<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Nucentrix Broadband Networks, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(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:
-----------------------------------------------------------------------
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
NUCENTRIX BROADBAND NETWORKS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 9, 2000
The Annual Meeting of Stockholders of Nucentrix Broadband Networks, Inc.,
will be held at 9:00 a.m., local time, on May 9, 2000, at The Clarion Hotel,
1981 N. Central Expressway, Richardson, Texas 75080 for the following purposes:
1. To elect five (5) directors of Nucentrix, each to serve until the
2001 annual meeting of stockholders of Nucentrix or until his successor is
elected and qualified;
2. To consider and vote upon a proposed amendment to Nucentrix's First
Amended and Restated 1999 share Incentive Plan to (i) increase the maximum
number of shares of common stock that may be issued under the plan from
900,000 to 1,300,000 and (ii) permit the grant of nonqualified stock
options with an exercise price less than 100% of the fair market value of a
share of common stock on the date of grant;
3. To ratify the appointment of KPMG LLP as the independent auditors
for Nucentrix for the year ending December 31, 2000; and
4. To consider and transact such other business as may properly come
before the meeting or any adjournment thereof.
A copy of the proxy statement in which the above matters are described in
more detail accompanies this notice of annual meeting of stockholders.
Stockholders of record at the close of business on March 24, 2000, are
entitled to notice of and to vote at the meeting or any adjournment thereof. A
complete list of these stockholders will be available for examination at the
offices of Nucentrix located at 200 Chisholm Place, Suite 200, Plano, Texas
75075 during normal business hours for ten days before the meeting.
Please sign, date and return your proxy in the enclosed return envelope as
promptly as possible. You may revoke your proxy at any time before the shares to
which it relates are voted at the meeting.
By Order of the Board of Directors,
J. CURTIS HENDERSON
Senior Vice President, General
Counsel
and Secretary
April 11, 2000
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING OF
STOCKHOLDERS OF NUCENTRIX SO THAT THE PRESENCE OF A QUORUM MAY BE ASSURED.
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE COMPLETE AND SIGN
THE ACCOMPANYING FORM OF PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE> 3
NUCENTRIX BROADBAND NETWORKS, INC.
200 CHISHOLM PLACE, SUITE 200
PLANO, TEXAS 75075
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 9, 2000
SOLICITATION OF PROXIES BY THE BOARD OF DIRECTORS AND REVOCATION THEREOF
The accompanying proxy is solicited by the board of directors of Nucentrix
Broadband Networks, Inc., for use at the annual meeting of stockholders of
Nucentrix to be held at The Clarion Hotel, 1981 N. Central Expressway,
Richardson, Texas 75080. The approximate date on which this proxy statement and
accompanying proxy are first being sent to stockholders is April 11, 2000.
HOW IS THE COMMON STOCK OF NUCENTRIX VOTED AT THE ANNUAL MEETING?
The common stock of Nucentrix can be voted at the annual meeting only if
the holder is present or represented by proxy at the annual meeting.
WHAT IS THE RECORD DATE?
The record date for the stockholders entitled to notice of and to vote at
the annual meeting is the close of business on March 24, 2000.
WHAT ARE THE BOARD'S RECOMMENDATIONS ON THE PROPOSALS?
The board of directors recommends a vote FOR each of the nominees, FOR the
amendment to the 1999 share incentive plan and FOR the ratification of KPMG LLP
as independent auditors for the year ending December 31, 2000.
HOW DO I VOTE?
Sign and date each proxy card you receive and return it in the
postage-prepaid envelope enclosed with your proxy materials. If your stock is
registered in your name and you attend the meeting, you may deliver your
completed proxy card in person at the meeting. If your shares are held by your
broker or bank, in "street name," you will receive a form from your broker or
bank seeking instructions as to how your shares should be voted. If you do not
instruct your broker or bank how to vote, your broker or bank will vote your
shares if it has discretionary power to vote on a particular matter.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes, you have the right to revoke your proxy at any time before it is
exercised by giving written notice of the revocation to the Secretary of
Nucentrix or by executing and delivering to Nucentrix a later-dated proxy. Your
attendance at the annual meeting will not be effective to revoke the proxy
unless written notice of revocation also has been delivered to the Secretary of
Nucentrix before the proxy is exercised.
WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
If your shares are registered differently and are in more than one account,
you will receive more than one proxy card. Sign and return all proxy cards to
ensure that all your shares are voted. We encourage you to have all accounts
registered in the same name and address (whenever possible). You can accomplish
this by contacting our transfer agent, Harris Trust & Savings Bank at (312)
360-5368, or, if your shares are held in "street name," by contacting the broker
or bank who holds your shares.
1
<PAGE> 4
WHO IS ENTITLED TO VOTE?
The only class of outstanding voting securities of Nucentrix is common
stock. As of the close of business on the record date, there were 10,148,183
shares of common stock outstanding and entitled to vote at the annual meeting.
Holders of common stock of record at the close of business on the record date
are entitled to one vote for each share held on all matters submitted to a vote
of stockholders at the annual meeting or any adjournment of the meeting. The
holders of shares of common stock do not have cumulative voting rights.
WHAT IS A QUORUM?
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of common stock entitled to vote is necessary to constitute a
quorum at the annual meeting. If a quorum is not present, either in person or by
proxy, a majority in interest of the stockholders entitled to vote who are
present in person or by proxy, or in the absence of all the stockholders
entitled to vote, any officer entitled to preside at, or act as secretary of,
the annual meeting shall have the power to adjourn the annual meeting from time
to time without notice, other than an announcement at the annual meeting, until
a quorum is present. At any adjourned annual meeting at which a quorum is
present in person or by proxy, any business may be transacted that might have
been transacted at the annual meeting as originally notified.
HOW WILL THE VOTES BE COUNTED?
Votes cast by proxy will be tabulated by an automated system administered
by our transfer agent and votes cast in person at the annual meeting will be
tabulated by hand by our transfer agent, and collectively, these votes will
determine whether or not a quorum is present. Abstentions and broker non-votes
are treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum for the transaction of business.
Abstentions and broker non-votes are tabulated separately, with abstentions
counted in tabulations of the votes cast on a proposal for purposes of
determining whether a proposal has been approved while broker non-votes relating
to a proposal are not counted as a vote cast with respect to that proposal.
WHAT IS REQUIRED TO APPROVE EACH PROPOSAL?
The election of directors will be determined by plurality vote. The
proposed amendment to our First Amended and Restated 1999 Share Incentive Plan
and the ratification of the appointment of KPMG LLP require the approval of a
majority of the outstanding shares of common stock that are present at the
annual meeting in person or by proxy and entitled to vote on these proposals.
Therefore, abstentions will have a neutral effect on the election of directors
and will have the effect of votes against the proposals to amend our 1999 share
incentive plan and to ratify the selection of independent accountants, whereas
broker non-votes will have a neutral effect on the election of directors and the
proposals to amend our 1999 share incentive plan and ratify the selection of
independent accountants.
HOW WILL MY SHARES BE VOTED IF I RETURN MY PROXY WITHOUT INSTRUCTIONS?
Shares represented by each proxy that is properly executed and returned and
upon which no contrary instructions are indicated about a specified matter will
be voted as follows:
- FOR the election of the five (5) persons named in this proxy statement as
the nominees of the board of directors of Nucentrix for election to the
board of directors,
- FOR the proposed amendment to our 1999 share incentive plan,
- FOR the ratification of the appointment of KPMG LLP as the independent
auditors for Nucentrix for the year ending December 31, 2000, and
- in accordance with the discretion of the holders of the proxy on any
other business that properly comes before the stockholders at the annual
meeting.
2
<PAGE> 5
The board of directors currently is not aware of any other business that may
come before the stockholders at the annual meeting. However, under the
circumstances permitted by Rule 14a-4(c) of the Securities Exchange Act of 1934,
the board of directors will have discretionary voting authority with respect to
proxies submitted for the 2000 annual meeting on any matter, without including
any discussion of the matter in this proxy statement, for which notice is not
provided to Nucentrix within a reasonable time before we mail this proxy
statement to our stockholders.
PROPOSAL 1.
ELECTION OF DIRECTORS
The board of directors currently consists of five (5) members. The board of
directors has designated the following nominees for election as directors of
Nucentrix, with their terms to expire at the annual meeting of stockholders in
2001 or until their successors are elected and qualified:
Carroll D. McHenry
Richard B. Gold
Terry S. Parker
Neil S. Subin
R. Ted Weschler
Each nominee currently is a director of Nucentrix. For information about
each nominee, see "Directors and Executive Officers" below.
If any nominee named in this proxy statement for the office of director
becomes unable or unwilling to accept nomination or election, the person acting
under the proxy will vote for the election, in his stead, of any other person
whom the board of directors recommends. The board of directors has no reason to
believe that any nominee named above will be unable or unwilling to serve if
elected.
In February 2000 Mark Schoeppner resigned from the board of directors. As a
result of Mr. Schoeppner's resignation, the board of directors was reduced from
six to five members. The board of directors currently intends to increase the
number of directors from five back to six as soon as practicable after the
annual meeting, with the vacancy created by the increase to be filled by a
nominee of the full board of directors. The board of directors anticipates that
the person selected to fill the vacancy will be an outside director. As of the
date of this proxy statement, the board of directors is actively pursuing the
selection of the person to fill the vacancy that will be created by the increase
in the number of directors, but has not made a final selection. Therefore,
information concerning the person that may fill the vacancy is not included in
this proxy statement. The initial term of the director chosen to fill the new
directorship will expire at the 2001 annual meeting of stockholders, at which
time all directors will be subject to election by the stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEES.
3
<PAGE> 6
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of Nucentrix and their ages as of
April 3, 2000, are given below.
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD
- ---- --- ----------------
<S> <C> <C>
Carroll D. McHenry............... 56 Chairman of the Board, President, Chief Executive
Officer and Director
Marjean Henderson................ 49 Senior Vice President and Chief Financial Officer
Russell A. Wiseman............... 36 Senior Vice President -- Internet Operations
J. Curtis Henderson.............. 37 Senior Vice President, General Counsel and Secretary
Frank H. Hosea................... 50 Senior Vice President -- Video Operations
Richard B. Gold.................. 45 Director
Terry S. Parker.................. 55 Director
Neil S. Subin.................... 35 Director
R. Ted Weschler.................. 38 Director
</TABLE>
Pursuant to our plan of reorganization, each current member of the board of
directors was approved by the committee of unsecured creditors appointed by the
bankruptcy court in our Chapter 11 proceeding. As disclosed in the disclosure
statement under which votes on the plan were solicited, the current members of
the board are entitled to serve until the 2000 annual meeting, unless they
resign or are removed prior to the meeting. Except as described above, there are
no understandings or arrangements under which any current member of the board is
serving or is entitled to serve on the board.
Carroll D. McHenry joined Nucentrix as Chairman of the Board, President,
CEO and Acting Chief Financial Officer in April 1997. Mr. McHenry currently
serves as Chairman of the Board, President and CEO. Prior to joining Nucentrix,
Mr. McHenry was a senior executive at Alltel, Inc., a national communications
holding company, most recently serving as President of Alltel's Communications
Services Group, and serving as President of Alltel Mobile Communications, Inc.
from July 1992 to May 1995. From 1991 to 1992, Mr. McHenry was Vice President of
Cellular Business Development at Qualcomm, Inc. From 1989 to 1991, Mr. McHenry
was Chairman of the Board, President and CEO of Celluland, Inc., a franchiser of
cellular telephone stores. From 1980 to 1989, Mr. McHenry served in various
capacities with Mobile Communications Corporation of America (MCCA) and as
President and CEO of American Cellular Communications, a joint venture between
MCCA and BellSouth.
Marjean Henderson joined Nucentrix in August 1997 as Senior Vice President
and Chief Financial Officer. From April 1996 to April 1997, Ms. Henderson served
as Senior Vice President and Chief Financial Officer for Panda Energy
International, Inc., a global energy concern. From December 1993 to October
1995, Ms. Henderson served as Senior Vice President and Chief Financial Officer
for Nest Entertainment, Inc., a home video and movies concern. From October 1987
to December 1993, Ms. Henderson served as Vice President, Chief Financial
Officer and Treasurer for RCL Enterprises, the Lyons Group, Lyrick Studios and
Big Feet Productions.
Russell A. Wiseman joined Nucentrix in April 2000 as Senior Vice
President -- Internet Operations. From August 1999 to March 2000, Mr. Wiseman
was employed by FlashNet Communications, a national Internet Service Provider,
as Executive Vice President and Chief Operating Officer. From January 1999 to
August 1999, Mr. Wiseman served as FlashNet's Executive Vice President and Chief
Sales and Marketing Officer. From July 1997 to December 1998, Mr. Wiseman was
employed by PrimeCo Personal Communications, a wireless phone service company,
first as Vice President -- Strategic Planning and later as PrimeCo's Vice
President -- Corporate Marketing and Strategy Officer. From June 1992 to June
1997, Mr. Wiseman held several positions with PA Consulting Group, an
international management and technology consulting firm. From June 1986 to May
1992, Mr. Wiseman was employed by NYNEX Corporation in network engineering and
corporate planning positions.
4
<PAGE> 7
J. Curtis Henderson joined Nucentrix in May 1996 as Vice President, General
Counsel and Secretary. In September 1998, Mr. Henderson was appointed Senior
Vice President. From July 1994 to April 1996, Mr. Henderson was Senior Vice
President, General Counsel and Secretary of ZuZu, Inc., a restaurant and
franchising company in Dallas, Texas. Prior to his employment at ZuZu, Mr.
Henderson was an associate in the Corporate and Securities section of the Dallas
law firm of Locke Purnell Rain Harrell.
Frank H. Hosea joined Nucentrix in November 1998 as Senior Vice
President -- Video Operations. From June 1996 to November 1998, Mr. Hosea was
Senior Vice President and Chief Operating Officer for CS Wireless. From July
1995 to June 1996, Mr. Hosea was a marketing and operations consultant for Time
Warner. From February 1990 to July 1995, Mr. Hosea was Vice President of Sales
Field Marketing for KBLCOM, Inc., a division of Time Warner and Houston
Industries.
Richard B. Gold became a director of Nucentrix in April 1999. Mr. Gold has
been the President and CEO of GenOA Corporation, a privately-held optical
communications equipment company, since January 1999. Between November 1991 and
December 1998, Mr. Gold held various senior-level executive positions with
Pacific Monolithics, Inc., a supplier of wireless communications equipment,
including Vice President -- Engineering, Chief Operating Officer, and from
January 1997 through December 1998, President and CEO. From 1987 through 1991,
Mr. Gold was Executive Director of the Massachusetts Microelectronics Center, a
non-profit education and research consortium. On October 13, 1998, Pacific
Monolithics filed a voluntary Chapter 11 bankruptcy petition. Mr. Gold is the
Chairman of the audit committee of the board of directors.
Terry S. Parker became a director of Nucentrix in April 1998. Mr. Parker
currently is an independent consultant in the telecommunications industry. From
March 1995 to July 1996, Mr. Parker was President and Chief Operating Officer
for CellStar Corporation, a domestic cellular telecommunications distributor.
From October 1993 to March 1995, Mr. Parker was Senior Vice President for GTE
Personal Communications Services, GTE's cellular telecommunications division.
From August 1990 to October 1993, Mr. Parker was President of GTE
Telecommunications Products and Services, a diversified telecommunications
services and systems division of GTE. Mr. Parker currently is a director of
CellStar Corporation. Mr. Parker is Chairman of the compensation committee of
the board of directors.
Neil S. Subin became a director of Nucentrix in April 1999. Mr. Subin
founded and has been the Managing Director and President of Trendex Capital
Management since 1991. Trendex is a private hedge fund focusing primarily on
financially distressed companies. Prior to forming Trendex, Mr. Subin was a
private investor from 1988 to 1991 and was an associate with Oppenheimer & Co.
from 1986 to 1988. Mr. Subin is a member of the compensation and audit
committees of the board of directors. Mr. Subin currently is a member of the
board of directors of Teletrac, a provider of fleet management services using
two-way wireless messaging.
R. Ted Weschler became a director of Nucentrix in April 1999. Mr. Weschler
has been the Managing Partner of Peninsula Capital Advisors, LLC, a private
investment management firm in Charlottesville, Virginia, since January 1, 2000.
From 1989 to 1999, Mr. Weschler was an executive officer of Quad-C, Inc., a
Charlottesville, Virginia-based investment firm that primarily engages in the
acquisition of businesses in partnership with company management. Mr. Weschler
is currently a member of the board of directors of WSFS Financial Corporation, a
thrift holding company based in Wilmington, Delaware; Deerfield Healthcare
Corporation, a provider of adult day care; Virginia National Bank, a national
banking association; NWS Holdings, a national furniture retailer; and Teletrac.
Mr. Weschler previously served as director of American Quality Cable, Applied
Video Technologies and Wireless Cable of Atlanta, all of which were involved in
the wireless broadband industry. Prior to the formation of Quad-C, Mr. Weschler
was employed by W. R. Grace & Co. as a special projects assistant to both the
Vice Chairman and CEO of Grace, focusing on acquisition and divestiture
activities associated with Grace's restaurant, retailing, healthcare, natural
resources and chemical operations. Mr. Weschler is a member of the compensation
committee of the board of directors.
Executive officers of Nucentrix are appointed by the board of directors and
serve at the discretion of the board of directors. Employment agreements with
the executive officers are described in "Management Compensation -- Employment
Agreements and Change in Control Arrangements." There are no family
relationships between members of the board of directors or any executive
officers of Nucentrix.
5
<PAGE> 8
MEETINGS AND COMMITTEES OF DIRECTORS
The board of directors has an audit committee and a compensation committee.
The board of directors does not have a nominating committee.
The audit committee is responsible for:
- recommending to the board of directors the selection of Nucentrix's
independent auditors,
- reviewing and approving the scope of the annual audit,
- discussing internal accounting procedures and financial controls with
Nucentrix's management and auditors, and
- reviewing compliance by management and employees with Nucentrix's
policies, and may initiate and supervise any special investigations it
deems necessary.
The members of the audit committee are Messrs. Gold and Subin, both of whom are
independent outside directors. The audit committee held three meetings in 1999.
The compensation committee is responsible for:
- setting annual base and cash bonus compensation levels of executive
officers,
- establishing and administering Nucentrix's compensation policies and
practices,
- administering Nucentrix's stock option and incentive compensation plans,
and
- supervising the administration of Nucentrix's other employee benefit
plans.
The members of the compensation committee are Messrs. Parker, Subin and
Weschler. The compensation committee held two meetings in 1999.
During 1999, the board of directors held six meetings. Each of the
directors attended at least 75% of the aggregate of all meetings held by the
board of directors and all meetings of committees of the board of directors on
which the director served during 1999.
6
<PAGE> 9
MANAGEMENT COMPENSATION
BOARD COMPENSATION
Cash Compensation. Each of our non-employee directors receives an annual
cash retainer of $5,000 for service as a director, and reimbursement of all
ordinary and necessary expenses incurred in attending meetings of the board of
directors or any committee of the board of directors. Employees of Nucentrix who
also serve as members of the board of directors do not receive any additional
compensation for service as a director, but are reimbursed for expenses.
Stock Option Awards. Each of our non-employee directors also is eligible to
participate in the 1999 share incentive plan at the discretion of the
compensation committee and on terms and conditions as established by the
compensation committee. Effective April 1, 1999, each of the four non-employee
directors was granted options to purchase 2,000 shares of common stock on April
1, 1999, at an exercise price of $12.50 per share. In addition, each of Messrs.
Gold, Parker, Subin and Weschler, as a non-employee director who was serving as
of the April 1, 1999, effective date of our plan of reorganization, was granted
stock options to purchase an additional 1,000 shares of common stock on April 1,
2000, at an exercise price of $27.50 (the fair market value of our common stock
on the last trading day preceding the date of grant) and is entitled to receive
additional grants of stock options to purchase 1,000 shares of our common stock
on each of April 1, 2001, 2002 and 2003, for so long as he continues to serve as
a director. All stock options granted to the non-employee directors vest and
become exercisable as set forth on Exhibit C to this proxy statement, and all
stock options granted to the non-employee directors on April 1, 1999, are fully
vested and exercisable. See "Management Compensation -- 1999 share Incentive
Plan."
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the total compensation awarded to, earned by
or paid by Nucentrix to its CEO and its four most highly compensated executive
officers who were serving as executive officers at the end of Nucentrix's last
completed fiscal year for services rendered in all capacities to Nucentrix
during Nucentrix's fiscal years ended December 31, 1999, 1998 and 1997. In this
proxy statement, we refer to the individuals listed below as the "Named
Executive Officers."
7
<PAGE> 10
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION ----------------------------------------
---------------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($) (#) ($)(2)
- --------------------------- ---- ------- ------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Carroll D. McHenry.......... 1999 300,000 187,500 -- -- 300,000 --
Chairman, President and 1998 300,000 150,000 -- -- 100,000(3) 4,384
CEO 1997 205,768(4) 204,326 -- 154,688(5) 350,000(3) 54,364(6)
Marjean Henderson........... 1999 200,000 100,000(7) -- -- 70,000 --
Senior Vice President and 1998 195,385 31,500 -- -- -- 2,000
Chief Financial Officer 1997 60,923(8) 20,000 -- 14,375(9) 100,000(3) --
J. Curtis Henderson......... 1999 158,400 139,500(10) -- -- 70,000 --
Senior Vice President and 1998 146,892 24,885 -- -- -- --
General Counsel 1997 105,992 24,469 -- -- 40,000(3) --
Alexander R. Padilla........ 1999 175,000 91,875(11) -- -- 50,000(12) --
Senior Vice President -- 1998 80,769(13) -- -- -- -- --
Business Development
Frank H. Hosea.............. 1999 150,000 78,750 -- -- 50,000 --
Senior Vice President -- 1998 22,500(14) -- -- -- -- --
Video Operations
</TABLE>
- ---------------
(1) While the Named Executive Officer may have received certain perquisites for
the year, these perquisites did not exceed the lesser of $50,000 or 10% of
his or her salary and bonus for the year.
(2) Represents Nucentrix's 401(k) Retirement Plan contributions, except as
noted in (6) below.
(3) Under our plan of reorganization, all stock options granted before April 1,
1999, including all stock options reported for 1998 and 1997, were canceled
effective April 1, 1999.
(4) Mr. McHenry was first employed by Nucentrix on April 25, 1997, at an annual
base salary of $300,000.
(5) Restricted stock grant of 75,000 shares of common stock granted to Mr.
McHenry in connection with his hiring. The closing price of the common
stock on The NASDAQ Stock Market on April 23, 1997, was $2.0625. Under our
plan of reorganization, all shares of common stock outstanding immediately
prior to April 1, 1999, including the restricted shares held by Mr.
McHenry, were canceled effective April 1, 1999.
(6) Includes $53,347 in relocation expenses paid in 1997 in connection with Mr.
McHenry's hiring.
(7) Effective April 8, 1998, the board of directors of Nucentrix approved an
employee retention program for executive officers (excluding the CEO) and
other key employees as designated by the CEO. Under the employee retention
program, Nucentrix offered a retention bonus of between 15% and 25% of a
participant's annual base salary if the individual remained an employee of
Nucentrix through March 31, 1999. Includes $50,000 paid in 1999 under the
employee retention program.
(8) Ms. Henderson was first employed by Nucentrix on August 27, 1997, at an
annual base salary of $180,000.
(9) Restricted stock grant of 10,000 shares of common stock granted to Ms.
Henderson. The closing price of the common stock on The NASDAQ Stock Market
on January 22, 1998 (the date of grant), was $1.4375. Under our plan of
reorganization, all shares of common stock outstanding immediately prior to
April 1, 1999, including the restricted shares held by Ms. Henderson, were
canceled effective April 1, 1999.
(10) Includes $39,500 paid in 1999 under the employee retention program. See
Note (7) above.
(11) Includes $43,750 paid in 1999 under the employee retention program. See
Note (7) above. Also includes $17,500 hiring bonus paid in 1999 in
connection with Mr. Padilla's employment.
(12) Mr. Padilla resigned from Nucentrix effective April 3, 2000. Mr. Padilla
exercised options to purchase 25,000 shares of common stock in March 2000.
Options to purchase 20,000 shares of common stock, which were not vested as
of April 3, 2000, were canceled and became available for reissuance under
the 1999 share incentive plan. Mr. Padilla has until May 3, 2000, to
exercise his remaining options to purchase 5,000 shares of common stock.
(13) Mr. Padilla was first employed by Nucentrix on July 13, 1998, at an annual
base salary of $175,000.
(14) Mr. Hosea was first employed by Nucentrix on November 2, 1998, at an annual
base salary of $150,000.
8
<PAGE> 11
The following table provides information regarding stock options granted
during 1999 to each of the Named Executive Officers. No stock appreciation
rights were granted during 1999.
OPTION/SAR GRANTS IN 1999
<TABLE>
<CAPTION>
NUMBER OF PERCENT POTENTIAL REALIZABLE VALUE
SECURITIES OF TOTAL AT ASSUMED ANNUAL RATES
UNDERLYING OPTIONS/SARS EXERCISE AT STOCK PRICE APPRECIATION
OPTIONS/SARS GRANTED TO OR BASE FOR OPTION TERM(3)
GRANTED EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME (#)(1) FISCAL YEAR ($/SH)(2) DATE 5% 10%
- ---- ------------ ------------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Carroll D. McHenry.... 300,000(4) 37.6% $12.50 4/1/06 1,527,000 3,558,000
Marjean Henderson..... 70,000(4) 8.8% $12.50 4/1/06 356,300 830,200
J. Curtis Henderson... 70,000(4) 8.8% $12.50 4/1/06 356,300 830,200
Alexander R.
Padilla............. 50,000(5) 6.3% $12.50 4/1/06 254,500 593,000
Frank H. Hosea........ 50,000(6) 6.3% $12.50 4/1/06 254,500 593,000
</TABLE>
- ---------------
(1) All options were granted under our 1999 share incentive plan as of the April
1, 1999, effective date of our plan of reorganization.
(2) The exercise price was based on the estimated enterprise value of Nucentrix
as approved by the bankruptcy court in our Chapter 11 proceedings. Our
common stock began trading on the over-the-counter market on April 5, 1999,
and the closing price on that date was $15.63.
(3) Potential realizable value is based on the assumption that the price of our
common stock will appreciate at the rates shown above, compounded annually,
from the date of grant until the end of the option term. The values are
calculated according to the rules of the Securities and Exchange Commission,
and do not reflect our estimate of future prices of our common stock.
(4) The stock options vest and become exercisable as set forth on Exhibit A to
this proxy statement.
(5) The stock options were subject to vesting as set forth on Exhibit B to this
proxy statement. Mr. Padilla resigned from Nucentrix effective April 3,
2000. Mr. Padilla exercised options to purchase 25,000 shares of common
stock in March 2000. Options to purchase 20,000 shares of common stock,
which were not vested as of April 3, 2000, were canceled and became
available for reissuance under the 1999 share incentive plan. Mr. Padilla
has until May 3, 2000, to exercise his remaining options to purchase 5,000
shares of common stock.
(6) The stock options vest and become exercisable as set forth on Exhibit B to
this proxy statement.
The following table provides information about options to purchase our
common stock held by the Named Executive Officers as of December 31, 1999. No
options were exercised by these persons during 1999. No stock appreciation
rights have been granted.
AGGREGATED OPTION/SAR EXERCISES IN 1999 AND YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
UNDERLYING OPTIONS/SARS MONEY OPTIONS/SARS AT
AT FISCAL YEAR-END(#) DECEMBER 31, 1999($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ---- ------------------------- ----------------------------
<S> <C> <C>
Carroll D. McHenry.............................. 200,100/99,900 2,401,200/1,198,800
Marjean Henderson............................... 46,690/23,310 560,280/279,720
J. Curtis Henderson............................. 46,690/23,310 560,280/279,720
Alexander R. Padilla............................ 25,000/25,000 300,000/300,000
Frank H. Hosea.................................. 25,000/25,000 300,000/300,000
</TABLE>
- ---------------
(1) Based on the closing price ($24.50) of our common stock on December 31,
1999, as reported on The NASDAQ Stock Market.
9
<PAGE> 12
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
Employment Agreements.
Carroll D. McHenry. Nucentrix entered into an employment agreement with
Carroll D. McHenry for a term of three years, effective as of March 6, 1998.
Under the employment agreement, Nucentrix has agreed to pay Mr. McHenry an
annual base salary of not less than $300,000. On each anniversary of the
effective date of the agreement, the term is automatically extended for one
additional year unless Nucentrix or Mr. McHenry elects not to extend the term by
notifying the other party at least 90 days before the applicable anniversary of
the effective date. Under the employment agreement, if Mr. McHenry's employment
is terminated by Nucentrix other than for cause, as defined in the employment
agreement, or on account of Mr. McHenry's death or permanent disability, or if
Mr. McHenry resigns for good reason, as defined in the employment agreement,
then Nucentrix has agreed to pay Mr. McHenry a severance payment equal to his
then-current annual base salary, excluding any bonuses, for the balance of the
term of his employment agreement.
Other Named Executive Officers. Nucentrix also has entered into employment
agreements with each of Marjean Henderson, J. Curtis Henderson and Frank H.
Hosea. Ms. Henderson's and Mr. Henderson's employment agreements became
effective on April 8, 1998. Mr. Hosea's employment agreement became effective on
November 3, 1998. Each of these employment agreements are for a term of two
years from their respective effective dates. Under the employment agreements,
Nucentrix has agreed to pay each officer an annual base salary of not less than:
Ms. Henderson -- $200,000, Mr. Henderson -- $144,000, Mr. Hosea -- $150,000.
On each anniversary of the effective date of each employment agreement, the
term is automatically extended for one additional year unless Nucentrix or the
respective officer elects not to extend the agreement by notifying the other
party at least 90 days before the applicable anniversary of the effective date.
Under each employment agreement, if the officer's employment is terminated by
Nucentrix other than for cause, as defined in each employment agreement, or on
account of the officer's death or permanent disability, or if the officer
resigns for good reason, as defined in each employment agreement, then Nucentrix
is required to pay the officer a severance payment equal to his or her
then-current annual base salary, excluding any bonuses, for the balance of the
term of the officer's employment agreement.
Each of the employment agreements discussed above provides that the officer
will be entitled to participate in the Nucentrix Performance Incentive
Compensation Plan and other bonus plans, if any, as the board of directors or
the compensation committee may specify. The Named Executive Officers also are
eligible, independent of the employment agreements, to participate in and
receive awards under Nucentrix's 1999 share incentive plan and to receive any
discretionary bonuses, if any, as from time to time approved by the compensation
committee.
1999 Share Incentive Plan
The 1999 share incentive plan provides for the granting of stock options
and stock appreciation rights for non-employee directors, officers and key
employees of, and consultants to, Nucentrix and its subsidiaries. On April 1,
1999, Nucentrix granted nonqualified stock options to the Named Executive
Officers as described in the "Option/SAR Grants in 1999" table.
Under the 1999 share incentive plan, upon a change in control of Nucentrix
all outstanding stock options and stock appreciation rights will immediately
vest and become exercisable and all performance targets relating to outstanding
benefits shall be deemed to have been satisfied as of the time of a change in
control. Under the 1999 share incentive plan, a "change in control" of Nucentrix
occurs upon any of four situations:
- any person (other than an employee benefit plan of Nucentrix) acquires
50% or more of the combined voting power of Nucentrix's outstanding
securities then entitled to vote for the election of directors,
- during any period of two consecutive years, the individuals who at the
beginning of the period constitute the board of directors or any
individuals who would be "Continuing Directors" (as defined below) cease
for any reason to constitute at least a majority of the board of
directors,
10
<PAGE> 13
- Nucentrix's stockholders approve a sale of all or substantially all of
the assets of Nucentrix, or
- Nucentrix's stockholders approve any merger, consolidation or like
business combination or reorganization of Nucentrix, the consummation of
which would result in the occurrence of any event described in the first
and second bullet points above, and such transaction shall have been
consummated.
"Continuing Directors" means the directors of Nucentrix in office on April 1,
1999, and any successor to any director and any additional director who after
April 1, 1999, was nominated or selected by a majority of the Continuing
Directors in office at the time of his or her nomination or selection. All
current directors and director nominees qualify as Continuing Directors.
The compensation committee, in its discretion, also may determine that,
upon the occurrence of a change in control of Nucentrix, each outstanding
benefit will terminate within a specified number of days after notice to the
holder, and that the holder also receive with respect to each share of common
stock that is subject to the benefit an amount equal to the excess fair market
value of the share of common stock immediately before the occurrence of the
change in control over the exercise price per share of the benefit.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Parker, Subin and Weschler served as members of the compensation
committee during 1999. None of these persons are officers or employees or former
officers or employees of Nucentrix. None of the executive officers of Nucentrix
served as a member of the compensation committee or board of directors of any
other company during 1999.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation committee of the board of directors has overall
responsibility for compensation actions affecting Nucentrix's executive
officers. The compensation committee's duties include approving base salaries,
setting incentive compensation targets and discretionary bonus amounts and
administering executive compensation plans.
General Compensation Philosophy
The compensation committee believes that compensation to Nucentrix's
executive officers should be designed to encourage and reward management's
efforts to develop, implement and establish Nucentrix's wireless broadband
services business and to enhance stockholder value. Compensation criteria are
evaluated annually to ensure that they are appropriate and consistent with
Nucentrix's business and strategic objectives. Nucentrix's compensation policies
and programs are intended to:
- ensure competitive levels of compensation to allow us to attract and
retain superior executive talent, and motivate those executives to
successfully lead Nucentrix in a very competitive industry that is
subject to rapid technology changes,
- align executive compensation with sustainable increases in and the
preservation of stockholder value, and
- provide a compensation package that is contingent upon and recognizes
individual performance as well as the attainment of business objectives
and overall business results.
Components of Compensation
The key elements of Nucentrix's executive compensation program are base
salary, annual cash bonuses and equity incentive compensation. These elements
are addressed separately.
Except for bonuses determined under the performance incentive compensation
plan described below, the compensation committee does not use quantitative
methods or mathematical formulas in setting any element of compensation. In
determining each component of compensation, the compensation committee considers
all
11
<PAGE> 14
elements of an executive's total compensation package, recommendations of the
CEO (as discussed below) and other objective and subjective criteria the
compensation committee deems appropriate with respect to each executive officer.
Executive Officer Compensation
Base Salaries. Each of the Named Executive Officers has an employment
agreement that provides for minimum annual base salaries. The compensation
committee reviews the base salary of each of these executive officers annually,
and makes adjustments for executive officers other than the CEO based primarily
on the recommendations of the CEO. In reviewing base salaries, the compensation
committee and CEO consider a variety of factors, including:
- each executive's then-current responsibilities, specific experience and
performance,
- competitive compensation practices at other similarly situated companies,
and
- the executive's overall contribution to the business and strategic
objectives of Nucentrix.
Bonus. Effective January 1, 1998, Nucentrix adopted a performance incentive
compensation plan. The performance incentive compensation plan provides
incentive compensation opportunities to Nucentrix's executive officers and other
key employees based on achievement of predetermined financial and strategic
objectives. For each plan year the compensation committee, based on
recommendations of the CEO:
- determines the executive officers of Nucentrix entitled to participate in
the plan,
- determines each participant's target award amount, expressed as a
percentage of base salary,
- establishes financial and strategic goals for Nucentrix and Nucentrix's
Internet and wireless cable services business units, as applicable, for
each participant, and
- may also establish individual performance goals for each plan
participant, which may be objective or subjective.
Under the incentive compensation plan, bonus awards for the executive
officers other than the CEO are targeted at 35% of the executive's annual base
salary. After the financial, strategic and, if applicable, individual
performance goals are established for a plan year, each plan participant is
notified of the goals applicable to that participant and the levels of
attainment required to earn a bonus award, which award may range from 0% to 150%
of the target award amount. After the end of a plan year, each participant's
bonus amount is then determined by multiplying the participant's target award
amount by the percentage applicable to the level of attainment of the
participant's goals for the plan year. For 1999, financial, strategic and
individual performance goals were established for each executive officer, but no
specific weighting was assigned to any particular goal. Rather, the attainment
of certain identified goals was required to obtain a minimum bonus equal to 50%
of the target award amount, with the attainment of additional goals necessary to
obtain a greater percentage, up to 150%, of the target award amount. For
example, an executive officer could have earned a bonus of 17.5% of base salary
(50% of the target) if a minimum number of goals were achieved, 35% of base
salary (100% of the target) if other additional goals were achieved, or a
maximum of 52.5% of base salary (150% of the target) if an even greater number
of goals were achieved. In 1999, each of the Named Executive Officers was
eligible to receive bonuses under the plan. However, the ability of Nucentrix
and some of its executive officers to achieve certain predetermined goals
established for 1999 was adversely affected by external factors as discussed
below, and this was taken into account by the compensation committee in awarding
discretionary cash bonuses for 1999.
In addition to bonuses paid under the incentive compensation plan, the
compensation committee may grant discretionary annual cash bonuses to executive
officers, other than the CEO, based primarily upon the recommendations of the
CEO. The CEO, in developing discretionary bonus recommendations for the other
executive officers, and the compensation committee in evaluating the CEO's
recommendations, consider the financial and operating performance of Nucentrix
as described above, the performance of Nucentrix in
12
<PAGE> 15
relation to, and as affected by, industry conditions, and individual performance
which contributed to Nucentrix's financial performance or otherwise assisted
Nucentrix's efforts to achieve the objectives of its business strategy. In
particular, for 1999 the compensation committee considered that external
factors, such as delays in the commercial availability of a viable technology
platform to support the operation of two-way services over Nucentrix's radio
spectrum and the regulatory licensing process to acquire non-developmental
two-way operating licenses for its spectrum adversely affected the ability of
Nucentrix and some of its executive officers to accomplish certain predetermined
goals established for 1999 under the performance incentive compensation plan
described above. As a result, the compensation committee granted discretionary
cash bonuses for 1999 to certain executive officers.
In determining year end discretionary cash bonuses for 1999, the
compensation committee considered the efforts of its executive officers in:
- establishing a strategic relationship with a leading Internet networking
company to:
- pursue testing and deployment of fixed-wireless broadband services,
- provide financing for the purchase of equipment to provide these
services, and
- provide for technical and marketing support as Nucentrix launches its
wireless broadband services,
- managing Nucentrix's cash position to meet corporate objectives,
- achieving consolidated EBITDA operating objectives, and
- preparing Nucentrix for the FCC filing window for operating licenses to
provide two-way wireless broadband services.
In addition to the year end discretionary cash bonus paid to the executive
officers, in April 1999 the compensation committee granted to certain executive
officers a discretionary cash bonus in recognition of the efforts of those
executive officers, including the CEO, in consummating a recapitalization of
Nucentrix under a plan of reorganization.
No specific weighting was assigned to any of the factors considered in
determining annual adjustments to base salaries and discretionary cash bonuses
for the executive officers.
Employee Retention Program. Effective April 8, 1998, the board of directors
of Nucentrix approved an employee retention program for executive officers,
other than the CEO, and other key employees as designated by the CEO. Under the
employee retention program, Nucentrix offered a retention bonus of between 15%
and 25% of a participant's annual base salary if such individual remained in
Nucentrix's employment through March 31, 1999. Under this plan, in March 1999
Nucentrix paid an aggregate of $728,000 to 96 employees. No further payments
will be made under the employee retention program.
Equity Incentive Compensation. The compensation committee believes that
equity ownership by management is beneficial in aligning management's and
stockholders' interests with the enhancement of stockholder value. The 1999
share incentive plan facilitates equity ownership by management.
Through the 1999 share incentive plan, Nucentrix has used stock options,
and has the ability to use stock appreciation rights, as components of executive
compensation to:
- ensure external competitiveness of the total executive compensation
package,
- motivate executives to improve long-term stock performance,
- encourage equity ownership of Nucentrix by executive officers, and
- align the interest of executive officers with the enhancement of
stockholder value.
In granting stock options under the 1999 share incentive plan, the compensation
committee considers the total number of shares available for future grants under
the 1999 share incentive plan, prior grants outstanding and estimated
requirements for future grants.
13
<PAGE> 16
The compensation committee anticipates that future awards of benefits under the
1999 share incentive plan, except for grants to the CEO, will be based on
recommendations of the CEO and consideration of:
- each participant's position and scope of responsibilities,
- the strategic and operational goals of Nucentrix and the expected future
performance of each participant to achieve these goals, and
- the number of options, if any, held by each participant.
The exercise price for awards granted under the 1999 share incentive plan,
the term of these awards, the vesting of such awards and the other terms and
conditions of such awards are determined by the compensation committee, in its
discretion. All stock options granted to executive officers in 1999 under the
1999 share incentive plan were granted on the April 1, 1999, effective date of
our plan of reorganization and have an exercise price of $12.50 per share, which
was based on the estimated enterprise value of Nucentrix as approved by the
bankruptcy court in our Chapter 11 proceedings. The vesting of these options are
described on Exhibit A for Mr. McHenry, Ms. Henderson and Mr. Henderson and
Exhibit B for Messrs. Padilla and Hosea. The compensation committee believes
that these vesting schedules recognize the efforts of Nucentrix's executive
officers in completing the recapitalization of Nucentrix through a plan of
reorganization, provide an incentive to enhance stockholder value and promote
the continued employment of executive officers, which the compensation committee
believes is important for the successful implementation of Nucentrix's business
strategy.
Chief Executive Officer Compensation
The 1999 base compensation of Mr. McHenry, the Chairman, President and CEO
of Nucentrix, was governed by the terms of the employment agreement entered into
between Mr. McHenry and Nucentrix in March 1998. Under the employment agreement,
Nucentrix has agreed to pay Mr. McHenry an annual base salary of not less than
$300,000. See "Management Compensation -- Employment Agreements and Change in
Control Arrangements."
Mr. McHenry also is eligible to receive cash bonuses under the performance
incentive compensation plan, as well as discretionary cash bonuses. Under the
incentive compensation plan, awards for the CEO may range from 25% to 75% of his
annual base salary, depending on the attainment of pre-established financial and
individual performance goals determined as described above. For 1999, Mr.
McHenry did not receive a cash bonus under the performance incentive
compensation plan, in large part because his ability to attain certain
predetermined goals established for him in 1999 under this plan was adversely
affected as described above under "Bonus." However, the compensation committee
believes Mr. McHenry's leadership has contributed significantly to enhancement
of stockholder value, and awarded Mr. McHenry discretionary cash bonuses
totaling $187,500 for 1999. In determining Mr. McHenry's discretionary cash
bonus for 1999, the compensation committee considered the same factors
considered in determining year end discretionary cash bonuses for the other
executive officers, as well as Mr. McHenry's efforts in recapitalizing Nucentrix
under a plan of reorganization.
On April 1, 1999, Nucentrix also granted nonqualified stock options to
purchase 300,000 shares of common stock to Mr. McHenry under the 1999 share
incentive plan. The stock options vest and become exercisable as set forth on
Exhibit A to this proxy statement. The number of options granted to Mr. McHenry
was based on equity awards to CEOs of other comparable companies, his critical
leadership role in Nucentrix's future growth and success, and total number of
shares reserved for issuance and granted under the plan. The compensation
committee anticipates that future awards granted to the CEO under the 1999 share
incentive plan will be awards based on the same criteria as grants to other
employees, as well as other factors the compensation committee may deem relevant
at the time of grant.
14
<PAGE> 17
POLICY WITH RESPECT TO $1 MILLION DEDUCTION LIMIT
Nucentrix's executive compensation strategy is to be cost and tax
effective. Therefore, Nucentrix's policy is to avail itself of all proper
deductions under the Internal Revenue Code, where practical, while maintaining
the flexibility to approve compensation arrangements which it deems to be in the
best interests of Nucentrix and its stockholders, but which may not always
qualify for full tax deductibility. Section 162(m) of the Internal Revenue Code
generally imposes a $1 million per person annual limit on the amount Nucentrix
may deduct as compensation expense for its CEO and its four other highest paid
officers. Although the total compensation of the executive officers did not
exceed this deduction limitation in 1999, factors involved in Nucentrix's
compensation program may impact on whether the deduction limitation is exceeded
in the future.
The 1999 share incentive plan is designed to permit compensation associated
with stock options and stock appreciation rights to be excluded from the
deduction limitations, but various payments under the 1999 share incentive plan
may be included as compensation for purposes of calculating the deduction
limitation, potentially impacting the deduction limitation. In particular, the
1999 share incentive plan currently permits the compensation committee to grant
stock appreciation rights with an exercise price less than the fair market value
of common stock on the date of grant. If the proposed amendment to the 1999
share incentive plan is approved, the compensation committee will be permitted
to also grant stock options under the 1999 share incentive plan with an exercise
price less than the fair market value on the date of grant. Under current
Internal Revenue Service regulations, income attributable to stock options and
stock appreciation rights granted under the 1999 share incentive plan with an
exercise price less than the fair market value of the common stock on the date
of grant will not qualify for an exemption from the $1 million annual limit on
deductible compensation imposed by Section 162(m) of the Internal Revenue Code
unless either the grant or the exercise of these stock options or stock
appreciation rights are conditioned on performance-based criteria as described
in "Proposal 2. Amendment to Nucentrix Broadband Networks, Inc. First Amended
and Restated 1999 share Incentive Plan -- Performance-Based Awards." To the
extent the total non-exempt compensation paid, or deemed paid, by Nucentrix to
such an officer for a year exceeds $1 million, such excess is not deductible by
Nucentrix if the officer is employed by Nucentrix as of the end of that year.
As Nucentrix moves forward in its efforts to create stockholder value in
the years ahead, the compensation committee will continue to review, monitor and
evaluate Nucentrix's program for executive compensation to assure that it is
internally effective in support of Nucentrix's strategy, competitive in the
marketplace to attract, retain and motivate the talent needed to achieve
Nucentrix's financial objectives, and appropriately rewards the creation of
value on behalf of Nucentrix's stockholders.
This report has been provided by the compensation committee, which consists
of the following members:
TERRY S. PARKER
NEIL S. SUBIN
R. TED WESCHLER
15
<PAGE> 18
CERTAIN TRANSACTIONS
Under the terms of a Registration Rights Agreement dated April 1, 1999,
among Nucentrix and other parties named in the agreement, Nucentrix filed with
the SEC a registration statement registering the offer and sale by various
selling stockholders of the common stock received by them under Nucentrix's plan
of reorganization. This registration statement was declared effective on
December 16, 1999. Each of the stockholders identified in notes (3), (5) and (7)
of the table under "Security Ownership of Principal Stockholders and Management"
as holding shares of our common stock, including the investment advisory clients
of Quaker Capital Management Corporation referred to in note (5) of this table,
had all of their shares included in the registration statement. R. Ted Weschler,
a director of Nucentrix, also had 161,878 shares included in the registration
statement, and Neil S. Subin, also a director of Nucentrix, is affiliated with
an entity that has 78,799 shares included in the registration statement. See
Notes (9) and (10) to the table under "Security Ownership of Principal
Stockholders and Management." Generally, all fees, costs and expenses of any
registration under the registration rights agreement were and will be paid by
Nucentrix. Nucentrix remains obligated to use its commercially reasonable best
efforts to keep the registration statement continuously effective for up to
three years from the date of its effectiveness, subject to Nucentrix's right to
suspend the use of the prospectus for designated corporate purposes specified in
the registration rights agreement. Under the registration rights agreement, the
selling stockholders will be indemnified by Nucentrix against certain civil
liabilities, including liabilities under the Securities Act of 1933.
During 1999, Nucentrix leased office space from affiliates of Mr. L. Allen
Wheeler for total payments of approximately $77,000. Mr. Wheeler co-founded
Nucentrix, held in excess of 10% of the common stock prior to Nucentrix's
reorganization, and was a member of the board of directors until November 1998.
Nucentrix believes that such rents under the leases were at or below market
rates and the terms of such leases are at least as favorable as those Nucentrix
would be able to otherwise obtain through arm's-length negotiation with an
unaffiliated third party. Effective March 31, 1999, Nucentrix terminated
approximately 56,000 square feet of these leases in connection with Nucentrix's
plan of reorganization. Claims of the lessors for damages were treated as
miscellaneous unsecured claims under Nucentrix's plan of reorganization and, in
satisfaction of these claims, the lessors received 4,960 shares of our common
stock.
16
<PAGE> 19
PERFORMANCE GRAPH
Set forth below is a graph comparing the total stockholder return of an
investment in:
- Nucentrix common stock,
- The NASDAQ Stock Market U.S. Index, and
- The NASDAQ Stock Market Telecommunications (Telecom) Stock Index.
The graph illustrates total stockholder return at December 31, 1999, of
$100 invested at April 5, 1999 (the date Nucentrix common stock began trading on
the over-the-counter market) for Nucentrix common stock, the NASDAQ U.S. Index
and the NASDAQ Telecom Index, and assumes reinvestment of all dividends.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
4/5/99 12/31/99
-------------------------------------------------------------------------------------------
<S> <C> <C>
Nucentrix Broadband Networks $100.00 $156.80
NASDAQ US $100.00 $155.87
NASDAQ Telecom $100.00 $134.80
</TABLE>
As a result of our plan of reorganization, which became effective April 1,
1999, we did not hold an annual meeting in 1999 and, therefore, did not have a
proxy statement containing a performance graph. Although the performance graph
in our proxy statement dated April 30, 1998, for our 1998 annual meeting of
stockholders included a peer group consisting of companies which operated
multiple wireless cable television systems, we have not reflected this peer
group in the performance graph contained in this proxy statement because each
company in the peer group has been acquired and, therefore, market information
is not available with respect to these companies.
17
<PAGE> 20
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
Based upon information known to Nucentrix as of April 3, 2000, the
following table sets forth the ownership of the shares of common stock issued
and outstanding as of April 3, 2000, by:
- each person or group that is the beneficial owner of more than 5% of our
shares on April 3, 2000,
- each director and Named Executive Officer of Nucentrix on April 3, 2000,
and
- all directors and executive officers of Nucentrix as a group on April 3,
2000.
Unless otherwise indicated, to Nucentrix's knowledge, each person holds sole
voting and investment power over the shares shown.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENTAGE
NAME OF OWNER OWNED OF CLASS(1)
- ------------- ------------ ------------
<S> <C> <C>
Wayland Investment Fund, L.L.C. ............................ 1,649,794(2) 16.3%
12700 Whitewater Drive
Minnetonka, Minnesota 55343
Terrence D. Daniels
Quad-C, Inc.
Quad-C IV, LLC
Quad-C Partners IV, L.P. ................................... 1,557,997(3) 15.4%
230 East High Street
Charlottesville, Virginia 22902
Stephen Feinberg............................................ 1,306,266(4) 12.9%
450 Park Avenue, 28th Floor
New York, New York 10002
Quaker Capital Management Corporation....................... 1,288,365(5) 12.8%
401 Wood Street
1300 Arrott Building
Pittsburgh, Pennsylvania 15222-1824
Jefferies & Company, Inc. .................................. 756,711(6) 7.5%
11100 Santa Monica Boulevard
10th Floor
Los Angeles, California 90025
Richard Reiss, Jr.
Georgica Advisors LLC....................................... 651,832(7) 6.5%
1114 Avenue of the Americas
New York, New York 10036
Carroll D. McHenry.......................................... 220,080(8) 2.0%
Marjean Henderson........................................... 51,352(8) *
J. Curtis Henderson......................................... 51,352(8) *
Frank H. Hosea.............................................. 30,000(8) *
Richard B. Gold............................................. 2,000(8) *
Terry S. Parker............................................. 2,000(8) *
Neil S. Subin............................................... 80,799(9) *
R. Ted Weschler............................................. 101,008(10) *
All directors and executive officers as a group (consisting
of 9 people).............................................. 538,591(11) 5.6%
</TABLE>
- ---------------
* Less than 1%.
(1) Based on 10,148,183 shares of common stock outstanding on April 3, 2000.
(2) Based on information set forth in Schedule 13G/A dated April 26, 1999, and
Form 4 dated July 9, 1999.
18
<PAGE> 21
(3) Based on information set forth in Schedule 13G dated April 10, 1999 filed
by Terrence D. Daniels, Quad-C, Inc., Quad-C IV, L.L.C., and Quad-C
Partners IV, L.P. Includes (A) an aggregate of 1,514,585 shares held of
record by Quad-C Partners II, L.P. (287,057), Quad-C Partners III, L.P.
(410,078) and QCP IV (817,450), (B) 32,569 shares held directly by Terrence
D. Daniels and (C) 10,843 shares held by the Terrence Daniels Trust. The
Quad-C Schedule 13G reflects that (w) Quad-C, Inc. is the sole general
partner of Quad C Partners II and is a party to management agreements with
Quad-C Partners III and Quad-C Partners IV and, as such, may be deemed to
beneficially own the 1,514,585 shares of common stock held by Quad-C II,
Quad-C Partners III and Quad-C Partners IV, (x) Quad-C IV is the sole
general partner of Quad-C Partners IV and, as such, may be deemed to
beneficially own the 817,450 shares of common stock held directly by Quad-C
Partners IV, (y) each of Quad-C, Quad-C IV LLC and Quad-C Partners IV has
sole voting and dispositive power with respect to the shares held directly
by Quad-C Partners IV, and (z) Quad-C also has sole voting and dispositive
power over the shares held directly by Quad-C II and Quad-C III.
The Quad-C Schedule 13G also reflects that Terrence D. Daniels (A) is the
sole manager and a controlling stockholder of Quad-C IV LLC, the sole
director and majority stockholder of Quad-C, the sole manager of Quad-C II,
L.L.C. (which is the sole general partner of Quad-C Partners III), and, as
such, may be deemed to beneficially own the 1,514,585 shares of common stock
held directly by Quad-C Partners II, Quad-C Partners III and Quad-C Partners
IV, (B) is the direct beneficial owner of 32,569 shares of common stock, (C)
may be deemed to beneficially own 10,843 shares of common stock through his
interest in the Terrence Daniels Trust and (D) has sole voting and
dispositive power over an aggregate of 1,557,997 shares of common stock.
(4) Based on information set forth in Schedule 13D/A dated October 26, 1999,
filed by Stephen Feinberg. The Feinberg Schedule 13D reflects that (A)
Cerberus Partners L.P. is the holder of 302,100 shares of common stock, (B)
Cerberus International, Ltd. is the holder of 606,200 shares of common
stock, (C) Cerberus Institutional Partners, L.P. is the holder of 87,066
shares of common stock, (D) certain private investment funds hold, in the
aggregate, 310,900 shares of common stock and (E) Mr. Feinberg possesses
sole power to vote and direct the disposition of all shares of common stock
held by each of Cerberus, Cerberus International, Cerberus Institutional
and the Funds.
(5) Based on information set forth in Schedule 13G/A dated February 14, 2000,
filed by Quaker Capital Management Corporation and Form 4 filed by Quaker
Capital on March 10, 2000. The Quaker Schedule 13G and/or Form 4 reflect
that (A) Quaker Capital Partners I, L.P. is the direct beneficial owner of
752,337 shares of common stock, Quaker Premiere, L.P. is the sole general
partner of Quaker I and Quaker Capital is the sole general partner of
Quaker Premiere, (B) each of Quaker I, Quaker Premiere and Quaker Capital
has sole voting and dispositive power over the 752,337 shares of common
stock beneficially owned directly by Quaker I, (C) Quaker Capital also has
sole voting and dispositive power over an additional 83,046 shares of
common stock and (D) Quaker Capital may be deemed to beneficially own, and
has shared voting and dispositive power over, 452,982 shares of common
stock which are held by a variety of Quaker Capital's investment advisory
clients.
(6) Based on information set forth in Schedule 13G dated February 4, 2000.
(7) Based on information set forth in Schedule 13G dated June 5, 1999, filed by
Richard Reiss, Jr. and Georgica Advisors LLC. According to the Reiss 13G,
Mr. Reiss and Georgica have shared voting and dispositive power over an
aggregate of 651,832 shares of common stock. Mr. Reiss is the managing
member of Georgica.
(8) Consists solely of shares of common stock issuable upon the exercise of
options granted under the 1999 share incentive plan which currently are
exercisable.
(9) Consists of (A) 78,799 shares of common stock held by Condor Partners IV,
L.L.C. and (B) 2,000 shares of common stock issuable upon the exercise of
options granted to Mr. Subin under the 1999 share incentive plan which
currently are exercisable. As Managing Director of Trendex Capital
Management, the investment advisor to Condor, Mr. Subin may be deemed to
beneficially own the 78,799 shares held by Condor.
(10) Consists of (A) 99,008 shares held directly by Mr. Weschler and (B) 2,000
shares issuable upon the exercise of options granted to Mr. Weschler under
the 1999 share incentive plan which currently are exercisable.
(11) Includes an aggregate of 360,784 shares of common stock issuable upon the
exercise of options granted under the 1999 share incentive plan which
currently are exercisable.
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<PAGE> 22
REORGANIZATION
On December 4, 1998, we filed a voluntary, prenegotiated plan of
reorganization and disclosure statement under Chapter 11 of the U.S. Bankruptcy
Code in the U.S. Bankruptcy Court for the District of Delaware (In re Heartland
Wireless Communications, Inc., Case No. 98-2692 (JJF)). We filed the
reorganization plan with the prepetition agreement from the holders of more than
70% in principal amount of our 13% senior notes and 14% senior notes to support
the plan.
On March 15, 1999, the bankruptcy court confirmed our plan of
reorganization, which became effective on April 1, 1999. As of the effective
date, we changed our name from Heartland Wireless Communications, Inc., to
Nucentrix Broadband Networks, Inc.
Also as of the effective date:
- all previously issued and outstanding common stock, options granted under
our stock option plans, warrants and any other equity interests in
Nucentrix were canceled,
- holders of the senior notes received 9,700,000 shares of newly issued
common stock in exchange for cancellation of the senior notes, and
- holders of $40.2 million of convertible subordinated notes received
300,000 shares of newly issued common stock and warrants to purchase
825,000 shares of common stock at an exercise price of $27.63 per share in
exchange for cancellation of the convertible notes.
As a result of these events, a change in control of Nucentrix occurred as of
the effective date of our plan. To our knowledge, the persons who acquired more
than 5% of our common stock as a result of these events are:
<TABLE>
<CAPTION>
NUMBER OF SHARES BENEFICIALLY
NAME OWNED UPON CONSUMMATION OF PLAN
- ---- -------------------------------
<S> <C>
Terrence D. Daniels
Quad-C, Inc.
Quad-C IV, LLC
Quad-C Partners IV, L.P.................... 1,557,997
Quaker Capital Management Corporation...... 1,567,941
The Mainstay Funds, on behalf of its High
Yield Corporate Bond Fund Series......... 1,042,000
Northstar Investment Management
Corporation.............................. 800,000
Richard Reiss, Jr.
Georgica Advisors LLC...................... 651,832
</TABLE>
See "Security Ownership of Principal Stockholders and Management" for
information regarding the stock holdings of these persons as of the record date.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires Nucentrix's directors
and executive officers, and persons who own more than 10% of Nucentrix common
stock, to file with the SEC initial reports of ownership and reports of changes
in ownership of common stock and other equity securities of Nucentrix. Officers,
directors and greater than 10% stockholders are required by SEC regulations to
furnish Nucentrix with copies of all Section 16(a) forms they file.
To Nucentrix's knowledge, based solely on review of the copies of these
reports furnished to Nucentrix, and written representations from Nucentrix's
executive officers and directors, Nucentrix believes that all persons who were
subject to Section 16(a) of the Securities Exchange Act during 1999 complied
with the filing requirements thereof, except that Amy Ivanoff, Controller of
Nucentrix, did not timely file a Form 3 initial statement of beneficial
ownership.
20
<PAGE> 23
PROPOSAL 2.
AMENDMENT TO NUCENTRIX BROADBAND NETWORKS, INC.
FIRST AMENDED AND RESTATED 1999 SHARE INCENTIVE PLAN
OVERVIEW
The purpose of the Nucentrix Broadband Networks, Inc. First Amended and
Restated 1999 share Incentive Plan is to provide incentives that will attract,
retain and motivate highly competent persons as non-employee directors, officers
and key employees of, and consultants to, Nucentrix by providing them
opportunities to acquire shares of common stock or to receive monetary payments
based on the value of these shares pursuant to the benefits described in this
proxy statement. Additionally, the 1999 share incentive plan is intended to
assist in further aligning the interests of Nucentrix's directors, officers, key
employees and consultants to those of its other stockholders. To accomplish this
purpose, the 1999 share incentive plan offers a proprietary interest in
Nucentrix through the distribution of benefits in the form of stock-based
compensation, including stock options and stock appreciation rights.
Subject to the terms of the 1999 share incentive plan, the board of
directors or the compensation committee determines the terms of each benefit,
which are set forth in a written agreement delivered to the recipient of the
benefit. Nucentrix is the issuer of the shares of common stock issuable under
the 1999 share incentive plan. The terms of award agreements may vary from
person to person. Benefits may, as determined by the committee in its
discretion, constitute performance-based awards, as discussed below. See "--
Performance-Based Awards."
The board of directors and stockholders of Nucentrix adopted the 1999 share
incentive plan, as amended and restated, effective as of April 1, 1999. Under
the 1999 share incentive plan, the maximum number of shares of common stock that
may be issued currently is 900,000, subject to adjustment as described below
under "-- Adjustment Provisions," and stock options are required to have an
exercise price at least equal to the fair market value of the common stock on
the date of grant. As of April 3, 2000, 20,800 shares of common stock were
available for additional benefits to be granted under the 1999 share incentive
plan, subject to 12,000 shares currently reserved for future grants that may be
required to be made to our non-employee directors. See "Management
Compensation -- Board Compensation -- Stock Option Awards."
AMENDMENT
In March 2000, the compensation committee adopted, and the board of
directors ratified, an amendment to the 1999 share incentive plan, subject to
stockholder approval. If approved by the stockholders, the amendment to the 1999
share incentive plan will:
- increase the maximum aggregate number of shares of common stock that may
be issued pursuant to benefits granted under the 1999 share incentive
plan by 400,000 from 900,000 to 1,300,000, subject to adjustments as
described in "-- Adjustment Provisions," and
- allow the committee, in its discretion, to grant nonqualified stock
options with an exercise price per share of common stock less than 100%
of the fair market value of a share of common stock on the date of grant.
The board of directors believes that it is in the best interest of
Nucentrix and its stockholders to approve the 1999 share incentive plan
amendment to allow Nucentrix to continue to use equity compensation to attract
and retain superior executive and other personnel in a very competitive industry
that is subject to rapid technological change, and to have shares available for
future grants of benefits to employees as the compensation committee deems
appropriate.
DESCRIPTION OF 1999 SHARE INCENTIVE PLAN
The following is a summary of the material features of the 1999 share
incentive plan, together with applicable tax implications. This summary,
however, does not purport to be a complete description of all
21
<PAGE> 24
provisions of the 1999 share incentive plan. Any stockholder who wishes to
obtain a copy of the actual plan document may do so by written request to the
Corporate Secretary at Nucentrix's executive offices at 200 Chisholm Place,
Suite 200, Plano, Texas 75075.
ADMINISTRATION
The board of directors has the duty of appointing a committee to administer
the 1999 share incentive plan. The committee must consist of two or more members
of the board of directors. Each member of the committee must be:
- a "non-employee director" for purposes of Rule 16b-3(b)(3) (or any
successor rule) promulgated under the Securities Exchange Act, and
- an "outside director" for purposes of Section 162(m) of the Internal
Revenue Code.
The members of the compensation committee of the board of directors currently
administer the 1999 share incentive plan.
The board of directors establishes the timing and terms of benefits awarded
to directors of Nucentrix who are not employees or officers of Nucentrix or its
subsidiaries on terms as it shall determine in its sole discretion. Except with
respect to benefits awarded to non-employee directors, the committee has wide
discretion and flexibility to administer the 1999 share incentive plan. The
committee:
- selects 1999 share incentive plan participants,
- determines the type and size of benefits,
- establishes the timing, terms and conditions of benefits, and
- otherwise makes determinations and performs such acts as are necessary
for administering the 1999 share incentive plan.
References to the committee in the remainder of this proxy statement refer to
both the board of directors and the committee in their administrative capacities
under the 1999 share incentive plan unless specified otherwise.
SECURITIES SUBJECT TO THE 1999 SHARE INCENTIVE PLAN
The 1999 share incentive plan currently provides for the issuance of a
maximum of 900,000 shares of common stock, subject to adjustment in various
instances. See "-- Adjustment Provisions." If the share incentive plan amendment
is approved by the requisite vote of stockholders at the annual meeting, the
maximum available shares will be increased to 1,300,000, subject to adjustment
in various instances. See "-- Adjustment Provisions." The share incentive plan
shares may be authorized unissued shares of common stock or shares of common
stock held in the treasury of Nucentrix. If any outstanding benefit terminates
without being fully exercised or vested, as applicable, the shares reserved for
the benefit that remain unissued at the time of the termination become available
for issuance pursuant to benefits granted thereafter for purposes of the limit
on the number of shares of common stock that may be delivered under the 1999
share incentive plan.
ELIGIBILITY
Members of the board of directors who are not employees of Nucentrix are
eligible to participate in the 1999 share incentive plan at the discretion of
the board of directors and on terms and conditions as established by the board
of directors. See "-- Administration." Other participants eligible to
participate in the 1999 share incentive plan are designated by the committee
from among the officers and key employees of, and consultants to, Nucentrix and
its subsidiaries and affiliates as the committee in its sole discretion
determines to be significantly responsible for the success and future growth and
profitability of Nucentrix.
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<PAGE> 25
BENEFITS OFFERED
The two types of benefits that may be granted under the 1999 share
incentive plan, stock options and SARs, generally are rights to acquire common
stock or cash by satisfying specified conditions that usually are based on
service to Nucentrix and, in some cases, payment of an exercise price or
accomplishment of specified corporate goals.
Stock Options. A stock option entitles the holder to purchase a specified
number of shares at a price fixed when the stock option is granted. Two types of
stock options may be granted under the 1999 share incentive plan:
- "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code, and
- stock options that do not qualify as incentive options, which are
referred to as "nonqualified options."
The committee has the authority to grant to any participant one or more
incentive options, nonqualified options or both types of stock options (in each
case with or without SARs). Stock options may constitute performance-based
awards, as described below under "-- Performance-Based Awards."
Except for certain annual awards to non-employee directors as described
above under "Management Compensation -- Board Compensation -- Stock Option
Awards," the committee determines the terms of each stock option, including the
exercise price, vesting period and exercise terms for stock options; provided,
that, the exercise price per share of common stock under each option must equal
at least 100% of the fair market value of a share of common stock on the date of
grant. If the share incentive plan amendment is approved, the committee may, in
its discretion, award nonqualified options with an exercise price per share of
common stock less than 100% of the fair market value of a share of common stock
on the date of grant. The aggregate fair market value (determined at the time
the options are granted) of shares subject to incentive options that are first
exercisable by any individual in any one calendar year may not exceed $100,000.
Upon the exercise of a stock option, the participant must pay the exercise
price in cash or, in the discretion of the committee, by:
- delivery of shares of common stock then owned by the participant,
- the withholding of shares of common stock for which a stock option is
exercisable, or
- a combination of these methods.
In the discretion of the committee, payment may also be made by delivering a
properly executed exercise notice to Nucentrix together with a copy of
irrevocable instructions to a broker to deliver promptly to Nucentrix the amount
of sale or loan proceeds to pay the exercise price. To facilitate the exercise,
Nucentrix may enter into agreements for coordinated procedures with one or more
brokerage firms. The committee may prescribe any other method of paying the
exercise price that it determines to be consistent with applicable law and the
purpose of the 1999 share incentive plan.
The committee may, at the time of grant of a stock option or thereafter,
provide for the grant of a subsequent stock option referred to as "restoration
stock options," if the exercise price for the predecessor stock option is paid
for by delivering previously owned shares of common stock. Restoration stock
options:
- must be granted for more than the number of shares of common stock
tendered in exercising the predecessor stock option,
- must have an exercise price equal to the fair market value on the date
the restoration stock option is granted, and
- must have an exercise period that does not extend beyond the remaining
term of the predecessor stock option.
23
<PAGE> 26
Stock Appreciation Rights. An SAR may be granted in connection with a stock
option or totally independent of a stock option. An SAR is the right to receive
an amount equal to the excess of:
- the fair market value, or other specified valuation, of a specified
number of shares of common stock on the date the right is exercised, over
- the fair market value, or other specified valuation, which may be less
than the fair market value, of the shares of common stock on the date the
right is granted, all as determined by the compensation committee;
except that, if an SAR is granted in tandem with or in substitution for a stock
option, the designated fair market value in the award agreement may be the fair
market value on the date the stock option was granted. SARs may constitute
performance-based awards, as described below under "-- Performance-Based
Awards."
An SAR granted in tandem with a stock option generally will require the
holder, upon exercise, to surrender the related stock option or any unexercised
portion, with respect to the number of shares as to which such SAR is exercised,
and to receive payment as described above. The surrendered stock option will
then cease to be exercisable. A tandem SAR generally will be exercisable or
transferable only to the extent that the related stock option is exercisable or
transferable.
An SAR granted independent of a stock option generally will be exercisable
as determined by the compensation committee. An independent SAR will entitle the
holder, upon exercise, to receive payment as described above. The compensation
committee may limit the amount payable upon exercise of any tandem or
independent SAR. Any limitation will be specified in an agreement at the time
the SAR is granted.
Payment upon exercise of SAR's will be made, at the discretion of the
committee, in cash, shares of common stock or a combination of cash and shares
of common stock.
VESTING AND EXERCISABILITY
Each individual participant's award agreement will set forth the terms on
which benefits will vest and become exercisable, as determined by the committee.
See "Plan Benefits -- Outstanding Plan Benefits" and Exhibits A, B and C for a
discussion of the vesting and exercise terms of outstanding stock options, and
factors that may affect these provisions.
ADJUSTMENT PROVISIONS
The 1999 share incentive plan contains customary provisions that
automatically adjust the terms of outstanding benefits and the maximum number
and/or type of securities available for issuance under the 1999 share incentive
plan upon a subdivision, consolidation or reclassification of outstanding common
stock or when Nucentrix undergoes certain restructurings. The committee also may
make such adjustments as it deems necessary to prevent dilution or enlargement
of participants' right under the 1999 share incentive plan upon the occurrence
of these events and otherwise to preserve the equitable treatment of
participants in the 1999 share incentive plan.
CHANGE IN CONTROL OF NUCENTRIX
For a description of change in control provisions contained in the 1999
share incentive plan, see "Management Compensation -- Employment Agreements and
Change in Control Arrangements -- 1999 Share Incentive Plan."
TRANSFERABILITY OF BENEFITS
Benefits granted under the 1999 share incentive plan generally are not
transferable; the committee, however, may permit benefits to be transferred to
certain family members and trusts for the benefit of the persons or
partnerships, corporations, limited liability companies or other entities owned
solely by the persons.
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<PAGE> 27
PERFORMANCE-BASED AWARDS
Certain benefits granted under the 1999 share incentive plan may be granted
in a manner such that the benefits qualify under Section 162(m) of the Internal
Revenue Code as performance based compensation or performance-based awards. To
comply with Section 162(m) of the Internal Revenue Code, the committee, in its
sole discretion, may grant benefits with an exercise price per share of common
stock equal to 100% of the fair market value of a share of common stock at the
time of grant or may base either the grant or the exercise of performance-based
awards, including nonqualified options with an exercise price per share of
common stock less than 100% of the fair market value of a share of common stock
at the time of grant, on one or more business criteria that apply to the
individual participant, one or more business units or Nucentrix as a whole. The
business criteria are as follows and may be applied, individually or in
combination:
- net sales,
- pretax income before allocation of corporate overhead and bonus,
- budget,
- earnings per share,
- net income,
- division, group or corporate financial goals,
- return on stockholders' equity,
- return on assets,
- attainment of strategic and operational initiatives,
- appreciation in and/or maintenance of the price of the common stock or
any other publicly-traded securities of Nucentrix,
- market share,
- gross profits,
- earnings before interest and taxes,
- earnings before interest, taxes, dividends and amortization,
- economic value-added models and comparisons with various stock market
indices,
- reductions in costs, or
- any combination of the foregoing.
Performance-based awards also may include comparisons to the performance of
other companies, as measured by one or more of the business criteria described
above.
In addition, to constitute performance-based awards for purposes of Section
162(m) of the Internal Revenue Code, the number of shares that may be associated
with the benefits awarded to any one participant in a given year must be
limited. For this purpose, the 1999 share incentive plan limits to 350,000
number of shares that may relate to stock options and SARs that any one
participant may receive in any calendar year.
AMENDMENT AND TERMINATION
The 1999 share incentive plan shall continue indefinitely until terminated
by the board of directors or the compensation committee. The board of directors
or the compensation committee may amend the 1999 share incentive plan from time
to time or suspend or terminate the 1999 share incentive plan at any time.
25
<PAGE> 28
FEDERAL TAX CONSEQUENCES
A participant receiving nonqualified stock options or SARs will not
recognize taxable income at the time the nonqualified stock option or SAR is
granted. At the time the nonqualified stock option or SAR is exercised, the
participant will recognize ordinary taxable income in an amount equal to the
difference between the exercise price (or fair market value of the common stock
at the time of grant of SARs granted independent of stock options) and the fair
market value of the common stock on the date of exercise. Nucentrix generally
will be entitled to a concurrent deduction equal to the ordinary income
recognized by the participant, subject to the limitation imposed by Section
162(m) of the Internal Revenue Code as described below under "Other
Considerations."
An employee granted an incentive stock option will not recognize taxable
income at the time of grant or, subject to certain conditions, at the time of
exercise. If stock acquired upon exercise of an incentive option is held for a
minimum of two years from the date of grant of the stock option and one year
from the date of exercise, the gain or loss (in an amount equal to the
difference between the sales price and the exercise price) upon disposition of
the stock will be treated as long-term capital gain or loss, and Nucentrix will
not be entitled to any deduction.
If the holding period requirement is not met, the employee will recognize
ordinary income in an amount equal to the lesser of:
- the excess of the fair market value of common stock on the date of
exercise over the exercise price, or
- the excess of the amount realized on the sale of the stock over the
exercise price.
Special rules may apply to employees subject to Section 16(b) of the
Securities Exchange Act of 1934. Other than in the case of an incentive option
held in accordance with the specified holding period requirements, the amount
and timing of the recognition of income by an employee subject to Section 16(b)
and the concurrent deduction by Nucentrix on the exercise of a stock option or
SAR generally will be based on the fair market value of the shares received when
the restrictions of Section 16(b) lapse, unless the employee elects otherwise by
making a Section 83(b) election.
OTHER CONSIDERATIONS
Under the Omnibus Budget Reconciliation Act of 1993, Nucentrix's tax
deduction for certain compensation paid to the CEO and to each of the next four
highest compensated officers in any one year is limited to $1,000,000 per
person. The 1999 share incentive plan is intended to comply with certain
provisions of Section 162(m) of the Internal Revenue Code that exempts from the
deduction limitation income arising from such officers' exercise of a stock
option or stock appreciation right (or the sale of the underlying stock acquired
through the exercise of an incentive stock option before the required holding
periods are met). However, under current Internal Revenue Service regulations,
income attributable to stock options (and SARs) granted under the 1999 share
incentive plan with an exercise price less than the fair market value of common
stock on the date of grant may not qualify for an exemption from the $1 million
annual limit on deductible compensation imposed by Section 162(m) of the
Internal Revenue Code unless the grant or the exercise of these stock options or
SARs is conditioned on performance-based criteria as described above. If income
attributable to these stock options (or SARs) granted to a covered executive
officer is not eligible for an exemption from the $1 million limitation, that
income would be included in the annual compensation calculation for the
executive in the year recognized by the executive for purposes of the $1 million
deduction limit. To the extent the total compensation paid, or deemed paid, by
Nucentrix to the executive officer for that year exceeded $1 million, the excess
would not be deductible by Nucentrix if the executive was employed by Nucentrix
as of the end of the year.
PLAN BENEFITS
As currently in effect, the 1999 share incentive plan authorizes the grant
or award of stock options or SAR's with respect to an aggregate of 900,000
shares of common stock, subject to adjustment as described
26
<PAGE> 29
above, and stock options are required to have an exercise price at least equal
to the fair market value of the common stock on the date of grant. As of April
3, 2000, there were 20,800 shares of common stock available for the future
issuance of benefits under the 1999 share incentive plan, subject to 12,000
shares currently reserved for future grants that may be required to be made to
our non-employees directors. See "Management Compensation -- Board
Compensation -- Stock Option Awards."
FUTURE PLAN BENEFITS
Benefits under the 1999 share incentive plan are awarded from time to time
at the discretion of the committee and are not generally determinable prior to
actual grants. Therefore, the benefits and amounts that may be received by
Nucentrix's directors, executive officers and other employees in respect of the
increased number of shares that would be available or as a result of the
committee's ability to grant stock options with an exercise price less than the
fair market value of the common stock at the date of grant are not presently
determinable, except as described in the following paragraph.
The compensation committee has granted to Russell A. Wiseman, who was
employed as Nucentrix's Senior Vice President -- Internet Operations in April
2000, stock options to purchase 20,000 shares of common stock at an exercise
price equal to $12.50, which is less than the fair market value of the common
stock on the date of grant ($27.50). Therefore, the grant of these stock options
is subject to obtaining stockholder approval of the proposed amendment to the
1999 share incentive plan. If the stockholders approve the proposed amendment,
20% of these stock options will vest in each of the next five years, subject to
continuation of employment. To date, no other benefits have been awarded under
the 1999 share incentive plan conditioned upon stockholder approval of the
proposed amendment. The compensation committee also has granted to Mr. Wiseman
stock options to purchase an additional 80,000 shares of common stock with an
exercise price equal to the fair market value of the common stock on the date of
grant, which options are reflected in the table below in "Current Executive
Officer Group."
OUTSTANDING PLAN BENEFITS
The following table reflects all stock options granted under the 1999 share
incentive plan as of April 3, 2000. No SARs have been granted under the 1999
share incentive plan.
1999 SHARE INCENTIVE PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES
SUBJECT TO
NAME AND POSITION OPTIONS GRANTED
- ----------------- ----------------
<S> <C>
Carroll D. McHenry, Chief Executive Officer................. 300,000
Marjean Henderson, Senior Vice President and Chief Financial
Officer................................................... 70,000
J. Curtis Henderson, Senior Vice President and General
Counsel................................................... 70,000
Alexander R. Padilla, Senior Vice President -- Business
Development............................................... 50,000(1)
Frank H. Hosea, Senior Vice President -- Video Operations... 50,000
Current Executive Officer Group (5 persons)................. 570,000(2)
Non-Executive Director Group (4 persons).................... 12,000
Non-Executive Officer Employee Group (36 persons)........... 257,000
Nominees for Election as a Director......................... 0(3)
Associates of any Director, Executive Officer or Nominee.... 0
Each other person who received (or is to receive) 5 percent
of options or SARs........................................ 0(4)
</TABLE>
- ---------------
(1) Mr. Padilla resigned from Nucentrix effective April 3, 2000. Mr. Padilla
exercised options to purchase 25,000 shares of common stock in March 2000.
Options to purchase 20,000 shares of common stock, which were not vested as
of April 3, 2000, were canceled and became available for reissuance under
the 1999 share incentive plan. Mr. Padilla has until May 3, 2000, to
exercise his remaining options to purchase 5,000 shares of common stock.
27
<PAGE> 30
(2) Excludes Mr. Padilla, who resigned April 3, 2000. See note (1). Includes
options to purchase 80,000 shares granted to Russell A. Wiseman, Senior Vice
President -- Internet Operations, who was first employed by Nucentrix in
April 2000, but excludes options to purchase 20,000 shares granted to Mr.
Wiseman subject to stockholder approval of the proposed amendment to the
1999 share incentive plan, as described under "-- Future Plan Benefits"
above.
(3) Excludes 300,000 shares subject to stock options held by Mr. McHenry, the
CEO of Nucentrix, and 12,000 shares subject to stock options held by members
of the Non-Executive Director Group, each of which persons is a current
director and a nominee for director at the 2000 annual meeting.
(4) Based on stock options granted as of April 3, 2000, and 900,000 shares
originally available under the 1999 share incentive plan.
The closing sale price of the common stock on The NASDAQ Stock Market on April
3, 2000, was $27.50.
VOTE REQUIRED AND RECOMMENDATION FOR APPROVAL OF THE PROPOSED 1999 SHARE
INCENTIVE PLAN AMENDMENT
To be approved by the stockholders, the 1999 share incentive plan amendment
must receive the approval of stockholders holding at least a majority of the
outstanding shares of common stock present at the annual meeting and entitled to
vote on the share incentive plan amendment. The enclosed form of proxy provides
a means for stockholders to vote for the share incentive plan amendment, to vote
against the share incentive plan amendment or to abstain from voting on the
share incentive plan amendment. Each properly executed proxy received in time
for the meeting will be voted as specified therein. Because abstentions are
counted as present and entitled to vote on the share incentive plan amendment,
they will have the effect of votes against Proposal 2. If a stockholder executes
and returns a proxy but does not specify otherwise, the shares represented by
the stockholder's proxy will be voted FOR the share incentive plan amendment.
If the 1999 share incentive plan amendment is not approved by stockholders
at the annual meeting, no benefits will be granted to executive officers of
Nucentrix under the 1999 share incentive plan that exceed the current 900,000
share limitation and no nonqualified stock options will be granted under the
1999 share incentive plan at an exercise price less than 100% of the fair market
value of a share of common stock on the date of grant.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS OF NUCENTRIX VOTE
FOR THE APPROVAL OF THE 1999 SHARE INCENTIVE PLAN AMENDMENT. BECAUSE THE 1999
SHARE INCENTIVE PLAN AMENDMENT WILL INCREASE THE NUMBER OF INCENTIVE AWARDS THAT
MAY BE GRANTED TO NON-EMPLOYEE DIRECTORS AND ALL EXECUTIVE OFFICERS, AND PERMIT
THE COMPENSATION COMMITTEE TO GRANT TO NON-EMPLOYEE DIRECTORS AND EXECUTIVE
OFFICERS NONQUALIFIED STOCK OPTIONS WITH AN EXERCISE PRICE LESS THAN 100% OF THE
FAIR MARKET VALUE OF A SHARE OF COMMON STOCK ON THE DATE OF GRANT, EACH OF THE
NON-EMPLOYEE DIRECTORS AND EXECUTIVE OFFICERS OF NUCENTRIX HAS AN INTEREST IN,
AND MAY BENEFIT FROM, THE ADOPTION OF THE 1999 SHARE INCENTIVE PLAN AMENDMENT.
28
<PAGE> 31
PROPOSAL 3.
RATIFICATION OF INDEPENDENT AUDITORS
The board of directors has selected KPMG LLP as the auditors of Nucentrix
for the current fiscal year. Nucentrix expects that representatives of KPMG LLP
will be present at the annual meeting to respond to appropriate questions and
will have an opportunity to make a statement if they desire to do so.
Stockholder ratification of the selection of KPMG LLP as the auditors of
Nucentrix is not required by Nucentrix's by-laws or otherwise. However, the
board of directors is submitting the selection of KPMG LLP to the stockholders
for ratification as a matter of good corporate practice. If the stockholders
fail to ratify the selection, the audit committee and the board of directors
will reconsider whether or not to retain the firm. Even if the selection is
ratified, the audit committee and the board of directors in their discretion may
direct the appointment of a different independent accounting firm at any time
during the year if they determine that a change would be in the best interest of
Nucentrix and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS OF NUCENTRIX VOTE FOR
THE RATIFICATION OF THE SELECTION OF KPMG LLP AS NUCENTRIX'S INDEPENDENT
AUDITORS FOR 2000.
OTHER BUSINESS
Management knows of no other matters that will come before the annual
meeting. However, if other matters do come before the annual meeting, as
permitted by Rule 14a-4(c) of the Securities Exchange Act, the proxy holders
will vote in accordance with their best judgment.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
To qualify for inclusion in the proxy statement and form of proxy relating
to the 2001 annual meeting of stockholders, under Rule 14a-8 of the Securities
Exchange Act a proposal intended by a stockholder for presentation at that
meeting must be received by Nucentrix at its principal executive offices on or
before December 12, 2000. Under rule 14a-4(c) of the Securities Exchange Act,
the board of directors may exercise discretionary voting authority under proxies
solicited by it on any matter properly presented by a stockholder at Nucentrix's
2001 annual meeting that the stockholder does not seek to have included in
Nucentrix's proxy statement under Rule 14a-8 of the Securities Exchange Act if,
except as described in the following sentence, the proxy statement discloses the
nature of the matter and how the board of directors intends to exercise its
discretion to vote on such matter, unless Nucentrix is notified of the proposal
on or before February 25, 2001, and the stockholder satisfies the other
requirements of Rule 14a-4(c)(2). If Nucentrix first receives notice of such
matter after February 25, 2001, the board of directors may exercise
discretionary voting authority on any matter as permitted under Rule 14a-(c)(2),
without including any discussion of the matter in the proxy statement for the
2001 meeting. Nucentrix reserves the right to reject, rule out of order or take
other appropriate action on any proposal that does not comply with the
requirements described above and other applicable requirements.
GENERAL
Solicitation of proxies may be made by mail, personal interview, telephone,
electronic mail or facsimile by officers, directors and regular employees of
Nucentrix. Nucentrix also has retained Innisfree M&A to assist with the proxy
solicitation process for a fee of $4,000, plus reimbursement of various
expenses. Nucentrix also may request banking institutions, brokerage firms,
custodians, nominees and fiduciaries to forward solicitation material to the
beneficial owners of the common stock that those companies or persons hold of
record, and Nucentrix will reimburse the forwarding expenses. Nucentrix will
bear all costs of solicitation.
29
<PAGE> 32
Nucentrix's annual report to stockholders and Form 10-K for 1999 are being
sent to stockholders with this proxy statement and do not form any part of the
material for the solicitation of proxies.
A COPY OF NUCENTRIX'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SEC IS
INCLUDED AS PART OF OUR ANNUAL REPORT TO STOCKHOLDERS WHICH ACCOMPANIED THIS
PROXY STATEMENT. ADDITIONAL COPIES OF THE FORM 10-K WILL BE SENT TO ANY
STOCKHOLDER WITHOUT CHARGE UPON WRITTEN REQUEST ADDRESSED TO CORPORATE
SECRETARY, AT THE OFFICES OF NUCENTRIX, 200 CHISHOLM PLACE, SUITE 200, PLANO,
TEXAS 75075.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO COMPLETE, SIGN AND
RETURN THE PROXY IN THE ENCLOSED POSTAGE-PAID, ADDRESSED ENVELOPE.
By Order of the Board of Directors,
J. CURTIS HENDERSON
Senior Vice President, General
Counsel
and Secretary
April 11, 2000
30
<PAGE> 33
EXHIBITS APPEAR ON THE FOLLOWING PAGES
<PAGE> 34
EXHIBIT A
1. Subject to Paragraphs 2 and 3 below, the Option shall become fully
exercisable in accordance with the following vesting schedule:
(a) 33.40% will vest on the date of grant;
(b) 6.66% will automatically vest on each anniversary of the date of
grant for five years after the date of grant; and
(c) up to 33.30% will vest as follows (such portion hereinafter
referred to as the "Contingent Portion"):
(i) if the average closing sales price of the common stock equals
or exceeds $16.50 per share for any 20 consecutive trading days between
the date of grant and the first anniversary of the date of grant,
one-fifth of the Contingent Portion will vest on such 20th trading day;
(ii) if the average closing sales price of the common stock equals
or exceeds $20.80 per share for any 20 consecutive trading days between
the date of grant and the second anniversary of the date of grant,
two-fifths of the Contingent Portion will vest on such 20th trading day;
(iii) if the average closing sales price of the common stock equals
or exceeds $25.00 per share for any 20 consecutive trading days between
the date of grant and the third anniversary of the date of grant,
three-fifths of the Contingent Portion will vest on such 20th trading
day;
(iv) if the average closing sales price of the common stock equals
or exceeds $28.61 per share for any 20 consecutive trading days between
the date of grant and the fourth anniversary of the date of grant,
four-fifths of the Contingent Portion will vest on such 20th trading
day; and
(v) if the average closing sales price of the common stock equals
or exceeds $31.10 per share for any 20 consecutive trading days between
the date of grant and the fifth anniversary of the date of grant, all of
the Contingent Portion will vest on such 20th trading day.
"Average closing sales price" shall mean: (i) if Nucentrix's common stock
is publicly traded, the average of the closing prices as reported by the OTC
Bulletin Board, The Nasdaq Stock Market or other applicable regional or national
securities exchange or quotation system on which the common stock is so traded
or quoted for any applicable period; or (ii) if there is no public trading
market for such shares, the fair value of such shares on the applicable date of
determination as determined by the committee after taking into consideration all
factors which it deems appropriate, including without limitation, recent sale
and offer prices of the common stock in private transactions negotiated at arms'
length.
Notwithstanding anything herein to the contrary, if the Employee is
employed by Nucentrix on the date which is 30 days immediately prior to the
Expiration Date (such date referred to herein as the "Final Vesting Date"), the
unvested portion, if any, of the Option will immediately vest and become
exercisable on such date.
2. Subject to Paragraph 3 below, the unexercised portion of the Option,
unless sooner terminated, shall expire seven years after the date of grant (the
"Expiration Date") and, notwithstanding anything contained herein to the
contrary, no portion of the Option may be exercised after the Expiration Date.
3. If prior to the Expiration Date, Employee's employment with Nucentrix or
any subsidiary corporation terminates, the Option will terminate on the
applicable date as described below, provided, however, that none of the events
described below shall extend the period of exercisability beyond the Expiration
Date:
(a) If the employment of Employee is terminated by reason of
Employee's death while in the employ of Nucentrix or any subsidiary
corporation, the Option shall immediately become fully exercisable and
remain exercisable for twelve (12) months after Employee's death and shall
be exercisable by the executor or administrator of the estate of the
deceased Employee or the person or persons to whom the deceased Employee's
rights under the Option shall pass by will or the laws of descent or
distribution;
A-1
<PAGE> 35
(b) If the employment of Employee is terminated by Nucentrix or any
subsidiary corporation for reason of Employee's "Permanent Disability" (as
defined below), the Option shall immediately become fully exercisable on
the date of such termination and shall remain exercisable for six (6)
months after such date; provided, however, that if Employee dies during the
six month period following such date and Employee has not exercised the
Option, the Option shall remain exercisable for an additional twelve (12)
months after Employee's death and shall be exercisable by the executor or
administrator of the estate of the deceased Employee or the person or
persons to whom the deceased Employee's rights under the Option shall pass
by will or the laws of descent or distribution;
(c) If the employment of Employee is terminated by Nucentrix or any
subsidiary corporation for "cause" (as defined below), the Option shall, to
the extent not theretofore exercised, immediately become null and void on
the date of such termination;
(d) If the employment of Employee is terminated by Nucentrix or any
subsidiary corporation other than (X) for "cause" or (Y) for reason of
Employee's death or "Permanent Disability", the Option, to the extent
vested and not theretofore exercised, shall immediately become fully
exercisable on the date of such termination and shall remain exercisable
for thirty (30) days after such date and the unvested portion of the Option
shall be canceled;
(e) If the employment of Employee is terminated by the Employee prior
to the Final Vesting Date, the unvested portion of the Option shall
immediately become null and void on the date of such termination and the
vested portion of the Option shall, to the extent not theretofore
exercised, remain exercisable for thirty (30) days after the date of such
termination; or
(f) If the employment of Employee is terminated by the Employee on or
after the Final Vesting Date, the Option shall, to the extent not
theretofore exercised, remain exercisable for thirty (30) days after the
date of such termination.
The terms "Permanent Disability" and "cause" shall have the meanings
ascribed to such terms in the Employee's employment agreement with Nucentrix, as
amended from time to time.
A-2
<PAGE> 36
EXHIBIT B
1. Subject to Paragraphs 2 and 3 below, the Option shall become fully
exercisable in accordance with the following vesting schedule:
(a) 10% will automatically vest on each anniversary of the date of
grant for five years after the date of grant; and
(b) up to 50% will vest as follows (such portion hereinafter referred
to as the "Contingent Portion"):
(i) if the average closing sales price of the common stock equals
or exceeds $16.50 per share for any 20 consecutive trading days between
the date of grant and the first anniversary of the date of grant,
one-fifth of the Contingent Portion will vest on such 20th trading day;
(ii) if the average closing sales price of the common stock equals
or exceeds $20.80 per share for any 20 consecutive trading days between
the date of grant and the second anniversary of the date of grant,
two-fifths of the Contingent Portion will vest on such 20th trading day;
(iii) if the average closing sales price of the common stock equals
or exceeds $25.00 per share for any 20 consecutive trading days between
the date of grant and the third anniversary of the date of grant,
three-fifths of the Contingent Portion will vest on such 20th trading
day;
(iv) if the average closing sales price of the common stock equals
or exceeds $28.61 per share for any 20 consecutive trading days between
the date of grant and the fourth anniversary of the date of grant,
four-fifths of the Contingent Portion will vest on such 20th trading
day; and
(v) if the average closing sales price of the common stock equals
or exceeds $31.10 per share for any 20 consecutive trading days between
the date of grant and the fifth anniversary of the date of grant, all of
the Contingent Portion will vest on such 20th trading day.
"Average closing sales price" shall mean: (i) if Nucentrix's common stock
is publicly traded, the average of the closing prices as reported by the OTC
Bulletin Board, The Nasdaq Stock Market or other applicable regional or national
securities exchange or quotation system on which the common stock is so traded
or quoted for any applicable period; or (ii) if there is no public trading
market for such shares, the fair value of such shares on the applicable date of
determination as determined by the committee after taking into consideration all
factors which it deems appropriate, including without limitation, recent sale
and offer prices of the common stock in private transactions negotiated at arms'
length.
Notwithstanding anything herein to the contrary, if the Employee is
employed by Nucentrix on the date which is 30 days immediately prior to the
Expiration Date (such date referred to herein as the "Final Vesting Date"), the
unvested portion, if any, of the Option will immediately vest and become
exercisable on such date.
2. Subject to Paragraph 3 below, the unexercised portion of the Option,
unless sooner terminated, shall expire seven years after the date of grant (the
"Expiration Date") and, notwithstanding anything contained herein to the
contrary, no portion of the Option may be exercised after the Expiration Date.
3. If prior to the Expiration Date, Employee's employment with Nucentrix or
any subsidiary corporation terminates, the Option will terminate on the
applicable date as described below, provided, however, that none of the events
described below shall extend the period of exercisability beyond the Expiration
Date:
(a) If the employment of Employee is terminated by reason of
Employee's death while in the employ of Nucentrix or any subsidiary
corporation, the Option shall immediately become fully exercisable and
remain exercisable for twelve (12) months after Employee's death and shall
be exercisable by the executor or administrator of the estate of the
deceased Employee or the person or persons to whom the deceased Employee's
rights under the Option shall pass by will or the laws of descent or
distribution;
B-1
<PAGE> 37
(b) If the employment of Employee is terminated by Nucentrix or any
subsidiary corporation for reason of Employee's "Permanent Disability" (as
defined below), the Option shall immediately become fully exercisable on
the date of such termination and shall remain exercisable for six (6)
months after such date; provided, however, that if Employee dies during the
six month period following such date and Employee has not exercised the
Option, the Option shall remain exercisable for an additional twelve (12)
months after Employee's death and shall be exercisable by the executor or
administrator of the estate of the deceased Employee or the person or
persons to whom the deceased Employee's rights under the Option shall pass
by will or the laws of descent or distribution;
(c) If the employment of Employee is terminated by Nucentrix or any
subsidiary corporation for "cause" (as defined below), the Option shall, to
the extent not theretofore exercised, immediately become null and void on
the date of such termination;
(d) If the employment of Employee is terminated by Nucentrix or any
subsidiary corporation other than (X) for "cause" or (Y) for reason of
Employee's death or "Permanent Disability", the Option, to the extent
vested and not theretofore exercised, shall immediately become fully
exercisable on the date of such termination and shall remain exercisable
for thirty (30) days after such date and the unvested portion of the Option
shall be canceled;
(e) If the employment of Employee is terminated by the Employee prior
to the Final Vesting Date, the unvested portion of the Option shall
immediately become null and void on the date of such termination and the
vested portion of the Option shall, to the extent not theretofore
exercised, remain exercisable for thirty (30) days after the date of such
termination; or
(f) If the employment of Employee is terminated by the Employee on or
after the Final Vesting Date, the Option shall, to the extent not
theretofore exercised, remain exercisable for thirty (30) days after the
date of such termination.
The terms "Permanent Disability" and "cause" shall have the meanings
ascribed to such terms in the Employee's employment agreement with Nucentrix, as
amended from time to time, or any successor agreement, or if Employee does not
have an employment agreement with Nucentrix, such terms shall have the meanings
ascribed to them on Annex A attached to the Employee's Award Agreement.
B-2
<PAGE> 38
EXHIBIT C
1. Subject to Paragraphs 2 and 3 below, the Option shall become fully
exercisable in accordance with the following vesting schedule:
(a) if the average closing sales price of the common stock equals or
exceeds $16.50 per share for any 20 consecutive trading days between the
date of grant and the first anniversary of the date of grant, one-fifth of
the Option will vest on such 20th trading day;
(b) if the average closing sales price of the common stock equals or
exceeds $20.80 per share for any 20 consecutive trading days between the
date of grant and the second anniversary of the date of grant, two-fifths
of the Option will vest on such 20th trading day;
(c) if the average closing sales price of the common stock equals or
exceeds $25.00 per share for any 20 consecutive trading days between the
date of grant and the third anniversary of the date of grant, three-fifths
of the Option will vest on such 20th trading day;
(d) if the average closing sales price of the common stock equals or
exceeds $28.61 per share for any 20 consecutive trading days between the
date of grant and the fourth anniversary of the date of grant, four-fifths
of the Option will vest on such 20th trading day; and
(e) if the average closing sales price of the common stock equals or
exceeds $31.10 per share for any 20 consecutive trading days between the
date of grant and the fifth anniversary of the date of grant, all of the
Option will vest on such 20th trading day.
"Average closing sales price" shall mean: (i) if Nucentrix's common stock
is publicly traded, the average of the closing prices as reported by the OTC
Bulletin Board, The Nasdaq Stock Market or other applicable regional or national
securities exchange or quotation system on which the common stock is so traded
or quoted for any applicable period; or (ii) if there is no public trading
market for such shares, the fair value of such shares on the applicable date of
determination as determined by the committee after taking into consideration all
factors which it deems appropriate, including without limitation, recent sale
and offer prices of the common stock in private transactions negotiated at arms'
length.
Notwithstanding anything herein to the contrary, if the Director is serving
on the board of directors on the date which is 30 days immediately prior to the
Expiration Date (such date referred to herein as the "Final Vesting Date"), the
unvested portion, if any, of the Option will immediately vest and become
exercisable on such date.
2. Subject to Paragraph 3 below, the unexercised portion of the Option,
unless sooner terminated, shall expire seven years after the date of grant (the
"Expiration Date") and, notwithstanding anything contained herein to the
contrary, no portion of the Option may be exercised after the Expiration Date.
3. If prior to the Expiration Date, Director ceases to be a member of the
board of directors, the Option will terminate on the applicable date as
described below, provided, however, that none of the events described below
shall extend the period of exercisability beyond the Expiration Date:
(a) If Director ceases to be a member of the board of directors
because of Director's death, the Option shall immediately become fully
exercisable and remain exercisable for twelve (12) months after Director's
death and shall be exercisable by the executor or administrator of the
estate of the deceased Director or the person or persons to whom the
deceased Director's rights under the Option shall pass by will or the laws
of descent or distribution;
(b) If Director ceases to be a member of the board of directors by
reason of Director's "Permanent Disability" (as defined below), the Option
shall immediately become fully exercisable on the date of such termination
and shall remain exercisable for six (6) months after such date; provided,
however, that if Director dies during the six month period following such
date and Director has not exercised the Option, the Option shall remain
exercisable for an additional twelve (12) months after Director's death and
shall be exercisable by the executor or administrator of the estate of the
deceased Director or the person or
C-1
<PAGE> 39
persons to whom the deceased Director's rights under the Option shall pass
by will or the laws of descent or distribution;
(c) If Director resigns, is removed or is not reelected as a member of
the board of directors prior to the Final Vesting Date, the unvested
portion of the Option shall immediately become null and void on the date of
such resignation, removal or failure to be reelected and the vested portion
of the Option shall, to the extent not theretofore exercised, remain
exercisable for thirty (30) days after the date of such resignation,
removal or failure to be reelected; or
(d) If Director resigns, is removed or is not reelected as a member of
the board of directors on or after the Final Vesting Date, the Option
shall, to the extent not theretofore exercised, remain exercisable for
thirty (30) days after the date of such resignation, removal or failure to
be reelected.
The term "Permanent Disability" and shall have the meaning ascribed to it
on Annex A attached to the Director's Award Agreement.
C-2
<PAGE> 40
Appendix
Nucentrix Broadband Networks, Inc. First Amended and Restated 1999 Share
Incentive Plan.
First Amendment to the Nucentrix Broadband Networks, Inc. First Amended and
Restated 1999 Share Incentive Plan.
Filed pursuant to Schedule 14A, Item 10, Instruction 3.
<PAGE> 41
NUCENTRIX BROADBAND NETWORKS, INC.
FIRST AMENDED AND RESTATED
1999 SHARE INCENTIVE PLAN
1. PURPOSE. The Nucentrix Broadband Networks, Inc. 1999 Share Incentive
Plan (the "Plan") is intended to provide incentives which will attract, retain
and motivate highly competent persons as non-employee directors, officers, and
key employees of, and consultants to, Nucentrix Broadband Networks, Inc. (the
"Company") and its subsidiaries and affiliates, by providing them opportunities
to acquire shares of the common stock, par value $.001 per share, of the Company
("Common Stock") or to receive monetary payments based on the value of such
shares pursuant to the Benefits (as defined below) described herein.
Additionally, the Plan is intended to assist in further aligning the interests
of the Company's directors, officers, key employees and consultants to those of
its other stockholders.
2. ADMINISTRATION.
(a) The Plan will be administered by a committee (the "Committee")
appointed by the Board of Directors of the Company from among its members (which
may be the Compensation Committee) and shall be comprised, unless otherwise
determined by the Board of Directors, solely of not less than two members who
shall be (i) "Non-Employee Directors" within the meaning of Rule 16b-3(b)(3) (or
any successor rule) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and (ii) "outside directors" within the meaning of
Treasury Regulation Section 1.162-27(e)(3) under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). The Committee is authorized,
subject to the provisions of the Plan, to establish such rules and regulations
as it deems necessary for the proper administration of the Plan and to make such
determinations and interpretations and to take such action in connection with
the Plan and any Benefits granted hereunder as it deems necessary or advisable.
All determinations and interpretations made by the Committee shall be binding
and conclusive on all participants and their legal representatives. No member of
the Committee and no employee of the Company shall be liable for any act or
failure to act hereunder, except in circumstances involving his or her bad
faith, gross negligence or willful misconduct, or for any act or failure to act
hereunder by any other member or employee or by any agent to whom duties in
connection with the administration of this Plan have been delegated. The Company
shall indemnify members of the Committee and any agent of the Committee who is
an employee of the Company, a subsidiary or an affiliate against any and all
liabilities or expenses to which they may be subjected by reason of any act or
failure to act with respect to their duties on behalf of the Plan, except in
circumstances involving such person's bad faith, gross negligence or willful
misconduct.
(b) The Committee may delegate to one or more of its members, or to one
or more agents, such administrative duties as it may deem advisable, and the
Committee, or any person to whom it has delegated duties as aforesaid, may
employ one or more persons to render advice with respect to any responsibility
the Committee or such person may have under the Plan.
<PAGE> 42
The Committee may employ such legal or other counsel, consultants and agents as
it may deem desirable for the administration of the Plan and may rely upon any
opinion or computation received from any such counsel, consultant or agent.
Expenses incurred by the Committee in the engagement of such counsel, consultant
or agent shall be paid by the Company, or the subsidiary or affiliate whose
employees have benefited from the Plan, as determined by the Committee.
(c) Notwithstanding the foregoing, the Board of Directors shall have
the authority to make grants of Benefits under the Plan to directors of the
Company who are not employees of the Company or its subsidiaries, on such terms
and conditions as the Board of Directors shall determine in its sole discretion.
3. PARTICIPANTS. Participants will consist of such directors, officers
and key employees of, and such consultants to, the Company and its subsidiaries
and affiliates as the Committee in its sole discretion determines to be
significantly responsible for the success and future growth and profitability of
the Company and whom the Committee may designate from time to time to receive
Benefits under the Plan. Designation of a participant in any year shall not
require the Committee to designate such person to receive a Benefit in any other
year or, once designated, to receive the same type or amount of Benefit as
granted to the participant in any other year. The Committee shall consider such
factors as it deems pertinent in selecting participants and in determining the
type and amount of their respective Benefits.
4. TYPE OF BENEFITS. Benefits under the Plan may be granted in any one or
a combination of (a) Stock Options and (b) Stock Appreciation Rights (each as
described below, and collectively, the "Benefits"). Benefits may, as determined
by the Committee in its discretion, constitute Performance-Based Awards (as
defined in Section 8 hereof). Benefits shall be evidenced by agreements (which
need not be identical) in such forms as the Committee may from time to time
approve; provided, however, that in the event of any conflict between the
provisions of the Plan and any such agreements, the provisions of the Plan shall
prevail.
5. COMMON STOCK AVAILABLE UNDER THE PLAN.
(a) Subject to the provisions of this Section 5 and any adjustments
made in accordance with Section 10 hereof, the maximum number of shares of
Common Stock that may be delivered to participants (including permitted
assignees) and their beneficiaries under this Plan shall be equal to nine
hundred thousand (900,000) shares of Common Stock, which may be authorized and
unissued or treasury shares. Any shares of Common Stock covered by a Benefit (or
portion of a Benefit) granted under the Plan, which is forfeited or canceled,
expires or, in the case of a Benefit other than a Stock Option, is settled in
cash, shall be deemed not to have been delivered for purposes of determining the
maximum number of shares of Common Stock available for delivery under the Plan.
The preceding sentence shall apply only for purposes of determining the
aggregate number of shares of Common Stock subject to Benefits but shall not
apply for purposes of determining the maximum number of shares of Common Stock
with respect to which Benefits (including the maximum number of shares of Common
Stock subject to Stock Options and Stock Appreciation Rights) may be granted to
an individual participant under the Plan.
2
<PAGE> 43
(b) If any shares of Common Stock are tendered to the Company, either
actually or by attestation or withholding, as full or partial payment of the
exercise price or any tax withholding in connection with the exercise of a Stock
Option or Stock Appreciation Right or the vesting of any other Benefit granted
under this Plan, only the number of shares of Common Stock issued net of the
shares of Common Stock tendered shall be deemed delivered for purposes of
determining the maximum number of shares of Common Stock available for delivery
under the Plan. This Section 5(b) shall apply only for purposes of determining
the aggregate number of shares of Common Stock subject to Benefits but shall not
apply for purposes of determining (x) the maximum number of shares of Common
Stock with respect to which Benefits (including the maximum number of shares of
Common Stock subject to Stock Options and Stock Appreciation Rights) may be
granted to an individual participant under the Plan or (y) the maximum number of
shares of Common Stock that may be delivered through Stock Options under the
Plan.
6. STOCK OPTIONS. Stock Options will consist of awards from the Company
that will enable the holder to purchase a number of shares of Common Stock, at
set terms. Stock Options may be "incentive stock options" ("Incentive Stock
Options"), within the meaning of Section 422 of the Code, or Stock Options which
do not constitute Incentive Stock Options ("Nonqualified Stock Options"). The
Committee will have the authority to grant to any participant one or more
Incentive Stock Options, Nonqualified Stock Options, or both types of Stock
Options (in each case with or without Stock Appreciation Rights). Stock Options
may constitute Performance-Based Awards, as described in Section 8 hereof. Each
Stock Option shall be subject to such terms and conditions consistent with the
Plan as the Committee may impose from time to time, subject to the following
limitations:
(a) EXERCISE PRICE. Each Stock Option granted hereunder shall have such
per-share exercise price as the Committee may determine at the date of grant,
but in no event may the per-share exercise price of any Stock Option be less
than the fair market value of the underlying shares on the date of grant.
(b) PAYMENT OF EXERCISE PRICE. The option exercise price may be paid in
cash or, in the discretion of the Committee, by the delivery of shares of Common
Stock of the Company then owned by the participant, by the withholding of shares
of Common Stock for which a Stock Option is exercisable or by a combination of
these methods. In the discretion of the Committee, payment may also be made by
delivering a properly executed exercise notice to the Company together with a
copy of irrevocable instructions to a broker to deliver promptly to the Company
the amount of sale or loan proceeds to pay the exercise price. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms. The Committee may prescribe any other method of
paying the exercise price that it determines to be consistent with applicable
law and the purpose of the Plan, including, without limitation, in lieu of the
exercise of a Stock Option by delivery of shares of Common Stock of the Company
then owned by a participant, providing the Company with a notarized statement
attesting to the number of shares owned, where upon verification by the Company,
the Company would issue to the participant only the number of incremental shares
to which the participant is entitled upon exercise of the Stock Option. The
Committee may, at the time of grant or thereafter, provide for the grant of a
subsequent Restoration Stock Option if the exercise price is paid for by
delivering previously owned shares of Common Stock of the Company.
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Restoration Stock Options (i) shall be granted in respect of no more than the
number of shares of Common Stock tendered in exercising the predecessor Stock
Option, (ii) shall have an exercise price equal to the Fair Market Value on the
date the Restoration Stock Option is granted, and (iii) shall have an exercise
period that does not extend beyond the remaining term of the predecessor Stock
Option. In determining which methods a participant may utilize to pay the
exercise price, the Committee may consider such factors as it determines are
appropriate.
(c) EXERCISE PERIOD. Stock Options granted under the Plan shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee. All Stock Options shall terminate at such
earlier times and upon such conditions or circumstances as the Committee shall
in its discretion set forth in such option agreement at the date of grant.
(d) LIMITATIONS ON INCENTIVE STOCK OPTIONS. Incentive Stock Options may
be granted only to participants who are employees of the Company or one of its
subsidiaries (within the meaning of Section 424(f) of the Code) at the date of
grant. The aggregate Fair Market Value (determined as of the time the Stock
Option is granted) of the Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by a participant during any calendar
year (under all option plans of the Company and of any parent corporation or
subsidiary corporation (as defined in Sections 424(e) and (f) of the Code,
respectively)) shall not exceed $100,000. For purposes of the preceding
sentence, Incentive Stock Options will be taken into account in the order in
which they are granted. The per-share exercise price of an Incentive Stock
Option shall not be less than 100% of the Fair Market Value of the Common Stock
on the date of grant, and no Incentive Stock Option may be exercised later than
ten years after the date it is granted; provided, however, Incentive Stock
Options may not be granted to any participant who, at the time of grant, owns
stock possessing (after the application of the attribution rules of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of stock of the Company or any parent or subsidiary corporation of the
Company, unless the exercise price is fixed at not less than 110% of the Fair
Market Value of the Common Stock on the date of grant and the exercise of such
option is prohibited by its terms after the expiration of five years from the
date of grant of such option. In addition, no Incentive Stock Option may be
issued to a participant in tandem with a Nonqualified Stock Option. No Incentive
Stock Option may be granted after ten years after the Plan has been approved by
the Board of Directors, the Committee or the stockholders of the Company,
whichever is earlier.
7. STOCK APPRECIATION RIGHTS.
(a) The Committee may, in its discretion, grant Stock Appreciation
Rights to the holders of any Stock Options granted hereunder. In addition, Stock
Appreciation Rights may be granted independently of, and without relation to,
Stock Options. A Stock Appreciation Right means a right to receive a payment in
cash, Common Stock or a combination thereof, in an amount equal to the excess of
(x) the Fair Market Value, or other specified valuation, of a specified number
of shares of Common Stock on the date the right is exercised over (y) the Fair
Market Value, or other specified valuation (which may be less than the Fair
Market Value) of such shares of Common Stock on the date the right is granted,
all as determined by the Committee; provided, however, that if a Stock
Appreciation Right is granted in tandem with or in
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<PAGE> 45
substitution for a Stock Option, the designated Fair Market Value in the award
agreement may be the Fair Market Value on the date such Stock Option was
granted. Stock Appreciation Rights may constitute Performance-Based Awards, as
described in Section 8 hereof. Each Stock Appreciation Right shall be subject to
such terms and conditions as the Committee shall impose from time to time.
(b) Stock Appreciation Rights granted under the Plan shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee. All Stock Appreciation Rights shall
terminate at such earlier times and upon such conditions or circumstances as the
Committee shall in its discretion set forth in such right at the date of grant.
8. PERFORMANCE-BASED AWARDS.
(a) For purposes of this Section 8 "Covered Employee" shall have the
meaning given to such term under Section 162(m) of the Code. The foregoing
notwithstanding, because the Committee cannot determine with certainty whether a
given individual will be a Covered Employee with respect to a fiscal year that
has not yet been completed, the term Covered Employee as used herein shall mean
only a person designated by the Committee, at the time of grant of
Performance-Based Awards, who is likely to be a Covered Employee with respect to
that fiscal year.
(b) For purposes of this Section 8 "Performance-Based Award" shall mean
any Benefit the grant, exercise or settlement of which is subject to one or more
of the performance standards set forth in this Section 8. Additionally,
Performance-Based Award shall mean any Stock Option or Stock Appreciation Right
granted to a Covered Employee if the exercise price (with respect to such
Benefit) equals or exceeds fair market value.
(c) For purposes of this Section 8 "Qualified Member" means a member of
the Committee who is an "outside" director within the meaning of Section 162(m)
of the Code.
(d) At any time that a member of the Committee is not a Qualified
Member, any action of the Committee relating to a Benefit intended by the
Committee to qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Code, may be taken either (i) by a subcommittee,
designated by the Committee, composed solely of two or more Qualified Members,
or (ii) by the Committee but with each such member who is not a Qualified Member
abstaining or recusing himself or herself from such action; provided, however,
that, upon such abstention or recusal, the Committee remains composed solely of
two or more Qualified Members. Such action, authorized by such a subcommittee or
by the Committee upon the abstention or recusal of such non-Qualified Member(s),
shall be the action of the Committee for purposes of the Plan. Any action of the
Committee shall be final, conclusive and binding on all persons, including the
Company, its subsidiaries, participants, beneficiaries, transferees or other
persons claiming rights from or through a participant, and shareholders.
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<PAGE> 46
(e) In each calendar year during any part of which the Plan is in
effect, a participant may not be granted Benefits relating to more than 350,000
shares of Common Stock, subject to adjustment in a manner consistent with any
adjustment made pursuant to Section 10, under each of Sections 6 and 7 with a
maximum limitation of 350,000 shares of Common Stock in the aggregate. If a
Stock Option is canceled, the canceled Stock Option continues to be counted
against the maximum number of shares for which Stock Options may be granted to
the participant under the Plan, as set forth in this Section 8(e). If, after
grant, the exercise price of a Stock Option is reduced, the transaction is
treated as a cancellation of the Stock Option and a grant of a new Stock Option
for purposes of this Section 8(e). In such a case, both the Stock Option that is
deemed to be canceled and the Stock Option that is deemed to be granted reduce
the maximum number of shares for which Stock Options may be granted to the
Covered Employee under the Plan, as set forth in this Section 8(e). Such
cancellation will likewise occur in the case of a Stock Appreciation Right
where, after the Benefit is granted, the base amount on which stock appreciation
is calculated is reduced.
(f) The Committee shall retain full power and discretion to accelerate,
waive or modify, at any time, any term or condition of a Performance-Based Award
that is not mandatory under the Plan; provided, however, that notwithstanding
any other provision of the Plan the Committee shall not have any discretion to
accelerate, waive or modify any term or condition of a Benefit that is intended
to qualify as "performance-based compensation" for purposes of Section 162(m) of
the Code if such discretion would cause the Performance-Based Award not to so
qualify.
(g) The right of a participant to exercise or receive a grant or
settlement of any Benefit, and the timing thereof, may be subject to such
performance conditions as may be specified by the Committee. The Committee may
use such business criteria and other measures of performance as it may deem
appropriate in establishing any performance conditions.
(h) If the Committee determines that a Performance-Based Award to be
granted to a participant who is designated by the Committee as likely to be a
Covered Employee should qualify as "performance-based compensation" for purposes
of Section 162(m) of the Code, the grant, exercise and/or settlement of such
Performance-Based Award shall be contingent upon achievement of preestablished
performance goals and other terms set forth in this Section 8(h).
(i) The performance goals for such Performance-Based Awards shall
consist of one or more business criteria and a targeted level or
levels of performance with respect to each of such criteria, as
specified by the Committee consistent with this Section 8(h).
Performance goals shall be objective and shall otherwise meet the
requirements of Section 162(m) of the Code, including the requirement
that the level or levels of performance targeted by the Committee
result in the achievement of performance goals being "substantially
uncertain." The Committee may determine that such Performance-Based
Awards shall be granted, exercised and/or settled upon achievement of
any one performance goal or that two or more of the performance goals
must be achieved as a condition to grant, exercise and/or settlement
of such Performance-
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Based Awards. Performance goals may differ for Performance-Based
Awards granted to any one participant or to different participants.
(ii) One or more of the following business criteria for the
participant, Company, on a consolidated basis, and/or for specified
subsidiaries or business or geographical units of the Company (except
with respect to the total shareholder return and earnings per share
criteria), shall be used by the Committee in establishing performance
goals for such Performance Awards: (i) net sales, (ii) pretax income
before allocation of company overhead and bonus, (iii) budget, (iv)
earnings per share, (v) net income, (vi) division, group or company
financial goals, (vii) return on stockholders" equity, (viii) return
on assets, (ix) attainment of strategic and operational initiatives,
(x) appreciation in and/or maintenance of the price of the Common
Stock or any other publicly-traded securities of the Company, (xi)
market share, (xii) gross profits, (xiii) earnings before interest and
taxes, (xiv) earnings before interest, taxes, dividends and
amortization, (xv) economic value-added models and comparisons with
various stock market indices, (xvi) reductions in costs or (xvii) any
combination of the foregoing. In addition, Performance-Based Awards
may include comparisons to the performance of other companies, such
performance to be measured by one or more of the foregoing business
criteria.
(iii) Achievement of performance goals in respect of such
Performance-Based Awards shall be measured over a performance period
of up to ten years, as specified by the Committee. Performance goals
shall be established not later than 90 days after the beginning of any
performance period applicable to such Performance-Based Awards, or at
such other date as may be required or permitted for "performance-based
compensation" under Section 162(m) of the Code.
(iv) After the end of each performance period, the Committee
shall determine the amount, if any, of the Performance-Based Award
payable to each Covered Employee. Settlement of such Performance-Based
Awards shall be in cash, Common Stock, or other property, as
determined in the sole discretion of the Committee. The Committee may,
in its discretion, reduce the amount of a settlement otherwise to be
made in connection with such Performance-Based Awards, but may not
exercise discretion to increase any such amount payable to a Covered
Employee in respect of a Performance-Based Award.
(i) All determinations by the Committee as to the establishment of
performance goals, the amount of any potential individual Performance-Based
Awards, and the achievement of performance goals relating to Performance-Based
Awards, shall be made in writing in the case of any Benefit intended to qualify
under Section 162(m) of the Code. The Committee may not delegate any
responsibility relating to such Performance-Based Awards. The determination as
to whether any performance goal, with respect to any Benefit, has been satisfied
shall be made prior to the payment of any compensation relating to a Benefit.
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(j) It is the intent of the Company that Performance-Based Awards
granted to persons who are designated by the Committee as likely to be Covered
Employees within the meaning of Section 162(m) of the Code shall, if so
designated by the Committee, constitute "performance-based compensation" within
the meaning of Section 162(m) of the Code. Accordingly, the terms of this
Section 8, including the definitions of Covered Employee and other terms used
herein, shall be interpreted in a manner consistent with Section 162(m) of the
Code. If any provision of the Plan as in effect on the date of adoption or any
agreements relating to Performance-Based Awards that are designated as intended
to comply with Section 162(m) of the Code does not comply or is inconsistent
with the requirements of Section 162(m) of the Code, such provision shall be
construed or deemed amended to the extent necessary to conform to such
requirements.
9. FOREIGN LAWS. The Committee may grant Benefits to individual
participants who are subject to the tax laws of nations other than the United
States, which Benefits may have terms and conditions as determined by the
Committee as necessary to comply with applicable foreign laws. The Committee may
take any action which it deems advisable to obtain approval of such Benefits by
the appropriate foreign governmental entity; provided, however, that no such
Benefits may be granted pursuant to this Section 11 and no action may be taken
which would result in a violation of the Exchange Act, the Code or any other
applicable law.
10. ADJUSTMENT PROVISIONS; CHANGE IN CONTROL.
(a) If there shall be any change in the Common Stock of the Company,
through merger, consolidation, reorganization, recapitalization, stock dividend,
stock split, reverse stock split, split up, spinoff, combination of shares,
exchange of shares, dividend in kind or other like change in capital structure
or distribution (other than normal cash dividends) to stockholders of the
Company, an adjustment shall be made to each outstanding Stock Option and Stock
Appreciation Right such that each such Stock Option and Stock Appreciation Right
shall thereafter be exercisable for such securities, cash and/or other property
as would have been received in respect of the Common Stock subject to such Stock
Option or Stock Appreciation Right had such Stock Option or Stock Appreciation
Right been exercised in full immediately prior to such change or distribution,
and such an adjustment shall be made successively each time any such change
shall occur. In addition, in the event of any such change or distribution, in
order to prevent dilution or enlargement of participants' rights under the Plan,
the Committee shall adjust, in an equitable manner, the number and kind of
shares that may be issued under the Plan, the number and kind of shares subject
to outstanding Benefits, the exercise price applicable to outstanding Benefits,
and/or the Fair Market Value of the Common Stock and other value determinations
applicable to outstanding Benefits. Appropriate adjustments may also be made by
the Committee in the terms of any Benefits under the Plan to reflect such
changes or distributions and to modify any other terms of outstanding Benefits
on an equitable basis, including modifications of performance targets and
changes in the length of performance periods. In addition, other than with
respect to Stock Options and Stock Appreciation Rights intended to constitute
Performance-Based Awards, the Committee is authorized to make adjustments to the
terms and conditions of, and the criteria included in, Benefits in recognition
of unusual or nonrecurring events affecting the Company or the financial
statements of the Company, or in response to changes in applicable laws,
regulations, or accounting principles.
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<PAGE> 49
Notwithstanding the foregoing, (i) each such adjustment with respect to an
Incentive Stock Option shall comply with the rules of Section 424(a) of the
Code, and (ii) in no event shall any adjustment be made which would render any
Incentive Stock Option granted hereunder other than an incentive stock option
for purposes of Section 422 of the Code.
(b) Notwithstanding any other provision of this Plan, if there is a
Change in Control of the Company, all then outstanding Benefits that have not
vested or become exercisable at the time of such Change in Control shall
immediately vest and become exercisable and all performance targets relating to
such Benefits shall be deemed to have been satisfied as of the time of such
Change in Control. For purposes of this Section 10(b), a "Change in Control" of
the Company shall be deemed to have occurred upon any of the following events:
(i) Any "person" (as such term is used Section 13(d) and 14(d)(2) of
the Exchange Act but excluding any employee benefit plan of the Company) is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) directly or indirectly, of securities of the Company
representing more than fifty percent (50%) of the combined voting power of
the Company's outstanding securities then entitled ordinarily (and apart
from rights accruing under special circumstances) to vote for the election
of directors; or
(ii) During any period of two (2) consecutive years, the individuals
who at the beginning of such period constitute the Company's Board of
Directors or any individuals who would be "Continuing Directors" (as
hereinafter defined) cease for any reason to constitute at least a majority
thereof; or
(iii) The Company's stockholders shall approve a sale of all or
substantially all of the assets of the Company; or
(iv) The Company's stockholders shall approve any merger,
consolidation, or like business combination or reorganization of the
Company, the consummation of which would result in the occurrence of any
event described in Section 10(b)(i) or (ii) above, and such transaction
shall have been consummated.
For purposes of this Section 10(b), "Continuing Directors" shall mean
(x) the directors of the Company in office on the Effective Date (as defined
below) and (y) any successor to any such director and any additional director
who after the Effective Date was nominated or selected by a majority of the
Continuing Directors in office at the time of his or her nomination or
selection.
The Committee, in its discretion, may determine that, upon the
occurrence of a Change in Control of the Company, each Benefit outstanding
hereunder shall terminate within a specified number of days after notice to the
holder, and such holder shall receive an amount equal to the excess of the Fair
Market Value of such share of Common Stock immediately prior to the occurrence
of such Change in Control over the exercise price per share of such Stock Option
or Stock Appreciation Right (as the case may be); such amount to be payable in
cash, in one or more kinds of property (including the property, if any, payable
in the transaction) or in a
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combination thereof, as the Committee, in its discretion, shall determine. The
provisions contained in the preceding sentence shall be inapplicable to a
Benefit granted within six (6) months before the occurrence of a Change in
Control if the holder of such Benefit is subject to the reporting requirements
of Section 16(a) of the Exchange Act and no exception from liability under
Section 16(b) of the Exchange Act is otherwise available to such holder.
11. NONTRANSFERABILITY. Each Benefit granted under the Plan to a
participant shall not be transferable otherwise than by will or the laws of
descent and distribution, and shall be exercisable, during the participant"s
lifetime, only by the participant. Notwithstanding the foregoing, the Committee
may permit the transferability of a Benefit, other than an Incentive Stock
Option, by a participant solely to the participant"s spouse, siblings, parents,
children and grandchildren or trusts for the benefit of such persons or
partnerships, corporations, limited liability companies or other entities owned
solely by such persons, including trusts for such persons, subject to any
restriction included in the award of the Benefit."
12. OTHER PROVISIONS. The award of any Benefit under the Plan may also be
subject to such other provisions (whether or not applicable to the Benefit
awarded to any other participant) as the Committee determines appropriate,
including, without limitation, for the installment purchase of Common Stock
under Stock Options, for the installment exercise of Stock Appreciation Rights,
to assist the participant in financing the acquisition of Common Stock, for the
forfeiture of, or restrictions on resale or other disposition of, Common Stock
acquired under any form of Benefit, for the termination of any Benefit and the
forfeiture of any gain realized in respect of a Benefit upon the occurrence of
certain activity by the participant that is harmful to the Company, for the
acceleration of exercisability or vesting of Benefits or the payment of the
value of Benefits in the event that the control of the Company changes
(including, without limitation, a Change in Control), or to comply with federal
and state securities laws, or understandings or conditions as to the
participant's employment (including, without limitation, any restrictions on the
ability of the participant to engage in activities that are competitive with the
Company) in addition to those specifically provided for under the Plan.
13. FAIR MARKET VALUE. For purposes of this Plan and any Benefits awarded
hereunder, Fair Market Value shall be the closing price of the Common Stock on
the date of calculation (or on the last preceding trading date if Common Stock
was not traded on such date) if the Common Stock is readily tradeable on a
national securities exchange or other market system, and if the Common Stock is
not readily tradeable, Fair Market Value shall mean the amount determined in
good faith by the Committee as the fair market value of the Common Stock.
14. WITHHOLDING. All payments or distributions of Benefits made pursuant
to the Plan shall be net of any amounts required to be withheld pursuant to
applicable federal, state and local tax withholding requirements. If the Company
proposes or is required to distribute Common Stock pursuant to the Plan, it may
require the recipient to remit to it or to the corporation that employs such
recipient an amount sufficient to satisfy such tax withholding requirements
prior to the delivery of any certificates for such Common Stock. In lieu
thereof, the Company or the employing corporation shall have the right to
withhold the amount of such taxes from any other sums due or to become due from
such corporation to the recipient as the
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Committee shall prescribe. The Committee may, in its discretion and subject to
such rules as it may adopt (including any as may be required to satisfy
applicable tax and/or non-tax regulatory requirements), permit an optionee or
award or right holder to pay all or a portion of the federal, state and local
withholding taxes arising in connection with any Benefit consisting of shares of
Common Stock by electing to have the Company withhold shares of Common Stock
having a Fair Market Value equal to the amount of tax to be withheld, such tax
calculated at rates required by statute or regulation.
15. TENURE. A participant's right, if any, to continue to serve the
Company or any of its subsidiaries or affiliates as an officer, employee, or
otherwise, shall not be enlarged or otherwise affected by his or her designation
as a participant under the Plan.
16. UNFUNDED PLAN. Participants shall have no right, title, or interest
whatsoever in or to any investments which the Company may make to aid it in
meeting its obligations under the Plan. Nothing contained in the Plan, and no
action taken pursuant to its provisions, shall create or be construed to create
a trust of any kind, or a fiduciary relationship between the Company and any
participant, beneficiary, legal representative or any other person. To the
extent that any person acquires a right to receive payments from the Company
under the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Company. All payments to be made hereunder shall be paid
from the general funds of the Company and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment of such
amounts except as expressly set forth in the Plan. The Plan is not intended to
be subject to the Employee Retirement Income Security Act of 1974, as amended.
17. NO FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued or delivered pursuant to the Plan or any Benefit. The Committee shall
determine whether cash, or Benefits, or other property shall be issued or paid
in lieu of fractional shares or whether such fractional shares or any rights
thereto shall be forfeited or otherwise eliminated.
18. DURATION, AMENDMENT AND TERMINATION. The Plan shall continue
indefinitely until terminated by the Board of Directors of the Company or the
Committee. The Board of Directors or the Committee may amend the Plan from time
to time or suspend or terminate the Plan at any time.
19. GOVERNING LAW. This Plan, Benefits granted hereunder and actions taken
in connection herewith shall be governed and construed in accordance with the
internal laws of the State of Delaware, without giving effect to its
choice-of-law provisions.
20. EFFECTIVE DATE. The Plan shall be effective as of April 1, 1999, the
date on which the Plan was adopted by the Committee (the "Effective Date"),
provided that the Plan is approved by the stockholders of the Company at an
annual meeting or any special meeting of stockholders of the Company within 12
months of the Effective Date, and such approval of stockholders shall be a
condition to the right of each participant to receive any Benefits hereunder.
Any Benefits granted under the Plan prior to such approval of stockholders shall
be effective as of the date of grant (unless, with respect to any Benefit, the
Committee specifies otherwise at the time of grant), but no such Benefit may be
exercised or settled and no
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restrictions relating to any Benefit may lapse prior to such stockholder
approval, and if stockholders fail to approve the Plan as specified hereunder,
any such Benefit shall be cancelled.
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<PAGE> 53
FIRST AMENDMENT TO THE
NUCENTRIX BROADBAND NETWORKS, INC.
FIRST AMENDED AND RESTATED 1999 SHARE INCENTIVE PLAN
This FIRST AMENDMENT TO THE NUCENTRIX BROADBAND NETWORKS, INC. FIRST
AMENDED AND RESTATED 1999 SHARE INCENTIVE PLAN (this "Amendment") is made and
adopted by Nucentrix Broadband Networks, Inc., a Delaware corporation (the
"Company"), effective as of ______, 2000.
PRELIMINARY STATEMENTS
A. Effective April 1, 1999, the Board of Directors of the Company (the
"Board") approved the Nucentrix Broadband Networks, Inc., 1999 Share Incentive
Plan (the "Original Plan") and certain amendments thereto as set forth in the
First Amendment to the Nucentrix Broadband Networks, Inc., 1999 Share Incentive
Plan (the "First Amendment").
B. Effective April 1, 1999, the stockholders of the Company approved
the Original Plan, as amended by the First Amendment.
C. The terms of the Original Plan, as amended by the First Amendment,
as currently in effect are set forth in the Nucentrix Broadband Networks, Inc.,
First Amended and Restated 1999 Share Incentive Plan (the "Plan"). Capitalized
terms used but not otherwise defined herein shall have the meanings ascribed to
them in the Plan.
D. The Board has approved and recommended to the stockholders of the
Company that this Amendment be adopted to: (i) provide for an increase in the
maximum aggregate number of shares of the Common Stock in respect of which
Benefits may be granted under the Plan by an additional 400,000 shares, such
that the maximum aggregate number of shares of Common Stock in respect of which
Benefits may be granted under the Plan shall be 1,300,000; and (ii) provide that
under the Plan the Compensation Committee (the "Committee") may grant
nonqualified stock options with an exercise price less than 100% of the fair
market value of a share of Common Stock on the date of grant.
E. On ______, 2000, the stockholders of the Company approved this
Amendment.
AMENDMENT
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Section 5 (a) of the Plan is hereby amended to read in its entirety
as follows:
<PAGE> 54
"5. COMMON STOCK AVAILABLE UNDER THE PLAN.
(a) Subject to the provisions of this Section 5 and
any adjustments made in accordance with Section 10 hereof, the
maximum number of shares of Common Stock that may be delivered
to participants (including permitted assignees) and their
beneficiaries under this Plan shall be equal to one million
three hundred thousand (1,300,000) shares of Common Stock,
which may be authorized and unissued or treasury shares. Any
shares of Common Stock covered by a Benefit (or portion of a
Benefit) granted under the Plan, which is forfeited or
canceled, expires or, in the case of a Benefit other than a
Stock Option, is settled in cash, shall be deemed not to have
been delivered for purposes of determining the maximum number
of shares of Common Stock available for delivery under this
Plan. The preceding sentence shall apply only for purposes of
determining the aggregate number of shares of Common Stock
subject to Benefits but shall not apply for purposes of
determining the maximum number of shares of Common Stock with
respect to which Benefits (including the maximum number of
shares of Common Stock subject to Stock Options and Stock
Appreciation Rights) may be granted to an individual
participant under the Plan."
2. Section 6 (a) of the Plan is hereby amended to read in its entirety
as follows:
"(a) EXERCISE PRICE. Each Stock Option granted hereunder shall
have such per-share exercise price as the Committee may
determine at the date of grant. The exercise price for an
Incentive Stock Option shall be subject to the limitations in
Section 6(d) hereof. The Committee may, in its discretion,
grant Nonqualified Stock Options with an exercise price per
share of Common Stock less than 100% of the fair market value
of a share of Common Stock on the date of grant."
This Amendment, and the changes to the provisions of the Plan effected
hereby, shall be effective as of , 2000. Except as expressly set forth
herein, the Plan shall remain in full force and effect without further amendment
or modification.
2
<PAGE> 55
IN WITNESS WHEREOF, the Company, acting by and through its officer
hereunto duly authorized, has executed this Amendment effective as of the date
first written above.
NUCENTRIX BROADBAND NETWORKS, INC.
By:
-------------------------------
Name:
----------------------------
Title:
----------------------------
3
<PAGE> 56
PROXY PROXY
NUCENTRIX BROADBAND NETWORKS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Carroll D. McHenry and J. Curtis
Henderson, or any of them, lawful attorneys and proxies of the undersigned with
full power of substitution, for and in the name, place and stead of the
undersigned to attend the Annual Meeting of Stockholders of Nucentrix Broadband
Networks, Inc. (the "Company"), to be held at The Clarion Hotel, 1981 N. Central
Expressway, Richardson, Texas 75080, on Tuesday, May 9, 2000, at 9:00 a.m.,
local time, and any adjournment(s) or postponement(s) thereof, with all powers
the undersigned would possess if personally present and to vote the number of
votes the undersigned would be entitled to vote if personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DESCRIBED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2 AND 3.
IN ACCORDANCE WITH THEIR DISCRETION, SAID ATTORNEYS AND PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS OR PROPOSALS AND HEREON AT DUE TIME
OF SOLICITATION OF THIS PROXY WHICH MAY PROPERLY COME BEFORE THE MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE. THANK YOU.
(Continued and to be signed on reverse side.)
- --------------------------------------------------------------------------------
<PAGE> 57
NUCENTRIX BROADBAND NETWORKS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
<TABLE>
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 THROUGH 3.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.ELECTION OF DIRECTORS- For All Withhold For All 2. Amendment to the First Amended and For Against Abstain
Nominees: 01-Carroll D. McHenry, All Except Restated 1999 Share Incentive Plan. [ ] [ ] [ ]
02-Richard B. Gold, [ ] [ ] [ ]
03-Terry S. Parker, 3. Ratification of the appointment of For Against Abstain
04-Neil S. Subin, KPMG LLP as the independent auditors[ ] [ ] [ ]
05-R. Ted Weschler of the Company.
- ---------------------------------------------- The undersigned hereby revokes any proxies heretofore given to
(Except nominee(s) written above) vote upon or act with respect to such shares and hereby ratifies
and confirms all that said attorneys, proxies, the substitutes
or any of them may lawfully do by virtue hereof.
Dated: , 2000
--------------------
Signature(s)
---------------------------------------------------
---------------------------------------------------
NOTE: Please sign exactly as your name appears hereon. When
shares are held by joint tenants, both should sign.When signing
as attorney, executor, administrator, trustee or corporation,
please sign in full corporate name by president or other
authorized person. If a partnership, please sign in partnership
name by authorized person.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
o FOLD AND DETACH HERE o
YOUR VOTE IS IMPORTANT.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE. THANK YOU.
