SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
(X) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PLIANT SYSTEMS, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than 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)(4) 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):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
March 31, 2000
Dear Shareholder:
It is our pleasure to invite you to attend the Annual Meeting of Shareholders.
The meeting will be held on Tuesday, May 16, 2000, at 10:00 a.m. at the North
Carolina Biotechnology Center, 15 T.W. Alexander Drive, Research Triangle Park,
North Carolina 27709.
At the meeting we will elect two Directors for three-year terms, approve an
amendment to Pliant Systems Equity Compensation Plan increasing the number of
shares of Common Stock reserved for issuance thereunder by 650,000 shares,
ratify the selection of Ernst & Young LLP as independent auditors for Pliant
Systems, Inc. fiscal 2000, and answer your questions.
Please use this opportunity to take part in the affairs of Pliant Systems by
voting on the business to come before this meeting. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING
PROXY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE. Returning the proxy does not
deprive you of your right to attend the meeting or to vote your shares in person
for the matters acted upon at the meeting. The vote of every shareholder is
important.
On behalf of Pliant Systems Board of Directors and management team, we look
forward to greeting you and our other valued shareholders that are able to
attend.
Sincerely,
Dr. John R. Hutchins, III David E. Orr
Chairman of the Board President and Chief Executive Officer
<PAGE>
PLIANT SYSTEMS, INC.
DURHAM, NORTH CAROLINA
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
We will hold our Annual Meeting of the Stockholders of Pliant Systems, Inc.
(formerly known as BroadBand Technologies, Inc.) on Tuesday, May 16, 2000 at
10:00 a.m. at the North Carolina Biotechnology Center, 15 T.W. Alexander Drive,
Research Triangle Park, North Carolina 27709. Our company, Pliant Systems, Inc.,
is incorporated in Delaware. The purposes of our meeting are:
o to elect two directors for three-year terms;
o to approve an amendment to our Equity Compensation Plan increasing the
number of shares of our common stock reserved for issuance by 650,000
shares;
o to ratify the selection of Ernst & Young LLP as our independent
auditors for the year 2000; and
o to transact other business that may properly come before the meeting
or before we adjourn the meeting.
Stockholders owning our stock at the close of business on March 23, 2000 may
attend and vote at the meeting. We will make available a complete list of the
stockholders as of the close of business on March 23, 2000 who are entitled to
vote at the meeting. Any stockholder may inspect the list for at least ten days
before the meeting during ordinary business hours at our offices. Our offices
are located at 4024 Stirrup Creek Drive, Durham, North Carolina 27703. This list
will also be available at the meeting.
By order of the Board of Directors
John T. Autrey
SECRETARY
<PAGE>
PLIANT SYSTEMS, INC.
4024 Stirrup Creek Drive, Durham, N.C. 27703
PROXY STATEMENT
Our Board of Directors is requesting proxies for the 2000 Annual
Meeting of Stockholders. The meeting will be held at the North Carolina
Biotechnology Center, 15 T.W. Alexander Drive, Research Triangle Park, North
Carolina on Tuesday, May 16, 2000, at 10:00 a.m. local time. You may also vote
your proxy at any adjournments or postponements of the meeting. We mailed this
Proxy Statement on or about April 14, 2000, to stockholders entitled to vote at
the meeting.
Whether or not you plan to attend our meeting, please sign, date and
return the enclosed proxy promptly to be sure that your shares will be voted.
You may revoke your proxy at any time before it is voted at the meeting by
submitting a written statement revoking the previously submitted proxy,
submitting a new proxy, or by attending and voting at the Annual Meeting.
When you sign and return the proxy card, you appoint David E. Orr and
John T. Autrey as your representatives at the meeting. Mr. Orr and Mr. Autrey
will vote your shares, as you have instructed them on the proxy card, at the
meeting. The proposals being voted are:
o to elect as directors the two persons nominated in this Proxy
Statement for a three-year term;
o to approve an amendment to the Pliant Systems Equity Compensation
Plan increasing the number of shares of common stock reserved for
issuance by 650,000 shares;
o to ratify the selection of Ernst & Young LLP as our auditors for
2000; and
o to transact other business that may come before the meeting or
before we adjourn the meeting.
We do not know of any other business to be brought before the meeting.
If an issue comes up for a vote at the meeting that is not described in this
Proxy Statement, Mr. Orr and Mr. Autrey will vote your shares, under your proxy,
using their best judgment. You can always vote in person at the meeting, even if
you have already submitted your proxy card.
We are paying for this proxy request. In addition to mailing you a
proxy, proxies may be requested by telephone, Internet or fax and/or by
contacting our directors, officers and other employees. None of our company
representatives will receive any compensation for assisting in the proxy
request. We expect to pay an independent party, Corporate Investor
Communications, Inc. ("CIC"), approximately $5,000, plus out-of-pocket expenses,
as compensation. CIC will perform the broker nominee search and distribute proxy
materials to banks, brokers, nominees and other third parties. CIC will also
request voted proxies from stockholders for the Annual Meeting. In addition, we
may reimburse brokers and other custodians, nominees and fiduciaries for their
expenses for sending proxy material to beneficial owners, in accordance with
Securities and Exchange Commission regulations.
OUTSTANDING VOTING SECURITIES
On March 23, the date for determining stockholders entitled to vote at
the meeting, 13,637,102 shares of our common stock were outstanding. Each share
is entitled to one vote on all matters covered in this proxy statement. There is
a maximum of 13,637,102 votes that may be cast at the meeting.
A "quorum" is the number of shares that must be present, in person or
by proxy, for us to transact business at the meeting. The required quorum for
the Annual Meeting is a majority of the shares outstanding on the record date.
There must be a quorum present for the meeting to be held. All completed and
signed proxy cards and telephone votes, whether representing a vote for,
against, withheld, abstained or a broker non-vote, will be counted toward the
quorum.
<PAGE>
A plurality of the votes cast is required to elect the directors. A
plurality of votes equals the number of votes for a person that is greater than
those cast for any other person but not necessarily more than half the total
votes cast. A majority of the votes cast is required for all other actions to be
voted upon at the meeting as described above.
In the election of directors, any action other than a vote for a
nominee will have the practical effect of voting against the nominee.
Abstentions and broker non-votes are counted for purposes of determining whether
a quorum is present, but do not represent votes cast with respect to any
proposal. Brokers who have record ownership of shares that are held in "street
name" for their clients, who are the beneficial owners of the shares, have the
discretion to vote such shares on routine matters but not on non-routine
matters. If the proposals to be voted upon at the meeting include both routine
and non-routine matters, the broker may turn in a proxy card for uninstructed
shares that votes on the non-routine matters. Any vote with respect to the
non-routine matters is referred to as a broker non-vote. Broker non-votes are
counted for the purpose of determining the presence or absence of a quorum, but
are not counted for determining the number of votes cast. A broker non-vote will
not affect the outcome on any proposal in the Proxy Statement.
An independent party will receive and tabulate all proxies and ballots.
This independent party and other employees of Pliant Systems will be voting
inspectors at the meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists the only stockholders we know to be the
beneficial owners of more than five percent of the outstanding shares of our
common stock as of March 23, 2000:
<TABLE>
<CAPTION>
SHARES PERCENT OF
BENEFICIALLY SHARES
NAME AND ADDRESS OWNED (1) OUTSTANDING (%)
----------------- ------------- ---------------
<S> <C> <C>
Goldman, Sachs and Co.
85 Broad Street 1,233,392 (2) 9.0%
New York, NY 10004
Loomis, Sayles & Company, L.P. 2,156,678 (3) 15.8%
One Financial Center
Boston, MA 02111
</TABLE>
(1) The persons and entities named in the table have sole voting and investment
power with respect to all shares shown as beneficially owned by them, except as
noted below.
(2) In its Schedule 13G filed with the Securities and Exchange Commission and
dated March 10, 2000, Goldman, Sachs and Co. reported that it has shared power
to vote or direct the vote and shared power to dispose or to direct the
disposition of the shares listed in the table.
(3) In its Schedule 13G filed with the Securities and Exchange Commission and
dated February 1, 2000, Loomis, Sayles & Company, L.P. reported that it
represents shares that it has a right to acquire as a result of its ownership of
convertible securities. These securities consist of 5% convertible subordinated
notes due May 15, 2001, which have a conversion price of $41.48 per share. In
the Schedule 13G, Loomis, Sayles & Company, L.P., reported that it has
o sole power to vote or direct the vote of 1,807,835 shares;
o shared power to vote or direct the vote of 212,753 shares; and
o shared power to dispose or to direct the disposition of 2,156,678 shares.
2
<PAGE>
OWNERSHIP BY OFFICERS AND DIRECTORS
This table shows the number of shares of our common stock that our
directors and executive officers beneficially owned as of March 23, 2000 and
options exercisable within 60 days on March 23, 2000.
<TABLE>
<CAPTION>
OPTIONS PERCENT OF
SHARES EXERCISABLE SHARES
BENEFICIALLY WITHIN OUTSTANDING
NAME OWNED (1) 60 DAYS (2) (%)
---- --------- ----------- ----
<S> <C> <C> <C>
Richard P. Clark 0 33,166 *
Director
Dr. John R. Hutchins, III 91,714 35,666 *
Chairman of the Board of Directors (3)
Dr. Charles T. Lee 24,733 8,333 *
Director (4)
David E. Orr 80,000 28,125 *
Director, President and
Chief Executive Officer (5)
Dr. J. Richard Jones 101,571 67,383 1.2%
Director and Executive
Vice President (6)
David J. McLean 2,325 76,562 *
Vice President of Engineering (7)
Leonard D. Hayes 0 70,012 *
Vice President of
Operations
Craig M. Swinn 0 26,875 *
Vice President of Sales
And Marketing
Alan E. Negrin 0 16,666 *
Director
All directors and executive 300,343 441,840 5.4%
Officers as a group (11 persons) (8)
</TABLE>
* Represents beneficial ownership of less than one percent of common stock.
(1) The persons and trusts named in the table have sole voting and investment
power for all shares shown as beneficially owned by them, except as noted below.
This includes restricted stock holdings, which are shares that can be voted but
are subject to a vesting schedule and forfeiture risk.
(2) These shares can be acquired through stock option exercises through May 22,
2000. These shares cannot be voted unless the option is actually exercised.
3
<PAGE>
(3) Dr. Hutchins' beneficial shares include:
o 91,264 shares owned by Dr. John R. Hutchins, III, Revocable Trust, for
which Dr. Hutchins is both the sole trustee and beneficiary; and
o 450 shares in Dr. Hutchins' account under our 401(k) plan.
Dr. Hutchins' shares do not include the following shares as to which Dr.
Hutchins does not claim beneficial ownership:
o 41,352 shares owned by Jane Ide Hutchins Revocable Trust, for which Jane
I. Hutchins, the wife of Dr. Hutchins, is both the sole trustee and
beneficiary; and
o 75 shares in Jane I. Hutchins' account under our 401(k) plan.
(4) These shares include 24,733 shares owned by Dr. Lee, for which Dr. Lee is
both the sole trustee and beneficiary.
(5) In connection with his employment, effective April 1, 1997, we issued to Mr.
Orr 80,000 shares of our common stock. Mr. Orr will forfeit these shares of
common stock if his employment with us terminates for any reason before the
fifth anniversary of the grant of the stock to Mr. Orr, except under certain
circumstances. Mr. Orr also received a nonqualified stock option to purchase
350,000 shares of our common stock. See "Executive Compensation - Employment
Agreements."
(6) Includes 100,962 shares owned directly by Dr. Jones. Includes 609 shares in
Dr. Jones's account under our 401(k) plan.
(7) These shares include 2,325 shares in Mr. McLean's account under our 401(k)
plan.
(8) These shares include 441,840 shares that the officers and directors as a
group may acquire upon exercise of options within 60 days after March 23, 2000.
They also include 44,375 shares that John Autrey may acquire through stock
options exercisable within 60 days after March 23, 2000, and 34,677 shares that
Loretta Woodall may acquire through stock options exercisable within 60 days
after March 23, 2000.
4
<PAGE>
PROPOSAL 1
TO ELECT TWO DIRECTORS
Our bylaws provide for a Board of Directors with staggered three-year
terms. One-third of the directors are elected each year. Two directors will be
elected at the 2000 Annual Meeting. Our Board of Directors has nominated Dr.
Hutchins and Mr. Orr to serve as Class I Directors with terms that expire at the
2003 Annual Meeting of Stockholders. If any nominee becomes unavailable before
the election, our Board of Directors may recommend another person. Mr. Orr and
Mr. Autrey, as your representative, will vote for that person.
Below is information concerning the two nominees for election as a
director at the 2000 Annual Meeting, including each nominee's business
experience for the past five years:
<TABLE>
<CAPTION>
FIRST YEAR
ELECTED AS TERM
NAME AGE DIRECTOR EXPIRES FIVE YEAR BUSINESS EXPERIENCE
---- --- -------- ------- -----------------------------
<S> <C> <C> <C> <C>
Dr. John R. Hutchins, III 65 1989 2003 Our Chairman of the Board from 1988 to
March 31, 1997, and since January 31,
1998. Our Chairman of the Board
Emeritus from April 1, 1997 to
January 31, 1998.
David E. Orr 48 1997 2003 Our President and Chief Executive
Officer from April 1, 1997. President
and Chief Executive Officer of Alcatel
Network Systems, Inc. from August 1991
to March 1997.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL
TO ELECT DR. JOHN R. HUTCHINS, III AND DAVID E. ORR AS CLASS I DIRECTORS TO
SERVE FOR THREE-YEAR TERMS.
5
<PAGE>
CURRENT DIRECTORS
The following table lists information regarding our directors whose
terms of office extend beyond the 2000 Annual Meeting:
<TABLE>
<CAPTION>
FIRST YEAR
ELECTED AS TERM
NAME AGE DIRECTOR EXPIRES FIVE YEAR BUSINESS EXPERIENCE
---- --- -------- ------- -----------------------------
<S> <C> <C> <C>
Dr. Charles T. Lee 60 1989 2002 Chairman and founder of Charles Lee
Enterprise, an information industry
business development firm with a
specialty in Asia/Pacific alliances
since 1989.
Alan E. Negrin 61 1998 2002 Telecommunications industry consultant;
previously co-founded E/O Networks in
1993 and co-founded Optilink Corporation.
Richard P. Clark 52 1992 2001 Retired July 1999. Vice President,
Global Product Planning, AMP Inc. (TYCO
International), from March 1999 to June
1999. Chief Executive Officer of
M/A-COM, Inc. (a wholly owned subsidiary
of AMP, Inc.), from July 1995 to February
1999. Associate Director of Corporate
Development of AMP Inc., a supplier of
connectors for electronic products, from
July 1989 to July 1995.
Dr. J. Richard Jones 52 1988 2001 Our Executive Vice President and Chief
Technical Officer since 1988.
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that our
directors and certain officers report their holdings and transactions in our
common stock. We have reviewed our records and believe that all reports required
under the Section 16(a) rules were filed on time during the fiscal year.
COMPENSATION OF DIRECTORS
We pay our eligible directors, those directors who are not full-time
employees, the following:
o a $10,000 retainer each year while serving on the Board;
o a fee of $1,000 for each day on which the Board and/or committee
meets or is in conference, which such directors attend, except for
committee meetings held on the same date as a Board meeting or
conference;
o reimbursement for reasonable travel expenses incurred in attending
meetings of the Board or committees of the Board; and
o stock options based on the terms of the Equity Compensation Plan,
which our stockholders approved on May 19, 1998.
6
<PAGE>
Under this plan, directors are granted options to purchase 5,000 shares
annually. Each eligible director received these annual grants to purchase 5,000
shares in 1998 and 1999. New directors, upon their election, will be issued an
initial option grant of 10,000 shares. Under the previous Directors' Stock
Option Plan, eligible directors received annual grants of 1,000 shares.
On December 10, 1998, our Board of Directors approved a repricing
program for all options with an exercise price more than the current market
price as of December 10, 1998. Option exercise prices were reduced to $3.25 per
share, the fair market value of our common stock on December 10, 1998. The
repricing program applied to 111,900 nonqualified stock options held by Richard
P. Clark, Dr. John R. Hutchins, III, Dr. Charles T. Lee and Alan E. Negrin.
MEETINGS AND COMMITTEES
Our Board of Directors held six regular meetings, one every other month
beginning in January 1999, and eleven special meetings during 1999. Average
attendance by our directors at these meetings and committee meetings was 98%.
Each director notified us when he would be absent from a meeting. Absences
occurred as a result of travel, illness or a prior business commitment. The
large number of special meetings was due to the debt restructuring discussions
during 1999.
Our Board of Directors is responsible for our overall affairs. To
assist it in carrying out its duties, they have established several regular
committees and delegated certain authority to these committees.
The regular committees of our Board are the Audit Committee, the
Operations Committee, the Personnel Committee and the Compensation Committee.
Our Board discussed activities and concerns of the Personnel Committee and made
decisions at the regular board meeting. In addition, the Board from time to time
establishes other committees to make decisions about specific matters or
specific transactions.
<TABLE>
<CAPTION>
Number of
Board Committees Meetings in
1999 Committee Membership Functions of the Committee Fiscal 1999
- ------------------------- -------------------------- -----------
<S> <C> <C>
Audit Committee o Recommends selection of independent 2
- --------------- auditors to the Board
Dr. Charles T. Lee, Chairman o Reviews and approves proposed
Dr. John R. Hutchins, III accounting changes
Mr. Alan E. Negrin o Reviews internal accounting controls
o Reviews our investment policy
o Reviews audit examination and annual
financial reports
Compensation Committee o Determines total compensation package for 7
- ---------------------- CEO and others
Mr. Richard P. Clark, Chairman o Recommends to CEO policies on compensation
Dr. Charles T. Lee of employees
(all non-employee directors) o Administers and approves awards under our
stock option plan
Personnel Committee o Identifies potential candidates and establishes None
- ------------------- qualifications for Board membership
Dr. John R. Hutchins, III, Chairman o Makes recommendations to the Board regarding
Mr. Richard P. Clark the organization and personnel of the executive
Dr. Charles T. Lee management team
Mr. Alan E. Negrin
</TABLE>
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
This table and narrative text discuss the compensation paid in 1999 as
well as compensation earned in 1999 but not paid until 2000. It also includes
compensation amounts for the two prior fiscal years earned by our chief
executive officer and the four most highly compensated executive officers. This
table also lists one former executive officer who would have been included had
he still been an executive officer at fiscal 1999 year end.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
AWARDS PAYOUTS
------ -------
OTHER ANNUAL RESTRICTED OPTIONS/ LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION STOCK SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) (1) ($) AWARDS (#) (#) (2) ($) ($)
------------------ ---- --- ------- --- ---------- ------- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David E. Orr 1999 350,000 148,750 (3) (4) -- (4) 162,120 (6)
President and 1998 350,000 175,000 (3) (4) 400,000 (5) (4) 397,650 (7)
Chief Executive 1997 262,503 175,000 (3) 80,000 (5) 400,000 (4) 262,880 (8)
Officer
J. Richard Jones 1999 150,000 43,031 (3) (4) -- (1) (4) (4)
Executive Vice 1998 150,000 67,500 (3) (4) 121,204 (9) (4) (4)
President and 1997 145,008 (4) (3) (4) 68,596 (10) (4) (4)
Chief Technology
Officer
James L. Chitkowski 1999 (4) (4) (3) (4) -- (4) (4) 45,000 (11)
Vice President, 1998 47,903 (4) (3) (4) -- (4) (4) 90,000 (11)
Sales and 1997 132,500 30,000 (3) (4) 33,369 (12) (4) (4)
Marketing
David J. McLean 1999 180,000 76,500 (3) (4) 30,000 (4) (4)
Vice President, 1998 170,004 75,000 (3) (4) 128,365 (9) (4) (4)
Engineering 1997 120,006 10,000 (3) (4) 108,365 (4) (4)
Leonard D. Hayes 1999 140,004 78,550 (3) (4) 50,000 (4) (4)
Vice President, 1998 135,000 54,000 (3) (4) 71,671 (9) (4) (4)
Operations 1997 118,334 28,128 (3) (4) 41,299 (4) (4)
Craig M. Swinn 1999 180,000 108,850 (3) (4) 20,000 (4) 65,644 (14)
Vice President, 1998 36,290 110,000 (13) (3) (4) 100,000 (4) 11,193 (14)
Sales and 1997 (4) (4) (3) (4) (4) (4) (4)
Marketing
</TABLE>
(1) Amounts in this column include bonuses earned during the fiscal year but not
necessarily paid during the fiscal year.
(2) This column includes the number of shares of common stock issuable upon
exercise of options granted during 1999. We did not grant any Stock Appreciation
Rights during 1999.
9
<PAGE>
(3) Other Annual Compensation for executive officers is not reported. It is less
than the required reporting threshold of the Securities and Exchange Commission.
(4) There was no compensation of this type.
(5) Restricted stock award was granted to Mr. Orr on March 27, 1997 at the then
current market price of $10.12 per share. The total value of the restricted
stock was $235,200 at December 31, 1998, based on a price per share of $2.94.
The total value of the restricted stock was $714,960 at December 31, 1999, based
on a price per share of $8.937.
Includes 400,000 options considered to be granted based on the December 10, 1998
repricing of a total of 400,000 options previously granted to Mr. Orr.
(6) This amount includes $118,936 of interest on $4,000,000 deposited in a trust
for January through June of 1999, based on Mr. Orr's employment agreement. It
also included $43,184 in retirement benefits for 1999.
(7) This amount includes $4,042 paid during 1998 to Mr. Orr for moving expenses
and $247,045 of interest on $4,000,000 deposited in a trust based on Mr. Orr's
employment agreement. For a discussion of Mr. Orr's employment agreement and the
payment of interest on amounts deposited in the trust, see "Employment
Agreements" in the next section. This amount also includes $64,563 for 1997 and
$82,000 for 1998 contributions we made to the BroadBand Technologies
Supplemental Deferred Compensation Plan in 1998. This plan was terminated in
August 1999.
(8) This amount includes $87,493 paid during 1997 to Mr. Orr for moving expenses
and $175,387 of interest on $4,000,000 deposited in the trust based on Mr. Orr's
employment agreement. For a discussion of Mr. Orr's employment agreement and the
payment of interest on amounts deposited in the trust, see "Employment
Agreements" in the next section.
(9) All options previously granted were repriced on December 10, 1998.
(10) This includes 22,500 options granted based on the repricing on April 2,
1997 of a total of 22,500 options previously granted to Dr. Jones.
(11) Mr. Chitkowski terminated his employment with us on May 8, 1998. In 1998,
we paid Mr. Chitkowski $90,000 in connection with the termination of his
employment. In 1999, we paid Mr. Chitkowski $45,000 in connection with his
termination.
(12) This includes 10,000 options granted based on the repricing on April 2,
1997 of a total of 10,000 options previously granted to Mr. Chitkowski.
(13) This amount includes $60,000 paid to Mr. Swinn as a sign-on bonus and
$50,000 paid as a retention bonus.
(14) We paid $11,193 to Mr. Swinn in 1998 and $65,644 in 1999 for moving
expenses.
EMPLOYMENT AGREEMENTS
GENERAL
We entered into an employment agreement with David E. Orr, referred to
as the Orr Employment Agreement. We have summarized below the major terms of
this agreement. This summary is not a complete
10
<PAGE>
description of the terms of the Orr Employment Agreement. You should read the
entire employment agreement for a complete understanding of all the terms. A
copy of this agreement is filed as an exhibit to reports we filed with the
Securities and Exchange Commission.
SALARY AND BONUS
Mr. Orr was appointed president and chief executive officer on April 1,
1997. Mr. Orr's term of employment is five years, but automatically renews for
additional one-year periods. We or Mr. Orr may terminate the Orr Employment
Agreement by written notice to the other at least one year before the
termination date. Mr. Orr's base annual compensation will be at least $350,000
and he received an incentive bonus of $175,000 for his first year of employment.
After the first year he will be eligible for an incentive bonus in accordance
with our incentive compensation program, but the annual bonus target will be at
least 50% of his current base salary. If we terminate his employment without
cause during the term of the Orr Employment Agreement, Mr. Orr will receive, for
two years after termination, payments based on his then-current base salary and
his target bonus for the year in which the termination occurs.
SIGNING BONUS
We also agreed to pay Mr. Orr a signing bonus of $4,000,000. We placed
the $4,000,000 in a trust which will be distributed to Mr. Orr on the earlier of
the fifth anniversary of the Orr Employment Agreement or the termination of Mr.
Orr's employment by us without cause. If Mr. Orr voluntarily terminates his
employment before the end of the Orr Employment Agreement or if we terminate his
employment for cause before the end of the Orr Employment Agreement, we will not
distribute the trust to Mr. Orr. A pro-rata portion of the $4,000,000 will be
paid to Mr. Orr if he becomes disabled and is unable to work. Interest on the
amount deposited in the trust will accumulate and be paid to Mr. Orr quarterly.
In March 1999, our Board approved a modification of the employment agreement
with Mr. Orr to provide that the trust be converted from a rabbi trust to a
secular trust. The secular trust was established in August 1999. All income
earned after August 1999 will be paid annually to Mr. Orr on January 1. All
other conditions of the Orr Employment Agreement were unchanged, including the
term of the employment agreement.
STOCK COMPENSATION
We also issued to Mr. Orr 80,000 shares of our common stock. Mr. Orr
will forfeit this common stock if his employment terminates for any reason
before the fifth anniversary of the stock grant. If we terminate him without
cause, he will retain the stock. Mr. Orr also received a nonqualified stock
option to purchase 350,000 shares of common stock at an exercise price of $12.50
per share. This stock option was repriced to $3.25 per share on December 10,
1998. The option becomes exercisable upon reaching certain performance goals,
but is subject to accelerated vesting upon a Change in Control under certain
circumstances. Change in Control is defined on page 11 under "Effects of a
Change in Control."
SUPPLEMENTAL DEFERRED COMPENSATION PLAN
The Orr Employment Agreement also provided for a Supplemental Deferred
Compensation Plan that was to be funded at $82,000 annually. The Board modified
this agreement on May 18, 1999 to terminate the deferred compensation
arrangement and to pay the $82,000 directly to Mr. Orr, less any tax
withholdings. The balance in the plan was distributed to Mr. Orr in August 1999.
11
<PAGE>
EFFECT OF A CHANGE IN CONTROL
Mr. Orr will receive certain benefits and payments if we incur a Change
in Control of our company and Mr. Orr's employment is terminated without cause
within three years of the Change in Control. The Orr Employment Agreement
defines Change in Control as:
o a public offer to purchase a certain number of our common shares or
other acquisition which results in at least 50% of our stock being
purchased;
o the merger or consolidation of Pliant Systems with or into another
company;
o the sale of all, or most all, of our assets;
o the sale of our assets to satisfy all of our liabilities; or
o our directors at the beginning of the agreement or directors elected
by the stockholders on the recommendation of at least two-thirds of
such directors (or directors previously so elected) cease to be a
majority of the Board of Directors.
Upon a Change in Control, Mr. Orr would receive the following payments
and benefits:
o full vesting of his stock option or a lump sum payment equal to the
value lost under the option;
o three lump sum payments each equal to his base salary on the date of
the termination of his employment; and
o his bonus for the year in which his termination occurs.
We will make the above payments on the date of his termination and the
first and second anniversaries of the date of his termination. The agreement
limits Mr. Orr's ability to compete with us or solicit our employees, suppliers
or customers for two years after the termination of his employment.
STOCK OPTIONS GRANTED DURING FISCAL YEAR
This table shows the stock options granted to our executive officers
during 1999. No stock appreciation rights were granted to our executive officers
during 1999.
<TABLE>
<CAPTION>
OPTION GRANTS IN THE FISCAL YEAR ENDED DECEMBER 31, 1999
INDIVIDUAL GRANTS
------------------------------------------------------------
% OF TOTAL POTENTIAL REALIZED VALUE AT
OPTIONS ASSUMED ANNUAL RATES OF STOCK
GRANTED TO EXERCISE OR PRICE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION APPRECIATION FOR
NAME GRANTED FISCAL YEAR (1) ($/SH) DATE OPTION TERM ($) (2)
---- ------- --------------- ------ ---- -------------------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
David E. Orr - - - - - -
J. Richard Jones - - - - - -
James L. Chitkowski - - - - - -
Leonard D. Hayes 25,000 1.7813 2.375 11/4/09 $37,340 $94,628
Leonard D. Hayes 25,000 1.7813 2.094 9/30/09 $32,922 $83,432
David J. McLean 30,000 2.1376 2.375 11/4/09 $44,809 $113,554
Craig M. Swinn 20,000 1.4251 2.375 11/4/09 $29,873 $75,703
</TABLE>
(1) We granted a total of 1,403,450 options to purchase shares of our common
stock to all employees during 1999. Our directors were granted options to
purchase 20,000 shares of common stock during 1999.
12
<PAGE>
(2) We calculated the potential realizable value of the options reported above
by assuming 5% and 10% annual rates of appreciation of our common stock from the
date the options were granted until their expiration. These assumed annual
appreciation rates comply with the rules of the Securities and Exchange
Commission and are not intended to predict our future common stock price. We
chose not to report the present value of the options because we do not believe
any formula will determine with reasonable accuracy a present value because of
unknown or rapidly changing factors. The actual value realized from the options
could be substantially higher or lower than the values reported above. The
actual value from the options will depend upon the future appreciation or
depreciation of our common stock during the option period and the timing of
exercise of the options.
STOCK OPTIONS EXERCISED DURING FISCAL YEAR AND YEAR END VALUES OF UNEXERCISED
OPTIONS
This table shows information about the stock options exercised by some
of our executive officers. No stock appreciation rights were exercised by these
executive officers during 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
<TABLE>
<CAPTION>
SHARES
ACQUIRED ON VALUE NUMBER OF UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-THE-MONEY
EXERCISE REALIZED AT FY-END OPTIONS AT FY-END
NAME (#) ($) (1) (#)EXERCISABLE/UNEXERCISABLE ($)EXERCISABLE/UNEXERCISABLE (2)
---- --- ------- ---------------------------- -----------------------------
<S> <C> <C> <C> <C>
David E. Orr 0 0 21,875 / 378,125 124,403 / 2,150,397
J. Richard Jones 0 0 62,852 / 58,352 357,439 / 331,848
James L. Chitkowski 0 0 0 / 0 0 / 0
Leonard D. Hayes 0 0 49,451 / 87,220 282,578 / 546,795
David J. McLean 0 0 51,750 / 106,615 294,302 / 632,570
Craig M. Swinn 0 0 20,000 / 100,000 146,140 / 715,800
</TABLE>
(1) Upon exercise of the option, an option holder did not receive the amount
reported above under the column entitled, "Value Realized." The amounts reported
above under this column reflect the amount by which the value of our common
stock on the date the option was exercised exceeded the exercise price of the
option. The option holder does not receive any cash until the shares of common
stock issued upon exercise of the options are sold.
(2) The value of our common stock at December 31, 1999 was $8.937 per share.
Value was determined by taking the last sale price of our common stock on that
date as reported by the Over the Counter Bulletin Board (OTCBB). The value of
options was determined by subtracting the total exercise prices of the options
from the value of the common stock issued upon exercise of the options.
DIRECTORS' STOCK OPTION PLAN
Our directors approved the Directors' Stock Option Plan, also called
the Formula Plan, on March 23, 1994. Our stockholders approved the Formula Plan
on May 23, 1994. The Formula Plan allows us to grant stock options to compensate
directors who are not full-time employees. The Formula Plan also allows for
unbiased administration of our other stock option plans under Rule 16b-3 of the
Securities and Exchange Commission. The Formula Plan was terminated as to future
grants on May 19, 1998 when our stockholders approved the Equity Compensation
Plan.
Our Compensation Committee administered the Formula Plan. The
termination, vesting, exercise, date of issuance and exercise price of options
are fixed by the terms of the Formula Plan. No future grants of options will be
made under the Formula Plan.
13
<PAGE>
The Formula Plan provided that each eligible director would be
initially granted options to acquire 10,000 shares of our common stock upon his
initial appointment to the Board. This was known as the initial grant. On the
date of our Annual Stockholders Meeting, each eligible director would be granted
options to purchase an additional 1,000 shares of our common stock. This was
known as the annual grant. As of March 17, 1998, annual grants will be made to
each eligible director to purchase 5,000 shares of our common stock, and options
to purchase 10,000 shares of our common stock will be granted to a new director
when elected. The exercise price of all options granted under the Formula Plan
equals the fair market value of our common stock on the date of grant.
The initial grants to eligible directors in 1994 were reduced to less
than 10,000 shares for certain directors whose options under our 1992
Nonqualified Stock Option Plan had not vested. On March 17, 1998 Dr. Lee, Dr.
Hutchins, and Mr. Clark were each granted options for 10,000 shares under the
Formula Plan in recognition of their efforts in recruiting new management and
establishing our new direction. Mr. Alan Negrin was granted options under the
Formula Plan for 10,000 shares upon his appointment as a new director on April
27, 1998. The following options were issued to directors under the Formula Plan:
o Mr. Clark was granted options for 19,000 shares;
o Dr. Lee was granted options for 24,000 shares;
o Dr. Hutchins was granted options for 21,500 shares;
o Mr. Negrin was granted options for 10,000 shares;
o Mr. McLernon (who resigned as a member of our Board of Directors on
January 26, 1998) was granted options for 9,000 shares; and
o Mr. Boswell (who resigned as a member of our Board of Directors on
May 20, 1997) was granted options for 10,500 shares.
Our directors approved the Equity Compensation Plan on March 17, 1998.
Our stockholders approved the Equity Compensation Plan on May 19, 1998. The
Equity Compensation Plan provides for the grant of different types of
equity-based compensation awards under one plan. Awards under the Equity
Compensation Plan may be made to participants by incentive stock options,
nonqualified stock options, restricted stock and other forms of equity-based
compensation. The Compensation Committee administers the Equity Compensation
Plan. The ISO Plan, Nonqualified Plan and Formula Plan were terminated as to
future grants on May 19, 1998.
Effective May 19, 1998, all grants made to directors will be granted
under the Equity Compensation Plan. Annual grants for eligible directors were
made for 5,000 shares from the Equity Compensation Plan on May 19, 1998. On May
18, 1999, eligible directors were granted options for 5,000 shares as an annual
grant under the Equity Compensation Plan. As of December 31, 1999, all eligible
directors had been granted options for 10,000 shares under the Equity
Compensation Plan.
The exercise price of all options granted under the Equity Compensation
Plan equals the fair market value of our common stock on the date of grant.
Initial grants vest in three equal installments, except that the
initial grants made in 1994 vest in accordance with categories in the Formula
Plan. These categories were based on the service provided to us
14
<PAGE>
by each eligible director before the initial grant. Annual grants under the
Formula Plan vest in all cases on the date of the stockholders Annual Meeting
that follows the date of the annual grant. Annual grants under the Equity
Compensation Plan generally vest on the date of the stockholders Annual Meeting
but not later than 12 months after the date of the grant.
RETIREMENT SAVINGS PLAN
We have a retirement savings plan for our employees that is intended
to qualify as a tax deferred retirement plan under Sections 401(a) and 401(k) of
the Internal Revenue Code. Eligible employees are permitted to contribute to the
retirement savings plan through payroll deductions within legal limitations.
These deductions are also subject to limitations included in the retirement
savings plan. We match fifty percent of the first six percent of salary
deferrals of participants in the retirement savings plan. In 1997, we converted
administration and investment of assets held under our 401(k) plan from Paine
Webber to Fidelity Institutional Retirement Services Company to improve its
competitiveness and reduce administration burden and costs.
FLEXIBLE BENEFITS PLAN
We have a flexible benefits plan for our employees that is intended to
qualify as a nontaxable employee health and welfare plan under Section 125 of
the Internal Revenue Code. Eligible employees are entitled to deduct their paid
premiums for our group medical plan from pre-tax salary, subject to any
limitations included in the flexible benefits plan and under applicable law.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999 the members of the Compensation Committee of the Board of
Directors were Mr. Clark (Chairman) and Dr. Charles T. Lee.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Compensation Committee reviews salary and bonus incentives for
executives, and makes recommendations to the Board for consideration and
approval. The Compensation Committee also administers the Equity Compensation
Plan, which enables us to offer stock through options or other equity-based
compensation awards for the purpose of attracting and retaining employees and
others who provide services of value to us.
The actions taken by the Committee and a description of the effect on
the 1999 compensation of Mr. Orr, our president and chief executive officer, are
discussed below:
COMPENSATION STRATEGY
The Committee is responsible for ensuring that executive compensation
is based on objective measures of performance by the company, the individual,
and, where appropriate, the organizational unit. The committee also believes
that compensation should vary with corporate performance and should be driven by
the long-term interests of the stockholders. The compensation strategy the
Committee follows is based on the following principles:
o base salary ranges at all levels should be competitive and
adjustments within the range should award performance and
contribution to the company;
o bonus compensation should become a larger part of total
compensation as we grow and/or as an employee takes on greater
responsibilities; payouts should be based on performance compared
to well-defined targets and measures that influence growth in the
value of our stock;
15
<PAGE>
o stock options and other forms of equity interest should be
granted broadly among our employees. This promotes and increases
personal interest in the welfare of the company, and encourages
employees to think and act like owners. The specific agreements
should have terms that encourage continued employment and should
provide long-term incentives for all participating employees.
This will aid our continued growth and financial success; and
o retirement and benefit packages should be competitive and
designed to promote career commitment to the company.
The compensation program for our executives is composed of the above
items. For the executive officer levels, the Compensation Committee continues to
benchmark total compensation opportunities (base salaries, annual incentives and
long-term incentives) at the 50th percentile market consensus for companies with
annual revenues of approximately $250 million. Although this is substantially
higher than our current and future forecasted revenue, it is more representative
of the types of companies with which we compete for executive talent.
In terms of compensation mix, we rely primarily on higher levels of
annual and long-term incentives as the primary means of achieving a
market-competitive status.
COMPENSATION ACTIONS
At the beginning of 1999, we set target awards based on meeting
annual financial, strategic and individual goals approved by the Committee and
the Board. The Committee recommended an 85% payout of the target awards. Our
Board approved the payout and used it to determine the 1999 bonus compensation
shown in the salary column of the Summary Compensation Table.
We grant stock options broadly among employees. Options generally
vest in installments over a number of years to encourage employees to remain
employed. After benchmarking the practices of other companies and as part of a
retention strategy, the Committee accelerated the vesting of the most broadly
used option agreement from five years to four years. We applied this
acceleration to all levels of current employees, except for officers, and to
future hires from January 1, 2000. We award all new hires an initial grant soon
after they begin working with us. The Committee also granted additional options
to promoted employees and certain key contributors in 1999 as well as to most
key executives.
The welfare benefits provided to executives are competitive to market
and are made available to all employees. This includes participation in our
Retirement Savings Plan (401(k) Plan) through which we match fifty percent of an
employee's salary deferrals, up to six percent of salary.
CEO COMPENSATION
BASE SALARY: Mr. Orr was hired at an annual salary of $350,000 in
April 1997, based on his employment agreement and competitive to market
consensus levels. His salary remained the same in 1999.
BONUS: We made significant progress on the development of our new
product, the Pliant(TM) 3000 Integrated Access Platform. We announced details of
our product and our new branding and positioning strategy. We have received
commitments for field trials of our new product from three potential customers.
Our net loss for 1999 was $1.96 per share compared with 1998 net loss of $0.21
per share. If we exclude one-time items that occurred in 1998, our net loss
would have been $2.35 in 1998. In November 1999, we decided to discontinue our
negotiations for restructuring our $115.0 million bonds that are due on May 15,
2001. Based on our 1999 progress and results, Mr. Orr received 85% of his
$175,000 bonus target award in February 2000.
16
<PAGE>
SUPPLEMENTAL DEFERRED COMPENSATION: In accordance with Mr. Orr's
employment agreement, we established a Supplemental Deferred Compensation Plan.
Mr. Orr elected to defer $143,500 in 1998. Our Board modified Mr. Orr's
employment agreement on May 18, 1999 and terminated the trust. As a result, we
paid Mr. Orr $154,724 from the Supplemental Deferred Compensation Plan in August
1999.
STOCK OPTIONS/RESTRICTED STOCK: As part of the Orr Employment
Agreement, Mr. Orr was granted 350,000 nonqualified stock options which will
become exercisable upon our meeting certain performance goals. He also was
issued 80,000 shares of our common stock, which he will forfeit if his
employment with us terminates for any reason before the fifth anniversary of the
grant of the stock, unless we terminate him without cause. On December 17, 1997,
Mr. Orr was granted 50,000 nonqualified stock options which will vest over four
years. In 1998, Mr. Orr's grants of 350,000 and 50,000 stock options were
repriced to $3.25 per share. There were no new grants to Mr. Orr in 1999.
CONCLUSION
The Committee believes the quality of executive leadership makes a
significant difference in our long-term performance. It is in our stockholders'
interest to pay compensation that rewards high expectations and continuous
improvement, as long as there is risk when expectations are not met or when
improvement does not occur. The Committee also believes incentives should relate
to our corporate performance, so all employees think and act like owners in
their desire to maximize stockholder value. The Committee believes the current
compensation program is making progress toward these goals.
The Compensation Committee:
Mr. Richard P. Clark, Chairman
Dr. Charles T. Lee
17
<PAGE>
PERFORMANCE GRAPH
The graph below is a line presentation on an indexed basis for the
period July 1, 1993 (the initial trading date of our common stock) through
February 29, 2000, comparing our cumulative stockholder return for that period
to the cumulative total return of the Nasdaq Stock Market (U.S.), the Nasdaq
Non-Financial Stocks and two peer groups. The total return is based on a $100
investment on July 1, 1993 and assumes the dividends were reinvested quarterly.
COMPARATIVE EIGHTY MONTH TOTAL RETURNS
JULY 1, 1993 THROUGH FEBRUARY 29, 2000
FOR PLIANT SYSTEMS, INC.,
NASDAQ STOCK MARKET (U.S.),
NASDAQ NON-FINANCIAL STOCKS
AND TWO PEER GROUPS
18
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
12/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 2/29/00
------ -------- -------- --------- -------- -------- -------
PLIANT SYSTEMS $100.00 $ 53.28 $ 48.36 $ 13.52 $ 9.63 $ 29.30 $ 34.02
NASDAQ STOCK
MARKET (U.S.) $100.00 $141.34 $173.90 $213.07 $300.43 $555.97 $636.31
NASDAQ NON-
FINANCIAL (U.S.) $100.00 $139.26 $169.17 $198.10 $290.85 $573.71 $670.49
OLD PEER GROUP
SOURCE: NASDAQ $100.00 $113.18 $161.08 $186.77 $171.48 $731.10 $716.70
NEW PEER GROUP
SOURCE: NASDAQ $100.00 $129.20 $206.85 $251.65 $243.45 $398.92 $483.53
</TABLE>
Old Peer Group consists of ADC Telecommunications; Advanced Fibre
Communications, Inc.; Andrew Corporation; Aware, Inc.; Ciena Corporation;
General Instruments; General Semiconductor; Newbridge Networks; PairGain
Technologies; Qualcomm, Inc.; Scientific-Atlanta, Inc.; Tellabs, Inc.; and
Westell Technologies, Inc.
New Peer Group consists of ADC Telecommunications; Advanced Fibre
Communications, Inc.; Carrier Access Corporation; Copper Mountain; Efficient
Network; Newbridge Networks; Next Level Communications; Orckit; PairGain
Technologies, Inc.; Tellabs, Inc.; Westell Technologies, Inc.
The change from Peer Group #1 to Peer Group #2 reflects our product
repositioning to the access equipment market.
19
<PAGE>
PROPOSAL 2
TO AMEND THE EQUITY COMPENSATION PLAN
In March 2000, our Board of Directors authorized the adoption of an
amendment to the Equity Compensation Plan, which would increase the number of
shares reserved for issuance under the plan by a total of 650,000 shares of
common stock. Our stockholders are being asked to approve this amendment to the
Equity Compensation Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL
TO APPROVE AN INCREASE IN THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER THE
EQUITY COMPENSATION PLAN BY A TOTAL OF 650,000 SHARES.
Our ability to offer stock through options or other equity-based
compensation awards has been and will continue to be a necessary and beneficial
method by which we can retain the services of employees and attract competent
employees and new Board members. Our Board believes that the Equity Compensation
Plan will continue to promote our growth and prosperity by providing employees,
directors and others with an additional incentive to contribute their best
efforts. Our Board believes that equity-based compensation awards create this
incentive by providing the recipient with an opportunity to acquire a potential
ownership in our company and thus providing a means to participate in our future
growth.
Our Board has determined that retention of qualified employees, and
directors is critical to our success. It is a challenge to retain both groups in
the extremely competitive employment environment of the Research Triangle Park
area in which we operate. We believe these pressures necessitate that we use
significant stock options to attract and retain the appropriate skill sets. The
proposed amendment will bring the number of shares reserved for issuance under
the Equity Compensation Plan to 1,550,000.
Our Board desires to better balance the perceived ratio of risk to
reward in order to retain critical talent without significantly increasing the
cash compensation. Future grants under our Equity Compensation Plan will assist
us in accomplishing this objective.
20
<PAGE>
SUMMARY
The table below lists for all of our current executive officers, all
current executive officers in total, all current non-employee directors and all
other current employees in total the number of shares of our common stock
subject to options outstanding as of February 29, 2000:
<TABLE>
<CAPTION>
OPTIONS
NAME OUTSTANDING DOLLAR VALUE ($) (1)
---- ----------- --------------------
<S> <C> <C>
Richard P. Clark
Director 36,500 $ 378,688
Dr. John R. Hutchins, III
Chairman of the Board of Directors 39,000 404,625
Dr. Charles T. Lee
Director 11,667 121,045
Alan E. Negrin
Director 20,000 207,500
David E. Orr
Director, President and
Chief Executive Officer 400,000 4,150,000
Dr. J. Richard Jones
Director and Executive
Vice President 121,204 1,257,492
David J. McLean
Vice President of Engineering 158,365 1,643,037
Leonard D. Hayes
Vice President of
Manufacturing 136,671 1,417,962
Craig M. Swinn
Vice President of Sales
and Marketing 120,000 1,245,000
John T. Autrey
Chief Financial Officer,
Secretary and Treasurer 95,000 985,625
Loretta M. Woodall
Vice President of Human Resources 75,139 779,567
Executive officers, as a group 1,106,379 11,478,682
Non-executive officer directors, as a group 107,167 1,111,858
All employees, as a group 1,836,346 19,052,090
TOTAL 3,049,892 $31,642,630
</TABLE>
(1) The value represents the dollar value of options outstanding times
$10.375, the closing price of the stock on 2/29/00.
Described in the following section are some of the material terms of
the Equity Compensation Plan.
21
<PAGE>
DESCRIPTION OF THE PLAN
The following description of the Equity Compensation Plan is only a
summary of some of its terms and provisions, is not intended to be a complete
description of the Equity Compensation Plan, and is qualified in its entirety by
reference to the full text of the plan.
The Equity Compensation Plan is not generally subject to the provisions
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
The Equity Compensation Plan is not a qualified plan under Section 401 of the
Internal Revenue Code of 1986, as amended (the "Code").
NATURE AND PURPOSE
The Equity Compensation Plan provides for the grant of a number of
different types of equity-based compensation awards under one plan. Awards under
the Equity Compensation Plan may be made to participants in the form of
incentive stock options, nonqualified stock options, restricted stock and other
forms of equity-based compensation as may be provided and are permissible under
the Equity Compensation Plan.
The Equity Compensation Plan is designed, for the benefit of the
Company, to attract and retain for the Company personnel of exceptional ability;
to motivate such personnel through added incentives to make a maximum
contribution to greater profitability; to develop and maintain a highly
competent management team; and to be competitive with other similar companies
with respect to executive and non-executive compensation.
ADMINISTRATION
The Equity Compensation Plan is administered by the Compensation
Committee (the "Committee"). Members of the Committee are appointed by the Board
from among its members who are "non-employee directors," as required under Rule
16b-3, to serve at the pleasure of the Board, and may be removed by the Board in
its discretion. The Committee has the exclusive right to interpret, construe,
and administer the Equity Compensation Plan and to select the persons eligible
to receive awards. The Committee determines the number of stock options or
shares of stock subject to an award and the form, terms, conditions and duration
of each award. The Committee's decisions are conclusive, final and binding upon
all parties.
The Committee is given broad discretion under the Equity Compensation
Plan to make adjustments to awards under the plan upon any extraordinary event
affecting the Company or its financial condition or performance, including, for
example, recapitalization or merger transactions or a Change in Control or
potential Change in Control of the Company. See "Securities to be Offered",
"Types of Awards," and "Effects of Change in Control" below. In addition, the
Committee has full power and authority to determine whether, to what extent, and
under what circumstances any award under the Equity Compensation Plan may be
canceled or suspended.
SECURITIES OFFERED
An aggregate of 250,000 shares were approved by stockholders on May 19,
1998 to be issued pursuant to the awards granted under the Equity Compensation
Plan, as originally adopted. The stockholders approved an amendment on December
7, 1999, increasing the number of shares of common stock reserved for issuance
under the Equity Compensation Plan by 650,000 shares. The current proposed
amendment of 650,000 shares would bring the number of shares of common stock
reserved for issuance up to 1,550,000 shares available for issuance. In
addition, the following shares are also available for issuance with respect to
the BroadBand Technologies, Inc. 1988 Incentive Stock Option Plan, the BroadBand
Technologies, Inc. 1992 Nonqualified Stock Option Plan and the BroadBand
Technologies, Inc. Directors' Stock Option Plan (collectively, the "Terminated
Option Plans"): as of the effective date of termination of a Terminated Option
Plan, (1) the number of shares of Common Stock that are authorized for future
issuance under such Option Plan on such date; and (2) any shares of Common Stock
22
<PAGE>
represented by outstanding stock options under such Option Plan on such date
that subsequently expire, are canceled or are forfeited without the delivery of
shares of Common Stock or which result in the forfeiture of shares of common
stock back to us will be available for issuance pursuant to the Equity
Compensation Plan. Such shares of common stock will be available from authorized
and unissued shares. The last sale price of the common stock of the Company on
February 29, 2000, as reported on the Over The Counter Bulletin Board, was
$10.375 per share. The 1988 Incentive Stock Option Plan, the 1992 Nonqualified
Stock Option Plan, and Directors' Stock Option Plans were terminated as to
future grants on May 19, 1998.
The following table summarizes the number of shares available for
future grants under the Equity Compensation Plan as of February 29, 2000:
<TABLE>
<CAPTION>
NUMBER OF SHARES AVAILABLE
FOR FUTURE GRANTS
PLAN AT FEBRUARY 29, 2000
---- --------------------
<S> <C>
Rollover from 1988 Incentive Stock Option Plan on May 19, 1998 123,260
Rollover from 1992 Nonqualified Stock Option Plan on May 19, 1998 294,149
Rollover from the Directors' Stock Option Plan on May 19, 1998 26,834
Equity Compensation Plan on May 19, 1998 250,000
-------
694,243
Amendment to Equity Compensation Plan on December 7, 1999 650,000
Grants from May 19, 1998 to February 29, 2000 (1,894,050)
Cancellations from May 19, 1998 to February 29, 2000 695,233
-------
Total Available for Future Grants under the Equity Compensation Plan 145,426
=======
</TABLE>
To the extent any shares of common stock or performance shares awarded
or subject to purchase under the Equity Compensation Plan are not delivered or
purchased, or are reacquired by us, such shares or performance shares will not
be charged against the aggregate number of shares available for awards under the
Equity Compensation Plan and may again be awarded under the plan. This would
occur, for example, upon a forfeiture of restricted stock or termination,
expiration, or cancellation of a stock option, stock right, or performance share
under the Equity Compensation Plan, or any other termination of an award without
payment being made in the form of common stock.
Proportionate and equitable adjustments will be made by the Committee
if certain events that result in changes in the outstanding shares of common
stock or that result in exchanges of shares of common stock for a different
number or class of common stock or other securities of ours or another
corporation. These events include, without limitation, a reorganization or
recapitalization or reclassification of its shares, stock split-up, stock
dividend, or consolidation of shares of common stock, merger, consolidation, or
sale of our assets, or any distribution to stockholders other than a cash
dividend. Under such circumstances, adjustments may be made by the Committee in
the limitation on the aggregate number of shares of common stock that may be
awarded under the Equity Compensation Plan, the number and class of shares that
may be subject to an award, the purchase price for shares of common stock under
outstanding stock options, and the number of shares to be transferred in
settlement of outstanding stock rights, and the terms, conditions, or
restrictions of any award or award agreement, including the price payable for
the acquisition of common stock.
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<PAGE>
The Committee is also authorized to make adjustments in
performance-based criteria or in the terms and conditions of other awards under
the Equity Compensation Plan in recognition of unusual or nonrecurring events
affecting the Company or its financial statements or changes in applicable laws,
regulations, or accounting principles. The Committee may also correct any
defects or omissions or reconcile any inconsistencies in the Equity Compensation
Plan or any agreement evidencing an award under the Equity Compensation Plan in
the manner and to the extent it shall deem desirable to carry it into effect.
Moreover, the Committee may, in its discretion, make such adjustments in the
terms of awards under the Equity Compensation Plan as it deems appropriate if we
assume any outstanding employee benefit plans or awards or the right or
obligation to make future awards in connection with the acquisition of any other
entity.
ELIGIBLE PARTICIPANTS
The Committee has the exclusive right to determine those persons
eligible to participate in the Equity Compensation Plan and shall select the
persons eligible to receive awards. Subject to the foregoing, any team member of
the Company, as well as any other person, including directors, may participate
in the Equity Compensation Plan if the Committee determines such participation
is in the best interest of the Company, subject to any limitations as may be
provided by applicable law or the Committee. As of February 29, 2000, the
Company has approximately 253 full-time employees, 5 part-time employees and 6
directors, 3 of whom are employees of the Company as of such date.
TYPES OF AWARDS
The Committee is provided broad discretion to determine the terms and
conditions of the various types of awards under the Equity Compensation Plan.
Each award granted will be evidenced by a written agreement setting forth the
terms and conditions of the award. Each such agreement will also be subject to
and incorporate the applicable terms and conditions of the Equity Compensation
Plan and any other terms and conditions, not inconsistent with the Equity
Compensation Plan, required by the Committee. The various forms of awards that
may be made to participants under the Equity Compensation Plan are described
below.
INCENTIVE STOCK OPTIONS
The Company is authorized to grant incentive stock options ("ISOs")
that may be entitled to favorable tax treatment under Section 422 of the Code.
See "Tax Effects of Equity Compensation Plan Participation" below. ISOs may be
granted to eligible participants under the Equity Compensation Plan at such time
or times as determined by the Committee until May 18, 2008, subject to certain
conditions described below.
The exercise price of an ISO under the Equity Compensation Plan may not
be less than 100% of the fair market value of the Common Stock at the date of
grant (110% for 10% owners of the Company). The fair market value of the Common
Stock for any day in question will be determined for purposes of the Equity
Compensation Plan based upon the closing price of the Common Stock as reported
on the exchange on which the Common Stock is traded if the Common Stock is
traded on an exchange or on The Nasdaq Stock Market if the Common Stock is
traded on The Nasdaq Stock Market, provided at least 100 shares of Common Stock
were sold on such date. If there was not a sale of at least 100 shares of Common
Stock that day, then the fair market value shall be determined based on the
closing price of the Stock on the last day on which there was a sale of at least
100 shares of Common Stock. The Committee is also authorized to establish an
alternate method of determining fair market value of the Common Stock.
An ISO and any related stock right, if any, granted under the Equity
Compensation Plan must be exercised in whole or in part from time to time within
10 years from the date of grant (5 years for 10% owners of the Company), or such
shorter period specified by the Committee corresponding in the award agreement.
Upon a
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termination of employment of the optionee with the Company, as determined
by the Committee in its discretion, the ISO, and any related stock right, will
lapse and cease to be exercisable upon, or within such period following, the
termination of employment, as determined by the Committee and provided in the
award agreement. In no event, however, can the period of time during which an
ISO or related stock right remains exercisable following a termination of
employment exceed three months, unless employment is terminated because of death
or disability of the optionee. Following death or disability, the period of time
during which an ISO or related stock right may be exercised cannot exceed one
year after the date of death or disability. In no event can the period of time
following a termination of employment during which an ISO or related stock right
may be exercised extend beyond the original exercise period of the ISO or
related stock right.
The amount of ISOs which are first exercisable by any one participant
in any year which may receive favorable tax treatment as ISOs is limited. To the
extent that the aggregate fair market value of the shares of Common Stock with
respect to which ISOs are first exercisable during any calendar year by an
eligible participant exceeds $100,000, such options shall be treated as NQSOs.
Similar treatment applies in the event the exercise of an ISO is accelerated by
reason of change of control. See "Effects of Change in Control" below. The
aggregate fair market value of the Common Stock for these purposes is determined
as of the date the ISO is granted.
Subject to the limitation on the maximum number of shares of Common
Stock that may be issuable pursuant to the Equity Compensation Plan, as
discussed under "Securities to be Offered" above, the maximum number of shares
of Common Stock may be subject to ISO awards under the Equity Compensation Plan.
An ISO granted under the Equity Compensation Plan will also be subject to such
other terms and conditions which the Committee deems necessary to impose in
order to qualify the ISO under Section 422 of the Code, as well as any other
terms and conditions not inconsistent with the ISO provisions of the Equity
Compensation Plan as determined by the Committee.
The Committee may combine awards of ISOs to participants under the
Equity Compensation Plan with other awards under the Equity Compensation Plan
and may provide that all or part of the shares of Common Stock to be issued upon
the exercise of an ISO will take the form of deferred stock or restricted stock,
as provided for under the Equity Compensation Plan and described below.
NONQUALIFIED STOCK OPTIONS
The Company may also grant nonqualified stock options ("NQSOs") to
eligible participants to purchase shares of Common Stock at such time or times
as determined by the Committee. These stock options will not be eligible for the
favorable tax treatment available to ISOs under Section 422 of the Code.
The exercise price of an NQSO under the Equity Compensation Plan will
be as established by the Committee in the agreement evidencing the award. Such
exercise price will not be limited under the Equity Compensation Plan and may be
less than 100% of the fair market value at the time of grant. Thus, discounted
stock options providing for an exercise price of less than the fair market value
of the Stock at the date of the award may be granted as NQSOs under the Equity
Compensation Plan.
An NQSO under the Equity Compensation Plan, and its related stock
right, if any, will be exercisable in full or in part from time to time as
specified by the Committee or in the corresponding award agreement. Upon
termination of employment of the optionee, the NQSO and any related stock right
will lapse and cease to be exercisable upon, or within such period following,
such termination of employment, as determined by the Committee and specified in
the award agreement.
An NQSO may also be subject to such other terms and conditions, not
inconsistent with the Equity Compensation Plan, as determined by the Committee
and specified in the award agreement.
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STOCK APPRECIATION RIGHTS
The Committee is empowered under the Equity Compensation Plan to grant
a stock appreciation right (an "SAR") to an eligible participant in connection
with an ISO or an NQSO. SARs may also be granted independent of any related
stock option.
An SAR is a stock right granted under the Equity Compensation Plan that
provides for an amount payable in shares of Common Stock and/or cash, as
determined by the Committee, equal to the excess of the fair market value of a
share of Common Stock on the date the stock right is exercised over the exercise
price of the SAR or the exercise price of a related stock option to purchase a
share of Common Stock. Thus, an SAR granted in conjunction with a stock option
will entitle the participant, within the period specified for the exercise of
the stock option, to surrender the unexercised stock option, or a portion
thereof, and receive in lieu thereof a payment in cash or shares of Common Stock
having an aggregate value equal to the amount by which the fair market value of
each share of Common Stock exceeds the exercise price per share of Common Stock
under the stock option, times the number of shares of Common Stock under the
stock option, or portion thereof, that is surrendered.
Any SAR granted under the Equity Compensation Plan in conjunction with
a stock option will be subject to the same terms and conditions as the related
stock option, including limits on transferability, and will be exercisable only
to the extent the stock option is exercisable. If the related stock option
terminates or lapses, the SAR will also terminate or lapse. Upon exercise of an
SAR, the number of shares subject to exercise under any related stock option
will be reduced automatically by the number of shares of stock represented by
the related stock option (or portion thereof) that is surrendered. The grant of
SARs related to ISOs under the Equity Compensation Plan must be concurrent with
the grant of the related ISOs. For NQSOs, the grant of a related SAR may either
be made concurrently with the grant of the NQSO or may be made in connection
with NQSOs previously granted that are unexercised and have not terminated or
lapsed.
In addition to the foregoing restrictions, a person subject to Section
16(b) of the Act will be subject to a number of additional requirements imposed
by Rule 16b-3, promulgated by the Securities and Exchange Commission under the
Act, in connection with the exercise of an SAR.
The Committee is also empowered under the Equity Compensation Plan, in
its sole discretion, to grant limited stock appreciation rights ("Limited
SARs"), which will become exercisable only upon a Change in Control, as defined
in the Equity Compensation Plan, subject to such terms and conditions as the
Committee, in its sole discretion, may specify. Such Limited SARs may be settled
only in cash. For further information on Limited SARs and other aspects of the
Equity Compensation Plan, which may be triggered by virtue of a Change in
Control of the Company, see "Effects of Change in Control" below.
INCIDENTS OF STOCK OPTIONS AND STOCK RIGHTS
Each stock option (ISO or NQSO) and stock right (SAR or Limited SAR)
granted under the Equity Compensation Plan will be subject to such terms and
conditions, not inconsistent with the Equity Compensation Plan, as may be
determined by the Committee. Such provisions, for example, may require the
continued employment of a participant as consideration for the grant or exercise
of a stock option or stock right.
A stock option or stock right under the Equity Compensation Plan will
not be transferable by the participant other than by will or the laws of descent
and distribution or pursuant to a qualified domestic relations order, as defined
by the Code and ERISA, and will be exercisable during the lifetime of the
participant only by the participant or his or her guardian or legal
representative. In addition, the Committee may, in its discretion,
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permit the transfer, without payment of consideration, of an NQSO by a
participant to a member of the participant's immediate family or to a trust or
partnership whose beneficiaries are members of the participant's immediate
family. In such case, the NQSO shall be exercisable only by such transferee.
The purchase price for shares of Common Stock upon exercise of a stock
option under the Equity Compensation Plan will be payable in such amounts, at
such times, and upon such terms as will be determined by the Committee. The
Committee may establish payment terms for the exercise of stock options that
permit the participant to deliver shares of Common Stock with a fair market
value equal to the stock option exercise price as payment upon exercise of a
stock option.
No cash dividends will be paid on shares of Common Stock subject to
unexercised stock options under the Equity Compensation Plan. The Committee,
however, may, in its discretion, provide for the payment of "dividend
equivalents" on shares of Common Stock subject to an exercisable stock option
under the Equity Compensation Plan. The Committee may also, in its discretion,
authorize payment of "interest equivalents" on dividend equivalents under the
Equity Compensation Plan.
To the extent a participant may be required to pay the Company amounts
with respect to income and employment tax withholding in connection with the
exercise of an NQSO and/or with respect to certain dispositions of Common Stock
acquired upon exercise of an ISO, the Committee, in its sole discretion, may
permit the participant to satisfy the obligation, in whole or in part, by making
an irrevocable election that a portion of the total fair market value of the
applicable shares of Common Stock be paid in cash in lieu of the issuance of
Common Stock and that such cash payment be applied to the satisfaction of the
withholding obligations. Certain restrictions, however, will be applicable with
respect to this feature of the Equity Compensation Plan for participants subject
to Section 16(b) of the Exchange Act and Rule 16b-3 thereunder.
RESTRICTED STOCK
Restricted stock awards may be made to participants under the Equity
Compensation Plan as an incentive for the performance of future services that
will contribute materially to the successful operation of the Company. The
Company may award restricted stock either alone, in addition to, or in tandem
with other awards granted under the Equity Compensation Plan and/or cash
payments made outside of the Equity Compensation Plan.
A restricted stock award under the Equity Compensation Plan will be an
award of Common Stock issued with the restriction that the holder may not sell,
transfer, pledge, or assign such stock and with such other restrictions as the
Committee, in its sole discretion, may impose. These other restrictions may
include without limitation, a restriction on the right to vote such shares to
the extent, if any, such shares possess voting rights and the right to receive
cash dividends. The restrictions may lapse separately or in combination and at
such time or times as the Committee may determine appropriate.
In addition to determining the applicable restrictions on restricted
stock, which restrictions may include service or performance restrictions, the
Committee may also in its discretion determine the purchase price, if any, to be
paid for such restricted stock, the length of the time during which the
restrictions will apply, and whether dividends and other distributions on the
restricted stock will be paid currently to the participant or paid to the
Company for the account of the participant.
A participant receiving an award of restricted stock under the Equity
Compensation Plan must accept the award within 60 days, or such shorter period
as the Committee may specify, after the date of the award, by
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executing an award agreement and paying the purchase price, if any, for the
restricted stock. Upon termination of employment of a participant with the
Company prior to the lapse of restrictions, all shares of restricted stock then
held by the participant will be forfeited, unless otherwise provided in the
award agreement or determined by the Committee.
Except as otherwise provided in the Equity Compensation Plan, no shares
of restricted stock received by a participant may be sold, exchanged,
transferred, pledged, or otherwise disposed of during the restriction period.
The Committee in its discretion may waive applicable restrictions in cases of
special circumstances. In its discretion, the Committee may also waive any
remaining restrictions on restricted stock upon hardship or other special
circumstances of a participant whose employment with the Company is
involuntarily terminated.
Unless otherwise provided, a participant receiving an award of
restricted stock will have all the rights of a holder of the Common Stock with
respect to such restricted stock, including the right to vote the shares to the
extent, if any, such shares possess voting rights and the right to receive any
dividends thereon. The Committee may require, however, that any dividends be
deferred automatically and reinvested in additional restricted stock or may
require that dividends and other distributions on restricted stock be paid to
the Company for the account of the participant. If all of the restrictions
applicable to restricted stock expire without a forfeiture of the restricted
stock, unrestricted certificates for such shares will be delivered to the
participant.
To better ensure that award payments actually reflect performance of
the Company and the service of the participant, the Committee in its discretion
may provide for a tandem performance-based or other award designed to guarantee
a minimum value, payable in cash or Common Stock, to the recipient of a
restricted stock award, subject to such performance, future service, deferral,
and other terms and conditions as may be specified by the Committee.
DEFERRED STOCK
The Equity Compensation Plan also empowers the Company to issue shares
of deferred stock to participants under the plan. Deferred stock awards may be
issued either alone or in addition to other awards granted under the Equity
Compensation Plan, as determined by the Committee in its sole discretion. The
Committee is empowered to determine the individuals to whom, and the time or
times at which, awards of deferred stock may be made, the number of shares to be
awarded, the price, if any, to be paid for the deferred stock, the time or times
within which such awards may be subject to forfeiture, whether shares of
deferred stock will accrue cash dividend equivalents, and all other conditions
of the deferred stock awards. The Committee may also condition awards of
deferred stock upon the attainment of specified performance goals or such other
factors or criteria as the Committee may determine.
Subject to the provisions of the Equity Compensation Plan and the
applicable award agreement, deferred stock awards may not be sold, transferred,
pledged, assigned, or otherwise encumbered during the deferral period, as
specified by the Committee. Upon the expiration of the deferral period,
certificates for shares of Common Stock will be delivered to the participant
representing the number of shares of Common Stock covered by the deferred stock
award. The Committee, in its discretion, however, at or after grant, may
accelerate the vesting of all or any part of any deferred stock award and/or may
waive the deferral limitations for all or any part of such award.
Upon termination of employment of a recipient of a deferred stock award
with the Company, the deferred stock covered by an award will be forfeited by
the participant, unless otherwise provided in the Equity Compensation Plan or
the applicable award agreement. The Committee in its discretion, however, at or
after
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grant, may provide for accelerated vesting in the event of special circumstances
as determined by the Committee. The Committee may also require that a certain
percentage of the fair market value of deferred stock shares be paid in the form
of cash in lieu of shares of Common Stock and that such cash payment be applied
to the satisfaction of all applicable federal and state income and employment
tax withholding obligations that arise at the time the deferred stock becomes
free of all restrictions.
A participant receiving a deferred stock award may elect to further
defer receipt of deferred stock for a specified period or until a specified
event, subject in each case to the Committee's approval and to such terms as are
determined by the Committee. Unless otherwise determined by the Committee, such
election must be made at least 12 months prior to completion of the deferral
period for the deferred stock award in question, or for the applicable
installment of such an award.
To better ensure that the award actually reflects the performance of
the Company and the service of the participant, the Committee, in its
discretion, may provide for a tandem performance-based or other award designed
to guarantee a minimum value, payable in cash or Common Stock, to the recipient
of a deferred stock award, subject to such performance, future service, deferral
and other terms and conditions as may be specified by the Committee.
STOCK AWARDS
The Company may grant an award of Common Stock under the Equity
Compensation Plan in payment of compensation that has been earned or as
compensation to be earned, including without limitation, compensation awarded
concurrently with or prior to the grant of the stock award. In determining the
value of the stock award, the shares of Common Stock subject to such award will
be valued at not less than 100% of the fair market value of such shares of
Common Stock on the award date, regardless of whether such shares of Common
Stock are then issued or transferred to the participant and whether or not such
shares of Common Stock are subject to restrictions that affect their value.
Shares of Common Stock subject to a stock award may be issued to the
participant at the time the award is granted, or at any time subsequent thereto,
or in installments from time to time, as determined by the Committee. To the
extent the shares of Common Stock subject to a stock award are not issued to the
participant at the time the award is granted, dividend equivalents may be issued
to the participant as determined by the Committee. In the Committee's
discretion, any issuance payable in shares of Common Stock under a stock award
may be paid in cash on the date delivery of shares would otherwise have been
made.
A stock award will be subject to such terms and conditions, including
without limitation, restrictions on the sale or other disposition of the stock
award or the shares of Common Stock issued pursuant thereto, as determined by
the Committee. Upon issuance of shares to a participant pursuant to a stock
award, the participant will become a holder of the Common Stock fully entitled
to receive dividends, to vote to the extent, if any, such shares possess voting
rights and to exercise all of the rights of a stockholder, except to the extent
otherwise provided in the stock award.
PERFORMANCE SHARES
Awards of performance shares may be made to participants under the
Equity Compensation Plan as an incentive for the performance of future services
that will contribute materially to the successful operation of the Company.
Awards of performance shares may be made either alone, in addition to, or in
tandem with other
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awards granted under the Equity Compensation Plan and/or cash payments made
outside of the Equity Compensation Plan.
A performance share under the Equity Compensation Plan will be an award
of a unit valued by reference to a designated number of shares of Common Stock,
which value may be paid to the participant by the delivery of such cash or
Common Stock, or any combination thereof as determined by the Committee, upon
achievement of such performance objectives during the applicable performance
period as the Committee may establish at the time of the award grant or
thereafter. The Committee in its sole discretion may determine the participants
to whom awards of performance shares will be made, the performance period,
and/or the performance objectives applicable to such awards, the form of
settlement of a performance share, and any other terms and conditions of such
awards. Performance periods may overlap, and participants may participate
simultaneously with respect to performance shares for which different
performance periods are prescribed.
The Committee in its sole discretion will determine the performance
objectives relating to awards of performance shares. These objectives may vary
from participant to participant and between awards and will be based upon such
performance criteria or combination of factors as the Committee may deem
appropriate. For example, such performance criteria may include minimum earnings
per share or return on equity. The Committee is empowered to revise such
performance objectives during the applicable performance period if significant
events occur that the Committee expects to have a substantial effect on the
applicable performance objectives during such period. The Committee may also
provide for the pro-ration of performance shares if a participant terminates
service with the Company during a performance period because of special
circumstances in which the Committee, in its discretion, finds that a waiver is
appropriate. If a participant terminates service with the Company during a
performance period for any other reason, then such participant will not be
entitled to any payment with respect to that performance period, unless
otherwise determined by the Committee.
The Committee is also authorized to approve requests by participants to
defer payment of performance shares on terms and conditions approved by the
Committee and set forth in an award agreement entered into in advance of the
time of receipt or constructive receipt of payment by the participant.
OTHER STOCK-BASED AWARDS
The Equity Compensation Plan also authorizes the grant of other awards
that are valued in whole or in part by reference to, or otherwise based on,
Common Stock. These other stock-based awards will include without limitation
convertible preferred stock, convertible debentures, exchangeable securities,
phantom stock, and stock-award options valued by reference to book value or
performance. Other stock-based awards may be granted either alone or in addition
to or in tandem with other awards granted under the Equity Compensation Plan
and/or cash awards made outside of the Equity Compensation Plan.
The Committee in its sole discretion is empowered to determine the
participants eligible to receive other stock-based awards, the time or times at
which such awards may be made, the number of shares of Common Stock subject to
such awards, and all other terms and conditions of such awards. The provisions
of other stock-based awards need not be the same with respect to each recipient.
Shares of Common Stock subject to other stock-based awards may not be
sold, assigned, transferred, pledged or otherwise encumbered prior to the date
on which the shares are issued or, if later, the date on which any applicable
restriction, performance, or deferral period lapses. Interest or dividend
equivalents may be payable with respect to other stock-based awards in the
discretion of the Committee. The Committee may also determine whether any other
stock-based award will be subject to vesting or forfeiture provisions, and the
effects of termination of employment upon such awards.
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EFFECTS OF CHANGE IN CONTROL
The Committee is granted broad discretion under the Equity Compensation
Plan to deal with awards under the Equity Compensation Plan in the event of a
Change in Control of the Company, as defined in the Equity Compensation Plan.
For these purposes, a "Change in Control" will be deemed to have occurred if (a)
any person, including a group, but not the Company or any subsidiary or employee
benefit plan thereof, consummates a tender or exchange offer for shares of the
Common Stock pursuant to which at least fifty percent (50%) of the outstanding
shares of the Common Stock are purchased, or such person, together with its
affiliates and associates, becomes the beneficial owner of at least fifty
percent (50%) of the Common Stock; or (b) the consummation of a merger or
consolidation of the Company with or into another corporation if the Company's
stockholders immediately prior to the transaction do not own at least fifty
percent (50%) of the surviving company's outstanding stock immediately following
the transaction, a sale or other disposition of all or substantially all of the
Company's assets, or the liquidation of the Company; or (c) during any period of
twenty-four (24) consecutive months the incumbent directors at the beginning of
such period cease for any reason other than death to constitute at least a
majority of the Board, provided that a director will be deemed to be an
incumbent director if such director, although not a director at the beginning of
such 24-month period, was elected by, or on the recommendation of or with the
approval of, at least two-thirds of the directors then qualified as incumbent
directors.
Upon the occurrence of a Change in Control, the Committee in its
discretion may declare any and all then outstanding stock options not previously
exercisable and vested as immediately exercisable and fully vested, in whole or
in part. In addition, under such circumstances the Committee may also in its
discretion declare the restrictions applicable to awards of restricted stock, or
other stock-based awards to have lapsed. The Committee in its discretion may
also direct that the value of all outstanding stock options, stock rights,
restricted stock, deferred stock, performance shares, stock awards, and other
stock-based awards, in each case to the extent vested, be cashed out on the
basis of the change in control price, less the exercise price under such award,
as of the date such change in control is determined to have occurred. For these
purposes, "Change in Control Price" means the highest price per share of Common
Stock paid in any transaction reported on The Nasdaq Stock Market or any
exchange on which the stock is traded, or paid or offered in any bona fide
transaction related to a potential or actual Change in Control of the Company at
any time during the 60-day period immediately preceding the occurrence of the
Change in Control as determined by the Committee.
In addition to the effects of a Change in Control upon an award under
the Equity Compensation Plan, the plan also allows the Committee in its sole
discretion to grant Limited SARs, which become exercisable only in the event of
a Change in Control, subject to such terms and conditions as the Committee, in
its sole discretion, may specify. Limited SARs will be settled solely in cash. A
Limited SAR will entitle the holder of the related stock option to surrender
such stock option, or any portion thereof, to the extent unexercised, and to
receive a cash payment equal to the difference between the SAR fair market
value, at the date of surrender, of a share of Common Stock for which the
surrendered stock option or portion thereof is then exercisable, and the price
at which a participant could exercise a related stock option to purchase the
share of Common Stock. For these purposes, the "SAR Fair Market Value" means a
value established by the Committee for the exercise of an SAR or Limited SAR.
AMENDMENT AND TERMINATION
The Equity Compensation Plan will continue in effect until terminated
by the Company as provided in the Equity Compensation Plan. Notwithstanding the
perpetual nature of the Equity Compensation Plan, ISOs may only be granted under
the Equity Compensation Plan until May 18, 2008.
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Upon the recommendation of the Committee, or otherwise, the Board may
amend the Equity Compensation Plan. To the extent required by Rule 16b-3 under
the Exchange Act, no amendment to the Equity Compensation Plan may be made
without approval by the Company's stockholders that would make certain changes,
including altering the group of persons eligible to participate in the Equity
Compensation Plan, increasing the maximum number of shares of Common Stock
available for awards under the Equity Compensation Plan (except as otherwise
provided in the Equity Compensation Plan), extending the period during which
ISOs may be granted under the Equity Compensation Plan, limiting or restricting
the powers of the Committee in administering the Equity Compensation Plan,
changing the definition of participants eligible for ISOs or increasing the
limit or value of shares of Common Stock for which eligible participants may be
granted ISOs under the Equity Compensation Plan, materially increasing the
benefits accruing to participants under the Equity Compensation Plan, materially
modifying the requirements of eligibility for participation in the Equity
Compensation Plan, or changing the amendment provisions of the Equity
Compensation Plan.
Notwithstanding the foregoing, no amendment to or discontinuation of
the Equity Compensation Plan or any provision thereof may adversely affect any
award previously granted to a participant under the Equity Compensation Plan,
without the written consent of such participant. The Committee is empowered to
determine whether an amendment or discontinuation adversely affects any existing
award. Notwithstanding the foregoing, the Committee retains the power to (a)
annul any award if the participant is terminated for cause as determined by the
Committee; (b) provide for the forfeiture of shares of Common Stock or other
gain under an award as determined by the Committee for competing against the
Company; and (c) convert any outstanding ISO to an NQSO. If an acceleration
event (Change in Control) has occurred, no amendment or termination will impair
the rights of any person with respect to an outstanding award as discussed under
"Effects of Change in Control" above.
RESALE RESTRICTIONS
Participants under the Equity Compensation Plan may be restricted under
certain circumstances in their ability to resell shares of Common Stock
purchased or awarded under the Equity Compensation Plan. Resale restrictions may
be imposed by virtue of the provisions of the Equity Compensation Plan and the
applicable award agreement and/or by application of the federal and state
securities laws.
A participant acquiring shares of Common Stock granted pursuant to a
stock award under the Equity Compensation Plan or upon exercise of a stock
option granted under the Equity Compensation Plan will hold such shares subject
to any applicable restrictions imposed in the Equity Compensation Plan and/or by
the Committee. For example, the Committee is authorized to grant awards of
restricted stock under the Equity Compensation Plan. Shares of Common Stock
issued pursuant to a restricted stock award will be issued with the restriction
that the holder may not sell, transfer, pledge or assign such stock and with
such other restrictions as the Committee, in its sole discretion, may impose.
Such restrictions may lapse separately or in combination and at such time or
times as the Committee may deem appropriate. If and when the applicable
restriction period expires without a prior forfeiture of the restricted stock,
unrestricted certificates for the applicable shares of Common Stock will be
delivered to the participant granted the restricted stock award. Similar resale
restrictions may also be applicable to other awards under the Equity
Compensation Plan.
TAX EFFECTS OF EQUITY COMPENSATION PLAN
The following discussion of the federal income tax consequences of
awards granted under the Equity Compensation Plan is intended only as a summary
of the present federal income tax treatment of stock options (ISOs and NQSOs),
stock rights (SARs and Limited SARs), and other stock awards under the Equity
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Compensation Plan. The federal income tax laws pertaining to the Equity
Compensation Plan are highly technical, and such laws are subject to change at
any time. Some variations on the federal income tax effects of Equity
Compensation Plan participation described below may occur with respect to
participation by persons subject to Section 16(b) of the Exchange Act.
INCENTIVE STOCK OPTIONS
Although the Company has obtained neither a letter ruling from the
Internal Revenue Service (the "IRS") nor an opinion of counsel stating that the
ISO provisions of the Equity Compensation Plan constitute an incentive stock
option plan under the Code, it is expected that the options granted under the
ISO provisions of the Equity Compensation Plan will qualify as ISOs for federal
income tax purposes. It is also expected that options granted under the ISO
provisions of the Equity Compensation Plan in tandem with stock rights will
likewise qualify as ISOs for federal income tax purposes as long as the stock
rights expire with the underlying option, and the rights may be exercised only
when the market price of the stock subject to the option exceeds the exercise
price of the option.
In general, no taxable income will be realized by an optionee, and no
federal income tax deduction will be allowed to the Company, upon the grant or
exercise of an ISO. The federal income tax consequences of a disposition of
Common Stock received pursuant to the exercise of an ISO will depend upon
whether the optionee has held the shares for the requisite holding period. If
the optionee disposes of such shares after the later to occur of: (i) two (2)
years from the date of the grant of the ISO or (ii) one (1) year after the date
of the transfer of the shares to him (the "Holding Period"), then the optionee
will be taxed according to the rules of sales and exchanges generally. The
amount subject to tax will be the difference between the amount realized and the
optionee's cost basis in the shares of Common Stock, which difference will be a
capital gain if the shares are held as a capital asset. In such event, the
Company will not be entitled to a tax deduction by reason of the disposition.
For purposes of this discussion, "disposition" means a lifetime transfer of
legal title, such as by sale, exchange, or gift, but does not include a transfer
that is triggered by death, such as one by bequest or inheritance or one made by
a decedent to his estate.
The Holding Period will not apply to an ISO that is exercised after the
optionee's death by his estate or by a person who acquired the right to exercise
it by bequest or inheritance, or otherwise by reason of the optionee's death.
The Holding Period will apply if the optionee dies after he exercises his ISO.
In that case, his estate, or any other person holding the shares acquired
pursuant to the ISO, must either hold the shares for the applicable Holding
Period or suffer the tax consequences discussed below for a "disqualifying
disposition."
A "disqualifying disposition" takes place if the optionee makes a
disposition of the shares of Common Stock acquired through the exercise of an
ISO before satisfying the Holding Period. If a "disqualifying disposition"
occurs, the optionee must include as ordinary income the gain realized on that
disposition to the extent of the lesser of (i) the fair market value of the
Common Stock on the date of exercise of the ISO minus the option price; or (ii)
the amount realized on the disposition minus the option price. Upon the
occurrence of a "disqualifying disposition," the Company will be entitled to
deduct, as compensation paid, the amount so included as ordinary income by the
optionee.
Under the Equity Compensation Plan, an optionee who exercises an option
may be allowed to pay for his shares with cash or with shares of Common Stock,
including shares acquired in a prior ISO exercise. Generally, such payment would
not give rise to recognition by the optionee of a gain or loss. If, however, an
optionee exercises an option and pays for the shares upon exercise with shares
that the optionee acquired in a prior ISO exercise but has not held for the
requisite Holding Period, the optionee will be taxed on the disposition of the
shares acquired in the prior ISO exercise as if a "disqualifying disposition" of
those shares had occurred.
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In order for an ISO granted under the Equity Compensation Plan to be
governed by the general rules pertaining to ISOs, the optionee must be an
employee of the Company for the entire time from the date the ISO is granted
until three (3) months before its exercise. An optionee who is disabled has
twelve (12) months rather than three (3) months after leaving employment to
exercise his ISOs. These employment requirements do not apply if the optionee
dies before exercising an ISO, but in such circumstances the employment
requirement must have been met by the employee at his death.
The federal alternative minimum tax consequences of the exercise of an
ISO under the Equity Compensation Plan may differ from the federal income tax
consequences of such exercise. The alternative minimum tax consequences of the
disposition of shares acquired upon the exercise of an ISO may also differ from
the regular income tax consequences of such disposition. The difference between
the option price and the fair market value of the shares upon exercise will be a
preference item subject to the federal alternative minimum tax. For purposes of
the individual alternative minimum tax, the income tax rules governing the
transfer of property in connection with the performance of services apply, not
the regular income tax rules applicable only to ISOs. For example, if an
optionee acquires shares pursuant to the exercise of an ISO under the Equity
Compensation Plan and disposes of the shares in the same taxable year, tax
treatment under the regular income tax and the alternative minimum tax will be
the same. If, however, the shares are disposed of in a disqualifying disposition
in a later taxable year, the difference between the option price and the fair
market value of the shares will be included in alternative minimum taxable
income in the year of exercise and in regular taxable income, but not in
alternative taxable income, in the year of the disposition. Similarly, if an
optionee acquires shares pursuant to the exercise of an ISO under the Equity
Compensation Plan and disposes of the shares after the Holding Period is
satisfied, the difference between the option price and the fair market value of
the stock at the time of exercise will be included in alternative minimum
taxable income, but not in regular taxable income, in the year of exercise, and
for alternative minimum tax purposes the cost basis of the shares will be the
sum of the option price and the amount of income included in alternative minimum
taxable income in the year of exercise.
NONQUALIFIED OPTIONS
Holders of NQSOs will not be entitled to the special tax treatment
afforded by Sections 421 and 422 of the Code in connection with ISOs. Under the
Code, an optionee granted an NQSO will realize no taxable income upon receipt of
the NQSO, but will not be deemed to have realized ordinary taxable income equal
to the excess of the fair market value of the stock acquired at the time of the
exercise of the NQSO, over the option price paid, unless at the time of exercise
the stock remains subject to a "substantial risk of forfeiture" as defined in
Section 83 of the Code. Whether an optionee who exercises an NQSO under the
Equity Compensation Plan will acquire the stock subject to such risk will depend
upon the terms of the NQSO award as determined by the Committee. For a complete
discussion of the income tax treatment when a participant acquires Common Stock
subject to a "substantial risk of forfeiture," see "Restricted Stock" below. The
Company is required for federal income tax purposes to withhold tax on the
amount of income realized by the optionee in the transaction. The Company will
be entitled to a deduction for federal income tax purposes in the year the
optionee must report the income in an amount equal to the ordinary income
realized by the optionee as a result of exercise of his NQSO.
An optionee's tax basis in shares acquired upon the exercise of an NQSO
will be the fair market value of such shares used to determine the amount of
ordinary taxable income reported by the optionee with respect to the exercise of
the NQSO. Upon any sale of such shares of Common Stock, the optionee's gain or
loss will therefore equal the difference between the sale price and such tax
basis. Any such gain or loss will be short-term or long-term capital gain or
loss, depending on whether the shares have been held for more than the long-term
capital gain holding period. In general, when an NQSO is exercised by the
exchange of previously acquired stock, the
34
<PAGE>
optionee receives a tax-free exchange and basis carryover for old shares for an
equivalent number of new shares. The basis for any additional shares will equal
the sum of the amount included in gross income by reason of the exercise of the
NQSO, plus any amount of cash paid by the optionee upon the exercise of the
NQSO.
STOCK RIGHTS
The grant of a stock right to a participant under the Equity
Compensation Plan will not require recognition of taxable income. Upon the
exercise of a stock right, however, payments received by the participant will be
included in that participant's income as compensation in that year. If payment
is made in cash, that amount of cash must be recognized as income. If the stock
right is paid in the Company's Common Stock, income will be recognized in the
amount of the Common Stock's fair market value. The Company will be entitled to
a deduction for compensation in an equal amount, to be recognized in its taxable
year in which the participant's taxable year of income inclusion ends. Upon the
sale of any Common Stock acquired by the exercise of stock rights, the
participant will realize gain or loss equal to the difference between the amount
realized on the sale and the participant's basis in such stock.
RESTRICTED STOCK
A recipient of restricted stock, or any other stock award under the
Equity Compensation Plan that is subject to a "substantial risk of forfeiture,"
generally will be subject to federal income tax at ordinary income rates on the
excess of the fair market value of the restricted stock or other stock award, at
such time that the stock is no longer subject to forfeiture and restrictions on
transfer for purposes of Section 83 of the Code ("restrictions"), over the
purchase price, if any, of such restricted stock or other stock award. However,
a recipient who so elects under Code Section 83(b) within 30 days of the date of
transfer of the shares will have ordinary taxable income on the date of transfer
of the shares equal to the excess of the fair market value of such shares on the
transfer date, determined without regard to the restrictions, over the purchase
price, if any, of such restricted stock or other stock award. No additional
ordinary taxable income will then be recognized when the restrictions expire,
although any gain on the disposition of the stock will be subject to tax as
discussed below. If the shares subject to such election are forfeited, the
recipient will only be entitled to a deduction, refund, or loss for tax purposes
equal to the purchase price, if any, of the forfeited shares, regardless of
whether the recipient made an election Section 83(b) of the Code.
Upon the sale of any Common Stock following the expiration of the
forfeiture period for restricted stock or other stock award or upon the sale of
Common Stock for which a timely election under Section 83(b) of the Code was
made, the participant will realize capital gain or loss equal to the difference
between the amount realized on the sale and the participant's basis in such
stock. The Holding Period to determine whether the participant has long-term or
short-term capital gain will generally begin when the restrictions expire, and
the tax basis for such shares will generally be based on the fair market value
of such shares on such date. However, if the participant timely elects to be
taxed as of the date of transfer of the shares, the Holding Period will commence
on such date, and the tax basis will be equal to the fair market value of the
shares on such date, determined without regard to the restrictions.
The Company will be entitled to a deduction for federal income tax
purposes in the year the participant is taxable in an amount equal to the
ordinary income realized by the participant as a result of the restricted stock
or other stock award. The Equity Compensation Plan requires any participant
exercising an award to give the Committee prompt written notice of any election
made by the participant under Section 83(b) of the Code.
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DEFERRED STOCK
The recipient of a deferred stock award under the Equity Compensation
Plan will generally be subject to tax at ordinary income rates on the fair
market value of the deferred unrestricted stock on the date that such stock is
transferred to the participant under the award, and the holding period for
purposes of determining capital gain or capital loss on any subsequent sale of
such stock will also commence on such date. Upon the sale of any Common Stock
acquired pursuant to a deferred stock award, the participant will realize gain
or loss equal to the difference between the amount realized on the sale and the
participant's basis in such stock. The tax basis for such shares will generally
be based on the fair market value of such shares on the date the deferred
unrestricted stock is transferred to the participant. The Company will be
entitled to a deduction for federal income tax purposes in the year the
participant is taxable in an amount equal to the ordinary income realized by the
participant as a result of the deferred stock award.
STOCK AWARDS
Unrestricted awards of Common Stock will be taxable to the participant
and deductible by the Company at the time of the award in an amount equal to the
fair market value of the shares at that time. If the shares are subject to
forfeitability and nontransferability restrictions, the participant may either
elect immediate taxability in an amount equal to the fair market value of the
shares at the time of the award, less any payment therefor, or delay the
recognition of taxable income in an amount equal to the fair market value of the
shares, less the purchase price, if any, when the restrictions lapse. See
"Restricted Stock" above. Upon a sale of shares received as a stock award, the
participant will realize capital gain or loss in an amount equal to the
difference between the amount realized and the participant's tax basis, which is
generally the amount of ordinary income previously recognized plus any cash
payment. The Company will be entitled to a deduction for federal income tax
purposes in the year the participant is taxable in an amount equal to the
ordinary income realized by the participant as a result of the stock award.
PERFORMANCE SHARES
A participant granted an award of performance shares will not recognize
income at the time of grant but generally will recognize ordinary income when
the award is settled, either at the conclusion of the performance period or at
the end of the deferral period elected by a participant. The amount of ordinary
income recognized will be equal to the sum of the cash received, if any, plus
the then fair market value of the shares of stock of the Company received. The
Company will be entitled to a deduction for federal income tax purposes in the
year the participant is taxable in an amount equal to the ordinary income
realized by the participant as a result of the performance share award.
DIVIDENDS AND DIVIDEND EQUIVALENTS
Dividends paid on restricted stock or other stock awards transferred to
a participant under the Equity Compensation Plan will generally be treated as
compensation that is taxable as ordinary income to the participant and
deductible by the Company, subject to applicable withholding requirements,
unless the participant makes a timely election under Section 83(b) of the Code,
in which case the dividends will be treated as dividends that are taxable as
ordinary income to the participant but not deductible by the Company. If
dividend equivalents are credited with respect to an award under the Equity
Compensation Plan, such equivalents will be taxed at ordinary income rates when
paid to the participant and will generally be deductible by the Company at that
time, subject to applicable withholding requirements.
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PAYMENTS UPON CHANGE IN CONTROL
The Equity Compensation Plan authorizes the acceleration of payment of
awards and related shares of Common Stock in the event of a Change in Control of
the Company, as defined in the Equity Compensation Plan. Such acceleration of
payment may cause part or all of the consideration involved to be treated as a
"parachute payment" under the Code, which may subject the recipient thereof to a
twenty percent (20%) excise tax and which may not be deductible by the Company
for federal income tax purposes.
No determination has been made with respect to any other awards which
may be made under the Equity Compensation Plan in the future. Such future awards
will be determined in accordance with the terms of the Equity Compensation Plan,
which are described above, as amended. Consequently, it is not possible to
determine the benefits or amounts that will be received by or allocated to any
executive officers or employees of the Company or other persons pursuant to the
Equity Compensation Plan in the future.
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PROPOSAL 3
TO RATIFY THE SELECTION OF THE INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP has served as our independent auditors since 1988.
They were recommended by the Audit Committee, selected by our directors and
ratified by our stockholders as auditors for the year ended December 31, 1999.
Representatives of Ernst & Young will be present at the Annual Meeting of the
Stockholders and will have an opportunity to respond to stockholder questions
and make a statement if they so desire. The Audit Committee has recommended to
the Board of Directors that Ernst & Young be appointed independent auditors for
the year ending December 31, 2000. The Board has approved that recommendation,
subject to approval by our stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF ERNST & YOUNG
LLP AS OUR AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2000.
STOCKHOLDER PROPOSALS
If you would like to include proposals in our proxy materials for the
2001 Annual Meeting of Stockholders, you must send them to us by January 31,
2001 for us to consider them for possible inclusion. Stockholders who intend to
present a proposal at the 2001 Annual Meeting of Stockholders without inclusion
of such proposal in our proxy materials are required to provide notice of such
proposal to us no later than March 31, 2001. We reserve the right to reject,
rule out of order, or take other appropriate action with respect to any proposal
that does not comply with these and other applicable requirements. Any such
proposal should be sent to the Secretary of Pliant Systems at P.O. Box 13737,
Research Triangle Park, NC 27709-3737.
OTHER BUSINESS
We are not aware of any other matters to be presented at the 2000
Annual Meeting. If any other matters do properly come before the Annual Meeting,
the persons named as proxies will vote upon these matters using their best
judgment.
John T. Autrey
Secretary
Dated: March 31, 2000
You may obtain, without charge, our Annual Report to the SEC (Form
10-K) by writing to the Chief Financial Officer, Pliant Systems, Inc., P.O. Box
13737, Research Triangle Park, NC 27709-3737; or you may download an electronic
copy by visiting our web site at www.pliantsystems.com.
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APPENDIX
(FRONT BOTTOM)
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
MAY 16,2000
PLIANT SYSTEMS, INC.
4024 STIRRUP CREEK DRIVE
DURHAM, NORTH CAROLINA 27703
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PLIANT
SYSTEMS, INC.
The undersigned stockholder of Pliant Systems, Inc. hereby acknowledges receipt
of the Notice of the Annual Meeting of Stockholders and the accompanying Proxy
Statement and hereby constitutes and appoints David E. Orr and John T. Autrey,
and each of them attorneys and proxies with full power of substitution to act
and vote the shares of the undersigned at the Annual Meeting of Stockholders of
the said corporation to be held Tuesday May 16, 2000 at 10:00 a.m. and at any
adjournment or adjournments thereof.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
Any proxy previously given by the undersigned is hereby revoked.
PLIANT SYSTEMS, INC.
PROXY SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS
<TABLE>
<CAPTION>
<S> <C>
VOTE ON DIRECTORS
1. Electing Dr. John R. Hutchins, III and David E. Orr as Class III Directors to serve for three-year terms.
[ ]FOR all nominees listed above [ ] WITHHOLD AUTHORITY to vote for nominee(s) listed above
[ ]WITHHOLD AUTHORITY to vote for the nominee(s) listed below; and vote FOR all other nominees:
------------------------------------------------------------------
</TABLE>
VOTE ON PROPOSALS
2. Approving an amendment to the Company's Equity Compensation Plan increasing
the number of shares of the Company's Common Stock reserved for issuance
thereunder by 650,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Ratifying the selection of Ernst & Young LLP as auditors for 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion with respect to any other business to come before the
meeting or any adjournments thereof.
<PAGE>
(BACK BOTTOM)
This proxy will be voted as indicated below. In the absence of any direction to
the contrary, the proxyholders will vote this proxy for the election of the
nominees listed below as directors, for approval of the other matters listed
below, and in their discretion with respect to any other matters which properly
come before the meeting. If before or at the time of the meeting any of the
nominees listed has become unavailable for any reason, the proxyholders have the
discretion to vote for a substitute nominee.
<TABLE>
<CAPTION>
<S> <C>
NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES Number of Shares: [_____]
Please check box if you will attend the Annual Meeting in person. [_______]
Please complete, sign, date and return this proxy promptly using the enclosed
envelope. [________________________________] [______]
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: Signature (Please sign within box) Date
[_________________________________] [_____]
Signature (Joint Owners) Date
IMPORTANT: Please sign your name
exactly as it appears on your
certificate. Please add your full
title to your signature.
Executors, administrators,
trustees and other fiduciaries
should so indicate when signing
and furnish proof of such
fiduciary capacity. All persons
signing on behalf of corporations
and/or partnerships should so
indicate when signing.
NOTE: If you receive more than
one proxy, please date and sign
each one and return all proxies
in the same envelope.
</TABLE>
