunder (including Regulation
1.162-27). The performance objectives for an Award subject to this Section 7(f)
shall consist of one or more business criteria and a targeted level or levels of
performance with respect to such criteria, as specified by the Committee but
subject to this Section 7(f). Performance objectives shall be objective and
shall otherwise meet the requirements (including the shareholder approval
requirements) of Section 162(m)(4)(C) of the Code and regulations thereunder
(including Regulation 1.162-27(e)(2)). The following business criteria shall be
used by the Committee in connection with a performance objective:
(1) Annual earnings before payment of taxes and interest;
(2) Annual earnings per share; and/or
(3) Annual return on common equity.
Achievement of performance objectives shall be measured over a period of one,
two, three, or four years, as specified by the Committee. No business criteria
other than those named above may be used in establishing the performance
objective for an Award to a covered employee. For each such Award relating to a
covered employee, the Committee shall establish the targeted level or levels of
performance for each business criteria. Performance objectives may differ for
Awards under this Section 7(f) to different covered employees. The Committee may
determine that an Award under this Section 7(f) shall be payable upon
achievement of any one of the performance objectives or may require that two or
more of the performance objectives must be achieved in order for an Award to be
payable. The Committee may, in its discretion, reduce the amount of a payout
otherwise to be made in connection with an Award under this Section 7(f), but
may not exercise discretion to increase such amount, and the Committee may
consider other performance criteria in exercising such discretion. All
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determinations by the Committee as to the achievement of performance objectives
shall be made in writing. The Committee may not delegate any responsibility
under this Section 7(f).
(g) ACCELERATION UPON A CHANGE OF CONTROL. Notwithstanding anything
contained herein to the contrary, unless otherwise provided by the Committee in
an Award Agreement, all conditions and/or restrictions relating to the continued
performance of services and/or the achievement of performance objectives with
respect to the exercisability or full enjoyment of an Award shall immediately
lapse upon a Change in Control.
8. GENERAL PROVISIONS.
(a) COMPLIANCE WITH LEGAL AND EXCHANGE REQUIREMENTS. The Company shall
not be obligated to deliver Stock upon the exercise or settlement of any Award
or take other actions under the Plan until the Company shall have determined
that applicable federal and state laws, rules, and regulations have been
complied with and such approvals of any regulatory or governmental agency have
been obtained and contractual obligations to which the Award may be subject have
been satisfied. The Company, in its discretion, may postpone the issuance or
delivery of Stock under any Award until completion of such stock exchange
listing or registration or qualification of such Stock or other required action
under any federal or state law, rule, or regulation as the Company may consider
appropriate, and may require any Participant to make such representations and
furnish such information as it may consider appropriate in connection with the
issuance or delivery of Stock under the Plan.
(b) TRANSFERABILITY. Except as otherwise set forth in Section 7(d)(ii),
Awards and other rights of Participants under the Plan may not be transferred to
third parties, pledged, mortgaged, hypothecated, or otherwise encumbered, and
shall not be subject to claims of creditors.
(c) NO RIGHT TO CONTINUED EMPLOYMENT OR SERVICE. Neither the Plan nor
any action taken hereunder shall be construed as giving any employee or person
providing consulting or other services the right to be retained in the employ or
service of the Company or any of its subsidiaries, nor shall it interfere in any
way with the right of the Company or any of its subsidiaries to terminate any
employee's employment or terminate any contract with a person providing
consulting or other services at any time.
(d) TAXES. The Company or any subsidiary is authorized to withhold from
any Award granted or to be settled, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee may deem advisable to enable the Company and
Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations.
(e) CHANGES TO THE PLAN AND AWARDS. The Board may amend, alter,
suspend, discontinue, or terminate the Plan or the Committee's authority to
grant Awards under the Plan without the consent of stockholders or Participants,
except that any such action shall be subject to the approval of the Company's
stockholders at or before the next annual meeting of stockholders for which the
record date is after such Board action if such stockholder approval is required
by any federal or state law or regulation or the rules of any stock exchange or
automated quotation system on which the Stock may then be listed or quoted, and
the Board may otherwise, in its discretion, determine to submit other such
changes to the Plan to stockholders for approval; PROVIDED, HOWEVER, that,
without the consent of an affected Participant, no such action may materially
impair the rights of such Participant under any Award theretofore granted to
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him. The Committee may waive any conditions or rights under, or amend, alter,
suspend, discontinue, or terminate, any Award theretofore granted and any Award
Agreement relating thereto; PROVIDED, HOWEVER, that, without the consent of an
affected Participant, no such action may materially impair the rights of such
Participant under such Award.
(f) NO RIGHTS TO AWARDS; NO STOCKHOLDER RIGHTS. No Participant,
employee, or other person shall have any claim to be granted any Award under the
Plan, and there is no obligation for uniformity of treatment of Participants,
employees, and other persons. No Award shall confer on any Participant any of
the rights of a stockholder of the Company unless and until Stock is duly issued
or transferred and delivered to the Participant in accordance with the terms of
the Award.
(g) UNFUNDED STATUS OF AWARDS; CREATION OF TRUSTS. The Plan is intended
to constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant pursuant to an Award,
nothing contained in the Plan or any Award shall give any such Participant any
rights that are greater than those of a general creditor of the Company;
PROVIDED, HOWEVER, that the Committee may authorize the creation of trusts or
make other arrangements to meet the Company's obligations under the Plan to
deliver cash, Stock, other Awards, or other property pursuant to any Award,
which trusts or other arrangements shall be consistent with the "unfunded"
status of the Plan unless the Committee otherwise determines with the consent of
each affected Participant.
(h) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the
Board nor its submission to the stockholders of the Company for approval shall
be construed as creating any limitations on the power of the Board to adopt such
other incentive arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under the Plan, and
such arrangements may be either applicable generally or only in specific cases.
(i) NO FRACTIONAL SHARES. No fractional shares of Stock shall be issued
or delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards, or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.
(j) COMPLIANCE WITH CODE SECTION 162(M). It is the intent of the
Company that Options and other Awards subject to the performance objectives
specified under Section 7(f) granted under the Plan to persons who are "covered
employees" within the meaning of Code Section 162(m) and regulations thereunder
(including Regulation 1.162-27(c)(2)) shall constitute "qualified
performance-based compensation" within the meaning of Code Section 162(m) and
regulations thereunder (including Regulation 1.162-27(e), and subject to the
transition rules under Regulation 1.162-27(h)(2)) thereunder. Accordingly, if
any provision of the Plan or any Award Agreement relating to such an Award
granted to a "covered employee" does not comply or is inconsistent with the
requirements of Code Section 162(m) or regulations thereunder, such provision
shall be construed or deemed amended to the extent necessary to conform to such
requirements, and no provision shall be deemed to confer upon the Committee or
any other person discretion to increase the amount of compensation otherwise
payable to a "covered employee" in connection with any such Award upon
attainment of the performance objectives.
(k) GOVERNING LAW. The validity, construction, and effect of the Plan,
any rules and regulations relating to the Plan, and any Award Agreement shall be
determined in accordance with the Delaware General Corporation Law, without
giving effect to principles of conflicts of laws, and applicable federal law.
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(l) EFFECTIVE DATE; PLAN TERMINATION. The Plan shall become
effective as of the date of its adoption by the Board and shall continue in
effect until terminated by the Board.
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NETRIX CORPORATION
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND
WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF DIRECTION,
THIS PROXY WILL BE VOTED "FOR" EACH PROPOSAL.
The undersigned hereby appoints Steven T. Francesco and Lynn C. Chapman as
Proxies, with the full power of substitution, and hereby authorizes them to
represent and vote, as designated herein, all shares of common stock of Netrix
Corporation held of record by the undersigned on April 25, 2000, at the Annual
Meeting of Stockholders to be held on June 23, 2000, or any adjournment thereof,
upon all such matters as may properly come before the Meeting.
|X| Please mark your votes as in If you plan to attend the Annual
this example. Meeting, place an X in this box. |_|
1. ELECTION OF DIRECTORS.
FOR the nominees listed WITHHOLD AUTHORITY |_|
below |_| for the nominee(s) listed below
Nominees: Nominee(s):_______________________________
Mr. Steven T. Francesco
Mr. John M. Faccibene _______________________________
FOR AGAINST ABSTAIN
|_| |_| |_|
2. PROPOSAL TO CHANGE OUR NAME FROM NETRIX CORPORATION TO NX NETWORKS, INC.
FOR AGAINST ABSTAIN
|_| |_| |_|
* * * CONTINUED AND MUST BE SIGNED ON THE REVERSE SIDE * * *
<PAGE>
3. PROPOSAL TO APPROVE THE AMENDMENT TO THE NETRIX CORPORATION 1999 LONG-TERM
INCENTIVE PLAN TO INCREASE THE NUMBER OF AUTHORIZED SHARES BY 2,500,000.
FOR AGAINST ABSTAIN
|_| |_| |_|
4. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP TO SERVE AS
NETRIX'S INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL YEAR ENDING DECEMBER
31, 2000.
FOR AGAINST ABSTAIN
|_| |_| |_|
IN THEIR DISCRETION UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
ANNUAL MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
SIGNATURE: DATE:
---------------------------------- --------------------------
SIGNATURE: DATE:
---------------------------------- --------------------------
(SECOND SIGNATURE IF HELD JOINTLY)
NOTE: Please sign exactly as name or names appear on stock certificate
as indicated hereon. Joint owners should each sign. When signing
as attorney, executor, administrator or guardian, please give full
title as such.
- --------------------------------------------------------------------------------
STOCKHOLDERS ARE URGED TO DATE, MARK, SIGN AND RETURN THIS PROXY STATEMENT
PROMPTLY IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED WITHIN
THE UNITED STATES.
- --------------------------------------------------------------------------------
